Chris Giorgi, an experienced overseas investor, joins Slocomb Reed to discuss his journey into the world of real estate investing. From the challenges of managing long-distance real estate deals to the intricacies of syndication, Chris shares a wealth of insights for commercial real estate investors looking to expand their portfolios and understanding.
Key Takeaways:
- Clarity and Trust: When investing long-distance, it's crucial to establish clear communication and build trust with your local representatives. Chris emphasizes the importance of having a property manager who's also a realtor.
- Syndication Due Diligence: Don't just jump into syndications. Understand the debt structures, management plans, and exit strategies. Also, actively seek out and learn from experienced voices in the syndication space.
- Stay Flexible in Your Strategy: While there are several established strategies in real estate investing, Chris advises not to become dogmatic. It's essential to remain adaptable, question everything, and mold your approach based on changing circumstances and market conditions.
Chris Giorgi | Real Estate Background
- Overseas investor and contractor for the U.S. Army
- Portfolio:
- 31 units of single family, duplexes, fourplexes, and apartments
- 20+ syndications as an LP
- Based in: Hohenfels, Germany
- Say hi to him at:
- Best Ever Book: The Hands-Off Investor by Brian Burke
- Greatest Lesson: Don't be so dogmatic about never selling. Always evaluate your properties, especially as it refers to turn on equity, and make decisions that are best for your portfolio.
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Transcript
Slocomb Reed:
Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and today we are joined by Chris Giorgi. Chris is joining us from Hohenfels in Germany. He is by day a site manager for a defense contracting company supporting the U S army in Germany. He's also a long distance overseas investor. His current portfolio consists of 31 residential units, a combination of single family, two to four units and a 12 unit apartment building. He also has over 20 LP positions in syndications. Chris, can you tell us a little bit more about. your background and your current investing focus?
Chris Giorgi:
Sure. So welcome. First, I was super excited to be here. I know it's the longest running real estate podcast, but it's also the longest one that I've been listening to. I started back in 2018 when I started getting re-interested in real estate. And this was one of the first ones that came up. So it's an honor to be here. So, like you said, I am an army veteran. I got out of the army in 2019 and I was able to stay in Germany. It's one of the reasons why I got out. My family were pretty well integrated here. Kids are in the German school system. So it was important for me to stay here and make it work. And that really has defined a good portion of my portfolio and how I invest. The other portion that defines it is I've always been interested in finances. I remember when I was 14 years old, a freshman in high school, I got one of those big yellow books, the personal finance for dummy's book. I read it cover to cover a few times. My parents thought I was crazy and weird. All my friends did too. But I understood the time that where a little bit of every paycheck, you invest it in some kind of mutual fund and then wait 20 or 30 years to have. I think my numbers were $3 million. I was like, Oh, I'm going to be rich. I think there was like 40 years. If I just keep on doing this. Looking back, obviously there was other ways to do it, but at least got me started. And I was fortunate that my dad. He started investing when I was 16. So he met a financial advisor for the first time. I have no idea what he did before that. Not sure if he had probably spent all his money, but when I was 16, he set up a fund for himself and he set one up for those four kids. And I took a little bit of money, like all the birthday money I had saved up. And I put it in there. I think I started with $500 and I had invested a little bit of almost every paycheck, even from when I was mowing grass, I was a lifeguard as a pizza maker. So I was in the army and I had invested in that fund until 2018. So quite a long time. And that money is what really helped me starting to invest from overseas where some people are less fortunate and they're starting with no money. So that's a little bit harder. I was fortunate enough that I had saved for 20 plus years and I had a pot of money to start with. That's what I used to really re kickstart my investing career. I had four properties. that my wife and I, we either bought his long-term rentals or it was a personal rental and we just couldn't sell it. So from 2004 to 2011, we had four properties and then we flipped two other houses. But from 2011 to 2018, kind of took a pause, did a few deployments, went to Estonia for a year to do some schooling. And then when we came to Germany in 2016, A few years later, knew I was getting out of the Army, and I realized, hey, I need to do something else to get some more passive income. So I got started again.
