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When a financial and economic crisis happens, so many factors impact real estate. Unfortunately, most of them are out of your control. Peter Siegel explains how to jump into this industry even in the most challenging times and face the risks in the most strategic ways. He joins Shannon Robbnet to discuss how he got a $140,000 check in the middle of the COVID-19 pandemic. He also explains how the 9/11 Tragedy and the 2008 Economic Crisis taught him to prepare for the worst by always providing reliable customer service. Peter delves into the threats of rising inflation, increasing rates, and declining costs to real estate, detailing what must be done to avoid losing so much.

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Peter Siegel On Jumping Into Real Estate During A Financial And Economic Crisis

I’ve got a special guest. I’ve got my friend Peter Siegel on the show. We’re going to talk about demonstrating success, happiness, financial wellbeing through relationships, execution, perseverance, and by providing access to investing in cashflowing real estate, and how all of that comes together. I’m super excited to have Peter on the show. Peter, how are you?

Shannon, I’m great. Thanks for having me.

I gave everybody like this huge thing that we’re going to be talking about because as two experienced guys here, we’ve seen challenges and trends. We’ve seen things that are good and bad in the business. We’ve been around for a long time. How long have you been in the business of multifamily? Tell us a little bit about your process to get where you are.

I’ve been doing this for many years. It happened overnight, over many years. It was very quick many years and here I am.

You don’t look a day over 65. For being in real estate, that’s quite a compliment.

I understand what you mean and I take that as a compliment for sure. People ask me all the time how I got started. I grew up the youngest of four boys. We are from Trenton, New Jersey. My grandfather passed away, he left my brothers and me a building in Trenton, New Jersey. Most people would say, “That’s great. You’re so lucky you inherited a building. How amazing is that?”

Believe me when I tell you that you wouldn't have wanted this building. This building was a time and money suck. It was falling apart. It didn't make money but I had to take care of it. My brothers were all off at school and they were much older than I was. At 12 years old and 13 years old, I had to ride my bike into Trenton, New Jersey and meet roofers and locksmiths. At the time, I didn't understand what was happening but looking back, it was an incredible experience because I gained skillsets at a very young age that I would never have had the opportunity to have acquired.

While we didn’t make any money with this building, I certainly became pretty good at interfacing with other people in our industry that I needed to interface with to keep this building dry, safe, locked up, secure, and whatever I was doing at the time. It wasn’t even rented at the time. Fast forward, I went to college because back in those days, we used to go to college to become more employable and hireable to earn a larger salary compared to the competition out there that perhaps didn’t have the same degree or any degree at all. That was the culture back then of going to college.

I went to college and got an MBA. A business degree undergrad, an MBA in Real Estate and Economics at the graduate level. I find that the skills I learned when I was twelve, riding my bike to the building to meet with the roofers and locksmiths are more of the skills that I deploy now than the skills that I learned getting my Master’s degree in Real Estate and Economics. I learned all of those things in college but you can learn about them now.
Real estate may be a bricks-and-mortar business, but it is mostly about people and communication.
Acquiring knowledge is more accessible now. It’s plentiful and easy for everybody that you don’t have to go to college. This is probably a discussion for another episode but perhaps ultimately, it will contribute to the decline of higher education at some point. I think it’s got its economic and cost-benefit challenge as college does.

I couldn't agree with you more. When my kids were looking at college, I had one that wanted to go into the dental field and we started looking at it. If you went into general dentistry, you'd pay about $150,000 and you make about $150,000 a year. If you went into orthodontics, then you'd pay about $250,000 and you'd make about $250,000. If you went into oral surgery or periodontist, then you're about $400,000 and you could make about 400,000. I look at my other child who is looking at a completely different degree that's still $150,000 and the pay is about $45,000. We had to have this conversation.

I went to college on the first day of the semester. I didn’t realize that there were multiple things. I have found that the people that are the most employable are those that can solve the problem. Not put a degree in a plaque and put it on the wall. I completely agree with you that a twelve-year-old probably learned a lot more than the guy at eighteen who went through that MBA program all those years. You’re here and you took that from one building to where you’re at. What's your portfolio size? What states are you working in?

