Active vs. Passive Real Estate Investing Opportunities

Jeff Mount - President of Real Intelligence LLC hosts Brock Freeman - COO of Kirkland Capital Group and Chris Carsley - CIO of Kirkland Capital Group.

This is the second episode in a series dedicated to alternative investments. As volatility dramatically increases in the stock market and as rates rise to challenge existing fixed-income investments, middle-class millionaires will be searching for asset classes that have nothing to do with stocks and bonds. This group of investors is less interested in having a "blowout year" and more interested in a predictable return pattern so they can meet their investing objectives at the distribution date. Low or negative correlation between investments can help accomplish this, even the toughest of times. Enjoy our discussion with Chris Carsley and Brock Freeman of Kirkland Capital Group.

“Active real estate is where you will be more hands-on. You are carrying out all the work to acquire the property and the ongoing asset management. It doesn’t mean you don’t have a team, such as a real estate agent and property management company that aids in the management of your rentals. The fact is regardless of the team you are the direct owner and responsibility for the asset and its operations falls on you. ”

— Brock Freeman

Listen to the Interview

Transcript

As we watched the dramatic increase in stock market volatility, it may be time to assess how your strategy will fare in the near future. Download the dynamic map app and become a premium subscriber. To identify your unique path to financial. This podcast is intended to help middle-class millionaires.

You define that as families with $750,000 or more in investible assets and control over the budget to access the capabilities of an essential family office. Today's discussion is the second in a series on alternative investments. I want to welcome to the show Brock Freeman and welcome back, Chris Carsley who was with us last week to talk about alternatives in general and stays a deeper dive on realist.

Um, before we get into this, I want to share with you a conversation I had with a friend of mine over the weekend, who is deeply involved with AI, and they're using AI to, uh, analyze credit worthiness of individual people like in milliseconds, which of course, and it's not just usual spike, uh, scores. It's, it's, it's much, much deeper than that.

And his comment to me was. The technology is improving so fast that he's scared to death, that this is going to disrupt opportunities for his kids when they grow up. I'm curious, first of all, do you guys do anything with AI in terms of, is it a challenge? Is it an opportunity? Is it in any way involved in the stuff that you guys do to some degree?

Yes. There's AI behind certain things. We don't know. Directly very extensively yet. It's interesting your question though, around, is that going to be something that's going to be sort of this blocker or enabler? And I think like any technology it's going to be both for some people, it's going to be a challenge for others who learn to use it.

It's going to be a great enabler to enable us to do things that we haven't been able to do before. I think our own existence as a private credit lender, uh, it sort of is based on technology. Honestly, I would say five years ago, we would not have been able to do what we do now because the data wasn't there.

Going back to your question around the AI, if you rely simply on AI or you rely simply on these things without having any sort of ability for a human to interview. And override that that's where I think it becomes dangerous. Uh, I think it's very useful, super useful. I look forward to being able to use such technology ourselves, but it is, it will always be in conjunction with a human being able to overlook it and see, Hey, did, did it make the right decision or can we make an exception here or is there some other risks to be offset?

Well, that of course takes us the next step, which is the internet of things which could potentially circumvent the human, uh, oversight.

I'm not so familiar with those, but it could to some degree, I mean, I am thinking about what I know about internet of things in the end, humans, we like control and we're always going to want to have some sort of out technology is not always going to be the, be all end. Uh, I know that there's technology maximalists, I've met a lot of them in the blockchain community who think that a blockchain is going to disintermediate, lots of, you know, real estate agents, et cetera.

Here's the challenge with that. People like dealing with humans in the end, we like to have information at our fingertips, but in the end, when we're actually talking to someone, when we actually want to deal with someone, we want answers to a question that we asked. I don't go ask Siri. I go ask a human because I want that interaction that I don't get with AI yet.

Yeah. One thing that I'd like, I I've been an advisor to a few FinTech companies that used AI and I want to throw in the other term that we're not really actually mentioning yet is the ML, the machine learning. Um, let's just be honest. True. AI doesn't exist. Um, we don't have the actual capability to create AI.

