Steven Jack Butala and Jill DeWit share yet another approach to getting your real estate deal, this time exploring the opportunities around a syndication. They discuss how to make the most out of syndications and the things you should avoid doing.
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How To Fund A Real Estate Deal With A Syndication
This is Episode 2,107. Our topic is how to fund a real estate deal with a syndication.
Are you bored?
No.
I’m not talking to you.
We had different answers there.
I wonder if anybody has searched and is reading this show, I have never heard this before. They are like, “This is the one show. I found these people. I need to hear about the syndication.” I was curious.
Guess who came up with the topics?
I wonder.
Jill DeWit.
I did not come up with this topic.
Deal funding all week.
I did. I came up with deal funding, but I have a different spin on it, but thank you. I came up with a weekly theme, not the daily breakdowns.
Discord Question: Pricing A Mobile Home
We are talking about the five ways to get your real estate deal funded, and being part of a syndication on either side of it is one of those ways. Each day on the show, we answer a question from our Land Academy member Discord forum, and we take a deep dive into land-related topics by popular request.
Tony and Kristen wrote, “I have a question about mobile home pricing. I used O2O, AKA Offers2Owners, to pull data, scrub the list, and price. Now I’m testing for a reason, but this is my first mobile home mailer, so I could use some guidance. Offers2Owners recommends starting with 25% of retail, similar to vacant land, but then adjusting, which is what you do, given the fact that there’s a mobile home on the property. Now, as I’m reviewing the ZIP codes and selecting APNs to test, I will run the addresses in Zillow and then get a significantly higher price per acre, and then some nice mobile homes, and then I will increase the offer to 35% to 40%. Is this common, or am I overanalyzing?” I would say overpricing, but go for it.
You are not overanalyzing. This is an incredibly good question. It’s detailed and presented perfectly, and I can tell you guys are new, but you are going to do incredibly well. Thank you for asking and then I will explain. In every dataset, there are outliers. When you go to price anything, whether it’s houses, land, mobile homes, or anything like that, within geography, let’s say a ZIP code, you are going to get some price breaker examples that are way too expensive for your dataset and way too cheap.
I don’t know how they work their way into your dataset. The chances are they got reported, but they are not real. Things sneak into our datasets. It’s way easier to price mobile homes because we have more data, and we can tie values to mobile homes based on a few things, namely the age of the mobile home.
You think about your car. If you drive around in an old car, good for you. I do it all the time. It’s usually worth a lot less than if you drive a brand-new car, and it’s the same thing with mobile homes.
Mobile homes and automobiles, in the eyes of the law, are the same, and so they depreciate or devalue pretty seriously. New mobile homes are very expensive. Old mobile homes are very inexpensive, but the price of the land is the same. What we are doing is trying to capture a low-quality mobile home on an amazing piece of land, and Jill and I do this all the time.
In your dataset, I want you to choose a county or a ZIP code that has part of its dataset telling you the age of the mobile home. We usually start at about 1940, which is when mobile homes started to be prevalent, and as new as maybe 1985, 1990, or sometime in 2000. If you go into real recent mobile homes, they are going to be very expensive, and they are going to be valued that way and probably taxed that way because we are using the assessor database. To get a dataset for mobile homes, a like-kind dataset, choose an older mobile home. You don’t want to buy a newer mobile home anyway. They are too expensive, and it’s not what we are trying to accomplish in most cases.
Do you know why I love that? You did some stuff. You followed their directions, and there are some things that don’t make complete sense to you. You are applying common sense here, and it’s not making sense, and that’s a great train of thought. Our topic is how to fund a real estate deal with a syndication.
Syndication is a very fancy word for something that’s very simple. I have a great real estate deal, and I’m staring at it. I don’t have any money. I have got 10 friends who have $10 each. They are all going to put $10 in. We are going to buy the thing together, resell it, and everybody gets more back. They get their $10 back plus a little bit of juice on top because of the profit. That’s all a syndication is.
Funding A Real Estate Deal With A Syndication
It gets in the news, and we all know about syndications if you’ve been in real estate for a while because it is a capital-raising potential scheme. That was, like a lot of things in the ‘50s and ‘60s abused. There are some serious laws. Even if three people are sitting in a room, there are some very serious rules about syndicating a real estate deal with them. I don’t care if you know them or don’t know them.
