Replacing W2 income w/ private investments w/ Ian Milligan-Pate, VP of Sales @ Zscaler

Welcome to The Legacy Wealth Podcast where we help accredited business owners become educated & get access to, private investments that the wealthiest investors in the world utilize to grow their net worth. We do this by providing insight & access to successful fund managers & investors across multiple asset classes.

I’m your host, Pascal Wagner, and today we are interviewing  Ian Milligan-Pate, VP of Sales @ Zscaler, and we'll diving into:

- How to evaluate the track record of operators
- How to balance risk and return in real estate investing
- And how to create a portfolio that generates horizontal income

Links from this episode:
- If you're looking for highly vetted opportunities to invest in, get access to our deal database of alternative investments & join our investor club at www.getfundbase.com.
- Watch the show on YouTube here: https://youtu.be/JjjHHFBCIVs

About Ian Milligan-Pate:
Ian is a husband and father of two, based in Denver, Colorado.  He has spent the last 18 years building his career in the software and SaaS industries.  He is currently a Vice President of Sales for a publicly traded cybersecurity company.  He's been investing in real estate since 2013 and has been investing passively in real estate and other alternative asset classes as an LP since 2020.  He's invested in more than 30 LP positions and focuses primarily on income generating investments that produce long term cash flow. 


Links from our Guest:
- https://www.linkedin.com/in/ian-milligan/
- https://www.linkedin.com/company/zscaler/
- https://www.facebook.com/Zscaler
- https://twitter.com/zscaler
- https://www.youtube.com/user/ZscalerMarketing
- https://www.zscaler.com/company/contact

Time Stamp:
00:00 - Intro
02:00 - Ian's background
03:30 - Ian discusses buying his first rental property and exploring different investment options
04:30 - Challenges faced in acquiring a mobile home park and the realization of the operational intensity involved.
05:11 - Ian's experience with passive investments and the shift towards LP investing.
06:45 - The appeal of passive investing and its potential for generating mailbox money
08:14 - Ian shares a challenging incident with a burst pipe in one of his properties
10:20 - Ian's recognition that being an operator does not align with his goals.
11:00 - Ian's preference for income-generating investments
12:19 - Ian expresses his preference for income-based strategies over accumulation-based ones like 401(k)s.
13:30 - Ian decides to focus on building a portfolio that generates income and provides control
14:30 - Ian reveals that the majority of his net worth is in private investments, particularly passive LP positions
15:11 - Ian's preferences for private investments over dividend stocks or REITs
16:00 - Ian highlights the cash flow stability and predictability of real estate investments.
17:28 - Ian talks about the importance of diversification and avoiding concentration risk.
18:00 - Ian discusses the balance between wealth building and wealth preservation
19:30 - The importance of staying within your expertise
21:15 - Deals with floating rate loans and the impact of rising interest rates on cash flow
22:00 - The impact of higher interest rates on cash flow and the rising cost of rate caps
23:20 - Ian discusses the demand and cash flow potential in the mobile home park sector.
24:01 - Interest rates doubling in a year was an unexpected miss
25:00 - High demand for property acquisitions and capital on the sidelines
26:00 - Ian's procs for evaluating deals
27:09 - Looking for operators with experience in past down cycles
28:00 - Seeking referrals and talking to other investors who have invested with the operator
28:57 - Polaris as a private REIT offering loans in the industrial cannabis space.
30:51 - Ian expects compression on the rate of return over time as more lenders enter the space.
31:10 - Ian highlights the historical returns of Polaris
32:21 - The increasing demand for affordable housing and how mobile home parks serve as a last resort for such housing
33:00 - The efficiency of mobile home park operations, where tenants own their homes and are responsible for maintenance cost
34:30 - The strategy of aggregating mobile home parks and transforming them into REITs.
35:06 - Outro

Creators & Guests

Host

Pascal Wagner

I help accredited entrepreneurs & executives in the US replace their primary income through private investments.

