The Woman Who Makes Your Deals Happen: Beth Bungay

Hello everyone, and welcome to the Raise Capital Leally podcast and YouTube channel, your go-to source for insights on raising capital the right way. We dive into topics that matter most to real estate syndicators and fund managers with live Q&A opportunities before we wrap up. I'm Krisha Young, your co-host and business development director at Syndication Attorneys. And joining us is attorney Kim Lisa Taylor, founder of syndicationattorneys.com. Now, before we get started, please note that audio and video from this event will be posted on our podcast platform, YouTube channel, website, and social media and will be made available to the public. You can go ahead and ask questions at the end of the broadcast by raising your hand or typing it in the Q&A. Please note that information discussed during this event is of a general educational nature and should not be construed as legal advice. Now, today's podcast is The Woman Who Makes Your Deals Happen: Beth Bunge, Loan Guarantor, Due Diligence Expert, and Capital Raiser. In this episode, Kim Lisa Taylor and Krisha Young shine the spotlight on Beth Fungay, the powerhouse behind Cash Cow Investments. Beth is more than just a loan guarantor. She's a strategic partner, sharp-eyed due diligence professional, and trusted capital raiser who helps syndicators elevate the quality of their deals and investor communications. With decades of financial experience and a reputation for high standards, Beth walks us through what, what she looks for in a deal, how she protects both her own and her investors' interests, and what makes a sponsorship team worth backing. If you're serious about syndication, this is the conversation you can't afford to miss. And I'm very excited about this one. Hello.

Hello.

Hello, everyone joining.

Great. And so, Krisha, there was something else you wanted to mention?

Yeah.

Okay.

Well, Absolutely. Beth, I just wanted to say, I just wanted to kick off and just say thank you so much for being such an integral part of our weekly mastermind.

Oh, thank you.

So yeah, you've been coming the last several weeks and the value that you bring is top-notch and it's so wonderful. And I know our clients are like, the rest of our clients are really excited and happy that you're there. And I get messages like, look, can I have Kim or Beth's contact information? So I'm really grateful that you're there. And for anybody who's not sure what I'm talking about right now, we do, we have a Capital Raiser Launchpad program. We've been running it for several years now and we've got over 200 clients in there and we meet every week in a mastermind type setting where we get to like discuss all things capital raising and pick brains of legends like Beth and have Kim on demand in it. And I'm so proud of this program. I love it. And I know that everybody there loves it as well. And I just wanted to kind give you a shout out and give it a shout out. I'll put a link for the program in the chat for anybody who wants to join. And if you want to contact me directly, I can get you $300 off. So I just wanted to share that. Thank you. Yeah.

And if anybody wants to know more about that program, we do have a page for it at our website. So the menu item says, if you go to syndicationattorneys.com, it says Capital Raising Masterminds. So if you click on that link, then you'll learn all about our Launchpad offerings. And there's kind of 3 different levels, so you can pick and choose which one's right for you. But yeah, it does give you access to the weekly masterminds. Those are run either by me or Mola, or sometimes we have one of our other attorneys on. But it's really just, you know, 90 minutes of, you know, free questions or sometimes subject. I think the next subject we're going to talk about next week is pitch decks and the 2 different kinds of pitch decks you need. For your deals. So that's going to be kind of new and interesting.

But a free template as a bonus when you join. So there's that and there's more.

You know, everything you do with Moola, you guys, you have to be in compliance. So I know if anybody knows me, I love to have fun, right? And it's let me turn your concierge in real estate, turning your money into Moola. But you guys, at the end of the day, we're dealing with people's money. And as hard as people work to earn money, it's really important that we protect it for them and do it properly. So that's why I love being here, Kim. And you know, I'm a huge fan of yours. I have always been. But you guys, the value is immense. And even somebody with a hedge fund background like myself, I learn little nuggets every single time I sit in there. And we learn from each other. It's, it really truly is a mastermind. And Kim is just very free coming with answers and information. So if you're serious about the business and building it for yourself and your investors, it's, it's certainly something you may want to consider as an investment into your business. And it's cheap.

Yeah, it's affordable.

Oh, let me tell you, a lawyer for an hour or 2 is going to cost you far more. than the opportunity that you have to plug in and get, get those golden nuggets. So, yeah.

Yes. Thank you, Beth.

On our podcast, we know we've been planning this for a very long time, and we're super excited that we could finally get it organized. So I know that people are interested not in hearing from us. They wanna hear from you. So tell us about your How you got started in real estate investing.

Okay, so if we rewind the clocks, I started with my first purchases in 1996 back in Columbus, Ohio. And I always say if I had actually had a track of houses for everywhere I lived, I would have done just fine because I was born in New York, raised in Colorado, went to school at the University of Florida, lived in Austin, Texas, and Columbus, Ohio, and then finally got to the beautiful state of San Diego Which is where I wanted to be since middle school, high school, in between those 2 timeframes. The one thing you'll know is if you've ever been to California, you will know the water is cold. So clearly, you know, when we visited California, I never got in the water. So I am where I am now. But if we go back and we look, my first major investment was my first fix and flip in Columbus, Ohio, you guys, and I was so good. You guys, I made a grand total of $50. Okay, you know, hey, at least the number was not negative, right? Uh, but what it did do is I took all that money and I put it into our personal home that we were living in. So when we did leave Columbus, Ohio, we had enough money to buy our first home, put 20% down. So, and that was during the, the day of stated income. You guys remember those loans, right? Stated income here, stated income there, blah blah blah. So if I, if I rewind, that was back in 2000, and then we proceeded to buy and hold and buy and hold because we're in an area that we thought would appreciate, and it has. We just didn't know it was going to go like this because I had never had to handle the California market. Okay, I did not— in that time frame, I did not lose a single property. Because even though we bought on stated income, we also got fixed rates. So I knew what my liabilities were. I also knew that I signed the notes on those single-family residences. And so there was no way I was going to have my tenants not stay in their home. So you guys, I, I had taken out my entire line of credit on my personal home. I was going to a food bank.

Wow.

So I was doing everything I had to do to make sure I didn't miss a payment, I wasn't late, and I didn't lose a property.

Okay.

