Josh Cantwell: So, hey, listen, welcome back to Accelerated Investor. And in this episode, I am interviewing the principals at CPI Capital. Ava and August started CPI Capital years ago to be an owner/operator. But today, they’re focused on their private equity and co-syndication model. What I thought interesting in this interview is the fact they’re actually located in Vancouver, Canada, and are actually doing deals with very experienced operators in the Sun Belt. They’ve raised and deployed tens of millions of dollars, have over $200 million of assets under management through their co-syndication platforms, and raising money and deploying it with operators. Believe it or not, they actually started their business to be an owner/operator and found that through all the work they were doing to raise capital, they actually thought it’d be better to JV with partners.

I love this interview because of a couple of things. Number one, I asked them, what is their process to actually vet out owner/operators? You’re going to hear there are five specific criteria that they used in order to find operators in the Sun Belt, number one. Number two, we also talked a lot about the four metrics that they want to see for deals that they invest in the Sun Belt. We had a great conversation, number three, about yield, a little bit about the market, what’s going on with interest rates, what’s going on with cap rates, and of course, finding yield for investors. And we also talked a lot about underwriting, number four, some specific criteria that you’re going to hear about how they underwrite deals, specific metrics that they’re looking for.

And I love this because they’re investing hundreds and hundreds and hundreds of miles away from where they live and operate, operating, living in Vancouver, investing in the Sun Belt in the United States. So many of you are looking to do virtual investing or investing outside of your actual market, I think you’ll get a ton out of this interview with Ava Benesocky and August Biniaz from CPI Capital. Here we go.

[INTERVIEW]

Josh Cantwell: So, Ava, August, hey, thanks for joining me on Accelerated Investor. So glad to have you guys on the show.

Ava Benesocky: We’re so happy to be here, Josh. Thanks for having us.

August Biniaz: Couldn’t wait, and doing a bit of research on your show and seeing the guests that you had on is an honor and privilege to be here. So, I can’t wait to add value to your audience, man.

Josh Cantwell: Absolutely. Thanks for jumping on. Listen, why don’t we just talk real quick about what you guys are up to right now? You guys are running this private equity firm. I know you guys have done a lot of deals in the Sun Belt, you’re raising money constantly, but what is the project or what’s an investment opportunity that you guys are working on right now, like this afternoon, next week? Tell me what’s cooking, what’s going on right now in your world?

August Biniaz: We just closed on our deal.

Ava Benesocky: We just closed on a deal.

August Biniaz: In Houston, Texas. Ava is head of investor relations and she’s like give me a deal, August, give me a deal. So, that’s where I’d really talked into our operating partners, looking for deals.

Ava Benesocky: We’re scouting the next best investment to bring to our investor community.

August Biniaz: Yes. And also, internally, we’re somewhat growing here at CPI Capital. So, we have a couple of new partners on board and we’re trying to get them fit into their position. So, those are kind of quick updates.

Josh Cantwell: Nice. Tell me about the deal in Houston. The reason why I’m asking is because I own about 650 units in Houston in the Spring Branch submarket. And I’m on my way to Houston on Tuesday. So, tell me about your deal.

August Biniaz: Nice. Go ahead.

Ava Benesocky: Yeah, the 232-unit, built in 2000, value-add. It was the most perfect deal because it wasn’t picked over by syndicators. So, 137 of the units were in classic condition.

Josh Cantwell: Oh, nice.

Ava Benesocky: Yeah, now, the units have washers and dryers. So, we’re really excited about that. So, we’re going to go in there and start the renovation process soon here. And yeah, get going.

August Biniaz: Minutes from Walmart and minutes from Home Depot. When you got those two, Goliath’s nearby, you’re in a good position.

Ava Benesocky: Yeah.

Josh Cantwell: No doubt. Now, how did you guys select that deal or that operator to partner with and that kind of submarket in Houston? What were some of the boxes that you had to check to make that deal go?

August Biniaz: Absolutely, yeah.

Ava Benesocky: One of the things that I just want to point out really quickly is it’s very important, of course, when we vet the right operators to partner with. And the particular operator that we partnered with on this deal actually wrote the book on underwriting. So, that’s a key component of our business, underwriting properties, being conservative, making sure the numbers make sense. So, that’s kind of one aspect that we really fell in love with.

