Episode #211 – An Insider’s View of Banking, Regulation, and Analytical Investing with Sam Morris

Knowing your numbers can make or break your bottom line as a real estate investor. This is what separates the successful investors from the newbies.

Unsuccessful investors let small holes in their buckets eat away their profit margins or even lead them into bankruptcy.

The ability to read these numbers is a superpower that will put your portfolio into high growth mode.

In this episode, Sam Morris from Sunset Capital joins us to discuss the magic of numbers and what every investor should look for. Become a sophisticated investor by knowing your KPIs and maximize your portfolio returns.

Listen now.

Show highlights include:

  • The one skill that will separate you from newbie investors (learn this or perish) ([7:22])
  • 2 common costly mistakes investors make when dealing with lenders ([9:20])
  • How this outdated real estate model is causing investors to fail ([11:20])
  • Why most investors fear the IRS but could be using this approved money roadmap instead ([13:25])
  • What savvy investors are doing right now to take advantage of the looming market correction ([18:45])
  • The top 2 lessons that veteran investors experienced from the 2008 crash ([20:35])
  • The “Oreo” effect that is slowly eating into your bottom line over time ([32:06])

To connect with Sam Morris, please visit:

To get the latest updates directly from Dan and discuss business with other real estate investors, join the REI marketing nerds Facebook group here: https://adwordsnerds.com/group

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Read Full Transcript

You're listening to the REI marketing nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords nerds, a high-tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

(0:40) All right, hello. Welcome to this week's episode of the REI marketing nerds podcast. As always, this is Daniel Barrett here from AdWords nerds.com. And if you are looking to get more leads and deals online, you know where to go. It's AdWords nerds.com. This week, I've got a really fun interview with Sam Morris from sunset capital that's over at sunset hyphen capital.com. And what I love about my conversation with Sam is Sam has this really unique background, he has been in corporate banking deep in that world. He's currently sitting on the board of a bank. He's worked with lenders as both the you know, the person lending and the person asking for the money. He's worked with federal regulators. And now he is a successful real estate investor. And what Sam brings to that equation is this idea of really deep qualitative and quantitative analysis. Sam is someone who pays attention to the details, as he says, and you'll hear me bring this up in this this interview. He reads numbers, the way that most people read words. And Sam's got this really interesting worldview about the type of real estate investing business. He wants to build the way that he needs to interact with his investors and clients. The way that he goes about asset management, the way that he goes about figuring out which deals to invest in and which to leave on the side. He is a fascinating character. Really, really fun to talk to. And I know you are going to get a ton out of our conversation. So without any further ado, let's jump into my interview with Sam Morris from sunset cap. All right, what's up everybody? This is Daniel Berra. And I am here with Sam Morris from sunset capital. Sam, welcome to show man, thank you so much for being here.

(2:30) Dan. Man, thanks so much for having me on. Really appreciate the opportunity. And it's been great getting to know you. Yeah, I've been looking forward to this conversation because like we had on this sort of a, you know, a brief meeting before this. And I took a bunch of notes about stuff that I really want to talk about, before we dive into your background, which is something that I really want to kind of pick through a little bit. Let's talk about sunset capital. So for people that if you're listening to this, you can go check this out the website is Sunset, hyphen, capital.com. So like sunset dash capital.com, you can go check that out, see what Sam is doing there. But for people that don't know you or don't know, the company, give people a little bit of a background on what you guys are doing.

(3:10) Yeah, so I mean, we're experienced operators. So most of that has been in the business for a long time, although that's kind of a newer entity. And you know, we're kind of old guys that have been doing doing this for a while, but we are in the multifamily and storage space, mainly multifamily. And we buy properties from, you know, a class, that D class, and we'll do turnkeys all the way to full gut remodeled, and we offer that as indicators to our investors. So allow them to invest alongside of us. And, you know, we're looking for those those returns that are, you know, I would say around that 15% IRR. So you know, we're always looking for more investors to come join us and grow the company with us. Yeah, I love it. You mentioned this, too, that you're experienced operators. And I kind of want to dig into that. Because based on our kind of talk before, I think this one of the things that makes what you guys are doing really cool. So tell people a little bit about your background. You've been in real estate for a long time. But how did you get started? And what is the kind of trajectory? What does that look like to get you to where you are today with sunset capital?

