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245 Jeremy Roll, Professional Investor

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Jeremy Roll

Lead Roll Investment Group's efforts to seek passive / managed alternative investment opportunities in Real Estate and Businesses in the $500k-$25M range. RIG focuses on low-risk non-institutional cash flowing equity investments that are managed by experienced operators / syndicators and low-risk secured (collateralized) short-term loan investments.

Current investments include commercial real estate (including traditional asset classes such as multifamily, retail, and office, as well as niche asset classes such as mobile home parks and self-storage facilities), residential real estate and notes, ATM machines, cash flowing websites, hard money real estate loans, and other relatively low-risk cash flowing opportunities. Our group is currently invested in over $500 Million worth of non-institutional cash flowing assets.

Read the transcript of my conversation with Jeremy Roll below while listening along:

245 Jeremy Roll Investor.mp3 (transcribed by Sonix)

Adam Gower: If you've ever had a dream of living the good life on passive income, then hearing my guest today, Jeremy Roll, talk about how hard he works to maintain a passive-income lifestyle will put the idea squarely into perspective.

Adam Gower: Welcome to the NationalRealEstateForum.org Podcast, Episode 245. Thanks for joining me today. I'm Dr. Adam Gower and this is the National Real Estate Forum, where I speak to leaders of the real estate syndication industry, so you can learn about trends, and practices in real-estate investing, so you can raise capital online, and invest wisely.

Adam Gower: Well, I think today is going to be probably the last, if not one of the last episodes in this series. Thanks so much for listening to this series. The next series is going to be concentrating on actually how to raise money online for your real estate syndication. It's going to be absolutely fascinating. I've lined up a hit list of the wizards of digital marketing, and I'm going to be talking to them about best practices.

Adam Gower: Although I don't have the website name, or anything lined up yet - it's all in process, but moving very quickly - be sure to go to the show notes for today's episode at the NationalRealEstateForum.org website, NREForum.org, and I'll put a link on there, so you can find the new series without any difficulty.

Adam Gower: Interestingly, I've also been working on an educational series that uses case studies from the SmallChange.com website to look at some of the key concepts in real-estate investing, primarily for the investor. What's particularly fun about that project is that it is a series of 02:20 videos, no longer than 02:20 videos that will be syndicated on all five social media platforms: Facebook, Twitter, LinkedIn, YouTube, and Instagram, which took me a solid two weeks to figure out how to actually turn it on, right?

Adam Gower: We're going from absolute zero to warp speed in a very short period of time. Anyway, go ahead, and check out the show notes for today's episode at NREForum.org/Jeremy. I'm going to go ahead, and post links to all those other channels, where you can find that fascinating series. Fascinating for two reasons. One, the content, of course, is, as usual, scintillating, but also, the delivery method is experimental, and will be illustrative of the kind of techniques that you can also apply for raising capital online.

Adam Gower: My guest today is Jeremy Roll. Jeremy is a professional investor, and has established a lifestyle of earning his income from passive investments. His story is particularly interesting for two reasons. One, passive, in his case, and I suspect in anybody's case, actually, is anything but passive. It's strictly a description that is founded in the tax code - passive versus active income, I suppose. I'm not an accountant.

Adam Gower: It requires a lot of hard work, and a lot of attention, so it's definitely not about sitting around on your hands being passive. Also, because Jeremy has such a broad experience of investing that his insights are very interesting, and I'm sure you're going to enjoy his thoughts about what to look for in a real-estate sponsor. If you want to reach Jeremy, you can find out more about him by going to the show notes page at NREForum.org/Jeremy. Here is Jeremy Roll.

Jeremy Roll: Thanks for having me on the podcast. I really appreciate it. My background on the passive-investing side is back in 2002, I was working in the corporate world, and I was really sick and tired of the stock market for two reasons. One is because of the volatility. This was right after the Dot-com crash; that was really my catalyst. I'm just a really kind of low-risk-prone, steady guy, and watching the market go up and down 30 percent a year was just not for me.

Jeremy Roll: The less obvious thing, actually, that bothered me even more was the lack of predictability in the stock market, for my long term retirement situation, as far as where was I going to be in 10-20-30 years? That was really bothering me more.

Jeremy Roll: I looked at different ways to invest. Came across the concept of passive investing; then eventually honed in on passive investing, and low-risk cash-flow opportunities. I really look for more predictability. Really, the word 'predictability' was key for me, because that's what was driving away from the stock market.

Jeremy Roll: I basically rotated all my money from stocks and bonds into cash-flow opportunities, between 2002 and 2007. Had a last-straw moment in the corporate world, in mid-2007, with my manager. I was actually working at Toyota headquarters at the time, and decided to leave the corporate world in 2007, because I had enough cash flow built up to live off of, from having rotated everything out of stocks and bonds, at that point.

