081. Finding the Right Opportunities for Your Investors with Ruben Greth

Connect with the host:

LinkedIn: https://www.linkedin.com/in/brandon-e-jenkins/

Website: https://www.birchprosper.com/

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About the guest:

Ruben Greth is the host of the Capital Raiser Show, value add multi-family syndicator, and build-to-rent developer based in the Phoenix market. His experience includes: JV acquisitions of 22 residential multi-family units, establishing Co-GP partnership for 190 Units in Arizona, private equity management and advisory for 2 subdivision developments (256 houses), and the scaling, development and management of Legacy Acquisitions and Co-GP relations.

Connect with Ruben Greth: 

LinkedIn: https://www.linkedin.com/in/rubengreth/

Instagram: https://www.instagram.com/capitalraiser/

Podcast: The Capital Raiser Show

Episode Highlights:

✔️ Finding unique ways to add value to experienced operators

✔️ Having the right perspective on your first Co-GP deal

✔️ Establishing a brand

✔️ The impact of intentional networking

✔️ Strategies for raising capital in development deals

✔️ Understanding the needs of your investors

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💡 Interested in learning more about opportunities to partner in deals as a passive investor? 

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Transcript

SPEAKER_01 0:06

What if you could leave a lasting impact on your investors by successfully finding investment opportunities that fit their goals? Imagine how that could redefine their financial future. See, too many deal makers do this backwards. They find the opportunities and then they try to force it to fit with their investors. You know, finding the right opportunities for your investors as a capital raiser solves the critical problem of aligning their investments with their unique financial goals, ultimately paving the way for financial and time freedom. So today we're speaking with Ruben Greff. He is a build-to-rent developer and the founder of the Capital Raiser Show. So stick around and listen to this episode because we're going to do a deep dive into the strategies that make sure you resonate with your investors' needs and desires as a capital raiser. Discovering the insights from a seasoned capital raiser and developer is beneficial because it equips you with the knowledge to navigate the investment landscape strategically, maximizing your potential and your investors' returns. So stick around. Ruben and I want to help you make sure you succeed. Here he is from the Capital Raiser Show.

SPEAKER_00 1:15

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SPEAKER_01 2:22

What would you do if you had the freedom to pursue the things you enjoy the most? How incredible would it feel to have the resources to pursue your passions fully and live life on your terms? This is Brandon Jenkins, host of the Capital Stack Podcast and principal of Birch Prosper. You might have heard that 90% of the world's wealthiest people attribute their wealth to real estate investing. Well, guess what? It's true. Investing in real property continues to be the greatest generator of wealth all over the world. So join us each week on the Capital Stack Podcast to hear about how commercial real estate group investment opportunities can help you reach true financial freedom and give you your time back. Hello everyone, what's up, and welcome back to the Capital Stack. I'm your host, Brandon Jenkins. We have a very special show for you today. I have someone who is a fellow podcaster, someone who I've actually known for several years now. Um, and and you know, the importance of making connections, building a network, because you don't know how long folks will be in this space. I think you know, I speak to that a lot. I think it's very important. This individual has um mastered that building connections, having a variety of types of asset classes that they um invest in and that they manage. And so um, he's someone who really in this space needs no introduction, but I think that um he has a lot of value to add to this uh to this show and just to this business in general. So our guest for today is Ruben Greth. Ruben, how are you doing today?

SPEAKER_02 3:51

I'm fantastic, Brandon. Thanks for having me on your show, brother.

SPEAKER_01 3:53

Absolutely, man. Thank you for being here. So, Ruben is an experienced multifamily syndicator, subdivision developer, and the host of the Capital Raiser show, where he interviews uh industry experts and creates content design to help scaling syndicators raise capital compliantly, very important, compliantly with best in class strategies, technology, marketing, and psychology. Ruben's investing experience includes uh JV deals, syndication deals in key markets in Arizona, as well as serving as a um in sort of a private equity management and advisory role for two subdivision developments, totaling 256 houses. So that's no small feat. We'll kind of dig into that and more. But uh Ruben, look, I've been talking too much. And so um let's hear kind of about your background, about your journey, and what got you to this space.

