Tuesday, Tuesday, TUESDAY! RING BATTLE!
We have a good ol’ fashioned battle in the ring today! In one corner, you have the fund structure. And in the other corner, at 5′ 11″, 189 lbs, you have the great… the fast… the furious… Syndication!!!
It’s an exciting smackdown, where only one deal structure will leave the ring alive. Dan and Anthony decide whether or not they prefer a fund structure or syndication. Which one is better, and why?
Find out on this episode of Multifamily Investing Made Simple!
LEAVE A REVIEW if you liked this episode!!
“The offering size of a fund is typically quite a bit larger than your single asset syndication, because you’re presumably gonna go out there and acquire instead of just one asset three or four of that type of asset.” -Anthony Vicino
“The thing that I like a lot as an operator, and I would like as an investor as well, is that funding period is really drawn out.” – Dan Krueger
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[00:00:00] Anthony: Hello and welcome to multi-family investing made simple. This is the podcast where we take the complexity out of real estate investing so that you can take action today. And I am your host, Anthony Vino, actually Anthony Daniel,
[00:00:23] Dan: Christopher, what record scratch. I wish you could make the noise. Join us always
[00:00:28] Anthony: by Dan, the real
[00:00:30] Dan: Dan.
[00:00:32] Anthony: Stewart Kruger Stewart.
[00:00:34] Dan: Thank you. Uh, no, damn he didn’t. It’s actually George
[00:00:39] Anthony: he’s said Stewart. So atory. I was like, holy crap. Did I guess that’s no. Okay. George. I was surprised.
[00:00:45] Dan: I was like, I mean, usually you come up with something that’s like slightly offensive for my little middle name or whatever you wanna call it.
The time was really going for your genuine middle name. Just threw a guy’s name in that. I thought Stewart could be like a fit. I mean, I don’t know. Do I, let me look at myself on camera? Do I look like a. [00:01:00]
[00:01:00] Anthony: Mm, that’s I think for the audience to decide, and I do know that this is generally an audio only format, um,
[00:01:07] Dan: podcast, check out YouTube, cast your, so you just need to go
[00:01:09] Anthony: over to YouTube and find multifamily investing made simple.
And then watch this episode, Dan, um, look at his face and let us know in the comments. Does that man look like a steward or does that man look like a George? Not, not for his first name, but it’s for, for a middle name. Like obviously he’s a. obviously, obviously, but what is, what is his middle name? Did you know?
My, my first name is actually a hyphenated first name, Anthony Daniel. So legally I could also be Dan. We could both be Dan’s. We could be the Dans. Yeah,
[00:01:38] Dan: you could. But do you want to, we could be the Dan Klan. What do you guys think? Good. I mean, that’s a lot of Dans
[00:01:42] Anthony: though. It is it’s maybe too many Dans.
That’s too many. I mean, one is a lot, one we’re kind of pushing my, my tolerance.
[00:01:49] Dan: Yeah. Have you ever gone by Daniel? Uh, yeah, when I was a little kid, actually, did you ever go by D uh, only two people in the world would call me Danny. Who was it? George and Robin. [00:02:00] Who’s George.
[00:02:00] Anthony: George must be dad. Okay.
[00:02:02] Dan: it was like,
[00:02:03] Anthony: George is
[00:02:03] Dan: your middle name, but it must be somebody close.
Yeah. You kinda connected the dots. Yeah, I got
[00:02:07] Anthony: right. Cool. All right, guys. So, uh, now that we got the Woody banner outta the way, let’s get to the, let’s get. Let’s get to the topic. Let’s get into what we’re gonna talk about today. Don’t don’t worry. I’m not actually gonna get into it. I’m just leading Dan was looking at
[00:02:20] Dan: and be like, are we really gonna do this is really fast.
We’re only two and a half minutes in. We’re already getting to the point.
[00:02:24] Anthony: No, no, no, no. I’m just, I’m just, um, I’m leading you guys on boat today. We are going to go and to the, the octagon, the thunder dome, we’re gonna, we’re gonna go into the passive investing. DEOs. And we’re gonna, we’re gonna wage war.
We’re gonna have a battle Royal between syndication versus funds, which ones better? What’s the pros. What’s the cons. Which one should you invest in? Is there a reason that some people do funds? Some people do syndications? Well, I don’t know what the story, don’t worry. By the end of this, uh, two, two investment vehicles will enter, but only one [00:03:00] will exit cause
[00:03:02] Dan: it is a zero sum game, right?
There’s there can only be one winner. Between those
[00:03:05] Anthony: two. So yeah, when it comes to investing it, investing is a zero sum game. It’s all the money is funneling into one hand. And if it’s not your hand, um, that, that sucks. That sucks. Um, but Hey, the probability of it funneling into your hands with 7 billion people on the planet is very low anyway.
So like probably nobody listening to this podcast is gonna win the grand game of life.
