GI210: What is Real Estate Crowdfunding with Adam Gower

Adam Gower combines over 40 years of experience in real estate investment and finance with  digital marketing strategies to build crowdfunding platforms for real estate capital raisers. He has over $1.5 billion in real estate transactional experience, has personally raised over $500 million in capital, and has taught over 4,500 individuals how to build wealth, preserve capital, and earn passive income from investing in real estate.

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Transcript:

Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now, here’s your host, Charles Carillo.

Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Adam Gower. He combines over 40 years of experience in real estate investment and finance with digital marketing strategies to build crowdfunding platforms for real estate capital raisers. He has over $1.5 billion in real estate transactional experience, has personally raised over $500 million in capital, and has taught over 4,500 individuals how to build wealth, preserve capital, and earn passive income from investing in real estate. So thank you so much for coming on today, Adam.

Adam:
I’m very happy to be here. Thanks for having me, Charles.

Charles:
So give us a little bit about your background, both personally and professionally prior to getting involved in real estate investing back in the early eighties.

Adam:
Well, prior to getting involved in real estate and real estate investing, I was at high school, <laugh>, actually, that’s like basically I left high school and started working for an electrician, pulling wires. So I was crawling around in basements and attics and pretty quickly that very hands-on experience evolved into working for a ground up multifamily sponsor. And my job there was to raise money for them. I was hired by them to you know, to basically stand in front of investors and pitch the deals that they had. So that’s, and my background is almost, but not quite, but almost exclusively commercial real estate investments in finance.

Charles:
Very interesting. Is there a specific reason why you chose it compared to other industries that you might have learned about at that time, you know, real estate over something else, or commercial real estate?

Adam:
That’s an interesting question. No, my life has been a a path, a meandering path of discovery. <Laugh> basically look, I was 18, I was knocking on doors and telling people I’ll do anything for $5 an hour, <laugh>. And I started talking, you know, my family was involved in real estate in a big way in England. Okay. But when I came to the States, you know, I was on my own. And one of my friends was a real estate developer, ground up real estate developer, and I was actually working for a boutique Japanese m and a shop, actually little m and a shop. And I met with my friend. I used to meet, I used to like to have breakfast with people a lot in San Diego. And so I met with him. He was telling me about the kind of returns and what they did, and I just, oh my goodness, that’s, that’s really, those are really, that’s really interesting. He showed me a proforma, I can almost remember it in my own, my mind’s eye at the moment. He showed me a pro forma, and I introduced it to the shop I was working at, and it very quickly I wanna say spiraled into spiral is usually something that goes down. But they very quickly evolved in, into raising capital from these Japanese investors. They really liked the idea of, this was also during a period when there was a lot of Japanese investment. Yeah.

Charles:
They were buying up everything. Yeah.

Adam:
At the time, it seemed that way. And yeah, so that’s kind of how it evolved. And I never really left the industry since one way or not, I’ve been involved.

Charles:
Very interesting. So, coming full circle here, I mean, explain kind of what your company does now, and you have an interesting business model of how you incorporate online marketing in into real estate investing.

Adam:
Okay, so the, basically, so what happened was, and during the, I’ll try that bit of context is important for how I got here. So in the end of the global financial crisis actually in 2007, I sold my entire portfolio of real estate. I got lucky and I exited. And in and that same year, I was brought into a major bank that had done a lot of commercial real estate lending. And most of the loans were defaulted. So I had to help ’em clean their balance sheet. And then I ended up going over to Colony who’d done deals with the F D I C, and eventually the global financial crisis kind of mellowed out, and the economy started to pick up again. And when that happened, all this distress stuff that I’ve been working on had done actually so well in went away.

Adam:
And I started doing seed and angel investing in startups. So I was suddenly surrounded by all these kids, really kids, like 18 to 20 years old to 18, 21 years old, who were starting tech companies and looking for seed investors. And they were talking a different language and the language, they were talking a, a language that I didn’t know. It was the language of digital marketing. And and I mean things like Google Analytics or SEO or, I mean, really nothing. I knew nothing at all about this industry, but it was fascinating to hear them talk about that. And then in 2012, the Jobs Act passed, and suddenly you have this opportunity. I said, I looked, I thought, my goodness, all this marketing that you can do online now has never been permitted before for sponsors, for guys like me who’ve raised, you know, hundreds of millions in our life, we’ve always done it face-to-face in person.

