I recently had someone ask if I would be willing to be a mentor. I responded with a request for more specificity as to what they were seeking and I got 35 questions. Here are my responses.

1. Have you ever mentored somebody who didn’t work for you?

Every year I teach a case studies module to the University of Florida’s Nathan S. Collier Masters of Real Estate Program and I frequently respond to email requests from grads. Mostly I mentor within The Collier Companies and every fall I teach Collier College -ten evening sessions plus summary and graduation, alternating between “hard” topics dealing with very current real internal case studies (i.e. “Real Estate Investing 101” and “How to Be a Financial Analyst” and “softer” subjects such as Goal Setting, Negotiation, Decision Making, Motivation and Desire, Communication, Emotional Intelligence etc.)

2. How do I solicit investors? Who makes for the best investors or lenders? Banks, private individuals, insurance companies?

Banks lend, they don’t invest per se, although they may have relationships with investors. Institutions generally require track records and prefer to invest with organizations (even if owned by an individual) not individuals per se. Individuals will invest more on faith and character but can be hard to find. That is why I used a lot of owner/seller high leverage financing in the beginning, then commercial bank financing with personal guarantees; did not start to solicit institutions until one day I looked around and realized I’d become an organization.

3. What advice would you give me?

Commit to being a Life Long Learner. Learn everything you can about anything and everything related to your chosen field. Ask questions incessantly. Beware of pat or easy answers, be a polite skeptic, be from Missouri, challenge the status quo, Expect the Best and Inspect relentlessly for what you Expect, Trust but Verify, Have Written Goals for all the major roles/areas of your life and Action Plans with targets and deadlines, journal regularly, anchor your sense of self deep within, listen to your gut but make allowance for the thoughts of others, Be a Realistic Optimist, work on your EQ, develop a good process for decision making but remember EXECUTION is much easier to impact. Furthermore, a good decision does not guarantee a good outcome and even a bad decision can have a good outcome (betting your 401k plan on what turns out to be a winning lotto ticket is a good outcome but a lousy decision). Above all, treat all with respect, do unto others as you would have them do unto you. Make your word your bond.

4. Do you prefer investors (private companies or individuals) or lenders (banks, etc.) for financing?

Lenders for debt, investors for equity BUT raising equity is INCREDIBLY time consuming, which is why I was patient and grew by bootstrapping, internally generated capital and high leverage (though never mezzanine). Most of my partners are deal specific. Now of a size and reputation that it is easy to find partners.  

5. Did you have a partner that held equal stake in your company or the majority stake in your company?

In my company, no. In individual investments/communities, yes. We are 2/3 Core and 1/3 partner and our equity stake in partner deals ranges from 5% to 28.5%

6. How do you feel about having partners in business? How does a person find a good partner?

Pluses and minuses; all depends on your personality and needs. Until 2005, no partners. Now institutional partners in 1/3 of deals; I believe it works best when they are passive capital and goals are aligned. I have had awesome partners, I have also had some (not many) that are high maintenance.

7. What’s the purpose of having a holding company?

Liability Protection.

8. Did you ever take any home study courses to learn the business?

No, but then I lived in a University town. Most cities of any size have some institution of higher learning.

9. Have you ever attended any seminars that taught you how to invest in real estate? Which ones were most impactful?

No. However, I have degrees from the University of Florida (Finance, MBA and Law) and late in life I took Harvard Business School’s OPM course which was excellent though very expensive and requires ownership of minimum business size.

10. Did you have a mentor when you initially started (besides books)?

No, it was tough. My dad, a civil engineer, professor and part time city elected commissioner and stock market investor, was a good sounding board but no operating business experience.

11. Do you have a mentor now?

No, although I joined Young Presidents Organization, whose members offer much mutual support.

12. Why multifamily and not retail or other commercial endeavors?

Multi-family to be the least complex of the real estate sectors; most of us have rented an apartment or lived in one at one point or another. Retail and commercial leases are more complex as is the marketing there of, also seller financing much rarer. Apartment less risky, demand is more stable (i.e. when the recession comes, retail goes dark and office goes see thru but with apartments, folks still need a place to sleep every night). There are exceptions of course, for example, household formation can slow or reverse – roommates double up, folks move home etc. and Detroit is a scary story of a shrinking city.

