Updated: Jul 4, 2020
Investing in NJ commercial real estate properties takes a lot of education to avoid losing money. At Peoples Capital Group, investors learn from Aaron Fragnito and Seth Martinez. Hear how this investor made his first million.
Peoples Capital Group has been helping passive investors build wealth in NJ real estate for 10 years. Visit www.PeoplesCapitalGroup.com to find out if you qualify to start earning passive income and pay less taxes via investing in real estate. IRA's and 401K's are accepted. -- https://www.facebook.com/peoplescapitalgroupnj/
Aaron: All right, ladies and gentlemen, welcome back to the Cash Flow Podcast. We have a guest here today Gercino Soares, say hi, Gerry.
Gerry: How's it going?
Aaron: Oh my gosh. I've known Gerry for years now. He was introduced to me to a good friend of mine. Gerry and I did a flip together years ago. As a passive investor Gerry brought in the capital. We did the work here, Peoples Capital Group, we made a nice profit on it. By the way, guys, go to PeoplesCapitalGroup.com learn more about how you can get invested passively in our properties and upcoming projects.
Let's jump into it guys. As you know, we work with a number of passive investors here. Gerry, talk a little bit about your journey. I know you've been working become a young millionaire yourself and build wealth. Gerry's actually taken our learner program a little bit and actually developed a very awesome real estate investment company now. That's I think he's a millionaire. I'm pretty sure Gerry's a millionaire. I think he wrote that on Facebook. Once it's on Facebook, it's legit. Absolutely. Gerry, what sparked your interest into real estate?
Gerry: I caught myself a lot just watching those HGTV shows, to be honest. I say that as corny as that sounds and I feel that such a generic answer to a question like that, but that is the truth. Growing up I remember just spending hours watching those shows and then starting to get a realization that these people, if you really look into them, they're just regular people that are just doing these amazing things. It made me realize it's just a matter of getting started.
Just not watching anymore and just action. That's when I met you through Art, I believe at the time. Aaron was big into real estate. These were back in our party days. We had lots of hangout times. We would always talk and get deep with what we were doing. I saw the opportunity with what he was doing. That's when I decided I said, "Aaron, I want to do something together." He introduced me to this. We got together on a property in-- It was Lake Hopatcong-
Aaron: Lake Hopatcong.
Gerry: Lake Hopatcong.
Aaron: Beautiful place to go this day.
Gerry: That was actually around the time they had that Anaconda loose there that people were freaking out about.
Aaron: Yes. I had to capture with my own two hands so that property values would go up.
Gerry: I wasn't there for that, but I heard the story. We got to check up on that. [chuckles]
Aaron: We go above beyond here at Peoples Capital Group. There's rumors of Anaconda in the local lakes of our real estate I'll personally jump in there in my underwear and I'll strangle that snake so property values go up.
Aaron: Yes. Overall, I think that was a good one. That was back also in our days when we were also learning more on our end as well and building our resources, building our contractors, our investments and investor connections. We offer something called the Learn and Earn program at that time, we still do today, where we would give our documents and spreadsheets, and operating agreements, and offering contracts and just gives people a leg up to get started on investment.
I always say to our investors that do the Learn and Earn program like you did. It's just the documents and the spreadsheets and our knowledge. It's not going to really-- There's a lot more to starting an investment company and being a real estate investor. It's getting up every day and doing the struggle. You are one of the one out of 100 that actually took our resources, utilized them, and now you have a really interesting real estate business. What do you do now in real estate?
Gerry: I ventured off into a few different-- I guess you could say roads, what real estate. I got into developing. Found a little bit of a niche where I, I'll go into a town that is a little bit on the lower side of rents and things like that, very different. I always tell people this very difference between somewhere that's dangerous and not a good area and somewhere that's just an underdeveloped area. You have to be able to--
As you're in the real estate world you're going to get that niche more and more, you get that feel of what the difference is. Going into towns like that and finding a building that's been stagnant there and no one has a vision with it, we renovate them into luxury apartments, and rent them out at very reasonable rents.
It brings new people into towns and the town is more open to working with you because there's not a lot of activity so you're bringing something new to the table. It's really just deciding on the market that you want to attack. I did that. I did a couple of flips, flipping. I decided it really wasn't my thing. Personally, my belief system it's going to take me the same amount of time to find the deal, close on the deal, renovate the deal to then sell it. Hopefully, make a profit.
Then I just didn't want to do that too often. I decided to buy and hold was really my game because the same amount of time that I would spend to find that deal, close it and renovate it, I realized I have that deal for life now if it wasn't a good deal. Again, we are friends but at the end of the day, we learned a lot together. I learned a lot from you and your group.
