Latest / The Academy Presents podcast / Tracking the Truth Behind Real Estate Syndications with Prolet Miteva

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Tracking the Truth Behind Real Estate Syndications with Prolet Miteva · The Academy Presents podcast

• 0:01
  Did you know that 90 % of the world's millionaires
• 0:05
  invest in real estate? Well, I'm Angel with the
• 0:09
  Academy Presents Real Estate Investing Rocks,
• 0:11
  and I'm here to help you if you want to go for
• 0:15
  your piece of that pie. Are you new? Are you
• 0:19
  new to this and you just don't know where to
• 0:20
  start? It's okay. Are you someone that has invested,
• 0:25
  but you feel stuck, you feel like you've lost
• 0:27
  momentum, you don't know where to really head
• 0:30
  from here? Are you a seasoned real estate investor
• 0:33
  who is doing great but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
• 0:52
  dreamed of all through real estate investing.
• 0:56
  You're already taking the first step. just by
• 1:00
  joining us here today. I will say that in the
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  golden age, you could base all your investment
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  decisions on the projections. That is really
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  no longer the case. If you're coming across somebody
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  that's still forecasting aggressive rent growth
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  and a lot of cap rate compression or movement
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  that's favorable, they're doing all of these
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  things that was happening during the golden age,
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  probably up through probably mid 21. Um, but
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  it's just, it's not the case anymore. And things
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  are kind of rebounding. Um, somebody yesterday
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  thought that we'd hit the bottom. I don't think
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  we've hit the bottom. Um, I don't think we hit
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  the bottom on the rent adjustments. I think that
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  they're still, um, Market by market granted,
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  but I think there's still a lot of markets that
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  are gonna continue adjusting. I have a passionate
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  thing about what you mentioned though, about
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  projections. And I think that we're different
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  kind of projections, but I fully agree with you
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  on the, when people are doing the projections,
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  they can make the deal look so amazing. And there's,
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  the sad part is that there's tiny levers like
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  multiple tiny levers that people can adjust to
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  make a deal look amazing. And some of them, like
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  the rent growth, the expenses, the exit and entry
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  cap rates. The time horizon. All of those things,
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  like even with the very tiny adjustments, can
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  have a big, big, big deal. a big impact on the
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  deal. And this is because really the formula
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  that we have for commercial real estate is that,
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  you know, NOI rules everything, NOI and cap rate,
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  that's it. That's all it matters for your project,
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  NOI and cap rate. And if you can swing either
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  one of those up and down, you can make any deal
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  look amazing. But from projection perspective,
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  one other thing that I felt very, very passionate
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  about and that's The another thing that I built
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  into syndication tracker is, and I would actually
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  wonder, I want to ask passive investors out there,
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  how many of them are actually taking what your
• 3:33
  sponsor projected and actually tracking what
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  they're delivering against the projections? And
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  I bet that every single Well, maybe not every
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  single, but 95 % of passive investors don't really
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  pay attention to that as much. So when I was
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  building the syndication tracker, one of the
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  things that was hard for me in my spreadsheet
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  really was that it's like, okay, I have a deal.
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  How much money am I supposed to receive? When
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  am I supposed to receive it? And then did I get
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  it? I tracked did I get money and how much money
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  I got, but it wasn't really against like, well,
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  on this date, you were supposed to give me this.
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  And on this date, you were supposed to give me
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  this. Where is it? So I built that into the syndication
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  tracker. So now when you go and say, like, let's
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  say that you as a sponsor say like, oh, year
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  one, we're not gonna have distribution, year
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  two is gonna be 3%, year three will be four,
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  five, whatever. You as a passive investor can
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  enter that into the platform and it will actually
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  visualize by month or quarter, depending on your
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  distributions, what are you supposed to get?
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  And then as you start getting the money, you
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  can track how you are tracking against projections.
