Real Estate Investment Funds
Explained

The structure of the real estate investment funds facilitates the management of the properties and the distribution of the income generated, which simplifies the investment fund experience for the participants in an efficient way to invest in the real estate market.

Pete Kavanaugh, is a man that has the experience when it comes to building funds and working with investors to help them get good returns.

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Transcript

one of the most valuable lessons I’ve learned over the past decade in real estate is how essential it is to learn
from the industry professionals that’s why I’m gathering professionals from across the country to share their
experiences with you this is a gregerson’s podcast where experience and passion come together in
the world of real estate I’m Casey Gregerson your host and I’m very excited you’re tuning in to today’s episode I’m
very excited to introduce you to Our Guest today Pete Cavanaugh he’s got a lot of experience when it comes to doing
funds and working with investors and helping them get good returns and ultimately yeah he’s just a super
transparent guy you’re going to learn a lot very detailed very analytical so I hope you guys enjoy this episode as much
as I do I started building it all out and go high level like I brought a ton of people that have had lunch with or
conversations with dumped them all into there and now starting to put them in like either an email campaign or a text
campaign and then I created like a pipeline to basically move them from I could even show you but basically from a
lead to Discovery call talking about the fun to like reviewing documents to like
a lot of them I feel like I’ll go into a drip at that point where they’re just kind of like they’re reviewing it they’re not ready but I want to stay in front of them if they’re on social media
they’re just seeing it right but I feel like there’s a lot of investors that I’m talking to that aren’t on Facebook or Instagram that aren’t getting that
constant like hey here’s what he’s doing staying in top of mind so I wanted to create like an email campaign to do that yeah I feel like there’s um a
generational shift in kind of what’s going on with um technology right so you know I feel like I’ve got kind of three
bands of investors like you’re 60 and older you’re 40 to 60 and then your
young professionals who’ve been you know really successful at something in life whether it’s a high paying W-2 job or
Investments of their own as that ladder group that is yeah getting the feed on on social media and stuff like that but
the other two groups they either want to meet with you in person they want to see the documents printed out they want to see you on LinkedIn LinkedIn my LinkedIn
has been exploding lately I’ve gotta put some more effort into that uh yeah but yeah it’s tough because you gotta create
stuff that speaks to each of them I personally do not do a ton on on social media it’ll be part of my strategy
eventually um it’s just not it’s not necessary right now for what I’m doing yeah what’s more I mean yeah where does most of your
Leaf flow come from you think mostly word of mouth and uh relationships you know somebody once or twice removed that
that has investment in the as much people invest me in the past you know they’ll tell 10 of their friends hey
I’ve got good Returns on what Pete and his team is doing you should check it out that’s been the bulk of it honestly
like we haven’t really had to go into a large uh marketing campaign or anything
like that we’ve put a ton of development into our website and I’m actually doing a ton of updates on that this week to
expand it even more but right now my website is more of an authority Builder so if somebody meets me in person first
time they met me maybe they got referred by it by Casey and they want to see what I’m doing and then they’ll follow up on I see them going to LinkedIn or we see
them to our website to start to to research our company a little bit more so I’m investing more time and energy to
the website to get that kind of filled out a little bit more and then uh LinkedIn as well yeah that’s LinkedIn
I’m with you man I finally took some of your advice well you gave it to me a long time ago I’m finally executing on it like I just went through everybody
pretty much in my shell Network on LinkedIn and I figured that was a soft way to be like hey what are you up to we
should talk and then been kind of booking some calls that way and then my next step was get a VA or one of my va’s
to go into like because I don’t you probably know this you can go to the secondary connection con connections and I was like go pick this one for example
this guy that was a high level guy at Shell like go message everyone of his second degree connections and there’s
like maybe 150 of them just something kind of informal and then I’ll try to work that from there into a call which I
guess the tricky part is going to be I don’t want to get on a bunch of calls with people I don’t know I’m trying to streamline a VA to ultimately set
appointments but it’s a tricky one to standardize I don’t know if you’ve got it like how do you know when it’s uh and
you never know gonna know if it’s a good call right with an investor but a way to kind of filter them out
before the caller it was in like the first 10 minutes of being on a call with them oh well good point I’d say before
both but I say before the call knowing like a conversation in a perfect world I’d have my VA trained up to where they
like they could kind of lead a conversation be like hey this person actually is thinking about what is has has interest in being an LP versus like
me pitching him on it oh maybe I might do that down the road yeah I don’t have a great system for
qualifying them ahead of time because most of them are coming somewhat qualified already yeah you know so last
night I had a great call really brilliant dude who’s done a lot of Investments but not so much private
Equity Real Estate but he came highly referred from a good friend that he went to business school with his MBA with right so just right from that moment
he’s qualified uh coming to me uh because because my friend who’s name also happened to beat said yeah I’ve sat
in this guy with class he’s aware of generally uh the investing that you’re doing um he just doesn’t understand the inside
ins and outs of private Equity Real Estate can you get on a call with him and kind of walk him through the stuff
that’s involved with it so a really really warm intro to it and then the call went fantastic I mean there’s certainly some education involved we
have to talk about metrics like IR is a very very confusing one for people that are not used to investing in real estate
like what it is why is it important how do you use it to compare uh Apples to Apples if you’re looking at stocks bonds
you know other alternative investment other real estate things um so we talked about that for a while things like preferred return and
waterfall structures like what they are why are they useful to a limited partner so that was about half the call and the other half the call was just talking
about my background some more you know what have I done what about what do I see in the market why am I pursuing the
things I want to pursue and then this particular guy was um very risk focused like hey explain to
me where the wrists are so we kind of walked through a few scenarios there of what happens if you know the project takes a turn here or takes a turn here
but I love those conversations because um from my previous job that’s kind of what I focus on a lot was was risk
management so I certainly love having those conversations with investors well on that note what do you yeah what do
you have how do you typically say on like uh you’re targeting like a what’s your kind of term on it you targeting like a five-year exit yeah so we have
multiple stuff going on now I think since last time we talked to us so it depends which one you’re talking about
we have drifted into ground up developments so those are shorter terms so the one that we’re raising for right
now it’s a uh reg d506c to do a single-family development horizontal
development it’s going to take uh 12 months so that one’s a pretty tight turn which a lot of folks are excited about especially the people that are new to
our firm so they see our tracker they’re like you look great you have something short I could get into this is what we’re
offering them right now hey try this out with us can be 12 months and get your we’re projected to get your money back press return in 12 months right
nothing’s guaranteed to kind of feel us out for the single family funds Homeland residential which is the one you and I
have talked about a bunch because you know you formed your own that one we’re looking at least a five-year time Horizon because it’s just got different
goals to it that’s more of a Buy and Hold and collect cash flow is kind of the main play there whereas the
development funds are more hey we’re going to develop piece of land rapidly appreciate it and valued for bringing it
to a higher and better use and then sell it off for a profit and then coming up here in the next six months we’re
looking at some where we’ll develop it and then hold it so that’ll be a different strategy as well you know we’ll bring investors to hey we’re going
to spend two years building and stabilizing this thing refinance it and then look to hold it for additional
three years for cash flow so we get a whole bunch of stuff going on right now and on the butt so on like the five to
seven year old with the single family how do you kind of speak to the people that are like because there’s there’s also a point if
after five to seven years if we’re in a downturn like it’s not going to make sense to sell the portfolio right but how do you kind of tell those people say
hey just plan on this could go longer but we’re going to do the right thing or yeah it’s all about fully disclosing it
up front and clearly staying like this is my intention but this is where things can can go right so in that particular
one the planned exit strategy is at five years but we have the option to extend it if we need it and we point that out
to investors right away it says hey if it doesn’t make sense to sell at this point in time we’re going to keep
