How Real Estate Investors Should Adjust In The Current Rising Interest Rate Environment – Spencer Gray


We’re currently under challenging circumstances. With the pandemic and inflation, we are all forced to pivot and rethink how we do things to continue thriving. In this episode, Ava Benesocky and August Biniaz sit down with the President and CEO of Gray Capital, Spencer Gray, to talk about how real estate investors should adjust to the current rising interest rate environment. Spencer takes us into his journey of starting in music and, throughout different business ventures, ending up in real estate. He breaks down the macroeconomics of the current real estate investing space, discussing the benefits of being in the multifamily investment market. Having also built a strong online presence, he takes us behind the scenes of how they built their brand and are providing valuable content to investors.


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About Spencer Gray

REID Spencer Gray | Rising Interest RateIn his role as President of Gray Capital, Spencer focuses on investment strategy and driving forward the vision of Gray Capital, a Multifamily Real Estate Investment Collective. Since founding Gray Capital with his wife Alex, Spencer has been involved in over $1.5 billion in transactions, and currently controls over $500M of multifamily real estate. Spencer is also CEO of Gray Properties, LLC, a commercial real estate-focused family office.

Spencer has 16 years of experience in a variety of real estate investing strategies since buying his first investment property just prior to the Great Financial Crisis. Prior to pursuing real estate full time, Spencer worked as an recording engineer and audiobook producer before founding and eventually selling Sugar Creek Hops LLC, the largest hop brokerage in the Midwest focused on the growing craft beer industry. In his free time, Spencer enjoys either spending time with his daughters, Isla, Rooney, and Padme or in the outdoors fly fishing and bowhunting.


How Real Estate Investors Should Adjust In The Current Rising Interest Rate Environment – Spencer Gray

We have an exciting show for you because we have Spencer Gray on our show. We’re going to dive into Spencer but before that, please like and subscribe as it helps us build our channel. It allows us to keep bringing you great content and these unbelievable guest speakers that bring tons of golden nuggets to the table.

REID Spencer Gray | Rising Interest Rate

We go out there and find the right guests. We connect with the guests and get them to come on the show. We go through that whole process. We create the show and put it all online. The only thing we ask is to like and subscribe. That shows that we’re getting paid for what we do even though we’re not getting paid.

We’re paid by likes.

I got to be super candid and open here. The reason I’m excited about this show is I’m a bit starstruck. This means a lot because I’m usually a person who parties with Puff Daddy, Leonardo DiCaprio, and some other billionaire. If I’m getting starstruck, it means a lot.

We know we have a pretty cool guest.

REID Spencer Gray | Rising Interest Rate


I explained to you what it is. It’s because I’ve been consuming so much of the content they’ve been creating on a daily basis, in the morning, in the car if I’m in the car, at night, and all the time. I feel like I know the person. I’m excited to have Spencer on our show. I want to briefly say that.

Before the show started, I was telling Spencer how August and I have a competition on who listens more to Spencer. We test each other on some of the golden nuggets that you put on your show.

They’re like my knowledge funnel. They’re out there gaining so much information from all these different platforms, particularly related to real estate private equity and with an emphasis on multifamily. I’m going in there and not only I’m seeing where they’re getting their information from but they’re also putting it in a concise way for us.

For someone who has been in real estate for over sixteen years and somebody who manages a real estate private equity firm, I gained most of my real estate knowledge or a great portion of it from The Gray Report. I’m super excited to have him. It’s one of the most underrated podcasts, YouTube shows, and reports out there. In my opinion, this should have millions of views.

I bet you, they will have millions of views. Why don’t we dive into it guys? Everyone’s like, “Tell me more about this Spencer guy. Tell me more about him.” Spencer Gray is President of Gray Capital. Spencer focuses on investment strategy and driving forward the vision of Gray Capital, a multifamily real estate investment collective. Since founding Gray Capital with his wife, Alex, Spencer has been involved in over $1.5 billion transactions and controls over $500 million in multifamily real estate.

Spencer is also CEO of Gray Properties LLC, a commercial real estate focused on family offices. Spencer has over sixteen years of experience in a variety of real estate investing strategies since buying his first investment property prior to the great financial crisis. Prior to pursuing real estate full time, Spencer worked as a recording engineer and audiobook producer before founding and eventually selling Sugar Creek Hops LLC, the largest hot brokerage in the Midwest focused on the growing craft beer industry.

In his free time, Spencer enjoys either spending time with his daughters, Isla and Rooney, or in the outdoors fly fishing and bow hunting. This interview with Spencer will bring great value to both passive and active investors looking to learn more about why family offices invest in multifamily and the macroeconomics of the current real estate investing space. Without further ado, Spencer, welcome to our show.

Welcome, Spencer.

Ava and August, that was an awesome intro. I’m incredibly flattered. It’s gratifying to talk to people who are getting The Gray Report and getting value from it. We put a lot of energy into it and everything we do. I’m excited to be here. I’ve been looking forward to this show. This is going to be a good one.

It’s our honor and pleasure.

Let’s dive right into things, Spencer. Talk to us about your background and your start in real estate, please.

You might have figured out from that brief bio that I haven’t always been doing real estate. I’ve had a little bit of a nonlinear career path. Probably a lot of that was in my younger days, trying to figure out and taking all these passions that I had. I tried to figure out what is going to be my true path and where I want to concentrate my energy.

I was and still am extremely passionate about music. I’m a musician and a recording engineer. That’s all I can think about. I’ve also always loved the idea of being an entrepreneur. My parents were entrepreneurs. I saw them start a small business when I was young and they grew that business. I always wanted to do something on my own.

REID Spencer Gray | Rising Interest Rate


I was fortunate to be raised by my parents. They brought me up with the right financial mindset. The standard of going to college, getting a job, and working a career wasn’t the ideal route for us. Being an entrepreneur, starting something, controlling something, and building something that creates value for others was always my dream, but I didn’t know necessarily what industry.

I started with music. I graduated from Indiana University, the Jacobs School of Music. I went out to New York City to move out and be with my then-girlfriend and now-wife. I was working in a recording studio in New York City and eventually producing a lot of audiobooks for Audible. I realized I couldn’t afford to pay rent in New York City doing what I was doing. I love it but I didn’t love it enough to stay there forever.

We moved back to Indianapolis. I continued to be an audiobook producer. While this was going on though, I kept learning about real estate. Eventually, I continued to flip houses, rehabbing older houses in Indianapolis. The first rehab or flip I had ever done was even before I went to college. I flipped a house prior to the great financial crisis back in 2006.

That wasn’t the most successful real estate investment, but it was probably the most valuable real estate deal I ever did because it planted the first seed in my brain that this thing called real estate Investing is out there. It’s something that I can do and it’s approachable. It’s not rocket science. I always wanted to do something with real estate but I didn’t know exactly what.

