Title: How Survive When Real Estate Deals Fail with Ruben Kanya
In this conversation, Seth Bradley, a securities attorney and real estate investor, discusses the complexities of capital raising, the importance of experimentation in finding one's niche, and the critical role of networking and trust in the investment landscape. He shares insights from his journey in real estate and tech, emphasizing the need for grit and public speaking skills to succeed in capital raising. The discussion also highlights the challenges of the first capital raise and the lessons learned along the way. In this conversation, the speakers delve into the multifaceted benefits of hosting a podcast, emphasizing the importance of listening and connection. They explore the intricacies of capital raising in real estate, discussing the significance of grit, networking, and leveraging other people's money. The dialogue also covers compliance with securities laws, compensation structures in syndication, and the emerging trend of fund to fund structures. Tribevest is introduced as a solution for simplifying fund management and ensuring compliance in capital raising efforts.
Links to listen and subscribe:
https://podcasts.apple.com/ph/podcast/raising-capital-the-right-way-compliance-funds-and/id1341895972?i=1000688593916
Links to watch and subscribe:
https://www.youtube.com/watch?v=UyF9Z72m2R0
whole idea here is you're actually not allowed to raise capital without a license. So just like being a doctor or a dentist or an attorney, you have to have a license to be able to raise capital and it's called a broker dealer or potentially an RIA, registered investment advisor. So if you're not one of those people, if you don't have a license, you need to have an exemption from having that license. if it's your, this is speaking in generalities, but if it's your own deal, if it's your own fund,
If it's your own syndication, if you're the one buying the property, that's an exemption. You're exempted. You can raise capital for your own deal and that's okay. And that's kind of the co-GP concept that we talk about sometimes. I actually don't like to say co-GP because to me it's a fallacy. There's no such thing as a co-GP. You're either a GP and an active partner.
Who's this? you're an entrepreneur? you're a real estate investor? you're trying to learn from those who did it? Well, come into the lab then. Put your white coat on, gloves on, notepad, and let's go, Joe.
Experiment nation this episode was a really fun one with Seth Bradley who is a fun manager Invest in entrepreneurs. He's an attorney he as a startup founders of software as a service and Really what I loved about What he's built is
Everything that he's built, it's vertically integrated, which I love, but he really embodies the principles of experimenting. Right. And what I mean by that is he has tried multiple models in real estate, which allowed him to get exposure, which I think is really important when I talk about having a well-rounded experiment in your lab, LabAK being your life, so that you can at least identify
(Seth Bradley) (02:10.529)
what you like, what you don't like, what gives you return on energy, what drains you. I think those are all important things for us to then be able to niche down. A lot of times we talk about niching down, but we haven't even gotten a taste of what's on the menu to even understand what it is that we want to niche down in. And so part of what I created here at Experimentation in the lab is to bring you
folks who can present the menu of the different options that there is in not only real estate, but in business and even career to then give you that exposure so that you can then get a taste even from this show and then implement it yourself and maybe try one or two or three experiments or four or five. How many it takes for you to feel like this is the thing. This is the thing that I'm going to hold on to and grasp to and go all in on. Right. And that's what we did.
And keep in mind that life has seasons. A lot of us can do something and it could be four seasons. Your season could be five years, 10 years, 15, but I do believe in the compound effect. his journey, Seth's journey, he was able to get his first duplex, then quads, then small multifamilies and big multifamily units. And the next thing you know, he's doing $120 million a deal just in 2022 alone, right? In one year.
But with that, one thing I wanted to highlight, so one thing is the experiment, different exposures, AKA building blocks towards the very thing that he's doing now. But the other thing is being able to get a free, or I should say, get a paid internship. And that's through servicing your clients, learning from them, and then taking a page from their book. He was an attorney that was putting down together his SEC deals of syndications,
capital raising, and then he learned from his clients because he had full transparency. Sometimes, often we're in a position where the proof of concept is right in front of us, but we don't grab it by the horns. We just see it for what it is, just clocking and clocking out. No matter what job you have, there's an opportunity for you to actually take lessons, systems, SOPs, structure, any skillset to take it to the next level for your own endeavors.
(Seth Bradley) (04:38.252)
And what I mean by that is I was a realtor and I was a realtor for the investor. understood how investors, underwrote their deals. And that was my win for me to hone my craft in real estate, underwriting deals, pulling comps, walking properties, understanding value at all. That was when I was the realtor for the investor. You can still look it up on bigger pockets. You can still see my page. That's what I was doing. I was helping investors invest until I then became an investor myself.
And in this case, he was an ICC attorney providing these, you know, going through the process of doing syndications, fund to fund, et cetera. And then he learned and he said, not only do I have a practice that does it, but I can also be on the other side of that transaction. So don't you ever forget the importance of being on the other side of the transaction in whatever service that you offer, even if it's just call it.
You work in hospitality at a restaurant to make ends meet. There's a system, there's a SOP, there's a checklist. There's something in there that is a proof of concept that you can then take and implement somewhere in your business. And the universe will tell you its secrets if you listen. The clues are all around us. Last but not least, I love our conversation around being an authority, building a brand.
Essentially, that's what capital raising is and he talked about three pillars. I don't want to talk about he said money Right is one heart of the center trust in your network, right? Your network is you gotta have a big network He talks about having a platform like this where I think everybody should have a podcast because you get the interview you get to learn the skills of communication listening, etc but most importantly you foster relationship while on the air and then
It builds trust to whoever's listening. I'm sure that if you're listening right now and you and I wanted to go into a deal together, there's some form of trust. If this is not your, your first episode. So there's that, right? We talked about having a meetup, restarting our meetups. That's key. Connecting people, they trust in you. Being an authoritative figure, trust. They can't flow you if they don't know you. So stop being cute and stop hiding and put yourself out there. Right? Money. Money follows all of the above network and trust.
(Seth Bradley) (07:00.408)
people who have money in your network will make it easier than those who are in your network who are broke. So surround yourself with people who have money, not just because they have money, but of course it can help you tremendously if you're trying to raise capital. And there's something that goes about saying with people who have money, it's not that they're better or anything, but there is a level of opulence and abundance.
And I think there should be a good balance. But certainly if you're trying to raise money with people who don't have money and you're in a circle, people don't know how many doesn't mean to say that you can't uplift them when you have an opportunity, but it's going to be hard to raise capital from people who don't have capital. Right. So that's one thing to keep in mind. Money trust network and being an authority. You can build an authority from home in the lab, in a studio, in person.
And you don't always have to be an expert in something else. Sometimes you can actually have authority within your own circle. If you're a dentist and you're trying to raise capital with other dentists, they trust you. You have authority maybe in your current marketplace, you're a manager of some kind or you're a lead or you're just someone that people really trust. You have that authority. You have trust already with like-minded people in your circle. So this was a great one. He brought a lot of core values home. And that's what I love about
the show. It's every time you listen or anytime you interview someone who's had done some amazing leaps and experiments in their own lab, there's always some consistent clues that kind of bring to the surface and maybe it just, I'm aware of them, but if not, my goal is to extract that and make them aware for you. So I trust that you're going to get a lot from this episode without further ado, Seth Bradley in the lab, y'all.
Experimentation, what's going on? Your host Ruben here. Today I have the pleasure of connecting with a gentleman that we connected with, had some mutual connections. And I was like, I didn't want to let the serendipity go to waste because I saw there was a mutual beneficial component to the lab, as I always say. And I always think you're as good as your tools, you're as good as your resources. And so I'm really happy to have the gentleman here step into the lab with us to give us insight. And I also love the
(Seth Bradley) (09:21.39)
I'll call it a vertical integration I think and maybe Seth will keep me honest here, but without further ado I want to welcome Seth Bradley. How's it my man? Welcome to the lab brother
Going great, man. Ruben, really appreciate you having me on. Thanks for having me in the lab.
