Join Bronson today for an episode with Brian Burke, author of The Hands-Off Investor and founder of PraxCap. Brian shares his journey from house flipping to syndicating 10,000+ multifamily units, selling his portfolio in 2019-2020 to avoid market resets. Learn how he shifted to senior housing (assisted living, skilled nursing) amid demographic tailwinds, acquiring 19 properties for $150M in two years.
Discover key advice for passive investors: prioritize operators over deals, vet via track records and networks, and embrace work-life balance.
Get my new book: https://bronsonequity.com/fireyourself
Full Transcript:
Bronson Hill: All right, welcome, welcome, welcome to the Mailbox Money Show. I’m your host, Bronson Hill. I’m super excited to be here today.
I’ve got the amazing Brian Burke, who’s the author of this book, The Hands-Off Investor. It’s a great book just about evaluating real estate deals, particularly multifamily. And gets into the weeds a lot of times as an investor. How do you evaluate deals?
How do you know one deal is better than another? How do you evaluate an operator? And he just has a ton of experience, so excited to have him here today.
So, Brian, good to have you in the studio. How are you doing today?
Brian Burke: I’m doing great. It’s great to be here.
Bronson Hill: Good. When you were talking, it’s kind of one of the benefits of real estate is that you can be flexible sometimes.
If you have things set up and system set up, you can travel. So, you’ve been traveling a little bit, you’re in Italy, going to Maui. I think that’s the right way to live, man. To have some things scheduled in there where you can enjoy yourself too.
Brian Burke: That’s the whole idea, right? I mean, that’s why we do what we do. We don’t do all this stuff just to work more.
And that has actually been my MO for about the last three decades. But I’m finally coming around to a better work-life balance, which I think is really important.
Bronson Hill: Yeah, I think there’s seasons. Last year, I traveled six times internationally. I went to the base camp at Mount Everest.
Did a hike there. I went to India and Portugal. This year, I’m like, okay, I’m doing some modular home development in Altadena after the fires here in Southern California.
So, I’ve got a whole new business I’m starting there. And so, it’s just like there’s certain seasons where you kind of hunker down and there’s things where you kind of balance it out. But I just have a lot of respect for you, man.
You’ve had, I think, over 10,000 units at one point or 5,000 to 10,000 units at one point, and then you’ve sold off. You sold a lot kind of at a really good time and you have a few more of those you talked about. But you’ve made some shifts. But talk to us a little bit about your experience, how you got started in real estate and just how you’ve had just a very illustrious career doing multifamily.
Now you’re doing something even better.
Brian Burke: Well, I think it is, but I started out like a lot of people do, you know, as a small time house flipper. And grew that business to a big time house flipper and then grew that business into a small time multifamily investor and grew that business into a big time multifamily investor and then shrunk it down. We’re really fortunate that around 2020 started to see that the market was getting a little bit overheated, thought that there was going to be a reset of some kind. We didn’t know exactly what was going to be the catalyst or exactly what was going to happen, but we just felt that something was going to happen.
So we started selling in, I guess probably late 2019 or early 2020, we started selling and made it through most of our portfolio. We had about a thousand units left when the market completely, the bottom completely fell out. So we didn’t get totally out of the market, which, on one hand, I kind of wish we did on the other hand, it is nice to have your hands in it still and really understand exactly what’s going on on the street.
So, that I think is probably my latest claim to fame as a calling yet another market cycle in the right direction.
Bronson Hill: Yeah, what did you experience in 2008? Did you see that coming? Did you make plans there?
Was it something that, I mean, obviously we don’t get right. There’s things that we’ve had some conversations offline. We did some things right in the last down with other things.
We raised a lot of money and we should have been selling. And so there’s some issues we’ve had with some of our deals. How did you know to do that? Or were there some kind of learnings along the way that kind of was like, Oh, I’m seeing this again.
I know this is coming or how did you do in previous downturns?
Brian Burke: Yeah. So in 2008, we, I did pretty well. I was doing a lot of house flipping and, and buying smaller single family and some multifamily back then.
And I, in 2006 as what I really saw what was coming and pretty much stopped buying anything right around that time. So values fell from about O six to O eight. And I did very little during that period of time, about three years of almost complete downtime really.
And then got back into it heavy in 2008 and nine, right as it was bottoming out, so kind of managed to call both sides of it pretty well. Certainly I had to feel some pain in some of my personal, commercial portfolio when it all fell, but fortunately, I’ve been syndicating now for two and a half decades and have never lost a dime of investor principle. And I think a lot of that comes down to knowing when is the time to buy, when is the time to sell and knowing when to sit it out?
