CJ Calio's Real Estate Success Strategies

Hello listeners and welcome to Wine and Real Estate. I'm currently not drinking wine at the moment, but I just came back from an awesome trip to Dubai and Malaysia where I'm looking at properties. Dubai, I've already purchased Malaysia. Anyway, it could be in the mix. And today I'm excited to have a great guest on CJ joining us from Nevada and he's going to talk to us about the Midwest in the US So a lot of you have been asking where should I invest in the us So I thought why not? CJ would be a great guest for this. So welcome cj if you could tell us a bit about yourself and yeah, your background and 30,000 foot view of your life and what you've done so far.

Yeah, I appreciate the opportunity. So my story goes back to when we were in Hawaii. That's where I was born and raised and that's where this journey started. So interesting enough, before I got into real estate I had a really good profession. It was a UPS driver. I was delivering. Yeah, I was that guy in a brown suit, you know, what can brown do for you? That was me. And it was a very good job. Especially being in Hawaii with the high cost of living, clearing a good salary and having a consistent income really did support a comfortable lifestyle in the state. And me and my wife were satisfied and we one, one thing that I, I took for granted was Christmas. So Christmas out is the busy time of year for UPS drivers where that put on the brown sand all the packages. Yep. You know those guys ringing the doorbell pretty late saying hey, Merry Christmas. That was me up to this year that, that things shifted for me. I was satisfied. I actually enjoyed it. I enjoyed the thrill of being that person that put smiles on people's faces delivering packages. However, this one Christmas changed everything. And this Christmas was, I'd say about 10 years ago now when we got bombarded with so much deliveries and packages we weren't prepared for. We were understaffed, we were undermanned, we didn't have enough vehicles. And I found myself working into the early morning 812 3am still, still delivering packages for a period of five to six months. It was brutal and obviously sleep deprived, stressed, overwhelmed. All that emotion got me, got me thinking that there's got to be another way. You know, this isn't what I signed up for. This isn't what I'm willing to put up with for the next 20, 30 years till I retire. So something's got to change. And after that Christmas died down, I'm still in an Emotional state. I approached my wife and said, look, can, can I quit? And I was surprised with her response. She said, yeah, I just got one question for you. How are you going to replace your income? I didn't think about that. You know, it never dawned on me that, yeah, I'm giving up a very good paying profession because I don't want to do this anymore. But I didn't provide her a solution. So the funny thing was, is during this whole season she was already researching what are options for us to do to get me out. And one thing she pegged and stayed consistent with researching was real estate and specifically rental properties that produce cash flow. And when she proposed that idea to me, I was very hesitant, very, I guess you would say resistant to the idea that real estate could even be a thing because I have no background in real estate. I don't know what, I didn't know what, what an agent was or what they did. I didn't know how mortgages work. I didn't have any trade background. So it really intimidated me. And strangely enough at that moment I pushed her away. So she's my supporter, she's on board and yet I pushed her away. And I got, I got into more of a business setting startups and multi level marketing, you know, network marketing type of things. And the funny thing is, is I did a bunch of those and they didn't work. You know, like most startups, they don't, they don't last. And six, nine months later, more frustrated, more upset and, and distressed, not seeing a good result that's going to get me to my goal. I was able to humble myself and come back to her because she was still talking about real estate. She was going to all these really crazy meetups. I thought they were cults and speaking with other investors who were doing what she wanted to do. And you know, I got to humble myself. And as I went to these meetups originally, I was very standoffish, I was defensive, I wasn't approachable. And the more that she brought me to these things, the more I started to hear testimonies of success, hearing sharings of failure and, and lessons learned and things that normal people would say, oh man, that happened, I'm quitting. These guys did it. They took that and then learned from it and adjusted their strategy to then go back into the game. And it really brought up a sense of, of courage for me to then put myself out there. And over time, through the networking events, I got confident and I said, you know what, let's, let's Do. Let's do it. So we started off with our very first property out in the Midwest. We bought a turnkey property. I didn't know what I didn't know was available. And what I did find out at the time was turnkey was something that could get me started. And from there the bug bit, I just started looking for more deals, building relationships and teams till about five years later, me and my wife were both able to walk away from our W2s and do real estate full time. And the cool thing is after we reached a level of success, people were interested in knowing how did we do what we did. And from that I got to go back into business and I started a mentorship company that does help people learn what we do and apply what we do to have what we have. And it's been a wonderful journey for the last almost nine years now.

