RG 279 – From Fix-And-Flips to a Large-Scale Investment Firm with Vince Caviglia
Join Vince Caviglia and me for this week’s episode as we talk about rental rates, value-add, portfolio management, and so much more.
Vince Caviglia is the owner of CEO of Equity Group Investors, a real estate investment firm that focuses on helping people invest in distressed real estate. Having worked in the real estate industry for over 15 years, Vince has tons of direct experience in areas ranging from mortgage lending and debt syndication to commercial acquisition in various markets.
Equity Group Investors evolved from a successful residential fix-and-flip company. With years of hands-on experience and real estate running deep in his bloodline, Vince is one of the most reliable sources of valuable insights, especially when it comes to scaling and avoiding pitfalls in fix-and-flip and buy-and-hold markets.
For this episode, we talk about the most notable experiences in his career, including how he split from a shady partner and managed to prevent investors from losing their money. We also get to learn more about his unique approaches and views on a variety of aspects, such as fund management, deal structures, and finding underappreciated opportunities. Notably, we also touch on rental rates in relation to wages, which is something that every real estate investor should know.
In just forty-five minutes, you’ll find out why Vince is one of the most trusted people in the industry.
Being transparent with your investors is key to winning their trust.
Obsolescent assets are now trading for what it takes to replace them.
You can see the highest growth where there is no inventory.
- Trickling from macro to micro assets and vice versa are great strategies to reduce risk.
- Start small then build up gradually.
Be Bold, Be Brave and Go Give Life a Crack!
Listen to Podcast
Reed Goossens (00:00):
Good. Hey guys. Now, before we dive into today’s show, I want you to let you know that some of you may be aware that over the past eight years, I have built a substantial multi-family real estate portfolio here in the US worth over half a billion dollars. And in that time, my passive investors have received fantastic double-digit returns. And now you too can invest directly into my deals for as little as $50,000. So if you’re an interested investor, head over to [inaudible] dot com to find out more that’s Reed goossens.com. Now back into the show,
Vince Caviglia (00:41):
We’ll get the wages back by people actually going back to work. Their growth is just going to make it tougher for those people to actually pay rent. Cause you’ll still get the rent inflation, but they’re still going to kind of make the same amount. So there’ll be a cap that will, they will hit. But I should say, you know, the eviction moratorium has kind of held down how much the rents can actually go out because people can’t move those people out that aren’t paying and then release them up at a, at a higher rate. So even the, the fed. Now, if you like, if you don’t listen to what they say, if you actually read their reports are talking about double the amount of increase over the next year in, in rents. Once the eviction moratorium lists,
Reed Goossens (01:39):
Welcome to investing in the US a podcast for real estate investors, business owners, and aspiring entrepreneurs looking to break into the US market join Reed As he interviews go getters risk-takers and the best in the business about their journey towards financial freedom and the sheer joy of creating something from nothing
Reed Goossens (01:59):
Good day eight ladies and gentlemen, and welcome to another cracking edition of investing in the US podcast from Los Angeles. I’m your host Reed Goossens good as always every with us on the show. Now I’m glad that you’ve all tuned into learn from my incredible guests and each and every one of them are the cream of the crop here in the United States. When it comes to real estate, investing, business, investing and entrepreneurship, each show, I try and tease out their incredible stories of how they have successfully created the businesses here in the US how they’ve created financial freedom, massive amounts of cashflow, and ultimately create extraordinary lives for themselves and their families life by design. As I like to say, hopefully these guests will inspire all of my cracking listeners, which are you guys to get off the couch and go and take massive amounts of action.
Reed Goossens (02:46):
If these guys can do it. So can you now, as you know, I’m all about sharing the knowledge with my loyal listeners, which is you guys, and there’s absolutely no BS on this show, just straight into the nuts and bolts. Now, if you do like to show the easiest way to give back is to give us a review on iTunes, and you can follow me on Facebook and Twitter by searching at Reed Goossens. You can find the show wherever you podcast on iTunes, SoundCloud, Stitcher, and Google play, but you can also find these episodes up on my YouTube channel. So head over to Reed goossens.com, click on the video link, and it’ll take you to the video recordings of these podcasts, and you can see my ugly mug of the beautiful faces of my guests each and every week. All right, enough of me let’s get cracking and into today’s
Speaker 2 (03:31):
Reed Goossens (03:32):
Do they only show I’ve the pleasure of speaking with Vince [inaudible]. Vince has worked in the real estate industry for over 15 years with direct experience in a range of areas from mortgage lending and debts indication to acquisitions of commercial properties in varying different markets across the United States. And most recently he has co owned and operated a very successful residential fix and flip company here in Southern California, which has involved into his company today, which is called equity group investors. Now over the last eight years, Vince has established a consistent and solid track record for creating positive returns for his investors in San Diego, in the San Diego, which is a very tough market to be doing work, doing business, particularly in real estate investing and he’s steady methods or steady methods in generating profits and revenue have continued to attract and repeat investors into his real estate investment opportunities, which is really, really incredible for him and his business partners, but I’m really excited having him on the show. So not out of me, let’s get him out of here, get a Vince, welcome to the show. How did I make
Vince Caviglia (04:33):
Thank you. I’m excited to be on here. I’ve been listening to your podcast. It’s one of the best real estate podcasts I’ve heard. So I’m now following.
