Aileen (00:01):

Welcome everyone to today’s episode of the, How Did They Do It? Real Estate podcast. We are your hosts Seyla and Aileen and today’s guests. We have our Arn Cenedella. Arn as the founder of spark investment group, helping people leverage passive real estate investments to grow their wealth, simplify their portfolios and create the lives they’ve always wanted to live. He has over 40 years of experience as a real estate broker and investor, and is currently helping investors transition into passive multifamily syndications. So welcome to the show ARN. We have a lot to discuss with you about, and I’m very happy to have you on today. How are you doing?

Arn (00:34):

Hey, great to meet you guys. Happy to talk real estate with anybody loved talking real estate investing, and hopefully your listeners can gain a little education and knowledge from this. So excited to be here. Thank you. Thank you.

Aileen (00:51):

And so you know, you have a ton of experience over 40 years of real estate, you know, and so there’s a lot of that goes behind it. So if you can please share a little bit more about your background and how you got started in real estate. That would be wonderful.

Arn (01:04):

Sure, sure. So I was kind of the typical kid grew up on the San Francisco peninsula way back when back then it wasn’t Silicon Valley, but it is Silicon Valley now. And had kind of a typical childhood college was always sort of a given. And I went to Colgate University in upstate New York for undergrad, Michigan for graduate school actually have a degree in chemistry. So not that I ever did anything with it, but during graduate school I decided, you know, kind of education and research really wasn’t my ideal. And my dad had started a real estate business in Menlo Park, California, which is next to Palo Alto. So I called my dad one day and it was about a five minute conversation. I said, hey dad, I’m kind of tired of school. I don’t think it’s really what I want to do.

Arn (02:10):

I’m going to get my master’s and kind of close it up. And he goes, well, come on out, get your real estate license and I’ll put you to work. So loaded up the car, drove from Michigan back to my home and in the Bay area and went to work for him as a residential real estate agent in 1978. And I’ve been doing it ever since. So that’s kind of how I got into it. I kind of fell into it. My dad happened to be in real estate and it turned into a great career and feel fortunate and blessed that my dad was a great mentor and kind of taught me a great industry. And I’ve had a good life as a results

Seyla (03:00):

On, thank you again for being on our show today. So how have you built up your single family rental portfolio in the last 40 years and what lessons can you share with our business?

Arn (03:14):

Sure, great question. So unlike many real estate brokers, my dad kind of understood that investing is the way to really create kind of long-term wealth. The brokerage income is great and I sold real estate in probably the greatest real estate market in the world and San Francisco peninsula. So no complaints there, but he understood investing was the way to really create lasting financial freedom insecurity. So very much an old school guy, he accumulated rental houses, one by one [Inaudible] park, Palo Alto. That’s what he did. Didn’t drive a fancy car. He invested in real estate and I kind of followed his footsteps. I didn’t know any better. He was my dad and it seemed to be going well for him. So I kind of followed and I started out like a lot of people. I bought my first house, right, 1980.

Arn (04:32):

And I remember way back when I paid 175 for the house in Palo Alto, California, it’s now 5 million, but anyway, that’s a different story. And I paid 11 and three quarters for my mortgage. Okay. 11 and three quarters. And my mortgage payment was eight 68 Oh eight. So I still remember that like kind of 30, 40 years later. So my wife and I lived in that house five and sit five or six years. And then as often is the case. We are making more money. We’re going to start a family and we wanted to maybe move to a better location, a house. Our first was a townhouse. So we moved in 1986 and we kept our original property as a rental. So that was our first rental. And then as our careers expanded and our income increased, we would save money and we would buy a rental here, we’d buy a rental here.

