Over the previous eight years, Peter Badger has been a full-time investor in real estate and agriculture, and he recently joined Farmfolio as Chief Strategy Officer. After 18 years on Wall Street and a decade in Silicon Valley, Peter brings a diverse set of abilities to Farmfolio. He is a data and process-driven leader that oversees Farmfolio’s LOTs product strategy, sales, and distribution.

 

Peter co-founded and led Framehawk, an enterprise software firm, through its acquisition by Citrix Systems before becoming a full-time investor. Prior to co-founding Framehawk, he worked at Barclays Global Investors, Qwest Communications, Merrill Lynch, Credit Suisse, and Morgan Stanley in technology strategy, enterprise architecture, and software development responsibilities. King’s College, London University, awarded him a BEng (Hons) in Computer Systems and Electronics.

 

Peter has had the good fortune of living in a variety of locations throughout the world, including Denver, Medellin, Puerto Rico, San Francisco, Hong Kong, New York, Valencia, and London. He’s also been to Antarctica and climbed Kilimanjaro, and he enjoys running, skiing, hiking, and biking everywhere he goes as a real estate and farming investor.

 

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Wise Asset Allocation with Peter Badger

 

Brett:

I’m excited about our next guest. He is the Chief Strategy Officer at Farmfolio. He comes back to us with a diverse background and regards to asset allocation, as well as investing in different things that are going to help you create and preserve more wealth. He’s been a full-time investor in real estate agriculture over the last eight years and recently joined the  Farmfolio as the new Chief Strategy Officer. He brings multiple skills after spending 18 years on Wall Street in a decade in the Silicon Valley, founding and working with some of the most innovative companies in the world, including Barclays Global Investors, Merrill Lynch, Credit Sushi, Morgan Stanley, and so much more. Please welcome the show with me, Peter Badger. Hey, Peter, how are you doing?

Peter:

Good. Thank you. How are you today?

Brett:

I’m doing well. Great to have you on the show excited to dive into the topic when we’re talking about wise asset allocation. But before we go there, Peter, would you give us a little bit more about your story and your current focus?

Peter:

My story is simple. I spent 18 years on Wall Street, I drank the Kool-Aid, all about stocks and bonds and everything through derivatives. After 18 years, I quit and started my own Silicon Valley Tech company spent eight years on a crazy VC fundraising series, a series we finally got acquired by Citrix Systems in Santa Clara in the valley. Then was my beginning journey around real estate. So the question is, is when you make some money, where do you keep your money for preserving it and growing your wealth over the long term. That was my journey the past eight years?

Brett:

Fantastic, Peter. I think we’ve all been given certain gifts in this life. I want you to go back to your younger days, maybe the university days, maybe your high school days. I think these gifts are given to us to be a blessing and help to others. So I’m curious, what are those one or two gifts that you believe you were given? How does it help how you help and bless people today?

Peter:

I think from my side, I’ve actually inherited from my father, the ability to kind of look at the big picture and go down deep into, for instance, investment asset classes and help it explain this to people in a way that’s understandable, so they can actually benefit from it. So I think one of my gifts is to basically be able to bring people down into an asset class and show them how it can benefit their lives, for wealth building, or generally just living their life through passive income.

Brett:

Very cool. I’m excited to dive into that exact part of it with wise asset allocation, making complex things simple, and making it in a way that’s digestible financially. So we can all, hopefully, level up in our decision-making here. So that being said, Peter, what’s the number one secret to wise asset allocation?

Peter:

Honestly, it’s having one. Most people don’t have one. So I think when we kind of look at most of the investors out there that normally and paper, investment products, stocks, bonds, ETFs mutual funds, the normal stuff that’s publicly traded on Wall Street, my request of people is you actually have a wiser asset allocation. We make money from private and public company stock. Then you actually invested in real estate and other assets to actually keep retain and grow that wealth. So I think, at the outset, have a strategy for your asset allocation, and decide, yes, keep some stuff liquid in the stock markets, but then actually choose real estate and farmland and other real hard assets to have that wiser asset allocation strategy.

