Putting Together Your Capital Stack – Equity | S3E4

As briefly mentioned in the last episode, before you can start sourcing deals and finding investment opportunities, you need a strategy and you need money. Episode 1 talked about how to develop a strategy. Episodes 4 and 5 talk about how to put together the capital required for closing a deal in real estate. Specifically, this episode addresses equity when putting together your capital stack. Just as in the last episode, the key to capital is networking.

You can raise capital. You can find a broker. You can go find somebody to help you do that. But having relationships already made legitimately is critical.

Below, watch, listen, or read the various approaches to raising capital and the relationships needed to do so.

Putting Together Your Capital Stack – Equity

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Episode Transcript

Announcer (00:01):

Welcome to the Adventures in CRE Audio Series. Join Michael Belasco and Spencer Burton as they pull back the curtain on everything commercial real estate, and introduce you to some of the top minds in the industry. If you want to take your skills to the next level and be part of a growing community of CRE professionals across the world, this is for you.

Sam Carlson (00:24):

All right. Hello and welcome back to the podcast at season three, and we continue on in the vein of deal-making and deal doing. I got Michael Belasco and Spencer Burton with me here in studio.

Michael Belasco (00:36):

I liked the way you said my last name.

Sam Carlson (00:38):

It was maybe with a little bit of an accent. Fancy, maybe. I don’t know. Anyway, we’ve talked about strategy, sourcing. Today, we pick up on this theme, this season three’s theme of capital raising. If you’re going to put deals together, you’re going to need money to do it. And there’s a couple of different ways that folks go about that. So, let’s get started into that. But if you’re listening to this podcast, or this is your first episode or whatever the case may be, you’ve just tuned in. It should be of note that season three so far, I have to say, is a lot of fun.

Sam Carlson (01:14):

And what we’ve done so far is, we’ve started out the very beginning and we’re talking about deal-making and deal doing. And what we’re trying to do is we’re trying to give almost a storyline about how these two things work together and how, if you’re a real estate professional or commercial real estate enthusiast. Some of the things that the case says that you guys have been involved in to really expose some of the nuances of getting this done. And, capital raising is a huge part of this. I think, it’s daunting for a lot of people. So, Spencer will turn over to you. We’ll, we’ll talk about the general framework of how it’s generally done and then jump into some cool stuff.

Spencer Burton (01:54):

Yeah. So, we talked about in the previous episode, sourcing, and that’s ultimately bringing in investment opportunities. And once you have an investment secured, in order to close that investment, you need capital. And when we say capital, we’re talking equity, and we’re talking debt. Sometimes, you have some creative also slivers within your capital stack. Michael might mention a few of those in a minute. And I generally throw this capital raising piece into the deal-making component of our framework, deal-making versus deal doing, even though there’s certainly doing in the capital side. There’s a capital raising. We’re going to talk about kind of the keys to it. As we see it, the first being, not a surprise. But I think, the most important element of raising capital is relationships.

Michael Belasco (02:48):

Here we go again.

Spencer Burton (02:49):

Here we go again. This was number one in sourcing. You can’t say this enough. And in fact, right now, we’re scheduling, we have out our networking reboot crews. It’s all about kind of relationship building. And, you build relationships. You build trust with individuals through shared experiences. And, I know this sounds like a plug for the networking reboot cruise, but relationships were so incredibly important to the sourcing and out of the capital raising. I think, it’s worth bringing up. And, those relationships in my experience are best built through shared experiences, whether that’s doing deals together or whether that’s going in vacationing together.

Sam Carlson (03:36):

Yeah. And, it’s funny because it seems like we’re plugging this thing and we’re definitely not. It just, every time we sit down, we’re like, “Okay. The next episode is going to be about capital raising.” We go through and we start talking about what really gets this done, what really moves the needle. And in every step of this process, so far, the undertone of your relationships and your network has been there and has not only been there, has been a big participant in getting the result that you want. So, I don’t think that we’re necessarily plugging. I just think that, there’s no way around it. That is what gets the job done.