Guest

Ian Milligan-Pate

Ian is a husband and father of two, based in Denver, Colorado. He has spent the last 18 years building his career in the software and SaaS industries. He is currently a Vice President of Sales for a publicly traded cybersecurity company. He's been investing in real estate since 2013 and has been investing passively in real estate and other alternative asset classes as an LP since 2020. He's invested in more than 30 LP positions and focuses primarily on income generating investments that produce long term cash flow.

What is Grow Your Cashflow Podcast?

Welcome to Grow Your Cashflow Podcast where we help accredited investors learn how to earn consistent monthly passive income from private placements.

If you're uncertain about where to invest for dependable returns, have limited access to exclusive opportunities like private placements, or are looking for expert insights and guidance on generating consistent income across various asset classes, then this show is tailored just for you.

By listening to this show, you'll achieve your passive income goals faster by learning:
🚀 Proven strategies to secure monthly passive income. 
💡 Expert insights from successful fund managers and investors. 
🌐 How to access exclusive opportunities in private placements. 
📈 Techniques to diversify across multiple asset classes for a robust portfolio. 
💰 The well-guarded secrets of wealth accumulation used by the world's elite.

Try listening to our most popular episodes on your favorite podcasting platform or on YouTube. We look forward to you joining our community of investors. You’ll be one step closer to growing your cashflow!

Pascal Wagner:
All right, welcome to another episode of the Legacy Wealth Podcast where we help accredited business owners become educated and get access to private investments. We do this by providing insight and access to successful fund managers and investors across multiple asset classes. I'm your host, Pascal Wagner, and today we have on the show Ian Milligan-Pate, who also lives here in Colorado. Welcome.

Ian Milligan-Pate:
Thanks for having me.

Pascal Wagner:
Hell yeah. So I'm going to give a little bit of a bio or a background on Ian, just so we know who we're speaking with here. So Ian is a husband, father of two. He's based here in Denver, Colorado, like I said. He spent the last 18 years building his career in software and SaaS industries and is currently a vice president of sales for a publicly traded cybersecurity company. He's been investing since 2013 and he's been investing passively in real estate of asset classes as an LP since 2020 and he's invested in more than 30 different positions as an LP focusing primarily on income generating and investments that produce long term cash flow. So awesome bio there Ian. I'm excited to jump in. And you know I was mentioning before this call that I wanted to jump right in but you have a very interesting story that audience, which is just tell us about how you started eventually investing in private investments, funds and syndications.

Ian Milligan-Pate:
Yeah, I'll give you the backstory and you can cut me short if it's too long. But, you know, in a nutshell, I did the, you know, the traditional route that they tell you to go, go to school, get good grades so you can go to a good college, get good grades there so you can get a good job, climb the corporate ladder and try to sock money away into, you know, your 401k and IRAs and, you know, mutual funds and those types of traditional, you know, public security I realized at some point that that wasn't the game I necessarily wanted to play for the long run. You know, to work in corporate until I'm 65 or 70 years old and then hopefully have a nest egg. And,

Pascal Wagner:
When

Ian Milligan-Pate:
you

Pascal Wagner:
was

Ian Milligan-Pate:
know...

Pascal Wagner:
that? Like how old were you? Like how far into your career?

Ian Milligan-Pate:
Yeah, well, we started getting interested, my wife and I, in real estate when we were around 30, so that's about 10 years ago. So we bought our first rental property in 2013. We did a crash course seminar at a local community college, taught us how to evaluate single family rentals and we had saved up a little bit and bought a rental back at the time when you could still buy houses in Denver for 200 grand. well, we ended up getting a second rental. Then a couple years later, got a duplex, executed a couple cash out refis, bought a fourplex, so we were up to eight doors. And we were kind of at an inflection point of okay, do we want to keep scaling in small residential properties? Do we want to go into multifamily and scale up? Or do we want to do something else? And where we landed was that we wanted to go into mobile home parks. We had been learning about that asset class, listening to a lot of podcasts, reading up and it just like a great cash flowing asset that kind of fit our goals. So we sold all the residential properties we had. We cashed out, took the chips off the table. The market had appreciated really well in Denver. And we went all in on mobile home parks. Took a while. It was harder than I thought it would be to actually land one. We went under contract twice, fell out of contract twice in due diligence. Finally ended up closing on one in 2020. And the goal was to build a big portfolio of mobile home parks that out and build a lot of passive income. And the realization I had pretty quickly after we bought that mobile home park is that it was not passive at all. And it was

Pascal Wagner:
Yeah.

