WS1120: Networking Tips For Finding Investors | #Highlights

EPISODE 1120

[INTRODUCTION]

[0:00:01.6] ANNOUNCER: Welcome to The Real Estate Syndication Show. Whether you are a seasoned investor or building a new real estate business, this is the show for you. Whitney Sewell talks to top experts in the business. Our goal is to help you master real estate syndication.

And now your host, Whitney Sewell. 

0:00:24.0

Whitney Sewell: This is your Daily Real Estate Syndication Show. I’m your host, Whitney Sewell. We are introducing a new segment called The Real Estate Syndication Show Highlights, where we’re bringing you a look back at episodes focused on a specific topic that we believe added a lot of value to you in your syndication journey. 

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[INTERVIEW 1]

0:00:50.0

Whitney Sewell: Our guest is John Rubino. Thanks for being a show, John. 

0:00:55.0

John Rubino: Thanks, Whitney. I appreciate you having me today. 

0:00:56.0

WS: What’s your main role in the company?

0:00:57.0

JC: That’s a great question. I’m jack of all trades. One day I’ll be doing marketing and advertising, answering emails, talking to investors, the next day I’m out talking to developers and sponsors either online and actually go in to meeting, sitting down with them, rolling up our sleeves to talk about our business and to talk about their business. The most important thing to me is to find like-minded partners which we called sponsors and developers we work with, and to build that relationship and partnership on trust. Getting the chance to talk to each other, really being transparent and open. And, that’s worked really well for us. 

We don’t typically look at a deal right out of the gate with a company. We’re looking for companies that we can grow a relationship with, that we can start the process out to talk to. And that takes a lot of time, ’cause you can reach out to 10 or 20 businesses in a day. So that’s kind of one side of what I do on the project development, to reach out to new sponsors who need our money.

And then I’m going out and I’m talking to our current investors were giving them project updates, we bring them out to the sites, we want the project with them. We avert relationship that we build with those partners allows us the opportunity to really have the open line of communication directly to the presidents and CEOS of the company.

At a meeting two weeks to go with the President of Clark Construction, I was in in his office, that’s the type of connections that we are starting to get through our relationships and through our networks, which is fantastic. Well, yeah, on any given day, I could be marketing and advertising, entering emails, but I really like it now in the field and looking at our projects, bring in our investors out there. I also go on to our large group of networking groups in the area, which I think is the life one of our business.

If anybody wants to start in real estate, get out there and go to me it groups, go out to network, go out and meet different people, because so many people can open the door for you, whether it’s directly or indirectly. And that to me is the best part of this business. 

0:02:56.0

WS: I like what you said. So many people can open the door. You have no idea when you’re speaking to someone who they know and how that person can help you or maybe you can help them in the future.

So, you talked about finding a good deal sponsor, these partners that you’re talking about. Can you give us some pointers on doing that, how do we know when we find a good deal sponsor, maybe somebody we want to invest with? What do you look for? 

0:03:17.0

JR Sure, so we typically wanna do our due diligence on any company we work with. We typically look for a certain type of partner that we can help, whether it’s a partner that’s doing a larger development, it’s a partner that has something that we’re attracted to from a real estate standpoint. And I laid it out, we’re gonna put in a town house development, they’re going to build a condominium complex, or they’re gonna do a senior assistive community, and it’s not too hard to go out and look for those folks. It’s pretty interesting, if you think about it.

You can go into your LinkedIn profile, you can go into LinkedIn and do a search for developers and companies that are out there that are doing these large developments. And you can do that by state, you can do that by real estate market, you can just go to Google and do a Google search. That’s kind of the old way of doing it, but like I said, if you go out network and you can present yourself in a way that it shows people what you’re attracted to, you’d be very surprised that people can come out and connect with you and the relationships again, they open a lot of doors.

We’ve had the luxury of working with some great developers of which some have been, some of my best friends, some of them have been people that were introduced to through mutual contacts, but if you do your homework and you see that area of what you want to invest in, you can definitely find different companies out there that can use your help. And you have to be unique, and these days, I started out as a private money and hard money lender, but the money is so, I don’t wanna say easy, but it’s so accessible that you can go out and get money pretty easily nowadays.

Some people are worried about that, obviously, because of where we’re at, still at the same time, I wanna make myself unique. And the way I make myself unique as equity. And equity is unique because equity is a little more vulnerable, you have to protect yourself a little bit more with equity, because if the bank comes in and they’re gonna bring an 80%, let’s say I’m the investment money and you as equity, you’re gonna bring in 20% or you’re behind the debt, which is the bank. So my biggest risk as an investor in my business and for my investors is how do we protect their equity ’cause if some happens with the market or the sponsor defaults, we can lose all our money.

