Kristen: [00:00:00] Welcome to this edition of Insider Secrets, the weekly podcast that turns real estate investing goals into reality. Each show we interview guests who are seasoned real estate professionals actively closing and managing real estate deals. Mike is the founder of My Core Intentions and would like to help you make your real estate investing dreams a reality.

Mike coaches you to buy investment real estate, creating short term cash flow and long term wealth. Your host and real estate coach, Mike Morawski, has more than 30 years of real estate investing and property management experience. Here’s your host, Mike.

Mike Morawski: Hey, what’s up, everybody? Good morning. I am glad that you’re here. And listen, if you are here for the first time, just tuning in, Welcome! Glad that you found us. And whatever we can do to help support you and your business and your business growth, whether it’s looking for deals, underwriting deals, [00:01:00] managing those, whatever that might be, don’t hesitate to reach out. If we can help, we certainly will try and do that.

And you know what, follow us on social media because we’re always bringing out new content, new information. I always have a great speaker on. A guest, somebody smarter than me, right? I keep learning, been in the business 30 years, and I keep learning from everybody I interview and talk to and meet at networking events. So I would encourage you to take that same mindset and that same approach.

Hey, one thing that I want to just kind of comment on this morning is, I’ve had a couple of conversations over the last few days with people and one word keeps coming up. And if you know me, I talk about intentions a lot, but this one word this week seems to come up a lot, it’s trust.

And I think that we’re seeing some things in the markets today and in the marketplace that may be causing people to waver in their trust of operators [00:02:00] and of individuals in general. I have some friends that have run into some challenges here recently and people around them are calling me and asking me, Hey, can I really trust this person?

So, I really believe trust is one of those things that it takes time to build. But boy, you can lose it in an instant, right? So we have to live a life that is just filled with integrity. We have to walk in a direction that continually builds into others, builds into helping people know who you are at the core. What are your core values? What do you believe in?

So I would just say, if you’re looking at a sponsor today, if you’re looking at a syndicator, make sure that you have that level of trust and rapport built with them, and that you’re moving in a direction that is equal for both of you. At the end result, the goal is going to be the same.

Follow us on social media, like us, love us, it always helps. If you are on YouTube, smash the subscribe [00:03:00] button this morning. I’m always bringing out content, new information, short form, long form that’s gonna help you help in your business grow.

All right. Let me introduce our guest this morning. I am joined this morning by Stewart Heath from Spring Hill, Tennessee. I can’t wait to find out a little bit more about Stewart and what he does. He’s a syndicator really in the self storage and office space. I can’t wait to hear about office here this morning a little bit, but he’s with Harvard Grace Capital. So let’s bring Stewart in. Stewart, good morning.

Stewart Heath: Good morning. Thank you for having me.

Mike Morawski: Hey, thanks for being here. I’m glad that we get to meet. I’ve met some of the greatest people just on this platform and from doing this. Connecting and dropping into other people’s world. So it’s been pretty interesting.

Stewart Heath: Yeah, I enjoy doing these. You get to meet smart people and learn from them too.

Mike Morawski: Yeah, for sure. So, I didn’t set this up [00:04:00] but I always ask one question that is prominent in all my shows and I always ask my guests and in one word, what best describes you personally and professionally?

Stewart Heath: Excellent question. One word, driven.

Mike Morawski: Okay. And about what?

Stewart Heath: Just through life experiences, I am driven to deliver returns to people who’ve put trust in me. Obviously, I’m trying to deliver returns for myself too, but, I wake up most every day making sure that we are sticking to the business plan that I pitched to my investors and who put their trust in me.

Mike Morawski: That’s awesome. Do you ever feel like sometimes maybe you could be overdriven or, that old workaholic type of driven?

Stewart Heath: Every day about six o’clock. That’s about when I was like, oh, I need a break.

Mike Morawski: It’s funny. I spoke on Tuesday night, I was in Milwaukee and I’m in [00:05:00] Chicago. So Milwaukee is about an hour and a half drive, but I went up to Milwaukee. I did a book signing and did a 90 minute training on multifamily. And it was interesting by the time I got home, got to bed, the next morning I was like, again, we’re going to go do this again. I think I’m driven too.

Hey, so talk about your background. What have you done in the past? What are you doing today? How’d you get here?

