After 6 years in the aviation industry, Josh began investing into multifamily real estate. In only 4 years after beginning his real estate journey, Josh built a portfolio, alongside his investors, of 874 units, worth over $65 million, while raising tens of millions of dollars from private investors.

Listen To The Podcast Here:

Transcript:

Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines 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 Joshua Ferrari. After 6 years in the aviation industry, Josh began investing into multifamily real estate. In only 4 years after beginning his real estate journey, Josh built a portfolio, alongside his investors, of 874 units, worth over $65 million, while raising tens of millions of dollars from private investors. So thanks so much for being on the show today, Joshua.

Joshua:
Yeah, man. Well, I know this is called Global Investors, but here we are both in Florida, so I like it. <Laugh>.

Charles:
Yeah, yeah, I know. Yeah. We have a lot of investors that come from foreign, that listen to it about investing here in the United States. So the whole theme of the show really. And so Joshua, I kind of gave a really brief background on yourself, but can you give a more in-depth background, both personally and professionally prior to getting bit by the real estate bug and getting involved in real estate investing?

Joshua:
Right. I’m really curious to know what the real estate bug actually looks like. You know, I’ve always wondered, <laugh>, when you get bit by this bug, what does it look like? But anyway, Josh Ferrari, I I got started in investing in real estate back in January of 2018. I had no prior experience or honestly desire, passion, drive, entrepreneurial spirit. None of it existed. Before actually getting into this business, I was a full-time aircraft technician. That’s what I went to college for. Thought I was moving down to southern Alabama to start a longstanding career as an aircraft technician. And it wasn’t until my, my dad actually called me up outta the blue sometime in January of 2018 and told me that him and my mom were getting ready to start flipping houses, and it was one of those, wow, never thought about that.

Joshua:
Didn’t even know you could do that if you didn’t have a lot of capital. And then it became one of those, well, if you can do it, I can do it, kind of conversations. So that was really the conversation that catapulted my interests into the business. I never actually did flipping mm-hmm. <Affirmative>, but my wife and I, almost immediately after that, two weeks later got a wholesaling course, jumped into wholesaling, jumped into local real estate investor associations and meetups, clubs, started listening to podcasts, reading books, BiggerPockets the whole nine, right? Yeah. So I got really into wholesaling as much as I possibly could. We tried that for about six months, had probably about seven or eight deals that we got under contract. Didn’t close a single deal Along the way, realized I could’ve cared less about wholesaling. So pivoted and wanted the benefits of owning real estate.

Joshua:
So we bought a fourplex. This is again about six or seven months into actually first hearing about the business. And then that was supposed to be a house hack. We were supposed to live in one of the units and ran out. The other three. We’re really excited about that, thought we were gonna make a ton of money, it’s gonna be our ticket to riches, so to say <laugh> start us on this path of, of building a portfolio. And none of that happened at all. We ended up losing about $60,000 on that deal and just about anything that could have gone wrong, went wrong and we can talk about that later if you want to, but it’s a lot. And so we learned a lot through that, though. One huge valuable lesson I learned through that process was that I had absolutely zero clarity on what I wanted both my business and my life, like lifestyle to look like.

Joshua:
So the wife and I got really crystal clear on what we actually wanted that to look like. We crafted what we call our vivid vision, which for any of you that have not ever read the book Vivid Vision by Cameron Herald, highly encourage it. Fantastic book changed my life. And after crafting that, we were like, okay, we realize small multis, single family flipping, wholesaling, short-term rentals, none of that’s gonna be the solution to us living a passive lifestyle and having enough money to do the things that we ultimately want to do. So it was February of 2019 when we made the decision that large scale commercial multifamily is all we were gonna focus on. No more shiny object syndrome. I’m sure there’s there, you know, there’s a million gajillion, different ways you can make money in this business, but I’m just gonna focus on one thing.

Joshua:
So I tried something a little bit different, got a mentor. I had tried to do everything on my own the previous two times and failed miserably, both with just not being able to close a deal. And with losing over 60 grand, I was like, I, I don’t wanna lose anymore money. I don’t wanna waste any more time. Let’s just find someone who’s been there, done that, that can help me along this path. So I learned a ton underneath my mentor. It was absolutely the most invaluable relationship I feel like I’ve ever experienced. And was underneath him for about two years. Found my two business partners along the way. And we ultimately closed our first syndication, first multifamily, it was 42 unit complex in December of 2020. And then from then till now, it’s been about 30 months, almost 31 months, and we’ve closed over 874 units, 65 million asset center management.

