Going Long Podcast with Host Bobby Keels and Guest Speaker Scott Choppin
Here’s what Scott shared with us during today’s conversation:
Where in the world Scott is currently: Longbeach, South California.Favorite European City: London, England.
The best thing to happen in the past 24hours: Making plans to share his knowledge of business and entrepreneurship with his children on an ongoing basis.
A mistake Scott would like you to learn from so you don’t have to pay full price for it: Look for the “Signals in the Noise” – don’t ignore the signs you see, which are based on tried and tested data analysis, as they can sometimes get buried within the noise of all else that is currently going on.
Book Recommendation: The Price of Tomorrow, by Jeff Booth. For full transcript click here Expand File Name: Going Long Podcast-Episode 68 with Scott Choppin
Host: Billy Keels
Guest: Scott Choppin
File Length: 00:46:24
Billy Keels: Welcome to the Going Long Podcast. We’re back once again, to continue to help to educate you so that you feel comfortable as well as confident investing beyond your backyard. I’m your host, Billy Keels. And you know what, if you’ve ever wanted to know how to use innovation with development projects, even after you’ve been in the business for over 20 years, then guess what? Today’s conversation is absolutely the one that you’re going to want to be able to listen to all the way until the very end. Because today’s guest not only has 35 plus years in real estate development, he’s also the father of three and fourth-generation Californian, which is pretty, pretty awesome. We’ll go into some of those details as well. He is also the founder and CEO of the Urban Pacific Group of Companies. I want to welcome to the show, Scott Choppin. Scott, welcome to the show, man.
Scott Choppin: Billy, great to be here. Appreciate the invite.
Billy: Hey, you know what? This has been really awesome. And I love your energy, even from the very beginning, chatting with you in the pre-conversation. And so I want everybody to learn from you as quickly as possible. So let’s jump right into today’s question.
Scott: Looking forward to it.
Billy: Yeah, me too. Scott, as you know, I always love to kind of get started. Help us understand, where do you live in the United States?
Scott: Yeah. Thank you. So I live in Southern California, right? I think everybody sort of generally knows California, like on a high level, but I live in the Southern basically third of the state around Los Angeles County. I don’t live in the city of Los Angeles. I live in a city called Long Beach. It’s right at the Southern end of LA County, right at the Northern border of Orange County. I live on the coast not directly on the water, but it’s basically coastal. So, you know, Long Beach is a big city but our area is sort of like a little beach town. You know at least it has the feel of that and it’s actually where I was born and raised and raising my family now. And as you said, a family of three. My wife and I have been together and married for 27 years.
Billy: Wow. Congratulations, man. So we’re going coast to coast and I’m a guy from Columbus, Ohio. So I didn’t grow up with the water, but you know what, now that I’ve been around it, I don’t know how to live without it before. Right?
Scott: I’m with you. We have that conversation, like everything about moving away from the water and it’s like, you know, it’s a hard conversation.
Billy: Yeah. I can imagine. Awesome. So, on the lower third of California, great place. So what’s the most positive thing that’s happened to you in the last 24 hours, Scott?
Scott: Yeah. You know, it’s an interesting question. So the answer I came up with my two older sons, my oldest, Sean Patrick is 19. He’s a sophomore at USC University of Southern California. Then my younger son is Dylan who’s 16. And since the pandemic started and everybody, you know, my college sophomore, Sean Patrick came home. You know, we’re all basically back together as a family. We started a weekly learning process, just think social skills, things that you would need to pay attention to. And so in answering your question, yesterday, we reformatted our meeting. You know, it was sort of going to turn into your business career sort of weekly, meetings for guidance and learning. But really, I changed the course of how we’re doing that really to focus on, you know, fundamental strategic knowledge is what I call it.
In other words, what are all the things that fundamentally or underlying business and, you know, social interaction, think, you know, getting married and having a family? And so we re-oriented this meeting after I thought about it and all the things that I was teaching them sort of started to fit into these fundamental knowledge categories. And so you know, the positive is they accepted my offer to learn. And in fact, we sort of like, hey, we’re doing this because we’re at home and we have the chance and we’ll never have this again. This pandemic and everybody at home situation. But I said, let’s plan on keeping this, you know, weekly meeting, like working together, think like a mastermind, and let’s just keep it going, you know, forever in essence, and you know, that won’t be forever because I won’t be here forever. But they accepted that. And I was excited about that.
My daughter, Jen is 13 and in the future when she matures a little bit more in the sense of just growing and her brain maturing we’ll involve her with that. And really my ethic, my standard of conduct for myself, Billy about this, is that I tell my kids, you know, I learned lots of hard, difficult lessons being an entrepreneur now for 20 plus years, coming from a family of entrepreneurs. And there’s a lot of lessons that I’ve got. Gosh, I wish I would’ve learned that 20 years earlier or 30 years earlier, whatever, like things like investing now. So we’re in the practice of investing, you know, we’re talking about cryptocurrency and stock market investment, of course, real estate because that’s our business. But I’m excited to convey this knowledge to them early. I mean, I don’t know it all. In fact, part of my knowledge is who to find who knows things better than we all do right, collectively, and that they get an early start.
