Paul Moore on Buffett-Inspired Real Estate Investing Strategies

Paul Moore (00:00)
She had homeless people living in some of the units, which is illegal.
⁓ It’s not safe. It’s not sanitary. ⁓ She had a lot of vacant units. She had high delinquency. ⁓ She was charging $60 for a 10 by 10 unit and the going rate in that market was $148. She had no little or no advertising, ⁓ no website, all kinds of things she was leaving on the table. And so by taking over that asset, by cleaning it up, and it was a huge cleanup effort, including new fences, new signs, ⁓ new paving, all kinds of things, evicting the ⁓ homeless tenants, and getting the rents up near market, which again, was like almost two and a half times higher than the rents were. There was a massive improvement in income.

Erika (02:35)
Hey everyone, welcome to the Real Estate Pros Show. I’m your host, Erika, and today I’m thrilled to be joined by Paul Moore, the founder of Welling’s Capital. Paul, it’s awesome to have you on the show today.

Paul Moore (02:47)
Erika, it’s amazing to be here. Thank you.

Erika (02:50)
I think our listeners are really going to learn some valuable lessons and insight with all that you’ve learned in the industry. So let’s dive in, Paul. For our listeners who aren’t that familiar with you, give us the rundown. How did you get started in real estate and investing?

Paul Moore (03:08)
Yeah, so I stumbled into a staffing company when I was only 29 years old and at 34 ⁓ exited to a publicly traded firm and I had a few million dollars in the bank and I thought that I was a really smart full-time investor and it turns out I was a really stupid not investor. I was actually a speculator and I lost a lot of money.

I made some money along the way, but I learned a lot of hard lessons that have really served us today. I eventually got into real estate investing, flipped dozens of houses and waterfront lots at a lake called Smith Mountain Lake in Virginia, built some houses, learned some painful lessons doing that, and eventually landed in commercial real estate in 2011, where we’ve been since then.

Erika (04:00)
Well how do you decide which areas in the market to pursue?

Paul Moore (04:04)
Well, we’re looking for, we managed seven, now eight funds in commercial real estate funds, and we’re looking for recession resistant assets. There’s no such thing as recession proof, of course, but recession resistant assets that generally are not correlated to the stock market. They’re not dependent on a war in the Middle East or a random CEO’s tweet. ⁓

They have lot of intrinsic value. Warren Buffett said value, excuse me, price is what you pay, value is what you get. And we’re looking for assets that have intrinsic value that was not discovered or acted on by a mom and pop operator. And when that asset is acquired, there’s a lot of ways to grow income, increase the margin of safety.

and therefore increase the profits and the value long term for our investors.

Erika (05:51)
You mentioned Warren Buffett. How has he inspired you and influenced what you do in investing?

Paul Moore (05:58)
Well, it’s crazy. know, Erika, I actually spelled Warren Buffett’s last name wrong in my first book. Excuse my second book. was on multifamily investing. And so I didn’t know anything about him, but a couple of guys came to me and I was blogging on bigger pockets and they said, you know, Warren Buffett, if he was a real estate investor, he would teach us so much. Would you like to learn more about him and write some blogs? And I ended up writing lots of blogs.

and I’m working on a book called Warren Buffett’s Rules for Real Estate Investors. Buffett said, you don’t learn to make money while you sleep, you’ll have to work until you die. And I found out that by flipping houses and building houses, I wasn’t earning money while I slept. I was working to get all that money, and there’s nothing wrong with that. But I wanted to build true wealth. And I think true wealth is having

you know, not, you know, the mansion or the boat or the car, but it’s having assets that reliably produce cashflow. And by having those type of assets, ⁓ we can actually, you know, we can have that true wealth. We can have freedom from being handcuffed to our desk and handcuffed to working night and day.