Jeremy Roll: I've been at an investor, a passive investor, for 17 years now, in various opportunities. I've actually been in over a hundred, over time, for sure, and more than that. I'm currently in, I think, over 60 or 70 opportunities, right now, and I've been a full-time passive investor for almost 12 years now, but a passive investor for about 17 years.

Jeremy Roll: That's my background as it relates to cash-flow focused, and passive investing. It's worth noting, I have also built up my own investor group over time. I have over a thousand investors, but most the stuff I invest in is just for myself, as a passive investor. Once in a while, I might send an opportunity to the group that I'm investing in, and they can choose to invest in it, but, for the most part, my focus is for my own investing.

Jeremy Roll: I've looked at many different opportunities over the years, and I've invested in most of the major commercial real estate asset classes, and the residential real estate asset classes, as well as some ATM machines, and cash-flowing websites; some oil and gas opportunities, and even a handful of start-ups. Those are extremely rare for me. That's the point I have to make about [inaudible] a specific person, and there's been a few over the past few years. I am a very big fan of more predictable lower-risk passive cash-flow opportunities.

Adam Gower: Did you see this article recently about Jeff Bezos's first million that he raised? Had to 60 meetings before he raised his first million for 20 percent of Amazon. Talk about a start-up, right?

Jeremy Roll: Wow ... I actually saw a video on him. He was interviewed in 1997. It was so interesting watching him back then. He's just such a different person now, to begin with, and just hearing ... They were in their office, and it was such a small office. They were like hand-packing the shipments at the end of the day, on ... It was a very funny story about like they had to basically pack shipments on the floor, and then someone finally suggested, "Why don't we buy a table?" He didn't even think of that. He was actually just standing to pack everything. It was really interesting.

Jeremy Roll: His business, at the beginning, when he raised the first million, was so different with the focus, and everything, and it just evolved ... I'm amazed at what he's done, frankly. I order from Amazon literally every week-

Adam Gower: All the time. I know I do, too. We're going completely off subject, but that's okay just for a moment. Another one of my heroes is Richard Branson, of Virgin fame; Virgin Atlantic, and Virgin everything; Virgin Galactic, I think he has. You're familiar with Richard Branson, right?

Jeremy Roll: Yeah. In fact, I actually have a signed book of his that I won in a raffle. I didn't mention this in my introduction, but I actually have an MBA from the Wharton School. He came, and presented to us. This was back in '98 to 2000, when I was there. I don't remember the exact year. Yeah, it's amazing what he does. That's another truly fascinating person [cross talk] in terms of what he's accomplished.

Adam Gower: -you know how he started? He started, selling records. Did you know that? His business was originally used records. Before he decided on calling it Virgin, he actually ... The other name that he came up with was Slipped Disc Records. Slipped Disc Records, and he opted for Virgin, instead. Interesting that he, and Bezos started with completely different businesses than they ended up with [inaudible], or at least they grew into extraordinary empires.

Adam Gower: Let's get off that. because you and I love ... We can always go down these conversations, and I do like it, but let's try, and get back to real estate. I actually have a question for you, Jeremy. When you started, or actually, when you had finished migrating from stocks, and bonds in 2007 into real estate, you had actually just timed it for the very peak of the market. Tell me something, before we start talking about other subjects today, tell me a little about your experience during the downturn of 2008-2009, and how that informs your point of view, today, and where we are in the market, today, or in the cycle, today.

Jeremy Roll: Yeah, great question. I tried to keep my introduction succinct, but to give you more details, as it relates to this, I'm originally from Montreal, Canada. When I started investing in 2002, what I quickly recognized is that I had no idea what I was doing. I didn't really know real estate. I didn't know commercial real estate, certainly, and I didn't know cash-flow investing. I didn't really understand it very well, as far as understanding the details on what I ... I had no clue what I didn't know.

Jeremy Roll: I was very lucky, because I was able to start investing in Canada, with lifelong friends of my family; I'd known them since I was five years old. I used to play hockey with the kids, and when I was growing up, they were a couple blocks away [inaudible] street hockey all the time.

Jeremy Roll: I actually approached them, to invest with them first. They had actually been syndicating opportunities in commercial real estate for about two or three decades, at that point. I was lucky, because I said to them, "Look, I really want to learn. I want dip my toe in with a couple deals, but I want to learn about how all this works."

Jeremy Roll: They were very, very detailed, and very conservative, which matches both ... key pieces of my personality. I got to learn a lot through them, and, frankly, a little bit by luck at the beginning, between '02 and '05. I focused mostly on Canada, and by the time '05 came around, I remember I had been just sucking up as much data and information as I could. There are many sources. I concluded that the housing market was going to crash at some point. I just recall it, because I was much younger.

