July 20, 2022

JF2878: 3 Lessons for Sponsors from a Full-Time LP ft. Joe Giuliacci

Joe Giuliacci started his real estate career with a halfplex investment property in Northern California. After several years of actively operating a number of duplexes, he discovered the world of syndications and passive investing

Today, Joe has retired from his 31-year engineering career and is a full-time passive investor in multifamily, industrial, self-storage, and commercial real estate properties. In this episode, he shares his top three pieces of advice for sponsors based on his experience and what he looks for as an LP.


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1. Make sure you meet all the qualifications.

Joe tends to keep his lane narrow when it comes to operators he trusts. Before coming into the syndication space, he didn’t have mentors to guide his qualification process — instead, he got the majority of his information from podcasts. 

“These hosts are typically doing it because they’re also sponsoring deals,” he says. “What’s been powerful for me is to listen to that podcast host’s interview experience and get another characterization of that person.” After he’s found a potential sponsor he feels he can trust, Joe sets up a one-on-one meeting to ask questions and continue to build the relationship. 

“The first couple [sponsors], I knew there was some element of risk in that, because you don’t know what you don’t know, and we’ve all had experiences where we thought we knew somebody and they turned out to be somebody different,” he says. “So I’ve been blessed. I’ll just say that I’ve had some really great experiences in that process.”


2. Be prepared to answer the tough questions.

During his initial one-on-one meeting with a potential sponsor, Joe likes to cover the following topics:

  • Their experience. Have they gone full cycle on some deals and been through multiple market cycles?
  • Their track record. He asks for examples of some past offerings, what the investor deck said, and the result. 
  • Their past failures. “I don’t ask have they had a failure, I just assume they better have a failure they can talk about,” Joe says. He wants to hear how they worked through the problem and what they learned from the experience.
  • Their communication approach and accessibility when it comes to answering questions.
  • The underwriting. “I’m a spreadsheet nerd,” Joe says, “so I like to understand the underwriting and have some transparency in how they underwrite their assumptions.” 


3. Maintain open and consistent communication.

Communication and accessibility are the two most important things for sponsors to get right, Joe says. He enjoys receiving summaries via email on a monthly basis that detail business execution on the property, how it’s performing, and the high-level occupancy number. It’s also important that the sponsor can answer any questions that may arise clearly and in a timely manner.


Joe Giuliacci | Real Estate Background

  • Passive investor with 5 Talents Capital, which focuses on multifamily investments. He explores other asset classes as well for his passive investments.
  • Portfolio:
    • 15 multifamily properties
    • Three industrial properties
    • Four self-storage properties
    • 16 commercial real estate properties
    • LP of:
  • Retired from a 31-year engineering career at Boeing Commercial Airplanes.
  • Based in: Lake Stevens, WA
  • Say hi to him at:
  • Greatest lesson: Find great sponsors/operators first and foremost; the investment offering will be the bonus.


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Ash Patel: Hello, Best Ever Listeners. Welcome to the Best Real Estate Investing Advice Ever show I'm Ash Patel, and I'm with today's guest, Joe Giuliacci. Joe is joining us from Lake Stevens, Georgia. He is a passive investor with 5 Talents Capital, which focuses on multifamily investments and also explores other asset classes. Joe is an LP on 50 multifamily properties, three industrial properties, four are self-storage, and 16 commercial real estate properties. He's also retired after a 31-year career as an engineer for Boeing. Joe, thank you for joining us today, and how are you?

Joe Giuliacci: Hey, great Ash. Great talking to you. Great sharing some of my experience with the Best Ever audience here. One correction, it was probably my bad typing, but it's Lake Stevens, Washington. So-

Ash Patel: Right. I stand corrected.

Joe Giuliacci: No problem, but thanks for that intro.

Ash Patel: Yeah. Joe, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?

Joe Giuliacci: Yeah, you bet. I'll give you a high-level fly-by of kind of my spectrum and journey here. So I was always intrigued by real estate mentor and started studying it, reading about it really early on, even maybe - embarrassed to say - even bought some CDs way back in my early 20s... Never was really able to put anything into execution mode at that timeframe. So really my wife and I came about our first investment property really by necessity, and we can talk a little bit about what I mean there. But from that, over the course of about the next 10 years, we ended up flipping that little halfplex in Northern California into about four duplex properties. And we did the best thing you can do with real estate, we added time and we just let those operate for us for many years. And they didn't kick off a lot of cash, but they started building equity for us, which was kind of the intention at that point in our journey.

