An Insider's Expert Tips on Passive Investing and Real Estate Syndication with Charles Carillo

Nate Trunfio: Welcome to another episode of The Real Estate of Things. I'm your host, Nate Trunfio, with Lima One Capital. Today, we are going down the multifamily road with Charles Carillo, managing partner of Harborside Partners. He is a very savvy and experienced investors for decades, investing over$ 200 million as both passive and active, and that's what we're going to cover. What's going on in the market today? What is a syndication? What should you look for if you're looking at investing in a syndication, and how do you effectively be a great multifamily investor in today's market? Let's chime in with Charles and see what he's got to say. And here we go, into another great episode of the Real Estate of Things. Charles Carillo, man, welcome. How are you?

Charles Carillo: I'm doing well. Thank you so much for having me on, Nate.

Nate Trunfio: Man, I am excited to be able to reciprocate this, being on your podcast. So excited to have you here, as I know you're an aficionado, to say the least, in all things multifamily, commercial, investing, and other things that I know we're going to dive into. But let's hit it squarely on the mark of... What's going on today, and what are you seeing in regards to multifamily investing right now?

Charles Carillo: So for the first half of 2023, we've seen just a real slowdown on deals, people doing deals, people that were selling... We just sold a property actually yesterday, and we weren't planning on selling it, and then we had a buyer that purchased a property from us last year. Perton came to us with actually a very, very good offer, and we ended up selling it to them. So it's an interesting market out there, and it was just in a pocket listing type of thing, but those are how deals I see are getting done. And I've really only seen a handful of deals that really pass my desk over quarter three or quarter two. We'll have to see how quarter three pans out, but I think people are waiting to see exactly what's going on in Q3 and Q4. We have so much debt that's coming up. Looming debt crisis, let's just say. And I don't know if I want to use crisis, because you don't know how that's going to be worked out, but I think people that bought good properties are going to be in a much better position to get any of their loans worked out, compared to people that maybe bought less ideal properties.

Nate Trunfio: Man, I couldn't agree with you more. You bring in some of the lending stuff that we know a little bit about here, Lima One Capital. But yeah, there's a ton and plethora of bridge maturities among other loan maturities. I think the crisis is very, very accurate for especially the office world of CRE investing. That's for sure. So I'm curious then. You said it a little bit, but... So we know the transactions have slowed down, but also just looks and just what you guys look to DD for any acquisitions. You've seen that take a fairly material slow down here recently?

Charles Carillo: Yeah, and a lot of operators that we partner with on deals... I had talked to one, and we have a deal that's going well right now. And I was asking them about underwriting and stuff, and they were like, " Well, I've only underwritten like two or three deals in the last two months," and that was a pretty big operator. And you're like, " Oh, wow. Okay." Yeah, I see... I still get stuff that comes in, gets sent in. People are like, " What do you think about this?" And most of the time, it's a tear apart, and you're just like, " Yeah, it's just not..." Because if you're going to buy in the uncertainty, you want the deal. So the deal we sold yesterday, we had bought in July 2020, and not too many people were buying. That was right in that lag period before people really started buying again. So we purchased, and I was like, " Okay, this is like the same price of buying properties a year before, so let's do it," but a lot of people weren't thinking that way. And then it was the end of 2020, beginning of 2021 it really kicked up again from where it was in 2019. So I don't know. I just think we're always looking at deals, but we're looking at less deals now and being a lot pickier on what we're looking at. But we did... Our last deal we purchased was at the end of 2022, and definitely a deal property in Dallas. And it was a great property, but you look at it and you're like, " This should have been like 15 to $20, 000 more per door if this sold a year and a half before." But they had owned it since 2017, so it's a haircut for them. Whereas if someone bought it in 2019, they wouldn't be able to sell it at that price. They'd be kicking the can down the road, which I imagine some borrowers that are doing the same thing.

Nate Trunfio: Yeah, I think that's the inflection point that people are feeling, and that unfortunately people are going to run into, is at some point in different... Whether it's different cycles or the trajectory of a given deal going right or wrong, at what point do you just unload and release if you don't see the light at the end of the tunnel, and the continued growth or continued cash flow or successful navigation of any original business plan? But look, we're going to see... So I guess going down this... what you're looking at, how are you looking at then properties? How are you looking at deals, and how are you looking at markets in today's world?

