Insider Secrets Podcast Episode #78

Featuring Guest: Chris Larsen

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Guest Bio:

Chris Larsen is the founder and Managing Partner of Next-Level Income, through which he helps investors become financially independent through education and investment opportunities. Chris has been investing in and managing real estate for over 20 years. While completing his degree in Biomechanical Engineering and M.B.A. in Finance at Virginia Tech, he bought his first single-family rental at age 21. During his subsequent career in the medical device industry, Chris expanded into development, private-lending, buying distressed debt as well as commercial offices, and ultimately syndicating multifamily properties. He began syndicating deals in 2016 and has been actively involved in over $400 million of real estate acquisitions. 

In addition to real estate, Chris has invested in equities, oil & gas, and small business lending, as well as being active in Venture South, one of the nation’s Top 10 Angel Investing groups. Chris lives with his wife and two boys in Asheville, NC where he loves spending time with them in the outdoors and enjoying the food and culture that the region has to offer.

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:

78 Chris Larsen

[00:00:00]

[00:00:05] 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 experience.

[00:00:27] 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.

[00:00:41] Mike: Welcome back. It’s Mike, your host of Insider Secrets, brought to you by My Core Intentions. I always ask, what’s your intentions? What’d you get up this morning and think about? What did you put on your list of things you had to get done today? You know, we all have those items in our life that are negotiable and non-negotiable. In your daily disciplines, the things you need to do for yourself to grow and push yourself forward.

[00:01:02] Let me do a little housekeeping first. I would love for you please follow me, like me, love me, subscribe on my YouTube channel. Follow me on LinkedIn and Instagram, that’s where you’ll get the most of me, but you’re going to get great content, great free stuff, and great intros to guests like I’m having today.

[00:01:21] Listen, I’m glad that you’re here today. I got a great guest. I’m joined today by Chris Larson. He’s the founder of Next Level Income. Chris say hi to everybody.

[00:01:29] Chris: Hey, Mike, thanks for having me on.

[00:01:31] Mike: Chris. I’m excited that you’re here, we’ve been planning this for a while now and it’s finally gonna happen. Chris is calling in from Asheville, North Carolina, great place up in the mountains. I know a lot of people that are up that way.

[00:01:43] Chris helps investors become financially independent through education and investment opportunities. He’s been investing and managing real estate for over 20 years, while completing his degree in biochemical engineering. I had to go to school just to be able to say that much less, be able to do it. What I want to find out is how we get from biochemical engineering to real estate.

[00:02:05] He’s got a finance from Virginia Tech and he bought his first single family rental at age 21. During his subsequent career in the medical device industry, he began syndicating deals in 2016 and has been actively involved in over $400 million of real estate acquisitions. Chris has also invested in equity, such as oil and gas.

[00:02:29] Let’s dig in here a little bit, one question I ask all my listeners right out of the gate is in one word. What best describes you personally and professionally?

[00:02:39] Chris: Discipline.

[00:02:40] Mike: So when you look at discipline in your own life, where do you think that you have the most discipline in your life?

[00:02:47] Chris: Mike, you’re very kind. I always joke that my counselor pulled me aside in college and said, “Chris, you’re not smart enough to be an investor or an engineer, you have too much personality, you should look into something different.” So I ended up in the sales side of things and real estate, but I was fortunate throughout my career to work with a lot of geniuses in the form of surgeons and a lot of other people. I started out in college, I was racing bikes, Mike, that was my first real passion in life. I played other sports, I played instruments, but my first real passion was cycling.

[00:03:15] I was never the most talented guy out there, so I had to develop discipline to achieve the level of performance that I did. It became ingrained in me. So if you looked at my schedule, my wife makes fun of me. Like I even have one when I’m going to shower, when I’m going to eat. All of these things and I started this habit back in college. I’m not the most talented guy, I’m blessed with some talent, to get the most out of what I have to get the most out of every day. I developed this discipline in terms of scheduling that really allowed me to focus on what I think are the, the high impact activities. That’s why I love the question you start out with on your show.

