Episode Transcript
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SPEAKER_00 (00:20):
Hey everybody,
welcome to Paradigm Shift.
I'm going to kind of get rightinto it.
So I just got off the phone.
I want to sit down and give youa quick recording.
This is March 31st.
Boots are on the ground rightnow in Iran.
This is important because whatyou're going to do is you're
going to track the stock marketand start watching where the
money is going to be moved.
Now, of course, people arescared they're going to pull
their capital along with a lotof the trading algorithms.
(00:40):
When you have trading software,the AI software that a lot of
wealth managers are now leaningon to continue to manage their
AUM, they have risk toleranceand there's certain algorithms
that once you know certainstocks start dumping, so will
that technology and so will thatsoftware.
And all of a sudden you're goingto see a run on stocks.
Now, what's happening when I'mtalking to investors is people
(01:01):
know that it exists.
So the average day trader, whichby the way, one of my largest
backers in family offices is aday trader.
She's at a point where she'sdone with the volatility.
She's stressed out.
She can make a lot of money, shecan lose a lot of money.
So people are getting to a pointwhere they just want to see
consistency and not as muchvolatility.
So the nine 90% of myconversations recently is how do
(01:23):
I get into asset classes thatcan produce good cash flow,
income, and some sort of futureequity and outpace the cost of
living by giving me enoughincome to cater to my health or
my family members that needmoney.
Cause right now it's that's notthat's that's not you know beat
around the bush.
It's tough for people.
And the financial aspect isbecoming you know a little more
(01:45):
rough.
Look at gas prices, uh, creditcard costs are uh uh uh debts at
an all-time high.
You know, interest rates arehigh.
Just things aren't great.
And even though the job marketdata shows that it's doing okay,
it's really not.
Um, because I'm boots on theground dealing with business
owners that are getting out oftheir businesses or selling
their businesses, which isanother data, some data to track
(02:07):
too, is how many people areselling their businesses and
letting go of employees whilethey're doing so.
And that doesn't help the jobmarket.
And as there's more volatility,people, as they are boomers that
own companies for 30 years, arejust closing up shop and getting
out from underneath that andfocusing on tax strategy.
So right now, there is a hugemovement of people coming out of
the public markets and into theprivate markets.
(02:29):
Oil and gas investors areliquidating right now, all of
the money in which they've madeover the last two or three years
are completely gone.
They're now liquidating thatback down to the principal
balance from the originalinvestments that they made, or
some of them haven't pulled thetrigger fast enough and are
actually losing money.
So, real estate has always beenthe head been the hedge against
inflation.
(02:49):
Real estate has always been themost secure strategy for people
to park their money and createwealth or for diversification.
That's why wealth managers, realwealth managers or RIAs always
talk, take 20, 25% of theliquidity and put it in your net
worth and put it in real estateat some level.
Real estate has always been themost stable, but you need to
identify which asset class,where there's a demand, and
(03:12):
where the spending habits are ofthe people where that demand is
going.
So I'd re- I'd encourage you tolook at and continue to watch
what it is we're doing so I cangive you more data for you to
navigate these waters in a veryunique time.
All right, guys.
So I'm gonna touch on somethings that people continue to
ask on, which is probably someof the most popular.
And what we just kind of listedas it says inside the deal, how
(03:32):
we actually structure theseinvestments.
One of the talking points is whydifferent funds exist and what's
the difference betweenaccredited and non-accredited.
So every investment, everyproject has its own merits.
It has its own timelines, itshurdles, its problems, its risk.
And so every fund is really justset up as a disclosure package.
So think of it that way.
(03:53):
It's a disclosure package of allthe things that you need to
consider as an investor that hasthe risk, like what could happen
and how that can impact you.
Two, it also protects theinvestor from other investors
going through hardships, right?
So we all know divorces arecommon, unfortunately.
So if you have an investor whodecided to invest into a project
(04:15):
as a partner and you have 15other investors a part of this
entire project, each investorhas to sign an agreement stating
that if they go through theirown hardships, their problems
will not pollinate and have adirect impact on the on the
project or other investors.
So the fund a lot of times isset up for that.
