Insider Secrets Podcast Episode #27

 Guest: Aaron Fragnito

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Guest Bio:

I focus on many different types of real estate. I complete many short sales and help
distressed property owners. I work with investors to help build their wealth in real estate. I
work with both buyers and sellers to facilitate a successful closing. Let me know how I can help you?

TRANSCRIPT

[00:00:00] Kristen: Welcome to this week’s edition of Insider Secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Morawski has more than 30 years of multifamily, real estate investing and property management expense.

Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.

Mike: Hey everybody. Good afternoon and welcome to another Insider Secrets brought to you by My Core Intentions. And I’m glad that you’re here today. One of the things I want to ask you is what are you doing [00:01:00] today? Did you start your day out intentionally? Did you get up and write down exactly what you were going to accomplish today and what your intentions were?

How clear are you on your why? You know at My Core Intentions, we really invest in our client’s future through our educational and coaching platforms. Helping you create short-term cashflow and long-term wealth. Teaching you how to develop a portfolio in multifamily real estate, starting with small, moving into syndications.

And that’s what we’re going to talk about with our guest today. If you’re looking for some directions about your business career, your investing career, your property management, give us a call. Let’s see if we can maybe balance you out a little bit and give you some nuggets that might help you on your way.

I’m excited about our guest today. My friend multi-family syndicator,Aaron Fragnito and Aaron’s a real estate entrepreneur who partners with qualified investors. Aaron, why don’t you say hi [00:02:00] to our listeners real quick?

Aaron: Hey listeners, how are we doing today?

Mike: Great. Glad you’re here, Aaron. Aaron has been helping people successfully invest in real estate for 10 years.

Aaron’s a co-founder of People’s Capital, which holds a $10 million portfolio outside of New Jersey. And he hosts the New Jersey real estate network. He is the host of “The Passive Cashflow” Podcast, a licensed New Jersey realtor and a full-time real estate investor. Aaron has completed over 250 real estate transactions.

Totally more than 40 million in real estate in his career. People’s Capital works with qualified investors to create passive returns through local commercial real estate. The owners of People Capital are experienced in locating discounted apartment buildings for sale in Northern New Jersey and implementing a value add strategy to create a maximum return for their [00:03:00] silent investors.

Hey Aaron, that’s a pretty impressive bio. And I know we’ve talked about that a couple of times and you certainly do a lot in that part of the country. Aaron, let me ask you a question and maybe you could tell our listeners in one word, what best describes you personally, and your investing strategy?

Aaron: Boy, that’s a tough one. I would say Perseverance. I think at the end of the day, what separates success no matter what business you’re in, especially real estate though, you need to keep going. As Winston Churchill said, when and how, keep going. And getting started developing a real estate investment company, you need to keep going, there’s no oh man, that investor did not decide to invest or this deal didn’t work out. You’ll always have to keep going, looking at the next opportunity, building the next relationship. And if you quit, then you’re definitely not going to get to where you want to be.

Mike: Yeah. It’s that one word sometimes that really describes who we are at the core. Perseverance, I love that word. And I say, this is probably my 30th episode [00:04:00] doing podcasts for this show, and it’s interesting to me that everybody I have on asked that question and they all have a different word.

It’s something What equates to me for perseverance is years ago, I remember a guy told me, he said, man, are you tenacious? And I had no idea what that word meant. I had to go look up in the dictionary, but really the same thing. Just keep going and you have to keep going. And that’s what I like about you.

And your story is how much you have persevered and kept going. Aaron, why don’t you tell us, tell the listeners about your backstory and how you wound up getting involved in real estate?

Aaron: Sure. I was graduating college around 2010 with an entrepreneurial degree at Rowan University, and really didn’t have any idea what I wanted to do with my life.

But I read “Rich Dad, Poor Dad”. And I recognized my passion for real estate. So I got a real estate license and I started as a realtor and I made about $500 my first six months of selling houses. It was a really hard time to sell houses, it was a difficult way. But it was a good way to get started and meet people, learn the industry.

And [00:05:00] eventually I started doing well with that and learned short sales and distressed properties during 2010 to 2012 or so. And that’s the time I met Seth Martinez, my business partner, and we realized we work really well together. His strengths, compliment my weaknesses and vice versa. So he’s very good at operations, management and underwriting properties, where I’m better at marketing, branding, finding the deals as well, but also raising capital and working with investors.

