47. Building Your Network to Find the Best Sponsors with Denis Shapiro

PILF 46 | Diversified Investments

 

Do you want to invest but don’t know where to start? Join us in this episode with our guest, Denis Shapiro, the Managing Partner at SIH Capital Group LLC, to gain valuable insights on where to begin. Denis started investing in traditional stocks at age 14. Unlike most investors who focus on specific investment assets, he still looks at both traditional and alternative investments. Now, he is helping people diversify their funds and investments through SIH Capital Group. Denis also wrote the book The Alternative Investment Almanac to share his insights into building wealth. Start building yours by listening to this episode!

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Building Your Network to Find the Best Sponsors with Denis Shapiro

I’m happy to have Denis Shapiro here with me. He began investing in real estate back in 2012. He has built a cashflowing portfolio, including a lot of alternative assets like note funds, ATM funds, mobile home parks, life insurance policies, tech startups, short-term industrial rentals, and more. He cofounded Investment Club for credited investors in 2019, and following that, he launched SIH Capital Group to provide accredited investors with a simplified strategy to invest for passive income. He published a book, The Alternative Investment Almanac. Denis, welcome to the show.

Thanks for having me. It’s a real pleasure to be here.

It’s great to have you. The first thing is I would like you to tell us about your journey. How did you become an investor? What were you doing before that, and what are you doing now? Tell us the whole journey of your investing experience.

I started investing in traditional stocks when I was fourteen. My oldest brother gave me a copy of Rich Dad Poor Dad. We were very much a family, where if one of us found something good, we had to brainwash the other people to think the same way. He was about eight years older than me and in a much different position than I was as being a student.

In high school, I had a part-time job. I read the book. I wasn’t a big fan of it the first time I read it. I had a huge 180 later on in my life on it but I was a little bit of a cynic. I was like, “This guy is probably making more money on his book tours and speaking engagements than what he’s preaching in the book,” but I did get out of the book saying like, “I should probably buy an asset.”

I had about $1,000. I didn’t know what to do, so I asked my older brother, “What should I do?” He was like, “I started investing in mutual funds. Maybe you should,” so he put me in a high-expense ratio mutual fund. I remember I was following it for a whole year, and it went up the cost of the trade. At that time, you had to pay for a trade. I remember it was exactly $7, so it cost me $7 to purchase the mutual fund. I waited a whole year, and I think it was up $7. I was like, “There’s got to be a better way because I’m not going to get rich off $7 annual increases.”I took more of a deep dive into traditional assets. I started reading more about Warren Buffett, Peter Lynch and how I can do better than just the traditional mutual fund. That was my journey. I thought I was good at it. I was doing those Yahoo stock simulators when I was 16 or 17 while all my friends were doing Fantasy Football. I was like, “If you guys think of your fantasy lineup like a stock portfolio, it could be much more fun, and you will learn a valuable skill.” I was pushing that when I was 15, 16, or 17 years old.

I went to college in a big business school in New York City. I’ve got to the junior year where you are supposed to start going for internships, and the global financial crisis happened. It was a complete halt in the whole finance industry, especially I was in school in New York City. I had two choices. I couldn’t find a job, so I was like, “Let me go for more education.” That’s always the solution. I went for my MBA.

While I was in my MBA, I’ve got recruited by the government, and I was like, “This is such a nice change of pace.” I was going for hundreds of internships in the finance section but over here, they wanted me, so I started working for the government. That first paycheck was a big life moment. It wasn’t my first job. It was my first career. Usually, when you have the lower-paying jobs, you don’t really see the tax hit but once that first paycheck on my first real W-2 came, I was like, “Not only are they my employer. They are my business partner.”

PILF 46 | Diversified Investments
Diversified Investments: Traditional stock will never provide the income you want because of the liquidity. The liquidity leads to volatility, and volatility is like the kryptonite to yield.