Wow. Congrats. Maybe for a bit of context for the audience. So Midwest in the US where is that exactly? We're not super familiar in Canada.

Sure.

Kind of have an idea, I guess Chicago is sort of Midwest Illinois, but.

Yeah, it's not far from there. And there's like that Midwest belt that people like to reference to for rentals. And we started in Indianapolis. However, our primary market is Kansas City. Kansas City, Missouri.

Okay. Wow. So fairly central and kind of affordable properties. I guess they're not like top high end. You're not dealing with California pricing or, or Hawaii. Yeah, yeah, Hawaii. Yeah. Even worse probably.

Exactly right.

And then you mentioned turnkey. So they're all renovated and tenanted properties or how, what's the, what's the mix there?

Yeah, so we started with turnkey until we, we ran out of money. You know, you eventually, you know, your capital runs dry when you're putting 25 down and that's, that's tied into the asset till you do something with it. And, and from there I shifted into looking into what are other strategies for me to continue my growth. Because 4, 5, 6 deals of turnkey properties didn't get me to my number of cash flow. I needed to do my job. So we had to, we had an opportunity to pivot and we pivoted towards what's called the burst strategy. For those that don't know what that is, it's a buy, rehab, rent, refinance, repeat strategy where you're able to take limited capital and use it over and over again when you, when you do it properly and do it well. And that's really how we were able to shift from trusting and relying on Others to producer prop property or a performing asset to taking more control as an active investor and creating the results we were looking for so we could scale quickly.

Great. And then the BRRRR, what did that look like for you? In the U.S. like Canada, the BRRRR strategy is usually adding a basement suite or now the province where I currently live in, in Ontario, everything's been rezoned as triplex. So you're adding two suites to any single house and then you're able to refinance. Is it something like that or similar?

Yeah, it's. So it's similar and it really depends on what you're able to do in the market you're in. So in our market it could be as simple as taking a property that just went vacant that the owner doesn't want to renovate or bring back up to rental condition and doing it that way to the extent of I'm, I've done firehouses where there's no roof and you got four walls and that's the extent of it. And you get to play with this strategy, which is why I love it so much. It's such a freeing strategy. Depending on your risk tolerance, you can play with it on a very light to minimal rehab to basically building a brand new house. And the spectrum is so broad and we, we do a lot of basement value adds like you were mentioning. We're able to convert an unfinished basement to a livable square feet, maybe a second unit almost like an accessory dwell, additional accessory dwelling unit or adu. And we also have done like what you would say ground up development style where you buy a piece of land where the space is so large in the area you can actually subdivide it and build up multiple properties on the original parcel you bought with individual addresses.

Okay. Yeah, the US is very different for that. That's why I think it's a favorite market. You deal with a lot of distressed properties. That's not really a thing in Canada. Like you don't see abandoned houses or things that are burnt down or things like that. Or even really large lots are very uncommon now. But I know in the US as you drive around suburbs, there's some little houses with huge lots in fairly central areas and you're able to re like subdivide it and create value there. So that, that's amazing. And now you mentor people on how, how to do it as well. So can you tell us more about that?

Yeah. So the thing like I was saying about reaching my goal or our goal of both leaving our Jobs and doing this full time is people start to take notice. And I wasn't thinking that that was going to be an opportunity until I got enough people asking me, I want to learn. How do you, how did you do that? You know, I, I want what you have and I'm, I'm willing to do what you did. And I felt kind of into that business of mentoring. Where I took on people originally was just word of mouth or close acquaintances. At these REI meetups we're going to, that really wanted to commit to doing the work. And from there we've grown it to where we're helping over 100 people now in our space. And we're able to do this so, so freely because it's virtual and long distance. Right. Like, similar to like your investing style. It's out of country. There's that huge distance between you and your property. And I'm sure you're like us where you have team members, you have points of contact that can support you in these markets. And that's what we have. So we have people from Hawaii all the way to the east coast, part of our group that are learning to do and, and take action on all the steps that we've done to begin their, their journey in real estate investing afar.