He’s really good on the operation side, I’m quite a people person. Both sides of business are extremely important. And we worked well together. He had exited a business where he had some capital, I didn’t have much capital, but I had the hustle and the deals coming in as well. And together we started buying, renovating the refinancing multifamily properties, started small and grew big from there. Raised capital, developed our own management company and built about a hundred unit portfolio over time.

Mike: Interesting. Hustle boy, that seems to be the hot word these days. We used to just call it work ethic. Now it’s hustle, right?

Aaron: Yeah. I [00:06:00] feel the difference between work ethic and hustle, right? So is I’m working in completing a project right now for our marketing and it was seven o’clock or six o’clock the other day.

And I’m like, if I didn’t own the business, I would just be going home, but we need to get this project done. So we’re going to stay and get it done, and that’s hustle.

Mike: Yeah, exactly. That makes the difference. Tell me about that entrepreneurial degree. So that’s an interesting degree to go to school and get.

Aaron: It was really interesting. I really enjoyed it. I learned a lot about what a franchise was and the debit and a credit. And I read in a book how to manage a business. And I got to say, though, at the end of the four-year degree, $80,000 later, I don’t know if I knew a whole lot more about being an entrepreneur.

I knew how to show up on time. I knew how to make myself work for free, how to study. I did an internship where I learned a lot of things and didn’t get paid it off for me. Which is part of being an entrepreneur is working hard and not always getting a check at the end of the day. And you have to have that Entrepreneurship, I always joke. Yes, I have a degree in it, but then the next [00:07:00] word out of my mouth is you really can’t learn how to be an entrepreneur in school. It’s a bit of an acquired taste or kind of boring. So just want that constant grind, that constant stress of always trying to reach the next thing, but also being completely responsive for everything almost, not everything, but at the end of the day, everything. It’s an acquired taste and I learned so much more in a given day of managing my investment firm than I did probably from four years of school. But listen, college was a good experience for me. I learned a lot of things.

Mike: Boy, isn’t it interesting how I think there’s a difference between being an entrepreneur and being an entrepreneur. I believe I’m a serial entrepreneur, I’ve been in business for myself since I was 23 years old when I opened my first business. I’m pretty much unemployable.

I don’t think I could get hired by anybody because I have my own set of values, my own way of wanting to do things. And that’s what we try to instill in other people is how to be better and do that better. I think that’s great that you went to school and got that degree like that.

Along the way, what do you think was a [00:08:00] defining moment for you though to make a shift and to go into real estate?

Aaron: Boy, it’s hard to say. Definitely reading the book, “Rich Dad Poor Dad” at my senior year of college was a game changer. My roommate gave me the book and it completely changed my life. The funny thing it was, I don’t think he actually read it and he’s this is a good book.

I just heard it. But also my father owned a Condo when I was younger and we would go and paint it between turnovers. And I always wanted to own a big establishment like that a big complex, and I didn’t really know how it was done, but I always had a passion for that. And my father would always say my, the best investment I ever made was the real estate I should have bought more.

And so I always remember him saying that those things lined up and then I read the book and I was also to crossroads, I didn’t know what I wanted to do with them. I had a landscaping business. I had a painting business. I had this four year degree. I was wrapping up, I, I knew I wanted to be something of a value get back to the community, build wealth as well.

Not, I went to my college advisor and he said listen, if you get a job at enterprise rent, a car, they’ll start you at [00:09:00] $32,000 a year. Full benefits and it’s 2009 Bucko. There’s not a whole lot of options right now. He said, you should do that. And maybe over time you could eventually own your own franchise or something like that.

And he wasn’t wrong. Maybe I would own my own franchise by now. Maybe I’d be a multimillionaire as well, the bottom line is I didn’t have a passion for that. And I remember I went to a job fair and 2009 job fairs were like empty. So there was a bunch of insurance companies and they’re like, you can work for free.

And I just didn’t have a passion to sell insurance. And I said, what, if I’m going to work for free, I’m going to work for free and sell something. I have a passion for. So I started as a realtor and so real estate where you’re working for free.

