Journey to Multifamily Millions

Real Estate Vs. Stocks from a Former Stockbroker’s Perspective with Jonny Cattani, Ep 70

November 16, 2023 Tim Little Season 1 Episode 70
Journey to Multifamily Millions
Real Estate Vs. Stocks from a Former Stockbroker’s Perspective with Jonny Cattani, Ep 70
Show Notes Transcript

Today's guest is  Jonny Cattani, He is the founder of Cattani Capital Group. He’s a former stockbroker turned RE Investor and has been in commercial real estate for 3 years, and an investor 6 years. He currently manages a $650k STR (Short-term rental) Fund and specializes in helping busy professionals build wealth through passive income. 

He's also the host of The Cash Flow Chronicles podcast, where he interviews top experts in real estate and business.

In this episode, Jonny shares his journey from stockbroker to thriving real estate mogul in this multifamily real estate podcast. Discover the hidden potential of real estate investments, debunking the stock market myth. We explore the power of new money wealth management and how to thrive in uncertain times. 

Tune in to gain insights on mastering the ever-evolving real estate market.

Episode Topics

[01:58]  Meet our guest,  Jonny Cattani
[02:47 ] From Stock Broker to Real Estate Success
[10:29]  Unlocking Wealth Beyond Stocks
[16:29]  Investing Insights for Teens
[24:35]  Wealth Building Strategies for Today's Generation
[32:05]  The Future of Real Estate: Shaping Expectations
[39:35]  What is one red flag every investor should look out for?
[40:52]   What is a myth about the real estate business?
[43:48]   Connecting to  Jonny

Notable Quotes

  • "I started as a stockbroker, but real estate was where I found my true passion and success." - Jonny Cattani
  • "The stock market is not the economy. The stock market is not the only market." - Tim Little
  • "People think they have control in the stock market, but true control is in predictability and mitigating risk in alternative assets." - Jonny Cattani
  • "If you like Coke, you can drink Coke, but it won't affect the stock price. Real estate offers control and value addition."  - Tim Little
  • "You cannot save your way to wealth; you have to find these skills to make more money, and then you can start investing that." - Tim Little
  • "Ultimately, the way to do it is to go and continue to learn and build your skill set so that you can go out and essentially make more money."  - Jonny Cattani

Connect with  Jonny Cattani

👉 Connect with Tim

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Ep 70 - Jonny Cattani (audio)

[00:00:00] Jonny Cattani: But what I really realized is that ultimately the way to do it is to go and continue to learn and build your skillset so that you can go out and, essentially make more money.

And when you can go and you can make more money and you have that ability and specifically for me, the ability to go out and raise money and leverage other people's money, which I think is ultimate skill that you can have, because then you don't need to worry so much. About making sure that you're making a million dollars.

If you can go raise a million dollars, once you do that, it completely changes everything because then nothing's off the table. You can go and do what you want and get access to these opportunities that, may have taken you 10-plus years to get access to, if you were trying to do it all on your own.

So that was the biggest thing that I learned. The difference between the old money and the new money. The new money is yeah, savings good. And certainly you should have a rainy day account, but, it's really about going out and building your skillset and present and getting and putting yourself in the position to have those opportunities.


[00:01:48] Tim Little: Hello everyone. And welcome to the journey to multifamily millions. I'm your host founder and CEO of ZANA Investments, Tim Little. And on today's show we have with us Jonny Cattani. Jonny is the founder of Cattani Capital Group. He's a former stockbroker turned real estate investor and has been in commercial real estate for three years.

And an investor for six years, he currently manages a 650, 000 short term rental fund and specializes in helping busy professionals build wealth through passive income. He is also the host of the cashflow chronicles podcast, where he interviews top experts in real estate and business. Jonny, welcome to the show.

[00:02:29] Jonny Cattani: Hey, thanks so much for having me, Tim. Grateful to be here. 

[00:02:32] Tim Little: Yeah. And it is great to have you. So I gave everyone a high level overview of your background, but on this show, we really like to get into the details of how you got started on your journey. So please take us back to the beginning and tell us how you got to where you are today.


[00:02:47] Jonny Cattani: absolutely. Grew up grew up in New Jersey, moved to Utah to live with my dad when I was 16. So I've been there ever since. So about half my life now, I've been here in Salt Lake city. I was a really good student up until I wasn't really probably about high school ish. I think it's when a lot of my ADD and my ADHD really started to show itself.

And I had a challenge, but still graduated, had a good GPA, went to college ended up not actually graduating college. Was a bit eclectic through my 20s in terms of careers, but eventually found.

