Insider Secrets Podcast Episode #77

Featuring Guest: Denis Shapiro

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Denis Shapiro is a guest on Insider Secrets

Guest Bio:

Denis began investing in real estate in 2012, when the market was just beginning to recover from the GFC (Global Financial Crisis). He built a cash flowing portfolio including many alternative assets, such as Note and ATM funds, mobile home parks, life insurance policies, tech start-ups, Industrial property, short term rentals, and more. He co-founded an investment club for accredited investors in 2019. Following the success of his investor club he launched SIH Capital Group. SIHCG provides accredited investors with a simplified strategy to invest for passive income.

Denis has observed key changes in the alternative asset market in the decade of recovery from the GFC. The JOBS Act of 2012 opened many alternative assets up to everyday investors, but clear expertise and guidance is still hard to find nearly a decade later.

This observation compelled Denis to write The Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways in 2021. His book is based on his own experience becoming a successful alternative asset investor and interviews with some of the best alternative asset investors in business today.

Shownotes:

Standout Quotes
 “Nothing changes your career trajectory as quickly as a global financial crisis, when you’re trying to get a financial job.”-[Denis]
“We’re in an age, especially with social media, where everybody posts how much money they make and everything like that. You get to the point where ‘oh, maybe I should invest into something that I have little knowledge of.’”-[Denis]
“I’ve been in the business 30 years, and this is the biggest compression of cap rates I’ve ever seen.”-[Mike]
“To me, cautious just means to stay in your lane, really focus on building up your education and your knowledge before investing.”-[Denis]
“I call it (apartment buildings) the gateway drug of alternative investments. Once you get into apartment buildings and once you get a certain amount of knowledge in analyzing an apartment building deal, it gateways you to almost all of these derivative classes.”- [Denis]
“Multi-family offers a set of fundamentals that you can use in the other asset classes. So many of them, especially from the underwriting capacity. I think it’s really important that people understand those fundamentals in order for people to grow and be able to develop their business.”-[Mike]
“I’m still a believer of keeping a certain amount of money in equities and traditional equities, because when people start investing, where did they put their money. They’re going to put it into the stock market and I want to participate in that.”-[Denis] 
“Chicago is not a positive rent growth or market. Neither is 50 miles around me. When you look at national rent growth at 4%, then you look at a market that I live in and it’s less than 2%. Why would you not want to go to Texas, Florida and be at 12, 15, 20%.”-[Mike]
“I think office space is going to present an opportunity. I think traditional retail is also gonna present an opportunity. It’s going to require much more creativity with whoever’s operating.”-[Denis]
“On paper, it might look like you’re getting better returns, but you need to be 100% more sure of the business plan than what you’re looking at in the apartment buildings. A lot could fail in an apartment building, but as long as it has the right debt and the right location, you’ll probably be just okay. The office, not only do you need the right location, but you need a good plan.”-[Denis]

Key Takeaways

  • Dennis began his investing career in real estate in 2012, when the markets were just beginning to recover from the global financial crisis. He built an alternative asset portfolio, notes, ATM funds, mobile home parks, life insurance policies, and a tech startup. He had some industrial property, short-term rentals, and more. Dennis has been busy since 2012. Following his success in the investor club, he launched SIH Capital Group. SIH Capital Group provides accredited investors with a simplified strategy to invest, to earn a passive income.
  • The fundamentals of apartment buildings are still incredibly strong and there’s going to be more renters than there are house buyers.

  • Understand what kind of market you’re getting into before investing, research and due diligence before just diving in.

  • Vacant office and retail spaces provide a unique opportunity for creative investing.

  • Denis’ book,”The Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways,” is available on Amazon.

  • The stock market is an amazing tool, but because it has unlimited liquidity, it has unlimited volatility, and volatility crushes yield.

  • Your approach should be to get to the point where you have built up a certain amount of knowledge, get to the point where you’ve learned the language of commercial real estate. Get to the point where you’ve networked with other limited partner investors and then commit your money. What you’ll do is you’ll be investing from a position of power.

  • Start educating yourself. Start educating yourself or networking, they go hand in hand if you’re going to do alternative investments, start networking.

