ONE Mental “Switch” 99% of Real Estate Investors Miss In Private Equity – Natu Myers of Raises.com
There’s a tried and true method of thinking that people use to structure their real estate deals or their mergers and acquisition deals, whether it be a fund or a syndication. And this method goes past all the nonsense and circles and people walk and walk through over and over again. And the method is. Thinking from the top down. When people work on structuring their transactions for a real estate fund or real estate syndication or mergers and acquisitions fund, when people don’t think from the top down, you know, disaster strikes in the sense of people being confused and what to do from the compliance side. From the investor relations and outreach side. People get stuck with one investor that they don’t fit the mandate for and their deal isn’t closed. And then even as an entrepreneur, people can get stuck. And so I’m going to walk through the main ways. I guess there’s thinking from the top down versus the bottom up and why in 90% of these cases, thinking from the top down is the solution to your planning problems and why you’re not able to get results in either going to set up a proper real estate fund or doing your proper syndication if you haven’t done so before. So when it comes to people who haven’t set up a mergers and acquisitions private equity fund or a real estate fund, when people think from the bottom up, they get to suck on the details, they get intimidated, they get scared. (private real estate investments)
They look at you know, they look because some people, you know, they’re very stuck in the weeds. And it’s paralysis by analysis because, you know, when you look at the mountain for the for the pebbles, you’re not going to be able to even make that first step to even get to the summit. I’ll give you a specific example. The reason why, you know, my company raises dot com. We’ve been able to create hundreds of private equity funds in the real estate niche and in the M&A niche and also structured tons of syndications is because we know the main variables at play and we can see the big main options objects that people should focus on when we bring people in and when we look at other companies that do similar things and we look at investment bankers and the other companies we used to work for, what we saw is that a lot of these investment banks, they ask the right questions and they knew the right objects and relationships and systems that went into it. For example, you know, an investment bank that raising $100 million for a deal. They would ask several questions about the revenue, about the EBITDA, about the principals, about the lawsuits. And then it was really simple when it comes to creating private equity deals, you know, things that are important to focus on from the top down are, number one, the jurisdiction. (private real estate investments)
Because if you look from every rule, every law generally comes from a country. And within that country, you know, this is from the top down within that country come different rules and come different sub jurisdictions within that country. And within those sub jurisdictions and federal jurisdictions, you have rules. And the main rule that governs most Commonwealth countries and the United States of America are the rules that are governed by securities law. And securities law is really just split into two parts. There are publicly traded securities and there are privately traded securities. When people are working on raising capital by creating a private equity fund or creating a syndication, what they’re doing, they’re creating a private equity deal which is subject to the laws of securities law by the trading of private equity securities, meaning that you’re going to fall subject to exemptions within the private equity securities. And we’ve made videos on this before. If you just go back to raise the dotcom such, naturally you will be able to see it. But you’re doing one of the exemptions within private equity securities law. And if you just understand that’s that removes 99% of all the confusion that you may have. Because once you understand that you’re just filing an exemption, you just have to check with exemptions applies for your situation. (private real estate investments)
So that that’s pretty much it. There’s no like thinking about it or whatever. Just follow the country, the jurisdiction of the country, the sub jurisdictions, and then the private and the securities law of the jurisdiction. And then look at the private equity exemptions which allow you to trade private equity securities within that jurisdiction. And then you’re going to see like a list of the different exemptions that you can use to sell your private equity deal. And if you do that, then you just follow the manual and take things step by step. But if people see things from the bottom up, they’ll get confused. They’ll start looking at the exemptions first and they’ll start looking at the detailed rules first. Look at the blue sky laws and the detailed rules first, and then they get stuck. And they when they’re when they get stuck, they won’t be able to see beyond all of that and then to see how the entire picture works together. And when it gets stuck, that’s when people start getting intimidated and paying like $200,000 for a lawyer. That will really take you in circles because they don’t they’re not able to see things in the grand scheme of things if you look. Got a human organism. You look at a body, you look at his system. If you focus too much on the details without keeping into accounts, into into context the entire picture. (private real estate investments)
That’s how cancer is created, cancer and diseases. And, you know, defectors of a system of an organization is just windows and too much of a focus on too much locality. You focus too much on one part of the body, one part of the system, one part of the entire system of the jurisdiction, without keeping into account, into into context the entire picture. So that’s why a lot of people get stuck and confused. And, you know, it’s it’s like it’s crazy. It’s like a rampant disease. But then once people understand the context in how it works together in a system, then everything starts to make sense and then people start structuring their own deals by themselves. So that’s ideally where we want to get everybody to. So the next thing that people get stuck on is when it comes to investor relations, they see things from the bottom up. What people do, they they don’t understand that people have mandates and mandates just show you the overall condition of the market. There are tons of investors that are looking for a certain return, a certain type of deal and a certain type of pattern. And there are patterns that are in the markets. But what people do instead, they really focus extremely high on the personality behind it, which is important. And these things are important. (private real estate investments)
