#35: Clive Davis, Real Estate Investor - Leaving a high-paying job, buying back your time, and investing with no cash

I started doing my due diligence on mentoring programs. And that's when I found initially Michael Blanc. I attended his deal, I think his first deal make alive event in 2018. The following week I went to Dallas and I attended Brad Summrock's Rat Race to retirement event, which is kind of all you can eat. Two to three day exposure to multifamily investing. And I think after the first night I called home and I said to my wife, you know, hon, I think I'm going to join this program. And she said, you know, if you're calling me, you've already made up your mind. I'm not even sure why you're telling me that.

On today's episode we have the founder of Park Royal Capital, Clive Davis. Steve Every time I hear Clive story and it's, it's a couple times at this point, one thing always stands out to me that, that we hear oftentimes from real estate investors is at a certain juncture in their life, they say, I want to buy back my time. You got a guy like Clive who's working in corporate America. He's working 70, 80 plus hours. He sees it's probably even more as he heads up the corporate ladder and he says, I'm tired of selling my time, I'm ready to buy back my time. And he makes this hard pivot into real estate. And it's so inspirational every time I hear it because lots of people think this, a lot of people want this, yet not people have the audacity and the courage to actually do it. And Clive's one of those guys who did it. And you could see the fruits from his choice. Jake.

Clive's story started with his family moving from Jamaica to London and then his mom leaving early to head to the United States to get things set up and bring the family later for the American dream. He gets into corporate America, there are pit stops along the way, different, different changes and he ends up in as a real estate investor. Great story and it gives us inspiration of what can you do by staying on the journey and heading west 100% true.

Well stay tuned as we discuss leaving a high paying job, buying back your time and investing in real estate with no cash. With our guest, Clive Davis. This episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest your money. Stocks, bonds, crypto and rental home. The list is literally endless. As we've all seen over the past year, the stock market is unstable. The housing market is just weird and Inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. Well, Clive, I doing some research before this podcast episode. I'd seen you on a couple podcasts before. I loved your story. I thought it'd be so fun to have you on heading west. And you have a really unique story. You went to Columbia Law, 20 years as a corporate lawyer, and then in 2017, you made the, the, the hard right turn the pivot, so to speak, into, into real estate. And I know you've, you had done some, some real estate previously sort of on the side. I think you said you started in like 1998, 99, something on that time frame. So you had some Runway leading into that, that pivot in 2017. But I, I don't know if I've heard much of your background before real estate, so I'd love if you wouldn't mind kind of giving us a background of where you're from. What's the family dynamic, schooling, why being a lawyer, and then eventually what led to the decision to go into real estate.

All right, we're going deep. Yeah. So background. Well, let me start with where I'm from and then we'll go from there. So originally, London is actually my hometown. I was born in London in the UK and grew up there until my early teens. And at that point, that's when we relocated, moved to the US Settled in Bradley Beach, New Jersey, which is what I refer to as the real Jersey Shore.

Real Jersey Shore.

And that was our home. And so when I think of kind of the closest thing to my home state in the US Is New Jersey. So I have lots of ties and connections to New Jersey, went to high school, undergrad at Rutgers, grad school, and eventually law school, as you mentioned, at Columbia. So New Jersey and New York for much of my time before relocating to Atlanta in 2005. So 18 years ago, now and professionally. Started out as a lawyer. Straight out of law school. I joined a Wall street firm servicing kind of Wall street clientele. Morgan Stanley was a big client of ours and we did work for the other investment banks. I kind of rotated through a number of different areas within that firm from mergers and acquisitions, general banking. Eventually I did a little bit of real estate. I think I did a six month stint in real estate and I was involved in a sale of some ass or some transactions there in New York, one of them being the east side Marriott Hotel Avenue in Midtown New York. And I got to work on that transaction and ran across a gentleman called Larry Silverstein, who, if you know anything about commercial real estate, you will know that he's a legend in all things commercial real estate and closely associated with the World Trade center and the rebuild of the World Trade center and a number of other trophy assets. I had no clue who he was, but I was a junior lawyer working on a deal and he was the lead partner on that transaction. I ultimately settled and became a capital markets attorney or securities attorney. And I was doing debt and equity offerings for our clients, whether they were investment banks or by extension their clients, who were the ultimate beneficiaries of the work that we did. So I did that for several years and in the early 2000s, actually, right after 9, 11, as a matter of fact. And I happened to be in New York City heading into New York City during the first attack and was on the island of Manhattan during the second, and so have a real vivid memory of that time. But that's when I made the transition shortly thereafter to Pfizer, when I joined them as in house counsel. So Pfizer at the time, and they've probably only grown bigger since. They probably had 300 lawyers around the globe headquartered in New York, which happened to be a block or two away from the firm that I had been working at. So I made that transition really with a mindset of this work is great, it's interesting, it's intellectually stimulating. But as I looked around the room, I really said to myself, is that what or who I aspire to be? And very quickly I made up my mind that I didn't want to, you know, partnership track or tenure was really not for me. Even if I, you know, had the belief or delusion that that was something that was viable for me, it was not an aspiration that I had. I looked around, I'm surrounded by, you know, partners and lawyers who by most metrics and measures would have been deemed success, successful. They Were, you know, financially well off. But I was also seeing them work long hours. And as a junior lawyer, you know, you go into it knowing, okay, I'm going to do 70, 80 hours as par for the course. And I, I did that on a regular basis. But as a fresh out of law school student, you know, you're in that environment, that's to be expected. You're compensated well. But what I tell people is you're compensated well because they are buying your time. And so, and I'm bouncing around a little, but fast forward into the end of 2016 when I ultimately decided to part ways with corporate America. Part of that transition was an effort to buy back my time that I had sold to someone or someone had acquired for the preceding 20 years. And so in any event went to Pfizer, did a number of interesting things, worked with a number of different product teams at the time. At one point in that time frame, Lipitor was the number one selling drug in the world and I was the lawyer on that product team. So got a lot of good experience in kind of a new terrain. They transitioned me, relocated me to Atlanta. I supported their southeast regional team that sat over 1500 sales reps spread out throughout the southeast with the sales leadership team here in Atlanta. So I supported that team and their people underneath them. And two years after that I joined ucb, which is a Belgian pharma company most people have never heard of, but they've heard of Zyzol, they've heard of Zyrtec, Keppra for epilepsy and some of their other products. So I joined them as chief compliance officer. So really transition from traditional legal into the world of pharmaceutical compliance. Leveraging my legal skills and background, but really leaving the day to day legal work to the law department and me focusing on building out the compliance function and the compliance team. And that grew to me being responsible for the Americas business, which for them was comprised of the U.S. canada, Mexico and Brazil. So outside of my four or five trips to Brussels each year, I was doing trips to those other locations I mentioned, not counting, kind of just regular domestic travel.

