[00:00:00] Speaker A: Welcome, listeners. You're listening to the deeds in the desert, where real estate investors tune in for the latest news.
[00:00:07] Speaker B: Welcome to another episode of deeds in the desert. I'm your host today, Izzy Urizari. Today we have Kate Buda, business development executive, and Greg Yang, business development executive. Today we're going to go over a topic that we actually haven't gone over before in the deeds in the Desert podcast, something that's been coming up quite often, I would say, over the last couple years, not as popular about, let's say, ten years ago, but it is something becoming more mainstream, and we wanted to talk about it, and we wanted to actually tell you why trust deeds are better than this option. So let's get right into it. Syndications. Real estate syndications. Right. So I brought you two here because we go to a lot of events and we hear this term all over, right. People are always talking about, oh, I need to get into a syndication. I need to get into. It's a fancy word. Honestly, it's not my favorite word, but we'll get right into it. Before I ask you guys any questions, though, I did print out the exact definition right from the Internet, so let's read it out there for everybody so they understand what a real estate syndication is. Okay. A real estate syndication is a partnership between multiple investors who pool their money to purchase a property and manage it together. The investors receive a share of the property and ownership in the form of equity units or shares, and they can expect to receive returns from rental income, appreciation and cash flow. A lot of those things sound similar to what we do, but we are so much more different than that. So I'm actually gonna let Kate take. Can you go ahead and start it off and tell me how are we different? Just the baseline of what were different in syndications.
[00:01:36] Speaker C: Baseline is this is straight debt, okay? Meaning that you are picking the investment. You're not going in with a whole bunch of investors and splitting rents and different things like that. Right? You are listed on the deed of trust by your name, by your percentage of your investment amount. And that is really the main difference. You're picking the investment that you want to go into, and you have that. That property is the collateral for your investment.
[00:02:04] Speaker B: What do you like to tell your clients, Greg?
[00:02:06] Speaker D: My favorite difference between syndications and our trust deeds is the fact that we provide fixed passive income.
Syndications also provide fixed income. I mean, passive income, but not at a fixed rate.
[00:02:24] Speaker B: Correct.
[00:02:25] Speaker D: Oftentimes because you're owning the property like an owner of a business or a rental property, your returns are dependent on how well the property performs or how well the management company manages their p and L. That's not the case with us. We offer fixed passive income and at a predetermined interest rate.
[00:02:49] Speaker B: Something I wanted to talk about is we were actually talking about this offline right before we started, which is a lot of potential investors and some of our current clients will talk a little bit about. They'll read too far into the details. And that's okay. We understand. We have some analytical clients. They start looking at, let's say, one of our retail projects that we have going on, and they're looking at who the eventual tenants are gonna be, and they're like, oh, they don't have good financials. What if you can't get the deal done and whatever have you? That stuff doesn't matter. It really doesn't matter to us. At the end of the day, you know, we're gonna be, as the k always like, you know, we're out of the deal before it even happens. You know, and I think that's something that a lot of people harp on a lot. And to know that, you know, the biggest thing difference between us and a lot of syndications is our duration. You know, our duration's only nine to 18 months. You know, we're able to get in and out of those kind of things before anything is to happen, you know. But the other thing, too, is that it's not just a duration. What have you guys heard as far as syndication minimums? Kate, you got, you recently went to events. Great. You went to some events. What have you heard? Syndication minimums are.
[00:03:48] Speaker C: A lot of those syndications are anywhere between three, five or seven year old.
[00:03:53] Speaker B: Right.
[00:03:53] Speaker C: And what I would tell you is how we're different in the trustees, right. That nine to 18 months, you're out of it. Right. Your investment in your funds going to be a lot more fluid in that 18 months. If something is going to happen in the real estate market, whatever type of real estate that you're investing in, to a seven year hold, a lot can happen in three to seven years. Right? So an 18 month hold, right. You have that flexibility. If the market is going to take a horrific downturn, which we haven't seen in a long time, you're going to know before that eight. After that 18 months is over, you're going to see it slowly, gradually going there. But your payoffs already happened by then. Right? So if you choose to not reinvest your money and hold, you're good three to seven years. You better strap in because you don't know what's going to happen at that point.
