"Inspired to Invest" Podcast

Alternative Investment Strategies To Build Big Wealth

• Serena Holmes • Episode 78

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Are you curious about alternative investment strategies to build big wealth?

Welcome back to episode 78 of "Inspired To Invest". This week Denis Shapiro is with us. To watch rather than listen, click here.

He is here to share how he transitioned from investing in traditional stocks to a robust portfolio of alternative assets.

Discover the journey of Denis Shapiro, who started investing at 14 and navigated the choppy waters of the global financial crisis to emerge as a leader in alternative investments.

From real estate and mobile home parks to tech startups, Denis shares his transformative experience and the steps that led him to form Strategic Investment Holdings Capital Group.

Along the way, he touches on his discovery of note investing and his bold decision to leave a stable government career to pursue his passion full-time.

Learn how flexibility in work schedules and strategic partnerships can reshape your professional life. Denis candidly discusses his shift from a nine-to-five routine to an adaptable, entrepreneur-driven lifestyle, emphasizing the importance of tailoring work to fit personal and family needs.

By collaborating with like-minded partners, he has successfully launched a boutique hospitality company and engaged in affordable housing projects, proving the power of teamwork and specialized skills in crafting successful business models.

The episode also offers a treasure trove of insights from Dennis's real estate ventures, underscoring the value of relationship-driven investments.

Hear his cautionary tales of investing in Ponzi schemes and the unforgettable story of a broken sewer line at a housewarming event.

Denis emphasizes focusing on quality over quantity, maintaining strong investor relationships, and critiquing traditional syndication practices to foster a transparent investment environment.

Join us as we unravel the strategic thinking and lessons that have fueled Denis' journey to successful investing.

To connect with Denis, go to sihcapitalgroup on social and https://sihcapitalgroup.com online. 

“Inspired to Invest” is proud to support the Beyond Success Program, a not-for-profit financial literacy program for students, launched by More To Give & MAK Investments. Find out more at @more2give.ca.

Join us again on Jan. 29 for our next episode!

Thank you for tuning into “Inspired To Invest”, hosted by Serena Holmes & remember, "when you invest in yourself, the sky's the limit!"

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Serena Holmes:

Hey everybody, welcome to Inspired to Invest. I have Dennis Shapiro here with us. From Freehill, New Jersey, he began investing in real estate in 2012, just as the market was beginning to recover from the global financial crisis. He built a cash flow portfolio including many alternative assets, such as mobile home parks, life insurance policies, tech startups, industrial property, short-term rentals, affordable housing communities and more. It feels like you kind of cover all of it. He co-founded an investment club for accredited investors in 2019. And, following the success of this club, he launched Strategic Investment Holdings Capital Group. He also wrote a book called the Alternative Investment Almanac Expert Insights on Building Personal Wealth in Non-Traditional Ways back in 2021. And this is based on his experience becoming a successful alternative asset investor. So thank you for being with us today. How are you?

Denis Shapiro:

Thank you so much for having me on. It's a pleasure to be here.

Serena Holmes:

So it sounds like you've definitely covered a lot of ground in the last 10 to 12 years, so maybe you can take us back to where things started and how you got introduced to this concept of alternative asset investing.

Denis Shapiro:

So I got started pretty early on in my investing career. I first started doing traditional investments. I had a part-time job when I was like 14 years old. You're not really doing many alternative investments at that stage, so I went down at that point those can't believe 20 years ago, where, you know, I was buying mutual funds. I was actually trading and I kind of thought that there might have been a better way of doing things. The first thing that I realized is by putting your money in the hands of a mutual fund, you kind of take away any potential responsibility for your own capital, and I went down this rabbit hole where I wanted to be like the next. Warren Buffett went to business school for it.