Billy: Of that. So being able to get an early start, having children between 13 and 19 and really taking advantage of this unique opportunity in the world, right. To really focus on that strategic knowledge and adapting to this new reality. So congratulations and thank you for sharing that with us as well, to kind of get us started. So listen, I really touched on a couple of things, right. And I’m sure that there’s so much more that you’d like to add. So if you can give us just a little bit of a sense, maybe Scott, tell us a little bit about your backstory, maybe some of the key moments in your life, decisions that you made to help get to the point in the journey that you are today.
Scott: Yeah. Great. Thank you for that. So, you know, as I mentioned just in passing, I have a family background in real estate development. So my uncle Mike Choppin founded and ran a company called IDM Corporation, a large commercial office and apartment development company. My dad, Kerry was in the business, ran his own apartment development firm. So I like grew up around the development business and, you know, as many people do when they become 18 or 19, it’s sort of like what you decide you don’t want to do right in your rebellious phase. But I graduated from high school and I didn’t really have a specific plan. Like I wasn’t, you know, burning with desire to go do X or Y or Z. In fact, I was not really clear on what I wanted to do. So I, you know, work to make a living. You know, this is the days, Billy, when you left home at 17 and a half to go, like, you know, make your way in the world. Didn’t know jack on how to make money, but, you know, did it right.
So I worked in the electrical trades and the construction trades for a couple of years. And I mentioned that because you know, I learned, you know, gave me a background in construction, which turned out to be valuable in part, just one part of what I needed to know to be a successful developer later on. But it really taught me, like, I didn’t want to do this for a long time. And you know, we work with the construction trades all the time as a developer, hiring people to build our buildings. And so it gives me that background, the capability to manage our teams and our vendors appropriately. But it also really just said, look for me, personally, this is what was not going to be my career aspiration. You’re going to be limited in what you could make in money. And you know, people’s bodies breakdown, right. You know, being a 45 and 50-year-old construction workers, good people, like nothing against the people who choose that as a career, just wasn’t going to be for me. So sort of like what not to do, right. What I didn’t want to do.
And then while I was doing that work, I was working on apartment buildings. So I got to observe the people who were the developers, you know, they got to come on the job site and they drove the nice car and they wore a suit and tie, and they clearly were in charge. And because I had the background development, I go, oh, I know that’s the developer. Like I knew who that person was. Right. Like, what did they do? And I go, oh, you know, this is sort of a view of outside my family structure that I’m exposed to that.
Then third was during that time, I mean, I’ve always been a heavy reader and I read a series of books, but, you know, they’d sort of be in that category of How to Make a Million Dollars Investing in Real Estate on the Weekends, right. One of those fifties-era books, and, you know, the business tactics and strategy in that book weren’t anything particularly brilliant. But for me, it opened up a space of thinking about deal-making. Like, what was deal-making? Yes, so a real estate developer finds land, you know, designs buildings, builds them, rents them, right. That kind of thing. That would be the basis of that formula. Like, what does it mean to make money? What does it mean to create value, to buy low and sell high, right? To use some common terminology.
And that book really opened up my eyes and go, oh, this is how you can make a career out of this. This is why you do it. You know you want to be profitable. You want to produce value for investors. And so when I started sort of putting all those things together, and that couple of years that I worked in construction, finally, you know, the light bulb went on for me. I go, oh I have this background in real estate development. I can see how people can make money in real estate and real estate development. I now know what my pathway is going to be. And really from that point on, I did everything else. You know, decided I needed to go to college, get a college degree, get a business degree, specialize in finance. You know, pick the school that I wanted to go to. Made my way through that, graduated there. And then that led to my first professional job in real estate development that I worked for a couple of companies for a handful of years to basically build my knowledge and my working knowledge of being a real estate developer.
Billy: Wow. So, I mean, you get to the point where you’re a real estate developer, but then you think about in the very beginning with your dad, Kerry, and your uncle Mike right that kind of were in that area already. You didn’t really know what you wanted to do, but you knew you wanted to get out there. You got into a trade and you learned as much as possible about that trade. And then you also had that vision of the thing. And I love what you said it’s not sometimes what you really want to do, but it’s knowing what you really don’t want to do. Right. And so then realizing that you get tunnel vision, you’re able to focus, build all the ancillary skills to then be able to get to where you are today. So, I love you telling that story. So thank you for helping to fill that in for us.
Scott: Yeah. I appreciate that.
