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We educate investors and potential investors on the in's and out's of investing in rental property. We focus on residential and multifamily investing, but include commerical, storage, mobile home parks, and more. We interview industry experts on tax strategies, property management, vendor selection, syndications, capex, and more.
If you were willing to pay that for this thing and because of tariffs or whatever else is going on, if I could buy that same thing at a 20 to 25% discount, yeah, That's awesome. Why why would I not participate in that?
Nicholas Cook:Hey, investors. Welcome to the Retire on Rentals podcast. I'm your host, Nicholas Cook. And in this show, we explore how to optimize real estate investing, create passive income, discuss operational tactics, and ways you and your family can retire on rental income. If you wanna invest in real estate or currently do, then this podcast is for you.
Nicholas Cook:Okay. And today's guest is Nick Cooley. He is the cofounder of Rodeo Capital, and he is in charge of acquisitions and investor relations. Nick, welcome to the show. We're super excited to talk to you about what you guys got going on and to help share some of your wisdom and knowledge and, explain some of the projects you've got going on with our audience.
Nicholas Cook:So, thanks for joining us today.
Nick Cooley:Yeah. I'm glad to be here, man. Hopefully, there's some wisdom to be shared, but I guess that, we'll find out soon enough. So
Nicholas Cook:Certainly will. We certainly will. But I heard you're you're the man to talk to. So, glad to have you. So, you know, before we jump into kinda what you're doing currently, you know, lot of times people when they're investing, they have, like, an origin story.
Nicholas Cook:Right? And, you know, from what I gathered, you kinda cut your teeth in, you know, the brokerage side at Keller Williams. I know that before you decided to do that, you had, you know, been involved in some real estate and that you're a little hesitant about maybe getting your license. What made you decide to to kinda jump in, start at Keller, or just, you know, get licensed in the first place?
Nick Cooley:Yeah. So my my real estate origin story, I won't go all the way back to when I was a knee high to a grasshopper. But, the the origin story was I I moved to Denver, met up with a former college football buddy, and he was actually working as a broker at at the time. And he, you know, it was New Year's Eve. And he was like, dude, you won't believe this, but there's people that I work with that they buy houses and other people pay them off.
Nick Cooley:And that was how he explained real estate investing to me. Sure. And at the time, I was, you know, mid twenties, thought I was gonna be the VP of sales for a Fortune 200 company someday, these big aspirations. And, my wife and I started buying single family rentals, here in the Denver area, just the two of us. And so as we scaled that and as we you know, we eventually ended up getting to about 18 doors.
Nick Cooley:I learned how much the typical Resy agent doesn't know anything about, you know, unlevered yield on cost, return on equity. They didn't know how to underwrite a rental property. Mhmm. And so as that portfolio scaled, that was kind of what forced my hand into the brokerage side is that our our single family rental portfolio had gotten to the point where me not participating in the real estate market full time was was costing us something.
Nicholas Cook:Yeah. And that makes sense. And, you know, that's that's pretty awesome. And a lot it's a big accomplishment, especially in a market like Denver. I mean, it's not like you've got low price points.
Nicholas Cook:So, you know, congrats on being able to to aggregate, you know, portfolio like that. You know, obviously, eventually, though, you've you've kinda decided to say, hey, you know, this residential game is not for me. And you started pivoting towards, you know, under the banner of what's, you know, called commercial real estate, which is more on the multifamily side. What made you decide to make that leap? That's a you know, you're going from, you know, a couple hundred thousand dollar home, maybe half a million dollar home to multimillion dollar assets.
Nicholas Cook:What was what was kind of the thought process behind, you know, that change?
Nick Cooley:Yeah. This is a really good question because it's twofold. Like, there's analytical, very data driven, and then there was one that was very personal, like the true inverse. And so it was 2021. We we had a a portfolio that was, like, 18 doors.
Nick Cooley:And I remember looking at our return on equity. And like most people that are aggregating a single family portfolio, you know, we kinda did it piece by piece until the scale really started catching on. And so I'm looking at our our portfolio and kinda analyzing how efficiently it's working for us. And I'm like, we're millionaires, but we're not making any money on a monthly basis after, you know, you're you replace that one garage door and you account for all the things that go into proper, you know, underwriting. And I was like, this kinda sucks.
Nick Cooley:Like, it's taking a lot of our time, and we were, you know, hoping to start a family around that time. And it's like, we're millionaires, but I can't buy diapers with it. Or at
Nicholas Cook:least, like,
Nick Cooley:not a lot of them. Right? Yeah. And so that was the one thing. And then the second thing that we learned is scaling single family operationally, which I'm I'm sure you know as well or better than anybody, is tough.
Nick Cooley:You know? Every single countertop is probably different. The paint is different at many of them. Even if you had 18 brand new properties, you have 18 brick like, distinct and separate roofs.
Nicholas Cook:Mhmm.
Nick Cooley:And so all of the operational inefficiencies that went into that was, like, financially, it's not serving us in the way that we had hoped for when we started down this journey. And on the day to day lifestyle of just how involved we are, my wife and I at the time, Neither one of those was really scratching the itch as to why we were making all these sacrifices and hopefully delaying gratification for a a later point in time. And so those two things combined is what made us actually liquidate the single family portfolio, And that acted as our seed round to get us into what we now focus on, which is commercial multi.
Nicholas Cook:Cool. Yeah. Awesome. And I think a lot of people, you know, have that realization at some point, especially if they own more than a couple rental houses. They start to see, yeah, you're not getting a lot of economies of scale.
Nicholas Cook:And it's and it's just really difficult to also liquidate down the line, and and the valuations move around a lot. Right? They're really subjective because somebody might pay, you know, $50,000 more because they love the kitchen. Right? And it's hard to anticipate that, because it could cut the other way too.
