#100 - Getting to Know Tait & Ryan

[00:00:09] Welcome to Passive Income Pilots, where pilots upgrade their money. This is the definitive source for personal finance and investment tactics for aviators. We interview world-renowned experts and share these lessons with the flying community. So if you're ready for practical knowledge and insights, let's roll. Welcome back to Passive Income Pilots everyone. 100, here we go!

[00:00:36] Virtual high five and we are in the top 1.5% of global finance podcasts. Welcome to the top 2% or can we say 1%? Actually, it's even better than that. There are something like three and a half million podcasts active globally. Yeah, yeah. And we are consistently in the top 200 in the investing category in the United States of America.

[00:01:02] We occasionally crack the top 100, which is insane when you figure we have such a niche audience. So thank you for being such amazing listeners. Yeah. And you know what? As pilots, we love to look down on our competition, right? Exactly. No, we don't have competition, but welcome to the show. If you haven't listened to Passive Income Pilots, the reason why we had this show, Tate and I, about seven years ago, eight years ago, we bumped into each other at a real estate conference.

[00:01:31] And we decided, hey, let's start this podcast because nobody is helping aviators learn about investing in the industry. And I'm not talking about just learning how to do your 401k or life planning. I'm talking about the real stuff. Every single type of investment out there from franchises to real estate, to syndications, to 401ks, to cash balance plans, to life insurance, to crypto. I mean, you name it. Not everybody's going to talk about all of these things.

[00:01:59] Sometimes you're, you know, if you go to an advisor, sometimes they're going to limit you into one stock, spawns, mutual funds. That's not a bad thing. That's not a good thing. You know, we give that perspective on the show. We bring on people who only do that. We get bring on people who don't like that. Right. So, and here's the thing, you know, as pilots, we run into the same thing, the same problem as physicians, as high paid tech employees.

[00:02:21] And that problem is that nobody teaches you in flight school, how to handle $600,000, $700,000 a year of income. Nobody prepares you for that. Yeah. You know, they don't teach you this stuff in med school. They don't teach you this stuff in flight school. And the deck of millionaires think about this stuff in a completely different way. They do not have the same view around money. They don't have the same investment products as, you know, the upper middle class.

[00:02:51] But nobody ever teaches this stuff to you. Right. We, we almost made the intro to the show. Never take investing advice from another pilot. Right. Right. Yeah. But then where, but we didn't want to start off on such a negative foot. So we changed it. But the, the follow on to that in the hypothetical intro and the first draft intro was, well, then where do you get it? Yeah. Yeah. Where do you get this information?

[00:03:14] And so we wanted to create this platform where we being bring on the best and the brightest and just share unbiased, unslanted, unfiltered advice from the smartest people that we can possibly find in our respective Rolodexes. Just share that information on an open platform where nothing's being sold. There's nothing to buy here. Right. So here we are. We're a hundred episodes in the show has taken off like wildfire.

[00:03:42] If you have recommended it to a co-pilot or a captain, thank you. That is the number one thing that you can do to say thank you is to share it with your friends. So we really appreciate that. It's been a blast. Yeah. So Ryan, you know, one of the questions we always get asked is, is this show scripted? Where do we get the guests?

[00:04:02] We wanted to have a little bit of a look behind the curtain today on our hundredth episode of who Ryan and I are, where we came from, our journeys here and how we put the show together. So is the show scripted? Yeah. So first of all, I want to give a shout out to our team who edits this podcast. And we do also a shout out to the team that helps put out the social media, put out the show notes that helps us answer the emails. So many great people behind helping this, this show go.

[00:04:30] And don't worry, we're going to get into some meat and potatoes here at the end of the show. We're going to go into economics and where we are in the market cycles and, and what both Ryan and I are doing on the real estate side. But we just wanted to take a moment to acknowledge these people who are on our team. Thank you to the editors and thank you to the team in the Philippines who does a lot of the legwork behind the scenes. Absolutely. Yeah. And you know, before we talk about where our guests comes from and how we know our guests is, I think the inspiration comes from those reviews that people leave for the podcast.

[00:04:57] It comes from people sending us email and saying they like it or even they don't like it. Hey, I liked that episode. I don't like that episode. Like kind of giving us that feedback really helps to continue driving content. But if you're listening, the way that I think about inviting guests onto the show is we always say one thing. How is this applicable to an airline pilot? If you're an airline pilot and you're flying the line and you're making decent income and you generally are going to have a tax problem and you're wondering where and how to shape your investment portfolio.

[00:05:27] Tate and I aren't going to be able to sit down and give you a life plan or advise you on how to pick stocks. That's not what we're doing and we're not going to tell you what house to buy. What we're going to do is we're going to go find the best people out there on the planet, beg them to come onto the show. And then we pick their brains on how to invest in what they're investing and how they think about the world. But we do it through a lens of an airline pilot. Now, it's okay if you're a doctor listening.

[00:05:57] You can get a lot from this because you're in the same category. You're a high income earner and you're paying a lot of tax and you're trying to restructure how you do things and maybe change the way you invest. But the guests we get, I run a 200 plus person company. I'm a real estate operator. I am very well networked in the industry. So we go out and we find well-connected investment professionals that come onto the show. I'm part of some global organizations that have entrepreneurs and leaders in it.

[00:06:27] And that helps me stay really well connected. And that gives me access to guests that we wouldn't otherwise have access to. So that's a big part. Tate, is this scripted? Let's bust the myth. Are we writing scripts? It's definitely not scripted. Yeah, it's definitely not scripted. Typically, before we jump onto it, at least I can't speak for Ryan, but for myself, I'll spend about 15 minutes, 20 minutes before a show researching the guests, you know, thinking through the questions that we want.