Ian Milligan-Pate:
actually very operationally intensive and that with my job being as demanding as it is, there was no way I was gonna be able to manage a whole portfolio of these things.

Pascal Wagner:
Yeah,

Ian Milligan-Pate:
stuff.

Pascal Wagner:
yeah, okay. And then from there, what happened?

Ian Milligan-Pate:
Yeah. So, um, I, along the way I had made one or two passive investments, kind of friends and family deals with, with operators I knew who were buying, you know, multifamily apartment complexes where I had taken a small LP position. And I started to just look at the chessboard and kind of put the pieces together that actually, you know, if I just went all in on LP investing and plowed as much as I could into that, um, and really built a portfolio up that way that, you know, much better with my lifestyle goals, which is really to create, you know, lifestyle freedom and time freedom, rather than, you know, being in the operator side and, you know, having to manage and own and operate properties.

Pascal Wagner:
Yeah, something I know that we've talked about, I even remember when you were putting in an offer on one of the mobile home parks, and maybe even Pueblo, I think it was.

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
You know, something we talk a lot about on the show is this idea, or at least I'm bought into this mindset of focusing on your cash cow, the thing that makes you your income and brings you a lot of money and then figuring out how to diversify and shove that into other investments so that you can stay focused when you're investing as an LP. Do you think about it that way? operator versus a passive investor evolved over time.

Ian Milligan-Pate:
Yeah, I totally agree with that. And part of the realization I had when I was going through this with the mobile home park was that my biggest asset is my W2. That generates way more than the mobile home park or any one real estate investment is going to. For me, so from a leverage standpoint, what makes the most sense is for me to double down and maximize my W2 earnings and then take the cash that that kicks off investments and you know passive investing is still a lot of work But what I really like about it is you know, you do the work once you make the decision at the end of due diligence It's either a yes or a no and either way it's done and from there forward it is truly completely passive, right? You know for better for worse or sometimes you probably

Pascal Wagner:
Yeah.

Ian Milligan-Pate:
wish you had more control of the way the investments going But but either way like it, you know when it's going well as it's supposed to I mean it truly is the only investment That is, you know mailbox money, right with no strings attached

Pascal Wagner:
Yeah. Yeah. And maybe like I'd love to dive into, you know, you said that when you first started, you started buying a couple pieces of real estate and then you flipped, you flipped that into the mobile home parks. Like walk me through what, what was the switch? What was the turning point? Right. Like there was a moment where you sat down and you, you were like, okay, fuck this. I don't, What were the things that you were doing in your investments? Like give us the detail of the day to day.

Ian Milligan-Pate:
Yeah. Yeah. I'll give you the, the painful glory details. I was, uh, we bought this mobile home park in January and, uh, I think we were probably 30 to 45 days into it. And I'll, I'll never forget. I was on a ski weekend. I was in steamboat Springs, staying in a hotel room with my family and three in the morning, I see my cell phone ringing from a number in Illinois in the area code where we own this mobile home park. And I'm like, Oh, this, this can't be good. And it's one of the residents who lives in a single family property that's on the, on the park and in the basement of that single family property is the, all the private infrastructure that the park runs on. So the, the well tanks for the well water and the controls for the septic system. And this guy's calling me freaking

Pascal Wagner:
Oh no.

Ian Milligan-Pate:
out. You know, I answered the phone, I'll groggy and he's like, Hey, the basement is filling up with water. There's a burst pipe. And you know, at this point, I'm just like, no plumbing contacts, we have nothing. I don't have an on-site maintenance guy. So spent the next two hours on the phone, frantically making calls, trying to get a 24 hour plumber in there, shut off the water system, fix it. And it was an ongoing song after that. It didn't end just in those two hours. But it was that and those kind of things where it was like, okay, there's no way I'm gonna do this. This is way too active. And I think if you do build a portfolio you get economies of scale as an operator and you can build layers of management in your company and third-party property management potentially and have these different pieces. But until you get to scale, you're kind of in no man's land, especially with mobile home parks. You know, it is very much a like self-operated, self-managed business. There aren't a lot of options for property management. So it's a contact sport, especially with that tenant class can be, you know, can be pretty demanding in terms of collections and the other issues you have to deal with. And I just realized this is not for me and this does not align with my goals at all.