And not I think everybody knowsthat.
And really it's it's the fund isalso in a way where it just
(04:38):
identifies and holds accountablethe operator to stay with inside
the business plan.
So it spells out the overallstrategy, what the capital stack
looks like, kind of the overallfinancial aspect of it and what
the accomplishment and hurdlesare.
So it's really kind of anoverall circled up uh business
plan with all the rightdisclosures and protection
methods in it.
(04:59):
Now you have accredited andnon-accredited.
The accredited side is forpeople who are a little
wealthier, right?
It's the$300,000 a year incomecombined income with spouse, if
you have a spouse,$250 if you'resingle, and or a million dollars
in net worth, not including yourowner-occupied property equity
(05:20):
as part of your net worth.
So other real estate assets,stocks, bonds, life insurance,
you know, whatever else, cars,whatever else you have that as a
value that gets you over thatmillion dollars for net worth
will give you uh theaccreditation status to invest
into more of the uh, let's sayriskier asset classes or funds.
(05:42):
And the reason is the SECbrought that up was because they
feel that if wealthy people areinvesting, they can afford to
lose the money.
It's the non-accredited or thepeople that don't really have a
lot of money that are trying tobuild some wealth and they go
and invest into somethingthat's, you know, a little bit
more risky.
Well, they really weren't assophisticated as more of the
larger investors.
So they weren't able to identifywhere the real risks are.
(06:03):
And if they lose their money,they could, you know, literally
go into bankruptcy.
That's the reason why you wantto go with uh an accredited fund
or what you call a 506Cregulation D for solicitation.
The non-accredited is actually afund that you have to submit the
business plan to the SEC.
So it's two differentstrategies.
(06:24):
All the business aspect can bethe same.
Financials, the disclosures,everything can be the same.
It's called a parallel fund tobe exact.
You can have a fund open forhigh net worth clientele that is
the exact parallel business planwith a non-accredited fund.
And then the smaller investorsthat don't necessarily have the
financial backing, the$300,000 ayear and combined uh income or a
(06:46):
million in net worth, but theyhave$50,000 to invest from an
IRA, they can still make theinvestment.
But it's a fund that is uh hascomments passed by the SEC that
will take a look at who we are,make sure that we have audited
financials, and we have toprovide those audited financials
to our investors, ultimatelyproviding more transparency.
Now, that is a big thing rightnow in the market because
(07:10):
there's fraud everywhere, and weall know that.
So transparency is veryimportant for investors when
they're just now gettinginvolved on a new operator.
And because of really thevolatility, people really want
to get involved in real estate,but they don't know where to
start.
They may see somebody online orbe referred to somebody.
They just want to kind of learnhow the process works.
And by implementing transparencyon the strategy and how things
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operate and how we navigate intodevelopment is what creates the
transparency.
It's not just transparency forsafety, it's learning how it's
being built and how it's beingdone or how they're navigating
unique times and how thatproject will ultimately come to
fruition and make the returnsthat you want.
So transparency kind of has alarger uh wingspan than just
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making sure that someone's beingheld accountable.
The other question was let'ssee, um, why not all deals uh
are for why aren't all deals foreverybody?
To be candid with you, you know,we are in Lake Havasu, right?
I'm gonna use this as anexample.
Not everybody knows Lake Havasu,and we do marketing across the
country.
So we pick up people, you know,that are interested in the
(08:14):
investment uh out of New Jersey,out of New York, I mean, all
over the country, and they don'tknow anything about never heard
of Havasu.
They can't even pronounce Havasuproperly.
They do Havasu, right?
So they they can't evenpronounce it properly.
So, you know, a lot of timespeople want, especially right
now, people want to invest intosomething they know, right?
So if people know Lake Abbaso,you're from Southern California,
(08:34):
you or you come out here, youknow, during uh the uh snowbird
season and this is kind of whereyou want to go to get out of the
cold, you know, people know thecommunity, they believe in the
community more.
And so people will want toinvest into something that they
know, feel, can touch, andunderstand and believe in.
So if you don't, then a lot oftimes the investors won't make
an investment.
