The AAA Storage Podcast

Welcome to the AAA storage podcast,
your integrated real estate and

development partner, exploring all
things, self storage investing to

bring you diversified success.

Let's dive in.

Brandon Giella: Hello and
welcome back to another episode

of the AAA Storage Podcast.

I have with me as always
the inimitable Paul Bennett.

Thank you for joining again.

And we have a featured guest
today, uh, in Paul Shannon.

Now, Paul Shannon, you are
an expert in real estate.

You host your own podcast.

I would love if you could tell our
listeners a little bit about yourself.

And, uh, and we'll talk today
about what's going on in real

estate from your perspective.

Paul Shannon: That sounds great.

Brandon, Paul, first of all,
thanks for having me on the show.

I'm looking forward to our conversation.

Uh sure a little bit about my background
Um, i've been investing both actively

as a multi family and single family
operator Uh, as well as a passive investor

since 2016, uh, I found that actively,
uh, sometimes profits are higher, but

the workload is, is quite heavy, right?

Um, sometimes there's more
risk as a passive investor.

I've enjoyed being able to diversify
my capital outside of my local area

of knowledge, uh, outside of my local
geography and into other asset classes

that I don't have experience in, uh,
those asset classes, uh, to name a few.

Also, multifamily in other areas of
the country, uh, industrial assets,

self storage, mobile home parks,
uh, private equity businesses, uh,

industrial assets, um, I've invested up
and down the capital stack, that being

debt, preferred equity, common equity.

So a wide variety of experiences.

I'm a passive investor over 40 deals.

Um, I have, uh, done a lot of
renovation on heavy value, add

multifamily residential units, uh,
upwards of about 200 units and, um.

You know, just I'm really
interested in the space.

I always like to try to stay up to speed
on what's happening in the world of, uh,

of economics and the economy and, uh, you
know, the global kind of, uh, how all the

pieces fit together, so to speak, and how
they connect to the real estate world.

So it's been a good journey
and, uh, as of late.

Um, I'm also the co host of the
Passive Pockets website, passive or

a Passive Pockets podcast, excuse me.

Passive Pockets is a community of passive
investors, uh, that come together to

kind of share knowledge, uh, help each
other, vet sponsors and understand the

industry, stay away from the bad actors.

If there are any sort of a word of mouth
type approach, uh, but just a strong

community to kind of get other people's
opinions to make sure that you're on

the right track as a passive investor.

So that's been a fun experience too.

Brandon Giella: That's right.

Great.

Thank you so much.

Yeah.

Definitely.

Check out the passive pockets community
and the podcast that Paul helps host.

Uh, the triple a storage team is
members of that community and would

love to interact there as well.

Um, definitely a great resource for
all your real estate investing needs.

Um, Paul, before we get
started, uh, can you.

Paul Shannon, there's two Pauls.

I gotta, I gotta clarify Paul Shannon.

Uh, tell us what, how do you
define passive investing?

What does that mean to you?

Or how would you describe it to somebody?

I

Paul Shannon: when I think of passive
investing, the first phrase that

comes to mind is mailbox money, right?

I alluded to it, uh, when I was
introducing myself there that there's

active investments and those are ones
where you're the active operator,

you're in charge, you're the manager
of a project, so to speak, you own the

real estate, uh, maybe you hire a third
party property manager, but you are.

You know, interacting with brokers,
trying to source deals, find deals,

come up with the value add plan.

If there is one, uh, source the debt,
um, basically hold the property and

service it during the, during the period
that you own it as a passive investor.

Uh, it's a different approach.

I wouldn't say it's completely passive.

I think people sometimes make that.

that mistake that they can just hand
their money to somebody and they'll take

care of it, care of it as a fiduciary.

Uh, the work really is on the
front end for a passive investor.

And that's identifying people that you
know, that you like, that you trust, that

are competent in the space that you're
interested in, and they are going to

be able to execute their business plan.

But once you make that decision and
you subscribe to their offering,

And you hand over your money.

That's where you sort of are out
of your, everything from there

on out is out of your control.

