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SHOW NOTES FOR EPISODE 567: DEAL EVALUATION TIPS FOR SYNDICATION INVESTORS
Passive investing in syndications is a great way to generate real estate cash flow without having to worry about tenants, toilets and trash. However, you still need to be a wary, diligent and wise investor. In today’s podcast, publisher of Accredited IQ Magazine Bryan Ellis shares how high net worth investors can avoid the investment rip-offs and bad actors in the real estate syndication world.
What You Will Learn
- What every investor must know to evaluate any syndication project
- Don’t be fooled by marketing presentations with lots of media logos, suggesting media endorsements of projects or sponsors
- Why you should never invest in a project solely based on the presentation
- The biggest mistake many passive investors make
- A warning to self-directed account investors
- The defining characteristic of syndications
- The key element older investors should focus on when investing passively
About Our Guest
Bryan Ellis
With nearly 30 years of experience in real estate and investing, Bryan Ellis is publisher of Accredited IQ Magazine, America’s only magazine exclusively for accredited and affluent investors. Through Accredited IQ, Bryan is able to provide exceptional investment opportunities to his readers along with the tools and techniques they need to carefully evaluate those opportunities for themselves. Bryan is also America’s most sought-after investment “pitch man”, charging a whopping $25,000 per day consulting fee to project sponsors who want his help in raising money for their projects. As an expert in investor persuasion, Bryan routinely helps his readers in Accredited IQ to recognize when they are being manipulated and how to protect themselves to make the most of their hard earned investment capital.
More About Bryan
- In the 1990s, Bryan was in the software and consulting world
- Spent a lot of time writing and designing software
- Working 90 hour weeks
- When his daughter was born, he wanted to spend more time being a dad
- He couldn’t figure out how to reduce his workload, so he looked at other ways to make money
- He found real estate investing
- However, he was terrible at real estate investing, especially during his first 1 1/2 years
- The good thing, however, is that he learned how to do marketing and communications for real estate well
- He enjoyed the marketing much more than he did the real estate side of things
- He did a lot of it. Made money doing it but didn’t enjoy it
- Ultimately, he shifted to being a publisher of news and information for real estate investors and works with syndication sponsors
- That is where he landed. He publishes two publications:
- Self-Directed Investor Magazine
- Accredited IQ Magazine
- He helps educate accredited investors to better understand syndication investing and help prevent them from being taken advantage of
- He also helps project sponsors of syndications. He…
- Helps create presentations
- Helps develop plans to raise the capital they need
- He helps individuals on “both sides of the fence” so to speak – syndicators and investors
- He currently is not doing any active real estate investing
- He is only passively investing with some of his client companies
- He only wants to focus on cash flowing investments
The Challenge of Finding Good Passive Investments
- Because there isn’t a lot of public information available on syndications and syndication sponsors, it’s not always easy to know what you are getting involved with
- For his Accredited IQ subscribers he teaches them how to be reasonably critical and to properly scrutinize opportunities
- A cautionary situation
- If a syndication’s marketing materials have lots of logos of credible media sources where they’ve been covered, it doesn’t mean the media endorses them
- They may have just issued news releases that got picked-up in those publications
- Anyone can pay to issue news releases
- If a syndication’s marketing materials have lots of logos of credible media sources where they’ve been covered, it doesn’t mean the media endorses them
Investor Database
- Years ago he began and grew an email list of several hundred thousand real estate investors
- Then he started a podcast called Self-Directed Investor Talk
- It became a very successful podcast
- He generated more leads that way
- One day, he decided to do a syndication of his own
- A single family property they bought and renovated and sold in California
- After he did it he said he would never do it again, even though he did a good job of it
- He just didn’t want to run the syndication
Developing Effective Presentations
- Today, he gets the call when a $30 million project has only raised $22 million and they are weeks away from the raise deadline
- He knows how to effectively re-write a presentation to make more sense and where they get a better response
- He’s usually called in in the “bottom of the 9th inning”
- He loves the work and does well at it
- He doesn’t do the presentation but restructures it
- He knows what information a sponsor needs to share at the right time
- They weave a “story narrative” that addresses an investors’ needs and concerns early on
- Caution for Investors:
- Never make an investment solely based on the presentation!
- On the other hand…
- A lot of people have missed out on great opportunities they should have participated in because it was so poorly explained to them
- They were confused and said “No”
- When he creates a presentation…
- He provides just enough information to understand the “big idea,” the flow, the potential and who’s behind it
- All the information to determine whether it’s worth pursuing further
- Then, they should contact the sponsor and get
- The PPM
- All the spreadsheets
- Everything else that’s involved in the project
- That’s the stuff they need to review to know if it’s a good project
- People shouldn’t make investment decisions based on the sales presentation!
- The presentation is just the starting point
- He provides just enough information to understand the “big idea,” the flow, the potential and who’s behind it
Biggest Investor Mistake
- It particularly starts with physicians
- When Dr. trusts an investment referral from Dr. B because he knows him
- What may work well for Dr. A but might not be right for Dr. B
- Just because a fellow physician trusts another physician doesn’t mean the investment is right
Biggest Investor Success
- Investors who really do best are those who do a very thorough due diligence job on each investment they consider
- They dig deep into the people behind the projects (sponsors/GPs)
The Future of Self-Directed IRAs for Investors
- The future of self-directed accounts is currently at risk
- The new trillion dollar proposal in Congress has provisions that could seriously hurt investors who use self-directed IRAs and 401-ks
- Bryan had lunch with a political insider recently who said the self-directed accounts are at risk
- He recommends that people get on the phone, text or email your representatives and tell them to vote NO on this bill
- If it passes you will no longer invest in any syndication and you could lose all your tax savings
- They will say it only affects people who have $20 million or more in a self-directed account (citing Peter Thiel’s $5 billion Roth IRA) but that’s a lie, according to his friend
- There are lots of things in the bill that will hurt ALL self-directed investors
Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years
- It makes sense for “old dawgs” to shift their funds from equities (stocks, bonds, etc.) into cash flowing real estate projects, and particularly, multifamily rental properties
- The defining characteristic of syndications is cash flow
- Mutual funds cannot compare
- It takes many years to build up a nest egg
- If you don’t have all that many years left, it makes sense to use that nest egg wisely
- Refocus your energy on cash flowing investments rather than just appreciating investments
- The great thing about many real estate syndication deals is the value-add component where you get an equity bonus when the project is sold 3, 5, 7 years later
Current Business
- He’s building his finances for his young sons
- They home school and pour a lot into them
- He wants to help them in their future and are building a legacy for them
Rap-It-Up
- Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki
- Favorite business book: Influence: The Psychology of Persuasion by Robert Cialdini PhD
- Most valuable web site for success (other than your own): RightMark I00 (CRM system)
- Favorite app: YouTube
- Favorite quote: “You shall love the Lord your God with all your heart, with all your soul, and with all your strength.” Deuteronomy 6:5
- If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to re-launch your real estate investing business? Set up an account at RightMark.I00 and go to all the people I’ve known along the way and say, “If you need a little help, you know I’ll make good on it.”
How to Reach Bryan
- To get a free subscription to Accredited IQ magazine
- Text your email address to Bryan at 678-888-4000 and he’ll send you the link to free subscription.
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