[00:03:29] Dan: Yeah, well, that’s kind of a downer now, but let’s,
[00:03:32] Anthony: make the, let’s put some odds. May the odds or the numbers, may the odds ever be in your favor or whatever that hunger games reference is. Let’s, let’s help out the, the listeners and maybe ourselves here and give them a little bit of bad investing advice, which hopefully they don’t take.
And then they can, they can maybe better their chances of getting all the money and winning, winning the zero sum game of.
[00:03:56] Dan: All right. Let’s do it. Bad. Investing tip of the week [00:04:00] is I’m actually gonna do two. Oh, I’m gonna do two because you suggested one before the show. Do you like, and I, I do. I do. Um, so I’m gonna do both.
I’m gonna do the one I had. Okay. I’m I’m gonna do yours. And then maybe we let the
[00:04:12] Anthony: listeners kind of judge which one they thought was, uh, the best. Zero sum game zero
[00:04:16] Dan: sum game that this, this is today’s episode is death matches. Yeah, this is a very competitive podcast. All right, let’s do it. Bad investing tip number one of this week is you must accumulate a massive amount of knowledge in order to in effectively invest in anything.
So you would better just sit there and study. Yeah, I was gonna save the Ty Lopez reference, but thank you for getting it in. Uh, so you better study, study study before you do. now, if you listen to a previous episode that this is coming out after our, our short episode, right? Yeah. Okay. Probably if you listen to our last episode, our short episode you’ll know that, uh, according to us, uh, the best predictor of success is not, uh, what you [00:05:00] have or what skills you have or how good you are to think.
It’s really it’s when you start and how consistent you are. So my argument here is that yes, there’s a lot to learn when you’re investing. However, um, Circling back to that Warren buffet, uh, example that we used, where he started investing and you are riding Warren really hard. He’s the perfect example of this concept.
I get it. Uh, if you start early and you’re consistent, you can, you can compound your returns at no matter what you’re doing. Uh, way more effectively than getting stuck in an analysis paralysis. Now I’m not saying just go out and start shoving money in random investments, you know, nothing about, but you need to start taking action earlier and be consistent in it.
Now this doesn’t mean go take massive action. Don’t take all your money and dump it into the first thing you see, but start the process of investing into something. As soon as you can get that muscle flexed and get those reps in as early as you can. So you can go through the learning curve and get better and start to accrue some returns.
[00:05:52] Anthony: knowledge is learned. Wisdom is earned. You gotta get in the game, you gotta apply what you know, and if you don’t, then you’re just a, just a book worm. [00:06:00] Um, Hey, let me say, let me a little segue here real quick. You said analysis paralysis. And I also say that. Yeah, but most people. they say paralysis by analysis and I’ve always thought that’s an inferior way of phrasing.
It sounds weird. Doesn’t it? It seems healthier. Uh, and it seems
[00:06:18] Dan: just paralysis by analysis. Yeah. Is that
[00:06:21] Anthony: paralysis by analysis? And I’m always like no analysis paralysis is way
[00:06:25] Dan: better. Yeah. Sounds like flows off. Sounds like a metal band.
[00:06:27] Anthony: Yeah. I want, I wanna rock out
[00:06:29] Dan: at that band. Nothing. Uh, yeah. So anyways, uh, investing tip, uh, bad investing tip number two for the week.
[00:06:37] Anthony: real quote to unpack that one too. I just wanted to add, like, it’s super easy. I, I find myself in this boat where it’s easier to like keep collecting more knowledge. Think you’re not quite ready yet. And that like that next piece will just make it that much easier. And, and so you put off actually applying the knowledge that you’ve, you’ve accumulated up to that point.
And, uh, across the board, I generally genuinely, [00:07:00] generally genuinely believe that you, if you’re listening to this podcast and you’ve listened to like more than a handful of them, you already know. To get started. You, do you, whether or not you’re ready, uh, financially or you’re out there actually networking and doing the work.
Like that’s a different conversation, but you probably know. Yeah, honestly,
[00:07:18] Dan: to get started and getting started doesn’t necessarily mean dumping 50 grand into a deal. Getting started means talking to operators, starting to review deals, starting to show ’em to your CPAs, starting to go through those reps of getting ready to deploy
[00:07:31] Anthony: capital.
Yeah. Yeah. Building your business card, creating the business cards. That’s key. Get your LLC. Get your, your logo.
[00:07:38] Dan: kidding. That’s
[00:07:39] Anthony: familiar starts. And that’s like the most important stuff in the beginning anyway. Okay. What’s your, what’s your number two bad investing advice. So number one is know.
[00:07:47] Dan: Number two is what?
Yeah. Number two is the one that, uh, you suggested, and hopefully I don’t, I don’t butcher this, but, uh, blank and you gotta fill in the blank here. Blank is the best, the highest, the best, highest [00:08:00] return, low risk investment you can make. blank. If you hear that, now you could, I’ve heard this. You I’ve heard this
[00:08:06] Anthony: recently with triple net.
I’ve heard it with self storage. I’ve heard it with multifamily. Like, I mean, we sometimes say this.