Stewart Heath: Well, I’m a CPA. Went to college and thought that going into public accounting would be the be all end all. It’s what my dad did and my dad’s one of those rare people who literally had one job or worked for one company his entire career after he left college. And he became a cpa and so I grew up thinking that was normal. And I kind of followed in his footsteps not really knowing what he did. But being in public accounting and being a CPA I got to see lots of different companies and [00:06:00] executives and my favorite clients and some of them are still my clients today.

One of them in particular, I think has been my client for 36 years. And when I first met this lady, she was upside down with the IRS, but she was a driven real estate agent, and became the best selling agent at her firm for year on year. And she started doing the fixing and flipping and so she just sort of became an inspiration to me. And now she just wildly successful, but mostly retired.

I had several clients that were in the real estate business. And I observed this and there was one point in the early nineties, I’m just like, I think it was 98 or something like that. And I’m just, what am I doing? I was in the middle of tax season and I’m working 18 hours a day. And, I’m just exhausted. And while I was making money at the moment, I knew I wasn’t really building long term, I wasn’t building wealth. I was making good [00:07:00] money, but I wasn’t building wealth. And so kind of turned my attention to real estate.

Mike Morawski: I like that. I like that building wealth. How do we help our clients and the people around us create generational wealth. Not just wealth for today, but generational. For the average person and there’s the anomalies, but for the average person, it’s hard just in a W2 job. We hear, you hear those.

Stewart Heath: I would say it’s impossible. Yeah.

Mike Morawski: But you do hear those stories of people who have worked for UPS for 30 years and I have seven million dollars saved. You do hear some of those crazy stories, but for the average person that doesn’t just happen. Let’s talk a little bit about your strategy around building wealth. What does that look like?

Stewart Heath: Well, my strategy has changed over the years. We talked a little bit in the pre show about some of our common history. I [00:08:00] had a hiccup around 2008-2009 because my strategy then was, buy as much as I possibly could. I wasn’t doing any syndications. I was doing what they call either equity stepping or equity ladder.

Buy this, hold it, operate it, wait a year and a half, refinance it, pull out that equity, go buy something else. And so I had built up an awful lot of assets going into the 2008 crisis. But there was no foundation. None of it was stabilized. My philosophy these days is Stabilized Cash flowing properties.

In the intervening years, I’ve studied and learned a lot about. You’re talking about generational wealth. Well, where do the people that have generational, where did that come from? You can go back to some of the old families in europe or the older families here. In these family offices, what do they almost all have in common?

They have a [00:09:00] core investment in cash flowing real estate. It tends to be stabilized. It doesn’t fluctuate much with value. It’s cash flowing, which means it’s income producing. It’s not very sexy. In fact, it’s really quite boring. But I’ve become in love with boring investments since my high flying, 2008 days.

I love boring. And so to me, that’s my strategy and that’s what I talk to investors about. And I find that people who even have wealth managers or what this idea of a foundation of cash flow is foreign to them. And it’s just really, this ought to be 101. This ought to be the first thing you learn in investing and what most people think is investing, I now think is gambling. And there’s a place for that. I mean i’m not against bitcoin or IPO investing or any of that, but you ought to do it from a place of strength. That shouldn’t be your first dollars out of your 401k.

Mike Morawski: [00:10:00] Yeah, 100 percent. I couldn’t agree with that more. I like what you said though the cash flowing asset, right? So when I put a syndication together for investors, I want to make sure that I can provide cash flow and long term wealth. I think and you’re doing that. The difference between what you do and I do though is I’m in the multi family space.

So I love apartments but you like self storage in office, and really I talk about office a little bit right now because a lot of indicators and fundamentals say that office really is going to maybe go through another downturn here. What are you seeing in that space?

Stewart Heath: Well, first I’ll say there’s about six subcategories of office. I don’t think that the financial news media is doing anybody any favors by trying to throw all office into one bucket. It’s not. The second thing I say is, all real estate’s local, [00:11:00] and I’m sitting in one of our assets right now. And this is a suburban office. I managed this building for about four years before we bought it.