SPEAKER_02 4:43

Cool. Thanks for letting me talk on a bunch of topics that I'm really excited about. One of them being subdivision developments, and also on the capital raising side, I really love to dive into all of the different aspects and nuances, the structures, you know, psychology, sales, marketing, branding, etc. Right. So I got my start, let's see, back in 2010, I started raising capital for JV forplexes here in town during the real estate clash back in 2010, 11. And we're talking about the fire sale that was going on here in Phoenix, where we were buying fourplexes for like$80,000. So it was pretty ridiculous. Um basically I knew that if I could learn how to raise capital, my skills would be in demand for the rest of my life. So I started a meetup, and a one specific or I should say an investor came into town with a bankruptcy, lost all his money in spec homes during the crash, but was buying a fourplex every other week. So I was like, How are you doing this? Is it cool if I come to your projects and just film you talking about how you're gonna acquire the property, how you're gonna raise capital for it, how you're gonna tend it occupy it, how you're gonna negotiate the price, and how you're gonna get it back on the market for sale within 15 to 30 days, which was a ridiculous time frame for doing that. In fact, it violated some of the um I think there were some mortgage laws that said you couldn't buy and sell a house within 90 days. We're he was doing it anyways. Uh I think there were some FHA things that were going on. But, anyways, I raised for him. We bought a threeplex, a fourplex, another three plex, a 12plex, and we had a 42 unit under contract. And then we split up and made money on all of those deals. It was impossible not to make money. They would cash flow astronomically. But after I left my partnerships with him, I kind of crawled back to corporate America. I didn't know how to do it. I didn't think I could find another multifamily partner. And then many years later, I was like, I know fourplexes, I'll get back into real estate. I created a plan, I'll just buy one fourplex and then multiply my portfolio. I'll do it over and over until I get 32 forplexes and I'll be done. And I took this plan to somebody at the local RIA, the Arizona Real Estate Investors Association. They're like 128 units, 32 forplexes. Why don't you just go buy them all right now? And I was like, What? I don't know how to do that. So they introduced me to syndication, and then I found a local syndicator, partnered with him. They were looking for capital, and I didn't know exactly how to raise capital from limited partners, right? I had raised from joint venture partners back in the day. And so I started a show called the Capital Raiser Show to figure this whole thing out. Like, how do you raise from limited partners? What are the sources of capital? How do you do this whole thing? And through this process, I eventually learned about funds and raising from family offices and raising from institutions and other forms of creative capital raising strategies, marketing, branding, psychology, sales, everything that had to do with it. This like this whole world opened up for me. And I decided to leave that local syndicator who was only doing stuff in Arizona so that I could have access to all these syndicators with great deals all across the country. And that's when I partnered with my existing partner, Andy McMullen of Legacy Acquisitions, and we started raising capital for some other syndicators across the country, and eventually found some guys in Louisiana that were building a bunch of houses and needed an infusion of capital. So we ended up teaming up, and now we have three subdivisions, 475 houses that we are constructing, and that's kind of like our exclusive business model right now. So we're working on our first subdivision. The streets are going in, the sidewalks just got put in, and we got about 100 units, 100 houses, cottages, what we call, that are going up in the next probably 14 months. And then two other land, two other pieces of land, a 20-acre and a 30-acre in Louisiana and Alabama that we are uh putting together right now. It's they're in the engineering phase. Entitlements are coming up soon. And then we'll go horizontal, which means we'll put in street sewers, utilities, curves, etc. And then we'll syndicate the vertical development of the houses. So once the roads and everything are put in, that's when we raise another another round of capital to build the houses vertically. And then the exit goal with these is to stabilize them and sell the entire subdivision as one commercial real estate asset to an institution. So it's been a crazy ride, man. I didn't know anything about development just about two years ago. And now I got 475 houses under construction.

SPEAKER_01 10:07

So that is awesome, man. Listen, uh, thank you so much for sharing that background. You have a like I said, it's a fantastic journey, and there's a lot to dig into um within that. I just think that's that that's incredible. If nothing else, it really shows people that, you know, listen, if you um the first thing is you you start off with kind of a plan. And I think that if you just keep working, keep networking, and keep growing, you never know where you'll you'll end up. But it's important that at each stop throughout your journey, that you allow yourself the room to pivot, particularly if it's into something that can help you scale up and increase, you know, kind of uh even faster, which you which you've done. I just think that's awesome. Um, you know, so because because here you're starting off with one investor kind of uh sourcing capital for them, and then now you're moving on to uh building out developments, raising capital for each phase of that, and then packaging that for institutional capital. I just think all of that is just fantastic. So, how did you um if we go back to the raising capital for the the investor, the individual who had the kind of quad quads and triplexes and those things? How how did you how did you do that? Like from the very beginning, raising capital is something that um a lot of people are just it makes people nervous to do, right? To start doing having those conversations. So, how are you able to do that?