[00:08:12] Dan: Yeah. I, I mean, you hear it, uh, all the time, right? There’s X or Y or whatever is the best thing ever. Everything else stinks. It’s the highest return, lowest risk thing. You gotta get into it. Adjusted
[00:08:25] Anthony: returns out there.
Yeah. Those asymmetric returns is the best.
[00:08:28] Dan: So when you start to hear that advice pitched at you, uh, chances are, you should probably run the other way. That is a major red flag, in my opinion, and apparently yours too, because this was your idea, um, that you know, that that’s kind of one of the telltale signs of something, a little sketchy.
Because honestly, there’s a bunch of really great options out there across the board. We love multi-family real estate, but honestly, anything in real, estate’s gonna be pretty darn good. If you get really good at it, um, you can master the public, uh, stock market too. Get really good at that. [00:09:00] Warren buffet, another reference for you.
Um, you know, so there’s a bunch of really great options out there. We don’t claim that we’re in the best one. We’re just in the one that we know the best. It’s
[00:09:09] Anthony: best for us. Yeah. And that’s, that’s the thing is that context matters a lot. There is no best investment for everybody. That’s a stupid claim because I might be looking for cash flow.
You’re looking for appreciation reading those sexy tax benefits, right? Like, so it’s, it’s different. And to say like, one thing is the best is just, it’s an oversimplification. And generally we love simplifying things like that’s our stick, right? Passive investing made simple, uh, best book in the world. , uh, multi-family investing made.
Best podcast in the world. However, there, as Einstein said, like things should be as simple as possible, but no simpler. And there becomes a point when you’ve oversimplified and now you’re taking a very complex subject and you’re distilling it to too few variables or too shallow of an understanding and then trying to extrapolate it to the masses.
And that’s, I think where people get really, really hurt. And, and you guys, [00:10:00] you’re listening to this. You’re. You’re savvy people cuz we don’t, we don’t talk to, um, Neanderthals. And so by extension, you, you are, you’re a shining beacon of hope in, in otherwise dark world. And I know you guys understand that context matters and that there is no such thing as best.
It’s just a matter of like what’s right for you. But most people don’t. yeah, like the general population does not understand that. And so marketers are always like, this is the best thing ever. And it’s like our, one of our sticks on our website is invest better. Right. Not invest best. Oh, it could be. We should go change it.
Ooh, that sounds actually ring us off 10 pretty well. Hey, let us know guys, which would you be more likely to invest with invest better or invest? Okay, best, best kind of is fun to say. it’s fun.
[00:10:47] Dan: Uh, completely contradicts everything we just talked about for last time years. I talked
[00:10:50] Anthony: myself into a corner here, so, so now you guys let us know which one do you think is actually the, the better, worst investing advice, um, knowledge, knowledge.
[00:11:00] Sucks or
[00:11:01] Dan: know it sucks. Is that how you’re gonna sum mine up there? No, no, no knowledge sucks or there is no best .
[00:11:07] Anthony: Um, let us know in the comments, uh, go leave a review. Otherwise find us on YouTube, multifamily, investing in simple and drop a comment in there. Let us know which one was. Number one. Um, by the time we get your feedback on which one you actually think is the better or worse one, remember this is a death match.
And so one of us has to die. Um, we promise we will. You. we’ll sort that out amongst ourselves, once we we’ve tallied the
[00:11:29] Dan: results. Yeah. Um, that’s gonna have kind of a negative impact on
[00:11:32] Anthony: our business. Future episodes might only have one of us. So take that into consideration who death match, who do you want to be stuck with, into perpetuity on this podcast?
Let that maybe influence your decision. Mm-hmm just know Dan has a child, so he will be survive. Um, I do not. And so if you kill me off, there’s nothing. There’s, that’s the end of my lineage. So yeah,
[00:11:55] Dan: it might be Anthony and cocoa. Yeah. That actually would probably get [00:12:00] really good ratings. Yeah. That reviews or whatever
[00:12:02] Anthony: you wanna call it.
Just, just me trying to handle a, a toddler and that would be rough.
[00:12:07] Dan: Yeah. She’s uh, she’s a handful right now.
[00:12:09] Anthony: Let’s let’s keep it. Let’s keep, uh, let’s keep it in the realm of things that I actually have, like somewhat of an understanding of. So. Let’s talk real estate. Okay. Let’s do it. What do you think?
[00:12:20] Dan: let’s go into funds versus syndications. Yeah. Yeah.
[00:12:23] Anthony: This was a, this was proposed by Reid. He said, uh, which is better a syndication or a fund. And I thought it might be fun just to kind of talk through what are the pros and cons and the differences of a syndication versus a fund. I think funds are becoming very sexy in the last couple of years.
I mean, we started looking at one at like launching one. 2020.
[00:12:42] Dan: Yeah. It was like end, probably end of 2020. We started, yeah, right
[00:12:44] Anthony: before granted Goodrich in November. Yeah. We had started looking at it and we thought like this would be a great device. We didn’t actually launch our first fund until, um, mid 20, 22, depending on when you’re listening to this.