Reed Goossens (04:40):
Wow. That’s a huge, huge accolade. I thank you so much. Thank you so much, my friend. Um, well, as, as an avid listener, I’m very privileged to have you on the show because you also have a wealth of experience and we want to get into that. We’re going to talk a little bit about today, about how you’re developing a fund, but as we do with every show, we start the show with rewind the clock. And tell me how you made your first of a dollar is,
Vince Caviglia (05:03):
This is funny. I said, I, you know, in listening to your podcast, I knew you were going to ask that question and I had to call my parents and ask them how that, how that worked out. And, uh, you know, my mom was a really good baker and she, uh, later on like years after this started a bakery that did really well that funded my dad buying real estate. But, um, you know, at every holiday, me and my brothers and my sister, uh, would bake with her and, uh, you know, so we learned how to do that really well when we were young and we lived across the street from a junior college. And at one point there was a ton of construction crew repaving, the whole parking lot, and, you know, they wanted to get it done fast. So they had a ton of people out there.
Vince Caviglia (05:50):
And so we decided to cook up a bunch of baked goods, you know, brownies and chocolate chip cookies and all that stuff, and then bringing it out there with water and sell it to the whole construction crew. And we actually, uh, did pretty well, uh, you know, sell into all the, all these people. We made quite a bit of money for, you know, as a young kid, quite a bit of money. And, you know, the funny thing is, is that you, you have no, like breakeven your parents fund the, all the, you know, all the ingredients or whatever, but that, I think the funnier part of this story is, you know, they said that I had that money for a little while. And somehow I knew what a bond was. Uh, at that young age, I was like nine or 10. I think the only thing that we could come up with is that my grandpa was also an entrepreneur.
Vince Caviglia (06:42):
He owned a bunch of real estate and had a couple of companies and, you know, he owned a bunch of bonds. So we figured I probably learned it from him. And my mom took me into the bank, America bank of America and, uh, Saratoga because I wanted to buy the bond. And I asked to tell her, I was like, I want to buy a bond. And she’s like, well, you’re about $900 short for that bond. And she’s like, you don’t want to buy that anyways. Cause you know, it’s kind of a boring investment. And I think it’s funny now, you know, knowing what I know about the financial markets that was like nine or 10 years into a 40 year bull market in bonds. Um, but right around that same time, you know, uh, a couple of years later I started painting rentals with my dad and actually my grandpa had been developing apartments and some medical office at that time.
Vince Caviglia (07:37):
And he, uh, told me real estate is the best investment you can make. And you know, then my dad, a few years later he was developing single family. Uh, and he had some rentals and he told me the same thing. And so I kinda knew that’s what I wanted to go into. And I came out of college right into mortgages and I had a couple of good years and then 2008 hit. And those two experiences, you know, my family tell me that real estate is the best investment you can make. And then coming out right into, uh, 2008, like so many others, it influenced a lot of the things that I do now with like risk and reward and, um, you know, how I underwrite, uh, I do do it a little bit different, which is probably be one of the more valuable things for your listeners later on in the podcast.
Reed Goossens (08:26):
Awesome. Well, that’s an incredible story. And clearly, yo, I think you mentioned your uncle, Rob Beltran, you’re on an early age to want you to go on a bond, but as a nine-year-old I, I don’t think I knew what a bought a bond. Was it buying a bicycle or a skateboard was, was probably what I’m saving up for, but that’s awesome. Really, really incredible story. So, so walk us through the, the, the path into real estate. You mentioned that you’d had, you’ve had a varying array of, of backgrounds and experiences in the different real estate sectors, but did, did you just naturally fall into it or what, what was the impetus to get involved in it? What was it from your parents telling you, you always got to get involved in real estate.
Vince Caviglia (09:06):
Yeah, it, so it was my, you know, actually going back to my great grandpa, he bought his first piece of land in 1906 in the bay area. And everybody’s kind of had this, um, you know, a little bit of a real estate background. They’re all entrepreneurs, not in, not in real estate. I mean, like my family owns a, a winery which has really long backstory going back to the, you know, prohibition and depression. But, um, you know, I, they all had real estate and in that, you know, my grandpa, my dad telling me that, that early, I knew exactly what I wanted to do coming out of college. And I went into mortgages, but, you know, I didn’t know what I was looking at now. And maybe a lot of other people didn’t, uh, didn’t know back then either, but you know, these option arms and, and, you know, like two year fixed loans with three-year prepays, I actually left the mortgage industry a little bit before 2007.