SPEAKER_02 11:21

So a lot of people they get excited when they can physically touch an asset, but if they can't do that, the next best thing is to see it, right? So I just went to the project and I started shooting videos, right? Tell me about this project. How did you find it? How did you negotiate with the seller or the broker? What did you do? What are you gonna do to rehab this house or this vorplex or however many units it was? How are you gonna tend it occupy it? How are you gonna manage the contractors? How are you going to get it lit relisted? And then just basically talked about cash flow 101 concepts. Hey, don't buy liabilities, buy assets that pay for your liabilities, and just kind of you know, those kind of mindsets, personal development, a lot of cash flow concepts. Why buy a fourplex instead of a house? Why buy multifamily instead of a house? And just put those videos out on YouTube and pretty much everywhere that I could think of Facebook, Instagram, and LinkedIn didn't really have a huge presence back in those days. But I would put it on Vimeo and any other channel that I could put it on. And then over time, people started noticing. And because during those days it was a ridiculous investment opportunity when you were at the very bottom of the market and things were just gonna go up and up and up. So by posting these videos, people started reaching out. We would take them to lunch, some people would fly into town, and then over time we'd say, Hey, you want to partner with us on this deal? And they'd say, Oh, maybe on the next one. So we'd go ahead and take it down, anyways, and show, hey, we don't need your capital, but we're inviting you to participate with us. And that fear of missing out on the astronomical cash flow and the incredible appreciation that we were seeing in the Phoenix market during those days made people want to come and invest with us. And it's very similar today. I think one of the greatest ways to start raising capital is to educate and nurture people. And one of the best ways to do that, because most people or a lot of people are visual, is to just create videos at the project, at the multifamily property. And if you don't have a property like me back in those days, you just find somebody that does and you videotape them there talking about it because a lot of these really successful investors don't have a marketing presence or don't know how to get on social media. They're very good at acquisitions and management and running contractors and general contractors and micromanaging them and making money, but they're not so good at the marketing and branding and raising capital side of things. So that's a great way to get in. And that's exactly what I did.

SPEAKER_01 14:10

That's incredible. You know what's interesting about that is I like to share with people, usually I say there are two people, two ways that um that you can really add significant value to um you know an active investor. And I typically will say one, you can you know help uh help them raise capital by introducing them sort of to your network if you have a network where of you know high net worth and liquidity. The other one is to sort of understand kind of the analysis on the acquisition side and essentially bring them a packaged deal to where you have all sides of the deal sort of worked out, you've verified and vetted the numbers with property management, insurance, all these things, and you bring them a packaged deal. I think that what you're saying now is actually um huge because another way to add value to them is to do exactly what you did, which is to say, uh, listen, you don't, and you're you're 100% correct. Most um investors, syndicators, you know, operators don't have a strong social media presence, still to this day, you know, aside from a few posts here and there. But that's not the same as saying, listen, here is the property right here. Here's what we're going to do. Here's why answering small questions that you can, and you can spin those into small pieces of content. You know, you can have one conversation that ends up going into 10 different pieces of content. And so um it because that's important, you know. The truth, the truth is the uh attention spans are short. Um, you know, people, you almost want to answer potential investors' questions before they have them, before they have to bring them to you, and certainly before, you know, ideally before there's a webinar or something like that. Now you have a deal, now you're forced to sort of answer all these questions at one time. Where if you were able to gradually do that, coming into that deal, they've answered all of the questions that are at least that that pertain to how you operate. So now you, you know, that's that's a huge, you know. I personally haven't heard of someone doing that. I think that just adds a ton of value. Um yeah, absolutely. So so okay, so you were able to to add value that way, which is significant, able to to, and I like that you said um the fear of missing out piece, because that is something that, you know, by first of all, by saying, hey, listen, we don't necessarily need your capital, we're inviting you to partner. This is an opportunity to partner. You know, now the investor is interested, they see the deal, they see that first of all, this is an actual thing. So, so they're excited because of that. There's upside, they're excited because of that. So now you have them interested in partnering. And so you were able to do that effectively at that scale. So now you've you've then gone from that to scaling up into larger projects. And um, were you was the approach then to more or less take those same investors into this larger scale with you, or did you have to pivot a little bit to and um to to kind of get in with larger capital sources?

SPEAKER_02 16:52

Yeah, those those early stage investors, or those better said, when I was early stage, that group of people wasn't really, it was just a few people, and they went off and did their own thing. So when I came back, I had to figure out how to create and establish a limited partner database. And the syndication group that I was partnered with, they're like, hey, we brought you on to raise the capital. Where's the capital? We need the money, we have a deal under contract. And there was just no way you can't raise capital from people that you haven't spoken to. So I didn't have a network and I was forced with this tough decision. Like, how do I make this successful for my team and then add value to them without spending the next you know, year and a half, two years building this database? And I discovered that you could kind of sidestep this by doing a co-GP partnership, which basically you would find somebody that wants to become a general partner that has a database of investors already, and then bring them and share the deal with them and their investors. So the whole co-GP capital became something that I excelled at very early on because I didn't have a database. In fact, I I grew up with a group of people that didn't have any interest in investing at all. So I had to build an entirely new database of people that weren't from my friends or family. And one of the best ways that I was able to establish it was just networking, you know, go to multifamily groups, go to local different places where people are congregating and talking about multifamily and find some people that I resonated with that resonated with me as well. And so that's how we raised, that's how I raised about a million dollars worth of capital for that syndication company, was just bringing in co-GPs. Now, the more people that you bring in, the less of the business you get to keep, right? Because you have to share with it. But I didn't care, I was it was really focused on the momentum. Like if I can bring some capital partners, then people will see that I can actually raise capital, and that's gonna help me. So even though I didn't make an incredible amount of money on those first couple of deals, what I did do is establish some momentum, and that's really what got me to where I am today, where somebody else wanted to partner with me, see what kind of capital I could bring to their business, and now I'm syndicating subdivisions. So that was kind of how I got my step in.