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  And that for me is a super powerful tool to actually
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  hold sponsors accountable. I often And that's
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  been my fault too. It's like, I don't know if
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  us as passive investors, we hold the sponsor
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  as much accountable as they should be. And part
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  of it is like, if you're getting some money,
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  hey, no, great. Okay, maybe it's not exactly
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  what they said and when they said, but still
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  you are getting some money. So having a clear
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  view of that was super important for me. And
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  now when I... use it in the syndication tracker.
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  I'm like, oh, hey, this is nice. It's like, oh,
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  this month I was supposed to get this. I didn't
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  get it. Now I can send an email to my sponsor
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  and be like, where's the money? Or hey, at the
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  end of the year, they didn't perform against
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  their projections. Again, why? Now it gives me
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  more tools that give me more in -time information
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  on where I am versus just me waiting for the
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  end of the deal or waiting until the sponsor
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  completely stops giving me distributions and
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  then me trying to go and hunt them down. That's
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  one of the pieces that Jason and I talk about
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  a lot, especially with our GP team. I think that
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  we need to be sending updated projections as
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  the deal progresses. Because almost then it's
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  us I know and I know that like most people they
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  do their underwriting and that's to submit their
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  LOI but your underwriting is literally your business
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  plan like it should be a living breathing document
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  and if it's a living breathing document then
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  your projections are living and breathing also
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  and so I feel like we need you a better job of
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  keeping investors up -to -date and understand
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  where we think projections are going at least
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  in the short run because the hope is is that
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  at the turn you catch up and everybody gets the
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  projections you set in the front but if things
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  aren't progressing is at the speed that you needed
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  them to and it's going to take a longer time
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  horizon that's going to affect the IRR I mean
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  that's going to affect everything but if you
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  have to extend out to me it makes so much more
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  sense to send out your updated projections based
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  on current performance. The hope is always there
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  that at the end everything's going to catch up.
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  We're all going to be beautiful. But it's who
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  can who can keep treading water and manage the
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  storm long enough to be able to get to the end?
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  Because I think that that's another situation
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  that's happening is people are taking the haircut.
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  People are just getting out from under stuff
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  because they're tired. They can't tread water
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  anymore. They're drowning. And the only option
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  they have is to let go. I personally am refusing.
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  I don't know how long we can sustain it, for
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  real. But I want to know that at the end of the
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  day, I worked as hard as I could to try and get
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  to the end. Yeah. And frankly, as a passive investor,
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  those are great things to hear. you know everyone
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  talks about like oh what's the sponsor skin in
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  the game and it's like yes and most sponsors
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  do have money in the game but uh really how true
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  that is because right in some cases that skin
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  in the game is in a form of the two percent acquisition
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  fee that they charge up front and now that gets
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  rolled into their equity instead of them physically
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  putting money and yes they are working for it
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  and yes they are putting their time into it but
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  it's kind of like different when you put in your
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  cash in there so is that part of your tracker
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  too because i think about like if say it say
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  say uh gp does put 100 000 in but if their portion
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  of the acquisition fee is 200 000 then What do
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  they really have in? Negative 100? So I mean,
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  and Sandhya was the one that brought that to
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  my attention. She was like, how much are they
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  getting in the acquisition fee? Because if you're
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  not looking, if one is bigger than, if the acquisition
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  fee is bigger than what the person's putting
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  in, then they don't have any skin in the game.
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  Yeah, that is true. And it's definitely something
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  to pay attention. I want to say that I wrote
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  in something like it's part of the questions.
