What does it take to be a
syndicator? Who has no trouble
raising money? Who can raise 2
million 20 million in a matter

of days, rather than months?
Well, the answer is simple. And
it actually boils down to just
three questions. And by

answering these questions, it'll
make everything work so much
better, you'll be able to raise
money much faster, you'll be

able to market easier, you'll be
able to save costs on your
marketing. And you'll probably
even be able to find deals to

syndicate easier. Now, by not
answering these three questions,
it costs me a lot. I had to
learn these the hard way. And

I've noticed that as a
syndication mentor, and as an
attorney, I see new people who
are trying to syndicate hit this

roadblock all the time by not
answering these three questions.
And I see experience people get
setback as well by not answering

these three questions. So in
this video, we are going to go
through the founder investment
theory.

Start talking about founder
investment theory. Let's
flashback to my first deal. So
my first deal came on by landing

on my desk when a partner said,
Hey, do you think we can
syndicate this deal now the deal
was smokin hot, it was a good

deal. It was gonna make money it
was it was very, very secure.
And I had a lot of faith in it.
I've seen a lot of deals that

were good. I've seen a lot of
deals that were bad. This was
definitely in the good category.
So it met all the criteria, we

got the deal. It was good, put
it into escrow, and started
working on putting that
syndication together. But that

syndication process actually
ended up taking six months. Now
a good portion of that time was
just making sure we were doing

things absolutely right,
complying with all the laws, a
step by step most people will
skip, but you're not going to

because you're in this program.
But the other part was finding
the right investors and getting
the matched up with the property

was challenging. Now the bar for
me was pretty high, because I
have this friend Mike. And Mike
is a very active syndicator. And

he has no problem raising
millions and millions of dollars
in a matter of hours. So the bar
for me was high. I wanted to

challenge it. And so I did
everything that I could to fund
that deal and to find the right
investors. So I tried

researching marketing sales, I
tried every sales Gambit, I
could take, I tried every sort
of marketing angle I could take,

I experimented with things, I
spent a lot of money and a lot
of time to try and find those
investors and get them matched

up. Now my approach was shotgun
or throw the spaghetti at the
wall, I pitched that deal to
everybody. And everybody I

pitched it was I never really
got very far. So one day, I was
lucky enough to have a lunch
that I set up with a prominent

physician whose name was Dr. S.
And Dr. S was known to me I had
done a deals with Dr. S before.
And he was great guy, very easy

to get along with very candid
and just, you know, liked what
he was doing and liked his place
in life. He was a practicing

anymore. He was just, you know,
having fun and living the good
life of a retired fairly well to
do person. So I have this lunch

with Dr. S. And I went in with
the intention to pitch him the
deal, because I knew that he
could easily come in for at

least $300,000 in my deal, which
would make a huge difference in
getting that deal, closed it. So
I sat down to lunch, I started

pitching him the deal. And he
looked at me with a furrowed
breath. And I told him
everything about the deal. He

said, Okay, is that it? And he
said, I said, Yeah, that's the
deal. It's great, huh? He said,
Yeah, it's okay. It's not for

me. And I was kind of taken
aback because I thought What
else for sure he would do this
deal. He likes me. He knows me.

He trusts me. You know, it seems
like if the deal was good, so it
seemed like he would be a sure
thing to go in this deal. And I

said, Okay, well, why not? And
so Dr. S turned to me and he
said, Well, let me tell you,
I've got three different

categories of investments. The
first category is I have My safe
money. So you can think of that
like it's in bonds or Munis or

things like that. But it's very
unlikely that anything is going
to happen to that money, it's
very unlikely I'm going to lose

anything in it. If the great
recession comes, again, I'm
going to be okay with that
money, it's not going anywhere.

That's the first category. The
second category of money is my
income money, that's the money
that I live off of, I need to

get about a 10% return not very
substantial, I just need to get
some money. And I will still
want it to be pretty safe. But

I'm not looking for anything
very special, I'm looking for
regular, consistent income. The
third category of money that I

have is my play money. Now my
play money is for me to just
have fun. It's those deals where
I can speculate I can come up

with find somebody who's got a
crazy business idea and be a
part of that. And really, it's
just play money. Now, I'm

probably not going to make this
money back in any one particular
deal. But the returns are so
high, I'll probably get it back

in,

you know, down the road. And if
I want hits it out of the park,
I've made a little bit of money.
But really, I'm not looking for

my play money to actually make
me money. I'm just enjoying it
and having fun. It's not a big
portion of my of my wealth. It's

just a little bit. And I took a
deep breath. And I said, Okay,
well, you know, would does, you
know, this is this is a great

property. You know, it's really
good. And he said, Yeah, but
this doesn't fit. It's not safe
money. It's not income money,

and it's not play money. I mean,
it's not safe, because it's real
estate. It's not income, because
you told me that the real value

in this property is its
appreciation, and the IRR. You
told me about this deal. Is it
17%? Well, that's way below

where my play money mark is. So
it's just not the deal for me,
but I appreciate you telling me
about it. Please tell me about

your next deal. So I left that
lunch with no check in hand. But
I did leave with an education.
So that night, I am thinking

about Dr. S. And I'm reading a
book about Warren Buffett and
how Warren Buffett would invest.
Now, you obviously know, Warren

