2371 FBF: Apartment Fund Listener QA with Andrew - Buying Into Investment Funds Break Jasons 3rd Commandment - Thou Shalt Maintain Control

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slang on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your financial Independence Day. You really can do it. And now, here's your host, Jason Hartman with the complete solution for real estate investors.

Hey, welcome to the Creating wealth show. This is your host, Jason hartman. Episode number 541. 541. Thank you so much for joining me today. I am in beautiful Portland, Oregon. Yes, Portland, Oregon. I'm here for a conference and I tell you, one thing this state did right. You know what I'm gonna say? I bet, right? Libertarian Jason. One thing they did right, no sales tax. As left wing as this state is, it is a great place for shopping. So if you need some retail therapy, no sales tax is quite a good deal. Quite a good deal. Hey, so today we're going to take a call from a caller and just talk a little bit about investing in funds. And I got to tell you, it boggles my mind, people. It boggles my mind how many smart, sophisticated people will go into deals just not really even knowing what they're getting into. And this is not rare, you know, this is done probably tens of thousands of times every day, maybe hundreds of thousands. I don't know, I'll venture to say it maybe millions of times around the world each day that people do things like this, just really knowing so little about what they're getting into. You know, they just don't talk much about it. And it's amazing that people will go in and they will invest in some sort of pool money asset, whether it be a stock, a real estate fund, whatever kind of anything where you pool the money together. Any kind of fund, a general partnership, an llc, whatever the vehicle, let's not complicate it with that. Let's just call it a fund. And they'll do it and get a lousy return on it or they'll even lose money. They'll be susceptible to one of the three major problems. Might be investing with a crook, might be investing with an idiot, assuming they're honest and competent. Taking a huge management fee off the top for managing the deal. I'm going through that quickly because you already know commandment number three, but it just boggles my mind. I got pitched last week by a friend of mine who syndicates hotel and apartment deals. I said, look, send over your documents, I'll take a peek. And probably nine attachments to one email with monumental amounts of reading that have to be done to look into the deal. And still when you do all that reading after you've done all of that, you still really don't know what you're getting into. It is mind boggling. And I have to tell you this, of course, as you know, is one of the reasons I started the Venture alliance, because I want to do some bigger deals. And I've done some big deals myself and you know, with, with a couple of different clients, you know, they've worked out fairly well. I definitely would say some have worked out very well. But you know, I think the thing is when you want to do everything as a direct investor, that's great for the vast majority of people, the vast majority of our clients, being a direct investor and buying 5, 10, 20 houses over the course of, you know, maybe quickly, depending on how much you have to invest in terms of capital, maybe you do that over the course of several years. It's all different for everybody, no problem there. But you know, the one downfall it has is you can't have access to big deals necessarily by yourself. Right. So it necessitates making this choice and I say the fund choice, where you're doing it with a bunch of people you don't know and you're basically giving your money to a fund manager you don't know, that is not a good choice. And above that, the bigger, bigger choice is the sort of the Wall street type choice and that's a really bad deal. And below that, if we're looking in amounts of capital, by the way, that's how I'm kind of ranking that. You know, you've got the big Wall street stuff, the huge stuff, you know, all of their different funds and pooled money, investments, even stocks, private equity, hedge funds, whatever, we'll call that the sort of the Wall street category in that stuff stinks. We all know that, okay? It's great for the insiders, but it's terrible for the average investor. And then below that, we've got the people that are out there, you know, syndicating a hotel or apartment deal or whatever, you know, those are. I don't know, they're all different. But Maybe they're raising $10 million to buy a hotel or an apartment or something like that. Those deals usually stink to, okay, because you're doing it with a bunch of people you don't know, and you're just likely to get burned at some level with the three major problems. Then below that, in terms of amount of capital raised, is getting together with a few people you know like and trust. Well, you don't even have to like them, just know them and trust them. And there you're basically going in on a deal together. Now, I'm not sure how it might be structured. You can structure a lot of different ways, general partnership, limited partnership way, lots of different ways, but you're doing it with some people, you know, and all of the people in the deal, or at least the vast majority of them, you know them. So you're really keeping an eye on it. It's almost like being a direct investor. And then the level below that, in terms of, you know, overall capital raised for the deal, is where you're just doing it yourself. You're being a direct investor. And, you know, I mean, we all know people who have started with very little and created some really nice wealth for themselves just buying some houses. I mean, it's so simple. And as humans, it's funny how our nature is that we want to just over complicate everything. I do it myself all the time, and I see other people doing it. And it's a lot easier, I guess, certainly to critique what other people are doing than to look in the mirror and to critique myself. But I have this tendency, too. I certainly over complicate things a lot of times when the best things are really pretty simple.

Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy.

So, something to keep in mind there. So we're going to take a call and talk about that today. I think it'll be educational for you and enlightening. So we'll get to that in a few minutes. But as I'm at this conference, you know, I'VE been hanging out with Doug. You've heard Doug on the podcast. He lives up here in Portland. Tomorrow I'm meeting with one of our lenders. The conference ends tonight. And you know, these conferences, I really have expanded my horizons, my network a lot. You know, the past couple of years I've really made it a point to attend a lot of conferences and get out there and see what's going on in the world. And you know, I've done this over the course of years, but I don't know, I guess I was in a little conference rut for a while where I wasn't really going to too many things. You know, this has been a fairly interesting event. It's called the World Domination Summit. Kind of a funny name. Definitely skews left wing for sure. I mean, heck, we're in Portland, okay. And it just always amazes me how inefficient conferences are, you know, I mean, it's great, you get inspired, you learn some things, you meet some great people and stuff. But someone has got to do an expose. Really, someone needs to take this on and it's not going to be me. Okay? So listeners out there, maybe you'll do it, but someone has got to do an expose. I never see anybody talking about this on these conferences and the environmental impact of them. I mean, you know, this conference, they're talking about how we need to take care of the environment and all this kind of stuff. And you know, when I was in Europe a month and a half, two months ago, I was in Croatia at another conference. The same, same type of drivel, you know, we gotta take care of the environment. But people are traveling to these things from all over the world and making a huge environmental impact. Now I don't think, you know, I think people are a resource. You know, I don't think that's all that bad. I think we should be good stewards. I think we should be conscientious about things. But I don't think we should view ourselves as like this elite class and get up on stage and say that the rules apply to all of the little people out there, yet they don't apply to us. Right? And that's just what I hear over and over at some of these left leaning conferences. And it's just really annoying to me. But anyway, enough of that. So the debt crisis, wow. You know, we're watching the news about Greece. It continues to unfold. Do you know that in Greece over half of the population under age 34 is unemployed? And over half or oh, Sorry, no, it's more than half. I can't remember the number, but it's like a really high percentage. I'm going to botch this one. I bet. I just want to say it's like 70% of the population under 34 lives with their parents in Greece. And Spain is almost exactly the same. Right. In terms of those numbers, do you know that for 90 years Greece has been an irresponsible debtor? They've basically been in a debt crisis for nine decades. Half of the time they've been independent. It's just, it's mind boggling when you look at this stuff and you, you look at what's next in the domino. And I constantly am talking about this, about, you know, the US and how much debt we have and how many unfunded mandates we have, how many obligations we have that we cannot possibly meet unless one of the six things happens. The six things I talk about, and you know, just to highlight a couple of those, I've talked about them before, they six ways to escape the debt disaster. One is to have garage sale. Another one is to increase taxes. Not enough tax money to increase to solve that problem. Another one is to have technological innovation that is America centric. And you know that. I don't know, you know, it's a wild card because nobody really can analyze the impact. It's impossible to tell. But as you know, and I'd love to have some listeners come on the show and talk about this with me because I am wrestling with this big time. I really, you know, I like to make predictions. I like to think of myself to some degree as a hack economist and a hack futurist. And in doing that, you know, I'm talking to all these people all the time on all of my shows, not just the Creating wealth show about scientific advances, about technology. And in doing that, it is a huge wild card as to what technological innovation will mean to us. But if America is at the center of some of these things and certainly the whole world will benefit from them, that could save us all. Technology could save us all. And the thing I'm really wrestling with, specifically, specifically as it comes to technology is the subject of robotics and the way they will displace workers in virtually