EP 9: De-globalization? Bringing back INDUSTRIAL to USA with Ben Fraser

Make smart calculated risks. Right? You don't want to just invest in every deal that shows up in your inbox. That's not a good strategy. But there are going to be good deals that you want to invest in and you want to be able to identify those when they come.

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Hey, hey, hey. Welcome to Think Outside the Stocks. I'm your host Madhuri Jain and we are going to continue our journey. We felt that we were left hanging with the knowledge that Ben was sharing in our last episode. We talked about inflation, we talked about recession, we talked about the asset class that you should be focusing on as a passive investor during this recessionary periods. But we did not get enough time to talk about these assets and why Ben is so bullish on this asset classes. So we invited Ben back to our studio so that we can talk about dig a little bit deeper into these asset classes. Ben, welcome back to Think Outside the Stocks.

Yep. Thanks for having me back. Looking forward to it.

Thank you. So for those who are just joining us, Ben comes from Aspen Funds and they are managing $120 million equity for their invest. What's very interesting in this environment that Ben actually has experience from underwriting from banking side. So when it's managing risk and looking at deals, kind of a different perspective, he has this tremendous insight. So Ben, can you elaborate about how your underwriting experience is actually helping you to navigate and especially to look at and evaluate due diligence on the investments currently?

Yeah, absolutely. You know I had a several year stint in commercial banking and it was a great learning experience for me and I never, never wanted to be a banker long term. And it was, you know, it's an interesting industry because people that get into that business generally don't leave and you see, you know, 3040 year bankers because it Gets pretty, pretty cushy after a while, you know, and you can make, make your money and it's, you play golf every Friday. But you know, I knew I wanted to be an entrepreneur, but I wanted to learn the basics of risk mitigation. Right? And when you're a banker, you are in a unique position because you don't get to participate in the upside. If a deal performs well, you still get your interest rate and that's it, right? But you participate disproportionately in the downside, right? So if the deal does not perform well, you, you have to mitigate your risk. The way that banks work, it's actually kind of ironic to me. Sometimes people don't understand how banks work, but they're leveraged sometimes 8 to 10 to 1. For every dollar of equity that they have in the bank, they have 8 to $10 of debt. They're actually very highly leveraged. Which is kind of funny because you think about, banks don't like to lend in high leverage situations generally, but because of that they have a very minimal amount of ability to handle losses. And so they have to really manage their losses. So one of the great trainings and just experiences through that was learning how to look at the downside, how to think through what are the worst case scenarios and what's the likelihood of them happening. And if they do happen, what are the ways that we can protect ourselves and make sure that we're okay. And so, you know, those are ways that I've been formed in my thinking that help when we're making investment decisions on the types of opportunities that we invest in. But now I gotta have a lot more fun. Cause I gotta participate on the upside, right? And also be thinking and using that base of, you know, how do we protect downside, how do we mitigate risk and what are the risks, right? Because understanding risk is not a general thing. It's very specific to every deal and every investment and to be able to quantify what those risks are. And then how do you specifically mitigate each risk? Or can you not mitigate a risk and then are you comfortable taking that risk? Right? So those are the things that are very, very helpful. And as we've kind of broadened our investing into multiple asset classes.

That's interesting. I mean, there are going to be always risk, right? I mean, I come from a project management background as well. Even I worked in consulting with Deloitte Consulting and you know, mostly in project management to quantify that risk, to kind of mitigate that risk, create a plan for it. Right. So you coming from that underwriting background where you know, you're working from banks, looking from a perspective that is this deal going to fail? And now you are looking at using the same kind of expertise to evaluate your deals. So that's great. So let me ask you a question, you know, a lot of people ask that. Is multifamily still a good asset class to buy in? Last episode we talked about, you know, recession, the inflation, and to be on the right side of inflation, you need to focus on real estate. So let's dig deeper into the real estate aspect. Is multifamily still a good buy?

