GI322: From Navy Captain to Multifamily Syndicator with Marshall Sykes

GI322: From Navy Captain to Multifamily Syndicator with Marshall Sykes

Marshall Sykes was raised in a real estate development family and began building houses and apartments as a teenager. He is now a partner in over 2,000 multifamily units, while also managing a single-family rental portfolio. Additionally, he has achieved success in investing in oil and gas, tech startups, and other private equity opportunities. Marshall is a retired U.S. Navy Captain with 24 years in the Civil Engineer Corps while leading billion-dollar global projects at ExxonMobil. 

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Marshall Sykes. He was raised in a real estate development family and began building houses and apartments as a teenager. He is now a partner in over 2,000 multifamily units, while also managing a single-family rental portfolio. Additionally, he has achieved success in investing in oil and gas, tech startups, and other private equity opportunities. Marshall is a retired U.S. Navy Captain with 24 years in the Civil Engineer Corps while leading billion-dollar global projects at ExxonMobil. Thank you so much for being on the show!

Marshall:
Charles. Thanks for having me. It’s a pleasure to be here. So

Charles:
You started in, in real estate as you’re brought up in it, but can you give us a little background on yourself during those times, like a little bit of your personal family background and how you got introduced to real estate investing?

Marshall:
Yeah. Well, my, my, my mom and dad built houses basically after my dad retired from the Army. He wanted to kind of start, start his own business, and he knew that passive and well investing in real estate was a good way to grow his net worth. And so he started doing that and they were builders. My mom and dad both would build two houses at a time. They’d sell one and to live off of and then keep one as a rental. So they kept their portfolio that way. As a teenager, I was one of seven, one of eight kids. I have seven brothers and sisters, and we all at some point kind of worked on the, on the properties. But I, I used to do that as a teenager, so I learned, learned it. I didn’t really like it very hot in the, in North Carolina in the summers, but all the same. It kind of something in the back of my mind that I could remember later in life how how you could create a house like that and have passive income the rest of your life.

Charles:
Yeah, that’s, that’s pretty powerful. My dad got involved with buying de class, let’s say C minus class apartment buildings where I’m originally from in Connecticut. And he self-managed ’em, he got up to like a hundred units, him and a partner. And I, I, I hated going to those places. It was like in elementary school and middle school, it was like, it was terrible. He had me collecting rent in elementary school, like collecting it, bringing back the receipts. But it was something that as years and years go by and you start looking back at kind of what it affords you, which is the passive income or semi passive income, let’s just say. And everything else you find out how powerful of an asset class it was, even, you know, and kind of it, it just, you know, just some of these things that you might not like, I think as younger and then you find out kind of what the whole point of it later on that you don’t really see as a younger person. That’s kind of what, what happened with me, right. You

Marshall:
Don’t really, you’re not really, you don’t know what’s going on the next day. I mean, you’re, you’re doing that hour’s worth of work or whatever. You don’t really see the big picture like you’re saying, you know? Yeah.

Charles:
That’s it. Big picture. Yeah. You don’t see the big picture until you get a little older and then you’re like look back and you go, oh, wow, that’s, that’s, now I see what, what kind of, what’s got going on here. So kind of moving forward, what was your professional background? You know, you were in the Navy corps. What happened where you went into you know, that pushed you back into investing in real estate yourself? Yeah,

Marshall:
So I after my, I got an engineering degree in NC State University in Raleigh, and then went into the Navy as a Civil Engineering Corps officer and, and did construction management in the Navy. So I guess about, you know, I got busy with my military career. I had had invested a little bit in the stock market, realized that the stock market really hadn’t gone up a lot. I think I invested $25,000 and about 10 years later it was still $25,000. And I thought, wow, this is not really a good way to invest. And so I realized I, well, I can rely and leverage my family resources that, that want to help me get into rental income. And so I started, I reached out to my brother who was a builder at the time, and he, him and I would go into business together and build he would build the house and I would provide cash, I guess. So we, I got into the business that way by just starting and owning rental property, single family homes, basically. So

Charles:
What was what kind of brought you to kind of what you’re doing now and what is your current investment strategy where we stand right now for you and your company? Yeah,

