What Makes Mindset So Important For Capital Raisers With Special Guest David Lindahl

Hey everybody, welcome to Syndication Attorneys' free monthly podcast where we talk about topics of interest to real estate syndicators with the opportunity for live questions and answers at the end of the call. I am attorney Kim Lisa Taylor. Before we get started, please note that all of our podcasts are recorded and also simulcast on YouTube and may be used for future promotion, posted on our website, or broadcast in a podcast available to the public. If you don't wish to have your voice recorded, please schedule a one-on-one consultation instead of asking questions during the live call. We will go to a Q&A session towards the end of the call, so you can either raise your hand if you want your voice recorded, or you can use the Q&A button and type your question in there. Information discussed during this free podcast is of a general educational nature and should not be construed as legal advice. And today, today Our topic is what makes mindset so important for capital raisers? And we are talking to David Lindahl. I've been in some really intensive sessions with him this year. He started a new program where it was a lot about mindset. I was blown away by the stuff that I was learning, had no idea how important it was for people to get their mindset straight before they started raising capital. But so that's what we're gonna talk to Dave a little bit about today. But we're also gonna ask him some questions about what he thinks happening in the market and stuff like that. So, Dave, tell us a little bit about your company and your background and what you do and how you got into this.

Well, I started investing in real estate way back in 1996, multifamily properties. I wasn't interested in single-family properties. I actually— but I used single-family properties for down payments for multifamily properties when I ran out of credit card money. That's how I actually got started. And the short version is from there, took me 9 months to do my first deal. And after I did the first one, within 3 months I had 3 more. Within 6, I had 9. And within the first year, I had 11. Within 3 years, I had almost 40 deals in this city called Brockton, Massachusetts, created a cookie-cutter method to buy 'em. And then, and I was a broke landscaper at the time. So I had done a 6-year stint in a rock and roll band. I was lead vocals. So, you know, I had a few brain cells left when I decided to leave. Those were the ones that told me to leave the band. And I did. And I went from a landscaper to rehabbing houses, and then I started buying them, but with credit card money. So, when I ran out of credit card money, I learned how to flip. So, I was flipping properties so I could buy more multifamily properties because it was basically an interview with a guy by the name of Harry Helmsley from New York City who started with nothing, started buying multifamily properties, small ones, and then ended up owning the Empire State Building. And it was during that interview with Biography that the biographer said, Harry, was it about multifamily properties that got you going? And Harry said, and this was the game changer for me, Harry said, I always liked the idea that a group of people would pool their money together, the tenants, and they would pay for the maintenance that needs to be done so we didn't have to swing hammers or take out trash. They would pay for management companies to take care of the tenants, take their phone calls and collect the rents so I didn't have to. And they would pay for all of those expenses plus themselves through the cash flow. The cash flow would cover the And I would have extra money at the end of the month that I could go out and either put into a savings account, do more deals with, or just go and have fun with. And I thought, man, you know, if that's really true, if that really happens, then I want in. And if I could do it with no money because I had none, I want in too. And I found out it was true. 9,000 units later, I found out it was true. And I started with the small ones and I didn't only do the small ones for 3 years because it was a mindset thing. First, it took me 9 months to do my first deal because it was a mindset thing. I was so afraid. I didn't think I could do it. I didn't think I was worthy. Did the first deal, got the system down, but the whole system wasn't done on the first deal. But at least I went through the process and I had the confidence that, yeah, I can do this. I have to do it on the first one. Then after, I would only do 3 to 6 unit deals. My market started to change. I did that for the 3 years. Wouldn't buy anything bigger because again, I was afraid to. And then my market started. And during this time, I'm continuously learning, continuously learning. And I learned about market cycles, and I learned that, you know, what goes up must come down. And the fact that there are— every city's in its own different market cycle. They don't all go in the same cycle throughout the country. So while mine was going up, I realized I had to either get into cash or go into another market where the cycle was down. And I didn't want to go into cash because now I'm having fun. You know, for the first time in my life, I have money, and I want to just be expanding on this. And for the first time in my life, I was really successful at something too. So I just want to keep doing it and to keep doing it. So I learned about job growth. I learned to follow job growth. Montgomery, Alabama had just started building a Kia plant, bringing in 5,000 new jobs. There was a multiplier effect of 3, which meant another 15,000 jobs were going to be coming in as ancillary jobs. So now there's 20,000 new jobs coming into this market that had a barrier to entry, the barrier to entry being the floodplains. Can't build in the floodplains there. So supply's going to remain the same, demand's going to go up. So that market took off. So my first emerging market was Montgomery, Alabama. I bought a 40-unit there, an 80-unit there, and then I went up to Huntsville and bought 400 units there, 350 units in called the Vineyards in Jackson, Mississippi. And then I just started working my way around the country. So at one time we were in 18 different markets. With over 9,000+ units. So that's how it all gets started.

Well, and don't you have a finance background also?

Yeah. So I went to Northeastern University. I also went to the Harvard OPM program. So I'm a Harvard alumni as well. But I went to Northeastern University for finance. But the interesting thing about that is the fact that I was in a rock and roll band when I was in high school. So we were playing all the frat houses or sororities. I just showed up for school enough in order to graduate. But it was the fact that I took finance. My life was so unruly that you either had to do economics or accounting, you know, as like the cohort for that. And I knew nothing about economics. I just didn't understand it. So I thought I'll do accounting. Well, you know, my— I do not have an accountant's brain and I hated it the first month I was there. So I told them I wanted out. They said, well, you gotta finish this semester and then we can put you in economics. And economics I love because my life was so unruly. You know, and so it was just, it was just out there. So economics showed me that there was no order in it. So economics showed me that, you know, if this happens, there are probabilities that this, this, or this would happen. And if this happens— and so I started to understand how to create order out of chaos. And so I gravitated to economics so much to the point that I had a double major when I, when I finally graduated. And my advisor— because I want to make sure I was going to graduate. And he's like, oh yeah, you know, you got your double major, you're going fine. I was like, no, no, I'm a finance major. He said, oh, why'd you take all these economics classes? And I was like, because I liked them, because it was like straightening out my life. So anyways, I went back. So when I really— I started learning about market cycles, real estate market cycles, I started thinking about my textbooks back at Northeastern. So I dug them back out and started reading through them, and that's how I started understanding job growth.