Yeah. And I find it's actually even easier long distance investing because if it's close, that's how I started then anyway, I'm a bit of a control freak. I started mowing the lawn myself. It's not done properly. And then painting and then you're fully involved and you have no time and that defeats the purpose. You're going back to UPS and working until 2am so if it's long distance, you got to rely on someone, your team. Can you tell us maybe more about building that power team? Because that's a question I get asked all the time. How do you find like property management, renovations, all of that?

Yeah, and I get asked that a lot too. We're in a similar position of investing with distance. For me, my, my initial suggestion is start networking. Right. So we started in a group in Hawaii. However, they were investing in Indy and I was able to meet and network with those people to get contacts that got me pointed in the right direction. Now I like to say be, be mindful of references or recommendations because there's so much in this business that's relationship driven that just because they work with me well doesn't mean they'll work with you well. So we use the term trust but verify, meaning if I refer you or Recommend you to somebody and go and do your due diligence and homework and interview them. Make sure that they're in alignment to your vision and goals. Because if they're not, that's not a team member you want to work with. So starting off with networking events, finding others who are doing what you want to do is a great starting point. Another thing I've leveraged heavily is social media. Joining all these online groups and Facebook and Instagram groups and being a part of them, where there's a lot of virtual meetups now where you can do exactly the same thing from the comfort of your own home and having those conversations and sharing your vision and your goals with anybody you can. So you can start to pick up. You know, the thing is, is when people start hearing, oh, C.J. is looking for a property manager at all these events, people may not be the property manager, however, they know somebody who is or heard of somebody and they connect me to them. Now they've done a lot of the work for me and all I get to do now is interview and the last recommendation is take action, pick somebody and get a result. Because you never know, you may think somebody's not a good fit through an interview and maybe they're just a bad interviewer, but they create the result you're looking for and now you can start building off of that and vice versa. They can interview well and not perform. So having that result driven mindset is crucial when you're building your teams.

Yeah, I've had that. Like you said both ways, some people were terrible in interviews, but they were amazing property managers. And then the opposite, super slick, very salesy, horrible property manager or like contractor or something like that. So yeah, you have to take your risk. I mean calculated risks obviously, maybe don't give them the biggest project to start with, start smaller, test them out. Yeah. Ask for several references. But of course when you give references, you give a bad reference. Normally it's just, it's quite rare someone says, hey, call Bob, they're gonna say how bad my work is. So yeah, trust but verify. I like that concept. I, I apply it a lot now. What about financing? Because I know the financial landscapes change quite a bit in North America, in General, Canada and U.S. a lot of banks, interest rates have gone up, things like that. How do you still make the brrrr work with those rising interests? And in the us when you have a mortgage, I know it's for the duration of the mortgage. Canada changes every five years. You never have those 30 year mortgages that you have. So for us, it's not an opportunity. I know in the US you can buy the property and the mortgage and different things. So yeah, if you have some suggestions for financing.

Yeah. It really comes down to what you're looking to create. Right. We started off with turnkey, so we didn't want to throw all our money into one property because we didn't know what we would do once that property was purchased and known free and clear. So we chose to leverage the lender where we put 20, 25% down. They come up with the difference, which increases my buying capability. So I'm not tying up all my cash in one property. And that can serve you if you're looking to get started. It's where we start. We encourage. If that's what you need to get a proof of concept, do it. The other form that I've been using for majority of my investing career is coming in cash because cash is. Yeah. You know, with the rates being the way they are and the market taking a shift in direction from what it was during COVID we are seeing that there's just less inventory and prices are reducing and financing is a little bit more challenging to get for the same property because you're not seeing the, the comps, the appraisal values or, or the loan to value the LTVs that you used to get during COVID And rates are so high where if you're a cash flow investor like me, the rates going from 4 or 5% to 9 can take you completely out of cash flow. So having the understanding of what the intent of the property is and my strategy is going to be crucial on how you tackle financing. There's so many ways to finance a deal. Traditional financing, cash are pretty much your go to initially and then we can go on and on and on about the other creative ways we can finance deals.

