Real estate wholesaling is indeed a profitable space to be in. But going all out by yourself might not be the best approach to take. Finding the right partners is the key to achieving significant wholesaling success. In this episode, Don Costa interviews Adam Balsinger who shares his inspiring real estate journey. Their conversation focuses on the nitty-gritty parts of wholesaling and syndication skills, emphasizing the most important strategies that lead to desirable results. Adam also drops information bombs on securing the best partnerships, creating the right content, and more. Tune in now and get mentally equipped for your real estate journey!

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Listen to the podcast here

 

Success Secrets On Real Estate Wholesaling With Adam Balsinger

I have been doing quite a few of these, banking them, and having multiple interviews a day. This is the one day where I’ve had a break, so this is going to be a good interview. Sometimes the best ones are the ones when I haven’t talked to you in a while. I’ve got my buddy Adam here with me. I am going to dive in with him. Before I do that, make sure you’re going over to FlipTalk.com and checking out what we have going on.

There are the latest episodes and some great free content over there. You can also check in on what we have going on with coaching and our masterminds. There are a lot of great things going on in the community. If you want to be a part of what we have going on, go to FlipTalk.com and check that out. With that said, I have Adam. How are you doing?

I’m good. I thought you were going to say that I was the reason this was going to be such a good episode.

You are.

It’s because I didn’t do twelve of these already.

 

 

People don’t realize we record these episodes in chunks. We will do it 3 or 4 in a day. By the time you get to the third conversation, you feel like you’re repeating yourself, even though the audience isn’t going to feel that way. Sometimes I feel like we do a disservice and lose the quality of the conversation.

You’re lightyears ahead with your show. This is our twelfth episode. I do the same thing. I try to record a bunch. That way, it’s not, “I forgot I need a podcast tomorrow. What do I do?” When I’ve done 2, 3, and 4 in a row, I’m mixing stories up of the guests. It’s very easy to get yourself confused after you have a couple of high-level conversations with people digging into their businesses. I totally relate.

A phenomenal guest is going to drop some amazing information bombs here, but I am clearheaded, so it’s going to be double cool.

It’s the double-dip.

Let’s start where I usually start. For people who have been living under a rock or don’t know who you are, can you break down who Adam is and how you get started in the real estate game?

That’s a great place to start. I’ve been a full-time real estate investor for years. I got started doing single-family fix and flips. I did fix and flips for three and a half years. While I was trying to build that fix-and-flip business, I was having a lot of difficulty doing the volume I wanted to do. We were doing a handful a year with 4, 5, or 6, making some money but by no means setting the world on fire and working a ton.

I was trying to figure out how I could get more deals into the pipeline. That led me to go down the direct marketing rabbit hole. I had been initially buying off of other wholesalers, auctions, and the MLS. I never had any intention of doing any direct marketing. That wasn’t the goal but having bought a couple of deals from wholesalers, I figured, “If these people can find these direct seller deals, then I can too.”

I limped my way through direct marketing and generating some leads. It just so happened that the first few didn’t fit my box at that time. I wound up again Quasimodo-ing through wholesaling them. In my first wholesale deal, I made less than $500. The story is ridiculous. The buyer was arrested prior to the settlement and sent to jail, not a holding cell.

What was the buyer arrested for?

I don’t know. I never got to that part. I was so consumed, “This deal is going to fall apart.” I tracked the guy down to the prison that he was at, went through his case worker, and got his mom designated as his power of attorney. It was all for $472 or something like that. It was crazy. It’s going. I wound up doing a $30,000 wholesale deal a couple of deals in. When I was doing fix and flips, I was doing them in the Greater Philadelphia area.

I was doing no money out of pocket. It was a hard money and gap lender. I was trying to make $30,000 or $40,000 on a flip. Most of Philly was built in 1900. Everything, for the most part, is a gut renovation. There’s a 6 to 12-month process to get $30,000 to $40,000. I made $30,000. I didn’t have to buy it or do any of the construction. None of that stuff.

