How ANYONE Can Start A Real Estate Investment Fund

Woo! Welcome back to Investment Fund Secrets. I'm Bridger Pennington, and today I want to talk about real estate equity funds. Alright, this is one of my favorite topics, and actually my dream one day is to run a massive real estate equity empire. I know a lot of you guys on here want to start real estate funds. You've probably watched Grant Cardone, other people on this show. I've talked about my dad a little bit closer to home. He right now runs a $15 billion real estate equity fund. I mean, they're massive, they're huge. They do deals all over the country. And the funny part is about, about his story, and I've talked about some previous episodes, my dad's here He grew up in ghetto North Las Vegas, went to a second-tier college. Out of college, he's struggling financially, started a few businesses, and then finally met 2 guys that were running a real estate fund. And he started to hear about what a fund actually was. They were just combining investors and then investing that money into real estate projects, and blew his mind. These 2 young guys were really successful. They were wealthy and doing really well. So he decided, screw it, dude, I'm gonna start my own fund. And so what he did— he didn't know anything about real estate and still doesn't know that much about real estate, just a side note. But he went and found a few guys that were really good at real estate and said, hey, do you want to be my partners? And then he found another guy that was really good at raising money, brought them all together and said, I'm gonna run the fund. I'm gonna figure out all the SEC compliance. I'm gonna figure out all this fund structure and bring it together. And they said great, and they formed their first general partner and limited partnership and launched their fund. And from there, took off. They started doing what they call value-add in multifamily. So they started out with their bread and butter was apartment buildings, and essentially what they were doing was flipping apartment buildings. Think about a normal flipper, you know, buy it for $100 grand, you put some work into it, sell for $150. Instead of buying it for $100 grand, they were buying it for $20 million. They would put $2 million into it, upgrade it, raise rents, all this kind of stuff, and then they would turn around and sell it for, I don't know, $29 million, right? And they make the spread and then they roll that money into their next deal and next deal and next deal and raised more and more money. And talking to my dad's partners about this and interviewing them, the best thing they say about this is like, you need to get out of the weeds of all of the small deals. A lot of them say it's really, really difficult to go out and flip a house for $100 grand because anybody and their brother-in-law and their mom can put $100 grand together and flip a house, right? So your competition is really high on small deals. Once you start breaking through $1 million, $5 million, $10 million, the competition gets a lot less. You actually have a lot better chance of finding great deals, adding a ton of value to these deals, and that's exactly what they did. They started to exploit this, and now they're moving up from $10 million deals to $30 million deals to $50 million deals to $100 million deals that they do, and the competition just gets less and less and less of people that are willing to bid on these projects, right? So that's where they've found their sweet spot is growing that, and they've moved into all sorts of things. If you follow Grant Cardone, you see he had like my dad and Grant, you don't have to watch him for very long to know he's not the smartest guy in the world. But he's done really well. It's because he's hustled and he's picked the correct vehicle of starting a fund, right? His story, Grant's story is he got out of rehab in his mid-20s, went out, started into a sales career, started coaching people through sales and companies, then finally just started dumping his money into real estate. He brought it all together and started figuring out what deals are good and bad. Now he owns a multi-billion dollar real real estate fund, right? And Grant isn't the smartest guy in the world. My dad isn't the smartest guy in the world. You can do this. You can go out and start a fund without a Harvard degree, without working on Wall Street. All these guys did it. Another fantastic example of this is a guy by the name of Nate Paul. A few years ago, he was at the University of Texas. He was 24 years old and started to get interested in real estate. So what he would do is he just said, I'm gonna find any way that I can get involved in deals. So he would actually go to the county courthouse and On every Saturday, they would do an auction there, and most states do this. He'd go there and they're auctioning properties off at the courthouse, and he would watch how real estate investors would show up. They would bid on the properties, how they would negotiate, and then he would start picking people's minds, started making connections. Got him very interested in real estate. And so he finally— he was looking around, he finally found a fantastic deal, a 13-unit apartment complex right by his university. He put a bid on it for $1.1 million. He went and found other investors, found money from a family friend he knew, and kind of brought some people together. This is a couple, they were getting divorced, and this is kind of the aftermath of the divorce was this apartment complex that they kind of were just laying off. And so he picked it up for $1.1 million. 90 days later, he found a buyer for $1.6 million. He made $500 grand in 90 days on this one deal in college, and at this point, it kind of opened his eyes and he said, I could do this. So he went out, used that money, leveraged it into his next deal where he bought 5 different kind of townhomes and different apartments around the university and then leveraged that money into the next deal and the next deal. By the time he was 30, Nate Paul ran a billion-dollar real estate fund. Right now, I think he's 31 years old, lives in Austin, Texas. His office is the tallest building in Austin, Texas. He lives on the top 2 floors. His office is up there, has his whole empire, and he right now still owns 100% of his company, right? He didn't have to do what my— I told you my dad did. He didn't find all the people and give them equity. He actually just did it himself and just hustled And did it. He did it without all the fancy connections and without the Harvard degree. I'm trying to tell you stories about this that give you the confidence that you can go out and think about doing this and get into it and get into the game and start practicing and then eventually start playing and get moving. In a few episodes, I want to— I'm gonna interview some of my good buddies. They've just started a real estate fund just like this, bought their first property just a little bit ago, are doing really, really well, and they're all in college. They're all my age. And they are doing this. We are starting a revolution around the world and opening, pulling back the curtain and opening the doors for regular people like you and me to break into private equity, to venture capital, to all this stuff. And the best thing I love about real estate is it's, it's simple, it's basic, and it's easy to tell investors about as well. My dad, when I was talking to his partners as well, they said— I'd always ask, how do you raise money for a deal? He said, don't. Theorize the deal. Don't say, hey, Mr. Investor, we're hoping to, you know, get $5 million from you and we're hoping in a year to find some good deals. What you do is you go out and find the real estate deal and say, hey, like Nate Paul did, hey, we got a great deal here. You want to put some money in? If you pass, we're going to close this deal in 14 days. So, you got to put— you got to get in now or get out. That's the best way to pitch an investor because they can see the deal. They can see how you've analyzed it. Say, hey, we're buying it for this. We're going to rent, do all this stuff. We're going to raise rents and we're going to sell it for this. It's a lot easier to pitch an investor than a lot of these guys on Wall Street are trading the yen versus the euro, and they're trading the Brazilian, you know, yeast market versus Indonesian livestock market, and they're trading those commodities. It's a lot more difficult to analyze those types of markets versus real estate in your backyard. That's why I love real estate funds. They're simple, they're effective, and there's a lot of people in real estate that you can grab and bring together into a fund. fund and take off like crazy, like Nate Paul did, like Grant Cardone did, like my dad did. And like, one day I'm gonna— that's my goal. One day I want to be running a fund like that. That's today's quick story on real estate. In future episodes, we're going to dive deeper of how to do that. If you're interested in how to set up a real estate fund, look back on the bones of a private equity fund. That episode will give you a lot of insights of how to set up your general partner, your limited partnership, how to actually do the legal part of it. And in future, we're going to talk more about legalities. But I wanted to give you a few stories to inspire you tonight. When you're going to bed, think through how you can get started in a real estate equity fund. Thank you guys. See you on the next episode. Yo, if you're just starting out, you probably have a lot of questions. That's awesome. I want to hear them. So please go to investmentfundsecrets.com, submit your questions, and if I like your question enough, I actually want to bring you on the show with me to ask those questions live to me, and I'm going to bring on another investment fund manager to answer them for you. interested in that, please submit a good question on the website. Again, that's investmentfundsecrets.com. See you there.