Transcript

Dr. Alexa D’Agostino:
All right. Well, welcome to the Think Millions podcast. As you all know, I’m your host, Dr. Alexis D’Agostino, and every week I’m bringing to you people that have been there and are doing it. Not just people that talk the talk, but people that are walking the walk. And today I have a special guest. We are joined today by Patrick Grimes. He’s a CEO and founder of Passive Invested Mastery, an internationally bestselling offer and a Forbes council contributor. And I’m really excited to share his story on how he pivoted from tech into real estate, and a lot more. And I can’t wait. And so, glad to have you, Patrick, welcome to the show.

Patrick Grimes:
Fascinating show you have here with a great tribe. Glad to be part of it and contributing today.

Dr. Alexa D’Agostino:
Yeah, I look at your background and you’re serial entrepreneur. You have expertise in alternative investments. We talk a lot about alternative investments. I actually am part owner in a couple private equity companies myself, focusing on alternative investments. You could read everywhere. Everyone is saying now that everyone is leaning towards alternative. And typically real estate is something that is also included as an alternative investment. But you saw this before everyone else even saw this. You started to pivot into real estate and really started to shift what you were doing. And I believe, correct me if I’m wrong, but you were in tech, correct?

Patrick Grimes:
Yeah, I was educated mechanical engineer. Have a master’s in business administration and MBA. And I did machine design, automation and robotics. I mean, I was in the pit doing 3D modeling right out of college.

Dr. Alexa D’Agostino:
So, tell the story. So, what made you transition from… because they always say, you go to college. What are the three careers they tell you to go into? Technology, healthcare or business. And so, you did what everybody does and they go, they get a degree in technology, and then you go into it and then you decide to transition. So, talk us through that.

Patrick Grimes:
Sure. Well, so when I started out in high-tech, I was always been an engineer at heart. I was building Legos, taking apart VCRs, old things that don’t exist anymore. But I was having a lot of fun with technology growing up as a kid. So, when I went to engineering, it fit real well. I was skilled. I did well, started making some bonuses. And then I sought some advice. We were involved in a lot of really cool projects with aerospace and medical device, and some of the bigger companies, even in Silicon Valley, Facebook, Google. But I was looking for those little startups, something I would make it big in. So, I asked the founder of the company I was working for at the time, “Hey, where do you invest? I mean, I’m making this money. I want to do well for myself.” And he goes, “Make all your money in high-tech and dump it all in real estate because my only regret was not doing more sooner.”

So, I was so shocked at the time because this was a guy who’s a titan in the industry. He does extremely well, very sharp. And he’s using high tech to build out his alternative portfolio. And I did that. But I did it. Young Snano’s engineer. Doubled down into some highly leveraged pre-development right before the subprime mortgage collapse. So, my first attempt, it was just a complete failure. I lost everything, came crawling out of it battered and bruised, and foreclosed on. It took me a while to financially and build my confidence again. But I learned a lot. I say I got a lot of education during that time. But that’s what got me into it very early on.

Dr. Alexa D’Agostino:
Well, it’s interesting too because we talk a lot on this podcast about mistakes and how that leverages… leveraging your mistakes from your past is actually how you become successful. And a lot of times people get nervous to make mistakes, or they become depressed or they decide, “Oh, real estate’s not for me.” But instead, you use that as a way to propel yourself forward, which I think is pretty awesome. And so, you transitioned, you started investing in 2007. And I believe you started with single family rentals, correct?

Patrick Grimes:
Well, so I did a pre-development first in 2006, 2007 and 2008, and then lost it. It took me a couple of years after that. I dove back into my career, started building up my financial reserves again, building my credit back up, got two master’s degrees. Then I started following the breadcrumbs of the wealthy and how they invest. And it did lead me back to real estate. It also led me back to some other alternatives we can talk about what we call non-correlated investments. But it led me back to real estate in a different way. Not trying to double and triple my money every year, but being the tortoise, not the hare. Buying real assets that cash flow it exists, and in recession resilient markets.

And I started researching out of California places like Texas where the dotcom or the subprime mortgage collapse happened. Residential real estate just leveled off before it started climbing again. And then I found some assets I could buy, and renovate and refi. And I built a team in Texas while living in California and I started buying real assets. And it was moonlighting. It was tough because ina career, like many of your listeners, who worked very hard during the day. And then doing a side gig really was a taxing trade on time with my family, friends and hobbies. Those causes I care about most in the world.

