Is Your Portfolio Truly "Recession Resistant" with Steffany Boldrini

Are you ready to bring your real estate game to the next level? My name is James Prendomano. I'm the CEO and founder of Freewheel. And over the past 25 years, I've closed over a billion dollars in transactional real estate each week, a meeting with outstanding standing investors, high performing individuals and visionaries operating in the real estate space. These are the people that are actually out there in the real estate game right now. Getting it done. This podcast aims at bringing anyone's game to the next level. This is the PreReal Podcast.

Welcome everyone to the PreReal Podcast. We have Steffany Boldrini joining us today. Steffany is the principal of Monte Carlo Real Estate Investments. She's got a great story. And it's again, good timing here. Steffany got an amazing podcast. It's called The Commercial Real Estate Investing from A to Z Podcast. For those of you that are always looking for tips and tricks, it's packed with information. Great guest. I definitely would give it a try. Steph. Thanks for joining us today.

Thank you so much for having me, James. I appreciate it.

It's our pleasure. So I thought it would be fun to talk a little bit about your beginnings, right. You were born and raised on a small Ranch in Brazil. Is that correct?

That is right.

So without giving us a three hour history, how do you get from a small Ranch in Brazil to running an investment company and preparing for scale?

It's a blessing to be here. So I always like to thank God for it. But my parents decided to come here and we came here about 20 years ago, landed in Silicon Valley and started working in tech just by the nature of just living here and decided to start investing in real estate because I had my boyfriend at the time, that was a very successful real estate investor. And it was very clear that real estate is at that point, I was interested in angel investing. It's a much better form of investment compared to angel investing. Well, I have to press you on. You were involved in tech. You were involved in tech. And from what I understand, one of the startups went public and was traded for, like, 20 billion or is worth over $20 billion. Yeah. Right now, I think they're at 50. So good for them. So during that time in the tech space, what was your work centered around sales, all the sales. And was it tech for what industry for other tech companies? So anyone that has a website and is scaling those websites, but also enterprise companies like Salesforce, Cisco and things like that. Got it. So you get the real estate bug and you decide that this is something you want to pursue. Let's talk. I guess about that initial journey, your first deal, your first official interaction outside of affiliation. How did you actually land in the game? Yeah. Great question. So was with that person at the time, so decided to take as many notes as I possibly could and learn as much as possible. And it did take me a couple of years to finally end up buying my first couple of properties. And it was some car washes, and it was just a very humbling experience. But the numbers work out so far really well. But at this point, at that point, I did not know anything about car washes. What I learned was all in the retail space, and I'm like, how hard could it be to learn about car washes? And there are literally more than 100 moving parts, skews and anything that you can. I cannot imagine that can happen. But the numbers made sense because I was well trained by my mentor to how to negotiate and how to analyze the property for upside and adding value and things like that. Okay. So you acquired real estate that had leases for car washes, or did you actually acquire real estate and the business both I'm running. It is a big difference there. All right. It's been a journey, James. Now I understand. Okay. So it's not that Stephanie decided. Hey, I'm going to go buy my first piece of real estate. She decided I was going to buy a piece of real estate with a living business on it that you were the owner of at this point. Yeah. Which at the end of the day, a lot of them are actual businesses. I think self storage would qualify as a business. I think multifamily would qualify as a business. So I think industrial, retail and office are the ones that are more really. Once you negotiate and sign the leases is more mailbox money, but everything else you need to have a manager on site, you need to collect rent and other things. So I think there are a few classes out there that are actual businesses. Yeah. I would agree. In today's world, Stephanie, we hear all the time and you see all the Glitz and the Glamor and the great parts about real estate. Right. And everybody wants to be a real estate investor and everyone's