Michael Belasco (04:16):

There are ways to slog through processes and get it done. And, there’s ways to do it. And you could do it. It’s not like relationships are impossible. But, Spencer and I have seen firsthand, in specifically capital raising, the benefit of having a good reputation and strong relationship. A, good reputation, B those strong relationships. I mean, greasing the skids is the understatement of the year. It is like, you’re going to take a year. You’re going to take six months while a relationship in this world, in capital raising, could expedite that by 10X.

Michael Belasco (04:56):

Legitimately, this is not hyperbole. This is absolute truth. It’s absolute reality. You can raise capital. You can go find a broker. You can go find somebody to help you do that. But having relationships makes us thing. Well, that’s very high level, but we’ll get into the details, but I wanted to emphasize it.

Sam Carlson (05:20):

So, you had two different ways of looking at raising capital. Is that right?

Spencer Burton (05:26):

Well, look, I have a list of things that I think are important to raising capital. The first is relationships. I bring this up. I mean, the great example of this is Heinz. Let me use Heinz as a perfect example. Michael spent some time there. When Heinz needs capital for a project, there’s a line of Lps, mile-long, lining up to invest capital into that project. That’s a relationship. Now, it may not be a personal one-on-one relationship, but it is relationship with the people at those firms and the relationship at that line of LPs that are coming out the door. And what that means is, certain people have an advantage in this space simply because they put in the time and the reputation. And reputation, we talked in the last episode. It’s trust-building. That’s really what that reputation because you can have a bad reputation and you’re not raising any capital.

Spencer Burton (06:28):

And so, it’s having trust with the market. And we can give great example of this at Stablewood, but we won’t. But just need the list to say, Glenn Lowenstein, who was our CEO, has just an impeccable reputation within the industry and great relationships. And, that made capital raising a much easier task than it otherwise would have. Now, the flip side of that, and this is actually the second point. If you want to make it easy to raise capital, have a proven track record of success, a long resume that actually to the Heinz point, that’s part of it. They’ve been doing this for a very long time and have this great track record. You look at the greatest capital raiser of all time in real estate. Blackstone. No one raises capital like Blackstone does. And why? Because they’ve got this proven track record. And so, big-equity providers know they put their money with Blackstone that it’s a safe place, or at least presumably. That’s the implication. And that’s because of that track record.

Spencer Burton (07:38):

Now, the flip side of that, and this is now to my first real example, and I’ll leave names and specifics out for this individual and firm’s experience. But I think that, the story is still hold. So, there was a kind of a newer individual to real estate. This individual had done a few smaller deals, but largely was new to real estate and had raised capital up until that point through friends and family. And this individual decided to go and do an entirely different strategy, a strategy which this individual had no track record whatsoever in. But, this individual had some relationships.

Spencer Burton (08:27):

And this individual was very persistent and this individual had a compelling investment. And in the end, was able to raise the capital through a syndication. When we say syndication, that means through a whole group of investors. Was able to raise capital for this, the first investment. And this individual, by the way, is not any of us, the three of us, but someone that is an incredible person. And, I wish we could use their name, but, just because we don’t have permission to, we shouldn’t. Was able to raise capital for that first. And it was a lot of work. They had to do webinars and they had email campaigns and they were doing social media campaigns and they were out there. And that, again, a compelling investment that if this was a Heinz, they wouldn’t had capital even before the deal is done. But it had to go through all this work because they didn’t have the track record and their relationships were somewhat shallow.

Spencer Burton (09:18):

Now that this individual had their first deal done, they just came to market with their second deal. And within 24 hours, had the deal done. They had a track record. And it was only a track record of one. That’s all I needed. Track record of one, raise all the capital in 24 hours. And by the way, when I saw that come through, that made me feel so good because I’d been cheerleading this individual. I was. When that first go-round, it took months and months to raise the capital they needed. The second go-round 24 hours.

