Are you interested in real estate investing? Arn knows that one size does not fit all. He believes that most people understand the value of real estate but he also understands that some people want to start slow or with smaller properties and others want to go big and scale much faster. Arn has been in the real estate business for over 30 years and he loves to help people learn no matter what their experience level is and no matter how big or how small their goals are. If you’re looking to learn from someone that's been through up and down cycles, listen and learn!

Table of Contents:

• Where To Listen To The Podcast
• Scale Up to Multifamily Because One Size Does Not Fit All
• Building Proper Foundation
• Diversification Is Key When One Size Does Not Fit All
• You Can’t Put All Your Eggs in Because One Size Does Not Fit All
• When One Size Does Not Fit All, Prove Your Worth and Move Forward
• Tell the World What You Do
• An Accomplished Guy Who Knows One Size Does Not Fit All
• How to Reach Arn Cenedella

Scale Up to Multifamily Because One Size Does Not Fit All

Darin: Arn Cenedella has been in the real estate business for over 30 years. He lived and worked in the Silicon Valley area in California for most of his career. Arn currently lives on the East Coast in Greenville, South Carolina. He started by investing in 30 to 40 single family homes and has since scaled up into multifamily.

We were both speakers. Actually Arn was the moderator of a panel that I was on, not this past January, but last January, and just a good guy. We've connected through social media, and this is the first chance we've gotten to spend some time talking to each other. First question, how many properties and how many units are you currently invested in?

Arn: Individually sole ownership, I probably own six or seven properties, maybe about 25 units. These would typically be single family to smaller two to four-unit properties. I probably have three or four smaller JV properties, these could be 6 to 12 unit properties. In terms of syndication, I believe I'm in eight syndications as a limited partner, maybe totaling about 1200 units. As a general partner, I'm in four syndications, totaling about 433 units. I have a pretty broad spectrum of investments in real estate and I like doing it all. There's pros and cons to each approach, and I don't see any reason to limit myself to one.

Darin: What were you doing prior to getting into investing in real estate? What was your background?

Arn: I was trained to be a mathematician and chemist. I got a graduate degree from University of Michigan way back in 1977. I'm dating myself a little bit.

How Life’s Perspectives Shape People’s Opinions

Darin: I actually like having somebody that's a little senior. Usually I'm interviewing people that I'm like, how'd you do it at such a young age?

Arn: Of course life's perspectives shape people's opinions and so forth and world views. Hopefully I'll be able to offer a little different perspective than many of the people on your show. I thought I wanted to teach and be a research scientist. During grad school, I had to come to the conclusion that it really wasn't for me.

My father had opened a residential real estate brokerage business in Menlo Park, California. We had about a five-minute call. He said, "Come on out, get your license, and I'll put you to work." So in March, 1978, I got my real estate license, Menlo Park, California, basically next to Palo Alto, better known as Silicon Valley. I had the good fortune of selling residential real estate but worked with a fair number of investors for over 35 years.

Darin: You were going to be a chemist and then you're in grad school and you end up deciding, I'm going to go work for dad. It worked out because you stayed in the business for that long. So you were in residential real estate for 35 years.

Arn: It's interesting how life evolves and how small decisions can have a big impact in the direction of one's life. Yes, it turned out to be very good for me. My father taught me the brokerage business, but really he taught me the investment business. He understood, while the brokerage business produces good income, really investing is what's going to lead to financial wealth, security and freedom.

When One Size Does Not Fit All in Real Estate Investing

Arn: So he was a single family home investor, an old school guy, and I just modeled his behavior. I was blessed to grow up in the San Francisco Peninsula and probably the greatest residential real estate market in the world. Then I started investing in the Bay Area, as well as elsewhere across the country. I was able to create a good work-life balance for me through my real estate investing.

Darin: At what point did you actually start investing? Not just working in the brokerage business, but started to invest.

Arn: I probably started like most people, you reached a certain age, it's time to buy a house. So I bought my first house, in 1980. I remember it was in a rougher neighborhood right up against Bayshore Freeway. It was Highway 101 that runs from San Francisco to San Jose. I paid $175k for that property back in September 1980. Interestingly enough, for those who remember, late 1980 is when mortgage rates started going from about 10% or 11%, all the way to 16% and 17%. In the spring of 1981, residential mortgages were about 16.5%. I paid 11.75% for my first mortgage. When I see rates today at 3.25%, 3.75%, it's pretty good.

My dad told me long ago, anytime you can borrow money for single-digit interest rates, it's a good lending market. Of course now we're in uncharted territory. I bought my first house in 1980 and lived there for about six years. Then like many people, I was ready to move into a better neighborhood, a bigger house. I’ve kept my existing residence as a rental, and from there, it just snowballed.