And it’s been full and I wish I had three more just like it because I’m in a very well to do community. There is no other office space for a three mile radius. And if you’re a doctor, or a dentist or an insurance agent I mean, this is the type of asset that you want to be in. The office that we do is what I call consumer facing tenants. I think the problem area is going to come in class A downtown office, central business district offices, where you’ve got businesses where employees go to work and then they go home.

Some people might call this asset that I’m in retail because mainly consumers come here. And so insurance agents, mortgage [00:12:00] companies, like the doctors, your doctor is not going remote. Okay, he can’t and he’s not coming to see you. So you’re going to have to continue to go see your doctor. And there’s a number of businesses that deal with consumers that are legally required to have office space. Like real estate agents, like mortgage brokers, like insurance agents. And things of that nature and there’s just any number of those types. So technically this is an office building, but I mean it’s somewhere between office and retail.

I mean, but all of my tenants here in this building, they deal directly with consumers. Similarly, some of our other S are strictly medical office buildings. Again, I’ve already talked about doctors and nothing’s going to happen to MOVs in my opinion. I mean, they’re not going remote.

Mike Morawski: Yeah.

Stewart Heath: We’re not pursuing central business district assets either. I think those are the ones that are going to have to go through some more pain. I listened to, I think [00:13:00] Agostino on your last show, and you’re talking about they’re converting some office to some of its storage, some of it multifamily, some of it’s a combination of both. I think there’s going to be a lot of that.

Mike Morawski: Yeah, I would agree. So, I don’t know that I ever looked at office that way. Where you’ve got medical office and then you’ve got other offices were like Google go in and they’ll take five floors and they just did that in Chicago. Google was here.

Stewart Heath: I just did it in Nashville.

Mike Morawski: And now they pulled out, right? They pulled out. So yeah, I think you’re right that the central business districts are probably heard. I think the number that I heard within the last few months in Chicago was that the absorption rate for office was five years, right?

Stewart Heath: Yeah.

Mike Morawski: That’s a big number, right?

Stewart Heath: I think some of the bigger cities will have it worse than perhaps some of the other Southern or Midwest,[00:14:00] Southwest cities, what I meant to say. For instance, going back to all real estate is local. Huntsville is a major market for us. It’s our area of focus and what’s in Huntsville? Defense contracting. Well, what do defense contractors do? Well, they go into their office and they work on a lot of top secret stuff. A lot of them have to work several hours a day in a SCIF, which is a top secret electronic signals blocking space.

And so, some of that’s Class A office. We’re not pursuing any of that, but I don’t think Huntsville is going to go through a major Class A office space. I think they might in downtown Huntsville for a little bit, but I mean, you’re talking about a handful of buildings there. But again, you got to look at your specific market and understand what’s going on there.

Mike Morawski: So I like Huntsville as a market. I think, it’s always been a great market because of the Nassau’s there and you’ve got the air force base. And we owned[00:15:00] a number of units in the Huntsville market surrounding Madison and Decatur, but I know that . Do you do self storage there also? Cause I know that’s a class you like, so.

Stewart Heath: Yeah. Yeah.

Mike Morawski: Talk about that business a little bit. Where do you see that business going?

Stewart Heath: Well, as a numbers geek, my favorite thing about self storage is that it correlates so directly with multifamily. So, I’m not saying we won’t, we haven’t done multifamily yet. Most of it, I find very expensive, but I love the pattern. Right now in construction as of last week, there’s 14, 653 apartment units under construction in Huntsville right now.

Mike Morawski: Say that number again.

Stewart Heath: 14, 653 multifamily units under construction.

Mike Morawski: And are they coming out of the ground as A class or B class deals?

Stewart Heath: Most of those are A class.

Mike Morawski: Okay.

Stewart Heath: Huntsville is a very high net worth, high [00:16:00] income area as you might imagine. Most everybody’s literally a rocket scientist. And, we have a map and we’re looking for areas around all of these places because where multifamily goes, storage goes and the need for it.

And almost all the storage in Huntsville right now is 100% full as is ours. We’ve done actually a niche within storage in that what we’ve acquired is all big units, which were originally built for RVs and boats back during 2020. And now there’s a business class that sort of come in there and uses up a bunch of them. But we’re looking at more traditional storage, the mix of units five by fives and ten by tens as well. So, we’re very keen on the multifamily market. But to me, doing storage is like doing multifamily. And with the profitability, you just don’t have the toilets. You don’t have that problem.[00:17:00]

Mike Morawski: When you’re in that market, let’s just say the Huntsville market, you’re looking at a self storage deal today. What’s kind of the market cap rate for those today?