holding this for cash flow and that fund is interesting because
we take in uh assets that are stabilized already so they’re cash flowing from day one so in the first quarter that
investor comes in they’re receiving a dividend we did that in our first quarter of operation and I’ve been doing
it ever since so it’s not like we’re holding people’s money and not giving some type of return along the way if
it’s extended yours is designed similarly right yeah we targeted a four-year hold and then yeah just it
obviously if it doesn’t make sense so again if you’re say get that kind of same question the implications are if in
your fund for example after five years it’s we’re in a dip in the market and say it takes two to three years before
it makes sense to sell ultimately your irr might be impacted a little bit but you’re still going to get cash flow is
that kind of how you say hey we’re mitigating some risks but I don’t know versus I guess going down the wrong Rabbit Hole of them oh man
well now there’s risk to my irr but it’s like no it’s really ultimately this is a small risk you have but we’re mitigating
it with your irr mic drop to this or curious if you’ve now how you navigate that no I mean you’re nailing it right
and at the end of the day we we kind of encourage investors to to do their own research as well you know those
properties are primarily in Columbus Georgia which is a market not many people know about but it’s second
biggest city in Georgia and what I point people to is you know the last major recession you know if you look at home
prices across the nation a lot of spots from 04 to 2010 you have
a sharp increase in prices and then it fell off the cliff right and that’s what most people remember when they think
about the 08 crash so we took a graph of I want to say it was um San Francisco San Diego uh
a few cities in Texas Florida New York and we we drew out that kind of curve
for the prices and then we overlaid the price fluctuation in Columbus Georgia during that same time frame and it
looked like this it was flat prices never skyrocketed up in those in that lead up to the crash and therefore
they never came crashing back down when investors bring up the 08 crash to me I
always say listen you have to understand a lot of that stuff is a lot of the numbers he thrown around
number one are National aggregates and anytime you’re using National statistics to talk about real estate in the US it’s
going to be massively skewed it’s just not good data to go off of if you’re talking about pricing real estate is
inherently a bunch of really really small markets that congregate into those numbers so you can’t compare what
happened in San Francisco to what happened in Columbus Georgia uh during the crash so the first thing you have to
do is separate those things I’m sure this is probably pretty similar for your markets as well I don’t imagine there’s some huge spike in the areas that you’re
doing all these these rentals exact same exact same right I haven’t done with you down to where we overlay it that’s I
mean I’ve been qualitatively saying that verbally and any people who lived in Wyoming are inexperienced it they knew
it but it’s a great way to verbal or just visualize it and it’s helpful because a lot of my
investors have come out of California and Texas yeah I mean even the gentleman we were talking about last night he was sitting in Southern California and and
you know we were talking about pricing he remembers them going like this and yes that’s true for your experience
there but that doesn’t apply necessarily to Columbus Georgia so yeah I encourage you to to put that graph together
because it’s it’s pretty funny looking and it’ll help articulate your points cool man we can keep you got your note I assume you got your notes as well or
what notes you got actually should ask that yeah we had a slide in here about assessing a sponsor right which is what
you and I are you know a sponsor the operator the general partner uh kind of all the the same thing for the most part
but one of kind of the core values for for me with Iron Horse Capital group is really trying to educate people on the
same path uh that you and I have walked on already right you know we both had both went to Great colleges had uh great
W-2 income jobs were doing really well in our careers and said you know what I want to try the entrepreneurial route I
want to apply the skill sets that I’ve gotten this point in my life and then you know changed my life and changed my life through real estate and both of us
have been doing that successfully so where I feel like we as a company of resonate really well is walking people
along that same path um not necessarily the entrepreneurial path but saying Hey listen there’s more ways to invest your money than just
stocks and bonds nothing wrong with it it’s part of your strategy but I believe
that private real estate Investments should be part of your overall investment strategy that could be coming in as a
limited partner that could be as a private lender that could be you know investing in a REITs well that’s more
kind of you know Wall Street Stock than baseball like the stock it is backed by real estate if that’s what you what you
enjoy it could be your owning rental assets yourself Airbnb is kind of any of that stuff I’m just encouraging people
to to find Freedom through through real estate most folks don’t know how to even start
assessing a general partner or sponsor when you talk to Pete or talk to Casey what what are the questions I need to be
asking them before I move forward with their fund that is something we we find people struggle with number two is how
to understand the returns I touched on that earlier you know what is the difference between ir and Roi why are
they important how should you weigh one versus the other and then third is how to actually move forward I mean you’ve seen the SEC documents that that Nick
Moore puts together I mean my most recent one is 115 pages long I mean that’s daunting that’s a daunting task
to sit down and weave through that say what am I getting myself into unfortunately it’s the nature of the
Beast we can’t make those much shorter because we have to protect ourselves and protect investors and make sure we just
load stuff appropriately as as outlined by the SEC but it is daunting if somebody’s not used to that so we spend
a lot of time trying to educate people on the ins and outs so they can make an educated decision if they invest with us
that’s great but if not if they move on from us and sit down with you know Casey Gregerson and his team they know the questions to ask to start kind of poke
and holes in your fund and deciding if they should move forward with it and a lot of a lot of investors or limited
partners you work with we just touched on this he talked about like just going through the PPM and it’s this could be a
very long document as you mentioned 115 pages but what kind of advice do you give to limited partners knowing that it’s super important to go through that
but also it can be overwhelming but just and you just talk to the importance and how you people can navigate that
yeah I would say first don’t don’t fall in love with the projected returns numbers you know I see people all the time get
excited about you know a 25 projected uh your return on something and those numbers are great you know but don’t get
super lost in the numbers right away I would say fully understand the business plan from the sponsor right so the first
thing they’re going to do is they’re going to talk to you about that through their marketing documents so if I’m pitching you and I’m saying okay Casey
you’re going to come into our Brightwood development um here’s our plan we’re going to buy this plot of lamb it’s got a series of
trees on it we’re going to clear the trees we’re going to go ahead and bring in you know electrical water sewer we’re going to pave the roads we’re going to
level the uh plots subdivide them for single-family homes and then we’re going to sell that off
um to an end buyer who ultimately build the houses on the Lots so I’ll walk you through that plan
verbally with my marketing documents but when you get that operating uh memorandum that includes the um
operating agreement which is how the companies run private placement memorandum which is all about risks in your subscription agreement
you want to check that everything that you were discussing the marketing documents is reflected in that operating
memorandum you don’t want it to say something different or or deviate drastically and don’t be
afraid to ask questions right so if you’re sitting with I see a lot of these sold through through sales reps
third-party sales reps and and sales people can be very salesy so if you’re getting pitched on one thing from the
sales rep that doesn’t match what’s in the document don’t don’t be afraid to to ask a question on like a great question
I got this week uh was on this offering we’re doing an 18 uh preferred return and the person
we’re pitching on it it wasn’t clear to them that the fees charged inside the the document were reflected in that 18
return whether it was added on top of it and are taken out of it and he found the section the PPM and just called me and
asked a question so hey when I’m getting my 18 return does that account for some of these fees
you have in your diet and the answer was it does the the 18 was not a fees but it was still a good question because I’ve seen other
ppms that are worded in a way that is not net a feast it’s very misleading because
you’re you’re put up uh a sales person to put a marketing document in front of you that says yeah you’re gonna get you
know 26 return but as you start reading into it that’s that’s the gross and there’s some fees that are taken out of
that for things like sales and marketing and stuff like that and it could really adjust your returns and this isn’t just a real estate problem you know I see
this in you know registered investment advisors that are selling stocks and bonds and stuff like that if you really start reading into them those
instruments operate the same way so first off just make sure that the plan is clearly reflected in the
operating agreements because those legal documents are what the company is going to be held to so if there’s ever a
disagreement in the future that’s what everybody’s going to go back to is those documents and say hey we clearly articulated in paragraph 56.