I came back to Indianapolis. I was working for as a contractor. I was still recording bands and flipping houses on the side to supplement my income. I liked it but I didn’t love the grind of always having to find a new deal, flipping out of it, and being done. This entrepreneurial bug kept itching. I wanted to do something else. The house flipping wasn’t doing it for me.

My then-girlfriend and now-wife and one of my best friends, we’ve got together. We were drinking some craft beer and we said, “All these craft brewers are opening up and they’re brewing all these beers.” I read an article that there’s a hop shortage going on. I’m from Indiana. I was in Indianapolis at the time. Indiana is a strong agricultural state, “Why can’t we grow hops here? I wonder if we could sell hops for brewers.”

We started calling up local breweries and asking them, “If I had hops to sell you, would you buy them from me whether I grew them here in Indiana or if I can find them for you?” They all said, “Yes, absolutely. We can’t get our hands on it. There’s just not enough out there. That would be great.” I got on a plane and flew out to Yakima, Washington and started meeting with hop farmers. I was banging on farmers’ doors out in Yakima. I started networking.

Eventually, we built out the largest hop brokerage firm in the Midwest. It’s the largest firm that was outside of the Pacific Northwest and New York City. We’re selling to brewers all over the country in almost every state and exporting internationally. We had the largest hop farm in the state of Indiana, which wasn’t a big success because the climate is different. It’s not as economically feasible to grow hops in Indiana. We learned that the hard way, but the brokerage side was very successful. We sold that business around 2015.

My wife and I were looking for our next thing. What’s our next business? I love real estate. I started consuming every piece of material I could get my hands on, digging into BiggerPockets, reading books, listening to podcasts, and listening to books. I said, “I need to build a business revolving around investing in real estate, specifically buy and hold multifamily.”

There’s this concept called Value Add Investing. We tried to jump in right away and we quickly realized we didn’t have the qualifications to start. Specifically, with some of the financing that we wanted to get, we didn’t qualify for them. We started meeting with lenders and taking meetings with anybody who would spend time with us.

I remember meeting a lender. We showed him the property. We showed him an OM, “This looks great. We would love to lend on this beautiful property. I know it well, but I can’t lend to you though. You don’t have any experience. You’ve never gotten one of these loans before.” I said, “How do we get the experience if we can’t get the loan in the first place? It’s a chicken-and-the-egg issue.”

He said, “That’s true. We want to do business with you. There’s one way you can do it. I know someone that this might work well. If you partner with someone, you help them sponsor the loan and you sign on the loan itself, you can start gaining loan experience. You don’t have to know every piece of the business but you can be a part of their deal and start gaining that experience.” At first, we wanted to do our own projects, but then we quickly learned that we were going to be able to do a lot more by partnering with people.

We did our first co-GP syndication, which I didn’t know what a co-GP or syndication was at the time. We thought we were just buying apartments and raising money from investors. We helped guarantee the loan. We helped raise a little bit of money. We put some of our own money into the project. We closed on it. That was a little over 200 unit apartment community in Indianapolis.

REID Spencer Gray | Rising Interest Rate


When I saw that, I was like, “This is a much more scalable model. We can start building a business while leveraging the experience and the track record of our partner.” We knew that we needed to raise capital. I had an experience in business. I had a good track record in the hops-selling business, but it didn’t completely translate. Sure, you can build a hops business but how does that relate to buying, renovating, and selling a multifamily apartment building?

Fast forward, we did over a dozen co-general or co-GP partnerships with this syndicator in Indianapolis. We’re still good friends. We still do projects together occasionally. Eventually, we got to a point where there are some things that I would do a little bit differently if I was in the driver’s seat as a lead sponsor. They do things their way and that’s great, but we want to do things our way and build a brand. I love marketing and building brands. We did a good job building a brand with Sugar Creek Hops. I wanted to do the same thing. I thought that we could resonate with investors.

More importantly, I had seen how investing in apartments had changed my life, my family’s life, and the investors that we had worked with. We saw people who were replacing their income, diversifying with the stock market and real estate, and seeing great returns. I said, “I don’t think there are that many people who know about this.” I’m passionate about getting more people into this space.

From that point on, we started doing our own syndications, acting as the lead sponsor, and building out our team. We have nine full-time employees. We opened a new office space here in Indianapolis. Prior to Q2, we’ll close on under $100 million of multifamily assets in 2022. That’s going to add to the existing $500 million multifamily assets that we control.

What portion of that is within your fund and what portion of that are syndicated deals?

The assets under management, that full $500 million net, are all individual assets syndications. Those aren’t inside the fund. The under $100 million that we have under contract, the majority of that is going into the fund itself.

Since we’re on the topic, what is your view when it comes to a fund model or a project-specific syndication model? Some are doing them concurrently. What is your view on that? Is that something that you would pursue to do on the side beside your fund?

Honestly, we’re right in the middle of it. We launched our first fund a few months ago. It’s called The Gray Fund. We’re looking to raise $100 million to buy around $250 million to $300 million worth of multifamily assets. I’ve learned a lot since we started it. We have a lot of existing anchor investors. I would call them ultra-high net worth individuals who invest $1 million to $3 million in some of our individual projects. Some of these are quasi-family offices.

Some of those individuals have a rule. They don’t invest in funds, especially a fund that doesn’t have pre-identified assets. Knowing that, we structured our fund to allow individuals to invest directly into the projects outside of the fund. We didn’t want to say, “Sorry, we are not going to be able to do business with you guys anymore.” We wanted to facilitate that. Knowing that different investors had different philosophies and different strategies.

We made a pretty high bar though to go directly into a project-by-project basis. We have a $1 million minimum to invest directly into a project. Whereas, on our fund, we have a $100,000 minimum. If you want to take a big chunk of a deal, we can facilitate that but you do have to step up. To be frank, we’ve raised more money directly that way of individuals stepping up and writing large checks than we have in the fund.

At the end of the day, we want to be able to raise over $100 million to take down the assets, regardless of which bucket it comes out of. I’m a little bit agnostic. We still want to get to the $100 million inside of the fund itself. We’re seeing that as a bucket of capital and a tool that we can use for projects. It has been interesting having conversations because there are some groups that the fund is a non-starter. They want to continue to do individual deals.

Saying all of that, even before we raised a single dollar for the fund, it has done so much for our business from a branding standpoint and a reputation standpoint. One of the reasons why we launched it is because we kept losing out on deals because we did not have discretionary capital ready to go. In 2021, we lost bets on three projects. We were pretty much at the same purchase price, similar terms, and had a good relationship with the broker.