So a lot of it is very advanced, um, deep tech machine learning. Um, I worked with a group that, as Brock said earlier, we didn't have the data available. Now we have data available and they can consume that in through a series of algorithms. And what I found at no matter how smart people were and what they created, especially in the investment arena, the machine couldn't completely.

Close out the circle of what needed to be done to make an investment yet it still had. Human intervention involved. Um, I was trying to create, and in my, my first steps of working with these companies, I would come in and ask for these amazing things and they'd look at me like, well, it doesn't actually do that.

Um, I'm like, what do you mean the machine can't do this all? Like, they're like, they're like, no, You got to still tell it what to do, and it can do tasks very, very quickly that are beyond even a large team of humans. And that's the stage we're really at yet. So. Our children, um, are probably safe. I can't speak for two, three generations from now, but right now the machine is not that smart.

Go ahead. Go ahead guys. I appreciate it. I just thought it was an interesting discussion and, uh, always looking for different opinions. You know, Chris, during last week's call, uh, you suggested there are a number of ways to invest in real estate that might deliver different results. Can you guys go a little bit deeper on that?

What are some of those. Those opportunities. And how different might the results actually be? Sure. The, do you want to kind of start out because you knew where you were and then I'll pick up? Oh, um, no, really yet to, to carry on with that, it's really, there's a number of ways to invest in specifically real estate.

And I think Brock you and I talked about, you can take a debt and equity position, passive, uh, or active. Um, if you want to walk through a number of those. That'd be great. Yeah. Let's, let's start with active versus passive. I think having this in mind helps one really start down the proper path. It's interesting.

You brought up this AI and then I think rather it's Chris brought up, it's really machine learning to a large degree is what we actually see out there. And it's called AI. What we, what, what we've found. Technology, uh, no matter how we've used it in particularly in, in how we've applied it, you know, with what we're doing here at Kirkland capital or anything else that I see, I tend to see it as a help in a process of elimination.

So in other words, I'm not going to rely on machine learning. Tell me the most excellent best 100% reliable investment idea or for our case, the best loan out there for us to make. What we're going to use AI for, or machine learning or even technology in general is help me understand and eliminate those items where we see red flags.

I want to be able to not miss those red flags or things that I should catch. And in reality, that's far more worthwhile for us because humans, we miss things sometimes. I mean, how many times do you give that slap on the forehead? Like, oh man, how did I, how did I miss that? Something that was so obvious in hindsight that you should've picked up, even if you've seen it and identified it a hundred times, you miss it because you become, I don't want to use the word lazy.

I mean, it's simply human nature that, you know, we didn't get enough, sleep our mind somewhere else. And we're reviewing a file. How do we eliminate that sort of thing? Human nature of misses. I think that's where we can use technology. Now, back to your question around the number of ways to re to invest in real estate.

So first of all, let's assess your life, you know, do you, do you want, how much time do you have, how much passion do you have for this subject real estate? Look, I'm biased. I'll tell you that right now. I am biased. I think real estate is one of the best investments out there. It's not the only investment.

It's not my only. But I have the vast majority of my net worth in it. So of course, I think it's great. Otherwise, I probably wouldn't be talking to you about this now. I've decided though in my own life that I'm going to work full time. My effort, the vast majority of my working life effort is going to be dedicated to this, to, to, to this investment type.

Uh, maybe you don't have that. Maybe you're a technology worker that loves their job. Or whatever you do, you're a doctor, you're someone you don't have time really, or a desire to have a second job. And if that's not the case, then let's remove this whole idea of doing active real estate. And what do I mean by that?

So in general, we say active real estate is where you're going to be more hands-on you're going to go out there and acquire the. Uh, it doesn't mean you don't have a team that doesn't mean you don't have a real estate agent or a man, even a management company that goes and manages your rentals. The fact is that you are sort of directly owning that asset and managing it because guess what?

