#158: Investing In Different Asset Classes

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Welcome back to another episode of the Richer Geek podcast, we have Charles Carillo. He's the founder, and managing partner of Harborside Partners, he has been actively involved in over $200 million worth of real estate transactions since 2006. That is a lot of stuff, and under 20 years, he carries extensive knowledge and renovating, and repositioning multifamily, and commercial real estate. And he also invests in ATM's early-stage tech. And we'll get into some of that.

In this episode, we’re discussing…

In this episode, we’re discussing…

[1:36] Charles Carillo's Background

Started investing in real estate in 2006, initially with a three-family house, followed by various residential and commercial properties.

Actively involved in renovating and repositioning properties, particularly in multifamily and some commercial real estate

[4:37] House Hacking

Charles explains house hacking, a strategy where you live in one unit of multifamily property and rent out the others.

Recommends utilizing FHA loans for 3-4 unit properties with a low down payment.

Emphasizes the financial benefits of living almost rent-free while building equity

[7:15] Lessons from Self-Managing

Charles discusses the challenges of self-managing lower-class properties.

Stresses the importance of buying better properties in better areas for long-term success.

Highlights the significance of treating tenants fairly and building good relationships for successful property management

[11:09] Pros and Cons of Self-Management

Charles talks about transitioning from self-management to third-party management.

Advocates for finding a balance, utilizing third-party management for operational efficiency while still being hands-on with key decisions.

Emphasizes the value of building relationships with reliable contractors, especially handymen.

[17:27] Scaling and Transition to B-Class Properties

Charles shares the pivotal moment of transitioning to B-Class properties from C-Class for better resilience, control, and predictability.

Underlines the significance of having a solid management system and the ability to scale when working with investors.

[18:08] Importance of Personal Project Experience

Advises against jumping into syndications without personal project experience.

Encourages investors to gain hands-on experience, learn from mistakes, and prove their ability to manage properties effectively before seeking investor funds.

[20:46] Minimum Viable Product (MVP)

Charles recommends having a minimum viable product and showcasing a successful self-funded project before pursuing syndications.

Stresses the value of demonstrating competence to potential investors through personal experience.

• [23:27] Where to Find Charles Carillo

Charles provides information on how to connect with him.

Website: Harborside Partners

[24:56] Podcast and Coaching

Charles hosts a podcast with strategy and interview episodes available on the website.

Offers coaching services, providing one-on-one guidance.

Resources from Charles

Harborside Partners | YouTube | Facebook | Charles Carillo LinkedIn |

Charles Carillo Facebook | Instagram

Resources from Mike and Nichole

Gateway Private Equity Group | Nic’s guide

+ Read the transcript

Mike Stohler
What if you could be doing something smarter with your money that creates income. Now, if you're wanting to get ahead financially, and enjoy greater freedom of choice, if you want a comfortable retirement, and you know you'll have more choices, if you can do more with your money. Now, if you've wondered who else is creating ways to make their money work for them, and you want actionable ideas, with honest pros and cons, and no fluff. Welcome to the Richard geek podcast, where you here helping people find creative ways to build wealth and financial freedom. I'm Mike Stoller, and in this podcast, you'll hear from others who are already doing these things, and learn how you can teach. Everybody welcome back to another episode of the Richard geek podcast, we have Charles Carrillo. He's the founder, managing partner of harbor side partners, he has been actively involved in over $200 million worth of real estate transactions since 2006. That is a lot of stuff. And under 20 years, he's he cares, extensive knowledge and renovating, repositioning, mainly multifamily, but some commercial real estate. And he also invest in ATMs early stage tech. And we'll get into some of that. But we'll talk about mainly some asset classes as he's doing. How're you doing, Charles?

Charles Carillo
I'm doing great. Michael, thanks so much for having me on.

Mike Stohler
So, you know, let's start with your background. In any prior careers, what you know, when did you get started? And what made you get this real estate bug that so many of us have?