SPEAKER_01 19:28

Yeah, that um that's an excellent point that you just uh made there. And in that, you know, when you're looking at kind of deals number one, two, three, you're you're really almost sowing the seeds for deals number five and beyond, um, especially as a kind of on the active side. And um, you know, I've had conversations with people who sort of get stuck on deal number one because they can't they can't stop thinking about, well, what's in it for me, what's in it for me. When when the reality is, listen, you're you're you're you're gonna more than likely seek out a partnership with someone who has a lot of experience and who has a network to where they probably don't necessarily need that person to come in, but it's more we're inviting you in. There's something we like about you, we're gonna give you a shot. And so we could use it, but but more more often than not, at least in my experience, it's been we're we're not bringing you on the team because we without you, we fail. It's more that hey, there's something I see in you, you have a good strong network and a presence. Yeah, sure, you could you could add value to the team. And so I guess all I'm saying there is um, I think that the perspective you had is very important because you know this is a message also for people who are looking to get into the to the active side. You have to look at deals maybe one, two, and three as as resume builders, as momentum builders, the way you said you don't really go into it saying, well, hold on a minute, look at that that dollar, that figure right there. I need that to be three times that and four or five times that. You don't do that yet because you're building your resume, you're adding value. And um, and without, I think, without those first few deals and without that mindset, you're probably not going to make it very far. Um, you know, at least at least that's my viewpoint on this.

SPEAKER_02 21:03

It's tough the first few deals. I've been interviewing some guys most recently and asking them, hey, I know that you've taken down like four or five syndications. Are you rich now? And they're like, No, not even close. You know, the first few deals, they help. You get some acquisitions fees, you start building that track record. So I'm like, well, where do you get your money? Like, how do you survive in this kind of environment as you're building your business? They're like, you either have to do it while you have a job or you have to have a spouse or some source of income or very low expenses to survive those first few years. Because as you're building your track record, building you know, everything that has to do with syndication and your building a database, et cetera. You have to be able to survive the storm because, like, especially in my business where I'm building houses, I'm not going to get paid any major amount of cash until we sell all those houses, those subdivisions. Like two years down the road. So, what do you do in the meantime? That's a question that you have to wrestle with because it's not just like you see people, hey, I just closed on 142 units or whatever amount of units, and you think that they're very successful and rich, but the reality is behind the scenes, they're getting their feet wet and they're taking a small piece, and they're probably not going to get paid any significant amount until they sell the property and share in that back end equity. So I always recommend for people that are wanting to get into the game, be prepared to not have a lot of money the first couple of years.

SPEAKER_01 22:36

Yeah, yeah, that's great advice. I mean, and that's sort of a it's interesting. That's a bit of a reality check as well for people who are looking to get into this business. There are many reasons why the active side, being an active investor, is not easy. And that's one of them. Um, because there the truth is it's a ton of work. You know, everyone likes the flashy acquisition side, but really when you're done and you close, you you're at the starting line or starting point. So the work begins. So that's one reality check. The other one, of course, is in those first few deals, you're it's you're not making a ton of money on those. Um, you know, I and I would even say that, you know, when you're on the GP side or your sponsor on those first few deals, you probably want to be a passive investor in some deals if you can afford if you can spread your capital into them, because you're at least getting something coming in from those as well. Um, so, but at any rate, yeah, that's that's a bit of the you know, that's just kind of how we're how how the reality of this business is. Um, I want to ask you something about branding and marketing because you talked about that a bit. And how important is branding, marketing, exposure in the syndication and in the private um investment business.

