Scaling with Charles Carillo

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome to episode number 157 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. Thank you as always for joining and keep an eye out. We are now we've actually switched platforms. We're now recording on Riverside, which is a fantastic platform. But what we're able to do now is to simultaneously stream to Twitter as well as LinkedIn. And we've also been recording some of these on IG Live. So you might be on Instagram and you'll see that we'll pop up and we'll be recording some of these interviews live, which will also give you an opportunity to type in your questions. And on that note, why not email me@jamesperiodnelsonvisonyoung.com if there is questions that you have. Maybe it's a deal that you're looking at an investment. I'm always happy to use this time to share my experience as well as draw on the stories of many of these investors who we've had on the show, not to mention the lessons from the book to help you gain the insider's edge to real estate investing so you can outperform the market. So for today's show, we have with us Charles Carillo. And whether you're interested in active or passive investing, you're going to get key takeaways on how to expand your footprint from this episode. Charles is a real estate investor and entrepreneur who's been involved in multifamily and commercial real estate investment since 2006. He's the managing partner of Harborside Partners, a real estate syndication firm and has invested more than $200 million worth of investments to date. He's also the host of the Global Investors Podcast in which he interviews professionals about investing in the U.S. charles grew up in Connecticut, watched his father's practices, which include being an active investor with over 100 units in the area. This experience helped him learn property management, deal making with tenants and decisions on repairs. He has seen the flexibility his father was able to have as an investor. And during our conversations, Charles advises on starting out, such as with his two to four units of multifamily and that's what he did in 2006 when he purchased a three unit property and lived in one of those units. He put into place some of the knowledge which he's gained from observing his father's management and went on to purchase more properties, spotting opportunities to expand Charles foray into other areas of the country, starting with Florida, and he saw the synergies that could come from syndications and establish systems to vet deals and operators. Today, Having invested in 13 states, he mentions the value of looking for a job growth, population growth and decreases in crime over the past two decades in a region. He also has implemented strategies to create efficiencies, including using AI, which is something that I think we're going to be talking more about these shows moving forward. And along the way, Charles fielded questions from those living outside of the US who are interested in real estate within the country's borders. In response, he shared deal opportunities with them and developed resources related to foreign investing. He also talks about using his referral network to connect investors and legal work that he's been involved with. And he strives to educate those interested in real estate on the importance of studying locations, learning about markets and working with the right people to get ahead. So as always you can go to james nelson.com that's where you can find the show notes for this episode as well as links on how to find Charles at harborsidepartners.com and how to connect with him. We're going to have a brief word from our sponsor. We're going to get right into that interview with Charles Carrillo.

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And now with us today, I'm thrilled to have Charles Carillo who is the founder and Managing Partner of Harborside Partners. Charles, thank you so much for joining us today.

Thanks so much for having me on today James.

Wonderful. And we were Catching up before and I was saying I always love having a fellow podcaster on the show. I see you've got the right equipment, you've got the microphone, you even got the headset. So we're ready to rock and roll here. And I think, you know, we're going to deliver a lot more than just, you know, good quality audio today. So Charles, tell our audience a little bit about your story, where you grew up, maybe how you got into the business.

Right. So I am from a little town in Connecticut. I grew up in the real estate business. My dad has been a multifamily real estate investor since 1984. So I kind of grew up elementary school, middle school, going to his properties and him and the partner, they owned about 100 units themselves, not in the most say less ideal areas, let's just say of parts of Connecticut. And in, in those areas, it was just something that I, I like, didn't really like too much, didn't really care too much for real estate investing. And it kind of got bit by the bug at the end of, I would say high school, college. I bought my first property in 2006, which was a three unit property. And back then we didn't have a name for it, but now we call it like house hacking. And so that was where, you know, we're living in one of the units and or I'm living in one of the units and I'm renting out the other two units to tenants and then bought another property in 08, bought another property in 09, 2010. I moved down to Florida in 2012 from Connecticut. So I had a professional third party manager that took over from there. But during that six years of 06 to 2012, I self managed the properties myself. And that was a lot of work, but I learned a lot about it. And since being down here in Florida for several years, we've really been focusing myself and now my partners and purchasing larger apartment complexes mainly throughout the southeast United States. Last year, in 2022, I sold all my small properties in Connecticut to a New York City investor. And just really focusing on three main markets down here, a couple different areas of Florida, Greater Atlanta and then parts of Dallas.

That's awesome. Now you've got a great story. I love how you built it from the ground up. And we're going to have a lot to talk about today on the show. So Charles, I want to go back to those early days of touring those properties with your father and you know, maybe, you know, tougher product. I mean, but what were There any observations that you had at a younger age as far as what works? You know, how do you manage property? I mean we talk about real estate being a hands on business. I mean what did you observe from your father that has stuck with you throughout your career?

