Listen to the Podcast Here: Podcast Episode by Jason Lee – Premiered June 9, 2022

What You’ll Learn in the Podcast:

● Spencer’s unusual and non-linear start in the real estate business.

● How is Spencer finding and sourcing the amount of deals that he does.

● Spencer’s day-to-day changes as he started doing his own real estate investments.

● What criteria does Gray capital use when deciding to invest in a property?

● Why types of investments in Spencer looking to get into at the moment?

● What should a first time investor do when looking to get into real estate?

● What advice would Spencer tell his younger self.

Summary and Highlights:

Jason Lee interviews millionaire Spencer Gray, the president and CEO of Gray Capital, LLC, a commercial real estate management firm that focuses on investments and assets. They talk about Mr. Gray’s unorthodox start to venturing into real estate. Spencer Gray hashes out how he started a partnership with his friend and his wife by flipping houses, which is a real estate method that involves buying income-generating homes, remodeling them, and selling them for an even bigger profit. Aside from that, Mr. Gray also started out providing ingredients to breweries in his hometown, Indianapolis, and the rest of the United States.

He then sold his business and went back to real estate. He finds deals and the funds for these deals, but ultimately, he focuses on cash flow as the main foundation of his business. His company’s target market is those that are not so congested with investors, and of course, the market within the Midwest. Mr. Gray explains the risk between investing in or purchasing properties that produce passive income and properties that are considered fast-moving in the real estate market. Jason Lee explains the risks of buying property in his location with his real estate agency San Diego.


Jason Lee and Spencer Gray trade secrets on how to do great in the real estate business. Since Jason Lee has a real estate agency in San Diego and Spencer Gray is the president of a real estate investment company, they shared their insights on risks and cash flow in real estate.

1. Create connections 

Both Lee and Gray agree that newbie real estate investors should make many connections in real estate. It’s good to meet different people in the business because one might find their partner or their potential broker in real estate events.

2. Get a deal

Anyone thinking of venturing into real estate should grab the first good deal they get. Then, get the deal up and running, close it, and use the momentum to venture into other real estate deals. It’s a good way of learning how cash flow works while investing in properties and how deals are created and closed successfully.

3. Build a portfolio

Having several successful closed deals on one’s portfolio can attract buyers and potential partners, investors. In addition, it means that the person knows what they’re doing, even if real estate is hard to follow due to the fast-moving market.

4. Invest in other things aside from real estate 

Other lucrative markets to invest in, such as stocks and bonds. Like any other market, real estate has its highs and lows. If one’s capital is focused on real estate and the market crashes, they might find it hard to get up again since they might lose all their investments.


Spencer Gray built his company, Gray Capital, on chasing real estate risks. He encourages people interested in investing in real estate to find a deal and close it, which serves as a running start. He says that people should focus on cash flow since it’s the fuel that makes real estate deals run. Jason Lee, who has a real estate agency in  San Diego, agrees that all markets, especially real estate, involve risk-taking.

Episode 11: How Gray Capital Understands Cash Flow and Risk

Watch the Podcast | Read the Transcript


[Intro]Welcome to the multifamily millionaire podcast. The show that interviews multimillionaire real estate investors and top producers in the real estate industry.

If you’re looking to create passive income and achieve financial freedom so that you can do what you want whenever you want, you’re in the right place. Our goal is to simplify and make real estate investing easy for you. For more information, you can find us at

Jason Lee: All right, everyone. Welcome back to the show. Today on the multi-family millionaire, I have my friend Spencer Gray here. How are you doing Spencer?

Spencer Gray: Hey Jason, I am doing wonderful. How about yourself?

Jason Lee: Doing great. Super stoked to have you on the show. I think your story is really cool and inspiring to many. I want to just start out the conversation by just asking, you know, your bio says you started in media distribution agriculture, you founded some businesses. Just want to hear more about your background and how you got into real estate.

Spencer Gray: Yeah, absolutely. And just, you know, reading that it’s like, wait media distribution in agriculture real estate, like those things don’t really go together and throw, you know, music production and working recording studios in there also. And so as you can imagine, I didn’t have a very linear path to being a full time, real estate professional investing in multifamily syndicating apartment deals. And we’ve done, I think we’ve invested in over 9,000 apartment units to date. But kind of funny, I started in real estate, I was getting ready to graduate high school and I had a buddy, his dad was an attorney he’d been flipping houses. This was like just before the great financial crisis. And he was like, I want to teach my son how to flip homes. And part of that, he said, you know, son go out and get a partner.

So I got roped into it, borrowed some money from my parents cause they were entrepreneurs. They wanted to support me in kind of entrepreneurial pursuits. And so, and again, this is right before the great financial crisis, didn’t know what we were doing and, you know, ended up not being able to make any money, basically broke even on that. But was able to gain a lot of wealth in terms of knowledge in the idea that, okay, this whole idea of real estate investing is a thing that I can do. But I didn’t really do anything with it. After high school, you know, I went to college, I studied music production, music composition in Indiana university. Moved out to New York city, was working recording studios eventually got into media distribution, work for a media distribution company. That wasn’t really why I kind of got into the business in the first place. Moved back to my hometown of Indianapolis, wanted to start a business.

