The 5 Questions Podcast
Join us as we unlock real estate and business insights, one question at a time.
The 5 Questions Podcast
Elevate Your Portfolio with Christian Szpilfogel's Expert Strategies
🚀 Ready to supercharge your real estate investment strategy? Join us as Christian Szpilfogel, CIO of Aliferous Group, reveals how he achieved a 24% cash flow increase! 💥 From his tech-savvy approach to managing risk to innovative property redevelopment, Christian shares the strategies that can transform your portfolio.
Gain actionable insights and discover how AliferousAcademy.com is educating the next generation of investors. Don’t miss this episode! 🎧
#RealEstateInvesting #CashFlowIncrease #ChristianSzpilfogel #TechMeetsRealEstate #PortfolioDiversification #AliferousGroup #InvestmentStrategies #MultifamilyInvesting #FinancialPlanning
Office space is such a toxic asset in the lending world.
Speaker 2:Welcome to the 5 Questions Podcast, where we unlock real estate and business insights one question at a time. Welcome to the 5 Questions Podcast. I am your host, mario Lamar, on our show today. He is coming from private and public technology corporations. He refocused many years ago now on new venture through investments in real estate and tech startups. He is the CIO of the Ali Ferris Group and he believes in giving back to the community by spreading his knowledge and helping others develop their own personal wealth strategy to success. Welcome, christian Speifogel. Christian, welcome to the podcast today.
Speaker 1:Thank you very much, mario. So just a quick correction there, it's Christian Spielfogel. Spielfogel sorry, oh man, I can't believe you got that wrong. It's such a simple name, of course.
Speaker 2:Sorry about that. It's all good, Okay. So, Christian, the concept of the podcast is real simple Five questions about real estate in business and we get straight to the point. You ready Fire away. All right. So, as mentioned in the intro, you have a strong background in both public and private technology companies. How has your experience in executive positions within those tech corporations influenced your approach in real estate investing?
Speaker 1:So that's a really good question and I think it's principal to the success that we've had. When you're running a large organization, you have to have a lot of discipline, processes, financial discipline, ensuring that everything that you do has a predictable outcome and that you can ensure that you have the ability to pay the employees. That you do has a predictable outcome and that you can ensure that you have the ability to pay the employees, that you have to deal with the expenses you have, regardless of the ups and downs that might happen in a market. And so when I first started out in investing, I was a hobby investor, like most people are. You don't have a full. You know you pick up a property or two at the beginning and you do your best along the way, and what I found was what was really essential was ensuring that I had discipline around how those investments were managed, what my business cases were going to look like, how I was going to generate money, etc. What my business cases were going to look like, how I was going to generate money, etc.
Speaker 1:So when I went from being a hobby investor to a full-time investor, I look at every opportunity, every acquisition that we do.
Speaker 1:We determine exactly how we're going to make money in this transaction, so we understand what we're going to do to the property, how it's gonna generate new net worth, how it's gonna generate new cash flows, and I think that's principle is having a business case.
Speaker 1:But then the second piece of it is like I led in with is you have to have the operational discipline. So we're up to six staff now I need to make sure that I can continue to pay them, regardless of what might happen in the market in terms of up and downs, interest rates, etc. So I manage the risk side of it very, very carefully, which means that you know for example, let's take interest rates, which are something that's always on people's minds I take a look and say, okay, well, I could have saved money a few years ago and gone with a variable rate. But I looked at it and said you know what? Fixed rates are a little bit more expensive, but I look at it as an insurance premium and what I do know you know by picking, you know, say, a fixed rate in that scenario is that I have very predictable costs associated with my mortgages for however many years I do it. I do between five and 10 years, depending on the asset, it's how stable it is, et cetera.
Speaker 1:But now I have very, very predictable costs, which helps protect my business and my operations. So that's a key piece. And then we monitor revenue very, very carefully as well. So we have, you know, just to kind of put a bow on this, if you will. Right, we have formal plans around everything. We have an operational plan so we know exactly what our expenses, what our ratios are going to be. We have a risk management plan. We have a capital management plan, you know. So there's a whole series of plans that we look at on a strategic basis and on an annual operational basis.