And so, I was doing great in single family. Called it the BRRRR method. I didn’t even know what it was at the time, but it’s like buy, renovate, refi, rent and redo, do it again. And so, I was doing that and it was working great. But I ended up having to stop because, man, it was brutal. I met my soon to-be wife and I took a break for about two and a half years. Got married here in Beijing where she’s from, was awesome. I was on a horse with a bow and arrow and she was on a carrier-

Dr. Alexa D’Agostino:
That’s so cool

Patrick Grimes:
… with a red dress and a Phoenix, and it was just fascinating. But I circled back around, I learned about private equity. I learned about partnering in those markets with people that lived there, and have a track record and teaming up. And that’s what founded a company and was able to start buying larger apartments that scaled 80 plus units. And that’s what got me really to a point where I could balance the day job of engineering high tech. Which I still love to this day, although don’t have to do it anymore. My wife and I are out of Honolulu now and I’m full-time private equity. But I was able to strike a balance between that and building out these alternative investments which ultimately became real estate and energy. We’re in the legal industry right now. We do debt as well. So, quite a few different, what we call non-correlated investments.

Dr. Alexa D’Agostino:
Yeah, I mean this is the new world that everybody’s starting to now get into alternatives and see the benefits of it. And what’s cool is you leverage real estate to jumpstart your journey to private equity and alternative. Now, I want to ask you, when you’re thinking about all these investments that you’re making. So, essentially, you’re doing commercial real estate, multifamily. You’re doing private equity. You’re doing a lot of other types of alternatives. How do you look at everything and figure out what’s the best investments for your private equity? What are the things you look for?

Patrick Grimes:
Well, I mean like many of your listeners, you need to find something that’s outside of their traditional portfolio. And all of our decks start with the pie charts of TIGER 21 allocations and how they’re wealthy allocate. And there’s some charts from Wolf that show how that middle-class, high income and ultra wealthy allocate. And it’s really like 20%, 25%, maybe 27% real estate. And so, while real estate’s a great alternative to the stock market, because they don’t rise and fall together. Sometimes they have, but they’re not necessarily driven by the same economic factors. There’s what are you going to do with the rest of the portfolio after that? Me myself, I used to trade the baseball cards of alternative investing strategies with just a few guys. Only just a few guys in my high tech world even knew these existed. Now we have a platform where we showed our hand in the entire deck, and we show every other week different strategies, people on our platform.

But I look towards ones that are non-correlated, don’t rise and fall, don’t the same market fundamentals and drivers from real estate or from the stock market. And so, you may get into various types of energy which have a completely different ebbs and flow to them. And are completely different markets like healthcare that are recession-resilient because people need healthcare, even in recessions. Education, people continue need skilling and upskilling. Or the legal industry. All of which these three industries tend to rise steadily even in downturns. So, if you can find ways to access those like we did with our diversified litigation portfolio, where we’re getting access to the legal industry in an investment product to serve attorneys acting in representation for those that can otherwise afford it, we can then participate in proceeds from an industry that won’t rise and fall with the rest. When you’re able to do that, build a full allocation of non-correlated or industries that don’t have the same market fundamentals, you cannot just build financial independence in one thing.

And I think very successful people, they get really good at one thing. And they want to do that one thing and they get way over indexed in that one thing, and then they’re at risk for that one thing. But if you can get into lots of things that don’t rise and fall together, you start to get foundational pillars into your wealth building and preservation strategy. And you sleep better at night. And for somebody that’s lost at all wines and been through the ebbs and flows, I’m always struggling. I get really good in something and I get over indexed that one thing. And I got to find out how to. And that’s why our company provides alternative strategies to working professionals, because I’m one of them. I’ve been there. And we provide those services so that people can build that true financial independence.

Dr. Alexa D’Agostino:
Yeah, I mean it’s interesting too because I love seeing the different philosophies from all private equity on how they make their decisions on their investments. And I mean I look at you and what you’ve done, and correct me if I’m wrong, but I believe your portfolio now is valued at a couple hundred million, correct?