Build a Portfolio When One Size Does Not Fit All

Arn: I built a portfolio of maybe 35, 40 houses in the Bay Area, in the Austin, Texas area, and of all things, in Charlottesville, Virginia. It’s where my father eventually retired and relocated to. So we started investing back there.

Darin: I've never invested in single family homes. But the multifamily investors that I've talked to that started there, they tell me when you get to somewhere between 10 and 20 homes and they're self-managing, that it just starts to become too much. So that 35 to 40 homes is a lot. Were you self-managing or did you have somebody that was managing that for you?

Arn: The local properties, I self-managed. The ones out of the area, I had a property manager. It was a little bit of both. So in Austin and in Charlottesville, I had professional property management. In the Bay Area, I basically took care of my own rentals. Yes, it did get to be a little bit much. We'll cover it later on in our talk, I'm sure, as to why I made the transition. Certainly, the hassle of managing all these properties was one of the reasons I did that. I’d say it’s unlike your typical W2 career investor.

I was a real estate broker. I'm out and about in the community meeting with buyers, sellers, tenants, contractors, stagers, landscapers. The management of my properties was just part and parcel of my overall real estate activities. If somebody was working at the Apple computer and working 60 hours a week, they don't have time to run out at 10:00 AM to go meet a contractor to get something fixed.

The Reason to Switch to Multifamily

Arn: I had a little bit of an advantage there, but yes, the management becomes intensive. That was one of the reasons I eventually switched to multifamily, though I'm a little slow. I didn't switch to multifamily till about 2020. It took me about 40 years of doing single family. The other thing I would say is one size does not fit all. What I mean by that is, I really believe in real estate investing. There are numerous ways one can go about investing in real estate. It's up to each individual to find their niche and work with them.

If somebody said to me, "I want to build a single family rental portfolio," I'm going to say bravo because it's tried and true, it works. On the other hand, if somebody says, "Real estate's not my expertise. Between work, family, kids, community, and church, I don't have an extra moment. I don't know the business and I don't want to take care of tenant’s repairs. So I want a more passive investment." Then that's the right solution for them.

Sometimes we get caught in there's one right way, and I don't believe that. There are numerous ways you can go about investing in real estate and creating wealth.

Darin: It's all mindset. Some people have to start smaller and then they may do it and then they just want to replicate that. That's fine, like you said. Then there are other people that may start small. They're like, okay, well, now I understand that. How do I do the next thing? That could lead you into bigger properties, but it's not a requirement. It's not the only way to build wealth. That's a very good point.

Building Proper Foundation

Arn: I'm an old-school guy, so I believe in fundamentals and step-by-step progress, building proper foundation each step of the way. I find that's a more conservative approach. Many in the space now say, go big as soon as you can. I can't argue with that. Many people have been successful doing that. It's just not my personality. Even now in my multifamily business, despite 40 years in the real estate industry, I'm fairly new in the multifamily business.

Most of the deals I put together are smaller $3, $4, $5 million deals because handling other people's money is a big responsibility. In order for me to ask people to invest with me or in my investments, I have to know I can do the job. I got to prove to myself that, okay, I've got this down, I'm ready to take it to the next stage. That's how I approach it. Again, others can do different things. This is just what works for me.

Darin: Why did you shift? So 2020, you said that you started to invest in multifamily. Why'd you do it?

Arn: It was interesting. I have a young friend here in Greenville. He's probably mid-30s now, probably onto his seventh or eighth syndication. We'll talk about real estate and we supported and followed each other. In March of 2020, he called me on the phone one day and he goes, "What do you think is going to happen with rents?" If we reflect back, March 2020 was when we became fully aware of COVID, and the major impacts it was going to have. People were afraid. We didn't know what was going on.

The Time to Learn Why One Size Does Not Fit All

Arn: He called me in the middle of March, "What do you think's going to happen with your rent collection?" I said, "Mario, Well, I don't know. Call me on April 5th and we'll talk about it." I wanted to kind of see how my rents came in, and then I would know. At the end of the phone call, he sent me a podcast on multifamily and a light bulb just went off. Prior to that, I had started buying smaller multifamilies, 4 units, 6, 10, 12. I was moving in that direction. But that call, COVID, everything slowed down. It gave me time to really learn, I probably listened to three, four hours of podcasts a day.

Then with my real estate experience, most of it came second nature to me. As I investigated, it made a lot of sense. Another point is I've done single family for 40 years, and honestly, I was a little bored with it. I wanted to do something different. And I can tell you, I've so much enjoyed learning a new aspect of the business. It's residential real estate. It is what I've done all my life. I'm not going to do office buildings, I'm not going to do industrial. I really love networking with people like you. I'm going to my first in-person conference here in about two weeks in Colorado. Excited about that.