So, we put different things in place to help arm best to sleep at night, we don’t pay the business any money until the investor makes a minimum of 12% annual on our projects. We don’t take any fees upfront. We do very, very detailed due diligence on our developers. Our developers and our sponsors bring in a minimum 10%. So if someone’s looking for me to raise $2 million, they have to bring in a minimum of $200,000. That’s what we call skin in the game.

So, we want to developers to have skin in the game. We bring in our own money, my business partner, David and I bring in our own money when we go out and raise money for our investors, and then also we don’t guarantee any of the bank loans, so when you go out and you get a bank loan, just like when you buy a house, you guarantee that. No, you tell them By, okay, I’m personally telling you that I’m gonna make my mortgage payments and if I do, you can come after me personally. We don’t have any say in that. As the Investors on these projects were purely passive, we’re a limited partner, and we’re basically built into the management side of the project underneath the sponsor, who is either the managing partner or the general partner. So we come in as a limited partner, which releases us from a lot of liability. 

Now again, the biggest risk for us is the equity is exposed and it could have potential ramifications if something happened with the deal, so that’s why it’s very important that we do our due diligence, that we make sure that we’re very, very connected, relationship-based connections to the partners, so that we feel hospital with what we’re doing. And obviously the location, where we’re gonna be investing in the demographics, what’s the attraction to see? We love DC. Everybody knows that Amazon HQ has been in the mix to come to either Northern Virginia or Washington, DC, we’re watching that. That can definitely skyrocket price.So there’s a lot of things here in DC we love about this market, but they’re also other markets. I could tell you about it, land, I could tell you about Atlanta, I could talk to you about South Carolina, North Carolina. So, it all depends on what you wanna do, what makes you unique in which you can bring to value or value for those folks you wanna work with. 

0:07:36.0

WS: That’s great. I have many questions I was gonna ask you, but if I just gave you just a second, you answered it. That’s really good. So, you talked about presenting ourself, think about our listener who is really just getting into this business and they’re looking maybe at other deal sponsors to partner with, or raise capital for, or maybe even how to present ourself to an advisor. Could you speak to that a little bit? How do we present ourself like you were talking about? 

0:08:06.0

JR: Sure. I took a full year to get our business launched. It took four years because I said, “I don’t wanna launch this and have areas that have major holes.” I’ve been a player on my whole life as a Navy pilot. When you go out and fire an aircraft you wanna make sure you got enough gas. You know you can make it to your destination, but your student’s study or that we know what mission we’re gonna do. 

So, you wanna plan, you wanna sit down and you wanna put your arms around what your plan is, what do you wanna do in real estate, do you wanna be a wholesale or do you wanna be a finance? Or do you wanna be a rehab? Depending on what you wanna do, you sit down, you decide what you wanna do. 

I’m a lender, so I love capital stack, so when I look at a deal, it’s always, “Hey, what’s the money aspect of it? What does this individual need to do to bring capital and to make money for everyone and make it a successful project?” And that’s where I then pick it apart, 

But, yeah, planning is a big part. It’s that full year. We built our website, we build our marketing pram, we build the perspectives for our investors. We build up to our website, we built our Facebook, so we did all of the stuff, and then we went out to our most trusted mentors and people that I’ve had 30, 40, 50 years of combined real estate experience.And we have them just beat the living heck out of us to say “This is the holes that you have in your plan,” and these individuals I came in, made us a better business as they gave us back to paperwork, they say, “Hey, you guys are ready to go,” they held on to it pretty tight because when we pull the fact they said, “Before you take this back, just to make sure that we’re the first investors in your company.” So that was a great compliment.

So, my advice would be is planning. Plan your business model, plan on what you need to succeed, depending on what you wanna do, if you wanna be a rehab or make sure you got a good contract, or make sure you got a good attorney, make sure you have a good money source, make sure you have a good real estate agent, and put your plan together before you launch it. And then when you feel comfortable to go for it and talk to people within your network, and those are the people I mentioned that you can but to talk to at these meet-up groups and just learn from.

[INTERVIEW 2]

0:10:04.0

Whitney Sewell: Our guest is John Cohen. Thanks for being on the show, John.

0:10:07.0

John Cohen: Thank you, Whitney. Thanks for having me.

0:10:08.0

WS: How did you structure that deal and how did you raise capital from investors at being your first one? 