Jeremy Roll: Between '05 and '08, I was very young, no kids, so into having fun. A young guy going to dinner parties, and all this. I actually remember that I would be the crazy person at the dinner party telling people this housing market was going to crash. It took like three years. That's a long time of saying that to people, and you're looking like a crazy man.

Adam Gower: But you were right.

Jeremy Roll: Yeah, exactly. I actually watched all this happen, but it was almost like in slow motion.

Adam Gower: Be sure to go to the show notes for today's episode at NREForum.org/Jeremy, where you'll find links to my educational series on real estate investing, made up of short videos on all the major social media channels. When you're there, go ahead and leave a comment below, and let me know what you think. That's NREForum.org/Jeremy for all the links to my new educational series on real estate investing.

Jeremy Roll: First of all, I actually am very lucky because I had no investments I ever made in the US that were ... For example, foreclosure has challenges because of the downturn, which is crazy, but it's because, at that time, I was mostly exposed in Canada. I was just very lucky. By the time I was worried in 2005, because I'm really low-risk, I worried years before, I not really was considering anything here.

Jeremy Roll: I really sized up everything, and honestly, just very lucky - bottom line. That being said, having watched the last downturn, and having read all the data coming up to it, I would say that it made me ... If you think about it, the degree of what happened in the last downturn was quite severe, compared to historical cycles, both in terms of housing prices, commercial real estate prices, and the general stock market, and the economy.

Jeremy Roll: That is definitely an outlier, but it's great to go through an outlier, without having experienced a crazy amount of pain from it, because you can watch from the sidelines, and learn a ton. Unfortunately, me starting already out as a very conservative person, it's made me even more paranoid about the next cycle downturn. Not that I think that - realistically, objectively - we're going to have the same degree as downturn as last time, but more of the understanding that it's comparative for someone like me, who's a passive investor, who gets locked in, long-term, into deals, to think way ahead.

Jeremy Roll: Honestly, I don't think enough investors think far enough out. What I mean by that ... Let me give you an example. I had literally started investing for a downturn out of 2013, thinking the downturn would be in 2018, which was clearly incorrect. We're recording this in 2019; there hasn't been a downturn yet. I extrapolated that based on previous cycles - how long the cycles have been, et cetera - and also how things work after a major downturn, and a major downturn that was related to debt.

Jeremy Roll: Long story short is it's not like I was stopped investing in 2013. The difference was that I was only investing in asset classes, and in fields that I thought would do well during a downturn, in the right markets that would experience less volatility during downturn, all the way back then, because I was investing in 10-year deals. I was typically looking for a fixed-rate 10-year loan for more predictability. Of course, that's just one strategy of many you can use, but that's what I did, so I've truly been investing for a downturn since 2013.

Jeremy Roll: The other thing I've also noticed that I've done is I have very much changed what I'm investing in, and I shift focus, depending where we are in the cycle, because I try to stay away from what's hot. Let me give you an example. This is probably going to sound extreme to a lot of investors out there, but I have literally shied away from apartments, as of 2013. The reason is I started to see prices go up, cap rates go lower. For me, it's like why am I going to take the same degree of risk for a low return, and less of a multiple? I then shifted focus to self-storage; I shifted focus to mobile home parks, at that point [cross talk]

Adam Gower: Let me jump in, actually, and ask you about that. What about value-add apartments, because that's a different [cross talk]

Jeremy Roll: Right, so, great question. Yeah, great question. I don't typically do heavy value-add; I do minor value-add. Again, that's just my really low-risk profile, right? The most degree of value that I would do in apartments is the following strategy. Buildings ... Well, actually, in value-add, 90- to 100-percent occupied. I'll actually invest the stuff that's 80- to 100-percent occupied, but for this type of strategy [inaudible] it has to be highly occupied.

Jeremy Roll: Then, the operator says, "Look, the units are a little old. We're going to ... We've got CapEx reserves right now to actually redo the interior of all the units, and do a little bit of exterior work, but nothing crazy. We think we're going to be able to bump up the rents, but we're not going to force anybody out. That's not the strategy we're going to use."

Jeremy Roll: "We're going to say when the person vacates, instead of taking on a new tenant immediately, we're going to go ahead, and do the work for a couple of weeks up to a couple of months; have that unit redone. Then, this is going to be a three- to four-year process, but we're going to have the vast majority of the building done in three to four years. In other words, we're not going to force people out on renewals. They should continue to stay in that apartment. When they want to leave, that's when we'll actually go [inaudible] ..."

