How Busy People Build Wealth Without Learning Real Estate

Today we're going to be talking about what is a fund. My name is pace morby, and I run multiple funds. And you might have heard the word fund multiple times in circles that you're running around in. But today, we're going to talk about what a fund is, why you should care about what a fund is, and how a fund can make you way more money, save you money on taxes, and kind of be a passive investment for you. Now, let's talk about what a fund is, and then I'll talk about some funds that I've done in the past. What a fund is, is. I like to tell the story of a couple of friends. They all grew up together. And all of these friends went off and did different things, okay? So one friend grows up and he becomes a doctor. Another buddy grows up and goes and sells insurance. Another buddy grows up and he goes and sells, let's say, MLMs, right? Or like, herbalife, something along those lines. You have another buddy that grows up, and he's an engineer. And you have another buddy named pace that grows up and gets to be an expert of real estate. But they all went to high school together, they went to college together, and they all went and did their own things. And they kind of split up over the next couple of years. And got to the point where they're making a lot of money, building their family, building their wealth, etc. And they then start meeting up at, let's say, a high school reunion. And it's 10 years later, 20 years later, after the high school reunion, and all of these guys are getting together. Or gals. Guys or gals. And they're talking about how much money they're making and how happy they are and all of those types of things. And they realize a doctor over here says, man, I really love what I do. I make really good money. You know, I make 500,000 to a million dollars a year. But, man, I really hate how hard I work. And I never have any time to invest in real estate. And then this guy who's doing insurance says, man, I do the same thing. I made $2 million last year. And you know what I hate is I hate all of those things that you just said, doc. I hate that I don't have time to look into real estate. I've always wanted to get into real estate, but insurance became my thing then. I really hate, more importantly, that I just don't have the time. You know, I want to be a good father. I want to be a good husband. I want to be good all these things. I don't have the time to go run a side hustle in real estate. I really wish I could invest in real estate, but I don't know what to do. And so his thing is time as well, and also the energy expenditure to go and learn real estate. Then the guy in the MLM says, well, yeah, I agree with all of those things, but I also don't like how much money I pay in taxes. And Pace is over here saying he doesn't really pay money in taxes. And his. A lot of his money is passive income. I really wish I had passive income. I'm worried that if I stop working in my mlm, I stop working my doctor field, I stopped working in insurance. I'm not going to have money for a legacy. And so the MLM adds an additional. The MLM guy says, yeah, I wish I wasn't paying taxes. The engineer then comes along and goes, man alive. My problem is I don't know what to invest in in, because I do have excess capital, right? Making a couple hundred thousand dollars a year. I have excess capital, but I'm putting money in the stock market, I'm putting money here. And I just don't have something I can touch, feel, see, visit, something tangible. I'm an engineer. I want to see it in my mind. I want to see the structure. I want to be able to invest in those types of things. And here's Pace over here, me listening to this whole conversation at the reunion. And he says, hey, guys, you know, I could solve all of those problems for you. I've spent the last 10, 15, 20 years becoming an expert in real estate. And I've had tremendous amount of success. In fact, I have $500 million in real estate. I have hundreds and hundreds and hundreds of thousands of dollars that I distribute every single month to other investors, people just like you that don't have the time, the energy, or really don't ever want to learn how to be a real estate investor. I put together a fund and all of these guys here, the engineer, the insurance guy, the doctor, the MLM guy goes, what the heck is a fund? And Pace me goes to those guys and says, well, it is where I bring a group of people together and we invest together, we invest together. But you rely on my expertise, my team, and everything that I've done in the past, my credibility to go and find the right project, find the right team, determine the right structure, negotiate with the seller, acquire an apartment building that I feel like we could turn around or improve, and we create A timeline, a horizon. And you rely on me to do the accounting. You rely on me to do the taxes. You rely on me to do all of those things so that you don't deviate from making your active income as a doctor, an engineer, a lawyer, whatever it is. You allow me to amplify your return in something that's real and something that's growing and something that scientifically has proven to outbeat everything else. Everything else has been outbeaten. Real estate has always been reliable, and it's always going to appreciate, and it is the perfect hedge against inflation. And so a fund is where we all gather our money together and we go buy big properties, and we wait for those properties to double, triple, quadruple, depending