The only difference between us and the other group is the other group had $100 million of cash sitting in a bank account ready to go. We would say, “We need a couple of weeks to raise the capital.” Even if a seller said, “I would like to work with you guys but this other group is a sure thing. You have to go out and raise the capital.” We kept losing projects.

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Another reason that we wanted to launch the fund is we didn’t like the idea of only raising capital when we had a project under contract. We could have conversations with investors and tell them about what we do, our philosophy and our strategy but the end of the conversation is, “Let’s stay in touch. As soon as we have a project, we’ll be in touch and we’ll talk to you about it.” That was fine and well but by the time we would have a project, they would say, “I would love to do it but I invested in somebody else’s deal. I can’t participate in this one.”

We wanted to not have to start and stop our capital raising machine into the fund that would facilitate that, and also not create such an incredible sense of urgency and force people to rush to make a decision like, “The project is under contract. We know we’re going to oversubscribe in a week. You have one week to review the documents. Make your decision. Sign the docs.” That was an unhealthy environment where investors weren’t able to do their proper due diligence.

They’re investing in us because they like us and not necessarily that deal. You still need to understand what you’re investing in. I thought that the fund would solve those two problems. It has led to deals. Even before we raised $1, we told everyone we were doing the fund. We told brokers and lenders. They were all excited about it because they had seen some of our past successes. They started bringing us deals because they were like, “We want to help you seed your fund.” There have been a lot of ancillary benefits to doing the fund.

There’s a lot to unpack there. For us to understand the structuring of the fund alongside your syndicate investments, would you say that the fund allocates capital to a syndicated investment where your high net worth investors can invest directly into the syndication? Does the fund then allocates capital into that syndicate investment as well or is the project inside the fund?

It’s more of a joint venture structure. We’ll have a joint venture LLC or entity where you will own the project itself. The fund will be an investor in that joint venture. What we call our sidecar vehicle will also be an investor, and then the cashflow is split off pro rata. If the fund is 50% and the sidecar is 50%, 50% of the cash goes one way, and 50% of the cash goes the other way. They’re both investments in a joint venture.

I’ve been exploring the concept of the fund model and the syndication model. What I realized was there were a lot of large real estate private equity firms that have every capability to create a fund, but they’re still going ahead doing their syndicated deals. At some point, they would bring on a fund. In my research, correct me if I’m wrong, the investor profile for a syndicated investment is much different than a fund.

Whereas in a fund, you could utilize the capital markets or broker-dealers to pay a cost of capital and bring them on because the investor profile is different and they’re used to investing in a fund. Whereas the syndication investors are a bit different. They want to see the deal presentation. They want to understand the deal itself before they invest. Have you realized that as well?

Yeah. I would say that there’s a bifurcation of some of those larger investors. Some are used to investing in funds and they prefer to invest through funds. We’re having a couple of conversations with those types of groups. There are some that don’t invest inside of funds. It comes down to comfort level. Individual investors like the idea of picking out their deals. It’s a more direct connection to real estate. They feel like they’ve reviewed the project itself. They can get comfortable with it and they’re making that specific decision.

There are a lot of trusts that are involved in even putting together syndication for a single asset. It’s another level of trust to say, “I am going to allow you to pick the assets as well. I don’t necessarily have a say in it. You may have a strategy and criteria but it’s up to you. How do I know you’re not just going to pick some property I would have absolutely no interest in?”

Some of the large groups don’t have time to underwrite every single opportunity or research every single opportunity. Frankly, they admit that they’re not the experts in that. We have a specific skillset, whether that’s portfolio management or wealth management. They may understand the public markets well but they’re not necessarily real estate experts. They’re partnering with us because we are the real estate experts.

To your question about using broker-dealers and bringing extra capital, that could be applied either to a single asset syndication deal by deal or a fund. We’ve had conversations with individual projects that were large equity raises that we wanted to cast a wide net, and so we were having conversations with equity brokers. It could apply to either structure.

Going back to your initial start in this space, you’re talking about being with your wife and business associates. You guys are drinking beer and then trying to solve a problem that exists. That speaks about your entrepreneurial spirit. You brought that spirit to the real estate space. That brings us to our next question. You also talked about brand-building items. It’s incredible what you have done with The Gray Report, YouTube, and the podcast show. It brings us to our next question here.

Our team here at CPI Capital lives, eats and sleeps with real estate private equity with a focus on multifamily. We try our best to consume a great amount of content about our sector. When The Gray Report started, we noticed you guys right away. What was shocking to us was the tremendous amount of knowledge you guys have. I’m like, “These guys are so smart.”

Housing has an inelastic demand, whereas no matter the price of goods, people will always need it. Click To Tweet

How many contents were you guys creating? The fact that you came out of nowhere, talk to us about how the idea came about for The Gray Report, the podcast and YouTube show, and the amount of research that you and your team need to do every day to be able to bring so much value to your audience and put so much content out there.

I appreciate that because there’s a lot of effort that goes into it. It started as a problem. I was personally trying to stay on top of where the market was. I loved reading a lot of the research reports, whether it’s the Yardis, the CBREs, or The Brokers. All of these groups are putting out these thick in-depth research reports that would come out. I kept finding old reports and I was trying to stay on top of it. I realized they weren’t doing a very good job of getting that information out there and disseminating the information.

Deciphering it even.

They were just posting it on their website that you would have to go through and click fifteen times to find. Sometimes it was just the data. There wasn’t any context. Some have gotten a little bit better. Some are part of the course. I got together with our team at the time. We were much smaller. I had brought on somebody. His name was Matt Bastnagel. Much of the credit for The Gray Report and the newsletter goes to him. He’s the one that’s doing a lot of the research. He’s aggregating that report.

I said, “I want to start communicating with our investors more frequently. We need to start creating content.” We probably seem like we popped out of nowhere because we were flying under the radar a little bit doing deals in our own little world. We didn’t have much of a social media presence. We weren’t out there shouting, “You can learn more about us.” We had a small handful of investors who we were working with. Things are good.

One day, I was like, “We could do something even bigger and build a real brand.” I was having a conversation with Matt Bastnagel who was brought on to help with our communications and marketing, helping set up some of our systems. I said, “I want to start a newsletter.” We can create recurring content by going out there and aggregating all of the good information in the reports that are coming out. I keep finding these old reports that I didn’t see, but if we’re actively going, finding, bringing and sharing it, we’re going to be able to create a lot of value that way.

The way that we do it is a combination of manually knowing when and where these groups are posting this information, as well as developing a pretty in-depth series of RSS feeds that are feeding in from a variety of sources. Anytime anything comes up related to multifamily, commercial real estate, or real estate in general, that gets flagged and we review it. If it makes sense and if it fits the report, we want to include that.

