Join Big Mike for another insightful episode with Patrick Grimes, founder and CEO of Passive Investing Mastery. Patrick, a former automation engineer turned serial entrepreneur, shares his journey from losing everything in a 2009 real estate deal to building a diversified portfolio across real estate, energy, and litigation finance. Discover his Passive Investing Mastery platform, which educates investors on non-correlated alternatives like commercial real estate debt and equity, litigation finance, and more. Patrick explains the mechanics of litigation finance, lending against late-stage lawsuit settlements for 20-35% IRR, and highlights today’s opportunities in distressed commercial real estate (industrial, retail) for high returns through strategic lending and acquisitions.
Learn why diversification across non-correlated assets is key to financial security, especially amid macroeconomic risks like Fed rate hikes, trade wars, and debt spirals.
HIGHLIGHTS OF THE EPISODE
00:00 – Welcome to the BigMikeFund Podcast
00:19 – Intro: Patrick Grimes, alternative investment expert
01:27 – Patrick’s journey: From engineer to real estate and alts
03:27 – Transition from tech to full-time investing
04:06 – Passive Investing Mastery: Educating on non-correlated assets
06:16 – Alternative investing webinars: Sharing diverse strategies
07:14 – Ray Dalio’s wisdom: Non-correlated diversification
08:30 – Litigation finance: A novel asset class explained
19:34 – Case studies: LA Juvenile Detention and Camp Lejeune
27:16 – Real estate today: Opportunities in commercial distress
29:31 – Debt and equity funds: High returns in industrial and retail
34:40 – Market outlook: Downturn opportunities and macro risks
36:45 – Non-correlated assets: Stability in volatile markets
38:52 – Rebalancing: Key to a resilient portfolio
42:32 – Connect with Patrick
43:48 – Takeaways: Diversification, litigation finance, and real estate
If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.
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Full Transcript:
Mike Zlotnik: Welcome to the BigMikeFund Podcast. I’m the Big Mike, Mike Zlotnik, and today it is my pleasure and a privilege to welcome Patrick Grimes. Hi Patrick.
Patrick Grimes: Good to be here today, Mike. Looking forward to having a good chat.
Mike Zlotnik: Thank you for coming on the podcast. Let me do a short intro. Patrick is a founder and CEO of Passive Investing Mastery. He’s an international bestselling author, a Forbes counsel contributor, and a serial entrepreneur specializing in alternative investments. His portfolio is diversified across energy, litigation, finance, commercial lending. Commercial equity or acquisitions, including retail, industrial, and thousands of apartments. So, I’ll keep it that short. I’ll let you continue a little bit about, you start with, did I forget anything important on your accomplishments list? And then a couple of words about you, your family. I know you’re in Hawaii, you are in a much better climate than I am in New York, a little bit more pleasant, but, talk a little bit about your journey. Have you always lived in Hawaii? Have you moved there? A little bit about your family.
Patrick Grimes: Well growing up, we moved around a lot. I was actually born in Italy. My dad was in the American Air Force, so I traveled. We were in Florida for a while. but mostly my formative years were all in California of the United States, and I spent some time in Southern and Northern.
I. Most of my childhood that I remember was at Yosem National Park, up in the mountains in a beautiful, beautiful country. So, I did a lot of backpacking, made my way to the big city for college. did a master’s, Did a mechanical engineering degree for later on, did a master’s in engineering and an MBA, became a, did machine design and automation.
It’s been kind of my passion throughout my life until I went full-time into investing. Never imagined that would happen. At the time, I thought, man, I’m an engineer through and through. I, I loved being a geek and I was good at it. So, but yeah, I got, I have a wife. she is wonderful. Sh she does feature length animated film producing.
I have a, a boy, two and a half year old Emory, just wonderful kid loving life right now. And yeah, we enjoy it here in Hawaii. We made this journey, through, and through COVID. We started coming here. And we ended up spending about more than a half our time here and decided, look, we shouldn’t have two places.
We should have one. And we, we opted to make Hawaii the, the set of our second home. Make it our home.
Mike Zlotnik: That’s very cool. I’ll acknowledge the journey. and so many people do what you do. They start with some kind of technical field, including me. I started, as a technology, engineer. And then ultimately finished 15 year technology career and then went to real estate full time.
you have some similarity as you were also a, on the technical engineering path, and then you decided that, you had to move your journey to more, I guess passive investing and real estate is, is, is a great platform. So let’s, let’s talk a little bit about, passing in, investing mastery. What is it?
what is this platform, how do you work with folks? How do you help folks? And, we’ll, we’ll, we’ll, we’ll talk a little bit about litigation finance, in just a, second litigation finance. Just curious a little bit about that. I haven’t had much exposure and sort of energy and just, we’ll, we’ll, we’ll get there in a second.
