Next-Level Real Estate Techniques to Revolutionize Your Investment Portfolio with Josiah Smelser

Figure out what risk you're willing to take on. And maybe it's investing some money in a syndication and doing a smaller deal myself and having kind of a mix of that.

I mean, the goal is not just to be busy and be working all the time. The goal is to be spending time on things that matter most.

Welcome to Truly Passive Income. I'm Neil Henderson.

And I'm Clint Harris.

Josiah Smelzer. Welcome to Truly Passive Income. Is pleased to make your acquaintance.

Same. I'm pumped to be here. Thanks so much for having me.

I'll jump in here. Josiah and I actually went to school together. Without knowing it, we both went to Harding University. Go Bison's. Even though bison is plural.

We went to school together and actually I've been in his house before a lot of his. Several of his roommates were in the same social club that I was. We connected. Didn't get a chance to meet until years later.

Just through Facebook and seeing you through obviously bigger pockets, fame and a few other places, and recognizing the Harding logo on some of your content, I was like, what in the world? How have I not connected with this guy before? So it was nice to connect with you.

Recently we did a podcast episode together and learned a little bit about your story, but really looking forward to unpack that today. So tell us a little bit about you, where you're from, how you got to Harding, and what has happened in your life since then.

Yeah, yeah. Really excited to be here. Thanks so much for having me. Really enjoyed our podcast episode on my show. Love learning about your business.

You guys are doing some amazing things. I love the concept of the BRRRR strategy on self storage and how you guys are in these things for pennies on the dollar.

I think that's a really smart way to do these things. So I'm looking forward to watching your business grow over time. But a little bit about me.

I got out and I worked for PwC and Ernst & Young, and I was working like 90 hours a week sitting in cubicles, and I was like, this is not for me long term. I cannot do this the rest of my life.

And so I left that job and I helped one of my good friends start an appraisal business out of the back of his house. And that was in Fort Worth, Texas. And so that's how I got into real estate. I started Learning real estate valuation.

At the same time, I got my real estate license because I would pick up deals on the side, just an extra way to make money.

I got my real estate appraiser license and was working for myself and we grew that business and hired some people and I went from stuck in a cubicle to total flexibility. And I love that. I love working with friends, I love the small business atmosphere.

And then so flash forward, you know, I went and got my MBA at one point and then met my wife and got married. But a good friend of mine came to me after a really good year in sales and he had an extra $200,000 he wanted to get into real estate.

He's like, what should I do? And I was telling him kind of what I would do if I were him. And he said, I don't know if I'm confident enough to do that myself.

So I said, well, hey, I don't have the capital that you have. I feel like I've got the knowledge, you've got the capital. Let's team up and I'll run point on everything.

We'll buy distressed properties, use the BRRRR strategy, get them fixed up, get them rented out, refinance, get most if not all of our capital back and just rents and repeat. And so over the next few years, that's what we did. And at the same time, I started my podcast at the time, which is the Josiah Smelter show.

But that show was about documenting the pursuit of financial independence through real estate investing. And so I just got to meet a lot of cool guests and ended up having Brandon Turner, who was at Bigger Pockets at the time, on my show.

And then he invited me to the Real Estate Mastermind in Hawaii, his first one. And while I was there, he asked me if I go on Bigger Pockets. And so I went on Bigger Pockets and I had two episodes on Bigger Pockets.

So long story short, when Covid happened and they did all the stimulus, our real estate portfolio went crazy. And we had about.

We started off on the low end like most people do on doing these little fifty thousand dollar houses and then we quickly realized, like, we don't want to have a hundred of these things.

So we ended up changing our strategy and trying to locate a market where we could do the BRRRR strategy and gain good equity, but we could keep it to like 20 or 30 properties. And so we ended up investing in Fort Worth, Texas, and I knew that market really well because I lived out there for five years.

We had millions in equity there, but the cash flow or the profit wasn't that great. We were making like 50 grand on all that equity. So the return on equity wasn't great.