[00:03:46] Mike: Chris talked about daily planning, time-blocking, making sure it’s in your schedule. He says he scheduled a shower and brushing his teeth.

[00:03:55] Chris: You don’t have to do that necessarily, but I’m a little crazy when it comes to that.

[00:03:58] Mike: I always tell people, you have to block it out. If you want to get it done. If it’s important, a non-negotiable for you in your life, you’ve got to block it out. I think that’s a great representation of what those daily disciplines entail for us. Before we get into your background, talk about the cycling thing for a minute. You mean bicycling?

[00:04:16] Chris: Absolutely.

[00:04:16] Mike: Great. Great. So a Tour de France Lance Armstrong kind of stuff?

[00:04:20] Chris: Yeah. I actually got to train with Lance before he won the Tour. And obviously he has an interesting history with what was going on in the sport at the time. I started racing in the early nineties. so I was a little bit younger than Lance. I came up like a generation behind, but yeah, I raced road bikes. I started when I was 14, I got a mountain bike at age 13, and in the early nineties, mountain biking really became like a thing. I started racing, raced in high school, met my best friend, raced into college. That’s all I wanted to do, I want to be a professional cyclist.

[00:04:46] I got decent grades, went to college for engineering because I wanted something that was valuable as a degree and would teach me something I wouldn’t learn on my own. I really enjoy physiology, performance of the human body. But I thought, biomedical engineering. Engineering education really teaches you a process. It teaches you how to solve a problem, how to figure out assumptions, how to then put a plan in place, how to then execute that plan to solve a problem.

[00:05:10] It’s that same process that we still use today. When we look at a property, we make assumptions going into the property to figure out what projects need to be done, where rents are, where they can be in the future when it comes to multi-family apartments. I talk about all of this in my book, which I’ll tell you guys how to get free if you’re listening today.

[00:05:25] Like a true engineer, I go through the whole process and my book step-by-step. In between my freshman and sophomore years at school learning engineering, racing my bike, just want to get through school and go turn pro. My best friend, who I mentioned I met racing bikes, passed away. Had a massive brain hemorrhage and died. Raced another year, put my heart and soul into it, I was as fit as I’d ever been. I was a category one cyclist, I was racing with professionals, I trained with Lance that winter. And I wasn’t happy. It just didn’t give me any fulfillment.

[00:05:54] I came back to school, I quit racing, quit cycling. So now I’m back in school, I don’t want to be an engineer, I quit the sport that I spent the last five years doing, my best friend was gone, didn’t have a girlfriend. My friends were all cyclists and I wasn’t part of a fraternity or anything like that. That’s when I really hit the reset button and that’s when my investment career actually started.

[00:06:15] Mike: Two things. I want to ask you your age, but you’ve already dated yourself with the Franklin Covey planner. I had one of those too. .

[00:06:22] Chris: It was awesome.

[00:06:22] Mike: Yeah, it was a great way to schedule your day. So how old are you?

[00:06:26] Chris: Turned 43 this year.

[00:06:27] Mike: Okay. All right. Good. What caught my attention was, “I started cycling at age 14” and I was like, wow how long has he been doing this? So cool. Good for you. I like what you talked about the engineering stuff, right? Got a couple friends who are engineers and you’re right, Chris, they’re really dry. You’re not like that. You got a personality, just like your professor told you. I love that. So that’s great.

[00:06:48] Chris: It’s a joke, but it’s kinda not, it is funny. I’ll never forget, I’m sitting in class and we watch these movies and they make fun of nerds and all this stuff, and I’m in this high level math class that I had to take and I felt pretty dumb. It was one of the first times in my life that I was really over my head academically. I’m looking around, it was one of these like senior level type math classes. I was trying to get a math minor, with my degree I just had to take a couple more classes and I’m looking around the room and I’m like, “man, I really don’t belong here. Like I’m I’m in over my head.” I’ll never forget, the professor made a joke and I was the only one in class that didn’t laugh. I didn’t get the joke. I looked at the guy laughing next to me and he had tape right around his glasses, something you’d see in a movie. So here I am, I felt like I was that guy, like that jock or something sitting in class, it was the first time in my life where I was like, “man, I might be the coolest guy in this class.”