Yeah, and you have a lot more options in the US like there's more hard money lenders and private lenders. It's, it is, it does happen in Canada, but it's not as common. So I find those strategies, and that's why a lot of Canadians are looking outside of Canada is there's a lot more opportunities. There's also Canadian banks lending in the US So a lot of Canadian banks have been buying American banks. So we get an inn as like a vacation home, even though it's not a vacation home, but to them it's a vacation home. That's how you get qualified with Canadian income, things like that. So that's great. So you mentioned an Investor could start with a turnkey property to get proof of concept, and then they could get further down, like with bigger renovations, value add. And then how do you scale your portfolio? Like, do you want to get to 100 doors or what's, what's kind of next phase? You've done a few of them and then what should be your vision, in your opinion?

Yeah. So if I were to look back at our story and what we did is we started, we started what we call playing Monopoly. You know, where you start with this game, you're buying these individual cards, they don't really make you a lot of money until you get a set, and then you start making a little bit more money. And when you got more money, you start adding these green houses to these sets and eventually you get to a point where you're not able to put any more green houses. And what we, what we did is what we, we took our one, got more results into five, into 20, into 90, and then created this large portfolio of doors. And it, it, what it did is it hit our goal for our dollar amount we were looking to create, replacing my income and my wife's income required for US 90 properties. And when we hit that, we now shifted to thinking, great, we hit our initial goal, how do we make more? And we, we take the monopoly analogy again. So after you reach your max of green houses, you start to trade them in for red hotels. And then where we got, we got to that point where we're like, that's a lot of doors to manage. Even though we leverage team members, it's still a lot of managing properties. We wanted to shift into something larger that produced similar results, if not better, and lowered our obligation to be as active in it. So we started taking those greenhouses and 1031, exchanging them or tax deferring them into large commercial assets. For the past four or five years, we've been doing that to our portfolios. Taking up a few of the green, rolling it into a red hotel.

Amazing. And again, another tool that you have in the US that's not available in Canada, the 1031 exchange. Here, when you sell a house, you pay capital gains and then you buy bigger and then you sell that, you get capital gains always. While in the US you kind of defer the capital gains until the, the final sale, or if you're smart, you, you set up a family trust or something, and then there is no capital gain at the end. But yeah, good point. And again, it is available to Canadians if you set up a corporation in the U.S. the corporation is American, so it is a person in essence and can benefit from the 1031 exchange. So. Wow, that's. That's some amazing tips on how to grow. You start small, kind of like the, the story about the penny. One penny every day and then eventually you have. Can't remember, isn't it 5 million or 2 million after 30 days, something insane. Anyway, you double it.

The.

Yeah, the compound effect. So same idea with the house. And you mentioned earlier about taking action. Can you tell us more about that? Because a lot of people are scared. What if it goes wrong or things like that? They get analysis paralysis.

Yeah. And one of my guys I look up to is Robert Kiyosaki. I know he does a lot more of like stocks and crypto right now. However, he did speak on real estate during a season where I got to meet him in person. And one thing he encouraged me to do as an investor is to always be straddling the edge. And what he meant was the edge of a coin. Most people see a coin and think there's only two sides. Well, there's actually three. There's the edge. So as it, like you were saying, most people are going to see the fear of. Or the worst case that can happen. There's a possibility if you switch it to what if it goes right? What if it does work? What if I make money? And it's really like that pros and cons concept where you're laying out what's the good and the bad and eventually you're going to get to a point to making a decision. Because my thing I talk to a lot of the mentees I work with is indecision is a decision. So yeah, make a decision that's going to move you towards. It's either going to show you it's going in alignment to your vision and goals or it's not. If you simplify the decision making process in the beginning, you start to create the habits of success where you speed up your decision making process. So if my advice would be is just make a decision, you're going to commit to something, see it till you get a result, then revisit it. We call it debriefing in our community. Debrief what worked, what didn't, what's next and learn from that. Because these are all stepping stones to success. And the journey isn't a single step. It's a thousand, it's ten thousand, it's a hundred thousand. Everybody's journey is different. We all get to start with a step.

