TDI Podcast: Private Equity Insights (#956)

23:31The Disciplined Investor:So our model, it's a little different than that. So one of our owner-operator partners will source an existing deal. And just for clarity, we don't do any development. All the stuff we invest in is existing. and the typical scenario for mobile home parks because about 70 percent of the 40 ,000 mobile home parks in the u.s 70 percent of them are still owned by a mom and pop owner not a professional owner so the typical scenario is you have an owner who's aging the kids don't want to deal with the property and the owner decides to sell and they don't want to work with a broker it's they're they just want to get the deal done quickly with cash they don't want to go through this drawn out process and do a bunch of tours so our owner operator partners will reach out directly to these owners and they will they will call they will send text messages they will send emails, they will send physical mail, they will do fax even.

24:44The Disciplined Investor:And that's how they generate these deals. And they'll say, we can close in X days in cash. And you go into this park or this community and you'll typically find rents that are far below market. You'll typically find tenants that aren't paying their rent. You'll typically find infrastructure in disrepair, whether that's the roads or the common areas like a pool or a clubhouse, trees overhanging, and maybe there's some sewer water issues. And the move really is to slowly, over time, raised the rents to market you don't want to go in and do a huge adjustment there have been players in our space that have done that and that has mass exes not gone it doesn't go well politically and reputationally and and you just want to um and then also filling vacant lots that's another huge one so sometimes these mom pops they don't have the, or care, they don't care or they don't have the money to bring in a new or used home and sell it to a tenant or sell it to a prospective tenant.

26:07The Disciplined Investor:That's huge value add. So it's not uncommon to see year one cash on cash of 7 % or maybe higher for these, for these.

26:19Benjamin Kahle:And by the way, these are non-leverage deals. This is just cash down.

26:23The Disciplined Investor:There is leverage eventually. So maybe it's closed for cash just for sake of speed. And then the owner operator will, and that's a really good clarification, the owner operator will go to Fannie Mae or Freddie Mac have really strong debt programs for mobile home parks, or maybe it's a regional community bank. It depends. And I would say in the range of 40 % to 65 % leverage is what they end up at.

26:59Benjamin Kahle:So is it leverage or is it borrowed? Is it different?

27:04The Disciplined Investor:So let's say the purchase price is$10 million, let's just say. So of that purchase price, say$4 million to$6.5 million would be a loan. And the rest would be equity in the deal.

27:18Benjamin Kahle:So it's not a multiple leverage. It's a partial of the value leveraged.

27:23The Disciplined Investor:Yep. Yep. Exactly.

27:25Benjamin Kahle:So one of the things that you've done, I think, is you mentioned the various ways you work with people where you have owner operators, et cetera. This is, I guess, what you're calling the JV hybrid strategy and JV hybrid equity and structure. Yes. Explain that to me.

27:47The Disciplined Investor:Yes. So this might sound like Chinese, but I'll try to explain it the best way I can. So when we're investing in these deals, and there's just one point of reference, we have control. So like a private equity firm would come in and buy a company or a part of a company, they have certain control rights. And that's what we do. We control when the property sells, refinances, the budget. We control the capital improvements. And we often hold back the capital improvements, any major decisions, even sometimes the management of the day-to-day. So JV Hybrid, it's basically like the sponsor need. Again, let's use this$10 million deal example.

28:46The Disciplined Investor:let's say the loan is$5 million. And then we would bring$3.5 million. So there's a need for$1.5 million. And that would come from the owner-operator's own money, like their skin in the game, and maybe friends and family or closely held investors. That means, and the JV hybrid structure means, we have a return of capital priority upon a sale. So there's some downside protection. So let's say that property sells, and I'm just going to use just really broad terms. Let's just say it sells. It's purchased for$8.5 million or$10 million. Let's say it sells for$8.5 million. There's a loss of$1.5 million.

29:40The Disciplined Investor:Our investors, Wellings, we wouldn't lose anything. in that scenario. Right.

29:46Benjamin Kahle:You're the first paid. You're the first paid.

