As a guest on the podcast “The Real Estate Vibe!” hosted by Vinki Loomba of Loomba Investment Group, Kim Lisa Taylor discussed “When do you say ‘no’ to money? It’s a very important question.” This episode is full of golden nuggets, so be sure to listen to the conversation.
As a guest on the podcast “The Real Estate Vibe!” hosted by Vinki Loomba of Loomba Investment Group, Kim Lisa Taylor discussed “When do you say ‘no’ to money? It’s a very important question.” This episode is full of golden nuggets, so be sure to listen to the conversation.
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Just because somebody has money doesn’t mean you should take it. Okay? So number one, they may not be able to afford to lose that money, and if they can’t afford to lose that money and it’s going to affect their lifestyle, then you shouldn’t take the money. If they’re expecting the returns that you’re going to provide to them to sustain their lifestyle, they’re counting on it to make their car payment or the mortgage payment, you better not take that money because you don’t want to be responsible for somebody’s lifestyle. There are people that will try to use syndication to money-launder, and I can’t tell you how many times I’ve heard over the course of my career that, “Oh, I met somebody who knows someone with the $50 million.” It’s always $50 million…
Welcome to another episode of “The Real Estate Vibe!” On this show. Your host, Vinki Loomba, brings highly successful industry professionals to learn from their life experiences and how their mindset played a huge role in their success, especially in building generational wealth with commercial real estate investing.
By the way, this show is strictly for educational purposes and should not be considered legal, accounting, or investing advice. Please stay tuned. We have a free gift for you at the end. And also, if you like this show, don’t forget to give us good ratings and comments below.
I’m super excited to tell you today we have Kim Lisa Taylor with us.
Yeah, I’m very happy to be here. Thank you for the invitation.
Of course. A little bit about Kim Lisa Taylor. She’s a nationally recognized corporate securities attorney, a speaker, an author of a No. 1 Amazon best-selling book, “How to Legally Raise Private Money,” and we’re going to be talking about that for sure. She’s the founder of Syndication Attorneys, PLLC and InvestorMarketingMaterial.com, and has been the responsible attorney for hundreds of security offerings. So, welcome. I’m super excited to have you today.
I’m happy to be here.
Thank you. So tell me abpiy yourself, where you are at present in your life, professionally as well as personally.
So, let’s see. I’m a corporate securities attorney, as you said. I’ve been doing real estate syndications exclusively since 2008. Actually I had a former career. I went to law school later in life and I had a former career as a geologist/environmental consultant. I had that practice for about 15 years. I was actually doing reports, conducting data, doing reports on contaminated soil and groundwater at hazardous waste sites all around the country. And then, designing remediation systems to clean them up. And I looked into my future and said, “Hmm, I don’t know if I want to be standing behind a drill rig with steel-toe boots and a hard hat later in life. I think I might want to do something else.” And so I had always thought about going to law school, even when I six years old. I remember my mom asked me, “What are you going to do with your life?”
And I said, “I either want to be a lawyer or an architect.” And somehow I ended up in the practice of law, but people always said “logical Kim” — they called me with that when I was a little kid because I was always thinking things all the way through and being very logical. And I liked explaining things that were complex and putting them into terms that everybody could understand and I seemed to have a talent for that. So, that seemed to lend itself more toward the practice of law than going into architecture, so after looking at my career and examining where I was in life, I decided “Why not go to law school?” So I went to law school at night in Colorado while I was still working my full-time day job, and it took me four years to get through, which the night program is usually a four-year program.
And then after that, I didn’t know what I really wanted to do because I already had a career in which I was making decent money. So I started working for other attorneys and exploring different practice areas. An obvious place for me to go was into environmental law, and I did end up practicing environmental law for a little while, but I realized it was all litigation and it all had to do with these cases that went on and on and on for years and there were tons of paperwork that you had to look through. It really wasn’t that exciting. And then, I met an attorney who was practicing securities law and I started working with him and realized that I really liked doing syndications because it was helping people put deals together. I had always been interested in real estate. And the way that I met him was because my husband and I went to a real estate training event where we were learning how to buy multifamily properties for ourselves.
My husband had already been buying single-family and duplexes and owned several rental property at the time. So it was a natural extension for us to look into doing bigger multifamily deals. And then, while I was there at that event, they mentioned syndication and they said, “Well, if you’re going to raise money from private investors, you need to learn how to do this.” So we went to their next class, which was their Private Money Bootcamp. There, we learned more about securities and I was already an attorney at that time, but I really hadn’t picked my niche yet. So that’s when I met the other attorney and started working with him and just made this the practice. This became my focus area of my law practice.