It was about four or five years ago that I started studying the syndication model and passive investing and what that looks like. And then about three years ago, decided that, okay, I started getting comfortable and decided to put a toe in the water, so to speak. I ended up at making a couple of investments in that area to explore and to learn. I think I did one multifamily and one self-storage right out of the gate.

Got those into operation, and was pleased with the experience of it all, and started getting cash flow out of it, according to the original projections... So all that seemed to be going well. I continued to learn and kind of listen, talk to people, and did a couple more investments and started just getting a little more comfortable.

It was just last year that my wife and I made a significant strategic decision for our investing... We decided to divest our remaining duplex properties that we held and go all-in in this passive investing space. Just a couple of months ago we finished the sale of those properties and moved that money now into limited partner arrangements, and those are starting to work for us.

So anyway, that's kind of our journey from where it kind of started for me and where we're at today, what we're looking at in the future. So maybe I'll turn it back to you, Ash, and see where you want dive in.

Ash Patel: I took a lot of notes, but one, it has to feel good to just be a pure passive investor. You have no more active properties to manage.

Joe Giuliacci: I tell you, what really kind of broke that final straw was right after the start of the year here in 2022, we got a call about a tenant moving out on one of our duplexes, and the property manager we had in place said, "Yeah, they've been in there for a long time, so it's going to need carpets, and linoleum, and appliances", and I was just adding up this $5,000 bill. And we said, "Nope, let's just pull the ripcord and punch out of these." So yeah, it feels great.

Ash Patel: Joe, the CDs that you bought - were they Carleton Sheets?

Joe Giuliacci: [laughs] Nailed it.

Ash Patel: Yeah, I bought that too. He was essentially the Robert Kiyosaki of our day. He was a legit real estate guy.

Joe Giuliacci: And then combine that with a Robert Allen No Money Down book was the starts.

Ash Patel: Awesome. What is a halfplex?

Joe Giuliacci: [laughs] In California it's a duplex building, essentially, as we understand it. Most of us understand a duplex, but they were sold with separate titles. So my wife just owned one half. It still had the common wall and it had a fenced yard that was separate. But anyway, that's what a halfplex is.

Ash Patel: So what happens if the roof needs replaced? Do you just pay your half?

Joe Giuliacci: Yeah.

Ash Patel: Do you find a roofer to only put on half a roof if the other guy doesn't want to pay?

Joe Giuliacci: I can't remember exactly how the roof line ran. That's a good question. We never owned it long enough to have to figure that out. [laughs]

Ash Patel: Good. Alright. So how does a passive investor and why does a passive investor start a company?

Joe Giuliacci: Well, even when we held our private duplexes, we held them in an LLC. And we did it for a couple of reasons; it was really just to have some anonymity, but also just some asset protection that we wanted to put in place. And so as we moved into the passive space, I similarly created an entity of which to invest through, rather than us and our personal name.

Ash Patel: Got it. And you don't invest for others? You don't take on investors? It's strictly your own capital?

Joe Giuliacci: It's strictly our own capital, yeah. Now, I try to talk about this with friends and family, but it's a little bit ominous for others that aren't familiar and comfortable with real estate to begin with, to go drop 50k or 100k. So I thought about joining up with some family or friends in an arrangement and creating an LLC entity to structure that, but I haven't done that yet.

Ash Patel: Well, let's explore that.

Joe Giuliacci: [laughs]

Ash Patel: So you can set up a fund and do a fund-of-funds model. So you pool all of your capital and whoever else wants to get in, their capital together, and you can choose to invest in other people's deals. And if you go in with more ammunition, you can at times get a better percentage or more of the GP shares.

Joe Giuliacci: Okay. So that's an area that I'm interested in playing around with a little more and exploring that. So--

Ash Patel: Yeah. If you go through Joe Fairless podcast, maybe type in "Joe Fairless fund to funds--"

Joe Giuliacci: Okay.

Ash Patel: ...on his blog. There's a ton of information. I know I've interviewed a number of people that do that. So if you're passionate about it and if you want to help other people that don't have the same knowledge, expertise, and avenues to invest their money, it could be a good post-retirement job.

Joe Giuliacci: I appreciate that tip. I'll definitely put that to my list.

Ash Patel: Okay. So I want to dive into your LP investments. You started out with multifamily and self-storage.

Joe Giuliacci: Yeah.

Ash Patel: And I would assume pretty safe investments, good areas, good operators. What made you go into industrial properties?

