Emma, why do you think PREIshare is exciting for sponsors?

Liquidity is the biggest game-changer. We’re talking a lot about tokenization, the tokenization of assets and fractionalizing through some sort of a blockchain and we are waiting for that to happen. But if you have an opportunity to find out that you can have some liquidity beforehand, that would take a lot of the pressure off of the investor. This is a three-year, five-year hold, these are not liquid investments. For the investments that are typical for people to be putting in like a 401k, the reason that they’re in there, it’s not necessarily because they’re less risky, it’s because they’re more liquid. And so if you have something that you can’t invest in inside your traditional 401k, it’s because the liquidity is not there.

It’s not a value of risk. Like ‘Oh, your 401K only wants you to invest in this because it’s safer for the average investor.’ No, it’s just more liquid. So if you can establish that confidence that if I need to get this out for whatever reason in an emergency, that is a game changer!

RE Investment Deals You’ve Worked On

Well, my first commercial deal was in March of 2020. We’d had it under contract for probably six or seven months. We didn’t know what we were doing and our investors were working with us, our loan guarantors were working with us, to make sure that we  made it over the finish line. We closed in March, and probably a week later everything shut down because of Covid-19. Everyone was saying you should hold back from doing any major repairs  or changes because you want to pile up cash during a crisis. Cash is king. But we had just bought this building and it was in really, really bad shape, but we believed in the potential! But… it was a sitting lawsuit waiting to happen.

So that was a difficult decision for us to say “We have this working capital that we’ve raised, but instead of letting it sit on the side while we figure out what’s going on with Covid, we’ve just got to push forward with the business plan.”

Then when everything kind of settled down, and lending went back to normal, we were able to do things more traditionally. So we bought a couple more buildings with some partners. So I started to just partner on and take smaller pieces of deals and just offer my little niched experience rather than trying to manage the entire project. 

Now, we have a couple of nicer properties now that are easy. You know, those are the ones where you just hire a property manager and everything’s fine. But for the lower quality stuff, you have a property manager and your entire team working full-time trying to get this property up and stabilized. It’s a great opportunity to make some money, if you’re willing to put the time and effort to learning and network.  You need to get the resources you needed to handle that.

But that’s where we started. That’s where a lot of people start.

Best … and Worst … Deals You’ve Been A Part Of.

The worst deal is the one we decided not to buy and would’ve made a ton of money! Sometimes the best deal is the one you didn’t do.

The best one I ever did… Our highrise entitlement. It was the sexiest project I’d had the opportunity to work on… up to that point. But, I had to come up with half a million dollars. I didn’t know how I was going to close.

I managed to get the partners together and get it done. It was an amazing team, one of the best teams I’ve ever worked with. After we got it together, a seller told me, “I thought the first time you called me about this, there was no way you were going to close this thing. I thought you were just tire-kicking and wasting my time.” Which he wasn’t wrong, I had kicked a lot of tires and I had wasted a lot of people’s time… But eventually, if you do that enough, one will close. 

Most people are never gonna feel comfortable doing their first deal. I’d say 80-90% confident. Just pull the trigger. Just go for it.

How Are You Preparing for 2023 and Beyond?

I’m waiting till 2023, that’s for sure. Why? It’s so bad right now. It’s so bad. And it makes me feel completely incompetent. 

Commercial lending right now is a train wreck. Banks are pulling out, a lot of private funds are running out of money and shutting down operations. Not me personally, but someone recently closed during a conference and panicked after they signed their paperwork and realized the LTV on the loan crashed and they ended up having to go raise 2 million in 24 hours. I don’t even know… It’s like, that’s when you call YOU!

It’s safer and I don’t want to lay awake at night wondering how I’m going to raise that last little bit of capital needed for an investment deal. I don’t like to invest with people I don’t think can close because nobody wants to get just their money back… They want to see a return on their investment. 

Key Takeaways When Getting Started in Real Estate Syndication?

First things to do when you come across a new deal: 

• Find out the IRR 
• Find out your Debt Yield
• Find out your Equity Multiples
• What’s the total return 
• What’s the cash on cash return. 

Then, evaluate for risk. Because, the best way to lose property is to get foreclosed on. That’s how you lose 100% of the money. The quickest way to get to foreclosure is to have a bad capital stack where you and your debt are the largest sum. If you can’t pay that debt, you’re literally out of business!

The other thing is, your capital expenditures budget. It should be pretty big. The older the property, the bigger it needs to be. It should have 10-20% contingency on top because anything can happen.

The last thing that’s important to a new deal is working capital. How much money do they have set aside in their bank account that can go to unforeseen expenses? Having to do a capital call to investors isn’t ideal, and can ruin a deal. 

Now I’ll give you an example:

If you have a high IRR and low cash-on-cash return, those two things are telling you, you’re going to make all the money on this when you sell. It’s won’t cash flow very well.

So if you see a big delta between those two things, it usually means that it’s relying on a refinance to make that money, which is risky. You don’t know what those refinance terms are going to look like. So, if you’re seeing high cash flow and low IRR, it might be a property that’s not going to appreciate very well. It may also be a terrible property in a terrible market. Finding the relationships between these things will tell you exactly what you’re looking at. That’s what I’m talking about. That’s the thing about real estate, if you’re not willing to learn and dissect these things, then you’re taking on more risk than you need to. You’re investing into something you don’t understand and that’s the biggest risk of all. 

Top Recommendations for Networking in Real Estate. 

There are two main skills. One, networking. Two, financial savvy. I’m not the financial manager, I don’t do the spreadsheets, but how do I get those spreadsheets done? I force myself to learn, so I can at least understand them. I found other people to handle the financial management through networking. So if you don’t really like people and you don’t like finances, then real estate probably isn’t a great business for you.

Now that said, if you can get your mind wrapped around that and you’re willing to do those two things, everything else can be delegated, negotiated, whatever… but those two things, you can’t, you can’t outsource that stuff.