Agents Building Cashflow

EP 179: Unlocking Real Estate Syndication Secrets with Tilden Moschetti

• Tilden Moschetti

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In this episode of Agents Building Cashflow, Randal talks to Tilden Moschetti, a seasoned legal expert and real estate investor with nearly two decades of experience. Tilden delves into the intricacies of real estate syndications, offering invaluable insights for both sponsors and limited partners. He discusses everything from structuring deals and navigating legal compliance to effective capital raising strategies and market trends.

Whether you're curious about syndication basics or want actionable advice on building investor trust, Tilden’s expert knowledge makes this episode a must-listen. Don’t miss the opportunity to learn the secrets to syndication success - tune in now.

Key takeaways to listen to:

  • The critical role trust plays in attracting and retaining investors.
  • Navigating the legal essentials of real estate syndication to avoid costly mistakes.
  • Crafting compelling stories to emotionally engage investors.
  • Adopting effective communication strategies to maintain strong investor relationships.
  • Exploring emerging syndication opportunities in logistics, triple-net funds, and creative development projects.

About Tilden Moschetti

Tilden Moschetti is a distinguished legal expert and real estate investor with nearly two decades of experience in the industry. As the managing partner of Moschetti Syndication Law Group, a boutique firm specializing in securities and Reg D syndication law, Tilden has dedicated the last nine years exclusively to serving securities and syndication clients. His extensive background includes brokering and consulting on hundreds of thousands of square feet of commercial real estate.

In addition to his legal expertise, Tilden is an active Reg D syndicator, offering a unique blend of hands-on experience and deep legal knowledge to his clients. He is known for his ability to navigate the complexities of securities laws, ensuring that syndicators avoid common pitfalls and successfully manage each stage of the syndication process.

Tilden is passionate about helping others unlock the secrets to syndication success, sharing his insights on growing real estate investment portfolios and achieving stability through informed, legally sound strategies. Whether you're a beginning investor or a seasoned professional, Tilden's guidance and expertise can help you take your multifamily assets and investment ventures to new heights.

Connect with Tilden Moschetti:

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To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!

[00:00:00] Tilden Moschetti: The more trust you have from your investors, the less money they're necessarily going to require to go in with you. So it's gotta be a fair balance of, you know, if I had some, I have somebody who's doing something at 6%, so it's a fixed return at 6%. And they've got a huge name and they've got a huge amount of trust.

[00:00:19] Tilden Moschetti: And that's the only reason that they're going to be able to do it. Cause if I went in front of their investors, there's no way they're going to give, let me, they're not going to invest with me for 6%. It's not going to happen. So the trust scale is really what drives it more. Most of it is certainly over 10.

[00:00:36] Intro: If you're a real estate agent earning 200, 000 a year, and you want to grow your passive income, this show is for you learn secrets, other agents use, and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities, so you can take your commissions and turn them into cashflow.

[00:00:56] Intro: Here's your host, Randall. 

[00:00:59] Randal McLeaird: Hey guys, welcome [00:01:00] back. It is great to have you here today. I am talking with Tilden Muschietti of the Muschietti Syndication Law Group today. It's always good to have a refresher on what syndications are, what PPMs are, what you should look for as a limited partner in some of these deals, and as a sponsor, what you should be doing as well.

[00:01:17] Randal McLeaird: Tilden's an expert in the field, and so it's great to have him on the show and have him share his knowledge with us. We're going to talk about syndication again. So if you're looking for that, this is the show for you. Uh, we're talking about some of the deals that he's working on. And obviously he is, I got an inside track on what's happening in the market because he sees a lot of people putting these deals together, different types of syndications.

[00:01:37] Randal McLeaird: So he's seeing return profiles. He's seeing. Terms that need to be put in to the PPM and to the other regulatory docs. So the wealth of knowledge, and we cover a lot of that in this conversation. So if you're getting something out of the show, please go on rate and review. It helps us a ton as always. And we are still raising capital into the RAM capital fund, where we are going out and buying single family [00:02:00] properties, creating notes.

[00:02:00] Randal McLeaird: And so it's a reg CF is it's a crowdfund deal that we have done. So if you're interested in that. Please go to the show notes below and you can hear about that. All right. Without further ado, let's jump into the show. Here's Tilden. Well, hey Tilden, I appreciate you jumping on. Welcome to the show. And I'm excited to talk to you today about syndications and, and just have you share your knowledge so that when we're going out, we're looking at some of these deals and offerings that are coming up or we're trying to set our own up, we have a little bit better understanding what's going on.

[00:02:27] Randal McLeaird: So welcome to the show. 

[00:02:28] Tilden Moschetti: Totally. Thanks for having me. 