Arn (05:37):

Sometimes we refinance an existing rental to pull out cash to buy the next rental, or we would sometimes 10 30, one out of an appreciated rental and buy two or three more, right start from one hour, should trade into two or three more. And as time went on we invested in the Bay area, but of course the Bay area is not really a cash flow market, as you well know. And Los Angeles, it’s hard to make the numbers work. So over time we invested in other areas, Austin, Texas, Charlottesville, Virginia. And so over time we just accumulated a rental portfolio. And then back in 2014, we decided to kind of make a lifestyle change. And we moved to Greenville, South Carolina, which we love and prices are a lot cheaper here. And so we bought quite a few rentals here and, you know, so basically we have quite a few rentals, I’d say right now, maybe we have 10 or 11 properties, maybe about 20 doors, but all the rental properties have been single family or two to four units. And that’s kind of where I was until the last year. So kind of refinance 10 31 build the portfolio. So if I only own 10 or 15 houses now over 40 years, it wasn’t like I was buying 10 houses a year, but it’s done very well. They’ve appreciated. They’ve been great properties. And you know, I’m in a secure position because of it.

Aileen (07:28):

Thank you so much for sharing that ARN. So over the past 40 years or past 40 years that you’ve been doing the single family so far, has there been any one story that has stood out to you during your time in real estate so far?

Arn (07:41):

Well, there are a lot of stories, hard to cover them all, but I generally been good about selecting tenants and I generally manage the properties myself. So I don’t have any nightmare stories that many mom and pop single family landlords experience. I never had six months evictions, I think. And in 40 years I’ve maybe had to evict two or three people. So I’ve been very fortunate that way. But recently a house in Greenville, it was a Saturday afternoon or Saturday morning I was finishing up at the gym, just finished a yoga class. I was feeling very Zen. It was a beautiful, it was August 29th the day before my birthday, which is right. I remember it. So it’s about noon. I leave the yoga studio, I’m feeling great. And I go, Hey, it’d be a nice time to walk on this swamp rabbit trail, which is a trail that kind of goes through Greenville by the river, down by the waterfall.

Arn (08:53):

So I started to walk and then of a sudden my phone rings and I see my tenants, one of my tenants names show up on the phone and not only is it an audio call, it’s a FaceTime call. Okay. So general rule, if when your tenant calls you is generally not good news, right? So here I am, I’m feeling good. Just got out of yoga as beautiful day. I’m going to go for a walk. My tenant’s gone. Hey, Mary, what’s going on? Well, it turns out a new tenant was moving into the neighbouring property and they had a shared driveway. So the knuckle heads who moved or in who were driving the moving van, as they backed out of the driveway, they clipped the electrical whine and pulled down the weather vane to my house that Mary was ranting, right? Boom. So Mary calls me, she Face Times me, shows me these pictures.

Arn (10:02):

And you know, now the electrical wires on the driveway, the thing from the meter box is going like this. So it’s like, Oh, Christ it’s Saturday afternoon, my birthday weekend. And now I got to deal with this. So, so we then call Duke Energy to ask them to come out. They came out and they said, well, until you put the weather vane back up, we can’t reconnect power. I called my electrician Randall and he goes, I’m not doing anything I’ll run right over. So that was a blessing. My guy didn’t have anything to do. He was home. He ran over, put the weather vane back up, Duke came back out, connect the power. Meanwhile, I talked to the other adjoining property owner. So that’s the kind of stuff you get when you kind of manage your own rental. It just came out of the blue. Somebody driving a truck, pulls down your power and all of a sudden, your whole afternoon shifts, it all worked out good. There was really no damage. And we got to go back, go on. But it’s kind of a classic story of what can happen when you manage your own property. It’s a happy birthday.

Arn (11:17):

It was the day before my birthday. Yeah. So it was okay. She’s a great tenant. And what I always tell my tenants is, hey, if something goes on, call me right away. You’re not bothering me. If there’s a problem, I want to know. Right. Because as a property owner, you want to jump on these things and not let them mushroom. So anyway, I’ve had her as a tenant for about three, four years. She’s a great gal. I ended up talking to the adjoining property owner who lives about two blocks from me and she was great. She said, hey, if there’s any damage and there’s any cost, I’ll work it out with you. My electrician did it for nothing because I do a lot of other business with them. I do a lot of flips too. So it all worked out, but it just kind of an interesting story of what can just come by and lap you and they had when you don’t expect it.

Seyla (12:15):

And thank you so much for sharing that story before because you did mention that you also invested in multifamily as well. How did you learn about a multifamily syndication and why did you decide to transition from the single family rental portfolios into the multifamily space?

