Receiving higher ROI is the name of the game in real estate, and our guest today shares his story on how he navigated this path into multifamily. Listen as he discusses how the current market for multifamily properties is different from what it was six months ago and why investors should focus more on the primary markets that have a very good population and rental growth.
Marshall Sykes is the president of Capitano Investing Group and has over 20 years of real estate investment experience. With 24 years of real estate investing experience, he likes to help others create sources of passive income to boost their retirement planning. As a real estate syndicator and General Partner in 2700+ multifamily units for 14 properties, he has access to and knowledge of a wide variety of assets and markets.
[00:01] – [08:12] The Aim of Earning More from Passive Income
- Marshall’s story on growing up in a real estate development family
- Serving 25 years in the military and retiring to do real estate
- Building a more robust model through switching from single-family to multifamily
[08:13] – [18:32] Full Commitment Entails Giving Your All
- What it takes to fully commit to what you are building
- Marshall’s sentiment and advice on the changes in the real estate market
- Strategizing for building relationships and inviting higher ROI
[18:33] – [20:09] Closing Segment
- Reach out to Marshall
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- See links below
- Final words
Tweetable Quote
“What I’m seeing is it’s a little bit different than it had been in the last six months. There are a lot more properties that seem to be available or easier to get. I think [it is] more of a buyer’s market now than it used to be… Focus more on the primary markets that have a very good population and rental growth. Because those are the stronger markets, in my mind, for the future.” – Marshall Sykes
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Connect with Marshall Sykes on Linkedin. Check out his website and email him at marshall@capitanoinvestinggroup.com.
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Want to read the full show notes of the episode? Check it out below:
Marshall Sykes [00:00]
What I’ve tried to do is set up my multifamily one-on-one investing to make it easy for an investor to come in and say, Hey, this is what it’s all about. And if you’re ready to get to the next level, we’ll talk to the next level.
Intro [00:12]
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.
Sam Wilson [00:24]
Marshall Sykes is the president of Capitano Investing Group and has over 20 years of real estate investment experience. Marshall, welcome to the show.
Marshall Sykes [00:32]
Sam, thanks for having me. It’s a pleasure to be here today.
Sam Wilson [00:35]
The pleasure is mine. Marshall, there are three questions I asked every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now? And how did you get there?
Marshall Sykes [00:44]
I think for me, as far as real estate investing, I started with my family. I grew up in a real estate Family Development family and started in single-family homes, and where I’m now, I am now a general partner in 14 multifamily deals, and we own over 2700 units. And then how did I get there? Well, it’s a loan. Definitely a long road. Hopefully, you can tell that story a little bit here. But I’ll give you a quick, quick 30 seconds, I grew up in a real estate development family. We built single-family homes, and my mom and dad decided they wanted to do that instead of having a corporate job. And so they built two at a time they sold one as a life off of basically and kept one as a rental. So I learned that growing up, I helped them a little bit on those projects. But then I went into the Navy doing construction engineering. And about 10 years into the Navy. I just said, Hey, it’s time. I want to have some passive income when I retire, besides my military pension. And so, how can I do that? I knew real estate. And we started investing in single-family homes. And eventually, I decided, hey, maybe multifamily is a little bit better. Let’s look at that as well.
Sam Wilson [02:00]
Did you end up retiring from the Navy?
Marshall Sykes [02:04]
I did. I did. 25 years in the Navy, I retired. I was in the Civil Engineer Corps and wasn’t on a ship, believe it or not, for over 25 years. I’ve built and maintained military bases. Basically, I was in charge of the planning, design, and construction of new projects.
Sam Wilson [02:19]
Wow, that’s really cool. I love that. And when you got out of that, but you when you exited, you said, hey, I want to have you know, like you said, passive income already coming in once you quit working or retired from the military.
Marshall Sykes [02:35]
Yeah, I saw that model with my dad; he retired from the military, and he developed single-family homes. And so he had some rental income coming in; I saw that he could put away money and live off of his real estate investments, basically. And I kind of knew that that was a good model. And I wanted to have more freedom of movement. When I did retire. I didn’t want to put a bunch of money in the stock market and then try to draw down to three or 4% a year and hope it lasts until I’m until you know no longer live here. At this thought, that wasn’t the best model to do. I guess it’s a simplified model. Yes. But I wanted to I wanted a more robust model.