You know, one of my sayings that people quote me on often is that there’s a time to buy, there’s a time to sell. There’s a time to sit on the beach. And for the last three and a half years, that’s exactly what I’ve been doing is just basically sitting on the beach.
We didn’t buy anything from 2021 to 2025, not one thing. And, again, it kind of mirrors back to 06 to 09. You know, there’s just periods where you go three years without, without doing anything.
And that’s, that’s gotta be okay. You gotta be ready for that in this business.
Bronson Hill: Yeah. It’s kind of like the saying, you got to know when to hold them to know when to fold them, right?
So you’ve been very good at that. So, do you play poker as well? Are you a unit in a strategy games at all or anything?
Brian Burke: I’m not, and I would probably be terrible at it because that, that requires, you know, like that eye to eye kind of like, thing. And I’m much more like sentiment and data driven. And I like to look at what the market as a whole is doing.
So you put me up against one player and I probably wouldn’t figure it out as well.
Bronson Hill: Yeah. Yeah. It’s a whole nother.
Yeah. You’re playing the person across from you. And in the market you’re doing that, but it’s more like the broad group of players, not just the one right across from you.
So you have made a transition into another exciting asset class. Tell us about that. I mean, obviously you sold a bunch of your stuff and you did, you have been to the beach, but you’ve also been pretty busy the last couple of years here too.
Talk about what you’ve been doing on the, on the acquisition side.
Brian Burke: Yeah. Well, I’ve actually only been busy for the last six or seven months, but in that six or seven months, we’ve managed to acquire, well, I guess we’ll be at 19 properties for about almost $150 million. So it’s been, it’s been a little bit of a busy part here.
Cause we made a shift early this year into assisted living, skilled nursing and memory care, senior housing, healthcare properties. We launched a $50 million fund, I think back in April. And we’re about, oh, well, I guess we just crested 35 or 38 million or something. So, we got a little bit ways to go, but I think in today’s climate, being able to raise any money at all is pretty good. To be able to raise, you know, almost $40 million in I guess five or six months is actually quite good.
Bronson Hill: Yeah. That’s amazing. You know, that congrats on that.
That’s huge. And so you guys are buying, this is like single homes or is it more kind of big box, kind of a hundred unit senior living memory care is, are these existing places? Are you building some?
I’d love to know a little more about what you’re doing.
Brian Burke: Yeah. They’re, they’re medium sized facilities. I think the smallest one we own is 46 units and the largest is about 150 units and well, we buy them in portfolios.
To go out and buy a single 46 unit property would be a probably a little too much brain damage, but if we could buy 10 of them at the same time and get 460 units in one transaction, that’s kind of more our speed. So really, despite the fact that we’ve got, almost 20 properties, it’s really only been across three transactions where, we’ve bought several properties at a time, seven at once, nine at once, and that sort of, that sort of thing. So, we’re buying existing facilities.
We’re not building ground up. I think the numbers just don’t work, especially considering we just, we just closed a couple of weeks ago on a two property portfolio that we bought for $35,000 a bed. And it would cost about 180,000 a bed to build the same facilities.
And these are really new facilities by the way. So it’s the construction just doesn’t pencil for us. It’s just much better to buy distressed assets.
And there’s actually distressed assets to buy, believe it or not, as hard as you’ve been trying to find that multi-family for a decade. There hasn’t really been much of it but in senior housing right now, there are distressed assets that we can pick up.
Bronson Hill: Yeah we’re doing a project with a partner in Fayetteville, Arkansas, it’s actually a new build. It’s half assisted living and half independent living. And there’s a three year waiting list for the nearest facility nearby.
And so we feel like there’s an incredible demand and it’s just certain markets. I’m sure that there’s certain areas where it is cheap to build like that market and it’s still demand is high, but it’s just crazy. I mean, people are paying for assisted living. I mean, at least in where I live in California, it’s over 10 grand a month pretty typically.
And so it’s just, it’s amazing how expensive it is when you look at it, like from a cap rate perspective, when you compare multifamily and, and obviously, you have more of a, it’s operates differently, for some of these, they’re more assisted living, there’s a lot more labor that goes into some of these, but how like from a cap rate, what do these kind of look like as far as, you know, if you were to purchase in cash, the returns on something like that.
Brian Burke: Well, this is kind of part of the reason that we’re doing this, right? I look at multifamily where it’s trading at a 5% cap rate with 6% borrowing cost. And if the money that you make as an investor is the difference between your cap rate and your borrowing rate, you’re losing money, right?
