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Let's just get down into it and tell you what's up, right? Because better you find out now then into the deal and you're unhappy. Absolutely. So the first question biggest mistake, accredited investors may, I think that, where do we start with this question?

Maybe one, like a credit investors are usually not very sophisticated investors. A lot of them haven't owned rental property. So they just look at like the pitch deck, if it's nice and shiny, and they look at the performer return, is it making 20% a year or 20% IRR?

120% in five years. That means nothing. You can change any number on the spreadsheet to get what you want on formal. Yeah. I think that e-course does a really good job of going through there showing you what the assumptions, the check reversion cap rate increases per year as assumptions, economic vacancy on assumptions, that those were the things to check.

To make sure that the number at the end of the tailpipe comes out and it's legit. Yeah. And I asked that question because my assumption is initially when you get started, you think that you get mesmerized by the numbers, whether it's equity multiple or the IRR or whatever it may be. And then once you dig in a little bit, what I found is it seems to be more of a investigate the operator and think who you're.

Who's going to be the main person that's going to be pulling this engine. Who's going to be the main engine behind it. So that's where I landed on, but I wasn't sure if that was the main thing or if there's anything else that I'm missing beyond that you're going about this, you're following the exact typical progression right now.

You're realizing, you're hearing all this terms of invest with the operator. Which is me, I guess it's like the, I don't know if that's the best advice. But yeah. In one respect. It is true. You invest with the right operator, but you got to build up your own network to verify that third party wise, right?

Yeah. And people, I think a big mistake is people will interview the operators and I think that's an incredible waste of time. They're going to be able to tell these questions and answers in their seat. Sure. It doesn't really do any syndicator can do this. Even the horrible one. What I do is yeah.

The, I go look at the numbers first. If they're underwriting the deal the right way, then I waste my time and talk to the person. Sure. So if you're able to get to a, I think you're trying to get to that next layer, which is all right. I need to for the most part, know how to look at a pitch deck to spot check their assumptions.

If their assumptions are right, then I'll continue forward and continue to stating process. Yeah. Yeah. Yeah. I think it's one of those trusts was verify. The first part is just understanding that figure's line liars figure, like you can make statistics say anything. So to your point, it's, let's figure out who the operator is, but then the next layer beyond that is how do I know that this operator is legit because everyone's got a great story.

Everyone that you speak with is gonna have a a compelling value proposition, but that's their job. So where do you go from there? How do you know that? From a, maybe another source for someone else, who's in a similar situation as you, that the situation that you're looking at, the operator that you're looking at, that they're legit and they've proven that.

Over time. That's where I'm at right now. You can also, you gotta be also careful of like operator just got lucky from 2012 to 2014, where any idiot could have made money in Dallas. Now they're getting really ballsy on their underwriting and they're not even expanding their version cap rate for example.

And yeah. Yeah, they have, they got lucky with that track record or some people that felt for them, but their numbers. I wouldn't confess, I'm not invested in them. Yeah, I thought that sponsor. Sure. And I think that was the modus operandi behind. I don't know if that question is in here around. So when you're looking at things from an underwriting standpoint, what are some of the, there's so many things that you could look at, but what are some of the things that stand out for you?

Because it does come down to, okay. So how are you underwriting this particular opportunity? So for you, what's what stands out. Yeah. So number one is reversion Capri. Number two is what are they using for rate increases per year? Number three is what are they using for economic vacancy? Those, I think that's 70% of it right there.

I'm you spot check those three. Yep. Pretty good. From LPs perspective. I think you're better than most of these at that point. Yeah. So you mentioned reversion cap rate, economic vacancy. What was the third one? What is the annual rent increases per year? What is the annual escalator? Okay. Got it. Better. Not be higher than two and a half percent to 2% sub-markets are getting crying, but some of these guys will be using three, three and a half percent, right?

Yeah. Yep. Yep. Okay. Your second question here. Example of a mentee success. I think a lot of people, I don't really follow too many people in my group. I have about 400 and investors now that have been in deals. I don't really track what they're doing and then they come back. Yeah, but you guys don't have enough dry powder to invest in every single deal.

All right. So they just get on a routine where they invest in one deal a year. So I with once a year, but the guys in the family office, Ohana mastermind, I see them pretty frequently every other week. So I think that's why I tried people get people in there because the whole thing is like, deals is just one third or the picture you fixate on it right now.

But trust me, it's just the beginning of this simple passive Castro gravy train. It allows you to get the passive losses. And then those passive losses allow you to implement different tax strategies to pay less taxes, maybe even real estate professional status, which may or may not be for you for a high paid professional that can seriously save a lot of money, way more than they're going to get in any real estate deal.

And that allows them to save more money to invest. Yeah. Or unlocked other, higher end strategies like infinite banking get into the legal and other tax strategies from there. So unfortunately guess the deals is like how I kind of trick people into the mastermind because it's the sexy thing to go after like returns.