I shifted my business to wholesale. That has been happening in the wholesaling business. I was doing all that transactional stuff to build a rental portfolio. Passive income is what generates a lot of interest. A lot of us get into real estate. We‘re like, “This isn‘t passive.“ I had built a portfolio of about eighteen doors, single-family, duplex, triplex, quad, and that kind of thing. I realized, after having some experience under my belt, that I was going to need way more doors than I initially thought.

I came to the conclusion that in buying onesie-twosie and adding a door to a year when you’re BRRRR-ing them, I was a long way away from financial freedom. That led me down trying to learn how to do rental real estate at scale and to multifamily syndication. I also have a syndication team. We wrapped up our year. That’s the other team. I presently have two different operations that are real estate-related. One is the wholesaling side, and then the other is the syndication.

On the wholesaling side, what does the team look like?

The team is in flux. In theory and what winds up happening in practice sometimes winds up being a little different. The way that I envisioned everything in my head, I knew it was dumb to try to build 2 teams and 2 companies at the same time, which is what I was doing. I had a little bit of a headstart in the wholesaling business. I knew more about that than I did the syndication.

My initial thought was, “The primary focus is on wholesaling. Get that to a point where it’s humming, and then I can divert more of my attention over toward syndication.” To say that I made it easier in my head than it was going to be to do that was probably an undersell. Honestly, we got it to the wholesale business multiple times to a point where we felt, “We’re good. We can be a little bit more hands-off.” We were a little too quick to pull back.

We would grow, fall apart, and then add some people. Some of those people would fall off. There has constantly been this little bit of ebb and flow. We have an admin. I do have a partner in that business. He’s in the Greater Philadelphia area, which is where we still do that. We have an acquisitions person, a dispositions person, and then two virtual assistants. That’s what that team looks like.

On the syndication side, which is apartments, what does that look like?

I have two business partners in that business. We have a handful of people that have joined our team as a value exchange. We are looking to get into multifamily syndication but don’t have any experience or any deals under their belt. They team up with us. We will pick a market for them to focus on. We have a guy that targets Georgia for us. He uses our company name.

In anything that he gets under contract, we give him a percentage and then help him close the deal. It’s my two partners. We do have our asset manager. That’s the one person that we hired thus far and brought on board. We have one person that helps out with the commission partnership idea with acquisitions. I have somebody that helps me out and gets a piece of what we do.

My role in the syndication business is more investor relations. I am marketing, branding, talking to investors, boarding new investors, and then walking them through the process once they have invested in a deal. I have a guy that helps me out with that. We have a freelance guy in the marketing consultant thing on a per diem basis. I have a blog writer that writes my blogs for me. I tried writing them myself. It took way too much time for me to write multiple blogs on an ongoing basis.

I find myself writing a lot of copy for different things. It’s freeing in some ways. In another sense, it’s a burden. It doesn’t quite balance itself out but it’s a weird conundrum to be in.

 

It’s interesting. I’ve been putting out a lot of content focused on being on a variety of different platforms for about a year. I was always a pretty good writer in school. I used to run a direct sales business. Thinking on my feet, running meetings, public speaking, and that stuff doesn’t bother me at all. The advice when you’re getting used to turning out content is to pick what you’re good at and focus on that.

Don’t try to write blogs and do videos. If you like one over the other, put all your chips in that one place, get used to it, and then add the second one on. Since I was a pretty good writer, I was like, “I’ll do both.” I like videos. I have to take five minutes. I think of a couple of bullet points. It’s one take, and I’m done but to write a 2,000-word blog would take me a day or two. The amount of time that I had to invest was not worth it.

You’re struggling with what I have learned because I struggle with the same things you do. I will talk out what I want to say. I’ll record myself like this through a podcast medium like Zoom or on my phone and say what I have to say. I send that over to Rev and have Rev transcribe it. I go through and clean it up. That’s the speedway for me to write at this point in time. It’s very successful when it comes to cutting down time and thinking things out.

