Coming from the disciplined military system and transitioning into entrepreneurship has its perks. In this episode, Ava Benesocky & August Biniaz chat with former Army Captain Marshall Sykes to discuss how his experience and subsequent shift into real estate compounded and resulted in his success. Marshall is a full-time real estate investor and the owner of Capitano Investing Group. In his real estate career, he has partnered in 4000+ multifamily units and has owned single-family rental properties for 23+ years. He shares his real estate experiences and meaningful and practical advice for entrepreneurs. Marshall also talks about how his military background has influenced how he does business and how it comes in handy. Learn about managing a business, building partnerships, and more by tuning in to this episode.
Get in touch with Marshall Sykes:
If you are interested in learning more about passively investing in multifamily and Build-to-Rent properties, click here to schedule a call with the CPI Capital Team or contact us at firstname.lastname@example.org. If you like to Co-Syndicate and close on larger deal as a General Partner click here. You can read more about CPI Capital at https://www.cpicapital.ca. #avabenesocky #augustbiniaz #cpicapital
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About Marshall Sykes
Marshall Sykes is a real estate investor and entrepreneur at heart, having grown up in a real estate investing and development family. He is a partner in 4000+ multifamily units and has owned single-family rental properties for 23+ years.
Marshall has three master’s degrees as well as three engineering degrees from NC State University, the University of Texas at Austin, and the U.S. Army War College. In addition to being a licensed Professional Engineer, he had a 30+ year career in construction project management and facilities asset management.
He served 24 years in the U.S. Navy Civil Engineer Corps retiring as a Captain and had a second career at ExxonMobil Global Projects Company where he worked on large-scale construction projects at international locations. He resides in Houston, Texas and is a full-time real estate investor and owner of Capitano Investing Group.
From An Army Captain To A Multifamily Syndicator – Marshall Sykes
Welcome back, August.
It’s been a while. I was having a serious meeting with someone. It was a business meeting and I haven’t seen that person for a while. I’m like, “It’s been a minute.” He’s like, “In the finance world, I haven’t heard someone use that expression.” I’m like, “I’m cool like that. I say it’s been a minute.” Ava, we took some time off from the show. We’re converting our YouTube to a show.
It’s going to be on seventeen different platforms. We’re excited about that because not a lot of people can watch YouTube when they’re driving, running and in sports. We’re excited so that people can listen to us while they’re working out or doing anything else.
What a great way to be back. We have our good friend and associate Marshall here. We’re excited to have a great discussion with him.
You had the pleasure of talking to Marshall a couple of times, haven’t you?
Yes, I have. I met him in person in Columbia, South Carolina so I had the pleasure of meeting him in person. I’m sure that our readers will have a lot of value added to them reading his journey, his background, his living in different places around the world and his involvement in real estate. It’s going to be a fun and exciting show.
Should I dive right in and introduce our incredible guest?
I want to read his bio here and he’s quite the man. Let me start by saying, Marshall Sykes is a real estate investor and entrepreneur at heart. Having grown up in a real estate investing and development family, he is a partner in 4,000-plus multifamily units and has owned single-family rental properties for many years.
Marshall has 3 Master’s degrees as well as 3 Engineering degrees from North Carolina State University and the University of Texas at Austin and the US Army War College. In addition to being a licensed professional engineer, he had many years of career in construction, project management and facilities asset management.
He served 24 years in the US Navy Civil Engineer Corps retiring as a captain and had a second career at Exxon Mobile Global Projects Company where he worked on large-scale construction projects at international locations. He resides in Pinehurst, North Carolina and is a full-time real estate investor and owner of Capitano Investing Group.
Welcome, Marshall. It’s a great bio. We’re happy to have you on our show.
Thank you for having me. It’s pleasure to be here.
Marshall, we mentioned a bit about your background but if you could please go ahead and tell us in your own words a bit about your background and then your start in real estate.
When I look back on my life, I was thinking I would never do construction management or be in the military because my dad had retired Army. He decided, “I’m not going to go work for another company. I want to do my own thing.” He and my mom built single-family homes after he retired from the Army. They would build two homes at a time. They would keep one and sell one to live off of.
