Co-Founder and Chief Investment Officer of Peak Asset Management Bob Thomas
Co-Founder of Chief Investment Officer of Peak Asset Management Bob Thomas
Gabriel Flores 0:02
Hello, everyone, and welcome to the shades of entrepreneurship. This is your host, Mr. Gabriel Flores. Today I have the co founder and chief investment officer of peak asset management, Bob Thomas, what's going on, buddy?
Bob Thomas 0:17
Nothing. Thanks for having me. It's quite a day out there.
Gabriel Flores 0:20
It's raining. Yeah, you know, it's kind of funny. I had an episode that we were talking about the heat in Oregon, and we're completely 180 and is pouring down rain.
Bob Thomas 0:30
The season has shifted,
Gabriel Flores 0:32
shifted. So Bob, thank you so much for coming on the show. First, let's introduce the world who is who is Bob.
Bob Thomas 0:40
I am a real estate entrepreneur, based in Portland, Oregon. My company peak asset management, we own and operate commercial real estate throughout the metro of Portland and the greater West coasts. And we're looking to expand nationally over the next year to two years. Nice, where you're trying to expand to, We'd like some markets in the southeast, and on the Eastern Seaboard. So we like Atlanta, Charlotte, Metro, Raleigh Durham, get into more specifics, but just looking to kind of expand to where we see some economic fundamentals that support potential investments.
Gabriel Flores 1:17
How do you how do you go through that process of like determining what is the economic benefits of going through these markets?
Bob Thomas 1:22
I think we'll start with kind of major, major economic major economic factors supply constrained from a, you know, kind of supply side perspective, as well as population growth, median income, you know, just kind of like larger, larger metrics. So when you're buying something, you're saying, there's not going to be a ton more of what I'm buying coming online to delete the supply. And then you know, the demand is increasing relative to who's who the user bases.
Gabriel Flores 1:49
Nice, nice. Now let's before we get too deep into what, what, what is what does your business do, let's let's kind of talk about what peak Asset Management is.
Bob Thomas 1:59
Definitely. So we are a vertically integrated real estate investment company. So we raise money from high net worth individuals, and invest it on their behalf in usually value add type real estate investments. We are also integrated. So we're real estate, we are real estate brokers, we have a property management company. So effectively, we're like the quarterback of a real estate deal, where we acquire and find the deal. We raised the money for it and operate it cradle to grave.
Gabriel Flores 2:31
Nice. Are those now? Are those similar to like, what are they called like the Rijks are right calm and REITs
Bob Thomas 2:38
Real Estate Investment Trust, there's a lot of different potential ownership structures of real estate. This is not a REIT. REITs are very specific in terms of how they're capitalized how money gets dispersed back to the owners. We're typically doing things, mostly in syndications right now, and some general, some joint ventures but it's basically, we do a lot of Regulation D, kind of unregistered securities, you have to raise them from accredited investors who are like high net worth individuals. And yeah, so there's some specifics in terms of who can invest in the deals. But mostly, they're just individual partnerships, or LLCs. With various limited partners who are investing.
Gabriel Flores 3:19
Gotcha. So where did the concept come from? How did how did this all current? How did the company start?
Bob Thomas 3:26
Well, so my background is probably a good place to start with. Yeah. So I went to school for accounting down in San Diego, got a couple of degrees in accounting. But I had really wanted to do real estate, again, been interested in real estate since I was like eight, I think I saw a bunch of everyone who I saw who was extremely wealthy or well off, they all had one thing in common and it was a bunch of property ownership. And I was like, Man, I'm making this connection, I think I need to do that. So I did a lot of internships in college. And I was always trying to get into the just kind of dip my toe into different facets of real estate. But when it came to picking a major in college, the question was, what do you do real estate right away? Or do you get more of a, you know, kind of business oriented, educational base that you can then leverage with some cajoling from other people in my life who were helping, who were helping finance the college education. I ended up going the accounting route, which was great. I got a couple degrees in accounting out of school went to work for a big public accounting firm, audited large public companies, a lot of tech mergers and acquisitions. So it really got to understand, you know, kind of like just the baseline of business from a very high level. public capital markets like all that, all that fun stuff. After three or four years there, I realized that I did not want to go on to become a partner in a public accounting firm. They don't, they make a lot of money, but they never have time to spend it. So I at that point was up in San Francisco. And I got a job with CBRE, who are though, you know, one of the larger commercial brokerage houses in the world, worked on their institutional capital markets group. So we were selling large office buildings for institutional clients, pension funds, sovereign wealth funds, you know, people who own the office towers in downtown San Francisco. So we were, you know, basically helping people buy and sell those kinds of funds, buy and sell those kinds of deals. That's where I really got a an understanding of how large commercial real estate deals are put together, our other valued etc. After I'd seen enough of that, I said, Well, instead of being a broker, how about we, you know, become the principal and do it on that side of things? So, there's a story behind that. But that's kind of how, you know, I kind of saw the light I said, you know, you can make a percentage on Commission's selling these deals, but you're really leaving, you know, someone else to clean up, make it make the real money. So that was kind of like that.
