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Edited Transcript from the Webinar, “10 Things To Do When You Can’t Find Deals That Make Sense”

Originally broadcast April 4, 2019

Listen to the teleseminar

 

Kim Lisa Taylor:

Welcome to Syndication Attorney’s free monthly teleseminar where we talk about topics of interest to real estate syndicators, new and seasoned, with an opportunity for live questions and answers at the end of the call. I’m Attorney Kim Lisa Taylor. Also joining me on the call is Charlene Standridge.

Before we get started, please note that all of our calls will be recorded and may be used for future promotion, posted on our website, or broadcast in a podcast available to the public. If you do not wish to have your voice recorded, please schedule a one-on-one consultation instead of asking questions during the live call. You can schedule an appointment at our website at www.syndicationattorneys.com.

Information discussed during this free teleconference is of a general educational nature and should not be construed as legal advice. This is an audio-only conference. Today our topic is “10 Things To Do When You Can’t Find Deals That Make Sense.”

I’ve been hearing from a lot of people that multifamily deals are really hard to come by right now, that the cap rates are low, the prices are high. There’s whisperings in the marketplace of a potential recession. It’s just hard to find deals. But there are things that you can do in this market. Let’s just talk about what those things might be.

First of all, you can do nothing. You could give up, just say, “Forget it, I tried. It’s not the right market,” maybe try to wait out the recession and do it again later in a few years. The problem with that is that you’ve got momentum now and you’re probably going to lose that momentum, and it’s going to be a lot harder to get back into it later on. You may never get back to it again.

That could really be a shame because you’ve already invested likely a lot of time and effort and money in getting some training, looking for deals, learning how to analyze deals, learning how to do due diligence, learning how to coordinate financing, learning how to syndicate. All of that stuff could be lost if you just give up.

This isn’t the time to give up. This is the time to really just knuckle down and maybe change your approach a little bit. Waiting for a better market, sure, you can do that if you want to, but I will tell you that during the last recession, our law firm grew during that period of time with people that were still doing deals.

One of the reasons it grew was because the bank stopped lending, but Fannie Mae didn’t. As long as there were Fannie Mae loans out there for multifamily, the parameters, the loan-to-value parameters, got a little tighter. All of a sudden you had to raise a little bit more money from investors to be able to do deals. Maybe they weren’t quite as sweet as they were before, but the deals were still there to be had.

You have to be ready for that if there is a recession, but you really need to be able to ride it out now. One of the ways you can ride it out now is to keep your loan-to-value ratios lower than maybe what’s even available to you from lenders right now. When you leverage your properties very high and if there is a recession, then all of a sudden property values drop, and if you have a short-term balloon payment due, then you might be in trouble.

That’s what happened to a lot of people during the last recession. They had these short balloon payments that came due during the recession when property values have dropped, and they couldn’t get new financing on those properties. One of the ways to do that is just to keep your loan-to-value ratios low, kind of hedging against that potential dip in pricing that might come in the next few years. That way you’re protecting your investors.

The other thing to do is, if you can, get loan terms that have the longest possible time with a fixed interest rate before that either adjusts or before you have to cash out that loan, because then that’s going to give you a longer period of time to ride out that recession. You can wait for a better market or you can just hedge against it is what I’m trying to say.

So just get prepared. That’s what we’re going to talk about next. How can you get prepared and think about having yourself positioned in the right place at the right time when the opportunities do start to make themselves available again?

The first thing is maybe don’t wait, you’ve just got to dig harder. That’s sending out more letters of intent. How many of you are actually sending out the number of letters of intent that your training guru or coach told you to do? I think when I first got trained in multifamily that I was told to send out something like 100 LOIs a month.

LOIs are a numbers game. You send out 100 of them; 10 of them you start to negotiate back and forth; two of them stick; one of them closes. These are just anecdotal numbers, they’re not real research numbers or anything like that, but you have to think in those terms. The more you send out, the more deals that you’re likely to start to be able to negotiate, the more likelihood that you’re going to find a couple that actually get to the purchase and sale agreement. You’re going to be able to get one or two of those deals to close. You’ve got to dig harder, turn over more rocks, look for more deals, and do what your coaches told you to do.

If you don’t have a coach, this might be a really good time to get one, because those coaches are staying abreast, or should be staying abreast, of the current market conditions as well. They should be able to tell you how to keep doing deals in this kind of a market and be able to give you ideas and guidance on how to not let your business come to a screeching halt. So send out more LOIs.

