Welcome to the untold stories of real estate investing. Hosted by Wayne Courageous II. A place where active and passive investors come to hear the good, bad and ugly of real estate investing. Our guests consist of experienced operators and investors who want others to succeed by sharing their stories. If you're looking to syndicate deals or grow your wealth passively in real estate, you've come to the right show. It's now time to sit back, take mental notes, and enjoy our next episode of The Untold Stories of Real Estate Investing.
Welcome to the untold stories of real estate investing. I'm your host. Wayne courageous. Today I'm super excited to have Jeff Greenberg back to our podcast. He was our podcast number five when we first started getting our podcast going. So we're going to have a really great conversation, but let me reintroduce him. He's the CEO and managing member of Synergetic Investment Group, LLC, also known as SIG. For over twelve years, he has managed all aspects of commercial real estate ownership, including acquisitions, investor relations, operations, value add implementations, and dispositions. Through the SIG Wealth Fund, a diversified and customizable equity fund, SIG provides the opportunity for high net worth individuals to passively invest in commercial real estate. With best in class commercial deal Syndicators, jeff uses his extensive experience and network to help investors discover and invest in high quality alternative investments. Jeff has been involved in projects worth nearly $150,000,000, consisting of over 2000 units. He's been involved with stabilized and value add properties, including student housing, as well as short term rental and market rate multifamily properties. Welcome to our show, Jeff. Thank you very much, Wayne. I'm excited to be here. Yeah, I am so excited for you to be here. We had a great conversation just catching up prior to this, and I told him I was like, we should have just pushed record from the very beginning. So super excited. When we first talked about when we first had you on the show when this podcast was getting going. Episode five, we talked heavily on student housing. Want to start there? Sounds like you're at your last student housing property that you own in Georgia. How was the ride with student housing? Any overall lessons learned or anything that you want to share before we pivot into more of what you're doing today? Well, I mean, student housing I think is a great asset type. There's a lot of advantages to it. There's a lot of disadvantages. We talked a lot about that before. As far as the specific things involved with student housing, the property that we're selling coming up, it's been seven years that we've held onto this property and it's time to cash out. But I really like student housing. I do like working with students too. I mean, being involved in that end of it has been a great run. You had been more so on the general partnership side of multifamily short term rental, student housing, et cetera. What was the reason for you to sell off pretty much all the assets other than the one at least on the student housing, it was just time to sell with that five to seven year whole period, or was there? Yeah, all of the properties it was time to sell. And that's always what we're looking for. I mean, I've had properties for six years, I've had this one for seven, I've had properties for two and a half years, I've had properties for three years. I think I had one other for six years. I'm going to look at what the best time is for the investors as far as when we should cash out and take advantage of any added value that we brought to the properties. And some properties, just from the nature of the properties, took longer to add that value and some of them got COVID, kind of slowed things down. So sometimes we had to reschedule or replan, depending on the market, but it was time to sell them and move on to my next adventure. Which we'll be talking about. Yeah, it's a great segue. So a lot of times on this podcast we've talked a lot with multifamily syndicators or other general partners who are sharing their experiences in real estate and such, but we haven't really talked about a fund, the fund model, or a private equity fund. So that's what we're going to be talking about today and really just learning as much as we can from Jeff here on what he's doing and how it actually is benefiting his investors that are going through this fund model. So Jeff, share what you're doing, what the overall fund like structure is, and how it benefits your investors. Okay, first let me start with the reason I made the transition. Because for the past twelve years with all of my deals, I was the main GP. I did have partners, and so sometimes there was two of us, sometimes there was three of us or five of us on the GP side, but I was always where the buck stopped. So I was the main GP on that. And I realized that there was a lot of things that I didn't enjoy doing about the business, and acquisitions didn't really excite me. Going out and getting broker relationships and finding the deals and closing on the deals, that was all part of it. And those were hats that I had to wear, but it didn't excite me as much. And then on the last deal we had, which was a 225 unit, I brought on somebody to asset manage, because that was also one area that I didn't care much for was the asset management. And I brought her on and she became part of our GP team. And working with her just pushed me over the edge in realizing that there's other people