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Show Summary
In this episode of the Real Estate Pros podcast, host Michelle Kesil interviews David Giovanniello, a seasoned real estate investor with 28 years of experience in multifamily units. David shares insights into his investment strategies, focusing on small multifamily properties, and discusses how he finds opportunities, finances deals, and adds value to his investments. He emphasizes the importance of treating tenants well and structuring deals creatively. David also offers advice for new investors and expresses his desire to give back by coaching the next generation of real estate investors.
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Investor Fuel Show Transcript:
David Giovanniello (00:00)
Yeah, so that number one thing I would say is that anybody can do this. You don’t need to have money. You don’t need to be super educated. It really just takes hard work and hustle ⁓ and making connections. So you can do this. is in most real estate investors came from modest beginnings, start small and grow from there. And you’re going to learn as you go. You can’t know everything. You sometimes you just have to jump, jump at it, find a good deal and justTake the plunge.
Michelle Kesil (02:02)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, David Giovanniello who is a real estate investor, primarily focusing on multifamily units for the past 28 years. So excited to have you here today, David.David Giovanniello (02:25)
Yes, excited to be here. Thanks for having me.Michelle Kesil (02:29)
I think our listeners are going to take something away from how you’re approaching finding deals and good opportunities. So we can dive in.David Giovanniello (02:39)
Sounds good to me.Michelle Kesil (02:41)
First off, for those who are not familiar with you and your work, can you share what your main focus is?David Giovanniello (02:47)
So my main focus now is small multifamily where I can find opportunities to add value. So I stay in markets that the large pension funds, banks, REITs, they stay away from. Usually 30 units or under in the residential multifamily. And I look for opportunities where I can add value, not just by renovating, by proper management or finding ways to improve the way the business is operating.Michelle Kesil (03:18)
Awesome. And what markets are you operating in?David Giovanniello (03:21)
So primarily I’m in London, Ontario, Canada. I do have a building in St. Thomas, which is a small market just outside of London. And then I do have a small Airbnb property in Costa Rica that has got me testing the international waters as well.Michelle Kesil (03:38)
Awesome. How did you get started as an investor?David Giovanniello (03:42)
Yeah, so I got started when I was young. So I had got my first full time job and I thought there’s no better way than to buy a house and rent out the other unit. Nowadays they call that house hacking. So I bought a duplex. I lived in the upper one bedroom apartment and I rented out the lower that allowed me to live for free and be able to save some money to buy a second, which that second property was a student rental. And from there I’ve learned different ways and I’ve fallen into the model of multifamilies. What I prefer.today, but I still have that duplex now, which was now 28 years ago.
Michelle Kesil (04:19)
Amazing. And now you’re mostly doing multifamily. Can you expand on some of the type of investment strategies that you currently dive into?David Giovanniello (04:30)
Yeah, so I started with the duplexes, the smaller multifamily, and then I grew after that point, I got a fourplex, sixplex. And then from there, I learned how to scale the business. And so I would buy what I would call buying smart, buy well-located properties in that market where the REITs and pension funds and banks and insurance companies are staying away from. And so the big players aren’t playing in the sandbox so I can compete a little better. In this situation, I find…seller financing a lot of time or I’m able to use other people’s money because there’s less competition, more mom and pop sellers.
So I’ll buy smart, use other people’s money to purchase the property. And then the goal is long term. Man, when I mean long term, mean forever. My plan is not to sell these properties. It is to refinance to buy more and eventually hand off to my children. And then I add value. so
In multifamily, the beautiful part about adding value is it’s not just about renovating the property. If I can increase the net operating income, I can increase the property. So I have a building right now in St. Thomas that I have a sign that’s going on the side of the building. A company’s renting the building side of the building from me and they’re paying me $1,000. So at a conservative five or 6 % cap rate, I’m going to get $200,000 in added value just from that sign.
So I look for opportunities like that to add value, increase the net operating income, and then at that point refinance and then look for my next opportunity.
Michelle Kesil (06:54)
Awesome. What are some of the main keys that have made the biggest difference in allowing your business to be able to grow and run smoothly?David Giovanniello (07:05)
Yeah, so for me, has been to find good partners that allow me to operate the business and finding properties that have the ability that are being under managed or not managed properly. being able to buy these under market value, increase the value, this has really allowed me to grow and get ahead in this business. And I also do it in a way thatYou know, there’s a lot of young hustlers out there that would work the same way. I just don’t give up. I find a property and this not even for sale. I just see a for rent sign. I bought one of my favorite properties from a for rent sign. That was an old school just for rent with a handwritten phone number on it. I called that man for six months straight wanting to buy his property. He didn’t want to sell, but he was older. I could tell he wanted to retire and I was able to find an opportunity by nonstop.
Just not harassing, but hustling to the point where he was ready to sell. I was the first person he talked to with no competition.
