March 11, 2025 • 28 mins
Special Episode Recorded LIVE From The Best Ever Conference Podcast Stage!
Andy welcomes back Aleksey Chernobelskiy, and together we explore the often-hidden complexities and controversies in the real estate investment world. Aleksey shares insights from his new GP-LP Match system, which has sparked quite a stir among industry professionals due to its disruptive nature. Listen in as we unpack the challenges faced by general partners (GPs) and limited partners (LPs), focusing on the risks and misunderstandings that can arise, particularly for those not fully prepared for the illiquid nature of their investments.
Our discussion then turns to the critical issues of capital calls and cross-collateralization risks in real estate investments. We examine how some GPs use debt to fund distributions, potentially misleading LPs about a property's financial health. With a focus on ethical considerations, transparency, and the importance of open communication, we highlight real-world examples of the pitfalls of deceptive practices. We challenge the notion that capital calls should never happen, urging investors to seek GPs who prioritize honesty and clarity over unrealistic promises.
Finally, we delve into the alignment of interests between GPs and LPs, emphasizing the need for transparency and clear communication. The conversation touches on the evolving expectations of LPs, the importance of traditional deal structures, and the recalibration of return expectations in today's market. As we wrap up, we underscore the value of due diligence and consulting with a professional advisor.
(0:00:00) - Industry Controversy and Bridge-Building (0:12:50) - Capital Calls and Cross-Collateralization Risks (0:20:54) - Investor Alignment and Partnership Transparency (0:27:41) - Investment Advice and Expertise Sharing
About Aleksey Chernobelskiy:
Aleksey advises Limited Partners ("LP's) and General Partners ("GP's" or "Sponsors" ) on existing and future investments.
He writes weekly to over 7,000 investors on his Substack where he shares how to property vet and think about LP investments in the grand scheme of their portfolios.
His latest venture, GP-LP Match , gives a users the ability to both post their deals they are looking for LP investors in, as well as to find deals as an LP that match their "buy box".
Aleksey also helps General Partners on matters relating to LPs, like capital calls and distribution pauses and provides feedback on investment decks.
Prior to this advisory work, Aleksey ran STORE Capital's $10 Billion commercial real estate portfolio and oversaw the firm's underwriting team.
Aleksey graduated from the University of Arizona with a quadruple major - Finance, Mathematics, Economics, & Accounting.
Connect with Aleksey Twitter/X | LinkedIn | Substack
Please take the time to support the show - we’d appreciate you subscribing and leaving us a review! YouTube | Apple Podcasts | Spotify
Learn more about Andy McQuade Visit his website Check out Andy’s Consulting Firm
Follow Andy on social media LinkedIn | Twitter/X | Instagram | F
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Today, we've got a very special episode of The TCO Method ®.
(00:03):
This was recorded live at the Best Ever Conference on the Best Ever podcast stage.
Aleksey Chernobelskiy joined me after his panel discussion on the Best Ever Conference
stage with about 700 people in the room.
We got a little bit more into the nitty gritty of the ugly stuff that didn't get talked
(00:24):
about on stage.
So if you're investing in real estate, large commercial stuff as an LP or a GP, give
this a listen.
Since it's 2025, and my insurance company says I have to do this now, this is my disclaimer.
Nothing we discuss on the show should be construed as legal financial tax or other investing
(00:45):
advice.
Consult everything you hear on this program with your own team of real estate professionals.
That would be attorneys, CPAs, and other providers that you work with to make sure that
you don't just like money on fire.
Welcome to The TCO Method ®, the only show focused on helping you massively increase your
(01:30):
net operating income.
I am Andy McQuade, thank you so much for tuning in.
I have a very special guest returning to the show Aleksey Chernobelskiy talking about some
of the craziness that's been going on in the market for the last, well, last time he was
on was a little over a year ago.
And we're just going to catch up on people he's ticked off, much like me.
There's been some people angry about a little bit of education and knowledge being shared
(01:52):
because it hurts their business or at least they think it does.
And we're going to focus a little bit on how Alexi is now burning bridges with placement
agents with his new GP-LP match system that he is building, crazy algorithm that I'll have
him talk about a little bit.
And let's just catch up.
(02:13):
Aleksey, how are you?
Thank you so much.
It's great to be here.
We're live at BEC, right?
Yeah, yeah.
So we're at the Best Ever Conference.
We're recording on stage.
This is awesome.
And take away from there.
Good to see you in person.
Yeah.
Yeah, thanks to you back.
I think in terms of the first point, I guess there's a difference of opinion in terms of whether
(02:36):
people like education or not, which is fair.
I think that's always a fair point.
And I think that the second thing that gets complicated is I get to see a lot of negativity
today.
I hope he's reaching out, losing money.
And the question is, how do you handle that information?
In other words, do you disseminate it in its fullest form and sort of like call out the GPs?
(03:02):
And by the way, I think there's an argument for that, right?
Being, you know, if you're being dishonest, if you're losing people money, perhaps you should
be called out.
That's one side of it.
What I do is not that.
I guess I'm of the opinion that I can still distill the lessons of whatever that person
learned without name calling.
(03:23):
But even then, some people have an issue with it because they basically say like, you distill
these lessons, but they're so negative that it impacts the industry and, you know, people
just assume like, I'm always going to lose money as an LP.
It's all risky out there.
There's always risk though, and they should be aware of what they're playing with.
(03:44):
It's a risk adjusted returns business.
So if you're being told that there's a 30 or 40% IRR and you're going to get 17% cash
on cash, you better realize that the risk of getting zero is a lot higher than going into
a deal where you're told I'm going to get 7 to 10, right?
Right.
Exactly.
And that's my point too is what I usually tell people, what they'd like it or not is if an LP
(04:10):
gets cured as a result of what I'm saying, they'll probably not agree to still be in
the first place.
They're like the type of LP that invests and then like a year later, they call you and be like,
"Hey, can I have my money back?"
They're like, "What do you mean?
Like this is an illiquid investment."
You signed up for five years as I can't give you the money back and they're like, and they
get upset and they're like, "What do you mean?
(04:30):
Like, I need my money.
Like it's just like the stock market, right?"
So in other words, the type of LP that gets scared off by my comments tends to be the LP
that I actually think probably shouldn't participate or at least they're just not ready
to participate.
So I think that's productive and the type of LP that doesn't get scared off and they get
educated, I think that's in that positive too.
(04:52):
I guess, but I'm also biased.
Of course, right.
Well, I mean, the last time you were on the show, we talked a little bit about the rise
of fund of funds and what kind of risk that that was going to entail and how there was
potential delusion and other stuff going on in the market and still going on.
Yeah, absolutely it is.
