Ep 131 - The Wide World of Alternative Assets with Denis Shapiro

In a world where traditional investments are becoming more and more volatile, it's worth looking for alternative ways to grow your money. We have a wonderful guest on Elevate Your Equity Podcast, Denis Shapiro - who built a cash-flowing portfolio including many alternative assets, such as Note and ATM funds, mobile home parks, life insurance policies, tech start-ups, Industrial property, short-term rentals, and more. On the show, he shared where his passion for alternative investment come from and what are some of his favorite alt assets.

We also talked about:
• Some key pointers for folks trying to pick out the best alternative asset class
• What is the market of a great alternative asset operator

More about Denis, he began investing in real estate in 2012 when the market was just beginning to recover from the GFC (Global Financial Crisis). Soon after he launched SIH Capital Group, a company that provides accredited investors with a simplified strategy to invest for passive income.

Denis has observed key changes in the alternative asset market in the decade of recovery from the GFC. Denis wrote The Alternative Investment Almanac: Expert Insights on Building Personal Wealth in Non-Traditional Ways in 2021. His book is based on his own experience becoming a successful alternative asset investor and contains interviews with some of the best alternative asset investors in business today.

Connect with Denis on LinkedIn and learn more about his business at SIH Capital Group LLC https://sihcapitalgroup.com/.

Thanks a bunch Denis Shapiro for coming on the show!

Unlock 3+1 degrees of freedom (time, location, financial + health) with our 5-Point Blueprint! https://elevateequity.org/podcastgift

If you really enjoyed this content and are looking for more, you can continue to learn more about us in several different places for free!

• on our website for blogs & other podcast interviews! elevateequity.org
• our YouTube channel! youtube.com/channel/derekclifford
• our book/audiobook! amazon.com/dp/ebook

If you'd like to have a FREE copy of our 7 Ways Commercial Real Estate Syndications Protect and Build Wealth, simply click the link below. We are here and vested in your long-term success! elevateequity.org/7waysEbook

Unlock 3+1 degrees of freedom (time, location, financial + health) with our 5-Point Blueprint! https://elevateequity.org/podcastgift

If you really enjoyed this content and are looking for more, you can continue to learn more about us in several different places for free!

• on our website for blogs & other podcast interviews! elevateequity.org
• our YouTube channel! youtube.com/channel/derekclifford
• our book/audiobook! amazon.com/dp/ebook

If you'd like to have a FREE copy of our 7 Ways Commercial Real Estate Syndications Protect and Build Wealth, simply click the link below. We are here and vested in your long-term success! elevateequity.org/7waysEbook

Transcript

Introduction: 0:03

Welcome to the Elevate Your Equity podcast, where we, as married busy professionals, leverage real estate investing to unlock the three plus one degrees of freedom, health, location, time and financial.

Derek Clifford: 0:16

Today I am joined by Mr. Denis Shapiro. Denis, how are you, man?

Denis Shapiro: 0:22

I'm doing good. Derek, I am super excited to be here.

Derek Clifford: 0:25

Awesome, man. Great to have you on the show. And for those who don't know, Denis, first of all, Denis and I have been in a pod for quite some time together. It's been going on two years, hasn't it? Or maybe more

Denis Shapiro: 0:37

Two and a half. Yeah, I think COVID. I got started on COVID.

Derek Clifford: 0:41

Two and a half years. And so we've been meeting almost every single week in that pod. And it's been one of the most valuable pods that I've ever had. We can talk about that a little bit later on. But I want to introduce you audience to Denis. He actually began investing in real estate back in 2012, when the market was just beginning to recover from the global financial crisis. And he built a cash flowing portfolio, including many alternative assets such as note, ATM funds, mobile home parks, life insurance policies, tech startups, industrial property, short term rentals, and more. That is already making me very tired, sir. Soon afterwards, he launched sh Capital Group, a company that provides accredited investors with a simplified strategy to invest for passive income. And then Denis has also observed key changes in alternative asset markets in the decade of recovery from the global financial crisis triggered by a bunch of legislation that we can talk about in a little bit. And Denis wrote the alternative investment almanac expert insights on building personal wealth in non traditional ways back in 2021. His book is based on his own experience in becoming a successful alternative asset investor and contains interviews with some of the best alternative asset investors in business today. Denis, I'm super excited to jump into the show today, are you?

Denis Shapiro: 2:02

I am truly honored. I've been thinking about this all week and ready to rock and roll.

Derek Clifford: 2:07

Awesome. Well, let's do it, man. Let's start how we normally start with all of our guests, which is why don't you tell us a little bit about how real estate in general got the spark going for you? What was it about real estate investing that truly got you excited and started exploring space for?

