Funds on Fire
Welcome to Funds on Fire, hosted by Devin Robinson—a seasoned fund manager with years of experience launching, managing, and scaling multiple successful investment funds. Devin has also helped numerous entrepreneurs ignite their own fund ventures. This podcast is your go-to guide for mastering the world of investment funds and capital raising.
In each episode, Devin dives deep into the essential aspects of fund management, SEC compliance, and strategic capital raising, sharing the insights that have powered his own success. Alongside solo episodes filled with practical advice, you’ll hear from top fund managers whose funds are truly on fire. These industry leaders reveal the strategies, tactics, and stories behind their remarkable success.
Whether you’re an emerging fund manager or a seasoned professional aiming for greater heights, Funds on Fire delivers the knowledge and inspiration you need to take your funds to the next level. Subscribe today and turn your financial ambitions into a blazing success!
Funds on Fire
Turning Backyards into Apartment Buildings w/ Andrew Erickson | Ep. 17
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Andrew Erickson's entrepreneurial path defies conventional wisdom, taking him from laser-cutting beer cap maps in a makerspace to developing apartment complexes in San Diego backyards. This conversation reveals the fascinating evolution of a business mind constantly seeking new opportunities and leveraging technology to scale.
What makes Andrew's story compelling is how clearly it demonstrates the power of capital as an accelerator. After building an e-commerce business to near seven figures, he recognized that even the most efficient operations hit ceilings without investment capital. This realization led him to San Diego's innovative ADU regulations, which allow homeowners to build multi-unit dwellings (up to 12 units!) on single-family lots.
The economics are staggering - purchasing million-dollar properties, adding another million in construction costs, and creating assets worth approximately $3 million. While the 24-month development cycle requires patient capital, the potential 20%+ returns attract sophisticated investors willing to wait for substantial payoffs.
Behind these impressive numbers lies Andrew's secret weapon: AI-powered automation. His systems scrape property listings, analyze zoning regulations, calculate potential units, and underwrite deals in real-time, giving his fund a significant competitive advantage. This marriage of real estate expertise and technological efficiency allows his team to evaluate hundreds of properties and select only the most profitable opportunities.
Perhaps most valuable is Andrew's perspective on personal growth: "The ceiling of what you dream to be possible raises, but also the floor of your limiting beliefs raises too." Each achievement becomes the foundation for the next level, especially when surrounded by the right mentors and peers who push your thinking beyond current limitations.
Ready to transform your own entrepreneurial journey? Whether you're fascinated by real estate innovation, capital raising strategies, or how to leverage AI in your business, this episode delivers actionable insights from someone who's successfully navigating all three frontiers.
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The Entrepreneurial Journey in Phases
Speaker 1What fires me up about this episode and this conversation is that it perfectly captures the entrepreneurial journey in phases. Andrew Erickson didn't just start out as a fund manager. He started out as a guy in San Diego's makerspace carving out beer cap maps on a laser cutter which is kind of crazy. And from that quirky little product he scaled into an Amazon business, built a team, crossed the million dollar mark and then eventually ended up selling it. But there's where it gets interesting. Andrew realized what all of us eventually realized on this entrepreneurial journey that time and expertise will only take you so far. The real accelerator is capital. When you understand how to raise it, how to structure it, how to scale it, you stop playing in the small pond, you stop worrying about maxing out a $250,000 business and you start building things that can absorb millions. That's exactly how Andrew went from side hustles and corporate engineering gigs to raising capital for developments that are shaping the housing supply and market in San Diego. Now I love this story because it echoes something we believe deeply at fund founders. The golden rule of investing has always been this he who holds the gold makes the rules. Andrew understood that. He learned that you can have the best idea in the world which is turning backyards into 12-unit apartment buildings, but without access to capital. The ideal never leaves the sketchpad. Once he tapped into investor capital, his vision scaled quickly and it's really, really cool to watch. And this is where Founder Circle comes in, because the exact leap Andrew made from hustling to raising capital at scale. That's what we help people do every single day inside of Fund Founders Founder Circle. We give you tools this legal docs, ai-powered CRM, the investor psychology playbooks. Thank you so much for joining us. Go to wearefundfounderscom. Slash apply Now. This episode is packed with lessons how to spot overlooked opportunities, how to structure funds that investors trust, how to use AI to underwrite and scale smarter and, most importantly, how to think bigger than your current limiting beliefs. Andrew talks about how, every time he leveled up, the ceiling of what he thought was possible got higher and the floor of his limiting beliefs got higher too. That's exactly what happens when you surround yourself with the right rooms, the right mentors and the right capital. So, as you listen to Andrew's story, don't just think about beer caps, maps or accessory dwelling units. Think about your own journey. What would it look like a year from now? You had your first fund launched, investors committed and capital working for you instead of against you. That's the work we're doing every week inside of the Founders Circle, and if you're serious about stepping into that next level, head over to wearefundfounderscom. Slash, apply and join us. But for now, buckle up, because this conversation is going to show you exactly what happens when creativity meets capital and when an engineer turned entrepreneur learns how to turn backyards into cash flowing apartment complexes. Let's dive in with Andrew Erickson, because this thing is wild.
From Beer Cap Maps to Amazon Success
Speaker 1Welcome to Funds on Fire, the podcast that ignites the passion of investment funds and capital raising. Here we turn the complexities of fund management into clear, actionable steps that drive results. I've invested into diverse real estate across the United States and managed thriving funds, and I'm committed to transforming lives through the vehicle of investment funds and helping others to do the same. Join me as we document the journey of scaling businesses, raising capital and impacting tens of thousands of people around the world. My name is Devin Robinson and welcome to Funds on Fire. What's up? And welcome to another episode of Funds on Fire Today.
Speaker 1I'm so excited to have Andrew Erickson on today. Andrew, it's crazy, we've never met. Andrew was in one of my fund masterminds and I was asking does anybody want to be on the podcast? And what's really cool is, as I researched a little bit more about Andrew as we connected a little bit, Andrew's doing some really cool things. I mean, really, he's not just another guy flipping houses, he's literally turning backyards into apartment buildings and it's awesome. And one of the other things because he was on one of the calls and he was teaching one of the calls recently for our mastermind. I love automation and AI, so I think we're really going to geek out on that today. So I'm super pumped, fired up to have you on here.
Speaker 1You seem like a really great guy. You also live in the most beautiful place in the country. I always tell people there's two places in the country. I've been all over the world. I've been to almost every city, almost every major city in the US. I live in two places Charlotte, which I currently live in, or San Diego. That is it, and so you currently live there. I'm excited and I'd love for you to let the people know who you are, what you do and, yeah, tell us a little about yourself, man.
Speaker 2Awesome, devin, I'm so excited to be here. So, like you said, I'm Andrew Erickson. We are buying single family homes and building ADUs in the back, and so sometimes people think ADUs are like little, like backyard offices or something, but in this case they're in San Diego. They changed the laws so you can build entire apartment complexes. So we're building six, eight, 12 unit complexes on these properties. So it's pretty exciting and on top of that, I love AI. I love being a dad. I had two little kiddos two and a half and five. They can be really busy and, like you said, live in San Diego, so I do the fun San Diego beach lifestyle. It's great.
Speaker 1Oh, I'm sure, man. Okay, now I do research, right Like I do research, and so I would love to hear a little bit about the journey One.