[00:06:55] And of course, our team tees up, you know, a bunch of information for us ahead of time. So it's great. We kind of show up, take a look at the briefing as you would look at your flight plan before you jump in the jet. And then we take it from there. Tends to be a little open format once we get on the show. So Tate, you're a pilot. What are the three airplanes that you have the most time in? That is such a good question. I stopped logging in 2012.

[00:07:22] So give us the fly by the seat of your pants answer. There you go. I'll give you a different stat. I have flown every tail number at my airline, except for the two brand new 787s in the last 15 years. So I've literally flown every tail at the airline. And that includes the 767, the A330, the A321, which I instructed on and was a Czech airman and the 717, which was my first upgrade.

[00:07:52] Well, that's way cooler than me being like, I flew every tail at Air Wisconsin when they had the CRJ200. Yeah, I wanted for you to get to know us a little bit today. We won't spend too much time on it. But Ryan, where did you go to college? I went to Mercyhurst University in Erie, Pennsylvania, and I went there to study business. But more interestingly, I got a rowing scholarship. I was on a crew team and my high school team competed on a national level, won two North American championships.

[00:08:20] I got recruited on a scholarship to be a rower at Mercyhurst and was coached by a world famous coach, Adrian Spracklin, who coached the Russian national team before the conflict, of course, and into the Olympics. And so very good school, you know, very good rowing program. So a lot of fun. And I really enjoyed it. That's awesome. Where'd you go, Tate? Where'd you go to school? I wanted to go to USC and I wanted to study business. I got a 4.0 in high school. But even with that, I didn't get in.

[00:08:48] So who knows where I would be today had that letter said something different in the mail. And I wanted to go to the Marshall School of Business and study real estate and entrepreneurship. And that letter started with the words, we regret to inform you. And so my backup plan was flying, believe it or not. Oh, wow. Interesting. Two of my uncles are airline pilots. My grandfather was actually an airline pilot at the airline that I fly for. That's cool. So I'm third generation. Wow.

[00:09:14] My uncle actually was the check pilot on my very first IOE flight 15 years ago. And I got to downgrade from captain to FO mostly for my business. But one of the driving factors was getting to fly his retirement flight last summer. That's so cool. That's such a fun story. Anyway, so I went to a community college in LA called Mount Sac, Mount San Antonio College. They had a flying program that my uncles went to. That was my backup plan.

[00:09:41] I fell in love with aviation, but the real estate and entrepreneurial bug never really left. So after two years, I moved down to San Diego. I went to ATP Riverside back in, I don't know, 2004. Moved down to San Diego, instructed there. Got my bachelor's from Southern Illinois University at a satellite college there. Flight instructed and ended up flying caravans and Metroliners and then ended up buying airline in 2010. Nice. I like it.

[00:10:06] Yeah, I was just a civilian guy and learned how to fly in high school and went to a local part 61 flight school. Shout out to Flight 101 in Waterford, Michigan. That's no longer there, unfortunately. But got my flight hours, ratings, went to Masaba. If you guys all remember, Masaba Airlines. Yeah. Oh, yeah. We got a lot of SJ tails out there still. Flew the Avro, the Bach 146. RJ 85, I guess, is the technical thing. So that was cool. That was a cool plane.

[00:10:35] Didn't last very long, though. Burned a lot of fuel. Didn't go very fast. But it was a fun plane to fly. People always joke. It's got four engines. You guys, is that noise that the flaps make when you take off? Is that the two of those engines turning off? People always ask us that and it's pretty funny. That plane had a very distinctive howling sound. Anyway, got to fly the CRJ when I got furloughed from Masaba, Northwest bankruptcy. Missed payments to Masaba. Went to Air Wisconsin. Flew there for about almost nine years. Did a lot there.

[00:11:05] Did G-Pilot, regional G-Pilot, I should say. Sim instructor, check airman, all the rest. And then ended up moving over to Alaska. Flew Alaska 7.3s. Got Arctic qualified. The coolest flying I've ever done in my life. Sitka, Petersburg, Wrangell, Juneau, Ketchikan. And flying in the Arctic, that was really fun. That's a very unique opportunity to fly a 737 through the Arctic. And then after that, kind of moved on to the Delta. Amazing. Yeah, kind of fun. Flown the 7.3, the 7.5, the 7.6.

[00:11:35] And a very good career. Lots of really fun, exciting things. Tate, let's just ask the question that every pilot agonizes over about when you sit next to a passenger on a plane, you have your uniform on. What's the scariest thing that ever happened to you in an airplane? Well, there's been a few things. I had an aileron lockup on me in a Seneca one time. Wow. The ailerons completely froze. So we had to drop it into Montrose, Colorado using just differential thrust and rudder. That was a little scary.

[00:12:04] I had a compressor stall on a 717 taking off when I was a new captain. Wow. It was a little exciting. About 1500 feet thing just boom. And I thought the nose gear bay door had come undone and flipped up and hit the fuselage. It sounded like somebody just hit this, the side of the airplane with a sledgehammer. And then, you know, trying to figure out what was going on. And then it happened again. Boom. And saw the engine indication. Didn't have to shut it down. Just brought it back to idle.

[00:12:34] It behaved itself and came in, declared an emergency and taxied in uneventfully. I think the funnest thing I got to do though, the coolest thing that I've gotten to do in an airplane. When I was a Czech airman on the, the a321 neo, cause we only have the 321 variants. I got to fly to Hamburg and do the acceptance flight on a brand new airplane. So I spent a week at Airbus. That was like last year or something, right? No, this was four years ago now. Oh, four years. Okay. Time flies. Time flies. Yeah.