Joshua:
We’ve raised over $25 million from passive investors over the last two, two and a half years. We officially vertically integrated last year we started our own property management company now has five full-time employees. We have four full-time employees just inside Ferrari Capital. You were actually on my podcast, creative Capital that I started three years ago in April. We’re now at, we’ve surpassed a million plus downloads, 60,000 plus people that tune in on a monthly basis. Couple of show sponsors. Really been incredible to see what that show’s been able to do. And then the last thing I’ll say is I officially became financially free after about 18 months of actually closing multi-family deals. So it really doesn’t take that long to actually achieve financial independence. And then I wanted other people to achieve the same thing. Mentors played such a pivotal role in my ability to succeed. So I wanted to give back and be able to do the same for others. Started a mastermind in summer of last year. We’ve had over 52 people go through now. They’ve closed over 950 units, they’ve raised over $35 million of equity, and they have another 1200 plus units under contract. So that’s quite literally what I’ve been up to in the last five and a half years.

Charles:
That’s fantastic. A lot of great information. That’s a great story. So can we just circle back to your first, I guess, multifamily deal that you’re doing with your team? And it was a 42 unit. Can you give us, like, break that down a little bit of what, what was in that deal where you raised the money from, how you found the deal?

Joshua:
Good question. So I actually found the deal from my mentor. So that was one of the many invaluable pieces to that relationship. It was actually his deal that he owned that he was selling, and he sold it to me. <Laugh>, it is like I’ve been seeing you trying and trying and struggling to find a deal that makes any financial sense. I’ve got a deal. I know what pencils, and I’ll tell you what, I was going to list it with a broker. This was August of 2020. He is like, what we were gonna do is we were gonna spruce up the property a little bit. We were gonna list it with a broker beginning January or February of next year, and we were gonna basically put it on the market for x, y, z price. But if you think that you would be interested in closing a deal, if you think you can close it before the end of the year, and if you think you can do that without us having to go through a broker, then I’ll give you a $450,000 discount on what I was gonna list it at.

Joshua:
And I was like, give me what you got, right? Send me all the information. Let me take a look. I’ve gotta check this out. So looked at it and it seemed like it made financial sense to me. So I had one business partner at the time, it was just me and Reggie, and we put it under l o I put it under p s a, it was like the most simplified process ever since I knew very well the seller, right? And then after getting it under contracts, it was about three weeks, four weeks in not one, but two hurricanes blew through the Gulf Coast for the first time in 16 years and blew all the roofs off of pretty much every single one of the buildings damaged the siding, tore a bunch of trees down and now there’s this massive insurance claim, massive problem now with the property.

Joshua:
And we were like, well shoot, you know, not only have we never closed a multifamily deal, but now you’re telling me I have to go through a giant insurance claim along with it. And they had a right of, they had like a right of attorney or something like that, that they had actually going through the process for them. And they were wanting to charge exorbitant fees to be able to do that. And we were gonna end up having to eat those fees or we could just do it ourselves and fire them. But it was a very political bureaucratic process we had to go through to be able to fire them and take it over ourselves. I don’t know. Long story short there was a lot of different things that came up throughout that deal. A a lot of big learnings, even just in the first one.

Joshua:
And so another one of your questions was how did we raise the money two months prior to actually getting that deal under contract? I had done what I now created myself, which was basically a 30 day capital raising challenge. The whole challenge, the whole purpose of it was to learn how to raise $500,000 in 30 days. And I was like, yeah, right, 500 grand in 30 days. Who the heck’s gonna be able to do that? I had never raised money, like at all up to this point, never even tried. And it was like a couple hundred bucks to get into the challenge. I was like, all right, I’ll try it out for a couple hundred bucks. Worst case scenario, I learned nothing, couple hundred bucks down the drain. Best case scenario, I learned one thing and like it changes my life forever. So I did the challenge 30 days later, I raised 6 million bucks in 30 days and I was like, holy cow.

Joshua:
I obviously have some, a skill set that I never knew that I had. I just have a network and connections that I never knew that I had before because I never knew how to actually tap into those connections to tap into that network. And so literally two months later, once we actually got the deal under contract, then I was able to go back to all of those investors and say, Hey, remember that example deal we were discussing two months ago? Now I’ve got something solid you know, do you wanna jump in and be a part of it? And it was really easy to just because it was 6 million and soft commits we got from that, that I got from that. And then we only needed to raise about 650,000, like, you know, 10% of the amount that I had just basically raised. So it was super, super simple and super easy to get the commits for that from already having the interests previously from the challenge.

Charles:
Interesting. So, Joshua, how were you, what, you know, when raising all this money from investors of the years, I mean, what have you found to be the most valuable avenues for raising money for deals? So what did you utilize for, for raising all this funds? I mean, obviously there’s some relationships in there, but what else did you use to do this?