We're like, we need to unlock this equity, move all this over to something that's giving us a higher cash on cash return, higher return on equity. And so we moved it all into vacation rental cabins and the Smokies. And that just exploded our income on the whole thing.

So we went from about 50 grand a year profit to about 600 grand a year profit. And we happened to catch that market just as it was taken off as well. And so that market's gone up a lot since then.

But that was essentially how I was able to reach financial freedom through real estate investing.

You just glossed over. Something there that we've been talking about a lot recently is that was a really, really good time to do a reposition.

The reason that you reposition is because I think you figured out what a lot of people have figured out is that the BRRRR strategy is a very slow way to get ahead because you're cannibalizing your cash flow in order to get the money back out. Right? You're putting debt on the property to get your money out, which is great because it allows you to recycle the cash.

And if you're not leaving any cash in the deal, it's an infinite cash on cash return, because you got nothing in there and it's just coming out. The problem is, and luckily you were nice enough, you chose the right market that had room for appreciation.

Very slow way to get ahead, especially when it's a cash flow investment, but you're taking the cash flow away to get the money back out and go buy the next one. You chose very wisely by choosing a market that had room for appreciation.

And then when the stimulus happened and everybody had money, we had that massive market appreciation that hit areas like that in an outsized way. And it would have been easy to find a way to recapitalize on some of that equity and continue to buy.

What you did was you looked at your return on investment was great, right? You started with a couple hundred grand and now you're making 50 grand a year. That's a great return on investment.

And because you're not leaving cash in most of the deals, probably a little bit in some of them, it's a fantastic cash on cash return. But when the value of the property shoots up, you're making 50 grand off of $200,000 originally invested. That's a 25% return. That's fantastic.

But when you have two to three million dollars in equity and you're making the same 50 grand, that's a two to two and a half percent return on equity. It's a horrible return, right? It was great.

But when you scale to the point that you've built that equity now, your return on equity is so low that it's time to reposition and you want to reposition into something else that again has room for appreciation in that market.

So you reposition into something that is a lot more labor intensive, but it has a 3 to 4x the cash flow or gross potential rental income of a long term rental in an area that also has massive room for appreciation. So that was a very strategic reposition at a really good time because interest rates were still rock bottom then.

You've probably got debt locked on those properties that you'll never see again. And now one of the only issues is you probably can't really sell them.

First of all, you probably don't want to, but you can't really sell them because you're going to have to go buy something else with twice the amount of interest rate debt on it.

So you leveled up a couple times in that brief description in a very strategic way that puts you on financial independence now, time and location independence, at least to some level. So talk to me about the jump from Brrrr Properties long term.

Were you managing those yourselves and then moving to an area where you're investing outside of your immediate tell me wherever you live. But I'm assuming either you're managing these remotely or you're managing the manager remotely.

And what does that look like in terms of the additional work that goes to switching to a short term rental portfolio?

Yeah, yeah. So our cash on cash return went way up and then our portfolio profit did a 12x. We went from like 50 to like 600. It really moved the needle for us.

And the great thing about the vacation rentals was the appreciation. Like we just have to say that was just somewhat, just pure luck. But we caught that market just as it was catching on fire.

I don't expect that to continue. That's unrealistic.

And a lot of that was a function of just all the stimulus that was out there chasing all these different asset classes, causing these bubbles. But yeah, we had the properties previously managed by a property manager that we were managing from out of state.

And when we moved it into vacation rentals, as you know Clint, because you have vacation rentals, these are more management intensive properties. We were doing it ourselves, splitting it up at first to like you mentioned this on my podcast and I wanted to highlight this.

In vacation rentals, especially these cabins in like the Smoky Mountains, when you buy them, it takes about a year, six months to a year for really all the problems that are hidden to really surface. And you gotta work through that over the next year of just getting all these little things fixed and updated and all that.

We found like once we get past the 12 month mark, it's a lot smoother sailing with it. So year one, we handled all that.

We got it up and going and we were really happy with the return on it even though we were doing this from out of state. I'll also add that when you're managing these vacation rentals, it doesn't take that much time. It's just the time that it takes is inconvenient.

