Lessons Learned From Real Estate Operator & Educator With Joe Anfuso

Lessons Learned From Real Estate Operator & Educator With Joe Anfuso Multifamily Investing, Multi generational Wealth

Hanh D Brown:  Joe tells us about his childhood and being born of a Portuguese mother and Italian father. Joe grew up on the water, went to college, returned periodically to fish with his father and got interested in real estate during the boom era of the seventies and eighties.

Joe Anfuso:  I was born and raised here in San Diego, California and I’m a, I’m the son of a commercial fisherman.  My family when I was born, mom was Portuguese, Dad was Italian. I grew up on the water. And that happened to you. You were a; you grew up to be a fisherman. So that was a commercial tuna fisherman. And I actually left college ones for a while and what commercial tuna fishing and spent most of my time growing up on the water; but I was always kind of attracted to real estate as I got older and saw people that when San Diego was booming in the seventies and eighties, a from a real estate standpoint  The only other people I saw that were making money besides fishermen were people that were building houses, selling houses, brokers,  all kinds of different areas and real estate.

Hanh D Brown:  Joe tells us about his journey into becoming a real estate investor, first, his college education studying accounting and CPA, then getting his MBA, later on to developing homes; from there, he moved up the ladder to developing multifamily properties. 

Joe Anfuso:  It just started to attract me.  My family’s life has been on the water, but this real estate thing, people are paying people that own real estate, and they use that as a wealth building and a, a cash flow creation. And it was always something that attracted me. So, I, when I went to school, and I’d probably end up in the real estate field, I went into accounting, then later, got my MBA and then started in on mostly the development side of the business and developing homes and multifamily properties and so forth. So I took the time over the years to get a general contractor’s license, a broker’s license, and I’m also a recovering CPA, so I’ve spent most of my time in the, in the finance and the operations area until, moving on to where I’m at now.  We’re a; we’re an owner-operator. We’re about 20,000 units.  We don’t do any ground-up development, but what we do a lot of acquisition rehabs.  So I do spend a lot of time on looking at our records and so forth on underwriting and what we’re going to do to properties and overseeing the financial and also really a lot of, I get to spend a lot of time now on technological improvements on what’s going on in the future of this business. So that’s where I’m at.

Hanh D Brown:  Joe tells us how he transitioned from an operator to a teaching role and those who help make it happen.

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Joe Anfuso: I have been part of a, I graduated from USD a couple of times, and I’ve been part of what they call the Burnham more center of real estate, which is affiliated with the University of San Diego and is really for the development of the real estate program.      A man by the name of staff, Charisse, runs it. And so their academic, person, Charles, Dr. Charles to call me last year, and they were an in a little bit of a bind in between teachers going on Sabbatical and another teacher not showing up. They needed somebody to teach a commercial real estate finance and investment class to mostly graduating seniors and thought that having been affiliated with them, the organization for so long and knowing what I had done that I might be able to give the students a perspective.

Joe Anfuso:  We talked about it here in the office, our president, but his name is Mark Lieberman. We’re the fairly good benefactor for the program.  We talked about it at the time. My time commitment and he thought it’d be a great way to give back, as did I.  I took it upon myself and, tried to, become a teacher, but I should know, I need to apologize to any, the good teachers that are out there that are doing this day in and day out. I am not what I would call a great academic. I’m a good operations person and a finance person that transitioned to give the kids a little flavor of what I do for a living and, and part of the business.

Joe Anfuso:  I would say not what those good teachers do every day.  It’s kind of, all the different facets of the business. I mean, it was everything from, a pro forma writing to capital markets, to the real estate investment trust.   ,    the class was really trying to give the students an opportunity to look at all facets of commercial real estate, how it’s valued, how it’s financed, all those items of it, so that from an investment standpoint, they can understand what’s going on, whether it was a multifamily property, which is mostly, everything that we do, here at mg properties or even an office buildings and retail and so forth.

Hanh D Brown:  So what are some of the most important decisions you made as a leader of your organization?  What technological changes are impacting the real estate industry? 