[00:04:47] Speaker B: Right. I think the other thing too, Greg, is, I mean, we recently went to an event, we've hear syndications is what's our minimum like to invest, you know, compared to us ten k. I mean it's, it's feasible for a lot of the everyday investors. But what number, do you remember what numbers stick out to you?
[00:05:02] Speaker D: Very commonly thrown around there is 50,000 minimum.
I have seen things as little as 5000. But then, you know, there are two other barriers to that. Number one, a lot of syndications require accredited investors.
[00:05:20] Speaker B: Right?
[00:05:20] Speaker D: We do not. Number two, a lot of these lower minimums are oftentimes higher risk investments. And I think one other thing that a lot of our clients like is when they get their feet in the door for their very first investment, we always have options available with folks that have borrowed from us in the past, oftentimes in the tens and hundreds of millions even. Sometimes.
[00:05:49] Speaker B: I think that's the key, key point right there that you mentioned is that most of those syndication have to be accredited. And luckily here at ignite, the clients don't have to be accredited. We take accredited investors, but that's not a requirement. I think the other thing too is, Kate, we went to best ever conference back in April, and I remember coming back to you to the booth and I said, hey, there's this syndication over there. Their minimum's $100,000. Like, I get it. We go to all these events and we see people online and they can invest with that. You guys have seen, sometimes I can hear you guys out there on the floor, you guys are like, he wants to start off with $200,000. That's great. But at the same time, that's not helping diversify anybody. At the end of the day, that's what we're here for. You know, the passive income is great, the diversification great, mitigating the risk is also great. But at the end, we don't want to put all their money in one basket. And I feel like that's what some syndicators do because they feel because of the structure or what they hear online now that this popular word is coming about that they want to do this and it's, it's really nothing. It's not the end all, be all, you know, trustee's been around forever. Trustee's been around since, I don't know, last 50 years. A lot of people like to say Las Vegas was built on trustee's and performing notes. And I think it's just interesting that this new buzzword's coming around. And I'm not trying to hate on it. I'm not trying to say it's the worst thing. It definitely belongs in some people's portfolios. I just don't want people to have a misconception that it's the new and improved thing to do and get into, because not everybody can get into it. You know, let's talk a little bit about the structure of a syndication, because what people don't know is here at ignite, we're just on the debt side. That's it. You don't own the property. You don't get a k one unless there's a foreclosure, but we don't deal with that. Whereas in syndication, what's typically the model, Kate, what are we seeing on that side of things?
[00:07:35] Speaker C: So a syndication model. Right. You're going into it, maybe it's multifamily. Right. You're going into a purchasing, a multifamily complex. Right.
Is it rented? Right. You get a percentage of the rents if it's rented.
[00:07:50] Speaker B: Yeah. If it's rented.
[00:07:52] Speaker C: If it's rented. Right. If your four plex, eight plex, twelve plex that you purchase is 50% rented, well, that reflects in your passive monthly income. Right. And then you have to look at, so when they sell the property, let's say they sell it. Right.
[00:08:07] Speaker B: Right.
[00:08:08] Speaker C: Is everybody in that syndication going to agree on that price? Is everybody in that syndication, right. Everyone's. What percentage are you getting? Yeah, and I've, I've heard a lot of investors say, well, I'm getting 15% in my syndication. Are you really? When everything's said and done fixed, it's not, it's not fixed. You might have gotten 15% for a couple months and now you're, that's how.
[00:08:30] Speaker B: They look at it, though. They don't want to talk about the low.
[00:08:32] Speaker C: No, they don't want to talk about the low. They don't want to talk about the overall average with our stuff. If we tell you to 10%, it's 10% annualized over twelve months and it's 10% on that monthly basis.