Patrick Grimes:
Yeah. So, I’m a partner in a few thousand multifamily apartments. We’ve got some retail, we’ve got some commercial, warehousing, some litigation funds. We’ve got a debt fund where we lend into a commercial property, small bounce commercial property. We have an acquisitions fund right now that we’re buying commercial assets. We got a quite a few different things. Some opportunistic, taking advantage of the downturn of commercial real estate, and some sustained from years past, and some totally alternative like energy and legal, which helped to really balance it out.

Dr. Alexa D’Agostino:
So, it’s interesting, because you look at where you’re at, where you started, where you’re at now, and it’s overwhelming. It’s like how do you get to that? It’s like how do you find the right partners? How do you learn about all this stuff? Because let’s be honest, there’s nothing out there right now about commercial real estate and really teaching him what to do. And I know that because one of my clients is one of the leading commercial real estate guys, and he is out there having to teach people because there’s literally not much out there. So, how do you learn? What did you do? And how did you surround yourself with the right people to learn this stuff?

Patrick Grimes:
Well, it’s really cool that you say that because my whole platform, Passive Investing Mastery, that’s one of my passion project. It’s literally every other week, we educate on platforms and talk about different strategies, completely different strategies, like how to buy a plane for cashflow, or bourbon barrel cask investing, or crypto, or gold mining or whatever it is, alternatives. Because nobody really knows about it. And I used to be working with some of the sharpest people in the world at Lockheed, and Raytheon, and Tesla, and SpaceX ,and Google, and Facebook, and Abbott and Johnson & Johnson doing custom automation projects and none of them knew anything about it. I’ll tell you how I really got into it. First I had some good advice, and I went out and tried to do it on my own and lost everything.

I started doing what I call passive education where at least every morning I’m on a run. And wherever I was living, whether it’s on the beach or the lake or right now, I love it. I get to run on my beach. I’m listening to podcasts like yours, audiobooks, I’m listening to Ted Talks and webinars, things that really educate me on different topics. And I’ll circle around different topics, all self-help related or [inaudible 00:13:22] related. So, I call it like passive. You can do that in your car, you can do that where you’re at the gym. Try and do that every day. I tell people at least make one passive step a week and then do at least twice a month an active step where you’re literally physically going somewhere. I know in COVID that became Zoom. But I still prefer to actually get in front of people. And I’ll tell you why, because nobody teaches us about…

Financial IQ of America is horribly low and the investment products are terrible that are given to it. They’re spoonfed. And so, it almost mutually assures destruction and scarcity later in life. And so, people that aren’t exposed and aren’t doing and being these things are acting differently. If you don’t get in front of them, go side by side, go on meetups. That’s what I had to go on meetups, go to conferences like yours, go to events where people are already doing, and being and looking differently. What you’ll find is a different tribe. And the human condition is that we are tribal. We’re nomadic. We want inside of us to band together. Nobody wants to go out into the desert by themselves or the wilderness by themselves.

And what’ll happen is if you find people that are already there, start rubbing your shoulders, all of a sudden your brain’s going to start shifting. You start learning about one investment strategy and then maybe another one. It’s so much easier to learn the second one. And then the third, oh, it’s just slightly different in these ways on the fourth. And then you begin to start understanding that while it may seem like alternatives are the craze and the smartest people that the hedge funds, the sovereign funds, the wealthy, they have very built out diversified portfolios in all of these alternatives.

And the more I get advanced, the more I find that even in our legal fund, we’re fighting with these 5,000 plus million dollar private equity funds for the same investment products because they highly covet these types of investments because of their recession resilient, steady growth and non-correlation investor portfolio. So, the more sophisticated you get, what you find is that you’re actually sitting at the table with people that have been operating like this for centuries, but just thinking about it very differently. And so, I just get out there and being… I think that’s the step you need to take.

Dr. Alexa D’Agostino:
I love that. So, with your engineering background, I’m just curious. This is off the question. But it relates, because I think when people are pivoting like you did, they think, “Oh, I can’t go from healthcare to real estate. Or I can’t go from X to Y.” But you did, and I assume that you took some of the things that you learned from engineering, the skills that you learned there to real estate. And I think at the end of the day, people don’t understand how transferable skills are.

