In this episode, we delve into the world of cross-border real estate investment with Thomas Lorini, CEO of VentureCo Capital. Thomas shares his experiences and strategies for investing in commercial real estate across the United States and Canada. From diversifying portfolios to vetting partners, his insights are valuable for both seasoned investors and newcomers looking to explore opportunities beyond their borders.
Key Takeaways:
- Diversification Across Markets: Thomas emphasizes the importance of diversifying investment portfolios across different markets. While many investors focus on hot markets like California, Thomas has found success in the often-overlooked Midwest, where cap rates are more favorable. He highlights how markets like Cleveland and Columbus are experiencing significant appreciation, offering unique opportunities for cash flow and growth.
- Partnering for Success: To mitigate risks and ensure success, Thomas stresses the significance of vetting operators and partners carefully. Whether it's partnering with experienced operators in specific markets or collaborating with developers, understanding the track record and capabilities of your partners is crucial. This due diligence helps protect both your and your investors' capital.
- Guidance for Canadian Investors: Thomas offers valuable advice for Canadian investors looking to venture into the U.S. real estate market. He recommends exploring two paths: slow and steady or strategic partnerships with experienced operators. Financing challenges for foreign investors often necessitate careful planning, and Thomas underscores the importance of understanding the differences in regulations, financing options, and tax considerations between the two countries.
Thomas Lorini | Real Estate Background
- CEO of VentureCo Capital and Real Estate Coach
- Portfolio:
- 400+ multifamily units in a variety of markets across US and Canada
- Based in: Irvine, CA
- Say hi to him at:
- Best Ever Book: The Bible
- Greatest Lesson: Surround yourself with people that are better and more skilled than you.
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Transcript
Narrator 0:00
Quick disclaimer the views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information go to Best Ever show.com
Thomas Lorini 0:17
Do enough due diligence on the people you associate yourself with. I think people get excited to get into a deal and to a project and to an opportunity. And that excitement may put blinders on them. So I think it's really important you really know who you get into business with
Narrator 0:33
Welcome to the best ever show the world's longest running daily commercial real estate podcast. Our hosts interview commercial real estate experts every day to get you the best advice ever with none of the best ever listeners.
Slocomb Reed 0:47
Welcome to the best real estate investing advice ever show I'm Slocomb Reed and today we are joined by Thomas Lorini. Thomas is joining us from Irvine California. He is a dual citizen Canadian and US citizen, grew up in Canada. He is the CEO of VentureCo Capital, his private investing firm, and OfWealth Genius. His real estate coaching program where he primarily coaches Canadians on how to invest in us real estate current portfolio consists of over 400 multifamily units in a variety of markets across the US and Canada. Thomas, can you tell us a little bit more about your background and what you're currently focused on?
Thomas Lorini 1:28
Absolutely. Well, first off the pleasure to be here slow comb, and I'm excited to share them more about my story. quick background, as you shared, I'm originally from Toronto, Canada born and raised, start investing back in 2004. With a house hack, that was my first experience of being a landlord. From there, it really was a slow growth, I didn't grow up in an environment where I had friends or family who were investors. So it took about five years later, where I joined a group where I got the proper education and motivation to take the next step. And I quickly got my next property, which was a duplex. And over the course of the next four to five years, I just added one to two properties a year, it really was the decision for us to move to the US where I got into real estate investing full time. That's about 10 years ago, where we moved and my wife's originally from California, so we moved to warmer climates. And basically I transitioned full time into real estate at that point. And since then I've kind of gone full tilt into multifamily investing, we are focused in a number of different markets. I do like the Ohio market. This has been one of our main focuses this year, specifically, but I've been investing that market since 2018. We do have a project here in Southern California. Although it's not a landlord friendly state, there are still opportunities here. So we are in the process of building 172 units, about an hour and a half from here, from where I'm based out of that's something that we've gone through the full entitlement, I raised the capital. So we've got partners lined up, and we're hoping to break ground in q1 of next year. And we've also got a similar project in Tucson, Arizona, we do have a deal in Texas, just outside Dallas 100.8 units that we're looking to close in about three weeks, that actually going to be a two year play. And we've got an off market with a significant amount of value on the acquisition. So we're not looking to do a full bore on it. And we're basically going to flip it in about two years time, but very strong returns on that one. And I got a portfolio of assets back in Canada. But additionally to my investment, as you'd mentioned, I'm a coach. So about a year, year and a half ago, I realized that I've got a tremendous network back in Canada. And there's never been more interest in Canadians to invest in us. So basically launched my coaching program through wealth genius, which is a huge network backing Canada, offering to coach Canadians to invest in us. So currently, I've got about 60 students. And it's been a significant focus of mine, to helping as Canadians. There's a number of reasons behind that. We can get into that if that's something you'd like. But Canadian market in general is a smaller market. Canadians have capital, but there's a tremendous amount of opportunities in us. And there are certain steps that Canadians need to factor consider and set up prior to investing in the US like Americans. So I helped take them through that. And I've got a multitude of resources from cross border CPAs attorneys and whatnot to help set them up with that. So again, those are been my two focuses my private investing firm and my coaching program over the last little while.