Arn (12:38):

Great question. So to back up, my dad did single family homes and then he also invested in multi-tenant office buildings. He did not do apartment buildings, but certainly I was aware of them. I took a lot of the CCIM courses. I’ve sold a few apartment buildings in my day. But then another launch story, sorry, I’m Italian. And I tend to go on. So it was the middle of March and I have a young guy who I met here in Greenville, young African-American guy who I’d met at the gym one of my first days in Greenville and we’re on the treadmill next to each other. And we started talking and we’re both in real estate. So I developed a friendship with Mario and he went from SA flipping single family homes. He’s probably thirties now probably done about three syndications and we’ve developed a friendship.

Arn (13:45):

He’s a wonderful guy. So middle of March, he calls me and goes, Hey, ARN, what do you think COVID is going to do with rent collection? And I go, Mario, I don’t know, because right back in March, the whole, the severity of the problem was coming. And I think within the apartment, community, landlord, community, and the economy as a whole, what was it all going to mean? And so we added a discussion and most of my tenants, my rents in Greenville are kind of 1,014 hundred a month, kind of young college educated people. And usually when I lose them, I lose them because they buy a house so gay. So I felt relatively secure about my tenants, Mario dealing in multifamily kind of class C more working fours. He had more concerns. And so we had a nice conversation and he goes, well, I’m going to send you, I’m going to text you a podcast from this guy who I met at some conference in Colorado. Well, it turned out it was from Neo Balboa. So you probably know, and he was talking about COVID so at that time, the gym All close and I’m kind of a fitness fanatic. So instead I rode my bike for two hours a day. And when I’d get on my bike, I’d stick in my eye, my ear buds and listen to podcasts. So I listen to Neil Bawa and then I kind of became fascinated by the whole thing. So this is mid-March, early April, and I kind of hooked up with the syndication show with Whitney Sewell best ever with Joe Fairless and Theo love the old capital guy podcasts, you know, the lenders love those guys. And so literally I consume two or three hours of podcasts a day when I was out on the trail, riding my bike. So then the other part of it was at the beginning of year, I always take a would you call it kind of a snapshot review of my real estate holdings. So, okay. I have a spreadsheet, the properties, I own what they’re were the equity loan amount, what the rain is, what my net income is. And so properties have done well. I have a lot of equity and so forth. But really the cash I was putting in my pocket honestly, was about three, three to 4% of my equity. Okay. And that’s not a lot, not that they’re bad properties, you got appreciation and they’ve done me well. But At the age of 66 I’ve always think at thought of things is a Teeter totter. There there’s always a day debate between capital appreciation and cash flow. What do you want? What’s more important? And I would argue when you’re early in your life, early in your working career, and you’re making good income, the focus should be on capital appreciation growing your net worth because at the end of the day,

Arn (17:34):

Your income in retirement, whatever that means these days, and it’s totally change is basically going to be a function of the size of your nest egg. So when you’re younger grow that nest egg, but I think as you get older and you stop working at least at a high pressure, high demand, high income job, I think the scale may start to tip where cash flow becomes more important. And so in educating myself about syndications, I was finding you could safely count on seven to 8% return on your equity with higher on the upside upon resale. And I’m making three or four. And so for me, it just made sense. Plus I also want to lessen or limit my day to day responsibilities of managing property. So for me, it’s kind of a no brainer. Let’s switch more to a cash flow, less day-to-day responsibility, and I’ve made that change. I’ve invested in four apartment syndications is a limited partner. Charlotte Simpsonville, Columbia, South Carolina, Boise, Idaho. I love being able to kind of diversify vocation. I’m kind of a class, a class B guy, but I’ve got a value C you know, a class C value add property. And so it sets up well to kind of diversify your portfolio. And so kind of what I’m doing now is I’m helping other investors make the same transition because I think it makes a lot of sense.

Seyla (19:36):

Awesome. Thank you so much for sharing your backgrounds on getting into the apartment’s indication. So you mentioned that you invested in for syndication deal so far. What is the process of bedding the sponsor that would be the right fit for you?