The idea of this is really getting your feet wet. Going out there and doing it once. Getting this whole illusion that this is such a scary thing out of your head because once you do it once and you're there live in person and you realize that it's not overly complex, you get that motivation to just do more and more of it down the road.
Then you'll grow your own million-dollar real estate empire and then the sky's the limit once you really figure that out. You guys really do provide those tools to realize that this is not as-- It is scary but for those who have done it for us, we can simplify it for you. I guess that's the easier way of saying it.
Aaron: Yes, which is great. With our recent interviews between investors, I had a doctor in here, Roy and Risha the other day. That's very interesting. The difference between our investors were Roy's a great doctor, he's busy being a doctor all day and where other people who are able to do the real estate investment actively. It's really a nice fit as far as passive investors where you're working as a doctor many hours a week and you don't have the option to run around and do a real estate investment company.
Then we have any other end of the spectrum of our investors who are more active like yourself here, which are fewer and further between I'd say for sure, probably about, maybe 10% of our in passive investors are also active investors doing their own thing. It's really a very cool mix and it's a good way to diversify too for active investors. You recently have gotten into also the housing of recovering addicts and things like that.
Gerry: Yes. That's something else that real estate gives you the opportunity of doing. Once you figure out the real estate game I guess through learning and by doing so much you can find, again, the word I like to use as niches because you could do a lot. People look at real estate, sometimes it's just a house. With the house you can do a lot with, are you going to rent it? Are you going to sell it? Are you going to create a two family out of a one family that the town has a zoned. Out of one deal, you can create 10 possibilities or more.
By being in that field so much and having a passion for something, along the way I met a partner, my business partner, Michael. He had a history of addiction. In getting to know him and working with him, he actually had a bad relapse. After he relapsed, I was there with watching the struggle of him going back to rehab, getting his life back together. It was a very hard run. When he got out, he pretty much explained to me about all the horror stories of what's out there and rehabs, and treatment centers, and sober living homes.
We really got together with his expertise of that world and my expertise in real estate and being able to find a deal, fixing it up to fit our needs that now we combine and we actually have Lux Residence, which is a sober living housing. We provide housing for people as soon as they come out of treatment centers. We'll help them with their credit, we help them get jobs if they don't have jobs, we help link them up with the community to get back on their feet.
That to me has been the biggest joy is, the more real estate you do once you do start building some passive income that does come in every month, it gives you the ability to start doing things with your heart versus just for the money aspect of things. You can actually do things to give back. I can tell you there's no dollar amount that I've ever received that matches the feeling of, even last night we had Thanksgiving dinner with 10 guys at our Lux Residence house. No dollar amount matches that. That's the other venture I've gone down regarding real estate. It's been a fun one and it's just a start.
Aaron: Yes, that's amazing man. Addiction has plagued my family as well. I've been to the funerals of friends that died from opioid overdose. It's really a catastrophe here in our country and around the world really. It's incredible what real estate does. At the end of the day, it's our biggest expense. It's really the most important asset in our lives. People don't recognize it but it's the biggest asset choice you'll make. It's one of the biggest purchase decisions you'll make.
You'll go to the grocery store and you'll weigh two different slices of meat to save 89 cents. Then, when looking at real estate or buying your home or whatnot, people just say. "Oh, I need a home, I'm going to buy a home," like it's a commodity. Sure it is a commodity but it's also the most important commodity you'll ever purchase. Then the other flip side of is on the investment side, once you have knowledge and you have the experience and you have the means to go about and make a difference, real estate is such an awesome asset class, not only can you offer housing to people in tough situations like recovering addicts, which is a serious problem in our society today, or even just offering affordable housing.
We do a lot of affordable housing or being a good landlord of section 8 housing, with the lower end of real estate, you see a lot of slumlords and a lot of guys and gals that just take advantage of lower income-producing lower demographics, they know they're not going to hire an attorney as quickly so they don't have the means to fight so much, so you see slumlords take advantage of lower income housing. That was always-
Gerry: A lot.
Aaron: - a very sad thing.
Gerry: A big problem out there. A very big problem.
Aaron: By just being a good landlord and working with people and being clear and transparent, respecting their needs, you can make a difference in the community. Just buy rundown buildings, and fixing them up, and leasing them up to families, and making them safe and stable again, and creating jobs for the local contractors in the area.
Then you're taking it a step further. You're actually housing recovering addicts that are in between the step of a halfway house to actually getting their own apartment, getting their feet on the ground. It's really an incredible step because I actually I have a family member who went through that process of falling out of society due to drug addiction. Really smart, really sharp that we always say that he was the smartest one, the best looking one in the family but had the challenge of drug addiction and it's so, so difficult.