Speaker 2I'm also curious do you like Deion Sanders?
Speaker 1Sure, you like what he's doing Because you went to Boulder. I know you went to Colorado and I'm always curious on like what people think about Deion out there. I know that's such a random question, but I'm like, okay, are you like diehard? I love Colorado like this is great.
Speaker 2Or are you just like eh, dion's cool, I guess, I don't know. Yeah, I mean, I think it's awesome, I think it's fun, I think it's exciting, you know, I think it's, I think they're all doing great stuff out there and I, you know, and, uh, I went to see you boulder and so I, I love colorado and it's one of the only places like you said, all the places in the world that I would ever consider living back in, boulder, denver metro area I love that area and Austin, texas. Those are kind of my like. I've actually never been to Charlotte. I need to put that on my list to go check out. But those are all. Those are all my favorite spots and yeah, but yeah, I'm a fan Beyond. Let's go.
Speaker 1Yeah, awesome. Okay, now, a little bit kind of, I'd love to hear a little bit of coding in your life. You're carving beer cap maps by hand at one point I thought that was really interesting, and so, like you've gone from that to that to now you're building ADUs in backyards. I'd love to hear a little bit more of that journey. That kind of like have gotten you to where you are today.
Speaker 2You did your research, man. I love it Nice. So I have an engineering background, so I have an engineering degree applied math and electrical engineering and so I'm an uber nerd I have. You know. I like spreadsheets, all that stuff, and I just like creating, I like making things, I like taking things from nothing and getting, like, these fun ideas To me, like creating something new and different and special, is what I love doing, right? Yeah, and so I worked for some big mega corps. Qualcomm is a big mega corp that that uh used to work for. It brought me down to san diego. Actually, I should say the beaches brought me to san diego. Qualcomm is how I paid for it, right?
Speaker 1because something's got to pay for it.
Speaker 2Yeah, corporate world though you know, not for everybody, not for everybody.
Speaker 2It's great, it has a lot of perks For me. I just like doing entrepreneurial things. I like, like I said, I like getting excited, building new things and creating new things, and so I tried. I have a coding engineering background, I was a programmer for a while and you know engineer and stuff and I tried some side hustles in that. It's very difficult, though, just to kind of be like a solo engineer trying to like make something and it's, it's hard. I thought. I thought I was gonna like steve jobs or like some of these, like silicon valley guys, and like make a cool app. It's just, it's hard and competitive. And so I I I'm always looking at entrepreneurial you know blogs and podcasts and stuff like that. And there's this opportunity where people started talking about doing e-commerce and so, while I was having my big boy engineering job, I I started uh making stuff. I doing woodworking, um, at a maker shop, uh, like a maker space. You know it's like a there's a meal with maker spaces.
Speaker 1Maybe. I mean, I guess it sounds like a ghost kitchen or like some place where you can go and like sell, like use almost community stuff to sell your products and things. Yeah, cool.
Speaker 2Yeah, so it's fun. It's like it's kind of like a gym membership, right? So for a gym membership, you pay 80 bucks a month and you get access to the treadmill and the weight rack and stuff like that, right, same idea, but instead of a treadmill, you have a buzzsaw, and instead of a table saw, instead of a, instead of a weight rack, you have a high power laser uh power, high powered laser cutter machine. And so I'm like, let me see if I can make something, just like making new things. Right, make something new. And I tried making these beer cap maps. It's a very weird niche product. Google it, I guess, if you have no idea what this thing is. But it's a thin piece of wood, it's a plywood 5 millimeter, quarter inch plywood and we cut it into a map so USA, california, texas, like the outline of those places and we put holes in them for beer caps. So you collect beer caps. It was a very 2017, 2015, 2016, 2017 era when craft beer was very big.
Speaker 2Now it's all seltzers and especially in san diego all sorts of other not craft beer things, um, and we ended up, uh, I ended up making some of them. I listed on etsy. The etsy store took off. Uh, I ended up hiring a of them. I listed on Etsy, the Etsy store took off.
Speaker 2I ended up hiring a bunch of people at the makerspace, like the people who actually ran the machine, just like other people who are just kind of hobbyists like me. I ended up hiring like every single person in the entire space, because you can only book two hours at a time. So I'm like I'll just hire six of you guys and you just book two hours every single day. We, six of you guys, and you just booked two hours every single day. We'll book the entire machine for. For, I don't know if I'm supposed to, but we did. You probably wait, yeah, and then I hired, uh, those I don't know if they have them where you're at, but in colorado or in san diego there's. There's like the guys who hang out the home depot parking lots. That's the other thing.
Speaker 2Guys are everywhere okay, okay, here they're there's just day laborers who hang out in the parking lots, right, and so I hired a bunch of those guys to do packaging, taping, whatever. So I had my big boy job. I would go and code with a whole bunch of other engineers and then on my lunch break come back and just like manage this team of of laborers, packaging and whatever. It was a hustle, but it took off and we ended up becoming, you know, did really well on Etsy and then I found a factory in China. We scaled that up on China and then we became number one seller on Amazon for that category. So we were doing that. Business never broke a million a year, but it was just short of a million. We then expanded to to it. We were number one though, right, you can imagine, it's not a billion dollar industry beer cap maps, right?
Speaker 2never heard of them, yeah uh, but we're number one, the tiniest little pond possible, right. So we're, we're, we're a shark and a little, yeah uh. So we expanded out into wooden shelves, of all things.
Speaker 1All right.
Speaker 2And we grew that company up pretty big. We had a full team in the Philippines and that business is what allowed me to quit my corporate job and go full-time entrepreneur. And so we built that company up to a couple million a year and then sold it a couple years ago.
Speaker 1Wow, fantastic, that's great. Congrats on that, man. First of all, that's incredible. I'm curious. So you once joked on a podcast having like reverse ADD, and so it's almost like this idea. It sounds like you stick with something until it clicks and you become hyper fixated. Is that because, like I have ADHD and I'm all over the place? Do you feel like that superpower is like what helps you to kind of do one thing? It sounds like you do it really well, you find it, you got to find the thing. You do it really well, you scale it, you sell it and then you go on to another thing and then you dive into that. Because now, very similar, it sounds like what you said earlier something weird or not really thought of, into something where, like adus, short, but nobody's building apartment complex adus, but now you're hyper fixated on there. So do you think like that superpower has been really useful for you along this journey? Because I thought that was a really reverse add is also?
Speaker 2it's like a very interesting concept yeah, I get, I get obsessed with things and I I get it where my entire youtube. I go down the YouTube Wikipedia rabbit hole and I just get obsessed and I also like doing I just can't help myself but to like rip the business kind of build a business plan around it and start thinking about how I can monetize it, and for me, I just get excited. I always say, like I have hobbies for profit, right, I just enjoy kind of building those business structures and stuff, and so, yeah, I do, I just, and it's just natural, I don't have any. Yeah, I'm just lucky, I don't know, lucky, or maybe it's unlucky, depending on on. Sometimes I get a little obsessed. My wife's like God, please shut up about Amazon, please shut up about AI, please shut up about crypto, please shut up. Like you need to go eat a venue, go to some meetup or do some podcasting, whatever, like stop bothering me about these obsessions of yours that you have for you know, for whatever. So, yeah, no, it's it's, it's it's good.