Arn (19:56):

That’s a great question. And there are a lot of syndication deals people can invest in. And I think at the end of the day, a lot of it comes down to trusting the operator. And so I think vetting the operator is as critical as analysing the deal. Okay. So how long is operator been in business? How many successful transactions as he had start, or she’s had start to finish? What type of deals do they do? I know some operators love that core plus high B a. I know other operators who love that values sorry. I keep saying that classy value add. And so the operators critical. A small group of LP investors and we have monthly phone calls And we get on a zoom call and we just talk, I talk to them, Joe Smith, I talked to Sally Jones and we kind of compare experiences. I’ve invested here, I’ve invested with this outfit. What’s been your experience? So there is you can kind of form groups of LPs who have invested with a variety of operators and kind of talked through and hear the good and bad. So I think that’s very positive. So when you’re out there networking with other investors, ask them who they, who have they invested with, what’s your experience. And so I think the other part of it is you have to light the market. So I would say it comes operator first, then it’s the market. Yeah. and so I would encourage everybody to kind of focus on two or three markets, whether it’s the Caroline is, or whether it’s Texas or whether it’s Arizona or whether it’s Utah and Idaho, you know, CA or the Midwest, the Midwest is great if that’s kind of what you want to do. And so you kind of got to fit it for what you want to accomplish get to know the market. Most of my investments are in the Carolinas, so I’m able to drive the properties and if it’s a two or three hour road trip, I drive them and I would encourage people if people want to invest in San Antonio, Get on the plane, spent three days in San Antonio, have some fun, right, go out, have dinner, have drinks, drive around, talk to people, kind of just get the feel for it. You don’t even necessarily have to look for a specific investment, get a sense for what’s going on in that market, in that community, in that town. And then yes, if you can put your own eyes on the property and I know a lot of investors don’t do that, but when you’re talking invest in 50 or 75 or a hundred thousand dollars, is it worth taking a weekend of your time to fly? Well, pre COVID and after golf. But right now I know it’s a little bit difficult podcasts are also a great way to get to know people. When you hear operators speaking on the phone, either what they’re saying to you make sense, right?

Arn (24:27):

With your perspective and worldview, or it doesn’t make any sense. You don’t know what this guy or gal is talking about. That’s probably not the person to, to, for you to invest with. So I think you can kind of have a residence with operators who kind of see investing the way that you do. God have a personal phone call with them, get them on the phone for 10 or 15 minutes or one of their team. You can also ask for some investor referrals. But I think kind of networking outside of that is probably a better way to do it. And for me, a lot of it just comes down to my gut sense of the person. You know, when you meet people and you talk to people, when you look at people, typically you get a sense, is this somebody being straight with me or not? Is this somebody that I trust? So I’d encourage people to rely on their gut. It’s not about the fancy Lamborghini. Okay. That, that isn’t the deal. Its more, are they going to be straight? And if their problems are they going to be upfront with you and, and kind of let you know. So I go a lot on gut instinct. And so far to date, I’ve been fairly correct. Not that I’m always correct.

Aileen (25:58):

No, that’s great advice, especially, there’s a lot of great sponsors out there. So if you have that gut feeling that this person is not the right one for you, you know, it’s okay to move on. There’s plenty of others out there. [Inaudible]

Arn (26:09):

What I’d also say is I’m moving into the syndication space as is, are you got ice? And so if I was a doctor and I had a certain specialty, I would know all the players in that specialty, right. Because I go to conferences with them and I get a sense, similarly, for folks like us, we’re interacting all the time with these sponsors, your typical investor, doesn’t have the time to do that. It’s not, they’re busy at work. They’re busy with their family. And so folks like us who are in this space and interacting with people, we’re a good resource for investors to kind of rely on because, you know, we’ve talked too many of these operators, most limited partner investors have not. So I think that’s another big part of it kind of rely on people you trust, who know the players in the industry, because there’s a thousand syndications out there and somebody grind at nine to five, isn’t going to have the time to kind of sort through all these people. So work with somebody who is bouncing up against these people all the time.

Aileen (27:38):

Thank you so much. And RN, you mentioned that you’re also getting into the active space. Can we discuss that a little bit? And why did you decide to go towards the active space and how are you doing this?

