Real Estate Acquisitions In Texas!
Investing in real estate can sometimes feel like navigating a turbulent ocean. Shane Thomas, co-founder of Catalyst Equity Partners, offers his insights into this multifaceted world, underscoring the importance of approach and strategy on episode 89 of “Inspired To Invest”.
Beginning his journey with a foundation in accounting, Shane transitioned from a corporate role to the vast landscape of real estate investing, focusing primarily on multifamily properties. He reflects on his early days in the Greater Toronto Area (GTA), emphasizing that the initial spark for real estate came when he acquired single-family homes in the Kitchener-Waterloo area. This basic instinct to invest soon morphed into a more substantial venture that would shape his career.
Moving to Texas was an important turning point for Shane.
The Great Recession heavily influenced his journey, offering both challenges and opportunities. As many around him faced job losses, Shane buckled down in his profession while simultaneously scouting better investment opportunities. His passion for multifamily properties intensified during this period, particularly in the burgeoning cities of Dallas and Houston. These locations presented him with prospects ripe for growth, and he was eager to seize them, thanks to his willingness to adapt to change and his keen understanding of market dynamics.
In acquiring his first multifamily investment, Shane encountered significant hurdles. Initially starting his ventures by passively investing, he learned the ropes from the inside while building his network. He partnered with experienced investors to mitigate risks inherent in unfamiliar territory. The journey to his first deal was neither swift nor easy. It took them over a year and examining roughly 110 deals to finally find a fit. Their dedication and thorough preparation laid the groundwork for future successes.
Shane emphasizes the criticality of maintaining a robust network throughout his real estate journey. It became a lifeline during the challenges he faced, especially regarding financing. Shane’s first deal occurred simultaneously with Hurricane Harvey, which wreaked havoc on properties and financial agreements alike. With the help of established relationships, he and his partners secured an alternative funding option that salvaged their venture. This experience confirmed the lesson: having a backup plan isn’t just a wise strategy, it’s essential in real estate investing.
On the topic of financial prudence, Shane advises listeners to focus not just on upside potential but also on downside risks. He stresses that safeguarding investments is paramount. As he points out, understanding what could go wrong in a deal is as crucial as dreaming about future gains. Gradually, Shane has learned the balance between seeking profits and recognizing limits, a mindset that has served his company well.
Celebrating slow and steady growth is another principle Shane champions. While many investors aim for rapid expansion, he and his team have adopted a more gradual approach, evaluating market shifts and responding rather than reacting impulsively. Shane expresses satisfaction with how Catalyst has navigated tumultuous times while remaining competitive, ensuring values such as transparency and trust drive investor relations. Their diligent focus on operations and management has fortified their reputation in the capital-intensive world of multifamily investments.
Looking ahead, Shane sets ambitious yet grounded aspirations for Catalyst Equity Partners, targeting to expand their portfolio to 5,000 units while continuing to offer quality services and returns to investors. He envisions introducing in-house property management to streamline their operations as they grow, highlighting the importance of scaling wisely.
Ultimately, real estate has gifted Shane with not only financial flexibility but also the freedom to create a lifestyle that empowers him and his family. His journey inspires aspiring investors to understand their motivations, strategically manage risks, and to build lasting relationships within the industry. As Shane rightly states, “the only limitations that are put upon you are the ones you put on yourself,” a sentiment that resonates deeply in the world of investing.
To connect with Shane, go to https://catequity.com.
Thank you to The GeoFocus Group for bringing us this month’s episode. To learn more about their construction management support services for real estate development, including missing middle housing, go to https://thegeofocusgroup.com.
“Inspired to Invest” is proud to support the Beyond Success Program, a not-for-profit financial literacy program for students, launched by More To Give & MAK Investments. Find out more at @more2give.ca.
Join us again for our next episode on Apr. 16.
Thank you for tuning into Inspired To Invest & remember, “when you invest in yourself, the sky’s the limit!”