Speaker 1That's so interesting too. I think it's. I love this because my wife very similar. So I've got ADHD and I get. I just say I'm zero to a hundred, real freaking quick, and I jump in and I'll dive into something and I feel the same. My wife has the same sentiment as yours where it's like oh my gosh, what is this new thing? What are we talking about All these things? And so I think it's really fascinating and I love that. You said crypto, because I'm extremely bullish on crypto. I'm going to transition this a little bit because I love funds. I love talking about funds. Um, we actually started a thing where we want to help people to launch and scale funds and all those things. Well, how do you, for you who, um and I think you you we're in the same fund mastermind you off?
Speaker 1you said before it never let cash get in the way of a good deal yes, love it this idea of and I think that's inherently a um, somebody who knows how to raise capital well can say that, and somebody who knows like funds because for me, I'm also like and I know I'm wrong when I say that in general, so I'm excited to hear your thoughts on it more made you go real estate when you have so many other things that you could have started a fund for right. Like sounds like you like bitcoin or like crypto. Let's start a crypto fund. You know like what, what I? I'm kind of like there's two separate questions in there. There's the quote part, but then also like how did you dive into real estate specifically?
Speaker 2yeah, okay. So entrepreneurship or or the, the, you maximize your, your earning potential, right? There's, there's three parts of the equation. There's there's time or effort, really, cause you know your mindset, or my mind. I call it mind share, like, how much do I, how much can my brain chew on this thing? Right? Or how, how much can one's brain chew on something, right? So, mind share, effort, time, it's all kind of one, that's one pillar Expertise, you know experience and expertise, whether it's formal education or just like work experience, right, that kind of like that skill set.
Speaker 2And then the third one that I then realized, after kind of like doing a few of these things, is capital, right. And so when you're on your entrepreneurial journey, you obviously you know the expertise and experience thing. You can, you can learn a lot through, you know, youtube, university, or through formal education or through experience or internships or masterminds. I learned so much from these masterminds, I love the masterminds. And then obviously you know if you have whatever you're committed to or have effort to do. And then obviously you know if you have whatever you're committed to or have effort to do. But then the capital part I realize as I'm scaling up, as I'm moving up through my career, through my maximizing my potential capital is the thing that like really juices everything. Yeah, so the beginning, you know the golden rule.
Speaker 1He who holds the gold makes the rules.
Speaker 2I love it. I love it. Yes, yes, yes, yes, yes. So what I found is, you know, early in my career I was like doing freelancing on the side, which is absolutely no capital at all, it's just purely time. There's exactly that, you know, freelancer, sweat equity, sweat equity, sweat equity freelancer is is, uh, is uh, um. Zero capital.
Turning Backyards into Apartment Complexes
Speaker 2E-commerce ended up being you know, thousands, tens of thousands of dollars of capital. But we got to the point where we scale these companies up to a couple million in revenue and we have maybe a quarter million dollars in like operating assets, right so inventory and operating cashflow and blah, blah, blah, that kind of stuff. I found it very difficult. Once I'm at a quarter million, it's very difficult to deploy more capital in that business without having to scale up a team of like 20, 30 people and the margins in that thing it's not really there to have a team of 30 people, 20, 30. It's very difficult and, again, so, if you want to throw a million dollars at that, it's not really the kind of business you want to get into. And so we you know, matt, luckily, you know, through a lot of hard work and savings and stuff, we're at that cap. I'm at that level where I like, well, I have more than the capital I have in this business. Where can I put it? And, of course, real estate is where it starts to get awesome. So now I can see where I can take a quarter million dollars of my own money. Quarter million or a million, that's about how much I have to play with for these kinds of businesses.
Speaker 2Now I start doing things like, okay, where can I deploy that kind of half a million dollars worth of assets? And so I started getting into ADUs. I'm like, let me do one by myself, let's go. And once I got one going by myself, I'm like, oh my god, this is amazing. This scales. Well, you can shove millions into this.
Speaker 2I don't know about tens of millions, but the scale I'm at, if we can get, we can handle millions right, seven figures, not not necessarily eight figures. We have to do something else. We get the eight figures. But then I'm like that's when the next level is let me start raising capital from other people so I can take my half million and then compliment it with another couple of million from other investors. And that's where that like that fun thing I've only been. I've only been raising for a fund like this for just over a year, year and a half, and so like that's. That's the part. Like you start just scaling right Zero, thousands, hundreds of thousands or maybe tens of thousands, hundreds of thousands, and now we're at millions, and so like it's just fun, we're just getting started, so that's good.
Speaker 1And it's funny because so literally my wife and I, on the way to dinner last night, we're talking about this. It's this idea that, um, as you like you said, experience right, with the experience, you just learn because of what you've done in the past, so much you learn what the next level is because you're surrounding yourself by people who are actually doing it. So you get to a point in your life where you no longer take the advice of people that you like, that your peers, but you're taking advice from people that are where you want to be. And then when we're in these rooms, like our Avesta Mastermind, raise, master, whatever it is, then you start getting around people who are now like oh shoot. So like, oh shoot, this guy owns 6,000 units. Oh, my gosh, this guy owns 10,000 units. And so I say that, like the ceiling for what you dream to believe is possible, raises, but also the floor of your limiting beliefs also raise. And so then there's just a new standard that continues to raise.
Speaker 1And so for you, I'm really curious because I was talking to Phil Green, who I introduced you to. I sent you guys up in a text message. Hopefully you guys have connected. He was telling me about this ADU thing, probably like six months ago, and he was saying that like you can buy a house and essentially because of the inaffordability in san diego, they are letting you tear down a 1500 square foot house and build a six-story unit on it, like um. In a lot of ways. So you should get with phil because, like he's even talked about the governor and things like that are really for this, because it's really helping to solve the unaffordability crisis and and I was like this is crazy. So he's doing it a lot and it's wild the way he's able to do it and so I'm excited to hear how you're doing it.
Speaker 2Dude, I love California so much and California gets a lot of shit it does Because there's a lot of dumb stuff that happens here and it drives me nuts.
Speaker 2I'm like you know people always joke like oh, I love California but I don't like the government. I wouldn't go as far as to say that I'm medium on the government I guess I don't know Sweet. But the thing is that California had its success for so long, and they were able to be successful despite not allowing people to build housing easily. And now they're feeling that pain pretty substantially Now, as everyone's on the news, we have a exodus during covid, um, uh, and now, of course, we're getting a little bit of a rebound from that. We call it boomeranging, where people you know they're like oh wait, there's, it's hot and humid and buggy and tornado-y. Uh, somewhere that's not california, let's go back, uh, but uh, it's just so freaking expensive.
Speaker 2And so the number one reason that people state for leaving California is the cost of housing. It's not employment opportunity, it's not schooling, it's not the traffic Actually, san Diego actually doesn't have terrible traffic for a city it is the cost of housing. And so they're trying to solve that right now, and of course there's a lot of things to get in the way because California is very bureaucratic. But one way that they're like shoving in some new housing is by allowing people to build in their backyard and they can fast track this through. So it's not considered new development. So you don't have to do environmental studies, you don't have to do all these different like big things. You're just adding a few units in the back. And then San Diego's like oh, you're adding a few units. Well, if you qualify for that, like, hold my beer, just two as many as you can get back there.