Denis Shapiro: 2:23

Yeah, I'll try to keep this as short as possible, because there's generally a pretty long answer. So I started investing when I was actually 14 years old, my brother gave me a copy of Rich Dad, Poor Dad absolutely hated the book. I was I was a super cynic at that time. But I was like, Alright, let me actually start investing. I had I think $1,000 saved up from my part time jobs, went and did the worst thing I can imagine. I went to my older brother and said, What do you do to invest? And he was like, Oh, I buy mutual funds. I was like, Oh, this is a great idea. Let me do what you do. I spent about a year looking at this one mutual fund and my brother highly recommended in quotation marks. I think it went up $7 during that whole time period, and I actually had to pay for a trade during that time period. That's how old I am. And I was like, Oh, this is not really this is not what I had in mind. I'm not gonna get really rich at $7 a year type of growth switch went the whole individual stock picking and went the whole, Warren Buffett did my research went to business school was like, Hey, this is what I'm gonna do. I'm gonna be like a fast broker something related to stock. And I went in, right in 2005. By the time my junior senior year, it was smack in the middle of the global financial crisis, basically had two choices, basically either pivot or go back to school. So I was like, Alright, I guess the smart move is just go for my MBA at this point, with no, no real work experience. So I went for my MBA got my, when I was in my MBA was recruited by the government got my first paycheck from the government real paycheck, my part time jobs prior. And I was like, Oh, it was great. The government's done only my employer. They're also my business partner, because the amount of taxes they were taken out. And this kind of leads us to the question that you originally asked is, I went home that day, and I was like, How do I pay less taxes? And the first couple results were semi illegal. I went back and I was like, How do I pay less taxes legally, and then the whole first page was real estate. And that got me. Then I then made the second biggest mistake, I went to my oldest brother at the time, and this is a consistent theme in my life. I said, Hey, do you have any real estate that you want to sell? And he looked at his whole portfolio gave me one of his worst properties. I cut my teeth on that property, but then went way more passive after that. And yeah, that was my spark. It was about 10 years of being on the traditional side and then figuring out hey, there's, there's, I don't I hesitate to use the word better. But there's a complementary set of assets that in this alternative space that we kind of dabble in. Right, right.

Derek Clifford: 5:07

And so what helps you maintain that space, because I think you kind of went really over over it real quick. But I want to know from you how you're able to maintain that first rough property that you got, because it's very easy for you to just throw up your hands and say this, this, at least for real estate investing isn't isn't for me. But then you stuck with it. And then you found the passive side. So what kept you going through all of this?

Denis Shapiro: 5:31

That's a great point. It was mainly because I was seeing that other people weren't doing it better than I was. So it was either me coming in with a victims mentality. And I'm, like, one of my pet peeves in life is the victim mentality. And say, like, oh, you know, my brother sold me a bad property, or, you know, the path of progress is not coming to my area. But it's going, you know, 20 blocks away, it's all these things that you could say, or you could just say, like, Hey, I made a really, really bad decision, I did no market research, I asked someone who has invested themselves on what they want to sell. So I committed all the the bucket list items of things you should not do when it comes to buying investment. So I took that on myself. And I ended up looking back at it, I'm like, Okay, I got the GC that project, you know, I did a complete renovation, I went through eviction, they weren't as scary as I thought it was, I had the police called out, I have to go walk the property with a police officer. So I did all of that. And it was like, okay, it wasn't as scary. But at the same time, I got to a point really, probably, I would say, two, three years in with that property, where I very firmly came to the decision where I don't want to scale this, I didn't want 30 of those. So that actually got me into the rabbit hole of more passive stuff, because I wanted some of the benefits that real estate can give to you. But I didn't want to be the one responding to the burglar alarms, I didn't want to be the one that was dealing with the evictions. And that kind of actually got me down this rabbit hole that ended up being commercial real estate, where you got the professional property management, you got all of those things that buffered that part of the things that I hated when I was a landlord for that one property.

Derek Clifford: 7:16

Yeah, I love that. So I want the listeners to really take away a main theme throughout this. Denis, you may not know this, but when you are doing this, you are taking the internal locus of control, you're saying, okay, all those things out there is actually a result of my doing. And I find that the most people that end up looking inward to try to find a solution to their problems, whether it's finding a good investment to go with, or they have a problem with a property that they just are stuck with, right? The people that succeed and stick with it and end up making money in the long run. Because that's usually the way that it always does, is that people that have their mind, right? They have this victim mentality that's not there, right? Or they've learned to evolve from it, they've learned to take responsibility for their actions. So just want to point that out for the audience members, if you guys are in a situation right now, where it's really tough. Listen to Denis's story. Because obviously, you know, this is a story that has a beginning. And it's always rough, but it gets much better. So I just wanted to point that out there. I don't know if you have anything you want to add to that. But that's that's what I've observed in listening