(4:11) Yeah, sure. So ironically enough, I actually started as a corporate banker, right. And so I actually started up in the banking world and learning how to actually lend on the types of products. I lent tons of money doing this over the years. So I was a corporate banker for 18 years. And during that time, too, I actually started investing into the deals with other syndicators, really learning the process from both sides. And so one of those value adds that we always think that we can bring is that we've actually seen it both ways, right. And so your lending relationship is actually there, typically the biggest partner in the deal with you. And so one of the things that we really bring to that as a value add to our investors into our group and that, you know, that's a different vocabulary that's a different world than just the real estate world. I mean, they look at things from a very different point of view, and they have very different metrics of which they're measuring things on that we would typically look at just in the real estate world. And so having the ability to communicate, and speak the language, so to speak with, with those lenders, it's been one of those value adds for us and the competitive advantages for it. That's really just been something that our investors have been able to benefit from. And so, but yeah, I mean, I grew up in the banking world, and started doing deals, Koji teaching, and things like that back in 2014. But I was investing in these deals since 2008. So really got a flavor for it. And so I've been an LP and probably over 8000 units. And it's just been a wonderful thing, learning how to create passive income. And actually, it's been something that's tremendously beneficial to me and my family. And so it was something that I was like, not getting, if I want to share this with everybody, like, there's ways that we can do this. We can, we can, like everybody can, can join in on this. And so it's been kind of the precipice of how that would born.

(6:02) Yeah, I, I really want to dig in a little bit on your corporate banking background, because I think, you know, one of the things that I've noticed about the investors that come on the show that are really successful, they have built built long term successful business, right, is that they tend to have some sort of background element where they bring a different set of mental models to the real estate space, right? Like, it could be, Hey, I was in construction. And now I'm, you know, investing or like for you, you had you mentioned that it was kind of a different vocabulary and banking and that kind of lending relationship that you bring over to what you do. So I'm curious, what from your banking background? Have you found really useful in your investing business today? Is it just like a certain way with numbers, a certain kind of analytical view of the world? Is it that sense of well, he, like you said that lending relationship and its importance. I'm curious, like what you kind of point to and say, You, I brought this from begging, and it's really helping me over here and investing?

(7:03) Yeah, so you know, I would, I'd actually probably have to say, first and foremost relationships, yeah. Analytic, you know, analytic can be taught, it can be learned, you can you can actually go and learn the different things that for KPIs that you need to look at, and how that's going to be looked at upon. But yeah, you know, when you're in banking for a couple of decades, you develop some pretty strong relationships with people that are all over. And you know, that's the funny thing. I'm still in banking from the perspective of I don't I don't do it day to day, but I sit on the board of a bank and community banks here in Katy, Texas. And so I'm still actively involved in that industry, continue to develop those relationships and things because your lending changes. It does. And it actually, it could be the same lender, but they've changed their guidelines internally of what they're willing to do. And knowing how to ask them the appropriate questions to figure that out, is a big deal. And so there's so many ancillaries and intangibles of knowing the dynamics of that world that aren't really in the analytic, that's actually helped us quite a bit, right? So because I can be talking to five different lenders on a project. And I'll know from just communicating with them, that three of them are actually real, even though every one of them will told me yes. Right. Because of of having that vocabulary and that communication and going Yeah, yeah, he may be willing to do it, but he's not going to be willing to do it on the terms that we need, or, you know, he's saying he's willing to do it. But as soon as he gets in the loan committee, it's going to be shut down because of some of these other things that he's telling me or she's telling me. And so knowing, knowing that, from having been so integrally involved in that world, has been just a great intangible for us to being able to pick the right lender, making sure you have that right partner to to grow with, and, and having that understanding of that lending world.

(8:55) So I'm curious, like, having been on both sides of that equation, right. And having this understanding of what both parties, you know, maybe the incentive structures that they're operating under, you know, what they're really motivated by, I'm curious where you think real estate investors typically go wrong, when they're sort of building or working on those lending relationships, right? Like, what are the mistakes that you see investors making where you're like, you know, this would, this is not going to be optimal for you kind of long term?