Absolutely, man. I should so listen if I'm curious so Seth because you know, we we start to talk a little bit and I was a car We're getting to the weeds of things. I want to make sure I hit this record button, but I'm just a curious guy and I'm so curious that if I'm at a real estate conference and you and I sit next to each other and I say hey I'm Ruben Seth. Nice to meet you. You know, what do you do for a living? What do you lead with because you have a very interesting background? So I want to we're gonna reverse engineer, but I'm so curious as to
at the time that we're recording this, what do you lead with if you don't know what my interests are, you don't know where I'm coming from, I could be an investor, I could be interested in putting my money to work, what do you lead with? I'm just so curious.
I love that question, man, because sometimes I have a hard time answering it. It's an easy question to answer for most people, but for me, I have to think about it for a second. But typically I'll lead with I'm a securities attorney, specifically a real estate securities attorney. So if you're raising capital for real estate from passive investors, I'm your guy. can help you put together your fund or your syndication compliantly and secondarily, or, you know, one B I'll call it a tech founder. So involved in a few tech startups as well.
(Seth Bradley) (10:48.238)
That's awesome. Then that opens up the window because I see her tech founder and then I securities attorney. Is that that accurate?
securities attorney. would you do you happen to do you still do I mean, of course, you've been involved in raising capital yourself, which is what I want to lead with next. But are you actively investing? And if you are, what is the model? Is it more investing in the startup? Or is it more investing in actual capitals? I should say social capital relationships, or even you know what, maybe it's some form of real estate, what is your current I guess, investing
season for lack of better words.
Yeah, it's all across the board, man. mean, everything that you mentioned, I mean, just quickly, I started in real estate in 2013. House hacked into a duplex did kind of the bigger pockets podcast. Listen to that. Red Rich Dad, Poor Dad, you know, the typical journey you take and house hacked into a duplex and started buying bigger and bigger properties got to the point where, you know, I wanted to get into syndications and funds and start raising capital. So I started actually investing passively into real estate first and I got my feet wet.
figured out what that investor journey looked like. And then I started raising capital myself from my own syndications where potentially I could be just a capital partner or also an operator. So I raised a good amount of capital from 2019 to 2023, I would say, before the interest rates started to spike. And then we slowed down a bit, but we still own a good amount of that real estate and just put it in perspective. We bought about $120 million with the real estate in 2022 alone. And now I'm kind of
involved with a handful of tech startups where I'm also in that same capacity where I'm raising capital or helping the CEO raise capital for seed rounds for these startups.
Okay, very interesting. So I'm glad let's go to the very beginning because you talked about bigger pockets with shout out to bigger pockets, right? Because that's or did you say bigger pockets? I did hear you say that. Okay, cool. had a mutual kind of, know, I was planning my seeds. I think that they did an amazing job, of course, like minded investors together. 2013 get a duplex. I'm sure one thing I'm curious about and you know, someone else might be listening is, you know, what
point now every everyone's situation is different with that said, but at what point did you start to think, okay, it's time to bring in some outside capital and, I'm going to lead with you. It seems that you strike me as a guy who does things strategically. enlighten me a little bit as to get the duplex. Was there another lever that was pulled to get the next property before you start to raise capital? Or is that right away, right into, okay, now it's time to raise capital. Cause
duplex going to take me so far. Tell me about that journey.
No, I mean, that journey was, you know, a lot of different types of things. mean, I've wholesaled, I've fixed and flipped single family properties. We were doing that in Cleveland for a while. Then we kind of moved on to multifamily, you know, smaller multifamilies up to four units, which is still residential, but then up to, you know, like 16 units, those sorts of things. Then we started getting to where, you know, capital starts getting constrained, your own capital, or if you're doing like a JV, starts getting constrained. But I was fortunate enough that my legal practice, which also started in 2013,
was highly related to what I was doing. So as a real estate attorney, my real estate clients were raising capital for their real estate deals. So then I got into securities law. So I saw how they were raising capital. Then I started helping them raise capital from the legal side. And then I started raising, and then I realized that, hey, if we want to go bigger, I've got to be more like my clients who are buying, you know, 50, $100 million properties. How do we do that? Well, like they do it. They need to raise capital from either
passive investors or from, larger investors like family offices and places like that. So I knew that that was the pathway. So I was fortunate enough to kind of have that perspective shown to me by my clients and they kind of showed me the blueprint. Hey, this is how you need to do it. Now, a lot of other attorneys see that same blueprint and they don't really have that entrepreneurial mindset. So they're kind of just like that service oriented, Hey, let's do what I'm doing. And I'm just going to help. But I have an entrepreneurial mindset. I I'm like,
I want to do that. I want to buy that property. I want to run that business. I want to scale it. like anything else, though, I still had a little bit of reservation, I would say. So I decided to invest passively first just to get my feet wet, just to see what that investor experience was like. And then once I did that a few times, I really got into the active side and dove right in.
Oh man, I love so many elements of that. Let's unpack the experiment phase, right? Because that's what I truly believe in. I'm curious to what your thoughts are on this, right? Before I even preface by saying this, I think, and this is just a thought, could be wrong. I'm experimenting life as it is. But when you ask someone, hey, what do you want to do for a living? Right? It's like, well, I don't know. I haven't been exposed to enough.
(Seth Bradley) (16:03.116)
Right. But then when you start experimenting with a lot of different things, then you can niche down because you've been exposed to like this that I don't like, et cetera. And there's a second leg to that, but I want to touch on that for a second because you said you did wholesale fixing flips, then you need small multifamily. What do you think you were able to gain from that? My personally, when I see that, I see, well, you were able you were able to get insight, but
Again, maybe you see things differently. Maybe it's like you needed to do those things and you thought it was true. And then you were led down one path and led to another. What do you take from that? Were you experimenting or was it more or less of the natural progression of events and what you thought was going to be your end all be all ended up progressing into a new ideal. Tell me about that experience.
Yeah, I mean, I think it was an experiment. It was me trying. I knew I wanted to be in real estate. I love real estate. I've always been drawn to it. It's just been an interesting thing for me and interesting subject. I remember when I was in undergrad and I couldn't afford to buy any kind of real estate or didn't have a job at all. And I was trying to figure out, well, man, how can I buy like these townhouses that I'm living in and rent those out? Like, I remember just being interested from the get go. So I knew I wanted to be in it, but it was certainly an experiment to see.
how to break into the market, how to scale a business. Because once you got into a duplex and your house hacked and bought a few other single family properties, it was like, okay, well, we can continue to do this, but I'm always looking again to scale. And to do that, a lot of times you do need to bring in other people's money to be able to fund that scale. But not always. mean, I think it would be a better pathway, honestly, if you can scale without other people's money, because then you can own 100 % of it. But a lot more difficult to do. So if you want to...
you want to grow with scale fast, typically it's with other people's money. And again, luckily I was already in a profession that gave me that experience to be able to see that pathway and be able to execute on
(Seth Bradley) (18:02.35)
Now tell me that's a great insight or at least a transition point there, Seth, because we, know, in our professions, we spend a lot of time, but not a lot of folks spend the time to have the lens of an entrepreneur to say, hey, maybe I can actually take a page from their book. Right. Because I think it's interesting that it's we all are entrepreneurs. Right. So we go into business ourselves to run away from maybe possibly corporate. Some people.
And then we build our own companies. We install systems, we invest in resources. And then it's like, we turn into the thing that we were maybe running away from, but there's a lesson that we get to build it our way and have maybe learned lessons from these big corporations. In your end, it reminds me a little bit of me because I again, certainly not an attorney by any means. And I won't compare being a realtor to an attorney, but you are servicing clients and you get to at least,
at least get nuggets from their journey and then say, Hey, why don't, why don't I take a page from their book? Can you talk to us about that? Because I think honestly, it's an unkept almost secret and not even talked about enough where it's like, Hey, you're taking this opportunity right now to get to understand the playbook, see how they've done it, learn from their mistakes, right? Right. Through service and while getting paid. And then you're like, okay, now I'm going to do it for me. So
Do you see it that way as well? was it kind of, know, or did you strategically go into it thinking that you do that? Or it was kind of like, you know what? This is kind of cool. Let me try it myself.