But let’s start with passive investing Mastery. what is that platform?
Patrick Grimes: Well, so pass Besting Mastery is kind of a passion project for me as an automation robotics engineer. I was in a lot of amazing facilities. We were contracted to do machine design by Google, Facebook, Johnson, Johnson, Abbott, Lockheed, Boeing, Tesla, all, all amazing companies.
And I was in there working with some of the smartest people in the world, and I was. And they didn’t know. I, I look back on those times and all they knew about were crypto or startup stocks, 401k. They had no idea, nor did I about any kind of alternative investing options. And my, I just got, I, I, I was eager and I wanted to invest.
I talked to the founder of the company that I was working for and he said, Hey, you should invest in real estate. And he said, my only regret was not doing more sooner. And that the high tech ride is not gonna get you that financial security you want for your future family. I was like, wow, that’s insane.
So I, I, I went, got into real estate. and that’s what kind of led me into this alt, alt space. And as I grew into it, I realized, wow, these, there’s a lot of alt, there’s a lot of opportunity to invest in completely non-correlated investments. Ones that don’t rise and fall with the stock market. Ones that don’t even rise and fall with real estate, like legal, like medical, like education.
Those can provide more stability. Being somebody who has seen the ups and downs and has ridden those waves. I started really developing an affinity for alternatives and passive investing Mastery is really that platform. It’s about alternatives outside of the stock market. It gives us the ability to educate I Every two weeks we have an alternative investing Investing Mastery series session, which is.
My take on, I used to be the guy that would have kind of a set of baseball cards of alternative investing options, and I would trade those with just a couple guys, and then I started talking about it. On these webinars, people loved it. So I said, look, let’s just show the whole deck. So every single two, every single session mastery session, we bring up completely different alternative strategies.
I bring a panel of two, three, maybe four people that are specialists in these alternatives, sponsors, educators, or strateg. Tax Asset Protection retirement accounts trust, and so passive investing master really gives us me that ability to broad spectrum, blue ocean, the education, I think every American needs, and that’s what are the ways to invest outside of the stock market, potentially even outside of real estate.
There’s hundreds of options that build really true financial security that don’t ride these same volatile waves. You could build true pillars of wealth that. We’ll outlive any recession.
Mike Zlotnik: Yeah, I appreciate that wisdom. And, what comes to mind is, I’m a big fan of follower of Ray Ray Dalio. Ray Dalio does, you know, a lot of educational stuff and one of the key, messages that he talks about is, folks should have 10, 12 non-correlated investments as a part of the diversification strategy.
It could include obviously some main stream and some wall. So Main Street and some Wall Street investments. Obviously stocks, bonds, mutual funds, are sort of Wall Street, but you can go to Main Street. You can have, like you said, real estate and you can, can do other alternatives. Energies is obviously an important alternative, and, litigation, finance, medical, finance, all kinds of other.
Niche opportunities do exist for sure. So the fact that it’s gotta be non correlated, that’s the key word, at least per raise, Dalio, theory that you could have approximately same target returns, but reduce your risk volatility by 80% by doing this non-correlated investments in alternatives. So I subscribe to that theory.
It makes a lot of sense. So it’s great to hear that you are, that’s your journey. So, Let’s cover a couple of things that you do as part of that, and I, I, I kind of went to your website just to take a little more look and you do have a litigation finance as one of these alternatives. Just curious what it is.
I know. What’s medical receivables, finance people do that all the time. It’s, it’s billing, you know, advance for, finance of, I guess maybe similar with lawyers, right? Somebody gotta, somebody needs a liquidity. and these litigation law, you know, lawsuits need to get settled. So, or takes time to actually complete the, the lawsuit.
So just, just, just explain how it works. Is it fronting on the money to complete the lawsuit to get to settlement or get to a judgment? And what kind of, you know. How does it work?
Patrick Grimes: Well, Mike, you’re not alone when you don’t know about it because it is what we con, what I consider to be a novel asset class and relatively new to the accredited investor public.
However, it’s been a very active in the United States as early as 1910. When a bunch of people were walking around with these horrific diseases and they started thinking, look, man, maybe it’s these cigarettes. I know that they’re saying these cigarettes are healthy for us, but I don’t know. I mean, because we’re all dying these terrible, terrible diseases.
