FULL TRANSCRIPT

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Slava (00:00)

In this episode of Smart Humans, we talk with Nate Helbach, who's the co-founder and CEO of Neutral, the real estate investment platform. We talked to him about how he differentiates his real estate multifamily investments, how he focuses on sustainability, health and wellness, what he thinks about the market, why he thinks there's going to be a massive under supply of real estate in the years to come, where rates are headed, and of course, his predictions for three years out.

Slava (01:46)

Hello and welcome to the latest episode of Smart Humans. I'm excited to have our latest guest, Nate Helbach, who is the CEO and co-founder of Neutral. Nate, welcome to the show.

Nate Helbach (01:58)

Thanks for having me.

Slava (02:00)

Absolutely, so we always like to start right from the beginning. How did you even get into alternative investing? Where did it all start?

Nate Helbach (02:08)

Yeah, started working for a real estate company and primary focus was multifamily investing, but they were doing investing all over kind of the real estate sphere of office, multifamily industrial, and really found that I like real estate because it's a non-financial asset. You can actually touch and feel what you're investing in and did that for several years. then 2015.

Slava (02:32)

what year did you start that?

Nate Helbach (02:37)

and then went through and started just really investing in mostly the Wisconsin market, but all over the Midwest. And then in 2019, I decided to exit from that firm in my investor relations and development management role and get into what is now today called Neutral, which is the company I founded. And we have a primary focus in multifamily real estate investing, mostly luxury housing.

in right now, Wisconsin, Arkansas, and California. And the big reason why I like alternatives, not that I don't like public markets, but I think you should be invested in all of them, is that it's really giving you a really big differentiation and diversity from kind of correlated risk in the public markets that you have all these non-financial assets that are not correlated to the S &P or sometimes even kind of the broader

macro trends of the economy. Really, you're looking at a specific market, even down to not just a city, but even a neighborhood and figuring out is this a good asset to invest in or is this something that, maybe we should pass on because the neighborhood has issues, maybe there's high crime, maybe there's not that much big inflationary factors in the neighborhood, maybe there's not a lot of people moving in.

And so you really get to analyze a specific neighborhood, then a specific city, then a really specific state. And then overall, you're still looking at the macro market, but you're not as correlated with the macro market. So that's my big reason why I like alternatives.

Slava (04:15)

Nice, we'll dive into that more in just a second. So what was happening for Nate, for you, before 2015?

Nate Helbach (04:23)

Yeah, I was in high school actually. And right out of high school, I got an offer from this institutional developer and he said, hey, you should come work for me. And I was like, well, I want to go to college and kind of go the traditional route. And he gave me an offer I couldn't refuse. And so I was really looking into what could I do with college and working full time and making really good money. And so I enrolled in Harvard extension school.

which is Harvard's program for basically online executive learning. And so was able to go through my undergraduate program there while I was working full time, really learning kind of the academic side of investing in real estate, but then at the same time learning the more practical, non-Ivory tower side, I'll say, of real estate, of what really happens when you invest in a ground up deal and...

something goes wrong during construction and you got to go report back to investors. So it was this really nice dichotomy between understanding the academic, but then also understanding the practical, really this is how the world works. And so I did that while I was at the company and then in 2019 exited. And really what I learned from that experience was there's a lot of things that you kind of learn in a book that don't necessarily apply.

to the real world. And there's a lot of things that you learn in the real world that don't necessarily apply to academia. And I think this dichotomy between the two is what actually a lot more professionals need because a lot of people kind of get into these almost just like black boxes of like, this is the box I work in and I can't even think outside of the box. And I think having the really real world impression and the academic impression gave me this opportunity of

being able to have found a company outside of these kind of really traditional boxes.

Slava (06:21)

So it's interesting, you hear folks going to college, you hear folks dropping out of college to start startups or to do startups, but you rarely hear going to do jobs and doing college at the same time. So why was that important to you to do the Harvard Extension School at the same time?

Nate Helbach (06:37)

it was really, I wanted a holistic approach to one, just, think, practically speaking, my mom and dad were really big into this, but pushing like mathematics, grammar, English, and physics was a big thing in my family. And so having that really foundational principles be applicable to the business world. They're like, you need that. Like if you want to succeed, you need to be able to do mathematics. You need to be able to understand and be able to write.

And then you need to be able to actually like communicate those, those thoughts. And so that was one of the big reasons of why I thought it was really helpful to do both at the same time. The other reason was I was kind of already thinking about starting neutral even way back then. And I wanted this kind of framework of how can we start a company within a certain business plan within the confines of academia.

and then really take it into the real world and see how it's applying. And a lot of the lessons I got to learn on, say someone else's dime, because we got to learn them back at the old firm. But there's been a lot of lessons too that we've learned at Neutral that hasn't been on someone else's dime. We've made a lot of mistakes along the way. Fortunately, none of them have been a existential mistake, but some of them have been big mistakes that we've made. it's like those are bound to be made while you're in a startup mode.

So the reason I wanted kind of both perspectives was I feel like there's a lot of things you can learn in the business world that are really, really beneficial to being a CEO, but there's just as much you can learn within the academic world. And having both kind of perspectives is I think what makes us such a good company.