[00:07:32] Mike: Sitting here picturing you sitting next to this guy with tape on his glasses. Great. So, assumptions, strategies, problem solving, looking at something down the road. Let’s look at right where we’re at in today’s marketplace, you’ve been investing for a while, you’ve had your hands on a number of opportunities and a number of deals. Where do you see us in five years from now cap-rate wise and why?

[00:07:58] Chris: Yeah, I wish I had a crystal ball on that one. When I talked to investors, I’d say, Hey, this is what we’re going to go through, this is the process, what we’re going to do to the property, this is why we think we can raise rents, this is why we think we need to achieve these cash flows. With all these inputs, this is what we think the value is going to be, but there’s a variable in there that we can’t control. And that’s cap rate Mike. So it’s a conversation I have almost on a daily basis, especially now because interest rates are rising.

[00:08:21] So I’m not going to answer that question black or white, but I’m going to talk about the forces that I see affecting cap rates right now and then we can come to a conclusion from there. So if you look at interest rates as a whole, historically it’s money and interest rates. It’s a gauge of the demand on money, right? So the more people want money, the less money there is, the higher the interest rate is, the more expensive money is, does that make sense?

[00:08:46] Mike: Yeah, yeah.

[00:08:46] Chris: So money is like anything else. The price goes up and down and the price of money is determined by the interest rate that you have. Now it’s also supply and demand. So if there’s less money, interest rates go up. If the central bank, the fed pushes out dollars, interest rates are going to stay low and the fed has its own reasons for doing that.

[00:09:06] You also have money that comes into the country from outside of the country, from international investors, right? So we have to look what’s happening across the world. So if we look at interest rates around the world, they’re low. All the developed countries around the world have interest rates that are as low or lower than ours.

[00:09:21] Then I’m going to peel that back another layer. How do you determine demand on money? How do you determine demand on real estate? The answer is demographics. So if we go back into the 70’s and early 80’s and say, why were interest rates high? There was a massive influx of demand for dollars and borrowing from a generation called the baby boomers. The baby boomers wanted money, they were borrowing for things like cars and houses left and right. Housing prices went up and then we saw the stock market going up in the 1990s. This is all driven by those demographic demands.

[00:09:52] Now, the central banks are turning the faucet up and down on those and they made some policy decisions back then that are probably different than they’ll make in the future.

[00:10:00] Now today we look around the world and we also have these ultra low interest rate environments around the world. So investors are starting to come into our country and say, “Hey, we want to own assets in America.” So you have demand increasing in America for assets, you have the fed flooding the market with dollars, keeping rates lower, even though you have inflation increasing, I think that inflation and interest rates- there’s a bit of a dichotomy. There’s a separation there because of the market forces at play. So even though we have prices of things increasing, due to demand and the dollars that are in the market, that doesn’t mean that interest rates are necessarily going to go up.

[00:10:39] All that being said, what does it mean for cap rates? How do we estimate what our cap rates are going to be? We always assume the same or higher cap rates for our exits internally when we buy an asset. If we’re buying at a four and a half percent cap rate for class a property, which is an unusual in today’s market, we may assume a 5% exit cap rate for instance.

[00:10:57] Mike: Are you figuring that base maybe 25 basis points a year?

[00:11:01] Chris: I think 25 basis points a year isn’t unreasonable to assume. We usually provide a matrix for our investments, for investors, so they can look and say, “if cap rates go down, this is what it might look like. If they go up, this is what it might look like.” Frankly, if you look at the properties we bought at the beginning of the year, those cap rates are towards the bottom of that matrix that we provided already. So they could rise say 50 or a hundred basis points above where they are today and we’ll still exit.

[00:11:25] Mike: Let’s look at this on another step. So let’s say, we pretty much know right now that for the next couple of years, we’re going to stay pretty robust. If cap rates continue to compress for the next 24, 30 months and then start to go up. That almost levels the playing field at some level, doesn’t it?