I’m going to stay with content because that’s what we’re talking about and then move into something else here. You’ve been putting out content. You’re putting out content because you want to build brand recognition and credibility with investors and have people trust, know, and like you to invest in the projects. Ultimately, how much do you feel like that helps you? People will question, “Do I need to do all this stuff and work to have credibility?” Do you feel like it has propelled you, opened doors for you, or a lost cause or all of the above?

Yes to all of those. A lot of people, myself included, had the wrong idea about socials, to begin with, content creation, and this idea of being omnipresent because that’s the goal for almost any marketer that’s trying to put out content at scale. You want to be visible everywhere. Going in, a lot of times, we’re expecting the return on the investment to be a lot faster than it is. It’s valuable.

It has helped me become more of a subject matter expert whether I am or am not because I’m located in so many places talking about the same thing. I don’t think honestly that we have seen the true impact and result of all of the work that we have put in. Gary Vee has been putting out content for years since he was able to. A lot of people underestimate the amount of time and effort that they’re going to put in and overestimate how quickly they’re going to see a return on that.

I view it as an investment of time and effort. If I get a return on it, I’m happy but it becomes something difficult to tie an ROI to as well because if somebody sees me on my podcast, YouTube channel, and Instagram and then engages with something that I put up on LinkedIn, then what you’re always trying to do with marketing is tie it back to where that source, lead, or contact came from. Technically, it came from LinkedIn but the only reason it came through LinkedIn is they saw what I had in the other places too. It becomes very difficult to quantify what the return on investment is.

I have a buddy who works for SAP. He’s in digital marketing. He’s pretty high with digital marketing for SAP. I got together with him when we had the mastermind in Austin. We have talked a lot about digital marketing strategies. He tells me all the time how difficult it is for them at SAP to tie back a return on investment for branding and content. SAP is having difficulty figuring out how to tie that back. Forget it. I’m not the guy to figure that out. I don’t know if that answers your question though.

It does. There are unmeasurables. I always talk about the unmeasurables when it comes to putting out content. You and I might have even had this conversation. I’m not sure. I’ve been doing the show since 2016. With short intervals of breaks, I’ve taken a break here. I’ve been putting out content since then. There are still a lot of people that interact in the real estate space who have no clue who I am. It doesn’t have this massive reach that people think it may have but the people who have come into my circle or my sphere can trust me at a level that is beyond anything I could have ever even imagined. There’s that aspect of it.

For a number of years, I put out the show and didn’t try to “monetize” it. I wasn’t trying to raise private money or sell a product. I was trying to put out content but it opened so many doors, relationships, and opportunities that made me money had I not paid attention to that or quantified that in as an unmeasurable. If I would have thought the show wasn’t doing anything for me, it was a waste of time. There are a lot of responsibilities when it comes to putting out content. If you’re going to do it, you have to commit because consistency can be a pain in the butt.

 

We’re all different too. Some people love that social aspect. They like putting the content out and creating it. Honestly, I don’t. I could never be on Instagram, Facebook, or any of those things and be perfectly happy. Most people see me and don’t think that about me. You see somebody in a couple of different places. You could say the same thing, Don. You’re all over the place. That would surprise me too. We come up with these perceptions based on what we see.

Depending on who you are, it may be a heavier time commitment. There were times when I was first trying to get used to creating content. You’re sitting there and trying to rack your brain about this one piece of content that you’re going to put out. A huge thing for me that was helpful was beginning to place less value and importance on each individual piece of content and being more committed to the overall process of consistently putting out similar messaging.

How many times has a seller seen one post of yours, called you up, and then you’ve done a deal with them? It doesn’t happen that way. It’s the repeat messaging and seeing somebody over and over again that starts to impact them or be the catalyst to get them to engage with you. It’s not one post that’s going to do it. A lot of people are nervous, “What if I sound silly?” I’m at the point now where I don’t even rewatch videos and proofread stuff freely anymore. I get it done, get it out, and shift it. If it’s a fifteen-minute-long YouTube video, I want to watch that one, but if it’s a Reel and 45 seconds long, I get it out.