And I somehow realized that, you know, all these craft breweries had been opening up and they didn’t have any of the ingredients they needed brew beer. They didn’t have any hops. There was a hop shortage going on, calls up some breweries. They’re like, yeah, I can’t get any. And if you can find some, I would buy from you. I didn’t know anything about the industry at all, but I kind of, I got on a plane, went out to Yakima, Washington where they grew the majority of the country’s hops, started networking with hop farmers. And I started putting a bunch of crop features under contract, selling a bunch of future contracts for hops, and started brokering those hops to breweries back in Indiana and eventually started working with breweries all across the United States. We were pretty quickly one of the largest hop brokerages, certainly in the Midwest, one of the fastest growing in the country. And we’ve kind of really stumbled in the business, saw an opportunity and just kind of went for it. Fast forward a little bit, I decided to sell that business. And then I was asking myself and my wife who was my business partner, I am in that venture okay, what do we do? So what are we going to start? And we kept coming back to real estate.

And so we thought we were going to do it all on our own. And you know, we were looking at, you know, duplexes, single family homes, small multi families, cause I had done the flipping thing and I liked the idea of buying in Holden. But we just didn’t know kind of the right strategy in the right way to go about it. So we didn’t want to screw it up. We didn’t, we knew enough to know that’s what we wanted to do, but we just didn’t have all the experience to give us confidence. And eventually I got together with a multifamily syndicator. I didn’t even know what syndication really was at the time, but he was like, Hey, why don’t you invest in one of my deals? And I was like, I don’t want to invest one of your deals. I want to do my own deal. And he was like, okay, well that’s fine. Like what kind of deals you’re looking at? And you know, they were these small little deals and I was like, dude, you should just invest in my deals. They’re better deals than what you’re looking for.

And I was like, no, I want to do my own deals. Eventually. He said, Hey, how about this? What if I bring into the GP group, you get a little bit of accelerated returns, you know, part of the general partnership you know, maybe you invest a little bit more money, you put up your balance sheet to help guarantee the loan you know, help us out with some asset management, but you would be kind of be part of the deal. It would be your deal as well, I was okay, You know, that sounds good. We hadn’t been able to do a deal up until that point. And so we ended up doing that first syndication as a co-sponsor, co-general partnership with that group. And we were off to the races.

We, from that point on we co-sponsored 15 different multifamily syndications, about 5,000 units with that group. And we started investing as the limited partners with some other syndicators. And then, you know, about two and a half years ago, I said, you know, we’re doing really great with this partnership that we formed, but I think we can do things a little bit different, maybe a little bit better, a little more our style. And so I started building out my own team and we’ve been focused on our own acquisitions of, you know, large multifamily assets in the Midwest and been doing it ever since and have a great time doing it.

Jason Lee: That’s amazing. That’s a great story. And how long ago did you first get into real estate when you first started, you know, doing those co GP deals?

Spencer Gray: Yeah I was 27, 26, 27 when I started doing those deals as a cosponsor, I think plus, or minus maybe 28, but yeah, mid late twenties.

Jason Lee: Got it. And How old are you now?

Spencer Gray: 33

Jason Lee: 33. Yep. Got it. I mean 9,000 units and from then to this, you know, amount of time is pretty insane. So, It’s good for you. I guess my first question to follow back that answer is, you know, how are you finding and sourcing these deals to have, you know, this much deal flow to get up to that many units so quickly?

Spencer Gray: Yeah, it was through a lot of partnerships and really making that decision to not just do things all on our own. And so, like I mentioned, you know, you know, as a couple years ago I had done about 5,000 units as a co-sponsor also invested in about 3,500, maybe 4,000 units as a limited partner as well else. So really with no control just as a passive investor. And so really being able to work with a lot of different groups, not just putting all our eggs in one basket and we were able to do, you know, that many more deals seeing that much more deal flow, but even more than that, it was really maximizing the use of our own bandwidth and not getting so kind of tied down on, okay, we’re just focused on this one deal that we’re running everything. And we have to just focus on that. We had all the teams in places, you know, with, through our partners really leveraging their experience and their tracker and the systems that they had built.

So we could kind of do what we thought, you know, think that we were the best at, which was really, you know, finding these opportunities, underwriting those opportunities and then also just really kind of networking and building out our own investor base, which is what we were doing kind of this entire time, not just investing our own capital, you know, that’s great, but you know, we run out of capital pretty quickly when you’re investing in so many deals. And so just having, being able to focus on those pieces, really the investment strategy, building kind of the global investment plan and then really just networking with our partners and being able to build kind of that investor base allowed us to kind of grow faster and quicker than I think a lot of other groups. And then we were at a point of feeling confident that we really knew the operations as well, and we just needed to build the right team around us. So we could really kind of go vertical on a lot of those other aspects of the business.