Joshua:
Literally just social media. So about at this point, about 90% of all the investors that have ever invested with us up to this point have come through social media. And there’s a really strategic way that you have to utilize social media to be able to do that. You can’t be like everybody else. You can’t post all the educational content and say, Hey guys, look, did you know that you can invest in your self-directed i r a in your 4 0 1 kss? It’s really great and you can take all this money and make all this money if you just invest in real estate because then you’re just, you know, a million and a million. Like you’re literally just like everybody else in this sea of echoes on social media where you’re not different, you’re not special. There’s nothing that differentiates me wanting to invest with you from wanting to invest in with the other millions of people that are saying the exact same thing on social media.

Joshua:
So you have to be different. You have to be unique, you have to be authentic. And a lot of people for some reason don’t like to be authentic on social media, but you have to be, if you wanna be any level of successful in this business because consistency is really the next key to success. And you’re never gonna be able to be consistent if it’s always a chore, if it’s always a job, if it’s always a, a work for you to have to be fake and come up with what you’re gonna say on social media. If it just comes naturally to you, if you’re as authentic as you possibly can be and the content that you’re curating and what you’re posting, then it’s gonna be really simple, really easy, and it’s gonna be a lot, a lot easier for you to be able to be consistent, which is going to allow you to be able to build those relationships, raise a ton of capital, and ultimately just be successful in, in real estate investing or in syndication. So what

Charles:
Platforms were you you utilizing and then the othering was, what were you posting?

Joshua:
Hard to say exactly what I was posting, but Facebook and LinkedIn are really the two platforms that I’m primarily focusing on. I, I have a LinkedIn account, but I mean, not a LinkedIn. I have an Instagram account, but I don’t ever get on it. I know some people are massively successful with Instagram, like Brandon Turner, but he’s also been building his audience for over 17 years. So if you want to take many decades building your audience to be able to see success on various other platforms like Instagram, by all means be my guest if that’s just what you really enjoy. But the reasons that I really like Facebook and LinkedIn is one, I already had at least a semblance of an audience on Facebook that’s just a lot more personalized on that platform than it is with other platforms. And then on LinkedIn it’s very business oriented and the algorithm allows you to be able to reach a massive audience without spending decades building that audience.

Joshua:
So like as of now, I’ve been on LinkedIn since around middle of the year, around Q two of 2020, and I have about 9,700 followers which sounds like a lot, but it’s really not a lot. So every time I post, I usually post anywhere between three to five times a week. Only during the weekdays. Monday to Friday, every time I post only having 9,700 followers, my post sees about 10 to 70,000 views per post. So I’m able to reach a much larger audience on LinkedIn without actually having had to build that audience due to simply the algorithm that LinkedIn uses. So I really like LinkedIn. It’s also the primary platform for networking. It’s the primary business platform. It’s the primary investing platform. So that’s just where a lot of people are that are looking to find this kind of information, looking to want to know how to invest passively, looking to want to know how to invest, actively looking to just want to know more about real estate investing.

Joshua:
So it’s definitely a platform I’ve seen massive amounts of success with. And as far as what I’m posting, again, it goes back to the authenticity piece. So don’t be the guy that’s always posting educational content. You’re always like, Hey, check out how much money you can make on this 10% pref, man, let me explain to you what a pref is. Let me tell you that you know, cap rates, they’re, they’re, they’re getting lower, they’re compressing, you know, we can make a bunch of money with these low cap rates, dude, I promise you no one cares about any of that. That’s why when you post that stuff, you only see those posts get like five to 10 likes and maybe one or two comments from their mom and their grandma. Like no one cares about all of that because everyone already knows the answers to all of that information.

Joshua:
It’s already widely spread from millions of other people. So you gotta be different. And the best way for you to be different is to just be yourself. Talk about your personal story, talk about your life, talk about your dog, talk about your wife, talk about your family. Talk about a deal that you’re struggling with, you’re failing that you lost 60 grand on. Talk about a deal that didn’t pencil, talk about a deal that did pencil. How many Lois you’re submitting, how exactly you’re submitting those, Lois, what does that document look like? How are you going through that process? Like stuff like that is really what people wanna see. ’cause Then they get to see behind the curtain of you specifically your company, what you’re doing. And that’s gonna help people build, build the confidence and the comfortability and wanting to be a part of what it is that you got going on.

