TGCI 160: Diversifying across many different alternative investment

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Episode 160: Diversifying across many different alternative investment

Copy of EP #18 - 2 Guests

Summary

In today’s show, Pancham interviews Denis Shapiro – co-founder of 3LM Investment Club, managing partner of SIH Capital Group, LLC, and author of The Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways.

When Denis first invested in a single-family rental, he had the worst experience possible but still wanted to create passive income and be able to build his portfolio. So, he had tried out various investing strategies and options – note and ATM funds, mobile home parks, life insurance policies, tech start-ups, and short-term rentals are only some of the alternative assets he has invested in!

His journey was certainly not an overnight success. Find out how Denis made it all possible with the help of networking, performing his due diligence, and acquiring every knowledge he can get to be a better investor! Learn the different opportunities in investing, insights from being in the industry for almost a decade, and more throughout this episode!

 

Listen and enjoy the show!

PanchamHeadshotTGCI
Pancham Gupta
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Denis Shapiro

Tune in to this show and enjoy!

Copy of Quote #00 - 1 Guest

Timestamped Shownotes:

  • 0:42 – Pancham introduces Denis to the show
  • 1:55 – On starting his career through different alternative investments
  • 9:29 – His learning process that helped with his venture’s success
  • 13:42 – The one thing that the F.I.R.E. movement overlooked on
  • 20:11 – Misconceptions to look out for when investing in syndications
  • 23:15 – Learning the language of investing to get a headstart when networking
  • 27:01 – Factors to look at when market prices are at all-time highs
  • 31:32 – Taking the Leap Round
  • 31:32 – His 1st investment outside of Wall Street (at 14 yrs old!)
  • 31:59 – Overcoming his fears when he first started investing
  • 32:41 – How his apartment and crowdfunding didn’t work as expected
  • 35:22 – Why investors should value education and learn from deals everyday
  • 37:09 – Key insights from his book and where to get a copy of them

3 Key Points:

  1. Networking with other investors is a powerful tool in order to understand investing better as you can be able to learn more such as its terms and process.
  2. Find your “why” and your purpose so that you’ll enjoy your journey even if you’ve already achieved financial independence.
  3. There would be a lot of good and bad operators when investing. As investors, one of our roles is two be able to differentiate the two.

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Read Full Transcript

 

Welcome to The Gold Collar Investor Podcast with your host, Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host, Pancham Gupta



Hi, this is Tom Burns, author of Why Doctors Don’t Get Rich. You’re listening to The Gold Collar Investor Podcast with Pancham Gupta.

 

Pancham Gupta  Welcome to The Gold Collar Investor Podcast. This is your host, Pancham. Really appreciate you for tuning in today. I have an amazing show for you. My guest, Denis Shapiro has an amazing story to share with you. He started investing in real estate in 2012 when the market was just beginning to recover from the global financial crisis. He built a cash flowing portfolio including many alternative asset classes such as note, ATM funds, mobile home parks, life insurance policies, tech startups, industrial properties, short term rentals, and more. He co-founded an investment club for accredited investors in 2019. Following the success of his club, he launched SIH Capital Group, which provides accredited investors with a simplified strategy to invest for passive income. Hey, Denis, welcome to the show. 

 

Denis Shapiro  Hey, Pancham. Thanks for having me. 

 

Pancham Gupta  Super excited for the show today because you are one person I know that I saw from your bio, and we got entities from a common friend that you are big into alternative investments and that’s what I focus on the show. So, I thought it would be a perfect show for listeners. Before we get started, are you ready to fire up my listener break out of Wall Street investments?  Yeah, let’s do this.  I’m super excited.  So, Dennis, tell our listeners about your background, and more importantly, the person behind that background.

 