Our average cap rate in our portfolio is 10.3. And we’ve got about half of our assets are class A assets less than 10 years old. Then the other half are scattered between 15 to 20 years old. We have a few assets that are about 40 years old.
And to have an average cap rate like that with that kind of a portfolio construct is impossible in sing in multifamily, but it’s impressive, even in the space that we’re in.
Bronson Hill: But it does seem to you like the trend every talks about the silver tsunami that there’s so many boomers turning 65 every day. And it’s just like over the next probably 25 years, it seems like this is going to continually be a demographic. Obviously a lot of people want to stay at home, but it’s much more expensive to stay at home.
If you have a caregiver that comes to the house, my background is medical device sales. So I worked with a lot of people in their homes years ago. And so I’d fit them for physical therapy products.
This was like 10 plus years ago, but you just see they’d have to have a full-time caregiver there a day, night, all the time, or a family member, it was just very labor intensive. And so, do you think, I mean, this is going to continue to be strong for the next 10, 20 years. And this is a very solid business.
It’s not going away anywhere unless AI robots can take care of us in our home, like Elon has said, which is possible. It’s just, I don’t think for the level of care that you’re talking is going to be maybe a viable option for a lot of people.
Brian Burke: Yeah. And to think, a lot of this might be if you fall, can a robot pick you up and get you off the floor, maybe assisted living is where you need to be. I think part of the reason again, I mean, it’s not just cap rate and the only reason that we made this shift.
I mean, the other part of it is exactly, as you said, is another theory of mine is if you want to make money and income property, follow the demographics. And the demographics are telling me two stories right now on the senior housing side, you’ve got increasing elderly population. The over 80 population is expected to double in the next couple of decades.
You’ve got almost no new construction. Cause as I talked to a minute ago, it just doesn’t pencil out. So you don’t have a lot of new construction.
So you got an increasing demand without a lot of supply. That means that the demographics are very supportive of this, this thesis. And I compare that to my old best friend, the multi-family business that I’ve been in for decades.
The demographics are different than that, right? Here you’ve got declining birth rates. You’ve got immigration policy.
You’ve got AI leading to potential job losses in the younger segment of the population. Those all create headwinds for multifamily. And not that I’m declaring multifamily as a dead investment strategy when you stretch the imagination. But I do see headwinds in one and tailwinds in the other.
And one thing that I do like to do in my investment career is follow the trends that carry me further. And right now those trends are pointing me in this direction.
Bronson Hill: Yeah, I think that’s great. It’s amazing to you as an investor. We talk a lot about this.
I talk about this in my book, Fire Yourself. It’s just that, they say don’t fall in love with the deal or the asset fall in love with the numbers, right? And there’s opportunities in every environment, every sort of investment time, there’s time to wait.
And Warren Buffett says, there’s a lot of emphasis on waiting, right? Finding the right type of opportunity. What does it take?
I mean, if, if, can, can somebody just buy, like if I’m a wealthy investor and I’ve got $5 million, can I just go buy an assisted living place? If I had the money, is it like, what does it take to manage one of these? Is there a property manager kind of similar to how it works for multifamily and, and, or as administrator, like how does it work to kind of run these?
Brian Burke: Yeah. If you have the money to buy one, you can absolutely go and buy one. And if you have the money to flush down the toilet, you can do that too.
I mean, it’s your money. You can do whatever you want with it, but it doesn’t make it smart. So I don’t think that it’s really a business that just everybody should get into.
And I don’t say that just selfishly because I don’t want the competition. I mean, it really is a different business where you’ve got patient care issues. You’ve got a whole host of things that are much, much different than what you would experience in multifamily. Things like, dining food and beverage, entertainment, a bus to take people to appointments.
There’s so many moving parts that if you don’t have experience in the space, I think t’s extraordinarily risky. And as much as I love this space and I love the thesis and I think everything is very supportive of what we’re doing. I never would have made the move into this sector had I not had the opportunity to bring someone on my team that had two decades of experience in doing only senior housing, healthcare, real estate. You know, he’s bought over a billion and a half in assets.
He’s got a master’s degree in senior living. He was the president and CEO of a publicly traded healthcare read. And, now he’s on the practice team and having that brings me the ability to be able to get into this business and do it the right way and make the right decisions and mitigate risk and find opportunity and, and also just the relationships and networking and all that stuff, every, every deal that we’ve bought has been completely off market direct to seller with no brokers.