It's, it's in the active partner of
that businesses, uh, you know, hands

at that point to, to control your
capital and execute their business

plan and ultimately, you know, arrive
at those returns that, uh, they

were targeting on the front end.

Brandon Giella: love

Paul Shannon: point, when I say passive,
that's where the mailbox money comes in.

If everything goes to plan, that's
where you start getting checks in

the mail for your distributions.

And when the asset is eventually sold,
hopefully you're going to be enjoying

the profits as well, but you don't
really have any active involvement

from the time you wire the funds until
the time you get it back at the end.

Brandon Giella: that.

That's perfect.

Thank you.

Yeah.

We spent a lot of time on that front
end doing that kind of due diligence

and showing, you know, why, especially
the AAA storage team goes into certain

investments or the way that they, you
know, think about the process, think

about their own due diligence in order
to kind of build that trust and help

investors walk through that process.

Cause to your point, that's, that is
the activist part, you know, at the

very beginning from an investor, uh,
on, on, uh, as a passive investor,

Paul Shannon: 100 percent just to add
to that too, is that you really need to,

um, put more emphasis on the sponsor.

Their experience and their trustworthiness
than you do necessarily the deal.

We always talk about it in the passive
pockets community that a bad operator

can mess up a good deal or even a great

Brandon Giella: Mm.

Paul Shannon: a good operator or a
great operator can make a bad deal

into an okay, or even a good one.

So, uh, getting the sponsor, right.

Is the most important thing
as a passive investor.

Brandon Giella: I like that.

That's helpful.

That's helpful.

Okay.

Well, shifting gears a bit, uh, I
want to get into some of the, the,

your, I know you're tracking markets
and economic analyses and things

like that, uh, pretty closely.

So Paul Bennett, before we started
recording, he talked about this,

uh, article that you found very,
very helpful to understand a trend

that is developing in your world.

Can you describe that
article a little bit?

And then I'll let you guys kind
of take it from here as the,

as the real estate experts.

I don't, I don't want to jump in too much.

Paul Bennett: Absolutely.

First of all, Paul Shannon, I'm thrilled
to have you on the podcast with us, man.

I've got so much respect for you
and you have a unique seat in the

passive investing world and an ability
to sort of see the market from a

perspective that a lot of people don't.

And so I really, really
value your information.

I was, we were talking before we started,
I just read an article recently, it

was published by one of the big fund
administrators, um, so they have sort

of a unique view of capital being
raised and that type of thing and it

had some interesting statistics in it.

One of them was that the current
market for private equity is about 25

trillion and it's projected to more
than double between now and 2032, where

it's projected to be about 60 trillion.

I can't even wrap my
head around that number.

But the other comment that I found
fascinating was that a lot of that

growth is being driven by the entrance
of high net worth individuals.

into the private equity markets
and in particular in real estate.

So I'm just curious if you're seeing
that sort of migration of people that

have traditionally invested in ETFs
or equities or suddenly beginning to

consider adding alternatives to their
portfolios or what do you see sort of

at the broadest level of the market?

Yeah.

Paul Shannon: has grown
dramatically and is going through

a maturation process as we speak.

Uh, in 2020 or 2012, excuse me, the
tax cut and jobs act was enacted

and that really paved the way for
syndications and private real estate,

uh, private investment in general from.

From high net worth individuals and
then in 2017 that act was revised during

trump's first administration And since
then the space has grown dramatically.

I think there's a couple factors there
one is that There's a lot of people

who are looking for more control
in their portfolios And most people

prior to that time period were really
allocated heavily Into stocks and

bonds traditional markets, right?

and As much as your financial advisor
will tell you that you're diversified

It sure doesn't feel that way when
everything's moving in the same

direction Down, you know if everything's
going well and it's going up.

You're not too worried about it.

But When everything's going down in
tandem Like it was in 2020 for example

And then even bonds that are supposed
to be the safe haven provide income

and sort of reduce volatility in a
portfolio started going sideways.

Uh, you start to feel out of control.

