Shownotes
BIO: August Biniaz is the Co-founder and Chief Investment Officer of CPI Capital. CPI Capital is a real estate private equity firm with the mandate to acquire multifamily assets while partnering with passive investors as limited partners.
STORY: Upon looking back and reflecting on the worst investment decision August has ever made, he says it’s his time, shiny object syndrome, getting excited about new investment ideas, and then putting a lot of time into learning about those ideas and losing that time.
LEARNING: Don’t be a jack of all trades and a master of none. Focus on your primary business. Stay in your lane.
“Being focused is probably the greatest asset anyone could have when it comes to success in business or otherwise.”
August Biniaz
Guest profile
August Biniaz is the Co-founder and Chief Investment Officer of CPI Capital. CPI Capital is a real estate private equity firm with the mandate to acquire multifamily assets while partnering with passive investors as limited partners. August was instrumental in the closing of over $208 million of multifamily assets since inception.
August educates real estate investors through webinars, YouTube shows, weekly newsletters, and one-on-one coaching. He is the host of Real Estate Investing Demystified PodCast.
Worst investment ever
Upon looking back and reflecting on the worst investment decision August has ever made, he says it’s his time, shiny object syndrome, getting excited about new investment ideas, and then putting a lot of time into learning about those ideas and losing that time.
In one incident, when crypto came around, August got involved in the crypto world, trying to connect with investors, creating businesses within the crypto world, and putting his brainpower and time into learning about this new asset class. However, August went down a rabbit hole that took him away from his main focus.
In another incident, an asset class came across his desk. This was the build-to-rent single-family rentals or BTRSFR. After the great financial crisis in 2008, single-family homes in the US were selling for pennies on the dollar. Wall Street got involved, knowing that the market would eventually turn around, and started buying portfolios of single-family homes. However, as they managed these properties, they realized they were handled similarly to multifamily ones. So, they created this new asset class: build to rent single-family rentals.
August brought this idea to investors in his database and invested in a development project. It was a former purchase contract in which August partnered with a developer. This deal created some difficulties for his investors, partners, and himself. He never closed on that deal. This deal diverted August’s focus from his main business, and he lost opportunities there.
Lessons learned
- Being a specialist is very important if you’re dealing with investors and have partners. Don’t be a jack of all trades and a master of none.
- Focus on your primary business.
- Stay in your lane.
- Have tunnel vision in the business that you’re part of
- Understand what’s happening in macro, economic, and political situations.
Andrew’s takeaways
When things aren’t working well, it’s apparent that you may need to find something else or double down on your efforts to fix them.
Actionable advice
If you’re in the process of building a business or you already own a great business, don’t put your attention and focus into something that’s totally outside of your sandbox. Instead, try to focus on that business you’re already building.
August’s recommendations
August recommends listening to the My Worst Investment Podcast, learning how entrepreneurship, startups, investing, and other asset classes work, watching YouTube shows, and reading books. He is happy to provide 30 minutes of his time if you quote the My Worst Investment Podcast.
No.1 goal for the next 12 months
August’s number one goal for the next 12 months is to hit his target of two deals in 2024. On the personal side, he’s moving to the US and setting up a base in Florida.
Parting words
“If you’re looking for risk-averse advice, talk to your parents. They’re always risk averse. And anytime you’re looking for risky advice, talk to your drunk friend.”
August Biniaz
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Connect with August Biniaz
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- The Become a Better Investor Community
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- FVMR Investing: Quantamental Investing Across the World
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points
- Achieve Your Goals
Connect with Andrew Stotz:
Transcripts
Andrew Stotz:
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to win in investing, you must take risks but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives. And I want to thank you for joining that mission today. Fellow risk takers this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guest, Auguste Benitez as August. Are you ready to join the mission?
August Biniaz:
Absolutely. And you know, before the show, Andrew tells talking to me about his radio voice and it's definitely the truth because the voice that he was talking to me before the show in his current voice are totally different. So
Andrew Stotz:
it's a little different. Well, you got to bring something unique to the show. Well, let me introduce you to the audience. Audience. Audience listen up. Auguste is the co founder and chief investment officer of CBI capital. CBI capital is a real estate private equity firm with his mandate to acquire multifamily assets while partnering with passive investors as limited partners. AUG was instrumental in the closing of over $208 million of multifamily assets since inception. AUG educates real estate investors through webinars, YouTube shows weekly newsletters and one on one coaching. And ladies and gentlemen, he is the host of the real estate, investing demystified podcast, August, let me ask you to share what unique value you are bringing to this wonderful world.