The reason I want to hit on this is there are so many ways you can produce content and grow your business. You can produce content looking for partnerships and JVs. I’ve had people reach out to me because of the show. We have done JV deals. We can produce content to bring seller awareness to your brand in a particular community and drive opportunities in your community. You can do it as you do it to produce content and raise investor awareness and private capital. You can do all of the above. There are people out there trying to decide if it’s worth it for them to do it or not, if they should or shouldn’t, or are overthinking it. I want to hit that. I appreciate you indulging me there.

It’s funny because you talked about your show and not trying to monetize it. I had a conversation with my marketing guy who was trying to convince me to stop doing my eleventh. He was like, “My marketing friends and I sit around and talk shit about podcasts because they have difficulty tying back the return to the podcast.” I was saying, “I understand your perspective. I understand that it’s very difficult what your lead magnet is on a podcast.”

It’s not as cut and dry or as much of a slam dunk as, “Download my eBook off of my writeup on a Facebook post.” It’s a little bit harder. What I was saying was, “I understand where you’re coming from, but you have to understand this is an investment into my brand. It ties in with a variety of the other things that I have going on with some ideas that I have in the future as well.”

It’s a little bit of satisfying this one thing over here. Also, it’s important to be strategic with the way that you’re producing content and always be aware of what your intent is, what your motive is, what the end result is, and then where your company is going, not just now but next year and pre-paving a little bit for that. The whole content creation game is interesting to me. Initially, it was not something that I was very excited about digging my teeth into.

Be strategic with how you produce content. Always be aware of what your intent is, what your motive is, and what the end result is. Click To Tweet

I don’t think any of us are excited about it at first, but the doors it opens are amazing. I want to pivot into the running of two businesses comment you made. I always talk about staying in your lane, doing what you’re good at, and not chasing multiple things or shiny objects. One of the sexy things in the highlight Reels on Facebook, Instagram, or anywhere else is how these people have 5 or 20 businesses or some crazy multiple–business thing going on.

We’re running an education component. I’m still an active real estate investor running a real estate investing company. I’m trying to switch my brain between a marketer and educator and a real estate investor. It’s two different mindsets. I find that to be daunting and frustrating at times. When you’re going from being a wholesale company to being a large apartment community acquisitions company, what are some of the challenges that you’re dealing with? Do you find it challenging to wear multiple hats and switch back and forth?

For sure. If I could go back and do that whole thing over again, I would have slow-played or held the reins back a little bit on the syndication and put 100% of my focus into the wholesaling business. The biggest mistake in the way that I did things was I was trying to build them both simultaneously. I’ve done one and gotten that to the point where it was better relatively hands-off and less of a time commitment for me than I could have replicated myself and had my minion or my replacement handle all the other stuff while I could then go, “This is good over here. Let me divert my attention over to the syndication.”

I wasn’t able to do that because I thought I could do them both at the same time for some reason. The challenge was that neither was mature enough in their life cycle. I’ve probably grown a lot as a leader and as an owner, but at that time, I thought fires all needed to be handled immediately. I would be over here and it would be like, “It’s the afternoon. It’s the syndication business time but then a fire would pop up over here.” I felt my earlier stages of being a business owner, “There’s a fire. I need to go.”

In reality, I don’t think there are that many fires that would destroy your business. I could have said, “Let’s talk about that tomorrow,” and focused that afternoon time which had been on the calendar on the other business. In the next day, you can have my attention over here. I was constantly being pulled. It is a different business, type of deal, structure, and analysis. Everything about it is different. The only thing that’s the same is real estate. This is how we analyze it and line up the debt over here, “Here’s a straight wholesale.” It was very difficult to switch gears and bounce back and forth.

That’s the mistake people make when it comes to picking a marketing channel or an exit strategy. It’s not mastering one before they move on to the next. You only have so much time or money to divide it. A house divided is a house that’s not going to stand strong. Get one thing going well. I like to talk about spinning plates. Get one plate spinning well before you move on to the next plate. Otherwise, you are going to constantly be running around like a chicken with your head cut off like crazy.