I mean there were days where we wouldn't get a phone call, you know, but then there's days where Friday night at 9pm when you're watching a movie with your family, you're getting text about somebody needs an extra towel or something and it's just like I don't want to do this long term. So we ended up hiring a guy in house to manage all our stuff for us. And then he's basically been doing that ever since. So it has been, it's.

We're still managing him and managing the issues that he's dealing with. But it's been about the same time requirement for us now since we hired him to do it, that it was previously when we had these long term properties.

Oh, and I meant to say I'm in North Alabama. I'm in Florence, Alabama. By the way, I left that off at the beginning.

So you're bringing up such a great point that I want to hit on, and you mentioned this as well, Clint, is that whether you're talking long term rentals, short term rentals, or self storage, the scale is what allows you to get out of the business. If you've only got 1, 2, 3, 4, even 5 long term rentals, you're probably going to have a manager.

You know, if you're smart, you're going to have a manager doing that for you. But, you know, you're really not going to be making a lot of money. You're also not going to be high on the property managers list of priorities.

To really get to the point where you're high on their priority, you're going to have to probably have 20 properties, whatever. Same thing with short term rentals you bring up. A good point is like you've got one or two short term rentals.

It's going to be really hard to be making much of a living if you're hiring out the property management third party. And it's not until you start to achieve a certain level of scale that you can literally hire somebody in house to handle.

I mean, you had to build up a lot of the systems. You didn't hire a property manager to build those systems for you, you did that for yourself.

But then you got to the point where you're making enough income, you could hire somebody to handle those inconvenient problems as you talked about.

Yeah, yeah, that's a great point, Neil. So the different, like when we looked at hiring management, some of these companies were quoting 20 and 30%.

That to me is why a lot of these owners are struggling or cash flow negative. All their profits go into their property management company.

So when we brought this guy in house, we're paying him about 4% of our gross revenue to manage this. So. And he's doing a better job of it than we believe 95% of these property management companies would do. Because it's not their property.

They're taking care of it for somebody else. We felt like that was like a crucial part of this. And then finding the right cleaners and the right maintenance people.

Clay, I know you have your own cleaners on your stuff. We found a company that we kind of teamed up with on that, that does all of our stuff.

One company, and they manage all the scheduling of all that for us. So we took that the management of that off of us. But it's worked well. I mean, it's work. It's not nothing.

You know, you got to really be diligent in managing it. But for the payoff, you know, exponentially raising the cash flow on the thing monthly and then the appreciation, you know, it's been great.

Now the next step is when we sell this portfolio, which we're planning to do probably next time the market really catches fire, we would like to either invest in syndication, investing in something like you guys are doing, or do a syndication on our own and try to level up and get in commercial again, unlock this equity again. Right. Trade up again.

Because, you know, there's really a trade off, like Clint's saying, like you're either operating the property and you gotta put your focus there, or somebody else is operating it for you and you're essentially sharing that pie with them. But then you get the luxury of kind of sitting back and getting your checks in the mail kind of thing.

Yeah. You know, Clint and I, we hammer this home a lot. On this podcast, we talk about the difference between passive income and residual income.

And a lot of people, you know, a first time short term rental owner, you know, they're thinking, oh, I'm going to buy this. It's going to be passive income. I'm going to have a manager manage it for me. Okay, it's going to be passive.

It's not going to be all that profitable, as you're pointing out, because you're giving up 30% of the profit to basically have it be passive.

Whereas you put in the work to do to create the systems, the processes and work out those kinks and figure out, as you said, every property is different. And you had to spend about a year figuring out and suffering and dealing with that. Absolutely not passive.

But once you built that up, now you've got this residual income stream that's life changing. And now you're looking for to level up to the next level. Clint's trying to do the same thing.

Clint's built himself a pretty good residual income from his short term rental business and he's looking to level up as well. In our mind, the next level is. All right, how can I completely step away and just have somebody else handle this at scale, which is syndication?

