How Paul Moore Subdivided His Way Out of $2.5 Million in Debt

Episode 114: How Paul Moore Subdivided his way out of $2.5 Million in debt

The Profit First REI Podcast

September 19, 2022

David Richter

Summary:

On this episode of Profit First, we’re going to dive in a bit on “Giving First” with Paul Moore and more!

Paul Moore is a real estate investor and self-proclaimed former serial entrepreneur. His journey started with him jumping from one venture to another, becoming what he calls a “Real Estate Speculator,” owing millions of dollars in debt, before finally finding his footing as a successful investor.

Tune in and hear about his wisdom on real estate investment based on a history full of ups and downs, how he overcame debt with ingenuity and charity, and his key insights to succeeding in investment!

Key Takeaways:
[0:46] Paul Moore’s Background in Real Estate Investment

[2:36] Paul on Self-Storage, and Growing Into an Investor

[6:01] On Struggles and Failures Along the Journey to Success

[10:00] How Paul Got Out of 2.5 Million Dollars of Debt

[13:58] Focusing on One Thing and Hiring an Expert for Others

[17:52] Paul’s Keys to Success

[20:22] Why is it Important to Find Your Big Why?

Quotes:

[5:24] “You’re taking something that you know is a weakness and you’ve turned it into a strength.”

[10:47] “Hope isn’t a good business strategy.”

[19:00] “Putting it in investment terms, if you’re always playing double-or-nothing with your money, someday you’ll end on nothing.”

Links:

5-Day eCourse and eBook on Commercial Real Estate-wellingscapital.com/resources

Profit First Real Estate Investors FB Group-https://m.facebook.com/groups/ProfitFirstREI/ 

Simple CFO-https://simplecfo.com/ 

Tired of living deal to deal? 

If you are a real estate investor or business owner who is tired of living deal to deal, and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David 

Transcript:

Paul Moore:

If you are focused on being an entrepreneur, a real estate investor, whatever. And you’re probably not the very, very best accountant or CFO outsource that to somebody else or hire somebody to do that and focus on what you’re really good at.

Intro:

If you’re a real estate investor, who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors, just like you and discover how they’ve completely transformed their business by taking a Profit First approach. This is the Profit First for REI podcast where we believe revenue is vanity profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.

David Richter:

Hey, this is David Richter, your host of Profit First REI podcast here with Paul Moore today, which he’s an incredible investor he’s bought and sold his business before he has been in the real estate game for a couple decades now. And he is also gone through lots of ups and downs. He talks about in this episode, what is one of the biggest hindrances to real estate investors? He talks about the difference between real estate speculation and real estate, actual investing, which is great with his definition. So if you’re wondering what that is, then make sure to listen to the episode. He also gives his keys to success over the years, how he gave his way out of 2.5 million in debt. So yes, you heard that right. Gave his way out of 2.5 million in debt after having millions in the bank years before that. And a lot of the other things as well, too, he talks about his big why.

David Richter:

And the big why of, you know, is like something that could maybe set you on your path for that. It’s a, it’s a jam packed episode of things that will help you get to where you want to be. So I hope you’re ready and hope you buckle up here as we interview Paul Moore, Hey, Hey, here we are. Now we’ve got Paul here on the podcast. Paul, it’s so good to have you on because I’ve heard so many good things about you. It was finally good to meet you because David Phelps, who’s been on our podcast multiple times speaks very highly of Paul Moore. And if you know David, then you know that anyone he endorses is legitimate and is a great person. So Paul, thank you so much for being on today on the show, man.

Paul Moore:

It’s such an honor to be here. Thanks, David.

David Richter:

He, you are the self, you’ve got a lot of self storage. Now you, that’s kind of where you live in that space, correct. Is the self storage world. And you have been in the multi-family world. You’ve been in the residential world. You’ve dabbled in kind of a lot of different aspects of real estate, correct?