And so a third party stepped in and said, Hey, look, I will help fund your. I’ll help finance this litigation. and then these attorneys said, look, we’ll work under a contingency fee basis, meaning we’re not gonna go pro bono for free, but what we’ll do is we’ll provide access to you the harmed individuals.
For a side of the settlement, for a part of the settlement, and typically in our world, that’s about 40, 50% of the settlement amount and we’re not in class actions where class actions are. Maybe somebody gets $50, $75 and it’s all one lawsuit. Big win loss risk. We’re in individual lawsuits, so which have meaningful settlements, so ones where people are awarded a hundred.
$400,000 for the harm. For the harm that has caused them. And basically just like a real estate debt fund, like our real estate debt fund, it’s an asset-backed lending strategy. And legal funding is a proliferate thing, is the legal industry is the size of the global airline industry. And so when you’re approaching the mechanics of lending to operators in the legal industry, it’s similar.
So lending to operators in the real estate industry, we wanna find those guys who have a track record, who have been doing this for a while that are well capitalized. Have the staff necessary to execute on the business plan. What is that business plan? Well, in real estate, it’s to either acquire buildings or improve those CapEx to improve those buildings so that they can provide housing to tenants.
Well, in the legal industry, it’s. Most often an attorney who’s working on contingency has assets, which are these agreements with these harmed individuals that says they’re representing them and they’re, gonna be awarded some percentage of the claim. And just like in the real estate space, you can have an appraiser appraise the price of the building.
You can have a law firm valuation specialist, which we do go through the docket, the attorney’s dockets, the list of, of contracts of clients look in there and say, Hey look, do these people have medical conditions? Let’s look at the medical records. Do these people have proof of harm? Do they have proof of exposure to this chemical?
This. Device or whatever it was. and do they apply to a lawsuit? Do those two apply to a specific lawsuit? And is that lawsuit already in settlement negotiations? what would it be worth? what is it worth right now? has, has lawsuits already been won, just like it, what is that worth? And so these law firm valuation specialists can get in there and, and evaluate the value of an attorney’s assets.
That’s the value of the fees that they would get back from the thousands of agreements that they have. A case or more cases, portfolios are cases. And so we’ll take that value and we’ll lend against it. Just like in a real estate deal, we’ll typically 10, 20, 30%, just real estate, you’ll be 50, 60, 70, 80, 90%.
But in, in litigation finance, you lend the loan to that collateral value is low, quite a bit lower, gives you a lot of cushion for volatility. And then you put a lien just like in real estate, you got a deed to trust. Litigation finance, you put a UC one filing on the attorney and the assets, and you have carve outs for them.
Put a financing agreement in place just like you have financing agreement, and, and, and, and those guys, those attorneys, they need capital primarily for two reasons to add additional clients or claimants. To a case that they’re already working. In other words, they’re already putting in the time. They just, and they, they’ve already marketed and found a bunch of people that are similarly harmed for a case that they’re up against.
And the more people they get, the more intimidating they are. So they wanna get a lot of ’em. So they would use, they could use help. Hey, I’ve got all this a, I’ve got all these claimant agreements, can I take a loan out against these and help fund more marketing to get more claimants and that’ll increase my settlement leverage.
It’ll make myself more intimidating and it’ll provide a bigger carve out. Maybe it still settle sooner, or so it’s either acquiring claimants similar to acquiring real estate, or maybe they just need operating expenses to help get that case across the finish line. So we can lean against it and say, look, you can use these for operating expenses.
Just like how a real estate investor might say, look, I need CapEx ’cause I gotta get this business plan across the finish line. I need to improve my existing building. These guys may need to complete the case and complete that business plan and and pay their rents so that they can provide access to justice and get the settlement.
So that’s the mechanics. Yeah. And the cases is probably really interesting too, Mike, if you’re interested to hear about that. Sorry for the long answer about well, let, let ask
Mike Zlotnik: a couple of quick questions. Yeah. So I appreciate, in depth, overview of this is an asset class, it’s a specialty strategy. It requires in depth understanding how to evaluate these assets.
’cause these are not like a hard collateral, but just more intellectual property type of assets. I’m familiar with medical receivables, but that is. likely fronting payments due from insurance companies. so that, that is a little bit clear. My wife is, is in the medical field, so I can clearly understand, but I can imagine, the same way you can evaluate, some of these, lawsuits and the likely value of, either possible settlements or, you know.