We also started including some of the key market metrics that we thought were important for multifamily investors to keep an eye on. That’s as simple as, where is the 10-year treasury on a given day? When are mortgage rates being quoted? What is the yield curve looking like? Even with cryptocurrencies and some other commodities, they’re a little bit more macro but still go into the whole thesis and help us figure out where we are and where we’re going.

You guys have done a tremendous job.

Please tell Matt I said hi.

I will. He puts in a lot of time. He does a good job. After the newsletter, we break it all down on The Gray Report YouTube Show, which we’ve converted into a podcast as well. It’s helpful to not just be like, “Here’s the report. It’s 48 pages of data,” but “Let’s pick and choose what we feel is important, discuss it, analyze it, and give it a little bit of context that is helpful and more consumable.” It also allows whether it’s a potential investor, partner, industry or colleague to understand where our mindset is as well.

We’ve been doing it for over a year and a half. You can go back throughout the pandemic and see where our mindset was and what we were thinking about the market at that given point. A lot of it is more transient. It’s much more about what’s going on today. You can go back and hear what we thought about in March of 2020.

I got a direct a shotgun-question for you. Why multifamily, short term, long term? Give us your thesis.

REID Spencer Gray | Rising Interest Rate

Rising Interest Rate: Syndication investors want to see a lighter deal presentation. They want to understand the deal itself before they invest.


The bottom line is everyone needs a place to live in. That’s housing in general. Housing has an elastic demand no matter the price of goods, it’s a good that people will always need. That’s a solid foundation. It’s not something that’s going to go out of style anytime in the near future. That’s residential real estate homes.

Looking at the supply of those homes, we have not built enough housing in general post great financial crisis. That’s also in conjunction with a large demographic shift that we’re three-quarters away through, which is Millennials, which is the largest demographic cohort. They’re renting in years, typically, the early 20s through mid-30s. That’s continuing to extend out as homeownership becomes more and more unaffordable. In general, residential housing has been an excellent investment thesis because of those drivers.

Why multifamily is the best vehicle to take advantage of that are the efficiencies, the economies of scale, and the ability to force appreciation through that investment. Doing one multifamily transaction of a 200-unit apartment community is a similar amount of work to transacting on a 2-unit, 4-unit, or 5-five unit property. There are some zeros that are attached at the end. The analysis of it is, is this a good investment running the numbers? It’s not incredibly different. Maybe you have a slightly more complicated model but you don’t need one to figure out if it’s a good investment or not.

The ability to have onsite staff to manage those properties makes it much more efficient rather than having a scattered team that’s managing houses all over a city. Also, think about it from a simple standpoint of you’re going to have 20 to 30 units under one roof versus having one unit under a single roof.

I would rather have one roof to replace rather than 30 or 50 roofs that are all in different locations that you don’t have people on site to track and see what’s going on. The financing is better also. A lot of what we’re doing is we’re shorting the US dollar with residential real estate using debt and letting the growth and inflation destroy that debt away.

It’s like what the Fed itself is doing.

It’s the whole plan. It’s watching what these large institutions are doing and taking note. The Fed is slowing down now, but they are pumping out money. These big bank institutions figured it out. You just have to get close to the Fed and they’re pumping out free money. We’re using multifamily apartments, which is a great investment vehicle in itself, to get close to the Federal Reserve to get this almost free money.

We’re using some of the agencies, Fannie Mae, Freddie Mac, and HUD to get low-interest rates. Because the loans are guaranteed and backed by the government, we can get a cheap cost of capital that is much cheaper than many other investments have access to. All of that comes together to create this solid investment thesis that provides cashflow that is sheltered from income tax.

Also, the ability to force appreciation. You’re going to do something on that property. As you increase the operating income through increasing revenue or decreasing expenses, you see a direct correlation between the value of that asset. It takes the speculation out of it and you can take control over the success of that investment itself.

This only exists in the United States and certain regions in the United States. We’ve been researching the world and this idea doesn’t exist but we’ll touch on that.

This is the most exciting part of what we do in multifamily. It’s that value-add component and how you can force appreciate the value of the asset by millions and millions of dollars. Showing those numbers to investors, you can see the excitement in their eyes.

We’re in the business of increasing NOI.

A quick example of that, we have a 2900-unit property near South Bend Indiana. It’s nice. It’s a luxury A-class apartment community. We had a nice three-bedroom model unit. The property is 98% to 99% occupied all the time. Let’s get rid of the model unit. It charges around $2,000 per month. It has three bedrooms and a direct access garage.

Real estate is a shelter from income tax. Click To Tweet

We put a cap rate under the income that would come in that year. We were adding over $600,000 of value to the asset by taking a model unit and turning it into a rental. It’s easy as that. We just have to list it for rent. We’ve created over $250,000 of value just like that. If the property was valued like single-family homes on a comparable basis, it wouldn’t have increased the value at all because you’ll look at what the last apartment building sells for and be valued like that.

A lot of people talk about reading Rich Dad Poor Dad being the that light turns on. If you understand NOI and the cap rate and that calculation of how these assets are assessed, the light will go on why multifamily.

Take the income approach, not the comparable approach.

Let’s switch the conversation. You’re talking about politics, inflation, interest rates, and macroeconomics. I recall you speaking on this subject that the Federal Reserve likes inflation because of the debt the US government owes. If the US dollar devaluates, they owe less. Please give us a crash course on this concept of inflation and how the Fed likes inflation.

As a disclaimer, I’m not an economist. I was a Music major. I was a hop broker. Now, I’m into real estate. Economics is a passion of mine. I’m trying to understand it and in this pursuit of knowledge so we can make better decisions and understand the world that we’re living in. What you said is absolutely true. The Federal Reserve and the United States government are two separate organizations.

The Federal Reserve is a private organization not directly controlled by the Federal government. There’s some oversight from the Federal government but it’s a private organization. They’re in control of the US monetary system. We all know that the US government has quite a bit of debt. By keeping interest rates low or increasing inflation, as you increase the supply of dollars into the system, it’s a simple supply and demand. The value decreases as that supply increases. If you have a significant amount of debt, one way to get rid of it is by devaluing the debt. You can print new dollars that make your debt worth less and less.

The Federal Reserve is playing this balancing act. Their two mandates are full employment and stable prices, so as low as unemployment is going to get. Stable price usually means relative and not extreme inflation, and not volatile movements in inflation. They don’t mind higher levels of inflation. They’ve been hoping for and trying to create higher levels of inflation for the past years.

Since the great financial crisis, they have had interest rates considerably low. We had quantitative easing, which is when the Federal Reserve buys mortgage-backed securities, other types of bonds, and treasury bills to pump more money into the economy, hoping to increase inflation so that debt will be reduced in value.

We find ourselves in a situation where they’ve caused inflation because they weren’t good at it for the last decade or so. Because of COVID, supply chain bottlenecks and a massive amount of money were created on the fiscal side. Governments around the world spent a lot of money on COVID for a variety of reasons, some probably good and some probably weren’t necessary. That’s probably a whole other conversation.

