Breaking Into Real Estate Syndications: From $1M Deals to Passive Income with Tilden Moschetti, Esq.

Josh St. Laurent: Welcome to the Wealth in Yourself Podcast, a show dedicated to helping you master the complex subject of money by simplifying it through stories and actionable advice. I'm Josh St. Laurent and this is Wealth in Yourself. Welcome to the Wealth in Yourself Podcast where we help people to design their ideal life and take control of their time and money. I'm your host, Josh St. Laurent. Today we're joined by Tilden Muschetti. Tilden is a syndication attorney that focuses exclusively on regulation D offerings for real estate syndicators, business owners, entrepreneurs and private equity funds. Tilden is a highly regarded expert in syndication as an attorney, a syndication coach, general counsel to two private equity funds and an active syndicator himself. He has been featured on NPR, NBC News, People Magazine, the National Law Journal, the San Francisco Chronicle and the LA Business Journal. Tilden came to the practice of syndication law as a syndicator of his own deals first. Josh St. Laurent: Tilden's practice as a real estate attorney changed gears when a partner showed him a deal and asked him if they could syndicate that deal together. Both investors and Tilden made a great return so he kept syndicating. As his success grew, doing deals nine years ago, he refocused his firm away from real estate law to syndication law exclusively. Tilden, glad you're here. Excited for the conversation. Tilden Moschetti: Me too. Thanks so much for having me, Josh. Josh St. Laurent: So maybe if you can give us kind of the high level overview of how you got here today and maybe some of those early deals that you did that made you kind of shift gears in your own practice, I'd love to hear. Tilden Moschetti: Yeah, I mean, that first deal that you talked about was a deal that a brokerage partner showed me and said, hey, check this out. That's a really good deal. Tilden Moschetti: Yeah, this is really good. He said, we should syndicate it. And I had no idea what he was talking about really. And I just said, sure, let's do it. I'd figure it out. And I did. That was good. And just got more and more deals done and just started thinking, well, I don't like the practice of being a real estate litigator. Why don't I just do syndications? I love this world. So yeah, about nine, 10 years ago, I moved over full time and been doing that ever since. Josh St. Laurent: Maybe starting with the basics for someone who's listening who's never done a syndication deal. What are the nuts and bolts of a syndication? What is it? How does it work? And what would someone expect doing a syndication their very first time? Tilden Moschetti: Absolutely. So let's start really high level. So any time there is an offer that's made where somebody is going to invest money and they're going to be passive. Tilden Moschetti: That's a security. And a security under US rules either needs to be registered with the SEC or fall under an exemption. The most popular exemption is regulation D. And so we talk a lot about regulation D. It's about 98% of those offerings go under regulation D. It basically is collecting a pool of money from investors. It's run by a sponsor, a manager, a syndicator. They're all the same person. That's the person who's running the deal typically. And they're making some profit off of hooting that deal together and making it work. The investors get to take a nice passive stance and then they get to enjoy the benefits of a good investment. Josh St. Laurent: Interesting. And so for somebody who is, let's say, on the investor side, maybe starting there, what should they plan on, as far as do I need to be an accredited investor, what areas to focus on? Tilden Moschetti: What are some of the questions that they should be asking themselves if they're looking to get into bigger deals and syndications? So being an accredited investor is nice because it just opens up your door, right? A lot wider. So if you're an accredited investor, you can invest in what we call rule 506 C deals where you need to be an accredited investor. Those are those deals that the syndicator is basically marketing out to the outside world. So you don't necessarily know them, but want to get in. If you're not an accredited investor, you're probably going to only be able to invest in rule 506 B deals or in regulation A or regulation CF, those kind of deals. And you're going to need a personal relationship with that sponsor because they're not allowed to market to you. So they can't make the, you know, they can't advertise it. Tilden Moschetti: So the only way they even find you really is that they got to know us. So five or six B deals can take up to 35 non accredited investors in any 90 day period. So there's always, there's typically enough spots for non accredited when those deals are going for. Josh St. Laurent: How does someone know? Let's say for a listener who's been buying single family homes and do plexes and they're saying to themselves, you know what, I'm wanting to branch out and do some bigger deals. In your opinion, how do they know when they're ready to move on to something a bit bigger, like a syndication and work with, you know, potentially 30, 40 