HEATHER EWING: The CRE RUNdown

Ep. 65 Luis Frias - Beyond Mailbox Money: Building Legacy Through Multifamily Investments

• Heather Ewing, CCIM • Season 1 • Episode 65

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In this episode, Luis Frias, Principal of Caltech's Capital Group, shares his journey from broker to multifamily investor managing over $140M in assets. Driven by a desire for time freedom after the birth of his son, Luis discusses how his brokerage background laid the groundwork for investment success through operational efficiency and risk mitigation. He also dives into the impact of AI on streamlining property and asset management, highlighting tools like Market Stadium. This episode offers valuable insights for anyone looking to build legacy and purpose through commercial real estate investing.

Tune in now and discover how to turn your career experience into long-term wealth and meaningful impact.

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Heather:

Welcome to Heather Ewing, the CRE Rundown. I am your host, Heather Ewing, and today I have another fantastic guest. It is none other than Luis Frias. He is the principal of Caltech's Capital Group, Luis welcome.

Luis:

Hey Heather, Thank you so much for having me on today. I do appreciate your time.

Heather:

My pleasure. So we've been connecting through LinkedIn, I think, for about a year or longer, and it's been really nice getting to know more about your investment style. I really like, of course, the heartfelt take that you have not only in community but with your family, of course. If you could, for our guests, please share a little bit more about yourself.

Luis:

Sure, no, I appreciate that. My name is Luis Frias, based out of San Antonio, Texas. Licensed broker turned investor sponsor managing Caltech's capital group. Currently, we own and operate over 700 multifamily apartments here in Texas, managing about over $140 million in assets under management here in the Texas Triangle. Founded the company of Caltech's Capital Group in 2019, right after my son, Maximiliano, was born. Reason behind it, the goal was time, freedom and legacy, and, as far as that, the core mission also does have a little bit of that model helping busy professionals earn passive income while we handle all the heavy lifting. And that's pretty much myself in a nutshell, and what we do at Caltechs.

Heather:

Well, I love what you've done and how you've really been able to grow your career and also your life Share with us. So there's a lot of brokers throughout the country right, I can think of it here in Madison and throughout. What would you say helped you transition from that broker position into investor?

Luis:

Definitely being in the trenches, issuing a lot of BOVs, underwriting a ton of properties. We're in the business of putting out listings, so we have to do a lot of volume and that's going to be a lot of pro formas BOVs issuing out broker opinion values and that's just getting a lot of time in front of the numbers. So that really allowed me to hone in my skills of mind you, this is before the peak of multifamily and transactions happening. So when I started was in 2015 and doing brokering up to 2019. So I had a really good run of just, you know, underwriting properties and giving it to value based on where the properties are operating today, not so much focused on the appreciation aspect of the future. So that really gave me a good understanding of the fundamentals, the operations, finding different ways outside of just saying we're going to tack on, you know, a $50 increase every year.

Luis:

You had to find different ways to make your numbers work and that meant, you know, making sure that your operations expenses were being, you know, efficiently managed. And then, of course, your income doing your best to, you know, solidify your occupancy, do tenant retention. So it's not just income growth that a lot of people think it's going to be a lot of other drivers that could move the needle. So that really gave me a really good understanding that. You know, there wasn't a steep learning curve where I wanted to go from one day from doing earned income to passive investments.

Luis:

I essentially had that shoe in where I could hit the ground running and say we're not going to be underwriting where the brokers think the properties are going to be in a couple of years. We know where the properties are today and how we could tweak them based on the operational efficiencies that we need to drive. So that's what really gave me a really good understanding on how to approach multifamily, how to underwrite it and how to build out realistic business plans that one were within grasp, conservative and two mitigate as much risk for our investors. So that's not just about the returns that we're solely focused on, but it's also the return of money, just not the return on your money. So we want to make sure that we're mitigating as much risk as possible upfront to save headaches down the road for our investors.

Heather:

Definitely. Yeah, that's where too, you know, everyone hears the fond statement of mailbox money, but frequently they don't understand what they're doing. Really isn't mailbox money when they, as individuals, are going and taking care of everything, but as you have the systems in place and people doing things, that's where it does become the mailbox money, and it's a whole other arena. What would you say were two or three of the pivotal mind shifts, or even shifts in action, that helped you to bridge from broker to investor?

Luis:

Yeah, I would say that it would have been coming down to in 2019, when we found out we were going to have our first child. That really lit a fire under my chair is you know, you're a broker, we have teams that help us, and a lot of people do think that, oh well, you're an agent, you get to pick and choose your own hours, which is beautiful and I love it. And then when you have teams that are behind you helping you with your transactions, your listing, your pipeline, that's great, but still, being a broker, it's all earned income. So when I took time off to be with my wife and help her with maternity leave and then post once my son was born, I really enjoyed that time and I was blessed that I had a team back then at Keller Williams still working the business that we had, but I wasn't on the phone, I wasn't doing BOVs, I wasn't running reports, I wasn't doing new business development, so new deal flow stopped and because of that, when I got back in, it really took a couple of months to get new business coming in.

