Identifying Real Estate Opportunities with Don Wenner

July 19, 2021

Identifying Real Estate Opportunities with Don Wenner

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Identifying Real Estate Opportunities Show Notes

Building great companies isn’t simple. There are so many moving parts, unforeseen challenges, and unique issues (and opportunities) you will only face as an entrepreneur.

Today’s guest is Don Wenner. When he was 21 years old, he founded DLP Real Estate Capital. Now, at the age of 36, he has experienced growth of over 60% annually every year he’s been in business. He oversees 12 companies, over 430 team members, and $1.5 billion in assets.

In this conversation, Don and I talk about the pivotal moments that made him into the businessman he is today, the powerful tools he’s created to make expansion consistent and reliable for over a decade, and how to use them to scale any great business smartly and sustainably for years to come.

In this podcast interview, you’ll learn:

  • How Don caught the entrepreneurial bug.
  • Why Don doubled down on real estate during the Great Recession–and why this strategy ultimately paid off.
  • How Don saw unique opportunities when COVID hit.
  • The crisis and challenges facing housing and commercial real estate right now.
  • How to make sense of the job crisis facing the American workforce.

Inspiring Quotes

    • “My belief is that whether we’re in a COVID environment, or a great recession, that great managers in almost every industry thrive, gain market share, and dramatically outperform.”  – Don Wenner
    • “When everybody thinks something’s a bad investment and nobody wants to buy it, that’s often what makes it a great investment.”  – Don Wenner
    • “If somebody else has been able to do this successfully, there’s no reason I can’t do it. I just need to go out there and seek knowledge from those who have done things successful.”  – Don Wenner

Interview Resources

Interview Transcript


[00:00:08] Dean Barber: Hello, everybody. I’m Dean Barber, Managing Director at Modern Wealth Management. I’m your host of The Guided Retirement Show. Buckle up your seat belts. Strap in if you’re sitting watching us on YouTube. You’re about to meet an amazing young entrepreneur, Don Wenner.

He is the CEO of DLP Real Estate Capital, a company that he has grown at the age of 36 by over 60% per year since he was 21 years old. It was all his idea. Everything that’s happened here has been at the hands of this young entrepreneur. You’re going to really enjoy my conversation with Don Wenner.


[00:00:47] Dean Barber: So, Don Wenner, welcome to The Guided Retirement Show. It’s a pleasure. It’s always exciting to meet a fellow entrepreneur, especially somebody as young as you are, Don. And so, you have done an amazing job building what we could call a real estate empire but why don’t you just give us a little background?

You are the CEO of a company called DLP Real Estate. So, let’s start with what is DLP real estate, and then I got to hear your story because I know that all of our listeners and those that are watching us on YouTube, the viewers are going to want to know how did you do what you did.

[00:01:25] Don Wenner: Thank you, Dean. Appreciate that kind intro. So, yes, I am the founder and CEO of a company called DLP Real Estate Capital. In short, we’re a real estate-based investment and financial services company. So, in short, we invest in real estate and we do the underlying management and execution of our investment strategy.

So, we do property management and construction management, asset management, and lending and development all in-house. It’s a family of essentially 12 companies that make up DLP Real Estate Capital. I’m proud to say we have 430 team members today. We have 1.5 billion in assets and I’m talking to you from St. Augustine, Florida, which is where our Southeast headquarters are. And I started the firm in Bethlehem, Pennsylvania, where I grew up about 15 years ago.

So, with all that said, obviously, to your point, Dean, I didn’t start as a 430-person company and did not start with a family of businesses, and I’d be telling you a story if I told you I knew 15 years ago this was exactly where I’d be at and how the business would come to be the way it is today. I’m 36 today. I grew up to two young parents who had me at 16 years old. And so, of course, with 16-year-old parents, I grew up in the nice way to say the lower middle class.

We’re a family who shop at yard sales for all our belongings and fought hard to make ends meet but of great values and taught me a lot of great lessons as a young kid. And fortunate enough, maybe part of it is the question of nature and nurture, I guess, but I had an entrepreneurial spirit and hard work ethic from a young age.

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[00:03:22] Don Wenner: And my entrepreneurial spirit started as a kindergartner selling donuts to my classmates and continue through my school-age of running small businesses. And then in eighth grade, I had a pivotal moment in my life and it actually almost sent me down your path, Dean. I was in eighth grade and we had a career day, and keep in mind, I’m growing up with very limited means and parents fighting to meet our ends each month and fighting really hard in every regard to do so.

And we had Career Day at our school and a bunch of different professionals came in and one of those professionals was a financial advisor and a financial planner. He showed us a little chart that showed financial planners made more money than doctors, lawyers, accountants, all the job your parents tell you to become and I thought, “Well, that’s the perfect job for me.” He described it as this entrepreneurial business and it was about finance and math. And I was like, “Well, I’m great at math and I’m entrepreneurial, and that’s the job for me.”

And I was set. That was the path I was going to go down and I started shadowing financial planners from eighth grade on through high school. I got my securities license, my insurance licenses while I supported my way through college. I actually moved out of my parent’s home as a junior in high school and lived on my own and supported my way through college at Drexel University but all along thinking I was going to be a financial planner, and that is until a gentleman kind of changed my path forever. On the weekends, I would wait tables at the restaurant I worked at, this gentleman kept coming in and asking me to come work for him.

