Multifamily Truth Nobody Wants to Hear ft. August Biniaz

0:00One thing I've noticed over the past years that almost everyone says they're using AI, but when you actually look at how it's being used across a company, it's usually just a handful of people who have really embraced it. Everyone else falls back into the same old workflow. That's why superhuman go caught my attention. The problem isn't that people don't want to use AI. It's that most AI tools expect you to stop what you're doing, open another tab, start from scratch, and explain the context every single time. Superhuman go flips that around. It's an AI chat that's already up to speed right there when you need it, and it works inside the tools and websites you already use without switching apps or losing your place. It's from the makers of Grammarly, and whether someone on your team is drafting an email, summarizing a long thread, or getting ready for a meeting, the help is already there. That's what really drives adoption. When AI works where your team already works, people naturally use it. Less friction, more consistency,

1:01and more time spent on the work that actually moves the business forward. If you want to see what that looks like for your team, check it out. Find out more at superhuman.com. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up require a compatibility and availability very 16-plus. Hey, best ever listeners. Welcome back to Unlimited Capital. Today I spoke with Argus Benias, and we had a great conversation about what it takes to get LPs back. I mean, I am one of the people who believes that we may be entering a point where it was making sense to invest in multi-family, but just because me and other real estate guys trying to do deals, we believe it's a good time.

2:01Well, guess what? We're not going to be able to do deals if we can't get the LPs on board. And so among many other topics where we spent the meat of this episode was about what is it going to take? What are the deal structures? How are you explaining it? And who are the type of LPs that are willing to dip their toes back in and re-enter the cycle if they believe? Like I do, today is potentially a good time to be investing in multi-family, but how are you going to convince your LPs? So with that said, I hope you guys enjoy the interview. What's up? August, how are you? August Benias, thank you for joining the show. Thanks for having me. Really looking forward to this. Great energy. You kind of got me excited, so I hope to add value to your audience, my friend. Yeah, I'm excited to add value to the audience every day. That's why I get up. So yeah, why don't you tell me a bit about yourself and the audience? Oh, yeah, but myself. Yeah, but currently I'm the chief investment officer with CPI Capital. I cut a company that I helped found. And it's been an exciting kind of six years of my life, I would say, just over six years, not only because of building something great,

3:02not only because I became a father in this time, got married and so on, but also because it's been such a difficult time. I mean, it says really, there's a statue of a self-made man, which is this guy basically chiseling himself out of a piece of stone. And I feel that way of what we've gone through over the last six years. I left my career as a home builder. My successful career as a home builder to start a real estate investment firm or real estate private equity firm. So it's been a very difficult time, but I love every moment of it because it's such a dynamic and fluid business. There's so many moving parts. You never get bored of it. So that's the current. Never get bored. Yeah, that's what we're going to go. This is the best game. I mean, entrepreneur is a category is 100%. But it's a bit different because you're dealing with investors. In our case, mostly retail investors. These are people who are investing. They're hard earned money in what your kind of business is. What your pitch is, what your idea is. Is they're interesting. They're hard earned money with you.

4:03So if there isn't a situation where there are losses, that's on your reputation and the brand that you've worked so hard to build. Yes. So the times of people just trying to raise new money and changing their company's names and looking at different asset classes with social media and with so much online content that AI as well, those times have passed. So today, if you're dealing with retail investors and you're raising capital, you better be performing otherwise. It'll be all over the internet. So, but yeah, taking a step back, I've always been in real estate. Again, in recent years, there's been people that have come into the space from other spaces. A lot of doctors, chiropractors, a lot of people in tech have got involved in. You're host included. Yes, host and so we got involved in real estate and did tremendously well bringing their knowledge and background from that space. But I would say, kind of, tooting my own horn here,

5:04but taking, you know, standing up for the real estate guys, there's something about real estate. There's a muscle memory with real estate investors who've been doing it for decades that you just cannot you cannot, you know, it's hard to beat. So, yeah, my background, I always say, I come from somewhat of a real estate family. My maternal grandfather was a real estate broker. My mom was the real estate investor of our family. She always invested in real estate. She always spoke about real estate. She had some very basic lessons that she taught. And that was real estate. If it doesn't work out, you can always move into it. And because it's a structure, right? It's something there. So, it's tangible. It's there. It's the largest asset class in the world. It's been around for as long as we know. Worlds have been, wars have been fought over it. There's boundaries have been created. So, real estate is part of our lives, really. So, I totally agree with that. By the way, and that's actually one of the reasons that I, okay, as a transplant, form a tech professional, but lifelong entrepreneur got into real estate. And I've told this story many times in this podcast,

6:04is that I have lived and done business around the world in my career. I moved overseas right after college. And one of the things that attracted me, this is an asset class, was that every culture I've ever interacted with, values real estate. Highly. And that people pursue it. Like my, my wife, I met in college. She was a full-bright scholar. And she's from Eastern Europe. And they do not have capital markets. But what is her father own? A bunch of rentals. You know, as a successful guy. And then I lived in China. And of course, China is dominated by its real estate industry. You know, and I just like every country I ever went to, like to the point where I think, owning real estate is part of the human condition. Like it's even like genetic. Like you're saying, like war is being fought out. Like when you were saying that, I was like, oh yeah, I totally agree. Like we are like genetically driven to own real estate. But 100%. Yeah. And you can also kind of look at a society's freedom and rule of law on how they govern over property rights. Right? That's like a classic, telltale sign. I'm originally from Iran.