I’m located in New York and New Jersey, the regional MSA here. I’ve got approximately more than 2,000 units under management and some commercial properties. When I say 2,000 units, multifamily, residential apartment buildings, so 2,000-plus units of those under management, some commercial space, some office space, warehouse, mixed-use but 90% of what I do is multifamily. Typically, what I do is I choose to purchase vintage garden-style apartment buildings and deploy capital into them, provide better apartments to renovate and create amenities where there weren't any. We better the properties and we're able to achieve an increase in rents by improving the properties in what we call forcing the appreciation. We have a little bit in Pennsylvania and Florida but 90% of what I do is multifamily in the New York, New Jersey area. Years ago until now, it was an overnight path.

I don’t know why you took years to get to that overnight success, but we can dive into that a little bit more later. You’re in one of the most regulated markets out there. New York and New Jersey, I don’t think behind California, there isn’t any more regulated. Even communist China probably doesn’t have as many regulations, but the reality is you made it through. You’re still here. COVID is understandable at this point. I don’t know that it’s in front of us or behind us. It’s all around us. What were some of the things and challenges there that you saw that you had to play your way through? Not blindly because you have experience. How did you get through that whole COVID situation?

For us, our properties are mid-price products. We’re not luxury high end, which I felt was a problem during the COVID for a lot of people. We weren’t the low end of the market with the properties and apartment product that was not properly maintained that didn't have a strong tenancy. We sit right in the middle. When I say we sit right in the middle, our rents are $1,350 to $2,100 a month. To qualify for an apartment with us, we screen tenants for a 35% income to rent ratio. That means that they’ll make $45,000 to $120,000. Some of our tenants make $150,000 and have a minimum FICO score of 670. With that screening process, we’re able to attract strong tenants that have good financial backgrounds and wherewithal to pay rent but we’re able to attract them also because the product that we’re offering in the mid-price range is the best in the mid-price range.

You have a lot of choices. When you go into these websites, you see apartments that cost all different prices. A lot of them are crappy. Everybody wants a clean, nice space that’s recent, new and with amenities. We found ways to deliver that type of product at the mid-price point. Our apartments stay full. We don’t have people leaving us because they’re poorly maintained, there are leaks or bugs everywhere like you will see with a garden-style walk-up product. We don’t have people leaving us because they want to pay $10,000 a month for a penthouse somewhere in some luxury situation because that’s not the profile of our customer. Our customers and products are mid-priced. We’re able to create a good marriage. That was helpful.

I didn’t have a lot of non-pays or defaults during COVID. Out of the portfolio, we maybe had 15 or 18 COVID arrears. We work with people. That’s the other thing. You have to know that real estate is a little bit bricks and mortar and land but it’s mostly people. It’s a people business. You have to work with your people. With any relationship, a lot of communication is necessary. We over-communicate with people. I was sending out daily emails and recaps. We were directing people to the various sources for rental aid and unemployment. I don’t know anything about unemployment but I learned quickly how it all worked because I needed to help my tenants reach it. They were stuck in their homes and scared.

I mobilized a lot of informational resources and shared them with my tenants. There was a lot of communication. They stayed. They didn't move out. They may not have moved out because it was scary to move out during COVID. When shit was hitting the fan, people didn’t want to move anywhere. They stayed. It was comfortable, clean living that they were experiencing with us. That helped us prevail through COVID. If we had offered crappy products, if we were slumlords, whatever the phrases are, if we were any of that stuff, it wouldn’t have been good. We would have lost people for sure. We had met about 15, 18 people that fell into arrears. We worked with them and got through it.
S2 9rrecaption1
Financial And Economic Crisis: You need money to remain healthy. Without these two, you cannot do anything in the service of others.
Do you know what’s amazing, Shannon? We had our budget meeting. Every budget meeting, we pull up all the buildings. We can go through the numbers. We flip through them real quick and make sure there are no pressing issues. We have the arrears list. Throughout all of COVID, we were seeing the list of the eighteen people that were in arrears. The arrears were built up $10,000, $20,000. People were trying to pay but they built up arrears. Last budget meeting, we looked at the list and it was down to three people. I'm like, "Where are the other fifteen people?" They said, "Peter, they paid."I was like, "What do you mean?"

