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Show Summary
In this episode of the Real Estate Pros Podcast, host Michelle Kesil interviews Alex Pal, owner of Pal Capital Group. Alex shares insights into his journey in real estate investment, focusing on his business model, strategies for success, and the importance of cash flow. He discusses the challenges of scaling a real estate business, the significance of partnerships, and offers valuable advice for new investors. The conversation also touches on market trends and the future of real estate investment.
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Investor Fuel Show Transcript:
Alex Pal (00:00)
Perfect. Yeah. So that, that’s where I’m getting that too. The biggest difference is the fact that we have treated real estate like it should be, which is a flat type of boring business. If real estate’s really exciting, then you’re doing something wrong. Like if you’re biting your nails and clenching your fists a little bit, every time you’re purchasing something, it maybe isn’t the best approach. Real estate is something that as long as your systems and your processes are good in terms of, you know, running youryour analysis, turning things over, it can become a very repeatable process. so for that, that has made it very successful for us in terms of just keeping things vanilla.
Michelle Kesil (02:12)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone that I’m looking forward to chatting with, Alex Pal, who is the owner of Pal Capital Group, working on all things real estate investment and management. So excited to have you here today, Alex.Alex Pal (02:34)
Yeah, thanks for having me, Excited to chat.Michelle Kesil (02:37)
Yeah, likewise. So let’s dive in. First off, for those not familiar with you and your work yet, can you share what your main focus is?Alex Pal (02:45)
Yeah, we have a few businesses in real estate and I kind of break it down to four main pillars. Number one is Pal Capital Group. deal with large building acquisitions. So we’re working with equity partners through syndicated type models to raise capital and buy bigger buildings. So those buildings we typically are focused on are you kind of see class buildings and we’re bringing them up to the B plus. We’re not looking for that grant card on style A plus buildings.That’s not really our sphere that we’re looking at right now. We’re looking at the value-add approach. So that’s our big focus. So that’s one of the elements of our business. We also have here locally in Ontario, a full-scale property management company. So we help people, third-party manage their properties, multifamilies, single families, anything in between. And of course, that manages part of our own portfolio as well, which has created this ecosystem around real estate. And then last,
Next, we do a lot of fix and flips. buy a lot of off-market opportunities. We do the odd wholesale here and there. As much as it’s not like the core focus of our business, it does add this cash flow element to our business. And then last but not least, my wife and I have our real estate licenses. So we do have a large client base of investors who are looking to get into the door themselves, get into some investing themselves as well. So we can definitely help them navigate that sphere.
Michelle Kesil (04:06)
Awesome. And I know that you’re in the Ontario market, but are there any other markets that you operate in?Alex Pal (04:13)
Yes, so we have bought and sold in New Brunswick, St. John New Brunswick. We’ve also bought in Alberta. So we have about 80 units out in Alberta right now. We’ve also bought in Columbus, Ohio. And currently we’re exploring opportunities out in Knoxville, Tennessee, as well as Indianapolis. So we’re looking to branch out into the US more. We have already done so, but now we’re looking to get a little bit more aggressive.Michelle Kesil (04:41)
Awesome. And so how did you get started as an investor?Alex Pal (05:37)
Question actually, my cousin, cousin-in-law, I guess, he’s married to my cousin, took me to the Real Estate Expo in Toronto when I was maybe 14 years old and I had no idea. He would let me wrench on my car because he had an auto mechanic shop and I didn’t have two nickels to rub together. So he would let me bring my car into his shop and I could use the hoist and change my own brakes and stuff like that. And to pay him back,I would help him on the odd weekends to like paint a unit of his and he was just getting into real estate. So he knew that I was like asking all these questions and he saw that I was really interested and fascinated by us. So he’s like, you know what, like I’ve got this extra ticket to the expo. Why don’t you come with me? It’s funny. like that leader, not one of the keynote speakers was Donald Trump at that keynote in Toronto. So, I don’t know how you guys feel about him out in California, but, but he was there and he was ripping up people then too. So.