And there are some good fund managers and some that are not.
And there are some people who are being very upfront and saying, "This is going to be
(05:13):
a rescue fund for our own deals and other ones that are saying, "Hey, we're starting a
fund."
And they're not telling the LP's and the existing properties is that they're about to get
diluted, right?
So I mean, there's a lot of games being played and a lot of, I guess, showmanship and smoke
and mirrors like there has been.
But the service that you are doing now and providing free of charge at GPLP Match is
(05:35):
ticking off more people, right?
Not just now syndicators and GPs, but you're now ticking off fund managers and placement
agents that are counting on commissions, right?
We've seen the, I call it the ambulance chasers, people who are just looking to get acquisition
fees and they've gone from product A to syndications to funds and now they're raising capital
(05:56):
for oil and gas, right?
Craziness.
You've changed jobs five times in four years.
Can we pick something and actually get good at it instead of just throwing spaghetti at
a wall and trying to get a paycheck, right?
Nobody's going to believe you.
You're eventually going to burn all those bridges down to zero.
Yeah.
I mean, I guess I'll just start by saying, I don't know if people will believe you, but my intention
(06:17):
is never to piss people off.
I just try stuff that I think is valuable.
The idea with GPLP Match, as you said, is, and actually, I, to clarify even further,
I think probably within a month or two, I'll probably launch for feeder funds and also
for equity brokers.
(06:40):
For example, in other words, if an equity broker has a phenomenal deal and they want to share
it with LPs and LPs agreed to get deals from equity brokers, like who am I to be the
arbitrary?
I call myself the email guy.
You're the information broker, basically, without being paid.
Yeah, I'm the email guy.
I make sure that the GP submits something that's accurate, it makes sense in other words,
(07:04):
right?
If it matches the filters, IE, the investment preferences of what the LP wants to see, they
get a notification, right?
And if they want to get it a deal from a feeder fund, if they want to get a deal from an
equity broker again, I think it's good for both sides.
Absolutely.
If they want to get it, let them get it.
Yeah, more is more, right?
(07:25):
Yeah, so I think the intention of it at least is not to lead to controversy, but I guess
I've gotten some feedback that was along those lines.
Yeah, I get it too.
Every time I talk about LED lighting and not to use integrated fixtures because it's
e-waste, then they die after three to five years and it creates a cat-back, and you tell
tenants that they're responsible for light bulb changes and then there's no bulbs to change.
(07:48):
So when the unit dies, you have to e-waste it and recycle it, which costs you money.
But after a certain number of years, what do you do?
You're going to have enough of them burned out where your units don't match.
They're a mishmash of garbage and you have a cat-back that you didn't plan on.
So I've burned bridges with tons of LED reps and manufacturers and whatever because they're
(08:09):
like, "We're going to cost us money."
Well, sell more LED light bulbs.
I don't know what it's for, can tell you, man.
It's just this is what it is.
Right, right.
And it just, they get pissed.
And it's unfortunate, but it's just information.
You don't have to follow what I advise, right?
Most of my clients don't do everything I tell them to do.
It's just part of the deal.
Yeah, yeah.
I've learned that over time too.
(08:30):
I try to share what I think is the truth.
Generally speaking, there would be like 30 to 40% who listen, 30 to 40% who listen, but don't
do it.
And then the remainder will be get pissed off by it.
Correct.
I don't know.
I think maybe this is just a function of being on social for long enough.
(08:50):
You just realize that and I actually think some of it is healthy.
You know, like some of it, it's actually funny.
Like early on in my journey, there was an anonymous account on Twitter that would like
call me out and they're like, what you're doing is stupid.
Whoever said that, to diligence is helpful for all of a piece.
Like show me the data.
And I was like, I mean, was it Jake?
Was it a Jake account?
(09:10):
Might have been.
All right, well, it does account.
Nobody cares what you can say.
So it's just like, you know, but to be candid, like I was early on and I was like, you know,
maybe he's right.
Right.
Or whoever this person is, like maybe they're right.
And I remember sitting there one Sunday, you know, and like he was one of these days,
like a few days went by, no revenue.
(09:32):
And I'm like, man, like is this a real business?
Am I doing the right thing?
Like maybe there is no data.
Like maybe I'm just charging people for a worthless service.
You know, but then you like have a few rounds and other few rounds and you're like, like,
wow, like people are really need this.
And you're like, okay, absolutely.
And I think, and I think there's right and there's nothing wrong with with seeking advice
(09:54):
that's from somebody who has more experience in a particular sector, then you do people
should be when they don't know something.
They should be seeking information from people who have experience in that world.
And it drives me not seeing all the gurus and coaches who are like 24 years old and they're
like, I'm a life coach.
I mean, are you though because you haven't even lived yet.
(10:16):
So are you a life coach?
Because I don't think you are.
You're kind of just trying to fool people into thinking you've done something you haven't
done.
Like people, I mean, they did live for the first time.
24 years.
I mean, great.
You know, it's, it's awesome.
Good for them.
And maybe they're super happy and they're in a good place.
There's always the outlier that what they say could be true and that their experience is
valuable to someone, right?
(10:37):
But then I see people who are following these gurus and the gurus have never really done
anything, right?
Like they've closed two deals and then they're coaching people like they've done 500.
It's like two deals is probably not enough for you to actually have the reps in to get
good at something.
So when you were at store, I mean, how many deals a week did you underwrite?
(10:58):
Well, it wasn't me by myself.
Correct.
You had a team of 20 people.
I think on an average week, we probably went through between like probably 10 to 20.
It was a lot, you know?
Yeah.
Like you did like a billion dollars, right?
We bought about a billion to two billion a year.
Yeah.
(11:18):
Yeah.
But they were also like smaller deals.
Like they were like, I think an average was probably like 10.
Like 10 to 15 million?
Still.
And that's the stuff that we actually bought.
But you're talking about perspectives.
Most of the people that you're talking to are not placing 10 to 15 million and crack.
There are some, right?
There's outliers.
(11:38):
But your experience in doing the math and crunching the numbers and looking at market data
and looking at inflows and outflows, that gives you an advantage that some of these other
people don't have.
And the information scares people because I think some of these people that are pushing
you're like the gurus who don't have the experience.
Like you're sharing info that they should be knowing and looking at and when they don't
know it, they look dumb or they look bad or they're worried about being exposed in some way.
(12:02):
Right.
I think there's just this premise that LP investing should be passive.
And I always just try to remind people and again, you know, most people don't listen.
But I try to remind them that it's only passive like once you invest.
Correct.
Right.
But before it's like, it's extremely active.