Um, so it took us a while to get there. Usually we did single asset syndications, but let’s [00:13:00] first just define the terms. What’s a syndication as we’re defining it here. And what’s a fund.
[00:13:07] Dan: So a single asset syndication is a, um, uh, private placements. For a real estate investment, you could syndicate anything, but obviously we, we syndicate real estate.
Uh, a single asset syndication is where you go out and you find an opportunity, uh, whether it be building or a little collection of buildings that can operate as a, as a, um, an entity. And you, uh, you get that under contract and you go to your investors and say, Hey investors, I’ve got this thing. 1, 2, 3 main street.
We’re gonna be closing on in a couple months, if you wanna get in on it. Great. Let’s go do this. People invest their capital. Uh, and then they are owners in that. now fund by contrast is, uh, almost the exact same thing, except, uh, typically the way this plays out is, uh, the operator’s gonna go to their investors first and say, Hey guys, I’m gonna go out and I’m gonna go look for this type of asset and I’m gonna go get a bunch of these things.
It could be [00:14:00] seven to 10 buildings. Usually it’s more of a dollar amount type of thing they say, I’m gonna go buy a $20 million of this type of asset. Uh, we don’t have the assets identified yet, but here are the kind of the parameters we’re looking for. And we’re gonna be doing this over the next year.
And by the end of it, when that fund is closed, we’re gonna have five or six or 10 different assets in this one fund. And your one investment, we get you exposure to all of those things. Uh, that’s a blind pool fund. Sometimes the assets are identified, but I think generally speak. They’re not, I think most commonly you’re gonna see what’s called a blind pool fund.
So biggest difference there is, you know, one of ’em is multiple assets, uh, held in one entity and the other is a single asset and one. there’s, there’s actually,
[00:14:40] Anthony: uh, two angles that we should look at this through. One is through the passive investors lens. Mm-hmm like, which is better syndication or fund.
And then also we should give some credence, cuz we do have operators that listen to this podcast, which one is the better structure for you? Like should you offer a syndication or go with the fund model? So let’s, let’s unpack it first for the passive investor. Cause I think it’s, [00:15:00] it’s way more straightforward there.
Yeah. Generally like the number of pros and cons for a passive, I. Very very few.
[00:15:07] Dan: Yeah. I mean, there’s not that many differences. I think I summed up most of them there. Um, it really, I think it, for the, for the past investor, it kind of depends on, on their personality. Um, are they the types of, of, of investors that want to, uh, see all the data they can and get really particular about what they’re investing?
Um, or do they more so, uh, have an operator or a couple operators that they like to work with and they just wanna be in whatever those guys are doing and get some diversification there via one investment. Um, so I think it really kind of comes down to the type of personality. Do you want, do you wanna really get crystal clear on everything you’re in and really underwrite it really deeply?
Or do you more so just want to kind of bet on the jockey and say, Hey, everything you’re doing this year, get me in. .
[00:15:53] Anthony: Yeah, so that’s like the big, the big benefit of the fund is it’s instant diversification. Let’s say you only had $50,000 to invest for a [00:16:00] year. And you had the choice between like this one single asset, or you could invest it into this fund where they’re going to be diversifying it across maybe three or four assets over the course of a year.
Well, that $50,000 might be from a diversification standpoint, better just to go into the fund. It’s still bit. Um, one really big one that you, you don’t really think about, but it came up at a lunch the other day with a, a guy who has been investing a lot. He has a lot of, um, passive investments collects a lot of K one S at the end of the year.
And the thing that he mentioned was like, at a certain point, you’re, you’re collect, you’re getting a lot of K ones mm-hmm and it can lot of stuff to keep track of. Yeah. It can be a bit of a nightmare. He’s like if I ever die, I kind of fear for my wife, like good luck figur, figuring it out for her. And so the nice thing about a fund is.
We might go and buy five or six buildings, but you’re only gonna get one K one mm-hmm . Whereas in the single asset syndication, like maybe we go and buy five or six and you do you invest in five or six of those? You’re gonna get five or six K one S. Now, is that a really, is that a strong enough reason to pass up on a syndication?
I, [00:17:00] I don’t know that’s for you to decide, but it is something it’s nice to know. You’re only getting one K one at a. Yeah. Yeah.
[00:17:06] Dan: I, I guess I’m the type of person who, and I’ve realized that I’m different than most of our investors, because we’ve pretty much asked everybody, you know, like Anthony said, we’ve been looking at this concept for, well over a year now, and we’ve asked most of our investors, you know, how do they feel about the concept of fund?
Is that something they’d be interested in? Do they like the single asset stuff? Better. And personally, I prefer being able to dig deep into the weeds on every single thing I invest in. So I’m, I think the minority here who would prefer a single indication where I can see, okay, here’s the asset I’m gonna get.
Here’s all the details about it. I can go down a rabbit hole doing research on this thing and get a really good understanding of it. that’s just the nature of my personality. I think the vast majority of people per us talking to our investors and just the general vibe I get for most people out there that they’re the opposite.