(9:27) Yeah. And so I mean, a great example right now would be your unwillingness to change your model. If you were if you were underwriting your model, like today, the way you did it, I would even say three months ago, yeah. It's not gonna work. Because the terms have changed in the last three months, right. We've seen what's happened with interest rates, you've seen what's happened in the cap rate market, not to be confused with rate cap, right? We've seen what's happening in the rate cap markets, too, right? And the things of the types of debt that are out there and what's going on and so if you're underwriting that same way that you were even 90 days ago, you're going to have real, real trouble trying to get deals done, because that that markets change on that lending side. And like I said, if for the most part, you know, our lender is our biggest partner in the deal, right, they're typically giving us more than 50% of the money to go in. And sometimes that can be in that, you know, let's just say it can be anywhere from that 60 to 75% range of them bringing capital to the deal. And so they are our biggest partners in the deal. And so and that's how we look at him too. And we let them know that too, Hey, you are your partner with this in this, the beauty of it is as they want this, this kind of a returner, my specula investors expect a much bigger return. But they've said, look, here's what we're willing to do. And here's why we're willing to do it. And here are the things that we need you to, to accommodate us for that, right. And you're the steps that you're gonna have to do to do that. And you follow those steps and you accommodate them, and you communicate with them. And they're great partners from that. And so, if you are, if you're not, you know, adjusting your models associated with the change of the environment, you're not going to be able to, to consummate a deal. Or if you do consummate a deal could be troubling.

(11:11) Yeah, I mean, that that strikes me is such a. So I mean, first of all, it's such an applicable example of what you're talking, right. But it's also this kind of universal human thing, where we're not really great at updating our models of how the world works, right. And I think the the example of the investor that bought a house, based on the way that how, you know what they thought the the value of that house was going to be based on housing market data from three months ago, like, that's a really easy one to understand. But it's something that we're all doing all the time, we're everywhere, we all got to, you know, the universe is confusing, and we got to kind of figure out where we need to change our opinions. I wanted to ask you about something that you mentioned, when we spoke, we spoke earlier, because you actually stay fairly closely in touch, or you stay in touch with regulators of various kinds of sort of federal regulators, economic regulators, that's the case, right?

(12:07) Sure. Yeah, have to I mean, it's one of benefits of being on the board of the bank, right. So they, they will tell you exactly what they they feel your institution is doing, or they'll tell you what they're seeing in the market or what they want you to be aware of. And so that's obviously one of those intangibles to have knowing what's going on in our immediate market to being able to go hey, you know, if they're seeing this right now, and I'm not seeing it right now, but they're seeing it from that from a regulatory standpoint, it might be something that we have to address adjust for, or at least look for when we're, you know, when we're evaluating our own deal. Alright, so I wanted to ask about that. Because I think, you know, I think for many people, the term is the term federal regulator, right? Like, it's sort of this like, weird, mysterious, like, the shadowy cabal of people, you know, there's like, people have very strong opinions about regulations of every size and shape. Right. So I'm curious, just not so much about specific regulations and policy issues and things like that. But what is it like to talk to and work with regulators at that level? Right, like, are they super smart, super professional? Like, what do people think they know about regulation and the way that it works, that they actually do? Or where they kind of have that misunderstanding? You

(13:23) think it? Well, I mean, you know, in my experience, I would actually say they're pretty helpful, right? I think they want you to be successful. Right? That and probably the easiest way I could equate it to, like, you know, an everyday person and it takes the IRS, right. The IRS has the code. It's complex, right? And taxes are complex, right? But it's the way that you look at it. For most people, it's a fearsome thing. It's, oh my gosh, I don't want to ever have to deal with an IRS person or I don't want to have to deal with all these IRS things, right. But the IRS has written a code that has effectively given you a roadmap into how they want you to make money. Think about that, from a mindset mindset. Just a mindset shift right of going wait in in particularly with real estate because I love this used to throw the IRS has written a code, telling me how I can make money, legally do it the best way and keep the most of it. So if I follow these rules, I make the most amount of money. And they're happy with that because they have dictated how they want you to make money. And so in particular, the real estate you hear about all the time tax advantages and things like that, it understanding the implication of the regulation, and the rules that they have in place and utilizing the thing within those rules in the regulation to make the most amount of money. And so dealing with you know, federal regulators or buyer's agent or anybody like that, it's, I would tell you, they're not there's not a like amount that gets you all the time. It's more of a I would actually say they're out to assist you into getting to that next point, and that it's probably a little bit different than what you were expecting, but I actually you know, I find it You utilize them. And I will tell you for the most part too, and particularly when you're talking with people, like from the FDIC or somebody like that, you know, we may have a question, they would encourage us to call, Hey, do you have a, you know, something that you're not sure about qualify, and we're going to be there to help guide you through it. So I would actually say, you know, it's funny as it is, you know, my impression of it is, you know, the most of these people out to help you. And if you look at it that way, my gosh, they're willing to do that, because it overwhelming majority of people look at them as an enemy. And I just don't think that's