Guess what, when you own a real. As anybody who has held their, had their own rental house management company, or not that water here breaks, you know, 4:00 AM guess who gets the call when it's going to cost $5,000 to do an emergency replacement. It's not going to be the management company. They're going to pick up the phone and say, Mr.

Owner, uh, we, you know, here's what happened? What do you want to do? So, if you don't want that second job, if you want to be looking over the shoulder of these, these companies that are supposed to be doing you, helping you out, then that's probably not the pathway you want to go. And there's a bunch of other ways you could do active, uh, as well.

And that there's nothing wrong with that. In fact, there's lots of people who've made lots of money doing it. So my own parents who my father was a teacher, not a lot of money and teaching, you know, but they were smart enough as they got it a little extra. To put it aside and buy some rentals. And they were fortunately DIY people, my dad could get out and he could do plumbing, electrical, wiring, all that stuff.

And with that, they built up a pretty significant net worth by owning several different single family rentals, fixing them up, et cetera. So it's there. I mean, if that is your place in life, where you've got that extra time to die. Kudos. It's a great thing. Now, if you don't, but you have the money to go into, uh, invest in things, then you really want to look at being maybe what we call an LP.

You know, a limited partner, someone who says, look, I here's the active part of this stuff and don't, don't get me wrong with passive. Passive does not mean that you go, Hey, those look like pretty good things. I look, you don't even want to do that on the stock market. You don't want to do that in other markets.

You really want to understand very well, the nature of that investment. Do you understand about it? Do you at least have some passion for it to kind of understand what it is because there's a bunch of different things out there you can, you can do as good as Chris alluded to. Um, and you do want to do your due diligence about the, both the manager and the type of.

Or the type of debt that you want to invest in and I'm going to stop right there because I know there's a bunch of other things we can cover as far as other types, you know, whether it's multi-family short term rooms, et cetera, but, you know, does that resonate with you that active versus passive? Yeah, no, I, I definitely understand that.

Um, uh, you know, I'm just thinking about some of the, you know, greater risk, lower risk, uh, potential. Uh, I have a friend of mine who used to be the managing director for a, uh, family. It was a family office and their business was commercial real estate, which is very risky. And, uh, his mandate as the portfolio manager was just to get them three and a half percent on their cash.

Uh, obviously he's a lot more than cash, but, uh, the idea was, well, we, we, we want to be very conservative with the pool that you're managing because we know we're taking this risk over here. So if he could help the listeners understand the differing degrees of risks that might be taking when investing in real estate, the Kirkland.

Well, I won't necessarily just talk about us. Um, w w w let, let me, let me kind of start from the let's assume passive. Okay. So if you're going to go active, that's sort of beyond the w we could, we could talk for hours about different active parts. Okay. Let's, let's talk about passive. So that's really, you touched upon risk and I, and I think that's a great place to say.

You really want to start with risk. And unfortunately, too many times when I talk to potential investors out there, even those who experienced they start with, well, I need this return. Well, if you don't start first with risk, you, you, maybe you can get that return. I mean, heck there is 20% returns out there that you can get.

Not only in real estate. Heck I, you know, look, I know I talked to people in the blockchain crypto community that are getting a hundred percent plus returns on their. But let's talk about risk. How much risk you want to take with your assets? Uh, particularly for the majority of them. Uh, one reason Chris and I established Kirkland capital group and went into this, uh, debt part of it is because we're at a time in our own life where we thought, look, we can't afford to lose our money here and start over.

So principal preservation was of the utmost importance before. Yeah, don't lose the F and money carpet. That type of deal. Yes. We want a good return, but principally and primarily, we are not going to make an investment where we feel there's a risk of loss of capital. I think that's a very important point to make to our listeners because I know that, you know, every now and then you get somebody who says, oh, I want to, you know, and they go, they have maybe a million dollars to invest.

I want to invest in private equity. I'm like, do you understand what the winning percentage is? And private equity are you really willing to take on that kind of risk? So thank you for clarifying that. Jeff, the same question I would ask though, for people who invest in the public markets, I mean, look. As of today.