Adam:
Now we can do it online. So I started to investigate, or I started to experiment and build systems for my own, for myself to see how they worked. And they started working extremely well. People would contact me who I had no prior relationship with, and they knew all about me. It was crazy, right? They, they, they were already inclined to working with me. And so that’s now probably, I don’t know, over, I was talking to my wife about this, the, there’s probably eight years solid, eight years ago, maybe more even. And so over that time, what Goer Crowd has evolved into being the really, one of the only, if not the only, but certainly the foremost platform for assisting sponsors to raise capital online. And what we do essentially is we build best of class crowdfunding platforms that are tailored to the sponsor, specifically to a sponsor.

Adam:
The, these are not cookie cuts you know, they’re not cookie cuts websites. Yeah. You can’t expect to be successful raising capital for real estate if you just put out a cookie cutter website. So we build I think the English, English, English term is bespoke websites that have functionality, lead generation hooked up to social media, lead generation tracking capabilities, automated email systems, everything built into one platform so that you can raise more capital more quickly from more investors without actually having to spend time pitching your investors. That was a long answer to your question. I forgot what your question was, but I hope it answered it.

Charles:
No, it’s perfect. It it tells us about your, your foray into getting into mending both of them together. The real estate investing, the digital marketing, which obviously prior to 2012 with the Jobs act wasn’t really a thing. It was really back in doing, let’s say country club deals, right? Like you said, face-to-face, right? So going forward now, I mean, there’s a number of different crowdfunding sites out there now, and obviously you’re talking about building websites that are sponsor specific, and they are unique to that one sponsor. But I think when people look and they hear crowdfunding, they’re talking about a platform where there’s a lot of deals on there where there’s a lot of sponsors on there. And I think, and I have people reach out to me and they’re asking about those they want to get involved in real estate investing passive, and they look on these and they don’t really know exactly what level of information they’re getting. And I mean, when you look at these, these other websites that are out there that are putting deals out there is it, is it a job really just to put out these deals and have them already, like a fully de a fully vetted deal, a fully vetted sponsor? Or are they really just list supposed to be just listing deals and every investor, you know, caveat mTOR goes in there and buyer beware, finds out what they’re supposed to do and does it because you have a lot of new investors on these

Adam:
Right, so it’s a good question. I’m just tapping out some notes here. Okay, so that’s actually quite a big question. Let’s start at the very top for a passive investor to get to know. So in other words, not a professional real estate investor. Some like a, you know, somebody who is an accredited investor who has a real day job and they’re looking to diversify their investment portfolio into real estate. They’re what the p the picture you’ve painted is essentially twofold. One that are crowdfunding platforms that act as marketplaces, and then the second is to invest directly or to find and invest directly with individual sponsors. So let’s start with the platforms themselves. Some of them are exceptionally successful. The really big ones are of course, Cloudstreet who have, I, I mean the latest number. They’ve raised about 4 billion in equity since they started.

Adam:
So they’re really huge. But Cloudstreet Realty, mogul Equity, multiple real crowd. They’re the, they’re the kind of the the early adopters of, in the industry. And they’re the ones that have really survived and thrived over the, you know, last 10 years or however long they’ve been. Actually, it’s not 10 years, about eight years that they’ve been active. And what they do is they provide marketplaces. You will find that in the small print. They will never tell you that they recommend an investment, and you’ve gotta do your own homework. And that’s really a bottom line. You really do have to do your own homework. If you’re a passive investor, you gotta get comfortable with a, with a shop, with a sponsor, and do you know, you gotta and, and ask your own advisor. So you’ve really got to do that. What the, what the platforms do though is that they do ha they, they, they pr, I’ve gotta be careful what I say actually, but they promote that they screen the people that list on their website.

Adam:
So for example, Cloudstreet will only accept 5% of all sponsors. Right? Now, whether or not as an investor, you think that their screening process is effective and you know, meets your standards, that’s a whole different discussion. But they only take 5% of sponsors that come to them. However, only 5% of sponsors go to them. So what you are looking at on the crowd Streete platform is 5% of 5%, which is a tiny number of all the opportunities that are out there. Now, the other issue that you have with the platforms is that they come with a cost of listing. Somebody pays for that. It’s typically not the investor, although in some cases it can be, you’ve gotta look into the small print, but there is a cost to listing on the platforms and it can on these marketplace websites, and it can be relatively high.