Marshall:
So, so after I did my full Navy career, retired as a captain, and then I went and worked at ExxonMobil. I for my second career, I started, I was really interested in multifamily investing and I’ve always been interested in an apartments. We, as fact, one of the houses, one of the things we built when I was a teenager was a fourplex with my mom and dad. So we, I got a low exposure in, in apartments then, and I always looked at some of the bigger properties bigger multifamily properties, especially in California when I was later in my career. And I thought, what wouldn’t it be nice to own that much of a property to have passive investing? I didn’t realize you could actually do that through syndications. And so I, I got familiar with that maybe six or seven years ago, and realized that you could pull your money together from individual investors and, and invest together as a syndication to buy apartments like this.

Marshall:
So I did a few of those. And I started after Exxon, I started working at, I mean, I for my own company to do some of these. And, but I, when I first started, I was like, okay, I want to, I wanna mentor, I wanna help some get, and I realized, I realized I really didn’t want to run the property. I liked reconnecting with old colleagues and doing some of the capital raising. So I really have morphed my business into just fund being a fund manager and raising capital for other sponsors. I, my superpower, I guess is networking and getting in and to understand the partners that are very structured and very successful. And so that’s, that’s where I’ve been doing lately. I’ve been networking with those kind of folks and in fact, I decided to, to kind of pivot a little bit and start working in oil and gas investments. So I’ve raised, raised currently for an oil and gas investment and I’ve done that in the past as well. Been very successful with those. What was

Charles:
Kind of your your reasoning behind going into let’s say multifamily investing from single family? What were some of the pros and cons that maybe you found between those two?

Marshall:
Yeah, I think what I, you know, I had, I had a rough portfolio around 10 single family homes at the time, and, but I realized that it’s a very long process and I had owned them for 20 years. And so a long process to get to a point where you’re actually cash flowing a lot at least in the ones I was in. And so it was a hard market, I guess I was in, is the, the prices, the rental prices weren’t really increasing a lot. So you kinda have to understand that when you start investing is how, how much the rental prices can go up or not. And I, so I kind of got a little frustrated with that. I was making, you know, two or 3% return on investment of our, of our capital that was in, and I realized that you could, we could probably do the projections for multifamily are much more than that. So I started looking at multifamily and the first few that I invested in are very successful and had a lot more return on capital for that.

Charles:
That makes sense. When you are working with partners and reviewing ’em, whether it’s you know, passively investing with them or if you’re also a general partner with them, you know, how are you really vetting, how are you vetting your sponsors when you’re doing your networking? Yeah,

Marshall:
I think originally I was involved in a, in a multi-family investment group. And so we were working with someone who had done this over and over again. So we were very well connected as a group and the sponsor, so I understood that part of it. I think the risk on that, that we probably didn’t all see was that the interest rate was gonna spike so high three or four years ago that just spiked really fast over a year, one year period that no one had ever kind of across the industry, never anticipated and nor has it ha had it happened in the history before. So that kind of put us a lot of people on buying. In fact, it was very hard. We had, we had a lot of properties in distress for that reason. So that’s the part I did not get involved in.

Marshall:
And so I started focusing more on that. If I got involved in a real estate deal, I would really understand the lending terms because I wasn’t involved in that at all in my original ones. So when I look, well now, when I, when I start looking at a, something to raise capital for, whether it’s oil and gas or a pre IPO company or a, or a real estate deal, I always, I start with the sponsor for sure. ’cause The sponsor risk or operational risk is very big. And then you have to look at the market risk that you’re in. Those are the big three that I look at. But the sponsor kind of, they have to be somebody who’s very structured and has been in business a long time and can overcome any kind of challenges. ’cause You’re gonna have challenges in any investment. Yeah, it

Charles:
Makes perfect sense. When you are, when you’re doing, I mean, multi-family investing, you came from like the single family investing part of the business. So it’s, it’s, it’s different, but it’s still the same kind of concept, right? Renting out properties, residential when you’re going into oil and gas, that’s kind of like a whole new ball of of wax air and like, how does that work in regards to, I mean, how do you vet that? I mean, you can vet out that operator and know that they’ve had successful past projects, let’s say, but how are you really getting in and vetting an actual deal? Or do you just leave that because you’ve vetted so much that operator?