Darin: The best ever conference.

Arn: We can discuss all the logical reasons why I moved to multifamily, certainly, but some of it was, I just wanted to try something new.

The Back Up You Need When One Size Does Not Fit All

Arn: The other thing to back up my math science background, once I got my residential career going in the Bay Area, I ended up taking all the CCIM coursework. As you know, it's a very prestigious commercial designation. It's five, one week-long courses and then you get to document real-world experience and success in commercial real estate.

Even back then, I was toying with making the shift from residential to commercial. I was at the point in my life, I was recently married, I had a baby on the way, Alex, my oldest son. Maybe I just didn't have the courage to leave the lucrative residential business I had built to go to commercial. In some ways, my decision in 2020 circles back to my education and training. It's been a good move for me. I enjoy helping people invest. It's a way people can invest without dealing with the day-to-day headaches of property management and so forth. I get some satisfaction from doing that.

Darin: A few things that you said are important for listeners. You were bored because you knew what you were doing, and you did it over and over again. At some point, it doesn't matter how much money you're making. If you just rinse and repeat and you don't have that challenge factor, you could get stuck. It doesn't matter if you hit that financial freedom bucket, you're continuing to do that. So, if you're bored, if you want to try something new in your life, whether it's real estate investing or starting your own company, or doing whatever, listen to your gut.

When One Size Does Not Fit All, Listen to Your Gut

Darin: Listen to that and don't keep shoving it down because you only have one life to live. The other thing you said was courage. It does take courage to go after something new. You don't necessarily know what the outcome is going to be. But then, what's very cool about moving from single family to doing the small deals to doing syndications now is you said, you like to help people invest.

With syndications, you get that opportunity where you can take your knowledge and then bring other people for the ride. They don't have to participate in finding the deal and putting the financing together and raising the capital and managing the deal. What they could do is just provide you some funds and then you do it. Talk about where you find investors and what's been their feedback to you in terms of being involved with some of your transactions.

Arn: I come from Silicon Valley. So I sold real estate there for a long time. I have a good database of friends, clients, and business associates. As you can well imagine, most of them are fairly well invested in the stock market. They have significant stock market investments. One of my approaches is just to talk to them about diversification. I'm a real estate guy. I'd say in my personal portfolio, half of my net worth is in real estate, half in the market. In the stock market, I have a professional advisor and I just do what he says. I trust him. He makes recommendations, and invariably, I just follow him.

The Benefit of Knowing That One Size Does Not Fit All

Arn: I don't know Wall Street and I don't know the market. But I see the benefit of having some of my capital there. I also see the benefit of having some in real estate. With many of my past friends and clients, it's a discussion of diversifying your portfolio. Maybe taking 5%, 10%, 15% of your net worth and transitioning it to real estate. Most people understand the value of real estate. They live in major metropolitan areas, they see the prices of houses going up, they understand real estate is a secure, long term investment.

What holds most of them back is either they don't have the knowledge and expertise to run these assets, or they just don't have the time. One of my best investors is a young woman who used to work for me at Coldwell Banker in Menlo Park. Her mom and I were the same generation, the daughter joined the mom. The daughter's now 45. She manages three offices in the Bay Area. Probably 250 agents, makes great money, mother of three, and had no real estate investments.

Here's someone managing hundreds of real estate agents, certainly understanding the value of real estate. Her husband has a demanding W2 career job, she's got a demanding job. Trust me, trying to herd 250 residential agents is a big lift. She started to invest with me. So she understood the value of real estate, but she didn't have the time to breathe, to really look at it. A lot of my investors are in a similar situation in life between work and family, they're just jammed. And they appreciate the opportunity to put some of their net worth in real estate.

Diversification Is Key When One Size Does Not Fit All

Darin: What's been her take in terms of say performance, or the times she has to be involved? Any tax benefits that she's received? What is she telling you that she sees the benefit and the value of doing that diversification?

Arn: She speaks with her checkbook because she keeps investing. The proof is in the pudding, and as you know, when you do well by your investors, you now have repeat investors. So the next deal comes along, they go, "Put me in a good deal over here." He's got another one in the same market I'm in because I've seen what he's done. She's happy with no headaches, regular distributions.

That benefit for her is she's an active real estate professional. Therefore, she’s well situated to take advantage of the passive losses that syndication investments can generate. She's a pretty happy camper. The other thing I would say is I never promised the moon to my investors.