I’m looking at the list. It was $160,000, $170,000 that magically showed up. I said, “Where did this money come from?” “Peter, that was the CARES Act money. They got that rental aid that the Federal government sent down to the states and counties. It got dispersed and they cleared up the arrears.” My jaw hit the floor. I was silent. They were looking at me like, “Why isn’t Peter speaking?” I was stunned. Nothing stuns me but that stunned me. I thought, “Am I happy about this?” We got $160,000 or $170,000 so that’s good but it felt so weird to me. I was so conflicted that this is part of the printing of the money and it flowed to us. I didn’t know if it was a good thing or not, even though I was the beneficiary.

That costs somebody because nothing is from nothing. That $140,000 came into your account and that helps stabilize some things. Maybe it helped do some things. I continue to tell people that I can’t point to one thing that government does good. They don’t even do it well. Everything that they do, everybody else can do better. The reality is you can take anything that you want and when the government does it, they can’t even build a fighter jet on a budget. They got $40,000 toilets on the space station. These things don’t make sense but it’s because they’re not motivated like you are. You lined out a perfect example. If you had an inferior product, if you had poor customer service, if you had these things and you combine that with a pandemic, you now have a real problem.

You’re a good operator. You understand that you have to maintain because you never know what tomorrow is going to bring. You have to make sure that your customer service is on point, whether it’s servicing them because you have a national emergency or servicing them because you want them to stay. One of the things that I figured out is I can charge $35 a door more for my property than the one next door if I put somebody in my management position that loves their job. When you start looking at what 180 units at $35 a door per month makes, that’s $2.4 million at a five cap. You can’t afford to have somebody that’s grumpy. When was the last time you called the IRS and got somebody that was cheerful? I’m not even cheerful when I call the IRS.

Why are you calling the IRS?

Sometimes you got to get a copy of this or that. You got to check if your return didn’t get posted, stuff like that. You’ve been able to manage through this. Is there anything that happened during COVID other than getting a $140,000 check that hadn’t happened some other time during your career to some extent or the other?

In 2008, we deployed a lot of communication as well. We had to communicate with them. It wasn’t as scary as it was during COVID. The communication things survived. That’s not the question you asked. You asked what was different. The rush to deploy sanitation resources into the buildings. We turned off the four pay laundry machines, opened them up and made them free. There was a shortage of quarters. People didn’t want to touch money and appliances that other people had touched so we made them all free for a year. That was the first. We installed all the hand sanitizers in the various other things in the buildings so that people could hit the codes to get in and then clean their hands. We felt that was important to do. We quickly upgraded, if that’s the right word, but we’re still upgrading these buildings.

When you look at it, this was another aspect of customer service. You were already giving some of the best customer service in your market. That’s why you had the tenancy levels. In 2008, you deployed a lot of communication to make sure people stay. You weren’t losing customers at that time when it was very important. Did you see anything different during 9/11? That was a scary time. That was something that an experienced operator weathered and an inexperienced operator splattered.

9/11 wasn’t economic. I distinctly remember that the fear and the FUD in the marketplace at that time was non-economic. It was this other stuff that was going on. It was fear for your life or safety. It wasn’t fear of not being able to pay. 2008 was a liquidity crisis. Those that needed to borrow couldn’t and those that needed to replace old money with new money couldn’t. As you remember, things came to a screeching halt but people weren’t afraid for their lives. In the pandemic, it’s a bit of both because people are afraid for their lives, safety, money and financial capabilities.
If you're not striving for excellence, you're just going to get left behind in just about anything.
As I watched the pandemic unfold, the thing that I most often reminded myself of is a quote. I love this quote because I keep coming back to it. It’s when James Carville said, “It’s the economy, stupid.” You have to have health. Without health, you can’t do anything, but you have to have money. You have to be able to have resources to aid in the health and wellness of your family. You have to be able to help yourself in order to help others. You can't do anything for others if you're not well and strong.
I’ve been listening to all the debates about the pandemic, how people felt, what they were scared of and concerned with. I keep coming back to, “I’m hearing you but I think you want your job. You want to make money. It’s the economy. It’s your economy. You need money. People need money.” I saw a lot of people discount the need for money because they were getting so much of it without having to do anything for it. They were very quick to say, “I don’t need money,” as they were making $600 a week. “Money’s not important to me,” as they got the $1,400 thing. I saw a lot of that. What did you see that was different?