every industry. The transportation industry, the. I'm going to say it, don't laugh when I say this, but the poetry industry. Yes. You didn't know there was a poetry industry, did you? But computers and artificial intelligence can write songs, it can write poetry, they can write books. Do you know some of the Stuff you're reading now is actually written by computers. It's written by machines. Yes, it is. There are now algorithms and, you know, the burgeoning field of AI or artificial intelligence that is literally writing some of the articles you read. There's a company who does this. I actually talked to them on the phone about a year ago and communicated with them. And for example, if you need an article, if you're a media outlet and you need an article on a sporting event or the financial markets, think of it, it's really not that complicated for a computer to write about this stuff. You have an event, and with that event, you had certain numbers occur. Yesterday, the Dow went up, the Dow went down. The Nasdaq went up or down, or the S and P went up or down. The Russell 2000 went up or down. The Nikkei Index went up or down. And what happened? That's just some data. Those are just data points. And you can put that into English or any language for that matter, with a machine. I mean, Google has made incredible advances in understanding natural language. And if you look at the apps like Siri on your iPhone or the. I guess there's a similar product on the Android, I don't know, I'm not an Android user. But this morning, for example, I said on my phone, I said, siri, tell me a story. And, you know, it came back and said, you already heard that, or I already told you a story. And then I asked a few more times, and then it really did tell me a story. It was kind of funny. So try that on your iPhone, if you have one. Ask Siri to tell you a story. So when you look at that, maybe this will save us all. But overall, as far as the debt crisis goes and being the, you know, the best house in the worst neighborhood, I think the United States is definitely in that seat. Because I'm looking at a Business Insider article now. 14 countries that are spiraling towards a government debt crisis. This article is by Heather Stewart from the Guardian. And let me just share with you a little bit of these lists, okay? And, you know, you think Greece is bad. You think the US Is mismanaged, and you know we've got a lot of debt in the U.S. certainly, you're right. But the U.S. happens to have the reserve currency and like I always say, the military to keep it that way. So forgive me if I'm pronouncing some of these country names wrong. By the way, some of them are rather small countries, okay? Buhatin, Cape Verde, Dominica, Ethiopia, Ghana, Laos, Mauritania, Mongolia, Mozambique, Samoa, Sao Tome, Principe. I don't know how to say that. Senegal, Tanzania, Uganda. Those are countries that all have a very high risk of a government external debt crisis. And these countries are currently in a government external debt crisis. Armenia, Belize. Belize. We've talked a lot about Belize over the years. Costa Rica. You know, many people think, let's just go invest in Costa Rica. Are you kidding me? Have you been to Costa Rica? Have you tried to drive on those roads in Costa Rica? The potholes are like the stone size of VW bugs sometimes. It's insane. Croatia, I was just in. Beautiful. Croatia, External government debt crisis already. Cyprus, you know about that. They had the haircut where they just swiped a bunch of money out of the bank accounts. The Dominican Republic or the doctor. El Salvador. Gambia. Greece, of course, Greece. Grenada, Ireland. I was just in Ireland. Jamaica, Lebanon, Macedonia, the Marshall Islands. Montenegro, Portugal, Spain, Sri Lanka. St Vincent and the Grenadines. Tanzania, Ukraine, Sudan, Zimbabwe. Okay, all of these are already in a debt crisis. The world is in a debt crisis. I mean, and those are just the high risk countries. There's a lot of lower risk countries as well. I mean, look at what is going on around the world. I mean, China is an. I had just had Harry Dent. I just recorded an episode with Harry Dent again last week and that will air soon. You know, that's, I think his fourth time on our show. And China does not look good, okay? Russia does not look good. I mean, this is a matter of relativity, okay? It is relativity. So when we look around the world, there's a, there's a lot of to consider. And when we look at, when we look at real estate investing, the United States has a very special real estate market. Very special, very unique characteristics that are unrivaled in the world. Having been to 78 countries myself and some of those countries I've been to several times. Okay. It's not just a one visit in many cases. I tell you, the US has got