We talked about Elon Musk taking a company public. Everybody buys a few shares of stock. It’s affordable. There are some serious rules. The SEC has made sure there are serious rules to follow and all kinds of disclosures when you do that, but in the end, it’s a syndication, and it made him incredibly wealthy. One of the wealthiest people in the world, if not the wealthiest, for Tesla. Another type of syndication is what he did with SpaceX. He brought in a few partners. They put tons of money in. Not a lot of people, a few people. One person in particular. He syndicated the company. They all own it together, and theoretically, everybody’s going to live happily ever after.
This is all designed to protect the investor. It’s designed not to wreak havoc because that’s how I see it. It kept messing with me. Great.
What’s happened, you are going to see, is that this is going to become a very prevalent way for deals to get done in the next several years. We are seeing all kinds of people illegally start website-based portals or companies where you can put in $100 like you would buy a $100 share of stock and own part of that apartment building over there. Jeff Bezos is doing this right now in a huge way. I don’t know how successful it is or not. There are some serious rules that you have to follow to do that.
The simplest way is to make sure that you are part of a group for more than six months, like Land Academy. Jill and I have syndicated on both sides. We have been the syndicatee and the syndicator for properties that we believe in with people that we have had, more than a year, that have been Land Academy members for more than a year. Syndication is a great way to do specific deals, but they have to be good deals. It goes without saying. The problems that have been with syndications are bad deals. There’s something about raising capital.
The only time you hear about a syndication gone wrong is when it went wrong, and then somebody raised their hand and now is jumping up and down. If it all goes smoothly and great, nobody’s talking about it. If anything, they are like, “We don’t want to tell anybody, but what happened? Let’s quietly do it again.”
There are some personality types in business that are hardwired to raise money. That’s what they do. If you read any of Warren Buffett, all the stuff that he has written, he has said, “I was hardwired to use capital markets to raise capital,” and he’s been crazy successful with it because he did it the right way. He’s a bright guy, and he’s not a crook.
Most of the people that I have ever met who are professional capital raisers don’t have the best intentions in mind. They raise capital, set a huge salary for themselves, and they make their professional capital raisers. That’s going on in Palo Alto right now and has been for a couple of decades with seed capital and private equity and all of that. When someone comes to us to try to raise capital it happens all the time that’s non-real estate deal-based, we chuckle.
What’s funny is sometimes it usually happens like it’s the latest and greatest thing. They have got this new thing. “You got to get in on this. I’m going to let you in now.” That’s the last thing I want to hear.
The worst type of syndication is what I call macro syndication where detimbering Venezuela right now is hot. “Give me $100 and I will show you.” We don’t ever syndicate anything like that. How we do it, and how you should consider it on either end, is this only ever considered syndication if it’s this deal. Here’s the real estate deal. We are buying this property for $30,000, and I can show you clearly that it’s worth $90,000 wholesale. You probably get all your money back within about 90 days.
Here are the 92 other deals we did that fit that profile, and even then, it’s slimy. Unless you are in a group with Land Academy, and you believe in this product, believe in Jill and I, and are in a small group where you know other people in the group and feel great about it, I would never consider syndication of any kind on either side.
Closing Words And Next Episode’s Topic
Join us for the next episode. We are going to discuss using your own money to fund a real estate deal. This is the fifth and final installment where we are talking about financing deals and getting a deal done with equity or debt. You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration to buy undervalued property.
Steven Jack Butala and Jill DeWit share yet another approach to getting your real estate deal, this time exploring the opportunities around a syndication. They discuss how to make the most out of syndications and the things you should avoid doing. Listen to
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Concierge Data+ (with data)
Included mailers each month (data + concierge + mailer + postage). Our team will do your data for it and get it out the door.
6,000 mailers
PatLive introduction at no cost
We will help you establish your first script and get PatLive set up on your behalf to answer your phones.
$500 value
Transaction Coordinator
Use of our personal Transaction Coordinator team to manage your deals. Trained and ready to go!
$7,500 value
AirTable
Ready-for-you CRM managed by your personal Land Academy Pro Transaction Coordinator
$100 value
Personal Consulting
1 on 1 personal consulting with our Transaction Coordinator each week.
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Regular Office Hours
Regular office hours with Jack and Jill + our staff. Private for LA Pro Members Only. (Think Career Path Office Hours)
$2,500 value
ParcelFact
ParcelFact is included in your LA Pro membership with unlimited pulls.
