GI177: How to Invest in Affordable Housing with Denis Shapiro

Denis Shapiro began investing in real estate in 2012 and 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 now syndicates individual deals and funds.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Denis Shapiro. Denis began investing in real estate in 2012 and 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 now syndicates individual deals and funds. So thank you so much for being on the show with us, Dennis.

Denis:
Thanks, Charles. It’s a pleasure to be here.

Charles:
So give us a little background on yourself both personally and professionally prior to getting involved in real estate investing in alternative investments.

Denis:
Sure. So I think my journey begins in around 18 years ago in like 2004. Mm-Hmm. <Affirmative>. I was in high school at the time. My, my oldest brother gave me a copy of Rich Dad, Poor Dad. We we’re, we’re one of those families where if you find something good, like your job to bring, wash everybody else to kind of think that way as well. So he had like a light bulb moment with that book. So he gave it to his 14 year old brother. I read it and I wasn’t a big fan. I was more of a skeptic at that point. I, I just think I wasn’t ready for it. But I did get out of that book that I wanted to actually buy an asset. I had a little part-time job. I come from like an immigrant background.

Denis:
Everything that I’ve gone, I had to work for. So I had a part-time job, had a couple of thousand dollars saved up started buying mutual funds. Quickly realized that’s not really for me. Then I did a deep dive into the stock world and, you know, for the last 18 years, I’ve, I’ve always invested in stocks. But about in 2012 when I got my first w2 after I finished graduate school I got my pay stub and I was like, Oh, okay, great. I was recruited by the government at that point. I was like, Yeah, this is awesome. And not only my employee, they’re all from my tax partners because of homeless taxes. They got taken out and I realized that the traditional investments, like your stocks and bonds really provide you almost zero tax benefits if you’re doing it through a, you know, a non-retirement vehicle.

Denis:
So that got me down the rabbit hole. All the return investments about my first single family property. That was a really bad experience cause it was a low income area that was managing myself. And I was like, Wow, that’s not scalable. So then I kind of got into a rabbit hole of passive investments. I started with a note fund did ATM funds, kind of got into the world of apartment building certifications. And that’s kind of where I felt where, you know, it, things took off for me because with no funds and ATM funds, you’re not really networking with a lot of investors. For some reason, when you come across the apartment building world, then it’s like your network really starts paying off, getting to know who investors or what operators seeing what due diligence other investors do. And that’s kind of like where my career took off.

Charles:
Interesting. So let’s just kind of circle back real quick to your first investment. Can you just quickly kind of go over what, what you bought, what, what mistakes you had with it, stuff like that before you made the decision to get past investment? Because every, I mean, everybody on their first investment, I, there’s stuff I could go back to and do on my first investment, which is now when I tell people, and you know, it’s, I think it takes many years for investors, real estate investors to realize buy better properties and better areas. But, you know, tell us about what you did.

Denis:
Yeah, so I have a history of doing the same mistake over and over again, unfortunately. So when I was 14, when I started investing in stocks, I asked my big brother who gave me rich that or that. I was like, Hey, what would you recommend? And he gave me one of his mutual funds. He’s like, You should recommend this. And I blindly did it. The only good thing is I usually recover really quick from mistakes from family members because, you know, I realize I, I’m lazy and I’m like, Okay, I gotta actually do the homework myself. So when it came to the alternative investments, I did the exact same thing. I didn’t need the stupidest thing anybody could have done. And I went to my older brother and I said, Hey, you have a couple properties. Which one do you wanna sell? And he was like, Yeah, here, take this one.