Yeah, I mean, and Ruben, hats off to you, man, because a lot of realtors and brokers, they're around real estate every single day. That is literally their business. They have access to deals before other people. They get to see things that other people don't get to see. They get to see the transactions. They get to see how they change hands. And as you know, most of them don't invest in real estate. like, you even own your own house? Do you own any investment properties in...
90 % of them don't, right? Unless it's, well, maybe their own house, but that's probably it. They don't invest. And it's crazy to think about that when they're around that all the time. And it's the same thing with attorneys, right? Like, know, they're, whether there's somebody like me, there's real estate or securities, and they have clients that are, that are buying large properties and raising capital, or it's, you know, some other practice like and A where they're combining companies and building companies and things like that.
I think that there's a certain entrepreneurial DNA that's in some of us and it's not in others. And that's okay. Like some people thrive in an office atmosphere or thrive in a W-2 type of atmosphere. And a lot of times I don't even like to disrupt that. Like people, you know, are comfortable there. They like the steady paycheck and that's okay. And I think the vast majority of people do want that and they do like that. They like the predictability of it. But some of us out there, like me and you, I believe are, you know, we just,
We're not a fit for that. Like we need to build. I think that's the key is, is the build, right? Cause you were talking about, you know, we start putting all the systems and the processes and the things into place to ultimately end up in the, the same machine that we didn't want to work for. But I don't think that's the piece that's important. The piece is important is that that climb the build, we want to build like we were builders. love to build.
Yeah. Have you ever had a conversation, with maybe your associates on? I don't know if this is a hypocritical question, because I don't know if I could answer this. But I'm curious, have you had a conversation with another attorney? Like, hey, you see this all the time. Have ever thought of doing it yourself? What's the mindset behind? Have you had that conversation? And have you had around those? Yeah, just curious.
Yeah, I definitely, I definitely have. think, you know, at least specifically with the attorney industry or with that profession, we are, we're trained to look at risk. We're trained to evaluate liability. We are trained to be conservative in nature. and that is totally different than when you're an entrepreneur and you're out there building a business and you're, don't know what tomorrow is going to bring. And there's going to be a problem that pops up today that you didn't expect.
And you don't know if you're going to be able to pay payroll and all these different things that come up as an entrepreneur, as a business builder, that's totally a different mindset than it is that attorneys are trained for. So I think that's definitely a separation. like, you know, I have a lot of investors that are attorneys. That was, that's who my investor base is. Typically it's other attorneys. A lot of other capital raisers don't go after attorneys because they are paying the ass. We ask a lot of questions. Like I said, we are risk averse. Like, you know, we're not the ideal.
person or people to raise from.
I'm gonna predict my money isn't really the case.
with a cold on the page. 137 second paragraph line four. What does that mean? Why is that? And, know, that's the kind of stuff you have to deal with. But, you know, they do make a good amount of money. So there's a, you know, there's a push, there's a give take there. But, you know, I think that that's, I have identified that with conversations with my investors and obviously my prior colleagues. I mean, that in itself is, is a big difference.
It's a big difference. We're just as attorneys, we're just trained to find and look at risk and think about all the bad things that can happen. And man, when you're building a business, when you're growing out on your own and you say, I'm done with my W-2, I don't want that paycheck anymore. That's a lot of risk, right? Or at least it's a lot of risk to a person that thinks that way. I actually don't think that way. I think it's more risky to be have one income stream and be a W-2, but that's certainly not the way that they typically look at it.
(Seth Bradley) (24:02.306)
Yeah, no, it's interesting what you're saying. But I'm also curious though, that if they are also investing, because it sounds like you've also worked with some associates, or at least your investors have come from the same cloth, it sounds like they might be, instead of again, raising the capital like you are, high risk, high leverage, they're willing to put their money to work. Do you find that
And I guess maybe that's it. Do you find that that kind of archetype is finding that to be of a less riskier approach versus flipping versus doing it themselves? Or do you find that it's more of time constraint thing? it's like, listen, I got the money. You mentioned it. I have a high net worth. I'm an accredited investor. Let me just do it with someone who's an expert. What have you seen since you've been on both sides, and especially as a fundraiser?
Yeah, I think it's that investor profile. You know, these are folks that make a lot of money from their W-2. They have no time on their hands because their W-2 is so demanding. then any time they have outside of that, it's got to be spent with family. So they really just don't have any time, but they do have capital. So it's just that investor profile that you're dealing with with attorneys and some of the similar, you know, with doctors and dentists and engineers and people like that. Same thing. You know, they're highly paid professionals.
You know, they went to school for a long time. They make a lot of money, but they don't have any time. And unless they really want to venture out and say, okay, I want to raise capital or, or, I don't know, you have to figure out a way to carve out more time because they certainly don't have it. I know when I worked in big law firms and I'm trying to bill 2000 hours a year, I don't have time to, you know, invest actively. In fact, I actually got fired from my big law job, my last one, because of that, because I'm raising capital and doing real estate deals.
and starting businesses and guess what? You don't have time to do that if you're working at a demanding job, whether that's as an attorney or Dr. Dennis, whoever that might be. So I think it just comes down to that profile and do you have time? Do you have capital? And then whatever one you have a surplus of, that's probably where you're going to fit into the asset. So you can invest if you have capital and no time.
You need to find something a little bit more passive and that comes through like funds and syndications and things like that.
All right. So that's very helpful and I think very interesting because you've seen both sides. You not only were on the other side, but you've also been the capital raiser and then you've also yourself invested passively. Tell me about the first deal that if you recall, at least the like kind deal when you raised capital, who did you go to?
Did you start with your client base? Did you start with friends and family? And then maybe we can even get into the granularity. I know there's different non-accredited, accredited 506V versus 506C. There's a lot of different kind of foundational pillars. But talk to us about what your first deal was like, if you recall some of the numbers and what kind of asset type and then who you actually pulled in. So people can start thinking of actually what's possible when we talk about capital.
you know, in fundraising, we think of it as this big thing, but people like you and me can actually start initiating these kinds of transactions. Talk to us about your first one.
Yeah, man, I mean, don't remember the actual specifics, but it was like 100 because there's around 150 unit multifamily something like that was your first That was the first raise it was the first raise but I was brought I I wasn't the primary operating partner I brought in as a capital raiser that sort of thing and also providing some legal services as well. Um, but I was
(Seth Bradley) (27:48.078)
That was your first race.
(Seth Bradley) (28:01.422)
Hold on. That's interesting. Now you kind of you're kind of double. Is that is that how you got your general partner essentially? Were you a general partner on that? Or were you tell us about that? Because from what I understand, you can correct me if I'm wrong here. You're the expert. You can bring in different subject matter expertise to the table to value your I guess your position and a capital raise. Maybe one is investor relations, one, et cetera. Did you from what I understand, bacon?
some of your services and as a GP or is that, what did you?
Yeah, for sure. Yeah. I was a general partner on that deal, baking in some of my legal services as well. Started leveraging my skillset that's super valuable. Obviously, it's applicable to these capital raises. I can help you raise capital and also be the securities attorney and also potentially the real estate attorney as well on the deal. So lots of different ways that I can get in there and provide value to the active partnership.