Stewart Heath: I’ll just give you an example. We bought this current facility we have, at a 6. 8 cap, which a good price. That came with five extra acres that we can expand on as well. So that’s part of that purchase price. We’ve already been offered by a major national player, what would be the equivalent of a six cap, without really spending a dime on the property.

We have gone in there and raised rents and stuff like that, but this player is trying to acquire everything. Hardly anybody else is selling in Huntsville and I doubt we will sell either at this time. So I would say high 5s, low 6s is the cap rate in the market that we’re in. So it sort of defies the rest of the market commercially speaking.[00:18:00]

Mike Morawski: Yeah, interesting. How about in office? What about cap rates in office?

Stewart Heath: We closed one two weeks ago and had a 7. 8 cap.

Mike Morawski: Okay.

Stewart Heath: And we have a contract on one that’s a nine cap. Although, I’m not sure we’re going to go forward with that one.

Mike Morawski: Yeah, interesting. I always like to look at the disparity between other product classes and multifamily. So now you syndicate, and for my listeners that might not understand that because maybe they’re new to the space. All syndication means is that we are grouping people together to participate in a real estate investment.

So we’re finding as an operator, a nice real estate property, whether it be office or self storage or multifamily. And then we’re going out and finding another group of people that are private investors that want to invest in that self storage. And they don’t even have to be private investors. As [00:19:00] you do this business a little bit, they could be family offices, which you’ve mentioned or institutional investors.

And you’re bringing those groups together to share in the profitability of a project. So I always like to break things down a little bit more simplified for some of the newer people and people that are new to the space. So, if you’re syndicating, are you syndicating all your offerings then?

Stewart Heath: We are.

Mike Morawski: Okay. And how’s capital raising efforts today?

Stewart Heath: We’ve had no problems this year. We do have a fairly tight knit group of investors. We’re always trying to expand that group. And I’ve talked to a lot of people who are eagerly looking for opportunities. There is a sense out there in the investor side that there are some deals coming. People are starting to smell some blood in the water and we’ve all heard the stories now for nine months. The two trillion dollars of [00:20:00] commercial mortgages that are going to start coming due in q3 of this year and we’re gearing up for that too.

I think I’m starting to see the front edge of that. I’ve seen lots of deal flow since middle of May, where deal flow was getting hard to find, but most of the deal flow right now is land. If you got somebody who’s been holding land, which almost by definition doesn’t make any money, and now they’re going to have to refinance that note and pay double or more on that note just to hold the land.

I’ve seen a lot of land coming on the market lately. And I think, the further we go into this year, that’s going to lead to income properties and so forth and so on. So, there’s a lot of investors who understand that’s coming and while they’re passive, they just say, yeah, I want to hear what you’ve got coming in Huntsville. So they’re joining our list and they just want to know about what’s out there.

Mike Morawski: Yeah. Interesting. And, does your passive investor, do they come from a specific market? [00:21:00] Like, are you just looking for investors in Huntsville or in your home market, Tennessee, or are they coming from everywhere?

Stewart Heath: They are coming generally from the southeast, but that’s because, I just sort of started with people that I knew. And the people that I knew were the ones who were clients or family members of plants from my accounting practice for years and years. And and every time we do a deal, one or two of them brings a friend with them.

So right now we’re centered in Tennessee, Alabama, and Florida. I went to a conference a couple years ago, met a guy, we’ve stayed in touch, and raised a half million dollars from a group down in south of Atlanta. And so it’s really just networking, to use the old fashioned term, who you know.

I do a lot of posting online and videos and stuff like that. I’ve picked up maybe one or two reach out to me through that. But by and large of our investor group, I can usually [00:22:00] trace them back to about five people that I started out.

Mike Morawski: Okay. Interesting. So a lot of referrals is what I’m hearing.

Stewart Heath: Which is very gratifying actually.