Joshua:
‘Cause Then a lot of times what you’ll do also by being as authentic and personal as you possibly can be, is you’ll prevent the need from getting on a thousand plus one-on-one phone calls with a thousand plus different investors because now they’re basically getting to have a conversation with you three to five times a week. Every time you post, they get to hear you in a video, they get to see a picture of you, they get to see a deep descriptive, detailed information about something that’s been going on in your personal life. And oftentimes what I’ve found in my own personal business is that people will literally invest with me. And I’ve never had a single conversation with ’em in my entire life. And I’m like, wait, we gotta have a pre-existing relationship. Hold on. Like, how did you find out about me? And they’re like, oh, I’ve been following you for years.

Joshua:
You know, I’ve been following your podcast, I’ve been watching you on LinkedIn. I love your content and I’ve been wanting to reach out, but I’ve just been kind of shy or scared or blah blah, didn’t, didn’t know how to, so I build up the gumption to finally reach out to you and, and I want to get involved. And then they’ve got like a ton of money, come to find out these random Joe blows out there. Have million, 2 million, 5 million bucks. You’re like, dang, just these lurkers back there that you never knew existed and you would’ve never known if you didn’t remain consistent and remain authentic. Yeah.

Charles:
Oh, that’s great information. Thank you. So Josh, what would you say for, give us a little background into your current business now with your partners. I mean, what are some of the main criteria you’re looking for when you’re reviewing deals and when you’re ultimately pulling the trigger on one?

Joshua:
So we have a target, kind of like focal area right now that we’re focusing on. Southern Alabama, southern Mississippi. We also like Northern Florida, just haven’t found anything over there quite yet. Just kind of this Gulf coast panhandle is where we’re primarily targeting a lot of our efforts. And a lot of that comes from the fact that myself and one of my other business partners, Reggie, were both locally based in southern Alabama for pretty much the last seven years. And so we were really a, our locale helped us a lot. Not only with building relationships, but having that competitive advantage and being able to tackle a lot of these deals, be seen as more of a credible professional be able to go tour the assets in the blink of an eye literally like 10 minutes from my house. Just go and, and check out all these different these different assets.

Joshua:
So that helped us a lot grow internally. It also helped us build a business. So I actually began hiring, right? We started our property management company, which is based down there. We started hiring inside Ferrari Capital and some of, we have one or two employees that are local. Some of ’em are more VAs that are more global, but basically a lot of our locale is there. And so it makes it really easy for us to scale. So when there’s another deal that pops up in that general area, we already have contractors, we already have property managers, whether that be our company or a third party company. We already have so many different things, a a big team built out that allows us to quickly just flip the switch, snap our fingers and rinse, repeat our model. Super easy. So that’s why we like the markets that we’re in right now.

Joshua:
There’s also some other fundamentals behind that, but we don’t have to dive too deep into those. As far as the criteria we look for, we have a specific model where model’s very different than that of, of what a lot of other people utilize. We utilize what we call our perpetuity model. So a lot of times what you hear when you think about syndication or when you have conversations with folks, they talk about the doubling your money in five years. Now that was the big thing for so long. Honestly, I don’t even know if that’s the thing. Now what I’ve seen more of is doubling your money in seven to 10 years just because of where the, the market is and the, the debt market. But it used to be the traditional model was, Hey, I’m gonna double your money in five years. You’re gonna give it to me.

Joshua:
I’m gonna give you some level of pref. We’re gonna try to do some kind of liquidity event in a couple of years and then by the fifth year I hope to sell it and double your cash rent, repeat, pay all the taxes on it and let’s move on with our lives and find the next one. It was a very transaction based business, very burn and turn type model. And it’s never really what we sought out to do. ’cause I knew from the clarity that I got from that vivid vision that I wanted to live a passive lifestyle. I wanted to be able to build a business that was gonna allow me to work literally 15, 20 hours a week and spend the rest of the time spending time with family, traveling, literally doing anything and everything that I could possibly want to do, just having the freedom to be able to do it.

Joshua:
I didn’t want to create another job for myself. And so I needed passive income. The only way to have passive, passive income is to hold onto these assets longer term. So through this syndication model, I had to figure out, well, how on earth am I gonna hold an asset long term while having and utilizing other people’s investors cash? ’cause That’s what a lot of people’s dilemma is. They say, well, there’s gotta be an exit, right? All of your investors, they’re gonna want their money back, they’re gonna want some kind of an exit. They’re not just going on to remain illiquid for 20 to 30 years. And so we found a model that works very well for us. Again, we call it our perpetuity model. Basically we do a refi by the second or third year. So we, it has to be a value add asset.