[00:13:02] So you spend all these days with the, the engineers, the German engineers, you know, and they're doing the flight test things and you're shutting engines down using the fire cutoff, push buttons and all sorts of fun stuff like that. And then the, the test pilots French and he's got his chest hair poking out. And, uh, we got to go up and do alpha floor demos and, you know, just whip the airplane around. You go up to 39,000 feet, turn the packs off, drop the gear with the emergency extension, just super cool. And then it came in, landed at, of course, no charts, no checklist, nothing.

[00:13:32] You just have a block of airspace with, uh, with center, uh, over there in Germany. And then, uh, I get to sign the nose wheel gear bay. So I signed aircraft 216 captain Tate Durier. Oh, nice. That's cool. I love it. You can still see my signature in the nose gear bay. If you look just right. Nice. I love it. My fun story about flying is going to transition us into talking about some financial stuff, some economic stuff, a little bit more about what I do outside of flying and on the real estate side.

[00:14:01] That's what I want to get into. Yeah. Yeah. So my favorite flight, you ready Tate? I'm ready. Is when you and I. Yes. That one. Was it a one 82 or one 72? It was a one 72. One 72 SP. Yeah. With the G1 SP very, very, you know, I had an extra, you know, two knots or whatever it has super fun. So Tate and I bought some real estate together. We flew into Atlanta and we actually rented a one 72 SP from PDK.

[00:14:31] I think it was the airport. And I think it's called Aeroflight. I think is what the company's called. I remember that. We rented the plane, got checked out, flew to Chattanooga, looked at our four properties that we were going to buy there. So there were 11 total properties, right? Yeah. Yeah. In three states. So we, over three days, we flew to all 11 of these properties. Sorry. I'll let you jump in. No, no, no. You're, you're, you've got a good memory. Uh, yeah. 11 properties, three states, couple of days.

[00:15:00] And we did do diligence on a portfolio that we bought together of self storage properties. And we had a blast. I think the, the highlight was going to Centerville, Tennessee. We landed on that runway, um, is one of those runways where, what was that guy's name that, that worked at the airport? I can't remember, but it was like, we were in the middle of nowhere. Let me tell you. He was one of those guys that just left the keys on the hook in the hanger. And it was like, just bring the car back full.

[00:15:30] And, uh, so we got in the courtesy car. We drove over to the facility, which is right across the street. There was a guy playing a harmonica when our car battery died. We, we had, uh, yeah, our, our crew car from the airport, the crew car battery died at, at this, uh, storage facility in Centerville, Tennessee. And the, uh, store manager had to get her boyfriend to come out with his tools and, and jumpstart us. Anyway, it was an adventure harmonica though, going, it was so much fun. They were such a great people.

[00:15:59] Oh, they were fantastic. Anyway, we bought that property. We sold it. We got a 85% return on our cash in that deal, which was really cool. And then we proceeded to go, I think, where'd we go from Tennessee? We went down to through like near Macon, Georgia, and then down to a Palatka, Florida. Yep. And checked out a facility there. And then, um, you dropped me off in Tampa. I flew out and you hightailed it back to return the airplane. Yep. Well, you know, it's a really funny, a really funny story.

[00:16:27] So that Palatka storage facility that we still own and operate, we expanded it by 30,000 square feet. I actually had a lender that wanted to really close on that loan, but he said, Hey, I got to see the property first. And we were trying to get the loan closed quickly before interest rates went up. And so I said, and I was sitting in Seattle. I said, Hey, where do you live? And he gave me kind of where he lived. And I said, Oh, Falcon field is right down the street from you. I was like, I'll be there tomorrow morning in an airplane at Falcon field.

[00:16:52] So I flew, uh, airlines to Atlanta, jumped in the one 72 SP went to Falcon field, just south of Atlanta, picked him up, flew him down to Palatka, you know? And when we got there, there's no Uber there. There's no, the taxi takes like an hour, whatever, no rental car place. The courtesy car was repossessed by the city because a pilot had taken it to a liquor store in the middle of the day. And it had the government tags and somebody complained to the city. So they took away the courtesy car.

[00:17:22] So they give us the gator. They give us like the golf cart gator. And they're just like, all right, your storage properties across the street, the gates open, just drive across the runways and, you know, go over to your property. So we went over there in a gator, uh, we're like buzzing, but the banker is just laughing his butt off. Like this is the most funny, you know? So anyway, my, my fun has been general aviation. I mean, the Alaska flying was amazing, but flying general aviation and mixing that with business has been like, I think this is the coolest thing. Absolutely. Yeah.

[00:17:51] And it's a big tax write-off, which we have like a million episodes about that, you know, using a plane for business and, and, and things like that. You can go back and, you know, over the a hundred episodes or so and listen to that. But I want to transition to real estate here. How'd you get the real estate bug? Yeah. So I've been an entrepreneur forever, you know, nine years old, pushing the lawnmower around the neighborhood, knocking on people's doors. Yep. I actually cut your grass, even if you didn't answer the door. And then I'd come back later and say, Hey, I cut your grass. Give me 10 bucks. That was a strategy and it worked. It works.

[00:18:19] And they're just like, yeah, you cut my grass like crap, man. Like the lines are crooked. So I got better and better and better. I did that. We're shoveling snow. So I kind of got that reputation. I've just always been that way. And so, you know, I got into the airlines, you know, 21 and, you know, we weren't making any money. If everybody remembers back in 2004, 2005, a regional pilot made 18 grand, you know, and the best, the best pilots, you know, made 25 grand, you know, thankfully that's changed. And so I started crash pads. Ah, that was a lot of work.