Slocomb Reed 4:46
Nice. That's a lot. A couple of questions here. There are a couple of things from your current portfolio that I'd like to dive into. But first, I know that your commercial apartment investing is relatively recent. Have you gone full cycle on any of those large properties yet?
Thomas Lorini 5:01
The larger ones, no. So the assets in Ohio, I sold off my smaller assets a few years ago, actually during COVID, and got into the apartments in that market over the past year and a half. So we haven't gone full cycle as of yet. The new builds are still in the process of being constructed. So those are going to be a two year turn, to be able to get them to a point of stabilization. In terms of my experience in Canada, I've gone full cycle and some of the assets there. But I've predominantly been a buy and hold investor over the lifetime of my investing career. And I've got some partners of mine that we've gotten to a multitude of deals together. And we're just mainly vine holding these. And that's the case with a number of the assets that we've acquired in the last little while.
Slocomb Reed 5:48
Gotcha. And with regards to your involvement in these larger apartment deals, are you primarily involved in capital raising and investor relations and then partnering with other deal finders and operators in each of these markets?
Thomas Lorini 6:04
Not necessarily, every deal is different. But I would say the majority of them are very similar. Myself or one of my partner's, we'd source the deal. For the most part, if we're talking specifically to Ohio assets, I've either found them put them under contract and raise a considerable amount of capital myself, brought on a few partners on the active side to help with the management also on some other ways as well. And that's been the process and the main focus of mine, the Texas deal is going to be a co GP opportunity. So there's a group that's been focused on Texas market over the past four or five years, they own hundreds of doors in that market, they've gone full cycle. So it made more sense to me to partner with them to leverage their experience and systems in that market. So that'll be the first code GP opportunity in that market. For instance, the California deal here, which a new built. So I've been lucky enough that my father in law's a developer and a builder. So I've partnered with him. I actually used to work with him when I first moved here. So we've got a working relationship that goes years. And basically I've been able to raise the capital for a deal that he already was in the process of entitling. So that's more of a JV scenario. So you can see a little bit different across the board, but not that different. Again, the co GP is really one project out into three different sectors.
Slocomb Reed 7:30
That's interesting. The other thing that stands out is the diversity of the markets that you are invested in currently, California is a thing unto itself, then you have the Southwest, and you have the Midwest in Cleveland, how is it that you are selecting the markets you're looking to invest in?