Jason Lee: Yeah. I mean, it sounds like you learned a ton from your partners when you were first starting and then you took their knowledge and met people through it, seized the opportunity and now created your own thing, which is the goal in real estate, in my opinion, is, you know, branching off and doing your own thing. How has your day to day changed from when you first started, you know, in that role to what you do now?

Spencer Gray: Yeah, it’s definitely changed a lot from when we just started and, you know, and it continues to evolve or to evolve. So it went from, I would say macro to micro. Now I’m back at the kind of the macro again. So at first, you know, we were really looking at, you know, who we wanted to partner with and really kind of underwriting those sponsors. As well as the opportunities themselves, you know, looking for deals much less, we were doing asset management, but much less in the kind of the day to day operations.

You know, we had really good property management partners and, you know, they were doing a lot of the asset management, we were involved, but really kind of let them take the lead on it, but really not as in the weeds on the nuts and bolts, still like learning about it being involved, but it wasn’t as, you know, we had to make decisions every single day, you know, for those deals. You know, now doing, having our own projects, you know, we’re much more focused on the day to day. You know, we used third party management. So the real kind of day to day onsite still is done by our partners. But, you know, we’re still much more in that driver’s seat.

So there’s a lot more just kind of real time decisions that have to make. But one thing I’ve been really working on over the past year or so is again just putting the right people, the right people in the right places who are much smarter and much better at those tasks than I am. So again, I can continue to focus on what I think I am decent at, which is again, really creating the investment strategy, having a good idea where the market is, where it’s going and being able to really pick apart, you know, what makes a good opportunity, what makes a good investment to find that, you know, risk adjusted return that makes the most sense for us and our partners.

Jason Lee: Yeah. I think, you know, as a business owner like yourself, I think the most important thing to growing a company is making sure to hire the right people so you can focus on what you’re best at. And it seems like you’ve done a great job of doing that and, you know, kind of switching gears when you’re looking to purchase a potential acquisition, what does Gray capital look for in order to see whether this investment for you or if it’s not for you.

Spencer Gray: You know, for us, and this is just for our kind of an investment profile and our criteria is we are cashflow investors and most of our investor partners are, you know, focused on cashflow. Not that we do own have some opportunities and some of the focus of some projects, there still might be some great opportunity for appreciation to get a great equity multiple, cause I think that’s kind of the key for wealth building is, you know, cash flow in your income is great, but you really need to multiply your equity. And so how can we find a project that’s going to provide that nice equity multiple, but at the same time, we really like to see a lot of cash flow. You know, one because, you know, quick creating passive income is great, but really the most important thing is it’s the lifeblood of, you know, any business in any deal. You know, when I see strong cash flows or the ability to create strong streams of cash flows in the immediate future, that’s the main metric that we are, you know, we’re looking at lot of other KPIs, but kind of the first thing when we just, you know, we throw a deal into our model.

Okay. You know, what does the cashflow look like? And what’s the cashflow kind of year two. And then that first three years, because if we can’t get to a reasonable level of cashflow by really year two or year three, it’s just not going to work for what we want to do and what we want to see and our investors. So really cashflow is key, it’s king. Again, it’s the lifeblood of, I believe any business in any deal. So that’s what we’re really focused on. How do we find a good strategy and unique strategy to, you know, increase NOI, net operating income to, you know, deliver some strong cash on cash.

Jason Lee: Got it. So cashflow over appreciation is kind of your Mo.

Spencer Gray: Well, we like a balance. I mean, we really want to see a balance. I want to be able to, you know, at least double our investors’ money, you know, over a certain period of time, really kind of five years. But with that, we want to also see cash flow alongside of it. So if it’s just a 2X after four years, but it’s only 3% or 4% cash flow with along those years, we’re counting on a big sale or some kind of major capital appreciation. Well, that’s great and we can plan for that. There’s a little bit more speculation and there’s calculation that goes in projecting cash flow, future cash flows as well, but there’s just a little bit less of market sentiment and just market forces that influence cash flow rather than appreciation. I mean, obviously you both influence the other market forces influence cash flow as well. We just have that much more control over cash flow. And we try to paint as clear pictures or clear paths as possible kind of to our cashflow targets.

And so where it’s, it’s not, you know, well, I hope the market rents, you know, increase to this level in three years, it’s market rents are already at this level. The property is below those market rents. We are simply moving rents to market, not over you know, one year period, but that’s usually unrealistic, but you know, over a two to three year period, and that’s something that we can be, you know, reasonably confident and then know there’s additional upsides. That market rent is probably going to organically increase over that period as well. And then on appreciation, I mean, that’s, you know, a method of, I can change what the equity multiple is and how much we can get, you know, just by manipulating our cap rate, you know, relatively easily.

And everyone kind of, you know, has known that trick and, and knows the mechanics behind that. So it’s the easiest to manipulate. And so it’s important. And again, we want to see a high velocity of capital multiplication. That’s how you really build wealth, but if you don’t make any money on the deal, or if you lose the deal or if the deal goes south, because you don’t have the cash to get to that point, you know, again, it’s the lifeblood of the deal. And so you have to have that cash to, at least in our opinion, you want to have some cash to get to that exit.