Yeah, great question. And I'm sure one that a lot of people are thinking, right, because it is, I would say probably the most institutionalized asset class in real estate, meaning that it's got the most attention from the big players, it's got the most attention even from individual investors. And so it's the one that a lot of people pay attention to. And it's also performed very, very well for the past decade. So yeah, I think it's a loaded question because do I believe that there's still going to be a high demand for multifamily properties? I think the answer absolutely, unequivocally is yes. If you look at, you know, we still have population growth and really for the past 10 years, the early part of that 10 years, there was not a lot of there's been a shortage of housing, right. And most of that that shortage has been on the single family side. So it was disproportionately under supplied on the single family. But what's happened is as single family prices have gone, you know, just exponential and I think are going to still, they're going to slow down in price increases, but it's still going to be going up and it's pricing out a lot of buyers out of the market and I think going to continue to be that way. It's going to push more people into multifamily. So now you're having population growth, you're having more people that can't buy that are now being pushed into multifamily. I think those two factors are driving a lot of demand for it. And then we also saw, like you said in the last episode, very high rent growth over the past several years. And a lot of that was what I would say would be pent up demand and kind of catching up to where the market really is. And we definitely think it's going to slow down, if not rent growth in certain markets. Will likely go negative for a short period of time. But I do think the trend is going to continue because there is still a shortage of housing. So I think from that standpoint, yes, we need to be paying attention to multifamily. I think multifamily is still a good place to be. The challenges that we have right now, multifamily is, in the past several years, capitalization rates, or cap rates have compressed so much, meaning that for every dollar of earnings that you're paying for, you're paying a lot more for it. If your investors are more familiar with price to earnings ratio, it's a very similar type of ratio, a cap rate. The lower the cap rate, the more expensive the property and the lower cash flow it's going to produce. We've seen a cap rate compression, meaning cap rates going down, which means prices are going up. And so I still think multifamily is a great place to be. But it's difficult right now to find deals that are good opportunities from an investment standpoint, purely based on the valuations and then you add in the borrowing costs and the interest rates going up. You know, I'm actually a believer that I think interest rates are going to remain high for a period of time. I've been saying it all this year, actually, that interest rates are going to remain high through 2023 and 2024. And now the Fed's kind of showing their cards. And I think the market's reacting to, hey, this is going to be around for a little while. And the reason is because I think inflation is going to be here stubbornly longer than we would ideally like. So it's going to force the Fed to keep interest rates higher. But all that to say I think there's definitely opportunities. We just recently closed, are about to close our property in two weeks, where we are buying a class A new development property straight from a developer. You know, there's a lot of opportunity to improve operations, improve, you know, there's way, way below market on the rents and we're assuming a 3.49% Fannie Mae loan. So we can, you know, take this really great interest rate coupled in a great asset and a great market. And you talking again earlier on the last episode about, you know, using debt to your advantage and using inflation to your advantage. Those are a great recipe for success. So those deals are very hard to find. And so my allocation to multifamily is slowing down because I want to get into really, really good deals. And I think they're definitely out there. I Think we're actually going to see some pretty good buying opportunities going into kind of mid to late 2023 as a lot of the deals in the past several years were financed with bridge debt. I've talked a lot about bridge debt on our podcast Invest like a Billionaire and why I think that's a problem for a lot of these types of value add, multifamily investments and we'll get into that now. But basically I think there's going to be opportunities. So very long answer to your simple question. But I think yes, it's a good place to be. I think it's something you want to be very selective in the deals that you invest in in multifamily for the next 12 to 18 months. But I do think there's going to be opportunities. So I don't think it's a hey, completely write it off and no more multifamily. But I do think it's a very disciplined approach to which deals you do.