13. What determines if you acquire a particular property? What criteria do you look for when making offers?

Sustainable Cash flow, leveraged cash on cash return, do I have the capital? And enough reserves after? Is it the best deal on the foreseeable horizon? How easy will it be to manage? Proximity reduces risk. Is there something special I can do that is not being done? We all prefer off market deals, anytime you win an auction, you have to ask yourself are you the smartest person in the room or the dumbest? Do not pay too much attention to IRR projections as they require assumptions such as exit cap rates and final year NOI (i.e. pro formas beyond a year or two or three involve HUGE assumptions – unknowable future). The New Norm is that there is No Norm!

14. What books have you read that have catapulted your business understanding as it relates to multifamily investing? 

None. Learned by doing. Recommend my own: “Construction Funding” which is more about development, also Jorge Perez’s  Powerhouse Principles: The Ultimate Blueprint for Real Estate Success in an Ever-Changing Market is good, also check out ULI’s and National Home Builders’ website, they offer some good books.

15. What top five books would you say have helped change your life the most?

How to Win Friends and Influence People
Seven Habits of Highly Effective People
Awaken the Giant Within and Unlimited Power
The Road Less Traveled
Love is Letting Go of Fear/Change Your Mind, Change Your Life
Getting to Yes
Real Magic/You Will See it When You Believe It
Man’s Search For Meaning
You Just Don’t Understand
Learned Optimism 

16. What changed from 1972-1982?

This was a period of “nothing down” single family homes purchased from FSBO (For Sale By Owner) and in my case, high leverage financing by owners. I’d drive the neighborhoods walking distance to the University of Florida and look for “For Sale By Owner” signs and then start talking! I was able to purchase approx. 2 or 3 a year, grew to a portfolio of a couple dozen houses over 10 years. I would try to buy at break-even pricing for mortgage payments, taxes and insurance, do all the management and maintenance myself and hope that rising rents would create positive cash flow. I was quite the jack of all trades handy man and carried a trunkful of tools and spare parts in my car trunk; I even mowed lawns!

What changed from 1982 (103 units) to 1992 (829 units)? 

When I hit 24 or 25 houses I realized “that dog don’t hunt no more”. Single family homes as rentals was not a sustainable business plan. Sites were scattered geographically, every floor plan was unique, had to be shown individually and if you wished to maintain back to back 100% occupancy, they had to be shown while occupied. All this was incredibly labor intensive and each had different plumbing fixtures, appliances, etc. In other words, no economies of scale. So I turned my attention to small multifamily developments in the College Park neighborhood north of the University of Florida and began buying quads, 12 units, all the way up to 28, 32 and 40 unit apartment communities between 14th Street to 19th Street; from 1st Ave to 5th Ave. In essence, over a decade, I bought (and developed) a 450+ unit apartment community on the installment plan, a bit here, a bit there.

Then 1992 (829 units) to 2002 (3778 units)?

Just increased sophistication; while the absolute numbers are pleasingly large, the RATE of growth actually tapered off (hard to beat 800% growth from 100 to 800 apartments!).

17. Do you make decisions based on cap rates?

 Theoretically you should focus more on the SPREAD between the cap rates and your permanent financing rate.

18. Did you liquidate your 24 or so houses to get the $50k down payment to acquire your first complex?


19. Was the 109 units your first complex?

Yes, though not truly a complex i.e. 5 different developments over 5 neighborhood blocks but built by one developer.

20. Can you acquire a property with a land trust and then place that land trust under a shell corporation?

I guess you could. NEVER used land trusts, never used shells per se.

21. I know you said in the video retrospectively that you would want to access capital faster. Is there anything else you would do differently?

Hindsight is always 20-20. You don’t know what you can do until you do it, always looks easier when it’s done.

22. Have you ever used third party property management companies for managing any of your properties? Why or why not?

NO. Our management adds equity values. The ONE time I let someone manage something for me, I lost $5M.

23. Do you prefer student housing (Class A or B) or blue collar workers (Class C)? And Why?

I’m personally over weighted in student housing so moving to B class market rate, which is a statement of portfolio theory balancing not a reflection of the relative merits of each product theory. While I own C class apartments by age, most are in A or B LOCATIONS and were at least B when I purchased them. I generally do not purchase C, it is VERY intensive management.