Billy: And you know, when we talk about the Urban Pacific Group of Companies, I know that you all do something a little bit differently, right. So can you do me a favor? Could you tell us a little bit about what your model is in terms of specifically the Urban Townhouse Model because I think this is really, really cool?
Scott: So when I started the company in 2000, which is now 20 years ago, this year in March, we [crosstalk 00:10:47] operations.
Billy: Congratulations.
Scott: Thank you. We’d always focused on urban infill. When I was leaving the last company that I worked for professionally, that was 1999, 2000, urban living and urban housing were starting to become like, you know, not really popular or mainstream, but people were starting to discover living in this downtown areas of LA and Long Beach and other places in Southern California.
Billy: You know what? Sorry, Scott, just to cut you off really quickly, because you just use a word that some people may not be familiar with. I know you will explain it in a little bit, but you talked about urban infill. I know you’re explaining that.
Scott: Yeah. Like what is that?
Billy: Yeah, exactly. What is that? Just so people kind of get an idea as to what so [crosstalk 00:11:25].
Scott: Yeah. Thank you and stop me because I’ll use jargon every once in a while. I use it so commonly and regularly. So urban infill is just sort of what it sounds like we’re infilling in the urban fabric of development. So we’re finding underutilized sites, vacant sites, but they’re in already existing neighborhoods. And that would be versus, or the opposite of going out to the periphery of a city where it’s undeveloped. People call it green fields where it’s unbuilt land and you’re building new. We’re finding sites that are, you know, right in Downtown Long Beach or Downtown Los Angeles, although our product, our urban townhouse is sort of, you know, two or three concentric rings outside of the Downtown area. It’s still in existing neighborhoods. So really just thinking, building new housing in existing neighborhoods would be, I think that the shorthand way of thinking about it.
So we decided urban infill was what we’re going to do. Urban housing, right, like we like the story of people returning to or deciding to live in the city. I’m a gen X-er and that was at the time where the trends were headed, even though it wasn’t mainstream. Right. In fact, we had people that were like, are you crazy? Like, I don’t want to live in that place. Of course, those weren’t the people who it appealed to, right. Maybe they’re older, [Inaudible12:42] as an example like they didn’t get it. So we did that until 2016. And then in 2016, you know, sort of, we went through the recession. We can talk about that. But you know, the recession 2010, 2011, we hit bottom and started to recover. And we captured a good number of distressed and below-priced land assets and developed those and did really well.
But in 2016, we started to sort of feel echoes of what we saw in 2008 regarding a lot of supply starting to come online. Like, you know, you can track new supply that’s coming. It’s not yet arrived in the market but people are gearing up to deliver a lot of new product. And we started to see that. So we didn’t want to go through, you know, 2008 in a marketplace where we’re competing against other developers in an oversupplied market, right? That’s a classic development industry issue that is oversupplied by developers. You know, everybody floods into a space, they overbuild it and then it crashes. And then, you know, somebody loses money. Not everybody but some people do. You know, usually, those are last to the market, right.
So we’ve always been contrary and we’ve always been looking for the niche, the uncommon offer. That’s why we did urban infill in the first place. So we started to look around for what was a marketplace that wasn’t contested, that was undersupplied, where there were good demand characteristics. And if you look at the market, Billy, on one end of the spectrum, you got what I call truly affordable housing. That’s for low-income families that are government-subsidized to live in those units, right. Developers build those government-subsidized projects. On the other end of the spectrum, you have true market rate, even luxury people might call it where, you know, it’s downtown. It’s a high-rise, mid-rise super sexy, killer amenities, you know, marble countertops, all that kind of thing. But high income, usually single earner or small households, right. Usually studio one-bedrooms. And that’s the big trend meeting the demographics of Gen Z, Millennials that are moving into the apartment market, right?
But what we started to observe is there is this big space in the middle for working-class families. Think blue-collar, multi-generational families that want to live together, that don’t necessarily have the housing offers that are coherent with their lifestyle. And also these are working families that make too much money to afford, or they make too much money to qualify for affordable housing. And then they don’t necessarily choose the high-end housing because that’s not there…You know, the one they don’t fit in a one-bedroom. You know, they have a family of six or a family of eight or however big living multi-generationally. So we started to really formulate a story of a housing type that fit the style of their living, meaning, you know, the number of people that live together and also to fit how they live economically. In fact, they live what we call an economic sharing lifestyle.
So multiple earners living in a single household. So usually it’d be multi-generational families. Think mom and dad, maybe an adult child, or two in-laws, grandparents, right or some mix of those people. But the key characteristics of their living multi-generationally, they economic share across the family group. And they have multiple earners in the household, right. Hence the economic sharing. And so we really started to focus in on this, on this family group. Now I had some background from this from my professional development career, before I formed Urban Pacific. I worked in sectors of the development business that actually serve some of these families. I worked in the affordable housing space so I had this background.