In my teen years, I helped them build houses. It’s hot in North Carolina where I was growing up and it’s very hard work. Maybe my mind wasn’t stimulated enough and I thought I’d never do this. Something must have sunk in because even at night in the living room, I would hear them talk about the business and I get an idea of it. Fast forward ten years after getting an Engineering degree at NC State, I was in the Navy and I thought, “I’d like to have some retirement income or some other passive income that I could rely on besides work at working every day.”
My wife and I decided to start investing in real estate as well. We ended up with a portfolio of 10 single-family homes in a few short years and kept those all along the way for maybe the next 20 years or so. I went back and looked at the return on investment and compared it to the multifamily syndications. I was like, “Multifamily syndication is the way to go here.” I love my single-family home rentals but multifamily seems to step it up a notch with all the different ways you can make money.
The economy is scale.
We’ll dive back into that transition from single-family to multifamily. I have a lot of questions but maybe we can touch on this point to get that out of the way.
I’m excited to discuss this with you, Marshall, because of your background in the military, we think it’s very important to focus on this. I’m sure our audience will be very interested to learn how your military training helped you in your business career. I’m sure there were lessons and systems which you learned from the military, which you use in your business life.
The biggest thing on the military side is that as a young officer, the military gives you an opportunity to do a lot of big things that maybe other companies wouldn’t allow you to do. For example, when I first got into the military, I was in charge of eight projects at a time normally. I’m dealing with a contractor. I’m directing them on their work activities. If there’s a change order, I’m negotiating that. I learned contracting and construction management. Business acumen is involved in all that.
In the other part of the Navy, I also did the planning for new projects, new facilities and even revamping the whole base. When I was at Camp Pendleton in Southern California, we were building up a huge barracks program. We had 10,000 new units that we were building, which is very similar to multifamily.
In that part, we had a chance to build the best of the breed. I led a group where we went out and looked at all the different barracks across the military in the United States and said, “What are the best things that the Army is doing? What are the best things that the Air Force or the Marines are doing?” We put all that together in what we call the best of the breed. It allowed me to understand multifamily as well. It gave me a hint of what amenities you want in a multifamily unit or complex and what’s good for the residents.
The reason we were interested to learn that was because we do have a military connection as well. Both my father and grandfather were in the military and Ava’s grandfather was in the military and served in World War II. We’ve had other military people on our show in the past so it was interesting to dive into it a bit more and see as far as the background. In your case, you are in construction, contracting and building within the military and you’re an engineer. I’m sure a lot of those things you brought into your career as well.
Another thing I wanted to say is I’m sure the military probably provides grueling training and put a lot of systems in place for their soldiers so that stay with them for life. I know for a fact to have a successful business, systems are everything. We always talk about what’s the number one thing got to do to have a good running business. It’s these strict systems that you put into place. I’m sure it has done a lot for you and what you’re up to in real estate private equity.
I agree with you. With the systems, I look at it as a structure. What’s your business structure going to be? What are your gaps? Who can fill those gaps for you? What system can you put in place to fill that gap or to make you successful? You want to be successful and have an impact, whether you’re in business, in the military or whatever you do in life. I have looked at that, not only the structure of the systems. The military also provides you discipline and it makes you think outside the box. It helps you relate to people and work as a team because all those things make success happen in the business world as well as in the military.
If you’re contractors in the civilian world, you can’t court martial them for being late.
There are a lot of levers in federal contracting that you can do. Normally, you’re trying to partner with the contractor. That’s the best relationship. You’re partnering with people so you have it win-win.
Let’s get back to real estate and touch on that. You start investing in real estate in single-family and have ten single-family homes in your portfolio. Where was this located? Was it around where you guys were living, you and your wife so you have more boots-on-the-ground access to these homes?
What happened was I leveraged mostly what I could do within my family because my whole family touches real estate in some way or construction. I leveraged my brother and my sister who both have real estate development companies to do some things and build houses for me. Most of those were in North Carolina but we also had one in Texas where we did live.