That's fantastic. And it, you know, I think that, that background has done you so well in just, you know, the books that you've written and being able to understand these emerging markets and how come it's so critical for people to be able to figure out where they should be buying, what they should be buying beyond just what they should be buying.

Yeah, you know, the interesting thing about that too, through the years, I've got another book coming out. It's not quite ready. It's going to come out probably late fall. It's called Multifamily Moneyball. And so, in that book, what I did is I took the 5 key strategies of wealth creation through multifamily investing, and I show people how to— not only what they are, but also how to stack them, you know, so you can create even faster wealth. I call it extreme wealth in a very short period of time. And one of them is not just investing in emerging markets, but investing in the right emerging markets. Because now, at any given time, there's between 15 and 20 emerging markets happening in the United States. So, you're going to make a lot of money getting into an emerging market and investing there. But if you get into the right emerging market, you can make 2 or 3 times the money that you would've made in a good emerging market. So, yeah, so that's where all that information, education, and my experience all come into play.

That's fantastic. So, you know, let's talk about mindset a little bit. So, I mean, I know you've kind of touched on it, but, you know, you've got this new program that really just delves deep into mindset. Why do you think that's such a critical thing? For capital raisers?

Well, first of all, in my life, it was critical for me because I was in that rock and roll band for 6 years. You know, I had— I lived a crazy life. You know, when you're partying all the time and hungover for like, you know, 5 out of 7 days, you tend to create this negative attitude. And when I left the band, I still had the same party mindset. You know, I just wanted to— now I wanted to start businesses, and I started businesses, start businesses. I started a landscaping company. And then from the landscaping company in the wintertime, they asked me to clean out houses. One of my friends was a local real estate broker, asked me to clean out a house for a bank. And while we were cleaning out that house, somebody got foreclosed upon, left all their stuff behind. And we were cleaning it out. There was this tape set called Lead the Field from Earl Nightingale, and it was cassettes. This is how long ago it was. And I thought, that looks interesting. So I started listening to it in my truck and I was like, hmm. So I started doing what he said to do. things started to change. And I was like, hmm, I thought that's, you know, so I got Tony Robbins. He just came out with the book Awaken the Giant Within. I read that, started doing it what it said. My life started to change. I was like, wow, this stuff works. So I, so I got, uh, The Magic of Thinking Big, Raise the Bar, all these different books. Still do it, still feeding my mind because it's a lifelong journey. The battle with the mindset. There's this great book called, uh, Superbrain. written by Deepak Chopra and a professor from Harvard. And it really explains why your brain is wired to the negative. It defaults to the negative when anything comes in. So what you've got to do is you've got to, you've got to, you got to reset that default. So you can, you can set it to the positive, but it's really the hard thing to do. The first thing you got to do is you've got to, you've got to recognize the fact when these things are coming in, that default is there. And then from the recognition is the neutralization. You kind of neutralize that thought by thinking its opposite. And that's really difficult a lot of times, depending on how negative you are. And then from there, you've got to take the next step and actually have something come out of your mouth that's either neutral or positive. So that whole process right there, it probably takes people 2 to 3 months, you know, to get to the point where the things that are coming in, they recognize immediately. And, you know, you know, you've reached it when you're about to say something about something, maybe something that somebody said, or, or just a comment, um, uh, you know, about something that happened during your day, and it's about to come out negative, and you grab it and you throw it back in there and either say, I don't need to say that, or you spin it. And when that starts happening, then you're, you're winning the game. But it's a constant battle.

So— Wow.

Yeah, it's that, that— so that's the first trend. That's what I explain to people all the time, you know. So this is when I realized that most people, everybody, you know, everybody could use some mindset stuff. But when I first started teaching way back in 2002, all right, now I'm, I'm what, about 10 years into the business, and I've got almost 1,000 units. Things are going pretty well, and I'm teaching the system that got me there, and people are successful, but not as many people are successful as I thought they would be after like the first year and a half. And I'm thinking, why is that? So I start calling people and saying, you know, How are you doing? Are you doing deals? And I'd hear all these different answers. And what I realized is that people had to go through the same process that I went through. The majority of them, not everybody, but the majority of them is they had to reset their mindset. And when I started teaching people how to reset their mindset in year 3, all of a sudden the success of our students just started taking off. And so I thought, wow, I'm the guinea pig for my own process. You know, first of all, I was so afraid to do the first deal, but after I did the first deal, everything opened up and I did a lot more very quickly. And we see that on a regular basis with our students. You know, it's the first deal is the hardest, but once you get that first deal done, it's like you take off. And it's the same thing with mindset. You know, if I've been teaching now for 21+ years, teaching the same foundational system— yes, during different market cycles the techniques change, okay, but it's the same foundational system. So why is it that someone takes it, goes out there and kills it, and they're a deca-millionaire now, like 3 to 5 years after they do the system, and other people, they don't even do their first deal? And I figured it out. It's mindset. It's the mindset. It's getting over yourself. It's recognizing— it's first, it's understanding that you have limiting beliefs and then starting to recognize them and then starting to overcome them through certain strategies. There's this other big thing out there. It's called victim mindset. A lot of people have it and they don't even realize it. And victim mindset is, is things are happening to me. You know, I don't know why things go wrong all the time. I don't know why I can't do this, but it's not my fault. It's other— it's either other people's faults, other circumstances' faults. You know, the, the, the person that has the deepest rooted victim mindset doesn't even know they have it. It's everything else is— they feel like they're cursed and they can't figure out why. And if anybody What I just said, that that that statement—you feel like you're cursed. There's this great book out there called *The Mountain Is You*, and at one point in my life, I thought I was cursed. I was like, I'm I'm self sabotaging myself. Even as I was becoming more and more successful investing in real estate, I was still self sabotaging myself. I'd get into a deal that I knew I shouldn't get into, or didn't know that I shouldn't get into. But there were warning signs about you know how this deal could go wrong, and. one or two of them would hit. I was like, damn, I saw that. Why did I do this deal? I'm self-sabotaging myself. So I started going deeper into mindset, so to protect myself and also to share it with other people as well. So yeah, that book, uh, The Mountain Is You, is an awesome book.