Adam:
So what you’ll find is that a lot of sponsors will pass on listing on the marketplaces cuz they don’t want to pay the fees, number one. Or they will list on the platform if they can, and then they will promote their own deals off platforms separately. Or what we see in a lot of our clients through this is that they will under, they will discover crowdfunding because they went to one of the platforms listed, had success and success, and then decided why do we need to pay these fees? Yeah, let’s do it ourselves. Okay, so those, so for an investor, you find these are marketplaces or you can go directly to sponsors. But what you have to look for in both cases is you gotta establish, essentially you gotta establish a relationship. You don’t have to actually talk to anybody, but you have to establish a relationship with the sponsor directly. Meaning you wanna check out their website, you wanna look at what kind of educational materials they have, what kind of videos they have, are they open, are they communicating extensively? Do they send newsletters, right? What to what extent do they, do they communicate what they’re doing to their investors? So investors can really understand the, or, or, or form their own view of who they are. And that applies equally to sponsors that don’t list on platforms as it does to those who do.

Charles:
That’s a great answer. You’ve been around real estate and commercial real estate for many decades and you’ve looked at a lot of deals let’s just say high level. I mean, what are the metrics that you are looking at that you should, you would suggest people to pay the most attention to when you’re reviewing a deal initially, let’s say?

Adam:
So there are a few things. When you, what I like to do is when you look at the first thing you gotta do is look at the offering documents, right? So at least that’s, that’s a kind of a starting point for credibility. You’ve got all the deal memos and those are designed specifically to entice you to invest. But the small print is in the deal, is in the offering documents. Mm-Hmm. The ppm whatever subscription documents, whatever, you know, the 80 to a hundred page documents that probably nobody ever reads thoroughly. That’s the first place that I go and the things that I look for. And you can actually do this really fast. You don’t have to, it doesn’t, you don’t have to read a hundred pages, run searches on those documents for some keywords. One of the keywords is fees.

Adam:
So I wanna see what kind of fees are being paid. That’s number, that’s the first thing, not necessarily an order priority. The second thing is I wanna see what the co-invest is. How much is the sponsor putting into the deal and how much do the fees that they charge offset that investment? Because what you’re looking for is an alignment of interest. You wanna be sure that a sponsor has skin in the game and that it’s real skin, right? It’s not carried interest that’s been carried over from another deal or the, the, you know, they’re putting in a million dollars of their own money, but their acquisition fees are 2 million, right? It’s basically, there’s, there’s nothing there. The other things to look at that are very important are experience and track record. And when I say that particularly I’m talking about multi-cycle track record, how long have they been doing this and what kind of cycles they’ve been, have they been, have they gone through?

Adam:
So for example, forgive me for saying this, I really, I, I don’t know too much about even what you’ve been doing, so just sorry for, but forgive me anyway, but you asked me a question. I’ll tell you anybody that tells you that today, and I’m gonna date stamp your podcast 23rd, whatever we are, beginning of April, 2023, who tells you that they’ve been in real estate for 10 years, hasn’t got experience <laugh>, basically, no, that’s like going to Vegas and just being told, oh yeah, you’re gonna win on red every time. Just keep on going and then one day it doesn’t work that way and you can lose everything. So going, having experience, having gone through cycles, understanding the impact of cycles being conservative with debt because debt is really the killer. It, real estate doesn’t kill deals, debt does, right? It’s not the real estate, it’s the, it’s the capital stack and the amounts of leverage.

Adam:
So I always look at look, I am also Charles, I’m a super conservative investor to the point of you know, almost point of paralysis to be honest with you. I, that’s because I have a very strong aversion to losing money. And so I look personally, I look for downside protection first and foremost. Am I gonna, is my money gonna be safe with this sponsor? And then I look at returns and you know, and I also look long-term, I like long-term, I don’t want to be flipping and chop, you know, I like, I like seeing sponsors that have a long-term perspective because ultimately that’s how you ride out downturns is by underwriting to assumptions that you’re gonna be, do you wanna hold an asset for a long time? If you don’t do that during a downturn, like we are headed into I in now and headed into more deeply in the latter part of this year, you’ll lose deals. People, all equity will be wiped out. So I’d rather take lower returns with higher security in terms of confidence, I’m gonna get my money back. I’m sure there’s a lot more that I could say about sponsors, but that covers kind of the main things.