[00:11:42] Chris: Yeah, I think it does. As an investor, again, I didn’t really answer the question, the last piece I didn’t mention was the government is incentivized to keep rates low because we have so much debt out there. So unless we have some sort of reset of them where they wipe that debt away and can restart with interest rates, they’re incentivized to keep rates low. So as an investor, you have to think about, “okay, what am I comfortable with? Or what do I believe?” If you believe rates are going to go up, maybe you want to be in something that has more of a fixed return, or it’s not as dependent on an exit strategy with respect to where you want to be. Or maybe you moderate your expectations because if cap rates are going to go up the other thing that’s probably going to go up are rents as well. So you could say cap rates might go up, but maybe your rents go up 50% more than you thought they would, that’s the thing about multi-family that I like.

[00:12:26] Mike: Yeah, that’s market driven though. You know what I mean? Cause I’m in Chicago and you’re not going to see that rent grow.

[00:12:30] Chris: That’s what I wouldn’t buy in Chicago personally.

[00:12:32] Mike: Me neither. We’re doing a deal in Tampa right now and the reason for that is because of the extreme rent growth.

[00:12:38] Chris: It is extreme, yes, double, 10, 20%.

[00:12:41] Mike: Here’s what’s cool, I can underwrite a deal at 4% and know I’m safe, my rent growth at 4%. So let’s peel this back another layer, have you heard about this builder in Japan or China, that’s in trouble right now?

[00:12:53] Chris: Perhaps.

[00:12:54] Mike: $300 billion worth of debt and you can’t pay principle or interest on it at all. So how will something of that magnitude, across the globe from where we’re at, affect us here?

[00:13:10] Chris: Yeah. That’s a good question. So I think whenever you have market excess, like you do today, right? You have the stock market at highs, you have prices going up, it masks a lot of things, right? You can get away with a lot when prices are going up, like Maydoff or Ponzi schemes. Prices are going up, you can take money, people keep investing. When money starts exiting, when it starts walking out the doors like we’re seeing with some of these companies around the world. It’s going to have ripples that are going to affect. There’s historical trends that we can look at. We’re in the kind of the last stage of, what is probably about an 18 to 19 year historical real estate cycle. So I think you do have to be cautious as an investor, as we go into these next five years. Personally, I would say, if you’re buying a property like cashflow properties, lower loan to value.

[00:13:58] Also, you want to say, “okay, what if we have to hold this property for a little bit longer? Is it still going to work?” If you’re into a development deal that has to sell at a specific timeline to hit your mark and then it basically, self detonates, those are deals that get risky and those are the ones that really hurt.

[00:14:12] I think that, as you see these things happen around the globe, invariably, they’re going to hit the United States more than they did historically and that’s going to have an impact. As people take their money, you’re going to have money to put back in, all the markets affect one another.

[00:14:24] Mike: Yeah. So let’s dial it back a little because I think that, for a lot of my listeners, we might be over the top a little bit. It’s like a brain teaser, right?

[00:14:33] Chris: It is yeah.

[00:14:34] Mike: Some people like doing crossword puzzles, I like trying to chase the number here. Who knows what’s going to happen? I think that at some level, you’ve got to take somewhat of a risk, but you want it to be calculated too. I can remember sitting in a math class and saying to my math teacher, “Hey, Mr. Thompson, I will never use this.” He goes, “yes you will someday.” And he was right. I was like, “no way, I will never use this.” Thinking I just hate math, there was no reason I’ll ever use it, but boy, I love it today,

[00:15:01] Chris: I love it. This is yellow spreadsheets and this is my favorite thing. I think just to cap that off, Mike, the only people that can be wrong as much as they are in their careers and still get paid really well are economists and weatherman. It’s absolutely amazing when you look at some of these predictions. If you strip that all away,

[00:15:17] Chris Larsen: look at the demographic trends, look at where people are moving, look at what people are demanding, and their ages. Look what the millennials are going to be doing here over the next 10 years, look what the baby boomers are going to be doing.