I did lose one thing though. I lost a marriage. Okay. Because at the time we were both real estate appraisers. Now, when they say don't put all your eggs in one basket, let's see how many are in the same basket. Real estate appraisers, real estate. We own investment properties in San Diego that we started buying between 2000 and 2007, going into the implosion. Okay, so 14 properties going into the implosion, didn't lose any of them. And then our retirement was invested in second trust deeds. Okay, I have learned that I control assets really well, and I will kick and scream, but not everybody has those values. And I also know that when all your money's exposed over here and you don't have control over it sometimes, with people who have the same moral compass as you, it's very easy to see it go poof. So fast forward, I never lost a single property. We are still friends. We have 2 beautiful children together. So for that, for that, I'll be thankful. Um, I, I would never turn back my salt and pepper set. They're pretty amazing. Um, but now fast forward, here I am, appraiser licensed for 25 years. I also opened and ran my own hedge fund. And then I got introduced to syndication, a lot like a lot of you on this call today. And I was like, wow, wow. I've raised my kids now. They're both off to college or out of high school and making their way. My daughter's becoming an entrepreneur. Follow her on Instagram, Bailey Norris, blonde hair. You'll be confused because I have brunette, but she's super adorable. And but I was like, you know, I have these properties and I'm starting to lose that depreciation write-off, right?

Mm-hmm.

You guys, that depreciation write-off, that coupled with buying and having real estate, is what truly got me to where I can sponsor people on their projects because of my net worth now. Okay, that hanging on to that, having that portfolio, has moved me forward where now I've, I've done the hard work, you guys. I've laid tile, I've had a roof leak, I've dealt with the sewer line pop below a building. Right? So I've done the hard work, but because of that, I've gotten myself to a certain level where now I have the freedom to help others also build their portfolio, rather it's on the passive side or on the active side as a general partner or a limited partner. And I do believe some of the best people in this business are the people who have been in the school of hard knocks. Okay. And You know, having been— oh, I love that. Thank you, Augusta. And I see the claps and stuff and the, and the, and the helmet on the head.

Great.

Awesome. Yeah. So, you know, I come to this when I say due diligence, you guys. Licensed appraiser, still licensed legally in California. It's a very hard license to get, so I'll probably always be saying licensed appraiser. But I've inspected over 14,000 properties.

Over 14,000.

Okay, in 25 years, that's a lot of properties that I put eyes on. So I, I can walk on a property and I can tell you from the cracks in the wall, is that just a drywall seam that's split, or is that a building that's settling and may potentially have foundation issues? Okay, do you think that that is valuable?

Yes. Oh yeah.

Okay, I also know, like, when I go in there and I know the age of the property, I know if we need to be running lead-based paint testing. Or asbestos testing. Again, all those things cost additional dollars. If you don't plan for them, it can make a project go in the wrong direction. Okay.

Yeah.

Cut that off and go on to our next questions because we do have a lot of questions that we want to get through. So you're known for rigorous due diligence. I think that's kind of what we were talking about right there. So what is your process when you're vetting a deal or an operator?

Okay, so a couple different things. If I'm vetting a deal, I'm going to be looking at the underwriting. I'm going to start on the paper just like all of us do, right? I'm going to look at the numbers on the paper. Do the numbers make logical sense? Because the numbers tell the story. Older property, I want to make sure we've got adequate underwriting dollars to cover issues like plumbing that will show up. I promise you, I promise you, okay? Just like a mother cow gives you milk, there will be plumbing issues on an older asset. And so I want to make sure we have enough moolah in the project to cover those what-ifs, right? So I look at that. After I've done that, I physically will go to the asset and participate. If I'm coming on a project, I'm going to walk through all the due diligence. If I'm coming after a project's already begun, I'm still going to go to that asset. Okay. And I believe Kim got one of my calls when I first got in the business. I was like, hey, I went to this asset and I seen this and I'm not seeing it in the underwriting. I just don't think it's right. What do you think? And Kim, again, she's so valuable because she's like, trust your gut. If your gut says that, then you're probably right. Okay. And I, and I think as women, we may have that, just that little extra little pizzazz, right? Okay, so that's kind of the due diligence. We're doing the numbers, we're doing the physical side of it. And then as operators, what's their background? Like, if I hear that they've imploded a half a dozen times and things they've done, that tells me I maybe don't have somebody with enough grit. Now, depending upon where they're in in the project, that may or may not be okay, right? Like, if they're saying, hey, I found this project and I want you to take it over, asset manage it, run it, da da da, raise capital. And I just want the part because I found it, you know, then that might be an acceptable thing. But if they say, hey, I want to asset manage it, again, my little spiny senses are going to go, maybe not the best person to be in charge of running the asset when other, other things they've done, they couldn't get off the tarmac. Does that make sense? So we do, we do, even though we've maybe never done this, you guys, maybe you've never done this, but what's your resume look like? Because what you do in your past tends to present how you will do things in your future. And I also love, I love, I heard this yesterday, Kim. Oh my goodness. Somebody said the people you will relate best to are the people who have been through part of your story.

Interesting.

Okay. You know, and it's true, right? How many of you struggled in 2007? How many of you want a better life for your family? You want that passive income, you know, so super excited. So, and a shout out to Kim, when you do work with somebody on a general partner team, they always do a bad actors check, and I would highly recommend you have that done as well.