If you win, and, and the number’s obviously drastically higher, so I, I, and, and that business understood. What is the product, what kind of interest rates are you able to loan at even, let’s call it conservative leverage, right? The conservative leverage in that product may be 30%, while in real estate could be 65%, right?
It’s a different. Different type of collateral. So, but what, what interest rates typically do you charge, for loaning to attorneys to do what you just described as far as spending their case, getting more, clients and, and et cetera. So just curious what, what that and what kind of term. So it’s the term, is it the line of credit?
Is it a three year duration, two year duration? Just gimme a little more color on from your perspective as an investor or lender in, in, into that business. What do you get out of it?
Patrick Grimes: Yeah, it’s a really good, great question. I, I’ll put a couple things in the context. the reason why I didn. Follow your thread of comparing it to medical receivables is because they are fundamentally different just to be.
So, medical receivables is factoring, it’s actually buying an accounts receivable, whereas we act, it’s not creating a financing agreement and a lien on somebody to perform. It’s you actually, purchasing that receivable. Well, the,
Mike Zlotnik: the two, two things I’ve seen, I’ve seen you either buy receivables or you finance receivables.
So you could be a lender secured by the receivables.
Patrick Grimes: Okay, so in this particular case, it’s more analogous, I think, to real estate operators because as you said, in this case, it’s not a physical property. It is a real tangible corporate asset. Right? Yeah. and that’s what we’re getting a lien against. But let’s talk about that. So your, your questions were great because they, they lead kind of into this next, now what, what is the benefit essentially to the investor or what to the attorney, right? What do we lend at, right? And how does that flow through? you gotta look and you say, well, it has to do something to do with risk.
You acknowledge that loan to value and litigation finance quite a bit lower typically than it is in real estate. so. Like any investment, like any asset backed lending or any kind of investment, there’s a range in different kinds of investments you can make. You made the comment if it wins, right? And so a lot of people in in approaching litigation finance, they think about almost like rolling the dice.
Like you’re like it’s just a binary win loss. Right? And that can be the case if you’re doing something more analogous to oil and gas, wild caddy. Where you’re going out in the middle of nowhere and you’re just drilling and hoping you’ll find some, you know, bubble in crude and you may get a hundred x returns or lose everything.
Right? And that’s what we call early staged. Similar to angel investing and to startups really early could get a thousand x return or, or more often lose it all. And so just like in real estate, oil and gas and venture capital, it can be really early staged where. You get to charge huge returns for your capital and maybe you’re gonna make it big or lose it all, or you can be really late stage all the way to the point where the judges gaveled down the settlement’s been made statistical loss, and it does become a receivable.
Because the payment’s underway and then you can buy that receivable much more similar to the medical device or the, the medical receivables you’re talking about where it purely is just a fractional percent difference, right? Or you’re collateralizing these actual receivables, but before they gavel down, there’s this range.
And in this timeline, typically in single event cases like. We just won a case, with sexual assault victims in the LA Juvenile Detention Center. And if you look, when I say that, I mean we contributed to an attorney to help him locate victims of sexual assault that were housed in the last 10 years in the LA Juvenile Detention Center.
If you look online right now, LA Juvenile Detention Center, that was typically a one or a two year timeline. Now. There’s lots of other cases and there’s of similar cases to know what these settle at. There’s, it’s been through the court system to determine is this a wildcat opportunity? No. Why? Because it’s been through the court system to the point where they’ve done discovery, they’ve seen that it’s happened, that it actually did happen, and that.
The, they did not do the proper disclosures to law enforcement. They over a long period of time and didn’t correct this behavior over a long period of time. Causality and liability are the legal terms, and once you determine that, you’re not quite too receivable, but you’re in what we call late staged, right?
When it’s not a coin flip anymore. It’s not a coin flip, it’s much more so the attorney saying, look, I’m headed to the finish line here. We’re already in negotiations. It’s super easy to underwrite this because we know what these settle at. On other cases, we know this case is currently intox. Settle around these numbers and here’s the, here’s the intake forms with the medical records and proof of, of, exposure in this case.
attendance at the juvenile detention center, you know, those kinds of cases. And so we can lend. Kind of, kind of that, that pref factoring or pre receivable, but late staged. Now, you can also think that in that timeframe, depending upon the case, maybe that’s one or two years in single event type cases, like a sexual assault where each of those are individual, but that can be the whole timeline of a mass tort can be seven years.
Like for example, we’re currently funding. One for the, for, camp Lejeune water contamination. We have an attorney who’s representing thousands, two multiple attorneys that are representing thousands of different harmed military civilians and their families that were present at the Camp Lejeune, mil Marine base for a 17 year period in which they were exposed to harmful chemicals.
