Helping Foreign Investors Invest in the US Market with Charles Carillo

 

Some people think that their investments are limited to their direct environment, but Charles Carillo joins this episode to extend a helping hand to foreign investors. He lays out the important details you don’t want to miss when investing in another country and he also gives some tips on what you need to prioritize as an international investor. Listen in and learn all about the importance of having reserves before buying any property and doing the numbers diligently to be well equipped for any unforeseen mishaps along the way. He also touches on the topic of having cash-on-cash transactions and why it’s considered as the simplest type of measurement for your investments. Charles also shares why focus has been a big foundation for his success and why you should master it in the real estate industry.

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Helping Foreign Investors Invest in the US Market with Charles Carillo

I’m excited to bring you guys another episode. Before we get started, I want to remind you to please subscribe to my channel. If you’re on YouTube, this is Lisa Hylton channel. Please go ahead and hit subscribe. If you’re on iTunes, Spotify, any of the podcast distributors, please go ahead and hit subscribe as well. Lastly, please go ahead and visit my website, LisaHylton.com. Sign up for my newsletter to learn more information about investing passively in real estate investment opportunities. Without further ado, on the show is Charles Carillo. Charles, can you go ahead and introduce yourself?

I am a real estate investor. I’ve been investing in multifamily real estate since 2006. I still own the first properties that I purchased. I was living in Central Connecticut at the time. I’ve been living in Florida since 2012. My focus is in the southeast, which is a much better market where it’s appreciating not rent prices but also the property prices. In Central Connecticut, it’s a cashflow market, which a lot of people through parts of the Midwest and other areas in the country can relate to. What I focus on is we syndicate properties, 50, 60 units, and above. We try to focus on 100 units plus. I also work with a couple of partners. We look for smaller multifamilies that we’ll purchase as a joint venture with a couple of partners. I also run a podcast as well that focuses on foreign investors investing in US real estate passively or actively.

We have a lot of amazing things to jump into. You touched on a little bit about how you got started in real estate in 2006. Is that correct?

That’s right.

Can you talk about how you got started? What was your first property? What was that experience buying it?

My dad was a real estate investor, multifamily, mixed-use. He had a couple of single-families, but mainly it was all multifamily. I had known nothing about this when I was growing up of how this was all planned out. He and his partners had building after building, 6, 12-unit buildings. They had scale because you could walk to the different buildings on the areas that they were purchasing in for the most part. When I graduated from college, my dad was pushing to buy a property. I wasn’t 100% into it. I was like, “I don’t know.” He pushed it. We did it. It was at the top of the market, which is fine. We sold the property.

There are many things that you don’t know when you’re buying a property. This is in Central Connecticut. These are older factory housing. This is built in the early 1900s. It’s was a three-family property. The goal was, as they call it, house hacking. Live in one of them and rent out the others, which happened. Dramatically, we underestimated the rehab on parts of it. Value add wasn’t a thing at that point when you’re reading through real estate books. It was the no money down Carleton Sheets stuff people were still reading. We got it rented.

The one plus about buying in ‘06 is that when you refinance a couple of years later, the interest rates were lower. That saved you a little bit of money when we did that. It’s something where whenever I invest in a property, I always stress to people the reserves. Not that I had to dip into anything that I didn’t want to, but it would have been much easier if I purchased a property with the amount of money required to do the mechanicals like the hot water heaters that I wanted to do right away. We piecemealed it throughout the five years. We did an HVAC system and a furnace. We did the roof. It would have been less headaches if you had the right amount of money you’re supposed to use to go in and you got it taken care of, which we did on the second and third property afterward.

I’m guessing that was the early lessons learned from that first experience. Was that your first forte into passive income? Was passive income something that you experienced before, maybe through your family?

My dad always pressed the passive income. You don’t know. You’re not thinking about this when you’re younger. My uncle at the time ran a large independent insurance agency in Connecticut and that’s all passive as well. You’re around this, my father and my dad, they set it up and you weren’t even thinking how they did this. They had the amount of time freedom that they did. I was like, “This is what I’ve got to do.” When I left college, I was like, “I want to do it.” I just wasn’t ready. My dad pushed me into doing it. It was fine.