They, you know, once they find a group that they like to work with, um, they’d rather just make one investment. In a [00:18:00] year and get exposure to multiple things and they don’t wanna dig into all the details. They don’t wanna build models and real overanalyze things. They just wanna make it simple, which I think makes a lot of sense.
So I’m gonna guess that I’m kind of the minority here, but I’m the type of guy who would actually prefer single assets indications from a, from a passive investor’s perspective. It’s yeah, a little different on the operator side though, a, a,
[00:18:20] Anthony: a happy middle ground is something called a mini fund, which is a little bit, it’s kind of like the blend between the two.
So here’s how it could work. Let’s say you wanna go and raise $5 million and you’ve negotiated with a seller. Um, he has three buildings. You’re like, I like to buy this building and then that building that building. So you have ’em all in their contract and maybe you spread out the, the purchases by a couple months.
And so you don’t wanna do ’em all as single asset syndications cuz as an operator, we we’ll talk about this is when you do a single asset syndication. Pay all those legal fees, each time that’s like 20 K $25,000. Each time that can add up, or you could just do one fund and that’s about 20, 25,000. So you can save a lot of money there.
It’ll bit simpler. So maybe you want to do, what’s called a [00:19:00] mini fund where it’s just like a single asset syndication. But in a fun structure. So you’re gonna go raise 5 million to be distributed across those three buildings. And now when you go race from your investors, you can actually sit down and say, we’re buying this building on this date, here’s the underwriting for it.
And then we’re gonna go buy this building on this date. Here’s the underwriting for it. So it’s kind of a blend yeah. Between the two
[00:19:19] Dan: models. And there’s actually another rather large component that impacts the passive investors that I completely forgot to mention. And that is, um, the, the capital, the funding.
Um, that you get with a single asset. Syndication is relatively short typically, uh, when we get a single asset, uh, syndication set up and we go to our investors with it, they might have 30 days at most to, uh, absorb all the information, unpack it, talk to their legal counsel, their CPA, uh, their spouse, whoever else needs to have eyes on this thing, decide whether or not they wanna invest and then fill the paperwork and get their funds in.
Um, 30 days might sound like. But when you’re looking at [00:20:00] moving, you know, 5,000, couple hundred thousand dollars into something, um, that’s not a ton of time to really fully unpack it. So a lot of people might feel a little bit rushed, especially given the fact that these things fill up typically in a matter of days.
So people have to really just be, you know, kind of. Ready at, at almost like they’re starting a race. And then as soon as those, those docs come out, boom, get it in there and get it done. Whereas in the fund, the thing that I like a lot as an operator, and I would like as an investor as well is, uh, that funding period is really drawn out.
Um, there’s not this kind of big mad dash, obviously. There’s still a sense of urgency. There’s um, there’s, there’s a little bit more limited supply, but you can raise, as you’re closing on these properties, instead of having this mad dash a few weeks before a closing that you would get in a, a single last syndication.
So it kind of smooths out that process a little bit, which I think is a huge benefit for, for passive investors and for the operator. Yeah, that’s a
[00:20:52] Anthony: really good, that’s a really good point. And the another part of it that I’ll add is the, the offering size of a fund is typically quite a [00:21:00] bit larger than your single asset syndication, because you’re presumably gonna go out there and acquire instead of just one asset three or four of the, that type of asset.
Right? So the offering size is usually three or four times bigger. Not always, but generally the funds are gonna be bigger. What that means is there could be more room in the fund than in a single asset syn. So depending on the investor pool size, again, you might not have as much competition. You might have more time, more time to breathe.
And we have experienced this in the past where we did a $2 million raise, 48 hours filled up. That is really frustrating to investors. So you can imagine like, okay, well, if that was a $10 million fund, maybe instead of 48 hours, that would’ve taken two weeks, it would probably take a little bit longer than two weeks, but mm-hmm um, you guys
[00:21:45] Dan: get the.
Yeah. And honestly, on that one, the, the general partners got pushed out a little bit because we had to make more room. We were gonna put some money in on the limited partners side and we had to make room because it was just an outsized
[00:21:55] Anthony: demand. Yeah. We had, we had a cranky, we had some cranky investors who were like, let me in.
Yeah. And we’re like, [00:22:00] okay, fine.
[00:22:01] Dan: Sorry. You know, it’s a good problem to have, I guess, but, and then, you know, just for context, we are talking. You know, kind of our sized operation here, there’s funds out there that are much larger. If you look at a BlackRock fund, it’s in the billions. So massive, you know, they’re doing more than three or four assets in one of those.
Um, but that’s another component. And we mentioned that there’s, uh, diversification that you get into fund, but really why that matters is, um, sometimes there’s just unforeseen events that might hit a building. Um, something that couldn’t have ever been caught in underwriting or analysis or due diligence or anything, there’s just some sort of freak occurrence, um, could be a fire or something like.
when you get a fund with multiple assets in there, those types of things are gonna have a much, uh, smaller impact on the, the portfolio than they would have. If you were, uh, just in a single asset syndication, there was an issue at a, at a, at one building. So that’s, that’s I guess, kind of the perk of the diversification.