So that is, you know, number one, we've had some clients that probably shouldn't have been raising capital and didn't discover that until well into the, you know, well into our work on their projects. And so we want to know upfront. And what happens is we do that to protect the other people in the management team from those bad actors because they'll bow out as soon as they find out that, oh, this law firm's going to require me to do a bad actor and a background check, and maybe I just can't do this deal, right? And they'll bow out so that you don't have to ask those hard questions of your management team members who might be some people you just met at an event and spent a couple days with, you know, so you really don't know their background. And it's uncomfortable for you to say, hey, I'm going to do a background check on you. So we kind of take that away from you and then we'll alert them. Oh, and another thing that happens is people will come to us and say, hey, well, I had this or that happen in my background. Do you think that's going to be a problem? And then we're able, you know, they can come to us privately and we can kind of counsel them on, you know, whether that's going to be a, you know, maybe an absolute prohibition, they can't do it at all, or is it going to be something that has to be disclosed? to all investors that could, you know, impact the ability to raise capital? Or is it something that's unrelated, not relevant, doesn't matter, nobody cares, you know? And, and it could be any one of those things. So just because you had, you know, something— I always say, I always say from the stage, you know, if you got in trouble for, you know, marijuana when you were in college, maybe not going to impact your ability to raise money 20 years later, right? But, you know, if you were convicted of some kind of fraud or, you know, in litigation over it or something like that, That's, that's going to be a big red flag for the other team members and for your investors. So it's got to be disclosed at least, even if it happened a long time ago, because if someone can find something about you on the internet, you're obligated to give them all the material facts you need to make informed— they need to make informed consent. And that includes facts about you, every person on your management team, their background, the deal, and, you know, all things related to it, to those things. So if they find out later, they can say, hey, I wouldn't have invested if I'd known that. Then they can force you to unwind the deal, not just for them, but for everyone. And usually when that happens, it's very ugly and it happens in a very short time frame. And more often than not, the deal gets lost.

So, Kim, what do you, what do you do in a situation where all your lights just went out and you realize that your computer's unplugged and it's behind you and you're on a podcast? I think you fixed the situation. So I am going to go plug in my computer. I was sending out emails and I realized everything's connected. It's got to be. So this is problem solving, you guys. Do you problem solve or do you stick your head in the sand? Right?

Problem solve.

Problem solve.

And you admit it. And what I like about this is that she admitted it. She just said it like there's no big deal. I think people are so afraid of saying things because they're afraid of being judged or they're afraid of being ostracized or they're afraid of being shut out or something like that. I've been watching The Politician on Netflix. Have you guys seen that show? It's it's funny. Anyway, it's this young kid, and he's running like for student body president, and now he's running for like actual Senate like stuff. Anyhow, and there's like things from his past that like from when he was six years old, like and he's like twenty two, you know, twenty five, whatever, right? But things from when he was like six are coming out now, and everybody's like up in arms. Like how dare you do that thing when you were 6 years old, and he's like, okay, well, you know, I did it and I take responsibility for that or whatever. But what you're talking about here is just reminding me of like that, you know, like we have to be just honest, you know, about whatever's up. And, and, you know, the, the bad actor check kind of forces that to happen.

Well, you own your background and, uh, you know, you can't try to hide from it. You can't try to shy away from it because it does come back, uh, even, you know, You know, we've— I've known somebody who had sealed records from something that happened when they were a minor. And, you know, partway through a deal, that stuff surfaced. Somebody found out it was out there, and, you know, they had to explain it. They had to deal with it. So, you know, you want to make sure that you're being upfront and honest. And, you know, it doesn't mean that you can't participate. It just means you can't participate in management. Right? You can't be a decision maker. You could still provide services, maybe as a Class B member. You still might be able to earn a share of profits, but you're not going to be able to be in the management team and, you know, being underwritten on loans and making decisions on behalf of investors and their funds. So that's really what it comes down to. All right. So, Beth, what are some red flags that would make you walk away from a sponsorship team?

So a couple different red flags.

Okay.

Number one, if I'm seeing anything where they're not in alignment with who's signing that check, right? So like for me, and when I'm sponsoring, we can go up to $40 million. But if I see that somebody's pushing out numbers and commitments on financial choices on a project, until we've said, hey, green light, let's move forward with this. If I see them doing that, that's a— that's, you guys, for me, that's a non-starter, especially in a situation where that person's giving a commitment to a broker of 3% ED money and, and not waiting until we clear it and say, hey, okay, we are going to move forward if that part of the business plan can work, then yes. So anytime that there's, um, early on in the relationship a discrepancy with the money, if you will, you, you need to pay attention, you guys. It's okay to have negotiations and discussions, understand the difference, right? But it's not okay for your partners to go spending your dollars or your limited partners' dollars without having those appropriate discussions or having them be in alignment with what the business plan is. Okay, so like, hey, our business plan is we're going to remodel units, we're going to spend $8,000. So what if somebody's signing a check on $20,000 a unit? Do you think that that would end up messing up the project in the long run? So that's what I'm saying, pay attention to that. The other thing that for me is I want to make sure we're in alignment on who's going to do what. So who wants to be what part?

I'm gonna clarify a couple of things you've said. So when you're talking about someone who's signing the check, you're really talking about who's guaranteeing the loan, correct?

Correct.

Whoever is guaranteeing the loan has to be comfortable with all the other people in the deal and make sure that they're in the right positions, as my stepdaughter puts it, in the right seat on the bus.

Never mind, Kim. Okay, gotcha.

You're driving this car down the road. If you've got the wrong person in the driver's seat, the whole thing, you know, could go very badly, especially if the road starts getting windy.

Right.

Thanks. That's really what that comes down to. But I think for me, when I see a team that comes to me and there's like 7 or 8 people, that's a huge red flag. And what that tells me is that the people that found the deal have not done what they needed to do to create a pre-vetted and ready, willing, and able group of investors. So they've now had to compromise their position by giving it away to other people and hoping that they're going to go out and do the right thing and follow securities laws and raise capital the correct way. And very often they're not. And so if you have too many people in management, it's a disaster waiting to happen. I've seen the worst-case scenario was a lawsuit that happened immediately after closing amongst the management team, went on for the whole, for all the years that they had the property, completely affected, you know, everybody that was in that deal. And, you know, too many people just can't get along, right? You can't get along. And so, and the other thing is you spread the money too thin. And what ultimately happens, there's 2 or 3 people end up doing all the work. And the other people are just along for the ride and they're dragging everybody down. So don't do that. The way to not have to do that is to create your own pre-vetted list of investors that you've qualified, that you've had suitability conversations with, that you know, like, and trust, and making sure that you don't have to give that away to other capital raisers who might be doing things illegally. Because ultimately, if they do it wrong, it all comes back to everyone on the management team. and then you all get in trouble for it. It's not just them. So you've got to be careful. Too many people is not good. So my recommended number, never more than 5. 2 or 3 is ideal, but anything more than 5 is a big red flag. So also that you know, like, and trust these people, right? So your investors have to know, like, and trust you, but you have to know, like, and trust the other people in management, because you're going to be on calls with them every week, every month, you know, asking them for a report on what they were supposed to be doing. And if you don't like them and you don't like getting on a call with them, you're going to dread those calls. And it's going to impact and it's going to trickle all the way down to the investors who aren't going to feel comfortable that the management team is working effectively together. So you just have to realize you're, you're creating a startup business. Every time you do a syndicate, you're creating a new startup business, and there's roles that have to be filled by the people in that business. And if you can't fill it with 5 people, then you're going to be too top-heavy, and you're not going to get anything done, and nobody's going to make enough money, and everyone's going to be upset about the deal.