Denis Shapiro:

However, right when I was in my junior year, the global financial crisis happened. It became really really hard to get anywhere and I was in smack in the middle of New York City while this was happening, ended up working for the government. I had a pretty successful 12 year career with working for the government, but pretty early on with the government I realized that they weren't my they weren't only my my employer, they were also my business partner, with the amount of taxes they were taking out. I had no kids at the time, so basically no write-offs went online. I was like, well, how do I reduce my taxes? And kind of stumbled onto the whole bigger pockets world. But my first single family rental then quickly realized this is not really what I want to do. I was kind of the project manager. I was the project manager, I was the manager on site, I was a construction manager. I kind of wore old hats while working full-time job. I realized I didn't want to scale that. And then I kind of got introduced. I think I was listening to a bigger pockets podcast and I got introduced to, you know, a private placement random and investing in an alternative asset, and at that point I had enough money to do so.

Denis Shapiro:

I went down that rabbit hole and then that kind of got me into. The first investment I did was a note investment. Then I then I kind of stumbled into apartment building investment. And that's when it was like like it was the Holy grail for me. It was like, wow, I could buy 1% of a large apartment building. So I did that for a little while doing my own deals where I was investing in other people's properties. I basically not recruited, but I kind of told two other people what I was doing, and that's when we did that investment club and then we ended up doing 10 or 12 limited partnership deals that year and then from there we kind of took steps to get back on the operational side. So it's funny when you say it in 30 seconds it sounds like it's just bam bam bam. But there was just a lot between.

Serena Holmes:

Yeah, it's all part of the progression. Now for us in Canada, I'm not familiar with the concept of note investing. Can you elaborate a little bit on exactly what that is and how it works?

Denis Shapiro:

Yeah. So a note investment is basically where a private equity company will buy, usually from a bank or a third party, where they'll buy a bunch of loans that have gone bad for one reason or another. Usually they're mortgages on a property. So this company went out, they would buy, let's say, two $300 million worth of loans that weren't performing. They would spend time, effort, to get them re performing and then they would give a certain amount of returns to their investors and then they would sell off those loans when they got them back to be performing.

Serena Holmes:

Is that the equivalent of buying the debt Someone had talked to me about?

Denis Shapiro:

that.

Serena Holmes:

Yeah, I've got books saved in my Amazon shopping cart, okay. So from there, obviously, you kind of take things to the next level and you went full force into it. So at what point did you leave your government job to go ahead with all of this?

Denis Shapiro:

It was in 2022. At that time, we had a couple multifamily properties and I just I felt like I had one foot in and one foot out. Yeah, the main difference was I was working with people that I wanted to work with. There was no with the government, unfortunately. You don't. You don't choose anything. It is what it is and I didn't mind that when I was young.

Denis Shapiro:

But then it got to a point where I didn't want to work with incompetence and I appreciate working with competence, and then that was the big aha moment. It wasn't like I had anything against working for the government. It's just I had problems with working with people I didn't want to work with at this stage of my life, and I think you got to cut your teeth. You got to go through it to realize and appreciate partnerships when you but you, you can't go through without going through like really bad times where you're being micromanaged and just told what to do and you kind of know differently, like hey, I've been here for 12 years, I know exactly what needs to done, but you're not letting me do the job.

Denis Shapiro:

So when we I transitioned out of the government in 2022. And then, honestly, it's like what everybody the older cliches that people say it's like, well, I should have done it sooner. Part to me. I was like, yeah, I should have done it sooner, but we've been growing exponentially the last two years so it's like, all right, what would have gotten me if I did it a year sooner or six months sooner? It would have been great to say it. But I love the trajectory that we're at and it's because it's slow, it's steady and it's continual.

Serena Holmes:

Yeah, and I mean it's kind of like the quote you grow through what you go through. So I think sometimes, even if that could have been possible, maybe you just didn't have enough life experience, or just being exposed to different concepts to really decide what you wanted, and maybe it could have gone a different way had you started that 10 years sooner. Like, you'll just never know that and I don't think you can go back and can't change it, so all you can do is like take what you've learned from at this point. How have you found adapting to life as an entrepreneur? Because obviously now you're not in a set schedule and I find that everyone adapts to that differently. Like, sometimes you'll be like I don't have to go to work, so I'll roll down at 12 o'clock to get my day started. And then there's other people that are like well, now I'm working 14 hours a day instead of eight hours a day, so you know, how have you found that transition?