Pascal Wagner:
Yeah, no, thanks for sharing. Okay, so you went in with the idea of like, look, I'm trying to get cash flow. Was it

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
strictly cash flow? Were some things equity growth? Like, how do you think about investing in different asset classes and what your real investment objective is?

Ian Milligan-Pate:
Yeah, I mean, my thinking on this has changed over time. Originally it was kind of what I was saying earlier, which was, hey, you build a nest egg and then someday you retire and you have this big nest egg saved up and you draw it down, you know, until you die or leave it to your heirs. I started to learn, you know, around 2017, 2018, you know, about this idea of cashflow. And as you know, in GoBundance, we talk about, you know, your vertical income, which is your job or anything you do to trade time for money. your horizontal income, which is income that comes in without you having to trade time for money. It's the more passive income. And so I got this idea in my head about building my horizontal income up to the point where it exceeds, one, my cost of living, and two, hopefully at some point, exceeds the money that I make in my W-2 job. And for me, that's the ultimate freedom, because at that point, you can keep your job if you like it, which I like mine, but you don't have to. You're not a slave to it. meet it, right? And so I really focus on cashflow when it comes to investing. Equity growth is great. It's great to have capital events because you can redeploy that to create more cashflow. But I don't do a lot of investing in things that are purely equity growth, you know, like for example, you know, new construction development or something like that, where you're waiting on a big payday at the end of a deal. I tend to focus on deals that really start to generate cashflow with, you know, early on in the deal cycle.

Pascal Wagner:
Why do you think that is? Is it like you want to have that freedom that optionality to kind of, you know, be your like, although you're working at a W2, you, you then have the control if you have all the extra cash flows.

Ian Milligan-Pate:
Yeah, that's exactly right. I mean, it's, it's income based instead of accumulation based because I think, you know, the accumulation based mindset, like for me, the realization I came to with a 401k is it, you know, I think it's kind of a trap, right? You, you plow your money into this thing. You can't get it out until your retirement age. At that point you have a lot less use for it, right? So I want to have access to my money now. And then, you know, of a misnomer is it's not actually tax free, right? It's just tax deferred. You still pay taxes, right? As you draw that money

Pascal Wagner:
Right.

Ian Milligan-Pate:
out in retirement, you're just kicking the can down the road, which you know, there's something to be said for that. I mean, tax deferral is good if you can push things out. But the notion that financial advisors push on people a lot of times is they say, oh, well, when you're in retirement, you'll have less income. So you'll be in a lower tax bracket. So when you you would if you paid it now and just invested it in, you know, non tax deferred investments. To me, that's totally backwards. I'm not planning to be poor when I get

Pascal Wagner:
Right,

Ian Milligan-Pate:
to retirement age. I don't,

Pascal Wagner:
right,

Ian Milligan-Pate:
I don't

Pascal Wagner:
I

Ian Milligan-Pate:
know.

Pascal Wagner:
plan on making more money when I'm

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
older.

Ian Milligan-Pate:
I'm not excited for the idea of, you know, planning to live off 40 grand a year. And that's kind of what they're peddling. I think sometimes I plan to continue to build my wealth and to be in a great spot when I'm in retirement age. So for me, it just, that was where I was like, okay, I'm going to scratch the, you know, IRAs, the 401Ks really focus on building a portfolio now that I have control over that generates income.

Pascal Wagner:
Yeah, so what does that makeup look like? So is pretty much most of your net worth in private investments? Do you have stuff in equities? Why not equities, like the stock market?