that we weren’t starting this project for 90 days or whatever the case is the second big document is your private
placement memorandum and the private placement memorandum is all about risk risk risk risk and that document is
going to spell out absolutely everything that could possibly go wrong and that’s why it’s so daunting because there are a
lot of things that could go wrong you know it could be negligely operator it could be a lightning strike I mean there’s kind of crazy things that could
go on and it’s important that those risks are discussed openly so as you’re going through those
I think ours is 54 Pages for our last PPM as you’re going through those 54 Pages
don’t be afraid to ask that General partner that operator hey tell me about the risks that are outlined here what do
you think the chance that could happen how are you mitigating this particular risk I’ll give you two questions I got
this week number one was about insurance requirements for the general contractors you know one of our investors wanted to
understand how do we hold insurance and what insurance requirements do we hold the general contractors to in case
something goes wrong another great question I got was about the actual contract between our firm and the
general contractor they wanted to review it and see what it looked like now that particular client was highly
sophisticated has done development deals himself before but that’s the level of due diligence that he wanted to to do to
see if he could move forward with us or not so those are kind of the big two pieces of advice I’d give with those documents if I have someone that I know
is a brand new investor they’re brand new to private Equity Real Estate I will
schedule a time with them to go through those documents right so if I come to you Casey you’re brand new
I know you’re highly successful as an engineer you got some extra money to put in I said Casey here’s our big pitch I
give you the nice beautiful documents that kind of outlays everything and you’re sold you say Pete this sounds awesome I want to move forward I go
ahead and I send you over all the legal documents and I say Casey let’s schedule 30 minutes for you to sit down and ask
me any questions that you have on these documents because they can be daunting and if you’re not drinking coffee or
bourbon they might get a little bit confusing love it that’s that’s a great great advice I love just taking a little bit
of time booking it with them like hey let’s a go through them kind of maybe high level and then you can ask questions and but set the set the lp up
to give him that opportunity to be like hey let’s it forces him to to get into it and then no better way than just do
it one on one yeah and the process like all about transparency because the worst thing for for both parties you know me or you come
in a semester is to get a year down the road and and there to be a resentment or disappointment for how the investment is
going right and that could happen on on both sides of the street you know from your perspective as LP you say Pete you
know I thought I’d have my money out by now and I could say well Casey was clearly articulated here here and here that this is this is the plan or or
likewise we’ve had uh investors that want to get overly involved in in some of the decision making as a certain of
our funds and and that’s not how mine are set up you know we are real estate professionals like we do this 24 7. um
so you know if uh if an investor wants more control in a deal they should talk
to us about that up front before they sign the documents and we’ll decide whether or not that makes sense for the particular deal
makes a ton of sense Pete we’ve talked about this one earlier but uh for somebody who’s just trying to again sort
of base level understanding irr and understanding like preferred returns but mainly irr like how what’s a good easy
way to kind of explain that to somebody who’s just trying to understand what that metric means sure I’ve had a lot of practice with
this one recently so I’ll give you my best pitch so profit from Real Estate making money
through real estate money comes in a very lumpy form right so normally do a real estate project you have to bring a
bunch of money to the table up front to either acquire a property acquire a land do construction there’s a lot of cash
outlays in the initial year the initial time to get that investment off the ground right so you get a lot of negative money that flows out first then
depending on the project over the years you’ll have some cash flow come in and that’s normally through rents right so
single family house you got a tenant in it they’re giving you rent and then some some net profit comes off that or if you
build a multi-family building as you start getting it stabilized you get some monthly rents coming in and that applies for any commercial asset so you’re
making some some profits along the years and then at the end of the project there’s a big windfall of cash if you’ve
done it successfully right you sell it for some massive upside so in that final year you get a big sum of money uh that
comes in so when I say it’s lumpy that’s what I mean is a lot goes out at first some along the way and then a lot all at
once so if you try to compare that real estate investment in in year one where
you’re just collecting rents if you tried to compare your return to that of stocks or a Government Bond
or some type of fixed income security it doesn’t really capture the full picture
because it’s not accounting for that large windfall that’s that’s coming at the end the irr helps us solve that so
IR is internal rate of return so what it does is it looks at the totality of the project and this could be applied to
anything but it’s most commonly applied to real estate looks at the totality of the project and tries to smooth out the
return over time so it says okay in year one negative cash flow because we’re building it got five years of positive
cash flow from rents and then a big sale at the end an IR takes that and says okay if we smooth that out what would
the annualized return be per year in the case we were just talking about your returns year to year could look like
zero in the first year maybe you’re getting a six percent dividend for a few years and then at the end you’re making
30 40 of your money it Smooths that all out and says okay over the an annualized
term over six years you’re actually getting a 15 return so now once you have that IR number if
you say my IR is 15 percent now I could take that and compare that to other Investments available to me I
could compare it to other real estate Investments I compare it to stocks bonds Etc and say okay from Strictly a numbers
perspective which one is going to give me a better return on my money now from there you
have to evaluate the actual underlying real estate strategy you know I’ve seen plenty of Investments that are promising
a 30 40 IR um but they’re they’re pretty risky yeah
you know I don’t know if I would choose them over a you know seven percent uh return off a Reit or something like that
um but it’s a good start to compare apples to apples got it it is to simplified I know the math doesn’t perfectly work like this but to give
people actual round numbers if they invested a hundred thousand let’s say they’re projecting a 20 irr
let’s use 15 15 irr over five years so they could expect that the actual money
if they put in a hundred thousand they could take 15 000 times five so I’m calling it seventy five thousand is that
a good kind of rule of thumb that that’s as much money they can expect in right using easy math yep using easy math
that’s a good way to kind of calculate the IR now if you’re evaluating one of these projects like if you’re
valuing ours right now we would provide you with a pro forma that not only lists the IR but it’ll also have the charts
the accounting that shows how we arrived at the IR so you could back check the math and say
okay you know Peter’s team are expecting these amount of cash flows here and then a total sale here that brings the total
net profit to this if I bring 100K in I’m a five percent owner of this and you can kind of do the math and check it and
I encourage people to do that um check the math and if you’re confused about the math ask the general partner
to explain it and how they’re getting to the areas you’re getting because the performers are a future
projection that that’s the Latin translation right the future projection of what this thing could perform it’s
not a guarantee and remember that’s not a guarantee when you’re talking about private Equity Real Estate Investments
got it Peter I want to get your opinion on this so um looking at like because you’ve set up several funds and looking at the
underwriting and and the performer right so like in our fund for example we set up a low medium and a high scenario and
the the math on that was we kept a lot of variables the same but the big variable we changed was