August Biniaz: The other aspect is they’re very focused in the Houston market. They’ve had a few deals that have gone through a full cycle. We looked at how their performance on those deals, where they’re very much hands-on, involved in the renovation process. My background comes from construction and development as a general contractor for a long time, so I know how it is for real estate investors to be at the mercy of the contractor. But in their situation, they had a contracting team in-house, so they had taken two deals in Houston through a full cycle with extensive renovations that were more extensive than this deal. So, you knew that they could manage that part as well.

Ava Benesocky: And achieved incredible returns for investors on those two particular deals that they went through the full cycle.

August Biniaz: Absolutely.

Josh Cantwell: Nice. You said they wrote the book. What’s the name of the book? Who’s the author? I’d love to read this.

August Biniaz: Rob Beardsley. I don’t have his book in front of me, but…

Ava Benesocky: How to underwrite multifamily, something. It’s a good one, you have to…

Josh Cantwell: Absolutely. We’ve done 18 syndications, so I’d like to think I know a few things, but I’m always learning that. I didn’t know there was a book out. I know how to underwrite, so I have to check it out. For sure, that’s great. So, what are your thoughts on the market today? Obviously, there’s war in Ukraine, interest rate, fear of the interest rates going to go up and then go through the roof like the 80s. That’s not going to happen. We have too much debt. It can’t happen. But what are your thoughts on the market today? And obviously, you guys are specifically focused in the Sun Belt. So, I hope my audience understands why the Sun Belt, and what are your thoughts about where we’re going with the economy as a whole?

Ava Benesocky: Yeah, I’ll talk first on why the Sun Belt. So, we look for certain growth metrics when it comes to what regions we want to invest in, particularly job growth, population growth, rental growth, and income growth. And with the interstate migration and international migration to these states, these are the places we want to be. We’re in the business of rentals. The U.S. is a renter’s nation, and people are flocking to these states, which is great for us.

August Biniaz: Yeah, that was great. For me, personally, I mean, having a look at the market where it’s going to look at the macroeconomics, the microeconomics, we look at long term, short term. Long term, I feel very bullish about the U.S. real estate economy, the U.S. economy, looking at it from a 30,000-view. From the research we’ve done so far, the U.S. still has one of the highest rental yields in the world. Compared to Canada, compared to Europe, compared to Asia, compared to other places in the world, the U.S. has one of the highest rent-to-value ratios. I mean, it’s all about the yield. As a business, we’re in, we’re chasing yields.

So, long term, I feel very strongly about it. Cap rates are being compressed in certain areas. You’ve seen people wouldn’t touch a deal in Arizona if it was less than 8 cap. And now, deals are going at a 4 cap. So, the market is changing. But look at Vancouver, look at Toronto, look at areas where you do have international migration coming into these two large cities in Canada, and cap rates are on a multifamily Class A, cap rates are at 2%, 2.5%. So, is there still room to grow when it comes to rent? Absolutely. Is there room for cap rates to still be compressed? Absolutely.

So, I would say that deals are going to get a bit more difficult to find. You also had at the start of the pandemic, a lot of other asset classes started focusing on multifamily. You had industrial, you had the office space, you had the hospitality that switched their focus to multifamily. So, you had this rush of capital into multifamily that made the deals more scarce. I think they’ll start focusing back into their space. Our job as asset managers, our job as fund managers is to find the best deal for our investors.

So, U.S., with over 300 million people, the richest country in the world. To give you a perspective here, we’re here in Canada, 40 million population, second-largest land mass country in the world, a G7 country. The state of Texas has a larger economy than the country of Canada. The state of Texas has a larger economy than the country of Russia. So, when you talk about investing in Texas, you’re in a good place, man.

Josh Cantwell: Yeah, absolutely. That’s good to hear. I always like to hear somebody else that I’m just getting to know tell me that I’ve made a good decision of investing in Houston. So, I think I made the right choice. But it’s just always good to hear that positive kind of feedback. Talking a little bit more about the market and directionally, one of the things my investing thesis, my hypothesis is that interest rates are going to have to go up some, but because we have so much debt now, this is not like the 1980s, $30 trillion, that a massive increase in the fed funds rate, 200 bits, 300 bits would absolutely take the residential real estate market, but absolutely tanked the stock market. The Federal Reserve doesn’t want to do that.