Joe Anfuso:  For Now, I think it’s, this kind of translates to the students as I do spend a fair amount of time on technology and, the strategic planning for the company. And as I’ve told the students, I think we’re kind of on the cusp of the new golden age of real estate because of technical, technological changes that are happening.

Hanh D Brown:  How have the AI, big data, business intelligence impact how you do business?

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Joe Anfuso:  We are implementing new things, on an, yearly, a couple of years ago.  Not only do we have a general ledger package and now we’re putting in automated accounts payable packages.  We’ve got automated investment management, system, just last year we went into the big data analytics and business intelligence programs. So we’re now starting to analyze all this data that’s what we’re receiving from the standpoint of the properties and, from rent and vacancy and, and expenses and all this data that now you can get and really start to, evaluate from your properties what you can do to enhance revenue or to decrease expenses and,    and begin to look at that in much more detail than you ever have been before.

Hanh D Brown:  How are college graduates grew up with cell phones prepared to take on the job market?  In terms of digital marketing, social media marketing, how do you think the next generation of graduates will adapt to real estate roles?

Joe Anfuso:  The young people as they come out of school, they grew up with cell phones and, from the time they can read and write and, and computers and technology and they’re just going to be well positioned in the future to step into these new roles. For example, a couple of years ago, we didn’t have a, a, a business intelligence analyst or a data analyst. We didn’t have a director of digital marketing.  These are all new positions that are coming out in the, that every company is going to be needing in the future, which fits well with the students that are coming out.

Joe Anfuso:   I think, as think about the future of our business and I’ll take the multifamily business for example, before if you were at the apartment level, then, you had an, a leasing agent who if they were any good, they were pretty good, they might want to be into a jump into the assistant manager, and a few were a little right there. You, you became a manager, and then you can become a regional manager and, and, and, kind of, that was the basis. And then you’d come a regional; maybe you could get into the corporate office. And so forth. And now think about, the manager’s position or the regional manager’s position. Now that person is looking at data and how they are assessing their properties is through data. So far, we have this business intelligence and big data analytics that now they’ve got dashboards where they can see where their vacancy is and their region, what, what’s coming available and so forth.

Joe Anfuso:  The same job is requiring entirely, so very different skillsets on what they’re using. And so, what you used to be, how you came up to become a regional manager might not be the same type of person that you’re looking for anymore, one’s is you’re going to need, still need a customer service person on site and so forth. That’s concentrating that area. Somebody else looking at that’s managing that property might be having to be a, have more of a data analytics mine and more of a business analyst rather than a customer service. So I think it’s changing the dynamic of how are we going to manage properties and how we’re going to affect the outcomes of properties, the financial outcomes of properties, right? Because our job is to make sure that we can, run a good property and provide a safe, healthy environment for people while they’re at the property. But it’s also too, right, we have investors, we’re trying to get a return on our investment. The people are trying to ensure that we can, increase net operating income, that we’re advancing the property. So that at the end of the investment period, we’ve had a healthy investment in health or return for our investors.

Hanh D Brown:  Digital technology is remaking the workforce and changing job roles.

You will need new skills, from cloud architecture to social media.  There will be more entrepreneurial and innovative thinking.  Job roles are being created that didn’t even exist five years ago.  New additions are being seen in existing job roles.

You will get to know adjacent roles, a blurring of roles; you will be developing solutions that touch upon other roles.   Digital is blurring the lines between industries, and the activities of one are flowing into adjacent sectors.

Joe Anfuso:  No, you’re absolutely right. I mean, I don’t see how that doesn’t occur, and it is going to change the dynamic of the person you hire from the beginning. Companies like us start to adopt all these different platforms; you have to start thinking about who is going to be using those platforms. And what’s that skill set needed?

Hanh D Brown:   Sure, sure. Okay. So what are some of the key things, let’s say first-time investors or graduates coming into this space who are trying to learn more about how to become an excellent multifamily investor? Like what qualities make an intelligent real estate investor and what kind of mindset is that person need to have?