29:48The Disciplined Investor:After the lender. Yeah. After the lender. Right. Right. And that's a, it's a unique structure because we're getting the same upside potential as the common equity in the deal, that one and a half million. Like our return is not capped, but we have some downside protection.

30:09Benjamin Kahle:So the risk is on the operator on a sit on a on a qualifying event, if you will.

30:15The Disciplined Investor:Yes. And how we pitch it to the operator is, you know, hey, you know, this structure won't mean anything. It doesn't matter unless you lose money and you're not planning on losing money on this property. Right. You're putting in a million bucks or whatever of your own money. And, you know, of course, they're all they all going to they're all going to believe that, say that. And we do, too, going into it. But if a worst-case scenario happens, we at least have something to fall back on that's not going to result in maybe a total wipeout for our investors.

30:50Benjamin Kahle:And you have this – I read about this – I think it's like a 20 – 27, 26, 27-step due diligence process for the owners and operators and properties and all that. And there's a, what, what thing when you go into a property is kind of a red flag that would be like, oh, you know, right off the bat. Yeah. I don't think we'd do this one.

31:18The Disciplined Investor:Yeah. So our due diligence process might be a little different from some firms in that most of our due diligence is centered around the owner-operator, or we call them the sponsor or the operator. It's really the people. So the thing about real estate that's different from other asset types is, yes, it's sticks and bricks. It's a physical asset, but the results of that investment in that property are really going to be driven by the people and the team running that property. We say this, you could have the best property, the best mobile home park with the best upside potential and the best area, neighborhood.

32:17The Disciplined Investor:But if the sponsor is mediocre and their systems and processes are mediocre and how they're doing things day to day, that property could still end up sucking for everyone. But on the other side, you could have a so-so property, so-so area. But if the sponsor team, the owner-operator, if they're dialed in, that property could still generate an amazing return because it's really the details. So we bet the jockey more than the horse. The jockey being the owner-operator, the horse being the property. And yeah, the property matters. Yeah, we're going to look at it. But I think we're looking for a couple things in the first couple calls we have with our potential sponsor partners.

33:18The Disciplined Investor:we're looking for openness and humility and yeah, willingness to, to, to share about mistakes and things they've learned. And that's a hard one. That's hard. Yeah.

33:35Benjamin Kahle:I mean, it's hard because some people, well, some people may not want to admit, some people may just forget, like they just literally forgot, you know, like let's not even wipe this from my memory. I can't even, you know, But that's an interesting thing, humility and openness and to talk about mistakes. So the point there is that you want someone who is coachable, if I may put words in your mouth, coachable and can understand how to better themselves. Is that true?

34:05The Disciplined Investor:Yeah, because I think at the end of the day, we've been on a lot of calls over the years, and a lot of the groups are putting their best foot forward. Of course, we would want to do the same. And there's a tendency to just tell us, Wellings, what we want to hear. A lot of people say that's what sales is. is just tell the other person what you think they want to hear. And I'm really cautious when it comes to these things. I think the best sponsors, and we've invested with 24 of them over the years, the best sponsors that we've worked with, they're not salespeople. When I say the best sponsors, I mean the main guy, the owner, the CEO.

34:59The Disciplined Investor:I don't want them to be this salesy promotional guy or gal. I want them to be in the details and understand things or have a very capable person in that number two seat, like the COOC or operations seat, that has real authority to call some shots and the owner operator is not just going to dominate them. So I think that's something you can just kind of feel on some of these calls. And we're not getting intense or we're not interrogating. We're just asking people to tell their story and say, you know, what have you learned over the past couple of years? What things stick out to you?

35:51Benjamin Kahle:Well, the bottom line is because you're going to get all the financials anyway. Exactly. And those are easy to pick apart and figure it out and do some accounting and send it out to kind of dig in and figure out, like, what's that line mean? Why is that over here? Why do you see that big jump or drop over those two years in this particular sector or whatever it is? That's easy enough. That tells the story. There's no – there's no – there shouldn't – well, there shouldn't be – there shouldn't be inference, right? You should be just, here it is, and make a decision financially using whatever multiples you're using and whatever breakdown which is important to you.