Joshua:
So we’re looking for value add assets, a, B, or C class that allows us to either do some kind of loss to lease, play a more effective management play or simply just increase the rents, actually do a large CapEx project, whatever the case is. And how I can extract value outta this asset. I need to be able to extract enough over a two to three year timeframe to be able to pull out a hundred percent of our investors’ initial investment. So if I raise a million dollars, I need to be able to pull out a million dollars in two to three years so I can give it back to my investors, make them whole, also give them a pref along the way. It’s just not like I’m just holding their money and not giving them anything. And then once I give them their capital back, I then as a gp, me, my two business partners mad and Reggie, we then take 70% of the deal.

Joshua:
So we get 70% of the deal for the remaining 20 to 30 years and they get 30% of the deal, which ends up equating to about three to 6% in annualized returns and infinite returns in perpetuity. As well as they get to benefit in 30% of the upside from all the additional refis in the future. As well as when we do ultimately decide to sell, they get to benefit 30% of the upside. We get to benefit 70% of the upside, which is typically multiple six figures a year per deal, per gp. So I can, I can make upwards or am making upwards of two, $300,000 a year passively from one deal. And it’s literally just because I took 70% of it because I wanted to structure my business in such a way that allowed me to do that. So the criteria that we look for is a deal that we wanna hold onto for long term.

Joshua:
So that’s another reason we like the markets that we’re in. ’cause We know we’re gonna be in those markets for a long time 20, 30 years, that that’s a long time, right? I need to know that there’s gonna be growth in this market. I need to know there’s gonna be some level of appreciation. I need to know that this market isn’t gonna be tanking. There’s no negative negative connotations here or imple implementations for what could be with this particular market I’m gonna be in for a long time. So I’m also looking for an asset that I can add value pretty quickly. Multifamily been our primary bread and butter, a, b and C class, although this year we did actually buy an RV park. We actually really liked the RV park model due to insurance. Insurance is ridiculously expensive in coastal markets right now. And you’re anywhere between 1250 a door to 3000 a door annually in your premium right now for multifamily in the markets that we’re in. Whereas at RV Park, I’m literally like, like ridiculously cheap. It is like $7 a pad for annual premium insurance. And I can get the same level of rent and a less operating expense ratio that you can with about a c-class asset that we have in that same market utilizing the RV park model.

Charles:
Very interesting. I had a question about going back to your perpetuity model that you utilize. Do you find that any of your more sophisticated investors, which I have found that enjoy quote unquote velocity of money with that, I mean, have you found pushback from investors because of that or because they’re still getting their money out, they’re fine with it and they still have, you know, a lot of their upside is coming after they’re, they get their money back, you know what I mean? Like the years to come since they’re getting that, that large percentage still,

Joshua:
Right? No. So we’ve had some investors like you’re saying, that are just like, I don’t like that model. You know, I, I like holding long term, but I don’t like that exact model. Unfortunately, I’m not gonna be investing with you. That’s few and far between. I’ve maybe had a handful of those conversations. Honestly, most people I talk to really actually love this model ’cause there’s, there’s practically no other sponsor out there that holds onto an asset for 20 to 30 years or at least hasn’t a business plan up holding on for that long. So when people hear something like that and they know they’re gonna get the a hundred percent of their cash back in two or three years, and let, let’s just finish, let’s finish going through the rest of the benefits. I was trying to give you the high level, but to really answer this question, the best way to do it is to go through the entire model itself, all the benefits to both the GPS and the LPs.

Joshua:
So from a passive investor perspective, this is gonna be structured with a 70 30 initial split on the buy-in. So your standard model there from, from equity split, they’re gonna get a 10% prepared return. They’re gonna get that for three years. So let’s use a hundred thousand dollars as an initial investment example that I give from an investor, a hundred grand. They give me, I at the end of the third year, they’ll have $130,000 10% year over year for three years and they’ll have their a hundred thousand dollars back from the refi. Now since it’s a refi and not a sale, it’s tax free. So they don’t have to worry about paying any depreciation, recapture, or any capital gains. And they can literally take the a hundred thousand dollars I initially gave them and invest it into another perpetuity deal or do whatever they want with it and never have to worry about paying a dime a taxes.

Joshua:
They’re also gonna have their 70% per rata share of, of the equity, right? And all the K ones that they receive, which is gonna give them their higher net worth and all of their depreciation and tax benefits, which of course will be doing a class irrigation study. So they’ll be able to accelerate a lot of that. And pretty much every dime that they ever earn from a perpetuity model deal, they’re never gonna have to pay taxes on. So that’s another great thing that people really enjoy about this model is like, wow, I can invest a hundred thousand dollars and never have to pay taxes on it. This is great. So people really like that. Then on the inversion, so after year three, when they get a hundred percent of their money back and we take 70% of the deal and they keep 30%, that’s strictly just cash flow.