other partners? Tilden Moschetti: It really is when, and it happens quite a bit. So a lot of the initial calls I get from people are, you know, they've done some deals for themselves. They've made good money. And now they really are looking to go to that next level. But really, it's a capital need, right? So they keep the deals themselves for they may not have the next five million to invest in a really big deal or in 10 million or whatever that need is going to be. And so when that need is there for that additional capital, that's when they'll start thinking, yes, put together a syndication or a thought. Josh St. Laurent: What is their responsibility as an investor? Because I've heard people going this route, let's say, let's stick with the same example, single families, do plexes, all of a sudden, I want to jump into this bigger pool and do a bigger deal as part of a syndication. What is their responsibility as the investor? And I've heard sort of the terminology of general partner, limited partner in a way to kind of differentiate the two roles and responsibilities. Tilden Moschetti: Yeah. So the sponsors are typically the people we call general partners. It's kind of an agronistic because they were really talking about one, you know, a limited partnership of role. And then the limited partner is typically the investor. For the investor side, when they're going to come in as a limited partner or, you know, basically they're acting as an investor, they may not have a significant amount of things that they need to do, right? They need to, if they need to be an accredited investor, they probably need to establish that they're an accredited investor. They need to make the capital commitment that they promise to make. And then really what they should do, and probably most do, is just do due diligence. You know, make sure that the deal that you're going into is the kind of deal that you'd want to go into. You got, you trust the sponsor, you trust this indicator, you can't understand what the offering is enough to really have, have it make sense and make sure that it fits into your, what your need is. I think what goes wrong sometimes would be you have investors who make investments into a syndication. And they didn't realize that it's not a cash flowing kind of syndication. It really is just, we get the cash at your five and you're going to have to wait for that. And so then something happens in their life. They're expecting this cash, you're being able to get it. And it's not there. Well, it's not really the fault of the sponsor, though they should have made it a little bit more clear because really you've probably got a PPM that really explained it all anyway. So it's just making sure that the way the deal works works for you. Josh St. Laurent: And that doesn't sound dissimilar to analyzing a duplex, you know, a lot of the same considerations, but I'm sure that the due diligence process is probably slightly different. Could you talk a little bit about what that process entails? Tilden Moschetti: And I think I heard you say the PPM. And so for the people listening, you know, what's the PPM, the due diligence, like what is that process and maybe even how is it different than, you know, analyzing a smaller deal? Sure. When a sponsor meets anybody, so when they are thinking, you're thinking about investing with any sponsor, they probably gave you a private place in the Mar random. They're pretty much required to. So they hopefully did that private place in the Marano is kind of like the workforce document of that offering. So it goes through what all the risks are, what conflicts of interest the sponsor may have, what the terms are, how distributions are going to happen, you know, what kind of, this be the thought process behind it. All those things are contained in the PPM. That PPM also explains the operating agreement. So the operating agreement really is the rules of the investment company itself. So it's, we make distributions this way quarterly. These are the rights. These are voting rights, things like that. Next to the time that the PPM should explain all of the workings of that operating agreement. The other document that you'll have gotten is the subscription agreement. The subscription agreement is the document where the investor says, I'm going to give you $100,000 and in exchange, I'm getting this piece of this offering. So I'm getting this piece of this company. It really binds them to the operating agreement and to the company itself. And it's kind of that agreement that have gotten a PPM, I've read everything, I understand the deal. I want to be a part of it. Here's my money. And so the due diligence process should be reading that PPM, making sure that it's understandable, making sure that it's the right deal for you. And then really kind of the other things that just make sense. If you're going to give $100,000 to somebody, you may want to at least like Google, right? And see who this person is and not find out that there's 30 lawsuits against them. It's probably a good idea. Just kind of get a good sense of what you're going into is that due diligence. If you're investing into a property and it's nearby, drive by it. Because why not? You might as well. So things like that are what I recommend. Josh