Jeremy Roll: It's a lower-risk strategy to keep the occupancy rate higher, and not to force depreciation as quickly. That's about the highest degree ... I actually invested in a deal in 2013, and apartment building in Mesquite, which is a part of Dallas, Texas that was that exact profile. It worked out really well, and it was very unique price at the time but. That's the most value-add I would do.

Jeremy Roll: I think that in today's market if somebody is looking to invest, I personally think one of the best investments potentially is doing a value-add strategy in an apartment, at this point in the cycle; although I think that apartment prices are ludicrous. I think that if you're willing to take the risk of the execution risk, and the refi risk of getting a value-add deal done right now, I see why it would make sense, because apartments tend to have relatively secure rents. They don't go down as much as other asset classes during downturns. Just generalization, compared to others.

Jeremy Roll: I see strong demand in apartments for many years to come. You've got to be in the right location, in a strong demand area, strong economic area, and a strong population growth area. I 100-percent agree with you. I see people doing that actually, and I understand the strategy. It's just not the right strategy for me, but there's many different ways to invest.

Adam Gower: You've described investing across a broad range of asset classes. Let me ask you something that is presumably consistent, irrespective of what asset class you're investing in. That is the sponsor, the person that's actually operating, and managing the deal. What are the key things that you look for in a sponsor? Is it uniform across asset classes, and what do you look for?

Jeremy Roll: That's a great, great question. It's funny, because this I have learnt over the years that the most important thing to focus on in a deal is actually not the actual property, but the sponsor stuff. I tell people number one is the sponsor; number two is the property. Now number two is a very close second place, because clearly the property is extremely important, and everything surrounding it, as far as all the analysis running is very important.

Jeremy Roll: To me the sponsor is the number-one piece. I like to give this example. I live a couple blocks south of Beverly Hills, and LA, so this is why I use this example. I say, "Look, I can invest in the best building in the best part of Rodeo Drive, the fanciest street in Beverly Hills, with the best tenants, and it's 100-percent occupied right now. If I invest as a passive investor, and the operator runs that building to the ground, then ultimately, we won't have any tenants, or we'll have a more vacant building, and we're going to end up foreclosing, and we're going to give the keys back to the bank. It didn't matter that we were in the best location with the best tenant. Literally didn't matter." That's how important a sponsor is, relative to the property, in my opinion.

Jeremy Roll: I also want to point out something really interesting, and it's something I used to do, when I first started investing in start-ups a long time ago. I think it's a critical error, which is, you've got to make a bet on the person, and then look at the idea in a start-up. I mentioned earlier on this podcast that I invest in a handful of start-ups is when I have to make a bet on a person, and then, I also think the idea's good, but that's like the second place. Don't get enamored with an idea in a start-up; make sure you're betting on the right person. Don't get enamored with the property; make sure you're betting on the right person. It's the same principle, in my opinion.

Adam Gower: What, actually, do you look for? What are the key characteristics of a sponsor? We could look at it two ways, actually, Jeremy. We could look at the positives, or you could also look for warning signs. However you choose to ...?

Jeremy Roll: Let me focus on the positives, first. I will try to make it as succinct as possible. Essentially, number one, I'm looking for someone who's experienced. If it's someone's first, or second, or third deal, I don't mind tracking them, watching them, and maybe getting on their investor list, and watching what they're doing, but ... This is going to sound awful, but it's honestly true, is I just don't want them learning on my money. That's why it's hard for them to find external investors, when they're new. That's why they have to go with friends and family first. It's a question of building experience, and trust. That's number one.

Jeremy Roll: Number two is I am looking for somebody who is conservative, uses conservative projections, is actually looking to under-promise, and over-deliver, and be very careful with their projections to make sure that they either meet, or exceed their projections, to try to get long-term relationships with investors. I see those types of deals from time to time.

Jeremy Roll: I also see the other side of things, which is what I'm not looking for ... I'm not looking for someone who is over-promising, using aggressive assumptions, and making the numbers look really good, and they don't quite care as much about the long-term relationship with investors. They just want to get the deal, and get their fees, and, if it doesn't go well, they'll move on to the next investor. That is really ... Yeah-

Adam Gower: Let me jump in ... I said this in a few podcasts ... My wife hates it when I do this. She's always telling me, "Stop interrupting them!" she says. "Don't bloody do that!" But I am going to interrupt, because I've got a question here. That is you've talked about looking for sponsors, who are more conservative, and have a longer-term perspective, and not being aggressive with their assumptions. All right, so, good, but how do you make that assessment?

Jeremy Roll: Yeah, that's a great question. There are two different ways to make the assessment as to whether someone is conservative. Actually, it takes a lot of work, because it's not just two steps, but there's multiple steps in each part. One way is to actually look at all their assumptions, and actually understand what their expense-increase assumptions are, their rent-growth increase, or income expense ... income-growth assumptions are, sorry.

