$0-$1B AUM: Real Estate Investor on Growing to $1B

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller and today I have my dear friend Matt Burk.

Matt is the chairman of Verivest and founder and CEO of Fairway America, with 1 billion AUM he knows how to launch funds, raise capital, and build a wildly successful real estate fund.

So what this means is Matt understands real estate investing, raising capital and how to launch a fund and he's about to teach you and I, how to do the same.

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[THE GUEST]: Matt is the chairman of Verivest and founder and CEO of Fairway America, with 1 billion AUM he knows how to launch funds, raise

Transcript

Ryan Miller  0:00  

Hi, my name is Ryan Miller and for the past 15 years have helped hundreds of people to raise millions of dollars for their funds, and for their startups. If you're serious about raising money, launching your business or taking your life to the next level this show will give you the answers, so that you too can enjoy your pursuit of Making Billions. Let's get into it. 

Ryan Miller  0:22  

If you want to run a billion dollar Real Estate Fund, like the big dogs, then you need to understand how to launch, run and administer deals with your investors. So my next guest has dedicated his entire career to helping you do just that and in a few short minutes, he's going to walk you through his best advice on how to win in real estate so that you too can enjoy your pursuit of Making Billions. Here we go.

Ryan Miller  0:42  

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller and today I have my dear friend Matt Burk. Matt is the chairman of Verivest and founder and CEO of Fairway America, with 1 billion AUM he knows how to launch funds, raise capital, and build a wildly successful real estate fund. So what this means is Matt understands real estate investing, raising capital and how to launch a fund and he's about to teach you and I how to do the same. So Matt, welcome to the show man. 

Matt Burk  1:08  

Ryan, thanks for having me, man. Big fan of the show, appreciate being on there on my, I'm excited. It's privilege to be here, thanks to you and the community for having me.

Ryan Miller  1:15  

Yeah, man, it's an honor, I've been following you for a while and I am impressed with everything that you've done over a very long career and the hits just keep coming, man. So it's truly my honor to have you on the show and all of us here in the Making Billions community, we are certainly blessed to have you. You know, you've done a lot of things in the private investment space, particularly in real estate, helping people launch funds and you've done it all brother. You know people starting out, you've been a beginner at one point, I've been a beginner at one point, what would you say to people in the early days where they're starting out? How do beginners win in your industry? And then after that, how do they not lose? So how do they win?

Matt Burk  1:48  

Yeah, well how do they win? I think there's a lot of people that want to start a real estate asset based fund and I think how you win doing that is you take the walk before you run. So take steps to do individual deals, I feel I certainly did and I think a lot of the most successful fund managers that I've worked with, coached, advised over the years, start by doing one deal at a time. So you know, syndicate the deal, fractionalize the deal if it's a loan, matchup, one investor, one deal at a time and get your feet wet doing that don't jump straight to the fund, it's an order of magnitude more complex. So you really want to understand what you do. And I think that's probably the biggest thing is, you know, walk before you run. 

Ryan Miller  2:29  

Yeah, so kind of do a couple syndications before you launch a fund?

Matt Burk  2:32  

Yeah, if you're in the realist, direct ownership of real estate, business, syndicate a couple deals that bringing in multiple investors into one asset during the lending business, you know, fractionalize the loan where you bring multiple investors into a single loan. But you know, syndication or fractionalization is one deal, multiple investors, whereas a fund is multiple deals, multiple investors.

Ryan Miller  2:54  

Yeah, I love that. Are there any areas in there that you would advise people who are starting out in the real estate business who maybe say, hey, one day I would love to own a fund and have a billion AUM and now all these famous accolades, but you got to start somewhere? Are there particular areas that you would advise someone who's starting out in the real estate who wants to do these private deals, what areas would you say they really need to drill down and understand well?

Matt Burk  3:13  

Well, at the deal level, I think you need to understand the operations of whatever asset type it is that you're doing. So if you're buying property directly, property management, understanding financing, how do you capitalize it, understanding all of the aspects of property ownership, you know, liens, title work, encroachments, easements, I mean, all of that, for at the very beginner level. If you're in the finance, business, you know, understanding the ins and outs of how loan agreements work, how foreclosures work, how taking property back, what the accounting treatment is on all that, there's a large number of things to know and to learn, that will be important if you're trying to rough on so I'd say start with blocking and tackling start with the basics.