Nicholas Cook:So Mhmm. So I think that's a natural progression, and that makes makes a lot of sense. Before we talk more about kind of your operations and kind of what you're up to, what I'm curious about is, you know, the mission you have for your company currently. It's responsibly create better places for Americans to call home. Where where does that come from?
Nicholas Cook:I mean, that's an excellent mission, and I'd just like to know more about that.
Nick Cooley:Wow. That's cool. You're, you're digging deep on me, man. I don't get asked these questions. This is fun.
Nick Cooley:Nobody is gonna get into this business. You know, we raise capital from other investors. Right? And so we have an obligation to create returns on behalf of our our partners. Mhmm.
Nick Cooley:But that doesn't mean that we don't lose sight of the fact that at the end of the day, what we invest in and what we operate in on the day to day side to somebody else, that's where they're hosting their daughter's fifth birthday party.
Nicholas Cook:100%.
Nick Cooley:Like, we take pride in doing that really well. Cool. Or at least trying to.
Nicholas Cook:Well, I think that's really powerful. And, you know, in our line of work, because we focus a lot on the management side, you know, we spend a lot of time talking about our core values because they really govern how we operate and really differentiate us from other companies. And it's really important for staff retention, right, to make sure that people have that same ethos and philosophy. And so it's great to see that you guys are doing that. And you talk about, you know, the the importance of, you know, grit, tenacity, work ethic.
Nicholas Cook:You embodied that as kind of the, you know, the Western culture vibe, which, you know, in some ways, you know, it's just it's uniquely American, I think, obviously. And it's something that, you know, built the West. Right? And it's great to kind of well, that yeah. That and a few other things.
Nicholas Cook:Exactly. So, you know, it's it's great to see the you know, they bring that kind of ethos. Is that is that kind of language around is that something that you guys use, in your core values when you think about, you know, partnering with vendors or hiring people or, you know Yep.
Nick Cooley:Taking on a project? Absolutely. So we kinda launched rodeo, in response to you know, there's a lot of funny business going on around the private placement real estate. It's an industry that the more that you get involved in it, the more that you realize. I wouldn't trust everybody that does what we do, with my own capital, which is not to discredit anybody.
Nick Cooley:There's also a lot of, like, very well intended and very upstanding people in the space as well. Mhmm. But I grew up in a town of less than a thousand people in Western Nebraska. And there's just something about, like, no matter what I did, I knew before I got home that my grandma would have heard about how I handled myself. Yeah.
Nick Cooley:And so there's something about, like, let's bring that level of, responsibility to how we interact with vendors, partners, tenants, where I think that there is something beautiful about, like, if you and I shake on it and I say this is what's gonna happen, you can take that to the bank. And that's what we're trying to really emphasize and bring to this space.
Nicholas Cook:Yeah. And have you seen that be helpful in telling your story to investors and people that are, you know, trusting you with their with their capital?
Nick Cooley:Totally. Yeah. At the end of the day, right, like, any kind of financial modeling or underwriting is gonna be based on some level of assumptions, and that some level includes hundreds of assumptions on any kind of deal that you buy or operate.
Nicholas Cook:Mhmm.
Nick Cooley:I don't care how good you are. 5% of those assumptions are gonna go differently than what you had planned. So at the end of the day, what really matters is who is it that you're entrusting with your capital? And on the flip side, if I accept Nick's money, are you somebody that I feel like we have a strong ability to communicate with and to say, hey. These are some of the challenges that we're facing.
Nick Cooley:We saw three out of the five of them coming, and these are the plans that we had in place to try to mitigate that. But these other two, we're doing the best we can, and here's what we're currently doing. You know, let let's see what happens. Like, that's a reality of of our business.
Nicholas Cook:Yeah. No. %. I think you, hit the nail on the head with, you know, being cautious about who's operating out there, you know, being on the management side, and that's where we kinda started. Or in in your case, if you're working with investors, and and we do that too.
Nicholas Cook:But, you know, the genesis of this was on the third party for for my career. And we have something called a fiduciary obligation. And I cannot tell you how many people I've seen that are licensees would I would violate what I would consider their fiduciary obligation. And even before I got into management, I flipped houses from 02/2005 to 02/2008, which was kind of an interesting time frame. And obviously, in 02/2005, they just gave anybody money.
Nicholas Cook:But in 02/2008, things weren't going so well. And I saw some people, you know, really get destroyed during that market. And one of the things I remember pretty clearly is that some of the hard money lenders that we used had people that they had been doing business with for, you know, ten, twenty years, like start ghosting them, not calling them back, all this kind of stuff. And it just really blew my mind because to your point, I didn't grow up in a small town, but I definitely grew up with, you know, the principles of accountability and keeping your word and, you know, kind of death before dishonor kind of thing. And Yep.
Nicholas Cook:To see that there's people out there that are, you know, representing these assets and not taking that fiduciary obligation seriously is is a is a big concern. So I'm glad that you guys are addressing that with, you know, essentially the company brand and essentially what you're looking for with investors and being able to tell that story. What sort of markets are you buying in? I know you said you're from Nebraska. You live in Denver.
Nicholas Cook:I'm not sure. I'm not familiar with the Denver market, but in Portland, you know, the cost per unit's pretty high. So are you buying things, you know, in larger metro areas like Denver? Are you branching out to areas where you've got a little bit, you know, lower cost, per unit? So maybe you could talk about what markets you're buying in, why you chose those markets.
Nick Cooley:Yeah. So we built our single family portfolio here in Denver just because it was familiar for us. Right? One of the things that has held true during both kinda chapters of our real estate investing journey is that I'm a huge proponent of there are people that are making Portland work in the same way that there are people that are making Miami, San Jose, Flint, Michigan. Like, there are people that are monetizing each of those markets.