And the most important thing you can do is learn transferable skills and just learn skills in general. I always tell people when you’re in your 20s, learn sales. When you’re in your 20s, learn how to manage books. When you’re in your 20s, learn how to communicate. You’d be surprised how many people don’t know how to communicate. When you’re in your 20s, learn how to get back a client you lose, et cetera. These are all skills that people need to learn and it’s so important. So, I would love to hear from you, what skills have you learned when you were in engineering and technology that you transferred over to real estate?

Patrick Grimes:
Well, so I think the biggest lessons early on was be humble. Because I felt like probably many of your listeners, I takes about 8,000 hours to get mastery in something. I had done that in engineering, automation, robotics, and I felt, oh, you know what? I can do this all on my own, all by myself and I can go do this. And that’s when I got in that pre-development. And I lost everything. I didn’t have all the knowledge that I needed. And then I got into single family after that. I was like, oh, I can do this all my own money. I can do all the jobs. I can do all the work. I could be just an expert at this like I am. And I’ll be just as good as this as I am in real estate. And I was successful at producing profit, but I wasn’t successful at keeping a balance in my life.
And so, I think the challenge for me was being patient and allowing myself to partner. I think that learning how to build those relationships and work with others, was probably the single most valuable lesson. I have so many doctors, lawyers, CXOs, and I’m talking to passive investors all the time. That’s a lot of what I love to do actually right now, is we have those calls with passive investors help get pointed in the right direction. And they’re all just so busy. Only I had the time to go do it myself, then I’d be interested.

So, it takes that kind of desire, that kind of, hey, look, do you really want to go through pre-med again? Do you really want to go pass the bar again and then make the mistakes you made again? Or do you want to partner with others? I think that’s really the ticket, because then you can take five, 10, 15 year leaps and be patient, not try to capture all the deal and all the control, but make time for others to be able to do some of the jobs and give a partnership to them. I think that was what was key for me. And that wasn’t until I learned that skill that I was able to grow a sustainable way where it didn’t constantly jeopardize the rest of my life.

Dr. Alexa D’Agostino:
I love that. I mean, I think that I love hearing your… you talk a lot about education and it’s why you have passive investing mastery. And I love people that give back because I think there’s people like you that have been able to transition and have such a successful career. And a lot of people are, I would say the last five years in particular, probably also 2008 probably scared a lot of people in the real estate. And I feel like the last five to seven years people started getting back into it and seeing the value that there is. But a lot of people don’t understand the value of commercial. And obviously all the stuff you’re doing on the lending side, too.
We started probably about two years ago doing hard money loans as well in the real estate in particular, a lot in commercial and doing loans. And I had no idea that all of this existed until I started hanging around people like you and listening.

And this is exactly why I started my events because I knew that I could sit in a room with 5,000 people and all these big masterminds, and that’s great. And yes, you’re hearing people. But really the value is when I sit down with somebody and tell you my situation, say, “Hey, what do you think?” And they come back to me and say, “Hey, you should do this. This would fit you perfect.” Not a generic power conversation with somebody. And that’s why I love what you’re doing with your Passive Investing Mastery because it’s something that people need to understand that it’s out there. And it’s a whole new world that people don’t even understand that’s out. And I think alternatives is here to stay. And from what I understand, when you look at Blackstone and some of the big players like Goldman Sachs, they’re diving deep into alternatives because they know that’s where the future is.

Patrick Grimes:
And especially now, I mean if you’re looking at somebody that lost everything in a downturn once, we just finished a fed rate hike, 11 out of the last 14 of those ended in a bust in the market. And we see commercial real estate at the lowest point in my lifetime. So, it’s really an opportunist time. I mean, it’s like buying residential right after the subprime mortgage collapse. That’s what buying commercial real estate is. Not office. We don’t do office. I don’t know how office is going to recover, but the other assets in commercial real estate. But it’s more important now for people to really look in the mirror and draw that pie chart of their wealth strategy and say, “Do I really have confidence in this?” I mean, we got tariffs, we got a lot of shake-up. The world’s biggest economy is betting against the dollar. Are we comfortable with the stability of these? Or should we look at maybe some of these other totally investment strategies that helped us let us sleep a little better at night? And that’s how I feel, and that’s what we always talk about.

