How to Scale Commercial Real Estate Podcast with Sam Wilson On the New York City Podcast Network

The Right Mindset For Raising Capital

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Ariel O Diaz CCIM is the Managing Principal of Trajan Capital LLC and CEO of Trajan Commercial Real Estate Inc He and his wife Claudia oversee the day-to-day operations of their family-owned commercial real estate investment and consulting firm based in Miami FL He has achieved the distinguished Certified Commercial Investment Member CCIM designation which only six percent of all real estate practitioners across the globe have the privilege of holding He serves on the CCIM Miami Dade Monroe District Board of Directors In this episode Ariel discusses his approach to raising funds breaking through limiting ideas and how he s been successful in commercial real estate 00 01 – 05 08 Getting into Commercial Real Estate Investing Started as a real estate broker 20 years ago which led to his property management career Built his own commercial real estate brokerage with his wife Commercial real estate and brokerage are challenging but doable with the right team 05 09 – 09 26 Teamwork in Business Breaking down the fund side of his business He teams up with different partners from other states allowing them to operate without starting all over again Find out why Single Purpose Vehicle is the fund structure that works for his team The long-term benefit allows attorneys to lower their price 09 27 – 17 14 Build Relationships Build Business Turning active investors into passive investors Break limiting belief in raising capital by presenting investors with opportunity instead of asking for money Talking to more people increases your chance of finding good opportunities 17 15 – 19 17 Closing Segment Earning the Certified Commercial Investment Member CCIM Designation Reach out to Ariel and check out his latest book The Four Pillars of Real Estate Links Below Final Words —————————————————————————– Connect with Ariel on LinkedIn for passive commercial real estate investment opportunities Connect with me I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below 00 00 00 Ariel Diaz Most people I m not gonna say everyone and everyone structures their business differently But definitely we have noticed at least for ours definitely you know everything matters So you know you have to have the good articles you have to have a good website you have to have all those things But at the end of the day you ve got to call people and let them know even if you sent them an email hey did you receive that email I have an opportunity now I don t know if it s gonna last you know we are getting reserves coming in And just that simple call 00 00 42 Sam Wilson Ariel Diaz is an investor himself that creates opportunities that he shares with his clients so everyone can participate in a high-quality asset that outperforms the overall market Ariel welcome to the show 00 00 53 Ariel Diaz Welcome Thank you 00 00 55 Sam Wilson Hey you know there are couple of questions I asked Three questions I ask every guest who comes on the show Ariel in 90 seconds or less Can you tell me where did you start Where are you now And how did you get there 00 01 04 Ariel Diaz Sure Well I started 20 years ago as a real estate broker I assisted people to buy and sell residential properties And that led me into a property management career And about 15 years later I started my own commercial real estate brokerage with my wife and I ventured into commercial real estate really enjoyed that I ended up buying multifamily properties And then little by little we scaled and by actually looking for better opportunities because I m here in Miami Florida we were trying to invest that estate and we ended up partnering with an operator I ended up investing in that project And I brought a couple of my close clients along And that s how I started actually a fund and investing in other people s projects 00 01 56 Sam Wilson 15 years you say as a residential broker 00 02 01 Ariel Diaz I was 15 years as a resident Well give or take So in 2014 I transitioned into strictly commercial real estate I had done one multifamily project And and I fell in love with it I was really that s what I ve always really wanted to do And I said You know what I m never gonna do residential again And I m just going to do commercial real estate And then it just went on from there And we did industrial properties And we got involved in a retail center And next thing you know we were just focused on commercial real estate And when I say we it s myself and my wife because she s a commercial real estate broker as well 00 02 38 Sam Wilson That s awesome Do you ever look back at your story and go Why did it take me so long to get involved in commercial real estate 00 02 45 Ariel Diaz All the time all the time 00 02 46 Sam Wilson So what was the lightbulb moment Like when were you When did you go oh my gosh like this is 100 What we have to be focused on 00 02 53 Ariel Diaz I always wanted to do it The thing is I was very fortunate I had a mentor but he didn t like commercial real estate And he told me you know you re just gonna have to get involved with a bunch of attorneys and all these rules regulations just stick with residential you ll be able to do that it s a lot easier And I guess that just goes