Evolution of Private Real Estate, Due Diligence & More feat. Matt Burk

Welcome back to the Invest Like a Billionaire podcast. We've got a very special guest for you today. We have Matt Burke, who is the founder and CEO of Fairway America and VeraVest. You may have heard his name before. He's been in the private alternative and real estate space for several decades. He's a seasoned real estate executive, chief investment officer, fund manager, multi-decade career. He successfully managed over 11 different real estate funds, and we're going to dive into his extensive background just in the industry, exploring the evolution of this business of private real estate. He shares a lot of very valuable insights that he's gained over the past several decades and giving our listeners a really unique perspective of someone who's been around for a long time and has seen the evolution of this industry. So tune in, you're going to really enjoy this episode as we uncover kind of his story, what led him to get into this space and all the knowledge that he's gained over the past several decades. So you're not going to want to miss this. Hope you enjoy. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments, so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Welcome back to another episode of the Invest Like a Billionaire podcast. I am your co-host Ben Frazier, joined by fellow co-host Jim Maffuccio. And today we're very excited to have as our guest Matt Burke. Matt is the founder and CEO of Fairway America and Varivest, and he's been doing this for a good amount of time. So he's been a seasoned real estate executive, chief investment officer, fund manager, He's managed over 11 different real estate funds over 22 years. And so, Matt, really excited to have you on and just kind of bring your kind of breadth of experience to our listeners and just sharing your insights over what you've seen over the past 20 years. So give us a little bit of background on how you kind of got started in the business. And I know your business has evolved, you know, quite a bit over time. So share just some of the story here.

Here, Ben. Well, thank you for having me. I appreciate the opportunity to be here. Yeah, I started out in real estate finance sort of by accident coming out of college and learned real estate and finance and, you know, all that goes along with those things almost by happenstance. Kind of really enjoyed the real estate piece, moved around to a few banks and thrifts and thrift and loans back in the day and then ended up starting my own company. In the late, early '90s, 1992. And, you know, kind of took a, took a path to get here. But we did commercial real estate loan brokerage in the early days and eventually started our first fund in the late '90s, '99, 2000. We launched our first fund and that kind of started me off down a path of fund management that coming out of the Great Recession kind of got into more of a coaching and advisory role, helping other managers get set up and kind of one thing led to another. So I guess, and with the benefit of hindsight, it's always interesting to see how, you know, twists and turns that your life and your career and your business take. But, um, yeah, I guess if you're around long enough, you know, you do a lot of different things.

I, I love it because one of the cool things that, uh, you've kind of evolved your business into is you're really serving kind of both investors where you have your own funds, where you're still managing those, although you've kind of graduated, so to speak, or kind of moving up the food chain to more institutional money. But you also have a business that serves fund managers. You do administration, you do coaching, you help set up funds and syndication. And so you're really at this, this cool place where you see the perspectives of both. And I think you have a really unique perspective to share with our listeners who are mostly passive investors. But before we get there, I'd love to hear— you said you launched your first fund in 1999. And so this was before the JOBS Act. Right. And, and it's so fascinating to me to hear what it was like back then because a lot of people are in the space now. Well, I've been doing it a couple of years. Right. And so they don't have the benefit of that long perspective. So what was it like in '99 launching a fund? I mean, just so curious. Yeah.

I mean, you know, all the things that people take for granted now, there, you know, there was no JOBS Act, there was no public solicitation and advertising. Right. Everything was a B. Now, there was— it wasn't called a B because there was no B and C. It's just it was all the same. And, you know, you couldn't publicly solicit and advertise. You had to have a prior business relationship with all of your investors, and there was ways to do that. So, you know, it was pretty old school, I think. And I would say we built our investor base largely one investor at a time, one referral at a time, you know, kind of from the inside out rather than, you know, being able to do social media and podcasts, you know, things like we're doing today. It was kind of a different world. But the vast majority of our investors were from the area. And then, you know, it was a lot of really word of mouth and one investor leading to another, which I still think works really well today. Right. I mean, it's always easier to transfer trust from people that already know and trust you to other people that also can. So in some ways, it's not all that different. But I think the way in which people market now and, you know, do things to try to generate new investors. That has changed a great deal.

