GI231: Passive Real Estate Investing with Jim Pfeifer

GI231: Passive Real Estate Investing with Jim Pfeifer

Jim Pfeifer is one of the founders of the Left Field Investors website and community. Jim has invested in over 100 passive syndications, including apartments, mobile homes, self-storage, private lending and notes, ATMs, commercial and industrial triple net leases, assisted living facilities, and international coffee farms and cacao producers.

Watch The Episode Here:

Listen To The Podcast Here:

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:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Jim Pfeifer. He is one of the founders of the Left Field Investors website and community. Jim has invested in over 100 passive syndications, including apartments, mobile homes, self-storage, private lending and notes, ATMs, commercial and industrial triple net leases, assisted living facilities, and international coffee farms and cacao producers. So, thank you so much for being on the show today, Jim.

Jim:
Thanks for having me. It’s great to be here, Charles.

Charles:
Give us a little background with yourself, uh, personally and professionally and prior to getting involved with real estate investing and, uh, and passive investing.

Jim:
Sure. So, you know, I, I was always in interested in finance. So in college I studied finance, and when I got outta college, I, I took a job as a reinsurance underwriter. And, and, but I still had, I, I was really focused on personal finance. Mm-Hmm. <affirmative>. So as soon as they allowed me to, uh, put money in my 4 0 1 KI maxed that out from the start. I was a big stock market mutual fund guy, switched careers a few times. I was a high school teacher for a while, and then I became a financial advisor. And that’s when things really changed for me, because as a financial advisor, they kind of just teach you about money from, from ground up. Now, I, I thought I already knew all there was to know, and I was great at investing in all these paper assets. And at the same time, I was becoming a financial advisor and getting all this training.

Jim:
We sold a house and, or I’m sorry, we built a new house and we couldn’t sell our old house, so we turned it into a rental. So on the side, I was an accidental landlord, and I was learning about real assets that way. And the more they were educating me as a financial advisor in how to, you know, how money worked and how banking works and all that, on the side, I saw how real estate worked. And so it kept pushing me. The more they trained me, the more I was applying their concepts to real estate. And so I went, and before I kind of figured all this out, what I did was I went to my realtor when the market changed so we could try to sell that house. After having a rental for five years, he convinced me instead of selling it because it was paid off, he convinced me to get a loan on it and take the proceeds and go buy two more rentals.

Jim:
And he would manage all three of them. And that’s when light bulb went on, getting this financial training. And I’m off to the races and I’m really digging into real estate. And so at that time, then I became an active investor with single family homes, some small multis. Eventually I had to leave, uh, being a financial advisor because my philosophy was always to put my clients in the same investments that I’m doing. Right. I want to eat what I’m cooking. Well, as a financial advisor, you can’t do that for a couple reasons. One, you’re not licensed. Mm-Hmm. <affirmative>. And two, you don’t make any money off of it. Yeah. And that’s why financial advisors don’t put you in real estate. Not because they’re, you know, they’re trying to make all the money for themselves, or they’re bad people. It’s that they, they think it’s risky because they don’t understand it and they don’t have the proper licenses.

Jim:
So eventually I quit being a financial advisor, went full-time into, uh, active real estate, and I realized that I was a bad asset manager. Mm-Hmm. <affirmative>. So I, I wasn’t, none of the properties were cash flowing like they should. I was constantly fighting with property managers to try to, you know, make the properties cashflow the way I thought, but I wasn’t willing to put more money into ’em to actually make them cashflow. And that’s when I kind of figured out that not being a good asset manager, I should not be an active investor. And that’s when I found real estate syndications. And that’s where kind of everything changed. And I realized I could hire asset managers that would do the job of managing the asset. Now, I made money on all my active investment. Mm-Hmm. <affirmative>. ’cause I, I was just lucky with timing, right?

Jim:
Yeah. Everything went up during those years. So now more than ever, it’s important to have, uh, quality asset managers. And that’s why I’m a full-time passive investor, mostly in real estate syndications, where I hire quality asset managers to take call of the asset, manage it, and then return, hopefully cash to me. And the difference for me, that’s investing, right? What I was doing as a financial advisor, that to me now is speculating. Because you don’t, you know, if you’re investing in stocks or paper assets, you’re not getting a current benefit. You’re buying an asset holding it until you can hopefully find someone to buy it for more later. Right. That’s speculation. Right. Investing is where you buy an asset, you have a current benefit in the form of cash flow, hopefully. And then the appreciation on the back end, that’s just a bonus. Yeah. So that’s kind of my story. Uh, you know, at the end when I, when I really got into passive investing, I looked for a community, I couldn’t find one. So we created our own, that’s left field investors, and we can talk about that as well, if you

Charles:
Wish. Yeah, that’s great. So you said most of your investments are in, um, in real estate syndications. Could you tell us kind of what your favorite asset class is to passively invest into and why?