Found finance and was a licensed stockbroker for discount brokerage. And so I had my seven and my 63, and that was my first real intro to finance, right? We, you had some personal finance classes in high school. And then of course, like in college, I took some business classes, even those who have.

Study finance. You don't really learn how it works. So what was cool is I got to see how the stock market actually works. And while the stock market isn't everything. It's a lot, right? When people talk about the market and talk about how the market's moving or the market's doing, they're typically referring to the stock market or some sort of derivative.

Obviously, we talk about more of the private sector, but ultimately it was really awesome to get that opportunity. And I worked my way up and started working with high net worth clients who had 5 million in assets or more. And really my job was just to see, Obviously ensure that they enjoy, we're happy with the service that we were providing at the institution and ultimately try to get them to consolidate outside assets, which led to conversations about outside portfolios, which led to me realizing that the majority of these high net worth individuals had real estate in some form or fashion, even so much so that, We allowed you to have self directed IRAs and 401ks.

And even some of them would call in to complete the paperwork and, use their IRAs to invest in syndications. And this is back, six, seven years ago when syndications weren't as, they had just become possible, they were brand new structure and. It was really the ultra wealthy who had access to them first.

And certainly, you can make an argument that's still a bit of the case, but so anyway, so I ultimately ended up hating the corporate world and left and joined the tech startup world. We've got a lot of tech startups here in Salt Lake City. And so ultimately that led to getting laid off from COVID.

And, after I had learned about all these alternate worth. High net worth people having real estate. I started listening to books and podcasts and really looking into it and, going to meetups and a lot of the people here in my local market are, they love to wholesale and they love to do fix and flips.

And that just wasn't for me. It's too transactional. And, you really see, a lot of. A lot of them will get too much on their plate, right? Especially the fix and flippers. And you see the risks that you run in a market cycle like this, where, listings now are sitting for a long time and that's costing them money.

And so I saw that early on and it wasn't for me. So I found a group here that was doing. Buying apartments in Oklahoma City and Columbus, Ohio. And, I asked how I could add value to them and it turns out they needed some help in kind of the investor relations side of things in terms of, helping set up their CRM and building automation, some things that I had done at the tech startup, as well as.

With talking to high net worth individuals for, gosh, almost three years I guess a little over three years, I had an idea of, how they thought and so I was able to help them set up automations and just add value however I could. And we ended up scaling from 70 units to 570 units and a little less than a year.

And that led me to really realizing that my skill set was best suited in that kind of investor relations, more specifically the capital rate, capital raising role. So I found Hunter Thompson's book Raising Capital for Real Estate, listened to it on audible. Absolutely loved it and was like, all right, I got to find this guy.

So I'd originally reached out to try to be part of his original mentor, his mastermind group, the cashflow connections had the same name as his podcast and reached out and got an email back from Adam Adam Carr as well. And He was like, Hey, we're not bringing new people to CFC.

We've got this new mastermind group called raise masters. You should check it out. So I jumped on to a webinar and if any of your listeners know Hunter and I know, no, Tim. As soon as it was over, I was like, take my money. That man can, he's selling you and he's taking you through the whole spiel and you're still like, yep, here you go.

So I was one of the first, probably a hundred or so members of raise masters which is pretty cool. Ended up going to the retreat in Austin and got to meet them all. And ultimately they pushed me to start my own group the long term vision with that other group wasn't aligning.

And they pushed me to start my own. So I started Katani Cabell group in January, 2022, as you mentioned in the intro ended up partnering with some other Raise Masters folks, actually, and we raised 650, 000 for the TechVestor short term rental fund, which was absolutely awesome, and a lot of valuable lessons learned on your first raise, as I'm sure a lot of capital raisers can attest to, and, from there continued to grow the business, add some infrastructure in terms of my own kind of internal workings, and have since launched an oil and gas deal and have been raising for that.

Thank you. And possibly exploring some other asset classes. My big thing is cash flow. A lot of my investors are cash flow investors. All but dried up right now in multifamily. I still love the multifamily asset class as a whole. I'll never say anything bad about it, but when you've got investors like, Hey, I want cash flow.

Hey, I want cash flow. It's tough to bring them. Some of these deals right now, although I do believe some of these multifamily deals that we're seeing right now are going to be home runs, especially, in the right markets despite their very conservative, economics. So yeah, so ultimately that's that's the whole story in a nutshell.