He bought another property. It was a much better property. It’s only a block away from this one. The area was fine. Obviously, this was a month before Madoff was found out a couple of months after Bear Stearns. It was right in that area. You had no idea if your financing was going to be good. We’re telling the realtor, “I guess we’re closing.” If the mortgage broker says, “I’m closing,” we’re closing. We went in and that property was the second property I bought. When I bought it, it was 108 years old. I was only the third owner. That had been owned by a family for 60 plus years. It was fantastic. The original wood floors are still there. You look into it and you go, “I should have extra bedrooms.” It was much easier to turnover.

I have one tenant in that property that’s been there since I self-managed it in 2011. In this area, they weren’t living in three bedrooms. I still have realtors send me stuff because if it’s in that area, those blocks, I’ll still look at it. I won’t go outside of it because I won’t have any scale. It has to have three bedrooms and stuff like that. You learn after you’ve honed in exactly what your investment strategy is. Everybody’s investment strategy is different because everybody has different time requirements and everybody has different return requirements.

You’ve touched on a few of the lessons that you learned from your early start in investing. One is having the right amount of sufficient reserves. The second one sounded like understanding your strategy. Maybe I’m wrong or maybe I’m right. What are some of the early lessons you learned and how they impacted you when you continued to invest further?

With more sources of income that you have, your income is going to be more stable. Share on X

How I learned real estate investing from my father, he was more of a back of the napkin. I remember going to Friendly’s, which is a restaurant chain. I don’t know if they have it where you guys are. Like flipping napkins over is my dad buying property. Cash-on-cash was the only thing. He never knew what IRR was. Cap rate, not important. It was all about cash-on-cash where he can get the financing and it was all long-term. These are smaller properties. His debt was commercial financing. Those were the lessons I learned. I still have cash-on-cash depending on the type of investment and the amount of time. You factor in the time. I didn’t have a strategy at that point.

From the beginning, your strategy is going to change when you start investing no matter if you’re doing it passively or you’re doing it actively. You want to hone in and figure out what you’re looking for and what you’re comfortable with. It’s like when you talk to banks, there will be different banks. There are banks you go to that don’t want to deal with multifamily investing, which I feel is crazy. There are other banks that love it. That bank, it’s not in their risk or appetite to take on that type. An investor like that has to realize and figure out their strategy that they’re comfortable with.

Can we move on to how you play now? You touched on it in your introduction. Can you dive a little bit more into the way you play in real estate?

We’re focusing mostly on syndicating properties. We’re focusing on 60 units and above for doing syndications. Before, we’ve put together a couple of different properties to make up a larger portfolio. We might pick up a 35-unit and then another 50-unit. It’s something like this and we will then offer that as one syndication. Historically, pre-COVID, in Florida, 100 units and above would sell for a premium of about 4%, as one of my brokers quoted me on. If you have the properties and you can keep them, you’re buying different properties near each other. We’re talking within a block, sometimes next to each other. That’s one of the strategies that we like looking at. One of the partners we work with likes that. You can get the cost per unit much lower than if you’re going out and say, “I only buy 180-unit complexes and above. It’s got to be $20 million.” That’s a great way. You have to think outside the box, especially with so much buzz around syndication in today’s environment as you know.

When I’m looking for a strategy cash-on-cash, we want something that’s going to go 8%, 9% cash-on-cash if I’m doing it in the syndication. I don’t buy on the IRR. It’s great that it can be 15% and above when we do our estimates. There’s no way of knowing for sure when you’re going to sell it. We’ve purchased a property before and two months later, we got offers on the property. It wasn’t what we wanted but it was close to what our ending target was. Everything can change once you start purchasing a property. Cash-on-cash is the main thing because it’s the easiest for investors to understand.