He was a patron in the restaurant and would ask me to come work for him. It turned out he was in the ADT Security business. I didn’t know much about what that was. I was 19 years old and he convinced me if I came to work for him, I would make $2,000 a week. And at 19, $2,000 a week sounded pretty good. So, for some reason, I believed him and I said, “Alright. I’m going to give this a chance.”

[00:05:27] Don Wenner: And I came to work for him. My first paycheck was $5,280. My job consisted of knocking on doors, residential homeowners’ doors, and that was one of my worst paychecks I ever made. And I was making $6,000 to $8,000 every two weeks as a college student selling alarm systems. Later, I found out that Nathan who’s the owner of this company, Nathan Robinson, still a good friend of mine to this day, I found out that no one had ever made $1,000 a week for him before but because he gave me this expectation that I should make $2,000 a week, that’s the norm, I went out with that mindset and did really well and here I am thinking I’m doing amazing. I’m making $3,000, $4,000 a week.

And Nathan happened to be a real estate agent as well as owning this company and he convinced me that if I could sell alarm systems, knocking on doors, I could sell real estate. So, I got my real estate license, basically gave up sleep for a few weeks, took my classes online, got my real estate license. I was still in college. I developed a marketing message of, “Your home sold guaranteed or I’ll buy it,” and what worked out well for me doesn’t sound like it would have worked out well but it worked out well. October 2006 is when I entered real estate and that happened to be the peak of the real estate market, that month.

And where I grew up, Lehigh Valley, Pennsylvania, October 2006 was the peak. So, having a marketing message of your “home sold guaranteed” was a pretty strong message at a time when the market was slowing down and homes weren’t selling as well. And so, we started helping motivate home sellers to sell their homes, and then it also turned into I was starting to step in and buy people’s homes and flip homes. It was the beginning stages of our investment business that grew to what it is here today. So, that’s a little bit of kind of the journey how I got into real estate and I’ll kind of pause there, Dean, and turn the call back to you.

[00:07:32] Dean Barber: That’s fascinating. You know, it never ceases to amaze me. So, you and I grew up with similar backgrounds. I’m a few years older than you. I’ll be 56 this year. You’re 36. And I too grew up with parents that had me when they were 18. They had my older brother when they were 17, when they had another boy when they were 19, and then another twins when they were 27.

And so, I get the whole idea of buying your clothes at yard sales or moms making them or something like that. It is a similar mindset. You know, I’m coming out of there, “Okay. This isn’t going to be me. I’m going to make sure that I do something.” And so, two different paths and your success story and as fast as you did it, though, is phenomenal. Your work ethic through college, I mean, you were doing more at that point in time than many people in their 40s or 50s today.

And it always kills me when you hear our politicians say, “Well, there just aren’t as many opportunities out there today as what people should expect and we need to give more.” I think it’s just the opposite. I mean, we need to encourage people to get out there and look at the fact that we live in the greatest country in the history of the world with more opportunity than you can even imagine. I mean, think about what you’re doing.

You now have over 400 people working for you that are doing what? They’re paying taxes, okay, and I’m assuming that those 400 people plus that are working for you are also having a pretty good lifestyle so they’re able to go out and consume, which is going to create more jobs, which is going to create more taxes. That’s the American way. That’s how we do it. But what I’m really fascinated with is how you grew this thing from a guy selling houses, your “house sold guaranteed or I’ll buy it” which is brilliant to that virtual empire, $1.6 billion worth of real estate.

[00:09:37] Dean Barber: So, what was your vision? I mean, most people would have taken that and they’re selling these houses and they got all this stuff going on. “Hey, man, I got a pretty good life. This is good.” When did you hire your first employee?

[00:09:50] Don Wenner: Yeah. It’s a great big question. You narrow that down to a great question, which I was going to lead into my answer, which is I hired my first employee about a month into the business. So, I wasn’t afraid from the very beginning to hire and I realized early on, anybody who’s ever been in sales in their career understands that how you succeed in sales is you have to spend your time in front of potential clients.

You have to be on the phone. You have to be in front of people. And I realize anything I was doing that wasn’t allowing me to be on the phone or in front of people, helping people find a home or sell their home, was not the most productive use of my time. So, within literally a month of being in the business and literally pounding the phone nonstop like The Pursuit of Happyness movie with Will Smith. You don’t want to put the phone down because you lose time and then literally just hammering the phone. I had no relationship.

I just turned 20 when I got or right after I got my real estate license. There wasn’t like some spirit to call on. I was just hammering, hammering phones, using some newer forms of marketing like Craigslist and some digital marketing and things but literally out knocking on doors like I had done in security, literally hanging doorknockers, literally knocking on people’s doors, and offering to guarantee to sell their home.

But very quickly I started leading to me being on a lot of appointments because I was doing massive amounts of activity. And so, I grabbed another young lady who was in the real estate office I was in at the time. I said, “Hey, would you be interested in some part-time work?” And she sure said, “Alright. I’m going to hire you 15 to 20 hours a week.” By the end of her first week, she was working 50 hours a week. And so, within about three weeks after that, I hired my second full-time assistant who’s still with me to this day. And then about two months after that, I hired a transaction coordinator, another administrative assistant.

[00:11:51] Don Wenner: So, within three months of being in the business, I had three full-time assistants supporting me, freeing me out to focus. And so, I always have been willing to put people in place, give people opportunities, and allow me to grow and make a bigger impact. And so, we did that early on. We started hiring people relatively quickly and I’ve always been an avid, avid learner, always curious, always wanting to gain knowledge.