Jeremy Roll: Then, to look at, for example, their assumed exit cap rate. In other words, the multiple they think they're going to get, when they exit. Their expense ratio - are they're using a lot of expenses, and padding them to get those additional expenses they weren't expecting, or is it vice versa? Are they reserving a lot of money for maybe unexpected items down the road, or is that going to have to come from cash flow, so they're just not showing that there's any reserves? The numbers are going to look better, because they're not holding back some money to make sure they're really conservative.

Jeremy Roll: So the numbers will tell you a lot, but what I find really intriguing is that the other side of the coin, it's actually harder to do, I think, but that could even be more telling. It's actually reading between the lines. When I say that, what I mean by that is that if you're reading an opportunity, and if ...

Jeremy Roll: Better example: let's say you're on the phone with an operator; you're asking questions about an opportunity [inaudible] If I say, "Why did you use 2-percent rent-growth expectation, or assumption and a 2.5-percent, or 3-percent expense-growth assumption?" The answer from the operator is, "Look, we think we're going to do better, but we're trying to be really conservative to make sure that we don't overstate what's going to happen in terms of setting expectations for investors." That, to me, is telling me that that's a conservative investor. You have to ask the question to get the answer, though. You actually have to speak to the operator to learn that.

Adam Gower: Right.

Jeremy Roll: The flip side is I may say to somebody, "Why is your average rent-increase assumption 4 percent per year, and your inflation assumption is 2 percent per year ...?" because it's building a gap each year, and it's making the numbers look quite big over time. If their answer to me is, "Look, we're buying this property. It's near the train that's being built. There's going to be even more demand for the property in the future, as the population growth in this area is projected to be very high, and we think we're going to do really well for this property," what does that tell you?

Jeremy Roll: They may be completely right, but, what it tells you is that they're not being conservative, because they could just as easily use a 3- or 2-percent rent-growth-increase assumption, and then, actually give me the exact same response I gave you from the other operator, saying, "We're being conservative. We think we're going to do better."

Jeremy Roll: Sometimes, you can even read the way that the verbiage in an actual opportunity offering documents, or overview, and actually see those types of things mentioned. You can start to get hints of whether you're dealing with someone conservative or not.

Jeremy Roll: There's a side, what I call the intangible side, of having to ask questions; get someone on the phone; maybe even email back and forth; ask questions; see how they respond, and read between the lines of their responses. Then, there's the more tangible side of actually looking at all the data, and the numbers that are more objective, and try to understand even where do they come from with their assumptions? What strategy did they use? Did they take a conservative, or an aggressive approach to their building their entire assumption base?

Adam Gower: Interesting. I'm going to share with you a couple insights that I've had from my career, as well. I've been on the, up until recently, been only on the other side of the equation, in the sense that I've been a sponsor. What I've seen, a couple things ...

Adam Gower: One, I've seen sponsors, really sophisticated sponsors will generate best, worst, and most likely scenarios, so there's a range. I really like that, actually ... When I was running a fund, we did it internally, for our own deal-evaluation purposes.

Adam Gower: Then, another interesting way of measuring a sponsor's degree of optimism, if you like, or conservatism, is that, in many cases, what you'll see is a sponsor will assume that the exit cap is going to be the same at exit as it is today, or more likely, it's going to be compressed slightly, because, as you well know, even a small compression in the cap rate at exit is going to have a very significant impact on the projected returns.

Jeremy Roll: Right.

Adam Gower: I was talking to a guy recently, who actually had a ... He thought that cap rates were almost certainly going to go up over time. In his projections, he built that into his assumptions, that each year, I think they went up 25 basis points, or something; so, in five years, they were up a solid 1.25, or 1.5 percent from where we were today. It was a very ... I have never seen that before, actually, and very seldom see ... Have you seen anything like that?

Jeremy Roll: I tell you, the most I normally see is a spread of 100 basis points, between where we are today, and where we're going to exit in 10 years, and that's like 10 basis points per year, which I see some people use. Sometimes, it's a half ... 50 basis points, if it's a five-year deal.

Jeremy Roll: Let me tell you the most obvious thing I've ever seen once, which I've never seen again, is there's a sponsor I've invested with, who actually ... It was an apartment deal, and I remember, about three to four years out in the projections, there is actually a decrease, an actual negative growth in the rents, just for one year. I don't remember how much it was.