And we have so many unfunded liabilities in our economy from pension funds, life insurance companies, Medicare, Medicaid, things like that. I actually think the Federal Reserve wants the inflation to debase the dollar a little bit so that these unfunded liabilities become more affordable. So that’s my thesis. And what’s going to happen is interest rates will go up. But I think because there’s so much money, people like you, people like me doing deals, raising capital, there’s a lot of demand for multifamily. It’s been the darling asset of COVID.

So, as interest rates go up, there’s the spread between interest rates and cap rates. I feel like interest rates will go up, but cap rates will probably hold for a while, and that spread will just get a little thinner. So, I just love to hear your comment on that global macroeconomic kind of talk there. We probably could talk about it for days and days. We don’t have that kind of time, but what are just your thoughts on that whole interest rate, cap rate? What are your goals here in the next year or two?

August Biniaz: Absolutely, I concur with you on most of those items that you brought up. Again, I compare the U.S. market, particularly in Houston, in Phoenix, and in other areas to Vancouver and Toronto. And that’s exactly what happened here. The cap rates were compressing, depending on the interest rates. At times, cap rates do follow interest rates, but at times, they don’t. So, it’s not an exact mark. But in my opinion, currently, The Hands-Off Investor book has set the bar as far as what the returns should be for investors, kind of a 7% to 9% pref returns on the cash flow, 6% to 8% cash on cash. You got the high teens into IRRs for investors. That’s set the bench, but as the numbers change, as the interest rate changes, as the market changes, those numbers change. So, we’re chasing yields for our investors. But if the market doesn’t allow for those returns, look at it this way, in Canada, the most recent private equity firms don’t provide any cash flow. So, it depends on the investor’s need to change the perspective of what’s going on, but deals will still continue happening. This deal will go on.

Now, as far as where the interest rates are going and what’s happening with the Fed and what have you, my prediction is it’s a very fragile situation with the markets currently. They’re not going to come in and increase interest rates. Bank of Canada will increase its interest rates a bit. The U.S. hasn’t followed suit yet. So, I think they’re afraid of shocking the system right now. But yeah, definitely, the interest rate will go up, but again, astute fund managers, astute syndicators, they need to put into place higher exit caps and take that into account. And it’s not always sunshine and rainbows, and investors need to understand that as well.

Ava Benesocky: Yeah. And that’s exactly what we did when we underwrite. Underwriting on our Houston, Texas deal is we actually put a higher exit cap than the entry cap, which is obviously very conservative by 0.75, so.

Josh Cantwell: That’s great. You have to get out and make those moves. And if the cap rates do stay down, there’s a lot money in the system as there is now. Then, the exit profit is more for everybody based off of your predictions. So, that’s fantastic stuff. So, guys, help me understand a little bit more about your business structure. My audience is not only investors, operators, and also limited partners, but a lot of them are just building businesses. So, I’d love to hear a little bit more about just structure of your business. What really is kind of your investment, the kind of thesis or the reason of what you’re doing, what you’re doing, and how do you do it? I know you originally started, we were talking offline about, and you were thinking you were going to be an owner/operator. Now, it’s a lot more joint ventures, co-syndication, co-sponsorship. Just talk a little bit more about that and how your business has evolved over the last couple of years.

Ava Benesocky: Yeah, for sure.

August Biniaz: Absolutely, yeah.

Ava Benesocky: My background is in real estate for the last decade. And I was actually helping many, many investors invest in residential real estate. There were a lot of pain points that I’d seen existed for real estate investors, particularly. And when I met August, and he’s going to tell you a little bit about his background, but we both notice these pain points that exist for investors and we wanted to find a solution to that problem with the pain point. So, that’s where we kind of co-founded CPA Capital about three years ago, where now, we’ve really created this streamlined process for investors to be able to show up, kind of by the click of a button is what I say. We vet and bring them the best investment opportunity on a platter, where they already have that know, like, and trust with us because we’ve built really strong relationships with our investors.