some pretty good real estate deals for sure. But if you are interested in this topic of robotics and robotics replacing jobs and what that means to the economy, call into the show, leave a comment, go to jasonhartman.com and just press that little. Leave a voicemail tab there on the right hand side of the website@jasonhartman.com Leave your comment about what you think about robotics displacing jobs, about the future. There's an interesting Mises Institute article that I want to share in a future episode. Maybe we'll have Another, we've had some Mises Institute guests on the show before over the years, you know, about robotics and about how it's great news because we don't want jobs, we just want wealth and prosperity. Well, maybe that's what the future holds. Maybe we really are moving into a state of utopia. Maybe we are. We will see. Or maybe we're going to see, as some say, 47% unemployment around the globe. Of course, we've already got that in Greece and Spain and, you know, many other countries like that are close to it in the United States with these minimum wage increases and the movement to increase minimum wage. We've got that in some minority communities. I mean, I think that's just downright cruel. You increase minimum wage and you basically put people out of work. By the way, we haven't talked much about it lately, but certainly we had John Williams on before from Shadowstats.com Very interesting insights into what's really behind the government statistics. And we've talked about the unemployment rate, the inflation rate, how all of these things, the gdp, how they're all manipulated. Okay? Now they're talking about how the unemployment rate has fallen to 5.3%. That is totally bogus on so many levels because it doesn't take into account the labor participation rate, the much more important metric, and it doesn't take into account the types of jobs. So we're seeing, of course, manufacturing jobs disappear, we're seeing many white collar jobs evaporate. And part of this is the alchemic economy, you know, part of it is robotics at some level. And when I talk about robotics, I don't just mean some machine, you know, building cars on an assembly line. Robots come in many forms, okay? Some of them are just circuitry. Nothing actually moves. They're solid state robots, right? They think they do high speed, high frequency trading. The robots are on Wall street, okay? They've displaced jobs too there, and they've certainly displaced investor profits. We all know that for sure. So what will this mean? I'm really struggling with it. I do not know. I can't quite formulate my thinking around this. But I think it's critically important because I'll tell you why, folks, this is imminent. It is like three years away, five years away. By 2020, we are going to see massive shifts in the economy. We've got to be thinking about this. It is hugely significant. And it doesn't just affect the U.S. it affects the entire world. So a lot to think about, lot to talk about. So if you want to call into the show and, you know, talk to me real time about it. I'd love to have you do that. Just go to jasonhartman.com Jason, if you want to be on the show, book a time with me. Real easy to do that there and you know, make some comments in there so I know what it's about and so forth. If not, just go to jasonhartman.com and leave a comment on the voicemail. We'd love to hear from you. And those of you coming to our Chicago, Chicago tour, look for an email in your email box. We're going to be touring Chicago, Grand Rapids and if you want join us for our little side trip to the poster child for big government disaster Detroit. Okay. You know, you may want to be packing heat for that trip. I don't know. I haven't been there in a while and here it's pretty bad. But we're going to go kind of look around there just, just for a little while. And we will see you on, what is it, Thursday? Yeah, we'll see you Thursday morning. We're gonna meet at 8:30 at our hotel and then we're going to our first provider. We're gonna have breakfast there. We're just gonna spend a great day together. So I'm really looking forward to it. And look for an email with details about that and you can get the full details there. But 8:30 Thursday morning, that's when we need to meet you. So you know that that's our little semi private Chicago Grand Rapids. And yes, Detroit. I can't believe it. Property tour. Hey, Detroit's right there. We might as well go check it out. So it'll be interesting to say the least. All right, let's get to our caller today and let's talk about investing in funds or maybe why not to invest in funds. Here we go. Hey, we've got a listener call in and it is Andrew, who I know through one of my mastermind groups, he's looking at a real estate deal in Texas. Andrew, how are you?