SPEAKER_02 23:48

For most people, I think it's really huge, right? Because uh one thing is personal brand, the other thing is company brand. What I found is that most people want to do business with people, not companies, right? So you want to have a company that's got a established brand that's friendly, that's not necessarily all about buildings, but that is kind of touting passive investing or financial freedom. I think for a lot of people, they resonate with that versus like here's here's the return, here's the market, here's the team, here's this, here's that. But it doesn't really resonate with a specific avatar audience, right? So if you're trying to target one specific kind of person, you need to incorporate all of that into your website, into your marketing, into your social media post, into the way that you talk. You know, what do you talk about? Is it just numbers? Is it financial freedom? Is it cash flow 101 concepts? You have to come up with something that can speak to a specific audience. So if your avatar, for example, is a pilot that's 35 years old that lives in California, you want to target them and say, hey, you know, I resonate with this particular avatar because I myself am a pilot, or whatever it is that you are. If you're a high-ticket sales coach or if you're a tech professional, you want to speak to the audience that most resonates with your message and target something specifically for them. And the marketing and branding is a huge piece. So I would say it's incredibly important to do a company brand, but also you have to be able to get yourself out with like who is Ruben Greth or who is Brandon Jenkins? What is this person about? Are they spiritual? Are they into making money? Are they all about financial freedom? Are they about helping people? The more that people listen to you, the more that they're going to kind of get the gist of what kind of a person you are and if you're really trying to help the world, or if you're just out there to make a quick buck, and people will start to resonate with you, whatever it is that your message is. But you do need both a personal brand and a company brand. However, you need both of them, right? Because if you're just if you're just some dude that's out there networking with people and you don't represent any specific company, they're going to be like, Well, I don't know if I should invest with this guy. Who does he actually work with, or who does he work for, or what company does he own? But the reality is, is because I have a show that's got exposure, a lot of people recognize the Capital Raisers show and they still don't know to this day like who does he actually do business with? What company does he own? But they inquire, they get on my calendar, and then if you're doing the right kind of social media, they'll say, Oh, this is the Bill Torrent guy. Let's go talk to him about Bill Torrent. It's harder for me to find multifamily today than it was three years ago. Maybe this is kind of the path. Let me explore it. And they get on my calendar. So they know me from the Capital Raiser show, and then they know my partners, and then they see my social media, and then they hear me, you know, on other people's podcasts. And the more touch points you get, the more people will start to see, okay, this guy's stable, he's been around for a long time. Let's go see what he's about, and possibly maybe there's a chance for me to partner with him. And a lot of multifamily, both passive and active investors, are all about networking. So they get on your calendar pretty readily. You think that it's kind of like, where am I going to find these people? But if you just go network, you share your contact information, you have a good LinkedIn profile that allows people to access your phone number, your email, and your calendar, then people start getting on there eventually over time.

SPEAKER_01 27:47

That that is just an incredible breakdown of exactly what I think is required uh in order to sort of build that presence in that brand. It's it's very important, it can't be overstated because um, you know, the thing is, you don't know sometimes you don't know exactly what piece of content or pieces of content or information that you put out there that will have someone saying, you know what, I need to reach out to Ruben. You know, um I've been checking out his stuff every so often. And initially I was just casual, but he put out this post that really struck a chord with me. And then I started to lean in a little bit closer, and then I listened to a couple of his podcast episodes, leaned in closer, and then finally this one post is the one that made me say, you know what, I need to pick up the phone. And it's it's an interesting thing because um, for someone who it may be thinking about getting into this, but doesn't want to do any of that. The the challenge is look, we're all people just uh all we have to do is think about ourselves. So if someone puts a product in front of you never heard, you don't know anything about the company, other people, or anything about it at all, you know, what's the likelihood that you're gonna buy it? You know, being top of mind is important. And it's not, and it's not just to, you know, you're not trying to annoy people. You're trying for the first thing is you want them to make you want to make it easier for them to understand who you are so you they can partner with you potentially. But but the the other piece is just you have to have that circle of content, that web of content, I guess, to where it's like, you know, you want some update or some post you put on LinkedIn, you want it to, you know, them to be able to somehow connect to your other pieces of content to understand a little bit more about you. You know, it's just important, I think, to have. Um, and I think one thing that's interesting you mentioned kind of having that personal and that professional content is, you know, I've seen some websites where they do a decent job of connecting both of them. So what they'll what they do is, and I don't want to name name the names, I would, but there are two particular firms that I'm thinking about um where what what they've done is on their website, they are essentially giving the viewer a glimpse of the other side. So what they're showing, they're syndicators and what they're showing, though, is the travel, the time freedom, and the location freedom that being in that being a partner with them affords you. And so I just find that to be really cool because all their pictures on their website, it's them traveling, it's them relaxing, but then they have that bar right in the middle, the amount of capital that they've raised, the number of units that they have under under management, this kind of thing. It's like an oh, by the way, we do this, but this gets us this, you know, this gets us that time to do what we want. Um, so anyway, I just think that's you know, that's another sort of interesting way to do it.

SPEAKER_02 30:18

That's excellent.

SPEAKER_01 30:19

Yeah. Um, so uh let's let's talk then about um capital raising and structures, because I think you you touched on that very quickly. Um, the differences between the structures between, say, like a syndication and what you're doing now, where you have to break it into phases, right? Because if you just have an existing asset, you can maybe do it in you know just one block of capital that you raise. Um, what's the difference between that and now the built-in rent model from a capital-raising structure perspective?

