Josh Cantwell:   Welcome to the Accelerated Investor Podcast with Josh Cantwell. If you’re looking to retire early with forever passive income, you’re in the right place. This podcast is the go to destination for real estate investors, both active and passive, and multifamily apartment investors, both new intermediate and advanced. Now sit back, listen, learn, and accelerate your business, your life, and your investing with the Accelerated Investor podcast.

[INTERVIEW]

Josh: So, hey, Brian, welcome. Welcome back to accelerated investor. Excited to have you on the show.

Brian: Josh, thank you so much for having me.

Josh: Hey, listen, Brian, as we kind of introduce you to our audience, I always like to talk about real time events and kind of some passion projects that our guests are up to today. So, as our audience gets to know you, why don’t you tell them a little bit more about passion projects that you’re working on, both in the personal side and on the business side right now? Like things that you’re literally working on, like this week, next week, things that make you money.

Brian: Yeah, sounds great. Well, I’ll give you a little bit of the personal side first, just for some fun and context. So my family and I just moved to Peru, just moved to Lima about six weeks ago, and it’s been quite an adjustment so far. Trying to learn Spanish, trying to make friends, trying to get set up here, got set up at a co working space and found a new gym and all that stuff. So it’s been exciting, but it’s been a lot of work, too.

Brian: And I will say this about living overseas and particularly living in South America. We have an apartment on the 13th floor of an apartment building that literally looks out over the Pacific Ocean. Like, wow, ocean front, balcony and view. And we’re paying around $1,300 a month for that apartment. That’s not something you could probably do in the US anywhere.

Josh: Wow, that does not suck. What took you guys to Peru?

Brian: My wife is an international school counselor. She helps college juniors and seniors or high school juniors and seniors get into college. So, yeah, we spent four years in Brazil before this, in the capital city, Brazilia. For that, we spent four years in Abu Dhabi, the capital of the UAE. So it’s been fun, it’s been an adventure. Get to do a lot of travel.

Josh: And so real estate, I’m sure, has to be a virtual, maybe passive arrangement for you. I mean, if you’re traveling all over, I can’t imagine being an active operator unless you have a really good team back home.

Brian: Exactly. So I used to be an active real estate investor. Now I only invest passively. I decided that the young bucks can mess around with buying fixer uppers and renovating it and hassling with contractors and tenants and the 02:00 a.m. Phone calls and leaking toilets and all that stuff. I’m done with it. Yeah, it’s just passive investing for me at this point.

Josh: And you’ve pivoted from residential to multifamily. Tell us a little bit about some of the growth.
Brian: Yeah. So there’s a lot that I like about commercial real estate, multifamily. But we also. We’ll get into our investment club in a minute. But what we do is every single month we invest in a new passive real estate syndication project. The bread and butter there is the multifamily properties, like you talked about. But we also try to diversify across every different type of property, from self storage to mobile home parks to retail to industrial.

Brian: So there’s a lot to be said for a diversified approach to real estate investing. My crystal ball is no better than anyone else’s. I don’t know if multifamily is going to collapse in six months from now, or shoots at the moon or vice versa, with mobile home parks or self storage or whatever, but by spreading money across a lot of different types of properties in different geographical areas around the US, with different operators and sponsors, you can just spread your money out across a lot of different types of assets, know, get all those different types of diversification.

Josh: So you mentioned an investment club. Tell me about that. So what’s the structure, the setup? How does it work? What benefits do the investors get? What’s in it for you? Tell me about the whole set up. I’m curious for personal reasons, because we have a huge multifamily portfolio. We’ve done 19 syndications, 4500 units. We currently have 3000, 250,000,000. We personally operate and manage 100 million of it in the Cleveland market. We have a construction company, and I’ve got investors coming out of my ears who, like us, trust us. We’ve built amazing relationships with. And they’re like, hey, Josh, help me get this money deployed.

Josh: And I’m like, well, I’m not buying anything at the moment. So they’re like, isn’t there some other way that I could give you my, you know, Josh, you could help me kind of steward this money through this cycle, if you will. And I’ve often wondered and thought to myself, Brian, like, I’m not really serving or providing value to these investors at the moment as best as I could. If I was more diversified, maybe had some different investment opportunities for them, whether they were mine as the sponsor or somebody else’s.