Most investors don’t understand all the different metrics that real estate investors use, especially more sophisticated real estate investors, the IRR. How do I know the cap rate? You can’t give them a straight answer of what the cap rate is. It differs so much from different classes per neighborhood. You’re like, “We can take a broker report.” This is what we work it off of. The cash-on-cash is something that everybody sees because then you can say, “This is 8% or 10%, cash-on-cash.” You’re going to get that quarterly. That’s someone that says, “$100,000 and I’m going to get $8,000, $9,000, $10,000 a year, and split it up.” That’s simple for people to understand. That’s how I keep it when I invest.

On smaller multifamily, there’s increased risk but there’s also increased hassle. You want to see 10% or 12% cash-on-cash. People reading will be like, “That’s crazy.” It’s the stuff that we found going direct to the seller. In most markets, you’re going to be able to find better-appreciating markets than you’re going to find by going to a broker. I could be wrong, though. That’s the tactic. We don’t work with brokers in the small multifamily.

When you broke down all these different pieces, one of the things that stood out to me is the increased risk and hassle of playing with the smaller multifamilies versus the larger multifamilies. For some readers, they might think, “Is that true?” Could you probably expand on your experiences as to why you’ve made that conclusion?

With more sources of income that you have that are coming in, let’s say avenues of income, your income is going to be more stable. That can be in all different types of businesses. If you’re an insurance agent, you’ve got 5,000 versus 50 clients. It could be that you have a portfolio that you’re getting income from, let’s say, 100 units versus you have 15 units. I’m not saying they’re not good investments. Some investors veer away from them because they think it’s a ton more hassle. When you’re starting, you want to make sure that your property is going to pencil with having ten-plus income streams. The key is that the first one might be a little tight. Once you’re adding units in that market, the real goal is if you can get to 50, 60 units within a quarter-mile, half-mile, a mile, whatever it might be, you can then have the scale. You can have a full-time person and then you’re not paying the full price to your management company.

 

A lot of management companies, they’ll scale back with their fees as the units rise. If someone has a condo and they rent it out, they’re paying 10% on average. If someone has an apartment complex that has seven units, that might be 7%. If someone that has 30 or 40 units in their portfolio, that might not be 6% or that might be 5%. That’s a huge change across your bottom line when you have that type of scale. There’s going to be an increased risk with smaller properties. It’s not a bad route to go if you’re aware of, “In the beginning, I’m going to self-manage these. When I hit 20 units, I will have these managed by a company,” or whatever your end goal is.

What market do you play in?

I like Tampa, Florida. There are a few markets in Florida that we like and Tampa being our target. I like the whole southeast. I have a partner in the Carolinas. I have another partner in Atlanta. These growing areas in the southeast, we’re seeing what I feel is one of the most important, which is the job growth. You have the job growth and you also want to see a decline over whatever timeframe. You want to see a decrease in crime with an increase in population job growth. If you can find it, it doesn’t have to be perfect but you have something like that. Parts of Florida are starting to see that. We don’t deal too much in Orlando. At this point, we don’t have the diversity of employment base with what we’re going through. That’s something that Florida didn’t have at all in ‘08, but now we’re getting it. With the whole COVID, Florida was under 13% unemployment, which was on par all the way to Texas and all through the southeast. Only a few states were less than that. Florida, as a market, became much more diversified and that’s why I like it as our main target.

What are some of the lessons or the things that this pandemic has brought to you that have either reinforced the way you choose to invest your strategy or maybe have highlighted you a way in which you want to change your strategy going forward?

It goes to cement the point that value add is not a bulletproof strategy. Not that you can’t employ that but it’s not something where we were seeing in 2010 through 2018 and 2019 where you could buy a property. You could hold it for three years. You could increase it. You could provide your investors with 20% plus IRR. It was something that would continue. As it stands, where we are with the markets, everybody is pausing on their value add, whether they’re pausing 100% or whether they’re pausing part of the process. Operators aren’t penciling in. We’re not penciling in rent increases for eighteen months. At this point, we’re taking care of all the bones of properties that we’re buying, which is the first thing we always do, which is roofs and mechanicals. When I say mechanicals, I’m talking HVAC, hot water heaters, and stuff like this. The bones of properties are something that a lot of syndicators avoid doing as much work to because, with that, they’re not increasing rent. You can’t increase rent because some guys’ roof is leaking. You’re not going to increase rent because they have a straight parking lot.