I mean, we were seeing, and here in early 20, 22, uh, a bit of correction, how long and how far that goes, who knows? I mean, if, if you knew then you wouldn't be listening to this, right. Uh, so you know, the other types of ways that you can get exposure to real estate, there's public REITs out there. So you, you can take some of your money that's in, uh, But the public markets and simply move it to a public REIT.

Uh, but there's a couple of issues with that. Number one is yes, you're going to get real estate exposure and that's, that's good. The challenge with that though, is that public REITs are listed publicly on the public marketplaces. And so they're, they're going to tag along. They're going to be effected by the Y.

Uh, movement of the public markets. So when you hear that NASDAQ or the S and P or whatever, go up, go down, whatever they're going to drag those things up and down there. Unfortunately, no, one's going to go look at those and say, Hey, you know what? The real estate underneath, underneath that, the actual assets, those prices are, those values did not change.

So that stock shouldn't be. At public listing? No, no, no. That's unfortunately that's not quite how it works. So then you turn to private alternatives and those could be equity. Uh, those could be debt and the amount of risk that you're willing or able to take with those things, I think is going to depend on what type of equity play it is.

There were some private equity players that are going to be fair, you know, that are going to be less risk than others. Let's put it. And there's some debt that's going to be very high risk depending on what it is. There's some debt that's, that's built from the beginning to be low risk. Uh, and then of course, on top of that, there's various classes of rules.

Uh, there there's ones that are going to be, that you do an equity play on that are going to be a much higher risk, you know, think about anybody who invested in, in, in retail or particularly malls. Uh, they're still at a disadvantage at this point, you know, with COVID with this left tail event. Uh, they're also, you know, you gotta consider short-term versus long-term if you haven't had some long-term and you're early, when we're talking about private alternatives is probably the shortest term you're talking about is probably a year, which is generally you're going to be your lockup, but on your average, Equity deal for, let's say an apartment complex, which I think are some of the, some of the best ones to look at as an asset class, because everybody needs a place to live.

Not that there's not bad investments and bad managers that there are, we've heard the stories, right, Chris. Um, but, uh, Yeah, but, but you're, you're looking at a four to five-year window at the minimum, generally on those kinds of plays. Uh, and if the market goes bad, goes bad during that time, or maybe it goes down.

The nice thing is you can generally just ride it out, but if you think, oh, look, I'm going to rely on that money in five years to retire, then don't make that investment because you could end up looking at a 10 year. If that manager wisely decides, you know, look at five years, we can't solve for, we want to, we're going to lose money on this, but we know its assets going to go back up.

So let's just ride it for another few years. So you need to really allocate portfolio. According to look, I'm going to need this money out. Uh, in five years when I retire, then you better look at some sort of private alternative where, you know, it's a little bit more liquid at that period of time. Uh, that may be means, means debt.

You know, that that's a lot. With that time period. So do you, you probably don't want to invest in ten-year debt if you have a five-year window. I mean, that's just some common sense, but people, sometimes people don't think about those things. They think. Well, the, the, the, the manager promised me that I could get my money out in five years.

But I'm investing in ten-year debt. Those things don't align. So I'm glad you brought up liquidity. That was gonna be my next question. So you got there first, um, I'm hearing stories about, uh, fractional shares, allowing, uh, not only liquidity because it's a secondary market, but, uh, also allowing smaller investors access to big commercial real estate opportunities.

First do you do any of that? And can you explain a little bit more about. Yes. And no, uh, the, the, the reality here is I first started, let me go back a little bit. I heard first heard this term fractional shares when I started attending some blockchain events in 2017. Um, what many people don't know is this?

This idea has actually been around for decades. Uh, it first started in New York in the 19. I think it was like the twenties or thirties. It's just a new name. Put on. What's what we've been calling for decades called syndrome. Uh, and really that's no different than even the idea of it is a stock share in some, uh, in some, you know, I mean, really what, what are you getting your, your, your, your, uh, syndication is just dividing up the ownership of.