[00:02:29] Randal McLeaird: Right on. So let's jump in just, just briefly cover for those that don't know you tell us how you got into the syndication game specifically and was that like what you had always wanted to focus on or you, you found it through some other means of either investing yourself or something.

[00:02:45] Tilden Moschetti: Real estate is really what I was focused in on more than anything else. My idea was I was going to be a developer and I was going to build assisted living facilities with. Using manufactured housing. 

[00:02:56] Randal McLeaird: Okay. 

[00:02:56] Tilden Moschetti: Uh, didn't have any idea how I was going to pull that off, but I [00:03:00] thought it was a great idea. So I looked around at a bunch of other developers.

[00:03:04] Tilden Moschetti: They were all lawyers in my area. And so I thought, okay, well, I'll go to law school and then, and then I'll be able to talk what needs to happen. So I did that ended up just because of circumstances. I ended up practicing law as a litigator, but just really in real estate around any kind of dispute that relates to like the valuation of real estate.

[00:03:26] Tilden Moschetti: So I didn't do landlord tenant issues, but I always did things like property value, partner disputes, divorces, whatever it was, as long as real estate was a big part of it. I hated it. Okay. Litigation is absolutely terrible for everybody involved. So I wasn't happy and I was looking around and brokers seem to be making good money.

[00:03:48] Tilden Moschetti: So I added some brokerage into my background, did a few deals, you know, earned a CC. I am. And then one of my partners on the brokerage side showed me a deal and said, Hey, look at this. [00:04:00] It's really fantastic. So I looked at the deal and was like, yeah, that's really good. And he said, we should syndicate it. I didn't know what that meant, but, uh, I figured I could figure it out.

[00:04:10] Tilden Moschetti: And, uh, that was the first syndication about 10 years ago and, uh, did another and then realized, well, why am I doing this? Why am I litigating? It doesn't make any sense. I really enjoy putting these deals together. Why don't I just. Do my own deals and also put deals together for other people. So I started doing that and, uh, love it.

[00:04:30] Tilden Moschetti: So nice. All right. It's now a great job. 

[00:04:33] Randal McLeaird: Yeah. No, no, I love that backstory. So then on that first deal, what was it? Was it a, because when you first started saying you started a brokerage, I didn't know if you were talking on. Residential or commercial, 

[00:04:42] Tilden Moschetti: I was on the commercial side. So it was a, uh, it was a medical office in, uh, Decatur, Alabama.

[00:04:50] Tilden Moschetti: And, uh, it had just been developed, so it was buying it, you know, the developer wasn't really, they just kind of wanted to be done with it and go on to the next project. They weren't looking [00:05:00] to make maximize fees. And so we got a really good deal. And, um. Yeah, we're able to buy it, sold it after the rent bumps and, uh, yeah, 

[00:05:10] Randal McLeaird: fantastic.

[00:05:10] Randal McLeaird: Okay. So you both sides of the, of the deal then. So you're on the ownership side and the syndicator side and as well as the, the legal side. So it's funny because when I used to work for an attorney, it was just very similar approach to it. I was like, I'm going to go to law school and I'm going to. This is 2008 when I just came back from Australia and in the process of going through that, I was like, I'm going to go work for an attorney who does a lot of investor deals and see if I kind of want to do that.

[00:05:36] Randal McLeaird: So I never went back to law school. I audited some classes and did that, but I got on the, you know, investing side of the business and never went back to law school. But yeah, it's certainly beneficial and helpful because I saw him through his syndications of, of some of the deals that he was working on some storage facilities back then.

[00:05:52] Randal McLeaird: I mean, he was doing all his own PPMs and. You know, managing that whole process. So it was interesting to see that side of the business as well. So [00:06:00] 

[00:06:00] Tilden Moschetti: totally. 

[00:06:00] Randal McLeaird: Yeah. Yeah. So, okay. So you, you were doing that and then, so you've morphed into straight syndication side of the legal practice. Are you standing up the syndications or are you still having to do some litigation on the back end if something goes wrong or you just, 

[00:06:15] Tilden Moschetti: I only do people, if it's a reg D, I do it.

[00:06:18] Tilden Moschetti: Yeah. But I don't do any litigating on if there was a dispute. I don't represent investors. My clients are putting the deals together. If anything were to happen, I'm not the attorney that's going to litigate it. 

[00:06:31] Randal McLeaird: Yeah. Yeah. Yeah. Okay. Good to know. So, all right, then let's walk through syndications. I've covered it on the show.

[00:06:37] Randal McLeaird: We've had other attorneys on, but I think it's always helpful to just go back and kind of discuss the basics of what it is. So again, if you're looking to raise capital from others and you're selling to security, this is what we're talking about right now. Okay. So. So just tell us, you know, what's syndication, when would you use it?