that do the asset management a lot better than I do and enjoyed it a lot more. And I enjoyed just watching her work. I enjoyed coming to meetings and having her organized and going through all the details. And I decided all I want to do is work with people like her. And so that's what I've been doing for the last couple of years is investing with people that I trust that do their part of the deal very efficiently. And now what I do is I'm on the equity side where I raise money and I do the part that I enjoy, which is talking to investors, which is working with investors, helping them get into quality deals and to looking after the investors. And so that's what I'm doing now. Now as far as how I'm doing this, I have two different equity funds, private equity funds, which are customizable. And most people wonder what does that mean customizable? Well typically in a fund you're going to have a criteria as far as what you're going to invest in. And typically it's going to be a narrow criteria because you want investors to be interested in it and not to have it too broad where you would scare some people off and say no, I don't want to do this or I don't want to do that. So you want to keep it narrowly focused, maybe on a region, maybe on a specific asset type or asset class or maybe a specific operator. And once you're in the fund, you're in everything. You have no other choices. It's pretty much a blind fund where you're in whatever is brought into the fund. Well, on my fund you have a choice. It's customizable in that if I bring a new opportunity to the fund, everybody in the fund or even out of the fund has an opportunity to decide whether or not they want to be in it. So new people could come into the fund and invest in that deal and now become part of the fund. Or people that are in the fund can also invest in that deal or pass if that's not something they want. And at the end of the day they get one K one. No matter how many deals within the fund they're in, they'll get one k one at the end of the year. So it makes it very simple for the investors and they get to self diversify. So some of the deals that we bring in are going to be higher on cash flow, some of the deals are going to be higher on capital appreciation and investors can decide which ones they want to be in based on their own criteria and their own goals. Yeah. So I'm pretty visual. So say I'm bringing in $100,000 to your fund. Do I have access to this portal? And then I'm choosing how much of each or how much I want to invest in what is available offerings within that portal. Yes. And then from there, is it more of the one on one conversations that we have or is it when I go in the portal, I can select if I want to be part of multifamily or retail? Because I know it's a diversified fund, which is really amazing compared to some of these other funds that are very focused in on one type of asset class. So how does that sort of work for, say, if I'm investing at 100,000, what would my experience be like inside the portal? Okay, first of all, there are some that have been pre funded that are available at this point in time for someone to invest in. But typically the way it happens is I bring in a new opportunity and I start to market the new opportunity. Now, that 100,000, you could decide, okay, I want to put 50 in this, and then maybe I want to put 50 in something else. Or maybe I could even divide it up into smaller increments. But let's say I committed the entire $100,000 to this one opportunity that I brought up, and then I bring in another opportunity. Yes, you would have to bring additional funds in because that 100,000 is already committed to that one deal. But if you only committed 50 to the new deal that came in, you now have 50 that you can use for other opportunities that come in. Or you could just wait until the new deal comes in and then you could fund it. So those are your options. Right. And so one of the benefits of this that we talked about is you get one K one, even though you're investing in multiple deals, but you're still waiting on those general partners on those deals to get you their K one. So how does that all roll up? And from a timing standpoint, I guess you would just anticipate to potentially file taxes later in the year like most of us real estate investors do. But has that been an issue so far in your experience? I mean, from a passive side, it's a huge benefit to get that one K one. But from your side, it seems like a lot of we can't get the one K one out until all the K ones are in. So as real estate investors, we tell investors, plan on filing an extension anytime you're investing in real estate or a syndication, because that typically is a problem. And yes, we do have that issue. We get on the cases of the sponsors to get the K ones as quickly as possible. But yes, all the K ones have to come into the fund before we can issue K ones. That's one of the pain points that we can't do much to avoid. One thing I love about you, Jeff, is you've got a lot of active general partner experiences through multiple asset classes. There are a lot of people that are getting into the space that are doing these fund to fund models or private equity funds that had no experience in real estate investing or just what all goes involved into day to day. And for me, and we've talked about it on the show before, that's what concerns me. It's these funds that are coming into these other people's deals where they have no control over what's going on and they really don't even know how to vet them any better than