EP 201: Short Term Rental Investment Offering from Impact Equity and Techvestor

[00:00:00] All right. Welcome back to The Gentle Art of Crushing It podcast, Passive Investing Edition.

[00:00:06] My name is Randy Smith and I am your host for today's episode. And today's episode is going

[00:00:12] to be a little bit different than anything we've done in the past. In fact, I'm not going to be

[00:00:16] interviewing anybody. We're actually going to be presenting a webinar to you that is offering

[00:00:23] a new passive investment offer in the short-term rental space. So I will be presenting some

[00:00:31] information with Sif, who is the CEO from TechFester. And we're going to walk through

[00:00:36] the entire business model, all of the returns and everything you could expect as a passive

[00:00:41] investor. This is a 506C offering. So it is only available to accredited investors.

[00:00:48] But even if you're not accredited, it will be a great way to learn about a really,

[00:00:52] really exciting asset class and a great way for you to learn more about what types of offerings

[00:00:58] are available to accredited investors. So sit back and enjoy. And if you have any questions

[00:01:04] or you want to schedule some time with me, you could do that at ImpactEquity.net. Well,

[00:01:09] of course, you can always reach me by phone at 623-336-5558 or on LinkedIn at

[00:01:16] Oldiesmith. So enjoy the show. Hello, and thank you for joining us today on the Gentle Art of

[00:01:22] Crushing It Show, where we focus on learning and sharing with our listeners all there is to know

[00:01:27] about how to create success in our lives. This show stands on the shoulders of giants.

[00:01:33] Our mission is to empower and inspire our listeners to create the life of their dreams

[00:01:39] whilst having a blast in the process. Let's celebrate life together. Welcome to the show.

[00:01:47] All right. Thank you so much for joining us today on this webinar to launch our third partnership

[00:01:54] with a new investment opportunity in partnership with TechFester, a short-term rental operator.

[00:02:01] So really, really excited to be offering the second asset class to our investors,

[00:02:07] which falls in line with our goal at ImpactEquity was to put multiple deals

[00:02:15] from multiple operators in multiple asset classes across multiple markets in front of

[00:02:20] our investors so you can gain diversification in real estate by working with ImpactEquity.

[00:02:28] Are you interested in real estate investing but don't know where to get started or think you

[00:02:32] don't have the time or money? Are you stuck in your W-2 because the golden handcuffs make it

[00:02:36] hard to walk away? If this sounds like you, check out ImpactEquity.net and schedule some

[00:02:42] time to talk with the founder, Randy Smith. Randy went from massive income to leaving his

[00:02:47] W-2 through passive income and he can help you do the same. www.impactequity.net.

[00:02:54] Really, really excited specifically to be working with TechFester because one, I've really been

[00:03:01] interested in the short-term rental space for a number of years. My wife and I have spent a

[00:03:05] ton of time staying in these units both here in the U.S. and abroad as well. And then a

[00:03:11] couple of years ago, I actually had an interest to start buying these things myself personally.

[00:03:17] And I found very, very quickly that I did not have the expertise to find good units.

[00:03:23] I didn't have the expertise to manage these assets and I certainly had no expertise in

[00:03:29] positioning these things to sell them for a bigger profit on the back end like TechFester

[00:03:34] is doing. So really excited to be getting into this space with this world-class investor.

[00:03:40] As you may or may not know, the short-term rental space has just amazing cash flow potential,

[00:03:45] sometimes two to three times what you might see in the multifamily space over the hold period.

[00:03:52] So while we're still doubling investor capital in on average about five years,

[00:03:57] the cash flow throughout the hold is just amazing. So I'm going to go ahead and hand

[00:04:02] this over to Seif at this point. He's going to walk us through the majority of this

[00:04:06] presentation. I'll come back and I'll add some detail when we're talking about the metrics,

[00:04:12] but I'll hand it over to the co-founder of TechFester, Seif. Off to you.

[00:04:17] Thanks so much, Randy. We're excited to partner with Impact Equity as we scale our second fund.

[00:04:23] And I know you have recently visited some of our homes in person, got a sense of the style

[00:04:28] and how we approach design and operations. So that was exciting. But without further ado,

[00:04:33] let's hop into the meat and potatoes here. So essentially what TechFester does is it

[00:04:39] breaks down all the barriers of short-term rental investing into a singular fund.

[00:04:44] Through Impact Equity and working with Randy, you can invest in his fund,

[00:04:49] which will then partner with us and buy this year, we'll buy close to about 150 plus

[00:04:55] short-term rentals across the country. We will find them, we will design them,

[00:04:59] we will operate them. It's a completely vertically integrated operation.

[00:05:03] And the big idea here is that you don't have to do any of the work yourself.

[00:05:07] And at the end of the day, one of the big benefits of short-term rentals,

[00:05:11] in addition to the cash flow that Randy was mentioning, is usually short-term rentals are

[00:05:17] a headache. They're a job if you're going to go buy one and operate it yourself. Here,

[00:05:21] you can get started with as little as 25,000. You'll have instant diversification. You'll have

[00:05:27] a growing amount of appreciation. One of my favorite things is the fact that it has zero

[00:05:32] liability with things like loans and lending. The only thing at risk is, of course,

[00:05:37] your principal investment, which you're making like any other investment you'll ever have.

