Life Within the Real Estate Investing Business
“I’m 67 years old, I don’t have any desire to build a monolith business. I just want to do a good job for my investors. That would make me happy and hopefully make my investors happy, too.”
Welcome to the Next Level American Dream Podcast. We have an incredible guest for you today, but first please make sure you have subscribed, if you haven't already. We also love getting your feedback through likes, comments, ratings, and reviews. Today, Sean has a conversation with Arn Cenedella. From Silicon Valley to Real Estate Investing in South Carolina, this was the shift that Arn made in his profession. He shares with us how he got started, grew, and what his business looks like today in guiding investors to passive real estate deals. If you found any value from today's episode, then please share it with a friend and help us grow. For more information on our sponsor, visit: thomsonmultifamilygroup.com to start taking your American Dream to the next level through passive investing!
Key Topics
Tell us about your background.
How did you get into real estate?
What are you wanting to do with your business/career?
What are some things that you would attribute to your success?
What does the American dream mean to you?
-
SUMMARY KEYWORDS
multifamily, people, real estate, business, american dream, investors, investing, area, deal, property, real estate investing, passive investing, syndication, produce, silicon valley, investment, invest, diversification, rent, rental property
SPEAKERS
Sean Thomson, Abigail Thomson, Arn Cendella
Abigail Thomson 00:01
Welcome to the Next Level American Dream podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean will discuss how you can take your American dream to the next level through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish their goal of financial freedom. We hope you learn more about how to define and achieve your American dream. Here's another episode of next level American Dream. Welcome to the Next Level American Dream podcast. We have an incredible guest for you today. But first, please make sure you have subscribed if you have not already. We also love getting your feedback through likes, comments, ratings and reviews. Today Sean has a conversation with Arn Cendella, from Silicon Valley to real estate investing in South Carolina. This was the shift that are made in his profession. He shares with us how he got started through and what his business looks like today in guiding investors to real estate deals. If you found any value from today's episode, then please share it with a friend and help us grow. For more information our sponsor visit thomsonmultifamilygroup.com to start taking your American dream to the next level through passive investing.
Sean Thomson 01:15
Arn how're you doing? Thanks for coming on the show.
Arn Cendella 01:18
Hey, Sean, happy to be here. Appreciate the opportunity to chat with you about the American dream.
Sean Thomson 01:24
Yeah. Well, you and I just meeting for the first time now we talked a little bit beforehand. You've got a pretty extensive experience in real estate and vast knowledge real estate and you're you're doing multifamily stuff now. So tell the people kind of what your background is with with real estate or what your background is, period. And then kind of what you have going on today.
Arn Cendella 01:42
Sure, that'd be great. Thank you. So pretty typical, middle class American Life. I'm born and raised in the San Francisco Bay Area was expected to go to college I enjoyed school I did well at it ended up getting a master's degree in physical chemistry of all things. But my father had a residential real estate brokerage company in Menlo Park, California, which is next to Palo Alto and Stanford. So I kind of gave up the academic life and went to work for him in 1978. And I've been in real estate full time ever since that.
Sean Thomson 02:22
You know, I know I knew some guys that had bikes up in that area wheel Smith that used to be there long, long time ago. I don't know. Do you know wheel Smith bike shop? I do. Yes. Yeah. It's guys that the owners of that were friends of mine.
Arn Cendella 02:33
Interesting. Yeah. So I mean, it's it was a fabulous place to sell real estate. We were single family residential brokers. But my father understood, while the brokerage business can produce income, financial freedom, financial wealth really comes through investing. So he was kind of an old school single family investor, I followed his model. And as my business grew, I started buying single family homes in the Bay Area, as well as elsewhere across the country, and did very well, both in the brokerage and investing provided me good life work balance for most of my working career. And so I felt fortunate and blessed to be able to sell real estate in such a great area.