Denis Shapiro  Yeah, so I started investing in 2004. I was 14 years old, I got a copy of Rich Dad, Poor Dad from my oldest brother, who’s about eight years ahead of me, and we come from a family where if we find something good, we kind of brainwash the other people into believing your side of it. It’s like you almost take offense if they don’t do what you just did. So, I read the copy. I actually didn’t really like the book, I thought it was kind of like a scam, like he was getting more publicity and he’ll make more money from his booking tours. I was very cynical. I was a 14 year old. I didn’t really know any better. But I did actually went and purchased my first mutual fund at that time. Oh, it was from my own part time job. I had a Scottrade account, my oldest brother helped me open up a Scottrade account. And I remember I paid $7 for the trade. This is how old I’m dating myself because this is actually a time when you actually paid for trades. So, I remember I purchased it, I waited a whole year. And then I kind of got frustrated, I was like wow, this is not really moving. I was gonna be rich at the end of that first year. And I was like, you know, there’s gotta be a better way. Then I went down the rabbit hole that a lot of traditional investors go from mutual funds to individually stopping stock picking and trying out different strategies and options and everything under the sun. And I was going to college and my intention was I was going to Brook college and Manhattan, which is a very geared towards like stocks and equities. And I went right into the smack in the middle of the global financial crisis where I was interviewing for an internship. And by the time I got to the second or third round, the company was like no longer in business. So, I had to, I had to pivot at that point. And I went for my straight through for my graduate. And when I was in my MBA program, I got recruited by the government. So, I started working for the government. And when I got my first paycheck, I realized that they were not only my employer, they’re also my business partner with the amount of taxes that were taken out. And that’s what actually got me started into alternative investments. I kind of googled, you know, what’s the best ways to avoid taxes legally. And of course, investing in real estate came about so I bought my first single family rental at that point, I bought that before even my own primary home, I believe it was 22 at the time, and I had maybe the worst experience possible. It was a low income area, just every mistake known to man, I probably did. And I just knew one thing. I was like, I don’t want to scale this, but I need alternative investments. So where do I go from there? And when I started really looking into them, I found that there were so many more passive options where you’re not being a landlord. And that’s when I kind of got into note funds. And I got into ATMs and life insurance policies and startups and just kind of opened up a whole can of different types of alternative assets that I felt complimented my traditional portfolio really, really well. 

 

Pancham Gupta  Great. So yeah, a lot to unpack there, but I’ll tell you I had a Scottrade account, and I do remember that it got bought over by, I believe a live.com. And before that TradeKing, because I had to migrate all those trades from one to the other so cool. So, Denis, like, you know, you did that one renter and you thought, you know, that was a pain in the butt, right? And then you actually started looking into alternative space. And you said that you did industrial tech startups, life insurance policies, mobile, home parks, in funds. That’s a lot, right? If someone’s listening, they’re like, when’s you know, you started with a single family home and that was such a pain. And now suddenly, you’re talking about these massive asset classes, which, like, how did you do that? Like, how did you get over from get from, you know, bad experience and single family to so many different asset classes and how did you go about learning about them? Got it.  So, this is actually great. You know, they say that it’s not an overnight success, but it’s like 15 years or 10, nine years in your case. So even though it’s nine years, like I would have a follow up there that it takes a lot to kind of learn about an asset class. So, are you actively managing these different kinds of investments? For example, ATM machines, or are you more like collaborating with operators who are spending their time and you get them out and met a team and then work with them and invest with them?

 