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  I have to double check, but this was definitely
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  something that I was thinking about. Maybe I'll
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  call it out a little bit more specifically. Well,
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  I had never even thought about it that way until
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  she brought it up to me. And that was a few years
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  ago now. And I was just like, wow, I just had
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  never thought about it that way. I think it's
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  a piece of that lack of education or self -serving
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  education. Because if you're taking a 5 % acquisition
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  fee the last thing you want the people that you're
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  trying to educate to be future investors should
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  do is Put it together in their head that wait
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  a second. They're getting back 5 % and they're
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  only putting this in so there's no skin in the
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  game I'm the only one with skin in the game So
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  how are they actually gonna be fiduciarily responsible
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  for my investment in their deal? because they're
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  only care they're not gonna care about my money
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  like I do and so I don't know. Something that
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  I tried to put in the syndication tracker for
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  sure is you can go right now it's more the optional
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  information like the acquisition fee and a couple
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  of the other fees that the sponsor charged by
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  default and you can evaluate an investment where
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  you basically right now it kind of goes a little
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  bit more and just says like hey you know what
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  based on the numbers you're providing does it
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  or does it not fit the typical deal right now?
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  So if somebody puts 5 % acquisition fee, I can
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  tell you that syndication tracker right now,
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  it will flag it as like, hey, you know what,
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  this is too high because you really should be
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  between that one to 2%. So I did try to put some
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  of that in because the other part, as I was mentioning
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  earlier, is that new passive investors don't
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  know. They don't know what to expect. in a deal
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  and not all deals are the same right different
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  asset types have different um return profiles
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  they're generally roughly the same but they are
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  slightly different so I definitely try to put
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  in some of that to kind of at least gives you
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  hints around hey what you should be paying attention
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  uh instead of just blindly accepting what the
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  sponsor is telling you. What you're providing
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  is a really awesome piece of software for people
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  and the information that it can provide can really
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  help and I'm thinking about it from like our
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  side too. If there was a better way to keep up
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  with that stuff as a GP team as far as keeping
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  up with the property management company is supposed
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  to be doing, I think it would help us keep them
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  more accountable too because I can foresee people
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  saying well we just didn't know because I've
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  said it. I've said well I just didn't know. What's
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  that? Well I said I'm gonna leave that for somebody
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  else to develop because my focus is the passive
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  investor and that is something that I feel truly
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  truly passionate about. I'm tired of all those
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  portals that I mean granted yes you make money
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  out of the active investors you sell the product
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  to the active investors and surely it simplifies
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  a lot of stuff for you but as a passive investor
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  that is more of a marketplace for me right it's
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  where I get bombarded with stuff I need somewhere
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  where I don't get bombarded with deals. I don't
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  have sponsors meddling in my stuff. I can see
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  my whole portfolio because right now it's like
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  I have 10 sponsors, I have 10 portals, right?
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  Or you have more than that because they're popping
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  between Juniper Square and Atfolio or something
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  like that. They keep popping back between them
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  and you're like... Yeah, but how do you view
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  full portfolio? How do you know how your money
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  is allocated? How do you know if you're over
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  invested in certain asset type? If you're too
• 13:43
  much into multifamily, if you're too much into
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  industrial, how much, how do you know if you're
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  too much in two with one sponsor? Those are all
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  things that you should be thinking about holistically
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  about your portfolio. And the more you are spread
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  across multiple portals, the harder it gets.
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  That's the other reason I created the syndication
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  tracker. I mean, really, after four or five deals,
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  doing some of this stuff in spreadsheets is just
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  a mess. And the other thing, as you know, we're
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  talking about five -year commitment. Do you remember
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  what happened last year in April? Probably not.
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  Do you remember what happened with that property?
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  No, right? Exactly, so having one place where
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  all of your information is there, you can put
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  your notes in, you can put in how you felt about
• 14:42
  that investment, like each quarter, so you can
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  understand over time, like how things are changing,
• 14:50
  being able to track your K1s, like are they late,
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  are they not late, did you get them, right? Those
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  things become troublesome, the moment you get
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  beyond couple of deals. Uh, and especially if
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  you're working and you're doing other stuff and
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  this is not your full time job, it's, it, it
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  becomes complicated. So that's why I just thought
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  of something too. So after 10, 15, 20 years,
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  you're going to have like historical data, data
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  trends against the business cycle, which will
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  help you. in future investment decisions because
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  you've got the historical data to back up while
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  you're making the decisions you're making in
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  the future. So it provides more than just a snapshot
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  view or even a three, four, five year view of
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  asset allocation dollars and returns because
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  it can give you, it can inform future investment
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  decisions because of how past performance has
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  gone. Yeah, and if you have the data, like I
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  had it in an Excel sheet, you can import it and
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  kind of start managing it in a different way.