Jeremy Roll: I said to them, "What is this? I have never seen that before." They literally said to me, "You know, we don't know when it's going to come, but that's our best guess as to when we're going to have a recession, and we're assuming that we're going to have a decrease in rents. Then, the rents are eventually going to go back up." They literally decreased the rents in a year. I have seen thousands of deals over 17 years; I've never seen that again. That's a really great indicator that you're dealing with someone who's trying to be really careful, and not trying to basically over-promise. [inaudible] really good example.

Jeremy Roll: By the way, I want to add one more thing I think that's very important. Some of my favorite sponsors to invest with, they're so much of the same mentality as me, from a low -risk perspective, that when they send me a deal, nine times out of 10 ... I've invested in over ... One of the sponsors actually I invested with, the first one I mentioned to you that I started with, I've been in over 20 deals with, and there's another one coming to mind that I've been over 15 deals with, I think.

Jeremy Roll: When I get something from them, and I start to slice and dice the numbers with them, and I look at their spreadsheets, I know that we're going to be ... They're going to point to the exact same things that my head would go to, as far as being conservative. They will use very similar assumptions that I probably would put in myself. It's almost like you're perfectly aligned with the whole mentality of how you're looking at this.

Jeremy Roll: It's rare, but when that happens, you know you've got someone really, really good, that's going to be a good fit; and then, you have a pretty high degree of confidence that every time you get something from them, it's probably going to be a good fit for you, because you're so much aligned with them, just generally across what assumptions should be, what exit cap rates should be, et cetera. That's always an interesting scenario.

Adam Gower: You actually mentioned having ... I'm going to kind of put words in your mouth a little bit; you didn't quite use these terms, but having a long-term perspective, when you actually talks about 10-year horizons. What is your broader investment philosophy, in terms of timing? Actually, let me ask another question, Jeremy. Having a conservative perspective, and this dovetails into timing, overall, over the long run, how have you seen your portfolio perform in annual growth, interest, let's say, or returns?

Jeremy Roll: Sure, and those are two separate questions. Let me deal with my portfolio, first, and then the timing. Timing, to me, is critical. I want to give you some examples. It's really, really key, and that's ... It's funny, we're talking about this in 2019, because I think you and I are both on the same page of being almost paranoid right now about investing in anything, based on the timing.

Jeremy Roll: Let me backtrack, and just talk about my portfolio. I track my portfolio on a very large spreadsheet, and it's month by month, but I don't normally do an analysis on how I've done. I don't take the time to ... I'm in so many different deals, and it's going to ... I don't normally have the time to go, and figure all this out, all the time.

Jeremy Roll: What I will say is that I did do an analysis of 2012. That's kind of an odd year to do it, because I missed the entire [inaudible] between '12, and '17, or '18, so far, so I missed a lot of returns, but I think it's an interesting time, because it's far enough away from this last downturn that whatever effect that could've had, even in Canada, probably was away from at that point.

Jeremy Roll: Anyway, back then, I could tell you that, from a 10-year view, that I averaged about 18 percent per year across everything, total return. By the way, that was an assumption, because I had to make assumptions of what properties are worth today, not that they were sold, but what they were worth today to figure out what would I actually exit from, today, based on my splits with the operators. That's about what I was averaging back then.

Jeremy Roll: If I had to guess, I'm probably ... When I invest, my goal is to be at between 15, and 18 percent, total annualized return, but cash flow being around 10, or 11 percent average, I would say. I'm very heavily focused on cash flow, actually. I don't normally look at the total returns. To me, the additional returns are icing on the cake.

Jeremy Roll: I am highly dependent on the cash flow, because I live off of it. I've been living off it for over 10 years, almost 12 now. When I look at a deal, I just try and slice and dice the cash flow, and the predictability of the cash flow. That's really my number-one concern. Anyway, that's my answer to the total return question.

Jeremy Roll: With regards to timing, and by the way, as you know, my 2012 snapshot may not tell you much about today, unfortunately ... I don't have a good answer for you, for today, but that's the best answer I have. The timing ... The timing is absolutely critical.

Jeremy Roll: Here's the example that I like to give people. If you invested with the best sponsor, and the best asset, and the best location, in 2007, at the market price, you may have already been foreclosed, regardless of how well they executed. If you invested with the worst sponsor, in the worst location, with the worst asset, in 2010, you may have exited this year, and made a boatload of money, even on poor execution.

Jeremy Roll: Timing is absolutely critical, and I definitely pay a lot of attention to that. Like I mentioned before, because real estate moves quite slowly. and prices adjust slowly, but because you have to think way in advance, in the way that I invest, I've got to be really defensive. I've been very defensive for, actually already, this is going on my third year in anticipation of a downturn. I'm going through the same agonizing process I went through between '05, and '08 that I am now. It's an agonizing wait, but I'm quite convinced it'll be worth it.