Like it's extremely time consuming to find something that you actually like, that I'm sorry
(12:25):
to say this, but if you invest in the first few deals that you just get, you're just gambling.
Correct.
You know, and people don't like to hear that because they'll say, well, you know, but my
friend over here is invested in their other deals and they've been paying distributions
on time.
Okay.
Like I can name you 20 cases where distributions have been paid and then one day they
(12:45):
stopped and then you all of a sudden you realize you lost all your money.
Right.
You know, so.
It's a lot of the requirements for some of these deals, especially like two years ago when
stuff started hitting the fan and people were worried about distributions and capital calls
were getting all, and we'll talk about what you talked about on stage today with capital
calls.
But people were getting nervous about capital calls, so they were actually funding their distributions
(13:08):
with debt.
They were taking on extra debt into the stack and then paying people their, their distributions
so it looked like the property was performing well and guess what?
Or, or, it just makes it worse in a long run.
Or in some case, they were funding like GP loans into the LLC in order to do the same thing,
(13:29):
either paying working capital or making distributions to sort of continue the messaging of everything
is fine, which is that, that's a whole topic that's actually actually saw your article on
that a couple of weeks ago.
And I was like, I did not even realize that that was a thing where they were actually
loaning the LLC money from their own funds and then paying themselves back without disclosing
(13:50):
any of it that the loan existed or the payback existed.
Yeah, that's bonkers.
Yeah, it is, you know, but here's what's interesting, like some people online will be like,
if that occurs like complete red flag and then we're doing business with them again, but
I'm just like, wait, like one second, look at your docs, the GP did not need to fund that
(14:10):
loan.
So you have to give them some credit, like meaning they didn't need to do it.
They tried.
They didn't need to do it.
They decided to do it.
Now, the question is, how did they do it?
Was it in secrecy while telling you everything is fine, even though everything is falling apart?
Right.
That would be a problem.
Huge problem.
Or did they send you, not right away and say, listen, Mike, we're partners, things are not
(14:31):
going according to plan.
We just pushed in a million bucks for cash flow.
Right.
Like we're going to keep you updated.
Hopefully we don't need a capital call, but we might.
Here's what's going on and here's the plan.
Like that's very respectable.
Yeah, absolutely.
In other words, I'll just give you a simple example.
Let's say, let's say a GP funds their own debt into a deal, right, to just like bridge the
(14:57):
need for working capital.
And then, you know, a week goes by and they send a capital call and part of that capital
calls pay themselves back.
So I think most people will be like, no problem.
Yeah.
You put the money and you take it out.
Like you just like, it was just, it's been a week.
Right.
Right.
Of course, you should get paid back because you weren't supposed to put in the first place,
but you wanted to give us time.
Maybe it's a month apart, whatever it is.
(15:19):
So there people don't mind it where people start minding it and I think they should is
like when that time horizon gets larger, right?
And when the information isn't clear on either side.
In other words, the capital call comes and there's no clear uses that says, hey, we're getting
paid back.
Right.
(15:39):
And I'll tell you like probably 75% of the time, there's like miscellaneous expenses or
like some weird name that they make up and it turns out that that's like paying themselves
back and that's what they called the loan.
And of course, they'll tell you, well, like, you know, if you looked at the balance sheet
that we sent a year ago, you would have seen an item called that and you will could have
figured out.
(16:00):
I'm like, really like, yeah, but smoking mirrors is never good.
Is this how it works?
Like, no, it shouldn't be like you're going to bank do it.
One question is, in this world, like, if a bank could get away with it and nobody would say
anything, right?
And the answer is no, then maybe there should be some transparency there.
And I think the message just from what you do and today in general when you were on stage,
(16:22):
the reality is that some of these fund managers and GPs shouldn't be getting ticked at you.
They should be learning from you and finding out what not to do so that they don't fall
into that trap of stupidity and and smoke and mirrors.
Some of them don't have the ability to do that.
They don't have the team.
They don't have the capacity.
They don't understand what they're doing enough to really, they don't have the acumen to
make that work.
(16:43):
But, like, a smart player who sees what the negativity is out there from LPs towards indications,
towards funds, towards all this other stuff, they should be learning from you guys who are
out there raising awareness, you know, between your newsletter and Leila Kunimoto has put
out there recently.
(17:04):
I mean, the two of you are really doing a great job of bringing the facts and a little bit
of reality to it.
And I just love your blunt, like, it's just part of the business, right?
So capital calls.
So talk about that a little bit.
And like, capital calls aren't bad.
GPs who say capital calls are never going to happen are maybe out of touch with reality
a little bit.
It's great if they don't happen, but eventually-
(17:25):
Well, I just-
It's not even like out of touch with reality.
I would just say it's like- it's just the logical.
It's like literally seeing- we're never- well, here's the-
The real issue, I think, is the difference between what they want you to conclude and the
actual conclusion.
And this is where a lot of LPs get tripped up.
So if I tell you- if I tell you I'm never going to make a capital call or I've never done
(17:47):
one, why do they tell you that?
Because it's like, oh, everyone else is doing it.
90% of LPs will sit there in that conference or whatever meeting and they'll be like, oh,
how like this sponsor is so amazing.
Like everyone is doing capital calls, but these guys will never do it.
Therefore-
My money safe.
My money is safe.
There are four I should invest again, right?
(18:08):
And that's where I have the issue.
Because there's no problem with saying that.
I mean, you can say whatever you want, but you know that saying that is leading people to
the wrong- no, no, it's not a wrong conclusion, it's just like a misleading conclusion, right?
Because you know you're sitting on deals that have paper losses and they have challenges,
right?
(18:29):
And that's why I just- like, I don't understand it.
I just simply don't understand it.
If you need money, your first source of capital should be your LPs or at least they should
know about the challenges and have the option to invest.
If you decide to not do that and pursue external sources, then they should know about it.
And then I see a lot of these funds now and some of them are rescue funds and some of them
(18:52):
are advertised- whatever, I don't care what they call themselves, right?
And I don't really care how they structure themselves.
That's not my world, but I see a lot of cross-collateralization happening without anybody
really being aware of that.
So why don't we talk about the risk of cross-collateralization and how that is probably the king of
red flags because there's only so much equity to go around in these properties because they
(19:13):
have essentially maxed out what they can get from the banks on LTV.
So why don't we like-
How much time do you have?
We are.
We have 10 minutes.
So let's talk about cross-collateralized assets for 10 minutes.
I mean, I'll just- first, I'll just define it for the listeners.
If I invested in like three separate LLCs, you know, person one invested in LSE-1, person
(19:36):
two invested in LSE-2, person three invested in LSE-3, presumably, and I think it's a fair
assumption, they invested in those LLCs because they did diligence and they liked those specific
investments and they did not want like a fund, right?