Denis Shapiro  That’s a great question. So, one thing I just want to give a time reference was that this was nine years in the process. So, it’s easy to say, then I did this, and then I did this. But in between those, then I did, this was like 12 months at a time type of thing. So, I, originally, once I got into real estate, I started networking with a lot of real estate investors, and a lot of real estate investors were also into a lot of other stuff. It’s kind of like this, almost like a cult where once you get in, and you’re like, hey, I invested in this project, that’s really cool. By the way, did you ever look at self-storage or mobile home parks, and you’d always have these conversations, I remember, when I first got into the whole concept of networking, I would have like a 30 minute call set up with another investor and that call would go for two hours easily. And during that call, we would start with what we actually made the intro call for, but then we just go into so many different channel tangents. So, it was definitely a learning process. This was definitely not an overnight success type of situation, given just for reference, I’ve invested since 2005. So, I have almost, you know, 90, no, actually, even earlier than 2005, I was reading college. So, I’ve been investing in stocks for almost 20 years. And I’ve been investing in alternative investments for 10 years. So that definitely nothing happened overnight. So, what I realized during my 20 years in the traditional space is I was having a really difficult time of getting income from my traditional portfolio. So, a lot of times, usually, they kind of say like, well, you want to do 60-40, portfolio, stocks and bonds. And then there’s dividend high paying dividend stocks. And then there’s rates and mlps. And there’s all these solutions in the traditional world. And what ended up happening is, every time I tried to diversify from like a plain old index fund out, I end up underperforming, and then all the extra yield that I would get from all these strategies and quotation marks, I would lose on the first market correction. And then even though like the rules are that if you have high yielding stocks, then they will weather the storm better, because the high yield is supposed to protect them. And that’s not always the case, I actually found out all my strategies that never worked out like that I just would lose, I would lose all that extra yield in days or, or like a month. And what I realized was, it was really simple, because the stock market has unlimited liquidity, it also has a limited volatility, and volatility absolutely destroys yield. So as long as I realized that I knew that the traditional side of my portfolio was really good at long term appreciation, as long as I don’t panic, and low cost index fund and then set it and forget it. But then I could spend the rest of my time on the alternative side. And that alternative side, that’s where you need to network, you need to pick up certain due diligence skills. But that’s the time that you free up from simplifying your traditional life, where you can really kind of leverage on the alternative side. And that’s how I kind of really scaled into a lot of different alternative investments. Because I started spending a lot more time I stopped reading, the analyst reports for 30 stock portfolio, because hey, I have it in the index fund, I don’t need to really keep up on the individual positions. Now I have all this extra time where instead of reading an analyst report, I’m gonna network my butt off, I’m gonna get into as many calls as possible, I want to learn from all these people who are doing this. And once I kind of got into that rabbit hole, it kind of quickly escalated really, really quick.  So that’s a great question. So originally, I was only as an investor, I was called what’s a limited part are usually in a private security general partner, there’s limited partner, I was really on the limited partner side, I started building up a couple of my own deals mean invested as a limited partner on a few of my own deals, it started working out really well. And then what I did was I founded an investment club with two out of partners a mine. And when we did that, we were able to go from like three deals, because a lot of times, I’m sure your listeners know private securities are very expensive, they have a high minimum buy in. So, by being able to leverage to other people with different backgrounds, but they’re all accredited, we were able to leverage our experience. And instead of doing three deals, we did 12 deals, and we got to see the seasoning period, we got to see which variables were really effective for which operators, we kind of got to filter out kind of apply the 80-20 rule and say, you know, these are the best operators, these operators that are not so good. And that learning process is what took me from being a limited partner and to being potentially a general partner. So, what ended up happening is, because of the success of the investment club, a few years down the line, again, not overnight, a few years down the line, I ended up founding SIH Capital Group, which is an income fund for accredited investors who are looking for a yield and to lower the volatility. It’s basically it’s the product that I was looking at for those 20 years, when I was trying to go through all these different traditional strategies for extra yield, I was looking for, like a read that’s not publicly traded. And that’s kind of what I created. Now, in addition to that is as your network grows, you get presented opportunities, and there are opportunities that I get to be on the general partnership side of it. And those I also offer to my investors as well. So, it’s kind of like two sides of it. But it was a long process to get there. I’m not like one of those people who, you know, they signed up to like a coaching program, like two weeks ago, and now they’re closing in on $30 million deal, great for those people. But my process was to really learn that investor side of it first. And then I have been slowly, slowly building into where I am today.

 

Pancham Gupta  That’s awesome, man. And so, this is so true. Like, as you do these things, initially, it’s really hard. It’s like, you know, this, and then as the airplane is taking off the ground, you’re burning so much fuel, but once it’s in the air, it’s not burning as much fuel and it’s like gliding. So, you’re talking about exact same thing, if anyone’s listening. That’s exactly you know, that’s the fact. Now, typically what I know a lot of people have taken where it’s very hard. And you did a great thing by creating an investment group where you kind of got a bunch of people together. That was, was it in New Jersey, where you are from our what was it a physical medium, or more like a virtual meetup?

 

Denis Shapiro  So, my partner’s it’s only two, okay, it’s a very small investment club, there’s only three of us, my two partners are actually in the PA Area. One of them is in the tech space, one of them is an IT. So, we all have kind of different backgrounds, different thing. But I would definitely say the investment club probably expedited the process by probably a decade, I would even say, from what I could have done myself, again, it could have gone the other way. And if I chose my partners poorly, they probably would have set me back a decade. But I’m not, you know, a 10 year old boy anymore. It’s been a long process and in learning how to pick partners, and a lot of time, the alternative investment space is all about how well you pick partners and exact well you can network. So, I don’t want to say fortunate. But I worked really hard and learning how to pick the right partners. And that came about really, really well with the investment club and the results paid off really well.

 

Pancham Gupta  Awesome. So, let’s switch gears. And you know, I want to ask you one question that you’ve heard of this fire movement, right? The financial independence retire early. So, what is one biggest thing that the fire movement in your opinion misses out on?

 

Denis Shapiro  So that’s a great question. So, I was a participant, I was I’m still I am I still believe in the principles. I was always very frugal. 