Yeah, I want to jump back. You had said that you at early age moved from London, which I assume was England, unless there's a London, New York or something. London, England to New Jersey shore. Why the move? How'd you handle that? How old were you during that transition?

Yeah, yeah. So I'm a child of immigrants and so I have nomadic blood. And so my. So how I ended up being born in London and growing up in the UK was that my parents on both sides are Jamaican, so they were still at the time part of the British empire. So in 1960 and 1961, when my father first and then my mother followed, relocated to London, that was commonplace. You had that kind of migration between the Caribbean and the British Empire, you know, people coming from their countries and making England their new home. So that's, you know, my father saw snow for the first time in 1960 at the 35 year old man.

Yeah.

And so I was later born 1977 years after. And when I left and we arrived in the U.S. i was 13 going on 14 years old.

Okay.

The transition, I would say I loved Americana.

Yeah.

And it was a. It was a easy transition for me, I would say. I did have a very strong British accent at the time and so.

Still hear it.

Yeah.

I made a concerted effort to kind of shed that as quickly as possible. The girls loved it, the guys kind of teased me about it. So. Yeah, as a result, you shed it as quickly as possible. And then just being around kids your age, at that age, you know, you kind of shed it kind of naturally. Yeah.

So go ahead, Steve.

I was gonna say, Clive, what brought your parents from London to New Jersey?

Yeah, so my mother, it was really. My mother really had an American dream. So she had a sister living in New York who had left Jamaica and settled in New York probably in the early 60s. And so my mother had visited her a couple Times and in 1978, just made the decision that she really wanted to pursue the American dream. And so she actually headed off to New York ahead of us leaving. I had older siblings at the time that were adults or about to be adults. And then it was me and my sister, who's four years older. So she left me, my sister and her husband in pursuit of the American dream. Always with a plan and intention. I'll go make a path and then I'll bring you guys to reunite the family. It turned out that we didn't reunite until 1984. And, you know, she was, you know, doing what she needed to do and eventually became sponsored and got a green card and then was able to bring us. But she was doing, you know, housekeeping, caring for elderly, whatever she needed to do to kind of, you know, make a way for us. Sure. And I say the American dream, but that's, that's really the vision that she had in her head that we can make a better life or there's a better life for us if we try this. And so that's what it Was, did.

She have like an entrepreneurial spirit, so to speak?

I wouldn't. My mom had very little formal education. She might have had a fourth or fifth grade education formally and kind of struck out very early, probably as a 15, 16 year old. She was working from, you know, even before that, but really out on her own from, you know, her mid teens. So she didn't have an entrepreneurial underpinning or grounding. But interestingly enough, she's the real estate investor in the family. I love it, I think sparked my interest, unbeknownst to me at the time. But when we got to the US in 1984 to reunite with her, she had the family home in Bradley Beach, New Jersey. And she had a rental property in Queens, Queens, New York. And so my father and I would drive on the weekends between tenants or for repairs, we'd have a sleeping bag. We'd either be doing some painting, wallpaper. And my dad, my father was a, is a jack of all trades. He's still with us 98 years old and wow, wow, God bless him. But you know, as a 13, 14, 15 year old, I would be spending the weekends alongside my father doing kind of handyman stuff at the rental property in Queens. So my mother, with her limited formal education and low paying jobs and what have you, she had something that enabled her to, by the time we got there, she had the family home and she had this rental property and then we were selling the home in the uk. So my first exposure to real estate, especially real estate other than where you lay your head at night, was based upon what I saw my mother do with her limited education, as I mentioned.

Yeah, Clive, I'm trying to put myself in your shoes in London and you can go two ways. I'm excited to go to the United States or I'm really scared. What is this what it's going to be like? Can you elaborate on that?