[00:06:56] Randal McLeaird: And, um, just really high level so that we can start the conversation from there. [00:07:00] 

[00:07:00] Tilden Moschetti: Sure. I mean, briefly, anytime you're raising money from a passive investor and the goal is for them to make money, then it's a security as we registered with the sec, which nobody's going to do here because that means really like going public and it costs millions of dollars, that's not it.

[00:07:17] Tilden Moschetti: We're talking about an exemption to the two registration. Which lets us basically raise an unlimited amount of money from an unlimited amount of accredited investors. And sometimes raise money from non accredited investors. Reason you do it is really because you want to go bigger and you want to do bigger and bigger deals.

[00:07:34] Tilden Moschetti: So you want to find, you want to not only do the single family home or the small apartment building, but you want to do a really big apartment building or a really big office building or whatever it is. And so you need additional capital in order to do that. And at the same time, you'd like to make a little bit more money than by using other people's money, which is what the role of a sponsor really does.

[00:07:57] Tilden Moschetti: So really, it's always a balancing act [00:08:00] between borrowing money through through financing and also using syndication and using the investor money. I'm really coming up with a nice balance that really maximizes. Ultimately you want the best profit for you, but also you need to make sure you're getting a good return for your investors.

[00:08:17] Randal McLeaird: So when does it make sense at what price point? Right? Because 500, 000 house, you're probably not needing to syndicate. Yeah. So the cost to technically 

[00:08:27] Tilden Moschetti: do. So even if you're raising a dollar, you still need to go through the motion. So it probably doesn't make sense to do that deal. If you need to raise, you know, that dollar.

[00:08:39] Tilden Moschetti: But it's still a security and still it's, you know, security is violation. If you're not properly underneath an exemption, like right D that break even point, I typically tell my investor or my sponsors probably about a million. That's where it starts making sense. The returns your investors are going to get based on taking [00:09:00] into account attorney's fees is where they start.

[00:09:03] Tilden Moschetti: It just starts to make good returns. Good enough that they'd want to invest in it below that it's going to be eating into a fair amount of the return that they're going to get 

[00:09:13] Randal McLeaird: to that point. It's more. Along the lines of, if you're going to do some sort of JV or you're just going to borrow and they're going to be a lender on a deal, right?

[00:09:22] Randal McLeaird: Instead of like private money on a deal. Yeah. So for a lower dollar amount, would you recommend that? I'm not an attorney. I'll let you say what the recommendation would be if it's below a million dollars. Yeah, I mean, 

[00:09:32] Tilden Moschetti: probably I'd be looking at if it was lower than that, I'd, I'd really have to kind of see if I'm going to be able to get a great return to offset that price of the basically paying for legal fees.

[00:09:42] Tilden Moschetti: Then maybe I'd still do it the smallest deal. I think I've put together was 200, 000 for somebody They wanted just the experience of going through the process and then ultimately to do more and more bigger deals And so that was okay, but more it's really got to [00:10:00] be there's got to be an overwhelming need At that lower price point to do it through syndication rather than using hard money or something like 

[00:10:07] Randal McLeaird: that.

[00:10:07] Randal McLeaird: Yeah, yeah, for sure. Okay. Just again, want to cover that. It's not a, what is that saying? It's like not every nail needs a hammer or something. I don't know what that Yeah, it's, it's not for everything, but 

[00:10:18] Tilden Moschetti: yeah, 

[00:10:18] Randal McLeaird: you can edit that out. It can be for a 

[00:10:19] Tilden Moschetti: lot of things, but yeah, it's a tool in, in your tool chest, so, yeah.

[00:10:23] Randal McLeaird: Yeah. 

[00:10:23] Tilden Moschetti: It's a way to get deals funded. Sometimes it works great. 

[00:10:27] Randal McLeaird: Yeah. Yeah. Okay. All right. So what are you seeing right now in the market? Again, we've covered syndications and I can point to some of the other shows if you want more detail specifically to syndication setting and that sort of thing. But what are some of the deals that you're seeing right now?

[00:10:42] Randal McLeaird: Because how many of these one, I guess let's just cover how many syndications are you standing up at any given time? Like what does the operation look like that you guys are running right now? 

[00:10:50] Tilden Moschetti: Yeah. I do about a hundred a year. For clients right now, we're looking at just putting about two or three together, probably within the next six months for [00:11:00] myself.

[00:11:00] Tilden Moschetti: And then maybe another four or five, six months after that. 