Uh, really that's what it is. It's just a fancy word that we've used for that fractional shares. Uh, the, the cause could be thought of a number of ways. There was a couple of tea. There's a few bit, a few changes over the last few years where not just in technology that allows maybe slicing and dicing things a little bit smaller to allow on the private side, something similar to what we see, where you can go buy one, share of apple stock through some of these apps, you can buy a, an eighth of a share or $1 worth of a share.

Uh, w with the real estate, same thing as what's, what's happening both using technology to be able to divide this up and allow more people to, to, to own a piece of that. And let me get to the liquidity in a moment. And then the jobs. So the jobs act, allow the sec to allow small investors to invest in these smaller projects where you didn't have to be accredited.

Uh, and you weren't under the rural such as, even for these non-accredited ones where you just got 35 investors. So that's sort of open it up and we've seen some real estate deals now being offered through quote unquote, these crowd funds. Uh, type of, uh, of, uh, portals. And I think, honestly, I think that's a good thing, but we want to see more people have access to these types of private investments that were really only for the rich.

And that's unfortunate. I'm not even going to go into the political side of that now to your second question. I believe Jeff was around the ability to trade those, you know, the Google liquidity. Right. Okay. Yes, there, there's your we're seeing through a lot of times these blockchain ability and behind the scenes, uh, the ability to trade those shares, even though they're not done with the investment.

So let's take an apartment complex. Okay. You, you, you, you, you go and you buy into this apartment complex and maybe you buy these new blockchain based shares, which allow you later to trade them. Okay. Great. Then two years out, you decide, you know what, I've got to have this money back. Okay. So you go to the exchange and you find a buyer for this, and I'm not going to go into all the technology or anything.

Here's the challenge with this though? How do you value that your, your midterm valuation on something that D is not highly publicly traded does not have a lot of liquidity in there. In other words, there's not a lot of sheriffs. Yes. You might have the mechanism to sell that share, but you don't have a mechanism for fair and transparent valuation of what those shares are worth.

So, you know, there there's yes, you have the ability, but you may not have, you may not get what you're thinking. You're going to get right. Right. That totally makes sense. So, Chris, last week we talked about correlations and, uh, and of course, uh, Brock, I know you've mentioned a whole bunch of different ways.

You could own real estate equity debt, et cetera, to what degree is the risk that you're taking in either equity or debt in real estate connected to say just traditional stocks and bonds. Okay. Yeah. It's a great question, actually. Um, a lot of the things that you guys have been talking. Underlying, you know, everything we've been talking about so far is this question is as the investor coming in and understanding, what do I want to invest in?

As you know, Brock was saying, what is, you know, my risk aversion level? What is my liquidity requirement? All. Also piles into your creating a portfolio of assets. You're not going to put all your money in one thing. Well, at least I hope you're not going to put all your money in one thing. Um, nothing's a sure bet.

Even though people will tell you and to your point, this correlation, so you're going to put together a basket of assets and there, again, it depends on the asset you've chosen for your portfolio. So as Brock mentioned earlier, if you're going to do something that's related to the public markets, you'll get liquidity.

You will get, uh, as fair of a valuation as you can possibly get. Now, sometimes those get misaligned, uh, as we saw in March, 2020, um, you know, Brock mentioned earlier, you had public REITs that absolutely collapse. Now, why did they collapse? The underlying real estate wasn't necessarily worth any less. But what happened was is you had a lot of people selling.

So I'm going to go out and sell my S and P 500. I'm going to go out and sell my fixed income funds. And at the same time, I'm, de-risking my portfolio. I'm going to go out and sell that public REIT. And so are all of the large institutions. Now that's the real key. I think the three of us combined, if we all decided to sell the same asset, no one would care, but when someone.

And an institutional, uh, you know, mutual fund family or our ETF family or combination thereof decides to sell something. It can be billions of dollars. It can move the price quite rapidly. And that's something you need to be aware of that you're going to have a higher correlation, anything that you have a public access to, and you can sell on a daily basis.