Are you guys managed those by yourself and rented them out?
We did a little bit. Usually, we also leveraged that because we moved around so much in the military. We moved even more in ExxonMobil. We had a property manager for those, especially in North Carolina because we were a long way away.
Let’s talk about your transition from single-family to multifamily. You talked about a syndication model. I was in contracting and development for well over ten years before I even learned there was a possibility of raising capital, this concept of private equity or syndication. I was syndicating deals before even knowing what syndication was but I realized there are systems and processes. There’s a whole industry around raising capital and doing deals both on the institution and retail levels. I fell in love with it and now I’ve dedicated my life to this business.
When was that turning point for you? The turning point for me was a need. I had a great project that came. I put on under contract. It was a ground-up development project. I didn’t have the equity to close on it. I went to a few investors and we incorporated a company. We put shareholder agreements in place so it wasn’t a GPLP structure.
It was out of a need that I learned about this business. I got involved in it then I wanted to grow and scale, then I realized there’s US real estate. I fell in love with that and co-founded CPI Capital. With you, when was that moment that you realized this business model even existed and then what was your involvement in it initially? For it to intrigue you and excite you enough for you to get involved in this business and switch careers. Talk to us about that whole journey. You touched on it briefly but I want to go into it much deeper, please.
When I was at Camp Pendleton building those barracks and I haven’t gotten out of the Navy a few short years later, I want to do multifamily. It was big in Southern California at that time but I always thought, “I can’t do that. I’m just a person. I can’t own those myself. Those are big corporations that own them.” I went into the oil and gas business. It was overseas in Canada and the Middle East for five years or so.
During that time, I started looking at my portfolio on single-family. I thought, “The return on investment is not as good a source to change this.” We moved back to Houston in 2018 and that’s when I first started hearing about these syndications. I had never even heard of syndications. I missed the boat on it for a while there. Somebody reached out to me through LinkedIn and we had a phone call. I thought, “These returns are too good to be true.” I understood returns from real estate and I thought, “There’s no way these returns were that good.” I did not initially invest in the deal that this person reached out to me for but I did my homework at that point.
I got involved. I learned from YouTube. I read books and thought, “This is what I want to do.” I started at LP investing in multifamily. My first few were LP Invest, passive investments and limited partner. I thought, “I like this. I want to be a general partner.” A few years ago, I decided I want to be a general partner and started transitioning to it.
Good for you. I can’t wait to talk about you becoming a general partner because there’s capital raising that’s involved with that and asset management, which I believe you’re good at too. Let’s discuss a little bit about capital raising because that’s my favorite topic to discuss.
I want to go break it down for our audience that might not understand the real estate private equity space, the multifamily or any type of asset class. You were involved in commercial real estate. Commercial real estate is an umbrella of different asset classes. You have multifamily, build-to-rent single-family, industrial and hospitality office space. These are all different asset classes and investment firms focus on different asset classes or whatever asset class is their focus. We’re talking about the multifamily asset class within the commercial real estate space. Syndicating these projects, which is raising capital to buy the project from passive retail investors, could be institutional as well.
Blackstone and other large firms raise capital from institutions like pension funds and university endowments to buy their properties. We raise capital from retail investors but for a fully operational company, you got three main components for a real estate investment firm utilizing the syndication model. You got the equity, capital raising and investor relations. You got the acquisitions, which is sourcing the deal, underwriting and purchasing of the asset and then you got the asset management, which is executing the business model if there are renovations involved, upgrades or overseeing the property manager.
As a general partner getting involved in this business, depending on your expertise, background and knowledge, you can get involved in either one or some of these facets of the business. Marshall is involved in investor relations capital raising and also asset management. We want to dive more into capital raising and we can touch a bit on asset management as well. You end up in a space, you want to be a GP and you realize, “I can go and raise capital.” What’s the first step you took? As for me, I called my mom. My mom has been investing with me for many years. That’s what I did. Go ahead, Marshall.