 

I came home that day, and I googled, “How do I pay taxes?” At first, the search yielded me a lot of unscrupulous results, then I changed it to, “How do I pay fewer taxes legally?” The first couple of things that came up were real estate, and then I started piecing together the Rich Dad Poor Dad philosophy. I did what I did with how I’ve got involved with stocks. I went to my oldest brother and said, “What should I do?” He’s like, “You should buy real estate,” and I was like, “Do you have some properties? Do you want to sell anything?” It was probably the stupidest thing you could ever tell an investor like, “What do you want to sell me?”

I bought his biggest headache. It was a low-income area rental property. It was every mistake but it allowed me to quickly assess that being a small-time landlord wasn’t my definition of being passive, so I went down the rabbit hole. That’s when I’ve got into the note funds, ATM funds, life insurance policies, and crowdfunding. If you name the alternative investment somewhat related to real estate, I have done it.

During that whole process, I never gave up on my traditional stocks. I refined my process where I went from individual stock-picking to more index fund focus but the same problem kept repeating on the traditional side of my portfolio, where every income strategy that I tried failed. I tried the high dividend stocks, high utility stocks, closed-end funds, REITs, and MLPs.

What ended up happening is the same thing kept repeating. The traditional advice is those high yields will protect you in a downturn but the traditional advice was not made when algorithms controlled how things go down, so for 2 or 3 years, I would get outsized yield as I was supposed to but I was underperforming my index funds.

At the moment of a crash when those high yield stocks were supposed to hold up really well, they went down as much as the index funds. I came to the conclusion that traditional stock will never provide me the income that I want because of the liquidity. The liquidity leads to volatility, and volatility is like the kryptonite to yield, so I started looking in and re-examining my total portfolio. I was keeping the two portfolios separate where it was traditional or alternative, and then I started incorporating them and saying, “If I streamline my traditional side and put it into low-cost index funds where I don’t have to read analyst reports anymore of individual stocks, I could set it to get it but not expect any income from it.”

I like to say it’s 1% of my brainpower on the index fund, and then that allows me to spend 99% of my brainpower on the alternative investments, which require networking, due diligence, and all these different skills but there’s so much more value in applying those skills. In the stock world if you try to network with the CEOs, you might go to jail for insider trading but in the alternative space, that networking pays off a hundred X. That has been my journey. It wasn’t fast. I’m approaching twenty years on the traditional side since 2012 and on the alternative side, maybe another ten years or so. That’s how I have merged those two, and they work really well together for me.

That’s interesting, especially since you’ve got started so young. That’s fantastic. Coming out of high school and early in college, I was interested in the stock market. I stuck with it for 30 years before I found the passive and the real estate, so you are way ahead of the game. You said now, you are in index funds, and then everything else is real estate or real asset related. Most people that I meet that start in the stock market, and then find passive real estate go all in.In our Left Field investors, we call alternative investing a left field, and the stock market is the right field. In our group, people are moving to the left field or already in it and you are staying in the center field. The long-winded way of asking this question is, why are you still investing in index funds or in the market at all if you have the ability and knowledge that you have on the passive real estate side?

The traditional advice is those high yields will protect you in a downturn, but it was not made when algorithms controlled how things go down.

That’s the reason why I wrote my book, The Alternative Investment Almanac. We could go into it but to more specifically answer your question why I stay center field is because I felt like the conversation has always been where the pros of one side tend to subtract and discount the pros on the other side. If I spoke to a stock person who’s in the stock world, they would say, “All alternative investments are Ponzi schemes,” and you are like, “That’s not it at all. It just requires doing more homework.” When I talk to the alternative investments, they are like, “My returns are better. I get the leverage and the tax consequences. You don’t really get that in the stock world. The pros of the stock market are not worth it for me anymore.”

What I have learned in these couple of years is that there are distinct pros in the stock market. One, it’s the ease. It’s the fact that you do get liquidity. I’m a firm believer that 100% liquidity is not great for your portfolio but to have some liquidity, there are some benefits for that to get that access. If you are all in on all private securities, good luck making maneuvers when the time is needed. There’s a certain value in the fact that there is liquidity.The other big pro for me for the traditional side is that most Americans, when they earn in the stimulus money, and they say, “I want to invest,” they are not going to take that $1,200 check, and they are not going to put that in the private security. What they are going to do is go into their Robinhood app or something else, and put it in the stock market. One way or another, I want to benefit from the flow of cashflow. Where does it flow first most of the time? It is the stock market.