Denis Shapiro:

So from first off, I have three small kids. So from a work life balance, it's amazing. Like this whole summer we didn't need a babysitter. It was terrible for my work performance but amazing for my family life. The other thing is I find that it's interesting is when you work a nine to five, there's really no rhyme or reason why you work a specific nine to five, right, it's just. It's just, the government can't manage too many different schedules at the same time. Whatever it is. But the truth is people work at different paces, different schedules. Like I have one of my partners. He like pumps out emails at one in the morning. I don't understand how he does it. I like to wake up at six in the morning and I like to respond. But I wake up and sometimes it's annoying because I like to wake up at six in the morning and I like to respond.

Denis Shapiro:

but I wake up and sometimes it's annoying because I like to go to sleep sometimes with an email box that's like empty, and then I'll wake up and I'll be like cursing them out.

Serena Holmes:

Yeah, yeah, I'm missing. I'm laughing because when I had my own business, I used to you know work was busy. I'd wake up crazy early in the morning, like four in the morning. People be like why are you emailing me at 430 in the morning? And then just the same thing like with your inbox. To me it's kind of like anything that's there needs to be dealt with. Anything else is kind of like organized and filed or, like you know, it's kind of done in a certain way but it keeps me organized. So everyone is different. But there's people that have like 11,000 emails in their inbox and I'm like my head would explode.

Denis Shapiro:

So just about like one of my things that I've realized working by myself is that there is a lot of strategy involved on how you actually work. So, being surrounded by other entrepreneurs, like I get bits and pieces, like I was the guy that had 11,000 emails before. And then one of the people in my network who's also a real estate operator, he's like super into productivity and efficiency, yeah, and he's like. He's like Dennis, I can't see, like, like when you screen share, I vomit because I see the 11,000 emails. I'm like I'm gonna clean your email box out. And he spent like an hour or two like consulting, like just like walking me through here. Here, this is how you do. You know forwarding and this way it's in the right places. This is how you start. And then from here you bring it into your project management software and I'm like, oh, okay, I was like this is how you do it.

Denis Shapiro:

So, working with like high level entrepreneurs, you actually put a lot of rhyme and reason of why you work a certain way. And now I'm at the point where we've had a lot of acquisitions the last two, three years. We built out our own property management companies. Now I'm at the point like 930 in the morning, like when my kids are off on the bus. Like 930 in the morning is like my health gym time. Like I don't have one meeting scheduled until 11 o'clock because hour and a half is like my personal time. Like I can't imagine that in a world where that would ever fly for the government would be like hey, I'm going to come in.

Denis Shapiro:

I'm going to take care of a couple of things. I'm going to get the main things out of my way, but then I'm leaving the office for two hours because I need a little me time.

Serena Holmes:

Yeah, yeah, yeah, and that's just it, though, right, need a little me time. Yeah, yeah, yeah, and that's just it, though, right. I mean I do understand in some capacities, like there are times that like at least you know what other times everybody's working at, and stuff like that, so I can understand why it's like that. But I mean, once you have a family and your priorities shift and stuff like that, I don't think it's reasonable for most people. I mean, we're spoiled now because of COVID and you know remote work and stuff like that, because we know we can, like, put our kids to bed and then work for another hour in the evening if we have to. But I think you just have to decide what kind of lifestyle you want and you know what kind of life you want to be leading Now in terms of your successes to date. So you mentioned you obviously had all these acquisitions and stuff like that what would you say you're most proud of, based on everything you've accomplished in the last 10 to 12 years?

Denis Shapiro:

Just surrounding myself with certain partners. A lot of my partners ended up having very similar demographics as me, where we're all in our 30s and 40s. We've all were successful in our previous career, we all have young kids and, like our name and reputation means a ton to us and because of of that we've done some amazing projects which I would never like. You don't realize. Like, when I worked for the government, I was like a superstar employee but I was surrounded by people who probably many of them would not make it in the private world for one reason or another. Right, so I was like a really big fish in a small pond. And then now I work with a bunch of superstars and I'm amazed at all the deficiencies I have and it's just amazing working with them. So we've done.

