Ep 115 - What Is A Liquidity Fund?

Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies. And welcome to another episode of our.

Podcast called Freedom through Passive Income.

That's right. And this episode is entitled what is a Liquidity Fund?

Yes, I've been talking about liquidity funds for a while.

Yes. Yes, you have. So what is a liquidity fund?

Well, liquid doesn't mean water in this sense.

Dang it.

Because I believe that you said that on our last episode, didn't you?

Right, yeah, the joke was coming.

So liquidity in real estate investment just means easier access. Right. You can get in and out of something quick as opposed to very typically in real estate. And your funds are illiquid and they are locked up for a long period of time.

Pretty sure it's unliquid.

Unliquid, illiquid, whatever. I have no idea. Anybody who's listening, it's solid. Don't judge me for words.

It's solid.

But yeah. So it's just easier access. You can get in and out fairly quickly, usually 12 months or less. People will call that a fairly liquid investment. Right.

And so the benefit with being liquid means you have is it's lower interest rates, but it's better than letting your money sit around doing nothing, earning a giant goose egg.

Yes, goose egg.

Or even being in your savings account at the bank earning.00005%. Yeah, my crypto makes more money than my savings account. That's sad.

That is sad. So what do you want to look for when you'. Okay, so liquidity fund. Let me describe it a little bit better. We are doing different types of funds in order to allow investors to invest in our opportunities. So every time we do an apartment building, like we're getting ready to buy this 48 unit apartment building, we are creating an LLC. And that LLC is the fund. The people who invest in it are going to be company shareholders or owners, if you will, of that LLC that owns the property.

Right, Right.

So then we have debt funds. Debt funds are meant to invest and get a rate of return based on how much you're investing. And that debt fund is being used to loan money for properties, in our case, our properties. We keep a lot of this in house, at least for now. And then a liquidity fund is again just another fund where you invest money. And that one is meant to give you a rate of return because we're likely going to be investing in short term things like transactional funding, gap funding, that's usually 30 days or less, things like that. And it's gonna allow you to get a lower interest rate of return. You're gonna be able to then give us notice to say, hey, I would like my money out in X days. So that's kind of. All of these different types of funds are just vehicles for you to invest in. And every fund might be different in terms of what it is investing in in order to ensure, like a liquidity fund. You don't want that fund investing in the apartments, right? Because the apartments aren't liquid.

Yeah, no, not at all. Not for years.

Yeah. So you want to be able to. I want to talk about the research. When you're evaluating opportunities like this, you want to look at the people first.

Right?

So talk to the people. Get to know the people. Know, like, trust the people, understand their experience. What's the worst deal they did? What's the best deal they did? How long have they been doing it or been real estate in general? Who are the people on their team? There's all kinds of questions that you can and should be asking the people, but vet them first. Who cares about the fund documents? Just look at who you're investing with. Because many times that matters more than anything. Flip and I could tank on a deal, and we are going to take care of you. We're going to do everything in our power to make sure that we take care of you. And we do that by structuring different things in our company. Like for the private lenders, we're doing volume. So when we lose money on the deal, we don't have to go and go, flip, sorry, I lost money on the deal, I can't pay you back. We do volume. So, you know, lose two out of 10 deals, who cares? We made money on the other eight. We're going to make sure our private lenders are returned. When it comes to the world of funds and syndications and things like that, it's not that you have a note and mortgage, it's not securitized that way. So what we're doing in this instance is instances. We're diversifying across so many different things that if an investment goes bad and there will be investments that go bad, then the other ones are taking care of it. Because we've got multiple things going on. And again, we're just mitigating the risk by doing volume in a way that we make sure that we can take care of our investors. So know the people, know their strategy, know their experience and background, then go to the fun facts. Understand what is the fund? Is it a liquidity fund? Is it a Debt fund? Is it a syndication where you're investing in a storage facility or apartments? Or by golly, there's a guy I was just talking to that's bitcoin mining. He did a fund and he's doing bitcoin mining. I was like, dude, don't know that space. So you're not gonna get that from us anyways. Evaluate the fun facts and understand. In the case of a liquidity fund, which is what we're talking about today, you're gonna wanna ask, how much is the minimum for me to be able to invest? How soon can I get it out? How much notice do I have to give you to get it out? Those are gonna be important questions, and we don't even have the answers yet. We got a general idea of what we want to do, and we're talking with attorneys about how to structure everything that we want to do. Because we've told you before, we like simple. Simple is easy to understand, easy to invest. It's how we invest. It's how we communicate. Because we don't want any of our investors to be confused about what they're investing into. So that's kind of the nuts and bolts of the liquidity fund. And as we get it built out, we'll be able to share more. But now you have the basics and you understand what it is so that you. If liquidity is important to you, which it should be for a section of your investments. Right, Right. We talk about 40, 40, 20. That's not even necessarily how you tie in liquidity, but you could have a section of. I want 10% of my money, always liquid, meaning I can get it at any point in time. Now, the stock market will give you that return, but we're gonna. There's another episode, it's coming when we're talking about the stock market and what liquidity. What happens to your emotions when your money has such easy access like that? We're gonna talk about it and it' so if you listen to this one, do not miss the one where we talk about emotions. When you see the word emotions, you're gonna know that that's what we're talking about. And it's right. It's gonna be within 10 episodes of this one right here. Probably within three. But it's really, really important. I won't go into it now because we're supposed to keep these short and sweet.

That's right.

I think I did a good basic overall.

I'd say so Overview, right? Yep.

Okay.

Cause here at Freedom Capital Investments, we put the fun in funds. I've been waiting to see that. You like that?

Oh, my gosh.

You like that?

That's kind of cute.

Thank you. Thank you very much. And then, of course, you talk about the bitcoins and of course, we know nothing about crypto. I'm just lighting my money on fire. You know, it seems pretty easy to create a bitcoin, so I just need to create a flip coin. I'll invest in that. Oh, my goodness. Anyway, we hope that this episode was informative as it was for me. They all are, because I'm usually learning as we go. And make sure you're going over to our website, Freedom Capital Investments, to join our investor club and to hang out with the other club members. And Also Facebook and LinkedIn. We've got our special groups on those social media platforms as well, and that's a great place to ask questions. Tell us how we're doing, if you have any recommendations and whatnot, but make sure you're subscribing if you're watching on YouTube. But we like to end all of our episodes with Invest Smart, Live Happy. Bye bye, everybody. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss, y' all.