Let me expound on that a little bit, if you don't mind. You're right.

You know, everything you've done, Josiah, you're sitting back, you have someone that you hired that's managing it at significantly lower cost than hiring your own manager. The reason you're able to do that is because of the economies of scale that we talked about.

You can't do this with 2, 3, 4 properties and even with the cleaning companies that you're using. For me, I have 14 Airbnbs and we have a property management company it took a couple of years to build out, that manages another 80 listings.

There's a cleaning company inside of there. You went the other direction.

The other direction is you can become a big enough book of business that you hire a cleaning company or an H Vac specialist or a handyman.

And even if you don't own that business or own that person as an employee, you become a big enough chunk of their book of business that they are taking very good care of you. And specifically, in your situation, you're not paying retail costs for the management. That's why I built out a property management company.

In retrospect, yeah, it was a lot of work. And it's not something that I don't know how I feel about my name being something is tied to something that I'm not working in every day. Right.

I've got great operation partners, but that's one thing I learned about myself. It might have been better to find one really, really good person just to operate my 14 listings and do it on their own.

And that's the direction that you went. And it's probably the better option because that person's taking ownership and their name is on it. Same thing with the cleaning company.

You didn't start a cleaning company, but how many listings do you have now?

We've got 13 in our business, and then I've got another one personally, and then my business partner's got three more. So all those are being managed by our same manager, same cleaners, same maintenance people. I will add this. You have your own cleaning company.

Your cash flow positive on that with all your other clients. Right. It's running a business, but our biggest expense, it's bigger than the mortgages, is the cleaning. Right. So we've looked at this multiple times.

Like, we could bring people in house and do our own cleaning thing and save some money, but it's trading our time off and having to manage that as well. So you have to choose your battles with all this, and it's like pick your poison kind of thing. So the cleaners are doing a good enough job.

They're not doing a perfect job, but the business is profitable. We're not having to manage a cleaning company on top of our own manager in house.

So we just decided to Bring the manager in, because we were looking at 20 to 30% versus 4%. We'll hire him and then we can manage the quality on that, make sure he's doing what we need him to do.

You know, we trust him to take good care of people. And then the cleaning and maintenance, that's all outsourced.

And I know we could save some money there, but we're not convinced with the headache of managing those people that we want to do that.

I totally agree. And I think I'm in a position where I can have an opinion on this just because we've been through it and we built it out. Dude, stay where you are.

Do it the way that you're doing it. Because sometimes less is more. And you know, I would also say this.

I know a lot of short term rental investors, especially on the island where we live and in Wilmington and across the Southeast, they all typically started with single family homes and then got into short term rentals or they started with some kind of background and then they saw shiny object syndrome, they jumped to short term rentals. And for most people at the time, they thought that was a destination of where they were going to end up with their real estate investing career.

And at least the people that have been doing it to a high level, the people that have one or two listings, they're usually daydreaming about how they get to five to 10. The people that have hit double digits and are doing well, those people, a lot of times they thought that was a destination.

And what I am seeing as we go farther along is that most people realize it's a stepping stone onto something else. And inevitably the next stepping stone for most people has very little to do with money and more to do with time.

Yeah, and we don't let it be lost on the listeners. This is called the Truly Passive Income podcast.

That having been said, I started out as a single family and then multifamily and then short term rental guy. None of which is passive. Even picking syndications requires some upfront work.

But the idea is, as we all get farther along in our investing career, and Josiah is another example of this, I think right now is you're telling us you're going to look to reposition this equity again into something that is not just a focus on financial independence, but time and location independence as well, and put yourself in a position where you can level up that equity into something that gives you more freedom.

I would argue that, you know, we're basically the same age that I think our time is going to be worth more to us when we're 60 than it is right now, and probably worth more to us when we're 70 than we are right now.

So I think the sooner people start looking ahead to what's going to be the most important thing to me later on in life, and it's likely to be time with my friends and family and go into places I like with beautiful people that I love. The sooner you make that transition, you're just giving yourself more Runway to get there.