You're going to have that rollercoaster ride of things that may not be very particular to that investment. I E. Um, but there was some other occurrence in the broad market where you just had people selling off. So that's one important thing to understand. You will always see correlations and to give you an idea, you know, we do track certain correlations and you know, one of the numbers that, um, you know, we were looking at the MSEI us REIT compared to the S and P 500.

The correlation is as high as 0.85 for the last 20 months. It's actually very, very correlated. So. In short periods, you will see, Hey, um, those REITs and real estate might have an idiosyncratic move, but over the long run, they act 85% of the time. The same. Um, so that's something to be aware of now when you go into private investments and I'm not going to get into the, a long drawn out battle between does illiquidity actually a mute, uh, correlation.

Um, that's a whole nother subject, but you will generally find a private asset does not have regular money flows. It is not liquid. You can't sell it every single day. So generally what you have. Is, uh, an asset class that tends to be lower correlation or, you know, similar moves, um, to any type of public asset.

Um, and that will go for private equity or private debt. Um, now obviously if you're going to mix and match, there's a natural offset in a lower correlation between equity and debt. So my correlations between. You know, private equity in real estate and equity in the public market will be slightly higher than if I chose something like, well, private debt versus public equity.

Um, and those numbers, depending on which asset and which index you're looking at will obviously shift and move. But the important aspect that listeners need to understand is you're putting together this portfolio. Don't always just, what is my return that I'm going after. Think about the basket of what I'm putting together and how will that look.

Uh, when I put it all together and hopefully your financial advisor that you're using can actually run those numbers and help you understand what is my net risk. And I understand that risk comes in lots of different forms to different people or what is my expected return of a portfolio of assets. And that's how you need to think about and why correlation is really important.

W we did talk about this last week and the fact that you can, let's say smooth out the ride by having, uh, some non-correlated asset classes or even better negatively correlated asset classes to offer a higher degree of predictability from a financial planning perspective, I think is very valuable to a lot of people, especially that middle-class millionaire who.

Generally in pretty good shape financially, but maybe hasn't quite yet reached all of their goals. So I see the advantage now here's my question too, because, um, I was in the business for 25 years and the opinions vary dramatically on how much of someone's portfolio should be in alternatives. Is it 5%?

Is it 20%? Is it somewhere in the middle? What would it be? Best a way to truly get that core non-correlation to minimize volatile. You're just going to throw me the tough pit for enough to bat and to tell you the truth, I've got 80%, maybe more

to get non-correlation.

That's a loaded question because you really have to go back and it'll be different for every single investor because every one of your life occurrences and how you look at the world and you have a family, you don't have a family your age. There's so many factors that go into that question. Um, But, you know, there's been, we wrote a paper early on about is the 60, 40 dead.

Um, it's a 70 year old model that really worked quite well until recent as a, you know, people realized, wow, this the streets keep on going down in the fixed income portion. That 40% is really not gonna to. Offer the return, nor is it going to offer the historical diversification it used to offer. Um, and so people have been, there's lots of papers out there.

Uh, you can almost Google it anywhere, um, that people are talking about, well, is it five? Is it 30 last paper I just read was 33 33 33. I'm not saying that's right. And here's the problem with alternate investments is okay. Go do 33% of your portfolio in alternatives. Okay. Now let's just look at that 33.

What is in your alternative bucket, it may not be all real estate. Maybe there's a hedge fund exposure in there. Maybe there's a private equity exposure in there. Maybe there's a venture debt exposure in there. There's so many different things that you can look at in the alternative space that, that even that decision to say.

I've got the wealth and the capability and the education. That's the real key thing I will Brock hears me say this all the time. Read your documents. If you are going to go into a alternative investment, you are investing in a company that provides a financial service and ever turn to you in one form or another.

Read the documents, understand who the managers are, understand what they're doing and the flexibility that they have to provide that return to you. So I'll get off my soap box there, cause that's something that's near and dear to my heart that I know. Unfortunately, a lot of people don't take their time to read the PPM.