[00:05:42] But if you don't have the time, you don't have the energy, you don't have the know-how,

[00:05:46] or perhaps you don't have the want to do this yourself, this is a way to get exposure

[00:05:50] to this asset class in a really great way. And Ceef, I'm curious. I don't see a number

[00:05:55] seven on there that says you're not getting text in the middle of the night when a water heater

[00:06:00] breaks or a pool pump goes out or something like that. So that's kind of a big benefit of this

[00:06:04] as well, I suspect, right? It's a massive one. And I think I should take that into consideration

[00:06:08] as a number seven as we add to this, right? Yeah. With toilet calls, nothing. Our team is

[00:06:16] 24-7 all across the country in terms of what we do. And speaking of the journey here that's

[00:06:21] going to be happening over the next few years, right? In short, because we're buying an aggregate

[00:06:27] number of homes all across the country, each time we buy a home, we're going to design it,

[00:06:32] renovate it and operate it, stabilize it as a short-term rental. That means it's going to make

[00:06:38] a lot more money and it's going to have historical revenue. We're then going to take

[00:06:42] 20, 30, 200 of these together at a time, package them up, then go into Costco, right?

[00:06:50] And my favorite analogy here is fruit roll-ups, right? Because we're rolling up homes, right?

[00:06:55] And I used to get all these fruit rolls from Costco back in the day when I was a kid. So

[00:06:59] I was a huge fruit candy guy and we're going to then sell these to private equity, right?

[00:07:05] And private equity is going to want to buy a portfolio like this because you can't go do

[00:07:10] this yourself. We've already put in all the sweat equity. We've already moved the historical

[00:07:14] revenue and they want to buy stabilized yield. In fact, what I just described is the exact

[00:07:20] strategy in multifamily, right? The only difference is slightly different asset class

[00:07:26] and different type of operation, right? So this isn't our first rodeo, right? We've done this

[00:07:33] before. This is our second fund. We're coming off of a $37 million plus fund last year in 2022.

[00:07:39] This year's fund will be 2, 3X that. Last year we delivered over 75 plus properties. We exited also

[00:07:46] eight times more on that later. But one thing I want to point out too is our performance and

[00:07:52] you'll see a little bit more in depth on this is we're competing against mom and pops.

[00:07:58] 90, 95% of the time our competition is, you know, mama Jo down the street or grandpa Bob,

[00:08:05] who's got a room in the back with Ikea furniture. It's not an enlightening experience and you're

[00:08:10] saying, you know, it's just not ran professionally like a business. Therefore, between all the

[00:08:16] things we're able to accomplish and do any advantages we have, which we'll dive into,

[00:08:21] we've been able to drive 71% more revenue than our competition, 41% more occupancy and

[00:08:28] the exits we've had to date have been really fantastic, right? So not only have we scaled

[00:08:34] and started, we've also exited not once, not twice, but eight times proving that we can in

[00:08:40] fact make this happen. So over these next few years you can expect that we'll buy 100 plus

[00:08:47] properties, right? We're going to talk. We've always been cashflow positive each quarter,

[00:08:52] so you don't have to worry about a capital call and whatever market fears you might have.

[00:08:56] And anytime in real estate it's always a bell curve. And I want to just reiterate

[00:09:01] that because you're investing in something that is getting done along the way. So we buy properties,

[00:09:08] we stand them up, we renovate them, we operate them and the first year or so is really when

[00:09:14] you're doing a lot of sweat equity in the middle of those years, the middle of the sandwich,

[00:09:18] the meat, the potatoes, that's when you're earning all this cashflow and then it will

[00:09:22] eventually start dispositioning that off. And you'll see that in the investment pro

[00:09:26] format that Randy will talk about a little bit later. So as a leader, one of the best things

[00:09:32] that I can do is build an incredible team and I cannot tell you how proud and excited I am

[00:09:38] for the team that we have here at TechFest or I genuinely believe we have the best operating

[00:09:42] team in this space. Our team is ex-Facebook, Apple, Vecasa, DR Horton. We've run in

[00:09:49] technology operations, hospitality all under one roof. We're advised by industry heavyweights

[00:09:55] places like AirDNA, Bear Pockets. We built our own software so we can underwrite over 100,000

[00:10:01] homes a month across 250 markets that we track and the fact that we have this early traction

[00:10:09] has allowed us to really scale and get excited about what we're going here in fun too.

[00:10:14] So a couple of things today, we're going to talk about the asset cost, we're going to talk

[00:10:17] about performance, we're going to talk about team technology and strategy. We're also going

[00:10:22] to talk about some boring things like numbers, how you make money but more importantly,

[00:10:26] how we also protect your initial investment. So let's talk a little bit about the asset class

[00:10:32] of short-term rentals and what's really important to know is that our society prefers

[00:10:38] this. I have two kids. I can't tell you the impact of having a kitchen and amenities

[00:10:45] anywhere I go. The experience is more local. It's what people want. If you've ever traveled

[00:10:51] in a group of more than six or seven or eight people, you know what happens when you guys go

[00:10:57] back to the hotel. It's literally a friction of space. It's not an experience, it's not what

[00:11:03] people want and in fact most of the homes we buy are four-bedroom plus homes with amenities,

[00:11:09] with pools, we deck them out, their experiences. We do not compete with hotels but it's really

[00:11:15] interesting to see that Airbnb and short-term rentals have a ton more rooms than hotels combined

[00:11:22] and I know Randy mentioned the cash flow is significantly better here. The tax benefits

[00:11:26] between business and real estate is also fantastic but you always want to invest in