The other biggest pro that people that go all-in on the alternative investment side is less minimize the benefits of the track record of the stock market. If you look at the Dow S&P, it has an average of 8% annualized return. Im a firm believer that if you have your private securities making up a portion of your portfolio, it will be 100 times easier to keep your emotions in check because the private securities aren’t tanking like your stock portfolio is.

If you could keep your emotion in check, realize that the cashflow does usually flow to the stock market first and that there’s a track record of almost 100 years, those are hard pros to argue against. Its biggest con for me was the yield. A good low-cost index fund that will yield you 1% to 2%. Good luck retiring on that. That’s clearly not the answer to that question. The answer to the income question is alternative investments but the income to a pretty streamlined approach, and I’m not talking about stock-picking and trading options or all these complicated things. I’m talking about a very simplified and traditional approach to get that access to that cashflow and some liquidity. You then focus on the alternative sides with the rest.

That’s a really interesting approach, and I haven’t heard anyone do it that way before. Everybody has to find their comfort zone. For me, what I liked about what you said is the liquidity because the alternative space liquidity is a problem. In our group, we talked a lot about cash drag and where you put your liquid money. If you are just doing index funds, that might be a smart place to do it. Where I would get a little nervous is the volatility of the stock market because it’s up and down, and you really have no control or knowledge of when that’s going to happen, so I get that.The other thing I was going to say is the yield. You don’t get any yield but I would also say that in the real estate or alternative investments if you go back many years, you are probably getting a similar yield as an index fund at 8% but it’s tax-free. It seems to me like you are diversifying. With that, you give up a little bit of return possibly, but isn’t that what diversification is about anyway?

Yes, and I will make the argument that real estate is not tax-free. It’s tax-deferred with the right planning. There are ways to defer taxes on your stocks, especially if you set and forget it with an index fund, so it’s 100% true. My point with the book and going on these podcasts is to create an end conversation. You are right. The cash drag is a huge issue, and that’s why you hear some strategies out there potentially cryptonazing private securities and to me, that’s just creating a problem with a problem. The real solution is diversifying it with assets that complement each other where you can remove some of that drag by not trying to reinvent the wheel with some of the strategies that are being proposed.

PILF 46 | Diversified Investments
The Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways

I like the strategy, and you are right. Sometimes, I do say the real estate can be tax-free, and it really is tax-deferred. If you do it correctly, in theory, you can keep deferring that forever, and then it effectively becomes tax-free but it is better to say it in the right way. I like that you have both traditional and alternative investments. You would be what we call a center fielder, and we have some others in our group who also like to stay in the market, and you had some good answers for that. Can you also talk a little bit about your group? You founded an Investment Club. What is the Investment Club?

The Investment Club is a private club. That’s me and a couple of peers that became close friends/partners. What ends up happening is the biggest cons in the private security world and why it’s so difficult sometimes to get into is the high cost of entry. There are cheaper ways to get into private real estate but most of the time, an LP syndication is around $50,000. That’s typically the minimum.

If you go in with a club, there’s 1 of 2 things. One, you have the ability to leverage everybody else’s contributions and potentially go to the operator and say, “Instead of $50,000, how about I put $150,000 in?” $150,000 doesn’t move the needle but that’s just an example. Now, your voice is slightly louder towards the operator at that point. Honestly, we tried to get in this because we just wanted to do more deals but the biggest benefit was I had certain skillsets. I’m a great networker. I love finding and vetting operators but I’m not the most with fine details when it comes to underwriting.

By being in an Investment Club, there are certain people that their skillsets are going to jump out at you right away, and then you could leverage their skillset where I could propose a deal but the way our Investment Club is structured, the other two members have to greenline it. I have to, A) Pitch it to my group, and then B) I have to defend it like a thesis statement type of thing. At first, I was like, “This is a little annoying.” I wanted to be like, “This is a good deal. Let’s do it,” but then getting that habit of talking it out, you realize, “Maybe you are right. That is a negative deal.”