They wanted that.
And so you live by that and tie by that.
Meaning if that property performs well, you do well.
(19:57):
But it does not.
You don't do well, right?
And what's happening now is like the sponsor sitting there, I'm just giving you an example,
the sponsor sitting there, one deal might be, you know, 2x on paper, right?
Another deal might be a total zero.
Another deal is like a 0.75, okay?
So you have two options.
And this is a much broader topic, which is the conflict of interests between the GP and
(20:22):
the LPs starts to diverge very quickly as soon as distress comes around and it causes
like some of these, what I would call suboptimal decisions.
And so one of the decisions from the perspective of GP is like, well, okay, so like we could
sell it, lose all the money, on one.
Could sell the second one, not lose all the money, return some, but people are still going
(20:46):
to be pissed off, not great.
But man, if we sell the third one, it's going to be 2x.
So we've got equity there.
And so they're head, usually like, you know, these speakers are like some investment maker
or some advisor and they like, you know, tell them like, well, you know, you could just
like cross all three and put like a pref piece into all of them.
(21:12):
And then you don't have any negative news, right?
Because all of a sudden you have like one capital provider that takes collateral or lean,
it depends what type of security, right?
But they'll take some sort of interest in all three LLCs or like the properties.
And all of a sudden like, no bad press releases, you're not mentioned on forums.
(21:36):
Like how amazing is that?
And I keep raising.
And I can keep raising.
Yeah, the real deal leads you alone.
Exactly.
Right.
So, but of course the problem is is like, that's not what people signed up for.
Right.
And I'm going to be in this deal to be in this deal.
And I don't want to be in the other guy's deal.
So if I'm the two ex guy, the worst thing that can happen to me is like, I get crossed with
(21:59):
someone who is zero and in another guy who is zero point seven five.
And of course, like, you know, when these bitches come around, they're all super cute and
glossy and like, you know, everything is going to be awesome.
And, you know, they're all like about equal and value, like you're all all this stuff.
But at the end of the day, there's just a bunch of gray areas, man.
(22:21):
Like, it's gray areas and communication is key, transparency is key.
Transparency is key.
There shouldn't be a gray area.
Everybody should understand what they're getting into for the entire time they're in the
deal.
Right.
And when you steer away from that, it should be clear what's happening.
Right.
Usually it's not.
No.
(22:41):
And that's the other problem is like when these things get presented to LPs, most of
them, they're not clear.
Most of them, it's like, oh, like, you get diversification by being in these other two deals.
Oh, but you forgot to tell me it's a zero.
Like, why would I want to diversify into a zero?
Correct.
And I'm like, oh, well, you know, you get diversification across another market.
(23:02):
And like, it's going to be awesome.
It's like a read.
Yeah.
You know, I mean, like, you hear all types of stuff.
And you know, and then they get votes from a bunch of LPs that like, don't really know what
they're doing.
Correct.
That's the best case scenario, by the way, is to actually get votes.
And sometimes they don't have any need votes.
Any time they just do it.
That was just part of the operating agreement and how they structured the deal at the beginning.
Yeah, yeah, yeah.
(23:22):
Meaning sometimes operating agreement will say, like, you can't do that unless you have a vote.
And sometimes it just gives almost like unilateral rights to the GP to do anything that's, you
know, let's call it like within the best interest of the partnership.
And so they'll, you know, for the last reason, to make it in the best interest of the overall
(23:43):
partnership, meaning it might not be the best interest of the LP, but it's in the best interest
of everyone, IE the GP.
IE the GP.
Follow the money.
Yeah, yeah, exactly.
So the last time you were on the show, we talked a little bit about conflict of interest
in following the money, right?
And some of that comes down to how well informed are the LPs when they get into it.
(24:08):
Are they even looking at what the alignment of interest is between themselves and the sponsor
of the deal?
Because back in the day, we talked about a little bit of smoke admirers in GP collateral
going in, right?
And they weren't actually collateralizing at all.
They were taking their promote and they were using it as their part of the deal.
(24:30):
So they weren't actually putting any personal capital into it.
And a lot of these people, honestly, working w2s, that should be the first red flag if you
have a sponsor who's working at w2 and you expect them to put capital into a deal and they're
not.
And it's coming out of something that could happen maybe down the road in the future.
You're basically saying, I'm okay with you putting zero into this deal.
(24:50):
Where is that today versus what it was two years ago?
Yeah, I think, first of all, alignment of interest, I guess in my opinion, is like to be
different things.
One of which you mentioned like the co-invest from the GP.
The other one is fees, which would include the acquisition fee, which sort of is very much
related to the co-invest.
My ambience is a whole list.
Right.
(25:11):
And then the waterfall.
Right.
So just generally, as I said on stage that over the past two years, we've seen a very material
change in expectations from Alpeas.
And I think these expectations are, they're logical.
Meaning at some point things come back to normal.
I think back in the day it was very normal to have 7,30, 80, 20 splits with a 7% preff, 8%
(25:37):
preff.
But during 2020, 2021, things just got crazy.
Right.
Free money.
Yeah.
And exuberance.
You almost couldn't announce a deal that wasn't fully subscribed within a few hours.
So why shouldn't I?
Why shouldn't I have better terms?
(25:57):
You know what I mean?
Risk-adjusted returns, right?
And you need to figure it out.
If it's crazy numbers that they're throwing out, there needs to be a calculation like, okay,
well, if I can get this in the equity markets and I can get this from a mutual fund and
I can get this from Nvidia stock or whatever, or I can get this from Bitcoin on it.
Yeah, I mean, I can get like 4% of treasuries.
Right.
4% was zero.
(26:18):
So why shouldn't my preff and return expectations change?
Correct.
And it's, I don't know that there's that calculation for a lot of investors where they're
really weighing the higher return with the amount of risk that they're taking on.
Like, if you're putting money into a deal and you're being told, you know, 17, 20, 25% return
and you see the word guaranteed, which I know is one of your favorites.
(26:40):
Like you should immediately think I could get completely wiped out.
Like that should be the very first thing that any of you go into it.
I think it's important to realize that it's always a possibility.
Absolutely.
You would be shocked how many people I speak to that say something along the lines of,
I thought the worst thing that could happen is I just get my money back.
Right.
(27:01):
And those are just like the most painful conversations because they really mean it.
Like, and by the way, it's not like such a crazy idea.
It's very easy for us to like debunk because it's a physical asset.
It's a building in a city somewhere on a street.
Yeah, I think generally you assume like, you know, prices are stable or maybe they go
up.
So what's the problem?
Like you just sell it, pay off the debt and I get my equity back.
