Today we have Paul Montelongo on the show! Is your real estate portfolio ready for the next recession? Investing in real estate can be especially profitable during recessions. Paul Montelongo has unlocked the secret to preparing and profiting from recessions. He plans to double his multifamily unit count in 2023 by taking advantage of key opportunities available when markets are struggling.
In this episode you will learn:
- how mindset impacts how you look at recessions, business, and life
- three opportunities Paul sees for 2023
Table of Contents:
- Where To Listen To The Podcast
- Capitalizing on Recession Through Proper Preparation
- How Recession Sways the Market’s Pendulum
- Recession Can Bring Good Times and Bad Times
- Picking the Ideal Investment to Overcome Recession
- How Paul Picks His Partners
- Exploring the Area Outside Your Comfort Zone
- The Human Experience
- How to Reach Paul Montelongo
Capitalizing on Recession Through Proper Preparation
Darin: Paul Montelongo lives in the San Antonio area. He's an owner in eight multifamily properties with over 1000 units. He's been through recessions before and he knows how to prepare and profit during these challenging times.
A little bit on how we know each other. I was introduced to Paul from a fellow person in my multifamily group, Brent Ritchie. Brent was on the podcast episode number 82, and he and Paul are part of a mastermind together. So Brent had recommended that the two of us should touch base. We both have podcasts and we actually met when he came up to Dallas. So I'm interested to learn more about what he's got going on and have you guys learn from his experience. So with that, Paul, can you share with the listeners how many properties and how many units you're invested in?
Paul: Sure, glad to. First of all, I'm from San Antonio, Texas, born and raised here, although I moved away for about a dozen years to different places, Las Vegas, North Carolina, and so forth. But I moved back three years ago to San Antonio and this is now my home.
So I started investing in 2015. At this moment I'm at 1,065 doors that represent 8 properties plus a portfolio of cash-flowing residences. We've just built it steadily and methodically and try to increase it. What I've discovered is, that with the passing years, a little bit more momentum each year. So in 2023, I think, with the momentum that we have, we'll likely add over a thousand doors to our portfolio.
Darin: Holy cow. So basically you're going to double in 2023?
The Effects of Recession on Those Who Seek Opportunities
Paul: I think it's very possible. I think it's very possible, but very doable also. I'm sure we'll talk about this more later, but I think 2023 will provide an opportunity for investors like us that we've not seen in recent years and I like the prospects of that a lot.
Darin: Yes, talk about that. So there's a lot of people that are afraid, that are fearful that we've got a recession coming, we've got an inverted yield curve, we've got rising interest rates, we've got inflation. So all these worries and so some people are like, "Look, I'm either on the sidelines." Or maybe they're a passive investor and they're like, "I'm going to just hold my cash and not invest at this time. Because it's a scary time and I don't know what's going to happen." So with that, I also have people like yourself that say, "Hey, I'm looking forward to the opportunity." So what does that opportunity look like in your mind?
Paul: Yes, so this for me is a big formula. I've been investing since I was 17 years old. My first property I bought in 1977 and I sold it in 1979. It was a piece of residential dirt. But in my lifetime, if we are in fact in or about to approach a recession, and I have a whole line of thought on that if you want, but if in fact, we are okay, then this would be number four for me in my lifetime.
Darin: The fourth recession?
Paul: The fourth one. The fourth recession. I don't mind saying the first one, I was a young man, I didn't know the difference, and I was a victim of the first recession. The oil prices were high, interest rates were high. I remember mortgage rates were 17, 18, 19%, and I was like, it was unheard of. So anyway, I was a victim of that. I let it affect me. I didn't know what I didn't know. But recession number two, three, and now four, again, air quotes, I made a decision.
I made a choice that I was not going to be a victim of any kind of outward economic situation because if you look at the track record of successful people through the course of history, many of them have maximized bad times, what most people consider to be bad times. So, it's a mindset I believe, and I believe that in every one of these time periods, there's opportunity.
Our specialty is real estate. I don't do anything else but real estate. So real estate, once you know how to buy it and where the value is and where the opportunity is and where the good deals are, you're going to find out where those opportunities are. So 2008, the great depression or recession or depression or whatever it was.
Darin: Whatever you want to call it.
Paul: Whatever you want to call it, you could tell I don't give a lot of power to it, I made more money in that timeframe than I had ever made in my life. But I sought opportunity and that was in foreclosures, pre-foreclosures, list pendants, taking over properties and in certain areas of the country, specifically the west coast.
Building Your Own Economy Amidst Recession
Paul: I moved to Las Vegas to invest in the Vegas and the California properties out there because that's where the opportunity was. In fact, it was a hypermarket, like low prices, and low entry points, but people still would pay a lot of money for properties. They didn't pay the money that they're paying now, but they paid a lot of money for properties, so it was easier to sell those.
The whole point is that, in any economic situation, we get to decide, I get to decide if I'm going to participate and what the hurt mentality is, and I choose not to participate in the hurt mentality when it comes to recession. I'd like to build my own economy.
Now, having said that, Darin I like to keep my wits about me and remain humble in the fact that it's going to require more work. It's going to require more discernment on properties. It's going to require more negotiation to get to where we are.