What’s great about the real estate industry or the financial services industry is there are many people who’ve done what you and I are doing before us, right? These are big, well-established industries. And I always thought of it, you know, if somebody else has been able to do this successfully, there’s no reason I can’t do it. I just need to go out there and seek knowledge from those who have done things successful. So, I started going out, finding people, learning, reading a lot of books.

And quickly I realized that as much I was learning all these great ideas and was growing the organization, I needed to figure out a way to, as the company is growing, put discipline into the organization. And I think that’s a different thought than a lot of entrepreneurs have. A lot of people become their own boss or go into sales because they want freedom and they don’t want structure and they don’t want to have discipline in their business.

I learned early on from greats like Jim Collins, that great organization, those organizations who are featured in books like Good to Great are those who were disciplined, disciplined thought, disciplined action, disciplined people. So, we went down a path early on to putting a disciplined structure around how we run meetings, how we set goals into our organization. And that molded and grew into what today is we call the Elite Execution System, which is what I just wrote a book on. You can see that book kind of above my shoulder here. I just wrote a book called Building an Elite Organization, and the subtitle is The Blueprint of Scaling a High Growth, High-Profit Business.

[00:13:51] Dean Barber: We’re going to put a link so people can get a copy of that book there in the show notes and I expect an autographed copy to be mailed to me. I can’t wait to read it.

[00:13:59] Don Wenner: I thought you already had one. I will be getting one out to you today. Yeah. What I found is I’m sure people who come on a podcast like this, right, are people who want to learn and want to grow and want to gain knowledge. And what’s tough, I think, is those trying to grow a business is you read one book or talk to one expert and they tell you the key to success is leadership or the key is content marketing or the key is management or the key is execution.

The key is running effective meetings. There’s all these one secret, this one magic pill to grow your business and the reality is, is that you can be great in any one area but you still won’t be able to grow a consistently fast-growing high-profit business unless you can improve in all the areas of a business at the same time. The way I think about it is every business has four quadrants which are strategy, people, operations, and acceleration. They need to grow together as a part of one plan, and that’s what we built in the Elite Execution System. It’s to allow us to grow by over 60% a year every year now for 15 years and continue to consistently expand into new business lines, new geographies, go through multiple market cycles. It is the kind of disciplined way we go about our growth.

[00:15:09] Dean Barber: So, at what point did you begin to get away from just selling real estate and getting into lending and getting into real estate management and getting into construction management? Those are all very different aspects of the real estate business. And it would almost be like, “Hey, man, you’re going to be a jack of all trades and a master of none,” but you’ve proven that you can actually make that work. So, did you have to go out and hire expertise in these other areas to help you figure out how to make those systems work? Tell me about that and then how did you figure out how to marry all that together?

[00:15:52] Don Wenner: You know, it’s a great question and sometimes we teach our Elite Execution System to a lot of different organizations across many different industries. Most often we’re teaching other real estate operators. And I often say from an outside perspective, it looks like we’re kind of a bad example but what I often end up teaching, which is not to try to be a jack of all trades, not try to do 15 things at the same time if you’re going to end up not doing any of them all that well. There’s great value that comes from expertise.

And so, for us, we never set out saying, “Hey, we’re going to be in 15 different businesses at the same time.” It happened very naturally and we’ve never moved into a new business until we were crushing it, running it, hitting budget, hitting our growth targets, had the right leadership in place in all the businesses that we’re in. So, for us, it’s been a very natural progression where we’ve sort of added an arm to our business that’s always integrated to everything else we do. Once every year or so, we’ve added a new arm but we don’t do so until we’ve sort of mastered the businesses we’re in.

So, for me, it started with a real estate brokerage and then we started flipping homes because we were offering this guaranteed sale program and we were out talking to motivated home sellers. That became logical that we started stepping in and flipping homes. The first flip just came kind of out of solving an issue. That’s kind of we’ve realized everything we’ve done has come about realizing there’s inefficiency, a problem people have, and trying to go down a path of solving it. And so, we started flipping homes. In the beginning days, our first few years, that’s what we did.

We help people sell homes or we would just step in and buy them, renovate them, and sell them. And then within a few years, we couldn’t find enough good contractors. Because we had grown renovating so many houses, we couldn’t find enough good contractors. We said, “Alright, well, let’s hire our best contractor and let’s start our own construction company.” Just because we have no other option, we couldn’t find enough good contractors, we said, “We’re going to have to do this ourselves.” So, we built that.

[00:17:49] Don Wenner: And then by the bottom of the real estate market, 2011, we said, “Alright. This is the bottom of the real estate market. It’s time now to build a portfolio of rental properties and invest at these incredible prices.” And that caused us because we couldn’t find any good local property management to launch property management, to service these investments we were buying. And then quickly, we started having a lot of investors wanting to invest with us. It didn’t just happen magically. It was a lot of good old school knocking on doors again but started talking to a lot of investors, bankers, attorneys, relationships we had.

And all of a sudden, more and more investors wanted to invest with us and we said, “Alright. We need a structure to do this.” And so, we started an investment fund management business to be able to better structure these investments for the families investing it with us. And then by 2014, we started having more capital than we were able to deploy into our investments and we said, “Hey, we could take this knowledge and the capital we have and we could lend money to other real estate investors doing the same thing and help them emulate what we’ve been able to do,” and we started our lending business.