August Biniaz:
Oh, wow, what a question What a question to this world. I mean, that's such an important question is another question of, you know, basically are what do we live for, I mean, the spectrum of being able to change the world and being a nihilist, there's a such a spectrum. What I personally, what are my personal talents is really problem solving, being creative. I've recently became a father, my son, Atlas is five months old. So I see what I'm building in him being my contribution to the world. But as well as also, you know, again, in business, there's a lot of prob problem solving building businesses. That's something that excites me, I used to build on single family homes. So every time a home was complete, I felt I contributed to the world. So it's a big question. It was a big question, Andrew, I covered a bit of it.
Andrew Stotz:
Yeah. I mean, what I like about that question is that tries to focus in on kind of what is unique? And I think that, you know, we all have a lot of things in common. But there's something unique to all of us that, you know, comes together. And for the listeners and viewers out there. What about yourself? What's the unique value that you are bringing to this wonderful world? Once you crack that code, and you really figure that out, then I think you really can find happiness, you can find the work that you love. And I highly recommend everybody think about what is your unique value. I know, for me, one of my uniquenesses is the idea of simplifying complex material. I've been teaching finance since 1992. So we're talking 32 years, and I've worked as an analyst all my life. And the result of that is I can really simplify complex material. And that is a value, particularly because I teach a lot. Why don't you tell us a little bit about the business that you're doing and kind of what's unique about your business? And you know, so we understand a little bit more about what you're doing? And then after that, and tell us about the podcasts and you know what you're doing there?
August Biniaz:
Of course, no, I appreciate that. Just quickly touch on what you just touched on. As far as simplifying things, chat. GPT AI is very helpful with that if you're struggling with a complex, you know, concept put into chat up and said, Hey, explain it to a 10 year old or a 15 year old I do that often. I manage a real estate private equity firm, but I still do that a time. So that should be a great tool, but I totally live. Yeah, I mean, I'm the Chief Investment Officer and a co founder of a firm called CPI capital is a real estate private equity firm focused on multifamily value add. And what that really means value add means that we buy already existing multifamily properties with a need for some level of upgrades. We go in there due to renovations, increase the net operating income and then exit these assets. Private equity side of it is we partner with investors to raise the equity needed for the project. I've been in real estate for the last 20 years in some aspect or other as a real estate agent as a builder as a general contractor as a developer, but real estate private equity is very exciting, a lot of moving parts and I have not been closely bored of it yet. So it's a difficult nut to crack and Have you got a follow up question there?
Andrew Stotz:
Well, let me ask you this before we go into that. For people who don't understand any of this stuff, what's a multifamily asset? Is that mainly a apartment building? Or is that a house that subdivided or how does that work?
August Biniaz:
Yeah, I mean, multifamily is any residential is structured as four units or above that's considered multifamily. But when you talk about institutional multifamily type of investments, where you bring on, you syndicate these deals, or you put together a fund and raise a bunch of money to go out and buy these assets, the business model doesn't really work on smaller, you know, four units, or 10 units or 20 units, there's got to be 100 plus units, or that economies of scale exist in that you can bring in a third party property manager for a nominal fee relatively. And it can obviously make sense to put these deals together and raise money from investors, a lot of largest institutions, including Blackstone have a huge allocation to these types of properties.
Andrew Stotz:
Okay, so we're talking about kind of apartment buildings that are relatively big, over 100 100 units. And when you actually buy that, who is the seller,
August Biniaz:
the sellers is very diverse, you have a baby boomer generation, that's retiring a lot. Some of those sellers are coming from people that have owned the properties for a long time, some of them have actually developed to build the properties themselves, many decades ago, a lot of institutions a lot of funds, a lot of family offices, is very diverse background as far as who owns these properties. Majority of multifamily properties in the US are owned by quote unquote, mom and pops. But that also includes a four unit 200 unit mark as well. So but they're still owned by your everyday kind of average owner, not institutions, not funds and what have
Andrew Stotz:
you. And when you're looking at let's just talk about the overall market for a moment. And you know, I talk in one of my courses I teach called valuation masterclass, we value companies. And what we can see with companies is it you know, you can, you can get close to a estimate of value, let's say that our estimate of value is 100. And let's say we say, well, it could be 120. And it could be 80. But look, we're gonna pick a number 100. Well, in the stock market, sometimes that $100 asset can trade at $200, or $50. And I'm just and the value of that asset doesn't change that much. Unless something very significant happens to that company an acquisition or they really have a big failure. But over because you're talking about generating revenue and income for a lifetime, then it's really hard for that asset value to change dramatically. So my question to you is, and I would assume that real estate assets value doesn't change that dramatically. I mean, you can, you can invest in fix it up. But that doesn't necessarily change the dynamic because you've paid a certain amount, and then you've put in a certain amount, and that amount that you put in affects the value, and so that you're putting money up front to get a little bit more money in the future. So in some ways, it's a little bit of a trade off. But I'm just curious, where are things now? Are you able to buy properties at below or above the value on average in the market?