Denis Shapiro:

I have one of our. We have two core, two core niches. One is hospitality and one is affordable housing, and they couldn't be more opposite. But on the hospitality side, we have one partner who runs almost every farmer's market in the state of New Jersey and he's a branding whiz and I have zero experience with branding marketing any of that. So I worked for the government. It's as unbranding and marketing as you can get and we created this boutique like hospitality company where we have beach bungalows, and it's such a great like I walked there and I'm like so proud of this. I'm like this is amazing, but it would never happen without people like Brett. And then, on the affordable housing side, I have someone like Anthony and John who have 15 years of property management experience and their number one goal is to provide a safe, great environment for people to live in that's affordable. So I create amazing overall projects because I work with like really amazing people that I, by myself, I wouldn't be able to do any of it.

Serena Holmes:

Yeah, yeah, no, that makes perfect sense. Now, obviously, when you started, it was when the world was kind of coming out of these challenging times and then, you know, come full circle. You know COVID has presented some challenges with like interest rates and the housing market on a downturn and stuff like that. What would you say are some of the biggest obstacles that you've faced?

Denis Shapiro:

I think figuring out how to actually acquire, yeah, I think there's just a lot of different misconceptions and some people go the route where I don't have to ever focus on going out there and talking to a broker. Just let the people who I know like we have someone in our circle who does mobile home parks and they're amazing at mobile home parks They'll bring me one mobile home park deal a year and then I have a self-storage guy and then my affordable housing we kind of have a partnership with a brokerage firm storage guy, and then my affordable housing we kind of have a partnership with a brokerage firm. So it's not spending time on cold calling a random broker, but instead just forcing really strategic relationships around you. And you only need a handful of them, yeah, and you can get anything you want to accomplish. You could accomplish anything you want at that point.

Serena Holmes:

Yeah, yeah, no, that's perfect Now in terms of lessons and stuff like that. What would you say is maybe like one of the biggest lessons that you have learned from, and is there anything that maybe you know, based on what you know now, that you could have done differently?

Denis Shapiro:

Yeah, my number one lesson really is investing in other people that I didn't have significant relationships with. We kind of coined the term relationship-driven investments and we invest with a small group of operators and we have really intense relationships with some of our investors where we get on calls quarterly and just let them know what's going on, what's happening, everything like that which I think is counter to the common market, to millions of possible investors, and hopefully one or two of them end up investing. So we really try to focus on the relationships. We've invested in two Ponzi schemes and in both cases we had no relationship with the operator. We kind of got blinded by the terms.

Denis Shapiro:

So there's never a perfect investment. However, if you have a really solid relationship and you can tell me you know you invested with operator A, you could tell me how many kids does the operator A have? Is he religious, is he not religious? Does he drive a flashy car? Does he live beyond his means? If you could answer like 20, 30 really high level questions about that specific operator, I'll tell you if your deal is going to go well or not, and it has nothing to do with the deal.

Serena Holmes:

Yeah, well, I mean, I think that there's something to be said on both respects. Like, even in my communities there's a couple of really significant situations that have affected hundreds of investors and a big thing is just, again, I think, there's elements of misrepresentation and fraud and stuff. So, like you know, you'd really have to dig deep to even really get a true sense of that Right. So I think it really shed light on like, don't be afraid to ask for financials and always get maybe even like two opinions from like a lawyer and stuff like that, right Cause there's something that one lawyer might catch, that somebody else wouldn't necessarily catch.

Serena Holmes:

And in this instance, you know, instead of raising money for down payments and stuff like that the right way, so with like limited partnerships or joint ventures and equity, they were raising them all on P notes. So there was just such a significant amount of debt to the equity. And then in other instances there was, you know, I think there was like 19 or 20 P notes on one property, for example. So the property is only worth 400,000. There's like a million dollars in P notesOs. Like you know, everyone thought you're the only one PINO, because it's being used to renovate this property and refinance it, and we all kind of understand the BRRRR strategy and how that's going to work, but we didn't know there's all these elements of fraud happening in the background with a company that had been around for, you know, in one instance for 10 years and had, you know, hundreds of five star reviews, and you know it's just something that nobody could have expected. But I think you know, if you think you've done enough due diligence like there's always more so just you'll come up with your own systems and find ways to protect yourself.