One of the people in my Investment Club, we call him the no man. He’s the guy that says no to everything, and when he says yes, you are like, “We’ve got ourselves a good deal,” and you need that. That’s what an Investment Club does. It allows you to leverage your individual skills. We had a tech guy in the club, and without him, I probably would have never invested in a startup. By having his expertise and knowledge, I felt 100% okay with investing.

At the end of the day, I think it expedited the learning curve, where if I was on my own, I would be at 2 or 3 deals as an LP now but instead, we are at ten plus just from the Investment Club. That allows us to check out different markets, different operators, learning the variables that are important and the variables that are not so important that get marketed heavily. That’s what an Investment Club allows you to do. I know you run a great investment club. I see the emails from you.

In the stock world, if you try to network with the CEOs, you might go to jail for insider trading. In the alternative space, that networking pays off a 100X.

Also, the education part. I teach my partners stuff, they teach me stuff, and it works really well. One last nuance I will throw about investment clubs is if you are going to do your own private investment club and not join someone else’s, you have to be very careful. If you co-invest and you co-invest with people in your club, you’ve got to keep that club smaller because if you do a larger amount of people and one person is not actively involved, and you are commingling your funds, you have created security.

This was a real eye-awakening moment for me a couple of years back when we did it. If you are commingling the funds and you are all deciding on what to do and vetting the deal together, that’s completely fine but if one person goes on vacation and tells the other two, “I want you to manage it for me. I completely trust you,” that’s great. Now, he switched from active to passive, and you need a PPM. There are some little nuances with investment clubs that you should be aware of.

One clear answer is I’ve got lucky with my partners. The other more non-lucky answer is that I started networking extremely aggressively at a certain point. When I stumbled onto apartment buildings, syndications, and this whole alternative investment community, I was under the impression that I could convert my family and friends that I have been around for years to that.What ends up happening is you come off as like a shoe or encyclopedia salesman. You are trying to pitch all these benefits, and they were like, “Did you watch the game last night?” You realize you were having the conversation with the wrong people. They are childhood friends and everything is great but the problem is they are just not interested in that.

The first step was to find people who were interested in that. How I found one of my partners was, I was at an investor presentation for a winery, and it was syndication. We were there listening to the pitch. My partner, Matt Canning, was asking the operator good questions. There were certain quality questions that were being asked and layups where this person may have never invested in their life. I really respected Matt’s questions. On the flip side, it turns out Matt was listening to my questions, and he was appreciating the questions.

There was a series of questions where we piggybacked off each other. It got to the point where the operator realized that the questions went down a rabbit hole that wasn’t appropriate for an introductory investor presentation, and it was because of me and Matt. He said, “You two stay behind, and I will give you guys a one-on-one deep dive on this deal. This way, the people who don’t want that much information can go and enjoy their dinner and the drinks at the bar.” It’s because there are a lot of investors who do not want that much information. “We will sit down with an Excel sheet, and deep dive into it.” Afterward, we came up to each other. We never ever met before. We said, “What’s your background? What’s my background? It’s nice to meet you. Let’s exchange emails.”

In the course of 2 or 3 months, we ended up almost emailing each other weekly. I did not invest at that time, and he did. It was almost like the early innings of what the Investment Club. Later on, would be where I was giving him my reasons why I’m not investing, and he was giving me his reasons why he was. That engagement in conversation was the prelude to the Investment Club. I call it the dating period.Once you create an LLC with someone or co-invest with someone, you are practically married to them. That dating, you should not rush into it just because you could see like, “This is going to be so great because of this and this.” It should be months unless you are joining an existing investor network but in terms of starting your own, you need to get to know that person on a granular level, I will say, and talk about different investment philosophies.

The other thing that attracted me to someone like Matt was his tech background. I was way more into the real estate portion of the deal and he was way more into the systems or the team that was in place because that stuff is much more important to him in his world. You don’t want to start an investment club with someone like you. You want that difference of opinion.Our third member was also someone that I worked with, and he was the IT person for my organization. It was 9 to 18 months from the time we started talking to the time that we pulled together our funds, and we did operate them. It was not something like, “I had a blind date with an investor, and now we are doing this Investment Club together.”