I think it sounds good, but just so people understand, um, you know, the, the outperformance or underperformance of one asset, uh, won’t necessarily disrupt [00:23:00] the returns too. So,
[00:23:01] Anthony: yeah, the, so to the point of like the three or four assets in the fund, um, there are there’s so, so many different types of funds.
Some funds could have like hundreds of assets could be single family homes where they’re collecting a thousand of ’em or something. Right. Um, generally though, you’re gonna see a fund for. I would be surprised to see a fund for two assets that, that doesn’t really make sense. Seems like overkilled me.
Yeah. Yeah. You’d, you’d probably do it. I think minimum, like you’re gonna go get three assets, anything below that it’s probably like maybe not worth the time and energy. Yeah. Like why? Yeah. But from an operator standpoint, this is something like it’s a completely different game. Like all the things that we’ve talked about.
Uh, from the passive investors’ perspective, they still apply. So we won’t unpack all of them. But one thing I will point out is that the, just the, the return calculations, the administration of a, of a fund is quite a bit more complicated just from the perspective of, well, how do, how do we handle. Um, investors [00:24:00] who come in on day one versus investors who come in day 90 after we’ve already acquired the first two assets and we still have two more to buy.
Right. So that can be tricky doing the math and calculating, how do we want, how do we want to handle this? Or are we just saying, uh, are we doing capital calls so that we’re not actually sitting with the money in the bank, but we’re waiting until we need the capital. Maybe you, you hard. And then in six months, when we say we’re ready to close this building, now we need your money.
And if you don’t come through, then you get penalized. Like there’s, there’s more nuances with the fund that you really need to think about because they can have, they can have really big downstream consequences if you haven’t thought them through all the way.
[00:24:38] Dan: Yeah. And this is another reason that that mini fund is kind of a, a good option on the way to a full fledge fund because, uh, mini fund, um, usually isn’t just a little bit smaller than, uh, regular fund it’s, it’s a little bit shorter duration as well.
So you, so those, those timing nuances become much less of an issue and are even kind of a non-issue, uh, depending on [00:25:00] how you structure it. So I think for a lot of people, many fund. From an operator’s perspective is probably the best first option, because it’s just a little bit different than a syndication, but it’s not, you’re not gonna have to go out and, uh, necessarily outsource the bookkeeper or the, the back office work of, of calculating all this stuff, uh, to a fund management company.
Cuz when you do a full fund, that’s going on for a year or more, um, you do have to account for the differences in, in when these investors came in throughout the process of funding and it’s, it’s not something you wanna try to do in a spreadsheet. You want the pros to actually do that because it’s not the most intuitive process and there’s a significant expense to that.
So I would, if you’re an operator, I would definitely look at that mini fund as your first fo a into the, the world of
[00:25:43] Anthony: funds. Mm-hmm and, and for an operator, uh, you mentioned this at the beginning, is that when a passive investor’s probably first starting out and they like getting their feet wet with an operator.
The, the single asset syndication makes a lot of sense, because they’re gonna wanna look at the deal and to write that specifically. Then as they gain more trust with you, [00:26:00] they’re gonna be comfortable just saying, I trust you guys. I like everything that you do. So just here’s my, my money, put it into the next six assets.
Right. But in the beginning, depending on where you are in your journey, you might not have the luxury of being able to do that. You might not have the track record yet that you could even think about a fund. And I’ve seen a lot of people launch funds, prematurely, where they just didn’t really have the track record yet.
And then they really struggled to fill it. And the, and the thing is in the fund world, if you, if you fail to raise your fund, your first. Um, it’s gonna make it really hard to do a second fund. Yeah. So you, you kind, you have to knock it out of the park on the first one. Otherwise you’re, you’re probably, you’re gonna be shooting yourself in the foot, in the future.
[00:26:38] Dan: So don’t try to go too big, too fast. Yeah.
[00:26:40] Anthony: Start small again, guys. It’s not about where you start when you start. Oh, you guys weren’t here on that last podcast episode. That’s fine. Rewind, go back to last Saturdays, 10 minute episode where we talked about that concept. It’s a. That was a pretty good episode.
I thought it was pretty good. Uh, you guys let us know. What do you think? Go, uh, go listen to it and then drop this review. Say, nah, that sucked Anthony. You’re you’re what are you [00:27:00] talking about? That wasn’t great at all. Okay. Anything else that we want to unpack on this? Otherwise, have we killed
[00:27:05] Dan: this horse?
No, I mean, I, I’m gonna double down on the, the fundraise process from the operator’s perspective. I mean, I mentioned why it was nice from the, uh, investors’ perspective. It’s a lot less of a, a rush, a mad dash. Um, so I think people are gonna feel a little bit more comfort. um, having time to unpack all the information and then invest when they’re ready.