7:06And it's a country over the last 50 years, at least has gone through, you know, very overwhelming US sanctions. It's gone through an eight year war when you're Iraq. I'd say country that was taken over by Islamic fundamentalists and has been, you know, some people say, Iranian people are even a hostage of this regime. But there are at least 10 million Americans. It's sorry, 10 million Iranians that strongly support this regime from the 90 million people. So they do, it's not like everybody is a heist of regime. There is a group within Iran that controls it. But the point of trying to make about Iran is that even the Islamic Republic had an understanding that there should be some level of property rights for people. And that's why Iranians can invest in equities, they can invest in bonds. It could, I mean, but it's not a common thing that it's like my father-in-law. Yeah, he's in Belarus, dude. They don't have capital markets. It's like, it does not a thing, you know? Exactly. Exactly. So, yeah, I mean, but yeah, bringing it back to kind of my story. So I understood real estate if it was a language from an early age.

8:07So it was just a natural thing for me to get involved. I got my real estate license in my early 20s. But I didn't really see myself, you know, building a life and a future and a career out of the brokerage. Because I saw others in my peers and I didn't really enjoy the lifestyle they lived. These are people who were earning over a million dollars a year. I still didn't see myself doing that. And, you know, it's, there is a somewhat of a survival fallacy in the world of real estate brokerage because you see successful realtors. But you don't see the 99 other percent, other realtors that don't earn a living. You don't transaction a year or zero. That's right. Exactly. Exactly. So, didn't really want to want to be a real estate agent. But I wanted to be involved in real estate. So I started doing small fixed inflips early on. While I had my license from there, I did well in those fixed in place. I eventually started my own general contracting company. Rather than trying to hire somebody to help me with a fixed inflip, which is very difficult. Your road's away all your profits. I started becoming the GC on those deals myself. Eventually started actually building both spec and custom homes

9:08from the ground up. And did that for close to a decade. Always wanted to scale. Always wanted to do bigger projects. I had this dream of being this large developer, you know, red, Trump's, art of the deal and about his story. I don't want to ruffle any feathers about that. It's just, it's just a book, just a story of it. New York is over. You have developed real estate. We can all agree on that. Exactly. And whose father was a huge developer. So a lot of lessons learned from his father's side. But in the book, he talks about the time where where his is his shift from developing workforce and rental properties into actually developing mega projects in Manhattan. And the story is that he goes with one of his, one of his dad's workers that goes in those collections on unpaid rents. And when they got to the first apartment unit that they got to, this fellow knocks on the door and steps to the side and tells Donald to stand to the side. And then after the meeting, they met this person for Brent and they collected a rent. Donald asked the guy, why did you ask us to stand to the side? He's like, well, sometimes they just shoot.

10:10So after Trump, after Donald hears that, he's like, this is not my thing. I'm out of here. I'm going to be building high rises in New York. So yeah, again, coming back to me was a, was a home builder for 10 years. I always wanted to do these bigger projects. And was it was so unattainable. Because as a home builder, when you're building a million dollar, two million dollar home, even for either for myself or my clients, you need at least one third of that in cash, in equity. You need that in hand. Otherwise, the project is not feasible. That's a bare minimum. So we're talking about 300,000, 600,000 for a two million dollar house. That's a lot of money. So when you look at a mega project, that's cost 100 million dollars or a quarter billion dollars, even a 10 million dollar project. We're talking about three million dollars in cash liquid that has to be put into the deal. And it's there until the deal gets completed, which could take years. So it just seemed so unattainable. I didn't understand the process of syndications or funds or, you know, the other vehicles that exist. And the process of raising capital,

11:11the real estate private equity world. So I started educating myself in that space. A few light bulbs went on when I started doing that. One was most of the content was coming from the US. So most of these podcasts, most of the books, most of the stories was about you. And you're in Canada for the, for the, I mean, Canada. Exactly. Yeah, sorry. That's a very important part to mention. So I live part time between Canada and the US. I mean, part time in Florida, part time in Vancouver. But at that time, I'm Canadian. I'm trying to build my business as a home builder in Canada. I want to do bigger projects and realize about these hurdles that exist, which is capital, which is equity. So I go out there trying to learn how to raise equity. And most of the content is coming from the US. And while I was learning about the process of raising capital and so on, I also learned about US real estate, the deals that were available in the US, like multifamily value add, the yields that were available on development projects, other asset classes. And comparing that to Canada, I'm like, why, why isn't this business so combating Canada?

12:13And the reason was because the yields in Canada are much lower compared to the US on an apples to apples basis. So if you're out there going to buy, and I'm like, I mean, real surprises are high in Canada. And rents are high, but rents relative to values are very low. So in the US, for example, there is a metric we use, which is a 1% rule, as we call it, when we buy an apartment community, are monthly rent on a per unit basis needs to be 1% of a per unit value. So if you buy a 100 unit building or a community, you buy for $100,000 a door, so you spend $10 million for this 100 unit community, you're monthly rent, average monthly rent needs to be $1,000. That's a 1% rule. If you use the same kind of math in any Canadian deal, you're at 30 basis points or you're at point, you're at point three. So the yield is not there. So you either need to put in more equity or you need to be negative cash flow and carry the rest.