One thing I learned from Warren Buffett and Charlie Munger too is the fact that we learn a lot more from our mistakes than from our successes. ⁓ Warren Buffett’s partner Charlie Munger was obsessed and he was called the most brilliant investor in the world by Buffett and by Bill Gates. And he was obsessed not with coming up with some brilliant algorithm or some really smart investing strategy.

but he was obsessed with avoiding other people’s mistakes. And he thought, if I can avoid other people’s mistakes over and over and over, I will actually build wealth. And they’ve done pretty well for themselves. Did you know that if Warren Buffett’s Berkshire Hathaway lost 99 % of its value, in other words, if it was $100 a share and it went down to $1 a share, it would still wallop the S &P 500 over the last 60 years?

Erika (08:23)
That’s a very impressive.

Paul Moore (08:26)
It really is. And I really think that Buffett and Munger would have been happier as real estate investors, but of course, we’ll never know.

Erika (08:34)
So Paul, I want to talk a little bit about Welling’s capital. What made you get into multifamily and the commercial assets that you have?

Paul Moore (08:46)
Well, I called my first book, The Perfect Investment, which I know is a quite humble title, the first book on commercial real estate that is. And ⁓ I just was amazed to find out that residential real estate, as great as it is, it’s based on the values based on comps. And we all know that. Competitive, comparative properties in the neighborhood, comparable properties is the word I was looking for.

And but commercial real estate is based on math. You know, our moms always told us to be good in math and this is why, because there’s a wonderful formula, the value formula, the value of commercial real estate is the net operating income divided by the cap rate, which is cap rates sort of similar to comps, but it means that we can actually drive value. We can force appreciation. You know, if you get a

an asset with intrinsic value built in. If you can force appreciation, then you can make a massive difference in your wealth and the wealth of your investors. When I realized that, I realized, hey, this is Buffett’s making money while you sleep formula. And so we got into multifamily in 2014 and we pivoted when we thought it was overheated.

another Buffett idea in 2018 we added cell storage, mobile home parks, RV parks, light industrial and more. And we realized there’s no way we can be an expert in all that. ⁓ Buffett, Munger, others are quoted as saying things like, know, diversification is stupid. And of course that means when you yourself, your team are trying to do too many things. That doesn’t mean you shouldn’t own a lot of things, you should. But, ⁓

We decided to pivot, like I said, into fund management. Now we have eight funds at Wellings Capital we manage on behalf of investors.

Erika (11:23)
The website talks about finding hidden value in underperforming properties. Paul, can you give an example of a recent deal that fits that?

Paul Moore (11:24)
you

Yeah, one of our operating partners found a cell storage facility right outside of Las Vegas. Now the owner had ⁓ built it, her family had built it 42 years ago and the people who build aren’t always the best operators, but she had owned it for 42 years and

had homeless people living in some of the units, which is illegal.

⁓ It’s not safe. It’s not sanitary. ⁓ She had a lot of vacant units. She had high delinquency. ⁓ She was charging $60 for a 10 by 10 unit and the going rate in that market was $148. She had no little or no advertising, ⁓ no website, all kinds of things she was leaving on the table. And so by taking over that asset,

by cleaning it up, and it was a huge cleanup effort, including new fences, new signs, ⁓ new paving, all kinds of things, evicting the ⁓ homeless tenants, and getting the rents up near market, which again, was like almost two and a half times higher than the rents were. There was a massive improvement in income.

and margin of safety, which we really focused on, and ultimately on the asset value. And then by refinancing that asset, taking all the equity that we had put in out of it, and then reinvesting that in other assets, it was a big win for our fund.

Erika (13:18)
That’s awesome. Paul, what’s the biggest challenge you face with working on these projects and how do you overcome it to deliver returns to your investors?

Paul Moore (13:31)
The biggest challenge is finding great operators. ⁓ There are, ⁓ you know, we looked at 745 deals and operators last year, that’s 2024, and we only invested in five. ⁓ But here’s the crazy thing, Erika, and this is a warning, I think, to everybody listening. Every one of them looked good at first. When we got the website, the brochure, the memorandum,

⁓ It looked really good and it looked real shiny and the numbers at first looked really good until you dug into them and start asking hard questions. To get from $745,000 down to $5,000 was a huge challenge. And Erika, I can’t promise that those were the five best. They probably weren’t. But from what we could see, they, you know, looking at protection of principal first, income,

Margin of safety second, looking at them as a great operator, those all factored in. And a great operator can take a mediocre deal and make it work. A poor operator can take the best deal in town and destroy it.