Thomas Lorini 7:49
Great question. Number one, the Midwest, I think in this high interest environment that we're all faced in the Midwest offers solid opportunities. I'm acquiring these assets between a SEVEN and an EIGHT cap, and with a value add component to it. I think the Midwest traditionally has been overlooked, sexier than some of these other southern markets, the Florida and Texas that gets more of the headlines. But I think now more than any time in the past 10 years, you're seeing the Midwest outperforming these places. So I'm glad I got that ahead of the curve. And now what we're seeing, actually, there was a recent article by fortune.com that talks about the return of the rust belt and talking specifically on Midwest, Cleveland, Columbus, Pittsburgh, these markets, which again, they've been more cashflow plays, but now what we're seeing is appreciation has escalated considerably. So these markets over the last 12 months are experiencing anywhere from eight to 11% appreciation over the last 12 months. Versus some of these other markets, as I mentioned, are either flat, slightly negative, or just over one to 2% appreciation. So for me, that's been one of my main focuses for value add. In terms of new construction, I wouldn't do a value add in a rent control market like California, I did have a project under contract last year here in LA, but walked away from it just to see the tenant profile and the rules in place very difficult to operate as a landlord. However, as I shared a new construction deal, you control the tenant pool and overall product and cost going into it. It's a different scenario. So that's where I am excited to be involved in a deal like that. And that's why I am again new product and us able to control putting in tenants paying market rent and us having all that control versus trying to do a value in this market. The Texas deal is a little bit more of a diversity play for me and my team, mainly because exploring a market from an operator unity standpoint. So a friend of mine who basically locked up this deal was working on this off market deal. He brought it to me saying, listen, He locked his 114 units, basically 39 per door, put it under contract for under 6 million, and recently just got it appraised for 8.1. So before in closing it, there's about $2 million of equity on the buy. And that's why we're just planning to do it almost like a two year flip with a considerable amount of equity, and exits about 10 million. So that's a more of an opportunistic scenario. And then more of a market and overall focus, would we consider doing more in the Texas market, perhaps. But I'm just dipping my toes, if you will, with this opportunity exploring and see if it makes sense to continue. So my involvement is not a tremendous amount, I'm assisting with some capital raising and putting some resources towards that, but minimum amount of resources over the next year and a half to two years. So again, I hope that answers a little bit why I've considered these different markets and different opportunities.
Slocomb Reed 11:07
That does make sense to us. And portfolio diversity, I figured was going to be one of the answers that you gave, it makes a lot of sense. Yeah, we're in a market where again, high interest rates, we're seeing cap rates increasing. And this may be the environment we are over the next several years. So these traditional investing markets have four or five caps just don't pens a lot of my opinion. So unless you're securing them under market with the Texas deal, you got to be very careful as operators in this current climate that we're all in, if that makes sense. One interesting point from what you were saying about your ground up construction deal in California. Interesting to hear you say. And this, of course, makes sense that it leads to having greater control, not only over the physical components of the property, because you're designing them, but also over the tenant base, that you're not inheriting any. So you get to make sure that your tenants meet your qualifications. But also, it makes sense that in a rent controlled area, new construction gives you more control over the rents that can be charged because you don't have that inherited tenant base with that rental history that you're bound to in a rent control situation.
Question Thomas, given that you teach investing in other markets, you raise capital from lots of investors that sounds like particularly Canadian investors, and you are investing in a diversity of markets, a diversity of business plans within the commercial multifamily asset class? What is it that you're doing within the way that you structure your deals, or structure your ownership in those deals to protect your capital and your investors capital?
Thomas Lorini 13:00
That's a good question. In most cases, my investors capital, obviously on the LP side, so they have limited exposure. In terms of the liability standpoint, the LP structured tends to be the best model for Canadians, and making it into that conversation. But in terms of from a protection standpoint, I think underwriting conservatively, having realistic exit timelines and exit plans, under promising over delivering is the focus for all of us. Most of these opportunities, I tell my investors, it's likely going to be a five year hold. And we'll aim to be in a position to return capital in a shorter time like that through a refi or an exit. And as I shared earlier, a majority of my investors are from Canada. And for them, the type of deals that I'm structuring and they're getting involved in don't really exist in Canada, I think it's important to talk a little bit about that. Canadian market in general, is very small compared to us, the population of Canada is less than California, that's a state. And then from there, you have maybe three four cities really, which have a decent amount of population affordability. Another aspect to consider the average home in Canada is around $800,000. When you compare it to the US with average home was around 350. You can clearly see that it's very expensive in Canada to make your dollar work in comparison to the US. And then you've got the rent control in most major markets in Canada is a significant consideration and very challenging for investors. But there's many instances where investors are waiting over a year to evict the tenant for non paying and so forth. And when I compare that to the markets we're invested in where for non paying eviction times is weeks, and in terms of control landlord has in the states where it is no rent continuation, and you can evict with maybe a 60 day notice. It's a 180 and comparison. So for my investors, they're getting two deals that they would have no opportunity in Canada. So they're excited for that. Canadians have capital, it just from the opportunistic standpoint, it's just not incomparable. And again, that the states is 10 times the size of Canada. So it's definitely an educational component that they have to understand and learn. And then putting together the right team from advisors, and then presenting the right opportunity for them. So we've gotten number of lawyers and accountants involved in the process to help them structure their setup.