But yeah, I I was tasked with raising, you know, half a million dollars. I didn't hit it. I hit way under. I think I might've raised like a couple hundred thousand dollars. And I was pretty happy that I even hit that because it's the first time. I'm, and I'll tell you what, man, like capital raising is hard. Like I think that, you know, you see all these masterminds out there and these coaching programs and things and they're teaching how to raise capital and some are great. And I'm actually in a couple of them. but they are, you know, they, have to sell you on that. easy, right? They have to sell you on, Hey,
I'll give you the systems, the processes and boom, you're going to be able to raise a million dollars easily. It's not that easy. unless you already have a built in network of high net worth individuals, that's where you'll find success. Or maybe you have a platform like yours where you can access a lot of people that you already have a relationship with and you'll like, and trust you that love what you're doing. And they're like, man, if he's investing in this, it must be good. So that those people, like you, and then also people that are.
we tend to see a lot of doctors and dentists that are very successful right out of the gate. Cause guess what? They work with other doctors and dentists who already trust them, who have money, who already trust them. So they do great. and then others, like me are probably somewhere in the middle, right? We we've got a base of investors that are like attorneys, which seem like they'd be great because they have money, but guess what? They're a pain in the ass. So there's, there's a little bit of give take there. and then you have other folks who,
you know, maybe they're a school teacher or something like that where their colleagues maybe don't have a ton of money to invest and they have to follow just like, you know, follow the processes, the systems and the marketing funnels and those things and rely really heavily on that. And typically it doesn't go that well. It doesn't on the first one. You've really got to be scrappy. Like you've got to get in there. You've got to literally make a list of a hundred people that you know, that might want to invest right.
type it up, go systematically through that list, and you've gotta break out of your shell and not be afraid to just reach out to these people, no shame, get your pitch together and just do it. And it feels awkward and you don't wanna do it and you feel like a salesperson, but you've gotta do it. You've gotta break through those reservations and make it happen because that first raise is a bear. You've gotta just be.
You've got to be scrappy and you've got to do whatever it takes and 10x whatever you think is going to take.
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(Seth Bradley) (31:59.278)
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and midterm rental insurance bootcamp to fast track your way into landing these lucrative insurance contracts the exact same ways multiple investors have taken advantage of this unknown and untapped niche within the midterm rental umbrella. Wow, so I'm a systems guy and as you're speaking, I'm taking notes here guys. I heard three key pillars and feel free to add to them because I wanna hear.
kind of the downfall of some of what folks are coaching. I heard one is money, number two is trust, and number three is network. And I like how you highlighted those because I hear, well, if you have a network and you can get access and you have a large pool, then there's probably people who are gonna have money in there. Then if you have what I'm hearing is authority, trust, AKA I'm a doctor, you're a doctor, we speak the same language. And by the way, guess what? Third pillar, we all have money.
So that's kind of like the sweet, sounds like that's the sweet spot. MTN money trust and network. What did I miss?
You nailed it, man. That's it. That's kind of the big level, the high level things that you need. I mean, you need that authority or you need to be able to show that you know what you're doing, that you know what you talk about and what you're talking about, that sort of thing. And then obviously that network, you either have to develop that through your W-2 that you already have or however it might be, or maybe you have a platform, right? Like maybe you have a platform like a podcast or an investor group.
or an in-person meetup. We don't do those as much as we used to before COVID, but that used to be a huge thing. Like I were on a real estate meetup in San Diego County or something like that. And it goes, that used to go really, really well for people to be able to raise capital. So yeah, you gotta have that platform. Network. I know, right, Networking lunch.
You should bring that back. There's something about because there's something about this, right? This is cool. Like, what a time to be alive where you and I can connect in the flesh. But I want to echo what you just said. Because I'm kind of speaking to myself as a reminder, Ruben, you got to get these meetups going again. We used to do a meetup in New York and Atlanta.
And just the relationships that happen in the room and you're being the super connector is so powerful. I wouldn't get cute and just, you know, this is great that you and I can connect while you're in San Diego and I'm here in Boston, but it's not, or it's and, I think we should, I think we should bring it back. Cause I could tell it may a super charismatic dude, great energy. you know, obviously you're authoritative figure and I feel like, I think, it will only service more.
(Seth Bradley) (35:41.87)
to have these in there's something about in person. So yeah, I'm just I'm preaching to the choir, but I'm also like, hey, accountability, I'm gonna check up on you. gotta do the same.
You gotta appreciate it. Tell me sure man. And it's great. Like when we meet on something like this and we have some interactions on social media and then we get on each other's podcast, you know, get to know each other. And then when you meet in person, you're like, this is awesome. You already feel like you know the person. So technology is a great and right. Another and yeah.
Yeah, don't sleep on that fit that in person. We need more of that if anything. And people are, you know what, people I think are actually searching for it with all this technology. So good reminder for the both of us and whoever who's listening. I want to touch on something that you said, Seth. You mentioned, because I like learning from those who either have failed or made mistakes because can expedite our learning process. So you said,
First deal typically, uh first one doesn't go well, uh, it's a bear but then you also mentioned that uh, you know Some some mastermind programs, right and there's a lot out there good and bad and some are better than others. Uh, some of them, you know I see I guess uh, maybe Don't um, I should say, um, maybe they fall a little short
of helping you get to your first link. What's missing? What's the missing link? We talk about money, trust and network, but like if I wanted to nail it the first time the right way without, and I wanted to learn from someone like you from, your mistakes or from someone else's mistakes or from, know, those masterminds that are just falling short, what is a, is, is it a foundational or at least insight or lesson learn or thing I should keep top of mind in addition to the money, trust and network that would maybe put me in a
(Seth Bradley) (37:40.024)
position not to have the first one be so challenging.
Yeah, I mean, to be honest with you, I think it's going to be challenging no matter what. I mean, I think what I was going to say is actually grit, right? You have to have grit. So I think it kind of it's a counterbalance here where you have a mastermind or coaching program or a class or something like that that you're selling to somebody. And the only way somebody is going to buy it is if you say, hey, buy this or come join me in this group and
I'll make it easy for you to do what you want to do. Like that's the selling point. You have to say that it's going to be easy to get them to pay you to do it. But the problem is once they're in, you realize it's not easy. So, you know,
People sell the promise, not the process.
That's right. That's right. So, you know, I think maybe I don't know if there's any way around that. Like you certainly can't sell it is going to be hard and be like, Hey, well, if you buy my $20,000 program, you're probably not going to make it. So you can, if you want, you know, it's just not, it's not going to work. So I don't know if that's going to change, but I would say maybe once you get into that program, then you preach that, look, I can give you the systems, I can give you the processes. I can even teach you the compliance and I can hook you up with all my different, you know, my network and
hook you up with my securities attorney and my CPA and my funnel builder and those sorts of things. But at the end of the day, really emphasize that it's going to be work. You have to not only implement the systems, but you're going to have to scrap. Just like building any business, capital raising is a hard business and you're going to have to do things that are going to make you uncomfortable. And if you don't go all in, you're not going to make it. That's all there is. It's just like any business.
or even a piece of a business. So me and my wife own a few gyms together and like sometimes we'll implement like you know, a promotion or something. Right. And if we half asset, it doesn't work. It just doesn't. It simply does not work. You have to have full buy-in. You have to believe in it yourself and you have to get your teammates and your employees to believe in it or they won't or they won't grow in the same direction as you. You've got to be all in just like with any business or it's not going to work.
love that. That's a good one. The belief system is certainly a big one. And I'm sure it comes off across, especially in this space of capital raising, you people want to know that, do you believe in what you're saying, right? Just as much as you believe in yourself. That's interesting. So
Tactically, was talking to this gentleman yesterday at the gym, speaking of the gym, a young guy, a hustler, you know, making some good money. And we were kind of talking about, you know, journey, you know, part of the journey is, you know, acquiring skill sets and honing your and sharpening the axe, for lack of a better word. And so I'm curious, you know,
And I'm going to stick to my pillager because that's a reference point for me. But if I'm thinking of, what is one skill? Not saying for this is the end all be all by any means, just curses. If I was to focus and truly get really, really good at one skill and, can she not just achieve mastery in it? Is it fostering relationships, remembering Seth's birthday, what he does? Is it being able to really get
(Seth Bradley) (41:17.998)
great at communication and putting together a pitch deck, just to get a little bit more granular of like, what skillsets should I be thinking of, of honing, flexing that muscle and or which skill sets would actually give me an advantage in this space to really double down on? What would you say to that?