So again, not all deals are foreveryone, um, including like the
(08:56):
terms, right?
Maybe it'd be something that's alonger term, a four-year term,
or you know, they don't likethat term or a seven-year term.
Uh, people want shorter term.
So that may be one reason too.
Another one is they want to bewith maybe an outfit that's much
larger or maybe much smaller orhave a specific asset class or
whatever the case may be.
So every project won't attractevery investor.
(09:18):
And every investor will want touse their overall life
experience to get the warm andfuzzies to make sure they're
going to make the right decisioninto the right operator and the
right project in the rightlocation, and believe that what
it is that they're trying toaccomplish will actually hit
their mark.
So again, not every deal is foryou know every project or
investment offering is for eachinvestor or every investor.
(09:40):
How capital is being deployedstep by step.
Well, that's kind of a movingtarget to be candid.
We'll use one of our projects asan example.
As we raise capital and we'rebuilding the project, you
ultimately are paying, you know,your construction bills.
So there, but there are otherstrategies out there where
people raise capital, they putit into a brokerage account,
that brokerage generates income,they go and identify land and
(10:00):
locations, and then they startputting money to work by
acquiring the land, you know,that type of stuff.
Where we stand in our projects,we already own the land.
We've got a lot of the planningand and all of that already
built out and designed.
Um, we know our numbers as faras our construction numbers, and
then a lot of times we'llactually go out to raise the
capital then.
So um there's just differentstrategies.
(10:21):
I think right now it's importantfrom investors that are getting
to know us for the first time,uh, will uh see that a lot of
that heavy lift or work hasalready been done.
A lot of the investment hasalready kind of taken place.
And then you're kind of at the11th hour and the risk is
dropped by plans are approved,ready to break ground, lands
already owned.
You know, you got the citycommunity support, you have
(10:41):
other investors that havewritten checks, you got uh
people in escrow that want tobuy units as an example.
The Barncades has a lot ofinvestors that chose units as
well, which ultimately gives usa fixed price.
It makes your your returns morerealized when all we have to do
is focused on building on timeand on budget, right?
So uh the step-by-step anddeployment process will vary
(11:02):
depending on the strategy andthe project and location and
just kind of overall um the uhproject too.
But that's kind of how it's youknow, certain things are done
step by step.
Okay, what happens uh to yourmoney after you invest?
Well, the 99% of the time themoney is gonna get pushed right
into the project when it's uh tostart development or in the
(11:22):
middle of the development, butmost of the capital that we're
raising is gonna go right intobuilding that project.
So uh if you're investing intobarn caves or the flats as an
example, it's going to go rightinto construction cost because
that's the only thing we haveleft.
So now the capital is gonna getdeployed in construction.
And the reason for this video isbecause a lot of investors don't
know what happens when they dowire the money and the money's
(11:46):
actually deployed.
So we just wanted to providethis short video, just to give
you an understanding on how thefunds are structured, why the
funds exist, what it does toprotect every party, and how we
move that capital through theprocess and the term.
So that way you understand nowwhy it is we do what we do.
If any of this segment was ofvalue to you, I encourage you to
(12:06):
take a look at some of the otherwebinars and what it is that
we're doing as a firm.
I manage a$100 million debt fundnow, which is a distressed asset
fund.
I do a lot of things and privateequity from equity opportunities
and development and identifyingmaterials all the way down to
opening up gyms.
We just opened up a gym in LakeHavasu.
We'd encourage you to take alook at the Family Office
Society website, see what typeof product that we're bringing
(12:29):
to the town, and look how fastwe ramped up with memberships
and showed proof of concept ofway the world is moving, but we
use the data to support ourdecision making with that
investment.
We'd love to continue toencourage you to watch what it
is we're doing and how we'remitigating risk through these
unique times.
I really appreciate theopportunity to earn your
business.
And if there's something thatyou guys want me to touch on or
(12:50):
talk about or topics, feel freeto DM right, you know, right on
this post.
Let me know what it is you'dlike for me to touch on so I can
go ahead and give you more valueand continue to hit some of the
things that matter most.
So thank you very much forwatching.
We'll see you soon.