Vince Caviglia (10:04):
So I left early and I went and actually bartended and I thought it was the worst decision of my life. But, um, and you know, the first part of my career kind of was like a roller coaster in real estate, which served me later. But, you know, looking back on it now, I actually, I can’t remember where I found the term, but I call it Jomo joy of missing out because I left the mortgage industry and, uh, as bartending and actually met my, you know, my senior in commercial real estate while I was bartending, he came into the bar, he actually had met my girlfriend, which was his neighbor, or yeah. And he then ended up hiring me and I sold single-tenant net lease and office industrial. And when I was in the commercial space, you know, it was probably cause it was after 2008, but at a certain point I looked around and you know, not many people own real estate in, in my office.
Vince Caviglia (11:00):
And I knew I always wanted to own. And I was like, maybe this isn’t the right spot for me. And so I actually left and then went into, you know, buying distress debt in private equity in these large pools, which is a really fun part of my career. The owner of that company was a great mentor. He kind of like, there’s always the way to make a deal. There’s always a price for it and always a structure to make deals. And I learned a ton from him, but, you know, as I said, it was, was kind of a rollercoaster that company ended up changing directions, firing, you know, 95% of their staff. And, you know, the next thing that I did was going to work for a residential developer and a fix and flip company. And that’s when everything kind of like came together and jailed and you know, all these different avenues that had worked in, uh, in the past, I even did some leasing, uh, back then as well, but like all these different areas of real estate that I worked in started to gel and all these different, like ways to put deals together, kind of jelled.
Vince Caviglia (12:09):
And I ended up breaking like all the sales records for, for that company. And then, you know, the growth kind of like stagnated a bit. And that’s when I jumped out in, uh, started my own company. And, you know, there’s as with any business, there’s, there is a roller coaster ride in there. You know, I had a partner for a while and he didn’t ended up panning out. He did some things that, uh, probably were the best for the company. And, but, you know, going through the roller coaster early in my career makes you super resourceful. And so when I split with that partner, I had to like fire all the contractors off all the jobs that we had and, you know, take them all over and finish, finish them out. And some of these things that I was talking about that I learned in 2008 and after, and the way I purchase was what protected me.
Vince Caviglia (13:01):
And I actually was able to come out of that with no investors losing money, even though he’s doing some really shady stuff. And, uh, you know, then it was easy once I protected all of them and I was super open with them, you know, I want them to trust me as, as investor. So, uh, I told them everything that was going on, you know, like some of the construction, you know, over payments and not knowing where the money was going, all that type of stuff. And, uh, so once I came out of it, they’re all like, well, you just protected us through something like that, which is huge. We all want to go bigger. So it allowed me to, you know, kind of catapult my, my business where I am now, like tenfold better with better asset managers and project managers and, you know, a team of operations and all that. That’s what allowed me to then go to this fund structure that we’re going to,
Reed Goossens (14:00):
That’s awesome. It’s such a varying, uh, array of experiences, which I think is really important for the listeners to understand, because there’s not just one path to starting a business. So you’re, you’re really, you look relatively young, you know, you don’t, you don’t have gray hair, you know, you you’ve, you’ve, you’ve been around the street a few times right now on the block of your time, because you had to write, you have to just put, you know, a bed to put food on the table. You have to keep a roof over your head. And for every time you’ve got to transition jobs, probably no fault of your own. You were saying that, you know, the company, the mortgage company changed directions. You always have to keep moving forward and keep picking up skill sets. I think that’s really, really important for those people listening out there when you’re getting started in real estate to, to not pursue different opportunities to learn. And that’s, I think that’s a, that’s, that’s an incredible accolade to you because now you’re at a point where you have the confidence, you’ve been through a couple of ups and downs to say, I’m going to run my business differently because I’ve, I’ve been through some, some, some bad experiences, but, but, but one of the questions that comes up as I mentioned, San Diego earlier, Hey, doing deals in San Diego, in this market right now.
Vince Caviglia (15:09):
I mean, uh, so this actually gets into, you know, like when, when 2008 happened, that was a really like traumatic time in real estate for a lot of people. And I heard somebody on one of your other podcasts talking about how you, you like, can’t let fear drive you if you’re doing that, then it, um, you know, is it a problem it’s going to limit your, your growth in, in, in what you do in, in business. And for a while, it actually did. So I became like a voracious reader and studier of the, of the markets. And it was like a few years after 2008, I started, uh, I read an, a seem to lab and I started experimenting with a tail risk hedging, which is a thing in the options market. But, you know, you put these little tiny bets on, so it limits your, your profit a bit.