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Joe Anfuso:       Sure. I think first what we have to remember, I’m a very big proponent of keep things simple, and this might be because of my old, fishing background days and the people I grew up with.  I think you have to remember that at the, in the end, this is all about cash flow. It’s, it’s the end of the day, you’ve got revenues coming in and revenues and expenses going out. You’re going to pay your debt, and there’s going to be money leftover and is at enough for you to make an investment or you’re getting a return on your investment from that cash flow. And, and sometimes we try to get a little complicated, and we’ve got all these crazy excel spreadsheets or different programs and a lot of smart people doing stuff. But I think sometimes people don’t. Just take a step back and remember to give you an example.

Joe Anfuso:  Investors used to do this on back of Napkins at lunches, right? How we do it on computers, excel spreadsheets and computer, no, the models and all that. This used to be done by guys and women just writing down on the back of a Napkin, go on, what? What’s your revenue? What are your expenses? Here’s what I’m going to invest it, here’s what I’m getting a 10% return, let’s do a deal in its simplest form. So I think first thing investors have to realize is that keep it simple, the, and with that, I think the next thing for an investor is what I think separates really good investors and our people that can assess risk, and that can sit and think about the risk-reward with any investment. Whether you’re investing in the different types of property types, right? You’ve got core plus properties, value add and opportunistic, right? A good investor is going to know there are a risk and reward to the type of property type investment you’re making and what you should be compensated for that risk., if you’re taking development.

Joe Anfuso:  At risk from an opportunistic standpoint there you should expect that it’s a riskier and that you shouldn’t be rewarded for taking that risk and understand that dynamic as opposed to your investment in a core property that could be a brand-new building in downtown Seattle and the returns are going to be much less. But for that you’ve, you’re investing in a newer property that has much less risk in a, a bigger metropolitan area that should stand the test of time. Does that help?

Hanh D Brown:  Investors focus on risk not only returns. The good returns will come if you manage your risk properly. We only want to take prudent risks; risks which offer probabilities that are in our favor.

Joe Anfuso:  I think, for other young investors, the one thing that I think I would say in the world of academia and the, in the operating world, the other thing that we need to understand and that young investors should start to learn from the beginning is how that it fits in their risk portfolio.      Meaning is this amount of money that you’re investing? Is it 5% of your net worth? Is it, I know 90% of your net worth, a lot of times young people go home, this person invested in this and made a ton of money and they got $10,000 to invest, $20,000 to invest in, put it all in one project, in a high risk project that’s supposed to have a big return in an area that they don’t know much about and haven’t done a lot of due diligence and then all of a sudden they lose money. And so it again, part of the risk-reward dynamic that is taking one step further back and saying, okay, what am I investing?    How much is it of my net worth and how much of that am I willing to risk going forward knowing where I am in my stage of life and how much this money means to me.

Hanh D Brown: Regardless of what financial stage of life you are in, you will have to decide what your needs are and how comfortable you are with risk.  Are you investing for growth or income, you need to understand the length of time and your own risk tolerance.  Where you are in your life cycle certainly affects how you invest for retirement.

Joe Anfuso:  Absolutely. If you’re, if you’re a, if you’re a younger person and you’ve, you’ve, you’ve got a little bit of money, maybe taking a big risk on a development deal and $10,000 when you’re at the middle stage of your career, if you lose that money, terrible.  None of us want that to happen. No, you get half of it back. You’ll; you’re still a young person in your, let’s say the early thirties who’s going to be getting salary increases and so forth and building your nest egg. And so it’s a small price to pay. But, if you’re in your late forties, you put in 50% of your net worth in one property because you’ve had other people tell you this, this is a great investment.  That’s a risk you, you’ve got to know you’re willing to take.    And Is it worth taking at that stage of your life?

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Hanh D Brown:  There’re so many different aspects of the deal.  There’s the pro-forma, sponsor, the projections, the tenancy, the value-add strategy.  Does an investor need to know all of those? Are there certain aspects that they should focus in on first?  How do you discern and filter it down to the most important components, since it can be overwhelming with all the information?