And I think it's important, you know, I think a lot of people get to this business and they think they're going to make a million dollars overnight, you guys. This is not that business. If you want to make $1 million, stay on the investor side because investors are going to make more money faster than typically— I'm going to say typically, not always, but typically the investors are going to make more money faster than the general partners are. And guess what? They don't have to get along with the team. They don't have to deal with the phone calls. They don't have to get the call about a gas line break. Okay, so, you know, if you're looking for the, the bigger horizon and building, right, and building a portfolio, then yeah, you want to be on the general partner side. And I always say, watch who your teammates are. Are they doing what they say they're going to do? Okay, are they doing what they say they're going to do, you guys? Because for a lot of people, maybe you've never worked a business, but I've had my own business And you don't have to tell me to go do something. You don't have to tell me how. And if I don't know, I'm the first to be like, hey, I don't know, how do I do this? You know, can somebody give me some guidance, any suggestions? And then I'm gonna, I'm gonna take that ball and I'm gonna start dribbling it down the court. Okay? So, you know, it's not inked until that project closes and the capital raise is done. So if you bring on partners and they're not doing what they said they were gonna do, What you guys all agreed to, they don't have to retain that partnership part. That's when you have to have those hard conversations. And somebody— and then, as somebody says in the industry, have the hard conversations easy if you want an easy life in the back end. And it's okay to have those conversations, you guys. It is absolutely okay. And it's okay to have emotions and feelings. What's not okay is to ignore the fact that the computer just went dead, the light went out, and you need to get it plugged in. Okay, so have those conversations. Sorry, Kim.

You know, for every syndicate we create, we always create at least 2 entities, right? One is the management entity, which is where all the members of the asset management team are, the people that are signing the loans, people that are putting up the at-risk funds to get the deal to the closing table. That's all the management team's money. That is not investor money. You don't use investor money at all until you get to the closing table. And if you never get there, You give their money back without deduction. It's your loss. And so, you know, a lot of people don't realize that. They think, oh, I can syndicate. I don't have to have any money at all. Well, somebody's got to put up the deposit. Somebody's got to pay our legal fees because our work has to be done before you can raise money. You have to have the money for all of your pre-closing expenses. So everything, you know, your property inspections, your loan lender is going to require you to pay certain loan fees so that they can order the appraisal, so they can order the phase. Environmental site assessment, and you have to be raising capital for, you know, you have to have all that money to be able to cover all those expenses that are upfront expenses that you may not get back if that deal doesn't close. So if you're not sure that the deal, you know, you haven't done enough due diligence, you got to be careful about how much you spend before you got to the point in your due diligence that you're sure it's a deal you want to do. So you've got to be super careful. And I will say that there is one thing you absolutely should spend before that point, and that is you should hire a real estate attorney, a commercial real estate attorney in the state where the property's located to write your purchase agreement. Do not rely on the broker's purchase agreement because their purchase agreement is going to protect one person and it's not the seller and it's not the buyer. It's them and their right to the commission. So they don't care about you. Their agreement protects them. You're going to hire a real estate attorney who's going to write a purchase agreement that protects you and make sure that you get what you need out of the deal and that your money isn't hard or isn't, you know, irrevocable until you're ready, until you know you've done enough due diligence. So spend the $3,000 or $5,000 it takes to get the purchase agreement done and then go out. Get yourself to the site, do a site visit, because just like Beth said, you're going to learn how to walk around these properties. I always used to— I used to be a HUD housing inspector. I used to go to these horrible, like the worst of the worst housing communities around the country that HUD had financed. And a lot of these owners would get in and buy these properties, and then they would not maintain anything and they would just let them run down. And so I always used to say, you got to get out of the car and find the bullet holes.

Wow.

And, and you got to drive the parking lot and drive the neighborhood and go, oh great, there's burned-out buildings here, here, here, and here all around me. This building's beautiful, but there's no way, you know, because no one's going to want to live here because of everything that's in the surrounding community. So you've got to be able to drive to that site and get out of the car and walk around and figure out, is this even a property that I would feel comfortable collecting rent at if I had to? You know, without carrying, you know, weaponry or a bodyguard. And there are places where you would not, I can assure you of that. So—

Yeah, and this is one of the things, Kim, like before we engage a client for a syndicate or a fund or whatnot, is like, have you visited the property? Like due diligence is like, have you done your due diligence? Do you have a list of prequalified investors? And have you visited the property? It's like, That's one of the sort of soft requirements before even engaging in our law firm.

And we want you to do that.

We don't want you to waste your money with us if you're not that far into the deal. But you got to do all that stuff right up front. You can't stretch that out over 6 weeks because if you do, then you won't have time to finish your due diligence, then hire us and still raise the money because there's a period of time that we need to be able to draft the docs. I always say 3 things, 3 things you have to have before you engage us, and that is you have to review the financials and put in all the add-backs, everything that's missing that the seller wasn't doing, didn't have property management fees, you know, things like that. You've got to scrutinize that, put it back in so it makes sense for you and what you're going to be doing. You've got to do the site visit, and you have to have a signed purchase agreement. With those 3 things, Now, you— our statistics show you're 85% likely to close. 85% likely to close. The people that don't close, something was hidden, maybe discovered later on in the due diligence, or they didn't have the pre-vetted group of investors and they couldn't raise the money. And they, you know, they relied on people to do it for them who did the job. And, you know, or they had too many members in their management team and the deal fell apart. So, uh, you know, do, do those things. What would you say to that, Beth? Do you agree with those things?