It's mainly always buy better properties. That's number one. And it's not for the management headaches. You should be buying better properties. But also from an investment strategy of appreciation. Bad properties just don't appreciate. It's just how it is. They don't even probably hold with inflation for most of it. My dad took a lot of these properties over from people in the late 80s where you could just sign over loans and all types of stuff that you can't do today. And that's how he acquired a lot of his stuff initially from people that got in over their head with stuff. And then my dad was able manage it. He had superintendents but he never had a management company. So it was something where he was more active in it. But it was, you know, they're just. When you're getting into like, you know, D class properties and stuff like this, you're, you're getting into a tenant base that is, it's tougher to manage, right? It's tougher to vet people, it's tougher, it's, it's very normal for people not to pay rent on time and it's. And this can even be when you're getting into C class properties. Myself owning C class properties for you know, 17 years or something, it was something that you know, you get paid, you'll get paid a large amount of your, your rent on time but a lot of it just trickles in throughout the rest of the month. And that's really the tenant base that you're working with in these properties. So it takes the right investor and the right management company to, to manage those properties. The other thing too is when you're in those less than ideal D class properties and you're in these areas that just aren't. It's very difficult to find people like you can't just bring it to a management company. Everybody throws around like oh, just have a property manager manager property. You're not going to find a property manager that's a good property manager that's going to manage your, your D class properties. And then the other part of it too, which is, which is something that you, you know, you always hear the word like or you sometimes when you hear these properties you'll hear slumlord. But really it is when you're operating these properties, there's stuff that's broken in them and there's stuff that's deferred. However, it's really difficult to corre correctly fix them. You know what I mean? You can't make money in the property and you can't provide the housing. And if you don't make money, the housing is going to go worse than it is. So there's a really fine line. It takes the right investor in those properties to do work that you know, to do your main work and right on the property. But it's also, you know, keeping hot water and heat on and all this type of stuff. But you might not be able to upgrade the kitchen, you might not be able to upgrade someone's toilet, you might just be able to fix the toilet, you know what I mean? And these are the differences between kind of the properties we work in now, where we're going into properties and we're really. There is the upside there of really renovating the properties. When you're dealing with like less than ideal D class properties, there's not really upside, right. You're just the only thing is to get, make some cash flow off it, which these brokers will sell it as the best cash flowing deal you've ever seen in your life. And then you get in there and you figure out that while not everyone pays on rent on time, just like I pay my mortgage on time and you, you really learn that it takes the right person to really manage not only the tenants and the issues with the property, but also the neighborhood too. I mean you're in these areas that are very crime ridden, right? For the most part, many times I've had to go, I had to go with my father to look through mug shot books. There was dea was at his building a lot of times. Doors kicked in, doors drilled out, doors finding heroin needles in the hallways. You can't pick up the trash in the front yard. I remember with, with your hands, you had to rake it up because there could be needles in it. It was just like, just terrible, terrible stuff that coming from, you know, suburbs of Connecticut. It's not something that you normally run into. And that was something that really. I hated dealing with it. But I also saw when I got a little older all the benefits that real estate offered to my father, which was a huge time benefit which a lot like other parents of my friends that were attorneys or doctors that had more prestigious positions, right. Let's say were not able to make it to their lacrosse game, right. Or come or Do a vacation that was more than 10 days or something like this. And that wasn't anything that our family really dealt with. So that was, it was a blessing. But you also see both sides of the coin.

So, Charles, really appreciate you sharing that experience because at this time in the market, you know, there's no doubt going to be distress and you know, there's a lot of opportunities that are out there that look cheap. I mean, I remember, I mean this has got to go back probably 15, 20 years. But I remember I sold a 40 unit apartment building in North Philly for like $300,000. You know, you look at this, that's what one apartment would go for in New York. And you know, look, a lot of the times these deals, maybe they seem very cheap, but then the question is, okay, well, what else goes into it? You know, and that's, you know, that doesn't just apply to, you know, class D housing. I mean, it could even apply to office buildings. Today you look at what an office building costs, that's just where you get in the front door. Then you, the base building work the concessions, the ti to lease this up. So really important to understand kind of what goes into this. And I think it also plays into the conversation station of being realistic with your time and are you able, you know, again, if you want to do multifamily. Right. It is a hands on business. And is this something that you're prepared to do? Because like you said, you can't just hand this off to a manager. So. All right, so. So you learned that you wanted to kind of position yourself maybe in some, you know, more kind of class AB type apartments where, you know, when you do a renovation or, you know, you can get a much bigger pop. So was that like, talk about that first three family that you bought, Was that during college? Was that after school? How did that all happen?

Yeah, so I had just graduated college in 06 and I have to tell you, James, I know North Philly. My brother went to temple for a year and I know, yeah, that's, that's a tough area, very tough area where you have that property. But when I was, I started right after college and I bought the property like a mile and a half from where I went to school in Connecticut. And so the first tenants were all people I knew from college that hadn't graduated that were renting out those properties, renting out those units. And I got a little bit over my head. Not majorly, but it was more of a major renovation than I had thought. Getting into It. My dad was kind of acting as a mentor, not really a partner on this. So he was kind of telling me, the area's good, this is fine. But then there's other things that pop up, you know what I mean? And you learn. And on my second property a couple years later, that was when I bought a property that was in much better shape, literally only a block and a half away. So it's funny how real estate is super, super local and how neighborhoods change very quickly from neighborhoods and properties can change. And like, it's. It's important to know that and know where those lines are when you're buying property. But the first three unit, yeah, it was just a regular house hack. I was able to have the majority of my mortgage taken care of by those two units that I rented out. And you really learn the intricacies of actually signing leases. Never signed a lease on the other side of it before. So I was preparing leases, signing leases when there's issues, putting together handymen and contractors to fix stuff, and then everything else that goes with it. I was renting the apartments myself at the beginning of it. I was mowing lawns and doing all that stuff myself as well, which I took off my plate later down the road, but just a lot of stuff. I think that new landlords do a lot. They really wear a lot of hats. And unless this is like your dream or this is, you know, this is really what you want to do with your life. I mean, that's why it might not be the best thing of being active real estate investor.

Yeah, you know, I. I did. Interestingly, one of my first investments was a three family as well. This was more of a weekend place up in Cold Spring, New York. And we, we just love going up to the area. So we. The idea was buy a three family, have a unit that we go visit to, and then have the rents take care of the mortgage. And I learned about a lot of the things you did, you know, whatever it takes, the maintenance and the landscaping and all that. And look, it covered the mortgage. But, you know, long term, I saw the benefits of appreciation because I bought it at $350,000 and sold it for 515,000. So that was, you know, and basically got to stay, you know, rent free. Now, obviously, for that to happen, the area has to appreciate, so you have to hope that the market's moving in your favor. But that was a great way to get into it. And I just have to ask you this question because it's interesting when either going into business with Friends, partners. But kind of that dynamic of having friends who are also your tenants. Was there ever, you know, some weirdness with that or was that, you know, because it's interesting. We, I had Drew Brennaman on the show also and he kind of did something similar in college. And we do get a lot of college students listening. So I guess I'm asking this question for them. You know, the idea of, you know, buying a place around your college and filling it up with students. Any guidance you would give there?