The third thing you can do is change markets. A lot of people start out thinking, “Oh, I just want to buy stuff close to home.” Well, buying stuff close to home is fantastic if you live in a place where there’s a realistic market. I used to live in Southern California, and one of the reasons that we moved was because we were looking for deals and we kept flying out to the east coast, into the southeast. Eventually, we said, “Well, why do we keep flying where the deals are? Why not just move there?” which is what we ultimately did.

Think about that. You may not have to relocate, but you might have to just think of a different market if the ones in your market aren’t making sense, or you’ve really got to change your deal parameters so that those do make sense. We’ll talk about that in a little bit. If your market’s a dud, find a new market.

How do you find a new market that’s maybe not close to where you live? Well, you can do a Google search on emerging markets and read some articles about what are the current emerging markets. You can read books. There’s plenty of books on Amazon about emerging markets. There’s one written by Dave Lindahl that I happen to be familiar with. It’d give you good advice on how you can research and figure out which markets are emerging markets yourself.

If you don’t know what an emerging market is, look it up on Google. Then maybe search out some of those emerging markets and call some brokers, get an idea of what the cap rates are and what the markets, the local markets, are in those areas.

The fourth thing you can do is change asset classes. Sometimes when one asset class suffers, others are doing well. I was talking to a very successful syndicator just a couple of days ago, and they’ve been in the multifamily and retail shopping center business for a while, syndicating those types of properties.

Right now their attention is on self-storage. It’s going crazy. I know just driving around where I live there’s multiple self-storage units being built. Don’t ask me why. Why do we have so much junk we need to put them in self-storage? That’s a completely different question. But the fact is that there’s a need for that, and right now it seems to be a hot market.

Hotels are another one, real estate development, recreational properties, industrial properties, you name it. I have talked to some people recently that are buying farms. You’ve got to just think outside the box and don’t just get stuck in one asset class.

If you’re going to do that, you should probably avail yourself of learning a new skill set. That’s our number five thing you can do, learn a new skill set. If you’re going to change asset classes, get trained in the new asset class. There are plenty of trainers out there that will teach you how to buy different types of asset classes than maybe the one that you’ve already been trained in.

If you’re going to find that there’s a lot of overlap with your prior training, if you’ve already had training, if you haven’t had any training at all, you need to go get it and you need to go get as much training as you can in as many different asset classes as you can. You’re putting together a toolbox of tools that you can pull out at different times in the market and when opportunities are arising.

When I started out as a securities attorney nearly 10 years ago, I went to as many different types of training events as I could, so I could learn what my clients already knew so that I could help guide them better as a securities attorney. You can do the same thing. Go out and get trained in additional asset classes so that you’re not stuck on one thing.

You can become a developer of vacant land. A lot of people turn into developers when it’s hard to find existing properties that make sense, because there’s still opportunities in developing vacant land. However, don’t do this by yourself. If you’ve never been a developer before, you are far, far better off to find a developer who’s been in business for a while and fund their deals.

You don’t want to be learning how to become a developer by yourself on somebody else’s dime because you’re going to make mistakes, you’re going to underbid what it’s going to cost you to do something. You’re going to not realize how long it actually takes to do something. There’s going to be additional costs involved that you didn’t anticipate. Whereas if you’re teaming up with a seasoned developer, they will already know that stuff. They will have taken it into account.

How would you get somebody like that to team with you? Well, you offer to fund their deals. You need to develop your own database of investors so that you’ve got something of value to offer to a developer. Now the big developers, they don’t need you, so they’re not going to want to talk to you about that. They’ve got their own sources of funding. You’re going to have to find some smaller developers that are local to your area and get to know them.

How you’re going to do that is you’re just going to have to probably do some digging in your local community as to who those developers are. Drive around, see who’s developing things. Maybe do some research, even at your local building code or the local county government, asking them who are the local developers in this area, who are some of the smaller developers, and see if you can figure out how to get to know those people.

Offer them something of value. Bringing them some money to their deals would probably be something they’d be very welcome to have you come in on. Then in exchange for that, they can give you some on-the-job training on how to become a developer. Do a few deals with a seasoned developer. Now you can be a developer.