 

Pancham Gupta  Can you explain that for the listeners like what does that mean 

 

Denis Shapiro  So financial independence, retire early movement, basically, this this has been around for decades, but it’s been popularized. In the last I would say 10 years or so there’s been a couple of really big blogs that kind of personified the movement. Basically, a lot of people were able to take a complicated topic like retirement and simplify it to basically a formula. So, it’s basically how much you have saved, how much it’s earning, how much you spend. And if you figure that out in your savings rate, and you back test it, according to how the typical stock market performed, you should be able to withdraw about approximately 4% of your investment. So, if you could basically get to 25 times your expenses, then in theory, you reach this fire number. I discovered this in my early 20s, probably my mid-20s. And it related to me because I was always really cheap. I was always frugal; I was always investing since I was 14. So, it just made a lot of sense to me. But then I kind of went down the rabbit hole. And I became even more frugal. And I started only focusing on this, like magic number that I had that I was like, hey, I need to get to, I forgot what the number was at the time, because it’s the post has kind of moved as I had three kids, but it was it was this number and you kind of get blinded into this tunnel vision of like, how do I get to this number sooner, and at the expense of maybe taking an extra vacation or all these different things. And what you realize is that, when I started networking with a lot of people in the movement was there was a big problem of the after, right? So, there’s this magic number, you get to this number and then what? And what ended up happening is the same cliche things were on almost everybody’s list, there was like a bucket list, there was like one travel the world and to catch up on my Netflix, queue, and three, maybe homeschool your kids. And there were these things that were on the buckles, what people didn’t realize is that they get to retirement, and then they start knocking these things off, and they go traveling, and then they come back and they’re like, okay, I kind of I’m all traveled out, eventually do that unless you really, really, really love traveling. And that’s the case, great, that’s not a problem for you. But once you get a couple of weeks of traveling, you kind of get homesick and you want to come home. And then the second thing is I go on catch up on my Netflix queue, and then you’re like you do and then there’s no more queue. And then you’re like, okay, and then the third thing is like homeschool. And then your kids, you know, you’re with your kid for three days in a row, and they’re driving you nuts. And you’re like, wow, homeschool is a terrible idea. Why did I ever sign up for it, and you know, and then you’re like, maybe I’m going to put my kids back to school. And all of a sudden, you have nothing to do because you haven’t built you know, an additional life. That was where I was really fortunate because as I started getting more and more until alternative investments, I realized, that was like a way for me, like I realized the importance of having a conversation with someone and them telling you, there really aren’t any good income options. And you can relate to that. And I started realizing that was a big, powerful why. And that became my why was instead of me looking for a number to retire, I’d rather just do something I enjoyed more, which was my Income Fund and writing a book and everything like that, but I get to still spend a lot of time with my kids. It was to, I got to enjoy the journey much more. And I probably hit the number a while ago, but it’s not even something I even look at anymore. Like I used to be extremely obsessive way.

 

Pancham Gupta  That’s a great explanation when the going from, like, it’s always the why right? A lot of people are chasing the shiny objects but at the end of the day, you have to have a purpose if you don’t have that purpose, after a while, you know, and you have to enjoy the journey and it gets very boring otherwise. So, All right, great. So, so far, like you’ve how many different kinds of asset classes you have to count like you’ve invested, and which one is your favorite.

 

Denis Shapiro  So, the favorite is much easier to find. So, the favorite is definitely apartment buildings, I definitely, that’s my core competency in terms of evaluating them. I also call that the gateway drug of like apartment buildings, because once you kind of learn about them, it’s so much easier to get into the different asset classes. So, once you learn about apartment buildings, you really can use that knowledge to be a good investor in self-storage or mobile home park, because the commercial real estate language lends itself really, really well. So, the favorite by far is apartment buildings. 

 

Pancham Gupta  Now why is that? 

 

Denis Shapiro  Why is it the favorite? Just because it was the one that I naturally was really, really good at. I’m pretty good at evaluating business plans. I’m good at underwriting, I could see if the deal is aggressive or not. It’s just it comes very natural to me. And I also think that it’s just the fact that people always need to live is such a common logical reason why do you know, invest in something, it’s such a core staple. It’s like, you know, if you’re going to invest in something, invest in the one thing people always will need, and that’s, that’s the place to live.

 

Pancham Gupta  Got it. Got it. And you said the second question is most hard to answer. So, you have tech startups, you have life insurance policies, mobile home park ATM funds, right? So, do you do tech startups still, or you’re moved away from that?