Slava (08:17)

Awesome. So you've said multiple times that you're a big fan of alternative investments. So what is it, what kind of alternative investments do you like versus which ones do you shy away from? We think about it as six major categories. Tell us which ones you like and why. So one, there's obviously real estate and private credit, you know, the yield oriented. Then there's more of the risk on assets like pre IPO venture or crypto, or there's art and collectibles like sports cards. What do you think about those six categories? Where do you like to put your

personal net worth, where do you like to invest?

Nate Helbach (08:50)

Yeah. I mean, I think I'll be somewhat biased here and say real estate is my favorite. that's where the majority of my net worth is held. I think the other ones are great. one of the ones I actually think I like a lot is the pre IPO. the reason being is you kind of get to see the early inception of the company. You get to see the minimal viable product, then probably version one, version two, especially with technology companies. And once they're on version three, it's like,

this is likely going to work. Right. And the only thing, big question is, it scale and can we scale efficiently? And so what I've done in my personal investing, this is not something we do at Neutral, is invest in those kind of pre IPO stocks. The other ones I must say, I haven't actually done that much investing. I've of course followed Vincent and have seen some of the webinars and other things that you guys have done, which has been really helpful to learn more about it.

Um, one that's actually intrigued me that I've dabbled in, uh, is wine investing. And I know I think you guys have talked about this in the past. Um, but my, my dad used to own a cafe and he had a liquor license. And so we, uh, actually got to buy wine at a major discount. Any cafe you that has a liquor license gets to buy wine at like 40 to 50 % off. It's actually one of the biggest discounted liquors out there because like whiskey and

Slava (09:55)

For sure.

Nice.

Nate Helbach (10:15)

Hard alcohols are typically more in the like 15 to 20 % range. And so we kind of took this arbitrage and started buying these really, really expensive wines. And we're still holding onto them in our cellars because we are hoping that as they get older, more people get a little bit more greedy and want to drink them. And once more and more people drink them, then they will be more and more obviously increased in value.

Slava (10:43)

More scarce

Nate Helbach (10:44)

And so we're practicing something that is sometimes hard, especially with great wines, which is constraint. And we're not drinking the great wines and we're going to keep them in their bottles. And hopefully in 10, 15 years, double, triple, or even quadruple in price. So that's the, yeah.

Slava (11:01)

Amazing. Amazing.

Can you name one of them that you have or?

Nate Helbach (11:06)

well, sure. Yeah. I could, I could name several of them. I think one of the best ones I have is it's called Penfield Grange, which is a big Australian producer and they make a really, really good wine. a few of other ones are probably not necessarily very common, but Penfield Grange is a pretty common brand. they just make a really nice reserve.

Slava (11:30)

Awesome. And then so you're a pretty young guy. I'm surprised you haven't brought up crypto. What's your point of view on crypto?

Nate Helbach (11:35)

Yeah, I'm uneducated in crypto, I must say. I haven't spent enough time really exploring it. I have a few buddies that have done really well in it, but for me, I have been really focused on non-financial assets like real estate. so crypto has been something that has been a little bit more abstract for me to understand and try to invest in. And I try to go along with Warren Buffett saying, I've only invested in things that you know, and I definitely don't know crypto.

Slava (12:04)

All right, well, I know it's not Warren Buffett, but maybe you should think about putting one or 2 % of your net worth in it, because even if you lose it, it's not that big a deal. But if it's 10 Xs or 100 Xs, it could really matter.

Nate Helbach (12:16)

That is true. have thought about it. I've been thinking about putting it in Doge, but I haven't pulled the trigger. Specifically Dogecoin, yeah.

Slava (12:21)

specifically specifically Dogecoin.

I don't

know if that's the best bet of all the options you have in crypto, but you know, it's definitely worth a little risk if you'd like some. All right, amazing. So anything you want to cover on art and collectibles or you just shy away from that for now and it's not really your focus.

Nate Helbach (12:41)

Yeah, it's not, mean, other than the wine dabbling, I'll say it's not really my focus. One thing we have thought about though, that I'm starting to explore actually just of last week is looking at buying art for the buildings because we typically do murals on all the buildings. One, because the cities love it. The neighborhoods really love it and building rapport with the neighborhoods is really essential for us to keep getting new buildings entitled and developed.

Slava (12:44)

Exactly.

Nate Helbach (13:08)

but one thing I've thought about is we have art throughout all of our buildings. So like every elevator lobby, we always have art, in all of our gardens, we do these beautiful sculptures and things like that. And so one thing I've thought about is having art and collect collectibles being a part of the building and in a part of the investment. not totally sure exactly how we figure it out, but that's one thing that we've been talking about on our investment team of how can we kind of integrate this art and collectible idea.

of alternative investing into our real estate concept.

Slava (13:41)

Super interesting. Next question is open-ended. Take it where you'd like. What do you think of the macro economy right now? Obviously you got Trump pretty new, in his seat you have inflation that's trying to decide how sticky it's gonna be. Rates don't seem like they're coming down so much. Bond yields are coming down some. There's a lot going on, right? So what's your perspective on the current market?