I'm doing great. Thanks for having me, Jason.

Yeah, well, the pleasure is all mine. Tell us about your deal.

Okay, so it's really in the very early stages, but it came to me through my brother who I trust and a gentleman of one of his close friends that he's known for a significant period of time, who's done, from what he says, very well in real estate. My brother has a lot of trust in him, but he doesn't have the time to really look into the deals, do the due diligence and be the competent investor that he wants to be. I'm filling in for him and I'm going to be doing the investment. Well, potentially I'll be the one doing the investment if everything looks good. So I kind of wanted to get your perspective on the, the handful of details that I know. And I'm going to be getting more information as, as, as. As we proceed down the line. Obviously, before I make any agreement, I'm going to have more information than I have now. But I kind of wanted to run past you kind of the information that I know so far.

Okay, super. So don't tell us exactly where the property is located, but it's a, it's a Texas property and it's two apartment buildings, is that correct?

That's correct. Two apartments. Buildings, which is attractive to me. I think that's a better direction to go rather than just individual units. Both of the apartment buildings have 32 units and they said they've done due diligence on it and there weren't any surprises. And properties are in excellent condition and they're planning on. Well, do you want me to read you some details on it?

Yeah, yeah. I'm going to ask you the income they produce, how old they are, all kinds of stuff. Also, I want to get your take on why you think this is better than single family homes. Probably because of the deal size, I'm assuming. But tell us, what is the seller asking for the property and how much income does it produce every month?

I don't have those exact numbers in front of me, Jason. I would actually have to. I would actually have to get some of that information from the gentleman that I'm talking to.

Okay. So that is obviously critically important. First of all, do you have a price?

Well, they're breaking it up between several investors. They're going to purchase the two 32 unit buildings under a company and they're going to have multiple investors who are going to invest chunks of it.

Who is they?

This gentleman and his partner who have approached me about the investment.

So what you're saying is he's not actually selling the property as one piece. He's selling a bunch of little shares and basically syndicating it to investors.

He's not selling the property. He's going to purchase the property with me as a partner. So him and I would be partners along with maybe one or maybe zero other investors. We would all put down chunks of money and owe own different percentages of the two properties.

Okay, so what's the partnership structure? He's offering. Is it a true partnership or is it an LLC where you're owning shares in it or you know, all that kind of stuff?

We haven't gotten that far yet. And kind of one of the reasons I reached out to you is because I don't know the exact questions I need to ask in a situation like this. Whether it's a single unit or a multi unit dwelling. I don't know the exact questions I need to be asking in this situation.

Okay, so what's the likelihood, Andrew, of you doing this just with him? Is it going to be many investors or you just have no idea yet?

I don't know yet exactly how expensive the properties are and how large his personal investment is going to be.

What makes you interested in this deal? There's so little information about it. I know that you'll get more information, but why are you interested in it? I mean, there's a zillion deals out there.

I want to do business with somebody I trust, obviously, but I'm really looking for the questions that I need to ask before I even consider the deal. All that I have right now is very basic information and they're going to be giving me more information in the future. But I don't know the proper questions to ask.

Well, there's definitely no shortage of deals. Okay. I mean, you know, deals are all over the place, but I should actually clarify that. Whether they're actually a quote deal unquote is quite another question because most of them aren't very good deals. So, you know, I'm saying you can buy properties, you can buy into syndications and partnerships quite easily. Those are plentiful, but most of them aren't very good deals. So the first thing we've got to do is we've got to get a price. We've got a. There's just a zillion details we need to know. What do you know? You said you had some information you wanted to share about it.

Yeah, I can give you the outline as it's been given to me. They're going to be running this as a single entity because they're adjoining apartment complexes. Their conservative five year projection is return of 100% in five years. Their Class B properties built in 1986 in a great location in between two major freeways and a sub market. And the properties are already stable, meaning that there's no vacancies. And the rents for class B properties in this area are increasing more than in any other class. From their analysis they say that they're planning a $3,000 a door in rehab, which will be completed as units become vacant. And the rehab is virtually all for interior improvements because there's very little required on the exteriors. The interiors are in excellent condition and are easily rented as they are. And due to the location in excellent condition, the property management company does not even need to market or advertise and they have absolutely no issues renting the units.

Did you say they were 100% occupied, no vacancy at all?

Yes, that's correct. They're 100% occupied at the moment.

Okay, that's, that's pretty awesome. Okay, go ahead.

And once they take over and the units become vacant, they're going to make improvements to update with newer fixtures, lights, kitchen backsplashes, interior paint, and in some cases they'll also update the flooring. Now, based on their market analysis, they should be able to get an additional 20 to $25 a month in rent if they do not make any improvements just by raising the price. But if they make some minor improvements, they should be able to get an additional $50 to $75 a month. If they do the full upgrade, including floorings, we should be able to get an additional $75 to $100 a month. From their pro forma, they've only bumped the rents up by $25, which they say is conservative. They use an economic vacancy of 10%, but the management company who conducted the market survey believes that 8% should be achievable. So 10% is conservative is what they say. They did not increase their other income, but their, they, they're considering charging for covered parking, pet rent, cable, pest and trash, which will result in even better returns.