So I think a lot of people that I talked
to are attracted to the alternative

space, specifically real estate,
because the collateral is so strong

and the underlying asset that you own.

Um, that, you know, we're
looking for a little bit more

control and consistency and, and.

diversification, true
diversification in their portfolios.

So that's one thing.

And then as it relates specifically to
real estate or commercial real estate,

um, I think people are realizing that
they don't have to be active landlords.

You know, it used to be that there's
a phrase out there that if you're,

if you're going to get involved
with rental properties, it's gotta

be single family homes and you're
going to have to deal with tenants

and termites and toilets and 2 a.

m.

phone calls and all this stuff.

And that may have been true at a certain
point, but now with passive investing.

Um, you can put your capital in the
hands of, of responsible folks like

triple a storage and many others
that are out there in different asset

classes who have been doing, uh, their
specific niche in the space for decades.

Um, and, and they do the
work for you basically.

So it's really just identifying
who those people are and, you know,

real estate has some very specific
and very unique characteristics to

it that are different than stocks,
bonds, and traditional assets.

There's an acronym that
I like to reference.

It's ideal.

Ideal stands for I income.

So the properties that
you own produce income.

D is for depreciation.

So you're getting some tax
benefits from these assets.

Uh, E is for equity buildup.

That's where the tenant is actually paying
down the debt that you originate and

the note and they're servicing that note
basically through their rent payments.

Um, a is for appreciation.

So these assets tend to
appreciate over time.

Real estate is shown to appreciate
oftentimes, uh, at greater

rates than the stock market.

And then L is the use of
leverage and that's twofold.

One is leverage meaning debt.

So when you borrow fixed rate debt
and inflationary environment, the

cost of that debt in real terms
actually goes down over time.

Because as inflation makes the dollar
worth less, so are the dollars that

you borrowed, say five, 10 years
ago, they're worth less today.

If you borrowed a thousand dollars
today in 10 years, that thousand

dollars isn't worth the same, right?

But you still have to pay
back that thousand, which is

not as much of a debt burden.

So That's one point of leverage.

And then the other is again going back to
leveraging other people's expertise and

experience and you know in the operators
that you invest with as a passive

investor, so All those things make for
a very unique investment opportunity.

In my opinion, multifamily, um, self
storage, these commercial real estate

assets are some of the best asset
classes in the world to get involved in.

And now there's just more access to it
so that the space is definitely growing

Paul Bennett: Yeah.

That's, that's really good stuff Paul.

We've talked with a number of registered
investment advisors and we've got

a whole group of them that have
recommended opportunities with us to

their clients, but I often found in
that market that They're so oriented

on ETFs and equities and mutual funds
that it almost blows my mind because I

think any, any high net worth individual
should have an allocation to tangible

real assets in their portfolio.

So I agree with you.

And the lack of correlation of the public
markets is one of the biggest reasons why.

I totally agree with you.

That's really great stuff.

I'm going to steal that ideal,
I'm going to steal that ideal,

Paul Shannon: Yeah, please do.

Paul Bennett: that's

Paul Shannon: I stole it from
somebody else, so I can't take

Paul Bennett: Ha ha ha ha

Paul Shannon: But the correlation piece
is huge and you feel it today, especially

when the stock market's kind of on
a decline and there's talks about a

recession happening, et cetera, et cetera.

I'm sleeping better at night
during a volatile period

than I ever have in the past.

My allocation to public markets
is as low as it's ever been.

And I'm happier than a clam to be where
I am right now in real estate position.

So for sure.

Paul Bennett: Yeah.

Absolutely.

Brandon Giella: wonder, uh, Paul Shannon,
uh, I wonder if you could tell us a

little bit about how you're seeing, uh,
markets play out right now and things

that you are paying attention to in
the near term, let's say the next six

months, next 12 months, what are some
things that you're trying to follow on?

Are there particular, you know,
influencers, economists, market analysts

that you're following or reading or how
are you, How are you staying on top of

things right now as they're developing?