Ian Milligan-Pate:
Yeah, I have a little bit in the stock market. For me, the benefit of that is really more liquidity than anything. Just kind of rainy day money rather than keeping too much in cash. But the vast majority of my portfolio, my net worth is in private investments, mostly in those passive LP positions. And I've done about 30 investments. Few of those have gone full cycle and I've reinvested. But getting better and better, I'd like to think with each one as I learn.

Pascal Wagner:
Yeah, yeah. So we focused on, I mean, is the real, actually, I want to take a step back and say, okay, I mean, there are ways that you can cash flow in the equities market, like you

Ian Milligan-Pate:
Sure.

Pascal Wagner:
could buy dividend stocks or reads or, and so because you're very cash flow focused, why not, why not those or why, why private investments? Like there is some risk, there is a, you have to learn the asset to private investments over anything else.

Ian Milligan-Pate:
Yeah, I think the big thing I look for is asymmetric risk. So the deals where I can get greater upside with lower risk profile. And I think my competitive advantage as an LP investor is I understand real estate. I understand how to underwrite it, understand how to underwrite the operators. Whereas if I'm looking at a stock or a publicly traded REIT, you know, for me, that's a throw the dice, right? And so much of, you know, is just based on market sentiment. I mean, we've seen that in the last year. There's tech companies that are performing phenomenally well, and the stocks have still been hammered by 75% just because of macro and market sentiment. So I like things that I'd like to think I have more control over, more predictability in, and that cash flow kind of rain or shine. Even if real estate valuations go down, if you're in properties that are performing well from an NOI standpoint and have good debt, they're to kick off distributions, you know, even when values may be compressed a little bit.

Pascal Wagner:
Yeah, and then for the audience, NOI, Net Operating Income, essentially the revenue minus expenses before the debt service. And so, yeah, if they have great NOI, then they should be able to continue to perform. So, Ian, you've invested in over 30 different funds or syndications and projects, so, and you've invested across an array. Before this call, you mentioned you invested to

Ian Milligan-Pate:
Yeah, great question. Couple things, like when I set off down this path, the path of investing early on, I tried to borrow some guiding principles that I learned from people who are much further along than I was and much smarter at this. And one of the things that they talked about was concentration risk, right? And not having too much of your net worth in any one particular deal with any one particular operator So, you know, in a nutshell diversification, right, to spread that risk. Now I am super heavy in real estate and within real estate, I'm pretty heavy in multifamily, but I'm trying to get more diversified. I think it's a balance because it really depends, you know, are you, where are you in your journey? Are you in wealth building mode or are you in wealth preservation mode? I'm still in wealth building mode and you know, in wealth building mode, I think you do better by making focused bets, right? If you're in wealth preservation mode, you know, everything is about diversification because you're really, you know, you don't need to win. You've already won. You're just trying not to lose. Right.

Pascal Wagner:
Right.

Ian Milligan-Pate:
So that's how I think about it. And I think it's a balance because, you know, I've done well in the real estate investments for the most part. The couple of times where I've really got upside down on an investment is when I've strayed far outside of that and kind of gotten So, you know, the two worst performing investments I have are the e-commerce and the crypto, right, which were both, you know, kind of chasing shiny objects. And those are the ones I really got, you know, smacked over the head on. So, you know, that's a lesson I've had to learn the hard way.

Pascal Wagner:
Yeah, I mean, so let's dive into that a little bit because I maybe have a slightly differing opinion and I'd like to see how you think about it. So to me, I'm imagining you invested in a crypto fund or syndication before the market tanked. And

Ian Milligan-Pate:
Correct.

Pascal Wagner:
so, yeah, and so to me, I'm thinking about it's like, okay, well, I'm investing over time and crypto I view as a long term investment and we

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
know that there are cycles in that So to me, I'm like, you know, I've bought in all across the spectrum, we've been dollar cost averaging into it,

Ian Milligan-Pate:
No.

Pascal Wagner:
but do you really feel like those maybe have gone sideways for you or just that the market is temporarily down? Like, are you like, oh, I don't want to invest in these asset classes anymore?