 

Denis Shapiro  I do, but like I mentioned, so in my investment club, I have someone who has a tech background, he works like an incubator type of role. So, when it comes to tech, I really go by his lead, and I’ll ask questions that make sense to me. But if he gives the green light on the deal and makes sense, then I trust his opinion, just like he’s much less than two apartment buildings. But if I give a green light on apartment buildings, he trusts my opinion, that’s part of our partnership. So, I am invested in two different tech startups. I plan on adding to them but it goes to his like council, I want to say, or we just do it through the investment club, which makes it a lot easier. And it diversifies a lot of the risk as well.

 

Pancham Gupta  Got it. Got it. Awesome. So now you’ve done so many of these different kinds of real estate related syndications and tech startups. I always wanted to invest in tech startups. But you know, it just takes too much time to evaluate them. My question for you is like, what are some of the misconceptions that people have about investing in syndications?

 

Denis Shapiro  That’s great. So, when it comes to like, this is more towards real estate, this is more of the real estate focus. One of them is just the concept of conservative on the writing. So, when you start getting into the space, you start talking to these operators, and they’ll use this term a lot conservative, and that just means that the deal can outperform their projections. But what you end up realizing is that every single deal is labeled as conservative. So, if you’re a new investor, just understand that it will take you months and maybe a year to really realize what a conservative deal is not. And most conservative deals don’t have to be labeled conservative, because it’s geared towards an investor that can understand that, well, if it’s just labeled as conservative, it’s kind of like almost like a marketing tool at that point. And you got to kind of, you know, be careful. So, the other big misconception is, it’s commonly thrown out as tax friendly. Real estate deals are tax friendly. So, you’ll hear that term so much, and I’ll get pitched tax friendly, tax friendly, tax friendly. In reality, it’s all tax deferred. And I took me, this was a huge learning curve, because you kind of need to see a couple deals exit. And that takes a couple years for that to go through for you to realize the difference between tax friendly and tax deferred. So, a lot of the best explanation I got from talking to a CPA on this is that you’re kicking the can down the bucket. So yes, you may collect certain income during a holding period, and that income will be offset because of depreciation That is true. But that depreciation does get recaptured at the sale. So, you kick you can kick, your can kick you can. And you just have to be prepared, when that can stop kicking kick, you may have to pay your taxes at that point. So, I think that’s a huge misconception out there. I think it’s marketed really, really heavy out there as tax friendly. And reality, it’s tax deferred, and what I call it like the quicksand effect, where if you invest in one syndication, and then two, three years later, you start getting those capital gains, you have to like you’re in quicksand, at that point, you’re going to be getting these schedule K’s with actual gains now. And now you have to go and do four or five different syndications to offset the gains from those two, three. So, it involves a lot of planning, and it’s not as simple as like, Oh, okay. I will never pay taxes on this money.

 

Pancham Gupta  Yeah, I think that is a great point on the second one that you know, a lot of people confuse that we talk to a lot of investors. And, yeah, it is a great tool. And yeah, you can use it, but it requires a lot of planning. Yeah, after you understand it. That’s where the very important piece of really understanding these investments is. So let me ask you this, like, you know, you have done so many different asset classes, someone is listening to you and like, oh, my God, Dennis has done so many different asset classes. I want to do that I want to learn about investing in ATM machines or real estate, multifamily building the gateway drug. So how would you? Like if someone who’s never done any syndication? They are always skeptical about investing privately, because they’re private? And it’s a big ticket item, like you said, what advice would you have for them?

 

