Best Ever Tweet:
Carlos Vaz Real Estate Background:
-Co-founder and CEO of CONTI Organization, a multifamily real estate investment company
-Portfolio of over 1,400 units his first year in the multifamily business
-Been involved in over $400MM of real estate transactions
-Member of the Urban Land Institute (ULI) and the Young Presidents’ Organization (YPO) Currently enrolled in the Harvard Business School OPM Program
-Based in Dallas, Texas
-Say hi to him at www.contiorg.com
-Best Ever Book: Good to Great
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluffy stuff. We’ve spoken to Emmitt Smith – yes, he develops real estate, believe it or not; we’ve spoken to Barbara Corcoran from Shark Tank, Robert Kiyosaki, the author of Rich Dad, Poor Dad, and a whole bunch of others.
With us today, Carlos Vaz. How are you doing, Carlos?
Carlos Vaz: I’m doing great.
Joe Fairless: Nice to have you on the show, my friend. A little bit about Carlos – he is the co-founder and CEO of CONTI Organization, which is a multifamily real estate investment company. He had a portfolio of over 1,400 units his first year in the multifamily business. He’s been involved in over 400 million dollars of real estate transactions. He’s a member of the Urban Land Institute and the Young Presidents’ Organization, which is an organization I’m currently in the process of getting into. He is currently enrolled in the Harvard Business School Program, and he’s based in Dallas, Texas. With that being said, Carlos, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Carlos Vaz: Sure. First of all, Joe, thank you for putting this together. I’ve heard outstanding things about yourself and about the program. Keep up the good work, we need more of that!
About myself, as you can all tell, I do have an accent; I was not born in the U.S. I am one of nine kids, I’m number eight of nine. My father was a butcher and my mom a homemaker. I’m very proud of that. We didn’t have that much growing up, but it’s just that attitude — the attitude of being thankful and having gratitude for everything that we do.
So I started to work with my dad at the age of seven, going to the farm and going to the butcher shop, put myself through school, started going to law school in Brazil, but they went on a strike the first year, they went on a strike the second year… It was taking a little bit too long, and I ended up coming here to the U.S. about 16 years ago, working odd jobs. I worked at the law office as an intern, working from 2 AM to 6, loading and unloading trucks, working in restaurants during the night, and also going to school during the night whenever I didn’t have to work, and working over the weekends as well.
That was pretty much the beginning, slowly getting myself involved in construction, learned a little bit more, [unintelligible [00:03:20].21] We’re located in Dallas today, Dallas is home. Today we own almost 5,000 units in the greater Dallas area. Our portfolio now is getting close to 600 million, and I’m very proud of what we as a company have achieved together… Not just myself, but being honored to put the company together and achieving so much.
Joe Fairless: I can tell the multiple jobs while you were going through school and having jobs – that has a lasting effect on you because you went into detail about that and I’m sure it was a decent amount ago from a time standpoint. So how have you applied that mentality to get you to where you’re at now?
Carlos Vaz: Well, I think sometimes people complain — it’s so easy for people to complain about what they have in front of them… “I hate my job, I hate this [unintelligible [00:04:13].13]”, but sometimes you need to look into gratitude. Even when I was working as a waiter you never saw me complain; I was thankful for what I have. If I don’t like this job, I’ll suck it up and see “What can you do differently to change your position?”
If you work at a job that you don’t like, and you get home and you just watch TV and you go to bed, and the next day you do exactly the same thing, guess what? Five years from now, where are you gonna be? Exactly in the same place. I think at the end of the day it’s up to us to make decisions, right? Not because the world is not fair… We need to look at our own habits. Many times I constantly look at my habits and say “How can I improve? How can I make things better?”
When I look at the jobs that I used to have, even working as a waiter or working on a construction site in all different places, I was thankful for what I had. “This is gonna give me some money so I can take another class” or “This is gonna give me some knowledge that I can take somewhere else.” That’s how I approached every job that I used to have, until I have my own company now.
The way that applies here is that if you come and you work for CONTI, you really need to enjoy what you do, because everybody inside of the company really enjoy what they’re doing. You can see the passion, which is actually one of our core values. You can see the passion in everybody. I think that’s what sets apart — how can you find your passion eventually and live it?