Ian Milligan-Pate:
I'm not anti crypto or anti e-commerce. I think, yes, I definitely, you know, nailed the timing 100% in the wrong direction by investing right at the peak. So I'll own that one. You know, maybe crypto has great long-term prowess. Maybe it's a good inflation hedge, although it seems to move more up and down with the NASDAQ than it does, you know, moving against the dollar and kind of behave more like a tech stock. so much that those are bad asset classes, it's that they're outside of my swim lane in terms of what I really deeply understand. And the way you de-risk any investment is through knowledge and education, right? Versus for me, I was jumping into something speculative because the return profile looked great when I really didn't truly understand how to underwrite it. And so, you know, probably deserve to get smacked in the head for that reason, right?

Pascal Wagner:
Yeah well verdict still out on that one so we'll circle back in a couple of years and see if

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
you still feel that way about it. Okay so let's let's dive into you know one of the things I want to start getting into more is is understanding. One things that have gone wrong. And before the show we talked about one of your syndicated deals and lessons you've learned. From. evaluating different real estate deals. Let's talk about one of your real estate deals where you're getting squeezed right now.

Ian Milligan-Pate:
Sure. Yeah. I've got a couple that fall in the same bucket and there's, there's a common pattern, which is the, the deals that I'm in and these are primarily multifamily syndications, one fund, and then a couple of like individual assets syndications, where they are on a floating rate loan. Right? So these are deals that were purchased in, you know, 2020, 2021, 2022, you know, at the time, 3% and you know fast forward to today and you know those rates have more than doubled on a lot of deals and you know operators have the operators all have rate caps but even so when you're you know your debt service is at a 3% rate and it jumps to 6 you're eating into your cash flow pretty significantly. So that's you know that's been a real lesson for me in terms of something I'll take forward And the other thing that's happening with those deals is even if they're performing okay, you know, with the rate cap in place, the pricing on those rate caps has gone up like crazy. So that, you know, those rate caps expire at some point, you know, after whatever 12, 24, 36 months, and then the operator has to buy a new rate cap policy. Well, what the lenders are doing is they're making the operators escrow a ton of money to cover that future price of the new rate cap. So in some cases, they're making the lenders escrow a ton of money to cover that future some cases, the lender is telling the operator, hey, you've got to escrow 20 grand a month to get this new rate cap that's going to cost you a quarter million dollars in two years. And so that comes straight out of your cash flow too. So the net of all that is these deals are, they're all okay. I don't think any of them are going to be deals where the property gets turned back over to the bank or anything like that. But they are deals where I have capital invested and I'm not getting any cash flow distributions. while they try to kind of work their way out of this hole or hope that, the rates go back down at some point here in the future.

Pascal Wagner:
Yes. What do you think the thinking was behind that? I mean, right? Like, I'm pretty sure when interest rates were at 3%, no

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
one thought that they were going to go to, I mean, I'm sure there are people thought that it might go to zero, but

Ian Milligan-Pate:
Right.

Pascal Wagner:
I think that the logical thing was like, okay, these rates are going to go up at some point. What was, what was, what do you think is the logic behind going after these floating rate caps when you would want to lock in long term debt? in these deals.

Ian Milligan-Pate:
Yeah, I think there's a couple of things. I mean, I don't think anyone was underwriting interest rates doubling in a year, right? So everyone was kind of, yeah, interest rates are gonna go up, but very slowly. And that was at the time when people were still talking about inflation being transitory and those kinds of things, right? So that was definitely a miss that I don't think anyone saw coming. I think the other thing is when you get to the top of a market cycle, what we saw in 2021 and 2022 And there's different ways you can do that. But one of the ways you can do that is by, you know, taking on that floating rate debt, right? And betting on that, that low rate, you know, hopefully staying low or, you know, being able to refinance into fixed rate debt in the future at a low interest rate. And, um, you know, everybody wanted to keep acquiring properties. There was tons of capital on the sidelines looking for deals. And so, you know, that's where we were. And so, you know, we were able to do that. And so I think a lot of people did stretch their underwriting in different ways to make deals work.

Pascal Wagner:
Yeah, so what's the takeaway here? Is it like you don't invest in floating rate caps or that's still something you're willing to invest in, but it's just have a better idea of where we are in the market cycle?

