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Transcript:
For busy, higher earners. Yes. Your money just really starts to grow compound over time.
All right, guys. Thanks again for joining me this week, I’ve got a special guest, the cohost of the tech guys who invest podcast, a podcast about real estate investing, whether directly multifamily notes, syndications funds. Adam is the one I listened to every week, so I can further gain knowledge on my investor path. He also happens to be the head of investor relations for dream stone investments down in Florida. I believe so, Adam, thanks so much for joining us today and sharing all your knowledge,
Mike, thanks so much for having me on. I’m really excited to be here.
Fantastic. And Adam, I’ve got you here because a lot of my airline pilots are very interested in syndications, basically pooling funds together with multiple investors. So, you know, a manager can go in and we can have, we can enter larger properties with larger profits and everybody gets to share the profits. Not only that, now we get to share experience too, because we all know that investing is a team sport and the more friendly, educated, and experienced people we have, the more money everybody can make. So Adam, what did I, a big question is since syndications funds, this is new to people. CRISPR. A lot of us are just used to day trading with the stock market or 401ks. This is a new avenue. So in your experience, so…
Why would investors choose to invest with this indication like dream stone?
That’s a great question, Mike, and it’s pretty interesting because it is new to a lot of people. It was new to me just a few years ago and perhaps it’s, it’s fairly new to you as well, but it’s actually been around for awhile. And what’s interesting. I sort of started to peel this back along my investor journey. And one of the things that I love about it is wealthy people have known about and been doing this stuff for a long time. And you, you sort of had to know somebody or you get a, you know, how do you get exposure to that? Well, you know, before the technology that we’ve had more recently, it was through word of mouth and being in the same social circles as some of these folks. So it existed, but it was most people didn’t know about it. And now that we have the information at our fingertips that we do and word gets around, uh, people who are receptive to it enough to sort of pick up on it and, and learn about it and take the initiative to go learn about it on their own.
They can figure this out and realize that it’s actually accessible to guys like you and me and the audience who’s listening here. So I think that’s, that’s a super interesting thing to understand about this and it sort of helps clear away some of the mystery around the, these things like these syndications and private more private investments. Right. Um, so, uh, your question though is around why some reasons investors would invest in those syndications? Well, like that’s kind of a reason it’s, it’s what the wealthy do. And you sort of want to look at, uh, what you’re trying to achieve, what your goals are, and look at people who are achieving those types of goals and try to emulate what they do. Right? So that’s one thing I think is, uh, it is a great way to build wealth as demonstrated by wealthy people who invest in these things.
So that’s just one reason why, uh, you mentioned a couple of other reasons why, which are really important. I think bigger, better deals than you could get on your own, right? Like Mike, you or I could go buy a rental property and we can, we can manage that. Even if we’re using professional property management, uh, it’s, it’s one rental property there and we’re probably fairly limited, uh, in the size and the scope of what we could do all by herself. Right. But if you pool resources, you can get a bigger deal. Uh, and then you can start to capitalize on economies of scale and efficiencies and things like that. Right? So bigger deals than you could get on your own better because now we’re working with people who do this professionally, they do it full time. So they’re able to really get into and understand the business in a way that someone who’s dabbling in it or someone who does it kind of, part-time just as enabled to compete with, right.