13:14So who is the best? Yeah, great question. Same question I said to a lot of commercial brokers in Canada. So first of all, the transaction volume, even if you look at the fact that Canada is a 10x smaller market, it has almost 10x less the population, the number of deals trading are well, well, a way less than the US. So that's number one lot. There's not a lot of deals trading. That's equity. There is less, less trade of the deals. There is also less debt liquidity in sense of there isn't as many lenders available in Canada as in the US. For example, agency lenders in the US, a Fannie Mae Freddie Mac, they do the lending themselves. Whereas in Canada's agency lenders, CMAC, Canada, the Canadian housing corporation, it doesn't lend itself. It just secures the mortgages from other lenders who want to get into the space. So you don't have as many lenders as available. There's not as many deals and the yields are not as much as the US. So people who are buying are buying for number one capital preservation.

14:15Number two, over the last quarter century, Canadian real estate has done tremendously well because we had this huge influx of immigration around 10 million immigrants have come into Canada over the last 20, 25 years. I was a Hong Konger. So I know many, they even call Vancouver Hongkouver. Exactly. Exactly. A lot of Chinese left. So basically to put two and two together, Chinese buyers or from whatever other country paying cash. Yes. So initially it was, it was people from Hong Kong, they were coming into Vancouver and Toronto and Canada in general because they're the least for Hong Kong was expiring. Oh yeah. Britain was going to take over Hong Kong. The Hong Kong nationals were concerned that the Communist China is going to take over and basically, you know, expropriate all their funds and take all their money from them and seize everything they have. But when China took it over, Yes. When China took it over in the mid-90s, that didn't happen. So a lot of people from Hong Kong started going back. But then when the Chinese economy started doing really well in the early 2000s

15:17and an onward, that infrastructure had already been built in Vancouver in Toronto. So a lot of people from China started coming to Vancouver and Toronto and other cities. So it was a huge, best Chinese dude I ever had outside of China was in Vancouver. Best Chinese to buy for. No, no, no, no, it was in Toronto. Yeah, in Vancouver too though. In Vancouver, I speak to some Chinese friends and I'm like, hey, outside of China because in California, it is a huge diaspora of Chinese as well. I was in Marcom, which is like Marcom Ontario. That's right. It's all Chinese. It was wild. I live in Richmond as a city of it's a suburb of Vancouver. If you ever fly into Vancouver, you're flying into the YVR airport that's in Richmond. Yes. It's a city of population of 200,000 people and it's 70% Chinese. Yeah. 70% Chinese. Just mind blowing. So going back to the story, you have this influx of people have come in. The real surprises have increased from 1995 till 2015. Real surprises went up 500%. So a lot of these investors were just speculating,

16:19which is the big no-no in real estate, right? You want to see yield. You want to see cash flow. There's not just that. The Chinese government does not allow people to own stocks. And so hence why there's a big bubble in China is that what they are allowed to own is foreign real estate or Chinese real estate. And like when you were talking about capital preservation, what they want is liquid-ish assets out of China not denominated in you on. Exactly. Great, great point. So those are some of the reasons why it didn't work. So I really fell in love with US real estate and trying to get bring these deals to investors other than my dream of becoming a big large developer in Vancouver. And that culminated in me, partnering with a couple of great partners and starting a company called CPI Capital, which is our company today, with his mandate to go on a choir US multi-family. But this was in late 2019. And I'm sure as you know, and our listeners and viewers, no soon after we had the worldwide pandemic COVID hit.

17:20And it's really through a wrench in all everything, especially for a newer firm who's trying to get into a market. Where we're at in the multi-family cycle. So we've kind of like kicked that off with, and then you started a firm in 2019. I bought my first property as well in 2020. So you know, know how it goes. You know what OK? I mean, luckily those are single-family homes, so I don't have a rate reset or anything. You know what I mean? I got 30-year debt. Not like Canada, which is every five years. Yeah, yeah. I actually invest in a Canadian mortgage fund, but we don't have to. It's not on this podcast. So, OK. So the market obviously went crazy in COVID. And where I wanted to, where we're going to lead this conversation. I should say it now so that we drive towards that point is I am also one of the people that is starting to become intrigued with opportunities in multi-family today. So to kind of like fast forward, we all know price is shot up because two full, two things recurring. Number one, rates dropped to zero. So of course, cap rates are a derivative of financing costs.

18:21And then second of all, we had a lot of inflation and rent growth. And when you put really low interest rates with very high income, rent growth together. And then forward projections of continued rent growth that were like 10% of your 15% of your crazy in hindsight, obviously unsustainable trend. Price is shut up. A lot of deals were bought at this cap rates and financing costs. And now that cap rate is not the going cap rate anymore. And also your financing costs have doubled or tripled. And so none of this is new. Few other points. Yeah. Few other very important points, particularly for the sunbelt. You had a huge influx of people moving to the sunbelt. And supply. Yeah. So that that that and then when cheap did was was there available for acquisition groups, cheap did was available for development groups as well. So while groups are out there gobbling up all these deals and seasons a lot of season investors are selling deals at this point 2021, 2022. A lot of developers are building as well.