Episode Timeline:
[00:13] Introducing today’s guest, ‘Denis Shapiro’.
[02:39] A brief bio on Denis.
[03:54] One word that describes Denis.
[05:06] Denis dives into his finance career.
[09:01] Denis’ favorite asset class.
[11:39] Where the market is headed.
[07:11] Start of current private equity fund venture.
[09:02] Defining moment in career change.
[12:55] Housing shortage in the USA.
[15:01] Utilizing vacant office spaces.
[17:30] Denis on being cautious & strategic while taking action.
[19:37] Raising private capital for investments.
[21:00] Passive vs. active investing.
[22:37] Tech that helps with networking.
[23:19] Denis talks about his new book.
[27:52] Denis’’ biggest piece of advice.
[29:51] Bonus questions-favorite book, food, & tourist attraction.
[32:16] Closing remarks.

To get in touch with Denis visit www.sihcapitalgroup.com or contact him at Denis Shapiro on any social media platform.

Transcript:

Insider Secrets 77 with Denis Shapiro

[00:00:07] Mike: Hey everybody. It’s Tuesday, welcome to Insider Secrets. I’m Mike, your host brought to you by My Core Intentions. Today I am joined by Dennis Shapiro. Dennis, why don’t you say hi to everybody? Tell them what they can expect to hear on today’s episode.

[00:00:20] Denis: Yeah, Mike, thank you so much for having me. Today, we’re going to talk about how we could use alternative investments to help accredited investors increase their income and how you can have alternative investment portfolio alongside a traditional portfolio.

[00:00:33] Mike: Awesome. Thanks for being here. I appreciate it. This is one of those that you’re going to want to listen to a couple of times, see you inside.

[00:00:39] 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 Moraski has more than 30 years of multifamily, real estate investing and property management experience.

[00:01:00] Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Helping you create short-term cashflow and long-term wealth. Here’s your host, Mike.

[00:01:15] Mike: Hey, welcome back everybody. It’s Mike, your host of Insider Secrets and Insider Secrets is brought to you by My Core Intentions. Let me start with a little bit of housekeeping and ask you guys a favor. If you would, please go to wherever you hang out on social media. Whether that be Instagram, LinkedIn, Facebook, Twitter, wherever that is, please go out there and like us, love us, subscribe, follow us, and please make sure that you follow me personally, as well as My Core Intentions.

[00:01:45] That way we can deliver you the most relevant content that we put out there, whether it be daily or weekly depending on the platform. With Insider Secrets, my intention through this is to deliver relevant content with great speakers, great interviews that bring people to the table that hopefully know a lot more than me.

[00:02:06] I always say that I learn more from my guests. I try to create value for them and build into their network, but I learn so much in these interviews. So I’m excited about my guest today. I’m joined by Denis Shapiro. Denis, why don’t you say hi real quick to everybody before I get into introducing you here.

[00:02:25] Denis: Sure. Thank you, Mike, for having me on. I’m excited to be here.

[00:02:28] Mike: I appreciate you being here. I’ve gotten to know you here a little bit, and I’m excited about what you have to bring to the table and offer and we’ll talk a little bit about private equity and multi-family and really dive in.

[00:02:38] So, Dennis began his investing career in real estate in 2012, when the markets were just beginning to recover from the global financial crisis. Anybody who’s followed me knows that I was affected really adversely by the 2008 financial crisis. Dennis was a smart one, he got in after that. He built a cash flowing portfolio, including many alternative assets and he’s laughing, but we’re going to see how smart he really was. He built an alternative asset portfolio, notes, ATM funds, mobile home parks, life insurance policies, and a tech startup.

[00:03:12] He had some industrial property, short-term rentals, and more. Dennis has been busy since 2012. He founded an investment club for accredited investors, we’re going to ask him a little bit about the difference between accredited and non-accredited today. Following his success in the investor club, he launched SIH Capital Group. SIH Capital Group provides accredited investors with simplified strategy to invest, to earn a passive income. Really that’s what a lot of this investing is about today is how do we help people get more cashflow, long-term wealth and do that passively.

[00:03:48] So, Denis, welcome today. I’m glad that you’re here. One question I always like to start off with and ask all my listeners, in one word could you please describe you personally and professionally?

[00:03:59] Denis: I would say one word that I would take would be cautious.

[00:04:04] Mike: Now that’s interesting. Over the last year, I have to say that you’re the first person that said cautious. I’m going to want to dig into that a little bit. Why don’t you fill in some of the gaps, tell your backstory, let the listeners know who you are.