Mike Morawski: So I’m a huge advocate of the more lines you have in the water, the more fish you catch. Been a sales guy for years and sales tells you, you can’t just have one lead generation source going. So today in your business, I know you said you do some social media posts in that, but in your business today, what is that one albatross thing that you do in your business that maybe helps you generate potential investors?

Stewart Heath: Well, I can tell you about three things that we do. Doing this right here is one of them. We’ve made a big effort this year to go on as many podcasts and it’s [00:23:00] very effective. People reach out to me and we talk and chat and my only ask is, join our list because we only do a few deals a year. So, likely when we chat, I won’t even have a deal to pitch to you, but I still love talking to people about real estate.

So become a podcast guest. We have a LinkedIn strategy where I have a person who works with me to generate conversations with people on LinkedIn, with the end goal of booking a phone call so we can introduce each other, find out if there’s a fit. And that’s been successful. The least successful so far is, we have a lead magnet strategy that we’re trying to push forward on LinkedIn and Facebook, which is supported by video posts and whatnot.

We have lots of lead. We have lots of resources on our website. The one that we’re talking about right now is a checklist for passive investors on [00:24:00] how to evaluate your passive investment sponsor. So, how do you evaluate somebody like me? I think it’s pretty good list. I stole it from lots of other people and took the best parts and put it together and put our name on it.

And it’s free. I mean, we asked that you join the email list, which you can also immediately unsubscribe from. But download that, read it and kind of tells you, how we see our side of the business and I think it’s a good resource. We have a investor 101, sort of a definitions list on there. It’s got a number of data points in there. I look back at myself if in my twenties, would that be helpful to me? I think it would.

Mike Morawski: Yeah, I like what you just said, though. We’ve stolen it from a lot of different people. So the old adage is that if you take one piece of information, it’s theft. But if you take a lot, it’s research.

Stewart Heath: This is true. Yeah, you just got to take a lot of it from lots of [00:25:00] different people.

Mike Morawski: You know what? Why reinvent the wheel? Right?

Stewart Heath: Yeah.

Mike Morawski: So I agree.

Stewart Heath: I think I’m flattering all those other people, imitation is the greatest form of flattery, right?

Mike Morawski: Absolutely. Well, listen real quick. Tell people if they want to get that checklist, how do they go and download it?

Stewart Heath: Sure, harvardgracecapital.com, or actually even harvardgrace.com, that takes you to our site, find the resources tab, which is right up top. Go there, you’ll see it in a very short list. Click on it, it’ll ask you for your email address and name, nothing else.

And then it’ll take you to the place to download that list. It’s very easy. It’s not a big ask. We don’t send out a ton of emails, a couple of months at most. But it depends on whether or not we have a new deal, but we have one monthly email. So anyway, we’re not going to burden you or harass you for days on [00:26:00] end, just for downloading that.

Mike Morawski: Why not? Everybody else does.

Stewart Heath: Yeah. And I know what I do with their emails.

Mike Morawski: Just kidding. Yeah.

Stewart Heath: Yeah.

Mike Morawski: Yeah, obviously we know that when something comes from your office, we know it’s important. So, one good point or tip that you give a new investor today, considering the environment we’re in and what should somebody coming into the space, whether it be self storage office or multifamily. What would you tell an investor today?

Stewart Heath: I would tell them that they’re likely on the front edge of a generational opportunity. Nevertheless, go slow, especially if you’re new. Go slow and new can be exciting. And I say all this because i’ve made all these mistakes. And if you’re going to do it passively, make sure you check out your passive investment sponsor, and ask them for references and then search the internet find out [00:27:00] about them. You’ll likely find something bad about them because everybody if they’ve been in business long enough, somebody’s complained about us.

But do your due diligence. Don’t get sold on it. And perhaps with the first time you do a deal with one particular, go with the minimum investment. That’s what I would do. So in other words, manage your risk. But, I do think you need to be diligent about getting into this market that’s coming, but diligently slow. That’s what I would say.

Mike Morawski: Yeah, very good. I appreciate that. And, I couldn’t agree with what you said more that I believe that we came over the cliff of this high and now we’re coming down into the valley. And if you position yourself today, anywhere coming down, coming out. And none of us can time the market.

I’ve been doing this 30 years. It could all spin around tomorrow. But if you position yourself in front of that next bull run, I think we’re going to [00:28:00] see one of the greatest redistributions of wealth we’ve ever seen in this country coming up right now.