But we are already seeing like in two properties that I'm buying right now, the appraisals came in, one of them came in at 11% above what I'm paying, and the other one came in at 9% over what I'm paying and I had already negotiated 10% below market. So that's a net of what? 19 and 20% below market at this time last year. Will it go down a little bit more? Probably. Probably, but now I offset that with good financing and so there's your formula. I told some folks the other day, I said, "It feels old school to me now."
How Recession Sways the Market’s Pendulum
Paul: If you look at where we were in this real estate environment a year, a year and a half, certainly two to three years ago, over the past three years, it's been a very, very strong seller's market, rightfully so. I sold in a very strong seller's market, but the conversation was different with a seller or a seller's agent. The conversation back then was, "Hey, listen, Paul, a seller wants $15 million for his property." And I would say, "Okay, but I'm looking at it and it looks like it's worth 13 million." The response back to me was, "Okay, thank you. Bye." There was no dialogue. Earnest money deposits were high, and they were non-refundable on day one.
When you're in a seller's market, they have a lot of leverage. So we've seen that pendulum, we've seen that balance more balance out here in the last, well, since July, I would say. So that's what? The last five months or so? We've seen that balance out, maybe even longer than that, early summer June, we've seen it balance out.
Now, it's still not, in my opinion, a buyer's market. I don't think it's a hundred percent buyer's market, but there's more balance here. How do we know? I remember the day that it happened. This was in April. We were working on a deal and we got all the paperwork for the deal and we said, "Okay, this deal, they want 13 million, but we think it's worth 9. Well, what is that?"
Darin: It's a big difference.
Taking Advantage of Recession to Set Yourself Up for Success
Paul: That's a 24% hit, 25% hit. So that's unheard of a year and a half ago. The conversation would've stopped right there. But the day I knew that it changed, because the broker said, "Listen, our seller is taking all offers. Please submit your LOI and we will go to discuss it with him.
Darin: Even though it was 4 million less? Yes, that would not have happened before, right?
Paul: I did not hear that language from an agent in the previous three years. So several things happened then. Of course, then now the financing markets, started becoming uncertain. So this is what started where we are at this moment.
Darin: Can I jump in here? I wanted to ask you a couple of things based on what you said. One is a comment. I firmly believe what you said is, that you have to make a decision. People, it's not just a decision, do I invest or not invest? But you said, "Look, everyone's talking about a recession comment. I am not going to be a victim of this recession. I'm deciding that I'm actually going to set myself up for success through this downturn." That's a big mindset shift for a lot of people because I think a lot of people are afraid of what's coming versus getting prepared to take advantage of what may be coming.
Paul: I agree. I see major investors just sitting on the sidelines. Now, I know some of them are getting poised for a really good run in 2023. I know this, but I've been able to eke out three deals.
Approaching Recession by Making Sense of the Economic Situation
Paul: In fact, I've been able to eke out three deals that make sense regardless of whatever economic situation we are in right now. So even if it's in super, super good times, it's still a mindset, because if you think about it, the people there was also a mindset when it was super, super good times. There were a group of people that said, "Oh, I'm not going to do anything right now, because it's going to dip." So I mean, pick your mindset. Like you said, make a decision.
Darin: I completely agree. I mean, I got involved a lot later than you did in 2017, '18, and I met some syndicators that said, "Hey, I was buying at 30, 40 a door." And I'm like, "Well, okay, I'm going to buy at 80 door." They were like, "I'm out. I'm waiting for it to correct." That was back in 2017 and 2018, and then we bought at 80 door and sold it at 150 a door.
There's never a guarantee that you're going to pick it perfectly, but I think that that's really smart to be prepared. So let's talk about what are those opportunities. What do they look like? What are the situations that may be coming in 2023 that multifamily investors may be able to take advantage of?
Paul: Okay, there was a group of owner-operators and buyers that obtained bridge loans. This is the first one, they obtained bridge loans. So now, those bridge loans have come due and they will continue to come due. The current rate doesn't make sense against what their bridge rate was. Maybe they didn't buy a cap, or maybe they negotiated a poor bridge loan because they were betting on the continued escalation.
The Old, Tired Owners
Paul: So that's one, they're in trouble and they need to be handled. Their properties need to be taken off their hands. Is it going to suck for them? Probably. I mean we've all had deals that sucked for us at one point or another. So I mean, if you're in the game long enough, and if you're in the game serious enough, if you're in the business at that level, you're going to have a property, I think. Maybe this is my mindset that I get to check, Darin. There's going to be your good ones and you're not so good ones. So there's the first opportunity, people that have properties that they didn't make the best deal for a year ago or two years ago.
There's going to be always a group of properties that are being sold by old, tired owners. I don't mean naturally old, I just mean that they've had the property for a while, 10 years or more, and they're just worn out. One of the properties that I'm buying right now the guy, he's not an old guy. I would call him a young man, he's probably in his late forties, or early fifties, but he's had the property for 25 years and he works there himself every day and he's got 142 residents and he's just done. So a combination of some seller finance, some good debt, and some incentives. Again, remember the comment I made a few months ago.
Darin: I would add to that old, tired owner, it could be someone passes away and the wife doesn't want to deal with it, right? Or vice versa.