Nick Cooley:The big discrepancy is, do you have a distinct and measurable competitive advantage in that market? And so for us, initially, when we weren't all that sophisticated as real estate investors, anybody that's listening to this from Denver knows that there's a difference from 40 Fifth in Tennyson and 40 Second in Tennyson. Like, that just is true. They're they're same street and from Manhattan, maybe it would seem like the same submarket. But if on the ground, I can tell you it's not.
Nick Cooley:And so, initially, that's where we started. As we started to scale, we actually moved away from Denver, and now we just buy in the Midwest. So Western Michigan, Nebraska, and Iowa are are the major markets that we feel like we again have a distinct competitive advantage. But there's also some mathematical advantages to buying in markets where, you know, a Denver class b product like we buy in the Midwest is probably gonna be $2.75 to 3 20 5 a door, and that unit is gonna generate 2,200 a month gross in rent.
Nicholas Cook:Mhmm.
Nick Cooley:We just bought a a building in Iowa for $67,000 a door, and that's gonna generate a thousand 50 a month gross. So the economics just make more sense, especially taking into account some of the policy risk regarding, Colorado as a state as well.
Nicholas Cook:Yeah. Yeah. And I think you make a good point. I mean, you can make any market work, but it kinda goes back to a function of what your goals are. Right?
Nicholas Cook:If you're chasing cash flow versus appreciation, and also a function of how big your balance sheet is. Right? If you've got a lot of money, you can play in markets, you know, that are more expensive. Totally. But yeah.
Nicholas Cook:And have you focused mainly on purchasing existing buildings, or have you been building anything? Like, what what are you guys how are you approaching your investment strategy?
Nick Cooley:Yeah. So our team has a background specifically in development. Myself and my cofounder have developed over half a billion dollars worth of ground up, everything from hospitality to multifamily to but with rodeo, we we are very, very, very fee light. We only take a one and a half percent acquisition fee, and that's it for all of our fees throughout. And so while we've been chomping at the bit to develop, we haven't found enough that's, where the pricing makes sense to to put money in the ground yet.
Nick Cooley:But as soon as the economics of that turnaround, we will happily, do new development as well.
Nicholas Cook:Got it. Got it. And in terms of your fee structure, what inspired that? Like, why did you guys because, you know, there's a debate about, you know, what fees you charge, how much you charge. You know, some people say, well, you know, if you charge too much, then you're kind of fleecing the investors and you're just fee rich and you're not worried about the performance.
Nicholas Cook:And other people say, well, you have to make a living. You have to pay your own bills while these, you know, pro form pro formas play themselves out. How did you kind of decide on your philosophy on that?
Nick Cooley:Yeah. And, you know, I'm gonna make a a platform statement, but there's obviously nuance to the to the topic. Luckily, our my me and my team have always ate our own cooking. Like, we have our own real estate portfolio in the background that's generating, income for us to live on. And when you operate from a perspective that that is the truth, then I think the question of how much fees are the right amount to charge your limited partners, I think that conversation gets pretty easy pretty quickly.
Nick Cooley:If if I were to tell my limited partners, hey, guys. Guess what? You're gonna put 90 to 95% of the capital at risk for this deal, and you're gonna get 80% of the upside. Oh, and oh, hey. By the way, I'm gonna make 6% a year in fees commission, I mean, fees, by putting your capital at risk.
Nick Cooley:That that just feels like an opportunity for there to be misalignment. So anytime that there's an opportunity to analyze what are the behaviors that we want and then what are we incentivizing, I think it's easier to on the side of being extremely fee light because it just feels to us like that's the right thing to do, when other people's money is at risk.
Nicholas Cook:Yeah. Makes sense. Now I imagine, maybe this isn't the case, but if your fee structure is set up that way, are you currently outsourcing your property management, or
Nick Cooley:are you also doing that in house? We do. We work with, people that ride the property management bike every day. I I would love to be an expert at everything, but I've ceded control of that part of our business to people that are the true experts. And so, maybe that that changes at a different scale of our business.
Nick Cooley:But for now, we work hand in hand with third party PM.
Nicholas Cook:Got it. And so since you've got a multistate strategy, is this mean you've got different PMs in different markets and you're kind of able to see how different ones operate and, you know, see what you like and don't like?
Nick Cooley:Yeah. So we cover three states, have two different property management companies. The Nebraska Iowa thing kind of operates as one big market. Our our property management company that handles those two markets is based out of Omaha, and then the Michigan part is based out of Grand Rapids. And so in some ways, we do kinda get to have, this is a really bad analogy, but it's almost like our our parents are divorced.
Nick Cooley:And so we get to see like, oh, well, dad lets us have pizza on Fridays. Oh, well, mom lets us stay up late. And so we get to kinda have, like, best practices and hold each of the other ones to the standard that we've kind of, gleaned from the other. Mhmm.
Nicholas Cook:And, you know, property management is its own kind of animal, and it's it's a difficult business to be in. Sometimes people who have not actually operated buildings directly don't necessarily know the ins and outs, and especially people who aren't, like, professional investors. Right? Like, they may have a building, but that's kind of, like, the extent of it. They don't always understand the challenges that property management faces.
Nicholas Cook:And a lot of times, they try to grind down on the managers in terms of fees, which is a resource issue, for the management company. And then it prevents them from sometime sometimes being able to, you know, really manage the property in in the best way possible. What have you identified as things that, like, working with property management companies that as an owner, as an investor, somebody who represents capital, you know, that you're saying like, hey, I don't like this. I wish they did it this differently. Do you have any any tidbits along the way, tips that you've learned or thoughts on that?
Nick Cooley:Yeah. And just to make sure that I'm understanding the question correctly, you want, like, things that I would wish if I were building the perfect property management company or things that operators can do better to help you all? Probably the first one.