19:21When a developer makes a decision to build something, it usually takes at least in the fastest case possible, it takes two years, but usually it's three years, four years, five years, three, four, five years. So so so peek at the market. So not only you had the migration, the interest rate, migration stopping, not only you had interest rates, increasing and being being high, relatively speaking, you also had supply coming online, which has a downward effect on occupancy and rents. You have a higher like I'm like I said, my debt costs are under control and sure, interest, my insurance has gone up. But the fact of the matter is is I own and Colorado Springs and Colorado Springs had a wave of supply and my rents are down 25% yeah, down rent rents down 25% for a multifamily deals is is basically the death of it right? Yeah, you've done it's gone. Yeah, because even if rents are flat, like if we look at a deal and we underwrite it that the rents are going to be flat for the next five years, the deal is not is not it doesn't pencil. It's not as well just walk away from it. But historically people always put in 3% rent growth on an annual basis and now today we have to

20:27put in zero year one, maybe one one and a half year two and then it goes up to two and a half and then stays at two and a half for the next few years in our in our model. But but yeah, so all that happened with with the with the market real estate market, it goes through these cycles. So I would say today we're definitely in the bus cycle of multifamily, caprices have expanded, rents have dropped, too much supply has come on. But in some of those great cities like the DFW cities like Tampa, the fundamental drivers are still there. People are still moving there. Yes, I agree. The jobs still exist there. It's not a Detroit situation where the jobs are leaving and the cities, you know, claiming for bankruptcy. Not did my view is like Texas is the when we talk about GDP growth in the US, that is happening in two places, one of which is investible, that is occurring in San Francisco in the state of Texas. San Francisco is not investible because it's all just like andthropic shares and going into the single family home market. Yeah, it's not business friendly either.

21:28It's not business friendly landlord friendly. And it's not job creation. There's like 5,000 employees have been through a big making all the money. Yeah, you know what I mean? Evan and Texas on the other hand, that like the actual dynamic part of the US economy is in Texas. Like I can believe that, you know, and that's also not a political statement for the record. That is just reality. The fundamentals and these parts of the country are incredible, but the big but does that mean it's a good time to invest? Because let's analyze that. Yeah, let's break that down. Yeah, like the one thing that it definitely surprised me and you made a comment when we were talking before I hit record how real estate cycles take 20 years. I had never read that before, but I immediately believed you because I can tell you I would have thought that we would be a little further along in this cycle as of what is today August 2026. Like four years into interest rates going up and now we might have another hike. I would have thought that we would have been going back up by now. Yeah, and you also have geopolitical issues.

22:29You have a war in the Middle East. So you have the perfect storm for what's happening. But the point I was trying to make analyzing where we are, our read near bottom, where we're going. I want to make a comparison today in the multi-family process, multi-family properties compared to, wait, right, one of the greatest financial crisis that I ever took place is called GFC because it is a great financial crisis. So multi-family prices, single-family prices croaked at around 30% nationwide. And multi-family was around the same number. They corrected around 30%. And now prices I would say in Tampa, one of the cities every focused on San Antonio is another city that we're focused on and DFW. Multi-family prices have corrected around the same amount. That's why I feel that is it going to go down another 30%? I don't think so. Yeah, I don't think so either. But is it possible that goes down a bit more? Absolutely. Could down go down a bit more. But that big correction has come. But here's the problem that I've, though I trade stocks purely for fun. I have a very small account and with no intention of making money because I have just learned

23:31that I'm like, I can't beat the S&P 500, but I also can't help myself. So a big learning this year was, and I'll tell you how it relates to real estate, is that I should have gone harder into semiconductors because the question of when you're holding a liquid portfolio and allocating is not, is this a good investment and is this a good company? Is this the best home for my capital today versus another opportunity? And hence my question of why I was underway, I was not overweight enough. Semi is because I was investing in large asset managers because I think that they're very oversold and I think that they're going to do very well selling in the private wealth channel. But they're up like 5% versus my Semi's are up 120. Here is my push back to that is just because are we at the bottom and are we close to, I accept both of those answers for the record. Are we going down another 30% like no, or you know, I don't believe so, financial advice, disclaimer and all that. One thing I've noticed over the past years that almost everyone says they're using AI,

24:34but when you actually look at how it's being used across a company, it's usually just a handful of people who have really embraced it. Everyone else falls back into the same old workflow. That's why superhuman go caught my attention. The problem isn't that people don't want to use AI. It's that most AI tools expect you to stop what you're doing, open another tab, start from scratch and explain the context every single time. Superhuman go flips that around. It's an AI chat that's already up to speed right there when you need it and it works inside the tools and websites you already use without switching apps or losing your place. It's from the makers of Grammarly and whether someone on your team is drafting an email, summarizing a long thread or getting ready for a meeting, the help is already there. That's what really drives adoption. When AI works where your team already works, people naturally use it, less friction, more consistency and more time spent on the work that actually moves the business forward.