Denis:
And it was by far his biggest headache. I I took it, I, I didn’t run, this is like 2012 where you could have really bought almost anything and made money on it. And instead I bought a property probably 30,000 miles over what it was actually worth. I, I was cash flowing, but I had property manager myself, so it’s taking up way too much time. But I did cut my seat on that, on that property. I learned the basics of being a landlord. I learned the eviction process. I learned how to deal with you know, tenant turnover. I learned how to basically cons do construction management. So I learned quite a bit like from investment purposes, from a dollar perspective, it was a terrible investment. But from where it comes in handy today, I think it’s extremely beneficial and helpful. But yeah, I definitely didn’t wanna scale being like a single family rental landlord in low income areas. That was for sure.

Charles:
Yeah, experience is one of the best teachers and it’s kind of hard to say that, but it, it is. And I think it’s always important that people before they start getting into passive investing well, not really passive investing, but more of running investments with investors where they’re raising money. It’s really important that they, like you did they cut their teeth on an investment and they understand all the parts to it and self-managing. It’s a pain, but it is a it’s a great learning experience for people to understand all the different facets of rental property investing. So that’s, that’s great. So let’s kind of circle back on what you’re doing now. What is your firm’s current investment strategy and criteria? What are you guys focusing on asset wise, property wise, class wise?

Denis:
Yeah, So great question. So when we, when I went down the rabbit hole of apartment building syndication, you know, I didn’t just go jump into like a coaching program and just start buying apartment buildings. What I did is I learned from the, from the investor side of it so I did, I, I created an investment club and we end up, it was a coincidental investment club. It wasn’t like, it wasn’t something, I created a strategy and said, Hey, I really wanna create an investment club. It kind of came out very organically between me and two individuals that were talking quite frequently at the time. And we did a series of limited partnership investments. And then I think once we got to like 10 to 12 investments, we really started seeing the data, started seeing which variables work and which not. That led me to my company SI Capital Group, where we do two things.

Denis:
We do first we have a fund model we have an income fund. The goal of that income fund is just to pay a certain preferred return every single month. We’re remarkably consistent with that income fund. And then second of we have individual deals. Our focus is actually on affordable housing. So those are deals that we actually operate on. The fund side will go in as a limited partner on deals. So it’s not as time consuming, it’s just more my own history of having relationships with these operators. But on the individual deal side, we focus on affordable housing. We think it’s a really unique niche in the space today where it has a lot of barriers of entry where usually you gotta be certified by the state, you have to deal with different vouchers. And it’s ironic where I started with a really bad experience with a single family rental in that space. And now I do communities in that space and it’s a whole different animal and it’s something that we’re gonna be growing in in the next couple of years.

Charles:
That’s a very interesting asset class compared to other operators I speak to. And having, I know a lot of people that, well, it’s usually when I hear about whatever it is, low income tax credit section eight, people love it or they hate it. And I’ve spoken to investors that own properties all themself, you know, a hundred plus units themself and they’ll swear by section eight. And I have other ones that are like, Oh, I had two units like that. And I kind of swear off that and I’m kind of like in that second camp, because I had issues years back with just section eight. Not like problems with tenants per se, but with the organization of working with them. And it wasn’t my forte, I guess you would say. So it takes a good operator. But talk to me about how you fi how do I find a property manager that knows, because you’re obviously not filling out and dealing with these programs. You wanna properly manager that does it, You know what I mean?

Denis:
Yeah. 100, 100%. So one of the key things when you’re looking at property management, the affordable housing space, is to see if they have a division that deals with affordable housing. You don’t wanna be in a situation where you’re giving this property to a property manager whose previous property might have been like a like a class B property cause they’re not gonna be able to handle this. The level of compliance is one of the things we do like about it because it scares away a lot of operators. So the level of compliance is that is you need to have a property manager that can deal with that compliance. That means to have a property management that has a compliance team on staff. And it it is, you know, more time consuming endeavor. But the advantages are when we went and bought our last property, there was no bidding war, even though this was, you know this was a year ago.