St. Laurent: So continuing down that path, like are there red flags that you look for? If you're helping someone go into a syndication as an investor, are there red flags or agree flags that you're seeing that constitute, hey, this could be a great deal or stay away from this syndication over here? What are some of the key differences between a great deal and something that nobody should be investing in? Tilden Moschetti: For me, it all starts when I'm acting as a sponsor. Does what I'm offering to investors? Does it sound compelling? Does it sound like something I want to be a part of or does it sound like something cookie cutter that they could really go to anybody for it? If it sounds like that, it's probably not a great deal. There's probably a better deal that's got something a little bit more compelling. At the end of the days, you've got tenants. You've got all these things where cash are coming in from. It'll be compelling to them too if it's got a compelling story. If it doesn't, if it's very boring, it's probably going to have a hard time getting tenants as well. That money is not as likely to come in. The other things that just have to be there is look at the underwriting of the deal. Does it make sense? Does it make sense in a way that seems realistic? If you see a deal that's promising 100% returns in a year, they better really have a good explanation on how they're able to do that and why they're offering it to you to begin with because those are pretty crazy returns and they should just keep it for themselves. Right? So, definitely a good, too good to be true. It probably is. The numbers also just need to tell the right kind of story that just makes sense. It should read very clear, okay, I see how they're going to make that money or how they're going to make that kind of return. And it's okay if it's a little off by a little bit in terms of what, you know, while they're promising a 20% IRR and I think it's going to be in 19, I wouldn't knock it out for something like that. But, you know, if it's something like, I don't know how they're going to make a penny, that's probably not a good deal to fill it in, too. Josh St. Laurent: Yeah, that makes a lot of sense. So I guess putting a bow on the investor side of a syndication, maybe we can talk a little bit about some of the downsides, let's call them. Like, if you could talk a little bit about liquidity and then also I think one reason people look at syndications is also sort of this limited partner role where maybe they're not having to, you know, fix appliances or whatever it is that they had to do in their duplex. And you talk a little bit about their role in this syndication and also maybe some of the downsides or at least things to be aware of like liquidity. Tilden Moschetti: Yeah, I mean, there's really two downsides. Tilden Moschetti: It's loss of control and really the loss of liquidity. Loss of control, you're probably not going to have very much of a say directly in the decision making. Most of the time it's the sponsor who's going to be making really all of the decisions. And you're trusting that sponsor in order to make those decisions. Ultimately, their incentive should be to maximize the amount of money it makes, which makes you more money and makes more money for them and everybody's happy. But there is that, well, I don't really get anything. You should though be able to have an open line of communication with that sponsor and still be able to ask them and voice their opinion and any good sponsor and most of them are good sponsors. We'll always take a call, we'll always talk with you about, well, here's what's going on. Here's why I made that decision. If you have another idea, I'm open to hearing it on what we should do, we can talk about. It should always be able to get a hold of them, pick up the phone. On loss of liquidity, if I'm giving you $100,000 and my deal is I'm not going to get the money until five years from now, it's really hard to get that money out. So it kind of comes from what all the money is probably put into the project. And so there's not just your $100,000 sitting there waiting to come back to you. It's already been committed. And we can't just give you the money back directly and have every one of the other investors who put money in get hurt as a part of it as well. So most of the time there are ways to get out. I've probably never had a deal where there hasn't been somebody who had a life event who needed to get out. Tilden Moschetti: And I've never also had a time where I haven't been able to get them out as part of the process. The only thing that we can't do in this context is we have a prohibition on resale. So what that basically means is the SEC says, we don't want to create another market for these private offerings where basically people can just sell their shares in these indications through some website. That's really the sponsor's activity to do those sales and not for the individual investors. So you can't really set it up that way, which makes it a little bit harder to get that cash out. So liquidity is a problem. And something we go through with sponsors to try and figure out what the best solution is every time. Josh St. Laurent: Well, I'm glad we're talking about it. So at least it's