Vince Caviglia (16:04):
But when something like COVID happens, it pays off multiple, you know, like 20 X, 30 X times a year investment, and it can cover your losses. And, but in learning how to do the option stuff, you know, you kind of meander to some of these other things like institutional macro, which is something that I use now in my business that protects me. And, you know, I like to challenge some of it narratives within our real estate space. And, you know, the narratives that I like to challenge our, everybody, everybody you ever talked to, you ever always says, we buy value, add assets in great locations. And, uh, you know, real estate’s local, but it’s, these macro moves like 2008. COVID, uh, even 2018, there was an interest rate spike that took out a lot of funds in my market, and those are all macro moves. And so I kind of think you need to trickle from macro down to the micro, and I can tell you why that’s important if you want to get into,
Reed Goossens (17:09):
Let’s just let’s get into it. Cause I think you bring up a very good point. So many people, including myself, like I invest in Texas, right. I live in Los Angeles. And, um, I also look at deals in other parts of the country. I’m not, I’m not in that market. Right. I don’t buy, I don’t buy my back out. I’d love to buy in downtown Los Angeles, but it’s just too expensive. Right? So I’d love you to give me your 2 cents on the macro tripling, dribbling down into the Mo the micro in terms of real estate is local and why that is so important in your business when you’re buying that, as you said, we will well positioned assets that have a ton of value at
Vince Caviglia (17:48):
This all lead back to your question of how I find the profitable deals in, uh, San Diego. You know, so you start with the macro and you want to know, like, are you in stagflation? Are you in real inflation? Are you in like a Goldie locks? Or are you going into deflation and contrary, you know, in studying this stuff contrary to beliefs, everybody calls, COVID a black Swan. It actually, uh, if you look at Nassim Taleb who coined the term, he says it wasn’t. And it’s because he’s a student of Mandelbrot and the things like copper, you know, the commodities, the dollar gold, yeah. The treasury market, they were all signaling that this sell off was going to come. You didn’t know it was going to be COVID, but is all signaling that it was, uh, going to come. So you start with that, like, you know, for right now, you know, in the next few quarters, it’s starting to become known, but we’re going to go into stagflation. You know, you hear the fed, talking about how it’s transitory inflation and all the, all this stuff, but then you look at their projections and there’s no transitory part about it. They’re, they’re, they’re inflation just keeps on, keeps on going for the next few quarters. So, uh, once you know what
Reed Goossens (19:01):
[inaudible] difference between stagflation and inflation, so you sell a huge you’re stagnant in one high position of inflation, is that correct?
Vince Caviglia (19:09):
So it’s, uh, when you have inflation, but you’re, you’re stagnating on like growth and like wages and like GDP and stuff like that. So it’s kind of a funky market. And usually it doesn’t like
Reed Goossens (19:23):
It’s inflation being high, but stagnant on your GDP and your, your, your wage growth.
Vince Caviglia (19:29):
Yeah. And growth. Yeah. Growth. And, you know, usually it’s a, it’s a tougher market than, than currently the, uh, but the fed is actually manipulating the treasury markets. I mean, they are kind of messing with the CFTC and options, uh, futures and options market on the treasuries, which I think is probably too technical for this conversation. But you just know that like when they, when they limit that, they’re the only people who can do that legally. And, uh, it manipulates the way the, the interest rates new. But anyways, so, you know, we’re going into stagflation the next, the next level down, why I challenged people on the value add assets. If you look at some Zell said this first about New York. And then, you know, I talked to a guy at an invite only fund conference, uh, who is a land kicker who sold tall to large developers.
Vince Caviglia (20:26):
And he said that that is going on across the Pacific north Northwest, but I’m going to talk about San Diego since 2008, there’s been inflation and building supply. And a lot of the developers when went out and the ones that are left, they’re seeing this inflation and building spider, like, how do I make my margins? So everybody built the top end of the market. If you look at their residential all the way up until COVID until, you know, the fed started buying the MBS market, you know, the top markets like Rancho Santa Fe and San Diego is probably like the most affluent zip code in this market. And they had 13.2 months of inventory because people were building out there and nobody is buying. And then LA Jolla, and, you know, other areas like that above a million, there was six months of inventory. And below a million, there was 1.8.
Vince Caviglia (21:16):
So that’s like an extreme buyer’s market and extreme sellers market. And then you can go over to something like the, the, you know, apartments. And you could see like say on CoStar analytics that you know, that the top tier markets, there’s like 6,200 deliveries. And then you go down to next tier, there’s like 450, and then you go down to the next year and there’s like 14, you know, at the bottom end of the market. So everybody’s building into the top end of the market. And I’m like, that’s why I asked, or I say the value add part is like, if you’re buying value, add where everybody else is delivering their, their inventory. Is it really value? Add, you know, are you getting it cheap enough to offset that supply? That’s the way it’s coming.
Speaker 2 (22:08):
Speaker 5 (22:09):
For those of you who are interested in staying up to date with all the latest happenings in my business, or to learn more about passively investing directly into my multifamily value, add deals, then head over to [inaudible] dot com and sign up for my monthly newsletter by signing up, you’ll automatically be notified about my new up-and-coming investment opportunities. You’ll be able to stay up to date with all the latest real estate news here in the United States, and much, much more. So head over to Reed goossens.com and sign up today now back into the show.