[00:09:46] Tim Little: Awesome. So the first question I want to ask you, where did you live in 

[00:09:51] Jonny Cattani: Jersey? Near Atlantic City in South Jersey. Okay. Yeah. I, 

[00:09:56] Tim Little: I grew up in Lakewood. Okay. And if you know where great adventure is, it's 20 minutes away from there. I'm sure you do. If you lived in Jersey, I had a I had a season pass all through middle school.

[00:10:06] Jonny Cattani: Oh man. Yeah. Jealous. Yeah. I grew up six flags. All those theme parks around there. We used to go down to universal studios as well because we had a house down near there. And Yeah, I came out here out West and they don't do roller coasters quite like we do over there.

So it's been, I've had to anytime I go back East, I'm like, we're going to a amusement park today. I need to ride some roller coasters. 

[00:10:29] Tim Little: All right. Yeah, definitely. Let me know the next time you're in the central Florida area, since I'm in Tampa now, it's only about an hour to Orlando.

Yeah. How's bush 

[00:10:35] Jonny Cattani: gardens. I haven't been there. It's 

[00:10:38] Tim Little: it's pretty awesome. Yeah, definitely worth checking out. We get to I get to go there once a year for free because I'm in the military. They do this whole thing where they let you know, military folks. So I usually take the kids to like either the Halloween season.

Or the the Christmas season when they have it all decked out. But the kids love seeing the animals in addition to, roller coasters, most of which they can't ride on, but they still have Sesame street land. So it's all good. 

[00:11:06] Jonny Cattani: Nice. That's awesome. 

[00:11:08] Tim Little: I was going to hit on some of the stuff you were talking about.

Let's, you're right. When people talk about the market, they're almost always talking about the stock market. But I think that's really a result of like the news and publications. And that's 99 percent of their focus. And sometimes we need to remind people that the stock market is not the economy.

The stock market is not the only market. And I think that's like what you and I and other alternative investment investors have to do. And sometimes it's an uphill climb because. These people have only had their money if they've had any investments at all. 99 percent of the time, it's been in some form of the stock market, whether it was in mutual funds, individual stocks, whatever.

And so I think that's a huge challenge in terms of educating new investors that. Hey, that isn't your only option, right? Is that something you find to when you're dealing with, people, maybe not even in that high net worth category, because maybe they're a little savvier, but you tell me, 

[00:12:11] Jonny Cattani: yeah, certainly.

Even in the high net worth category, it's still absolutely a conversation. You'd be surprised how many of them don't aren't aware of course they've heard of real estate and a lot of times they've invested, but a lot of times it's some kind of single family or, their friend bought, is a fix and flipper and they supply all the debt, which, those guys are typically pretty savvy, but yeah, for the most part with newer investors, the nice thing that you're starting to see with.

With social media, especially over the last couple years is a lot more awareness, right? And so people are aware that they don't know really what's happening with their money, even though they are investing it, right? They've got a 401k with their employer, but they really have no idea what the heck it's doing I don't really know if anyone does know what their 401k is doing and so What I've noticed it's interesting because what I've noticed is that with the current downturn that we're in, and although the stock market is, turned bullish I put that in quotes, but it's turned bullish.

People are aware that, oh, wow, there's a lot of volatility here. And so what it's done is it's, at least in my social media, I've had people reaching out, especially on Instagram where I'm most active and people being like, Hey I know I need to learn what you're trying to teach. I know my I don't know what my money is doing and I want to know what my money is doing.

And that's the thing with the stock market is, even if you invest in a company like Apple, do you know why you're investing in Apple? Do you know what Apple is trying to accomplish as. A publicly traded company, right? Yeah, sure. Most of us have iPhones. And of course, like I always, I get an upgrade every year, just like everybody else.

And my laptop is Apple and I have all Apple products and I love Apple. But, do you know why you're investing in Apple? Is it just because you like them, does that make them a great company? So my thing with. The stock market, like public versus private, like the big thing I talk about is, people think that because they have the liquidity and the option to go and I place a trade right now, like while we're recording this, the market's open, it's a weekday.

It's a Wednesday. I put a sell order in now and my money is available from, it's got to go through the settlement on Friday. I can withdraw it as cash, right? And so people think that gives them control. But unfortunately, Control is actually in predictability and when you can predict as many variables aka mitigate as much risk as possible like we can in what we do with the private sector and specifically, multifamily and these alternative assets that is actually where you actually have the control.

Now you don't have the liquidity. But there's a bit more predictability there, right? You're not worried about some analyst writing an article and being like, Oh, I actually don't like Austin, Texas, or actually don't like Dallas as a market. It's not going to sink the Dallas real estate market because someone writes a blog that they don't like it.