The DOJ acknowledged this. They took responsibility for it. It’s gone through the court systems. Discovery was done. The, the disease for toxicology reported on the harm, causality and liabilities. There a law was passed the Camp Lejeune Just Relief Act, and the US Judgment Fund was put to pay claims. A grid was published saying, based on how long you were there and what your disease was, here’s how much your settlement is.
All of those things, call it late stage, means we’re not rolling the dice, right? We know based on due diligence of medical records and proof of exposure that that they have had a certain disease for a certain amount of time and we can lend on that. So that’s what we call late stage. Keep in mind, 90% of civil cases settle anyway, so it never really is a 50 50 coin toss, but you really late stage, it becomes more about like when you’re gonna get the settlement.
And how much, if you get on late stage, we hope that we’re late enough to the point where it’s maybe 1, 2, 3, 4, maybe on the outside, five, maybe there’s some trickling ones in. But in a diversified portfolio of thousands of late stage cases, we’re expecting to see the majority of those come back. And years two, three, and four, we’re already seeing some settle now.
Right? and maybe we’ll have some outliers, but the ma, it’s not like a real estate deal where you’re waiting for one refi or one sell event, and it’s all backended. Thousands of individual things coming in through the middle.
Mike Zlotnik: So lemme just add a, a couple of questions. By the way, I greatly appreciate the in depth explanation that you land towards the late stage of a legal process where your confidence factors are high.
So everything you explain in my head resonates. With more predictable outcome. Not guaranteed, of course. I mean, these things still have to shake out. Mm-hmm. But more predictable. The K June, if I’m pronouncing it correctly, you see those ads all over TV because the settlement has been reached on a, I guess, national scale and all these, I guess, attorneys are looking for more.
Soldiers who were stationed, and they, they, they literally, it’s a plug and play. They just get edited to the lawsuit and then the, the likely settlement scenario is pretty high. So all that is understood. Then late state is understood. So with all that, your risk profile is reduced. And then the other element you mentioned, what I heard from you.
Diversification across multiple or many cases, which is typical with a fund, right? You spread the risk. It’s not any different than a hard money loan portfolio fund, right? You, you have a hundred loans, or 50 loans or whatever that is. It’s a, it’s a portfolio. All that is appreciated. I can certainly see how it makes, makes sense.
I still wanna get the kind of high level answer to the question, what kind of rates of return, so I know the lending rates and hard money lending, right? You that is, if you ask me today, I can tell you the range today. I’m just curious what they are in. Legal, receivable, well not receivables, but lawsuit, settlements or whatever they’re called, or, or the, the finance of the lawsuits.
I’m just curious at late stage, what are the rates of return? gimme some ballpark number. Is this 14%, 15%, 18%, 25% annual rate. And, and by the way, I’m completely in agreement if you are investing in early stage energy development. High tech startups, any of the staff exploratory high risk, you know, those are, you write 10 checks, you expect one home run and nine strikeouts.
Right? This is different. You write 10 checks, you expect nine singles or doubles and maybe one strikeout, right? That’s kind of how I’m, I’m hearing this and just confirm if that’s the right understanding. It’s a late stage, settlements, and then what the rates look like in term. And then let’s move on to the next discussion.
Patrick Grimes: And I appreciate you being patient with me, Mike, because I was hesitant to give you returns when there’s a lot of different kinds of litigation finance from wild, from wild early stage to factoring receivables late stage, which go from a hundred Xs to, you know, 10, 12%. Right? And we’re kind of in that range of late stage where we’re projecting above a 20% IRR.
So 20 to 35, but. Every litigation, finance fund, or type of investment is different. So it is very specific to our very narrow strategy that allows us to kind of get a little higher return than, just a receivables factory, but a calculated return ’cause we’re close to the finish line. Does that make sense?
Mike Zlotnik: Yeah. Yeah. I appreciate it. It’s, it’s the risk reward profile, right? So you, you’re not exactly medical receivables. You’re not exactly hard money lending, but you’re at the same time not rolling the dice with a, you know, a lawsuit with no proven track record. It’s just a, you know, well, goose chase, you may hit a massive hormone or could be a complete, you know, strikeout.
So I get it. Understood. So, what else, what else you, you, you like to invest in? I’m just curious. This was a unique asset class. I appreciate all that explanation. what do you do today in real estate? What do you like today in real estate? And then if you’re doing anything with energy, I, I, I, I’m not an expert in energy.