One of the other things is, why do you think cashflow real estate is powerful? What is the alternative to purchasing cashflow real estate?

Historically, through many different administrations, we’ve been printing money. It’s not one way or the other. It’s probably never going to stop. It allows you to make money. If you buy gold, you can’t make money off of it unless you sell it, unless it’s in some fund or something. The thing is that you can buy real estate and you can make above-average returns, which I would consider 8%, 9% above average. With inflation historically being 4%, at this point. You have money in something that thrives on inflation for the most part. If you’re in one of these markets that are seeing an increase in job growth, an increase in population, decrease in crime, these are going to be areas where people are moving to. These are going to be places that exceed inflation, the value of the home, plus you have to leverage with it.

One thing with properties, your insurance and taxes will change. If you have long-term fixed debt, it won’t change. It’s going to be a fixed expense unless you have VC, if you refinance it or if it’s not long-term debt. That is powerful as well, especially where people are getting debt per 10%, 12%, less expensive. We were getting debt at 4.65% before. We’re now getting around 4% with four years interest only instead of two years interest only. That gives you a lot of flow. When you’re in these properties, you aren’t going to see any increase in your debt service for four years. Even if you don’t instill the value-add process for a couple of years, you still have time to do that without any issue.

That leads me to my next question. What are some of the biggest mistakes that you have seen investors make and advice to mitigate some of those risks?

The main issue I see or hear about is too aggressive on the underwriting. Taxes are a big thing. Whenever you talk to commercial bankers and you’ve never spoken to them before and you’re telling them about a property, they’ll ask you, “Have you readjusted to taxes?” That’s something that a lot of investors aren’t doing. They’re not working that out. The other thing is the reserves and not having long-term debt. On your first properties, once you get more seasoned, you can start working with bridge debt and all these other types of financing products. When I’m saying long-term in commercial bank, you’re not going to a 30-year amortization or anything. Look for something that is 7, 10, 12 years. It gives you some flow.

This pandemic goes to cement the point that value add is not a bulletproof strategy. Share on X

If anything happens with the property, make sure you’re raising money for all of the issues that are in the property. Don’t try to cashflow, that’s a huge mistake even if it’s your own money. If the roof needs to be replaced, make sure you have the money in cash for the roof to be replaced. If your hot water heaters need to be taken care of, make sure you have the money for hot water heaters. What we do on smaller multifamilies, we make sure we have six months of debt service. We’ll probably have a few more months for operating expenses that will keep a savings account for the property. When I’m doing it with other partners or even if I’m doing it by myself, when we’re doing syndications, it’s eighteen months of operating. The lender will tell us what we need, which will be 6 to 12 months probably on the debt service. Those are the main three things.

You have grown up in a family that has exposed you to real estate. You’ve had opportunities where you’ve done real estate manage, self-managed yourself. You’ve moved into the realm of larger syndication deals. Why is it important for you to complete a project on your own before raising funds?

It’s proof of concept. With any business, you start a business, you’re doing something, and nothing is real until the money hits the bank account. I wouldn’t feel comfortable, with friends or family, to take money from anybody that you’re not sure that you have a strategy in place. As many books, podcasts, the YouTube videos you watch, you’re not going to know. That strategy is going to change. Strategies change when you’re saying, “This is what I thought was good. I purchased this and this is fine. This is a single or a double property. I can hit a triple or a homerun if I change this, if I pivot my strategy.” People have to get that ironed out before they start going to friends and family and saying, “Trust me,” which they do and you wouldn’t be going to them. You have to make sure that you’re not going to lose their money.

Saying that, it’s the importance of building a team. For the individuals who don’t necessarily come with all the different experiences for all the different areas, how have you leveraged the skills and experience of maybe other team members in building and scaling your business?