I don’t think much has changed. But it was very inspirational from all the different aspects of it. They have these breakout rooms and things like that that you can go into. And just learning about the concept of financial freedom and you know cash flow and building something within that, I was hooked instantaneously. So all through college and high school, was…
you know, reading up on books and he would keep feeding me things to read. And then next thing you know, after university, I was like geared towards, you know, just go buy a house. And then that’s when it started, I was working full time for a project management company here, like an industrial project management. And I was doing flips on the side. And eventually I flipped enough that I didn’t have to work anymore in that sphere. you know, changed my nine to five to work 24 seven.
Michelle Kesil (07:23)
Yeah, amazing. Walking the path of entrepreneurship.Alex Pal (07:28)
Yes, yes, it’s a fun one. And I wouldn’t trade it for the world, truly. I say that with some sarcasm and clarity because of course there’s stresses that come with these businesses and things like that. I think that it never beats the concept of building something for yourself, right? So I appreciate that.Michelle Kesil (07:39)
Sure.Definitely.
And so what do you feel are some main keys that make the biggest difference in allowing your business to be able to grow and run smoothly?
Alex Pal (08:01)
That’s a good question. mean, I’m a person that likes stability and I’m very conservative in my analysis. So in real estate, I find that you don’t necessarily have to take a tremendous amount of risk. You just have to find a good deal. And I’m fully bought into the idea that you make your money on the buy in any sort of real estate deal. So whether you’re in Canada or in the US, it doesn’t matter that that’s one and the same, right? Doesn’t matter where you buy.you make your money on the buy. That’s the most important thing. So I think that from a standpoint of like, where have we succeeded or what’s our, repeat the main question if you don’t mind, so I can make sure I address it.
Michelle Kesil (08:43)
Yeah, like what has made the biggest difference in your business growth and success.Alex Pal (08:47)
Yes.The biggest difference is the fact that we have treated real estate like it should be, which is a flat type of boring business. If real estate’s really exciting, then you’re doing something wrong. Like if you’re biting your nails and clenching your fists a little bit, every time you’re purchasing something, it maybe isn’t the best approach. Real estate is something that as long as your systems and your processes are good in terms of, you know, running your
your analysis, turning things over, it can become a very repeatable process. so for that, that has made it very successful for us in terms of just keeping things vanilla.
Michelle Kesil (10:01)
Yeah, absolutely. And so what are you most focusing on solving or scaling to next?Alex Pal (10:11)
So our biggest focus right now is scaling the PalCapital group size. So we have a lot of amazing investors on board that have been, you know, just great support and they’re excited because they’re making some good returns. So we’re looking to grow that sphere and get more into larger acquisitions. So we’ve bought a number of them already and they’ve all gone very well. We’re, as I said, we’re just in the process of a 48 unit building that we’re upgrading inin Edmonton, Alberta. And so as we move into the US market, that is our central focus right now in terms of finding these low class buildings. You see a lot of the middle-aged folks, people like early retires, baby boomers that are now starting to liquidate the assets that they’ve sat on for years and years and years. if you go into some of these mid-markets,
you’ll see an apartment building that hasn’t been touched for 30, 40, 50 years. They might’ve just done some patchwork and put duct tape around things. And so I think that those buildings, you have a real opportunity to buy them and turn them into something amazing. And you don’t always have to just demolish the building and start over. The economic life of these buildings and the location where they sit can often be preserved for quite some time still, right? There’s not any impede,
like urgency to like, you know, turn them into something that’s a little bit more conducive to the areas that they are in. So I find that if you can keep the shell and make it a little bit nicer and spruce it up, your tenant profile is still good. And that’s once again, when I say vanilla to my previous comment, we’re not looking at, you know, if I know average rents for a one bedroom, I don’t know what they’re in California, but let’s say for a one bedroom here, we’re 1500 bucks a month.
I’m not running my pro forma at $1,900 a month because I think I’m going to have the most sensational unit on the block. I don’t think that that’s the right approach. And I think that that’s how a lot of people have really gotten burned. as long as you’re running your numbers conservatively, the challenge I think that most investors should have is finding the deal. That’s always the challenge. That’s when you’re running your numbers and putting offers in consistently.