transparent for people listening. And I think the last thing I want to ask you before we switch gears over to kind of the sponsor perspective is for people listening who are familiar with a REIT, for example, how would that be different than going into a syndication? Tilden Moschetti: It's really not. So a REIT is in general, is oftentimes, you know, a private REIT is probably put together under regulation deed, just like anything else. Public REITs have gone public. They've gone through that process of registering with the SEC and then private REITs just start going under probably under regulation deed. So they're kind of the same thing. The REIT status itself is really a tax thing. So the corporation of that entity, so they're using a corporate structure, it doesn't have to pay taxes on the profits that it's distributing and then pass on those profits to the investor who also has to pay taxes on it. So it creates a single layer of taxation for the investor rather than this double layer of taxation and it works on corporation level. So other than that, they're really exactly the same. Josh St. Laurent: Got it. So a lot of people investing into syndications as individuals or do they do it through an entity like an LLC or what do you see typically? Tilden Moschetti: Both. Yeah, most people probably do it as individuals, but I think every one of my sponsors has always asked me about, well, I've got these people coming in with an LLC because they want to get to a different tier of distributions or whatever reason that they have. They want to meet the minimum investment, whatever it is, what's that structure look like, they'll do it through an LLC. It doesn't particularly matter people buy in through their trust or their corporation or there's almost always a way to get whatever that structure looks like in. Josh St. Laurent: Cool. Thank you. Well, let's switch gears then and talk about from the perspective of a sponsor, maybe just starting with who does this make sense for? Who should be thinking about becoming a sponsor? Tilden Moschetti: Yeah, I mean, it really makes sense for a lot of people. So really, anytime you want to raise additional capital and you can make a little bit more money on that capital that you're using, that's why you do it. Tilden Moschetti: Right? So if I can take in people's capital and pay 15%, but I can make 20% total on that money, well, now I'm just making that additional 5% for myself. It starts making good sense. So this applies not only to real estate deals, it applies to businesses, to startups, to different kinds of offerings. So we're going to find an oil of well and we're going to make money off selling the oil or whatever. That can all be done. It can be done selling tax credits. Any of those things are all fair game and really make sense for everybody. You're not limited by the type of deal you're doing. If you're someone who wants to build self storage on a plot of land that you have, you could do a syndication. If you want to buy 100 unit apartment building, you could do it as a syndication. Josh St. Laurent: Is there a minimum sized deal that people should be thinking about? And I guess sort of a double question here, what's the minimum commitment for the sponsor themselves? Is there a requirement to how much capital they must have or should have in the deal when they're starting a syndication? Tilden Moschetti: Let's talk about minimum deal size. This is first. So probably I think it starts really making sense once you're raising over a million dollars. When you're raising over a million, it works out when you take into account attorney's fees and your time marketing that you'll probably be making more money to make it worth its time. It may not make it sense for less. That said, I've done deals for people who are just raising 200,000, but they wanted the experience of doing it so that they could do a million, so they could do two million enough. Tilden Moschetti: So there are people who want to just ladder it up and they may start smaller, but probably most likely that break even point is a million dollars or more. In terms of what the sponsor should put in, I always try to put in as little of my own cash as possible because I'm working that deal and I'm using the cash for the next deal and the next deal and the next deal. They probably will need to pay attorney fees up front. They'll get reimbursed for it on the back end, but that needs to be taken into account that it's not free to set up. I don't know if a single attorney who takes money at the end, we all take it at the beginning. So there is going to be some sort of capital commitment. If you're buying a piece of real estate, you're probably making that down payment or that deposit yourself before getting reimbursed from investors. Tilden Moschetti: Just because you're going to be trying to bring money in at the same time that you're doing a deal, most of the time that deposit is still going to need to be done by the sponsor. Josh St. Laurent: It sounds like there isn't necessarily a minimum capital commitment. It's not like they have to have at least 1% of their own capital in the deal or anything like that. Is there a range that you could give for startup fees for someone listening who's never done a syndication