Denis:
We didn’t have a bidding war because our, our seller wanted to know that our seller is one of the largest affordable housing developers in the country. And what happens is they’ve gone to bidding war route. And what ended up happening is the person who won the bid at the end of the day might have not got certified. There was incidents where that person who won the bid didn’t get certified by the state at the time of closing. They were literally a day away from the closing table. And that person did not get certified by that state. So the, the developers that originally developed the property, they’re kind of not scared off. They’ll still go the broker route, but they just prefer to have that relationship with a buyer that actually has been certified already by the state mm-hmm. <Affirmative>. And then they know it’s more of a, Hey, this will at least close. Maybe we’ll get a couple hundred thousand less for the property, or million dollars, whatever it is. But at least they know it’ll be a smoother closed process. So I guess that kind of, I went a little bit off tangent, but the answer is you need to make sure that the property manager that you’re hiring for this actually has a division that deals with affordable house.

Charles:
Yeah. Cause I remember just going back a couple years, any landlords that were renting during that time, they had to deal a lot with state governments and federal governments with getting, you know, everything with covid money. And when that started, I had some properties with one property manager and they’re like, Oh yeah, we’ve done this like a do you know, dozens of times, blah, blah, blah. Like they’re, you know what I mean, they’re like a paralegal pretty much, and they’re filling all the paperwork and they’re taking care of, and you’re like, Oh, this is fantastic. Like they’ve been through the whole process, they understand it. And you know, if they didn’t have that, then I’d be, or someone else on my team would be learning like how we do this, which would be obviously a pain. So it’s, that’s how, that’s why I brought that up because I’ve seen that firsthand. When you’re dealing with governments and stuff like that, you really need to have someone that knows the whole process. But buying them obviously is easier and getting better deals. What do we have for an exit strategy? Are we holding these long term? And then when you’re selling ’em, are you coming into the same issue when you bought them that the seller was having? If that makes sense, where there’s not as many buyers.

Denis:
So that’s actually one of our favorite parts about this asset class. So the way, just to give a high level overview of Litech, a low income tax, a low income, I always get housing and tax stuff sometimes. So litech credits, low income tax housing credits. What happens is the government understands that if you have a raw piece of land, the cost to develop that raw piece of land is really similar for a high end class a building and then affordable housing building. What is different is that last mile. So usually, you know, you still need the same foundations, you still need the same parking pads, you still need all the same utilities, hookups, everything like that. But what’s different is with the Class A, you might put in a couple extra amenities, you might have the extra pools, the gazebos, but all of that stuff is more or less a noal cost.

Denis:
So no developer in their right mind would ever go into a project and say, Hey, you know, I’m just gonna go out and build affordable, because they might as well just build the class A and get the higher rent or whatever the situation. So what the government does is they subsidize that process where it actually brings down the cost to a point where it really is a no brainer for these developers to do the low income housing credits. So in change for all these subsidies, there’s two 15 year periods. Usually the first 15 year period is the developers are getting a lot of credits for that period. So they, they rarely sell in that 15 year period. But the magic happens is in that second 15 year period, that’s the one me, my partners focus on. Because during that period, you already see the, the, the light at the end of the tunnel, so to say. So on last acquisition, for example, we bought it in 2022. The expiration period for that second 15 year period is 2028. So we’re about six, six years away from, from that exit point. And at that point, we could actually go back and now sell it into free market because the expiration period is over. So we’re buying with a limited buyer pool, but we’re gonna be selling it to a much greater buyer pool.

Charles:
Ah, that’s awesome. That’s very, very interesting. And it makes perfect sense too. So then you’re not gonna have, obviously the subsidies at that point, but you’re also not gonna have the regulation from the government of, it’s more ghost free market, like you said. Right?

Denis:
So we have a choice at that point. So we could either renew at that point mm-hmm. <Affirmative> or we can go free market. So obviously if we renew, they’re gonna re-up the tax advantages. So basically it’s kind of a situation where in six years we’re gonna evaluate, does it make more sense to hold onto this property cash for the next 10 years and maybe put on like a HUD 35 year ized project and then give our, you know, investors like a double digit cash flowing property, or does it make sense to let it completely expire and then put it on for free market? Interesting enough, when you do an appraisal for a Litech property they sometimes actually put what the appra value is for that property at the time of the expiration of the cap. So that’s kind of interesting that you don’t see that in regular, you know, value acquisitions.