[00:18:47] A lot of, a lot of time got out of that, but I started reading books on real estate. Yeah. You know, rich dad, poor dad. Um, you know, that was a great mindset book, but you know, I was always looking for jobs that just paid the money, but I realized like I was spending a lot of my time in exchange for cash and I just realized it wasn't sustainable. Right. And so, you know, I read the book cashflow quadrant when I was on a layover in Palm Springs and that's like the light bulbs. Just that's the sequel. Yeah. To rich dad, poor dad by Kiyosaki. Yeah.

[00:19:17] And so I just kind of like decided like I need to get out of this, like trading my time for money. And it made me realize that like you're an employee, trade your time for money. There's nothing wrong with that. We got a good job, but then I was a consultant for the FAA. That was even worse. Like changing, exchanging your time for money. Cause like you only get paid when you get money. And then I realized like, okay, I can become a business owner and that's how people get really wealthy. And then also if you become an investor, cause anybody listening to this can be an investor.

[00:19:45] That's where you pay the least amount of tax. I want to break down the cashflow quadrant real quick for anybody that hasn't read that book. So draw a cross on a, on a piece of paper and in the upper left-hand side, it's E for employee. And in the lower left-hand side, it's S for self-employed. The upper right is B for business owner. And the lower right is I for investor. And on the left side of the quadrant, you're trading time for money.

[00:20:12] On the right side of the quadrant, you're leveraging other people's time, money, resources in order to, to create more wealth. Right. So a lot of people think they're starting a business, but really they've just gone from E to S they've just gone from the employee to the self-employed. They bought themselves another job. And I just want to make that distinction clear because that's a really powerful concept. Yeah. And I think also people think that if they start buying real estate, they're going to come rich really fast. It's a really slow way.

[00:20:39] It's a really slow way to generate income and wealth. It's for sure way, but it's also very slow, very slow. So it takes, takes a long time, takes it's, you know, and you know, it could take a lot of work, you know, for, for someone listening to this, like Tate and I, we, we do the work in the real estate and you could invest in a syndication that we do. Right. So turbine capital and then Spartan investment group, we do syndication. So like, if you're like, Hey, I want to be in real estate and I want to own, you know,

[00:21:07] that specific project, you could invest in our deal and it's completely passive. There's nothing to do. There's no loans to sign. There's no going to the property. There's no, you know, calls in the middle of the night. Investors take 70 to 80% of all the profits for doing none of the work. Exactly. And then there's some things that you don't get, right? Which is like control over when you buy or sell, you don't get, you know, you don't get the headaches, but you also don't maybe get, you know, some of the rewards that you would get otherwise from a, from doing a deal yourself.

[00:21:36] You know, it's like, but you get a lot of benefits. You get the professionalism of having a world-class operator. You still get to take advantage of all the tax incentives. Um, and you really do get something that's truly passive. I really liken it to, you know, flying your own aircraft, you know, flying that one 72 from LA to New York on your own, or just buying a ticket on a, on an airline and taking a nap on the way while the pilots fly the plane. So where was the real estate spark? You read rich dad, poor dad.

[00:22:06] You know, we've talked about a little bit about this on the show before, but for those that either haven't heard that episode or that wants more detail, what was the genesis of a Spartan investment group? Yeah. So, I mean, I, like I said, I've always been encouraged by my spouse, by my wife to be an entrepreneur and look for things. And so I've always been kind of on the hunt for like my thing. And, um, you know, I bumped into my neighbor in DC, Scott, and he was entrepreneurial and

[00:22:35] he was like, Hey, let's start a company together, you know? And, uh, you know, I think that was really the time that I was reading those books and it kind of lined up. And I said, Hey. I think it's also important to note that Scott is former army, right? Yep. Very disciplined, uh, very organized, like, you know, drill sergeant task and you two play off each other very well. So this isn't just some random neighbor that was like, Oh, Bob's a nice guy.

[00:23:04] It's like, Scott is a machine. And so are you. Yeah. So we, we basically like kind of, you know, you know, I don't encourage you to try to meet your neighbor to be your business partner, but that's who my business partner is. And we've scaled a, you know, almost $800 million portfolio together of storage across the country. And, you know, he had strengths that, and I had strengths. And so kind of combining, you know, his weaknesses, my weaknesses, his strengths, my strengths, you know, we were able to really flourish and start a business.

[00:23:32] And, uh, and so that's the route that I took. And so I, you know, the, the great thing about the airlines is it's really nice flexibility to do kind of stuff like that. So, you know, that's, that's, that's kind of the Genesis. And so we started flipping houses. We, we went down the roads that everybody thinks to go down, right? I want to buy turnkey rentals. I want to go buy crappy properties in Detroit. I want to go buy cheap, cheap, cheap, cheap, cheap, buy what we can afford, buy what we can get there, you know, buy what we can understand. You know, those are okay, but we kind of moved away from that.

[00:24:02] And we said, Hey, what, let's look at something that's easy to own, easy to evict, easy to maintain. And so we started to settle on storage. And then we just went around the country. We learned everything we could about all the trade shows and all the education. We went to conferences. That's how Tate and I met. And then we just got going on a business plan and strategy to make Spartan what it is today. And, you know, I was flying with guys and they'd be like, what are you doing on the weekend? You know, what are you doing on your days off? I'd be like, well, I'm buying this storage facility. And they're like, Oh, I've always wanted one of those.

[00:24:32] And I'd be like, well, for 50 grand, you can. Yeah. And, you know, and it's like, okay. So then, you know, all of a sudden I have investors putting money into my projects and I'm partnering with people to go buy more and more and more properties. And basically it built up a company that way. And I share in all the cashflow and appreciation, you know, and tax benefits along the way. So it's been really fun. Yeah. So that, you know, I don't know where the spark was, but I think it was just kind of a confluence of things. It's, uh, it's amazing to see what you've built.