Denis Shapiro  One is that literally, I wrote a whole book about this, the misconceptions out there on alternative investment, when I talked to people and me kind of stopped talking to my inner circle about alternative investments, because the competition will go nowhere, it’ll be like almost like, they think that these are like all Ponzi schemes and that these things are just super unsafe. In reality, they’re almost safer than the traditional side of it. But what you have to realize is that there is a whole world out there of these types of investments. Now, there are also a ton of operators and there’s a ton of bad operators and a ton of good operators. Now your job as an investor, is to learn how to tell the difference between the two and it takes time. So that’s where if you’re starting from zero, just understand that the return and risk profile for these alternate investments definitely worth the time and effort to get to know them. Now, when you do that doesn’t mean it’s like, oh, I picked up a book on alternative investments and day two on wiring out these, you know, $50,000 intervals, that’s the wrong way of doing it. But if you’re gonna spend your time if you’re gonna say like, hey, this is a meaningful I want this to be a meaningful part of my portfolio. I’m going to spend the next nine months to act really learning and that that means networking, that means maybe going to an event or two. That means you know, getting on the phone with an operator, there’s, you know, these baby steps that you could take. And once you start networking I have my process is this is you start networking on LinkedIn, by putting the words investor or real estate investor in your profile, you will get summoned with so many 15 minute requests, it’s crazy. And once you get those 15 minute quest book a couple of those times now, a lot of that time, it’s going to be very spammy, just understand that they’re probably trying to sell you something. But listen to that language, listen to the terms being used. Once you get those terms down, figure out which ones you really need to know better. Now once you actually do that, now you have your first step completed, that’s the process, I call that just learning the language, learning the lingo. Now you could go to events, now you can go to a meet up, and you can have a conversation with other investors. Because if you skip step one and just go there, what you end up doing is you’re gonna make a fool of yourself, and you’re gonna make it look like you’re asking for, like coaching and help, instead of you trying to network with peers. Because if you don’t know the language, that’s what someone’s going to assume that you’re asking them for. Because it’s gonna come off as I need help, I need help, I need help. But once you start learning the language, now you could actually network now you could actually start building up your actual coding, like your other investors that you can get honest opinions on. And once you learn how to do that, then you can actually start building a big list of operators and different alternative investments that you’re interested in. And then you can actually take the next step, which I call learning some basic underwriting skills. But it’s a process. It’s not overnight. It shouldn’t be like something like, oh, I picked up a book, this is great. I’m just gonna start wiring money, because that’s gambling. And that’s not investing at that point.

 

Pancham Gupta  That’s an amazing advice. Thank you for sharing that, Dennis. And I want to ask you one last question. Before we move on to the next part of the show, which I call taking the leap round. My question for you is, the market has been going crazy, right? Like, you know, the devaluations and whether it’s the stock market, whether it’s crypto, whether it’s real estate, you name it, pretty much all asset classes are through the roof because of all this liquidity and, you know, many factors that we won’t go into. But what’s your take? If an investor calls you today and ask you whether to invest in this market condition? What would you say to him? Like, he’s very skeptical, and he’s asking you for what your take on investing is in, let’s say, even real estate syndications, for instance, in an apartment building, given that it’s pretty much all time high. 

 

Denis Shapiro  So, you’re absolutely right. everything under the sun is at all-time highs right now, literally everything under the sun is at all-time highs, if they were probably selling the sun right now, it would be red hot. But the market still has a couple of tailwinds that are really, really, really powerful forces right now that it’s hard to dispute. One, there is a shortage of housing, like the amount of renter’s in this country has increased substantially. And the amount of new supply is not matching that. So that’s a very favorable trend. The second biggest thing that newer investors should look at is what’s going on with interest rates. As long as these operators keep getting mortgages, like right now we’re looking at a deal that I’m looking to do work on, the financing sheet that we’re getting at is lower than 3% for 35 years, you know, it is very difficult to lose money, not to say that you can’t. But it gets very hard when you could borrow money at that rate for such an extended time period. So as long as those rates starting now, if the rates start trickling up, it’s a game changer. But as long as the rates are staying like this, and the deals that are locking in those rates now, for the next five 710 X amount of years, those deals are probably going to be fine, because even if they made a couple mistakes and underwriting, the financing will bail them out. However, you know, I wouldn’t be looking at deals that have bridge loans which have higher yield that are looking at six to 8% and then need a refi or a capital event in year two or three those deals I tend to stay away from right now. So that was one piece of advice that I said that the fundamentals are still really strong. It’s hard to argue that it is at all-time highs. But as long as the fundamentals still stay strong, they’ll probably be good for the foreseeable future. Now the other thing I want to say is that just like you could dollar cost average in the traditional world, you can do the same, it’s just harder because the alternative space, it’s hard it’s  a dollar cost average on a $50,000 investment versus a thousand dollar investment and build out a small portfolio that way, so it is much harder but given the fact that you need to be an accredited investor you should have a net worth of over a million dollars that $50,000 Still only, you know, 5% of your potential portfolio. So, if that’s the case, and you want to allocate 25% of your, you know, portfolio to alternative assets, and I’m just throwing out a number, that’s not financial advice, let’s say you want to do 25 to 50%, into alternative investments, you know, do 5% this year, wait six to nine months to 5%. Next, you know, nine months, you could build out a portfolio, there’s no reason why you need to put everything in one shot right now. And then, you know, yes, if one of those deals goes bad, it’s not going to be a pleasant thing, but it’d be a huge learning experience. And you still have two out of four deals at different time periods in different markets, with different operators to kind of balance you out.

