Syndication Series #1: How To Evaluate A Syndication Deal With Dr. Sam Giordano

Everything starts with learning. You can excel really great in one thing if you are determined to know how it works. In real estate, it’s the same case. You have to strive for your goals. Moneeka Sawyer sits down for a conversation with Dr. Sam Giordano on evaluating syndication deals. Where should you be investing? How do you find the right process that works for you? How do you evaluate a syndication opportunity? Dr. Giordano answers these questions and more! Plus, he offers a spreadsheet that could just be the one to help you up your syndication game. So listen to this episode and enjoy the process of learning and growing.

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Syndication Series #1: How To Evaluate A Syndication Deal With Dr. Sam Giordano

Real Estate Investing For Women

I am so excited because we are going to do something a little bit different. One of the things that I’ve been thinking is that as we’ve gone through the years of this show, every single time I do a show, we record something new. There’s a new idea, a new strategy or a new opportunity, and I love that. It’s very exciting to me. I know many of you love that too. What concerns me a little bit is that I feel like I might be confusing you.

Instead of giving you an opportunity to go deep and to learn strategies so that you can make a decision whether that strategy is right for you or not, I just keep presenting new opportunities, which is confusing for me hearing them like I think, “That’s a good idea,” and I know that if I wasn’t already well implanted into some strategies that I’m already using, it could be confusing for me.

In order to support you, ladies, to actually start taking action and grow your portfolio and become super-wealthy and blissful, I’ve decided that I’m going to start doing some different series. Each series is going to be focused on a strategy that I’ve heard a lot about from you. You’ve asked many questions and you want more information. I’ve brought on several guests onto the show already about that topic because of your interest in it.

What I’m going to do is create some of the series that will be a deep dive into that particular topic. Sometimes, it’s hard to go back and re-listen to episodes that are hard to find on iTunes and a lot of the podcasting formats, and even on my website. There might be so many that you don’t know what to listen to.

What I’m going to do is go back and compile the best episodes into a series. If there are any missing parts or holes, then I’ll record a new episode or two to fill those holes. Either it’ll be a new person, maybe I’ll do something, but my strategy is it won’t always be a series and it won’t always be replays. This is to support you as we move forward from here to help you to start taking action and feel like you’re getting what you need to create success.

I’m not just here talking about real estate. I’m here to help you build the blissful life that you dream about. That’s my goal and that’s why I’m creating this series. I’m now starting the first series and I’m excited about it. We are going to be having some reruns and that may irritate some of you. If you don’t like this series idea, please email me and let me know. If you love this series idea, please email me and let me know because I’m here to serve you. I want to make sure you’re taken care of and that I’m providing what you want. I’ve got all my great ideas, but they don’t mean anything if you don’t love them. This is the time for you to tell me what you need so that I can be of service to you.

Here is the first series that we’re doing. Welcome to the Syndication Series. We’ve had many people on this show talking about syndication. Some of you are still a little bit confused about what syndication means. What it means is someone has a big project and they need to get money for that project. What they do is they go out there and find investors to invest in their project. That’s called syndication.

If it’s actual syndication that is legal, they have to file with the SEC. There are some definite legal things that they have to do, but the basic idea is they’re taking money to help invest in a project, either to buy the property, build the property or refurb the property. That is what that very complicated-sounding word is. Syndication means people are collecting money from lots of different individuals to fund a project.

In this series, we’re going to be talking to several syndicators. I’m also going to be starting this series with an education piece about how to evaluate projects. This is so exciting because it’s new in the market. I feel extremely excited that I met this person. It’s as if the universe sent him to us, so I can’t wait to share him with you. He’s going to be talking about how to evaluate syndication projects. We’ll start the series with that, and then we’ll move in so you can get to know some of the syndicators that I want you to hear more from. Maybe they’ve already been on the show and we’re doing a replay, or I’m re-recording something. We’ll see how it goes. I want to make sure that as we go, I’m providing the best value.

Welcome to the Syndication Series. I am excited to welcome to the show, Dr. Samuel Giordano. He is a practicing gastroenterologist, author, real estate investor, and Cofounder of PassiveAdvantage.com, a website designed to help physicians and other high-income professionals with passive real estate syndication deals. He and his partner, Terry Kipp, have designed tools specifically geared towards passive and limited partner investors to help objectify and bring to light the risk points of various real estate syndication deals before choosing to invest.

The tool also has built-in functionality for tracking investment performance versus proforma, as well as a separate tool for tracking your progress on the path to financial independence. He has been investing in passive syndication deals as a limited partner since 2017 and initially developed this tool for himself. Now, he is focused on helping other physicians and investors and bringing it to the masses. His ultimate goal for himself and others is financial freedom, and to be able to live a life of your choosing on your own terms. How are you, Sam?

It’s great to see you. Thank you so much for having me.

Did I do okay with your specialty?

You did outstanding. Perfect.

My mom’s a physician. I have a level of integrity around this. I want to be able to say it right.

It must be in the genes.

I am excited to have you on the show. I want to tell you a little bit about how I met Sam. I was on another show. Do you remember whose show it was? I want to mention it because it was so good.

It may have been Taylor Loht, The Passive Wealth Principles.

