How to Vet a Real Estate Sponsor Before Investing in Any Multifamily Deal

Natasha Falconi (00:00)
Many people get very excited about an opportunity because they’re told, the IRR is this and this is going to be an incredible return, but they don’t look behind the current to see who are the people actually managing the opportunity? Who’s running it day to day? Who’s handling it? Who’s really boots on the ground?

Cody Crabb (01:50)
Welcome back to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. Today we’ve got Natasha Falconi with us, owner and operator of Falconi Capital out of Miami, focused on value add multifamily. With over 20 years of experience to the space, she runs a vertically integrated operation. We’re going to get into scaling a real estate business the right way with systems and operations.

and what it actually takes to grow without stuff breaking on the way. So Natasha, thanks so much for joining us today.

Natasha Falconi (02:18)
Thank you for inviting me, Cody. This is looking forward to our conversation.

Cody Crabb (02:22)
Same here, same here. So if you could give us a quick little intro, how did you become ⁓ involved in real estate? how did you get involved in this world?

Natasha Falconi (02:31)
That’s actually a great way to pose the question because I had no idea that people owned real estate when I was young, which just doesn’t make any sense. It never crossed my mind. ⁓ I started in accounting. I was a CPA and I was placed in the real estate tax department. This is how I figured out that people owned real estate, all sorts of real estate. Fast forward, I developed my career in the private industry, working for a developer owner.

Cody Crabb (02:40)
haha

Natasha Falconi (03:01)
And in 2019, I decided to work on my own and start my own firm. And so that’s when I developed Falconi Capital and started investing in multifamily properties in South Florida and at Value Add. So adding value to the assets that we own, which I’m sure we’ll get into. But going back to my experience, all of that that I just mentioned really honed in my skill set to be able to do what I

decided to do when I started my firm.

Cody Crabb (03:35)
Yeah, so give me a little bit of background on the day-to-day of Falconi Capital. What do you do for people? Who’s the main clientele that you typically work with and where do you operate in the United States?

Natasha Falconi (03:48)
Well, it just, you know, it depends what aspect of the business we’re dealing with. So I’m in Miami, I’m in the Miami area, which is the South Florida, South Florida, but Miami specifically. And I invest in specific pockets within this market. And who are our clients? Our clients are now if we’re talking about investors are

high net worth individuals which love their jobs, love what they do for a living, but want to get involved investing in real estate, which I believe everyone should be involved, everyone should be investing in real estate. And so those are our partners are mostly that, those that want to be in the game, but don’t want to do the day to day. That is really what our focus is.

Cody Crabb (04:36)
Yeah, that definitely perked up some ears in the listeners, because I feel like that’s a lot of people are like, well, sure, I have some money, but I don’t want to be a landlord. There’s so many things that go along with that. So you mentioned value add. Can you kind of walk me through what types of value add do you bring to the table for your clients?

Natasha Falconi (05:46)
Well, so I look at properties that are underperforming. what that means is potentially a long-term holder, someone that’s owned a property a very long time, they haven’t really raised rents or haven’t invested in capital improvements or modernizing the units. So we’ll come in and we will invest in the property. We’ll invest in the beautification. We’ll invest in anything that

that the property and the units will need. And we enhance it. So we elevate the asset, so we improve it for the residents that are there. And the way it interestingly has worked out for us on many occasions, now every asset is different, so the strategy is different for every property. But many times, the one thing that we see is when we start re-develop, re-changing the assets, the units, should say, excuse me, the units on the inside.

in a vacancy, a resident will say, I want to move over there. I will say, of course, here’s a new rent, please move over because they start seeing how we take care of our properties and the love that we give to the asset. And then they end up staying. So if for those of you that are familiar with Tetris, that’s kind of what we start doing. We start like we move someone over and then we fix the next unit and then someone else wants to move. And that’s kind of how how we’re able to keep the residents in the community.

but still elevating the property.

Cody Crabb (07:18)
Yeah, think when you talk ⁓ about elevating the space, when I’ve talked to people ⁓ that are involved with doing something like that, oftentimes they see a ripple effect as well with not just that property but nearby properties as well. So ⁓ that Tetris analogy especially is really good too when you’re doing that repositioning. What are you spending per…

per unit and what kind of rent increase are you kind of looking for on the backend?