But once they're in, they start, the strategy becomes more holistic wealth planning with the taxes and the vehicle and the network. Yeah, where I'd read somewhere. I can't remember if this was on a podcast you had mentioned or, and and one of the the resources that you had where you had made a comment around, Hey, in four to seven years, there's a possibility for an individual to, really be able to sub supplant a significant portion of their income through passive investing.

And I was curious in terms of, little bit of back, even if it's not a a specific individual, what are the strategies that they implemented? So day one, they come in, obviously you gotta have a certain amount of cash on hand. You just can't be someone who's broken is coming in saying, Hey, make me rich.

So typically speaking in order for someone in four to seven years, to be able to generate a good amount of that passive income. What do they, what do you think is a good start to come with? Typically speaking, how much on a yearly basis do you think they would invest? And then what are the, where do you see them?

Do you see them in 47 years? Gender and what kind of income? At the time in 17? The nice thing about this real estate stuff is you, aren't going to strike out. It's hard to do. The bad thing is you're we're not doubling our money every other year. Yeah. Oh, the performers are set that you double your money every five years.

Sure. That comes down to maybe a 15%, 60% of my are, or 20% on average on total returns. But your money is moving. But you got to get it in there. I think one mistake is like some investor comes in, invest in three deals and they're like, why am I not the financial freedom? It's dude, you only put in 150, 200.

Thousand dollars. What did you expect? Like the best thing that this thing can do is 20% a year, I do the math. That ain't much, you got to put in enough, you got to put enough skin in the game for it to work. Which is typically, the model is to start to go into deals pretty frequently.

As soon as you can save up money in the ideal scenario is you're in maybe two or three dozen deals. Yeah, 50 grand a piece and you're invested a million million and a half at that point. Now you're kicking off at 8%, at least, six figures a year for you to live off of. Yeah. But that requires you go into a serious amount of deals, not just dabbling in as you're trying to see.

What's what you want to do. What's your million dollar 401k. Yeah. Cool. What would you do with 500 grand liquid today? What would your expectation be for the investment in five years? If you're brand new to this, maybe just dabble with a few deals, like 150 grand, right? Three deals. See how that goes.

See if your operator steals your money. See if they're competent. See if this is good for you. A lot of guys, they come into this and they're neurotic. I can't really tell what kind of personality is. That's why I'm pretty upfront with you guys. And look, if you're asking a question about something nitpicky on the P and L's every other month, this is not for you go to Vanguard rank who bothered them should, they'd love to spend their time on the phone on investor relations.

But if you're looking for folks to run your guys' investments, prudently with pretty much low fees where you get most of the returns, this is the show. But I always liked the concept of, getting proof of concept first, then bringing in the majority or money, so I dunno if I wouldn't, if you had to force my arm and you have to invest 500 grand, maybe throw it in a handful of deals at a hundred grand a piece, you don't just get diversification again.

You're trying to build up to this syndication ladder where they're evenly spaced out over five years in a few dozen deals. That's the goal. Yep. Any of the, more than that, I think you'll go a little crazy. That's a lot of K ones, but you start to lose track of who's got your money. Okay. Number four here.

What's a deal. You Greg, we're getting not taking, I don't know if there's a deal. I, Greg, not taking. I do every deal. That makes sense. If it's cash flowing day one, there's enough buffer in there. And there's a true story to raise the rents with a little bit of value. Add on it. Because that's another good deal that I want to diversify over.

Yeah.

There's like deals like we're looking at one and I was like, seriously, a class D on Houston that ultimately the deal killer was like, The rents are already pushed. It was already 850 for unit. So we weren't able to push the rents, but we're getting such a good deal. And the and the buyer was so desperate to sell it.

They're so distressed that they're willing to carry back like $9 million of the loan. So I didn't have to bring any money to close the deal. Yeah. It just seemed like a little bit too dangerous of a deal. But that just didn't fit in my criteria. I could choose cash line day one, stabilized 90% occupied or more with the ability to bump the rents up a hundred bucks with a little bit of, that stick on a pig.

What was your criteria include D or maybe C at best and, hope for those B minus C plus. And higher, I would have done that deal if it wasn't a little bit better area that was in the straight up D class area. There were murders like every week there. And if there was ability to bump the rents on that one, there wasn't.

So if you get into trouble, you can't really bring in extra capital bump that rents up cause already too high. Yup. Okay. I don't know that. I don't know. It's hard to turn away from because the seller was like bringing in all the down payment for me. No money in, but it just didn't fit the criteria.