100%, you know, keeping things that, that vanilla, that’s, that’s going to be the best for anybody.
Michelle Kesil (12:37)
Yeah, definitely. And when it comes to finding deals, is there like a lead gen strategy that you work with or what do you do?Alex Pal (12:47)
Good question. I think the biggest thing is network, especially in the big building space. I find that it is different for small scale residential. That’s a heavy marketing based lead generation type of system. But most of these big buildings and most of those legacy owners, they have a big network because that’s how they got into it at one point. you go to some of our local real estate networking events and you still see some of these old guys that are just like,could tell they’d been around for a million years and they’re sitting on like a lot of these assets probably paid off completely at this point. Those people are still connected within the sphere that they’re in. And I find that these deals tend to trade in those spheres more than if a property is listed on the MLS. And that’s why when it comes to like larger apartment buildings, I find that if a property is a good property,
in terms of like a buy, it’s most likely because it’s bought off market.
Michelle Kesil (13:48)
Yeah, definitely that makes sense, especially when it comes to connecting with the network and the people in your sphere.Alex Pal (13:57)
Exactly.Michelle Kesil (13:58)
Yeah, and is there any like tips that you have for maybe those that are earlier on in their journey or just looking to get started that you wish that you had?Alex Pal (14:10)
Yeah, I mean, the most important thing is to take action. I love that saying, what’s the best time to plant the tree? And the answer is a hundred years ago, but then the second best time is today because that’s the truth. think something like real estate, it’s a long-term play. And real estate, also have to kind get out of your mind the micro price fluctuations and look at the macro.For example, in California, like I don’t know too much about your guys’ demographics, but I know that, depending on certain areas, know that there’s like net migration is leaving California. Hopefully the government does something to spur that back into gear. But if that’s the case, then maybe focus on areas that are seeing more growth, that are seeing more jobs coming to it. ⁓
every state has areas that are growing and declining. So you want to look at those kinds of elements to make sure that you’re investing in the right spots. So same with Ontario, we have areas that are maybe a little bit more desirable at one time or another than they are today. So we’re always looking at where the best place to invest is. Don’t ever buy for appreciation. Always buy for cashflow and you’ll be good. Now, when I say don’t ever buy for appreciation,
You of course want to look at the area. Let me just correct one thing before people run with that. You of course want to buy in areas that will appreciate. That’s a given. Look at things like GDP growth, population growth, those kinds of elements. They’re very important, but don’t buy a property because you think is going to appreciate. That’s the only reason why you’re buying it. That’s called gambling. Cause it’s the only thing that we can’t control. So just to clarify that one point is that cashflow is king. You guys have all heard it. So make sure you focus on that.
Michelle Kesil (16:41)
Yeah, definitely that makes a lot of sense. And so, I know that you mentioned that you’re vertically integrated. What are the other assets of your business?Alex Pal (16:51)
Well, right now it’s mainly just like the idea and the concept of this ecosystem that we have is to allow anybody with any sort of real estate need to be able to enter our sphere and for us to be able to service them at the highest possible capacity. So for example, if a person wants to buy a rental property for themselves, perfect, we can help you because we have access to the MLS, we can show you properties, we can advise you.based on our own experiences. We’re very well versed with the areas that we live in. So that’s a huge value add, right? In terms of buying off market, we can then find that person who’s like, I need to sell today, right? I need to, I’m leaving to Austin, Texas, or I’m leaving to California for my job. And, you know, I don’t have the time to be on the market. I need the money now. So we can do that kind of thing here as well, which helps another person in this ecosystem, as I said.
And there’s the people who want to invest in real estate, but they want immediate cash flow. So hard money type lenders. And there’s the lenders who don’t necessarily care about cash flow. They want to park their money somewhere where it’s going to grow. And it’s going to have to be like a safe haven for them. As long as the deal is good, we can have those. Right. And then of course, property management, which also envelopes asset management. And that’s really what Pal Capital is. It’s an asset management company. So we buy and redevelop these properties and then we’re managing the assets on behalf of our investor clients.