[00:25:01] You know, we met seven or eight years ago and, uh, I invested in one of your deals at that time, which, uh, was fantastic. And we've partnered on a bunch, uh, since then with, with turbine. That's fantastic. What about you, Tate? Cause we, we met at best ever conference, I think like seven or eight years ago. And, you know, by the way, Tate's a really good snowboarder. If you didn't know, uh, uh, like really good. I was like, Oh, like, I was like, yeah, let's go skiing. And I was like, Oh, this guy from Hawaii that wants to snowboard. I was like, Oh man, this is going to be awful.

[00:25:31] Like, you know, and then Tate was just like shredding the fricking mountain. Well, so I started skiing when I was four. I actually, uh, I was born in New York city and then my parents got a while. They, they got sick of, uh, the city and moved to Bozeman, Montana. And so I, I grew up in Bozeman. I started skiing when I was four. So I kind of flipped back and forth between snowboarding and skiing, depending on conditions. So yeah, I think I showed up, you know, uh, one piece, you know, and you're like, Oh, this clown, right. You know, the fart bag, the fart bag. That's right.

[00:26:00] I am a connoisseur of vintage fart bags. If, uh, if you didn't know that about me, Tate's very stylish on the hill and off the hill. Uh, yeah, we met back seven, eight years ago. So for me again, always entrepreneurial. I started buying real estate when I was really young, my second year at my airline, I was scrounging every penny I could. And I bought my first property when I was 24, 25 years old. It was a three bedroom house in Summerlin in Vegas. And I rented it out to, to a family.

[00:26:27] I used the property manager rather than managing it myself because I didn't want them to know how young I was. So traded that property up a few times into some, some multifamily. And I wanted to build a whole portfolio of multifamily rentals. I wanted to scale to 50, 100, 150, 200 unit apartment complexes in my own personal portfolio. And I hadn't really discovered the limited partner model of investing like Ryan's mentioning, uh, through syndication.

[00:26:53] And so I went to best ever conference with the goal of expanding my network, meeting more people, meeting lenders, meeting brokers, making friends in the industry who are also doing it so that I could have more confidence and, you know, find some mentors. And instead what I found were a bunch of firms like, like Spartan, like Ryan, where, you know, you could just throw 50 grand in, keep 80% of the profits for doing nothing. And I had just upgraded to captain. I was making good money and I'm like, this is genius.

[00:27:24] Why am I fighting over scraps? You know, if you can't beat them, join them. And at the time I was spending my days off flying across state lines to hire cashflow markets to try and find properties. And I'm like, I'd rather enjoy my life. I'd rather pick up double time and just fly an extra couple of days and make a bunch of extra money and just dump it into and let somebody else deal with the day to day headaches. And so started investing in that capacity.

[00:27:50] And then, you know, in the process met a bunch of doctor groups, met a bunch of doctor groups who had education platforms like this for doctors. Fun fact, a nice guy named Peter Kim, who's an anesthesiologist, has passive income MD. And he's a good friend of mine. And he's actually the one that said, yeah, man, take the name. And that's where passive income pilots came from. Yeah. Yeah. And I just came away from it going, how is there nothing for the airline pilot community?

[00:28:18] And I sat on the idea for about a year and launched my firm five years ago to help airline pilots diversify beyond their 401k into all sorts of things. So Ryan is in self storage, hyper focused on self storage, which is a fantastic asset class. We're a little bit more diversified because we're a fund and we use our economies of scale to form partnerships with operating partners who are the day to day boots on the ground.

[00:28:47] Well, Tate, you're not just a fund into everything. What's cool about what you do is you get to kind of pick what asset class type, right? We do. So we kind of have a top down strategy where we look at macroeconomics, which I think we're going to talk about here soon. And we look at where it makes sense to be investing in what asset classes. And then we go out and find the markets and the individual deals that we want to participate

[00:29:13] in and we participate across multifamily and mobile home parks, industrial self storage. We do debt. We do even with our latest edition of our skunkworks division. We've been layering in some venture capital and early stage seed round stuff that has much higher risk, much higher return. By the way, that looks really cool. But like that stuff is crazy, but it's crazy fun because like you get to go into companies

[00:29:40] that anyway, we have amazing episodes on the show about like VC stuff. Like it's so cool that you get to go and invest in that. Like I don't know anybody in the real estate circuit that's really offering that. So I think it's really special that you guys are doing. That's pretty cool. You have to opt in or be hand selected. So it's not for everybody, but we recognize that, you know, we do have some investors on our list that are, are higher net worth, have a higher risk tolerance and are, would be interested in it.

[00:30:05] And we just, because of our respective networks, we get exposed to a lot of stuff. Tate is doing you a service by saying that like, it's not for everybody. And like, you got to understand that, that, that risk factor and, but also the reward. So like, yeah, Turbine, Turbine and Spartan both, you know, we do everything we can to, to de-risk the investments that, that are on our respective platforms. And again, we don't, we don't provide any tax legal investment advice. We're just, we're out there pounding the pavement, trying to find the best, best possible

[00:30:35] deals we can and bring them to our, our respective investor groups. And we do everything we can to reduce the risks of those deals. When we launched Skunk Works, it was like, hey, this is the speakeasy in the back. Yeah. This is different. You, you gotta be, you gotta be willing to, to part ways with this cash. Yeah. So let's, let's switch up to some economics here. So, you know, the economy has been on a tear. Stock market has had its two best years nearly in history, two 30% years back to back.