Jim:
Yeah. And, and that, that changes. Mm-Hmm. <affirmative>, you know, a few years ago you would’ve asked me that, I would’ve said probably multifamily and, you know, maybe self storage. And I think that I’m, I’m hyperfocused on diversification. Mm-Hmm. <affirmative>. So when you ask me what my favorite asset class is, that’s a hard one. Um, you know, I’m getting more into debt, private lending, and also debt syndications now because of where the market is. I think it’s smart in times of uncertainty to, um, get into asset class that a little bit shorter duration. So ATMs where you’re, you’re de-risking it by getting your capital back pretty quickly. I like those. But I think favorite asset class is gonna change as the market changes. So I’m still looking at multifamily deals and, and some of the other self storage, even industrial, but I’m really paying more attention, which I should have been doing already. More attention to the debt structure, more attention to the, you know, the loan to value those, those type metrics than I was before. So it’s hard to say what my favorite asset classes, but it’s more the approach I’m taking that changes with the, with the economic times.

Charles:
Yeah, that’s a great thing because years back, uh, I mean, now it’s one of the big things is where you have, where you have a lot of syndications that are, because of mainly, you know, interest rates, you’re having pause distributions or half distributions, something like this. So going into asset classes that might not have that type of, that happening at that point. Right. And that might not be affected by interest rates as much like ATMs, you know what I mean? So it’s, it’s not really in, right. Yeah. Interest rate,

Jim:
You have to match it. Also, I think, to your purpose of investing, right? Like why are you investing? Yes, we’re all investing to make money, but your goal has to match your investing strategy. For me, I’m a full-time passive investor. I don’t have AW two, the only money that we get is from these investments. So I need to make sure that I’m investing in cash flowing assets. Right? I can still have some development or some non-cash flowing on the side, but the bulk has to be cash flow. And so you really have to, when I first started, I, I didn’t focus on that. I was just focusing on getting in as many different investments as I can. And I wasn’t matching my strategy up to my goals. And that’s critical, right? You have to have the right strategy to match your goals and your needs, or you’re, you’re not, you know, you’re not gonna be successful.

Charles:
That’s great. That’s great. So what is, you know, the importance of referrals when you’re finding sponsors? I mean, how do you kind of grade or, um, you know, you’re, you, I imagine you speak to people, I’ve spoken to a number of people before that have passively invested and you’re getting referrals from some people. You might be getting reviews of a sponsor from people, and some of the information’s good, and some of the information might not be y you know, peoples take all different types of investments and returns and communication. They want different types of it, depending on how busy they are. They have different returns, they have different, everybody has different ways of how they wanna invest. So when you’re speaking to people, because your whole community is about really, as I understand it, reviews, referrals, understanding vetting, sponsors. So when you’re reviewing and listening to someone up, tell you about a, uh, a sponsor or a deal, I mean, how do you, where do you kind of put more weight on, let’s say what they’re saying or kind of what you’ve heard from different sponsors or if that makes any sense?

Jim:
Yeah, it does. And it, it’s a tough one, right? I mean, the, the, the number one question I get is, you know, tell me the sponsors you like, or How do I evaluate a sponsor? Right? It’s very difficult. And so I think I’ll kind of tell you my, show you my journey, where I started and where I am now, because, you know, most of it is referrals for me now. Um, but when I started, the first thing I did was I went to a, a conference, a syndication conference, and I was really proud of myself for actually spending money and doing this, which now looking back, I’m like, of course you have to go learn stuff, right? Um, so the first thing I did was I had a 4 0 1 K rollover burning a hole in my pocket. I went to a conference where there were syndicators there, and I said to myself, the, these must be the best syndicators in the business because they came to a conference, right?

Jim:
They’re here, they gotta be good. So I just started walking up to people saying, oh, you’re an operator, a syndicator, here’s some money. You know, just throwing it around because I just assumed they were good operators. Terrible approach. Um, some of those investments didn’t do well, some did okay, some did great, but it just isn’t the right approach, right? Uh, I mean, you go to a conference, some operators are there to educate, others are paying their way just to find people like me, right? So that way didn’t work, and I recognized that pretty quickly. Then I switched to, uh, my second attempt, which is I just listened to a ton of podcasts, right? And there I was listening to, someone would come on a podcast, they’d give their spiel and be like, oh, man, they, they sound great. So I’d call them up, talk to ’em for 30 minutes.