I was on that show and then Sam called me because I offered an opportunity for people to talk like I do with you ladies and see what happens if you call me. He set up an appointment and we started chatting about syndications. He’s like, “I want to figure out my next step. I’m not sure what I’m doing,” and he was so humble. I got on the phone with him and he is miles ahead of me in the syndication world. This is such an interesting thing that I want you to know. Many people can be successful. I’m successful in what I do and Sam’s successful in what he does.

You’ve heard many amazing people on this show that are successful, but we’re successful at what we do and there are other people that are so much more successful at what they do. This is one of those amazing synergistic things where he was like, “I wanted to find out about what you’re doing,” and I’m like, “I want to find out what you’re doing.” Once we started talking, I realized what a value he could be for you so I asked him to be on the show. This is his very first ever. Is that true?

It’s one of my first ones, so forgive me if I make any rookie mistakes.

We love rookie mistakes. We like the true, authentic deal. This is going to be fun. I’m excited for him to talk to you about this tool because many of you are interested in the passive growth opportunities of syndication. We’ve had several people on the show talk about syndication, but sometimes it’s hard to figure it out. Where should you be investing? What projects, what people, how do you find a facilitator? Is it called a facilitator?

Yeah. There’s a liaison. There are certain liaisons that put you in touch with syndicators. There are a lot of questions.

I’ll get all that information. When Sam presented this tool, I thought, “This would make it so much easier even for me,” so I wanted to share him with you. That is why Sam is on the show.

Thank you for having me. It’s my pleasure.

Tell us a little bit about your story. How did you get into this? I know you’re a doctor. Tell me a little bit about what happened.

Evaluating Syndication Deals: If somebody is not performing adequately, then you can obviously not recommend them any longer.

I appreciate you giving me the opportunity. It’s great to talk with you again. I’m born and bred in New Jersey. I came from humble beginnings. My father only graduated 8th grade, and my mom only graduated 10th grade. I was the first person in my family to go to college. After college, I went on to work in the pharmaceutical industry research for a few years, and then not feeling fulfilled, I decided to go to medical school. I met my wife in between medical school and residency. She’s a California girl. I somehow convinced her to stay in New Jersey, although I fight that fight every day.

I finished my fellowship as a gastroenterologist back in 2012. I was doing all the traditional things you think about from a personal finance standpoint. I was maxing out my retirement accounts, paying off my student loans, investing in my children’s 529, all the classic personal finance things that are preached to us. Eventually, as loans got paid off, I was able to invest in post-tax accounts. There came a time where I wanted to look into more alternative investments.

That was around 2017, the same time when the Tax Cuts and Jobs Act was enacted. We lost the ability to deduct state and local income tax. In high taxes states like New Jersey and California, that can be a big hit on your taxes. Synergistically at that time, I started looking into alternative investments, and then I also started looking for ways to diversify some of my taxable income. That brought me into the real estate realm a little bit.

Why did you choose syndications?

Initially, I had dabbled in thinking about owning my own rental properties, single-family rentals, and looking into possible turnkey opportunities in most cases, out of state since New Jersey doesn’t have the best real estate investment opportunities for those types of things. I started to hear horror stories about people who bought these turnkey properties and that the property managers that were managing them out of state weren’t always truthful. It started to steer me off a little bit.

I talked to a few friends that had done some of these real estate syndication deals to where they invest in the deal passively. You give them a certain amount of money and you have fractional ownership in the deal. After you do the upfront vetting and due diligence of that deal to decide whether you want to invest, once you make the commitment financially, then you start receiving distributions either monthly or quarterly, depending on the structure of that deal. You don’t have to do anything anymore.

The great thing is you get a lot of the tax benefits, which is some of the stuff that I was looking into, where at least it doesn’t increase your taxable income. In some cases, you can use that depreciation from those deals to offset some of your other passive income or active income in somebody who’s a real estate professional.

Once I saw these deals and I saw that it was more hands-off because I still have my day job as a physician and I’m not looking to give that up. This looked like the perfect fit in terms of what I wanted to accomplish. It was like opening Pandora’s box when I learned about it, and then it just set off this year-long education process of learning more.

You talked a little bit about turnkey. We are probably going to be doing a series on turnkey also because it’s a strategy that I love. What is interesting is you’re talking about all these horror stories of the scam artists out there that create a dodgy products. The properties aren’t right and the management company that they put in isn’t right. There’s a lot out there that doesn’t work, but there is also a lot out there that does work. One of the values that I provide in this show is vetting and getting to know these different people and operators. My ladies go and invest with them and I hear feedback.

We’re able to put together a network of operators in the turnkey area that my ladies can invest in. The syndication area is not that much different. It’s interesting that you said they were opposites because in the syndication area also, there are a lot of scam artists and operators. There are people that are taking people’s money. In anything in real estate, if the market goes down, you lose money. Not to scare you off, it’s significantly more secure than other investments but it is an investment. There are a lot of operators, even in the syndication world, that are scamming people, unfortunately.

I wish that wasn’t the case but you’re right.