I’ve seen, mineral rights, investments, some exploratory projects. It’s a wild west over there. So I’m just curious, just gimme your comments on what do you, what do you like in, in real estate today? Is it lending? Is it, equity? Just gimme, gimme the comments. Relevant to today, we’re recording this in late June, 2025, where we are in the cycle and where you see opportunities.
Patrick Grimes: Well, it’s interesting because we didn’t talk about this Mike, but I actually lost everything in a development deal, my first real estate deal in 2009 and 10. And so I, I’ve been, I’ve ridden through the cycles and I’ve been very overeager in the past to double, triple my money and, and try and get rich quick and as a sanos engineer and, but then lost it all.
And so, that was in residential real estate and bringing it forward to today. What we see is. Very similar kinds of, of course, there wasn’t a big mortgage fraud thing, but we see a similar cycle happening in commercial real estate. Commercial real estate’s taken a colossal hit, and this time right now is about the best buying time in my lifetime for commercial real estate.
Whereas 2009 and 10, it was the best time of residential real estate and in commercial real estate. It’s not just acquiring, it’s also lending. And that’s why we both acquire now and we lend now, and it’s not any kind of asset. We’re sniping specific opportunities where these. Operators are financially distressed, but they have good assets, they have good properties, and those opportunities are abundant right now.
And either these individuals, they, they really need more time and we can lend at high interest rates ’cause interest rates are high. Banks are hitting with liquidity issues right now because their bonds de devalued, their other loans aren’t paying out. So the banks are not lending on what we call small balance commercial real estate.
It’s kind of like 500,000 to 6 million. It’s somewhat of an ignored area, so we’re able to come in and lend at great interest rates, 12, 13, 14% and that’s how we do our debt fund and income, and provide outsized returns with. 90 day, six month, one year or three year lockups with strong liquidity. Or they don’t need more time, they just need out.
We can buy it in cash on our acquisitions fund. And that is what’s incredible is that you can really, today in commercial real estate, not multifamily so much, or not office so much, we actually more a little more favorable in more you’ve seen in big resurgence, in not a decline. You’ve seen a lot of decline in multifamily, but you see a lot of resurgence in some industrial manufacturing warehousing, you know.
Pre, during COVID especially, but now with the trade war going on, a lot of opportunity there. and also some retail centers in certain markets. We’ve seen some incredible buys where you can literally make your return on the buy. You don’t have to hold it for three to five years, inject a ton of capital, turn that into improvements and hope that.
That correlates to value gain. You can make your return on the buy like you could in residential real estate in 2009 and 10. And so we call that, we call that recessionary income and recessionary acquisitions ’cause it’s opportunistic evergreen funds that we’re producing really great returns, finding really incredible opportunities.
We believe this will continue for another three, maybe five years, but we’re gonna. Do as much as we can of that lending and acquiring and, and our acquisition strategy is to buy quick and exit quick, which is awesome. It’s working and we’re gonna keep doing that. So that’s why I say like real estate in general, not a great unity right now, but if you’re an opportunistic fund, specifically positioned with heavy cash to lend and heavy cash to acquire quickly.
You can do some real damage right now. Like those people that became billionaires in 2009 and 10 because they bought, they were, they were liquid. They were liquid, and they bought at the right time.
Mike Zlotnik: Yeah. Thank you for sharing that. I, I agree. right now is a phenomenal time to come into commercial because resi, interestingly enough, residential real estate has not corrected, enough.
Not on a broad. basis. Some, some markets have corrected, but, resi hasn’t responded to higher for longer interest rates while commercial has. So commercial valuations are off the peak heavily, and if you can get into those motivated seller situations, you get phenomenal terms. And, yeah, on the lending front, banks stepped out and, private credit stepped in.
So it’s a great time to be a lender. As interest rates, you know, where you used to land at 10, 11, you could land today at 14 taking, let’s call it same level of risk and just get a better return for the same risk profile. Exactly. Or being an equity play. Yeah, just basically equity site. I, I concur with you.
You know, I, years ago I developed methodology called, investment quadrants. Just like Robert Kawasaki has his quadrants, I have my quadrants. To make. Long story short, I had an income quadrant and a growth quadrant and investment grade and speculative. Great. And I’ll just tell you this, a lot of the deals today, they all look like investment grade, which basically means exactly what you said.
You make money on the buy. You’re very downside protected by virtue of incredibly deep buy. And you also getting cash flow from day one today. This is the crazy part. You don’t have to wait for a couple of years because you’re buying these assets at such steep discount that you have a positive spread between the.