Charles Carillo
Yeah, so I grew up in a real estate investing family, my dad had been a multifamily investor starting with a six unit in 1984. And so I grew up and they were, he got hit him and a partner built into about 100 units. And most of them were in the D or C minus to be nice type of class properties. So not ideal of what you want to be investing in. And a very tough, a very tough tenant class a very tough areas. And he he starts selling them off, I think in the late 90s and early 2000s. But at one point, he did get to about 100 units him and a partner know syndications. And yeah, they manage cash flowing and everything from you know, small apartment complexes with like six units or some to 18 unit apartment building stuff like that mixed uses in there. So going to a whole feel kind of a whole whole range of stuff there. So that was a very interesting, second education growing up. And spending time in the weekend. And during the weeks with him talking to contractors collecting rent, when superzoom collected and all the type of fun things that go when you're self managing, but you still have a team, but you're kind of more you know what I mean? It's a mix, you don't you just push it off on the third party manager. And then like, right, I graduated college and oh six and I was running a small, my partner and my brother runs it right now is a we had a payment processing business. And I purchased my first property which was a three family. We call it now house hacking. But back then it was you know renting out one unit. This was a three unit. So I rented out two units, I lived in one of them. And I did that for a couple years. I bought another one about a block away didn't house I could I purchased it normally. And that one was a full rental. And then in that was at the end of oh eight and then at the end of oh nine I purchased my first commercial property which was a mixed use property which had an office on the first floor and then it had four apartments above it. And that was a in the you know, the depths of the Great Recession. No financing available had do everything by cash, no refinancing, it was a very interesting time out there great deals, but everything goes with every task for the deals that we'll talk about how hard it was to finance the deals. And so did that and then bought some other properties that kind of started everything. And I sold a whole portfolio of properties because I'm originally from Connecticut, those were all in Connecticut, I moved to Florida in 2012. I put those all under a professional third party management, which I had been self managing from oh six to 2012. And then since being in Florida we've got involved with larger properties syndications, we got involved with in 2018. And I sold that whole small portfolio to a to one investor out of New York in 2022.

Mike Stohler
Yeah, it's a lot you know, for for your, I'm not gonna say for your age, because that ages me. So, a couple of things that you talked about. Talking about House hacking, what that is some of our audience may not know what that is, and how powerful it is. Yeah,

Charles Carillo
it's a great it's not spoken that much And it's a great way, especially if you're younger, and you're just just starting out. And you're, you know, you're single and it's easy to do, where you're purchasing a property, the, you know, in, you're utilizing your FHA, and if you went to the military, you might have a VA, you can utilize that as well. But if you just say you didn't, and you have FHA, that means you can get this fantastic, I think it's like three and a half percent down or something like this on a one to four unit property, I try to get as many units as possible, if you can get three, if you can get four, fantastic. threes are usually easier to come by twos are good, but you're going to be coming out of your pocket for more things in most situations. So, you know, these are these properties, since they have to abide by the guidelines for FHA, they can't be, you know, these aren't like major rehabs, right, they have to be like livable appliances in there, you're not going to get like, you know, probably fantastic deals on these properties. But that's fine, it's your first property, find something that really is nice, minimal work, so you don't get over your head. And if it's not rented out, rent them out, you stay in one of the units, if you could choose probably go to the third floor, whatever it is the most the smallest unit, and then that way, the majority of your mortgage payment can get covered. I think when I was living in one of my properties, I think I rent that out to the floors, and I rented out the second bedroom in my place, I think my cost was like 40 bucks a month, right? To to do it. And then I would throw in like a few $100 more into the property account. Keep that reserve kind of going, in case anything went wrong. But yeah, you can live for you know, you can live for a fraction of what it costs. And usually what you're paying into it's actually equity. So it's kind of, in some sense, you're moving into you know, you're moving or you're checking your money from a checking account into a savings account. So it's, but also you could start it with working with renters on a small scale. And it's not like, Oh, I'm buying a property half hour away, and I finished my w two then I gotta go over there. This is people living close to you. But there's a there's a you know, there's pros to because if you're working at home, you know, you go downstairs, you open up a door for a handyman, you know what I mean? Like this, if there's an issue, you're not driving across town, you go see it? Yes, that's a problem. Let me call someone. And it's easier to kind of dip your toe in to the realm of multifamily investing when you're, quote unquote, on site.

