Why Real Estate Investors Need Liquidity: Gold, Memory Care, and Market Cycles

Kevin DeMeritt (00:00)
that translates and the opposite is true where we have a lot of real estate investors and say, look, in those bad times, I had zero liquidity and it would be nice if I had liquidity in the tough times. Well, their stocks were down, their real estate was down, you know, all that kind of stuff and gold had skyrocketed. So we had enormous amounts of real estate investors who loved the liquidity either where they could sell the metal at a higher price and pay a mortgage because the government wasn’t making people, you know, pay their mortgages through.

Michelle Tack (00:10)
Yep.

Kevin DeMeritt (00:27)
you know, COVID and, and, ⁓ you know, at certain times. And so how do you get that liquidity? Precious metals gives it to you.

Michelle Tack (02:06)
Welcome to Real Estate Pros. I am Michelle Tack. I am the podcast leader for today. We have a great operator with us today, Based in, California, Kevin DeMeritt Kevin, say hi to the group.

Kevin DeMeritt (02:18)
Hi everybody, nice to be here.

Michelle Tack (02:19)
⁓ Kevin’s got a great speaking voice for podcasts. He’s probably been told that before, nice low voice, which resonates well. ⁓ But the reason that I’m excited to have Kevin here today is for a couple reasons. One is that he has ⁓ funds and investments in one area of real estate, and that is around memory care and a fund about that and acquiring

real estate to help ⁓ as we continue to mature ⁓ and need that demographically ⁓ for people in the United States. And also has a fund regarding ⁓ the precious metals environment ⁓ that is interesting and certainly can augment the investment strategy as we think about real estate as well.

So with that, Kevin, for those that don’t come from either the precious metal world or in fact, the memory care that you’ve done, can you describe your businesses and what markets you serve, please?

Kevin DeMeritt (03:31)
Sure,

yeah, on the real estate side, have a fund, Wilshire Finance Partners, and that fund specializes in long-term care and memory care, ⁓ where we make bridge loans to people who want to expand their memory cares or their bridge, ⁓ know, with the bridge financing. ⁓ And that fund has about $100 million in it. And so we’ve specialized very specifically in… ⁓

those areas because we believe the demographics and so on and so forth look great there. On the precious metal side, it isn’t a fund. We actually deliver physical precious metals to people’s homes. Yeah, that’s fine. ⁓ And we also deliver it to ⁓ your IRA or if there was a large 401k or something like that that needed gold in it, then we would physically deliver the precious metals to those people. So they’re individual investors.

Michelle Tack (04:07)
I’m sorry. I’m sorry. Sorry.

Kevin DeMeritt (04:23)
or institutions looking to ⁓ include physical precious metals in their portfolio.

Michelle Tack (04:28)
That’s great. When you look at this, you’ve been doing this for a while on both sides of the house, as it were. ⁓ Again, you received the actual precious medal for correction. And you’re also doing the memory care. Can you talk about how you’re able to operationalize that to make it?

as smooth as possible to run over a period of time when precious metals go up and down. Now we’re at a height with gold and some others, right? But memory care keeps on, there’s no greater need than that in many, areas, but they are two different things. So how do you make that run smoothly?

Kevin DeMeritt (05:59)
Yeah, I have a CEO at both of those organizations. ⁓ I was very, very involved in both of them when they started, and I still am today. But I have somebody running them on a day-to-day basis. And really, what I’d like to do is back up, look at from a very high level, and make sure my thesis about why those businesses should still be in business are intact. So on the precious metal side, I’m simply looking at the debt

Michelle Tack (06:24)
you

Kevin DeMeritt (06:27)
of the United States government. There’s a 92 % correlation between that and the price of gold. And so if we can take a look at that over the long term, unless you believe the government’s gonna stop spending money, then gold probably is going to continue the rise. ⁓ And the correlation is held because the government has just piled money into a whole bunch of different programs and the deficit has skyrocketed and so has gold and silver. On the long-term memory care, same thing. ⁓

You know, Michelle, you and I spoke a little bit before and I said, I have a thesis. My thesis there is that the baby boomers are going to get older. I’m pretty sure that’s going to be a true thesis and it’s going to happen. Yeah, I hope so too. ⁓ And if that’s the case, then we feel like we can grow that business fairly consistently and at a fairly rapid pace over the next 10 years. ⁓ Because just our backlog of people.

Michelle Tack (07:03)
We hope so anyways! We hope so!

Kevin DeMeritt (07:21)
talking about what they want to do with their facilities, how many more they would like to own in different states is fairly substantial. And we feel like we’re in the right place at the right time there.