[00:11:31] an asset class that's growing not necessarily one that's dying right and demand is outpacing

[00:11:36] supply for short-term rentals and we're going to nerd out here for a couple minutes

[00:11:40] and talk a little bit about what that supply looks like. So 34% of people prefer short-term

[00:11:46] rentals that's up 3x over the last decade right if you look at the market in itself

[00:11:53] it's a hundred nearly 150 billion dollar market in 2022 we expect that to continue to grow

[00:12:00] but what's really interesting is if you look at where the market share is

[00:12:04] over 50% of that is domestic right well this is very popular overseas most of that revenues

[00:12:11] happening here locally well you know like see aren't we in a recession are people moving

[00:12:16] around well the data doesn't say that we are right people are absolutely moving around

[00:12:22] right in 2023 booking activity is starting off 17 percent stronger than it did in 2022

[00:12:30] this is a really important metric and the reason i want to call this out is because

[00:12:36] people often look at covid or the year of covid of 2020 or 2021 the year after that it started

[00:12:43] as a covid year and anything that happened that year could have been an outlier

[00:12:46] and i think that's possible but we are starting in fact stronger than that covid year in 2023

[00:12:54] demand okay is also up 15 in january and it was up 19 in december right so we are pacing

[00:13:02] nearly identically in terms of how the past years have gone but we're pacing significantly

[00:13:07] higher than where things have been and speaking of pacing it's pacing up through even longer

[00:13:14] throughout right i mean people are not only traveling in the short term they're proactively

[00:13:19] planning where they're going even further in advance which by the way there's this

[00:13:25] beautiful thing called dynamic pricing meaning we make more money when they price out further

[00:13:30] right because they want to book those reservations so from a revenue perspective

[00:13:34] we expect revenues to actually increase a fun little data point some of our early properties

[00:13:40] in our first fund that have eclipsed a year five out of the six already met their

[00:13:45] preff right and we don't expect that in the first year and we believe four out of the six

[00:13:51] out of those six will actually exceed a double digit cash on cash in their first operational

[00:13:56] year right so those types of things get us really excited when things are going

[00:14:01] so actually see if can i jump in there for one second so so you're talking about year one

[00:14:07] cash on cash approaching double digits so close to 10 percent and to kind of bring that back

[00:14:14] to what we see in the multifamily space we see some that are in the three percent range

[00:14:18] we see on a very very good deal maybe five or six percent but more often than not we don't even

[00:14:25] start paying distributions in year one until three or six months down the road so

[00:14:31] to be able to get this type of cash on cash return in year one is just absolutely amazing

[00:14:36] yeah and we're really excited about it and i don't want to mislead anyone when i say that

[00:14:41] the cash on cash to the investor may not be relative of that 10 percent it's what's great is

[00:14:46] to see that the actual asset is generating that but because we're stabilized and we're

[00:14:51] yielding and we're growing right like that's what we have as a look forward to right and

[00:14:56] that's really fantastic which is to your point you know two three four times higher

[00:15:01] than what you'll see in multi right which i'm an investor in multi i love multi in many ways

[00:15:06] but you know diversification is key so um you know i talked about mom and pops earlier right mom

[00:15:13] and pops are in fact the very reason why we really got excited about scaling short-term rentals

[00:15:19] in places like multifamily and storage you're competing against large institutions incredibly

[00:15:25] well capitalized well-talented organizations like blackstone and blackrock and huge private

[00:15:30] equity firms and strs are competing against everything that's opposite of that and because

[00:15:36] of that we're able to win on acquisition management design hospitality our technology

[00:15:44] stack and it shows in our performance right so this is december's performance where we had

[00:15:50] over nearly 50 higher than what we underwrote for and as you can see last year our first

[00:15:56] property went live in january of 2022 and we hit about 93 of our pro forma that month by the way

[00:16:03] we were only live for half the month that's why um we hit that every other month since then we

[00:16:10] have excelled and we're continuing pacing as it improves it's also in our first rodeo doing

[00:16:16] it even before our first fund our team comes from the world of short-term rentals we've

[00:16:20] owned these personally professionally and you know for quite a bit of time we have beat

[00:16:25] projections through and through so randy you know remind people here a little bit about

[00:16:31] impact equity you know you've gone excited about strs tell us a little bit about why

[00:16:35] you're excited about this opportunity as we scale yeah no thanks eve so so yeah as most

[00:16:40] of you guys know i actually came from corporate america i spent 25 years working for fortune

[00:16:46] 100 and 200 organizations primarily in sales and sales leadership roles and i actually ended

[00:16:53] up deciding to move into the real estate space probably about five years ago and i did what a

[00:16:59] lot of people do when they start getting interested in real estate i thought i should buy

[00:17:04] some single-family homes i thought i should manage it i thought i should be involved in

[00:17:08] every decision and activity around that business and and as i said earlier i found very very

[00:17:14] quickly that i was not an expert in this space and i was not an expert at operating these

[00:17:20] units and certainly was not even i wouldn't even say barely good at finding good deals out there

[00:17:26] at the time so i moved as a lot of people do into the passive investing space and moved

[00:17:33] all of my capital over to that space over the last handful of years and when i actually fast

[00:17:40] forward a couple of years i was i was laid off from corporate america in may of last year

[00:17:45] but fortunately due to all the work that i had done in the real estate space over the prior

[00:17:49] years the majority of my monthly expenses for my household were actually met through this amazing