And the only way that you can do that is if you have relationships in the business and, and I had, I didn’t have those relationships. So bringing him on board was a major thing. So it’s not just something that I recommend that anybody goes and takes a weekend course, then jumps both feet into this sector.
Bronson Hill: That makes sense. What’s been the most surprising thing for you coming from multifamily seeing like what moves the needle the most? Because I know there’s a value add component to a lot of these deals. What’s the, is it like you said, a lot of vendors and getting pricing and just looking at kind of from a financial perspective, the pieces as a whole and saying, what will move the needle the most or what are the things that you found have been the biggest value add?
Brian Burke: The biggest surprise to me was the way you structure these opportunities and the way you can mitigate your own investment risk by structuring it right. And I’ll give you some examples like we’re we bought this one portfolio was dying assets in it and there was an operator in place. It was doing a fantastic job.
And so we bought the real estate, signed a new triple net lease with the existing operator that was already in place. And now we’ve got our income set for the next 15 years. We know exactly what the rent will be.
We know exactly what the rent increases will be. They’re responsible for all expenses like property taxes, insurance, repairs, and maintenance. So for us, it’s just like a total hands off kind of triple net business.
And I didn’t really expect that from this sector. I thought that it was going to have a lot more operational challenges that we would have to deal with. But the way we’ve been structuring, our approach to this business has been much different than that. And that, that came as a bit of a surprise to me.
So it was, it was a surprise on all the different ways that you can structure these things to give you better investment outcomes with lower risk and less variability and that sort of stuff, all of that is something I never saw coming.
Bronson Hill: Yeah. Yeah, it is. It’s interesting.
I love learning about different assets too. It’s funny, like you’ve had a real edge in the multifamily space because you’ve done it in different flipping and other things. And you’ve kind of learned and built onto that.
What’s, what’s one mistake, I mean, from your book and just from you see with passive investors, what’s one mistake that you see a lot of passive investors make when they’re getting started investing in syndications or other types of deals?
Brian Burke: The biggest mistake, and this is how it usually starts. I’ll hear somebody ask me this question. They’ll say, I’m looking to invest in a syndication deal.
How do I find a deal to even invest in? And right then I know that they’re approaching the whole thing wrong because the question is not, how do I find a deal to invest in? The question is, how do I find a good sponsor to invest with?
Yeah, because that really is the key. Who you invest with is going to make or break your investment performance as a passive investor and getting in with the wrong group can be a total disaster. So if you, if you find the right group to invest with, they’ll bring you the right deals to invest in, and then you get to vet them, obviously, but the, I think the biggest mistake is approaching this business from the wrong direction. And not understanding the fact that the most important decision you’re going to make is operator, not deal.
Bronson Hill: Yeah. Yeah. It’s interesting.
We have some of my book I call the deal funnel where you start, we actually start with the market because a lot of times Warren Buffett has this idea. He says, if you have a great manager with a bad business, it’s the end of the reputation of the business that takes stays intact. So sometimes too, like you’re, like you’re in a great business now, you’re in, obviously you see the trend of it as well.
So how do you, like, what do you, how do you evaluate a market when you’re looking at, Hey, as this specific area of assisted living or this specific multifamily market, like, how do you also kind of include that in your evaluation as well?
Brian Burke: Yeah. And you know, it’s totally different too, how you approach it. Cause when I think of multifamily, the way I approach multifamily is this, I look at markets where people are moving to, and that’s where I want to buy.
And I look at places, markets where people are moving from, and that’s where I want to avoid. So again, following the demographics, right? If people are moving to an area and you have a population growth, income growth, job growth, household formation, all of those things drive commercial real estate and income property.
And you can be very successful if you can find those demographic trends and follow them. Absolutely works on multifamily and a number of other types of commercial real estate too, like office retail, that sort of thing on the skilled nursing assisted living memory care, senior housing, healthcare side, I approach it totally differently because here I don’t need people to move to the area.
I just needed to stay put and get older. That’s all you really need. So, what I’m looking for instead is I’m looking for markets where I have a favorable regulatory climate markets where there are favorable Medicaid reimbursements for skilled nursing. If the property has a skilled nursing component.
I’m looking for areas most importantly, where we know a really good regional operator that we can put in place to operate that facility because that really is absolutely everything. Again when I told you a minute ago, when you’re investing passively, the group that you choose to invest with will make or break you when you’re investing in skilled nursing memory care and this sort of stuff. The operator being in this case, the on the ground team that will make or break you. So it’s very important for us to find really good operators.