Nate Helbach (14:05)

Yeah, it's somewhat elusive, I must say. And I don't think I have all the answers. So I'll preface my answer with that. But one thing that we are seeing right now in the market is tariffs are causing a lot of really burdensome policies, I'll say, in the steel and aluminum markets, particularly. So all of our buildings are mass timber. And so we always build using mass timber, but we always have a lot of aluminum and steel.

incorporate into our buildings because we're using them for our facade system. There's structural connections that are steel. Sometimes we replace glulam columns with steel columns. So we always have a lot of different materials on site. And as we go through bidding and budgeting and purchasing, we're able to kind of see these inflection points almost live time. So one big thing that I'm concerned about with macro economics right now is tariffs.

in three different dimensions. The first dimension is looking at import tariffs because we buy a lot of our mass timber from Europe. So two of our big manufacturers, one is called Stora Enzo, which is actually the oldest European company, and they import from Sweden, Finland, and Austria. And so one thing I'm really concerned about is if Trump puts a just gross tax on the EU of 25%, that means that our mass timber, which

typically the scopes of that is like six, seven, eight, nine, $10 million would be taxed at 25%, which we didn't have a budget for. So that's something that I'm keeping my eyes on. The next is steel. Steel is really interesting. About 75 % of all steel is actually already domestically produced in America. So 25 % is imported. And what we just saw as of two weeks ago,

is our steel manufacturers sent us a letter and they said, we're increasing your price by 9.25%. And we're like, what? Why would prices go up by 9.25 %? So I called them and they're like, well, imports on steel are getting tariffed at around 25%. And so because imports are getting tariffed at around 25%, we're going to take advantage of the situation and have a little bit of arbitrage here and increase our price by 9.25%.

And so fortunately in this case, our budget actually was higher than their increase. So we had a savings, but not as much of a material savings as we thought. But it's really interesting to me to see like what the main intention of what Trump is trying to do in regards to tariffs, which is bring back American manufacturer and bring back all these goods to be domestically produced. We have a very great instance of that with steel.

And now those same manufacturers are taking advantage of our manufacturing products and taking advantage of the clients by increasing the price. So that's something that has been a just kind of developing phenomenon that we've seen. The last one is aluminum. So aluminum is the opposite. About 80 % of aluminum is foreignly produced. So 20 % we produce domestically.

That is what I'm really concerned about because we import a lot of our aluminum for our facade systems because on our high rises we build with aluminum window wall. And so all of it comes from India. And again, if we see a 25 % tariff across the board, like Spend Discuss, then we would have a 25 % increase on a huge scope because typically those scopes are in the 15 to 25 to 30 million dollar range.

So we're talking about a lot of money there. So that's kind of what I'm worried about on the tariff side of things for our business, because it's directly impacting the costs of the buildings. And one thing I can't really understand is if I'm experiencing this, then probably every other builder is going to be experiencing this across the country. And so as everyone knows that's listening, we have an inflation problem.

And if every builder's materials goes up, well, guess what happens? Prices go up. And so my question and what I really don't understand, which maybe your audience could answer it is how is this helping inflation? Because if we keep tariffing, which I, from a macro policy perspective, I agree with, like if other countries are putting tariff on our materials, importing to their country, then we should probably do at least the same.

Right. That's only fair. But when we're dealing with inflation, how is this going to help bring inflation down when now every single cost material is going to be inflated by maybe up to 25%. And so that's something that I've kind of just been wrestling with and trying to read more economics about of really understanding how is tariffs going to help us decrease inflation.

Slava (19:13)

Yeah, that was really great perspective from your actual reality of dealing with those commodities. You're obviously not supposed to be predicting or are we betting on anything you're saying exactly, but we just want to hear your opinions. How do you see this? You're shaking out. You know, is it where we continue to see prosperity or do you think these tariffs and inflation hits are going to cause certain problems?

Nate Helbach (19:41)

Yeah, I mean, I definitely do not see inflation coming down. I think that what Trump is doing on the energy side will help a lot, but I don't think it's going to curb what we're seeing right now with the other inflationary measures being taken. I think one big thing that we've been watching is looking at the interest rates and understanding where the Fed is going to fall on some of these policies. One thing that we watch every single week is we look at the SOFR curve.

So if your listeners maybe don't know what that is, it's the secured overnight financing rate, which replaced the LIBOR about two years ago. And almost every single large bank pings all their loans, if they're floating rate loans to SOFR. So what we look at on a weekly basis is I get a report from JLL's market study group called Kensington Capital and Chatham Financial.

and both give me the SOFR curve for that specific week. So every week it's updated based on what the Fed says, based on what's happening with tariffs, all these different things. And the interesting thing is you can go online right now. If you just type in chathamfinancial.com and you look at the SOFR curve is you can compare it to the fedgovernors.plot. So the Fed governors, I think there's 11 of them.