Well, I, I've seen, uh, in the, the coursework that, uh, you know, we did over the last year, I've seen the people that started in your program just evolve, you know. And I'm sure that you saw that too, is that people started, they were fearful, they didn't really think that they do it. They were kind of in that fear mindset. And then as each of the classes evolved, I saw people just getting more and more confident, starting to do deals and starting to really just come out of their shell. So this stuff works, right?

When you start winning the battle of the mind, that's what happiness is all about. Right.

Okay, so let's talk a little bit about the current market because I know everybody is really curious and we all love to hear from those that are in the trenches. is what do you think is going to happen and what do you think is happening right now? So I saw an article in Globe Street and it was just from last week, August 15th, saying that commercial mortgages are down 52.2% since August of last year.

Yeah.

Rates are expected to rise to 6% to 8% and commercially— commercial properties have dropped by 25%. Is this good news for syndicators?

Uh, it's good news, but, you know, it's not, it's not unusual because, you know, during a market reset, which we're in right now, it's 2023. You know, we had the last market reset in 2009 after the financial crisis of 2008. The one before that was 2002 after the IT crisis of 2001. So this is what happens during the reset year. Uh, sellers still think they can get the inflated prices. They don't want to, um, they don't want to sell lower. There are some sellers that can actually hang on. They don't need to sell. The ones that, that do need to sell will eventually end up selling. but for even a larger loss than they would've taken, or not a loss, but maybe some will sell at a loss, but maybe less capital than they would've gotten had they sold at the turn. So that shakeout starts to happen. And then there's also, there's always the group of people, 2001, 2008, 2021, '22, that bought at the wrong time. And most of these are investors that started, this is their first cycle. Maybe they started in 2018, 2019, 2020. They did a few deals and they made a ton of money. Which is awesome. And if they were using the right conservative formulas to do that deal, even better. And if they stuck to those formulas as they're doing more and more deals, then that's really good. But the problem is when it's your first cycle, you typically don't stick to the conservative formulas because you're starting to make money, more money than you ever made in your entire life. Things are going good. You want to make more money, you want to do more deals, you want to feel that adrenaline of the acquisition fees coming in. You know, the cash flow coming in. So you start to like, you start to get away from the model a little bit. You start thinking, yeah, I can make this work, I can make that work. It doesn't quite fit what we call the Trinity. You know, it doesn't quite fit our model. But yeah, I know we can make it work. And the worst thing that happens is it does work, you know, because the market corrects the mistakes on an up market, especially near the peak. Those mistakes are corrected because of the accelerated appreciation. And then all of a sudden, the bottom gets kicked out. I like to call it the naked man is exposed, always exposed at low tide, right? Because that's what happens when you're now not disciplined and you're not buying properly, right? And the market has this crash like what just happened with the interest rates. And then people were buying those bridge loan deals They were financing with that. You know, that was like the guillotine just waiting over their head. If the market goes the wrong way, you're screwed. And that's unfortunately that's what happened. So, so we're so those are the people now that that where there's the opportunity. And when you said that the mortgages are way down, they are way down. And that's typical for a market like this because sellers aren't aren't cooperating. The ones that have to sell will sell. But we'll see this. And so it's normal. So it's good because we're going to see the backside of this too, maybe 3, 4, 6 months. And then it's like, you know, put on your sneakers, lace them up, and let's get ready to run.

Well, before we delve a little bit deeper into that, you mentioned the Trinity. Can you, you know, we can't do an interview with Dave Lindahl without asking about Dave's Holy Trinity. So can you just kind of refresh everybody's mind on what that is?

Yeah. So when you're first starting out, I always preach to be a conservative investor because that's how I was taught. And so the trinity is when the 3 of the ratios line up, then it's a buy. So the ratios are the capitalization rate of 8+. So you want your capitalization rate to come in at 8 over 8. Your cash-on-cash return is 12+. And then your debt coverage ratio is 1.6+. So I This came about because I realized that those were the deals that I was getting my best returns on when they met those ratios when I first started out and I was analyzing my stuff. And I also realized that if a deal didn't go right, I would see how I get into it. And it was usually because those ratios were off a bit. So when you're a conservative investor, you can do that deal and get 25% of the cash flow, the profits, and 100% of the acquisition fee by bringing in investors to that deal. So that's why when we start out, that's what we teach— momentum play deals, and we teach you to be conservative. Now, after you do a few deals and you start building your real estate gut, you learn about value adds and you actually execute a value add or 2, then you can start playing with the Trinity because you understand how the game is played. But until then, do 2, 3 deals, do it with the Trinity. You'll win on those deals, you'll have all the confidence, and then you stay within the model, playing with it just a little bit because you understand value adds.