SPEAKER_02 30:47

Well, yeah. So this when I say structures, there's different sources of capital, right? You have limited partner capital, you have co-GP capital, you have joint venture capital, you have larger investor capital, like quasi-institutions and family offices, and then you have fund structures. You can do a blind pool fund, you can do like a deal-by-deal segregated fund, you can do an SPV or specific purpose vehicle, which is a fund designed to raise for one specific deal, which some lawyers like that and some do not. But the idea is, you know, what makes the most sense for you and what can you afford to put into place, right? Because one of the barriers of entry, if you want to go, if you're a newer syndicator or newer capital raiser, one of your options is to launch a fund, but then it starts to you, you have to question, well, who am I going to use as a lawyer? Am I going to get business advice? How much can I afford to spend on this? Is a more complex structure appropriate for me? What's going to be my capital raising strategy for this? Because if whether you have a fund or a syndication, you still have to go and raise the money. A lot of people think, well, I'll just go launch a fund and then the money will be magically there when it's time to raise. Um, for a development, some people raise from family offices or larger institutions, and that can be beneficial, but you have to give up a lot of control over the deal. So that's something to contemplate too. In a fund, what would be nice about a fund if you were using one is you could have money for the purchase of land, you could also have money set aside already for the horizontal infrastructure and the putting that in, and then you also have money for the vertical development. But if you don't have a track record of doing subdivisions, it's hard to do a fund and ask people to put money into a risky, riskier investment or what people consider riskier because they feel like during the land phase, when it's not entitled, that's the greatest opportunity to lose money. And then as you force appreciation by doing things to the property, including getting entitlements and zoning changes, and then eventually engineering and also putting in horizontal at every step, you're reducing the risk. And a lot of people that are investing into syndications, they want their money back fast, right? So we're just talking about limited partners here. And so, what's the fastest part of a development project? It's the vertical construction. So that's where we syndicate. So typically what we'll do is we'll take our own money, we'll put a property, I should say, a piece of land under contract with an option to buy, we'll go to the city, we'll get engineering approved, and then any zoning or delineation changes that we need and make sure that the architectural plans could be approved based off of whatever it is that we want to develop, and then coordinate with the city. Once they say yes to everything and engineering is approved, at that point we exercise the option, we purchase the land. Once again, we've done this with our own money, so we've mitigated the risk. And then from there, we usually do like joint venture capital or some kind of a safe agreement or something that allows us to raise money for the horizontal, and then we'll do the syndication when it's time to vertically in you know build the houses. But ideally in the future, we're kind of setting ourselves up once we have the track record of selling these subdivisions. We want to have a fund and give a hybrid return structure for each risk, fate for each phase, which is risky, and then kind of make it a group return, you know, or I should say group the three different phases and and just make it so that people get a large return because they're participating in all three phases. Um and that kind of would be ideal for us in the future. But right now, what we're doing, and you know, when I say structures, it's like you have to contemplate where are you raising the capital from? Are you doing it from joint ventures? Are you doing it from co-GPs? Are you doing it from limited partners exclusively? And that's going to help you decide what kind of structure to use. Typically, the way syndications work is you have a 70-30 split between limited partners and general partners. And then of the general partners, there's a portion that's dedicated to capital raising and in conjunction with other full scope duties for the duration of the entire project. And a portion of that GP goes that's is dedicated to that. Another portion may be for acquisitions, another portion may be for asset management or construction management or things of that nature. But 70% goes to the limited partners. So you want to set up a structure that makes sense for all parties involved, depending on where the capital is coming from and what your business plan is.

SPEAKER_01 36:11

That's awesome. And I appreciate you uh kind of sharing that breakdown there. And so with the hybrid model that you mentioned there, the idea would be the investors will stay in for the initial portion and sort of um as they progress through each uh phase with that carries with it less uh increasingly less risk, then they will be paid off a portion of that initial capital that they that they put in each time. Is that okay?