Yeah. So it was only for like the first year, I guess two years. I had, I had one, I had one friend that just would not graduate college or maybe two of them. And they just stayed in, they just, they were long term tenants. But I had one unit that was, that turned over after one year and I had to rent it out to people that were non friends. So it's difficult up front and however they're getting a great deal, you know what I mean? So maybe it wasn't the most professional management experience that they've ever had in a property, but they also were paying probably 50% less than they should have because I didn't know any better. And I. It just really takes laying down the law, I guess you would say, and lack of better words. And that can be with all types of tenants. And I found it where, because I would have, when I, when I was getting to the end of my like self managing properties like in 2010, 2011, I would have a. You send out, you have a lease that no one ever reads, let's be honest. And then you have a. I'd put a cover sheet on top of it with all the important parts of the lease which would have late fee if you're bringing out your trash can when it comes out, stuff like this, who you call how you pay rent and those are like the main, main things. And I would walk through people with highlighter and like see that and like, hey, if you don't pay your rent on time, it's $50. The thing I did with like roommates after I had them for a while and people living in the house that were friends, as soon as like they missed rent, it got sent, it got moved to a weekly Friday payment, you know what I mean? That was like, that was how I sent it to my own collections right when I was like, all right, we're not waiting monthly for you paying rent now. You have to give me something every Friday. And I don't care what it is, but you have to give me something Friday. And I would do that with tenants, you know, in that I had a deal with, in C class and they say, hey, I can't pay my rent. Okay, you just have to like, you have to give me something now. I'll write you a receipt, but like, I need something like today. So, like now. So give me anything you have now and I'll write you a receipt. And we can, you know what I mean? We're not just going to like, put it on that everything's fine. You have to give me something to keep this, to keep us, you know, you living here and everything going fine. So I think it takes. It's hard for landlords to do it. It was hard for me in the beginning. And then after a part it's just like, hey, I'm fixing everything when they call me. This is a business relationship. And, you know, I'm not slumlording this. There's no issues with this property whatsoever. Because that's when you hear about issues with your property that you didn't even know. What happened is when people owe you rent. But the thing though is that it's just. I think it's just being as professional as possible and just kind of making it very stringent. Like this is what happens, you know, if you call me, there's an issue, it'll get fixed in due course, you know what I mean? And it'll be fixed depending on the importance of what it is. If your heat's not working, that's very important. If your blinds don't come down, that's not as important. So it's, you know, people have to understand this and have to understand the type of property they're living in as well, which is something with C class people they might want. Oh, well, that person downstairs got a whole new renovated bathroom. Well, we. That the whole property, you know, the whole thing was demolished with the last tenant. That's why we did it. You're not going to get a new bathroom in your house. You know what I mean? Um, so I think it's just good.

Lessons learned, you know, doing it yourself and, you know, at least you understood everything works. So when you did eventually bring on third party management, you could still, you know, you know, know how it all works. So. So, Charles, from. From there. Where did you go to, you know, a point where. And I, I know in between that you started a. What was it? A. A payment processing business. And you, you. It sounds like it scaled to like a billion dollars. What was that all happen?

Yeah.

Simultaneously with real estate.

Yeah, I started at like 05 in college. And my brother came on board years later to assist me with it. It was, it's in transactions. So you get paid a very minimal amount in transactions over those like decade plus that. I was running that mainly full time and my real estate was part time. And then I really took that off my plate a few years ago and my brother runs that full time now. But it was something that really, it was. We, we did a lot of payment processing for businesses so they accept credit cards, checks, online, stuff like this. I had a lot of clients. I kind of like focused into a niche which goes hand in hand with my podcast now. A lot of niche with, with partners and with also with clients that were in Europe and that processed a lot of volume through their different businesses through there. And we did like credit card processing forum, Visa and MasterCard processing. And I'd be over there on business trips and I spend a couple months a year over there. And people would always ask me about how to like they'd ask what else you're investing into. Normal business conversation you would have with someone, right? And I'd be like, oh, I'm investing in the US real estate. And this or that night, this is before I got involved with un syndication stuff. And they'd be like, well, how do I invest into that? And I had no idea. So I kind of set my whole podcast, global investors podcast around that idea. But yeah, the payment processing was something I ran on the side. I will ran it full time before going full time into real estate. And that really allowed me to, to buy more real estate. And it also, that's a business like most businesses where there's ups and downs, right. And having the real estate really cemented the idea that you need to have additional additional income streams that aren't dependent on your normal, let's just say day to day, nine to five, right. So that was one thing that I really draw drive into all types of investors, I guess. Investors, business owners, more entrepreneurs, anybody like that. And I'm like listening to, you know, the real estate and going passively with it gives you another. Diversifies you away from just the stock market, but also gives you another income stream that can weather any type of issues that you might have in your current business or lulls.

So I want to ask you about because, you know, if you take a look at your site at harborsidepartners.com, you've put together a lot of resources. You have this guide to passive investing. You said you started a podcast very early on before you really understood exactly how to do this. I love that you started exploring, hearing from other people. So kind of what came first? Did you say, okay, I'm going to put together all this collateral, figure out how to do this, try to bring on investors and go find deals to invest in? Or did you keep buying one property out of another three units turned into six units, turned into 20 units and then you said, okay, I got to bring in some friends and family money. Maybe just talk about the evolution of not just your investing, but also, you know, what you did to, I would imagine, cultivate new investors with this content that you put out.