Serena Holmes:

But yeah, there's been lots of lessons, I think, in this last couple of years in particular. But on that note, we're just going to take a really brief break forward from our sponsors and we'll be right back. It's gonna close my blinds because I'm like sunrise in my face here. All right, hey, everybody, welcome back to inspire to invest. I have dennis shapiro here with me and we're talking about how he's grown his business over the last 12 years. We're talking about everything from successes and obstacles to lessons. But next I kind of want to know what's the craziest thing you've ever experienced as a real estate investor so far?

Denis Shapiro:

Craziest thing. Okay, so this is actually when I bought my second house. Secondly, it was a house hack and it was a two family. The house was over a hundred years old, but it was a nice brick house. And as a two family, the house was over 100 years old, but it was a nice brick brick house, like one of my favorite houses ever.

Denis Shapiro:

It was actually kind of painful to sell it like two years ago, but we moved in in October and then, like two weeks later, so we rented up, run, rented up upstairs and then downstairs. We lived in the smaller apartment, upstairs and then downstairs. We lived in the smaller apartment and two weeks in we realized that the sewer line was completely busted and this was kind of inexperienced, so it was fine. We didn't really think of it too much because there was only two of us downstairs and no one upstairs at the time, because no one rented up upstairs yet. And then, um, we decided to do like a housewarming party in December and what ended up happening was it was a, there was a snowstorm that came in and the temperatures dropped like overnight, and I think we did this like new years and um, so I just remember there's 30 40 people in the apartment and, uh, I get a like a knock on the door and they're like hey, there's your ice on your sidewalk. So we go out and it's not. It's not actually ice, it's actually frozen sewer.

Serena Holmes:

And so I go get a shovel and I can break it out, but every time someone flushed, it came back out.

Denis Shapiro:

So I had a house full of like 30 people and they're just going into the bathroom and, um, all I'm like thinking I was like this is like I literally put all my money into this house and like I see like a couple people stumbling around like new year's drunk. I'm like someone's gonna fall and just take my house, like tomorrow yeah, and I was out there it's like three in the morning basically shoving, shoveling dog poop ice, yeah, so that was a great it was all outside the house, so nothing backed up inside nothing back down inside.

Denis Shapiro:

No, the crack was right before the main line so it's like worse it could have been worse, but where it cracked it was going on to the sidewalk. Yeah, um, so we it was. It was a long story, but uh, it was just.

Serena Holmes:

You know, always get a sewer line inspection yeah, I mean there's so many things right that you never even know. Like I have friends that bought a house and they had clay, piping and a tree branch, I guess.

Denis Shapiro:

Yep Through it.

Serena Holmes:

So I think they were only in the house like two days and like the whole sewer like backed up into their basement. So yeah, it was just happened. So yeah, you can never skimp on anything like that. Now, you obviously mentioned that you're part of this investing club. You've connected with a lot of big players in the industry. What would you say is some of the best advice that has been given to you?

Denis Shapiro:

So we're not like the biggest by by any shape or forms, but we are very, very authentic of what we do. We don't we're not out there on social media saying you know how many assets on the management we have, how many doors we have.

Serena Holmes:

Yeah, what does that mean? Like, like.

Denis Shapiro:

Hey, I'm an LP and a 10,000.

Serena Holmes:

Like an ego thing, I don't know.

Denis Shapiro:

Yeah, it drives me freaking nuts, like it absolutely it really does. So I think, just being authentic, just really connecting, we ended up I'll tell you a story the first person I ever did my first syndication with and this was in 2012,. I want to say his company has grown to like they're approaching a billion dollars in assets on their management and 12 years ago I literally was just an investor. And then about two years ago I asked him like hey, I have this group of other operators, would you mind? And it's in his backyard. I was like would you mind just come in once a month and just you know, helping us out like mentor, like almost mentoring us us. You know we're all doing deals, we're all doing blah blah.