Jason Lee: Completely agree. And what markets are you seeing, You know, these kind of returns that makes sense for your model.

Spencer Gray: Yeah. You know, it’s tough this year, the markets are moving so fast. It’s been difficult to kind of stay in front of it. And on top, I think we’ve done a pretty good job, but they’ve just, they’ve been moving really fast and we’re based out of Indianapolis. And so because of that, just our geographic proximity to other markets around us, we focus on typically markets in the Midwest and markets in the Southeast that are relatively close to us. And typically secondary and tertiary markets, markets that aren’t too overcrowded from institutional investors. But they’re large enough that does have enough capital activity going on, but they’re just slightly mis-priced.

So they may have, you know, very strong population growth, really diversified economies, strong employment growth, but not every investor from, you know, New York city is piling into some of these markets. So we get slightly elevated cap rates, ability to go and provide more cash flow. We’re still seeing, you know, good appreciation. It’s just not the, you know, the crazy, you know, appreciation that we’ve seen in some markets. And so when we’re focused on cashflow, you know, markets like Indianapolis, markets like Kansas city, you know, markets like Chattanooga, Tennessee, Louisville, Kentucky, you know, those are some of the markets that we really like, that we focus on and that we’re investing in right now.

Jason Lee: Got it. And as a broker, I really see two, you know, main types of investors. I see the active value add investor that goes in, you know, might clear an apartment building renovate them and then [15:41 inaudible] with market rent or the more passive investor that kind of raises rents, you know, 5% to 10% a year here in San Diego at least. And kind of just is more of a passive investor. What is more your Mo and your business model when it comes to buying opportunities?

Spencer Gray: Yep. That’s a great question. For us It’s finding, you know, where are we receiving inappropriate risk premium on our investment in the business plan itself? And if I had to put us in one of those groups, we’re definitely more on the passive side, we focus on stabilize assets and where we don’t have to, you know, bring the property down to 30% occupancy and completely release it and do a 30,000 per unit renovation. And we’ll look at those projects. We will underwrite those projects. But what we typically discover when we do that is that, you know, you certainly can get a higher rate of return, but you also a are going to be paying up a little bit for that upside because that this stressed opportunity is there. Other buyers are going to understand, you know, the potential for that. And so you may be buying, you know, a sixties or seventies vintage property that needs a full renovation, but you may be buying it at a four cap or you know, a three and a half cap still where you could buy an asset for a five cap, or, you know, it’s hard to even stay on top of where, you know, cap rates, different markets are these days.

And, you know, so overall when you put in your model in, in those cases, cap rates sometimes doesn’t matter as much, cause it’s not, when you’re doing a full reposition like that, it’s not, you’re not buying the in place cash flow. You’re really buying for the potential of future cash flows and what you can and do with it. But still at the end of the day, if you model out what you can do, if you’re going to put that money in, lease it up, raise rents, your return has to be significantly higher than that, you know, passive stabilized strategy because there is a unbelievable amount of moving parts in that reposition in that very heavy value add, not that you can’t create an incredible amount of value, but if that, if a lot of that upside is already priced into the purchase price and you can crank out a 17% IRR over that, you know, I would say fairly risky strategy. If you can get a 15% IRR on a stabilized project, more or less passive going in still creating value, still forcing appreciation, but much simpler, which much less moving parts, to us we’re getting a much better risk adjust to return rather than taking significant amount of risk and getting, you know, a few hundred more basis points of return. So typically, you know, we fall much more in that kind of stabilized passive category, mostly because that’s where we feel like the best risk premium is. And we’re being compensated appropriately for the amount of risk we’re taking.

We don’t think we’re really a significant amount of risk cause we can really quantify most of the elements of risk in this types of strategy. And then we can mitigate it. So now are there some full reposition, deep value add opportunities out there that make sense? Absolutely. You can make a lot of money doing that. That’s just not the risk profile that we like or our investors are at or much more in kind of the stabilized kind of core plus, you know, light value add kind of risk profile rather than, you know, a full value add, which I think really goes up onto the opportunistic side of the risk curve.

Jason Lee: Yeah. It’s interesting hearing that. All great points by the way, but my partner and I, all the acquisitions we bought here in San Diego, I feel like nothing makes sense numbers wise, unless you do a heavy value add. So we have to take that risk, which is much more riskier than a light value add like you said, to get it there. So, I mean, that’s why I feel like, you know, investing in other markets could be a good idea because you know, it’s really tough to find a deal that makes sense here in California, where you can just raise rents and the numbers will pencil. Like it’s tough to cash flow here for sure.

Spencer Gray: Yeah. No, absolutely. And most, I would say most markets are like that, you know, especially California, most of the west coast a lot of, you know, the Eastern seaboard as well, especially at, you know, New York and new England, the cap rates are just so low that you’re not getting any cash, so you’re not getting, you know, really any risk premium, but if you can, you know, create something, enforce an appreciation in those markets, I think that strategy, you know, makes a lot more sense. It’s just, you know, those, aren’t the markets that we’re in or we’re focusing on, but I think it, again, you have to be compensated, you know, for the work and in those markets because the cap rates are so, because there’s so much appreciation, my gut is you guys probably are getting an appropriate risk premium for taking on those projects. But if you like the idea of cash flow, sometimes it’s worth looking out at markets that may be a little bit more off the radar if cash flow and, you know, passive income is, you know, a part of your, you know, your investment criteria and return profile.