Interest rate between your cap rate and your interest rate. So yeah. Love Mike. So you, you’re preaching to the choir in a matter of speaking. Yeah, I, I concur with that statement wholeheartedly. And, a lot of investors are still shy to, it’s almost like Warren Buffet says, be greedy. When I was a fearful, be, be fearful when I was a greedy.
A lot of investors are fearful to go in, but it’s a time to be greedy. So it’s, it’s almost a great contrarian play today. If you have the courage to act and you have the cash to act in a matter of speaking.
Patrick Grimes: And the strategy, I mean, I said it’s really not a good time for real estate unless you have the right kind of strategy to win in a downturn.
Really find that upside of the downturn, which you’ve mapped out there. A lot of people are not doing that. Some people are still doing the old school playbook of buy from a broker at top dollar and try and inject capital and hope. That that interest rates come down, hope that rents go up. None of that’s been happening.
Hope that, well, the, the whole purpose of
Mike Zlotnik: investing today is to, to get a de value deal. Mm-hmm. So we make people call me and they tell me a deal, give us a deal. I really need to understand why it’s a great devalue buy not a good, a great one. If it’s not a great one, why bother? It’s, it’s just be a lender, don’t, don’t take the risk.
So I concur.
Patrick Grimes: can we, I can talk about the market a little bit. You asked about the market and I would love to answer that question if that’s okay.
Mike Zlotnik: Yeah, go, go ahead. We, we have a little bit of time, so provide a commentary and then, you have any good book recommendation on what’s the best way to, to reach out.
Patrick Grimes: Okay. Yeah. What you said about the market, I, you know, we’re real estate downturns happen about every 15 years, right? And we’re certainly due for one. And so I, I don’t necessarily think real estate’s your end all be all. I was a high tech automation robotics engineer that found my way to diversify.
Portfolio. As one of those allocations being real estate, it was never the end, all the end game. And when I went all in and one, I lost it all and here we are, you know, many years later due for another downturn as an engineer. Mike, you look at the numbers, right? While it always makes sense to be diversified, true diversification, not just in lots of kinds of one asset, but in assets that completely different market fundamentals that don’t, aren’t driven by the same market cycles.
That’s why I talk about things like. Healthcare, litigation, finance, even CEPA firms or HVAC guys. These are guys that are needed regardless. Right. Well, it makes sense in any, any time because you don’t know when that next downturn’s gonna happen. Probabilistically right now, Mike, you can resonate with me on this.
11. Out of the last 14 fed rate hikes ended in a downturn. We just got done with one of the most aggressive fed hikes of all time, especially in my or my grandfather’s lifetime. And it’s in just the, the point of brink of collapse that just that alone would cause. But what else is going on? What other key macro economic indicators?
Our debt is spiraling outta control. Another key macroeconomic indicator that we may be in trouble. There may be a correction or a dollar devaluation. Meanwhile. We’re in a trade war. We’re in a trade war. Also a major macroeconomic threat to the stability of a recession, and we’re actually at war now. We actually today are actually at war as a country, not even through a proxy.
We literally bombed Iran wanting current events. Another key macroeconomic indicator that traditional markets are at risk. Those traditional markets are where most of the wealth of America is held because they’re taught retirement account, retirement account, retirement account, and passive investing.
Mastery’s intention is to provide just the knowledge and education. We do have alternatives, but what I tell investors to do is go home. Think about all of what I just said there on our slide decks. We always have these pie charts and these bar charts, which show the allocation of the middle class. The high income and the ultra wealthy and the pie charts of, you know, the different of where they allocate to different kinds of assets.
And what you’ll find is real estate’s like 20%, 25%, but then they have another 25% in other alts. And then the rest were traditional fixed income. Where is that allocation? Where are your funds based on the instability of broader, broader economics economic indicators right now, how comfortable do you feel?
About your allocation strategy. How many investments do you have that don’t ride those same waves? What if you added one slice? We moved some money around. We allocated to an industry like the legal industry, which is just straight as an arrow, like healthcare and education. People need representation. In good times, they need an even more so in bad times.
Just goes like this. Just simply doesn’t care about interest rates, doesn’t care about gold, doesn’t care about oil and gas, doesn’t care about the stock market. The rule of law in the United States of America is known worldwide as just a steady tried and true process. So well think about it. Think about that.
Well, what if Mike’s talking about medical receivables? We’re talking about all kinds of, what if you added slices completely non-correlated investments? Would you feel better? Would you sleep better at night? It’s worth the time and effort to step out there and learn about these, get educated because each time I’ve made a step into Alts, I felt better about my portfolio.