You’re not able to compete with someone whose job it is. It would kind of be like a, um, a hobby, somebody flies for a hobby, trying to compete with you, who flies for a living right there. There’s not comparison there. Um, and then one more you mentioned that I think is really important and that’s that leveraging a professional team, you know, partnering with those experiences, those experienced people to operate more efficiently. And the, the key there is you being able to partner with them. So that’s why that’s why investors like doing this because you get a chance to partner up with that professional team and take advantage of their experience and their knowledge and their wisdom. It kind of benefit from that. Does that make sense? You know,
That’s a great point because a lot of airline pilots are dabbling in their side hustle. They own a few single family houses here and there. And a lot of them are frustrated. Like they’re excited about the learning process, but they’re frustrated that I bought the single family house and I’m getting $200 a month, right. It’s tough. And you make a great analogy. You know, you can fly for a hobby and fly a little Cessna around and have a great time learning and being up there, or you can hop in a jumbo jet, put the fall, the throttles full forward, take off. And now you’re making money, lots of money by utilizing the team, the copilot that air traffic control, like you mentioned, experienced people. So that’s huge. And I hate to admit, but you know, just a few years ago, the idea of investing in a private fund sounded really scary, same here. And that sounded like, well, that’s that’s for the trumps of the world, but you know, with technology, we can get you to broadcast to other people about that. It’s not so scary. This is the rich have been doing this forever. And like, you make a great point. It’s who, you know, and having you on here brings your knowledge to us. And now we know you and now everybody has the opportunities that what used to be just reserved for the Trump. So that’s amazing. I really appreciate
That they pile investors. I’m here in key west at pan AM’s original headquarters down in key west. Now it’s first flight brewery and restaurant, and I’m here because Tyler chef and I, as I’ve been introducing to you are starting an investment fund specifically for credit investors, airline captains here, we’re going to be bringing in our team, our property management team contractors. Everyone’s going to be talking about our investing strategy here in key west, which you’ll be able to participate in. I’ll get you a firm date and time later on, but we’re going to be meet right here at pan AM’s headquarters off to see you guys. So
Let’s say I’m an airline pilot. I’m really curious. I want to learn about syndications. So, you know, if I go on each trade and I buy a stock, I push the button and then it magically comes up on my screen. Yay. Now, if I want to invest in as syndication with experienced professionals, people I can actually talk to what’s the next step. Well, what happens when I sign on the dotted line and the money is wired to the fund now, what? Okay.
Yeah. That’s a great question. You, why are your money into the fund? And, um, you know what, I’m gonna S I’m going to take it like a, a step or two right behind that. So you sort of see with this, what the runway looks like here. Okay. So do you use a little airline analogy there? Um, they typically will. We’ll submit a soft commitment indicating interest in a deal. We’ll share the details of the deal up front with investors. And they look over that and say, Hey, this one looks like a good fit for me. I like what I’m seeing here submit a soft commitment indicating I have interest in the deal. And then they receive legal docs. So like a subscription agreement, operating agreement, private placement memorandum, and, and they outlined the deal terms and the structure of the deal boring, but necessary reading.
Right? So your, your informed investor to read that stuff, make sure you understand it. If you don’t, you’re talking to your attorney and reviewing it with them and get a nice, comfortable feeling about this. Of course, you’ve done all your due diligence on the operator, but if it’s us, you know, you, you have met with me. You’ve talked to me, uh, my team, you feel comfortable with who we are. Uh, you’ve asked Mike about us. Uh, so, so all of that’s happened. And as you said, uh, Mike wire, your money over when it’s time, we close the deal. Okay. And then you sit back and collect your distributions. Hmm. Interesting. Right? Like there’s not a bunch of work. There’s not a lot of elbow grease. You’re not like dealing, you’re not dealing with tenants. You’re not managing business operations. You’re, you’re a passive investor. So as someone who invests in a syndication that, that we offer, you’re a limited partner in the deal, which means you’re not active.
You’re, you’re putting your investment up. We use that as capital to take the deal down and then you’re rewarded by receiving distributions. Well, that’s cashflow a lot of times and you know, it’s typical for it to be a quarterly distribution. So, so quarterly, you, you receive that in your check. Um, we communicate with our investors, most syndications do this. We communicate, uh, monthly. And, um, and so you’ll get a monthly communication that sort of talks about operations what’s going on and the deal, how it’s performing. And, um, and then fast forward to five to seven years later, we’re ready to exit the deal. Uh, you will receive the, uh, the payout there at the end as well. That’s the exciting part, right?
Wow. And the big difference between stocks, I mean, you have stocks, you can go on their quarterly webinar where there’s thousands of people talking, but with syndications, somebody can call up you and ask questions. Right?
Absolutely. In fact, it happens frequently. People will reach out and they’ll just have little questions like, Hey, Hey Adam, what about this? You know, what about that? They, they can, they can reach out to me directly. They do. I respond personally. And, uh, there’s that personal relationship. And as, as operators who are in this business for the long haul, we want to establish relationships. We want to, we want to know you by name. We want you to know us and, and we’d love you to be with us for a long time. So we take a lot of care and we take a lot of an intentional relationship building. Seriously.
So as an investor, I’m part of the team I’m seeing quarterly reports. I can call Adam with any questions about what’s going on. As far as where my money’s going, which is important. You put your money in the stock, you have no clue what to do with your money,
Right. I hate a little scary. And Mike, we all, we have an portal. So if you invest with us, you can log into your investor portal, anytime. Uh, you know, you’ve got your investment in there and you can look at the look at the highlights of the deal. You can look at your documents. We, we put your year-end tax documents in there and all of that kind of thing. So if you’re in your investor portal, when you see something, yet question, reach out to me. We can have a discussion. Now try doing that if you invest in apple.