Joe Fairless: I love your approach. You said “It’s easy to complain, but it’s more important to have gratitude”, and even as you were waiting tables you were grateful, and it’s more about what are you doing differently to change your position, and it boils down to those habits. In addition to have the macro-level gratitude approach, what are some specific habits that you have that have helped you get to where you’re at, or maybe just daily habits now?
Carlos Vaz: It’s interesting, that’s something that my wife and I [unintelligible [00:06:22].12] and I told her “I need to put something together, because that’s how I see some of the habits and the way that I was raised, and being thankful for…” — first of all, you never see me complain. I think that it’s not part of who I am; I don’t have enough time to complain. If I were to look at something I put together, I can come up pretty much with ten values that I live my life. That’s how I was slowly teaching my kids… They’re still young – 4 and 2 – but I’m telling them.
So I would say to me – and that’s very personal, and that’s how I live my life… I’d say these values would be 1) Faith. In my case, my faith is important, because [unintelligible [00:07:06].29]. 2) Excellence. Doing your best in all you touch. It’s not about the quantity, it’s about the quality. Sometimes people say “Well, I’m gonna do this halfway.” Really? It takes twice the amount of time and effort to come back and fix something that you didn’t do well the first time, so take the time to do well the first time around, so that you don’t need to come back.
The third one, perseverance. Again, don’t complain about the situation. [unintelligible [00:07:34].16] working hard. Number four – relationship. Be a team player and help others, and let others help you. So how can you be in a situation — because nobody wants to be around a jerk. Come on, that’s reality. Communication, right?
I think many times there’s an issue it’s because of a lack of communication. It’s not communication itself, it’s what you call effective communication.
Another one that’s important to me, number six – integrity. You always do the right things, even if it means making hard choices. Integrity is everything. When I shake your hand, Joe, and we do business, we’re gonna do something together, it’s not a contract that’s gonna put us together. That contract is just gonna be the formality. I think that you have to have the integrity to do the thing that’s important.
Another thing to me that’s important is family and country. I always say “What can I do to provide for my family, for my parents, to my mom and to my brothers?” and also I do believe that this country (on my book) is the best country in the world. Seriously. We live in an amazing country called the USA. There are opportunities every day, as long as you’re willing to wake up in the morning and go get them. So I think that it’s important to give back and help this country.
The other one is knowledge. What are you doing to pursue growth and learning? A lot of people that are gonna be listening to your podcast — I wish five years ago you were doing this thing, then I could be listening to you. There’s so many good nuggets, there’s so many things if you’re looking for learning from other people that are actually doing things. That helps me not to make mistakes.
Another one is health. Health is really important when I look at my life and everything. If I don’t have health, there’s nothing. So what are your habits? What are you doing to yourself?
And finally, commitment. When you say that you’re gonna do something, get things done, because there’s no point about you saying something and at the end there’s no commitment. When I look at some of these values and I put all of these together, those are my habits, that’s how I live my life.
Joe Fairless: I did not expect you to have a list of ten and be so thoughtful about it, so thank you for that. I’m glad we took the conversation that direction.
I wanna rewind a little bit… Correct me if this is not correct – 1,400 units your first year in the multifamily business. First off, is that correct?
Carlos Vaz: Yes, [unintelligible [00:10:04].21] My first deal was March 2008; that’s when we closed the first deal, and from then to September we were buying a lot.
Joe Fairless: How did you have the funding and the knowledge and expertise to pull that off? Because the last time I checked in with you on your startup background, you ended where you said you were flipping homes and got into some construction. That’s a big jump.
Carlos Vaz: It is. Well, I think that you need to start somewhere, and everything goes back to that knowledge. To go back a little bit, when I stopped buying houses in the greater Boston area was about May 2007. I said, “Okay, the market is getting too crazy, it’s not gonna go anywhere… It’s just gonna get very bad, so I’d better get out of the market.” So I was selling everything that I could.
Then I met some of the friends that had apartment buildings, talking to them. Everything made sense, but number one – I had to go and learn. Where can I learn about apartments? To me, I’d say one of the best places to learn about multifamily real estate — not only multifamily, but also commercial real estate, office, retail, industrial and the multifamily side is CCIM. I’m a huge fan of CCIM. Everytime someone wants to learn about multifamily, go talk to CCIM, because they [unintelligible [00:11:30].03]. So I started going to all their classes and learning more, and now look at highest and best use and demographic change.