um the rents right because we might if especially in a value-add or a multi-family if you especially as you
start to multiply it by like in our situation 63 units times just a little bump in rent it makes a big difference
right so we did a below market value rent we did a market value for a middle case and then the high case was hey I
think there’s a lot of data showing that market rents are going up so hey here’s what it looks like if we hit if market
value goes up and just ran the same scenarios again keeping a lot of other variables constant so we’re not changing
too many things but what are your kind of feedback on that as a way to kind of that way you can show your limited partner hey these are some there’s risk
right there’s different scenarios but here’s there’s a here’s kind of a range you can expect no I think that’s a great
a great way to do it another way I’ve seen people articulate that same process but the terminology they use is um uh
base case best case and worst case and and your your base case is is you’re in the middle conservative approach of
hey I’m fairly confident we could hit this and that’s what I would use to um in my pitch
to sell investors say hey I am operating off the base case so this is what you need to wrap your head around and say
okay this is what I’m mentally prepared to receive here’s the best case if we get that
sizing on the cake and then here’s the worst case and then here’s all the risk that could cause us to get to that worst
case and how I’m mitigating the heck out of those love it yeah especially the worst case too to show them because as
you mentioned like fully disclosure transparency on hey here are the Rifts and here’s how we mitigate them here’s
what that could look like can go a long way I’m sure if you do hit some of those hurdles in year one year two yeah and
that’s why I appreciate your mindset because with your with your engineering background your mind like you’ve been taught your
entire career to focus on risk right no engineer goes out there and says you know what wind’s blowing this way we’re
gonna wake it today this should work out no that’s not how the engineering World works so when I see guys like you transition into
real estate investing you tend to do really well because you spend so much time mitigating those risks and finding
those risks and and less time focused on the upside potential the upside potential is great it’s there that’s
what we’re shooting for but I found that operators are much more successful if they’re focused on that risk yeah you
just inherently in you as an engineer without a staff that’s your job is to mitigate risk and if you can apply it in
in real estate and you’re right that’s the thing that’s what it separates a lot of a lot of operators is just risk
management and understanding risks and ultimately when they when the risk comes or or they’re throwing a curveball if
they’re they plan for it and can mitigate it no you’re absolutely right and some of them you can’t you can’t control everything right I had a mantra
in my old job it was uh control the controllables and influence the heck out of the variables love it that’s good
cool Pete you talked about this a little bit earlier but go into against thinking I’m a limited partner um this one might
be my one of my first funds that I’m getting into like some of the questions kind of high level questions you would
be asking the operator you’ve touched on some of these but just kind of in a kind of quick summary what what are the
questions you would ask if you were an LP interviewing an operator yep so I’ve got five here right now the first is
market knowledge I mean we started this call by saying listen real estate is not a national it’s not a national number
doesn’t really capture what’s going on so when you’re coming into a deal you want to know what what is the sponsor’s
knowledge and footprint in that market right for example I’ve seen some
some investment firms that are selling deals and and they’re in all 50 states doing deals kind of hard to be an expert
in all 50 states right so if I’m dealing with an operator that’s that spread out I want to know okay what is the
experience for the the portion of your team that’s running this deal in Kentucky that I’m trying to to invest in for us a lot of our projects are either
in you know the Columbus Georgia region or up here in uh North Carolina either around Raleigh or Charlotte right
um and I live in the in the North Carolina area so I feel like I’m here every single day uh but I’ve got a team I’ve got
contractors that I’ve got lawyers and accountants that really really understand uh the insides and outs of North
Carolina Georgia I’ve been operating Georgia for 12 years you know a lot of times I’ve been doing something in the single family realm as long as you tell
me the the street it’s on I can tell you roughly where we need to buy it without even looking at the deal because I’ve just been there for so long I’ve had
some amazing conversations with different limited partners in these different markets you know some that kind of want to know my general overview
of Georgia I’ve had one guy who knew Columbus Georgia really well he had lived there twice so we had a fantastic
conversation on kind of area by area where we see uh rental Trends where we see Trends with tenants and stuff like
that so go as deep as you want to go with that sponsor on their market knowledge if they are not giving you the
answers you’re looking for they probably don’t know that area too well and you either want to move on or you might want
to say hey let me talk to somebody on your team that’s the one that’s actually running the deal or or the one that
actually did the underwriter you might be talking to a sales rep in that particular company yeah number two I
would say is is what’s your team composition and I would split this into two things what’s the team of you know
the employees and the contractors that work underneath you and then who are your advisors who are
the people that you are surrounding yourself with to make sure that you are successful right so I know both of us
we’ve got a massive network of people that we reach out to to help us kind of get forward right so as you formed your
fund you know you talk to me you talk to a few other guys and you say hey I’m trying I’ve got this idea for how I want
to share this this cash flow in the profit with investors and make my company grow who do I need to talk to to get this
going and I think I helped you a little bit but then more importantly I got you to your next advisor who is Nick right
and Nick from um Robinson frondsman the lawyer he sets up 200 of these a year he
probably knows something right and knows the advisors that you’re surrounding yourself with to make successful and the
team composition you want to say okay what is your structure what is the background for the project manager that’s running this or the general
contractor they’ve hired to actually uh build this who are you using for illegal advice for tax advice who’s doing the
accounting who’s doing the investor relationship management understand uh the totality of the team and I’ve seen
fantastic teams that are small this doesn’t I’m not trying to say you need some big well-developed team when you’re
getting into investment I know one investor who’s controlling over a billion dollars in commercial assets and
he’s got five people on his team because they’re all just incredible incredible humans that have been doing this for a
long long time third thing we already touched on it quite a bit is understand the risk of the business plan like what
are we actually doing and the marketing documents we’ll get you there marketing documents can vary ours tend to be very
in-depth um because we tend to cater more towards investors that are kind of just getting
into the private Equity space so we spend a lot of time educating people in our marketing documents I’ve seen other marketing documents that are really kind
of skinny and don’t say a whole lot they’re kind of more designed to get an investor in the door and then you can
have a more in-depth conversation but don’t be afraid to ask those tough questions about risk about the business
plan like hey walk me through the plan on how we’re actually going to get this thing built it’s okay to ask for
Education I’m dealing with this a lot right now because our projects a lot of our projects are are horizontal
development and most people say what the heck is horizontal development what does that mean what it means is we’re taking
entitled lands and setting it up for a vertical Builder and that normally means bringing in
utilities roads lock clearing getting the pads ready for a foundation to be to be laid but then we’re selling that
product off to to a vertical Builder right and there’s a lot of Pros to do it
that way a lot shorter time frame a lot less risk because we have our backside buyers set up already it’s a really neat