Speaker 1Let's just shove it in there Now. How many are you saying?
Speaker 2Like I mean. So like, what's the lot sizes that allow for this? So, legally, if you're a single family home, of course zoning is complicated, so I'm not going to get into all the nuances, but legally in California, the whole state of California, you can build one 1,200 square foot house ADU, a little dwelling unit, right, and also it's called a junior ADU. So it's like a garage conversion or an addition or whatever, like a 500 square foot kind of addition or conversion thing. Right, that's legally required in every single city in the entire state of California.
Speaker 2San Diego has this program called bonus ADUs, where every extra unit you add you have to make it what's called deed restricted. I don't want to get too much of the nuances of it because some of these details are boring, but you have to make half of them affordable and half of them are what we call market rate, the affordability restriction, though it's not that restrictive. You have to rent them to people who make less than $120,000. That's considered affordable in California, making under $120,000 a year salary, and you cannot rent them for more than $2,700 a month for a one-bedroom condo.
Speaker 1Oh, my gosh.
Speaker 2Yes, I know Most people are like what? And I'm like, even in San Diego that's not very restrictive, but that's the rules they put in place and really what you think of it is affordable units really is just non-luxury housing. It's working class, regular, not even working class even freaking nurses and doctors, whatever like it's. It's like regular people doing regular jobs. It's housing for those people that's good.
Speaker 1now I know you've made it pretty clear before that, um, that this isn't section eight or low income housing, um, but you're also not building the luxury high rises. So when someone says, oh, twenty eight hundred dollars isn't rent, isn't really affordable, how do you respond? And then, like, where do you draw the line between impact and profit in these type of things? You know, because, like that's the whole goal is to provide more housing, but also you want to make a profit.
Speaker 2Yeah Well, we don't rent them at twenty seven hundred. That's just our limit, right, twenty seven,800. And it adjusts with inflation too. It goes up. But so there are effectively market rates. There's a few restrictions on them. There's no Airbnbs. These are long-term rentals and you know it really comes down to creating supply. And you know it really comes down to creating supply. It's no matter what people say. The rules of supply and demand price depending on supply and demand is 99% true. And so if you just create more supply, we create more opportunities for people to live in these units and, of course, these units. If you create supply of new units, then the units that are 10 years old kind of become the let's say, less than premium and the units that are 40 years old become kind of let me call that like even more affordable, less, you know, non-premium stuff, right, and so just creating that supply allows us to have should drive down the price.
Speaker 1Okay, so like I'm trying to picture this. So is this like you buy the house, you flip the house, somebody lives in the house and then somebody drives past the same driveway to a 12-unit complex, like how big? I'm still trying to.
Speaker 2So we keep the house, we keep the primary home You're home to right, because it's an ADU.
Speaker 1It has to have an accessory to some dwelling. A general manager.
Speaker 2Yeah, so we have a two-story. So you imagine you have A lot of these houses are 80, 100 years old and they're on these kind of awkwardly sized lots where you have 7,000, 8,000 square foot lots, so maybe a quarter acre or 0.2 acres, right, uh, but you have, the house is only like 800 square feet in the front, and even that the original house might only have been 600 square foot and there was an addition 30 years ago that made it 900 square feet, right, so it's a little tiny house. It was a big backyard. And now you take that big backyard that's just a flat piece of grass and we turn it into a two-story. You know two or three-story housing units and there's one or two buildings right and we go vertical and it's an apartment complex.
Speaker 1And they have garages or do like where does everybody park?
Speaker 2You're not required to add parking On the street. There's street parking and a lot of these things are. It also has to be near high transit options, so you have to be within half a mile of transit options.
Speaker 1Well, like all, of San Diego is high transit options pretty much yeah.
Speaker 2Yeah, and so that's kind of the awkward thing though, man. But yeah, it's hard. It's hard to add parking. We try to add parking when we can and so like we're adding a 12 plex in one spot and we're adding seven parking spaces there, right, but it's hard, man, because you think about it. Think about the cost of parking is insane how much it costs to build housing for cars. We're building housing for humans not for cars.
Speaker 1Yeah, that makes sense. So I'm curious. This is really good. So you said that you just launched this fund about a year ago, so you've been raising for it. So that means that you probably were using private lenders, things like that, before. As you were doing this, built up a track record, and then now you're raising for it. So, so what does that look like for you? How many are you trying to do now that you've got a track record, you've got the proof of concept, you've been doing this and so then, like, are you perpetually raising or did you close the subscription? Or like, what does that look like for you as you're continuing to build this? Because I would imagine I mean you want to build as many as you can, if you can. And then I'm curious on, like, what the purchase price on these houses and you're all in on them is, because I'm just I'm so curious now.
Speaker 2This is awesome. Yeah, yeah, yeah, definitely. So I love spreadsheets and stuff, so we could go. We could get crazy nerdy. I do too. Obviously, spreadsheets don't translate well to audio video stuff.
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The Economics of ADU Development
Speaker 2Now back to the show the short of it is most properties are about a million bucks that you're buying. Every property is different, of course, but you're usually buying something that's kind of old, kind of small. The average house, the median home in San Diego, including condos, is a million bucks now.
Speaker 1I was looking, but we were going to move to Claremont three or four years ago and it was like $800,000. And that was. But then we started, we fostered and adopted one of our daughters, and so then we started, we fostered and adopted one of our daughters, and so then we didn't move, but we were going to move out there. So we were looking at Claremont and they're like 800, 850, something like that over there.
Speaker 2And that was three or four years ago. Those are all north of a million now.
Speaker 1Yeah, that's crazy.
Speaker 2Yeah, so generally we're buying a house for a million bucks, build the design and permitting and engineering. Let's say 100, 150,000, depending on how big you're building, but just say 100 to make the math easy and then the construction is about a million also, and then you have about a quarter million dollars in transaction holding costs, transaction brokerage, insurance, property, all that other kind of stuff that isn't just holding it or that is holding it not just the assets, right, and at the end you're creating a property that should be worth 3 million. You know so big numbers buy for a million, build for a million, quarter million dollars of transaction holding costs and then selling for three.
Speaker 1So like 750.
Speaker 2So it should be hopefully netting 750, maybe, maybe 500, if we're gonna be conservative, right, but uh, somewhere in that neighborhood of like five, you know, half a million to three how long does that take you to build?
Speaker 1like eight months so.
Speaker 2So, from acquisition to so. So we buy it, design it, permit it, build it, lease it, lease it and sell it. All right, that's the six steps. That takes 24 months 24.
Speaker 1I was way off.
Speaker 2And the actual build only takes six to eight months. Yeah.
Speaker 1Oh, okay.
Speaker 2Yeah, but the problem is it takes six to eight months. It actually takes more time just to get a thumbs up from the city than it does to actually have dozens of humans and tons and tons of material come in and pop up a house that someone can live in takes more time it's a quarter a million of a holding cost, so like.
Speaker 1And what's crazy is you? You just mentioned that they were fast tracking this thing it went from one year to or what year?
Speaker 2sometimes year and a half, to now fast track to six to eight months.
Speaker 1Yeah.
Speaker 2Wow.