Josh: Sounds like an investment club kind of concept would help me along with that. So I’m kind of asking for personal, selfish reasons, but help me understand what the setup is.

Brian: Yeah. So there’s really no one else doing what we’re doing here. We kind of had to invent this as we go.

Josh: I could be number two there you go.

Brian: A new competitor in the making. I love it. So every month, we propose a new real estate syndication deal to our club members. We vet those deals as a club. We bring the sponsor on and girl them with questions. Together as a club, if we decide to move forward, we open an LLC, we create a new joint bank account for that LLC. Everyone who participates in that investment gets named as a member in the LLC proportionate to their ownership interest, and we invest as one single non accredited investor, as the LLC.

Brian: So we only eat up one of those 35 sophisticated investor slots. Now, it is part of our mission to serve not just wealthy accredited investors, but also everyday people, non accredited investors. So we do intentionally limit ourselves to 506 b deals and other types of investments that allow non accredited investors. That is part of our mission. So that does limit us to some of the deals we can do. We have to pass on a lot of deals that look great, but they’re only for accredited investors, and that’s okay.

Brian: There’s plenty of accredited investors out there, so that’s all fine. But, yeah, the idea is that instead of having to come up with 50 grand or 100 grand to invest in a single deal, a single investment, you can invest with $5,000 or $10,000 and makes it a lot easier to diversify and spread your money among a lot more different types of investments like we talked about a few minutes ago, also makes it easier for people without as much money to get involved and start accessing these deals before they have that 50 grand or 100 grand sitting around collecting dust in their checking account. So that’s kind of the high level view of how we structure this and how we do it.

Josh: Yeah. So does the typical group investment, like, how much is it typically, once you kind of pool everybody together, some people with five or ten grand or those things? The thing I like about it, if you’re an operator, is you’re doing one investor update, cutting one check back to the LLC. Right. And then the LLC is then sharing those dollars back with all the investors on their pro rata share of that entity.

Josh: But with the investor club, I’ve got a lot of guys that can check in my world, a lot of guys that can cut checks that are 100 grand to one and a half million. Right. So 250 to 500,000, but allowing people in with five grand, ten grand, non accredited. There’s a lot of non accredited guys that can stroke checks for 200 grand to 400 grand. We’ve got a lot of those, too. But what’s the typical amount of money that you guys like to raise into an opportunity if everybody kind of likes it and signs off on it.

Brian: Yeah. So our club is not huge so far. We are now investing in the kind of 100 to 150,000 per deal range. The minimum investment per person per deal is 5000. And they can invest more if they want in any of these deals. But because we’re doing at least one deal a month, there’s only so much. People are investing smaller amounts across more deals throughout the year.

Josh: Right?

Brian: Sure. A typical non accredited investor, maybe they can invest 100,000, $200,000 in a deal. They’re probably not doing twelve of those a year. Right?

Josh: Right.

Brian: And if they could do that, if they could afford that, they’d be an accredited investor. Yeah. Part of our mission here is doing more deals with smaller amounts per deal, making it easier to diversify.

Josh: Cool. How do you find, Brian, the operators, the sponsors that you bring on, do you find them through a podcast? Do you find them through relationships, networking, going to events, finding twelve sponsors to bring on? And some of those sponsors might not have their craft together. Right. And they just fall apart on the call and they’re like, no way, we’re not going to invest with this guy. But let’s assume you have six or eight or ten decent presentations.

Josh: It’s kind of a lot of work for you to find and network with that many people a year and bring them on your show and into your club. So how do you find those operators and network with those guys to bring them on to begin with?

Brian: Mostly word of mouth and referrals from other syndicators. So we’ll talk to someone like you and talk about what you’re doing, what you’re investing in, and trying to build that relationship with you and get a sense for whether you might be a good fit for our club. And then at the end of every call that we have with a sponsor, we ask them, hey, who are some other people who you like in this space? Right? Like, who are some other sponsors who maybe you’ve invested with as an LP with some of your own money while you were looking for other opportunities elsewhere?