Yeah. So when I started, when I started getting involved with syndications, I think it was like 2018 or so and I had business partners from my payment processing that wanted to invest into real estate deals that we're doing. And I initially was like, oh, we'll do like a smaller property, we'll buy it. And then it just doesn't work out legally for that. It's really because you have one part of it that's passive. So legally it just doesn't, it doesn't work. So we, you know, I started looking into doing passive, passive syndications, larger investments where you had a branch of them being passive investors. So I had my investors really lined up, which was out, which was different from my other partners because when it came time to, to do the deal, a lot of it was a first time syndication for most people involved with the deal. And a lot of investors from the other partners I was working with backed out. My investors didn't. And I had to raise even more money from other investors because you have to get over that line of buying the property. You know what I mean? You have to raise that money. So it really, there is really a turning point like in maybe 2016 or so where I came to the realization that if I really want to scale my business, real estate portion of the business and do that full time, I really need to take money from, from past investors, third party investors to invest in the deals. I was doing something I tried to avoid my whole life because I learned about syndication 08 and I was like, oh, that sounds terrible. Asking people for money and no one likes doing it. But it's something that when I turned it around and I saw that people were asking me to invest in without even a property, they're just like, hey, if you have a deal, let me know. Do you have a deal, let me know. Then I let people know, hey, we have a deal in Tampa. This is what we're doing with it. This is what's happening. And people are like, okay, just send me out the paperwork and the wire instructions. And you know, because I had been working on those relationships for many years. And so that was the thing is when we, when I did that first deal and then you're like, okay, we're gonna do a second deal. That's really. When I started, I had gone through one deal because my first investor was actually a European investor. So I kind of had an idea of what the process was. And a couple months later I started the podcast, Global Investors Podcast. And you know, the majority of our investors are US based investors, but we, we do have a, we do have a significant amount that are non us. So it's something that. Working with a lot of non US investors to kind of get them set up with the correct CPAs and the whole team over here so that it can be done correctly and most tax efficiently. But yeah, it was, there was an aha moment there that you. I had to make that decision to raise money or stay small, only doing your threes and sixes unit properties and just like do that for the rest of my life and build a portfolio, which there's nothing wrong with that. However, if you ever want to invest outside of that market where you've done it or that area or that neighborhood, it becomes very expensive because now you have to restart it again. You know what I mean? You don't have a team in the place there. So that was something that I saw. Syndication and working with partners, especially now, we work with a lot of experienced operators in these different markets we partner with. And that gives us a lot of diversification into new markets, into, you know, different properties and stuff like that for us and our investors.

So I want to get to that. But let's first of all talk about this book or pamphlet that you put out, a guide to passive investing and real estate syndicating. So give us a little syndications, give us a little sense of what that book is about. What are kind of the takeaways that you're helping educate potential investors.

Yeah, thanks, James. So that is. The booklet that we put out is a guide to passive investing real estate, as it says, and it's really breaking down exactly what syndications are and what is meant by passive investing. And syndication sounds like a really. It sounds like a very professional word, a very illegal jargon word, and it really breaks down exactly what it is and how this asset class can now be open to really common investors that previously was just open to what we'd call like country club investors. Right. And it breaks down exactly what the pass investing model is, kind of how it works, how returns look, what minimum investments look like. It's breaking down exactly how the process works all the way through. So when, you know, we have a conversation, then maybe a few months later you get a deal from us. And if you want to invest, how that works, how many weeks you have between the time we send out a deal to the time that you have to invest, and how you do your due diligence, how you vet not only the deal, but also vetting the sponsor, which is even more important than the deal. And then all these different things. And that's what I've really spelled out in that guide there. And that's really what all the resources and the podcasts really go to in Royal, as well as just kind of encompassing it all together into assisting people making better investing decisions, whether it's active or whether it's passive.

Perfect. Okay, so now let's talk about this platform that you've established. Right. And so I see it looks like you're in 13 states now. You said that you partner. So is your model going to find co GPS partners who you go and do deals with and then part of your value add is, you know, you bring investors to the table? Is that kind of the model of what you're doing?

Yeah. So those are, those are markets on our website. Those are markets that we have invested into and we might have investments there or we might have previous investments there, but those are really the, those are really the states that we would look at to investing, let's just say. So those are mainly business friendly, landlord friendly states, number one. And statewide, let's say not market specific because that'd be very difficult to put on a map on your website. But statewide we are seeing job growth, we are seeing population growth, and we're seeing decreases in crime. So those are really the main things. From a state level. What we're looking at going forward then how our model has really changed from is that if we have properties where we are in Florida and they're in what we call our backyard, we can be more of a boots on the ground type operator partner in the group. However, we partner with a lot of experienced operators that we have invested with previously, whether that's passively or whether it's something that we have actually done a deal with them before as a general partner that we know in an area where they already have a network, a team on the ground. And this allows us to Tap into that. So if we are, if we have an operator in one market and they've got six properties there and this is going to be their seventh property and they've got the contractors, they got the property managers there, they got everything all set to go. We literally are just riding in on their coattails with us and our investors into the system they have. Now what we can do is we can then assist with part of the asset management, which is getting on weekly calls with property managers, which is reviewing where we are with vacancies, how many units have rented, what is the method that we are finding people that are actually renting, whether it's like partners.com or Zillow, so we can double down on those and really maximizing on the management part of it. And then also, yes, we do bring investors to the group as well. We'll also usually sign on the debt, the mortgage as well. So there's many different things that we'll bring to assist the main operator partner that we're partnering with, but and also some things too that they can offload onto us so we can assist in. But really they're going to be the one that's going to be on the ground, boots on the ground and really dealing with the contractors. And we're going to be really doing a lot of in location independent type activities with working with the property manager, which we don't meet them on site. You're really talking to them on the phone or on a zoom.

And are you still doing direct investments on your own or is this your new model? Do you partner on pretty much every investment now where you're going and finding sponsors, looking to get into deals with them?