The main thing is finding out what you like and what you’re good at, which is usually the same thing, and then minimizing spending time on activities that you don’t care much about. I’m not a twelve-tab underwriting kind of guy. I get them sent to me and I review them. They know when to send me a stress test, 1 of the 2, so I can review it as well. I know exactly what our occupancy is. I can review all that and I understand it, but it’s not something I’m going to generate. I have partners on the team that love doing that stuff, and that’s perfect. I like talking to people about the deal. I like walking the properties and seeing it myself. I know I’m confident about it. People are contacting you because you’re busy and they’re working with you because they’re busy and they want to be part of these opportunities. They don’t have the time or the ability to go. Even if they did, what would they look for if they didn’t know? That’s something that we bring to the team and figuring out exactly what you’re good at, what you like doing, and then finding people that fill out the void in what you like.

Going deeper into some of that, you talk about the use of virtual assistance. Can you talk about some tips? Number one, why do you recommend enlisting them? Number two, tips in enlisting them properly or efficiently for your business.

Virtual system is one of them, but outsourcing and taking stuff off your plate, which is something I should have done years back when I was self-managing. When I was in my twenties, I didn’t do it all. It’s in your mindset. I look back and I’m like, “I could outsource all this stuff inexpensively.” Now it’s easier than ever. I have virtual assistants that help with all parts of our business, whether it’s putting together nice presentations, whether it’s editing audio and video that we put out as content on our different channels. When we’re looking at properties, I say, “Pull me the rent comps you’re finding in this area.”

I can then review that. A lot of stuff like that, you can take off your plate. It’s not like when people see or hear the assistant, they think, “I’ve got to have this 40 hours a week worth of work for this person.” It’s not true. You can start them and say, “I’m going to start with 3 to 4 hours a week.” Work up to wherever you need to go. With it being easy to do it, you can enlist the services of a virtual assistant for any portion of your business. In real estate, there’s so much work that it’s a low value for the operator to be doing. It’s something that somebody will love to do for you and get paid for it.

From there, I want to move into your podcast and the fact that you have a podcast that is focused on educating foreign investors on opportunities to invest in the US. Can you talk about why you decided to do this type of podcast?

 

Years back, I was running a business that I’ve merged with a business with my brother that he handles 100%. I was doing a lot of traveling and meeting investors mainly throughout Europe and parts of the Middle East and also Asia. You go there for weeks, months for something like this. I’ll talk to the partners I was working with and they go, “What else do you do?” We talk about real estate and they love it. In a lot of these countries, they do not have anything like what we have in the United States, whether it’s the lending that we have, whether it’s the ability to make cashflow on properties at the level we are. They ask me, “How do I invest in that?” I go, “I have no idea how a foreigner would invest in this.”

Our first investors that we had passively were foreign investors. It was something where I schedule the whole podcast towards working with foreign investors if they want to be active or if they want to be passive. Active is a whole other thing because it’s difficult to get the debt and there are a lot of different pieces that a foreign investor being active has to jump over, a lot of hurdles. That’s one thing with passive. With the syndication, it allows them the ability to invest into an opportunity that will allow them with all the benefits, cashflow depreciation without having to find and trust a team in the United States, and go through all the stuff that we do as operators to get a deal done.

This leads me to my next question, which is advice you’d have for foreign investors who are reading and who might be thinking, “I didn’t know this opportunity existed to invest in the US.” If you could share maybe 1 or 2 key things that they need to think about or consider if they’re interested in passively investing in an opportunity in the US.

The first thing is to get connected with a CPA or a tax professional or an attorney that works with international investors. They can start the process for you. There are different ways of doing it. We usually suggest it, obviously, it passes by your CPA or an attorney before you do anything. They will set up usually an LLC in the United States and then they will invest through there. The CPA that they had set that up for them can handle the tax returns for that and anything else and send the money back. The actual investor will be the owner of the LLC. They’ll control the funds within that.