Denis Shapiro: 8:21

Yeah, you know, it's ironic, my my son actually just kind of related but also lated. My son started school in first grade. And, like, it was a big thing for me to get them on the bus. And like I said, I had to fight my inlaws to get him on the bus. And the first day literally got off the bus, screaming and crying. And like, I was doing breakfast for him. And I was like, I was like, Look, I know the bus wasn't a good situation last year, but you could either shut down from the situation, or you could actually label what made it uncomfortable. What made it bad. And then, you know, and then he got to the root of it. No one wants to sit next to him. So I said, Look, that's normal for first day. But let's, you know what happens if that happens again, then, you know, what can we do? And like the solution was like, so simple. I was like, why don't you just bring a book, if no one wants to sit with you pull out the book and just read your book. And of course, he gets off the bus today. And he was happy. He made a friend to read a little bit of his book. He had a great day at the past he was complimented, but But basically, like, I think it's instilled to us at such an early age, especially when people that mean well, like they really do you know, his grandparents love him, you know, almost too much to a certain extent. But what they what they're teaching him to do when they kind of cover him and basically tell them you know, it's okay, maybe we won't, you won't do the bus the next day is they're teaching him that victim mentality, basically saying you know, the wasn't that for you. And it's crazy when you really think about it. It's ingrained at such a young age. And it's like you, we have to be like the voice of like, hey, you know what, just label what the problem is. Because that's what we deal with every single day. And in commercial real estate, right? We got that one tenant, and we could blame the eviction more than we can blame. There's always somebody or something to blame, you know, especially with geopolitical, geopolitical, health, whatever you want to do, there is more of a political, whatever you want to do. There is always someone to blame. But the ability to actually just start with AI is just so powerful. That I can't Yeah, I can't say that enough.

Derek Clifford: 10:44

I totally agree, man. And I think before we move on, like, I think that's a great example, very visceral for people to listen and hear about, you know, little kids, because very easy to relate with that, because we all wear that once. But the best leaders out there are the ones that when things go wrong, they take accountability for it. And when things go, well, they give credit to other people, that is like the ultimate level in, in mindset and being able to lead right, and you're able to help, like start to walk your children through that process, but by using this very cool example early on. So that's awesome stuff. Um, but what I want to do now is I want to kind of shift over to alternative investments, because we got the pro here. So we want to make sure that we we take advantage of this time as much as we can. So let's start from the beginning here. Where did your passion for alternative investments come from? I know, we talked about real estate. So like, how did you start shifting around and discovering these alternative investments.

Denis Shapiro: 11:43

So what ended up happening was, I discovered a huge problem with the traditional side of my portfolio. And when I when I when I talk about traditional, I mean really stocks and bonds. This is the stuff that your financial advisors gonna give you. This is the stuff that I when I started 14, you know, I had my Scottrade account, and this is what I was digging into. And what I started realizing was that I have all these strategies where ideally speaking, I want the two things from my portfolio, I wanted income, and I want the appreciation. That's all I ever wanted from my portfolio. And what I started realizing was there was always a part of my portfolio that was really appreciating really well, the problem, my portfolio was always the income side is I couldn't crack this not like I had, I had a situation where I was buying reeds, and I was buying MLPs and I was buying these high dividend stocks in these utility companies. And the same thing kept happening over and over again, where I would own them for a year or two, I see them underperforming just the index fund for a year or two. And I'm like, okay, don't worry, because the the old adage is when the market starts crashing, those defensive stocks, they're gonna be the ones that holding up really well. And then I went through one correction. And I'm like, okay, they didn't actually, they didn't actually stay afloat, they actually went down just as much as them, they thought. And then I went through another market correction. And then the same thing kept happening over and over again, where I realized that the old adages don't work anymore because of the algorithm. And the way that the algorithms play on the market is that basically, something goes down, everything goes down type of mentality. And so what I started realizing was all these things that I was supposed to be getting income from, you know, highly underperformed the appreciation stuff. And then when it was time for them to do their job, they couldn't do their job because of the computer algorithm. So I realized that I had a, I have a solution and a problem solution, I realized that I could simplify my whole traditional portfolio and just put it in an index fund and move on with my life. The problem is, I needed somewhere to get that income. And what ended up happening is with my first real estate purchase, and then I did a note fund, and then I did I forgot what my other passive fund was, I started seeing, I'm like, wow, these privates, everything in the alternative space was basically private, right? I couldn't trade in and out, they weren't volatile. So I was seeing like, consistent cash flow. And then when the market actually caught, like, had a correction, the underlying asset didn't change hands. So there was no price fluctuation. So I didn't need that defensiveness, they just naturally kind of had this defensive element. So it actually what I started realizing was, it's not like, should I do traditional alternative, it's like, Hey, I could just do 1% of my brainpower on a traditional index fund. We'll set it, forget it, let it appreciate. And now I got 99% of my brain power to really do this cool alternative investment portfolio. That will give me that stability that will give me that cash flow and it solves the income. So what I just realized is that I couldn't shove I couldn't get everything I wanted out of the traditional size, but by actually labeling what that's actually good at, I was able to then realize what I needed and they'll turn inside kind of started. Really like Metamorpho like it started really showing what it's good at. And then it all kind of makes sense at that point. Right?

Derek Clifford: 15:07

That makes sense. That's awesome. So it kind of evolved out of a need, right? It sounds like you have one place where you're able to kind of work on just appreciation, which is the index fund right at the very beginning, you're just put put it into the index fund, you know, don't worry about the dividend yielding stocks, and then start to look for solutions outside of that, which was, which is very cool. So as far as alternative assets out there go, I know that this question is much different if I ask it last year or the year before, but what is your favorite alternatives assets out there right now in 2022? And then also going forward into 2023? What do you think is, is good for most people to start looking at, or at least for your favorite ones? Because everyone's situation is different?