When you were talking about spinning the plates, I was thinking of juggling because you’re juggling one business with both hands. You have two different juggles that you’re trying to maintain, one with each hand. The balls are crossing over from one hand to the other. It’s a lot to manage and deal with, especially if you’re not used to it. One of the other reasons it makes a lot of sense to start with one and then add the other is your brain starts to get used to these additional variables that you weren’t used to dealing with before.

In a lot of instances, we’re very programmable. We can learn and evolve a lot. If you keep doing those same things for two months, in two months, it’s not going to be overwhelming anymore. It might feel like it’s not that big of a deal. When you’re trying to put one business together, that can be overwhelming. You’re dropping balls along the way but if you’re trying to do two at the same time, they almost merge in your head unless you have a crazy brain that you can separate them. Mine doesn’t work that way. Everything jumbles together.

When you’re trying to put one business together, it can be overwhelming and push you to drop balls along the way. But if you’re trying to do two at the same time, they almost merge in your head. Click To Tweet

Mine too. I’m going to stay on the syndication side of things. We would be wholesaling to death on this show. If somebody wanted to get into syndication, they wanted to chase it. Let’s talk about the size of communities you chase. What size of communities do you go after?

It has evolved over time. Initially, where we wanted to be was 100 to 300 units. That was from the research and the education that me and my two partners had acquired. The advice was, “This is the size that you want to play in.” That’s where we started. We had no experience in the syndication space. I’m coming into it thinking, “I used to flip houses. I had eighteen doors,” but you’re competing with BlackRock and real financial institutions with trillions of assets under management.

We were not being taken seriously. It’s like, “We’re going to raise all this money.” “Have you ever raised that money before?” “No, but we can.” Brokers are reluctant to award you the deal. It took us two and a half years to get our first deal. A year or two into banging our heads against that 100-unit issue, we decided we were going to adjust our strategy and start targeting 50 to 100 units. That’s where we first started to see some success. The first deal that we ever did was 92 doors. We did 48 and then 64. I believe it was our fourth deal the first time that we cracked 100 units.

We won’t look at anything that’s under 80 doors. We’re looking at 80 and over. The reason that the number is 80 and the advice that we had gotten was 100 units and up is that with about 80 doors, the property generates enough income where you can have full-time staff on site. You can have a leasing agent there from Monday through Friday. You can have a maintenance person there on salary from Monday through Friday. Generally, you can run your property more efficiently and have higher occupancy numbers.

Think about the last time you went to look for an apartment. Most people aren’t setting up appointments. You might go to one section of town with the intent to look at property A but you hit every single apartment that you drive past. If you drive up somewhere, and it’s only 30 units, they don’t have an office and nobody can come out and meet you, you’re probably never going to go back to that property ever again. You wind up renting at the next place.

It has been years since I’ve looked for an apartment to fully disclose that but I vividly recall that we would pull up and walk into the leasing office. That was our practice. We didn’t call ahead. We would drive by apartment communities we liked and pull up. If they had a leasing office, we would walk in and see if we could see something right then and there. That has been the norm.

Back to my original question, if somebody wanted to get into this, what are some things that you consider? You answered part of that. You have to pick a target that’s realistic for your ability to get into this game. What are some other things that people would want to consider if they wanted to get into apartments or syndication as a strategy?

Everybody is different. There are four parts to every single multifamily syndication. There’s the person that finds the deal. That’s one part. You get good at finding these types of deals.

Aren’t they referred to as a sponsor?

A sponsor has multiple definitions depending on who you’re talking to but you read my mind. There’s the person that finds the deal, and then there’s the key principal and the loan guarantor or also sometimes known as the sponsor. This is the person who is able to sign on the loan. Financing a large commercial multifamily property is different than financing a single-family rental. The credit score is not what they’re looking at. What they want is somebody that has a net worth that’s approximately equal to the loan amount. A little less or a little more, but liquid.