Yeah, that's so interesting. So in— you said after the Great Recession you shifted more towards kind of coaching, consulting with the fund managers, or when was that transition that kind of, kind of happened for you? Yeah, it was—

I mean, what happened? Well, I had a fairly good-sized fund. It was about $80 million in 2000. '08 through, you know, really all the way prior to the Great Recession. We launched that in late '07, which is my fourth fund. And then we— that was the first fund that I ever really used leverage. So we had a large— we had a $50 million line of credit that had a 3-year term on it. And with, with the banks not really wanting to be in that business anymore in 2011, even though we met every covenant, made every payment, had every, you know, had crazy good cash flow coverage and everything else. They just wanted out of the business, you know, across the board. So they failed to renew the line, which forced me to have to wind down that fund. That was the first time I ever had to wind a fund down. And that whole experience, you know, everybody— it's like I would say when people set up a fund, everybody's optimistic and, you know, of course they're going to grow it and so forth. And nobody really thinks about, you know, what's going to happen 3 or 4 or 5 or 10 years from now when I actually have to wind this down, let's say, in a not very good market. Right. So as my securities lawyer put it at the time, he's like, Matt, you now have your PhD in fund management, you know, because I had to wind that thing down. And as we were winding it down, ironically, you know, the bulk of our income was tied to, you know, deal fees and asset management, the fund management fees. Well, if your mission is to wind the fund down and your primary source of income is the management fees off of that fund, you're kind of in a position where Okay, I'm basically working myself out of a job, right? So we had to decide at that point then, you know, what is the next iteration of what we're going to do? And I'd say coincidentally, I had 4 or 5 real estate people that I knew who came to me during that time period and said, hey Matt, I know you know a lot about funds. You know, you've built, you've done several and you've managed them. And I'm thinking about setting up a fund. And what do you think about this? What do you think about that? How should I do this? How should I do that? And while we were in the process of winding the fund down, you know, and lowering our income, it occurred to me that there are a lot of people out there like I was who, when you first set up a fund, you really don't know. You don't know what you don't know. And there's— it's just— it's very difficult to launch and set up a fund from scratch. And back then and even today, for the most part, the only real option a manager has to get that guidance is security lawyers. And security lawyers are, they're great, they're important, but they're only one spoke in the wheel of fund management. I mean, they, you know, and look, and if you don't have that spoke or the spoke is off, the wheel doesn't turn. So you need, but it's not the hub, it's the spoke. It's a spoke, right? But there's capital raising and asset management and investor relations and, you know, accounting and legal and all of those things have to, you know, factor into each other. So, and the long story short, Ben, if it's not too late already, is we, I, I started saying, hey, there's a real business to be had here by helping people, you know, understand what it's like to set up a fund, to do it properly in the first place. Because if you set it up right, you match your asset model to your, to your capital structure, you just stand a way better chance. And I think That's what launched what is now, you know, we've since then done— I don't even know how many funds, 300, 400— that we've played the lead role in helping managers all over the country architect that fund. And there's always Securities Council is still involved, right? But we help them think through and set it up properly to give them the best chance of success in the first place. And that's kind of the core product that we offer to managers that then leads to other stuff. So Yeah.

And talk about fortuitous timing with the JOBS Act happening shortly, shortly after, right? In 2012. I think for listeners, you know, if you're kind of newer to the podcast and haven't heard us talk about the JOBS Act, I mean, this was— this is a fundamental shift in how the private markets can now operate. So do you want to kind of share a little bit, Matt, of just what that kind of did? And did you see or did you foresee when that came out like, oh, this is going to be a game changer? Was it still like Okay. Yeah. Tell me when that happened because, you know, I was still in school then or just come out of school. So it's still fresh to me.

But yeah, well, when that passed in 2012 and then they didn't actually implement it until 2013, but I knew right when it passed that, okay, this is a game changer. I mean, you can now publicly advertise and solicit. So you're not limited to people with whom you have a prior business relationship. You know, the tradeoff was you had to verify the accreditation, which, you know, the— it became the manager's responsibility to verify the accreditation, whereas in a, in a B or the old school, they didn't have to verify it. They only had to represent it. Right. So that, that early on, that was a big thing. I remember when that first happened, investors were like, well, why do you need to prove that I'm, you know, worth, you know, more than $1 million? Like, why do you need that? Like, well, because this is a new regulation. We want to solicit and advertise. We have to do this. So it was a big deal. We, recognized immediately. Every, every fund that we've done since 2013 has been a C, and we verify the accreditation and follow the Safe Harbor guidelines and so forth. But yeah, it's— and, you know, more importantly, even than just, you know, verifying accreditation, it gave rise to crowdfunding, right? It's like all these crowdfunding sites that they, they didn't exist prior to 2013 because it wasn't legal to, to put out there that you were running a fund, you know, other than the people that you knew. So yeah, it's fundamentally changed things and it's given rise to, you know, investor portals and crowdfunding sites and all kinds of stuff that, you know, 10 years since people kind of take for granted now. But, but yeah, that's all happened in a very short period of time.