So, that’s kind of been the progression of how each business came to be. They’ve all been a natural evolution of trying to solve challenges and then seeing an opportunity to fill a void alongside what we’re already doing and that continued into a title company and a loan servicing business and so forth. And next, we’re buying a bank. That’s our next big thing, which fits in really nicely with what we do in the services we offer.

We basically do private banking today. So, it’s been a natural evolution where it would be nice if I said, “Hey, I had this great picture. One day I whiteboarded it fifteen years ago what DLP would look like today.” And unfortunately, that’s not the way it worked but it was just looking at being able to solve problems. And what the great thing is once you build a system that works, once you understand the importance of putting right leadership in place, building structure on hiring and driving ownership with an organization, you put structure on how you communicate and how you run meetings and how you execute and how you set goals, you start realizing that all businesses are more similar than dissimilar and it can be emulated through multiple different business lines.

[00:20:00] Dean Barber: Okay. So, I got to back up because you covered a whole bunch of ground right there. But the thing that blows me away is that you created your massive organization at a time when the real estate and the lending markets killed our economy and put us into the Great Recession. And people were running away from real estate as fast as they could possibly run and you’re going, “No, no, no, this is an opportunity.” And so, that had to take a lot of courage and there had to be a lot of thought there that, “Hey, there’s risk.” And you knew you were taking risk and you knew that obviously you had a high expectation that that risk was going to pay off but how did that feel at that point in time?

[00:20:56] Don Wenner: Yeah. It’s a great, great question and I’d say we can probably spend the rest of our time talking about risk because it’s a topic I enjoy very much. It’s an interesting topic and how people think about risk. I wrote a whole chapter on the topic of risk in my book but I think about risk a little different than I think most do. For us, at that point in time, we looked and realized that there was a phenomenal opportunity.

For us, it felt like a no-lose opportunity where to us it was so clear that property values were at all-time lows and that the demand was drastically exceeding supply. If you really dug deep and didn’t listen to the noise, didn’t listen to what all the so-called economists and experts thought what was going on, and you really paid attention, I think it was actually maybe the first time in history that this was a great time to invest.

The way I think about investing is what’s important for an investment to work is first and foremost, you need a good strategy. You need a strategy that makes sense for the time horizon of your investment. So, strategy that can make sense for the next year might not make sense for the next 10 years or strategy that makes sense over a 20-year horizon might not make sense just looking at the next week. But you need a strategy that makes sense over the horizon of the time of your investment and then you need great management.

And my belief is that whether you’re investing in a public stock, you’re investing in Facebook or something, or you’re investing in a private real estate investment, it still comes down to those two characteristics of a strategy that makes sense and great management. And my belief is that whether we’re in a COVID environment, a great recession, that great managers in almost every industry thrive, gain market share, and dramatically outperform, and a lot of times have their biggest growth and profits through those volatile times when a lot of companies are struggling, cutting back, going out of business, failing.

[00:22:58] Don Wenner: And there are a lot of reasons for that but fundamentally, it comes down to great management and ability to execute. And so, when COVID hit, it created not as many unique opportunities as we would have liked but it created some unique inefficiencies that if you were willing to look right at them and be nimble and adjust, it created some unfair advantages for the rest of the competition who didn’t have the ability to kind of adjust to the new challenges and opportunities that came from COVID and the same thing comes from the Great Recession a decade or so ago.

[00:23:31] Dean Barber: Okay. So, I want to hit the Great Recession first, and then we’ll jump forward to COVID because you do have two very real crises there that both had. And then we still don’t really know what the long-standing negative impact of COVID is going to be and what opportunities will be out there. Maybe you know what the opportunities are going to be but I think a lot of people look at that and they see risk today. But I want to back up to the Great Recession and I’m going to give you my take and I’m going to see if you see it the same way.

You and I haven’t talked about this, so I have no idea. So, we come out of the dot-com bubble and you had gone through a period of a decade where you had some of the best equity returns in history during that decade. We roll into the dot-com bubble. Equity valuations, depending upon the index that you’re looking at, fell anywhere from 55% to 75%. And so, people were like, “I’m done with the stock market. I’m done. Just look at what it did. It just ruined my ability to retire, whatever. I’m going to go buy real estate.”

And so, then you had this mad influx of real estate coupled with some of the most insane loose lending standards that you and I, I mean, we’ll never see that again. If we do, we know what to do when we see it, right? But you remember the ads that were out there on the radio or television, “If you own a home, we’ll loan you up to 120% the value of your home. No questions asked. You don’t even need to prove your income as long as you can breathe and as long as you can sign this note, we’re going to loan you the money.” The height of it came about in 2006 that you were talking about that peak of the market. I’ll never forget one Sunday morning, I wake up and this is when I still took the newspaper.

[00:25:29] Dean Barber: And I wake up, I walk out on the front yard, I grab the newspaper, I open it up sitting on the couch, and I’m like, “Oh, my God,” and I looked at my wife and I’m like, “This is the end of the real estate market as we know it.” She goes, “What is it?” I go, “Look at this. Pulte Homes is giving away a free BMW with the purchase of every home. This is insane.”