Nicholas Cook:But the second one, if we can dive into that too, that'd be great. But, yeah. No. The first one is really just kind of, know, what are you seeing where are you seeing the gaps that you're like, hey, I wish this was I wish they were doing this because, you know, I feel like we're speaking two different languages.
Nick Cooley:Yeah. That's a good call out. We actually work with, I have a really good relationship with both of our property management companies that we currently work with. That hasn't always been the case. You know, certainly, I've worked with ones that I've enjoyed working with less than the ones that we currently are partnered with.
Nick Cooley:I think the biggest thing, and it's something that we share and that we're obligated to, again, keep using that word, as far as reporting and financial transparency, is just the quality of reporting. You know, we do a lot of value add stuff. There so there's a lot of unit turns. And did we spend $9,000 or $10,000 on that last unit turn? Which unit was it?
Nick Cooley:Did we use the same? And so you and I know this industry better than 98% of people. Right? Yeah. The problem is is I raise money from the other 98%.
Nick Cooley:And so I need to figure out, hey, guys. Sometimes it's a huge pain in the ass when one of the tenant's kids goes and sits out in their car and shoots BBs into, like, the dog park signs. Ask me how I know. But, like, we're responsible for translating that day to day operation into digestible information on behalf of our partners. And, really, it's just that frequency and level of transparency on the reporting that I think you can never improve enough.
Nicholas Cook:Yeah. No. That makes sense. It's a great response. Great response.
Nick Cooley:Thanks, Freda.
Nicholas Cook:So, you know, let's talk a little bit about investors here. You know, in any business, you've got customers. And to some degree, the investors are your customer. Right?
Nick Cooley:Mhmm.
Nicholas Cook:And there's this old adage that people sometimes say, which is the customer is always right. And while that could be true in some businesses, perhaps, it's not always true. And who you choose to partner with matters a lot. And so, you know, you could take money from really anybody that has it, right, that meets some of that criteria. But when you're looking for investors, what process are you going through to make sure that like, hey, I wanna be know, in bed with this person.
Nicholas Cook:This person is somebody that, is aligned with our values and that is gonna be a good good fit for Radio Capital. How how do you go about that process? What what is that like?
Nick Cooley:That's a fun question too. I think the onus initially is less so on the investor on the part on the unlimited partner and more so on us as the operator. And what I mean by that is to have a radical level of transparency in what we do and what we target, what we pass on, what we say yes to, what is the ideal that we're aiming for both in return and product and all of the different, levers that go into the bike that we ride on a daily basis, the business that we, you know, are participating in. Mhmm. And then only once we can get that prospective investor to really understand what we're good at and simultaneously what we're not even interested in becoming good at, only then can we have a productive conversation on whether or not we're the right fit.
Nick Cooley:There are too many people that are screaming into Instagram live, sell all your stocks and buy real estate. You can't trust the S and P five hundred. You should trust me.
Nicholas Cook:It's
Nick Cooley:like, well, maybe, but you're also saying that every single prospective investor is a good fit for you, and that can't be true.
Nicholas Cook:Mhmm.
Nick Cooley:It can't be the right fit for you to go really deep on NVIDIA stock and simultaneously for you to go really deep on the two year treasury. Like, it it just can't be true simultaneously. But after they've been informed and educated on what the the ideal is and also what it's not for us, and then I think it comes down to we specifically try to be the very boring, predictable, repeatable, part of your portfolio. We're not IRR driven. We actually do this really crazy thing in private placement real estate where after we buy the assets, we actually move to pay them off, which is woah.
Nick Cooley:Never heard that one before. Because it's the we view real estate first and foremost as a principal preservation play with incredible tax benefits. Both of which you're you're risking losing if you're gonna play the five year flipping the apartment game and chase IRR. And there are some people that do that very, very well, but we don't aspire to be great at that. And so we ask for people that are okay getting that six pref for the first three to five years.
Nick Cooley:But in thirty years, that six pref is gonna turn into a 600 pref as inflation does its thing and as we pay off the asset. And so if you prioritize predictability and certainty over the long term, then we might be a good fit for you as a as a limited partner.
Nicholas Cook:Yeah. And I think people who have, you know, good, you know, reasonable time horizons for their investments, I mean, that's really the way that you should be investing. Real estate is kind of like the story of the tortoise and the hare. Right?
Nick Cooley:Mhmm.
Nicholas Cook:And people who are just trying to chase IRR, you know, that might work out here and there, and you might hit some amazing home runs. But over the long run, you're gonna be at serious risk. And right now, there's some people out there just getting their face ripped off in the capital markets because they're stuck in bridge loans that, you know, they're not gonna be able to extend. They may not even be able to get out of their construction loan. And it just to to lose someone's capital is such a substantial, like, problem and and candidly, in some ways, failure if you're reckless.
Nicholas Cook:Right? I mean, no investment is, immune from loss, but there are some things you can do that obviously ratchet up the risk. And I think, you know, it depends on whose money and what they're signing up for. But I see a lot of stuff where people don't you know, they're they really just don't know the operational side, so they can't underwrite properties very well. And, and that puts people at risk.
Nicholas Cook:And, you know, it's interesting. You know, we talked earlier about residential brokers not really knowing how to underwrite, you know, rental property, single family homes. But I found that a lot of multifamily brokers don't actually know how to underwrite apartment buildings very well either. And that's also a concern because they're they're, you know, handling off this life changing asset for better or worse to somebody.
Nick Cooley:And,
Nicholas Cook:you know, I've we've come across clients that weren't even aware of some pretty major regulations in our market that is gonna have a huge impact in their in performance of that building. So, yeah, you've gotta really just, you know, commit to learning, so that you know enough to ask the right questions. And so, I mean, I love your guys' business plan. That sounds like the right way to go. It's not, you know, sexy on the front end, but over the long haul, you're gonna have some cash cows that are just gonna kick off, you know, lots of money over time.