Brett:

I love it. So my background is on commercial real estate, that’s been like, I grew up in the business with my parents and rentals and in cash flow and development in the Bay Area, then went to Marcus and Millichap, fell in love with like multifamily on a big scale. I love that your background was Wall Street and the idea of diversification and over concentrating, and making sure that that you have enough liquidity as well as the ability to like I say, go collect the rent or a place that someone’s living in or maybe it’s in the farmland industry, be able to grow crops and do different business. So talk about the difference between traditional Wall Street asset allocation and what you’ve come to help people with Farmfolio?

Peter:

I think you kind of have to break up the area of Wall Street as serving you. Because honestly, there’s the general population could just get the ability to go to your kind of discount broker and buy ETFs and mutual funds, you’re not being served at all, those with high net worth three, 5 million-plus, they get a lot more strategies that the common people like us have never gotten before. So in reality, for everyday people is like the classic, the 60-40 equities versus bonds, three died 20 years ago 60% equity, 40% bonds when the stock market crashes, the bonds keep your wealth intact, that is all rubbish and outdated. So honestly, people are just told to have 80%-90% equities, hold on the long term. Even when it dips 30%, 40%, 50%one of the major crashes, just hold on with your bare knuckles don’t sell out of it, and it’ll come back and recover. That’s really what we’re told, isn’t it over and over again, from Wall Street marketing.

Brett:

What we’re seeing right now is inflation, and sitting in the bank, it’s like your money’s just burning out the other side of your window here.so holding and owning large assets and commercial, real estate and farmland, different things like these things that are perhaps more tangible.  Walk us through your strategy with what a good asset allocation might look like, in today’s environment doesn’t involve crypto, how much real estate is involved? How many stocks aren’t involved? Does it even involve bonds? What is your take on someone who’s worth $5 million? They’re a baby boomer. They’re doing well, they don’t want their wealth to be wiped out by inflation. They also don’t want to get over overextended in too much debt or buy properties that don’t make sense. Right now with value. So give us your overall kind of feel where someone might be wise to allocate? What does it look like?

Peter:

Let’s kind of rebase a little bit. So when I made some money on Silicon Valley added to my Wall Street property gains, I basically went out and tried to work out what is my own asset allocation. I went through every major hard asset class I was buying single-family homes, multifamily buildings, mobile, home parks, short term rentals at the beach, or in major cities near hospitals get like regular income, I went through every possible thing, touch storage for a while. Ultimately, at the end of it, I realized, especially post-pandemic, which actually taught us a lot about our asset allocation strategies, food and shelter have won out for me, that means multifamily apartment buildings and farmland, or agriculture because we all got to have a roof over our head, we always have to eat. That really, those two asset classes have put me in good stead since the pandemic and throughout, and I believe into the future.to your point, I think one of the things think about this is that the asset allocation for me is all different. I have four pillars. Number one is the stock market. I do keep it on equities because it’s liquid, I can sell the ETF mutual fund or my Tesla shares if I’m feeling a bit generous in the market to get into cash. That’s key, to always have some liquid funds that are hopefully invested in something that’s going to beat inflation. Number two, I have a good foundation in multifamily or US real estate. Then number three is farmland, I do overseas or international farmland, because it’s not correlated with generating a second. Then number four is my play money. I call it maybe 5% to 7%. So I’ve got some Blockchain, Crypto, I’ve got some asymmetric currency trades going on. That bucket is the fourth bucket, I don’t mind if I completely lose it. Most of it is speculative in nature. But there are hype cycles in speculation. So choose the cycle.

Brett:

Got it. Perfect. Love that. I love that breakdown. That’s really helpful. See a stock market with some liquidity, some traditional real estate, maybe investment, real estate, farmland overseas. I think that’s where we want to I want to dive in now because most of our clients, know the stock market pretty well. They know real estate very well. They’re learning about crypto for some who are really great at crypto, but that farmland seems it’s different. I love the way you said like people need a roof and they’ll say food that makes sense. That’s part of why multifamily is such a desirable asset because we all need a place to live. So we feel good about investing in those and obviously the supply and demand imbalance. Well, let’s talk about farmland. So walk us through this because this is kind of new to me. We’ll break down that investment class for us right now and then the opportunities and maybe some general returns.