I'll just lean on what I personally did. And I think that that's public speaking. So it's a lot, it's something that people hate, right? Like most people hate it. There's a small percentage of people that love it. Not very many. Most people say it's their biggest fear. Certainly my biggest fear was public speaking. so I had to overcome that. I realized that in order to be the person that I wanted to be, I needed to overcome that fear. I needed to get good at what I was not good at. And that was certainly it. And I'll tell you what.
doing what we're doing now helped me. So I launched a podcast. It helps a lot. You get used to talking, you get used to conversating with people and you being the center of attention and focusing your thoughts and putting them into the words that you want to say. And it, it really helped. And I think that that goes from the top down. So even if you, you know, public speaking, you're thinking about, you know, being on stage and giving a presentation, that sort of thing.
but it trickles down all the way to networking conversations, to having a phone call with an investor. Like it just improves your conversation skills and your communication skills that you have, whether you're on stage, whether you're on a podcast or whether you're on a phone call or a face-to-face meeting with an investor, it trickles all the way down.
I love this conversation so much and Seth, you have your own podcast as well. Why don't you plug it in for a second.
Sure, it's called the Passive Income Attorney podcast, but I will say that I'm rebranding to Raise the Bar Radio. Obviously a homage to raising capital and being an attorney.
Right. No, the reason I bring that is I couldn't, I just want to echo that, that, everything is, is, is a, is a building block, right? I think what's fascinating about having your own show, right? Seth is, you know, that when someone is talking, traditionally, or if you're not well trained, you're already thinking the next thing to say, not really hearing the person. This skillset right here, but we're doing, which I love so much, you know, forces you to be a better listener.
You know be able to collect information Digest it analyze it and then respond to it. I've always said I think having a show a podcast is one of the ultimate hacks because of the the the There's just so many multiple benefits associated with it. I'm curious. Do you see it that way too? Or is it just me?
just 100 % man 100 % you heard me man like that it's a game changer I mean there's that's to me the number one thing but also you you just get to make connections too right like you get to have guests that you have to have a reason to have somebody on your show that maybe you wouldn't get to talk to for whatever reason or and you get to cross paths with people and you get to say you get to share this experience like we're always gonna have this experience I know when I meet up with people in real life
maybe five years later, like at a networking event, I'm like, my gosh, you remember we were I was on your podcast four years ago or whatever. And it's just like, you know, it's like we're high school buddies or something. you know,
You know, that's so funny you say that Seth, because I was at a conference and I've seen this dude and it had been so long. He's awesome. And I blanked on his name and I was like, but I like, hadn't seen me yet. So I just went to my episode, scrolled them like that's right. Cause I couldn't put it together. I'm like, why am I playing on it? And we hit it off. went to lunch together. Like it was just awesome. But it's to your point, it's, it's sharing an experience one.
It's learning how to communicate, learning how to listen, and then being able to... That's why I actually like being on this side more, because I get to ask you questions. It's having a master class. I'm learning so much right now, and then I get to share with my audience. It's like, Roman, that was just a great interview. like, dude, I self-interest. I selfishly was just as hyped. I'm so glad you got value out of it. So that's awesome, Seth. Let me ask you. So, know, biggest...
You talked about the capital raising, challenging, having grit, needing grit, having a network, having money, having relationships. On the other side of this is, ah, this isn't for me. Do you have a message for those folks who are saying, you know, if you're an advocating for it and obviously you have a service around it, you've done it yourself. Sure. It's not for everybody.
(Seth Bradley) (46:14.178)
Right, but for someone out there who's not thinking this right like I think I was in a meetup There was a gentleman out like 300 something units like single-family homes. I think I think you did it the old-fashioned way old gentleman I'm like, yeah, I'm like damn. what is it? What message you have to like share as far as I? Like pulling on levers, right? That's why a lot of us get into real estate levers being anyone resources capital social capital, etc Can you?
Just give us your take on this lever and the power it has. And if someone's not thinking of this, the power it can have. I you mentioned 120 million in 2022. Like help us understand and grasp that for someone who's thinking still like, oh, I'm going to just refinance. I'm going to flip this home and I'm going to OPM. How important is that?
It's so important. Like I said, it's scale, right? It's scale and speed. And that applies to any business that you're trying to scale. It's speed. Like, can you get there on your own or maybe finding one partner at a time? A lot of times that's where you start. Like if you're fixing and flipping homes, you get to a max and you're like, I'm going to bring in, you know, Joe Shimo or my brother-in-law and they're going to fund this one deal. And you're doing one house at a time, or maybe you're doing two houses and you're doing three, but that takes time.
I mean, it just takes a lot of time to get there. So you're just going to be going like this. Maybe you're going to keep improving and then you're going to have one bad deal and it'll be chopped back down a little bit and they're to keep going. But with other people's money, you go like this, like that you get vertical and you can get, and you can just get economies of scale. can, again, just go with speed and that's what matters in business. Now, maybe that's not for everyone. I do get that. Like, I think if you would have asked me a few years ago, I would have said, this is the only way.
Like this is the only way you have to do it. I don't know if it's necessarily for everyone, but if you do want to get to that next level and you want to get there fast, like you want to achieve it soon, then other people's money is where it's at. Like you have to use it like gasoline on a fire.
(Seth Bradley) (48:21.678)
Tell us about the, I recently heard Alex Formozzi say this, and I think he was talking about how people need to realize that a piece of a watermelon is always gonna be greater than a large grass, like grapes or something like that. I was like, oh, that's a very interesting analogy. Can you break down maybe just for us who are not familiar with the split?
when you're raising capital and you have other people's money in play and you know a lot of people talk about assets under management here and there millions here and there but help us understand like what's what's the what's the ratio you helped a lot of clients if someone's a GP on a hundred million dollar deal or a ten million dollar deal how much are they actually taking home right like how much do I make because you know you see a lot even on social like
I think that's very interesting for us because you know, we got into the space and we're super lean, but at the same time our margins are ridiculous and it's not about how many doors someone how much profit we make per each, you know, property with all these insurance companies who are paying us like five X what you would traditionally pay. So it's never been about a door contest for us, but that's very prevalent in the industry. Like, we got assets on a management, you know, 20 million here, 120 million. But how much would one.
for someone who's listening, or maybe you're not thinking, said pour gasoline on it, how much am I actually taking home, let's say on a $100 million raise, or on a 20 million, 10 million? What's the good ratio? Like what am I making? And then what's the upside of that? And why is it beneficial for me to really pay attention to this? Especially if I am for profit and money driven, and I understand the opportunity that might be at stake here.
For sure, man. And you're kind of opening up a can of worms, right? So we'll see where we take this. the general idea here is you're actually not allowed to raise capital without a license. So just like being a doctor or a dentist or an attorney, you have to have a license to be able to raise capital. And it's called a broker dealer or potentially an RIA, a registered investment advisor. So if you're not one of those people, if you don't have a license, you need to have an exemption from having
that license. Now, if it's your, this is speaking in generalities, but if it's your own deal, if it's your own fund, if it's your own syndication, if you're the one buying the property, that's an exemption. You're exempted. You can raise capital for your own deal and that's okay. And that's kind of the co-GP concept that we talk about sometimes. I actually don't like to say co-GP because to me it's a fallacy. There's no such thing as a co-GP. You're either a GP and an active partner.
or you're not. And what's a co GP. So we call co GPS or the way that the industry tends to frame them as kind of these small capital raisers, right, these small capital raisers that come in and raise a little bit of capital, and they don't participate in the deal in any other way. So they don't provide any services, they don't do any of
I got got I got rich friends Right you call me you say Ruben. Can you code GP this? know you can probably bring us an extra 50 million to the table Co GP or you're saying is actually not kosher
It depends. So it all depends on how you structure that deal. So if you're bringing a large amount of capital and you're only bringing capital, what you're going to want to do is negotiate managerial or voting rights within that legal entity that you're partnering with. So maybe they're the operating partner and you're the capital partner. And that's okay. So long as you as the capital partner have some sort of like meaningful voting and managerial rights. So that's kind of what private equity does, right? They come in, they raise capital.