In my mind, if you can get 7% or 8% cash on cash return, if you can get an IRRs of 14%, 15% in a low-risk investment, that's a win. People should be satisfied with that. If they're not, then maybe their expectations are a little askew.

Granted, we've had 10 years of unbelievable growth in multifamily. COVID didn't really slow it down, COVID made us take a breath and it kept on going up. One thing that I have from being in the real estate business for 40 years, if I've been through a few cycles, I've been through a few markets. I don't know when we're going to have a little correction. But I know at some point, we are going to have a little correction.

Serious Swings

Darin: You say little, it's funny because you were doing business in Silicon Valley. California is the biggest up and down real estate market there is. You've been through some markets where it is not just a little downturn. In California, you could have some serious swings both up and down.

Arn: It would vary depending on the area. For example, on the Peninsula, during the Subprime crisis recession, values on the Peninsula are good upper middle-income neighborhoods, maybe they drop 5% to 10%.

Darin: That's not bad.

Arn: But out in the Central Valley, two hours from San Francisco where developers just kept building tracked home, there you saw values drop 50%. You're right about that. It's a little bit market-specific. Certainly, I lived through the dot-com boom, I lived through the dot-com bust. Somebody who's gotten into the real estate space in the last five years hasn't been through these cycles. I sold houses when interest rates were 16.5% adjustable. It gives you a little bit of perspective that it's not always up. You have to kind of be smart and savvy and understand there's going to be some downturns.

Arn: What I would say is if you use leverage properly, if you're properly capitalized, meaning good reserves, you can ride out some difficult times as a real estate investor. As long as you ride out those times, I can almost guarantee you, when you come out the other end, you're going to be happy you stuck in it. Long term, the trend for real estate just has to be up. I don't see any other way it's going to go.

One Size Does Not Fit All in Wealth Building

Darin: I've asked people, do you know anybody that has saved their way to wealth? I have not gotten an answer saying yes. Just saving 10% in your W2 and putting it into the stock market and building your nest egg. The difference between doing that and investing in assets, hopefully cash-producing assets, cash flow producing assets. But, even if you have 50% in the stock market, 50% in real estate. Owning assets that appreciate over time is where most people build their wealth.

Real estate is one where you've seen the quotes, 90% of millionaires have built their wealth through real estate. But there is a true fear factor for people that have never invested. What you said in the beginning is critical that there's different ways to invest. You could decide to purchase your first single family home. Or you move from your house like you did, and then just rent it out and move to another house. You could do small duplexes and fourplexes and eightplexes, or you can do syndications.

On the syndication side, you could be a GP like you are and then bring other people. Or what's great and which I didn't know about until four years ago was there's the ability to passively invest in these syndications. So you find a syndicator like Arn and you invest alongside them. They're doing the heavy lifting and the management. They have a property management company that's typically managing it day to day, but they're overseeing it. It's a way to get involved and grow wealth from that perspective. Fear stops a lot of people from getting involved. What's your take on that?

A Great Way for People to Invest

Arn: People are fearful to do something that they're not familiar with. Of course, when you sit there and watch the stock market go up and down, that might create a little fear. You might think about another way to do it. Syndications really have only been widely available for about the last 10 to 12 years. There was a tax law change that opened it up to average Americans. It's a great way for people to invest in something they intuitively know is a good thing.

We know the population's growing, we know we have a housing shortage in this country. There's really no solution to it. Nobody's really said, "Oh yes, we're going to build 10 million homes in the next two years and solve it." It's going to be a continuing problem. When a lot of my investors are first-time syndication investments investors, I talk to them about not going all in on your first investment. If you have a nest egg of 250,000 investable cash, do not throw all 250 into the first deal you would see. No, don't do that.

What I would say is invest 50 over here, invest 50 there, spread it around a little bit so you have some diversification. Then you'll get to see how that feels over the next year or so. Then, you'll be able to determine, is this something that you have good comfort with? You'll find operators you like better than others. You might find markets that you like better than others. Don't put all your chips in, dip your toe in, get a little exposure.

You Can’t Put All Your Eggs in Because One Size Does Not Fit All

Arn: There's going to be another great deal, six months for now. They don't disappear, they keep coming. So just take it slow, get your feet wet, see how you like it. If you do it that way, the fear comes when you put every last dollar you have to your name into an investment. I wouldn't do that. That would terrify me.

Darin: It's not just if you put all your eggs in because I know my first passive deal in real estate. I’ve been trading loan portfolios for years, but I'd never invested in real estate. I had money in the stock market. Like you said, it could drop by 20% or 50% just like that. But it was like, what was familiar and what was talked about, and everybody's supposed to do that.