Michelle Tack (07:31)
That’s awesome. You’re doing everything domestically in the United States, is that correct? mean, the precious metals, mean, yeah, okay, good. In terms of every operator I know, whether they own one business or multiple, like you do, that focus in different areas, but a lot of the same… ⁓

techniques are used. Find a time when either a deal went sideways and they had to pivot quickly to resurrect the deal. And I’ll let you define what a deal is. That could be acquisition, could be not a deal, could be a relationship, what have you. ⁓ Can you talk about a time where you had to…

more quickly and the results of that. And if not, ⁓ you weren’t able to resurrect that situation, something that you learned that has helped you along the way in your tenure and what you’re doing.

Kevin DeMeritt (08:28)
Yeah, it’s a great question actually. I think on the real estate side, prior to specializing in memory care and the long-term care, ⁓ in 2008 when there was lot of flipping going on, a lot of people lost their homes, so investors were sitting at the courthouse steps. We thought, hey, we can go out and make these loans and we’re in pretty good shape. The market’s already fallen. We’re only going to make a loan at about 60 % loan to value and we’re going to be fine.

And that was not the case in certain areas. Pomona, Palmdale, I mean, in California, Las Vegas, know, some of that real estate lost 60 and 70 % of its value. So our valuable lesson was, A, number one, we want to work with people who’ve been in the business, have operated for a certain period of time. And a lot of times I don’t mind if that person went through a pretty tough time themselves, because if they have, they understand it, they got through it and they…

Michelle Tack (09:18)
Yeah, great.

Kevin DeMeritt (09:22)
They have a way out. They’re on the other side. Yeah. And it has served us well because our underwriting is extremely stingy on that memory care and things like that. We only work with certain operators. We’re looking for a certain type of ⁓ operator. ⁓ And so that was the biggest lesson to us. Work with people who understand what’s going on and really do a lot of due diligence on those people and try to do repeat business with them.

Michelle Tack (09:23)
They’re on the other side now, right? They’re on the other side now. Yeah.

Kevin DeMeritt (09:51)
You know, we did a lot of the flipping, you know, with the bridge lending at that time. But we noticed that we started doing it with the same people over and over because they were successful over and over and they were conservative as well. Yeah. Yeah. In precious metals, the biggest lesson I probably learned in precious metals was you cannot hold a position as a company because I took a pretty big position in precious metals. literally it was a mistake, quite frankly, where

Michelle Tack (10:01)
Yep, and they want to do it, right?

Kevin DeMeritt (10:20)
Overnight, I did not hedge. I pressed the button to hedge $2 million worth of metals. And the next day I woke up and they were down almost 10%. I lost $200,000 in a night. Overnight, $200,000 flushed down the toilet. And so we just have systems in place now. You cannot hold the position as a precious metals company. You have to be neutral because if you go out of business, then all your clients have no place to go. So that was the biggest lesson I learned in precious metals is

Michelle Tack (10:32)
Yep, that hurts.

Yes?

Kevin DeMeritt (11:23)
There’s a lot of inventory. It’s a very capital intensive business. mean, you got millions and millions and millions of dollars in inventory. And if you don’t hedge it, ⁓ even for a day, you can wake up with a big loss in the morning and out of business.

Michelle Tack (11:33)
Yeah, it’s…

Yeah, and you know, this is why we like…

operators like you coming on that have a lot of experience to say, look, this happened, but I’m not doing that again. And it gives, I think the audience even more confidence to say, hey, I want to reach out to Kevin, maybe invest, maybe partner, what have you. that’s wonderful that, you know, I too lost my shirt. I lived in Long Beach, California for 25 years and in Northern California. And I had second home in Scottsdale, Arizona and Fountain Hills. I lost my

shirt. I was qualified for it, but I got fired from my job as a VPS worldwide sales and I couldn’t find a position for three years. that’s why I’m still working. Not to make it about me, but those of us that have been through it that that word flipping that had the funds to qualify and then lost a lot of people lost their jobs in 2007, 2008 and it was a whole different situation. But enough of

me in terms of you know your network how do you network I know that you know a lot of people but do they try it do sometimes you get you get one that’s in the pressureless metal and does it go over and you know transfer over to the memory care do you ever get that sort of cross pollination

Kevin DeMeritt (12:58)
No,

you ⁓ get some cross-pollination with investors where you’re talking about precious metals and they say, I’m getting a little older. Precious metals has great liquidity, but it doesn’t have income. How can I get some income? And you can take some of the investors in the precious metals and move them over to the fund, which is very, very conservative, and get 9 % on your money annually. And they feel very, very comfortable with that.

Michelle Tack (13:27)
Right. Yep.