24. What’s the most profitable multi-family apartment class? A, B, C?

Depends on your definition of profit and your risk tolerance. Folks tend to talk about profit without mentioning risk or the probability aforesaid profit target will be achieved and what is the downside if it isn’t? I’d say a C you can raise to a C+ or B or a B to a B+. Competition for A’s tough, easiest way to get one is to build one but many risks along that path. B is probably best sweet spot on the risk/profit continuum but in times when too much capital chases too few deals, the spread between A and B’s and B’s and C’s gets scary/irrationally thin.

25. In the inception were you using your own money at all to fund your deals or a part of your deals?

All sweat equity, bootstrapping, high leverage seller financing. That is why it took so long.

26. What’s the best vehicle for protection when it comes to holding multifamily property? LLC, S-Corp, Inc?

LLC by far, S-Corp is obsolete, way too complex tax wise, difficult to get out of. C-corps suffer from double taxation of dividends.

27. Would you say acquiring a distressed asset (complex) for repositioning is more profitable than building a new complex?

Both have their pluses and minuses though easier to do high leverage with distressed asset (existing owner may cut you a deal if truly distressed BUT everyone and his brother is chasing value add at the moment) than with new building; while can get mezzanine debt (beware loan shark rates) and equity partners (best bet!) on new construction; good luck getting a bank to go higher than 75% loan to COST (note that is cost, not value) i.e. you need 25% true cash equity (can get a break on land if you bought it super cheap but have to convince the bank that somehow you were able to get it below the true market value. Best bet is a land partner throwing in land for percentage interest. You can also take a development fee as carried interest but better have something else to put food on the table.

28. Was the purpose of you earning a JD, M.B.A, and becoming a C.P.A personal or to enhance your business?

Knowledge reduces risk; I am HIGHLY risk adverse; you can never know too much. I am an intensely curious person; I want to know ALL about my business AND all the businesses/sectors that touch/impact it. I am also a committed lifelong learner. Good entrepreneurs are versatile, jack of all trades, not one trick ponies.

29. How do you choose to spend your time now?

I am VERY active Executive Chair, my joke is that I’m retired and refuse to work more than 40 hours a week. Truth is, it is not really work, it is fun that pays.

30. Are you open to mentoring me?

Effective mentoring is a lot more challenging than folks realize. Two levels: one can be an occasional strategic sounding board at pivotal times for major life decisions verses ongoing tactical consulting. The latter most often occurs by a senior to a junior within a common organization where contact is relatively frequent and the challenges, and particular personalities, problems, personalities, procedures and policies are already all too familiar to the mentor. Even the strategic level requires a good knowledge of the personality and potential of the mentored to be effective; this is not easily acquired. 

31. Is there anything you want that you don’t have?

Still working on becoming an Enlightened One 🙂 In this material world? Not really. You can’t sleep in more than one bed at a time, drive more than one car. It never really was about the money, that was just the resource required to grow, how you kept score. Also, my father was a very altruistic man who believed in service to mankind, he had a huge impact upon me (his life was his sermon). I’ve always fervently believed in Principled Profit and Main Street Values. I have always been a rather happy person and believed that happiness comes from within, not from without: “I have learned, in whatever state I am, therewith to be content.”

32. How do you choose a successor?

My goal is to create an organization large enough to support a self-sustaining, self-replicating Senior Management Team. My wife, who will no doubt out live me by a good 30 years, has an in residence MBA from the University of Florida and is a graduate of Harvard Business School OPM Class of 35. She understands the business and has a low tolerance for waste and bureaucracy and will make an excellent Chair.

33. What motivated you to continue to grow your company when you had enough personal money?

 I love what I do; once beyond the base level of Maslow’s hierarchy it has been about the love of the game. 

34. What motivates you now?

A love of excellence, the joy of building something, of working with people and solving challenges, the challenge of continuous and never ending personal and professional growth. If you are not growing, you are at risk of stagnation.

35. What advice would you give me for working towards owning a large multi-family portfolio? What should be my focus?

Look for opportunities to create value, make sure you are in a position to harvest. Work hard, Prepare, over prepare, even harder, keep the Fire of Desire burning hot. This is advice so generic that it is either hopelessly useless or preciously universal, take your pick.