Ian Milligan-Pate:
Yeah, I think I probably would not invest in deals with floating rate debt again. Um, you know, I think there's, there's plenty of ways to get good long-term fixed rate debt, you know, whether it's, it's bank agency, you know, uh, et cetera. And there's plenty of operators that continue to lock up deals with fixed rate debt and did even through the market peak or, you know, maybe, maybe weren't as active buying, but also didn't end up in this situation where they have deals that are a little bit sideways. So. Yeah. For me, it's probably something I'll stay away from in the future.

Pascal Wagner:
Yeah, yeah. So in the future, so one of the things you mentioned also before the call is you have somewhat of a process of how you go about evaluating deals

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
and having invested in 30 different ones. Walk

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
us through what that process looks like for you.

Ian Milligan-Pate:
Yeah, I think, you know, a good core principle, and I'm sure all your listeners have heard this before, is you bet on the jockey, not the horse, right? You know, a great operator, you know, can turn an okay property into a good property and a bad operator can turn a good property into a really poor property, right, from a performance standpoint. So I definitely try to focus on the operator. I don't want to have to find 50 different operators, right? I'd rather have a small group that I really have grown to trust and continue to invest in their deals. And that streamlines my underwriting too, because then I don't have to underwrite the operator again. I just have to underwrite the deal if I already trust them. So I look for track record. That's the big thing. Especially today, there's a lot of people that have jumped into real estate syndication just in the last couple of years. Nothing wrong with that. that there's some great people that have jumped in but it also means they don't have a track record that's as long they haven't lived through a down cycle they probably didn't live through you know 2008 as an operator and so ideally i look for operators that that have been through a down cycle that went through 2008 or even earlier cycles than that and i'm looking for how they've performed throughout that right and going back and asking for you know what were the results of their looking like. And then talking to other investors that have invested with that operator, I think that's huge. I always look for referrals, try to find people I know who have invested with them. I never want to invest because of that, because I have been burned before kind of piggybacking on someone else's underwriting and then not doing my own proper due diligence. But I think it is an important data point to talk to current investors and find people that they really know, like, and trust as operators.

Pascal Wagner:
Totally and did they communicate well did they you

Ian Milligan-Pate:
Absolutely.

Pascal Wagner:
know mention anything when things went sideways and You know were they proactive instead of reactive

Ian Milligan-Pate:
Yep.

Pascal Wagner:
all of those kinds of things There were two funds that you mentioned that you Currently really love and that I think are really interesting. Let's dive into those. Let's let's figure out which the one you talked about was the Polaris fun. Let's, you're really interested in debt lending. Tell us about why you like that fun particularly. Dive into the strategy and why you think it makes sense for you.

Ian Milligan-Pate:
Yeah, yeah, Polaris is an interesting offering. It's a private REIT that is a debt fund in the industrial cannabis space. So think of a large scale cannabis grow operator that's gonna have a commercial grade kind of warehouse and grow operation that they need to finance and build out. So they're looking for a loan on that property. And there's an inefficiency in the market because cannabis is still federally illegal. A lot of the major national lenders that you would traditionally see in the industrial space won't touch those properties. They can't touch those properties. But as a private REIT, Polaris comes in and offers these loans. And so there's kind of this arbitrage where because there is a shortage of lenders, they're able to command a higher interest rate on these loans. and then can pass through those returns to their LPs. So I really like that. For me, it's been a good vehicle. I have a pretty decent position with them, pays monthly cashflow distributions, has a liquidity component. I think there's some gating around redemptions, but you can redeem from it. It's kind of semi-liquid. So it has a lot of the things that I look for in an investment.

Pascal Wagner:
Yeah, I mean, so one of the things that immediately comes to mind for me is, is I think about, OK, eventually my thesis is that cannabis will become legalized across the United States,

Ian Milligan-Pate:
Mm-hmm.

Pascal Wagner:
at which point lending from banks would be fair game for a fund like this,

Ian Milligan-Pate:
Yep.

Pascal Wagner:
for those kind of facilities. How do you think about that risk when you invest? Like, pretty interesting deal. Totally see, totally makes sense.

Ian Milligan-Pate:
Yep.