Okay.

The problem most people have is they play with it a little bit as they start becoming successful, and then they become more successful, the market corrects their mistakes, and then they just blow it out. You know, they'll tell me the Trinity doesn't work anymore. It's like, oh no, the Trinity works, you know. But if you're doing deals that are way out of the Trinity, like, you can't do any deals unless they're in the Trinity. And my response is always, look at your relationships. If you can't get deals that are with some markets, There's not as many deals in the Trinity, the backside of the markets. At the beginning of the upsides, then there's a lot of deals there, but there's always deals that meet that Trinity or are very close, and it's your relationships that will get them to you.

Well, and so with the Holy Trinity, if you're doing a value-add, you still have to achieve the Holy Trinity.

It's just that maybe there's— Yeah, you want to get to it within 6 to 8 months. So that's the whole idea with the value-add. It's like, okay, so I'm buying it for below cash-on-cash return. But I can— I'm going to be able to increase my rents because I'm going to be improving the units by X amount now, and that will come in by this date.

Right.

Okay. That makes a lot of sense. So you said that there's some opportunities coming. Where do you see that materializing?

The opportunities are coming from— first of all, there's a wall of debt that's being— that is— that's not being paid. So those properties are going to be coming onto the marketplace. So you're either going to get them beforehand Prior to them going to the bank, and you can potentially negotiate that with the bank on the takeout. You can get them from the bank, you know, buying the notes. And then afterwards, it's usually best, I find, is to wait until they come back on the market after the banks get them. If you can't get them before, it's always best to get them before and negotiate a takedown with the bank before the bank actually takes it over. And then if not that, then get it on the backside. But yeah, there's like— well, you had referenced an article. I think there's $90 billion of debt coming into the marketplace.

Yeah, $90 billion is estimated right now. And they expect that if the Fed federal funds rate increases to 5.5% to 6%, that that's going to double. That's what CBRE said in the Globe Street article.

Yeah. And I mean, as investors, those are the market conditions that we wait for. It's unfortunate that people are in that position. But it's just a typical business cycle. So you take advantage of the cycle when it comes. Here's a typical way people get into these problems. First of all, in this cycle, a lot of it's due to bridge financing. Bridge financing is typically buying a deal for below 85% occupancy. If you buy for below 85% occupancy, which is considered equilibrium by Freddie Mac and Fannie Mae, then they won't finance the debt. Freddie Mac and Fannie Mae is always the cheapest debt, which means you can buy more property, you can spend more and win the deal if you get this cheaper debt. So for the first time since I could ever really remember, bridge financing, which is if the property has a little hair on it, needs a little work, you'll get bridge financing first until you can get up to 85% occupancy and then you switch it over to Freddie Mac, Fannie Mae. It's always, you know, a point or two higher than Freddie Mac, Fannie Mae in terms of percentage. And there's always like 1 or 2 points that you have to pay as well. So that dropped below Freddie Mac, Fannie Mae. So the deals that people couldn't get to pencil out with Freddie and Fannie, they get to pencil out with bridge. But the big problem with bridge is there's a lot of added risk because that debt is due in typically 2 to 4 years. And if interest rates go up or if you don't hit your value add, then you don't have the money to refinance that debt. You have to come out of pocket. So that's the, like, the game of Russian roulette that people were playing with. And unfortunately, what happened was interest rates doubled. So these loans that are coming due this year, next year, they're not going to be able to refinance because there's another thing that happens almost like the perfect storm to get people in trouble is that the rent— people were expecting these rent increases to meet their goals, their pro formas, their NOIs. And then with the increase in the interest rates, we saw rents drop as well when the market dropped. the rents dropped. So those performance not only weren't happening, rents were actually dropping below market as well. So there was like a double whammy happening. Interest rates go up, rents go down, you know, NOI, net operating income goes down. So therefore you can't— you can't qualify. That property doesn't qualify to be refinanced the majority of the time.

Even if they bring in additional money?

They can bring in additional capital. Yes. That's so— that's the thing. So in order to save the property, you bring in additional capital. And it's usually a big hit. It's a big number. Depending on the size of the deal, it can be $300,000 to $3 million. I saw a deal out there at $48 million and the bank would only lend $24 million for it. And actually, Mark Shula got that deal, one of our clients. You were at the first Insider's Club, right? Or the second one? Mark talked about that deal, how they were able to fund that deal working with the bank, working with the owner. Yeah, that was a huge haircut off of that deal.

Right. Well, and so I've heard of some of these deals too where people are going, they're refinancing from bridge and the lender's saying, we're not going to bring— you're going to have to bring $1 million or $2 million to the table. And we've actually been able to help some of our clients structure deals like that because the banks will allow you to— if your documents or your investors will allow you to do it, then the banks will actually allow you to bring in a pref equity piece. That doesn't have any voting rights, doesn't have any ownership interest, but they get basically mezzanine debt. But they're coming in as a separate class within the LLC. And with that structure, then the lenders will allow you to bring them in without having them sign on the loan. They can come in for 2 or 3 years while you need the extra cash, you know, finish your capital improvements or whatever, get those rents back up until the property is operating well enough that you can buy them out.

So hold on, don't leave that thought because I'm not in trouble with any of my deals. Fortunately, I'm not familiar with that, but I'm interested in it. So is that private equity companies coming in or—

They can create their own. The way that we write our docs is we have some language in the docs that say that people are able to bring in a superior class if needed to salvage the property. Or they just first, they usually go do a capital call to their investors. They're only usually able to raise maybe quarter to a third of the money that they really need. And then they have the ability to go out and to bring in a preferred class that just gets maybe a fixed return, but maybe it's high. It might be 10% or 15%, but they're getting paid before the equity investors are getting paid with the idea that after 3 to 5 years, you're going to refinance and cash them out again.