[00:04:17] Denis: Absolutely. I could definitely dive into the cautious meaning afterwards. But I started investing when I was 14 years old. My oldest brother gave me a copy of “Rich Dad Poor Dad”. I absolutely hated the book the first time I read it. I thought he was more of a scam than what he was actually preaching. I was young. I didn’t have the mentality for it. I was more of a sceptic, but I did get out of it that it should be investing in assets.

[00:04:41] I bought my first mutual fund and I was in love with the idea of equities and traditional investments. I was waiting, I followed that mutual fund for the first year expecting to be rich, and I think it went up like $7 and that was like the cost of my trade. I’m old enough to actually say that I paid money for trades. We don’t really see that these days, but I remember I spent the whole year, I said, this isn’t work and I gotta find something better. So that’s when I started diving into more individual traditional stock pickers, like Warren Buffet and Peter Lynch.

[00:05:12] I was like maybe I could just do a better myself. I thought that was going to be my career track. I really enjoyed researching stocks and following research reports and then I went to college. I went to a top 50 school for business and I went right in the smack into global financial crisis. Let me tell you something, nothing changes your career trajectory as quick as a global financial crisis, when you’re trying to get a financial job. I remember when I was going for job interview from a company and a lot of the finance industry, you have multiple layers of interviews, and by the time I got to the later parts of the interviews, the company was out of business.

[00:05:49] So it was definitely a really unique experience, but I was like, you know what? I think I might need to change my profession here. So I graduated my bachelor’s and then I went and I was like, let me go for my MBA then. I went for my MBA in the same school, and once I was in my MBA, I got recruited from the government. That’s when I started investing in alternative investments because after I got my first paycheck from the government, I realized that not only were they my employer, they’re also my business partner with the amount of taxes that were taken out. That’s how I got into the whole alternative investment space. It was a necessity at that point.

[00:06:22] Mike: Interesting. So talk about the cautious thing.

[00:06:25] Denis: So the cautious thing is I’ve been investing in traditional stocks since I was 14, and the number one rule of investing, according to the greatest stock picker of all times, is don’t lose money. That’s where cautious comes in. We’re in an age, especially with social media, that everybody posts how much money they make and everything like that. You get to the point where ” oh, maybe I should invest into something that I have little knowledge of.” The whole Reddit craze last year that we saw and investing in certain cryptocurrencies that people don’t have a background enough where they should be investing in that.

[00:07:00] So to me, to be cautious just means to stay in your lane, really focus on building up your education and your knowledge before investing. When you could do that that’s being cautious versus “Oh, I know X, Y, and Z, and they all made 10,000 X returns and you’re just going to put your money in that.

[00:07:18] Mike: You know, you’ve alluded to the fact that whole Robinhood and I can’t think of the other name of that company, but the stock deal last year where gameworks went up and there were a couple of other ones that went up and busted. I’ll tell you what I lost some money in there at my son’s advice. Hey listen, how many brothers do you have?

[00:07:37] Denis: Two older brothers and we’re very much a brainwashing family. So when one of us find something that we like, we have to almost brainwash the other people into believing it as well. I thank my oldest brother for putting me in that path where he read the book and he absolutely adored the book. That’s when he brainwashed me into reading it and I’m glad he did, because later on I did reread the book and I have a very different perspective of it now.

[00:08:02] Mike: What was the defining moment for you that changed your thought process? Obviously, you said you read the book, you thought it was a scam and nobody can do this. Something happened for you or to you that said, “Hey, you know what, maybe this is real. Maybe I should look at this a little bit more.”

[00:08:18] Denis: Yeah. I used the word scam, almost like an umbrella term, which I probably shouldn’t. I was just more of a cynic saying you know what, it’s not that I don’t believe what he’s writing in the book. It’s just that I think the guy would make more money selling the book in his book tours than when he actually put in the book. I still read it. And I said, you know what, it makes sense. Assets versus expenses, assets are good. I liked that. I took it to its simplest messages and I applied that right away. So it wasn’t like a defining moment, I understood what I needed to get out of that book, but I was just more of a skeptic overall. That skepticism kind of goes away as you get older and you’re more mature and you realize it’s not really a sales pitch. The guy’s life work went into that book.