I saw it was more of a panic. The year 2008 was a long slide backward. We saw it was going to get better. With COVID, it got better as we got more information. The fear of not enough information paralyzed people. While we attempted to make the world a better place by providing the “safety” of having a check come to you, whether you worked or not, the economic issues that we’ve caused our future generations are going to be a burden that a lot of people cannot bear.

That’s what I thought when I cashed the check for $160,000 that we got from the CARES Act. I said, “I’ll take the $160,000 but we’re paying for this.

With interest and you're going to pay for somebody else's also because they applied for the forgiveness. Nobody forgives a $160,000 check, especially the government. What I saw was the good operators still did okay. Bad operators or inexperienced operators still struggled. What I saw was that it was our experience that we were able to look back on and go, "I get it." My kids were looking at it. I had children that were born the year of 9/11. They never experienced and understand it. This was their first "the world could be ending" thing. I remember the fear of 9/11. We all know exactly where we're that day. I hate to keep coming back to that.
This pandemic is on that scale of marking the world's history for something that happened. My kids are looking at this going, "What are we going to do?" I go, "We tend to do the same thing we always do. We're going to get up and put our pants on, whether we Zoom with them on or not. That's a different story but we're going to put our pants on, go to work and do what we can." I saw that a good operator did well. In fact, good operators did great. That was because your maintenance was spot on.

Your people were there. They were experienced and ready to handle the situation. There was, “I never thought about that quarter shortage. Let’s turn on the washer and dryers. Let’s make that free. Hand sanitizer by the front door.” You had people that were thinking about how we make this a great experience for our guests and tenants. That was the point I was trying to get. Where do you see things going from here? We’re going into an inflationary period. We’ve got prices and housing prices going up. Where are we going?

I see a rising interest rate environment coming. I don't think it's going to spike but it's going to gradually increase. The ten-year treasuries are already at 150 basis points. It hasn't been there. We see the tenure start to creep up. We hear hints that the Fed's going to adjust its policy to allow for some increases in the rates coming up in 2022. I don't think it's going to spike but it's going to go up. I don't know that we're going to hit 7%, 8%, 9%, 10% interest rates but we're probably going to go from this current environment, which is a very low-interest-rate environment to the 5%, mid 5%, maybe 6%. I see that happening. With that comes the adjustment in values of assets. As interest rates go up, the value of assets is going to adjust accordingly.

There’s a major shift in workforce and employment so the people that we always counted on to rent apartments from us in our markets are going to be a different set of people. We know there’s more work from home and people are valuing things differently. Before we used to cater to people that needed to rent an apartment nearby where they lived. It was an easy commute and a good price. We get people that are renting from us that are less price-sensitive because there’s all this money that’s out there that has been absorbed by the system. Our perspective tenants included. They’re less price sensitive.
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Financial And Economic Crisis: Bad operators will get weeded out. The good ones will presumably have the capital to take advantage of acquisition opportunities when that adjustment occurs.
We see a rise in rents so they’re able to absorb the rise in rents. We’re seeing them not need to commute. They have other needs. They want to get packages safely and securely. They want all these new things, which for mid-level, mid-priced garden-style apartment buildings are big things to deal with new construction. There’s a package delivery room in a secure area, probably a doorman and other things like that.

We don’t have those types of things in our buildings. They’re class B, B-plus, some cases are A-minus but the minus is that they’re unmanned and unstaffed. I see the profile of our tenants changing. I see the need to deploy service and excellence. It’s always been there but I see it as so critical. If you’re not deploying and striving for excellence, you’re going to get left behind. Not just only in real estate, but anything that’s going on. The cookies are crumbled and the dust is settling.

Let me go back a little bit. You mentioned that as interest rates rise, it affects the cost of the assets but you weren’t clear. What does that mean to you with your experience when interest rates go from 3% to 5%?