Erika (14:48)
Yes, speaking of rough moments, earlier you were talking about how some of the mistakes that you made early on taught you so many lessons. Can you share one of those moments and one of those lessons that propelled you forward?

Paul Moore (15:45)
I thought we only had 20 minutes. It’s going to take me hours to tell you all this, but no, seriously, I hosted a podcast called How to Lose Money for years. And we talked about the pain of our lessons and the lessons of our guests. ⁓ One of them was, you know, like right when I got the money back in the 90s, ⁓ a year later, somebody told me about this amazing currency trading scheme.

Erika (15:47)
you

Paul Moore (16:14)
They didn’t call it a scheme, but it was. ⁓ the guy in Charlotte who had this amazing way of turning 2 to 3 % per month profits net to the investor. And of course, I didn’t dig deeply into it. Charlie Munger says, it’s too complicated and if I can’t understand it, I will never invest in it. And that’s what it was. But of course, I wasn’t listening to Charlie back in the 90s in my…

early to mid 30s. And so I invested in it. And that guy is, he built, I think it was 1800 investors out of their savings. And he is on year, I think 24 now of his 158 year prison sentence.

Erika (17:07)
That’s crazy. Paul, the other thing that I wanted to ask you with all of your experience, what for you has made the biggest difference when you are networking and building relationships? What kind of relationship or who made the biggest difference for you throughout your career?

Paul Moore (17:28)
⁓ You know, ⁓ my father, because he knew how to love people really well. He took a Dale Carnegie class, it sounds old-fashioned now, but in the 50s, ⁓ on how to win friends and influence people. And he actually memorized the names of over 700 employees who worked in the factory where he was an executive. And he would walk around, talk to them about their lives, their problems, their pain.

⁓ their son’s little league game, etc. And he was truly an amazing person. And even when the unions rose up in anger against that company, they always loved and respected him because he always kept his promises and he always treated them with love and respect.

Erika (18:22)
that. That’s an amazing answer. Paul, when it comes to networking in real estate and investing, where would you recommend people to go who are new?

Paul Moore (18:25)
me.

You know, I mean, if it’s online networking, I would go to bigger pockets for residential real estate and passive pockets ⁓ for commercial real estate. And if it’s local networking, would, you know, Google and try to find a local real estate investing association. And they often meet approximately monthly and likely are meeting in your town. ⁓

That’s some really good options, I think.

Erika (19:07)
Yeah. Paul, what do you see next on the horizon for Welling’s capital? What gold do you have in mind?

Paul Moore (19:09)
you

Well, I think we’re at the place, you we have over 200 million in equity under management, over a thousand investors. I think we’re at a place where family offices, smaller family offices, smaller institutional investors would really like what we have and like what we do. And we have not figured out how to crack that code yet and how to get some of those investors. And so I think that that’s probably next for us.

Erika (19:43)
Yeah. Are there, are there any strategies or anything that you’re looking at trying something different to crack that code?

Paul Moore (19:51)
Well, almost all of our thousand plus investors have come to us because they heard me on a podcast or they read one of my books or one of my blog posts. And I think we’re going to go out and, you know, begin to pay broker dealers to begin to bring some of those folks to us.

Erika (20:09)
Yeah, yeah, that makes a lot of sense. Paul, before we wrap up, if someone wants to connect with you, learn more about Welling’s Capital, what’s the best way for them to reach you?

Paul Moore (20:20)
They can go to our website, wellings.com. And if they want some free resources, free special reports, access to my books, they can go to wellings.com.

Erika (20:37)
Paul, thanks so much for being on the show. we need more people in this space like you who are building wealth the right way and also caring for those investors with their returns.

Paul Moore (20:50)
Thanks, Erika. It was great to be here.

Erika (20:53)
And for those of you tuning in, if you got value from this episode, make sure you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with operators like Paul who are out there building fantastic real estate empires. We’ll see you on the next episode.