It's a horrible document, but it's a necessity, but go in, understand those alternatives. And as we said, last time, Jeff, are you trying to enhance return or are you trying to lower. Because there are certain alternatives that will definitely boost that return. It's an aggressive strategy that will hopefully over time enhance the return of your entire portfolio.

There are other strategies, and I think a lot of people have a misnomer of the word hedge when they always think everyone's trying to go out and bust out 50, 60% returns. But the original hedge fund in the definition of the word hedge is to offset some form of risk. A lot of those people. Trying to target an equity like return.

So let's just use the S and P 500 is Oracle return eight, 9%. But at much lower risk levels. And so now this is more of a, a risk offset without losing return. Now, the ideal unicorn you're looking for is something that can be massively. Uncorrelated has very low volatility and you know, can provide an outsized return in relation to, you know, here it is, goes back to that person's specific goals, their expected return.

What do they want for a return? Not everybody's hunting 20. I talked to a lot of people and they're like, well, all I need to do is get, you know, seven or 8% and I'm good. Um, and so that 33% or 40% or 50%, that's going to be an alternative, whatever you want to move to. Is it just a complicated question?

It's find what you want in that bucket and what you're trying to do. And then you can find very delicate way of avoiding an answer. I really appreciate that going to play on the rally request because it's different for everybody, everybody in the world. Nice job. No, I totally hear what you're saying.

Obviously everyone's different in terms of what they want from these things. I do appreciate it. All right. Last question for today. I'm definitely going to have you guys back because these are always fun conversations. What do you see as the best real estate investment opportunity right now? Wow. I'm going to throw out the answer podcast host hate it depends.

Are you going to get some nasty emails from listeners? Yeah, but it really, again, it goes back. Depends on what your situation is. I'm going to use this sort of two ways. Number one, approach, the best opportunity for you. As your own individual as investor, as a process of elimination, don't go out there searching.

I'm going to festival find the best stuff, make a list. Here's here's what my requirements are for my portfolio. My situation alive. Am I doing active versus passive? Do I want to eliminate and not, I don't want to be a. On the public market and see, you know, my, my amount go up and down. I want to be able to sleep at night and not worry too much about that, you know, make a list and then go, okay, here are, let's say real estate opportunities, which I'm just gonna eliminate right off the bat.

They don't make sense. Um, you know, th th there's a whole bunch of stuff you can eliminate just by going through that process, but I'm going to also give a warning out there. I see all kinds of stuff all the time. You know, look, I read lots of real estate articles and. The, what did I see last time? Uh, the, the 10 best places for owning rental properties in the United States for 2022, guess what?

I'm going to slot this type of stuff into the same thing as when you, you know, where we hear, you heard your aunt come to you and say, Hey, I heard this, you know, XYZ stock is doing great. Are you in this? I'm in this, you know, all my friends are in this guest. Way too late. Someone already did the run-up by the time you see a best cities or best asset class generally run it.

It's already done well. And we have an educational video in the app talking about tout risk, which is exactly what you're describing. And it is real. It is real. Yeah. Uh, you know, I was, it was hilarious to see, uh, for 20 22, 1 of the top 20 cities is a city that I'm very familiar with because my parents and my grandparents were there is Akron, Ohio.

I'm like, wow. And I taught, I was talking to my cousins like, Hey look, Akron, Ohio, you missed it. You should have invested years ago when you were thinking, oh, I do want to do is get out of this place. You missed it. Uh, you know, we had a good laugh. But in all seriously, you know, there is certain asset classes that are probably going to do with.

Day in and day out, or at least for a long period of time, you know, because of what they are. So, and I'm not going to mention what they are here, but there are certain ones that you classically probably want to be very careful of that do very, very well. And run-ups, uh, I'll tell, I'll talk about fixing flips, you know, this single family fix and flips, they became famous for non real estate people with the shows online, you go, somebody go in there and do a show, uh, you know, but at the same time, Those were the Canary in the coal mine of the oh eight.