Number seven is you can fund other people’s deals. One of the options that you have when you’re, say, teaming up with somebody who’s got a deal under contract is to bring your group of investors to their deal. There’s two ways you can do this. You can either just hand over your investors. You team with the person who’s got the deal. You have some investors, they have some investors. You create a syndicate, say, “We draw up the documents for you.” Now all of the investors that everybody in the management team brings to the deal just become direct investors in that deal.

That is one way to do it, and that’s fine. It’s a fine way to do it, but realize this. All the people in management that have access to that group of investors in that deal might start farming them for future deals that you might not be involved in. All of a sudden you may have given away your contacts so that they’re now somebody else’s investors. Now you have to compete for their funds. So that might not be the best choice for you.

If you have a lot of investors and you want to be able to bring them to other people’s deals, you can create your own fund of funds. It’s called a fund of funds. It’s your own securities offering where your business model is not to buy direct properties, it’s to look for great opportunities and invest in them. You would create your own group of investors and your own LLC with your investors, your own syndicate. Then your syndicate can come and invest as a single investor in somebody else’s deal.

If you do it that way, you don’t have to give up the contact information for your investors. You will probably have to give that syndicator who has the deal under contract, that’s getting a loan from the bank, you’re probably going to have to give them your list of investors, but it’s just a list of names. It doesn’t mean that you’ve given up your investors. This is just so that that lender can make sure that nobody has over a certain percentage of ownership interest in the property that they’re financing, and then has to be underwritten on the loan.

If they can see that you have a bunch of investors that nobody has over a certain percentage … For Fannie Mae, it’s 20%, Freddie Mac, it’s 25%, et cetera … If you don’t have people over those percentages, then they’re not going to be too concerned about having those people be underwritten. But they do have some rules, banks have some rules they have to follow, that when your investors exceed certain threshold ownership percentages, then they do have to be underwritten. In some cases, they may even have to become loan guarantors or members of the management team. Just be aware of that.

That can happen when you’re coming in as a single investor, or your group is coming in as a single investor. Say you go out and you raise $500,000 to invest in somebody else’s deal. Now that $500,000 investment in your LLC’s name might exceed that threshold. That would be where you have to show the list of those investors to that lender and then explain to them that, yes, it is one LLC, but it’s a group of investors. Nobody individually has more than that requisite threshold. Remember, you still have to follow securities laws. You can’t just go out and form your own LLC. You’ve got to follow securities laws.

Also, you have to be cognizant of this: You have to make sure that the group of investors that you’re putting together meet the financial requirements of the deal that you’re investing in. If the person who has the deal under contract is doing a 506(b) securities offering, they’re allowed to bring in an unlimited number of accredited investors and up to 35 non-accredited investors.

If you go out and form your own group and you have eight non-accredited investors in your group, then that syndicate that you invest in is going to have to count all eight of your people. That’s going to count towards their 35 non-accredited investor limit.

If you’re trying to invest in somebody’s offering that has a 506(c) exemption, then you’re going to have to make sure that all of your investors in your fund of funds are accredited investors, have been verified, and you’re going to have to provide information about that to that syndicate that you’re investing in so that they can meet the guidelines and rules for their exemption. Just be aware of that. You’re going to have to read their offering documents and make sure that the people you are bringing into their deal are actually qualified to be in their deal.

You can do bigger deals. I’ve had a lot of clients … In fact, the normal progression of the syndicator is you start out doing $2 million to $5 million deals, raising anywhere from $500,000 to a couple million dollars. Then after you’ve done three, four, or five deals, you’re starting to look at bigger deals and you’re starting to raise more money, maybe $3 million to $5 million. Maybe you’re getting to where you’re looking at deals in the $15 million to $20 million range or $25 million range and you’re starting to raise $8 million.

That’s the normal progression. Once you get to a point where you’re raising more than a couple million dollars yourself, you’re usually going to be bringing in other private equity partners that are going to fund a portion of that deal. You’re going to start doing joint ventures, and the joint ventures could be between your syndicate and somebody else’s syndicate. They could be between your syndicate and a private equity company or a family office or something like that. You can start to team with others to do bigger deals.

In order to do that, though, you’ve got to get out there and meet other syndicators and private equity companies and family offices. You should be doing that now while you’re doing the smaller deals in preparation for being able to do bigger deals down the road. Some great places to go and meet some family offices are the Richard Wilson Family Office Club conferences. There are some other family office events. Opal has them. IMN is another one.

You might want to look at some of those conferences and try to go to some of them and try to get some contact information for some of those family offices. Learn what their criteria is, what kind of properties they like to invest in.