The Advantage of Having Good Connections During Recession
Paul: So this is the third situation. Again, I'm speaking from deals that I experienced and deals that I have currently going on. So this gentleman inherited the property from a trust earlier in the year because his father died and he just doesn't want to operate it. He's like, "I've got other things I want to do in my life. This was handed to me. I'm grateful that my family was able to live off of it for a while." They've got other properties, but, "I'm thankful that the property served its purpose. I'm done. So who wants it?"
We were contacted on that one, only one of two groups, because I had a track record and I had a relationship with the broker. And we were able to make a deal. Then you got the poor debt situation, you have old, tired, what I call the old tired owners. Then you have some kind of distress that a current owner does not want to operate the property anymore.
Now, all of these are going to still come from your broker relationships, even though this like the last property I mentioned was not a listed property, it was in the hands of a broker and so that was a result of a broker relationship.
So, even through this time, you've got to maintain your broker relationships. The conversation, I think, with your broker, and your agents, is a little bit different and that is, "What can we do to help your seller get this off of his books immediately in these times?"
Recession Can Bring Good Times and Bad Times
Darin: And talking about good times and bad times, and being able to find good deals in any market, you characterize three different opportunities that may be available in 2023. Two of those are always available.
Paul: You bet.
Darin: They just may be harder to find, right?
Paul: You bet.
Darin: And the broker may be setting different expectations with those buyers, but the old, tired owners and the inherited property situation, those could happen in any market.
Paul: Here's the difference, I believe. I'm going to say a year and a half, two years, I'm going to say a year ago, a year and a half ago, the difference would be a seller would approach a broker and say, "I'm thinking about selling my property. What do you think it's worth?" And the broker would say, "Let me test the market." Then the broker would go through a process of testing the market, and then there'd be a call for offers, and the offers would come in, and then there'd be another call for offers to try to trump those previous calls for offers. Then in some cases, even a third call for offers would come in to try to trump the previous two. So now it was the agents and the brokers pushing the market up to sell at the highest point for those sellers.
Hey, listen, I don't fault them for that. Great. Good on them. That's a good mindset, I think. All right. So now the difference is a seller goes to a broker agent and says, "I'm thinking about selling my property." What do you think the broker says? "Let me look through my Rolodex. Oh, Paul has performed before. Let me give him a shot.
Understanding the Market Fundamentals Will Help You Overcome Recession
Paul: So now, it's not out to the general market, it's out to those one or two, three people that the broker has a relationship with, where the owner-operator has actually performed. Because now he has a quick sale, he has a sure sale, his seller's happy, he's happy, and we move on. So that's the difference in the dynamics right there currently, versus a year, year and a half ago, or even later.
Darin: That makes sense. So what markets are you focused on?
Paul: So I have Texas. We just sold one Wednesday in Georgia, so I no longer have Georgia. Again, remember, we're on the seller's side too. Then the other is Wichita, Kansas. Now, when the Wichita, Kansas deal came to me, if you're listening to this and you're in Wichita, Kansas, you know what I'm talking about. If you're not in Wichita, Kansas, you're going to know what I'm talking about, because I said to myself, "What the hell is in Wichita, Kansas?" I'm like, "Is that Wizard of Oz and tornadoes?"
I'm only being halfway facetious, but I didn't understand the Wichita, Kansas market. So any investor that's listening here, you know you have a group of fundamentals, market fundamentals that you look at. If those market fundamentals are met, if the benchmarks are met, then you have yourself a good market to invest in. Well, Wichita, Kansas met all of those fundamentals, at least the fundamentals that we look at. So we bought a 70-unit class A over the summer, and now I'm buying an 88-unit class B, one mile away in downtown Wichita, Kansas.
Making Decisions Base on Fundamentals and Your Understanding of Recession
Darin: It's funny because Wichita was not on my radar screen. We had breakfast together, me, you and your wife. When I left there, maybe it was a day or two later, I was talking to somebody else that I've done business with. I brought up Wichita, Kansas, and he started selling me on it, on the market. He was like, "That's a great little market"
Paul: It's called a submarket. I think it's number 92 or 93 MSA. So it's in the top 100, but it has long-term population growth, long-term jobs growth, and diversity of industry growth. Its median income is suitable. It's median price. Excuse me, it's median age suitable. So I mean, all of those fundamentals just lined up. I'm like, "Okay."
Darin: On top of that, you probably don't have the competition from buying groups as you do with some of the Texas ones.
Paul: Well, I probably will now.
Darin: The word is out, watch out.
Paul: The secret is out. But there's opportunity. There's opportunity in the Midwest though. So the Midwest is surfacing, as we start, as we evaluate markets, because Texas, we all love Texas. I've got two in Texas right now, and I just sold out of one earlier this year. So we bought that one at $77,000 a door. We sold it for 135 a door. So we owned it for 18 months. Texas continues to be a hypermarket. Millions of people are flooding to Texas for all the right reasons, so it's not going away.
The Things You Need to Look For in a Market
Paul: So yes, the competition is fierce, but some of these Midwest markets I'm learning as we look to expand. Yes, they've got good fundamentals, good population growth, landlord-friendly, little government interference, these kinds of things that you look for in a market.