Michelle Kesil (08:14)
Yeah, amazing. And how are you currently finding the best opportunities for properties? Is there a specific way?David Giovanniello (08:23)
So there’s no specific way or best way. I do a lot of things. I’ve been doing this thing for 28 years. So I do a lot of how I work is old school. I still drive for dollars. I’m sure listeners for this podcast would know, but I drive and look for opportunities like that for rent sign or properties that look like they need work and they’re not being managed properly. If I see grass on a building that’s not being cut, I’ll contact the owners.or find a way to contact the owners. And I also look for Facebook ⁓ ads in the Facebook marketplace. I look for ads from mom and pop investors who are putting it for rent. Maybe they’re getting sick of being a renter or being a landlord. And so I’ll approach them that way and start a conversation to see if they’re interested in selling. And that’s how my opportunities seem to come.
Michelle Kesil (09:21)
Amazing. That’s so cool that you’re able to approach things in that way. When it comes to financing, is there a specific strategy you have for that?David Giovanniello (09:35)
⁓ there’s no specific financing strategy that I have besides I’m trying to use. don’t use, I just bought, I just closed on an 11 unit building on December 12th. And with that building, have none of my money in the property. So I have seller financing and small joint venture investment. And then I split the property with that investor 50 50. So I look for ways that I can not have my money in the deal.I’m gonna have most of my hard work and sweat in the deal. In Canada, why I like multifamily is it’s a commercial mortgage and they don’t finance me, they finance the property. So if I can find a good deal, I can find someone who’s gonna finance that property.
So that makes it a lot easier. A lot of investors, especially here in Canada, and I’m sure it’s a situation in the States as well, is when you start to get two or three properties,
the banks start to penalize you and they think that your debt ratio is too high. And so when you have multifamily, they’re doing the financing on the property, not yourself. So I find that for me has allowed me to scale and grow and it allows me to use either seller financing or joint venture, joint venture partnership money.
Michelle Kesil (11:31)
Yeah, definitely. And has there been any challenges that have come up through that that you’ve overcome?David Giovanniello (11:39)
For sure, there’s been challenges when I was starting to grow. That’s what I was finding. had five or six properties and the bank started to say no to the smaller properties. So that’s when I pivoted to bigger. I also used private money or seller financing at first, refinanced the property. So once I was able to add value to the property, I could refinance that with the bank to a property that was at its full potential.and then pay back the seller or the private money. So I was able to pivot when I wasn’t able to get the financing on the smaller, go bigger and use private money.
Michelle Kesil (12:22)
Yeah, amazing. It’s important to know how to pivot in this world.David Giovanniello (12:28)
for sure, especially in this day and age.Michelle Kesil (12:30)
Right. What are you most focused on solving or scaling to next in your business?David Giovanniello (12:39)
⁓ for me, the idea is to continue to scale, ⁓ on trajectory I’m on now, which is a slow and steady pace. ⁓ I’m looking to continue in this sandbox of small multi-families, somewhere between 10 to 30 units. And I’d like to keep purchasing probably only about one a year, cause I don’t want to get myself too over leveraged. So I’ve been, like I said, I’ve been doing it for 28 years. It’s been slow, conservative.I don’t over leverage when I do refinance. I make sure that there’s still tons of equity in the property, but I’m able to grow and scale at a controlled and conservative pace, especially when I’m using other people’s money.
Michelle Kesil (13:23)
Yeah, and what does that look like to scale out a conservative pace?David Giovanniello (13:28)
⁓ for me, it has been basically one property a year. I did go a little slower in the slow down. So we, we had a very big after COVID massive spike in prices. Interest rates were super low. So during that time it was quite easy to purchase. ⁓ but in the last year or two after that, interest rates spiked really fast and sellers were still wanting top dollars. So finding deals that made sense.didn’t work. So I took a break. When it doesn’t make sense, I just don’t force it. The numbers have to work or I’m not purchasing it. So now I’m starting to see deals start to come down. Sellers are realizing prices have come down. And so it just means knowing your numbers and doing it at a pace that makes sense to you where you feel comfortable. And for me, one deal a year has been a pretty good pace, even though I did do two last year.
Michelle Kesil (14:28)
Yeah, absolutely. Are there any goals or opportunities you’re excited about that are coming up for you?David Giovanniello (14:35)
Well, for me, the biggest thing I’m excited about is now that I’m getting older and looking almost towards retirement, maybe spending more time at that property in Costa Rica, I want to start giving back. so I’ve started coaching one on one and teaching the younger generation things that I’ve learned over the last 28 years. And so what I always thought was common knowledge, I realized isn’t common knowledge. And I can share that and start helping people whoI find that, have a son that’s 27, they’re finding it very difficult to get into real estate. And with what I’ve learned, it’s possible basically for anyone. It’s the best way for the average person to get ahead in life. And so I’m trying to give back that way. So I’m really excited about that while I continue to grow my business at the same time, like I said, in a conservative manner.
Michelle Kesil (16:07)
Yeah, can you expand on some of those things that you feel are common knowledge but others don’t?David Giovanniello (16:13)
Well, I guess it’s a lot because when you’ve done something for so long, ⁓ well, one was an example. So I was talking to an investor that had three or four properties and I suggested to them to get a VTB or seller finances. So in Canada, a vendor take back or seller financing. So I used the term VTB with that investor, which I thought was common knowledge. He had no knowledge ofwhat I was even talking about, he didn’t know what seller financing was. He didn’t know that we could use someone’s retirement savings. Someone could use that and invest in your real estate deals. So there’s a lot of people don’t even realize that you can use someone else’s money and buy multiple different ways with no money in the deal. So a lot of these things I’ve learned over the years, way to structure deals are common to me, but not common to someone just getting started or who has a very small portfolio.