And that's all they do is provide capital. But guess what? In those legal documents, if something goes wrong, let's say with the property or whatever the asset is, they have takeover rights. They can come in and manage the property and take over the asset management if they want to. Those rights are baked into the legal documentation. And that's what makes it okay, because they are an active partner because they have those managerial and or voting rights. But when you come in as a, let's say a smaller partner, and all you're doing is bringing in capital,
and you're not doing anything else. So you haven't negotiated any meaningful rights to make decisions or to manage. you don't actually manage the asset. You don't actually attend the meetings. You don't do anything except, here's my 500,000 bucks from my investors. And then you walk away. That's actually not legal. And a lot of people call that the Code GP model. But actually, you're either an active partner in the deal or you're not.
Would it change Seth if I, it sounds like what you're saying is I'm bringing 500K and then I'm just leaving. I'm just like, here you go. Here's, I'm just hooking you up. Would that change if I put my own money into the deal? Now I'm an LP or no, there's more complicated.
Now you're, yeah, now you're an LP because it's your money. So you're just an investor.
Right. you're saying I could, yeah. So you're saying the difference between the example you just gave is the fact that that person never had money in, they just brought money in. That's none of their own money. And then they didn't do anything. You're saying that's a red flag for lack of better words, if they don't have the proper, I guess, voting rights, manager rights, et cetera. Is that an accurate recap?
Yeah, I can use my own capital. I can put my own half a million dollars into somebody's deal and be a passive investor. And that's okay. I'm not raising capital. That's my capital. But if I said, okay, here's $250,000 from my mom and $50,000 from Rubin and another $100,000 from this person and that person. And I put it in a LLC or I just bring them into the deal. Then that is raising capital. You're raising capital from other people. And that's, that's the difference there.
(Seth Bradley) (54:14.254)
Yeah, so it's almost like you could be stacking, you know, people are a bunch of people are recruiting for the fund, but those folks are not on there as investors. It's aggregated funds, essentially, which could create a problem, right? Is that what you're saying? Yeah. Okay. Yeah. Very interesting. I never even thought of that case study. Yeah.
Yeah, I didn't even ask your question though, which was how much money can you make? Right? So typically, typically, and again, we're putting securities laws aside here. We're just talking about kind of industry norms, we'll call it. Maybe 30 % or so is put aside for the capital raising. So 30 % of the GP. let's say there's a syndication where you do a 70 30 split, 70 % goes to the investors, 30 % goes to the general partners. Well,
If you bring in, let's say, 100 % of the equity, you bring in all of it, then you'll probably be allocated about 30 % of the general partnership. So 30 % of the 30 % in that example. So you get 9 % of the deal.
What did you mean by 100 % of the equity amount following?
So if you had to raise, let's say you're closing on a $10 million property and you need to raise $4 million to close it, or let's say the down payment plus capital improvements, something like that, and you bring in the full $4 million, you brought in 100 % of the equity needed to close the deal.
Yep. And then overall, so and then what has happened now? So what's going on now or what's happened over the last couple of years is that there have been some very well-known syndicators in the space get investigated by the SEC and people have said, all right, well, now we need to figure out a different way to raise capital, compliantly. Right. And the answer is actually always been out there, but it's had some difficulties and that's a fund to fund. So
people out there, they've heard of a fund to fund. This is more a more prominent way, a more compliant way to raise capital nowadays. But I'll tell you what, comparing it to the CoGP model, it's more complicated. It costs more money and it's just a lot more work for you as the capital aggregator or the fundraiser. So people have avoided it because they've just done the CoGP model because it's easier. But now that the CoGP model isn't as available, people are still doing it, but people are kind of shying away from it because of the
the investigations that went on. Fund to Fund has become a lot more prominent and you have companies like Tribe Best who I'm chief legal officer for, full disclosure. We put together a Fund to Fund product where we make it cheaper, easier, more compliant, and you can just do it very easily and within five business days because we do everything for you. So instead of you having to find a securities attorney and a CPA, open a business banking account, file your LLC,
Walk your investors through the signing ceremony and get them to wire your funds. We call that herding the cats. Do all these things and put your cap table together, do your distributions, all those things that you'd normally have to do. Tribe Best does. And we do it for a very low price in comparison to what I would charge you if you came to me as a law client.
Interesting so I like how you just covered the foundation there. Let's go back to the 10 million dollar example, right? Yeah, you put in equity is you said so this is me saying Equity to close is 4 million. And so I'm bringing in 4 million just so I'm clear is do I have and this is my assumption that a Lot of syndicators are also raising the capital for that 4 million. Is that not correct?
Okay, so then you're saying, just want to make sure I understand all the different use cases. So I could be 4 million and then the Delta, I can either traditional lending and or have my investors cover the Delta, which would be the 6 million. Is that accurate?
Yeah, I mean you can find however you need to fill in that the debt the equity stack Well wouldn't be the equity stack the full capital stack. Yeah
Typical though, it more typical that if I'm the GP to $10 million asset that I'm actually going to raise, I don't know, $3.5 million and put 500K on my own money? Is that more typical than I'm...
I would say that is typical. Yep. That is more typical. would say prime example idea, $10 million property, get a $6 million, maybe a little bit more, $6, $7 million loan. And then you raise three or $4 million, whether that's from passive investors or whether that's your own capital that you put in, or maybe you bring in fund to fund investors.
(Seth Bradley) (59:02.478)
Okay, so that's where I wanted to ask the question, fund to fund. Tell me how that's different than the, bring in 3.5, I bring in 500K to the table, I raised 3.5, now I have a $4 million down payment, we borrow $6 million on debt. Tell me how the fund to fund is different than that approach.
Sure. So that deal that you just described, we like to call that when we're talking it with respect to fund to funds, the target deal. So that's the target deal. Like that's the entity and the structure that's buying the asset. So they're buying this $10 million asset. We're actually at the fund to fund level, one level down from there. So we create our own legal structure, our own LLC, and you have your own manager, a fund manager who brings in their own passive investors and they put them in that fund to fund legal entity.
And then the fund of fund legal entity actually invests into the target deal. So they come into the target deal as basically a big passive investor. let's say they aggregate a half a million dollars where typically, you know, the average investor might be $50,000. So these are bigger investors. It's just one big investor to the lead sponsor or the target deal, but it's really, yeah, it's really another fund is what it is. So it's a fund of a fund or a fund of a syndication.
That is so interesting. so you're saying that is becoming more prevalent. You fund a fund. I mean, I would imagine that's where not to get so far off topic, but that's where a lot of big companies who are deploying their excess capital or investing in. I I guess it's in multiple portfolios, right? Investing, right? mean, there's commercial, there's insurance. I mean, there's so many different things you can invest your money into.
(Seth Bradley) (01:00:46.656)
Is that all fun to fun families essentially?
For sure. For sure. Yeah. You know, you can call it a fund. There's different kinds of fund to funds. Fund funds aren't new. They've just been deployed in a different way recently or more prominently or more often, which is this kind of this I'll call it. We like to call it an SPV fund to fund single purpose vehicle fund to fund. Now other people will call it that same thing and mean something different, but the way that we mean it is that we create this fund to fund entity.