36:29Benjamin Kahle:So I get that. And then this is sort of the soft data.

36:34The Disciplined Investor:Yes. And that's part of our kind of screening process. And you're not going to be able to tell everything, of course, about a person and a couple Zoom calls. But we look for that at the beginning, like early signals. and we really try to pay attention to the early signals and we really try not to ignore the gut check. And there's different perspectives on trusting your gut, but more often than not, when we've had a gut check or something that kind of doesn't feel quite right in the early stages, It is often, and then we move forward with due diligence, something else will come up in due diligence that causes the deal to fall apart for one reason or another.

37:29The Disciplined Investor:And so we're really trying not to ignore the gut. And, you know, there's some interesting data and resources out there about the role of listening to your gut. But I think we try not to do it.

37:46Benjamin Kahle:You're not just buying the company. If you're buying the company and you're taking it over, and then basically the management and the founder, if you will, or the person in charge is leaving, that's one thing. But you're actually keeping them on, right? So it's owner-operated.

38:00The Disciplined Investor:Exactly. Exactly.

38:01Benjamin Kahle:And you've got to work with them, obviously. So that's important.

38:03The Disciplined Investor:Yes, for many years. You know, it's a marriage. You know, we're typically in the deals for a minimum of three years and sometimes up to 10 years.

38:14Benjamin Kahle:So let's talk about the structure for a second. Private equity, private credit, you know, they're all out there. People are, I'll tell you, I went to an event down in Miami about a year ago. It was a financial event and they invited me to come down for some cocktails one night. And I literally, I'm not even kidding, I was down in Miami Beach and I'm standing there, don't know, in this particular area I was, I didn't know a lot of people, they were kind of somewhere else. And I was like attacked. It was like, you know, it was everybody telling me that private equity, private equity, private equity has got to be a new thing.

38:46Benjamin Kahle:You've got to do this to this. You've got to do this to the future. It's the best thing for your clients. It's going to be in this. It's going to be in the 401k. I'm like, ah, enough. Can't take it. Right? I'm like, this is starting to now get me to a point that I'm turning to the other side of it saying, what's the problem here? But anyway, let's talk about private equity. I get it. What is your structure?

39:05The Disciplined Investor:Yeah, so we're not investing debt. So we would not be classified as private credit. We're investing various types of equity. Some of its preferred equity, which is kind of a blend between common regular equity and debt. where you have a, you know, people who invest in stocks might have some understanding of that structure where you have kind of a fixed current pay, and then you have a PIC, payment in kind, or accrual, and then you have basically it's capped upside. So in our structures, you know, Our PREF is typically in the 7 % to 10 % current pay range. And that's typically for stabilized deals that we're coming in to recapitalize.

40:05The Disciplined Investor:And then maybe a 15 % or so, maybe less, maybe a little bit more coupon rate. And that's capped. So that's preferred equity. And then we'll do this JV equity or JV hybrid equity, like I mentioned a little bit ago. And we're 100 % commercial real estate. We don't do anything outside of commercial real estate. When I say commercial, our investment criteria or what we're investing in today is multifamily apartments, mobile home parks, small bay industrial, like multi-tenant industrial, industrial outdoor storage or iOS, which we like to do more of. and we have not done anything yet. That needs no upkeep or massive build.

41:02Exactly.

41:02The Disciplined Investor:Here's your piece of land. Thank you. Oh, look at all the grass.

41:07Benjamin Kahle:Too bad. Throw your junk on it.

41:09The Disciplined Investor:Yes. And you have a high quality, high credit tenant, typically just one. And then the other would be like neighborhood shopping centers, which we've done some of. Those are probably the riskiest of all.

41:27Benjamin Kahle:You would think. You would think. Just a turnover. I mean, listen, some idiot opens a restaurant in a place that a restaurant fails all the time.