And so, then you had all these people that couldn’t pay their loans and they were mortgaged not just the normal what you and I would consider a reasonable rate of 60% to 70% debt-to-equity but they were 110% or 120% debt-to-equity and they were doing it on these stupid five-year balloon notes that were interest-only. And then guess what happened? You got to refinance. Well, guess what happened to the value of the home? The value of the home went down and it just crumbled. It was not just the home buyer, it was the commercial real estate buyer that was doing the same thing. Those loose lending standards, in my opinion, while it spurred this massive economic growth from 2002 to 2007 are what caused the Great Recession. And I want your take on that.

[00:26:36] Don Wenner: Yeah. That’s a great perspective and you gave some great examples that some of those lending practices were even crazier like the negative, where you pay less than even the interest due on your mortgage every month. You had the option of paying less than even the interest so that your principal balance went up every month. It was just like just insane.

But yeah, I mean, I think that’s all great analysis and I think that’s definitely the case. And to your point. I think what this past cycle, those things that are very different first is that has not happened again. Lending guidelines have remained much, much stricter than they ever got to, which is a good thing. And in addition, what’s very different about this market cycle than that market cycle is we were facing in October 2006 the greatest oversupply of housing in American history. There have been so much construction, so much development, so much speculation going on that it outpaced population growth and it outpaced most market’s need for housing.

So, real estate, like most things, often fundamentally just come down to supply and demand. And right now, in the state as we’re still talking today, we have the greatest undersupply of housing in history and so it’s a very different dynamic. So, all those lending practices led to a lot of the challenges including it led to so much construction and development going on that simply there weren’t enough people to occupy all these homes and so it created some interesting dynamics.

That’s where I say for us, in 2000, it didn’t make sense in 2007 and say to buy a house as an investment property, to own it as a rental for the next 10 years when it was obvious that property values were going to go through some heavy decline. Why would you want to buy something for $200,000 that’s probably going to be worth $150,000 or maybe less in a couple of years? That didn’t make sense, right?

[00:28:34] Don Wenner: But if you could buy in a distressed situation and underwrite for the potential decline in value as a home flip, as an example, that still makes sense. You just have to underwrite that investment from a different perspective. So, we flip lots of homes. People say, “How could you flip a home when property values were going down?”

We had to buy at a distressed enough price that you can still make a profit and you have to buy and assume, “Alright. The house isn’t going to be worth what it is today in six months or a year. It’s going to be worth less,” and the investment has to make sense understanding that. But then quickly, what became clear to me was that even despite all the recession, even despite the big drop in home values that happened over those couple of years following that time, the average rent for workforce housing in America did not go down, neither did occupancy. So, workforce housing when less people could own a home when constructions finally slowed down that more and more people, we went through of course some unemployment challenges, that just spurred more demand for affordable workforce housing.

That’s what became clear to us that, hey, we can go and buy properties in 2011, 2012, where we don’t need even leverage and we can be at a 10% cash-on-cash return for a property that is in incredible demand and rents are still flat or going up. And as soon as any property is available is leased as fast as you can make it available, now that happened through the depths of the recession and that’s continued all the way through here we are to this cycle today, that simply with the cost and this has never been more of a crisis than it is today.

This is a crisis we’re really focused on making an impact on. So, the best way I like to sum up the affordable housing crisis that we’re in today, the average rent in America in 2010 was $700 a month, a little over a couple of dollars over $700 a month. The average rent in America today is $1,215 a month.

[00:30:39] Don Wenner: Over a 70% growth in the cost of rentorship in one decade. Who thinks incomes have gone up 70%, right? Incomes have gone up 4% to 6%, 7% and the cost of living has gone up 70%. And there’s no end in sight there. There’s just simply not enough supply. So, there’s just a couple of ways we thought about how we were able to be comfortable going in and still investing in these really trying recessionary times where there was a lack of confidence and people would think it didn’t make sense to be buying homes in these times. But the fundamentals were just so obvious if you’re paying attention.

[00:31:17] Dean Barber: So, that’s one of the crises that you point out in your impact investing is the affordability crisis of workforce housing. You’ve got a couple of more here. I want to kind of go through some of these. But before we get to those, I want to come to COVID, alright, and I want to come specifically to commercial real estate and the impact of COVID on commercial real estate.

And specifically, you can go out and look at a lot of the traded real estate investment trusts that are out there, even the real estate mutual funds, and those things are heavy commercial real estate. And those things got absolutely crushed last year. They’re rebounding pretty nicely now but I think there’s still a lot of uncertainty around how is this work-from-home thing that we’ve been doing. And you and I are doing a Zoom meeting for a podcast here. People have adapted.

And there’s a lot of people if you look at the statistics out there, a lot of people that they say, “You know what, I’m more productive at home. I don’t think I want to come back to the office.” And then there are companies that are saying, “You know what, we don’t need all this office space anymore.” So, specifically to the commercial real estate right now, what are you seeing as far as both problems and opportunities?

[00:32:38] Don Wenner: Yeah. Great question. And I think commercial real estate, I think you’re most specifically they’re talking about offices as a subcategory of commercial but whether you’re talking retail or hospitality or whatnot, some sectors, of course, like industrial have done extremely well. But the office space and retail are the spaces most people thinking are going to be dramatically affected due to COVID.