[00:31:05] It's been insane. I'm a huge real estate proponent, but even myself, I'm looking at this and going, God, the S and P has been on a rip that can't go on forever. Where are we? Right. Ryan, you want to talk about inflation, some of the new Trump policies and the potential for throwing a wrench in their feds rate cut cycle. Yeah. I don't even know where to start. Right. So, I mean, we could lean into what tariffs might do, right? So tariffs are going to be potentially increasing cost of goods.

[00:31:35] Inflationary. Inflationary. So a cost of goods are higher because they're taxed. That could lead to potentially increased costs of materials. Now, if you're a real estate guy, you might be thinking, oh, well, that's bad now because I can't build a new storage or multifamily or whatever. And the costs are going to go up. But there is also a flip side to that. Oh, yeah. What happens if people can't build more multifamily or self storage? Well, if you own these assets, guess what happens to the rents? The rents go up.

[00:32:04] According to the Association of Multifamily right now, right now, the renewal rate of multifamily tenancy has increased to 85%, the highest it's ever been. So basically people are in their apartments and they can't move or they buy, they can't buy a house. So when you look at, when you look globally at the market, we're at the lowest period of home sales we've ever had since 1997. And think about it.

[00:32:31] There's 63 million more Americans since 1997 than there are today. But the housing market hasn't crashed. It's just nobody's buying houses because interest rates are super high because the Fed raised the rates. We all know about that. And the housing pricing has stayed steady, maybe to slightly increasing in some markets. Some markets it's down, some markets it's up. But, you know, we're in this like weird environment where tariffs could be just a global political move, right?

[00:33:00] They could really have no economic impact. Hey, if people stop buying less things, then because of tariffs and things are too high, it actually could deflate some of the prices. So, geez, what's going to happen? I don't know. There's a lot there's a lot to think about, though, that have led us to this inflationary environment. Of course, like, Tate, you ask a question like I'll give you a direct answer. What happened to inflation? Well, COVID happened. Everybody stopped working. People stopped producing things.

[00:33:25] The government got out trillions and trillions of dollars, injected it into the economy while no one was producing. Things got more expensive because they weren't being made. And it drove the cost of goods through the roof. Meanwhile, real salaries didn't keep up with the price of inflation. So now you have this environment where people's salaries increase, but not at the pace of the cost of goods and the cost of living.

[00:33:52] Now we have an environment where it costs a fortune to own a house and rental has been, you know, rent, renting has been more attractive than ever. Right. Right now. So and if I may, let me layer onto this. So, you know, the real estate market was kind of slow and steady up until 2020. Right. And then COVID happens. So the government turned on the printing presses, pumped $5 trillion into the economy, expanded

[00:34:21] the money supply by $5 trillion. The last trillion and a half was very unnecessary because we were already kind of on the recovery and stimulus can, can be inflationary, cannot be inflationary depending if factories are sitting idle and people were just in a sluggish economy and you inject money into people's pockets, not inflationary because they're going to go out and buy the widgets that the factories

[00:34:49] aren't producing and get people back to work. But when the factories are already a hundred percent capacity and supply chains are breaking and you can't produce any more goods, and then you inject a bunch more capital into the system, inflationary, because now you've got even more dollars chasing those goods that are too scarce already. So that's what really kicked off the inflation wave. Then the fed has no choice after saying inflation is transitory.

[00:35:18] It's don't worry about it. If you were in a real estate deal that you bought in 2021, let me guess how it's going. Probably not so good because- Not so great. Yeah. Because you were at rock bottom interest rates and debt is the most expensive line item on a real estate deal. I think everybody would agree with that. And debt rates shoot through the roof. The fed after saying in the spring of 2022 that they will hold rates steady till 23, they went

[00:35:48] on the fastest rate hiking cycle in US history, jacked the federal funds rate up by 5.5% in 14 months. Yeah. That drove commercial real estate into an absolute brick wall. Deals are going back to the bank. If you're just getting into this, you may not be aware that it's been a bloodbath over the last year and a half. For the last two years. Yeah. If you're just getting into real estate, I think it's created a tremendous buying

[00:36:17] opportunity in the next year and two years because- A lot of people got upside down on their debt because interest rates were so high. And it was this quadruple whammy because the debt cost increased, inflation meant that labor costs and material costs increased. So you wanted to do all those renovations you were planning on? Well, guess what? All the materials cost 20%, 30% more than you were planning on. Yeah. And a bunch of these development projects started back in 21, 22 because debt was super

[00:36:46] cheap and everything pencils. It's amazing what pencils at a 3% interest rate, right? So all this supply, whether it be storage, multifamily, industrial, all this supply dumps into the market. So you have this quadruple whammy of like, you bought the property at the height of the market, the debt costs went through the roof, your material costs and labor costs went up. Oh, and by the way, property taxes and insurance probably went up quite a bit as well.

[00:37:12] And you're competing with all of these other properties that are brand new and delivering into the market. So there hasn't been a better time to buy commercial real estate in the last decade, two decades. Yeah. We're finally kind of through the storm and we're kind of getting out the backside. And, you know, I think, I think one of the thing that we need to talk about, because like, where are we today? Right? Like that's kind of where we were. Like we're kind of in this good buying.

[00:37:37] I think one little thing I want to go, I really want to make sure we get to is spending bills, you know, spending bills. Some congressman wants some pet project and they're going to give it to him. If some other congressman gets what they want and sort of, we have in America, we have this increasing quality of life expectation, right? And the way that we get there is we spend more. The government just keeps spending more, spending more, spending more, spending more. And I think we need to transition and talk about what's going on in the federal government

[00:38:07] now as it relates to you as an investor. So let's talk about Doge. Let's talk about Doge. Let's talk about Doge. Cause like, this is controversial. Again, I'm not going into politics, but like, let's just talk about realities of what's going to happen to you as an investor and what kind of you need to be aware of. Right. And I want to kind of set the stage a little bit. I mean, what's super important to understand is the federal deficit has increased.