To see you creating a company that has a place for those people to stay, give them the Thanksgiving dinner because those things are so important, those are priceless. When you've lost your family and friends to drug addiction, and it's Thanksgiving, and you're on your own, that is one of the saddest parts of society. That's very cool, man. Props that.
Gerry: Thank you. I appreciate them.
Aaron: Real estate really is an incredible tool. Now, talk a little bit about you're a hard-working salesman as well. You're a manager at a dealership. Gerry here is one of the top leaders of a sales team I think at a Honda dealership a few towns away and just crushes it in the sales world. You work a lot of hours. Talk about your transition to working a ton of hours, 9:00 to 5:00 or more 9:00 to 5:00, and then transitioning into being an actual owner of wealth and real estate as you barked to us.
Gerry: There's no sexy way of saying it. You're putting in hours. You are. You're prioritizing where your time goes, and that's where I think a lot of people struggle. A lot of people struggle to give up some of their life for what's to come later. I've always said if you've known me that I've consciously given up my 20s to just go in, build as much wealth as I can so that my 30s and 40s are the life that I want to live. I'm okay with sacrificing my 20s.
I'm 29 years old. I'm not in a fantasy league in NFL. I watch football every Sunday, but I don't have the time throughout the week to reshape my roster. Sometimes I meet these guys and they could give you a breakdown stat sheet of every team in the NFL for the last week, and who's pacing this yards and who's going to break this guy's record and that record, and I'm just like, “Jesus, if this guy only knew that mental strength that he's applying to this--"
As great as hobbies are, if you apply that same thing to the real estate world or anything else, that you may be passionate about what you can actually become. A lot of people do use the excuse of time, and it's the hardest thing. I manage probably about 60 people right now and we run one of the top Honda dealerships in the country. We’re top 10 in the country.
Doing that and then doing the real estate developing side and then doing the sober living home business, I could tell you it's doable because I do it, but a lot of times I'm not at the party that everyone's at. It's the sacrifice. It's like anything else. It really is a sacrifice. Are you going to sacrifice now or later?
To me, the idea of waiting till you're 65 to retire and collect a monthly pension that hopefully is enough to somewhat continue your lifestyle, the way you've had it the last 60 years that you've been slaving away, to me is not a concept of real retirement. Retirement is just not having to show up anywhere, never worrying about an account running out of money. When you do get into passive, especially real estate, and on a long term basis, you can literally solve that problem.
Aaron: I remember when I was graduating from Rowan University in 2009, my college advisor said, “You should get a job at Enterprise Rent-A-Car because they're the only place hiring right now in this recession. They'll start you at $32,000 year, but if you put away enough money into your IRA, by the time you're 65, you can retire.” I said, “That's great.”
Aaron: I looked at this guy and he was about 65, and he wasn't retired yet. I said, “Why am I taking financial advice from a broke guy?" Listen, nothing against college advisors. They’re there for a reason. A lot of us lack direction. I did at the time as well. Then I read Rich Dad, Poor Dad and I started reading Trump University books and David Lindahl books and reading about how easy it was to build a portfolio, and actually got in and realized how difficult it was.
It's all that that mindset of what you put your extra time into, even what people are doing with their capital. Now, a lot of you are saying, “Listen, it's not realistic for me to go out and develop a real estate investment company, and start building condos and stuff in NetCom like Gerry's doing here, doing sober living houses." It's a lot of work. Gerry's a hustler. He's 29. He's an outlier and that's why I like having on the show here.
A lot of people say, “Listen, I have my skill set. I'm good at being a doctor. I make a lot of dough doing that. I put in a lot of hours doing that. At the end of the day, that's what I'm going to do.” That's fine, but then just being smart with that capital, putting it into something passive where that money is making money that's so, so important. I feel like our generation, really, actually they say, millennials are good savers. We're millennials here, unfortunately. They might be good savers, but do they understand wealth and how wealth is created.
Gerry: How to grow wealth.
Aaron: How to grow wealth. Do they understand that being wealthy isn't a bad thing? It allows you to give back to your community. It allows you to give back to your church, and give back to people that need it. Actually, if you don't have wealth and wealthy people in society, then you can't have those people that give back and create jobs.
Gerry: Correct. It’s the reality of t.
Aaron: That's what concerns me about a lot of where our society is going and our generation in particular, and the ones below us too, that look at being wealthy and look at being rich- one thing I like about you is you're not afraid to say, “Hey, I just made a great investment that's going to put me on the path to being a multimillionaire. Hey, I just got top 10 of the sales team in Honda in the whole country. Hey, I'm doing great.”