(15:34) the case. Yeah, it's like everybody wants to be, it's like, no matter your role, right, you could be very high up, you'd be very powerful in many ways. But like, everybody wants to be appreciated for what they're doing. Right? So it's like, you know, I think you're very right, it's like, starting with that kind of different frame around the relationship is, is really powerful. And again, that's a very universal kind of thing, right, that extends outside of that, that situation. So alright, so I would be remiss, because we just talked about how, you know, you're sort of embedded in these, these different worlds that intersect with what you guys are doing it since a capital, you're intersecting with real estate investing. You mentioned that, like, you know, you got to update your model from three months from three months ago, things as we're recording this right, changing very rapidly. And obviously, that's, that's a constant in real estate, but it seems like feels like right, we're going through some kind of correction now. So I'm curious, what do you think the next year or two are going to hold for the real estate investing industry, because I know there's a lot of investors will assume this, they are very worried maybe they got started, you know, in this kind of period, where things have been very active and very, very big and profit, you know, money has been everywhere. Now, it doesn't feel that way. And I think people are feeling pretty anxious. So what do you think the next couple of years are going to look like? I'm asking you to put on your Nostradamus hat, which I know it's hard, and basically impossible to do. But I'm just curious how you think about that, or how you feel?

(17:07) Well, I mean, not too much like a politician, but it's somewhat the pinch, right? Right. And the reason I say that is it because it kind of depends on what side of it, you're on, right? If I'm, if I'm somebody who's sitting there going, man, we really need to sell this deal. You're going into an environment where there could be some potential distressed assets out there that make that kind of hard to get the value that you were expecting. If you're a buyer of assets, I would sit there and go man, there's probably going to be some opportunistic deals out there for you that if you you know, you stay sharp and keep on your relationships, and you keep hunting, you might find some, you know, some some gems in the rough that are, you know, going through some rough time. And so I will tell you, there's from just talking with a lot of different groups, I mean, I've talked to some institutional people, I mean, so these are guys that have a lot of money with them. And they're there, you know, when they start talking about unleveraged IRR, meaning they're not even going to borrow money, they're going to start paying cash for deals, because they see some correction in the lending environment that they're going to want to wait out. But they want to gain the asset. Now, that's really unique, that bill tells me there's a lot of liquidity out there for these types of assets. But the best probably the easiest way I can tell you is that it it really depends on what side of it you're on. But if you're a buyer in this market, I would tell you, really you could you could pick and choose where the best spot is for you to enter in to make sure you've got to you've done the full due diligence of what you want to do. But I think, you know, in that next, you know, call it six, nine month timeframe, you're going to start seeing a lot of people that are in positions from a seller standpoint, where you know, they're in a position where they have to exit for whatever that might be. And that that that typically spent he spells opportunity for the person on the other side of that transaction. And so yeah, I mean, I think you're gonna you're gonna see some buyside opportunities here in the next 12 months if that's what you're wanting to look at. And I think if you're do not have to sell you're running a property, there's maybe a cycle you want to try to operate through and get to the other side because I think it'll be worth more once you're at that point

(19:30) let's find motivated seller leads online but don't know where to start. Download our FREE motivated seller keyword report today. AdWords nerds have spent over $5 million this year researching the most profitable keywords for finding motivated seller leads and you can grab these exact keywords when you download our report at www dot AdWords nerds.com/keywords. Yeah, it strikes me be that the something you mentioned earlier in this conversation, right was that we you got started around 2000. Nate, right. And I think that it's funny. I was mentioning this the other day, I was speaking to a real estate agent. And I was talking to her about her business. She started around 2008. Ray, and I said, you know, what, what was the lesson that you pulled from that period? And she was talking about how difficult it was? And, and she was saying like, well, you know, I know I, after going through that I knew, like deep in her bones, right? She knew that real estate is a cyclical market. Right? It's cyclical. And so she was like, when, when things were really good, I just kept in the back of my head that things are going to come back down the other direction. Right. And I'm wondering if you took any lessons from that period, Mr. years, you started investing around 2008, which is kind of like this, again, very common thing among investors that are very, very successful, today's getting started around that period. I'm curious, like, what lessons you pulled from that, if any? Yeah, I mean, so I