Charles Carillo: Anything that that's not premium, we're not really interested in, just like a first- tier- type markets. Our last deal was in Dallas. It's a great market, about 15 minutes from downtown, and just a great area as well of Dallas. And it was one of those type of deals was... This is stuff we're looking at before we would... To look for deals years back, you start moving a little bit out of cities. And you don't want to get too far out, because then you're... When rents start coming down again somewhere, people start moving back in. And so you might be caught there, because there's no draw where you are of business. And so we're looking for... We're focused right now is mainly Greater Atlanta, Dallas, Fort Worth, and then what we call the I- 4 Corridor here in Florida, which is really Tampa to Jacksonville. Orlando, yes, it's on that route, but really, Tampa, Jacksonville are really where we're looking at. And Tampa's been very difficult for many years, but Jacksonville is something that we really like, and a lot of jobs growing there. Main thing is we just like to keep an eye on... when we're looking at markets, not just what's happened in the last six months or year. We really look back on a 20- year window of how a market has grown. So we're really looking at three main things. We're looking at the population growth, we're looking at job growth and diversified job growth, and then thirdly is looking for a decrease in crime, and all over a 20- year period. Now, crime and population are... You can just Google search them and see where that trajectory has been and where it's going. Jobs and diversity, that takes a little bit more of just digging into it, and then see exactly those markets where there is going to be continued jobs going in. Even if we have a little dip, there's still people moving into these areas. There's still employers that are staying here. And then also, looking at really where office vacancy is. I was looking... Orlando is like 11%. So you still have... inaudible to show you. Now, yes, you're going to have people with leases that are going to come up. We all know how that works, but it's not like investing in other parts of the country where we've seen that go to 50% vacant. Like New York City. So the thing is that looking at all those things and putting them together to see exactly where business is going and what is... Because if you have offices there, you most likely have to have people there too.

Nate Trunfio: Yep. No, as you listen to this, it's just really important. What you're talking about is a lot of just the fundamentals. And I think that over the last couple years, there's been too much frothiness of people just seeing these monstrous, crazy trajectories, whether it's rent increases and cap rates compressing. And so you're looking at... Oh, if cap rates continue to compress, I can buy anything and sell it at a premium. But really, that was just a fairly artificially inflated market. Maybe not artificially inflated, because I think there's a ton of fundamentals that'll keep driving it in that way, but I think a lot of what you said does speak to really being more sensitive to secondary, tertiary markets as well because of the reasons that you said. I'd be interested to flip to the other side of the coin just because of something you brought up here early on, so like the dispo side. So as an investor... And remind us or educate us on how long you've been in the space. You've been in it for a while. So somebody that has a number of assets, what do you look for then at the time of disposition? Because at some point, what is really marketed versus soft marketed? Because everything's on the market for the right price for somebody. But I'd be interested in how you look at that, if you don't mind breaking that down.

Charles Carillo: So when we're looking to sell a property?

Nate Trunfio: Yes.