Slocomb Reed:
Nice. Couple of quick questions here. Why not invest in real estate in Germany where you are?
Chris Giorgi:
Long story short, I'm able to stay here under SOFA status. So that's a status of forces agreement. It's an agreement that the US has with Germany. I'm still considered in the American tax system. And so I pay American taxes and not German taxes in order to buy in Germany. German real estate is very expensive. Everything's not everything. Beer is much cheaper here, but real estate is much more expensive. So I put myself at risk of having to be enrolled in the Germans taxation system, which can be upwards of 45 to 50% for an average worker. And that's not something that I want to do.
Slocomb Reed:
Yeah. I think the short answer is sufficient there. With your investments here in the U.S. the 31 units, where are they? You were telling me beforehand, you're from the Chicagoland area. Is that where you're investing?
Chris Giorgi:
No, actually I don't own anything in Illinois. Most of these were based on where I previously lived in the Army. So my first ones that I bought were at Fort Bragg, North Carolina. That's Fayetteville, North Carolina. And then I owned a few down in the Savannah area, Georgia, and then one in Clarksville, Tennessee. So between those three locations, as of this year, I sold off the two in Georgia and now all but one are in North Carolina.
Slocomb Reed:
Why did you stick with North Carolina?
Chris Giorgi:
I knew the area pretty well Fayetteville, but most importantly, I met. Actually, I never met her in person, but my broker and my property manager, same person, she owns her own property management business there and she has taken me. I bought my sixth property with her. And so we went from six to 36. That's what I had at the height of it in 2021. And then I started selling off from there and probably nobody's more responsible than her for where I am today with all my investments. So trying to recreate her, which is like just the perfect broker, the perfect property manager in another market. Impossible. Just, I don't have the time right now to try to recreate that.
Slocomb Reed:
Chris, why is it that investing in real estate in Fayetteville, North Carolina is the right fit for you now? That's question number one. Question number two is what are your investing goals? What are your target metrics? Is it about cashflow? Is it about appreciation and a portfolio that will be there for you when you come back stateside later? And then similar question to those two: what's the trajectory that your real estate investing is taking right now? You are very busy professionally outside of real estate. You have a bunch of LP positions as well as your portfolio. Are you headed more passive? Are you headed more active? Where are you going with real estate? So the questions were, why are you doing what you're doing? What are your goals and where are you going?
Chris Giorgi:
Great. So see if I can knock those out. So why am I doing what I'm doing?
Slocomb Reed:
And feel free to take your time to sort all of that out. I couldn't find a better way. I want all the answers all at once. I couldn't find a better way to do it. Go ahead, Chris.
Chris Giorgi:
So Fayetteville, like you said, it was a market that I knew. So when I started again in 2018, most of the properties were 40, 50, 60,000 and they were 2.0 rent to income ratio. I was cash flowing. Between I'd say 10 to 20% ROI. And it was just like, there was so many deals. And I look back, I always feel like I don't realize how good I had it until it's too late. I should have been buying more properties at those prices. Nowadays, all those properties that were, say it was 60,000, three bedroom, two bath, they're 180 now and the numbers don't make sense anymore. So. The market was great. The numbers made sense. I had a great property manager and I just kept on buying as long as I have money. I did a few BRRRRs. I did a bunch of cash out refis. So the money that I had, it just kept on going and all this stuff. I was just learning as I was going a lot of podcasts. I was talking to people. I was networking on social media, but I probably should have had a mentor, but I didn't have a mentor, but I was just hours a day on podcasts, just trying to figure this stuff out. So some of it was luck. Some of it was being at the right place at the right time with the right amount of money. So I think that might answer your first question. Forget your second question, but the third question is I don't plan on going back to the States. So the only reason why we're not fully retired right now is because my kids are in the German school system and in order for me to stay in Germany, I have to have a job. And so I have a very good job. I really like it. But if I had the choice, I would probably hang it up. We would move to Italy, buy a nice Italian farmhouse with some two to three apartments and Airbnb those, and then just figure out something else to do stage two in our life. How my properties are doing. So I told you beforehand, I'm selling four properties that actually close tomorrow. I sold three properties last week. So seven properties this year. There were three duplexes that I bought all at the same time under one commercial loan and that loan that was five years ago. So it's come and do and the mortgage note was about the double and just the forced appreciation and the market appreciation, it just made sense to let them go and they all sold asking price within about a week because the market is still very good there for investment properties and that's actually what I've been doing. I've been doing a lot more analysis. I told you I'm learning as I'm going now, I'm doing the return on equity. I heard about that a lot. It takes me three or four times to hear it. Let me Google it and let me YouTube it. All these podcasters are talking about it. And then I set up my spreadsheet that we all have. And I was like, Holy cow, I'm getting like a 2% return on this. Why don't I sell it? If I sell it and I put the money into a syndication, where will it be in five years? A lot of the deals were no brainers. And so that's where I'm currently transitioning. Some of my property is just about done with these sales tomorrow. So now I have the ones that I want, the ones that are very good long-term rentals. And then the rest will be going into my syndications.