August Biniaz:
They're just to briefly answer your question. So currently, where we're at at the market, real estate is cyclical, it goes through these cycles. And as I'm sure you're aware, real estate goes through recession, recovery, expansion and hyper supply. We are currently in my opinion, you know, between hyper supply and recession, we might not hit recession. So when the COVID hit, and there was quantitative easing, by the Fed and by central banks, the reduction of interest rates, that basically money was free, you're borrowing at 3%, inflation is at 9%. So you're getting paid to borrow money. And there was a huge influx of money coming into the real estate market, particularly multifamily that pushed up the prices that compressed the cap rates, and the prices went through the roof, people are making aggressive assumptions. And all of that has come to an end a lot of distress in the multifamily and particularly also office space. That has resulted as the change and the Fed increasing rates to fight inflation. So currently, we're in a very difficult spot for commercial real estate. And but now we're at we believe we're at somewhat of the tail end of that spot is that Goldilocks moment for groups like us to get in opportunistic investors to get in and buy deals, the current deal we have under contract we wrote an offer on this deal a year ago, and we're purchasing it at the 30% discount to the price that we offered ourselves a year ago on the deal. And that's because of the expansion in cap rates. That's because of the rents being either flat or decreasing. That's because of some distress in the market as some groups having to sell is because the interest rates have gone up. So that's where we are. But I think you also discuss touched on difference between buying businesses and buying real estate. Historically real estate is assessed its value differently than buying a business because you have future projections you Tesla wasn't making money for, what was it 10 years, but it was trading more than most other car companies. But it wasn't even in profits. But so you're paying for that future value. But that aside, real estate is valued from the comparable approach single family and what have you, multifamily in particular, is is valued on the cap rate approach, the income approach, what is the income is producing, what's his net operating income, which is similar to EBITDA in the business world, and then that gets divided by the cap rate, and it gives you what the property value is. So currently, those cap rates are being expanded. So the property values are coming down. That's what really affects it. And that's what's the difference between buying a business and buying real estate, particularly with commercial real estate?
Andrew Stotz:
Okay, I think, I think that's good for now. And I have an idea that we're gonna probably talk a little bit more about that as we get through the story and the likes. But now it's time to share your worst investment ever. And since no one goes into their worst investment, thinking it will be. Tell us a bit about the circumstances leading up to it, and then tell us your story.
August Biniaz:
What an incredible question. I mean, when you have a guy, a real estate guy like me, and who's managing a fund a real estate investment firm, you expect the answer to be some real estate deal that I did that went sideways. But that's not going to be my answer, my answer to this question is going to be, I look back and reflect on it on what was the worst investment decision I've ever made. And I would say it's, it's my time, it's shiny object syndrome is getting excited about some new investment ideas, some some new, you know, deal or be in real estate or other asset classes, and then going in putting a lot of time learning about the new asset class learning about the new business, and really losing that time and not never being able to get it back. Now, obviously, there's a learning curve there that always helps. But being focused is probably the greatest asset anyone could have, as far as success in business or otherwise. So what is
Andrew Stotz:
what is the site what is a shiny object as an example that got you distracted? And it turned out being really a waste of time?
August Biniaz:
I'll talk about outside of real estate and invest in real estate. So I'll send a real estate I would say crypto crypto came around and being an entrepreneur or entrepreneur and being a investor and being keen to be involved. I didn't want to just buy some bitcoin and leave it there on the side. I mean, Mark Cuban has a great advice, hey, crypto 1% of your net worth put into crypto Buy Bitcoin, put it on the side, nothing else. So it's very reasonable advice. With me, I wanted to be involved. So I would got involved into the crypto world trying to connect with others trying to create businesses within the crypto world and not just buying some bitcoin leaving on the side I did I did I did well with crypto so but that that brainpower that time that was spent me learning about a new asset class and going down rabbit holes and having these new connections and having these WhatsApp groups that I was part of and it was, it took away from my main focus within the real estate space, I would say it was an asset class that came across my desk. It's called bill to rent or BTR SFR, post 2008. After the great financial crisis, single family homes in the US were selling for pennies on the dollar and Wall Street got involved knowing that the market would eventually turn around and start buying swats of single family homes portfolio, so these were scattered single family homes, and they knew they had to just sit on it. But as they were managing these properties, they realized that they manage very similarly to multifamily. So they actually created this new asset class, which is built to rent single family rentals, and they actually started building these, and then the market shifted, it no longer made sense. But BTR SFR was something that came across my desk a couple of years ago was a deal. But it was to our investors to our database who understood multifamily work very well got that invested in our market family deals before when I brought in this new deal, which was not built yet. It was a development project. It was a former purchase contract that we were partnering with a developer, it created some difficulties for myself, for our investors, for our for my partners, and we never ended up closing on that deal. But that opportunity cost that was lost in this somewhat of a new asset class was I learned a lot but again, focus is probably the most important thing in business.