[00:08:58] Mike: So do you have a favorite asset class today?

[00:09:01] Denis: Yeah, it would definitely be apartment buildings. I call it the gateway drug of alternative investments. Once you get into apartment buildings and once you get a certain amount of knowledge in analyzing an apartment building deal, it gateways you to almost all of these derivative classes. If you could become an investor in apartment building, you probably could be as an investor, not as an operator, you could probably go invest in something similar, like an apartment building or a mobile home park or even other private securities because you know what you need to know just from the apartment building world.

[00:09:34] Mike: That’s interesting you say that. Just before you and I got on, I was on a call with another individual and her and I were talking about the fundamentals that multifamily has to offer. I think multi-family offers a set of fundamentals that you can use in the other asset classes. So many of them, especially from the underwriting capacity. I think it’s really important that people understand those fundamentals and you’ve just alluded to that, that it is important for that to happen in order for people to grow and be able to develop their business. So what excites you in today’s environment about multi-family?

[00:10:13] Denis: I just think that we’re at an age right now that it’s hard to find an asset class that’s not at an all-time high. It’s so hard. Almost everything is at all-time high. My brokerage account is at all time highs, almost every asset class I invest in all time highs. It’s like a good problem to have, but you also have to be cautious and say, “what does it look like in five years or 10 years.” At the end of the day, the fundamentals of apartment buildings is still incredibly strong that there’s going to be more renters than there are house buyers. There are certain markets that you can easily see the demographic trend too.

[00:10:46] So you could put your money in the best markets and then you have an extremely favorable finance debt world out there for the commercial real estate. A lot of people don’t know that aren’t part of it, that the terms and the rates that the operators of apartment buildings get are usually even better than what on the residential side. I don’t want to say it’s hard to lose money because there’s always the ability to lose money. But when you’re looking at three years or two years of interest only debt that’s below 3%, it gets really hard. Even at really compressed cap rates. It gets really hard to lose money in those types of deals. At the same time, anything can happen, but you want to deck the cards in your favor.

[00:11:25] Mike: So I’ve been in the business 30 years, and this is the biggest compression of cap rates I’ve ever seen. I know now you’ve been in the business since 2012, from your perspective, where do you see the market headed? Where do you see the business going?

[00:11:39] Denis: I think it’s going to stay on this trajectory. Unless the rates start moving considerably higher, I don’t see the cap rates significantly growing up because the money is flowing. It’s going to go by where the money is going at the end of the day. That’s why I’m still a believer of keeping certain amount of money in equities and traditional equities, because when people start investing, where did they put their money. They’re going to put it into the stock market and I want to participate off of that.

[00:12:05] Now the alternative investment side, whereas private securities, I think most of these business plans that you look at there, they have three to five to seven year horizons. I think when you have that longterm horizon and you’re locking in good rates today for the next three years, five years in seven years, you have a certain margin of error for your investments. Now, that being said, if we’re having this conversation in 12 months or 24 months, and the rates just jumped up 2% and the cap rates remain where they are now, I wouldn’t feel as comfortable saying that apartment buildings is my favorite asset class because the two need to move together. There’s probably going to be a lag between the two where the rates might still jump up and the cap rates, if they still compressed then we’re going to see some problems. My theory is they’re going to move hand in hand.

[00:12:55] Mike: You see a shortage of housing in this country?

[00:12:57] Denis: I do. I think the data kind of supports that. I think there’s been migrations from the urban to the suburban kind of flights that you saw with COVID. There’s obviously the states that are winning the population battle. Texas, Florida, and the Carolinas, and then there’s obviously the North East where people are leaving. That’s why I hate investing the idea when people say, “oh I invest in publicly traded REITs. I have exposure to real estate. I’m like, oh, that’s great for you, you got to exposure to the entire market.” Why I love private securities is that I could pinpoint and put my money in certain markets where the data is supporting to put that into. I don’t want to invest in a REIT that’s investing in certain non landlord friendly states.

[00:13:39] Mike: Yeah, so true. I’m in Chicago, and Chicago is not a positive rent growth or market. Neither is 50 miles around me. When you look at national rent growth at 4%, then you look at a market that I live in and it’s less than 2%. Why would you not want to go to a Texas or a Florida and be at a 12, 15, 20%.