The big difference with the syndicators is that they have to file with the SEC. These guys are being tracked by the government. There are ways to find out about their reputation. If they start to scam people, they’ll be shut down. There’s a little bit more security as far as finding operators this way, but it still doesn’t mean that they’re perfect. If they say you have a ROR of 34%, and then they give you 9%, at least you didn’t lose money. It’s very important to find syndicators that have a good reputation, which is why I’m doing this series because I personally have invested with several people.

Interestingly, Sam has invested with some of the same people, and I’ve developed relationships with some of these syndicators. That’s why we’re doing this series. We want to educate you on how to evaluate projects so that as we go through talking about syndication, you can look at each one of those operators.

If you like what you hear, you like what kinds of projects they’re in, you can get information from them, and then when they start sending you projects or opportunities, then you can go through those opportunities with this tool that Sam’s going to be talking about. There is meaning to my madness. There’s a reason I’m doing it this way. I wanted to point out that it is true that out there in every industry, whether it’s education, real estate, turnkey, REITS, syndication, whatever it is, there are risks. The operator is going to be the key. Wouldn’t you say?

I do. The service that you provide to your readers is huge because you have a go-between where if somebody is not performing adequately, then you can not recommend them any longer. That’s a cost to them so they then would have to treat your readers and the people that you referred to them well. As far as if you don’t have those associations available to you, the only way that you can combat that uncertainty or to differentiate which syndicators are good and which are not is through your own education.

The first year that I started to learn about these syndications was in 2016 or 2017 because of the fact that some of these syndications require a pretty significant upfront financial commitment, I’ve made a promise to myself to spend an entire year just to educate myself. That was in the form of podcasts like your own, reading as many books as I could get my hands on, looking at different real estate forums. Anywhere I could get the information in regards to the real estate syndications, I was taking that all in.

As I was going through that year-long timeframe, I used a note sheet to take notes on some key points, or if I heard something interesting on a podcast, I’d put it on that note sheet. Eventually, that note sheet morphed into an Excel sheet where it had parameters that I was looking for in these syndicators. That first year, in addition to the education, if I heard of a syndicator or there was a recommendation of a syndicator through a friend, I would reach out to them, try to have a discussion, and see if it was a fit. What you tend to do if it’s a fit is to get on their investor list.

At that point is when you start receiving these deals through what they call an investment summary or a pitch deck. When you first see those, it’s overwhelming. Some of them are 40 or 50 pages and you don’t know what you’re looking at but over time, when you combine some of the education components into what metrics you need to look at and after looking at some of those investment summaries multiple times, you start to pretty quickly pick out what the metrics are that you’re looking for and what’s in the investment summary.

Over that year, I formed this sheet and it’s what I still use now. It’s gone through many iterations but it gives me the confidence that there’s not one clear risk point or red flag in the deal. If there is, then I’m aware of it and I can then decide if I want to invest in that deal, or I want to move on and invest in another deal. Getting back to the question, the one way to combat that uncertainty and not knowing whether someone you’re dealing with is scrupulous or truthful is to educate yourself as best as you can. The whole process of forming the sheet is to try to truncate or shorten that education process that I had to do so that people can more quickly be pointed out to certain areas that they need to look at.

That’s the education process that you went through. What is it that you actually go through when you are evaluating a syndication opportunity? We’re going to do an awesome deep dive in EXTRA. Give us a high level and then we can go much deeper. We’re going to have more time in EXTRA to do that.

When you look at a deal, the three main components would be the sponsor, the market and the deal, and in that order. Meaning that the sponsor is clearly the most important component of the evaluation, but that’s the trickiest because there are a few objective things that we look at, but it’s not as many clear quantitative objective parameters that you can look at when you’re evaluating the sponsor.

A big thing is when you do have that phone conversation with them, what’s the feel you get? Do they seem like nice people that you’d want to go have a beer with or hang out with? Do you feel like as soon as you get off the phone, you’re like, “I don’t want to talk to that person again?” You got to trust your gut. Even though that’s not quantitative, that’s one of the more important things that you can have when you’re evaluating these sponsors.

The market looks at parameters where people are generally moving like the Sun Belt area, Southeastern Florida, Atlanta, Texas, Arizona, and moving out of states like our state, New Jersey, California, New York, and moving to places where the weather is good and taxes are better. Most of the investments I look at have what they call population migration into those areas. You look at job growth and education in those areas. You look at the average salary in the particular community that the apartment is going into.

Evaluating Syndication Deals: One way to combat that uncertainty and not knowing whether someone you’re dealing with is scrupulous or truthful is to educate yourself as best as you can.

The third part is the deal itself. You can get granular in the deal metrics because those get quantitative, but the three main breakdowns of the deal itself would be property metrics, the debt structure, which is extremely important what kind of debt is on the deal. That’s one of the higher risk points of the deal, and then the rent growth projections. That’s a high-level overview of the main things that you look at in a deal.

As the limited partner investor, one of the best things you can do is think about what your end game is like what you’re doing this for, and where you see yourself in whatever time horizon you set out if it’s 5, 10, 15 years. I did that early on and that has made all the difference because then I can see where the goalpost is and how close I am to getting it. If you don’t know where that goalpost is, it makes it a little harder to see what you need to do to get there.