That’s how we approach looking for real estate is first we go, okay, who do we know who’s really good, who has capacity to take on additional facilities, and now are there facilities in that market that we can buy that we can install them into or are there facilities that they currently already run where we can buy the real estate because either the real estate is owned by a different entity and they’re looking for an exit. Or maybe the operator is looking for a sale leaseback to raise capital so they can have an expansion. Whatever the case may be we want to find a real estate where we have good operators to install in that real estate and operated for us.
Bronson Hill: Yeah, that’s amazing. Yeah, I think it’s, it’s good to the operator is obviously very important. And like you said, the market just, it can be different for different assets and understanding that well.
Well, Brian, you’ve been, you’ve been wildly successful both in the multifamily and stuff you’re doing now. I mean, obviously it sounds like you’d be doing this for quite a while. If let’s say all of a sudden we’ve got your book, but let’s say we didn’t have your book and you only had one thing to share with people with the world, what would you want to share?
I mean, from a personal perspective or as well as an investing, just your life. Like what would you want to share with the world? Remember Brian Burke, that will happen anytime soon, but just in general for your life, like what do you want it to stand for and to mean?
Brian Burke: Well, that’s a really good question. One thing that I’ve found is really important to me as a work life balance. I think getting out and seeing the world and enjoying yourself. Not making it all about just the next thing I think is extraordinarily important.
I think looking ahead to your own retirement is important. And that’s something that I have to think about now, as I get older. What’s kind of my retirement next at plan, which leads me to making more passive investments in other people’s deals. Which leads me right back to kind of what I talk about in the book about making really smart investments. Because if you lose your money, it’s really hard to make any. So I think one piece of advice I give to a lot of people is tha,t it’s so much easier to lose a million dollars than it is to make a million dollars.
So, just take really good care of it. And, I think if you do that, you could set yourself up for long-term success. And, those are the things I’m thinking about these days.
Bronson Hill: Yeah. It reminds me of Warren Buffet’s rule number one of investing is don’t, don’t lose money.
Brian Burke: Don’t lose money.
Bronson Hill: Don’t forget about rule number one. So I think that’s really great, man. And I think it’s, it’s so good.
Well, I’m excited for this next step for you and what you’re creating for yourself, for your investors. And it just seems like an awesome asset to be into. I know a lot of friends that are doing different types of residential assisted living or assisted living.
So how can people reach out to you? And find out what you’re doing, get your book, and follow you?
Brian Burke: So the best place is to start is on our website. It’s PraxCap.com. It’s P-R-A-X-C-A-P dot com.
You can check out the book at BiggerPockets.com forward slash syndication book. Or you can find it on Amazon or bookstores or whatever. If there’s any bookstores still out there, it’s the Hands Off Investor. And you can also find me on Instagram @investorbrianburke.
Awesome, brother.
Bronson Hill: Thanks so much, man. Look forward to chatting with you soon. Thanks.
Thank you. All right. So it was a great show with the amazing Brian Burke.
One thing I like about Brian is that he is a straight shooter. He’ll just talk about, hey, this is why deals work, but this is why they don’t work. And he’s been wildly successful at not only making money, but really avoiding losses. If you can just in your investing career, find ways to minimize or avoid losses. Sometimes the best deals I’ve done are the deals I didn’t do, right?
And it’s not that we’ve done things perfectly. You’d say, I’ve never lost any money of my own or extra money. And we’ve had a couple of challenges of deals that we’ve done. But I think those are definitely learning experiences.
And so as an investor, it’s so important that you continue to get better. If you haven’t read this book, The Hands-Off Investor, this is a great book. But Brian Burke, you mentioned where you can get that.
We’ll put some notes in the show notes there as well. But it’s just so important that you gather and be in a place. Where you’re continually interacting with other investors that are ahead of you. That you’re learning from. We have a group called The Wealth Forum. And we have an event coming up on December 12th in Pasadena at the Langham Hotel. Which is a luxury hotel in Southern California.
And we’re going to have 30 or 40 people there that are all high net worth people. They’re going to be there. And if you have not been in a room with people that are high net worth, that no one’s pitching anything. You’re just simply sharing notes. There’s going to be some workshopping of just, hey, here’s what I’m trying to do.
Here’s what’s worked. Here’s what has not worked. You will really grow from that.
So that’s my hope for you. So if you want more information about that, you can go to brownstoneequity.com slash wealth forum and you check that out. You get to go to our website.
You can get in touch with us. And if you haven’t joined our investment club, please do check that out at the link below. We look forward to seeing you with the next episode of the Mailbox Money Show.
Thanks for joining us.
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