investing strategy but most people don’t understand it if you just say horizontal development you have to take time to sit
there and educate them on hey here’s my business plan here’s how we came up with it here’s the risk here’s how I mitigated them and here’s my exit
strategy number four is is transparency you know I think we’ve hit the head on this quite a lot already a lot of this
stuff should be transparent in the offering memorandum the legal documents it should lay out absolutely everything
that you’re doing and I’ve got a few guys in my team that helped me raise capital and I tell them all the time
everything needs to be disclosed to anybody that’s coming in as a limited partner and we cannot deviate from what
we’re disclosing I can’t sell people on hey we’re doing a horizontal development and then turn around and build a carnival
the plot of land if I didn’t clearly disclose it because not only is that not a good way to do
business and really um you’re not being transparent in what you’re doing and then finally is a
record of Integrity right so if you’re dealing with a very seasoned operator you could say hey show me other
properties that you’ve completed and show me the final accounting the final books show me kind of how you were able
to perform for others now if it’s a newer operator that’s totally fine too totally fine as well if they don’t have
that track record you want to talk to other people that have worked with them other contractors maybe they had other
private investors that you know you know somebody loaned Casey money in the past and said yeah I’ve worked with KCI five
or six homes he did great he gave me extra turn here’s how he communicated here’s how the documentation went you
want to find those other people that could help you with that record of of Integrity for the person so those are
kind of the five things I look at market knowledge team composition risk and business plan transparity and integrity
that’s great very detailed but five big things people could hit on Love It Pete so Pete another one and you see this
with Real Estate Investors right they talk about this um if somebody’s trying to get just go buy their first house buy their first rental always this analysis
paralysis people that just don’t ever take that first step and then they look back 20 years ago and they’re like man if I would have just bought that first
house think where I’d be so I’m curious what you when you see that when somebody wants to be a limited partner and maybe
they’ve got colleagues that have done it and been successful or they’re just they’re definitely interested in it but they’re like but they haven’t done it
right so kind of what what have you noticed have there been any best practices to help those people
ultimately like it’s their decision they got to be feel comfortable but helping them because they they definitely want
to do it but they just maybe can’t get that need that little push any any feedback there yeah it comes back to the
education piece right so you know the analysis paralysis happens when normally The Limited
partner is you know uncertain about what they’re getting themselves into like we have have done a good enough job to that
particular person’s liking on hey here’s the entire plan so to me it just comes
back to to education second thing that’s useful is is having them talk to someone in your network
that has successfully done business with you before I think that’s kind of the the best thing you can do for a person
like that is like get them in touch with that person that’s lent money through the past or has come in
um as an investor alongside you so that they can understand their experience and and feel a little bit more comfortable I
would say now now is a tough time too if you’re sitting on the fence because there is not there’s not a lot of
opportunity out there for real estate in general I mean everybody anybody that’s not involved in this industry you can look on the news and
see how hard it is to find a house right now right that we have an incredible incredible shortage of inventory in the
U.S and the same is true for some of these private Equity deals there’s just not
enough of them to go around currently so it is it is a tough spot to be sitting on the fence right now because a lot of
those deals uh might might slide past that’s a good point Pete because a lot of people like the being a limited
partner in a fun is allowing you to get into real estate in a very competitive market as you mentioned there’s a lack
of inventory but also borrowing and just the ability to like buying power is is
compressed right so it’s hard it’s harder for just the average guy that wants to just get into real estate to go
buy his first house really the numbers don’t often work right it absolutely is and that’s on the
single family side for our vertical there that’s our value proposition is Hey listen we’ve got a proven method
for acquiring these homes off Market at a discount I’ve done over 140 of them
550 at this point but we bought a bunch last week in this week we’ve done a lot of them we know it in inside and outside
I’ve been through all the Terrors of bad contractors buying bad deals I’ve done
all that stuff already um so I know how to avoid it so that’s our value of proposition people’s like listen being a real estate entrepreneur
is really hard it is really hard there’s some incredible risk to it we figured
out the system you’re welcome to come on board as an investor in different capacities and just work alongside with us and we’ll
give you a return for for going with us I’ve taken plenty of people along that path some of them stay with us as
investors and just kind of love that passive income I’ve also got a few guys that came in as investors and then have
since gained enough knowledge that they’ve gone out and and are doing uh doing their own thing right now I got a
great Special Forces Medicare Army Special Forces medic I was out in Washington state came in with me several
years uh backed a few of our deals made him good money he asked a ton of great questions
um was super involved in um we opened up our bookstore and we opened up you know how we work with contractors all that
stuff and then he uh called me one day and said Pete I want to do this myself I’ve identified a duplex can you look at it
for me no problem look to the duplex it was a great deal he ended up living in one side renovate the other and then
flip-flopped and then renovated the other one used all the money that he had invested with us and made with us to go
into that deal since then he successfully got that to two units rented out and then pushed a
Triplex over me help them underwrite it he bought the triplex and that’s what he’s living it now so it’s it’s been
really rewarding for me to watch that happen him graduate from you know not
knowing anything about real estate being on the fence coming in with us is in a passive role to now actively uh doing
his own thing and succeeding I love that story P all the time talk to people that are like interested want to be in real
estate don’t quite have the knowledge but they want to get going so that’s a great way we call them swimmers right they can swim alongside you learn the
process and then again I encourage people just like you do if we can help you with a deal at the end of the fund
or even during the fund with some other capital and you can start to do your own deal like that’s I mean we love seeing that that’s yeah you’re absolutely right
I’ve had a few limited partners approached me about our turkey Investments one of our models uh like yours is to create uh TurnKey rentals
and they’ve come in to help us on the capital side to get the project done and they’ve requested first ride refusal
they said Pete we’re going to back in this deal what is your projected exit price what’s your projected rents what’s your plan
uh I’m gonna let them know say okay we’re going to renovate this one at the end of the day we should sell it for 120k and it’ll you know cash flow at a
seven Cal and they say okay we want first round refusal for that property
when it’s ready and we’ve given it to all the people that have asked for that’s another great way to get get involved as well is you say okay I’m
gonna watch Pete and his team or Casey and his team do the actual work how they figured out and they’re inheriting all the risk in
case something goes wrong and then once I know it’s a solid investment I’m going to exercise my right to to have um first
credit it and if I don’t like the property for some reason don’t exercise my right and take my profit and move on to the next one
as I say you had something great about the swimmers I thought that was a good analogy um yeah I’ll add another one for you so
all things in life take time effort and money right like some combination of those and not everybody is in
a position to bring one of those things forward right sometimes people could offer time sometimes I get off effort