Slocomb Reed:
Chris, that was an excellent job answering everything. I threw you all at once. Thank you. I'm going to make a bunch of assumptions in order to summarize what I'm hearing from you thus far, and then I'd like to transition the conversation a bit, but I'm making assumptions. For the sake of summarizing and moving forward, please correct me where I'm wrong. You've been living in Germany for quite some time. When it came time to start investing, you chose real estate investing and you chose it for cashflow reasons that and your experience in the military and living in the places where you live, took you to Fayetteville, North Carolina to invest for cashflow along the way. You've continued to have solid income, but also you got to experience a lot of the bull run that we have had and may still be having the last 12 years. And you've seen a lot of that forced appreciation. And so now you're in a position where you are looking to redeploy your capital that has grown in the form of equity in your properties into greater cashflow, ideally more passive. Like being a limited partner in apartment syndications, as opposed to owning the real estate yourself. Although you're going to hold onto the ones that make it really easy for you to keep owning them and cash flowing with them. You're at a position now where, financially speaking, at least based on your military career and your cashflow from your real estate, you could retire, but you have family reasons to not yet retire. Is that all fair?
Chris Giorgi:
Yes, I think it's definitely fair to say that I enjoyed the run up. Just some of those properties that I bought in 2018, a couple of them have three or four X, which is why there's a lot of equity and some of them I have done cash out refis, but some of them, it just makes sense to sell. And to be clear, most of it is passive. I set up all my investments. I'm not hands on anything. It would be very hard for me to do that from over here. I have four short-term rentals. I have one property manager that manages that. I mean, I probably text with her one hour a month. The other properties, all these long-term rentals, if I'm not selling a property, I'm talking to maybe two hours a month. So everything is super passive. Syndications are obviously a little bit more passive. What was really making me mad about the short-term rentals is I remember one day I got an HVAC went out, a toilet needed to be replaced. There was plumbing that was backed up in another one. It was five or six emails all in a row. And I added it all up and it was like 1500 bucks besides the HVAC, which was 7,500. And I'm like, okay, this is it. I'm selling it.
Slocomb Reed:
I was gonna say 1500 bucks, you got off easy.
Chris Giorgi:
No, no, everything else besides the HVAC, which I'm the king of replacing HVACs I feel like. I just felt like I was getting nickel and dimed on some of my properties. So I'm like, okay, it's time to offload these.
Slocomb Reed:
Chris, your LP positions, how have they been performing?
Chris Giorgi:
I had a feeling you were gonna ask. So they've been all over the place. I've gone full cycle on one deal. That was my first one I did, 2019 to 2021. So a little over two years, returned 56%. It was great. The next four, as I said, I was learning as I was going, I heard syndications for about six months on podcasts. And then finally I was like, let me just look this up. I was like, oh, this is cool. But I'm not saying I didn't do my due diligence. The operator is good, but all four of them have had capital calls. Only one seems to be at risk of losing my capital based on the email that I got today, unless more capital is infused in the deal, but the other ones, everything seems to be going well. I'm invested in some hotels. They're actually paying very well short-term rental fund, which is paying well and ATM, which is obviously paying. And some of them. haven't started paying yet, but that's only because I just started investing. But like probably a lot of other people, I got hit with a few capital calls, which came out of nowhere. This is my first experience with them. So yeah, they're all over the place, but they're generally doing well.