They don’t have to get it done in a week necessarily. Uh, but from the operator’s perspective, that’s, that’s wonderful because it gives you, uh, more flexibility in your timelines, whether it’s on closing the asset or collecting the funds, because in this business, there’s always things changing. There’s always.
Uh, things that come up, um, you know, getting close to closing in the 11th hour, there’s always stuff happening, changing things, get delayed, there’s unexpected things. So just having the extra wiggle room from an operator’s perspective, um, to shift your timelines around a little bit and not be, uh, ultra constrained by a tight timeline on a single asset syndication, I think is, is [00:28:00] great.
[00:28:01] Anthony: that’s one of the reasons we were really drawn to the fund originally, a number of years ago, when we were looking at it was the idea that if we went and raised the fund, then we had the dry powder. When we went to make offers on deals, we could be competitive and say, Hey, we can close this in three weeks, as opposed to this person who can do it in six 60 days.
And it’s, there’s something about having the confidence to close because you know, the money’s already. And it’s already good to go. Whereas I don’t care like how good of a capital razor you are, how many deals that you’ve done in the past. Every time you go to do a single asset syndication, you bring it to your investors.
There’s always the question in the back of your mind of is this the time nobody’s gonna come through and want to invest with us. And so you gotta put the properties under contract on a little bit of a leap of faith that you are going to be able to replicate past. You know, uh, results and that’s not necessarily a guarantee.
[00:28:49] Dan: Yeah. And what we always did when we were, uh, putting things in our contract is we’re conservative guys. We always plan for the worst and hope for the best. So when we’re submitting our, our contract, uh, to a [00:29:00] potential seller, you know, we’d always try to build in a. Decent amount of time from when it’s under contract, when we’re closing so that we had a lot of time to, to get the capital together because you know, these days we, we fill up a single asset syndication in two days.
Um, but for those first few deals, we’re sitting there saying, okay, man, hoping can get 60. It’d be great to get 75 days, but that’s. You know, that’s gonna turn a seller off, like nothing mm-hmm . And so our thought was, Hey, if we like Anthony just said, if we could actually kind of pre raise this stuff, we can go.
And instead of trying to get a 60 day period between when we put it under contract, when we close, uh, let’s do it in three weeks, right. Uh, that would be a much stronger offer and much more likely to get accepted by the seller because. That’s one of the biggest things, uh, in trying to get somebody to sell a property to you is they need to believe that you’re going to perform.
And if you come in asking for all the time in the world, that’s going, going to imply that, Hey, maybe, maybe they’re gonna struggle confident. Uh, but yeah, if you say, Hey, I’m gonna close in three days. Uh, and the only thing that’s gonna earn three’s holy moley. Whew. Hey, if we, if we didn’t have any debt, we’d [00:30:00] just do cash.
No problem. But, but yeah, I mean, we could do it in three weeks, but, and the only thing that really takes three weeks in that timeline is the bank and the appraisal. Other than that, like we’re ready to rock right now. That is a much stronger offer mm-hmm
[00:30:10] Anthony: yeah. Confidence has a way of getting deals done.
And, um, the, these, like during that period, we never actually ended up doing the fund during that period of time. Uh, we just kept doing the single assets indications and, um, I have a lot of confidence in that now to the point where if we’re looking to do deals of a certain size, we, we know. Pretty with pretty high degree of surety that we can close it.
And now we can convey that to sellers, um, which has really helped our deal flow, honestly, in the last couple of years, like you can really feel when sellers are looking at you with a different eye and they’re like, these guys can perform and you started to build a reputation. People are talking, um, it makes deals, uh, come to you, which is pretty
[00:30:47] Dan: cool.
Yeah. It wasn’t like that in the early days, but not, you had to really sell yourself to the. I’d be like, no, trust me. I could do this. Here’s my track record. And they’re like, well, who are you? What’s your name? Trust
[00:30:56] Anthony: me. I’m good for it. And the whole time, you’re kind of like, I don’t know [00:31:00] if I’m really that good for it, but you know, I gotta believe to achieve.
Yep. So here we are. yeah, it’s kind of like, it’s a little bit of a fake until you make it in the very, in the very beginning. Um, I don’t like saying that, but there’s a little bit of truth in it.
[00:31:11] Dan: Yeah. I wouldn’t, I wouldn’t say we, we faked anything per se. I would say that we, um,
[00:31:19] Anthony: we were, we were health. We had healthy.
Confidence. Yeah, but also I’m, I’m highly skeptical, always of everything. And so also cautiously
[00:31:31] Dan: pessimistic yes. Well, that’s, I mean, that’s really at the root of, uh, playing for the worst and hope for the best, right. We’re always saying, okay, what is the absolute worst case scenario? What is that? Let’s recognize it.
And then how do we avoid that at all costs stay away.