But we really started to focus on really pairing private capital with our workforce housing model that served this family-style that I’ve developed. And that’s really, our innovation is putting together the private capital with the workforce housing model, basically serving a sector of the demographic in the marketplace that’s completely underserved, but yet has good demand, in fact, rising and, you know, solid demand and ongoing stability in that marketplace with nobody serving that from the development standpoint. So for us as an innovation, we create these new financial structures. We create these new business structures of how we execute a plan to produce yield and find the capital. And then we have the social impact of serving these families that don’t have a new housing type, right. But in fact, most of our renters who rent in our units, Billy, they’ve never lived in a new unit. Never. And so, we get the chance to serve them in that way.
Billy: Yeah. So, you know, initially a lot of things that you helped us to understand and formulate this opinion, right. Because we were thinking about development, number one, and you have clearly carved out a niche because it’s not the high-end brand new development. It’s not the affordable housing. You really touched on the keyword, which is the multi-generational and workforce housing, where you have been able to find an area and serve this demographic. That is a demographic that is definitely in need. And so you’ve talked about a couple of things as well. So maybe you can help us understand what you just talked about, but I know that there’s a concept, the build to rent, which is what we’re talking about now. And then also, if you could talk to us a little bit about how you are doing things differently from the traditional way, especially when you started talking about things like financing aspects. Because I think that’s really, really interesting for people to understand.
Scott: Absolutely. So, yeah. So build to rent, I mean, we didn’t call it that. Well, let me back up a little bit. So we’ve always been a rental housing builder predominantly. You know, we’ve done some affordable rental. We did condos for a period of time when that market place was good. But really, if you look historically we’re an apartment development company. The vast majority of projects we’ve done have been in that space. So we’ve always been serving the rental market, right. But the build to rent market, I mean, there’s always been built to rent, right. And I think what people use, there’s like different definitions of build to rent. But I think what people mean when they say that commonly is that it’s a different product type that wouldn’t normally be seen as rental housing. So as an example, would be single-family houses that were built, that typically would be built and sold in a subdivision, now are built and held to rent, right? Where a family comes in and rents that single-family house and doesn’t buy it, right. That’s probably one end of the spectrum.
Now our product is built to rent. We just happened to be building a townhouse, meaning a three-story unit where the family lives in all three stories. Garage on the ground floor. We do five-bedroom, four bathrooms. That’s partly the way we serve this multi-generational demographic. Ours is an attached product, right. So our units might be thought of like, you know, in Europe, you’d be thinking of them as row homes, right? They’re multiple units in a row. They’re all attached. They’re individually occupied. They got a front door, they got a back door. Maybe they got a garage, right. And that’s our model.
But what’s happened really in the three and a half, almost going on four years that we’ve been working on this is that market has sort of like, I don’t want to say it’s created, but it’s sort of developed in the sense that people are starting to think about, Oh, we could make a business plan out of building single-family homes and renting them. Or we can build row homes and rent them where that might not commonly be thought of. You know, in fact, people come to our projects sometimes and they go, “So these units are for sale.” Like I don’t get it, right. And we go, “Oh, no, they’re for rent”. And then, you know, usually, that really shows up for people who are in the rental markets. They’ve never seen a five-bedroom, four-bath, three-story townhouse rental with a garage. For them, it looks like a house that you would buy. How can this be for rent?
It’s not the reaction we necessarily work to produce. But when it happens, we go, oh, this is exactly right. We want to appeal to a tenant that would be seeking this type of housing, but they don’t think it’s available. Now, of course, we would love for it to be available to every family that would be in the need of it. But I think we’re really positively receiving this assessment by people is that this means it’s meaningful for them. Like they go, “Oh, I didn’t know this existed. But now that I do, I would like to live here.” Right? That’s the reaction we want to get from the folks who would live in our unit. So that build to rent model is really in the last, I would say two, three, four years really started to sort of coalesce were big parts of the development marketplace are now moving to build units that they might normally sell to rent. And that’s when I hear built to rent, that’s how I think of it. And of course, everybody will have different definitions of it.
Our offer is just a multifamily offer, right. We build anywhere between, you know, let’s say 30 to 90 unit projects. We build them to rent. In fact, our saying, Billy, and I’ll finish with this, you know, we design and build to rent, but it looks like a house. That has the garage, has an in-unit laundry room, right. Has multiple bathrooms in it. Has you know, three floors above it, right. So you don’t have a family living above you that you don’t know or below you that you don’t know, which is a typical apartment living lifestyle. My joke is if your kids are bouncing on the bed, you know it’s your kids.
Billy: Right. It’s all in the same family. So…
Scott: So you can tell them to be quiet.