Jeremy Roll: Timing is absolutely critical, and I cannot stress enough how I personally think it's a dangerous time to invest right now, based on valuations. I won't invest in a deal today. unless there's what I call unique pricing. I look at either 10 percent or below true market value, today, to get me even looking at a deal right now. Anything close the market value just doesn't make any sense.

Adam Gower: Yes, that's interesting, because I would even think that that is actually not that conservative, to be honest. Maybe I'm really too paranoid. 10 percent [cross talk]

Jeremy Roll: I actually agree with you that that's not that conservative, but then you have to layer in, okay, is this a 10-year hold? Yes. Where are we going to be in 10 years [cross talk]

Adam Gower: Yeah, that's very different. In fact, I spoke to Peter Linneman, who's a professor. I think, actually, he ran the ... I think he founded the Wharton Real Estate School. He told me about a study ... There's actually a podcast coming up. I'll put it right alongside yours, actually.

Adam Gower: He told me about a study that he had conducted that found that a 10-year hold was optimal, minimum, for real-estate investing to avoid, or to ameliorate the risks of the cycle. Anything less than that, and you're really going to be exposed to the cycle. If you've got a 10-year horizon, or perspective, investment perspective, then you'll do all right, I think he actually said. His [cross talk] Just FYI, it's interesting that you're hitting 18. His data set showed you can expect an 8-percent return. If you're doing 18, you're doing extraordinarily well, compared to other people who was similarly minded.

Jeremy Roll: I would argue, though, that he may be analyzing, for example, institutional types of opportunities, which have lower returns, typically, because they have lower cap rates. I actually purposely invest in non-institutional deals for many reasons. One of which is a slightly higher return. It's not a fair apples-to-apples, as far as my performance, honestly.

Jeremy Roll: What I would say, by the way, is that when you take a timing approach, and you're careful with your timing, and then, you layer in timing plus long-term, that's just even better, as far as reducing the risk even more. It's one thing to say you can invest at any time, if you're going to invest 10 years, and you'll probably be okay.

Jeremy Roll: Frankly, to be honest with you, if you're willing to hold through a downturn, you're not having to refi, you have a locked, fixed rate, and it's a 10-year loan, I actually don't necessarily disagree with that that across most asset classes, assuming that you're not in an asset class that's going down and down, like for example large enclosed malls, right now, are having a major challenges, and 10-year may not help you at all.

Jeremy Roll: When you actually layer in the timing aspect, along with the 10-year, that's like the golden ticket to what I call sleeping well at night. That's the funny thing ... For me, the 10 years isn't enough. To say to me, "Look, invest in an apartment today. Even though the prices are crazy, you're on a 10-year horizon." Some people will say that, and they may be right, but, for me, it doesn't allow me to sleep well at night, which is one of the intangibles I look for. The sleeping well piece is when you layer on the timing piece, and have that patience. That's how you sleep well, as well.

Adam Gower: Jeremy, what are the key daily habits that you have that make you productive, and successful?

Jeremy Roll: I would say that two things come to mind. One is that I actually plan my day the night before, and that I take a look at what's coming up. If I have calls with people I don't know, I may go back, and research the emails, and get ready for them. Planning the day before is essential.

Jeremy Roll: It's something I didn't used to do, when I was much younger, in the corporate world. Sometimes, you get behind, and kind of get a little discombobulated with what's going on, if you're running around. If you plan the day before, you'll wake up already knowing what to expect.

Jeremy Roll: Number two, which is really key, is that I have a very specific structure to my day to be able to manage the volume of what I have to manage on my own, because I don't even have an assistant, or anything like that. For example, I schedule calls during a very specific block of time, and then I do emails before that, and after that, and ad hoc calls, before or after, if need be.

Jeremy Roll: Having my scheduled calls at a specific block, and time, and being pretty stringent with that, allows me to be, in my opinion, a lot more productive. Now, what it doesn't do is give people much flexibility, if they're trying to schedule a call with me. Sometimes, it might be one, or two, or more weeks out, to actually speak to me, because of that, because I'm backlogged. Then, I also even block off a couple of days a week for no scheduled calls, in case I have to do contracts, or projects, and I really have to dig into something.

Jeremy Roll: If I hadn't pre-thought all this out, I think that I'd probably be a lot less productive. I wouldn't be able to handle the amount of volume that I do. The other thing, of course, is I work quite hard. I work very hard. I work during the day, and at night; work much harder than I worked in the corporate world, even though I worked very hard in the corporate world, so that's always key, as well.

Adam Gower: Second question: what has been the hardest lesson you've learned in real estate?