0:10:13.0

JC: So, the first thing I did while I was looking for the deals – two things. One, you always have to sourcing deals and sourcing equity. Now I’m not an attorney but I mean when you source equity, consult with your corporate attorney, ’cause there’s a lot of things you can and can’t do. But I just went to the database, I take to my cell phone and went from A to Z and just started writing down everybody that I knew or had a relationship with their name in a potential amount of money that I think they would have been able to invest. And then together an email list, I emailed all of those individuals, sat down with them on coffees, lunches, dinners, you name it, had different events for them to come and so they knew that I was an expert in that field.

And then finally, once it came to raising money, and then you put together in the executive summary and then you got to ask for it. I said “Here you go.” So, I sent it out and basically said, you know, the minimum investment at that time I would take anything from anybody. We’re a little bit different now, but it was a mixture of all of that, it was just different events, talking to different people, networking, going out, a million coffees. And then basically just ‘Hey, here’s the deal, here’s a situation, do you wanna invest or not?”

0:11:18.0

WS: Awesome. How did you present yourself as an expert considering it was your first syndication deal? Or maybe you had taken on investors with your other 150 single-families, I’m not sure. But, how did you present yourself as an expert considering you were just starting this venture?

0:11:32.0

JC: Well, the 150 single-family houses, it was my own money, my brother maybe a cousin or two, who was not full investor stuff. I present myself in an expert and I think this is something that everyone should do. You have to educate your database of investors and potential investors before you have a deal. They have to know who you are. So, a lot of my investors, I did have a couple of old clients from what Mark and I invested, and I had some friends that knew what I’d been doing, let’s call it five years at the time, and when I was a financial advisor, from when I was a broker, from when I was a commercial broker to when I finally put this deal under contract. 

So, they knew that on as a financial advisor, I’ve raised money before. They knew that I had an education as a real estate broker before, also being a commercial broker, and then you have to put a spin on that, you can’t just go by, go to Loopnet, go buy a deal and wherever it is. You gotta pick some target markets. I did identify Columbus as a market that I really like, there was a lot of positive stuff going on. And prior to that deal, it was an email once a month, my database saying I’ll look at this great article about Columbus, look at the job in Columbus. So, when they saw that and everything, that is a story that I built around myself, they bought it. But we had about, I think it was maybe about 12 or 13 investors in the first deal raised $580,000.

0:12:51.0

WS: Nice, so fast forwarding to maybe a deal you’re working on now, or your most recent deal, what are some things that stand out that you wish you had known when you were completing that first deal?

0:13:02.0

JC: That’s a good question ’cause I actually joke about it. Partially is on that loan, a buddy of mine helped me sign for the loan, and my dad and my buddy who helped me. He invested 120 grand and also time along with me. We’re still friends today, we are on a ton of deals, we have four or five deals we’ve done. And we always joke about it ’cause we knew what we knew today on that deal. Now that deal we bought and sold, and I was about 18 months and we did phenomenal, over a 40% return and 40 IRR for the investors. So, it was a great deal for them, but we knew we knew today that that would have gone completely different and probably significantly better. 

But what are some of those things? One, don’t be afraid to fire manager. And I think that’s something that everybody has to do. I know we, 8 months into that deal, I knew that we could have fired him, I spoke to my mentor, I spoke to a lot of people and they… and we were getting ready to sell it. So, they basically said, “Hold off, don’t disrupt anything right now online.” So, I should have fired him 30 days after take over, just the stories, nothing is going right, but don’t be afraid to fire a manager.

I think that when you put your deal on paper, you always wanted to do better. You do have to be a little bit patient, these deals do date time, it’s not a single-family flip where you can go and renovate cation and sell it 60 days, 90 days, you’re dealing with multiple tenants, multiple personalities, not only from your personalities of investors, your personalities of the manager of the personality of all the tenants, and you got a lot of work to do. We spent about 250 grand on the deal, renovating it and fixing it, and getting units online. It was down units as they manage contractors as well as you want to deal to do and they can do really well. I always want it done yesterday, and you gotta realize that some stuff takes a little bit longer, so you just gotta have a little bit more patient when you’re doing the bigger deals and the managing contractors.

The first contractor on that property was fantastic. We hired him on another deal, and sad story, he ended up getting cancer and passing away. But then he passed off the deal to someone in his company who lost, and he lost was just the regular contractor stories amplified just that he was the worst human being in the world. We ended up firing him right away. But managing contractors from 2014 to today, we’ve got significantly better at.

[END OF INTERVIEW]

00:15:25.0 

Whitney Sewell: We hope that you enjoyed the Highlights show today. You can always listen to the full episodes that were featured today by clicking the links on the show notes page. And in the description box, let us know what you’ve thought of this episode or you can go to lifebreidgecapital.com/podcast and click the feedback button. Let us know how we can add more value to you. Thank you and talk to you tomorrow.

[OUTRO]

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