who's saying, you know what, I've got this $10 million property I'm looking at. That would be interesting to raise some capital. What would a range of startup costs be for someone in that situation? Tilden Moschetti: I mean, aside from legal costs, it's probably going to be somewhere between five and $10,000 and then legal fees on top of that, which are if you go to a boutique firm like mine, it's not going to be $40,000. Tilden Moschetti: It's going to be less. There's just a cost associated. Josh St. Laurent: Okay. Somewhere in the neighborhood of maybe like 30 to 50K is kind of like what I'm hearing is that fair to say? Tilden Moschetti: Yeah. I think if you had that much, that would definitely be able to do it. Josh St. Laurent: Cool. And then thinking back, you had mentioned earlier, there's different types of syndications you can set up. I don't want to miss quote you here, but a type A, I believe was a credit investors only. I'd imagine certain requirements there, whereas the type B was allowed, I think you set 35 non accredited investors. Can you differentiate for us the differences between the two and some of the high level points? Tilden Moschetti: Let's start with the decision making process. First of all, how you choose and then we'll go on to what the differences are because I think it makes a little more sense. Tilden Moschetti: So first you look at where your investors are coming from. So if you know all of your investors, you're not going to go through the process of doing what's called the 506C offering or you have to not only, does everybody have to be an accredited investor, they also have to verify that they're an accredited investor. You already know everybody. So why are you, you don't need the additional ability to advertise? Whereas you don't know anybody, you don't know anybody who's going to invest. You don't have much of a choice here. You've got to be able to solicit and the only way you can solicit under RECD is through the 505C. So there, it's going to be accredited investors only. We're going to have to come up with some sort of verification process for them to make sure they're accredited investors and that's who it's going to be. Tilden Moschetti: So really the decision is kind of made for you. It's kind of made by what where are they coming from. Because I would always do a 506B if I just know everybody. It's just simpler and faster. Josh St. Laurent: It seems like it would be. Like in my mind, I'm thinking through, hey, I know five people that I've done deals within the past and we all want to get together and pull our body perfect. Don't have to do some of the regulatory requirements. Josh St. Laurent: It sounds like what is the difference maybe time wise in setting up the two different offerings? One, where you have to vet everybody, the other one where you already know that people I'd imagine that it's more time intensive setting up the more complex structure. Tilden Moschetti: No, it's actually not from the legal point of view. From my point of view of what I do, it takes the same exact amount of time. Tilden Moschetti: So it really becomes, it's that conversion cycle that takes longer when you're doing a 506C from yes, they want to come in to getting their money. And that's because we have to verify that they're accredited investors. Otherwise it's the form that we used to file with the SEC. It's the same form either way. Filled out slightly differently. The PBM looks pretty similar between the two. We just have to establish a little bit more when we're taking non-accredited investors than we do with accredited investors. And then we have to basically put the package together, the operating agreement and everything like that. Josh St. Laurent: So to your point earlier, it has a lot to do with the decision making process. If you know, hey, I'm looping in a few family members who aren't accredited investors. And if you partner up on real estate deals with who meet X criteria, I'm going to set the deal up this way versus I don't know anybody and I need to kind of advertise this and get out there, you're going to set it up differently, is that fair to say? Tilden Moschetti: Yeah, exactly. And the nice thing is as we can go, we can grow it. So if I set up everything under rule 506B and say I need to raise $5 million. And I talk to everyone I know and I get $3 million, so I'm $2 million short. I can actually go from rule 506B to 506C. So I can do that. I close off that 506B so everybody kind of knows we're not taking any non accredited investor money anymore. We let time go by so the SEC doesn't think it's the same deal. And then we open it up again under rule 506C. It's all fair game. We just find investors at that point. We can market, raise that additional $2 million. Josh St. Laurent: That is really interesting. I think a really important point for someone who is wondering what if I fall short in my capital raising. The thing that I'm just thinking through is what is your responsibility as the sponsor and doing due diligence on your investors? Josh St. Laurent: I'd imagine you don't want the person or persons who are going to come to you six months in and say I want all my capital back. Right. So what is your responsibility when you're vetting investors into your