Charles Carillo: Okay. So normally, when we're putting out a pro forma to investors, we always put out saying five to seven years, and we've been doing that. So we've been involved with syndication since 2018, and I've been involved with multifamily since'06 and commercial property since'09, and much different than it was today. But real operators came out in'09 and 2010. Those are the people that made money, just like what's happening now. So when we're looking to sell... How we had done this property that we just sold, it was really just a pocket listing that we had with a broker, and they were floating it to different people with an idea, a whisper of what we were looking for, and turning down a lot of people that were really low balling, because it's a good property. It was in Tampa, and just really going through and seeing exactly what we would sell it for, and then reviewing offers when they came in. And not only on price, but also on the strength of the buyer. So we had this property under contract last year, and we sold it for just about the same amount this year, and it fell through last year. And we picked it because it was a very good seller, and they lost some hard money on that deal that they'd gone hard on initially day one. And so we held off on it. We didn't get the price we were looking for, and we had continued with our business plan, which we had just completed a week and a half ago, all of our submetering on the property for water, which was going to be... It's going to be a huge thing for the bottom line for the buyer. And so that's how we're looking at it. If we're getting the price that we're looking at on properties, we don't have anything else right now that we're looking to sell, per se. Obviously, if the price comes up, our other stuff is fixed, so it's not really an issue. We have one that's floating rate that's done very, very well, which wouldn't be... It's not going to be any type of issue when that interest rate cap... if we don't refinance it beforehand. But that was just... You're buying in B areas. So people will pay to live there, and there's not that much B inventory where we purchased this property, where it's located outside of Atlanta in an area called Gainesville. And so it's just one of those things that when you're buying in those areas and you're buying better properties... because this was our last C-class property we just sold. So dealing more with the better properties, it's going to be easier to run your business plan, and it's going to be easier to refinance out. It's going to be easier to find good tenants to go in that actually have... credit tenants that are coming to come in there that can actually pay your rent on time every month. And that's something in C-class where we joke about it here, but C-class people don't have much in savings. So it's something that a few hours changed on their work schedule every week is going to impact when you're going to get paid rent. And that's coming to truth since COVID money ran out nine months ago or so. And I think any type of C-class investor, apartment owner listening to this can agree with me that there was... At the end of last year, there was a lot of evictions and a lot of changes that had to be done on properties because of that money drying up, because a lot of tenants were just spending money elsewhere and not used to paying full rent for almost two years.

Nate Trunfio: Yep. Look, it's, again, fundamental. When you set a plan up front, you said a lot of your deals are five, seven- year trajectories, and you know what you're going to accomplish, and you know what you want to receive or obtain at the end of the day, and you'll end up having a strike price. And it's been interesting these last number of years where, again, it's easy to see this continued value- add growth, whether it's due to you executing on a value- add plan, or just the market tailwinds helping you out. And I think the disposition side is going to need to be a lot more calculated, whether that means that people have to have more staying power to hold until the right time down the future when they truly accomplish their plan, or they realize, " Hey, I can get out now and return money to investors, or get a certain return that fits within my targeted return matrices," and things of that nature. But I think right now, we're gone of the days of just being able to sell at any point in time, because no matter what you sell for, you're going to make a pretty penny on it. And I think you really articulated that with the example you gave earlier, where... Hey, we bought this property in 2017. If we would've bought it in 2019, we probably wouldn't have been in the scenario to have made the easier decision to sell now. So appreciate you walking through not only live examples, but some of your philosophy on that. Because I think making sure that everybody's prudent in this regard is just so important nowadays specifically, because now we really need to build a plan, follow the plan, execute on everything a part of the plan, and can't just wait for the rising tide to raise all ships, if you will. So you brought up a topic that I want to go deep in, because I know you're an expert in it. So you had referenced that you syndicate deals. So just to educate listener, first off, what's a real estate syndication?

Charles Carillo: Yeah. So real estate syndication in a couple minutes here is... It's going to be a... You have two groups in this enterprise, and it's going to be... You have general partners, operator sponsors, whatever you like to call them, and then on the other hand, you're going to have the passive investors, the limited partners. The whole deal is run by the general partners. So general partners are handling finding the markets, finding the deals, identifying everything about it. They're going to purchase the property, they're going to raise the money for the property from the passive investors, they're going to renovate the property, they're going to work with the property manager and all the contractors, and they're going to sell the property. And the limited partners have one really role in the property other than doing their due diligence on the deal, and the sponsor is going to be investing capital. Once they've invested capital, they're really... There's no more requirement for them in the deal. They don't have any more time requirement. They're going to get... They should be getting a monthly update from the sponsor, and then they'll be getting a K- 1 sometime in quarter one or quarter two of every year for the previous year, and they literally are just forwarding that to their CPA. So the main thing is that you have people that are... Investing in syndications is best for people that want to provide a little bit more diversification to their portfolio, and with higher returns usually than REITs, and more tax advantages than REITs, real estate investment trusts. And then the other thing too is that it's going to be for busy professionals, entrepreneurs that don't have the time. They listen to this podcast and go, " Great, I want to invest in the real estate." But then they're like, " I don't want to deal with anything else." Which I understand totally. I self- managed property for six years, and then I had third- party managers myself, and we do everything now with third- party managers. Or if one of our partners has their own management company, we'll utilize that in a deal, but it's a lot of work. It's a lot of work just doing asset management. Because yes, you're not going to be collecting rent or getting calls for the toilet or anything at night, but the thing, though, is that... Hey, what do you want to do with this apartment? Are we going to change this HVAC unit? Do you want to repair it again? What are we doing with this roof? It's got six or eight months left on it. Are we doing it now? Are we going to wait, cross our fingers for rainy season? So these are things that you have to do, and then you also have to allocate that money towards it. So most people, the real estate syndication, if they're busy people on the passive side makes a lot more sense than going in on the active side, which is the first thing people, I think, really think of when they say, " I'm going to start investing in real estate."