[00:15:27] Chris: I would say invest in those spaces. Interest rates are going to do what they are, there’s going to be markets that do well and not do well. But if you focus on those demographics, to me, that’s the underlying bedrock of what you can found your investments on and that’s probably going to be the most stable as you go forward.

[00:15:43] Mike: So Chris, why real estate over some other asset classes like gas or oil?

[00:15:48] Chris: They’re all good, all these are great investments and if you’re listening,

[00:15:52] Chris Larsen: I’m not trying to convince anybody to invest in real estate, I think you should invest in what you know. Now, if you don’t know, if you look at ultra-rich families, 20 to 30% of families that have 30, 50, 100 million dollars or more in wealth, they put 20 to 30% in income-producing real estate. So I think personally, I want to invest where ultra-rich are doing, because these are the smartest people that are out there. Pension funds, sovereign wealth funds, look at where they put money.

[00:16:16] Chris: But getting a little bit back to the numbers, one of the things I learned about, doing my MBA in finance, I was actually portfolio management, it’s called the sharp ratio. Don’t worry about what it is, it’s real simple, it’s risk adjusted return. What that means is, it’s how volatile an asset is. So if you think about the stock market it can go up and down, like 30%, right? We’ve seen it go up 20, 30, 40%. We’ve seen it go down 20, 30, 40%. It might average 10% over 20 years, but that volatility, that is the risk-adjusted ratio that we talk about, that’s what the sharp ratio is. So if you have less risk and you have the same average return, that’s better.

[00:16:55] Here’s the reason why it’s better, if you have a stock that doubles in value, it goes from $10 to $20 and then it loses 50%, you’re right back to where you started. So it goes up 100%, it goes down 50%. What’s the average return? It’s a 100% minus 50%, which is 50% divided by two, which is 25%. You say, “Hey, my average return was 25%.” What’s your real return? Zero. You got a zero real return.

[00:17:22] If an asset is more volatile, over time that’s going to erode your returns, assuming the average returns the same. So real estate, specifically income-producing real estate, and even more specifically, things like multi-family, self-storage, mobile home parks. They have the highest sharpe ratios, they have the lowest volatility. So if you look at a matrix, and again this is in my book, I talk all about this. Multifamily income-producing real estate has similar volatility to bonds and similar returns to stocks. So I love it. If you can get a stock market-like return, if you can get these high returns with a low volatility, I’m going to take that all day long. Because over a 20, 30, 40, 50-year investment horizon, you’re going to get a higher return, a higher real return, just like that example I provided. Even though your ‘average’ return is the same. That’s called a geometric average return.

[00:18:14] Mike: Interesting. I feel like I just spent four years in college just now with you.

[00:18:18] Chris: Now you don’t have to go back.

[00:18:20] Mike: That’s right. So we know that this time can be stressful. There’s a lot going on, a lot we need to think about as an owner, an operator, as a manager, right? There’s a lot of things we need to look at, we need to look at going in, we need to look at planning. It can be stressful for a lot of people. How do you, in your own life, make high-stake, high-stress decisions?

[00:18:40] Chris: Man, that is a great question, Mike. I have two boys they’re 9 and 11, and to me there’s nothing more high stakes than the decisions that I personally make that are going to affect my children. My life has a certain expectancy, my children’s life hopefully should extend out beyond mine. So whatever decisions I make personally, are going to affect the rest of my life, but they’re also going to affect my children’s life even further and maybe their children’s children and so on and so forth.

[00:19:04] Again, I think it all starts with, you have to be comfortable and confident in yourself and your values. We have family values that we talk about, and then how do you find peace and be centered on a daily basis?

[00:19:16] Chris Larsen: I started meditating about five years ago, because if you’re reacting and you’re constantly taking things as they come at you, you’re in a stress situation, your brain doesn’t function the same way. It just does not function the same way when you’re under stress.