Luis:

And that's where the aha moment went off, as, like I'm brokering these deals, I'm helping buyers and sellers sell and buy multifamily as investment properties. That's why they're buying it for multiple streams of income. I'm pitching it to you know, other investors of why the benefit of Texas multifamily and I'm not taking that page, the same page I'm putting out there, I'm not taking it out for myself. So that's where I said, instead of just brokering these deals, I want to start owning and operating these properties to get those benefits see all the drivers that other investors are doing. So I want my seat at the table with it. And that's what really lit the fire under my chair is, you know, wanting to buy back time for my family that I could be present, not only providing them for the financial security, but also being present because we work hard but at the same time, we want to make sure that we could enjoy the rewards that we're, that we're after. So that that was really what spurred me to do what I'm doing today.

Heather:

Which is terrific, and I think, what's really neat in talking with so many different people on the podcast and also out and about is, you know, it's identifying that point or that sector of life where you're just like gosh, it could be easier, and then following it up with the questions. What would it take is starting to look into different opportunities and talking to other people, and that's where those incremental changes can and do occur, which is really neat. So, brokerage, investing it's all moving really fast and, of course, a hot topic that I'm sure is coming up for you as well is AI.

Heather:

How do you see, that affecting multifamily but also investing in general. So kind of a twofold question.

Luis:

It's going to be changing everything and it already has changed everything. We've already been implementing it in our day-to-day business, from property management, asset management, investor relations, just finding the tweaks. Is it a perfect product? Right now? It's still relatively new. It's been out for a couple of years.

Luis:

It's not going to be coming out of the package 100% ready to go with no flaws. It's essentially training a new hire. You're going to be training a new hire the same way that they're coming off the street. You're needing to train them on your standard operating procedures, your expectations. You know and as far as what you expect, the same thing you're going to be doing with AI. So that's what we've been doing.

Luis:

I would say this past couple of years is really utilizing our experience, training it in our approach, giving it our standard operating procedures and we've seen our business take off tenfold approach, giving it our standard operating procedures and we've seen our business take off tenfold. So it's not a matter if, but it's already that. It's already taken place and just you know whether or not you're implementing it, because you can be sure that there's people that still are hesitant with it. No, I don't like it because it's artificial, it's not genuine. It's not this. It's not that that that's fine, but just know that somebody else is already figuring it out, working with it. It's not perfect, but they're working with it and they're 10xing their production right now.

Heather:

So I do think that, yes, it's already changing the industry and it's changing it for the better well, and that's where too, in my opinion, that if people don't get on board, they're not going to be in business much longer. Because I heard something, you know, a stat, something to the extent of, I think it's every three months, three months, the data that it's taking in is doubling. And if you think about that, right, just the scale, especially if you're a smaller boutique, especially if you're if you're a smaller boutique right where I'm a boutique, if you're a large JLL, cbre, right, some of the really big groups that you've you've got more scale to begin with and and more time to make the adjustments. But I think if people don't become fast friends, that they will be wiped out quickly. And I think, kind of like what you said too, that I want to call out Luis, is that it's a conversation with it.

Heather:

My understanding is, with all these different prompts and things too, is it's telling you know, really, whose eyes are you looking through? If you, if you're doing something of a design nature, then it's looking through the eyes of a top designer. If you're crunching some numbers, then it's through that, and I think one of the neat things is it's going to take care of some of the lower level things and allow each of our expertises to really shine and to spend more of our time there, which to me, right. We can delegate and do things, but the less on your plate of what doesn't bring you energy is nice to hand off.

Luis:

Oh, absolutely and especially. I'm sorry if I could just, yeah, absolutely on that end. I don't think it's here to replace or anything like that. I think it's here for us to leverage.

Luis:

You know you and I were in the same field, data's king and data is not something easy to sift through.

Luis:

So for it to allow us to essentially train an analyst and, as you mentioned, some boutique firms you know I still have my real estate team. You know we still practice commercial residential, so we don't have, you know, a full staff of analysts to to help us with but leveraging this and making sure that when it's built out right as you mentioned, it's a conversation you have to train it, making sure that the bots are built out right. We've seen it really help out one our agents and then also too, on the investment side, it will really help us crunch data, kick out property reports, investor reports underwrite, crunch data, kick out property reports, investor reports underwrite. So we just see it not that it's being replacing or honestly making our job a lot easier. It's making us to be able to do a lot more within our hours. So I really do see that it's helping us really pick up business and really drive, but essentially put the pedal to the metal with what we can do.

Heather:

Exactly and at the end of the day, everything is reviewed by the person within the company to make sure it is accurate, because not everything is accurate, just like everything you read is not accurate. What are a couple systems, two or three that you really like, that you'd like to share with people?