So for anything on the long term that we've done, it's all been done through sponsors and partners. We don't do anything ourselves right now. Would that change if I found the right partner? Yes, I always would keep that option open. Possibly doing something with my, you know, possibly with my dad or my brother if we did something just a joint venture type thing. But really what we've been focusing on is building up our model because it gives a lot more diversification to the markets that we can now invest into. So your money is not all in all these properties in Tampa or in Orlando, you know what I mean? Now it's spread.

So you're almost like a capital allocator in that sense where you're putting together portfolios. So when someone invests with you, are they investing in a specific asset or is it almost like a fund structure? Where you're in multiple deals, we are.

Doing a specific property and this allows the investor to understand that property 100% the fund model. I've invested in fund models before passively, and I understand them and I see the benefits of them. But also with the single asset model, it allows people to know exactly where their money's going. If you're investing into a fund that's going to close in December and it is June, you don't know exactly where the rest of those properties are going to be. You have an idea because they give you an outline of what they're looking for, but you don't know the exact numbers of what they're going to purchase. So it gives people a little bit more control. When you're doing a specific asset by asset investment structure, they know exactly the exact numbers for the property. They know exactly how you're financing the property. They know exactly what, what the comparables are. When you're investing to a fund and there's, you know, 3,000 units and all in eight different properties and all this different stuff, I mean, it's just overwhelming with it. And you're really putting your trust 100% into the operator, whereas this, yes, you're going to trust mostly on the operator, but you also can do your own due diligence and I can pull all my different crime reports and everything for the property passively. Whatever I need to do to make myself feel comfortable with investing.

Absolutely. So talk about. Also part of what you're investing in is obviously the deal. So maybe talk about what makes for a good deal. And then equally important is the sponsor. So I guess the second part of the question is how do you vet the sponsor to make sure that they're reputable and they're going to be able to execute on the business plan.

Those are great questions. So the, the deal specific, I would say is what we're looking for in deals. I want to see something 1985 or newer built property for vintage. I want to see properties that are in B class areas. We don't really deal with A, but anything like a B minus B, B plus area. Those are perfectly fine. Those are going to be areas where you're going to get good credit tenants. That means tenants with credit that probably want to buy a house or access credit in the future, which means they're going to pay their rent on time. That's very, very important. I want to see areas where we have increase in population, increasing job growth. I want to see a consistent decrease in crime over and all these Numbers, let's say over a 20 year period. And that shows that there's been a lot of reinvestment into health care and into education in that area. So these are important factors to see where the future is of the area you're investing into. And then for deal specific I would say we want to be looking at as well is any comparables in that area. If they're telling me that rents can go to $1300, where are those comparables that they're using? You know, I want to see what that property is and they'll list it in their offering memorandum. And you can check those, you can just put them right into Google. You can review their goals, you can see what they're renting it for. You can call the people. And that's where you're really doing your due diligence. Because if someone's telling me, oh they can go to 1300 and I'm calling around and people are getting like 1310 or 1290, that, you know, that's your business plan doesn't sense make feel great. If I look around I see that people are getting like 1400 and you're just being very conservative or conservative. Then I say, okay, now this is, you know, now we have a little bit more, these are fatter deals. If there's any type of issue, we have that buffer zone. And that's what makes me feel better. Operators is a whole different thing. Number one is the more sophisticated investors I that invest with me is that they are focusing more on the operator than they are in the deal. And that's how I've changed my mindset over the years when I'm investing passively into deals. So I want to see people that have, first of all that have, have done their own deals themselves with their own money. Right. Preferably people that have been through the 2008 Great Financial Recession. And I want to see how they have done in their investments that I'm investing into. I want to see the markets that they're in and I want to see that I'm buying a property or investing into a property that they're purchasing in an area that they have, you know, that they, that they are a seasoned investor in. Right. That they have many properties there or at least, you know, it could be multiple properties there is really what it is. And just that they have a team on the place. I don't want someone calling me after six months saying, you know, this is our first property here. The management company's terrible. Now we're like changing this around and it's going to like, disrupt everything for a few months. I don't want to get into anything like that. So you want something that already has a perfected business model and we're just like getting plugged in there. That's one thing I want. And I also want to see that, you know, multiple groups partnering with other groups and other people that have control makes it good as well. Because if someone, someone passed away, you have someone else that's at the reins that can run that deal. That's really important. You just don't want, like one person, you know, I mean, running the whole deal that has all of the power. You want there to be other people there that have control. And if we're getting in there on the general partner side, that's going to be something that we ask for as well. You know what I mean? Having access to all those financials, not just getting pictures of stuff, but having links to bank statements, financial statements on a regular basis so we can do the verification there. But really it's a track record. It's a track record that someone's invested, that they, they understand the model. This isn't their first or second. And it's difficult now where we are in this part of the market cycle, because if anybody's invested in like the last eight years, I mean, no matter how terrible investor they are, they've made money for investors and they've probably outdone what they thought they were going to tell their investors. So it's really, you have to kind of go back more and be like, well, how did you deal with, like, through these different upsets or issues you had with properties? You know, how did you deal with it? What was it? How did you fix it? And like, where's the property now? Or what happened to the property?

So you bring up a lot of good points and questions and first of all, checking track record and making sure they have expertise. This is a lot of the things that I talk about in my book as well. Whether you're looking to invest yourself as a general partner or even be limited, you're going to be limited then. Yeah, you need to make sure that who's running the deal has that expertise, has that track record. And I like what you said about having that access to information. Because, you know, if you're a limited partner, you know, you got to make sure that you're getting, you know, good reporting, you're getting the information, access to bank statements, like you said. I think the last piece of that, and I would ask is you Know, integrity. How do you know that this partner is going to do the right thing by their investors? You know, how do you diligence them? How do you. Maybe it's references tell us a little bit about how you get comfort there on how the partner is going to be to work.