My husband and I did go on and syndicate a multifamily property. We had some friends in it with us. We owned it for nine years. We sold it in 2019. It was definitely a learning experience. And then, my husband retired. He didn’t want to do it anymore so I just kept on going into the practice area more than into becoming the investor. But during that time, I went to a lot of different training events. I went to every real estate training event I could find for self-storage, mobile home parks, commercial real estate, multifamily. I was active in my local real estate investment associations … I lived in Southern California at the time, and there were three of them that my husband and I would go to every month just learning all these different techniquesv— tax deed investing and single-family fix-and-flips.
I went to a week-long fix-and-flip academy. And so, I really felt like I had a deeper understanding of what my clients were doing because I had been through the same kind of training that they had been through. So, that’s how I got here, and once I started practicing in the securities world, I did form a law firm with that other attorney. We worked together eight years and then I decided I wanted to move out of California and move to Florida, so I went there and set up my own separate practice. And, that was in March of 2016 so we’re well over five years now and I’m doing very well. I’m very successful.
Wow, congratulations. Wow, that’s exciting right? From the geologist career to attorney, that’s quite a journey. So before we dig deep into that, let me ask you about your background. Can you tell us a little bit about your background as a child, where you grew up, in what kind of environment? And, you wanted to always become an attorney, right?
I did. I grew up in Michigan. I was the youngest in a family of five. My father worked for General Motors. He was a tool and die maker for 40 years in Kalamazoo, Michigan. My mom died when I was really young. She died when I was 11, and my father didn’t remarry until I was in my 30s so I grew up as one of those latchkey kids. My dad was working seven days a week, 12 hours a day, so I didn’t have a lot of parental supervision. Made some stupid choices. Finally in my 20s, I got my act together and got started off on my career. So, it all worked out.
But those were all good choices at that time, because now we look back and we think, “Oh my God, those were not good choices,” but …
Well, they helped me become who I am today somehow or another, painful as they might have been. We all get through everything we have to.
That’s true.
I feel like I’ve done okay.
When you were growing up and then you didn’t have your mom, how did that affect your life? Did it make you more resilient or did you feel like something was lacking?
Well, I was a momma’s little girl. I was the one who was always hanging on her skirt and following her everywhere. So, when she died, it was very painful to try to figure out where I fit into the world. I remember making decisions that, “Okay, I can let my dad boss me around who I never see and I’m afraid to talk to him or I can let my older siblings boss me around or I can just make my own decisions.” And I remember making that decision just, “I’m just going to do what I want.” And so, I was just a little wild child. But, I think it made me much more independent. It probably made me a bad employee, because I didn’t want anybody to supervise me. I had made that decision when I was 12 years old: “I’m not going to let anybody tell me what to do so I’m just going to do my own thing.” That’s why I probably wasn’t the best employee. I do remember times when I suddenly left jobs because I didn’t like what was going on. I heard the term one time “unemployable.” I became unemployable.
That’s a good one. I like that.
It doesn’t work well when you’re constantly disagreeing with your boss or if you’re doing it in public in public meetings. So, I learned I needed to do my own thing.
You told me that you pivoted to law, you went to law school, you decided that you wanted to do more than just being a geologist, so you pivot to law. So what was that journey like? All of that change in your life?
Well, at the time I started law school, I was married. So, I’ve been married … I’m now married to my third husband. My first husband lasted eight months, so that was the “trial marriage.”
It was like, “Whoops, made that wrong decision. Get on to the next thing.” And then, I was married at the time, too. I had been married for many years, but law school broke through that. I didn’t know that that was going to happen, but with me working full-time, I was living in Colorado way up in the mountains at that time and I was commuting an hour and a half into town for my job. And then, getting done with my job and going to law school at night and then turning around, driving an hour and a half home. So I wasn’t home very much. I usually got home just in time to sleep, and not really even sleep long enough and then get up and go again. So my marriage didn’t survive that, but that was probably a necessary change.
It was very hard to have a social life when I was working that much or so busy. My stepdaughter came to live with us right when I started law school. That was a pretty cool experience. She lived with us for a while, but then even she ended up moving on and going to live with other relatives after he left. You just get through it, right?