on how long we work on them and we where we buy them and what type of projects we work on. And these guys are like, you're joking me. I can invest in a project and I can be a partner, or am I a lender? And pay says, no, no, no, you're a partner. I become the general partner, and you guys become the limited partners, which means you're limited on the amount of work you have to put in. You're limited on what you have to vote on. You're limited on having to visit the property, manage employees, doing any of those types of things. I have to do all the general duties that are with the fund. That's why I'm called the general partner. I do the general duties. Finding the project, negotiating the project, doing the paperwork, getting the financing, selling the asset when we acquire the thing. And these guys are like, wow, that sounds really cool. Can you give us a good example of maybe something you've bought in the past? I go, yeah, no problem. But are we good? Are we clear on what a fund is? And the engineer says, well, I'm an overthinker, so I need to hear it one more time. Here's what a fund is. A fund is where a group of people that don't want to go out and individually invest in real estate because they don't want to have the exposure. They don't want to have to learn all those skills. And it allows them to go, hey, I'm going to put my money into a group of people called a fund. I always say that we put the fun in fund because you're investing with your friends and you rely on one general partner to go find the asset or the apartment building or the business or whatever. I mean, there's a fund for everything. There's a fund for bitcoin there's a fund for water wells, there's a fund for businesses, there's a fund for just about anything you think of. But the most commonly understood and utilized fund is a multifamily or an apartment building fund because they're so reliable, time tested and even above and beyond that. So I go to these guys and I go, so do we all understand what a fund is? I go to you and I say, let's invest together in this project. And by the way, every fund that I've ever done, I'm always the largest investor. I believe in what we're doing so much that I invest the most out of everybody else. I am the largest. I'm obviously gp, the general partner. I do all the general activities. I find the deal, manage the team, do all of those things. But I also am part of the lp. I'm also a limited partner where I invest alongside with my buddies. That's always what I've done. And I always tell people, if you're going to invest in a fund with me, good luck investing more money than me. I will always invest more money than you because I believe in our ability to find a good quality asset. I'm going to show you a fund that we just launched and closed, okay? So a fund will make a determination of what we're going to go after and what we're going to find and what we're going to buy. And that essentially is called a thesis. And so I go to my friends and I go, hey guys, I have a thesis. Here's my thesis. I believe in warmer states where people are migrating to. I'm going to go and buy, buy B class assets. Meaning B class means it's not brand new, it's not shiny, it's not the most modern building, it's not the most expensive and it actually is affordable to the people in that local area. We like going for B class or you know, C plus type of assets. And so you're looking at a property via Alamos Apartments. This is a property that we found and we've already purchased this, we've already renovated this. This is an old pitch deck, right? So this is what I would normally do is I would go to my friends, my engineer, my doctor, my attorney, all of my friends and go, hey guys, I have this property that I and I've negotiated a really good purchase price of this. I need to go and raise money from my friends and we're going to put a fund together. So this property has already been purchased. This is not an opportunity for people. I'm not pitching you, I'm just explaining to you what a fund is. The original purchase price of this property was $20 million and it was built back in 1984. The property has never been renovated and the original owner is also the guy who built it back in 1984. He's owned it for over 40 years. And so we went to individual and we said, hey, it looks like you probably want to retire and you want to move on. We'd like to buy this property from you. Will you give us seller finance? And the seller said yes, which means I don't have to go to a bank and get a large $20 million loan. This seller said, if you give me $5 million down as a down payment, I will finance the other $15 million over the course of a 10 year horizon, I will let you make monthly payments to mean I will be your bank. So that's pretty cool, right? That's a unique thing that we do in our funds is that I'm the creative finance guy. Everybody knows me as a creative finance guy. I've got Wall Street Journal best selling books all about how do we buy these types of assets for people that want to run their own fund. But most people don't want to run their own fund. They want to stay a doctor, an attorney, make their money, keep in their lane and then divest and put money in other people's projects so that they can go. I'm a real estate investor too and I don't have to do any of the work, which is cool. So this property at Via Alamos, we brought a bunch of our friends together on this project and we raised 5 million DOL. Now I put in, I believe 1.4, $1.5 million. So I'm, I'm like 30% of