Billy: Yeah. You know, so one of the things that really sticks out as you’re talking about this Scott, because I think a lot of times people will have this perception of someone who’s in development, it’s really just about the numbers. And one of the words that you’ve continued to use over and over is the feeling that they have and really wanting them to have the sense of this being there, but really are the emotional type of words. And I think that the fact that you’re really focused on that, it’s no wonder that you are able to create the right type of product and service for a market that is clearly in demand. And so yeah, I think that is just phenomenal that you’re so focused on being able to provide that feeling to your clients.
Scott: You can think of it as, you know, people call it double bottom line and you’ve heard that terminology. But you know, it’s basically we would need to produce a yield to our investors because we need to continue to attract capital to produce the projects and own them long run. But also we have a social impact, right? We’re taking care of families that don’t have this living environment. And sometimes people call it a triple bottom line where your project would be environmentally friendly. You might be lead certified and, you know, we do that on occasion. But we’re really focused on the combination of producing markets for yields and the social impact of housing families that don’t have this opportunity otherwise. Those go together and those in our model are not separable, right. Like for us, our innovation is the pairing of those two together.
Billy: Wow. I love that you’re focused on that and you’re continuing once again, not just the financial, the social and also being able to have that element of environmental, right, and being able to focus on all those things. Scott, help us understand. I mean, because you’re very, very forthcoming with your knowledge and helping to educate us in this space. But tell us a little bit more about how you are typically educating the marketplace and helping people to understand more about the type of value that you are looking to provide.
Scott: I mean, you know, it’s like I say, you know, Billy, we have to produce markets per yields. I mean, we have to compete in the marketplace to attract capital. So there’s a couple of ways, you know, one, we do this. How do we do this? People go, “Oh, what makes your product special? Why is yours like produce more yield than others?” So, you know, we have a combination of practices that we have. So we buy land in B and C working-class neighborhoods where our tenants already live. That allows us to buy land more cost-effectively. Also, we skip the entitlement governmental approval process. I mean, we still do plan check, but we don’t have to do zoning. And you know, that kind of thing, which in California is a big deal. It can really slow projects down. We choose to skip that in almost every case, which basically gives us lower-cost land quicker, right.
We build the product, you know, production model. So we’re using the same couple of footprints, you know, unit design, unit plans over and over and over again. We work with the same subs to really get the efficiencies really maximized in the construction production cycle. Our unit itself produces very high, whole dollar rents, right? So normally in the multi-family sector, you’re as a developer and owner or sponsor of multi-family, you want to produce the most rent per square foot, right? What we call the value ratio. And that’s an appropriate way to do it. In fact, that’s the market standard and we’re after producing yields too, but we do it basically through whole dollar rent. So instead of maximizing per square foot rent, we go, what’s the whole dollar rent. So can we get, you know, 3000, 3500, 4000 a month for this big five-bedroom, four-bath unit? In our marketplace in Southern California, we can do that. We’re about 3,500 on average right now.
The reason that makes sense is we’re building a lot of bedroom space. Yes, we build multiple bathrooms, of course. But if you think about it, you know, as you hear commonly, hey, your kitchen or your bathrooms are your most expensive space to build, right. And that’s true. And so for a 17, 1800 square foot unit, we’re building one kitchen.
Billy: Right.
Scott: And we build a decent kitchen. We have kitchen islands, you know, we make it nice. But if you think about it, we’re producing revenue, producing space at the lowest cost. That’s a bedroom. And our families, they really, in fact, when you tour them when our leasing teams tour them, you can watch the families. They start to think about economics per bedroom. They go, “Oh, okay. I got mom and dad, I got grandma. I got Aunt Jean. I got an adult child and they’re all earning money.” They all have jobs in the service economy or blue-collar sort of generally. And they start to think about the metrics per bedroom. Like they’ll actually divide the rent. Hey, you know, it’s this much rent divided by five bedrooms. I pay this much. You pay that much. And we’re always related family groups or we’re roommates situations. Well, I call that economic sharing, right? The multiple earners are sharing the housing costs and other costs across the family group. Right? So that whole dollar rent at $3,500 a month relative to the costs that it cost us to build, that is a good ratio. It’s a positive ratio, meaning we’re creating more value via the rent stream than it costs to build that.
And that’s true of all real estate assets, right? You want to buy low, sell high would be a very classic way to say it. And then the question is, how do you produce that larger value? And for us, it’s the unit type in the locations that we’re in the family type, and the rent that they will pay. And also there are other factors. So that’s the economic structure. But what I tell investors also is right now in the pandemic, you know, we’re really in the story of recession prone assets versus recession resilient assets, right? And resiliency is the terminology I came across and sort of created and applied to our product type. There’s a book called Antifragile. It’s written by a guy named Nassim Taleb. I think that’s how you pronounce his name. But his whole concept is to create structures that be business organizations, teams, you know, anything, that’s a social structure. And business is a social structure, by the way, it’s humans interacting and transacting, right. That is anti-fragile and his terminology is benefit1 from harm, right?