What happened was that we had a little mastermind group. We would meet once a month at ExxonMobil. We would meet for lunch and talk about investments. A couple of us decided we were going to take the next step, join a coaching group and be in a general partnership. That’s what we did. The easiest step to make being a new partner in a multifamily deal is in the capital raising stage.The easiest step to make in being a new partner in a multifamily deal is in the capital raises stage. Click To Tweet
When I first joined the group, I thought, “I’m not going to do that.” I then started thinking about it and I thought that’s not a bad way to start because you can learn as you go through the process a little bit more. It’s not as difficult for me because my network was pretty extensive through LinkedIn, being in the military for 25 years and then ExxonMobil for a while. I’ve been around a lot of people and I liked the network. I did call my friends and family. That’s what you start with. Some of them have invested with me.
You have seven siblings, right?
I do have seven siblings.
You had a lot of calls to make.
I’ve had a few of them invest with me as well and I had a lot of calls to make. You can always make more calls. There are a lot of people in your network if you start thinking about people.
Marshall, I’m curious. You’ve invested as an LP so when you made those calls, what response did you get from people right off the bat?
I usually try to talk to people that are interested in real estate investing. If you’re interested in real estate investing, it’s a much easier conversation. If you have never invested in real estate or if you’ve invested in it and it went bad, it’s a harder conversation. If somebody is interested in real estate and they’ve already done it in the past, the syndication model makes sense more to them. It’s better than probably they can do or less work than they can do on their own. The general partners do all the work and the limited partners provide the money. It’s a win-win for them.
It’s a no-brainer then you got the tax benefits that are involved when you’re a passive investor in these multifamily syndications, which is exciting when you put that in front of an investor who’s heard about syndication for the first time or investing as a limited partner. That seals the deal.
Particularly for US investors, there are unbelievable tax savings. Not so much for Canadians but there’s some. We have 2% or 4% depreciation that they could use annually.
Here at CPI Capital, I’m Head of Investor Relations so I speak to all the investors that call into our company. They all have my cell phone numbers. It’s getting a little hard to keep up but I’m enjoying it because we want to have that investor experience. We want to have this white glove treatment that we keep.
You invest in equities, the stock market, other large funds or REITs. You’re just another number. In this business, you say, “Make your case to me. Why do you like this deal?” Your name, reputation and whole life are on a deal that you present to your investors. It is much more intimate and there are a lot more emotions involved. Things go up and down. You get calls from investors. We have investor dinners. Keep going with what you want to do.
It’s a very important point. You reach out to your network, your family and your seven siblings as well. What else do you do to bring people into the funnel?
I’ll tell you one of his secrets that I know about, which is one of your secrets as well. It is LinkedIn. Both of you are very active on LinkedIn but you can keep going.
Definitely LinkedIn. Even if people don’t directly reach out to you, I found out that they monitor what you’re putting on LinkedIn over the months. They might reach out to you 6 months or 1 year later. It’s interesting but they follow what you’re doing. They want to see if it is real or if you are a flash in the bank. Getting a sustained presence out there does make a difference. That’s where I’m trying to go. I do a little bit of that but I could improve a lot more.Getting a sustained presence out there does make a difference. Click To Tweet
There’s something that came to mind. You’re a captain in the military. Have you ever gone to the military base to do presentations for others?
That’s one of my goals. I’m looking to go to a couple of them here. I’m planning on doing that.
That’s what you should do. Put up the returns that you’ve made on a big screen and you’re like, “This is proof in the pudding.”
Marshall and I had a meeting about them. We were talking about different strategies we utilized to connect with investors. We got to brainstorm and take over the world. A few other things I want to touch on and it’s important to do so. Initially, when we started CPI Capital so much of our focus was on capital raising, investor relations, the compliance side of it and the accounting structure because we had investors from Canada investing in our US investments. A lot of our time and resources were spent on the equity side. We weren’t overextending ourselves to get involved in acquisitions and asset management so we partner with other groups who were involved in those aspects as well but they were mainly involved in asset management and acquisitions.