(21:09) would tell you in these these markets, where becomes recessionary, or there's a downward market to it, it's typically been when, to be very honest, I've made the most amount of money and real estate. Because if you were opportunistic, if you were patient, and if you can make that right call, you'll go through that cycle. And the upswing is pretty nice on those deals. And so and then it's just picking that point of when you're going to exit the hardest game. And so, yeah, I'd also tell you that there's a lot of things and a lot of it's industry specific too, but just making sure that, you know, this is all we do all day, every day. So I mean, right before this, I was on the phone with our CFO, we were talking about specifically one property in our portfolio and some of the things and adjustments and changes that we're going to look to do manage hereditary at that property. And so and then right after this, you know, I got a call for on another property with another partner for a financing thing that we're going to be doing there. And so even now, we're refinancing in that and even in this market, right? So there's, there's still deals being done, right? There will always still be deals being done. You just have to make sure that you're positioning yourself to win, win that up market comm that you're you're ready to go, right, we're when the down market does come that you're able to capitalize. And so, you know, for us, it's it's just being ingrained in it all day, every day. And going back to Oh, eight, when that happened. I mean, there was, I mean, look, it was a lot of learning lessons, right? I've done a lot of things from the lending side of that point. But turning into the investor side, and actually starting to do deals and have an understanding of all of that it was for us, it was just for me, it was a huge learning curve, right, and trying to just just consume and sponge everything I could and all the knowledge from from doing the deals. And you know, I would feel Bill tell you that this is going to be a great learning opportunity for a lot of investors going through the media, you learn more in these types of markets. Because you know, the last several years we've had, you know, a high tide raises all boats, right. And everybody looks like a genius when when everything can you know only go up. But this is where kind of rubber meets the road. And so down here in Texas, you know, we could be in we call them wildcatters the guys have just really just gotten into the business in the last couple of years. You know, when they go through that, you know, we'll see how many people make it. And those that are well capitalized have good people and good processes and procedures in place, they're going to come through no problem with this. And real estate is one of those things that if you can, if you can successfully hold through the types of cycles you're probably going to be good for for a long time. So I want to ask him about well, let's let's get into it a little bit more into what you guys are doing at sunset capital, which

(24:04) again, if you're listening to this at sunset, Dash capital.com Read, you can go check it out. But one of the things that you know, we're just talking about you people can learn so much to this period. And you know, specifically people have really strong processes and you know, people and all that stuff. So one of the things that you mentioned, when we first met, we were kind of getting to know each other, and I let I wrote it down and I highlighted it and I bolded it because I was like, wait, I wish this was true of me. But it isn't you said we read numbers the way you read words, right? And I highlighted that because I've barely read words. So I feel he's listed. I'm very jealous of this. So I want you to talk about or spin on however you like, right, this kind of culture that you guys have built of using numbers using this kind of analytical mindset to make those right calls, right because it's like you said right, you got to make the right decisions in order to come out on the other end. So how do you think through the broad question, but how do you think through decision making and when to use that kind of analysis versus, you know, some people prefer to use gut intuition or things like that broad question can take it wherever you like. But yeah, but up to kind of pick your brain on that a little bit.