Slocomb Reed 15:45
Do they have a holding company? Do they set something up in the US? Or do they invest directly?
Thomas Lorini 15:50
Personally, the good thing between Canada and US, there are tax treaties. So there's not necessarily a double taxation situation happening. If it's structured correctly.
Slocomb Reed 16:25
Thomas with regards to protecting your investors capital you're giving solid answers that our best ever listeners, those who've been listening for a while we'll have heard often because excellent operators across the board are all saying the same things about bringing on Capital Partners as limited partners to protect them from liability. And making sure that you are investing in deals at the deal level on a global level are going to have solid returns and ideally shorter timeframes than projected so that capital is being returned faster. My question is, let me put it this way, Thomas, there are a few things you're doing that the quote unquote, average syndicator of commercial multifamily is not, and that is that you are invested across the country, the United States as well as in Canada, but you're also doing value add, as well as ground up construction at the same time and diversifying your investment portfolio and diversifying the opportunities you're making available to your investors. Makes sense with regards to things like meeting the investment appetite of your investors and creating blended or diversified returns and opportunities for them. The question is really, beyond the standard practices of the industry for protecting capital, is there anything else you're doing within the way that you structure your deals, to make sure that you're mitigating any risks that could be coming from the way that your investment portfolio is stretched across markets and across business plans? When you're bringing on co GPs, for example, in Texas, is there anything that you're requiring of CO GPS with regards to making sure that everyone's bringing in their own capital so that everyone has that alignment of interest? Is there anything else you're doing like that in your other deals? So that makes sense?
Thomas Lorini 19:14
Absolutely. I think it's important to vet the operators who are the parties involved there can take the deal across the goal line. So let's talk about the California deal. As I mentioned earlier, my father in law has been a builder and operator and developer for about 40 years. So I've seen and been involved in several deals with him over the last 10 years. So I have a good sense of what his capabilities are. So for my investors I'm bringing in, I can clearly show a track record and experience level from the operate on a deal. So my involvement is yes, protecting my investors by doing a good amount of homework and background check on the operator. In this particular case that I've shared, there's a tremendous amount of experience and trust that I've built in terms of the co GP opportunity in Texas. Similar, I'm looking for an experienced group, they've gone full cycle, they've gone and done several deals in this market that had a team the resources. And that's what I found with this particular group. I've built a relationship with them over the past year, I've seen what they've been doing. I've got other people corroborating on their experience. And that's helped me to feel comfortable to bring in investors into their deal. And again, this will be the first one, and it'd be a good test case for me to do future business with them. But you're right, in terms of a protection standpoint, thing is very important, as capital raisers to do a good amount of background check on the individuals who are running the project. You do bring up a very good point vetting operators is critically important. vetting partners, of course, as well, especially when you have the opportunity to have a track record.
Slocomb Reed 20:51
Actually, one quick thing, the ground up construction in Tucson, Arizona, who are you partnered with on that?
Thomas Lorini 21:00
My father as well. So we own so the same partner vetting and protection for yourself and your investors as the California
Slocomb Reed 21:11
Yeah, that's what I wanted to ask because I didn't catch you referencing Arizona when you were referencing California. Last question here before we transition the conversation. Thomas, unfortunately, we only have time to do this in a bullet point fashion. What are your top pieces of advice for Canadian investors looking to invest in the US.?