Joshua:
So it’s almost like a waterfall. So now I’m taking 70% of all the actual monthly cash flow that’s gonna be put off, any refi proceeds that’s gonna be put off. And ultimately when we sell, I get 70% of the upside, they get 30% of all that. Now again, I say it’s like a waterfall because they keep their equity. So the 70% equity they initially bought in never changes. So not only are they gonna have still be in the deal, they’re fully divested like you would be in the stocks, but you get the stale benefit and all the upside. So you’re still gonna get 30% of all of the cash flow, which again is typically gonna equate to be about three to 6% of their initial investment. So three to six grand with a hundred thousand investment example in perpetuity. And since they’ll have the higher share of equity, the higher depreciation amounts, they’re never gonna have to pay taxes on that either on any of that cash flow.

Joshua:
So on top of all that, again, 30% of the upside when we do sell, which you know, 20 or 30 years from now, is no telling what the property will be worth. And they’ll get to benefit in that another massive payday. But also we have, we call our Christmas bonus. So this is the last benefit that I’ll say. We call it the Christmas bonus because it’s nothing that we can project, it’s nothing that I can say without a shadow of a doubt that you’ll absolutely get this. These are the projections. It’s more so like, hey, there’s a massive chance that this is what will happen. And this is like the way that we’re structuring the deal. So every five to 10 years we’re gonna be using agency debt, right? So every five to 10 years, due to the standard lifecycle of debt, we’re gonna be forced to do a refi.

Joshua:
So with that refi, I am going to extract every amount of value that I can out of that and I’m gonna do a cash out refi. Now imagine three years in, if I do a refi at first and I’ve done all the renovations, I already came, then 10 years down the road, there’s probably some things that need to be replaced. If I didn’t replace the roofs initially, the roofs probably need to be replaced, the siding needs done. The interiors may slowly start to become outdated. Parking lot needs redone, the pools nasty. Now, like bigger, larger CapEx items suddenly need to be taken care of and we never want to have to do a capital call, right? So we’re just extrapolating the equity out of the asset to pay for larger CapEx items down the road. So every five, 10 years, let’s call it 10 years, we’re now 13 years into the deal.

Joshua:
Let’s say I raise the value of the asset by a million bucks every year over a 10 year timeframe. We’ve got $10 million of equity. Now let’s say I do a 70% loan to value loan. I pull out $7 million in cash out of this asset. Let’s say I only need 2 million bucks to replace the roof interiors, whatever else I gotta do, the other $5 million is gonna be distributed 70% to the GPS and 30% to the LPs. So this Christmas bonus is literally every five to 10 years, even with a hundred thousand dollars investment example, you could expect to receive another 50, a hundred, 200, $300,000 check in the mail also tax free. ’cause It’s a refi throughout the life of this deal. So people are like, holy cow, that sounds incredible. And then that, like the Christmas bonus is almost what puts it over the edge.

Joshua:
There’s a a lot of benefits throughout the, the deal here. But then knowing that they could make even more money because like you said, people really want the velocity of money. So they’re like, you know, this is great that I get all my money back and that I’m making returns, but can I make even more money in the same deal? So the Christmas bonus allows ’em to make more money plus the sale, plus the perpetual, you know, infinite returns that they receive. And then some people really like the fact that they actually get a hundred percent of their money back in two to three years. ’cause Not a lot of deals actually provide that. Most, most often than not you have to wait for the sale, which is at this point, and where the market is, ends up being later, closer to seven to 10 years.

Joshua:
So we actually did a calculation, this last thing I’ll say, we did a calculation on this. We looked at the traditional syndication model and we looked at the perpetuity model. We had to make some assumptions of course, but our assumptions were basically that every time you got a hundred percent of your investment back, you just reinvested it. So when I look at the traditional syndication, if I look at it just every five years, we’re rinsing and recycling that money and I’m paying my depreciation, recapture, I’m paying my capital gains with a hundred thousand investment example, I end up with about 160 some odd thousand bucks when it’s all said and done, take that money rinse repeated after the fifth year, and then 10 years later I’ve doubled that and 10 years later I’ve doubled that, you know, less all the taxes and everything. Now with the perpetuity model and us not selling a deal every three years, instead of every five years, are you able to recycle that capital. And then when you recycle it, you get 10% pref on the higher number of capital that you recycle. So on top of all that, plus never having to pay any taxes plus potential Christmas bonuses, you know, you’re able to recycle the capital much faster and you actually end up with the same exact initial $100,000 investment with like an extra 1 million, one and a half million dollars in like literal cash in the bank worth of value from your initial investment over a 20 year timeframe.