Nicholas Cook:And, you know, you can always go find more depreciation and things like that. But, no. I think that's a super solid strategy. What do you think the hardest part about raising capital has been? A lot of times people say, well, you find a good deal, the money will just flow to it.
Nicholas Cook:And while that's probably true in some respects, you know, it's not an easy button. Right? So, like, what have you found to be the most challenging thing about raising capital?
Nick Cooley:It's a good question. Think the biggest thing is I I think a lot of operators try to try to do it too quickly right now. It it's been made so famous on Instagram, and real estate is a get rich quick scheme. Right? Like, everybody I see that's doing it on Instagram has a Lambo.
Nick Cooley:So real estate has to like, I've been doing real estate for three months. Where's my Lambo? Yeah. And I think that there's a certain part of the raising money thing where you as the operator have to understand it's not about the perspective return or, hey. Here's what can happen if everything goes well.
Nick Cooley:I think it's that lack of experience on the operator's part where they fail to comprehend just how valuable it is to have a distinct and firm understanding of here's the hundred different things that we're going to do to help. We can't guarantee to help ensure that your your original principle is not at risk. And only once that is well established and I feel comfortable as the limited partner okay. Once we've got that base covered, now tell me about what's gonna happen if it all goes well. But the professional allocators and the professional investors, and to be frank, if you're just starting to raise money, the people you actually wanna work with, they're gonna place the fear of loss at a 10 x level higher importance than the % return that's that's possible if everything goes well.
Nicholas Cook:Yeah. Well, it's like, you know, Warren Buffett says, right, rule number one, don't lose money. Right? Rule
Nick Cooley:number two.
Nicholas Cook:Yeah. Go ahead. I don't want to
Nick Cooley:lose thunder.
Nicholas Cook:No. It's all exactly. Right?
Nick Cooley:We rule
Nicholas Cook:I think
Nick Cooley:of the chair. I yeah. I I I think of the Charlie Munger quote where he says, show me and I'm gonna paraphrase this, but show me where and how I will die, and I will spend the rest of my life avoiding that place.
Nicholas Cook:If you can
Nick Cooley:do that in real estate, dude, you're gonna be a multi multimillionaire. If we're compounding up into the right without resetting the clock Mhmm. It cannot come as a surprise that you end up becoming a billionaire with a long enough time horizon.
Nicholas Cook:Yeah. Well, I mean, there's a reason that real estate's created the most wealth for anybody in the history of, you know, the human economies in the planet. So, I mean, it's just like, why reinvent the wheel when you've got something right in front of you? So Welcome to,
Nick Cooley:the Nick and Nick podcast where we both say how much we love real estate. Let's go.
Nicholas Cook:That's a great title for a podcast. I like that.
Nick Cooley:We might be onto something. We could be.
Nicholas Cook:Yeah. So cool. Well, I think that's great that you're going through that process with investors and, you know, kind of lining up everything to tell the right story and to to to vet people out and make sure, you know, you're on the
Nick Cooley:same
Nicholas Cook:mission. You know, another thing that people ask about, you know, when they're, you know, looking to invest in in a company is, you know, skin in the game. And so it's like, do you guys put money, like your own money in some of your deals? Or how do you guys handle your participation in that?
Nick Cooley:We do. Historically, we've done a co invest that ranges from five to 10% of most of what we do.
Nicholas Cook:Alright. Yeah. Solid. Yeah. So you put your money where your mouth is.
Nick Cooley:Hey. We like to say, man, we we eat our own cooking too. So it's, I can't tell you how good this is for your family and then me not want to participate in the model myself.
Nicholas Cook:Yeah.
Nick Cooley:So it's not like, oh, well, Nick is making me. I have to throw some of my own money in. It's like, no. We're we're a believer. Like, I truly want some exposure to what it is that we're building.
Nicholas Cook:Mhmm.
Nick Cooley:And if that weren't the case, I think it's fair for somebody to look at it and be like, well, why should I participate in this if the product that you're selling isn't good enough for you and your family? You know?
Nicholas Cook:Yeah. 100%. Indeed. Alright. So we're gonna take a quick commercial break, so we will be right back.
Nicholas Cook:This show is sponsored by SleepSound Property Management, one of Portland's largest and top rated management companies that specializes in multifamily and residential real estate. They can help you acquire, operate, protect, and sell or exchange your properties. If you want to invest in real estate, give them a call or visit them online at sleepsoundpm.com. That's sleepsoundpm.com.
Nicholas Cook:Okay. We're back. Alright, Nick. Round two here. We've got some more questions.
Nicholas Cook:We kind of ended some of that last discussion around, you know, whether or not an investment's good for you and your family. And it sounds like you're obviously actively investing in your own deals, which is great. But what about kind of the broader involvement? Do you have other family members that are involved in your real estate business? Or is this something that you've kind of, you know, been the lone wolf in charge of this sort of thing, or or do you collaborate?
Nick Cooley:Yeah. We again, there's, like, the two chapters of our ongoing real estate story. Right? Chapter one was Nick and Hannah, my wife. And I my default bias is towards growth and revenue, and I'm a believer in some ways that revenue kinda cures all ails.
Nick Cooley:Hannah, a professionally trained emergency, you know, nurse practitioner, will find that point 1% thing that will kill us, and she will work to eliminate that via control and proper organization. That was also partially what made me wanna get out of the single family space. And so I joke that Hannah was fired from our real estate company solely because, husband and wife was more important to me than business partner, Nick and Hannah. True. True.
Nick Cooley:And so we do have in the iteration that exists today, we do have family members that that co invest alongside of us. Mhmm. But luckily, I only go to Hannah on opinions regarding the business when I want them, and she's not forced to participate on the day to day.