And I think what COVID has done is it’s accelerated a lot of trends that were already happening. So, this concept of more and more people working from home, and it’s just accelerated it by maybe 10 or 15 years, and that was already happening. Same thing with some of the population transition from simply cold climates to warm climates, right? It just accelerated that process. So, I think from an investment standpoint, I think Sam Zell, great investor, says, “You buy deals. Not markets.”

And I think when everybody thinks something’s a bad investment and nobody wants to buy it, that’s often what makes it a great investment. Something that’s a great fundamental investment at too high of a price is not a good investment. Something that fundamentally has some challenges, such as office at a really incredible price can be a great investment. As an example, we almost bought, we didn’t but we almost bought basically the nicest office building. It was the previous Bank of America building in downtown Jack.

Nicest prime, 300,000 square foot incredible office building that we had the opportunity to buy at like 20% of construction cost at just an incredible price that we could be 50% vacant at half the market rents and still generate a great profit. It was just such an incredible buy-in. Because it was the nicest property in the market, you’re always going to attract the best tenants. The best commercial companies are going to want to come there so that they’re going to do better. If there’s, “Hey, there’s only 25% demand for all the office space in a market,” well, the best space that you can price competitively because of the purchase price are going to be able to outperform and pick up those tenants.

[00:34:45] Don Wenner: So, there can be great opportunities. I think though, fundamentally, we’re going through some demographic changes and there’s no doubt more and more companies are going to have a larger base of their employees working from home. And that creates some different fundamental residential housing needs. More and more people now, instead of being able to live in a small apartment, now when your apartment is your home office too, you need more space at home if you’re going to work from home, which has helped spur this tremendous growth of single-family, build to rent single-family rental community for more people that would rather rent a home than an apartment. And that’s a huge growing sector that we’re investing in and we think this trend will help with that.

I think, though, from an overall societal standpoint, I think we’re going to have some swings back and I think many companies are already realizing that, yes, you or I, Dean, or any productive, hardworking, self-motivated person, individually, we’re all more productive working from home, right? When you don’t have to drive into the office, you don’t have to drive home, you don’t have any distractions, we’re all generally more productive individually in a working environment.

But companies, teams are less productive because there’s so much value that comes from collaboration and communication. Especially young people trying to build their career, they need to build those relationships. It can’t happen the same over at Zoom and companies become significantly less productive. It becomes harder to keep the great people. You’re not building interpersonal relationships. We all heard the saying people join companies and leave leaders. Well, they’re never building relationships with leadership. They’re going to be easy to lose them.

[00:36:30] Don Wenner: So, here at DLP, we’ve already instituted. Almost the whole organization has been working from the office through COVID other than our Pennsylvania office and we’ve instituted a come back to work for June 1st that everybody is back here in the office. And we’ve just realized that we’re all more productive. We’re building a better culture, more engaged workplace working from the office. So, I think certainly there’ll be some decline but I don’t think there’s going to be the dramatic that everybody thinks that all of New York real estate’s going to become vacant and nobody’s going to work from the office anymore. I think that’s a far stretch. And I think some of the other innovation and automation stuff that’s coming, if done well and if companies embrace it, are going to spur great job growth and spur demand for office space.

[00:37:21] Dean Barber: So, let’s talk about your second bullet point here on impact investing, the job crisis of the American workforce. What do you mean?

[00:37:29] Don Wenner: Yeah. So, right now, we’re in a situation in America today that the stats are a little all over the place but I think widely accepted today. And this might sound surprising to people who never heard the stat before but somewhere between 30% to 50% of today’s jobs here in America, and this is a worldwide fact as well, but here in America, 30% to 50% of the jobs that people occupy today will be gone within the next 20 years alone.

Those jobs won’t exist anymore. There won’t be a need for them anymore due to automation, due to technology, and a few other factors but those are the big ones. And so, a lot of people think of that and those people who fall into the fear factor of that America is going downhill and we’re losing our jobs to Mexico or whatnot and kind of want to dig their feet in the ground to the past, think that this is all bad news and think, “Well, we got to save these jobs that are here in America.”

They’re just simply not going to be able to save due to innovation that’s going on. But what happens from technology innovation, I think people often don’t realize, is it spurs a need for a lot of new jobs. It creates new jobs and through innovation technology, will create a boom of new jobs. They’re not going to be the exact same skills and backgrounds that many people have had in their careers thus far. And I believe the only way, though, that you create new jobs is through small businesses. I don’t believe the government creates jobs. I believe small businesses create jobs.

[00:39:08] Dean Barber: 100%.

[00:39:09] Don Wenner: And as I mentioned earlier, and that’s what building elite organization and our Elite Execution System is all about is it’s hard to grow a small business and do so profitably.

[00:39:18] Dean Barber: So, what you’re talking about, Don, is natural disruption, right? So, you know as well as I do that you don’t grow your company without continually disrupting the status quo. I know that I don’t grow my own company without continually disrupting the status quo. Because if we don’t disrupt our own, somebody else in the industry is going to come in and disrupt you and displace you, and that’s where it goes.

But if you think back to I’m going to go back 30 years ago and the Internet was really just getting started back then but there was just this mountain of information that was becoming available and people are looking at the financial services industry. Then I’m going to compare this to your real estate industry here in a minute. They’re saying, “You know what, people aren’t going to need financial planners anymore, Dean, because they can get all the information that they need right on the Internet and they’ll be able to do their own thing.”