Yeah, I think it definitely skewed towards excitement. You got to remember, so 1984, you've got the Los Angeles Olympics going on. Michael Jackson's probably at his peak. You know, you've got Thriller, the album is out, the video's out. You know, I think shortly thereafter you got the Cosby show and you got all of these things that are kind of very American that are being exported around the globe. And so even at that time, America's influence was huge. And so for me, you know, I didn't really do fast food before I moved to the US to go to a McDonald's that was kind of a foreign thing for us. So for me, as a 13 going on 14 year old, it was pretty. Mostly excitement. Obviously. There's the unknown of, you know, am I going to fit in? You know, what is this community that we're going to? It's a beach. You know, we've never lived near water. We're like, what is this? Yeah, so, so I get to Bradley beach and it's, you know, the kids are surfing, there's surfboards and there's, you know, you know, bmx, you know, it's all this stuff. And so for me, it was all good. There was no. Once I got there, it was like, oh, this is good. I wasn't learning a new language. You know, it's English English or English American English. And you just kind of fit in and, you know, make friends and, you know, make, make it a new home.

Yeah. You said your mom roughly out of fourth grade education. Was there a heavy emphasis on education in your household that that sort of led you to. I mean, I think you said you went undergrad at Rutgers. You did. I think you said your master's and then your J.D. is that correct?

Yep. Yeah. So I'm the first in my immediate family. I'm the first to attend college, obviously, graduate first to, to grad school, law school, obviously. All of these are firsts within my family, so. And I'm actually the youngest sibling in the family. So just within Jamaican culture generally, and really true of immigrant culture, when you're part of a family that picks up and relocates to a new country, I tend to think that you're. You're in a situation where you see people who are driven, who are hard workers, who want a better life. So the whole American dream, you know, there are people who sit around and say, man, I'd love to have the American dream. But they don't. They don't or can't. They're not positioned to actually act upon it. But those who do tend to be ones who legitimately are looking for a better life for their family and children than they experienced. And so even though my mother, I don't think she had ever been on a college campus before I stepped foot on a college campus, there was always an emphasis to do well in school. That can only lead to good things for you. And so that just kind of saturated the culture in my household. And so, yeah, it's kind of like we haven't done it, but we've made a way so that you can do it. And so I kind of just followed that lead.

Gotcha. So you jump ahead. So we jump ahead to roughly 2000, I think we were talking about that timeframe. This is about the time you get into real estate yourself, right?

Yeah. So actually I was putting together my January newsletter and it just realized that I've been invested in real estate for this is my 25th year. Wow. So my first real estate investment that I did that wasn't my personal residence was in 1999. I bought a duplex in Cape Coral, Florida and Cape Coral, Florida. So I'm living in New York city working this 70, 80 hour firm job and I bought this duplex down in Florida primarily because my parents had retired in 96 to from New Jersey, the Bradley beach home relocated to Cape Coral and left the snow behind them. And when I bought the duplex, it was really with the intention of one. There was a, a strong prevalence of these things there. Unlike in New Jersey, New York that I was familiar with, I didn't buy it because I, you know, I was thinking about the monthly income or cash flow and supplementing my law firm job. You know, it wasn't for that reason. What it did enable me to do is I opened up a checking account. I put both my parents names on it. I had the rents going into that checking account and that was my way of subsidizing them in retirement without them having to ask. So early on they, you know, if the hot water heater went or the pool pump or something went, they'd say, hey Clive. And I'd redirect them and say, why are you asking me? Just go get it from your account. And you do that enough and they start, you know, go in and start feeling like, okay, we do have access to it and if we need something that's there for us. So that was originally what I was doing. I did that for from 1999 all the way up until 2018 when I sold it. I went into it without an exit plan. It was very much hobby like, as opposed to how I think about real estate now where I don't buy anything unless I've got an exit plan and a business plan I'm executing against. And it's just night and day in terms of kind of the small multifamily holdings that I had and kind of the stuff that I'm involved in today. I was also able to move a sibling, an older sibling, into one of the units and of course he got a family discount on that unit. So that was a way of me kind of having someone known and trusted in one of the units. And also you know, have family in close proximity. So that first investment played a number of roles and really gave me exposure to what is it to self manage, to interact with tenants, to deal with issues that later I would go on to deal with in a much bigger way.

That's really interesting. Most of the people we talked to gotten a real. Obviously this is a real estate podcast, so to speak. The foundation is under real estate investing. So most of the conversations we have tend to be around okay, my first deal was I wanted to have passive income or I needed to offset, you know, my income taxes or something like that. And yours might be the first that I've heard of was really came from more of a place of it seems sounds like, like generosity. Like I want to take care of my family, I want to help them out. I want to, you know, invest in real estate more as a way of helping the family. And, and through that it sounds like you were able to learn or to build upon the, the, the real estate knowledge you already had from your mom and you know, the real estate they did. But able to learn and cut your teeth doing it on a duplex from a place of generosity rather than again, passive income.

Yeah, def. Yeah, I agree with that. And I would say I was smart enough to know that Lee County, Florida is one of the fastest growing counties in America for a long period of time. And real estate generally was doing well there and appreciating. My parents have relocated there. I kind of saw like homes being constructed every time I went there. It's like, oh, three more new homes on that side. You know, they was. They started out as kind of being the lone house and then the whole street was lined with home. So I saw all of that and kind of anticipated some of that. So I definitely was hoping to kind of see my original investment appreciate over time. Although I wasn't counting on, you know, it doing a certain kind of multiple or anything like that. Again, I was a novice in terms of how I was thinking about it and how I was managing it. More hobby like than professional at that time.

Do you, did you have a desire to do more real estate or was this sort of at this time a one off thing and you were focused more on your day to day job?