The US government is a little different on how they’re taxed in the sense of withholding versus a US investor because there’s no recourse. If some guy from Hong Kong invests here and takes his money out, there’s no recourse for that person getting their taxes. Even though with the syndication’s depreciation, there are no taxes that are owed in the beginning. Not that it’s a huge thing, but they’re going to have that withholding. A CPA that works with foreign investors can get the ITIN number that they have and then set up the LLC with the EIN, Employer Identification Number, and get that all sorted out for them. It’s going to cost a little money upfront but they can use that LLC to invest in not only your syndication but any other syndications that they might like or investment opportunities in the US.

Are there any maybe drawbacks or things that they should think about or be mindful of perhaps?

There are banks that we work with that make it easier for opening up accounts with. Your traditional banks, unless you have some special relationship with one of them, it’s going to be much more difficult. With everything that goes on with AML, Anti Money Laundering, and KYC, Knowing Your Customer, how I do it with any type of investments and investors I talked to, I would say, “These are the contacts. You can contact these CPAs. If you find your own, great. Whatever works best for you.” You have to invest with money from a US bank account. We don’t have the resources of Citibank, HSBC, or any of these companies that have hundreds of people that work on this KYC and making sure that they’re opening up accounts that are not for people that are illegally doing something, terrorists or whatever it might be.

If Bank of America is going to open up an account for you, for instance, I know that I can accept money from that account. I know that you’ve passed all the checks of this corporation and this banking system. That’s one of the things that we keep internally as one of the guidelines that we use. Some countries will make it more difficult for getting the money out, that’s the biggest thing. Getting the ITIN number and all this kind of stuff in the United States, that can be all done by a CPA. They have to realize, “How am I going to get the funds to the United States?” Some countries have no issue. It won’t be any problem at all. Some countries, it might be an issue. It depends.

There’s so much good information there. Moving on from that, advice for passive investors in general. Obviously, you’re a syndicator. You’ve done a variety of different deals. A piece of advice you’d have for people who are reading and who would be interested in investing passively, especially in light of the environment, COVID, the pandemic, social unrest, the whole nine yards. Looking at the landscape of real estate investing, what are your thoughts, and what is your advice to them?

Any deal that you have, I would make sure that the rent increases are within reason. It might be great when you’re looking at deals and someone says, “The rents are 40% or 30% under market.” When you’re doing a rent increase like that, you can be assured that no one is staying there. When we’ve done rent increases that are smaller where we say, “This is 15% under,” we’re going to raise that rent over five years. You’re going to have tenants that move from old units to new units, no downtime on rent. They’re paying more and going into a new unit. When you start going into double-digit yearly increases on a property, that’s when people aren’t staying. That’s something you have to check.

With any business, nothing is real until the money hits the bank account. Share on X

I also do what we call stress testing, which means what is the percentage of what we call economic occupancy, which is a fancy way of people paying rent that needs to be reached for all the expenses to be paid, property manager taxes, insurance debt. We like to see that right around 78% to 82% usually. That means that you can have 20% of people in the property not paying rent, going through the eviction process let’s say, and your property is still above water and not going into any reserves or anything like that.

Would that be still breakeven or no? That’s even before breaking even.

The stress test is to find out what the breakeven is on what the current rent structure is. Most deal that we would look at, they’re going to be in the high 70s. That is saying that the breakeven is 78%, let’s say. You have to make sure you don’t want it to be 88% or something crazy. That’s risky on a yield play. On a value-add play, people have to realize that if your operator is telling you, “We’re going to only do two units a month,” that means that only those two units will be offline. You have to make sure that the units are vacant beforehand so that takes downtime and they don’t rent the day you finish. The thing is that there’s going to be a lot of lag before and there’s going to be lag after. It’s making sure they have the reserves and making sure that the stress test is there and they’re not over-leveraging the deal. The deals we’re looking at when we talk to lenders, it’s in the mid to low 70s. That’s what the loan-to-value is, which is conservative. Where in some areas, you might be able to go up to 80% or something like this.