Gabriel Flores 5:57
That is very true now. So how did you guys formulate the business? What did you guys decide to do with like LLC, S corp, C Corp.
Bob Thomas 6:04
So I think what you see and there's a lot of different underlying businesses, I think I probably got 40 or 50, LLC is with the state of Oregon and around the country right now. Most Asset Management kind of platforms, I mean, you can see it from, if you were to, if you were to take my company to scale, which we're trying to do, you would kind of look at it like a Brookfield, or a Blackstone or KKR, at least on the real estate front. So those are kind of the large companies. And what you've seen is, before 10, or 15 years ago, they were all partnerships with a bunch of sub entities. And it was just, you know, like, every deal was kind of capitalized individually that rolled up to this parent company. Over the past 10 years, they've all gone public, and they've seen their stock prices go nuts. But so we're kind of in that partnership kind of phase where each deal is kind of individually capitalized, the partners get their share, the general partner, you know, gets their promoted interest. And so So right now, peak is a LLC, owned by my, my portion is owned by my S corp, for tax reasons. And then I own my all my investments through a separate LLC, that's just a disregarded single member LLC. I could also I'm a former CPA, so I could get into why that's
Gabriel Flores 7:24
smart. Why that's dumb. Yeah. Well, we'll talk about that after the show. We don't want to try to give away the farm over here now. So let's talk a little bit about the funding of the business because you know, this is this is this is really good stuff. Let's let's talk about did you, especially real estate, it's kind of difficult, because real estate kind of is where, as you mentioned, you're working with high capital individuals. Those aren't just laying around, right? How, how do you build this business? And then one, first, how did you get the capital build the business? And then how did you build it? Because you mentioned your scaling. So how did you kind of get from point A to point B, from the finance perspective bootstrapped?
Bob Thomas 7:59
At least along the individual side of things? Perfect? Yeah. So I mean, I am looking back on it, you know, I probably should have raised more capital upfront and given away some of the company, it would have accelerated our timeline by a few years, I would also not be as equity heavy and as the business. So you know, there's trade offs there. Work Integrated, right. So I think the big thing for our business is the property management company is kind of the base revenue generation where if everything else goes to shit, you've still got this property management company that, you know, downturn or not people are, unless there's COVID going to be paying rent, you're going to be getting fees. And so that should you know, theoretically sustain the business. So it's been how do we bootstrap the property management company to scale to support the overhead for the, you know, acquisitions and other parts of the business? Now that we've gotten there, I look back and I say shit, I should have just bought a property management company. made it a little easier. Yeah. But, you know, nonetheless, we're here now. And you know, we're at that scale point where we're really starting to look at hiring, hi level, Asset Management acquisitions, folks to really kind of accelerate the growth of the of the business that will, you know, end up feeding the property management company and kind of create this virtuous
Gabriel Flores 9:24
cycle. Nice. So, you know, one of the things you mentioned is, you know, you have roughly 4050 LLCs, right. What was your first business?
Bob Thomas 9:33
Man? Um, well, so I created, I met, so I'm a real estate broker. And so I created an entity to funnel the revenues from that real estate brokerage, you know, through to me. So that was one of the first businesses I created one of the first more entrepreneurial kind of real estate investment ventures. I think, my it was a partnership between a capital partner, myself and my contractor friend, and we went and flipped a house in the southwest hills or the Northwest hills of Portland.
Gabriel Flores 10:09
Nice. Nice. What would you say has been difficult about this whole process, the entrepreneurial versus just real estate? We're all of it, I'd say.