Natasha Falconi (07:50)
It’s not a standard, so it varies because some landlords have believed in renovating bathrooms and then they don’t do the kitchens or vice versa. So there’s not like one standard that I can tell you, we spend X. It just depends. we invest always on the outside. We paint, we invest in landscaping. So asset by asset, it changes.

Our main goal is to make sure that when residents are showing up at the property, they feel like they’re home, meaning we fix up the landscaping, we make sure it looks nice. And then we go on the inside and we make sure that their cabinets are nice, that their bathrooms are working, that we make sure everything’s crowded, that everything is proper, that the doors are not falling off, that it’s a place where if you would walk in, you would comfortably live there too. That’s the goal.

Cody Crabb (08:46)
So when you’re deciding kind of where to spend in a house or in a property, ⁓ know, kitchen versus bathroom versus exterior, like what is the highest ROI that you’ve seen in this kind of situation? Because I mean, none of those are all, they’re not all created equal. We all know that. But I’m curious if you’ve seen like a big return on investment on a particular thing.

Natasha Falconi (09:10)
I think there’s a definite return on elevating the exterior space because you will attract a great resident that wants to be somewhere where it matters to them what their property where their where their residence looks like. So that’s that’s one thing that I believe is is a great return on investment. And then on the interior I believe it’s again it’s case by case. Why do I believe I think that

⁓ kitchens should be nice. That’s where many families spend their time. So nice functioning, functional ⁓ kitchens where, you know, they can feel good about where they’re cooking and where they’re spending time and etc. So if I were to, if you would ask me to pick one, that’s what I would say I would spend. But truly, I think the whole apartment should get some, should receive some love.

so that it’s something that has ⁓ just looks and feels good when the resident is coming in.

Cody Crabb (10:49)
What is it that you’ve seen in the market recently ⁓ that you think maybe not everybody is aware of because of your position?

Natasha Falconi (11:00)
What have I seen recently that not everyone is aware of?

Cody Crabb (11:05)
I know that’s a very specific question.

Natasha Falconi (11:06)
That’s a very, yeah, I don’t know if there’s not a lot of people that are aware of, but I would say that something that is happening is that there is a generational shift going on right now. So there are many properties that are legacy-owned properties that the next generation is now inheriting. And I believe that many of them are not interested in.

being in the real estate business because most of the time those legacy owners are active operators. So what I am seeing is that there’s many that want to, what is it, divest themselves of the properties. Now, that doesn’t mean that it comes at a discount or that it comes at a deal, but I believe that we’re seeing some more of

Cody Crabb (11:39)
Mm-hmm.

Gotcha. Yeah, and it’s interesting that you bring that up because I was just talking to someone about the silver tsunami as well ⁓ and about how that’s going to be like, that’s going to greatly affect the market. But also I don’t think that enough has been said about the silver tsunami of investing. Like you said, I think a lot of people are going to be cashing out and they’re going to be kind of, it’s going to be a

Natasha Falconi (12:09)
Mm-hmm.

Cody Crabb (12:25)
different market because there’s a massive generation that’s investing right now that is about to not be investing as much anymore. yeah, that’s huge.

so you’ve built what you call a pretty lean but effective operation. You know, as you started scaling first, like what did you see, how did that happen? What was that process like?

Natasha Falconi (12:47)
at first it was all me because like any business, you start off and you start at zero and you basically start building and you start building on your own and you’re the one showing up every day at the property and you’re the one managing everything that’s going on. And even though I am still very hands on, at first I was doing everything. I was doing the administrative, I was doing the leasing, I was doing all of it.

As we grew, then I brought on a team member to help me day to day because I wanted to make sure that the service that we were providing was maintained. And then I brought in an operations person that helps me administrate day to day so that we respond quickly to our residents. So slowly, as we have built, I have increased the team. And so I would say, if there’s anyone building a team out there, you’re going to know where your

If you’re spending most of your time on day-to-day operations and not growing your business, that’s a sign where you should start opening up and developing your team. And that’s where you should start, even if it’s just with a, you start with your executive assistant or your administrator so that you have time to go out and continue growing the business.

Cody Crabb (13:53)
When you’re not, yeah.

Yeah, think that’s the best advice I’ve heard about this is something along the lines of if you’re not actively able to grow your business because of how busy you are, that means you’re too busy. So yeah.

Natasha Falconi (14:15)
Right. You need to be,

what is it? You need to be on the business, not in the business in order to scale.