Now that's Great. And then you're also advising to start fairly small. Don't start with a hundred unit building, like 10 story apartment building. That might be a little too much to bite off right from the get go. You start smaller single family house, duplex, triplex, fourplex, something reasonable and you're going to learn from that about property management and tenant culture as well. Are, is the Midwest a fairly landlord friendly area or is it more tenant friendly?

It's very landlord friendly. There are conversations and signs showing that the tenants are starting to fight a little bit more. And that's just happening throughout the US period. So it's one of those where like you said, research, do your due diligence in the market that you're looking to invest in, make sure that you're setting yourself up for success. Because if it's like say a California or Hawaii market, they're very tenant friendly. There's a lot of opportunity where you might be in a position of having to reposition your asset because somebody else doesn't like something about it versus being the owner and controlling it. In, in other markets that are more landlord friendly, where you get the majority of the say and you can, you can really drive home the fact that this is your asset. You get to make decisions around the thing you own, not the somebody who's renting it.

Yeah, because those more landlord or tenant friendly states or provinces where you are, it depends where you are. Sometimes it creates an opportunity. It's a challenge of obviously if you want to do a turnover. In Ontario, where I started, it's really hard tenants, it could take three years to evict them or more months, years, it depends. So that makes it hard to increase the value. If you're in those states or provinces where landlords have more power, turnover or repositioning can be much quicker. Can you tell us more about repositioning, C.J. like you're probably getting into larger multifamily assets when you're talking about repositioning.

My repositioning is actually more towards traditional commercial. So everybody.

Oh, okay.

I mean multifamily is a big thing right now. And I'm choosing to go into commercial, the traditional style, the strip malls, the retail, the office, the medical. That that's the space I'm playing in. And repositioning there doesn't look anywhere close to what it is in residential. So residential. The goal the go to in residential is make it pretty, get the ugly, make it nice. Right. In commercial, where we're at with these office, retail, medical, strip malls, it isn't necessarily making it pretty, it's getting it performing. So it's a different skill level. You get to walk in with more. More head. Head work than physical work. And in contracts and negotiation and tenants and understanding the logistics that go around stabilizing an asset so you can increase value that way. It's just evaluated slightly different than the residential space.

No, I like it. I think it's a huge opportunity. It's commercial as well. For the most part, you don't supply the insides. Depends how it's rented, but many of them. You don't install the carpet or anything. Or you could, I mean, depending on what it is. But usually it's services around the property like snow removal, lawn care, whatever you're providing. There might be common areas, but the inside, sometimes it's fully unfinished. It's like slab to slab. And you get it, you hear the tenant. And it's long leases too. Like five years, ten years, maybe more. So, wow. Okay. And so you're seeing those opportunities in. In what? More central areas or where do you see those opportunities?

Right now I see them everywhere. And it's more of knowing where to look to see the opportunity. Because there's a lot of property that I picked up that were sitting on the MLS for two, three years that I saw value in that nobody else did. Like, it could be that. It could be that simple opportunity could be right in front of you. And unless you're looking for it or know what to look for, it can go right by you. And for me, it's consistently training in and knowing what I'm looking to do and the end result I'm wanting to create and finding that. That property that serves it. So every, every season in our investing journey, we. We adjusted our strategy based on the end result we're looking to create. And right now the end result is where can I plug my greenhouses into a red hotel? So my buy, my buying power, my buying box, I like to call it, you know, what I'm looking for, dollar amount wise, may be different than somebody who's just wanting to take their cash and buy a property. So it's knowing that we're not comparing what I do is the right way. It's just the way that serves my vision and goals.

That sounds amazing. So, wow. All kinds of wisdom, C.J. all kinds of great information. Where can my listeners get a hold of you if they want to find out more about what you're doing and follow you on social media or finding about your mentoring program?

Sure. Yeah. I appreciate the opportunity. You can go to @wn properties on Instagram and follow us there, and we have a bunch of links where you're able to connect with us in one way or the other.

Okay, that's amazing. Well, everybody, if you're interested, especially the commercial side, we don't hear enough about it. I think I'm seeing a lot of things turning over, and I'm sure some investors are doing very well with those. So that's been great. And yeah, it was a pleasure to meet you, cj. Thank you and take care. Cheers.