The first time I invested in a passive deal, it wasn't 100% of my portfolio, but I was still scared. I didn't know how it would pan out, if it was a good decision or bad decision. So I read a lot of self-development books and I talk to a lot of people. People are more afraid of losing than they have hope of gaining, and I fell under that camp. That will hold people back from making that decision to try it.

Arn: It sounds like you educated yourself about the space, about limited partner investments, about syndications. I imagine you probably interviewed a variety of operators.

Darin: I did all the things that you were supposed to do. I listened to podcasts, read books, joined a mentorship group, got referrals, met the syndicators, vetted which ones I wanted to work with.

Falling Into the Trap

Darin: Still, wiring that first 50,000 or 75,000 was like, oh man. It all worked out great. I made great money off of it, but you didn't know at the time.

Arn: That's instructive for us who are on the GP side to not forget what it's like for an LP making their first investment. There has to be a degree of understanding and compassion and putting yourself in the other person's shoes. This is what we do. We talk all the time with syndicators all over the country, we buy and sell property. This is what we do. Sometimes, we fall into the trap thinking, this is easy and everybody should get it, but it's not the way it works.

Darin: Understanding what they may be going through and the emotions they may be going through as a first-time investor is important. The 2nd and the 3rd and the 4th and the 5th and 10th, passive investment after that didn't feel the same. It's that first one or two.

Arn: You made a comment earlier, more talking about life, that if you feel yourself stuck, you got to go for it. The same thing applies. For me, I'm a perfect example of that lifelong Silicon Valley resident. My life partner and girlfriend, Laura, and I decided to pull up roots and move to Greenville, South Carolina seven years ago. We knew nobody. We’d visited for three days, but intuitively in our gut, we knew it was right. We took the leap of faith, packed up, moved clear across the country, and had been happy as clams.

On the Precipice of Growth

Arn: You get back to that fear and how you work through it. They all often say when you're uncomfortable, you're at a growth edge. That's what tells you you're on the precipice of doing some growth. I forget Einstein may have said something, the day you stop learning is the day you start dying. Bringing it all back around about the idea of new experiences, keep growing, keep living, it all ties together.

Darin: I don't want to go off on this tangent too much, but I will share like, so now I'm like you. I understand the multifamily world, but four years ago, I didn't. I'm playing golf with a multifamily guy who called me, but he is a younger guy. So I'm like, "You're a young guy, what's up with all this crypto and metaverse and all this? I don't understand it."

There's a piece of me that's like, is this like the dot-com thing where it just goes up and then plummets? Or am I just an older guy who is naive and is not taking the time to learn about a different industry? I don't know the answer. Again, I don't want to go too far on it, but that's a responsibility on myself that I have to do some educating of myself.

Arn: I'm with you. I don't have any crypto and I don't understand it. I'm not buying any crypto, and call me an old fuddy-duddy, but it's okay with me.

Darin: The thing is, I'm 51. If I'm going to live till over 100, then I'm like, well, this 50 years. 20 years from now, is something going to be there or not? I don't know the answer.

How Your Gut Comes Into Play When One Size Does Not Fit All

Drin: But the point is, you have to trust your gut. Arn was in single family for a long time. He probably wishes he took that chance a little bit earlier. You know you have to take the chance. Then he went and moved across the country, that was a risk. He could always move back but he took the risk and it turned out fantastic for him. Talk about perseverance and determination, and how that plays into getting into something new.

Arn: In general, I tend to be a pretty optimistic person. I also believe I'm the captain of my own ship, and my actions can impact my destiny. If I didn't think that, why would I ever get out of bed? Believe that your actions can create the life that you want, not that it's going to be easy. I tend to be a little bit of a plotter and I'll just keep going. The other thing with real estate, particularly, it's a long-term gig. If you just stay consistent and determined, you're going to win. You just have to stay on that path, not get distracted. If occasionally some rough winds come in, you just keep marching through.

What I have found in the transition of multifamily is I started as an LP investor, probably did three or four. In a conversation with one of the GPs, I mentioned, "I've been able to raise capital for other real estate deals, and would like to start raising capital for multifamily deals." He said, "Well, if we have a need, I'll let you know."

How to Build Your Confidence

Arn: About a month after that call, he called me up. He goes, "We got a deal in Augusta, Georgia and we need some help. Are you willing?" I jumped in, and then it just kept continuing on that path.

Your first couple of deals are always the toughest. When you have a little success, that builds confidence. The first one's always the hardest. That’s a hurdle you have to get over and then you still need to keep moving forward. But breaking through on that first one or two, it then starts to fall in place for you.