So is the benefit for this new capital coming in the fact that they're getting a higher return? Than the common shares.

And they get paid first before any of the other investors. So they're right after the bank. The lenders have actually suggested that in some cases, hey, why don't you bring in this pref equity piece? And the trick here is that for the pref equity piece not to have any takeover rights or ownership interests, because if they have either of those things, then they also have to sign on the debt. And that can be a complicating factor down the road if you want to try to cash them out.

So, good point. So there would need to be a lot of upside in that property for someone to come in and be that, come in on the white horse.

Well, that, and then they might be sucking up all your cash flow for a while that you're not having anything to your equity investors until you can get them out. But in the meantime, you're not losing the property to foreclosure.

You're not losing anybody's capital.

Right. You're not losing them. Eventually the prices will come back, you know, the interest rates will change and, you know, eventually it'll, it should work itself out.

But it's interesting because I've been teaching for so long that a lot of my clients have actually gone out and started teaching themselves. And some of them got stuck in— they were 2018, 2019, 2020 investors and they did really well. They're out there teaching other people how to do it, but now they're in trouble because they fell into the same trap of a first market cycle investor where they made a bunch of money and their mistakes were corrected. They got away from the Trinity and now they're calling me and saying, hey, how can I get out of this? I've got 1 or 2 properties that just aren't performing and I don't want to lose anybody's capital. How do I get out of this? So now I have a potential answer. Thank you.

Yeah, well, and yeah, it could be money from your own investors because maybe you have some investors are like, well, I don't want to put more equity in the deal, but sure, I'll take 15% or 12% interest for 2 or 3 years on a fixed return, and they're willing to even put up the more money for it. Or you could bring in an outside source of funds. So, you know, there are people that are contemplating doing rescue funds where they're creating you know, fund of funds or something like that specifically for that deal. So, or for, for this purpose so that they can go out and rescue some of these properties that are in trouble. It's just, you gotta teach your current investors, you're just gonna have to sit tight and hang on for a while. And there might not be a lot of cash flow to share with you, but in the meantime, we're not losing your money. We're not losing the property.

Better than the alternative.

Yep. Yep. And so there are— there is hope, but it does require some planning. And it also might require your investors' approval because if you don't have our documents, you've had them written by somebody else, they probably don't have the provisions our docs do where we've allowed people to bring that in if they need it. And you might have to go to your investors and get their permission, but if they're smart, they'll agree to it.

Yeah. One of the things I learned, because I was a first-cycle investor as well, and I get, you know, I bought some properties that I shouldn't have at the of the market. Um, and but one of the things that saved me was my documentation, you know, the great documentation. They said I was in control of everything regardless. I was able to make decisions without having to go and ask other people. And, you know, the decisions were the right decision. I was always looking out for the best interests of the investors. But some investors, they just don't, you know, some investors, they just don't see anything beyond that, you know what I mean?

Yeah, yeah, they just, they think they're on a sinking ship and they don't want to, you know, do anything to help bail it out. But if you can, you know, a lot of it's education, right? You really just have to— you might have to go do a presentation to your investors. Hey, here's the situation we're in. Here's how we got here. Here's where we can see our way out. Here's our options. And then let them decide, because an educated investor is a lot more likely to look at it logically and say, okay, this makes sense. Whereas if you just kind of say, hey, we're going to do a capital call, y'all need to put up this much more money, you're not likely to get a very good result.

So, and by the way, while we're on this particular subject, the one thing I learned, you know, being investing since 1996 is if a property's in trouble, you got to overcommunicate. Because what most people don't do is— what they would do is they stop communicating because they don't want to talk about what's going on with the property. Uh, but that is when you overcommunicate, you overcommunicate. And then when you get in a situation like this, you know, where you have to have a call like that and say, hey, this is where we're at, this is— these are the solutions, you know, let's all talk about this and get it together, the investors are right there with you because, you know, they know what's going on with the property. You probably had calls before that discussing about, all right, you know, this is what I think we should do about it. Let's hear from other people. What do you think? And that way you still come out okay from it. Because really, at the bottom line, real estate is risk. You know, people go into investments, they assume that they're going to go okay, but not all of them do. I mean, that's why it's real estate. That's why in all the private placement memorandums it says you can lose some or all of your money. I remember the first time I got one, it wasn't from you because I started with somebody else a long time ago. And they gave me the first PPM and I was like, wait a minute, I can't give this to my investors. Every page says they're going to lose all their money. He says, yeah, well, if you don't say that, then if they do, then you lose all your money too. And I was like, oh, okay.

Hey, I should have done this in the beginning. And sorry, Krish, this was an oversight. I wanted to introduce Krish Young, our co-host on the show today. Krish is a new staff member for Syndication Attorneys. We're super excited to have her. She is Got many, many talents that we're going to be tapping into. She's going to help start co-hosting our podcasts. And also you'll be probably talking to her if you're calling our office and need to talk about legal services. So, Krisha, welcome to the firm and welcome to our podcast. And we're super happy and excited that you're here.

Oh, thank you so much. This is such an awesome conversation. And, you know, just what you were talking about, looping back to mindset, that fear of confrontation. Right? Like being afraid to face the challenges or speak about the challenges, like that's a mindset issue. That's a fear of confrontation. So I think it's awesome that you're like really focusing on mindset because it is that foundation piece when it comes to doing anything in business, I think, that makes or breaks something and can make, if it goes awry, more, a little bit more smooth because we are having those conversations. We're not afraid to have those conversations and work to some sort of solution as opposed to like hiding and pretending every, you know, nothing's wrong, nothing to see here. So I just wanted to loop in on that. Thank you so much for having me.