Cause there is some turmoil right now.

I think it lasts like a month or so,
uh, folks have, have felt a little

uneasy about the way that the market is
headed based on whether it's, you know,

trade policy or, you know, treasury
rates or just the general stock market.

Um, so how, how do you, how are
you seeing things right now?

And then how are you keeping
up with those developments?

Paul Shannon: Great question, and
I'll try to keep this short because

I could really go on a tangent here,
but You know, uh, a lot of times

headlines are, are clickbait and they're
sensationalized and they're meant to,

uh, get people excited or to panic or,
or whatever to get readership, right?

So, I, I try to, uh, you know, eliminate
emotion the best I can when I'm, when

I'm keeping up with current events.

But, I do also believe that the macro
environment is critical to Being

able to, uh, invest effectively.

And I don't want to say that
I try to time the market.

I certainly have failed
at that plenty of times.

And in the stock market, uh, trying
to, you know, pick hot fads or, you

know, predict when the market would
go up or go down and been wrong.

Almost every time real estate
tends to move much, much slower,

uh, where the stock market
can act like a roller coaster.

The real estate market acts
more like a Ferris wheel.

So, uh, there's specific cycles.

And these cycles could be independent
of, you know, different markets across

the country based on supply and demand
and, um, you know, population growth and

jobs and what's driving, uh, you know,
the growth in the market, et cetera.

Um, so, you know, trying to keep up with
those things in real estate, I think

is a little bit easier because it, it
moves a little slower and you can kind

of follow these macro trends and, and
attached to a thesis and sort of ride it

for a little bit longer than the stock
market where things happen very quickly.

There's algorithmic trading and.

There's a sentiment that's involved
that's much stronger and emotions and

you can just go into your computer
and click a button sell and trade and

do all these things It's a little bit
different in real estate where you're

locked into a pretty illiquid asset.

So I will say that but There has been a
lot of turmoil, so to speak, in the real

estate market in general, commercial
real estate over the last three or four

years, and I follow multifamily very
closely and just briefly touching on the

past five years or so since, since COVID
happened, you know, we, we expanded the

money supply by almost double, which
created an inflationary environment.

Um, at that time, the federal
reserve was saying that.

All that money wouldn't really impact
inflation and any, you know, price

changes that we saw at the, uh,
grocery store counter or any of these

other stores that you go shopping
and where you see these prices go

up, it's just going to be transitory.

It's going to be, you know, semi
permanent, but it'll go away on its own.

And that narrative started to, uh,
you know, lose, lose credibility

around late 2021 when inflation was
at about 9 percent and the federal

funds rate was still at zero.

They probably didn't
raise rates soon enough.

Um, but they, they started to identify
and recognize that inflation was a little

bit more structural than, than transitory.

So they, Jerome Powell and the
Federal Reserve started telegraphing

that rates were going to go up.

And, you know, if you look back at
history, the last time inflation

was as high as it was at that
point was back in the 1980s.

And the Federal Reserve chairman at that
time was Paul Volcker and he's credited

with breaking the back of inflation.

Well, how he did that is he
wrote, he wrote, raised interest

rates, the federal funds rate.

Significantly and quickly.

And at that time, you know, I've
got stories from my parents and my

uncle, they bought homes and they
had interest rates of 15 percent

on their houses at that time.

So just those stories anecdotally and what
was happening in the market kind of had

me a little bit concerned and interest
rates heavily impact commercial real

estate because they're not correlated one
to one with cap rates or capitalization

rates, which is the multiplier that's
used to value commercial real estate

based on the income of property produces.

Um, Not correlated one to one,
but they are they are heavily

influential with one another.

So if interest rates go up Typically
in historical terms, cap rates tend

to expand and cap rates are inversely
related to the price of real estate.

So if cap rates go up, property
values go down and vice versa.

So my thesis going into 2022 was that,
you know, we're going to see downward

pressure on real estate prices.

First of all, they had
gone through the roof.

So what goes up often comes down hard.