Speaker 2:Well, this is really interesting and it goes to show that the importance of first having a plan, but not only on the acquisition side, but afterwards the, you know, stabilizing the asset and where the growth is where it's going to come from. So really interesting how you did it. So thank you for that. Insight Brings us to our second question now. Your portfolio is very diverse. It spans across real estate sectors like multifamily You've got retail, light industrial offices and mixed-use properties. What inspired you to diversify your portfolio across all these areas?
Speaker 1:Well, it feels a little eclectic, doesn't it? But it's. You know, every market changes, right? So right now, people are chasing multifamily. Okay, and because everybody's chasing multifamily, the amount of money to be made in multifamily right now is actually relatively limited. So one of the things that I do is I take a look at what my objectives are for the year and figure out what asset classes are going to be able to participate in that.
Speaker 1:So, back in 2017, I'd left my corporate job. I was working on developing our business, and one of the reasons that I changed at the time was a life circumstance associated with one of my daughters my elder daughter that forced me to leave my corporate job, and real estate was the way that gave me the freedom to be able to handle what she was dealing with. But what I had to do immediately was find cash flow, and I had to replace my salary at the time. So in 2017, I started buying light industrial property, because it just cash flowed extremely well at the time and it wasn't that big a deal to manage. We were still doing some repositioning on it, et cetera, but you were able to get those at like 10 caps or even 12 caps. Wow, that's really good, and so they just generated a ton of cash relative to the amount of investment you put in Later on.
Speaker 1:Again, it was just opportunity, whether it was retail, right now it's office space. Office space is such a toxic asset in the lending world right now Nobody none of the A lenders want to touch it, which is great because it means I have no competition. Nobody wants to buy it because they're all scared now. But in reality, if you buy them properly, you buy a class A building in a class A neighborhood. It will always be filled. First. It's the class Bs or off know secondary street offices that don't, or retail that don't work as well. So we've been buying office space this year and they've been cash flowing on acquisition, purely because we're getting incredible prices on them right now, because my only real competition, mario Mario, is for the current owner to be able to refinance the property. So and it's challenging for them to refinance it, so that's my competition on that side the exit on their side is your, your entrance for you yeah, absolutely, and these are the kind of opportunities we have to look for.
Speaker 1:So we you know it's really important that the investment community look at where the real opportunities lie that meet your financial objectives and not necessarily what everybody is chasing. And in fact there's a pretty good chance that if everybody's chasing a particular asset class or a particular geographic area, such as Moncton a few years ago or Edmonton right now, then chances are that's not the best opportunity anymore because everybody's there and people with crazy money, people who aren't even thinking about what a business case looks like. So you're competing with people who don't necessarily have the financial discipline. So you can still find opportunities there, but it's a little harder and often it's easier to find other stuff.
Speaker 1:So the other asset class that I've been working with over the last three years is what's called mixed use the retail on the main level, residential up above usually, where the commercial space is 30% or less of the overall square footage. But I don't have a lot of competition right, because a lot of people they might be comfortable or somewhat comfortable with multifamily, but as soon as you throw a commercial retailer with triple net leases et cetera involved, people get a little intimidated. So I find I don't have as much competition, which means I can get them at a higher cap rate. So I might be able to buy them at, say, a six or six and a half or even a seven cap right now, whereas if I go to a multifamily I'm still buying them at ridiculous rates of four and a half percent or 5%.
Speaker 2:Yeah, so this, this kind of makes me think of the, of the saying think, think outside the the box. Everybody's got a buy box, but sometimes the opportunity is not in there, it's outside of the box. So, um, you know, you're right, we should always be open to look at an opportunity, even though, if it's, it's not our usual buy yeah, yeah uh brings us to our third question.
Speaker 2:and you run your family office and fund your own real estate deals which is not something that's really common in the real estate space and you pride yourself with strong financial and operational discipline. How have these qualities contributed to your success and the growth of the self-funded family office?
Speaker 1:Sure.