Reed Goossens (22:45):
And I just want to jump in there because it’s a very interesting point. You bring up because of how frothy I’m seeing, like just in markets. I know other investors are in areas like Phoenix, for example, 1970s assets going for over 200 K a door. Right. And, and, and that, to me, just as nuts, right? I mean, I know, and this is for my listeners. I know that if I buy somebody 200K a door, I need to get a 50% growth on that value too, to make a 15% IRR to my investors, which means I need to sell it for 300 K a door in three to five years time. Do I believe I can do that now with, you know, the rule of thumb has always been 250K a door give or take, you know, for potent, for rockstar product, depending on your market, right?
Reed Goossens (23:29):
Maybe a little bit less for guard installed, maybe like one 70 to 200. If you’ve got all land, all in, in coastal markets is obviously a little different, but I’m talking about interiors. So it’s very interesting. You bring that up because I’m struggling with the exact same thing. And a lot of people are when they’re penciling deals in today’s market with these, these obsolescent assets are now trading food, just shy of what it takes to replace them. Right? So you don’t, you know, you’re not going to scrape the dirt and then build again, right. You’re going to, you have to keep going, like people still need a roof over their head. So it’s super interesting.
Vince Caviglia (24:02):
Yeah. And so then, you know, then the next tier down is like, I mean, so at first I think I should say that, like, I didn’t have this all dialed from, from the start. You know, a lot of you kind of like fire yourself from, from jobs as you, as you grow your business and, you know, you might be, uh, researching the entitlement. You might be researching the market at the, at the start. Now I have, you know, quants that map the market for me. I have people who are really professional in, uh, entitlement that been doing it for like 40 years. They kind of keep me ahead of the curve. And so once you see that everybody’s like 93% of the market is building rentals into the high end. You’re like, how can I create inventory at the low end where nobody’s building? And that’s where you’re going to see the highest growth, because there’s no inventory. And you also hear things like Biden talking about how they’re going to incentivize first time home buyers now, and they’re incentivizing into no inventory or, uh, you know, the housing affordability crisis that’s on the low end. That’s not on the high end with the price agnostic, uh, buyers. And so you have to then go to, you know, like zoning and entitlement, what’s going on on there, like San Diego’s led the way in, uh, for California in making it easier to build 80 use. But I always think that,
Reed Goossens (25:35):
And I use just for the, for, for the, sorry to cut you off, it’s accessible dwelling units for those people, who’s a granny flat in the back of your house. You have extra land, you can, you can build on, but keep going.
Vince Caviglia (25:44):
Yeah. And so they’re exactly, and they’re, they’re leading the way on making, uh, that easier, but I always think you have to like, go one step above, uh, above, like what everybody’s doing and you have to get into it, you know, go to lunch with your guy who does entitlements and find the, the, you know, things that nobody are looking at with parking or, or whatever that are going to make it easier for you to actually easier, cheaper, and faster to get through like the city to then create your margin. If you’re going to build into that low end with these high, you know, building costs or even like, I mean, something that I’ve done recently is, you know, a lot of mom and pop retailers are hurting in these, these little buildings in San Diego are really easy to, uh, entitle if you change them over and because they’re hurting their fire, sailing it low enough that you can actually change the use.
Vince Caviglia (26:42):
And so, you know, like 80 years change use and then, you know, within, you know, within the residential side on the, on the fix and flip stuff that I, that I do, I mean this, I’m not sure this isn’t very nice to say, but I mean, most, you know, like the top, like 5% of the agents make, you know, 90% of the money or whatever the statistic is, the rest of them, maybe aren’t necessarily as good at, uh, pricing and, and putting the correct information into their listing. And if you do a little extra work, you can find these deals that, uh, you know, people price wrong. And, and that actually goes back to the options thing. You know, when you’re, when you’re trading options, you’re looking for price, inefficiencies, uh, using math and the guys that I follow use something called fractals. That again, that’s probably above where we’re what we’re talking about.
Vince Caviglia (27:39):
The, the point is that they look for pricing efficiencies. And that’s what you’re kind of doing in the market. Since you know, that everybody’s building the top end. Most people that claim they do macro are just like listening to the fed or something. You know, you need the, you need these processes and systems in place to actually go find these pricing efficiencies in the market to then outperform. And, and as you ask, like now that I laid it out there, that’s kind of how I’ve still been able to operate within the San Diego market. And I kind of having multiple acquisition strategies is beneficial depending on where you’re at macro and where you are as you trickle down from, you know, micro at the, at the whole market level to micro in, you know, say LA Jolla or city Heights or whatever. And that’s kind of my, my process.
Reed Goossens (28:33):
That’s great. And you bring up some, really some good information and tidbits there, but I want to challenge you. What’s, what’s the billing on mass, right? And, and you mentioned earlier stagflation, the biggest thing that I think has, uh, and I, you know, I’m getting into it, things are going, inflation’s going up, cost of construction is going up, but wages are staying stagnant. So people are, people are not getting paid enough. How are they going to go for the new homes? Right. And that’s where the rent is. The renting comes in, right. They still need to rent. Well, rent’s going up, right. Well, if their wages aren’t keeping up, how’s the rent, you know, how are they gonna afford the rent? So this is, it’s very cyclical. So I want to, I want to tell you if you’ve got high cost of building rents, aren’t good wages aren’t going anywhere or very stagnant, but yet everything’s costing more than, than what what’s the solution here.