(25:16) Well, and so, you know, being more quantitative and analytical in nature, right. And so that's really our teams were asset managers, right. And so, you know, a lot of the data that we require to actually help make some of those decisions, right. It's qualitative in nature, meaning I need to know from the onsite team, hey, you know, the lies, right? So it could be as simple as, Hey, guys, I'm analyzing the numbers, we're seeing a trend in water usage that's going up, right. And that's something that's very black and white. And so that's why that's why I say this is the quantitative aspect is, there is no room for, for gray area, it's black and white. It's one plus one is two, and you're not going to convince me to three, and you're not going to convince me that there's zero. And I'll show you why. Right. And so when we start seeing things that are that are trending in nature, or outside the box, right, it pops up, right, and you're able to see that from an analytical perspective pretty easily when you're so in the numbers. So in depth on a really consistent basis, right? Things will just pop out at you the way a word would if you were reading it, right. And so you may know that, hey, all the sudden, we had a spike in our water bill by 30%. This month? Well, that's something that's going to stick out, right. And for common common sense. Most people would say, hey, you know, my bill goes from $1,000 to $1,300, that's going to stick out to you. Right? And, you know, we're larger complexes. So, you know, for our world, it may be from $10,000 to $13,000. Right. And so are internally, we would sit there and go Alright, well, that creates a question. Right? So do you have a water? Right? Now, it'd be kind of a common question to ask, right. And we're not on site. So we don't know. Like, I can't see water bubbling up or anything like that? Or has a has a usage changed? Right, right. Are we using a lot more water for some reason, right? We ended up filling up the pool three times this month? For some reason? I don't know. Right? But you can see that in the numbers. And it creates those that those questions that you need the qualitative data for AR and so in doing all that you have all kinds of things that can occur. I mean, a great example is I had, I had one today at our Tuesday meeting. While I was asking about one particular bill, it's a smaller bill. Right? I have $160 bill, but it was to a vendor we didn't recommend. And it was our onsite team had made a decision, oh, yeah, we're going to do this. And it was something that wasn't approved. And so you sit there and go, you know, this wasn't approved, we already have this service, you're gonna have to explain to me why you want to do that. Right. And, by the way, this was caught in the banking numbers. So this was a quarter of us looking reading bank account data. The numbers hadn't even come out yet. So we wouldn't even see this for several more days from our accounting department. This was just reviewing the bank statements, like, hey, there was a charge, right? And so that small number, you sit there and go, Well, you know, hey, it's only 160 bucks. You know, the way Asset Management looks at that goes, well, I got it, but that that's $1,900 a year, right. And the way we value properties is based on a cap rate, right? So by cap rate that, yeah, that ends up being actually 10s of 1000s of dollars in value of the property because you guys made a decision, I'll do what you thought was small, to change something that you didn't have approval for. Right? And I can turn around and go, Yeah, but here you go, you just lowered the value of this property by $30,000. Because you thought that this was the best way to do without getting approval. And so that's where being so ingrained, and so deep into the numbers, and having the ability to calculate those things really quick to go, Hey, look, there are ramifications for all the things that you're doing. Yeah. And I need to know why. Right? And I need to know, does it add value. And so Asset Management is so focused on the dollars and cents and the values of deal. Whereas property management over here is more of, you know, there's a lot more gray area associated with it, hey, we might have to spend this so that we can obtain what's going to happen and we make an asset management, Nate may not have all that information, but they certainly can see the numbers and they can they can actually tell you and translate it over here to property management, you making that decision. Here's what that costs. Now, is that really worth it? And a lot of times, a lot of times they'll come back and be like, Okay, well, I got it from you, but that's not you know, that may not be what the best way to do so. You know, when I give talks to specifically about asset management, and how to blend the relationship with property management because I've talked about that over the country. You know, we can hold our green glasses moment. So we tell you the world looks at asset management through blue glasses. It's very focused, it's very, you know, black and white. Whereas Property Management looks at the world through yellow glasses, you know, they have some, you know, there's all kinds of different things going on, they have a lot of pressures, a lot of people coming at them, you may have to register to a lot of people. And so what what we saw that we say the blend is the green, the green glasses, which we always say green for money, too. But the green glasses is what we need everybody looking at. So that you're you're working in a harmonious environment, you're all working to build the property up, together. And so, meaning property management has to have a good understanding what Asset Management looking like and asset management needs to have a good understanding of what property management is looking like. But in reading the numbers, on the asset side, everybody involved in that process is when these are advanced degrees, these are guys who can, you know, they can absolutely see, you know, things, what's going to happen in the future because of this, or what might have happened because of this. And a lot of that ends up being common sense. But it maybe doesn't translate with the property management side. And so yeah, I mean, it, we build trend analysis stuff in our heads, because you can just see if it's going up if it's going down, and you can, and that's why they a lot of times, you know, we read numbers, the way you read words,