trading in the nine to five to be an entrepreneur. But what you don't see is the other side of it, the sacrifice, the stress, and sometimes these really sharp learning curves that you have to adapt, and you have to pivot in many instances because industry now any business that you buy, I don't care what sector it's in. It's in the midst of significant disruption, significant change. And I agree that there are certain asset classes like self storage, where you are absolutely running a business. But a car wash for me, at least on its surface, would appear to be an entirely different discipline. Right. There's mechanical components. Of course, there's the web presence and trying to grow the business and organic and all of those things that you need to do in the digital world. Wow. So you're still in those deals now? Still. Yes. Okay. That was your first acquisition, so it cannot get worse than this. Trust me. Yeah. So you make this acquisition, you have a sharp learning curve. You're enjoying it outside of the pain, of course, of the learning curve. You're enjoying it. But what was it that once things settled down, what was it that triggered and had you say, you know what? This is what I want to do. I want to go take down commercial real estate and build a portfolio. Because real estate, my friend, a very successful syndicator friend of mine who said 90% of all wealth created for the last 100 years was through real estate. And today we can all see with our own eyes that things are inflating significantly and real estate, which is continue. It's just a trend. And even where I live for at least the last seven years that I know people that have been here every time it's crazy, cannot get higher than this, even in the Seventies or the 50s. Right. So back then they were like, oh, my gosh, how can you pay $50,000 for a home here? Last year it was average on one and a half. And today in the same areas, too. So we just have to. Otherwise, we're just losing money in our savings account every single day through inflation. I agree wholeheartedly. And for those of you that didn't catch that last little bit of absolute wisdom as inflation hits. And we've talked about this with fixed income assets, even though you're collecting rent. And even though you may be collecting a small margin in the bank, you are absolutely losing money as the cost of goods is far outpacing. Those offsets. And I think even the most bullish real estate assets, in short order, are going to be challenged to keep up with inflation. And with what's ahead, you talked about how and I remember this. I remember so clearly when I first started in real estate. There's a town out here called Westerly, a very nice residential town, and the homes were trading 100 and 5155 thousand detached, three bedroom, four bedroom homes. And I'll never forget one of the brokers had listed a house in Westerly for $170,000. And I remember thinking, what a fool who would ever, ever pay $170,000 for a home in Westerly. Fast forward 2025 years. You can't touch anything for less than 6000, 700,000 in Western. Right. But it's not all lollipops and Sunshine in real estate, either. There's an ebb and a flow to this thing, and there's a cycle, and there are market shifts. So I was wondering, as you're analyzing where to make your next play and you're debating which asset classes offer the most upside? Are you contemplating what we've been calling now for ten years? The decentralization of real estate from the major cities is that factoring into your decisioning? Absolutely. So long as there is a great obviously population growth, diverse economy, different industries there. We don't care as long as it's at least let's say, 150,000 population within a Metro area in today's world. I think that diversification is important for that next cycle, and there are two different thoughts. But some people want to focus on a specific asset class today. I think it's important to diversify once something hits the fan within the next few years, at least some of your asset classes should maintain its value and continue to be stable versus everything coming down like some office in some major areas are going through right now. So that's just my train of thought today. So it is so refreshing to hear somebody recognize that it is going to hit the fan in the next few years, I hope before recognizing no, you know what's happening now, Steph is the more and more people we're talking to, they're falling into the trap of buying a payment, right? They're looking at these super attractive rates and they're looking at these secondary markets and tertiary markets that are emerging and they're so drawn in by the low buy in because of the interest rate and the robust rental at this point that they're not contemplating. Okay, but what's