Ryan Miller  3:54  

I love that and you know, moving on to the second part of that question, same side or different side of the same coin. How do they not lose? How do they avoid getting wiped out in the early days and what's some cautionary tales you can share with some of our listeners who are just starting out? 

Matt Burk  4:07  

Yeah, probably the biggest one is to try to be really clear on your objectives, you know, know what you're trying to achieve. I think there's a propensity for entrepreneurs, certainly myself included over the years, to chase shiny objects, you know, whatever the latest greatest thing is get sidetracked or try to do too much. So think probably my biggest guidance on how not to lose is you know take one step at a time. Identify clearly what you're trying to do first, set a plan to do and stick to that plan, try to avoid shiny objects.

Ryan Miller  4:35  

Yeah, thank you for that and no, that's really good advice for people who are starting out how to get some early points on the board how to avoid getting knocked out. But I'm curious real estate has really been on the minds of a lot of listeners and a lot of my friends who are in real estate you're definitely one of them, if they're saying yeah, the market is interesting is what I hear a lot. That could mean many things, but what are you seeing out there? What's what's going on in the market?

Matt Burk  5:00  

Yeah, I'd say interesting is a good euphemism Ryan for very what we'll call challenging in the moment. You know, I think after COVID the market, everybody thought the market was gonna struggle, and certainly some sub markets did, but you know, the market just caught fire and then once interest rates started skyrocketing, it's been just a complete reversal and the markets are very, very challenging. You know I always say, in the real estate world, there is no one, you know, market, there's 1,000s of micro markets, right. There's asset classes, but then there's sub asset classes. So you know, pick an asset class. Multifamily, well, there's class A, you know, urban multifamily, there's class A suburban multifamily, there's high rise, there's low rise, class B, it is class C, right. There's a lot of different types of multifamily and that's true for office or retail, or industrial, or whatever type you want. So there's a lot of micro markets. So Ryan, when I talk about, you know, the market, I'm always careful to say he can't extrapolate, you know, one answer across all markets, because they're very different. But broadly speaking, you know real estate has because of real estate's a heavily dependent asset class on capital availability. 

Matt Burk  6:10  

And when capital, price capital goes way up, and capital is constricted and restrained, and all real estate suffers. So values have dropped precipitously, anywhere from in a best case scenario, if you have long term fixed rate debt on really core stuff, okay that probably hasn't got impacted very much, you know, but if you have variable rate debt on value add stuff that's not stabilized yet, those are getting crushed, because there just isn't really any good way to get out from under a deal like that. You can't really sell it, you can't refi it, people have a hard time put more capital in. So it is a overall it's a very challenging environment and some sub micro classes are much more challenged than others, depending on what they are. 

Ryan Miller  6:52  

Yeah and are you seeing a decline in deal flow at all?

Matt Burk  6:54  

Oh, yeah, I mean, deal flow has dropped precipitously, I mean, I've read anywhere, well, I've personally experienced you know it was a 90% drop in deal volume last year in 2023, for us. I think, for a lot of people is anywhere from 30-40% drop to 80- 90% drop in deal volume. Now and again, that varies by asset type, by subclass and so forth but overall, you know, the volume is down precipitously.

Ryan Miller  7:22  

Oh man, so where is ah, just collectively all these micro markets will just aggregate them, where do you see for real estate investors or people who, as we talked about wanting to launch a fund. You know, we try our very best, we don't have a crystal ball, so we typically we will use other things, but where do you see the market going? 

Ryan Miller  7:46  

Thank you for watching, if you've made it this far we must be friends so don't forget to like, subscribe and click that notification button. Now, let's get back to the show. 

Ryan Miller  7:56  

Where do you see the market going? What's your perspective on where things are headed?