Brian: Who do you know, like and trust in this space? And we have found that those referrals from other sponsors has been a great way to find reputable, trustworthy sponsors. You know, as a sponsor yourself, you’re only going to invest your money with people who you really like and respect. So that’s why we love to ask sponsors about this. But we also do come across some sponsors through podcasts. For example, Sam Wilson’s how to scale commercial real estate investment.

Brian: Their podcast is a daily show, so he’s constantly bringing on fascinating sponsors who are doing different kinds of things, but it’s mostly word of mouth from other sponsors.

Josh: And Brian, let’s pivot to you personally. The entrepreneurial journey with a wife and a partnership that takes you all over the world. How have you had to think about your investing strategy differently? Because you knew you couldn’t be local. You didn’t have a home base necessarily in the States. You were going to be in Peru, you’re going to be in the UAE, you’re going to be in Brazilia. You’re going to be in these different parts of the world. But you still like real estate.

Josh: I think a lot of people find your journey to be fascinating, to think that they could be oceanfront in Peru and investing in us real estate and sort of the normal Fortune 500 grind that a lot of people are going through. So tell us a little bit about how you’ve gone from an active operator doing single family deals and then learning that you were going to be moving all over the world with your wife and then be stationed in certain areas for maybe three to four years, but you still wanted to invest locally here in the states.

Josh: How did that go and what was going on in your mind to make it all work?

Brian: Yeah. So when we first moved overseas, our first international spot was the UAE. We moved to Abu Dhabi back in 2015. And I still owned over a dozen rental properties at that time. And it was just too much. Even with a property manager, it was just too much work, as you probably know. Well, you still have to manage the manager, right? You still have to manage property managers and double check their work and make sure that you feel comfortable with how they’re managing your property.

Brian: You still have all the tax complications. And I got to a point where it was too much. I didn’t want to do it anymore. So I divested all of my single family rental properties. But I still love real estate. Right. And I’ve still built my entire career around real estate. I didn’t want to give that up. So I started looking into other ways to invest in real estate. And we tried this investment club that we’re doing right now.

Brian: It didn’t start this way. We actually went through some experimentation with it to try to find the right way to do it. We started actually doing single family properties there with a local boots on the ground partner, letting some of our course students invest alongside of us. And then that ended up just being too much work for too little money. So it’s kind of evolved over time. Eventually I got into passive real estate syndications, but I also invest passively in real estate crowdfunding, a little bit of reits, although I don’t love reits.

Brian: So I just decided that as much as I love real estate, I couldn’t do the active investing anymore from halfway across the world. So I wanted to find more passive ways to do it, ways that don’t take any more work than clicking a button and investing in an ETF or an index fund. Right? Yeah. It’s a great way to invest without having to lay awake at night worrying about it.

Josh: Yeah. And what is some of the main questions? What’s some of the main vetting that you and your investment club does of a sponsor to invest with them? What’s important to you to see? And I think not only is this helpful in understanding your program, but for anybody who’s either an LP or a GP, there’s things to learn on both sides. Like, if I’m an LP, what’s good ways to make really strong investments, that I could sleep well at night and get a good return if I’m a GP, what are some things that I have to do, some bows I have to make sure that are tied on my deal to make sure that lps are comfortable investing with me.

Josh: What is some of the criteria for you to even get a GP or a sponsor onto the club? And what are some things that are absolute, like, red flags when you hear certain things, you’re like, man, there’s no way we’re doing a deal with this guy.

Brian: Yeah. So the first thing we look at, of course, is just track record.

Josh: Right?

Brian: We want to not just make sure that someone has performed well with their investments, but we also want to see how far back that track record goes, right? Recently, our club, we sat down and we talked about investing with a less experienced sponsor who was recommended to us by a club member, someone who’s been with us for a long time. And this sponsor, without much experience, he was doing some really interesting deals that we were intrigued by.