Darin: So I also had another syndicator that does business in some hyper-growth markets and also in the Midwest. What I was told from that syndicator was, that they see a difference in their investor base. Like some investors, they want higher cash flow and don't necessarily need the big pop on the backend for capital gain. So they like investing in some of the Midwest markets for that purpose. Then the ones that want the big pop and then roll that into a new deal, into a new deal, they're going to put those investors into the high growth markets. Do you see that kind of segmentation in your investor base or not?
Paul: Yes, a bit. I mean, we're still at a place where your investor base depends on you, the owner-operator, the lead. So if you've got a good relationship with your investor base, they're pretty much going to take your lead. Especially if they've done a couple of successful deals with you.
So it's always a cool conversation when you go to your investor base and you go, "Okay, I know we've been in Texas, but we've got this other place that we've really been watching. As we've watched it, it sure is coming up good." So, because there's confidence built in you already, that conversation is a little bit easier. Now, they're still going to want it proven to them. Listen, I have investors that tell me, "Don't even talk to me about anything but Texas.”
Think Outside the Box
Paul: Even though I've tried to talk to them about it, but you have to listen. They want Texas or Florida or the Carolinas. So my first deal was in Charlotte, North Carolina. I understand North Carolina and South Carolina, are cool places to invest, but guess what? So do dozens and dozens and dozens and dozens of other investors and owner-operators. So that's why we're trying to think outside the box a little bit, but the conversation is a little bit easier with investors that you have a relationship with.
Now, on the other hand, with investors that you don't have relationships with, now, you really have to know your homework. You really have to know your presentation, because first of all, if you don't believe in the deal, you can't sell it. I don't care who you are. It's just like people feel the energy, right?
Darin: Absolutely. But also from a standpoint of putting money on the line, I don't know that a lot of passive investors understand you're putting all this hard earnest money up, you're fronting the money to pay the attorneys and the application fee for the lender and whatever due diligence reports need to be completed. If the deal doesn't close, that's all lost money for the lead syndicator. The passive, they're putting in their money, but if the deal doesn't close, they get that back. So you really have to believe in the deal to go out to the market.
Paul: You do. And losing that money, I don't, let me see, my desk is wood, knock on the wood.
Picking the Ideal Investment to Overcome Recession
Paul: I've been fortunate there, but that's a very expensive cost of doing business when you front all that. But I think that's why there is the limited partner, the passive investment, passive investor scenario. I think that's the real advantage.
And I've been an LP because now someone else is doing all the heavy lifting, someone else is doing all the work, someone else is doing all the day-to-day operations. Someone else is really operating the property with the goal in mind of increasing its value and appreciation for a resale. That all comes from experience.
I mean, look, my learning curve has been a number of years, and while I was in my learning curve, I did passive investing, which helped me with the learning curve. So if someone is in a career that they absolutely love and is taking care of all of their family needs, and then they've got some other money that they want to park in real estate, then the syndication, limited partner passive investment arrangement is an ideal arrangement. For my first deal, I needed $1.4 million. In today's terms, it was a small deal. In my terms back then it was like, "How in the heck am I going to do this?
Darin: Yes. Well, I think you have both on, listening here, you got people that are thinking, "How can I raise a million?" And then you have others that can raise 10 million in a day.
Paul: Correct. So it's all relative, I guess. But I had business experience. I had good credit, I had cash to invest, and the thing that I brought to the deal was my really heavy construction background.
Creating Opportunities by Relying on Experienced People
Paul: So I was part of the deal over there, because I had the experience to go rehab it, which I did, and that's what caused me to move to North Carolina. But the guys that I was with, raised $1.4 million in nine days. I'm like, "That is phenomenal." I mean, coming out of the business world that I had come from, I had a nice Rolodex. But my Rolodex was not familiar with me doing this kind of work. So I had to go back and re-oil my Rolodex, which I've done, obviously, but here's the key.
It took 17 investors to come up with that money, 14 of them were from Silicon Valley. 14 of them, they had tech jobs and those tech jobs provided them a really nice income. They knew intuitively that real estate was a place that they needed to park their money, for all kinds of reasons. For their cash flow, for the bonus depreciation, et cetera, et cetera. So they knew intuitively that real estate was good.
But they didn't want to put in the work, they didn't want to put in the time, the effort. They have tech jobs. So it made sense for a group like that or people like that to park their money in syndication and depend on someone's experience to make the deal happen. So that was a really good learning experience.
Darin: That's huge. How were you connected to those people from prior working relationships?
The Importance of Give and Take Relationship
Paul: Actually, one I met at a conference, two, I met at a conference. Two I met at a conference, and then they knew somebody who was in the Silicone Valley who had sold a tech company. So they put us together and the parts all came together. But I mean, two of them, I've done more business with since.
Darin: No, it's huge, because you have to know somebody in the business to get invited to participate in these deals. I knew a lot of wealthy people, but until four or five years ago, I wasn't getting invites. Now, my inbox is flooded with them, but before that, it was like an unknown world. So I think that it's important to be able to let other people know that there's access to that.
Paul: Well, I'll tell you this, Darin, I say this, and I've said this to these gentlemen as well is, I was very fortunate that they took me on and they mentored me. So yes, I was a business partner and I brought some value. I brought a lot of value. Really, I brought value to the operation. In addition, they mentored me. They taught me the real ins and outs and the nuances of the business. I've acknowledged this to them personally. I think that has influenced me in the sense that anybody who comes into my partnerships, I take on a mentor role for them as well.