But in the stock market, analysts can literally put out a report and be like, yeah, Apple didn't sell enough. As many iPhones as we thought they were. I'm changing my rating on them from buy to hold. And boom, Apple's down 3 percent for the day. And what if that day was the day you needed to sell so that you could, put a down payment on your house or, whatever it might be?

And I've got a million horror stories about people who tried to wait and time it in the stock market. And so that is the risk that you run there, whereas with us, in the private sector, especially with real estate, you don't have those uncontrollables. Now, certainly there are things that can happen.

I'm not saying it's a perfect world. Of course not. But, ultimately in the end, you still own real estate and even in a down cycle you just hold a little bit longer, Oh, by the way, there's still cashflow and, the tax advantages and. All those different variables.

When you really put the two next to each other, it's almost apples and oranges. You know what I mean? And ultimately, the conversation with investors is just, what do you care about more? Do you care about having the liquidity? Or would you rather have that peace of mind and a little bit more predictability?

[00:16:29] Tim Little: Yeah. And I think you brought up a couple of key points right there. What you want is knowing your investors, right? What are their priorities? What is their risk tolerance? Like you said, do they prefer, longer hold, short term hold, do they prefer cash flow or, more equity, big bump at the end.

And these are the things that you need to find out because you want to align your deals with your investors, right? You don't want to be putting something in front of them that they aren't going to want because it doesn't help you or them. But I think the. My biggest takeaway from what you just said is if they're invested in stocks, they have liquidity, not control.

And those are two different things that sometimes get interchanged between each other when people use those terms. So sure, they could sell their stocks and they could buy their stocks, in seconds nowadays with the. The technology that we have, and that's just not something you can do with a longer term investment syndication, whether it's a car wash multifamily, it doesn't really matter.

But I think the other piece, in terms of the control is also true because. The analogy that I like to make to people is, Hey, if I like Coke I can drink Coke, but it doesn't matter if I drink a case of Coke a day, I am not going to push the price of my Coke stock. It is not going to change.

Even if I get all my friends to drink a case of Coke a day, I'm not going to pump up the stock. The difference with, something, an asset like multifamily or, mobile home park or something like that is you can actually add value to it. Yes. And you have the control to do that. And that's really a big difference too, that I think a lot of people just don't understand.

[00:18:18] Jonny Cattani: Absolutely. Yeah. I didn't even get that. That's such a great point is. You're not going to be able to call up Tim Cook and, now certainly you can watch him in interviews and, I've read books about him and he is very intelligent human and I'm not trying to knock Tim Cook.

I'm just saying you're not going to get a meeting with him to shake his hand and really understand what he's about. Whereas, when you go to invest in a syndication you should be on the phone bare minimum with that group at multiple times, right? If, a really great group that I think is doing things great is Rise48, right?

Their CEOs still will talk to investors. You can absolutely get Zach on the phone. Within the next 24 hours to have a conversation with him, even if you're just investing at their minimum, he'll still get on the phone with you and talk to you about, their strategy and their vision and their core values, excuse me.

And, and you have that opportunity to truly vet, not only the asset and the market, and of course those things are important, but you can vet the group and the people and make sure that your visions actually align with theirs. As opposed to, some mutual fund and, all you've got is the disclosure and, you're never going to get a hold of the fund manager.

So you have that opportunity here to really know who, what, and why you're investing in something as opposed to, like we've been saying, you really just, you don't get all of that when it comes to the public sector. 

[00:19:50] Tim Little: Yeah that's good. And that's another one that I hadn't really talked about much or heard much about is the access.

Because like you said, yeah, if you have some giant corporate conglomerate who do you talk to get information? There's no, what you get there, annual reports and stuff like that. But that's, through how many people has that gone through? If you want answers, how do you actually get answers?

And I think, like you said, that's a key difference, because if you have a question on a monthly update for a property, you can email whoever, the sponsor is, and they will get you an answer as to, hey, why was Yeah, income higher this month than last month or whatever. The question is that you have, and so there's that opportunity to continue to educate yourself on these assets and become a much savvier investor in a way that I think isn't really available on the other side.

Sure. You could read all the reports and stuff like that, but the interaction the access isn't the same. Totally. 

[00:20:51] Jonny Cattani: My cell phone number is on my website, go on my website and get my cell phone number and literally talk to me right now. You know what I mean? It's amazing how many people won't, but you can, you're not going to get that kind of access, and that's just really the kind of some of the biggest differences, is really that access and like you said, and the ability to add value right from the start.