Jim:
They’d send me a deal, maybe I’d ask ’em a couple questions about the deal. And then I’m stuck with, okay, now I gotta wire this person money for this investment. So I did a little bit better there, but still, I don’t know if these guys that are on podcasts are great marketers or they great operators. It’s very hard to tell. And, you know, you have a podcast. I have a podcast we get people on that are interesting and new, but we don’t always know, Hey, are they the best operator we’ve ever seen? Right? And so you can’t just rely on podcasts. So I realized that wasn’t working, and that’s when I discovered the power of community, right? I had started this little mastermind left, uh, now it’s called left field investors. But you know, my goal is to have 12 people and have in-person meetings and keep it there.

Jim:
Uh, but we the pandemic, so we couldn’t meet. So we went online and, and the group exploded. Now we’re 1800 people, roughly. But the purpose, and what I do now is I don’t invest in a new operator unless they are recommended to me by someone in my community who I know, like, and trust who is already invested with that operator, right? These are the referrals we’re talking about. That doesn’t mean that the operator is perfect and gonna be fantastic. But if I know that somebody that I trust and think highly of has invested with an operator, and they have done it long enough that they know the operator sends distributions, like they said, they would sends reports like they said they would, and generally is performing as they said they would. Um, that that’s the, the biggest endorsement you can get right now. Like what you said, not all referrals are equal.

Jim:
If it’s from someone who’s new and just is really excited and, and doesn’t really have the experience, well, I’m not gonna take that, um, referral as strongly as I would others. Now, you know, if someone’s been in the business doing this for 20 years and, and they say, Hey, I’ve invested with this company for 12 years, that’s something different. So you do have to look at who the referral is coming from, but I haven’t figured out a better way than to use your community or use people you know that have already invested. Right? The thing that you miss out there is you might miss out on some new operators who don’t have a bunch of people yet. And so I still talk to them and I still evaluate them, but it takes me a lot longer, right? If someone refer, if I’m referred to somebody by a couple of people, I might invest in the first or second deal they send me.

Jim:
If it’s a new operator, no one’s heard of ’em, they’re gonna have to send me four or five deals over a year or two before I get comfortable enough to invest. So, you know, the question was what’s the importance of referrals? I think it’s the most critical thing, but it depends on how you get those referrals. Yeah. ’cause if you’re just calling the operator and saying, Hey, can I get a, a referral? Right? That’s different. That’s not, that’s, that’s a solicited referral. And what are they gonna give you? They’re gonna give you the person that’s their biggest fan, right? So that might not be all of the answers. So what, uh, what one sponsor told me, they’re also an LP investor. And what they do is if they don’t, if they don’t have someone in their community or don’t know someone that’s invested, they ask the operator for three referrals.

Jim:
And it’s someone that’s been in multiple deals. They ask for someone that was in your worst deal, and then someone that didn’t invest more than once. Right? And so that is, is digging down and making the operator work for it a little bit, so they’re not just giving you their first one. Another way that I’ve heard is someone asks for, you know, two referrals. They get ’em, then they ask for two more, they get ’em, then they ask for three more. So now you’re going deep into where the operator has to pick someone that maybe isn’t just their, their biggest fan. So that’s, it’s a lot. But that’s kind of how I look at, uh, finding operators and, and vetting them. Yeah,

Charles:
That’s a great way of doing it. Yeah. It’s, it is the same thing as, um, when I used to self-manage real estate and you’d get the, uh, applications that come in and they’ll have referrals on it. I never called one of those referrals and I stopped asking for ’em. Right. It’s just, you know what I mean? It’s just one of those things. It’s where it, it it, you’re gonna call their old landlord that wants to get rid of ’em for one reason or another. So I, I totally understand what you’re saying. So when you’re, you know, you vetted a sponsor and you’re getting down to like a deal level and, um, what, what are the things that you’re really looking at in a deal? And obviously you said, you know, real estate’s one of your things that you really look at. So we can, we can talk about that. Um, you know, what, what are the things that you’re really picking out maybe of their legal paperwork or of the deal itself, whether it’s fee, fee fees, the deal structure, uh, a market, maybe, you know, how they’re handling asset management or property management. I mean, what are these things that you really look into that you maybe you’ve had issues with before or people in your community have, ’cause a deal wasn’t structured properly? Um, I mean, what do you, what, how do you kind of dig into that?

Jim:
Yeah, it’s a good question. Because you get all these documents, right? You get a hundred page PPM, yeah. You get a long LLC operating agreement and then you get a pitch deck. You know, the thing, when I get those three documents, what I’m focused on at first is making sure that they all match up. Mm-Hmm. <affirmative>, right? I look at the splits and the, uh, the waterfalls, right? That’s how, how I’m gonna be paid, right? I wanna make sure that it’s the same in all three places. Mm-Hmm. <affirmative>. Because if it’s not, we have, we have an issue, right? Other things I’m looking at is, you know, people talk about this, I wanna make sure that the operator has, has significant skin in the game, not just fees, but is in investing their own money in the deal. Uh, because then, you know, I’m hopeful that that will make them a, a better steward.