Darin: That's fantastic.
Paul: It just seems like the right thing to do, and I love it.
Darin: You're giving back, I mean, paying it forward
Start Selling Your Team
Paul: Yes. To me, that sounds kind of cliche. I understand what you're saying. It sounds cliche to me, but it feels like the right thing to do. Listen, I ran a bunch of companies before I got into this. I ran construction, I ran real estate, and I ran a salesroom. So I've had a lot of businesses and I've hired a lot of people. I always, somewhere way back when I read it. I read something that said if you train your people to leave, then they'll stay with you. If you train them from the perspective that they're going to stay with you, then they'll fly the nest.
That's set well with me. It's like, in other words, teach people how to do the business, not what to do in the business. Teach them how to do business and they can fly the nest on their own. I believe that grows the pie for all of us. So that's just my personal belief.
Darin: Sure. The other thing is I get in contact, there are people that, look, you had a lot of business experience that you felt like you brought to the table. But I meet people that feel like, "Look, I haven't run my own business. I haven't done this. I haven't bought a hundred-unit property, so how can I do this?" I'm like, "Start selling your team." If you build, you hire a third-party property management company that has 5,000 units in your submarket, well, that's a major advantage. So the investors looking at, look, it's not you that's going to be managing the deal. You will be managing the manager, but you've got extensive experience.
How Paul Picks His Partners
Darin: Then you're partnering with, just like did, you partnered with people that had a lot of experience, so you could be junior and then go out and find partners that have done this day in and day out for years. Partner with them. Then you're selling your team instead of your experience. Then hopefully one of those partners has your mindset and is a mentor, and can you learn a lot from that person.
Paul: One of the things that I've learned through life, I guess, and doing business and especially in this business is, pick your partners carefully. So hang out with them a lot.
Darin: So talk about that.
Paul: Yes, just hang out with them.
Darin: How do you pick your partners?
Paul: Well, I have this really elaborate, sophisticated process where I just kind of hang out with them. Because you get to know a lot about people by just hanging out with them, their likes, their dislikes, are they a family person? What are their values? The real question comes, what are they going to do in a time of challenges? So how people respond in times of challenge is where their real mettle is, where their real characteristics will be revealed.
So as you get to know people and as you get to hang out with them, and as you get to fellowship with them, you learn about their values. You learn about who they are, what their priorities in life are, and where they want to be. When you find those commonalities, then it usually works out really well.
Listen to Your Intuition
Paul: Here's the thing. You know intuitively, who could be with you and who can't. So I know, and the times that I've had challenges I didn't pay attention to my intuition. My ego got in the way. I was stubborn. Like, "I need this deal."
Darin: Have you ever had a bad partner?
Paul: Yes, I have.
Darin: So intuitively, you thought they were going to be good, but they turned out bad or not ideal.
Paul: Yes, and that's on me.
Darin: That's on you?
Paul: Well, that's on me. That's on me because people will tell you who they are if you'll just listen. I didn't listen.
Darin: You didn't want to listen? Wow.
Paul: I didn't want to listen. Yes, thank you. Now, I'm thinking of two situations. So two out of the numerous that I've had, a pretty good ratio, I think.
Darin: When I've talked to people about having partners and when it's not worked out, the people that had troubled partnerships have told me that it wasn't about their ability to do the job. It wasn't about their ability to execute. It was more that the two of them who saw the world differently and more from an ethical perspective. Going along with what you're saying in challenging times, how are you going to treat your investors?
How are you going to manage? Are you just focused on yourself and your perspective and your financial well-being? Or are you really looking at the fiduciary duty to manage this for everybody?
Choosing Partners Base on Their Moral Values
Paul: Again, I will reiterate, I think you know. I did and I just did not pay attention. So I take a little more time now. I take a little more time.
Darin: When you say, I think you know, what I would say to the listeners is, even if you haven't had the partnership opportunity, you can look at your life and know you're going into something that you shouldn't do. You know a bad situation or whatever like people say you're staying out past a certain time, that nothing good happens. But if you end up doing something or you’re hanging out with the wrong people, or you're going to someplace that you shouldn't go, whatever the case may be, you kind of know, have that intuition.
Paul: You do. I believe it.
Darin: You can look back and say, "You know what? I knew that. I knew I shouldn't have done that." Right? That's kind of what you're talking about.
Paul: A hundred percent. A hundred percent. So it's been a really good learning lesson, but I believe that it's part of the evolution. Part of my evolution.
Darin: Absolutely. So look, you're very experienced and in the beginning, I mentioned that we met because Brent Ritchie kind of put us together. You joined a mastermind.
Paul: I did.
Darin: Brent is also a part of it. With all your experience, why did you join a mastermind?
Paul: Very specifically for the connections. My wife and I, want to be around people who think bigger, who think more creatively, and who see the opportunity in everything instead of the downside in everything. Quality people, good values, values that align with ours.
Only Do Business With People You Like Especially During Recession
Paul: It's funny, I stated that they gave us an opportunity to speak in front of the group. I just said, "We want to do business with people that we want to have fun with." So if we can't go on a trip with you and have fun with you, then I don't know that we're on the same page. But this is a lifestyle choice for us. My wife and I in December of 2021. That would be a year ago today, right? We're in 2022. Is this right?