41:36The Disciplined Investor:Yeah, you would think. I think the type of retail that we're doing is not so much, you know, like local restaurant tenants or like nail salon tenants. It's more so like, for example, we invested in one in Atlanta or a suburb of Atlanta, and it's anchored by a Kroger, like a grocery anchored place. and then you have like national tenants in there, like Hobby Lobby or like maybe there's an out parcel and there's like a bank on the out parcel, like a Chase and they're paying. And it's not like these, I don't know how you describe them, but maybe sketchier neighborhood places where it's like a revolving door.

42:38Benjamin Kahle:Yeah, with a smoke shop, with an Italian restaurant, a Chinese restaurant, a deli, and a shoe repair shop.

42:47The Disciplined Investor:Yeah, it's not. You can see that strip mall, can't you? A hundred percent. There's quite a few of those. But, I mean, honestly, yeah, retail has been overall doing really well, despite the headlines. And I think everyone thought retail was going to die. You know, like after COVID especially, people were like, oh, it's game over. But from what we're seeing, I mean, there's a supply and demand imbalance. They're not building more of this stuff in a lot of areas. And the tenants are paying. and we're getting our cash on cash, which it depends on the deal, but some of our deals are getting over 10 % cash on cash without doing anything crazy.

43:46Benjamin Kahle:So let's talk about the other structure, which is private equity, where it requires first an accredited investor, which we can go through that. Basically, you got to be worth a good amount of money or have a good income and prove that. And this is not for someone who is fresh out of school with a lot of loans that's making$15 an hour. That's probably not the investment for them. This is not the investment for them.

44:05The Disciplined Investor:No, would not recommend it.

44:07Benjamin Kahle:Well, you can't. They'd be accredited, right? Exactly. Okay, so that's first of all. Second of all, the structure you have is, let's say, I'm just picking a number here. It could be anything here. Let's say that minimum investment for a particular share, if you will, is, again, this may not be the exact number. Let's just call it$100 ,000 for just lack of anything better to talk about, okay? So$100 ,000, but that money may not be due all up front, right?

44:33The Disciplined Investor:Yep, that's correct. So we do draw down funds, and sometimes we'll offer sidecars. And when I say sidecar, I just mean an opportunity to invest in one deal within the fund where We don't want the fund to take down the whole deal for diversification purposes. Side card, 100 % of the money would be called or due basically up front. It would all be invested. But for our funds, yeah, we'll do a drawdown structure. But today, investors typically aren't waiting super long to get their money deployed. but it just depends on how much capital is coming in and then how many deals. I think the benefit for investors is, and then also for us, is that there doesn't have to be cash drag.

45:35The Disciplined Investor:Basically, when we need the deal or when we have the deal, we can call the exact amount of money we need.

45:42Benjamin Kahle:So let's talk about that. The capital calls, we call it, or drawdowns. There's a lot of different ways of saying the same thing, which is basically here's a deal when you come in on that$100 ,000, maybe you owe$10 ,000 on it, just saying. And then down the road, you guys get something that happens. You get a deal that's going to close. You need money to fund it. You send out a letter to your people in the fund and say, look, we need$15 ,000. That's the amount from each of the people that we calculated out that's going to give us$14 million to buy this particular property, et cetera, right? Okay, let's go down the road a little bit.

46:12Benjamin Kahle:Now we're down the road about a year. and you didn't, let's just say, you didn't fund it yet because you've been looking for properties and you haven't found the right one. Now you find somebody that fits the bill about your criteria. They're good people. They're humble, right? They do all the, it fits. And now you put out another, you know, whatever, another$15 ,000. Somebody has$80 ,000 in the deal out of the$100 ,000. Are you with me so far? Yep. Okay. That person calls up and says, you know, I got to tell you, For Reason ABC.

46:48Benjamin Kahle:Not only do I not want to fund, but how do I get my money out of this thing? This is far before there is actually the out, if you will, right? I'm talking about way before. What happens in real life?

47:03The Disciplined Investor:Yeah. Well, yeah, there's what the legal documents say. And then there's what happens in real life.

47:12Benjamin Kahle:So what are usually in private equity like this, what do the documents say? You're pretty much on the hook for the money, right?

