[00:02:45] Patrick Carroll: So you have these properties that are performing well, but with the increase in interest rates, nobody really knows how to price properties. Cap rates are tied to interest rates, and nobody really has conviction on where interest rates are going. So there’s a disconnect on what people are willing to pay for properties, what sellers are willing to sell for.

[00:03:04] Patrick Carroll: So the market’s basically frozen a lot of times when that happens too. The last time that happened was 2008, 2009. So there’s definitely similarities there. I don’t think we’re quite there yet. But a slip up in the single family home market could certainly put us back at in that type of.

[00:03:21] Trey Lockerbie: Now you mentioned you don’t necessarily focus primarily on the single family market, but there is an interesting dynamic playing out there where there’s this low inventory happening, but also due to the high interest rates, there’s also lower demand. So a lot of folks have locked in very low rates and aren’t looking to make a move, and I think we’re often prone to thinking in these terms of boom and bust.

[00:03:42] Trey Lockerbie: Right. But is there a potential for a very sideways market in real estate for a longer period to come. 

[00:03:49] Patrick Carroll: Yeah, definitely. I mean, I think that’s what you’re looking at now. Like you said, people that were lucky enough to lock in, low interest rate. Mortgages are going to be, you are going to stay put. I think the only thing that causes somebody you know that has a good loan on the property to sell is if there’s a panic where.

[00:04:07] Patrick Carroll: You’ve read in the paper, home prices have gone down 25% and you start seeing your neighbors dump properties, things like that could be a catalyst but right now it’s literally double the cost to buy a new house, where interest rates are. So that will keep people renting longer.

[00:04:23] Patrick Carroll: It’s definitely a sticker shock. I think people, maybe they’ve been looking to buy for a couple years, are now seeing they could afford half the home. So I do think it’s going to keep people out, whether it’s renting or if they have good mortgages in place for the time being. 

[00:04:39] Trey Lockerbie:You  mentioned that during the GFC a lot of lending froze up, but that seemed to be kind of after the Lehman moments and the other collapses that were falling underway or are already underway.

[00:04:47] Trey Lockerbie: And we’re seeing the freezing happening now almost before we’ve had any sort of big break it would seem. Right. So is that something that is just different as in like history doesn’t repeat itself sort of thing? Or is this something that’s totally different in the terms of where a big break may or may not ever come.

[00:05:05] Patrick Carroll: Yeah, it’s totally different as far as I’ve been in the business. I’ve been in the business since 2004. What’s causing the freeze this time there? As you mentioned, there was no big failure of a big bank or anything like that purely capital markets, and I think everybody expected interest rates to go up.

[00:05:22] Patrick Carroll: Nobody expected them to go up as rapidly as fast as they did. So what you’re having now as lenders don’t really know how to price their debt; they want a price to get a return. They don’t want to put money out today and have interest rates keep rising and their loans are outta water.

[00:05:38] Patrick Carroll: So it’s purely a capital markets thing, I think. You could point to the office sector. I do think you’ll see some defaults there just because of the weakness of that sector. But I don’t think you’ll see massive defaults or a bank failure that’s going to cause the market to freeze even more.

[00:05:55] Patrick Carroll: I think the market freezing may cause massive distress because property owners that are looking to refinance, or all the developers that have construction loans on, right. Those are short-term loans. When they go to finance the properties, their properties are going to be underwater and they’re not going to be able to finance ’em.

[00:06:14] Patrick Carroll: So that can cause a downturn for sure. All the corporate debt that has floating rate, everything that basically causes interest or they use interest and leverage is going to be affected by this. Even the national government they’re. So much more in interest to carry that’s going to have an effect.

[00:06:30] Patrick Carroll: So there’s a lot of things. I mean, everything is basically tied to interest rates. I mean, I remember Warren Buffet said interest rates are like gravity. They keep every as they go up, things like that. So it’s really tied to everything. But yeah, there definitely was not one big failure unless you consider what the federal government’s doing.

[00:06:49] Patrick Carroll: There was no big failure that caused this. It was. Interest rates rising faster than anyone expected, really shock the system. 

[00:06:58] Trey Lockerbie: Yeah. Part of me thinks that we have this almost PTSD from that huge collapse that we’re just waiting for that next big drop. It’s interesting to think about ways where this might just be more like a normal recession where perhaps things just kind of Recover and it’s really hard to tell.

[00:07:13] Trey Lockerbie: I know that you got your start by financing homes a hundred percent financed, and a lot of people were doing that and were rug pulled in 2008 due to being over leveraged. But you managed to sidestep that. But when I see stats, like 50% of Airbnb units were listed since 2020, it tells me that perhaps a lot of people took out these HELOCs and bought extra rental units or properties with.

[00:07:37] Trey Lockerbie: And if real estate valuations continue to decline, that could cause some cascading effects as well, like margin calls and vast liquidations, et cetera. When you talk about the potential for a further decline, do you see something like that happening or something similar? 

[00:07:53] Patrick Carroll: Yeah, I mean that definitely could happen when people start speculating. I mean, you see it happening in China right now when people speculate on homes and they don’t have enough revenue coming in. So Airbnb, if people stop traveling as much, stop using those people are going to have to feed those properties. I mean, I remember back in oh eight and a lot of people had rental properties on 08 & 09, and even friends of mine had five houses and they were renting them.

[00:08:18] Patrick Carroll: And as soon as a resident would move out, they couldn’t afford their mortgage and they ended up walking away. It’s a lot easier to walk away from an investment property than it is your primary residence. So yeah, I definitely think that could be scary. You know what causes, mainly every downturn that I’ve been part of is a shock to the capital markets and the debts.