25:35If you want to see what that looks like for your team, check it out. Find out more at superhuman.com. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online makes sense? There's no place like Chrome. Check responses set up require compatibility and availability varies 18 plus. But the question is, could that also be dead money for another three years? In which case, you shouldn't about the deal just because it wasn't the bottom if it wasn't going to turn around. Do you understand the point I was trying to make? Especially if you understand IRR, internal rate or return. Yeah, exactly. Yeah, you didn't lose money. You're going to make money, but if three years, your money sat flat. But dead money does kind of bring down your IRR, so you're better investing in a debt fund. 100%. I run a debt fund. So there you go.

26:36Nice. Anyways, though, so I was setting up a, so my critique would be, so then why is, and where I want to go with a show is how do you convince? Because I am for the record, that was like a hard steel man argument against you. But I am personally someone who is in being able to the argument that it might be time to get back into the pool. And therefore, however, an operator getting back into the pool doesn't mean much if they can't convince their LPs to come along with them. 100%. So, so let's continue on this conversation. So what I would say, I don't think it's a right time to try to convince someone to jump into multi-family. But I think it might be the right time to try to work with current LPs even if they've had losses over the last experience. So I'd like to start this experience. Experience, experience. And the reason there is the experience LP can see what happened over the last five or six years. They can see the story that we're told. They can see the operators that we're investing with.

27:38Some of them starting in post GFC, starting in 2012. That's when multi-family went on a bull run all the way up to 2019. And then it's it paused there for a bit. And then also obviously 2020 COVID it paused there and then it started going on another bull run again after that. But they lost a lot of money on the tail end of that. So a lot of the make a lot of LPs, a lot of investment firms made insane amount of money. 30 IRR over that period. So you have to just look at it. You can see that we're going through these cycles. You can see that the deals that are being purchased are way less. And like for example, a deal that we have under contract in DFW in in Lewisville. The deal was purchased in 2022 for 25.5 million dollars. I did pick up the market for 25.5. The current seller put an order three million dollars in capex renovated 70% of the units, which is 150 units, so 70% of the units. And they're all in basis is 28.5 almost 29 million. I'm doing half of a piece of paper while you're talking. Okay. We have it under contract.

28:38We have it under contract for 23 million. There are no price from Arbor in 2022 as of today is 22.7. So they're getting they're walking away with $300,000 after that. So so when an experienced LPC is that he's like, hey, I might have not invested in that deal. That all the LP equity is getting wiped. But I did invest in in other deals that the LP equity got wiped. Here's my chance to recoup and the same market cycle that hurt me. Now I'm going to write the wave coming back out of it. That's how I would feel as an LP. That's some of one of our experience LPs are telling us. And that's understanding the way that the market cycles work. Okay. Agreed. It will come back. But what are to carry the metaphor? I love carrying the metaphor. What are the title forces? That are going to create this new wave. And what what gives us the belief that the tide is changing. So I just always type metaphor. Got it. Well, 100%.

29:39So so I would say I would I would try not to use a new wave analogy where we're going to go on this another bull run. I would say that for example, on our deal, like I said, as far as our rent growth assumptions, as far as our exit cap, we're being as conservative as possible. We're putting conservative debt on it, which is another reason a lot of these LPs lost are money and a lot of these syndicators got in trouble because they put three year high octane debt on their deals. Yep. And after three years, they basically the valuations were down. Their income was down. Their DSCR was down. So they had to they had to sell like the current seller who's being forced to sell to us. So my argument is that we have conviction in the deal. We have conviction in our in the market. We're in we see the fundamentals that exist. We see the demand that exists. We see the absorption for supplied us online. We're buying this at 150K a door approximately. The market doesn't have to do anything extraordinary for us to be able to double our money over the next five years. The market just has to chug along normally.

30:41Yeah. So yeah. I agree with that, especially because like at so I'm a fund of funds guys. So therefore I'm an allocator. You know what I mean? I'm not a buyer. I'm not operating these businesses, apartments are businesses. Myself. But I am starting to see deals where it's it's like you said. It's a good return going in and that we do not have to count on any miracles or any rent growth or even like in a lot of these cases rehab where you're just like, hey, we're why and it's another Texas deal that I actually just looked at from Odeleon in the BEC in a circle. She's got like 8% cash on cash going in. And I was like, dude, all on that. Like it doesn't have to go up. Like I don't there's they have a light value I'd plan. But I have of my mind is like don't even do the value I plan. Like you're 90 or at least or at least your positive leverage going in day one. At least right at the bare minimum. Yeah. Well, and I'll take like I think getting paid 7% to sit on some real estate is a really great

31:44optionality. Like, absolutely. Like like like then you're being paid to hold it. Well above for a can of bank account from a dead money point of view. You know what I mean? And number two, I will admit that there is a lot of positive optionality in the next five years. There's a lot of places where that deal could dramatically outperform that 7%. But even if it doesn't, I'm more than happy to own it. Like that's where I'm at with multi-family today. And I would imagine that your LP is in a very similar position where you got to say like, you're fine going in. And this is a good place to hold your money today. And there's a lot of really good things that could happen if the cycle actually sits here in reverses. But that all of that is is cherry on the top. We're happy to own this asset today. Exactly. Exactly. Well said. You should bring you on as you know, invest in relations on this side. Oh, dude, I love so. Yeah, awesome. So yeah, I mean, we discussed that. I mean, I would love to maybe touch on kind of the LP psychology these days as well.