PILF 46 | Diversified Investments
Diversified Investments: If you could keep your emotion in check, realize that the cashflow usually flow to the stock market first. There’s a track record of almost 100 years, and those are hard pros to argue against.

 

I liked the way you said that because syndication investing on their own, we talked about this earlier, are very illiquid, and they are long-term investments. You can’t get out of them. If you go ahead and put that into an LLC where you are investing with other people, that adds another layer of illiquidity and difficulty to get out of.When I’m talking to people who want to join a tribe or invest together, I always say, “There’s this period where you are dating but as soon as you sign that LLC agreement and submit funds, now you are married. It’s very difficult to get out of that, so make sure that that’s something you want to do.” Your Investment Club is very much aligned with what we have been doing through using Tribevest. The only difference is Tribevest is a platform that makes some of that stuff easier. You mentioned in the open that you have SIH Capital Group. Can you talk about that? What does SIH do, and what’s the whole process there?

SIH Capital Group is my private equity fund. What I realized in the twenty years of investing in stocks was I couldn’t figure out the income equation. What I wanted was in the liquid REIT, it had a better yield and that wasn’t publicly traded. I realized that there are not many options out there that allow for a more accessible version. Our investment minimum is only $10,000 versus the typical standard out there.

To simplify it, where a lot of investors, especially newer accredited investors, don’t know the difference between a pref and a cash-on-cash, so what ends up happening is they will sign up to a deal expecting a certain amount of cashflow, and that cashflow is not going to kick in until year three. I call the first two years the cashflow drag years. I had this product in mind that I had been looking for all those years.

Once I saw the success of the Investment Club and the alternative investments, I realized that when there’s a product out there that you can’t find and that you are looking for, most likely, someone else might be looking for. That’s where SIH Capital Group was born. It was the success of the Investment Club. It took a step further.

I realized that if we leveraged our knowledge in different alternative investments and you don’t just focus on apartment buildings even though the apartment buildings are the core. If you blended with other asset classes like note funds, mobile home parks, and self-storages, you can get a well-diversified fund that’s specifically geared to providing a higher income from day one. The negative on that is that there are no backends. There’s no nothing. It’s a fixed pref but that pref is paid from day one because I’m not just invested in apartment buildings. That’s SIH Capital Group in a nutshell.

Now, we only have the income fund. We do also allow our email list to invest alongside us on deals that we GP on. If you want the higher total returns, then you would invest individually in that specific deal. We make it very clear that the fund that we are in has access to close to 96 properties providing that yield with a heavy dose of the reserve because the fund was opened up in January 2021. What I wanted investors to do is if they wanted that fixed income, we pay 7% on our fund. They could sign up for the income fund, set it and forget it.

If you want the added total returns, then you could invest alongside us on some of the deals that we are investing inside because we are already vetting it, and we are on the GP team on some of them. That’s the way I structured it. My hope in the next couple of years is to not only do the income fund but to have a series of different low-costs.

Real estate is not tax-free. It’s tax-deferred with the right planning.

Even though there’s no backend, it’s a clean seven from day one because we don’t charge management fees on any of our funds. We wanted it to be much more accessible. It’s only a $10,000 minimum. It’s a different product but it is a 506(c) product out there. I wanted to clarify that our income fund is only available for accredited investors.

Just so I understand, when you say there’s no backend, that means the 7% is the 7%, and there’s no true upside, and is that why you would invest separately alongside you in some individual deals if you want the appreciation and the upside on end?

Yes, 100%.

You mentioned it but can you explain the pref and the cash-on-cash return?

I will put apartment building. A typical apartment building syndication these days, especially one in a market that’s hot, at this point, there are costs associated with buying the property starting to implement the business plan. There is the cost of ramping up the business plan to get those higher rents that usually these apartment building syndications are having. What ends up happening is in the first year or two, you see much lower cash-on-cash. Cash-on-cash is what’s distributed to the investments based on your initial investment versus a pref.