That was one of the very first things that we talked about, you and I in our first conversation. This is one of those things that I bring up for everybody. You need to know where you’re headed. There are a few things that we need to know, where am I headed, why and what my resources are. That sounds easy but it’s so much deeper than that. Once you know those things, picking a strategy, whether it’s syndication or anything else, becomes easier. Setting the goals and the path of that strategy is so much easier.

You want to pick a strategy that is aligned with who you are, all of it. I was talking to somebody about what your resources are and his wife wasn’t on board, but she’s one of his resources. If she’s not on board, that’s going to be a hard journey for you. Your relationships are a part of your resources, personal, as well as network. I go off on these tangents but I love what you were talking about.

My wife wasn’t on board initially either. It took her a little bit of time. I started to show her the numbers, she started to learn a bit more, and now she’s more involved. It takes some time to take a little transition.

Maybe we can talk in EXTRA too about how you helped her to make that transition because I’m getting a lot of those questions lately. Having a goalpost to know where you’re going is going to make a huge difference for you. The cold bolt is your first goalpost. Once you get to that goalpost, there will be another. Don’t worry about limiting or whatever it is. That goalpost will eventually change once you reach it too.

The biggest thing with these investments and when it’s something new like there’s some complicated variable to it where it’s not super intuitive to understand, I found that the hardest part is taking that first step. At least for me and I’m sure it is for others. Sometimes I feel like education conquers the fear, whether it’s a miss or in other things, when you feel like you’re fully prepared and you’ve done all you can, then it brings you closer to taking that first step.

Knowing the things to look for and having a tool as we have discussed helps take the first step. Once that happens, then it becomes easier. The next thing you know, three years later, I’ve done over ten syndication deals. I can still remember my first deal a couple of years ago. It’s amazing how quickly it can happen.

I also believe that education helps to mitigate fear, but there is such a thing as analysis paralysis. Don’t overeducate. There is a point where you have to actually take that step. Talk to us a little bit about how you took those first steps to invest in your first deal.

Believe it or not, the criteria I look for now are different from the criteria that I used on that first deal. That’s the nature of the economy as your education evolves. That first deal, I was primarily focused 80% on the sponsor because even though I had done all the research and my analysis on what to look for in deals, I wasn’t sure that I wasn’t missing anything. That’s that same thing, paralysis by analysis. I was at the point where I was like, “Do I know enough? Do I not know enough?” The way for me to mitigate that is to put even more of a weight on that sponsor.

The sponsor I invested in that first deal, my interactions with them and their organization, I’m like, “These guys are first-class. They seem like they’re doing things the right way. I have confidence in what they’re doing. I’m going to take a leap and go with them,” and I did. Thankfully, it worked out. They had what’s called a fund structure, where it involves multiple investments in one vehicle. Nowadays, I look for more of the single asset deals as opposed to the fund deals, just because some of the times with the fund deals, it’s a little harder.

There are nuances between the funds and the single asset deals, but the single asset deals allow me, now that I’m more comfortable with the vetting, to actually vet more of the deal. Whereas when it’s a fund, they may not have even bought the properties before you’ve invested, so you are 100% looking at the sponsor. At that point, I was comfortable to work with. Whereas now, since I’m more comfortable in what I’m looking at, I’m more interested in the single syndication deals, but that’s what allowed me to take that first leap. I had the most confidence in the sponsor. That’s where I was comfortable with at that point.

What is it that’s changed? You said that you don’t look at the same things. Back then, it was all about the sponsor. Tell me a little bit more about now.

The sponsor is still the most important. At the stage I’m at now, my overall goal was to try within 10 to 12 years to get to a point where I could create enough income to cover my expenses. I had an idea of how much I would have to invest in these real estate syndication deals looking at average or conservative returns to where I would get there in 10 to 12 years. In order to do that, a portion of me is focused on what’s called the velocity of money. I’m looking for deals that may not have a ten-year hold time to where it’s taken time to get my money back.

I’m looking for deals where they may have a five-year hold time. Hold time is just the amount of time that the deal is projected before they sell the property and do any business plan or value add to sell it. I’m looking for deals that may say that it’s a five-year hold but in reality, they’re looking to fix it up and sell it in three or refinance it in three. You then get all your money back during those refinances, then I can deploy it in other deals.

Back then, I was more focused on security, whereas now, I’m more focused on trying to not take extra risks. Just do deals where there’s more of a chance to get in and get out in a quicker time period, so then I can redeploy it because then you could capitalize those gains quicker and then that 10 or 12-year horizon, I could potentially achieve in 7 to 8 years if things work outright. One of the things is that the deals I look for have a shorter hold time. I’m less interested in the fund structure at this point.

Ten, twelve years from now, I may then switch back and want the security, and not want to have to continue to redeploy deals. The markets I’ve looked at have changed a little bit in that period of time. As well as the economic exchange, rent control states, and different things like that affect what you can do in terms of increasing the rents after you do renovations on some of these investments. All those things have changed, believe it or not, in the short years since I started investing. It’s a constant thing you have to keep up with a little bit.