[00:08:38] Patrick Carroll: So yeah, if you have a mass wave of people handing back the keys and these banks. Supposedly in good shape becoming in not so good shape. Now you could definitely see something very resemblant of 2008 and that’s been my view. I mean, everything’s fine until it’s not. And so, yeah, the banks may be good right now, but you know, if 25% of the people with home loans stop paying, it’s a really different story.

[00:09:02] Trey Lockerbie: Now on that note, that has been the narrative, right, that banks are strong right now. And despite this temporary period where the government suspended the statutory lending ratio requirements that has now expired, the major banks are being held to the SLR again, which is to say that they have to maintain 18% of their net demands and liabilities and liquid assets how they came to that number or, and whether or not it’s sufficient is a different discussion. But the general consensus is that banks are in a healthy position. If that’s the case, where is the economy most vulnerable in your opinion? 

[00:09:37] Patrick Carroll: I mean banks are so complicated to begin with. They are.

[00:09:41] Patrick Carroll: And you never really know what banks doing until you peel back the covers, I mean, Loans for big lending funds. I mean, debt funds, basically 80% of the properties in my business, in my industry were financed last year at that, I believe it was last year, on debts, debt funds. So very [00:10:00] aggressive lending, very short-term lending too, almost bridge loans that are all in trouble right now.

[00:10:05] Patrick Carroll: They’re all under water. Well, they operate off of warehouse loans given to ’em by banks. So if these guys are in trouble, the bank becomes in trouble. So there’s a lot of things out there that a lot of everyday people don’t really understand about banks. I mean, that’s what caused the last downturn was CLOs.

[00:10:23] Patrick Carroll: I mean, the housing market was a big problem, but you know, it was leverage on leverage that really brought the house down. So I do think you could see something like that. The banks have been restricted. First, I’ll tell you right now, they’re not in the. They’re not giving quotes. They’re not financing anything.

[00:10:40] Patrick Carroll: So whenever something like that happens, it makes me believe they’re not as healthy as they may allude to. 

[00:10:46] Trey Lockerbie: Well, there appears to be perhaps this situation happening where. People are withdrawing from their savings account. That’s only yielding 0.01% in order to put it in like a money market fund.

[00:10:57] Trey Lockerbie: Right. Which could give you 4% right now. And that’s actually kind of ending up in these reverse repo markets it would seem. And so that could potentially, I could see being an effect on the banks. But I’ve heard you also talk about shadow lending or other kinds of situations that aren’t held to these SLR standards. What are you seeing in that world, or have you noticed any weaknesses or cracks in the system in that regard? 

[00:11:22] Patrick Carroll: Yeah, I mean, the debt funds I just referred to are all but out of business and it’s ugly. I mean, they’re getting capital calls. A lot of the loans they’ve made are underwater, so like, and it’s leveraged upon leverage, meaning if they have a hundred million dollars, they lend that out and then they borrow 50 million against that.

[00:11:40] Patrick Carroll: So they’re lending it out at 150. So when that hundred million dollars that they lent first drops in value, they get a capital call from Bank of America, JP Morgan, whatever, and eventually it comes to a point where they can’t make those capital calls. So I think you have a period right now where everybody’s kind of frozen up.

[00:12:00] Patrick Carroll: These debt funds may not be getting paid their interest, but you know the banks don’t want to start foreclosing yet. So I do think about shadow baking. You know it’s happened in the single family market too. All these. Mortgage companies that you’d never really heard of were lending money probably at weak criteria, and you can’t really do that much volume that some of these groups were doing without dropping your underwriting a little bit.

[00:12:25] Patrick Carroll: There’s no secret sauce to lending. And when you see some of these groups, some of these debt funds, some of these non-traded reached, come out and do such volume, or you have to realize that they’re. Dropping the underwriting, they’re probably being a little too aggressive. I mean, I know Blackstone and Starwood, they’re beret nests.

[00:12:43] Patrick Carroll: I mean, they’re getting tons of headlines right now, but they were the most active borrowers over the last two years. They were paying prices that nobody was paying. They were way overpaying, and it’s just because they had too much capital. So when you look at somebody that’s doing that much volume with a relatively small shop, you have to realize that again, they’re being a little too aggressive.

[00:13:03] Patrick Carroll: And Warren Buffet says nobody knows who’s swimming naked till the tide goes out. You know, a lot of these groups that get aggressive in good times and look really good in good times, the second there’s a little hiccup, they’re the ones that usually are in the most trouble. 

[00:13:16] Trey Lockerbie: You mentioned there might become a time where these tenants or these homeowners can’t pay their actual mortgages or their rents.

[00:13:23] Trey Lockerbie: What are you seeing in your tenant base? Are you able to push rents anymore? Are most people paying on time or is inflation pushing up delinquent? 

[00:13:32] Patrick Carroll: It’s kind of a little bit of everything. We are still able to do rent increases, so the fundamentals are still strong. One thing we’ve noticed lately, probably over the last 30, 60 days, as delinquencies have started ticking up now, nothing to a point where it’s terribly concerning.

[00:13:51] Patrick Carroll: Nothing like oh 8, 0 9, but we are starting to see delinquencies happen. That typically is because of job loss or some other financial strain. So a lot of times these things are delayed. Not everybody realizes that their credit card bill is now higher because of their interest rate.

[00:14:09] Patrick Carroll: And so eventually and their food bill is now higher and gasoline’s a lot higher. Until eventually they’re outta money. And so it’s unfortunate, but that’s what’s happening. But again, the market that we primarily play in is still strong. I mean, there’s still a demand for rental housing. I think the demand’s going to continue because as we’ve discussed, it’s nearly impossible for a lot of people to buy a home right now with interest rates.