Sam Carlson (09:51):

I want to ask a hypothetical in this. And just use that example for your response here. So let’s say, it seems to me, that’s an amazing feat. Okay. They did all that themselves. And as a result, the next time, everything was way easier. Okay. So, that’s good. Last episode, we talked about partnering up with people who already have that type of experience. I wonder, and this is where I want your guys’ feedback in this particular situation. If somebody was thinking, “Well, I don’t want to do webinars. I don’t want to do all that.” Would this be a situation where going out and finding a person with a track record might be the way to go?

Michael Belasco (10:37):

Yeah. I can answer this well. First off, yes, absolutely. And there are times that this happens all the time. I mean, it’s very common to have co-GPs. And why is that? There might be a GPs not proven yet, or it’s just a space that they’ve just never been in. And, they can’t raise the capital themselves on the GP side. So, they might need that capital and they might need that support or that leverage. And so, I have an example of another. It’s actually a great lead-in question of a deal that actually worked on, that came through large institution. Small partner ended up tying up a piece of land way bigger, pretty much way bigger than they could chew off. They had relationships with large instances, with a large institutional partner. Showed up, pitched them the deal said, “We need GP support, 99% GP support.” So, have a massive deal. Something that they were able to tie down.

Michael Belasco (11:36):

They did have a bit of a reputation in the market in this example, but they didn’t have the capabilities to source the capital. So, they showed up to the juggernaut. There was a track record there. They got brought on a deal that they could never take down, ended up being over a billion-dollar project. And here’s what’s the crazy thing. So, they went out and got the GP. The GP brought on an LP. So, this was a bidding process with the city. The city-owned a couple of pieces of land. They ended up getting it under control and there was a negotiation going on. Now, the LP came in and this is sort of the power of … The CLP had a loan on a property down the street. It was like one of the last developable pieces of land for a high-rise.

Michael Belasco (12:20):

And now, the LP shows up and says, “Oh. By the way, there’s this piece of land that the city, at some point it’s going to have to get rid of.” They tied that piece into the deal. So, it turned in this deal that became a billion-dollar project, ended up becoming close to $2 billion simply because reaching up to a co-GP who had sufficient contacts in the market was able to help raise this or springboard into the next. It’s something that this GP could never have done on their own.

Sam Carlson (12:49):

That’s the third door. Sounds to me. So, I’ll tell you what. It’s interesting because we talk about relationships keeps coming back to relationships. But, it also comes back to everybody has different strengths and weaknesses. Okay. And so, picking a partner that would have the mental dexterity to think about, “Well, what if we did this?” My brain doesn’t necessarily work that. I don’t always see all the pieces that way. I can come up with ideas and I’m pretty good, but I need to be able to, and that’s almost like a negotiation skill. Would you call that a negotiation skill, I think?

Michael Belasco (13:33):

The creativity piece?

Sam Carlson (13:34):

Yeah. Just being able to say, “Hey, there’s all of these parts on the board. And I think, if I moved this one in that one, then I’m going to be able to take the king or the queen, whatever.”

Michael Belasco (13:46):

Is it the queen you take, I don’t know. I don’t play chess. You ultimately want the king. Queen is the most powerful.

Sam Carlson (13:53):

Yeah. In this case, I mean, that’s a pretty ingenious move.

Michael Belasco (13:59):

When you think of it, there’s so many different ways. I mean, look, if you’re looking to take down a piece of land, there’s an opportunity to go to the seller and say, or somebody who’s not a seller originally and say, “Hey, I have this idea. I have experience.” You might not be forthright and that you don’t have the capital to say, “Hey, do you want to be involved with this?” You contribute, contribute your land. You get involved in this deal. That’s raising capital. You may do something like that. And maybe your intention, maybe this is a phase. I’m just thinking creatively.

Michael Belasco (14:29):

And, I’ve seen these things play out where it’s like. I want to do a high-rise development. I actually don’t have the capital for that. But what I do have is the ability to bring people in who can contribute, even if it’s not. If you need people to design and develop, maybe you don’t even have the capital for that. Maybe you’re starting out. You get people involved. You pitched them an idea, contribute your land, contribute this, going through an entitlement process. As we talked about, I think on a previous episode, land is worth X when it’s un-entitled. In certain places, entitlement is the biggest value add you could possibly do to that piece of land. So you get a team on board. And this is capital. You get a team on board.

