Welcome back to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. I'm really excited today. I have Lucas Jensen on the call with us today from Winter Capital. Welcome, Lucas.
Lucas Jensen:Hey, Scott. How's going?
Scott Dillingham:Awesome. Awesome. How are you doing this morning?
Lucas Jensen:Good. It's it's a little early, but we're we're doing good. We're up and we're up and going.
Scott Dillingham:Yeah. Yeah. And we're in different time zones. So for me, mean, it's 09:30 eastern, but for you, it's 06:30 eastern. Right?
Scott Dillingham:Or you're not eastern, but your your time. Yeah. So thank you for coming on so early. But what I what the reason I'm really excited to have you on, we've had so a lot of Canadians are investing in The States, and, you know, we work with a lot of Americans investing in The States too. And we're essentially an investor focused brokerage.
Scott Dillingham:So that's kind of how I met you. It's just, you know, between different deals and stuff. But I really love what you and your group are doing. And I'd love to hear your story and then we can, you know, enlighten the audience as to what you guys are doing and what future opportunities are there for the investors. So I'll turn it over to you.
Lucas Jensen:Right on Scott. Well, so I got into this probably about a year and a half ago. And I came from, I worked at Microsoft. I'm an electrical engineer by trade. I have my master's degree in electrical engineering.
Lucas Jensen:And I was at Microsoft and during 2022, when all the interest rates spiked, everybody knows all that. Also cut a lot of employees during that time as well because the interest spikes. And so I was one of the first rounds that got cut off that And I spent seven years working on Surface devices there. And so pretty much every Surface device that was out during that time, had worked on it at some point in time, right?
Scott Dillingham:Nice, that's awesome. I got the Microsoft Surface mouse and the laptop.
Lucas Jensen:There you go.
Scott Dillingham:That's probably you behind the would
Lucas Jensen:like to help design that.
Scott Dillingham:Super cool.
Lucas Jensen:So then I was like, I had already gone through this job getting let go before. Back in 2008, I was out of a job for almost eight months and had a very young family at the time and wasn't able to find work. And so I'd gone back to school, got my degree, got the job at Microsoft. I thought everything was going great. Then of course, I landed in the same position again, right?
Lucas Jensen:I'm like, well, what's going on? And I was able to get a job much, much quicker this time. And I'm still employed at that place as a senior electrical engineer designing advanced communication amplifiers for the military. Okay. But it showed a weakness in my strategy, right?
Lucas Jensen:All I am is just one job loss away from not being able to support the family, take care of the normal things. And so I'm like, okay, what do I replace this with? And so that's when I started jumping into real estate. And I realized that there's some economics to real estate, right? If you buy a single family rental, you have one door.
Lucas Jensen:And if that person vacates and it takes you a month to two months, you're on the hook for all the expenses that come along with that rental. And I'm just like, well, I can't afford to do that. That's huge risk, right? And so then I started looking at like two duplexes and quadplexes and short term rentals and stuff like that. And I'm like, okay, well this is a little bit better, but still it's kind of in that gray area of like, only, it can be catastrophic, right?
Lucas Jensen:Because the numbers just don't work out. So the numbers really start to work out once you get above like 16 to 30 units. Then if you have a couple vacancies or you have to do turns on your units, then it's not really hurting your bottom line, your normal operating income, right? And so the numbers just worked out. So I had to try and figure out how I get those kinds of deals, right?
Lucas Jensen:And so through this process, I've partnered with some really great people that have allowed me to get into positions where I can actually own some of these bigger units. We're closing on a 50 unit property in Bremerton, Washington, right next to Puget Sound Naval Shipyards that caters to the Navy and the shipyards over there and the contract workers that go over there. And that's fantastic opportunity. We expect to close that in like a week or two. But then that also led me to my another opportunity, the other strategy that we have, which is trying to help solve the affordability crisis in the Pacific Northwest between Portland and Oregon and Portland, Oregon and Washington.