That'S, you know, you said few great points there, Ben. Housing being the supply and demand, that disproportion has been going for such a long time. It's not a want, right. It's a need. People need shelter, people need a place to live. And we have seen the rent growth going up with inflation, inconsistent with inflation. So it's interesting environment that's been created in even multifamily. And what I like about multifamily, which is our core asset class, essentially, you know what we call the fundamentals, right? The fundamentals of multifamily are really strong. It's a simple business plan. You come in, you provide value add, you increase rents and you sell at the, at a higher price that than you have moved in, right? So it's a, it's a simple plan. It's been kind of repeated over and over and over again, right. So that's why I really like multifamily. You also insist on, you know, the cap rates. There is a cap rate expansion kind of an adjustment going on. Actually the lending environment, I think, you know, that is one of the biggest risk right now to consider. So when I am evaluating the deals, right. I'm looking at these two aspect that how are the assumptions are, how conservative they are in terms of, you know, the cap, cap rate expansion. They have to account for every year some kind of expansion, right. So that at the exit if the cap rate is completely different, that actually they are ready for it. There is a stress test done in, in them. Another aspect, which really important aspect is Lending, you know, cannot insist enough on having the fixed rate. And you know, there are people who moved last couple of years with variable rate and didn't purchase the rate cap or did purchase the rate cap and which has gone like exponentially higher in terms of prices. And that's kind of has dried up their cash flow because now forget the property taxes, forget the cost to insurance, they have to pay for the rate cap, which is, you know, what they estimated and what they're paying is completely different now. These are the kind of deals we will start seeing, creating those opportunities. So great perspective on real estate. There are ton of deals that come in, you know, especially for passive investors. Right. They start seeing these deals and they just don't know how to navigate these waters. So it's really important to see, you know, to have that due diligence before they walk in into that investment. Right. So in terms of finding the deals you mentioned, the multifamily is becoming difficult even if you have money ready. But one aspect of it is that people are sitting on the sideline saying that, okay, if I don't see something, I just won't invest or, you know, if I just don't want to be open about investing at all. But what's happening to their money is now that money is eroding to inflation. So can you talk to the fact that, you know, people who are sitting on the sideline and who are seeing this very, very rare deals coming in and still have that fear that I, you know, it seems right, but I don't want to go in because I just want to sit on the sideline. Can you address that fear?

Totally? No, I think it's, it's a human nature, right. Everything around us is unstable seemingly, and there's, you know, distress going on. It's hard to push against that fear that's so natural to us as humans. But the flip side of that is most of the best investing opportunities occur when there's a dislocation of, you know, the capital markets, you know, that is investing into these assets, times of recession. So I think it's, it's going to be a really good time to invest in select opportunities. It takes a little bit of gut sometimes, right? But if you have conviction in the types of properties that you believe are going to do well, the operator that is managing those investments and you have really good debt and good capital stack in place, I think it's something that you shouldn't be afraid of. It's taking calculated risks are going to pay off in the long Run on the deals that are going to be purchased over the next, I would say 24 months. One of the quotes I love from Warren Buffett, he says be fearful when others are greedy and greedy when others are fearful. That's how he's made all of his money at Berkshire. And it's just a contrarian approach. It's simple to say it's much more difficult to do in practice to fight the fear. But again, going back to what I said in the last episode is you have to self educate, you have to understand, make smart, calculated risks, right? You don't want to just invest in every deal that shows up in your inbox. That's not a good strategy. But there are going to be good deals that you want to invest in. You want to be able to identify those.

So in terms of multifamily, right, people have seen and gotten used to this high returns, you know, this short exit. So since the trend is changing a little bit, that's going to start impacting, right? The numbers are not going to just pencil in just as high that as they have seen or, you know, it's not going to be a quick exit. So we are, we are in here for a little bit longer run when it comes to multifamily, right?