Yeah. Interesting. I like the way sometimes people try to re or define your life or your life strategy, the path that you’re going to go down, hey, go to work in enterprise running. And it’s interesting because you certainly didn’t want to go to work at enterprise rent a car. You wanted to do something else, which you have successfully done. Sure. And

What made me laugh was that I just paid, [00:10:00] $80,100,000 for a degree in how to start your own business and the college advisors.

Go work for someone else. Yeah. Now that I starting a business in an industry, it’s not a bad idea to actually work for someone else and learn that industry. Looking back, some of the best brokers I had were great. Some of the best investors I worked with were great. I learned from these people and I wouldn’t be where I am without them.

I also had some bad brokers. I knew some bad investors. I learned what not. Which is equally as important. And but really looking back, you cannot work for someone for too long or you’ll get comfortable, then you have kids and then he can’t quit. And he can’t, so I am glad I just jumped right into real estate.

I didn’t, I had $5,000. My grandpa gave me a bonds. I could live at home with my parents. I was 22 years old, so I had those advantages. And it was great. I learned so much.

Mike: Yeah. Good for you. So here’s what I want you to talk a little bit about. Tell us about your real estate sales path and that piece of your world and how that [00:11:00] relates to everything that you’re doing.

Aaron: Sure. Sales is arguably them. One of the most important parts of the business. I don’t want to say the most important cause I would insult my operations partner, but operations are very important, but sales, listen, if you don’t have a customer. It doesn’t matter how good your operations are. No one’s paying you then the money’s not coming in.

So sales is everything. I think it, what, if I could give some tips to entrepreneurial degrees, they should have classes in sales. I don’t know why I didn’t have to take any class in sales, probably because sales is viewed almost like the bottom of the totem pole, no one likes getting those annoying sales calls being flooded.

But sales is so important. And guess what? Less and less people are good salesman. Right? Me included. It’s hard to be a good salesman. Like I used to sell real estate as a realtor. Now I’m selling high level investment opportunities. That’s a completely different sell. It’s being a shoe salesman at Macy’s to go and.

Sell Ferrari’s and using the same [00:12:00] pitch, you can’t, you have to relearn everything. So sales is hard, who’s the person across from that you’re talking to, that could change your entire tone, your entire, the words you use, the way you explain your product. Without sales, your business will fail.

There’s no doubt about it. You can outsource sales, you can outsource anything in business, the truth is the passion you have for your product will come. If you’re a good salesperson. And if you hone that craft and I really think sales should be required in any business degree or, anything like that.

And I was surprised I had to take a business in logistics and learn how like factory logistics work. So it was really confusing. I had to learn calculus level two, but I didn’t have to learn sales. And man could, I’ve used a course in sales,

Mike: It’s funny how we use sales skills in year.

And people who even say I’m not a sales person, they really are because you have to sell somebody on something, you got to sell your kid on, you gotta sell your son or your daughter to do their homework. You have to sell your wife on something.

Becomes you all over time, you become a skillful negotiator, maybe as a better term.[00:13:00]

Aaron: You learn how to win people, when the room it comes out everywhere, when you need to make friends or things like that, or walk into a dinner party, if you’re a good salesman, that’s all a lot easier, huh? Yeah, for

Mike: sure. What how did you make the transition from real estate?

Single home sales as a real estate agent into the multi-family.

Aaron: My passion was always to own multifamily real estate. Before I got started in real estate, I actually moved out to Colorado for six months and I taught kids how to ski. So after my senior year of college, I’d read rich dad, poor dad, but I wasn’t really.

Sold completely on it. And I said, okay, let me learn more about this industry. I know nothing about it. I’ve no money. So let me learn more about it. So I read David Lindahl, I read Trump university books and they made it all sound so easy to get into real estate. I lived in Colorado, I taught, I was a ski instructor.

It was a great experience. I educated myself. I went on LoopNet and started researching properties and just trying to get gobble up as much [00:14:00] information as I could. And my passion was always to own real estate. So I wrote a list and I put it on the wall and I said, okay, in 10 years, I want to have a million dollars net worth of real estate and a hundred thousand dollars of passive income from real estate.