Paul Moore:

Yeah. I mean, quick story. I actually wrote a book on self storage. It was published by Bigger Pockets last fall. Awesome. But I’ve actually never operated a self storage facility. Let me explain. Over the years I was a shiny object chaser. I was a, a serial entrepreneur. I was thinking about putting serial entrepreneur on my business card. And now I think that’s a terrible, it was a terrible mistake because I found myself a lot of times. I mean, spending years in startup mode and then either getting bored or it failed or it succeeded. And I moved on to something else and started up again and being in startup mode all the time is like an airplane that’s having to take off the whole trip. If that was the case, it would burn through all its fuel very quickly.

Paul Moore:

And so, yeah, I sold my company to a publicly traded firm in 90, 97. I got into real estate to protect and grow my own wealth. I found out I wasn’t really a real estate investor. I was a real estate speculator. And you know, investing is when your principal is generally safe and you’ve got a chance to make a return. Speculating is when your principal is not at all safe and you’ve got a chance to make a return. And I made a ton of mistakes, lost a lot of money made a lot of money along the way as well. But over the years I was in residential. I flipped houses, flipped waterfront lots at a resort, did a subdivision. I was always trying to figure out how to get involved in commercial real estate. I finally got thrust into it when we built a somewhat speculative multifamily facility in North Dakota for oil workers during the big boom in 29, 20 11 around there, we managed that facility for years sold. It got involved in multifamily wrote a book on multifamily and then came to this conclusion that I was not a good operator. I am not a good accountant. I’m not a good money manager. So in and of myself, I’m not good at all those things, but I always found that when I succeeded really well, I surrounded myself by people who were really, really good at those things.

David Richter:

Okay.

Paul Moore:

And so that’s how we ended up starting the fund model, where we would actually invest with other people who are experts. So we invest in self storage. We invest in mobile home parks, multi-family RV parks, light industrial. And we find experts who are really, really good top of their field in these things. And we invest with them and investors invest with us and we diversify across their assets.

David Richter:

I love that. I love the fact that you’re taking something that you know, is a weakness and you’ve turned it into a strength of like, I know I’m not good at this. So I know I need to partner with people who are good and I’m going to turn that into, this is where, you know, like what I can do with, with what I’ve been given and what I’m good at. So I, I really like that. And you, you mentioned money struggles and you mentioned the struggles that you’ve had, you know, along the journey that you’ve made money, you’ve lost money. And come on right before the show, you told me about the podcast name that you used to have, which I thought was a great podcast name was how to lose money. Correct. That was a, was that the name of the podcast?

Paul Moore:

Yeah, we had a podcast. We had 238 episodes where we interviewed highly successful entrepreneurs, business owners executives about their pain loss and struggles on the way to the top. In fact, we interviewed Mike Michalowicz and David Phelps on that.

David Richter:

Wow. Well, see this ties right in with our podcast because I ask almost every guest, what money struggles have you faced in your life or business along the journey that you’ve taken so far? So I know you had that podcast asking other people, so I’d like to tell, ask a little bit there, what money, you know, like what struggles have you had up to this point?

Paul Moore:

Yeah. So one thing that really was, I think it was great. And at the same time it made things a little complicated was I have a very benevolent mentality. Mm-Hmm <affirmative> I actually believe in giving first, not necessarily a Profit First over the years. And that’s caused some harrowing moments like in 2007 it was the fall of 2007, 10 years to the month before I had a couple million dollars in the bank from selling my company. And I found myself with two and a half million dollars now in debt. And I actually was coming in, we were coming into the great financial crisis. Didn’t have any idea how bad it was gonna get in 2008. And my family and I got together and oh my business partner at the time resigned, he said, I’m sorry, I can’t pay half this debt anymore.