So myself and partners, yeah, references is one thing. And checking on people and obviously that is hearsay. Right. You know, it's just, you're listening to people. But I have a spreadsheet that, with operators that we've worked with or we thought about working with or that are just out there and we have notes with them of what we heard from other people that have invested with them. I'm very serious about partnering with one and actually raising money alongside them in a deal and managing part of the deal as well. We're going to, we're probably going to invest passively with them. That's how the majority of the time I would say we've done it and, or we're going to bring in a partner with us that has. So like on one deal we did one of our deals we did in like outside of Atlanta. One of my partners that worked with me and that would be my third deal we did together. And they, they, they had actually worked with the operator on another deal previously that went full cycle and they knew exactly how the person underwrit, how all the, all the deals were done, how they had it managed, how their business plan may be different from other people's business plan, how they weren't super greedy. So they sell when they'd get a good price even if they hadn't hit all their returns. I mean, these are all like, you know, you're making money. It's, it's, it's all good. Right? And they have different, everybody has a different model of how they do. You have some people that wait out longer. You have some people that want to take money right off the table first. But either way, it went through full cycle, which means that they bought it, they renovate it, they sold it, and they exceeded the expectations, profit wise, of what the, what the, what the general partner had stated initially. And then everything when there's an issue throughout it that's kind of like, well, what happened when, what happened when they had massive vacancies and it went down to like, you know, went from 99% occupied to 85% occupied over these three months. How do they fix this? And those are the stories I really want to know because everything's easy when it's running smoothly. It's really, like when there's issues and they're like, okay, this is what happened. We had a pause, distributions for six months, but we got this in there. We infused $200,000 as our general partners, we fixed this. That's who I want to be investing with. You know what I mean? Someone that's when there's an issue, they're getting in there. And they're not like they're getting in there, they're getting their hands dirty, they're getting it fixed and they're getting the asset to where it's supposed to be.

Yeah, I mean, I think being upfront, tackling problems head on, I mean, as brokers, when we bring product out to market, we do a lot of work up front to figure out what the problems are with the deal because we'd rather just tell investors up front. I mean, first of all, they're going to probably find out anyways and it's the right thing to do. But it's just, you know, it's again, you shoot straight. And I think you also kind of mentioned before, when you look at deals, are they conservative, are they realistic, you know, are they trying to, you know, oversell it? So I think these are all really good things to look for. So I'm curious also, you know, there's a lot of conversation always about on market, off market, you know, when you're looking at these deals, are you trying to get a sense of when you're buying into something, you know, has it been shopped? You know, how do you know whether or not it was a good price or not? Maybe talk a little bit about that. I see you guys went into a pretty sizable asset in Dallas with 536 units. I think there was also one in Lakewood with 138 units. So maybe talk about one of those deals. And how did you vet that? It was actually a good acquisition price.

Yeah. So the one we just did or the one we did, the last deal we've done and we closed at the end of 2022 and that deal was 536 units. And just doing the numbers on that and where we were at the end of 2022, we got a pretty sizable discount on that from where more realistic of what it should have been. But obviously the market was so high in 2021 and 2020. So it was when we saw a deal come through, it was passing all of our underwriting tests and the area was very good. And we were buying it from an operator that had really spent. I think it was $5 million on renovating the whole exteriors of the property. The only thing that was left with that property was interiors, which is usually the opposite. Normally you'll have people that go just in the interiors to renovate because that's where they can get higher rents. So we, when we came into this property we were looking at it and we knew that really built in the 8, built 85 I think and had just a ton of work done to it. There wasn't really any exterior deferred maintenance. It was really on the interiors that had been updated since really the 90s. And so that's how we looked at that deal and that's how we kind of when we went through it and we made like 109 a unit, which it should have been. I saw deals come up nearby afterwards that were closer to 130 and that's really what that price should have been two or three years ago. That's what it would have been. So when we're buying it out, you're buying a, you know, you're buying at a discount. And that was something huge that we want to get alongside with because number one, it was a, it was a great property, great area. I mean Dallas just has such a housing crisis right now for people. And then the other thing on top of it is the operator that we were working with, that deal, we love working with them. And they literally have within a 15 minute drive of this property, another 1500 units or another thousand units, 1500 now. And then within like an hour of this property, they have over 3,000. So the base, the operations on these 15 plus properties that they have in this area are fantastic. And then one of my partners had worked with them previously. So that made it all the better. And it was just, you know, we reviewed it, we put all of our numbers out to a third party underwriter as well to review what we're thinking. And we pay them on the hourly for that to see if the numbers that we're looking at are actually still accurate. And so we get that feedback back and then we can make our decision on, on where the deal is and kind of on where we stand on that. But that's really, really looking at is really checking out comparables. I really want to see what's around the property as well. It's really the Starbucks test, you know, I mean, how close to the Starbucks to that property and then want to see if there's new inventory, if there's new product in that area. And there was like a 200 unit, like Class A that had been built like 20, 21 or 2019 or something. And that's where you. So there's been a lot of money that's been invested into that area by new developers. And that's where you see that the property or the area is on the upswing. You know, it's, you don't see that, you know, it's just kind of falling apart. You see a lot of people coming in there and you see a lot of these higher income kind of retail, like I said, Starbucks. There's other ones like that where this is what they spend their time on and these companies looking at before they put in new locations. And that's what we're looking at as well when we're coming in there on the investment side.

That's great. So Charles, maybe talk a little bit about your, the big part of your business, I'm sure is building your investor base. So talk about how you do that. I mean, what's your typical investor? You know, do you have dozens investors? Hundreds, thousands? How do you cultivate those investors and then how do you retain them?