Every single meeting, they give a projection of where they think rates are going to be in 12, 24, 36, and 48 months from now. And the weird thing is if you look at their dot plot, actually curve, the curve goes down. So right now we're sitting right around the mid fours. It goes down to about 3 % over the next two years. But the interesting phenomenon is that SOFR, which the market just dictates, this isn't have

really anything to do with the Fed policy, even though it's correlated, but really the market dictates what the SOFR curve is. So the SOFR curve is flat. It's sitting right around 4.2 % for the next almost five years. So what that is telling us is the market doesn't believe the Fed is actually gonna take these rate cuts. The market thinks that the Fed is either bluffing or they're not seeing the full picture.

about what is actually going to happen in this geopolitical sphere over the next 12 to 24 months. And they're betting that the Fed takes zero rate cuts between now and five years from now, which would be 2030. Personally, I don't think this is the correct posture. I don't think this is the correct projection. One, I think whatever anyone thinks about Trump, he's a realistic guy and he's probably going to figure out a way to get the Fed to decrease rates. Two, I think the Fed is

automatically going to have to decrease rates because the federal government interest burden has just exceeded the defense budget, which is obviously a terrible situation. And so I think the Fed is going to have so much pressure from the federal government that they're going to have to decrease. And even though people like, and this is something that you learn in academia, that the Fed is its own policy, it's its own thing entity, and it has no correlation to the federal government, nor is it.

at all obliged to be able to have any dictation from the federal government. It really, in my opinion, does. And I think that the presidency and Congress and Senate and those around the presidency actually do have a really big ability to dictate what the Fed does. And I think that we are going to see rates come down. Now, is it going to come down to 2.5 or 2 %? Probably not. I think it will probably sit around probably 3, 3.5 % for at least the next few years.

Slava (23:28)

Nice, I like the fact that you're putting yourself out there with some predictions. So rates will come in and come down to about three to three and a half percent sometime later this year. Is that what you're thinking?

Nate Helbach (23:38)

I think it will be before the midterms. think they're going to have to do something before the midterms. So before November of 2026, I think we'll see rates right around three to 3.5%.

Slava (23:50)

Great. Okay. So you're obviously the founder and CEO of Neutral. Not everybody has heard of it who's a listener. So can you tell us what is Neutral? Why did you start it?

Nate Helbach (24:02)

Yeah. So Neutral is a vertically integrated real estate development company. What we do is we build luxury multifamily assets. The reason why I started it is because when I was working for that previous firm that we talked about early on, we were really just building what I call commodity real estate. So what is commodity real estate? It's basically what you see in every single suburb of suburban America.

for the last about 15 years. It's the four story, five story, stick built, ugly, big box of a multifamily living structure where a lot of people have been living for a long time, for the last 10, 15 years, a lot of millennials especially. And my thesis around Neutral was can we build purpose built, differentiated housing that really focuses on three factors. One is sustainability.

Second is health and the third is wellness. And how do we look at those three factors? Sustainability, we build only with mass timber. So that reduces our carbon footprint by about 50 % because instead of building with steel and concrete, we're using this renewable material, which is wood, and we're able to use that for our primary structure. And so we're able to take trees that grow in the forest and through photosynthesis.

taking carbon, take those trees down in a sustainable manner, put them through a manufacturing process to make these big panels, beams and columns and put that into a building. And so that's reducing our carbon footprint. Second, we're able to have everything be passive house, either certified or designed to passive house standards. What passive house is, is it's basically putting this massive jacket around your building.

so that you're able to be about 60 to 70 % more efficient with your energy. So instead of using 100 kilowatts, you're only using about 30 kilowatts to heat and cool your building. And so that's the second kind of mechanism of how we reduce carbon and how we're more sustainable. The next.

Slava (26:13)

That's called, that's

sorry. That's called passive house.

Nate Helbach (26:16)

Passive house, yeah, the certifying body is called Passive House Institute, United States. There's a passive house Europe and there's a passive house United States. And so those two factors really differentiate us on the building side of things because we're building more beautiful structures because you get this beautiful biophilic kind of natural feeling when you walk into our buildings because it's all exposed wood. You can view that on our website.

And second, we're building more efficient buildings because we're building to passive house principles or passive house certification. The next big point is health. We really think that buildings where you spend about 65 % of your life, wherever you live, you spend about 65 % of your life, really have a big impact on your health. And so what we're doing is really looking at how do we design

and build these buildings so they're more healthy for individuals. So for example, what does that mean? We put RO systems, reverse osmosis, for all of our water. So all of our water, you're not drinking city water, you're drinking reverse osmosis water, which is taking out all the crap of whatever that city, whether it's chlorine, whether it's PFAS, whatever it is, are putting in your water, we're taking it out, so you're drinking clean and great water. Next, we have

beautiful and great spaces. So you're getting a very biophilic, natural kind of living space, which is actually a lot more healthy for your physical and mental wellbeing. Another one is air. Air, what is air? So we are able to actually look at how much air is flowing into the building and put more fresh air into the building. most of our, going back to that commodity asset.

Most of those buildings are pumping stale air that is at about 700 parts per million of carbon dioxide into the building. Outside, you're breathing at about 300 parts per million of carbon dioxide. In a neutral building, you're breathing about 400 to 450 parts per million. So very, very close to outdoor air you're breathing inside. So it's much more better for your respiratory system.