Most often these private equity companies or these family offices don’t want to invest … They don’t even want to bother looking at your deal unless it’s more than a $2 million investment for them. You don’t want to talk to them about your little dinky deals. You want to make sure that you’re doing big enough deals that it’s enticing to them, because they have to do a lot of due diligence before they can decide whether to invest in your deal. They want to make sure that it’s worth their while to do that and that the money is going to be out for long enough that they don’t have to just keep doing due diligence over and over and over on the small deals.

As you know, as syndicators, it takes just as long to do due diligence and to get a purchase and sale agreement and all that on a small deal as it does on a big deal. In some ways, your big deals can become easier to finance if you have the right connections. It’s all about having the right connections and setting yourself up for that now by getting out and networking at events where you meet those kinds of people.

The bigger deals have more meat. A lot of times the cap rates are a little different, but there’s also the point that 40% of a $2 million deal or 40% of a $25 million deal is going to be a significantly different amount of money for the management team and maybe not a significant amount more work. You might be doing almost the same amount of work to get a percentage of a small deal that you would to get a smaller percentage of a big deal, but you’re still making more money because it’s a bigger deal.

We’re all in this business to make a living and to be able to share those opportunities with the people in our lives. If you’re thinking about it that way, how much do you really need to make a living and can you do it by just changing your parameters a little bit and looking at things in a slightly different way? That’s the next step, change your parameters.

Rethinking investor splits. I went to a conference, a RealShare Apartments conference, last October in L.A., and they were saying that the overall annual returns right now are somewhere in the 15% to 19% range for multifamily. The days of the 20-plus annual returns, we’re not in those days right now. You have to educate your investors about that. You have to explain to them that we’re not in those days right now. They may come back, we’re not here now.

But in contrast to what else you could make on the same investment in another market sector, how does this stack up? What can you make in the stock market? This is where you start showing your investors historical stock market trends versus what they could make in a multifamily investment that’s maybe having a slightly lower return than they were a few years ago.

Just keep your eye on those markets. A good place to figure out what the current markets are is to watch the crowdfunding platforms RealCrowd and CrowdStreet. Get on them and sign up so that you can see their deals, look at what kind of deals they’re offering.

Now realize this, they are picking the cream of the crop. They’re only accepting about 5% of what gets presented to them; 95% of the deals that are getting done out there aren’t being funded on a crowdfunding platform, and they probably don’t have as good of returns or may not have as good of returns as those that are being posted. That’s your high-water benchmark.

Just think of it that way. But it is an opportunity to see what other people are doing in the marketplace. There’s other crowdfunding platforms out there as well that might have their deals posted that you can look at.

Rethink your investor splits. If you were taught that you needed to keep 40% of a deal for your management team and sell 60% off to investors, we might not be in that world right now. You might be looking at a 70-30 split, 75-25 split, or even an 80-20 split.

There is a large real estate training group out of Texas. I’m not going to say their name. Some of you probably know who they are. Their entire model is based on two and 20 model, 2% acquisition fees, 20% of the equity is kept for the manager. Do you think that they’re still doing deals right now? I can guarantee you that they are; 20% of a bigger deal is going to equal the same as 40% of a smaller deal. You just need to factor in. Don’t get stuck on percentages, look at dollars. Think about that.

You realize that this may be just temporary. Once we go through a recession, if prices drop, then all of a sudden the cap rates are going to change, the liquidity markets, the financing ability is going to change, and you may be able to inch those numbers back up again. Maybe you can go back up from an 80-20 split. Now you’re back into a 70-30 splits and eventually maybe you even get back to a 60-40 split.

Run your deals through your analyzer software with different splits to see what makes sense and look at the actual dollars that are going to be received by the participants involved. That’s how you should be making your decisions on whether to go forward with a deal.

The last thing that you can do is this is a really perfect opportunity to start working on your marketing materials. If you don’t have professional marketing materials for your company, you’re going to have a very hard time competing with anybody other than your immediate circle of family and friends.

If you want to start competing with other syndicators who are out there meeting new investors all the time and adding people to their database, so they’ve got a wider network of people available to them when they have deals under contract, you need to have professional marketing materials in order to be able to do that.

If you want to have an idea of what those marketing materials should be, go to our website at syndicationattorneys.com and go to our online store. At the online store, you’ll see the kinds of services that we can provide and that you might want to develop in order to be able to compete in that kind of market.