Sam Wilson [03:17]
I love it. I love it. So you came out of the military, and you started investing in single-family homes. And then, at some point, you said, All right, there’s got to be a better way. What was that moment? Or was there an economic change? Or, well, I guess what was the lightbulb moment when you said I’m gonna go do this a little bit differently.
Marshall Sykes [03:35]
Yeah, so I retired after 25 years in the Navy. And then, I worked and worked in the oil and gas business. And I was actually living in the Middle East for several years. And I started; I had a little bit extra time on my hands. So I decided, hey, let me really evaluate our investments, our single-family homes. So I started doing that evaluation, just looking at the map, understanding what kind of the markers are the targets you should be getting on your return on investment, but not only the return on investment with the return on equity of what you have in the in a property as well. I looked at all that. And I realized, okay, the return on investment probably is five to 10% on a single-family home. But as far as just being able to own a return on equity. It’s probably 3%. And I just thought there’s got to be a better way, a way for that. And so I started, so I kind of had that back of my mind. And then, I moved back to Houston a few years ago. And when I was living in Houston, my colleague at work started talking about syndications, and I had never heard of syndications. And I thought, Okay, I want to get involved in these multifamily syndications. It seems like a great thing for me. And somebody else had reached out to me on two or three LinkedIn and talked about it. And I thought, okay, so I started doing the study on studying up on it. I learned about it. I decided, Hey, I’m gonna take, I’m gonna do three investments in this, but I’m gonna do it with three different sponsors in three different markets. So I could kind of test those out and see what I liked about it and what work, you know, somewhere market and sponsors are concerned. So that’s kind of how I got going in it. What year was that? That was 2019 when he came back in 2008 team back to Houston, and just then, I started really investigating a lot. The funny thing about it is I wanted to get into multifamily back in 2009 because I had just finished building 10,000 units of barracks at Camp Pendleton. And it was a barracks is basically 400 men that are men and women that are living in a single facility with 200 rooms and 200 units, and all the amenities were similar to multifamily development. So I had already kind of getting a taste for that. And in Southern California, that’s where I was at the time. They were building a lot of multifamily at that point as well. But I just didn’t understand you could do that as an individual. You could partner with others and do syndications. I just have not heard of that. I thought just corporations could do that.
Sam Wilson [06:14]
Right. It is amazing. Even today, I feel like there’s so much information on it, you could learn until you drop, but yet, even so, it’s still kind of a mystery, you know, to a large, even portion of the real estate investing community where it’s like, oh, this is possible that we can actually buy an apartment complex, this is wild. Now 2019 to 2022, you said now your general partner on 15 different deals; that’s a lot of movement in, I guess, a little over three years how have you strategically scaled without creating an unnecessary amount of work for yourself?
Marshall Sykes [06:54]
So, you know, the strategy was one of the things we worked on in the Navy, as well as at Exxon Mobil where I was; it was all about strategy and thinking about four or 510 years down the road, even longer, maybe. But so I kind of want to I did want to apply that to my general partnership and multifamily investing. And what I did was I joined a coaching group that allows me to have the structure employee a structure in place with the attorney, the same attorney on every project on every property, mortgage broker, lead, lead partners that are very well versed in multifamily preferred vendors for property management, as well as construction, due diligence, those type of things, that structure allowed me to go in with confidence and trust that I could go fast. And that’s not only that, there’s a lot of the partnerships, the partners in this group are very, very high level they’ve been in businesses, they’ve run many businesses before or properties. And so they’re all very like-minded individuals. And I just found a really good group that we can go to faster and with confidence in our underwriting and our partnerships.
Sam Wilson [08:13]
I think that’s great. And it’s certainly it’s a model that’s replicable. And it’s also a model that prevents, I think, newer, not that you were a newer investor, but you were a newer investor to the multifamily space for making some really dumb mistakes. And I think that’s the value that partnerships like this bring that mentors bring that. And I’ve certainly had some partners and mentors along the way that have looked at some stuff I was working on, you know, maybe we should tweak that just slightly. And it was a, you know, a tremendous value. Add to the project going, Okay, you just saved me from being an idiot. Thank you. And so that’s great. Certain certainly love that. What is there ever, I guess, the intention or the goal, because I know a lot of people transition out from the kind of working in that group setting into being the lead sponsor, is that somewhere you want to go?
Marshall Sykes [09:09]
You know, I’ve thought about that a lot of habits. In some ways, I might do that in 2023 or 2024. I just don’t think that that’s not a… I certainly can do it. Do I want to do it is it really where I’m at. So that’s kind of the space I’m in do I want to because once I do that, I know it’s full-time, right? You’re, you’re fully not just fully committed and fully committed already, but the full time that you’re going to be responsible for the whole project, you know.