Paul Moore:

It’s yours. And so that’s when I got, went from one and a half to, or so to two and a half million in debt. Anyway, I told my family and friends, I said, Hey, we’re gonna start by giving our way out of debt. And they said, what? And I said, we’re gonna start by giving our way outta debt. So we started on January 1st, 2008, re remember not knowing how bad of the storm we were about to face as a country, as an economy. We started giving a set amount to charities, churches, nonprofits, things we really, really cared about. And we gave that set amount every week, like clockwork and I’m laughing cause that’s another Mike Michalowicz book. Yes it is. But anyway, we started giving that money weekly, and we really believed that we, you know, that God would providentially pull us out of the hole we were in. And four weeks later we came up with this amazing idea that just kind of dropped into, dropped into my mind and used that idea, leverage that over the next 13 months. And I ended up in the spring of 2009, 100% debt free. Wow. And so that’s not Profit First story. That’s a giving first story, but I, I thought it’d be kind of fun to throw it in.

David Richter:

No, and I love that because we’re all about giving. And in pro first, we, with a lot of people we work with, we, they set up a giving account, you know, to be able to give away part of the money because you do, you need to have usually extra funds to be able to give or like for people to see that they can start giving and have it be baked into just a part of their, this is a part of the business. This is what we do. This is what we give. And I, I love that cuz that’s what we do. A portion of everything we make goes right to charities that we set up or that we are partners with. And, and so I definitely love that story and it sounds like that’s a big struggle going from several million in the bank to several million in debt. And I love that other side too, of how you came out of it, you know, debt free, which is absolutely incredible. So then, then from there, what do you mind me asking? What that great idea was that got you out of debt so quick? Was it a real estate exit strategy or was it I have no idea. I mean, I’m very

Paul Moore:

Intrigued, ancient Chinese secret. Okay. I’m kidding. I’m kidding. That’s that’s, that’s a joke from the seventies. So anybody over 50 might get it. It’s still not funny anyway. But no, we had a five acre waterfront lot that we bought for a be I believe it was eight or 800, eight $50,000. And we thought that if we subdivided into five, lots that about four of those five lots would be worth 400,000 each. So we thought, you know, this is worth at least double what we paid. Well, this was a terrible speculation on our part on my part because it was on a non-public road, which means you could not subdivide it legally. Mm-Hmm <affirmative> that’s when we bought it years before in 2000, I don’t know, seven, six. Yeah. I don’t know. Well, we speculated because we really believe the county was going to allow we really believe that was gonna turn into a state road any time. Well, hope is not a good business strategy, right? David? Nope.

Paul Moore:

Well, we hoped it would turn into a public publicly maintained road here we are 16 years later today. It’s still not. But anyway, I be, if I could, that was a lot of my debt right there, you know, 800,000 in debt and I think it was. And so I really believed that if we could subdivide this into five lots and sell those, you know, for, let’s say 1.5, 1.6 million, that would be a huge part of my two and a half million dollar debt. Yeah. Well, I came up with a crazy idea for how to subdivide those. And it was based on this obscure law in PLA rural places like Virginia that allow for a family exemption, a family exemption says that you can actually split off otherwise non sub dividable land to a family member. Well, there’s no way I, I had five family members.

Paul Moore:

I would be able to subdivide this to, and even if I had five family members and I granted an acre each to the other four, yeah, you have to hold it for five years. Okay. And other than that, the law is completely legit. I could have divided into these four family members hands and kept one. But no one said what you, what you could do with the parent tract. In other words, the part I kept, there’s nothing in the law about how fast I could sell that. So we came up with a, I don’t wanna call it a scheme, but we came up with a plan to actually sub to sell the entire five acres to one person. He would grant an, an acre to his wife and then he would sell the other four. Then the next four, he would grant an acre to his wife, sell the other three. And we were able to do that all consecutively in like four consecutive weeks. The miracle of it is that we even found buyers for the lot at all, because it was in the very worst months of the great recession in September through November of 2008. Wow. When no one was buying lots. So it really was miraculous.