At the same time, interest rates were zero. They were 0.05% on the Fed funds rate, which led to a ten-year treasury, which a lot of it is residential mortgages and a lot of fixed-rate mortgages. That declined to about point 0.47%, which is the lowest on record. It came down from about 3% back in 2019. The cost to borrow is extremely low, which leads to more spending. When you have someone that’s passing out free money, what you do is you spend it somewhere.

Inflation is more of a psychology than anything because it’s the perception of individuals that the prices are going to increase that then leads them to spend that money. If that $1 you have in your hand is only going to be worth $0.50 tomorrow, you might as well spend it today and get whatever asset or whatever you’re going to get. You might as well get that because that value is going to be there.

What we’re doing with real estate is we’re taking this money that is decreasing in value. The dollars are being worth less and less every single day. We’re trading that in for an asset that is appreciating in value. That not only tracks inflation but outpaces inflation historically because you’re continuing to sign new leases when you’re invested in a portfolio of rentals on essentially a daily basis. You can track inflation more closely than most other asset classes.

It beats the equities markets because of the chart that we saw with Marcus & Millichap that you guys were talking about. Multifamily has beaten the markets in every other asset class.

REID Spencer Gray | Rising Interest Rate

That was a great report that Marcus & Millichap did. If you go back over twenty years and you look at the total returns, they looked at all commercial real estate asset classes compared to the S&P 500. All but office beat the S&P 500 by a significant margin. Multifamily was the number two performer. Industrial was the number one performer because they’ve had an incredible run and an incredible cap rate compression. It outperforms on a total return basis. That doesn’t take into account all the tax benefits real estate has also.

Spencer, we have been watching, listening and reading The Gray Report. Your team is concerned about the increasing interest rate environment and how some real estate private equity firms are not accounting for the interest rate increase and potentially are putting investors at risk. Could you please walk us through a multifamily underwriting process in which if increased interest rates are not accounted for, it could cause either loss of cashflow or worst case scenario, a default? How do we lower risk in an increasing interest rate environment?

We came to these conclusions through conversations with a lot of people who are smarter than us, but also being in the process of underwriting deals and transacting on assets. After the Federal Open Market Committee decided to raise the Fed funds rate by 25 basis points, we immediately saw major moves in the market, specifically in the longer maturity bonds. The ten-year treasury started to run higher and higher.

We started looking at some of the predictions for the SOFR, Secured Overnight Financing Rate, which is what most bridge loans are indexed to, as well as most floating rate mortgages are indexed to. Looking at the options market, SOFR was already trading close to 1%, which was pricing in another 0.75% rate increase.

When you’re underwriting a property, your lender sends you over a term sheet. They’ll give you the index and the spread that they’re charging, and those should tell you your interest rate. For many apartment syndicators, they’ve been using bridge loans, which are shorter-term loans with a floating interest rate. You can get higher loan-to-values.

It’s popular primarily because we saw so much growth in the market. You didn’t want to put your permanent loan quickly because there are prepayment penalties associated with longer-term loans. You put on a bridge loan. You saw the value increase organically because you were seeing cap rate compression. You’re seeing rent growth. You’re going to refinance that out after that 1 or 2 years or maybe you’re going to sell the property at that point. Interest rates were flat or they had been declining. That’s what everyone was used to.

The script then flipped and we said, “We’re no longer in a declining interest rate environment, at least temporarily. We’re not in a flat interest rate environment. We’re in a rising interest rate environment.” Similar to what we were talking about previously, you want to watch what the Federal Reserve is doing. You don’t want to fight the Fed. You don’t want to go against what the Fed is doing. We were flowing with the Fed during the pandemic with low-interest rates using some of those maybe bridge loans and floating rate products.

The tides have shifted. It requires investors to change their mindset and say, “Where are things going?” If the Fed funds rate is increased to 2% up from 2.35%, you may be underwriting your interest rate on a multifamily acquisition at a 3.25% interest rate right now. In reality, by the time you close, you could be paying a 4.5% interest rate.

If you look at the dot plot, which is what I call the Federal Reserve Governors Mark where they think interest rates are going to be over time, there are some that are getting close to almost 3% on the Fed funds rate. That would mean that you would be paying an interest rate closer to 6% and maybe 6.5%. If you had been baking into your model that you would be paying 3.25% over that multi-year period, your cashflow projections would be considerably off.

The other element that’s going on is the amount of rent growth we’re seeing. The United States grew rents by 15% year over year. In 2021, we saw great rent growth. This 2022, it’s even higher than it was in 2021, which is incredible to believe but it’s represented because of inflation. I’m not saying that it’s going to stop tomorrow but you can easily make a mistake by over-speculating on that rent growth.

Syndicators are incentivized to speculate because they’re buying at low cap rates and the growth is required to bring the investment to a point where its cashflow is insufficient. You’re getting the net operating income to a point where you can sell it for a profit. If that rent growth tapers off sooner than we anticipate, I don’t think there’s a lot of data that points to that but it’s certainly a possibility.

If you have interest rates that are double what you would have anticipated on your underwriting and you’re not hitting your highly speculative rent growth assumptions, you could easily be in a situation where you have low or no cashflow. Even in a situation where you don’t have the cashflow necessary to cover that debt service. Not to mention these short-term bridge loans are 1 to 2 years.

Who knows what interest rates or the market environment is going to be in that second year. I’m not saying that the market is going to crash and it’s all doom and gloom. We’re in the middle of buying real estate. There are ways to mitigate that risk that don’t expose you to all of these potential pitfalls. You’re going to give up a little bit of return because you’re taking a little bit less risk.

By keeping interest rates low or really increasing inflation, you increase the supply of dollars into the system. Click To Tweet

We have to follow the first two rules of investing, which are to not lose money and then follow the first rule. To me, that’s pretty simple. I don’t think it makes sense to take risks with other people’s money, especially to squeeze out a couple more basis points of return on your IRR just because it will allow you to raise less equity to get the deal done, which is how it comes down to it.

REID Spencer Gray | Rising Interest Rate

How do you adjust risk then?

There are a couple of ways that we’re looking at doing that. One is dialing down the leverage. Instead of doing 75%, 80% or 85% loan-to-value loans, we’re looking at anywhere between 55% to 70% as the range that we’re shooting for right now. That’s what a lot of lenders will require. If you’re going to go with a fixed rate agency loan, you might not be able to get much more leveraged than that anyway because they’re seeing the same things. If you just want high leverage, you can still go out to a bridge lender or a debt fund and probably get it.