Denis Shapiro:

He started coming and literally you know he's here, we're down here where we're at, versus where he's at, and just he kept keeps coming. And then, if I talk to him and why? It's because we're not trying to do something that we're not like, we're just trying to be super humble, we're super grateful that he's coming out. So I throughout my career, especially like the last two, three years, as it really has taken off like there's been three or four people like that that are just a me realizing that they are way higher level than than I am being being super appreciative of their time and then just figuring out, like how to provide value, like so, how does a group like that can they provide value to him, not just the other way around? So those are like the type of things that you got to have in the back of your mind. It cannot be like a you situation but at the same time, don't be scared of networking with other high level people, because that's the only way you're going to get to that area.

Serena Holmes:

Yeah, I know, I completely understand. I've been part of a mastermind for the last two years. So Beardy Brandon was one of our expert speakers, for example from BiggerPockets, and you know they have an expert speaker once a month and then when they have their events, which there's three a year, they'll bring out a number of speakers, but they don't just come and present for an hour, like they'll actually stay with us all weekend. So all the meals and all the events and stuff like that we're there and we can connect with them, we can reach out to them kind of outside of the events, because now we've gotten to know them and stuff like that. So there's a lot of resources and strategies that they'll help.

Serena Holmes:

You see that you just otherwise wouldn't have known about right, Just to get you where you want to go faster. So I couldn't agree more. Now, obviously, your focus has really turned to this full time in the last two years. Do you have an idea of exactly where you want to take it and what your you know like what your financial freedom goals would look like?

Denis Shapiro:

You know, the funny part is, technically I retired multiple times in terms of like financial freedom in my life when I only had one kid. It was a lot easier. And then a second kid and then moving to a higher cost area, kind of I back to work for another year or two. So it was never really about money on the real estate side. There was just always this question about, like what do I do next after the government? And I just what I. And the funny part is I had an MBA in 12 years ago but never used it. So I went work for the government because of the global financial crisis, had this MBA and never got to really use it ever. And then now I got involved in these real estate projects and I realized like every single real estate projects like its own unique business, like it has.

Denis Shapiro:

I love coming up with a business plan. I love strategize. I love structuring the deal. It's like one of my favorite things, like hey, I got a good group of people around me, like how do we make this a win-win situation for everybody? And like I challenged myself on creating the maximum win for everybody. So those are the things that I genuinely like, love to do. I'd almost do it for free If, if, if, you know, if it was possible, but I think it lose some incentive.

Denis Shapiro:

But it's really something that I come to really enjoy so long-term and this is something that I talked to my partner about, where we started really strategizing what the next five years in and we've accomplished a lot of stuff where we've created two management companies, one for the hospitality side, one for the affordable housing side. You know we're over 200 units at this point in a few years but, more importantly, we have over 96% occupancy on those units. We're way more proud of that than the number of units that we actually have. So those are the things that we kind of pride ourselves in. So like, where is our next five years? How does it actually look like?

Denis Shapiro:

And what we've realized is like we only need a certain amount of property. So our goal is to get to eight properties on the affordable housing side, eight properties on the hospitality side and then but operate them in the high nineties efficiency Cause we found that we can do more with less if we just focus on a few properties but give it our undivided attention. We have also learned from being investors in projects that didn't go well. It's like well, why didn't it go well? Well, they got stretched on the asset management side. They didn't bring in anybody. Blah, blah, blah. So we do things like we just went to a new state and, instead of trying to figure out how to make it work with the current structure, we brought in a general partner just for that state. So his only responsibility will be that state's portfolio.

Denis Shapiro:

So those are the things that we've kind of learned. So yeah, very humble, we don't have a unit size. We do have a certain amount of deals that we do want to get done, and then it's going to be a long reflection in the mirror in 2028 and say like hey, do we want to add on more GPs? Do we want to add on more properties? Do we just focus in on the current properties? And then we'll have that moment of truth in 2028.