David Richter:

Yeah. That,

Paul Moore:

And, and by the way, we, we completely got this approved with the county. The lady at the county shook her head and she said, I’ve been working here 30 years. Nobody has ever come up with a scheme like this. She then she laughed. And she said, but you did. You’re right. It’ll work.

David Richter:

Wow. That’s incredible that I think that is a good template for giving your way out of debt of there’s no, you know, like sound like a miracle basically to think of that. And then that the county was like, okay, like, cuz we’ve heard other stories go the opposite way of like the county’s fighting you, you know, like all the horror stories that you hear. So that’s yeah, that is incredible. So then fast forward, a little bit to where then you have your, you know, your real estate investing business and you’ve had ups and downs there, you know, like with the real estate investing and the recent years or whatnot, and kind of what we were talking about, like what was some of the things that helped turn that around or like tell about that journey of, you know, like that we were talking a little bit before the podcast aired.

Paul Moore:

Yeah. You know, I came to the conclusion, David, that if Michael Phelps would have competed in 10 different sports, he probably wouldn’t have got a gold medal in any of them. I think we can all see why. Right, right. Yeah. Because everybody is, I think everybody should like Gary Keller and J Pappas on told us in the one thing book, we should become obsessively, wonderful and expert at one thing. And so Michael Phelps got 27 gold medals for us and for his, you know, team and for him, us as Americans, I mean because he obsessively focused on one thing and there was a time when I figured out that I could not be an expert in everything. And so what I did is I hired a young man who was an expert in the exact things I wasn’t. And one of those was the Profit First principles.

Paul Moore:

And because he is so obsessively good at that, it would allowed me to work on other aspects of our real estate business. It allowed me to focus on acquiring properties, getting operators. We could partner with raising money, creating education, writing books, by doing that and letting him focus on the Profit First principles. It has been a game changer. And I mean we’ve raised 80 million and deployed that in the last three years. And I mean, it hasn’t been without a lot of struggles, but having that right person outsourcing to that right person made all the difference in the world. I highly recommend to anybody listening, if you don’t have, I mean, there’s no way anybody can be an expert at, at everything. If you are focused on being an entrepreneur, a real estate investor, whatever. And you’re probably not the very, very best accountant or CFO outsource that to somebody else or hire somebody to do that and focus on what you’re really good at

David Richter:

That is that is advice that I think will rain true with a lot of people, because on this podcast, we talk a lot about how you can start it, how you can get it implemented, you know, or like what people have faced in the past. But a lot of people don’t hit on what Paul just said. Like, if you have no prerogative to go out there and do this yourself, there are people that can help. I mean, obviously you’re listening to this podcast and you’ve heard us probably say, we can help you with this. We’ve got a fractional CFO business. We’ve got the Profit First book. Like there’s no excuse now for you not to get some of these principles in place. That’s why, what Paul’s saying is so good because now he can focus on this, what he is good at. And even beforehand, he was talking about when he brought that hire in, like the business just was skyrocketed from there because he was able to focus on the one thing. He, we can’t be all things to all people and we can’t force ourselves to do that too. I think that that goes in line with what you said at the beginning, too, that shiny object syndrome we get into that shiny object syndrome. If we don’t have someone kind of like just steering us in the right direction. Like, no, this is your focus. This is where you need to be. I, I think you would agree. It’s very easy to get the squirrel and like go off and try and do way too much.

Paul Moore:

Sure is.

David Richter:

So Paul, I would say you are a successful real estate investor. You found what you are good at. You’ve outsourced what you’re not good at. So then let me ask this, what would be maybe one or two keys to success along the way, obviously outsourcing that’s a huge one, but what would you say has been maybe a key that has stuck with you, you know, over these years?