Vince Caviglia (29:21):
So, I mean,
Reed Goossens (29:23):
Lets let’s solve all the world’s problems today.
Vince Caviglia (29:26):
Yeah. Uh, you know, I don’t think this is necessarily accessible to most, but the best, the easiest thing to do in that situation is, is buy notes. And we haven’t seen, you know, because the government’s allowing the banks to hold a lot of these, uh, distress notes off balance sheet and you know, kind of recreate, extend and pretend that we did in 2008 with like FBIC loss share and um, you know, tarp and things like that. Uh, we haven’t seen that wave. That’s actually the best thing to go after. If, if that distress wave ever actually comes, I think they’ll just keep pushing it like 2008 for five years until the values come back, but you’re still get, you’re still gonna get an inflation on the asset, especially with them holding rates. So, so low in manipulating kind of the treasury treasury markets, not putting out as many.
Vince Caviglia (30:20):
So at auction, you know, they kind of get, still get bit up, um, on, on the, on the bond price and the rate stays low. Um, but you’re exactly, you’re exactly right. The, in this goes into the, the K shape dynamic of, of their recovery. They’re showing income growth, but they’re also, uh, it’s because the bottom earners fell out now they’re returning. And so the, the wages are gonna come back down and so you kind of have to buy, buy the assets, do the value, add and, and wait for the, the inflation to catch into true inflation, which will happen later on down down the road.
Vince Caviglia (31:07):
So, I mean, if we, if we, if you want to get into it, there’s something called a base effects and rate of change and base effects and rate a changer are almost like comping property. And so we’re gonna kind of stagflation till second quarter of next year, but you know, just like common property, second quarter of next year, we’re going to be competing against this second quarter, which was the highest like blowout numbers that we’ve ever seen in history because we printed so so much money. So we’re going to get kind of like a deflationary piece in that. And that’s when we’ll take, hold into, into true inflation after the deflationary move. And so, you know, in looking at these things, you can kind of, um, see where to sit now and then when to start selling a few of your assets to, to build up cash and then when, when to buy again, but as far as what you’re saying about the, the wages, so, right right now, we’re already seeing some, some, uh, inflation in, in the rents. You know what I mean? And whether people can
Reed Goossens (32:19):
Ridiculous, I’ll just jump in here as a, on my portfolio, do, I’m literally doing nothing, turning the unit and getting 300 bucks where Rwanda a year ago, I’m getting into in some of San Antonio properties, like putting in 70,000 civic, that’s $7,500, you know, putting you into a unit and misses on 150 and squeezing maybe 1 25 and all of a sudden, a year later, two years later, it’s just like I blinked and it goes off and rent and I’m like, what is going on?
Vince Caviglia (32:48):
So, so yeah, so it’s these inflation numbers, you know, like we are sitting at like 2% inflation this whole cycle. And then now the numbers that are coming out are like four and a half to five and a half for inflation. That’s a huge difference. Plus we’re getting, we’re getting people returning to work so they can actually pay those, you know, cause now they’re taking, you know, 20, I think it’s, if I remember correctly, like 26 states gave back the money that was giving to they’re giving the extra unemployment. So that’s forcing everybody back to work. So we’ll get the wages back by people actually going back to work. Their growth is just going to make it tougher for those people to actually pay rent. Cause you’ll still get the rent inflation, but they’re still going to kind of make the same amount. So there’ll be a cap that will, that will hit.
Vince Caviglia (33:38):
But I should say, you know, the eviction moratorium has kind of held down how much the rents can actually go out. Cause people can’t move those people out that aren’t paying and then release them up at a, at a higher rate. So even the, the fed. Now, if you like, if you don’t listen to what they say, if you actually read their reports are talking about double the amount of increase over the next year in, in rents once the eviction moratorium lists, which we’ll have, like one of the biggest pieces of the inflation number is housing and rentals, which will have it even greater effect. Like I was saying earlier in our conversation, it’s not transitory. And these are the reasons like as the eviction Rotarian lists, we get this rent growth, we’re going to get more inflation because that’s a huge part of your inflation number.
Reed Goossens (34:34):
Yeah. Um, so now let’s talk about you, you’re raising a fund, right. And how are you going about raising funding and how much you’re trying to raise. Right.