Darin: Two days before Christmas, we're recording this. Yes, 2022.
Paul: So, we consciously sat down and said, Okay, what do we want to do in 2023? We consciously stated to each other, "We want to only do business with people that we like, and we want to only do business with people that we feel like we can grow our life with, not just our business, but our life. We want to have long-term, lasting, fun, rich relationships."
So every time we go to a networking event, and by the way, we've been to many networking events this year. That was another commitment we made. Go out, get out. Get out, talk to people, and engage with people. Believe it or not, I know what you're going to say but believe it or not, that's not been the easiest thing for me to do.
Darin: Is that right?
Paul: That is. It's just I'm more comfortable just hanging out by myself.
Exploring the Area Outside Your Comfort Zone
Darin: It's so funny. You can't see it. It's like musicians or speakers. They look like they have all the confidence in the world up on stage and then they say that they were so scared to go out or they're so scared to perform.
Paul: Well, this is the real estate between my ears, what do you say to somebody that helps them understand what you do, but you're not sounding braggadocious, is the conversation between my ears. What do you say?
Darin: Well, that's just like social media, right?
Darin: I mean, social media is like that. I feel like when I first started getting involved with social media, I was like, "Okay, I got to post this." Or, it's like, "Look at me, look at me, look at me," but at the end of the day, if it helps one person.
Paul: That's the thing.
Darin: That’s what it's all about.
Paul: That's the thing. That's the thing. My wife and I, have very definite things we want to accomplish. We have a large family, we have a large extended family. Our parents are either passed or they're very, very old and they're about to pass. So she and I are the eldest in our families on our side. So we have taken on the role as patriarch and matriarch.
Nobody assigned that to us. Maybe even nobody knows that, but internally, that's the role that we took. Okay, so having said that, we feel like that puts a lot of responsibility on us so how can we step into that?
Living Life Wire to Wire
Paul: I know that before we got together here, one of the things we might talk about was, how to get out of our comfort zone. Well, that's getting out of our comfort zone, because she and I love to travel and we love to hang out. We get along famously, and we could get in an RV and go and not see anybody. But does that really serve our greater purpose?
And I'm not talking about handing down money or handing down property to family members. We're talking about being an example of how to live, is how we process that. So if they get money and they get legacy properties, great. That's a side benefit. But how do they look at us, and they go, "Okay, that's how you live a life wire to wire."
Darin: Yes, that's awesome. I also love what you said in terms of having a goal of working with the people that you want to work with. I think that that is both on the partnership side and it's also on the LP side.
Darin: I've asked some syndicators, I've said, "Have you ever had any deals where you didn't send your next deal to a few passives that were in a prior deal?" Every syndicator was like, "Absolutely." Some people, really like working with the group of limited partners that they have, but there are some limited partners that maybe they just didn't gel with.
Paul: That happens.
Darin: So, they're able to choose who they're going to do business with, both on the partnership side and on the LP side.
Focus On Your Own Values
Paul: I think that's why you're always continuing to build your network and relationships. People have situations in their life that don't allow them to reinvest. That's fine.
Darin: Oh right. Absolutely.
Paul: As you grow in the business and you get more deals and larger deals and your capacity, your needs, they extend. So you've got to continue to build that. But one thing I want to go back to on the social media thing that you tied into in meeting with people and so forth. This is a vulnerable thing, but years ago, many years ago, I would process information through how did I look to others? But a series of events happened and I just decided, "Okay, I'm going to be me." And I think that's really the important thing. Just be you, and I'm not going to be for everybody.
Once you don't give a hoot about that, then I think your life frees up and I think you do better work. I think you have better relationships and you have more purpose and mission in your life when you focus on your own. I focus on my own values, my own value set, and then if we can connect, great. If not, that's okay too. Everybody has their own set of values.
Darin: Yes, I think that's huge.
Paul: The philosophical part of that.
Darin: No, and like you said, you could just drive around and not teach anybody. But now that you're going out and you're meeting all those new people, those are all new people that can learn from you learn that you wouldn't have had that connection before.
Relationship Built by Trust
Paul: So let's drill down there a little bit. Let's say that you're on the passive investment side, all right? You've parked your money into a deal in a syndication with an owner-operator that's done a good job for you. So are you going to hold that to yourself? Likely not. You're going to tell your friends, you're going to tell your family, you're going to tell the people that you care about, "Hey, here's a thing that I've discovered that actually works. There are some good people involved, and it makes good business sense."
So that's a continuation of the relationship. I think that I did it when I was an LP. I went to people and I'm like, "Hey, I found this thing over here and you can decide, but let me at least tell you about it."
Darin: Right. It's huge.
Paul: That's all a relationship. That's all relationship-based. You get that when you build trust with people.
Darin: Yes, you perform, you communicate, and you build the relationship. I had one syndicator that said that he had one LP, that they traced nine other people that have invested since because that one person had a positive experience.
Paul: I have one that resulted in 19.
Darin: 19? I mean, that says a lot.
Paul: 19 twice.
Darin: What do you mean by 19 twice?
Paul: Well, the one relationship I had resulted in 19 into one deal, and then that same 19 went into the second deal.
Darin: Yes, I mean, that says a lot.