So it's kind of funny to hear you say already in this conversation, like, here's the next step, because there is a next step, and a lot of times people haven't realized yet. And it's funny to see how their journey changes from one year to the next. It's interesting to hear you talk about that ahead of time.

Yeah. And, you know, it's a velocity of money thing. You guys are operators.

You're doing these projects and then you're getting them up to stabilization, refi. You know, you're building. Right. A lot of people that are real estate investors want to keep building.

So whether I invest in a syndication and sit back and just get the checks in the mail or do a syndication myself, that's the next step. Because we moved 2 to 3 million into these, and now there's multiples of that there. And again, the return on equity has gone down.

And so now I got to unlock that move that again. So the question next time is going to be, what's the most productive way to do that?

Is it to go do a project on commercial, kind of like you guys are doing, or is it invest with someone that's already doing it, which is an easier way to go about it? And it may be both.

Let me ask you a question. Let's say you guys unlock that equity, however you're going to do it.

Do you think you got another 10, 15, 20 years of would you rather be an active Investor and make 30, 35%, or would you rather be a limited partner passive investor making 19 to 20%?

Yeah, that's a great question. That's something that I'm honestly, like, trying to figure out.

I guess it's going to depend on the opportunities that I can identify, how much chaos and inertia it takes to go after that, you know, because as you guys know very well, it's like a bird in the hand is worth, like, it's not two in the bush. It's like 10. So in real estate, it's like, people talk about, I got a deal.

Well, what they don't know is, like, how many deals you passed on to get that deal. So it's not as easy as just, oh, I'll just go get a great deal and start working on it.

It's like, it takes a lot of effort and time, and you can really go backwards financially quickly if you get a bad deal. So I don't know. I mean, that's a great question.

You know, considering probably all the other stuff I got going, I'd probably lean towards a second option, which is just getting a great return on my investment now. With the caveat that some syndicators are struggling to pay their preferred return right now.

And so you have that risk of you stick your money in somebody else's deal and they don't do a good job, and then you don't get anything. So it's like balance. It's like, figure out what risk you're willing to take on.

And maybe it's investing some money in a syndication and doing a smaller deal myself and having kind of a mix of that. But yeah, I mean, the goal is not just to be busy and be working all the time. The goal is to be spending time on things that matter most. Right.

And another thing is like, opportunity cost. Right. Like, if I'm trying to build my YouTube channel, which is my YouTube channel is just my name, Josiah Smelter.

I love for people to come check it out, by the way, but it's on personal finance, investing, building wealth to live out your purpose, make a positive impact in the world, make a difference in the world. If I'm trying to build that, I don't have time to be going and chasing down all this value add, real estate stuff as well.

At some point, you got to say, what do I want to focus on the most? And go do that and then invest in somebody else's thing, which would be something like you guys are doing. So I guess that's my answer.

I came up. I was a defense contractor. Clint was in medical device sales. You were an accountant. You know, we all have different levels of income. Clint was Mr.

Moneybags as a salesperson. I don't know how much you made as a defense contractor. I didn't make a huge amount of money.

So for me, actively investing was really almost A necessity in order to get ahead.

I mean, I could have sat back and put aside 10% of my income for the next 30 years and, you know, retired on what would have probably been a very meager existence. And I chose to start actively investing.

And then as you point out, you know, as Clint pointed out, you can make outsized returns if you are an active investor, but you also are giving up. It is time, it's time intensive, it's mentally intensive, it's not for everyone.

And then you've got people who, you know, maybe they're a wage earner, but they're a high wage earner, they're a doctor, they're a lawyer, whatever, they're a business owner who's already making the money. And as Clint points out is at some point the time becomes worth more than the money.

And there comes a point where if you are a high wage earner and you know, you're seeing all the sort of shiny objects out there, you're seeing the Josiah Smelzers and the Clint Harris's and the Eric Hemingway's that are making a lot of money doing short term rentals or self storage and they go, oh, I want to do that. Well, the reality is you're already making a really good living doing whatever it is you're doing.