Bob Thomas 10:23
You know, I, I really enjoy. Like the challenges that come along with it, I think that I think it's frustrating not being able to grow more quickly. I mean, we have goals, you know, like, like, people will kind of laugh when I say this, but like, I have a 10 year target of, of, like with Blackstone in my sights. Yeah. Right. So I mean, they're the biggest owner of real estate in the world, right now they've got like, 120 billion of assets under management on the real estate side. And our goal is to hit 120 billion inflation adjusted in the next 10 years. And so, you know, when it's like, Alright, how do we scale that more quickly? Because, you know, I mean, you need to be on a serious J curve, exponential growth, hit that kind of target. And so every month that we're, you know, not putting new deals in the pipeline to close, et cetera, you know, we're, it's harder to make that target. So the biggest thing for me, it's just like, how do I push momentum and not myself get in the way of that momentum. And in my mindset shift over the past year or so, where we're not a deal by deal company anymore, like we are a real estate company that buys operates real estate. And so thinking of it more, like I'm building a company that does deals instead of I do real estate deals, that might not seem like a, like a total mindset shift. But it was, it was huge. And so now we're just working on basically building a company that does, what I used to kind of think of was the end goal.
Gabriel Flores 11:52
And I would imagine, you know, pivoting like that also pivots your marketing scheme, right? Did you how do you market your business to to your clients?
Bob Thomas 12:03
So I think there's two pieces right of that there's the acquisition side, where you're, you know, marketing to the sources of deals out there, whether it's off market deals, brokers, etc. And then there's more of the the capital raising side of things. Both so far have been very referral driven. And, you know, I think my, I wear a lot of hats in the real estate industry, and then around town. And so just my network has been able to source the deals. And then on the investor side, it's, it's been more like referral based. So you know, you start out but but from from investors, so you just start out, you can get maybe two to three people in a deal that finally pays off. And then all of a sudden, these guys are like, Oh, what are you, you know, they're talking to their buddies, what are you doing for investments, I got this guy up in Portland, who, you know, keeps hitting keeps knocking him out of the park and these deals, and then you just start getting referrals that way. So, you know, starts out kind of friends and family on one side of things, and then and then just starts to ballooned from there. Where I see it going, though, is definitely more, you know, kind of corporate based, where, like, we have a capital group that's going out, and really just working relationships with high net worth investors, we've got an acquisitions person who, you know, has a background in brokerage, who's really just, you know, everyday pounding the pavement for deals. Up until now, myself and a few partners have been doing all that work. Yeah. And it's scalable to a point but the real way to scale is to remove myself from that process.
Gabriel Flores 13:34
Yeah, what was what would you say has been kind of difficult about scaling this business currently.
Bob Thomas 13:42
It's, you need to prove that you're able to, you need to prove to lenders, you need to prove to equity partners need to prove to the seller to these deals, that you kind of have the capacity and the experience to do it. And so it's that, you know, it's kind of like how when I first wanted to break into real estate, they were like, Oh, do you have any real estate experience? I was like, No, I really want to have real estate experience. But like, No, I don't. But if I if I don't have experience, how am I going to get experience, you know, and so it's this this vicious cycle you can't break into? It's the same kind of thing when you're starting to scale, right? Like, we're in contract on a 30 unit, multifamily property that we're closing next month in Southeast Portland. If I went and tried to buy a 200 unit deal, you know, these guys would be like, Well, what other 200 unit deals do you own? Well, I'm sorry. So it just takes a little bit to build up to that point in terms of, you know, now we've got 200 doors under under, you know, ownerships and now it's like, okay, well, look, we have it here. It's kind of aggregated, but we've got the capital and we've got the experience. So So let us go do it. So that's the really hard part about scaling. This is it just takes time to build the experience and build a cache to where all the players as you start leveling up in this industry. take you seriously.
Gabriel Flores 14:54
What have has there been any easy parts of this process?
Bob Thomas 15:00
So, I think I come from, like, what's nice is with my background of kind of having done this at some of the higher levels of real estate, I see how I've seen how it works. And so, you know, I come in with a lot of with a lot of institutional level knowledge that, in the, in the areas of the business I've been playing in, which has been more mid market up till now, you know, buy an eight Plex buy a 20, Plex, something like that, a lot of those owners and brokers and everything else don't have the same, like institutional level knowledge and, and ways to creative ways to structure things. And so I'm able to kind of lean on that a little bit where, you know, someone might only be looking at a deal in one way, either on an How do you, you know, value add the property to an exit? Or how do you capitalize this or you know, is there you know, some form of creative debt involved, I'm able to kind of layer all that on, and then they can usually create a better solution that drives more value, and I can do there, therefore pay more for it, or in some way able to execute the deal better than someone else who's playing in that same level.