Sean Thomson 03:25
Yeah, no one no one really probably could have predicted or, or sort of had the forethought of what would happen in that area. Between the times you guys started. And now really, it's a completely crazy thing, right?
Arn Cendella 03:37
Yes, it's, you know, it's amazing when when I was a little kid growing up in Santa Clara Valley, which is now Silicon Valley, webby canned food company was the biggest employer in the county, Santa Clara County was an agricultural thing, apricot orchards, peaches, etc. And then, you know, a couple smart individuals from Stanford and Cal somehow got on to the computers, the personal computer, the worldwide web, and everything changed and Silicon Valley boomed. And we used to joke houses in Menlo Park and Palo Alto were basically $100,000 A bedroom. So if you had bought a 303 bedroom house would be 300. By the time I left California 2014 it was closer to a million dollars a bedroom, so a three bedroom house cost 3 million. And so yes, when I say I was blessed to sell in such a great market, I do feel fortunate that I had the opportunity to do that. Yes.
Sean Thomson 04:46
You know, I talked to people about real estate investing and, you know, you look at statistics like that or information like that. And it just doesn't make sense, right? This doesn't equate like It's like trying to imagine what a billion dollars looks like stacked up in $100 bills or something, right? Just you can't really can perceive it. But it happened. It's already you know, it's there. It's been in the history books, right? So it's kind of funny to think about it that way. And you talk to people now and they're like, Well, I don't want to, I'm overpaying for stuff, you know? And it's like, well, maybe not, maybe not, you know, you just gotta, you gotta make sure you're in the right location, good locations, and things like that, if you if you use basic principles into your investing, and, you know, the future could be good, you just don't know, right?
Arn Cendella 05:28
Precisely, I can remember, you know, we'd have broker to her on Tuesdays and Fridays in my area. And I can remember driving around with a bunch of brokers, and in the middle of the 80s, middle 90s 2000, we'd say to ourselves, prices can't go any higher. They're crazy. And of course, we the experts were wrong, and we continue to be wrong. So it's interesting. And I think he touched on something important, I really believe in real estate investing, and there's some fundamentals right, use leverage properly, be properly capitalized, and then you're set for whatever the world throws at you. And through the boom times, I've also been through some bus times the.com crisis, the Great Recession, people don't remember, in the early 1990s 1/3 of every savings and loan in America went out of business, you know, and so, if you do real estate, right, and you have a long term perspective, it's going to create wealth, you're going to be okay, but you do need to do it properly. Yeah, the
Sean Thomson 06:41
one underlying thing that that real estate has that people always forget is that it's shelter, you're essentially providing shelter, which is an essential for all the humans on the planet, right. And so there's, there's going to be a need for shelter no matter what, and we can't produce enough of it. Currently, to keep up with population growth. And you know, the migratory patterns, I know, I'm in the Dallas market. And we have to produce 15,000 units a year, just an apartment units just to keep up with demand. And that it's you can't build that fast. So it's the demand is going to be there. And it's going to be there for a long time, especially. So I think people forget that when they're buying that they started thinking, Well, I just can't I can't imagine paying this price for per door or whatever it is, they're there, they're held up on. And you have to remember that there isn't enough, there's the just isn't enough, it's going to Oh, it's gonna continue to be an issue for a while. So
Arn Cendella 07:33
and certainly the cost of construction is going to go down, right, the cost of labor is not going to go down. So you know, there's a lot of rationale behind real estate investing. And, and, you know, I'm not one of these guys that says 100% of your money needs to be in real estate. I believe diversification is also a key tool for investors to protect their capital. And we're in unprecedented times now, you know, massive government borrowing and national debt. When I was a kid, we had the gold standard. And now we're talking modern monetary theory. So I think investing in hard tangible assets makes a lot of sense.