It was pretty much a one off thing. I did some other real estate investments with a couple friends and colleagues, but in terms of what I was doing solo, that was kind of a one off for a long stretch of time. And when I did leave corporate, one of the first things I did is I went and Bought a five unit, which is commercial. And we could talk about that. But I bought that in Cape Coral, same location. Within two or three months of leaving corporate, I bought that. And you know, so that was kind of me doubling down. And really I bought that as a proof of concept to say, hey, you've always been dabbling, you've always had this interest, you're thinking about going bigger, let's really see if you're, you're up for this. And so after buying that five unit, you know, I had to evict a hoarder. I had to gut, renovate one unit, renovate three other units. And you know, that we ended up doing really well in a short period of time. So for me, I bought that in spring of 17. I sold it two weeks into Covid, literally March 31, 2020. So Covid had been around a few weeks officially at that point. And I sold it, did well. And I just said, no more small multifamily. I got to figure out how do I get into the bigger stuff? And that kind of, you know, we can talk about it. But that's what got me into the journey into the world of larger scale multifamily and commercial real estate generally.

Clive, how'd you go about getting into the bigger stuff as you talked about from small scale? Did you need help? Did you just figure it out on your own? Did you read books from Amazon?

How did you do that?

Yeah, it's kind of all of the above. So the first thing I did is my legacy 401ks that I had left behind when I exited corporate. I purposefully moved both of those into a self directed IRA. During my entirety of my 20 year corporate career, I had never heard of a self directed ira. No financial advisor had ever mentioned it. I hadn't stumbled upon it until I went to some multifamily or real estate conference and someone had a 20 minute slot to talk about self directed IRAs. And that's when I learned, oh, you mean I can take control of my retirement funds, put it in this thing called a self directed ira, which is just an ira, but by another name essentially. But I am actively directing where my retirement dollars are being invested and a custodian is just basically the administrator handling or taking instruction from me. So I moved all of my money out of the stock market, essentially, which I didn't have a lot of faith in. I was looking to delve into the world of commercial real estate. So I said, well, why not invest there? And so I invested in a dozen deals, institutional Quality deals, multifamily acquisitions, some ground up construction of multifamily. I also invested in a portfolio of hotels here in Atlanta, three of them within 30 minute radius of me. And so beyond kind of the ROI I was expecting in making those investments, it was also part of my education because you're getting to see firsthand how these deals are done, what the capital stack looks like, what the business plans are and how they're articulated, what investor relations looks like, feels like from this side of the table as a limited partner, passively invest in all of the things that you're going to need when you step into the shoes of being a sponsor or general partner. I was getting some exposure to that, albeit from the passive side. So that was one part of the educational journey I bought for sure. I was attending multifamily conferences for the first time, going to conferences that were unrelated to my 9 to 5, because I had no 9 to 5. And so I'm attending multifamily conferences for the first time. I'm listening to podcasts daily, whereas in 2015 or earlier I don't think I'd listen to any podcasts. At the end of 2016 and starting in 17, I was listening to two or three podcasts a day. And not just podcasts of all varieties, commercial real estate with a heavy focus on multifamily. So that was part of my journey. And then really the final part, beyond kind of local meetups and networking, I started doing my due diligence on mentoring programs. And that's when I found initially Michael Blanc. I attended his deal, I think his first deal make alive event in 2018. The following week I went to Dallas and I attended Brad Somerock's Rat Race to Retirement event, which is kind of all you can eat. Two to three day exposure to multifamily investing. And I think after the first night I called home and I said to my wife, you know hon, I think I'm going to join this program. And she said, you know, if you're calling me, you've already made up your mind. I'm not even sure why you're telling me that. And I joined Brad's program and I joined it with the intention really with three things in mind. I want to do these deals and so I need to be around people that are doing these deals and investing in these deals. So this is a place where I can find prospective partners. That's one, because I know it's a team sport. You learn very quickly these large deals. It's a team sport. You'd be foolish to try and do them solo, even if you did have the financial wherewithal. So I'm looking for partners, prospective partners. I'm looking for prospective investors because when I find that first deal, you know, all that excitement is for nothing if you have no one to potentially invest in your deal. And then thirdly was I need to know the A to Z nuts and bolts of buying a large apartment community. How do you do that and not mess it up? And so those three things I found in Brad's program and Steve, you can, you can relate as that's where our paths first crossed.

Absolutely.

All of those things in combination were kind of my journey. And I tell people I'm not an overnight success. I didn't just quit my corporate gig and decide I'm going to do large apartments. And three months later, lo and behold, I got a huge deal that landed in my lap. My first LOI I submitted in April of 2019 on a 92 unit apartment community in Stone Mountain, Georgia. We didn't get it. Someone was willing to pay 300k more than we were. And I said, we didn't get that one. We'll get one in a month or two thereafter. Fast forward to summer of 21. Obviously during this time frame, we've got this thing called COVID 19 arrives on the scene and that disrupts everything in the world. Commercial real estate not being an exception. So for two years I'm offering on deals. I'm best and final. I'm a bridesmaid, but not quite a bride. Continually running up second and third and being almost there but not getting it until summer of 21. We got awarded our first deal. I got awarded my first deal, a 244 unit. So I go from the five units that I sold, I sold two weeks into Covid and then my first large scale multifamily deals at 244 unit we acquired for just around 30 million and we raised 8 and a quarter million in equity. And I say we and heavy emphasis on we because I could not have done anything that I'm talking about by myself.