Okay, great. Well, you know, I think like, look, you know me, I mean, in listening to the show, I don't like funds or really investing with, with groups unless you really know the people. I mean, obviously if you're going to be a direct investor in everything, you know it's going to keep you small. If you want to do something big, eventually you're going to have to partner up with someone, probably right. Or it's going to limit your growth. So I can totally understand that. If this is a fund type deal with a bunch of investors, I would definitely shy away from that, as you probably know, without me even saying that.

Hey, Jason, can I ask you a question on that? What in particular about that specifically makes you want to shy away from it? Is it just having that many people involved makes the deal complex, can introduce unknown legal issues? What is it would make you shy away from something like that?

Oh yeah, great question. Well, you've heard me talk about my ten commandments of successful investing. And number three is thou shalt maintain control. And you know, whenever you relinquish control of the investment to somebody else, you leave yourself susceptible to the three major problems. Number one, you might be investing with a crook. Number two, you might be investing with an idiot, assuming they're honest and competent. The third hurdle is they take a huge management fee off the top for managing the deal. And most of these guys running funds or partnership type investments of any kind are usually just looking to skim money off the top of the deal. And that's, that's how they make their money. A lot of them are involved and engaged in the construction themselves. You know, they have these like vertically integrated businesses and you just really don't know what you're getting until later, unfortunately.

Okay, that makes sense. So that should be one of the questions I ask is are they taking a management fee or a cut? Because they're spearheading the deal.

Right. And they will definitely take some kind of fee for that. But beyond that, Andrew, there are so many more subtle ways in which they do this. For example, if you have an investment fund and you want to bring other investors into the fund, even if it's a small fund, like it's you, the owner who's doing the kind of the syndication deal, or the buyer, I should say, and they want to bring five other investors in, well, you know, do they have to go and wine and dine them? Do they have to travel somewhere? And all that's happening on your dime most of the time, right?

Yeah. Right.

So I just, I just don't like that. There's also a lot of crookery that goes on and it may not be overt cookery in the construction side of the business. I will guarantee you that any of these guys that have big projects, when they want another project done for them or they want their home remodeled or some favoritism from a, the lender, any party in the transaction, there's so many people in the transaction that they're going to get some favoritism and basically that cost is going to be built into your deal. And so I, there are just so many reasons. I just don't, I, I just totally believe in being a direct investor. You know, I mean, I have partners in some of my deals and, and most of them have worked out great. You gotta really watch them. And when it's a bigger deal and there are so many little subtleties, you Know, you're not gonna have time to figure all that out. Even if you can, you're not a forensic accountant. And even if you were, who wants to spend the time doing that? Right.

Well, and that's, that's kind of sort of the catch 22. Because one of the reasons a deal like this would be attractive to me is because I don't have a whole lot of experience myself. This is a personal family friend that's been vouched for. So that inspires a little bit of confidence in me. And I don't have the time to manage it myself. But this is what they do full time. I think the question is very good. Is there a management fee? Because that hasn't been brought up at all. Because before you mentioned that, I was assuming that they're just looking for investors to fill out the remaining cash that they need to get a large property.

Right. Usually the way this stuff works is if the deal is that good, they'll just buy it themselves. They won't need to take on partners. Granted, nobody has unlimited amounts of capital, so you can't buy every deal yourself. Right. But if the deal's really good, and if they're not looking to, you know, milk the partners and the investors, then usually they'll just figure out a way to use bank financing or some other type of financing to buy the deal. Even if it's hard money financing, it's cheaper than having partners. And what I mean is hard money financing at high rates, you know, it's, it's usually easier than actually getting real partners, you know, because partners are like the most expensive, expensive part, you know, for you to split the equity and the profits with someone if the deal is good. So I mean, is this a, is this a big company? Tell me a little bit about who, who the promoter of this deal is. Okay, so here's just, just always remember Bernie Madoff had tons of friends.

Exactly. So they, they already own eight properties. They've been doing real estate for a long time, but have done it on, on smaller deals such as one to four unit buildings. About two years ago, they started getting involved in larger complexes. Some are newer deals and the deals they make are the deals. I'll read what they're saying. The deals we are in either make or are Projected to make 10 percent cash on cash return year and double our money in five years or less. A couple of the deals are already being sold again because our five year projection has been met in two years. I would not say this is common though, for the Sake of discussion. We project these two properties will make a 10 plus percent return a year. On cash. On cash and double money in five years or less.