[00:17:56] passive investing tool so at that point i decided that this was something i needed to help educate

[00:18:04] inspire other people to do and that's how impact equity was born so since that point

[00:18:10] this is now our third partnership as i mentioned we're now in two asset classes but overall

[00:18:15] our goal is to try to put one or two deals in front of our our investors every single month

[00:18:20] and we want to offer diversification across asset classes operators deals markets and

[00:18:28] partnering with tech fester is the logical and best next step for us to be able to meet that

[00:18:34] need so see if that's impact equity and i'd love to hear more about you guys yeah so similar

[00:18:42] randy i also came from corporate america and as did sabrina so we both came from

[00:18:49] apple and facebook respectively she scaled operations and scaled the first generation

[00:18:54] air pods to a billion dollar product line right leading that as our the lead project

[00:18:59] manager and i scaled people building teams and talent and infrastructure at facebook many times

[00:19:05] meant opening up offices around the country and around the world and in doing those you start

[00:19:11] to realize when you go open up an office you're not hiring a single person you're there in that

[00:19:16] city for a week two weeks three weeks at a time because you got to figure out where people are

[00:19:23] going to sleep eat enjoy raise their families right and i stayed in a bunch of airbnb's

[00:19:30] some of them were good many of them were really bad and that was where we started

[00:19:35] getting the idea of like well could things be improved in this asset class we come to learn

[00:19:40] about it but before we talk about the story i have to talk about our team people like sam

[00:19:47] who's our other general partner and head of capital markets mick comes from the casa who

[00:19:51] used to run portfolio management there tailors are head of acquisition has a fire twitter if

[00:19:57] anyone wants to go follow along some of his tweets austin leads us on revenue josh's xd

[00:20:03] are important right so he scaled operations across the country in the single family world

[00:20:09] and even people like john right who's our head of data right we are a private equity firm that

[00:20:15] actually has a head of data because yes we've built our own technology and you can catch all

[00:20:20] of us learn follow along we've been on podcasts we've featured in a few places online you can

[00:20:25] read a little bit about the story about the expansion about the growth but we're also really

[00:20:29] excited about the advisors that we have as i like to call it the gray hair on the team

[00:20:35] and i love i'm very much appreciative of these gentlemen here that you see people like jamie and

[00:20:40] scott scott is the founder of air dna jamie is the head of research and data at air dna as you

[00:20:46] can see people like lawzler and rob advisors and things like data and talent and strategy

[00:20:51] these are people who are the know-whos of this industry and i think this goes to show

[00:20:57] our commitment to execution starts with our people you know i can't tell you enough when

[00:21:02] i was at facebook the number one thing the number one trait that i saw why companies succeed

[00:21:07] is their people you cannot excel without the best talent and we've made a commitment to

[00:21:12] having the best possible talent here as well but we've also made a commitment to technology

[00:21:17] right we do we are not your zillow or your open door where we're eye buying to be very

[00:21:23] clear what we're doing is we are a real estate firm that happens to build technology

[00:21:27] not a real estate firm sorry not a technology company that does real estate those are two

[00:21:32] very different things right so we build technology that allows us to do our job easier we underwrite

[00:21:37] more properties we get our human eyes on the deals that make sense you know what to buy where

[00:21:42] to buy it how to finance it and all the details that come out so we can build a

[00:21:48] beautiful diversified portfolio across this beautiful country of ours in places like

[00:21:52] scotsdale in memphis the blue ridge mountains of georgia multiple markets in florida and

[00:21:58] we're investing in both destination and metro markets so we're getting beach mountain city

[00:22:04] towns and everything in between across all seasons right because short-term rentals have

[00:22:10] high seasons and low seasons right in each of these different markets there's fluctuation

[00:22:14] and if you own one you feel that really hard but when you own 150 everything is a little bit

[00:22:20] more even keeled throughout right and you can withstand a lot more and that's part of our 16

[00:22:25] point strategy right one of the things i'll call out here and i'm sure everyone can read what's on

[00:22:30] screen is when we started this we were on a target 200 bucks a night as an average daily

[00:22:35] rate that's what we charge per night to our guests the reason that was important is because

[00:22:39] we didn't want to compete with hotels right and that's a race to zero in fact you can see in

[00:22:45] this slide it says q1 2022 we were trending around 300 speaking today in q1 of 2023 we're

[00:22:54] averaging over 460 you do not see that rent growth in multifamily you do not see that

[00:23:02] revenue growth in multifamily and that's because these are the types of advantages we have

[00:23:07] right in terms of our scale but also because we're vertically integrated we are arguably from

[00:23:13] my understanding and i want i want to don't take me here too much for it i believe we're

[00:23:18] the only vertically integrated short-term rental investment fund across the country

[00:23:22] right where we own our own acquisition we built our own technology i will happily say i believe

[00:23:28] we're the best possible team in this space and done everything in house we manage our own homes

[00:23:33] but all of these types of things are led by our design and data infrastructure and we take

[00:23:40] this really seriously and you know to start things off let's just take a look at how

[00:23:45] cohesive this home looks you know note that i didn't say this home looks amazing it looks

[00:23:50] beautiful i didn't use those types of adjectives i used cohesive and the reason i use that is if

[00:23:56] you go on airbnb in any city that you want to go look at you'll notice that the one of the

[00:24:02] highest performing properties in your area is probably cohesive because it's an experience

[00:24:08] that your guests want to have you've tied everything together in fact if you think