[00:11:03] Randal McLeaird: Okay. So what are some of the deals that you are seeing right now? The deal flow has changed a little bit on like multifamily front. It's died off a little bit. So what syndications for? Predominantly, right? Yeah, 

[00:11:16] Tilden Moschetti: about 2 years, 3 years ago, it would have been mostly development or buying value add multifamily.

[00:11:23] Tilden Moschetti: I don't see a lot of it at all right now. I've still got a lot of development of single family development of land getting entitlements through. I got a ton of people who are doing hard money lending and looking for capital to basically lend out. And then there's just a lot of people like, kind of like coming up with more creative ideas.

[00:11:44] Tilden Moschetti: So not that apartment building, but maybe it's okay. We're going to convert that apartment building into a hotel or something. 

[00:11:52] Randal McLeaird: Yeah. Yeah. Or hotel conversion, condo conversion sort of stuff as well. Interesting. Yeah. I'm always curious. And again, you get to see [00:12:00] and set up a lot of the terms in these syndications.

[00:12:03] Randal McLeaird: And so there are infinite number of ways, obviously, to set these things up. And, and depending on the return profile that you're looking for and that sort of thing. But do you see a common theme right now in this market with capital raisers and what they're putting together as far as return profile? Or.

[00:12:18] Tilden Moschetti: Yeah, I mean, it's got to have a one in front on what the return your investors are going to get. I mean, it's always a balance between how much the more trust you have from your investors, the less money they're necessarily going to require to go in with you. So it's gotta be a fair balance of, I have somebody who's doing something at 6%.

[00:12:40] Tilden Moschetti: So it's a fixed return at 6%. And they've got a huge name and they've got a huge amount of trust. And that's the only reason that they're going to be able to do it. Cause if I went in front of their investors, they're not going to invest with me for 6%. It's not going to happen. So the trust scale is really what drives it more.

[00:12:57] Tilden Moschetti: Most of it is certainly over [00:13:00] 10 and it really depends on, you know, safety. Is it a cashflow play? Is it appreciation? You know, what's that whole deal structure look like? And then we work backwards to there and figure out what the splits need to look like. And in order to put the deal 

[00:13:14] Randal McLeaird: together, are you seeing more and more like debt funds or income funds?

[00:13:18] Randal McLeaird: Yeah, straight yield place. Yeah. 

[00:13:20] Tilden Moschetti: Yep. Yeah. And that was really rare. I remember the first one I got and it was like, really? Well, that's a little strange, but sure. We can write it and we can, and now it's like, I don't know, maybe it's like 30 percent of my business, 40 percent of my clients. So 

[00:13:37] Randal McLeaird: again, just going back, if I got somebody there looking to set one of these up, what is a typical cost that we're, we're looking for, for, uh, you know, boarded a plate five or six C 20 million raise.

[00:13:48] Randal McLeaird: Yeah. You know, like, what is it? I don't 

[00:13:50] Tilden Moschetti: mind if I do a flat fee. I don't charge based on on anything else. It's probably going to be somewhere across the board [00:14:00] between attorneys. It's probably between. I don't know on the lower side there, they don't really do do a lot of these deals. It's probably going to be about 10, 000.

[00:14:09] Tilden Moschetti: On the upper side, maybe 25, 000. If you're going to a big firm, it's going to be 40, 50, 000. Yeah. 

[00:14:16] Randal McLeaird: Yeah. Yeah. Okay. Again, just that's a conversation we were talking about a minute ago where if you're doing less than a million dollar deal, the legal fees actually do come into play. You got to take that into account whenever you're looking to set these things up.

[00:14:27] Randal McLeaird: So I want to go through and kind of address some of the items that, An LP should look out for and like a PPM or in the setup documents. And then the other side of that, what the sponsor should be putting in the documents that sometimes you see is left out. And then we can just go from there. 

[00:14:46] Tilden Moschetti: Yeah. I mean, I think the first thing for an LP that when they're looking at something is, does this look like a pro?

[00:14:52] Tilden Moschetti: Like, is this a pro doing this or not? If the documents basically look like they could have been written in crayon, then run for [00:15:00] the hills. It's not worth doing. They don't know what they're doing. Yeah. Don't do the deal. So I tell my clients, you need to show up like a professional and LPs should demand that.

[00:15:09] Tilden Moschetti: So that's one thing the deal's got to look, you know, make sense to them as well. It's gotta be something that they could see how, you know, the projected returns are going to be reached. You know, if I could put a PPM out there that says, you know, we're going to double your money in two weeks. But, you know, any investor should see that and be very suspicious of it.

[00:15:30] Tilden Moschetti: Unless I've got some really great plan that I've outlined for them. They need to understand how I'm going to get there if they're going to put their money on it. So certainly those things in terms of general terms, I'd look for things like, am I going to get diluted out? Are they going to be buying this property and then buying another property and not taking into account any appreciation and in the first property when they're selling it out to the second people.