 

Pancham Gupta  Great. That’s awesome advice. Thank you for sharing that, Denis. We’ll be back after this message to move on to the second round…If you want to know the top six reasons on why you should consider diversifying outside of the Wall Street, then you are in the right place. I have written a free report for you. It goes into not just the top six reasons why investing in stocks for one case may not be the sound strategy. But also, what are the alternatives. Get your free report today on thegoldcollarinvestor.com/download. I repeat, thegoldcollarinvestor.com/download.. So then is let’s go to the second round. This is the round which I call taking the leap round ask these questions to every guest on my show. My first question for you is, when was the first time you invested outside of Wall Street? Was it that single family home you invested in, was that the one at the age of 14?

 

Denis Shapiro  No, the single family was at 22. So, it was my first mutual fund . At 22 was my first single family in a very tough low income area, I highly don’t recommend that strategy for any of your listeners.

 

Pancham Gupta  Yeah, you know, it looks very attractive on paper, but in reality, it’s not. So cool. My second question, did you have to overcome any fears to when you decided to first invest in that area where you, you know, young and like they say that stupid and young at the age of 22. And you just like, you had no fears.

 

Denis Shapiro  Definitely stupid and young. But the way I did the math was that even if the deal performed poorly, the amount that would save in taxes made the deal make sense. So, I felt like I was in a no lose situation. Still one of my worst investments ever, I should have had more fear, I should have actually done almost anything else. But it, it was a good learning experience, and it did start me on my journey with alternative investments.

 

Pancham Gupta  Got it. So, my third question for you is, I think you already answered that, which is, can you share with us one investment that did not go as expected, maybe if you can share with us the numbers or at a high level, if you can on that investment.

 

Denis Shapiro  I’ll do the high level apartment building and why it was such a bad investment. And then I’ll give another one that’s a little different. So, the high level, you know, of the apartment building is I purchased it at 85,000 in 2012. And like, eight years later, I think I sold it for like 60. And if you would have purchased any asset in 2012. Literally, you could have purchased probably fish tanks, and you probably would have done better in 2020 from your basis in 2012. So, it was definitely financially a really, really poor decision that probably set me back considerably. But another one that that definitely did not go as expected was when I got into syndications. I was like hey, you know, $50,000 minimum sounds steep. I want the whole crowdfunding route. And I found the platform and they’re like, oh, you could do these $10,000 investments. I was like, wow, that’s bad. I could build out a whole portfolio of these excellent vetted companies on this on this tech crowd platform. How can I go wrong. And what ended up happening is, they weren’t a real estate company. They were a tech company with a really nice website. And I think almost every investor in that platform was like bamboozled. They’re highly vetting. And you know, there’s forums out there, I don’t want to mention the specific name, but it’s fine. It was one of the biggest, I believe it was the second largest crowdfunding platform, and it was probably the biggest one that got shut down and it got shut down because they couldn’t get another round of VC funding. So, here’s a good Golden Rule. If anybody is your real estate investment should have nothing to do if a VC can fund the parish companies deal. Those two should not be related in any shape or form. So that was a really bad experience. I’m still in a few of those deals, but it was a nightmare. Like the whole staff got laid off, and there was no communication. There was a bunch of like almost Ponzi scheme ish operators that ended up being on the platform. It was just a really, really bad experience. Thank God I still went and ventured onto other syndications where I got the bad taste out of my mouth. But it’s definitely one of those that you get what you paid for those lower minimums. And this is, you know, advice for your investors, those lower minimums, and really fancy marketing aren’t always the best combination. Sometimes it pays to save a little bit more, and just go with a really good operator.

 

Pancham Gupta  Awesome advice. So, my last question, I think you answered that already in the previous round, which is what is one piece of advice would you give to people who are thinking of investing in main street that is outside of Wall Street.

 

Denis Shapiro  So, I’ll say this is alternative investments take education, it takes networking, it takes time, but everything builds upon itself. Like, I’ll give you an example. When I first started looking at syndications, I probably was spending 45 minutes going through an offer. I am probably at less than five minutes. Now, when I first started underwriting deals, it probably took me two hours on the right, I could probably underwrite a deal from a limited partnership side not from a general that’s different level of underwriting. But I could probably underwrite a deal in less than, you know, three to five minutes with the right software. So, what I wanted to get out there is that the world of alternative investments is very accessible. And the knowledge just builds and builds and builds and builds, where in two, three years, you will be amazed at how far you’ve come and alternative investment world. And you get to network with some of the coolest people out there. Like I’ve networked with people who have saved like 300 year old wineries. I’ve networked with people who are doing startups and all these different things, people who are entrepreneurial, and are attracted to real estate. It’s a different mindset. And those are the people who you really I personally really enjoy networking with. So that’s what I have to say that that one piece of advice is that it seems like it’s a lot. But once you actually get into it, and you just learn a little bit at every single call every single offering every single question you ask, you’ll be amazed at how quickly you build the knowledge needed to actually make a good investment.