sometimes they could offer money so if if you’re a person who’s sitting on the fence and and not and you want to get
into real estate investing in some capacity you say I want to change my life in some small Way by investing in
real estate or being a real estate entrepreneur I encourage you to try it it’s changed my life it’s changed Casey’s life like get out there and try
it but first evaluate what are your strengths like what do you have to bring to the table for some
people that’s money for some people that’s hey I’ve got a high W-2 job I’ve got a ton of money I’m sitting on right now
but my job is 60 hours a week so I don’t have the time or effort so for me the best thing I could do is invest 100K in
KC and and further him by bringing money to the table some people don’t have money but they got a ton of time and
they want to learn the industry if you’re in that boat I’d say approach somebody like hey say listen case I got a ton of time where do you need help in
your business where can I where can I apply my time at no charge to you to help further you
and then I get an opportunity or an investment or coaching or whatever it is from you in return and that goes with
the effort thing as well like you know a lot of time and a lot of money figure out what type of effort you could apply
to help those people uh move forward I’ve had some great relationships with people that have come to the table with
you know a myriad of those things I’ll tell you a great story we had a my ops manager had a meeting yesterday
with a 16 year old high schooler uh called in and said hey I want to help
you guys find properties and I want to learn how real estate works I’ve got no money I’ve got a ton of time
and I’m willing to put in the effort and I think that’s great so we’re gonna we’re gonna turn this he’s a junior in
high school in the local high school here so we’re gonna turn him loose and see what happens e Cole called us he found out about our company and said hey
these are the guys I want to learn from that’s super impressive very interesting
yeah he’s way more impressive than me so love it cool Pete well I want to get you
you’ve also talked about this but I want to get your summary on just your outlook on the market right because I think
there are a lot might be a lot of people that are thinking hey well why would I invest in real estate now when when
we’ve seen this crazy appreciation and now interest rates are high things are there’s speculation there’s worry about
recession yeah kind of speak to those people and why ultimately you guys are continuing to grow and go out and do
more I love this question give this question all the time and the question
starts with a premise that we are acquiring real estate at current market values so if I went out
and I bought the house next door at its current market price it would it would start here right and then it would fluctuate with the ups and downs that
she just talked about so the initial premise doesn’t reflect what my business does and I don’t
believe reflect what your business does either we are both acquiring real estate whether it’s land for development or
existing inventory at prices much below the market value
so on the single family home side I’m typically acquiring a home anywhere from 55 to 65 percent of market value
once it’s fixed up right that is an enormous amount of space
for the market to fluctuate so if I’m doing a uh if you’re backing me on one
of my single family flips or the foreclosures and stuff that we do I’m underwriting that deal at an all-in of
70 to 75 of its value that means I’m acquiring the home renovating the home
covering all my marketing and overhead costs and underneath that number so I’m all in at 75 percent of value that means
that the market needs to adjust by 25 for me to lose
if you look at well throw a national statistic even though I don’t like them in 2008 the entire U.S market
dropped eight percent in over a year it took it a year to drop eight percent so
Casey if you’re backing me on a flip today right and I’m out there I’m working my little butt off and the 08 crash happens tomorrow
if I have a 25 margin in there and the market drops eight percent over a year
we’re still going to move that property I’m still going to get you your money back and we’re still going to move forward development is similar in the
sense that you’re taking a piece of raw land and you are bringing it to a much better
higher use and development is much harder it’s a it’s a much more advanced skill set than going out and flipping a
home and stuff like that it’s much harder to do therefore the margins in it are a lot higher right
because the developer needs to take risk to actually do it and there’s not as many people doing it so what we’ve done
in our company is we’ve paired that with the ability to go out and find the land itself below market value for if you’re
looking at just land prices so one we’re doing currently I want to say the land is appraised at like 700 and we’re
buying it for 350. so just out of the gate before we even tried to start developing we’ve gotten a 50 discount on
on the land so it’s going to take the market a lot to
move for us to be in danger of of you know potentially losing losing our money
so in terms of the horizontal developments you know the Brightwood one I’ve been discussing on this call that
one’s up in uh up here in North Carolina by the triangle and you can read any article about North
Carolina it’s absolutely exploding you know North Carolina South Carolina Georgia Florida Texas all these areas
have been exploding for the past five years and it doesn’t look like there’s there’s an end in sight regardless of of
where interest rates are right because people still need homes where they buy it or rent it there’s still a demand and
the interest rates kind of dictate which way they go depending on the community in our more affluent communities like we don’t really see the interest rates
affected as much if you’re talking about Columbus Georgia yeah every every point one percent change you know really
affects the consumer’s ability to buy if you look at the Brightwood development it’s a 12-month term so starting from
today if I know my all in costs are going to be under 75 percent and I’m selling it in in 12 months to a backside
developer there’s a lot of room in there for the market to go down before I start
to bump up to actually losing Capital like I could take a 15 hit and still be
profitable for my investors and myself on that particular deal Bring It full circle I do get that question a lot but
it starts the underlying premise of you are buying stuff at market value and that underlying premise is not true and
that’s what differentiates you know my company KCI I know quite a bit about your business I know you guys are very
Adept at finding stuff off Market as well we’re not buying stuff at market levels so I think once people understand
that aspect of it they start to realize how much risk has been bought down in that process love it Pete so you touched
on that one thing you’d even mentioned the other upside is typically I know your single family fun does and same with ours if you do see that big
correction let’s say that it’s it’s an extreme situation where we drop below that say 25 margin you got what you hold
right we’re buying cash flowing assets that you if the worst case scenario is you gotta hold an extra two to three
years and wait for the market to recover to get out and that’s a pretty good hedge right pretty good pretty safe bet
yeah that’s a great point the single family world so you know I started investing in 2010 and a lot of
my good investors were are good mentors we’re investors that survived the 08 crash right so so
in 2010 Casey there were deals everywhere there were deals absolutely everywhere and I
was in my 20s at the time and there was no money nobody wanted to land because they the
world was ending real estate was everybody lost their shirt if I could have bought everything back then man I’d be a billionaire right now but I
remember asking those mentors I said oh yo oh wait crash happened like what were the the moves that you made to
keep your business going and they said Pete I didn’t do anything I had cash flowing real estate that wasn’t
over leveraged I just stayed still I stayed still and I kept making that
profit off of cash flow and I watched as the world fell apart and I kept stacking cash getting ready for
the next time I can start buying and a lot of those guys started buying in the 2012-2013 is kind of when I saw
people start to get used to getting back into the market and I’ll be honest man at the start of covid
you know I kind of thought that was I personally thought that was a Black Swan event and a lot of the masterminds and
networking groups I’m in that’s what we were all talking about the time like a lot of those guys who had lived through the Black Swan event of 08. were
recommending like hey slow down stat cash and that’s what I did honestly all through 2020 21 22 is I probably missed