Real Estate Investing Podcast Transcript
Serena HolmesHost00:02
Hey everybody, welcome to Inspired to Invest. I have Shane Thomas here with me from Catalyst Equity Partners and he is from Houston, texas, but originally from Mississauga, so just about 30 minutes on the other side of the city from where I am. Catalyst currently has about 1,900 units under management worth more than $300 million. He is also the co-founder of CEP Construction Services, a multifamily construction and rehab company, so I can see how those work together really well. Shane leads the acquisitions, financing, asset management and investor relation efforts at Catalyst, and he also manages his experience in large-scale project management analytics process improvement to ensure that Catalyst processes are best in class. So thank you for taking time out of your busy day to be with us today. How are you?
Shane ThomasGuest00:49
Hey, I’m good, Serena Thanks. Thanks for having me and appreciate the opportunity and thanks for the warm welcome.
Serena HolmesHost00:55
So I find it interesting. Obviously, you are originally from the GTA and now you’re living in Texas. Maybe you can take us back to the beginning in terms of where real estate came into the picture for you and then why you made that move. Not only you know, just as Scott, I can’t even talk. Scott, I can’t even talk today. It’s going to say a hop skip and a jump away.
Shane ThomasGuest01:15
Yeah, yeah, yeah, no, we’d be happy to. So, like you mentioned, yeah, I’m born and raised in the GTA and I went to the University of Waterloo. So I’m a CPA by trade, chartered accountant, worked at a big four consulting firm, pricewaterhousecoopers for 10 years. I started off in the Toronto practice and then eventually transferred to Chicago in 2010. And at that timeframe, 2009, was when I started in real estate.
01:44
So I actually bought some single family out in Kitchener, waterloo, a couple, you know condos, townhomes, so that’s kind of what got my real estate itch, I think, growing up, you know, I’ve always, you know, in, you know, always had kind of a love for real estate, if you will, even as a teenager kind of a love for real estate, if you will, even as a teenager, you know, I just found that, you know it, it seemed to be a more proven wealth creation strategy, you know, and although I was in finance and you know it was, it was, you know, stocks and bonds weren’t really my thing, you know, I liked business and real estate and so, anyway, so I started investing then, not knowing what I know now, and for me at that time was just, hey, buy and hold, renovate, rent from a long term perspective Right. And so this wasn’t intended to be a full time gig. And then I transferred, like I said, from Toronto to Chicago in 2010. And, as most people know, 2010 was the depths of the recession in the US, you know. So I moved there when a lot of people were losing jobs, so I had my head down and worked for you know, five years and then, in 2015, I had gotten married a few years prior and you know, we were kind of, you know, about to have our first daughter and I just had to kind of decide for myself like, hey, you know, what do I want in my life? And then, you know, about to have our first daughter and I just had to kind of decide for myself like, hey, you know, what do I want in my life.
03:06
And then, you know, real estate in Toronto obviously has had done well and has done well, and at that time I said, okay, real estate, it was great for in Canada, let me look into it into the US, you know. And so that’s kind of where I got my start. I pivoted to kind of multifamily on a bigger scale in 2014, 2015. And I started off with passively investing, like many investors do. And then from there you know we started our company and fast forward to kind of what the background you gave us. You know we’ve got just under 2000 units in Texas and a construction company and I’ve been doing it full time for eight years.
Serena HolmesHost03:47
So so yeah, that’s going to go back to Texas because I know other people that you know are really bullish on that area.
Shane ThomasGuest03:54
What is?
Serena HolmesHost03:55
your main attraction.