You mentioned the value-add play versus yield play. Can you clarify what the difference is between those two?

The value add is what is going on for the most part in multifamily syndications. We’re taking a property that, hopefully, there are some issues and not low rent. Hopefully, there are issues with management, deferred maintenance. You want a whole problem property. The poor Yelp reviews, poor Google reviews, everything. You’re like, “This is exactly what we’re looking for, where we can do some work to the property and that’s not just new granite countertops but also the bones of the property.” We can increase the value of the whole property by increasing the net operating income. This is where shakeups are going to change where you’re getting rid of people’s management that they have. People that have owned the property, they’ve had the same manager for years. Mom and pop are small investment groups. It’s like joint ventures as we call it, JVs. They might cashflow on the property and they’ve had it for many years. This is the stuff we look at because there are a lot of inefficiencies there.

The yield play with all these properties is we get them turned around if they saved a couple of hundred units in the property. We were then selling that to a company, such as a life insurance company for instance. They’re going to use it as a yield play. They want to make 4% or 5% on it. They pay cash for it. That’s all they want. They want the money that they’re getting paid from premiums to increase inflation and give them some type of return. That’s where it is. The problem with that is if you have an operator that’s taking debt on that, it’s risky because there’s not much upside.

I don’t want to mention any names, but there’s a well-known guy that does it. He always boasts about the different amenities of his properties and he says that it’ll never go down in price stuff like this. The problem with that is if you’re having these beautiful B-plus properties, these magnificent pools, and all this stuff, when there’s a little bit of a pullback, it’s not the most important factor in where they’re living. It was maybe before, but now maybe I don’t need all the amenities. My amenities aren’t even open. Why do I need a pool? Why do I need a gym? These types of things, that’s where it can become a problem area where you’re taking debt and doing the yield plays.

Of course, if someone is investing for the first time, don’t go into a heavy value-add. Do something that’s simple with the type of debt we talked about. Be closer to a yield play because there’s not going to be that much work that’s required. Your returns will be less but you’ll safely learn the industry. When you’re dealing with good properties, high end, B-plus, A-minus, once there’s any type of pullback, those people aren’t moving down Ds or C minuses. Don’t get me wrong. They’re going to move down to a B-minus, to a C-plus and save 10% on the rent, 15% on the rent.

Before I jump into my level up questions, is there anything else that I didn’t cover that you would like to share to investors or to people reading who are interested in investing in real estate?

No. We covered all the different bases.

These are my level up questions. The first one is, what are you grateful for in your life?

I’m grateful for my life, definitely my fiancé. Our wedding got pushed back because of COVID. I’m grateful for her. I’m grateful for having the ability and growing up with a father that was my first mentor in real estate and in business and about learning about residual income soon.

What has attributed to your success and continuous growth?

I would say, partnering with like-minded people, learning to outsource and delegate, and focusing on high dollar value and high lifetime value activities.

That last one is good, for sure. What do you know now that you wish you knew at the beginning of your journey?

 

Simplicity is my new number one value and that’s in business and personally, and the power of terms and partnerships. Focus is power. If you’re a shiny object kind of person, I consider myself not that. When I went full-time in the real estate years back, I had all these different things that were in the background and I cleared them all out. I sold them, whatever it was, so you could focus on what your real goal is and figure out what that 5 years, 10 years, and lifetime goals are.

Thank you so much for coming on the show. I appreciate it. There’s so much good information and insight. I’m sure my audience will absolutely appreciate this episode.

Thank you so much, Lisa, for having me on.

Thank you. Bye.

—

Thank you, Charles, for coming on the show. I appreciate it. It was an awesome episode, chock-full of so much good information. For me, some of my key takeaways, there were many but I will limit myself to my top three. My top three was one, simplicity. Focus is power. I love that. There’s nothing more to say. The second one is raising money for all the issues on the property instead of planning to take it from cashflow. He was like, “This is a syndication but even if you’re not doing a syndication and you’re buying a property straight out, it’s making sure that you have enough cash.” It’s like, “The roof needs changing.” All the different things that you know going into the property that needs to be fixed, make sure that you have money on hand to take care of all those different things.