Denis Shapiro: 15:48

Yeah, so everyone is everyone's is different. One thing I would like to say is, that was one of the reasons why I wrote my book was that alternative assets have a certain language. And once you start learning elements of that language, they start mirroring each other in other assets that you think are not related, but they're actually very, very related. So for example, if you learn, if you learn the basics of mobile home parks, you can look at a Salesforce deal, or you can look at a multifamily where, because you're gonna see the same terms, right, you're gonna hear the cap rates, the cash and cash, the IRR, all those terms are going to repeat. So it's hard to say that there's a favorite, I like to focus in on where my operating partners are finding deals at the current moment, that's kind of the way we're doing it. The last year, year, and a half of focus has been on affordable housing. And I know that's something that's true and true and time to your heart as well. So right now, the Pacific moment, sh Capital Group, we started with an income fund, and then we kind of evolved into operating our own deals. So we are we are most heavily invested in the fordable housing space, we love the space, it's got, it's one of the only spaces in the commercial real estate world where there's an actual natural barrier of entry, because of the compliance is because of the bureaucracy. Most operators, and I don't want to, it's not in any way a negative, I don't want this to come off negative. But most operators out there in the syndication space, 99% of them have the very similar business plan, right, you're gonna look at their business model, and it's gonna be about improving the kitchen, the bathroom, they're gonna get an extra $200 a month, you know how many dog parks that you're going to see, you know, all of those things, were in affordable housing, it's almost a completely different animal, it's about the waitlist, it's about getting the expenses down, it's about being compliant. And most of the time, the occupancy is so strong with the weightless, you really don't have to do these heavy value add plays, you just really need to give them a great product for what at what they're, you know, what they're needed. And that's in such a critical, and it's in such demand out there, that we really liked affordable housing, say so I would put commercial real estate as my favorite asset class, for the time, foreseeing for the foreseeable future. Got it?

Derek Clifford: 18:08

Yeah, I was gonna say to that every, every asset class has different seasons, right? Because there's like a layer of popularity, you know, hence Bitcoin, right? And Bitcoin mining, things like that. There's also a layer of like inflation that comes in, there's locality, there's international stuff, there's all kinds of things and factors that feed into what it is. So I highly recommend that you guys out there, look into all types of different alternative assets. And Denis' book is a great place to start, which we can talk about in just a little bit. But maybe maybe we can pull some nuggets out from the book right now on the podcast for our listeners, how does someone or maybe you can provide some key pointers for folks that are trying to pick out the best alternative asset classes for them? Like what should they be looking at? How do they know where to start? Like what's, you know, what's the the menu of options for them? And how should they start thinking about what's important to them and what's not?

Denis Shapiro: 19:06

So that's a great question. So I would I would take this as a two prong approach. First thing is you really need to actually kind of itemize the assets that you currently have figure out where you actually have a need. So that's, that's really, really, I think, a point that people skip the step because they automatically start looking at deals and they automatically get blinded by like total return. And the biggest thing is, Derek, I know you see this too. The biggest thing that you catch between the experienced investor and someone just starting out in the space is the person who's starting out the space. They get blinded when they see like a 20% IRR. They they they're like this is the greatest deal ever experienced investor looks at the total returns as the last thing there is. So I think you know you when you when you look at that point Ah, forget about the return. Look at what you actually need what what are your needs? And then that's, that's step a step one, step two, this is the part that I think people forget, is to actually begin teaching yourself and networking. And the reason why I say that is that sometimes your network will lead you to your best possible opportunity. And, you know, if you're surrounded by if you network, and you have five guys that you consistently talk to in the self storage space, why are you going out and investing in mobile home park? You know, you know, at that point, that makes absolutely no sense. So what I like to say is, figure out what you need, there are so many alternative assets that will will fit those needs. But then don't go and find operators, then go find your network. And doing that first. And in my book, I actually write the the kind of the sequence that I kind of went about. And I'll just rehash it really quick, like the first thing I recommend you do is just go into LinkedIn, and posting on your title, your name, just put in investor, real estate investor, ATM fund investor, self storage, investor startup investment, what's gonna end up happening is a few days later, you're gonna get bombarded by these 15 minute call requests. And these requests are a complete waste of time most of the time, but take them because when you're starting out, what you want to do is you want to have those conversations and figure out what terms you're not understanding. So if you're talking to a commercial real estate guy, you know, don't look at the deal. Just have the conversations and literally write down every word that you did not understand. And then look them up at those conversations. And then what that will do is the reason why that's such a critical step is because the next step is to actually go to conferences, go into multifamily meet up, you do not want to go there without no knowledge of the key terms, because what's gonna end up happening is you're going to you're going to go to people, you're going to talk to them, and you're going to come off as you ask them for help. Versus you trying to actually network and provide value to someone because if you go to a multifamily meetup, you can't be like, Well, what the cap rate to someone? Because then you're going to combine them with question question. So you got to do your homework. And the easiest way to do your homework is actually do on LinkedIn. And once you got that, then you start going into the conferences, then you maybe join a mastermind, and then you will kind of get guided to the asset classes that are right for you. Because now you got people that you're texting with on a consistent basis. And no one will ever tell someone that, that they're networking with, oh, you should invest with that guy, he just completely wasted my $50,000. So you know, like, really, so figure out your needs, get educated, build the network, and then find the asset classes to match that.