You know what I mean? Even thinking about taking on an asset where the rents are below and all you do is change the rents you add 50 to 100 units, on a five cap and, what is that, like 200, 000 to the NOI or something crazy? it's pretty significant what you can do.

And so that's why truthfully, I believe that. True wealth, wealth is actually really created over here and what we do and, preserved now when it comes to the stock market, I'm not saying you shouldn't be invested there because certainly the buy and hold, if you have a long term outlook on it, obviously, if your current employer, if you're in a 401k, the current employer, you don't have a choice, you can't move it out of there.

I'm not saying you shouldn't be, I think diversification is important. You seen what, over 20, 30 years in the stock market can do, it can grow, there's no doubt about it. But I think, when it comes to, if I had 100, 000, I wouldn't go to the stock market for the next 30 years.

Let's just put it that way. 

[00:22:16] Tim Little: Yeah, no, and that makes a lot of sense. I'm a bit big advocate of diversification. I know some people, get into their tribes and it's, all or nothing. It very rarely is an all or nothing approach, the best approach but even I recommend diversification even within real estate, right?

And then you go even further, even within multifamily, you can get into different asset classes, a, b, c, or you can do different regions. Diversification by sponsors. There's so many ways to get diversified even within that one asset, just people say they're diversified because they have, a couple of different stocks.

I would argue that's not true diversification, because you don't have diversification in asset type. I want to go back to what you were talking about when you started working with these high net worth Individuals and most of us don't get that opportunity to get in front of folks like this unless we were Raised and I don't want to say privileged environments it's not their fault if they were raised in an environment where that was normal and I you know Sounds like for you and for me, that's not normal my parents were certainly not high net worth probably the lower middle class you could get by back then being you know lower middle class and you didn't have to worry about having a place to live.

It was a different environment, especially from a housing perspective. In terms of the lessons that you learned and like your mindset were you able to learn lessons from them and did it change your perspective on wealth investing? When you started talking to these folks and it Open the 


[00:24:35] Jonny Cattani: aperture a bit.

Yeah, that's a great question. So yeah, I'll never forget the first time I got a took a call from someone about a million dollars in their account and I was like, Oh my gosh, a million dollars. And don't get me wrong. I don't want to knock a million dollars. It's not a small amount of money, right?

Especially when used correctly, now I can be in a room and someone, has a hundred million dollars net worth and I can stand next to them without feeling oh my gosh. Or a billionaire even. I've had 'em on my podcast and it's just, they're just regular people now.

And that kind of goes away. But yeah. I'll never forget the first I saw million dollars. Oh my . Yeah. It, it's a little bit different because now you're getting a lot of new money and so new money. Is very different when it comes to its app, like its outlook, the lessons then were, it was still a lot of old money and, old money likes to be like, save everything.

And, they saved all through the eighties when you could, kick the can down the road and get a 10 percent savings account, and they're putting money away and getting these high yield savings accounts. And the lessons they want to teach you are save save, whereas, now what you're really seeing is no, actually what you should be doing, you should be going out and learning how to make more money, right?

It's, Unfortunately, like I just went and I'm moving all my stuff over to chase and, say what you will about the big large institution. I get it. But one thing about them is they their savings accounts right now are like still I think 1 percent while they're making easily for at least 4%.

If even if they're only making 3 percent on my money, there's still got a 2 percent Delta, and ultimately the time to, and I'm not saying you shouldn't save it and certainly shouldn't be taking on all this dead and I don't want to get into a whole, Dave Ramsey thing, ultimately the biggest lesson that I learned is that yes, you can go and get a million dollars by investing and saving for the next 20 years.

You can absolutely do that. We've seen it time and time again. You work at the same place or, you continue to grow your income and you invest in your 401k and you put money in your IRA and everything grows and in 20 years, you've got, a million bucks and that's great. But what I really realized is that ultimately the way to do it is to go and continue to learn and build your skillset so that you can go out and, essentially make more money.

And when you can go and you can make more money and you have that ability and specifically for me, the ability to go out and raise money and leverage other people's money, which I think is ultimate skill that you can have, because then you don't need to worry so much. About making sure that you're making a million dollars.

If you can go raise a million dollars, once you do that, it completely changes everything because then nothing's off the table. You can go and do what you want and get access to these opportunities that, may have taken you 10 plus years to get access to, if you were trying to do it all on your own.