That’s true. But that’s an interesting journey. You learned a lot. And then, the question I wanted to ask you is being a geologist, you learn so many things about the environment. I never learned about that subject, so I do not have any knowledge about that, but you might have acquired so many skills over there. Were there any skills that were transferable into your new career?
Yeah, so I was a project manager. I was a senior project manager. We were doing big site investigation and remedial projects for the base realignment and closure projects. So, at military bases. Some of those projects were just huge, and I learned how to manage other staff and how to get reports done and put all the pieces together in order to tell the story and then to write a report in plain English that anybody could understand, condensing all that information into a palatable report. And so, I think that all translated into what I do in my law practice, because running the practice is really about managing the projects, making sure that everything keeps moving forward, managing issues that come up with staff or problems with clients or things … trying to solve just any troubleshooting that comes up. And then, making sure that the products are good quality.
We had quality control and quality assurance programs for each of the reports we sent out when I was an environmental consultant, so you always had somebody else reviewing what you had done. And so, we instilled that in the law practice too, where every time anybody in our firm writes something, then somebody else reviews it before it goes out to the client. It just helps with making sure that everything is correct and minimizes things that are missed and helps our clients all get a quality product. I also have taken, and still continue to do that, in our documents, making sure that they’re written in plain English, that everybody can understand. That’s hard because you look at these long legal provisions and you have to stop and think, “Oh, what the heck is this trying to say?” And, how do you rewrite that so that it’s not a bunch of cross references and legal terminology that nobody’s really going to understand or be able to follow. And, how do you put that into words that investors understand so they don’t get upset because they’re getting into something that they didn’t realize? And so that your clients can actually follow the documents and not get in trouble because they don’t understand them either.
I’ve certainly seen a lot of other documents from other attorneys, and some of them are largely incomprehensible. And so it’s, I think, refreshing to the clients and we’ve gotten a lot of compliments from our clients’ investors saying, “Oh, this is the first time I really understood what I was getting into.”
I’m super happy that you’re trying to do it in a simplistic way so that people like us can understand. I read in your bio about “How to Legally Raise Private Money.” So can you tell us about that?
This book that’s right behind me, it’s called “How to Legally Raise Private Money,” and I wrote it as just a step-by-step. This is the process that you need to go through in order to be a successful syndicator. It’s starting with a practical aspect. The first chapter is about your mindset. If you can’t get past the mindset that you are asking people for favors, then you’re not going to be able to raise money very well. And so, you really have to get the mindset that you are helping people invest in something and to grow their wealth, and so you’re offering them an investment opportunity that they actually need.
That’s so true.
And so, if you change your mindset like that so that you’re offering them something of value that they need, or they may need, then you’re going to have a different mindset because it doesn’t ever feel good if you feel like, “Oh, I’m borrowing money,” or you’re giving me money. That’s just not a good feeling for you, and it’s hard. A lot of people can’t get past that, so that’s why a lot of people don’t raise money.
Maybe they take on other roles in a syndication. But that’s where it starts, and then it goes on to learning about the thing that you’re going to buy. Because you have to be an expert in the thing that you’re going to use that investor money on before you have any business taking their money, because if you’re not an expert and you’re trying to learn on someone else’s dime and you’re making $100,000 mistakes with your investors’ money, you’re not going to be long for this business. There’s a whole lot of one-time syndicators.
And, those are people who didn’t understand what they were getting into or didn’t understand the obligation or the responsibility. Even my husband is an example because he learned about himself during the syndication that we did that he didn’t like reporting to other people. He’s a lone wolf, too. He’s always been self-employed and he didn’t like having to report to investors. Well, if you don’t like having to report and answer to other people, then it’s not a good fit. You have to realize that you don’t own the properties. The investors own the properties, and you’re basically providing a service to the investors and you’re getting compensated for it, but without their money and without their acceptance of what you’re doing, then you’re not going to be in business.
So, there are a lot of people who do it once and decide they don’t like it, but the ones who really do get it, actually are able to develop the correct mindset, they do become experts in the field. They don’t try to be too broad. A lot of things that other people do is they try to, “Oh, I’m going to invest …” I just talked with someone yesterday, I said, “What are you going to buy?” “Oh, I’m going to buy commercial real estate.”
“What kind of commercial real estate?” “Oh, I’m going to buy multifamily and self-storage and warehouses and office buildings.” And I said, “Well, you’re going to have to narrow your focus and become an expert at one or two things before you go on and start doing other things. And, you’re going to have to get someone on your team who has experience with those things before you’re going to be successful even doing any of them.” So, it’s really about assembling your team.