So that's funny you say that. So I got a couple questions there. You went from five units to 244. Now in perspective, is it, is it easier to do five rather than 244 as a general partner, as a limited partner? I'm thinking about our audience. A lot of them are general or, excuse me, limited partners. They're just passively investing. So to them it doesn't really matter the size because it's not hard either way. For a general partner, though, did you find that the size had a big impact on the difficulty?

Yeah. So the thing about. So let me first tell you why I did the 5 unit as my first thing. So very quickly you realize that without a W2 in America, you garner little respect. So, so regardless of what you did before, you know, fancy law school, fancy law firm, xyz, none of that matters. When you go to refinance your personal home or pull out equity or buy a rental, single family rental, whatever, if it's one to four units, that is residential, the two questions they're going to ask you, two years tax returns and pay stub for the last 30 days, and your W2s, if you don't have one or either, they're going to ask you the same question multiple times trying to get the same answer that you can't give because you don't have it. And so I was in a position after 20 years for the first time being without a W2. And so what I quickly learned is that when you go commercial, that is five units and bigger, you're now in the world of commercial. They are primarily focused on the asset, the property you're acquiring and its ability to cover the loan. Secondarily, they'll look at you and say, is this a good guy, a good girl? You know, is there any bankruptcy that we should be aware of? But outside of that, as long as you can show up at closing with whatever the requisite closing monies are that you need, deposit and miscellaneous, you're good to go. And. And that's the big difference between residential and commercial. So that's why I opted for five units. Gets me in the commercial game. And it's the fewest number of units, therefore it's the most manageable for me. So I just needed to show up with, at closing, with the right amount of money, all of the effort to find it and then to eventually close it. When I compare that to the 244 unit, I would say, and this is why people scale, right, is because you want to get to your destination quicker. So the shortest, straightest line to your destination. And so rather than me buying many 5 units and maybe an 8 unit here and a 10 unit and trying to get to that point, that point of having accumulated mass, if you can go and get 244 units, that's what you go for because that's going to get you to your destination quicker. There's a little more complexity because of the type of transaction and you're raising capital and you're syndicating and some other complexities. But by and large it's not like it's not super complicated because you're going from 5 to 244. The money's involved and the paperwork involved might be a little bit more, but the fundamentals are pretty much the same. You gotta get a relationship with a broker, you gotta familiarize yourself with the market, you gotta. If anything I would say there was more work for me that I anticipated on the five unit because I'm self management. I'm going to be overseeing the gut renovation. I did the eviction myself of the tenant. These are things that when you're in a 200 unit, you've got third party professional property management. You're not getting the call about the toilet late at night that people kind of dread. All of that is kind of the day to day management. You're now an asset manager overseeing that third party professional property manager. So in many respects you're less involved or differently involved I should say than you are where everything is on you as a self managing owner, operator of a five year.

Yeah, Clive, when you're, when you're doing the larger units, the over 200, even over 100, you said this was a team sport and I've totally understand what you're talking about. Can. When you bring GPS in to be part of the team, how did you go, how'd you find GPS and how did you find GPS that all aligned together that made a really synergistic team. I've heard different things, good or bad, and the team is critical in a deal.

It is critical and I'm blessed to have gone on and done few other deals with the same core members, each operating from under their own shingle and then us coming together to get individual deals done, but the same core team, so. So the Sumrock ecosystem was a big part of it. All of my, each of my partners are part of the Sumrock ecosystem. So that number one thing that I was looking for, I put myself in a position where I was exposed to people that I could determine is this, you know, is there compatibility there? So there's lots of first dates. As you know, Steve, you're going on lots of first dates. Some of them are via Zoom or probably Zoom more so than Riverside. But you're doing these virtual engagements dates, first dates as I refer to them and you're trying to figure out is this someone that I'd want to go on a second date with? Is this someone that I'd want to, you know, go out to eat with or is this not a fit? So the blessing that I had of not being an overnight success is I had two years of running at deals primarily with one partner who we had determined, you know, we've got similar backgrounds, we'll be a good fit. And then we kind of enhanced the team once we kind of zeroed in on that first property. But for two years, better part of two years, I was running that deals, sharing my underwriting with this person, getting his feedback, kind of aligning our risk tolerance or kind of learning what our respective risk tolerance was calibrated. It got to a point where I would know the questions that I was going to get because I sent enough underwritten deals over and gotten kind of, you know, specific questions that I know, okay, he's going to ask me this, this and this. And I should be prepared to respond to those questions because I always get those questions. And so that was part of my vet in, if you will. It was, you know, during those calls, during those LOI submissions, you know, just doing that enough where you're like, yeah, this, this, this can work. And then just building the team around us from there.

Yeah, we oftentimes will, Steve and I, when we're talking to potential investors, we, we talk about sort of the ratio of how many you analyze to how many Lois, you put in to how many you actually win. And it's sort of like a 10 or 100 analyzed to 10 offers to maybe one purchased. And. And you had talked about you had roughly two years of just submitting offers and just not really winning, which I think speaks to the level of difficulty and competitiveness that is out there in purchasing real estate. But were you able to figure out like, what was the reason for that two year gap? Was it just market? Was it you were too conservative, therefore you were offering lower than everybody else. Were you able to kind of determine what that 2 year span was a result of?