For me, it’s not going to mean that much. Potentially, lose sleeper could stay up all night worrying about two things. One, an unprecedented act of mother nature and two, an unprecedented act of terrorism. I’m located in the New York, New Jersey area. Those are the things that concern me the most. Interest rates will always fluctuate. If you run a good business and if you know how to deploy debt into your assets and not over lever as we saw back in 2008 when everyone was getting 90 or 85 or 95 LTV in some cases, we will carry anywhere from 60 to 75 LTV in a rising rent environment. What I don’t want to do is be caught five years down the road when rates go from 3% to 5% or 6% and my rents haven’t moved at all. That would be an issue but my rents are increasing.
I know that as they’re increasing, they’re still catching up to the median rents within the state. While they’re increasing shore, they’re not where the rest of the world is around us. There’s room to grow and I see our rents grow. When I have to take out my existing debt with new debt 3 or 5 years out, which is going to be at a higher interest rate, I’ll be able to cover that because my values won’t be fluctuating so much because my income and expenses are going to be strong if not greater than it is now. For me, I don’t worry about the swing of interest rates. For a lot of people that haven’t been through 9/11 and 2008 and all the other economic events of the past years, maybe they’ve over-levered on an asset that doesn’t have enough rent creep.

If those rents aren’t creeping and you have too much leverage and you have to replace it at a higher cost, the same amount at a higher cost, you’re going to get squashed on values. I haven’t had to experience that because of the mindfulness that I pay attention to those details whereas a lot of people don’t. In our business, if you’re in multifamily or in commercial in any regard, if you’re renting to tenants and not delivering them excellent, if they’re not as creditworthy, unfortunately, everybody got hit by the pandemic.

We saw the Uber and Lyft drivers get crushed. We saw people that make cash that have all jobs that aren’t traditional employment with a company. They got hurt. Those buildings got hurt. The operators of those publics got hurt, unfortunately. Rates are going up. Values are going to adjust. I can’t believe some of the values that we see for real estate of all kinds but especially in multifamily. I’m sure you see it out there.

The people that are chasing it break it down into two categories. One that has massive amounts of cash to deploy like a REIT. People that you and I can’t compete with or people who are new. I’m looking at advising some friends in Nashville on a deal. The deal has gone from 130 to 160 a door in a market that 130 was a stretch.

What are the average rents?
If you're an entrepreneur, you have to recognize that your friends and family are a great capital source when you start out.
It’s at 1,000. That’s a lot. The deal has all of a sudden escalated up. It doesn’t make sense, especially because of all the things you mentioned. If we were going into a declining rate environment, if we were not going into an inflationary state, if we were solid on our economic recovery, then none of those things would be as crucial because I completely agree with what you’re saying. Not only because you’re a good-looking guy that I like and is a good friend of mine but because those are intelligent things to be being said. It’s because they are going up and that will affect pricing.

When it does affect pricing, it will affect everyone because what you’re going to have is the guy that bought this at 160 a door that starts to go under. He’s doing whatever he can to get whatever occupancy he can or he’s going to shut the whole thing down and it’s going to affect everybody negatively. Those are all going to be pressures that are going to affect good operators like the effect of bad ones. All of that is coming true almost on a daily basis.

The bad ones will get weeded out. The good ones will presumably have the capital to take advantage of acquisition opportunities when that adjustment occurs. My pipeline of buying new assets is about as thin as it’s ever been. You mentioned competing with the private equity firms, which I don’t. You asked how I got to 2,000 units over the years. I did that by focusing on a segment that no one else was focusing on. I focused on asset sizes of 20 to 100 units typically. There are some that are larger but by and large, smaller asset sizes, smaller transaction sizes, where the larger players that had more capital to deploy was too small for them but it wasn’t too small for me. I was able to exist in this world without all of that competition of the permit and professional capital.

Once you get up into these 200, 300, 500-unit recently built complexes, class A, these big communities, it starts to get very competitive. That’s why prices are where they are but I avoided that for a long time. I have a portfolio of a lot of buildings with two consisting of 2,000 units, as opposed to maybe 4 or 5 buildings consisting of 2,000 units because I didn’t want to compete in that space.