You know, I, I think all of that is true. So like, we, we were vetting a cow, a cash cow, in what was considered actually a really good neighborhood, okay? And the sellers, you guys, the sellers, they just want to sell this. And I don't mean to be mean, but so many of them are not 100% transparent. Okay, so these sellers were like, there's 2 burn units. Okay, we can, we can get that into the underwriting when we're doing the initial underwriting. Um, and as Kim said, there's money that comes out of pocket whether you close or you don't close. And I'm gonna tell you, I would rather have money come out of my pocket now and, and walk away from that deal than have money come out of my investors' pockets because I didn't properly vet the deal. So we had an offer in on this project. By the time we actually did the due diligence— and I think all of you guys have heard this before— you need to go in every unit. And I'm gonna go one step further, you need to open every door. So we went in one unit and it looked fine, and they had the door kind of jimmy-jammed on the bathroom, and I was like, okay, that's the door I want to go behind. What's behind door number?

3.

I open it up and literally the roof is caved in. Now that's a couple of things. Either A, there was a plumbing leak, or B, there's termites that are so infested in that property that now we have the roof trusses that are giving way. Okay, so, and I saw active termites as we're walking the property because it was older. I was like, oh, we need termite inspection. I saw cracks. We need foundation experts. Where the burn units were, when you looked up the catwalks, the concrete had split it out and the metal had melted. Okay, do you foresee that this is going to be a compliance issue with the city? Yes, those have to be taken care of because when the city says you have to do this in Texas, if you don't do it, they will take your building and tear it down and give you the bill for tearing down your building.

Whoa.

Okay, so don't think that you can ignore stuff, you guys. It's okay to walk away from a project. It's okay to send that ED money out and be like, hey, I'm willing to put at risk $100 for, you know, because there has to be some nominal amount that is in that transaction for it to be a valid earnest money that's deposited. Um, I'm not willing for it to be hard until after I've done due diligence. There is no way I will ever let my ED money become hard until after due diligence. Okay.

We're talking earnest money deposit because that at some point in your due diligence process, when you, when you pass the end of your due diligence period, that money is no longer refundable to you. And that's where that becomes— they call that hard money where it's gone. Okay. The seller has it. It's theirs. The other thing I would like to add to that is when you're setting up a property escrow, do not have investors wire their funds to the property escrow, because if you do that, you have now given the seller control over your investors' funds. And if they want to dispute whether or not that money is refundable to you, they can tie it up for months or even years. So you are going to create your own company bank account for your syndicate. You're going to have your investors wire the money To the syndicate, not to the manager LLC, not to any person's personal account. All of those things could potentially wind you up in serious trouble. You're going to have them wire it to the syndicate, the company that's issuing the interest to the investors and going to be acquiring the property. And you're going to hold it there and you're not going to touch it until you're ready to wire the money for closing. So about 3 days before closing. lender or title company is going to tell you, you need to send this much, and you're going to send exactly that amount because any excess money that you've raised is going to go towards your acquisition fee, your reimbursement of your pre-closing expenses, your capital improvement budget. You do not send that to escrow. You leave that in your bank account. And then after you close, you create a balance sheet showing your investors Here's what we raised. Here's what we sent to escrow. Here's the HUD closing statement that shows how that money was dispersed. And here's what's left in the bank account. Here's how that's being dispersed. And so they can see everything. If you still have to raise money, they need to be aware of that too. Hey, we're still in the raise. If you know somebody else that wants to get in the deal, please introduce them to us. And, you know, depending on how you handle that, you may or may not be able to let those new people into the deal. But, you know, that, that That's a different— that's a whole different topic.

Yeah, your intentions, your investors, you guys are, you know, they're, they're your gold. If you don't take care of them and your intention is not to take care of them, please leave this business now. If it's all about your pocketbook and it's not about their pocketbook, you're really, in my opinion, you're coming from this business with a state of greed, and I've never seen a greedy person end up successful and happy. Never seen that. So I'm gonna go for happy and successful because I've made others reach their goals as well, right? When I came into the syndication world, my goal was to take at least 100 investors to the point that they're a millionaire. Now, what does that mean? That means that they have to want to continue to invest with me, right? So if I'm not taking care of them, would they invest with me again? No. Okay. And then secondary, my other goal is to take 5 people to the level where they also can be a sponsor on a general partner team. And what does that mean? That— understand what I'm saying. I want them to outpass me. Okay, because that's the only way they could become a sponsor as a general partner. So that means I'm willing to teach them everything I know as a fellow partner. So they too can move up to the next level within the industry or the business.

Well, and that's a fantastic attitude to have. Yeah, often I, I have a little tongue-in-cheek thing I say that when I'm speaking, uh, in at an event, and one of them is, you know, how many of you are here because you want to, you know, augment your income, uh, or replace your current income? And, you know, most people raise their hand, and I'm like, how many of you are here because you want to help your friends and family? And like a whole bunch of people don't raise their hands. And what I say to them is, uh, you know, here's why you want to help your friends and here's why you want to help your family, okay? Because if you don't, they're going to be living with you later.

So yeah, I mean, at the, at the end of the day, this is, uh, this is relationships in every level of this business. Your property managers, they're going to go to bat for you because they like Thank you. You know, your investors, they're gonna stay with you even, even, even through a situation where the computer's unplugged, right? As long as you're clear, transparent, and you're making the best decisions possible, you know, you're built— you're building relationships on every level, you guys. You're building relationships with the broker. I know the last broker probably hates us because literally we shredded that property apart when we did the due diligence. But you guys, it had to be. It had foundation issues, it had asbestos, it had a burn unit, it had 4 or 5 other down hard units that floors were dug out, that they ran out of money, that, you know. So by the time you go back, it's really not a deal. So don't be afraid, you guys, to fully vet people, projects, You know, your financing. This is all about being a little bit of a detective, right? You got to be a detective. Um, and in that detective, you're doing what you need to do for your investor family.