Derek Clifford: 22:55

I like that that's a really good thing. Now, just to just to paint an example for someone, let's say that I'm initially interested in ATM funds, but then I start getting attracted to Bitcoin mining, or now I'm actually into, you know, some some other like, just notes, private notes, right? And what if I have an equal interest in all these things? Because there's, there's an adage there, where it's like, you can go, you know, an inch wide and a mile deep, or you can try to hit as many asset classes as possible. What's your thoughts on that for people that are maybe specializing or looking to try to specialize versus being a generalist? Do you have any, any thoughts on that at all? Or just Just curious where you're coming from?

Denis Shapiro: 23:40

That is a great, that's a great question. So my answer to that is, it depends on your personality. Are you a person that is that is easily attracted to the silver object syndrome, right? So if, if you're looking at 25 assets at the same time, that's probably a bad thing. So I remember I had a couple of investors that reached out and they were I think they were asking about assisted living. And a couple of things that actually genuinely didn't do. I wrote about nine assets, but I didn't write about all of them. So I remember and I told them the same thing. What I do is, I stick to my core core assets, and that's, you know, multifamily self storage. No hard money lending, those are my core assets. Now, when a new asset actually comes up on my horizon. What I like to do is actually like to follow it along for like two years. And that's something people are super impatient about, like I remember I did a infinite banking policy and I spent two years researching it and driving into it, going over the pros and cons and talking myself out of it and tuck myself back into it, all of these different things. But I was okay. And I set myself a timer for two years because the reason is, after two years, it's time for you to invest in that Ask the class or stop looking at it, because you're not going to learn anything else about that policy, but two years is also enough time to actually follow along and deal with it. So I think it's, it's like a catch 22 because people say the best thing to do is be diversified. And then but if you're super diversified, you know, Warren Buffett is not going out there buying Bitcoin, you know, he sticks to his, he knows his insurance companies. He knows his large cap on the value stocks, and he is done really well on it. Right? So my answer to that is, if you have the personality that gets easily distracted, then be more specialized. If you have the ability to systematize it, then by all means, diversify.

Derek Clifford: 25:44

Yeah, I really love that, Denis, because sometimes we have to find your own nature, because we tend to go to the extremes because we feed ourselves in that, right. And I think that that moderation is good, because while it's good to specialize, maybe you specialize in that diverse basket of alternative investments, right? Because, you know, I'm just trying to think back to my conversation with Jeremy role, right. And Jeremy is an is an amazing investor. He has a great long term perspective, and he's very willing to explore these different avenues, right. And as a matter of fact, that's probably where you picked up some of this perspective from is like, oh, you know, ATM funds, that works. Now, Bitcoin mining that works now, right multifamily that used to work, but it doesn't now. And so I just really love this approach of like, knowing who you are as a person. And then and then self adjusting to figure out what type of asset is going to work. And I also really like to, and I want your thoughts on this before I move on, because this is super important. What do you think about investors who understand a certain amount of criteria, like once they get the vocabulary down, right? They're like, Okay, what I want is I want appreciation, cash flow, and capital protection, or like some allocation of those, right? You have to you can't get all three at the same time, you kind of have to prioritize, right? At least that's what most people start learning out is you have to figure out, okay, what am I going to give up to get more of? And so what do you think about the approach of saying, okay, if I'm looking for capital preservation first, and then cash flow next, and then appreciation last, trying to find assets or asset classes that fit into that criteria and exploring those? Like, would you think that would be a good approach also, or do you think that that's maybe a backwards approach of looking at it?