My first reaction is “Well, I need to go to a place that’s growing faster than Boston.” I was between North Carolina and Texas, and I ended up coming to Dallas in August 2007. I spent about two weeks here and I said “Wow, this place is really home.” I really love Texas, I really love Dallas, and that’s how I made here my place.
Of course, when I moved here I didn’t know anyone, I didn’t have the equity, I didn’t know management companies, and the whole idea of “I need to start networking, networking, getting to know more people…” There’s a great book on that subject – Never Eat Alone. It’s a really great book on how to network efficiently, and not only [unintelligible [00:12:22].10] about yourself, but also help other people… And I started networking a lot in Dallas, with the idea that 1) when I move here I’m not gonna do single-family homes, I’m gonna do multifamily apartment buildings, and pretty much I’m gonna burn my bridge. Either I move forward or I move forward. That was my intention.
With that in mind I came here to Dallas, I started learning about the markets, talking to and meeting every single broker that I could meet, and then I found a broker that gave me a shot. He said “Carlos, I have this property, the bank has taken this property back. Take a look.” It was a 208 units, the first deal. I was running the numbers, everything kind of made sense, and I knew they were buying very, very cheap. I put the deal under contract; I didn’t have my equity, I didn’t have my debt, I didn’t even have the management company… However, I had that feeling that “Hey, we’re gonna make it happen” a lot, and I started calling every single person that I could, and I was able to find a group out of Utah – an amazing group that said “Carlos, we wanna partner with you.”
Of course, my first deal – the splits were not the best. We were talking about 99 and 1. We all know who got the one, [laughter] but it was okay. So at least part is easy — 99, and who’s getting the one, right? But one of the best books that I’ve ever read is Napoleon Hill, Think And Grow Rich… So you work for the knowledge, you don’t work for the money. I said, “Sure, I’ll take it, because I wanna learn.” And then I started learning more about multifamily and seeing how operations are being done.
Within not even three weeks after closing the deal, they said “Carlos, let’s do this again.” I said “Sure”, and we did it again. And “Let’s do it again”, and we did it again.
Joe Fairless: With that same group?
Carlos Vaz: With the same group. Then by September I was like “We need to hold a little, because it’s moving too fast.” But that’s how the beginning was [unintelligible [00:14:16].13] If you go back to those values, how someone is gonna trust you? Well, it’s easy if you have integrity, if you’re trying for excellence, if you’re trying to be transparent. I said “Listen, how can we grow together? How can I have a win/win relationship?” So that was my first deal.
My idea in the beginning was “I’m gonna learn as much as I can about the market, and then eventually I’m gonna get to a point that I’m gonna make more money.” Sometimes people are so focused on “Oh, I need to make X amount of money up front, otherwise I’m not gonna do anything.” Well, if you’re gonna compromise knowledge, I think that it’s very important to recheck that way of thinking.
Joe Fairless: Do you remember how you learned about the group in Utah?
Carlos Vaz: Yeah, I do. It was very simple, because three weeks before closing I still don’t have my equity and I’m like “I’m gonna die [unintelligible [00:15:13].02]” I started calling some brokers that were friends of mine. That’s why I tell everyone in the company, “The most important thing that we have is respect.” Always respect every person that you meet. I don’t care if the person is picking up the trash, if it’s the EA or if it’s the owner of the company. They are all the same. Treat everyone with respect, because you never know tomorrow.
So I’m meeting all these brokers, and three weeks before closing I just drew a map and said “This is a three-mile range from that property”, and started looking for all the properties. I called the broker and said “Listen, these are all the properties around one property that I own. Can you help me to find numbers of these owners? I wanna call them to see if they wanna partner with me.” And I started cold-calling every single one of those owners, until I found someone who said “So what do you have?” “I have this here.” I said “Okay, what are you paying?” “I’m paying this.” I said “Really?” “Yes.” I said “Can you [unintelligible [00:16:15].19] the contract?” “Sure. We’ll look at the contract.” “Wow. Yeah, I wanna partner with you.”
[unintelligible [00:16:20].21] but at the same time, “You know what? It’s gonna be fine. Let’s learn”, because there’s that saying “You’re gonna be known for the things that you finished, not by the things that you started.” Sometimes so many people when I talk about this story they wanna do those things, but how many deals have you done? So that was my way in. I’m very thankful for that group, and we’re still great friends, and probably if they listen to the show, they might be laughing on the other side, and they might be calling me and saying “Let’s go have dinner”, and I’ll say “Sure.” This time we’re gonna split the deal differently. [laughter]
Joe Fairless: When you were buying multiple properties in year one with them, did the split change at all from deal one to the last deal within that 12 months?