syndication? Tilden Moschetti: So we don't need to do a lot. We need to comply with the anti-money laundering laws and know your customer rules, their mechanisms to make that very painless. So that way we make sure we're on the good side there. That's very important, but it's not that big of a deal to make it happen properly. So the other part is, yeah, you just want good investors that you want in the deal. We normally will do that with by setting minimums. And it's not minimum investment because we're trying to keep certain people out or whatever. But the people generally, and this is a gross generalization who invests the least amount of money, oftentimes are the most demanding of our investors. Tilden Moschetti: My worst investor invested $5,000. Should have taken them, but I didn't. It's not like they sued me or anything, but it was just like constant phone calls and kind of a little thing. So I didn't like them. My best investor, give me a million bucks, never ear words or whatever. So it's just as quick as painless as that. And it's just kind of a weird truism about the way it works. There are plenty of investors that can only invest $5,000, then I'm sure are awesome. It just tends to be more problems when they're not. Tilden Moschetti: The sponsor always has the decision to take less, almost always has the decision to take less. Well, if they can't come in at the $50,000 mark or the $100,000 mark, but they can come in at $25,000 or $15,000, most of the time the sponsor has discretion in order to do that. Tilden Moschetti: And if they're going to do that, they should just have a good feeling about it. These are going to be your clients. You should, they will only do people with they know like interest and you should kind of do the same. I wouldn't want to have an investor anymore that picked up the phone and I didn't want to talk to them. If I'm running for the door when they call, I probably shouldn't have them as an investor. Josh St. Laurent: Now I can hear everybody thinking like, let's fast forward to the fun part, right? We're pulling profits out of the deal. The deal is completed. What is the incentive as a sponsor? What does that distribution of profits look like for the sponsor versus the investors? I would imagine as the sponsor taking the additional risk, putting down the attorney fees up front, what is the benefit of being the sponsor versus the limited partner? Tilden Moschetti: Yeah, they should make something. Now the way I look at it, so there's kind of two different kinds of money coming out to going to the sponsor. So first we have fees and those are the fees, you know, typically the most common would be your asset management fee. That fee is to pay for the work of investor communications, the work of putting, making sure the books get to the account and so the taxes can be performed, those kind of things that are very administrative and just need to take place. To me, all the body of fees, so all that set of fees really should just be, I set mine to be the absolute minimum amount that I will take and not hate myself for doing the work. If I'm putting books together to give to the account and making 50 bucks on it, I'm really mad at myself, right? Tilden Moschetti: So I need to make a little bit more so I don't hate how low I'm being paid for it. But I also want all my money on the back end. And most sponsors want that as well. And so in terms of the back end, normally there'll be a split, probably the vast majority of deals are done with a preferred return, which the first set of money, that first percentage amount goes to the investor and then everything else gets split. And that can be like a, you know, just roughly it can look like a 7% preferred return and then a 70, 30 split. It ranges radically between it. Really at the end of the day, it should be set up so that the investor gets to make the return that they've heard. So what that I or R looks like or what that ROI looks like, they'll make it based on the underwriting that's there. Josh St. Laurent: And then the rest of that amount will go to the sponsor. And it seems like most of this should be predetermined when they're coming into the deal in the disclosure documents that they're getting ahead of time. So everybody should be clear as to what that looks like. On both the investor side and the sponsor side, it sounds like. Tilden Moschetti: Oh, yeah. You don't want any ambiguity there because sometimes I'll get asked to put in like a range of what this preferred return will look like, for example. And I don't like doing that because it's like, well, from your point of view, it always should be the lowest number from the, what the investor is seeing, they're seeing that top number. And if it's never that top number, they're going to be really mad and you're going to be getting a lot of phone calls. So it should just be like, nope, here in the document is where it says that the preferred return is 7%, and then it's going to be this split. Josh St. Laurent: And here's the accounting that shows we did exactly that. Makes perfect sense. What about tax implications of the income that's coming out of this indication is indifferent for the sponsor versus the investor? Tilden Moschetti: Sometimes. So most of the time the sponsor is