Your business model is similar to that where you co-GP and partner with other groups. Talk to us about a vetting process that you put these groups to. For the end-user or the investor who partners with us, the partners that we partner with, they vet hundreds of deals before they put a deal under contract and then we’re sitting back. We have multiple partners so we look at the deals that are being provided to us by these multiple partners.
The deals are going through this funnel. By the time they get to us and get to our investor’s hands, these must be great deals because they’ve gone through so many different checks and balances. Talk to us about a strategy you utilize. What is the vetting process? What is your experience putting your name and reputation on the line to partner with someone else who will be the managing majority of the activities? Talk to us about your journey there.
That’s a very important point. Part of your investor relations role is to vet what investments you want to present to investors. That’s what we’re getting at here. To make it easier or more disciplined for me is to join that coaching group. I use the term coaching a little bit loose but it’s more of a group of like-minded investors who want to partner with each other. That in itself is one vetting process because they’ve already done their hurdle to join the group. That group has the structure in place with the same attorney that we have on every deal.
He does a lot of the vetting piece for us as well and we have the same person, the same group of people or a board that’s overlooking these investments to say, “This one is okay if there are some flaws in this investment.” If we don’t, then this underwriting that we have analyzed. Is it going to work or not? Those are some of the vetting pieces of it.
I then started thinking, “You have to go with the lead partners that are mostly running the day-to-day on this deal.” They have to have business acumen as we talked about before. They have to have some structure, maybe a finance background or construction background. Something where they can do the asset management piece on these partners because you don’t want to get it to where you close on the property and you own the property. That’s one piece of vetting.
The second piece of it is asset management. Can asset management manage it? Can they work with the contractors to get the work done? Can they stay on task for the business plan and execute the business partner? That’s where you’re going to make the money for the investors. I have looked at that vetting as well. You want to have the right partners. Have they done business in the past? Have they done multifamily? Are they able to relate to people and get the work done?
Marshall, you said that you are in this coaching group where it’s a bunch of individuals that take a look at the deal and all have their eyes on it. I was reading Stephen Schwarzman’s new book and he was saying that his whole team gets in a room and his analysts. They all reviewed the deal, come back and say, “We’ve found this.” It’s so great to have more than one set of eyes on these deals before taking them down.
That was after a deal blew up in their face where an analyst who was overseeing the deal didn’t like the deal and the numbers but the fellow who was presenting the project to the higher-ups loved the deal and it suppressed what the analyst was saying. The decision that Stephen Schwarzman made was that everyone involved in the deal needs to come into a room and everybody can express their opinion about the deal. As far as co-GPing, is it open communications? Does everybody get together and dissect a deal? Also, as far as any next big steps that you’re taking on the project, is it an open board meeting type of thing that you have? Maybe we can touch on that with us.
The leads will go out, find a deal, underwrite them and decide if it is worth pursuing or not. Usually, they’re going to look at 50 to 100 deals to get 1 that works for them. They bring that to the board. The board gives it a 2nd or 3rd view of underwriting and makes sure it’s working. After that, if it all works there, then they come to find guys like me who are going to raise capital and do other things for them. I’m going to look at it. I’ve looked at what my criteria are. Is it going to be my criteria? Does it do that or not? I’ll ask questions and probe it to make sure it sounds like my investors. That’s the next step that I take on that.
You got to believe in the deal before you present it to your network.
We got as much as we could get out of Marshall over here but we’re going to transition to the next part of our show.
It is a segment of our show, which is Ten Championship Rounds to Financial Freedom. We’re going to ask you some questions. Whatever comes top of mind, fire it off at us and we’re looking forward to getting to learn a little bit more about you. The first question, Marshall, is who was the most influential person in your life?
My wife is. Her name is Cindy.
Everybody’s wife is there. Does everybody scared of their wife?
It’s because you’re the closest to them. It could be a lot of people but my wife is because she knows me. We have coffee every morning and talk about things. It’s my sounding board and she helps me figure out myself and my day each day.
Next question, what is the number one book you’d recommend?