Speaker 1Now it sounds like, though, then you've been doing this for a while. If you've, if you've, if you've gone through full cycles of 24 months multiple times, or just on multiple projects. You've been doing this for a little while. Have you come across, um, and I mean, has there been any instances where there's been regulations? Because I think you've posted something that was like no more bonus ADUs, not so fast, right, and so, like, have you come across? Have you had to deal with any kind of regulation change? Have they tried to impose regulations? I even think of, like, how quickly Airbnb regulations spread in San Diego and their vouchers for that, but, like, have have you had to experience any of that? And have, have you? Have you dealt with it?
Speaker 2Yeah, so, so, but just to clarify, so I have a business partner who's a GC and he's the one who's done, who's been bill doing the builds for years and years. I started doing this about two and a half years ago, uh, so, uh w w, I've only gone full, uh, full cycle on one project. We have five total that I'm on and my business partner, who was doing this before as a GC rather than as a developer. He has another five before me. So these rules came out just the. You know, the first rule came out, I think, in 2018. But that was just like the one in your backyard. Yeah, bonus ADU program came out in late 2020. So it's only been around for four or five years.
Speaker 2And, yes, they're constantly changing it. They added stuff and then they expanded it and then now they're trying to put a few more restrictions on it. But they kind of are doing. They're kind of expanding, exploring, restricting and expanding certain parts. So there's some new proposed legislation that will make it harder to build on single family lots, zoned single family, but we, most of our stuff is zoned multifamily. So we're taking stuff that's like, again, 800 square foot house and it's zoned multifamily. It's just the laws in california never allowed anybody to build anything. Build multifamily, because it's like it's multifamily. But yeah, you could have to build one dwelling unit per acre, like okay, well, it's what 0.2 acres, right like there's.
Speaker 2You can, it's zoned multifamily, but you can't. And now they made it so you can't good now. They are changing the rules, though, and so likely they're going to see a lot of changes in the next few months. They're not getting rid of it, they're just modifying it, and a big thing that I'm excited about is they're talking about being able to condoize these units.
Speaker 1Yeah, that's what Phil was talking to me about. That's going to be crazy. That's going to be insane. You can sell the apartment because you can essentially sell the units that you have been renting out. You can sell them.
Speaker 2That's crazy and as far as I can tell I haven't done like a full appraisal on it yet, but as far as I can tell you get like a 15% premium, 15, 20% premium, but it's not like a lot of extra costs. But it's not like a lot of extra costs. I mean it's small. You know multiple thousands, small tens of thousands to get an HOA and those covenants and that kind of legal structure set up. But then you potentially would increase the value of property by 20%. So a $5 million property would become a $6 million property for $10,000, $20,000 of HOA fees, the setup fees. So I'm like, oh, let's go, let's do it, let's do it.
Speaker 1That's awesome, man, and it's really cool. So I'm curious on like two parts One for you how many of those are you going to own and how many are you going to sell? Like, rent, own, sell, because if they turn it to the condo side of it, you can own one or two of the condos in the unit and then sell the rest, which would be incredible because then you can just rent those. That would be awesome for your portfolio. I mean, owning that much real estate in San Diego is insane, insane. And then the second side of it, in the capital raising journey, as you have the fund, I mean it sounds like you're pitching longer horizons of like 24 months for one deal. How are you managing that with investors? I mean, I'm even curious on, like, what the payout looks like. Are they investing and not seeing anything for 24 months? Like what does that look like as you're raising capital and as you have that conversation?
Speaker 2Yeah, so do as little as 12 months and as much as 24 months, right. So it's in that kind of one to two year range. And what we and there's no cash flow because we're developing, right, so we're not holding costs there's no distributions, right, because there's no cash. And I talked to some people about that and they said, yeah, what we do is we raise an extra hundred thousand, an extra ten percent, so that we can give out 5% a year for two years in distributions. In my head I'm like that seems a little Ponzi-ski, as in me I'm like why don't you just raise $300,000 and you can give out 15% a year and then just keep doing that and then you can be with your buddy Madoff and Mr Ponzi, right? So I'm like, no, I don't want to just like give equity. Now, where is it Cash? Yeah, so there's no cash flow. It's effectively it's kind of like a fix and flip model where you get money on exit. Just it's one to two years.
Speaker 1Nice, are you doing like a two and 20 or anything like that?
Speaker 2Or are you doing like a two and twenty or anything like that? Or are you doing like how are you, what's their exit on it? Yeah, so we take a pref, we take a small, so we take a management fee at the beginning, right. So so, uh, twenty thousand or something like that, at the beginning, paying a big, paying a big, the raises obviously, uh, but twenty thirty thousand at the beginning as a management fee. And then we, and then there's a, there's a 8% Every deal is a little different but 8% PREF, and then we go 18% tranche, right. So I'm assuming your audience is probably familiar with equity waterfall, the whole.
Speaker 1Yeah, they should be. I talk about it, yeah.
Speaker 2Dude, I have a hard time explaining equity waterfall to people who are not finance people, but I'm assuming all of our audience here already knows these terms.
Speaker 1They are. You should be good. It's called funds on fire. Yes.
Speaker 2Okay, yeah, so 8% pref 18% tranche right, so a 70-30 split for that, up until the 18%, yeah, and then we do 70-30 the opposite way, the other way, nice, where the managers get the lion's share share, but then the investors can come all the way it's another, it's another, I mean, it's another performance incentive.
Speaker 1So, um, no, I love that man and I think I honestly I think everybody should do that. I'm like why would you go 80, 20, like indefinitely, like you should definitely switch it up. If you're performing at a high level, you deserve to be paid more and they should have no problem with it. So I love that.
Speaker 2Yeah, and also I love the idea of a pref too. I'm sure all the funds on fire people are very convinced that prefs are cool, but it makes sense because for me I would be okay with 50% of a small number. It actually might be a pretty decent return for me. If I raise a million bucks and I get 40,000 for doing that, but the investor gets 40,000, that would suck. That would only be a 4% return, right. And so I'm like no, you should give the prep makes sense. You should make sure that your investor gets, like, gets their like cost of capital uh paid for first, and then you split after that, right, and so I just think it's such a great. When I figured out the whole idea of an FD waterfall, it blew my mind. I'm like that's the answer. That's how we do this. This is amazing.
Speaker 1Yeah, good, and I think a lot of people have an issue, not an issue, but I think a lot of times we think, oh, people are going to want to be, and if they're compounding 8% over two years they're getting 16, and then they get to participate in the waterfall structure, then in the profit side of it with carried interest, so then they're getting taxed at a capital gains rate then way, way better than what they were doing before. So it just makes sense.
Speaker 2Yeah, and everyone's different. So some people want to have the 5%, 4% bonds. Those aren't the people that we Cool, that's not an avatar, right, our avatar, you know. So our number one goal is return of capital. So don't lose anything. Number one rule don't lose any money, right? Number two rule is look back at rule number one, right, that's right. Look back at rule number one, right, that's right. Uh, rule number three is uh, we always want to make sure. We can't say guaranteed, but we try as hard as we can to structure everything so that we can deliver over 20 a year, yeah, and so that's. And so we go. You know, obviously, higher than 20 would be fantastic, but we always, we structure everything so we can hit those 20 numbers pretty well, pretty confidently which is fantastic and it finds it's easier to do if you're on like a development side or like single family.