I think so. You know, I think, you know, we've seen the past few years a lot of deals exit early, you know, a two or three year hold because it was just a really good time to sell and you're getting absurd returns because of the cap rate compression. But I think we're going to see, we're going to see some rent growth slowing. We're going to see some turbulence in the debt markets continue to be, we're going to see there's been a huge surge of newbie syndicators and investors that haven't gone through recession and haven't weathered any storms and they've gotten to bad deals, right? And so I think there's going to be some turbulence there. So I think there's definitely some things to pay attention to. But again, when there's, you know, when others are fearful, there's a time to be, to be greedy and to find those opportunities.

I love, absolutely love that quote. And it's true, it has shown 2008, it has shown, it's come true. So that's kind of leading to our next question. If not multifamily or multifamily is getting more and more rare in terms of opportunities, what can they focus on? And you started talking about industrial last episode. Why Are you so bullish on industrial. Can we talk a little bit about that?

Yeah, absolutely. And, you know, if you want to dig into it, we have lots of data and resources on our podcasts and our website if you want to dig in, into these trends. But I'll kind of give you the real high level of what's going on and what we've kind of been seeing. So again, you know, our approach to investing is looking at the macro trends, at the big picture, you know, macroeconomic, meaning big, and trying to identify areas in the economy that we think are going to continue in a positive direction for a long period of time. Because even when there's whims in the market, you know, sentiment changes quickly. But you can identify these trends. And that's what we're trying to do. And you know, one of the things that we've looked at, you know, we like multifamily, but we like multifamily not because it's the only asset class we've ever invested or know how to do. Right. A lot of times indicators are, you know, they, they have a hammer and everything looks like a nail, right? When as an investor, you have to. Every asset class goes in cycles and there's a good time to be in every investment, there's a bad time to be in every investment. So it's important to know, you know, not, not every asset class is going to perform equally in every environment. And that's obvious. But it's important to make the point because we are looking outside of just, you know, multifamily, the big behemoth in real estate. We still like it, but we're more selective. And we found other asset classes that we are seeing some massive trends that we think we're really early into right now. And so one of those trends is an industrial. What we're seeing and what, what we, we saw in Covid, right. Everyone heard the excuse a thousand times of supply chain issues, right. And all the, you know, slow, this difficulty to get products in the door to products completed for manufacturing, et cetera, et cetera.

Well, the chip shortage.

The chip shortage, exactly. I'm glad you brought that up because it's a great case study in what's happening. So, you know, Ford auto manufacturers, they are sitting right now, I believe it's on somewhere with 3 to 5 billion dollars of truck inventory that are just sitting in parking lots that cannot be sold. Three to five billion dollars, they can't sell them because they're missing chip, a simple computer chip, and those are manufactured in other Countries that are having massive, you know, supply chain issues. And because they can't put those chips in, they basically have, you know, a 30,000 pound paperweight, they can't do anything with it.

I was gonna say that.

Yeah, sorry, I took the punchline for you. But it's something that is so simple but is so critical to the manufacturing process. And so what we're seeing is this just for a lot of big manufacturers, they want to de risk portions of their supply chain, especially for critical components in the manufacturing process. So what, you know, the rhetorical question is how much is it worth to Ford to bring back the manufacturing of those chips to the US on a chip that cost them a few dollars? Maybe it costs them 50% more, but in the grand scheme of things, of the entire manufacturing process of a truck, it's a very insignificant cost and very, very significant to the bottom line if they can get those trucks sold. So that's the kind of calculus that is changing with a lot of manufacturers. And then you take in all the geopolitical risks right now, the Russian, Ukraine war, that's changing the calculus. Do we want to have overseas exposure to potential countries that are going to be at war? It's going to further disrupt supply chains. The other piece of this is energy costs. Right. If you look, a lot of European manufacturers are actually looking at bringing manufacturing to the US because there is a massive energy shortage. Europe does not have their own energy sources. They have to import all the energy. The majority of the energy a lot of times for manufacturing is one of the single biggest expense items. And if that's increased by 4 to 5 or 10x in cost, it doesn't make sense. Right. It makes sense to move the manufacturing to the place where there is abundance of energy, which is in the US and we're one of the, we're actually the biggest energy exporter in the world right now. A lot of people don't realize that. And then you add onto the facts, you have these kind of more unique changes going on that have been exacerbated by supply chain issues through Covid. Well, this kind of slow, slower trend that's now kind of caught up is the developing countries where a lot of manufacturing was outsourced to, especially China. Wages have increased 15x over the past 20 years.