Joe Anfuso:   It can be overwhelming. But again, I think you have to take things from a very, simple approach. And, I use a couple of acronyms.  They’re like that I feel for people that are early investors, you want a call is real, right? REAL and then, and that is you look at the revenue, you always want to see the kind of revenue, where it’s coming from. Is it a multifamily property? Is it from the rent of 200 apartments? And then you can start to analyze a revenue. The next thing would be, and we can talk more in detail on these, but you were, so it’s revenue expenses, the asset itself and then the liabilities, so it’s what is, what is real in that property. Those four items are what are going to make and break your investments.

Joe Anfuso:   So as I said, the revenue on the expense side, what are the expenses per unit, what are the anticipated expenses, what are the assumptions for both revenue and expenses and what are the annual assumptions of increases. Now, how much our revenue is expected to go up? How much are our revenues going to go up? Is there any enhancement to the property from a value-add standpoint? So revenues are going to be increasing a higher than maybe what the market rent is. The asset, I think where the asset is located? Is it in an Opportunity Zone? Is it in an up and coming neighborhood? Isn’t in an older neighborhood? And then the liability is a one person that looks at the liabilities at the beginning of the deal.  And the big liability, obviously his debt.

Joe Anfuso:  I think that’s, one of those areas that you want to key on is how much leverage is the deal is necessary for the deal. Is it something that we are putting in 40% of the equity and at 60% loan to value? Or is it somebody, you might have a sponsor that’s a little more aggressive than that is going, we’re going to we’re going to do a 65% loan to value as a first. We’re going to go out and get mezzanine debt at another 10% on there. So we’re going to be at 75% to 80% leverage. Let’s say; we’re going to try to juice those returns and have the expectation that we’re going to improve this property. And all the, everything has to work out perfectly to meet their, their returns.    And, obviously much more risk involved with that because every real estate cycle we’ve had, it’s the those that have occurred, the greatest leverage have been the ones that have failed miserably.

Hanh D Brown:  I’m an investor; seeking properties to sponsor and meantime, I’m looking to invest with co-sponsor. I want to learn how’s cash coming in, how’s cash coming out, what’s the quickest way to get to that information?

Joe Anfuso:  First it’s obvious it’s going to be the pro forma that the sponsor provides, right?      If we’re a, we are a sponsor at mg, and our job as a sponsor is to do the due diligence necessary to ensure our investors are making a good investment. So that causes us to write. We have to from the very beginning, we’ve got to go out, and we’ve got to recreate a the pro forma, the, which is basically what we think the financials are going to look like over the whole period of the investment.

Joe Anfuso:  To get to that point, but there’s a lot of steps that you start with. The first is you’re going to get the sellers, financial statements. Then from there, you’re going to know, what if, what are the revenue’s been, what are the expenses bid and start to build the build from there. So that’s kind of the building blocks as you’re going to get that, you’re going to get some information from the broker and the building blocks. And then really, it’s your due diligence. I think this is what separates, good sponsors from sponsors that the lack a lot of knowledge. You need to start getting in there and your due diligence and assessing what the property is. Meaning you’ve got a good sponsor is going to spend a lot of money upfront understanding the property. Is it a property built in the 80s that as certain types of electrical work, certain kinds of plumbing where you said you need to be getting your engineers out there, and we have an, we have our construction department, so we know we’ve got our guys are out there when we’re doing the due diligence, we’ve got roofers out there, we’ve got, and we bring in independent inspectors out there and, if it’s got an elevator, you name it, we spend the resources necessary, so we understand, again, is it a property in the 80s or is it a property that was built in 2010, it’s much newer.

Lessons Learned From Real Estate Operator & Educator With Joe Anfuso

Joe Anfuso:  It’s different types of construction so forth. So there’s just a lot of that on the due diligence side, which then helps you build the pro forma from what you anticipate you’re going to have to spend. If it’s an acquisition, Rehab property, you don’t know if it’s an older property, it’s probably going to cost you a little bit more money because maybe you’ve got to scrape the ceilings from the old popcorn ceilings and perhaps you got to do other things. So these are, a good sponsor walks through all of those items and understands how much you really are going to have to spend or invest in the property in order to put it in a position so that you can meet your goals for revenue and revenue enhancement so that over the long term you can raise those rents, lower those expenses, raised that net operating income and time, raise the value of that property. So there was a return.