47:20The Disciplined Investor:Yes, you are. And then let's say you don't fund. And let's just say, you know, we have two funds. We have an income fund and a growth fund. Let's say it's the income fund. And if the person who has only partially funded their commitment decides not to keep funding when there are capital calls, we can do things like withhold their distributions from the fund. We can buy them out at a significant discount. They get significantly diluted in some cases. And there's a number of more punitive things that can be done. Thankfully, that's not something that we have had to do. We try to understand what's going on with the investor.

48:18The Disciplined Investor:And we try to do a lot of work up front getting to know the investor. And maybe, you know, you kind of heard kind of about humility and things like that. We're very we're pretty relationally driven. We have about a thousand investors across our different vehicles. And we we try to vet people up front and make sure they're actually understanding of the fact that this is not a liquid investment opportunity. if you need your money like don't invest this is you can't we can't just go in you know for a closed-end fund like our growth fund we can't just go and sell properties to to get people their money back it's just not how it works but we do try you know we try to make accommodations for people like if someone needs to get out like maybe like i've i've personally bought people's interests.

49:19The Disciplined Investor:So have other team members. What is the significant discount?

49:24Benjamin Kahle:Is it 50 %? Is it 40 %? That I've bought people's interests? It's theoretically, I'm just saying. I mean, what is, like in the industry, what are they, somebody that's not really nice and they say, listen, I don't want to fund this thing anymore. I just don't want to do this. Whatever the reason is, right? Are we talking, what kind of haircut are we talking about?

49:41The Disciplined Investor:I don't know. I don't know off the top of my head what our legal documents say, but I would say it's generally in the range of 15 % to 25%. Right, right.

49:54Benjamin Kahle:That's if the liquidity is allowed, of course. Yeah, no, I get it. I'm just wondering because people need to know this, I think, when they go into this, and that's the point you're making, that if you're going into this thinking that it's a regular investment that has some liquidity to it and they could possibly get out, it's really a whole different animal. That's the point. It's a different animal. It's a long term.

50:13The Disciplined Investor:Yeah, it's a long term thing. And, you know, it's funny because you mentioned you're at a conference and all of these private credit, private equity folks are kind of coming to you because you're an RIA, right? And they're probably like, yeah, we want access to his clients. and I think what we've seen with like because we have a couple RIAs that have brought their clients to us to invest not because we sought them out but just from relationships and it's a very it's a very rare RIA these days I think it might be changing a little bit it's like yes you know I'm pumped about commercial real estate and offering that to my clients yeah like it's just it's kind of, it's, it's pretty far outside the box because of these, these things that you're saying right now, where it's, it's, it's, it's not liquid.

51:12The Disciplined Investor:Okay. That's a huge difference from an ETF or whatever else that, you know, most RAs are, are dealing with. And I think over the next five years, I think, I think it'll begin to change for the RA community. I've heard different things and I think there's more interest, but it's going to be slow.

51:34Benjamin Kahle:I do wonder how all of this is going to play into the idea that, you know, the big boys are trying to get private equity, private credit and whatever else you want to call it, how you want to describe it. Long-term investments that are illiquid into 401ks. Yep. Now, obviously they'll make a great case like the crypto guys did, you know, trying their best. Why? Because it's good for them. The more they could do, the more they get on the top. I mean, And let's be honest. So I don't know. It just seems like you could run afoul. You got a guy in a 401k that retires, let's say, and needs his money.

52:11Benjamin Kahle:And then all of a sudden you're in this private credit. Now, they'll have to create some kind of mirror fund that is almost private credit because you can't have in a 401k a capital call structure, right? You just can't have that. So there's going to be something else with – And the fee structure for 401k is probably not going to hold under the current pension rules. You know, I don't know. What do you guys do? Do you guys do a 2 in 20?

52:39The Disciplined Investor:No. We'll typically do anywhere from a 1 to 1.5 asset management fee. And then we'll have a hurdle. So like an 8 % hurdle, I would say, is typically the case. And then after we achieve 8 % per year, and that's cumulative, it's not like staying on its own each year, then it's an 80-20 or 75-25.