And do you really want to like add this or do you have the bandwidth to add it? Because some people, they simply don't have the bandwidth or they don't really have the talent, let's be honest.

Or they don't have the time to develop the experience, to develop the talent. And you're better off looking for opportunities to skip the active investing part and go straight to the passive investing.

But if you're somebody who's making less than $100,000 a year, then yeah, start figuring out a way to do what you did or what Clint has done or what our partner Eric Hemingway has done.

Yeah, yeah, great point. I mean, when I started real estate investing, I think my salary was like 45,000 a year or something.

So I was doing the running the math and I'm like, it's going to take me forever to get a few million dollars saved up and I wouldn't be where I am if I hadn't done what I did and taken the path I did. That being said, there are people out there that don't have the time that I had to dedicate to it and are high income earners.

Like if you're working 75 hours a week as a physician and you've got $450,000 a year coming in. It seems like a no brainer to me to invest in a passive investment.

A big part of it is you don't have the debt, you just get to invest and get the checks. And like, that's another piece of this whole thing is like how rapidly the markets are swinging these days.

And then they jack rates to the moon and the market slowed down again.

And it's like you got to have the stomach to get out there and operate in that environment and have the debt and make it through all the problems and all that. And it's not nothing.

I mean, when you don't see all that, you just see the people out there making a bunch of money doing real estate, they're at war. Like you're at war battling all that stuff. You have to be vigilant and diligent in what you're doing to come out and still be profitable.

And so the people that are doing, you know, running these companies and really operating well, it's a skill that they have.

And if you're a high income earner in your position or something, you got to go learn that skill set in real estate versus just investing with somebody who's already done all that. So to me, like, if you can compound your money at 20%, not have the debt, keep doing what you're good at, that seems like a great option.

Yeah. And let me clarify.

You know, when I asked you that the question is really about taking the temperature of where you are as an investor with your portfolio and what you're thinking ahead to. Because the reality is there's no right answer there.

You clearly have the chops to go be an active investor and make a great return significantly better than what you're going to get from any syndicator. Right. You're going to make a lot more that way. The question is, is it worth your time or not?

Right.

So there's no right answer for anybody. Would you rather invest the time, be an active investor and make more, or invest and be a passive investor?

A lot of that's going to come down to the goals that you have for yourself and financial and time and location independence goals, along with the amount of capital that you have to invest.

I think that the answer that you gave is probably what the answer that most people that have an outsized amount of equity to invest at a young age is. You don't have to be sure about that. Because the answer is basically that you gave us diversification, right?

It could be invested with other people, it could be actively investing on your own. And I think that's the right answer, right? Because if you don't know, that implies some level of ambiguity. Ambiguity is a lack of knowledge.

And that means it's better to spread it around, invest in yourself and in other people. Because you're right, you could have a pitfall that could cause you to lose money on a deal, but so could an operator.

That's the importance of investing in different assets. Different geography, different operators, different debt structure, different timelines for when it's going to pay out.

All of that is kind of the idea is like you want to be diversified across all those things, even if you're going to be an active investor on their, on your own.

And then the question is like with what you guys are bringing in right now, north of a half a million dollars a year in cash flow off these properties with paying 4% for management cost, you know, is there a reason you couldn't take a small piece of that and start investing into different syndications? If nothing else, as a way to get education, right? Because you're investing into a deal.

Like instead of you paying for education, you are putting money in, but you're earning a return to be on the inside, looking at the monthly memos, the distributions, everything else. Like from an operator standpoint, I think people pass a lot of times on the education that can come from that by being on the inside of it.

But besides that, I guess that's the real question is what's the next new frontier? Because it's not single family homes. Multifamily is very tricky right now, especially with bridge debt and variable rate debt, short term rentals.

You know, the one thing that nobody can control is the amount of listings in the environment. We live on an island, right? You think an island would be very well insulated on the island.

Where they're not making any more land, it's more older listings getting fixed up, put on the short term rental market. But one thing you can't control is the supply. And I always thought I was in an area where the demand is going to be greater than the supply.