Serena Holmes:

Yeah, yeah, I mean I think that's something that I've seen a lot of in this last year with companies that have gone into bankruptcy or insolvency protection and stuff like that is that they scaled so fast and then they ended up in these situations where they had like 30% vacancies and it's like, well, why, like, why would you bought, say like 20 properties, made sure they're done, refinance them properly, then buy your next 20, or like, do it a certain way that makes sense, as opposed to like buying 600 plus properties in six years and they're like almost half vacant.

Serena Holmes:

So well, it's no surprise you end into, you know, insolvency protection, right. So it just blows my mind that people wouldn't think of the bigger picture and, to your point, about you know making sure that everybody's happy and there was those, you know it's mutually beneficial and everybody wins. Like that is how you, I think, win in the long run, right. Like you have to make sure that you're delivering what you projected. And, yes, there could be things that happen, like interest rates, there could be market downturns, but I think if your goal is to make sure that you've got that 96 plus percent occupancy, like I think you know you're going to be successful and you can weather the storm if you handle things appropriately right.

Denis Shapiro:

Yeah, and I think to add on to that, it's the what is the financing in these deals? So many of these deals, when I got started heavily into the limited partnership side, so many of these deals were billed as oh, we're probably going to refine two, three years and you'll get your money back and you'll still own the piece of deal, and that was really attractive when I was working for the government. That never happened Not one deal that was bought in 2018. At least I invested in. All of them had a moment of truth and they were able to sell for 25, 30% IRR and they went all over social media saying how great of a return it was. However, I was like I'm getting a huge tax bill in November of 2020, blah, blah, blah.

Serena Holmes:

I'm like this is not great at all. Yeah, I wasn't blah, blah, blah. I'm like this is not great at all intending to cash out.

Denis Shapiro:

Yeah, and all of it's because of the way they structured the financing and all this stuff, because they fell behind on the pref and that was the only way to. So what we realized when we got more on the operational side is like well, what is everything we don't like about how? The current syndication? Like I, can we remove the, the marketing, the marketing from from this? Because, like there's marketing and marketing is a necessary evil, but when you can't distinguish a good operator because they're a good marketer, that there's a problem with that. So can we? Can we remove the marketing? Can we increase the value, the value you replace on relationships? Can we do that? Can we increase the hold periods where we don't have a huge team of 20, 30 salaried employees, so we don't need to celebrate two to three years or whatever it is? Can we buy a handful of great assets and then really actually treat your investors with respect that they deserve? And that requires more timely communication? Like that requires that. Like, hey, after you wire the money, we still care about you.

Denis Shapiro:

Yeah, and so like let's get on a call next month or in two months. Let me figure out what's going on. It's not that you just wired your money on this deal. So those are like. The things that we identified were like hey, these are big issues and because of that we only do fixed financing. It's really rare for us to do that and other people they're like well, we have to do a deal. The only way it pencils out is a variable loan.

Denis Shapiro:

Well, great, what happened the last two years? How many of those deals now have foreclosed on or is in legal proceedings or everything like that? So we've learned from other people's mistakes. We've learned from our own LP deals that we've done. We've learned from joint ventures that we've done. And now we kind of have this mission creed our ourselves. Be like hey, this is everything that we thought was wrong with the space. This is how we're doing it differently. It doesn't attract every investor because we only model out 13 to 15 percent returns. So it's still hard. Because I go on facebook now and I'm seeing a slew of deals that are over 20 percent and I'm like, all right, and but they're all operators that just came in six months ago.

Serena Holmes:

I had a podcast I recorded with someone here that he he's Canadian but he does a lot of stuff in Houston and he's like don't talk about return on investment until you return my investment. It makes sense, Cause everyone's really attracted to these deals that are. You know these explosive numbers, and then the reality is well, will they be successful in the long run? Right, and do they have a leg to stand on? With regards to your affordable housing, Are those like Section 8 type housing, Like someone had mentioned that to me? But again, I'm not American, so I'm just curious if that's what you're referring to.