Most of my ladies know what syndication is. I’ve mentioned this a couple of times. What we’re talking about is an operator who has a big project who is looking for money. He’s registered with the SEC, and you have an opportunity to invest in that project. That’s the real simple way of saying it. However, Sam just mentioned a bunch of little things that I don’t think we’ve mentioned on this show. I’d like to break it down just a little bit.

What happens is when you find an operator, you’ll get a project, and then you evaluate that project. You then have an opportunity to either be a preferred investor. Sometimes, they have two different levels of investors and sometimes they don’t. They’ve got preferred and standard. The preferred is usually the people that get in first and they get a higher rate of return that’s paid to them. They’re basically borrowing money from you to start this project. You might get 10% if you’re preferred and 8% if you’re not preferred. Those are just examples.

What happens is the syndicator takes all that money. They either buy the property and start the refurb, or they already have the property and it’s just being used for refurb. They’ll tell you what it’s for. They’ll do a forced value add. A forced value add is they’re fixing it up. They’re doing a remodel. Their goal is to be able to raise rents because when you get a loan on a property like a multiunit, your loan is based on the income of the property. It’s not based on your personal finances but it’s based on the income of the property.

The property is getting a certain amount of income. They refurb it with your money, and then they raise rents. They’ll clear everybody out and put in a bunch of new people. Most of the time, they’ll do it piecemeal. As people leave, they’ll put in people at higher rents. As leases come due, they’ll raise the rents. There are a couple of things that they can do. They can sell the property and do it again or now they’ve got cashflow and they want to keep it.

Evaluating Syndication Deals: There’s a liberating feeling when you have the ability to cover some of your expenses and not have to worry about what’s going on in your job life.

Often what they’ll do is they’ll refinance it. They’ll take some cash out, and that cash out is now paid to all of the investors. This is tax-free income because it’s out of a refinance, so you get this income. A few years down the line, they might sell the property. At that point, you get a portion of the equity in that sale. Before that, you’re getting a portion of the rent every single month.

Not every syndicator will pay on every one of those pieces. Not every syndicator has the same plan or way that they run a project or pay their people. In general, those are the different opportunities. There are a few more opportunities but that’s a base level of what you can get. You’ll hear things like ROR. People will say, “I got a rate of return of 34%.” What does that mean over five years?

What happened was, they got 10% every year. During the refinance, they got another percentage, then they got all this rent, and then at the end, they got another percentage. Some of it’s taxable and some of it’s not. That’s when you hear the ROR. They’re taking all of those ways of being paid and they’re adding that into, “Over five years, this is what it averaged out to.” That’s when you hear that term. That’s what you’re looking at. Did I miss anything, Sam?

No, I think that’s great. You’ve explains it perfectly. With these multifamilies that are more than four units, the value, instead of it being a single-family home where the values are based on comps, or if somebody wants the house down the street and sold it for X amount, so my house is worth X amount. The multifamily, when it’s four units or more based on that net operating income, if it’s a 200-unit property and you increase the rent in each of those units $100 a month, that all of a sudden kicks up the value of that property a significant amount.

The difference between what they paid and what it’s now worth is based on the operating income, they could get some of that cash back, sell it and get some. The nice thing about multifamily units is that there are clear numbers based on what you can collect and what the value is. It’s not like, “I’ll pay you $600,000 for your house.”

When they can increase those rents, then it’s clear data as to what the value of that property is, and then they can use the benefit. It can benefit the investors and the syndicators. Even though it doesn’t seem like $100 a month rent is a lot in increase, when you add in all the months and you add in all the units, it becomes a pretty significant amount of money. You explained it perfectly.

Thank you for that additional input. You’re not doing this on smaller properties. You’re doing this on larger ones. I’ve done a few syndications. I’ve done one in a 252-unit property, I did one in a 550-unit property, I did one in a storage development ground up, and I did another one in a mobile home park that was being refurbed. That’s how I’ve invested in a lot of different areas that I know nothing about, but I want to get in on the action or on the opportunities there. It’s a way for me to go to an expert. Just like we’re talking to a doctor, you wouldn’t do what he does at home. You’re going to go to him. I believe in going to the pros.

If someone’s doing this and doing it well, I want to invest with that person. A lot of these things, I want the advantages that those markets give us without having to learn about them myself. I’m so busy myself. I don’t have the bandwidth to learn all that stuff, so it’s given me an opportunity to invest in places that I can’t learn enough about, but I can learn about the operator. I don’t want to be responsible for myself for a multi-million dollar project, in something that I don’t know, so it’s better to have a team.

That’s one of the examples that you used in relation to the unit size. One of the criteria we have in the sheet is we look for properties that are at least 100 units or more. There are a couple of reasons for that. One is that you can have economies of scale. You can afford to hire an onsite property manager as opposed to if you have a 40-unit or 50-unit. In addition, at the time of sale, if you want to sell to an institutional buyer or private equity, they generally don’t want to look at complexes or apartment complexes that are less than 100 units, so it just gives you more opportunities. One of the criteria we look at in the sheet in terms of the deal-specific criteria, is it 100 units or more? Is it 150 or more? They get assigned scores based on that. That’s good that you said that because that does affect the growth opportunity and the risk profile of the deal. That’s a good example.

Thank you. Talk to us about the kind of people that should be investing in syndications. Who is this for?