The other big thing that we're doing is wellness. So all of our buildings, we have a large building in each market that we build in, and then we have smaller buildings. We call it a hub and spoke model. And what this hub and spoke model, the hub actually has a large fitness facility, spa, pool, and full clinic. And we have personal trainers, nutritionists, and doctors on staff. So when someone signs a lease with us, they are then buying in.

automatically as complimentary a part of their lease into our wellbeing program. And with that, they go through a full diagnostic with our doctor and personal trainer, where they get a VO2 max, which measures your cardiovascular health to really understand how you're doing cardiovascular. They get a full resting metabolic rate, which is measuring how many calories you consume on a daily basis, just sitting at your desk. They get a full blood panel.

which looks at a whole bunch of different factors, but mostly for cholesterol and a few other cancer prevention items. They get a full mobility analysis from our personal trainer, and then they get a full DEXA fit scan, which DEXA is basically showing you what your body composition is. From there, we tailor then a personal training experience for them so that on a five weekday basis,

They have five different workouts that they do, and then they check in with our doctor on a semi-annual basis to see how they're doing on their goals. Maybe someone's coming to us and wants to lose weight. Maybe someone's coming to us and is an athlete and wants to increase their VO2 max. Maybe someone like my wife is coming after we just had a baby and they want to recover from the whole experience, quite daunting experience I must say, of having a baby.

And so really we're looking at these three areas of sustainability, health and wellbeing and trying to cater and put together this very kind of tailored experience for our tenants that you can't get in other places. This is not commodity housing. This is really kind of niche lifestyle experience.

Slava (30:48)

fascinating. So when you're building these buildings is this to sell units or to rent out units?

Nate Helbach (30:54)

It's all for rent. Yeah. So we've decided to go the for rent route, mostly because of our investment model. And that's what is the best for our investors.

Slava (31:03)

So included in the rental price is all these services or is it an incremental subscription price on top of the rent?

Nate Helbach (31:10)

Yeah, the base services that I just described are included. Once you go, which you don't have to go through, it's our recommendation that you go through that kind of early diagnostic when you sign your lease and move in. From there, then there's kind of this a la carte service cart that we give people, just depending on what we find. So the doctor might find, you know, pre-cancer or they might find someone's overweight and they want to lose weight.

And from basically that initial diagnostic, they can either buy in to more tailored experience, or they can just do the complimentary route, which the complimentary route is basically at full access to the gym. You have one annual visit with the doctor and you kind of go on your own pace. And then there's tiers above that that you pay additionally for.

Slava (31:57)

Amazing. How many buildings have you all put up?

Nate Helbach (32:00)

So we're on our fifth building right now in Milwaukee, which is our largest to date, where that building is 30, 32 stories. It will be the tallest mass timber project in the world. And it will be the first high rise Passive House certified building in the United States, which is in downtown Milwaukee, right across from the Buck Stadium.

Slava (32:21)

Amazing. if you include this fifth building, how many units have you put up total?

Nate Helbach (32:27)

Yeah,

that will be 780.

Slava (32:31)

Amazing, amazing. And that's in about like five years.

Nate Helbach (32:36)

Yeah, we just hit our five year anniversary.

Slava (32:40)

Amazing. So is there an opportunity for me to invest with you?

Nate Helbach (32:47)

Yeah. Yeah. So one thing that I did early on was I really didn't want to go the retail route. so typically developers can either go the institutional route where they find a big check and that institution writes a large check to the developer and they just go develop or the developer, which is, is what I was doing previously can go syndicate, where similar to what you guys have done, maybe on the other alt space.

They can go find a lot of wealthy individuals, accredited investors who will write $100,000, $250,000, $500,000 checks and invest in the project and have 50 to 100 people invest. And so early on, my two partners that had seeded the company were both real estate guys that were working for pension funds. And they were like, let's just go the pension fund route because we can get one check, it's single execution. We have surety of the money and we can just go develop.

And so I said, that sounds like the dream, let's do it. And so we got our first project entitled by the end of 2020 and went out in early 2021. And of course, you know exactly what happened back in end of 2020, early 2021. We had COVID, we had rampant inflation and every single institutional guy was saying, hey, we're on pause. And if they weren't on pause, they were only giving money out to

the most seasoned developer in the best market in the prime location. And we had great location, but we weren't seasoned and we weren't in kind of a quote unquote institutional market in Madison, Milwaukee, Wisconsin. And so we said, okay, let's go find some capital by syndicating our first few deals. And then maybe we'll turn back to the institutional guys. And we decided to go out and start raising capital and had a lot of great success. Cause I was able to kind of.

look at some of the old retail investors I've had. There's a lot of just neighbors that were interested even, and we started raising a good amount of money. We got $10 million raised and we found this wealth manager that was really interested in alts for his clients because his clients were like, we're always allocating to the kind of 60, 40 stocks bond portfolio. We don't like it. We want something new. We want something better. And so he was already thinking about, okay,

could I invest in real estate for these guys? And so we formed a partnership with him and he was able to raise another 10 million for us and we needed another 10. And so we kept going out, trying to look for people and finally found this guy who had just exited his company to Carlisle for 1.2 billion. And he was like, hey, I got some cash, would love to invest with you guys, but I wanna be a partner as well. Because I like your vision, I like what you're doing, I wanna grow.