next, right. For those of us who have been in the business long enough, we understand 95% Occupancy is not the norm. And you do have serious stretches. Years and years where those occupancies roll back and as Occupancy rolls back, rents drop and as rent drops, you have to be more competitive and invest more in your asset to make it more attractive. But folks are not looking at that as vigilantly as I think we should be. I'm a pretty big believer in 2024. I think second or third quarter of 2024 to 2025, we're going to be in for a rough stretch here for a number of different reasons. What are you forecasting? What do you see? As my mentor likes to say, I've been forecasting the last, the next downturn since 2016. So I'm the last person that will know these things. I thought last year would have been a disaster. Sold a lot of stocks. Sadly, everything quadrupled because the government printed so much money. How can we predict? Sadly, I'm not in that position. I do not know. So none of us know, right? And we certainly can't pretend that we know, but we can venture our best guesses. So, what we're seeing is as people are buying these payments, the institutional money, the big money is still on the sidelines, like the big banks. They're not lending. And what's happening is these opportunities funds or these mid market funds. They're filling that gap and bridge money that was 10% 11% is now 7%, and it's close enough to where the institutional rates were, at least to keep this thing moving forward. But it's all short term money. None of this is 10, 15, 20 year money. It's all short term money. And when that money comes due and those notes come due. Somebody's got to be there and knock them back out and refinance them. And I think that's where we're going to run into some trouble so we can't continue to print money in perpetuity. I think that the feeling out there is people are now starting to everyone at first loves the idea of printing money, right? Checks are coming in and everybody feels good and we're buying Reeboks and watches when we should be buying real estate and people feel good about it. But that starts to catch up when you see it at the consumer level, when you see the price of the pump going up and the price of milk going up and the price of eggs going up, that's when people start to pull back. And I think that we're starting to have that feeling in the country now and that will eventually translate into new policy and that will slow down. And when it does slow down, hold on to your hats, folks, because I think it's going to be an interesting time. But if you're well positioned and you keep some powder dry, I think you'll be able to do a lot of damage during that time as well. So let's forget about the future then let's talk about now what asset classes are you bullish in? Definitely self storage, maybe car washes. I still haven't decided if I would do another one again, but there are a lot of ways to add value in car washes, but definitely self storage has been proven over and over again that it is recession resistant even last year. And recently, short term rentals. These numbers look great depending on where you buy and everyone that is doing short term rental is very happy. Everyone that I know and their returns are pretty incredible. So self storage again, you're not buying like a stabilized portfolio where national tenants are occupying and paying a lease. You're actually buying the business, correct? Yes. Okay. And on the short term rentals, are we talking about like Airbnb's that portfolio? Yes. Okay. Short term rentals now make a lot of sense as inflation creeps up. Right? It was the Holy grail. At least out here was those longer term commercial leases that had decent paper behind them. And if you had built yourself in 2% or 10% every five, or if you were lucky, 3% annual increases, you felt real good about it. But again, as inflation creeps in, absent some sort of CPI reset on those leases, which is very difficult to get. We're technically facing a period where while the rents may be coming in and the debt services coverage is covered, we're still actually losing money in those assets year over year, even with 3% increases. So are you staying away from the long term leases completely? Yes. I never wanted to ever even dab into multi family and just came into short term because a friend of mine told me the numbers. And I said, wow, those are incredible numbers. And so I'm just dabbing on my first couple right now for fun. So would you feel comfortable sharing what numbers you're seeing, what kind of returns you're seeing? Absolutely. So just did the math. My first purchase was four months ago, and so far is a 30% cash on cash, including all the furniture and everything else. And what type of asset was that? A single family.