Darin: You could listen to as many podcasts, read as many books. But until you actually take action and start doing it, there's certain things that you're just not going to learn. Getting out and doing that first deal, buying that first investment home, or that duplex or fourplex, or getting into your first passive deal, those are all scary things. But then after you do, it's not anymore. You start looking for the next thing. That's what I've learned from talking to some people that are super successful.

They all started with one investment, every single person, and that led them to something else. That progress, that itch that you keep on trying to go after and get uncomfortable with is critical. Some people just let fear keep them in their spot.

Arn: It's okay to be cautious, it's okay to be prudent. Like anything else in life, you want to find the proper balance. I'll admit sometimes I've leaped in my life before I looked.

When One Size Does Not Fit All, Prove Your Worth and Move Forward

Arn: I might have taken a lump or two, but I also always had a confidence that I'm going to land on my feet. Whatever life throws my way, I'm just going to keep going. As we know, the multifamily space is very competitive now. You have to develop street credibility with the brokers and the sellers to actually land a deal. If you can get those first one or two under your belt, it just increases your street cred. It then gives you a higher probability to get that next one. You got to pay your dues to get in the space. Like pretty much any other profession, you pay your dues and you earn your way. You prove your worth and you then make progress.

Darin: I'm glad that you brought that up. That it's competitive because it is. I mean, in the large-scale multifamily world, it is competitive. If you're a new guy, and I've seen people in these multifamily mentorship groups, they sign their check to join. Then they just think that they're going to get a deal. If you're not willing on to fight kick and scratch, and figure it out and get yourself out there, it doesn't matter that you've stroked the check. You have all the resources at your fingertips. But you still have to do the work, you still have to put yourself out there.

Arn: The first syndication deal I closed here as a lead sponsor in Greenville was from a relationship that I had built with a broker over about a period of a year and a half.

Take Time to Build Relationships

Arn: It wasn't like I called him up on the phone and 30 days later, he said, "Here, go buy this thing." It took me about a year and a half to build the relationship. We looked at several other properties; they just weren't quite right.

It takes time to build those relationships. You have to put in the work. Just get out in the market, look at those properties, get to know the brokers. Get to know the property managers in your market of choice, wherever that happens to be. Coming from California, I can joke about this. Every multifamily broker in the Southeast or in Texas always gets a call from the California investor. It's kind of a stereotype.

What I would suggest is, you need to get on a plane and actually get in that location. Get face to face with the broker. Just doing it on the phone, they're not really going to give you the time of day. You have to show that you're willing to take the time, trouble, and money to get there and build those relationships face to face. Trust me, brokers get 50 calls a day about property. How are you going to stand out unless they've sat down with you across the table or something.

Darin: It's a relationship business. On a large scale, you need to partner with somebody who has experience to get your first deal. You find somebody else that already has that street cred, and that's the value that they bring. Then you do the busy work of going out and finding the right deal. You bring that person on as a partner, because otherwise, like Arn said, you're going to call these brokers.

Even When One Size Does Not Fit All, You Can Still Get a Chance

Darin: They're going to be like, Bob who? You're going to get put at the back of the line. It doesn't matter if you know you have a solid deal and you can raise the capital, or if you have the capital sitting on the sideline. If you have the money in the bank, you can prove it. You're paying more than somebody else that has the street credit, you might still get a chance.

Arn: On my first syndication deal, I joined a small short-term mentoring program. I developed a closer relationship with an experienced operator that I had known for two years. Our initial contact was me as an LP and him as a GP. He held my hand through the process. We got agency debt. He had agency debt experience. We had the net worth, but we didn't have the agency debt experience. He helped my partner and I, Brian, through the deal. He's now our KP on our second deal.

You need those people in your camp to help bring these deals across the finish line. I can tell you actually completing my first syndication deal as the lead operator, I learned so much. It was unbelievable. There were frustrating times, there were difficult times. One day I might have been down and my partner, Brian, picked me up, and then vice versa.

There are so many moving parts on these syndication deals. You got to bring them all together right at that correct moment to be able to get it across the finish line. It was really a learning experience. Once you get that under your belt, now the confidence picks up and you're off and running.

How to Attract People to Invest

Darin: You talked about some of your investors, a lot of them are first time passive investors. How do you attract people to you that were maybe not inside your network initially? What do you do to try to attract people? You said that the syndication space has grown dramatically over the last 10 to 12 years. I've only been in it for four years. In those four years, I've seen it grow dramatically.

I still know a lot of people that don't get any emails asking them to join a multifamily deal. They don't get invited to any of them, and they have the funds. I was that way prior to four years ago, like you still have to get invited to be a part of these deals. How do you attract and educate people that haven't done it before?