[00:08:44] Speaker B: Right. I think the other thing, too, that, that's interesting about how some of the syndications are put together is that you actually dwindle your position down if you have equity players built in, the more equity players built in. Those are the people, I hate to say, those are people who are usually making a lot more money than the debt side but at what risk? They're taking on the risks, so that makes a lot more sense. But at the same time, those people who are coming in, either after the fact or coming in with a lower amount to invest, they're not going to get those residuals that they would expect, like some of the other people are going. You hit it right on the head. If you ain't got no tenants in place, what kind of cash flow are you getting? Same thing, Greg, you had mentioned earlier, if you're not able to have that, what if you're not a good negotiator? What if you're not good at getting people in play? It's now not at the fault of the property, the fault of the person who's managing it. That's the other thing, is you had some mention something offline earlier, Kate, why don't you talk about it a little bit about how the investors themselves, in most cases, aren't the ones who own it.
[00:09:46] Speaker C: Yeah. You're not the drivers in the situation. So if a foreclosure happens with ignite funding. Right. We're the ones that are handling it for you on behalf of our investors. Because you hold that first position. When you get into a syndication, sometimes it's a second position. And they don't tell you that syndicate or will be the first position. And that syndicate or is the one that is listed, not you, as the investor. So you are 100% reliant on them to do the right thing, like a.
[00:10:16] Speaker B: Fund, almost same environment as a fund.
[00:10:19] Speaker C: So if that property goes into foreclosure, is that syndicator doing the right thing on behalf of their investors to return principal back to them?
That's what I always tell my investors. First and foremost, ask to see where their name is listed, what position they're in. And if you ask that question, it will, in most cases, be the syndicator that is listed in that position, which means they hold the cards, not the investors.
[00:10:44] Speaker B: That's not the way we like it.
[00:10:45] Speaker C: No.
[00:10:46] Speaker B: It's always great to be in an investment where your interests are aligned with the said company or syndicator or fund. If they're having to perform to be able to get their money, at the end of the day, to get you their money, that's always a better way to mix it up in there. Greg, can you think of any percentages you've seen of syndications? Most people have an assumption that they're higher yielding. That's not always the case.
[00:11:10] Speaker D: Again, they're market dependent. So, I mean, you'll see anything from eight to 12% again, oftentimes risk associated.
And, you know, the problem with it, something that's running at 12% is really what Kate's been saying this whole podcast. It's dependent on performance.
And, I mean, if you don't mind, I'd love to talk about what we do, the good stuff that we do, in comparison to what they do. Right. And, you know, everything that we do is dependent on how good the borrower is at executing and how we are protecting our investors, in addition to lending to nice and experienced borrowers.
[00:11:57] Speaker B: Yeah, it's not always about the financials. People really want to harp so much on the financials, the credit report and things like that. I mean, I think about it this way. It's like when somebody's going and applying from a job, and they see somebody who has no experience, but they have a degree. Okay. And then you have somebody who has 15 years of experience, no degree, but they're able to show their track record. It's to each their own at the end of the day. Right. That's kind of how we analyze it, too, because every borrower is great until they're not. Right? But for us, every borrower's new. I mean, at any point, they're new. So it's our job, like you mentioned, to really look at their track records, which is important. I wonder if syndicators are doing that. Do they care?
[00:12:36] Speaker D: Well, they. They may. But then another thing that we do is, you know, there's a misconception that debt is bad. But then, yeah, you know, us being on the debt side versus syndication, oftentimes being on the equity side is that, you know, we are fixed at a rate, and we are also a necessary part of a development of a project.
[00:13:02] Speaker B: Yeah.
[00:13:02] Speaker D: Right. Some people think that our borrowers are desperate for our financing.
[00:13:09] Speaker B: Huge misconception.
[00:13:10] Speaker D: But the reality is, oftentimes debt is necessary to build the city, and we use that need and protect our investors with what we call loan to value ratios that are a large way we protect this fixed investment. Because a lot of my investors say, okay, you're saying a fixed 10% versus the variability of a syndication, but how are you actually protecting us from apparent losses? Right. And I mean, do you. Due diligence. We've got the LTVs to protect us in addition to who we're lending to. And that's what we're here for, Kate.