their limited partners. And I'm not just saying this because you're on the show, I genuinely mean this. Your experience and what I've known of you for the last few years, that risk sort of goes away because you're vetting these sponsors. Like maybe no other group is at, or maybe other groups are, but maybe not to the detail and level that you are. So share with us on what all goes into vetting these sponsors. What are you looking for? Because that's really the game changer here, is that you're taking on that responsibility and you're adding that value through your experience so that limited partners don't have to go through the whole process of vetting and sourcing their own sponsors. You're absolutely right. And I feel that same pain when I hear new people that are just jumping in as equity raisers and they haven't gone through the operation side of it. I am so glad that I did go through the twelve years of operations. So a lot of times, especially a multifamily, when something comes to me, I go and I look at it and there's sometimes I could find problems in five minutes. As far as with the assumptions going into the underwriting and the numbers could all look very pretty and you could make just wonderful numbers, wonderful returns, with very little likelihood of ever achieving those. So you're absolutely right. And when I tell people about vetting an opportunity, number one is the sponsor. Number one to me is who is the sponsor, what have they done? What is their team like? Who's in charge of the operations? Then we could go on to the deal, we could talk about the deal, the debt, what kind of debt is it, what kind of reserves, what kind of break even occupancy different assumptions on raising rents and what if you can't raise rents, how are you protecting my investment? What are the steps that you're taking to make sure this investment is going to be as safe as possible? And we know in all of these deals there's always risk. So we want to know what the sponsor is doing. And if I feel comfortable with a sponsor, then I'm much more likely to like the deal. But I get people all the time bringing deals to me and saying, hey, I want you to raise money for my deal. And I look at them and say, I don't even know you. Who are you? The deal isn't important. You're important. And if I don't know you and I don't trust you, I'm not even going to look at your deal, I won't waste my time. And I think that's a problem with the newer fundraisers that don't know the business as well, as well as investors coming in and say, hey, I'm just going to go straight into the deal. Well, what are they doing to vet the deal, what knowledge do they have to evaluate the deal as well and the sponsor and the whole bit. So those are some of the things. The main thing is I'm spending time with the deal sponsor. I have a deal sponsor right now that I'm looking at. I like them quite a bit. I've met them before and we've on like two or three conversations. I think we have our third conversation coming up next week to continue talking about how we will fit together and how we can work together before I go and just raise money. The one thing about my fund and having it all set up, it allows me to go quick. So if I've already vetted the sponsor and I'm already comfortable with the sponsor, as soon as they have an opportunity come up, I'm ready to pounce because I don't have to form a new LLC or I don't have to do any other work. I can put it up on my portal and we could be ready to go in a couple of days. But the main thing is I'm vetting the person, their team, their track record, and then I could quickly go over the deal when it comes in. Yeah, I think. Well said. And I just want to for our listeners, so there's no miscommunication or assumptions being made. Most investors that are passive coming in, they're sitting in that limited partner stack. And for those that are actively handling the investments or the deal sourcing or asset management, et cetera, they are on the general partner side, they're on the active side. And so where Jeff has been for the most of his, he said twelve years had been more on that active general partner side. Now through this fund, he's investing like you would as the listener, as a limited partner, however they're doing it as a fund and he is the one that is sourcing and working with sponsors directly to push his investors capital. So it's interesting concept because most content and a lot of things that are going on out there know, you network and you build a relationship with these sponsors and then you vet, et cetera. And you being the listener of the passive investor here. Jeff is doing that and he's doing that with many sponsors across many asset classes. So I wanted to make that point there. Did you want to add anything to that before I have my next question? Well, the thing is, besides the vetting part of it, because we're coming in with a bigger check. We negotiate with the deal sponsor to get our fees taken care of and to make our profit. But for the most part, the investor is not at any disadvantage because we'll typically give investors equal to or better than what they would go. If they go straight in, we actually can do better. Sometimes it may be very slightly lower, but typically they're going to get about the same as they would if they went straight in. But they have us as a representative. They have us looking after them, looking after the deal, evaluating the financials as they come in. I don't know how many passive investors actually go through and look at the reports