Yeah. I mean, it kind of leads to the next question I wanted to ask you. And I mean, all the good of being able to now have more access in, you know, really in 2012, it's really spawned this whole new democratization of, you know, access to these types of private alternatives, which largely— and we're probably a little biased, right— but are superior in a lot of ways to the public markets where you have less volatility. A lot of times you can achieve better returns. But now the bigger challenge is not necessarily access to deal flow. It's determining, you know, which operators to invest with and which funds to invest in. Right. So now the Now the impetus is on the investors to be able to know the basics of due diligence. And, you know, I'm not just investing with Uncle Jerry who has a couple, you know, single-family homes. He's, you know, doing it. Now I'm seeing these ads on Facebook and, you know, it's a legit operator. So from your perspective, this is where I really think you add a lot of value with our listeners is just what are you seeing from the fund management side of this where you've worked now with 300 or 400 funds, some I'm sure very big variance of success from the fundraising. And, you know, what are some of the kind of key things that separate the good from the bad from the great? And, you know, maybe layer into that because, because one of the unique things is, you know, good salesmen may not be good operators, right? And vice versa. Good operators may not be good salesmen. And so there's like this constant challenge, right, as investors of be able to parse between those two.

Yeah, and it's— I admittedly, Ben, it is not easy for an individual investor to be able to perform the, the real appropriate due diligence that they should be doing, right? It's, it's challenging, no, no question about it. Uh, no, I think, look, you know, being what I characterize this juncture, you know, professional in this, I mean, it's hard enough for us to do due diligence on managers and do deep, real due diligence for an individual investor putting $50,000 or $100,000, which is a lot of money to that investor. But in the scheme of things, to a manager, you know, that's a relatively small amount. You know, it's hard to balance those two considerations. But I think there's very basic due diligence that people can do. You know, a lot of what, frankly, our company has tried to do is provide some of that. For investors. I mean, you can get background checks on managers, ask them if they have track records and verifications. You know, I think even just asking questions is helpful and seeing how the managers respond. You know, at the end of the day, there's— I think that crowdfunding, you know, and the JOBS Act has— it's like a lot of things in life. I think it cuts both ways. It's provided a lot more access to investors for a lot more variety of stuff all over the country, different asset types, different locations. But part of the tradeoff is, to your point, it's very hard to tell the difference between a charismatic marketer, you know, who doesn't know anything about being a good fund manager or real estate investor, you know, and a high-quality real estate investor who might be a terrible marketer. Right. So I won't pretend that it's easy, you know. Yeah, it's tough.

Yeah. I mean, what would you say are some of the kind of key distinguishing factors without getting too nitty-gritty here? I mean, there's a lot of nuance here, but just obviously track record is important. But, you know, when someone comes to you and say, I want to set up a fund, you know, do you have a gut sense of, hey, this is probably going to be a success? These guys are, legit versus, you know, yeah, yeah, yeah, I do.

And I, I think, you know, it's— they have a team. The best bond managers, they have a team. It's not usually just one person. They have a team of people in the management entity, and generally speaking, they do— they perform different functions. So like a lot of teams, you have complementary players that each do something, you know, different. I think they come in with a plan. They have a specific asset strategy that they— or thesis that they're committed to, and you can really tell their enthusiasm about it, you know, and, and why, um, they articulate a strategy for raising capital. So they're not just coming into it blind and have no idea how they're going to, to do that. So I could tell generally pretty quickly who has a pretty good chance of being successful and who's just sort of dreaming, you know, that— because, because a fund is sexy, right? I mean, a lot for a lot of managers, the idea of setting up a fund and having their own discretionary vehicle that they can use to have the money sitting there, right, is something that they, that they want to try to do. But from an investor perspective, I think, you know, track record, team, you know, if I can get background checks, you know, I think that's always helpful. You know, if managers are willing to provide it, you know, what have they done before? How long have they been in the business? What sort of deal velocity do they have? You know, if they're, if they're not sure how they're going to originate deals or they're only doing 1 or 2, they probably shouldn't be setting up a fund. But if they're at a point where they're, you know, raising significant— have they raised money before, you know, from other investors on a syndicated basis? Almost always, you know, they need to do that for some time period before jumping straight to a fund. They, they really don't want to jump from zero to a fund straight away for the most part. So things like that are things that we look for initially. And then, you know, part of our business is making seed investments in the manager to help capitalize the fund. And for us to do that, we go through very deep due diligence that is really not practical for, you know, a high net worth investor to be able to do. So I do think that investors sometimes can leverage off of the capability of some managers that they could invest in, you know, and certainly having experience asking around, knowing somebody that is invested with those people is always, you know, an excellent way, you know, to get an ideally not somebody that the manager provided you, but somebody that, you know, that, you know, that you've got on your own to get the real, the real scoop and, you know, not handpicked. So those are some of the things that I think can be, can be applied fairly easily for investors.