Yeah, thanks, Krisha. Well, Dave, kind of back to your point about communicating, I heard you say that when I went to the the first Multifamily Millions Boot Camp with you, I remember you saying, hey, if you're pro— if, if you have a problem at the property and you don't tell anybody about it, it's your problem. If you tell everybody about it, it becomes everybody's problem. And that stuck in my mind. And I had some clients a few years later that ended up in a situation where there was an insurance claim at a property, and the insurance adjuster for the— they, they ended up undervaluing the claim by you know, like 90%. And so it created a situation where they had to sue the insurance company to try to get them to perform. And of course, that dragged on for a couple of years. In the meantime, some buildings were down, they couldn't be rented, they couldn't make their mortgage payments. They ended up losing the property to foreclosure. And my advice to those syndicators was step up your communications, you know, and don't do once a quarter, do once a month. If a lot of things are happening, maybe even talk to everybody once a week. And yeah, that property ended up getting lost. The investors did lose their money, but nobody got sued because they all knew that the syndicators were doing everything they could to try to salvage the property. They were doing their best. They were taking every step they could possibly take. They were listening to the investors as far as any advice they might give. And all of that played into just everybody feeling like, okay, not all of these investments are great, Most of them are good, but some of them fail. This just happened to be one of them, but they didn't blame anybody for it. So I've seen that.

It actually works.

Yeah, I have. And I've seen the other side of that too. I saw one where somebody started putting their own money into a deal. The management started putting their own money into a deal and just till they got to a point where they said, we just can't do it anymore. But they weren't communicating with the investors. And so at that point they accepted an offer, but the investors were caught short. And so the investors were all of a sudden up in arms, like, what's going on? Why? Who gave you the authority to put all that money into the deal? Why didn't we know there was a problem? And, you know, had that person been communicating all along with their investors, then it would've been a different outcome because the investors would've understood, hey, our choices are we can put in more money or we can sell the property, maybe take a little bit of a loss. You know, they could've made that decision. But that, uh, because that decision was taken away from them, they were upset. Yeah, so, so all good stuff. So, all right, so where, where do you think we are right now with sellers adjusting their prices? We're starting to see some of them do it, but there's still some out there that are holding out. Is that what you're seeing?

Yeah, deals are starting to pop. I think sellers are, are still waiting. Um, you know, deals are, deals are way down. I remember Vanessa talking at the last, uh, Insiders Club, and she's like— and she's a really smart current investor. All the deals that she did during the height are still performing really well. This is the deal. If you're a value-add investor, if you buy based on being able to increase the value to the market, not over-projecting where the market will be, then typically you do well. And those are the ones that are okay during this particular part of the cycle. But she was doing a deal a month and she hasn't done a deal in 6 months because they're just not out there right now. But they are starting to pop through distress. So because people need to sell, people will stop doing the repairs first, you know, so they can make the investor, the investor distributions. And then when they realize that some repairs do need to be made or rents, you know, the rents aren't coming in, then they start making the investor distributions. When they stop doing the investor distributions, you know, the capital expenses still continue to rise and there are some of them that absolutely need to get done. But they don't have the funds for it. So now they do a capital call to the investors. Then you get a small percentage usually that will give money, and either the sponsor has to put up the money or the next step, it's going back to the bank because they're trying to make their mortgage payments and then they'll get to a point where they can't make a mortgage payment. So those are the deals that are out there right now.

Are we seeing the banks have any flexibility at all on modifying terms or are they just going to say no?

Yeah. So you can go to a bank because the banks don't want them on their balance sheet either, and they understand what's happening. It all depends on what's on the balance sheet of the bank right now, where they, you know, how many loans that are either in default or close to default, and that will determine how much they're willing to negotiate on a particular deal. But if you can get it before it goes back to the bank, you know, negotiate with the banks like a short sale type of a thing. Short sales, that's how I get into this business. My first real big deal was a short sale down in Texarkana, Texas. The mortgage was $4.2 million and I bought it back from the bank for $2.2 million, actually from the owner. But the bank, the bank had to agree to it for $2.2 million. So those are starting to come back.

All right. So, yeah, don't forget that. I think the message there is don't forget to talk to your lender if the loan's in trouble. Say, hey, what can we do? Can we modify this? Can we bring in some more money? What's going to satisfy you and your investors to make sure that we can ride this out? Because we're, you know, we can see the other side. And you might have to do a little presentation to your lender even and show them what you're doing and, you know, how you're projecting that you're going to get through this.

Oh, absolutely. You got to create a presentation or else, you know, it's not going to happen with a phone call.

Yeah, same with your capital calls. If you have to do a capital call, you should be doing a presentation and a little PowerPoint to your investors just explaining, laying out the situation, something you can send to them. They can mull it over on their own. and make their decisions. And, you know, those are things that we can help do as well. So, all right, good. So I want to just remind everybody, if you have any questions, please either type your question in the Q&A or raise your hand. We're going to go to questions and answers in a little bit. But Dave, what else do you think people should know right now? What haven't we covered?

Well, these are the times if you haven't started investing, these are the times to set your foundations. You know, get your team in place, decide which market you're going to invest in, get your team in place, um, get communication up. Yeah, you know, there's— there may not be a lot of deals on the market now, but there is going to be. So if you start like later to, to build your teams and your resources, then you're not going to be the guy that they're going to go to first. So it's going to be a lot harder then. So now's the time. Now's the time to establish your foundation.