Glad to hear you're sticking with your guns. Number five, what is an example of a deal that you were involved in with sideways? What did you do? Yeah, a couple of them. One of 'em I had a bad partner. He turned out to be a shyster. I had to remove him from the general partnership, getting my LPs to do and that was where I changed things up a little bit in my strategy. I needed to be more involved and see when things like that happen and not just put complete trust in partners. This is why on the deals these days, I'm pretty involved on operations. And I need to know when things are going sideways or something out of the ordinary is happening just out of fudiciary to my passive investors.

And that's the danger on these deals, right? It's the assets. They run themselves if you right by the right deal. But it's the people, right? The people, the operators, like kind of the biggest liability, biggest source of potential issues. Sure. Kinda like buying a nice car, cars. Not going to blow up where the wheels are going to fall off, but if your driver goes to sleep, yeah.

That's the biggest risk. Yeah. On another deal on our actually a couple of other deals, we, one deal, it took a long time for the deal to close the S the buyer, let the property go. Didn't fix up anything just didn't care. So we inherited the property at a nice 50, 60% occupancy. Which isn't the greatest.

We hired some consultants to help out lease up the property. And we got back up to 90% in a few months. So we brought that one back from the dead. Another one we had this both of those are class C all these higher class details, but the third case was property went down. Property was just the tenants.

Weren't paying collection wise. They were paying majority, but. Know, the 20% is pretty much, it's really bad for collections. And sometimes this happens in the first few months where, we're just the new step-parents taking over and tenants try and challenge you. But yeah, I think it was like four or five months went by and we were just like, yeah, this isn't gonna work.

We just gotta fire. These are evictees tenants. So that's what we did. We purposely demolished and got rid of 20% of the tenants dropped their occupancy down from 85, 80% down to sixties. And then pretty unfortunate event happened. The city pulled all our section eight units, which are about 10% of the units, just because the previous seller was really buddy with the inspector.

So that dropped us to 50% occupancy, which is not fun. And that was about where we were like losing money. You always ask what is this, the sensitivity analysis? But on that one, I think that was back in, we dropped the tenants in November last year. And a year later, we are now up to 85%, what an adventure.

So we'll probably refinance here in the next few months and then, catch up investors on performance. Probably even beat performer. I think a lot of the rehabs have been the good thing when tenants move out like that, and you have low occupancy as you can get in there and rehab the units.

Yeah. That's why we raised the capital for the rehabs. So it's independent, it's a separate budget or operating account.

Yeah, overall, like out of 30 something deals like know maybe 10% of the time, something like that happens. So there's not like we can't come back from it. Yeah, but it's the one, it's the one that stings is the one where you have a bad person. That's when it's hard and yeah, luckily it was the only deal I did with that person.

What is X number six, w from an underwriting standpoint, what is at the top of your list and what numbers you assume? We talked about that. I would check out the. Syndication e-course for that. And then in that e-course, there's also LP checklists, Excel spreadsheet with a whole bunch of questions you can ask.

I wouldn't recommend asking all the questions because you can get a little annoying, I think, to the sponsor, but I think just things for you to be aware of, make you think of it. Yeah. Number seven, where would you not invest that other syndicators are investing in geographic and asset type? Things like primary markets where there's no cashflow when rent to value ratios where it doesn't make sense. Not to say you can't make money doing that. You make money by increasing the NOI, but just my criteria.

I want to cashflow day one, types of assets. Office space. I actually like office space. You saw that last deal. We did that tax and bill tower. We bought that for 70 something million 75, 76, and we got it appraised the next week for 81. Yeah. But every deal is different.

But if there was one general cast of, I don't like retail, like storefront, like shopping malls. I don't like that. W what about deals in the Midwest? So it seems like more and more folks are gravitating toward the South or the Southeast. Back when I was looking at turnkeys, it seemed let's say, HIO there are a number of different places that have a pretty good, you were talking about the rent Value ratio that are 1% or above, would you go into in the Midwest where there's a cold type of an environment, snow, et cetera, or?

No. Or it depends on the deal. Sure. If it, if I use the right deal assumptions, right? So for a de Moines, Iowa, instead of a 2% rent increase per year, I might use a half a percent or 1%, like I'm able to tweak my. My spreadsheet to account for these types of things. So I'll never say never.

But yeah, and it's also gotta be more like sub-market based. So just blanket saying like Kansas city, Missouri, or. No. I want to talk about Oh, where is this property? Overland park, Kansas, or right. Or wherever, like I want to dig in. So I don't want to, that's where I would dig in a little bit more, but I wouldn't necessarily say it's like a no, no bueno generally pop increasing population areas.

Ohio's kind of a flat line in terms of population. Yeah. I invested in Birmingham. I still have a lot of my incubator stands, go to Birmingham. It is a flatline population. Similarly, I can say it's declining in a way, but if you invest in the right areas and invest the right people, I think you're fine.

It's all on. Not like sub market is more pointed, but also block the block too. So strictly from an economic standpoint, whether it's population growth, rent, growth, et cetera, obviously you got, it depends on the keel that you're getting. What are maybe three cities that pop out at you where you think, man, that's an amazing city.