And now, they have access to great real estate opportunities, completely passive, hands-off, where they don’t have to worry about anything, no headache involved, and they’re starting to build wealth passively. So, they still invested in real estate but don’t have all the hassles of being a landlord and getting the debt, and everybody knows all the headaches that come with real estate investing.

August Biniaz: Tenants and toilets.

Ava Benesocky: Tenants and toilets.

August Biniaz: Yeah, just for me to add to that a bit, I mean, it’s great for your audience to hear our journey. We’re both real estate professionals. This is not a space that we fell into, or multifamily wasn’t an asset class that we had experience with in the past. We seek that. So, our situation was, like my background is in construction, development, real estate. I started as a licensed agent 16 years ago. I talked really fast. So, the people who got this at 2x, they got to slow it down to 1.5x. But yeah, I started my career 16 years ago as a licensed agent. I wasn’t really good at being a licensed agent, but I was good at finding deals. So, I started doing small fix and flip, started my own general contracting company, moved on to build single-family homes, and then always wanted to scale. So, I started doing multifamily ground-up development.

And when I was doing multifamily ground-up development, I was syndicating deals before even knowing what syndication was, but it was more on a JV situation. So, I’ll find a deal. I would bring on the investors. I’ll bring on the contractors. I was a single-family contractor, I wasn’t a multifamily contractor. So, I would bring on the multifamily contractor. I would get a piece of the profits as my sweat equity into the deal. I like that model, but the issue with ground-up development, particularly where I was located in Canada, the entitlement process took a long time. It took almost two years for rezoning, dealing with the city.

And then when you started the construction process, you’re dealing with potential environmental issues, you’re dealing with cost overruns, contractors, suppliers. And then when marketing comes in, the market could have changed by that time because our market is very much foreign investor dependent here in Vancouver because of immigration and what have you. So, I was always looking for a different type of asset class or different type of investment to investment. And when I connected with Ava, she was seeing the same issues when she was helping investors invest in single-family as an agent. And we’re like, hey, there should be a process that we can kind of merge our two companies, merge our two businesses, and allow more people to invest into real estate.

And then, when we went looking at the property type or the business model, we were introduced to U.S. multifamily. And what we saw is groups rather than doing ground-up development and going through all the headaches that I just mentioned, they would buy already built apartment communities. These are stable assets, they’re cash flowing from day one. And they would do some small renovations, some value-add, sell the asset in three to five years, and give great return back to their investors. But what was shocking to me is that they were cash flowing from day one. I’m like, “How is this possible?” And because I’m going by the Vancouver 2% to 3% cap rates…

Ava Benesocky: Yeah, negative cash flows.

August Biniaz: Negative cash flow in most cases. So, I’m like, “This is amazing.” I looked at it, and it can be done all over the U.S. and California and New York. They do have lower cap rates so it’s not really possible but in the Sun Belt states. Anyway, we fell in love with the model to buy an already built apartment building to do some level of renovation exit in three or five years, but also with the alignment that existed with investors, the GPs alignment. In our businesses, as a general contractor or as an agent, you get paid no matter what happens with the deal, whereas as a GP in a syndication or as a fund manager, in most cases, you’re compensated relative to your performance, to the performance of the asset, particularly when you have preferred returns and hurdles in place, so that kind of keeps the sponsor’s feet to the fire to make sure they’re bringing good deals because the majority of the profits they’re going to make is on the back end.

And if they don’t perform, people will not invest with them, and it’s a small kind of space. Because of those reasons, we fell in love with the model, the plan was for CPI Capital to be the operator and the sponsor and deal with both sides of this because in this business is the deal and it’s the equity. But soon, when we started CPI Capital, there was so much time and resources spent into cultivating and nurturing relationship with investors that we’re like, “Hey, at this juncture, it might make more sense to partner with operators as our boots on the ground.”

Ava Benesocky: And the reason we also picked that route is because we realized that we wanted to bring, we wanted to actually start off by bringing in institutional multifamily assets to our investor community.

Josh Cantwell: Great point.