And so he actually came in and bought out my two German partners. His name's Matt. And he put the 10 million that we needed into our big deal in Madison. And we got started in the end of 2022 then. And so from then we decided to really transition to looking at two groups of capital. One is retail. And so that's the accredited route.

and the other is Wealth Advisors. And the Wealth Advisors has actually been explosive for us. So now we're up to eight partnerships with Wealth Advisors all over the country, all on Charles Schwab, because we got our fund registered with Charles Schwab. So we have an SSID number so they can allocate right in their client's portfolio. And they've really loved it because they've now been able to give clients access to alternatives. And for them, it's a huge differentiation.

when most wealth advisors are going out and saying, hey, I have a 60-40 portfolio, pay me 1 % and I'll put in stocks and bonds. It's like, well, a lot of people could do that. But if you have access to some alternatives that other advisors don't that give alpha returns, that really puts them, kind of sets them apart. And so that's been explosive. The other thing that has been really explosive is late in 2024, we launched an investor portal.

which is our own software that we built all of last year, similar to if you know Fundrise or Yield3, one of those other syndicators, we built a very similar software that allows anyone to go into our investor portal. You can pick any project, invest $10,000, that's our minimum. You have to be accredited and you can go through our whole process online. So between those two, it's been really great and we've been able to now raise almost $90 million with 310.

million dollars assets under management, including the debt side.

Slava (37:33)

Amazing, I think you answered this question, but if I wanted to, as a retail investor, not going through one of your Charles Schwab partners, I could just go online, I have to be a credit investor, and I could do a $10,000 minimum investment, is that right?

Nate Helbach (37:47)

Yep. Yeah. You just go to neutral.us and click invest with us. And then it's a pretty self-explanatory process from there.

Slava (37:54)

Perfect, and do I pick a specific project or do I put it into a fun type structure?

Nate Helbach (38:00)

Yeah. So later this year, we're going to be launching a hundred million dollar fund where we'll actually have all of our projects in one fund for you to invest in. Right now, everything is set up as a special purpose entity. So what that means is every single project we do is its own entity. You invest directly in that entity. So a lot of people like this right now because they might like a specific neighborhood. They might like a specific project and they want to invest in that project only. So we're going to keep that model.

and we'll have special purpose entities that you can invest in or you can invest in the fund. And if you invest in the fund, then you're getting a basically pool of all the projects. We'll be launching that in Q3 of this year. But right now it's just project by project investments.

Slava (38:47)

So am I investing into the equity or into the debt or do I get yield? How do I think about my $10,000 investment? Can you give me like a flow of imagine I invested tomorrow, what happens with that money for the next three years?

Nate Helbach (39:04)

Yeah, for sure. So when you invest, you can decide whether you want to invest in equity or debt. If you pick equity, that's pretty straightforward. You're getting anywhere between a 14 to 19 % IRR year over year and right around a two to 2.5 X return on a five year hold. And so you have a little bit of latency period during construction where you're not getting any distribution. Then we stabilize and open. Then you're getting a cash distribution.

And then when we sell is where you get that big kind of cashflow return. On the debt side. That is something that you can look at more as private credit. And so instead of going out and finding Mez capital for our deals, a lot of the time, what we do is we just ask investors to invest in a Mez position. And typically you're in second position. Sometimes you're in third position. If we do have a mezzanine, a big institutional debt provider.

So either you're in second or third position, but we're never going above 75 % of the overall cost. So you'll always be lower than 75 % loan to cost. And so in those positions, you're getting a yield and it's typically between 10 and 12%. So if you invest less than 250,000, you get 10 % paid quarterly. If you invest more than 250,000, you get 12 % paid quarterly.

Slava (40:29)

Gotcha. And given the fact that it's a 10K minimum, are most people slowly putting in more money over time or are they putting it in one chunk? does it typically work out?

Nate Helbach (40:41)

Yeah, our average investment is 158,000. That's mostly because originally our minimum was 100,000 until we launched the investor portal. One thing the investor portal has allowed us to do is it's way more efficient. So early on we say we were kind of doing hand to hand combat where we would go out to coffee, talk to someone, have them review documents, answer a bunch of questions, sit down again.

have them sign documents, wait to get a check in the mail, have to deposit the check, and it was just a very cumbersome process, which is oftentimes what happens with these syndications is it's not a clear process. It's very kind of elusive. There's a lot of paperwork. There's a lot of back and forth. What the Investor Portal has allowed us to do is you go on there and you get all your due diligence answered. We're still here to answer questions. You can call us, you can email us, you can chat us, but a lot of the questions that investors have

are answered right on the Investor portal. And then as you go through what we call the checkout process, you actually do all the documentation right there. So we have an integration with DocuSign, where you can sign all your documents there. We have an integration with Plaid, which is kind of this funding tech startup. Maybe you guys have covered them before, but they're actually a really cool company. And so they can do all the wire transfers very securely all through our portal.

And so it's a much simpler process. So we typically have seen the kind of average check size of 158 grand. We're starting to see a lot more of the $10,000 checks. I think that's mostly because the people doing that just don't know us, right? And so if they don't know us, they're not going to write a $150,000 check on day one. They're probably going to do 10 grand in this project, maybe 25 grand in the next project, and then maybe a bigger check if they get a great return. And so one thing we like is that

Every investor has to be accredited. So either you have to make a certain threshold of capital. You can look it up on the SEC's website, or you have to have a million dollars in net worth. And for those people, because they're only investing 10,000, we know there's a lot more money behind them that we could have access to if we perform well. And so on these deals, what we're trying to do is give them a great taste, get them a great multiple.

perform really well and then hopefully in three, four, five years from now, those guys are investing 100, 250, $500,000 checks.