Nate Trunfio: Awesome, man. I appreciate... That's a great way to explain it, because you made it very simple, but it can be overanalyzed and overcomplicated at times, and I think you did a great job explaining that. I'm interested. First, I believe you both active and passive invest currently. Is that correct?

Charles Carillo: Yeah, I passively invest in a lot of deals, real estate and some other asset classes, mainly real estate. But yeah, I love passive investing. It's great. It's fantastic, especially when you're in with sponsors that are veteran experienced sponsors, not just experienced syndicators, because syndication has really... in the sense that we're doing it has only been around 10 years. Obviously, prior it's been more like country club-type deals, when it was really just... you had to know the people to invest. And now it's where you can do advertising and all this other stuff, which came along like 10 years ago. But passive investing is great. It's a great way of diversifying if you're a real estate investor yourself, actively. Passively investing into deals allows you and gives you access to markets that you're not aware of. The first time I passively invested was in a deal in Phoenix, and I didn't know anything about Phoenix, per se. I don't know anything about how... I had no contacts there, no team there. So passively investing gives me that diversification there, away from where I was in the southeast and the northeast at that time, and so it's great on that part. And then also, you're working with people that have... You're really piggybacking off people that have really built a team, and you're just plugging into what they have going on. And that's a great thing about working with syndicators that have done multiple deals. They have a team in place. There's not going to be calls where, "Oh, hey, we're changing management, or something like this is happening, or..." You're not going to get anything like this. They already have the team in place. There's not going to be an issue finding contractors. All this stuff is done. You're really just plugging into the network they have. And especially if you're an active person and you're probably... If you're a small active real estate investor, you're probably in one geographic location, and they're probably smaller properties. And now this gives you the ability to invest less than what you would have to to purchase on a property, most likely. But it allows you to give you that diversification to other markets where you're not a professional, and it allows you to get income and just spread out everything. So it's a great way of becoming... diversifying as a real estate investor, or as just a entrepreneur or business professional.

Nate Trunfio: Man, that's awesome. I appreciate you sharing that, because I think a lot of type A personality people or people that like to be controlling are always like, " I got to be active, I got to be active." But I think you really articulated well the value of potentially doing both, if that suits somebody's interest and what they're trying to get out of their money and their lifestyle, and even an ROI on their time. I think you also just portrayed, again, further reasons as to the benefits and even the role that you and anybody takes as a passive investor, and certainly can speak to that as well. So I guess one of the important... I think what's important that you've touched on too is that although passive investing makes you think, " I can just go to sleep at all points of the time and then just collect the mailbox money," which... Quite honestly, if anybody's real with themselves, that story sounds great. Although, there are roles and responsibilities that you need to take, obviously, and one of them is just identifying the right sponsor. And you touched on some points, I believe, a minute ago, but why don't you elaborate a little bit more for active or potential passive investors out there on what they should be looking for in a sponsor in order to put their money behind them?