Dr. Alexa D’Agostino:
Yeah. So, my last question for you is for everybody that is… I think everybody understands what passive investing is. But I would love for you to talk about, give three tips to all the listeners on where to get started and how to be successful in doing passive investing.

Patrick Grimes:
Sure. Well, the first tip I already talked about, and that’s to get yourself in a tribe. Build a habit and a routine of carving out. If you’re thinking about investing a hundred thousand dollars, think about how much time it took you to make that. And also include all of your education leading up to what it took you. It maybe took some people a year, maybe six months. So, how much time are you willing to invest in your passive learning where you’re going about your life, listening to podcasts, listening to books, investing in joining webinars, series like mine, learning about different asset classes? And then are you willing to sacrifice a date night a week to date to invest in your financial future? Or you spend all this time making money. But how much time are you spending actually learning how to invest it wisely and allocate it wisely? And where’s that balance?

Because later in life it’s going to matter more to you than what you did. How much money you made is how wisely you invested it, what’s going to matter later in life. And so, take that time first. I think that was the first message. The other message was learn how to partner. And a lot of people that I speak to, they have it all in the stock market or have control maybe a rental or two properties, and they’re worried about partnering with anybody else. Meanwhile, they partner with the stock market and that’s not your friend. That thing goes up and down like crazy, and you never know. And you’re either on this ride on the way up and you don’t want to get out. Or you’ve lost it and you’re like, “No, I don’t want to forego my unrealized gains. I want to stay here until it starts going up, and then I’m back on the right again.” Ultimately, you got to take an exit.

So, you got to learn how to partner because you’ll never be able to become an expert in so many different kinds in one, two, or three or four different, completely different non-correlated investment strategies, because that’s really what you need. You need to be in four or five of those. You need potentially to have some investments in the medical industry. Maybe some in the legal industry. Maybe some in energy. Maybe some in real estate. And then you’d be on four or five different completely economic cycles where half of it’s very recession-resilient. Those are the kinds of strategies that ultra wealthy, the family offices, the hedge funds, that’s what they do. And the only way they can make that happen is through learning to partner with other people who have five, 10, 15 years of experience doing it successfully in these completely different markets.

Dr. Alexa D’Agostino:
I love that. I mean, I think you hit on something really important, which is something we’ve talked a lot about, which is finding the right partners. I will be the first to admit, I am really crappy at picking right partners. I find every 10th partner, I finally find a good partner. And so, it takes skills. Talk about mistakes. You talk about some that you made when you first got into investing. Well, for me, mine has been picking the wrong partners. And it’s not necessarily that they’re bad people or I’m a bad person, it’s just not a good fit. And so, there’s so many different things when you’re looking to essentially get married to somebody and become a partner with them. And picking the right partner is so, so critical. And do you feel like you have done a good job at that in your career? And what advice do you have for people who pick the right partners?

Patrick Grimes:
Well, you never learn how to partner up until you start trying and learning. And I think we’ve all had that situation where there’s never been a perfect partner for anything. And it’s interesting because if you agree on everything with the other half, then one of you is unnecessarily, so what’s the point of that? So, there’s completely different personalities, completely different skill set. And I think this Steve Jobs one time talked story about a rock tumbler and how his neighbor brought him into his garage and said, “Hey, let’s pick…” or picked up some rocks and brought him into his garage, put it in there with some grit, and he ran it. And Steve Jobs used that to explain, which was very resonate with me, the way it takes to be successful at anything. It takes very specialized… a team, a cross-functional group of people. Very specialized people that are sharp, really good at what they do and not scared, tumble together and work together.

And there’s going to be some friction, there’s going to be some heat. But what’s going to happen is they’re going to come out with a polished product. And through that process, you got to really differentiate is this healthy conflict? Is this healthy ideas? Because if we all agreed on everything, we would never get anywhere. There wouldn’t be the necessary friction, the trade-offs that are happening. And so, there’s been challenges with partners finding that right balance and to be able to… but I think that’s the challenge with everybody. I don’t know if I would say I’m a brilliant, I’m brilliant at it. I said, what’s been my strategy though most recently, which has worked well for me, is learning about people just through getting shit done.