Marshall:
Well, part of it, I, I guess part of the reason I got into oil and gas was I, I knew the sponsor pretty well and, and trusted him, but also I had been, I had worked a better part of a decade in the oil and gas business, so I understood that part of it a little bit at least. But so oil and gas investing is similar. I mean, we do it through syndications as well, so it’s similar to multifamily syndications. But when I vet when I vet them, I’m relying a lot on the sponsor. But I looked at their track record in oil and gas investments, and they had multi-year track record of and multi leases of success. And so it had been a long period of, you know, 40 years success on, on this particular operator who had done this over and over and over again. So that I was able to rely on their track record, but also we also had video conferences and ask questions to the, to the technical, some technical questions on the oil and gas aspects of the plays as well. Nice.

Charles:
Okay. As a passive investor, active investor, what are some of the lessons that you’ve probably learned over the years that probably stick with you the most? Whereas if you are raising money from people, if you’re vetting operators, whatever it might be, what are the some of the biggest lessons that you’ve probably learned in this space?

Marshall:
I think you, big, one of the biggest lessons I’ve learned is you gotta really kind of test the waters a little bit with the sponsor to make sure that they can handle questions and are not frustrated by questions that you ask ’em. Because you want somebody who’s gonna be honest with you and walk you through the process. So you want to test the sponsor. I, I like that as a understanding. I think some of the other things is as an, when I look at my investor relations piece and I, I talk to a prospective investor, you know, every invest, some of these investments just aren’t a good fit. So I like what I’m thinking, I, I like is finding somebody who can, has the risk tolerance to, to do an investment. Like this is not, they ha they can’t be just always nervous about the money. They’ve gotta realize that it’s an investment, there’s risk. And so you don’t want somebody who’s always nervous, you, they’re not, there’s not a good fit for this on front of themselves or for you as a, as a, as your investment. It’s you want a team that’s all excited and all that, but they need to be aligned on the long term prospects of having an investment. Yeah,

Charles:
No, I think that’s that’s, and that’s very responsible on the end of the syndicator because I think a lot of syndicators when they’re trying to make that deadline, they’ll take money from anyone, which is a huge mistake. But the thing though is I found is that you’ll have conversations with people like I invested that reached out to me this week and you know, they had a timeframe of one to three years for their investment, you know, for buying multifamily. I mean, it just doesn’t work, you know what I mean? It’s not, I mean, and they’re like, well, refinance or a sale, and you’re like, that’s even riskier. I mean, how do you pe penciling and refinances are extremely risky. I mean, like I all, you know, a lot of these numbers that people reach on these performers, just as a side note here, I mean a lot of it’s pushed by having this refinance or them doing some sort of, for lack of better word, like trickery with the exit cap rate. You know what I mean? Where they’re like, it’s down here a little bit, it’s a little down here now we hit the number. You know what I mean? Yeah.

Marshall:
You really have to look at those two things in particular because you do, those do change the proforma a lot, so you do wanna know that. But yeah, any, an investor has to be able to, not to realize this is an illiquid investment and your, your capital is gonna be tied up for years. You cannot this is not a good investment for one to three years, you know, or most of these syndications just aren’t they just really aren’t that kind of, because it can always drag into six to seven years even, you know?

Charles:
Yeah. We usually say, I think it’s five to seven years, you know what I mean? Obviously we’re shooting, shooting for three to five, but it’s five to seven. I mean, that’s what we’re getting dead for, you know what I mean? It’s just like one of those things, especially now if you have something that was bought in 2022, you know what I mean? You know what I mean? You’re probably holding that off just to make sure have rent start coming up again and you know, really start getting some of that return. And you’re probably underwater at some point right now at some if, if it’s not run correctly to the best. But or if your numbers were really off on rent assumptions, but either way it’s just, I think it’s telling investors like maybe in a nice way, no, or maybe this, you know, doesn’t fit with kind of what you’re doing or however you wanna word it, is I think more powerful because it takes then just a lot of, you know, it takes a lot of weight off your shoulders because if you took someone on like that, everything’s gonna run exactly how you’re saying it to fit into what they want and it just doesn’t work like that.