Hanh D Brown:  There are several versions and iterations of the proforma; can you elaborate on the distinction. The broker’s pro-forma from the seller.  The buyer pro-forma.  The investors internal model and then there’s the one that you give to the lender.

Joe Anfuso:  Remember every one of those that you just mentioned as a specific goal in mind and the investor needs to understand that each one has a goal, right? The broker, if you see them, the brokers marketing sheet and their information, right, what’s the broker trying to do? The brokers are trying to sell the property. So they’re putting things in the best light possible as they should. And understand that they’re giving you information. Some of it’s going to be good. Some of that, you’ve got a question in there. So you’ve got your sponsors pro forma, and as we just talked about, having done all that due diligence, having done all the work, you’ve got to have the faith and know that the sponsor is done. The due diligence necessary to put a pro forma that’s they believe is accurate for the investment.

Joe Anfuso:  The pro forma for the bank, again, you’re probably going to do a lot of summarization. The bank doesn’t need all the, all the details and so forth. So, year, their pro forma for the bank is to get them what they need, a succinct manner so that they can approve alone. And then the investor needs to do their homework and their due diligence to make sure that they are comfortable and can come back and ask questions with regard to what the sponsor is saying.  For example, in a market where the average rental increase has been, let’s say 3% over ten years if you’ve got to property that doesn’t require a lot of rehabilitation, but your sponsor is telling you what we’re expecting, an average of 5%

Joe Anfuso:  Does that seem reasonable from an investor standpoint or they’re averaging 5% because the sponsor’s going to invest, the investors are going to put in $15,000 a unit, they’re going to be upgraded. And the proof around the market is that that should take you from a, let’s say a dollar a square foot to a dollar 10 a square foot. You’re going to get; you’re, you’re, you’re bumping your increase through that value in rehabilitation. Than you again, a question that an investor needs to know and be able to ask why there’s a difference between market and the pro forma. You just answered my next question.

Joe Anfuso:  Let’s say I’m revealing their proforma, which easily over a hundred pages. What questions should I ask the sponsor to get a better understanding? Their mindset, their version of the pro forma? Well, let’s remember that the pro formas, and I think you’d mentioned this earlier, the performance telling you a story and the story is here’s the financial representation of what we think the property is going to do. And every story has a plotline has the undercurrents of what it means, and the pro forma is no different. And so the investor, while it doesn’t have to know everything specific should be able to look at a few of the items and see are these reasonable meaning, the annual revenue increases, the annual expense increases, what the capital investment is going to be. I’ll give you a good one there. You can have, let’s say you’re buying an older building and

Joe Anfuso:   There’s not a lot of money in there for capital expenses or capital improvement mince which need to be invested in the property. Right. Because the one thing you learn over time as you buy an older building, your expenses should be, they should be somewhat higher than a building that was built in 2015 so a, an investor, just one of those things that they can just ask a question on is, the capital expense enough for this building that we’re buying in 1982    , compared to other buildings, the debt, the leverage ratios, who, we talked about earlier, be acutely aware of how much leverage is being aware of that leverage is coming from and how I’m doing a little bit of homework with regard to how much of those revenues can change so that the debt can still be serviced. And then also to make sure that yeah, in the end, does, do all those assumptions and the questions that the investors are asking, do they match what the goal of the investment my nose. And the goal again is, is this a core best mint?    Is it a core plus value add or opportunistic is a?  Is what’s being proposed for that property? Is it consistent with what the ultimate goal of that property?

Hanh D Brown: Does a 300 unit deal 100 times more complex than a 3-unit deal?