How am I going to get there? Okay. First I have to raise capital, make connections, learning industry, figure out how it all works, develop a game plan, create partnerships. And it’s okay. The first way to them to get started is get my real estate. Yeah. It was less than a thousand dollars and a 70 hour course.

And boom, within three weeks I had my real estate. Actually two months I had my real estate license and was, I, hit the ground running, and started making commissions eventually figured out how, mate eventually made some good money being a realtor. I with by year three, I was making six figures.

Being a realtor is not a bad gig, but I did feel like I was the bottom of the totem pole and my goal was always to own. Income producing real estate. And I did not want to get bogged down in the day-to-day sales of being a realtor. So as soon as I made about a hundred to 150,000 a year, I started developing a team and that wasn’t necessarily successful either.

I developed my team in [00:15:00] properly and eventually just focused more on developing the investment side of my business. I had a lot of things, investors I was working with sourcing them deals liked me and trusted me said, Hey guys, why we pull capital together? And we’ll buy a building. No. And instead of me making a commission we’ll I’ll ownership, we’ll bring you, the deal did so started developing joint ventures like that, and, teaming up with Seth and developing an actual company.

Mike: Interesting. You said something that’s that I think is really important. And you said you had these goals and you had some direction of where you wanted to go and your goals sounded like they were pretty big. But here’s what here’s, what I understood you to say was that you had real clarity on where you wanted to go.

I think we can have goals, but if we’re not crystal clear on why, once we really develop the why, once we understand deeply. Not just, people say, because I want more money. Here’s a dollar go away. There’s more money. It’s not that it’s about what [00:16:00] that extra money will do for you or, time, freedom to, to be a little bit happier, to be able to take a trip when you want to, once you’re crystal clear on that.

The how just happens. And that kind of seems like what’s happened for you, right? You all of a sudden you and Seth are together and now you’ve, you’re building people’s capital and things are coming together for you. So it’s an interesting progression, how that always goes. So what was your first step into the apartment syndication business?

How did you make the transition from, sales real estate, single family sales to apartment.

Aaron: Multi big multifamily or decent sized multifamily bought was at six family building that Seth and I found from a, we buy houses signs. I used to staple on the telephone poles and those used to work really well back in like 2012.

And so a bandit sign. Yep. The old band is sign those, just get the phone ringing. That’s how I got my first listings. I got like a dozen listings that way I would do short [00:17:00] sales. And anyway, so the first deal we got was a six family. We bought it for two 20. We put about 70 or 80,000 into it, it appraised for much more than we bought a four wheel to refinance all of our money back out and recycle and move on to the next one and raise more capital.

Then we bought a 25 unit. That was my first real syndication where we actually raised a lot of outside capital. Like 95% of the capital is outside capital from passive investors and bought a 25 unit learned a lot along the way, sold it two and a half years later for a good profit ahead of target.

And we said, we had, by that time, we were flipping few dozen houses were all these projects were wholesaling, multiple properties per month. And we were saying, wait a minute. We just bought and sold a 25 unit over two and a half year period. We made a lot of money. We developed our own management company in the process because we had to fire two management companies that were not making the cut.

And so now we have our own management company we’ve recognized. Wait a minute. We made all these mistakes. [00:18:00] 25 unit fixing and flip and resale and reposition. And we still made a really good profit. In fact, we did better than we projected, and our investors are very happy. So that shows me that apartment buildings are more forgiving than flicks and flips.

More sustainable than a wholesale or a realtor commission. One of the things I hate about being a realtor is he works so hard in the closing and finally would happen. And by the time you had the check in your bank account, you were working on the next deal already. And you’re like, oh yeah, that deal.

I completely forgot about that. So you’re only as good as your last deal now with apartment buildings, you’re buying and you’re looking at long-term, you’re bringing in capital from outside investors. You have certain responsibilities long-term that our management company oversees.

It’s really it was an aha moment where we said, wait a minute, we’re doing all these hard fix and flips and things, and flips are tough. Lot, you gotta be at the project, your contractors are good for six months and they just stopped showing up one day and you’re like, contractors boy.

We realized, wait a minute, it’s actually easier to make money repositioning apart. Because it’s more sustainable. It’s longer term. You’re not pulling your hair out. [00:19:00] It’s more predictable and consistent. So we pivoted around 2017 or so 2018 to really double down on raising capital for long-term passive investors and buying stuff like you see behind me here.