So the book just goes step-by-step through all the processes and talks about how to structure your deals with investors, what to offer investors, what kind of fees that you can earn for yourself, and what does securities compliance mean, because that’s the big unknown is, “Oh, we’ve all heard that, oh, if you’re going to ask people for money, you need to understand securities laws.” And, that’s a big scary thing. We hear about the SEC and people getting in trouble with the SEC because they do things wrong. And most of the time, those people are actually stealing money or they’ve created some kind of a Ponzi scheme where they have to raise money from new investors to pay back old investors because the thing that they invested in wasn’t making any money, or they were taking too much money for themselves and not giving it back to the investors.
And so, that’s why you really have to become an expert in that thing and make sure that it’s viable, make sure that whatever you’re investing other people’s money in is going to make enough money to pay the investors back the return that you’ve promised them, and also to adequately compensate you. This isn’t a get-rich-quick scheme, it’s a get-rich-slow scheme.
That’s true. Yeah, exactly.
The clients that I’ve seen that have really changed their lifestyle have done it over about an eight-year span of time and then beyond. But it took that long to build up … This is a new business … And, I’ve also had clients that were acquisition fee junkies because they didn’t have enough income. The properties they were buying weren’t viable enough. They weren’t making income from the things that they own so they were always chasing after the new deal so that they could get that infusion of cash from the acquisition fee.
And, that’s not the right mindset, either. The mindset is that “we’re going to do this, we’re going to build up volume. I’m not going to make a bunch of money off one deal. I’m going to make a bunch of money off 10 deals but it’s going to take a lot of time to build that up.” And, over time, maybe you can do bigger deals or maybe you can do more deals because there’s really two tracks.
You can start out just doing one deal a year and that might be good enough to augment your current income, but it’s not going to replace it. You’re probably going to have four or five deals to be able to replace your current income. So you can take the track of, “I’m just going to buy a bunch more deals of the same size that I’m buying now.” Or you can take the other track of “I’m going to buy bigger and bigger deals.” And, we’ve had clients go both ways.
That’s good. You said it very well. I really like your mindset when you talk about how people need to understand what they’re getting into because indirectly they’re reporting to somebody, even if they’re the entrepreneurs they’re reporting, or they’re liable or responsible to report to their investors, whatever they’re doing. So indirectly, they’re employed by the investors because investors’ money is there to buy the property and that’s generating the income and everybody’s getting paid. Investors are getting the profit on their money. They’re not doing any work. You’re doing all the work as an operator or syndicator, so it means you’re employed by somebody.
It’s a project in itself, complete. And then I really like that analogy how you put it. There’s a bunch of pieces in the project that you put together for the project to get to the finish line and you get the success. Then you move on to the next project.
So let’s talk about one of the projects, about the syndication. End to end, what does syndication — and I know you can syndicate multiple ways — so, can we talk about that 506(c) versus 506(b) and then what is legal? What is not legal?
A typical syndicate is where somebody will come to us … I can describe the process of how people come to us and what that means is that they come to us and we usually have an initial consultation where we’ll talk about what’s their background, what are they trying to accomplish with their syndication? What are their long-term goals? And, what is it that they’re planning to spend the money on? What experience do they have with that? Who’s on their team? So, we’re just trying to gather information about 1), whether or not this person should be doing syndications, because some people should not, and 2) whether or not they have the right team members to make it successful or they have the right strategy to market to investors to be able to do it within the bounds of the securities laws.
And so, then we’ll have a discussion about how the deals are typically structured and what kind of people should be on their team, and also what does it mean to comply with securities laws? And so where that comes in is there’s really two types of ways that you can structure a real estate deal with other people’s money. One is you can do a joint venture, and that means that everyone in the project has to be actively involved in generating their own profit. So, they’re not relying on you or two or three team members who are going to be contributing all the sweat equity while they’re contributing all the money. Because when you get into that realm, then they’re not actively involved and then you actually are syndicating.
So syndication really just means putting a group together to accomplish a common goal, and the group is going to pool their resources. So some people are going to have money, some people are going to have knowledge and experience, and some people are just going to do work. And so, all of that comes together in order to make that syndicate happen.
A typical syndication is you’re going to sell off interest in your company. So you’re going to create a company that’s going to take title to the real estate and that company is going to sell off part of its interest to investors and then it’s going to retain part of the interest for the management team to compensate them for all the sweat equity. And so, that’s typical deal structure. You have a Manager-managed LLC.