Jim:
Now they have to invest more than they earn in fees, right? So you wanna make sure there’s, there’s a balance there. But that, those are some of the, um, just first things that I just kind of check out, right? And then, especially in this market, and I didn’t do it enough in past markets, really looking at the, the structure of the debt, um, the interest rate, the interest rate caps, you know, asking what the LTV is and, and making sure we understand all those different metrics. I think that’s become much more important. Now. Now, of course, we should have been asking that two or three years ago, and we were mm-Hmm, <affirmative>. But we just, um, kind of missed out on really evaluating that. Yeah, interest rates could go up, but we just really didn’t think they would go up that fast. And then for the deal specific stuff, uh, at left field investors, we have a deal analyzer, which is basically just a spreadsheet that we put a bunch of data in it from the, from the pitch deck.

Jim:
And you know, each me, then we have value about 30 metrics and each one turns red or green based on whether, um, it fits kinda the parameters that we’ve set out. And so, some of the things I look for, there are, you know, vacancy to make sure that the, ’cause when I was a active investor, I just put 5% in for vacancy, right? That’s it. I didn’t know anything about economic vacancy or all the different factors that go into it. So now just using that tool is showing me, I just wanna make sure that the vacancy numbers make sense, right? They should be higher than 5%, right? It, and it should include some of the other factors. So I look at that. I also look at rent increases. If they’re saying they’re gonna get a 6% rent bup in year one, okay, how do you do that?

Jim:
Because not all the rents come up on the same day. So to get 6% in year one, I don’t care if the market is getting 10% increases in rents, 6% in year one is gonna be hard to do, especially when you’re probably bouncing some people out. So you can do renovations. So I look to see if those numbers are realistic and look for, you know, compare it with the actuals in the past and compare it with what’s being projected in the future. Because too many people just throw up, well, I’m gonna get 5% rent increase in each year, 4%, and think that’s enough. And the other thing I look at is exit cap rate and making sure that is, uh, in, in line with, uh, with what, what I think it it should be. So those are some of the things that I look at.

Jim:
And one, one thing, I’m sorry to keep going, <laugh>. No, it’s fine. I also am starting to, which I didn’t do enough of in, in the past, is just kind of asking questions about the property manager, right? What their experience is, who are they, what are they doing? Because, you know, too much, we, we just figure I’m focusing on the asset manager, but they have to have a quality property manager, or they’re gonna have serious problems. So those are some of the things that I look for. And it changes based on the deal and the operator too, right? If it’s an operator that I’ve invested with a bunch of times and I really trust them, I’m not gonna look as that at that stuff as much as I would for some, a new one. And, and the reason is because once you vet a sponsor and you get used to ’em and you’re in a bunch of deals, hopefully everything looks similar each time and you can do less and less due diligence. You always need to do it, but you don’t have to do as much for an ex operator you have experience with than someone that you don’t. Yeah,

Charles:
That’s a lot of great information.

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:
I love the property manager part ’cause that’s something that I look into passive investing or whether we’re, it’s the property managers like the most important thing. ’cause they’re the people that are actually talking to your tenants, the clients that are actually paying for everything in this whole system, this whole investment to work. And people pass over that so quickly and they’re looking at, it’s, it’s, you know, there’s a reason like when the banks, when you’re, if you’re applying for a commercial, you know, commercial mortgage on a multi-family property, and, um, you know, you have never done it before, they’re gonna ask you for information on your property manager, right?

Charles:
Because that’s could be the experience piece. So like, these banks understand for the most part how to eliminate risk as much as possible. And passive investors kind of can follow right behind them in their footsteps and see exactly what they’re asking is really what passive investors should be asking. ’cause that’s how they’re vetting how they think the deal is gonna perform. And they know that, you know, right? The property managers in most parts more important than the asset manager. You know, the asset manager should be there assisting, overseeing, but the property manager is really the ones day-to-day that’s gonna keep those tenants happy. That’s gonna tell you, Hey, you should be increasing rents. Hey, this needs to be renovated. You’re gonna have an issue here with this. And, um, you know, in a good, in perfect world, that asset manager as well is working alongside them. But that property manager is very important.

Jim:
Yeah. And, and you can see that with, um, you know, recently we’ve had a few deals where the asset manager has replaced the property manager ’cause they weren’t performing well. Mm-Hmm. <affirmative>. And then you see the difference just in a couple of months about how, you know, the, the, um, you know, they’re filling up the, the units and, and there’s less vacancy. There’s, there’s less, uh, what the deliver not deliverables, but less outstanding. Um, late payments or what, I forget what those are called, but you know, there’s just, you can tell almost immediately the effect of a quality property manager. And, and I didn’t really focus on it as much until I saw that where you replace ’em and all of a sudden, boom, the, the deal now is going to pro forma where it wasn’t before. It’s, it’s pretty incredible the, the importance of the property manager. And you explained it very well. Yeah.