[00:19:30] So if you’ve experienced a trauma like I have with my father, my mother, and my best friend dying. If you’ve been in an accident, and those sorts of things, you owe it to yourself to go and focus on yourself. Maybe seek professional help, as I have in the past, to allow you to come back to a centered state so that you have an optimal point to make decisions. Only then can you then start to make those decisions.

[00:19:52] Chris: So I think that’s really important. Again, I’m an engineer, so I’m a planner. If I look at my personality profile, I’m results driven, and I’m also a strategic planner.

[00:20:02] Personally, what I do, I research quite a bit. I’m not the type of person that has this paralysis analysis, I’m able to research a period of time, I seek out experts, I seek out informed opinions. I try to find something that I can go to, like we talked about demographics, that is going to give me a better than 50/ 50 odds of being correct. We just changed my son’s school, I looked at all the options out there, I talked to a lot of people. Looked at things I said, “okay, are these values in alignment with us?” Then I make a decision. Here’s the final thing.

[00:20:30] Chris Larsen: When I make that decision, I don’t look back, I don’t second guess it. I make that decision, I go all in on that. Then if it’s not right, I change course as quickly as possible, repeat the process and do it again.

[00:20:40] I think if you follow that, if you can be right more than 50% of the time, you can try things with lower risk and execute 2 or 3X faster than other people. Just mathematically, if you’re right more often than not, you can try things a couple of times and come out ahead.

[00:20:55] Chris: Does that make sense?

[00:20:56] Mike: Yeah, it makes good sense. It’s good to have that foresight and to look ahead. Let’s talk a little bit about raising private equity. What’s your favorite technique or your favorite strategy right now for reaching out and raising private equity?

[00:21:09] Chris: I’ve learned so much. I guess we really started this process in 2015. What we do are syndications. We bring investors together, as partners, and we all go buy a property together. We typically form an LLC or an LP and go do that. Raising equity, talking to investors in 2015, it was just one-on-one phone calls saying, “Hey Mike, this is what I’ve been doing. I’ve been investing in real estate the past 15+ years, and we’re buying an apartment building. Are you interested in it?” That’s how it started.

[00:21:35] Now I’ve learned that there’s a whole system. There are best practices and things, but what I found is, the best thing that you can do is you can reach out to people and educate people and allow them to see if this is a good fit. We started a podcast a few years ago, to help curate and really help educate people who wanted to become investors but weren’t able to. I really focus heavily on providing, as you mentioned in the introduction, a lot of education for people. Whether you want to make more money, whether you want to keep more of your money, like tax strategy, that thing, or whether ultimately you want to grow your money. That’s one of the reasons I wrote my book, was not only to share my story with people but also talk about the process we follow and my personal process of how I invested.

[00:22:16] It all starts with education, working with investors, and then after the education it’s communication. One of the big things that we did during COVID, we started doing a weekly communication to update investors. Anxiety, in my opinion, comes from ignorance. If you fear the unknown, if you don’t know what’s in that dark room that you walk into, that’s pretty scary. So the more you can educate investors and they have an understanding about what’s going on during that process, that’s the most important thing.

[00:22:44] Part of being on your show, Mike, this is about communicating with investors on the front end and reaching out and doing that. So I’ve really started to branch out, scale my communications, and try to provide the best content, and a lot of content, to help educate people. Because I really think that there’s a lot of opportunity in this country to teach people better financially and that goes all the way down to, grade school, for instance.

[00:23:08] Mike: I think you’re right about that. Couple of systems technology-wise that you really like, that help you in your business, do what you do?

[00:23:16] Chris: We use some demand-based pricing for our property management teams through the platform that we use. Basically just like hotels, every day it seems like the price changes because it does, that’s demand-based pricing. We have short-term rentals in Asheville and we use the same demand-based pricing for those. We use the same thing in our apartments. So that’s something that helps on the front end with respect to revenues. On the backend, I use things like MailChimp to help communicate by email, but we also have an investor portal that allows investors to see their investments and their returns as well. Again, that communication, that force, or that transparency. So investors can see what they’ve invested, how much they’ve invested.