out on more skinnier Deals Deals I was kind of less comfortable with
um because I was stacking cash making sure my business operations were sustainable in anticipation that there
would be some some massive drop off of course that didn’t happen reasons in my opinion
um number one was the massive amount of currency that we were printing I mean we were printing the the GDP of Canada every single month uh it’s an enormous
amount of Fiat money to be pushing into the economy that’s all another discussion yeah kind of the larger thing was we
have a housing issue in the U.S we have a massive massive housing issue and I’m honestly surprised it’s not it’s
not discussed more but to go back to the crash the crash really affected Builders first all the guys were we had so much
inventory in the market that wasn’t selling when the crash happened a lot of those Builders got got wiped out
completely and that industry hadn’t really quite recovered I mean over the 10 years since it still hadn’t
recovered so what happened after 08 is the U.S population kept growing right Builders collapsed they started putting
their business back together started producing homes but the rate at which we are we were producing homes you know
multi-family or single-family uh residential units did not ever catch up to the population growth in the United
States we were slowly as a nation kind of catching up to it but we never caught it and then in 2020 we slammed into to
covet right so in 2020 I’m going to mess up my numbers here but I can send you a white paper on it I think we were 7.3
million units short of of housing needed to house our population
and we’re slowly trying to close that Gap 2020 hit and all the government
shutdowns happen and overnight that number jumped up another 5 million
units that were short so we immediately just exacerbated that that problem again and I’ll send you the sources for this
code or Casey I’m forgetting it right now but there’s some of the National Construction organizations you guys I’m
going black yeah I’ve looked at some of it it’s super interesting but they’re projecting you know 10 20 years
before we can get this problem uh fixed as as a country so how does that come full circle we need houses
we as a country we need houses we need places for people to live and and the consumer really has two choices either
buy or you rent typically when interest rates are lower that means the consumer has more buying power and we tend to see
people buying houses so from 2020 to 2023 in my company we sold a lot of
flips on the open market because money was really cheap and it was easy for for people to buy them what I’ve been preparing for recently is for a shift
back in the rental Direction so I touched briefly on Columbus Georgia which is one of our one of our markets
the income for Columbus Georgia is below the national medium averages below the median average for for state of Georgia
as well so the consumer there is extremely affected by every 0.1 percent change in
um in the interest rates so in that particular Market we’ve seen uh offers on houses and our
time on Market kind of well the offers have gone down and time on Market has extended because it’s harder for the
consumer to buy those houses now once again we’re at 75 value so I’ve got some room I’m not worried about it
but if I juxtapose that to up here in North Carolina in the Raleigh area in the Charlotte
area the consumer tends to be a lot more affluent right and so interest rate hikes they affect them
but it’s not maybe as drastic as it is down in Columbus Georgia or Fayetteville
North Carolina is another good example that’s a military Market we’re in down here as well that’s operates very similar to Columbus so in those time
periods of high interest rates you’ll generally see consumers push back into the rental side so if you’re running a
business like like near Casey it’s important to understand okay how is this flowing
in in each market and I touched on that already in Columbus for me we’re seeing people drift back towards rentals in
North Carolina hasn’t really been affected as much because the consumer still feels like housing is Affordable at the interest rates they’re getting
which is between six six and seven percent right now I think another thing to point out too Casey is over the past
40 years a seven or eight percent interest rate for a mortgage is actually the average
yep a lot of people don’t know that or forget that yeah so for for you and I I
mean we’re a little bit younger so for our adult lives we’ve kind of always known the three or four percent mortgage
rate that to us is normal but it’s important to zoom out and recognize that statistically that’s actually not the
norm a few Generations before us were used to purchasing houses at seven to eight percent my parents bought their first
house I think with a 16 interest rate 30 year fixed mortgage hard for me to imagine that but people transacted homes
during those times um so in no way am I minimizing the pain that people are feeling by the interest rate Heist uh I’m just encouraging
people to zoom out and look at the the data for for Where We Are okay so let’s summarize that really quick um and let’s
take it real this will be last kind of one Pete is so let’s take somebody who’s kind of used to investing in stocks or
other or not as invest not as used to being in real estate and it’s thinking about being a limited partner and being
part of a fund right so we’ve talked we’ve talked about it is not risk-free right we’ve talked about definitely the risks and and knowing the risk but the
upsides we’ve talked about is we’ve talked about um what you just dove into is there’s a
lack of inventory that’s and they and honestly interest rates could create more demand for rentals we’ve talked
about our businesses designed to buy at a discount so we’re buying below market value from the start so you’re kind of
locking in there and the last thing we haven’t really talked about which I want to hear from you is the tax advantages
right we’ve because when you invest in the stock market or maybe in other private Equity company you’re probably
not getting the same tax benefits that the US government gives us for investing in real estate but limited partners in a
fund they participate in a lot of those benefits right Pete yeah so the tax code code is is written
to support private investment in real estate in general generally that’s because I believe that the US government
recognized that hey this is better kind of left in the hands of private individuals so they structured the tax code in a way to really incentivize
anybody to to invest in in real estate because it’s useful to you to our
economy and how it’s run if you compare us on uh the DraStic end maybe to to a
place like Russia where you know that’s not set up that way you know the government is responsible for a lot of the housing um and it’s let’s just say
not the greatest um so the tax code is incentivized as Real Estate Investors uh to do what they
do if you’re coming in as a limited partner in a fund you want to understand what the tax advantages are for that
particular vehicle I know in the ones that we have set up currently all the tax advantages for us flows through
um to our limited partners based on their their ownership percentage so if there’s something like uh depreciation
or Phantom depreciation on a property that is getting uh passed through to our
investors and could be a write-off either on that particular income or
other income across across their own personal portfolio the question I get a lot is okay well how does this fit for
my particular situation not a CPA so what I always tell people to do is Hey listen these are the
advantages that my particular fund can give to you take that knowledge take the offering memorandums that spells out all
these advantages bring that to your CPA if you’re trying to compare my deal versus Casey’s deal
versus another one and say okay here’s what I have currently based on my tax strategy for the next few years
what’s the difference between Pete’s investment and Casey’s investment and your individual advisor is going to help
you along that path because they know the inside and outs of your financials I’ve gotten some great calls from very
sophisticated investors that are pursuing investment strategies
based solely around the tax advantages and they’ll Deep dive into some of my
deals and say you know yes or no based on what they’re looking for you know 1031 exchanges is a very common one my
structures are not set up for a 1031 exchange but there’s plenty of deals out there that are so if you’re a 1031 investor that’s you know sold the
property you have to do a lycon exchange or something else you could go buy another property yourself or there’s Vehicles
out there like the delator Delaware statutory trust or a text structure tenant common structure
where you could come in as an LP and do a successful 1031 exchange so that’s a