Paul Moore:

Well, I’ve already touched on a couple of these. So one is of course following the one thing principles. And if you haven’t got that book, everybody should get that book and read it and, and learn it. Another thing is knowing the difference between investing and speculating. Like I said earlier in the show investing is when your principal’s generally safe, speculating, it’s when your principal’s not at all safe. Another thing would be, you know, to create true wealth. You can do that by swinging for the fences, but it’s more likely that you will create true wealth by looking for singles and doubles and then occasionally hoping for a triple or something better. Yeah. But my my pastor in Roanoke, he was a professional baseball player in one year. He decided he would only focus on home runs. He hit more home runs than he ever had that year, but his batting average was miserable and overall his performance was much worse.

Paul Moore:

And so babe Ruth, you know, he was a strike. He was the home run king, but he was also the strikeout king. Right. And so, I mean, putting this investment terms, if you’re always swinging for the fences, if you’re always playing double or nothing with your money someday you’ll land on nothing. And then what will you have left to double? You’ll have the opportunity to start over again, is what you’ll have. And a lot of our guests on how to lose money experienced exactly that. So I would just really recommend that people take, take the advice of Paul Samuelson. Paul Samuelson was the first economist to win the Nobel peace prize from the us. He said, investing should be boring. Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.

David Richter:

Right. That’s that’s good stuff. Cuz that’s what we see in the business world. It’s not, it’s the ones that are making the money and keeping it are the ones that are just doing the same things, helping the same people, you know, like doing, doing what they know like you had mentioned over and over here is that, you know, being good at what you’re good at and not chasing those rabbit trails, you know that and just going off on the squirrel, you know, adventures there. So, no, that’s, that’s incredible. Just a couple last questions here. Why is it important? Because I, this was one that was on your bio. I don’t ask a lot of questions around the bios, but this one I really liked. Why is it important to find the big why in your life?

Paul Moore:

Yeah. So when I sold my company in October of 97, I woke up the next morning and I actually wasn’t really any happier than I was the day before. I, I mean, technically I was a lot more successful I guess, on paper, but you know, I realized, and I, I don’t know if you’ve heard this statistic, but there’s a study out there that says you’re no happier in the Western world. If you make over you, you’re no happier anything above 95,000. I said that wrong. If your income is above 95,000, let’s say it’s a hundred, 200, 500. You’re no happier than you were at 95. That’s kind of like the peak. Yeah. And so if that’s true and we kind of all know in our heart of hearts, there’s truth in that because we see these really wealthy, really unhappy people, you know, high, messed up family rates and all that stuff. If that’s true, then we really need something bigger to live for. We need, we were put on this earth for something bigger than just making money and being successful at work. And so I recommend that people find their big why before they’re really successful. Now, David, this is shocking. If you took the record profits, not average, the record profits of apple, general motors, Nike and Starbucks added those together and doubled that number. That’s the approximate profits. The us state department says is generated by human trafficking every

David Richter:

Year. Oh wow.

Paul Moore:

And so it’s a horrifying fact, but we have more slaves on the earth than any time in history right now. So I’m recommending that people think about it this way. If you were alive in the 18 hundreds, would you have been an abolitionist fighting against slavery for freedom? Hopefully you would’ve been, if you would’ve been alive or an adult in the 1960s, would you have been fighting for civil rights? Well, hopefully so, well this is a civil, right? This is slavery and it’s happening right under our noses. And so I’m recommending that people consider that if you haven’t got a big, why there’s a good one to consider.

David Richter:

Yeah. That, that is a really good one. And there’s good. There’s good places to put that money to, if you are in real estate, like operation underground railroad or a couple of these other ones that do the, they literally go in there and rescue children. Yeah. You know, from these horrible situations. So there’s definitely the opportunity, you know, to give for something like that. That is so good. And that’s, I always love when people bring up the why and cuz that’s really what keeps you getting outta bed in the morning and helps you, you know, during the tough days and during the really good times too. Right. But Paul, this has been awesome. So I’m gonna ask the last question I ask almost a hundred percent of the guests is you’ve provided a lot of value here on this episode. So how do people get in touch with you or how can they provide value back to you? What have you got going on? You’ve got books that you have written, you’ve got, you know, thing, you know, courses or sure. Or other things. What how can people get in touch with you?