[00:14:33] Patrick Carroll: We had record low interest rates for 10 plus years. So I think what you’re going to see. People that are having financial trouble, one aren’t going to be able to buy homes, but if they get in real trouble, they’re not going to be able to pay their rent. So it’s a scary situation, I think, for all asset classes.

[00:14:50] Trey Lockerbie: Now with the lenders freezing up like we talked about, does that mean that you yourself are also hyper cautious? Is Carol being active or are you also waiting on the side? 

[00:15:02] Patrick Carroll: A little of both. I mean, we are active, we are underwriting a lot of things. We’re working on a large transaction right now. I think the challenge is that we are still able to get debt.

[00:15:13] Patrick Carroll: I mean, when I say the markets are frozen, the biggest and best borrowers can still get financed through the agencies. So Freddie Mac and Fannie Mae are still in. Their loan to values may be smaller than we’re used to, but we can still get financed. The real cause of us being on the sidelines is what we want to pay is not necessarily what the sellers want to sell for.

[00:15:36] Patrick Carroll: So unless somebody has to sell right now, they’re kind of holding on and waiting to see if prices come back to where they were. And opportunistic buyers. Buyers like us. We’re putting out offers every single day and it’s just right now there’s just a disconnect between what we feel values are and what the market in general is willing to sell for.

[00:15:57] Trey Lockerbie: Now, in the aftermath of the GFC, you were able to acquire a few property management companies that helped set the foundation for your now multi-billion dollar real estate empire. Should another collapse of that magnitude occur, How would you advise investors to stay rational and make similar moves like you?

[00:16:17] Patrick Carroll: Yeah. Don’t freeze up. I mean, I think a lot of people in downturns, they get scared when a shock happens and they freeze up. They do nothing. What we’re doing is looking for creative ways to stay active. So we, I just launched Carol Capital’s business plan is to come in there and lend capital on good properties where the borrowers have just gotten in trouble.

[00:16:38] Patrick Carroll: So their interest rate caps have expired or their loan to value is too. And they need to pay down that loan to value. So we’ll come in a preferred position and provide that, you know what I’m calling Rescue Capital. Another thing we’re looking at is buying companies, buying property management companies, and buying other real estate companies.

[00:16:58] Patrick Carroll: If you look at the public capital market or the public equity markets right now, those values are down 25 to 30%. So those are interesting plays . The worst thing you can do in a downturn is panic and freeze up. I think, if you keep your head and you remain calm, you can spot opportunities while o others remain on the sidelines.

[00:17:21] Trey Lockerbie: That Carroll Capital Initiative is really interesting. It tells me that you guys must have a lot of liquidity that you’re wanting to put to work, and I know that you were, I think, upwards of 60,000 plus units at one point. I’m not sure where exactly it is now, but it seems like you’ve been active on the selling side as well in getting to this position.

[00:17:37] Trey Lockerbie: Is this something that you’ve been preparing for a couple of years now? Did you see this kind of on the horizon or is this sort of good timing again? 

[00:17:46] Patrick Carroll: It’s a little bit of good timing and I think I could sense that the market was overheated. I didn’t know when it was going to end, but I just knew it was a little too good to be true.

[00:17:56] Patrick Carroll: So, yeah, even at the beginning of the first part of this year, we exited 2 billion worth of property. I think like you said, over the last three or four years we’ve sold off 30,000 units and so we’re in a great position. We’re in a highly liquid position. We have great investor backing and so yeah, it’s a little bit of good luck and it’s a little bit of intuition.

[00:18:15] Patrick Carroll: Similar thing happened to me in oh eight. I sold my portfolio off. In March of oh eight and in September of oh eight, the market crashed. So I’m either very lucky or very lucky. But yeah, we’re in a great position thrilled to have sold kind of at peak pricing and very, feel very fortunate.

[00:18:34] Trey Lockerbie: Well, lightning doesn’t usually strike twice, so I wouldn’t say you’re lucky. I think at this point it’s. But I know with Carroll Capital, are you focused on multi-family and if so, maybe go into the reasons why you focus on multi-family over some of the other real estate classes. 

[00:18:49] Patrick Carroll: Yeah, multi-family asset class that I’m most comfortable with and believe the most strongly in.

[00:18:56] Patrick Carroll: When I did sell my portfolio in oh eight, I’d done just about every asset class at dental office, retail single family. And I really made a concentrated effort to go into multi-family. I mean, you could look. 20 years and occupancies were at like 90%. I still feel bullish about that. The need for affordable housing or workforce housing is something that is not going to be ever met.

[00:19:20] Patrick Carroll: You can’t really afford to go in as a new, as a developer and build that type of product and rent at that type of price point. It’s typically older properties in good locations that you come to. And renovate, but you can offer them at a much lower rent than you could if you built new and your cost was double that to build.

[00:19:39] Patrick Carroll: So we’re looking for properties that are great properties and the markets that we focus on that we would otherwise be buyers of. So we’re going to underwrite those properties as if we were to buy them and we’re going to lend on them. And that’s what we’re really looking for. So we’re looking at it from a buyer standpoint and also from a lender’s stand.

[00:20:00] Trey Lockerbie: So speaking of some of those markets, I know that you’ve primarily focused on what you call the Sunbelt, but a lot of markets in that area have started to look overvalued places like Miami and Austin, et cetera. What areas still excite you and that you think are still undervalued? 

[00:20:16] Patrick Carroll: Yeah, I don’t know if anything is really undervalued right now, but you know, my belief is the Sunbelt before Covid, nobody really paid attention to it, at least not nearly the international focus that happened After Covid, post Covid, I get calls weekly from international investors that want to be in the Sunbelt.