And we're insulated. And if you got four or five years of reviews and our company has 3,500 reviews, you're going to be fairly well insulated.

But boy, for people just now coming into the market, it's a little bit of a bloodbath. I'm in the same position as you is like, is it time to reposition that equity?

That reposition for me looks like passive investments into syndication because that's the path that I've chosen. It doesn't make it the right path, but for people that have a wide skill set like you, it's a lot of different things you can do.

So what are some of the shiny objects that you're looking at that you see out there that you're interested in?

Yeah, I mean, I think the point you're bringing up about you can't control the supply. I think that applies to every real estate class. Right? It applies to self storage as well. Apartments.

I mean, people are building apartments coming and going as fast as they can, you know, and so that's really affected the apartment market. I saw in Austin, Texas, apartment rents are going down right now because they put so many new apartments online recently. So this affects everybody.

And it's one of those things, you know, in short term rentals, you're talking about sometimes just converting a house, you know, it's like the house is already there, they just switch it on. So it's, you know, obviously new construction takes longer.

But yeah, I mean, the shiny objects for me are syndications or investing in commercial myself. But to go back to the conversation about what would you do next?

Really, it's an opportunity cost analysis of if I believe that I can grow this other business to seven figures a year, doing this with my time, and I can invest in a syndication with my, you know, or multiple syndications with my equity, maybe some index funds, things that don't require me to really do anything and have that income, you know, coming in and supporting me, then maybe that's the right move, you know.

And if it's like, okay, I don't have any faith that I can grow this business idea that I'm working on, I need to go out here and try to produce this outsized return myself in real estate, then maybe I do that, you know, but self storage is a very interesting asset class to me. I love what you guys are doing. I told you, sent you a message the other day.

But you know, I'm definitely interested in potentially investing with you guys at some point if I'm looking at what to invest in next. I think this unlocking equity thing is something that everyone's doing regardless of where you are.

You know, if you build up a huge self storage portfolio using the BRRRR strategy and you're in these things at 30 cents on the dollar, you've got a ton of equity in there. What are you going to do with it? You might be selling it to a REIT one day like you mentioned. So what are you doing next?

You know, what do you do with all that? So it's always a trading up. It's like rich dad, poor dad, you know, you're trading houses for hotels. You're constantly trying to unlock that equity.

And I was on a Better Life podcast with Brandon Turner recently and we talked about this a lot.

The return on equity piece of investing is something that a lot of people ignore because you can turn around and in a couple years in your portfolio, your equity may have doubled and you're sitting there with 2 to 3% return on equity. And it's like the velocity of money has really slowed down when you don't unlock and move that.

And that's one reason syndications are looking interesting to me is we've now got, you know, I mentioned 13 properties in the portfolio and then some more ourselves. So we've got, you know, 16 cabins we want to sell. Well, how do we sell all that?

Okay, yeah, I didn't know that, but.

We have interviewed someone that can, utilizing a Delaware statutory trust.

The flip side of that have since that podcast, I've had a lot of feedback from people who have some negatives about DSTs as well. So, like investigate that as well. We don't dig into that here.

You bring up a funny point like there's all these people out there that have built up portfolios of you got 16 cabins, there's people with 90 single family homes in Memphis, Tennessee. There's people with 200 homes in a portfolio spread across the Southeast or wherever. Like, how do you unload that?

You'd think that if you're selling it as a portfolio, it would get a portfolio bump and be worth more. And it is if you can find the right buyer, but it's a very limited buyer pool. You're going to make more if you sell them off individually.

And as you go up higher levels and you meet more successful people that are doing these big things, they have new problems. A lot of times they're the same problems that we all face, but it's compounded times 150 because that's how many properties that they have.

So and the higher you get and the more complex the problems, we find that the more complex and strategic are the solutions. And that's when it really comes down to networking and knowing the right people. And to me, that's the value of a podcast and education.

Yeah, absolutely. And I'm curious, when you guys build up a bunch of equity in these properties you're working on, you get them up to Stabilization.