Paul Moore:

Well, David, I spent years banging my head up against the wall, trying to figure out how to get involved in commercial real estate. And I didn’t know where the on-ramp was. So I’ve written a five day free eCourse and an ebook. On this topic, you can get that at our website. It’s Wellings capital that’s W E L L I N G S. wellingscapital.com/resources. And that’ll give you access to that. An ebook on self storage links to buy my other books on Amazon. Everything else you might need.

David Richter:

There you go there. That’s how you could get in touch with Paul and get that course. Or if you want are interested in that commercial side, which seems like everyone in the real estate investing game at some point is inve is interested in that side. So make sure you go there, we’ll put it in the show notes as well too. This has been incredible. Like in this episode we did, we talked about a ton of stuff, the shiny object syndrome that a lot of people, if they don’t, if they just keep going on the squirrel and the rabbit trails, you know, it’s like, you are not gonna be as successful as you can be. We also talked about hiring the best people around you or, or finding the best people, paying them well and doing exactly what they’re telling you to do and, and getting the help from someone else.

David Richter:

Who’s an expert in something that you’re not because you’ve got your own expertise. Love to talk about the big, why love your keys to success about the base hits and not always swinging for the fences for the home runs all the time. That was great, great stuff. And then I love that no happier, you know, at 95 K than anywhere else, but, and then really what is that big? Why in your life, that’ll be a good question for you to write down and, you know, fill that out over the next time you was before you listen to the next episode here, listen, you know, make sure you have that big. Why? So Paul’s been awesome having you on the show. Thank you so much for coming today.

Paul Moore:

Yeah. Thanks David. It was a real honor to be here.

David Richter:

So I wanted to say if you’re a real estate investor and you are tired of living deal to deal, or if you, if you aren’t good at the financial side, like Paul was talking about like, I want, I need the, you need the help. You need the help to keep the money and not just make the money. And if you need to get out of your rat race and spinning deal to, you know, living deal to deal and spinning your wheels, you can head over to simpleCFO.com. We have our fractional CFO service there. You can book a call with us or we can ping it to someone. If we’re not the right fit. I have a lot of people in my network on the financial side, and I’d love to make sure you at least get the proper introductions, cuz I don’t want you having the excuse that you’re not able to make more of the money and keep more of the money that you actually make without those good connections. So head on over there and remember, start making profit a habit in your business.

David Richter:

Thank you so much for listening to today’s show. If you found this episode valuable, could you do me a quick favor? Could you give us an honest rating within iTunes and be honest, you could say whether you liked it or not. And obviously with iTunes, the more reviews and ratings we have, the better it is for other people that are searching for Profit First and a podcast. So we’d love to be ranked on there and that’s thanks to your help. So we would really appreciate that if you would like to go give us a rating. Also, if you’re looking to connect with us further, I would highly recommend checking out our Facebook group Profit First for real estate investors. And that’s literally what, what it’s called. So you can type in Profit First for real estate investors and you’ll be able to find <laugh>, you’ll be able to find our Facebook group right there.

David Richter:

So come join active real estate investors who are supporting each other and growing their businesses and profits together. That’s what that group is all about. The link should be in the description below. And if you’re interested in working with us in implementing Profit First in your real estate business, we offer coaching and guidance. So if you wanna work with someone who’s actually Profit First certified and who works right now currently with real estate businesses, you can actually go start your application process by going to simpleCFO.com/apply or just go right to simpleCFO.com. And there’s an apply button right on there. If you wanna actually start your Profit First journey with someone who can actually walk you through those step by step and help, you know, and grow your cash flow. Thanks again for joining us for another episode of the Profit First REI podcast. See you next episode.

Outro:

This episode of the Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call @ simplecfo.com right now. We’ll see you next time on the Profit First for REI podcast with David Richter.