Charles Carillo: So when you're looking just on the sponsor, not even on the deal level, normally I'm going to find sponsors in the states in the markets I want to invest in. So that gets rid of a bunch of people right there. But most syndicators are in growing landlord- friendly states, so there is still a number of people that are investing in markets that I'm interested in. And then the second thing I'm going to go through is I'm going to find people that... Doesn't have to be that they were syndicators for so many years. It's that they've been real estate investors in multifamily, not... Single- family housing is much different than a 100- unit apartment complex. So it could be that they have some small multifamilies here and there, and that's one thing. They're working with a property manager. They're being able to coordinate all the different renovations. And I want to see that they have deals right now that are successfully going. It'd be great to be seeing that they have syndication deals that one full cycle. That means buying, renovating, and selling. That's always a plus, because then now there's a true track record for what you're investing into. But investors that have been successful in investing in real estate and dealing with tenants, and they're going into a similar property or a better class of properties. It might be even better. That's where you want to be part of. And then ones that have a system, a team in place on the ground. This is where... So knowing exactly who their property management company is. So the first deal I invested, that time in Phoenix many years back, and they had a property management company that was very focused on the area. They had like 20, 000 units they were managing in this close proximity of where it was. They knew the area upside, inside, every way. And it's like... That's exactly what I want to running the property. You don't want to bring in some rinky- dink property management company that doesn't really know what they're doing with that property class. You want ones that are like, " Listen, this is what we focus on." And I think it was a B- property. This is what we focus on, B- properties in this area, and in this... You can look through on their website and see exactly the types of assets and the vintage that they actually manage. And that's a big thing, because I was just speaking to someone a couple days ago, and they were telling me that they just bought a first six- unit property. And they're using... And they actually prepaid management for a year, which... Don't do that. They're using a regular single- family rental person that's going to... like an agent property management company that's going to be renting it for them. And you're like, " They don't know what they're doing with this type of class of properties. You're going to be switching them out in no time." And that's like... You need to know when you're... You really got to look into the sponsor, but you also have to look into the management company that's actually going to be... Because the management company's the one, and at the end of the day, we put all these millions of dollars together. There's some employee that's making 40, $50,000 a year that's actually the one that's going to be talking to your tenants, the clients that are actually making this whole thing run. So to make sure the people overseeing that, which is the property management company, you want to make sure that they have a good team on the ground, they know exactly what this neighborhood is, what this asset class is, that they've been successful, and then they do it all the time. And then you're just really plugging in another property into their whole working system, and you want that for the sponsor as well. If you have a sponsor and they're like, " This is our fourth deal in this neighborhood or this area, this market," that's perfect. This is now going to be that next one. We know the other ones were successful already, or they're moving along as they were, and so we're just putting in... I'm just riding off all the years of all their experience and of just knowing what they're doing in this market, how to get the deals, how to get them funded, and actually how to manage them and get them renovated. So that's what... You're looking one step past the sponsor, I would say.

Nate Trunfio: Yeah. I think it's no different than how we look at things from a lending side. Proof of execution gives you confidence, and hopefully more surety that it will happen successfully again. So I personally clue in on the one comment you made around seeing full cycles. For example, you just finished full cycle a deal that you just sold the other day. So that's proof that you've done it before, and were able to execute on the plan, and pay your investors, if any, what you promised and delivered to them. So I think some really important points. Especially appreciate the commentary on the property manager as well, because it's a uber- important part. And we've seen too many people make that mistake of just, " I'll put anybody in that role that has a potential title that's relevant." And your example of a single- family property manager managing a commercial asset is a great example. It may sound good upfront, but unfortunately, the reality is that most of the time they don't have that actual proof of execution in the realm where they need that specialty, and you really hit well on all of that. I want to also touch back. You said a couple minutes ago syndications has really risen up over the last 10 years, and absolutely factually that is certainly the case. And then you also elaborated on how there's a lot more marketing now. It was country club, and now it's even social media. All over the place, you see advertisements, most of them legal, let's hope. But there is certain rules and protocols on how and where you can do that, depending on the type of funds you raise money into. But what I want to get at is that for some reasons, I'd be interested in your take, syndicators have gotten a bad rap, and I don't necessarily believe that that should be the case. But any insights from your end on why you think that is, or why shouldn't that be looked at as negatively as maybe some people have? And I don't want to make this a fearmongering, stay away from syndications by any means, but I'd be interested for you to approach that a little bit.