Joe Anfuso:  In this day and age I say no. Mean I, for the, for my students, our final exam was on, we tie, give a lot of system on a number of deals and it wasn’t about 300-unit apartment buildings.      It wasn’t about, large, retail buildings. It was, I wanted them to do an analysis on let’s say a five-unit building, do the analysis and show me why this is a worthy investment that I made them act like sponsors and come and ask why I should, me being the investor, why I should invest in their deal. And the numbers get bigger. That’s all. You’ve got instead of five units, so you’ve got 300 units, but you multiply that times the number and that’s your revenue. And so it’s just a matter of concentrating on those, those items like I said before, that or the simple items of an investment, the cash coming in and the cash going out, and that understanding that risk-reward, which will make you a much better, a much better investor.

Lessons Learned From Real Estate Operator & Educator With Joe Anfuso

Hanh D Brown:  Regardless of the size, know the cash coming in and the cash going out and that understanding that risk-reward, all of which will make you a better investor.

Joe Anfuso: There are a few items. I, I taught the first four pillars that I, I taught students is jobs, capital supply, and sentiment.  I always think those are the four pillars of the investment to know whether you’re, you should be in this place, and that’s for the market. Right? And, and, for jobs, it’s, if are you investing in a marketplace where there are increasing jobs, right? What’s the job picture look like? What’s the unemployment, what’s the employment rate? Is it a, is it a good area? Is an up and coming year area. So you always want to know the job picture in, in any market you’re investing in capital. What is the availability of capital and the cost of capital in your investment? Are you getting a government-sponsored loan? Fannie Mae’s sort of Fannie Mae loan, a Freddie Mac loan. Is it an insurance alone life co company is, where does the debt and also within the market itself be our interest rates.

Joe Anfuso:  Where interest rates are going or his interest available for development? Is interest available for purchase, mortgages. How was the capital structure and capital, the flow of capital in the marketplace that you’re working in that job capital? The other two are supplying sentiment. It used to say supply. And then with the great recession, I added a sentiment because it became clear to me that not just the supply of [inaudible] on our case, what’s a supply of apartment building is going out there. What’s a supply of the, of any of the commercial investment types, but it’s, how much is being built and what’s that competition going to do? How are rents going to be affected if there’s overbuilding, is they’re not overbuilding.  I’ll give you an example. And, on the West were primarily on the west and, you probably have a better chance of being the starting pitcher for the Dodgers, and you do of getting a 200-apartment building built somewhere in Los Angeles or San Diego or up and down the coast.

Joe Anfuso:   So people need to understand, what’s going on with supply. And the last thing I put a sentiment, and that is, what is the current sentiment out there? Do people feel like there’s a market that’s available? And for us in the multifamily world, I mean, you look at the demographics and you look at the, you look at millennials, you look at student loan debt, you look at all those things that are in the marketplace and somebody’s got to explain to me how in the long term, if you’re buying multifamily properties, let’s say, not in your urban cores, but you’re in them, put a 10 or 15 mile radius around your urban cores and in some of those suburbs and you’ve got good apartments out there, you just can’t see over the long term investment horizon.  You’re not going to do well. If you, as long as you don’t over-leverage a property, you can withstand some downturn. and I think, the markets will come back and, you’ve got good debt on the property. You’ll, and I think you’re just going to be okay over the long term because I can’t see where that’s going to affect or to the detriment of investors in the multifamily space. Okay, great. Great. So what you say

Hanh D Brown:  What would you say has been your greatest accomplishment?

Joe Anfuso:  I think, for me, it’s just been, I honestly thought I was going to be a fisherman. Right. The big accomplishment for me was instead of you are, my dad’s been nine months out of the year on the ocean.  Right. And I left San Diego, and I stood on the ocean for me all the better part of nine months. And so I think personally the most, it was just able to do something else, not wake up one day and be 45 years old had spent 30 years on the ocean or something and go, no, where did life go by? I have, just being able to participate on land and, do things that nobody else in my family was able to do is kind of really what kind of drives me and, and was always made me feel good.  So I think that’s kind of always been something big that I’ve, I’ve always been happy I was able to achieve.

Hanh D Brown:  Who opened doors for you?