My job today is more secure than it was then because all of that information has created a massive amount of confusion. The government’s done a great job of giving me some amazing job security by all the tax law changes and everything that they’re doing. But it’s the same thing where people say, “Well, the Zillows of the world are going to disrupt the real estate market. We don’t need real estate agents anymore,” and yet you’re there and you’re thriving and you’re growing.

And so, you’re right. There’s a lot of naysayers out there, a lot of people that don’t really understand what the innovation is doing, not just to the real estate industry and not just to the financial services industry but it’s changing everything. It’s changing the way we work, the way we live, the way we travel, what we do, how we shop. And so, the innovation is good and the disruption is good, otherwise, you stagnate and die.

[00:41:10] Don Wenner: Yeah. Really well said. And I think the way I think about that concept of the job security you have now today, the middle is getting disrupted. And what I mean by that, I’m not talking about the middle classes. Those in working at companies or businesses that are easily able to be commoditized and don’t bring any expertise and any real value, they’re being replaced with technology and those who have…

[00:41:38] Dean Barber: Or they’re being kicked out by people like you and I, right?

[00:41:41] Don Wenner: Exactly. And what I feel is that more and more that there’s technology and systems and tools to do things for us, the more and more people want and will pay for expertise and are in need of it. So, I think in any industry sector, those who provide a high level of expertise and service have never been in more demand and people have never been more willing to pay for expertise and great service. So, I agree 100%. I think in the traditional industries like real estate and financial services, for those at the top of their professions, it’s never, never been a better outlook than we have today for a number of reasons.

[00:42:31] Dean Barber: So, I mean, you and I could talk for hours here, obviously, because it’s fascinating what’s really happening. What you’re saying now, there are some potential disruptors coming out of the voices in Washington with tax law changes proposed eliminating the step-up in basis and taxing capital gains, whether you sell the asset or whether you don’t sell the asset at the end of each year. And so, just some what I call lunatic ideas as a way to try to get some money back into the system where our government has so freely spent it and giving it away, what do you think that the danger is in the real estate market of some of these tax law changes? And have you guys addressed that and what are you doing on that?

[00:43:26] Don Wenner: Yeah. So, the way I think about change, whether tax changes is a phenomenal example of it, I think these large-scale changes like removing 1031 exchanges or large capital gains exchanges, I think they can be disruptive and negative as a market whole and can certainly slow down growth and certainly cause recessionary environments and may not be good in many of these ideas that we proposed I personally believe are not going to be good for the economy. But I think for anybody listening here from an individual standpoint or for me as CEO of DLP Real Estate Capital for you, Dean, I think any time there’s volatility or change creates tremendous opportunity and I believe it’s a great example to our last point of people will pay for expertise.

This is an example like when these types of volatility is happening, when change is happening, this is where you need experts. You need people who understand how to navigate through these changes and find opportunity from it. And so, to me, if all of a sudden capital gains they say, “Your 1031 exchanges are going to go away at the end of this year,” guess what’s going to happen? Lots of people are going to rush to sell their properties and that’s going to create some opportunities to buy at some big discounts, and that will some great buying opportunities.

[00:44:51] Dean Barber: Because they know if the 1031 goes away, which, by the way, if you’re listening, you don’t know what a 1031 is, it means you’re basically selling one property through a qualified intermediary and then immediately purchasing another property where you as the owner of the real estate never take active receipt of the funds.

[00:45:08] Don Wenner: Yeah. And you get to defer all the taxable gains.

[00:45:11] Dean Barber: That’s right. And a lot of people will do that because they want to get into a different property or they want to create more income and there’s a better opportunity to create income on another property and they don’t want to pay the capital gains tax and they want to be able to pass that down to the next generation with a step-up in basis. And so, there’s a lot of reasons behind that 1031 exchange. You’re right. There are disruptions

[00:45:34] Don Wenner: Same thing with long-term capital gains. If they were to go up a ton and that’s going to happen on January 1st, guess what? A lot of people are going to quickly sell assets, sell and liquidate various positions, which is going to create an influx of cash, which will be good for me because that’s going to be – a lot of capital is going to come in here to DLP.

And so, I think my point is any one of these changes and we could spend a lot of time analyzing what these could do, same thing of interest rate changes and goes up, as a market whole, it might not be a good thing for the economy but if you’re working with the right management, the right expertise, there can be tremendous opportunity that comes from these changes. And for us, there’s nothing that gets me more excited than volatility, than change, whatever that change is.

[00:46:15] Dean Barber: Because it creates opportunity.

[00:46:16] Don Wenner: It’s good or bad for the market as a whole. I know it’s going to be good for me and good for DLP because we’re going to adjust to it. Even situations like COVID has created not as many as we would have liked because the market has just boomed, has created a number of inefficiencies and opportunities that we’ve been able to capitalize on tremendously. I mean, we’ve already doubled our revenue through the first half of 2021 than our budget and COVID’s been a part of that reason.

[00:46:47] Dean Barber: That’s incredible. So, I guess I can go back to one tax law change that absolutely crushed the real estate industry, and this was before your time. This was the Tax Reform Act of 1987 and that Tax Reform Act of 1987 took away a lot of the incentives for real estate. That used to be that you could get tax credits for new construction on real estate. And I remember there in the height of that, back in the early and mid-80s, you’d see these ghost office buildings being built. What I mean by that is people were building these office buildings and they didn’t have any plans to occupy.