So within that ecosystem, that’s the beauty of the vertical integration within it all. And that’s why the big challenge right now is that scale, because each business has quite different elements in order to be successful. And each business currently is successful in its own right. But scaling those simultaneously is challenging.
Michelle Kesil (18:37)
Yeah, I can imagine. And what is like your partnership with other investors look like?Alex Pal (18:43)
We’ve done all kinds. So we’ve done your traditional, hey, you’re a 50 % owner of this corp and so are we type thing. We’ve done joint venture partnerships where our partners go on title and they supply the capital and we find the deal, execute on the deal and operate the deals. So we’ve done a lot of those types of deals. We’ve done syndications now where we’re acting GP. And of course we have a stake in the limited partnership, you know, with whatever capital that we invest.as well as whatever capital is invested by our partners. They have that directly proportional stake as well. And so we work with investors in all capacities. So for example, a flip property, we have a list of clients that we can call and borrow money from them if we have a quick turnaround like that person who needs to fly to California tomorrow and sell their house quickly. So our biggest time is just the lawyers for us. You guys have title companies, we have lawyers here we’ve to work through.
Michelle Kesil (19:38)
Yeah, makes sense. And so what is like a challenge or a hurdle that you’ve experienced now looking back? You can see the lesson behind it.Alex Pal (19:52)
Hiring the right people for the right seat, that’s for sure a big one. think it’s always a challenge. I think it’s a fast moving business in all respects. they say that real estate is simple, but it’s not easy. And there’s a truth to that. I think that when people think about real estate, it looks sexy. It’s just this… ⁓You know, it’s got all this kind of fun element to it, but to be truly successful in real estate, takes a tremendous amount of grit and hard work. you know, you’re dealing with personalities, like you’re in the people business, right? Whether you’re dealing with clients, you’re dealing with tenants, you’re always trying to make sure that things are running smoothly and you’re appeasing anybody. So having the right people in the right seat is crucial for that and to make sure that your systems and operations are running smoothly.
Michelle Kesil (20:46)
Yeah, definitely. Those things can really make you to break it.What is something that you’re looking forward to for this year? Maybe like a trend or an opportunity that you are getting geared up for.
Alex Pal (21:02)
Good question. I’m curious to see what’s going to happen when the interest rates drop on your side of the border. Because I think that’s going to spur the real estate market on your side of things. But I’m curious just to see what result that’s going to have overall. Will it have more of a global impact too in terms of us as Canadians and how we operate within that?that space. I think, am I looking forward to it? I don’t know if that’s as much the question as I am just naturally like, you know, it never matters who’s in power. You have to kind of go with the flow, right? So different policies can have these massive shakeups as we’re seeing, right? So I know US has beaten up Canada a little bit right now, but that’s one of the byproducts of these
know, these shakeups and things like that is that they affect the tenants that we have, you know, are they able to pay their rent, for example, right? So if a loses their job because some, you know, layoff takes place because some companies affected by tariffs, those things have trickled down effects. So I think one thing I’m looking forward to is some stabilization in that space, getting some resolution to the KUSMA agreement and seeing where that actually lands.
Michelle Kesil (22:25)
Definitely, that makes sense. So before we wrap up here, if someone wants to reach out, connect, learn more about what you’re up to, where can people find you and connect?Alex Pal (22:36)
Yeah, definitely on Instagram, you guys search Alex underscore pal capital group, you can follow us there and you can definitely reach out. And then if anybody just wants to shoot me an email, it’s alex at pal real pal capital group.com. you guys, I’d love to connect with anybody, whatever you’re looking for.Michelle Kesil (22:54)
Perfect, well, appreciate your time, your story, and your perspective. Thank you so much for being here.Alex Pal (23:00)
Thank you for having me. It was a pleasure.Michelle Kesil (23:02)
Of course and for those tuning into the show, if you got value, make sure you have subscribed. We have more conversations with operators like Alex who are building real businesses. We’ll see you on our next episode.