Joe Anfuso:  There’s a, a number of different people. I mean, I think one of the most important things, we didn’t talk about, but for a young investor is finding a good mentor. I can’t tell you how important that is to find people in the business that you want to be in, that have been there before, that have done that.  They’re willing to give your time. And, I’m, I’m one of those people that I think it’s almost incumbent upon me to be able to help people when they ask. A lot of times they don’t like to take your advice, but I think that you can give them information, valuable insight into, what you’ve done and what’s happened in certain sexual situations. So I think young people should go out there, find mentors, and be able to learn from them. I mean, even to this day, I still go to lunch, or dinners with people that have helped me along the way that were, that were developers, that, own their own companies that worked for home builders and so forth, so that you can,  you can continue to see what they were experiencing spirit experiencing in different points in their career.

Joe Anfuso:  So I think that’s one of a really important thing for, for young people, especially just starting out and trying to get a feel for what’s going on in the business.

Hanh D Brown:  Digital technology has made people more accessible, and it has given us the ability to communicate with the mass audience and learn from each other to make intelligent decisions.

Joe Anfuso: I agree. I think everybody understands that people want to learn and, and you want people to understand, right? The more intelligent you make people regarding the subject, the better it is for everybody.  And so I think you, if understand or if you’re with somebody that’s in this business, I can’t see how they wouldn’t want to help you. If you’re eager to learn and you want to learn, right? There’s, there are people that ask questions, so they think that’s what they’re supposed to do and then they never call you again. But if you are, if somebody knows that you are, you’re like a sponge, and you want this information, there’ll be more than happy to help you and get you on your way.

Multifamily Investing, Multi generational Wealth

Hanh D Brown:  That’s great advice. So let’s say if you were considering to partnering with another business or person, what’s some, what are some of the factors would be a deal breaker for you?

Joe Anfuso:  Integrity I think is a, is a big deal for me. [inaudible] I, I will say that I know I went to Catholic grade school, the University of San Diego’s a Catholic college, so I grew up with a lot of, from nuns back in the little days. So, going to school, I, if someone’s integrity is a big deal to me.      So if you’re dealing with somebody who’s, who’s telling you something and you find out that it’s incorrect or maybe a little bit misleading, those are always deal breakers for me. If somebody says, I’ve never lost a property, I’ve never done that and you, because they may be personally didn’t, but they’re mincing words because it was a property they were involved with under a different partnership and, you knew that one back to the bank. And so things like that, I think people’s integrity, you want to do business with people that are up front, they’re straight with you.  , cause either good times or bad you need somebody with that kind of integrity so that you can go forward and make good decisions with people that you can trust.  So I think that’s a that’s a huge deal breaker is, is, somebody is what you’d say has less than a substantial moral compass. You probably shouldn’t be doing business with them.

Hanh D Brown:  Sure, a real person self when going through a tough time.

Joe Anfuso: Absolutely right. I think that is a that is a true statement. And I, and I do think, over the coming years.

Joe Anfuso:  We’re going to see that in people because I would, well I’ve been somewhat a supporter of the theory of declining interest rates and, and I’ve, I’ve always thought they were going to continue to decline. I think there’s, there’s still going to stay low, but we’ve probably hit a secular point where, we went through almost 35 years of going from high-interest rates and, continuing to go lower and lower and lower. And I think that the point of the cycle is over and a lot of problems. And I used to get in trouble for this all the time when I was growing. A lot of problems get solved and the real estate world, by lowering interest, by decreasing interest rates and you can have, you can make mistakes, but if interest rates are going down and people can afford more, a lot of problems get buried that way. And I do think you are better sponsors, and your better investors will show themselves as interest rates probably start to increase rather than decrease. It’s still thought they’ll stay a little bit low. But, if you have a hundred to 200 basis point decrease and that increases interest rates, 50 to 75%, it’s the relative increase that causes the problem.  And so I think you’ll start to see who your real good investors are as these things happen over the next little five and ten years.

Hanh D Brown:  What has been your greatest failure?  And what did you learn from it?

Joe Anfuso:   Early in my career I learned a ton out. I was,  with a, a young development company and I just come out of, I was in one of them, back then one of the big eight CPA firms and got my MBA and went to work for an organization and it was a company that was owned about and was developing about six deals, six apartment buildings and  wasn’t an investment shop and, but we lied wholly on one investor for the majority of its capital. And when times get tough, this was in the late eighties, early nineties, the investor, the main investor just put the hammer down, right. And, and saw an opportunity to squeeze out the sponsor and so forth because of the declining properties. And it was a fairly substantial, a downturn during that time.