I mean, the most recent partner that I started a business with, the diversified litigation portfolio where we’re lending to attorneys like how you lend a real estate operators. And we started three, or four or five years ago, dueling on apartment building investments. And he would call me up. And he came from private equity. He was allocating $20, +$30 million dollars for large hedge funds. And so, he was super sharp. And so, he would get my underwriting template, we’d duel on it, go back and forth, he’d fly out to the properties. We had have conversations. We built a relationship through that grit of the details, that grit of travel, of actually going through apartment units and knowing how he consistently stuck by his principles and how sharp he was. We built that mutual respect over time. And then it was like a year or two later, I was like, “Hey, let me allocate into your legal deals, because man, I really want to get into that.” He said, “No,” because he only takes $20 million checks and that’s not where I’m at. So, he was only working with institutions.

And then about a year and a half ago, he said, “Hey, look, I hung up my hat. I moved from New York. I’m now in California. Let’s go ahead and do a legal fund together. I’d love to create a business.” They caught me up. And that took a long time of us, that friction, that tumbling, that those disagreements, that mutual respect for the brilliance of each other’s pieces of the puzzle that actually caused something, which is this beautiful thing now and this business that we created. And so, I think that if you’re out there and you’re wanting to actually build a trusted relationship, go out and meet those people. Go to dinner with their family, see how [inaudible 00:28:48] work. Travel with them to go look at the investments. Rub shoulders with them. Ask questions. Ask a lot of questions.

There was a Ponzi scheme that I didn’t invest in and the reason why I didn’t invest in it is because they couldn’t answer five simple questions. And they were just about my risk and they just blew me off. And I didn’t invest in it because I thought it was a Ponzi. It doesn’t take much to really get in to see if there’s a there there. And if while things are going well, they’re going to be there to answer your questions. They value you enough to answer your questions because if things are not going well, they’re not going to be there. So, I’d probably leave those tips. I can talk an entire day [inaudible 00:29:26].

Dr. Alexa D’Agostino:
I love that though. Just like what you just said was such gold because it’s interesting. I just went through a partial negotiation with the PE firm, and I asked them a bunch of questions, and I over asked questions and I didn’t really get the answers I wanted, which made me say, okay, you know what? I’m not going to move forward with this if I can’t get the information I want. 

Sometimes what I’ve learned is your due diligence can never be enough. And sometimes I’ve made the wrong decisions by not doing the right due diligence. And this is in an investment, this is in a partner, this is in everything.

And I love what you said. It has to align with your values. And that’s something that I’ve learned the hard way as well. And what’s interesting, they say that if you take a partner out to dinner and see how they treat the staff, and the waitress and everybody at the restaurant, that’s who you can really tell who somebody is. Which is very interesting because you break bread and you have a couple drinks, people’s walls come down. So, I never thought about it that way and I always thought it was quite an interesting suggestion. But this, Patrick, was awesome. So, when people want to get in touch with you, what’s the best way to get in touch with you?

Patrick Grimes:
Passiveinvestingmastery.com, all spelled out passive investing, and then mastery.com. On that you’ll see, you can set up a meeting with me. I’m happy to chat with anybody, asses where you’re at in your journey and investing, and help you get pointed in the right direction. We have all of our deals right there on the homepage. And we also have an alternative Investing Mastery series. And that series is my passion project. Every week or two, we feature completely different alternatives. We have usually three panelists, experts in each all type of alternative. And we just have a great friendly discussion, educate on the basics of those alternative strategies. And I think that that’s something everybody should be signing up for, something everybody needs. You need to know all different options for how you can invest in alternatives, which ones make sense to you, your risk profile, your liquidity, your goals, your returns. And to start building, take steps to start building that truly diversified, which builds that security that you need into your financial future so you can sleep better at night, not just riding the waves of one or two cyclic indexes.

Dr. Alexa D’Agostino:
Love it. All right. Well, Patrick, I’ll make sure to put all of your information also in the show notes. And this has been so fantastic. I know that everyone’s going to absolutely love this episode, so thank you so much. And everybody that’s listening, please make sure to hit that follow button and we will see you next week.

You’ve got quite an amazing story. I love it.

Patrick Grimes:
Well, thank you, Alexa. I appreciate it. Yeah, I saw your nice comments, too. It was a good discussion.