[00:38:32] As of January, 2025, the federal deficit has increased by 15% compared over the same year prior. So year over year, 15% increase in federal deficit. That's substantial. So, you know, they say the average organization for economic cooperation and development, like that type of country has a federal deficit to GDP ratio of 3%.

[00:38:58] So for the third year in a row in the U S we've been running at a 6% deficit to GDP. And that is unprecedented. Like the only time that's ever happened with the exception of times of war was during COVID like the recession. So I think, you know, as we kind of transition into this new presidency, like Doge is trying to cut. And so that's going to have impacts to you eventually. Right.

[00:39:24] So we're running a fiscal policy as of right now, or prior to Doge, like we've been running a fiscal policy that's basically fighting against a recession, but there's not a recession yet. Right. So here's, here's kind of the risk that I see if Elon Musk and you know, the department of government efficiency, what we're talking about, they have their way and deficit spending is dramatically reduced. What happens to GDP? What happens to, you know, the spending and the jobs and you know, what's kind of propping

[00:39:53] up this economy? What happens if we stop spending money on infrastructure and, and, you know, federal, federal government, right? Like, and these people start losing their jobs. And then now we don't have people who are employed and you could see a pretty big shakeout come from this. And what's, what's interesting, I think is I've been watching some of the reels and it's like, you know, people are losing their jobs and they're just like, well, I'm a, I'm an accountant for the federal government. I'm going to just go, go to the private sector now.

[00:40:23] And now there's more competition for that same job. So when you're, you know, as you're an investor, just, these are just global economic things to be aware of that might impact us as investors. So, okay, Tate. So we, we kind of gave a good overview of those, how we got here, where we are now. What are you thinking about in 2025? What are you investing in and what's on the top of your mind? Maybe, maybe even what keeps you up at night? Great question, Ryan. Yeah.

[00:40:51] So I'll start with what keeps me up at night and that's interest rates. You know, we've, we've all been waiting for interest rates to come down, particularly for the projects that we bought in 2021, 22. We've all just been trying to get through this period of, of high rates to the other side. And it looks like we're, we're through the worst of it, but we really are waiting for those, those rates to come down. The problem is it looks like we're going to be in this higher for longer environment, you know, with the new administration coming in immigration,

[00:41:19] tariffs and tax cuts, all three of those propositions are inflationary, which is going to prevent the fed from implementing the rate cuts that they had planned. If inflation stays persistent. So that's, that's the concern. The good news of that is it keeps pressure on the real estate market, which makes buying opportunities. So it's one of the reasons why we think today is just such a great buying opportunity in multifamily.

[00:41:45] It's a great buying opportunity in industrial, in mobile home parks. All of these asset classes just have tremendous tailwinds because of high interest rates. It's putting downward pressure on prices, which means we're getting assets at a really great basis. And then the other vertical that we see incredible potential in is oil and gas. We think that, you know, post COVID pre COVID oil and gas was really a, it was a growth asset.

[00:42:14] And now it really has become a cash producing asset. We're seeing where assets were trading at about 10% cash flow pre COVID. You can buy proven develop producing oil and gas assets today at 20 to 30% cash on cash. So we think that we are in, you know, this 18 month window of opportunity in the energy space, where there's just been chronic underinvestment in the energy space for the last decade.

[00:42:40] You know, new drilling investment is down 55% since 2017, I think. So while we're still 81% reliant on fossil fuels as a, a globalized economy. So while I'm a hundred percent behind the green energy wave, it's just not the reality yet. And, you know, while I'm, I'm very much an environmentalist, I'm also an investor and I'm looking at these trends.

[00:43:08] So again, we, we think that there hasn't been a better buying opportunity in commercial real estate since the great recession. And we've been waiting for this, right? You know, the, the best time to plant a tree was 20 years ago. Second best time is now. Yeah. The best time to buy real estate was 20 years ago. And the second best time is, is today. And we've been waiting for this moment in time. We got some really great stuff coming up. We've got, uh, do some multifamily deals. What's interesting about your multifamily. I want to just like touch on that.

[00:43:34] What I think is exciting about that is like a train, just like derail big time. Absolutely. For the last like three years. So like, nobody wants to touch multifamily right now. Yet construction starts are down by 70% since their peak. Yeah. So this is like the time you want to go and buy it. Exactly. Like it's 30% more expensive to own a home than it is to rent an apartment today. And, and when you look at the graph, I mean, it's just off the charts, right? So the fundamentals are there, you know, household formation is there.

[00:44:03] The demographic trends are there. Apartment demand is there. It's just that we delivered too many apartments to the market. And so as those get disabsorbed in the market normalizes construction starts to down 70% from their peak. So looking into 26, 27, there's going to be huge demand for this stuff. So bullish on multifamily, but I'm also bullish on storage. So Ryan, what are you excited for this next year? What keeps you up at night? Yeah. So here's what keeps me up at night. Like how operationally challenging it's been the last two years.

[00:44:31] It has been an absolute challenge. And like, I have spent so much time and effort, like making sure that my team has what they need, upgrading employees, like hiring great people, getting technology. So people can self-serve. So we don't have to have as much payroll in the property. It's been a bloodbath. And here's why. If you actually look at the amount of people moving right now, the amount of people moving up to the point in the last 30 plus years.