Carlos Vaz: It was getting better.
Joe Fairless: Got it, okay.
Carlos Vaz: I think that had we stayed longer, I think that things would have been different. It was just [unintelligible [00:17:23].18] was too much to pass, and I completely understand.
Joe Fairless: I went on your website a month or two ago and I noticed that when you go to the investor form I believe it says that the minimum for new investors is $500,000. Is that correct?
Carlos Vaz: Yes, that’s correct.
Joe Fairless: Help me understand, how do you get to that point? Is that through growing organically over time, so you’ve got more and more current investors making more money investing with you, so you just raise the minimum to 500k, or how does that work?
Carlos Vaz: Well, I’d say there are two things that you never have enough – you never have enough deals; you should always look at new deals, even if you’re not buying, because you’ll learn about the market. You need to really learn about the market.
For example, last year in the Dallas market alone we looked at 231 deals. That’s a little bit over 65,000 units just in Dallas. We’re a bunch of data people; we love operations, that’s us. We need to have data.
And the second one is equity. We never have enough equity. You should always be looking for the right partnerships and the right people. So how could you increase your minimum? Well, multifamily is one thing to me – multifamily is operations, operations and operations. It’s heavily intense operations. We brought the management in-house a little bit over three years ago, and of course, they don’t move that fast… But way in the beginning, over three years ago, our minimum was $50,000. Much smaller projects. We were raising only three million. That’s one thing.
We just closed a deal on Monday that’s about 20 million. It’s a little bit different when you close a 20 million dollar deal just the equity side, instead of a three million dollar equity side. But what happens is — number one, if you have a company, you have a very clear process, a very good execution, putting things together, but you have very strong core values behind this company, and you have these amazing people moving in the right direction, you have this communication, your investors are gonna see that.
The way that your reporting is coming out, your lender is gonna start seeing that, and say “Wow, this group is not a fly-by-night. These are guys that do the right things, the right projects. I wanna stay with them for the long haul.”
Our current investors are always repeating again. And I always ask other people, “Hey, if you think CONTI and what we are doing is an opportunity for you, come get to know us. Come to see our office, come to see one of the projects. Come talk to some other investors, see if it makes sense. We’d love to have you join our company.”
[unintelligible [00:20:20].02] growing, growing, getting to other points, now also scalability… We can no longer accept $50,000 investments, we go to 100k. Then you go to 250k. I think half a million is a sweet spot. I think half a million and above has been a sweet spot for us, and even right now, as we closed our last project, we just said internally that moving forward we’re not gonna accept higher raise anymore, and also we’re not gonna accept exchanges anymore. Exchanges get to complicated on the structure, so we said “Let’s not touch that one anymore.” But that comes with time, spending time building the business, building the foundation of the company.
If you focus on the foundation of the company, if you build that one, the real estate side is gonna define. The investment is just a vehicle, and that’s what sometimes people misunderstand. They think that real estate, buying the property is the most important thing. No, that’s one of the least important things, actually. Building the company with the right people, the right processes – that is by far the most important thing.
Joe Fairless: From a structuring standpoint with investors — you clearly have a lot of returning investors who have grown with you as your company has grown… How do you structure the deal with them in terms of preferred return, equity split, things like that?
Carlos Vaz: It varies, it depends on the project. If the project is older or the project is newer, although in our mind we always [unintelligible [00:21:55].27] So for us it’s typically anywhere between a 7%-8% preferred return, and anything above that, we’re trying to do that 50/50 split with the investors… And we have a couple of tiers that we have on the back, when we sell the property, until they achieve that 12% or 15% IRR. They split either 75/25 or 80/20. Those are a couple things you do.
Joe Fairless: Got it. And you mentioned the types of properties you buy… If I’m a broker and for whatever reason you and I haven’t met and I’m in Dallas and I ask you “What type of properties are you looking for?”, what do you tell me?
Carlos Vaz: It’s very simple for us. We only buy in Dallas, we’re very focused. We only buy 1970s and up vintage, between 150-500 units (that’s important to us), and a very important thing – the median household income (not the average household income) in a three-mile range has to be above $45,000, preferably $50,000. That’s [unintelligible [00:23:06].13] Because every time you go above that 50k as a median household income in a three-mile stage, it’s a more stable neighborhood. You’re gonna find good neighbors, such as Walgreens, Walmart, Whole Foods, you’re gonna find Home Depot, Starbucks… That’s all important to us.