Leverage is one way, and then the leverage is a direct correlation between risks. If you can dial down your leverage, you’re going to decrease risk. Our break-even occupancy when we’re looking at lower leverage is in the high 50% to 60% range. The occupancy has to drop so low before we break even.

The other way is to use either a fixed rate debt. We’re really just removing the bad variable of interest rate volatility out of the equation entirely. We don’t have to worry about it. It’s locked in. You may be locking out a slightly higher interest rate than the floating rate, but that risk is completely removed from the investment itself.

Another way to do it would be to purchase rate caps or hedge interest rate movements. There are two ways to do that. One, you can buy an actual rate cap, which is an insurance product. You have a couple of options to do that. Those rate caps are very expensive right now that typically last for a few years. The way they work is it’s an insurance policy essentially. You have to pay a premium and then if their interest rate hits a certain strike price, that insurance policy will start paying you out the difference between interest rates.

There’s another strategy that I’m still learning about, to be honest, but it’s fascinating. It is using SOFR options or purchasing SOFR options as a way to hedge against SOFR increases. What’s attractive about this strategy is that you’re buying rolling options every 3 to 6 months. You were rolling these options over, and then you’re pricing them to essentially if the SOFR increases and hits that price point that you buy your option at, the payoff is equal to the increased interest over the term of the loan.

If you are holding a project for ten years or your loan term is ten years, so you buy your SOFR option basically calculated for the proceeds that are going to equal that ten-year period. Rates could rise at the end of the year. You strike price. You sell that option. You receive a large windfall of cash equal to the interest payments of that entire period.

You don’t have to hold the property for there’s nothing saying that you have to hold a property that long. You could have the situation for you have an asymmetric return profile. If you have this big pop from the proceeds of this options contract hitting, but then still have the option of selling that asset in 3 years or 5 years or whenever that makes sense.

My only issue with that strategy is I don’t think many investors would be comfortable with it because it’s slightly more complicated. I think investors have confused mindsets now. Investors are trusting us to understand real estate, not necessarily trading options, which is a different thing altogether, but it’s a pretty interesting strategy nonetheless.

Just the fact that you’re exploring it is exciting enough. Talking about the relationship between the GP and the investors, the educational side of it is very important. In our case, we educate a lot of our investors about preferred returns, what preferred returns are and the importance of it, because a lot of other real estate private equity firms in Canada don’t offer preferred returns. They do in ground-up development projects, but they’re making their fees on construction development fees and other fees that they have. They’ll make money no matter what happens, even if those preferred returns are not hit.

We have to educate our investors, but it’s also important that when you’re talking to investors about cash on cash, you need to discuss that the cash on cash is lower on this investment because you have more security on the debt side. That’s what you put that reserve in. As long as the investors understand that and for myself looking at it from an investor’s perspective, I would see the astuteness of the GP trying to put those measures in place for the risk adjustment they’re going after. That’s a great conversation.

Let’s get to the next topic here. I want to talk about the fundamentals of real estate investing, but I got to give a brief story about how I ended up here. My background is in construction. I started doing small fix and flips, then eventually got into building single-family homes more on the luxury side. I always wanted to scale, and then I got into ground-up development where I would do single-family land assemblies.

REID Spencer Gray | Rising Interest Rate

Rising Interest Rate: If you have a significant amount of debt, one way to kind of get rid of it is to devalue the debt. You can print new dollars that make your debt worth less and less and less.


We’ll go to the city to do a rezoning and then build multifamily, but more townhomes for sale, not for rental. I then got a need for equity. I started researching how to raise capital and what have you. Most of the content was coming from the US, and then I realized this process of apartments syndication or multifamily syndication, or buying multifamily assets and existing assets. I’m like, “This is great.”

Buying multifamily assets is already cashflowing from day one. You do some small renovation and sell it in 3 to 5 years, then give a great return back to your investors. I’m like, “I’ll duplicate the same model here in Vancouver.” When I started looking at numbers, I realized that multifamily assets, it doesn’t matter what asset class or what region, they’re all in negative cashflow on a conventional mortgage on a 70-30 LTV. They’re in extreme negative cashflow. I’m like, “Who is buying these multifamily assets?”

It’s just not working out. That was the inception of CPI Capital being a real estate private equity firm that is mandated to acquire US multifamily while partnering with Canadian and US LPs. It has always been the curiosity in my mind about how can this business exist in Canada and who is buying it. I’m always researching that from brokers. I noticed the same environment exists in the US, where in California and New York, there is no real cashflow.

People are buying for their appreciation that could be there for the asset, either through forced appreciation or natural market appreciation. Going back to my initial discussion, in a real estate investment, there are certain fundamentals that need to exist. The asset needs to provide cashflow, which I wouldn’t say guarantee, but the odds are there of being some form of cashflow. The units are rented, so you know that most probably you will be receiving those rents in the next coming years because that’s what the market is.

You know that the cashflow is there. Either you’ve got to have cashflow or you got to have a natural market appreciation, or you got to go do some sort of force appreciation through ground-up development or renovations. The two latter points are 100% speculation. You’re expecting that the market would continue going up. You’re expecting that your value-add will increase value.

Vancouver, Toronto, and some areas in California and New York are playing that game of hoping for appreciation. Most of the world have also a similar idea. They’ve got massive inflation in other places in the world that is just a hedge against inflation. That’s why they buy properties and they build real estate. US seems to be the only place where there’s still this idea of cashflow and appreciation and forced appreciation from day one, and in certain regions within the US like the Sun Belt, but it is changing.

I look at Vancouver, where in the last decade, there has been no cashflow. That has caused other issues where a lot of buildings are rundown, and people are not doing value-add. They’re still in their ‘60s and ‘70s vintage because there’s no point in renovating. A lot of complaints are coming from people living here. People are staying in the same place. We’ve got extreme rent control laws as well in place.

You can see the same thing in California and New York with rent control laws, but it’s changing. The dynamic is changing for example in Phoenix, Austin and Dallas in Texas and other areas in the US. What is your prediction here when it comes to this environment changing? Do you think the same fate that was here for Vancouver and Toronto, two of Canada’s largest cities, and California and New York, the same large cities in the US? Do you think the same fate will be for places like Phoenix and other regions within the US and where things are going, but compressed cap rates and everything else we’re seeing?

Unfortunately, and I guess at the same time, fortunately, I do think that probably will be the case. Just looking at the amount of capital that is flowing into commercial real estate, specifically multifamily, it has been the major factor that is continuing to drive down cap rates. I look at other examples, whether you’re in the US or Vancouver, or even looking over in Europe where cap rates have been in the 3% to 4% range for years. I don’t track Europe that closely, but the cap rates have been low for a very long time.