Matt Burk  8:00  

Yeah, well, we ah I think you're aware, Ryan, one of the business lines that we have that Verivest is fund advisory and guidance and creation and setup, right? So we have, we're always working with clients to set up new vehicles, that business actually, that volume was not down last year, that volume was actually up, because a lot of people are trying to position themselves to take advantage of what they believe will be new opportunities as a result  of everything that's going on. Of course, you know, the flip side to, you know, a downside or a downturn is that after the markets recover? Do they tend to go on a run, right? So we're seeing lots of different strategies that people were putting together for, I think probably the most popular one right now is rescue capital. So you're seeing quite a number of funds that are aggregating dollars to inject into some of these challenge deals to come into either a pref equity, slug or a mezzanine slug, to provide capital to challenge deals to help, you know, try to get them to ride it out to the other side and make that happen. That's probably the number one thing that we're seeing. There's a host of others, but that's probably the biggest one. 

Ryan Miller  9:01  

That's the biggest one and you know, for 2024-5-6, so how would you walk that ladder up? If someone asks you your advice in a sentence or two, what do you see in the next three years?

Matt Burk  9:12  

Yeah, I think 24, hopefully better than 23, but I think it'll, it sure appears the rate increases are probably over. Rate decreases, which I think is what it's going to take to start getting some real traction, volume, and enthusiasm back into the market. And as you said, don't have a crystal ball but my best guess Ryan, probably second half of 24, you start to see that creep down and start to see a little bit of unthawing in the market. I think 25 is better than 24 and starts getting you know where you start seeing some people really jump back in and then once the froth starts to happen, that's when you'll start to see much more rapid increase in values and so forth and that probably happens till at 25 end of 26. That'd be my best guess, but that said, you know, what, do I know compared to anybody else in the world? 

Ryan Miller 10:04  

Well, look, I've read your resume and folks, I would encourage you to do the same and figure out how big of a deal Matt is and when he speaks, a lot of people listen, including myself. So he's, whatever, whatever your opinion is, I'm sure a lot of people are very interested in that you're very qualified in that area. So 2024 looking, looking okay, second half of the year, maybe we get some lower interest rates 25 little bit better, and then maybe 2026, we can start to see a little bit of that start as sprinkled on the real estate markets. We get that right? 

Matt Burk  10:33  

That'd be my best guess and you're too kind  on the compliment, man, I appreciate you, obviously, highly successful in your own right, your whole community. But ah, but yeah, I think if I was guessing, that's kind of how we're playing it out. I mean, our fund advisory side of the house is really gearing up toward lining up some new fund opportunities across a variety of asset class, so that's exciting to watch.

Ryan Miller  10:33  

Man, brilliant, as we round third base, and we look at, you know, we got a lot of people from all different kinds. We got fund managers, family offices, investment bankers, and recovering executives like myself. So we got all kinds of people that are looking at this primarily on alternative assets, dealing with funds that know how to win, everything in this area. I'm curious if any one of those people that I just described came to you, and they were looking for all of your advice, or some of your advice, what's maybe two, maybe three things that you can outline that you would give to people who are just starting up?

Matt Burk  11:30  

Well, probably the biggest one Ryan is, is be a lifelong learner, I mean, you've heard the phrase leaders are readers, right? I mean, learning, you know, when I was young, I kind of fought to get out of school and now I don't have to don't have to learn anymore. Well, that's nothing could be further from the truth, fortunately, I learned that lesson early in my 20s and since then have become and I see the books on a shelf back there, right is like, all the most successful people I know, are people who are committed to lifelong learning. So there's an infinite amount of material to absorb and to study, so pick those that makes sense for whatever you're trying to do, and dedicate yourself to constantly learning and growing and that's really the key to success in my mind. 

Ryan Miller  12:13  

I love it and if you want to launch your own investment fund or raise capital, or whatever that might be, you know, how do you balance or what's your perspective on reading? And well, we know that's encouraged, but versus maybe on the site training, do you feel like those are both useful, or where's, what's your position on that?

Matt Burk  12:29  

No, I absolutely. I think that you can, you know, read and study and do all that and that's helpful, but nothing teaches like doing the frankly, teaching is there, nothing helps you learn more than teaching the material. So ideally, learn to do it, teach it, and that syncs it and the most deeply, but I'd say, for people that are thinking about setting up a fund another advantage is go to work for another fund, right? Or work at a fund somewhere else where you can learn some of the things that aren't necessarily on your own dime if you're trying to be an entrepreneur, because you could learn a tremendous amount by doing he could learn what to do and what not to do. So yeah, read, learn, do, teach.