Shane ThomasGuest03:56
So I actually started one of my clients in my past life in consulting was in Dallas, right. So I used to travel to Dallas from 2010 to 13, almost every week for three years, you know. And so I kind of a started liking the city. I saw the pro business kind of you know attitude in Texas. And then the growth you know, there was a bunch of folks that I had known living in Chicago, new York, etc. That were all moving to Texas. There was a tremendous amount of job growth. So at that point in time I was like, wow, texas is a great place. And me and my wife were like, hey, you know, eventually we would like to move to Texas. Her parents have actually moved, they moved in 2008 to Houston. And so, you know, we, you know, long-term, we, we knew that Texas kind of was a place that we wanted to be.
04:47
And then in 2014, 2015, my passive investments, coincidentally, were in Dallas, right. So I met some folks I was living in Chicago at the time and then we, we started investing passively in Texas because I knew the market. I had, you know, spent so much time there. And then in 2016, for both personal and for business reasons, we moved to Houston. So I’ve been in Houston since 2016. And I think you know, recently I was talking to somebody. I mean, what Toronto, so what Dallas and Houston remind me of, is Toronto in the early 90s, when I was growing up, you know, like I could already see the the, the Miltons and the new markets of the world. Back then. I could see them in Dallas and Houston, you know. So that’s what it reminds me of very diverse, you know, and the job growth is very strong. I think the only difference that I see is that in Texas it’s very, very easy to build versus in Toronto it’s hard, you know, and so supply is always a concern. But from a macro perspective, a lot of similarities.
Serena HolmesHost05:56
Now, in terms of your first deal, can you talk about? You know how you structured your first opportunity Because obviously going from single family to multifamily you know it’s it can be really intimidating to some different people. So how did you navigate that? Did you work with other partners to help you structure it? Or, like what did that look like in the beginning?
Shane ThomasGuest06:13
Yeah, so great question. So, like I said, I started off on the passive side, so I was able to kind of see somewhat under the hood for a little bit right. So I was in a couple deals, you know, and I was able to kind of see what went well, what didn’t, what sponsors, systems they had that worked and didn’t work, and so at that time I said, okay, you know what, I have a good skill set in terms of project management, finance, accounting, consulting. And then I met my now business partner at a networking event and we had no intent to partner, we were kind of just like he had his business and we were just kind of like peer buddies, if you will, you know, because, as you know, I mean, entrepreneurship can be lonely and, and so we were just kind of looking for someone to lean on and then fast forward. He was also passively investing, I think like a year later, you know, I had moved to Houston. I said, hey, I think we can, you know, do a deal right.
07:04
And so we came up with our criteria and at that time it was like, hey, we can do a three to $6 million deal and we can try to raise a million and a half to 2 million from our network. And so I mean we spent, I would say, I think, close to like one year looking for a deal, diligently, with our full-time jobs and his full-time business. I think I want to say we looked at or underwrote like 110 deals to get our first one, kissed a lot of frogs and then once we got that deal, you know, even though you know we had good track records in our small business ventures and, you know, in our corporate lives, you know, banks and stuff were like, hey, you don’t have experience in multifamily, right? So then we ended up bringing on a experienced partner who had done 15 or 20 deals at the time, who I had built a good relationship with, who was local to the market, and basically said, look, we found this deal, We’ve got it under LOI.
Serena HolmesHost08:01
This is our business plan.
Shane ThomasGuest08:02
So he reviewed everything and he basically signed on as kind of like the experienced partner. And then so it was the three of us on our first deal and and then from there, yeah, I mean, we ended up, you know, raising $2 million and you know, at the time that was a large, large number and a large feat, and it still is. But I think, you know, what I would recommend to your listeners is that I didn’t get the deal. And then, you know, I think people have this attitude like you get a good deal and the money will come. You know, I don’t know how much I believe in that. I think at the, at the end of the day, I was networking and meeting people and telling them my intentions, and people had known that I’ve been in real estate for five, six years, but, like I would say, for two years prior to raising the $2 million, we were actively building our network, you know, and so I think that really helped us. You know, capitalize that first deal.
Serena HolmesHost08:57
Yeah, you’re planting the seeds with people.