Ava Benesocky: What’s the best investment that we can bring to our investors? And that was it. So, we’re like, okay, I understand most people start off with the fourplex, then they work their way up to a 10-unit and so forth. We didn’t want to go that route. We wanted to go full force and bring the best investment to our investors.

August Biniaz: Absolutely.

Ava Benesocky: And we’re like, hey, how are we going to do that? Okay, let’s find the regions we want to be in. Once we find those regions that have the numbers that the growth metrics that we’re looking for, now let’s go and find the best-operating partners to partner with. And that’s what we started doing. And we made ourselves really well known in the multifamily fraternity in the U.S., where now we set ourselves up today by not only partnering with the most incredible operating partners who, by the way, really set ourselves up even more because an operator, as we all know, they have to probably underwrite 500 deals before they really lock down that great golden nugget deal. So, by the time the deals hit our table, they’ve already been vetted. They’re already pretty much going under contract and they get kind of handed over our desk, and then we get to cherry-pick the best deals for our investor community.

August Biniaz: Cherry-picking deals for multiple regions, for multiple operators who’ve underwritten hundreds of deals. It’s literally like a funnel. By the time, the deal gets to our investors, and just for me to add a bit to that is also initially, again, I said CPI, we wanted to start be an operator and the general sponsor, and that is still in plans, we still want to be the operator in some point here in probably Q1, Q2 of 2023. Well, we still want to do the model we currently use because it ended up being an incredible model because of what we just explained as far as deal flow, as far as the quality of the deals, you got the other sponsor vetting the deals, you got our team vetting the deals.

And then when I think, again, going back to the investor alignment, a lot of times investors are like, okay, there are two GPs involved. Does that mean that my returns are going to be depleted? No, that’s not the case. In most cases, I’ve been talking about our situation and other sponsors that we know about is there is a portion of the profits allocated to the general partner in fees and in the promote. Now, our groups who co-syndicate, we just get a portion of that. There is no extra portion that gets cut out from the investors because there are two GPs. So, we fell in love with them also. We’ll continue using this model that we currently have, but we’ll also be…

Ava Benesocky: As we build up our operations and infrastructure and places in the regions that we want to be in as well.

Josh Cantwell: Got it. Love it. So, two questions, one more geared toward the limited partners and recruiting limited partners. So, this is really a question I’ll ask you guys that will benefit our audience that’s also seeking more of their own limited partners. What is your favorite way or favorite methods to make new relationships, meet new people, kind of have new blood in the pipeline, if you will, of limited partners because that’s the lifeblood of a private equity firm, as the lifeblood of a syndication is those LPs? So, again, speak to that portion of our audience that are also operators seeking to raise their own capital, what are some of the best methods that you’ve used to make those new relationships?

Ava Benesocky: We are in the business of relationships. So, that’s the number one most important thing. Without a relationship with our investors, we really can’t do much. So, there has to be this component of know, like, and trust. It’s very important. So, what August and I did when we first started was, okay, how can we create that strong know, like, and trust from day one? So, what we decided to do was become thought leaders in real estate private equity, start bringing value to people. And how do we get in front of people where we go and speak on as many platforms as we can? We do presentations, we do meet-ups, we do webinars, all that kind of stuff. And that’s really how we get people in the pipeline to be interested and want to learn more because when you give free value to somebody, they automatically feel connected with you and they want to start to learn more. So, that’s really the route that we took when it came to having our YouTube show, Real Estate Private Equity Academy. And then again, spending a lot of our time, going out there to educate on a daily basis, like with speaking engagements, but also on platforms like LinkedIn and other places, education, education, education, newsletters, vlogs, you name it.

August Biniaz: Just to give a summary of that, I would say build a brand, add value, connect on a personal level with your potential investors. And again, this doesn’t have to be the model. I was reading books on Steve Schwarzman and Blackstone and books like Barbarians at the Gate and King of Capital. I mean, he just left the bank that he was working at and made a few phone calls to a few investment firms in Japan and the U.S., and he ended up raising hundreds of millions of dollars on his first deal. Yes, are there firms that come from Wall Street or come from different backgrounds, and they can make a few calls and raise tens of millions of dollars? Yes, but if you’re going the grassroots way if you’re coming from a different profession into real estate and you don’t have a demographic you can leverage, you have to go this route as we’d be. Probably, in my opinion, the best route is to building a brand around yourself, building a brand around your company, adding value to your audience, creating a tribe, adding value to that tribe, adding value to that community, and then connecting with them on a personal level. We’re just flying to Toronto in a couple of weeks, having an investor dinner with our investors. Some of our investors who’ve invested in that LP many times in giant company say, “Hey, we’ve never been a dinner with the CEO.”