They didn’t have any plans to put in and didn’t know who was going to be in there. They didn’t care because the tax credit incentives were so great that they could lose money, have the property foreclosed on, and they still made money because they saved so much money in taxes. And the Tax Reform Act in 1986. I’m sorry, I said ’87, actually removed all of those incentives. And so, there were a number of properties that were absolutely just crushed and a number of people that were crushed on those things as well.

But that then created a lot of opportunity for people who had cash which brings me to one of the last things that I know we have time to talk about and maybe I think we’ll have you back on again because you and I got a lot more to talk about. But I want to talk about the idea of leverage and leverage is debt and there are people out there in the financial industry.

One guy that’s got a nationally broadcast radio show that says, “Never have any debt.” I think there’s good debt and I think there’s bad debt, and I think the bad debt was what we witnessed in the height of the real estate craziness leading up to the Great Recession but there’s also good debt. So, why don’t you talk about good debt and bad debt here for just a couple of minutes? And then finally, what do you think is the right amount of debt-to-equity as a wise real estate investor?

[00:48:45] Don Wenner: Yeah. That’s a big last part of that question but I’ll do my best to tackle it. So, I think debt whether we’re talking on a personal standpoint such as having a mortgage against your personal home or we’re talking for a real estate portfolio like we manage having debt against that portfolio, I agree with you 100% that debt used wisely can be a really powerful tool, especially over this past decade and especially today where these interest rates are at incredible lows.

Debt provides, A, it provides when used well, better returns, increased returns. Debt provides it can be a great risk mitigator in that it provides another form of liquidity which is really, really important. And I can talk more about it but a simple example and most can relate to, if you had a home equity line that you can draw on against your house, that’s liquidity that if you needed it, you can get access to. And having that in place when you didn’t need the cash but to have it in place, that if you did later having access to cash.

Whether for individuals and for organizations, when companies go bankrupt, same as individuals, it’s almost always due to one simple reason. They run out of cash. And often you can get through challenging times and challenging environments if you have enough cash on hand. And so, having access to liquidity is really important and that’s how we use leverage to provide us with another form of liquidity.

But then also by using it modestly, it helps us increase our returns and increase our cash flow, which cash on hand and cash flow go hand-in-hand and are two of the biggest ways to mitigate risk to put you in a position to not need to sell assets at the wrong time and to be in a position to capitalize on buying at the right time.

[00:50:40] Don Wenner: So, many of the old school kind of families who invest with us, and I say that in a respectful way, who invest capital with us they grew up in the mindset that, “Hey, you pay off your home mortgage and you’re debt-free.” And that makes sense, especially if rates are high or you don’t have a way to invest that cash that can generate a return above what the debt is costing you, that can make sense.

I can tell you many of the investors who invest with us, especially like, say, their beach houses that they own, they end up pulling a line of credit against that beach house and they invest that cash with us and they say, “Well, I’m borrowing that cash at 3% and here I am earning 12% while I’m getting a tax deduction from that debt that’s helping me maximize my depreciation,” which I get and do. And I’m getting a nice spread on that capital on my own equity, my own wealth that I’ve developed.

So, the short answer to your question of what I think the appropriate rate of debt is against real estate, we end up across our portfolio generally in the upper 50s portfolio-wide. I think a good place of debt-equity ratio for good cash flowing real estate and I think that’s an important point is our real estate is cash flowing. Real estate is about 65%. I think that’s a good place to be.

When you start getting into trouble is when you’re 80%, 90%, 95% leverage and you have such a razor-thin margin that, number one, your cash flows can be very limited because you have such a debt service coverage and then one little blip can cause you being upside down, which you may be able to weather if you’re generating cash flow but your bank might not be willing to allow that to happen in the decline that can cause banks calling an accelerated default on you. I mean, it can be a lot of challenges. It can come about in tough times of being over-leveraged. So, we do use leverage at DLP. I use leverage personally but we use it. We think it’s a great tool to help us maximize returns, minimize tax, and provide us liquidity and build our cash.

[00:52:54] Dean Barber: Well, I think you did a great job of answering that. I really do. And this has been a fascinating discussion. Don Wenner, he is a 36-year-old CEO of an amazingly fast-growing company called DLP Real Estate Capital. I encourage you to find out more with a link to his website in our show notes. Also, get a copy of Don’s book, Building an Elite Organization.

You’ll also find a link to that in the show notes here. And, Don, we’ll get scheduled for another time because there’s a whole lot more to your story and a whole lot more that you have to offer for the listeners of The Guided Retirement Show. Inspiring. Great to see. And you would be the front end of the millennial generation. And so, many people have discounted the millennial generation but you’re throwing it right back in their face and saying, “Look here, there’s opportunity all around us. Go get it.” Thank you for being here.

[00:53:52] Don Wenner: And thank you, Dean. It’s truly my pleasure. Look forward to that opportunity. Thank you, everybody, for listening.


[00:53:57] Dean Barber: Make sure and check out the show notes for links to Don’s book, link to his website so that you can find out more about the DLP Real Estate Capital. And also, if you’d like an opportunity to have a conversation with one of our financial planners or CFPs, go ahead and click on the show notes. There will be a link there where you can schedule a phone call, you can schedule a Zoom meeting, or we’re happy to meet with you face-to-face. If you’re listening to this on your favorite podcast app, always make sure and subscribe so that you get advance notice as soon as a new episode comes out. Thanks for joining me.


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