It’s been worth it.
Mike Zlotnik: Yeah. I appreciate that wisdom. And I’ll just have one quick comment and then go back. You know, you, you think about a good book to recommend and then, The best way to reach out. Yeah. So this, non-correlated investments portfolio location is a classic, dilemma and a classic need for a lot of investors to, to do.
Too many people are just used to what they’ve seen, through the Wall Street and which you’re talking about, essentially. Allocations quite often used by the Rockefellers, the highly affluent and highly successful folks, where they’re using, alternatives as a way to build a much more predictable portfolio and completely agree with the point that, people should not go into anything too heavy.
You just don’t know what’s gonna succeed and what’s gonna, it’s gonna. Strikeout. Another way to also pay attention to this, and this is particularly rel relevant today, is even if people are aware of this methodology, they often forget to rebalance. So rebalancing is a critical element to the same concept of non-correlated investments.
And the fact that your stocks might have done phenomenally, your, your precious metals, gold could be up a lot. Your, crypto, your Bitcoin is doing really well. However, if you look at the commercial real estate, you have tremendously under allocated sector. Or you could also add additional strategies like, finance of, litigation, finance and, and similar.
So all I’m saying is I con concur or agree with your thinking and, just adding that rebalancing factor because a lot of people invest and forget and then some time passes and they wake up and how am I doing? Well, you happen to be doing great here, but not so good here. So what do you do? And the logical question is, you, you rebalance and you allocate where, you should be a little bit, a little bit more weighted.
What’s a good book, that you’d like to recommend and how will folks reach out?
Patrick Grimes: Well, can I recommend my own because I’ll give it away for free. This is, it’s Lessons from Thought Leaders and I told my whole story, my wife and I, journey from, high tech to losing, losing all my first deal making into, making it up the corporate ladder, busting my ass, moonlighting at night, trying to do single family. And then finally learning how to trade up into apartments and energy and alts, and then building the passive investing mastery platform to educate. And I hope that it inspires those that are out there that feel like, Hey, there’s something missing from my, my investment.
There’s something missing from. My life that builds a little bit of fear. I’d like to take steps. And there’s also really other, there’s a lot of other great Phil Collins lead guitarist that Def Leppard tells his story an actual rock star. I’m sitting here next to a, Navy Seal. I’m probably the, the geek on here.
There’s the Kevin Eastman, Tom Ziegler, Dennis Waitley, all kinds of really amazing. It was such an incredible, Brian Tracy did The Forge. Such an incredible book. I give it away for free. If you go to passiveinvestingmastery.com/book and you put the name of this podcast in there and then promo if it’s, if it’s blank, we don’t send them out, but you can either download the ebook or you can download the ebook and I’ll sign and ship you a copy and I hope that it helps if you’re investors out there that are resonating with what Mike and I are saying, which is, man, I do kind of feel like I would love to do some alternatives, but what are those? Then I challenge you to go to investwithpatrick.com. If you go to investwithpatrick.com, I have a PDF you can download.
That’s Patrick’s favorite alternatives. That any investor can invest in now to start building more financial security, not just independence in one volatile asset driven by one market way, but security across lots of different non-correlated investments. I just list them. I list here’s the non-correlated investments that you can invest in today to help start that journey.
And then on one page I do that and then I dig deeper into what they all are and how they work, and point you in some directions of where to go do that. If you wanna learn more, join our webinar at passiveinvestingmastery.com. We have a bunch of alternative. We have three alternative investment options, private credit and real estate, cashflow, growth in real estate, opportunity to win from the downturn here, as well as litigation, finance, diversify litigation portfolio, and set up a call if you’d like to get to know me, and I’d love to get to know you and whether we’re a stop along your journey or not.
I’d love to hear your story and man, I have exposure with my platform. So 50 now different recorded videos where we deep dive into different alts. I’m sure we’ll find at least a couple that resonate with what you wanna get into and we get you pointed in the right direction.
Mike Zlotnik: That Thank you Patrick, appreciate your wisdom, appreciate your sharing, offering the book and I’m sure some folks will reach out.
And, yeah, thanks for running those mastery events, and inviting me to, to one of those things and we’ll talk about some, some things in real estate, but I see the breadth of various, strategies and some strategies I wasn’t aware of. So thank you for sharing your wisdom on litigation, finance, and other topics.
Thank you again.
Patrick Grimes: Thanks for having me, Mike.
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