People Just Want to Connect With Other People
Paul: Yes. So again, it's kind of cliche about building relationships and fostering relationships, and getting to know people. I like to get to know people on a human level. You can tell me what's in your bank account. You can tell me where you made your money, and you can tell me that you were a dentist or a doctor, or a tech guy. That's great. But I want to talk to you about your family and your interest and where you live and where you came from.
I talked to a gentleman day before yesterday from Nepal. All right? Well, I'm fascinated with that area of the world. He wanted to talk investment, but I'm like, "No, no. Hold on a minute here, hold on. Tell me more about how you came to this country. Tell me more about what it's like over there." I had to catch myself as, I couldn't get off the topic matter. But I'm genuinely interested in that area of the world. So that's how I roll, Darin.
Darin: I think that's great. I mean, I see that. So my wife and I are traveling around in an RV. We purchased an RV last year and our experience is, look, there are people that we've met. Some people have crazy amounts of money, but people are just people and they're just looking to learn, "Hey, where have you traveled to? Where would you suggest?" They're not as focused on like, "Well, how'd you make your money?" It's more, "Hey, what are some cool places to go to? Where have you met good people? What have been your good experiences?" People just want to connect with other people, not because you made good money.
Explore and Meet Other People
Paul: Yes. You might like this story. My oldest son, when he was in college in his junior year, he went on a genealogical search to find out where we came from. Well, that led into, after he graduated, he put on a backpack and he traveled to 60 different countries around the world.
Paul: 60. He went to Europe twice, and then he went to South America twice.
Darin: Holy cow. How long did it take him?
Paul: Oh, he was gone maybe 10 years.
Darin: Come on. 10 years?
Paul: He would go months. He would go months and we wouldn't hear from him.
Darin: How did he fund it? Did you fund it?
Paul: No. I did not.
Darin: How did he fund it?
Paul: I did not. He would do day work. He's an artist so he would do commission work along the way. So this is the point. So I asked him one time, and I said, "Okay, listen, you traveled all around the world. What's the biggest thing you learned?" He said, "Dad, I learned two things." I'm like, "Okay, do tell." He says, "Number one," he says, "you don't have to have a lot to live and be happy." I'm like, "God, that's pretty freaking cool right there." "Number two," he says, "people will do just about anything for you if you're nice to them, and you ask nicely."
Darin: That's awesome.
Paul: And then of course he tells me stories where he would just walk into a city, he'd sit in the town square on a bench and he'd strike up a conversation.
The Human Experience
Paul: By the way, this man is an introvert. He's very introverted, very intellectual, and very introverted. But he'd walk into a town square, he'd sit on the bench, he'd strike up a conversation. Before he knew it, he had a job, he had a place to stay, and he had a ride. He would hang out in that particular town or villa for a couple of weeks and then he'd move on to the next one.
So I think that speaks a lot to us. We try to complicate the human experience. I really believe this. We really try to complicate the human experience, but the human experience is pretty simple if we break it down. We just want to be happy and we just want to connect with other people and we want to live a life that brings us a measure of contentment.
Now, here in the west, we do all kinds of silly, stupid things to try to achieve that. But in other parts of the world, they don't see it that way. I've traveled a lot. You've traveled a lot. He traveled a lot. Those older civilizations, they've reached a state of contentment with their existence.
Darin: No, that's very cool. I mean, it's cool that he was, after all that travel, that he was able to boil it down to those two things.
Paul: He crystallized it into a couple of really good lessons that I've never forgotten. He told me that probably 15 years ago.
Darin: Yes. That's huge.
Paul: And I remember exactly where we were and how he said it.
Darin: So outside of work, what do you like to spend your time on? What's fun for you outside of work?
Paul’s Interest Besides Real Estate and Recession
Paul: There are so many things. My wife and I travel. We love live music. Went and saw Chris Isaac last night. That was awesome. We do a lot of traveling.
Darin: All right, hold on. On the live music side. Have you ever gone to one of these award shows?
Darin: Whether it be country music or any kind? No? So that is something that I have to figure out how to get involved with, because not for me, my wife would love that. So I need to figure it out. If there's anybody out there listening that has a plug or something.
Paul: To get tickets to the Academy Awards call Darin.
Darin: Call me. All right, so travel and live music. What else?
Paul: Yes, I am a certified yoga instructor.
Darin: I wouldn’t have thought that.
Paul: Yoga's for big guys too.
Darin: Hey, I'm trying it actually, because I read the book, what's it? The Miracle Morning by Hal Elrod has a number of different things to do in the morning. One of them is physical and I started to do yoga. I think that it also helps with that meditation state that I do.
Paul: It does. So 15 years ago I was running marathons and I was training for my fifth marathon. I was hurting. Everything hurt, legs, knees, hips, ankles, everything hurt. Someone invited me to a hot yoga session and 15 minutes into that hot yoga session, I decided I would never run again.
Commitment to Self Improvement
Paul: Yes. Not to that extent. Now, I could go out and bust out five miles.
Darin: Not 26?
Paul: Not 26. Although I don't know, I think that's a mindset. I know that a month ago, I went to a retreat and we did a wilderness run. It was two and a half hours long. I ran pretty much the entire two-and-a-half hours through the wilderness. I only stopped for a few short moments here and there to catch my breath. So I think that's a mindset.