A pref is a protection for the limited investors in the deal before the profit is split with the general partnership. The problem is people see pref, and they all automatically think that it’s cash-on-cash but it’s not. What ends up happening is you’re in this deal, and you realize, “I’m getting distributions, and it’s only 1.5%, 2% or 3% but I was promised 7%,” and then you contact the operator and they say, “The pref is not the cash-on-cash.” The pref is protection there for the investors for a certain amount of profits. The cash-on-cash is what the investors are seeing.In my income fund, I’ve got it where the pref matches the cash-on-cash, and for whatever reason, we can’t pay the full cash-on-cash, then the pref kicks in but it’s a much different product than what’s pitched out there. The pref usually is higher than the cash-on-cash, so that number is thrown out on the marketing documents, and that’s the number that’s like, “This is a 9% or an 8% pref but when is it going to payday?” It’s going to take years.

If you invest in an asset that has a preferred return to the pref and it’s 7%, they have to pay you 7% before they pay themselves. With the example you gave, they pay 1.5% in the first couple of years. They have to make that up on the backend. You are not getting the 7% every year but over time, they pay that back. Is that correct?

I don’t want to say 100%. I would say 99% because there are certain prefs if the language dictates it in the offering documents that do not roll over, and they are only annualized. That’s pretty misleading out there. I’m not a big fan of it. I would not in any shape or form ever invest with an operator like that because what that means is, as you said, if you had 1.5% for a year or two, you have a lot of pref that then gets stored up where you are owed that money. If yours doesn’t roll over, that means it’s just for that year, and then it resets well. If he hits the 7% next year, then you are not getting back the return that you were expecting. It’s not 100% always the case but usually, pref is rolled over for the life of the deal.

PILF 46 | Diversified Investments
Diversified Investments: If you leverage your knowledge in different alternative investments and don’t just focus on apartment buildings, you can get a well-diversified fund that’s specifically geared to providing a higher income from day one.

 

That’s why it’s so important to understand the terms of the deal that you are working on and have a good relationship with the sponsor. I understand that you are a GP on some deals, and other deals that you are investing in the fund, you are not a GP. Can you talk about how you vet a sponsor and what kind of things you are looking for when you are trying to find someone to put your money in and your fund’s money? How do you make sure you are working with someone that’s a high-quality operator?

I wouldn’t say magic sauce but the operator is probably the most important in our space. A couple of my mentors would say, “A good mentor could make a bad deal work, and a bad operator can take the best deal and tank it.” They used different terms not so eloquently. I have an established operator list, so it’s a little bit different these days but when I was starting out, I made a mistake at first of reaching out to operators. What I ended up realizing that worked so much better was to build out your network first.

In my book, I talk about a three-step process. The first step I have is to learn the basics of the language, and the easiest way to do that is by going to your LinkedIn account and putting in real estate investors underneath your profile. You will get spammed with so many fifteen-minute calls that your head will spin. Those calls are not for you to build up your network.

Those calls are for you to build up your understanding of real estate terms because they have their own very distinct language, so when you get on those calls, and you are talking to these newer operators, insurance brokers, mortgage insurance guys, jot down what you don’t understand. Once you have a couple of conversations where there are no more new terms, then you are ready for the second step.

The second step is to go out there and network, not with operators but with other limited partners or other investors who have a passive focus. That’s something your investment community can cut that process down significantly because now you are talking to people who are in 3, 2, 4 or 5 deals, and what you are listening to is what markets they are investing in.

How is a certain operator now? You usually sign NDAs with a lot of these operators but a lot of times, if you could get to know a fellow investor after months of talking and sharing about what is going on with you, there comes a natural period where there’s open, honest dialogue. It’s not something that happens on day one.

Once you get that dialogue going, that’s when you are going to start hearing certain operators that you should start reaching out to because they already went through vetting. They already went through this natural course. No limited partner that I have ever met has ever recommended me an operator that they are going through that the numbers are not performing. It’s common etiquette. You are not going to be like, “This guy hasn’t paid out for three years. You should invest in his next deal.” Those are my metrics in finding operators. That’s how I built my operator list.