And it's a single purpose vehicle, meaning it's created only to invest in one deal. So that $10 million multifamily deal, we create a fund of an SPV fund of fund only to invest in that one deal. So it's really just kind of a conduit for your fund to fund past investors to ultimately invest as a group into the $10 million target deal. But as you mentioned, there have been funds and fund to funds around, you know, forever, right? There's more.
know, blind pool funds and semi-blind pool funds that, you know, they'll aggregate $100 million in capital. And then when they find a deal they like, they'll put $5 million in this deal and they'll find another deal they like and put $10 million in this deal. And they'll just allocate capital where they want. So that's different than the SPV that's designed only to invest in one deal.
So now you mentioned earlier that I had opened up a can of words and I want to please call out the areas where it gets a little bit difficult and hairy because it all depends on the deal, it all depends on the return, it all depends on the value add, if there is a right and maybe that's where you're going but I'm curious like what did you mean when you know going back to the question of okay let's go back to that use case right putting down $500,000 myself right to target right.
(Seth Bradley) (01:02:33.518)
Then there's raising 3.5 million for the down payment And then this remaining 6 million is the debt I think originally I had the question of well how much I'm GP here like I put this together right in my charge I get 2 % my charging a 1 % and then maybe and this is where you can enlighten me Maybe is it difficult because it depends how long I hold the asset for? What the exit strategy is? I mean, I just just give us if you you
could just some light on, like, you know, you can raise capital. by the way, here's how you get compensated for doing so, right? Considering of course that the goal is not just, hey, I want to make money off of this, you know, for the hard work that you've put in, you're a stewardship of that money and you have to put it to work and you're managing that entire deal, right?
What is that compensation like on that kind of, on that $10 million year could one expect? And if you have some percentages and structures that are best practices, I would just love to know.
Yeah, just some industry norms that you'll see out there is you'll see the GP compensated as a whole. They'll get some sort of an upfront fee. They'll get some sort of an annual fee. And then you'll get some sort of a profit split on the exit. Now you can charge other fees as well. I mean, you can charge a construction management fee. You can charge a guarantee fee if you guarantee the loan. You can charge other fees like that. But typically those first three are the ones that you'll see on every deal, some sort of
upfront fee, annual fee, and a profit split. Industry norms, would say somewhere between one and 4 % for the acquisition fee. I'll just call that the upfront fee. And it depends on the size of the deal, typically. The bigger the deal, the smaller the percentage. The smaller the deal, the bigger the percentage. And then the asset management fee, which is your annual fee, usually is somewhere between one and 3%, something like that. And then your exit fee or your profit split.
Ruben Kanya (01:04:33.856)
or your promote, there's a lot of different nomenclature for it. That's highly dependent on the deal. So on a typical multifamily value add, it might be a 70-30 split or 75-25 in favor of the investor or something like that. Maybe even 80-20 if it's a class A asset or something a little bit less riskier. It really just depends on how much meets on the bone. With the development deal, for instance, it might be
more in favor of the managers of the GPs. It might be a 50-50 split, something like that. If there's a lot of construction management and ground up, that sort of thing. So it really just depends on the asset type and the deal itself.
That's a great explanation. So there's the upfront acquisition, then there's the annual, and then there's the exit. So there's an opportunity. Again, this is a big, it's a big deal. Uh, no pun intended, right? You're literally raising capital. There's a lot of, really, there's a lot of, um, uh, responsibility behind it. Wanted to understand what were some kind of numbers. Um, does that one to 4 % change when you're bringing in, you know, I know you mentioned code GP is, you know, et cetera. Um, but.
Is there a maximum or a number that you've seen gets a little bit wacky? Can you have too many cooks in the kitchen? What are your thoughts there?
Yeah, for sure. mean, that's, you know, when you're talking about cannon worms, this is probably one of them. I'm really alluding to, you know, the compliance aspects and making sure that you're co-chair with securities laws. And, you know, what happened with the CoGP model that we were talking about before is we're entrepreneurs. So we like to push the limits. So we're like, oh, cool. We can raise capital and we're an active partner. Great. Well, why don't I bring my friend in here? He thinks he can raise $500,000 too. So then I got two.
Ruben Kanya (01:06:21.176)
Plus you've got the operating partners. And then they're like, well, why don't we just bring in 10 people? We can bring in 10 people that can raise $100,000 a piece. Why don't we do that? Well, then it gets wacky, right? That's what we're talking about. That's where the SEC would come in and they would say, hmm, okay, you've got 10 people over here that are seemingly raising capital, but they're active partners. Then you've got these operating partners. Maybe there's two or four of them. We'll call it 14. So you've got 14 people in this deal that are general partners on this asset.
Tell me exactly what all 14 of these people are doing in an active way. And the answer is they're not doing anything but raising capital. There's probably like, there's probably these four active partners and maybe one or two of these capital partners that are actually participating and the other eight aren't doing anything except here's my $100,000 from my two investors and I'm walking away. And then the SEC is like, that's illegal.
Right, because that's not and is the argument that they're not actually engaged or is the argument that they're bringing in somebody going back to what we discussed earlier, or is the argument that they are bringing in somebody else's money that doesn't really have interest into the deal and they're not involved. what's maybe that maybe they're one in the same. I apologize, Seth, but what's
no worries. It's that the general partner, this co-GP person, is not an active partner. have to have a job. They have to be participating in the deal. Typically, and it depends on what attorney you ask, but typically they'll have to have some sort of meaningful thing to do, we'll call it, after the deal closes. the SEC-
Are you tracking like meeting minutes and like stuff like that going to
Ruben Kanya (01:08:02.86)
Right. Got it. Okay. So it's actually best practice. You're probably reinforcing that like, Hey, like every meeting it's logged every activity. Like you really need to, to reinforce the, the sec compliance, right. And I'm assuming that's where you come in and you kind of set the best practice kind of terms for, for the, for the
You need to get paid for doing something that is not raising capital. That's really what it comes down to. What are you doing that's not raising capital? Because yes, if you're an active partner, you are allowed to raise capital for your own deal, but that can't be why you're getting paid. You can't be getting paid to raise capital. You have to be getting paid to actually do whatever duties that you're doing. So are you asset managing? Are you doing due diligence? You know, the popular one is
investor relations, right? We always say we're doing investor relations as a capital raiser because we are, we're managing our investors, but the SEC is probably going to see through that. And really the hallmark is a lot of times you'll get paid based on how much you raise. So they'll be like, okay, Mr. Co-GP, you raised 200,000. Well, you'll say upfront, like, I'm going to give you 5 % of the deal because you say you're going to raise $500,000. And then
come to find out you only raised $200,000. And now the lead sponsor goes and says, well, I'm only going to give you 2 % now because you only raised $200,000. Well, that's going to be a big red flag if you ever get investigated, right? Like you're going
(Seth Bradley) (01:09:38.659)
So that's not allowed to adjust on the fly.
No, because think about it. You're supposed to be getting paid based on your other activities, not on how much you raise. Right. So if you calibrate it, if you backtrack it and say, oh, why raise $325,000? Okay. We get 3.25%. That's going to pretty easy to dig through the docs and see that, Oh, I've got these five co-GPs and this guy raised 325. So he got 3.25 and his other person raised 275 and they got 2.75. See it all the time.
If anything goes wrong with the deal and the SEC wants to look into it, it's going to be pretty obvious.
Yeah, that's a great call out man. And I'm curious that, you know, I could literally go on. You're giving me a whole master class here. I want to be mindful of your time, but I got to ask you this question. Is it, if I buy the asset with my own money, take on all the risk and then raise capital, is that still kosher?
That doesn't change anything. It doesn't matter if you're raising capital before.
(Seth Bradley) (01:10:44.366)
So I could put in my 10 million and then raise after.
Yeah, it happens all the time. It happens all the time. like you'll see, for instance, I'm trying to think of a good example. A good example is Grant Cardone.
I was going to say Cardone I think does that right?