These requirements change depending on the market. There have been times when the sponsor or the loan guarantor would need 5% to 10% of the total loan amount liquid or 9 to 12 months’ worth of debt service. You have to have net worth, liquidity, and the experience of owning similar assets. The loan guarantor doesn’t have to be one person. Theoretically, you could have multiple people that check off all three of those boxes. That’s part two. Part three is the equity. There’s the actual raising and bringing all that capital needed to the table to close the deal.

Number four is asset management running the deal after it has been purchased. If you’re trying to get into syndication and you do not already have a high net worth or a lot of money sitting in the bank, you’re resigned to either finding the deal or bringing money to the deal. For somebody in my position, I’m not looking to give somebody a piece of the deal to be boots on the ground for me. I don’t need it. I have property managers. We have a team in place. That doesn’t do much for me. I don’t see any real point in giving somebody a piece of the deal to do something that we already have covered.

Somebody can either get good at finding these deals. Once you get something under contract, then you can bring that deal, find the other pieces, and bring the people together to be able to close on the deal, or you get good at being able to raise capital and meet people that are like my team that is always looking for capital. You don’t need to be able to raise $10 million to be able to get a piece of syndication. Generally speaking, most operators that will bring in other people for equity will accept as little as $500,000 to $1 million and still give that person a piece of the deal.

In my opinion, capital is the easier and faster path to getting into syndication. Initially, my team and I wanted to be everything. We wanted to check all or as many of those four boxes that I mentioned as humanly possible because we wanted more of the deal. It doesn’t matter. The name of the game is the track record and stacking wins. If I get into the first deal for bringing $500,000 and I get 1% of the deal, that’s mission accomplished because I got a piece of the deal. I can put on my resume or have on my credibility story that I’m a piece of this deal. That gives me additional credibility that I didn’t have beforehand.

You said you had two other partners. I’m assuming you’re the money guy. Are one of them the credit guy and the other one the liquidity guy? How does that look like? How does that partnership shake out?

It didn’t shake out the way that we initially anticipated it. That’s worth mentioning. Partnerships don’t always work out the way that you initially set them up. One of our partners was my dad. He was initially brought on. He was the corporate professional guy that was lending credibility to us as a group. He’s an ex-CFO, CPA and has a Master’s in Tax. He was the credentialed one. The initial thought was that he was going to be the one that was underwriting a lot of the deals.

Business partnerships don't always work out the way that you initially set them. Click To Tweet

When we first started, it was like, “Let’s all go.” There wasn’t much of a plan. It’s like, “I’m going to look for deals and investors. I’ll do those things too.” We were all stepping on each other’s toes and we realized after a couple of months that we needed to create roles for each person. My dad’s role was going to be underwriter and analysis. My other business partner was Charles. His role was in deal finding, building relationships, and creating relationships. I was on deal-finding initially, too.

We screwed things up here when we were getting started. I was coming from being a fix-and-flip person so I had some investors that we had built relationships with. I was of the mind, “There’s no problem. We will find a deal. I’ll tap those investors. They will come over. Everything will be fine. All we need is the deal. We have already got the money lined up.” Most of those investors’ initial conversations were like, “That sounds awesome. I would love to be involved in something bigger,” but in hindsight, I didn’t get clear enough on the difference between investing and debt.

In a fix-and-flip, you get your flat percentage. You’re paid out, done, and get the first lien. I didn’t compare the two. When we presented the deal, your money is going to be held up for 3 to 5 years. You have no security. There is no mortgage. There’s nothing. It was like, “We’re not too sure about that.” We didn’t have anybody initially focused on the capital side because we made this stupid mistake of thinking we would be able to bring people over.

That was how it initially started. As we have grown, my dad retired from his 9:00 to 5:00. He’s now helping to babysit my little girl. He’s more of a passive partner. We have changed percentages. He’s now a very minor partner in the business. Charles is in acquisitions and asset management. I’m in marketing, branding, investor relations, and capital. That’s how it’s evolved over time.

That opens the door to a question but I want to mention this. Not all money is created equal and that was a lesson you learned. Not all investors are created equal. You have your JV partners. They are the guys or gals that want to put up all the money and split the profit with you. They’re not going to be a rate–and–term investor. You have your rate–and–term fix and flip investor who will want to turn their money 2 or 3 times a year on flip projects. They’re going to always want their money to go in and come out. In case something comes up, or they want to use their money elsewhere, it’s free.