So all of the above. So we Talk, we're talking 20, 19 and 2000. Oh yeah, 2020, probably the height of the multifamily competitiveness. So I offered on some properties where there were as many as 48 offers on the deal. And they worked that down. They kind of narrowed thin the herd down to you half dozen can battle it out to pay the most to have the privilege to buy our property. So that's the market that we were in during that time. I was being too conservative, especially early on. My margin was probably, again, I was being too conservative. So I wasn't pushing the envelope as much as I needed to to be competitive. And over time, your underwriting, you're continually improving your underwriting. Hopefully your underwriting is improving. You're making adjustments to the market, you're taking immediate feedback from. We didn't get that deal. And this is what the broker said, and this is where the other offers kind of landed on the dartboard. And this is where we are relative to those. We. We're not even on the dart board. We're like, below or a foot above or wherever, but we weren't on the dartboard. And so you figure out, how do I get closer and closer to that. That bullseye? And that just takes time. Or it did for me. And I was primarily, I did the underwriting and sourcing of deals and shared those with my partner and prospective partners. So it really was me kind of just improving my underwriting, developing stronger relationships over time with brokers from touring deals. And one thing, an advice I would give. The market's a different reality today than what it was in 2019. But I also realized that it was somewhat of a mistake to have the mindset that I had at the time, which was, hey, broker, I'm not submitting an offer on this deal. I don't want to waste your time, and I don't want to waste my time, and therefore, I'm not offering. And here are reasons why I think essentially you're asking for too much, and I'm not going to waste your and my time. I should have been offering more regardless of whether or not I thought I had a realistic shot of getting it. And I underwrote a lot of deals that I never submitted an LOI on because I was like, you know, they're here and I'm 3 million south of that, and so they're going to think I'm a joke if I submit an offer. I should have submitted a lot more humorous offers than I did. And that's kind of a learning because when you go and you tour a property and you engage with brokers around an loi, even if you're not on the winning end of it, you're developing relationship, you're developing credibility. And I started to do that more in the second year than I was doing in the first year. And I think, again, none of those efforts were wasted. All of that ultimately led to me getting the first deal. We got the first deal. The week that we closed on it, I got a call from Cushman and Wakefield. Congratulations, Clive. You've been awarded a 200 unit, $40 million deal that happened to be five miles away. So that law of the first deal that I know you guys have heard about, I've heard about, and Michael Blanc is a big kind of proponent of it. That, that was my reality. Two years knocking on the door, I then get awarded one deal, we close that same week, awarded a second one, three months later, we close on the second one.

Damn, bro.

And I'm off to the races. Yeah.

Clive, you have a legal degree. You've been an attorney in multiple different disciplines. And I believe also you've partnered up with some other GPS that are attorn.

Also, how have, how has your law.

Degree helped you in this? And how do you compare that to someone who is new in the real estate that doesn't have a law degree?

Yeah, so I would say you don't need to have a law degree. But, but if hopefully it's helpful. And I, I would say, and I say that kind of tongue in cheek because part of that conservatism that I talked about that wasn't serving me well was having been a corporate transactional lawyer and a chief compliance officer. And so both of those roles are around risk management. Right. And mitigated risk. And so that probably didn't serve me well to some degree. But where it did serve me well was that I felt very comfortable managing the transaction. All of the things that, you know, Steve, that need to happen between accepted loi. Not even that submission of the loi, because my loi probably I put a little bit more thought into my Lois than the typical.

So you didn't have the one page.

Loi I did, but oneplus.

I was more intimately familiar with every word on that one page or that page and a half. And I tweaked where I could tweak and I tried things that were intended to make it a more favorable loi as much as you can in a competitive environment. So submission of the loi to handling and juggling all of the balls or plates that you need to jug up until the closing table, the interface with the lender, the interface with the lawyer. So you're going to hire a lawyer. It's not like I was doing our legal work, you know, pro bono. That would have been malpractice. So we still hired a securities attorney, happened to be the same transactional attorney who also handled the securities piece, but someone on the team has to interface with them. And being a lawyer, it was certainly helpful to talk to someone with a similar background and kind of better understand kind of what questions they're asking or what's going to be helpful to them or responsive to them. So it was certainly helpful on that front. And I would say since we stepped into the ownership chair, you constantly have to go, someone on the team needs to go review the loan docs. You know, what does it say about that? Who do you think they're gonna, you know, they're not gonna say, you, Mr. Engineer, you go look at the loan doc. They're gonna, hey, you, Clive, or in my case, Jade. You guys have the legal background. That would certainly be helpful. Or you'd be the better option than any of us. So it is helpful. Although we're definitely leveraging outside counsel when it's truly needed.

Clive, I want to jump back to. You had talked about moving your traditional legacy 401ks into a self directed IRA, which I think is brilliant. That's something. You know, I used to work for Financial Advisor. I had never even heard about that when I worked there. It was only when I got into real estate with Steve and Skyline Point Capital that that became a reality of like, oh, wow, this thing actually exists. I can be the, I can manage my own or direct my own ira. So I think, and that's a conversation we have with a lot of prospective investors. You know, they say, oh man, okay, I know the minimum is 50,000 roughly to get into a deal and I just don't have that much cash lying around. And they think that they just need to have cash and they don't. Most people don't know that a self directed IRA is a pathway that is available to them that they can use to invest. So I love that that you brought that up and that was the vehicle that you, that you used. I'd love to hear from you though, is, was there any fear on your behalf transitioning from your legacy 401k to a self directed IRA? Did you have any fear of, oh boy, this is like the burden is on me to make sure this thing performs, whereas I usually would delegate that and pay a financial advisor to oversee it previously. Did you struggle with that at all?