Charles:
And then you’re gonna have calls every month with the same investor going to the same things once they get the report. You know what I mean?

Marshall:
A lot of people look at proforma and they think this is, this is what’s gonna happen, but proforma’s just a projection, you know, it’s not, it, once the contract’s signed, things change in a lot of different ways and so it could be positive or negative, but things change and, and that’s one thing that’s gonna be guaranteed there is gonna be change from the proforma.

Charles:
Yeah. And that’s one of the reasons why when you’re looking at any of these numbers from a seasoned operator, they’re gonna have hundreds and hundreds of thousands of dollars in reserve. And that’s for stuff that you didn’t know when you do your due due diligence. Right? So I mean, that’s just like, it just goes to show you how unknowns they’ve left at the property, which you can’t know everything, you know what I mean? When you’re, you can do a very thorough due diligence and check those boxes, but there’s always gonna be things that you know, that you weren’t aware of or stuff that comes up, you know what I mean? And you have to make sure that you get those fixed because you’re taking on not only, you know, are you buying that property, say with a hundred doors or whatever it is.

Charles:
I mean, you have a hundred contracts with those tenants that you have to take care of too, you know what I mean? So if something goes wrong, they owe you money every month, but you also have to provide your service back to them. And if ac start going out and stuff like this, you know, it’s, you know what I’m saying? You gotta get those taken care of or you’re gonna be breaking contracts, you’re gonna have a lot of unhappy people, a lot of issues. So it’s it’s a, it’s a lot of responsibility you take on when you buy a multifamily

Marshall:
Property. It really is. There’s so many different factors that could happen. So you want to go with a sponsor that’s really, that has been there and done that and has a great track record because there are a lot of things that they’ve probably come across that they weren’t aware of early on in their career, but now they are, and they’re able to think through those and, and react to ’em faster than a, a new sponsor.

Charles:
When you are maybe if you are, we were a being a passive investor or you’re talking to a passive investor maybe at one of your networking events you might have how would you explain someone to, let’s just talk multifamily to best stress test the deal itself. You’ve reviewed the syndicator, what are the things high level you would look at in a deal or suggest someone else look at a deal before passively investing?

Marshall:
I think, but I think you, well, you want to know a little bit about the industry and how it works, not just outside of the deal. So you wanna understand that part of it a little bit, but you also wanna understand where they’re investing, especially like a multi-family property. You wanna understand the market that they’re, they’re, they’re investing in, in fact, one, I have three different properties that I’ve invested in in the Atlanta metro. What if you know anything about Atlanta, it is made up of five different counties and every one of those counties controls things a little differently with, with their property, which I didn’t quite understand. But you want to understand that as a sponsor and you want the, well, as you as a passive investor, you want the sponsor to understand that’s kind of things when they’re going, I wouldn’t, you know, like if they go to a new market, it’s then there’s gonna be some hiccups probably, unless they have somebody on their team that’s been in that market before. Yeah,

Charles:
That’s a lot of great advice because the thing is I found is if I’m passively investing, and I use an example, they’ve got a thousand units there. They’ve got five deals there or six deals there. This is their seventh deal. It, it’s, they have a system that works and they’re really just like plugging this new property in and all the guess work’s been done, all the, you know, all the trial and error and all that stuff has already been done for the most part. Obviously it’s a new property, but the thing is that they have contractors in place, they have a management company, obviously that works. They’ve gone through five or six properties with them at that point. You are really, you know, you’re just kind of coasting in right behind with the sponsor’s already doing. And that’s what I feel is one of the best kinda situations. I don’t wanna be the first one in a new market, and I also don’t wanna be their only one in that market. You know what I’m saying? It’s just, I, that’s kind of how I’ve found it to be most successful. ’cause You’re, you want to partner with someone that has the experience, right? You’re gonna bring the money there and have the experience and the team and the knowhow and those couple things can check off when they have other assets there.