Mike: You talk about contractors, right? And you’re in a business where you still need contractors. But I remember when I was in the construction business and if I was pouring concrete on Friday morning, payday was on Thursday. And if I was pouring concrete on Friday morning, I wouldn’t pay my guys on Thursday night.

Cause I’d have to go pull them out of the Tavern next day. And that was never fun. That was never a fun job. And he used to get so mad when I wouldn’t pay him on Thursday, but I can say I won’t see you guys till Monday, then. Yeah, contractors are always a good group of guys to work

Aaron: with.

It’s all right. You don’t have to listen. I’ve worked with lots of contractors. We’ve done dozens of projects, big, small, we have our core group of contractors now. And I always say, when you find a really good contractor, don’t tell anyone about them. Cause their prices. [00:20:00] And if you have a good contract, you really should refer anyone.

Because one time I referred a good contractor to a guy and he burned his house down. The contractor did. Yeah. The contractor that I was like, oops, sorry about that one. I learned my lesson there for contractors to people.

Mike: I hope he was putting in a fireplace or something.

Aaron: Oh my gosh.

Light. And they left it in for the night and it was just, yeah. Oh my goodness.

Mike: Bonnie actually, yeah, I used to be a contractor.

Aaron: Interesting business, if you’re GC and you got your subs, you got the owner, who’s, you’re between a rock and a hard place, I, and I get it. The projects are unpredictable often, especially the old buildings and you got know, be fair to your contractors, but boy, I’ve also had them just really pull a fast one and sure.

Yeah.

Mike: Hey what’s so talk about your transition, your. Position a little bit. So you’re that first one you did was a six unit. How many deals have you done and, what’s your progression been?

Aaron: Sure. So [00:21:00] Seth and I did a lot of fix and flips and smaller. Multi-families like 60 units and less, and it took a while for us to figure out that you’re better off buying more units under one roof.

I’ve done. 250 transactions or so with Seth and those include multi-family single family, some wholesales, some apartment buildings but around 2018, we really doubled down in the apartment buildings. We cut contractors from our payroll and recognized everyone should be an independent contractor, so we have cut the fat, cut the pork a little bit, tightened up our systems.

Our management system made it into a repositioning company, not just a management company that calls a plumber and a pipe leaks and collects the rent, but it takes a mismanaged building. Takes zero turns into hero, and a class C into a B. And we’ve doubled down on that since then. We’ve done for syndications over the last two years we started small, you can syndicate a six unit property.

I did that. I brought in an investor and, we syndicated it. It doesn’t mean you need a whole PPM for 30,000 hours. You can have an in-depth operating agreement and you’ll talk to your sec attorney, but there’s [00:22:00] ways to avoid that. And we bought a 14 unit for about 2 million. That’s going well, we bought another 11 unit just over the summer that’s ahead of schedule.

And we’re buying a 25 unit as well right now. It’s going very nicely, got the COVID discount going. And so that’s exciting. And so yeah it’s a nice, the twenty-five years. Or we sold went very well. And then we’ve just done dozens of smaller Maltese, which we would package together and, buy them, renovate them, lease them out and refinance.

We did that for many years and we own a lot of those. So listeners, I really want

Mike: you to get a clear idea of what Aaron’s talking about and that there is. You can build a substantial portfolio with small multifamily property that you can start to create wealth for yourself. There’s that short-term cashflow in that long-term wealth piece, that over time, and you make that transition.

That first building he bought was a six unit and we grown from there. When you start to, and I [00:23:00] always tell people here, It’s not any more difficult to close a 20 unit than it is to close a six unit. And it’s done. I have the money,

Aaron: right?

Mike: Yeah. Process is still the same. The work is still the same.

All the effort is still the same. How should investors get involved in the multifamily space today? So I’m an investor looking to make a transition from small single families or small multi-families. How do we make that transition into the larger. So

Aaron: that’s probably why real estate syndications exist is because most investors don’t have a million dollars in cash to put into an investment, if you want to buy any and bigger is better in real estate.