Brian: But at the end of the day, we decided not to move forward with him because he just didn’t have enough experience. So a long track record, ideally a track record that goes back through a few different real estate cycles, right? I love investing with people who lived through the 2008 housing market crash because they have a different perspective on things. I lived through that myself as a real estate investor, and I’m sure I think about real estate investing a lot differently than a 20 year old today who just wasn’t there, didn’t live through that. Right, right.

Brian: So, yeah, track record, of course. But the main thing that we look for beyond that is just how conservative is their underwriting? Do we feel confident that they are vetting these deals not based on idealized numbers or idealized conditions, but across any possible market conditions? Do they do a sensitivity analysis showing, here’s how the returns would look at this low exit cap rate, but also this really high exit cap rate.

Brian: Here’s how the returns would look at very low rent growth or even flat rent growth versus high rent growth. And not just looking at those idealized scenarios. We want to look at what contingency plans do they have in place? Do they have an interest rate cap in place? How much cash reserves are they planning on holding? What other ways are they reducing risk for both themselves and for lps like us? And one question that I love to ask sponsors, and you and I are going to be coming on our show soon as well. And this is a question I’m looking forward to asking you, is what risks do you see in the space right now that no one’s talking about or people aren’t talking about enough?

Brian: So, for example, nowadays everybody’s worried about interest rate risk and everybody’s talking about it, right? But now actually isn’t really the time to worry about interest rate risk. Interest rates have already shot through the roof and they might go a little bit higher, but no one thinks that they’re going to double or anything right from here. The time to worry about interest rate risk was two years ago when nobody was talking about it.

Josh: Right? The interesting thing about interest rate risk, that money, but nobody is really talking about. We’ll talk about this on your show at some point. But is what if interest rates stay this high for the next five years? And they could, or ten years, right? So what does that look like as far as really forcing value so that you can exit with a profit? Whereas some people penciled a three or four or five exit cap, and if interest rates are at a six or a seven, the exit caps are going to be six, seven, eight versus a four.

Brian: All right.

Josh: That is a lot of people think they look at the forward curve and say interest rates are definitely going to go down. Interest rates are definitely going to go down. Definitely.

Brian: Yeah, they’re definitely about it.

Josh: Definitely. Maybe.

Brian: Right.

Josh: So that’s something for sure that we can talk about. But yeah, those are all really important things. Experience different types of exits, different exit cap rates, different ways you’re going to push know, shorter time holds. Longer time holds. What if rents don’t go up? All of those things. Really critical questions to ask. So that’ll be interesting. You and I come on your show, you don’t pepper me with some of those questions.

Brian: Oh, yeah, I’m looking forward to it.

Josh: Yeah. So, Brian, tell me a little bit more as we kind of wrap up for today about your personal mindset as a spouse, as a family man, as an entrepreneur, being overseas, what does it feel like? Because most people won’t experience what you’ve experienced in traveling and living on the beach in a different country. How do you feel right now? Like doing what you’re doing? Because most people are like, on the beach, my ties every day and other people will be like, I could never do that.

Josh: Other people think it’s a total fantasy luxury for you. It’s a reality for the last 810 years or so. Tell us about it. How does it feel? What is it like?

Brian: Well, it’s funny. My dad jokes that I had this dream of sitting on the beach and just relaxing in my middle age, but now I work harder than anyone else that he knows. He jokes that I created a job for myself, but the fact is, yes, I do work ten hour days typically, but I also took the entire month of December off last year to travel around Argentina with my wife and daughter. So what I encourage people to do is to think in terms of lifestyle design and intentionality. Right.

Brian: Designing what their perfect life looks like. So I don’t mind working long days, long weeks normally, as long as I have total control and flexibility over when and where. So I’ve got friends visiting from the US coming tonight, actually. So I’m going to be taking off a good chunk of the rest of this week because I can. Right. I don’t have to worry about requesting paid time off or any of that stuff.

Brian: I can just do it because I work for myself. Now, working for yourself is not all rainbows and butterflies, right? I have no floor for my income, but I also have no ceiling for my income. Whereas one of the ways or one of the reasons that my wife and I built our lives the way we did, her job provides a very stable floor, both for salary and for her benefits. She gets amazing benefits. We have free housing.