[00:14:02] Denis: Yeah, exactly. I think you made my point beautifully, like, why would you want to read that investment in Chicago then? You want that specialization location. A lot of people kinda of fool themselves saying ” oh yeah, I’m investing in real estate. I have 20% of my portfolio in a REIT.” You have to shrug your shoulders and say ” do you really understand what you’re actually investing in when you say that.”

[00:14:21] Mike: Yeah, and most people that are doing traditional investing really need to have that other side of the education. When I was just doing traditional investing, I didn’t understand it until you get in it. I think that one thing my dad told me years ago, he said, “if you ever go into business for yourself, food, shelter, or clothing, and shelter’s never failed. It had some rough spots along the way, but you know, I’m just going to kinda jump off the path here for a minute and ask you an abstract question just to see what your answer on it is. There’s a lot of vacant office space today, in the marketplace, as a result of coming out of the pandemic. What do you see happening with some of that moving forward as a retrofit?

[00:15:00] Denis: To me, I think office space is going to present an opportunity. I think traditional retail is also gonna present opportunity. It’s going to require much more creativity with whoever’s operating. I’ve seen retail spaces that convert into half self storage and then they retrofit the other half, so you don’t have to be reliant on all retail. I’ve seen some really creative things, like apartment buildings, it’s simple, right? Usually the business model involves some kind of renovations to get that rent bump. You scale that up, it’s a very simple model to understand. Office space on the other hand, if you’re investing in office space today, the cap rates may look better, right? You probably could get cap rates in the 8 to 10 range for office buildings versus 4 to 5 for most apartment buildings out there.

[00:15:43] So on paper, it might look like you’re getting better returns, but you need to be 100% more sure of the business plan then what you’re looking at in the apartment buildings. A lot could fail in an apartment building, but as long as it has the right debt and the right location, you’ll probably be just okay. The office, not only do you need the right location, but you need a good plan.

[00:16:02] At the same time, I’m not 100% against it. I’m invested in a startup that does a WeWork with a medical focus. Let’s say like a chiropractor that could rent a room by the hour or a new pediatrician or something like that. They’re not going to go out and sign a lease, they could go and have a coworking. I like little niche ideas like that versus just going out there and buying office space and expecting people to revert back to the norm because in one shape or form COVID will have long lasting effects on us.

[00:16:31] Mike: That’s very interesting. I like how you talked about the medical space for that WeWorks process. I had an investor client years ago who his focus was on medical housing. So he’d buy small eight, 12 unit apartment buildings near a teaching hospital. He liked that because his tenant was somebody in graduate school doing their internship, they were never home. They’d sign a two year lease. They were at the hospital 18 hours a day, so his wear and tear was very minimal and he had a two year lease and they paid a little bit extra than somebody normal. It was a great model and it worked really well for him. I think that there’s those models that can be niche product like that that work well.

[00:17:11] You mentioned cautious early on. Today, we’re in a space where cautious, I think is key. It helps you as an investor. How do you make high stake decisions? I think you and I are both faced day-to-day with some high stake decisions. How do you go about processing those and making those today?

[00:17:29] Denis: That’s a great point. I run a private equity income fund, so I am responsible to invest the money and allocate into certain deals. So I’m not cautious to the point where I’m saying I can’t invest in today’s environment. It just takes a certain level of due diligence that you have to apply, versus in 2012 you could have probably bought anything under the sun and you would have done really well.

[00:17:50] So today, for example, I like to buy into extremely experienced operators that have gone multiple cycles. Operators that have been through the global financial crisis and know what it looks like. I also like buying into deals that have something different in them. For example, I like when the apartment building operator I’m investing in gets a substantial discount because they’re assuming a debt instrument. So sometimes you’ll get, because of the previous owner, they got debt with a really high prepayment penalty because they thought they were going to hold on to the deal for so long.

[00:18:21] In mid cycle, they’re turning around they’re saying, “well I’m getting tons of appreciation here, I’m going to sell it.” But you still have that prepayment penalty and the rates are a lot lower today. So because of that, those are the rare instances where you could actually get a discount on the actual market value of the property. As long as you’re willing to come in and finish out the last 5 years. To me, that’s a no-brainer because the new operator is not in the deal for 10 years. The new operator can still business plan out for 5 to 7 years, but still get some kind of discount with some kind of margin.