And then you had this phenomenon
with interest rates going on, the

correlation between cap rates,
we kind of really backed off of

commercial real estate at that point.

Um, And it was difficult to acquire.

We tried to, we made offers based on
what we thought made sense, but there

was still sort of this irrational
exuberance in the marketplace.

And a lot of people were paying top
dollar for assets and they were doing it

using short term bridge debt, floating
rate, uh, debt, which, you know, if

it's floating, it moves, it's, it's, uh,
like, uh, uh, a variable rate mortgage.

And when the federal funds rate was
going up, these, these, you know,

mortgages that were now on these
commercial properties started going up.

So it was eroding cashflow,
uh, rents started to stagnate.

And that brings us up to really
today where a lot of these loans are

starting to mature and you're seeing
some distress in the marketplace

where these operators anticipated
that their net operating income, the

income, the property that produces.

Was going to be x and it's much less
than x they've also got much higher

borrowing costs So they have to actually
bring more cash to close or get that that

loan refinanced and property values have
fallen so What's happened is is that if

you were A active real estate investor
or passive real estate investor in some

of these deals You've lost you've lost
some capital and you know, hey you lose

capital in the stock market, right?

We take risks when we invest Uh, but
some of these risks that were taken

were outsized and that's part of the
maturation process of the industry

why I summarize all this is because
now what i'm seeing is that we've

sort of Reached peak rates, right?

The federal funds rate has actually come
down 100 basis points since september now

for a while There the 10 year treasury
was moving in the opposite direction and

going up Almost, you know correlated one
to one it moved up 100 basis points Which

is a weird phenomenon that hasn't happened
since again the 1980s six or seven of

the last um Um, rate hike cycles, um,
that have then turned around and sort of

been cutting, uh, that has not happened.

And so this is, this is sort
of a one off type scenario.

The good news is now the 10 years
starting to fall down again, and

that 10 years where a lot of the
barring rates are based off of.

So as debt becomes cheaper, that
infuses more capital into the space.

There's more predictability around what's
going to happen with interest rates.

That's good for commercial real estate.

So that's what I've
been keeping my eye on.

And for the first time in about
three years, I'm starting to see that

deals are starting to pencil again.

They're starting to make sense.

They're starting to look attractive.

And although the stock market and some of
the headlines you read in the papers are

going to say the exact opposite of what
I'm saying now is actually a good time.

to buy commercial real estate,
in my opinion, because the dust

has sort of settled and we've
already seen some of the decline.

And now we've got, you know, a
very difficult environment for,

for, you know, getting stuff out of
the ground and building new stuff.

But there's still a lot of demand
from, uh, from tenants, let's say.

And I'm talking in broad, broad
terms, that could be tenants of

the products you guys produce for
self storage or tenants that want

to go live in apartment buildings.

But, um, There's not a lot of supply
that's going to be available in the next

year or two there was for a few years Um,
but that's starting to dry up now and when

there's low supply and high demand That's
typically good with low borrowing costs

that drives investment into the space.

So even the stock market could be Doing
poorly that doesn't mean commercial

real estate's going to be doing
poorly the stock market's actually

been doing great the last few years
Right and commercial real estate's

been a little bit more challenging.

So Uh, to your point, Paul,
these are non correlated assets.

So sometimes one will do well and the
other won't, uh, but long term real

estate tends to appreciate over time.

And if you get into it.

safely, and you structured
debt appropriately, and you

work with good sponsors, these
things can all be mitigated.

But those are the kinds of things that
I'm keeping my eye on right now, or our

supply and demand policy, uh, or, or
supply and demand, interest rates, and

then, uh, administrative policy, too.

Obviously we've got a new president
in the office right now, and there's

been a lot of changes that have taken
place, proposed changes, uh, but some

have been enacted with tariffs and, um.

You know, such and such.

So there's, there's still yet to be a
conclusion as to what will unfold here.

But I would just say, you know, focus on
the macro picture, the bigger picture,

and always relate the headlines of
today to what's happened in the past.

History doesn't repeat itself,
but it often does rhyme.