[00:23:52] One of my personal favorite tools is a platform, that I’ve just started using here in the past couple of months, called Notion. I started using it like a project management software, but it’s so much more. If you’re interested in learning more about that, check it out, you can also reach out to me. It’s called Notion. I don’t make any money off of it, but it’s been fascinating to me to really learn how to organize my goals, my projects, but also things like, my knowledge, my books that I’ve read over time that allows me to access this information that I’ve taken in over the years.

[00:24:21] Mike: Yeah, I think one of my VA’s uses that.

[00:24:23] Chris: It’s been very popular. My VA uses it, well I introduced it to her, but that’s exactly what we use.

[00:24:27] Mike: Yeah. Interesting. Yeah. Hey, let’s start to wind down a little bit here. Let’s talk about your book, what it’s about, how people can get it.

[00:24:34] Chris: So it’s called Next Level Income, just like the company, just like the website. But if you look at the title, it says How to Make, Keep, and Grow Your Money Using the Holy Grail of Real Estate to Achieve Financial Independence. I stole the holy grail from Ray Daleo. We were talking about risk-adjusted returns earlier, Mike, and when I started writing this book, if you look at the numbers, multi-family real estate has the best risk adjusted return as the high sharp ratio. And I’m like geez, that’s exactly what Ray Daleo says is the holy grail, decreasing the risk in your portfolio, but increasing the return.

[00:25:05] Really, as I mentioned earlier, the book is a little bit about my story. It’s a hundred short pages, you could read it on an hour and a half flight or on a weekend if you want. But it also talks about why I went through the process I did to begin investing in multifamily because I started buying single family properties, and what I learned was, multi-family had better returns, it had lower risk, it had lower time management issues. It had these great demographic trends that really stuck out to me. So it walks through all that. Then it also walks through why I call real estate investing a team sport. How you need to build a team around you and you have to have the right people in the right places to do that.

[00:25:45] If you want to get the book, you can go to the nextlevelincome.com. Click on the book link, put your address in, I’ll send you a copy.

[00:25:51] Mike: That’s so true today. I think that years ago, when I first started doing multifamily, you really did everything yourself, but today you put strategic partnerships together based on the deal. I have a really good team around me right now, two really strong partners and a really strong KP. I think it’s that sponsorship group that, when people are vetting a sponsor, take a look at the strength of that group, take a look at what they’ve done, their track record, their experience. My life hasn’t all been success. I’ve created some really great things, but I’ve also had some big losses and I learned a lot from those. So I think that people need to see that and say, “wow, look at those losses, he won’t do that again.”

[00:26:31] Chris: Absolutely. I tell my kids this, it’s tough. My son came home and he had a really difficult life lesson that he learned this week. My wife and I were talking before bed last night, cause it’s a big deal in middle school and I said, “you know what?

[00:26:43] I’m actually grateful. Because he’s learning this lesson in sixth grade, some people don’t learn this lesson for another 10 years and it’s that much harder.” So I think that’s a great point. If you’re investing, I say, you need to look at the strategy, you need to look at the geography, but then you also need to look at the operator, which you just talked about, Mike. If you have a solid team in place that has a great track record, a great plan, the right people in the right spots, that’s going to be more robust than if you have that single person that you were talking about. There’s a lot of risk in that, there’s a lot of risk in investing all your money in one property, in one market, there’s a lot of risk in investing in a one-man team.

[00:27:21] Mike: Yeah, absolutely.

[00:27:22] Chris: Right on cue, alarm bells should go off. If you see that.

[00:27:25] Mike: I should know better, every day ambulances, fire engines. I lived in the suburbs for years and now I’m in the city. Hey, let’s talk about some fun things a little bit. Okay.

[00:27:34] Chris: All right. Interest rates were really fun.

[00:27:36] Mike: I might get a phone call from somebody saying that was like watching paint dry.

[00:27:39] Chris: I would not be surprised at that. I’m sorry. I’m sorry.

[00:27:42] Mike: I mean, that’s our world, right? You’ve got to pay attention. So if you’re going to be a good syndicator or be involved with a good syndicator, you want to know that your sponsor, your syndicator is paying attention to those red flags, those details that could go on.