So that was the biggest thing that I learned. The difference between the old money and the new money. The new money is yeah, savings good. And certainly you should have a rainy day account, but, it's really about going out and building your skillset and present and getting and putting yourself in the position to have those opportunities.

And, when you see an opportunity and it looks right. Ultimately you need to pull the trigger because too many people are scared and then, five years down the road, they've got regret because they, didn't jump in on some opportunity that, ended up, doing very well.

[00:28:15] Tim Little: Yeah. And I think, to a certain extent, it makes sense for old money to have that outlook because they've already made copious amounts of money. So their focus is on primarily capital preservation. Yep. And if you've got, if you're getting Three or 4 percent on a really large sum of money, then it's enough for probably your generation and a couple of generations to live off of.

So the priorities have shifted once you get to a point of wealth to where you, you definitely don't have to worry about money anymore. And I think what are the statistics, right? I think it's 70%, 69 percent of millionaires are new million, new millionaires, self made. Yeah, they weren't they didn't inherit that money.

They made it themselves and they did it exactly the way that you're talking about by building up these skill sets and finding new ways to make money because to your Dave Ramsey point, you cannot save your way to well, it's virtually impossible. To save your way to wealth. And so you have to find these skills in order to make more money.

Then you can start investing that. And I agree with you. We should always have a savings and stuff like that. That's why my wife and I are very different people. She's the saver. Patient less, more risk averse type and I'm the opposite where I'm pursuing these, other avenues of making and growing money and so it, it winds up working out well, right there, there should be that balance there, but that's all I was going to say.

I think it makes sense for, people who are uber wealthy to just focus on keeping the money. So their future generations don't blow through it. Like again, most statistics. Say they do, but 

[00:30:06] Jonny Cattani: yeah, and that's such a great point. Is it just different goals. And that's the thing is when you are that he's got 10 million.

Yeah. Going and putting 10 million into a two year treasury that is going to yield. I think it's down now around 5%, but for a while there was like five and a half percent. You're betting on the U. S. government. When I was taking my series seven, and you're learning about the different products, they're like, listen, there's no guarantees in investing, but the U.

S. government has never defaulted. Read between the lines there, right? So when you can take 10 million and go put it into a two year. That's going to yield you five and a half percent. Yeah. Why the heck wouldn't you? You know what I mean? And so of course your advice is going to be oh, yeah, look at these fixed income products You know what?

It's okay. I don't have 10 million dollars to go put in there. You know what I mean? So so yeah, just different. Moments in time for sure. Yeah, and 

[00:30:56] Tim Little: That, that segues nicely into, what investors are thinking right now. Because I think a lot are sitting on the sideline.

They got some dry powder. And there's a little bit of fear and certainty and doubt that the FUD out there right now in the markets. Not because necessarily they think there's going to be, a crash or a huge recession. Although I'm sure you'll find some headlines, that'll say that I think most of them just aren't sure where the market's going.

They're like, I think it's a soft landing. Seems like a soft landing, but things are more expensive. And, I don't know, commercial real estate with people not going back to the office could just tank one day. And, the. Single family housing market is a mess because of, higher rates and people not selling, yada yada, all of that to say that a lot of people aren't willing to put their money in right now.

And I guess I would say one is that what you're seeing as well? And what would you say to those who are holding on to that cash right now instead of choosing to invest it? Yeah, this is 

[00:32:05] Jonny Cattani: kind of the million dollar topic right now, right? Because we're all seeing it. And there was a period where I was like, what am I doing wrong?

And then, you see even the best in the game in terms of capital raisers, which is, what I really pay attention to and even they're struggling to raise capital. And so I'm like, okay, it's obviously not me, it just happens to be this moment in time, which I'm grateful for, because, you're having to, train at altitude in a And so to get to your question, ultimately.

It's tough because you were able to go into the two year treasuries and get five and a half percent. And so it's hard to have an argument with someone or, to convince someone to come over and get 6 percent on their money, 6 percent annualized return in, volatile real estate market right now, because like you said, we don't know what's going to happen now.

We do know as of the recording of today, the fed has paused Is doing a rate pause now, it sounds like their outlook is to raise interest rates at least one more time this year, which I believe will happen most likely in November. Ultimately, what they're doing is they want to wait for some of the data catch up.

As a lot of us know, and if you're not aware, a lot of the data that they use is a lag, at least six months, if not closer to 12 months, especially when it comes to real estate, right? Real estate takes, even a, residential transaction takes, 45 to 60, possibly 90 days, there, it's absolutely possible for, commercial real estate to take, 120 to 160, 180 days, right?