Sean Thomson 08:18
Right? Yeah. Well, in the traditional diversification is like owning a mutual fund. And that's not diversifying. You're still you're still beholden to one marketplace. Correct. real true diversification is having some stocks, having some real estate having some other alternatives, you know, so having various asset classes across a wide spectrum. So I think that's as a hedge for people that are already kind of in the markets as a hedge real estate's a good place to be. So let's talk about two. So where are you today? In your in your business? Are you focused on single family or multifamily? What do you have going on now?
Arn Cendella 08:52
Yeah, thank you. So about two years ago, I decided to move my rental portfolio into multifamily assets. And I've started to help other investors do the same. And I can talk about a couple reasons why I've done that. If you think that would be of interest to your listeners.
Sean Thomson 09:15
Yeah, for sure. Let's talk about that. So you you decided to go into multifamily. What was the catalyst for multifamily as as the new vehicle for you from single family? And then what is it that you're doing now to to bring other people on board?
Arn Cendella 09:27
Sure. So what I do as I kept track of my rental portfolio every year, I'd kind of do an analysis. What are the property's worth? How much equity do I have? What's my gross income? What's my net income? What's the return on my equity? And while the single family portfolio did very well, when I actually looked at the cash flow based on the amount of equity I had in those properties, it was probably about three and a half to 4%. Good properties, they grew my capital net worth and grew my equity. But in terms of producing cash flow, it probably wasn't the best thing. So for one multifamily, I believe produces more cash flow than single family rental properties. For much of my career, I self manage my own rental properties. And as I got older, I became a little less enamored of the day to day headaches with managing property. And of course, as you scale up and go into bigger buildings, you can get more professional property management, the property management is more affordable, as is a proportion of the rent collected. So I think the ability to turn over the day to day headaches to professional property managers through multifamily made sense. The other thing I think, is our society is changing. When I was a young man, the dream was by the big house at the end of the cul de sac and suburbia, right. And that's where we're going to put down roots. And that's where we're going to raise our families for 30 years, I think today's 30 year old, their dream, their passion is to maybe live in four or five different places during their lifetime. And kind of it's a much more mobile society. And so I think renting becomes much more appealing to folks who want to be mobile. And then the fourth reason is we all know housing affordability is a very difficult issue. And apartments provide the most affordable housing we have pretty much so I think there'll be strong demand moving forward.
Sean Thomson 11:46
I think that's the mistake people make to homeownership is expensive units may be cheaper on a on a mortgage versus rent basis. But if you factor in, you know, taxes, insurance, maintenance, all those other things, you know, and then the hassle of just living in a house that you have to take care of all the time, if you're like you said, if you're a 30 year old and you want to move someplace, selling your house is not that hard to do. But buying another one is a problem. Right? So there's, you know, just dealing with that is is an issue, and renting is becoming more of a, like you said, just a convenience, for lifestyle for a lot of people, I think for sure. And you can get nice, nice housing, you know, as a rental property everywhere, so it works out really well. Exactly. And so what are you what are you you were saying and you you're you have investors that you work with? How does that how does that work in your business?
Arn Cendella 12:34
Yes. So I've now started spark Investment Group, which is a multifamily syndication, investing business. So pretty much tapped into many of my friends and business associates clients from the Bay Area where I used to live, as we noted, many of them heavily invested in the stock market. And I just suggest, you know, let's move a little bit of your capital into real estate was diversify a little bit. And so they're receptive because they know the value of real estate, they may not want to deal with it themselves. So I think when you offer them a vehicle of professionally managed real estate, limited, hands on involvement, kind of a more passive investment, it's appealing. So I'm now located in Greenville, South Carolina, which is midway between Charlotte and Atlanta in the northwest part of the state. It's a great real estate market. We have North American headquarters for BMW and Michelin in the Greenville Spartanburg area. So to date, I have probably completed seven or eight multifamily syndications, two of which had been the weed sponsor in GP, so not doing huge deals, 3040 60 100 units is kind of where I'm at focused in the Carolinas.