Denis Shapiro: 27:33

I think I think people like to throw out things like they're looking for capital preservation, as like buzzwords. But then when I talk to most investors, like I'm like, What do you mean by capital preservation? Obviously, no one wants to lose money, right? And then what people are really looking for the most of the time is total return. And that is, like it. I think it's human nature. I think even someone who's in the 60s right now, that should be in the bucket of capital preservation, they are also looking at the fact that you got inflation at you know, 789 percent right now. So how could you be truly capital, you know, for them, investing in two 3% returns right now, for the sake of capitalization, so six to 7% law. So I think we all want to be inherently capital preservation, but capital preservation, I think comes with your own experience and knowledge. Because you if someone is extremely experienced in knowledge, and they look at a deal that is perceived as risky by other people, but they understand the variables of that deal. It's, I would say it's a safer deal than someone who doesn't really understand anything and is just, you know, blindly passively investing. So I always put that if you're going to do capital preservation, if you're going to put capital as a high priority, then what you're really saying is that you have a high priority on on educating yourself and knowledge. So I kind of removed that from the equation. So then it's about like appreciation and cashflow. And I think it's super important for deals, especially these days, is is for the deal to have a somewhat balance of returns, coming from the cash flow, and the returns coming from the refi and the sale. I recently had a deal of a person I'm kind of coaching and they sent me this deal. I was like, Can you help me break it down? I said, Sure. I looked at the deal. And it first red flag is they underwrote the refi. It wasn't even like a bonus. Like well try to get the refund. They underwrote the refi. And you realize why because there's such a large, you know, they project such a large refi that you you, you basically you know, your cash on cash is 30% because they're gonna give you a refi in year three of 100%. Okay, but what if that doesn't happen? You only got 1000 all the cash flow in year two. So you know, and then you look at your four it's the same thing. It's 1000 Miles cash flow, and then they're expecting a miracle double, and you're five. So I had this conference. issue with him. And I was like, look at the percentage you're getting from the cashflow of the deal, versus the percentage you're getting from the sale of the deal, which may or may not ever happen. So you know, you have to take that into consideration. And that's why these days, you know, IceCube, the deals that actually cashflow from day one, I you know, the sale is, is a bonus is a bonus at this point. But nothing is nothing is really guaranteed in today's rate environment, whether or not you're going to be able to sell in three years, I think people have gotten conditioned to that, especially investors that started in 2018. Almost like the worst thing that could happen, like I'm, I came from 2012. But I gotta watch more theories in 2018. So I know how my peers think. And they got conditioned into thinking that, you know, they're just going to put this money into these deals, they're gonna go full cycle in three years, and they're gonna make a 1.7 1.83 years. And when you present them a deal, that's only a 13 to 15% IRR, which I've learned is the only way I really underwrite it. And then they turn around this will the five last five deals I saw was a 26% IRR. I said, Okay, you know, good luck with that. But it's a dangerous situation. So I think in terms of capital preservation, capital appreciation, I think it's really, really important to focus on cash flow for the foreseeable future, until the interest rates really, really start stabilizing, and then start, you know, leveling off a little bit. So, to me, cash flow is king right now.

Derek Clifford: 31:35

Yeah, I think I think you're absolutely right on that. And I mean, again, you know, I have no idea when this podcast is being listened to by you, dear listener, because, you know, right now, we're recording this in the end of q3 2022. And, right now, there's a lot of uncertainty in the markets. So depending on when you're listening to this, it may say, it may or may not make sense. But if you're in, if you're investing in this in this time, then you'll you'll understand what Denis is talking about, just because it's been crazy, we've seen with COVID, and the stimulus, a whole bunch of insane amount of CAP compression, or, you know, sale, basically sale prices exploding, because people think that they can get in and just sell the property, you know, in a couple of years. And I think that we're actually returning to a more normal market, Denis, where the rate of returns at 12% 15%, that's also accounting, by the way, not in accounting for tax, you know, tax advantages, which is a big part of why we do what we do. But that's actually a pretty reasonable return for the amount of risk that you're taking when compared to the 8%. The stock market's supposed to depreciate year over year, on average over the last 50 to 75 years. So, you know, looking at an investment, and again, understanding too, that a forecast is just a forecast. And I could go in there right now. And I could say, Yeah, you know, what, instead of instead of selling at $75,000, a door, when we exit, I'm gonna sell $80,000. That's what I think five years, and then the deal becomes an incredible deal. And anyone can do that. And so that's what that's what you're trying to convey to your, you know, investors who are maybe just starting out that you got to look at the operator. Now, let's, let's shift there for our final question, then we'll head into the final, you know, the, the Rapid Round here, what in your mind, would you say, is the mark of an of a fantastic alternative asset operator? What is it that people should be looking for, at these conferences, if someone is interested in self storage, or they're interested in what's a common theme, right? Because a lot of multifamily operators, they'll tell you, here's the criteria, this is what I do. But there's there's got to be a common thread that maybe you've been seeing across all these operators that have done good work.

Denis Shapiro: 33:49

So this is interesting, because I have a section in my book, that was a q&a for every asset class that I picked. And in that q&a, I got, I think, really well regarded investors in that space to fill out the exact same questionnaire for their asset class. So I had Jeremy roll talk about ATMs, I had Brian Burke about apartment buildings, I had some really, really big names really, really happy. So it was really interesting to see how they each answered the question because it was the same set of questions for every single one. And I think I remember the last question was basically like, what do you see yourself in like five years? Do you see yourself investing in this asset class in five years, and some, you know, some, some of these operators are true marketers. And yes, this is the greatest thing since sliced bread and some operators gave you a very, very different perspective. And then, like one answer, I remember was one operator was and I think this is kind of would be my final answer if this was Jeopardy. was they said, I said you would you So in this case in five years, and the operator said, Honestly, I don't know if I'm going to be invested in next month. Because I'm just going to look at the data and just go for it. It's not that he's saying he's telling his whole portfolio in in a month. I mean, in a month, what he's basically saying is that he's consistently looking at the landscape of what's out there. And he is making decisions based on that. So I think it's the sense of open ended, and you talk to these people who are, you know, are at a different league in our space. And it's the same thing, even though they've been doing it for years and years and years, they literally treat this as maybe next month, we're just not going to buy anything. And it's that ability to actually pivot, I think is the trademark is of is the trademark of a really good operator. And it brings me back to one of our I remember, in our mastermind, one of the quotes that was said, I don't want to quote it as who said it, but but I know. And one of Andrews favorite lines was a good operator can save a bad deal. A bad operator can kill a great deal.