Sam Wilson [09:42]
It is, and that’s a strong consideration. That’s something we were talking about in a mastermind group here recently. It was like what do you want to build? Do you want to build it that way? Do you want to? As you said, going for it is not a full-time commitment for a year. It’s a full-time commitment for the life of that project.
Marshall Sykes [09:59]
It’s exactly right, yeah. When I joined, so when I first started, I just started raising capital and provide earnest money, and do some of the due diligence. I also participate in some of the asset management calls. But I’m not the asset manager, I just kind of help them out a little bit. But I just said it, I didn’t really think I would like raising capital. But I realized, I like this. I like networking with people, I like telling people, Hey, the advantages of real estate investing. I like that they, they can trust that, you know, I mostly go back to the colleagues that I know, and they trust me. And so that relationships are already there. And it’s, it’s just a natural conversation for me.
Sam Wilson [10:40]
That’s fantastic. And is that where the bulk of your energy goes? Right now? Are there other things in the owning and operating of these assets that you also plug in and help on?
Marshall Sykes [10:53]
Yeah, most of it is in investor relations and raising capital, but I do talk to the partners and just kind of help them think through things as well. Because it is especially in every apartment complex you buy, there’s gonna be something a little bit different little nuance in that market. So you want to make sure all the bases are covered there.
Sam Wilson [11:15]
What do you see, let’s talk about markets, maybe for a minute multifamily. We’re recording this. And I’d like to say this out loud. I don’t know necessarily when this will get published next 30 to 45 days, probably. But today is November first 2022. Let’s talk about the market for a minute, and maybe the multifamily space. In general, what are you seeing and what are your partners seeing in the space right now? And kind of what’s your what’s your overall sentiment?
Marshall Sykes [11:42]
Well, what I’m seeing is it’s a little bit different than it had been in the last six months. It’s there are a lot more properties that seemed to be available or easier to get, I think, as a buyer’s market more of a buyer’s market now than it used to be. I think that what I’ve tried to focus on more is the primary markets more now in the markets that have a very good population and rental growth. Because those are they’re stronger markets, in my mind for the future. And so the ones I’ve been working on have been more in the primary markets this year.
Sam Wilson [10:05]
Is there. One, I heard this recently, they said that they are no longer underwriting any rent growth. Are you guys still able to underwrite rent growth in the markets that you’re looking at? Or what’s your strategy there?
Marshall Sykes [12:35]
Yeah, certainly you you can underwrite rent growth, I think you’re, especially in a market like Jacksonville, which is what we we’re working on right now. But when we close two properties this year already there. And we have another one now, but the rent growth, there has been 17 18% year over year, so you can certainly in the market. And if the if the park our apartment isn’t charging, that hasn’t done that rent growth yet, and that apartment does lease outs, the straight out. So you can certainly do some but you gotta you can’t go, you got to when you’re doing your underwriting and do a conservatively, right, so you’re the first year right off the bat, you might get a little bit of bump or after you did renovations, but at you want to you don’t want to for the next five, six years, you don’t want to have a major your rent growth, I would say down to three to 4% per year, not 10% A year there’s no I mean, I just that’s just not sustainable. Right?
Sam Wilson [13:33]
No, it’s certainly not. And I’m always curious what people are seeing. And of course, that’s market dependent to you know, the, the real estate is local phrase is, you know, there’s no such thing as a national real estate market. So that that’s really interesting. And, and that’s, that was kind of the method. You know, when I first started learning about commercial real estate syndications multifamily it was like, Okay, two to 3%, maybe four, depending on the market was pretty standard. So I mean, that sounds like that’s where you guys are still landing, even a market that could potentially support much higher rent growth than what you guys are underwriting so that that’s awesome. Let’s talk strategy, since strategy is one of the things that you guys really focused on there in the Navy, as it pertains to your investor relations. Is there is there a method that you employ? Is there a guideline that you’ve set out for yourself where it’s like, okay, every 30 days, I reach out to anything on those on those fronts?
Marshall Sykes [14:29]
Well, what I’ve, what I’ve tried to do is set up my multifamily one on one investing to make it easy for an investor to come in and say, Hey, this is what it’s all about. And if you’re ready to go to the next level, we’ll talk to the next level, you know, so I want to, I want to give them a quick introduction with it. And then when they want to go to the next level, they they’re usually right and most of them and most of my investors are similar to me they have they were construction managers or proper asset managers in the navy or other other fields. like that. And so they understand kind of that part of the business, but they might not understand what multifamily is what investing is all about for on the, I guess the methods of how you invest and stuff like that.