(27:24):
I forget like fees and closing costs and all that stuff.
Like meaning it's not like such a crazy thought.
But then once you realize like cap rates are involved, things can happen.
Most of these things are actually not within the control of the GP.
Right.
Then, you know, things get a little bit more challenging.
Absolutely.
And it's all about do the due diligence, get an advisor.
(27:44):
And if you're not sure on a deal, send a message to Alexi because he, that's his, that's
his stick.
You don't know where you stand in a current investment.
If you don't know if you should invest in a deal and you think it's good, but you want
a second set of eyes on it, there's actually people out there who do that.
And Aleksey is one of them and he's one of the best in my opinion, but that's because we're
(28:06):
friends and I'm biased.
So, don't listen to his.
Yeah, whatever.
All right.
So I guess we're going to wrap up.
Aleksey, thank you so much for coming back on the show.
Thank you, Andy.
I will get all the links and stuff on the stuff.
We'll get up on YouTube with no video.
We'll do one of those still image things and we'll just go from there.
It's going to be awesome.
Thank you.
No, thank you for coming.
(28:27):
I appreciate it.
It's a great meeting in person for a change instead of just all via video and text and
LinkedIn, right?
And LinkedIn, yes, of course, and Twitter and whatever else we chat.
All right.
Great.
Thank you.
Woo!
[Music]
Today, we've got a very special episode of The TCO Method ®.
(00:03):
This was recorded live at the Best Ever Conference on the Best Ever podcast stage.
Aleksey Chernobelskiy joined me after his panel discussion on the Best Ever Conference
stage with about 700 people in the room.
We got a little bit more into the nitty gritty of the ugly stuff that didn't get talked
(00:24):
about on stage.
So if you're investing in real estate, large commercial stuff as an LP or a GP, give
this a listen.
Since it's 2025, and my insurance company says I have to do this now, this is my disclaimer.
Nothing we discuss on the show should be construed as legal financial tax or other investing
(00:45):
advice.
Consult everything you hear on this program with your own team of real estate professionals.
That would be attorneys, CPAs, and other providers that you work with to make sure that
you don't just like money on fire.
Welcome to The TCO Method ®, the only show focused on helping you massively increase your
(01:30):
net operating income.
I am Andy McQuade, thank you so much for tuning in.
I have a very special guest returning to the show Aleksey Chernobelskiy talking about some
of the craziness that's been going on in the market for the last, well, last time he was
on was a little over a year ago.
And we're just going to catch up on people he's ticked off, much like me.
There's been some people angry about a little bit of education and knowledge being shared
(01:52):
because it hurts their business or at least they think it does.
And we're going to focus a little bit on how Alexi is now burning bridges with placement
agents with his new GP-LP match system that he is building, crazy algorithm that I'll have
him talk about a little bit.
And let's just catch up.
(02:13):
Aleksey, how are you?
Thank you so much.
It's great to be here.
We're live at BEC, right?
Yeah, yeah.
So we're at the Best Ever Conference.
We're recording on stage.
This is awesome.
And take away from there.
Good to see you in person.
Yeah.
Yeah, thanks to you back.
I think in terms of the first point, I guess there's a difference of opinion in terms of whether
(02:36):
people like education or not, which is fair.
I think that's always a fair point.
And I think that the second thing that gets complicated is I get to see a lot of negativity
today.
I hope he's reaching out, losing money.
And the question is, how do you handle that information?
In other words, do you disseminate it in its fullest form and sort of like call out the GPs?
(03:02):
And by the way, I think there's an argument for that, right?
Being, you know, if you're being dishonest, if you're losing people money, perhaps you should
be called out.
That's one side of it.
What I do is not that.
I guess I'm of the opinion that I can still distill the lessons of whatever that person
learned without name calling.
(03:23):
But even then, some people have an issue with it because they basically say like, you distill
these lessons, but they're so negative that it impacts the industry and, you know, people
just assume like, I'm always going to lose money as an LP.
It's all risky out there.
There's always risk though, and they should be aware of what they're playing with.
(03:44):
It's a risk adjusted returns business.
So if you're being told that there's a 30 or 40% IRR and you're going to get 17% cash
on cash, you better realize that the risk of getting zero is a lot higher than going into
a deal where you're told I'm going to get 7 to 10, right?
Right.
Exactly.
And that's my point too is what I usually tell people, what they'd like it or not is if an LP
(04:10):
gets cured as a result of what I'm saying, they'll probably not agree to still be in
the first place.
They're like the type of LP that invests and then like a year later, they call you and be like,
"Hey, can I have my money back?"
They're like, "What do you mean?
Like this is an illiquid investment."
You signed up for five years as I can't give you the money back and they're like, and they
get upset and they're like, "What do you mean?
(04:30):
Like, I need my money.
Like it's just like the stock market, right?"
So in other words, the type of LP that gets scared off by my comments tends to be the LP
that I actually think probably shouldn't participate or at least they're just not ready
to participate.
So I think that's productive and the type of LP that doesn't get scared off and they get
educated, I think that's in that positive too.
(04:52):
I guess, but I'm also biased.
Of course, right.
Well, I mean, the last time you were on the show, we talked a little bit about the rise
of fund of funds and what kind of risk that that was going to entail and how there was
potential delusion and other stuff going on in the market and still going on.
Yeah, absolutely it is.
And there are some good fund managers and some that are not.
And there are some people who are being very upfront and saying, "This is going to be
(05:13):
a rescue fund for our own deals and other ones that are saying, "Hey, we're starting a
fund."
And they're not telling the LP's and the existing properties is that they're about to get
diluted, right?
So I mean, there's a lot of games being played and a lot of, I guess, showmanship and smoke
and mirrors like there has been.
But the service that you are doing now and providing free of charge at GPLP Match is
(05:35):
ticking off more people, right?
Not just now syndicators and GPs, but you're now ticking off fund managers and placement
agents that are counting on commissions, right?
We've seen the, I call it the ambulance chasers, people who are just looking to get acquisition
fees and they've gone from product A to syndications to funds and now they're raising capital
(05:56):
for oil and gas, right?
Craziness.
You've changed jobs five times in four years.
Can we pick something and actually get good at it instead of just throwing spaghetti at
a wall and trying to get a paycheck, right?
Nobody's going to believe you.
You're eventually going to burn all those bridges down to zero.
Yeah.
I mean, I guess I'll just start by saying, I don't know if people will believe you, but my intention
(06:17):
is never to piss people off.
I just try stuff that I think is valuable.
The idea with GPLP Match, as you said, is, and actually, I, to clarify even further,
I think probably within a month or two, I'll probably launch for feeder funds and also
for equity brokers.