Denis:
So for, in, in our example, our last property we purchased for 5.7, it was app price to 6.4, but the price value at the time of expiration date, they have it at 8.4. So then it, it kind of just becomes a numbers game. Does it make sense to, you know, take on that, I mean to take that 2 million gain, sell the property, distribute, or does it make sense at that point to renew the credits because we’re gonna hold onto the property for the next decade? So it it’s all, it, it’s just a numbers game at that point, which I like. Cause it takes the motion out. And the other cool part about Litech properties is because they are, they were either newly built or fully gutted, renovated within that 30 year period, you’re not dealing with like a 1970 property where you can’t hold it for 10, 20 years without doing multiple huge renovations. So in our situation, our property is 1998 on our last property, that gives us that flexibility where, yeah, the property’s only 30 years old, but it looks like a class B property you see in North Carolina. So you can’t even tell that it’s affordable housing. And at the same time, it, it’s, if we choose to hold it for another 10 years, we have a very small investor group on that one. Like, there’s no issues with that.

Charles:
Interesting. Very interesting. So Dennis, tell us about, kind of explain your investing philosophy and the importance of having traditional and alternative assets in the, in your portfolio. Kinda like how you started with traditional and you can moved into alternative assets.

Denis:
So this is kind of like where I think I stand out from other operators because usually if you do meet people that have already kind of crossed that line and gone alternative, usually they kind of go all in. They’re like, Oh wow, you know, I’ve had my first real estate investments. I love the fact that it’s not volatile. I’m gonna get all my money outta the stock market. Usually you kind of see that exponentially grow during markets of downturn like we’re in right now. So you, you have a lot of people right now trying to get into commercial real estate because they, they’re having a bad experience right now on the, the, their stocks front. But for me, I’ve had, I’ve been investing in stocks for almost 20 years, I kind of understand what stocks are really good for and what they’re not good for.

Denis:
So what they’re good for is you can autopilot a pretty sizable chunk of your assets and spend very, very little time, you know, some low cost index funds and over the long haul, as long as you’re not selling in the downturn, you could actually, you know, you could, you could benefit from that long term appreciation. The other big benefit to having traditional side traditional stocks in your portfolio and by traditional stocks, I’m not talking about 2030 stocks portfolio, I’m talking about just one or two well balanced, you know, index funds that are low cost. By having that, those, that exposure, you’re gonna guarantee one, two things. One, what happens is when people are getting money, like stimulus money and everything like that, and they’re looking to invest, those people are not putting that money into right. First time investors or whatever, where are their from that, that money in?

Denis:
Where is the Robinson money going into that money is going into stock. So I want to take advantage of the fact that usually investment cash usually flows through the stock market. Mm-Hmm. <Affirmative>. So I want to actually take advantage of that. And then the second part is you are at least gonna give yourself some liquidity. Now there are some more advanced strategies with a stock portfolio like collateralizing it so you don’t have to sell it, but still get access and then using that money to buy real estate. Well, we won’t get into that, but, so when I talk to people on the real estate side and they’ll say like, Oh no, I, I sold all my stocks and they, and I, and then we’ll talk about it. And in reality, they didn’t really need to sell. They, they could have just tweaked it and still had exposure and still have done the real estate world.