Gabriel Flores 16:05
So let's say let's just, let's give, let's give the folks at home an example. I'm a client, let's say I'm a prospective client, I'm coming with $100,000, I want to invest, take me through the process that you would take a client.
Bob Thomas 16:21
Yeah, so I think the first thing when I meet with a prospective investor, is is trying to understand what their investment goals are. Because everyone's investment goals are different, I could have a killer deal that I think is just amazing. But you know, if this deal that I have is I'm going to build 30 units of ground up multifamily in Portland, and you are, you know, very risk averse, near retirement, looking for cash flow, like those two down the line, right, there's a ton of risk and development, it could all go sideways, you're not gonna see cash flow for at least two years. And so you want to make sure that the investments aligned now, like we have three main kinds of investments that we focus on. One is more of that like kind of day one cashflow, it's a little bit lower yield, but it's safer. And we usually are able to buy the properties well enough where the deals make sense in a fairly low, almost like a turnkey, kind of almost like tuna. Yeah, kind of, it's like, I'm never gonna, until I get way cheaper capital, I'm just never gonna buy something that's like turnkey. But, you know, I'll buy like that the property is mentioned in in downtown Portland, like, We're sorry, Southeast Portland, within 90 days of owning that thing, we're going to be hitting 10%, like levered cash returns. So temporary, like you put in 100 grand, you should there should be like, like 10k a year in income that's coming back off that thing, just after 90 days of doing a few little rent rule changes, super low risk, you know, cash flows, day one, the second, so that would be more like kind of our value, add cash flow play. The second one is, like opportunistic stuff. So we're building apartments around town. Not a ton of cash flow day, one, way more risk, you're also looking at like significantly higher returns, right? So you know, wait two years, and maybe you get like, you put in your 100 maybe like 140 or 160 back or you know, something more like that. And then there's a third piece that we've done a few deals of and I'm looking to do more of where it's more like a tax efficient strategy. So we bought a a car wash recently, and a mobile home park. And those are like there's there's some some tax gimmicks in those kinds of assets that that make them make them really attractive from a year one depreciation standpoint. So like, we bought a gas station or sorry, a carwash for 800 grand, and we got 600 grand of last year one on it. And as real estate professionals, we can use that to offset or other active income. So if you think about that at like, you know, 50 or 40% tax rate, like the IRS gave us about 300k Yeah, buy this place, and we only put in like 200k in cash. So like you're just walking into a good deal because like you know, the IRS is basically paying you to buy it. Yeah. So value add cash flow, kind of more opportunistic development, and then like tax efficient investing are kind of our main three avenues that we looked at when when someone comes in so I tried to place you you know, if he said, Hey, I got 100k I try to place you on one of those buckets. Now, if it doesn't work, then it doesn't work. And then we'd go in and try to put you into the right deal for you.
Gabriel Flores 19:37
And you know, one of the things you highlighted is the different tax gimmicks and schemes that are available to individuals such as myself and individuals out there that are listening this show take advantage of those try to lower your put as much as you possibly can and your retirement your IRA you know always I think it's this year is 19,500 max that out. We're going to talk after the show about this LLC stuff a little bit more. But but for So, you know, let's let's kind of, let's go back a little bit. Think about all the things that you've kind of been through now, what advice would you would have loved to had before you got into this business?
Bob Thomas 20:14
So like you're, well, first of all right, like, I think that you're, you are the sum of your experiences. And so, you know, I don't really live with regrets. And, you know, I think that, you know, with all the, I mean, I've failed quite a few times, and different things I've done, but I've learned from those. And so I wouldn't be who I am today, without having done that. I do wish that I had started actually acquiring real estate at an earlier age. I think the first, I think I bought my first piece of property maybe five years ago, maybe five or six years ago. And I should have done that when I was in my early 20s, I could have done it, I just didn't know how to buy real estate. So if I had to go back and tell myself, I will give us a very brief overview of like, look, there are a few different ways where you don't really need cash, just go and buy a property, because that kind of changes your mindset and thinking how easy that how easy it is to get into, you know, kind of continuing, continuing to portfolio properties. So I feel like, you know, like, I'm like, 32, I'm not like super, I feel like I'm still my, you know, prime and able to do this well. But I could be 10 years ahead. If I had started 10 years ago.