Charles Carillo: So the first perspectives I ever saw was my dad invested with a sponsor in syndication, and it was like$7, 500. I wasn't even born, and I was just... inaudible early'80s in oil and gas. And he actually lost money in the first one. He reinvested again with them, and it got paid for like 25 years or something afterwards. So it was something... My dad was not an oil and gas investor. He was a real estate investor, multifamily investor since 1984. So when he invested into it, it was... Or out looking at this, and this is how it was before. You'd go to meetings, and you'd have a... It was like a spiral... I could find it in storage. It's like a spiral- bound... Just how it would. Looks like he hand- typed it up kind of thing off your computer, and hole punched it, sent it out. Now it's a whole different thing, because in that scenario, you're really... You're throwing stuff against the wall, and you don't know. There's not as so much due diligence as you can do, unless you know someone that's actually invested with them. And that's similar how it is today, because there's a lot of fluff that's put out there on social media. You have a lot. The main thing is that there's a lot more gurus. Back in the'90s, you had Carleton Sheets and some other people, and it was just like... You can name them off your hand of how many people that were out there. You know Carleton Sheets, right? So it's just... No Money Down, right? Was that it? And those were basic programs around that everybody knows, and that's how people learned about it. You go to the hotel thing, and then you had Rich Dadas well. He had his own thing going on. But nowadays, there's... I think over the last seven or eight years, the guru space for multifamily has just... And it's all for real estate. There's wholesaling ones as well and stuff, but multifamily get the big price tag, because you can really make more money doing it than other types of real estate situations and plans of investing. And there's just so many out there, and I think that people have really got drummed up of, " I have to raise money. I have to syndicate." And you're also bringing a lot of people in the syndication space that, first of all, have never invested in real estate. And I hear about it all the time, and I saw someone on social media the other day that I had known from a networking group many years... I guess 2019. And he joined it, and he just tell me... I just saw him. He just quit his job, and now he's running his own program. And you're like, " Well, man, you've been doing this for three or four years, man. This is not even full..." Now you're teaching people. You see something like that, and then you're just like, " Well, here's someone that rowed very good three years into it." And you have a lot of that with other gurus out there as well, and a lot of them just don't know. And they're bringing people on, and they're just... People throw money at them. They're teaching them something, then they're unleashing them out. And I don't know. I think the problem is that people haven't done deals themselves, and then they go just trying to raise money, and that's a huge red flag. I have people reach out to me all the time, sometimes to invest passively, sometimes to actively... to talk about actively investing. And they'll be asking me, and they're like, " Oh, I want syndicate deals." I'm like, " Well, just go do a house hack first." " Buy a property. Live in one of them. Rent the other ones, and you're going to learn about property management." Oh, no, no. I want to go buy like 500 units. Well, it's just like... You can do that. You can wait and spend years trying to put that together, get a small really portion of the deal, because no group is going to give you... You don't have any experience. They're not going to give you any responsibility. So you're going to learn what people tell you what was on the call. You're not going to be brought on to asset management calls. You don't know. And then when someone asks you questions, if you raise money from them... And then it's going to be like, " Hey, what does this mean when they're saying with these delinquencies and the evictions? How does that work?" They won't know. You've never dealt with... You've never had to go to court for an eviction. You've never had to tell a property manager to evict someone. You've never looked at some tenant application, told them yes or no after running a test on... the background check on them. And all these different things is... It's really important that you know exactly what it is before you start raising money and going into the syndication. And I think that's the problem, is you have people that started... And I guess there's good sponsors. I don't know if they've even gone full cycle if they started two or three years ago, but you have sponsors that started in that timeframe, and you don't know. Then you have other ones that start, and they've never raised money before. They're going to straight into syndications. And I think that's the problem with it and why syndications get a bad rap, because there's been people that lose money. And everybody's heard about the Houston fiasco down there, and that's a prime example. Someone that went to a coaching program, someone that, I guess smart from a different field, was able to find money to buy these properties, and then that's what happened. You don't have any... They don't know how to buy the property correctly to hedge, to minimize downside. They're buying subpar properties. All these things that we've taught on this call about the opposite of, they've done, but they found money for it. And people lost a lot of money in that type of deal. And this is something that if that person has spent a couple more years buying small multifamilies themself... And even if you have a property manager, you're still going to be involved around in the process. You're still going to learn it. It's not going to be as much as if you're hands on, but you'll learn it intimately, and you'll be getting calls. It'll be a normal thing weekly. You'll be talking when you buy that property with dealing with your property manager about all the issues that you have to take care of, and how much it's going to cost. And you are now making those decisions of what you're doing. And what are we going to rent this for? What should we rent this for? When does stuff get fixed? And that's a lot of work. You don't need to buy hundreds of units like that. And I think people just want to start at the top and work sideways, right?