(06:40):
For example, in other words, if an equity broker has a phenomenal deal and they want to share
it with LPs and LPs agreed to get deals from equity brokers, like who am I to be the
arbitrary?
I call myself the email guy.
You're the information broker, basically, without being paid.
Yeah, I'm the email guy.
I make sure that the GP submits something that's accurate, it makes sense in other words,
(07:04):
right?
If it matches the filters, IE, the investment preferences of what the LP wants to see, they
get a notification, right?
And if they want to get it a deal from a feeder fund, if they want to get a deal from an
equity broker again, I think it's good for both sides.
Absolutely.
If they want to get it, let them get it.
Yeah, more is more, right?
(07:25):
Yeah, so I think the intention of it at least is not to lead to controversy, but I guess
I've gotten some feedback that was along those lines.
Yeah, I get it too.
Every time I talk about LED lighting and not to use integrated fixtures because it's
e-waste, then they die after three to five years and it creates a cat-back, and you tell
tenants that they're responsible for light bulb changes and then there's no bulbs to change.
(07:48):
So when the unit dies, you have to e-waste it and recycle it, which costs you money.
But after a certain number of years, what do you do?
You're going to have enough of them burned out where your units don't match.
They're a mishmash of garbage and you have a cat-back that you didn't plan on.
So I've burned bridges with tons of LED reps and manufacturers and whatever because they're
(08:09):
like, "We're going to cost us money."
Well, sell more LED light bulbs.
I don't know what it's for, can tell you, man.
It's just this is what it is.
Right, right.
And it just, they get pissed.
And it's unfortunate, but it's just information.
You don't have to follow what I advise, right?
Most of my clients don't do everything I tell them to do.
It's just part of the deal.
Yeah, yeah.
I've learned that over time too.
(08:30):
I try to share what I think is the truth.
Generally speaking, there would be like 30 to 40% who listen, 30 to 40% who listen, but don't
do it.
And then the remainder will be get pissed off by it.
Correct.
I don't know.
I think maybe this is just a function of being on social for long enough.
(08:50):
You just realize that and I actually think some of it is healthy.
You know, like some of it, it's actually funny.
Like early on in my journey, there was an anonymous account on Twitter that would like
call me out and they're like, what you're doing is stupid.
Whoever said that, to diligence is helpful for all of a piece.
Like show me the data.
And I was like, I mean, was it Jake?
Was it a Jake account?
(09:10):
Might have been.
All right, well, it does account.
Nobody cares what you can say.
So it's just like, you know, but to be candid, like I was early on and I was like, you know,
maybe he's right.
Right.
Or whoever this person is, like maybe they're right.
And I remember sitting there one Sunday, you know, and like he was one of these days,
like a few days went by, no revenue.
(09:32):
And I'm like, man, like is this a real business?
Am I doing the right thing?
Like maybe there is no data.
Like maybe I'm just charging people for a worthless service.
You know, but then you like have a few rounds and other few rounds and you're like, like,
wow, like people are really need this.
And you're like, okay, absolutely.
And I think, and I think there's right and there's nothing wrong with with seeking advice
(09:54):
that's from somebody who has more experience in a particular sector, then you do people
should be when they don't know something.
They should be seeking information from people who have experience in that world.
And it drives me not seeing all the gurus and coaches who are like 24 years old and they're
like, I'm a life coach.
I mean, are you though because you haven't even lived yet.
(10:16):
So are you a life coach?
Because I don't think you are.
You're kind of just trying to fool people into thinking you've done something you haven't
done.
Like people, I mean, they did live for the first time.
24 years.
I mean, great.
You know, it's, it's awesome.
Good for them.
And maybe they're super happy and they're in a good place.
There's always the outlier that what they say could be true and that their experience is
valuable to someone, right?
(10:37):
But then I see people who are following these gurus and the gurus have never really done
anything, right?
Like they've closed two deals and then they're coaching people like they've done 500.
It's like two deals is probably not enough for you to actually have the reps in to get
good at something.
So when you were at store, I mean, how many deals a week did you underwrite?
(10:58):
Well, it wasn't me by myself.
Correct.
You had a team of 20 people.
I think on an average week, we probably went through between like probably 10 to 20.
It was a lot, you know?
Yeah.
Like you did like a billion dollars, right?
We bought about a billion to two billion a year.
Yeah.
(11:18):
Yeah.
But they were also like smaller deals.
Like they were like, I think an average was probably like 10.
Like 10 to 15 million?
Still.
And that's the stuff that we actually bought.
But you're talking about perspectives.
Most of the people that you're talking to are not placing 10 to 15 million and crack.
There are some, right?
There's outliers.
(11:38):
But your experience in doing the math and crunching the numbers and looking at market data
and looking at inflows and outflows, that gives you an advantage that some of these other
people don't have.
And the information scares people because I think some of these people that are pushing
you're like the gurus who don't have the experience.
Like you're sharing info that they should be knowing and looking at and when they don't
know it, they look dumb or they look bad or they're worried about being exposed in some way.
(12:02):
Right.
I think there's just this premise that LP investing should be passive.
And I always just try to remind people and again, you know, most people don't listen.
But I try to remind them that it's only passive like once you invest.
Correct.
Right.
But before it's like, it's extremely active.
Like it's extremely time consuming to find something that you actually like, that I'm sorry
(12:25):
to say this, but if you invest in the first few deals that you just get, you're just gambling.
Correct.
You know, and people don't like to hear that because they'll say, well, you know, but my
friend over here is invested in their other deals and they've been paying distributions
on time.
Okay.
Like I can name you 20 cases where distributions have been paid and then one day they
(12:45):
stopped and then you all of a sudden you realize you lost all your money.
Right.
You know, so.
It's a lot of the requirements for some of these deals, especially like two years ago when
stuff started hitting the fan and people were worried about distributions and capital calls
were getting all, and we'll talk about what you talked about on stage today with capital
calls.
But people were getting nervous about capital calls, so they were actually funding their distributions
(13:08):
with debt.
They were taking on extra debt into the stack and then paying people their, their distributions
so it looked like the property was performing well and guess what?
Or, or, it just makes it worse in a long run.
Or in some case, they were funding like GP loans into the LLC in order to do the same thing,
(13:29):
either paying working capital or making distributions to sort of continue the messaging of everything
is fine, which is that, that's a whole topic that's actually actually saw your article on
that a couple of weeks ago.
And I was like, I did not even realize that that was a thing where they were actually
loaning the LLC money from their own funds and then paying themselves back without disclosing
(13:50):
any of it that the loan existed or the payback existed.
Yeah, that's bonkers.