Charles:
Thank you. Yeah, that’s a lot of great information here. The rent increases big because vacancy and rent increases kinda work against each other, uh, in the sense of you need to have so much vacancy and the rent. So it’s very difficult to do renovations, keep the vacancy low and keep the rent increases high. Like on your classic units. It’s a, so that’s like a spreadsheet thing that you can pull out and be like, this isn’t true.

Jim:
Right? And, and one thing about the vacancy is I look less at, um, you know, are they, are they gonna have high vacancy? I, I more look at are you, are you being realistic? Mm-hmm. <affirmative>, right? Like you said, if you’re gonna, if you’re doing a heavy value add, if you’re gonna have high vacancy, so if you’re, if you’re gonna say, Hey, it’s only 5%, but you, you’re gonna renovate, you know, 20% of the units each year, that doesn’t match. So I’m, I’m really just looking for, I don’t wanna re-underwrite the deal. That’s what I hire the asset manager to do. I’m just gonna go in and, and try to spot check to make sure they’re on their game and they’re not hiding anything either on accident or on purpose. Right? Yeah. Because it’s very easy to, to juice that proforma. So I’m just checking a couple of things, making sure, okay, this all looks good. Yeah.

Charles:
And then I also, now it’s one of those things too that’s changing is now you have, you know, insurance, insurance is a huge thing and after going through such an inflationary time, that’s still continuing insurance and property taxes, you know, these are other things too that Yeah, absolutely. Used to be oh, 3%, 4%, 3%, 4%, no, that’s gonna be probably twice as much now. So you have to look into that. And if I start seeing that, that’s a red flag too. So these are, it is just number of things.

Jim:
Yeah. And, and you mentioned taxes, if I can real quick. Mm-Hmm. <affirmative>, what I look for is I look in the financials and I’m looking for are they, are they having, are they assuming taxes are gonna stay the same in the, you know, in the current and three years down the road? Because if you buy the property, presumably maybe not anymore <laugh>, presumably you’re buying it for more. So the valuation will go up. So I would expect taxes to go up. So I wanna make sure that I look at that and, and, and make sure they’re not being lazy and just plug it in the same taxes as last year. ’cause that’s unlikely to be the case. Yes.

Charles:
Yeah. That’s a lot of great information there. And then the other thing on insurance is I always like to ask ’em how they came up with this insurance quote. Like, did you actually get one where it is? And sometimes they’ll provide you a copy of that quote too. ’cause I’d like to see exactly, because everything’s changing so much. If you work off of any seller’s numbers, the sellers are gonna have lower taxes and lower insurance than you’re probably gonna pay. You know what I mean? You’re not gonna get a better deal than them that owned it for five, seven years, you know what I mean? Probably more. Yeah. So

Jim:
That’s a great point. Um,

Charles:
So let’s talk about like community personal finance and community first investing, which you’ve already gotten into with, you know, left field investors. What is community personal finance?

Jim:
So community, personal finance to us is, is basically there’s, there’s three kinds of finance, right? Traditional finance, that’s what everybody knows. You watch tv, you hear about it, you go outside your front door and you talk to your neighbor. They’re talking 4 0 1 kss and they’re talking, you know, uh, IRAs and all that kind of stuff. So that’s kind of the standard personal finance that everybody thinks of. Mm-Hmm. <affirmative>. Then there’s alternatives, right? That’s, that’s the world we live in. Real estate. Um, anything that is kind of different, right? Private placement. So that’s scary because you’re sending a wire, you know, most people don’t send a whole lot of wires. You don’t really understand it. Maybe it’s, it’s hard because, because you don’t have the education, it’s also sometimes hidden, right? Some of these private placement deals, they’re not even allowed to advertise them. Yeah. So the alternative space is really hard to get into, but the returns are great, the tax benefits are great.

Jim:
Like it’s where you want to be, but how do you get there? It’s so scary. And if you talk to your neighbors, they’re like, whoa, you just said syndications, you’re crazy. Real estate. Oh, that’s crazy. So that’s what we bring in community, personal finance, where you join a community who’s already doing these alternatives and it allows you to have some help, right? So we’re trying to turn community into a verb. When we look at an operator in our, with our community, we’re community, the the operator, right? We community a deal that’s analyze it together. And what it does is it takes the alternative investments where you can get great tax benefits, great returns, you’re buying a real asset rather than paper. It takes all of that and puts it inside a community of people like-minded individuals and not like-minded, like we’re all robots marching down the street, but like-minded that we’re all in this for financial freedom and whatever that means to you.