[00:15:56] Tilden Moschetti: So those kinds of open ended funds or funds that [00:16:00] blind pool funds that are going to be over a long period of time are going to dilute out the early investors. If they don't have mechanisms in place, 

[00:16:08] Randal McLeaird: I was going to say what kind of mechanisms can be put in place that would allow for that not to be diluted.

[00:16:14] Tilden Moschetti: Normally you'll have a periodic basis of, okay, we're going to raise on these kinds of schedules. We're going to determine the net asset value, and then we're going to adjust the asset, the unit price on each offering to account for that. It's exactly the same way a private REIT works or even a mutual fund works, just adjusting to the market price.

[00:16:35] Tilden Moschetti: So then the price they're paying in at is balances out with where 

[00:16:39] Randal McLeaird: you're at. I've seen that on some Evergreen funds and, um, when they have that, and I've seen it where it's not in there. 

[00:16:44] Tilden Moschetti: Yep. 

[00:16:45] Randal McLeaird: And so how often are you recommending that they update? As 

[00:16:49] Tilden Moschetti: much as they can in term and not go absolutely nuts doing it.

[00:16:54] Tilden Moschetti: If you were doing it quarterly and you're a small shop, you're never going to get it done. That's too often. [00:17:00] But if you're a, I mean, I have a, I have a huge developer who does a lot of product and they've got a lot of, they make a lot of money. They do it quarterly, but then they adjust it at the end of the year, but they've also got 20 accountants, right?

[00:17:13] Tilden Moschetti: So it's not, it's not a real big deal for them to come up with the net asset values for these things. For most shops, you know, if you're doing it once a year, that's great. Really it's whenever your plan on sweeping in new money, I would do it. 

[00:17:27] Randal McLeaird: Got it. So that, that's some of the things that you're, you're looking for as a limited partner.

[00:17:32] Randal McLeaird: And again, on the other side of that, if I'm a sponsor and putting something together, say it's a multifamily deal, you know, 15 million purchase, and we need to raise, you know, 7 million bucks. What should I be putting in my, my agreement that you may see left out sometimes, 

[00:17:46] Tilden Moschetti: You may want to consider, you don't always have to put it in, but you may want to consider putting in a capital call provision.

[00:17:53] Tilden Moschetti: What happens when that multifamily building is underwater and you've got no more, no more reserve left. [00:18:00] It's useful to have what that capital call structure is going to look like. I don't say it's required necessarily because everybody's going to be incented in order to make the deal work. And if it's that bad, uh, You're going to go to all of your investors.

[00:18:15] Tilden Moschetti: You're going to tell them what the situation is. You're going to suggest a solution to it. And we'll see, and you're going to have to see if everybody goes along with it. It's not the best way to do it because everything's kind of up in the air. It's much better to have it kind of laid out. But sometimes we don't lay it out.

[00:18:32] Tilden Moschetti: So that's 1 thing to definitely consider about. Also, just making sure the risk profile is right is important, making sure that the risks that are likely to happen with any property is there. We certainly were talking about a lot during for multifamily buildings. Rent freezes and things like that. Now we're probably talking a lot more about interest rate changes.

[00:18:55] Tilden Moschetti: Still, I still generally will write something about what happens when [00:19:00] rates continue to go up. I talk about changes in unemployment that that may have a dramatic effect on a specific multifamily property. Things like that need to be taken into account. 

[00:19:10] Randal McLeaird: Yeah, 

[00:19:11] Tilden Moschetti: and then, yeah, things like that. 

[00:19:13] Randal McLeaird: Okay. Yeah. Just curious.

[00:19:15] Randal McLeaird: Again, you've been doing it for a while, so obviously things have changed and you keep adding, I guess, to the PPM and that's how that document is getting bigger. Yeah, it always, 

[00:19:23] Tilden Moschetti: it's always evolving. There are things I'm always putting in or taking out and yeah, it's kind of whatever's going on at the time.

[00:19:30] Randal McLeaird: Yeah. So you mentioned that you are setting up a few for yourself. So what are you currently targeting? What are you looking at and investing in? Is it real estate based or something else? 

[00:19:39] Tilden Moschetti: All real estate still. So I, uh, I'm putting together a logistics deal in South Texas. I'm putting together a triple net fund.

[00:19:48] Tilden Moschetti: Those are the two deals in the next three months, four months. 

[00:19:52] Randal McLeaird: Okay. Can we talk about them? 

[00:19:53] Tilden Moschetti: I may not answer all of it. 