I’m not going to be on the real estate side on this one. I read this book called Halftime by Bob Buford and he was at a cable company. He worked hard for the first 25 years of his career, made a lot of money and then decided, “I want to do something different. I don’t want to be just successful. I want to have a life of significance.” He turned it around and focused on significance in his second half. That’s what that Halftime is all about. It’s figuring out what you want to do for the rest of your life.
Marshall, if you had the opportunity to travel back in time, what advice would you give your younger self?
Probably to start real estate even earlier. Have my dad help me buy my first house before I’m 18 or 20. I can manage it at that point.
It’s a common answer we get.
You’re so blessed that you had your family in real estate too that you can learn from that at a younger age. What is the best investment you’ve ever made?
I’m going to go with putting myself through college. My dad didn’t. I was 1 of 8 kids so we didn’t have a lot of money and I paid my way to college. I went to NC State in engineering school. It was a hard thing to do but I made that investment in myself. A lot of people think that college is overrated. Maybe in certain fields, it is where they don’t make a lot of money once they get out of college.
I don’t think it’s about the money in college. It’s a matter of your mindset and how you’re going to think in the future. When I first was going to college, my brother was a little older than me and I asked him why he goes to college. I was a teenager at that time. He said, “I’ll go to college to learn how to think.” I thought, “That’s stupid. Why don’t you go to school to get a job?” Thinking back on it, he was right all along to learn how to think.
I never went to college. I got right into my real estate career at a very young age. When they ask me about my schooling, I say, “I wish I would’ve gone to college because you learn how to learn.” It saves you a lot of future pain if you go to college and it’s exactly what your brother said.
It doesn’t have to be college itself. It could be a trade school or the military but you’re learning how to think and apply your life to the world.
Marshall, let’s switch the gears here. What’s the worst investment you’ve ever made? What lessons did you learn from it?
There’s one interesting. It’s my third multifamily passive investment deal. I didn’t look at the cashflow projections. They are quite low compared to the general industry. Instead of 6% to 8% cash on cashflow, they were planning on 3% to 4%. I went back and analyzed my deals. I thought, “Why did I ever do this one?” Thinking on that one, I didn’t do it for the cashflow because there are so many different ways you make money on multifamily deals. That one was more about an appreciation play. It was Boston, Texas. They bought it in March 2020 right when the pandemic hit. It’s because everybody is moving to Austin. It’s going to do well on the appreciation side. With the cashflow side, not so much.
Next question, how much would you need in the bank to retire now? What’s your number?
I don’t know how I thought of this but I guess because I’ve grown up in a real estate family. I always wanted more than one source of income. Passive income is the best way. That’s what I’ve always thought through that’s why I want ten rentals and my military retirement pay. Those are a lot of different sources of income. What I’m looking at is having sources of income that can sustain you through life. It’s not what’s in the bank but what’s coming in every month.It's not really what's in the bank, but what's coming in every month. Click To Tweet
If you could have dinner with someone dead or alive, who would it be?
A lot of options there, Marshall.
My dad died years ago. I would have dinner with him again. That would be awesome. I ask him every little thing about real estate that he learned and other things.
If you weren’t doing what you’re doing today, what would you be doing now?
I’d probably be working overseas as an ex-pat in the oil and gas business if I wasn’t doing full-time real estate investing.
My favorite question is, book smarts or street smarts?
I’ll learn by doing but I also learned by the books. I’m probably 50/50 on that one.
Last question, if you had $1 million cash and you had to make one investment, what would it be?
I would invest in one of the deals that I’m raising for in multifamily deals.
An 8% cashflow on that is going to be pretty good. You got the appreciation and the preferred returns.
What is the best way people can reach you?
The best way to reach out to me is on LinkedIn. I’m pretty active on that. I like to get messages from folks and meet new people.
Marshall, thanks so much for coming to our show. I loved getting to know you more.
Thanks for coming on. I had the pleasure of talking with you a few times. I’m sure we’re going to collaborate and be friends for a long time coming.
We’ll take you and Cindy out for dinner when we’re there.
Definitely. Thank you for having me. It was great to see you both again.