People focus on getting one investor at a time and just having a really good relationship with that investor, and that’s extremely critical and important. However, what people forget is that there are patterns by what people want in the markets. There are some people who would invest in a deal if the deal just gives a really good returns. You know, they hit everything that they’re looking for and it fits within the mandate of what they’re looking for. And then the relationship is like a bonus that will get the person to trust them. But what other people do, they put their relationship before the deal and then they work on just getting random relationships with people, with random deals without getting the good results. That’s consistent across the market because people want to have a consistent result in terms of the investors that they can reach out to. And then, you know, you’re able to scale and get tons of investors. What people fail to understand is that there are investment banks, there are broker dealers, and there are private equity firms that are looking for deals without respect to the individual who is selling the deal. They’re just looking for a certain result and return. The only problem then becomes finding or getting their relationship to the person or getting the relationship to the person who has the relationship. So what I really mean and what I’m trying to say is instead of just finding a random investor and selling them your deal because you have a good relationship with them, without keeping into context the quality and the results of the returns of your deal, You want to do both. (private real estate investments)
You want to understand that the market has patterns and there are tons of investors that are looking for certain returns and don’t worry too much about their relationships initially because you build your relationships in the long term. But understand there are tons of private equity firms in terms of investment bankers and tons of shops that just look for a certain return and then they can handle the relationships for you. So once you understand the patterns and try to understand broad patterns with what investors will invest in, then it removes a lot of the stress of you having to find a random investor and really kiss her. But for like ten years, 20 years or five years or months about things that you both don’t care about, like playing golf and you actually focus on getting good results to the market at whole, then you’ll be able to build a team around you that can help you build those investor relations campaigns. And once you understand that there’s a broad mandate that certain types of investors are looking for, then you can systematize your capital raising and think beyond just random investors. (private real estate investments)
Third, overall, when somebody stuck in an industry is very hard to innovate and think outside of the thing that kept you stuck. There are tons of real estate investors that have been invested in real estate for decades and they’ve never created a private equity syndication. And to me, it really baffles me because many people, they stay stuck in JV agreements. And the only reason many people stay stuck in JV agreements is either because they don’t know how to use a private equity syndication to get more capital. They are scared to do so, or they are probably just probably they’re a criminal and they don’t want to actually, you know, be subject to the scrutiny of securities law. But when people what people don’t understand is when you’re so stuck in the typical real estate niche and you can’t see beyond that and you can’t see the fact that get to a higher status, you have to you know, people deal with private equity, you know, you paper up your deals, then that can keep you limited. Even the people that have done many one off deals in mergers and acquisitions are in real real estate syndications. For people to create a private equity fund. It can even get them to that next level. But if people get too stuck in that syndication world without doing it for quite some time, then they may be limited. (private real estate investments)
And so with all these things, a lot of people that haven’t gotten the relationships or who get stuck in their own mode of thinking, you have to stop thinking from the bottom up. So try thinking from the top down. See things from the big picture. And, you know, it’s very easy. It’s much easier to see things from the big picture if you work from an industry that you’re not part of. When you look at what Elon Musk did with electric cars, one of the reasons why he was able to innovate the entire industry is because he came from not he came from technology into automotive and he came from a different niche. You know, so he was able to see things from the top down. And then he got the advisors and he hired the people and he bought out the stuff, bought off the company, bought out the assets to fit to fill within the fit within the gaps that were needed. But himself saw things from the top down. And so in short, just to recap, number one, when you’re looking at papering up your syndication, your private equity funds for real estate or for M&A, make sure that you try to see things from the top down because you’ll be able to focus on the broad laws of the land so that you don’t stay stuck on the intimidating laws up close. (private real estate investments)
And when you see the entire broad laws of the land, then you just fill in the blanks and do the right exemptions because then you’re doing you understand what’s going on. If you don’t understand your country’s securities law, private securities, law exemptions, and that’s it rather than the exemptions. And then you just see that and then you get scared because you don’t know what it means. Number two, people who reach out to investors, it’s really important to build that relationship, but build that relationship in the context with knowing that there are actually broad market trends. And remember, you want to systematize your capillaries. And by knowing that there are broad trends of what people want, and even if you don’t have relationships with people to get you the investors you need, you can still find the people who know the people or know find the people who have the relationships so that you can just get people, you know, you can just get your investors into your deal because you understand what the market wants at a broad level, rather than focusing on what one specific investor wants and being stuck with that one specific investment. Number three, in general, the reason why a lot of these things are intimidating for people who haven’t done this before is because it gets stuck in their own niche. (private real estate investments)
When people focus on clicks and fix and flip, they focus on mergers and acquisitions and originating a deal. A lot of people don’t think about the big picture and about deals that they like, about, you know, the next step in their in their career or their business. You know, many people who are doing real estate investing, they get intimidated with securities law because they don’t see things in the broad picture of things. People who have done real estate syndications or M&A deals, maybe they get stuck because they don’t understand that a private equity fund is the next step for them. And this is what a lot of people are doing who have closed a lot of deals. But if you take a step back and then you understand that, yes, these are different ways that people run their business and this is what the market is doing in the broad scheme of things. And if you step outside of yourself, outside of the things that you’re used to, then you might be able to see things from the big picture. And so with this, if you’re somebody who wants to see things for the big picture and you don’t know how to just head to razors dot com and book a call there, hit that subscribe button. If this video made some sense or click the like button. And with this, we’ll see you in the next one. (private real estate investments)