[00:24:13] about your favorite dining experience or a place that you go visit or even your favorite

[00:24:18] hotel you typically walk in and it's a cohesive experience it's not all over the place right

[00:24:24] it's organized it's colorful in whatever theme that it's in in this home that you're seeing

[00:24:30] here on the screen in scottsdale is a great case study so when we bought it it was doing

[00:24:34] about 145 000 a year in revenue as an existing short-term rental is one of the few

[00:24:39] that we've bond that were existing strs and you know we added some renovation we added our

[00:24:45] design more importantly we operated it significantly better with better pricing revenue and property

[00:24:50] management in its first year this home will do over 215 000 which is over 75 000 more than it

[00:24:58] was doing for three years prior to the previous owner now i won't get into all the

[00:25:03] numbers but i can tell you that's a half million dollars in value added in its first

[00:25:08] year to the equity value of this home here you have a beautiful cabin well was not the most

[00:25:17] beautiful cabin into a more beautiful industrial loft like cabin right over in the pocahontas

[00:25:23] mountains i mean the the reason these things matter is if you're on airbnb let me tell you

[00:25:28] exactly what happens when you go on airbnb you're going to enter how many people are

[00:25:31] going where you're going okay because airbnb all of those is a tech product so let me

[00:25:35] nerd out here for a second and you're going to enter those things you're going to get a bunch

[00:25:39] of results and you're going to open up four or five six of the things that look good

[00:25:45] right in terms of your eyes are going to eat first you're then going to sift through those

[00:25:49] four five six or eight properties and narrow it down to a list of one two or three you're

[00:25:55] then going to share that link with a group of people or whoever the decision makers are

[00:25:59] in your group of where you're going because we're targeting six eight ten plus groups

[00:26:04] right of people and then either will be commentary as to which ones you guys want to

[00:26:09] go what you'd prefer staying at you'll probably inquire on one or two of those and eventually

[00:26:14] your book now everything that i just described happens in five minutes or less okay and

[00:26:20] airbnb is very much like google in fact it's all about intent type of where you're going

[00:26:25] exactly what's happening so you see photos like this in your bachelor red group you're more

[00:26:31] likely to stay at a home like this in fact this home which i believe randy did you get a chance

[00:26:35] to tour this home when you were with sabrina i believe so you know i did it was as you

[00:26:40] mentioned cohesiveness like from room to room to room was was just amazing so yeah and and

[00:26:47] and the pink cabinets are on purpose and the green tile is on purpose the model in the photo

[00:26:53] is on purpose it's intentional this is one of our homes that gets one of the highest average

[00:26:57] daily rates because the type of person who's coming here is not only proactively planning

[00:27:02] in advance right but they really want this cohesive experience now this type of avatar

[00:27:06] is very different than say in memphis where we're attracting families we have modern decor

[00:27:10] modern design amenities like stock tank pools you do not see that in memphis right so if

[00:27:16] you're a family and you got a couple of kids that can go out and hang out in the pool

[00:27:19] you got a yard it's a beautiful space and then of course we have homes where we just went on

[00:27:24] simply design right in amenities and clean photos clean photos by the way over 40 percent

[00:27:31] of the time right people are not taking good photos on airbnb they're taking it with like

[00:27:37] an iphone 6 camera right so those are the things that we can easily win on so let's get

[00:27:43] into the numbers randy why don't you tell a little bit us about the the fund and what

[00:27:47] people can earn yeah absolutely thanks c if so and this is you know as as a passive investor

[00:27:53] this is the money slide all of the the information that cv shared up to this point is why we can

[00:27:59] prove we can actually provide these type of returns and these type of investment

[00:28:05] opportunities to our investors so you can see on the upper left hand corner one thing

[00:28:10] that's kind of unique about this opportunity is that our minimum investment is only

[00:28:14] 25 000 most investments like these will have a 50 or 100 or even 250 000 minimum investment

[00:28:24] so having an offering that allows 25 000 investments allows that first time passive investor

[00:28:32] the ability to dip their toe in this space and really start to understand how this works so i'm

[00:28:37] really really proud to be offering the 25 000 minimum which which a lot of folks don't do

[00:28:43] purposely because they don't necessarily want to work with folks that are newer to the space

[00:28:48] okay our projected hold period on this is five years now cc mentioned earlier that the goal here

[00:28:56] is really to ramp this portfolio and position it into a place where we can sell this off to

[00:29:02] equity or reach or something like that so the goal is a five-year hold but when the opportunity

[00:29:10] presents itself to sell and meet the returns that we've offered to our investors if there

[00:29:16] is an opportunity to do so earlier that is absolutely something that the group will consider

[00:29:22] and potentially execute on if that option is available so one of the biggest things in this

[00:29:29] space when you're investing as a passive investor is the tax benefits that you get

[00:29:36] through depreciation and other tax benefits and the team is actually transferring 100 percent of

[00:29:45] those tax benefits to you now seeing the amount of deals that i see this is not always the

[00:29:52] case and i wouldn't even say frequently the case so the fact that the group is forgoing these

[00:29:58] tax benefits themselves and giving it all to the investor is just one more reason why this is

[00:30:03] just a fantastic opportunity you'll see here we do quarterly quarterly cash flow with auto

[00:30:10] direct deposit passive income this means that after you've done the due diligence on this

[00:30:16] and you've signed on the paperwork and wired over your funds you'll start to get quarterly

[00:30:21] payments and that's all the work you have to do here truly passive income where you're not