Speaker 1:So really, real estate, when it comes down to it, is solid market analysis so that you understand your expectations of returns. And math, it's math, it's all math. So if you just want to buy and hold something, that's fine, right, but we need to recognize that what that is is a hedge against inflation. It's not necessarily a growth opportunity. There's nothing wrong with it. It's just we just have to recognize what kind of investment that is. But if we want to make money, then we need to think about what do we need to do to change a particular asset and make it better, more valuable? And that could be, you know, what I call repositioning projects. You know, on smaller things, you might call it a BRRRR, right, but it's whatever you're doing, you're changing the overall value of the overall property and there's a certain amount of money that goes into that and you get a certain amount of return. So what's really important is to make sure that you have the financial discipline to say what are my objectives? I'm buying this, what are my objectives in two years, five years, whatever the timeline happens to be? What specifically you're gonna do? How is it gonna change the value of the property? And be explicit about it. It's not a. What specifically are you going to do? How is it going to change the value of the property? And be explicit about it. It's not a magical thing, it's not a hope for thing. We know exactly what it's going to be worth when you're done. You know especially once you get into the commercial space and by that I include multifamily properties with at least five, you know, residential units in it, because then the math is very, very deterministic For every dollar that you increase the NOI, the value of the building goes up by whatever the multiple is on a cap rate, but let's say, 18 to 20 times the dollar that you increased on the NOI. It's very tangible and it's very predictable.
Speaker 1:So, having the discipline to know what your objectives are maybe it's a cash flow objective, maybe it's a net worth increase objective. In my case it's usually both right. I'm always trying to generate new working capital by increasing the value of the building and I'm trying to ensure that once the building completes, or whatever project I'm doing, that it's adding new cashflow to the business. And the mantra that I typically have as well is that when I buy something, it either has to cashflow an acquisition or have line of sight to cashflow, meaning that after I execute a project, it will generate cash flow into the business, absolutely critical.
Speaker 1:It's the only way you can scale. If you take on negative cash flow assets, you're fundamentally going to be, you know, stunted in your ability to grow Right. So through that discipline, so growing the net worth, which means we increase our capital pool, which means, you know, basically, we're generating new money to buy new things you can grow. And it's a nonlinear function, meaning that after the pandemic, everybody knows what an exponential curve looks like right, and with real estate investing, it's an exponential curve. So don't get frustrated, don't get impatient at the beginning if things don't seem to be moving, because it'll move fast before you know it.
Speaker 2:And it's really important to mention, to leave the emotion out of it. Like you said, it's math and it's numbers and it has to make sense for you to move forward on it. Which actually brings us to our fourth question, because I've rarely seen I talked to a lot of people I've rarely seen those numbers. The Alifaris group has seen a 24% increase in cash flow from 2023 to 2024, which is really good. What strategies did you implement to achieve this impressive growth?
Speaker 1:Yeah, well, it's consistent with what we've done in previous years as well, and that's why we added two new staff last year as a result of the increase in cash flow. And that's sustainable cash flow. That's not, you know, sometimes you get little blips where you get a little extra cash flow, you know, up and down, but that's the sustained cash flow to support our operations and our staff. And it goes right back to what I was saying a little bit earlier, which is that you have to have the financial discipline. So you need to have the predictable cash flow. So that means, for example, that I don't try and squeeze every last dollar out of my interest rates. Okay, I prefer to have it managed and predictable. If I take a five-year term, I have five years to figure out how I'm going to refinance that, you know, and etc. So, and in the meantime, I'm benefiting from that cash flow. So you get that baseline piece of it. But you're also, as I was saying, in terms of the way we think about our projects, is thinking about how do we increase cash flow from the assets that we have.
Speaker 1:So, for example, I'm redeveloping a building in downtown Ottawa. It's a historic structure and we're preserving the exterior shell. And then it was very old. The building was about 125 years old, and what we did? There was just nothing left that we could save on the inside, so we gutted it back to the structural brick and relayed it out. So it was originally a seven unit building that was very inefficient and we turned it into a 12 unit building that will have its permits occupancy permits by November of this year, 2024.