How did you build your capital stack? How are you funding these deals when you do get them?

The first several I did were by myself. With the equity, I did have someone co-sign on my first loan for me because I was a kid. I was in college. I couldn’t get housing in the dorms. I bought a six family, lived in one, rented out the others. In order to do that, I needed a co-signer on the loan because I was twenty nothing years old and had no credit. It evolved the next several deals I did after that, which were small things that I could afford in areas that were affordable. I was from Trenton, New Jersey so I did some there. I moved up to New York City. I was in Harlem, the Bronx, parts of Brooklyn. These were areas that hadn’t yet started on their path of gentrification and improvement in economic development so you could buy buildings.

I was buying them by myself and then as I needed to get capital, I transitioned to the friends and family world, which everybody who’s been on a path in business, whether it’s real estate or anything else, if you’re an entrepreneur, you have to recognize that your friends and family are a great source of capital for you when you are starting out. I recognized that so I was able to hit up college and high school friends, Uncle Bill and Aunt Susie.
Shannon, they were writing checks for $5,000 and $10,000. One person, back when I was 23 years old, wrote me a check for $50,000. When I got that check for $50,000, I was ringing the bell. It was a lot of money for me. I had to be responsible for it. I had a fiduciary. I had to go to work, create value and deliver them return, all those things. It grew and grew out of friends and family into a larger network.

At this point, for me, I’ve got a few deals I’ll do by myself if I have all my own capital and I do that still. When it’s a larger deal, I syndicated out. I raise money from investors who have been with me, new and old, because I have new people reaching out to me saying, “We’d like to talk to you about investing.” I’ve got maybe a contact list of 100 or 120 investors that have been with me for the course of 25 to 30 years. That’s how you do it.
S2 9rrecaption3
Financial And Economic Crisis: Give people a sense of confidence and safety when raising money for them. If you behave like a moron and do stupid stuff, especially on the internet, people might not be so confident.
You build, grow and expand. You have to start somewhere. I started buying pieces of crap with the little money I had, and then expanded into larger pieces of crap, and into not so pieces of crap. When you bring partners and investors on, you grow and make money together. You have to treat the money right. This is something my older brother always told me. I didn’t know what it meant until I got into the business. I’m like, “What do you mean you have to treat the money right?” As an entrepreneur, you need money and capital. Bend over backward for it.

We talked about providing service to your residents, but your investors want K1s without waiting or asking. They want reports and communication. They want to know that they're making money. They want to know that their capital is safe with you. You have to give people a sense of confidence and safety when you're raising money and responsible for their money. If you're out, fly by night, running around, behaving like a moron and doing stupid stuff on your social media. People might not be so confident. You see there are a lot of young kids out raising money and sponsoring deals. I always like to get in the rooms with them, challenge them, and ask tough questions because ultimately, I find that a lot of them don’t have the answers to the tough questions. Maybe they need a little bit more experience before they start raising them but that was my idea.

That’s the funny thing. It’s these years it took to come up with the right recipe to be that overnight success. I had an experience where a guy had loaned me a very sizeable sum of money and I didn’t treat it right. He’s a good friend and I didn’t communicate. I learned that lesson very painfully because I was taking advantage of the relationship. I was assuming that because we’re buddies, “I didn’t need to treat you like you are an investor with me.” I learned that very painful lesson. Thank goodness, my friend was more of a friend than ever because he allowed me a second chance to be friends. He didn’t let the money ruin the friendship, which I’ve seen happen too. I learned that lesson on the painful side and I’m not afraid to share that.

That's the kind of thing that has taught me. You can't treat somebody else's money like your own money. You got to treat somebody else's money better than your own money. I've seen some of the stuff that I've done with my money. My garage is full of all these things that were going to change my life. I was going to use 100,000 times that are sitting on a shelf that I've used my money for. I need to treat my investors' money better than that. Those are the challenges that we've learned and grown through. Sitting at a fireside with somebody that's been in battle for many years doing this stuff is refreshing because we're sharing the same stories.