Buffett is one of the greatest
investors of all time, but not
in commercial real estate
generally. So I asked myself,

would Dr. S invest in Berkshire
Hathaway? And I have come up
with the answer of No, I don't
think that he would. So Dr. S,

wouldn't see Berkshire Hathaway
as being especially safe. He's
still invested in companies,
which still isn't as safe as

say, like a treasury bond. So
it's likely that that it just
doesn't meet that safe, no
matter what happens criteria.

It's also not Berkshire Hathaway
is not income money in Dr. SS
viewpoint, because Berkshire
Hathaway generally doesn't pay

dividends. The third reason is
it's definitely not play money.
I mean, this isn't going to be
making him that 50% really fun

money, that he gets to be a
piece of the action and kind of
have fun with it. So let's not
play money either. So Dr. S

wouldn't invest in Warren
Buffett. So Hmm, what does that
mean for me and what I'm trying
to do? And so Dr. S wouldn't

invest in my deal, and he
wouldn't invest in Berkshire
Hathaway. So that led me to
answer will, what those three

questions are, that turned
everything around, and it became
the body of the founder
investment theory. So question

number one is, what is the
overall strategy? Now obviously,
Warren Buffett is known as a
value investor, he's looking at

at investments whose intrinsic
value is way below the sales
price of that of that
investment. So that's what

Warren Buffett does. So what's
my what's my overall strategy in
this? In this case, let's go to
what the different strategies of

commercial real estate are and
then we'll look at where this
investment fell, falls in line.

Alright, so we've got our
founder investment theory,
oftentimes, I'll call it the fit
for founder investment theory.

And so you'll, you'll hear me
say They that time and time
again fit or founder investment
theory, they're the same thing.

So question number one is what
are the what is the strategy.
Now I look at the strategy kind
of along a continuum. And along

that we've got our hold period.

And we've got our complexity.
And there's five different
common strategies. Now, I'm
going to put them on this, where

they fall for me on this
continuum, on how I like to do
things. Now yours could be
completely different. And so the

first example of that is
development.

For me, development has a longer
hold period than say something
that is, that is just like a
flip. For I am, I would be doing

most of my development where I'm
close to the property. And so
development for me is, is has to
be pretty nearby, every

development I have done, I can
drive to. So in California,
which is where I'm located right
now, our entitlement process

takes for ever, you're looking
at more than two years, in order
to get the entitlements and even
get it to ground ready. So for

me, that whole period is just
longer than a year or two years
to get something going. So for
me, the whole period is longer.

That's why it goes in this
quadrant. For you, it may be it
may be significantly less, and
that's totally fine. And it may

be something that's not complex,
it doesn't matter. What the
point is, is that you understand
where your strategy falls on the

continuum as you see it. So
we've got development,
obviously, we're looking for raw
land or for an underutilized

location. The second is value
add. When I'm looking for value,
add opportunity, I'm looking for
a deferred maintenance a missed

opportunity below market rents
or high vacancy, something that
I can do is something that I'm
gonna have to put some work

into. And so it's complex, but
it won't take me years in order
to do it. So for me value add
tends to be fairly, fairly

short. And compare that to the
same idea of stabilized. value
add, which is you're finding
properties that have maybe a

normal vacancy, but the leases
are expiring, and you want to
capitalize on that by either re
by either bringing those those

rents back up to market, or
you're looking for below market
rents in general. And then as
leases expire, you're building

those those lease rents back up,
in order to get more value out
of the property. This generally,
because you're, you're looking

at more than one tenant, a lot
of times it takes a longer
you're just at the cycle of
whenever leases come due in

order to build up that value
into the property. But still,
because you're doing leasing and
you're doing renewals, the

complexity is a little bit
higher, then you've got your
undervalued properties. These
are ones where they are trading

significantly below replacement
cost or their deals where they
have a very, very low price per
square foot, maybe it's got a

very high cap rate because
leases may be renewing but they
don't know whether the tenant is
going to renew or not. These are

undervalued properties. And so
the strategy typically with
these is you basically flip so
you sell them maybe a year after

take advantage of the capital
gains tax for your investors. So
you hold for a year then you set
resell is an undervalued

strategy. And the last strategy
is your cash flow strategy. And
these are those properties that
are in prime locations where

you're either looking for
massive appreciation or you're
looking for rent escalations. In
order to add that value and

normally this will take place
over the next extended period of
time, I just did a deal that has
an 18 year hold period. Long

story, why it's an 18 year hold
period. But it's a cashflow deal
that really is just banking on
that appreciation. And it has a

very, very long cycle. So these
are the five basic strategies,
that makes sense. So that first
deal that I was talking about,

really kind of bridge the gap
between these this in this
world, in this undervalued add
to cash flow properties is

really where it fell in, it was
not a value add deal, it was
brand new construction, the
tenant was already in place, but

it hadn't been turned on yet. So
that's why it was undervalued.
And then it was in a good
location. And so really, it was

wait until the rent bump at year
five and then sell the property,
which is what I did.