Jason Lee: Yeah, no, definitely. I agree a hundred percent. I mean, cashflow is extremely important. I think it’s the best part about real estate. I mean, the reason why I got into real estate is because I love the idea of passive income. So I think it’s the number one thing that I want to build. So if someone like me or a listener is looking to look in a market that’s not local to them, right. Let’s say, you know, I’m in San Diego, I want to, you know, invest in Indianapolis. What advice would you give to that person who’s looking to get into a new market?

Spencer Gray: Like many, you know, challenges in real estate. You know, the solution often lies in your ability to network and reach out to people. Because you know, you can fly out to a market and, you know, kind of stumble around and go out to some of the cool restaurants and where you think is the place to go to or whatever. But you know, it takes a long time to learn a market and you really have to have some local expertise, some, you know, boots on the ground or at least someone that has, you know, significant amount of interest experience in that market. You just can’t replace that. And so whether that is a, you know, a partner that you’re going to be working with, you know, a syndicator or a team that you’re putting together, you know, that the, you know, a broker lender, insurance agent, you know, GC, having a couple points of contact that you can just bounce ideas off of because you know, many markets take just Indianapolis as an example, you know, there are, you know, one intersection, one part of town may be a great place to invest, but you know, two or three blocks over, you may not want to go near, you may not want to touch. And so having that, you know, just that local knowledge that you, there’s no way to get that by just, you know, flying in, you know, once or twice. And, you know, again, going to the few cool restaurants and going to a couple parks and going downtown, you know, it just, you’re not going to learn it that quickly. And that’s why honestly, why we keep coming back to investing in markets that we know really well.

And, you know, that’s why we keep investing in Indianapolis because sure, are there markets that have higher growth rates? Like a hundred percent, absolutely. But I don’t know what I don’t know about those markets. And I know I can be much more effective and make a lot more money in Indianapolis than I can make in a, you know, Atlanta, Georgia, or Phoenix or Las Vegas, all great markets and people are making tons in those markets. And I recommend people finding good operators and syndicators in those markets if they want to go to those markets. But we’re going to, you know, make our returns, you know, at a similar return, if not better, by investing in what we know and really exploiting the inefficiencies, you know, in those markets, which is why real estate is exciting, is that not everybody knows everything about every real estate market and every piece of property and what’s going on. And so if you have that inside track, you can use it to your advantage. And, you know, in the stock market, it might be called, you know, insider trading, but no such thing in real estate, we can use that insider advantage to make a lot of money. And so that’s what we’ve chosen to do.

Jason Lee: Yeah. That’s a phenomenal answer. I think real estate just boils down to who you know, right. You got to get the information from the experts in each area. Whether it’s the property manager, a local syndicator like yourself or a broker, etc. Following up from that question. I mean, if someone’s newer to real estate investing, what advice would you give to them? If they’re looking to just get started and buy their first deal.

Spencer Gray: Two piece of advice, one just like we said, just talk to as many people who are doing it, just network, you know, just get out there, go to meetups, go to your local REIA meetings. You’re going to learn so much and [24:03 inaudible] meet your, like your partner, your broker, you know, you’re going to meet so many people part of your team and just learn what’s going on and what not to do. Second piece of advice, just do a deal, just get that first deal done. You don’t have to make a, I mean, try to make money doing it, but focus on getting the deal done, understanding the process, getting across the finish line. And it’s not going to be, you know, the home run. It’s not going to be your last real estate deal, but it’s important to get that first deal done and then take that momentum of getting that deal done to move on to the second deal.

And then the third deal, the next two deals are going to come right after the first you know, Michael Blunt calls this, you know, I think it’s the, I forgot the term, oh, it’s the law of the deal. So you did the first deal. The next few deals come very quickly. It happened to us and it was so many people that it’s happened to. The first deal’s going to be the hardest. The second deal is still going to be hard, but a little bit easier. The third deal, you’re going to feel like you’ve done this before. Feel a little bit better about it. And then you just have so much momentum to continue to build your own portfolio. Because you’re not going to doing one real estate deal is not going to get many people to where they want to be and really achieve their goals. It’s going to be doing many deals over time and it’s a marathon. It’s not a sprint. And so you really just, you have to get started. Cause you know, time in the market is more important than timing the market. And if you’re you in your first deal, you don’t know what is a good deal or bad deal. So just do a deal, surround yourself with people that are smarter than you, try to minimize your mistakes, but see it as education, see it as investing in yourself. And if you get your money back, that’s a great investment in your education. You can go on to do your next couple deals and make a ton of money, but just get the first deal done.

Jason Lee: Yeah. I love that answer. I think so many people who are looking to get into real estate deal with analysis paralysis, right? They’re analyzing hundreds of deals, but they never actually, you know, write that equity check to start their journey.