Thomas Lorini 21:31
So really, for Canadians, I always recommend there's two paths either slow and steady for them, or to partner strategically with an experienced operators. for foreign investors from candidate financing is the biggest hurdle for them. So really, there are one to four unit loan products that they can secure. So they may have to do a slow and steady acquire a bunch of small assets before leveraging up alternatively, as I suggested, partner with a more experienced operator, and leverage their system on deals and opportunities, and have bypass having to go through this financing. But in addition to that, a good cross borders attorney and build those relationships understand how to structure yourself correctly.
Slocomb Reed 22:16
That makes a lot of sense. Are you ready for the best ever lightning round?
Thomas Lorini 22:20
Let's go for it.
Slocomb Reed 22:20
What is the best ever book you recently read?
Thomas Lorini 22:24
That's a great question I get asked a lot. But for me honestly, as a born again, believer, it's going to be the Bible. That's my tried and true. Read that every day. It drives not only my faith, but encourages me in any direction in my life, business, personal, family, and so forth.
Slocomb Reed 22:39
What is your best ever way to give back?
Thomas Lorini 22:41
My time, my family, we're committed to our local church, we're there four times a week teaching on Sundays at Teach 10 year olds. And we give back our time and helping to set things up like tonight, we've got an event for Halloween Fall Fest, we call it and yesterday me my older kids were there helping set up for four hours. So again, giving up our time, our most expensive commodity for good causes, isn't the main ways we give back to our community.
Slocomb Reed 23:13
Tell us on the deals that you have done meaning properties you have acquired, what is the biggest mistake you've made and the best ever lesson that resulted from it?
Thomas Lorini 23:22
I think one of the things is not factoring in how much capital to raise for improvements, that could potentially be an area that an operator, you may miscalculate. And then you're gonna have to factor in how to fill that additional capital required? Is it going to be a cash call from partners is going to be borrowing, some debt and so forth. So I think it's really important not just to raise and focus on the race for acquisition, but really plan out for the first year to really what is your value add component? How much is that budget going to be? It tends to always be more than you initially anticipate. So you may want to be cautious and put a little bit more down and be able to have enough buffer to carry across the goal line for your exit.
Slocomb Reed 24:12
Can you give us an example of when you made that mistake?
Thomas Lorini 24:15
Well as a deal where we acquired a building, and we had anticipated about $250,000, or Renault's it was an older asset. And as we continue to do improvements, we discovered there were some additional deficiencies look like there's about $150,000 That would be required. So we have to get creative and finding ways to fill that gap. And in some cases, we had to come up with our own money. In other cases, we had to go back to our partners, or we really want to go have to go back to our partners as least as possible. But in some instances, there's no other choice and you go back explain your case and then everyone only is up a bit more pro rata. Of course, face the amount of shares that they have. And we all chip in to get the product cost the goal line.
Slocomb Reed 25:00
What is your best ever advice?
Thomas Lorini 25:04
I think is really do enough due diligence on the people you associate yourself with. I think people get excited to get into a deal into a project into an opportunity. And next time, it may put blinders on them. So I think it's really important you really know who you get into business with. And then the time enough to check, ask questions to other people in the industry. It's very important, because once you're committed, the likelihood is very high that you're going to be together over the next several years. So I've had cases where I've had students partner up with an individual, and then that person takes their money and basically runs with it. So you really want to be careful, my opinion on who you're involving yourself with who your partners are going to be active partners or money partners, any business scenario, really be careful on the partners.
Slocomb Reed 25:57
Last question, where can people get in touch with you? The easiest way is on Instagram, real Thomas Lorini or through my website, venturecocapital.com through Facebook, and thomaslorini.com as well, those links are in the show notes. Thomas, thank you. Best ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five star review and share this episode with a friend you know we can add value to you through our conversation today. Thank you and have a best ever day.
Thomas Lorini 26:28
Thank you for having me. It's been a pleasure to be here. Appreciate your time.