Sean Thomson 14:03
Yeah, I know. So a lot of people will want to be a real estate investor. I mean, almost everybody I talked to would love to be a real estate investor, kind of like me. But real estate is it's a very simple business, but it comes with a lot of complexity like layer, Dan, right. So understanding a good property understanding, you know, where to get them how to how to fund them, like you said, putting the right debt against them and leverage against them and having capitalization that works for your business plan. And all those things are complexities in the business. So people avoid real estate as a as a as a diversification on their own, I think right? So getting into a syndication with someone that has those experiences or has those abilities, for most people would be awesome, but they don't know how to kind of find people like you or me that that are doing those things. And a lot of people don't even know that you can, that you can invest $100,000 of your retirement account or retirement funds or whatever capital that you have in reserves into the syndication and go buy it you multimillion dollar properties and be part of the process and that on a smaller scale for you, but on a larger scale for their whole operation, right. I think a lot of people like we were talking about earlier, they're in the stock market, stock markets, they have their mutual funds in their IRAs and stuff. And they understand that because Wall Street, you know, sells that stuff all the time. But they don't know that this little alternative investment is possible out there. So I think that's it's good that you're, you have your group of people that you're working with for passive investing into your deals, too. So I think that's helpful. And I think people love it. I'm sure your investors give you good feedback, right?
Arn Cendella 15:35
Yes, most of them are happy and I can say speak for myself. I'm an LP investor in about seven or eight syndications. Okay, so I'm not recommending anybody else do anything that I haven't done myself. I was in a meeting earlier this morning. And I got two email alerts from two of my syndications where I'm in lb, your ACH deposit is on its way. And trust me, it's nice, just show seeing their money pop up into your account on a regular basis. And of course, the stock market's not necessarily set up to produce regular monthly income, real estate's a much better vehicle to do that. So you know, I believe in real estate investing, I think it should be part of everyone's portfolio. And so you know, I'm happy to be able to help people do this. Because the other thing is, you know, time is precious people are busy, if it's not the W two, it's the family, their church community, people have a lack of time. And so if you can put their money to work for them, that doesn't require any of their effort or time, that's kind of a win win.
Sean Thomson 16:51
Yeah, and you've spent, you've spent decades learning the real estate game, knowing no one's gonna invest that amount of time on a side hustle or a side investment or something like that. It's just impossible to do you, you know, you have a life to live, if you're a dentist or a doctor or something, a chiropractor, you've got a business to run, you've got you know, you got things to do, you don't have time to go become a real estate expert in your spare time, right. It's just not gonna happen. So I that's why I like this business is when you know, I can take what they want to accomplish and what I want to accomplish merge them together, and then we all win. Right? It's great system.
Arn Cendella 17:24
Yes. And and the way it set up, the limited partners come first, right, most of the general partner compensations that the back end at the end of the deal if the business plans executed successfully, and the LPS profit significantly, then the GP gets a share of it. So it's kind of the LPS get that first cut of the property income and property profit. So it's set up nicely to protect the LPS interest.
Sean Thomson 17:59
Right? Yeah. So it's a we tell people that all the time, and you don't, you don't lose money until I lose everything. And then, you know, I don't make money until you make everything right. So it's kind of those situations where we, we have a couple different structures, but our focus is always trying to make sure that we're last we're the last dog to the bowl, right? So we're gonna, I'm still gonna make sure I get some food, but I'm gonna make sure everybody else is taken care of first for sure. So and that's just how you build it out. It's structured that way from the beginning, and you just operate that way. And it's just a business principle, that works fine.
Arn Cendella 18:34
And this isn't to bash a stockbroker stockbrokers or something, but most stock brokers are paid on the trade, right? Not to success. So just just something for free people to think about just throwing it out there.
Sean Thomson 18:48
Right, right. Yeah. Well, I have to win. You have to win first and I get to win. Right. So it's a it's a more it's a better alignment of interest. I think if you're doing it properly, it's a better alignment of interest than almost any other investment out there. Honestly. Yes. So where are you hoping to go in the future? What do you so you've got? You're doing some some investing with your limited partners now. And what's next for you?