[00:18:51] Those to me are conservative deals because as long as you hold the deal for a certain amount of years, you’re already getting that equity arbitrage that you’re buying from day one. As long as the cap rates don’t really run on you significantly, you can still make out on the deal. So that’s what I mean by cautious, like I could look at a deal today and probably 5 to 10 minutes, I’ll just say,” too many red flags, it’s not even worth pursuing another five minutes on” because they make certain assumptions that just don’t jive with the cautious approach that I like.

[00:19:20] Mike: I think that’s very important as a sponsor or a business plan might have a assumption in there that just doesn’t equate to what your belief is. I think that’s so important that you stick to your gut, your fundamentals, the things that you feel are going to make your business. How about when it comes to private capital, what do you think are a couple of the best techniques today for engaging new people, in talking about private equity, raising private capital?

[00:19:48] Denis: I think it’s just about being authentic. A lot of people don’t realize that this whole age of syndications and everything really has taken off since the jobs act in 2012. it’s only been around for 9 years. What you’re getting is that first batch of operators that maybe started 3 to 5 years ago. They’ve just had pretty successful exits and now all of a sudden they’re becoming mentors and coaches, and they’re getting a lot of students. There’s this proliferation out there of people who literally just did a course and now they’re going out and they’re raising money for 200-300 unit apartment building.

[00:20:18] Usually you could spot them pretty quickly because they usually projecting crazy outsize returns versus all the operators that you know in that space. So those are the types of things that I think it’s important. You really need to know that alternative investments are a great differentiator for your portfolio, but it doesn’t mean that you just go in and you start allocating money in them from day one. There’s a huge learning curve to it.

[00:20:45] Mike: Whether you’re active or passive, right? As a passive investor, I think you have to get comfortable with the space and what’s going on. But as an active investor, all the education in the world, unless you have good execution, doesn’t help.

[00:20:57] Denis: Yeah, I like to call it actively passive because my philosophy is you should be very active up to the point where you wire the money. Even as a limited partner, because once you wire that money, you are truly 100% passive. Before you get to the point of wiring, you should be performing your due diligence, you should be performing basic underwriting, you should be networking with other investors to see if they’ve ever invested on the deal, you should begin character references, you should be doing your whole nine yards.

[00:21:24] It’s not “I heard this guy on a podcast, I’m just gonna throw money at him.” There should be a level of activity before getting to that point. So I didn’t really answer your first question about, what are you really doing for capital raising and everything like that? I think it’s just about being authentic of going out there and speaking about your brand because there’s just so many people out there. It’s important for you to actually talk about your voice. My brand is that I think traditional and alternative investments compliment each other more than people like to say.

[00:21:52] A lot of people are too much about, ” alternative investments are great, so I’m going to sell all my stocks, I’m going to go wholeheartedly into that.” Or opposite where they feel alternative investments are all scams, so they’re going to just stick with their financial advisor. My brand is to try to teach people that there’s a lot of pros and cons to both and they actually compliment each other really well. That’s usually what I talk about my educational content is focused around. So people who have gone through a lot of the different tribulations being a traditional investor, but that have not abandoned the traditional investment space. They resonate to what I have to say and that’s all I’m trying to do at that point to attract other investors.

[00:22:29] Mike: Good stuff that’s for sure. How about from a technology standpoint, couple of platforms that you feel best serve you in your business?

[00:22:37] Denis: I’ll throw out Slack and if people aren’t using it, they should. What I strongly recommend is if you network with a couple of investors and you start exchanging information. If you start doing this with 4 or 5 other investors, you’re going to get into an email clutter world where you’re not going to remember, who’s saying what. If you could get to the point where you can build a small community of limited partner investors, convince them to all get on a platform like Slack, where you could have channels and keep it organized, you can really improve your communication level.

[00:23:11] Mike: Slack is one of those interesting platforms that gives you that collaboration effect that you generally can’t get just from Gmail or email. Talk about your book, tell us what that’s all about?

[00:23:22] Denis: Okay. So this was one of those ideas that I had last year that I thought, “oh, this is going to take 2, 3 months, even though I never wrote a book and I never wrote more than five to 10 pages. 300 pages later and 6 months later came into fruition. I’m super excited about it. The book is called “The Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways” by me, Dennis Shapiro. It’s available on Amazon.