Often I hear these people that have been in syndication for five years and life is wonderful and things are awesome. They’re killing it and that’s awesome. Peter, the scenario you described with rising inflation, rising rates and declining costs based on rates is a storm brewing that a lot of people haven’t seen. I’m afraid that the challenges that are coming are going to separate the experience from the new people. There are going to be those that learned some hard lessons. Are you doing any different to prepare your company for what’s coming?

We talk about it all the time. We had meetings about it. There are a few things that we’re doing. As the world changes, we have to change. If you don’t grow, you die. We’re growing to adapt and pivot into this new world. Deploying technology more than ever before in all-new ways. Technology in the buildings and in the management office. Anywhere and everywhere, we can deploy technology to streamline our processes throughout our daily blocking and tackling of running buildings and dealing with people. I’m always investing in technology.

We updated our tenant management database platform. I’ve got a new investor management platform. Everything is seamless and simple. It’s secure now so you can do these things. Years ago, it was the infancy of a lot of this stuff with technology and real estate. Now it’s gotten good enough. I’m looking to make investments technologically wherever I can in real estate. It’s so fun too because real estate is unsexy and boring. It’s like a building. It’s not much going on. It’s not like I own a sports team or a restaurant where it’s social and fun. It’s not that exciting.
I love making it exciting. It’s exciting to me by putting a lot of technology in place so we’re doing that. I focus a lot on people. The people that are in our company that work with me are the best people I can find. I over-index on my people. I’m even inspired and pressured over-index on people more than ever before. To me, you can’t have good enough people. You can’t spend enough on your people. You got to have great people around you and with you all the time. I’m doing it more than ever. That’s going to be part of the recipe for the future.

That’s a recipe of experience. When I first started, I didn’t have the money to hire good people. I didn’t have the experience to understand that a good person is going to save you twice what you paid them, and a bad person is going to cost you five times what you paid them. The delta between saving $200,000 a year and costing you $600,000 a year is $800,000. I didn’t have the understanding and the capacity then to understand what I know now.
You can't spend enough on your people. Always aim to have great individuals around you and in your team.
That is such a great point because a lot of people operate from a penny-pinching mindset instead of an abundance mindset that if I paid for the best and I expect the best, I’m going to get the best. My tenants are going to get the best. I’m going to keep that high level of expectation on all things from my bank accounts, to my occupancy, to my staff and to the way my places look. That’s all going to come through in that abundance mindset. That’s such a huge point. Thank you for making that point.

Experience gives you the ability to have that abundance mindset more so. When I first started off, I was a bit of the brunt of a few jokes. I’d be out to dinner with my friends or my brothers in New York City. This great restaurant where everybody’s having fun. My phone would go off. Ultimately, it became the toilet phone because when I was a kid starting off, “There’s Peter getting a call about a leaky toilet at 9:00 at night.” We’re down in Soho, in New York City. I had to excuse myself and deal with it. I don’t have the toilet phone anymore. We get calls that come in at all times of the day. There are emergencies that happen but they get dealt with professionally with sensitivity and consciousness.

My phone doesn’t go off anymore because there are great people that pick up the phone that care, give a shit and want to help out. When the phone rings and you have to deal with something, if you deal with it correctly the first time, it never rings again. If you don’t deal with it correctly, it’s going to keep ringing. If you have 100 units, 10 units, 2,000 or 10,000 units, whatever you have, that’s a lot of phone calls to field.

If you can reduce the number of phone calls, it's the right way to scale and move forward. It's the right way to do business. We're problem solvers. We're entrepreneurs. We're here to solve problems. I don't want the same person calling me about the same thing all the time. That's the quickest indication of failure in my book. If you're calling me more than once for the same thing and I didn't address it correctly the first time, I'm so not doing my job. I'm not being successful. I'm driven to create this environment where I empower my people, they feel empowered, and they run with it. I'm proud of that.

That’s what got you away from the toilet phone, by doing it right the first time, hiring people, getting them to do it right the first time and you’ve been able to use your gift. All of us have physically swapped out a toilet in this business. If you have, it’s a rite of passage. It’s not that we want to do that. It’s not my gifting but at the same time, knowing how to put the right person there that understands that, "This is what I'm good at. I am good at keeping the grounds clean. I am good at maintenance. Peter and Sarah are good at their jobs. We're all good at this part like a clock works together." It's so key that a lot of people miss that. They get so caught up in, "I can't do it. I’m too good for the toilet phone.”