SPEAKER_02 36:36

There's always ideal and there's always the reality, right? So some people they're like, hey, if I'm gonna participate in some of the riskier parts of development, like phase two, which is the horizontal infrastructure, they may want their money back right after it goes, it's ready to vertically build. So ideally, like I said, I would love it if people came in and then they got a bump. So if they came in with$100,000 on one of these 506 C deals, we got them to 120,000 basis, you know, like a 20% bump. And then they stayed in the deal. And instead of working with$100,000 and the return for that$100,000, they're actually automatically starting with$120 because they came in at an early phase and without doing any other work. Now you're instead of like a 1.9 equity multiple, they're at like 2.3 or something that justifies them coming in at an early space. Now, with the fund, you don't have to worry about that because you have money to put into the deal at any given part of the business, including the land acquisition phase, which would be perfect for a developer. And that's why a lot of them like funds. Built to rent is very different where we invest in Louisiana because the cities are pro-growth. They want to provide housing and do it quickly for their residents and for their scaling cities. They are in pro-growth mode. If you compare that to a Phoenix, Dallas, Atlanta, there they also want to grow and they up, and the governments can't provide the housing, so they incentivize builders to put together things with tax benefits and sometimes opportunity zones and a variety of other things that they they put in place to incentivize developers to build houses, but they have so much on their plate that it takes forever to go through the bureaucracy and red tape of getting the engineering and everything else just to get it ready for development. So a lot of times institutions come to these bigger cities and they can wait. They don't really care about the time because they know that they're gonna they're gonna make a huge back end equity spread and probably just keep it in cash flow on a brand new property long term. But as syndicators, one of our primary responsibilities is to get the investor capital as fast as possible, in which case that's why we don't syndicate in some situations. It depends on a deal-by-deal basis. But for the majority of our projects right now, we are not syndicating until it's time to go vertical. And at that point, it only takes us, you know, 14 to 24 months to build out the subdivision, and then another, let's say another six months to stabilize it. So we're about 30 months maximum for a stabilized subdivision that we can sell to an institution. And that's a pretty quick return. When you're in and out of a development deal in three years or less, that's pretty fast. Obviously, we underwrite it for a little bit longer and put in contingencies and whatnot. So most people are prepared to stay for five months, but we get their money back a lot faster. Or I should say five years, but we get their money back a lot faster.

SPEAKER_01 39:55

Yeah, which which I'm sure that something like that would um sort of build sort of that stickiness, right? I mean, because you mentioned um, and actually, this is another point I wanted to ask you is depending on the source of of the capital, I'd imagine they might be more inclined to stay in throughout the entirety of the the built-in model, right? Because if it's someone like you mentioned, like uh family offices or institutional capital, they don't necessarily need to have it back now. I would imagine that they would be more inclined to stay throughout um the entirety of the project. Is that kind of what uh um you know, and what you've seen so far? I know I know at the moment you guys are yeah.

SPEAKER_02 40:33

A huge part of raising capital is finding out what your investors' needs are because some people are very cash flow focused, and a piece of dirt is not going to cash flow, or a heavy lift syndication is not gonna cash flow. So you got A class, B class, C class, and like heavy lift, right? Are the are the typical multifamily syndications? And the developments, whether it's for multifamily buildings or subdivisions, in either case, they're a lot less cash flow. You're gonna get a lot more equity and a lot less cash flow because you can't cash flow a piece of dirt. But if you're like heavy lifting and you know, gutting apartment complexes and removing tenants and putting in new tenants, a lot of times those deals are not going to cash flow either, but you're gonna get a lot more equity and back-end profit and a greater return for these riskier, less cash flow type producing assets. So if your investor tells you, hey, I need a cash flow producing property and I need some kind of investment that's gonna help me offset my taxes so I'm not paying so much of my W-2, they're not gonna be a great fit for the type of developments that I'm doing. If they want to do a long-term play, which would be the ideal investor, I think, for a lot of people, what better asset class than a brand new building or brand new subdivision could you have? Because it's gonna be low maintenance and it's gonna cash flow forever. But they have to wait out the period until they're either buying that asset once it's done, like the investors that purchase our subdivisions from us, or ideally, hey, let's build this thing out and let's employ a legacy strategy where we keep this thing afterwards. But in the first couple of deals, or maybe part of your business model might be, hey, let's do like four subdivisions or four developments, let's sell three of them, get the investor returns, and then let's keep one of them for ourselves. And any investors that want to stay long-term and cash flow along the way, they can stay with us, or we can refinance or get their cash out to them, or or whatever the situation may be. And then they can get their principal back and stay in the deal, or they can get the entire return back and go and do something else with the deal, you know, with the money that they made.

SPEAKER_01 42:56

That that that's all that's really that's really a creative kind of strategy there. You're given you're you're basically building in a number of different options depending on the goals of the investors, right?