Yeah, I think that's, that's great. I think what they just said earlier, which is kind of, you know, not even a quantitative metric, but just the qualitative of talking with someone on the team and asking the harder questions to see how they respond. And, you know, on a previous podcast, you know, we were talking about, you know, what happened recently with CrowdStreet and how they were, you know, a big platform raising a ton of money. I think $4 billion of equity they've raised over the past few years. And it's come out now that they actually explicitly excluded bad deals from a sponsor's track record because they thought it would— it was not essential to the investors to see that one deal went through bankruptcy and other, you know, deal was given back to the bank.

And that's not— that's not material.

It's not material.

It's— yeah.

So, I mean, Yeah, but part of that goes to like ultimately you're only going to see what they're going to show you. And so there has to be a level like you got to ask the right questions, you got to look at the right things. But then ultimately, like, ask them about if a manager has been operating for any length of time, they've had a couple of deals that didn't go according to plan. Right. And if they— if you ask them, tell me about the deals that didn't go according to pro forma, what happened? What did you do and how did you, you know, mitigate that and rectify it? They say, oh, we haven't had any deals go bad. That's a red flag. That's probably red flag number one, right? But then two, like, are they transparent about it and are they, you know, sharing about, you know, what they did and, hey, we missed it here, but it was out of our control and here's what we did to fix it. And we actually did a, you know, a manager loan to, you know, bridge the gap till we got back to stability or whatever it was. Like, those are the kind of things that can really, you know, the character of someone is really shown in a challenging situation. And sometimes you can't always get the actual quantitative data you want or maybe withheld. but you can get a decent gut sense, I think. So I think just wanted to make that point because I think it's important to have those conversations and have a face-to-face or at least a, you know, virtual face-to-face with the managers.

Yeah, I think the more that you can talk to the people, the better. And I do think that to your point, it's not always, you know, absolute quantitative. Sometimes you can get a good feeling just by having conversations. So I would encourage investors to talk to, talk to people and talk to others that have done business with them and get a sense of it. You know, that can go a long way.

Yeah. One of the things I love to kind of share a little bit is just you mentioned funds a lot. So for those that maybe are more familiar with syndications, can you just break down kind of at a high level what are the kind of differences between the two, maybe pros and cons of both?

Yeah, yeah. So I would define a syndication as a single asset. So one piece of property or one loan or whatever it is people are investing in, but it's one asset and multiple investors. So typically you're forming— the manager's forming an entity, pulling in money from 3, 6, 10, 12, 15, 100 investors. But they're— but the proceeds of that money are going into only one transaction. Right? So that's fairly simple. It's complicated in the sense that you have a bunch of investors, but they each own a pro rata share, but it's a single asset, right? A fund is this multiple investors, 6, 8, 10, 20, 50, 100, 500 investors, but multiple assets that are being acquired at different points in time. So it's not, the money isn't all being put into one identifiable asset that the investor can see. Before they invest in it. There it's, it's got, there's multiple assets being bought pursuant to some articulated strategy, right? Or box that the investor or the manager puts in their offering documents. But the investor doesn't know exactly which investments are going to be acquired, right? Because they haven't been acquired yet. They know what kind of strategy the manager's going to pursue, but they don't know which assets. So, and that's, that's how people call it a blind pool. Fund because from the investor's perspective, they're, they're buying into, they're buying shares of or investing in an entity that's going to acquire multiple assets at different points in time, but they're not clear on what those are. Right. And so that's how I would characterize the difference between a fund and a syndication. You know, as to which is, I always tell people neither is better than the other inherently, right? Some, sometimes a syndication is fine for certain instances and sometimes a fund is fine, but they have basic differences that, that are important for people to understand. And there's pluses and minuses, pros and cons to each. And from an investor perspective, I always encourage people to be really clear on what your objectives are going in, right? Because that may influence whether you choose to invest in a fund or a syndication. Do you want diversity? Are you looking for concentration? Do you want income? Do you want growth? Looking for tax benefits, right? Do you want to know what you're investing in specifically, you know, or are you content to pick, you know, a jockey and then let them run without knowing exactly, you know, where, where they're going to run to? So, uh, again, neither is better than the other inherently. They're different. They each have their pros and cons.