You need to widen your audience. Your whole job is to expand your database of potential investors, so you’re not afraid to go after bigger deals and you’re not afraid to put in LOIs and you’re not afraid to execute on purchase and sale agreements because you know you have a big enough database of investors that at any time you could fund $2 million, $3 million for a deal if you had to.

Once you’re in that position, you are not going to have any trouble at all funding your deals. You just have to stay in that mode of constantly looking for new investors, networking. How do you network? You’ve got to get out there. You’ve got to go to events. You have to get to know people investing … Go to local events so you can get to know people who live in your community.

You’ve got to show up on a regular basis. You can’t just show up once or twice, say, “Hey, I’m looking for investors.” The first couple of times you show up at a meeting like that, people are going to think you’re a scam artist. Until you start showing up on a regular basis, they’d realize you’re a member of their community, and someone who can be trusted and someone who’s reliable. You need to get out there.

You can go to national networking events. There are several gurus out there that hold national networking events where you can get elbow to elbow with plenty of other people, some of them who could become joint venture partners, some of them who could become passive investors, some of them who could help guarantee your deals, some of them who might be able to bring deals to you that you can help them fund.

You’ve really just got to get out there, work on your marketing materials, so then when you do go to those networking events and you meet those people, you have something professional to show them, company brochure, professionally prepared website, an investment summary. There’s all kinds of things you can do.

We even actually have on our website right now a free investor marketing program that you can download and its template. It’s like three or four pages where you can set up your own investor marketing plan, what you’re going to do to find investors and to widen your audience and to increase your database. That’s all I’ve got for you guys right now. I would like to open this up for live Q&A. Charlene is going to take that away.

 

Charlene Standridge:

Okay. You guys need to raise your hand. Once I see some hands raised, I’ll unmute you and you’ll be able to ask your question, okay?

 

Kim Lisa Taylor:

Okay. While we’re waiting for people to get in the queue, I’ll just give you our contact information. Please go to our website at www.syndicationattorneys.com.

There’s an article that’s posted on the website. If you go to the library and then select the articles, you will find the article that accompanies this particular webinar. You can remind yourself of this stuff later. When you get discouraged, pull this out and start just using the different tools in your toolbox.

Don’t stop. There’s plenty of opportunities out there. If you can’t do it right now, then get yourself prepared. But don’t give up because you can do this. We can help you. We’re telling you these things. The reason we have these seminars is because we’ve been exposed to hundreds of syndicators over the years, and we’ve seen the ones that have been successful and we’ve seen the ones that haven’t.

If you can avail yourself of some of the ideas and tips and tools that we’re trying to help you learn, then you’re going to have a better chance of success. That’s what we want to do is help you become successful syndicators. Charlene, do we have anybody?

 

Charlene Standridge:

Yes, our first person is Julio H. I’m going to unmute you now. It’ll just take a second for it to go. It should be ready.

 

Kim Lisa Taylor:

Julio, are you there? Hello, Julio? He might have his phone muted.

 

Charlene Standridge:

Yeah. I unmuted you.

 

Kim Lisa Taylor:

Julio, are you there? No? Okay.

 

Charlene Standridge:

I’m going to re-mute him and go to our next one.

 

Kim Lisa Taylor:

Okay.

 

Charlene Standridge:

I think that’s all we’ve got right now. Anybody have questions? Have you figured out how to raise your hand?

 

Kim Lisa Taylor:

Well, here’s someone that actually posted a question. Todd asks, “Can you recommend a few coaches?” Well, I’ve been associated with the Dave Lindahl RE Mentor organization. I’m not an employee or anything like that, but I actually went to them in 2007 with my husband when we were wanting to learn how to buy multifamily and commercial properties. We started in their coaching program. Then later on, when I started doing syndications as an attorney, I started teaching for them. Now I co-teach their Private Money Boot Camp twice a year.

That’s RE Mentor. They have multifamily and commercial training around the country at various locations. If you go to their website, you can see their events. I know there are … Let’s see. Who’s some other trainers?

There’s Jake and Gino are some other trainers. You can look them up on Google. Rod Khleif is another trainer. I think you’ve just got to … Oh, Vinney Chopra. He’s a highly successful client of ours. He’s got a training program as well. Look up Vinney Chopra. Those are just the ones I know. I know there’s other ones out there, but those are the ones that I know that have trained people successfully to become syndicators.