Michael Belasco (15:09):

Hey, look, we’re all at risk here. But on the opposite, let’s say, a piece of land’s worth a million dollars un-entitled. And this is, we’ll say a land is worth a million dollars. If this team had contributor land, architects come on board, entitlement guy, whatever. Here’s a sliver. This is worth nothing. It’s high risk right now. If we get this to the end, all of a sudden, this piece of land could be worth 10, $15 million, for example. Now, all of a sudden, everybody in this deal now has 10, $15 million, or at least a sliver of that. And then you need to go out and raise capital. Skin in the game is another big piece to capital. What’s your skin in the game? Well, actually now, we have $15 million in the deal. And by the way, we’re the ones that raises. Now, you can structure capital thereafter so many different ways. So I mean, it’s endless. The third. The fourth. The fifth. I don’t know what kind of door.

Michael Belasco (16:01):

We want to go bigger, but there are so many ways that you can get creative and just, it’s not. We’ve gone off on a tangent because we really talking about capital raising and what’s the straighten out. But, there’s all kinds of ways to-

Sam Carlson (16:12):

So, do people struggle with capital raising simply because they just think of it as a very like vanilla, straightforward process, like go to the front door? Again, we keep coming back to this third door, but there they go and get in line like everybody else.

Spencer Burton (16:29):

Well, relationship and track record really are the two things that drive. That’s the front door. You have relationships and you have a track record-

Sam Carlson (16:38):

That’s the front of the line on the front door.

Spencer Burton (16:39):

That’s the front of the line on the front door. That’s a good point.

Sam Carlson (16:40):

Very few to be.

Spencer Burton (16:41):

Yeah. There’s a bouncer at that door. And, he or she is kicking people out of the line constantly. And, you move quickly up and right through the door. But, the third door is what Michael’s saying. Be creative. There are creative ways. If you’re newer in to this, and you’re looking to raise capital, there are creative ways to raise capital. Whether it’s bringing on a co-GP, that’ll help make that happen. Whether that’s finding tax advantage financing that exists out there. Whether that’s bringing in a land owner as a part. I mean, there’s a whole variety of ways that you can do that. Again, it’s to get the first deal done so that you can then use the front door. You have the relationship. You have the track record, and it becomes much easier from that point forward.

Sam Carlson (17:31):

And it seems to me, all of this kind of … I love season three because we’re going through in this very chronological fashion. So, to me, raising money is almost, if without the relationships, we’ll say it that way. It becomes a challenge when our strategy isn’t sound or not sourcing deals that are instantly attractive to capitals. But if we do those two steps right, then that can position us towards the front of the line, even if we don’t have the track record. But again, now we’re talking about things that we can do to maybe get creative and bypass some of those challenges. So, it’s really interesting when you stack these things in order, how it really works and it’s …

Michael Belasco (18:23):

I want to ask Spencer. And I think, we should do this for the benefit of our audience. What is the typical process? Let’s do debt and equity. Is it different? What’s the normal process you want? You have a project. You have every strategy. You’re ready to go. How do you actually, what’s the typical way you just go and raise capital?

Spencer Burton (18:39):

Yeah. So, it kind of depends on the size of the deal. First off, capital can be raised in one of two fashions, either it’s raised on an individual investment. So, on a development deal, you get it entitled. You then go out and line up LP equity and construction debt to build the project. But, that’s capital just for that one investment. I think, that’s the most common, the least efficient, but probably the most common.

Michael Belasco (19:13):

How in a minute or less, or as long as you want, how would you typically do that?

