EP. 24 // How Conservative Investing Creates Opportunity from Uncertainty w/ Bruce B Wuollet
On today’s show we have the CEO and Founder of Bakerson. Meet Real Estate Investor Bruce B. Wuollet.
On today’s episode we have seasoned real estate investor and Founder of Bakerson, Bruce B. Wuollet. Bruce brings an absolutely tremendous amount of investing insight to this episode, drawing from his +20 years of experience in Real Estate, from thousands of flips to hundreds of wholesales a year. In this episode, David and Bruce talk about Bakerson’s pivot from buy, fix, and flip to a buy and hold model, how it’s always detrimental trying to time the market, and how consistently executing a conservative investing thesis in times of economic turbulence is the best way to create opportunity in times of crisis.
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Key Points from This Episode:
Bruce started in 2001, he shut down his first business and he started working with a real estate professional to pursue tax lien foreclosures; he started picking up houses, learned how to leverage from Rich Dad Poor Dad, and started fix-and-flipping and wholesaling.
Over 2000 flips in his first two years.
During the market crash he learned how to restrategize since his copious land ownership created major loss in 2008.
In 2010 he went back to wholesaling, 30 to 40 escrows a month. Up to 7 in one day! He demanded that his own title company was used in each transaction. He called it “whole-taling”, buying, cleaning up, and then wholesaling.
Started wholesaling apartment buildings. Operators who syndicate, not syndicators who operate.
Six deals in Phoenix, 11 in Tuscon, one in Sierra Vista, one in Albuquerque. Sold everything and shifted from in and out in a 12-24 months model to an indefinite hold model.
”We’ll be the rock in times of uncertainty.”
253 Units under Management, sold 500 in 2021 as a repositioning. Not huge teams of investors but heavily involved. Focus on Class C workforce self paying residents. Upper lower class, lower middle class. They'll look at any building in their district; if it’s cashflowing it’s not too small to underwrite. Although he loves 75-125 units. These are the assets that fly right under the radar of institutional capital.
Switched from buy fix and sell to a buy and hold. Holding for 24 months is technically passive but it’s a very involved process; 24 months is right when the investments are operating efficiently. This originally spoiled investors and this transition lowered the investor pool; but the quick flips are likely now over in this economic cycle.
Buy now, refinance, and hold over 10 years to avoid the bottoming out of the current economic cycle.
Don’t time the market, you will always lose money. Buy a good investment, even if it drops you have a locked interest rate and it will be cash flowing. “Catching Knives” by Jake Harris
When you panic you make bad decisions. Freezing is the stupidest thing to do, keep moving and figure out your path forward. Keep active, read the market, don’t be emotional. It’s okay to be excited about opportunity!
So long as your interest rates are fixed and the property is cash flowing, it’s enough to be a win. Price per unit, price per sqft, rent per unit, rent per square foot, and rent per market. If you enter a submarket, you want to make sure your price per unit is below market, rent per unit is within market; all six metrics should be working. Double digit cash on cash return is mandatory, 15% IRR over the life of the project. They don’t kick out investors once they get their money back, they give the opportunity to remain part of the cashflow option.
They look for agency or bank debt. If the market continues to be uncertain the challenge will be larger down payments, thus dropping the offer metric in their model.
Large operators never sell for the point of selling, they only sell to facilitate buying more. Bruce emphasizes cash flow; rents don’t often drop, they often even plateau in recessions if not raise. Properties drop, rents often do not.
”You flip for cash, you hold for wealth.”
Six perf, 80/20 split in favor of investors, once they get their capital back 15% IRR, it goes back to a 50/50 split. Often happens after a refinance. If the investors want a buyout, which seems ill-advised, they do offer a buyout option. But they prefer to keep the investors in!
Large operators often don’t want their money back because they want their money working, and they live off of the returns.
Bruce doesn’t buy off of cap rate, he uses other metrics such as price per square foot.
Keep occupancy up; if you go beneath 90% vacancy and interest rates up you may get stuck in a bad situation where you won’t be able to get a bridge loan. You won’t be able to get a capital call.
Best advice early on is “listen to those who have gone before.” People who have 40 years of experience, they’ve done some things right to survive.
Bruce’s morning routine is new; he forced himself to have structure. Up before 6, sometimes 5, he reads for one hour with two cups of coffee. He bikes for an hour, goes home to shower, then goes to the office with 90 minute blocks. 90 minutes of hyperfocus on each task, including lunch. He unplugs during lunch to air out his brain, then returns to it. Once he’s home he tries his best to not work to rest properly. He reads for 30 minutes before bed as well.
Relevant Links from Today’s Episode:
ABOUT BRUCE B. WUOLLET
Bruce began working in real estate in 2001 with tax lien foreclosures. It was during this time he learned how to research public records, to understand how title works and the legal side of real estate. He soon realized the huge opportunity in pursuing vacant homes that were not in tax lien foreclosure. By the summer of the 2002 he had picked up 3 investment homes, a duplex & a triplex. In the first year and a half he was introduced to private financing, deal partnering, cash flow and forced equity.
In October of 2002 Bruce partnered with Jack Martin to form Bakerson, LLC. Bruce's knowledge for title work coupled with his ability and experience in research as well as his passion for the legal side of real estate makes each transaction that much more secure.
Efficient systems within the organization are key to profitability and expansion. Bruce has a unique ability to build new systems as well as streamline existing ones.
Prior to real estate Bruce was an executive recruiter for four years; two years in Minneapolis and two years in Chicago. During these four years he was the top recruiter for the company. He quickly learned what it meant to keep a full pipeline of activity. The training and experience he learned in human relations as a recruiter is invaluable.
Bruce grew up in family bakery business in Minnesota. He started working with his father part-time in 1980. Over the next 16 years he was able to work in all areas of the business from baking to cake decorating to sales to deliveries. Each one of these departments gave Bruce a unique perspective to life and business: efficiency is key and life is all about the relationships we build.