Nicholas Cook:That makes sense. Yeah. That's a you know, I've seen some couples, probably like two or three ever, that managed to be in business together and really just, like, you know, benefit from that synergy and and crush it. Okay. But that's always been a challenge, I think, for, you know, a lot of other people because it's like there's no unplugged moment.
Nicholas Cook:It's like we're talking about work during the day and at night and on the weekends. And you've gotta have some really complementary skill sets. And, you know, it just seems extremely complicated. And, you know, my, girlfriend right now, we've been together for four years. And, you know, I I'm trying to get her to, like, participate in some ways mainly because, like, she has a skill set that I actually don't, possess in the same way, and that is that she absolutely loves spreadsheets.
Nicholas Cook:So she's a financial analyst, and so she can do things with Excel that I've never seen anybody do in my entire life. And and it and I'm, like, excited that she like, I love seeing the product of it. I don't wanna build it. Right? Like, I can build spreadsheets to do what needs to be done because I had to when I was studying real estate finance in college and went through that whole process.
Nicholas Cook:I can do it, but I'd much rather just read something that somebody built or at least, like, provide the inputs. And so I'm hoping in some fashion that I'll be able to lean on that expertise. She's got a full time job that's not real estate. So, you know, we'll see where that where that lands. But, you know, it's it's definitely one of those things where I'm like, okay.
Nicholas Cook:You might be able to, like, be the canary in the coal mine on some stuff here. And because she's just, like, loves, you know, like, reconciling bank statements down to the penny. And I'm just like, this is
Nick Cooley:God bless her.
Nicholas Cook:Right? See, I mean, I know. Like, this is not where I wanna be at all.
Nick Cooley:So I'm so glad you exist, but you can miss me with that. That is awesome.
Nicholas Cook:Yeah. So, you know, it sounds like in 02/2024, you were pretty active, pretty busy, which was awesome. I saw a couple posts you had and and things like that. What lessons, if you had to just pick, like, two, that you did you take away from 02/2024, that you thought may be worth sharing with the audience?
Nick Cooley:Work to again, I'm probably unqualified to advise many of your listeners. But the one thing that I think we do well is that we are really clear on what success is for us. And no matter what a podcast says or, any one podcast, I should say, we've accumulated, multiple decades between our team members' experience in this space. And for us, long term yeah. I hate to say it.
Nick Cooley:Passive income on behalf of our partners is king. And there's like, we're huge on unlevered yield on cost. We figured that out over ten years of banging our toes against and shins and elbows on everything else. Like, we have the battle scars on how we got here. Mhmm.
Nick Cooley:But we think basis is king. And so for you, if you're an operator or, considering investing alongside another one, I I think that there's power in distilling what success looks like for you to one or two very meaningful criterion.
Nicholas Cook:Mhmm.
Nick Cooley:And so that way, when you do have that clarity, it allows you to move with speed, on the thing that actually moves the needle for you.
Nicholas Cook:Yeah. No. I think that that's a great great takeaway. Speed is you know, that is a competitive advantage. And I think that goes back to knowing the market.
Nicholas Cook:Right? You have confidence. If you know what you're buying and you know where it is, you can move quickly.
Nick Cooley:Well and and just one last thing on that too really quickly and, you know, cut me out on the on the editing room floor if I'm overstepping.
Nicholas Cook:No. You're not. But
Nick Cooley:I think and now that I say that's funny. This actually is gonna get edited out. Damn it. I lost it.
Nicholas Cook:Never mind. Sorry. Alright. We'll come back to it. I'm sure it'll pop in there.
Nicholas Cook:So Yeah. The other thing too is just getting your perspective on, you know, current market kind of sentiment or fears. You know, there's a lot of, you know, issues right now around interest rates, around a potential recession. You know, what are what are you kind of anticipating or gearing up for as we move forward?
Nick Cooley:This is perfect. This is exactly what I was just gonna say.
Nicholas Cook:Nice.
Nick Cooley:So I think one of the things that because we're in the forest, we tend to overlook that real estate is a business that has been around since the romance. Like, it's kind of always worked, especially on the multifamily side. You know, there was a point in time where maybe, like, the mall was, like, the trophy asset of anybody's commercial real estate portfolio. We're pretty bullish on the fact that even if people are wearing VR headsets into the office, you're gonna be doing that from a living room somewhere. And so as long as there's a utility case, honestly, we prioritize unlevered yield on cost and basis to the extent that we do.
Nicholas Cook:Mhmm.
Nick Cooley:At the end of the day, if you bought a a valuable asset that is capable of producing a repeatable, consistent cash flow, at some point, interest rates and all the other micro stuff, certainly, they matter. And I'm not advocating that anybody just throw that to the wind. But for all of those Instagram syndicators that were buying three caps in Denver in 2022.
Nicholas Cook:Yeah.
Nick Cooley:If you were willing to pay that for this thing and because of tariffs or whatever else is going on, if I could buy that same thing at a 20 to 25% discount, Yeah. That's awesome. Why why would I not participate in that?
Nicholas Cook:Mhmm. Yeah. Yeah. I mean, it's you know, time heals all wounds in real estate. So the key is being able to hold on to it long enough that you can, you know, make it through.
Nicholas Cook:And that's one of the things that we tell people in our market because of the regulations is, like, if you're gonna come in here and buy something, plan on holding it at least at least five years. You know? Ten years would be ideal, but five years is at least gonna allow you to absorb some of the potential additional risk and operational cost. But, obviously, the longer, the better. And, you know, it's it's one of those things, like, amortizing debt is, like, hard work.
Nicholas Cook:Right? There's so much interest that you're paying for. And so it's kind of you know, I think that's why, you know, your model is long term the right right decision because you're putting all that work to retire that interest. And then people liquidate the asset and start that game over. And and I understand, you know, you kinda balance things.