the fund. I brought 30% of the investment to the table and I raised the rest from a bunch of my friends. So they didn't have to find the asset, they didn't have to put all this information together, they didn't have to do all the homework on it. They just had to rely on me. This property, now you can see it in its old state. It's all new roofs, new ACs, new windows. The units are all being renovated. We have 98% occupancy now and this property is making 40, $50,000 a month in net cash flow. And one thing I also want to show you is that this property has already shelled out. This was the first text message me and my partner shared with each Other my partner, Ted Head, who runs our fund, sends a text message saying, hey, Pace, just so you know, we have amassed $211,000 to send out to our investors. You can see the screenshot. This is what happens. Okay, so here's what's in it for you. For people that invest in a fund, right? You might be a doctor, an attorney, insurance broker, you might be loan officer. You might, whatever it is that you are, you're making a bunch of money. A lot of people make the mistake that are making a ton of money in their current field and they go, I'm going to start trying to figure out how to be a real estate investor. And they take their eyes off the prize. The prize is what you built your whole life around. Your legacy. Your legacy plays your. You're an attorney, you have an attorney practice. Put your money into a fund, one that you trust that is unique for you so that you can get all of these benefits. And I want to list these benefits out for you. Number one, you get to own real estate without having to find it, negotiate it. You don't have to manage the construction, you don't have to manage the money. You don't have to manage any of those things. Of course, you have full transparency. You have a dashboard and you can see what everybody else can see. But you let somebody else deal with all that kind of stuff and you move on with your life and go, I'm for my extra money and my cash flow that's coming in. That's the second benefit, cash flow. You get quarterly distributions right from the profitability of the property. Third benefit is that a lot of people take massive tax benefits from owning these properties. I last year made over, let's see, over eight figures last year, and I didn't pay a dollar in taxes. So how is that possible? I made over eight figures last year and I didn't pay a dollar in taxes. The way that's possible is because I invest in real estate. And so a lot of people that are doctors, attorneys, and they're over there making money and doing their thing and paying 30, 40% taxes. Guys, the real estate game is how you avoid paying a lot of your taxes. And so a lot of people will take tax benefits from owning real estate together. That's a big reason why I think they call, they say this puts the tax benefits, put the fund in fund because not only are you making more money from your money, you actually take the money you would have given to the government and you're investing that into a fund and getting A benefit off of it versus right now. If you've never invested in a fund last year, that money that you could have invested into a fund you gave to the irs. Smart people just said, hey, let me invest with you, pace. And that money allowed them to get a tax benefit large enough to not pay taxes on that money. And they got a return on it, got something to show for it, which is powerful. Another really big benefit of owning real estate is that it's an inflation hedge. It is something that when inflation's at 9%, guess what? These properties go up like crazy. I think inflation is going to be really hard to get rid of. And so this is a very safe bet to invest in and putting your money into a multi family fund. So again, a fund is a group of people that are investing in a team to go and execute on a vision. The vision for us is going and buying C and B class apartment buildings, getting them on creative finance, which means we're not going through banks, we're not worried about what the Fed is doing with interest rates. We are negotiating directly with the seller on really good terms, which allows us to raise less money up front and give a higher distribution and a higher return to our investors. Now here's another benefit of owning a fund, let's say three years, five years, seven years down the road, okay, you've gotten some quarterly distributions, the property's now gone up in value. We as a fund to just, we can decide a couple of different things. Do we want to sell this asset and roll it into another larger asset and keep the money rolling, or do we want to refinance this asset and pull everybody's money out, distribute your money back to you and then we all still own the asset together? There's so many different ways to win in a fund and it does get a little bit more complicated than what I'm making it sound. I want to just make sure you understand essentially what a fund is, is a bunch of people getting together saying, four of us don't know how to invest in real estate and one of us knows how to do it really exceptionally well and has a proven track history like we do at our fund. And not only that, it's not me, it's me and a six person team that goes and finds these deals, negotiates the contracts, finds the contractors, we raise the money. So this particular deal, we raised $5 million to buy the property and we raised $2 million to renovate the property. Raised a total of $7 million. Pretty amazing. We own