Ava Benesocky: And one more thing I wanted to touch on, which is really important for anybody listening, is investors want an incredible experience. There are so many operators to invest with. They want to show up and feel something, they want to enjoy the experience that they go through. So, we’ve made it a priority here that people, my investors have my personal cell phone number.  You know what I mean? They get to get on a call with me, we get to constantly communicate. It’s an experience for them. We invite them to investor dinners that are part of something, they’re part of a tribe. And yeah, that’s really important. I was on a call with a doctor once, and he was like, you know what? I just got off the phone with this operator and I was just another small fish in their sea.

August Biniaz: Just a number.

Ava Benesocky: Yeah, they just wanted my 50 grand and like there was nothing more to it. Just by you taking the time to have a quick call with me and connecting with me to learn a little bit about Hawaiian means the world, I’m going to invest with you guys. And that was the determining factor.

Josh Cantwell: Love it. Love it. I actually use the 506(b) rules as my excuse so when I meet with someone for the first time, normally, they want a pepper people, like ask with questions, what about your deal? What’s the profit? Do you have any idea of how this is already structured? What’s the IRR? How much equity do you give up, blah blah blah blah? Because I grew up in sales, I grew up in financial planning, I know that the person asking the questions is in control. And so, what I say is, “Listen, this all closed under Reg D, whether we use a 506(b) or a 506(c). The SEC requires that we have a prior existing relationship before I can even make you an offer.” And even though the 506(c) doesn’t require it, the 506(b) does, and so, I just say, “Look, these require that we have a prior existing relationship. If it’s okay with you, I could use your money, but I don’t need it. And so, I’d like to create a relationship with you, one, because it’s required, but two, because you have to be a qualified investor, like you have to qualify to do this. And long term, I’d rather have a smaller group of investors that I have better relationships with than a ton of investors that invest a small amount. And so, I’d rather have better relationships with less people that’s resonated on such a high level with so many people.”

I was on the floor with a couple of guys this past week, and they’re like, “You’re the first person that really ever asked us any questions. Everybody else is just doing a 506(c) and just presenting us the deal right away. And frankly, they all kind of sound the same.” They are, “Hey, 6%, 8%, 9% pref, 70/30 split.” What makes you different? And if they’re asking the questions, you’re on your heels. It’s very tough to be different. So, the fact that we are going after long-term relationships, we are, like you said, (A) about trying to be more of a create that personal relationship. We are part of their full-blown wealth plan, their retirement plan, and hopefully, for a long, long time. So, I guess, I’m speaking more to my audience about the way that they’re doing it at CPI Capital very, very much in lockstep with the way I do it, and it’s working. So, we must know something, we must be doing something right.

So, I would love to ask you just a couple of more questions and really, it would be around advice. So, first thing would be if you were to start over and look back 16 years ago when you were just getting started as a contractor and investor, 10 years ago when you guys were real estate agents, knowing what you know now, what advice would you give your younger former self? Like, what challenges did you hit that maybe you now know how to solve? What chokepoints were there that you’re like, “Wow, I never saw that coming,” but you got through it? What kind of advice would you pass along to a newer investor, a newer syndicator, a newer person raising money, or you’re a younger former self?

Ava Benesocky: Yeah, for sure. So, being an entrepreneur, it’s kind of built within us to try to go in, like with our smart ideas, our creative ideas, and try to kind of reinvent the wheel, and I’m going to put my systems in place and I’m going to do this and I’m going to do that. My best advice would be, don’t do that. Let your creative ideas come and flow and everything like that, but don’t try to reinvent the wheel because it’s actually going to hold you back a little bit. So, figure out where you want to go, put your guideline in place, but then also, look up to somebody who’s already invented the will and see how their systems are going and kind of mimic their systems. And I think you set yourself up for success a lot faster than trying to reinvent the wheel yourself.