[00:20:34] Patrick Carroll: They believe in the long term viability. They believe that it’s job friendly, it’s going to continue to attract businesses and people. And so investor capital, I believe, will continue to flock to those markets. Now on the single family side, I think you did see some overvaluation. I mean, I’m sitting here in Miami today and the prices that were paid a year ago aren’t available now.

[00:21:00] Patrick Carroll: And I think there’s a bunch of reasons for that. I mean, Miami, A lot of technology employees moved down. That sector’s been crushed, especially crypto. So you don’t have that buyer pool. The foreign buyers, I mean, there used to be a lot of Russian buyers, a lot of Chinese buyers. They’re outta the market.

[00:21:16] Patrick Carroll: So I think you’ve gotta expect the higher end prices to come down. And also the middle market. There’s just people that could finance a home at a low interest rate a year ago, could buy double the price of the home today. So if. Qualified for a $600,000 loan a year ago, they would qualify for a $300,000 loan today.

[00:21:37] Patrick Carroll: That’s gotta have an effect on crisis, 

[00:21:40] Trey Lockerbie: another effect on prices. Before all this was the lack of inventory. Right. So I’m curious, does Carroll ever go into building as well to try and build up more inventory in places where it’s underserved? 

[00:21:53] Patrick Carroll: Yeah, absolutely. I mean we look at development deals just about every day.

[00:21:57] Patrick Carroll: Where we’re focused now is basically I think developers that may be in trouble, we can come in there and provide capital. So basically using our balance sheet to come in there and help out potentially struggling developers. Development makes a lot of sense when you can when it’s more expensive to buy than it is to build and I think we’re not in that area anymore.

[00:22:17] Patrick Carroll: I think it’s going to be a lot cheaper to buy than build. You still have supply chain issues even though they’ve eased up and I think it’s going to be harder to get financing for development. I think as we’ve done, I think we’ll continue to be on the buy side. Some areas that we’ve looked at are built to rent, which is single family build to rent, which I think is attractive, but it’s not really a great time to speculate.

[00:22:40] Patrick Carroll: I like in downturns, I like to come in and find value things that we can buy below replacement costs, things that we can buy with exceptionally high cash flow and things like that. Mitigate risk in a downturn. The idea of building something that has no cash flow. Hoping that it works out in two years or however long it takes you to build is a scary proposition going into an environment like we are.

[00:23:04] Trey Lockerbie: So earlier you mentioned Starwood and even Blackstone. And I know that early on you really started out partnering with institutional capital, Blackstone, Carlisle, et cetera. Talk to us about those early days. Was there an imposter syndrome feeling when you were in those rooms trying to sell these, sell the dream to some of these institutions?

[00:23:23] Patrick Carroll: Yeah I don’t think I necessarily felt like an imposter. I felt kind of like a high school basketball player playing against LeBron James. I mean, I knew I. From an experience standpoint and from a just education standpoint I was outmatched, but it also made me really humble.

[00:23:40] Patrick Carroll: And so I would tell potential investors, look, I won’t eat, sleep or anything until I make the money back and earn my position in this business. And that’s what I did. I went out and I would work I think 18 hours a day when I was getting started. I would look for properties that, that not others could find.

[00:23:58] Patrick Carroll: I was just trying to do anything. To substantiate my existence. And thankfully I delivered on that. But I think instead of, I was always confident, I always felt I could figure it out. But yeah, it’s definitely made me humble. Still makes me humble. I mean, there’s a lot of very smart people that are in this industry, and they’ve been in this industry a long time.

[00:24:21] Patrick Carroll: Boost Starwood and Blackstone, those are the groups that help me get going. And they have extremely smart people, and I’m sure they’ll figure out whatever issues they come across. And so you’ve gotta remain humble. They’re the biggest and best, and they have a little bit of mud on their face.

[00:24:35] Patrick Carroll: There’s never a smartest guy in the room. Once you get to a certain level, everybody’s smart, everybody’s hungry, everybody’s aggressive. So I think I felt confident enough to be in the room. I just was humbled by the lack of experience and the knowledge that they have. 

[00:24:51] Trey Lockerbie: That was probably a great strategy, right, to embrace that humility and accept that, but sell them on what you knew you could do, which was work and provide the grit probably necessary to ensure it was a success.

[00:25:02] Trey Lockerbie: I very much respect the fact that you’ve built your empire from scratch, and I know that takes a lot of dedication. What were some of the biggest hurdles you faced, starting out and growing your business that maybe you don’t offer to read about in a business? 

[00:25:18] Patrick Carroll: I mean, the lack of credibility. I didn’t go to college. I didn’t have a long track record. I remember before I bought the property management companies, I was going to New York and saying, Hey, look, the single family market is going to get crushed and people are going to buy or have to rent multi-family properties and we should go out and buy those properties.

[00:25:37] Patrick Carroll: Who’s with me? And basically I was told, get the heck outta here. You’re 27 years old, you don’t have company. And we partner with fully integrated companies. So then I went out and I bought three property management companies. So I think the thing you have to get over is the lack of credibility.

[00:25:53] Patrick Carroll: You can be the smartest person in the world. If you don’t have a track record, you’re going to be looked at differently. You have to have the ability to take a no, but you can’t take it. You can’t rest on that. I used to always say, if somebody said no to me, I would. Well what would it take to get a yes?

[00:26:09] Patrick Carroll: And I think you have to be willing to constantly reinvent yourself. I mean you can’t get so comfortable and so confident that you don’t notice when the market shifts. If you were a brick and mortar retail and you didn’t adopt the internet strategy or the online strategy, you went out of business.