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FREE Career Path Access
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Land Academy
No more separate charges - Land Academy is included with LA Pro Membership. This includes all education, tools, support, and future releases.
Concierge Data+ (with data)
Included mailers each month (data + concierge + mailer + postage). Our team will do your data for it and get it out the door.
9,000 mailers
PatLive introduction at no cost
We will help you establish your first script and get PatLive set up on your behalf to answer your phones.
$500 value
Transaction Coordinator
Use of our personal Transaction Coordinator team to manage your deals. Trained and ready to go!
$7,500 value
AirTable
Ready-for-you CRM managed by your personal Land Academy Pro Transaction Coordinator
$100 value
Personal Consulting
1 on 1 personal consulting with our Transaction Coordinator each week.
-
Regular Office Hours
Regular office hours with Jack and Jill + our staff. Private for LA Pro Members Only. (Think Career Path Office Hours)
$2,500 value
ParcelFact
ParcelFact is included in your LA Pro membership with unlimited pulls.
$150 value
FREE Career Path Access
$23,000 value
Land Academy
No more separate charges - Land Academy is included with LA Pro Membership. This includes all education, tools, support, and future releases.
Concierge Data+ (with data)
Included mailers each month (data + concierge + mailer + postage). Our team will do your data for it and get it out the door.
12,000 mailers
PatLive introduction at no cost
We will help you establish your first script and get PatLive set up on your behalf to answer your phones.
$500 value
Transaction Coordinator
Use of our personal Transaction Coordinator team to manage your deals. Trained and ready to go!
$7,500 value
AirTable
Ready-for-you CRM managed by your personal Land Academy Pro Transaction Coordinator
$100 value
Personal Consulting
1 on 1 personal consulting with our Transaction Coordinator each week.
$1,000 value
Regular Office Hours
Regular office hours with Jack and Jill + our staff. Private for LA Pro Members Only. (Think Career Path Office Hours)
$2,500 value
ParcelFact
ParcelFact is included in your LA Pro membership with unlimited pulls.
$150 value
FREE Career Path Access
$23,000 value
Land Academy
No more separate charges - Land Academy is included with LA Pro Membership. This includes all education, tools, support, and future releases.
Concierge Data+ (with data)
Included mailers each month (data + concierge + mailer + postage). Our team will do your data for it and get it out the door.
15,000 mailers
PatLive introduction at no cost
We will help you establish your first script and get PatLive set up on your behalf to answer your phones.
$500 value
Transaction Coordinator
Use of our personal Transaction Coordinator team to manage your deals. Trained and ready to go!
$7,500 value
AirTable
Ready-for-you CRM managed by your personal Land Academy Pro Transaction Coordinator
$100 value
Personal Consulting
1 on 1 personal consulting with our Transaction Coordinator each week.
$1,000 value
Regular Office Hours
Regular office hours with Jack and Jill + our staff. Private for LA Pro Members Only. (Think Career Path Office Hours)
$2,500 value
ParcelFact
ParcelFact is included in your LA Pro membership with unlimited pulls.
$150 value
FREE Career Path Access
$23,000 value
Land Academy
No more separate charges - Land Academy is included with LA Pro Membership. This includes all education, tools, support, and future releases.
Concierge Data+ (with data)
Included mailers each month (data + concierge + mailer + postage). Our team will do your data for it and get it out the door.
18,000 mailers
PatLive introduction at no cost
We will help you establish your first script and get PatLive set up on your behalf to answer your phones.
$500 value
Transaction Coordinator
Use of our personal Transaction Coordinator team to manage your deals. Trained and ready to go!
$7,500 value
AirTable
Ready-for-you CRM managed by your personal Land Academy Pro Transaction Coordinator
$100 value
Personal Consulting
1 on 1 personal consulting with our Transaction Coordinator each week.
$1,000 value
Regular Office Hours
Regular office hours with Jack and Jill + our staff. Private for LA Pro Members Only. (Think Career Path Office Hours)
$2,500 value
ParcelFact
ParcelFact is included in your LA Pro membership with unlimited pulls.
$150 value
FREE Career Path Access
$23,000 value
Land Academy
No more separate charges - Land Academy is included with LA Pro Membership. This includes all education, tools, support, and future releases.