And your investor database, because you need to be educating your prospective investors on what is happening in market right now, and that, you know, at some point we're going to come out of this. There's going to be some investment opportunities. These are how they're going to work, but they're going to move fast. If you want to be part of it, then, you know, let's get a relationship in place right now so you understand what we're doing, and then we can start communicating these deals to you. So get your investor database in place. Don't— you know, just because people might not invest with you today doesn't mean they're not going to invest with you 6 or 12 months from now. So, okay, great. Well, let's, let's talk about some of your upcoming events. There's a lot going on. Yeah, we've got Ultimate Partnering. Tell us about that.

Ultimate Partnering in San Diego this year. We have Ed Mylett as our keynote speaker. That's where probably 75% of the people there are alumni. So people from way back in 2002 when we first started teaching to all the way to— we got new people that come in. It's the first event they come and see us at. But it's all about networking. It's all about, you know, finding private money in the room. It's about finding partnerships in the room. It's about the deals that are available in the room and the education from the stage. So we teach and we network, teach and network. And it's so much fun. You know that, Kim, you've been to— I don't know, probably since every one of them since 2006 when you first came to us. But it is a room where people just open up their arms for new people. Coming in. You know what I mean? It's like everybody's part of the community, everybody wants to help each other do well, and it's probably one of the most uplifting environments. It's the event I look forward to every year. I can't wait for it.

How can people find out about that and sign up for it?

They can go to ultimatepartnering.com, ultimatepartnering.com, and you'll see the, uh, the signup sheet.

All right. And then, uh, Private Money Boot Camp. This is an event that I co-teach with Bob Bowman. Some of you might know Bob But, uh, we've been teaching it together for a long time, um, for Ari Mentor. So there's one of those coming up. I think the next one is October 20th. Is that the right date on that?

I think it's the first weekend in October. Um, I think I have to double-check myself. I know it's in October. Uh, so that's all about how to raise private money. So Bob teaches, uh, what to say, who to say it to, and when to say it, which is the thing that most people fear. And then Kim talks about how to put it all together and keep it So it's a great combination and people love that event.

Yeah. And we always have a good time doing it too. We love getting close to the students there and really getting to know everybody. And then we've talked a little bit about your Insiders Club. Let's tell people what that's about.

Insiders Club is— I created this group. It's a network. It's not a mastermind, but it's a network and it's filled with the 3 different types of investors. I call them the doers, which are the people that haven't done a deal yet. yet, but they're going to. That's why I call them doers. We've got the rainmakers, people that own between 3 and 1,000 units, and they're learning how to put all their systems in place so they can get over 1,000 because that's their next goal. The doers, their first goal, their goal is to get one deal. The rainmakers, they want to get to 1,000. And then the magnets are over 1,000, and they're all about business building. So, during the 3 days that we're together, we go through all the different aspects of what to do to get yourself starting out. We usually have members present about, you know, the magnets will present to the doers how they started out. And then we'll get into systems. We'll do a lot of mindset, as you know, because it doesn't matter where you are in those 3 steps. It's all about mindset to get to the next step and to keep yourself going. And we have guest speakers come in. Actually, Ed Mylett came in and spoke to that group. And we have the— Kim speaks at different times about what's going on in the legal field. But it's very diverse in terms of topic. But more importantly, you expand your network, you know, very, very quickly. And We have a lot of fun. Quack, quack. We went on a duck boat tour. We went on a duck boat tour.

Yeah, that was funny. And it was a good time too. The other thing that I always say to people is, you know, they always ask me, who are the different real estate trainers out there? And when I talk about RE/Mentor, I like to say RE/Mentor has a curriculum. By the time you go through all the coursework that RE/Mentor has, it's like you've got an associate's degree. in real estate investing and multifamily in particular. And, you know, so it's unique in the market, I think, that way is that you guys really go— you have, you know, kind of your Multifamily Millions boot camp. If you haven't been to that, you need to go. You know, that tells you what to buy, what not to buy, where to buy, how to determine the emerging markets, things like that. You know, I was just blown away by the amount of information that was provided at that event when I went back in 2007. And so then you go to the Private Money Boot Camp, but then you have some other coursework. Can you tell us about that?

Yeah. So this is all an evolution. Way back in 2002, I was the only one that was teaching how to invest in multifamily properties. So I taught Multifamily Millionaire Boot Camp. So then as people started going out and doing deals, they're like, Dave, can you teach us how to raise the money? I was like, okay. So I created Raising the Money Boot Camp. Well, we went to those people doing deals and they're operating. So how do we— it's like, Dave, how do we operate these deals? Can you teach us how to be an operator? So we created Managing the Manager. And then we were teaching people how to do deals and do big deals, but yet they didn't qualify. And by the time we got there, like, you know, about 7 or 8 years in, we realized that a lot of our people had been very, very successful. And in order to qualify to do the bigger deals starting out, you need a sponsor. So we just got our alumni students and said, hey, how would you like to sponsor deals? We're going to have an event. We're going to bring people in, they get to meet you. Your benefit is you get to do deals and their benefit is they'll have sponsors. So we created the sponsorship event and then we created the immersion event because people want to go out and they want to see the numbers, really dive deep into them and understand them. Then they want to go out and touch the properties that you just analyzed. So we created immersion. It's like, here, here are the numbers and here are the properties, you know, touch and feel them. And then third day is how to build your team. So yeah, it's, it's really been You know, a one thing playing. It was the needs, you know. It's the needs of the client base. We all, you know, downstairs— you've been here downstairs— when you walk into this 12,000-square-foot building, there's a sign that says, we are not successful until our clients are successful. And we're always thinking about, you know, what do they need? What are the challenges in today's marketplace? What can we create to get them through those challenges so they can do more and more profitable deals?