[00:30:28] having to babysit property managers or construction crews or driving to properties

[00:30:32] literally just sit back and and watch the mailbox money come in we're showing here an

[00:30:39] annualized cash on cash average of eight to nine percent so what does that mean to you

[00:30:46] like in real terms from a pro forma standpoint you're going to see approximately five percent

[00:30:54] cash on cash in all likelihood in year one but we very very quickly jump up to almost 10

[00:31:00] in year two in years thereafter so far exceeding what you'll likely see in any other offering

[00:31:07] in multifamily self-storage or any of the other asset classes and then the overall projected

[00:31:14] total return is between 18 and 20 percent so when you look at the return on your capital

[00:31:21] and return of capital over that five-year period the goal is to is to double your

[00:31:27] investment in that five-year period so 18 to 20 percent is pro forma again it can always be

[00:31:34] a little higher or always be a little bit lower but based on the conservative underwriting

[00:31:39] that see from the team have done that's where we project these returns to be and then probably

[00:31:44] the biggest thing that i like most about this is the diversification i mentioned earlier that

[00:31:49] i was thinking about buying single family or single family or condos here in scottsdale

[00:31:55] for short-term rental space that would have meant that i would have been out of pocket

[00:31:59] probably 100 or maybe even 200 grand to get this thing up and running and then i would

[00:32:04] have one asset and every weekend that that thing sat empty would be weekends that i was not

[00:32:10] earning money so if we have 100 assets in multiple markets with both warm markets and

[00:32:19] cold markets the variation diversification across those different assets gives you

[00:32:25] consistent monthly income through the diversification so at a high level

[00:32:31] um 8 preferred return we talked about that so the first 8 in profitability goes directly

[00:32:39] to our investors so the operators myself other than small fees that we have on the front end

[00:32:46] we do not make a dollar until our investors get an 8 preferred return quite often in the

[00:32:55] space you're going to see six and seven percent as well so we're coming out of

[00:32:59] the gates with a higher preferred return probably the the biggest thing that differentiates

[00:33:05] what impact equity is doing specifically our company compared to the investor that actually

[00:33:11] invest directly with tech fester or invest with anybody else in this space is impact equity

[00:33:18] is giving 85% of all profits above the 8% directly to our investors so if you see other

[00:33:30] decks for from tech fester directly you'll see that this is a 50-50 mix if you invest with

[00:33:36] them directly i felt it was important for me to give more of that profit to my investors

[00:33:43] because it's a fantastic return and this kind of falls in line with the business model that

[00:33:49] i use in all of my other asset classes as well so i want to make sure that you're taken care of

[00:33:54] and you earn excellent returns because i'm sure if you do we'll continue to build

[00:33:59] that relationship and do more and more together and again finally it's passive no calls at night

[00:34:06] no calls during the day no people saying hey i can't get into my unit or the pull pump is broke

[00:34:12] or the heater's not working we take care of everything from you from the very first moment

[00:34:17] all the way down to the day that we pay out final distributions when hopefully we double your

[00:34:22] capital well and randy don't you know don't sell yourself too short so the reason randy is

[00:34:27] able to offer these eight percent and the 85 percent is because he has negotiated incredible

[00:34:33] terms with us right with tech festering he brings up a great point you know if you were to come to

[00:34:38] tech fest or direct and you're gonna write at the same size check that same 25 000 check

[00:34:42] you'd get an 850 right and the reason you're able to get significantly better terms with randy

[00:34:48] is because randy has come to us and you know took him out to the back running me out for

[00:34:52] a little bit and said you know what i need better terms for my investors and the reason

[00:34:56] is you know to be quite frank and blunt he's writing a much larger check through impact

[00:35:00] equity right the impact equity community is going to be able to write a two three five

[00:35:05] ten million dollar check and because so he has leveraged negotiation which he's then now here

[00:35:10] passing on to investors so you know this is what the investor will you know project to get

[00:35:16] randy so please walk us through this one yeah yeah absolutely so upper left hand corner we

[00:35:22] talked through 25 000 minimum investment projected exit cap rate is six to eight percent

[00:35:28] as you talk about cap rates as that number goes down the value goes up so we're expecting

[00:35:34] our exit cap rate to be in the six to eight percent which means that this is very

[00:35:39] conservatively underwritten okay we talked about projected hold time on average about

[00:35:45] five years but we we suspect could be as short as four years and it could potentially

[00:35:50] go a little bit longer as well so it's important to know that this is an illiquid

[00:35:55] investment meaning when you invest if in six months or a year you find that it's important

[00:36:02] to get the dollars back unfortunately that is not an option and that is actually a lot of people

[00:36:08] will see that as a negative but quite frankly i think it's a positive because quite often

[00:36:13] people will try to pull money out of the market or pull money out of investments

[00:36:17] when things are rough and that's the absolute worst time to do that so seath and the team

[00:36:22] reserved the right to hold these funds throughout the duration to make sure that we're doing

[00:36:27] what's best for the investor okay first distributions are paid at around six months

[00:36:35] so you'll make your investments they'll start purchasing assets renovating assets get get

[00:36:40] people in those assets and then you'll start to see those returns this is what i'm really

[00:36:45] excited about the projected performance we're we're we have performer at 2.02 x so more than

[00:36:53] doubling your capital and this when we go back to that previous slide where we did an 85 15 split

[00:36:59] this is the difference here in a 50 50 split you do not get these returns you have less