Slocomb Reed:
Chris, thinking about our listeners who are in a similar position to yours that find themselves needing to invest at a distance or invest very passively or both, what advice do you have for choosing which syndications are the right fit for them?
Chris Giorgi:
Great question. You really have to understand your goals. If you want cashflow, there are some deals that do higher cashflow. Let's say you're doing from a self-directed IRA. You probably don't want cashflow because it's hard to reinvest that small amount. It's a couple thousand a quarter. That's hard to reinvest that. So don't make the mistake like I did. There are some that very little cashflow, but the equity upside on the backend. That's maybe something for a self-directed IRA. If you want high cashflow, there's pros and cons about ATMs and car washes. But the one I'm in is very high cashflow and it's been paying every month, like clockwork. But you really got to understand your goals. Like right now I don't need a whole lot of cashflow, so I'm not really interested in tons of cashflow. What I'm trying to do is to X my money as fast as I can, as much as I can. So then for me, I have a timeline. It's six to eight years once my kids are out of school. Then that money I will roll over into some other kind of fund where it'll pay higher cashflow. So you really got to understand what are you investing for.
Slocomb Reed:
That makes a lot of sense, especially considering your timelines and your personal goals to look for appreciation, capital growth, until you hit that personal inflection point where it becomes about cashflow. That makes a lot of sense. Given your experience, both in syndications and with your active investing, what advice do you have on identifying the people that you know you can trust to operate while you're at a distance?
Chris Giorgi:
I know a lot of people are hesitant to pick up the phone and talk to people, but I found all my GPs on LinkedIn. I follow them. They're posting, if not every day. every week, multiple times a week. It's very easy to schedule a 20 to 30 minute call with them. I haven't found any to be pushy at all. Like trying to get money. They generally just tell you what they're doing. I asked a lot about their history of about any deals that went bad. Now I'm asking what kind of debt do you have on the deal? And that's very interesting to me as it would be for everybody. I want to see how long have they been doing it. Now I know some people that say, Hey, don't invest with anybody unless they haven't been around since 2008, the last real estate crash, but there's not a lot of those guys around. Maybe there are, but it seems like there's a lot of newer people, which still you can be doing 10 years and you didn't go through a market cycle yet. So I'm kind of okay with that. I'm a little bit more on the risky side, but I am talking to the people personally. Sometimes I'll ask them for references if they have anybody who's been one of their investors for a long time. And I feel like I can get a pretty good six cents. If this company is aligned with my investing interests.
Slocomb Reed:
What about with your active investing? Chris, you bought rental property in three different markets and then sold, traded and lined everything up to be investing with the one broker and property manager that was performing for you, that you knew you could trust. How is it that you identified that? And how is it that you identified the other deals and professional relationships you needed to get out of in order to focus on faithful?
Chris Giorgi:
So there was one relationship that I really needed to get out with and they were managing my very first property that I bought in 2004. They were okay managers, but as I said in 2018 when I started again, I was still with that company and I called them up and I said, Hey, this is what I want to do. I want to buy from over here in Germany. I'm never going to go back. And I want you to video call me, show me the properties, take everything off the MLS, and then I want probably a foreclosure and then I want you to manage the rehab. Obviously, I'll pay you a fee and then I want you guys to rent it. And that blew this lady's mind, even though her company did all that. And so I kind of struggled at first, but I stuck with it. We bought our fifth property. And I remember I was in Spain and we had the deal and they were accepting it, but they needed the due diligence money and I had no way of giving it to them. And her answer was, let's just walk away. Let's find another deal. And I was like, absolutely not. This is the deal. I want this one. Can't you just take it off my rental that I have with you guys? And she's like, Oh, yeah, I guess we can do that. So we did that. We got through it. And then I'm like, okay, I want to buy another one. She's like, I don't understand what you want. I'm like, nevermind. Thank you. I remember it was Friday night. I got on Google, "Fayetteville, property managers", found a few, shut off a few emails around noon. or one o'clock my time. So same time zone that you're in, it was seven a.m. This lady called me on a Saturday, which my other property manager, I can never get a hold of on the weekend. And we probably talked for two hours and I was like, wow, she was an investor herself. She flipped houses herself. She was born and raised in the area. She owned the company. She was willing to probably manage the rehabs for me. She sent me photos of all of her past work. And I was very clear with her because I had learned from the other lady. I needed to be very clear and if she was on board and she was completely on board. So it's been great. The other ones in the other States, everything's okay. If I sold the properties in Georgia, it's mostly because the numbers weren't making sense anymore.