Joe Giuliacci: I guess I'm a creative sort and I kind of even consider myself a little bit entrepreneurial in how I think. So how I've educated myself, let me start there, is I dive into all kinds of podcasts, and I learn a lot. So coming across some other sponsors that have been in the industrial space caused me to go and learn a little bit more about that. And what I love about just this whole passive investing model, as we're talking about this question particularly, is I love the diversification. I was all in on duplexes in one geographic location for almost 20 years, and now I get to spread that out across the US. I get to explore different asset classes, and it's just phenomenal. It's just lit me up.

So industrial - really solid. You buy in an income stream, because the industrial ones that I'm in are these triple net lease arrangements. I'm sure some of your listeners have heard that approach where the sponsor basically buys the property from an operating business and then leases it back on a particular term. And so you're buying just a real solid stream of income.

Ash Patel: What are the returns on those triple net industrial properties?

Joe Giuliacci: They're returning about 10% is where I'm at right now. So that's the cash-on-cash kick right now, is 10%. And then they'll still sell with a kick at the backend, because they're still operating -- the business model is that you're still selling it with plenty of lease life left that you're going to provide value on the backend.

Ash Patel: And what types of commercial properties are you into?

Joe Giuliacci: I've done one commercial property fund that's in this number of different asset purchases, and they're buying essentially your Walgreens, your CVC, Dollar General... It's those sort of retail alpha that's behind them. And again, they're set up as triple net leases, so you're getting just real good, steady cash flow.

Ash Patel: What are the returns on that?

Joe Giuliacci: In that space, it starts at 8 and moves to 12 over a few years. So, fairly respectable, in my opinion.

Ash Patel: Out of all the asset classes that you're in, what's the lowest returns and the highest returns?

Joe Giuliacci: Okay. So the lowest returns, quite frankly, is the multifamily. A lot of the models with multifamily is they're positioned as value adds when they're purchased. I'm sure many of your listeners understand that you purchase the property and you do a renovation package to it. And so in that early stage, they're not kicking off a lot of cash, because it's going into the CapEx portion of the value-add. And so on some of my multifamilies, I'm only making 4% cash on cash in these early years. And then the best ones that are kicking off are probably on 10%. And again, it depends on how you think of the metrics, because there's so many metrics out there, and whether you look at it -- I like to look at my cash-on-cash... I like to think of it as pure, no capital return in that number, no capital events; it's just the pure kickoff of cash.

Ash Patel: So 4% initial returns. They've got to kill it on the back end and make up for that.

Joe Giuliacci: Yeah.

Ash Patel: And are you confident they'll do that?

Joe Giuliacci: In my short time - as I've explained, I've only been in this passive space here for a handful of three years or so - I have had two already go full cycle on me, in just about a year's time, believe it or not. And one of those was a self-storage, one of them was a multifamily. The multifamily, as I looked at the metrics on it between what it was portrayed and what it finished at, it only yielded 4% in that year's timeframe, but it returned over 30% as it closed out. So again, I'll take that all day long relative to stock market or other types of investments. The self storage, that blew the doors off my experience, I guess you could say. I guess let's just use the IRR metric for comparison - self-storage was due to put out about 20% on an IRR over about five years. And in one year's time, of course, it kicked out 126%. So--

Ash Patel: Was that with a refi?

Joe Giuliacci: No, it was a ground-up build, which is another part of the story; but it was a ground-up build, so it really kicked off no cash or absolutely zero cash for the full year. They got the occupancy cert on it and they had a sale on it. They got an offer and it made the numbers and they went through with it and sold it.

Ash Patel: Yeah, that's a great win. You mentioned being diversified from your duplexes, but these are all real estate assets. Are you also in other types of investments besides real estate?

Joe Giuliacci: Yes, I am. Most of my holdings right now, there's the underpinning real estate that does exist, and then there's a multitude of different businesses that, I'll say, sit on top. And whether that's just a multifamily type of business or it's a self-storage, the industrial is a different type... I have a handful now of car wash investments that I've done just recently and I'm super excited and bullish about that model, so I'm encouraged to see where that goes. So again, it's underpinned, there's real estate there, but there's another business that sits on top.

And then I have explored a couple of what I call in the venture capital space. There's one energy-related one. It has to do with energy services; that's completely different from all the others. And then there's another one that more around business services, I'll call it, that doesn't have any real estate to it at all. So I have dabbled outside of the real estate space a little bit.

Break: [00:16:43] to [00:18:30]

Ash Patel: Joe, how do you qualify these sponsors?