[00:19:57] Randal McLeaird: I'm just kind of curious to the thesis in general, [00:20:00] if you haven't stood it up in that sort of thing. Like, so the logistics, is that a single asset syndication or is that a fund that you're setting up or what are you doing?

[00:20:07] Tilden Moschetti: The logistics deal will be, it's won't be a fund. It will be a single. Well, a multi asset, but it's all in the same region. It probably have a similar, it's all going to be in warehousing and trucking and things. 

[00:20:20] Randal McLeaird: Got it. Okay. Like iOS or, or more a mix of iOS and, and traditional industrial. 

[00:20:26] Tilden Moschetti: All just pure, uh, logistics.

[00:20:28] Tilden Moschetti: So it'll probably be that, uh, either, um, I forgot what they call it. Uh, certainly that warehouse space or at that point where they drive it over the border and, uh, need to get it certified into the U S 

[00:20:39] Randal McLeaird: got it. Okay. Interesting. Interesting. And then on the other side, you said you had another one. What was the other one?

[00:20:44] Randal McLeaird: And I'm putting together a triple net fund 

[00:20:45] Tilden Moschetti: and there it's just, it's not my normal, but I, I love retail retails kind of like, well, like my favorite product type. I don't do a ton of it, but I like it. And, um, so it's. Uh, there, it's just going to be snowballing cash flows. [00:21:00] So, uh, cash flow building, buying more assets, buying more assets, buying more assets.

[00:21:05] Randal McLeaird: So just walk me through it. I like learning why retail right now and what's the experience you've got in the retail space. Why is it your favorite? 

[00:21:13] Tilden Moschetti: I like it. Cause it's more complicated. The lease structure is much more interesting working with tenants and trying to figure out what the, the optimal lease terms for them are, but still the optimal for you to kind of balance it out, coming up with rent increases, it's just all, Fun and interesting.

[00:21:32] Tilden Moschetti: And then putting it together. It, I mean, it's probably going, it'll probably morph itself into a more of a private REIT just because of generally how the structure will go. It, it really will be not super cash paying, which is a little different than most REITs, but snowballing reinvestment of, of revenue into the, into acquiring more.

[00:21:52] Tilden Moschetti: And why? Because. Retail's hot right now. I mean, yeah, 

[00:21:55] Randal McLeaird: I've seen some of the price points on it and it seems like it's in a decent spot to [00:22:00] acquire. 

[00:22:00] Tilden Moschetti: Yeah. 

[00:22:01] Randal McLeaird: I was just curious about the actual lease up and if that's, if it's still hot. So it sounds like you are on, are you focused in a certain region or part of the country?

[00:22:10] Tilden Moschetti: Probably not on the West coast, probably mostly mid America to the East coast. 

[00:22:16] Randal McLeaird: Okay. And any idea on the return profile? Can you talk about that or not? No, I still haven't 

[00:22:21] Tilden Moschetti: underwritten it yet. I've got an agent that I've worked with for many, many, many, many years. And he sent me a bunch of stuff to start underwriting.

[00:22:29] Tilden Moschetti: So I haven't done that yet. I intuitively think it's going to work, but we'll see. Maybe. 

[00:22:36] Randal McLeaird: So again, are you structuring that as a completely separate business model, obviously from the legal practice? And so what does that look like? Are you providing legal or are you the sponsor? You're running the entire thing.

[00:22:51] Randal McLeaird: So you're going to your acquisitions and everything full 

[00:22:53] Tilden Moschetti: sponsor. And I have a reasonably sized, small team that can, that can manage whatever we need. 

[00:22:59] Randal McLeaird: [00:23:00] Nice. Okay. Yeah. I just didn't know if you were having outside partners that were doing all of that. You're working on that legal side and structuring the financing and that's what we're with it.

[00:23:07] Randal McLeaird: Yeah. And then I'll 

[00:23:07] Tilden Moschetti: do the legal cause hey, I'm free. 

[00:23:09] Randal McLeaird: Yeah, 

[00:23:10] Tilden Moschetti: exactly. Yeah. 

[00:23:11] Randal McLeaird: So my old, yeah, my old boss, that's why he's like, it's great. You know, I get to do all my own stuff. 

[00:23:15] Tilden Moschetti: Exactly. 

[00:23:16] Randal McLeaird: Okay. Well, you know, again, I kind of went on a sidetrack there just talking about real estate in general, just cause I like to know, you know, what you're working on, what you're seeing.

[00:23:24] Randal McLeaird: And so. Again, have you seen terms change on offerings in the last three years compared to prior to that? And if so, what are they looking like now? I know you said a lot 

[00:23:36] Tilden Moschetti: more fixed rate terms than before. So we're seeing a lot less of the fancy waterfalls, which thank God for with, you know, well, when it hits this IRR, it's going to be this split and this IRR with this one.