There’s a management team. It’s a separate LLC by itself. That LLC at the management level could be a joint venture and then the Manager-managed LLC is where the syndication occurs. And so, now that you know that you’re selling interest in your company, that’s actually called an “investment contract.” You create an investment contract when you are asking people to invest money in a common enterprise. They have an expectation of profits based solely on your effort. So, investment of money in a common enterprise with an expectation of profits based solely on the efforts of the promoter — those are the four elements that constitute an investment contract. So investment contracts, once you know that that’s what you’re selling, those are securities. If you look in the definition … the 1933 Securities Act defines what are securities … and there’s a whole big, long list that takes up about a half of page of all the different things that are considered securities.
But, the ones that pertain to the real estate investors are two things. The very first thing in the definition is a promissory note. And then later on in that definition is the investment contract. So, either of those things are considered securities, and so when you’re asking people for money, you’re either going to give them a promissory note or you’re going to give them an operating agreement for your LLC, or a limited partnership agreement if you’re using limited partnerships, or even if you’re selling shares in a corporation. Any of those things are going to constitute investment contracts where you have those four elements: the investment of money, common enterprise, expectation of profits based solely in the efforts of the promoter. So what does that mean? So now you know you’re selling investment contracts. Investment contracts are securities.
That means you have to comply with securities laws, and so that either means you have to register the offering, and that means going through a regulatory preapproval process where the regulators will review what you’re doing. They’re going to review your background, your financials, decide whether or not you should be doing it, decide whether or not your business plan is viable. And then, eventually they may approve it and register your offering so that you can go out and sell it to anybody. That’s the initial public offering. That’s the IPO process. That’s taking your company public. That’s what that registration means. But, that’s a very long and expensive process.
So for real estate, you have a very finite period of time in which you have to raise the money and get that deal closed or it’s just not going to happen. So the alternative is that you either have to register the offering or you have to qualify for an exemption from registration. And so, all of our clients are operating under these exemptions, and there’s multiple exemptions that you can choose from. There’s exemptions at the state level, where everything is contained within one state — you, all your investors and the property. If everything’s in one state, then you can look at your state securities laws. Every state has its own mini-SEC, and you can look at the state securities laws to see what rules would have to apply to who you can raise money from, what kind of financial qualifications they have, whether there’s any dollar limits on the amount you can raise, whether or not you can advertise.
All of those things are going to be described in the rules for that exemption. If you don’t have everything contained in one state — let’s say you’re buying property in a state where you don’t live, or you’re bringing in money from investors in multiple states — anytime you start crossing state lines, then it makes sense to look at the federal rules. And, there’s one federal rule that almost everybody uses called Regulation D Rule 506. There are other securities exemptions. There’s a Reg D Rule 504, there’s a Regulation A+. They all have different sets of rules. But, the reason that 506 is by far the most popular exemption that anybody files across the country is because it pre-empts all the different state laws so that you don’t have to then also comply with the laws for every single state where your investors are coming from.
You just need to follow the rules for the Rule 506 exemption, and you need to notify the states that you’re claiming this Rule 506 exemption and then they get to scrutinize whether or not you’ve followed those rules if an investor were to complain later. So you follow the rules for Rule 506 … and so for 506(b), you can raise an unlimited amount of money from an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors. But you can’t find them through any means of general advertising or solicitation. And, the way to prove that you didn’t find them through advertising or solicitation is to be able to demonstrate that you had a substantive pre-existing relationship with that investor prior to making them an offer to invest with you, so before you even tell them about the opportunity.
And substantive relationship means that you already have to know enough about that investor to understand whether the deal is suitable for them, whether they’re accredited, if they’re not accredited, how are they sophisticated? Whether or not they’re interested in investing something that you’re going to hold for five to seven years? Does that even work with their investment horizons? And, whether or not you think that they’re a suitable investor to even invest in this deal. So, you have to have an interview with that investor.
And the SEC doesn’t believe that this is something that can be gathered just purely electronically by form. Someone from your team has to have a live conversation with that investor, talk to them about their suitability and then at that point you have begun the substantive relationship. So, it doesn’t matter if you knew somebody for 25 years. If you’ve never had that conversation with them, you still don’t have the right relationship with them to offer them an investment opportunity. If people want to know more about that, there’s an article on our website — syndicationattorneys.com — in the library called “How Do I Create a Substantive Relationship?” I always encourage everybody to read that.