Joe Giuliacci: That's a great question. So that's the number one rule for me, quite frankly, is finding the good operator. I've kept my lane pretty narrow, actually. And the first part for me - since I came into this space really cold, I didn't have any mentors or anything, but it was listening to podcasts. And these hosts of podcasts are typically, many of them are doing it because they're also sponsoring deals, and so that is one of their outreach mechanisms. So believe it or not, for me, I have a pretty good ability to pick up a personality from just listening to people. And what's been actually even more powerful for me is to listen then to that podcast host and interview experience and get another characterization of that person. And then it's having some one-on-one meets with these sponsors and continuing to build a relationship.

So that's kind of some of the pathway for me, is to, again, build that personal relationship that I believe I can trust. And the first couple I knew, there was some element of risk in that, because you don't know what you don't know, and we've all had experiences where we thought we knew somebody and they turned out to be somebody different. And so I've been blessed. I'll just say that I've had some really great experiences in that process.

Ash Patel: Yeah. It's funny, in 2015 I invested in my first syndication. And at the time, I think it was like a 22% annualized cash-on-cash return, and I committed a large amount of money to it, because I just had a sale of a property, and I went home and I'm like, "Wait a minute, this sounds too good to be true", and I thought, "If I get burned, lesson learned, but man, if this is a real thing, what a great avenue to grow money." So I get that. What are some of the discerning questions you ask sponsors when you have these one-on-ones with them?

Joe Giuliacci: Great question, too. A handful of things that I kind of stick to is, one, I like to understand their experience. I want to make sure that this isn't just rodeo number two for them, or three. Have they actually gone full-cycle with some deals? That's been really important for me.

I've got to admit though, it has been tough to find some of these operators that have gone through multiple market cycles. So that's where maybe I do have a little bit of a risk play with some of the sponsors I've hooked up with just given how many market cycles they've experienced.

I like to understand their track record. I like to ask for some examples of some past offerings. What did the investor deck say and what did it do in the end, or what's it actively doing today? So I like to see that, so I can understand better what they portray and what they deliver.

I like to ask for an example of a past failure. Now, I'm really careful of how I ask this question. I don't ask, "Have they had a failure?" I just assume they better have a failure they can talk about. [laughs]

Ash Patel: Yeah.

Joe Giuliacci: And when I say failure, it could be just a problem with operating an asset, and I just want to hear how they work through that. What's their thinking, and how did it end up. And of course, it doesn't always have to end up good; it could end up not so good and they learned and they took away something from that experience. I think we all have those kind of things.

I like to understand the communication approach through the investment, and what's their accessibility when I have questions.

Last thing that maybe I'll point out is I'm a spreadsheet nerd, so I like to understand the underwriting and have some transparency in how they underwrite their assumptions, so I ask to dig in a little bit there.

Ash Patel: Joe, when you ask people for their failures, what if you get that typical interview answer, "What's your weakness?" and it's always, "Well, I'm a type A personality. I'm a go getter", the typical nonsense that you do in an HR interview. Do you ever get answers like that when you ask for failures?

Joe Giuliacci: Fortunately, I haven't.

Ash Patel: Okay.

Joe Giuliacci: Because if I did, I probably would really have to question whether I could go through with this particular sponsor.

Ash Patel: I agree. On your deals, have you had any that go bad, or have you had deals where bad news was communicated from the sponsor?

Joe Giuliacci: I can't say I've had any go terribly bad. Again, maybe that's still in my future here, since I'm still kind of young in this passive investing space. I gave two examples of two investments that went full-cycle really quick. One of them, it was an obvious result. It was, "Okay, yeah, I'd love to do that again."

The multifamily one, I don't know. I'm not sure. I think I would've been happy if that one played a little longer life and returned a little more of the equity multiple end of things than where it ended up. So maybe this multifamily one was one where it wasn't the most accepting news at the time, but I did have the follow on conversation with the operator to try to understand what was the play there. And I think what the takeaway for me was, is they were open to have the conversation and explain the business dynamics of the property at the time. So I was happy with that response.

Ash Patel: You must receive a lot of different sponsor communications. What is your favorite way to receive those, both in formats, frequency, and content?

Joe Giuliacci: Right now, I think all of them are coming via and email release. They all come on a monthly cycle. And I think the ones I like talk a little bit about what's going on in the property and what they're doing in their business execution on that property, and how it's performing. That might be, "We're at 99% occupancy", or "We're at 76% occupancy" or something that talks about those business stats. So I enjoy reading through those summaries on a monthly basis.

Ash Patel: You said you're a spreadsheet nerd. Do they include financials?

Joe Giuliacci: Most of them don't. The ones that have are the self-storage ones, that actually give me spreadsheets. [laughs]

Ash Patel: Do you prefer to receive financials, or just a high-level occupancy number?