Jim:
But we’re all working together to help each other. And it just gives you confidence, right? If the, I remember the first time I met someone who’s doing syndication investments and Steve Sue, he’s one of the founders of, of LFI now, and we were talking and he mentioned that he was, he invested in a deal with the same operator. I did big relief, right? Then I then I found out he was in the same deal. And the amount of relief I felt, here’s a smart guy, he’s a doctor, he knows what he’s doing. He’s in the same deal as me. Okay? This must be real, this is okay. And that’s community. Personal finance to me is to use people, because if, if you walk out your front door, like I said, talk to your neighbors, they’re gonna think you’re nuts talking about alternatives and all that.

Jim:
But if you talk to people in our community or other communities, it doesn’t have to be ours. And you’re talking to people who’ve already done it. So, you know, Charles, if you’ve sent three wires to a certain operator, and I’m nervous about it, and I say, Hey Charles, what happened when you send the wire and you’re like, yeah, here’s the, you know, it, it works every time they call you after, after it lands and, and no worries, man. That’s comforting. Right? I’ve, I’ve sent hundreds of wires by now probably, and I am terrified every time it’s gonna go to the wrong place. I don’t understand why it has to be so complicated. But the point is, if I know 20 people in my community have sent a wire to the same exact wire address, okay, then I’m just worried about typos. I’m not worried about the guy running off with my money as much. So that’s what community personal finance is to me. It’s just using a group of people to help you further your investing goals. Yeah.

Charles:
Nah, that’s a great explanation of it. And yeah, the wires is, uh, <laugh> is, uh, is one of those events that people don’t really do. And when you do it, and I’m always like, get a call first. Call first double check all those numbers. Yes. And then say, I don’t care. You know, if you’ve done it like seven or eight times, it’s still saved in your online banking. Call them, verify it, speak to them. Absolutely. And then I’d always tell people that are investing, I’m like, listen, it’s gonna take like 24 to 48 hours, so just don’t freak out if I like, don’t get it within <laugh>. It’s not, it’s not like the movies where I get in like four minutes. You know what I mean?

Jim:
Right.

Charles:
Anyway, that’s an interesting point that you brought that up. Uh, so I mean, we talked about before where you have have, you know, we have a syndicators out there that have kind of paused, uh, they paused some of their distributions on certain deals and in different asset classes. How do passive investors prepare for a downturn in the economy? And I know you stepped into this a little bit when you’re talking about getting into more fixed income and, uh, type investments and getting into kind of on the debt side, which kind of as I see it when I’ve invested into ATMs, it’s kind of similar to that, where you’re getting a fixed payout that comes out with it. But, uh, can you go a little bit more into kind of how you suggest or how people have been talking about this in your community?

Jim:
Yeah, I, I think there’s, there’s two parts to it, right? One is the deals you’re already in and the other is the deals you want to get in. Mm-Hmm. <affirmative>. Because one of the big downsides of this type of investing is these are illiquid investments. They’re out of your control and you’re stuck in ’em until the operator decides to sell. It’s completely out of your control, right? So what are you gonna do about all those old, the, the investments that, that you’ve made before? Now that the economy has changed? Well, you’re not gonna do anything really, right? Because you can’t. But what I recommend is, if, if an operator is stopping distributions, then you talk to ’em and say, why Mm-Hmm. <affirmative>, right? Is it because, because it’s different to me if an operator is stopping distributions, because their business plan was to be a, an apartment flipper, which is a lot of people, right?

Jim:
A lot of people did that. They were gonna sell these, you know, buy an apartment force appreciation, get rid of it in two years. That was their business model. I knew that going in and I invested with them. Then I can’t get too upset if they’re stopping distributions because interest rates, you know, rows at historic levels that no one predicted. I didn’t predict it. So they didn’t predict it. So I can’t get upset that maybe their business model isn’t working. They have to stop distributions. I can talk to ’em about it, make sure they’re on track, understand why they’re stopping distributions. Maybe it’s a good thing because they’re being conservative, right? That’s one issue. But if they just say, well, interest rates, that that’s what happened, and then you look and it’s maybe operational. They weren’t renovating the units like they said they were, they weren’t doing the things that they promised.

Jim:
That’s different, right? So the first thing is to do a little research and understand which, you know, what, where are you? Is this just because this economic event happened that we didn’t predict and their business plan didn’t work because of that? Or did they not execute their business plan either way? I think, you know, uh, I was talking to a, a well-known operator and he said, people have gotten so used to getting distributions every month like clockwork. They don’t realize that distributions, like on a multi-family deal, that’s you’re supposed to dis distribute excess, excess cash, right? If you don’t have it, you shouldn’t distribute it. Yeah. So that’s why they should be bumpy. You know, you should get, you know, a 10% one one month and 1% the next. Right? The pref the preferred return is what is consistent and paid at the backend, but monthly distributions don’t need to be consistent.