Andrew Stotz:
Yeah. So let's, if you can, let's review the lessons that you learned from these two experiences.
August Biniaz:
Review the lessons My goodness, lessons is be you know, in business, particularly if you're dealing with investors and you have partners is very important to be a specialist. You don't want to be you know, what does that adage that goes that saying was it Master of None, I don't know, the first part is, yeah, it's a jack of all trades master.
Andrew Stotz:
That's it. Yeah. So
August Biniaz:
so you can't do that if you're dealing with investors, you need to be a specialist in your space, you need to live it, you need to breathe it, you need to be consumed by it. So that's my advice for any business you want to be in, it doesn't matter what it is. So the lesson is focus, the lesson is staying in your lane, the lesson is being have tunnel vision in the business that you're part of also understand what's happening in macro, economic, you know, political situations, and what have you under having an understanding of what's going on in the world, but also being focused on your, your own lane.
Andrew Stotz:
You know, there's a couple of things that I would say, I'm thinking about as you talk about this, that it raises for everybody. And that is, you know, usually the shiny object syndrome only happens at two points in your business career, when you're making money, or when you're losing money. In other words, when you're making a lot of money, which means basically all the time. So when you're making a lot of money, like I got this money, I'm gonna, you know, expand, and I'm gonna do this or that, or let's try something different. And when you're losing money, like the thing that I'm doing doesn't work, I gotta find something else. And so you go look for another shiny object. And I can think about it for myself that I've been distracted like that, when I got really excited about something, and it didn't deliver anything close to what I thought it was going to deliver. And I'm sure for the listeners and viewers out there, you're in the same situation. And what I want to talk about briefly is trying to understand, you know, what we can do? So, you know, to deal with this, for instance, it's when things aren't working well, it's very obvious that you may need to find something else. Or you may need to double down on what you're doing and get it right. And making that, you know, distinction is hard, besides the fact that the shiny light is, you know, blinking over there. And the grass is always greener on the other side. So what I want to do is ask you the next question, I want to think about a young man or woman right now, who is they're, they're either in making great money, and they see a shiny object, or they're losing money in their idea right now, and they see a shiny object, based on what you learned from this story and what you continue to learn what one action would you recommend that they take to avoid suffering the same fate.
August Biniaz:
There's one more group that also includes in this as well as that group that's eager to make money and has fear of missing out and sees, you know, riches being made in different businesses as well that people want to get involved. It really depends on where you're at in your life. If you're in a situation where you are looking to change the space, you're in the business, you're in, first going from a W two or a job and you're looking to get involved in business, it's fine, it's totally fine to explore and try different ideas. If you are an investor, and you're looking to diversify, and invest in different ideas, and you have some money set aside to a risk and diversify, that's totally fine. But if you're not, if you're in the process of building a business, or you already own a great business, to then put your attention and focus into something that's totally outside of the box outside of your sandbox, and try to focus on that, so then your intention and focus is going to go there, that wouldn't be fair to yourself or to your business.