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  I would definitely say it's not the simplest
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  thing to start because there is a lot of information.
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  I don't think people realize how much even basic
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  information you need for a syndication investment
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  to even start looking at returns and what it
• 16:26
  is, right? It's quite a few things. And yes,
• 16:29
  it takes a few minutes to enter each deal. And
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  I know a few minutes might not sound like too
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  long time, but for all of the attention deprived
• 16:40
  people, that sounds like probably ages, right?
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  But once you are there, you can totally see the
• 16:48
  benefit of like, hey, now you have things in
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  one place. Now you can see the full picture and
• 16:55
  now you can make better decisions. And now you
• 16:59
  can be reminded of things that you might have
• 17:01
  forgotten and you don't want to do again. So
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  again, I built it like with myself in mind and
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  I built it initially for me. because I just needed
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  it. And there was nothing out there that was
• 17:17
  for me, not for the sponsor. Everything out there
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  is for the sponsor. And I understand it because
• 17:22
  people want to make money. And I'll say that
• 17:25
  because somebody sent me an email and asked me
• 17:27
  like, what's your pricing? It's free. Right now
• 17:30
  syndication tracker is free. And I feel fully
• 17:34
  committed into making it free for investors that
• 17:40
  are starting up. Eventually, I might monetize
• 17:42
  it in some way, but I always, always, always
• 17:45
  want to have a free tier that if you're starting
• 17:49
  out, if it's your first investment, if it's your
• 17:51
  first few investments, you should have stuff
• 17:54
  that help you for free. And that's the history
• 17:58
  of being me, like, you know, we like free stuff,
• 18:00
  but you should have some of these things for
• 18:04
  free. you shouldn't have to pay some obscene
• 18:07
  amount of money to get some of this. And yes,
• 18:11
  you invest a lot of money, right? Some people
• 18:13
  say like, oh, you're investing like $50 ,000.
• 18:17
  Yeah, but for some people that $50 ,000 is already
• 18:20
  a lot and they don't want to commit another 500
• 18:24
  or a thousand dollars into going like paying
• 18:30
  for something instead of getting something for
• 18:34
  free. So I'm just hoping that it can help some
• 18:37
  investors make a better decision and either decide
• 18:42
  that it's for them or decide that it's not for
• 18:46
  them. Because it's perfectly fine to decide that
• 18:49
  this is not something for you. Maybe it's too
• 18:53
  risky. Maybe it's too scary. Maybe you can't
• 18:56
  touch it. Maybe it's not for you. But you should
• 19:02
  go and make the decision in an educated manner
• 19:05
  and not just some sponsor told you to do it or
• 19:09
  not do it. Absolutely. You know, I just want
• 19:13
  to thank you for being here. This was awesome.
• 19:18
  There's one more thing I want to ask, but I don't
• 19:22
  want to get technical and take up a bunch of
• 19:24
  time, but would you look on it when you open
• 19:28
  it the first time, you're going to be like, I
• 19:30
  have so much I have to enter. But is there a
• 19:35
  piece that'll parse it in? Or do you have to
• 19:39
  manually enter everything? Well, right now you
• 19:42
  can manually enter it. You can import it. I am
• 19:47
  working on better ways to enter it. There is
• 19:52
  actually an AI. Assistant, you can go and ask
• 19:54
  it to it, but not an investment yet, because
• 19:57
  that's a lot more complex. But if you just have
• 20:00
  a distribution, you can go and ask the assistant,
• 20:02
  hey, add a distribution for this for me, and
• 20:04
  it will do it. You can also ask it other stuff
• 20:07
  like, hey, how is this investment doing, or other.