Absolutely. So Adam, we talked about one of the major hurdles is, you know, five 10 when I grew up, this was foreign, nobody ever heard of private funds. So I’m curious when people call you up, who are interested in investing, uh, they are, they leery about investing. Do they want to be handheld at first? And what kind of common questions do those people have? Cause there’s nothing wrong with that. Everyone has to start.
Yeah, absolutely. And as you know, Mike, I’m an educator. I love teaching people about this. Uh, Kevin and I do that through our podcast and we, you know, we try to educate people. And one of the things that we talk about a lot is educating yourself, like teaching yourself what you need to know and, and getting go out and getting that information. So when I get a call with an investor, if they are new to this, I really want them to do a lot of their own homework and, and self study. So they’re truly comfortable with it. I don’t want it to be a situation where I’m trying to sell them on something and try to convince them to be comfortable. It’s really important that, that they are on their own. So I will talk to them and answer real basic questions about, um, about getting started in this type of investing point them to a few resources and, um, you know, trying to help them that way. But then the opposite end of the spectrum is a lot of times I’ll have experienced and accredited investors who will, I’ll hop on the phone with, they, they find us and they know exactly what they’re doing. They know what they want. And I’m talking to them more about like the terms of the deal about our team and our track record, those sorts of things. So it’s kind of interesting.
Wow. So the new guys you provide that education, the experience guys, they want to know the numbers let’s go.
Yeah. Right, exactly.
That’s fun. So can you explain to somebody who is interested in learning to utilize their money properly, like the rich do…
What type of ways can the investor be compensated?
Okay. So that’s a good question. We talked about this idea of distributions, right? So that, that is one of the ways you get compensated in the deal. So you put your investment in and then the team starts to execute the business plan. And then pretty soon you start receiving a distribution or a, you know, a reward, a share in the cash flow that we’re generating. And that typically happens quarterly. Um, you know, every is different. Those terms will be outlined in the legal documents and also in the offering memorandum or whatever marketing materials, I’ve company, the deal when it’s being presented to you as an investor. So you’ll understand that going in quarterly that’ll happen now, many operators issue a preferred return. So that can be a little bit confusing if you’re just getting started, I’ll kind of give the super high level, but if you want to really dive into that and understand it more, there are resources you can pick up to do that.
Um, but essentially what that is is it’s, it’s kind of the cashflow amount that the limited partners or the LPs receive before it’s split with the GPS. Okay. And the reason it’s offered is because it’s sorta helps build confidence with investors that the operators are willing to share the first part of the cashflow before they even start to share in the profit. Right? So it, it takes confidence to be able to offer something like that. And, and that’s why we do it. And, uh, and so, you know, from the LPs point of view, it’s nice because, uh, well, it’s not guaranteed, but, uh, it’s very likely that you’ll be getting distributions, right. Equity split. So that’s the other way they get paid is at the end of the deal when we’re exiting the deal and we sell it, uh, we’ve forced appreciation along the way. Hopefully that’s, that’s in the business plan most of the time. And, uh, you get to share in that too, as a, as an LP, a partner in the deal, we, uh, we share that profit at the end and that’s a much bigger payday because, you know, we have really pushed the value of that property up over five to seven years and we’re selling it someone else.
Wow. So you brought up a lot of terms and people who were interested in getting syndication, there’s a lot of terms we’re not used to. So you refer to LP limited partner. Now, I assume that would be me, the investor, right,
Exactly. That is, uh, you can think of that as you, the passive investor, you’re, you’re literally a partner in the deal. So one reason that’s important is because as you know, there are a lot of benefits to investing in real estate, as opposed to investing in paper like stocks, or, you know, some sort of a promissory note type of a thing or a REIT, right. Which is a stock when you’re investing in one of these syndications, you’re, you’re literally investing in a hard asset. You’re investing in property in our case, it’s an apartment. So as a limited partner, you get to take advantage of all of the same benefits you would as if you went and bought a rental house. So when you’re doing taxes with your CPA, at the end of the year, we give you a K one, your CPA takes that factors that in, and those benefits of, you know, um, I guess, appreciation, uh, depreciation, uh, the tax benefits there, all of that are kind of included because of that.