that you can only grow as much as your mentor allows you to and he was extremely successful and no knocking that at the end of the day I really feel it just depends on what you want But one day I just ended up doing it anyways And then And then that s when I obviously started my own brokerage because they said Okay I m gonna do commercial real estate let him do residential And the funny thing is just this last year he was calling me for advice on getting into a commercial real estate deal 00 03 40 Sam Wilson That s awesome That s the what that s the way it goes Now do you still own and run the commercial brokerage 00 03 46 Ariel Diaz Yes We re still actively running an operating it here in Miami Florida 00 03 51 Sam Wilson What have been some of the challenges in growing a brokerage But it also sounds like you know you guys have started a fund and you re investing you know a lot in multifamily So what have been some of the kinds of challenges of running I mean those are two obviously compatible businesses but very different businesses 00 04 08 Ariel Diaz Yeah they re extremely different It s basically two monsters but at the end of the day running the brokerage has taught me a lot to also run the fund And it s just about putting systems and processes into place Now luckily again I do run the brokerage with my wife so she s had to take on a lot more responsibilities and deal with a lot more of the headaches that I used to be doing So if so to allow me to more focus on the funds But really what we ve been able to do is work with them together So a lot of our investors that invest in the funds come from past clients from the brokerage So that s really been able to give us I guess it s an extra layer of comfort knowing that we already have people that understand those know us you know have worked with us before And trust us to get inside something so complicated as an investment fund 00 05 08 Sam Wilson So break down your business for me today On the fun side are you guys partnering with other operators Are you know building the fund and then acquiring and owning and running yourself Or what s the structure there 00 05 22 Ariel Diaz Right So we owned and operated our own here in Miami But as you know as most people know this is an international city it got extremely competitive And to be able to scale it really got you know where the cap rates and the returns weren t really aligned with what we wanted to do with ourselves with our own investments and with bringing on partners So what we started doing was going to other states mainly Arizona and I could talk to you about that if you want of why we chose Arizona But by doing that we realize you know what the best way to do this is we re going to just meet up with an operator well we ve met up with plenty of them But we figured out that would probably be the best strategy because to get to know that market as well as someone that actually lives there and operates there you know to get to know the property managers to basically build our team all over again would take so much time effort and energy for most So it was just really fortunate that we were able to find this particular group and and that s when we decided just partner with them And we got advantageous I guess you could say splits for investing with them and bringing a large sum of money And then you know that s basically how we were how we structured it And then in order to get those ready to get those specific splits we had to bring in a larger amount and then that s when we got some of our clients involved 00 06 52 Sam Wilson That is really cool There s so many ways that funds can be set up Why did you choose the particular structure of the fund that you have 00 07 04 Ariel Diaz Right so we created let s call it a single and I won t get too technical but it s a Single Purpose Vehicle And so it was just a particular you know in layman s terms it s just an LLC that is just going to invest in this particular project Right So but what was good was let s suppose that we were just going to invest 100 000 we were going to get a 70-30 split But since I was able to raise money I said well if I bring in at least a million dollars will you give me a preferred rate And the operator was okay with that because now he s just dealing with one group that has a million dollars instead of 10 different people with 100 000 Okay so then that s when I got my investors involved And we were able to raise that million dollars and we ve done an 8020 split And a couple of other advantageous things If if the property performs a little bit better then we also got you know most investors get like a 5050 split you know after a certain of return has been reached and we were able to keep that 80-20 Split throughout the entire investment 00 08 14 Sam Wilson Wow Okay cool That s that s I love that one of the challenges that I have found with SPVs is that they add another layer of expense to a deal that may be you know it depending on the size of the deal can almost become cost prohibitive How have you overcome that 00 08 35 Ariel Diaz Yeah well that s just networking and getting to know a lot of different attorneys out there and just being able to feed them business then you re able to get a discount And if they re familiar with that particular operator and they understand you know the way that you know the