Speaker 1:So the key on that is that it increases in value and it's also increasing in cash flow and that cash flow gets contributed right back into our business. And we do that all the time right on industrial buildings. You might take a manufacturing building and cut it up into separate units that can be rented out with their own main doors, and you'll get a 50% boost in revenue. Or, during the pandemic, one of the things that we did when office space was really really hard to lease Almost impossible, almost impossible. But then we said, well, there are people who had to get away from the kids, the dog, the spouse, et cetera, to do their work and they wanted to just rent a small 160 square foot office or something like that. And so we converted a lot of those offices into small independent worker offices and made 50% more revenue per square foot. So the adaptability and thinking about how you can improve the utilization and get better revenue per square foot on a particular property is honestly the easiest way to grow your cash flow.
Speaker 2:That's very good insights on all the different aspects that you mentioned, which brings us to our last question. Already we mentioned in the intro that now you like to give back to the community and you created the alifarrisAcademycom, an online learning platform for real estate investors. First, what motivated you to start this academy and what can users expect to gain from it?
Speaker 1:Oh sure, yeah, so that was a passion project when I I'm an investor, fundamentally okay, and I focus on that. And for a long time a good friend of mine, bruce Firestone, who's a real estate investment coach, was trying to convince me to get into the coaching world and I just I was hesitant about doing that right, because that's not really. I wanted to help and contribute, but I didn't. I didn't want to defocus from what I was doing from my investing side. So I took on about four or five students at a time, after a lot of pressure from people who wanted me to coach them and encouragement from Bruce, and I said okay, from people who wanted me to coach them and encouragement from Bruce, and I said, okay, well, I'll do about four or five clients at a time and we'll see how it goes. And then I started to recognize that there's a lot of issues in the overall real estate training environment.
Speaker 1:There's a lot of coaches out there that really don't have much experience but put a shingle out and say they're going to be a coach. There's a lot of training programs out there that some are very good, to be fair, right, but there's a lot of stuff out there that really isn't very good in teaching people things that are quite questionable and potentially putting people at risk. So I figured, okay, well, what's the right way to approach this? And what I wanted to do was to have not me teaching things but to have experts in their field teaching things. So I wanted people who that's all they do every day. So, for example, chad Robinson, who does private lending and is an exempt market dealer, runs a MIG. He doesn't coach people, but I got him to contribute and do private lending course and it's a full course. You're gonna learn everything about private lending by someone who's licensed by it and does it every single day.
Speaker 1:Cherry Chan is contributing from an accounting for real estate perspective and I think many people know Cherry, right, she's probably one of the most renowned real estate accountants in Canada. I've contributed from a foundational perspective to help people with the foundations and the fundamentals. I've had Mark Amiotte with renovations or Melissa Dupuy, who's a big property manager in Southern Ontario, doing the property management piece and helping people with that. So the whole point really is you know it's our tagline is all the experts, one subscription. And the objective here is not for us to make money.
Speaker 1:I actually I make far more money on my real estate side than I do in the coaching. Coaching is really a rounding error on my income. To be perfectly honest, I do it to give back and that's what the Illifaris Academy is all about is really more about giving back. Of course we have to charge a fee because we have infrastructure right and I need to pay my contributors and I have to pay for marketing and sales. But whether we make an actual profit is a secondary thing and we plan to actually register as a B Corporation. If anybody who's familiar with that, that's a beneficial corporation that focuses first on social good and second is profit. That's the way that I want this to continue to roll out.
Speaker 2:Well, it's certainly a good project and I'm sure you're going to help lots of people along the way, and you surrounded yourself with a bunch of great experts, so people who will enroll in the academy are going to get a bang for their buck.
Speaker 1:Thank you very much, mario, I appreciate that.
Speaker 2:Christian, thank you so much for the time you took to be with us on the podcast. Lots of insights. I know it's short. We could have talked a lot more, but I appreciate the time that you gave us and hopefully we'll talk to you soon again.
Speaker 1:Absolutely, Mario. It's been my pleasure to be your guest.
Speaker 2:Thank you, Bye-bye. Thanks for tuning into the 5 Questions Podcast. If you enjoyed today's episode, don't forget to subscribe, like and hit the notification bell on our YouTube channel so you never miss an episode. Stay tuned for more insights and tips to transform your real estate and business game. See you next time.