Wow. Wow.

Yes. So if you include.

So it's not a cheap labor anymore.

No, it's not what it. Not what it was. It's still cheaper. But if you add in wage costs, transportation costs, supply chain risks actually starts to pencil pretty well, to bring manufacturing back to the U.S. so there's been a huge boom in industrial for the past 10 years because of E Commerce. E Commerce has really driven a lot of industrial property need for distribution primarily. But we think there's going to be a second surge in industrial for a lot of manufacturing and also for distribution as well. But this is a trend we're already starting to see. There's a lot of manufacturing jobs being brought back to the U.S. i mean, the numbers do not lie. And it's changing the calculus where we used to be a completely globalized economy where let's just outsource everything. It's going to increase the bottom line because we can get it cheaper manufacture somewhere else. Well, you're underpricing the risk of geopolitical risk, supply chain risk, all those other things that go into the kind of intangible costs. And let's. If they bring those back and control those pieces of the especially critical components, it's de risking the supply chain a lot.

Yeah. So it's almost like there was a period of globalization and now there is a period of kind of deep globalization because we created so much of dependencies with other countries. We are just trying. We just got burnt really, really bad. And I always tell my kids that it's okay to make mistakes, but it's not okay to repeat it. You got to learn from it. Right. So as a country, I think we are learning from it and we're kind of bringing it back, which is important from the independence perspective and also from all what you're saying, the cost perspective and most essentially managing that risk de risking as small as one small chip, you know, one small unit. And just imagine how much massive losses just in terms of inventory or things happening to these vehicles. Just one company, as big as Ford is going through. That's interesting. And Ben, you and me, we are very analytical people. We like to look at things, you know, from a perspective of the risk, managing that risk. We like to look at from the perspective of the data that's backing it. You know, what are the numbers saying? Right. So in terms of strong data that supports it, can we talk about, you know, what are these metrics? We talk about just the general moment why, you know, the industrial is kind of expanding. Are there any metrics that you are seeing which supports this process?

Yeah, I think the real simple metric and I don't have the numbers right in front of me. You know, we did a presentation where you have a lot of, a lot of the data, but the, the big ones Are the manufacturing jobs being brought back to America? Because that is a contrary to the past two decade trend. Right. Manufacturing jobs have been shipped out of America for so long. But the sentiment is really changing. So we're seeing new manufacturing plants being opened in the US we're seeing a record number of manufacturing jobs being opened up in the US like 350,000.

I think that's the number I saw last. The 350,000. That's huge.

Exactly. And it's, and it's a very, very big I think indicator of what's kind of an early stage trend. But you think about too a lot of Ford just can't magically all of a sudden create a manufacturing plant in three months. It's going to take several years. These are big long term decisions that require extensive capital investment. This is something that if you position yourself well over the next several years, we think over the next decade likely this is going to create an industrial boom. Because right now the other, the other data points are. Industrial vacancy in the US is at.

All a very simple data point.

Yeah, it's under 3% nationwide, which is considered nearly 100% occupancy because you have what's called functional obsolescence where certain portions of properties are not leasable. Right. So it just creates this functionally obsolescent piece. So it's, we're pretty close to 100% occupied. And we're also at the same time having this record low vacancy. We're delivering the most in the past decade of new properties per year. And it's being absorbed instantaneously because there's so much demand for it. Those are some of the real basic numbers and just the basic data that is supporting the thesis that I'm talking about.