SPEAKER_02 43:05

Yeah, because if if your whole thing is cash flow, it may not make sense for you to uh in fact, it probably won't make sense for you to look at our deals. So one of our things as capital raisers is we have to educate and nurture people is and let them know, hey, if cash flow, because you've heard a lot of these people, they're like, I got into multifamily syndication because I want cash flow and passive investing and financial freedom. And they all their friends are into cash flow. So they're taking less of a return so that they can get a cash flow play. But in three to five years, most syndications are done and you're gonna get your cash back anyways. You'll have made cash flow along the way, which makes your met your objective, but you're gonna get much less return, and the velocity of that money is gonna be slower than if you just invested into a syndication that was less cash flow heavy and more equity dependent. Independent because a lot of deals are like that. And if your idea is to grow wealth as fast as possible, cash flow may not be the best solution for you. However, if that makes you comfortable and you like to flip your money every three to five years, then you know maybe that's something that we can either find for you or you just need to go to a different syndicator that can provide exactly what it is you're looking for. But you always want to spend time with the investor, find out exactly what it is that they're trying to accomplish. And a lot of times they have pain points, like they need to get their you know, their kids into college, or they need to pay for a wedding, or they need to do something that is their whole reason for doing it. You know, maybe they're a 65-year-old CPA that wants to spend more time on the beach or with their grandchildren and they can't do that. So this is exactly when you say, Hey, this is let me show you a solution on how I can provide you with the opportunity to get closer to your goals through our particular product, whatever that may be.

SPEAKER_01 45:02

Yeah, certainly. And it's it's very important to kind of survey, you know, your investors as well. I mean, you have that conversation, make sure you do those touch points. Um, and then also just make making sure that you every once in a while kind of touch in and say, listen, you know, what are you looking for? What are your goals? You know, we want to make sure that we're putting deals in front of you that align with your goals. Yeah. Because you know, I think I think too often it's it's this whole whatever deal I have, here's here's the deal. But you know, you know, once you have a database of investors, you want to make sure that you're putting something out that that it's a great fit for them. It makes it easier for us as you know, syndicators, capital raisers, it also makes it easier for them because it it you know that the mechanics of the deal already fit uh what they're looking for.

SPEAKER_02 45:45

You definitely want to survey your audience and say, hey, if I found you a deal that met this parameter, would you invest? And if they say I'd be interested in looking at that, then go and find them a deal that meets those parameters.

SPEAKER_01 45:57

Yep, absolutely, absolutely. Um, so Ruben, I wanted to talk really quickly because we're getting kind of close to close, but I wanted to ask you something about your book, right? I know you you you have a book that you've uh co-authored, I believe. Can you want to share some details there?

SPEAKER_02 46:11

So I'm writing a book with Richard Wilson about capital raising. I think we're gonna call it capital raising strategies. And I do have a list of topics. It's gonna be like story brand selling, and it's gonna be a variety of different things, including mindset and probably some stuff on funds and some different asset classes to invest in. And then Richard's gonna write like 10 topics as well, and then we're gonna put the whole thing together and then market it out for the purpose of getting people educated on how they can raise capital. So we're really excited about it. It should be out by probably the end of 2023.

SPEAKER_01 46:51

Nice, nice. And Story Brand is kind of the secret sauce. Not a lot of people, at least in this space, know about it, but Story Brand is an incredible tool in order to kind of get, you know, it's a it's an effective marketing tool. It's a way to kind of make they always say, make the uh your customer or a client the hero of their journey. I think that's a very, very powerful way of doing it. Um, so uh, but but Ruben, um, wanted to get to so we're at the actionable tip phase of the show, um, where let's say that someone's listening to this, they're energized, they're really excited, um, but they're hesitating, right? And we'll say this from the perspective of a passive investor. Um, what's something that they can do to take action now?

SPEAKER_02 47:30

So they want to go network with people and then just educate themselves as much as possible by diving into podcast content or books on the topic or any other place where you know, if if they're audio people, listen to content, if they're visual, read some content or watch some videos. And that's kind of like the main thing. Do a lot of networking if possible and explore what are the different people that have access to the deals that you're looking for, and does their business model resonate with what you're trying to achieve in with your own personal goals?

SPEAKER_01 48:09

Awesome, awesome, perfect. So, uh Ruben, um, if uh any of the guests that have listened to this want to reach out, hear more about you, how can they do that?

SPEAKER_02 48:18

Yeah, they can listen into the Capital Raiser show on any platform that they want to, or they can hit me up on LinkedIn. I like to spend a lot of time there. If they're interested in the build-to-rent subdivision developments that we're doing, they can check us out at legacyacquisitions.com.

SPEAKER_01 48:32

That is awesome. We'll put that in the show notes. And Ruben, man, it's always good speaking with you. You know, you just are someone who I think adds a ton of value to this space, and uh you can and you just continue to grow, man. So I think I think it's really cool watching it. So um again, just thank you so much for adding value uh to the show here.

SPEAKER_02 48:48

I appreciate it, man.

SPEAKER_01 48:50

As always, thank you so much for tuning in to the show today, brought to you by Bridge Prosper. If you enjoyed today's episode and you'd like to learn more about commercial real estate investing, please like, subscribe, and share. And we'll see you again next week. I'm Brandon Jenkins, and this is the Capital Stack, where we help you learn, apply, and prosper.