A great place to network with other limited investors if you are not going to join a community like your Left Field community is to go to a conference. At that conference, you want to look at who the speakers are. You want speakers that are operators because that’s where the other limited partners are going to go there. You shouldn’t be going to a wholesaling or single-family rental conference.

Once you create an LLC with someone or co-invest with someone, you are practically married to them.

You need to go to a syndication conference, and you will see it by the operators. If the operators are syndicators, then all of a sudden, you are going to be able to network with other people, and that’s my process. For all the newer investors, you should learn the language, then you should spend the time to build out the network, and then only then, you should be reaching out to operators.

That’s why it helps with the traditional side of having 1% of my brainpower because all of this stuff takes time but the good news is that you do it once you have built up that language. You don’t have to re-learn the language. You can stop taking those fifteen-minute calls. Now, you move on to the second step. You only need to build out your network once. You only need, I would say, 5 to 10 high-quality, other limited partner investors that are actively investing to get a good sense of a collective mindset of what’s working, which are the best operators. Does that answer your question? I may have gone off on a little bit of tangent.

That was phenomenal. You nailed it. The first part, get the lingo. That’s easy. You gave a great way to do it. There are a million ways you could do it but I like yours. If you don’t want to talk to a bunch of people, you could also listen to a million podcasts. You are going to get a lot of that in there but the most powerful thing that you said, and the thing that I hope everyone understands, is networking with other investors to get referrals so you can find other sponsors. That is the key.

With minor exceptions, I have decided that I’m only going to invest with sponsors who are referred to me by somebody that I already know, like and trust. That’s my new approach to screening sponsors, and yours takes it a step further where you are purposefully networking with other investors so that you can share sponsor knowledge with them because you are right. Who’s going to recommend a sponsor that they have had a bad experience with? No one. In fact, they will warn you away from those and give you the good one. That nailed it right there.

The whole reason you develop a community and a network is to find sponsors that are high-quality sponsors because there are millions of sponsors out there. They have podcasts. Some of them are excellent marketers, and some of them are probably pretty good operators. If you are an excellent marketer and you are not a good operator, I don’t want to invest with you. I can’t echo enough that your way of screening for sponsors is fantastic. I love it. That’s really good advice.

I want to throw it out there, and this is a critical point. The main reason why you learn the language before the networking step is because when you start networking with other people, if you don’t know the language of real estate, you are going to come off as like, “Help me,” versus what you are trying to do is build a network of peers.That is why you have to learn the language first because it’s going to come off like you are asking for a whole bunch of coaching. Other LP investors who have done a few deals, 5 or 6 are not looking to become someone’s free coach. What they are looking for is a person they can share knowledge with because they can share knowledge back. I skipped it. While you were at the end, I was like, “I should mention that,” so I want to get that in there.

PILF 46 | Diversified Investments
Diversified Investments: When you start networking with other people, if you don’t know the language of real estate, you are going to come off as like, “Help me,” versus building a network of peers.

 

Again, that’s great advice. You are right. I always talk about community because I think that’s the most important part, and it doesn’t have to be Left Field Investors. It could be any community but if you dip your toe into a community, start reading the message boards and learning the terms and the vocabulary. You start interacting with people, then people are going to want to connect with you because you are all on the same level. That’s super powerful advice. I love it.I can’t thank you enough for sharing that because it is two components, and you need to do both. If you are just doing one, you are not going to get the results that you are hoping for. The last question I ask on the show is, what’s a great podcast that you listen to related to real estate, syndications or anything? You can give me a couple if you want.

I will throw one out there. It’s Elevate by Tyler Chesser. What I love about him is that he decided to brand it not from the point of like, “I’m just going to talk about syndication investments.” What he does well is he will bring on guests where it’s a neuroscientist, and it’s a good neuroscientist. They will give a couple of tips that help you sleep better and they were like, “If you sleep better, you could become a better investor.” He’s got a Tim Ferriss type of approach where he’s taking in best practices and how you could apply that to your life, and then he usually will relate that to syndications, so I like his podcast.