That's excellent. In terms of the supply demand and I think the vacancy rate and also the rent growth, that's kind of a simple metrics that puts industrial light like very close to where fundamentals of multifamily is. Right. I mean multifamily is at what like 95.6%, you know, occupancy. That's, that's really high nationally. I think that's, that's an indicator that it is worth the opponent of being right there. You know, in terms of fundamentals with, with multifamily. What about, you know, when it comes to the manufacturing and you're talking about the whole AI and kind of the robotics impact to manufacturing. Can that impact and is it a slow impact? Any thoughts on that?

Yeah, I mean I think that that's going to impact jobs. I don't think it's going to impact real estate investment. Right. Because to have those manufacturing plants you still need real estate. So that's very good from a real estate investor standpoint, I do think, and I think this is a whole other separate topic, but I think there's going to be some massive disruption in jobs over the next 10 to 20 years. You know, there's a lot of data to support, you know, this, but especially low level, entry level jobs that are repeatable, that can be replaced through technology, that are what I would call non knowledge worker jobs. So that don't require, require more physical labor versus require, you know, intellectual labor. Those jobs are going to be more easily replaced. And to the extent that robotics, AI and technology continue to become more efficient, more cost effective and can replace those jobs, that is going to have a negative impact on jobs. But I think from a real estate standpoint, not for the real estate, it's going to be a nominal impact and that's great.

So to wrap that industrial segment, we also mentioned a little bit about oil and gas and we don't have too much time today, but can you just kind of touch that point about the energy and oil and gas and what people should be careful about it?

Yeah, absolutely. The real quick points to make and why we're, you know, really bullish on oil and gas right now are a few things. One, the ESG narrative. So esg, environmental, societal governance kind of programs have been pushing toward the kind of renewable energies for many, many years. And nothing just, you know, to speak to the ethics or morality of esg. What it's done is it's caused massive decrease in capital investment in traditional hydrocarbon exploration. So hydrocarbon being oil and gas, a lot of these companies that have been drilling for more oil and more gas in the US at least, has decreased by 50% over the past roughly five to seven years. And if you think about the nature of oil and gas, it's a depleting resource, right? There's a limited supply in the ground and it's being pulled and pumped up every day. So if you're not drilling, you are increasingly or you're inevitably going to decrease the future supply. And so part of this is the ESG narrative has kind of put these oil and gas producers in a negative light, right where they're taking capital away from them. There's certain politicians that are going around to large banks defunding investment into these producers. And so what that's doing is it's causing a kind of supply challenge. And then you also add in now the Russia, Ukraine war. So Russia is one of the, the biggest exporters of oil and gas. Those products right now trading at a pretty significant discount because no one wants to support Russian oil to continue to wage their war. So Europe is in dire straits because that's their primary source for that oil in the gas. And so it's kind of changing. These kind of geopolitical factors are really impacting pricing of oil. You look at the supply is not going to be there in the future. It's not there right now. Over the next several years, it's going to continue to decrease. At a macro level, then you look at, well, what's going to replace is renewables? Well, the challenge is the current mandates for getting to certain metrics and benchmarks for renewable energy. They are completely unrealistic. One real simple number that I like to pull out is of all the cars that were sold last year, I believe it was roughly 5% of them were electric vehicles. So a very small percentage. But of that 5%, it used 60% of the global lithium production that year. 60%.

Wow.