I see. And so you mentioned preferred return and a percentage of the cashflow. So it’s correct me if I understand. Correct. So you’re saying preferred return means that the investor will get their returned first before the general partner, the GP would get theirs
And it is a, it’s a portion of it. So they get, um, they get a percentage and that will be stated in the offering materials. So you’ll know what that is going in, and you’ll be able to see what those numbers look like. Um, a lot of times it’s 7%, for example. Um, so you’ll get that before the GP or the, the active investors, the operators, the people who are managing the property after we go live and, and, you know, or managing the, um, the, the tenants and the business operations and everything. Um, so you get it first before it’s split between you and the GP.
A lot of syndications say, oh, we, we expect an ROI of 15 and 17%, which sounds like high numbers. Where are they getting that? And I don’t, I assume they’re not talking about the prep they’re talking about, right.
And that they’re talking usually, uh, they’ll communicate that in the form of a internal rate of return and IRR and, and that sort of, it factors the return on your investment over the life of the deal, right. And it’s a total it’s kind of a total return. Um, it’s actually a pretty complicated formula behind the scenes, but if you just sort of look at it as a great way to compare properties investments, rather to each other, uh, it can be a handy tool because you, you look at something with a 15 to 17% IRR, which a lot of our deals have. And then you can compare that to other deals. Other IRR is for your money and, and sort of say, well, where do I think I’ll get the best investment? Yeah. So here’s how it work. And it, it is a little bit complicated, but after you start to, after you look at a few of the deals on paper, for example, if you look at one of our offering packets before you invest, you’ll, you’ll start to get used to this and it’ll become a little less confusing, but, but just to kind of let me use an example.
So, um, the, the pref, the preferred return, um, that’s calculated by taking the, the capital amount in the deal. So not just yours, but like, let’s say the GP, um, let’s say the GP was raising a million dollars and they were going to, they’re going to bank finance the rest, right. So they need to raise a million dollars. Uh, so you’ll take that amount, the capital invested in the deal million dollars, and then divide it by the preferred return. So that’s going to be, that’s going to be 80,000 and then above that. So assuming the property, let’s say the property made a hundred thousand, so that 80,000 goes to all the LPs first, the remaining 20 then gets split. 70% of it goes to the LPs again. So you get more and then 30% of it goes to the GPS and then that’s it for that year.
And then that’s kind of how it’s calculated. Wow. Yeah, I know, I know it’s a little complicated, but, um, you know, I mean, they do it, the reason they do it well, keep in mind, also a lot of the people who structure these deals invest in these deals. As we talked about in the beginning of the show were pretty sophisticated. You know, they’re wealthy people. And as, as you get used to this, you start to realize what’s really nice having some sort of a preferred return there because that’s showing me that the operators have confidence, that they can provide that first, before they even take any. And they’re incented because they’re sharing the amount of, of that, their incentive to make that deal profitable, try to beat that and get above it as much as they can, because then they start to share with you. Yeah.
I never thought about that. It does show confidence. So it sounds like there’s different ways that an investor will be getting money. And there are quite significant amounts when you look at it. I mean, we’re looking at big numbers here when we’re looking at large multifamily and distributing all that. That’s, that’s really, that’s really enticing. I mean, like we said, if somebody has a small rental property, we’ve making $200 a month as cashflow, that’s, that’s great for the $200. Yeah. But you’re learning a lot, but now when we can combine funds and get with the big boys, those three ways to get paid, you just mentioned those are big paydays. Yeah.
And passive, right. I mean, it’s great for busy high earners. Your money just really starts to grow pound over time.
That’s a great point. You don’t have to deal with tenants of termites, right? Nope. That’s exciting. So at dreams don’t, can you talk about any current or past investment examples that you guys have offered?
Uh, yeah. The current market has, uh, has really slowed down our acquisition of new properties. It is interesting at the time we’re recording this. Uh, we have a lot of market conditions that, that, uh, we haven’t seen in a long time. Uh, sometimes we haven’t it ever, uh, but it’s making it really hard to get our next deal under contract. We’re working hard. We’re, we’re analyzing a lot of deals, submitting a lot of offers and working really hard to get our next deal. But, but we haven’t found any that fit that criteria recently. But our last two deals, I could talk about a little bit. Um, they were, they were very different from each other, but each one is an example of what we’d like to do, do more of in the future. Uh, so one of them was a large multifamily and apartment building and Atlanta.