Nicholas Cook:So you might have some deals every now and then you just say, hey. This one is the offer is too generous. Like, we have to we have to liquidate this thing. That does happen, but, you know, it's the slow and steady kind of component. So what do you guys have planned, just transitioning for 02/2025?
Nicholas Cook:Is it, you know, to kind of stabilize what you have? Are you looking to acquire more? Like, what is on your your agenda for this year?
Nick Cooley:Yeah. We're out our our, a fundraise right now. And, you know, we aim to be buyers throughout all phases of the economic cycles. Mhmm. Whether that underwriting looks like a 20% IRR, air quotes for those of you listening in, or or an 11, like, we claim to be buyers through all phases.
Nick Cooley:And so that means, you know, we adjust our offer accordingly, but we are net buyers. And I personally am really excited about this next year as net buyers just because I think with our very long term horizon, investment horizon, I think that there's gonna be incredible buying opportunities, and our calendars reflect that that thesis.
Nicholas Cook:Yeah. Yeah. No. That I think it's a good opportunity as well and especially for people who are thinking long term. I think the other thing too that is maybe an unintended benefit of being committed to buying through the cycles is you will become an institution in the market.
Nicholas Cook:And that will give you leverage when you go to buy because people will say, you know, look at Radio Capital. They make offers. They close on those deals. There there's certainty around their offer, whereas, you know, you might have somebody come in that isn't an institution. And that was one thing in the Portland market when we were in our heyday before things kinda went off the rails.
Nicholas Cook:We had a lot of people coming in from, like, you know, East Coast, New York, Wall Street trying to buy stuff, and they struggled. And what they didn't anticipate is they did not have the broker relationships here. People didn't know them. You know, they didn't know if they were kinda fly by night or not, and that boxed them out of some potential opportunities. So, you know, that's a competitive edge that you're also building through that kind of commitment to buy cycle in, cycle out.
Nicholas Cook:I love that. Yeah.
Nick Cooley:Good call. It it shows you your experience in the space that that you, you know, recognize that in my opinion. The other valuable thing that we've even begun to notice, you know, at our relative, you know, young careers in the space is being as geographically constrained as we are. There's a beautiful thing that happens when you're kind of your own comps. Dude, we can have such a high conviction about, hey.
Nick Cooley:We bought this building, and it's, you know, at 60% of market rents. I, a, I know that that tenant avatar, and I know pre with a pretty high level of of certainty, exactly where the market is gonna tolerate this with, you know, new countertops, LVP, blah blah blah blah blah. And so there's a level of derisking it from our perspective just by being institutions in the market as well.
Nicholas Cook:Yeah. No. That's a great point. That's a great point. Well, I've got one more formal question, and then we're gonna pivot to three questions to get to know Nick a little bit better.
Nicholas Cook:But, the last formal question I have is, you know, what advice would you give to someone who wants to get started in investing in real estate? Would you say, you know, go buy a house, invest with somebody like you, take down their own multifamily? Like, what what advice would you give to somebody who's, like, wanting to get started?
Nick Cooley:The the multimillion dollar question. I hate to answer a question with a question, but I think it depends on their time horizon and, honestly, what their income is like. Right?
Nicholas Cook:Mhmm.
Nick Cooley:I'm very public about the fact that when we started when Hannah and I started our real estate journey, we started with a negative net worth, like Mhmm. Zero. Less than zero. But the for us, we didn't really have much to lose anyway. So it made sense for us to start with, like, the three and a half percent down FHA house hack, live in it for a while, then go buy the next one thing.
Nick Cooley:However, if the roles were reversed, and I'm talking to me today, you know, you have a a decent income, certainly much more financially stable, especially if you're a high earning w two earner. It's like, we've learned the real estate game through blood, sweat, and tears over ten plus years.
Nicholas Cook:Mhmm.
Nick Cooley:You've probably gotten to that same point in medicine. It would be harder for you to spend that ten year stupid tax to get to where we're at now. It's probably better for them to just invest that other extra energy into their day job, which they have a track record of success in already. Yeah. And to just invest alongside us, that comes with a high level of transparency, and then you can accelerate that ten year stupid tax.
Nick Cooley:And maybe you learn it in two years. And then if you choose at that point in time that you wanna go out and do your own thing, by all means. But I just really think it depends on that person and what their goals are. I I do wanna make it clear. Sorry.
Nick Cooley:At risk of rambling. But if you are somebody that does want to go out and do your own deals, you certainly can. That still works. I do think it's important to note that in the single family space like we started, I think it's gonna be much more difficult to do the quit your job as a bank teller and live off of passive income. It's not your fault, but the change in interest rates and the change in the market, I think, is gonna make it much more difficult to replicate that in the next ten years as it was over the last ten.
Nicholas Cook:Yeah. No. Yeah. I think that's, you know, an excellent response here. I I we try to tell people, you know you know, time horizon is obviously a great question.
Nicholas Cook:But we ask people, like, you know, what is your goal? Right? Like, are you trying to achieve? Right? Is this because, you know, at the end of the day, to your point, there's an opportunity cost for their time.
Nicholas Cook:And, you know, it's like, why are you you know, as if you're a high income earner, it's like, are you changing the your oil on your car? It's like, you probably shouldn't be unless you really love cars. Like, if you love cars and you like that whole thing and that's kind of like your unplug third rail stuff that you do, then go for it. But that may not be the best time. And, you know, real estate has a brutal learning curve, especially in property management.
Nicholas Cook:And, you know, most people, especially if you're starting out, if you are in a position to even qualify for the financing, you're signing a personal guarantee. So not only do you lose the asset if it doesn't go well, but you're putting yourself in a lot of jeopardy. And to your point, there's still opportunity for people who are hungry, who wanna make it happen. You can do it, but it's not like a dip your toe in the water thing. It's like, hey.