All of that needs to catch up in order for them to really understand where inflation actually is. Now, prices are going up, which ultimately should slow spending. That doesn't seem to be happening as much, but you're starting to see data like credit card, I think the majority of the US now is just making minimum payments as opposed to paying everything off.

And so I preface with all of that to say, the biggest concern is just there's not a lot of predictability right now. If the Fed doesn't even know what they're going to do, then... Why would an investor want to jump into something? And so you can't take that away from them because that is true.

We're all insured. Now you and I are a little bit more biased and think that this happens to be an incredible opportunity. And like I said, in the beginning. These multifamily deals that you're seeing that don't look that sexy, especially when you compare them to what we saw the last three years.

We've got your 16 percent IRR, your 1. 6 to 1. 8 equity multiple and your six pref. And no cashflow for the first year. It doesn't look that, that great, but I promise you, some of these deals will be home runs now, certainly, more than goes into that, you got to get right market, operator, right asset and all of that. But, over the next five years. Things are going to turn around. Interest rates will start to come down. I think it's probably closer to 2025 that we started to see them really tick down. And then the other thing you need to get used to is we're not going to get back to, three to 4%, money.

Like I think we're going to settle right in that five to 6 percent range, which is still pretty cheap money. Now, once the market accepts that and all of the asset prices, fall into place, it's going to feel like normal. And when you go out and, you get a 5. 6, 5 percent interest rate, people will be like, Oh, wow.

That's really awesome right now. Everyone's Holy cow. And they're like 6%, 7 percent like, Oh my gosh, like that's a really high interest rate. It's not really, but it's just that we've had, we had what, two, three years of 0 percent interest rates. And, you're getting two and a half, 3%, I got 4 percent for my house.

And what I tell people that are sitting on the sidelines is, I understand, but you need to be careful because if you take your ear off the street, and you're not paying attention to what's happening when you go to get back in. It's going to be tough to get your a pulse on the market because, all of a sudden, like you're seeing, a 6 percent interest rate and you're like is that good?

Like I haven't seen what these other deals are doing. And so the conversation with investors is just, I understand why you're doing it, but just be careful because there are deals that are happening right now that may not look that good that are going to be home runs. And, there are still really good operators out there still, using very conservative underwriting and still getting very good deals across the finish line.

So I just caution those investors who are sitting out and just to tell you that, at least keep paying attention to what's happening because that way, when you are ready to get back in, you'll have your pulse, have the pulse of the market and you'll be able to recognize a good opportunity.

But, ultimately I'm not staying out of the market. I'm still investing. I'm still out there looking for cashflow. Cashflow is still there. It's an other asset classes but it's still there and good deals are still happening. And I would just say that, if you're really trying to create wealth and you really have a long term mindset, then this small little blip in, in history, that's ultimately going to be.

18 to 24 months of time and in the grand scheme of life is really not that significant to, completely step out of the game in my personal opinion. 

[00:37:39] Tim Little: Yeah. And I think that makes a lot of sense. Essentially it's probably going to take the passage of time for investors to get a better perspective because of the uncertainty right now.

And like you said, I get it. But What you said about them keeping an eye on things so that they don't lose track of, what normal looks like, right? And I think. That's the difference. Obviously we got spoiled by artificially low rates. When, like you said, they were at zero and everyone was awash in money.

That, that was not normal. And we, it was no way it was sustainable. Of course, no one wanted to end the party cause who wants to be that guy. But we shouldn't expect that to happen again. Just with COVID was also an anomaly and we can't expect. Multifamily deals to be doubling or tripling people's returns in a two year period.

It's just, that is just a total black swan event. And I was thankful for, the one or two deals that I did during that period and got those results. But do I expect that to be the norm? And I'm, am I going to be looking for that in underwriting if I'm investing with people? Absolutely not.

Because that's. That's ridiculous. So I think there's going to have to be a tempering of expectations as the market shifts. And maybe it's not, nine prep on, on every deal that you're looking at. Maybe it is that six prep or seven prep that's normal now. And that's why, like you said, people just have to keep their, their finger on the pole so that they know what normal looks like.

All right. Some awesome insights there. Some great conversation, but we do need to move on to the turbo round. All right. So I'm going to ask you three questions that I asked every guest that I have on the show. And I just asked you for a quick, honest answer. You ready? All right. What is one red flag that every investor should look out for?

[00:39:40] Jonny Cattani: That's a great question. One red flag, I would say lack of transparency. 