Vince Caviglia (34:42):
Uh, we’re trying to raise a 50 million and it’s kind of exciting because, you know, I got some of the, you know, from doing this and having like good returns and things like I’ve become kind of known in, in my, in sub market. And so like a bunch of people, once I was doing this one, you know, some of the best people in Southern California are like, oh, we want to jump on board and let’s do this. And so I’m going to give them, uh, some equity and there’s, you know, some more interesting things that you can do with like controlling risk with, within, uh, within a fund. And if you listen to like, you know, Michael Milken or, um, you know, Howard marks or, you know, Carl Icahn, they, they talk about how like the length of term of your, of your fund and how it can protect you or how you use debt within the fund, uh, how that can protect you.
Vince Caviglia (35:36):
And, you know, a lot of this macro stuff that we’re talking about can then, you know, like as you’re, as you’re buying an asset, you go from the micro and you trickle up and as your portfolio doing portfolio management, you go from the macro and trickled down to the, to the sub markets, to which assets you want to like keep and sell off and, uh, depending on where you are in, in the market. So, um, you know, one of the most fun things I think in real estate is being able to be creative and kind of, um, learn and grow. And, you know, this is my next stage of growth in how, uh, I can be a little bit more creative in, in how I use debt and in capital to go a little bit bigger and have, uh, you know, not only are these people really good at what they do that are coming on board, they’re actually really cool people as well, that I think would be fun to work with. And that’s something that your previous guests, Jason trio, you know, he’s my CEO CEO. And he always talks about, about that. Like building the team from the ground up to be, be strong.
Reed Goossens (36:48):
Yeah, no, I completely agree. What’s a, w w with the, with the, with the funding, you raising that from institutions, are you raising that from, from, you know, private investors are a little bit of both,
Vince Caviglia (36:58):
Uh, a little bit of both. I don’t think, um, you know, like this is something that I did when I first started first started raising, I think as like, oh, you got to have 50 million and just like jump in, but now you kind of like, you know, raise like five and start turning it. And then you jump up, you know, from like maybe a credited friends and family to accredited, you know, within, within the, the GP. And then you jump up to maybe like the institutional guys, uh, in the, in the LP, once you have, you know, quite a few assets they’re performing, performing well. So probably be like progressions, you know, and I think, I think that’s a good lesson anytime in business, you know, like don’t build it up too big in your head, like take the small steps of like doing one deal and then doing three and then doing 10, you know, type of, type of thing.
Reed Goossens (37:47):
I love that. No, I completely agree with that. I remember my first deal. It was like, it was only a small triplex, but, uh, and I talked about a lot on, on, on, on different podcasts that are getting interviewed on this was nearly 10 years ago and you don’t get to deal number 10 without doing deal. Number one. And if you want to go raise a fund, like I’m even thinking about raising a fund right now, I’d love to talk to you offline about what you’re doing and how you go about doing it. But it’s, it’s like, oh God, I want to raise $50 million. Where do I start? Or just go open, just go, you’re advertising. Like, it’s your points that you got to go raise five, and then you raise another seven on top of that and you raise another 10 and it’s slowly building on top of that and don’t work, but that money is going to work as your rolling it out. So, um, yeah,
Vince Caviglia (38:24):
You even have like a, you know, like a two year raise period, you know, and then like a five-year deployment period and roll up. And during that two years, you’re going to deploying and then pulling in more and then deploying and pulling in more and, you know, there’s, um, subscription loans and things that you can do when once you have the committed capital before you pull it in it, you know, see the, the, the money’s ready immediately to buy the deal. And then you pull in the subscription. Um, there’s a lot of, uh, of interesting things that you can do within a fund.
Reed Goossens (39:00):
That’s awesome. That’s awesome. Well, um, look, as we come to the end of every show, I like to ask you to dive into the top five investing tips, ready to get into it. Sure. Mate, what is the number one habit you practice to keep on track towards your goals?
Vince Caviglia (39:13):
I’d say, if you listen to Richard Branson and he’s like, how do you be more productive? And he said, work out. And I think that’s a huge one for mindset and air and everything. It makes you more productive over the day, uh, reading and time-blocking are a couple others. And then, um, you know, obviously like building systems within your company is a, is a huge one. So you can free up your time and, you know, taking breaks is important once you have the systems in place taking breaks. So you actually can wrap your energy of your mind to go after this stuff is important as well.
Reed Goossens (39:50):
Is that completely a question two is who’s the most influential person in your career?
Vince Caviglia (39:56):
So there’s so many, um, as far as like people, I don’t know, in like books that I’ve read it, it’s probably Sam Zell and the same to lab. Um, people that I’m closer to tat kind of influenced this, this macro stuff. There’s a team at head jive. It’s really amazing. Keith Macola and Josh Steiner are, um, just there, they know this stuff far superior to what I’m telling you here on this podcast. And they influence a lot of my investment decisions as well, but the most influential as of recent time was your previous podcast guests, uh, that I’m closest to, which is Jason true. And, you know, he’s kind of like the CEO of spur, um, either deals with startups or he deals with, you know, like billion dollar companies fixing their teams and things, and, you know, uh, from like psychology to, um, you know, how to build a good team, uh, everything he’s, he’s kind of like catapulted me to the next level.