Slocomb Reed:
So what advice do you have for our listeners who are active investors, especially the ones investing at a distance? What advice do you have for when it comes to figuring out who you can trust, who is the right fit for working with you and representing you locally when you're investing at a distance?
Chris Giorgi:
Great question. For me, the number one thing that's helped me is my property manager is also my realtor. When two different people are doing that, your realtor just wants to sell you properties so they make the commission. The property manager wants to manage a very good property, not anything that is in a C or maybe definitely D or lower neighborhood. I have had so many properties that she turned away that she's like, Chris, I'm going to say yes as a broker, but no as your property manager. So you can have somebody else manage this, but if you want to buy it, I'll buy it for you. I'm like, if you're not managing it, I'm not buying it. Cause I know it's in a bad neighborhood. So if you could find a company or a person that does both, you will save yourself so much time and headaches. The other thing I would do is obviously do the checks on them, get the references, look at how many places do they have, are they renting in their company? But then also have that conversation. Tell them exactly what you're looking for. Be upfront. If you want only one property, just say that. If your goal is 10 or 20 and you want to flip houses long distance, and if they're interested, can they help you out with that? How much is it going to cost? Just put it all on the table because if you guys see eye to eye in the very beginning, then things will be much smoother going down the road.
Slocomb Reed:
Chris, this is the moment where I'm supposed to transition the podcast to our last segment, but there are two questions I hope I can ask quickly and get quick answers to kind of unrelated to commercial real estate. And this question is not necessarily fair because I don't know that it's within your expertise. Why is it that the real estate in Germany is so expensive?
Chris Giorgi:
They're very controlling. It's not as open as much as a free market as it is here. They don't really have foreclosures. They don't publicly advertise. So there's nothing like a Zillow or maybe there was an MLS, but you can't get to that as a private citizen. So everything's very private. They don't open up a lot of land. There is a ton of land here. Farmland all over the place and you can build for 500 years here and you're not going to fill it up, but they won't do that. So they don't like large fluctuations in the real estate market. So they just want everything to stay stable and just appreciate slowly. The problem is so many people have come here, not native Germans, that population is not growing, but they have a lot of immigrants, a lot of foreigners because the economy is doing pretty good for Europe. So as these people come in, they need housing. Even renting has become very, very unaffordable and they're just not quick to build new houses. And also the way they build them, it's very good craftsmanship and it can take a year for a house to be built.
Slocomb Reed:
So correct my summary where I'm wrong. The Germans by nature are keeping supply fairly fixed. However, demand is increasing due to the increasing number of people who want to live in Germany. So with the way that they're controlling supply, the natural reaction to heightened demand is price increase.
Chris Giorgi:
Correct.
Slocomb Reed:
And then I can't remember if it was during the conversation or before we hit record, Chris, you said that as soon as your kids are out of school, you want to go retire to Italy. Why Italy and why the setup that you were explaining?
Chris Giorgi:
So our great grandparents, both of ours, they immigrated from Italy. Mine are from Sicily and Calabria down south. Italy is only five hours away and we just spent three weeks there. We've probably been there 20 times. We really clicked with the culture, the food. If you could see some of the views of the Airbnbs or the big farmhouses, like I was telling you, we want a big farmhouse that's been a couple hundred years old, we could renovate it ourselves or it's already renovated and then three or four annexes where you can Airbnb them. A lot of people do that. And the place we just stayed for three weeks. To the west, it had the mountains, to the east, it had the Adriatic Ocean, and it is just beautiful. And that lifestyle really, really resonates with us. And so that's where we will end up someday.