So like when you, anybody who works out and you lift weights, right. And grow your muscles. Well, the way the muscles grow is because you damage them. And then they grow from that damage right. They benefit from harm, right. That’s the idea of anti-fragility. So we started to think about, as the market changed in March, April, you know, we go, okay, investors now are going to be thrown into a different story. Now that we’re in the pandemic and how do they look at multifamily investment? Right. That’s a key thing. We’re always thinking about that. And we started thinking about, you know, professional and most seasoned investors will start to think about distressed asset investing. And that’s perfectly appropriate. We saw a lot of people made a lot of good money buying distressed assets in 2008. But we said our product still performs in this environment because our families because they’re multiple earners are very stable.
Even when employment is disrupted, as it is right now, there are still three or four or five earners in the household. And because they economic share naturally, in fact, they were already doing this before we’ve identified them, by the way, Billy. We just have to attract them into our unit to be our tenants. They’re very stable in downturns, or they have the capability to sustain. And they operate with this economic sharing lifestyle. They work that way purposely, right?
Billy: Yeah.
Scott: So why that’s important for investors basically is you want to be investing in recession, resilient product for the long run, not a product that is recession prone. Right now, if you buy a distressed apartment asset and you get really good discount. You may be safe from the recession prone characteristics of it. But if you buy a building that has all one-bedroom units, as an example, and the market goes against you and you’re distressed because you know, one-bedrooms are emptying out and people are moving into roommate situations, which is happening right now, by the way.
That’s why our product is resilient because this is we’re receiving those people that are moving out of the one bedroom. So like just a way to compare and contrast different multi-family investment types, all are valid, right? All are, are, you know, for good sponsors are valid, assuming they’re well underwritten except which is more effective, right? If you want to own an asset, that’s going to be recession prone over long demographic trends. Or do you want to invest in an asset that’s deeply under-supplied with not a lot of suppliers ever going to come on board with a market that’s already basically needed in vast numbers and will on a go-forward basis? That’s how we differentiate prone versus resilience.
Billy: Which I think is fantastic because you’re giving us a lot of different things to think about and at the same time as we talk about that resiliency factor. And we start seeing how your overall strategy is really playing into the different tactics that you have, right. Because we’re coming back to the same end customer, right at the end of the day is someone who is a multi-generational and is also someone who is in an economic sharing kind of dynamic. And so these play to the strengths that you have. And so, wow. That’s a really, really great way to look at it and helping us to understand how you’re also helping educate the marketplace.
And you know, what, there’s this kind of, I want to keep talking forever and I want to keep having you share more and more, but you know what, I’ve got to get to the part of the conversation, which is Going Long Final Three. But the thing is Scott, I never ask you about the Going Long Final Three, unless you tell me that you’re ready for me to ask. So are you ready?
Scott: I’m ready.
Billy: All right. Cool. So listen, the very first question we started with you in the United States and now kind of thinking about where I am here over in Europe, help us know what is your favorite European city either that you visited or still on your bucket list to visit?
Scott: Yeah, so we got a chance to talk about that. If it was the UK, I’d say London. But if we’re talking about the continent, you know, there’s a lot of great videos on YouTube where people walk around great old European cities in 4k video, you know, like a walking tour. And so I have really been watching some of that just in my downtime about places like Sorrento in Italy.
Billy: It’s a great town.
Scott: You know, Cinque Terre, Portofino, and those kinds of places. So I’m really, you know, as I expressed to you, when we were talking the beginning, Italy is the next place that we want to go. I’d include Rome in that. Again, this water, ocean orientation within away. The ocean [Inaudible 32:52] together to me, then that’s like, that’s where we want to go.
Billy: There you go. Well, listen, we’ll take London. And we know that you’re on your back over here once we can get traveling again and you can check out Italy. Well, listen, we’ll make sure that we include that. The next question that I have for you really is about helping to understand how we would well…Most successful people always get to a point in their careers where they’ve only probably made one mistake, just one or maybe more. But if you can think about one mistake that you have made, but more importantly not that, but what is the lesson that you took away from that learning experience would you share with us, please?
Scott: Yeah, that’s a great question. So, you know, like most people that are at their stage of my career, you know, lots of mistakes, lots of learning and bringing that learning and value to the offers that we make now. But the one I really always think about is what I call signal from the noise. And that’s not the mistake, that’s the process that we should do. And so the example is in, you know, 2005, 2006, we started to see signals in the noise that the economic shift that, you know, the great financial crisis was coming. And what I didn’t do was listen to those effectively. I saw them, I noted them, but I chose to believe, you know in the signal is that correctly underwritten, well assessed, valuable economic signals and reports from grounded sources. Grounded, meaning well-researched without a hidden agenda. Versus the noise, which is, the mainstream media that, you know, is trying to sell magazines and newspapers, right.