Nate Trunfio: It's funny, because you really hit it on the head, a lot of what you just articulated as to maybe why it gets a bad rap, but in some scenarios why it shouldn't. It's just because of all the things we've talked about thus far, and diligence, whether it's in the operator level or doing it on the operator if you're passively investing, and good old technology hasn't quite helped some of this too. And it allows those flashy, sexy, Lamborghini- type videos that... Everybody wants to be cool like that person, guy or girl. And it's made it easier and more conducive of people to raise syndications, and I think it's led to some of the frothiness in the market, but there's plenty of anomalies to it. Everybody has their own fancy, but at times, the only really way to learn is through the school of hard knocks. And clearly, you have a lot of that, and I think you really did a good job portraying that too. I'd be interested to... Since you've been around and seen cycles and just no syndications, and specifically you actively and passively invest, how has the return expectations changed for passive investors? What might they have wanted to yield a year, two years ago? And even has that even changed here as of recently? And I'd be interested in that.

Charles Carillo: You used to see years back the low 20% type returns and stuff like that, and it's... I think you're never really going to see it go below 15%, because I don't think at that point it makes sense for people to invest into it. They're going to look at that and then look at the S&P 500 and... And they're going to be like, " Why am I even dealing with this?" So I think to make anything work, and I... People get surprised when I tell them if we put out a deal, there's going to be... It's pro forma. We have to make sure... There's no guarantees, obviously, but the numbers have to show that you're making high teens on that property. The thing, though, is that it's just going to be out for a longer term. So that might be your equity multiple. It's going to be stretched out. How you're making that money is going to be stretched out longer. That's the main thing I'm seeing. I think you're going to still see... Because if it gets too narrow, you're just not going to have people invest in the asset class. It's just one of those things. Or you're going to have people that are going to be investing differently into different... Not just into real estate. They might not be investing so much into multifamily. They might be investing in self storage, or mobile home parks, or finding the next thing, short- term rentals, wherever it is to chase that return that they want, and knowing the risk that's going into it. But I just think how we've done it with numbers that we've done is just... We've always said the five to seven years. And we've never gone that long, but it's something that you don't know. We bought in 2019. You had no idea that nine months later... We were in COVID, and you're just like, " We don't know what we're doing. We're pausing distributions on this property." Just you have no idea what's happening. Then we're like, " Okay, only one person lost their job, so we can restart later this year." But you had no idea. It was a craziness in the cycle. And that's why you put the longer term on there, saying that, " Hey, our goal is..." It was always, " Hey, let's... Historically, it was five years, and let's double your money." And for many years, it was like two or three years and double your money, or get close to it. And so I think you might have it, " Hey, we'll get close to doubling that money, but it might really be that five to seven years type thing," which is still a fantastic return and with all the tax benefits and everything else that goes with it, but it's just going to be... People aren't going to be turning their capitals as fast as they were before. And it turns away a lot of investors if the sponsors are actually... Many investors haven't invested into deals. I remember several of them that haven't invested in deals because... saying that five years is too long. And that's great. Thank you for telling me now than after you wire the money in. But it's also something like... It's a very non- liquid investment asset class. And yes, you're going to have a level of more liquidity if you're actively investing in your own deals. You can sell it, obviously, without having anybody else's say, but you also can go to your bank and refinance it. So there's more control on the active side. The passive side just allows you into a different asset class that, let's be honest, most people would not have access to with their... just themself and a couple friends to invest into. So yeah, that's really what we're seeing. I think just longer hold times, and I think that those returns are going to be pushed down closer to the 15%.