Reed Goossens (41:00):
That’s awesome. Uh, I remember Jason being on the show. It was actually about a good, good year and a half ago now. So, um, it’s interesting. It’s, it’s a small world. Once you start talking to people in this awesome stuff, uh, question three is what’s the most influential tool in your business. And when I say tool, it could be a physical tool, like a, you know, a journal, or it could be a piece of software that you can’t run the business without.
Vince Caviglia (41:20):
I would say it’s those, those, uh, Quanta hijab. And, uh, yeah, and you’re not going to start there. Like I said, you got to learn about it first and then kind of up levels. And, uh, you know, I’m, I’m, uh, you know, kind of blessed now to have be able to have them be part of my team. That’s awesome.
Reed Goossens (41:41):
That’s awesome. A question I’m a four in one sentence, what has been the biggest failure or mistake that you made in your career and what’d you learn from that failure mistake,
Vince Caviglia (41:51):
Uh, partnering with the, with the wrong person and, you know, kind of having that. And he is a friend too, so, you know, I probably let it go on a little longer than I should have, cause I knew him for like 10 years, uh, prior, but you know, once you learn, once you get out of that, you, it kind of catapults you, your growth is as well. And like you learn like what, what, what values to look for in a partner or an employees. Um, and I think, you know, team building and who you got on the bus, as they say in good to great is like the most important thing you can have in your business that can either make you crazy, happy, and successful, or it can make you, uh, in the living. Hell
Reed Goossens (42:41):
Exactly. I couldn’t agree more that your team is so important when you surround yourself with, and, and I love what you said earlier, and I’ll mention this in the end, but how you, you, you, you, you go about doing things in your business, but you, you know, it’s like a job, but then you fire yourself from that because you’re starting to grow and you bring people in to, to, to, to, to do the asset management or the underwriting or whatever it might be. So bloody bloody, love it. Make question number five is where can people reach you to continue the conversation they want to be in your sphere, where they go,
Vince Caviglia (43:11):
I’m not that much on social media, but you can find me on LinkedIn. Um, Vince Caviglia, uh, as well as, uh, equitygroupinvestors.com is another, another place. And that’s probably the two spots reach out.
Reed Goossens (43:26):
Awesome. And we’ll go, well, thank you so much for jumping on today’s show some things I took away from today. Well, I think it was just your, your really deep knowledge about talking about stagnation, uh, you know, not inflation and where we’re going. I also think how you’ve used your ability to have different jobs or careers as you’re always kept. You always keep picking up information and sharpening your tools as we went through that transition in your early career, which has helped you put you on the right path today with your business. And that’s so important for so many people that, that I mentioned that earlier in the show that don’t think of a job as a bowl, think of it as something you can learn a skill through, and you’ve done exactly that. And you’ve now applied this in so many different ways that you look at markets where you look at deals, how you look at valuation, how you look at inflation versus deflation versus, you know, Goldilocks versus, you know, all the things that we’ve been talking about.
Reed Goossens (44:23):
And it’s puts you in a really good position because of that very well-versed background and array of experiences to, to be a really good business leader and to go out and find opportunities. And I think the last thing I took away was from is surrounding yourself with people that you, you might not be able to do it, like you’re starting your fund to bring on the right people who know how to do it, so you can be successful. Don’t think you can do it all by itself. I think that’s super important. So delivering to the end,
Vince Caviglia (44:50):
Nah, I think you nailed it there. And, you know, uh, just to add to that, like it doing well, isn’t normally when you learn the most and also too, like, um, this is something that Jason told me too, is like, as you go through your career, these ups and downs, uh, all you want to do with your new skillset is shortened them in, in, you know, like from going on up and down in the earlier part of my career, once I split with that partner and had a really rough time, I shortened that window, compressed it a lot. And I think those hard times are what you learn most from a hundred percent.
Reed Goossens (45:30):
Well, thank you so much for jumping on the show, enjoy San Diego and we will catch up very, very soon. Thank you
Vince Caviglia (45:36):
Reed Goossens (45:38):
Well, they have another cracking episode, Jen, with some incredible advice from Vince. Remember, if you do want to check him out, head over to LinkedIn and type in his name, it’s Vince [inaudible], it’s spelled the Jeevan solid Vince Caviglia and check out what he’s doing. He’s done some incredible stuff. Uh, he he’s really knowledgeable about all different market types, uh, and how that affects both macro and micro economics in certain locations around the United States, a wealth of knowledge really employ you guys to get reached out to him. If you want to be in his circle a little bit more. I want to thank you all again for taking some time out of your day to tune in, to continue to grow your financial IQ. But that’s what we’re all about here on the show. And remember, if you do want to jump on the newsletter and find out all about our latest investments, head over to Reed goossens.com and join the newsletter, jump on a scheduled call with me. And if you do like this show, easiest way to give back is to give it a five star review on iTunes. And we’re going to do it all again next week. So remember be bold, be brave, and go give life a crack.