Lucas Jensen:And so right now we have like a 16 unit that we're doing a condo conversion on. And the whole point of this is that we take the 16 unit apartment, we convert each individual one into condos and then we turn around and sell them to families that are at about the 80% AMI level in the market and don't really have a whole lot of opportunities to buy places. So then what we're looking for is charities from different charity organizations to help them with their down payment. And then if they still need it, then we'll take a secondary position on their title in order to help them avoid PMI. So then the ultimate goal of this is to get their payment, their taxes and their insurance, all that total cost at or around 2 to $300 maybe $400 more than what they're currently paying to where now they can step into home ownership with a little money out of pocket and with barely having to pay more than what they were before for the same style place, right?
Lucas Jensen:So we've been doing that. My partner has been doing it much longer, but to combine total, we're over thirty eight years of doing this. And we've put one of these projects out a quarter, once a quarter. And we like to pay our investors when they help us out with this whole thing. So we're solving a problem with home affordability, but at the same time, we're rewarding people for helping us out too.
Lucas Jensen:So this is a fantastic opportunity.
Scott Dillingham:I love it. I love it. So like how does that work? Is it considered like shared ownership? Like you guys still own it and that's like you're subsidizing kind of?
Scott Dillingham:Like I'm just curious how an investor makes money on that.
Lucas Jensen:Yeah, it's a whole process. So what we do is we set up our budgets because there's some definitely caveats that you have to be aware of when you're doing stuff like that. Like you have a responsibility for the property for ten years after you sell them when you condo them like that. So what we do is we go out and we buy three different insurances. So we get the insurance on the property because we're gonna be operating it while we're doing the conversions, while we're selling off the properties.
Lucas Jensen:So you can imagine these projects take anywhere between twelve to twenty four months to fully complete. Our investors usually participate for nine to eighteen months what we do is we pay out our investors first before we ever get anything. And then that way they're taken care of first. Okay. But the insurances that we pull on this thing are the regular insurance and we get also our insurance for any construction type of stuff that's going on.
Lucas Jensen:And then there's also a homeowner rider insurance allows us to be able to cover the properties with a one time cost for the next ten years. So then if anything were to come up on these properties, like the roof starts to leak or something starts to fail that should be covered underneath these rules, then it's covered underneath insurance. And so the way by that time, the only people that are really concerned about that risk is the sponsors, the ones that are still left in the deal, right? Because the investors get exited out. So it is non equity holding, but we do a 15% preferred rate that we pay out monthly for our investors while the project's And going then if it's less than twelve months and we get, once we give you back 115%, then we're good.
Lucas Jensen:And that could happen at month nine, that could happen month 10, but we at least wanna do the 15% preferred annual, right? And then after twelve months, then we just pay out the 15% preferred on a monthly basis. And so then your return could be 120% or 117% and you could have an EMX at like 1.2 or 1.7 or something like that. But the whole point is, is it's a short cycle with a very limited risk. We build up all of our budgets.
Lucas Jensen:We've been doing this for a long time and it's non equity holding. So there's really, we try to minimize the risk as much as possible. Obviously there's always risk in everything. There's always a chance that projects take longer and things always come up, but we've seen a lot of the stuff in the years that we've been doing this. And so we have lots of contingencies and plans for things like that, so.
Scott Dillingham:No, that's super cool. That's that's awesome. And it's actually a really unique strategy. Like, it's not something that you hear very often. So I think for those that are listening, it's probably piquing their interest.
Scott Dillingham:Like, what the heck is this? So do you have resources or anything that people can look up so they can see kind of the past projects and what you guys have done?
Lucas Jensen:Oh, yeah. We have a presentation that's available via the web that we can send out on John's profile. So John is my partner, John Lane. And he has seen the last three years on that particular sheet, we show seven properties that were done. Now he has more properties than that that he's done underneath different funds that he has.
Lucas Jensen:So he has a couple of different funds that he does. And so the one that I'm talking about right now is the current one that him and I are working on together to try and get done.
Scott Dillingham:Okay. No, that's super cool. That's that's awesome. And so I know you guys because we've we've reviewed like a couple of deals and I mean, the the things you're finding look fantastic. How do you I mean, without giving your secrets, of course, but how do you find these deals?
Scott Dillingham:Right. Because I mean, every investor, you know, we all know you make money on the buy. Right. And and we know the properties listed online. You know, there could be some some diamonds in the rough for sure.