It depends at what level you want to get into it. There are crowdfunding websites like CrowdStreet, RealCrowd, and Yieldstreet. A lot of what they do is they aggregate earlier syndicators that have a hard time getting investors, and they then have deal minimums that are smaller. If you go to those main sites, you can see some of the deals that have smaller minimum investments. It’s not always the case but sometimes the deals, they’re newer syndicators so there may be a slightly higher risk profile to some of those deals versus what they call private placements.

In private placement deals, there are two criteria. One looks specifically at accredited investors where you have to meet certain financial criteria in terms of your net worth and your income, and then there are some that don’t require you to be an accredited investor. In some of those deals, the minimums could be as much as $10,000, $20,000. In some cases, even $50,000. The way I look at it is people who have some disposable income and they want to get into real estate but they don’t necessarily want to earn things on their own. That’s one category of people.

The second category of people are those who start with active investing or active rental. They may start with a few single-family, then they have maybe a quadplex or an eight-unit, but they want to get out of the active involvement. There are some syndications that take what’s called a 1031, where they could take that portfolio of eight units investment and then transfer it into these limited partner syndication deals. You see people that either haven’t invested a while or were a little more mature in their career, or have a little more disposable income that gets right in, and go around that active stage.

There are some who start in the active stage that eventually work up to having more units and having more disposable income and cashflow from those units, and then get in syndications that way. One of the barriers to entry in these private placements is that some of the minimum investment sometimes can be a little higher. Once you meet that criteria, syndications are good for everybody.

Everyone should have a key component of real estate in their portfolio. You can do it through REIT investing and equities investing. If you’ve seen the market back in March of 2020, when the market goes down, the REITs go down. There’s not a lot of diversity in that case, but in times like now where the market’s very high and inflation is a concern, you’d want to hold onto the hard assets. Real estate is a great investment. That’s why we’re seeing things become more and more competitive. It’s a long-winded way to say it. It’s right for most people, the syndication investing. It’s just a matter of where you’re coming from and what angle you want to take.

My understanding is that for most of the syndications that I’ve looked at, the minimum I’ve ever seen is $25,000 but usually, each unit is about $100,000. Did you say that you can get in for less? Talk to me a little bit more about that.

In the crowdfunding platforms like the CrowdStreet and those kinds of platforms that have similar investments to syndications, some of those minimums may be as little as $1,000, $2,000, $3,000, anywhere in that lower range. You don’t have as much control over the vetting process of the syndicator because that’s done by that particular website.

In some cases, not always, it’s newer syndicators. A lot of the more mature syndicators don’t always go through those websites if they can raise the capital on their own. Whereas if a newer indicator doesn’t have a track record and is looking for some help from aggregating some of these investors on these websites, then the cost of that is the websites may take a fee, but they also decrease the investment minimum.

Those are the examples where you would be able to get in at a lower minimum. In the private placements like some of the stuff that we’re talking about, you’re right. Most of those are in the $25,000, $10,000, $50,000. Believe it or not, if you ask syndicators, even if the minimum is $50,000, especially if it’s your first investment and you say, “I like what you have to offer. I’m comfortable with you but with my first investment, can I maybe go half of that? After that, we’ll go to the minimum.” If the minimum’s $50,000 and you offer $25,000, most syndicators, especially if it’s your first investment, won’t say no to you.

You just have to ask. Sometimes it can be a little weird to ask, but it’s a lot of money, so you want to be comfortable with that, and they realize that too. If it works out, then going forward, you can then stick to the minimum. There is a little bit of a negotiation within reason that you can negotiate that minimum down a little bit to make yourself more comfortable.

We are running out of time but I want you to talk a little bit about how to use syndications to achieve financial freedom.

The way I look at it is you often see two different mindsets. Some people are either entirely based on investing in the stock market and going that route, especially if you’re not aware of syndication investing. Some people that have had their eyes opened to real estate are completely taking all their money out of their 401(k) and outside the stock market. You find people that are strongly on either side. I find myself right in the middle. I still do my traditional pretax retirement accounts. I am an employee as a physician so I max out those.

If you take syndication out of it and you think about the classic personal finance education, people use a 4% rule in that. The first thing you do is calculate your annual expenses, for example, $100,000 a year. If you want to have an idea of how much of a nest egg you need to save in order to retire, you would then times that by 25, which gives you a 4% withdrawal rate of your money. Let’s say your annual expenses is $100,000, then you would have to save $2.5 million in order to cover that $100,000. That may take a decent amount of time. That’s based on the 4% withdrawal rate.

When you add in syndication investing, where a lot of these investments are somewhere in the 8% to 10% cash on cash, if you’re doubling or in some cases even tripling the return, then that may be a twenty-year time horizon. If you just invested in the stock market, that can be truncated down to somewhere in the 8 to 10-year range, if assuming typical investment returns using syndications.