So a 25 unit or a 50 unit or a hundred unit, it makes better cashflow. It’s more forgiving with vacancies and repairs and tends to cashflow much better than my twos and my threes. Where in a two family, if you lose a tenant, you lose half your income, or if a boiler breaks, you can. [00:24:00] Lose $5,000 in profit, which might be two years of income.

So it’s easier to cashflow on bigger buildings. What we realized there was, oh shoot, I lost my train of thought. What was the question? One more time.

Mike: You were talking about the transition transitioning,

Aaron: right? So the reason syndications exists is the, sorry, got a lot of things going on. The reason they exist is because we pull the capital together.

We buy a bigger building, and that is very hot. These days. There’s lots of real estate syndications out there. There, most of them will pull capital in areas like New Jersey, New York or on the coast where there’s lots of capital and wealth. And then we buy a property in emerging. W, five or six states away, and there’s nothing wrong with that, right?

They’ll hire a third-party management company and hope that, the project goes according to plan, we recognized challenges with that. We hired a third-party management company in south Jersey for a property. We are repositioning our first reposition. We found a lot of challenges with that.

So then we ended up developing our own and saying, you know what, let’s buy local. We know [00:25:00] this north Jersey market very well. There’s so much inventory here. There’s so much, options here, if you know the right people. And people like investing in local real estate, they can go check out.

They don’t have to, but it’s fun. Being able to drive by a building and say, Hey I own 10% of that, and that’s nice, so the syndication is there. The real estate syndication industry exists to allow people to get started. Big multi-family real estate, which ideally is going to produce better cashflow than you’re getting from your twos or threes.

Now, there is a benefit to owning a hundred percent of a two or three family. There’s some pride to that. Maybe you want to experience property management. Maybe you have a property down the street. You always had your eyes on. Sure. But if you’re busy, working nine to five, you’re creating a decent income and you’re not a full-time real estate investor.

Then I really don’t. It’s up to you, but I really don’t suggest buying a property and being the property manager. And now you’re getting phone calls. I did all that. It’s tough. Even with just my first five unit I started with, I was the manager of it. And here I am trying to do a real estate team, look at other [00:26:00] properties and I’m getting, I got, I’m going to plunge a toilet.

It’s what do you, what’s the best use of your time? If you want that experience, go for it, real estates all around us, but a real estate syndications. When you invest in professionals who run the operations, from a to Z and you can invest generally a small amount, like $30,000 or something like that, there’s even websites.

Now you can invest like a thousand dollars or $500, which are interesting as well. Yeah. There’s

Mike: A small little mutual funds. Opportunities where you can, where your money’s a little bit more liquid than your traditional type of real estate investing. It’s leverage is interesting, right?

Cause you said it, you said, not everybody’s got a million dollars, but we can go get it. I always teach people. If you have a good deal, the money will show up. It’s other people’s money. What you mentioned something interesting, you mentioned emerging markets.

So explain to our listeners what exactly is an emerging market and how that fits into your perspective as far as that’s what you look for. Where [00:27:00] is it emerging market

Aaron: today? Sure. We focus on emerging markets in north Jersey. Now there’s so many different cities and areas of north Jersey that if you know what you’re doing, for example, we’re investing heavily in Patterson, New Jersey right now, because that’s the best bang for your buck in north Jersey.

You get the most real estate and the most cashflow for the least amount of investment. And it allows you to commute to Manhattan in less than an hour. So right. There is an emerging market in Norway. Now you can go wider than that. You can say I read that Cincinnati is an emerging market or, Buffalo or there’s parts of Texas, right?

So there’s markets where ideally the cost of living is below a certain threshold. I think it’s something like 30% or so where there’s different ways to estimate. How much more can the cost of living grow before. It’s gotten to a point where it’s tapped out. We look at Hoboken and Jersey city in certain cities, in New Jersey where yes, it’s tapped out your rent growth, isn’t looking and go a whole lot higher.

So you want to steer away from those cities for the [00:28:00] most part and focus on cities where rent is below market value. And the cost of living is below. Other cities and comparison. And ideally the expectation is those, the cost of living has room to grow in that area. But you don’t want to just based on that, and buying in the middle of nowhere, you want to also recognize that quite frankly, I always say you can make money in any market, as long as you know what you’re doing.