Stewart Heath: I agree.

Mike Morawski: I think people need to be involved and create that generational wealth for themselves for sure.

Stewart Heath: Yes, I agree. It’s going to be a huge buying opportunity. I would just say, be diligent, but don’t be greedy.

Mike Morawski: Yeah. 100%. Hey, I appreciate you being here. It’s good to get to know you.

Stewart Heath: Yes, sir.

Mike Morawski: I always like to kind of wind down with three bonus questions so.

Stewart Heath: Okay.

Mike Morawski: What’s the best book you ever read?

Stewart Heath: The best book I’ve ever read, I’m sure a thousand people have said this, is Rich Dad, Poor Dad. Because it changed my way of thinking. If I can add a second one, I would also add Who Not How which is a great book. It tells you how to do business. It’s really about delegating. It’s not learning how to do the next thing, it’s learning who should do the next thing.

Mike Morawski: The great book for sure. No doubt. Best [00:29:00] tourist attraction you’ve ever seen?

Stewart Heath: The Coliseum in Rome.

Mike Morawski: Oh, nice.

Stewart Heath: Been there twice. And I mean, pictures don’t do it justice.

Mike Morawski: Wow, that’s awesome. I ask that question all the time and nobody really has ever said anything outside of the Us. So I appreciate that. Thank you.

Stewart Heath: Sure. Yeah.

Mike Morawski: How about the best restaurant? US based because I travel a lot.

Stewart Heath: I was out in Phoenix six weeks or so ago and went to a place called I think season’s 52. And there are several. I know there’s at least a dozen, so I’m not going to call it a chain, but maybe it is a chain. But, I think you have one in Chicago. And my son was with me and and we went there because we could walk there from the hotel and it was just different and it surprised me and it was great food with great wine selection.

And, so anyway, I don’t really have another one unless I’m going to pick my [00:30:00] local Mexican restaurant. And they just know what I like and they just bring it without having to order. But, I doubt you’ll ever get there.

Mike Morawski: I used to say there’s always room for pizza. But now it’s there’s always room for tacos.

Stewart Heath: Absolutely. Absolutely.

Mike Morawski: Stewart, thanks for being here today. How do people get ahold of you if they want to reach out and connect and talk about?

Stewart Heath: Well, my email is running across the bottom of the screen. That’s great. And if you go to the website, you can actually find my Calendly link. And I invite everybody who’s interested to book some time with me. If you want to talk about real estate, you can overwhelm me with it if you’d like. But do that, send me an email or, just go in and join our email. We’d love to hear from you.

Mike Morawski: Awesome. Thanks. Thanks for being here. It’s been good to get to know you. I’m going to move you to the back room. Say goodbye. If you hang out with me for a minute, that’d be great.

Stewart Heath: Okay. Thank you, Mike. Appreciate you having me.

Mike Morawski: Thank you. Hey, everybody, that was Stewart Heath with Harvard Grace Capital [00:31:00] from Tennessee, and what a great show. Just very knowledgeable about the office space for sure. I learned some things today that I hadn’t known about that space, and maybe how to look at that a little bit differently. And, self storage, right?

Hey, if you’re somebody who’s getting in the investing and real estate investing, and you’re looking at different product classes, give Stewart a call, go download his list about how to check out a sponsor and see if that aligns with some of your thoughts and what you’re looking for.

And thanks for being here today. I appreciate you. If you’re new to the show, thanks for being here. If you need me, if I can do anything, don’t hesitate to reach out. You can message me on any social media platform, Instagram, LinkedIn, and email me directly. If I can answer questions or help you on your journey, I certainly would do that. If you want a copy of my book, email me and I’ll get you a copy of that.

Hey, thanks for being here. Glad that you’re joined us [00:32:00] today and certainly look forward to connecting with you in the near future.

Kristen: Thank you Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Wherever you hang out on social media, you will find Mike and My Core Intentions. Please like and follow us to get the most up to date real estate investing trends.

Visit mycoreintentions.com where you can get expert coaching on all things real estate investing and property management. If you’re looking to become an expert, Mike’s coaching will help you scale your real estate investment business. We’re looking forward to having you back again next week for more Insider Secrets.