Luis:

So a couple systems. One would be GPT chat. Gpt would be one Been, I would say, working in a lot of custom bots, really digging in to build out customized programs that are going to be used for our day-to-day management of the property, day-to-day asset management, investor relations, marketing, underwriting, so deal, sourcing and acquisitions. Another one that I do like, and it's a new one I had to give a shout out to Market Stadium. They are a tremendous platform for data. So you know I compare Apple to Apple's Crexie, costar and Market Stadium and I would say that Market Stadium is really leading the way there, and I really do commend Ryan Peng. He's been doing a really good job with his group. Him and Dennis have been doing a really good job in providing sponsors, operators, with really good, robust data. Essentially, you go onto their platform and you enter what property that you're looking for and it gives me an in-depth report of everything that I need to do for a preliminary review for underwriting and just basically to say at first plus is this deal worth? You know us reviewing outside of, you know the numbers, us doing a preliminary review on the underwriting. What does the market look like? What's the demographics, what are the trends, what's the construction in the area, what's the pipeline for that. So it gives you a whole snapshot.

Luis:

Um, and then another one. I know we touched on costar, but the costar underwriting report as well is a really good um report. Uh, comprehensive, essentially like market stadium gives you pretty much everything that you need um, but I just feel a little bit of quirks or little things, uh, here and there that market stadium has over it. One that I do like is, uh, the theme of flood maps in it. So, like I said, it's just a robust, comprehensive stuff and, at the end of the day, if we're able to have that data all in one house, it makes our job of doing underwriting or BOVs a lot easier and we could be doing a lot more production at that.

Heather:

I'll have to check that out, because I haven't heard of Market Stadium yet, so I'll have to check that out. Because I haven't heard of Market Stadium yet, so I'll check that one out. Are you familiar with site to do business? I am not. That's one that I really like. I get it through as a CCIM member and with it it really allows you to overlay, of course, the demographics, the psychographics, you know, just population growth. Extending it out by time, timeframes, you get the walk rings, the pedestrian counts, all of those different factors, which, which is really helpful, so it breaks it all down by different radiuses, or driving, walking, and that's really helpful too.

Heather:

So it's always fun to share different tips of what what people like right.

Luis:

Yeah, no, definitely. Um, I could definitely share that with our, with our team lead um at our, at our real estate office. Yeah, that's definitely that would be a good one. Um, we're getting data on on retail centers, triple net properties, vehicles passing by and whatnot Appreciate that Definitely.

Heather:

Yeah, of course. So, as we transition to the big and final question, luis, what does living fully mean to you?

Luis:

So living fully means to me essentially, it's going to be my big motivation. My big why it's going to be my big motivation, my big why, starts at home my wife Chiara, our five-year-old son, maximiliano, as I touched on earlier. When Max was born, I realized that real estate, closing real estate deals, was useful, but it wasn't just enough. I wanted those deals to buy back afternoons and times that I could spend with my son and my wife, and just moments that I can't outsource or reschedule. So living fully for me it's really time freedom, structuring our businesses so that passive cashflow can replace hours for dollars type income, and letting me choose family first.

Luis:

What I'm really building here, too, is also legacy. So I'm building an organization that one day Max could take over the reins and continue to grow it. So I really do want him to see, I want him to inherit that entrepreneurship that I kind of have. So really just wanting him to see what dad built and then what he could do and taking it further from there and continue to build out that legacy for our family and for our investors and overall our communities. And that's touching on the next one is impact beyond our front door. So outside of just our home. We're improving communities, and that's what I do love about real estate investing. But multifamily investing more specifically, it's not just about the dollars you're getting back in your wallet or the returns, but knowing that your dollars are not only working hard but improving lives, because the properties that were repositioned or renovate those are becoming somebody else's home.

Heather:

And if we?

Luis:

can raise a family. If I can raise my family while helping hundreds of other families live better, that feels complete.

Heather:

So, in short, living fully is aligning yeah, aligning work with my purpose, so that essentially, that's it pretty in a nutshell and I would say that's a beautiful way to wrap it up and I I do know when I am on your, your linkedin, I've seen the little pictures of max and and his baseball it. It is one of those really neat factors and I think that's also something I'd love about linkedin is that it connects all of us. It's such such a solid platform for business but also to get to know people a little bit more of what's impacting their lives and the impact that they're having on their community. So, luis, thank you so much for joining me today and please share. How can people connect with you? Maybe they want to invest in multifamily? What's a good way to connect with you?

Luis:

Yes, ma'am and pleasure. Thank you so much for having me on today. It was a great one just to meet with you finally. But if the listeners are interested in learning more about us, they could go to our website, caltexcapitalgroupcom that's C-A-L-T-E-X capitalgroupcom. We do have our investor resource center there for you guys as well, as, if you want to have an ebook to read over the weekend, we do have our passive investor playbook that is for free for download for those that do sign up. So that is one way to go ahead and get in contact with us. And then also, too, you could go ahead and schedule a call using the website and then included in our welcome email once you do register will be included the playbook, our investor presentation and additional educational resources. That way, you could hit the ground running with some education.

Heather:

That's perfect. Thank you so much, Luis.

Luis:

Thank you, Heather. Pleasure pleasure speaking to you. Have a great day you too bye.