and the financials and ask questions about it each month or each quarter as they come in. And so we take that on, looking out as a third party away from the sponsor themselves. Hey, listeners. It's Wayne courageous. I just want to pause real quick to say thank you for listening to our show. I hope that you're getting a lot of value out of it. If I could ask you to go ahead and like, subscribe and share this podcast, that would mean a lot. It will get a lot of other investors like yourself learning about the process and the steps to successfully invest in real estate, either as a passive or an active investor. I also want to do a quick introduction of CREI Partners. I'm the managing principal for CREI Partners and we started it back in 2019 with one goal to grow your wealth passively in real estate. We do so by buying assets in multifamily build to rent communities and RV boat storage facilities. And we do so in areas that have strong market fundamentals and also have strong partnerships with other real estate investors, such as ourselves. We personally discovered that passively investing in real estate was a really great blend for people that are busy like yourself, and that you can invest passively in real estate and still reap the rewards of the returns, the tax benefits, et cetera. If you're interested in learning more about passively investing, check out our website. We do a lot of content through our Passive Investor Coaching program, through our podcast, our blogs, and just other information that we do on a daily basis. Check out Creipartners.com. Again, creipartners.com. If you're interested in building the relationship and joining our Investor club, there's a link there to join. We'll set up a call and continue building the relationship with you. We're super excited to have that opportunity and I wanted us to get back to the show and hopefully again, you're enjoying the conversation and look forward to connecting soon. Thank you. Yeah, I like that. And one thing you had mentioned is before you even look at the deal, you've looked at the sponsor and the team that's behind the deal. And so for people that are thinking about passive investing or have been passive investing, they're likely to work with sponsors and syndicators that they know and trust and who have they vetted, which is important, but that a lot of times your network may not have access to a bunch of different sponsors indicators. So I've seen you at multiple conferences. You're out there, you're meeting people, you're of course, vetting these sponsors as they come on. So it's just another advantage for investors who are looking to even be even more passive in a way where they're not having to truly build these relationships and source these deals. They can work with your firm on that. Yeah, we're another layer for them of protection. We are looking out for them, for sure. So what asset classes are you bullish in now? And are you seeing more within your fund currently? Well, obviously multifamily is probably going to be our biggest asset type, but I also like self storage. Mobile home parks are looking good right now. I want to get more involved in assisted living. That's going to be a big demand as population gets older and older. So those are some of the ones that I'm currently looking at. There's also bill to rent that I've looking some at that, but looking at looking for experts in some of those different areas. And that's the thing is with those other asset types, I do want to look for the experts, somebody that I can really trust and build on their knowledge of that particular business. Yeah. And so with each of those asset classes, you see different cash flow and equity at the end of the life cycle. So each multifamily right now is, I wouldn't say hurting because I've got multifamily and it's doing pretty well. But if we were to sell today, it would be much more impacted than if we had sold a year or two ago. Right. And so are you seeing the similar headwinds that multifamily is into other asset classes such as storage, builder, rent that you had mentioned? In some cases, yes. But there are some that are stronger on the cash flow side and maybe not as strong on the capital appreciation. So you're always looking for balance. But most people these days are looking for cash flow and so I'm looking for more cash flow assets. I know some people now that have been in multifamily for years and now are doing car washes. Right. So there's all different things out there that a lot of us didn't think about. There's another fund. Well, there was one. They were talking about purchasing accounts receivable that you buy from hospitals. You go and you get a discount on accounts receivable and then you just have to wait 30, 60 days while those come in. Or another one is on judgments. I know somebody buying judgments. So if you sue somebody and you get a judgment, you would become like the collection agents to collect on those. So there's all different ways of making money and those are more cash flow, but they really aren't any capital appreciation end of it. Yeah, it is funny, I do see a lot of people that were in the multifamily seem like be herding over to the car washes and for a little bit it was the ATMs. Like that was a couple of months, few months maybe. I still see the ATMs, I haven't seen it as often, but then now I'm seeing tons of car washes and I'm one of those members that the car wash pay $32 but get unlimited car washes. So it does cash flow for sure. Well, the ATMs is all cash flow, no capital