Spencer Burton (19:19):

Yeah. I’ll go into that. So, the second piece of that though is programmatic capital. So, you have a strategy. And so, you go to Capitol and say, “This is the strategy I’m going to execute in this fashion. I need equity or I need debt,” and they put that up. But the first piece is the more common, which is just raising capital for an investment. If it’s an institutional deal, what will often happen is, for the equity, the GP will go to say a JLL or a CVRE, their capital markets team. And their capital markets team will go out and raise the equity for that deal. Now, that assumes that the GP has a track record and the GP has some relationships. And, it makes it much easier on the capital markets group to go raise the equity. And the debt’s generally raised the same way, may even be raised by the same group that raised the equity also raises the debt.

Spencer Burton (20:13):

And that becomes now streamlined. So, you’re an institutional group. You’re looking to do speed. And so, it’s worth paying for a professional and a capital markets group to raise that. Now, if you’re not an institutional group, or maybe you’re looking to save some money or for whatever reason, using a capital market’s brokers is not the way to go. And maybe you syndicate the equity. Syndicate, meaning you’d go out and you raise it through a whole variety of people. If you’re newer, you’re likely going to raise it more through friends and family. The more you have a track record, the more that you can raise it through individuals who don’t know you, as well, likely accredited investors.

Spencer Burton (20:52):

And that process, again, is more time-consuming and less sure, because you don’t know how much you’re going to be able to syndicate. But if you have a track record, you’re likely, you can be able to do it quickly. And then the debt. Once you have the equity in place, or maybe a parallel to that, you’re going to have maybe a bank or a more of a traditional lender, they’re going to be providing the debt. So, it really depends on the deal itself. Was that specific enough, Michael?

Michael Belasco (21:26):

That’s good. Or, give people a lay of the land.

Sam Carlson (21:28):

I have a question. And maybe this is premature in the context of this conversation, but, in the last 10 years between social media and everything else. We’ve seen this rise of crowdfunding. And I’m interested. You guys don’t do crowdfunding, obviously. You guys have big capital partners. But I’m interested, and this is more of an opinion thing as how you see the role of that right now. And then, does it have legs in the future? Or is it something that’s just kind of falls in that lower tier of investment opportunities? I’m just curious more so than anything only because we’re talking about these different ways of sourcing capital. I mean, we know of a couple of people that are doing it with crowdfunding. Is that something viable right now?

Spencer Burton (22:25):

Michael? Why don’t you chime in because this is … I think, you and I have a very different opinion here as I’d love for you to start.

Michael Belasco (22:31):

Yeah. I think, yes. I think, it’s extremely viable. I think, you go to crowdfunding, you talk about tokenization, all these opportunities that allow people who traditionally did not have access to real estate other than through REITs, or really REITs, public equities, the ability to get in and get involved. Now, it’s something I’m very interested in exploring and think about. Spencer and I have conversations about it and there’s legal ramifications and it’s very complex and there’s risks. There’s ways to do it. And it’s ever evolving, I wouldn’t say on anybody that has a true finger on the pulse here. But, the way decentralized, money and all that’s working, it seems to be an incredibly important new potential for real estate investing. I think, there’s a huge future. And I think, it’s going to become a lot more common. I don’t know. Spencer, your thoughts.

Spencer Burton (23:31):

I think, it’s wildly inefficient. That’s my initial view on it. If I need a hundred million for an apartment development, I can either go to one big LP I’ve worked with in the past, or I can go raise it from a hundred thousand people. So, in its current form, I think it’s wildly inefficient. Platforms that exist out there. I don’t name any, so we don’t give credit in. I don’t want to forget anyone, but there’s … The platforms are out there and I think everyone knows them. They’ve done some work in improving the efficiency. Internet technologies allowed that to be more inefficient or, I’m sorry, more efficient. The regulatory challenges to crowdfunding are difficult to get over. I will say, I have a great interest in tokenizing real estate in democratizing real estate and the demand for that is high.