So it’s a, a 100 unit class B, and I can talk about what that means, uh, in Atlanta. Um, it was, we, we thought it was a great deal. Uh, it was off market, which means it wasn’t, it wasn’t being offered on, you know, like we’ve net or out with all the brokers trying to shop the deal. Uh, we were talking directly with the seller and, um, and that’s nice because then we’re able to negotiate directly with them. We’re not competing against others. Uh, so that makes things really nice. And it wasn’t just like a nice, quiet area that had, um, good demographics, you know, like a strong renter base. Um, good, hard working people in the area, uh, a lot of jobs, high occupancy, uh, which, which we have managed to maintain, um, that, that property has really low delinquency, which means people are paying the rent on time.
We’re not like chasing people down to go pay their rent and things like that. Um, and, uh, just, just good steady cash flow. So I said, I’d talk about class fee. I mean, that’s just sort of means, um, it, it’s kind of like a, a, a good sort of middle, middle grade, uh, blue collar, but maybe, um, higher earners for blue collar jobs or low earning white collar job in the, in that kind of range. You’ve got maybe some cars in the parking lot that are a little bit older, but they’re in nice shape. You know, people take care, they have pride in their possessions there, and they’re, they’re responsible. These people probably have a trade or, or a career path. You know, they’re not, they’re not just sort of taking whatever job is available. Like if they lose the job they’re in now, they’re likely to take something that’s in the same field, maybe.
So that gives you just sort of a rough idea. The property is usually a little bit older, maybe, maybe 20 years old, uh, something along those lines. Um, and if it hasn’t been so well maintained, then we love that because that’s a chance for us to add value by just sprucing it up. And you could look at it just like, you might look at an older car that’s been well taken care of, or sort of refurbished and say, wow, you know, it’s got some age on it, but it’s in really nice shape. It’s clean. I wouldn’t mind being there, that kind of thing. So that’s sort of what a class B is. And that’s what this property is.
That’s exciting. Are you able to tell us, like what, uh, how many units properties that you just look for?
So that’s a a hundred unit. Yeah. That’s a hard crime, which is a good that’s, that’s a nice size. I mean, we look at, we’ve got some smaller ones than that in our portfolio. We’re looking at larger ones. We’ve submitted offers on much larger ones. Uh, got beat out of some of those. So as we grow into the future, we’re looking for bigger and bigger deals. Um, yeah, so recently there was a 322 unit that we were, we thought we were going to win that deal. And then, um, something happened there at the end and we didn’t quite, it didn’t quite land the plane, but, uh, the point is we’re, we’re growing, you know, we’re looking for bigger deals and, uh, that 100 units been a great product. Wow.
So exciting. So people who are out there, whether they’re dabbling in real estate on their own, and they still want to get the profits that somebody like Adam can provide. Adam, you mentioned, you know, a lot of your investors are high income earning, which is similar to airline pilots who just don’t have the time to be buzzing around the country, talking to realtors, property managers. Uh, and as we talked about in the beginning, investing in private funds is not nearly as difficult as we once thought. I mean, Adam just explained it right there. It’s just a few papers, a few papers sit back. And every quarter you hear about what your money’s doing and how it’s growing. So Adam, super exciting. If one of my viewers wants to get in touch with you, see what kind of deals you guys have going on and, or maybe they want more education on it, how would they get in touch with you?
Awesome. Thanks Mike. Dream stone invest.com is my website. Uh, you can, you can also check out my podcasts website T GWI podcasts.com. That’s called the tech guys who invest podcast. And we, we like to provide financial education, mostly around real estate, but sometimes we’ll have other people come in and talk about other assets that you might. We had an, an oil guy on there really interesting. So, you know, we’ll do stuff like that occasionally. Um, but T GWI podcast.com is where you can find that. Also you can find tech guys who invest on any, any sort of, uh, podcast app like Stitcher or Spotify or any of those. And then, um, reach me directly by emailing me at my dream stone address, which is Adam at dream stone, invest.com. And then you can find me on LinkedIn, uh, Adam jewelry. And tell me where you heard me. If you reach out to me on LinkedIn, uh, let me know, Hey, you know, I heard you on Mike show and that way I kind of know where you’re coming from.
Awesome. I am super excited. Awesome. Yeah, Adam, thanks so much for providing your information and more importantly, an opportunity, you know, especially in this market, a lot of guys have wondering, maybe this is a little too hot real estate market right now. Should I be sitting back and waiting? Well, you don’t want to have to wait when you’ve got experienced people like yourself, like your team, which we can profit off of now. Thanks, Adam. Awesome. Thanks Mike.