Slocomb Reed:
That's awesome, Chris. Now are you ready for the best ever lightning round?
Chris Giorgi:
Let's do it.
Slocomb Reed:
What is the best ever book you recently read?
Chris Giorgi:
So I recently listened to The Hands Off Investor, which is a book, a lot about syndications and I just happened to come by it and that was this year after I was already in 10 plus syndications. I wish I would listen to it a couple of years ago, but very good book for those of you who want to get started or are involved in syndications.
Slocomb Reed:
Who's the author?
Chris Giorgi:
Brian Burke.
Slocomb Reed:
What is your best ever way to give back?
Chris Giorgi:
So I have a bunch of friends over here in Germany. I started a Facebook real estate page. So I post on there, I throw out a lot of ideas about passive income, specifically real estate investing. I've gotten a few of my friends involved in syndications who didn't know anything about it. And so they're interested and they've done a few deals. I helped my one buddy. He just did a long distance Airbnb in Pennsylvania, helped him through a lot of that, how to set it up, do's and don'ts. And a few other people who are doing long distance investing for the first time. So I'm keeping it local.
Slocomb Reed:
Chris on the properties you have acquired, what's the biggest mistake you've made and the best ever lesson that resulted from it? I will say you couldn't talk about one of your LP positions. One of the ones you actually placed.
Chris Giorgi:
So I would say my biggest mistake. I haven't lost any money yet in any deal, but one or two of these syndication deals that I'm doing, their debt structure wasn't good. So it was invested, I think in 2019 or 2020 when. Everything was good. Everybody expected interest rates to remain low. They did not have a rate cap actually, and they had adjustable rate financing. So when the seven or eight interest rate hikes kicked off, it destroyed their plan. So now they are suffering a lot. I've had to put money for my first capital call. I was like, Oh, okay. Yeah, I'm on board. This kind of sucks. And then. A couple days later, I get another email for another property. A month later, the third property and like a month later, the fourth property. And I had to call the guy up and we had a one-on-one conversation about what's going on and why this is not just the market's fault. Some of it is his fault. It went well, but it was a hard talk for both of us.
Slocomb Reed:
What's the lesson there for our listeners?
Chris Giorgi:
When you're researching the deal, understand, especially now, what kind of debt financing do they have. Is it long-term? Do they have bridge loan? Do they buy a rate cap? What are all their assumptions, their exit cap rate? Who's going to manage the property? I'm still getting emails where they're still trying to kick out tenants, tenants who haven't paid. And I'm like, this is two years. This has been two years later. This should have been done in the first three months. And so those questions, but if you listen to that book first, you'll know the question to ask.
Slocomb Reed:
And what is your best ever advice?
Chris Giorgi:
My best ever advice is to question everything. I could say take action, read this book, do this, but I've been pretty active on LinkedIn. And I remember reading one of my first books where the author seemed very good. I'm sure he's very, very smart. He owns, I think, thousands of houses. And he was pretty dogmatic about never selling. He'd never sell, never sell, never sell. So in my mind, I was like, OK, I'd never sell. And then somebody else was saying the philosophy of money concept, I think it was actually Travis Watts, which I know you know him. So he started talking about it and Keith Winehill started talking about when does it make sense to sell? Look at return on equity. So don't be so stuck in just one approach. Learn about all of them, understand your numbers. And sometimes it makes sense to sell. Sometimes it makes sense to hold, but don't be one of those people who just think that never sell just because that's what they heard or to sell because everybody else is selling.
Slocomb Reed:
Last question, where can people get in touch with you?
Chris Giorgi:
So LinkedIn is my favorite spot. That's where you can find me. I'm pretty active there. And if you reach out, I'll quickly respond.
Slocomb Reed:
The link to Chris's LinkedIn is in the show notes. Chris, thank you. Best ever listeners. Thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five star review and share this episode with a friend you know, we can add value to through our conversation today. Thank you and have a best ever day. Thanks a lot.