Now I'm not saying that we're going to see an oh eight. Even if we see some sort of recession this year or whatever, I think the, the, the, the underlying foundational things what's happening. Our are very different. I don't think we're gonna see that, but. Still even during your classical recession, when home prices either kind of just kind of stay the same or maybe dip a little bit, those fix and flips are in trouble.

So those are sort of the Canary hole and in my own opinion. Uh, so I think those are something you got to watch out. Uh, they do excellently when things are in the run-up. Uh, so again, going back to what's the best real estate opportunity. I can't answer that. It's going to depend on yourself now.

Individual questions about your situation. You want to talk to me about it and then I can probably guide you a little better. I'm not going to tell you what it is. I can certainly guide you and say, okay, if you're a situation is you need that money in two or three years. Well, you probably want to go towards debt because you, you can get something where, you know, there's year lockouts only, et cetera.

Uh, or, Hey, I want to go with something that's super realist. Well, I might point you to debt, to debt again and real estate, you know, cause you can get that real estate exposure. You can get that debt. Well, look, I'm I'm, I'm in my thirties and forties and I want to, I really need that equity bump. Okay, great.

Maybe it's time you look at some private syndications on the equity side. Maybe that's multifamily, maybe that's self storage. Maybe that's a mix of those things. Uh, but you know, you're looking at professional managers who may not be concentrated in any one particular market. They may have an asset in Texas.

They may have an asset in the south and may have assets in certain places, uh, where, uh, the, the. The broader economics of that area or looking good over the next, you know, midterm, you know, five to 10 years. Uh, but I think Jeff you're, you're seeing what I'm saying is, again, I'm a warning out there for anybody who's looking at a best places to invest type of thing for real estate, Ron, it's already done for that area.

Well done. One thing I wanted to talk about also on the back end of that, that we haven't really talked much. No one likes to talk. Hoping that the IRS man won't hear us talking is a tax one aspect that, uh, you know, you're asking about what's the best investment. One thing that I want people to be aware of is understanding your tax situation.

Um, you know, like a Kirkland income fund, you know, You know, a classic vehicle, very much like many alternatives. You're not naturally tax advantaged. You can put up a good return. But if someone is in a very high tax bracket or has a lot, a lot of tax sensitivity that can also move you away from that quote, best investment.

So make sure that when you're looking at something, look at it from an after tax standpoint, you know, so you might look more towards equity where there's a. Uh, capture of, uh, you know, accelerated depreciation of an equity asset or something that may give you a slight tax advantage. So that's one other factor that we haven't really talked about much here, but is becoming an important one, especially for this class of listeners, as you have larger incomes.

Um, the tax man is coming more and more. So maybe that's another, uh, subject is, you know, what, how to think about that with, with real estate, there is some great tax advantage. Real estate plays out. Uh, you know, so there's a whole, another thing to dive down into that, about your portfolio, about your tax situation, about where you're making other money, whether it's W2, whether it's other ownership of businesses, uh, whether to place that in your 401k or self-directed IRA, or whether to keep that in your normal money, whole other fun subjects to talk.

Great job guys really appreciate it. If they do have questions and I can guarantee it, you're going to get questions because there was a lot that just came out. Uh, how could they reach you Brock? Well, the best place to start off is our website Kirkland capital com Kirkland capital group.com. And you can always reach out to Chris and I.

Uh, I know it's always dangerous to put our, our email address out there, but, uh, if you guys would go onto our website, there's a, there's a place where you can contact us. And, and Chris and I do try to personally answer, uh, questions from people. So it's not that hard to find us as reminder to the investors investment.

Excellent. And, uh, for, unfortunately we, you know, we've, we've opted the route and maybe that's another subject talking about accreditation stuff, but you do have to be an accredited investor for our investment. Uh, okay guys. Awesome job. I look forward to our next conversation, which we will discuss in the very near future.

I appreciate it, Jeff. Thanks. Thanks for having us, Joe.