Arn: This was actually the panel discussion that you and other operators talked about at the MFIN Summit. It's called building a platform, building an educational resource. The platform could be a website containing information and education about syndication investments. For me, being on podcasts has been the way I've probably attracted people who weren't already in my social or professional sphere. The podcast medium has done very well in attracting new people. I'm slowly building my database.

In the couple of three or four deals I've been to, that we sponsor on, typically 50% to 60% of the investors are people I'd known in a previous life. Let's call it that. Friends, family, old business associates, maybe 30% to 40% have been new investors that I've picked up along the way. So put content out there.

Build Your Investor Database When One Size Does Not Fit All

Arn: Help educate people, get on podcasts, write blog posts, go to meetups. There are a lot of online meetups. You can go to in-person meetups and just kind of network. That's how I built my investor database and continue to do so.

Darin: I've heard other people say that even before they got their first deal, even before they invested passively in their first deal, they started to put it out on social media. Their network is like, "I'm looking at real estate deals." All of a sudden, you find other people that are in your network that you didn't even know have an interest there. They want to learn from you. Like, what do you learn? Where are some good meetups to go to where I can learn? What are some good podcasts or some good books? It starts the ball rolling. Those people could end up being investors with you when you get your first indication deal. You don't have to wait until you get your first deal to start telling people what you're doing.

Arn: In my experience, it works better when I just let other people know what I'm doing. I'm not asking them to do anything, I'm not asking them for money, I'm not asking them to invest. I am just letting people know. Like when you go to a cocktail party, I'm sure at some point the conversation goes to real estate.

Darin: Hey, what do you do?

Arn: Yes, but also, did you see what that house down the street sold for or whatever. You just put it out there in the universe.

Tell the World What You Do

Arn: The guy or girl who cut your hair may have an uncle who has a 40 unit building that they want to sell. You just let people know what you're doing. What I found is that if they're interested, they'll come to you. They have a notion they'd like to do it, but they don't really know how to take that first step.

If you simply just talk about, "Yes, I'm going to Charlotte tomorrow to look at a 40 unit building," your neighbor may go, "Tell me more. I've been wanting to invest in real estate and I don't really know how. Can you help me out?"

Just let people know what you're doing. That will attract potential business to you much better than going, "I've got a deal. I need to raise $1 million. Do you have $50,000 you want to invest?" That's going to turn people off.

Darin: On those two topics, one telling people what you do is a great soft approach. It's no risk and it lets people know, and it gives them kind of the onus. There's a lot of people out there that they're like, "I want to do this, but I just don't know how. I don't know who to do it with." I've had people reach out to me. We met up with coffee and they're like, "I just didn't know anybody local that did this. Can I get in your next deal?" I'm like, "Sure." That's a very soft way for that to happen. On the flip side though, when you do have a deal, I would recommend that you offer it out to your entire network.

Different Ways to Look at Why One Size Does Not Fit All

Darin: You shouldn't be making the decision for them. It's an opportunity for them to invest. It is not, you need their money. There are two different ways to look at it. I learned from my first syndication deal where I was flipping through my phone.

There were certain people that I was like, that guy will never invest. I'm like, Darin, how can you make that decision for him? I text the person, next thing you know, "Let's grab coffee and talk about this thing." Then they invest. Another person, I'm like, this guy's a no-brainer. That person says, "I just bought this other company and I don't have any capital." So you just don't know. You don't have to be hard about it, but you should present the opportunity.

Arn: To clarify, once you've made contact and you've had some discussion with an individual where they've expressed interest in multifamily, then certainly you have to present every opportunity. I have automations where after I've made contact and had a conversation with an investor, and it's apparent that syndication investment would be suitable for that individual because it's not suitable for everyone, they get put into my deal.

So every deal I do get, I do send out an email blast. Right now, my database is probably 480 investors. That is after I've established contact and had some financial discussion with them. Where they have indicated to me, "Yes, Arn, I'm interested. I want to be put on your list. Please let me know."

How Your Mindset Should Be When One Size Does Not Fit All

Arn: As you know, depending on your offerings, 506C or 506B, 506B, which is what I primarily do, I have to have a prior relationship with the investor before I can really talk about specific investments to them, but the 506C, accredited investors only.

You can broadcast it a little wider. Your thought about the mindset is yes, we're not asking them for money. We're presenting an opportunity to them is exactly right. The thing is, if they want to invest, great, if they don't want to invest, fine. It doesn't make a difference if they're not invested.

Darin: There's some in between. They may not be ready on this deal, but they still have questions. That might be the starting of the learning process for that person. They miss this deal, but then a year or two later, they're like, "Okay, now I'm ready." You never know. What's the next big stretch goal for Arn?