Yeah, it is, you know, but here's what's interesting, like some people online will be like,
if that occurs like complete red flag and then we're doing business with them again, but
I'm just like, wait, like one second, look at your docs, the GP did not need to fund that
(14:10):
loan.
So you have to give them some credit, like meaning they didn't need to do it.
They tried.
They didn't need to do it.
They decided to do it.
Now, the question is, how did they do it?
Was it in secrecy while telling you everything is fine, even though everything is falling apart?
Right.
That would be a problem.
Huge problem.
Or did they send you, not right away and say, listen, Mike, we're partners, things are not
(14:31):
going according to plan.
We just pushed in a million bucks for cash flow.
Right.
Like we're going to keep you updated.
Hopefully we don't need a capital call, but we might.
Here's what's going on and here's the plan.
Like that's very respectable.
Yeah, absolutely.
In other words, I'll just give you a simple example.
Let's say, let's say a GP funds their own debt into a deal, right, to just like bridge the
(14:57):
need for working capital.
And then, you know, a week goes by and they send a capital call and part of that capital
calls pay themselves back.
So I think most people will be like, no problem.
Yeah.
You put the money and you take it out.
Like you just like, it was just, it's been a week.
Right.
Right.
Of course, you should get paid back because you weren't supposed to put in the first place,
but you wanted to give us time.
Maybe it's a month apart, whatever it is.
(15:19):
So there people don't mind it where people start minding it and I think they should is
like when that time horizon gets larger, right?
And when the information isn't clear on either side.
In other words, the capital call comes and there's no clear uses that says, hey, we're getting
paid back.
Right.
(15:39):
And I'll tell you like probably 75% of the time, there's like miscellaneous expenses or
like some weird name that they make up and it turns out that that's like paying themselves
back and that's what they called the loan.
And of course, they'll tell you, well, like, you know, if you looked at the balance sheet
that we sent a year ago, you would have seen an item called that and you will could have
figured out.
(16:00):
I'm like, really like, yeah, but smoking mirrors is never good.
Is this how it works?
Like, no, it shouldn't be like you're going to bank do it.
One question is, in this world, like, if a bank could get away with it and nobody would say
anything, right?
And the answer is no, then maybe there should be some transparency there.
And I think the message just from what you do and today in general when you were on stage,
(16:22):
the reality is that some of these fund managers and GPs shouldn't be getting ticked at you.
They should be learning from you and finding out what not to do so that they don't fall
into that trap of stupidity and and smoke and mirrors.
Some of them don't have the ability to do that.
They don't have the team.
They don't have the capacity.
They don't understand what they're doing enough to really, they don't have the acumen to
make that work.
(16:43):
But, like, a smart player who sees what the negativity is out there from LPs towards indications,
towards funds, towards all this other stuff, they should be learning from you guys who are
out there raising awareness, you know, between your newsletter and Leila Kunimoto has put
out there recently.
(17:04):
I mean, the two of you are really doing a great job of bringing the facts and a little bit
of reality to it.
And I just love your blunt, like, it's just part of the business, right?
So capital calls.
So talk about that a little bit.
And like, capital calls aren't bad.
GPs who say capital calls are never going to happen are maybe out of touch with reality
a little bit.
It's great if they don't happen, but eventually-
(17:25):
Well, I just-
It's not even like out of touch with reality.
I would just say it's like- it's just the logical.
It's like literally seeing- we're never- well, here's the-
The real issue, I think, is the difference between what they want you to conclude and the
actual conclusion.
And this is where a lot of LPs get tripped up.
So if I tell you- if I tell you I'm never going to make a capital call or I've never done
(17:47):
one, why do they tell you that?
Because it's like, oh, everyone else is doing it.
90% of LPs will sit there in that conference or whatever meeting and they'll be like, oh,
how like this sponsor is so amazing.
Like everyone is doing capital calls, but these guys will never do it.
Therefore-
My money safe.
My money is safe.
There are four I should invest again, right?
(18:08):
And that's where I have the issue.
Because there's no problem with saying that.
I mean, you can say whatever you want, but you know that saying that is leading people to
the wrong- no, no, it's not a wrong conclusion, it's just like a misleading conclusion, right?
Because you know you're sitting on deals that have paper losses and they have challenges,
right?
(18:29):
And that's why I just- like, I don't understand it.
I just simply don't understand it.
If you need money, your first source of capital should be your LPs or at least they should
know about the challenges and have the option to invest.
If you decide to not do that and pursue external sources, then they should know about it.
And then I see a lot of these funds now and some of them are rescue funds and some of them
(18:52):
are advertised- whatever, I don't care what they call themselves, right?
And I don't really care how they structure themselves.
That's not my world, but I see a lot of cross-collateralization happening without anybody
really being aware of that.
So why don't we talk about the risk of cross-collateralization and how that is probably the king of
red flags because there's only so much equity to go around in these properties because they
(19:13):
have essentially maxed out what they can get from the banks on LTV.
So why don't we like-
How much time do you have?
We are.
We have 10 minutes.
So let's talk about cross-collateralized assets for 10 minutes.
I mean, I'll just- first, I'll just define it for the listeners.
If I invested in like three separate LLCs, you know, person one invested in LSE-1, person
(19:36):
two invested in LSE-2, person three invested in LSE-3, presumably, and I think it's a fair
assumption, they invested in those LLCs because they did diligence and they liked those specific
investments and they did not want like a fund, right?
They wanted that.
And so you live by that and tie by that.
Meaning if that property performs well, you do well.
(19:57):
But it does not.
You don't do well, right?
And what's happening now is like the sponsor sitting there, I'm just giving you an example,
the sponsor sitting there, one deal might be, you know, 2x on paper, right?
Another deal might be a total zero.
Another deal is like a 0.75, okay?
So you have two options.
And this is a much broader topic, which is the conflict of interests between the GP and
(20:22):
the LPs starts to diverge very quickly as soon as distress comes around and it causes
like some of these, what I would call suboptimal decisions.
And so one of the decisions from the perspective of GP is like, well, okay, so like we could
sell it, lose all the money, on one.
Could sell the second one, not lose all the money, return some, but people are still going
(20:46):
to be pissed off, not great.
But man, if we sell the third one, it's going to be 2x.
So we've got equity there.
And so they're head, usually like, you know, these speakers are like some investment maker
or some advisor and they like, you know, tell them like, well, you know, you could just
like cross all three and put like a pref piece into all of them.
(21:12):
And then you don't have any negative news, right?
Because all of a sudden you have like one capital provider that takes collateral or lean,
it depends what type of security, right?
But they'll take some sort of interest in all three LLCs or like the properties.