Okay. And now you're enjoying some success. Here a lot of success here as our eyes get wide as they tend to do. Right. What's next for Stephanie on the horizon? What are you looking to step into next? Yeah. Just analyzing always self storage facilities where there is some upside there for increasing rent or building new units. So that has been my focus over the last several months. And you're looking to scale? Yeah, definitely. Okay. Do you have any plans for that? Any ideas of an offering or what that would look like an actual property? We have not identified a property today. We're always analyzing whatever is available. So when that happens, we're going to potentially do a syndication, depending on how large the deal is. Okay. So I think it may make sense for us to talk through the differences for some of the folks out there of a syndication versus doing like a traditional raise. So my sense is, Stephanie, that you're going to identify the next asset at scale price wise. Right. So the idea is to step it up in class for strike price. And then is it a friends and family raise or what type of a raise are you going to target? Probably friends and family, because people have been knowing that I've been doing this for a while now, and quite a few people reached out saying, hey, when you have a deal, let me know. So hopefully I'll be able to raise the whole thing through friends and family. Sounds good. So can you tell the audience a little bit about Monte Carlo real estate? How exactly did it like, what was the Genesis? How did it start? Well, I just wanted to do something on my own and decided to leave the sales life and started this investment firm. And at some point we're going to start doing syndications. I wanted to do a few deals on my own to show people that we can make. These numbers are great. And here they are. It's not just I don't have any experience. Just give me some money. So that was the goal at some point scale. Just indication, how many deals have you taken down to this point? It's around five, six, seven more or less. And are you investing in just a local market, or are you bouncing around right now remotely? So I'm investing in Texas right now in Texas. So when you're identifying a market to invest in, I think that's another challenge that the digital world has given us the tools to connect in a real meaningful way to these submarkets. But there's something about being able to touch and feel the investment and not being able to touch and feel the investment. Right. Having boots on the ground or not having boots on the ground? Yeah. So are there any particular metrics that you're looking at when you're considering an MSA? Well, population growth, different industries, strong business sense. Unlike California, Texas, Florida and a few other States are very business friendly, and yes, those are the major things that come to mind. But team is always so important. So that's one thing that I would always recommend is it just a blue collar city, because that will become very difficult for you to get professional people to work for. You. Obviously not impossible, but it just becomes harder. So these are some of the things you should be thinking about, talking from experience. So are you using, like a secret sauce? Are you looking at different metrics and using, of course, some of just your innate ability to size up a market and size up a deal, or is there any particular software or programs that you're looking at when you're contemplating a different market? I'm not using software right now. I just do some Google searches. I talk to people. I know quite a few people in the real estate field, and there are some websites out there that you can find. I really forgot the name, but it's like what kind of industries are in that city? It's all freely available to anybody. I do not have a specific software that I use. I had found a phenomenal company before, but they are no longer doing this type of business, but I'm sure there are other ones out there where they tell you which home you should buy based on so many other metrics within a specific city. So they look at even people's Instagrams. How many blue French Bulldogs are being posted on Instagram in this area? How many scooters? What bird scooters are in this area? And they used to find lower priced homes in really good up and coming areas, but they're not doing that right now. But I'm sure there are other websites that are starting to do that at this point. So something that again, we've been talking about, and I heard you hit on it a little earlier. Legislative threats that might be the single largest driving factor for us is what type of legislation is on the horizon? What type of legislation are they currently passing? Because it is having a profound impact on investment strategies up here in the Northeast. A profound impact. You're seeing the same in California. Yeah, California is not business friendly at all, but there are obviously a lot of very successful people that work around these things, or they know what they should be focusing on. I have not learned how to add value in a multi family property in California when you have rent control and a few other things, you cannot kick people out. It's just what you want to focus on. And there are obviously always ways to add value, but things can come along that can completely destroy your business. Like there was a proposition for the property taxes to become current pricing instead of what you paid for for commercial that will kill. I heard particular winery was saying, we're going to be dead if this passes. We cannot afford a new tax base if that regulation passes. But they're not