Spencer Gray: And I was there and I’ve done it too. I didn’t mention this earlier, but I thought about getting into multifamily investing back in 2013, before I started the hops, I was kind of in between just before I started the hops business, I was looking at multifamily. I thought the market was too hot and I just wasn’t sure. And I was just trying to find the perfect deal that had no risk. Well that’s not investing. There’s always risk. There’s always some speculation and people always think the market is hot. Market’s always hot. It’s either always hot or it’s always cold, but you know, that was in 2013. If we had taken action, you know, yeah, we’ve done a lot of great things and we’re very grateful for what we’ve done since 2015 or so, but man, two extra years in 2013 when prices were just incredible. So yeah, that analysis paralysis is a killer.

Jason Lee: Yeah. And the law of the deal is very interesting. Cause when I did my first deal the two deals came right after that. So it’s kind of funny how you say that. I never really thought about that.

Spencer Gray: I didn’t either. I heard Michael Blunt talk about it and I was like, yeah, that’s exactly how it happened. I did him a first deal and then it was bam, bam, bam. And you know, and then you don’t look back.

Jason Lee: Yeah. And that first deal is it’s all about learning. Learning is the absolute, most important thing is when you’re doing your first deal, cause you’re not going to hit a home run if you do That’s great. But I mean, you, like you said, if you get your money back and you’re still in the game, then you know, you’ve made so much headway in that first deal. So, It’s good stuff. So if you were to go back in time let’s say let’s go back to your first real estate deal. What would you, you know, tell your former self or what you know now?

Spencer Gray: That’s a good question. You know, if I was going back, well, not from my first multifamily deal, but if I went back to the first real state deal, kind of that flip, I would have told myself to, you know, keep doing it because, you know, contrary to what we were just talking about, I really didn’t keep doing deals right after that initial first deal. I started doing deals after I had my first multi-family deal. And part of it was, I mean the market just crashed, it was great financial crisis. So that definitely put a damper on things, but I wish I would have kind of gotten back into real estate a little bit sooner than I did. I wish I would’ve kind of, and I was sort of involved on the side a little bit, but I wish I was a little bit more active in pursuing kind of real estate entrepreneurship. I didn’t, you know, I kind of took, you know, a good, almost a decade off from really doing it full time and I wish I would’ve kind of kept doing it.

So I would say be persistent, you know, there’s going to be a lot of bumps in the road, but I would’ve told myself, just keep thinking about real estate a little bit more. You know, you’re going to see some other opportunities, but just go to straight real estate. I say that, but in reality, I don’t, I try not to have any regrets because you know, I’ve started businesses that weren’t that successful businesses that were, I wouldn’t be where I am today without those failures and just the way things worked out. So definitely I would’ve told myself to look at real estate, but you know, we are where we are.

Jason Lee: Yeah. I mean, you’re definitely a real estate guy. Why would you advise someone to invest in real estate instead of another investment such as stocks, bonds, or, you know, other business plans?

Spencer Gray: It’s a good question. I don’t think, I think real estate is a great investment. I don’t think it’s the only investment. I don’t think it’s bad to invest in other things. Personally I’m highly, my net worth is highly concentrated in real estate, partially you know, that’s the business that I am in. What I love about real estate compared to traditional investments, you know, like stocks and bonds is, you know, with stocks, public equities, you know, you have chance for price appreciation typically, but very little income generation, you know, the dividends are, you know, pretty small, but you’re taking a decent amount of risk and there’s no tax benefits.

In terms of, you know, fixed income in bonds, Yeah, you can get some income, but it’s, you know, today it’s next to nothing. Really, You’re still, it’s negative real yields on bonds. So you’re not really getting any income. You could go out and go a little higher on the risk scale and get a little bit more, but you’re getting no upside. Real estate, I mean, there are tax advantages in bonds, you know, for municipal bonds, but that’s about it. For real estate though, you get appreciation, you get upside, you also get income significantly more, multiples more than any bond or stock dividend can throw off. There are also incredible tax advantages from the amount of, you know, write offs, depreciation, interest write offs so that income can essentially be sheltered from income tax. And there’s a variety of other, you know, tax saving strategies that is unique to real estate. I see real estate as this really nice balance of having cashflow, solid income production as well as value in capital appreciation while also being very tax efficient. So to me, it kind of fits right in this sweet spot of just about the perfect investment.

The only reason that it’s not a perfect investment is the illiquid nature of investing in real estate. You can’t just sell out of it right away. That’s where the stock market and bonds have their advantage. You can move in and out within, you know, a couple seconds. Real estate, unless you’re investing in rates, which a lot of those benefits that we’ve mentioned go away. You’re kind of stuck in that investment. But there are advantages illiquidity. You usually get an illiquidity premium, you should get a little bit of higher return on your investment. Also some people like it, cause they’re like, Hey look, I invested, you know, that 50,000, 100,000 whatever I’ve invested in real estate, I can’t get it. I can’t get at it.