(31:20) yeah, I, I love everything you're just talking about mostly because an RSA, like the secret of this podcast is for me to get advice on stuff that I need. Just if everybody listens, that's great. But I mean, but I have a sticky note on my wall or right next to my computer over here that says work the details, because I have been guilty of doing this exact thing that you're talking about saying like, Oh, it's 100 bucks, right? Like, it's not a big deal in this immediate moment. But you sort of forget that all this stuff adds up. They've a friend and a mentor of mine, this guy, Dan Nicholson, who runs a CPA firm, very successful guy. And he calls it the to Oreo principle. And he tells a story about how he realized like, over the course of a year, he'd gained like 30 pounds or something like that. And then going over and analyzing his boy, his behavior, he realized his wife had been started buying Oreos, just having him in the house. And he would have two Oreos a day as like a snack after lunch. And two Oreos is like to under like 150 calories, it's not that big a deal. But over the course of an entire year, it adds up to many 1000s of extra calories, right. And so this idea that these little things build up over time, like you said, can really eat into the value of a property. I think that's such a useful takeaway in such a such a great example, kind of what you can get from this analytical mindset. We're coming up on time. So I got a couple of things. Ask about specifically about how you how you think about what sunset capital is doing, right? Because I know that for you, lifestyle design is really critical. You know, we were talking before we started recording, you've got a really active family, and you really make it a priority to kind of be there be a part of that. I know that you kind of pick and choose your deals based on the impact that it's not just going to have on the bottom line, but also that's going to have on the way that you live your day to day life. So I wanted to ask about that. Like, how do you think about building a business that serves the kind of lifestyle you want to live? Because it can be very easy for people to chase the dollar and end up building this business that eats all their time and kind of makes them miserable? So how have you thought through that kind of in the past? And how do you think about that now?

(33:38) Yeah, so I mean, I would say in the past that was Grover, grow, grow, grow everything you could grow, grow, grow, grow, right. And as I've gotten a little bit older, and as you know, we have, yeah, like you said, I have a larger family. I have four kids, and they're all fairly active. And I've been I've been married 19 years, and you know, that consecutively, do you know what I would tell you, I know what I would tell you, you know, we've decided we're going to be pretty boutique. And the reason I say that, to me, that doesn't mean that we're not going to grow, we're going to grow, right, but there is a cap of how big we can get. I mean, I hate to say that, but that is that's that's reality. And so we will get to that cap. And as we roll off your deals, we'll probably bring on nicer, better deals, but it'll it'll end up kind of recycling in that particular area, you can grow to a certain area, right? Where you can have great control that thing and as soon as you step out of that, it is a different business model and it's a different business plan in the woods. The way I've seen it too is you have to grow to such a scale, a large scale that to be able to have that control again and that that's that's something that that I'm going to do right you know, we're going to stay in our in our tiny in our lane, is probably easiest way to say that we're going to manage what we know we can controlling things and actually still provide quality returns and quality attention to each of our assets, which I know is kind of a contrarian right now, because everybody's all about, you know, I'm gonna grow to X amount of units, I'm gonna keep pushing, we're gonna go this far this path, and we're gonna keep doing it, we were a little different, we know, we're methodical, we're going to, we're going to grow a very specific pace, we're going to add assets that make sense that are going to get the return metrics that our investors expect, and that we want. And then when we get to that level, you know, we're going to be in a recycling type situation, but we're probably not going to go outside of that. And so really, what what that what that done to, for us, it just means that we're going to end up putting more of our own monies into the deal. And a lot of our investors when they start making that will probably become a little bit larger investors into the next deal. And so we're going to say boutique, right? And so I know that it's somewhat contrarian that in the market right now to just grow, grow, grow at any cloth. But yeah, I mean, I'm gonna make every football game and basketball game and volleyball game and, you know, dance recital, and gymnastics, I'm gonna, I'm gonna go do all that and life, and we're going to be graded charitable giving, and we're going to be, you know, playing the golf tournaments, and we're going to do those kinds of things in our community, and be great stewards of the resources that has been entrusted to us. And we're going to provide those returns, and just, we're going to guard that with our life, right? I mean, here's our deal, here's the structure we're gonna have, we're gonna guard this with our lives, and we're going to make sure it's protected for us and our investors. And because we invest in every deal we do, personally, we put our own money into all the deals that we do, not every indicator does that I put among money, right alongside the LPS. And that's not just my money, is my family's money, it's what I need to live off of, to. So I'm going to push everything I can into that. And so you know, there is, you know, there's that whole thing of, you know, if you have your basket of eggs, right, and you do everything you can to guard that basket of eggs, I'm gonna, I'm gonna protect my advanced in here with everything I've gotten. So if I have to start chasing all these other things, it's going to take attention away from that. And so we're, we're staying in our, in our lane for the it's probably the best way and we're probably going to stay somewhat smaller. And that's it's subjective. And relative, I understand that right. But yeah, we're, we have right now about a little over 800 units in our portfolio, but I've Cochiti probably another 2000 units out there. And so I understand that that's subjective, that we have a certain amount that we're going to grow to and that's, that's about the max, we're gonna go because the people that we have on our team, I trust wholeheartedly and, you know, if we have to start growing that aspect of it, there's, there's something you have to give away to do that. So yeah, that's, that's where we're going to stay. And so I know it's a little different, that we're going to stay boutique. But right now, that's what I want to do. And, and that's what our team wants to do. And everybody's pretty happy with that. I know, our investors love it. Because they get more eyeballs on their deals, and they're pretty excited about that. They know, they know, people are looking after their nest egg that they're doing. Right. So it's a comforting thing for everybody involved.