Gabriel Flores 21:22
Yeah, you know, it's kind of frustrating, I must admit about the the housing market sometimes is it is a little difficult to get the loan versus a student loan. You know, I always talked about this often, you know, I started this podcast because I went to Syracuse, I was reading all these case studies, all these entrepreneurs, and I'm like, why am I paying on this money? When I can just interviews entrepreneurs for free and have them discuss? Federal government was willing to give me that student loan pretty quickly with a 6% interest. But trying to get a home loan or with a 3% interest a lot harder these days? It seems like it was that said, What advice would you give younger you knew their real estate investors or future prospective investors? What What advice would you have for them?
Bob Thomas 22:08
Similar to you know, what I wish I had known when I was younger is, you know, there's other ways to buy properties and get into real estate deals, then taking you know, that's working your ass off for five years to get a 20% down payment to go and you know, put some money down or even, you know, putting your 5% down and paying PMI, like there are creative ways to find off market properties to work with sellers to have sellers lend you the money. Like there's a lot of other ways besides what people think is is the only way to buy real estate to do it. And so, you know, whether you go out and network and invest in groups, or you know, basically just expand, you know, go to education, you know, seminars, like in some way, invest in yourself either time, or money for education, or just networking, to find people who are doing it, and just figure out how to add value to them and just be a sponge and learn from them. And the more quickly you can go and start doing that, the more quickly you can, you know, leverage that that knowledge gained in order to benefit yourself.
Gabriel Flores 23:12
You know, one of the things you talked about is one a lot of this business has been referral base, right? Do you want to talk about the friends and family you know, there's the one who really started and now you kind of talked about network, how important is networking in your industry, it's everything
Bob Thomas 23:27
I mean, it is literally everything and if you if you if you could tarnish your reputation very quickly and so you know being being able to one deliver on what you what you say you can consistently and then to kind of be a resource for you know everyone else I think that helps when if if you can kind of be that that choke point in the funnel and you can know everyone and you can know what everyone needs and then just kind of be that connector all of a sudden you become the go to person and so the more knowledge you have right around for me it's around like the financing side like if you know how some oh well you should partner with this guy he'll give you the equity for the deal and here's where you can get the debt from and oh then then you have the person who will I've got a guy who needs the equity here you know I'll put you two together all of a sudden you start to become that that you know center point in the hub. Yeah. If you consistently do that and perform you just start to get a lot of inbound traffic and you start to see a lot opportunities are the good first looks at opportunities that other people don't so answer your question network in my industry is absolutely everything
Gabriel Flores 24:39
nice. So for the folks that want to network with you, they want to get a hold of Bob Thomas want to hear more about peak asset and management maybe possible investors out here listening, how do they do that?
Bob Thomas 24:50
So I am a total real estate junkie. I love talking deals and I love just kind of chatting through investment you know investment ideas and and options and trying to fit people in the right, you know, the right place. So I'm always happy to chat with people. My number is 503-489-7658,
Gabriel Flores 25:11
given out the phone number, I like that, or
Bob Thomas 25:14
B Thomas at peak asset, m g t.com. Either of those ways perfect to reach me. I am always open to chat, like, you know, if someone's looking at buying a house and just like want to kind of talk through different options, like, I'll take 15 minutes and chat with you about it. If you're looking at like, you know, buying your first office building, you know, and trying to figure it out, like, I'll help you out with that if you just have never done real estate before and are curious as to what real estate's about, like, let's talk. And I
Gabriel Flores 25:43
gotta admit, this is very true. In fact, you know, completely unrelated to this, but how you and I met, was we were just randomly at the food carts there in Beaverton and Beaverton, Oregon. And we just started chatting, and then it became, oh, you're into real estate. And you actually knew one of my former guests, Bob boxer who I went to school with and then and then we're like, hey, let's, next thing you know, we're chatting. We're having drinks and now we're on the podcast.
Bob Thomas 26:09
Yeah, exactly. It is. It's all about meeting people are staying open to seeing where relationships can go. Yep, that's very true. Bob,
Gabriel Flores 26:17
thank you so much for being on the show. For those at home. Please visit us on Twitter, LinkedIn, Facebook and Instagram. Have a great night.