Shane ThomasGuest08:59
Yes, yeah, absolutely you have to right, because you can’t just get a deal and then all of a sudden you think the money is going to come. So that was our first deal. I mean there are a lot of lessons learned, we can get into it, but you know it was during Hurricane Harvey and you know we had multiple financing challenges but ended up being a good deal.
Serena HolmesHost09:19
So now, in terms of those challenges, what would you say is the biggest obstacle that you faced, whether it was on that first deal or just even as you started to scale?
Shane ThomasGuest09:26
Yeah, I mean, I think I think the, you know, the biggest obstacle is that I mean, you’re never going to know everything in this business, right? And I think you know, building a team was very, very important, right, so you know, and having a deep bench, I think that’s the key, right, like it’s one thing very important, right, so you know, and having a deep bench, I think that’s the key, right, Like it’s one thing. You know, there’s a saying in our business you gotta always keep your vendors honest, right, and there’s folks that we’ve worked with for years, whether it’s brokers, et cetera, but having a deep bench where, if some avenue closes down, you have another option, you know, and that happened on our on our first deal, right, I mean, we had financing all lined up, you know, from someone that we knew. And then, you know, hurricane happened, and then that financing blew up and, uh, the seller at the time the property kept performing, uh, better every month, and he was like, look, I’ve been under contract, we’ve been under contract for four months, you got one more month, 30 days, and that’s it’s it. And you know, we had to use a relationship to kind of, you know, get a, get a loan closed in 30 days, which is not an easy feat in any market, you know, and so so anyway.
10:33
So that’s, that’s one of the lessons, and I would say the other lesson in in real estate is, especially in what we do is being over capitalized, right, my first deal, couple deals, I would say, you know, I mean, look at the end of the day, everyone wants to show good returns, right, so that more money you have to raise or reserves it dilutes your returns. But you know, from being a good steward of people’s capital, it’s better to have more money and not need it than less money and need it. You know, and so that’s the biggest learning I’ve learned over my last 14, 15 years in the business. You know real estate’s capital intensive, you know it’s not a matter of when it’s or, sorry, if something’s going to go wrong, it’s when. You know and you got to be prepared.
Serena HolmesHost11:19
Yeah, and I think just whoever’s most resourceful will win the game, and I think that’s one thing even I’ve seen in my community in this past year is that you know a couple of companies did things that were, you know, not well handled, but then there’s a lot of collateral damage, so people that were expecting money to come in and you know now they’re having very significant liquidity issues and cashflow issues, right. So I couldn’t agree more Better to have too much money than not enough.
Shane ThomasGuest11:42
So I couldn’t agree more.
Serena HolmesHost11:43
Better to have too much money than not enough. Now, in terms of something that you’re most proud of, what do you think is one of your biggest successes?
Shane ThomasGuest11:48
so far. You know, I mean I think you know we try to celebrate our wins. You know I mean, in small ways, that’s one of the, you know, key kind of takeaways recently for our team. You know, I mean I’m proud of the fact that, honestly, we’ve had this vision for the last eight years. We’ve grown and it may sound like a lot of units et cetera, whatnot, depending on your listener, but you know, I mean I would say we’ve been slow and steady, you know, doing one or two deals a year for eight years.
12:17
There’s a guy that started four years after me that have 4X the amount of units and honestly, they were growing at a time that that when things were easier, and now things are a lot tougher for them.
12:28
So we’ve been relatively, I mean, we’ve been prudent, um, slow and steady and we’ve really stayed the course, whereas a lot of my competitors, you know they were doing multi-family when it was hot and you know, right now obviously things are a little more challenging and you know those, those same people are now doing car washes and fix and flipping and oil and gas and don’t have the focus where, you know we’ve just, you know we’re in the trenches.