Sam Wilson [15:14]
When you say, multifamily 101, is this a course you’ve developed? Is this a something online where they can get through and work their way through it? Or is it something where you just coach each individual investor through that process?
Marshall Sykes [15:28]
You know, usually, I’ll have a conversation with each new investor and kind of go through that, but not necessarily get to do it on the slides. But I developed the presentation that I give them at the end of that conversation, where they can go back and look at more information on it.
Sam Wilson [15:45]
Okay. Okay. That’s, that’s awesome. And that’s something that you’ve put together that is, you know, exclusive to you and your investors. How did you know what to include in that?
Marshall Sykes [15:56]
Well, you know what, so back in 2019, I decided, hey, I want to, if I want to know this business, and I want to be a general partner, I need to understand, you know, so I did a lot of education on it. I listen to a lot of YouTube cat, YouTube videos, and podcasts, also read a lot of books on it. And since I had a real estate background already, it helped a little bit with that. And so that’s kind of where I got going, also went and joined the coaching group, we had an education process as well.
Sam Wilson [16:27]
Got it. That is awesome. What would you say? If you were to rewind three, four years, as you as you transitioned into commercial real estate? What do you what would you say is one thing you feel like you’ve done really well, that other maybe newer investors should emulate?
Marshall Sykes [16:45]
I think I think, you know, I’ve learned what I learned from big projects in the Navy and Exxon is you got to have a structure and your team has got to be able to cover all the bases. And I would say that’s if I was talking to somebody who wants to join this and do a general partner, I would say they need to join other partners that have a robust system in place that they can cover all the bases, you know, the financials, the renovations, the asset management, just finding a good market, but doing your investigative investigation in a market, working with people, investor relations, you got to find teams that cover all those bases.
Sam Wilson [17:29]
Right, absolutely. If you were to go back, is there anything that you would do differently that might help our investors avoid repeating the same mistake?
Marshall Sykes [17:37]
I think so i think i think it’s some of my probably initial partnerships. I probably didn’t ask enough questions about the asset management, because and the operations, I mean, we always hire third party property manager that knows the area. But sometimes that doesn’t always work out depends on the person, they might put it in, there may not be the right person. It also, I think, if you’re if you have a one man show, doing a partnership, kind of the one person doing the lead, and they’re trying to asset manage property they just bought as well as find new properties and underwrite new properties and go visit those properties. It doesn’t work as well as it could. And so what I’ve tried to do is I want I want to work with other partners, and other lead sponsors that have a team in place that can cover those bases, if they want to go look at other properties, too.
Sam Wilson [18:33]
I think that’s brilliant. That was a conversation that somebody was asking me yesterday, because it’s a it’s a smaller deal that we’re taking down. Lots of all that a normal sized deal. And he goes, Why are there four of you? What why do you why do you have three other partners on this deal, Sam and I quickly broke down the roles that each of us are taking. And I’m like these none of these other three or one roles I’m good at and to anything I want to do. And you got to pick so it’s like it’s like you said the deals can go a lot better when there’s delineation of and strategic placement of who’s doing what. So I like I like the way you’ve said that. Marshall, thank you for sharing that with us. Certainly appreciate you coming on the show today. This was a pleasure having you on if our listeners want to get in touch with you learn more about the project you guys are working on. Or you just want to in general, get in touch with you what’s the best way to do that?
Marshall Sykes [19:23]
You know, I think for me, I’m very active on LinkedIn, they can always link in with me and get in touch with me there but also they can go to our website https://capitanoinvestinggroup.com/.
Sam Wilson [19:32]
Fantastic and we’ll make sure we put that in the show notes as well. Capitano Investing Group. Marshall, thank you again for coming on the show today. I do certainly appreciate it.
Marshall Sykes [19:41]
Thanks, Sam for having me. It’s great.
Sam Wilson [19:43]
Hey, thanks for listening to the How to Scale Commercial Real EstatePodcast if you can do me a favor and subscribe and leave us a review on Apple podcasts, Spotify, Google podcasts, whatever platform it is you use to listen If you can do that for us that would be a fantastic help to the show it helps us both attract new listeners as well as rank higher on those directories so appreciate you listening thanks so much and hope to catch you on the next episode.