Charles:
Wow. That’s very powerful. The other thing too is owning property longer, there’s less risk with it. I mean, when you’re buying properties, when you’re, every time you purchase a property, there’s always a lot of unknowns. So I always see that the longer you’re owning property, the, the more you know about it, the the less unknowns there are and the safer the investment is just what I’ve found from owning properties for, you know, 10, 15 years multi-family properties that you know exactly what has to be repaired, what’s kind of there and what’s been completely done, you’re all set with. And you don’t know that when you buy a property, it’s like buying a used car, you know what I mean? So it’s just like you don’t, you don’t know exactly what’s going on there and until you get it and then you’re like, oh, okay, a lot more stuff than I thought was wrong with it.

Charles:
And now you just do that once in your life because your people are in and out of a property, they’re gonna know you have a list of stuff that you know that’s gonna be needing repairs, you know what I mean? You know, it’s kind of going, hey, this is gonna have to be, these HVAC units have to be looked at and all this kind of stuff. So that’s just something and it allows you to really, it helps you with your whole financial strategy I found. So that’s a great model, Josh. So as we’re wrapping up here, I just had a couple questions and then we’ll, we’ll give you a time to explain your business and how people can get in touch with you. But how important has partnering been for growing your business up to this point since you’ve had so much growth over the last few years?

Joshua:
Yep. Pretty much everything we’ve ever done up to this point has been done within our partnership. So within the three of us, me, Matt, and Reggie we’ve pretty much done all of our own sourcing, all of our own acquisitions, all the underwriting, the due diligence, all the capital raising, equity all the asset management, and now we’ve started our property management company and we’re doing that as well. So we’re trying to just create a company that allows us to do a lot of things internally, both from a scale perspective, but just from an efficiency perspective. You know, when once you bring a lot of third party people into the mix and they’ve got their own way of doing things and you’ve got your own way of doing things and you’re trying to mesh the two and oftentimes you’re butting heads and they’re just not performing the way you need ’em to, it just made, it made a lot more sense for us to vertically integrate once we hit a certain level.

Joshua:
But from a partnership perspective, the three of us, no chance would I be able to be where I’m today if it wasn’t the three of us partner. I mean, even all the way from the get go from we initially started, right? I lost $60,000 from my first fourplex investment and then I went on to raise $650,000, 6 million bucks in stock, commits closed our first 42 unit. But I wouldn’t have been able to close it if I didn’t have like any liquidity. ’cause For any of you out there that have never closed a multifamily deal before, even through a syndication, it still requires liquidity. You’ve still got earnest money deposits, you’ve still got due diligence costs, lender fees, there’s still things that are required upfront, even if you get reimbursed for them on the backend. And I literally had $0 and 0 cents. So I was like, oh, I’m gonna close the deal without any money, so I gotta find someone else that has some liquidity that wants, that wants in on this.

Joshua:
So the only way I was able to even build that partnership in the first place was by bringing value. A lot of people really want to already they wanna partner with people for free. Like they want to not join a mentorship program. They wanna not have any value to add and they wanna just go find a business partner that’s going to help them grow and scale and be massively successful in this business. But it’s really hard to go and find a reputable partner that’s actually going to benefit you and help you. You guys are gonna be able to help each other if you have zero value to add. The only reason I was able ever able to even find my business partners now was because I already had the mentor. So I already had the knowledge, the education, the ability to execute with having him in my corner and teaching me everything that I needed to know.

Joshua:
I already had the skillset to be able to go out and raise a bunch of money. I had sourced the deal, I had done a lot of the diligence on the deal. I was gonna help with a lot of the asset management. I was helping with so many different aspects of this investment that me not having any liquidity wasn’t an issue. Like that was an easy problem for someone else to solve, but it was only, they were only interested in solving it. If I brought value, I mean, imagine me, no money, no experience, no knowledge, no ability to raise cash, no ability to source a deal. I just go up to some guy that’s got a ton of money and I say, Hey, you wanna partner with me on a deal, man? Like, I’m just, I’m struggling here. I really wanna do multifamily. I don’t know anything about it.

Joshua:
I know you got money and and, and I’d love to help. And then at that point you’re like a burden. You bring no value, you just cause more problems. So if I could give any recommendation as far as partnerships go, it would be to jump into a mastermind, join a mentorship program, learn, educate, just learn as much as you can so that you have the skillset, knowledge, the experience to be able to then go and add value to someone who you actually need. Because if you’re anything like me out there listening to this right now when I first got started, then you don’t have any money. So finding someone who has money is only gonna be interested in you if you can do something for them. Yeah,

Charles:
No, that’s completely true. I’ve had people reach out to me, like, I imagine you’ve had people reach out to you to partner on deals and there’s, it’s kind of like a one way street kind of thing, and you’re like, this just, it’s not gonna work. You know what I mean? Because my, if I say yes, my partners are gonna say no, so might as well just say no now. You know what I mean? Because it’s has Yeah.