It’s really about the operators, but emerging markets. Are a pretty hot trend, but I wouldn’t go chasing them either, jump on an airplane. Cause you read a CNBC article about, Miami or something. And now you’re flying to Miami and the buy real estate. Yeah.

Mike: Hey, what how do you determine a good syndicator or a good place to do a passive real estate investing? How do you pick one?

Aaron: First of all, what’s their track record. And I have in the past, have they done what they said they were going to do? Or did they hit above their targets or below their targets?

So that’s the first thing you want to ask and also, what’s your overall strategy, right? Why do you get up in the morning? Why do you do this? Why are you looking at [00:29:00] hundreds of properties to bring us one cherry pick property and go raise all the money and deal with the 10 nos to get a yes.

It’s, you have a passion for it. You have a plan, what’s your track record. And do you have people in place also that are good, right? So I’m not the one taking the phone calls. I’m not the one underwriting, every single deal that comes in the door. I’m, I’m completely focused on social media, marketing, branding, raising capital.

And that’s what I do day in and day out. But the people in my business that do these things, they’re amazing. And I don’t think I could do what they do. Property manager. I know for a fact, I could not do her job, the amount of patients and how thankless good property management is mind boggling. It took years to develop that.

And so are those people in place, are those systems in place? So we use app folio. It’s a good technology. You have those systems in place so that the tenants can pay their rent. And a lot of places, can they go right online and put in a service call? Is it, is the professional system in place or, are we just rolling the [00:30:00] dice in an emerging market and hiring a third-party management company, hoping they do the job.

What I found was a lot of times third-party management companies did not treat your real estate. Like you wanted it to be treated, never treat your baby, the way you want to treat babies. And we found that we did recognize that sometimes to do something right.

You have to do it yourself, but that’s not necessarily everyone’s path. Yeah.

Mike: Yeah, for sure. So where does what’s people’s capital’s goals for the next 3, 5, 10 years. Where do you guys see yourself?

Aaron: The next five years, we do want to acquire a $15 million portfolio. In New Jersey and other parts of rural Northeast that were breaking into short-term leasing right now, which is super hot.

So we’re seeing a lot of development there and that’s exciting as the forefront of our business, but over the next three years, we want to develop our short-term leasing holdings. We want to develop our apartment building holdings in north Jersey. We want to improve our systems even more. And then the ten-year plan is to.

Yeah, really, we are going to be doing a lot of 10 31 tax difference is probably around that time [00:31:00] and trading into bigger buildings. So we, a lot of reasons our investors like us is because we have multiple exit options, but also the option to not exit, which is pretty unheard of actually in the syndication space.

So we buy these properties long-term and we plan on doing a 10 31 tax deferred. Between the 10 to 15 year mark, usually when you exhaust all the tax depreciation that we try to front load. So for the most part, that’s what we’ll be doing at that time. And by that time, our investors will made back their entire investment.

Plus some on the investments, we’ll be selling the buildings, using a 10 31 tax difference to escrow the monies and move into a bigger building. And these investors are going to then own a share of a even bigger building, which offers more cash flow and better tax appreciation and rinse and

Mike: repeat. Yeah.

Interesting. Good for you. So what advice would you give a new investor?

Aaron: Ooh. What advice do you have a new investor today? It really depends what you’re trying to do, what your goals are, how what’s realistic, how much capital do you have to invest? How much [00:32:00] time do you have? Most of the people I talked to are working full-time they have a family, they have a job they’re good at what they do, and they make a good income doing it.

If that’s the case. Don’t quit your job and become a realtor. Cause Aaron made it is real. If you’re good at something, you’re making an income doing it and you enjoy doing it, then you’ve cracked the code, doing that. But real estate is an asset class. That is what you need to diversify out of the stock market.

Don’t take all your money out of the stock take. We suggest it probably half your investment should be in real estate. I don’t mean a REIT. That’s a stock that just goes up and down in the stock market, but is backed by real estate. Actual real estate. Whether that’s buying the three family down the block and trying out property management or investing in a syndication like people’s capital group and getting the updates and the financials learning from that first and earning from that as well, find the right fit for you.