32:48What's been taking place? Yeah. What are you seeing in these conversations? Yeah, we're seeing we're seeing. I mean, the, the, the, the, the new LP is coming into the space. They're very curious. They want to learn about the space. So they might have not been through the process of losing equity or through the cycles that, that has gone on. So they're coming in more curious learning about the deal, understanding that there are options. A lot of LP's also understand that they can self-direct their retirement accounts into syndicated deals without a tax event. Canadian investors also, they can do it as well with with us CPI. We've created a vehicle that allows them to self-direct their registered funds. So that's been a more on an educational side for newer LPs. But, but yeah, when it comes to older, you know, more experienced LPs, they've been through, they've been through the ringer. So there is a level of PTSD. There is a level of the snake bite that they've had. So they're very hyper. And a lot of money, but liquid. I'd say it's even worse than that. Like their money is tied up.

33:48Yeah, but some of these high income earners are consistently making money, right? And they need to consistently find a fine room for it. Some LPs, yeah, you're right. They just recycle the same funds that are allocated to the alternative space. The other point is that now financial advisors, who a lot of high income earners have as their consultants advisors, are learning more about the space. They've seen what has happened because they get their, they got their finger on the pulse of what's happening with their investors accounts and so on. And a lot of those guys are saying, hey, that advice is do not invest in alternatives. Because financial advisors also don't get paid for any alternative options on, on their investors' books. They get paid on that. They actually are prohibited by law from even recommending it. If it's not on platform. So that like by law, they have to say no. Like they, they're, they're not even allowed to give it a fair shake. If it's not on their shelf, yes, they can't. But, but but then yeah, to go and actually kind of shoot it down and say no,

34:50don't ever invest in this, you'll lose your money. So now financial advisors also have enough ammo to go to their clients and say, hey, look, look at all these deals, look at all these funds going belly up, look at all these money being lost today. Honestly, if you look at this anecdotally, there is blood on the streets. And in real estate, historically, the best time is when you, when you, you buy is when there is blood on the streets. But paradoxically, the hardest time to raise money. Exactly. It's like such a cruel irony. You know what I mean? That like, oh, money's flowing. It's so easy to raise. Well, guess what? You are almost certainly overpaying. Like the fact that it is easy for you to raise money means it is almost, you are almost certainly overpaying. And then conversely, when the deals are great, impossible to raise. It is literally like the cruelest irony of this business. One thing I've noticed over the past years that almost everyone says they're using AI. But when you actually look at how it's being used across a company, it's usually just a handful of people who have really embraced it.

35:50Everyone else falls back into the same old workflow. That's why superhuman go caught my attention. The problem isn't that people don't want to use AI. It's that most AI tools expect you to stop what you're doing, open another tab, start from scratch, and explain the context every single time. Superhuman go flips that around. It's an AI chat that's already up to speed right there when you need it. And it works inside the tools and websites you already use without switching apps or losing your place. It's from the makers of Grammarly and whether someone on your team is drafting an email, summarizing a long thread, or getting ready for a meeting, the help is already there. That's what really drives adoption. When AI works where your team already works, people naturally use it. Less friction, more consistency, and more time spent on the work that actually moves the business forward. If you want to see what that looks like for your team, check it out. Find out more at superhuman.com.

36:51This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online makes sense? There's no place like Chrome. Check responses set up require compatibility and availability, very 16-plus. But the process for raising capital has changed as well. Keep in mind that true syndications and multifamily are otherwise, they really started since 2013, jobs act that was passed in the US that allowed the process and advertising. And soon after that, with the growth of social media, particularly Facebook, it allowed for paid ads to be this unbelievable driver, I joined a group, I'm not going to say any names, but I'll just give a bit of color on this. But the guy was a chiropractor and he got involved in the multifamily syndication space. And he was raising hundreds of millions of dollars.

37:54Like it was absolutely mind-blowing. So we connected with him. We actually actually ended up investing in a couple of his deals that didn't go well. Thank God we didn't lose any money. But very close to it, we lost a lot of, you know, obviously the GP gets paid the carried interest. So we were hoping on that carried interest from our side and our LPs to participate. But so we acted as a fund of funds, but the deals did not do well at all. But this guy, while we were going through that process, and while he was winning and doing really well, we went to one of his masterminds that he had held in their offices in the Carolinas. And when we went there, I already knew from the grape wine that all of their, I would say 95% of their leads was coming from paid ads. Right? So he was holding this class, this course, this kind of three day course on how to raise capital. And at no time throughout the whole process, he said a word about paid ads. Everything was all these other strategies that might gain you one or two investors. But his majority of his investors was coming from paid ads.