And so I was reading something the other day, the way I listened for this, and this is the lesson is when you start to hear certain, what I say keywords, right? So, Oh, it’s different this time. Oh, economic laws are suspended. Oh, you know this market’s gone up, you know, historically forever. Even I was reading something the other day that Ben Bernanke was quoted as saying that the housing market had been positive growth since 1930. I’m paraphrasing the quote that he gave. And so I saw the, you know, negative signals and I also saw a lot more, Oh, it’s good this time, you know. Yes, we’re at the highest rates we’ve ever been, but you know, this is a different market, right.
Same as the tech bust in 2000, 2001. Oh, internet companies don’t need to be profitable. It’s different this time. Internet companies, you know, they don’t have to play with economic principles, laws, and mechanics, right. They’re different. The internet makes them, you know, suspend economic law. It’s all baloney, right? And so the lesson is to listen to and find sources of economic data that don’t have an agenda. That can be trusted. So what I mean by that is, they’re not selling a book. That they’re not selling magazines and newspapers, although this is all old stream, you know, old media, right. That they’re not trying to sell Twitter ads and Instagram ads, right. You know, like for better or worse, the guys who sell gold are like some of the worst, right. The world is going to end tomorrow to all people that are selling gold. I swear, man. It’s like, you listen to these people. And it’s like, the world is ending. The sky is falling. And they do that because they want to sell gold. And maybe, you know, some stock guy has the same sort of thing.
So you really need to find economic sources. And, you know, in the end, I’ll share our contact info. I would welcome anybody to get a hold of me, and I’d be happy to share our resources. People can go to our website and find out what we’re tracking. But I’m looking for data sources that are agnostic to politics, that are agnostic to selling things. That are just there to you know, maybe they make a living too, but, they’re there to convey the information first, right. And to really start to listen to the small voices.
I remember, in fact, I have on my desk, a series of clippings from magazines and newspapers and websites that I keep in my office. And at the front of it is a cover of, I think it was Fortune Magazine and a guy named Tom Barrack who runs a company called Colony Capital. In 2005 was on the cover of Fortune saying, I’m getting out of the real estate market. And I keep that front center because if you read that thing, it was like a step-by-step of how not to lose money in real estate. Get out now. It’s early, here are the signals. And I remember reading that, I still have it. And then, you know, 2007, 2008 happened. And I was like, Oh man, he was right. Now, 2020 hindsight is just that right. You know, it’s perfect and looking backward, but it was there. It was right there, right there in front of me. So it’s like not ignoring those well-sourced economic data sources. And we have several that we try.
Billy: Making sure that you get the information so that you don’t have any other sources and then it’s as pure as possible in terms of the information that you’re going to get. So and you know what, I want us to get to the part where we can connect with you. So really quickly, can you let us know, what is the one book that you would recommend to us as well?
Scott: Yeah. So I’m going to go grab it really quick. Be right back.
Billy: Yeah.
Scott: So it’s this book called The Price of Tomorrow, Jeff Booth. Have you seen it? He’s been all over YouTube.
Billy: Well, yeah, I just got it today.
Scott: I got you.
Billy: It will be here soon.
Scott: Yeah. So I love this book and as you probably saw or source, but he’s in this, you know, I don’t even call it a theory, but he’s got this thought process and supported by data of the fact that technology is causing costs to lower, like deflation all over the place. So think about, you know, we have our Google accounts. We have Google Enterprise Suite, we pay for it. But you know, if you have a Google account, you get all those services for free, right. When you have your iPhone, you have a camera and you have a calendar and you have this, you have that. All that stuff now basically comes built into the cost of the phone. Yeah, it’s expensive generally to buy whatever an iPhone. But all those things had you bought them separately would have cost you thousands of thousand dollars. And then, you know, it’s all baked into the phone.
So this whole idea of technology-forcing deflation, forcing a lowering of costs, and the only way that old school economies can keep economic growth right, producing in the way that we’re used to, which is producing some level of inflation, right? So, you know, tomorrow’s wage is going to be higher, at least inflationary, even though the dollar is worthless. That he’s in this sort of planning stage of, if you will, the deflation is going to start to show up. That we can’t keep propping up economies. That the only way to produce economic growth and the old way is to produce a lot more debt. And we’re seeing this in the stimulus packages, and I can’t remember the stats, but the amount of debt we have relative to GDP worldwide is phenomenally out of whack.