Denis:
So that’s kind of where my school thought was that I realized that traditional stocks or traditional ETFs can be really an amazing tool to building long term wealth. But what it sucked at was creating income. And that’s what I was struggling with for years. At the years I’ve literally done every single income strategy on the stock market and has failed gloriously. So I went through utilities and bonds and closed ended funds and MLP and res and everything. And the same thing happened to me over year, year after year. Same thing always happened to me. I would get a year or two of underperformance of my regular index fund. And then what happened was during the downturn when things were supposed to be protected because of the higher yield, it went down just as much because of the way that the algorithms work these days. So what I realized is I needed to stop trying to create income outta my stock portfolio, just appreciate it for what it is and then focus my time. And the best part is now I have time diversification where once I autopilot my stock portfolio, I was only spending 1% of my brain power on that. And now I could spend 99% of my time networking with other investors, really become the best alternative investor that I, I can be with a focus on cash to compliment that traditional side.

Charles:
Yeah, it’s difficult to make income when you’re your index fund is makes like 1.4% or something dividend. But I understand exactly Yeah, yeah. With your different strategies there. That’s great. So let’s talk about some misconceptions when you’re talking to investors, maybe first time investors about investing in real estate syndications.

Denis:
So there’s a couple one of them and it’s, it’s almost like a byproduct of the way that syndications are marketed by most operators. So the first one I would say is that, you know, you’re a hundred percent passive. And what I like to say is that you’re a hundred percent passive after you wire that money, but before that you wire that money you need to do your homework. And that part about learning how to do your homework A takes time to, to learn. And then b like actually vetting takes time. So, you know, it’s, it’s not to the point. So what I call it is actively passive. So real estate syndications actively passive. And the good thing is usually that active part usually does fade away as you start getting your bearing straight in the industry, as you start having like your, your pool of five to 10 operators that you, you can certainly go to.

Denis:
So that’s the good. So that’s one of the biggest misconceptions. I think the other big misconception that’s thrown out there is that how, how tax friendly these deals are. And what ended up happening is, and this is kind of, I was a, I was a victim of this too and I didn’t really understand this until I started formulating the fund and speaking to one CPA after another on the proper strategies. So what ends up happening is most people are passive investors cause they have a full time job or whatever the the situation is. So they are, they make this assumption or sometimes it, they make that assumption because of what they hear out there from these, from these operators saying how tax friendly this is is that they’re gonna get this huge schedule K negative schedule K, and then they’re gonna take that negative Schedule K and offset their active income on it.

Denis:
And when tax season comes and they have that moment of truth, they realize what they were fed was wrong. So what happens is passive losses can only offset passive income. You know, there is qualified real estate professional system nuances to that. But basically if you’re active, if you’re an active real estate professional, then you could use those losses for whatever. So nine outta 10 times, yes, the cash that you receive during the year where you’re gonna, from an investment that that has depreciation, usually that cash would be tax free, but the rest of the losses you’re not gonna be able to upset and they become suspended. So a lot of people don’t understand that and I think the industry needs to do a better job of educating that because I hear webinar at the webinar of how tax friendly it is, but that’s where the conversation stops versus saying, by the way, it is tax friendly if you’re a qualified real estate professional or if you have other a passive income that needs to be offset. Yeah, there are nuances that make it tax friendly, but off the, off the start, it’s not necessarily tax friendly. It requires tax planning, which is a whole different animal. So I think those are the two biggest misconceptions out there.

Charles:
Yeah, it’s tax friendly with your distributions from in passive, but it’s not on your ordinary. But yeah, it’s, you hear all these things all the time people throw around, especially new people in the industry and they don’t understand the a hundred percent themselves and then they’re just, you know, telling people all these different pros and cons of, or mostly pros of investing in real estate syndications. So you purchased a property I guess it was initially like with an investment club, which is a very interesting idea and I kind of want to dig into this a little bit more. So if we, you know, we might have some listeners that are interested in beginning their own investment club. So what are some like advantages and disadvantages of starting one?