You’re going to have your buy–and–hold investor. You can tie their money up long-term for 2, 3, 4, or 5 years but generally, they’re only going to want to do residential real estate. You have your syndication investor who gets what we’re trying to do and will be willing to put their money into a project. They understand the risk involved. It’s a different investor at every level. It’s a different conversation, relationship, and goal. You have to understand that not all money is created equal. If you don’t know that, you’re going to have a hard time in the transition.

 

You’re going to learn it fast. It’s like, “What do you mean? This is better. You were getting twelve over here. I’m giving you eighteen over here.” They were like, “I had my money back in nine months. You want it for five years.” It’s the details.

I was looking at a storage unit situation here. The guy was trying to raise money. I said, “You’re not talking about selling this anytime sooner. You’re going to refinance it.” He said, “That’s not in the plans either.” I said, “What if something happens over here, and these people need their money back? You have an open-ended window. There’s no 3-year or 5-year benchmark. How do they get that money back?” He said, “They will be a buy–sell agreement.” I was like, “All that is a nightmare.”

You have to make sure that if you’re looking to put money into somebody’s project, there is an exit. They’re going to refinance the property at a certain checkpoint, plan on repositioning and selling it at a certain checkpoint, have some things along the way if things don’t work out the way they expect, and have a plan B. Those things are very important.

I will be shocked if that group has done multiple deals if they’re not communicating exit strategies. I put a lot of thought into the way that we present investment opportunities to people. It’s not just the information. It’s the sequence. What are we starting with? We’re typically doing a 40-slide PowerPoint presentation. It’s an hour-long webinar. We have multiple team members. Our favorite night is either Thursday night or Sunday night for webinars. We’re starting them at 8:00 Eastern Standard Time.

You have to figure out strategically, “How do we catch the interest right away to get them focused but then sprinkle in enough valuable information that they can wrap their head around the attractiveness of the opportunity without getting too far into the weeds?” It’s challenging. The presentation of that is not something you can wing together. I can’t believe that they wouldn’t have put more time and effort into the exit strategy. I’m always trying to think that if I’m the investor on the other side of the equation watching this presentation and thinking about this deal, what are my concerns? That’s number one. How am I getting my money back?

It raised a question. You’ve got a partner that is chasing deals. You’re the one out there raising the money. Who’s the credit?

That person is an outside person that we partner up with on a deal-by-deal basis but isn’t an actual partner in our entity. This was something that was news to me. It’s not uncommon for there to be 2, 3, or 4 groups in syndication. It’s not uncommon to see at least three, the person signing on the loan, the team that found the deal, and then the team that raised the equity or something along those lines. It’s very common that these deals get chopped up and that it’s not 100% owned by one group.

That is what you’re working toward because every deal that we close builds my net worth and gets me that much closer to having the net worth that will qualify us for the next purchase price the next time around. Generally speaking, syndication is made up of two different groups of people. You have the group that is running the deal or putting the deal together. My team is a member of that group. It’s called the General Partnership or the General Partners. You have Limited Partners or LPs. Your limited partners are your straight equity investors.

 

Normally, what you’re looking at in our market is a 70/30 split. The limited investors, the LPs, and the straight cash investors wind up with 70% of the deal. The general partners wind up with 30% of the deal. You may only have a quarter of that 30% but what’s pretty common in the syndication space is that if you’re signing on the loan, you’re getting anywhere from 10% of the general partnership or 3% of the total deal to 50% of the general partnership depending on how many other hats you’re going to wear and how many other roles you’re going to have within that deal.

This is where, in my opinion, syndication gets attractive. When we are able to start sponsoring our deals, I can start sponsoring other deals. I can have other people bring me deals. I didn’t find it. All I’m doing is vetting the analysis that they have done. If I like the deal, I can sign on the loan and then I’m a quarter of the general partnership right there for bringing the balance sheet and the liquidity.