[00:37:06] than a 2x equity multiple and your average annual cash flow is much less so because of

[00:37:13] the bargaining power that i get by bringing a bigger check to the table you the investor

[00:37:17] get much much better returns so average annual cash flow eight to twelve again three to four

[00:37:23] times what you might see in in multifamily annual return 17 to 20 percent again 20 times

[00:37:31] five is that 2x equity multiple and then the most important metric on this slide

[00:37:38] is the internal rate of return which factors in the time value of money so how quickly

[00:37:46] do you get your money back and how quickly do we double it so this number is the true

[00:37:54] measurement of the value of this asset okay on the preferred return in splits we've talked about

[00:38:01] preferred returns so you get the first eight percent above the eight percent 85 goes to

[00:38:07] the passive investor and 15 goes to the fund in the next section on the bottom you're going to

[00:38:14] see a year by year and overall summary of the returns that you can inspect in this deal and

[00:38:20] this is a hundred thousand dollar example so you see on the left there you invest 100 grand

[00:38:25] total return in cash flow you're going to earn 45 000 approximately over the whole period in

[00:38:35] quarterly distributions when we sell all of these assets on the on the back end once we've

[00:38:40] gone through our full business plan and they've packaged these things up and put a beautiful

[00:38:45] tie in them and sold them to private equity you're going to get 156 000 return at the end

[00:38:52] in addition to the 45 so you can see the year by year and how quickly that ramps up

[00:38:59] and i think it's important to note here like year one is showing five percent

[00:39:03] and the reason for that is the majority of the dollars are going into the business to

[00:39:09] renovate these and get operations up and running because the faster we get these things

[00:39:14] on the market and get them booked the the faster we can start returning better cash flows

[00:39:19] so you see as that ramps up and throughout year three four and five we're over 10 percent which

[00:39:25] you're just not going to find 10 cash on cash returns really anywhere else out there where you're

[00:39:30] also participating in the upside so again on the bottom you can see the projector

[00:39:37] investor projected projections and profit splits first eight percent go to you above that

[00:39:42] we split 85 15 yeah and miss anything see no you you hit it right on the money and i'll take us

[00:39:49] right in and talking about taxes right so you can expect here to get a write-off or a paper loss

[00:39:56] as the industry calls it right on your k1 of about a 20 000 dollar paper loss roughly or

[00:40:01] about 20 percent of your investment you know in that first year or between your first year

[00:40:06] and your second year now of course this is not financial advice please consult your cpa

[00:40:11] we do not give advice whether this is affecting your active or your passive income

[00:40:16] so please consult with your financial advisor there as well now randy yeah and for the newer

[00:40:24] passive investor this is this is almost as important as the previous slide that talks

[00:40:32] about the returns that you're getting the tax benefits that you're getting from this and of

[00:40:36] course check with your cpa are almost as great as the dollars that you're getting back and

[00:40:42] if you have questions about this definitely check with your cpa but let's you and i discuss this

[00:40:47] as well because i personally have been able to take advantage of these passive losses

[00:40:52] year over year over the last couple of years and it can be it can be a game changer when

[00:40:57] it comes down to how you strategize your finances and even employment decisions as

[00:41:05] to whether it makes sense to stay in the w2 or not so when you when you pull in all of the

[00:41:10] benefits of the dollars and the passive losses it can have a significant impact on you and

[00:41:16] your family so let's discuss yeah and we talked about taxes we talked about returns

[00:41:22] but what about using the properties right we and randy had an opportunity to visit some of

[00:41:28] these and as an investor you'll get the same benefit to not only visit but stay as an owner

[00:41:34] you're a limited partner but you're also an owner in this portfolio now remember it is an

[00:41:39] investment first so we can't give it away for free but we can certainly book direct and save

[00:41:44] on those platform fees and it usually comes out to about a 10 to 30 percent off the state

[00:41:50] we're across the country in many states and areas so you want to take your friends your

[00:41:54] family take a trip you can do all those things as well so the investment that actually

[00:41:59] has utility in addition to the investment side so one thing that is really important to remember

[00:42:07] here as well is you know let's get really granular for a second because investments

[00:42:15] don't always go perfectly in fact rarely do they go perfectly so the reason we've built

[00:42:21] an incredibly strong team is because from an operating perspective you want really great

[00:42:26] talent making decisions in addition to that you want those decisions as much as possible made

[00:42:32] as early as possible so some of the things that we do on the front end is we acquire really well

[00:42:37] in fact there's a saying in real estate is you make money on the buy you make money on

[00:42:41] the buy you buy well you reduce a lot of risk on that front we buy well we force equity

[00:42:46] through things like renovations of our floors or bathrooms our kitchens things that have value

[00:42:51] hard equity to the home and then we're also putting on really good conservative debt on the

[00:42:58] home now if you've done multi or other commercial real estate you'll notice that most of the debt

[00:43:03] terms in multi-family is typically a 311 or a five-year fixed and that's usually as good as it

[00:43:09] gets it's about a five-year fix where your rate does not change for five years depending

[00:43:14] if you have rate caps and those types of things that may or not be bought in our case

[00:43:18] all of our debt is fixed for a minimum of a decade now you're like well see if this is

[00:43:23] only a five-year old why do you need 10 years of fixed rate debt and the reason is we never

[00:43:28] want to become a forced seller in fact debt is the first silent killer in real estate

[00:43:34] for any real estate operator that's been through any sort of ups and downs they know