Peter:

I think from my side, I went on this crazy journey for the last eight years, I looked at all kinds of farmland or agriculture exposure. So most of us can kind of get into the public markets again you can buy John Deere machinery, you can buy fertilizer companies general public stocks, but again, the key here is to find a portion of our asset allocation, which is not correlated with anything else and that’s farmland because we can think about it. Real Estate cycles can go up and down. They’re all very local to the market or in stock markets have a seven to 12-year crash cycle based upon where you’re at in that cycle. Ultimately, for farmland and agriculture, people still need to eat choose permanent crops, I choose high demand permanent crops. So forget the row crop, the barley, the wheat, all the stuff that’s done mass-produced in the Iowa cornfields go for permanent crops like avocados, citrus fruits, like lames coconuts, I mean, these things, you plant a tree, they harvest within four years get to full harvest by year eight. Then they basically print money or products that can be sold for 20, 40, 60, 80 years in a row. So to me, the key is to find that permanent prop that’s in high demand will stay in high demand. We eat it every day in the supermarkets. Basically, it’s finding that piece of the asset allocation, which is not going to later

Brett:

Let’s talk about how farmfolio.net. How do you guys help people invest in these types of opportunities?

Peter:

So thinking about farmland in general, we believe you should at least have farmland ownership as in hold title to farms. So most farming agricultural today is like big, rich land. Landowners, large private companies, most people like us, the small little people don’t get access to that. So what farm food are we buy a farm that’s already producing limes or coconuts or avocado or the fruit of choice. Those that fruit is already being sold. It’s being basically from overseas South America washed pack salted, exported to the US, Canada, Europe and being sold in Walmart, Costco, Trader Joe’s, the major retailers. So the goal is we take those farms that produce, we break it into individual parcels or lots, as we call it. Then you can own a lot. So instead of buying a single-family home, or single-family rental on a plot of land in Texas, you can buy 220 producing Tahiti lime trees in Colombia, and they will give you the produce for year after year being sold in the major retailers. Okay,

Brett:

This is cool. I’m digging it here. I like some avocado and some citrus fruit. So what is the average return on these things? I get that it’s safe but what are the average returns we’re looking at here?

Peter:

It’s like a similar similar rental. There are many aspects of that question to answer but consider it like a single-family rental people mainly aim for an 8% cap rate with leverage that into 15%. I mean, it depends on the crop type, the age of the trees, therefore, the younger the tree, the less income it has, the less produce it has. The cost of land, the cost of labor, the country, you’re doing it in there, there are some aspects to it, but generally consider titled farmland ownership in farm following model similar returns to a single-family home, but without the real estate cycles.

Brett:

Yeah, I think this is like anything when we’re gonna invest in something new or we’re not too familiar with. Although you’re breaking it down and making it really simple, you got to go ride the bike, you got to jump on it, whether that be a cryptocurrency or the first rental or first flip in a first big multifamily project. You got to get with people like Peter Badger at farmfolio.net, who are doing this or setting it who have the background in the diversification of thought of 18 years in Wall Street and Silicon Valley. I think you’re the guy that helps with that. Because otherwise, I’d be like, I don’t know, what am I buying here, Peter? I’d have to have a guide like yourself, walk us through that. So that being said, I want to shift quickly to capital gains tax, and because you have a unique background when it comes to helping or exiting a big business. So what’s been your biggest frustration when it comes to exiting highly appreciated assets? Whether it be your business or crypto maybe in farmland if it’s part of the US? 

Peter:

I think for me, I mean, most of us who work and live in Silicon Valley end up exiting our companies in Silicon Valley. Of course, California Federal State taxes, you get a nice outcome and they take 50% of the top. I think one of the keys actually is, as you’re building your own company, moving out of these high tax states, it doesn’t make any sense, you can make so much more money by not being in a high tax state. Then at the end of that journey, make sure you move those assets quickly into hard assets like real estate. I mean, I did a bunch of selling private companies stock when strained to buy single-family home portfolio than a multi-family building. Then I did a bunch of 1031s and kept down the food chain. So it’s frustrating if you aren’t in a low tax state. It’s frustrating if you don’t know how to use those strategies quickly, to rotate your wealth from public markets into real hard assets. From depreciation, and all the capital gains avoidance strategies out there.