Jim:
So that, I’ll get off my high horse on that one, but you know, that, that’s something that, um, that I’ve really been looking at now. Okay. Well, I was gonna say the, the other part is looking forward, you know, how do you prepare? That’s what we’re talking about. You really gotta look at the experience of the operator, the, you know, making sure that, you know, before it was 80% loan to value is great. Now maybe it’s 60%. So looking at that and looking at the debt and really trying to understand where the market is going and what’s happening, right? Are you buying into distressed assets? Just because the subject line of an investment is distressed asset doesn’t mean it actually is. So dig a little deeper, right? Times are, it’s gonna be harder to make money now possibly. So you really gotta dig deeper, I guess, than you did five years ago. You invest in every deal and it makes money. Yeah.

Charles:
Yeah. You gotta make sure the deals you’re investing to too are kind of, are fat deals, you know what I mean? You don’t wanna get into skinny deals where you don’t really know because we’re going into possibly choppy waters and you don’t know what’s gonna happen. Um, one thing great about that is you were saying is the, uh, the distribution thing, and this is kind of like one thing that I despise about syndicators is that how it’s always sold is like a straight, um, it’s like a straight return, like an annuity. You know what I mean? And yeah, you have to tell people, Hey, you’re investing into a business. This is a business. Um, this is how it works. There’s gonna be quarters where it’s really good. There’s gonna be quarters where it’s a little slower. You know, the first, the first four or five, six quarters are probably gonna be a little choppy as we’re getting, people are coming out, people are going in, we’re doing, we start doing the many renovations.

Charles:
And as we’re getting into like, you know, the end of, uh, year two, something like this, that’s when it’s gonna get more consistent. And I don’t think when people see that and they’re like comparing it to other groups out there or other people, they don’t really, I don’t think they’re really put two and two together. They think they weren’t starting right away. You know what I mean? Yeah. And you also say, well, where are they getting their money from? ’cause it’s supposed to be from operations. It might just be that they raised extra cash to distribute it.

Jim:
Right. And, and operators are, are at fault for this in my mind. Yeah. Because there’s, there’s investments I’ve been in for five years and I’ve received $145 and 83 cents every month, like clockwork through everything, through the pandemic, through everything. And one side of me is, oh, thank you. It’s very predictable. But the other side is you’re not, you’re not distributing excess cash. Yeah. Right? You’re, you’re just setting the same amount regardless of what’s happening in your operation. And that’s not really what it’s supposed to be about. You’re distributing the preferred return. I’d rather you distribute the excess cash.

Charles:
Yeah, yeah. That way too. I mean, you want to make sure that there’s a, that there’s a reserve in there, right? I mean, I don’t want to come back. I’d rather not get cash and not have to put a capital call out and then we’ll, you know, um, than have to, I’m getting cash out and I gotta put it back in and all that stuff that goes with it. Right? So, um, all these different things, this is just kind of too many people came into the industry and they’ve kind of how they, how they market it, this is how they’ve done it. But, um, as we kinda wrap up here, other than having community, what would you, I mean, what are common mistakes you see past investors make other than maybe being part of a community like yours? Like left field investors?

Jim:
Yeah. I think getting too excited, right? Chasing the shiny object. And I think we’ve all done it. Um, but one of the things that, um, that I recommend, and I I learned this from, from someone in our community is I don’t invest with an operator or once I invest with ’em, I don’t invest with ’em again for at least a full year. Right. Give them some time. And if I had, if I had taken that advice or known about that advice before, um, I’ve invested a few times, I would, I would’ve gotten myself out of some trouble that I’ve gotten in. Right? So just patience. You don’t have to do this all at once. This is not a get rich quick scheme. It’s a get, you know, build wealth very slowly and reliably scheme. Yeah. Right? And so just recognizing that you don’t have to do it all at once and just taking your time.

Jim:
We have a, uh, one of, I mentioned Steve Sue, he just wrote a book, um, avoiding rookie Mistakes. And it’s like, you know, he’s been doing this for 14 years. He has 20 mistakes that he’s, that he’s made. And part of that’s what you need to do is learn from others’ mistakes. That’s a shortcut, right? That’s what community is about. Short-cutting, using other people’s experience. So now Steve lost some money, right? I’m not gonna lose money because I learned from Steve. And so those are kind of the things that you gotta look at. And then once you do make a mistake, then figure out what the mistake was, why you made it, and then, then you won’t make it again. Right? Too many people, you know, they make a mistake in passive investing and they’re like, oh, that was the operator, or that was the economy. Okay, but what, what did, what was your part in that? Why did you invest in this deal? And, and are you gonna invest in the same, are you gonna make the same mistake again? ’cause that is the problem. Don’t make the same mistake twice. I

Charles:
Love the one operator per year. That’s a great, that’s a great mentality. It’s simple to follow and it makes perfect sense.