Yes, as a— if I was coming from the investor's perspective, you know, it's one thing if somebody new to the game comes and says, look, I've, I've got this, let's just say in the apartment world, I've got this fantastic asset tied up, put together a pro forma, now I want to raise some money, I want to do a syndication. As an investor, I might look at that person and say, okay, I can, I can overlook, or I can factor in the inexperience. Maybe it's the first or second rodeo, but that's the asset. So at the end of the day, at least I know what we've acquired. Well, where it as a fund, You know, it's like, hey, let's go do apartments, you know, let's go do value-add apartments. And I've never done one yet, but I've been to some classes and it looks really good. And we have a kick-butt team and know how to raise all kinds of money. To me, that's a bug looking for multiple windshields. You know, I would think that, you know, investing in a fund is where experience, and not even just necessarily experience at doing deal after deal after deal, because there's a whole operational aspect and, executionary aspect to it that, you know, and, and even things like, can you trust the person to make as good of acquisitions as he would have if he only had the money to buy one? You know, so, you know, address that. What do you see there?

Yeah, well, those are all absolutely on, on point, uh, observations, Jim. I mean, you know, there's, and there's an infinite number of things like that, right? So I would say Managers, to part of your question earlier, Ben, managers that tend to make good syndicators. I would say the typical progression is people start off on a syndication, they do deals one at a time, and eventually they reach a point where it becomes operationally inefficient to try to raise money one deal at a time.

Right.

Because you gotta create an offering document every time. You've got a tight timeline to close. Right. And if you're doing any volume of that, it, becomes very inefficient. So raising, doing it in a fund can be much more efficient and effective for a manager, but it comes along with it come a lot of other operational requirements that syndicators don't necessarily, they haven't adopted yet. So people need to learn. So to Jim's point, I think, you know, certain people, you need a certain level of sophistication and size and understanding of what it's going to be like in order to be effective and as a fund manager. And it, I mean, the two words I use the most were character and competence, right? Character is like the absolute foundation. You have to have people who fundamentally view themselves as stewards of other people's money so that they don't, they're not likely to go out and just start making dumb decisions because frankly they can, you know, they're, the investor doesn't really see what's going on. Most of the time. And so they're relying very heavily on the character of that manager. And how do you judge character from somebody you've never met before? Right. It's very hard. But if you do it and you pick the manager wisely, there's a lot of advantages to investors. They don't necessarily have to pick and choose. Some people just don't want to spend time reviewing all those documents or they don't even have the expertise to do it in the first place. You know, or when they get the money back from the deal that paid off, they don't want to have to turn around and do it again. They're content to just, you know, let it ride. So there's all these reasons that that would drive people from one to the other. But to Jim's point, you know, not every manager is cut out to be a fund manager. In fact, I'd say the subset of total syndicators who really make good fund managers is, you know, it's, it's not 80 or 90%. You know, it's probably more like 10 hours, 1.

Yeah. I mean, to your earlier point, the fund, now you have created— if you're raising a lot of money, that's great. But now you've created an additional problem of, well, you've got to go and invest that money. And if you don't have great deal flow, right, and if you haven't identified a really tight strategy in what you're doing, you could actually be incentivized, you know, maybe unknowingly, but just have the feeling of, I have all this cash, I got to go deploy it. Deploy, and now I'm going to go and just maybe bid on assets that, you know, are overpriced because I just have to, you know, deploy this capital. And so if you're inexperienced, if you don't have the deal flow, if you haven't managed, you know, that kind of chicken and egg scenario at a larger scale, it can be, um, can be not good, right, from a capital standpoint.