Spencer Burton (24:32):

Right now, the frictional cost for retail investors to access real estate in a more efficient manner is very high. And, I’m hopeful that in time it becomes more efficient. The cost comes way down. I mean, we see that in our current role right now. It’s so inefficient for a retail investor. And I say, a retail investor. What I’m talking about is someone who has 5,000 or 25,000, or even a hundred dollars. To invest in real estate, you can either go to REITs. And really in REITs, you’re paying a two to 300% or two to 300 basis point premium. And some of that’s in liquidity, but a lot of this just in how inefficient the market is. Otherwise, there’s really no access to it. I mean, I guess you can get into syndication, but then you’re putting 50,000 in with someone you don’t know, and it’s fully illiquid. And it’s not very transparent. My point is, if I’m raising capital and I have a choice between a big LP or a crowdfund, I’ll go with LP.

Michael Belasco (25:35):

Well, I 100% agree with that. But for the many people that don’t, and first off, yes, I agree today. There are a lot of challenges, inefficient. It’s hard to get involved, but I do see a tremendous future in that. And that becoming like a viable opportunity, I think. And what I said, tokenization and all of these things going on, there’s just a lot of incredible, bright people that are working on this. And so, I really think that there’s a promising future in it.

Sam Carlson (26:04):

Right. So, maybe on a smaller scale, if you’re having a hard time getting your foot in the door with capital, this is a place to start. But at big scale, it’s-

Spencer Burton (26:12):

In 2021, it’s an option if you’re smaller and you have a hard time. But, I agree with Michael, by the way. I think, he and I generally are on the same page here. There’s a huge need and opportunity. And someone needs to figure it out.

Michael Belasco (26:26):

This is the trailblazer that we talked about. That’s where we are today. But because, this idea transcends real estate, this idea of democratizing real estate. I mean, democratizing a lot of things as the currencies, the currencies becoming disconnected with governing entities. When you look at what Blockchain is doing and all these things and how the decentralized yet verifiable, you can see a ledger and it’s not one guy that you trust at the bank. It’s independently verified. It’s open-source. And I think, there’s just a wave of this. It’s a paradigm shift in how we look at the monetary system that real estate will benefit from. I think a lot of other industries will too. And I firmly believe that change is coming.

Spencer Burton (27:12):

Yeah. I mean, there’s a whole discussion around governance. That’s the big challenge. The nice thing about a two-party partnership is, governance is two parties. But anyway, yes. It needs to happen.

Sam Carlson (27:31):

So, I got us a little off the beaten path there. Let’s get back to capital raising where are we at right now. Let’s go back to that.

Spencer Burton (27:44):

So, we brought up relationships. We brought up track record. We talked about being creative, which is kind of the third door concept. The next piece that can really get you over the hump, even if your relationships are not quite there, and you don’t quite have the track record, is a compelling strategy or compelling investment. And, an example of this … Part of what I did when I was at the real estate investment arm of Northwestern Mutual is, I sourced or placed equity capital. And, this wasn’t a particular deal I worked on, but it was one that I saw that was just incredible to me. I can’t give many details, but basically, a brand new GP, but with a really compelling investment and strategy and a very sharp individual. And, it’s hard when you’re a first time GP to raise capital and let alone from LP capital, but a very compelling strategy. And, it’s worked out quite well and to the benefit of the LP and the LPs stakeholders.

Spencer Burton (28:55):

So, if you’re new, but you’ve got a great investment thesis, don’t give up, even on the most difficult capital raise. And those big LPs, they’re tough to raise from. They generally want someone, or a GPU, with a long track record and deep relationships. But when you get the right strategy or investment, you can get over that hump.

Sam Carlson (29:23):

It seems to me, this was kind of what you were saying to Michael. The example you gave was, just some creativity and just what turned out to be a really good opportunity. And that’s really kind of what made the deal come together. We were talking about bringing the different pieces of property together and how they made a really…

Michael Belasco (29:45):

This guy had a track record, though. But-

Sam Carlson (29:48):

But I mean, in that situation-

Michael Belasco (29:50):

Yeah, in general. Yeah. Becoming creative and just-

Sam Carlson (29:53):

He made a deal that was maybe from the outside. Looking at what he had initially wasn’t attractive. But then, he paired it up, made it a lot more attractive.