Denis:
Sure. So the biggest, so there’s many different ways of doing it. And what we realized is we did it after the fact, like in hindsight we looked back and we’re like, Oh, we actually just created it. So what happened was, before I launched my fund, there was a period where I did one syndication and I met two other individuals and we were at a crossroad. Should we buy a small farm building or should we do more of these syndications? We actually chose the route of doing these small syndications. So we could have done one of two ways, we could have done it where we could have went to each operator and then said, Hey, I’m coming in with a few different people. Is it okay if we split that investment between the three of us? At a 50,000 minimum, That’s pretty unlikely because that means they’re taking in investors at $16,000 and that’s way below the minimum.

Denis:
Sometimes operators will let you in at 25,000, but usually not at 16,000. So that really wasn’t an option for us and we really wanted to diversify our portfolio. So the second option is actually to create an llc and you and the other few members that are in there, you pull your money together and then that LLC is actually making that investment. So the biggest pros is now instead of doing one deal yourself, if you only have 50,000, you can get into three deals with two other people. The biggest negatives on that though is there’s a couple. One line is that you have to make sure you’re not actually creating the security with it. So investment club is just a fancy way of saying you. And like if me and you say, Hey, I really wanna do you know, X next offering, let’s put in 25 25, we’ll create an lc and we’ll wire that money.

Denis:
That in theory is an investment club because now we’re pulling together our resources to, to invest in a specific deal. So the first thing you have to make sure when you’re in going down this rabbit hole is that you’re not creating a security. And how you can make sure you’re not creating a security is that every member in that investment club needs to be actively involved. And that’s why actually our investment club was only two other individuals. It makes it easier. Every additional person you kind of put onto that it actually makes it harder to be security compliant because someone in that group then becomes like, Oh, I’m gonna be leaving on six month trip you guys, I trust you guys. You guys decide what to do. The moment that conversation happens now that’s become a security. And that investor needs to have a PPM to understand all of his risks.

Denis:
Versus if you have a small group, each one of them is on board, each one of them green lights, every single deal, every one, every one of them vets it. That’s fine. So you wanna, you wanna be careful you’re not creating a security. The second downside to it is that once you have an LLC with more than two people, you need a 10 65, you need partnership returns. That tends to slow it up. But you know, the positive is that we probably would’ve done two to three deals alone. We did like 12, 15 deals with that fast track learning curve with all these different deals where we got tons of data mm-hmm. <Affirmative> and then we actually started having like a buy box type of situation saying like, Hey, this is, we don’t like one bedroom, we don’t like, you know apartment buildings that have one bedroom composition.

Denis:
We like these geographic areas, we like this type of class of assets. And I think that that was extremely helpful. And also just vetting when you’re starting out just to get to vet to deal with two other people. And we have very different backgrounds. Mm-Hmm. <Affirmative>, my second partner in my investment club, he is a really attention to detail type of guy. I’m like big picture, I’m like, Oh, I really like this idea. And then I’ll go through it and if nothing sticks out, nothing sticks out, he’ll get into the grainier of the details. So that was good. Our third person was much more of a leadership guy, so when he was vetting the deal, he would be vetting it from the you know, the executive side, who were the players involved, you know, team dynamic dynamics and all of that. So we kind of all brought very, very different things to the table. And we each picked up on different things and I think collectively, like we have a really good track record fumbles from those deals, those early batch of deals because of

Charles:
That. Yeah, that’s really great. Yeah. Cause if it goes the s e c route, then you’re talking like fund to funds type thing, which we won’t get into now, but people can look that up online and that’s really just you know, putting together passive investors to invest into someone else’s syndication. But the yeah, the other thing too is that what you said is that you are gonna have to obviously set up the llc, but you also have to maintain it with an accountant, all this kind of stuff for doing tax returns and everybody needs to get a K one and all that stuff. So, you know, you gotta make sure that you’re, this is something for the long term that you’re actually, you know, you’re not putting in just like 5,000 bucks a person, you know, because at that point your accounting fees are gonna eat up a lot of your, of your profit now, like you did your 20, 25,000 or whatever it was in deals you’re doing.