the only one. There are so many other people that own these buildings for several years that are paying a lower tax base for the audience. It's not about a cold or a callous strategy in these bigger cities. The reason that investors hang in and the reason that they stick around is plain and simple. It comes down to the opportunity and the rate of return. Right. And what's happened, unfortunately, is the pendulum has swung so far back, that opportunity is weaning and the risk just isn't is now outweighing the potential upside of investing here in New York. And we're excited that there's new leadership, new governor, that seems to be saying all the right things, and we know they have a great team around them that we're very bullish on. And a new Mayor inbound in New York City, we're hoping that we see a shift in some of the policies. For example, the opportunity zone is a great vehicle to defer taxes, spur investment and enter into new markets. So in New York, they pass legislation decoupling from the federal benefit. So if you put money into a QZB and you are making an investment here just like that, they decoupled from the federal benefit, and you no longer get the deferment benefit on your taxes. So what's happened is because the opportunity zone is very flexible. The rules are it's not like a 1031 exchange. It doesn't go to an escrow agent. You have control over your own money. There's a lot more flexibility and freedom. And what's happening are people are going back, amending returns and they're just buying elsewhere. We're seeing massive amounts of money fly out of the state into opportunity zones all around us, Pennsylvania, New Jersey exploding. The development is amazing with the money that's funneling in there. Those are the types of changes that are giving investors great pause. You talked about self storage. Self storage was a great industry here, and our previous governor last year in the budget removed any tax abatement. If you were self storage, real estate taxes, as you are well aware, if you're in a major city and you're dependent upon an ICAP or you're dependent upon a 20 year, significant mitigation of taxes that's the inducement people don't understand, why should they get a benefit? The reason they should get a benefit is because they're investing in many cases, tens of millions of dollars to acquire the asset and to develop it. And when you took that inducement out, we saw a long, healthy pipeline of self storage companies that were fixing to break ground and come to New York, and they just shut it off. It's a 20 year hit to your cash flow. Yeah. It's just so mind boggling how they can change the rules on us, just like that on property that is ours. And that's another conversation. Yes, it's another conversation, but it's sound advice for those of you out there that are looking to invest, make sure that you are looking at the local Council, the local, whatever the governing entity is, where you're looking to make the investment and get a real good understanding of what the temperature is. Are they passing things like good cause eviction, which I think is disastrous well intended but disastrous ramifications? Or are they passing legislation that's business friendly? When I started to do business out of New York City. Stephanie, the first deal I had, it was a beautiful land deal in South Carolina. It was 316. I don't remember the units. It was several hundred units. And I was so programmed to the way we do business in New York that when we flew down to meet with the owners after we had had some negotiation through our intermediaries, we sat down for lunch and they literally began drafting a contract at the table. Now where I come from, we retreat to our camp, you retreat to yours, and we start battling this terms and conditions. Several hundred page contract for a deal of that size. Right. We have shopping centers here, our basic leases for 2000 square foot tenant. We just reviewed this in one of the deals that we're involved in, and somehow we ended up with an 89 page lease for a nail salon. And it's like, how does that even happen? Right. So you go in and you think, Well, we can make this reasonable and we can cut this down to ten pages for a non corporate, non credit. And there's just so many trip hazards. We trimmed it down to 28 or 29 pages, but still 30 pages for a nail salon. I don't know how we got here, but I do know to get back to my story that this is not how they do it elsewhere. And it was my first venture out of state. And I blew it candidly because as they started drafting language, literally with a pad and a pen and we're sitting down over a meal. My antennas went up and I went, Wait a minute. Do you think you have this stupid New Yorker here that there's something I'm missing with this site? It has to be that we couldn't possibly draw up a contract over a meal. Right. Where are the attorneys and Where's all the trip hazards and searches? And I blew it because I was so programmed and I was so ready to fight. And I very quickly learned that there are really business friendly places out there. There are places where you can make these deals and perform exceptionally well, and it just doesn't have this high level of scrutiny. So again, I got off on a bit of a tangent there. But as some of the typologies you had mentioned car washes, same thing, actually, as I'm thinking about it, they started to pass restrictions where you couldn't do it unless there were certain infrastructure elements that were there. And we started to see car washes disappear. So you're using good old fashioned common sense. You're taking a look at what you're finding out on the websites and