If I could get the right deal, I'd go into is it, I dunno, Houston or Orlando or. Oh, it doesn't. I don't think I wouldn't. I would try not to answer it question, because again, it doesn't matter. It's more as long as you're in like a halfway decent city, the key here that a lot of investors don't realize it's your broker relationships, their deals coming up all the time that transcend can be in freaking Bozeman, Montana.

But that broker is working his butt off to get that deal, extract that deal from that desperate seller or that motivated seller. And those are the deals that we're pulling the trigger on. Yeah.

That's supersedes. If it's like that great of a deal, I'll go anywhere. I don't care. Yeah. Where meaning if all was equal. So yeah. Cool. Is there a particular geography or maybe I'll reword your question? I'm going to reword it and say, Hey man, I like these Houston deals. I like these Huntsville deals you're at.

But if you were recommending any other city that you'd like to diversify, because I would like to diversify my acute, my profile geographically, where should I go? I like Phoenix, right? That's it's more of a up and down market, but it can, it's been growing like crazy Landoll that Carolina, Atlanta, I think Dallas is a little overheated these days. You can make anything work there, but let me see Nashville. Yeah. Yeah. Nashville is a little expensive, but I think you could make like a we're looking like Tuscaloosa, Alabama, and you guys, I just want to go see the roll type plate.

Person that their place? Tallahassee, no, not Tallahassee. I'm liking on like Tuscaloosa and in Nashville, somewhere in Nashville or somewhere in Tennessee, but I'm liking not the city. It's one of those like more tertiary markets, but yeah, that's what I'm personally looking at a little bit.

But mostly because I have the property management connection to that area and the broker relationships, not necessarily because they're like the best places. Cause I think it doesn't matter, but again, where the question is coming from, you're trying to diversify. Yeah.

If you could roll back time, what would you do different in your investing career? Some people say you shouldn't have bought those 11 rentals. Yeah, maybe I shouldn't have, but that was key for me to getting above half a million dollar network, because I don't think if you're under that, you should have no business investing in syndications, but let's say you do have a half, a million dollars worth of your cash or ability to invest.

If you already have that. There really would have been no point for you to go into single family. You learn a lot, right? Like most investors that are accredited, they just come right into syndications, but they have a huge hole in their understanding of the stuff. Yeah. And I can see it. So I assigned for the learning.

So certainly single family is a great place to get your feet wet and get an appreciation of real estate. And just some of the terminology, how things work. If you preclude that, not counting that if you've got the 500,000, then there's, I'm trying to think of what the value proposition would be of going into single family.

If knowledge is not an issue. And if cash on hand is not an issue, they're really well educated. Education is a big thing, but I think to me, the holistic way of building of your net worth is to build your network. And unless you're just, you don't have any experience, you can't walk stories at the bar with other accredited investors, everybody is a rich guy with no experience. You're not going to set yourself apart. You're not going to be a value, add to another person. Yeah. Add some experience of, in the trenches being a landlord, owning some rentals. Okay. Sorry. That's what helps having some bad rental properties is some of the best stuff that talk about that relationship.

Oh yeah, of course. The key is getting in the right rooms, with the right pure passive approach to investors.

if you could roll back time, I wouldn't invest in my retirement account. That's a waste of time. I want my money out. I want to pay my taxes now. And I wouldn't pay down my debt. That's good debt. What makes me different from other syndicators? I don't know. I'm just trying to like, try to be transparent.

So what assumptions we're making and if you guys want it and you guys can join us. I don't know. I just see a whole bunch of people, just a bunch of smoke and mirrors and marketing and a lot of groups out there. And I think they attract the wrong people. They attract really annoying investors. I just want good hardworking folks that know that there's a little bit of a bumpy ride, but maybe you diversify or get there and just be good stewards of their money.

That's my vision know everybody to more petite or I can see people get to FY status beyond and see what else they do. And maybe they might want to stick around. That's what the family office Honda mastermind is all about. People stick around after the first year and help out the next guy, because relationships is the currency of the rich, every scenario looks great on paper.

What would your advice be for new LPs? What type of syndication would you be cautious about? I would go into more stabilized assets in the beginning and get the cash flow. At least know your sponsor's competent enough to set up direct deposit. Granted a lot of people raised extra money to pay out investors like a Ponzi scheme.

You gotta be careful with that, but, I think that's a great way of getting started. You don't need to go after like the luxury development off the bat. I don't think those typically aren't good deals because they typically attract on sophisticated credit anyway. Yeah. But. Get into some deals so that you can just, you can show that to other passive investors that you got some money in the game,

Any other questions or wrap up? No I think that's it, man. Like I said, very helpful. Appreciate your being open and taking the time to touch base and. Talk about some of these things very helpful or.