And I kind like that. Cause if something happened and I would panic sell, I can’t do that in real estate, but technically not being a liquid asset, that is a disadvantage. But being able to provide income, appreciation tax benefits, it’s really hard to find another investment that really kind of lines up to real estate. And I think that everyone should have it as a part of their portfolio. I don’t think anyone else, unless you’re in the business should have, you know, a hundred percent real estate, net worth, or portfolio. But I think, you know, what’s the point of investing in bonds, I’d rather have a little bit of cash or you know, some other risk protection and then have a real estate rather than, you know, bonds. I’d rather be 50/50 stocks and real estate rather than 60/40 stocks and bonds or something like that. Not real estate advice by the way, or not financial advice.

Jason Lee: No definitely. I think that real estate is amazing because you have more control of it than any other asset. I mean, you can’t really buy stocks at a discount, compare the market price. You’re always paying market price for a stock. You might time it right If you get lucky. But you can never buy the discount. Real estate is a very irregulated market, right? It’s not regulated nearly as much as stock. So that’s why huge, you know, wealth is built in real estate and you know, the tax advantages are better than any other asset class.

Spencer Gray: Yeah, again it’s those the, the market inefficiencies public markets are so efficient. There’s so much price discovery. There’s so many participants that the price, the price, you’re not getting a discount, exactly to your point. You can find something [33:08 inaudible] in real estate and buy it under market and immediately have built in equity in upside and then be able to control what’s going to happen on for that investment, you know, their trajectory, what decisions are made absolutely a hundred percent.

Jason Lee: Yeah. A lot more moving parts. So it’s a lot of things you control to make sure the asset, you know, performs well and you’re buying right. If you’re dealing with a mom and pop owner that doesn’t really know values and they want to sell quick, cause they’re in a pinch, you know, that’s where good deals are found. So kind of moving on to the next topic here, is there a major business mistake that you’d like to go over that where you learned, you know, so much from it and it’s kind of helped shape your current career and where you’re at?

Spencer Gray: You know, there’s probably not one, you know, huge mistake. It’s a lot of small and medium mistakes that have, you know, added up that I’ve tried to learn from. You know, one big mistake though I would say is, you know, is not scaling fast enough. And this is more of building my business rather than, you know, real estate, but it was waiting until you, waiting to hire, waiting to build the team until you absolutely needed that person or that team member or that system instead of building the systems and the teams in anticipation of the task at hand, knowing what the goals are and what the objectives are. And, you know, knowing the tools, but still being apprehensive because you’re spending money and wanting to, you know, keep cash, and not deploy funds, you know, to hire somebody where it’s like, I don’t know how I’m necessarily going to pay this person, but I need this person for all these projects that we are going to be doing.

And this was a problem for me, you know, SP actually kind of early on kind of getting started. Because first it’s like, okay, well I can do a lot of this myself. I kind of know all the pieces, I’ve been in different roles, but then it’s like, no one can do everything and I’m not the smartest. I’m not the best at a lot of these things either. There’s certainly people who’ve been in the industry for, you know, years more than I have that can run circles around me. But it’s coming to realization that you have to be ready to hire and build the team before you fully need the team.

And that’s something that’s taken me just a longer time as an entrepreneur than it probably should have, and it kind of comes down to the same thing as analysis paralysis. Sometimes you just have, when you see the task at hand, you know, [35:39 inaudible] whether that’s, I want to buy my first house or I want to, you know, build this company or I want to build this company to buy all these assets. Okay, well, you know what the task is, you know what the objective is, you know, okay, what’s the team, whether you need them, I need them this month, six months, or a year from now, we need the team. Like let’s just put it in place and let’s go. So it’s always taking action, taking the appropriate action and you know, what you need to do. You know, you’re telling yourself, these are the, I know I need to take these steps, but you are making excuses and I’m making excuses of why we can push some of those decisions off until tomorrow when they needed to be made yesterday.

Jason Lee: So yeah, honestly, I think that’s something that I need to take personal advice from you. Cause I am at a point in my business right now in my brokerage business where I have way too many transactions and I can’t handle my own and I have a small team, but I don’t have that go to, you know, administration’s operations manager to keep growing and scaling. And I think it is that, you know, paralysis that, oh, like I can do it myself or I can do this and that. So I think that’s great advice.

Spencer Gray: No, I need to take my own advice. I need to take the advice as well. And I think everyone should, but because we all there’s always, and Brandon Turner honestly was the one who kind of gave that advice. I was at bigger pockets conference a year or two years ago or whatever. And he was giving a speech and he basically said what I said, you know, that thing that you need to do, you know, that person who you have to hire, you know, who that is, or, you know, the role, like, you know, you need to do it, just do it, you know, stop putting it off. And I remember listening to him and I was like, okay, yeah, I’ve got like a list of four people I need to hire.

I’ve been pushing off. I just need to go do it. And I went and did it, and it was one of the best decisions I’ve made. And I need to keep reminding myself of that because it’s easy to stall out and say, okay, we’re good for now. But one of you know, are the key tenants, you know, of our company at great capital is this progression and we got to keep moving forward and we have to keep the momentum going, you know, rolling stone gathers no moss and we just don’t want that much moss gathering on us. And so we just got to keep taking steps.