Right, absolutely. And, uh, and, and I've seen that work. I, I will tell you that there are more clients of ours that have gone on and done many, many deals coming out of your program than any other.

And I've got, I've got this great testimonial from— and we got a great mentorship program too, uh, coaching program. Um, but, uh, oh, so since I just did that whole pitch, right, I might as well tell people where they can go if they want more information. So you can, uh, call the office, 781-

878-7114.

781-878-7114. You can talk to Rob Raposa, um, and, uh, or you could go online and you could email Rob Raposa. It's R-R-E-P-O-S-A, robraposa@irementor.com. So what was I just about to talk about before I did that?

Sorry.

Some of your programs, um, how to, how to find out about them.

Um, Ari Mentor, also the website Yeah, it's kind of scattered right now. We're putting it back together.

Okay. All right. But you can reach out to their office, reach out to RE Mentor, talk to their people. It's well worth the investment. I think I've just seen people that have gone through coaching program. I mean, all of our clients that have done multiple deals have come with a coach for their first 2, 3 deals, and they're the ones that have gone on and done many, many more deals. Others that accountability—

yeah, accountability gets in here. What I was going to mention is this testimonial I play. So there's this woman, I think you know her, out of, uh, Texas. She does, uh, she's a management company, uh, uh, Kathy— Kathy Fontana. Do you know her? So she starts this— so she comes to one of my preview events way back in 2009 or 2010, and that's when I was teaching them back then. And she stands up and she says, I want to say something. And I'm like, you know, there's a lot of crazy people in the world. I learned a long time ago is you don't just don't let anybody talk. You know, I learned in New York City, you know, when I did an event there and they started saying all this crazy stuff from the crowds when I let them talk. So, um, I was like, something inside of me said, all right, let her talk. So I said— she said, I want to say something. I says like, okay, come on up. She said, I just want to say that I'm a manager here in the Dallas-Fort Worth area, and those people he had up on there on that wall They're all my clients. She said, I've got about 12 to 18 of his clients and I manage their properties and they're doing really, really well and I want to know how they're doing it. So I'll give them the class myself. And so she came to the class, she went through all the mentorship and everything. And now I've got a testimonial that I did 2 years ago and she talks about the 5,000 units that she now owns, you know, and she taught her son how to do it through my systems and he owns his own jet. So I mean, if you follow this, people say, does that system really work? And I say, you know, that system works if you work. If you work the system, the system will work. Simple as that.

Well, this isn't a get-rich-quick scheme. It's, um, you know, do a lot of hard work and get rich over time scheme.

Yeah.

But also, it's not about just about you. It's also about helping your family and friends achieve their financial dreams. And you've got to keep that mind because it's not just about you, it's about them. And if you're, you know, kind of always keeping that focus, you're going to have the right mindset to be able to stay in it long term and make sure that their interests are met. So that's super important. Think about your investors. All right, well, we have a shy crowd today. We haven't had anybody ask any questions. Christian, do you have anything you'd like to add to anything we said today?

Not at the moment. Just, this is like amazing information. Amazing, beautiful information. Thank you, David, like, and Kim. Like, you guys are so brilliant, a wealth of knowledge here, and I love how enthusiastic you are. Um, but it's like how much you value being of service. That's really what's coming across to me here is just like, it's, it's not just about the money and, and, you know, that, that part of it is great and it's It's fun and it's there if you want it, but it's really about it being a passion and being of service. And really—

This is what I figured out. If you focus on your investors and you focus on your tenants, the 2 most important people in the deal and the banker, but the 2 most important people in the deal, then everything else takes care of itself.

Yeah, I agree with that. And from a security standpoint, when you're dealing with passive investor money, you have to put their interests before your own. You have a fiduciary responsibility to do that. And so always be thinking about them before you and what's best for your investors, and you're probably going to make the right decisions.

So I remember one time I walked up, you know, I was living in the one-bedroom apartment when I started investing in multifamily properties. And my sister Tammy, who, you know, joined my company, she was like, we were in the living room with 2 desks. That was the company. And so, but she was taking care of all the admin work. And I remember I walked up one day up the stairs to the second floor where the apartment was, and I hear her screaming at somebody. I mean, she's screaming at them. And I was like— so she hangs up the phone. I was like, who was that? And she said, oh, that was Mrs. So-and-so from Washington Street over in Brockton. And I was like, well, what happened? And she said, oh, you know, late about the rent or something like that. I said, why did you talk to her like that? Was she rude to you? She said, oh no, she was supposed to do this. And I was like, listen, that woman and every one of our tenants are our gold. I said, don't— they pay for our properties. They're our cash flow. I said, don't you treat them like that. Treat them like the gold that they are. And if you can't, then I can't have you work here anymore. And that's been our mindset ever since.

Yeah.

Yeah. You have to— you have to put them first. Put them first. So. All right, Dave, thank you so much. As always, you know, we're always blown away by the information that you share with our audience. Super excited to see everybody at Ultimate Partnering. We're going to be there as sponsors. Also looking forward to seeing anybody that hasn't been to the Private Money Boot Camp. It's 3 days of learning and immersing yourself in securities compliance and deal structures. But hey, I'm not— I try to do it in a fun way, but also learning the practical side of it from Bob, how he got into this business, how he talks to investors, You know, how he meets people. All that is just critically important to learn as you try to put all of this stuff together. You've got to build an investor database. That's what, you know, we're here to help you do. Dave's here to help you figure out what properties to buy, what not to buy, and how to put the deals together. So, you know, with both of us, you got a winning team, and you're gonna be able to do this business. So, Dave, thanks so much.

Thank you.

So much for joining. And we will look forward to seeing everybody at UP.

Take care, everybody.

Thank you.