Jim:
It’s, it’s simple to follow. It’s hard to actually do it. ’cause you get so excited when you meet someone, you’re like, oh my gosh, they’re the best. I can’t miss out on this deal. Right? And that’s the other thing, if I don’t, if I so fomo everybody knows about, um, but, uh, there’s one guy I had on the podcast, he calls it Jomo, the joy of missing out, right? Take joy when you say, Hey, you know what? I’m gonna stick to that one year rule. I’m not gonna have fomo ’cause that guy just sent me six hot deals. I’m gonna be like, Nope. I’m, I’m gonna have joy that I’m missing out because I might be missing out on something bad, right? Yeah. So Jomo is my, uh, recommendation. Yeah, that

Charles:
Was probably one of the big things I read, um, back in the, uh, Trump’s first book back in the eighties. And I read it like when I was in middle school. And the one thing was like, you know, the best deals are the ones you sometimes don’t do. So very interesting. Um, what, as we, you know, as we’re kind of f as we finish up here, one thing, one asset class, I didn’t see you and you’ve invested in a hundred plus, uh, investments is short-term inve, short-term rentals. Is that something you avoided or did I miss that in your bio and why?

Jim:
No, I, I, I guess, um, I think I’m in one short-term rental deal. It’s hard to find. I I like to do syndications. Mm-Hmm, <affirmative>, right? I, I managed a short-term rental for a while, a few years ago. I didn’t like it there, there haven’t been a whole lot of options for, um, having someone else do it for you. I’ve found a couple. And so I, I have dipped my toe in there. I guess I just, I haven’t updated that list, but, but I haven’t found an operator that does it consistently and really well, which is, which is why I haven’t really highlighted it. Oh,

Charles:
That’s, that’s great. Uh, so GM please tell us how our listeners can learn more about you, Leftfield investors and any other business, um, items or books that you have.

Jim:
Yeah, so go to leftfield investors.com. There’s all kinds of content there. We have a, a free membership level, we have some paid membership levels. And, uh, there’s, there’s, like I said, a ton of content. You can reach out to me personally, Jim, at leftfield investors.com, and we talk to investors, um, all the time. And we’re, we’re happy to just share information and chat. And as I mentioned, um, the, the book that Steve Sue just wrote, avoiding Rookie Errors, and then there’s a bunch more about it. But if you just search Amazon for avoiding rookie errors, it is imp Passive Investing, oh wait, sorry, I gotta get the title right or Steve’s gonna Kill me. Avoiding Rookie Errors as a Left Field Investor. That’s it. I’m sorry. It’s too early in the morning, I guess. But that book, seriously, I know I’m biased because Steve is a founder at LFI. It’s, it’s one of the best, uh, books I’ve read on, on past investing. It’s, it’s short, it’s a quick read, but it’s chockfull of just great stuff and I recommend it for a, a brand new investor or someone who’s been doing it for 10 years. It’s just a really fantastic book.

Charles:
Awesome. Well, thank you so much for coming on today, Jim, and, uh, looking forward to connecting with you here in the near future.

Jim:
Awesome. Thank you Charles.

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.

Announcer:
Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

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.

Links and Contact Information Mentioned In The Episode:

About Jim Pfeifer

Jim Pfeifer is one of the founders of Left Field Investors and the host of the Passive Investing from Left Field podcast. Left Field Investors is a group dedicated to educating and assisting like-minded investors negotiate the nuances of the passive investing landscape and world of syndications. Jim is a former financial advisor who became frustrated with the one-path-fits-all approach of the standard financial services industry. Jim now concentrates on investing in real assets that produce cash flow and is committed to sharing his knowledge with others who are interested in learning a different way to grow wealth.

Jim not only advises and helps people get started in passive real estate syndications, he also invests alongside them in small groups to allow for diversification among multiple investments and syndication sponsors. Jim believes the most important factor in a successful syndication is finding a sponsor that he knows, likes and trusts.

He has invested in over 100 passive syndications including apartments, mobile homes, self-storage, private lending and notes, ATM’s, commercial and industrial triple net leases, assisted living facilities and international coffee farms and cacao producers. Jim is constantly looking for new investment ideas that match his philosophy of real assets producing cash flow as well as looking for new sponsors with whom he can build quality, long-term relationships. Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Are You a Fan? Subscribe, Rate, Review & Share – Click Here To Learn How

What question do you always wish I would ask but I never do?

Connect with the Global Investors Show, Charles Carillo and Harborside Partners:

Scroll to top