Nate Trunfio: Yeah, it makes sense. It makes sense. I think at the end of the day, it is all about what the actual ability and capability to achieve the business plan and therein the returns are. And so as you said and know, it's all about risk- adjusted returns, so just depends on how big of a value add and how big of a risk execution you want to take. And every investor profile is different, but I really take some key points away, especially when you articulated the five to seven year, but yet you could hit the 2x in earlier timeframes recently. That's exactly what we've been talking about. So as we depart here, let's... I'm pretty sure you got a good crystal ball. Mine's been a little cloudy lately, so I'd just be... For anything you want to talk about in regards to investing in multifamily real estate in any duration of time into the future, what advice or projections and predictions may you want to make here?

Charles Carillo: Just make sure when you're looking at stats that you're not... If you're investing in a multifamily, don't just lump everything in commercial together, because there's a lot of asset classes that are going to drag that down a little bit to get a true sense. The other thing too is that I think people waiting for an ultimate crash or something like this... It could happen. However, the assets you probably want to buy, the banks probably still want to lend on them, and they'll probably work some of those loans out. I had a contractor many years back, and he owed money on this property only for doing over a garage. And I remember looking at his loan docks, and this is like 2010 or something, and they're... How they did it, instead of foreclosing, they just gave him... They just changed it, gave him a new mortgage right there for 40 years. And so that way, they're just hoping, like most people, this guy's person is going to leave. Just like most people, they're not going to stay there for much longer. So these banks might work together to... If they're looking at collateral and they're like, " This is really good collateral. This is not going to have a problem in the next 24 months probably being sold, and this person's going to probably sell as soon as they can. Maybe we just give them a little bit more, and a little bit more rope. We change around these terms a little bit for them and it gets sold." However, if you're having less ideal properties, lower C-class properties, properties in tougher areas, those probably will just go back. But you probably don't want to buy those, and should be buying those. So I wouldn't think that... because we talk about all this looming debt, billions and billions of dollars, that everything is going to come back on the market like that. There's still people, like our floating rate debt, that we won't have an issue with. I wouldn't say everybody's as lucky as that deal we had, which was great. But the thing, though, is that there's going to be other deals out there that are very good that aren't going to come back. So dry powder is great, but it's also... If you see a deal that pencils, and that it's a great market and it's a good-quality property, it's something you should pull the trigger on. Even if it goes down a little lower, like we said, we're in here for five years, five, seven years on each property, so there's going to be times when it dips as well when you're owning it.

Nate Trunfio: Well, we heard it here, and I also couldn't agree more. Even if there is some bearish outlook in some realms of the economy, there's still more than enough opportunity to invest in numerous asset classes, but specifically multifamily, as long as you are creating and have a long- term vision, and many times, staying power. And if you're looking for a quick pop, there's still those too. It just may be a lot harder. And so I think the main message, again, I take from that is there's still a ton of opportunity, and it can still be a great time to invest in multifamily. So don't be scared just by some of the big headline publication news. And man, I appreciate you, Charles, bringing decades' worth of experience here to the podcast, and really giving a great expose on your knowledge, man. We're appreciative to have you, but give us... Where do we find you? As we know we want to reach out to hear more from you.

Charles Carillo: Yeah, so if you're interested in learning more about our company, our company is harborsidepartners. com. So if you go to harborsidepartners.com, we have a weekly newsletter, which is what I put together, and it's really just a bunch of links and where the market is, links to articles that we're reading, and then where the market is with some little charts and stats in there. It's a quick read, few minutes. You click on some links you want to read. It's easy. If you're interested in passively investing with us, you can do it as well there. And then I have a podcast as well that Nate's been on. And so I do two of those, an interview every week, and then I also do what I call Strategy Saturday, which is three to seven minutes of me explaining something from pre- payment penalties to what liens and mechanic's liens and everything like that are on properties.

Nate Trunfio: Well, awesome, man. Again, thank you so much for being on The Real Estate of Things, and make sure you check out all the great information and value that Charles is always providing. So thank you, Charles.

Charles Carillo: Thank you.

Nate Trunfio: And that's a wrap of another great episode of the Real Estate of Thing. Thanks a lot to our famous guest here, Charles Carillo, with Harborside Partners. Please make sure to subscribe on your favorite platform, because we have new episodes dropping every Tuesday, and you can check out all things about The Real Estate of Things on our website, www. realestateofthings. co. We will see you next time.