53:13Benjamin Kahle:In favor of the investor, you. In favor of the investor. Yeah, yeah. I just want to make sure it's clear.

53:19The Disciplined Investor:No, that's a good clarification. Yeah, no, that's a pretty standard in our world of real estate private equity. That's pretty standard fee arrangements. You'll see some sponsors do some or some firms do some kind of wild fee structures. And, you know, with multiple layers to the waterfall, it's like, OK, it's an eight and an 80-20 up to a 15 % return. And then from a 15, it goes to 50, 50, you know, and there's different layers and, and I get it.

54:00Benjamin Kahle:But let me ask you this, you're talking about the, the 8%, which also gives you impetus to get this thing invested. Cause you're not going to make 8 % sitting in cash.

54:16The Disciplined Investor:Yes. I mean, I guess the, the preferred return, That hurdle clock starts when we, it doesn't start until we actually deploy the money that we call.

54:29Benjamin Kahle:Right. So, yeah, we want to get it deployed, but we're not losing anything by, like, on the welling side by not having it deployed.

54:42The Disciplined Investor:Does that make sense? Yeah. I mean, we're not getting a management fee.

54:45Benjamin Kahle:Right.

54:45The Disciplined Investor:But, yeah.

54:47Benjamin Kahle:So let's talk about where we are here in 2026. in January outlook for next year. You like that interest rates are coming down. You like that Trump is pushing the whole idea of making it more affordable. That's better for your cap rates a little bit, right? It's better for your profitability. It's better for values of the underlying property to begin with, making deregulation. What am I missing?

55:13The Disciplined Investor:For 2026, well, probably the biggest thing that's going to impact commercial real estate this year and next year, and I'm going to use commercial real estate generally, I'm going to probably more so focus on multifamily apartments because it's one of the largest asset types by total transaction volume, is supply. So when the interest rate environment started shifting in 2022 and into 2023, the cost for a construction loan more than doubled. And on top of that, the cost of materials, the cost of labor dramatically increased over that timeframe, even going back a little bit before then. And what has happened is it does not make financial sense to develop new multifamily in many parts of the country.

56:21The Disciplined Investor:It just flat out does not make any financial sense. And basically, multifamily, along with self-storage and other asset types, it's just a supply and demand thing. And it can be city by city and then sub-market by sub-market, neighborhood by neighborhood within the city. and i'll you i'll use an example um right now so we've actually invested a decent amount um not a huge amount but you know decent amount in chicago workforce housing and people are like oh my gosh that sounds scary yeah no kidding horrifying you thinking um and but you know we're It's not in the worst neighborhoods, but it's on the best neighborhoods.

57:12The Disciplined Investor:Anyways, Chicago has, and if you go back and just look like Chicago multifamily supply, like on Google, there has not been much supply coming online the last couple of years. I mean, maybe even going back four or five years. And people are like, oh, you know, it's a blue state. it's not friendly whatever for business but the reality is it's still a massive metro area and you have uh chicago now in the top five organic rent growth markets in the country wow Like it's up there with like a New York and a San Francisco for year over year rent growth. And it's not like forced rent growth from doing upgrades.

58:12The Disciplined Investor:It's just like the market. The market's just increasing. And it's really simple. It's just the supply numbers for the population dropped off. And same thing in a city like Minneapolis. We actually just invested in a multifamily deal in Bloomington, kind of near where the Mall America is. And similar story. There's not much supply. I think last year, it was, I think, Q2 of last year. In Minneapolis, St. Paul, it's a metro area of 2.3 million people. and there was two multifamily permits pulled for the entire metro area. Wow. In that particular quarter. And it just doesn't make any financial sense.