Brian: I was telling you earlier about that $1,300 a month apartment that we live in. We actually don’t pay any of that. Yeah, exactly. Because her job provides us with free housing and full health benefits for the entire family and paid flights back to the US every year. So she provides a great floor and we actually aim to live entirely on her salary and benefits and save and invest all of my income. But we can do that because there’s that synergy there, right, where he provides the stability, I provide the unlimited upside, but also there’s more risk in my income, right? I mean, there are months where I make negative money as a business owner, right?

Brian: And then there are months when we do great. But that’s why it works, right? And that’s all part of that design and intentionality that we have brought to our lives. And so that would be my advice for anybody, whether you are an employee, whether you work for yourself, is just design your own ideal life based on your priorities, right? I mean, it’s a priority for us to travel and to kind of do our own thing and live independently, have a very high quality of life at a relatively low cost of living.

Brian: But we spend money going back to the US twice a year to visit family, and that’s not cheap, but it’s a priority for us. So it’s just about your priorities and doing what is most important to you, which is not going to be the same thing as the important thing to the person sitting next to you.

Josh: Sure. Yeah. I love the fact that you said that. And I love the fact that it seems like you and your wife are also very aware of your own individual desires and needs for you and what you want. Being more of a risk taker, being more of an entrepreneur, doing what you enjoy, you being very aware of what she’s good at, what she likes, and having that sort of mutual respect, if you will, between the two of you.

Josh: To say that we can work together not only as a married couple who love each other, but as a financial unit, right. To have her income be the floor, yours be the upside. I’ve got another good friend of mine, Jack, who’s built an amazing portfolio, over 1000 units. And his wife is a nurse practitioner and she has a very successful nurse practitioner business. She’s actually got 15 or 20 nurse practitioners that work for her, that work a lot of nursing homes and memory care facilities and hospitals and those kind of things.

Josh: So she does really well, which allows Jack to walk around in his batman t shirts and invest in multifamily and crypto and all this other stuff that he does. And they’ve done an amazing job again, because I think they’re both very aware of what would make Jack happy, what would make Brian happy, what would make that kind of thing, and allowing each other to be creative and free, that is unusual. So congratulations for that and the lifestyle that you’ve been able to build together. It’s fantastic stuff.

Josh: Brian, as we wrap up, tell our audience a little bit more about where they can learn about your investor club, where they can find you online, your website, how can they engage with you and get more information.

Brian: Yeah, sparkrental.com. You’ll see our investment club listed front and center there. You can also connect with us on any of the major social media platforms at Spark Rental. And feel free to email me directly. My email is just brian@sparkrenal.com but you can also reach out through our website. Reach out to our support. Email support@sparkrendle.com we’re very accessible. We are very much a mom and pop business.

Brian: There’s just a handful of us working for the business and that’s intentional. Again, back to the theme of intentionality. We like being a small, nimble kind of maverick business and that’s how we’re planning on staying.

Josh: That’s fantastic stuff. And again, if you guys are potential operators, sponsors, Brian is looking, I’m sure, to always build out his network as well. And if you’re a limited partner, passive investor looking to be part of a club, especially if you have those non accredited lower dollars, visit sparkrental.com. I’m on there now. I can see the co investing and a lot of great videos and content on their website, so make sure you guys check it out. Brian, listen, thanks so much for carving out some time for us today on accelerated investor.

Brian: Josh, thank you so much for having me. It was a lot of fun.

[CLOSING]

Josh Cantwell: Well, guys, there you have it. I really enjoyed that episode with Liz. Man, being responsible to others is such a motivator. Giving to others, I feel so good about myself, right? Such and such a good place when I give to others. Number three, making a new decision. I remember when I was diagnosed with cancer and came out of my hospital bed and had an opportunity to restart my life, I had to relearn how to eat, I was not going to go back and redo my life the way I had been doing it, so making that decision. And then finally, as Caleb and I mentioned, don’t quit.

Guys, listen, everybody can do this business. Everybody can be successful. Everybody can be a multimillionaire with real estate. Keep getting your education, keep listening to podcasts like this. But most of all, go execute, raise capital, make offers. Don’t quit. We’ll see you next time on Accelerated Investor.