Arn: I haven't been a super goal setter in my life. I know that's criminal and I should be banned. But it goes against everything, and I say that half-jokingly.

Darin: There's always a time to start.

Arn: It's never too late. I'm only 67.

It's interesting with goals, it's more about activity, not so much results, if that makes sense. The goal should involve the activities to produce the results. If you're doing the right activities, the chips are going to fall where they may. There are a lot of factors that impact that.

But if I had a goal, my goal would be to start moving up into larger syndication deals. So the ones I've done to date have been primarily in the Greenville, South Carolina area.

A Legitimate Jump

Arn: They've typically been 30, 40, 50 unit buildings, $3, $4, $5 million projects. Now that I've got three or four of those under my belt, and I have my team in place here. I feel confident on tackling a bigger property, a bigger asset. The 2022 goal would be to start to acquire slightly larger assets. I'm thinking $8, $9, $10 million. That seems to be a legitimate jump. The other thing is developing a second market in what's called the Triad of North Carolina, which is Greensboro, Winston-Salem, and High Point. I have one asset under contract there.

We have an accepted LOI on another. It's about a three-hour drive from where I am. I want to develop that market and get the team there together. In Greenville, I have my team put together. I have my property manager, my asset manager, my contractor. I'm all over everything in Greenville. Because I know I have the team members that can execute the plan, I'm more kind of a big picture, acquisition investor guy. See the big picture, see the vision. I'm not as good in the day to day nuts and bolts. My partner is great on the day to day nuts and bolts.

We have our areas of expertise, we communicate and collaborate, but we're kind of in charge of our separate tasks. And it works really well. It gives me a lot of confidence knowing Brian's on the team and he can handle his end of the job. I need to develop the same kind of team up in the Triad. So that's the other goal for 2022. And I imagine I'll make some headway.

An Accomplished Guy Who Knows One Size Does Not Fit All

Darin: Look, you're a very accomplished guy. You’ve been in the business for a long time between residential and multifamily. I do see people who set goals, it pushes them. You don't have to say it on this call, but I would just write it down. Like, I want two deals that are $10 million or greater, or $8, $9 million and greater. Then it does stick in your mind. I had one gentleman that came on. He was, "I'm going to buy a two unit, then I'm going to buy a four unit the next year, and then an eight unit."

Then he got to the point where he was like, "All right, I got to buy eight units this year." He's like, "What if I changed my goal?" He did. I'm like, "What'd you change to?" He said, "800 units." I'm like, "Where'd you come in?" "Like 454." But if he had stuck at eight, he never would've gotten to 454. You got it and also you're a guy who said that you got bored. I just challenged you a little bit.

Arn: I appreciate the constructive criticism and there is some validity there. I'm never too old to learn something new. It's an interesting thing for me to ponder and see if I could execute. I do have affirmations put up on my bathroom mirror. So I do believe in affirmations and the power of positive thinking.

Darin: I believe in you. I'm sure your girlfriend believes in you. You got all these investors that believe in you. I can't wait to talk to you next year, and you've got it done. What do you like to do for fun outside of work?

A Fabulous Game

Arn: I'm a fitness fanatic. I enjoy keeping fit and I play golf. One of these days we'll have to get together.

Darin: Well, love that.

Arn: I've played golf since I was eight years old. That's 59 years, and it's a fabulous game. Love being out there with my friends and the outdoors. It's a mental challenge, a really fascinating game. I know you play. It looks silly from the outside to people who can't play golf.

Darin: People like my daughter, she doesn't get it. One day, you got one shot that's working. The next day, that doesn't work, but another shot works. You're out with your buddies and you're having little competition. It's all fun.

Arn: Little competition, and Laura is glad to get me out of the house.

Darin: If somebody wants to reach out to you, what's the best way for them to do that?

Arn: I'm active on Facebook and LinkedIn. My business is Spark Investment Group.

Darin: What's the website?

Arn: It would be investwithspark.com. My email is arn@investwithspark.com.

Darin: What does Spark stand for?

Arn: Simplify, Preserve, Accelerate, Reap, and Knowledge. Try to simplify people's investments, preserve their capital, accelerate their capital growth, reap the benefits of real estate investing through knowledge and education. It also fits my personality. I tend to be a bit upbeat and like to have fun. Spark is a good metaphor for how I approach life.

Darin: This guy is a good guy who’s been in the business for a long time. He's conservative, he wants to be involved in the right deals, and take care of his investors. Just a great person to learn from. So check him out. Till next week, signing off.

How to Reach Arn Cenedella

• Website