And you think about incentives, right? I mean, if they're going to earn their management fee, they need to get the money out. So are they incentivized They give the money back. I mean, I've seen plenty of really good quality managers that just say they didn't have the deal. They give the money back or they never deploy it in the first place, right? But how does one do that if that's the primary source of revenue that pays their bills or allows them to employ people? So I'd say another characteristic, Ben, would be good fund managers. Most of the time they have another operating business that fundamentally pays their bills and they're not reliant solely on the fund management fees to exist, right? Because if they are, then, you know, these disincentives or these lack of aligned incentives can definitely play, you know, against the investor's statement, right? So you—

yeah, that's a, that's a really big deal you just said there.

I mean, it's a really interesting situation because you're, you know, you're managing, you know, back to Ben's, you know, chicken and egg point. It's, you know, you don't want to be sitting on too much capital for too long because your IRR goes down the tubes for your investors. But you also don't want to spend everything you got just because you need to earn the fees or you got to do deals. And now your quality of deal analysis goes down the tube. So it really does take a level of, you said it, of sophistication. And we live in an interesting time when, You know, you could— you can get online and find 1,000 experts at showing you how to become the most popular face on any platform. Pick your platform and which usually can correlate into making sales or raising, raising money from the maybe less educated people. And but how many are there on, you know, and can you even learn how to be a good operator without some bumps and bruises and years of experience? I think, I think the right kind of person can learn to be an operator out of the gate and how to do some things right. But, you know, where are all the courses on how to be a good, seasoned, honest, integrous operator with character and competence?

You know, there's not very many. I try to put on as much, you know, educational material as possible, but you don't see all that much of it, you know. And to your point too, man, it's like when the crowdfunding stuff came out, It was like a lot of these crowdfunding sites who shall remain nameless, right? They would brag about the fact that these deals would fill up in like, in what, 30 seconds or a minute or two, right? How is an investor supposed to do any due diligence when the whole game is that they're trying to like click invest as fast as they possibly can so that the deal doesn't fill up? And then what are these investors? The problem too, is that the number one thing they're looking at is what's the IRR, right? And you guys know as well as I do, a manager can put out any number for an IRR, right? So the incentive then is to put the highest number you possibly can because they know that that's what's going to drive the clicks, right? And get the people to click as fast as they can without doing any homework or due diligence. Like, that's just a totally messed up system. It is not that— that is the way that it worked for, you know, in the heyday. You know, from the mid to late teens all the way up through, you know, 2021, '22. That's, that's how it worked. You know, now it's finally getting to the point where, okay, people are, you know, not treating it that way and they're waking up to see that, you know, that was just a dumb idea in the first place.

But it's kind of aggravating because, you know, it's the reason we have— I mean, we need regulation. Like, we all— I think we all would agree to that. But we also probably would all agree that regulations can be onerous and usually are, and they punish all the wrong people. But it's, it's, that's exactly just, it's exactly what you just described, which, I mean, there's got to be regulators foaming at the mouth looking at the CrowdStreet thing and looking at, you know, all of that kind of thing you described, you know, and saying, man, we ought to, we ought to be, we ought to be regulating this industry a little more. We have all these people out raising money.

Wait a second, stop.

But the hard part, Jim, is that Exactly to your point is like the regulations end up penalizing the people who are fundamentally honest and fundamentally feel compelled to try to attempt to comply with the regulation, which then only exacerbates the operational, you know, burdens and costs on those people. And then the people who really don't care about the regulations or who just flat out ignore them, right, are the ones who end up raising the most money, which was super frustrating.

You know, let's just go find them all, beat them up.

That's what I say.

I mean, I just think like for the investors listening to all of this, it's kind of like, well, what do they do, right? If you're in an environment where people are chasing yield and deals are filling up super fast, it's kind of like you feel like, hey, if I want to get on the game, I got to move super quick and I need to compromise all the standards I should be adhering to to actually try to underwrite the deal in the first place. I mean, that's frustrating, right? But really, they should not fall prey to that, and they should take their time, and they should do some homework on whatever they're investing in, and they should walk away from a deal if the pressure to invest inside of seconds or minutes is so great that, right, that forces them to try to do that. But, you know, the humans are, you know, we're people follow the herd and like, as you guys well know, it's like right now what's happening is, I mean, I see some really fantastic investments that people don't want to do because they're afraid. It's about whatever, right? Right. It's like be greedy when others are afraid and then be afraid when others are greedy. That's great advice, but it's very hard for the average person. Doing it here.