Jason Lee: Yeah. I mean, that’s great advice I need to take for myself. And I’m glad you have a great team with you. It looks like you and your wife work together too at your company. So that’s really cool. I mean, that’s amazing. How’s dynamic between balancing your personal, you know, life topics with business with your wife, you know, I think it’s amazing.

Spencer Gray: It’s amazing. It’s fun. I saw my parents start a business and so I was kind of like used to it, so it was like sort of normal to me. I will say this when my now wife, my wife and I now started a business before we were married. We were dating. We’ve been dating for a little while. We started a business together. We ended up getting married. So, you know, we were able to kind of figure it out. And in most people, I think it really puts a marriage to a test of, you know, what situations can we deal with each other? And I think we have a unique opportunity and it’s a double edged sword a little bit because some people have, you know, their personal life and their business life completely separated. And you know, maybe not even talking about it when, you know, when they come home that much, ours is like pretty integrated. Not that we don’t like take time, like we’re not doing business stuff right now. We’re just doing stuff with our family.

But you know, we’re able to kind of integrate our life and build our life around kind of what we want to do. And that includes our business too, because if we’ve got stuff going on with our family, well, you know, my wife is our chief operations officer or senior vice president of operations. And so it’s like, we can kind of make all this happen and frame our business and our life kind of around each other. But it does take, there are unique challenges to it because, you know, having my wife as a, you know, she’s not an employee, she’s a partner, you know, she is a founder with me, it’s harder to tell my wife something than it would be to tell someone that’s not my wife.

Because you know, obviously we have to go home to each other and we’ve been yelling at each other all day, which we really don’t do, but it’s a different dynamic, but it takes practice to decide what you’re going to take home with you and learning. And it’s pretty subtle, but like, what are the right thing to work on? You know, when we’re at home together and what are like the things I like, we can just deal with that later. So it’s been a process. We enjoy it. I don’t think I would do it any other way. It’s probably not for everybody or for every couple. But if you can make it work, there are a lot of benefits for doing it.

Jason Lee: Yeah. I think it’s amazing. I mean, you always have something to talk about. You’re always building together. You’re always talking about something, whether it’s personal or business. So I think integrating the two is in my opinion is great. So it’s cool that you’re a true power couple. It’s awesome.

Spencer Gray: Yeah. I appreciate that. You know, the way we say we’re just partners, we’re produce partners in life and whether that’s, you know with kids or in love, or, you know, in business, we’re just doing this thing together and, you know, it’s more fun doing it with somebody else and, you know, unfortunately I wouldn’t want to be doing it with anybody else and yeah, no, it’s great.

Jason Lee: No, that’s amazing. We’re running out of time here, but before we head out, it’s been an amazing podcast with you. Is there anything you’d like to say to the audience or where they can learn more about you if they want to reach out after the show?

Spencer Gray: Yeah. You know, there’s a couple ways you can find us or reach out to us you know, if you just Google great capital, we will pop up. You know, I’m pretty active on LinkedIn and bigger pockets. If there’s kind of one resource I’d encourage everybody to check out, We put out a weekly newsletter that, it’s essentially we’re aggregating all the latest research reports, data that comes out. And new articles specifically related to the multifamily industry, real estate, and the economy. So like all of these kind of like really, all these analytic firms that put out all these research reports, they don’t always advertise when they’ve put them out. They don’t do a great job of disseminating them. We’ve built a team that all they do is find these reports, aggregate them. And then we send them out an email every week. So hop on over to And you can sign up to receive that free weekly newsletter. So that’s about it.

Jason Lee: Fantastic. Well, one last question before we go, why is multifamily the best investment you can make?

Spencer Gray: Multifamily is the best investment you can make right now, specifically right now in 2021 due to really the macro-economic conditions that we’re seeing incredible amount of, you know, real price inflation, we’re seeing wage inflation. We’re also seeing, we’re at a decades high since really the mid-seventies high of household formation as well with a record low supply of housing. You know, housing supply per capita is essentially as the lowest it’s been since the 1997.

And all of these dynamics with you can’t even buy a single family house is creating a nation of renters. We’re going to see continued rent growth, and we’re going to see continued cap rate compression. Now, is it the best investment ever? I don’t know, there’s probably some cryptocurrency that you can go, you know, 10,000X on and there’s the equal amount of risk associated with that. But if you’re looking for the best risk adjusted returns that I’m aware of, it would be investing in cash flowing multifamily real estate in tax friendly and business friendly states.

Jason Lee: Phenomenal answer. Well, Hey, thank you so much for your time today, Spencer, and hope to speak to you soon.

Spencer Gray: Absolutely Jason, appreciate you having me on talk to you soon.

Jason Lee: Thank you.

[Outro] Thank you for joining us on the multifamily millionaire podcast. The show that interviews, multimillionaire real estate investors and top producers in the real estate industry. We’re here to help you create passive income and achieve financial freedom so that you can do what you want whenever you want. We’ll catch you next time on the multifamily millionaire.

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