Speaker 1You find good discounted properties, stuff like that. It's so interesting. So in North Carolina, right in Charlotte, where we had a horrible market last year just like of course in America was the worst market in the past 30 years for single family sales, and so it sounds like it's nice because you guys are sheltered in a fairly high appreciating market, no matter what the market's like. California will always appreciate. I feel like it will. It may not like-.
Speaker 2I hope so.
Speaker 1You're not going to get the cashflow, You're not going to get all that stuff. It will always appreciate. That's one thing about California, and I think that's been good Because, like you said, over three years ago the houses in Claremont from $800, $850 to over a million, where the houses in Charlotte three years ago are the same now Three years ago, and Charlotte's one of the hottest markets in the country, and so I mean not the same, maybe 2%, 3%. There's not much appreciation at all, and so that's really nice that you can be able to one. You're working with a longer horizon and you're giving the 20%. That's fantastic, man.
Speaker 2Yeah, that's cool and we assume when we do our numbers. We assume zero appreciation just to be conservative. But average appreciation in San Diegogo is, uh, six percent a year yeah and so it uh, yeah, then that's average. Of course it varies, but, um, but yeah, yeah, that's. That's a nice thing, as I'm like oh and also uh, because you have a math background, so I do all these sensitivity models and uh started doing some Monte Carlo simulations, which is I've never heard of that.
Speaker 1What is that?
Speaker 2I love it, but I'm a nerd, so no, no.
Speaker 1I think everybody will need to hear about what this is. What is the Monte Carlo simulation?
Speaker 2Okay, so imagine you're. Let's just look at the stock market. Okay, you have 10% return a year, right, but half the time it's zero, half the time it's 10, half the time it's 15%. I guess those math doesn't work out that quite so. Half the time it's 5%, or, sorry, third of the time it's 5, a third of the time it's 10, and a third of the time it's 15%. Let's just go with that, right to make the math easy. Okay.
Speaker 2So then what you do with a Monte Carlo simulation is you just you would look. You imagine okay, this year I'm going to run it. I'm going to run 100 variations, 100, I'm going to roll the dice 100 times. I'm going to have 100 games, 100 games, right, and each one I'm going to randomly choose 5%, 10%, 15%, okay. So on the first year, a third of them went up 5%, a third of them went up 10, a third of them went up 15%. Okay, the next year you do the same thing, but it's random again, and so one third of one third have gone up 5%, one third of one third have gone up 5 plus 10%, and you just keep running that over and over and over again.
Speaker 2It's kind of like you ran, it's like you're looking into the future and you're letting the math like look into the future for like like 5, 10, 20, 50 years, right, and then you look at the very end how many of my futures have me losing money? How many of my futures have me making like good, solid returns I'm happy with, and how many of my futures show me making a bajillion dollars, right? And so you can then say like, okay, well, 20, well, 20% of my futures I or you know, 3% of my futures I lose money Cause that's you know, it's a risk, right. 50% of my futures I look really good and 20% of my futures I make I'm doing fantastic.
Speaker 1Right, I could run the play. Sounds like you just do it. That's a good one, yeah, and of course you get a little complicated.
Speaker 2I don't want to get into too many of the numbers. You get a little more complicated. You start doing standard deviations and all sorts of fun stuff like that.
Speaker 1Well, and I think it's necessary too, because I think, especially with, just like, the emergence of the popularity of funds, I think a we're called Funds on Fire, and so I think about the things that fire you up. It sounds like ADUs. I generally wait until after, but I actually kind of want to transition into AI and crypto just because that's.
Speaker 2Oh my God, let's do it, let's do it.
Speaker 1So let's go ahead and finish the ADU conversation real quick. Okay, so I know that you've said at some point that your goal is 180 years by the end of 2025. This year, right Like. Is that what you? You said that End of 26. End of 26. Okay, end of 26.
Capital Raising and Investment Structure
Speaker 1So two questions what would be your dream 10 year vision look like for something like that, like cause, like that's the end of 2026. We don't know what regulation holds, but I think like it sounds like you love time with your family, you love the beach, you love like the lifestyle and not necessarily being caught up in the corporate world, but like owning that time for you. So what does that look like? And then also the second part of it so what? What does capital raising like? How much would you be looking to raise? I mean, I'm sorry for this layered question too how much would you be looking to raise? I mean, I'm sorry for this layered question too how much would you be looking to raise for 180Us? And then like, do you still feel like it's sustainable to return 20%? No guarantees on that, because you'll have people who listen that are like I want 20%. Is that still a sustainable model when you're raising significantly more to build 100?. You know what I'm saying.
Speaker 2Yeah, yeah, I think, um, adus, like I said, the beginning uh, of the of the hour, the, the. You start going, you start stepping up in the amount of capital you have, right. So when I had $0, I was a freelancer right. When I was out of college right, I actually had negative money. I was in debt Right, so I had a negative net worth. I celebrated when I was 25, I was out of college right, I actually had negative money. I was in debt right, so I had a negative net worth. I celebrated when I was 25. I was officially broke.
Speaker 2Instead of negative net worth, right, negative. And so as you grow, as you get more and more capital, then you do bigger and bigger games. I think ADUs are not, I don't think you need north of $10 million what we're doing for ADUs. So when we get past, we've raised $3 million in the last 12, 15 months, nice. And so our cadence right now is to buy a property every quarter, five a year or one a quarter, right. And then raise a million dollars per quarter and we're pretty on spot with that, pretty on par Pretty open-ended.
Speaker 1You've kind of let it. Are you under the same? Well, you have a customizable fund with Avester. Are you just doing new deal disclosures or do you have the one deal and it's continually opened?
Speaker 2No, we have single deals. Every deal is individual right. So when people invest, they invest on a single address and that single address sometimes 12 months, since I'm doing it like many syndications.
Speaker 1Yeah, but it's in a customizable fund, okay, cool yeah, every everyone.
Speaker 2We're raising half a million to a million on each one nice yeah, uh, and so the bigger ones, the big ones when we go beyond adus, and the big thing, I think is, uh, um, uh, what you were actually alluding to, what phil is, who's a big real estate guy here? Is this concept, is this thing they have right now who knows what it'll be like in the future? But complete communities where you can create. You can take a 8,000 square foot lot and build 25, 30 units on that and go six stories, five or six stories up, right, and so like that kind of stuff. I would love to do that kind of stuff in the future, or even whatever the next project is beyond that. So potentially, you know bigger, bigger, better stuff than that, right?
Speaker 1so it's just because it's just because the floor of our limiting beliefs continues to raise in, the ceiling of what we believe is possible also continues to raise, especially when you get around different people and the right people. Well, cool, um, awesome man. I love that all right. Now, I know I was on the call with you when you were doing a lot of automation with AI and things like that.
Speaker 2Before we move on, if anyone is interested, our group is called thenextwavegroupcom and if you want to check out our website, we have a contact form there if you want to check it out. Also, if you are a fund, we have really good fund economics. If you want to do a fund of funds, and we can do that too. Fund we have really good fund economics if you want to do a fund of funds, and we can do that too. So somebody brings in capital. We generally have enough meat on the bone to give whatever capital is brought in 5% to 10% a year of capital contributed. So you brought in a million bucks. We build a write-a-check for $50,000 to $100,000. It's inside the equity waterfall though, so it's a little complicated on how that works, but I would love to reach out. I'd love to have anyone reach out and talk about it.