Pascal Wagner:
whole operation works, how do you think about that kind of risk?

Ian Milligan-Pate:
Yeah, I think it's real. And I think what you'll see, and I think Flairs has already seen some of this, is compression on the rate of return over time. That'll be the net effect of that, as more lenders get into space. I don't think it's a risk to the fund or their current book. But I do think as it gets more competitive, rates could compress there. And I think they've already seen some of that. I think early on, prior to me investing with them, they were returning 12% to 15% to their LPs. know, 10 to 11, 12% range, but still a really good return, you know, similar to what you would get if you're doing your own hard money lending, except you're not having to deal with the, you know, the risks and headaches that can come with that.

Pascal Wagner:
Yeah, yeah. And then I also imagine if at that point when it becomes legalized, the banks just refinance the loan that Polaris has with them and Polaris returns the capital back to their LPs

Ian Milligan-Pate:
Yep.

Pascal Wagner:
and then the fun's over.

Ian Milligan-Pate:
Yep. Exactly. Exactly.

Pascal Wagner:
Yeah, okay.

Ian Milligan-Pate:
And these are all first position loans that are backed by the property itself. So in the event they have to foreclose, they're in a good position, a strong position on these loans in terms of LTV.

Pascal Wagner:
Yeah, and then another fun that you talked about, which I kind of just want to dive into before we wrap up, which is mobile home parks. You're super invested in the mobile home park space. You bought your own, now you're an LP in some. Why do you like mobile home parks so much?

Ian Milligan-Pate:
Yeah, a couple of reasons. One is, you know, there's, there's tons of demand drivers around a more affordable housing, right? We've seen what's happened with apartment rents. They've shot through the roof the last, you know, few years. So there's, there's more and more need for affordable housing and mobile home parks are kind of the last rung on that ladder in terms of, you know, true affordable housing, that works in a free market system without having to be government subsidized, right? Um, where somebody can own their home and rent a lot for four or 500 bucks a month. So that's one. The other is there's a huge moat around that business. And the reason for that is they're not building more mobile home parks. So there's actually a decreasing number of mobile home parks every year in the United States. And the reason for that primarily is cities don't like them. They think they're an eyesore. And so they won't permit new ones for the most part. So you have this moat because you can't go in and just build a new mobile home could a shopping center or an apartment complex. Right. So those are great things. The other thing I like is from an operational standpoint, they tend to run more efficiently because the operator doesn't own the homes. So in the ideal scenario, they just own the lots, the dirt, and they rent those lots to the tenants. But the tenants own their own homes. So when a water heater goes out or a toilet runs or something needs to be fixed, that tenant owns their home, and they're responsible for those maintenance costs. So it can run at a lower expense ratio than, for example, maybe an apartment complex or another type of asset. So I really like all those things about it. And because of that, if you find the right operator and the right deal or the right fund, they can generate great returns.

Pascal Wagner:
Yeah. And from my understanding, the strategy is there's tons of mom and pop operators out there that are not, you know, professionally managed. They're not building big

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
teams and they're they're still running some of these. And then you go in and you you buy them from or a fund that you invest in or both invest in a mobile home park, make it professionally managed, streamline increased revenues, lower expenses, and then flip it around and turn it to a

Ian Milligan-Pate:
Yeah, that's exactly right. They're kind of ripe for, you know, aggregation, right, and more professional operators to come in and buy these. A lot of them are, like you said, mom and pop owned. You know, some of them are still owned by the family that built the original park, you know, 50 years ago. And so for that reason, a lot of times the rents haven't been kept up to market or there's just a lot of inefficiencies in the way it's being run. And so there's a big opportunity to come in and expand the the NOI and grow the value of the property.

Pascal Wagner:
Yeah, man, so many different unique asset classes you can invest into with different strategies. I love

Ian Milligan-Pate:
Yeah.

Pascal Wagner:
it. Ian, this was awesome. Thank you so much for joining us on the show. You were your pleasure to talk to and I'm looking forward to seeing you around.

Ian Milligan-Pate:
All right, thanks a lot, Pesco.

Pascal Wagner:
Alright, sweet.