you're kind of piecing this together. So I have not done many deals where we bought the real estate and bought the business. We have bought businesses separate. We have bought real estate separate. I'm curious if there's ever been a deal where you absolutely love the dirt, but you couldn't get through some of the nuance of the business and you had to pass. Thankfully, not yet. But sometimes I do think of selling the car washes, honestly, but I am in the process of delegating as much as possible to people and creating the whole infrastructure for me to have the least amount of work as possible. I just needed some time to learn the business and take phone calls and all of that and really understand what's behind it and how I should program the management from my end. And when you're taking these pieces down, I assume the old owners stay on for a period of time. Yeah, very good point, too. Which is definitely something that everybody they're thinking of buying a car wise, if you're local, have the owner at least available for six months. If you're not local through a full four seasons, if you're in a city with four seasons because there's snow and there's other things that come into play that you need to be aware of what to do. So yes, you should definitely put that in your contract. And sometimes the ledger doesn't quite match the cash register. Are you making provisions for any types of claw back, or are you escrowing a certain amount if, in fact, sales don't match? How are you managing that? No, I did not. We just asked for the tax returns when we were doing our due diligence, and so far it's been matching perfect. So any other thoughts or tips that we could share with the audience if they're thinking about getting in the game and taking down some deals, particularly deals where there's a living, thriving business attached to it. If you had to offer one piece of advice, what would it be? Yes, for new asset classes, go to an industry specific conference first. Before getting into that asset class, you meet so many people. You meet, all the vendors, you figure out which vendor is the best. You'll be able to find, mentors, people that can call and say, hey, what about this? What about that? That is the one thing I did not do for the car washes that I would 100% recommend people do. That is great advice. Any books that stand out that you've read recently that you think may be a value? Oh, my gosh. I'm blanking out on the name. There was one really good one for investments. If you can give me a second, I can find it. Or we can just don't need to put you on the spot, but maybe offline. If you could shoot us a note, we'll include it in the links below. I know that on the spot. There's so many books, the title, the authors exactly to blur together. And how about any podcasts or anything that stand out, or is it just find something that's relevant in the industry and run it down that way? I was listening to Joe Farrellis in the beginning and found myself storage mentor through that. So you not only learn about multi family if that's your thing, but I did find really good people there. Great. So before I let you go, I just like to get a sense of the other side of the guest. Tell me a little bit about when you're not in real estate, right. What are some of your passion? Some things you enjoy to do when you're not working 20 hours a day. I'm sure I am a big foodie, but also just by living here where I live in San Francisco. So I love going out to eat at good restaurants around here, meet friends, meet family, go hiking. How is the business doing out there are restaurants hanging in there. Are they doing okay? Some did not survive. Sadly, but a few of them did. Yeah. We lost quite a few really great eateries out here. Also heartbreaking. It is. There was no right answer. When you go through difficult times like this, there's no right answer. And we don't like to look back and judge. But it did seem like there was an awful lot of wrong answers that seemed to be pretty apparent. So we're hoping that we're learning and we're headed in the right direction. We were talking with a restaurant operator maybe a week ago or ten days ago, and they're really struggling. And this was a really successful restaurant. I won't mention the name, but they had said, James, it's so hard for me to sit down. And I was watching a football game. I think he had said it was the Las Vegas Raiders, and he had said they had opened a new Stadium and there's 50, 60,000 people, and it's Vegas, right. So these are people from everywhere, right? Yeah. And there wasn't a mask to be found. And I'm not advocating yes, masks, no mask. I'm trying to convey the plight of a local business operator. And he said, Here I am, and I can't sell my product unless someone has basically a license to come in and patronize my establishment. Yet I'm watching in another state. 70,000 people shoulder to shoulder, screaming, yelling, cheering and again, he wasn't advocating that was right or wrong. His issue was the inequity and the imbalance. That's where the challenge lies. So, look, these are tough times, but we do our best to figure it out. I love that you're supporting local restaurants again, folks. Stephanie has got a great podcast. Commercial real estate investing from A to Z. There are nice to the point. 1718 minutes to 20 to 25 minutes episodes Great guests packed with information. Steph what's the best way for people to find you? All the social media LinkedIn and everything else or my website? Montecarlor.com. All right, Steffany Boldrini, thank you so much for your time. Thank you so much, James. Great interview. Thank you. As always, everyone, stay safe.