SEC regulations and everything that has to deal with you know creating this fund you can typically work out something like everyone everyone s running a business right So if you re able to offer them something though their attorneys they re able to lower their price because they know that they re going to benefit in the long run So luckily I was able to lower the price on this particular deal promising them more business in the future and also bringing them business from people that we know 00 09 25 Sam Wilson Right Talk to me about the capital raise process for you guys I mean it s really interesting Of course you ve got clients on the brokerage side that are looking for active investments How did you broach that conversation with those clients of yours saying hey by the way I ve got an opportunity over here that you could possibly invest in 00 09 42 Ariel Diaz All right So it s actually trickier than you think Because yeah they are looking for active investments And that s the keyword They re typically active investors So when you try to explain to them how the passive investment side means they re gonna get good returns And typically they re able to diversify into other asset classes into other markets this is all great But yes as a passive investor you re not going to be in full control of that property right and of that investment So that s where they typically have a little bit of an issue in issue with but as they really start diving into it and explaining it to them you know not everyone jumps on board but a good enough amount of people that really understand it and really realize wait a second this is actually very beneficial And I put myself in their shoes because I was an active investor and I still am and I believe they you should have a combination if you feel comfortable being an active investor you should definitely be an active investor as well But the way that I saw it was hey I m able to diversify in a new market I m able to diversified potentially in other asset classes not put all my eggs in one basket why not test this out do it And it s it was very viable So as I explained to them what I went through they kind of feel the same thing And they re like Okay so let s go ahead and let s give it a shot And the good thing is you know you could just start off with 50 000 100 000 So it s not like they re putting in the full million dollars or whatever they re used to putting into an investment they could test it out with just 50 000 100 000 200 000 whatever they feel comfortable with 00 11 23 Sam Wilson Let s talk about that capital raising a little bit more what s been one thing or one kind of limiting belief maybe that you ve had around raising capital and how did you overcome it 00 11 34 Ariel Diaz Right Well the limiting belief I try to stay away from them but I would say is just how much money you can raise Right And it s it s a difficult situation because you know the operator is counting on you to deliver right So if you re telling them Hey I m gonna bring in a million dollars or 2 million and that s the reason why they re allowing you to come in into their deal right because they ve they ve done pretty much everything they really set it up perfectly for you right they found the mismanaged property they re going to be operating they re the ones that are going to be renovating it running the whole operation and they re allowing you to take part in this And not only that they re gonna give you a better deal than they really would give them to themselves or to their own investors because you re supposedly bringing in a large sum of money Well there s pressure there And so I think you know that can mess with you mentally But you know you just go through it and you just realize okay you know really the sky s the limit the more people you talk to the more it s the more people are going to understand it And the reality is that people are looking for these type of opportunities And once you really take it like that like you switch it around you re not asking them for money for your fund right It s more of hey I m bringing you an opportunity I m giving you an exclusive opportunity to invest in here That s when your mind switches And that s when you re able to raise a lot more money that s for sure 00 13 07 Sam Wilson Oh it certainly is for sure And I take my own there I ve had some of my own capital in a retirement account sitting idle I m embarrassed to say it even on this show but you know I try not to hold any any cards The best I mean it s been sitting there for like eight months right And I ve had deal after deal after deal come across my desk And I m like oh yeah I need to do that I need to do that If I m sitting in that position with money sitting in an account doing absolutely nothing You know there are other investors out there in the same position that are just waiting And I think what you said there was really key so the more people you talk to there was a call I was on here recently someone and they said somebody effective Well I sent the deal out and I just didn t get any feedback on it I said Well did you pick up the phone and call everybody Did you dial their number on your top not send attack Did you call them No I haven t done that yet I m like right And so the guy that called me yesterday he was like Hey and it s somebody it s a friend of mine for