Speaker 1Yeah, I love that. That's awesome. I definitely would put that in the notes and I definitely was going to follow up with that at the end, because I want people if this sounds really awesome to them, then they should definitely be investing into this, Because I'm like man, how do I build one of these so I can own, like, once it gets condo, like doing the condos, I'm like I will own a couple of those um out there in San Diego. That's, that would be legit. Um, okay, cool. So, yes, reach out to him, Cause that sounds fantastic and it sounds like you've historically given some pretty good returns with it. So, um, that is great.
Speaker 1Now I love talking about, uh, AI, uh, the use of AI, because I think you are using an automated almost essentially an automated underwriting model. That I think is really cool and I guess, if you could kind of like break that down, I would love to hear is it just a custom GPT or is it something that you've built out a little bit more? Of course, you've trained it. If it's a custom GPT and things like that, but what was that process like for you?
Speaker 2And what do you use your AI models for? Mostly in what you're doing? Like I said, I get I get madly obsessed with things. And that chat GPT moment that came out last year or it was a year and two years ago now Uh, oh, my God, that that tickled me and I was obsessed. You know, I was watching, literally watching four or five hours of youtube on that stuff and doing stuff with the ai tools, right when it came out, every single day, four or five hours a day.
Speaker 2And again, that's one of those things where I told my wife about it. She was like that's cool, okay, you've been talking about it for a while. Oh, my god, shut up about it, right, yeah, and so here's a fun one, here's a fun little story thing. So I actually, when it first came out, oh, okay, okay, when it first came out, I wrote a book for my daughter, who was two and a half at the time, yeah, so we have all these. I don't. I don't think we have audio or visual here, but uh, for some of our people, but it's a book of of dinosaurs that are made of vegetables. So these are for my this is my two-year-old daughter. It's all created by ai. It was fun kind of a fun project. You can buy it on Amazon Pangea Picnic if you want to buy it there.
Speaker 1That's awesome. I love that. And it's funny because I do very similar stuff with my kids. I'll turn their drawings on their regular piece of paper into actual things, and they love it. It's so cool.
Speaker 2I love it. That's fun, dude. My daughter oh, I see our special guest behind you there, behind you there. Yeah, uh, my daughter. Now I we try to limit screen time to the whole thing, you know whatever, but but, uh, I also count with her as best I can. I'm not allergic to it, but yeah, uh, but we do this thing. We just I only let it happen once a week, but we do.
Speaker 2We do a ai story night yes and uh, uh, gotten to the point now. She just turned five, so I'm trying to have her help me tell stories and her come up with the stories as a kind of creative exercise, right. But then she and I are talking to the AI and she will say tell me a story about a little girl who has a pink dress, who likes unicorns, who, is, you know, plays softball with her friend Luca every weekend, right, and then it creates a story, and then she'll interrupt it and say oh, tell me more about the unicorn. And she's using the AI and interacting with it and building stories with it. It's really fun. It's super cool stuff.
Speaker 1Well, and it's incredible. And so on my Instagram I have probably, like we do a bunch of different prompts with the kids. So, like one day it's the cartoon you when the whole like cartoon thing was fun. So then, like I have, I have like all of our family's ones, and then like the car, the prompt at the end, and so I've been doing that a lot lately because, like they do, they have such great like times using their imagination.
Speaker 1I think it's such a really cool way to supplement imagination and um with a of different ways and I think, honestly, it's the world that they're going to grow up in.
Speaker 1So the fact that I, if even at all, like I'm inhibiting the opportunity that they have to learn it now and become comfortable with it now and grow with it now and have the conversation and for it to be normalized for them, the better I think they'll be in the long run because they're used to it. It's something that they've grown up with. Because I also think and I was on another podcast just now and we were talking about this I mean, with the emergence of humanoids and things like that, it's very normal. We were thinking that humanoids are on like a three-year time At the end of this year. There's going to be robots in people's houses At the end of this year, and so it's just one of those things where, like it's coming way faster than we expected or think it, and I think I would be negligent and remiss to not prepare my kids for it, and so it's so important one of my earliest memories.
Speaker 2So I was three and a half four years old. My dad had, uh, showed me how to use a keyboard and he had a little post-it note on on the on our when I was big computers at the house. Right, you have the CT monitor, so it's like it's 12 inches wide and 24 inches deep. Right, and he had a little post-it note and he showed me how to type L-E-N-I-N-G lemmingsexe, right, and that's how I had to learn how to. If I want to play a game, I had to learn how to use a keyboard to freaking type a command into the freak stupid DOS terminal. Right, and I was like three, three or four, right.
Speaker 2And then we also got the Internet for the first time. Was the only kid that I knew in my elementary, or at least on my street, that had the Internet? Nineteen, ninety four, ninety five, right, and it was amazing. I was six, eight, whatever it was, and it's just like it opens your mind, it blows your mind. The whole thing's fantastic and I hope we can do that same thing for our kids and I think it's AI 100%, and I think maybe it's robots and I think, whatever it is, it's going to be something fun.
Speaker 2Let's make sure that they're exposed to it.
Speaker 1They're exposed to it, they're prepared for it and they're not afraid of it. It they're prepared for it and that they're not afraid of it, like they know how to use it and aren't afraid of it. Because I think there's a lot, I think there's too many people that are just like no, no, I'll keep my kids away from it, that's the devil. Or like even just like that's cheating, that's this, that's that and it's like what do you think their adult life is gonna be? That's all they're gonna do? Like. I actually think that we're in this sweet spot of human history where, like 50 plus years ago it was too hard, it was so manual. 50 plus years in the future, it's going to be too easy, and I think right now there's this nice mix of, like human effort and technology that we get to teach our kids in, and I think it's really interesting.
Speaker 2So I love formal education. So not dissing formal education. Right, my wife's a teacher, my dad's a professor, right, but there's this idea where you don't ask the person next to you to help you on your homework or help you on the test, because that's cheating. You're asking someone else to help you. What are you talking about? That's what we do all day long as business owners and workers and whatever you want to ask collaborate, right. Yeah, the people on the bottom compete, the people on top collaborate, yep, right, and yes, we need to be able to embrace all these things.
Speaker 1Yeah, that's right. Cool, I feel like I monopolized the end of this conversation. I want to hear from you on how you're using it. So how do we use?
Speaker 2this effectively for our real estate professionals or entrepreneurs, people who are doing this stuff. So, obviously, first of all, it's incredible for marketing, right. And so for me, I still have the ideas, I still have the concepts, I still have the things I want to promote. I just the actual mechanics of writing out emails. I don't do any of that anymore, right, the AIs do all that. Also, a big thing is like I created a thing. Help me improve this thing, right, and so you can prompt.
Automated AI Underwriting for Real Estate
Speaker 2And so every single piece of thing I create, even with the AI, helps me create it. Like, okay, I'm going to write this, I have this concept of an email, I want these three things, and the AI writes all out and I'll edit a few little things and I'll take that and put it into a different AI and have it's Grok or ChatGPT or Claude different AI and have GROK or ChatGPT or Claw they're all great, All of them are really good. They have kind of different pros and cons. They're all really good. Though, Put into a different AI and say critique this, Tell me how to make this better. You are an expert presenter. You're an expert capital raiser, an expert real estate investor, an expert whatever. Don't hold back Critique this so I can get better, and that was one of my favorite ways to kind of like learn how the AI helped me create new things.