Charles:
That makes a lot more sense. And and then also at that point, if you’re putting in larger numbers with syndicators they should be cutting you a little better deal. And that hopefully will, depending on how much money you’re putting in, that hopefully should also increase your returns and also, you know, make it offset your additional llc, you know, whatever the thousand dollars a year is that you’re gonna be paying your accountant, whatever for doing all that stuff. So that’s a lot of great information. Thank you very much. So let’s, one thing you said, like when you were doing this in your investment club, you did a lot of networking and you start networking, you know, from kind of ground up. And what are some suggestions for people trying to do the same and build the network, whether it’s to do syndications, whether it’s to invest with other people? I mean, how did you go about that from the beginning?

Denis:
So this is one of those things where I kind of did this accidentally, and then looking back in hindsight, I’m like, Wow, this is actually like, I’m really fortunate that this is the logistically how I actually did it. So I started off basically from scratch. Like, so one thing I did was I started building on my LinkedIn profile mm-hmm. <Affirmative>, and this was just a tip I heard was you go in and under your name, you put, you know, real estate investor, passive investor, whatever it is, but actually get detailed into your, your title because there’s a whole bunch of people actually scouring your, the LinkedIn just for those, a few buzzword keywords. Now what ends up happening is the moment you change that title, be prepared for tons of inbox messages. And what ends up happening is, and I’ll be very frank, it’s 99 to a hundred percent it, it’s 12 and it’s, it’s definitely not something that’s worth your time for an extended period of time, but when you’re starting out, what ends up happening is you use those opportunities to talk to some of those brokers and equity placeholder place people and all these various people that will reach out to you.

Denis:
You use those 15 to 20 minutes or 30 minute conversations just to start learning the language of commercial real estate. What ends up happening is, you know, if someone’s a flipper or a wholesaler, they’re not gonna understand the nuances of commercial real estate and there’s not many key terms, but those terms are so important that you have to really know them inside and out. Mm-Hmm. <Affirmative>. So what I, what what I recommend is you do, you do the LinkedIn title change, get on a couple of those calls after each call, write down exactly what you didn’t understand. Then you can go and, you know, do your research on it. Now, when then a couple months later, you could stop those calls. It, it might be like a one month thing. Whenever you feel like you got all the terms down I doubt that it’s gonna be adding much value to your actual network at this point, but now at least you have the terms.

Denis:
So then the second part of that stage is you need to go to actual conferences where the speakers are, what you are trying to invest in. So for example, if you, if you wanna get into a real estate syndication, you wanna make sure the headliners, there are all real estate operators. You don’t wanna go to a place where a general, you know, where it’s a wholesaler is the key speaker, you know, you’re in the wrong place because it’s gonna attract the wrong people. So now if you go into one of these conferences where you have the right speaker in place, now you’re going in there with a frame of knowledge where you could actually converse with other people versus if you went to that conference without doing that LinkedIn step first, what ends up happening is you’re gonna go there and you’re gonna come off as very needy because you don’t know the basics and you’re gonna be coming off as just asking for help, help help.

Denis:
Versus if you go to the conference, at least you got the language down, then you could, you know, then you could value propositions. Say, Hey, you know, I’m looking to do a syndication in this area. What are you doing? And if that person says, Well, I’ve done one in that area, you could start exchanging information. So what ends up happening is once you have that base level of knowledge down, you could go to a conference with the, you go to the right conference, then you start networking with a couple of people. You really only need four to six people. And then once you have those four to six people in your network, what I do is I do a quarterly calendar call, and I’ve been doing this for years now, and we get on a, we get on a call usually you, you should probably take notes on it and then, oh, you know, I’m looking to add a deal in North Carolina. Okay. And then you start connecting the dots and then this person’s looking for a deal in North Carolina. Oh, you just heard about a really great operator in North Carolina. Let me make that introduction. And if you do that consistently and you’re providing value for other people, your network is gonna grow organically. You don’t need it to be huge, especially from a passive investor. You need four to five people in your network that are doing you know, consistent investments and then just that free exchange of information and you’ll be set.