I can show them how to get over that hump of one, two properties and get to bigger buildings and not using their money. Because eventually everybody runs out of down payment money.
Michelle Kesil (17:24)
Right. What is some advice that you would give to someone that’s wanting to get started or early in their career that you wish you had?David Giovanniello (17:35)
Yeah, so that number one thing I would say is that anybody can do this. You don’t need to have money. You don’t need to be super educated. It really just takes hard work and hustle ⁓ and making connections. So you can do this. is in most real estate investors came from modest beginnings, start small and grow from there. And you’re going to learn as you go. You can’t know everything. You sometimes you just have to jump, jump at it, find a good deal and justTake the plunge.
So that’s one thing I want people to know, it’s possible. Interest rates are high, prices are high, but it’s possible to find deals and it’s possible to structure deals even if you don’t have that much experience. Once you do find a property, my number one piece of advice is to treat it like a business and to treat your tenants like your number one customer. So you’re gonna treat your tenants with respect if they’re treating you with respect.
I give gifts at the end of the year, Christmas time, I have a tenant that has paid all year or multiple years, they’re gonna get a small token from me periodically. When they need something repaired in a timely manner, a professional is going to repair it. I’m not going there and tinkering. If they have a plumbing issue, a plumber’s showing up. If they have an electrical issue, an electrician is showing up in a timely manner. So you have to treat it like a business. Your accounting and book should be in order.
So that would be my piece of advice is structure your business properly and run it like a business and just realize that anybody can do this. You just need a little bit of knowledge and then it’s hustle and hard work from there.
Michelle Kesil (19:17)
Absolutely. When you say structuring a deal, what does that process look like for you?David Giovanniello (19:25)
Well, that’s a great question because it looks different on every single deal. so that’s probably my favorite part of this business is that you can structure a deal and the financing any way you can negotiate and any way that you can creatively come up with. So long as two people agree, you can make it happen. So I’ve had joint venture partners that I’ve come up with multiple.different ways on different deals and how we structure it. Sometimes it’s 50-50, sometimes it’s 60-40. Sometimes the partner wants to be involved in learning and doing the day-to-day and sometimes they don’t want any. So it really is just limited by your imagination and your negotiation skills. so same with seller financing. It’s what you can negotiate or what the seller is willing to come to a win-win situation for both myself and the seller.
So no deal that I have done in the last 28 years looks the same.
Michelle Kesil (20:25)
Right. That makes sense. So when you do value add properties, are those more of a long-term hold situation?David Giovanniello (20:37)
Yeah, so everything I do now and most of what I’ve done in my career has been long term. and like I said, when I say long term, I mean forever. My goal with my portfolio is to hand down to my sons. value add to me, though, means a little bit more than just, you know, I’m not just buying a house, renovating it and then adding value to it. I add value different ways. Sometimes it does meanto just clean up a unit and get more rent for it. Sometimes it means adding units to a building, finding the building’s highest and best use. I’ve had retail that made more sense to turn to residential. I can get more rent with less vacancies. I have a building, a 14 unit building that I added a tech, what I call a tech package. So I did ⁓ all the internet for the building. And so I get more rent than my competitors get.
So I was able to raise rent.
That sign on the side of the building is a great example of adding value without a dollar of my, I didn’t have to spend one cent. That sign company is paying for all the permits, they’re paying for all the hydro, and they’re gonna pay me $1,000 month for a relatively small sign on the side of my building just because it’s on a busy road. So those are the different ways that I add value. In multifamily, the best way to add value
is to increase net operating income. So if you can increase the rents, decrease expenses, then you’re gonna increase the value. So you’re adding value multiple different ways. I have sensor lights in all my buildings, so I’m not wasting hydro. It comes on when people need it. So yeah, multiple different ways, but decreasing expenses is another way that most people overlook.
Michelle Kesil (22:36)
Yeah, absolutely. I think that’s an important piece for people to note and some strategies that they can pull from. Great. Well, before we wrap up here, if somebody wants to reach out, connect, learn more, where can people find you and connect with you?David Giovanniello (22:43)
Yeah, for sure.Probably the best spot is ⁓ on my Instagram page. That’s where I share a lot of my videos about, I share some of the knowledge or my day to day in this business and it’s at David underscore Giovanniello and that would be the best way. If someone wanted to get a one-on-one session with myself, they can do that at jointhefoundry.ca. Yeah, and so those would be the best two ways to get ahold of
Michelle Kesil (23:21)
Perfect, well, I appreciate your time, your story, and your perspective. Thank you for being here.David Giovanniello (23:26)
All right, well thank you for having me.Michelle Kesil (23:28)
And for the listeners tuning in, if you got value, make sure you’ve subscribed. We’ve got more conversations coming with operators who are building real businesses and we’ll see you on the next episode.