38:54And when he taught us how to raise money, he never said a word about paid ads. So it was like, he was hiding that as like his, his, his, you know, process, his, you know, his, his secret process and how do you raise money? But yeah, those days are gone where you're spending a couple of bucks on paid ads and are able to raise tens and not even, not even, you know, to the tune of hundreds of millions dollars in capital from paid ads. Those days are long gone. The cost of capital is so high that it doesn't no longer make sense to be able to run paid ads, to be able to close that investor. I heard the growing rate, if you're doing well on ads these days is 6% cost of capital. And that's hard to get. And that to me, unacceptable to me. Yeah. And then, but you also need the internal team members, you need to have your appointment centers. It's just media. Let's just meet your closers. The closers, you need to have a perfect system because there is so many other groups out there. There's so many of these investors that were burnt. So yeah, the process of raising capital is just so difficult. But I would say that resilience really wins the game.

39:56It's, are you here to do a few deals and make some money or are you here to build something great and put your name and reputation on the line? Like, for example, with us at CPI, on our most recent deals are deal Atlas at Lewisville, the DFW deal that we have under contract, is named after my son, my first born Atlas. So it's something that we want to build for our kids to take over the company one day, a company that can create a lot of jobs and can be a build a strong brand, create housing, create great communities for people who live in our communities. We also are doing development, build to rent. So to build more supply in the US, for housing for people. So to have those types of vision, rather than making money today, is a sponsor you want to also partner with, rather than somebody who's just looking to make a buck. You know, I think there is a, so when I, like everything you said about, you used to run some Facebook ads, you used to raise a bunch of money. Like, I've talked to some, at this point, I've talked to either on the show or in person, a lot of people who did very well in the last cycle.

40:57And then especially like offline or occasionally online, they're just like, God, so hard to raise. I used to just run a, send one email and fully subscribe. Do one webinar, fully subscribed. And I think it's a versus, I would say, in my entire career has not been like that, especially since I started, like, started raising capital in 2022, or 2023, I said, you know, and that the thing is that those days are going to come back someday. My opinion, because everything moves in cycles and everything like that. But that if you are able to raise today with how hard it is in a highly, like, LPs are highly cynical. It is the hardest to raise money than it's been in anyone's memory. I mean, other than like, oh, nine, you know, which is the last time good deals were out, but that when the cycle turns, if you can squeeze blood out of a stone today, I think that anyone who's like figured out capital raising in 2026, your job is just going to get easier.

41:57Like, and that you will be absolutely able to clean up. Let me ask you, let me ask you something here. This has been the first time ever on a podcast. I'm asking a question, but I want to analyze this with you. What do you think is going to happen to syndication groups, investment groups that bought deals starting in 2013 and did unbelievable, we well in that time and made a lot of money, 20, 30% IRR for their LPs in that time. But by 2020, 2021, 2022, they got over zealous, they got, they got aggressive, they got prodigal with their LPs money and they lost a bunch of money. Can they come back? Is there a chance for redemption for groups in that way? We started in 2019, so I'm not talking about us. I'm talking about other groups. Thankfully, we have not lost investor money. But I'm just saying, when you look at these people who rode the initial wave starting in 2013 and did really well because, you know, real rising tides, lifts all ships. But as soon as a hard time came to loss all their LP equity,

43:00will their investors jump and give them an urge? I can tell you what, I know, I'll give you two answers. I'll give you the, I will answer the question you asked and then I will go above and beyond and say what they can do today and what I am actually seeing in real life. Number one, eventually they will be able to recover their relationship because time, time passes, you know what I mean? What that's going to require is I think restructuring the way they do deals today, because the only way to get your reputation back is you got to like get back in the game and post some wins and then also be incredibly transparent about here's what we learned and here's what we're doing today. You know, that like where where the game has changed and then second of all, be able to turn those promises into results. Because then that's one thing to say, oh, I got punched in the face and I learned and I'm doing things differently this time. It's a completely different thing to say to put that into past tense and say, and yes, and then we started performing again. And that that will eventually eventually the newer track record, though it will be

44:02very hard fought will eventually get to the point where you have rehabilitated your reputation. Now, what the smartest operator, however, that's not a very satisfying answer either, because I'm basically saying like, yeah, life is going to suck for years and that you have to go like, I'm sorry, but be very a shell of the amount you're able to raise before and tell you manage to turn this around. That said, the smartest operators and I have to be very careful about who I'm talking about here. The smartest operators who are in that position right now realize that they still have one asset. What they still have is distribution in terms of like they can get in front of people, whether that's through their email list or old connections, and that well, they may personally struggle with turning that distribution into checks because of all the black eyes and the track record and everything like that. What I'm seeing them doing is finding other groups who either sidestep this or are newer and therefore don't have the bad

45:07baggage and then they are essentially acting as a proxy for the new group today. And by saying like, hey, you know, everybody knows I'm out. I've lost some money, but you know, I met this guy and he crushed it through the whole cycle. Everything is going great. Maybe you should talk to this guy. And then of course, working out some sort of relationship with said new person, whether that's a fund of funds or whatever. I'm seeing some very smart, very well connected people go down that path. How about redemption for their long-term investors? Should they reduce or eliminate any carried interest on ongoing deals to recoup? No, on any new deals that they do for investors that they've lost money on? I'm actually glad that you brought that up because I had that I had like five things I was going to say and then I got out three as usual. I think that to raise money and multi-family today, you're also looking at a lot of different structuring where you are and what I