I did not struggle with that at all. And I don't know if that's a good thing. I didn't give it more thought, but I was very comfortable essentially moving my money out of the stock market, which I didn't have a lot of faith in. The excuse that you have when you are employed many hours, demanding job, the excuse that you have to turn over your retirement investments to some financial advisor or to follow the party line of 60% here, 30% here, 10% in these 10 buckets. And only these 10 buckets you have the excuse of, look, I don't have the time, I'm working a demanding job, I've got all this travel. Let me just do what, you know, put it in these limited options that I have and you know, if the market's up, great, I'll open those statements. If the market's down, I just won't open those quarterly statements. And hopefully 20 years later, 25 years later when you need it, hopefully things are in a good place. And so it's not an accident that you and I had not heard about a self directed ira. Because Wall street, let's be honest, they don't have an interest in people self directing their own retirement related investments because they don't make money that way. Whereas in the typical 401k retirement plan that your company set up for you, or if you're working with an independent financial advisor, they're going to be compensated regardless of what direction your investments are moving, whether they're sideways, up, down, they get paid in all cycles. So there's good reason that most of us have not heard about self directed IRAs. I'm a big believer in real estate and so for me it wasn't a leap of faith or it didn't require a lot of courage for me to say over the long run my retirement funds are going to do well if invested in commercial real estate.

Yeah, that makes sense.

What.

Sorry, there was. I wanted to ask you about your transition from the 401k to the self directed IRA. Was that A. You don't have to share details. Did you move everything over there or did you kind of split it up and then be a little bit more diversified?

Yeah, I effectively, I moved it all over there. I didn't invest it all at one time and I tried to avoid having money sit idle not making anything. So I would, I moved it into a generic, I think it was an ameriprise account. And then whenever I found an investment, I would just move the requisite amount of money I needed to fund that deal. But effectively I removed all of my money from those legacy retirement accounts and I was betting on commercial, which is a good bet. I'm still.

Good bet. You had said you also invested into some hotels, which I'd love to hear some about because we've, I think, I think we've, we've had one guest on this podcast who had invested in a hotel, but she did it in Belize. If I Remember correctly. So what is your, what's the appeal of investing in hotels to you? Because it. Go ahead.

Yeah, so that was probably my attempt to be a little bit diversified. And so I'm thinking to myself, okay, I'm doing these apartments, either existing or new construction of apartments. A deal from one of the investment crowdfunded platforms came across my desk and I was like, oh, this is sexy, this is interesting. And these three hotels happen to be. Each of them literally are 25, 30 minutes radius of my home. So I can drive by them, I could stay there, whatever. I kind of know this geography and like, you know, felt like a good idea. I think I only put 50k into it, so it wasn't a huge portion of my overall exposure, but it did give me a little bit of diversification. And then this thing called COVID 19 happened. And hotels primarily servicing business travelers, guess what? They didn't do so well during COVID Exactly. And so those hotels for the most part went down to 15% skeletal staffing. Obviously they were heavily impacted by Covid. They're just now starting to get back on their feet. But I don't think even Warren Buffett knew that Covid was coming in early 20s. So I'm not going to beat myself up too much about that attempt to diversify into hospitality, which through no fault of its own kind of found itself in, in hard times.

Yeah.

Clive, you also mentioned that you're doing some ground up development. How has the high interest rates and kind of the crazy times affected your business plan?

Yeah, so I attended a Biz now conference probably a month or two ago where they were talking about the climate for getting ground up construction deals financed and done in this environment, with interest rates being where they are, with kind of the risk appetite being where it is. Banks have kind of pulled back. Traditional banks interest rates are making it super challenging. The cost of doing these deals is much more than it would have been three years ago to do the same deal. And I'm not talking about, you know, materials, steel and wood and things of that nature. Fortunately, those have kind of, you know, lumber. The cost of lumber has actually come back from the height of where it was at one point, but just the cost to finance these deals is higher. So your deals are harder to pencil. And I've seen experienced developers, you know, struggle to get their deals funded. And so it's, it's, you know, even on. I'm involved with two developments right now. One is a 142 unit multifamily mid rise. And we're hoping that one will break ground in Q2 of this year. And then I'm involved in another one that is a 90 acre mixed use development which I'm more heavily involved in. And an hour ago I was just on with a family office and we're talking about funding and we have lots of first dates with family offices and other institutional check writers in the hopes of not only finding someone who has pockets deep enough to provide debt and or equity, but we are looking to replicate that particular model in other locations throughout the U.S. and so we want a long term partner who is aligned with the vision that we have. We're developing a culinary centric community, about 115 homes, 50,000 square feet of commercial retail. We have a 50 key boutique inn that we are able to put within our 90 acres, although we're likely going to turn that over to someone else to develop and operate that in. But we've got a lot going on there. We think we have a winning model that we're looking to replicate. So yes, we're looking for a financial partner for this deal but again we've identified six, seven or eight, I think locations elsewhere where we are looking to replicate the model and those deals too will need to be financed and funded.

Yeah, we're going to Clive, we're going to head into a speed around here just in a minute. But before we conclude and head that way, I want to ask is there a goal in mind for you with investing in real estate? You seem like a very intentional person. You seem like that you've, that you have some intention of where you're going. I don't know if it's generational wealth or just passive income or tax savings. Previously when you were a lawyer, but what is sort of the end goal that you have in mind?