Jeremy Roll: Hardest lesson in real estate; that's a good question. I would say that, when I first started in 2002, I don't think I understood the importance of exactly ... The focus that number one is the operator, when you're investing passively. I wouldn't say I've learned a lesson the hard way, per se, but I've seen that it's probably one of the most valuable lessons I learned over time, versus someone who's brand new.

Jeremy Roll: I also think the timing we talked about is extremely important; probably more important than most people understand. I would certainly say that the thinking way ahead as an investor, in terms of what asset class will still be doing well in eight years? What will actually get through a downturn in five years, when I'm about to get locked into it for 10 years? What's happening with that exact location, eight years from now?

Jeremy Roll: By the way, that's become much harder to forecast now with self-driving cars potentially coming up. That may change the way real estate is used in many different ways, and the demand pattern. Robots are replacing workers, and how workers can be impacted, depending on what type of income range you're targeting, depending on what you're investing in. I'm talking about 5 to 10 years from now. I have been paranoid almost of asking as many people as possible their opinions on this, because I don't have a conclusion yet. It's very hard to project.

Jeremy Roll: Also, one more thing - sorry I have so many answers to this - is I read about one to three, or two to three hours of data a day, literally. Most of it's actually a combination of news, and actual data, and looking at kind of what's come out, just in the attempt to synthesize a high-level opinion; almost like a direction of where we're heading all the time, and not from a daily perspective, but just it helps ...

Jeremy Roll: I absorb everything, and I end up with a very high-level opinion of where we are in the cycle, what's coming up, what's going on with interest rates, what's going on with the Treasury, if you have bonds, and the inverted-yield curve, and all kinds of other things. I spend as much time as possible reading data to get a perspective of where we are to try to help me to forecast where we're going to be in not just six months, but even in 5 or 10 years.

Adam Gower: Fascinating. All right, final question: if you could give one piece of advice to somebody who has not yet invested in real estate, but is considering investing, and I'm talking particularly about investing online, in a syndication, what would it be? What would that advice be?

Jeremy Roll: Don't invest until you understand enough about how to analyze both the deal, and the legal documents, to the point where you feel 100-percent comfortable investing. I'm not telling anybody not to dip their toe in, and try with a small [inaudible] first. That's also critical, but a combination of that, and ensure that, at the end of the day, you're highly diversified across asset classes, geographies, and operators - all three. That's what I always target for.

Jeremy Roll: Finally, be very careful, right now. It's a very dangerous time to invest. It's probably one of the best times to learn, because you're not missing out on much, right now, because prices are very high. Make sure you educate yourself enough, to the point where you understand how important timing is, and really get a sense of where we are with the timing, so you'll know when the right timing is to start. In the meantime, when you're educating yourself today on all those things, it's a great, great time, because you're not missing out on much.

Adam Gower: Fantastic. Thanks so much, Jeremy. One final question: how can listeners reach you? What's the best way of getting in touch with you?

Jeremy Roll: Absolutely. I'm happy to talk to anybody. Happy to help anybody any way that I can. Could be individual investors, sponsors. It could be even other investor groups that are looking for new investors, or sponsors, or whatever. I'm happy to network any way ... Help anybody any way that I can.

Jeremy Roll: Best way to reach me is through email. My email address is JRoll, J-R-O-L-L, AT Roll Investments, which is R-O-L-L investments, with an S, dot com. So, JRoll@RollInvestments.com is the best way to reach me.

Adam Gower: Fantastic. Thanks so much for joining me today. It's been a pleasure.

Jeremy Roll: No problem. Likewise. I've had a very interesting conversation we had today. Thank you very much for having me on. I really appreciate it.

Adam Gower: All right, so that was Jeremy Roll. Please go to the show notes page for today's episode for a bunch of links to my new series of educational short videos that you can find on all the major social media platforms: Twitter, LinkedIn, Facebook, YouTube, and Instagram. There's also a link to how to reach Jeremy. I've put his email address over there, as well, so you can have a look. The show notes page are NREForum.org/Jeremy.

Adam Gower: All right, I think this is possibly going to be the last episode. I am so insanely busy that I'm not sure what is up, and what is down. There may be one more episode in this series, but either way, do stay tuned.

Adam Gower: The next podcast series that I am going to be moving on to is going to be absolutely fascinating. It's going to knock your socks off. Going to be looking at what are best practices for raising capital online, if you are a real estate sponsor. Speaking to some of the wizards of social media around the world. It is practical, tangible, and actionable, so do please tune in. Tell all your friends. Be sure to listen in. It will change your world, okay?

Adam Gower: That's what I've got. Thanks so very much for joining me today. Thank you, Jeremy Roll, for spending your time with me today, as well. It was good talking to you, and perhaps we'll talk again. I would hope that we have an opportunity to do that. For right now, this is Dr. Adam Gower signing off.

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