[00:26:27] Patrick Carroll: I think if you look at this environment now, if you don’t adapt your strategy you’re not only foolish, but you’ll probably go out of business. You have to be humble enough to accept when your model no longer works. So other challenges were just, look, there was, everybody was bigger than me at that point, so, I vividly remember getting bullied and being threatened with lawsuits, things like that, and then Cashflow capital.

[00:26:51] Patrick Carroll: I w we were doing deals so fast I was investing a lot of money in properties, but also wanting to grow the business. And so that was challenging you always finding capital. My primary occupation is finding capital. And so I think to grow a business to buy properties, you have to have access to capital.

[00:27:10] Patrick Carroll: And so that goes back to the credibility thing. You’re constantly trying to prove yourself and reinvent yourself and as you know, stay at the front of the pack. So I think those are some of the biggest challenges. 

[00:27:23] Trey Lockerbie: And you have to adapt. And you have to adapt with the right strategy.

[00:27:26] Trey Lockerbie: Right? Because I read this quote recently, you know when the tornado’s coming, it’s not the day to repaint the garage, right? , you have to have, you have to have the right strategy. And after you bought these three property management groups, you now had hundreds of employees at that point.

[00:27:43] Trey Lockerbie: What was it like to step into that and say, okay, you’re, now, you’re leading a huge company and it conglomerate all of them together, and you’re leading hundreds of people. What was the experience like taking that on? 

[00:27:55] Patrick Carroll: Humbling. I basically bought the three property management companies and.

[00:27:59] Patrick Carroll: You think when you buy these companies, they’re going to embrace you. Okay. What I didn’t realize, even looking back on it, was that I was 27, 28 years old and the idea of that for most people scared them. So I had a lot of people that worked at the company. Wouldn’t respond to my emails or I would ask for something to be done one way and I’d get blown off.

[00:28:21] Patrick Carroll: And I remember vividly I went up to Greenville, South Carolina, where one of the management companies was based, and I believe I fired 95% of the office on a Friday. And coming back I basically told the president of my company, we need to go out and hire all these new employees.

[00:28:37] Patrick Carroll: And I remember it was a mad dash, but it was the best thing we could have done. It showed the rest of the employees. That we were, we met business. I was working harder than anyone at that time, so I expected that. And it really laid the groundwork for what we do now. I mean, I hire self-starters. I hire people that are hungry.

[00:28:56] Patrick Carroll: They want to be at the front of the industry. And so I think my biggest wake up call was there are a lot of people that are quite unquote fat and happy, that resist change and don’t want to don’t want to learn new things and certainly don’t want to learn ’em from somebody that they view as lacking credibility.

[00:29:14] Patrick Carroll: And so you have to be willing to be firm. I mean I think this is a bad example of this, cause I don’t really know how it’s going to work out, but like Elon Musk, Twitter. I mean, there was no doubt there were people. That we’re not working so hard that we’re working from home most of the time that we’re not giving their all.

[00:29:31] Patrick Carroll: So I think what I take from that is that he probably did need to come in there and trim the fat a little bit. Now I think he’s gone a little overboard. You have to maintain morale and I think there has to be rational decisions made and things like that. So I think we got fortunate. And the fact that we were able to rehire people, it was still in a market that was coming out of the downturn.

[00:29:52] Patrick Carroll: So there were a lot of really good people looking for jobs and opportunities. So we were able to fill those positions very quickly. 

[00:30:00] Trey Lockerbie: Yeah. Then you gotta sometimes cut out the cancer but not kill the patient. Right. So on the Twitter example, yeah. I think what they’re experiencing, like you said, a lot of people working from home, there’s pros and cons to that.

[00:30:10] Trey Lockerbie: Right. Because that’s sort of opened up a whole new economy in the world of real estate as I understand it, a lot of outflows of major metropolitan areas into inflows of new markets that are still burgeoning. Are there any in particular, or have you seen them rotate around? What are you focused on? Any markets in particular that you’re kind of dead set on 

[00:30:27] Patrick Carroll: I grew up in Tampa, Florida, and I still spent a lot of time there. That market really impresses me. It’s completely changed. It was a sleep. I don’t want to say beach town, but it was a sleepy Floridian town. Now I go there and every restaurant’s packed, all the brands that you see in Atlanta and Miami and New York are starting to come to Tampa.

[00:30:48] Patrick Carroll: And a lot of you know, more professionals are moving down there. I mean, Tampa was a back office community forever. You didn’t really see a lot of the entrepreneurial people moving there. A lot of the high level finance people. And now you do. And so I think Tampa has a lot of growth.

[00:31:05] Patrick Carroll: I think it’s still somewhat under the radar, so that market excites me. I moved down to Miami in April and I am very impressed with Miami. I mean, I think Miami’s typically a boom bus market, but I think. this time it could be different, which is usually the worst thing to say.

[00:31:20] Patrick Carroll: But I’ve seen people, I go to the gym every morning. I work out with guys that started businesses and sold ’em and are looking to get into new opportunities or major law firms have moved down here, Citadel. The major finance companies moving down here, Blackstone, Starwood, everyone has a presence down here.

[00:31:39] Patrick Carroll: So Miami went from a condo market or a market that was depending on tourism. And now it’s, they call it Wall Street to the. And so Miami, I’m very bullish and I think it started to attract different types of people and it’s truly become an international city, New York. I’ve been skeptical since Covid, but it’s interesting when I go back up there, that’s booming again.

[00:32:01] Patrick Carroll: I think New York’s biggest problem though is the regulations. So my business plan is focused on business friendly markets where people are embraced, companies are embraced, the taxes are low and regulation’s low. and I believe that companies will eventually relocate to those areas, which will bring talented workforces.