I wanted to invest somewhere in the $50,000 to $100,000 a year into syndications. Over a ten-year period of time, taking all the returns from those deals and then reinvesting it back into new deals, that would give me somewhere in that $1.2 million to $1.5 million range. If you then take 10% annually from using that cashflow as a rough estimate, even 8%, if my expenses were $120,000 a year, that’s what I wanted to cover. That’s how I came at that number

The beauty is that that would cover my entire expenses without taking into consideration any of my stock market investing. I realized that seems like a lot of money and not everyone can do that, but further along in my career, I wanted to invest. That’s what I allowed myself to allocate to that and what I wanted to achieve in the period of time that I had. That’s the way that I looked at it. I wanted to invest a set amount, assuming a specific return and to cover my expenses within a ten-year period.

That was a good breakdown. How he set his goals, how he decided to achieve them, and set his timeframe on when he wanted to achieve that. He set his goalpost and then set a path to get there. It’s a good example of that. Some of what Sam is doing is helping other people to achieve goals in a very similar way, so he’s created this spreadsheet which is I’m having him on the show. It’s more than a spreadsheet, this tool that helps people to evaluate syndications. Could you tell us a little bit about the spreadsheet specifically?

It started as what I created for myself back in that 2017 timeframe. As I was going through creating the spreadsheet, I started to speak with other real estate investors and other people in the space that are doing similar limited partner investing like myself. They’re like, “Can I get a copy of that? I would pay you for it.” At the time, I’m using it for myself and I don’t feel comfortable giving it to somebody else. I shared it with many friends in the beginning to take that first step and I’m like, “This can break that barrier to entry and break that fear hurdle that people have to get them to take that first step.”

We created a spreadsheet. There are three components to it. One looks at the deal itself to where you are analyzing the deal, going through more specifics in relation to the sponsor, the market and the deal. The other components are a deal tracker, which looks at when you have made the investments. It allows you to track the investments based on the distributions that you’re getting from it versus what they said they were going to pay you, and gives you a side-by-side comparison for all the investments you have. The third component is tracking your path to financial independence. For some of the numbers we just talked about, you could plug in your own numbers.

If the annual amount you can do is not $100,000 but $50,000, then it shows you how long it would take you to reach your desired expenses that people can plug in there. We try to make it like a one-stop-shop for people who are interested in passive investing. For most of the tools, you would need to both vet the deal and monitor your progress, both on the path to financial independence and then the deal performance so that people would take that step.

For some people, that can change your life, having the liberating ability to cover a lot of your expenses with your investments. You may choose to continue to work every day just like you do. I love my job. I’m not looking to quit, but there’s a liberating feeling when you have the ability to cover some of your expenses and not have to worry about what’s going on in your job life.

Someone asked me, “Why are you looking at retiring in two years? Are you unhappy, or is David unhappy?” We’re not, but our priorities are changing, our parents are more elderly, there are things that we want to be able to do, and it’s nice to be able to say, “I don’t have to worry about money so much that I have to be so committed to any particular job.” If Dave and I wanted to take six months around the world and his company said, “You can’t do that.” He can say, “That’s okay.” He comes back and finds another position but he’s not freaked out about, “How are we going to pay the bills?” You’re living in choice rather than in need. It’s a different way to live life.

It changes your whole mentality. I’m not quite at the point yet, but even just getting the passive income that I get in now, then I’m like, “I only need to bring in X amount for my job if I did want to change things.” It goes to, “I want to work,” from where it was, “I have to work.” You feel more control. In this COVID environment where people are getting more stress at jobs and physician burnout, many more people are looking into these things because of that reason. They want flexibility. If there are environmental changes, if there are job changes that they still can feel like they can cover the bills and it’s not as if you’re worried about that. That’s part of the reason we did this. It’s to try to get more people to that place because it’s a different place to be versus the typical.

Evaluating Syndication Deals: Take care of yourself. There’s something that happens when you realize that you’re on a path to a better life.

The other thing is that it’s not that you have to get there to feel that liberation and the comfort. When I started investing in real estate, I was making very little. I was putting away $100 a month type of thing, but the thing is that once you start taking that action, you suddenly feel like, “I’m going to be able to take care of myself.” There’s something that happens when you realize that you’re on a path to a better life and that you’re going to be able to take care of yourself. You’ve figured this piece out. You can figure stuff out. You don’t have to be at the goal to feel that feeling of liberation. It’s getting on that path that opens you up.

There’s something about seeing the checks come in the account that I use for syndications and I’m not doing anything. Even as a physician, if I stop choosing to go to work, I’m not going to get paid. My income as a physician or as anyone who does labor that requires themselves requires me to go to work to do that. I don’t make money while I sleep as a physician, whereas with this kind of investment, it’s unlimited in terms of it doesn’t have any limit to my time.

I only have the same amount of hours in a week that you have and everyone else has, whereas, with this kind of investment, the limit is basically for your financial means to do it. From there, it makes money without you having to do anything, which is a different place to be. It’s the classic passive income as opposed to the active income of your day job.

Here’s the cool news. He’s offering this to the public for the very first time. You get this price and he’s going to quote, but just understand that the price will go up, so if you’re reading this 1 or 5 years from now, the price is going to be a little bit different. They want to know how much it is for this tool.

What we have offered is I wrote a free eBook that goes over in more detail. It’s in a book format and an 80-page eBook on How to Passively Invest and Vet a Real Estate Deals. That’s free and there’s no price. You can just download that at PassiveAdvantage.com. There, you can also find the tool that we’re talking about that goes through all of the different metrics to look at, to track the deals you have invested in, as well as your path to financial independence tracker.