So if we want to get to, you know, 50% vehicles being sold, our electric vehicles, and I forget the actual benchmarks over time, but it's, they're, they're pretty fast numbers and they're completely unrealistic. They're completely, you know, disconnected from reality. And of, of all the actual, you know, mining and other materials that we need to get and increase not just incrementally, but exponentially to meet these standards. And then it's kind of ironic too, that the mining of lithium and these other materials is actually extremely dirty business. It's very, very not environmentally friendly and a lot of times in not great working conditions, etc. Etc. So this whole narrative has caused this very disjointed approach. Unrealistic expectations. And what's going to happen is supply is going to continue to go down. Demand has continued to remain steady for oil and gas, if not increase. Now you add in the other global players that are needing fuel sources from other places than Russia. You're talking about a recipe for high oil prices. Goldman Sachs and JP Morgan, they're projecting oil prices to hit in the mid $100 per barrel, if not $200 per barrel. Right now are about $80 a barrel. And those prices are a little hard to wrap your head around. And, you know, maybe they don't happen. You know, in our modeling on deals we're doing, we're still doing 80$80 a barrel. But it's, it's something that we think is very possible over the next several years.

So much of compression is getting created. It's kind of putting that pressure and just pushing that, you know, the whole demand just up. That's interesting perspective Pen. I think we need another whole, another segment to dig deeper into what you have been just saying. But you know, unfortunately we'll have to stop here today. But we will have a quick segment about our think outside the stocks before we, you know, jump out. So my question is going to be a little bit different. Instead of investing outside the stock, I would like to know, how do you measure your growth? Because you know, most commonly our passive investors, they're just like everywhere, right? If they're outside the stocks, if they're like just everywhere, what is the best way for them to measure their growth? So do you have some kind of like a dashboard created for yourself? How do you measure your own growth?

And we're saying growth. Do you mean like financial growth primarily or.

Yeah, just, you know, your portfolio. How do you measure that? You know, how is it doing over the period of, you know, years and you know, how do you just, just plan for that?

Yeah. You know, I think one thing that's a helpful perspective is what I call shifting from an income statement mindset to a balance sheet mindset. Right. So much we're so focused on what's my income going to be this year, but it's really shifting to what is my net worth, what is my actual balance, what assets do I own and as those assets continue to increase, what's the potential to convert those into cash flow flowing assets? I'm at a stage of life where I don't really need the cash flow. So I'm disproportionately allocating my investments to higher growth, higher return investments because the faster I can grow that and eventually I can convert those to more cash flowing opportunities. But I think looking at your balance sheet, measuring if you do have allocations in the stock market, sometimes it can be difficult to measure what your actual return is, you know, net of fees, you know, net of contributions. It's actually pretty difficult number to calculate. But I think obviously you want that net worth number to keep going up over time. Right. And so that's, that's going to be a combination of investing into new assets every year, reinvesting gains from current assets into other assets and continuing to kind of get that compounding, you know, flywheel working for you when you're in private equity deals like Real estate and other types of deals. It's important to measure and understand what your liquidity needs are because one of the biggest downsides of real estate is lack of liquidity. And so you need to measure that well and accurately. But I will say as a positive, there's been a lot of research done that most people overestimate their need for liquidity. So, you know, be conservative on that. But at the same time also realize that you may not need as much as you think you need.

Great, great advice. Thank you so much. We think outside the stocks actually focus on three things. One is to increase your cash flow, decrease your tax liability, because those are kind of the leakages too, and increase your net worth because we have to kind of provide that perspective. One question that I'm going to ask you, coming from the banking side, and I'm also a big proponent of the infinity banking system, essentially creating your own bank, family bank, within the life insurance, whole life insurance policy. Have you done that and how do you use it?

I have done that, did it about five years ago. And you know, it takes about that long to get the policies to become efficient from a contribution standpoint to what you're earning in dividends. So, yeah, I definitely use it. You know, my perspective on it has shifted over time. You know, when I first kind of got the policy, my perspective was that it's going to be, you know, replacement as an investment. But that's not, I think, a good way to view it. I view it as a way to make your capital more efficient while you're kind of velocity of money is a phrase a lot of those people use in that. And what that means is, you know, you have your cash value that you're building over time and that is going to be earning consistent dividends. You can keep growing, then you can use that cash value, you can take loans against it to invest in other opportunities. So for me, I view it as primarily my liquidity kind of fund. Right. So I like to keep a lot of liquidity there. I use that as kind of backup liquidity. So kind of more bridge funding into investments and then I'll pay it back. But it is difficult to kind of purely match the, you know, because the idea is you can take a loan from yourself and you pay yourself that that policy. The problem is I'm not that disciplined to do that over, you know, 10 years. I'm like, oh, I don't really need it this month or whatever. So if you can't do that, more power to you. But for me, I Use it as primarily a liquidity fund that I can use to fund deals and then pay it back and not have to be relying on a bank and have access to funds when I need them and also for short term opportunities that I can take advantage of.