Charles:
Yeah. So it’s really, I guess you would prepare for that by having lower leverage on deals that you’re getting involved with. I mean, that’s really just makes it safe, safer, correct.

Adam:
Well, an effect look, a, a sponsor who is really, who is truly conservative at underwriting two downturns or underwriting to hold for the long term, irrespective of what the market does, is gonna be looking at alternatives if the market does falter. So they will underwrite, they will look at, well, what hap So for example, you might look at how deep did the market that we’re in fall during the global financial crisis assume that’s what will happen in terms of values and rents and occupancies during the next cycle, and then underwrite debt and all of your numbers to survive a similar downturn. Now what that does is it substantially reduces the potential for upside, but it does, it secures the downside. And that’s what I look for. I would rather, I just said I would rather have lower returns and be confident sleep at night that my nest egg is gonna be safe, you know, for the, for, for decades than try and make a quick buck.

Charles:
Yeah. Yeah. And that mentality is kind of opposite of what a lot of people in the market are now, or what they were for the last couple of years, few years.

Adam:
Yes, exactly.

Charles:
So you mentioned one thing about communication prior to someone investing into a deal. What have you found with some of your successful clients? The proper amount of communication after a deal has closed, because I always find this with our deals is that you know, you have some investors, we’ll never respond to you, doesn’t matter what I send them, they’ll never respond. And then you have other ones that are want more information and they’re a little bit more, let’s say, hands-on as a past investor.

Adam:
So we did a, a survey, actually a multi sponsor investor sentiment survey at the end of last year. So just three months ago, it’s still valid. And we asked this question, how often do you want to hear from sponsors? And the number one answer was at least once a month, we want to hear from you at least once a month. And so what you want to be doing, this is what we, we do for our clients, and this is what we teach. The people that that come into our network that hire us to show us how to build and we do et cetera how to build our systems and to raise more money rather than doing it for them is we recommend that you have a newsletter that goes out at least once a month, and that that newsletter covers down the fairway information, just relevant information.

Adam:
You don’t want to be, you don’t want to be sent. There’s a lot of people that send out what I think of as bubblegum, you know, just co content that is mass produced. I mean it, now we’ve got AI writing, right Chat, G P T and AI writing articles. But frankly, a lot of the content that goes out there is, is written by humans. It may as well have been written by ai, right? It’s just, it’s flat. It’s not really, it’s not really authentic to the sponsor of what you want to be doing is to be addressing your investor’s primary concerns. Their primary concern at the moment is protecting their capital, not just me. That is what’s happening with investors the moment they want to have protect. They want to feel comfortable that you are protecting their investment. Therefore, for example, a newsletter that you put out should explain what your defensive strategies are to protect investor capital.

Adam:
And the best way to do that is to write an article about how you’ve been protect, how you’ve been orienting your investment strategy to capital preservation and what you’re doing now as interest rates are going up, how are you defending against that kind of situation? And be open and discuss all the different angles that you’re approaching and the challenges that you’re having and how you’re overcoming them. Put it in an article, put it on your website and punch that out in a an email that says, here, we’ve heard your concerns or whatever, right? We’ve heard your concerns about, and this is how we are dealing with, this is how we protect your capital. Click here and then redirect people back to your website. That’s really what you should be doing, and you should be doing it monthly.

Charles:
Yeah, that’s great sediment, because on past investments that I have, when I’m looking at emails that are coming from sponsors, I’m, you know, picking out collection percentages, not really on how much rent we, you know, we increased per month, you know what I mean? You’re looking at really maintaining what’s already there and, you know, keeping that property as full as possible with paying tenants. That’s kind of how I found it, and I found a lot of our investors think the same way.

Adam:
Yeah, exactly. Yeah, it’s really important. You’ve really got to, you’ve just gotta communicate, communicate stuff that is relevant to your investors and that speaks directly to how it impacts them.