appreciation, zero. Because at the end of whatever time, 510 years, those machines are worthless. But you do get the depreciation write off, so you get close to 100% write off on the taxes. So that's another thing to be looking at, depending on what your tax needs are. The bitcoin mining that we went into purchasing on the machines, I was pretty surprised at the first K one, it was 98% of that was depreciation. So whatever I invested in there, 98% of it was depreciated out and didn't have to pay taxes on. My problem with the ATM ones though, it's like I never carry cash and I go to these convenience stores and bank. I don't see many people pulling out money. But I don't know, there's still some, I guess. Today my kids have a football game and I've got to pay for tickets and cash. But between Venmo and Zelle and everything else, I'm like, what really? In five to seven years, what is even more the need then with all these different apps? You're absolutely right and I haven't looked into it, but those people that have been doing it saying that there's still the demand, I mean, I haven't looked at the data, so I don't really know because I haven't gone that direction, but they're still convinced I'm absolutely with you. You've got your Venmo and the apps and everything ways of transferring, but there's still people that need those ATMs. Yeah, there's something to be said about just having cash. It's a good feeling though, for me. It becomes like monopoly money. Every time I have money in my wallet. It goes a lot faster than if I had it. Sure does, doesn't right. Hey, I do want to talk a little bit about for those that are getting into these funds and such. We had talked about before this call briefly about the SEC guidance and restrictions and such on these type of you're because you're coming in, investing in a deal through the fund as a limited partner you're not exposed to. These SEC restrictions such but can you talk more about that and sort of just bring in what's the SEC guidance on these type of funds and sort of where you see potential movement with yeah, the thing is, a lot of people want to go in as a co GP. They want to come in and be on the GP side and be an equity raiser? Well, if you're on the GP side and you're raising equity, you cannot be compensated based on the amount of money that you bring in. That's number one. No, no. The other thing is you have to be doing something else other than just raising money. On the GP side, there can't be a direct correlation between how much money you get compensated or how many shares you get compensated and the raising of money. There has to be other things in there. Now, I know a lot of people go ahead and do it and it's the same thing as cheating on your taxes. It doesn't matter until somebody audits you or you get caught jumping the stop sign as well, driving through the stop sign, at some point something's going to happen. And that's the way I feel that at some point you're going to see more things going on. On the LP side. We don't have that issue. We're on the LP side. All of our compensation comes on the LP side and comes through the fund. And so it's as if we were a million dollar investor that we would get certain better terms than somebody coming in on a 50,000 investor. And so because we get those better terms so I can be compensated without affecting the returns of investors, the investors in my fund. Yeah, that's important right there. So by investors investing in your fund, their returns are not being impacted from what they would have normally gotten if they went directly with the sponsor. Right. But since you've negotiated better terms, your investors still get that return that the sponsor was offering. But because your work throughout the hold period and leading up to that through vetting and reviewing the deal, et cetera, that's where you're making your compensation is that difference that you negotiated? And it depends on how well I negotiated on that. But I just want to make it clear that in some cases they might be getting a slightly smaller return, but typically it's a fraction of a percentage, so it's not very much. But there is also the possibility that we could get you more on one deal. The terms that we got were very favorable and I may be able to push some of that back onto the investor side so they possibly could get more than if they went straight into the deal. Yeah. So we're getting close into wrapping up our show and it's been a lot of great content. We talked a lot about asset classes, obviously the fund. Talk to us a little bit about the markets and I mean, like areas of the United States that you're liking to invest and anything have changed from different markets that you would have invested a year or two ago versus today. Well, the biggest problem is when you're a GP, you don't want to know a little bit about a lot of markets you want to narrow down and. Focus in on your markets. And that was a mistake I did in the beginning, is going all over the place and not being an expert in any one area. And I think that's real important for new people to focus in. Well, the advantage I have is I'm dealing with other experts and they can be focused all over the place, but they become an expert in whatever area they are interested in. And therefore I can diversify myself out without thinning my reach. So I'm open to many different areas. Typically we look at the smile states, the Southwest and the west and a little bit on the east over there. But once I'm working with a deal sponsor, I want them to convince me why