E10: Generating Consistent Returns Through Crowdfunding with Matt Rodak

Most people think investing in real estate sounds appealing, but coming up with a large chunk of cash can be scary. If you don’t have that kind of money lying around, it’s easy to write off real estate investment altogether. But what if there was a way to invest in real estate with little or no money?

In this episode of the Passive Investing Show, J and Ashley are joined by Matt Rodak. They talk about crowdfunding, how it works, and how you can use it to finance your next investment.

Here are some power takeaways from today’s conversation:

• Choose the right capital.
• Build and diversify your portfolio.
• Manage risks.
• Structure your pricing carefully.
• Be open to learning.

Episode Highlights:

[08:45] Criteria for the Loan

They are focused on the single-family asset class and investors who are experienced in scale-up. Usually, they will finance about 85% of the project’s total cost to leave the customer some skin in the game.

When structuring the loan, manage risk by considering:

• What is the person paying for the house?
• Are you buying it right?
• What’s their scope of work?
• Are they renovating it?
• What will the ARV be?
• What will it sell for once it’s finished?

[12:44] Timeframe of an Investment

They try to match the term of the loan and investment to a reasonable amount of time to complete the project. An extension period can be built in.

[19:46] Investment Returns

Duration and rate may correlate. Because they use general solicitation, they can only take on accredited investors. While there is a loss of principal risk, there is a high probability that they will get most of your money back, but it may take longer than intended.

[27:33] Distributions and Taxes

Distributions are made monthly. Principal gets returned at the end of the project or maturity date. At the end of the year, their clients will get a 1099-INT from them.

[34:20] Matt’s Predictions and Advice

There’s a good legislative framework around crowdfunding. But inflation could affect the strength of the consumers and businesses. Never try to be the smartest person in the room. Always surround yourself with people with different knowledge and perspectives so you can keep learning.

Notable Quotes from the Episode:

[09:29] “It’s like small business lending. And we just happen to have collateral on the back end.”

[20:28] “That pricing is going to flow through to our passive investor base based on a number of different criteria that we’re looking at, ultimately price for the risk.”

[35:40] “Try to never be the smartest guy or gal in the room.”

Resources Mentioned:

Fund That Flip

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The Passive Investing Show