[00:39:46] Tim Little: Absolutely. If you're asking questions that they don't want to answer, that is absolutely a 

[00:39:51] Jonny Cattani: red flag. Yeah. I would say if they're not even going to let you look at their underwriting model, that's a red flag. Yeah. I think, you don't need to go into that much detail.

That's like detail I go into and that's, why you trust your sponsors and whatnot, but There, if they're not, there's, there, there's a certain level of transparency and communication. And if it's not there, that's a huge red flag. 

[00:40:14] Tim Little: Yeah. And I think, there's different ways you can handle it.

Cause the only issue that when it comes to like underwriting is some people have copyrighted models that say, say someone else built and you can't just send it to them. Yeah, 

[00:40:25] Jonny Cattani: fair. Show me your assumptions. How about that? At least let me see your assumptions.

[00:40:29] Tim Little: Absolutely. And one thing I've done is print out the summary of the front so that they could see at least all what went into it. Or another thing you could do is have a zoom call and walk them through it and literally go tab to tab if they wanted to get into that level of detail.

That way you're not like just handing over the product that, is copy. 

[00:40:48] Jonny Cattani: Yeah. That's fair. Yeah. No, 

[00:40:50] Tim Little: good point. All right. So the next one, what is a myth about this business that you would like to set straight? 

[00:40:56] Jonny Cattani: Ironically, after this whole conversation, that it's only for the ultra wealthy.

That is not true at all. 

[00:41:01] Tim Little: Yeah. And I think that's like the biggest challenge that we have in, educating newer investors, people who just haven't invested in real estate outside, maybe owning a single family rental or a duplex because they just have never been exposed to it. Finally, what does success look like to you?

[00:41:23] Jonny Cattani: Oh, that's a great question. I actually, this one's tough to answer real quick. Cause I do waffle with this periodically cause I like to reflect, but, ultimately I think for me is success is, admittedly I did get into this to make money and, that's the wrong outlook to have.

In my position, it's really to help others. And so for me, success looks like helping educate people on this industry and why, I believe in it so much and ultimately, obviously raising, I would love to get to the point where I'm raising, a hundred million dollars a year, but along the way that process looks like.

Education and helping investors and new investors specifically, which is my favorite conversation to have and seeing that light bulb where people are like, Oh, wow. Like I can access this. And it is within reach. And so to me, success is having that educational piece and bringing new investors along. 

[00:42:24] Tim Little: Yeah.

And I think that's so true. And one of the highlights for me is when you can remove a mental obstacle to doing it right there. They're like, Oh, that's, I can't do that because I'm not wealthy. Okay. There are different products, some that are only for accredited investors, but there are other products, 506B deals that are open to people who aren't accredited.

And, oh I don't have any money. Okay, that may be true, right? It does take capital to get involved in this. But do you have an, an old 401k from a previous employer? Yeah, but I haven't looked at it, in a year or two. Did you know that, that you could turn that into a self directed IRA and basically invest in whatever you want?

And like. When you tell people stuff like that, that they just had no idea and they realized that they have more at their disposal than they expected. I think that's huge. 

[00:43:18] Jonny Cattani: Absolutely. And Oh, by the way, you've have, things like tribe vest where, if you only have, 10, 000, you can get together with five other people that have 10, 000.

And now all of a sudden, you guys are able to write a 50, 000 check and, invest through an LLC. That's done for you. You know what I mean? So the opportunities are there. It's just really about educating people and making them aware And that's my big focus now. 

[00:43:41] Tim Little: Yeah, that's awesome.

Hey, Jonny, this has been awesome. I really enjoyed the conversation. Please tell our listeners how they can get ahold of you. And if there's anything else that you'd like to share with them. Yeah, 

[00:43:51] Jonny Cattani: absolutely. Best way. So for those of you that aren't accredited, I do every once in a while do a five or six B deal.

Obviously the only way for me to talk about that is for you to be on my list and for me to have a conversation with you. So if you're interested in that and go to join my list, top right corner, become an investor. We'll have a conversation, build a relationship, make sure our values align.

As you mentioned my intro, Cashflow Chronicles is my podcast available on all your favorite platforms. And if you're a social media junkie like me, then at Jonny Cattani on all my social, on all social media 

[00:44:29] Tim Little: platforms. Nice. We will definitely have all that information in the show notes. Hey, Jonny, I appreciate you coming on and I look forward to continuing to see you do big things on your journey to multifamily millions.

[00:44:42] Jonny Cattani: Thanks for having me, Tim.