Connected to that, he talked about having eighteen months in reserves for syndication and then six months in reserves for debt service and smaller properties and few more months of reserves for operating expenses. That leads me to my third point at this point, it’s reserves. The importance of reserves that came up many different times. I can’t reiterate that enough. It’s important to make sure that you have sufficient cash reserves before buying a property. Doing the numbers and making sure that you have enough of that money so that if something happens, you can at least ride out the storm for a good little while.

Last but not least, he talked about how his dad focused on cash-on-cash. Out of all the different types of measurements that people use, this one is the simplest. To be honest, for a lot of investors, it’s what counts. That’s the money that’s coming into their bank account either every month or every quarter, depending on what kind of investment they’re in either it’s monthly, quarterly or they’re investing on their own and getting cash off their properties. The last one was so much good information for foreign investors who are interested in investing in the US. Go back and read that area. He was talking about advice he would give to foreign investors interested in investing in syndications here in the US or even investing on their own in the US. Understanding and being able to take out that loan and all the different things that are needed if you’re going to take the route of financing versus paying it all out in cash. Obviously, if you’re buying it all cash, then it’s a little bit different.

Focus is power. Focus on what your real goal is and figure out what that 5 years, 10 years, and lifetime goals are. Share on X

A lot of good information there. Definitely hire that CPA that focuses on foreign investors, understands their needs, their processes, and how to set that up. I also have good CPAs myself who specialize in foreign investors. It was one of my first shows with Marie Grasmeier. It’s on YouTube. If you go to my YouTube channel, you can see it. It’s my earliest show when I first started. She handles and takes care of foreign investors. She’s absolutely an amazing resource to the extent that you’re interested in investing in the US in real estate either passively or actively. You should talk to a CPA that specializes in that area. Other than that, I hope you enjoyed the show. Definitely subscribe and leave a review on everything. Check out my website. Until next time, keep leveling up. Take care.

Important Links:

• Lisa Hylton – YouTube
• iTunes – The Level Up REI Podcast
• Spotify – The Level Up REI Podcast
• Charles Carillo
• Podcast – The Global Investors Podcast
• Marie Grasmeier – YouTube

About Charles Carillo

My name is Charles Carillo, I’m a licensed Florida real estate professional, an Eagle Scout and I first became a multifamily real estate investor in 2006. I am originally from a small town in Connecticut and moved to Florida in 2012.

While I was growing up, my father owned dozens of commercial and multifamily properties that he self-managed with a small team. This experience was priceless in shaping my future business and real estate investing career.

During college I started an online payment business which took me to dozens of countries in Europe and Asia to meet partners and clients; forging my passion for traveling. I ran my online business full-time until 2016 when I decided to switch my focus to my real estate investing company. It forced me to hire assistants and start delegating tasks for both businesses. This transformed both companies by freeing up valuable time that could now be used for “high value” activities.

Unlike other real estate investors that take a “hands off” approach to property management, I self-managed my properties for years before hiring my first professional management company. During that time I learned the intricacies of dealing with; tenants, contractors, superintendents, brokers, lenders and attorneys. I purchased and renovated multifamily properties; some completely vacant, and turned them into profitable investments that I still own today.

In 2016, I founded Harborside Partners, a real estate syndication company that offers other active investors and passive investors alike, the ability to partner with us and purchase larger, more profitable assets. Currently we are invested into over 250 units, worth over $25 million. We have designed an easy to navigate website that delivers volumes of free education along with a blog that features educational articles and the latest real estate news.

Additionally, I host a real estate investing podcast called Global Investors Podcast. After years of traveling the world for work I realized that there were many foreign investors who were interested in investing into U.S real estate but did not know how to go about it. My podcast focuses on international investors looking to invest into cash flowing U.S real estate and features detailed essential information in interview format from; attorneys, active investors, passive investors, syndicators, bankers, eb-5 professionals, etc. who work with international investors.

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