12:54
You know getting better and better every day, and you know, after winter there’s always spring and things are going to get better, and so I think that’s what I’m really proud of. I mean, you know we’ve got a good track record. I mean not every deal has gone, you know, perfectly right, but we communicate to our investors, good and bad, and I think that’s what sets ourselves apart from other people in the industry. I mean we, you know, we treat ourselves like a small private equity company and investors, time and time again, will come back to us because of the trust and the transparency and knowing that we’re going to do whatever it takes, and we show that with our actions.
Serena HolmesHost13:36
So yeah, yeah, no, I agree. Now, on that note, we’re just going to take a really brief break for a word from our sponsors and we’ll be right back. Hey everybody, Welcome back to Inspire to Invest. I’ve got Shane Thomas here from Catalyst Equity Partners and we’re talking about how he got started out as a CPA in the GTA, eventually moved down to Chicago and then ultimately into Dallas, Texas, where he scaled to 1,900 units and over $300 million in multifamily under management. Now, before the break, we were talking about some of those challenges and obstacles, as well as your successes, and one thing I always like to ask my guests is what’s one of the craziest things that they’ve experienced as a real estate investor?
Shane ThomasGuest14:13
Yeah, that’s a good question. I mean honestly. I mean we’ve seen. I mean we’ve seen so many things. I mean, if you think about you know, having 8, 19, 2000 units, I mean you know the amount of hoarding that we’ve seen, we’ve walked that many units and stuff. So I think I think that’s there’s a lot of you know those type of stories.
14:32
But I think you know one thing from a more of a inspiration type perspective is, you know, when I moved to Houston, I used to drive these streets, you know, night and day and figure out where which areas are good and bad. And there’s two properties that I own today that in 2016, 2017, when I was just getting started and had no multifamily, I was like I told myself one day I’m going to own these properties, you know, and one day and then four or five years later, ended up, you know, that broker sent me these deals off market and those are two deals that we own today and they’re well performers. So I think I think you know having a vision and and you know you may not know you know, kind of how you’re going to get there, but every journey starts with the first step, you know, and so I think that’s kind of the craziest thing. My wife still jokes Like she’s like. You told me that every time we drive by this property yeah, yep.
15:24
Yep, yep.
Serena HolmesHost15:25
So now, in terms of things like education and advice, what would you say is some of the best insights and advice that you’ve received over the last few years, while you have been growing?
Shane ThomasGuest15:49
happens is, you know a lot of people get greedy, right, and you know the reality is. One of the best advices I’ve got is and that I’ve taken to heart is that it’s never a bad day to take a profit. You know, and so I think you know what happens is like you know people when the market’s hot, you know it’s a seller’s market, et cetera. You know, obviously we seen in 2022 that that kind of changed on a dime, you know. So I think it’s never a bad day to take a profit Once you’ve hit your business plan. You know, look forward to I mean look, look towards. You know, executing your exit strategy. I think that’s one of the best things.
16:22
And then the other thing is, you know I keep leaning back on it, but I mean you have to, you know, be look at your downside risk more than your upside. Right, because a lot of folks are looking at, you know, the upside could be X, y and Z. But the way I look at all of our deals, what’s our downside risk? Right, whether I’m a GP or LP, what’s my downside and can you live with the downside? Right, because if you can protect your downside, then you know, then the upside could or could not happen. Right, and I think a lot of people go in with the you know upside first and I talked to a lot of new passive investors and I say, hey, understand, if this deal meets your criteria first, right, you have to define that, because and don’t rush right, because, just like a train stop, there’s an always another investment coming, you know. So yeah, that’s, that’s kind of the some of the advice I’d kind of offer.
Serena HolmesHost17:18
So I know you’ve talked about being slow and steady and you know I guess it’s been about 10 years to acquire these 1900 units. What would you say is next for you, Like, is it a particular volume of units, Is it a certain amount of cashflow that you want to live off of?
