How to Vet Passive Deals (and Avoid Getting Burned)

Overview

Derek sits down with Houston-based investor and capital raiser David Priest to unpack two decades of lessons: surviving the 2008 crash, shifting from transactional work to passive/commercial deals, why operator track record and conservative underwriting beat flashy pro formas, and how to protect yourself in today's capital stacks (avoid bridge debt, prefer simple structures with LPs directly behind the bank). They also cover buying when others panic, the power of boots-on-the-ground, and a novel principal-protection approach for LPs.

Key Takeaways

• Back the jockey: Prioritize operators with 10–15+ years and full deal cycles completed.

• Simple capital stacks win: Bank → LPs; be wary of mezzanine debt and complex pref stacks.

• Bridge debt = hidden risk: Favor long-term, fixed-rate agency loans on MF.

• Underwrite for durability, not sizzle: Think steady 15–20% targets vs. "home run" bets.

• Buy when it's ugly: Cyclical pain can create value—if the fundamentals make sense.

• Stick to your numbers: Conservative buy boxes outlast hot markets.

• Market matters & proximity helps: Leverage trusted boots-on-the-ground.

• Investor protection is evolving: Principal-protection style structures can trade a fee for downside cover.

Relevant Topics Discussed

• Surviving 2008 and the thinning of the herd

• Transition from mortgages/single-family to syndications

• Capital stack 101: bank, mezzanine, preferred equity, LPs

• Bridge vs. fixed agency debt in multifamily

• Return structures (e.g., 8% pref, equity splits) and principal protection ideas

• Operator selection, conservative underwriting, and market selection (Texas/Midwest)

• Collaboration mindset: "Who Not How"

Time Stamp

Suggested chapter marks

• 00:00 — Intro & show setup

• 01:05 — David's background (Houston, mortgages, resilience)

• 04:30 — Lessons from 2008; staying when others quit

• 08:10 — From passive LP to capital raising; mindset shift

• 12:40 — Failed 90-unit, pivot to raising for proven operators

• 15:30 — Single-family resilience; sticking to buy boxes

• 19:20 — Buying when there's "blood in the streets"

• 23:10 — Capital stack basics; why mezz/pref can push LPs last

• 27:15 — Dangers of bridge debt; prefer long-term fixed

• 31:00 — 8% pref, returns, and principal-protection concept

• 34:20 — Boots-on-the-ground & market selection

• 36:20 — What makes David different; collaboration

• 38:20 — Close & CTA

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