For today’s episode, we will be discussing the Jumbo Jet mythical investing strategy.
We will go over how the investment strategy is a good analogy to describe the syndication business model.
What can we do from this type of strategy that allows people to invest in real estate?
We will talk about these things…and more in another episode of Multifamily Investing Made Simple in under 10 minutes.
Tweetable Quotes:
“I want to go from New York to Paris and I want to sit in the back and I want to eat my peanuts.” – Anthony Vicino
“People typically think that investing in real estate is somewhat binary” – Dan Krueger
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Anthony Vicino: [00:00:35] Hello and welcome to multifamily investing made simple in under ten minutes, this is the show where we take the complexity out of real estate investing so that you can start taking action today and we’re going to do that in under ten minutes. Today, we’re going to be discussing the jumbo jet investing strategy. So, Dan, what is this mythical investing strategy? Why have I never heard of it before? OK, I actually have heard of it before because we made it up. But what exactly is it?
Dan Krueger: [00:01:03] If you listen to the stuff, you’ve heard this quite a bit. Anthony is is quite good at using this analogy to describe the syndication business model. Right. Because I think a lot of people, hear that word syndication and it gets intimidating and confusing pretty quickly. And so having an analogy to the kind of look at to wrap your brain around what exactly the structure is, this thing we know it’s a thing that allows people to invest in real estate. But beyond that, like, what is it and how does it work? The jumbo jet strategy that Anthony came up with, I think you came up with it. I don’t think you hijacked that from anybody else.
Anthony Vicino: [00:01:38] I didn’t hijack it from anybody knowingly. But it is such an obvious comparison that I don’t know if I’m the first. And honestly, you might have heard about it elsewhere, but it’s just such a really easy way to understand the syndication model, which because we know want your networks right to connect somewhere, we all get the concept. So so walk us through it. What exactly is the jumbo jet strategy from a fifty thousand foot view? Hmm.
Dan Krueger: [00:02:03] Well, I think just kind of frame things from a high level. People typically think that investing in real estate is somewhat binary. You’re either not investing in real estate or you’re out there buying properties and your landlord and you’re doing all the things. The truth of the matter is that there’s a nice kind of Goldilocks zone in between there where you could invest in real estate and not be the guy doing all the things, not being out there, being a landlord. Similarly, in the aviation world, that’s where the analogy comes in. If you want to get from New York to California, you don’t need to go and buy a jet and flatter yourself or drive there yourself. There’s a much more efficient way to do it. So in this analogy, what we’re basically saying is, well, actually, Anthony, you say it so well, I don’t want to butcher it.
Anthony Vicino: [00:02:49] Do you want to say said yeah? So let’s look at it like this. So we’ve really built the anticipation of homes, like, what is it? What is the point, you guys? So I want you to think about it like this. If you go out there and buy your own piece of real estate like a single-family home, that’s a lot like buying a car. It’s a great investment vehicle that can get you from point A to point B, but it doesn’t take you very fast. It doesn’t take you very far before you fill up on gas. And you always need to be behind the wheel driving. If you ever fall asleep, then the car drives off the road. And that’s what most people think of when they think of investing in real estate they think can buy this house. Will God the land don’t. So I’m just saying he threw a wrench in your analogy there, but that’s fair. Well, that’s fair. Yeah. So I guess you could sit behind your Tesla, but generally, that’s what a lot of people think of when they think about real estate investing is like, I got to go own and buy this house deal to Tenez, to toilers to trash. And I got to be active as there I think is the key thing.
Anthony Vicino: [00:03:44] Right. The thing people think about first is if I want to invest in real estate, I mean to go buy a house. Yes. And that’s not the case that you have to do that. Right. Like the next step up, let’s say if we want to get from point A to point B isn’t to drive the car, we could go and maybe get into little Cessna, a little plane and maybe we go in into that with a buddy who has a pilot’s license. And so this is kind of like a joint venture in the sense that might be larger multifamily. This might be like a joint venture where you bring the time and skills. What’s WhatsApp? Maybe a fourplex. Fourplex little deals, get together and do it together. And it’s an overall better investment. It’s going to get you to your goals faster. Let’s say it’s a little bit more stable and a little bit safer overall. But, you know, there are more moving parts. And the graduation point is, OK, I don’t want to be in a little podunk car or plane and I don’t really want to be active at all. I want to go from New York to Paris and I want to sit in the back and I want to eat my peanuts.
Anthony Vicino: [00:04:38] And that’s where the jumbo jet investing strategy comes in. If I want to go to Paris right now, I just need to go and buy a plane ticket. And they let me on the plane after they frisk me through security to make sure that I’m not like a crazy person. Once I’m on the plane, I don’t do anything. I just chill out and they transport me from point A to point B. Now, in this analogy of the jumbo jet strategy, that would be the limited partners or the passive investors, all you’re doing is paying to get onto this superior investment vehicle, which is an apartment, let’s say. And in exchange, you have these experts around you. You have the pilots and the flight attendants and the ground control these people who they know how to fly a plane. They know how to do it in comfort. And this is like the general partnership in syndication. These are the people that are running the deal. They’re responsible for getting you from point A to point B safely and securely. And so that really is, in a nutshell, the jumbo jet strategy.
Dan Krueger: [00:05:31] Yeah, I think at the end of the day, the key takeaway should be that you can. Get the benefits of aviation and the advances in technology and all these other people’s skillsets without having to do it all yourself. All right. So you don’t have to learn to fly. You don’t need to buy the plane, but you can still appreciate the benefits of, you know, having a jumbo jet available to you in that regard. And syndications, the same thing. If you want to get into a big cash flowing, relatively stable investment, that would be, you know, maybe a couple of billion dollars to get into. You don’t have to go and do it all yourself. You can invest in syndication in syndication. The pilot is the general partner right there doing the work. You don’t have to worry about, you know, learning everything there is to know about real estate or property management or debt. You know, you just go and you get to partake in the benefits. You get the tax benefits, get the cash flow, get that appreciation from the property. But you don’t have to do any of the things. You just sit there and eat your peanuts.
Anthony Vicino: [00:06:29] And I love those flight peanuts. Personally, I’m a big fan. And at the end of the day, it’s like it’s a really easy way to understand what kind of feels like an overwhelming or confusing concept at first. And so next time that you hear the term syndication, if it feels a little confusing, just substitute the jumbo jet and think I’m going to buy a ticket onto this plane or this investment vehicle. I’m going to sit in the back and you don’t have any control. Like you can’t go and knock on the pilot’s door and be like, hey, can we make a turn here? Like, so you’re just sitting in the back, you’re along for the ride. But that’s OK because you are trusting in that person’s pilot, their judgment, their experience, or wisdom to get you from point A to point B safely. So that’s the jumbo jet analogy. Anything to add before we let everybody go home then?
Dan Krueger: [00:07:14] Well, one thing to notice, I don’t think they actually give out peanuts on planes anymore because of peanut allergies, so. Oh, that’s Asterix.
Anthony Vicino: [00:07:22] That’s got a little bit of Scottie’s something that’s not good these days if I don’t get anything.
Anthony Vicino: [00:07:27] No, they do. I just flew recently and they gave me something. It wasn’t too bad honestly. But you get something. You get something.
Anthony Vicino: [00:07:35] So it’s going to do it for us. Guys, thanks for joining us here on that family investing made simple in under ten minutes. We’ll see you next week and.