FOMO is a real thing, isn't it? It's not a good— it's really not a good, you know, funnel point for evaluating your investments.

You know, it's how much FOMO is motivating me. But, but, but, you know, good capital raisers and, you know, charismatic marketers understand FOMO and they use it to their advantage.

Yeah. Now, I think those are really, really incredible points. One thing I love to just kind of round it out here with is You talk about alignment of interest. You talked about, you know, what are the incentives, right? I always talk about, you know, reviewing the PPM. These things can be— they can feel a little bit overwhelming if you've not read them before. They can be 100 pages long. It's all this legalese. What should I focus on? Well, the place I always go to first are the fees section, the waterfall section, right? Because it gives you a really good sense of what's the alignment of interest and what are the way or the incentives that the manager has in this particular fund or syndication. So can you talk about from the passive investor standpoint, what are maybe like yellow flags? Like if you're reviewing, you know, a PPM, you're looking at the waterfall and this seems to be a little bit off and you've— I mean, I'm sure you've reviewed a thousand of these. So we got a pretty good sense of things that, you know, are good and things that we should just at least ask questions more on. Right. So could you just give some of those highlights if you Do you have some top of your head?

Yeah, I agree with you. And there's, there's 4 sections I would look at. What, what is, what are the assets they're investing in? Then the investment strategy and fundamentally as an investor, do it, does that resonate with me? Like the bios and the experience of the manager. Who are these people? How long have they been doing it? What have they been doing? The fees and fees and waterfalls, like what fees are they charging and waterfalls and so forth. And then the risk factors and the risk factors. Course, going to be 40 pages long and it's everything under the sun, you know, and so forth. But if I know who they are and I know what they've done, I know what their investment strategy is, fees are reasonable, that's a great place to start. Right. And so to your point, I think, you know, I've seen PPMs where the manager can kind of do anything and everything under the sun. So that's, that's always a red flag to me when the manager can just do anything they possibly want to. Right. And they don't have a fairly defined box. And that's always an issue for a manager. How tight do you make that box? Right? Because I might want to do this, I might want to do that. If you make it too tight, I'm going to miss out on deals I might otherwise do. Right? But if you make it too broad, then the investor has no idea what the manager's investing in. And I've seen some PPMs from places that I've watched blown up where they could do all kinds of things that they shouldn't be doing, including, you know, appointing themselves managers of the things that they're doing, you know, are investing in and then paying themselves fees to do it in undefined amounts. I mean, those are just crazy provisions. So I think an investor should also learn what are— I get this question all the time— what are normal fees, right? What is the range of fees? What fees should I expect the manager to charge and what is a range of what's normal, what's good, what's bad? So an investor should familiarize themselves with that, in my opinion. You know, those are going to be asset management fees, points if it's a loan-based, you know, or a loan strategy, fund management fee, construction and development override fees, you know, acquisition fee, disposition fee, property management fees. You know, how much fees should a manager be charging and shouldn't they charge? Now, that's something an investor, I think, needs to familiarize themselves with. So if I look at the management strategy and fees, that I can go 80% of the way toward you know, yes, I want to spend more time looking at this or no, I don't, just off of that.

Yeah. No, I think that's really good. Really, really good advice. And, you know, for me, you know, I've talked about this before, but one of the quickest proxies to just get a good sense of alignment of interest is skin in the game, right? How much are the general partners putting in as LP capital, right? Right alongside you on the same waterfall and how much of their own personal capital they put it in because, that's a pretty good proxy for they believe in the strategy, believe in the offering, and are putting their own capital at risk. They have something to lose now if things don't go according to plan. But I love that. That's really, really helpful. So Matt, what's the best way— I know you kind of serve fund managers as kind of your core business. I mean, you have kind of legacy real estate funds. For those that are kind of curious on either side of those, what's kind of the best way to learn more about what you're doing and just the companies that you run?

Yeah, I think LinkedIn is probably my best spot. If people want to find, you know, public information, social media, LinkedIn is where I'm most active. The company, fairwayamerica.com, you can learn more about the company there. The other one is verivest.com, and either of those can give you information about the company and has my contact information.

Awesome. Well, thank you so much for coming on. I definitely got a lot out of it. I'm sure our listeners will as well. So thanks for sharing all your wisdom.

That's— it's my pleasure. I appreciate you guys having me very much.

Thanks, Matt.

Have a great one.