Shane ThomasGuest17:31
Yeah, no, I mean, I think for us, I mean we, we want to just continue growing prudently. I mean you know we’re at 2000 ish units. I mean you know our goal is really to kind of get to 5000 units and then, you know, potentially bring property management in house and have a fully vertical, vertically. You know potentially bring property management in-house and have a fully vertical, vertically integrated company. Right now we’ve got construction in-house, which is great, so that’s really where we want to be. And then you know there are some other. You know, I would say you know other businesses that we’re looking to. You know either acquire or start that are related to what we do. But yeah, I mean we really want to.
18:08
Our focus is a real estate private equity company and you know, I think you know not to say that we’re the masters of multifamily, but we spent eight years and that’s always going to be our bread and butter. But there’s a few other avenues that we’re looking to grow into. But yeah, no, that that I mean we’ve got a lean team and we want to keep it that way. But yeah, that’s kind of the vision for the future. But grow prudently, right, I think right now is a great opportunity it could be. You know our version of 2008, 9, 10 that we weren’t able to capitalize on because we weren’t in the business then. But, as you know, when you’re in these tough times it’s hard right Because everyone says I can’t wait till the next downturn, I’m going to capitalize then you realize that there’s no equity.
18:51
Deals are tough, interest rates are hard, you know, and so anyway, so we’re you know we’re being opportunistic and very active in this market.
Serena HolmesHost19:00
Now how would you say real estate investing has changed your life.
Shane ThomasGuest19:04
Yeah, I mean it’s, it’s definitely changed. Um, you know, I would say it’s interesting because a lot of people ask that and I would say I work more than probably when I used to work, but it doesn’t feel like work. I I don’t know how to explain it. Now we have a team and, you know, now we’re focused on more strategic things, but the, the, the, the best thing is that. You know we have freedom and flexibility.
19:25
I’ve got three daughters. Um, you know we have freedom and flexibility. I’ve got three daughters. You know my wife, you know, and, and we’re able to travel, you know, cause I could work from anywhere and and I think that’s the best thing right Like I’m not, you know, and and we can kind of make our own schedules. And we’ve got the team right and it’s taken eight years, but that’s the biggest thing, because you know that freedom we enjoy traveling and whatnot, and that freedom from both time and financial perspective, you know, enables us to kind of live a life that you know we couldn’t when we were living kind of both working corporate jobs.
Serena HolmesHost20:05
For sure. Now, obviously, the name of this podcast is Inspired to Invest. I always like to ask guests if there’s a particular quote that motivates them.
Shane ThomasGuest20:12
Yeah, I’m big into quotes and personal development. I mean, I think you know I’ll offer two, so one is. The only limitations that are put upon you are the ones you put on yourself. And I think the other thing that goes more in line with what I’ve described today is that if you want to go fast, go alone, and if you want to go far, you know, go together. You know. I think the latter is really what, you know, we kind of prescribe to in this business. You know it’s a team business and you know it’s. You’ve got to build relationships, not burn bridges, you know, and do what you say you’re going to do. So so that’s, those are two that kind of I look at often.
Serena HolmesHost20:52
Awesome. And for anyone that wants to get in touch to learn more about what you do or maybe your opportunities, what’s the best way for them to reach you?
Shane ThomasGuest21:02
Yeah, no, I’m happy to chat with any of your listeners, so best ways would be to reach out to me via email. Shane S-H-A-N-E at catequitycom. I’m relatively active on LinkedIn as well, so you can find me there. And then our website has a bunch of free resources, so it’s catequitycom C-A-T-E-Q-I-T-Ycom. We’ve got a bunch of blogs and free downloadable e-books and whatnot.
Serena HolmesHost21:33
Great, so we’ll include all of that in the show notes below, of course. Thank you for your time to be with us for today and for anyone that is watching or listening. We appreciate your time as well and if you have enjoyed this episode, make sure that you like, comment and subscribe below and you followed along at social, at Inspired to Invest podcast, and remember, when you invest in yourself, the sky’s the limit. Thanks again.