Joshua:
Might as well say. Yeah. I’ve had one guy reach out to me in particular recently. He had no experience in multifamily. First of all, he lived up in Michigan and he was looking at a deal in Florida down where, where I’m at down here in Tampa. And so he wasn’t, it wasn’t even close to me. Local, didn’t know anything about multifamily, had never invested in real estate before, didn’t have any money, didn’t have any ability to put any money into the deal, didn’t have any ability to raise any capital, like hadn’t ever actually done it before. And he wanted to partner with us, be like part of the asset management team, like actually help with asset management. Yeah. And wanted to raise the money. And I was like, this just, and by the way, the deal, this first deal that he’d like was trying to bring to me to say that we should do together was over 400 units and it was like a $50 million deal. Wait, dude, just let’s take many, many, many, many, many steps back first. This is just way too large, way too far away. You don’t have the knowledge and experience that you need. Yeah, I mean, it just, it just goes into what we were just talking about.

Charles:
Yeah, it’s crazy. Well anyway, people, yeah, people always, they, they don’t wanna start at the bottom anymore. They wanna start at the top and work sideways. A mentor of mine told me <laugh>, but Joshua, so let’s talk about how people can get in touch with you, listen to creative capital, everything else you got going on. Yeah,

Joshua:
I would honestly say just go to our website. So if you go to ferrari capital.com, spelled just like the car then all of our information’s there. That’s, you can find all of my LinkedIn channels there. Linkedin, or not LinkedIn. So I always say LinkedIn, social media channels there. Linkedin and Facebook are really the two platforms that I’m most active on. Again, so you can follow me there. All of our podcasts are actually on the website as well. If you’re interested in getting more active in the business, all the information for potentially jumping into our mastermind is in there. I have newsletter, I have a free ebook, I have blogs, all kinds of stuff. I would say just go to the website.

Charles:
Awesome. Well thank you so much for coming on today and yeah, welcome to Florida and it’s great to have you here. Hopefully we can contact sometime face to face.

Joshua:
Yeah, absolutely. I just I just bought a new Polaris side Byside, so we can take it out and have fun.

Charles:
There we go. Sounds good. Well, thank you so much for coming on today. I’ll talk to you soon.

Joshua:
Alright, later.

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.

Announcer:
Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

Links and Contact Information Mentioned In The Episode:

• Ferrari Capital
• Three Beach Capital

About Joshua Ferrari

Joshua Ferrari, founder of Ferrari Capital and co-founder of Three Beach Capital, was born in Omaha, NE, moved all throughout the Southeast during his childhood due to being in a military family, and currently resides in Mobile, AL. Josh graduated from Tennessee College of Applied Technology with his Airframe & Powerplant License so he could pursue his passion of becoming an Aircraft Technician… Or so he thought.

After college, he was in the aviation industry for over 6 years and grew exponentially in rank. With experience on aircraft such as an A300, A319, A320, MD-10, MD-11, B757, B767, and B777, he became the “expert” on such aircraft and was leading the #1 UPS MRO line in the world for almost 3 years.

Shortly after entering into the aviation industry, Josh found his second love… Real Estate. After just 4 short years, Josh has accumulated over $65MM AUM, 874 units, has successfully raised tens of millions of dollars from various private investors, and at the age of 25 was able to retire from Corporate America from the passive income he had generated through real estate.

In April 2020, he started a podcast titled, Creative Capital, to not only learn more about the industry from experts, but to help teach others as well. He currently releases two episodes per week, and since its inception he now has over 850K downloads with tens of thousands of loyal weekly listeners. It has allowed him to grow his network and meet with top tier professionals in the space who have done millions or even billions of dollars in transactions.

Are You a Fan? Subscribe, Rate, Review & Share – Click Here To Learn How

What question do you always wish I would ask but I never do?

Connect with the Global Investors Show, Charles Carillo and Harborside Partners:

• Setup a FREE 30 Minute Strategy Call with Charles
• Listen To The Podcast
• Join Our Email Newsletter
• Global Investors Web Page
• Foreign Investing in US Real Estate Facebook Group
• Global Investors Facebook Page
• Global Investors Instagram
• Harborside Partners Web Page
• Harborside Partners Facebook Page
• Harborside Partners LinkedIn Page
• Harborside Partners YouTube Channel
• Harborside Partners Instagram
• Charles Carillo LinkedIn Page
• Charles Carillo Instagram
• Charles Carillo Bigger Pockets