Mike Stohler
Yeah, and it's such a great deal, and you hit the nail on the head, even though it doesn't have to be younger people. But especially when you're getting started, it's like, Man, I want to invest in real estate, but I can't afford it. Well, that's an excuse, right? It's like, there's so many things and that's why we love having these podcasts is you realize that there's a lot of things like the house hacking or even just having roommates if it's a single family house, it's getting something is buying an asset, and then turning it into a cash on cash or some type of cash flowing asset instead of just you paying out you talked about you know, self managing versus having someone do it. And I want to get back to you. That's why I'm envious that you grew up in the real estate industry with your dad. No one taught me You know, I grew up in is called the PG the pre Google days where I couldn't ask anyone for help. What did you learn about helping your family? What was some of the things you really took out to help you in your later life later life when you own the your own assets,

Charles Carillo
I think my dad really instilled on me to buy better properties in better areas. And that was a huge thing. And my dad started doing it at the end of it and the properties he owns now are definitely in better areas. But it's it's it's something it's something with new investors and they just they get these brokers get them all enticed, and these huge returns that they see cash on cash. And they don't look at the management. I remember saw my dad sending my dad a property and he goes you know, this is going to require daily management this is required this are going to part of that. And you know, it's true. I mean, they're just very intensive and you can't just when you have a property that's not in a great area, you can't just call a management company and be like, hey, you know take over this property here and there, they're gonna be like, No, we're not touching that or they do it and they're going to say there will some people will take it and you'll definitely find to manage it but then it's gonna be like, hey, these people didn't pay rent on the first they said they need to the fifth so we already started evictions you'll never make you can't make money because every when you're dealing with you know see especially D class every month is a for the most part you're gonna people paying on time, but you have a large percentage of people that it's a negotiation you don't I mean, every month you're working deals you're making a difference between late payments and you being pretty much a somehow landlord slash payday lender, given people brakes and that's how you make money though in it. It's you know, it's not something if you want something where a check comes in on the first or transfer comes in on the first you got to buy B you got to buy a class properties. So if people want to do it if you But if you really want to get into that brain damage of doing that, then by all means, but you'll probably be selling it very shortly after a probably at a loss. Like I think most new investors been getting involved that so buying better properties is a big thing. My dad was very good at dealing with people. And it was when we collected rent to some of the apartments that didn't pay, it was really, you know, it was door to door and it wasn't like you're getting your he would go in, he had the old carbon copy book, and he would sit at the kitchen table with a plastic cover on it, I'd stand behind him and he wrote up checks, he talked to the people were about receipts, as he counted cash, or they signed over a cheque to him or whatever it was like a paycheck or whatever. And you know, that's I did door to door and take five minutes each place it was different from I never did that when I when I clicked it and peel pay cash would just be at the door, you can receipt were standing there and are gone. You don't I mean, he was a much more personable landlord, and everyone knew him. And I think he treated people very fairly. And that was one thing I really learned about it. And that's exactly how you have to how you make money in those properties is I mean, it's just that's how it is, you know what I mean? And yeah, very tough business. Yeah,

Mike Stohler
it is, especially you know, and everyone you have basically the four classes of multifamily A to D A's are usually your institutional buyers. A lot of us can't afford it. Your your bees are a little bit more. Most of the investors I talk to are in the sea, you know, be my assessees We call those like the blue collar. Apartment complexes, right? They usually pay on time, they're your plumbers, your teachers, your tradesmen, and they don't want to move, they can't afford to move. But then the D is that don't touch it. It's I had a D and it was like, oh my god, it's like no wonder I gotta sell financing, you know, seller financing, because the guy was like, gonna take it away from me. Yeah, but it was, yeah, it, you build character. And hopefully, you don't hate people. By the end. By the time you sell it, you

Charles Carillo
lose all hope and community that my dad took over a lot of his properties in the 80s that way, and they would sign it over to him and stuff like that. And you My dad didn't know better what was going on? But yeah, for it's a very interesting stay away from it kind of asset class and there are people that make money in it. But it's a you know, you have to they run it like a slumlord in some senses of what you consider one would be you know what I mean? Because there's not enough money to have can't renovate this bathroom to the standards that you don't I mean, I might have $5,000 to renovate. So I have to piecemeal this with a few $100 Every time someone moves out, that's just what it is.