Denis Shapiro:

So we do Section 8, but we also do what's called LIHTC properties. So the American government actually provides tax incentive credits to developers to build brand new affordable housing. Okay, but when they give these credits, they put two 15-year restriction periods on it. So the first 15-year period it's usually they hold on to it. There's tons of incentives. The second 15-year period, you'll see a lot of these go to market. Now these are usually there's some big. You know, you got the cbre's, you got some of the markets, millichaps, you got the bigger things. But then there are some very more. There's there are more niche brokerages that just focus on affordable housing. The best part about affordable housing honestly, you go to a boot camp, amind retreat. No one's talking about affordable housing at scale. So we usually like this is not like a one-off we buy whole affordable housing communities. We usually buy them in that second 15-year restriction period and then we'll take them out of the restriction period and then we have a choice to either renew those credits or turn around and take it to market at that time.

Serena Holmes:

Yeah, I'm sure it's not quite exactly the same, but we've got a product here called MLA Select which is through CMHC. So essentially it's a 50 year amortization and then you can come in at 5% down. So obviously that's really attractive when you're buying these really large commercial properties and stuff like that. I think one of the challenges that our investors have had here is that they just keep on changing the rules with no notice. So there was this one point system in place and it had that. Then they changed some stuff. There was some stuff for energy efficiency. So imagine you're building something specifically for the energy efficiency and then they just change it with no notice and then all of a sudden you know the projects may not be valuable and stuff like that, right. So I think we're just trying to jump through a lot of those hoops right now, but I always find it interesting just to see how things are different south of the border.

Denis Shapiro:

I was like for what it's worth. It's been pretty consistent with LIHTC credits. There are other state incentives that go onto it and those kind of change more frequently, but the the for the most part it's actually considered pretty stuff is the same that's good, yeah, yeah.

Serena Holmes:

Well, at least it helps make your plans work. Seen a lot of people just really struggling with that. Uh, now, just in terms of wrapping up, uh, obviously the name of this podcast is inspired to invest, so I always like to ask people what's a quote that motivates or inspires them a quote that motivates, that's a good one.

Denis Shapiro:

Um, you know, I'm gonna switch it up a little bit. I'm gonna say this was something that I was. It's more of an adage when it comes to networking. That I think stuck with me and I think is a great piece of advice is when you're going out there to network, network with three people directly above you and three people directly below you, make sure you help those three people below you get to where you're at today and then work with the three people above you. Too many people will go.

Denis Shapiro:

Well, I'm worth, you know, a dollar and I'm gonna go network with someone who's worth 10 million dollars. There's no, there's no common ground, so it'll be a bad connection thing. So I've I've been told that very early on in my career and it stuck with me. So if you want to go buy an apartment building of 10 units, go find someone that has two, five unit buildings and within 12 months, you guys probably be buying a 10 unit building together. Uh, so I think that's a great piece of advice, but you always want to figure out how to give back and make sure you're bringing those people up behind you and, like we've had people who have been LP LB on our deals that have come in and then, as we grew our portfolio, they've become GPs on other projects because of how well they work together. So that's the concept Bring someone up directly behind you and then make sure you're networking with people directly above you.

Serena Holmes:

Yeah, it's a good way to pay it forward, but going full circle on it Now, for anyone that wants to get in touch with you, what's the best way for them to find you? Either online or your website.

Denis Shapiro:

The best place is the website sihcapitalgroupcom. If you want a copy of my book, you can find that on Amazon the Alternative Investment Almanac. If you want a copy of my book, you can find that on Amazon the Alternative Investment Almanac. We go over a couple of different asset classes that usually LPs come across on a daily basis. But yeah, sih Capital Group Capital with an A Reach out anytime. I genuinely love connecting with my investors and I'm very passionate about actually staying connected with the investors.

Serena Holmes:

Yeah, I love that. Thank you for taking time out of your day today to have a chat and, of course, for anyone that's watching. Thanks for your time. If you have enjoyed this episode, make sure that you have liked this video and you subscribe below. You can also follow along with us at Inspired to Invest podcast on social and, of course, remember, when you invest in yourself, the sky's the limit. Thanks again.