• 20:11
  things for me to do, right? So there are some
• 20:14
  things like that that help you, but I'm definitely
• 20:17
  looking for better ways of how do you enter that
• 20:20
  information? And I'm working on some ideas, but
• 20:24
  I'm also looking for feedback. Please, please,
• 20:26
  people use it. Give me feedback. Beta test. Yeah,
• 20:31
  beta test. But the other thing that I recently
• 20:36
  included, which I totally understand it. it's
• 20:39
  hard, it's a hard sell. It's a lot to take in
• 20:42
  when you first do it. There is a playground.
• 20:44
  So when you go to sign up or log in, now there
• 20:47
  is a button there that says like log into a playground.
• 20:50
  There is a bunch of investments. There is a bunch
• 20:52
  of sponsors in there. Feel free to add stuff.
• 20:55
  Just do not put real sponsor names and real investment
• 20:59
  names people. I've had people go and try that.
• 21:02
  Makeup names, I don't care what they are makeup
• 21:04
  names, but if you want to just play with it,
• 21:07
  see what it looks like, see if it's for you,
• 21:10
  you can go and test drive it without the full
• 21:12
  commitment of doing your own portfolio. And if
• 21:15
  you feel okay with it, go and enter one deal.
• 21:18
  or like one deal that you're potentially evaluating.
• 21:21
  See what it can tell you about it, like what
• 21:24
  the projections are, what it looks like, what
• 21:28
  the actual calculated IRR is, not what the sponsor
• 21:31
  tells you. It should be based on the numbers
• 21:33
  they give you. And go from there so you can play
• 21:38
  with it. Awesome. Well, again, thank you for
• 21:41
  being here and thank you for sharing about your
• 21:43
  passion project. I think it can be really helpful
• 21:46
  for a lot of people. Because you're active owners
• 21:51
  and operators, we're still passive investors
• 21:53
  too. And we're not just passive investors in
• 21:56
  our own deals, because a lot of us have self
• 21:58
  -directed retirement accounts. Well, we can't
• 22:01
  put all that money in our own deals. So we do
• 22:04
  in fact invest in each other's deals. And so
• 22:07
  having a tracker like this is still really good
• 22:09
  for us too. So don't think that you have to strictly
• 22:13
  be a passive investor. You just have to have
• 22:16
  passive investments. I fully promote if you're
• 22:22
  an active investor, go and put in your deal with
• 22:24
  the numbers that you're promising your passive
• 22:26
  investor so you can see what they see. If people
• 22:29
  use the syndication tracker, go and see what
• 22:32
  they will see. Because even as a potential deal,
• 22:35
  the syndication tracker will go and calculate
• 22:37
  the IRR based on all of the numbers you're giving
• 22:40
  to the passive investor. So don't be surprised
• 22:43
  if somebody comes and tells you like, oh, you
• 22:45
  said that you're going to give me 18 % IRR, but
• 22:48
  this calculates it as 16. Why? Yeah, that's a
• 22:54
  little scary. So did you want to give us that
• 22:57
  link again? Yes, it's syndicationtracker .com.
• 23:02
  You can go, you can again use the top level calculator.
• 23:07
  It's open to everyone and you can use the playground
• 23:09
  to play with it when you click on sign in sign
• 23:12
  up. And please give me feedback. That's the best
• 23:16
  way to make a product better. And I am working
• 23:21
  on it actively. So anything you send. you to
• 23:26
  be sent to me. So you can always find me at prolette
• 23:28
  at syndicationtracker .com or on LinkedIn. I'm
• 23:33
  the only one with the red hair. Awesome. Well,
• 23:38
  again, thank you. This has been awesome. And
• 23:41
  just thank you for being free with it and just
• 23:44
  wanting to help out your fellow passive investors.