Joe Anfuso:   The savings and loan crisis was happening, and there were all kinds of things going on. And, what I learned is that’s kind of where the integrity thing is. I think the company should have probably done a little better due diligence because we found out that that investor had done that before. And certain things. So you realize that you got to diversify. You have to watch your debt and your leverage. I mean that was the other thing, cause back then, banks were giving, you can get 80% loan to value loans and high leverage John Development deals and so forth. And so I’ll kind of, a lot of those things we talked about earlier are what I learned, from the battle scars of, of early in my career where you saw those things happen, that you need to be dealing with good people.   You need to make sure that you watch your leverage, need to make sure you understand your market, the capital and so forth. And so I think there’s, that’s probably one of the big failures that, lesson learned.

Multifamily Investing, Multi generational Wealth

Hanh D Brown:  Do you have a health regimen to keep you living healthy and longer?

Joe Anfuso:  I’ve always been, from the old fishing days and just growing up, I am one of those guys that get up at like four o’clock in the morning. I’m in the gym early in the morning.   I usually do.  I trained for one triathlon a year just to keep myself in shape then, but I’m always doing some kind of exercise regimen that I, it’s just, what, I do first thing in the morning, get it out of the way and I’m a morning person, gets me pumped up, get the office really early, get some work done before everybody gets here and no, I’m ready to go. So I, that’s my regimen.  I’ll play a little golf on the weekends, hanging out with family, do all that kinds of stuff and, it’s always been important to me to, to keep exercise and in your life plan to keep the head clear and, to keep going.

Hanh D Brown:  Yes, exercise has helped my mind to think better, stronger to take on challenges.

Joe Anfuso:   It helps clear all this stuff that happens during the daytime and what’d you think about at night? So, it gives you that chance to it physically exert yourself and, and clear everything up so you can get ready to tackle it the next day’s issues.

Hanh D Brown: That’s true. Very true. So what has real estate allowed you to do for your family’s future?

Joe Anfuso:   I never apologize for being a capitalist, right? And so I think it’s given me the opportunity and I think for your young investors out there, the, it’s a cash flow business and you’re looking to get a return so that you can one, build up a cash flow for the future so that when the day comes.  When I retire, I know how the family, myself and, and the family’s going to be situated and a wealth-building mechanism so that I know that, good times and bad over the rest of my life, that there’s going to be something there to help protect the family and be able to live out my life in a, in a decent fashion. And I think that’s what every investor should have a goal of what they’re trying to accomplish, you should still have your personal goals and, and your philanthropy, the philanthropic goals and where you want to dedicate time. But there, this business is like a lot of venture capital.    It’s, you’re trying to make money and you’re trying to get a return on your money and understand that and w work your goals around that.

Hanh D Brown:  Absolutely. I believe that I think real estate is a key role in creating wealth.

Joe Anfuso:  I couldn’t agree more. I mean, I tell people, even though, I’ve gone to school and, and, and all that kind of stuff, I’ve taught there still some, in a known rich Dad, poor dad, I don’t care if you’ve got a Ph.D., read that book and you’ll get a, just a good understanding of, what real estate can do for yourself on what you should be trying to accomplish. And I think, that’s a good book. And another book I’d recommend your investors out there from a risk standpoint is if you’ve ever read, Black Swan, to leaves the book on risk. And what happens and opportunities, once you get through the how much smarter he is, then you are with that. He kind of writes in the book and start to read the book for events that occur that are never supposed to occur or not going to occur in a lifetime but yet happen all the time. It gives you a really good perspective on risk-taking that I, I tell everybody at, even the young people in our office and so forth, and they asked me what books are read. Those are just two good books from a real estate standpoint, and risk ward standpoint that I think would help out, any of your listeners.

Hanh D Brown:   Great, thank you for your wealth of knowledge and look forward to next time.