[00:23:50] Tilden Moschetti: I had one that was seven layers deep and that was ridiculous. So we're flattening that out, which is good Cause investors, it's just confusing for investors. It doesn't make [00:24:00] any sense. The durations are probably slightly shorter. I don't really think I even have in my stable right now, any seven years. I think everything is five or less.

[00:24:12] Tilden Moschetti: So durations have gotten shorter. 

[00:24:15] Randal McLeaird: That's kind of interesting. I would think it would be the opposite, but 

[00:24:18] Tilden Moschetti: yeah, I guess it's, um, I don't know. I guess the projects just in general, they tend to be. people are a little bit more worried about getting their cash out and so, 

[00:24:28] Randal McLeaird: okay, that makes sense. What do they need 

[00:24:29] Tilden Moschetti: to do?

[00:24:30] Randal McLeaird: So, yeah. Yeah, that makes sense. Well, okay, so again, you're on both sides of it. You see the legal side. You're doing this for other people and for your own opportunity. So do you have, do. Any tips, strategies for effective capital raising and how has that evolved? 

[00:24:46] Tilden Moschetti: So, I mean, my whole thing is that this comes from my first deal.

[00:24:50] Tilden Moschetti: And my first pitch to an investor is what I call like founder investment theory. So the founder investment theory is you've got to have. The story to the [00:25:00] property when you're putting an investment together, it's not enough to just say, well, we're getting a 18 percent IRR, but we've got a prep of 8 percent because it's just not, that's not getting people because when they see that 19 percent on that next page, they're going to go to that.

[00:25:18] Tilden Moschetti: So it's, that's not how people make decisions. People make decisions on emotions first, and then they make a rational decision to support their emotional decision. So, the numbers still have to make sense, or they won't be able to convince the rational part will be like, Ah, we gotta go out of this, it doesn't make any sense.

[00:25:35] Tilden Moschetti: But, they're really making it on emotions first. So the story has to be good. And so that story needs to be like, why are you doing this product in the first place? This, if it's a specific property, why this property, I mean, is it, and it needs to be better than, oh, it's got a 17 percent IRR or whatever the number is going to be, it's gotta be well, you know, here's what's going on in the market.

[00:25:59] Tilden Moschetti: And here's [00:26:00] why my team is especially suited to understand it. And this is what else is coming to the table. And, you know, we also think that in this region, we've got this company coming in. That's going to really drive up. Rents and raise the whole standard of living. So it's really an appreciation play as well.

[00:26:17] Tilden Moschetti: All that's got to be there in order to be able to talk to an investor and get them from, I don't know anything about your project to, wow, here's a hundred thousand dollars. So that's kind of like the biggest tip I've got for people. 

[00:26:31] Randal McLeaird: Yeah. Fantastic. So how does the conversation change if you're doing a C right?

[00:26:35] Randal McLeaird: You're marketing to people that you've never met before. So how does that conversation change from investors who have invested with you in the past? Compared to those you've never met and maybe they're responding to some ad you put up. 

[00:26:47] Tilden Moschetti: It's not too different. So I hardly ever talk about numbers at all.

[00:26:52] Tilden Moschetti: I mean, it's, it's in a pitch deck. It's there, but I don't talk about it. It's not how they're going to be deciding. And they probably are going [00:27:00] to ask questions about those numbers. And that's good. That means I've made it past the emotional side enough that the rational side is now wondering if this is a good enough deal for them to invest into.

[00:27:12] Tilden Moschetti: But so that's a good indicator, but most of it is talking just about the story and why this is a great property or why this is a great region or why my team is the best or or whatever it is. And then, you know, it gets shorter for my past investors about probably about 70 percent of past investors come on the next deal with me right now.

[00:27:34] Randal McLeaird: Yeah. 

[00:27:34] Tilden Moschetti: So them, it's, it's shorter. I don't have to pitch them on the team. They know that part of it, but they'd still want to know the vision because I don't do the same thing over and over. I don't always just there's a lot of multifamily guys or storage guys or whatever. And that's great for them. It's just not what I'm into.

[00:27:52] Tilden Moschetti: I like interesting deals that are, are fun to talk about and 

[00:27:56] Randal McLeaird: I love hearing that. Yeah. I was talking to a guy the other day and we were talking [00:28:00] about just, you know, are you working on anything interesting? Right. Instead of just like, you know, there's a. You know, another 80 unit, 150 unit, whatever it is, same thing, cookie cutter style, and that's all well and good, pays the bills, that sort of thing, but, um, yeah, is there anything else interesting that you're working on?