Ryan Miller  13:04  

Yeah, I love it! Yeah, teaching is such a powerful way, I personally take that and so I like to say you never truly own anything until you're able to give it away and that includes your knowledge, especially your knowledge. And so you can provide that and it's part of the show where guys like yourself and myself, are able to just bring that democratise a lot of that information just to help people know they can do it. So thank you, so be a constant learner, yeah earners are learners. So maybe a second thing, say, because I know a lot of people when they start a fund, they want to grow to the coveted billion dollar AUM, right? I call it the billy club. So you want to get into the billy club? What advice would you get people who are aspiring to that?

Matt Burk  13:38  

I think probably the number one saying Ryan would be, know how you plan to raise the capital and where is the money going to come from? 

Ryan Miller  13:46  

Yup.

Matt Burk  13:47  

I think one of the most common themes that I see over all these and we've set up and created and played the lead architecture role and several 100 funds over the last decade. I'd say it's very common that people are really not sure how they're going to get the money, or they have very big misconceptions on where that money will come from. Or they think that if they set up a fund, it's the old if I build it, they will come philosophy and that really doesn't work. There's a, depending on the type of assets that you're going after, that will, among other things, to a large degree influence the kind of investors that you can get. So are you going after, what are you going after the retail channel? Are you trying to raise money through registered investment advisors and financial planners? Are you going through the proper dealer channel? Are you going to do it yourself and raise from Country Club friends, family, etc? Are you trying to raise from institutional LPs, pension funds, etc. They're all very, very different and people I would say are routinely, they have a very high rate of confusion or misconception around what they realistically can do or not. So people tend to waste a lot of time and money pursuing things that they have almost no chance of ever being successful with. So if you can figure that out, or at least have a pretty good idea going in, you can save yourself a lot of time, money and effort by doing that.

Ryan Miller  13:47  

Yeah, I love it. Okay, so and for those who are maybe new to the fund world the way I view it, Matt, you may agree or disagree, but most people understand the importance of sales in the business for fund. That's kind of the same thing, right? Without sales, no I've never seen a business succeed without sales. So same with a fund never seen a fund succeed without capital. So raising capital what Matt is talking about is absolutely vital. Without it, you just got a bunch of expensive pieces of paper he paid a lawyer to build for you, but with capital, now we're able to do something. Now we're able to unlock value not only for yourself and your family, many, many more. I love it and what about do you have another one that you'd love to share? 

Matt Burk  15:41  

Yeah, I mean, I think, like you said, doing it working for somebody else, understanding how it works, I will save you a lot of time, and not understanding the capital. I mean, I think those are my biggest ones, Ryan, ah everything else would be significantly less in value compared to those two so if you master those two, or at least get 90% of the way. You're way ahead of the game. 

Ryan Miller  16:00  

Yeah, I love it. So as we wrap things up, is there anything else you'd like to say to our guests at all? Anyway, that did reach out to you or any of the products or anything at all? 

Matt Burk  16:07  

Yeah, and I just appreciate the opportunity to be here. People can find me on LinkedIn, the best place to reach me, it's a, Matthew Burk on LinkedIn certainly can look up our companies on the web, right? fairwayamerica.com or verivest.com, actively involved in both and anything and everything involving real estate funds we, we're heavily involved on it. So I love to love to hear from you and I hope the biggest thing, Ryan, I hope I bring a little bit of value to the community you've built, which is super impressive and just appreciate you having me. 

Ryan Miller  16:35  

Yeah man, it's certainly our pleasure to have you and someone with your caliber and background, it is truly an honor my brother. 

Ryan Miller  16:42  

So just to wrap things up, folks, you know, some of the advice that that Matt gave us be a constant learner, right leaders are learners as he said, if you have aspirations on building a fund to grow to a billion dollar AUM, by being in the billy club, just be very, very clear on how you will raise capital, take a course join a mastermind. Whatever it is you need to do to add pixels to that vision is absolutely vital. Building those characters those qualities are some of the most vital things you can do in your pursuit of Making Billions.

Ryan Miller  17:22  

Wow, what a show. I hope you've enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, once you head over to YouTube and see extra takes while you get to know our guest even better. And make sure to come back for our next episode where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.