Scott Dillingham:Yeah. But for the most part, we know, though, the those are the weaker ones. Right? The the best deals are the handshake deals that never hit the market. So how do you find these deals without sharing all your secrets?
Lucas Jensen:Well, we'll we'll share secrets. It's fine. So I'll focus briefly on so let's see. The 50 units, let's let's just take that one for example. It's up by the Puget Sound Naval shipyards.
Lucas Jensen:I was prior military. I served in the Navy for six years. I was a nuclear engineer in the Navy. And so I'm very familiar with Bremerton and the ports up there. And I know that there's contract workers, tons of contract workers that have to support the shipyards.
Lucas Jensen:And I know that they don't all live in Bremerton, Washington, a tertiary market in Seattle, right? Nobody knows where Bremerton is unless you know the shipyards, right? And that's the primary reason. And so when I seen this opportunity, it was actually presented to me by another person who was looking for properties. And I was like, oh, is a diamond.
Lucas Jensen:Like I knew it right away. It sits right on the water. I mean, look at it and it's got a water profile in front of it and then you see the 50 units. And I was like, well, is right across the bridge from where Puget Sound Naval Shipyard's entrance is and the ferry. And so you watch a ferry like dock into Bremerton.
Lucas Jensen:I'm just like, wow, this is an amazing opportunity. Then once I started hearing the business plan, it just made sense. I mean, there's no other way to do it. Like I've looked at hundreds of deals and none of them quite worked the same as this one did, but it required knowledge. You to understand how the shipyards work, what their what their workload is, what the next schedule is for the next five years to to really get comfortable with that strategy and know that there's room to grow because they're getting $3,300 a unit for those one bedroom, one bathroom units in a tertiary market in Seattle, which is phenomenal.
Lucas Jensen:Right? It's astronomical. But then there's room to grow on that one as well. We still expect to be able to move those rents up by at least $300 per per unit, at least over the next two years. Right?
Lucas Jensen:And if we do that, then then we're we're in huge profit mode with that.
Scott Dillingham:Absolutely, absolutely. And for those that are listening, are furnished units.
Lucas Jensen:Yeah, fully furnished. Yeah. And so the contractors send their people to us to stay while they're working there. And then oftentimes they'll have like rental vans and they all they all carpool over to the the shipyards together and and they come back together. They hold meetings in our common area.
Lucas Jensen:Like it's it's a unique experience. Right? So that's that's what really kind of piqued my interest on that one.
Scott Dillingham:Yeah. I love it. I love it. And I I don't think I told you this. Maybe I did in past conversations.
Scott Dillingham:I'm not sure. But one of my very, very first rentals I did as an executive furnished rentals. I had a property manager that specialized in having people that come out of town for specialized projects. And I'm telling you, you get well, you already know, but it's at least two to three times more rent than if it was just a regular, you know, rental unit on the market. Obviously, got to buy furniture and linens and all that good stuff.
Scott Dillingham:Right? But, yeah, it's it's an incredible investment for sure.
Lucas Jensen:Yeah. And the one thing you the the the risk with some of this stuff is well, a lot of it is that you do have sometimes a higher vacancy rate with some of these furnish finers, especially if they're like for executive level and things like that. With this particular property, because the demand, work that's the workload that's there, we're we're at 97% occupancy with a 10 to 15 person wait list on a regular basis, right? And people are staying in hotels until they can stay in our place. And it's like, that's a great problem to have, right?
Lucas Jensen:And so we're gonna be building off of that strategy getting more units and properties up in that area to be able to deploy a similar strategy, not the same, because you can't really replicate this particular property because it's right on the water. It's right next to the Puget Sound Naval Shipyards. It's 50 units. It's one of the bigger units in that area. So replicating is not what we're trying to do, but maybe creating a small offshoot that that complements it.
Lucas Jensen:Right? So that's what we're looking at right now. It's one of our one of our strategies going forward. We should have an opportunity for that here soon. Super cool.
Lucas Jensen:But then Super cool. The condos for converting, we're we're just taking advantage of the local laws. So if if nobody's familiar with like local laws in the Pacific Northwest, they suck for landlords.
Scott Dillingham:I've heard Avoid the blue areas. That's what they say.