Kevin DeMeritt (13:27)
So

that translates and the opposite is true where we have a lot of real estate investors and say, look, in those bad times, I had zero liquidity and it would be nice if I had liquidity in the tough times. Well, their stocks were down, their real estate was down, you know, all that kind of stuff and gold had skyrocketed. So we had enormous amounts of real estate investors who loved the liquidity either where they could sell the metal at a higher price and pay a mortgage because the government wasn’t making people, you know, pay their mortgages through.

Michelle Tack (13:39)
Yep.

Kevin DeMeritt (13:55)
you know, COVID and, and, ⁓ you know, at certain times. And so how do you get that liquidity? Precious metals gives it to you.

And the op, the other side of that, ⁓ Michelle was a lot of investors were in great positions with their real estate, but the real estate market was way down and they took their gold because that recession hit or whatever hit and that the precious metals are very high and they took those metals and they went and more real estate at extremely depressed prices. So it works both ways

Michelle Tack (14:11)
Yeah.

Mm-hmm

Kevin DeMeritt (15:03)
The great part about it, in my opinion, is if you understand real estate, you’re going to understand precious metals because they’re both tangible. There’s a limited supply. Some of the same things like inflation and so on and so forth affect both of them. And then they have the differences. Liquidity on the real estate market may not be as high, but you get income and gold doesn’t get income, but it gives you the liquidity. So it’s great that both of those things I’ve picked in life are both tangible because I’d rather invest in that than a piece of paper.

Michelle Tack (15:30)
Yeah, and then on the side of your business professionals that you network with, do you continue to add to that? I mean, I’m sure the answer must be yes. But do you have a core of 10, 20, 30 people? I don’t know what it is. And there’s no judgment here. But people that continue to go and refer you business, those that you go, geez, I’m so lucky that I have John Smith that, you know.

What happened?

Kevin DeMeritt (15:58)
Yeah, you know, I think on the precious metal side, it’s mostly the wholesalers and the government entities that we worked with when we produced a coin through the Royal Canadian Mint 10, 12 years ago. I mean, those have been great relationships because when you form those, then when they come out with new products and they come out with new ideas, usually they call you and say, hey, look, what do you think of this? And do you want to be a part of it? And you get to be a part of something that’s unique. And then people come in from that.

Michelle Tack (16:20)
That’s cool.

Kevin DeMeritt (16:26)
That’s been tremendous for us to have those kinds of relationships there. On the real estate side, I would say our biggest asset is our investors. ⁓ I told you before about every one out of every third investor, without ever asking, ⁓ gives us a referral to somebody else who wants to invest in the fund or invest in a trustee that we may have individually. And we just couldn’t ask for anything better. We’ve never lost anybody any money. We’ve never ⁓ not.

Michelle Tack (16:43)
That’s great.

Yep.

Kevin DeMeritt (16:54)
had a payment go out. And I think just people appreciate that through COVID and through 2008 when we started, you know, it’s a big asset to us. It gives us the fuel to kind of increase the value of the fund and increase, you know, what we can do for the long-term memory care or the long-term healthcare facilities when we need to fund a big loan.

Michelle Tack (17:06)
Absolutely.

Well, particularly given all of the financial shakeups that have happened, you know, since 9-11 and with the mortgage crisis in 2006, 7, and 8, and 9, it really went into, you know, being able to have stability.

is something that is huge and it’s quite a testament ⁓ to your knowledge and your teams. Before we wrap up, could you provide Kevin your contact information? I’m sure there’s a ton of people who would like to get in touch with you for either of these businesses or perhaps both in terms of investing, ⁓ what have you.

Kevin DeMeritt (17:53)
Sure. ⁓ On the precious metal side, you go to learcapital.com. It’s L-E-A-R-C-A-P-I-T-A-L.com. And ⁓ the other is Wilshire Finance Partners. And you can go to wilshirefp.com. So W-I-L-S-H-I-R-E-F-P.com. And you can look at the…

Michelle Tack (18:16)
That’s all.

Kevin DeMeritt (18:17)
There’s free information for investors right there. A bunch of questions can get answered, whatever they’d like.

Michelle Tack (18:18)
Awesome.

Well, look, I really, we really appreciate the fact that you’ve been on for our subscribers. If you find value in the content, please continue to check in with us to get great content like Kevin has provided. For those that have not subscribed yet, please do so. If you found value in the session today, Kevin, best of luck in the future. Sounds like you don’t need it, but luck can always ⁓ be used at some point. So continued success.

Kevin DeMeritt (18:51)
Thanks, Michelle, you also.

Michelle Tack (18:52)
Thank you.