Well, that's, those are pretty awesome projections. But remember, you'd be hard pressed to ever hold somebody accountable for projections. Okay. You know, you can't sue a fortune teller. Okay. You know what I mean? What I would definitely do if you really are dead set on entering into a deal like this, is you definitely want to talk with their investors who've been in their other deals, the ones that they claim were so good and so forth, and talk with a lot of them and, and you know, I, I kind of know your dilemma, Andrew, and although we haven't totally, you know, really talked about it here, but I know you're a very successful businessman and you want scale. You probably kind of look at what we talk about on the show and think, you know, I don't want to fool around with buying six houses, single family homes. Right? Because it's not, it's not big enough for you. It doesn't impact your net worth enough. Right. I'll tell you something, if nothing else, as considering it part of your education, just having a few little houses, you'll learn a lot, you know, and you'll, you'll, you'll, you'll just kind of get your feet wet with that and you'll kind of see how real estate deals work. So that training's pretty, pretty invaluable if you just consider it training. If nothing else, that's a consideration. But I, I tell you, I just do not like funds. There's just too many ways, and I'm not saying they're illegal ways, but sometimes they are. There's just too many little subtle ways that the investor is just losing out, you know, you're just not reaping the big profits. The big profits are to be the promoter of the deal, you know, or just do the deal directly yourself.

Yeah, that makes sense. That makes sense. What would be the sort of questions I would ask to do the due diligence on this besides just your two great pieces of advice to talk to the other investors in their other deals, if any. I'm not sure there are other investors in the other deals since they were smaller. Ask them if they're taking a management fee to handle the deal. What other questions would you ask, Jason?

Ask them to disclose all of their fees and disclose whether or not they own or are somehow involved with the construction company that's going to do the rehabs. If they're involved with any of the other parties in the transaction. Okay. And say you want them to disclose any revenue they get from the deal or any benefits they get from the deal at all. But see, the problem with questions is they don't much matter because people can lie, they can spin doctor, you know, they can shade the truth. You know, what you really need to do is read their document. Read every word of their document with a skeptical eye and just notice in that document how many disclaimers they probably have, how long it is. You know, good deals don't need to be complicated and you don't need to super long documents. I remember one, a buddy of mine who's a really nice guy, he started a fund to invest in real estate deals. And I just offered to kind of throw him a bone and say, look at, you know, what's your minimum? He said, 25 grand. I said, I'll give you 25 grand. You know, just, just to kind of be involved with him because I, because I like the guy. Right. Anyway, he sends me three, I think it was three documents. And the main document was a hundred and thirty, 38 pages long. And you know what, I emailed back to him and I said, hey, do you have an audiobook version of this? I mean, you know, it's just absurd. You don't need lengthy documents like that unless you're just looking for ways to paper over things and give yourself a bunch of outs. You know, people complain about the real estate contract, the standard forms, you know, being eight pages long or whatever they are. Depends on the state and you know, the locality. Read every word of the document. It's much more important than the questions. The questions you ask them aren't going to be that important. It's the questions you ask their other investors and try to really be somewhat suspicious about those other investors. You know, are they involved with them? Do they have an agenda in some way? Try and verify them from multiple directions. I mean, one deal that I invested in, I knew the other investors personally before investing, before I was even approached on the deal. And that made me feel a lot better because I knew, you know, it would be really hard for them to be shills unless they were setting up this, you know, big scam from a long time ago. Right. Which certainly does happen, but that would have been much more complicated to do. So it's really nice when you can kind of like verify that for, from a third party. Okay, agreed.

And to be quite honest with you, this isn't something that I would be interested in if it had just come out of the blue. But like I said, it is a family friend and somebody who's vouched for and I trust. But I completely agree with you and I promise I'll have plenty more questions when I actually get a legal document from them.

Good stuff. Well, hey, let's have you back on to look at that. When you get some paperwork and a whole private placement memorandum, you know, whatever you got, whatever you get from them, let's talk about it on the show, okay?

Okay. Sounds fantastic. I appreciate it.

All right, Andrew. Hey, thanks for being on. A lot of people have the same kind of questions you do.

Thank you, Jason.

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