Lucas Jensen:I mean, so so in in Tacoma, in Seattle, and in Portland, they have really crazy laws. Like you can't be and it's not it's not I wouldn't say they're crazy because they're humanitarian. Right? Can't move somebody out in the middle of winter it gets cold up here, right? Makes If sense, you have school aged children living with you and you're defaulting, then you cannot be kicked out during the school year to make sure that children don't get moved out of their places, right?
Lucas Jensen:So a lot of these things make sense, but at the same time, when you put all this onto a landlord that has running a business, right? It becomes very, very difficult.
Scott Dillingham:That's right.
Lucas Jensen:And so there are ways to kind of get around these things, but because of all these little laws that are going into place and the way that you have to, in Buryan, you have to pay for somebody's, if they're in default and you're kicking them out, you have to pay for their moving costs. That's a law. Like that one, I'm not a big fan of, right? But when start looking at these laws, go, okay, well what is this creating? It's creating a huge exit in multifamily, right?
Lucas Jensen:So people don't wanna own and operate multifamily in these areas. So we're getting really good values on some of these properties and finding some really good opportunities in there where people just don't want to manage and operate these things. So we're taking advantage of that and we're converting them into condos and sell them off. And so
Scott Dillingham:Yeah. I love it. I love it. So you're still investing, but you're you're not you're not bending the rules, but you're tweaking it. So that way, the rules and the laws that have come out don't necessarily impact you because you're doing a different investment style.
Scott Dillingham:So I like that.
Lucas Jensen:And we're also helping the community too. Mean, that's a big, that's one thing that really, really appealed to me when I was going through this is I can do what I like to do, which is investing, doing capitalism, right? And at the same time, when I'm done, if we have 15 units, 16 units, I have 16 families that are now homeowners where they weren't before, right? And it's all impossible because of how we run this and because of our efficiencies with how we're able to do this, that we're able to make money and also help people out.
Scott Dillingham:Yeah. No. I like that. It's it's really a win win. I mean, we hear programs with subsidized rent and stuff, but Mhmm.
Scott Dillingham:Subsidized essentially homeownership. Right? I think that's that's really cool. And I know you talked about some returns and obviously returns are not guaranteed. But I mean, the numbers that you threw out here are, you know, solid for for being able to help, you know, people enter the market.
Scott Dillingham:So I think that's that's incredible. And then we we had, you know, Freddie and Fannie buying all these bonds, right? 200,000,000,000 worth of bonds. So that's gonna lower the rates and help it make it a little easier for homeowners to enter as well. So that's that's great.
Scott Dillingham:No. Super cool. So I I wanted you on here because I know you guys are doing fantastic things. Like I said, I've seen multiple deals in projects that you guys are doing, and I definitely think it's investor worthy. And this is why I wanted to have you on so we could talk about this.
Scott Dillingham:But how does that work for an investor? So say someone's listening to this and they're like, I love what Lucas is doing. I want to invest with him or potentially invest or move forward. Yeah. What would the next steps be?
Scott Dillingham:What would that look like for someone?
Lucas Jensen:Well, they'd have to reach out to me. I mean, this is about a long term partnership. So I mean, even if somebody's got a bunch of money, we're not aligned in what we see as opportunity of the future or what we're currently doing for a business plan, then I wouldn't recommend investing with me. Mean, this is a partnership thing and it's built on trust. And so we need to be able to make sure that you understand our business plan and what we plan on doing and then are okay with the returns and the timeframe in which the returns come back.
Lucas Jensen:And then those all align with their goals. And then once we figure that out, then yeah, then we can then we start talking about the different opportunities. But I mean, honestly, the condo deals, we have lots of investors that are waiting to jump into the next opportunity. And since it's once a quarter, that gives an opportunity for other people to kind of sneak into there. We usually only get maybe one to three people that are new that have never done it before.
Lucas Jensen:They get the opportunity to jump in. Most of it's just capital that's rolling over because if once a quarter you have an opportunity to earn 15, a true 15%, right? Which is what most people are promising on some of these longer term multi families with a 15% IRR. But that IRR, when you break that down over time, what they're doing is they're saying, okay, well we're gonna pay you six or 8% cash on cash upfront, right? And then year three or year four, we're gonna refinance or we're gonna sell it.