[00:32:19] Patrick Carroll: Like Tampa is seeing a lot of inflow of new people with high paying jobs. Miami sees that and I think it’s directly tied to how friendly the markets are to do business. Them. 

[00:32:31] Trey Lockerbie: On that point, I think Elon is moving the Twitter headquarters to Austin . Right? Just like everything else, he kind of seemed to move everything.

[00:32:39] Trey Lockerbie: There’s a stat floating around that I was really curious about and to get your take on. I think it came from Pew research that roughly 50% of people in their early twenties, even maybe into their early thirties, are living with their parents, which is fairly understandable in today’s environment, especially after Covid and everything like that.

[00:32:59] Trey Lockerbie: But does this shift in demographics cause any concern to the. Of potential rental units. Are we, is there a sea change happening where we’re moving into a multi-generational household for a longer period of time? 

[00:33:13] Patrick Carroll: Yeah that is, I have not heard that stab, but it’s pretty crazy.

[00:33:17] Patrick Carroll: I think. I think you’re being offset by if people are staying with their parents, not only are they not renting apartments, they’re not buying homes. So I think with the rise in interest rates, it just becomes less affordable for a lot of people. And so you see people staying in apartments longer.

[00:33:33] Patrick Carroll: I think the market gets it. Most hit by that is probably a single family. I mean I started out buying a condo myself. I never rent an apartment. I was lucky enough to get a hundred percent mortgage. But I think you see that with a lot of young people. If they get a great job in technology or finance, they might be inclined to buy a condo.

[00:33:50] Patrick Carroll: I mean, that’s why typically we focus on. The middle market because unfortunately, a lot of those people are not going to be in a position to buy the high end of the market, the ultra luxury rental apartments. If they can pay those rents, they can typically go out and buy a condo or buy a single family home.

[00:34:08] Patrick Carroll: So I think where we are is relatively insulated. I think any job expense or any coming outta this economy, that’s when new house formation starts, and that could be a boom for the multi-family market as. 

[00:34:21] Trey Lockerbie: Similarly, we’re also seeing what people are calling the Great Wealth Transfer, and it’s somewhere around 68 trillion from the baby boomer generation that’s now being passed down sometimes through real estate and other assets to millennials over the next decade, and it’s already started to happen.

[00:34:37] Trey Lockerbie: Do you have any thoughts on how this might affect real estate, good or bad? Because at some point maybe there’s not as much selling, right? They’re just inheriting these properly. Or does that mean they’re coming into, somebody found wealth and there’s selling that’s going to. 

[00:34:52] Patrick Carroll: It’s kind of tough to tell.

[00:34:53] Patrick Carroll: I mean, I see it every day, especially down here, people that have inherited a tremendous amount of money. They and a lot of times they’re not terribly ambitious. They’re not going out and starting businesses, they’re more interested in living the life of luxury and spending the money than they are in earning it.

[00:35:09] Patrick Carroll: So it’s kind of hard to tell. I mean, I think you could see a boom in high-end homes. You could see a boom in other things like that, and you could probably on, on the other. They’re not going to want to live in their parents’ home. So you could see a flood of homes and other properties come to the market.

[00:35:25] Patrick Carroll: As these things are inherited, they want to move to the new house. They don’t want to, they don’t want to stay in mom and dad’s home. So you could see a lot, you could see a flood of properties hit the market like that transfer of the wealth effect as well. Baby boomers think a lot differently about wealth and about savings than the millennials.

[00:35:44] Patrick Carroll: So you can see the savings rates come way down. You can. Some of these big investment firms lose a lot of that money so it’s an interesting concept to think about and really what markets are they going to want to live in. It’s another thing to pay attention to.

[00:35:59] Patrick Carroll: I don’t see people inheriting a ton of money in moving to Kansas so these 24 hour cities may come back and vogue and it’s going to be interesting to watch play. 

[00:36:10] Trey Lockerbie: I want to talk a little bit about your strategy and particularly around indicators, let’s call ’em so you know, besides a cap rate, what indicators do you rely on most to search for deals or to just simply know if a deal is worthwhile?

[00:36:26] Patrick Carroll: Good question. I mean, we focus on, I would say, submarkets within submarkets. So we want to be, typically, if we’re looking at suburban properties, we want to be in the markets with the best school districts. So maybe that’s a high price home area and people want to send their kids to the exemplary school.

[00:36:44] Patrick Carroll: But they can’t afford to buy the homes. It’s a great option to be able to rent an apartment in that school district and send your kids to the great school. So we typically look for markets like that, that have great schools, great employment. So maybe it’s a great office market as well.

[00:37:01] Patrick Carroll: People want to be close to, to work close to the schools. We also look to buy B below replacement costs. We see, feel like that’s a good buffer actually if you’re in, if your investment is less than what a new competitor could come build for, you’re somewhat insulated. So yeah, we look at cap rate, we look at replacement costs, we look at price per square foot.

[00:37:22] Patrick Carroll: We also want to look for something that’s broken. So if the property’s leading the market in. It’s probably not a property for us. We want to look at a property that is similar in quality to other properties. We call ’em comps, but it’s somehow not getting the rent or somehow the occupancies off.

[00:37:41] Patrick Carroll: And we’ll come in there and make a determination that can we approve it? If we upgrade the units, can we get and push rents? Or if we apply better management, better advertising, can we improve the occupancy of the property? We typically look for something we feel is undervalued or underperforming and really good to defensible locations.