[00:27:55] Hey so most favorite tourist attraction.

[00:27:58] Chris: So I live in Asheville, North Carolina, which is a wonderful place to come visit. We have the Biltmore house here, so it’s the biggest private residence in the country. It’s really cool to take a look and go tour. It’s something that I wouldn’t do multiple times, but just to go through it and see the magnitude. It’s so big, Mike, they built their own railroad to bring in the materials to build it. How about that?

[00:28:21] Mike: Wow. That’s crazy. Okay. How many square foot is that? Do you know offhand?

[00:28:25] Chris: Ooh, I forget. It’s like a hundred thousand square feet. It’s massive. It’s like a castle. It’s just massive.

[00:28:30] Mike: How about a favorite restaurant?

[00:28:32] Chris: Again, Asheville is just phenomenal when it comes to restaurants. We were fortunate enough to meet the purveyor of one downtown, like right in the middle of COVID. That was those kinds of, one of the first to open back up, it’s a new one called Bargelo, B A R G E L O. I’m not a big pasta guy, after racing for all those years and eating a lot of bread and carbs and pasta, I learned that if I can reduce those, I tend to have a little bit better body composition, less fat. But they make their own pasta and it is so good, they make this cream pasta and if you can order a special short rib on top of this cream pasta it’s like heaven on your plate in front of you. It’s just amazing.

[00:29:07] Mike: I’m coming to Asheville that’s for sure.

[00:29:09] Chris: I will take you there, I promise.

[00:29:11] Mike: The best book you ever read? And it can’t be mine.

[00:29:15] Chris: Yeah, that one. I can’t be mine either. How about that? I love like the Richest Man in Babylon. There’s also The Alchemist. So I’m going to go with the Alchemist because my wife gave it to me when we first started dating and we actually celebrate our 15 year anniversary tomorrow.

[00:29:27] So she gave me that book and Paulo Coelho, who wrote the book, he has a great quote in there. He says and it may not be verbatim, but essentially ” if you get clear on what you want in life, the entire universe will transpire to make it happen.” It’s the same thing I tell my coaching clients, you have to have an absolutely vivid, clear vision in your head of where you want to go. Even if you hop in the car and you punch something into Google Maps, you might have a detour along the way, but if you know where that destination is, Google’s going to get you there, even though it takes you a different way.

[00:29:59] I think the universe is the same way. If you know where you want to go and you are just absolutely clear on that and communicate that and think about that on a regular basis, the universe will take you there.

[00:30:11] Mike: That’s awesome, and that was a good book. I’m glad you brought that up. I haven’t thought about that in a while, probably be a good one to go back and read. It’s been a few years. Listen, it has been a pleasure. I’ve enjoyed the conversation. I hope you have.

[00:30:21] Chris: Absolutely.

[00:30:21] Mike: Listeners have gotten a lot out of today, I come from a philosophy that you have to stretch yourself. So even though we might’ve talked up here a little bit more than normal, even as a beginner, you should have that desire, that starving kind of composition. It comes from conversation, it comes from education, it comes from what you learn. So I encourage people all the time.

[00:30:43] How do people get ahold of you, Chris? Talk, tell them how they grab your book, and get ahold of you if they want to pick your brain or come to Asheville and go out to eat with you.

[00:30:53] Chris: Yeah, come to Asheville. We’ll go have a drink or grab lunch somewhere. First off, nextlevelincome.com. You can check out our podcast or blog, you can get my book for free all our other resources that we have on there. Cause again, we’re an education website first. If I mentioned something that piqued your interest, you want to learn more and you want to reach out to me personally, reach out to me at chris@nextlevelincome.com, chris@nextlevelincome.com. I’d be happy to talk to you.

[00:31:17] Mike: Awesome, Chris. Thanks for being here today. Thanks, everybody for listening in and remember every Tuesday Insider Secrets. Talk to you soon.

[00:31:25] Chris: It’s been a pleasure, Mike. Thank you.