055: Why Apartments are the Perfect Investment

SHOW NOTES FOR EPISODE 055 – WHY APARTMENTS ARE THE PERFECT INVESTMENT WITH PAUL MOORE

In this episode, Paul Moore, serial entrepreneur, avid investor and the author of The Perfect Investment – Create Enduring Wealth from the Historic Shift to Multifamily Housing, shares his story of how after many types of business ventures he found multifamily real estate investing to be his top choice to produce significant cash flow and a legacy for his children.

What You Will Learn

• How he built his first multifamily property where he rented studio apartments for $3,900 per month with 100% occupancy
• How increased giving to his church helped him recover from being $2.5 million in debt
• Why he shifted his business focus after reaching 50 years of age
• What the two main things he did before jumping into multifamily investing
• What he learned after years of chasing “shiny object” investments
• What is a “lease option sandwich” and how can you use it starting out

About Our Guest

Paul Moore

Paul is co-founder of Wellings Capital, a commercial multifamily investment firm and the author of The Perfect Investment – Create Enduring Wealth from the Historic Shift to Multifamily Housing (2016).  After graduating with an engineering degree and then an MBA from Ohio State, Paul started on the management development track at Ford Motor Company in Detroit.  After five years, he departed to start a staffing company with a partner. They sold it to a publicly traded firm five years later.  Along the way, Paul was Finalist for Ernst & Young’s Michigan Entrepreneur of the Year two years straight. Paul later entered the real estate sector, where he completed over 85 real estate investments and exits, appeared on an HGTV Special Real Estate episode, rehabbed and managed rental properties, built a number of new homes, developed a waterfront subdivision, and started two successful online real estate marketing firms. Three successful developments, including assisting with development of a Hyatt hotel and a multifamily housing project, led him into this arena. Paul is married with four children.

More About Paul

• Always had the entrepreneurial bug
  • While undergrad, earning his petroleum engineering degree
    • Sold Easter baskets
  • While working on his MBA
    • Helped create Ghostbusters mouthwash
  • Even after being hired by Ford Motor Company, on the side, he…
    • Started property tax consulting firm
    • Oil change shop
    • Started human resource outsourcing firm and 5 years later sold it to publically traded firm for a lot of money
  • Moved from Detroit to Virginia
    • Started non-profit ministry connecting with international students
  • Going into retirement in his mid-30s made him bored
  • A buddy and Paul started flipping houses
    • 17-year journey
    • Some difficult lessons were learned at that season in his life
    • First house they bought at auction for $30k, sold it for $60 and were on their way
    • Flipped everything – including waterfront lots
    • Built modular homes in waterfront subdivision
  • Oil & Gas Boom hit North Dakota
    • Paul leveraged his petroleum engineering background
    • Invested in oil & gas wells in North Dakota in 2010
    • His friend would fly his jet into North Dakota but there was never anywhere to stay
    • Built multifamily housing — a 200-unit facility for oil workers
    • Leased out 300 square foot furnished efficiency units for $3,900 per month each (50% cap rate)
    • Later built a Hyatt Hotel in North Dakota
    • Oil prices went down and now he has only 50% occupancy on multifamily
    • When housing crunch hit, he found himself $2.5 million in debt
  • Other high-risk ventures
    • Wireless Internet company
    • High rise office building in Colorado
    • Found that high risk is not always proportionate to high return

His Light Bulb Moment

• Turning 50
• He reassessed what he had been doing
• No longer wanted to continue investing in high risk ventures
• He found the safety and stability of multifamily more appealing
• He wanted to leave his kids with something tangible

Pursuing Multifamily

• Started reading books on apartments and multifamily investing
• Wanted to go into commercial multifamily because of the economies of scale(75-100 units on up)
• Found an owner of a 6-unit off-market deal in his area — owner looked very tired – self-managed
  • It demonstrated that the smaller multis were much more work than the commercial multis
• Found an experienced mentor that had been in commercial for 8 years, studied under the mentor for a year and a half
• Other mentors he knows
  • Michael Blank – charges $1,000 for mentoring
  • 37^th Parallel Properties – $25,000
• He is now buying only class B apartments

Biggest Mistakes

• Reading the 2005 Fortune Magazine article that said the real estate market was about to implode and ignoring it
• Chasing “Shiny Objects”
  • Started wireless Internet company
  • Building office high rise
  • Purchased oil and gas wells
  • What he learned: Don’t chase high profit ventures in markets you know nothing about
• Pulling out of the $2.5 million debt
  • Cried out to God for help and felt God direct him to George Mueller to ask the question, “What would George Mueller do?” and he felt that Mueller would “give himself” out of debt
    • Started giving away more aggressively to church than he could really afford to give away
  • Shortly thereafter (4 weeks later) got word from local county planning board that the shorefront property that he had that he previously thought was not sub-dividable, all of a sudden it was and he was able to sell the property and recoup the $2.5 million loss

Biggest Success

• See above

Advice for Those Who are Just Starting Out

• You can take your risks while you are young
• As you get older, don’t “swing for the fences”
• Follow Solomon’s advice – “Wealth gained hastily will dwindle but whoever gathers little by little will increase it.” Proverbs 13:11

Where he sees his Current Business Going

• Looking to add several thousand doors to portfolio
• Smith Mountain Lake development
• Passionate about doing something that will change the world
  • Wants to donate 25-50% of internal profits to fight Human Trafficking and rehabilitate victims

Rap-It-Up

• Favorite real estate book: The Complete Guide to Buying and Selling Apartment Buildings by Steve Burgess
• Favorite business book: Made to Stick by Chip and Dan Heath
• Favorite quote: “It would seem that our Lord finds our desires not too strong but too weak.  We’re half-hearted creatures fooling about with drink and sex and ambition when infinite joy’s offered us like an ignorant child who wants to go on making mud pies in a slum because he cannot imagine what is meant by the offer of a holiday at the sea.  We are far too easily pleased!”  – C.S. Lewis
• Most valuable web site for success (other than your own): neighborhoodscout.com and Google Earth
• Favorite app: iPod podcast app
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your business? “Would like to get back in multifamily but wouldn’t start there.  Would place an ad in craigslist.com for a home that he could purchase quickly or get under contract for $100 and wholesale it back out.  Another thing would be to get a “lease option sandwich” under contract which would mean he would rent to own a house that was in pre-foreclosure.  Clean it up, paint it, get the person out and then rent to own it to someone else.  Take the down payment and the monthly profit to get some cash flow.  Then try as quickly as possible to get into an owner-financed multifamily apartment.”

Paul’s Book

• The Perfect Investment by Paul Moore

How Can People Reach Paul

• Website: wellingscapital.com
• Email: Paul@wellingscapital.com
• Phone: 800-844-2188

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