actually making income most of the time. Certainly if it's the appreciation at the end, it'll be a capital gain for them. Depreciation is passed through and partnership returns. So which is what most indicators use. So that depreciation typically will be passed through to the amount that the investor put in. And so the sponsor oftentimes doesn't get any of the depreciation unless they put their own money in, but it's all flexible. Kind of like deals can be put together in any way that's legal. So I could put a deal together today that would say, okay, Tilden gets 100% of all profits and the investors get not. Tilden Moschetti: No investors ever going to invest in it. It's terrible. It's a terrible investment. But I could put it out there. I could put it. I could show it to investors. I'm just never going to be successful. And I could put a deal together that says, okay, Tilden gets paid nothing. In fact, he loses money on this deal and the investors get to get all the profit. I'm not going to do that deal, but I could do it. And so we've got this huge range that we can go in between and it's all flexible and negotiable. So just to make sure I'm understanding, so it sounds like everyone who's a part of the deal doesn't matter if you're the sponsor or the investor. You're getting a K1 based on your participation in the deal, depending on how much you've put in, how much appreciation there is in the deal. Josh St. Laurent: And so theoretically, you could be getting earnings as well as depreciation in the same tax statement. I understand. Yeah. Okay. Who actually owns title to the property when you're doing a syndication, let's say you buy a hundred unit apartment building through a syndication, what is the title on the property? Is it owned by this indication itself as an entity or how does that work? Tilden Moschetti: Yeah. Most of the time it's owned by the investment entity. So it's owned by all of the investors, most of the time. That's not always the case. It's probably maybe even 30% of the time, not the case. And it really depends on the deal and the structure of the deal and what makes the most sense. There are development deals that we do that. It just doesn't make sense for anybody to really own the land because we're doing it in multiple phases. Tilden Moschetti: And so there might be just a holding company that owns it and then there's a contractual relationship between the investment entity and that holder of the land. You want to make sure as an investor that there is some sort of security that going there or at least know that there's not. And if there's not that you trust the sponsor enough that you're going to get your money back. Josh St. Laurent: My financial planning brain can't help but think about the risk management component. Is it prudent to have insurance policies in place, especially for some of the sponsors? God forbid something worked to happen to them along the way. Is that something that you advise clients to do or to set up? Tilden Moschetti: I talk with them about it and they make up their own decisions. So a lot of times there will be like an air and emissions policy that's put in place to protect the sponsor for any mistakes that are made. Tilden Moschetti: Of course there's going to be property and hazard insurance and deciding on the right levels. And then there's different kinds of insurance that may or may not be a factor. If I was in Florida right now, I probably want to make sure I had flood insurance. If I'm in California, I want to make sure I have earthquake insurance. It's not required. But if it's not going to be done, I'd probably want to at least let investors know this is an increased risk here that this isn't protected in that manner because we think it's too expensive. Tilden Moschetti: So that could be a potential question as an investor to the sponsor is what sort of insurance is in place. This is in whatever high-fire area are you going to have fire insurance on the property or not? Josh St. Laurent: I would imagine this is part of your decision in measuring the risk of the investment itself. Tilden Moschetti: Exactly. And if it's a super high risk deal, well, the return is better match. It's super, super safe. It's insured extensively. And boy, it's just almost guaranteed. Well, then you probably your returns aren't going to be super high. Josh St. Laurent: What else have we not talked about? What am I not asked that I should be asking when it comes to syndications? Tilden Moschetti: Yeah, I think the biggest thing is what people can do when it, what holds sponsors back from doing these deals. And I think really it's just getting it done. Most of the time it is kind of scary. I certainly was very apprehensive the first time I talked to an investor and had to tell him about what I was doing. And then I got rejected. And so that happens. And so there's kind of a pent-up fear or a, oh, well, let's plan to make it better. Tilden Moschetti: But at the end of the day, I mean, we're really all just people working to make everybody money. And I think getting it done is much more valuable than just kind of getting stuck in the planning or fear stage. Most of these get put together in a very successful way. And most people make good returns for their investors and their