And so his thought processes, that’s a naturally and then come home to roost. We’re going to have to, we won’t be able to produce debt endlessly. You know, he’s recommending investing in Bitcoin, which, you know, we’re, we’re sort of moving into the real estate equity cryptocurrency, you know, tokenization category in the space, really like that story.
Billy: Yeah.
Scott: But, you know, it’s really eye-opening. I mean, I never really thought of like the deflationary characteristics of these technologies, but, you know, we’ve talked about AI producing deflation, right. Lowering costs, which is all great when you’re a user of that technology. It’s not great when you’re the person whose job is lost because that, you know, now a wasteful process of tracking that data is no longer needed because AI could do that. Their job is gone.
Billy: I’m really looking forward to reading that one. The Price of Tomorrow is awesome. So great recommendation. So I appreciate that, Scott. So man, listen, I mean, you’ve helped us really understand from the very beginning and how you’re looking at, well, finding your way early on. Being able to build, use your time, your energy to build a trade. Being able to yourself be part of a fourth generation of Californians. And now you’re even in your business and the development really looking at how you can capitalize in a positive way.
Not only being able to provide a section of the economy that needs and wants the type of service and product that you are able to provide. You’re able to add value, not just financially, but socially and also environmentally, as we talked about as well, and have a really clear focus on being able to give back. And all the things that you’ve shared with us, I know I want to keep talking to you forever. And I know that there are so many people that want to reach out to you and find out more about you. So help us understand what’s the best way to get in touch with you, Scott?
Scott: Yeah. So what I’ll do is if everybody goes to our website www.urbanpacific.com. Go to our contact page and my email address will be there. In fact, I’ll offer it to your listeners. If anybody wants to email me, I’ll share a recent eBook that we finished, that’s really appropriate for this time period. Email me, request our eBook called Thrive and Survive a Recession. And that’s basically my like methodology of the things that you could do written from the lessons we learned in 2008 to produce value.
But of course, if anybody’s interested in finding out more about our investment opportunities email me. On our website is a red button that says, sign up, that’ll get you on our Saturday e-blasts and we’re putting out lots of this economic tracking data and these market trends and talking about new technologies and new market trends. We’re talking about that all the time and really what it is, Billy. It’s all the reading that I do that we share out into the marketplace, right?
And so it’s like, we’re like a transparent production line of just all the stuff we’re reading. What we’re using to track the economy and how we’re seeing the market trends in multifamily investing and ownership, and, you know, long-term asset management of multifamily, you know, with that just going out into the internet, right to people on that.
Billy: Awesome.
Scott: I would encourage people when you go to the website, go to our Investor Education section. We got tons of videos, articles. You know, showing you blog posts about the economic trends that we’re seeing. You know, we do a weekly market update on the multifamily market. We subscribe to every possible market, you know, update from Mark [Inaudible 43:55] and Yardi and [Inaudible 43:54] and all those guys, RCLCO, and all that stuff are shared there for people to digest along with us.
Billy: All right, fantastic. So we can go pick up everything and we’ll include it as well, Scott, in the show notes. So urbanpacific.com where we can find all of the information and to contact you as well. And you’ve given a generous offer there to be able to pick up your eBook as well. So listen, Scott, I want to thank you from the bottom of my heart, man, for really taking the time to share your knowledge, your expertise, your insight with us. And yeah, on behalf of everybody, just want to say thank you very much for investing your time with us today.
Scott: Billy, great to be here with you. Really appreciate the invite.
Billy: Alright, fantastic. And also for the Going Long audience, listen as we just mentioned, Scott has shared so much knowledge, so much goodness with you today, that you know what? I’m going to ask you, go out and share today’s episode with at least two or three other people’s that you can also be a positive influence on their lives and they can see you as a reference point. And I would also say, you know, for Scott and I would love to understand what are the things that resonated with you the most? What are the things that you would love to hear more from Scott? And you can continue that conversation with him. He’s made it really easy for you. You know, you leave us that kind of review so we can understand what works, what resonates with you. And if you want to leave a five-star review, we’ll accept that as well. And you know, until we get back to the very next episode, I want to wish you a great day. I want to say, go out and make it a great day. And I’ll be looking forward to welcoming you back on the day.
[Outro] Wow. Don’t you just love hearing from the absolute best experts in the real asset investing world? You know, I really wish I would have had access to such experts, and even more so I wish they would have provided a really easy to follow guide of the mistakes to avoid so that I could have gotten to my goals even faster and been much happier, even sooner. That’s why I’ve created just for you, this really easy to follow guide of the Seven Things You Should Avoid, so you can become successful in long-distance investing. In order to pick up your free copy, just go to billykeels.com/seventhingstoavoid. Once again, that’s billykeels.com/seventhingstoavoid. Really wanting you to enjoy the guide and really looking forward to welcoming you back to the next episode. Now go out and make it a great day.
End of Audio Transcript
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