I want to be in that area. So I may be open to some new area, but they have to convince me why I want to be there. I'm a little concerned right now about Florida with insurance companies pulling out of there with they're getting more flooding and more storms. It is of concern, but I have to make those decisions alongside of this sponsor if I really want to work on that. Yeah, I've not heard the smile states. So that is something the podcast that we previously had, what sticks out for me on that one was you had mentioned the Jockey, how you bet on the jockey. Anyway, just funny how you take little things from different the smile states may be a common thing, but I had not heard that until today. I hear that a lot of time it's mostly your sun states that have the warmer weather and everybody stays away from a lot of the areas. But the thing is, hey, there's some great deals. There's great deals in those other states, too. And there's no r1 estate market. There's many different little real estate markets and sometimes neighborhoods, there's good neighborhoods, there's bad neighborhoods. So even when things are going bad in some areas, that doesn't mean things aren't going great in others. And so you've got to evaluate each one. I mean, one of our properties is in Kansas City. I never knew anything about Kansas City until the sponsor brought it to me. And I'd known him for a long time. I had actually worked with him. Uh, so I said, OK, fine. We'll go to Kansas City. It's Kansas City, Missouri. I understand that's supposed to be the better part of Kansas City rather than Kansas City, Kansas. But yeah, there's good places in many, many different markets. You just need to either be the expert in whatever those markets are or work with those people that really have thoroughly researched those markets. Absolutely. Well, is there anything on the show that we haven't covered that you want to cover now? Well, the one thing I want to do is I want to give your listeners a gift. It's 46 questions to ask a deal sponsor before you invest and you could get
[email protected] sponsor and that will give you an idea. Even if you're planning on being on the GP side, these are good questions to think about because very likely your investors may be looking to ask those questions. So it's good to have the answers. If you're a passive investor, it's a good idea to ask those questions, to learn about the sponsor and their history and just to get to know them. And as you said, it's the jockey. I bet on the jockey and then I'll look at the horse. Yeah, we'll put that in the show notes for sure. I always ask this at the end of their podcast. And after I ask it, also share your contact information, how people can reach out to you. So the question I always end up is, what is your proudest moment in real estate? Whether it's passive active, and then if you could share your contact info, the proudest moment was, it happens to be on this property that I still own, that's student housing. And it's a small property, it's 36 units, and we put about $500,000 into fixing it up, all new floors, renovated, the whole thing. And then afterwards well, first I had my property manager interviewing students to get their evaluation of how we were doing and about the property and the property management. Their videos were so bad. So I actually went down to the property because I have a video background, and I interviewed the students and I put them on video asking them what they thought about what we had done to the property, what would they tell other students, just basically making a marketing piece. But the last question that I always asked each student, since they didn't know I was the owner, I asked them, if you could talk to the owner, what would you tell the owner? And I had this one young lady that went and said, thank you, thank you. Now I have a place that I could actually show my mother. Oh, wow. I get teared up thinking about that now. It was just so beautiful that she felt comfortable enough and safe enough in this property that she was going to bring her mother in and we would have decorating contests, decorating their room and stuff. And she had something that she was proud of. I mean, this is a low economic area and some of these kids just didn't have the opportunity to live in a place that was halfway as nice. So that was definitely a touching moment for me. Yeah, I got chills when you said that. That's pretty awesome. Yeah, it was beautiful. I mean, it was this beautiful young girl and 20 year old or so, and that was just her statement got to me. That's the fun part, at least, that I really enjoy is making the communities better. Because you do see, especially when you buy the properties that have just been neglected for so long and you give it the love. It know the residents appreciate it very much. So, Jeff, thank you so much for being on our show today. A lot of great insights. How can people reach out to you? You could get me at
[email protected]. That's synergeticig.com or my website, which is synergeticig.com. All right, well, thanks for being on our show, and I look forward to seeing you at a conference soon. Yeah, hopefully we'll see each other.
Introducer:
That's all for this episode. We hope you subscribe, share and leave a review of the show. For more information about passively investing in multifamily apartments, check out Wayne's free ebook by going to creipartners.com forward slash ebook. Also, follow us on Facebook by searching CREI partners. This was the untold stories of real estate investing.