Mike Stohler
In that type of class. Yeah, they're they're just expecting things to work. They don't want granite, they don't need fancy stuff, they don't need tile. They're just looking to stay off the streets in place to make their meth in, you know. I'm kidding on that bar, but you know, it's, I've had it, you know, units catching on fire because they're doing stuff that they shouldn't be. They're doing it just, it's unbelievable. So do you self manage? Now I'm sure you don't? And why not? You know, what are the pros and cons of self managing or having someone else manage it? Yeah,

Charles Carillo
so what I didn't learn earlier on there's there's differences and my dad had learned this and I didn't learn this was that you can self manage and not do everything else you do everything yourself. And I never really knew that being a younger guy in his 20s and I was doing everything that really like a lot of the repairs I had a handyman that did it and but you know, when they get in depth repairs, but you know, your normal stuff, landscaping faucets, changes stuff like this and prepping for new plants, and it was terrible. So you can self manage and still have people you're bringing in their to do stuff. And I did that at the end of myself managing people doing my lawn, people doing snow, people taking care of this, I had a list of stuff for handyman, they'd come in on like a Friday or whatever, they'd knock out this list, you know, every other Friday, I'd have something for them, you pay him cash or whatever, and they're gone. You don't I mean, and that's how I realize it. And, you know, now when I do is we're usually using with the operating partners we work with. Two of them have used third party management, which is mainly what we use, and one of them has in house. And whatever works for you. It's um, you know, I see a lot of people that push toward having their own management company and I understand the pros and cons for it, there's a little bit more control, but with some of the operators that we partner with and we work with, if they have a management company that has seven or eight of their units, you know, 1500 units, right? A various that are managing, it's pretty, you know, you have a very strong relationship there. So the third party management takes a lot, pretty much everything off your desk right off your plate in the sense of like, you're you might be taking a call here when there's a larger issue and you're taking on the asset management, so you're probably not going to have the property manager putting it to Well, $100 water heater, right without calling you, or whatever it is, they're gonna call you and be like, hey, this thing's leaking, you know, we should get this done whatever good property manager that you have relationship with, we'll just fix that and tell you, but you're gonna have these things where, hey, the roof, you got to take care of this, when you are being your own property manager, you're pretty much usually in the middle of it, and passing calls and messages back and forth. Hey, there's something wrong here. Now, as soon as I hang up, I call this person that I have to call, you know, tenant back, and I call this and I call that they're outside, let them you know, the whole nine yards of how it works. When you get good handyman, you work with them, that's when you're giving them keys. That's when Hey, call this person directly, and then they let you know you don't I mean, and that's how you really want to get it, it's just difficult to do that when you're working with like three or 15 units, or whatever it is, when you start getting to like 40 5060 units, you know, 30, at least I mean, that's when you can bring on someone full time. And you know, 30 units, you bring someone on full time, they're doing everything they're doing your make readies, right, they're prepping the units, the next tenants there, you're gonna give them hey, this is what you're getting paid every week, if you come on afterwards, I'll pay you this much per hour, right. So it's, you know, everybody they are taking care of for inconvenience them their own personal life. And once you have that relationship with them, now everything goes to them. And that takes off the majority of the headaches. Because today, rent collection, all these things can be all done for the most part online, if you're working mean C Class B Class A class tenants, they can pay they have, they have email addresses, they have computers, they have internet, you know, they can pay these things, it's not, they don't need to come to your office and cash and stuff like that, like back in the day or money orders. So you can set up a lot of that systems that work with it. But the main thing when dealing with multifamily is getting a handyman, and this is if you have a property manager, not because of the property manager, you they have a property manager, they're going to ask you do you have a preferred list of vendors? And you're like, yes, please call this person first, if the heat goes out or anything like that, because you know, this person is 1/3 What you know what they're gonna call. And so when you do that, that's what really saves is those relationships with the contractors and mainly with a handyman having handyman that can do most things. So when you're only calling someone when there's like a major issue, hey, we got to run like this new electrical line, because their circuits are popping or something like this, okay? It's called electrician, bring them out or license. But hey, they're just changing over some switches or some light fixtures, whatever it is, okay? That's all handyman, that's a whole different pricing, you know, 75% less expensive.