And now, there’s also a Reg D Rule 506(c). Rule 506(c) is a variation on the Reg D Rule 506(b). With Rule 506(c), you’re allowed to raise an unlimited amount of money from an unlimited number of verified accredited investors. So, they have to go through a verification process to prove that they’re accredited within the 90 days before they make the investment with you and they have to provide you evidence of that. So you — if you’re the one raising the money — are obligated to get that evidence and have a reasonable assurance that everybody who invests with you is accredited at the time they make that investment.
So therein lies the difference: is that the investors go through a verification process if you’re doing Reg D Rule 506(c) offering so that you can advertise. If you’re doing Reg D Rule 506(b) offerings and you want to be able to bring in your family and friends who aren’t accredited, then you do the 506(b). And then with the 506(b), the investors don’t have to go through a verification process. They can self-certify. We give them, in the documents that we create, a definition that says “Do you meet this definition of an accredited investor? If not, this is the definition of a sophisticated investor. Tell us how you believe that you meet that definition.”
A sophisticated investor is someone who by themselves, or with the help of their investment advisor, has the financial background, experience, or knowledge to be able to make that investment with you and to understand how it relates to their overall investing strategy.
Oh, good. So I have a question regarding 506(c) regarding the advertising. You can use any means of advertising? When you’re doing your offering webinar, can you just go live and …
Yep, you can do “dog-and-pony shows.”
Yeah, pretty much everything?
Drop flyers from a plane. You can make announcements. Some of you may have heard some people advertising on the radio. There’s some syndicators that advertise on the radio. If you listen, when they start speaking very fast at the end and giving you the fine print, then you’ll hear that “this offering is being offered under Regulation D Rule 506(c) and it’s only available to verified or accredited investors. If you want to invest, please contact us and get a copy of the private placement memorandum.”
You’ll hear something like that. And so then you know they’re using that same exemption that we’re talking about here. Giant hedge funds use these exact same exemptions to raise billions of dollars, and most of them still use Reg D Rule 506(b). So, they actually take the time to get to know the prospective investors before they’ll allow them to invest with them. And I will tell you that even though you can advertise doesn’t mean you should. First of all, what is the first question that a stranger is going to ask of you? Do you have any idea?
Maybe first they wanted to know who you are?
And how many have you done before?
How many you have done before? So, basically…
If you haven’t done any before, then they’re just going to sit it out and say, “Well, come back after you’ve done four or five.” So, you can waste your time advertising when you don’t have the right team assembled to be able to sustain those questions. It’s the same thing, we get people coming to us to establish funds. I probably talk to eight or 10 people a week who say, “I want to establish a fund.” And my first question to them is “How many have you done before? Because if you haven’t done one, then nobody’s going to invest in a business plan that says you’re going to buy five.”
That’s true. People want to look at the track record of who you are. So, I’m going to ask you one more question while we’re on this subject. When do you say no to money?
That’s such a fantastic question, and I don’t think anybody’s ever asked me that before, Vinki. I think it’s such an important question because just because somebody has money doesn’t mean you should take it. Okay? So number one, they may not be able to afford to lose that money, and if they can’t afford to lose that money and it’s going to affect their lifestyle, then you shouldn’t take the money. If they’re expecting the returns that you’re going to provide to them to sustain their lifestyle, they’re counting on it to make their car payment or the mortgage payment, you better not take that money because you don’t want to be responsible for somebody’s lifestyle. There are people that will try to use syndication to money-launder, and I can’t tell you how many times I’ve heard over the course of my career that, “Oh, I met somebody who knows someone with the $50 million.” It’s always $50 million.
It used to be China or Saudi Arabia. I just recently heard Russia and Turkey. It’s always from a foreign country, they have $50 million. They want to invest with you. I even had, one time, some people that were saying, “Oh, well this person has this $50 million to invest and they’ve sent us a contract, and the contract says that they’re absolutely responsible for generating X percent return.” It’s like, “Yeah, you don’t want to be responsible for that.” You can’t be responsible for that. All you can do is say, “Here’s a property. Here’s our projected returns. If we meet them, this is what we’re going to be able to pay you. If we don’t meet them, we’re not going to be able to pay you that.”