You can purchase the tool. The price of the tool is $199 but we’re giving your audience a 10% coupon discount. At purchase, you put in the words BLISS10, and that will give you 10% off. It’s the least we can do. Hopefully, you guys find the value of it and it’ll help with your education or help to see what’s important when looking at these deals, as well as see where you are on the path to financial independence.

Ladies, I do have a special web URL for you to go get the product or the tool and then put in the coupon code. That URL is BlissfulInvestor.com/syndicationws. When you go in there and you select the product, then you can put in the BLISS10. That’s how you get your 10% discount. This pricing is already incredible, but it’s nice to get an extra discount, so go check that out. The other thing that I’m super excited about is Sam has agreed to do a webinar for us where he actually goes through the worksheet. For those of you that want it, you know how to get it.

To me, it seems like a little bit of a no–brainer. If you’re interested in syndication, this is a no-brainer price so go do it. I don’t want you to stall, but if you want to know more or you’re more interested now in syndication and you want to know what the numbers look like, Sam and I are going to be doing a webinar together. He’s going to do a breakdown of a deal.

That is going to be on Thursday, November 18th, 2021, at 5:00 PM Pacific time and 8:00 PM, Eastern time. If you want to sign up for that, go to BlissfulInvestor.com/samwebinar. Definitely come. You get to ask questions. He’s going to go through a presentation and he’ll answer as many questions as we got time for. Please put that on your calendars and you’ll get some reminders too. Do you have anything else that you wanted to share with us before we sign off?

I think we’ve covered a lot. I truly appreciate you taking the time. It’s been a pleasure talking to you. It always is. I feel like we have a lot of synergy in terms of what we look for and what we’re looking for in terms of what we use real estate for. I want to bring it to more people to get to where we are, to make their first investment, and I’m hoping that this tool allows people to do that. I’m happy to answer any additional questions that they may have and happy to answer more questions at the webinars as well.

Thank you so much. This has been such a good show. Thank you for all you’ve offered in this portion of the show.

It’s my pleasure. Anytime.

Ladies, stay tuned. We’ve got more in EXTRA. We’re going to be talking about going through a whole deal. We’re going to do a run-through on a deal. I’m going to talk to Sam a little bit about that transition that happened for his wife and how they made that happen because I know this is a big topic for you, ladies. I am going to also ask him about the 1031 DST. He threw that in just a tiny little bit, and it’s a topic I’m interested in. I’m going to ask him about that in EXTRA.

If you are interested in those topics, stay tuned. If you are interested but are not subscribed yet, just go to RealEstateInvestingForWomenExtra.com. You get the first seven days for free, so you could get this one for free and as much as you can listen to in the first seven days, then you can stay subscribed if you’d like. For those of you that are leaving Sam and me, thank you so much for joining us. Have a great day and always remember, goals without action are just dreams. Get out there, take action, and create the life your heart deeply desires. I’ll see you soon.

Important Links

• PassiveAdvantage.com
• tool – Deal Analyzer
• BlissfulInvestor.com/syndicationws
• BlissfulInvestor.com/samwebinar
• RealEstateInvestingForWomenExtra.com

About Dr. Sam Giordano

Dr. Giordano has been a practicing physician at an academic medical center for ten plus years and has had consecutive designations as a “Top Doctor” in his geographic region. He has also published multiple manuscripts in peer reviewed journals. He has an avid interest in personal finance and financial education, and has formed a personal finance teaching curriculum for residents and fellows at his hospital. He is also an assistant professor at the associated medical school for his hospital. He began exploring real estate investing in 2017 and has now invested in multiple passive syndication deals during that time as a limited partner. He realized there was an unmet need and formed his own tool to better and more efficiently vet passive real estate syndication deals. He has personally experienced the benefit of passive real estate investments as a busy professional, but also realized how few of his colleagues were aware they exist. He is now committed to changing that, and feels a passion and calling to bring an exposure to passive real estate investments to more professionals to ultimately diversify from the stock market and forge their own path to financial freedom.

He is a proud husband and father of three children, and during his spare time enjoys hiking, exercising and traveling to explore our beautiful world.

Moneeka Sawyer

Moneeka Sawyer is often described as one of the most blissful people you will ever meet.   She has been investing in Real Estate for over 20 years, so has been through all the different cycles of the market.  Still, she has turned $10,000 into over $5,000,000, working only 5-10 hours per MONTH with very little stress.

While building her multi-million dollar business, she has traveled to over 55 countries, dances every single day, supports causes that are important to her, and spends lots of time with her husband of over 20 years.

She is the international best-selling author of the multiple award-winning books “Choose Bliss: The Power and Practice of Joy and Contentment” and “Real Estate Investing for Women: Expert Conversations to Increase Wealth and Happiness the Blissful Way.”

Moneeka has been featured on stages including Carnegie Hall and Nasdaq, radio, podcasts such as Achieve Your Goals with Hal Elrod,  and TV stations including ABC, CBS, FOX, and the CW, impacting over 150 million people.

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