Charles:
So, so Adam over the last four decades from knocking on people’s doors for $5 to where you are now, how’s your relationship towards money changed over the years?

Adam:
Well, I have more of it now, <laugh> than I had 40 years ago. I didn’t have anything 40 years ago, really nothing. But I’m still conservative. If I was to look back, I would say I wish I’d taken some bigger risks just because, you know, I’ve been so conservative. There are deals that I look back at and just think, gosh, I, I, I wish I’d not been quite as conservat or, or cautious of you know, worried about losing money, which I did, or getting into financial difficulties. So I think taking bigger risks would’ve been something that, but that doesn’t mean not taking calculated or taking yeah, not taking calculated risks that they were all calculated. And looking back, I would tell my younger self, yeah, buy that, do that. It’s a good idea. You never know what’s gonna happen, but you’re gonna come out okay. So yeah, I think an awareness of that, you gotta take risks to make it big, I think. Yeah.

Charles:
No, that’s great. That’s, that’s great response. As we’re off wrapping up here, what do you think are the main factors that have contributed to your success over the years?

Adam:
My wife says that my superpower is my ability to hear no and yet persevere. So just as many, you know, like you talked about your investors, some want or talk, some never communicate, you know, you try your hardest and your best. And 90, look, 99% of people more actually will say no the first time you approach them. That’s a lot of people. One in a hundred, you gotta hear no 99 times before one says yes, but that one will change your life. And so I just, I’ll, I just let it wash over me. Most, most of the time. I just let it, you know, sometimes, you know, we manage our, we manage our clients newsletters and their email process, and we do our own occasionally, you know, either we or, or they will get an f you email, you know, it, it’s, it happens.

Adam:
And I always, I actually think, I actually always feel encouraged when we get one of those, and I’ll tell you why. Because when you think of mass solicitation, when you’re soliciting to, for investors online, talking to millions of people, it’s statistics. If you remember the normal curve, we, I think it’s called the bell curve here. Somebody that sends you an fu email, don’t take me off your list. I don’t like anything you’re saying. There are two or three standard deviations to the left. They’re in this group of people that really don’t like you. But statist statistically speaking, that is that it doesn’t prove anything, but it indicates that on the other side of the curve, there’s somebody else who is dying to invest with you. They’re reading everything, they’re watching all your videos, they love what you do, and they’re just ready and waiting for you to say invest now. So I, that’s again, I keep forgetting your questions, but

Charles:
No, it’s great.

Adam:
Got your question, <laugh>.

Charles:
No, it’s fantastic. It was a great response. So Adam how can our listeners learn more about you and your business?

Adam:
Thank you for asking. So the, really, the best thing to do is to go to goer crowd.com, Slash’s, G O w e r, crowd.com, goer crowd.com, and sign up for our newsletter. It’s a, it’s a weekly newsletter. It’s free it covers everything that’s happening, all the deals that are listed in real estate syndication and crowdfunding industry. We cover industry news and updates and everyth. I mean, it’s, it’s free. You can always unsubscribe and you can, if you want to talk to me just, well, the first time you get one of those, just hit reply and I’ll, you’ll find me at the other end of the email.

Charles:
Yeah, you can always unsubscribe. There’s no need to reply with f you in there to Adam. So

Adam:
<Laugh>, no. So

Charles:
Thank, so I’ll

Adam:
Unsubscribe you for you if you do that. I’ll just hit the unsubscribe button.

Charles:
Thank you so much, Adam, for coming on today and looking forward to connecting with you here in the near future,

Adam:
Charles. Hope so. Nice of you to ask me. Thanks so much for having me on the show today.

Charles:
Bye-Bye.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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About Adam Gower

Adam Gower is the foremost authority on real estate crowdfunding (aka syndication) and has published five books on the industry. His latest, The Secret World of Real Estate and Crowdfunding, reveals the hidden benefits of investing in real estate that only crowdfunding has brought to investors.  Adam combines a lifetime of experience in real estate investment and finance with best-of-class digital marketing strategies to build crowdfunding platforms for real estate capital raisers. He has over $1.5 billion in real estate transactional experience, has personally raised over $500 million in capital, and has taught over 4,500 individuals how to build wealth, preserve capital, and earn passive income from investing in real estate.

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