Lucas Jensen:And then you're gonna get this huge lump sum. But while you're doing that, the cash you're actually receiving is only six or 8%. Whereas this one, we're treating it more as what's called mezzanine debt. It's just a secondary layer where our investors are coming in non equity and then we're just paying them out a handsome share for their participation. Since it's preferred, there's nothing guaranteed, but a preferred rate means that you have a preferred place within the payment stack.
Lucas Jensen:So we owe the money to the debt first, the senior debt first, and the second person that is investors. And so that's the order that has to get paid out before the sponsors get paid.
Scott Dillingham:Yep, no, I love it. And then also for somebody hearing this and say they wanna partner and move forward, what is sort of the minimum investment? Because that's the other thing too. Right? We don't want people to get excited and reach out to you, but then they don't have the capital.
Scott Dillingham:Right?
Lucas Jensen:We look for $25,000 as the minimum investment typically.
Scott Dillingham:Okay.
Lucas Jensen:And then we run these as five zero six c. So it is for accredited investors only. Okay. And so that's one thing. If we do do B offerings, you would never hear about it unless you had already known me because that doesn't allow us to actually advertise and talk about the deals.
Lucas Jensen:So there's very few opportunities that we run as five zero six B that's every once in a while we do.
Scott Dillingham:Okay. Okay. So no, that's fantastic. So how do people reach you? So we've got to wrap up the show here, but how do people reach you?
Scott Dillingham:And then, yeah, we'll we'll go from there.
Lucas Jensen:Well, they can email me at at lucas dot jensen l u c a s dot j e n s e n wintercapitalllc dot com. Okay. Or they can reach out over phone too. (425) 531-0777.
Scott Dillingham:Perfect. And what I'll do for those that maybe they're traveling and they can't write this down or whatever, it'll be in the show notes. I'll leave it in the show notes so you can reach out to Lucas directly. I know you've got a website and I know generally as there's new projects, right, you will create a website or a deal deck or whatever for people to review. And there's an option there to join your email newsletter I saw.
Scott Dillingham:So I think that's probably how you let them know about the deals, I'm assuming.
Lucas Jensen:Yes.
Scott Dillingham:Yeah? Yeah. Perfect.
Lucas Jensen:Yeah. We're now I'm actually designing and creating the next generation of our underwriting tools. So we actually should have some pretty cool stuff. I've been waiting to have that finished up to to do our deal room. But
Scott Dillingham:Super cool.
Lucas Jensen:Yeah. So hopefully hopefully I'll have all that in there in the deal room here pretty soon. We're that that's the place we're running.
Scott Dillingham:Love it. Love it. If this is a side note, and I, you know, I'm putting it out here in public. But Yeah. If you need help with that or whatever or some type of collaboration, let me know because we're also simultaneously building a tool that allows us to upload documents and everything, and it'll analyze everything and then let us know precisely how much the borrower could qualify for.
Scott Dillingham:Obviously, we're gonna double check everything. But, you know, with AI and using all the tools available, we're gonna have that as like an optimized stack to speed up our process. So
Lucas Jensen:It's it's quite amazing. Mean, I was able to take a spreadsheet and turn it into an app in in less than forty eight hours. And now now it's just about validating, making sure that all the numbers make make sense and and all that. It's it's getting super close. It's just, yeah, AI is pretty, pretty special.
Scott Dillingham:Yeah. Yeah. Yeah. No, it is. I I can't believe the things that you can do.
Scott Dillingham:We we actually I'm not gonna say it publicly, but we made it like a marketing tool with AI and it just it's incredible. Yeah. So
Lucas Jensen:Yeah. It's amazing. We'll have to we'll to we'll have to spend some time offline and
Scott Dillingham:and Yeah.
Lucas Jensen:I'll show you mine. My stuff, you show me yours and Alright. Sounds
Scott Dillingham:good, Lucas. Well, thank you so much. I greatly appreciate you for joining us and letting, you know, the investors know what's going on. And we'll put your details in the show notes. And I hope you have a fantastic day.
Lucas Jensen:Yeah. Thanks for having me, Scott. I really appreciate it.
Scott Dillingham:No problem. Take care.
Lucas Jensen:You too. Bye.