[00:43:38] this well if you're not a force seller history tells us you'll almost always be fine but if

[00:43:45] you are a force seller in fact if you look at 2008 2008 was a combination of poor lending

[00:43:52] but predominantly it was over 95 percent of the people who defaulted in the oh wait crash

[00:43:59] had adjustable rates and floating rates in fact they had mortgages and balloon payments

[00:44:06] things coming due at an unfortunately inopportune time if they had fixed rate

[00:44:13] debts right that was no not floating right they could have been creative they could have

[00:44:21] extended their timeline and as we saw and if you look at the history of real estate

[00:44:25] if you look at over a five or ten year period usually you are more than good so our debt

[00:44:32] structure is strong our acquisition structure is strong and we currently do not cross

[00:44:38] collateralize what i mean by this and excuse my very blunt analogy here but we can lose a pinky

[00:44:44] and we're still going to be good right i mean that pinky being a singular home if for whatever

[00:44:49] reason something happens that home it does not affect the rest of the portfolio and um and

[00:44:55] brandy please add some color there yeah so and and this is a big piece that i remember

[00:45:01] when i've been because i've been looking at this um at this space for a number of years now

[00:45:05] and my concern this time last year was buying in the single family space if something were to

[00:45:11] happen to the economy and values of homes would drop then i i was concerned that i might not

[00:45:19] have any protection there so with with things that we're seeing in the economy today i think

[00:45:25] it's it's we've seen some decreases in value of homes and i think now is actually an extremely

[00:45:32] good time to be buying single family homes because in some markets we're seeing those

[00:45:37] dip as much as 10 or 15 or 20 so um i think you know yes this has been a difficult uh

[00:45:45] change in the economy but it really creates a unique opportunity for us in this space so and

[00:45:51] see if i i see you've already got on the slide to talk about that but what are your

[00:45:54] thoughts there yeah you know i think for us the biggest thing i look at is a price to rent

[00:46:00] ratio right um just like you would in you know price per unit and the rent or revenue per unit

[00:46:05] in multi right here our revenues are increasing but our cost basis is going down right on the

[00:46:13] value of the home that's a terrific investment right you typically don't see that right you

[00:46:17] got revenue going down but the cost to buy that same home is coming down now that's the

[00:46:23] equity side i understand we're in a higher than normal interest rate environment today than

[00:46:28] when we were over the last few years but i do want to remind everyone that a two to three

[00:46:33] percent interest rate is not normal it has not historically been normal in fact a normal

[00:46:39] interest rate is usually in the five sixes and sevens historically historically right and so

[00:46:44] what's really great today is that most important thing is if we can buy really well our revenues

[00:46:50] are going up and let's say rates do come down in a year or two or three the amount

[00:46:56] of refinance that we can do on a rate in turn alone to bump cash flows would be massive down

[00:47:03] the line and that's something that we can't control but if the opportunity presented itself

[00:47:08] we can certainly do that and when you consider our strategy here in terms of how we're

[00:47:12] competitive in the market we control what we can control we control our infrastructure

[00:47:17] control our operations we've built an incredibly strong team we built our own technology that

[00:47:23] allows us to guide and perform in ways that others cannot right those are the things that

[00:47:28] we can control everything else that's market dependent we put in barriers right that would

[00:47:34] insulate us from dealing those types of pressures and in a market that is more

[00:47:40] advantageous as those things happen we'll be positioned to take advantage of that so

[00:47:45] without further ado randy why don't you tell people a little bit if they want to get

[00:47:48] started how they want to get involved you know what are those steps and how can they make that

[00:47:53] happen i think you're on me there randy so yes my apologies so so if um yes if everything

[00:48:04] we've talked about today sounds interesting um the the process for this is actually a fairly

[00:48:10] simple process and it's not quite as complicated as one might expect certainly not as complicated

[00:48:16] as if you were out there buying these yourself so yes there is some people paperwork that you do

[00:48:22] need to fill out there is a legal document that uh you know it is a rather extensive legal

[00:48:28] document that i certainly encourage you to review and read and understand and potentially

[00:48:33] share with with your advisor this is all very common in this space so essentially fill out the

[00:48:39] paperwork you will fund the investment uh generally via wire so you can do that at your bank some

[00:48:45] banks allow you to do that online and then we essentially do all of the heavy lifting on our

[00:48:51] end they're going to go out and buy these assets get them fixed up to the type of quality

[00:48:57] that we want and then ultimately it's just 100 passive income to you from that point you're

[00:49:03] going to start getting quarterly reporting so you're going to see tons and tons of

[00:49:08] information about what's going on with your investment you're going to start getting these

[00:49:12] quarterly dividends will just magically appear in your bank account or in your IRA account

[00:49:17] and then last but not least passive investing or passive income throughout the way so thank

[00:49:24] you so much for for joining us today see thank you for walking us through all the details

[00:49:30] certainly next steps would be let's connect or click the link where you found this video

[00:49:36] to start the process and we're both available throughout the entire process should you ever

[00:49:41] need us or you need assistance or have any questions so thank you for joining us today

[00:49:45] well there you have it ladies and gentlemen another episode of the gentle art of crushing

[00:49:50] it it was an amazing episode we know we sure learned a lot and we hope you did as well

[00:49:56] we want to take a second and thank you so much for viewing or listening to this episode

[00:50:01] and please just know that we only ask for one favor and that is to make this life magnificent

[00:50:07] thank you and have a wonderful day