Slava (43:11)

Awesome. And just to clarify, these are always projects that you all are sponsoring yourself, meaning you're not finding other sponsors and underwriting and investing in somebody else's projects. Is that right?

Nate Helbach (43:22)

Yeah, no, these are projects that are only neutral deals. So we're fully vertically integrated. have our own architectural team. We have our own development team. We have our own construction team, finance, accounting, and then our whole health and wellbeing team is our internal team. And we're only investing in those deals. And so it's really to deliver this kind of lifestyle concept that I talked about earlier. And those are the projects you're investing in. It's not like if you know of CrowdStreet,

or there's a few other big ones that are called syndicators that they invest in a bunch of different deals. You typically don't know the sponsor very well and their underwriting criteria is somewhat deficient, I'll say, to really ensure that they're actually getting the capital and return that they're stating in some of their private placement memorandums and decks. Whereas ours, it's the same process every single time. And because we now have a larger

family that's backing us with a good amount of net worth, they're investing personal funds. So typically, my partner, Matt, they have between 10 to 25 % of the overall capital sack invested. And so we have to meet their very, very kind of stingent underwriting criteria that his family office has before we can proceed a deal. And I think that's something that's a really unique benefit for Neutral.

because a lot of these other kind of startups in real estate or syndicators in real estate, they're just trying to get other people's money. We call it OPM, other people's money. And they're trying to get as much as possible and in charge of fee to be able to make their fee. What we wanna do is we're trying to invest our partner's money, we're trying to invest your money and wanna make a beautiful project and then we make our fee on the backend. And so when we charge our fee, it's actually when we sell.

and it's in the form of a waterfall. And so it's basically a 75-25 split, but only after our investors have received 10 % preferred return plus all of their original capital. So we're only making money once the investors make money, which I think is a really big differentiation for us.

Slava (45:38)

Awesome. And then you mentioned before that you think inflation is still high. You're not sure if the rates are going to come down. You're somewhat concerned about all of that versus the dot plots, et cetera, et cetera. Where does that put you in your mental space as it relates to the real estate market? Where are we in the real estate cycle and how you think about investing in 2025 and 2026?

Nate Helbach (46:01)

Yeah, I think overall the cycle is almost bottoming out. I think we're on our way down to the bottom. And I think in 2026, 2027, 2028, we'll start seeing it hopefully go back up. That's somewhat correlated with my interest rate prediction because of course real estate is highly correlated to interest rates almost than any other market.

And I think one thing that I've been noticing is that there's actually a lot of developers that have just said, we're going on pause. We're not going to continue doing development until we see interest rates start to decrease substantially. And what that's starting to cause, and we're even seeing glimpse of this early in Q1 of 2025, is a huge under supply. And that is only going to grow and grow and grow. Because the thing about, especially multifamily real estate, and I can't necessarily speak for

office or industrial, but especially multifamily is the demand is so strong because we have not been building single family homes at the rate we need to be to accommodate the demand that people are just having to turn to multifamily that it's not slowing down. so even though developers are slowing down on supply, demand is staying constant. And so what we see kind of

Even in 2025, but I think we'll see more of going into 2026 and 2027 is a huge deficiency in supply, which just going back to traditional economics class, what happens when we have a deficiency in supply? Well, rents go up and valuations go up. And so what our kind of projection is, is as we get through 25 and early 26, rents are going to continue to go up and valuations then in turn will go up.

which means better returns for investors. So in my opinion, I always think that looking at, if you've heard of this guy named Howard Marks, looking at his book, The Most Important Thing, it's really talking about holistically, how do you invest and why do you invest? And one thing he says in his book is invest not for five years, not for 10 years, but for 20, 50, and a hundred years. And when you look at the overall kind of long-term horizon, especially for real estate,

It's really great. And especially for multifamily. I mean, we're just not building homes at the rate we need to be. And so if you look at that long-term horizon, valuations will go up and I think we'll continue to see this escalation of rents. And so from the investor standpoint, my prediction and my kind of view is that we're going to have this really, really great next four or five, six years of real estate investing.

Slava (48:46)

Awesome. You talked about Howard Marks book. It's a great transition. What are the things that you like to read, watch, listen to that helps make Nate Nate? You could cover anything you'd like.

Nate Helbach (48:59)

Yeah. I actually listened to probably more than I have read his book, even though I've read his book once all the way through is the memo by Howard Marks. That's where I get a lot of my economic data. I think it's monthly that he writes it, but sometimes I think he skips a few months. And that's where I get a lot of my kind of up-to-date just overall macro data.

some of the micro data that I was talking about earlier is Kensington capital advisors. they just got bought by JLL. they have a really great view on where interest rates are headed. they publish a memo every single week about where they think, the sulfur curve is headed. And so I love listening or just watching and reading them. another book I actually just got done with, which was a recommendation, from Charlie Munger, that I read about.

was this book called Deep Simplicity by John Gribbin. And it's all about looking at very complex systems and very chaotic systems and how they usually can be simplified down to a few different components, a few different elements. And I found that really helpful, especially when you're building buildings. A lot of things are sometimes very complex, but you can usually narrow them down to relatively simple concepts. That makes sense.