Mike Stohler
It is and, and, you know, I utilized some people that actually lived in my complexes, like, you know, you have any handyman experience, I'll give you X amount per month off your rent to do this and do that. But it's, it's really hard to scale, isn't it? If you're always working in your business instead of on it? What are some of the ways that you know, all of a sudden, you're able to make that leap and say, Okay, now I can actually scale? At what point did you think that you're able to sit there and say, wasn't when you went to a third party Property Management Group? Or was it when you found investors? What What was that one point that you were able to scale?

Charles Carillo
Yeah, I'd say those are two great products, I would say, when the year into getting management, my first the first full year through, that's when I was like, Okay, now, this is like how the wealth is made, right? Because we're already everybody knows, and lays out main property management, right. But somehow, we always want to make as much money. And that's how we think we're going to do it. And it's like buying poor properties upfront. And the thing that was that, that was the first thing is the management and seeing exactly how much was taken off my plate and how much freedom I had to do other things. And I was just really taking care of high level calls and text messages, you know, a couple times a month on a dozen plus units, compared to you know, all the time you're involved with your business. The second thing was the ability of knowing from a mentor told me that, you know, to take it to the next level, now you have a system in place, knowing exactly, you know, you know, how it works, is now you have to raise money, you know, and that's the next way of doing it. And now that you have a working system, and it's a system that's always evolving, I mean, you know, we purchased and sold our last, last solar last C Class property, probably a month and a half ago. And it's really just that over the last two, three years, we've really focused our whole portfolio into you know, B minus and above properties. And it's just a more resilient asset class, and I love C class. It's something that I grew up doing and investing in, but it'll be something that invest in myself, but with investors money, we've made the decision of just focusing on the B class, there's less volatility, it's easier to manage. We either there's just more control as with that type of asset and there's more predictability. So as you're you know, I think it was like you said the third party management and then also taking on investors and when you put that together and you have a kind of a Buy Box of what you're doing. This is the class of properties. These are the areas I'm working in. This is what we need really, you know, this is exactly what we are buying and when We can sway a little bit over here, but these other ones don't move. And that allows you to really focus in.

Mike Stohler
Yeah, and that's extremely important. One of the things that you are saying in your, your bio here, I think is very important. People watch HGTV and ZIL boom. I am no expert, because I've seen five episodes. And I'm gonna get together and raise money. And, you know, it's so crazy how I have people, you know, how many properties you have, you know, why don't have any yet but, you know, can you teach me how to syndicate? And I'm like, What are you doing? You know? What is how important is it to actually do your own project and self fund your projects? Getting some experience in before you do syndications?