And if you study financial history,
you'll see this isn't the first time

this has happened, you know, and you
can kind of relate what the outcome

was, uh, during a past historical
perspective to what's going on today.

And I think that can keep you
rooted and grounded and commercial

real estate's not going away.

Paul Bennett: Yeah.

Paul Shannon: Kind of rambled there
a little bit, but, uh, that's, uh,

that's what I'm keeping up with.

You also asked me what, who I follow.

Um, man, there's, there's a great
people out there that are, uh, you know,

offering a lot of different perspectives.

There's, there's people out
there that are, you know, trying

to sell their potion too, but.

The people that I really pay attention
to are the ones that do track the

economy and look at the macro picture.

Um, Jay Parsons is a great guy to follow
as it relates to, uh, rental housing

that can be single or multifamily.

He's an economist.

He does a great job of, um, You know,
kind of breaking down and analyzing

market specific situations and how
it relates to the economy today.

Um, james ang is another guy that I
follow he's uh with a team over at

old capital They're lenders, but he
does a lot of analysis on capital

markets and where where debt Is
trending based on interest rates and

what borrowers are doing in the space
Um, so those are, those are two guys.

Greg Willett is another guy who's an
economist who, uh, is with real page,

who is, you know, very insightful
and breaks down information.

And then I read, I read market
watch a lot, market watch.

com, um, which is more, you know,
uh, for the stock market investor, a

lot of their headlines are, but they
do cover the economy quite a bit.

And if you can gauge, you know, where
sentiment is at and what's happening,

you know, uh, in a national and
global picture, it just gives you

more data points to make decisions.

So that's a good website for that.

Paul Bennett: That's great stuff, Paul.

Really great stuff.

As a developer, we look at a lot
of the same information, and I

think you and I talked about it on
the Passive Pockets Deal Review.

One of the things that we saw
in where the market was trended

in 22 23 was the drop in demand.

And the fact that there was a lot of
supply that started into the pipeline

in 20 and 21, but we felt like rates and
the environment would slow development.

And that's why we launched our first
fund when we did, in late 23, early 24,

really anticipating that demand would
have consistency to it and that with

a drop in supply, it would create an
opportunity for us and for our investors.

And we've seen exactly
that today in self storage.

Um, the, the, the pipeline of new
deals coming online is dropping below

3 percent of current inventory for the
first time in probably the last eight

years, um, as development has slowed and
demand sort of stays fairly constant.

So, um, but absolutely kind of
putting your finger in the wind and

listening to smart people like you.

Um, is, is a good guide to know
when, or when the opportunities

exist and, and when it's time to
be a little bit cautious, for sure.

Yeah,

Brandon Giella: Uh, so maybe maybe the
last question or kind of closing out

this conversation Paul shannon, do you
have any uh, Recommendations or advice

or wisdom in addition to what you said
for high net worth individuals who are

looking to get into real estate Maybe for
the first time or maybe trying to suss

out if this is something where they'd
like to place or allocate a part of

their portfolios or something that you
would recommend that they they do they

read they You know, analyze something.

I mean, what would you say if
you had to talk to hundreds

of people on stage right now?

What would you say?

Paul Shannon: Uh, great question.

I can tell you what I did wrong first
and then kind of how I found my way.

I tried to go at it alone.

Um, you know, I was in a sales career
and, uh, was in, in the operating room

selling capital equipment to surgeons.

And, uh, You know, spend a lot of
time, my feet and a lot of time talking

and networking and meeting people.

And when I left that career,
I was renovating single family

homes and multifamily properties.

And I needed a break from all that.

I just wanted to kind of be on my
own and be a project manager and

be, uh, be a real estate investor.

Right.

And Um, what I didn't realize was key to
being a successful real estate investor.

And that goes for passive
investing as well.

Is that networking piece?

You got to have it.

I mean, you really do.

And you have to know people,
you have to know who to call.

Um, when certain scenarios arise,
that's where it's not as passive as I

think it sometimes gets credit for, but
how can you make it a little easier?