[00:31:45] Anthony: All right. So that is, oh God man. Look at what we’ve done. Look inside that. You see, look at the thunder dome. There’s blood everywhere. Poor syndication. it’s just whimpering in the
[00:31:56] Dan: corner. That was a pretty clear, cut fun. Stop
[00:31:58] Anthony: winner. Stop it. [00:32:00] Stop. Stop, stop.
Picking at it. Funds. It’s not gonna get better if
[00:32:03] Dan: you keep picking poor syndication. All right, well,
[00:32:06] Anthony: there’s no clear winner here. They, they both just kind of devolved into a, a pile of sadness. I feel like
[00:32:12] Dan: the fund. You think the fund one? I think so. I, no, what do you guys, I’m gonna call it what you’re gonna call it.
Reid. What do you think? Reed thinks fun. One
[00:32:20] Anthony: fun. Oh man. Juda. I haven’t voted. Um, you should probably vote.
[00:32:25] Dan: Which one do. I mean, it doesn’t matter. At this point we already got
[00:32:28] Anthony: two as a, just as a investor. I would prefer the mini fund a hundred percent. If mini fund’s not an option, I’m probably still a syndication.
If I’m an operator fund, a hundred percent fund. So you voted for. Yeah, I guess, I guess more,
[00:32:49] Dan: more, I dunno what you gotta get his funds. Why don’t you just cast a confident vote? Because
[00:32:52] Anthony: I’m highly pessimistic in in everything I do. I like to hedge hedge always. So, but let us know what do [00:33:00] you cuz our opinions don’t matter.
We’re just three guys in a room. um, what do you guys think that matters? Um, which one do you prefer? Syndication or fund? Let us know, go over to YouTube again to multi-family investing made simple, to drop a comment and let us know, uh, both from the angle of an operator, which do you prefer, but then as a.
Passive investor, which do you prefer? Um, your feedback would be really cool. I’d like to see generally what people are feeling on the subject. So, uh, why, why don’t you take me away on a, a magical knowledge ride and tell me, and tell me about this week’s book. Deep dive.
[00:33:33] Dan: Sure. Raising capital for real estate by hunter Thompson, not hunter S Thompson hunter Thompson, much different individual.
[00:33:41] Anthony: What if hunter Thompson’s middle name starts with what, what if it’s.
[00:33:44] Dan: Oh, maybe that is
[00:33:45] Anthony: Steven. What if it’s F what if it starts with an F what’s? What if he’s Fitzgerald hunter F hunter
[00:33:50] Dan: F Thompson. That’d be a strong name. Hunter Fitzgerald, hunter, Fitzgerald Thompson. I don’t know what his middle name is.
I Don know you should probably tag him in the SEP and see if we can find out we’ll [00:34:00] find out. Yeah, we did, uh, RA capital for real estate, uh, by hunter Thompson. Uh, he’s kind of the, I don’t wanna say the word guru, but he he’s the man when it comes to raising capital out there, um, there’s a few people out there who have put out, uh, some content and some books.
I’m really blanket on the, the other guy’s name. Was it Richard? Uh, Matt
[00:34:18] Anthony: fair cloth and Richard Wilson. Richard Wilson, Richard Wilson talks a lot about it. Yeah. So more through the lens
[00:34:23] Dan: of like family offices. Yeah. Yeah. I mean, it’s the same, it’s the same kind of, kind of, kind of thing, but, uh, yeah, before, uh, Hunter’s book came out, it was, it was really, uh, Richard Wilson and then Matt fair cloth wrote one a couple years ago, which I thought was good, but hunters was, I think it just.
Was perfect for me because hunter kind of speaks like I do, there’s no fluff. It’s just like, here’s the actual information. Like here’s the blueprint, here’s everything you need to know. Uh, so we broke that down. Uh it’s really, for, uh, that episode was for, for operators. Um, you know, for passive investors, you might get some insight into what’s going on behind the curtain.
and what that process looks like, but that, I think that episode was [00:35:00] largely for operators who are potentially interested in raising capital or, uh, if they’re already raising capital, um, maybe they could do it better. Check it out. It’s a really good book. I liked it a lot.
[00:35:10] Anthony: I love that book. I got nothing to add.
It’s a great book. Um, if you go to, I think raising capital for real estate.com, you can go to Hunter’s landing sales page. And if you scroll all the way down, um, you can see a video review. I left for the book. A couple years ago. I didn’t know that they were gonna use it, but that’s cool. I’m gonna go watch that.
So, um, famous
[00:35:32] Dan: anyway, is that what’s making you that’s the thing, that’s the thing they did it. Yeah. It’s not the book. The podcast.
[00:35:37] Anthony: When you, yeah. Google. My name Anthony says author also reviewed, uh, pro capital capital for real estate. And that’s my claim. There you go. All right guys and gals, that’s gonna do it for us.
Hopefully you got a little bit of value out of this podcast episode. If you did, to us a favor seriously. I know I keep saying it over and over and over, but it’s because it’s super important. It helps us a lot. If you go and leave a review or just a rating on iTunes [00:36:00] or wherever you’re listening to this, it helps the algorithms a lot.
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