So with our investor base, the majority of the time that we found investors is really, we've had good luck on our, my previous business relationships or one of my partners previous relationships where we've found investors and cultivated them from there. But also we, we find them through our podcast through great podcasts like yours J. We also find them on LinkedIn. It's been a big source for us for finding investors. Typical investors for us are somewhere in the neighborhood of 50 to $100,000 that they usually start off with investing passively with us. We have a mix because some of our deals are for accredited investors and some are for non accredited. I would say two thirds are probably credit investor deals and I would say probably about the same amount. We probably have a little higher than that. Probably 75%, 75, 80% of our investor base is accredited investors. And so working with these investors, they're usually starting with smaller tickets and then they'll smaller investment amounts and then they're, they're really increasing that on future deals once we have deals that go full circle. So it's really, we put them into kind of, we have a whole drip campaign that we work with new investors explaining syndications because a lot of people don't understand the intricacies of it. They might have heard the word, they don't understand about it. And then getting investors in on a call initially with myself or one of the partners and then we can really, we Send out a whole, pretty much a whole folder, Dropbox folder of information to them with our, you know, our passive guide, but like a guide on syndications and previous properties we've done and before and after pictures and previous investment offerings, which is a big thing, getting people, hey, this is what you're going to see when a deal comes from us. And this is what it'll look like. And it might not be the same amount of pages, might be more, might be less, but this is the everything that's going to be in here. So when you do get it, when we do send you the email out and say, hey, here is a deal and you know, it's the first of the month and you can put in a soft commitment if you're interested in investing and get on a call with us and we can answer any questions just letting you know that, you know, all funds need to be in, let's say the 21st or the 25th. Right. So it gives you that time frame that, hey, I've got two weeks, I've got three weeks to really make my decision on if I want to invest into this property. And I know then if this is the information I'm going to get initially, then I know if I have to ask for more information or I know that I can then talk to whoever else is going to review it with me, they'll know. So when I get this deal, I can send it to them, they can review it, and we can get back in timely fashion. So really getting them prepped for what the deals look like and what the information is that we'll be providing to them, I think is a huge part of the investor relations. But the main part, I would say, is education for people in a new asset class. And then also pass. Investing is really a whole new part of real estate investing that most people don't know about.

Yeah, I was going to say that I really like how you lead with education and not just that booklet that you have on syndications, but I see you also have a guide to foreign investing. So when you have a glossary in terms and a lot of helpful resources on your site. So I think that's a really great way. Start by adding value, explaining how this all works, and then, you know, offering opportunities. So, you know, just, just quickly on that foreign investing note for, you know, we certainly have foreigners who listen to the show, but also maybe general partners who are looking to onboard foreign investors. You know, what short advice would you give there as far as considerations or things to think about when you're working with, with foreign investors. And I'm sure it differs depending on what country they're coming from.

Yeah, for sure. And it also depends on if they have any type of entity here or set up here in the United States already. My first passive investors were from work European. So it was something that getting them into the deals and explaining everything to them. But really a foreign investor in a nutshell, what happens if they reach out to myself and we're talking and we'll send them over a bunch of links of different professionals that we know of that could be includes attorneys, accountants. And it allows them that these people have worked successfully with foreign investors and can assist them in getting them set up to correctly invest in the US Real estate. Because I see people on forums like well I'm in, like, you know, I'm in Spain, I don't know what to do. And it's just like, you know, you're going to take someone's advice about what they would do if they're in the United States. Right. It's gonna be much different. And just a fact for people how this differs so much is that a lot of it's the same. But then there's some, there are some caveats like you know, for in the United States our if you have your estate tax is like free or zero, under $12 million or something. Right. For foreign investor it's like $60,000. Right. So this is how it dramatically can change if people aren't ready. And you can make $60,000 on a $50,000 investment in a syndication. It's not the most unheard of thing. So investors getting together us putting together with professionals, they can choose it. We don't have any kind of referral or payment off that or we just refer to people that work specifically with these, with these type of investors. They'll understand the tax trees between where your tax residency country is and the United States and they'll explain to you how the process works. And that's, that's really what we do initially. Since I am not a, an attorney or accountant or anything like that. It's really getting them put with people so they don't keep on searching online and find these people. We really have a whole Rolodex that we can send to them and then, and then yes, then they have to go through everything like everybody else with is, you know, finding the deal. But the main thing is if you're international, you want to invest in something like this, invest actively or passively. You have to go through the same hoops you know, you can reach out to us. No matter what you want to do, I will send you out or somebody from our team will send you out information on how to do it. And then the last thing is that it takes time, you know what I mean? So if you want to invest in real estate, you're not a U.S. resident, not a U.S. citizen. It's something where you have to start the process 2, 3, 4 months before you really want to do it.

Yeah, I think having the right professionals. And again, we never want to give accounting advice, we don't want to give legal advice. So it's great that you have essentially created a referral network there as well. So, Charles, this has been great. With only a couple minutes left, I want to talk about what are the traits, what are the skills that have given you the inside edge to real estate investing? And I've got to ask because I see you did earn Eagle Scout. I was actually just looking this up. I was a Scout. I only made it to Star, and only 6% of Boy Scouts make it to Eagle Scouts. So what, you know, what are these traits? What are these skills? Maybe it was something that you picked up, you know, through scouting that you've applied to your business today that gives you that edge.

I would say with scouting, it was something that I would have dropped out sooner if I didn't have my father's encouragement, let's just say to finish stuff that I started. And that's really important. I found something that I do throughout life and if something that I'm. If I'm something I'm going to do, I make sure I do it fully and I don't do it halfway. You know what I mean? Do it professionally, do it so it's correct and not perfect because that's the enemy of good. But it's also something that, you know, get started. It's better than being perfect. You can make it better down the road. The other thing too is I think all those years of spending time in those, in those drungy apartments and buildings with my father, collecting rent and talking to superintendents and tenants, I think was life changing because of how to deal with people, how to deal with people that might owe you money, how to interact with them, how to deal with people that you're in a business relationship with that might be not fulfilling their end of the deal. And how to look at properties and how to see you become very street smart. When you're doing any type of self management and C and D properties, you can pick up scams like no other after so many years of doing that. So it's something that, you know, having all that self management experience is something that I didn't love it at the time and I was so happy to get rid of it out of my day to day. But it's something that gave me an education that you can't, you, you can, you couldn't get from, you can't get from books.