Uh, it's joining a community.

Uh, it's, it's joining a, a
group of like minded individuals.

That share the same desire to create
passive income to create generational

wealth to um, kind of step into the
alternative asset or commercial real

estate passive investing private
equity space Um, whatever you want to

call it It's not as simple like you
pointed out early in the conversation.

Paul is going down to fidelity or
vanguard And talking with a financial

advisor who's going to give you that
traditional Advice of, Hey, let's

allocate your portfolio into, you know,
60, 40, and let's look at the 60 and

break it into mid cap and large cap.

And it's like, okay, that's, you
know, that's pretty generic advice.

So.

Um, if you're looking for alpha, if
you're looking to break away, create

true diversification and outsize returns,
um, you know, where do you turn to?

So it's usually from, from other
people that have been in the space

and been there and done that.

And I found that the passive pockets
community for me has been that outlet.

Um, there's other communities out there
that are similar and maybe take a little

bit of a different spin or approach,
but there's nothing more powerful

than being exposed to an opportunity.

that hits your inbox or you hear about
on LinkedIn or, uh, you're pitched to

by somebody else where you can go onto
a forum on a website and type in that

person's name or that group's name and
see if anybody else has had experience.

You'd be surprised.

There are people that have it's
either good or bad and you can, you

know, find out a lot of information.

Uh, if it's good, that would lead you down
the path to say, Hey, this meets my risk

tolerance and my investment objectives.

And I'm going to take a chance
with this group and invest.

Or you might find out that, you know, that
group hasn't been good at communication or

they're losing money on a couple of deals
or, you know, the worst outcome is that

they're a fraud or something like that.

You can save your capital.

And, you know, if you don't have
that community to fall back on, you

don't have that as a resource to
then get that additional information.

You just have to make.

You know, basically, uh, decisions
inside a bubble, which is, is never good.

So, uh, I remember passively investing
in a deal early on and I did it all on

my own and the outcome wasn't that good.

So that community I think is, is key.

And then, you know, getting
that pipeline filled.

I think, I think it's helpful
to be an active operator, to

be a passive investor for sure.

I can't deny that.

Uh, but there are plenty of people
that are passive investors that

have never dealt with the tenants,
termites, and toilets that are, that

are very successful in the space.

And I think how they become that way
outside of the, the aforementioned

community is just by looking at
deal after deal after deal, right?

You don't know what a
good deal looks like.

I made the mistake, another one, of
thinking that the Private equity,

real estate space was really small.

And when I got a couple of opportunities
into my inbox, I thought, man,

I really got to jump on these.

These are, you know, once in a
lifetime, so to speak, and that's

what they were advertising anyways.

That's what everybody advertises.

So when you realize after being in
the space for a while, that the, the,

the space is really, really vast.

It's large.

And if you say no to an opportunity,
even if it's a good one, there's

going to be another one that comes
down the road shortly thereafter.

So, um, I like to, you know, consistently
get emails into my inbox and have deals to

look at and then get, you know, competent
by understanding how to evaluate them.

What are the returns look like projected?

Are they realistic?

Can you look at an underwriting or
Excel file and kind of break down

what the inputs were that were
used to derive at the outputs, i.

e.

the projected returns?

Are those inputs realistic?

You start to understand these things,
the more deals you look at it.

You know, read a PPM, the Private
Placement Memorandum, and understand

some of the terminology that's used
in there and some of the commonalities

across these PPMs, and then you'll be
able to identify some oddities that you

might see in a PPM that are a little
bit different than what the norm is.

And you ask the sponsor questions
about that, or maybe you don't,

and you just say, you know what?

There's a risk I see.

I don't understand it.

I'm not going to invest in
something I don't understand.

Good enough.

You know, so there's always going
to be more opportunities to invest.

There's always going to be more deals
to look at, but I would say getting

the reps in is critical outside
of just joining that community.

Paul Bennett: Yeah.

What great advice, Paul.

And I would echo we have had
tremendous experience with Packet

Passive Pockets as a sponsor.