Cody Crabb (14:21)
Yes, that’s so true, that’s so true. ⁓ So you work with a lot of high net worth individuals, I’m assuming. What did they constantly misunderstand about real estate? Because I feel like sometimes these ultra high net worth people are just, maybe sometimes they live in a different universe. I would just be curious to know, have you run into something that is a misunderstanding about the market or the industry?

Natasha Falconi (14:49)
I think as a sponsor of real estate opportunities, it’s your responsibility, I find it is my responsibility, to make sure that everything is explained in detail, that your mission is explained, that everything, how your values are explained, everything that you’re expecting to do with the portfolio is explained, to make sure that they’re aligned with you, because everybody has their own opinion and different things matter to different people.

Some people are more interested in immediate cash flow. Others understand the value of equity growth. Some like both. So it is, I believe, the responsibility of the sponsor to make sure that they are very clear, that you need to be very clear, you need to be very direct, and you need to know that not everyone will agree with what you’re doing, not because it’s wrong, but it’s just not where they are in their journey at that time.

So if there would ever be a misunderstanding, which fortunately has not happened to me, I would take full responsibility for something like that because I believe it’s the sponsor’s responsibility to make sure they’re fully transparent on everything that’s going on in the deal.

Cody Crabb (16:45)
with all this experience, what’s something that you would tell somebody to avoid early in this process that you see people get wrong or that they maybe misunderstand?

Natasha Falconi (16:58)
As far as avoiding, I would say instead of telling them to avoid something, I would tell them to make sure that they deep dive into something. And what I mean by that is I believe that even good deals could go bad, but most importantly, you should know the sponsor. You should know the person running the deal. You should know the person that is the direct operator of the opportunity.

and really understand them because if you have that baseline, then everything else will also come together.

Many people get very excited about an opportunity because they’re told, the IRR is this and this is going to be an incredible return, but they don’t look behind the current to see who are the people actually managing the opportunity? Who’s running it day to day? Who’s handling it? Who’s really boots on the ground?

⁓

actually looking at the opportunity and making sure that the the asset is performing as it’s supposed to. I think that’s what you really should focus on rather than avoiding go all in.

Cody Crabb (18:08)
So just as a follow up to that, if someone’s trying to evaluate ⁓ somebody and kind of see if they vet them in a little bit, what would you say would be a couple things to look for before they invest?

Natasha Falconi (18:22)
I would say what opportunities have they already ⁓ invested in? I would say are they investing their own funds in the deal?

because the sponsor should have skin in the game too. So.

Cody Crabb (18:40)
little bit like drinking

drinking out of your cup to prove it’s not poisoned it’s like you know yeah yeah yeah and then it’s like well if you would get poisoned too then you wouldn’t have done that so okay that’s a good sign yeah

Natasha Falconi (18:44)
Yeah, you’re right.

So we were all in, everyone’s

all in together. So I would say that as well. I think those are two really important points, like really knowing and then feeling, you need to really feel comfortable asking questions and make sure sponsors are returning calls and know that you can ask as much as you need to to feel good about a deal.

Cody Crabb (19:13)
This has all been really great. I really appreciate all of this. ⁓ So if people want to reach out to you, they want to learn more about what you’re doing or maybe even work with you, where do they need to live? What kind of person do they need to be and how do they connect with you?

Natasha Falconi (19:30)
Well, they can live anywhere in the country. ⁓ Anywhere is fine because it’s very easy to communicate. ⁓ Anyone can find me on Instagram. I’m very active on Instagram. My handle’s @Nat Falconi. And actually, I have something for your listeners. I have this five-step document which could help you ⁓ decide if multifamily is an investment vehicle for you. And I’d be happy to share that with your listeners. ⁓

Cody Crabb (19:45)
yeah?

Awesome, cool. Yeah, I’ll make sure we have a link to that in the show notes or you can reach out to Natasha directly. But yeah, thank you so much. I’ll make sure we include that. ⁓ It’s been a real pleasure. I really appreciate ⁓ you coming on the show today and listeners. I appreciate you too. Thanks so much for listening today. And if you got something out of today’s episode, please like, subscribe, comment, do all the things and make sure you follow the podcast so you don’t miss more awesome conversations with people like Natasha. Once again, we really appreciate your time. Thanks so much for coming on the show today.