Grant Cardone buys his own real estate with his own out of pocket money and he gets a lot of flack because what he does is he inflates the price after he buys it with his own cash because he has so much money, inflates the price, sells those securities to his past investors at an inflated price so they get a lesser deal than he got. So he makes money as the purchaser. Then he also makes money on raising capital on the other side. So it doesn't matter if you
If you buy it with your own money to start, if you have passive investors coming into the deal, no matter when it is, or if it's a separate deal, or if it's the same deal, the same entity, a different entity, if you have passive investors, it's a security and you're going to be, you're going to have to comply with all these securities laws that we've talking about today.
(Seth Bradley) (01:11:46.978)
That's awesome. That's how you put a bow on it. let me ask you, got Tribevest, which you kind of plug a little bit, but just so we understand, you gave us an entire kind of scope of kind of how you come in into your lab and how you're able to serve others going through a similar path who are trying to raise capital in compliance and as well as possibly invest passively with those who are willing to
do all that front work. Where does Tribevest come in and sit in? Is it for the, you know, the person who wants to do it passively? Is it the person who wants to tell us a little bit about where Tribevest kind of, you know, connects all the dots here?
Yeah. You know, if you're looking to raise capital compliantly for somebody else's deal, so we would put it in what's called a fund to fund, then that's Tribevest. Tribevest is an all-in-one, done-for-you, fund to fund in a box. We handle all the setup. We do all the fund administration. We set up all the compliance elements. We do all these things for you so that you don't have to do any of them. Like it's literally a business in a box, so you can just focus on
the marketing, the sales, the pitching, getting your investors, that's what actually raising the capital. So we do all the back office, all the stuff that you don't want to do so that you can just focus on raising capital. And then it's a very narrow box, right? Like, there's only so many things that you can do with it because we're a SaaS company. So we are a software. We're kind of like a more sophisticated rocket lawyer where you give us the inputs and we fill out.
documents for you. And then we hold on all the fund administration and back office things and do that for you. But if it doesn't fit in that box, then that's kind of where my law firm comes in. So if you want to buy the asset yourself, you want to be the syndicator, you want to be the lead sponsor, you want to put together a really sophisticated blind pool fund where you're raising a bunch of money and then allocating a little bit of capital to all these different deals, then that's my law firm. It'll come in. My law firm is called Raise Law and I'll handle
Ruben Kanya (01:13:59.684)
the more sophisticated things for you.
That's interesting. Yeah, because I think what we talked about, talked about syndication, but then there's funds that basically invest into multiple individual deals,
Real quick, just so we can put this case study and bring it home, try VEST, put it in a case study where you're saying if you're looking to raise capital for somebody else's fund, let's go with our previous example, $10 million asset.
Yeah. What's the case study? Yeah. mean, somebody that commonly comes up would be for that same deal. Maybe you've invested in that lead sponsor's previous deal and you're, you know, you have a good network. Like I said, we've seen it time after time. You're a doctor, you're a dentist, you're an engineer, you're a tech person. You already have friends and family who are pretty wealthy and that have seen you invest passively in a deal and they ask you, Hey, how do I get involved? And you're like, well,
Ruben Kanya (01:14:56.462)
I can maybe, and then you realize that maybe you can raise a half million bucks. So you bring in your $10, $50,000 dollar investors, put them into one of these Try Best Fund to Funds, and then aggregate that capital, and then invest in that $10 million dollar deal as a $500,000 passive investor.
Well, and then your team is handling all the logistics and documents.
to handle all the documentation, the setup, the administration, everything.
Got it. And I guess when I think of what's in it for me, A, I got to bring people along the way. I'm technically the GP of that fund.
That's right. So you get paid for essentially raising capital and you can actually say it here, but it's kind of the same format, right? Like you're getting paid to operate.
(Seth Bradley) (01:15:48.098)
Yeah, I'm so I'm so glad we brought this full circle because there is a way you've created a way to be compliant in being able to essentially get paid to raise capital, but you're still again, the steward of the money. But now you have an entire compliance team that's handling the back office needs to be able to do it the right way. Is that right?
That's right. And then just to make it clear here, there's also parameters on that on how much you raise and how much you can possibly make. And the industry standard is, at a minimum, you might make 8 % of the raise over the life of the deal. So let's say that's maybe a five-year projected deal, that target deal, up to, I've seen as high as 20%. Now that's abnormal, but I've seen up to 20. And I would say the norm is probably 10 to 15 % somewhere in there that you make
(Seth Bradley) (01:16:47.534)
Would that fall in within the you said upfront annual exit does that then fall into the upfront fee in a way?
It's part of it. So that's that's the combined upfront annual and profit split. Okay, if you raise them Yeah, so if you raise a million bucks expect to make a hundred to one hundred and fifty thousand dollars on that over the life of the deal and that sounds pretty damn good
Yeah, a hundred percent. Cause it's, only a million, put a couple of zeros behind that. You know what we're doing. Seth man. Thank you so much. I can't tell you how much I appreciate it. I learned so much and it's, it goes back to what we were saying. It's just iron sharpens iron. I appreciate you reaching out and us getting together in the lab here. I think people are going to get a kick out of this one. And I want them to be able to go to an expert that has honesty.
Fully integrated solution the man's done walk the walk talk the talk. He even built a software as a service So you can do the same so tell us where we can get in touch with you my man because You're you're a wealth of knowledge and and and you've given us the tools to be able to do it ourselves in our lab So thank you for that. Where can we get in touch with you?
Ruben, really appreciate that, brother. Thanks for having me on. Best place would be to just go to SethPaulBradley.com and I update my links there and you can find links to Try Best. You can find links to Raise Law and also connect with me on social media.
(Seth Bradley) (01:18:17.72)
That's awesome, man. Make sure you check that out. Seth Paul Bradley.com. My man. Well, just like that, experimentation. We came, we saw, we conquered. Now it's time for you to implement in your lab. Experimentation. believe there are two critical components that will help you achieve your goals very quickly and succeed. Number one, it's information like this that you've received on a show in an episode.
(Seth Bradley) (01:18:46.452)
content that you can find on my YouTube channel or anybody's channel. And then there's a community and the way we've been able to expedite our process, the way people in our community, people that we consult, mastermind members, whoever, they get the information on an episode like this, but then they also have a support, whether it's me guiding them or being guided through a community. There is an opportunity for you listening to be able to expedite your process or even expedite your results that you're seeking by being part of the community.
If that is what you're interested in, we at ExperimentNation happen to have a community devoted to helping maximize your occupancy and your profitability altogether, regardless of which market that you are in. And for that reason, you have an opportunity where you can go to experimentrealestate.com forward slash submit. If you're looking to work in an environment that can help you prosper faster.
call out any areas that you might not be familiar in, especially the blind spots. That's where a guide comes in hand and I would be a pleasure and honor to be your guide. But in order to make sure you're a good fit, make sure you go to experimentosate.com forward slash submit, so my team can go ahead and take it and see if you're a good fit to join the mastermind and the multiple programs that we have. In addition to that, I'm also now a YouTube partner, which means that I want to give you more access to information, more access to Q and A's.
more access to the questions that actually come out of our mastermind to help people expedite the process. We've seen people get anywhere from four to five thousand, six thousand, even seven thousand dollar a month net on just one door by applying the strategies that we use by working with corporations and furnished accommodation in a very strategic way. So if you're interested, make sure you also subscribe because I'm going to have different tiers that's on YouTube now that we've become YouTube partner.
to continue to be the bridge to your success in your lab. And your lab means your life, your goals, or wherever you're trying to head. So make sure you also hit the subscribe button on my YouTube channel. That's youtube.com forward slash real estate experiment will be there. You can also look us up at midterm, mental insurance experiment. We will be there. Make sure you hit the subscribe because that's when you will know the tiers that are available to you. That makes sense for you, your marketplace for your results. Remember your only.
(Seth Bradley) (01:21:09.95)
one experiment away. Let's build.
Links from the Show and Guest Info and Links:
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https://podcasts.apple.com/us/podcast/funds-on-fire/id1801225885
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