[00:23:44] I realized that as I was networking for the last few years with other investors, I would start the conversation and we would be talking about a certain apartment building operator. Then the conversation kind of gets into a self storage operator or a mobile home park operator. I started getting these synergies where commercial real estate investors got their hand in multiple pots because once you’re in the private security worlds, you get thrown opportunities. Like last week I was at a winery and the winery was also raising money, stuff like that. So you get these interesting opportunities. What I wanted to do was I wanted to write a book where it presented these opportunities. I believe I have eight or nine asset classes in there.

[00:24:22] So everything from apartment buildings to mobile home parks, self storage, to start up tech companies, to life insurance policies to life insurance settlements, to private notes. What I wanted to do was introduce the actual asset class, but I didn’t want to introduce it in a way that overburdens the reader. I didn’t want to put 300 pages about apartment building, because there’s a lot of great 300 page apartment building books out there.

[00:24:45] I didn’t want to go that route. I wanted to give a high-level introduction, it’s about 10 to 20 pages per asset class. My favorite part is I invited 2 or 3 expert investors in this space and what they would do is they would go in and they would answer a set group of Q&As. You would get to see the different mindset of these amazing operators. I think my apartment building operators had 50,000 units between the two, and you see them answering the same kind of questions.

[00:25:10] What my reader can do is read the book if they like apartment buildings, great. One, they’ll automatically have two great expert operators that they can reach out to, or they could at least now go on the journey and say, “you know what, apartment buildings is right for me, compared to all these other asset classes, I’m going to focus in apartment buildings. Let me go now read the 300 page book because now I feel like this is a good fit for me.” So I really wanted to make this Almanac for these different alternative investments.

[00:25:38] I wanted to really stress the message where when I was investing in traditional assets for 20 years, I couldn’t find a happy median between getting appreciation and getting income. I was getting the appreciation, but I couldn’t figure out how to get the income. I tried the REITs, the MLPs, the closed end funds, the utilities. I tried the high yield bond funds and every single time, the same pattern would happen. Two to three years, I would get outsized yield, it would still underperform my usual index fund. Then when the market crashes and the high yield is supposed to protect my principal in these stocks, they went down just as much as the regular stocks.

[00:26:17] What I realized is, the stock market is an amazing tool, but because it has unlimited liquidity, it has unlimited volatility and volatility crushes yield. I realized I needed to find another place for that yield and that lower volatility. And that’s when I realized I was having two separate portfolios of alternative investments in traditional. I realized that if I started thinking of them as one portfolio and simplified my traditional stocks, where I’m just putting into a low-cost index fund for appreciation.

[00:26:48] I’m not looking for any yield there. I could focus all my attention on the alternative side. The book goes through my journey of these failed strategies, one by one, and how I came up with where I ended up. At the same time, I also wanted to show people who just do alternative investments that the traditional side also has some benefits. The pros and cons of both actually fit really well together.

[00:27:13] Mike: I really like the way that you spoke to all of that, it really gave a great overview of what people can anticipate. The one thing that I teach, is cashflow to long-term. That’s what you said, you couldn’t figure that space out and then it came together for you. I think once you create that cash flow or you figure out how to increase that, and I’m an out of the box thinker, so I’ll take any asset and I’ll say, “we can add this or do this to bump up the cashflow or to create multiple streams of revenue where it didn’t exist before.” That’s about changing the value of that property. What pitfalls do you see in today’s marketplace that an investor, whether they’re new or somebody who’s been around for a while should pay attention to?

[00:27:52] Denis: This would probably be my biggest piece of advice. The private security world is just in its nature is, the minimums are usually much higher. Usually if they’re an accredited investor, they have a network over a million dollars, they might not look like $50,000 is that much money for them. The problem is there’s a lot of operators out there that are really good marketers and they’re not good operators. When you’re starting out, you may not be able to tell the difference between a good marketer and a good operator because a lot of their business model is to attract new investors.

[00:28:26] You’re not going to attract new investors if you say how new you are, or how your last three deals have underperformed. All of these things the new investor’s going in blind on because it’s such a high minimum investment, all it takes is one or two bad deals and all of a sudden you’re going to curse out the entire space. You’re going to say, “this is all a big scam, my uncle Johnny was right. I should have never invested in this.”