Um, and I've been super impressed
by that whole community and the

way Passive Pockets is serving the
investment community by providing

things like the deal review that
you're one of the co host of.

Um, and I think it's just great teaching
people how to do that due diligence and

how to look at a PPM and dig out some
things that you might have stepped over.

Speaking of Passive Pockets, I'll put
in a plug for both of us a week from

this Friday on the 21st The tables are
going to be turned You're going to be

the moderator and I'm going to be the
guest along with Paul Moore to talk about

self storage in specific So if you're
if you're listening to this and you're

a part of the Passive Pockets community
Stick it on your calendar and make

sure you get to get the link to, uh, to
that webinar presentation next Friday.

Um, I don't know if we've got time for
this or not, Brandon, but I want to give,

um, Paul a chance to talk for just a
second about his InvestWise Collective,

the, the fund of funds that I know
is a big passion and focus for you.

Uh, I think people would love
hearing a little bit about that.

Paul Shannon: Yeah, I
appreciate the opportunity.

Paul, uh, invest wise collective is a,
is a fund that we started back in 2023.

Um, as I mentioned earlier, we have
experience operating multifamily, but we

also were investing me and my partners
passively in our own portfolios, and

we were identifying good opportunities
in other asset classes when multifamily

was kind of having a little bit
of a rocky road for a while there.

At least we thought so.

And we didn't want to invest
in that property type.

So we didn't want to stagnate, but we
wanted to keep our capital in motion.

And we created this vehicle to basically
collaborate and share and do diligence

and then pool our capital together.

And we thought, well, why not,
you know, if we're all three going

to invest in these deals that we
find and identify, why not give.

the opportunity to invest alongside us
and kind of keep them engaged too and tell

them what we're up to, even though we're
not as active on multifamily right now.

So, uh, we started that, um, over
the last couple of years, we found

really good yield and opportunity
and investing in real estate debt.

So moving lower in the capital stack.

And what I mean by that is basically
we're acting as the lender.

Um, through other funds
that were invested in.

We're letting people borrow money to
acquire real estate and we hold, uh,

lean to the property that they acquire
and a first position, uh, stance or a

second position in some cases, uh, where
we, we got first priority of payment.

Uh, we loan on low, low to leverage, um,
Um, where, uh, you know, if the property

declines in value or if, you know, a,
a, a worse situation happens where we

have to actually take the collateral,
take the real estate back, we're getting

it at a value that we feel like we
can liquidate it at and still be made

whole or, or potentially even a profit.

Um, so that's been a really
good place to hang out.

A lot of, uh, people have had, you know,
uh, a need or a desire for cashflow

lately and haven't been able to find
it in most places and we're able to pay

into the, the low, uh, teens on some
of the deals that we're involved in.

So that's been really good.

And we can redeem out of those funds
when we, you know, want to rotate

into something more aggressive, which.

We're about to embark on, uh, acquisition.

We're under contract on a class
multifamily property for the

first time in three years.

We're going to acquire
multifamily property.

As I mentioned, the conditions are
starting to change and things are

starting to look more attractive.

So, um, we may we maintain the
position that we can be general

partners or limited partners in the
positions that we take within the fund.

Uh, but our main objective is preservation
of principle, diversification, and,

you know, obviously to help people grow
their wealth through passive investing.

So it's been a fun journey with
InvestWise and, uh, we're looking

forward to a bright and long future.

Paul Bennett: That's awesome.

And thanks for sharing that.

I'm a big fun, a fan of
fun to funds as a vehicle.

So, uh, that's super exciting, Paul.

I really appreciate you taking
time to be with us today, Brandon.

Thanks as always for leading and guidance
and, uh, and I'll see you if not before,

I'll see you in about eight days.

Paul Shannon: Looking forward to it,
Paul, and I appreciate you and Brandon.

Thanks for having me on today.

Brandon Giella: Thanks
guys for being here.

The two Pauls.

Appreciate your insight
and expertise as always.

And we'll see you next time.

Paul Bennett: Great.

Thanks, man.