By far the one that has been the most successful at training syndicators that have gone on to do multiple deals is RE Mentor. They have a really excellent, huge networking program that they do every summer called Ultimate Partnering, where there’s about a thousand people there. That’s a really great place to meet investors, meet service providers that’ll support your syndication business, learn new things that can help with your syndication business.

Any time you can go to an event where there’s a large audience and a large attendance like that, that’s just a very unique opportunity, and you should try to go to those whenever you can.

 

Charlene Standridge:

Okay. We have another question from Greg W. I’m going to unmute him.

 

Kim Lisa Taylor:

Okay, Greg. Hi.

 

Charlene Standridge:

Hold on. Okay.

 

Greg:

Hi, good morning. Thanks for the session this morning. I’d like to ask a question about opportunity zones, if you could address that. I’m looking at putting together a fund, which, at a high level, just seems like it could be another Reg D private placement. I probably want to do a C so that I could not only invest in my own projects, but invest as an accredited fund with other operators around the country. I guess my question would be what are the key differences between setting up an opportunity zone fund and just a normal Reg D private placement?

 

Kim Lisa Taylor:

Well, the main difference is that if you want to be an opportunity zone fund, then you have to follow the opportunity zone rules, which means 90% of your investments have to be in opportunity zone properties. You’re stuck with only investing in those properties. Then the only people that are going to get the tax benefits from investing in the opportunity zones are going to be people that are investing gain from other investments in your fund.

It’s not going to help anybody who invests cash, and there are some limitations on what you can invest on your own into your opportunity zone fund. You’ve got to be cautious of those rules and just make sure that you understand them. Then you’re going to be bound to keep that property for at least 10 years before those gain investors are going to get the tax benefit.

In some ways, it’s going to tie your hands and maybe not allow you the same flexibility that you would have if you just did a 506(c) offering on your own. Some syndicators are taking tact of having side-by-side market 506(c) funds that can accept cash and such from anyone, including yourself, and putting that alongside an opportunity zone fund.

 

Greg:

I think that’s exactly what I was planning to do as well in this particular regular fund. At the end of the day … I’m here in Southern California, and one of the challenges I think we have out here is that the sweet spot is building affordable housing, but it doesn’t pencil.

I’m thinking that with the advent of the opportunity zone, yeah, I mean, look, it’s a different investor. It’s all going to be investing their capital gains, and I get all that. But maybe the pitch is that, well, instead of getting 15% to 19% or whatever the market is, you’ll return maybe 8% to 10%, which you’re going to get a huge tax break if you hang out for the duration.

I think that’s kind of, I mean, in a macro view, what I’m trying to do. I’m familiar with the opportunity zone rules, but thank you for reiterating them there. I’m mostly interested in if there are any, I don’t know, documentation issues or like … I mean is it just a matter of filing this particular fund with the IRS or if there’s anything like that that’s a real kind of …

 

Kim Lisa Taylor:

Well, there are specific clauses. We’ve written an opportunity zone fund, and there’s specific clauses that are needed. There’s risks associated with it that are unique to opportunity zones. There’s language that has to be in the operating agreement that apply specifically to the taxable aspects of the opportunity zone, some rules.

We are expecting the final rules to be coming out shortly. We were expecting them actually in the first quarter of this year, but because of the government shutdown, I believe it got delayed. The investing world is anticipating that those are going to be coming out shortly, and it will clarify some of the issues that were identified when the preliminary rules came out. Hopefully that’s going to give us some clarity. When that happens, we will definitely write an article and have an update on that and keep everybody informed.

But I like your thinking. You’re thinking of, “Hey, offer a lower return, but you get this better tax benefit.” It’s exactly how you need to be thinking if you want to invest locally in California, because the cap rates are always low.

But there are people in California that would love to be able to invest locally, and they’re not really interested in the high returns they might get investing in a state that they never go to. There are people that this will appeal to, but it’s probably going to be your local investors. You’re going to be hard-pressed to entice people from the southeast to invest in a Southern California fund that’s offering 5% returns.

Another thing some of the big syndicators are doing is actually doing staggered preferred returns. You start out with a preferred return of maybe 5%, then maybe the next year it goes up to 6%, and it continues to escalate until it gets to 8%, giving you some time to go in and reposition a property or do something that would make it more profitable so that you’d be able to offer a higher preferred return later on that maybe you couldn’t offer in the beginning and you didn’t want to keep carrying forward until the end.