Joe Fairless: And why 1970s instead of 1960s or 1980s?
Carlos Vaz: I said 1970s and up.
Joe Fairless: Yeah, yeah. Why?
Carlos Vaz: When I look at something that’s a little bit older — I can, but I just have to be careful… When you start to go a little bit older than 1970s, you might find a [unintelligible [00:23:46].26], so you need to approach carefully, say “Why are we gonna be buying this property?” That can be an example.
If it’s 1980s, we’re gonna be looking at 1980s. If something comes up, we’re just gonna take a look.
Joe Fairless: What is your best real estate investing advice ever?
Carlos Vaz: My best advice is never stop learning.
Joe Fairless: What are you doing right now so that you’re constantly learning?
Carlos Vaz: As we mentioned earlier, I’m finishing the Harvard OPM program. It’s a program for owners and managers of companies. It’s an amazing three-year program; you go to Harvard Business School for three weeks for one year, then you go back the next year for three weeks, and you go back the next year for three weeks. It’s a great program. You need to be an owner of a company with a certain revenue to qualify. It’s a great learning tool. I’ll finish my program this year, so that’s one thing I’m doing.
I do have a business coach that I meet every quarter. And it’s funny, now that my kids are young – 2 and 4 – sometimes just talking to them [unintelligible [00:24:58].04] It’s amazing how much a child can teach you sometimes, and I love that. I always learn. My wife knows, and Stewart, my partner, he knows that I’ll always be learning in my life… Learning not only how to become a better — I never call myself a boss, but how to become a better leader, how to become a better friend, a better father, a better brother. There’s so many things that we can become better, so I think that’s the best advice I can give someone… Never stop learning. We can always become better.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Carlos Vaz: Yes, let’s do it.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:25:41].16] to [00:26:42].17]
Joe Fairless: The best ever book you’ve read?
Carlos Vaz: I wanna say the Bible. The second one is maybe Good To Great.
Joe Fairless: Good To Great, got it. Best ever deal you’ve done?
Carlos Vaz: Partnering with Stewart, and marrying my wife.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Carlos Vaz: Talking too much. When you’re about to put a deal under contract, just be quiet, mind your own business, and finish the transaction. Whenever you get too excited because you’re about to put something under contract, you can lose the deal. It actually happened to me in the past. I had this great deal that I’m about to put under contract; I’m talking way too much, and somehow I lost the deal. It left a very sour taste in my mouth, and I learned very quickly to just shut up, close the deal, and that’s it. Don’t keep talking about the transaction, talk internally. Just do what you’re supposed to do.
Joe Fairless: Best ever way you like to give back?
Carlos Vaz: I think charities. There are four charities here in Dallas that I give to. For someone who was not born in this country, I appreciate this country in so many ways… This country is just unbelievably amazing. We do give to Make a Wish Foundation here in Dallas, [unintelligible [00:28:03].09] These charities are just unbelievable, and I’m honored that I can help them, and I wanna do much more.
Joe Fairless: What’s the best ever way the listeners can get in touch with you or your company?
Carlos Vaz: Just go to our website, you’re gonna find my e-mail there. And if you’re in Dallas, maybe we can get a cup of coffee.
Joe Fairless: Carlos, this has been a refreshing and enlightening conversation. I’ve mentioned this before we started recording, but I’ve heard you interviewed previously and I’ve kind of studied your career, and it is truly an inspiration. I’m grateful that we had a conversation, from the 10 habits or values that you hold near and dear to your heart, to how you approach things, where “What are we doing differently to change our position?” We don’t focus on complaining, we focus on gratitude, and what are we doing differently to enhance or evolve from where we’re at now? And then the first deal right out of the gate where you didn’t have the money three weeks prior, and then you were calling all the brokers who you were friends with who you had met, and said “Hey, here’s two miles of the properties around me. How can I get these phone numbers to the owners and call them to see if they wanna partner with me?” and you made it happen. You didn’t make much money, I don’t think, due to that 99/1 partnership structure, but more importantly, as you said, you worked for knowledge, not the money. And then again, talking through how your business has evolved.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Carlos Vaz: Thank you very much, Joe. I do appreciate it, and all the success to you, and I look forward to talking again, my friend.