And all of a sudden like, no bad press releases, you're not mentioned on forums.
(21:36):
Like how amazing is that?
And I keep raising.
And I can keep raising.
Yeah, the real deal leads you alone.
Exactly.
Right.
So, but of course the problem is is like, that's not what people signed up for.
Right.
And I'm going to be in this deal to be in this deal.
And I don't want to be in the other guy's deal.
So if I'm the two ex guy, the worst thing that can happen to me is like, I get crossed with
(21:59):
someone who is zero and in another guy who is zero point seven five.
And of course, like, you know, when these bitches come around, they're all super cute and
glossy and like, you know, everything is going to be awesome.
And, you know, they're all like about equal and value, like you're all all this stuff.
But at the end of the day, there's just a bunch of gray areas, man.
(22:21):
Like, it's gray areas and communication is key, transparency is key.
Transparency is key.
There shouldn't be a gray area.
Everybody should understand what they're getting into for the entire time they're in the
deal.
Right.
And when you steer away from that, it should be clear what's happening.
Right.
Usually it's not.
No.
(22:41):
And that's the other problem is like when these things get presented to LPs, most of
them, they're not clear.
Most of them, it's like, oh, like, you get diversification by being in these other two deals.
Oh, but you forgot to tell me it's a zero.
Like, why would I want to diversify into a zero?
Correct.
And I'm like, oh, well, you know, you get diversification across another market.
(23:02):
And like, it's going to be awesome.
It's like a read.
Yeah.
You know, I mean, like, you hear all types of stuff.
And you know, and then they get votes from a bunch of LPs that like, don't really know what
they're doing.
Correct.
That's the best case scenario, by the way, is to actually get votes.
And sometimes they don't have any need votes.
Any time they just do it.
That was just part of the operating agreement and how they structured the deal at the beginning.
Yeah, yeah, yeah.
(23:22):
Meaning sometimes operating agreement will say, like, you can't do that unless you have a vote.
And sometimes it just gives almost like unilateral rights to the GP to do anything that's, you
know, let's call it like within the best interest of the partnership.
And so they'll, you know, for the last reason, to make it in the best interest of the overall
(23:43):
partnership, meaning it might not be the best interest of the LP, but it's in the best interest
of everyone, IE the GP.
IE the GP.
Follow the money.
Yeah, yeah, exactly.
So the last time you were on the show, we talked a little bit about conflict of interest
in following the money, right?
And some of that comes down to how well informed are the LPs when they get into it.
(24:08):
Are they even looking at what the alignment of interest is between themselves and the sponsor
of the deal?
Because back in the day, we talked about a little bit of smoke admirers in GP collateral
going in, right?
And they weren't actually collateralizing at all.
They were taking their promote and they were using it as their part of the deal.
(24:30):
So they weren't actually putting any personal capital into it.
And a lot of these people, honestly, working w2s, that should be the first red flag if you
have a sponsor who's working at w2 and you expect them to put capital into a deal and they're
not.
And it's coming out of something that could happen maybe down the road in the future.
You're basically saying, I'm okay with you putting zero into this deal.
(24:50):
Where is that today versus what it was two years ago?
Yeah, I think, first of all, alignment of interest, I guess in my opinion, is like to be
different things.
One of which you mentioned like the co-invest from the GP.
The other one is fees, which would include the acquisition fee, which sort of is very much
related to the co-invest.
My ambience is a whole list.
Right.
(25:11):
And then the waterfall.
Right.
So just generally, as I said on stage that over the past two years, we've seen a very material
change in expectations from Alpeas.
And I think these expectations are, they're logical.
Meaning at some point things come back to normal.
I think back in the day it was very normal to have 7,30, 80, 20 splits with a 7% preff, 8%
(25:37):
preff.
But during 2020, 2021, things just got crazy.
Right.
Free money.
Yeah.
And exuberance.
You almost couldn't announce a deal that wasn't fully subscribed within a few hours.
So why shouldn't I?
Why shouldn't I have better terms?
(25:57):
You know what I mean?
Risk-adjusted returns, right?
And you need to figure it out.
If it's crazy numbers that they're throwing out, there needs to be a calculation like, okay,
well, if I can get this in the equity markets and I can get this from a mutual fund and
I can get this from Nvidia stock or whatever, or I can get this from Bitcoin on it.
Yeah, I mean, I can get like 4% of treasuries.
Right.
4% was zero.
(26:18):
So why shouldn't my preff and return expectations change?
Correct.
And it's, I don't know that there's that calculation for a lot of investors where they're
really weighing the higher return with the amount of risk that they're taking on.
Like, if you're putting money into a deal and you're being told, you know, 17, 20, 25% return
and you see the word guaranteed, which I know is one of your favorites.
(26:40):
Like you should immediately think I could get completely wiped out.
Like that should be the very first thing that any of you go into it.
I think it's important to realize that it's always a possibility.
Absolutely.
You would be shocked how many people I speak to that say something along the lines of,
I thought the worst thing that could happen is I just get my money back.
Right.
(27:01):
And those are just like the most painful conversations because they really mean it.
Like, and by the way, it's not like such a crazy idea.
It's very easy for us to like debunk because it's a physical asset.
It's a building in a city somewhere on a street.
Yeah, I think generally you assume like, you know, prices are stable or maybe they go
up.
So what's the problem?
Like you just sell it, pay off the debt and I get my equity back.
(27:24):
I forget like fees and closing costs and all that stuff.
Like meaning it's not like such a crazy thought.
But then once you realize like cap rates are involved, things can happen.
Most of these things are actually not within the control of the GP.
Right.
Then, you know, things get a little bit more challenging.
Absolutely.
And it's all about do the due diligence, get an advisor.
(27:44):
And if you're not sure on a deal, send a message to Alexi because he, that's his, that's
his stick.
You don't know where you stand in a current investment.
If you don't know if you should invest in a deal and you think it's good, but you want
a second set of eyes on it, there's actually people out there who do that.
And Aleksey is one of them and he's one of the best in my opinion, but that's because we're
(28:06):
friends and I'm biased.
So, don't listen to his.
Yeah, whatever.
All right.
So I guess we're going to wrap up.
Aleksey, thank you so much for coming back on the show.
Thank you, Andy.
I will get all the links and stuff on the stuff.
We'll get up on YouTube with no video.
We'll do one of those still image things and we'll just go from there.
It's going to be awesome.
Thank you.
No, thank you for coming.
(28:27):
I appreciate it.
It's a great meeting in person for a change instead of just all via video and text and
LinkedIn, right?
And LinkedIn, yes, of course, and Twitter and whatever else we chat.
All right.
Great.
Thank you.
Woo!
[Music]
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