Arn Cendella 19:10
Good question. So I'd like to continue to expand my multifamily syndication business, like to start doing slightly larger acquisitions, develop my investor database further. And also, I'm looking to partner with other good operators across the country. One of the things I love about multifamily that's a little bit different than single family, single family, you can almost kind of do on your own, or with multifamily, it's more complex, there's more skills that need to be brought to it. So it's more a team aspect. And I frankly, enjoy the relationships. I enjoy the team part of it, having a group of individuals in the general partnership who are all support already each other and supporting the project and kind of bringing it to a successful conclusion. So continue to grow and expand my business. I'm 67 years old, I don't have any desire to build a monolith business. I just want to do a good job for my investors maybe do four or five deals a year in areas that I know. Well. And that would make me happy and hopefully make my investors happy, too.
Sean Thomson 20:28
Right. Yeah, that sounds like a good plan. Well, so i Aren't I ask everybody this question. That's, you know, the, the name of the podcast next level American dream. And for me, the American dream of the 50s is kind of gone. Right. But I think the American Dream is alive and well. And it looks like 1000 different things. Right. So I always like to ask people kind of what what is the American dream mean, to
Arn Cendella 20:46
a great question. And, and and I think, is speaking, from a personal experience, I think the definition of retirement has changed significantly, right? From from our father's generation, or mother's generation, I'm 67. I figure I've got another 30 years, right. I mean, people are living to 90, it's not unusual. And so I think it's pretty clear that one, you can't really live off your savings, right? You're living too long, you're going to spend so you need to keep making income. For me the American dream and I'm trying to live it is I can still be productive now. And I look forward to being productive in the future. But there's a difference between having to work and wanting to work, right. Yeah, I so for me, the American Dream is being in a position to do things that you feel passionate about, that you're productive, that you're helping others. Of course, I play golf three times a week, I love golf. And so building a life where you have productive activity, but also social and recreational activity. And in order to do that, you need kind of an income that will support you. And the reality is in retirement, you pretty much need the same income you had during your working career to maintain your standard of living. So I think there's a shift there that we have to go through to continue living the American dream. And a lot of it also is about health, right? What's the point of live until 80? If you're not healthy enough to enjoy it. So all of that together is kind of what I take to be is the American dream.
Sean Thomson 22:40
Yeah, awesome. That's perfect. So aren't, you're looking for new investors, you're looking for partners, things like that. So how can people kind of reach out to you if they're if they have an interest in getting to know more about what you have going on and getting to getting to know what your business is? Like? How can I reach out to you? Is there a website or something?
Arn Cendella 22:54
Yes. So the My website is invest with spark.com. The business name is spark investment group on LinkedIn, Facebook, email, is Arne at invest with spark.com. So people can find me happy to talk real estate, happy to talk life transitions and thinking about the future. I moved from Silicon Valley to the southeast to Greenville, South Carolina kind of set off on a new life adventure. And so there are a lot of things I'm interested in and just kind of happy to help people find their Zihuatanejo. If you remember the movie from Shawshank Redemption, right? So each of us have that Zihuatanejo, and it's great to help people find that.
Sean Thomson 23:45
Yeah, that's awesome. That's a good, that's a good way to put there. I think everybody knows that one. So yes, well aren't thanks for coming on the show. I really appreciate it that we had some technical difficulties early on. And I appreciate the sort of persevering through that with me and I was great talking to you. And hopefully we can have you back on and talk about some of your deals or something down the road
Arn Cendella 24:03
that we create. Shawn, thank you for your time pleasure meeting you and let's maybe do a deal sometime here in the near future.
Sean Thomson 24:11
That'd be great. Perfect.
Arn Cendella 24:12
All right. Thanks. Thanks.
Abigail Thomson 24:15
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today. Want to contact the team directly or interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamily group.com Before you go, please leave a review your comments help us create more episodes for you to enjoy.