[00:38:01] Trey Lockerbie: It sounds like you’re kind of going into a place that’s already great and trying to make it better in some ways. So what about opportunity zones? Does that, is that something that’s still in VO or with real estate? Is that providing any sort of advantage or is that sort of come and gone? 

[00:38:16] Patrick Carroll: I haven’t heard as much about them lately, and we never really participated in them. I invested in several opportunity zones. Personally, I think it’s a great opportunity not to no pun intended, but a lot of ’em need to as far as location, you really need to study the location. So a lot of these opportunity zones are emerging locations or tougher locations that, you know, even if you’re saving on taxes, it’s not something I’d be terribly comfortable investing in.

[00:38:47] Patrick Carroll: So I think you’ve gotta really get in sometimes people. Foolish decisions based on SA tax savings. I’ve seen so many people, 10 31 into properties that are ridiculous and at a ridiculous price just to save on taxes. And I’ve always been of the opinion it’s better to pay the tax and take your time with making investments and not just rely on tax savings.

[00:39:09] Patrick Carroll: So, but yeah, I’ve not heard as many of those opportunities. I mean, for a while everybody was falling over themselves to do those. I just haven’t heard as much of it. Happening or even seen many of them lately. 

[00:39:21] Trey Lockerbie: So I want to shift gears a little bit and talk about Patrick Carroll and your skill sets, because as I understand it you mentioned you kind of built this from scratch and went to the school of Hard knocks, let’s say.

[00:39:33] Trey Lockerbie: Right? So I know this industry and really all industries. In deal making, let’s say people skills are a must and soft skills are harder to teach and really often left out of the discussion. Or when you’re interviewing people, I find you it’s always like looking for that equation, right? What did you do that produced X X that produced Y, but what about the software skills?

[00:39:53] Trey Lockerbie: Can you tell us about the fundraising efforts, the leading, the building, hiring? Any other tips or strategies you’ve picked up over your. 

[00:40:03] Patrick Carroll: Yeah, I mean, I’ll tell you, it may sound funny, but for 20 years I always wore a suit and tie and so I was the youngest guy in the room.

[00:40:10] Patrick Carroll: But I wanted to look like I was taking this seriously and then as I started getting a little more successful, I would always have a nice watch. I wanted the people in the room that really knew to notice and notice the little details. I think marketing is huge and I’ve always put a lot of focus on marketing when we prepare our material.

[00:40:30] Patrick Carroll: I wanted to look like the biggest out there, even though we weren’t, but I wanted it to look like we were, I used to say General Electric, but you know, I wanted to look like we were established. I wanted our wording to sound similar to how all the bigger groups were doing it. And I think, and also we used the media.

[00:40:49] Patrick Carroll: I mean, I was all over people and reporters to publish things about us when we would buy properties or sell property. And so we did a concentrated effort at becoming a well known name in the industry. I think as far as hiring what my strategy was to go to these large established companies and hire maybe the number two or number three person and a certain position and say, Hey, look, you can come to my company and be the number one person, and I’m a young guy, and I’m going to be doing this a long time, and you can make a lot of money.

[00:41:19] Patrick Carroll: And so it was we were going, as we were. I was bringing in these really talented people. And so it really, it was about building out a team. It was about marketing ourselves well and paying attention to detail. And then also I spent tons of time up in New York and in front of Capital. I mean, I would go around every two weeks or so and just give ’em updates on what I’m seeing in the market, ask them what they’re seeing in the market.

[00:41:45] Patrick Carroll: And so I think I did a good job early on building relat. With capital hiring the right people, compensating them well, and also at building our brand marketing the company marketing for sure touting our successes and things like that. But also just trying to become a well-known company and well-known name in the industry.

[00:42:05] Trey Lockerbie: That last point is interesting. I’ve heard you talk about announcements, I think you called them, and I thought this was so interesting. Especially when you’re not fundraising, right? Just keeping everyone, keeping a pulse going and letting people know that for your wins, even before they ask, right?

[00:42:19] Trey Lockerbie: You’re just keeping them kind of warm and informed on what you’re working on. I thought that was a really interesting strategy. 

[00:42:27] Patrick Carroll: Thank you. Yeah. I mean, I, and I always want to stay on the top of everybody’s mind. We know, I, I used to say, when they don’t hear about you, they think you’re dead. And so we would always come up with a way, a creative way to continue to be out there in the media or making announcements.

[00:42:42] Patrick Carroll: I make a joke about it now, but I say I used to if I made it to work on time, do a press release, and so it was just really important if we hired a key. We would put something out. Now we put out white papers, which I think is another good strategy. It is just keeping.

[00:42:56] Patrick Carroll: Top of mind and putting out information there. I mean, we have access to so much information, so much valuable information that it’s really important I think for people to have access to. Even the things I do on Instagram is kind of my way of giving back a little and just saying, Hey, this is what I did.

[00:43:12] Patrick Carroll: It was a non-traditional approach, but you know, just like the question you just asked me, what did I do that was different, that got me ahead and that’s what I’m trying to put out there as some for financial gain. It’s really for Just kind of giving back and helping people learn. I had great mentors along the way and they showed me a lot of things, and so it’s kind of like free mentorship just to put out there for the next generation.

[00:43:35] Trey Lockerbie: How did you find these mentors? I mean, what was the, I’ve heard this idea that if you want a mentor, don’t ask someone to be your mentor, but it’s sort of like the value needs to flow both ways. So I’m kind of curious how you found these people and how those relationships were. 

[00:43:51] Patrick Carroll: Yeah, for sure. I agree with that.

[00:43:52] Patrick Carroll: I mean, I get messages all day long and I wish I could help everybody, but hey, can I meet for coffee once a week? Can we do this? If you’re really busy, you don’t have the time to do that. So I typically found mentors by looking for one of the most successful guys in the area and bringing them a deal or talking to ’em about investing or doing something to add value.