That's wonderful to hear. And you know, typically my closing question is advice that you would give to aspiring investors. But I'm going to couple this because there's one other thing I neglected to ask you about and you said, and you know, some of your notes here about utilizing AI for real estate investing. That's, that's not something we've talked about on this show yet. I mean maybe we've talked a little bit about chat gbt, but you know, maybe it's advice to how to get into this. Maybe it's leveraging AI and anything that you would say on that front.

Yeah, so AI, we use a lot for keeping in contact with investors and it allows us to be more, more efficient on that front. Because you have some investors, I could send them any update, I could tell them anything and they'll never respond to it because they don't want to be bothered. They just want to sell a property, get money five years down the road. And I have other ones that respond to every email you send out. So having the AI that knows exactly how much email communication someone wants to get. I have some investors that invest with us that don't get our weekly newsletter. They don't want, they don't want to know anything about that. They just want to see deals that get sent out. And I'm on Latin other people's list as well. And the AI assists you with setting up people so they're categorized in the CRM correctly. And this is just small things that anybody can get for an email programs. But we've just realized that utilizing it and really integrating it in the beginning of 2022 in our business, it's really made it easier for us to follow up with investors that like talking to us. Some investors just sit on the list and don't want to talk to anyone and they just want to see deals and we know not to bother them. And if they reach out, they have our numbers. But the AI allows us to say, hey, this person's engaged, this person's not engaged, this person doesn't want to be engaged. And so anybody in any type of business where you're dealing with a lot of contacts. We have thousands of people on our investor list and it's something that, yeah, without it it would just be. It'd be a nightmare trying to manage people and you'd be following up with people and they'd be like, why you keep on calling me? You know what I mean? Just send me out deals when you have them and you talk to somebody that always want to talk to you. Every time you send me an email, they want to get them.

Yeah, I really like that. I might hit you up about the after the show to understand how to optimize communications. That makes a ton of sense to really cater to what people need. So what, just to close. What advice would you give for someone looking to get into this? And maybe it's just to make their first passive investment. And I know they can go to your site and they can, you know, we'll put that all in your show notes. But you know, if someone's thinking about ways to start off, you know, you know what, where do they start? I mean to find maybe the question is, I'm sure there's other people, other companies like you doing this. So how do they go and find these opportunities? Because part of the challenge is a lot of these, you know, it is. It's difficult to break in real estate especially, you know, these private offerings, you know, they aren't really publicized. So what advice would you give for someone looking to break into this and find these types of opportunities?

Yeah, so if you want to be a active investor, I would say number one is buy a property. If you do want to be an active investor and you want to learn about it and you actually want to do this actively buy a property. Buy a like 2, 3, 4 unit property so you can get long term fixed debt put together. Buy something that doesn't need much work, if anything. So it's going to be lower returns than someone showing you this dilapidated thing that has to be completely renovated. But get something very little bit of work required to get it going or you have already tenants in there and you're just going to be doing some work and add some value. You have the long term debt and make sure you have a reserve fund and buy in a good area and if you have all those boxes checked, you will be fine. Obviously make sure cash flows but you'll know your debt. So that's number one. If you ever want to be active, just start with something small and simple that doesn't need much work. If you want to go on the Passive side, then you're, you're going to be looking at deals, but you're also going to be looking at operators. You find a lot of operators by going to where they are. And it would be one thing by going why? When we find operators initially and when we worked that, it was a lot of conferences and it was a lot of networking. You finding people, talking to them, seeing what they have, getting on mailing lists, seeing what people offer, reading about them and then, you know, learning about. So you're. Because you're going to be vetting out deals, but sponsors, but you also want to be looking at deals. So have an idea, maybe do research, read up upon different markets that might interest you. If someone's focused in investing in Chicago and you don't want to invest in Chicago, that's not the person for you. If you found someone that's focusing on Atlanta and you love Atlanta, that's someone that might work perfectly for you. And you can now go in deeper to it. Is it the property types? There's so many different asset classes within real estate, multifamily, self storage, all these different ones. So find out, make sure the operator is doing exactly what you'd like to do, what you'd like to invest into, and then you can dig more into that. But there's a couple of ways of just those ways of really just filtering through and finding operators and then really kind of seeing if they have some sort of thought platform leadership platform like you do, James. It really allows people to learn a lot more about the person without really talking to them directly.

That's great advice, Charles. Thank you so much for coming on the show and sharing your story and some really practical advice that I know our listeners are going to get a ton out of it. So everybody. Well, I'll ask you, Charles, what's the best way for people to connect with you and find out more about your platform?

Yeah. So everything we've spoken about is on harborsidepartners.com and on harborsidepartners.Com we have a passive investing guide there. We have my podcast that I do two episodes a week. One is an interview and one is me just talking about everything from prepayment penalties to how to deal with tenants when you're selling a property. And then we have a weekly newsletter. You can sign up for all that for free on our website. If you're interested in passive investing, you can sign up right there. It'll get you on everything as we just spoke about. And you can get on a call with myself or one of my partners and we can learn more about your situation over a half hour and tell you kind of what we do and then we can provide you with a lot of information on deals so you can do start doing your vetting of us.

That's awesome. Thanks again, Charles. Thank you everybody as always, for tuning. If you haven't already, you know, please subscribe, leave a rating and remember, if you email Ann a n n eamesnelson.com with a copy of your rating and the your mailing address, most importantly so we can send you a copy of my book, the Insiders Etched Real Estate Investing, I'd love to sign one for you. It's my gift to you and I hope the show, as always, has given you this inside edge so you can gain the advantage to outperform the market. Until next week, thank you very much.

Thank you for listening to the Insider's Edge to Real Estate Investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at jamesnelsonnyc on LinkedIn, Instagram and Twitter. Please also visit james nelson.com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the Insider's Edge to real estate investing. Until next week.