great Advantage right there that’s now you nailed it so yeah to kind of re-summerize or and maybe from a higher
level um because you made it you I really like your tip there Pete you’re like hey you’re going to get tax benefits by
being a limited partner everybody’s different right so take it to your CPA let them make the call for you that’s a great point but like big picture you’ve
talked about Phantom depreciation and just kind of like higher level the benefits that everybody’s gonna get right and yeah actually maybe quickly
explain fancy depreciation and and what everybody’s going to get whether and let me back up one more so there’s a
difference between an active investor real estate investor and a passive right most of our LPS are not going to be active they’re going to be a passive
investor but they can still write off some of that depreciation so go into that real quick yep so Phantom
appreciation basically the IRS says that you’re allowed they assume that a
property is built out of wood and other materials and that’s going to deteriorate over time so they allow you to depreciate a certain amount of
money in what’s called Phantom losses that says okay we’re assuming that you’re gonna have to do all these things so we’ll give you a write-off right now
that you can write off against your the active income from it so a phantom loss
is not actually a true loss a true loss of rehab had to spend five thousand dollars on an HVAC right so an actual
cost incurred so the Phantom losses are are fantastic whether you are
owning and operating a rental yourself or whether you’re coming in as as a
limited partner so for us those Phantom losses and our funds the way they’re designed is to pass through to that
limited partner based on the percentage ownership uh that they have so whatever part of the pie that they’re an investor
in they’ve got that same size piece of pie for um for the tax advantages
um another strategy that we’ve had a few people pursue with us is the use of self-directed Ira vehicles uh I was
gonna ask this one self-directed IRAs great ready brother though either a self-directed IRA or a solo 401K LLC
which is more for you know entrepreneurs as an LPA operates similarly right so it’s a way to a self-directed IRA that
allows you to take Ira or 401K money and invest it in non-standard assets so
a regular Ira needs to be invested by basically Bank assets right stocks that investment advisor any type of product
that a bank would offer real estate as a whole is considered an alternative investment it falls on the same category
as if you’re buying precious metals or far into the Spectrum would be or or
collectible wine or collectible cars so it allows you to diversify into that
with your retirement funds the place I see people use us the most is in in real estate for precious metals so what that
allows you to do is take your IRA money invest it as a limited partner into one
of these deals and then whatever profit that comes from that is tax free because it’s going into a protected tax-free
vehicle as designated by by the IRS there’s plenty of companies that can help people set those up if we’re
working with an LP that doesn’t have one or has money in a traditional IRA we basically just set them up with a few
different companies let them do their due diligence and they can decide um you know what to bring over
if you have a self-directed IRA it doesn’t mean it needs to all be in real estate though you can still invest in
stocks and bonds and stuff like that just to open up that myself personally in my self-directed IRA I do have stuff
in more Traditional Bank products and it also um heavily into into real estate as well so you’re able to design it kind of
how you see fit good point yeah and you can go find a LP and you to your point or maybe kind of what our strategy is
yeah you could get so you want to use your self-directed IRA as an investment vehicle and you want to start to get
into real estate but you don’t know where to start in real estate or you don’t want to go buy your own deal or maybe you can’t afford to buy a deal
right like you might to take down a real estate deal and not and because there’s also there’s also limitations on taking
out debt through an IRA so the other way to work around that if you only got 25
or 50 000 or maybe even a hundred thousand go put it in you’ll go be a limited partner and then you can makes
it easier right you’re absolutely right yep and there’s even restrictions on how actively you
could be involved with your own money for me personally I’ve invested my self-directed IRA money in other funds
that are not run by me that are run by close friends that are operators I’m in an LP on other deals because I view it
as a way to quickly grow that money in a self in a in a tax-free environment so for example
if you came in on our Brightwood deal that we were just talking about the horizontal development I mean we’re projecting an 18 return in
a year I mean that’s pretty good that’s pretty good to have that all tax free right so if you brought in 100K if all goes to
plan we’d be giving you back 118k in 12 months and you could I have 118 okay to invest in you can start compounding that
yep love it man it’s been good stuff Pete any other ones you want to kind of share
in closing I would say at the end of the day you know I love educating people on this stuff so if there’s anyone that I could
kind of further dive into you’re welcome to reach out to me through through Casey but yeah that’s kind of what I’m here
for is to help educate people along the way and and help them find a path if you go on our website you’ll you’ll
kind of the front page talks about all these different paths that you could pursue on real estate and that’s kind of what we walk people through is we sit
down Casey you came I said all right Pete got 100K and a self-directed IRA I want to invest in real estate
I’m not going to put a deal in front of you right away I’m going to say Casey what are your goals where you’re comfortable with what do you think about risk in real estate what do you think
about the real estate market do you think it’s going up or down what’s your perspective on what I do and we start educating them on all the different
aspects of our business so now Casey can make a decision to say you know I really don’t want to be involved with this at
all I like the limited partner role I like kind of really just being a passive investor and and going to trust people
with it completely or Casey might say hey I want to be a private investor or I want to be uh I want to buy one of your
TurnKey properties I might want to be kind of more actively invested in managing something myself and get that
experience before I go and try to do it out myself and you don’t have to pick one way
as I mentioned in the beginning I’ve got that great special forces guy who came in and started on One path picked some more
pass along the way and is now off on his own doing doing his own Great Adventures I love that two things I love I love the
a you just bring people in and just understand hey what like what is their unique situation just just like we’re
working with a home seller when we’re troubleshooting making the breast solution same thing with an investor hey what are your goals what are you trying
to accomplish get on a coal hash that out and then the last thing he said is hey if you whatever path you decide on
that’s just that path for now right you can continue to could be a swimmer and move into doing your own deals or maybe
do your own deal and then be a LP or do the both at the same time this industry has changed the trajectory
of my life and and I want to help other people on that same path love it well good stuff today Pete last thing where’s
yeah where can people find you and what’s just let us know your website sure the website is um ihcg dot Pro p r
o um it’s Iron Horse Capital group and then you can email me at Pete ihcg.com
awesome well definitely reach out to Pete he’s got stuff the cool thing is we do different we do similar things but in different markets right so if you want
to diversify want to be in Wyoming want to be in Texas want to be in North Carolina I want to be in in Georgia some
of those other hot areas that you maybe can’t get access to Pizza Man perfect as you may have
learned by tuning in to this episode of Gregor sense the easiest way to make real estate investing hard is by going
at it alone so as you continue learning and seeking knowledge of the industry I want to encourage you to build
relationships with other professionals who are passionate about real estate whether that’s an agent a business owner
or a managing investor like myself there are Pros that want to see you succeed and are willing to help you by sharing
their experience you can always reach me by visiting Casey gregerson.com and scheduling a call I look forward to
connecting with you and continuing to share my experience with you here on Gregor since mobile until next time I’m Casey Gregerson thanks for tuning in