August Biniaz: For sure. My advice would be, I mean, particularly focusing on building a real estate private equity firm from the ground up. If you’re building an investment firm which requires investors and what have you is there are a lot of great coaching programs out there. Definitely get a coach, 100% get a coach. We didn’t, but we paid through it by blood, sweat, and tears. I learned a lot.

Josh Cantwell: You paid for it one way or the other.

August Biniaz: Yeah.

Josh Cantwell: You write the check or you pay for it through blood, sweat, and tears.

August Biniaz: 100%.

Ava Benesocky: And it ends up costing you money anyway.

August Biniaz: Absolutely. Dan Sullivan’s book, Who Not How, definitely, get the right people on the bus and bring on the experts who know what they’re doing, absolutely do that on the first day also. I have a lot of advice, I want to get a lot of advice. It’s also creating content, man. You’ve got to be a content creator. If you’re shy in the camera, if you’re shy to talk to investors, if you’re shy to be on a podcast, if you’re not detailed, it’s going to be a difficult business for you.

Ava Benesocky: But you can overcome it. If you’re shy, it’s all good. You got us.

August Biniaz: Yes. Let me think, I was going to mention one last thing here that’s super important. Oh, and other quick advice, again, building a company is hire slow, fire fast.

Josh Cantwell: Absolutely. I think, as a CEO, the growth, I spent all my time looking at deals, talking to investors, and looking 6 to 12 to 24 months out. That’s all I do. Sometimes I really feel like I’m working because I’m either in front of a desk, I’m in front of a computer, I’m talking on Zoom, I’m talking to an investor, I’m wearing a hoodie, like I’m on the phone, I’m out at my properties. Even though we own or operate, I don’t do the construction, my partner, Glenn handles that silo of our business. And then I also don’t do the property management or asset management, my partner Tyler does that silo of the business. And I trust them. We have an amazing working relationship.

But somebody has got to look 12 to 24 months out. And if they’re more actively in the business, it’s just as important. So, I think a lot of it’s about a mutual respect. Like I used to think, okay, I’m the guy that raises the money, I’m the most important guy in the shop. The mistake that I made is that this is truly a partnership, it’s truly a partnership between the lender, the bank, the GPs, the LPs, even like we’ve had a couple of fires at some buildings, the insurance guy, like everybody’s got to work together. So, as I’ve kind of grown up, I developed a lot more mutual respect for everybody’s role, and that’s allowed me then to say, “Okay, it’s okay for me to spend my time thinking because thinking about the next 12 to 24 months or 36 months is so important.” I used to think like, I’m just going to sit on, whoever’s handling cutbacks, God, I’m just going to ride that guy and make sure it’s all done the right way, or asset management, we’re going to sit on top of those property managers and make sure they’re collecting every nickel. And I realized, you know what? The bigger problem is the unknown. And somebody’s got to focus on with that.

Then when I found that that was my wheelhouse, that was my swim lane, it freed me up to not worry so much about the other things, let the guys do their jobs, run their silos. And for me, man, it’s just created such a sense of freedom and a sense of accomplishment, I guess, to really know that I have my own swim lane, and somebody’s got to watch after that stuff down the road is really, really important. So, that would be just my other piece of advice to throw back to my audience.

One last question for you guys, it’s so important. Since you guys decided to go more of the private equity co-sponsorship and partner with operators, what are some of the boxes that you have to chuck, the keys that you’re looking for to select a good operator? Like you said, you will get dozens and dozens of deals and operators and ultimately decide on a few, a very small few that you’re actually going to do a deal with. So, what are some of the criteria that you’re looking for?

August Biniaz: Yeah, I don’t want these criteria to be used by limited partners, by passive investors because our criteria is very strict. We have dedicated our life, we’ve certainly switched our careers to get into real estate private equity so we were very selective when it came to the operating partner to partner with. In this business, it happens, people do lose investor monies. Thankfully, we have not lost any investor money, but it sticks with you for a long time. So, it was very important as operator. So, our vetting process was very strict. Again, I don’t prescribe it for passive investors. There are great operators who don’t meet these months.