Brett:

I think that’s a key right, having the plan in place, I always say, plan the exit plan before you actually exit or you list the property or the business. As a reminder, 1031 exchanges don’t work for businesses. So we work with businesses all the time that are exiting millions of dollars of tax, and now they can defer it. The cool thing with the Deferred Sales Trust for those who are learning about that, for the first time, you can move funds back into another business, or back into real estate or back in the stock market into farmland, all these different diversified portfolios of liquid investments or hard assets, all tax-deferred, kind of like an IRA, kinda like a 401k. For those who want to learn about that, you go to capitalgainstaxsolutions.com. That being said, Peter, are you ready for the lightning round? 

Peter:

Good. 

Brett:

All right, knowing what you know now, if you go back to your 25-year-old self, what’s the one golden nugget, make sure to tell yourself to do?

Peter:

Always have a mentor alongside you, you’re never old enough or smart enough to not learn a lot more from a mentor in the topic you’re trying to master.

Brett:

Excellent. Question number two, what’s the number one book you’ve gifted or recommended the most in the past year?

Peter:

EOS the Entrepreneurs’ System. For those who are building businesses, you need a structure, you need a framework in everything you do. For those, building a business, read about EOS, and Traction is the book. It’ll put you in good stead to grow your company to a reasonable level.

Brett:

Excellent. Question number three, what are you most curious about right now?

Peter:

How to democratize farmland ownership. So you too can add a Farmfolio to your portfolio. So you can have a long-term 20, 40, 60 years of passive income without being correlated to stock markets or real estate cycles.

Brett:

That’s amazing. We discussed the surface and what we could have covered today. But maybe we’ll have you back on to talk about that exact topic right there in detail. But the next question is this favorite leadership quote or theme that you strive to live by?

Peter:

Trust, but verify, that is a Russian proverb. Don’t look at the marketing brochures, glossy marketing brochures in anything. Wall Street and properties in being whatever the asset class is, trust the brochure, but then go and verify the data and or theory of that investment opportunity.

Brett:

I couldn’t agree with you more. So the same thing with the tax deferral strategy. So you heard these things for the first time, like, go look at it, trust that it can be real, and it’s there, but then go verify the evidence and the IRS audits and everything else that’s associated with that. Love that Peter, last question. For those who want to get in touch with you and want to find you. Can you remind them one last time what’s the best place for them to find you?

Peter:

I’ll give my email peter@farmfolio.net, or find our website at farmfolio.net and learn how farmland ownership is made easy for you and me.

Brett:

Fantastic. Peter, thanks for being on the show. Thanks for sharing your wisdom with us. I appreciate the diverse background that you have, and your passion for helping people get wise asset allocation, especially in the farm world. I’m fascinated by that. I want to encourage you to keep using your gift and making complex things simple, and helping people create and preserve more wealth in their finances.

 

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About Peter Badger

 

Wise Asset Allocation with Peter Badger

Peter Badger has been a full-time investor in Real Estate and Agriculture over the last 8 years and recently joined Farmfolio as Chief Strategy Officer. Peter brings a multitude of skills to Farmfolio after spending 18 years on Wall Street and a decade in Silicon Valley. He is data and process-driven and drives strategy, sales, and distribution for Farmfolio’s LOTs products.

Before becoming a full-time investor, Peter co-founded and led Framehawk, an enterprise software company, through to acquisition by Citrix Systems. Prior to co-founding Framehawk, he held leadership roles in technology strategy, enterprise architecture, and software development at Barclays Global Investors, Qwest Communications, Merrill Lynch, Credit Suisse, and Morgan Stanley. After earning his BEng (Hons) in Computer Systems and Electronics from King’s College, London University.

 

 

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