(38:14) Yeah, I mean, I think that is such a valuable mindset to have, right. And it's something that I really relate to, it's the same thing at AdWords nerds, right? Like we're not we're not trying to be the biggest agency, right? We want to have a portfolio of the best investors in the world as our clients and we want to work very deeply with that group of people, right, because I think you're exactly right. What is the way in real estate investing that most people blow themselves up? It's by overextension. Right? It's by trying to do too much too fast. And like you said, you give away something to achieve that velocity, and it works for some people. And then if you mismanage that, it's very easy to go completely off the rails. I think that's such a valuable kind of mindset. And a great example like how you guys really hold that fiduciary standard for the folks that you work with? I think it's, it's really awesome. So for people that want to learn more about you, we've talked about the website, sunset, hyphen, capital dot coms capital with two A's in there. So sunset hyphen, capital.com. Is there anywhere else where you want people to kind of look you up? Do you just social media, anything like that? Yeah, we

(39:27) do a little bit of that. But I will tell you, if you go to the website to you can sign up onto our platform. We push out newsletters every month, and it goes over kind of our range of topics to write. So if you sign up to join our investor site, which is free to do it's free newsletters, but it is actually really up to date, good information. We'll talk about interest rates. We'll talk about what's going on in certain cities of mainly Texas because that's where we focus but it can talk about, you know, anything and everything that you can imagine right now about those specific things, and we may talk about new deals that we have coming up, and it allows you to go in and you can actually, you know, we have several people that come in, they look at the deals, they just want to see the information of how we do that. And we actually we welcome that too, right? Because we want you to study it the very knowledgeable before you jump into the deal with us. But yeah, I mean, obviously, if you go to the website, you can you can get to our investor platform, sign up there, we send out good information. Every month, we send out our newsletter, we did updated financials thrown all of our deal. And so I would welcome everybody to join you and you'll be able to find it social media, if you look up something capital, Instagram, Facebook, LinkedIn, we all have things on that

(40:44) awesome so again, sunset dash capital.com We'll have links and stuff to the social media profiles and all that over at AdWords starts.com/podcast in the show notes for this episode, but go I'm telling you if you are listening to this go check out Sam's stuff on Sunset capital.com Just like he said like Sam I just want to say like I think you have such a unique background you have such a great sort of worldview and sort of how you approach the real estate investing business I think for any investor wants to hear what you guys have to say about the markets in pretty much any context you're going to get something of value from that so again, sunset dash capital.com Sam Morris, thank you so, so much for being on the show, man. This was awesome.

(41:27) I really appreciate it. Dan, really appreciate it man. Thank you for having me on really, really blessed but but to get to know you too. Yeah, meat so that is it. That's it for this week's episode of the REI marketing nerds podcast. Thank you so much for being here every week. It means the world to me and look if you get any value out of these episodes. I would really love it if you could leave us a review wherever you download your podcasts. I read every single one and it helps other people find the show. I hope you are having an awesome week. I hope you're having an even better and in your year. I will be talking to you very soon.

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