a $20 million asset, we raised 7 million. And the seller financed the remaining remaining portion. This property is shelling out 50, $60,000 in net positive cash flow already just in a matter of like six months. So that's why you do it. You invest for the cash flow, you invest for the tax benefits, you invest for the opportunity for that property. And I would say the biggest reason why you invest is it's the safest, safest investment on planet earth. Is a tangible asset that is a hedge against inflation. And then on top of that, you don't have to learn everything. You man who wants to learn how to go and negotiate, get these things under contract, Wonder if you bought the right deal, Wonder if you have the right team that's managing the team and all of those types of things. So a fund is the easiest way for most people to get into investing in real estate. For me, outside of the financial benefit of investing in a fund and being a partner in a fund Is the camaraderie and the experience of investing with other like minded people. We become kind of a micro family around these assets. And we all have parties and celebrations and all of these types of things. So if you're an insurance company, for example, or you're, you're running an mlm, like an herbalife, you want to make sure that your people are invested in deals with you, right? They're making their money selling a product. They invest some of that money into an asset altogether. And it's breeds loyalty, and it breeds camaraderie, and it creates a culture of, hey, we're not just making money, we're investing our money together. We put our money where our mouth is. And that is why people put funds together. Now there's a thousand funds to invest in. A thousand, maybe more, maybe tens of thousands of funds that you can go and invest in. Personally, I would invest in funds that have a unique difference between the others. Our unique difference is that we don't go through banks. We are primarily. Now, there are some times that we'll go through banks on a refinance, or if it really calls for it, on the initial purchase, we will. But for the most part, we are buying directly from sellers. And we are getting the seller to negotiate seller finance terms with us. That allow us to buy properties in any market, Be insulated from what the fed is doing. So, for example, we got a 5% interest rate on this $20 million asset that we just brought up. And we don't have to worry about what the fed is doing and the banks and having to qualify at the bank and all of those types of things. None of our investors had to use credit. None of our investors had to utilize a bank statement or any of those types of things. We were able to work out a deal directly with the seller. And so that is one of the biggest unique differences between our fund and others. And so when you're making a determination of where do you put your hundred grand, your 500 grand, we have a lot of investors that have cut checks for over a million dollars. When you're making that determination, you want to make sure that the people you're invested in allow you to come to the office, right? That's one of the things that we do at our fund, is we allow you to come to our office, visit with us, visit with us at the property. You own that property with us. Come to the launch. We have big taco trucks, and we get the residents out of their out of the property, and we all celebrate together, and we start renovating and cleaning up the property and improving it together. And you'll hear the residents talk about how grateful they are that you invested into a fund with us. That's a big difference. A lot of investors that put money into people's funds, you don't even know the person who's running the fund. You're not allowed to go to their office. You're really not allowed to ask questions. And more importantly, you're definitely not allowed to go walk on those properties that you are a partner of. We are different. We want you to walk on these properties. We want you to touch the brick, go over to the playground, have your kids slide the slide, and you have the ability to go to your child and go, isn't it cool that we own a part of this entire property and your kids can see that legacy that you're building? Meanwhile, you don't have to learn how to actually do it. If you want to come by the office, we'd be happy to teach you, but most people don't want to learn that. So hopefully today I've given you a good example of a fund, let you know that we have the credibility we currently have in our portfolio. We have half a billion dollars in real estate in our portfolio, and we are actively launching funds and benefiting people that are out there making money but don't want to worry about learning how to do real est. They don't want to worry about how do I get tax benefits. You know, my CPA told me I need to start doing real estate and putting my money in real estate. But what's a good deal and how do I manage it? Most intelligent business owners don't want to go out and learn how to do real estate. They want to continually dig deep on what they're making money on and take some of that money and put it into a fund that we all collectively invest together. So hopefully this video has been helpful. If you guys have any questions, please reach out. We'd love to get on the phone with you, chat with you, dig deep on whatever question you have regarding a fund, whether it's one of ours, or maybe even just a general question you have, and hopefully we see you in our next investment.