[00:13:53] Speaker B: And I. I mean, frankly, if, I feel like we do a pretty damn good job. You know, it was interesting a couple years ago, going to events and listening to investors talk about, you know, their investments are 30, 40% into default. And I'd cringe, you know, when I see ours go above three, I'm like, oh, God, we need to figure this out. You know? But at that same time, it's. I don't like what some people are becoming used to, you know. Oh, it's normal to be in default. It's normal to have to be taken properties back. Not for us, you know, that's not, it's not. Do we go through it? Yes, but once again, we do a damn good job of going through the process. You know, I don't know how it goes in syndications. I didn't do my research before jumping on, but I don't know what happens, you know, what, how long can a property sit for? And then they're not producing any income. Do those people get to go in and out? I'm not asking you guys, I'm just asking, you know, anybody, even for the listeners out there, I don't know how all that works. I would assume, like most investments like that, I take more of the fund approach. You're locked in for a period of time. You're riding or dying at that point. There's no coming in and out with us. Yes, we're in a liquid investment, too, for a much shorter period of time, for less, a lower barrier to entry. But at that same time, you still have so much of the risk mitigated on our part. Whereas, you know, who's keeping track of those syndicators, who's keeping track of how they are? Yes, they're regulated different way than we are, but they have their own regulations that live by. But I think that's some important stuff for investors to look at. You know, I think we've talked a lot about things that are great about trust deeds, some of the facts about syndications. I'm not saying, again, that people can't go into them because we want all of our investors to be diversified at the end of the day. But there's a lot of things that I think a lot of investors out there really need to ask before they go into it. So I'm gonna ask you, I'm gonna leave the episode with this. I'm gonna ask you guys each, what's something that an investor should ask that you would push onto your own investors or even yourself, that they should ask before going into a syndication?
[00:15:56] Speaker C: Two things.
[00:15:57] Speaker B: Okay?
[00:15:57] Speaker C: What position do I hold?
[00:15:59] Speaker B: Okay.
[00:15:59] Speaker C: If it's not a first position, you need to back away and go look someplace else.
[00:16:03] Speaker B: Okay.
[00:16:04] Speaker C: What is your default rate? Is the second one.
[00:16:06] Speaker B: Okay.
[00:16:07] Speaker C: And if they can't give you those numbers right off the top of your head when they're having a conversation, you need to look at somebody else.
[00:16:14] Speaker B: So if you're not first, you're last. And what's your track record? All right, what you got, Greg?
[00:16:20] Speaker D: I like how we are predictable that 1011 or 12%, depending on who you're investing with and who you're lending towards. And I think fixed passive income is extremely valuable to anybody's portfolio. So ask how reliable the returns are. And double digit returns at a fixed rate will oftentimes beat out the variability of other investments like syndication.
[00:16:51] Speaker B: That's perfect. Always ask, at what risk? You know, getting 15%. Great. At what risk? Getting 20%. At what risk? Five or 6%. People probably won't bat an eye. I get it. But always ask yourself, at what risk are you going into the investment side of things? I'm very excited about this topic because we are going to be launching a blog about this as well. It'll be on our website so that clients and potential clients can go ahead and read it. I thought it would be a great chance for them to also listen to some of this stuff because the blog is just, you know, hairline. I think this is much more. I think it's better for some people to really hear what we're saying and understand that. And to all of our great followers out there, I'm sure they love listening to our amazing voices. So that's it for today's episode on Deeds and I, the desert. I want to thank Kate and Greg for joining us today. If you're on Spotify, Apple Podcasts, YouTube, wherever you're at out there, go ahead and like share, subscribe, comment, do all that stuff so you can keep seeing our amazing faces every week. Well, not every week. We got a lot going on right here. I think we got some new loans coming out here soon, but be on the lookout. Again, thanks again for joining us on deeds in the desert. We'll catch you guys on the next one.
[00:17:55] Speaker A: Thanks for joining us this week on deeds in the desert, where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends. Who doesn't like learning about passive fixed income, right? Still hungry for more education? Visit our
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