Here’s something that I bet we have in common. There is no job in my company that I haven’t done. I’m an expert in swapping toilets and changing locks. I learned how to do all that stuff because I had no one else. I bet you’re the same way.

The good thing is I’ve got people in here that when they see me go to do certain things, they go, “We can’t afford to have you do it. It’s going to be seven trips to Home Depot. It’s going to be four hours. I’ll take care of it in twenty minutes.” They know that when I pick up a power drill, it’s time to call 911. Somebody is about to get hurt. That’s about having good people that realize and recognize where the expertise comes from, which one’s good at it and who should be doing it.

It’s also good leadership.

To understand that and to empower your people to excel at what they’re good at. Peter, we’ve had some great things that we’ve talked about how we face challenges in every line of work. We overcome them. We look at the future and the past. We come up with a plan, innovate, pivot and do all those things. Give us one more thing that you’re looking at the future that you’re going to be doing inside of your company that you think a lot of people should be doing to be sure that they’re successful and they’re around in 2025, 2029 that you think is imperative to be implementing now.
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Financial And Economic Crisis: Technology must be streamlined in your processes to keep up with the growing demands and the changing world.
I'm waking up earlier. I'm starting my day sooner. I'm getting to work sooner. I'm doing more in my day. I'm not looking for a work-life balance. I'm not looking for weekends off and happy hours on Wednesday, hump day and Friday, thank God the week's over. I'm not looking for that. I'm getting up earlier and I'm getting to it because if I don't, the guy or the girl next to me is going to and they're going to take my food off my table. The world we're entering more than ever is one where competition is going to be more prevalent and the requirement for all the things success is going to be heavier upon us. I don't want to miss anything. I don't want to lose out. I want to stay in business and alive. To me, it's a survival thing.

I know a lot of younger people that have these great attributes. Those are the ones that I'm looking for. I want to work with them. I want to be in a relationship with them. I wish for everybody else that they can take this one thing. Get up, get out and get it done. Get your ass out of bed. You can make excuses or you can make good decisions and create success. Which are you going to do? We want to make good decisions and make success. You can't do it from your bed, behind the video game control or from the bar 3, 4 nights a week.

You’re so correct on that, Peter. You and I are a lot of like. I’m getting up earlier as well. We’ve had a good run. We’re coming into a time when things are going to get tight. It’s going to be a little bit harder to make what we made. It’s something that overnight successes have been able to acquire the skills to get through that. Thanks, Peter, for stopping by, being with us and sharing all of this knowledge that you’ve given us. I do appreciate you dropping years of knowledge on the table like it was nothing. It’s truly been a pleasure.

Thanks, Shannon. The pleasure is all mine. I’m looking forward to seeing you soon. I know we’re going to be catching up soon in person.

Thanks, guys. Don’t forget to like, share and subscribe on Spotify, iTunes or wherever you get your podcasts to get your automatic updates. You’ll also find us on Instagram and YouTube. Leave us a review and some comments. I’d love to hear your feedback. If you like what Peter has to share, go ahead and give him a follow as well on Facebook, LinkedIn, Twitter, Instagram. He’s all over everywhere. Check him out on his podcast The Daily Cash Flow. Peter Siegel at SiegelCapital.com. Thanks again for joining us.

Thanks, Shannon. Take care.

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About Peter Siegel

Peter siegel
Peter Siegel is a real estate owner, investor, manager, entrepreneur, author, and business leader and has been investing in real estate for three decades and has a well-established infrastructure for property management, construction, and investor relations. After years of partnering with friends and family, Peter created Siegel Capital so that multifamily real estate investments could be accessible to the typical accredited investor.

Peter has the business experience of a “street fighter” with a Wall Street background. Having completed hundreds of property acquisitions and financings, and with extensive construction, development, and management experience, Peter has a wealth of knowledge and track record that is required for you to successfully partner on the acquisition and ownership of great income-producing real estate.