Arn (27:52):

Yeah, so that’s a great question. And so real estate has been very good to me and I have a good life because of it. I’ve invested a long time. Not that I live a fancy life, not that I live with Jet set light. That’s not what we’re in. I do, but we’re financially secure. And I enjoy real estate and I kind of have a passion for it. And I love talking to people about real estate investing. And so to back up, I got my first social security check last month. Okay. And that’s great. I worked 50 years. I finally got my first social security check. As you probably would gas, it’s only about a third of what I really need to live on, right? So people need to plan for the future and we’re all living longer. So kind of the definition of retirement is changing. And so I think most people, most knowledgeable people understand you need to keep making income, even though retirement to maintain your lifestyle. And you can make income from working, or you can make income from your investments. And if you want take a break from working, if you want to reap the benefits of working 20 or 30 years hard, the answer is you have to earn income from your investments. And so real estate syndications, a great way to do it. It’s a much better set up for regular monthly income than say the stock market. And there are tax advantages associated with real estate investing that you don’t find in the stock market. So I think real estate investing real estate syndications is a perfect way for people to generate passive income that will take pressure off them, give them time to kind of enjoy their life with family and friends, giving the community, whatever they happen to love. And so I want to help other people get there. One of my best friends here in Greenville, he’s 46 years old. He works for a major manufacturing company. He said, engineer, he manages 45 engineers all over the world has three kids, Blended family as six kids. So He’s got team in China, India. So He Told me the other day, my job is not nine to five, right? His job is off the hook. A lot of people job or off the hook, 50, 60 hours a week. You never see it, but that’s the reality. And he also flips a lot of houses. So he’s at home Depot 7:00 AM every Saturday morning and he wants to get off the treadmill. He wants to get off the hamster wheel. And so guys like Leo, I’m working with him trying to help them get to a position where his income from his investments and assets will replace his W2 income. So it’s kind of fun to do.

Arn (31:50):

The other thing is Mouldy Family is very much kind of a team sport and there’s partnership. And I love that too. I was down in Augusta, Georgia last week with a team of about eight people looking at 167 unit deal. And we worked hard during the day, but at night we are on the rooftop bar having fun. And so that, that was kind of cool. And anyway, we’ll be rolling that out soon. So anyway, that’s kind of why I’m doing it. It’s fine. I like to help people. And I think like for somebody like me, I have a lot of knowledge and experience and expertise and because I come to a certain age, what do you do? Just shut down? You know, it, it doesn’t make any sense. I’m going to live another 30 years. So I’ve got lots I can do and lots I can help. And that’s kind of where I’m at.

Seyla (32:56):

So Arn, since you invested in real state, how has real estate investing impacted your life so far?

Arn (33:05):

Well, it’s been very good to me. I would say the main thing for me personally is it’s always allowed me to have a good life work balance. And, and I understand for millions of Americans in corporate America, it’s just difficult. They grind, grind. They were a card with technology. You can never really unplug, right? So you’re always on and you have family and you have things you want to do. And, and how do you get ahead up the corporate ladder if you’re not willing to put in those extra hours, you’re probably not going to do it. I mean, that’s the only way to do it, right? So I have two sons, they’re now men 30 and 34, but when they were little for 10 years, I coached every team. They were on soccer, baseball, and basketball, so that it, you know, when you guys have kids and they started playing an YSO and literally you’ll understand your whole schedule will revolve around when they’ve got games or dance recitals or whatever.

Arn (34:29):

But through real estate investing, I was able to have the time to spend that time with them outdoors in the field playing. And so it’s provided kind of a very nice work-life balance for me. And now that I’m older, I’m secure as scary as COVID it is and how it’s going to affect the economy. I know I’m going to be okay because I’ve set it up through real estate investing. And I have money in the stock market too, but I can tell you when the market was dropping 30% back in March or April, whenever it happened, I was happy to have my rent come in. And basically I collected all my rent all the time. And I understand that’s not everybody’s case, but even when you look at multifamily, maybe rent collections are down 10%, 5%, it’s still pretty steady to, to the stock market. And so that allows one to sleep at night, knowing you still have income coming in and you have kind of a physical, tangible asset.

Seyla (35:50):

So Arn what is one thing that you know now about real estate that you wish you knew when you first started?