Joe Giuliacci: I think the high-level. Where I like to dig in on the spreadsheet side is going into the investment and kind of re-proving out what they're portraying. Can I build that in my little spreadsheet model and get those kind of numbers to work? That's where I like to play in the spreadsheet.

Ash Patel: Yeah. Joe, one of the things you said you look for is a sponsor who's been through, at least, one market cycle, meaning somebody who started 2007 or prior and is still alive today. Have you found any of those?

Joe Giuliacci: [laughs]

Ash Patel: Because syndications really sprouted in the middle of the last decade.

Joe Giuliacci: Right. I think there's just been one sponsor in the multifamily space that has those kind of career legs, if you will... But no, I haven't found it with many of the ones that I am currently invested in.

Ash Patel: Joe, normally, passive investors are either in it for cash flow or to grow their overall returns. You seem like a hybrid, where some of your deals return steady cash, others you're willing to forego short-term cash for long-term gains. What is your philosophy on that? Do you pivot one way or another? Do you have a preference, rather?

Joe Giuliacci: I don't. I like to be open to a mix. And as we talked at the beginning, my wife and I are entering into this retirement space, so using this cash flow is still valuable to us. So I like to keep a certain play in that space, and then I'm okay with a certain fraction of our investments being patient.

And going back to my spreadsheet antics, I kind of model all this stuff out and see what kind of cash flow returns that we've got in our future that we can live on, and where we can maybe be patient and maybe try to seek a little better return with that patience model.

Ash Patel: Joe, some of the deals that you've done very well on - is it tempting to just go all in on their next deal, or do you discipline yourself to diversify?

Joe Giuliacci: So far, I've disciplined myself to diversify.

Ash Patel: I would imagine that's a challenge, and it's an internal struggle at times, because if you find one operator that does great at everything-- and that's what I did. I essentially went all-in with Joe for all of my passive deals over the last seven years. I haven't really looked at others a whole lot. Maybe that's just me being lazy. [laughs]

Joe Giuliacci: [laughs] Again, I try to play around with my [inaudible 00:28:26] spreadsheets and look at what kind of percentages I've got and how many different operators. And I like to look at all that and just try to understand it and see how that feels on me. Because there are a couple of operators that I've got significant chunks in, and then some more on the fringe activity. So like I said, overall, I've kept fairly narrow with my number of sponsors... But yeah, I certainly have used more than one in my experience.

Ash Patel: Yeah. Joe, a question that I normally ask everybody is what is your best real estate investing advice ever? Today I'm going to ask you, what is your best advice to sponsors of deals?

Joe Giuliacci: That's a great question. I would say, the best advice is communication. I think that stands above. And so maybe with that, I'll pair it with accessibility. I think those two go hand in hand. There's been a couple of experiences I've had that doesn't feel good when you're short on communication and you don't have that same level of accessibility.

Ash Patel: Great advice. Joe, are you ready for the Best Ever Lightning round?

Joe Giuliacci: Let's do it.

Ash Patel: Alright, Joe, what's the best ever book you recently read?

Joe Giuliacci: One great book I'll leave with your audience is The Gap and the Gain. Many have probably heard of Who Not How by the duo, Dan Sullivan and Dr. Ben Hardy. They came out after that book with The Gap and The Gain. Great book. So that's one. Maybe just as a bonus, I just got done reading Why We Sleep. It's a book by Matthew Walker. If most of us in this world like to have good performance and understanding how we sleep and what that does for us, it might seem obvious, but it was a great read also. There's a bonus one for you.

Ash Patel: Joe, what's the best ever way you like to give back?

Joe Giuliacci: What's been the guiding light for me, my family has been through our local church and given back in that means, both financially and with time. So that's where it's at right now. As we continue our retirement world, we're going to look for more ways to do that and also use more of these dividends that we're getting from our cashflow and give back. That's our objectives.

Ash Patel: Joe, how can the Best Ever listeners reach out to you?

Joe Giuliacci: Best way to find me is on LinkedIn. I don't have really any other social tags that I use. So LinkedIn is where folks can find me and happy to hook up with people that are learning in this same space that I've talked about and happy to share my experiences and perhaps be a mentor for somebody else that's looking to get started.

Ash Patel: Joe, thank you for joining us today and giving up your time teaching us what it's like to be a full-time LP investor and` some important lessons for sponsors. So thank you again for your time.

Joe Giuliacci: Had a lot of fun, Ash. Thank you very much.

Ash Patel: Awesome. Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review. Share the podcast with someone you think can benefit from it. Also, follow, subscribe, and have a best every day.

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