Charles:
Interesting. Yeah, it’s great. The other thing too is with doing a call like that, it serves up, you’re holding people accountable. So that’s that’s a big thing and I think it’s a huge part of, of this whole, because there’s usually not someone prodding you along and being part of a group like that where there’s some sort of accountability will usually help you become more successful and get to your goal. But as we’re wrapping up here, Dennis, gimme a couple mis mistakes you would see you’ve seen other real estate investors make over your, over your career.

Denis:
I would say. So there, there’s a key term in the traditional world when you invest in stocks is like do left averaging. But when it gets to real estate, I’ve kind of seen it go out the window. So what ends up happening is, let’s say someone had a 400,000 stock portfolio, sold it all, and now wants to move it all to real estate, They tend to, you know, and they’re someone newer, what they, in their head, they’re trying to figure out how to place that money as fast as humanly possible. And that is a big, big mistake. So you know, you wanna dollar cost average where if you’re buying high right now, cause the market is not right, you wanna make sure in the next six months you can buy again, and then six months later you can buy again. Most likely if you’re buying for a two, three year period, you could make sure that, you know, most of your purchases wouldn’t have been at the all time highs.

Denis:
So not rushing in to doing too big of a deal right off the bat. You wanna spread them out. It’s not a bad idea to do the minimums for, you know, 18, 24 months until you really can look back and say, you know, what’s worked, what hasn’t. Because I promise you, when you get into syndications, the deals where you’re gonna look back for your first couple of deals in like two, three year period, you’ll be like, how did I ever, ever invest in that? It had so many red flags is just, you won’t realize them until you, you, you have that time and knowledge in the space. So that’s the biggest I’ll just leave it at that. That’s the biggest mistake I see. People, they rush into deploying all their capital in real estate as quick as possible.

Charles:
And what do you think are the main factors that have contributed to your success? Dennis?

Denis:
Being willing to provide value to others and kinda like the core principle in, in networking. I’m a people connector. I’ve, I’ve always tried to connect, you know, unselfishly and that has come back to me 10, 20, 30 x my thing. So that’s the biggest thing is, you know, does that famous quote, if you if you, I I’m gonna butcher it, but basically if you provide the people around you with everything they need, you’ll always have what, whatever you need. Something like that. I, I forgot the quote, I definitely butchered it, but focus on providing that value. But at the same time, the nuance there is make sure you’re surrounding yourself with the right people. Because if you have a network that’s not providing, if you have, like if you’re trying to get into real estate operators and your network is a bunch of fishermen, providing a bunch of fishermen value is not gonna help you. But if your network is outta real estate, you know, syndicators, then providing them value will put you in a whatever place you need to be.

Charles:
Yeah. And try to network with people that are where you want to be. And that makes it much easier. Cause they’ll tell you, you let ’em talk and they’ll tell you everything that they did wrong. Yeah. As we’re doing here. So and then finishing up, how can our listeners learn more about you and your business, Dennis?

Denis:
Sure. So first thing I’ll do a quick plug for my book. If you go on amazon.com, it’s the alternative investment <inaudible> expert insights. I’m building personal wealth in non-traditional ways. I talk about almost every asset class I’ve invested in since 2012, and I have some pretty awesome q and as there. So that’s, that’s the first thing as I alternative investment HomeNet by Dennis Shapiro. And then the second thing, the easiest way to reach out for me is if you go on www ih group com, just click learn more. We give a free ebook version, which is the, the bridge version of my big book. And yeah, I love connecting with any new I so please reach out.

Charles:
Oh, sounds good. Well, thank you so much for coming on today and looking forward to connecting with you in the near future.

Denis:
Awesome. Thanks for having

Charles:
Me. Talk to you soon.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Denis Shapiro

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.

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