Few things right off the bat, $100 million of assets under management, not through syndication but under their belt. Currently, we have over $100 million in asset management, but it’s through co-syndication. So, second thing is, having gone through a full cycle of deals, having done value-add because of renovations. There’s some sort of thing that could come up, you can’t handle it. In my years of being a general contractor, I’ve seen so many investors, again, like I said, at the mercy of a contractor or deals going awry because contractor is involved or contractor is not involved. So, making sure that the operator has some level of understanding on the upgrades and value-add and renovation side of the business.

Their transparency is extremely important. When we get on a call with them, the questions you’re asking, get us in touch with your past investments, get in touch with other operators who co-syndicated with you, get us in touch with lenders, anyone. So, is there a level of how open they are and how transparent they are as far as their communications? If we’re looking to bring on a big portion of the equity on the deal and they don’t answer my emails in a couple of days, you got to be on it, man. I’m coming in here with equity, you’ve got to be on it getting back to me. If you’re not getting back to me as a large equity partner, as a co-GP, you’re probably not going to get back to investors in time. Again, so anything else that comes to your mind?

Ava Benesocky: No, I think you hit all the key points because, yeah, it’s really important for us because we’re also showing our investors, hey, these are boots on the ground, these are our operating partners.

August Biniaz: We had some other stuff, we require operating partners to come on webinars. We have a separate webinar, we require them to come on webinars and explain and kind of say, what do you like about the deal? And also, the other transparency is about asking questions, what you don’t like about the deal? It’s important to say, hey, where is the risk that you see? Where do you think something that could possibly go wrong? So, that’s really the vetting process. Somebody coming in investing 25K or 50K might not get the same level of transparency and the same level of access to information. In our case, we’re allocating millions of dollars to a deal, so keep that in mind as well. Again, that’s why I said this might not be the best recipe, this might not be the best blueprint for passive investors.

Josh Cantwell: Yeah, I love it. Fantastic stuff, guys. Listen, I love your energy, both of you. You talk fast just like I do. I asked the question, you got the answer at the tip of your tongue. This has been an absolutely phenomenal interview. I love having you guys on. Guys, listen, for my audience, check out their website. You can register on their platform, go to CPICapital.ca. Remember, they’re in Canada, so dot-ca, check that out. You can register on their platform to get more information about their deals that they’re co-syndicating, their operators.

And again, I’m a big fan of the Sun Belt. I don’t do a lot personally in the Sun Belt. We own about 2,000 units outside of Atlanta, but we’re not really growing anymore in that market right now. So, anybody on my audience is looking to invest in the Sun Belt, definitely get with the guys at CPI, spend some time with them, get their cell phone number like Ava talked about, meet with August, spend some time with them. If it resonates, make the jump.

August Biniaz: Yeah, and maybe stay tuned, and maybe CPI Capital and Josh, is that Freeland?

Josh Cantwell: Yeah, Freeland, that’s right.

August Biniaz: Freeland, there might be a joint collaboration there for both of our investors so stay tuned.

Ava Benesocky: Yeah, because we love your energy too, Josh. You’re awesome. So, thank you.

Josh Cantwell: Yeah, I appreciate that. Thank you so much. Well, guys. Listen, thanks so much for hopping on. Thanks for joining me today on Accelerated Investor.

Ava Benesocky: Thanks for having us.

[CLOSING]

Josh Cantwell: Well, I hope you enjoyed that interview. I loved hearing more about their five criteria when they look for an investor to invest within the Sun Belt, $100 million of assets under management, full-cycle investments, value-add strategies, transparency and openness, and their communication. I also loved hearing about their four criteria including job growth, rent growth, population migration, and income growth, absolutely great stuff.

And if you enjoyed this interview, guys, listen, go right now on your phone, open Spotify, open Stitcher, open iTunes. I would be so grateful if you would just go in, leave us some rating, leave us a review, give us a thumbs-up, tell us how we did. And of course, if you’re looking for more information from me to access my portfolio, our website or Facebook pages, YouTube channel, visit FreelandVentures.com. We’ll see you next time on Accelerated Investor.