Gerry: Success breeds success. At the end of the day, are you going to want to hang out with a group that's not doing anything or the group that's excelling and doing something? Because I could tell you the rule of thumb that I've always lived by, you are the five people you hang out with because the commonality is this, every successful person has the same common trait. We all want to help. Right? We all like to help if someone wants help.
Go to a group of five guys that are already doing well. Get in that group because one of two things will happen: one, you'll become like them and live the lifestyle they're living or two, you just won't get it and they'll weed you out, unfortunately. That's the clear and cut way of saying it, but it is a lot of work. Real estate's a ton of work. If you have a full-time job and you do want to enjoy your extra hours, not to have to build your own thing.
I've known you for a very long time. Aaron's been in business for a very long time. They've done the right thing always. People have grown with them. I've grown with them. I've taken what I've learned from them and propelled it into something else. I could have easily just also left it with you and you've shown me already what my returns what they've been up to now.
Gerry: They're doing great stuff. It's so much better than a 401(k). It's so much better than an IRA. It’s better than all that. I personally believe. I'm not a big believer of 401(k), so real estate's the way to go. Passive income’s the way to go. These guys, everything that I'm explaining, they know what they're doing. I call him for advice probably once a month at least to pick his brain about something. These guys, they're the real deal.
Aaron: Thanks, Gerry.
Gerry: I mean it.
Aaron: A lot of people have 401(k)s and IRAs, and it's not so much about your investment vehicle. It's like what are you investing in? Are you making good returns? Are you making double-digit cash and cash returns, so you can actually build wealth and beat inflation or are you just keeping up with inflation in the stock market, and playing is safer or not playing it safe?
Gerry: And 401(k), a lot of people don't even realize you can take out half of your 401(k) total as a loan. On that loan, you don't pay back interest to the bank. When you pay back that loan with interest, that money is actually going back to your pocket. You're paying yourself interest back. If you're smart and you have a good amount of money in your 401(k), take a loan against it, invest it.
Not only are you earning income from that money now, the money you're paying back to that loan with interest is also you're paying yourself double interest at that point. Little tricks like that are the things that a lot of people sometimes don't dive into or you're scared to dive into. It's black and white and it's there for you. Just invest.
Aaron: That's an incredible tip. That's something we teach with the webinar we're actually doing tonight. Although this will air after that, we do a webinar with that.
Gerry: Sorry. [laughs]
Aaron: That's an awesome tip. People take their 401(k), they roll it in their IRA, and then you could self-direct your IRA. as well into real estate, you can borrow against your 401k, like Jerry just explained. You can use your IRA to leverage and buy bigger real estate as well. About a third of our investors self direct their IRA, and it's a great fit for a passive investor, someone that's making a lot of money, has been able to put money away in their IRA. It's a very cool tool. So I think the bottom line is if you are more of a passive investor, make sure your money's working harder than you're working, making 10-11% if it's not, go to peoplescapitalgroup.com, put in your information, get in touch with us. We'll talk about the next building we're buying. See if you qualify.
If your money is actively working in the real estate market but it's wearing you out, you're getting tired of it, again peoplescapitalgroup.com. We can talk about passive investments, and that's what we do here, but Gerry here, took our information, invested with us in the past, made some money with us passively, and then took our Learn and Earn program, and now he's created tons and tons of wealth from it. Just an awesome success story. It wasn't easy, he put in the hours. He's a smart guy, he busts his butt, but you can do it too, and it all got started here PCG. Gerry, any final words of wisdom or ways people could possibly reach out to you?
Gerry: You can visit us at Luxrez.com L-U-X-R-E-Z.com. We're always accepting furniture donations as we are expanding houses and that's one of our biggest costs. That helps us tremendously, and the last tip is don't accept living a lifestyle that you don't want to live in. You know the things you enjoy watching on TV, those destinations, that's all a reality, it's a decision that has to be different than the masses. If the masses aren't doing something and then the select few that are successful, follow the select few that are successful because they know something that the others don't. Invest in real estate. I love real estate It's all I talk about on a daily basis, it's life. That's it. [crosstalk] Go and make that money everybody, success.
Aaron: [laughs] Spill the coffee all over. Guys, check out peoplescapitalgroup.com. Learn how you can start making your money work harder for you. Get that lifestyle you're looking for. Start protecting your capital, making strong returns, tax write offs through NJ real estate here at peoplescapitalgroup.com. Thanks for listening, have a good day.