Nicholas Cook:You're all in and be prepared for the roller coaster ride. So
Nick Cooley:I I think if you're well capitalized and you wanna buy, you know, up to 10 like, if you're gonna buy more than 10, like, just go to commercial.
Nicholas Cook:Mhmm.
Nick Cooley:But there's also if you can do one at a time for the next ten years and then you get to 10 that way, I'm all for it. But I would view the single family thing as, hey. I'm very well capitalized to hold this. Like, what's a median detached single family home in Portland? Five Hundred K?
Nicholas Cook:It's probably a little higher than that, but, I mean, it's probably, you know, maybe 700 realistically.
Nick Cooley:Wow. Okay. So that's like Denver prices. Denver's is, like, $7.15. So I I know the Denver market a bit, obviously, more so than than Portland.
Nick Cooley:Mhmm. Your typical single family home in Denver is gonna cost you $715. And it's probably if you're honest with yourself about the underwriting, it's gonna be cash flow negative right now. Mhmm. Yeah.
Nick Cooley:A a great deal if you're taking into account vacancy reserves, maintenance, CapEx, all that. Maybe you make a hundred and $50 a month, which awesome. It's gonna cost you a hundred and $50,000 down, and it's gonna get you, like, a good but not a great bottle of wine once per month on your date night if nothing breaks. Yeah. And so if you can if you're well capitalized enough that you can do four of those, I'm pretty confident that it will appreciate in value over the next thirty years.
Nick Cooley:Mhmm. But then it comes down to to Nick's point about, like, is being cash flow negative for the next thirty years with a pretty high level of confidence that it'll be worth more later? Is that investing, or am I speculating at that point in time? And I would argue, as the guy that gets paid to raise money, so bias acknowledged, I would, I would advocate that it's better to be participating in a cash flow positive commercial asset, and maybe you're only getting 75% of the proceeds from that. But still, I think net net, you'll be in a better position long term.
Nicholas Cook:Alright. Well, excellent. We are gonna transition now to a few questions about you. That's right. The exciting stuff here.
Nicholas Cook:So one of the questions I have is if you could have dinner with one person dead or alive, who would it be?
Nick Cooley:Dude, this is, ironically enough. I was just talking about this yesterday with a friend of mine. Oh. And I think it would have to be Winston Churchill. Oh, alright.
Nick Cooley:The the most American British dude of all time with, like, peak swagger. You're you're the you know, you're walking around town as your city's getting bombed with a cigar? Hell, yeah. I wanna have dinner and a steak with that guy. That'd be dope.
Nicholas Cook:Yeah. And his humor was on point. The thing that I'll say if you haven't done it and if there's a, there's a podcast out there called Founders Podcast. Mhmm. Yep.
Nicholas Cook:And it's incredible. And he's got a couple episodes about Winston Churchill in, like, early stages of life, and it's wild. It's wild to hear about that person's whole life.
Nick Cooley:Seek those out. I haven't heard this. That's a great call.
Nicholas Cook:Yeah. They're incredible. Alright. Next question. Whiskey or wine?
Nick Cooley:Oh. I pride myself on my ability to appreciate all of life's little treasures, including whiskey or wine. But, I'm actually in the process of studying for my Psalm one seller manager, so I'm gonna go wine.
Nicholas Cook:I love that. We are gonna have to connect about that because I last summer, for fun, I took the introductory, sommelier course from the masters of sommins last summer. It's like a three day course. Yeah. And I took that for fun because I and into wine and whiskey.
Nicholas Cook:And we actually, in the Willamette Valley, we have amazing pinots and chardonnays, and we've got Walla Walla not too far and stuff like that. So we'll have to and I actually collect, bourbon as well, so that's kind of the reason for this question. But No wonder my friends.
Nick Cooley:This is all coming full circle.
Nicholas Cook:That's right. That's awesome, man. Congratulations. That's exciting. Yeah.
Nick Cooley:Thanks.
Nicholas Cook:And then the last question I have here is, you know, being an entrepreneur means you accept the consequences of risk. Right? Not everyone has the appetite for that. Do you think that's something you were inherently born with? Like, it's in your DNA, or was that something you learned to appreciate and accept?
Nicholas Cook:Oh,
Nick Cooley:dude, you could have done a whole show on this. I think I was certainly born with a certain level of it, but I think it's been refined and enhanced over time. And, you know, one of the things that I think that's interesting about the the perception of risk is the reality is is, like, we're even the the guy that has a super steady w two as an accountant, there is risk that that firm is gonna go under or that they decide to relocate or offshore it. So I think entrepreneurs are maybe more aware of the risk and decide to try to take more control to counteract it.
Nicholas Cook:Mhmm.
Nick Cooley:But but I think most entrepreneurs would say, dude, we all have risk. It's just what are you gonna do about it? And, you know, we and other entrepreneurs that are listening in, this is our coping mechanism is to try to to saddle it up and ride it ourselves. You know?
Nicholas Cook:Yeah. I think that's a great way to describe it. I've not heard it described that way before, but that's pretty spot on with, yeah. I've I've that makes I like that. Cool.
Nicholas Cook:Well, Nick, it's been a pleasure talking to you. Really, really enjoyed learning more about your operation at Radio Capital, what you guys are doing, and and just getting to know you more as a person. So thank you for for joining us on this podcast today.
Nick Cooley:Thanks for having me, man. This is fun.
Nicholas Cook:And that concludes today's episode of retire on rentals. But we do have a quick favor to ask before you jump off. If you haven't already, please go ahead and like and subscribe. More engagement means better content and more excellent guests. And we look forward to joining you on your real estate journey.
Nicholas Cook:Now remember, stay focused, stay driven, so you can retire on rentals.