In this episode, we're joined by Taylor Welch, co-founder of Traffic and Funnels and founder of Wealth Cap, a real estate investment company. He also hosts the Traffic and Funnels show and Daily Mind Medicine podcasts.
On today's show, we discuss why Taylor decided to create Wealth Cap after building a successful sales and marketing company, Wealth Cap's unique turnkey investment strategy, COVID-19, and so much more.
Taylor began in the industry in property management. During this time, Taylor ended up falling in love with marketing. He created Traffic and Funnels, a marketing agency and sales consulting company.
Why Real Estate?
We can see all of the volatility that's inherent with Wall Street. There are many areas to consider, but at the end of the day Taylor was looking at the long-term bets he was making with his money. From Taylor's perspective, real estate is much safer than relying on the continued growth, innovation, and new development required for returns in an investment vehicle like the stock market. In real estate, the supply and demand is much more certain and reliable. Some people can play the markets well, it's just a full time job while still being highly volatile.
How Did Running and Scaling a Marketing Company Help with Real Estate?
Small businesses run the economy, but most venture capital is reserved for the big players. By running trafficandfunnels.com, it was necessary to develop worst case-scenario plans. If the company ran out of cash, the doors had to be closed. Taylor and his team realized they needed to optimize for safety, not necessarily optimize for growth. Real estate is the answer for sheltering the wealth in a safe and stable vehicle that will still be available in 30 years. The last thing you want to do is work so hard to build your wealth and capital just to lose it in a week or a month's time. Real estate will build cash flow, but that's not the main purpose from Taylor's perspective.
Right now, Taylor and his team are focused on single family homes. 70% of the portfolio is long-term rentals. Multifamily is hot and Taylor may expand there, but he is still most interested in safety. The other 30% of the portfolio is in vacation rentals.
Everything starts with acquisitions, that's the key to the game. Can you find houses that are undervalued? That could be distressed properties or distressed owners.
Taylor begins with value-add and likes to focus on knocking out the largest items that will come due for a renovation soon - whether that's HVAC work or a new roof due in 3 years, Taylor and his team like to make those investments first. This also plays into their purchasing strategy, where Taylor and his team factor in the value-add cost before acquiring the property. Wealth Cap keeps most of the properties, but after the value-add is done, Taylor is open to selling some properties.
Taylor founded and designed Wealth Cap as a way to store his wealth. As the marketing business grew, some clients began asking what they should do with their excess cash. Taylor offered to manage their cash, so now, Wealth Cap also functions as a way for passive investors to have their cash invested in the real estate industry in a very safe and risk-conscious manner. The function of Wealth Cap was never to generate cash flow, but as more outside investors look to join in, Taylor is seeing that they have unintentionally morphed into a turnkey company - with a few key differences.
Now, with Traffic and Funnels and Wealth Cap working together, Taylor can offer everything from sales and marketing to cash and asset management to his clients and investors. Still, Wealth Cap isn't trying to maximize for profit. A turnkey that doesn't care much about profit is bringing huge returns to investors because Taylor isn't marking up prices first, inflating any numbers, or taking additional fees like many other turnkey real estate investing business models.
Taylor and his team grew Wealth Cap to this point by being extremely safe and risk-conscious - in his words, they are "paranoid". Anything that could go wrong in the industry and economy as a whole, they double or triple the numbers to create a worst-case scenario. For example, vacancy of 8% is tough. Taylor and his team look at what would happen at 30% vacancy. If vacancy rises to this rate, the portfolio needs to be safe and diverse enough to still cover the costs of those vacant units. By planning for the worst-case scenario and protecting against the downside first, the risk is comparatively much lower.
At the tail end of the episode, Taylor, Brandon, and Thomas have a great discussion about dealing with COVID-19 and preparing for other future crises, leadership during downturns and recessions, the role of the media, and mental, physical, and economic health consequences. They also dive into the importance of strategic thinking and the power of your mindset,
Learn more about Taylor and his work: wealthcapholdings.com
We have created a Slack community for real estate investors to share ideas on how to protect their business and investments and to stay up to date on the laws and best practices as the coronavirus progresses. The community already has over 800 members and some great conversations are taking place: visit cashflowcommunity.slack.com to join