You’re assuming the risk. It’s real. To break this down in five–year–old terms for somebody reading, when we take a $1.4 million purchase and the bank is willing to loan, $800,000 of that is going to be the loan. You have somebody that comes in and guarantees that loan but you still have to raise the other $600,000. $200,000 is for the work to reposition the property and bring it up to standards. The other $400,000 is what the bank is going to require you to come in with.

You have to raise that from private money. That’s why you’re talking about the limited partners. That’s probably a pretty hefty number compared to what you’re usually raising but you’re raising $6 million from private individuals who will get a preferred interest rate, a stake in it, or a combination of both, depending on how you’re putting the deal together.

I love the ones where I get a preferred interest rate and a percentage of the deal because it gives me the percentage of depreciation. That’s the other thing. If you’re coming into these things and getting a stake in the deal, you get your percentage. Let’s say it’s 2.5% of the deal. You’re getting 2.5% of the overall depreciation, which helps you with your taxes. There are some advantages from an investor standpoint, the person bringing in the credibility for the loan and the person putting the deal together. There are a lot of advantages across the board, not just making money.

In my experience, that is one of the harder benefits for the typical investor to wrap their head around. It’s the tax benefits and the depreciation that they’re going to be able to claim. In my opinion, it’s the next level of financial intelligence. Most people aren’t thinking of it but the reality is that an investment in the S&P that yields you 10% is not the same as an investment in this syndication that yields you 10% because you get the tax benefits of the depreciation through the syndication. You are a minority owner of the property with the way that it winds up being structured.

Tax benefits and depreciation that investors can claim could be the next level of financial intelligence. Click To Tweet

In the way that we structure it, the property is purchased by an SPE or a Special Purpose Entity. The only thing it does is take titles to that one property. Each investor’s investment buys them shares of that Special Purpose Entity. They’re an owner of the LLC that owns the asset passed through depreciation and can write it off on their returns.

It can be a game–changer for somebody like us in the flipping and wholesaling business for sure.

It’s huge.

This has been a good conversation. We will go ahead, end it, and tight a little bow right here. If somebody wants to get ahold of you and reach out to you, how do they find you?

Instagram is where I am most active. I am @RealEstateAdam7.

Adam happens to be a member of our Inner Circle community. I’ve gotten a chance to hang out with Adam. If you are interested in having a conversation with Adam about possibly being part of one of his next syndications, some people on here may want to do that, reach out to Adam. I am not an attorney or an accountant. I am not going to guarantee anybody’s investments. I want to state that disclaimer, but I know Adam is a stand–up guy and will do everything in his power to do right by you. If you’re interested in something he has going on, reach out to him.

Don, we have to talk again because we just happened to structure our deals where our investors get a pref and an upside.

Those are the ones I like and want to be part of. I always enjoy those. We will have a conversation. I’m ready to put some money into some other things. If you’re getting value from this episode, make sure you’re liking and subscribing everywhere. You can find me on Instagram @TheRealDonCosta. I’m on TikTok and Facebook. You name it.

If you have questions, email me at DonCosta@FlipTalk.com. If you want to be part of an incredible mastermind and join gentlemen like Adam and some other incredible ladies and men that are doing some amazing things, go to the Inner Circle Elite’s website BeInThisRoom.com and apply to be part of the community. As always, FlipTalk.com has some amazing things for you as well. Adam, thank you very much for being with me. I appreciate your time.

Thanks for having the mastermind. It has been awesome. I’ve learned so much and met many awesome people with whom I would never have come into contact otherwise. I’m not here to plug the mastermind but it has been an awesome group. It’s one of my favorite groups I’m a part of.

We do have an incredible group. I’m working hard to keep it that way. We want some great people in there to join us and help us grow it. I appreciate you.

You too.

 

Important Links

• Adam Balsinger – LinkedIn
• SAP
• @RealEstateAdam7 – Instagram
• @TheRealDonCosta – Instagram
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• DonCosta@FlipTalk.com
• BeInThisRoom.com