[00:28:50] Instead, your approach should be get to the point where you have built up a certain amount of knowledge, get to the point where you’ve learned the language of commercial real estate. Get to the point where you’ve networked with other limited partner investors and then commit your money. What you’ll do is you’ll be investing from a position of power versus the other way of being suckered into someone’s been marketing and just gambling and hoping it works out.

[00:29:15] Mike: Again, that goes back to that education, right? That knowledge is power. It’s always amazing to me how fast this time goes, especially when we get into a conversation we’re really engaged with somebody. Last piece of advice you’d give somebody today?

[00:29:29] Denis: Start educating yourself. Start educating yourself or networking. I think they are go hand in hand if you’re going to do alternative investments, start networking. I have some great articles on that, I’ll share my website later on just the basics- how do you start from zero to actually building a good network, let’s start networking, start educating. They go hand in hand.

[00:29:46] Mike: All right, thank you. Let’s shift gears a little bit. I always like the bonus round, last three questions. So the best book you’ve ever read?

[00:29:54] Denis: Can I subjectively say my book, because during the editing process, I ended up reading it 6,000 times. So I’ve probably brainwashed myself. To me it’s the best book I’ve ever read because I read it 6,000 times. So I’ll just put my book out there for now. If you asked me this question in about six months, it will not be my book, but it’s still fresh enough since I just released it a few months ago.

[00:30:17] Mike: It might be the next book you write next, right?

[00:30:19] Denis: Hopefully not. I don’t know if my marriage can survive another book. So probably not.

[00:30:24] Mike: That’s funny. Hey best tourist attraction?

[00:30:28] Denis: Best tourist attraction. I’ll say the Dead Sea. I went there when I was 18. Just the experience, there’s no living animals in there because the salt concentration is so intense. But just the experience to walk on water and it levitate you is like an out of body experience that is unbelievable. You can’t describe it. I still think about it, it’s absolutely amazing just to go in and start floating. You’re just in a different world.

[00:30:55] Mike: Amazing. Best restaurant?

[00:30:57] Denis: I am from New York city, so I’m going to have to pick a pizzeria. The second house I bought was a block away from the most famous Staten Island pizzeria, it’s called Denino’s Pizzeria. It’s super burnt pizza, thin crust, it’s everything what a New York slice should be. So that is my choice.

[00:31:16] Mike: Nice, you ever been to Chicago?

[00:31:19] Denis: I haven’t. I do want to try some deep dish pizza though.

[00:31:22] Mike: All right. When you get here, make sure you let me know, we’re going to go have some pizza together.

[00:31:26] Denis: I like that.

[00:31:27] Mike: I want to thank you for being here today. How do people get ahold of you if they want to pick your brain a little bit, get ahold of your book, talk to you a little bit more?

[00:31:34] Denis: The best way to reach me is my website, www.sihcapitalgroup.com. When you go in there, I’d strongly recommend just going to the education page. I’ve got 40 articles about the stuff that we talked about today. On my homepage and almost every other page. I have two abridged versions of my book that I just published. I have an abridged version of the Q&A portion of my book, and I have an abridged version of the content portion of my book.

[00:31:58] I strongly recommend if the readers have any interest in getting a nice primer and they are not in the mood to read 300 pages and they only want to read the 30 pages about alternative investments, that’s definitely the place to go. So sihcapitalgroup.com and my book Alternative Investment Almanac is on Amazon.

[00:32:15] Mike: Okay. Perfect. Thank you for being here today, you’ve been a wealth of knowledge. I know that my listeners gonna gain a lot from you. I’m going to suggest to people go back and listen to this a couple of times, because we talked about a lot of things today, a lot of good points. Some things that you’re probably as a new investor or even a somewhat seasoned investor, you’re going to want to unpack a little bit. This is one of those episodes that I say, go back and listen to it a few times. Take some notes, write out some thoughts and call Denis or call me and let’s talk through some of that stuff.

[00:32:48] Denis, I appreciate you and your knowledge, your expertise, and I want to thank everybody else for listening in today. Every Tuesday, Insider Secrets.

[00:32:56] Denis: Thank you Mike for having me.

[00:32:57] Mike: You bet. See you guys next week.

[00:32:59] 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 and property management.

[00:33:17] We’re looking forward to having you back again next week for more Insider Secrets.