[00:45:00] You mentioned how few, how homes are changing hands. Like 70 something percent of realtors didn't make a single sale last year. Yeah. But yet our occupancy is 92%. That's awesome. So if you look as an industry, we're 92% occupied as an industry in store rents, which is the rents that people are actually paying are, if you look at the REIT data, there's been rental rate growth. Now, unfortunately there's been NOI slight decline because net operating income, net operating

[00:45:28] income has been slightly down because expenses are up, right? Property taxes insurance. But generally considering the 63 million more Americans living in the United States today, but yet we're at a lowest point in our housing since 1997. What I'm excited about is that at some point Americans are going to start moving again and we're going to hold these properties that are performing pretty well with the current economic conditions that we're in.

[00:45:56] Just imagine when moving normalizes again, people are going to use storage like crazy. And right now, you know, there's a, there's over $1.5 billion in loan maturities coming up on these storage properties. Yep. And we're seeing more and more of them come to market at a great price. So we've been able to build, we've been able to buy in this past year, some of the best buys that we're going to have. And I think upcoming, the things that we buy are going to really have a tailwind and occupancy at some point in the future.

[00:46:26] So the way I'm looking at deals this year is I'm saying, Hey, what makes sense now? Nevermind the people coming back and moving. I don't even care about that. That's just cherry on top. But, but like properties that you have now, we are looking at like the Salem deal that, that you guys did with us. We're not saying that the market rent is going to grow. We're not even assuming that in our projections. We're just looking for deals that are, Hey, where can we get deals that are highly occupied markets where we can just bring the rents up to what the other facilities are already getting.

[00:46:55] So we're just looking for those mismanaged properties that we can just simply bring up to the market. And then, Hey, if the moving activity goes crazy again, even better for us, we can even further push rents and occupancy. So I'm, I'm pretty excited about the future this year. So yeah. When you look at fundamentals, like, I mean, if you can buy a deal that pencils at a 7% interest rate, and of course you're using fixed rate debt to, you know, or, or interest rate caps

[00:47:21] in order to hedge for the downside in case for some black swan event interest rates increase. Uh, but that's likely not going to happen. If it does, it won't be for a prolonged period of time. Uh, a, an equilibrium rate is about a 2% fed funds rate. Uh, when the fed is not trying to grow or shrink the economy, a fed funds rate of about 2% is equilibrium. That means that interest rates normalize at about four, four and a half percent.

[00:47:47] So that's going to cause massive tailwinds to, to real estate, to commercial real estate. So we just think we're in a, uh, an incredible buying opportunity across all the asset classes. So I get this question all the time. How does somebody get, you said skunk works is like for a limited amount of investors or certain investors, but like, how do you even get on your list? How do listeners get on your list? Yeah. So we, we haven't really talked about this on the show, uh, much at all.

[00:48:15] We've just sort of been letting people find their way in, but our website is turbinecap.com as in turbine capital. So T U R B I N E C A P.com. Uh, again, skunk works is the, you know, the fringe, the outlier. So, well, it sounds cool. At some point you'll get an email if you're on our list that says, Hey, we also have this, this other division. If that fits your risk profile, you can opt into it, but yeah, you go to turbinecap.com, click invest with us and you can sign up to our list. Ryan, what about Spartan? Yeah.

[00:48:43] So you can go to Spartan hyphen investors.com and there's a, become an investor. You can, you can fill out a form on there and you'll get on our list. You'll get connected with the right person to talk about investing with us. And I think what's really cool is like, I had a friend who has invested. He was on our list for five years and just watched deals go by and there's never any pressure to do anything. Absolutely. Yeah. We have the exact same. Yeah. We have people that have been on our list for five years and just jumped into their first

[00:49:13] deal with us. Yeah. Just like read, read our newsletters, like see how we perform. Like, you know, just talk to us, get to know us. You know, I think it was kind of cool about being a pilot. Like if you ever run a Seattle layover, you can come see me. If you're ever on a Hawaii labor, which sounds way more fun than, uh, than Seattle. Well, I'm not, it's the summertime. Yeah. It's certain times of the year, you know, you can, you can jump in, see tape, but yeah, we'd love to have you in the office. We'll show you the podcast studio that we have in Seattle. Yeah.

[00:49:39] And the other thing I think we need to talk about is we have a Facebook group called passive income pilots, and it's a great place to come learn, share. We have some of the people that we host on the show in the Facebook group. Nathan Sosa is now in the group. He's a tax strategist. He's my personal tax strategist. He's in the group. So it's passive income pilots on Facebook, jump into the group. You can ask your questions there and we'll, uh, we'll tag those people appropriately so that you can get the information straight from the source.

[00:50:06] Rod Zabriskie from money insights who, uh, a lot of us have our whole life insurance policies with they're in the group and we're just trying to curate the best possible community for, for the pilots so that you can get the answers to your questions and shortcut your cycle of learning. Yeah. We're just here to collapse timelines and you can also go to ask at passive income pilots.com or email and ask us questions. We'll feature your question on the show, but you know, if you've been enjoying the show so far, give us a review. We'd love that. And, uh, that would mean, that means a lot to us.

[00:50:36] So next week we're going to talk about investing in airplane hangers. So we're gonna talk all about that. So the next episode, so I know we kind of went on a little bit tangent who we are and, but we're just, we just want to celebrate that a hundred and a hundred episode. But next week we're going to talk about investing airplane hangers, everything that goes into that, how to find them, how to buy them, how, you know, what the industry is like. I think you're going to find it really interesting. For those of you that have been with us since the very beginning, thanks for sticking with us for a hundred episodes. Uh, we're looking forward to the next hundred and if you're just tuning in, it's going to

[00:51:06] be a fun journey. Thanks everyone. Catch you next time. Bye. Bye. Bye. Bye. Bye. Bye.