Yeah, maybe I'm trying to follow in Steve's footsteps and certainly generational. Creating generational wealth, being the first in my family to do so. I mentioned the other first that I've been able to check those boxes. But creating generational wealth for my family is important for me. And when I talk about generational wealth, I'm not talking about, you know, what am I going to leave my, my kids. I already know that my children are going to be fine. They're already starting to do things that, that make me feel very confident about what they'll accomplish and their contribution to the world. I'm talking about my not yet conceived grandchildren. Like what is the foundation that will have been laid by me that they will stand upon whether I'm here or not. And so creating generational wealth for my family and being the first to do so is important to me. And then that's somewhat selfish. And outside of that, I would say I want to impact the lives of hundreds, if not thousands of people who I may never meet in person. And there's many ways that you can do that. And I know being in a strong financial position better positions you to be able to do that in whatever realm, ultimately you can make that impact. And so those two things together really are my kind of driving motivation for what I'm doing.

I love that. Well, let's head to a speed round. This is just an opportunity for listeners just to get to know you a little bit better. It's really Quick questions, quick answers before we wrap up. So first question for you. What one book has had the greatest impact on you over the past few years?

Past few years. So for different reasons. So I'm going to pick a real estate related one. So Joe Felis, his best ever apartment syndication book, I call it the Red Bible, is one that I've referred three dozen times, if not more, to people who are saying, you know, how do you do what you're doing? You know, it's basically the A to Z's of syndicating large scale scale deals. And they don't just have to be apartments. But his is obviously focused on that. That book. Again, I there's really a week that goes by where I don't refer someone to that. Yeah.

What's one piece of real estate advice you give to others?

Relationships are key. Your success in real estate, especially commercial real estate, is going to directly correlate to your ability to develop and maintain and build relationships. If you can do that well, you are setting yourself up for great success in the world of commercial real estate.

That's good. This next question is one I've never asked before, so we'll see if it lands at all. So you're a guinea pig on this. Something you said, though, kind of sparked the thought. Oftentimes we see people who make a move from corporate America to real estate investing. They're seeking something, some sort of freedom that maybe they can't get in their corporate life. They're seeking in moving into real estate. What was that sense? What was that freedom, that need for freedom from you? Was it something specific and what is it? What, what is real estate giving you in that sense of freedom?

Yeah, it's kind of general, but I would say time freedom I mentioned earlier, kind of buying my time back. But what is it that I wanted to do with that time? And so there was a number of things. And so in. At the end of 2016, right before I made the decision that, you know, this is the time to exit, you know, my mom was not in great health. She was kind of pinballing between hospital, nursing home, and home. And while I was able to support financially, I wasn't spending as much time physically there as I wanted to. And so when you're in Brussels four or five times, or South Paulo or Mexico City, not even counting domestic travel, and you've got a demanding job, it's easy to make the excuse that I really can't get there, but, you know, what else can I do? And so I was looking for an opportunity to spend way more time there than I had. And unfortunately, she ended up passing in July of 17. But the six months prior to her passing, I spent two weeks out of each of those months there in her home, and I spent more time with her in those six months than I had in the six years prior. And so I didn't know this when I decided to leave, but divine intervention, whatever you want to call it, that's how it worked out for me. And so that was just validation that I had made the right decision. Regardless of, you know, what happened in commercial real estate, I made the timing worked out for exactly, you know, the right reason.

Yeah, I love that answer. All right, last one. The title of the podcast is Heading West. It's a. It's a. It's a sort of way of saying in life, you start at one spot, you head west towards a destination. Along the way, there's lots of things you learn. Ups and downs, speed bumps, flat tires and whatnot. But it really is a journey. But you're heading towards destination. So as you head west in life and in business, what does the destination look like for you?

Yeah, so the destination, I think, ties back into those two objectives of generational wealth and impacting the lives of many others who I may not ever meet in person. So when I came into commercial real estate and I focused first initially on kind of going and learning about buying, acquiring large apartment communities, I always knew that getting into development was kind of the next logical step. And so that was something that I knew I was going to do. I just didn't know the timing of it. And then opportunities started to present themselves, and I think I seized those opportunities. I don't have a master plan that I can clearly articulate what the end of this journey or what's around the corner but what I do do is I remain open and receptive to embracing new opportunities and new relationships. And I go on lots of first dates. And again, you never know where these things are going to go. I think you just got to be open minded. I know I want to create that generational wealth and I know I want to have a meaningful impact on the lives of others. Outside of that, I'm still looking for what that west location, what's, what's there once I arrive.

That's good. That's part of the journey is just learning as you go and figuring out what destination looks like as you get closer. But Clive, if people want to get ahold of you, if they want to look you up, where can they find you?

Yeah, I'm active on social media, but the best place to go to find me is my website, which is parkroyalcapital.com and you can also connect with me there. Book a call, sign up for my newsletter, connect with me on Instagram, Facebook, LinkedIn, all that good stuff. But just go to my website. That's the best place to find.

Yeah. Parkroyal.com parkroyal capital. Excuse me. And we'll, we'll link it all in the show notes so that way I don't butcher it on the podcast. But Clive, thank you so much for joining us on this episode of Heading West.

I appreciate you, Jake, and appreciate you, Steve.

Clive, it's been a blessing. Have a great day.