Marshall:
Yeah. It makes a big difference in the returns and the health of the property and all that. ’cause You want a team that’s been there, done that, has the, has the contractors lined up to do the construction or renovations or maintenance has the property management team on staff, all those things make a big difference. Yes.

Charles:
And the one thing you’re talking about with Atlanta, which is an interesting interesting example is that for years after COVID they had issues and every county had different backlogs of what was happening with evictions and stuff like that. So if you’re a listener, you’re wondering how could it differ one county to the next? It’s because they might have a lot more evictions that were backlogged from whatever it might be, or they might just might be slower working through ’em as you’re being an investor in that county now it’s gonna be much harder for your property managers and for the g gps to really right side, or let’s say initially stabilize the property, right? Get people out that aren’t a good fit for the property and get new people in, that’s gonna take a lot longer. And that’s where this proforma gets messed up a little bit.

Marshall:
Exactly. I think evictions was the big, big lessons learned there. And if, ’cause some counties just would not evict and the, and the tenants, unfortunately, the residents understood that. And so they played the game some, and then you have a big backlog or you have a, a lot of people, like big percentage of people not paying rents and then you don’t have income and then you can’t pay your, your staff or your contractors and all that. So then yeah, that, that really hurts the property. Yeah.

Charles:
Yeah. And it’s it’s just the beginning to the end when that happens. But the thing though is that when you’re, when you have that good team, that’s where it comes in because if you have a really good eviction attorney that they, that your team is utilizing, that your property managers are using as well, they’ll tell you exactly what’s happening because they’re doing this all day long and they’ll assist you. So it’s all comes back to that gp, the team and all these different things kind of work hand in hand to making it for successful investment, which I have found over the years.

Marshall:
That’s why it’s important to go with a sponsor who’s has that track record, has that the long longevity so that they can, because they’ve come across, they built the relationships with the attorneys or the property managers and they, and they know how to handle situations a little bit better. Yeah.

Charles:
So Marshall, I mean, so many years you’ve been involved with investing in real estate. I mean, one, talking to people that are past investors that were active investors being both yourself, what are some of the common mistakes I guess you would see real estate investors make that are common to maybe repeat it by people that are beginners or maybe even experienced investors?

Marshall:
I think a lot of it is assuming, you know, the num you know, things or you’re assuming certain things. Like for example, you’re, I’ve saw some pro performance for multifamily properties that assume that contingency is only gonna be 5% or maybe even 10%. I like to have a little bit bigger contingency in there than that. Just, I know the numbers don’t work out as well in the end, but you don’t lose the property either or you don’t, you, you don’t have so much stress in the property if you have a little more contingency. So things like that.

Charles:
Yeah. I think the other thing too is like vacancies when people are going in and they’re doing a value add at vacancies at 5% or the brokers are doing, and it’s just like, it just drives me insane because it’s like, I don’t know where you’re getting this number from because it’s just, there’s no way you can keep this at 5% with doing all the stuff that you have to do in such a short period of time. You know what I mean?

Marshall:
Right. So you gotta verify the numbers, so you’ll see. And I guess one, one thing that I’ve heard about the brokers when they’re advertising a property and you’re looking at it as a potential buyer is it’s a, you gotta remember it’s a marketing campaign for them. It’s not necessarily, it’s the, I’m, I’m not saying they’re lying, but it’s, it’s the best it could possibly be. You gotta realize it’s gonna be a little bit less than that in most cases.

Charles:
Yeah, yeah. I was selling a property a couple years back and they sent me a copy of the perform on, I was like, what in the world? <Laugh>

Marshall:
<Laugh>,

Charles:
Where is this guy getting this rent increases from? And I didn’t ask him, but I was just talking to my partner about it and it is what it is, but it’s just like anybody in their right mind. I mean, just like you just, I’m the person trying to sell the property and I’m looking at it and saying it’s incredibly insane. But the thing though is that you just, this is where they’re pulling it. They’re pulling it from some like county number or something that’s not even close to where they are. They’re not like going on <laugh> going on Zillow or something and finding what my neighbor’s renting the property for, you know. So anyway, it’s just, it’s just how they do it. I don’t know. But so I mean, you were an investor for many years. You had a full-time job, you start investing again, starting in single family or into multifamily. What would be your advice to aspiring real estate investors? Maybe that already, you know, they have something going on. They already have a W2, maybe they want to invest in the side maybe they don’t know if they want to go active or passive. I