So, be careful of that. Don’t invest with the Nigerian prince…
Even though he has …
Yeah, $700 million. You only have to pay $10,000 or $20,000 to get it. Anybody who asks you for money up front, unless they’re a licensed securities broker dealer, anybody who says, “I can raise money for you,” and they want you to pay the money up front, unless they’re a licensed securities broker dealer who’s using that money to vet you and to vet your deal has a specific purpose for that money. Do not fall for that. I had someone who said, “We paid $50,000 to someone and then we never heard from them again. They said they were going to raise money for us.” And, that’s just within the last year, so that stuff, it happens. And, don’t invest with people you don’t like. You’re inviting people into your life for the next five to seven years and they’re going to have your phone and they can call or text you every single day.
You don’t want people that are nervous, that are super-needy, that question every single thing that you do. One time when we were doing our syndicate, there was someone I met who knew a bunch of people in Beverly Hills. I couldn’t stand talking to her. Every time she called me, I would cringe. I did not want to call her back. I had no business investing with her just because she wasn’t a good fit for me. She could have been a perfect fit for somebody else, but not for me, just like my first husband.
That’s a good one. Some people are paranoid. I don’t know, they entangle themselves without any reason. How much as a syndicator or as an operator, do we need to know about the source of funds? Or do we really need to dig deep to figure out where he or she’s getting the money?
Yes. You do need to know that, and usually they’re not going to tell you. So that’s your first red flag. The second thing is I have probably had 100 times that people have come to me and said, “I’ve got one investor. I’m chasing this one investor that says he can do the deal.” And I will tell you that 95% of the time, they do not do the deal, and a lot of it is they’ll talk to you … I mean, I get you people who have never syndicated anything before and they’re talking to family offices or pension funds or, “Oh, we’re making these deals with these investment banks.” And it’s like, “Yeah, this is never going to happen for you. Not with your current team. If you get somebody who’s very experienced on your team, possibly.”
But right now, before you’ve ever done a deal, they’ll talk to you. It’s their job to talk to you. Everybody has a potential opportunity and they screen the ones that might work for them. Some of them are just too polite to say no. They’ll say, “Oh, well, this is the criteria we’re looking for.” Then you think you found this golden egg and you send it to them and they’re like, “No.” Or, they’ll string you along and they’ll keep adding conditions: “Well, it needs to do this and it needs to do that, and it needs to …” and every time it’s like a moving target and eventually you’re getting too close to having to close on the property and guess what happens? They disappear. They stop answering the phone. They stop calling you, or they tell you that, “Oh, something just came up. I had another deal that just blew up and I’m going to have to spend all my money there.”
That happens time and again. It’s very much a rookie mistake to spend time chasing single investors for your deals. And, the other thing is that when you have those people in your deals, that doesn’t come without a price. Okay? If you’ve ever watched “Shark Tank,” it’s not like those guys just write checks for $100,000 and forget about it and hope the money comes back to them. No, they’re going to take on your deal. They’re going to start controlling you. And so, the same thing with people with a lot of money like that. They’re going to start being in control of that deal. And, guess what you just bought yourself? A new boss. If you don’t want to work for somebody else, then don’t let single investors take on your deal.
The people that will invest with you are people that will invest $50,000 or $100,000. They’ll also let you stay in control of your deal.
Wow. That’s great. Oh my God. This was so informative. I know we are running over time, but I wanted to ask you a few more questions before I let you go. You’re so knowledgeable about your field, so I wanted to ask you this question. What in inspires you to keep going at this time?
At this point in my life, I’m looking ahead to retirement, and who knows when that’s going to be. Is that going to be 10 years? 15 years? I don’t know, but I’m certainly …
Maybe never.
Yeah, you never know what’s going to happen in the future, whether you’re going to have to retire … Nobody can predict that. But, there’s things that I think people want to do. My husband and I have some dreams to travel and things like that, but the business is very, very consuming. So, maybe looking to the future to be able to do things like that is what inspires me. But each morning, since this is a mind/body thing, I do mediation. 10 minutes of meditation a day is really helpful to get your head in the right space. When I do the meditation, I’m much, much more productive throughout the day.
I also do yoga. So, the yoga is a great way just to … you just generally feel better and it is a form of meditation as well.
That’s true.
So, two of those things set the stage for the day. I was, for a while, following “The Miracle Morning,” and I don’t know if you’re familiar with that book but …
I am. Actually, that was my next question, so please talk about that more.
So “Miracle Morning” is a fantastic book to get you on track and keep you on track. The problem I have with “Miracle Morning” is once you achieve that thing that you had on your vision board, then what? So you’re like, “Okay, now what’s the next vision?” Because, that actually happened to me.