46:09mean by that is you have to put the you have to give the LPL a lot more generous terms. And that that comes down to really two axes. Number one is protecting them from downside. And so I think that like if I had to get a multi-family deal that I was feeling really good about if I had to get that across the line with the capital raise, what I would do is I would put my own money at risk first to demonstrate to LPL. And and you know, we're talking about capital stack trunches. Sorry to go to go from the clouds into practical advice. Like the guy who won the pitch slam at the last BEC had 30 million of his own money as common equity and then was only raising preff man talk about and he won and it was and I saw the pitch. I wasn't judging the panel, but I saw his pitch and then like six others and I was like it would be stupid if anyone but him one. And of course he won overwhelmingly the pitch slam and it was because of the look of that structure with that. He should have he should have he should have won pitch slam just because he had 30 million dollars. Yeah, yeah,

47:13his own money, right? Like I think that's the kind of deal that would get a skittish LP off off the fence. Number one, because like look, you're putting your money where your mouth is like he would have to lose 30 million bucks before this preff didn't even get paid. And that that is kind of like so the answer is yes, I think that the deal should be restructured and there are ways of restructuring the deal where these days you have to transfer as much of the risk off the LP as possible and I think it's the right thing to do because it is a risky time to be buying. And that if you really feel this conviction and you're going to go raise a bunch of money and put your name on something, I think look really hard at what amounts to preff equity structures or like uncommonly generous waterfalls. But I think it's not even about the split because people don't care about the split. I think that the LPs want to know that you're going to lose your money first and that that goes a long way that goes a long, long way in convincing an LP that you believe this is a good deal. And that you are in the ship with them. There was that good answer? It was a perfect answer. No, absolutely.

48:16I think we covered that. Yeah, I think that that's what because I heard that same advice from the guy who runs Family Office Club. Well, it was very similar, very similar advice. I like to look through themes and things, you know what I mean. And what he said is that if you're going to a family office and he's talking about people trying to raise JV equity, you know, you're going to go find like one LP and they're taking the whole project. You have to structure that as like a heads I win or heads you win, tails I lose kind of deals. Like that's how you get a family office across the board is you're just like, hey, you can't lose in this or that you you're interests are absolutely first, second and third. And only if we perform absolutely perfectly, do I get mine? I think that those are the deals that get funded today. Like especially if within a cynical environment, that's something that you can do to like convince us get a highly skeptical L.P. is I think through deal terms. And that what's implied there is probably lower returns for the investment for the investor, but that's okay because they're there's their cynical and risk off

49:20anyways. And so they will take a safer 12 preff versus like common at 17 like I would today with my own investors money. I'd I'd way rather take the preff at 12 than common at 17. If there's 20 points of common ahead of me all day. Yeah, absolutely. Yeah. So what are are you still raising most of your money up in Canada or how does that side of your business work or is it on both sides? On both sides we raise on both sides. So we have our we create a project specific entity for for that project. So is a project specific fund. So US limited partnership and then we create our Canadian basically acts like it's as a feeder fund or Canadian fund acts as a project specific feeder fund only into that one deal. So yeah, today's 70% of our capital comes from Canadian investors, 30% from US. That number was growing at a faster pace on the US side. So we knew that the US was going to overtake Canada at some point. But then we launched launched this fund in Canada that

50:23allows us to raise capital from investors who want to use their retirement accounts, which has now put some rocket fuel on that capital raising Canada because people can self-direct their retirement accounts into our deals without attacks events. So that's been great on that front. Oh, I imagine. I mean, that's that's what you need is like it. Well, there's another famous Canadian real estate investor, Marcin. What's he always say? Like you're unfair advantage. Yeah. Like if you go the extra legwork to make it so you can use retirement funds for Canadian investors and that the vast majority of products can't like I'm not surprised that it is blowing the doors off for you guys because you deserve it. Like man, you got yeah, well done on that. Yes, for sure. It took us a couple of years, but yeah, it's just like getting into the R.A. channel in the US like where I interviewed a guy and I was like, okay, let's be real. How long does it take? How much AUM do you need? Because how much is it going to cost and how long is it going to take to penetrate the R.A. channel? And he's like 400 K and 18 months. I was like, thank you. Like what a clear answer. You're

51:25just like, got to spend the money and put in the time. And then the rewards are on the other side of that wall. You know, when I was like, yes, yeah. So anyways, August, if people want to learn more about CPI capital or or connect with yourself, how can they find you? I'm very active on LinkedIn. August, Benia is on LinkedIn. I'm a LinkedIn top voice. So reach out to me anytime. I've created a lot of great content about real estate, economy, multifamily, BTR on there. And then our website cpicapital.com. A lot of great information there. We have our underwriting model. You can download. We have our webinar masterclasses that are on our website available for you to only access from our website. So yeah, reach out to me. Tell me you see me on the show and love to connect and chat. Yep. Thanks for coming on. I'll see you next time. Thanks for having me. Did you know that mosquitoes have killed almost half of all people who have ever lived? Today, people are fighting back. With support from the Gates Foundation, American scientists and

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