Yeah, that's a great point that you bring in. In fact, I always, you know, distinguish that one is a saving strategy and one is an investing strategy. The banking is the saving strategy. When you are making as efficient use as you are doing it. Right. Just parking there between investments, kind of that dry powder when there are opportunities which is going to be in sometime soon, soon future. Right. So that's great. With that we're going to go to our last round about the rapid fire. Just couple of more minutes. What is the one advice that you would give to the investors, the passive investors?

Yeah, I mean it's gonna be similar to what I said before, self education. But I would also say that you can figure it out, you can do this, you can be in control of your money. You're smart enough to figure it out, surround yourself with people that are gonna help you, empower you to do it. Because one of the things I find in a lot of conversations with investors is they feel like it's too confusing, it's too difficult. I just, oh, my financial advisor says I have to do this. That's what I'm going to do. Well, why have you challenged the assumptions? What are the assumptions? Why is that the best approach? Not to say that they're wrong, they may be right, but the importance is taking control, taking ownership of your own money. Right. You've worked your entire life, you've worked very, very hard to accumulate the money you've had. People do not work as hard to manage and grow and build on those funds that they've worked so hard to get. I think you need to take an equal, if not greater sense of ownership, of growing your net worth and growing your investing as you do to create the investable cash. So I would say that is one, you can do it and two, you need to do it.

Great, great advice to kind of bring in that confidence that's really essential to take that action. Now. I think that's most important. One last question. What is that one advice that you received that you know, kind of changed your path, change your, your journey in your financial structure?

Yeah, you know, I think it's, it's probably a lot of things. I think it's one, having people that believe in me, right. And believe that I could do, do things that I wanted to do. But I think, you know, kind of going along with the theme of your show. Thinking outside of the stocks, think outside the box. I think it's important to challenge convention because especially in investing, it's so much centered around herd mentality. Right. Well, I'm just going to invest because everyone else is doing this. Oh, well, crypto must be the next big thing. FTX is the next big thing. Right. Well, we found out that it wasn't because I know and he had a lot of very smart investors that he got hook, line of sink or sold into it. But it's just the nature of humans. We like to be where everyone else is because we assume that that's the best thing. Right. And so I think it's important to. You got to swim a different direction. Sometimes you got to challenge the convention, sometimes the convention is right. But I found most of the time it's not right. And that's how you become a disproportionate success in your investing is looking in places where other people are. It's part of the reason why we're looking at these other asset classes is where we're finding areas that we think are going to produce, you know, outsized returns based on the trends going on that other people may not be looking at.

Mind blown. Mind blown. Absolutely. Ben, you had been such a great guest and I'm sure that our audience has so much to take away. So thank you so much again and those who are listening, thank you so much for listening. There is tremendous knowledge bombs that Ben actually had in those these two episodes. I am just hoping that you have some kind of direction, some kind of, you know, thinking to do as a tidbit from this episode. So thank you so much, Ben again for joining us and this tremendous knowledge. I really appreciate it.

All right, thanks so much and really appreciate you having me on and it was really fun.

Thank you again for tuning in and hope you got a little bit perspective into the industrial and multifamily as an investment class and why you should not be just thinking about keeping your money on the sidelines and not participate in the tremendous opportunities that this investment classes bring you. So hope you have a lot of takeaway from this and I hope you join me in as soon in the next episode. Thank you so much.

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