Arn (36:03):

Yeah, I’m not. So I’m not a guy who really looks back. I always kind of looked forward. And I believe in doing things in sequence, in building and foundation and going step by step. But all that being said, I would say what I now know about multifamily and where I’m moving my pro folio and where I’m helping other people move their portfolio. There is a lot of rationale behind scaling up sooner rather than wait or so. I’m an old school guy, take it step by step. But looking back on it now, I probably could have accomplished much more. If I had hooked on a multifamily 20 years ago, it’s not a regretted. It everything’s great, but just looking at it, I think scaling up would have made more sense. There’s definitely economies of scale when you have more right.

Arn (37:25):

Managing 20 single family houses is a lot more difficult than managing a 20 unit building, right? And when you get up over a hundred units and can kind of get onsite managing and onsite maintenance, your costs for those items go down. Most single family, people pay eight to 10% to manage, you know, for property management, for their houses in larger buildings. Maybe you’re paying two and a half and three. It doesn’t cost you a hundred dollars service call when the toilet starts to leak if you have a multifamily. So I think I would have scaled up sooner. And that’s what I’d say, but don’t get crazy. Don’t get out over your skis. Don’t get over wherever bridged real estate. So long-term gain just keep going, long-term gain. But as you get educated and feel comfortable and partner with the right folks, I think you can scale up more quickly than I did.

Seyla (38:38):

So what is one thing that sets their successful people apart in the real estate investing business?

Arn (38:47):

Good question. What I would say is just stick with it. Okay. Just stick with it in our society today, 24 seven news cycles, and apocalypse happens every three months. Okay and life is longer than that. And I think if you just stay cantered and focused, keep doing the right things, and if you do it in a proper way, not over Web Bridge, properly capitalized, you can ride out the eventual the inevitable ups and downs. So yeah, that’s kind of what I would say is just stay steady with it. Don’t make any rash decisions just based on the crisis of the day. I mean, since I’ve been in the real estate business interest rates at one point were 16 and 17% for home mortgages in the early 1980s, black Monday happened in 1987 where the stock market dropped 30% in one day in the early 1990s, we had the SNL crisis. One third of every savings and loan in America went under one-third dot com, boom.com bust the subprime crisis. The great recession great economic expansion, and now COVID, and I just kept investing all through it. And it’s been good. I think if you panic and kind of get out, you kind of hurt yourself.

Seyla (40:51):

Yep. That makes sense. So, Art techniques, have you used to improve the efficiency of your business or personal life?

Arn (41:01):

Well, I’m pretty simple. So I would say my iPhone and my iPad. Okay. So I know that’s not you know, I don’t have any grades software program or anything like that, but I think just the communication tools, the ability to kind of access information when you’re on the go, when you’re at the gym, wherever it happens to be. So without those life would be much different and you have to understand I was in business when fax machines were a big deal. Okay. Now I realize that it’s hard for somebody like your age to understand, but, and cell phones were about this big, you know, and they’re in the car like that. So I think the technology, just being able to get information and communicate with your clients and investors it allows you a certain freedom, but you can still get business done. So that’s what I mainly rely on.

Aileen (42:13):

Thank you so much Arn. And so we really appreciate, and we love the all the advice that you’ve given us today with all your knowledge and just your outlook on investing in general and real estate and how you’ve gotten to where you are today. So I’m sure a lot of people are curious to find out more about you as well. So if they wanted to find out more about you, where can they go?

Arn (42:35):

Well, I’ve started a new business spark investment group. The URL would be invest with spark.com. My email is Arn@investwithspark.com and my cell phone I’ve kept my Bay area number because I still have a lot of friends back there. I think cell phone numbers are going to be social security numbers, right? You’re never going to get rid of them no matter where you move. So my cell phone is (650) 575-6114. And I’m on Facebook and LinkedIn, and always happy to talk to people about real estate. If they’re working on something and want my 2 cents happy to give it, I may not be right, but I’ll give you my honest advice. So that’s all I can do. Thank

Aileen (43:25):

Thank you so much. I really appreciate having you on today.

Arn (43:28):

Hey, it’s been great getting to know you guys and you know, I wish you the best of luck moving forward and let’s keep in touch and maybe we can work together on something. It would be great. Yeah.

Seyla (43:41):

Thank you so much.

Arn (43:42):

Okay. Thank you.