It was amazing. I did a vision board. I did this for probably two years. I had a vision, I had written down exactly what kind of house I was going to find, what kind of view it was going to have, what it was going to look at, how it was going to be set up and all of that. And, it’s just amazing how close to that vision that house I ended up finding was. So it really does work when you keep that in your mind. And then when you see it, you know it. There’s no uncertainty of “is this the right thing? Or should I do this or should I do that?” Because you’re just like, “Oh gosh, that was the picture that I painted for my vision board. And there it is. I’ve got to get it.”
There’s no question. So, it does keep you on track. I’m not so good at the journaling. Not so good at that. That was probably my biggest downfall, the one I didn’t do the most, but certainly the meditation, the exercise, the vision board. The mantras, they’re absolutely fabulous, especially if you’re going through some challenges in your life, because they get you out of that negative thinking and reframe your mind into thinking positively about what’s happening. I went through some challenges when I was doing that, and I remember my sister, who’s very Christian, saying to me, “Well, just pray for a just result.” And, it was interesting how that challenge ended up working itself out, but the end result certainly did seem to be just in the eyes of the world. Not anything I could have ever predicted or envisioned, but it did keep me from thinking bad thoughts. It kept me just framing it as, “Okay, it’s a just result. It’s not something I control. I’m not setting the stage here.”
You have an awesome, awesome journey. That’s what I have to say, and your experience throughout this life, I really love it. So I’m going to ask you one golden nugget. I know you gave us so many, but …
What is the golden nugget? It is this: Every one of my syndication clients that has gone on and done multiple deals has had a coach pushing them forward and keeping them on track, at least for their first three or four deals. So, I would encourage you to find that coach, find the person you’re going to follow, find the person who’s supportive of what you’re doing, who you can talk to when you’ve got opportunities to make sure they’re viable, who can look at your deal analysis and make sure that it makes sense, who can keep you from making $100,000 mistakes. Find a mentor. I found a mentor you can leverage from other people’s experience and offer them their efforts. So, use that to your advantage, but do get a coach and make sure that you follow them, and keep learning every single day.
Part of “Miracle Morning” is that you’re supposed to read for 10 minutes every day. So read something that’s going to help you enhance your knowledge and get more in tune with what your investors are thinking. Learn the terminology. Read my book, read other books on syndication. There’s another great one that I recommend for everybody. It’s “The Principles of Real Estate Syndication” by Sam Freshman. And, we have a podcast called “Raise Private Money Legally.” And, I interviewed Sam. I’ve interviewed him twice. Sam’s in his 80s. He’s been raising money for 60 years, and I asked him during the first interview — the episode is called “60 Years of Wisdom in Real Estate: Investing with Sam Freshman” and I encourage you to listen to that podcast. Everybody should, because I asked Sam during the interview — “How much money have you raised, Sam?” And he goes, “I don’t know. A billion dollars?”
And how did you do that? And he said, “I just joined every group that I could and kept showing up every month.”
Yeah, that’s true. And plus the other thing you said by that you cannot possibly make all the mistakes and learn everything on your own, because life is too short. We have to learn from others’ experiences in order to grow. So this brings us to our last round, The Why, our rapid-fire round. So, I’m going to ask you five questions. You have to answer in one sentence or one word. Not more, not less.
Okay.
Ready?
Mm-hmm (affirmative).
So, who was the most influential person in your life?
Gene Trowbridge.
What is the best book you have read or recommend?
I think “The Miracle Morning.”
What is your biggest passion?
I love to be outdoors, and actually my biggest passion right now is my dog.
Nice. In one word, what does life mean to you?
Happiness.
Last question. What is your favorite food?
Oh, gosh. Yogurt.
How can people reach out to you?
So the best way to reach our firm is to go through our website, so go to syndicationattorneys.com. While you’re there, check out the library. There’s over 50 different articles. There’s frequently asked questions. There’s all of our previously recorded podcasts. In addition, you can get a free digital copy of the book. So, do that. You can schedule an appointment there. There’s all different ways that you can interact with us.
Thank you so much, Kim. I really enjoy the session with you. It was so informative.
Thanks for listening to our podcast. We hope you have enjoyed listening to this episode. As promised, we have a free ebook for you, “Seven Reasons Why Real Estate Syndications Build Long Term Wealth.” Please go to our website — www.loombainvest.com — to download your free copy today. See you next week with another awesome guest.
At Syndication Attorneys LLC, we are committed to your success – book a consultation with one of our team members today!
At Syndication Attorneys LLC, we are committed to your success – book a consultation with one of our team members today!