Um, like shadow work for, for real estate. You know, that's what it is. It's just like, you know, don't be afraid of, of the shadows. Don't be afraid of the dark here. You know, like, like Look, dig, dig under the hood, take a look at things. You know, it's just, it's a matter of fact, and, and you are dealing with other people's money. That's the whole point of doing a syndicate. That's why there are so many laws around it, right? Because that's actually what is happening here. You're managing other people's money, and there's things to know about how to, how to go about doing that and to be able to do it long term. For a long time.

Much further. Let's go ahead and hand out your contact information. We've had a couple of people that wanted to know more about your background. So I just said, hey, reach out to Beth privately. What, what contact information would you like them to use, Beth?

So if you're not on your phone, if you're not on your phone, you're on your laptop. I'm on my phone. So I'm gonna do this kind of handicap-like today because we heard that my voice was better on my phone. So I feel like a true millennial and I'm not. So if you scan that QR code next to me, it'll do 2 things. It will allow you to get all of my information. So that'll give you my website, my phone number, my ID, my Social Security number. I'm kidding on that.

Okay.

It'll give you my calendar link. And that is my favorite way is once you've scanned that, it'll give me your phone number. Because believe it or not, if you're in my phone and I'm not on a Zoom, I will try and pick up the phone, even if it's a quick thing to say, hey, this is more of like scheduling a schedule, a calendar. I love to look at projects. If you guys are vetting a project and you're like, hey, we want to see if you like this one, Beth, but I like to do it with you on a Zoom with me. The reason is it does 2 things. It helps you see how I look at the project. And it helps me see how we interact as business partners.

Okay.

Now, I've had a couple of people that go, well, we want to build a relationship with you and we'll hop on your calendar every 2 weeks. You guys, I love you, but the person that I spend my private time with is my unicorn. So when we're together, I like it to be business activities. If that's underwriting or, you know, vetting projects, or maybe you're new in the industry and you do want to do that first meet and greet so we can have a one-on-one, I would love that as well. It's just that when you come back and say, hey, can we do this every 2 weeks? I'm probably gonna go, um, imagine if everybody I know wants to have a meet and greet every 2 weeks. It's— it doesn't allow me to do what I need to do, which for the investors, which is go out there and figure out how to make them some moolah. Um, so scan there. I am going to— Kim, I'm going to put in the chat, if you'll give me a few minutes, I'll let you talk. I will, um, find my Pop-up connection, and I'll put that in the chat as well so they can use that physical connection.

I realize this is also a podcast and there's a whole lot of people who are listening audibly.

Of course.

Okay, so just go to my website, www.cashcowinv.com. I as in ice cream, N as in Nancy, V as in Victor. So INV meaning investor investments. So Cashcowinv.com. And when you go on there, you guys— oh, thank you so much, Kim, that's perfect. So Cashcowinv, you'll see my logo, you'll see my face, you'll even see my Zoom backdrop in that. You know you're on the right website then. There's multiple places that say book a call, connect with me, bounce around there. And you guys, if you're new to syndication, please go to the website. There is a 5-minute cartoon that will explain syndications for you to your friends and family so you don't have to do it. It's, it's very— it's, it's a quick, easy little watch. Um, and I know like you guys are like, how do I, how do I explain this to my friends and family? So please feel free to use that as a tool for yourself. There's an ebook in there that talks about, you know, when the investor risk is up, their returns need to be up. Um, when the risk is low, like a brand new build, the returns are obviously going to be lower because there's less risk. So there's an ebook in there too that you can grab. So lots of great little nuggets in that website. So would love to connect with each of you.

Thanks, Beth. Of course. There's so much generosity here. That's like the sign of a true— I don't know, like, that's what I hear over and over and over again on these podcasts is like people who are the most successful are the ones who are the most generous with that success, whether it's educating or whatever. So thank you for that.

Of course.

Yeah. I mean, however I can help, that's what I like to do. And thank you, so many of you. I like see my pop-up like links flashing on my, flashing on the bottom of my computer, right? So thank you for all of you who are connecting. I appreciate that because I know that that also means that you're, you're sending some trust in my direction as well. So thank you. I appreciate that.

We also have a lot of questions, so I want to get through the questions and then if anybody else has questions, please type them into the Q&A or into the chat. Right now. So here's a question that I'm going to answer. This one on a new purpose-built assisted living facility with SBA senior loan, 85%, $800,000 offering from investors. What's a fair market return that passive investors look for in today's market? Well, so there's 2 targets. One is, are you going to offer some kind of a preferred return from cash flow during the period of time that you own the property? And then 2, are you going to offer a share of equity on sale that's going to bump up that preferred return to a higher amount that can be, you know, divided out over the years. So basically what you end up doing is all the money we gave you from cash flow plus the money that we're going to give you on sale of the property, add all that together and divide it out over the years that you've had the project. That gives you your cash-on-cash return. Divide that number into the amount of money that you put into the deal. So the amount of money that you raised and put into the deal, and that becomes your percentage cash-on-cash return. Always, always, everybody does this wrong. Figure out the overall cash-on-cash return on the project before you figure out what you're gonna give investors, because if you're gonna give investors more than your overall cash-on-cash return, the deal doesn't work.

Okay?

So, and you need to make sure there's enough left over for you to take on that risk. And so we've got to be cautious about that. So here's a question for you, Beth. Oh, so just what is, what is that return that people are looking for? 8% has been the preferred return that has gotten people to invest for decades. Okay. So you can offer less, you can offer more, but 8% has always worked. Okay. So 8% for preferred return, that's just from cash flow. That means you're offering them 8% If somebody invests $100,000, you're offering to give them $8,000 a year as a return on their investment, with an eventual return of that original $100,000 investment, plus some more money from the sale that's going to bump up that 8% to somewhere in the— we're seeing low to mid-teens returns right now. When I first started in this business in 2008, the investors were expecting returns in the low 20s. We have not seen those for at least 10 years. We were seeing a lot of 60/40 deals. Deals were richer back then. Loans were cheaper, easier to get. Sellers were more realistic as time went by. We now see a lot of 70/30 splits. We're seeing— we were seeing up until just a couple of years ago, we were seeing a lot of returns for investors, annualized returns in the mid to high teens. Mid to high teens. Now we're still seeing 70/30 splits, but we're seeing the investor returns Going down into the low to mid teens. So that's your target is your low to mid teens. So what that means is you got to have a 20% annualized cash on cash return for the overall project if you want 25% of that deal and you want your investors to have 15%. Get it? See how that works. If you don't get how that works, then you need to get this book. Because there's a whole chapter on that, how to split.