Derek Clifford: 36:15

Yeah, 100%. So, so good. I love that man, thank you very much for for that input. That's a really great, great thing for people to consider. And I know that we're supposed to move over to the Rapid Round right now. But I can't resist asking you this question, because I've been staring at it on the screen. And I want to make sure that I ask it. What is of all of these, you know, alternative investments that you're doing? Like all these switching and all of this moving around, what would you say is one of the toughest lessons that you've learned throughout your investing career?

Denis Shapiro: 36:46

Compass lesson, besides not listening to you brother on investment?

Derek Clifford: 36:52

Well, that's that goes without saying that's kind of, you know, we mentioned that already.

Denis Shapiro: 36:57

So I think this is I wouldn't label this tough. I would label this as bittersweet is the going in and expecting success from the first time you do something. And I remember, Derek, I think we talked about your first time, you know, when you raise money, and you went into a deal, and you know, you could you could label that as troubled. But damn, how much did you learn from that experience? So I always tell people, I, my first mutual fund investment was a terrible decision. My first individual stock was a terrible decision. My first, my first syndication was a terrible decision. And it's like, I have a list of these mistakes. But I will tell you that the second deal I did was slightly better. And then the third was even better. And then the fourth, and now I look back at it, like, not in a million years, but I really make that first decision. So I'm okay. You know, it's okay to make a really bad decision the first time as long as you're not consistently re making the same exact bad decision over and over again, it's, it's fine.

Derek Clifford: 38:05

Yeah, you just got to be consistent enough and be able to take an honest look at where you've been, and stick with it. It goes back all the way full circle around to the mindset piece, right? That internal locus of control, understanding that you are the maker of your own decisions, right. And if you make the decision, you got to sit in your own gravy, right? That's what you got to do. I don't think that's an expression. But I just went ahead and made that up. So sit in your own gravy. There we go. Yes. In your own gravy roast in your own gravy. Cool. Right now, this has been an awesome conversation. But we still have five final questions for you that we're going to rapidly ask you, if you don't mind. So if you're ready to go, let's let's jump in.

Denis Shapiro: 38:48

It's okay, I could pause. Before the second question, don't worry.

Derek Clifford: 38:52

It's all good. All right, number one. I don't know if you're a big book reader. But what book has had the biggest impact on you and why and we ask that it not the Rich Dad, Poor Dad or the Bible, because we get that every time?

Denis Shapiro: 39:06

I would actually say your book, The Part Time Real Estate book. The reason for anybody who doesn't know is in our pod. Literally, Derek came in like the first week and is like, Oh, by the way, I just published the book. And that it wasn't the fact that the concept or anything like that. It's just to be associated with someone that just wrote a book, and now you're talking to them consistently. I think without that book, I probably wouldn't have wrote my book. So his book, huge impact, highly recommend everybody's doing well.

Derek Clifford: 39:39

Thank you, Denis. That's awesome. I love that. Thank you so much. All right. Number two, if people wanted to emulate your success, what do you think is the first actual thing they could do to follow in your footsteps?

Denis Shapiro: 39:50

Change your LinkedIn to whatever investor that you want to become. It's such an easy step people will start reaching out to you and there's also a psychological thing Seeing when people actually reach out to you versus you, you know, reaching out to people for help.

Derek Clifford: 40:05

Yeah, I think that's, that's a very subtle shift and very tangible, easy thing to do. I would also say to like, you know, look at your LinkedIn profile and start moving in the direction where the puck is going, right? Like what direction you think you want to go. As long as you're approximately in the right direction, you'll start heading in the right way, right? You doesn't have to be directly on course, you just got to be approximately in the right direction. All right, number three, what is one tool process or hack in the last three to six months, either in your business or personal life that you've employed to help save you time and or efforts?

Denis Shapiro: 40:39

You know, the ironic part about this question is that I don't think your viewers but they probably have, have figured out that you're such a systems person. And for the last two years, almost every single system in my video I got we can go is flag Asana, email hacking. But yeah, I will say one, one that I don't know, if you gave me I really liked his loan, just to record. So we do have a VA. And what we'll do is, I'll do a quick five minute long video, send out the system. And you can actually tell it to actually create the system herself after you send us a video. And super easy just, you know, why repeat doing something more than once if you don't have to? Something for you that are

Derek Clifford: 41:27

100%? Man? Yeah, so I've been going back and forth about like Cloud recording on zoom with just screenshare and everything. But loom is definitely superior, because of like the link sharing the commenting on the video, and then you can tell whether or not someone's viewed the video. So definitely, highly recommend for sure. And it's free, I think up to about 25 videos.