 

Pancham Gupta  Great, awesome advice, Denis, and I want to actually ask you about that book that you mentioned during the interview, if you would be how can listeners get that book, The alternative investment handbook that you’ve written? And can you tell us more about that handbook? What would you have in that book?

 

Denis Shapiro  Yeah, absolutely. So, The Alternative Investment Almanac, Expert Insights and Building Personal Wealth in Non Traditional Ways. That’s the full name. I know it’s a handful but if you go on Amazon, it comes up on my name Denis Shapira, Dennis with one N. What I realized was when I was talking to real estate investors, I kept getting introduced to these different asset classes. And as I started investing those asset classes, I realized how many misconceptions were out there. So, what I wanted to do is I wanted to write a book that each chapter is different. So, each chapter goes to different alternative asset. So, on one chapter, you’ll get you know, high equity life insurance policy, or like infinite banking concept. And then on the next chapter, you will actually look at life insurance settlements, which has completely different asset classes. But it’s also completely different and completely diverse away from the stock market. Then on the next chapter, we looked at tech startups and then apartment buildings and mobile home parks, what I want to do is I wanted to get a book where it’s a collection of these alternative assets that are not commonly talked about, you’ll never see them advertised on CNBC. I wanted to introduce it without giving 300 pages on one asset, I wanted to maybe introduce 20 pages, 25 pages of a specific asset. And then my best part is I was able to leverage my network to get great Q and A’s on each chapter. So, if you’re reading a chapter on investing in ATM funds, I got two world renowned ATM, one ATM fund operator, one person who does ATM due diligence. And you get to see how they answer the exact same questions. And then same thing apartment buildings, you’ll get a 20 page introduction onto apartment buildings, you’ll get to know the basics, what are important variables, how our apartment buildings value, what’s the business plans, but nothing to the point where you’re reading and you’re like, oh, I you know, it’s 300 pages long. So, you get a great introduction, then you get awesome Q and A’s. And what you can do now is you can read a chapter about apartment buildings, you can reach out the mobile home parks and say you know what, apartment buildings is what I really like, I’m not going to waste any more time on the mobile home parks, but the apartment building side of it that I found curious, that’s what I really wanted to learn more about. Now you could go in and dig in, listen to more podcasts about apartment buildings, then start reading books about problems. Now you got yourself your gateway into all these different asset classes.

 

Pancham Gupta  Awesome. So how can people actually get a synopsis of it? I know there’s a handle sih@thegoldcollarinvestor.com. They can email that email and they will get in return; you said the bridge version of it or full version?

 

Denis Shapiro  So, the full version is about 300 pages that’s on Amazon. But I have two versions that I was able to take out of that book. So, since I did these great Q and A’s, I did a bridge versions of the Q and A’s, where it’s like my favorite responses to these Q and A’s, and I made like a 30, page PDF. And then same thing on the actual content. I took what I felt was the best content. So, it’s 30 pages. So, if you’re not in mood, to read about 300 pages, all these different alternative assets, it’s really a great way to read short synopsis of these different alternatives, it’ll introduce you to a couple of well known, well regarded asset classes that are not as speculative as people would like you to think they are. And if you like what you got, then you could reach out to me at SIH Capital Group or reach out to you. And you know, listen to more information about these different asset classes.

 

Pancham Gupta  Awesome. Well, thank you Denis, for your time here today. Your valid, ton of value and people if you want that book too send an email to s i h@thegoldcollarinvestor.com Thank you. Thank you, Dennis.

 

Denis Shapiro  No problem. Thanks for having me on.

 

Pancham Gupta  I hope you learn something from Denis’ story. It’s an amazing journey for him. Thank you for listening. I really appreciate you for tuning in today. Email me at p@thegold collarinvestor.com if you have any questions.  This is Pancham, signing off. Until next time, take care.



Thank you for listening to The Gold collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollar investor.com and follow us on Facebook @thegoldcollarinvestor. The information on this podcast are opinions. As always, please consult your own financial team before investing.

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