And so that's really helped my overall business model. The last thing, which is just for fun is if you've ever read this book, Breath by James Nestor, he talks about how breathing will change your life and specifically nostril breathing will change your life. But that one has been very influential the last few years for me.

Slava (50:42)

Amazing good ones. So final question. We like to put everybody on this spot What are two predictions that you would make today for three years out one public markets? Stock that we can buy and one private markets opportunity that we can try to get access to

Nate Helbach (50:56)

Yeah, I'll start with public. I think the next three years, four years, like him or not, I think Elon is doing a lot of interesting things right now in the both federal government sphere and the private sphere. and just overall with X what's happening there in Tesla, but I think Tesla is going to do really well. I think Tesla is going to see maybe even a two to three X multiple over the next three to five years in the public markets.

Mainly because I think they have a slight leap ahead on everyone on the AI front, which I know has been a big buzz topic. But that is my public market's prediction that Tesla stock is going to exponentially go up. Not sure exactly how much, but I think it's going to go up a lot.

Slava (51:43)

even though it's worth

a lot already today and it's gone down quite a bit in the last couple months.

Nate Helbach (51:48)

I know, I know it has, sometimes you gotta weather the storm to see the sunrise.

Slava (51:52)

All right, so you're

seeing multi-trillion dollar Tesla enterprise value, is that right? Okay, nice.

Nate Helbach (51:59)

I do. think so. Yeah. I

think, I think right now we're kind of on this brink of a AI revolution and whoever has the kind of headstart to it is going to win. And I think Elon has a big head, head start with both Tesla and what he's doing at X. And I think bringing those two together is going to be explosive.

Slava (52:21)

I love it. What's your private market spec?

Nate Helbach (52:25)

Private markets pick probably not surprising and very biased. think real estate, especially multifamily real estate throughout the Midwest and West coast are going to do really well. I think the Sunbelt and some of the kind of Southeast States are going to suffer. We've seen a lot of oversupply specifically in some of the kind of hot Sunbelt markets like Phoenix, Austin, Houston, and I think, and even Atlanta.

And I think those markets, we've done some market study research with the Conqueror Group are going to take three, four, five years to actually absorb, which means just lease the current stock of housing that's been built in those markets. so I think those markets are going to be somewhat challenging to invest in from a multifamily side for the next few years. I think the Midwest has been kind of the steady Eddie or the slow turtle.

that really hasn't taken this approach of build, build, build, mainly because we just don't see the institutional appetite from both international and national investors. And so there hasn't been capital to build through these really low interest rate times. And so we're not seeing this huge oversupply right now and the demand is really still strong. And so I think multifamily throughout the Midwest is gonna do really well over the next three to five years.

because we haven't really built a huge glut of supply.

Slava (53:54)

Awesome. Well, Nate, we have covered a lot of ground starting from 2015 when you decided to not go to college, but instead get your first job while also doing a Harvard extension at the same time. You right away decided that real estate was your play, but you also like some pre IPO stuff. You're not into crypto yet, but maybe after this podcast conversation, you might get into it. You obviously are a fan of wine, given the fact you've been able to arbitrage some and you're willing to hold.

You're concerned about the economy, more importantly about what's happening with inflation, specifically about how the tariffs can impact it. You're seeing it your own group at neutral with timber, steel, aluminum, et cetera. We have an inflation problem, and I'm not sure how anything is helping the inflation right now. That's what you said. I love it. You don't see really inflation going down anytime soon. There's a difference between what the Federal Reserve has with its dot plots for several years out versus what SOFA is predicting.

in terms of what the next five years looks like. Right now it looks like it's potentially 4.2%. You do think though the rates will come down in time for the midterms. One way or another they'll find their way to come down and Trump might have some influence there to bring it down to three to three and a half percent. So I love all the bold predictions. Neutral is doing some great work for the last five years. They're onto their fifth building, 780 units and focusing on three main things, sustainability, health and wellness. You really have a, you know,

quite a few differentiators as to how you build, whether it's being timber focused, being able to check your VO2 max, reverse osmosis, all kinds of interesting things I've never heard of from a real estate developer, which is super cool, focused on the Midwest, obviously. And then, you now you're opening up to the market in terms of individual investors who are accredited can join. You've already brought in $90 million that way, and there's $158,000 average investment. You do need to be accredited only, but it can be a 10K minimum.

and you know onwards and upwards from there. You do predict that there's going to be a huge under supply because of how much people are holding on building right now. So in 2026, 2027, there's a good chance the prices will go up because of supply demand dynamics. You gave us a bunch of good content to read and listen to and of course you came with two bold predictions. One is Tesla is going to become a multi-trillion dollar company and of course focus on multifamily real estate.

course in the Midwest. Thank you very much, Nate.

Nate Helbach (56:17)

Thanks. Thanks for having me.

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