Denis Shapiro: 41:46

Yeah, and you get five minutes of recording time. Yeah, five minutes.

Derek Clifford: 41:50

I've actually gotten to seven on a few and they haven't taken it away. So pretty awesome.

Denis Shapiro: 41:54

Hoping I am listening to this podcast.

Derek Clifford: 41:57

Number four, if the people that you know had to describe you with one word, what do you think that word would be?

Denis Shapiro: 42:05

I would say honest. I think I'm honest to a fault. And I think my I've grown my network. Because of that. I've given very honest feedback about my investments. And the most honest feedback. I've been around the ones that have not done well. And I think when you're honest about your, your bad moment, I think it opens the door for people to feel comfortable enough to share about theirs. And that's when you really learn stuff, versus if you just constantly telling people how you're like Michael Jordan here, and you don't make an Oh, yeah. Hey, you know, that's so annoying.

Derek Clifford: 42:41

Yeah. And what I really love about that, too, Denis, is that you've always had very good feedback from me on webinars on webinar recordings and everything. And I've always tried to implement that the best that I could with every one of them. And it's been very valuable. Another thing that comes out of these mistakes, right, when you try something, so really appreciate you for that. All right, last question that we have number five, what is one small thing that most people just don't know about you?

Denis Shapiro: 43:09

Once more thing, that most people don't know that me. Let me take a strategic pause here. Once?

Derek Clifford: 43:24

It's very hard for people who are on podcasts a lot, because a lot of their stories out there already, but it's all good.

Denis Shapiro: 43:32

I will say that, one small thing is that I was actually in dancing school till I was like 14 years old. actually helped me a lot in my other sports. But yeah, I got like four silver medals and one competition. And it was definitely an interesting experience.

Derek Clifford: 43:55

Dude, that's incredible, man. I bet that comes in handy when you're trying to find a wife or a suitor. I wish I had that skill when I was 14. That's pretty awesome.

Denis Shapiro: 44:06

You know, it's so different, like ballroom dancing to the stuff that you know, it's almost a completely different skill set. But yeah, it was fine. I definitely want to go with my my wife to actually do couple classes and stuff. I feel like you know, now I'm like 20 years after drudging it out. I'll be like, Oh, okay, this is this is nice to go leisurely whenever you want to.

Derek Clifford: 44:30

I love that man. Well, Denis, do thank you so much for coming on the show. This has been an incredible value add for the listeners. But before you go, why don't you tell everyone how they can get in touch with you how they can find out more about you and your world. Maybe your book. Let us know how we can find out more.

Denis Shapiro: 44:49

Yeah, so the first place I would say if you're interested in my book alternative investment almanac expert insights on building personal wealth in non traditional ways. Sorry, I know that's a handful. You can actually Find out on Amazon. And good search. Hello, my name is Denis Shapiro, Denis one. And I actually have a special special offer because it's been about a year since I published the book. So what I'll do with if anybody listens to this podcast, and if they actually buy the book on Amazon, send me a copy of the review, and I will pay for the book afterwards. So really excited about that offer. So that's the alternative investment almanac expert, expert insights on building personal wealth on Amazon. And then if you want to find out about me and my company, the best place is to go on SIHcapitalgroup.com. When you go in there, I actually have two abridged versions of my book, click on Learn More. And I will get those out to you. And I look forward to hearing from you.

Derek Clifford: 45:50

That's awesome. Denis, man, thank you so much for all the value add that you're giving to our listeners with all of the great advice then also your book offer as well with the review and the and the reimbursement on that that's really, really cool. So please, you guys, go out there take advantage of everything that Denis has got. He's got a lot of knowledge. I've been working with him for two years, over two years, two and a half years on this mastermind. And I know that you'll be able to take great benefit from listening to him as well, just as I have. All right. That anything else Denis?

Denis Shapiro: 46:23

Yeah, I forgot to actually where are you going to send the review. If you take a picture of the review and send it to me, send it to denis@SIHcapital.com.

Derek Clifford: 46:33

There we go, man. All right, no excuses. Now, everyone. So please go out there and do that. And for all the listeners that have made it all the way to this point in the podcast, I really want to thank you guys. But please be sure wherever you're listening or watching this podcast, please subscribe, like, comment, engage with us because we want to hear from you. And we want to make sure that the people that we're bringing on are adding tons of value to you. We want to make sure this is effective for everyone involved. And so please let's do that so that we can appease the algorithm gods as well and get more and more folks dialed in to the podcast so that we can share this with with more people so we really appreciate you. Denis, thanks again man for coming on. It's been awesome show. Really appreciate that.

Denis Shapiro: 47:14

Derek, thank you so much. It feels like a Monday now.

Derek Clifford: 47:17

Oh yeah, absolutely man. Dear listener, thank you as well and have a fantastic week. We'll see you next time. This is Derek. I am signing off. See you!