But anyway, so then the yoga worked for me and I became committed to learning more about the origins of yoga and everything. Then I found myself, I didn't find myself, I went to an ashram in 2018.
Darin: Holy cow. I would never have thought you were this much into it.
Paul: And I spent 30 days at an ashram in The Bahamas. And for 30 days, we meditated for four hours a day. We practiced yoga for four hours a day. We ate vegetarian. The entire thing was vegetarian, no sugar, coffee, alcohol, sex, processed foods, and no meat. So for 30 days. And it was a group of Hindu swamis that taught us so I went.
Because the other thing is, I have a fascination with theology so I study theology and I have a fairly broad knowledge of many theologies in the world. So I had not studied Hinduism, and this was an opportunity for me to study Hinduism. So I was immersed in that. Well, out of that came a 200-hour yoga teacher certification. So every once in a while, I'll teach yoga. I don't do it too often, but every once in a while I'll teach it.
The Perfect Checklist
Paul: I practice three, or four times a week.
Darin: That is very cool.
Paul: Going to the gym and such. So I like to play golf. I hunt. We love to go camping, my wife and I, so we'll actually go rough it for a little while.
Darin: All diverse hobbies there, my friend. It's a little bit of everything.
Paul: You have events in your life that change you. So I had been married for a long time. I had been married for 26 years. 26 years, then I got a divorce and it was a soul-crushing event. It just was. I think it's rougher on men than men want to allow or men want to confess to. It affects our dignity and we cast a lot of blame. A lot of men do. I did.
Okay. So then once I cleared through all that and got back on track, I spent the next 13 years as a single man. I didn't really think I was going to get remarried. I liked the idea, but I didn't really know that I was. Then I met Leticia and we met four years ago, and she also had been single for 13 years and she also had been married for 25 years, I think.
And she also had two children and I have two children and she also had grandchildren and I have two grandchildren. She also liked to travel and everything just like, if you could do the checklist, it was a perfect checklist. So we got married 10 months later and we just made a conscious decision.
Real Estate Investing Is an Adventure
Paul: So we talked about values earlier. I have a list of values that I've written down. By the way, I have it on my wall. I'm a passionate, creative, adventurous, and giving man. So that's over here. I have that. Adventure is one of my values. It's in my value system. I don't necessarily mean climbing Mount Everest. But right here, this interaction that you and I are having on this podcast, I identify as adventurous. We didn't know where we were going to go with this when we started. This is an adventure. Real estate investing is an adventure.
Paul: Going to a camp and doing a wilderness run for two and a half hours, that's an adventure. We were invited, Leticia, my wife, and I were invited last month to dress up as Santa Claus and Mrs. Claus. That was a freaking adventure.
Darin: I have yet to do that. I don't know that I want to do that.
Paul: Well, I hear you. I'm just going to tell you this, Darin, I'm just going to tell you there. That is checked off my list.
Darin: Yes, absolutely. One and done.
Paul: I ticked that box. So I mean, hey, it's all perception. We want to live a life of adventure and diversity and so real estate investing is sure part of that. That's for sure.
Darin: Absolutely. So, hey, I mean, you've got a ton of experience. Look, I met you and your wife and good people. Looking to do good things in the future. If people that are listening to this want to reach out to you, what's the best way for them to contact you?
The Purpose of the Empire You’re Building
Paul: Paulmontelongo.com. By the way, the origin of my name is Northern Italy.
Darin: Is it really?
Paul: So when my son traveled, he found a pueblo in Spain with the name Montelongo, and that led him to Northern Italy where there are villas. There's a villa over there with our name on it. So that's what we claim. By the way, if anyone asks me the origin of my name, I tell them, "If you owe me rent, I'm Italian."
Darin: Nice. Nice. If you want to reach out to him, paulmontelongo.com.
Paul: And that'll take you to all my social media sites. I'm all over social media. We try to educate on social media about real estate investing, but then we also try to show a lifestyle that we're enjoying life.
Darin: That's important. Look, it's not just about growing an empire and building wealth, it's also about why you want to do that. So you go out and have some fun with your family. I mean you don't want to spend all your days just toiling away just to have a bigger bank account.
Paul: I'm going to throw this in there, because everywhere I go, I'm throwing this in there. So Letitia and I, we're working on a show. So we're putting together a show, and that's all I'm going to say, but other than it is designed specifically for boomers and people our age to expand their life and squeeze the most out of this last third of their life. Real estate investing is a serious part of that for us, as is travel and adventure.
The End Game
Darin: A show can mean a lot of different things.
Paul: It can.
Darin: Is it a TV show? Is it a YouTube channel? What kind of show are you talking about?
Paul: The endgame here is to have a Netflix special. So if you're connected, if you're listening, you're out there and you're connected to Netflix and you want a winner.
Darin: There you go. All right. So get Paul on the Netflix documentary. Find me some tickets to bring my wife to the music awards or whatever.
Paul: Yes, you got to put it out there. Get this man to the Academy Awards. Get him to the Academy Awards. So who do you want to sit next to at the Academy Awards?
Darin: Oh, I don't really care. I just want to make my wife happy. That would be a dream for her to go to one of those types of events. Well again, listeners, I hope you enjoyed that one. Until next week, we're signing off. Thank you.