I like Taylor Loht’s Passive Wealth Strategies for Busy Professionals. I have personally known Taylor for a few years. I met him at a conference, and he was probably part of my original group of investors like the way I described it. At first, I started listening to his podcasts as a courtesy but then I was like, “This is good. You’ve got really good people coming on.” I have been listening for a couple of years. Taylor and Tyler had me on, so it’s cool to go from being just a pure listener to starting to be on some of these podcasts but Taylor has a great podcast.

The usual is the best evers. I feel like the daily ones sometimes are too short. I don’t like to tune in for 20 or 30 minutes. I want an hour of knowledge. I want to get into some cool stuff. I don’t want the basics on, “I found real estate. It’s awesome. Everybody should do it,” and that’s the end of the podcast. I also had this knack where for a couple of months while I was building out my network, every podcast that I enjoyed, I reached out to the host and the guests. Every single one, and it’s so easy.The guests are usually thrilled because that’s the whole point of them going on. I ended up having a much larger network from that, and I can’t do that if the podcast is fifteen minutes. I’m like, “Why am I reaching out to you?” I want to be able to reach out where I’m like, “I really liked what you had to say about this and that, and let’s further the conversation,” so I like the longer ones. I like at least 30 minutes to an hour. I think COVID slowed my podcast. I used to probably listen to two a day. Now, I’m on to 2 or 3 a week because I’m not communing as much. Those are little things that will throw out there about podcasting.

As getting in touch with people who have been on the show, how can our audience get in touch with you? Also, please include the name of your book and where we can get that.

This is a handful. I’ve got to take a deep breath. My book is called Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways. The best place to get that is on Amazon. I think that’s how I found myself on your show where one of your partners at Left Field read my book. We were at an investor dinner, and he came up to me. He’s like, “Did you write this book?” I was like, “Wow.” That was one of the coolest moments of my life to get that, and apparently, I stole his idea. He said that he wanted to write the exact same course of the book.

A good mentor could make a bad deal work, and a bad operator can take the best deal and tank it.

The book Alternative Investment Almanac is found on Amazon. Search Denis Shapiro. My first name is with one n, and there’s a whole story behind that. The book is about nine asset classes. It’s a book that I wanted to give a high-level intro to an asset class without going 300 pages into it, so you don’t have to read 300 pages to learn that, “I like apartment buildings or I like ATM funds.” It’s a quick snapshot, and then it gets into the Q&As, and that’s my favorite part.

For every asset class, I’ve got everybody from my network that I really respect. They came on and answered the exact same questions, so it’s cool from an investor perspective to see how a famous apartment building operator answers these questions, and then how a note investor answers questions, and then a mobile home park operator.

The combination is you read 20 or 30 pages. If you like what you are reading, you’ve got two great operators to reach out to. Most of them have their own podcasts, and you could go down that rabbit hole, and if you don’t, great. You probably spent 30 minutes to find out that you are not interested in a whole asset class, and now, you could switch to a different asset class, which is the next chapter. That’s my book in a nutshell. The best place to reach me is SIHCapitalGroup.com. If you go on it, I have two abridged versions of my book, so I did an abridged version for the actual content, and then I did an abridged version for the actual Q&As. You can download both of them for free on my website.

That was Steve Sue. He recommended the book, and he recommended you to me as well. I bought the book, and it’s on my shelf to read, so I’m excited to dig into that. Thank you for being on the show. It has been fantastic. I enjoyed it, and we will talk soon.

Thanks.

 

Important Links:

 

About Denis Shapiro

PILF 46 | Diversified InvestmentsSIH Capital Group is an ideal fit for an investor who values capital preservation and steady income versus risky appreciation.

Denis Shapiro began investing in Real Estate in 2012 by purchasing a single family in a low income area. He learned what every landlord learns – its tough. In the last seven years, Denis has evolved from owning a single family rental to investing in multi million dollar apartment buildings, mobile home parks, and note funds. Throughout the journey, he learned that it’s better to partner with rock star operators than tackling everything on your own.

Real estate is known as the ultimate wealth creator. Now, let Denis show you how an alternative income fund can be the ultimate cash generator. Please visit www.sihcapitalgroup.com.


 

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