A lot of the owners of real estate are very institutional. Insurance companies and major institutions are owning a lot of the real estate, partially because they’re the ones that can actually afford it. It’s the same place as where they had them and could not talk about negative cashflow. They’re buying negative-yielding bonds in many of those countries. Those yields maybe have come up a little bit but still, there are negative trading bonds. You can buy a bond and get paid back less than you initially invested.

It’s that same type of mentality there. They’re trying to preserve capital. They’re trying to find safe haven investments. Real estate, specifically multifamily, is one of those asset classes that has an incredible history of stable performance, and it’s very attractive. I would argue that multifamily in the US, the risk premium is what you are being paid beyond that risk-free rate of the ten-year treasury.

We’ve been paid a nice risk premium for the relative moderate or certainly not. There’s always a risk. There’s always the potential for loss, but look at the default rates of large commercial multifamily properties. It’s less than 1%. You have relatively low-risk investments, but we’ve been paid nice cashflow in many markets, not all. We’re seeing this happening now. If you look at what’s happening in Phoenix, in many of the markets in the Sun Belt, in Dallas and Austin, those cap rates are in the 3% range.

That changes that return profile and exactly as you were mentioning, August, it relies entirely on speculation of appreciation. The cashflow part of your return is made up of two components. You’ve got your cashflow and you’ve got the value appreciation. In the past, it has been a mix between the two to get your total return, but now you’ve taken cashflow out of the equation. You’re only basing that on appreciation and the increase in value, which is reliant on someone else later down the road deciding to pay you more for that asset.

Inflation is more psychological than anything because it's the perception of individuals. Click To Tweet

Whereas if you’ve got cashflow, since we don’t have the liquid markets necessarily, and we don’t have market-to-market pricing for these assets, the value could decline significantly. Assuming they have the rent stayed the same, I have still a cashflow coming up. I don’t care what someone says that the asset is worth it because I’m not selling it. I’m getting the cashflow that’s coming off.

Obviously, the value is related to the cashflow. That would be a pretty strange environment where that would be the case, but for us a great capital and how I got started, we were totally focused on cashflow and we still are. We’re cashflow investors. It has been tough to see that amount of cashflow decrease as we’ve seen cap rates continue to decrease and decrease.

We used to try to hit close to double-digit cash on cash year one if we were interest-only or at least 8%-plus trending to double digits after the first couple of years. That just doesn’t exist unless it’s a highly speculative rundown property and you’re going to do a complete reposition, and then there’s typically no cashflow in the first year.

I do believe that investors are going to continue to flock to multifamily investments. At the end of 2021, there was over $250 billion earmarked for multifamily investment, just for large firms. That doesn’t include just the private syndication space that is a relatively small percentage of the overall entire market. That’s going to keep cap rates low. Even though interest rates move up, there’s some correlation. I could see cap rates rising a little bit in the short term because no one will be able to buy at a 2% cap rate when they’re paying 5% or 6% on the debt.

There will be some folks out there that will still take that gamble, but over the long run, I see us still having low-interest rates. I still see us having lower and lower cap rates over time. I do see that happening. That’s unfortunate for those of us who are looking at cashflow and have a preference for cashflow. At the same time, if you are an investor in these assets, your cashflow may decrease, but your value is going to also increase significantly. Coming to politics, I mentioned politics a few times. I get asked this a couple of times, “What if the government gets involved in housing?” You hear people talking about the housing crisis.

They did with the housing projects.

They’ve already tried that, and look what happened. All of these buildings are falling apart and no one wants to live in them. They’ve tried that before. The government tries to further regulate housing. They’ve already announced. I forgot if it was the Federal government, but they’ve earmarked housing as too big to fail. They’re not going to allow the housing industry to crash again. Those types of government guarantees, even though there’s not maybe a written guarantee, decrease risk, especially to institutional investors and will continue to drive capital in.

At some point, different investment asset classes have to be related in terms of their return on their risk. You can’t have multifamily having a low-risk investment but have a high rate of cashflow and return compared to other investments. That’s what’s going to be happening because you’re going to see more capital coming into multifamily, increasing the price but decreasing the cashflow that it puts off.

One more item I want to add here is the unfortunate thing that’s going to happen. Supply is going to lower. It’s the same thing we see in Vancouver and Toronto because of this idea of condo conversion. A lot of these multifamily owners went to rent-to-value ratios that were so low. They started converting to condos and selling these things. That decreased the supply as well. That’s possibly happening in California and New York as well. For the time, I’m going to bypass some of these great questions we have. We’re going to go right here, I guess.

I’ve set it up with this on Spencer. Do you have a unicorn city? If you have to invest in one city, what would it be?

It’s a difficult question to ask a fund manager about that because they have a mandate and there are certain cities that they’re investing in, but it could be concurrent with what you’re investing in. Tell us if there is a unicorn city or a city that you’re bullish about.

You’re right, I am 100% biased, but I try to look around and see if the grass is greener. I know I’m biased, but Indianapolis remains my favorite market to invest in because I will never know a market like I know Indianapolis. I was born and raised here. We have tons of assets here. We’re better connected. We know all the players. That’s a type of home field advantage where it allows you to exploit the inefficiencies in the market and see things that other people don’t.

Removing myself from that equation, Indianapolis is a strong growing city. We’re adding about 1% of our population, just an entire MSA, and closer to 3% in some sub-markets. There’s more industrial development going on in Indianapolis right now. Almost anywhere else in the country. We’re building more than Chicago is building or any other major Metro, which is a leading indicator of jobs. Jobs are typically a leading indicator of population growth and wage growth.

REID Spencer Gray | Rising Interest Rate

Rising Interest Rate: If the dollar you have in your hand is only worth $0.50 tomorrow, you might as well spend it today and get whatever the asset is going to get.


At the same time, we haven’t built fewer apartments now than we were in 2012. We have not started ramping up the development. I think that we absorbed 5,000 units of inventory. In 2021, we’ve only built 2,500 in the entire Metro. We’re one of the most tax-friendly environments in the United States. People don’t believe in the property tax regime here. It’s illegal to chase property tax sales in Indiana. We’re a very landlord-friendly state and business-friendly state.

A lot of people are not familiar with Indianapolis, especially if you’re on the coast. It’s part of the Midwest. It’s fly-over country. They’re not sure. They get Indiana and Iowa confused. They don’t know where it’s at. It gets missed by a lot of institutional investors allowing for a slightly higher cap rate. That comes back to what we were talking about. It provides a more balanced return that still has that cashflow, but you still get the benefit of value appreciation all at the same time. It’s a total biased response, but it’s what I believe.

We love it. We got to start looking at Indianapolis.

Let me know when you guys want to come to town. I’ll show you around.

Last question before the next thing on our show and we apologize. We appreciate you’re here. What advice do you have to passive investors looking to start investing in real estate private equity?