Charles Carillo
Yeah, it's this is a huge thing. This is one reason I mean, I do coaching. And when I when I speak to people in their first call, because I make sure you know, we speak to them, we I go through them, because I'm doing one on one myself with them. And this is the one of the big things that really is like, Listen, I'm probably not the coach for you. If you want to do a property, I'll work with you doing it, but like we're not gonna I don't believe in like raising money before you've actually done something that's profitable, and doesn't have to be like a major, you know, you don't have to do like, just like, like we said, the house hack, you do something where you have tenants, and you know, exactly like when an eviction is, and you know about dealing with tenants and learning what's going on you have and really what the House hacks what they call like out in Silicon Valley, when I invest in like Angel stuff, it's like MVP, right? Your minimum viable product. And that is something that you have something it works, it's not pretty, right, which is perfect for a house hack. But like, you can go to a bank and be like, or go to anybody and be like, Hey, this is what it is. My my mortgage and expenses are 2400. You know what I mean? I get $3,200 in every month like this is you know, we this is it works. Right? Everything works, you know? And now that's like, Okay, perfect. So how do I do this on their scale? And like, how do I go the next sale? That's a great question you have instead of like, when you're going to people, because hey, I have no money, I have no credit, I have any like three partners. And we're going to buy like a three family house. And you're like, Oh, and this is just like this is get written, you know, bloodbath written all over it, because it's just go do one with your own money. And then partner with someone and you can work on something bigger. If you have another business partner, somebody that that you've worked with, you maybe you guys go together and buy something, if you have the reserves, and then you have to figure out the whole, the whole thing about your time and everything like that, which is a whole separate thing. But it's really, I always tell people do your own deal, whatever it is, get tenants in there, figure out exactly how it works. And then you'll get that thing done. Once you realize what it is, then you're going to guaranteed your plans can change a little bit from what you're planning on buying. Because you talk to people too, and they haven't alyssum it's something you put $8,000 in the unit or 10,000 hours, anything like that is a major project man, like he's been, I go into something, I tell people, Hey, we're gonna put $4,800 into doing like the kitchen. And you're like, Well, I'm like, that's a lot of money. That's what he that's a lot of upgrades to it. But it's like, if you've never done a project, I mean, the contractors, don't tell me in your first project, you're gonna pick the perfect contractor that's going to be there. That's not going to that's going to show up every day. It's just not going to happen. And when you buy property, and you're no Oh, yeah, that guy never showed up and I lost money to the contract. Well, it's your money or losing because you paid them too much up front. It's not your investors. And these are the lessons you want to learn. So you can tell your investors. Hey, look at me, I paid all these mistakes, but now I know not what to do. And now they're like, Okay, now there's your you're more likely to succeed with them. And for yourself. Yeah,

Mike Stohler
very important lessons, everybody. It's and. And also, it's like, Look, if you want me to give you $100,000 You better have some experience, you know, you no one's going to give you money. Most people are not going to give you money unless you can prove that you know what you're doing because it's it's just not worth it. There's just too many people I could I could invest with Charles instead of you know, these other people that don't have experience. Charles, where can people find you? We've been talking about your coaching, your syndications? What's the best website and all the other social media places that you're on? Yeah,

Charles Carillo
so if our main website for our syndications is Harborside partners.com. So if you go to Harborside partners.com You can find all the information on what we do here. We have a podcast I do twice weekly strategy episode and then an interview episode. And so you can learn about that listen to that the YouTube and sign up for our mailing list. I do a I send out a newsletter every Wednesday with links and stories that I've hand picked. And that we've put together and we send out to people that interesting stuff that I think about the economy, real estate, commercial real estate, everything about it that other people might find interesting to take a couple seconds to go through click on a link. If something interests you, and you can do all that on harbourside partners.com And I do coaching it's like it's a one on one thing. It's and it's you can find that link on the bottom of harbourside partners too.

Mike Stohler
And everyone listen to his podcast you get it? Free passive investing guide. You also can join his investor club and learn. Don't be like me who just went out and bought and then gave everything back because I didn't learn. I thought it was easy. It's not get with the mentor, Charles is a mentor. And again, it's Harborside partners.com Charles grill and thank you so much for coming on.

Charles Carillo
Thanks for hanging out, Michael.

Mike Stohler
Thanks for tuning in to the Richard geek podcast, where we're helping others find creative ways to build wealth and financial freedom. For today's show notes, including all the links and resources from our show, and more information about our guests, visit us at www. V. Richard kake.com/podcast. And don't forget to jump over to Apple podcasts, Google Play Stitcher, or wherever you get your podcasts and hit the subscribe button. Share with others who could benefit from listening and leave a rating and review to get the podcast in front of your eyes. I appreciate you and thanks for listening

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ABOUT CHARLES CARILLO

Charles Carillo is the founder and managing partner of Harborside Partners. He has been actively involved in over $200 million worth of real estate transactions since 2006 and carries extensive knowledge in renovating and repositioning multifamily and commercial real estate.

In addition to being an active investor; Charles passively invests in many different asset classes including; commercial real estate, ATMs, and early-stage technology and agriculture (AgTech) startups.

Charles oversees all acquisitions, investor relations, and strategic partnerships at Harborside Partners. He is also the host of the popular podcast, “Global Investors,” where Charles interviews successful real estate investors in addition to his weekly strategy episodes.

Passive InvestmentsNichole StohlerFebruary 7, 2024podcast, season 1