[00:44:14] Patrick Carroll: And a lot of times it resulted in a friend. And I was humble, was very open about the fact that I was green and I didn’t really know anything at all, and that I was very much impressed by them. And I would ask questions, but I was also conscious about not taking up time. I mean, every mentor I remember was pretty harsh.

[00:44:35] Patrick Carroll: I mean, he would, they would say, listen, don’t waste my time with these stupid questions. Come back when you’ve got good questions, this and that. And so I think you have to have thick skin. And I think humility just plays a big part of this. So it’s true. to say no, especially if you work around their schedule.

[00:44:52] Patrick Carroll: Hey, can I buy you a drink? Hey, can I buy you a cup of coffee or take you to lunch if you make it easy on them and you’re humble? And by the way, you’re bringing good opportunities and things like that. It’s a good way to get mentors. That’s what I’ve typically focused on, is bringing value to the table and like you said, make it a win-win.

[00:45:11] Patrick Carroll: And then once I had those mentors, I made it a point to keep keep the relationship going. I’d call ’em every couple of months or so and just check in on ’em. I’d send ’em Christmas gifts to do whatever, just to let ’em know I’ve valued that relate. 

[00:45:25] Trey Lockerbie: Now, it seems to me that you’ve really leveled up your presence in a big way.

[00:45:29] Trey Lockerbie: You were mentioning about being sort of regional when you were starting out the firm and letting people in the media know, but you’ve gone on to do much bigger things, especially recently. What’s the new mission for Carol and getting the voice out and is this sort of the Berkshire strategy, right?

[00:45:44] Trey Lockerbie: Where you’re making everyone know that you’re available for calling if they get into financial struggle as we, we might be preparing ourselves. 

[00:45:51] Patrick Carroll: Yeah, it’s funny you say that. I mean, I’m such a fan of Warren Buffetts and very much that is the strategy. I mean, by going on social media, by going on the tv.

[00:46:00] Patrick Carroll: I want people that don’t know about me or my company. I want to be on their radar. So when good opportunities do come along I want to hear about all the good opportunities out there. I also think there’s a big opportunity to build our brand internationally. Not necessarily buying properties internationally, but fundraising internationally.

[00:46:17] Patrick Carroll: I haven’t really done much international travel in the past, and I think over the next 10 years I’ll do a lot more of that. It’s also a strategy to recruit employees, as you become better known, as more people know you . People want to work for people that are well known, well respected in the industry.

[00:46:34] Patrick Carroll: The companies that are well known people want to work for brands. And so I think by building. A brand presence. It’s a great way to grow your business across the board. You see better opportunities and you get different people on your radar. So I think it’s really important to do all that.

[00:46:51] Trey Lockerbie: Tell me a little bit about the philanthropy you’ve been up to as well, because I know within the last year, you’ve donated millions of dollars to Ukraine, unicef, and others. Where does philanthropy fall into your overall strategy or philosophy? And at what point did you feel the need to start giving?

[00:47:09] Patrick Carroll: Almost immediately. I mean again, I think I’ve always been pretty humble and just to be in a position, to be able to give back to help people is hugely important to me. I’d say I dialed it up more so when my, when I had children, my sons, I wanted them to see that this is a big part of my life and that this is very important.

[00:47:28] Patrick Carroll: My main cause that I focus on is underprivileged children. I grew up in the Boys and Girls Club. And I needed mentors. I needed my coaches back when I was growing up. They were such big influences on my life by basketball coaches. And so when I moved down to Miami, I called the boys a girls club up and said, Hey what’s your biggest need?

[00:47:48] Patrick Carroll: How can I be helpful? And they said a lot of these kids don’t have enough money to buy new shoes to play sports. So I ended up coming up with a shoe giveaway. We gave away a hundred thousand dollars worth of shoes in Miami, and it was really so successful. I mean, to see the kids’ reactions and everything like that, I decided to do it in nine more cities.

[00:48:07] Patrick Carroll: So we’re doing a total of 10 cities, a million dollars worth of shoes. And to me that’s just, it’s about as rewarding as it gets. So I think between giving away financially and just giving away information, it’s a big focus of mine. I think the world needs it and it’s very important to.

[00:48:25] Trey Lockerbie: Patrick, this has been such a fun discussion and I really learned a lot, especially around real estate, which is not usually my forte. So I really appreciate the time you spent with us today and best of luck with the Carroll Capital and other endeavors you have going on. Before I let you go though, please hand off to the audience where you want them to find you, what social media or websites or any other resources you want to share.

[00:48:47] Patrick Carroll: Yeah. I’m active on Instagram, so my Instagram name is @mpatrickcarroll . You can find me there. I’m on LinkedIn and YouTube, so I try to be on all the social media outlets they could also,  I’m on CNBC frequently. And then also our website, www.carrollorg.com . And yeah, I’ll continue to put out new information and kind of talk about where I see the markets going and other things like that.

[00:49:12] Trey Lockerbie: Patrick, thank you so much. Let’s do it again. 

[00:49:14] Patrick Carroll: Yes, sir. Thank you.

[00:49:16] Trey Lockerbie: All right, everybody, that’s all we had for you this week. If you’re loving the show, don’t forget to follow us on your favorite podcast app. And if you’d be so kind, please leave us a review. It really helps the show. If you want to reach out directly, you can find me on Twitter @TreyLockerbie. And don’t forget to check out all of the amazing resources we’ve built for you at theinvestorspodcast.com. You can also simply Google TIP Finance, and it should pop right up. And with that, we’ll see you again next time.

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