Spencer Burton (30:05):

Well, I think that’s part of it. So, here’s another example. It’s very simple. It’s from you and I, Sam. There are very first real estate deal. Roosevelt. We had no track record. We had limited relationships.

Sam Carlson (30:22):

That was 20 years ago.

Spencer Burton (30:24):

It was such a compelling investment.

Sam Carlson (30:26):

That’s true.

Spencer Burton (30:26):

Anyone would have done it. And therefore, we didn’t have any trouble getting the capital to close on that.

Michael Belasco (30:32):


Spencer Burton (30:34):

Yeah. So it was. I’ll give the specifics on it. It was a single-family home. This was Sam and I’s very first deal and we haven’t done a lot of deals together. So, in fact, I think it’s one of the few real estate investments that we’ve done. I guess, I had a relationship with an attorney who had a client that-

Sam Carlson (30:57):

They were getting divorced.

Spencer Burton (30:58):

No, it was a state.

Sam Carlson (31:00):

Oh, that’s right. It was in a state.

Spencer Burton (31:02):

It was in a state. So, you have the family and they have this old home that the parents had lived in. And anyway, so long story short is his old home. It was in disrepair. Now, we weren’t wanting to fix this thing up. But what it turned out because I was in the land development space, this home had some excess land in the back that when I talked to and I kind of sensed that this was the case. And we confirmed with the city that it actually could be subdivided. And so, there was a lot in the back. And so, the home itself was probably worth, I mean, these are small numbers back then. I think, we paid 95,004, but it was in pretty bad condition. But it was probably worth on the open market, 115, 120. And if you fixed it up, the house itself would have been worth 160. So, the house had some opportunity to be fixed up. But the lot in the back was worth 75,000. If you can get the lot split to half then.

Spencer Burton (32:00):

And, it was a very compelling investment. It was kind of being in the right place at the right time. And so, what we did is we bought it. We split the lot off in the back, and then we sold the house without doing anything to it. And we sold it to someone else, left a little meat on the bone and that individual bought it, fixed it up and flipped it, added value in that regard. By the way, the family that sold, they were happy as can be because they had the situation. They didn’t want to deal with it. They were out of state. And so, they didn’t have the ability to separate. I mean, it was a win-win for them. But in terms of raising capital, really easy.

Spencer Burton (32:38):

We had the city that confirming that the lot split was good. And we were going to have the lot split before the home closed. And so, we run out. We raised equity capital. And, it was a single family home, so getting a loan out, in fact, I think we had to have even a … What do you call it? A co-borrower. Co-signer. Co-sign. That’s the term. Yeah. I mean, we were so young. We had to even have a co-signer on, but that was an easy thing.

Sam Carlson (33:08):

I think we were 25.

Spencer Burton (33:09):

No, we are younger than that.

Sam Carlson (33:10):


Spencer Burton (33:11):

Well, that would have been in 2001, 2002. 22.

Sam Carlson (33:17):

Long time ago. I mean, at the end of the day, when you have a deal, that’s good. You’re right. I mean, it’s attractive to capital. They can kind of see past some of the deficiencies that you personally might bring to the table.

Spencer Burton (33:32):

Ultimately, what the capital’s looking at is, if I have to remove this, an inexperienced person. Is my money still safe? That’s really what they’re looking at. If the investment’s compelling and they go, “Yeah. Okay.” In fact, it’s almost better if the GP screws up and I have to push them out of the way, because I’ve got this great deal here. And so, anyway. I guess now fourth point here is, if you have a compelling investment, makes raising capital a lot easier.

Sam Carlson (34:03):

Cool. Anything to add that, Michael? I think this has been another fun episode. I think that every time we do one of these, the story of how deal, making deals and doing deals, it just becomes more and more transparent and a lot of fun to follow along. So, if you’ve been listening to this, thanks for listening, and we’ll see you on the next episode. We’ll be watching. We’ll see you next time. Thanks for watching. And we’ll see you soon.

Announcer (34:31):

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