If you’re a passive investor looking to start allocating into private equity, you’ll want to take your time. Don’t focus on a deal but focus on finding a sponsor that aligns with your strategy, your goals and your style because you’re not looking to do just one deal. You’re hoping to form a relationship that will ideally last many years and multiple projects over time. If they do the right thing, there should be a doubling or tripling of your money to be able to grow your wealth.

It’s important to take those relationships slowly, to do your research, and get comfortable with that particular sponsor. Also, it never hurts to look at those projects like you were the sponsor. If learning how to underwrite a project is going to make you more comfortable with that sponsor, that’s what I did when I started looking at investing in other people’s deals. I went and reverse engineered the deal to see what they’re doing. That’s always a fruitful exercise, although not everybody has the time to learn that skill and dive into the whole underwriting process.

That’s good advice. Let’s jump into the next segment of our show. It’s called the ten championship rounds to financial freedom. Whatever comes top of mind, we’re excited to hear your answers. Here’s the first question, who is the most influential person in your life?

I would have to say my father is probably one of my most influential people. He’s not a perfect person. None of us is, but I’ve gained so much about how to build a business, how to treat people right, and how to see the bigger picture in things and take a step back. I’ve been able to learn a lot from him over the years.

He’s done a great job. I wish to have a son like Spencer one day.

What is the number one book you recommend?

The number one book I recommend is probably the book that most people recommend. That Rich Dad Poor Dad. That’s going to be one book for someone to read to get an intro into having that mindset shift. I don’t think it’s the best book by any means, but it’s the one book that unlocks parts of people’s mind and allow them to have the right mindset to see the world in a different light. It’s a classic.

Particularly if you’ve subscribed to this concept of going to school, working hard, getting a job, working there for the next 40 years and retiring, definitely that book will be eye-opening.

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If you had the opportunity to travel back in time, what advice would you give your younger self?

We get into all kinds of paradoxes with that because so many of the mistakes that I’ve made are the different paths that have led me to where I am today. I would tell myself to work a little bit harder in college. To be honest, I see myself as a pretty work hard, motivated, a driven person today. Back in college, I was not the most motivated work hard person. I remember there was a whole quarter that went by and I couldn’t think of anything I had accomplished.

Music was your major. You had to just rock harder.

Too much listening to music and hanging out. It was great. It was a lot of fun, but I wish I could have been a little bit more productive back in those days.

What is the best investment you’ve ever made?

I started buying Bitcoin back in 2012, but I ended up selling a lot of it in about 2013 and 2014. I thought I was a genius.

Follow the rule. Never lose money. We did it. We just didn’t account for it going up 100X.

I think I bought my first Bitcoin for about $90 and I sold it for $600. I thought, “I 6X my money. How am I going to do much better?”

You don’t know what you don’t know. What’s the worst investment you’ve ever made. What lessons did you learn from it?

It is a series of investments, but as I’ve mentioned earlier, I played around with options trading in the past. One thing I learned about any type of investment that requires me to get the timing right on something is a horrible investment. The only times I’ve lost money on investment is a time-based proposition of I have to get the direction right but I also have to get the timing right.

I learned that I got to have the direction of the stock go in the right way. I learned this thing called faded decay where you need the value decreases over time because it gets closer to the expiration date. It was only a timing thing. That’s why it’s burned into my brain. If I can minimize that variable of time just not being a factor, that reduces a lot of risks.

The GPLP structure does that for investors. You don’t have to get your emotions involved, let the GP decide when to exit.

How much would you need in the bank to retire today? What’s your number?

REID Spencer Gray | Rising Interest Rate

Rising Interest Rate: With real estate, we’re taking money that is decreasing in value. The dollars are worth less and less every single day, and we’re trading that in for an asset appreciating in value.


I like the belief that if I wanted to retire today, I could. I don’t have a number that I’m like, “I’m done,” because I see so much more to life than just sitting on a beach. I love sitting on a beach. I love activities, but I want to build a life with the purpose that I’m doing what I want to do every single day, so just integrating my life with my business. My wife, Alex and I have done a pretty decent job of that. We haven’t got it all figured out yet, but I don’t have a number because I’m not looking forward to retiring anytime soon.

We would love to meet you guys one day, by the way.

If you could have dinner with someone dead or alive, who would it be?

This is a little more personal. It’s not as financially interesting. I didn’t get to know my grandfather on my dad’s side very well. He died when I was very young and I’ve heard so many incredible stories about him that he’s an incredible guy. He was a Naval aviator in World War Two. He met my grandmother. They met in Australia and got married there. He took her back to the United States and built this incredible life. I wish I would have been able to have a relationship with him. It’s more personal and not as interesting, but definitely amazing.

I love that answer. f you weren’t doing what you’re doing today, what would you be doing now?

I love fishing. I love doing outdoor stuff in general. I think being a fishing guide would be fun. Taking people out and spending the day on the water. I don’t golf a lot. Fishing is the golf that I used to reset on the weekends. If I wasn’t doing this and it’s the springtime and the weather is warming up, I would probably be out fishing.

Book smarts or street-smarts.

You got to have a combination of both. If you’re going to have one though, you would want to be street smart to know how the world works. It’s like all things in life. It’s all about the balance of having the information, but also the experience. Balanced, but if I had to pick one, it would be the experience in street smarts.

Last question, I promise. If you had $1 million cash and you had to make one investment today, what would it be?

I’m going to put an emphasis on this question because it’s a particular question. It says $1 million cash and it’s liquid. You can make only one investment and you have to deploy it today like the next 24 hours thing.

I’m going to take The Gray Fund out of it because that’s what I’m going to do.

If I had $1 million to invest today, this wouldn’t necessarily be the lowest risk option. I’ll just be honest, but I would look at some options or futures strategy against SOFR or on bonds. I’m assuming that bonds are going to be moving up significantly. I would buy calls up to probably 100 basis points on SOFR or some other bond. We all know what’s going to happen and a lot of that is already priced in. I’m not really doing this so I don’t know exactly what the payoff would be, but being in short bonds would be a pretty good position to be in.

I look forward to video, content, and information coming on The Gray Report about this topic because I know he’s going to research it and he’s going to put it all together.

Share it with all of us. What is the best way people can reach you?

You can go directly to Gray.Fund and we’ll be able to get in touch with you. We’ve got a quick form to fill out. I’m pretty active on LinkedIn as well. You can find me on LinkedIn. Our website where you can sign up for our newsletter is

That’s amazing. We apologize for keeping you here longer, but we couldn’t let you go. We appreciate it. Thank you for that.

August and Ava, this has been a real pleasure. This was a great conversation. I’m looking forward to meeting you guys at some point here in the near future, whether it’s a conference. I’m up in Canada. You guys come down here to Indi. I’m looking forward to meeting you guys. This was a real pleasure. Thank you.