But I’m not one of these guys that says, Real estate of the highway. Real estate is one way to make income, but if you’re good at something [00:33:00] and you enjoy doing it, you’re making good income doing that. The look of real estate is a passive investment, not active.

Mike: And that whole explanation goes back to your why and being crystal clear on what you want to do, what you want to accomplish in your life.

And he, thanks for that. Listen, on a lighter note, let me ask you a couple of questions. Favorite book you’ve ever.

Aaron: Boy. I guess I have to say rich dad, poor dad. Cause it completely transitioned my life and I wanted to see, and I, yeah, I just, I saw my little brother reading it the other day.

I gave it to him like years ago and he finally picked it up off the shelf and started reading it and really put a smile on my face. Definitely probably my favorite book.

Mike: Nice. So I know you’re up there in New Jersey. Favorite tourist attraction.

Aaron: Boy, I like to go to baseball games, I’ve been to the Yankees and Mets games, but I like to go when I go to a city, I like to go to a baseball game. You can’t really do that these days, but my wife and I take these awesome road trips and go to the baseball stadium. In baseball games in each city which is a lot of fun to do in the summertime.

So [00:34:00] yeah, that’s my favorite tourist

Mike: attraction. Okay. It depressing this year though. I love baseball too. And I would turn a game on it and I go, I can’t watch this. Nobody’s there,

Aaron: it’s. Yeah. And there’s nothing like going to a game, especially if you like, haven’t been to a city and you roll into the city and go to the game, like I’ve been to Detroit and all these, red Boston, a lot of great stadiums and yeah, it’s sad.

Yeah.

Mike: One more. How about favorite?

Aaron: Favorite restaurant. Let’s see. Can I say Wendy’s or

maybe I’m just hungry? Nah, I don’t know. I honestly like going to new restaurants. I like to support smaller local restaurants, but also check it out new recipes. I’m gonna, I’m gonna take a pass on that. Maybe I’ll just say Wendy’s

Mike: okay. How about your how about the most memorable moment in the last six months for you?

Aaron: Most memorable moment in the last six months for me. Excellent question. Ooh let’s see, I got married a year ago, so passed [00:35:00] that test. But I would say. This whole thing. I remember we were doing a networking event. We used to do networking events in our office. We pack the house, it would be standing room only.

And we had an event for March 1st or was it March 2nd? Like beginning of March and no one showed up or we had a full booking online and it looked really good. And then no one showed up. It was really weird. And we’re like, what the heck is going on? What the heck is going on? I go home with all the food from the event.

Cause no one came. So I had all this extra food and I was like, honey, at least we got a lot of food and she’s no, did you hear on the news? There’s some virus going around or something and no one showed up. I’m like, what are some virus? What the heck are you kidding me? A virus. That’s why I be willing to show off, come on.

And man, about two weeks later we were having some really serious conversations and had to put some things on hold and pivot the business as well. So that was a really tough time. Yeah.

Mike: Yeah. Yeah. It’s been a, it’s been an interesting six months that’s for sure. So Aaron tell our listeners how they get ahold of you.

If [00:36:00] they have any questions or want to talk syndication.

Aaron: Sure. So our website is peoples capital group.com and that’s the best way to get in touch with us. We have a podcast there, the passive cashflow podcast, which you can also find on YouTube people’s capital group on YouTube. So I try to put out a lot of content there and you can check out some syndications we’re working on, even fill out an application to qualify, to learn more about our next step private offering.

Mike: Nice. Good. All right. And we’ll have your information on our website also. And I want to thank everybody for listening in this afternoon and for being here, Erin, I want to thank you. Your time has been valuable and I appreciate it. I remember like this, go to YouTube. I always forget. Go to YouTube like this subscribe, come back next Tuesday, who knows, who will have next Tuesday and enjoy this.

If you have questions on your investing strategy, if you have any questions on where you’re headed as an investor, go to my website, download the free coaching [00:37:00] stuff. Let’s see what we can do to help you. Aaron, you want to say. Goodbye.

Aaron: Mike, thank you so much for your time. I had a great time with my website.

One more time. People’s capital group.com. Have a good day.

Mike: Thank you. Look forward to seeing you all next week. Take care.

Kristen: Thank you, Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing in property management.

We’re looking forward to having you back again next week for more Insider Secrets.