Speaker 1That's good.
Speaker 2The marketing, of course, is pretty easy because, obviously, text-based marketing, also the PDFs. I take all my slide decks, download them as PDFs. Upload them and say here's my slide deck, help me improve you know, double check for spelling and grammar mistakes and help me improve this. What's? How do I include? How do I make the flow better? What should I add, what should I subtract? What part's lacking, what part is needs to be expanded on? That helps a lot, okay, so that's all. That's something that every single person should be doing. If you're the kind of person who's listening to this podcast, you need to have these AIs help you critique all these things. It's together, it's a team. You're you're.
Speaker 1Yeah, I actually think people shouldn't be thinking of AI as a tool, but as an employee, like literally as an employee and somebody on your team, a hundred percent.
Speaker 2Exactly yes, yep, yep, yep. So that is a for everyone thing. Now here's another step. If you want to go, if you want to nerd out even a little bit further, always, uh, we, uh. So so, because we have a, we have a fairly defined criteria buy box right, and so we have, uh, we have about 15 zip codes that we buy in. It's all in the city of san diego and we have to have a certain lot and a certain weather and a certain this, a certain zoning right, and so what we did, what I have is I have a tool that scrapes redfin and scrapes MLS and it pulls down every single property that's for sale, filters it into certain high-level criteria you know certain zip codes and certain whatever, certain size and certain whatever.
Speaker 2Then takes that, takes all those filtered things, pulls information from the city on the zoning, pulls information from property radar and what's the other one? Scout Red Red Scout. I always one Scout Red Red Scout. I always forget Scout Red Red Scout, whatever Some website. So polls from those websites and we're scraping. I use makecom Great tool.
Speaker 1Very easy Way, more customizable than Zapier and stuff like that, yeah.
Speaker 2They're great. Zapier is good too. Makecom is great.
Speaker 2If you want to get even crazier, I've not done this yet but n and g and n, eight and eight in, that's what? Yeah, yeah, uh, uh, that's I've not actually played with that, but that's kind of like the next level up, right. We pull information in and then we do a quick underwriting on it. So we take that information and we can then figure out like how many adus can we build on this? And we can also pull the rent information. So we know the rents, we know how many units we can build, we know our costs, we know our acquisition cost. Is the retail price right?
Speaker 2And then we create a quick underwriting on that property and we can say how much do we need to buy the property for how much would it be netting how much? You know all these different numbers and that allows us to underwrite every property in the city of San Diego. And then of course, we have a VA who checks some of the stuff. And then of course we have a VA who checks some of the stuff. And then so we're only picking the cream of the crop. And now I can say very definitively that we look at that, we have numbers for every single property and we only pick the best properties and that's how we're able to get the 20% plus.
Speaker 1That's awesome, that's fantastic, man, and I think like that's so good because I think what you just said specifically you said that's how we're able to get that 20 percent plus.
Speaker 1I think that that will be the differentiator moving forward on funds that are really successful is their application and in the way that they pivot and adjust to the changing times and then not like when robots can paint a house for you, then like have the dang robot paint a house instead of going out and paying, like cost of labor goes down. Now, granted, I know there's a lot of things that people would rather do, but I think also, like you just said, that's how we're able to get the 20% because, one, you're lowering your. You're lowering your um, your expenses, by paying somebody to do that, paying an analyst to do that stuff, and then you're expediting your conversion cycles and your time, your time horizons and timelines, because it does it significantly faster. So I really do think that there's such an interesting, interesting way to leverage and arbitrage AI that people just aren't taking advantage of. So I love that job.
Speaker 2Do you know? It's another one. That's really fun that I started doing this, do you know? What's another one that's really fun that I started doing. This might be. Everyone probably already knows about ChatGPT. Like you can put text in there, everyone knows that. Okay, here's a fun one that maybe some of the listeners don't know about. Notebook.
Speaker 1LM. Oh my gosh, it's so good.
Speaker 2Okay, okay, you know, okay, good, good. So Google owns this. It's one of, or a notebook LM. They have this thing where you can put information in, so you can put PDFs, websites, just type stuff in, and so you kind of put like a little repository and you say make me a podcast on this, and it creates a kind of 10 to 15-minute podcast of two people talking, and it's incredible.
Speaker 1Incredible.
Speaker 2And I take these new ADU regulations when there's like new proposed laws and stuff, and these are like really complicated. These are 120 page regulation changes and they're proposals. They're not even in effect yet. They're just like we might consider some of these things right. Oh, I can't sit there and read things that are proposed, right, and so I throw it into the LM and I'm like, just just give me a little chit chat on what's going on here, and then they'll go back and forth and talk on like good, I have kind of at least a high level understanding of it. It's awesome.
Speaker 1It's crazy. The conversational aspect of it Insane. Well, cool man this has been Andrew. I'm so glad that we've gotten connected and been able to chat here. I'm really excited for one you to get connected with Phil and and like kind of the synergy that you guys are going to have with that. Now this podcast, as I said, is called Funds on Fire. What's one thing that has you fired up going into, I guess, the rest of 2025?
Speaker 2Fired up. Well, I guess, adus. I'm excited about ADUs, I'm excited for this concept of like, how do we elevate ourselves when we take, I said, you know how we maximize our potential as we take our effort, our abilities, our time, effort, right Time and headspace uh, from experience and from education, and then and then scale it with capital right, and that's where these funds on fire, this capital raising thing is, is so amazing. So, if you do have the deal, you have the expertise, you find the capital and you make it happen.
Speaker 2And, like you said, devon, I always say is never let cash get in the way of a good deal. And you said, oh, that'd be easier for you to say when you raised your, when you already are capital raising. That's the opposite. Actually, it was the idea that never let cash get in the way of a good deal led me into capital raising, because the world is flush with cash. It's not flush with good deals, it's not good. Well, I should say it is flush with good deals. It's just there's more cash available than there are good deals available. And so if you have a good deal that's the rare thing, that's a special thing the capital is out there. You just have to go find it. You have to go find those people, find those institutions, find those fund to fund managers and you partner those things together and make beautiful, amazing things Nice.
Speaker 1I love it. You partner those things together and make beautiful, amazing things. Nice, I love it Again. Where can people find you? One if they want to invest with you, if they want to learn from you, if they want to follow along with you in your journey? Man?
Speaker 2Yeah, so thenextwavegroupcom is our website. We have our contact information there Also. My email is andrewatthenextwavegroupcom. And also, if you want, my Instagram it's fun, if you want to see I, I add and chat with people all the time. Uh, on Insta and the Andrew Erickson and you'll see uh, me with my kids and I post some other real estate stuff on there too. I'm always DMing people and chit chatting there too, and LinkedIn also.
Speaker 1Andrew Erickson on LinkedIn yep, very cool man. Well, I appreciate you, thankful for your time, excited to connect and excited to see where the world takes you man.
AI Integration in Everyday Life
Speaker 2Thanks so much, devin, thank you, thank you. You're amazing. Thank you for having such a amazing community and I'm excited for the whole thing wow, I hope you enjoyed that.
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