 

Greg:

Uh-huh (affirmative). Interesting. Great. Thank you.

 

Kim Lisa Taylor:

Oh, thank you.

 

Greg:

I’ll be in touch.

 

Kim Lisa Taylor:

Yeah. Great. We’d love to talk to you. If you want to make an appointment with us, you can do that at our website at syndicationattorneys.com. There’s a button there that you can select to schedule an appointment, have a 30-minute consultation, and talk about what you want to do and what kind of costs it would take to get that off the ground.

 

Charlene Standridge:

We don’t have any other questions right now, Kim. If anybody else has a question, you may raise your hand.

 

Kim Lisa Taylor:

Okay. Please, everybody, go to the website and download the article or read the article on the “10 Things To Do When You Can’t Find Deals That Make Sense,” so you’ve got this at your fingertips. Always stay open-minded. Don’t get stuck in your ways. You can get driven out of business that way. You really just need to take proactive steps to broaden your horizons and think bigger. Think bigger and do more. Do a little more.

It might be a little harder to find deals, but there are still deals out there. There’s lots of opportunities. You can always get yourself prepared. If you’re not ready to pull the trigger right now and you want to wait it out, this is a really great time to set up these marketing materials and make yourself into a professional company that people have confidence to invest in.

Thank you so much for taking time out of your busy day today and listening to our teleseminar. We love to have your questions. We love to talk to all of you. We’re really glad that we’re able to provide things we hope are valuable to your practice. All right, thank you so much.

Do you have another question?

 

Charlene Standridge:

Yeah, I did have one more come in, if you wanted to take one more question.

 

Kim Lisa Taylor:

Sure.

 

Charlene Standridge:

A gentleman named Eugene C., and he typed it in. I think he’s probably muted himself.

 

Kim Lisa Taylor:

Okay.

 

Charlene Standridge:

He says he buys partials from note investors, “Example, I buy 12 payments for the price of 10 or $24 for 20. How would I raise money and pay 8% to my investors on a regular basis?”

 

Kim Lisa Taylor:

Well, that’s just going to be a matter of tightening up your business model. That’s definitely something we could help you with. What you need is … Go to our online store and look up the description for an investment summary. This is what you would need to be able to explain your business model to investors. An investment summary is something that accompanies a blind pool offering.

The different types of offerings is you’ve got a specified offering where you’re raising money for one thing, you have something under contract, or you’re doing a startup company and you know you need to have a finite amount of money for that specific thing. That’s a specified offering. A blind pool is where you don’t have an identified one thing, but you know there’s multiple things you want to go out and buy, but they have to meet these certain parameters.

In an investment summary, you identify what the opportunity is, what you’re doing, how it works, what kind of parameters those things have to meet before you could buy them. It doesn’t matter if it’s notes, if it’s multifamily properties, if it’s single-family properties, you’ll identify the parameters. As long as whatever you’re finding meets those parameters, then you can buy it. Then you’ll go out and raise the money in advance so that when you find things that meet those parameters, you can go ahead and purchase them with the funds that you’ve raised from your investors.

Then there’s the matter of how do you pay your investors back. Well, that’s going to be a function of whatever you’re buying. If it’s a long-term, if you’re doing fix-and-flip properties, then you’re going to generate income when those properties sell. You’re going to have to create some rules and formulas on how you’re going to decide how much of that money gets reinvested and how much of it gets shared with your investors.

At some point, you would have a liquidation phase where you would say, “Okay; after the first three years of operation, or during the first three years, we’re going to be investing in properties. If we sell something, we’re going to buy something else. We’re going to keep leveraging our returns from these new investments until we get to our liquidation phase.” At that point, as we start to sell things off, then you’d start to pay back investors’ money. Then at the end of that, once everybody’s got their money back, then you would start to share the profits with them.

If you’ve got something, if you’re buying things that actually generate cash flow while you own them, then you can pay returns to your investors from the cash flow. If you’re buying things that don’t generate cash flow until you sell them, then that’s a different model.

That’s what that investment summary is about, is just nailing that business model down. Once what we know what your business model is, it’s very easy to draw up the offering documents. Then you get investors to invest with you and they just stay in, and you execute your business model until you liquidate. I hope that answers your question. But thank you, Eugene. Anything else, Charlene?

 

Charlene Standridge:

No, I think that covers all of our questions for today. Thank you very much, everybody.

 

Kim Lisa Taylor:

Okay. Thank you so much. Have a great day.

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