investors are happy and create good for the world. There's definitely a fear there, but it is a fear that's overcomeable. Josh St. Laurent: That analysis paralysis gets everybody. Just thinking out loud here, I don't want to use the word average because I know every deal is different. But is there maybe a goal post that you think about forgetting your money out of a deal? If you're going to go put a million dollars into a syndication, what's realistic to get your million dollars back? Is it one year, is it five years, or does it truly just depend on the deal? Tilden Moschetti: Oh, we could come up with it. It's probably, if it's a development deal, it's probably somewhere around two to three, three and a half years, the most. If it's a long term stable process, it's probably between five and seven years. And if it's not a multifamily building, if it's some other kind of commercial building, it's probably paged on when the most least renewables are coming up. So that way the value of the property comes up in relation to the capric. So it's probably going to look something like that. Josh St. Laurent: So would it be fair to say someone who is valuing liquidity syndication might not be the route to go, whereas if someone's looking for more of a longer term, capital appreciation, type of play, maybe syndication is a way to invest without having to spend a ton of their own time. Tilden Moschetti: I don't think I have any clients that don't have at least a lock up period for at least a year on anything, because it takes time to get money working. Tilden Moschetti: So I think the liquidity is going down at least going to be required a year. If you need it sooner and you want it to be safe, it's probably going to be some big product. Josh St. Laurent: Awesome. For people listening who are getting excited about syndications and want to connect with you, where's the best place to do so? Tilden Moschetti: Really, it's our website, mskiddylaw.com. I'm sure you'll link to it. Or if they just kind of want to dabble and like kind of explore the world more, I've got a lot of videos on YouTube. You just look up mskiddy syndication law and you'll see, I don't know, we've got 150, 200 videos or something that kind of goes through every kind of question that you may have out there. But really, if anybody is interested, we're happy to talk and see if your project will work or you answer any kind of questions. Tilden Moschetti: Ultimately, I want to make sure my clients are successful. So the more successful they are, the more they keep hiring me and referring me than everybody wins. Josh St. Laurent: We will definitely link it in the show notes, make it easy to find for people. I think the last thing I want to ask you is, what if we best? Is there anything else that we didn't talk about when it comes to syndications? Tilden Moschetti: Yeah, it's vast, right? There's a lot of different areas we can go in. I feel like we've really hit the high level overview. Is there anything that comes to mind for you? Maybe in recent history, that's an important point to be made when it comes to syndications. Tilden Moschetti: Not really. I think the overall trend is going to be to more and more syndications. I think that people are getting tired of the public markets and I think alternative investments like syndications are totally awesome. Tilden Moschetti: Of their, you know, where else if I invest in Apple, I can't pick up the phone and call Tim Cook. But if I invest in syndication, I can almost guarantee I can call the sponsor and say, well, why did you do that? That kind of access is just great. I mean, it democratizes the way finance should be. Josh St. Laurent: Completely agree. Well, thank you for being here, Tilden. I've learned a lot. I'm glad we had the conversation. I've been looking forward to this. Tilden Moschetti: Absolutely. I appreciate having me on. I really enjoyed it. Josh St. Laurent: This has been the Wealth in Yourself podcast where we help people to design their ideal life and take control of their time and money. Our guest today was Tilden Muskeady. Thanks for listening and we'll see you next time. Josh St. Laurent: The Wealth in Yourself podcast is hosted by me, Josh St. Loren, an edited and produced by Ray Haycraft. Josh St. Laurent: To learn more about how to make your money work for you, visit us at www.wealthinyourself.com and connect with us on all social media at Wealth in Yourself. Josh St. Laurent: This podcast is educational in nature and is not meant to be investment advice. Please do not construe anything said to be advice. And the opinions of the guests may or may not represent the opinions of Wealth in Yourself. Josh St. Laurent: This podcast and the information presented are separate from my employment at Golden Gate University. Still, they are part of my mission to make no cost financial knowledge more accessible. Josh St. Laurent: If you like the show, please take a moment to leave us a review. We read all of your feedback and we want to make sure we cover the topics that matter most. Josh St. Laurent: If you have a specific subject you'd like us to explore or a guest you'd love to hear interviewed, don't hesitate to shoot us a direct message. Josh St. Laurent: And as always, thanks for listening.