Andrew Stotz:
Yeah, I think that's one of the things that it made me think about is one of the things that helps me get away from shiny object syndrome is that I no longer make decisions on my own. I have business partners, they are, you know, they have a right to my time, because they've invested with me. And they have a right to understand and think about and share their thoughts on where is the right allocation of my time. And so that's something that's helped me over the years. There was a story that I had with one of my prior guests. That happened, right, right about when I started the podcast. And he was in Cambodia. And he saw that there was an opportunity to sell wine in Cambodia. And so he immediately set up a business. And he started going through the process of figuring out how the hell he's going to import wine into Cambodia, and how he's going to store that one and how he's going to distribute that and build out his sales team and all that. And in the end, you know, it was such a mess that he ended up failing and the business failed. And I asked him, what was his lesson and he said, if you've got an idea of something to do, like selling wine, start selling. Don't set up the business. There were other wine distributors. There was wine in Cambodia at the time. I could have bought a pallet of that wine and started trying to sell it and see if it would work. And that's, you know, lean startup type of thing where you bring your product and service out to the market. So right now I'm starting a news, it could be a shiny object, or it could be a really good way of getting people into my world. And that is I'm starting a series called in three hours. And I'm talking about different topics where I'm trying to solve one problem in three hours with a live event. So value your company in three hours benchmark your company, your financial performance in three hours. And I have the tools to do that very in an accelerated way. It's simplified, but it's, it's, it's, it does solve that problem. And so now I put those out on Facebook ads and other ads and see which one people are clicking on. So that I can kind of gauge Okay, where should we start. And that's a great example of I'm not, and I'm not even next thing I'm going to do is say, put down $100 Down payment for the next one, or that type of thing, to try to judge where people are really, really willing to put their money down to get something. So that was kind of a lesson that I learned over time. And any thoughts on that or any advice? Yeah,
August Biniaz:
no, absolutely. I mean, you talked about your friend who was looking to start a business, there's a spectrum with people in business, you have this serial entrepreneurs, we're always doing a different business. And we all have friends or associates, or we know of someone who does that, you know, COVID comes around, and now they're selling PPE. And, you know, something happens later, they're starting a different business. They're serial entrepreneurs. That's just who they are. They're continuously be building other business. And then you got on the other side of the spectrum, or analysis, paralysis, people who are keep looking at business to have great ideas, but they just never take that step. So finding that middle ground, depending on your own characteristics, your own, you know, advantages that you have, is a perfect place to be it's, you know, not not going crazy, like a serial entrepreneur and not just sitting back and not getting involved in it not taking that first step. Yeah.
Andrew Stotz:
All right. So what's a resource that you'd recommend for our listeners?
August Biniaz:
Resource? Ooh, I mean, there's podcasts here, I've watched a few episodes, I was listening to you at one and a half to 2x. So I was through a few of those. So definitely, it's diverse, your guests profiles are very diverse. So really enjoyed it, I definitely recommend it. I will also promote this show when it does go live soon as well. I mean, being this being a student of business, being a student of whatever business you're in, is very important. You know, investing some time into learning about how business works, how startup works, how investing works, how whatever that asset classes that you're involved in being be in real estate or other you know, other aside from podcasts, YouTube shows, great great books out there. I mean, Rich Dad, Poor Dad, richest man in Babylon. traction, these are all great books, great fundamental books, you can watch the you know, the summary of these books on YouTube that, you know, is a 15 minute summary of the book that teaches you a lot as well. Those are great resources, personal resource. I mean, if you, if you've heard me on this show, and you send me an email after the show, as far as being a resource, I'm happy to provide you with 30 minutes of my time, but you got to quote the show. You got to get in contact with me and I'll provide you 30 minutes of my brainpower, or whatever need or advice you need. That's pretty much it real estate investing demystified, our podcast checkup, check that out, we're going to have Andrew on our show pretty shortly here as well. So I'm gonna check it out.
Andrew Stotz:
Looking forward to it. All right. Last question. What's your number one goal for the next 12 months?
August Biniaz:
Number one goal, we currently have a deal under contract to deal in, in, in, in Florida in the Tampa MSA, St. Petersburg, beautiful city. I spend two weeks there recently and got to know about the city a lot of development going on there as a multifamily value add deal. We're going to be closing on that over the next few a couple of months here. The goal is for us to close on another deal this year. So it hits our target of two deals in 2024. That's on the that's on the business side and personal side, I'm in the process of making a move to the US have already kind of started a process purchase the property there and my son was born there in Florida, five months ago. So it's on the personal movies making Florida my bass. That's an on personal level, really. And other than that is really being active, going to the gym, eating healthy. All
Andrew Stotz:
that good stuff. Excellent. Well, listeners, there you have it another story of loss to keep you winning. Remember, I'm on a mission to help 1 million people reduce risk in their lives. And as we conclude August, I want to thank you again for joining our mission and on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?
August Biniaz:
You know what if you're looking for risk averse advice, talk to your parents. They're always risk averse. They'll give you the best risk of advice. And anytime you're looking for, you know more of a risky advice talk to your dad One friend
Andrew Stotz:
and that's a wrap on another great story to help us create, grow and protect our wealth fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast host Andrew Stotz saying I'll see you on the upside.