So that is the strategy. Now the
second question we ask ourself
is what is the what is the
niche.

And this can either be your
prop, this can be either or both
your property type or your
location. So for property type

is it going to be office
building apartment building,
industrial building, medical
office, retail strip center,

mall, self storage, airports, I
mean, whatever it is, what is
that property type. Now you
don't need to necessarily

specialize in just one property
type, but just not be aware of
where you fit and what you
generally emphasize. The second

is this idea of location. So
that first property that I did
was across the country, it took
more than six hours to fly there

because you had to change planes
in order to do it. So it was not
near me. Other properties like
properties I developed that I

mentioned, I like to be able to
drive to work regularly. So I
can kind of keep an eye on it
and monitor its progress. So

location is also important. And
if you're going to be doing
deals near you, maybe you're an
expert, and it also kind of

brings to how you talk to your
investors, for example, some
investors in California don't
like to invest outside of

California, other investors in
California only like to invest
to California. So if I have a
California deal, I'm talking to

one group, not the other, and
vice versa for something outside
of California. Some people like
something hyperlocal that they

want to visit and go see before
they invest in other times, they
don't care, they just want high
returns. So the second question

is niche. And the third question
that we ask ourselves is, what
is the risk profile? The risk
profile is where on that

continuum does it stand does
does the property stand, we have
very high risk. We have very low
risk. So maybe a very high risk

is paying something like a 40%
IRR. Maybe a very low risk is
paying something like a 10% IRR.
You know maybe ask yourself, why

would somebody do a 10% IRR
deal? Well, they may be wanting
to do that deal just to get
exposure into real estate and

don't really want to be a part
of a REIT or something like
that. They don't like the
efficiencies in REITs. What

about the 40% IRR? Well, who
wouldn't want that money? Who
wouldn't want it? Well, somebody
who's just generally risk

averse. Somebody who doesn't
want a high risk product, who
wants to make sure that their
money stays safe. That's a lot

of people. And somewhere in the
middle, you have sort of a
medium risk investor. And maybe
that's paying out 15% IRR. In

general, I try and stay in this
bandwagon here. As long as it's
not a development deal. I'm
trying to stay between 14% and

maybe 17 or 18%. I'll say 17
here. That's the kind of profile
that I'm generally market to. So
that's part of my founder

investment theory. And the
reason is because the people who
are attracted to the very high
deals are not going to be

attracted to the very low deals,
they're not attracted to a 10%
IRR. And it's probably a waste
of time to talk to them about

the medium risk deals, they
probably aren't very interested
in 17. If the person you're
talking to start saying, Yeah,

but I can get, you know, 40%
over here, you've probably got a
very high risk tolerance person
that is looking for just that

kind of deal. Whereas if they
start to get a little afraid
about what you're saying, in
terms of returns, and they are

asking a lot about how risky it
is, they might very well be in
this very low risk category. And
when you put it all together,

when you put these three
questions together, what is your
strategy, what is your niche,

and what is your risk profile,
you start changing the way that
you communicate with your
investors. So suddenly, now

investors are looking at you as
specialized in one particular
thing. And what that does is it
builds trust with those people

so that they understand what it
is that you do, and what it is
what value you bring to the
table rather than what I was

doing in the very beginning of
just choosing good deals and
bringing them and putting them
in front of everybody that I

could. So now what I do is I, I
have a very specific thing that
I look for. And I have a regular
set of investors that I invest

with me, and they know what I'm
doing and they understand where
I'm coming from. And that I'm
not going to waste their time

talking about something that is
just way outside of something
that they're they would be
interested in. When an investor

analyzes a deal for themselves,
the first thing they try and do
is trying to decide if they
understand it for themselves.

And then they try and see, you
know, is this very different
than anything that I've ever
seen, because if it's very

different, I don't want it. But
if it's close to what they've
seen before and they can
understand the deal, and then

they understand you and
understand how your approach to
this is and why you've chosen
this particular founder

investment theory to work with
then that builds that trust in
order for them to invest with
you. So, that is the founder

investment theory. Now in the
next module, we are going to
talk about how to protect
yourself from the very beginning

from either deals going sideways
or making a mistake in choosing
the wrong investors.