What is your strategy with unlocking that equity? Are you going to sell them, are you doing a refinance or what's your strategy there?

Yeah, so our strategy is it cash out, refi. So we're average $65 a square foot. When we open the doors of a facility for the building, the conversion, like an old Kmart, old grocery store.

We're average $65 a square foot for the completed project, including the land. So it's stabilization. Our average is between 35 to 40% LTV, so we can refinance.

So our typical deal is like we'll buy a building for 2 million or so, put 2 to 3 million into it. Stabilized asset is typically valued in the 13 to $17 million range, depending on the market. So we'll refi to 55, maybe 60% LTV.

We don't want to stress the asset. We want it to continue to cash flow.

So that gives us enough money to double the investment for the investors, which is tax free because we didn't sell anything, so it's not a capital gain and then keep the asset and allow it to continue to cash flow. We're at 150 million in assets right now and haven't sold anything.

The plan is we got a five year plan to 500 million and a 10 year plan to a billion. But that's the key. Anything that you take and you build it up and you add value to that and then you sell it and you take the money, that's great.

But you're trading time for money now and the day that you stop working is the day you stop getting paid. So like the idea is somehow a recapitalization while you keep the asset. Don't stress it too much.

That way allows you to take that equity out tax free and like you said, level up, continue to scale, continue to look for the next thing.

I've just come up with a new name for our strategy.

I'm terrified. What is it?

Big Burr.

The pink Burr.

It's not just brrr, it's Big Burr.

We might get sued by Sesame street and Brandon Turner.

So, Josiah, I want to finish off with one last question. We are kind of running out of time and I want to be respectful of your time.

If you get everything you want as far as financial freedom, you've got it all. What does living a life of purpose look like for Josiah?

Yeah, you know, I view everything through the lens of my faith. So it's my goal with this YouTube channel I'm building right now is to help people get unstuck financially.

There's a lot of people out there that are doing work that they're not passionate about. They actually dislike their job. I was there, I was stuck in the cubicle.

I know what it's like to not know where, you know how you're going to make ends meet next month.

And then, you know, I want to help those people get out of that jail cell, reach financial independence through wise investing and then use the talents that God's given them in a way that lights their fire, do work they love and live a life of purpose. So I would just say just helping people in that way.

You know, I've done some coaching with people and it's typically that scenario, somebody feels stuck, they want help making good investments, getting traction financially and getting into work they love. It would just be doing that obviously raising my kids well, you know, taking great family trips, being active in my church, those kind of things.

Awesome. Well, Josiah, listen, thank you man. I really appreciate the time.

You've got a lot of great stuff to share, so thank you for making time to share that with us and I'm glad we finally connected and very much look forward to following your journey. We'll have to have you on for a follow up in a year or two and see what happened with your portfolio and whatever big things are coming for you next.

Same. I really appreciate you guys having me on. It's been a great conversation. I'm excited to watch your business hit that billion dollar mark.

I know you're going to do it.

Thank you, man. Appreciate it.

Well, listen, before you go, if someone wants to reach out to you and figure out, you know, find out more about you and follow your journey, what would be the best way for them to do that?

Yeah, so I'm over on Instagram and it's just at Josiah Smelter. It's. And I guess you guys can put a link in the show notes or something.

But over on Instagram I've got a link tree down in my profile and it's got links to, you know, I have a book and then it's got, you know, the YouTube channel which I'd love everybody to check out. My podcast on audio is Josiah Smelter show. There's about to put out my 100th episode there. So excited about that milestone.

But yeah, I would love to connect with everyone and you know I'm all about. Real estate is not a zero sum game. Everybody can win here. We're not competing with one another. I want you guys to be successful.

I want everybody else to be successful too. So hopefully we can all move in the same direction and accomplish our goals.

Love it, man. I'm gonna go join your YouTube channel right now.

Yep. Hey listen, thanks Josiah. This has been great.

Thank you so much Neil and Clint. I appreciate you guys.

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