Is that the thick one or the little one?

The thick one. The thick one.

Chrisha does this, but, um, so this is our beginner's guide, How to Legally Raise Private Money. Skinny book, easy read. This is for people that don't understand what syndication is, what some of the terminology we've been using. Read this book first. This one is thicker. Same information, twice as thick, twice as much information, a lot more detailed. Uh, you should all have this on your desk. This is written as to be an encyclopedia that you can reference. You can read the table of contents, go to the chapter you want. You don't have to read the whole book, but it is also available on Audible, uh, if you want to listen to it, uh, through Amazon. So if you want to find any of these books, um, we do have a third book that we just wrote. How to Legally Raise Capital for Startups and Small Business. So we have an attorney on our team that does our business offerings, and he's very good at it. So if you want to start a different kind of business besides real estate, then you're going to want to get a copy of that book. We are going to be doing a formal launch on that book within the next few months, so we're going to ask all you to buy it anyway, and you can learn about the world of private equity as it belongs to business opportunities. So, yeah, just, you know, make sure you understand that cash-on-cash returns has to be for the overall project first. Then you figure out how much of that do I have to give up in order to get my investors the returns I want them to have. And that tells you what your splits are with investors. So until you've done that, you can't figure that out and you can't know if a deal's going to work or not. So I want to ask you a question that's right on point with that. When someone approaches you to raise capital to be a loan guarantor, what do you need to see first?

Well, first I need to vet the project, right? I'm not going to go on a project. So this is funny, you guys. I'm going to tell you a funny story. So somebody asked me to look at a project that was a $31 million project. That literally I'd pushed out an offer on that same project back in December, and this was just recently. That project, they were coming in at $31 million. So who do you think was more conservative, probably on the underwriting? And I was like, so I told them, you know, this is probably not for me. I also didn't think that their splits were big enough for them to actually make enough money that would keep them excited to stay in the project for the long term. So I told them that it really wasn't a good fit for me. I like the people. I would totally align with them as At some point, I'm sure I will on some project. That one just— it didn't check the boxes in my opinion. It wasn't safe enough. Um, so then she comes back and she asked me, hey, they still needed to raise some money, would I want to raise money? Okay guys, if I don't want to sign on the loan, I'm probably not going to raise money for it. Because that— like, why would I raise money for something I wasn't willing to take the risk on as a guarantee or So, um, and yes, I sometimes I'll wear just the capital raising hat, but I can wear both and will wear both. So if I am signing on the loan on a project, you guys, unless you've already raised the capital, I'm also raising my hand saying I'm going to help you with that raise as well.

Okay.

So, um, that kind of makes me a unique sponsor. A lot will only guarantee loans, they don't raise any capital, but that does make me unique. If you don't need me to raise capital, fine, I won't. But I can do that. So you're kind of getting a 2-for-1 and actually a 3-for-1 because I will be showing up on the due diligence team, if anything, just to make sure that we are dotting all the i's, crossing all the t's. Okay. Because it's really important that we have a healthy herd of cows.

Well, and so it's more than just guaranteeing the loan though, and raising the capital. You also are lending your experience, your credibility, your resume to the deal. So, you know, when we have people come to us and we help a lot of people learn syndication, I mean, that's kind of our forte is helping people that have never done it before get through it, understand it so that they can go on and do more and more deals. And if you don't have experience on your team, you've got to get some. You have to have someone like Beth on your team. Somebody— I'm not going to say this about you, Beth, because it's absolutely— True, but somebody said to me, they gotta have some gray hair.

Well, I'm glad you did. I actually do, Kim. We can look real close here. I'm sure we can find one. You know, that's, that's my— that's, you know, part of hair and makeup in the morning is I get my tweezers out. You know, uh, you know, us women, we just don't look as good as you men with the gray hair. So, uh, no offense, but, you know, I've— I, I, I, I have put my time in gray. I guess I would fall in somewhat of the gray hair people being in the industry for almost 30 years, right? In the real estate industry. So I guess I got either the bruises or the gray hair. We're just coloring it. Okay. Secrets of the rich and famous. Color your hair. I love— I saw the TikTok and it was this girl and she goes, he loves me because I'm all natural. And she's like, I've got 16 units of Botox here. I've got fillers here. I've got Mm-hmm. My hair colored. I got extensions here. And I was like laughing because, you know, part of that is you should take care of yourself, right? You honestly should. You should take care of your health. You should take care of your home life. You should take care of your wealth. You should take care— these things should mean something to you. So I will never apologize for wanting to care for myself, for going to hot yoga, For, you know, doing physical things, for wanting the weekends with my family, my kids, and my sweetheart, my unicorn. You know, because if you don't, if you don't take care of all parts of your life, you guys, I promise it'll all crumble.

Mm-hmm.

And it's so— it's okay to have those boundaries, right? Because that's what's gonna make you better when you're with your family or when you're focusing in on your business. Okay, it will make you better when you work on all of this. Very well said, Beth. Oh, thank you, Pam. Good to see you, Pam. There's like, you guys, thank you, all of you who are connecting in here today. Wow, super exciting. Kim, thank you for having me here. This is, this is a lot of fun. And you guys—

This is a great podcast.

Kim, Kim, Kim is one of my favorites. So like when we hop on a one-on-one Zoom, you can ask me about me and Kim's background. I'll save it for that. I won't put this on a, on a national podcast that's going out on YouTube, but, uh, you could ask. We, we hit it off, I think, the first time we met. Kim invited— I'm gonna give the G version, Kim. Okay, she invited me to go to dinner. It was at, uh, event, and I said, yeah, I'd love to go to dinner. Can we invite a few more people? So what was a one-on-one dinner, we ended up, um, having— I— okay, Kim's saying my website isn't working. www. That would be interesting if it's not. I will have to get a hold of my web tech if it's not. Dot com. Yeah, I think that it's working on my end, so I'm not sure. Maybe try putting the www. in front of it.