you probably know him here in the business as well And he said Hey you know I got an opportunity And I said Great done Oh good You can meet my need to place capital and you re we re on the phone and we re getting this deal done Because in that s what I think people over they just don t realize that I think on the capital raiser side of things that we ve got to be proactive in those outreaches So I love what you said there the more people talk to you 00 14 527 Ariel Diaz Yeah I think it s very few people have it down packed where they re just you know you re gonna have people calling you and saying Hey can you get me into a phone Right I think people get confused And no matter what even if you have the coolest website the cute the best articles out there Most people I m not gonna say everyone and everyone structures their business differently But definitely we have noticed at least for ours definitely you know everything matters So you know you have to have the good articles you have to have a good website you have to have all those things But at the end of the day you got to call people and let them know even if you send them an email Hey did you receive that email I have an opportunity now I don t know if it s going to last you know we are getting reserves coming in And just that simple call Because these guys are busy you know so maybe even if they met to look at your email and they want to invest with you and everything that doesn t mean that they re going to definitely get to that So by you calling them even if they don t say yes on the phone right there it at least puts an added I guess not pressure on them But add a reminder for them to actually go and do what s best for them which is to look at your opportunity and invest with you 00 15 35 Sam Wilson You said it man You said at one of the things that I saw there in your bio was that you have your CCIM designation Tell me really quickly No if I had one other guests I don t know what this will be 670 episodes a mod by the time you come on your lead one other guests I think that I can remember talk about that Tell me why you did it And then what the advantages are to you personally for having that 00 15 52 Ariel Diaz Well it is a global standard for professionalism and commercial real estate I always try to reach the top of whatever I do So I do believe in getting highly educated in anything I do So that was the main goal it was just a challenge that I put to myself And I said if I was going to do it I was gonna have my wife do it as well So I challenged her as well So we were able to do it together which is great But you know like I mentioned to some people what you said that not too many people that you ve had on the show had and that s because only 6 of the world real estate professionals have it Right So it s very unique cream of the crop type of people that you get to network with him So I went into further education but the value really was meeting all these other top quality real estate investors and commercial real estate professionals that made me really stick around and stay with it and say hey you know what this is something valuable to get Now I don t think that everyone should go out there and get it But I do think that everyone should at least take the CCIM one on one course and at least dive into it Because just that one little course was there s four main courses will teach you so much more than what you think you already know And it does take that education to another level 00 17 14 Sam Wilson That s really really cool Last question for you You ve recently written a book Can you tell us a little bit about that 00 17 20 Ariel Diaz Sure So it s called The Four Pillars of Real Estate Feel free to get it It s on Amazon and on my website pillarsofrealestate com It s also available right now for free But yeah it was a process It was something that I ve always wanted to do As I said I ve been doing this for 20 years And it s something that I wanted just to get out so that people can understand why they should be investing in real estate I m not telling people to invest in real estate just because I m a real estate broker or I m raising you know money for my clients There is the true value of why you know that there are so many millionaires you know that got there because they invest in real estate And I basically break it down into four main reasons of why someone should be investing in real estate 00 17 20 Ariel Diaz Man that s really cool Ariel thank you for taking the time to come on the show today From a residential broker all the way to opening your own commercial brokerage into then investing in multifamily assets Starting a fun you ve given us lots of things to think about even taking the one-on-one CCIM course I think that s absolutely fantastic And we ll also look for your book there on Amazon and make sure we link to that in the show notes If our listeners want to get in touch with you and learn more about you what is the best way to do that 00 18 31 Ariel Diaz And just go to the website www pillarsofreal estate com And if you want to retrain you can go to the website www dot pillars of real estate com invest 00 18 46 Sam Wilson Fantastic Ariel thank you again for coming to the show today I certainly appreciate it 00 18 50 Ariel Diaz It was awesome Thank you Sam Click here to visit this podcast episode