59:01The Disciplined Investor:The only deals that are getting done are some kind of government tax credit deal, where there's some kind of incentive from the local government. and and that's that's not isolated so there's there's things like that that you know we think it's compelling um and anyways i could go on but i think supply and demand is probably the biggest thing and there's certain cities metro areas that are being impacted differently like the southeast tons of supply dallas fort worth houston austin san antonio charlotte nashville Atlanta these these cities got you know everyone's like these are the growing areas it's like yeah they are but everyone started building there and that has hit rents so you see negative rent growth in a lot of these markets last couple years so I think in the next couple years in general right you know there there will be more market rent growth as supply new supply is getting absorbed and things kind of get worked their way through the system.

1:00:15The Disciplined Investor:And I think, I think what, what people are realizing, cause it has been kind of a, a winter season in general for commercial real estate the last couple of years. And I think what people are realizing is that, But, and I'll say this, like from 20, maybe 11, 12 through 2022, you could be a very mediocre operator in commercial real estate and still do amazingly well because the market was so good for so long. and you you would you wouldn't even know if someone was a good operator or not because they would they would buy a deal and then start doing upgrades and renovations and then literally 18 months later sell it for double what they paid for it it was like a musical chairs scenario and then the music stopped when the interest rate environment shifted and a lot of people got exposed it's like that famous warren buffett quote it's only when the tie goes out that you see who's been swimming naked.

1:01:21The Disciplined Investor:And we definitely saw that. And now the real operators are kind of showing themselves and the not so great operators are also showing themselves. And I think it's always, it's in times like this, I think it's just the day-to-day operations on the ground, systems processes, hiring, firing of the people. That's the make or break. That's the differentiator. And I think there's going to be, hopefully, with limited partner investors and on the GP side, like what Wellings does and other firms, there's more awareness of that. And there's more understanding of that. Because there's been a lot of really bad situations in our space where investors have lost everything.

1:02:15The Disciplined Investor:Yeah, that's the risk. Yeah, and it was mostly related to leverage. That's always the case.

1:02:24Benjamin Kahle:It's always the case. Too much leverage and bad operations, let's be honest. We're going to have to cut it right there. I want to thank you, Ben, from Wellings Capital. We'll have more information on The Disciplined Investor under the show notes page for episode number 956. Ben, I wish you the best of luck, and I wish you all sorts of great things in your endeavors. Thanks for joining us today.

1:02:45The Disciplined Investor:Thanks so much, Andrew. Thanks.

1:02:48Benjamin Kahle:There you go. A lot to learn about real estate, commercial real estate, private equity, private credit, all the things that are involved with that, understanding what's happening with drawdowns, capital calls, and the reality of the long-term investment nature of these. It is only for accredited investors, so that's something you need to know about. And if you don't know if you are or not, just look it up and you'll find out if you are. It's a high net worth or a high income. And again, it is something that has to sit for a while, these kinds of investments. But I thought it would be interesting in a time like this when there's a lot of talk about changing the rules about the housing market and interest rates to have somebody on in this field because we all own something or have something to do with real estate out there.

1:03:29And I thought that was kind of interesting.

1:03:32Benjamin Kahle:Thanks for joining me this week. I'll see you again next week right here on the Disciplined Investor Podcast.

1:03:41Benjamin Kahle:This podcast is intended for informational purposes only and does not constitute personalized investment advice. Investing involves risk, including the possible loss of principal and past performance is not indicative of future results. The views and opinions expressed are those of the host and any guests and may not necessarily reflect those of Horowitz and Company Inc., an investment advisor registered with the U.S. Securities and Exchange Commission. Registration with the SEC does not imply a certain level of training or skill. Advisory services are only offered to a client or prospective clients where Horowitz and Company is properly registered or is excluded from registration requirements.

1:04:19Benjamin Kahle:Any mention of third-party companies, products, or services is provided for informational purposes only and does not constitute an endorsement. Hypothetical scenarios or forward-looking statements are for illustrative purposes and should not be viewed as guarantees. Content is intended for U.S. residents only and may not be applicable in other jurisdictions. Listeners should consult a qualified financial advisor before making any investment decisions. Please visit our website for additional information, disclosures, as well as a copy of our form CRS. Advertisements are not related to the host or affiliates and are not considered recommendations by the host of the show or any affiliates of Horowitz & Company.

1:05:09We'll be right back.