No, it's— you've got some— we had something like this happen with ours. I think some of the DNS server settings got changed recently, and so you have to do some upgrade. So give your phone number if you could, Beth, instead, so that people can use that right now.

Sure, and maybe Kim, or can you get to your WhatsApp app? So my phone number is 760-802-2423. Again, that's 760-802-2423. Gosh, Christian, you are on top of it, girl. She's already got it in there. Perfect.

Some people are able to get there.

I'm not.

Somebody else wasn't able to. So, uh, you're gonna just check with your people when you get back, probably too.

Yeah, no worries. And you guys, I appreciate that because you know what, if I'm being honest, I don't go on my website. I let y'all go on it because I already know what's on there. Um, but I appreciate that because, you know, this is how sometimes we find little glitches. Like, I think the DSCR thing is, uh, Is a new kind of thing going on. So down to the wire.

And we have an important question from Ryan. If you act as a guarantor, how are you compensated for taking this risk? I have my opinion. Do you want me to answer that first, or do you want to answer it?

You can give your opinion first.

So my opinion is that you are creating— think of your management team like a pie, and you're going to cut it in quarters. Okay, 25% of it is for the people that found the deal or conducting the due diligence. 25% of that are for the people that are going to be in the deal long-term, interacting with the property managers and dealing with property operations. 25% of that is for loan guarantors, and the other 25% is for people who raise capital. Now, I will tell you that there should never, ever, ever be anybody who's just in the capital raising box. They have to have other jobs besides that, and that's what they get compensated for. Otherwise, it's illegal. So be very careful about that. Read about it in the books. You cannot be compensated based on how much money you've raised. If there's a formula in your group where you say you raise this much, you get this much, that is going to fail catastrophically when you're on the stand being questioned by a securities regulator. So, uh, don't do that. You need to make sure everybody in management has a job of raising money and they all get compensated for those jobs other than raising money. So even so, I said set aside 25% for capital raisers. You should have a piece of each of those slices unless you're not guaranteeing the loan, and then that part goes for the loan guarantors. So loan guarantors, you know, 20 to 25% is what they typically get. If it's more than one guarantor, then it's usually split among them. amongst them, and that means that they're getting that percentage of the management fees that the asset management entity is earning, as well as they are getting that share of the Class B profits that are reserved for management. So that is fair compensation for people for taking on that risk. Often when we have a management team, let's say there is— are 5 members of the management team, but only 2 are signing on the loan. What we'll do to satisfy the lender is those 2 guarantors are going to be managers of that management entity. All 5 of you are just going to be members. So you're going to split the, the fees that come into the management entity according to your percentage interest. But the 2 guarantors are the ultimate decision makers. That's what the lender wants, because at that point they don't care what percentage interest the other members, the manager have. They're looking to those 2 loan guarantors. They know if something's going wrong with the loan, Those are the 2 people they have to deal with. They have the most at risk, they have the most at stake. So just be prepared. But that's how we're going to suggest you structure that deal if you're coming to us. A member-managed LLC for a management team is never a good idea if there's more than 2 or 3 people and if some of them are not signing on the loan. So just be aware of that.

So yeah, you guys, and, and it's like these are all Numbers and percentages that as we're putting together a team, remember, we're— I'm watching people. Are they doing what they say that they're gonna do? Like, if I asked you to go set up 2 plumbers, etc., etc., and you don't, I'm probably not gonna make sure you're my boots on the ground. And you're not gonna get that carve-out, right? So that's part of building that team. A lot of us were coming in, we're just meeting each other. So the guarantee, or yes.

Yes.

20-25%. Usually I'll carve out 5% and allow everybody to put— who's on the team— put some of the ED money in so that they can get a portion of that carve-out. If your net worth is high enough and it makes sense that you too could be a guarantor down the road, if you want to sign on the loan in accordance and in conjunction with us, we will let you do that so you can get that experience box checked. You guys, to sign on these loans, number one, your net worth has to be at or above the value of the property. So Mark and I can do up to $40 million. Okay. Does that mean your first project you do should be a $40 million project? I don't know. I don't know you. Okay. I want to see how you are. That's why, like, let's get together, look at your underwriting, right? Because I'm going to learn a lot about you, about how we go through this. Are you able to follow directions when I say please book through my calendar and you say, hey, are you available for a call? And I've now told you 3 times, please book through my calendar. Like, I want to see— we, we can communicate, right? And I do that because my time is really important that I give it to you when we're on that call. And if everybody was like, hey, become— I'm not good at doing 6 different people's calendars, but I am good at saying, here's my link, if it's open, I'm available for you. Okay, um, the second thing is raising capital. Are you actively getting people to the presentation? Like, if you don't get anybody to that presentation, do you really deserve a cut for raising capital? Because if nobody shows up, is anybody going to invest? No. You know, you do have to get people in front of the presentation. Does that mean you need to give the presentation? No. That's why your sponsors are there. If you feel like you're a strong speaker, yeah, I'd love to have you participate in it. Okay. But what I'm not going to do is I'm not going to put the guy in front on the camera. Hang on just a second. Who doesn't get that his Zoom camera shouldn't be looking like this, okay, probably not the guy I want to put in front of our presentation because it doesn't look good. But you know what, guess what, he might be amazing at our back office stuff, doing the Excel spreadsheets, finding the deals, running the numbers. That might be his specialty. And that's why I say, as a general partner, we're figuring out who's best suited to run in what part of that, part of that asset.

Okay.

And yes, I'm gonna sit there in alignment with you guys on that asset management team, even if you're on the asset management team, until I know you can do it on your own. Right. We are over time.

Yeah, we gotta wrap up.

Uh, loved having everybody here. Thanks, Beth, you were an amazing guest. Uh, we look forward to doing business with you again in the future. And, uh, Christiana, thank you so much for your input.

Yes, everyone, thank you so much for being here. Thank you, Beth. Thank you, Kim.

Thank you, guys.

Listen to this on the mastermind every week, everybody, so come join. All right, thanks everyone. Bye.

Thanks, you guys.

Thank you.

Bye.

Thank you.

Bye, Beth.