Marshall:
Think get, I mean, you know, you get educated. There’s a lot of stuff on you too, but then you gotta go past that at some point and join a mentoring group or a mentor and have somebody help you understand it and walk you through. Maybe you assist somebody else for a year or two so you understand how they’re doing it. So you, so you, you make less mistakes that way on your own dime, I guess. And make sure you have contingency too. You gotta have, you gotta have, not just contingency of money, but you gotta have, if you wanna turn a property around, you are not gonna do it in three months or six months. It may, it may not, not in every case you need a little bit more leeway on that, on that. So you want to just have a lot more give and take I guess.

Charles:
I think if you’re going into a property or a new investor and people are already, you know, I, I’ll talk to new investors in the last meeting and it’s like, you know, get longer debt, you know, get it fixed get a reserve fund, you know what I mean? You know, all these things you put together, you’re gonna be able to and make sure if, make sure you’re able to hold. If you can hold a property for 10 years, you can keep it going. You’re not, the chances of losing money are very, very slim. You know what I mean? You

Marshall:
Don’t wanna lose money. Yeah. You want to do what you can and put into place so you don’t lose money. That’s what, those are the things you want to do. Yeah.

Charles:
So I think those are some of the things that I’ve learned over the years when I talk to new investors is really just you know, and I think the other thing too is that when people are always talking about investing, another thing that drives me insane is just, they’re just talking about the down payment. There’s no, like, after I close, because there’s buying and there’s owning real estate, you know what I mean? Owning slash managing and now you need to have that reserve fund. You need to have funds available for doing work at the property for fixing stuff up. You know what I mean? And that’s kind of stuff that’s not talked about, you know, it’s all about, oh, how do I get the 25% or 20%? You know what I mean? And that’s it. Yeah.

Marshall:
So there’s, you know, there’s a lot of ins and outs on all in your day to day and your forecasting that you’ve gotta be prepared for. And that’s what you’re talking about there. So

Charles:
Marshall overall your decades of being a real estate investor being a, a professional engineer and all sorts, what are kind of some of the factors you think that have contributed to your success over the years?

Marshall:
Well, part of it is just showing up every day and doing the work, being disciplined about things. I mean, I learned a lot about that in the military. I learned a lot about that growing up with one of eight, eight kids. And my dad was retired army, so I learned a lot about that. And teamwork. You always, and, and just communication with people. You can, you can communicate the bad news and the good news. So you gotta be ready to do both ’cause you will encounter both at some point. So communication, discipline, showing up to work every day. A

Charles:
Lot of great information. So Marshall, how can our listeners learn more about you and and your business?

Marshall:
Well, they can always reach out to me on LinkedIn and DM me there and kind of connect with me there. But also I have a free resource on various types of syndications they can invest in. It’s called you can go to invest with the captain.com and find that resource.

Charles:
Okay, awesome. We will put those links all in the show notes. So thank you so much for coming on the show today and looking forward to connecting with you here in the near future. Thanks,

Marshall:
Charles, for having me. It’s been a pleasure today. Thank you.

Links and Contact Information Mentioned In The Episode:

About Marshall Sykes

Marshall Sykes is a seasoned real estate investor and the founder of Capitano Investing Group. Raised in a real estate development family, he began building houses and apartments as a teenager and now partners in over 2,000 multifamily units while managing a 25-year single-family rental portfolio. He has also found success in investing in oil and gas, tech startups, and other private equity.

A retired U.S. Navy Captain with 24 years in the Civil Engineer Corps, Marshall also led billion-dollar global projects at ExxonMobil. He holds multiple advanced degrees in engineering and military strategy and is a licensed Professional Engineer.

In his free time, Marshall enjoys spending time with his family, brewing artisanal coffee, weightlifting, and supporting Christian missions.

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