[00:28:15] Tilden Moschetti: There's definitely nothing wrong with it. It's just different. I wouldn't be a very good salesperson for it because I don't, I don't find it interesting. If I don't find it very interesting, I probably can't sell it very 

[00:28:26] Randal McLeaird: well. Well, let me ask you this. And so you have to get people into your funnel. And if they're not, let's say referrals from current investment investors, then what are you putting or what kind of advice do you have for.

[00:28:40] Randal McLeaird: Sparking that emotional response in an advert you may be putting out to get those people to call you on the idea or the story of a property. The best 

[00:28:48] Tilden Moschetti: I can give you is an example of what not to do. So, and there I have a client who was having trouble with marketing. So we got on the phone and I said, show me the ad [00:29:00] first.

[00:29:00] Tilden Moschetti: Show me the ad. So he shows me the ad. He paid a marketing firm a lot of money to do it. But it together and, you know, they're selling the pay per click ads and stuff. And some of these guys are great. This particular company was not, it was an AI generated video. You could tell the voice was AI. It only talked about 16 percent IRR.

[00:29:21] Tilden Moschetti: I mean, it was. It was the worst ad in the world. I mean, no wonder Robots robot spewing 

[00:29:26] Randal McLeaird: facts about something. Yeah. Yeah. He 

[00:29:28] Tilden Moschetti: didn't have a single click because it was so terrible. I mean, I probably would click on it personally just because I would wanna know who the heck is doing this deal . Um, but yeah, he'll never get a deal.

[00:29:41] Tilden Moschetti: So I mean, it's gotta be a hook. That's interesting. Get on video yourself and pitch it. 'cause people o only invest with people they trust and. If it's a mindless voice or, or even just plain text, they're not interested. 

[00:29:57] Randal McLeaird: Yeah. Yeah. Okay. That's really good advice. Again, [00:30:00] it's the facts tell story sell. And yeah, if you're putting yourself out there, then that makes sense that you'd be getting the emotional response early on.

[00:30:08] Randal McLeaird: I guess, again, it's just one of those things you're not going to get on or your advice. It sounds like you're not going to get on and just say, Hey guys, 1, 2, 3, main street, uh, 17 percent IRR. Check you out here for more info, right? It's gotta be some kind of creative. Yeah. 

[00:30:21] Tilden Moschetti: I'll probably talk about, you know, whatever it makes it kind of special.

[00:30:25] Tilden Moschetti: There's a lot of these properties, even the ones that you think are kind of cookie cutter, sometimes have something really cool going on. And so it's like, Oh, 

[00:30:33] Randal McLeaird: okay. 

[00:30:34] Tilden Moschetti: Okay. 

[00:30:35] Randal McLeaird: Sounds good. All right. So that's on the capital raising side and some of the tips that you have there, but how about on investor relations and.

[00:30:43] Randal McLeaird: Once you have a deal and you've got a syndication set up and you're, you've deployed the capital, you have the asset, what do you recommend or, or what tips do you have around investor relations in general? 

[00:30:54] Tilden Moschetti: Communication is number one. So I occasionally get calls from investors wanting to sue [00:31:00] their person.

[00:31:00] Tilden Moschetti: And the one thing that is always true besides losing money is that they never heard from them. So you got to get on the phone, you got to send emails just all the time. So your updates should come out quarterly at least. Monthly is a lot. So you probably don't need to send it monthly but quarterly absolutely and it's got to be good So it's got to be I would take pictures of the property I would give metrics about how things are performing what i'm seeing in the market coming up, you know Write a full on narrative.

[00:31:32] Tilden Moschetti: My emails generally are pretty long when I write to investors The narrative is probably 500 words, you know, 700 words. It's a lot. They may never read it. Right. And I recognize because it's kind of boring that maybe they're, they're never going to read it, but they know that I care a lot about the property.

[00:31:51] Tilden Moschetti: And so therefore I care about their money. 

[00:31:53] Randal McLeaird: Yeah. 

[00:31:53] Tilden Moschetti: The fact that I always put like, if you have any question, give me a call. Anytime we'll talk right away. [00:32:00] I mean, it's critical. They know they can call me. About anything if they want to know why I decided something they can call if they want to know what's coming up They can call they just want to catch up.

[00:32:11] Tilden Moschetti: They can call so that's what makes alternative investments So cool. All right, if you invest in Apple, you cannot call Tim Cook up on the phone and ask him You know how he feels about the the Google lawsuit. It's never gonna happen. You're not gonna get him on the phone Maybe one or two of your lists, but I can't, so I can't call them on them, but they can call you.

[00:32:35] Tilden Moschetti: And that's what makes it so kind of awesome and democratize finance. I mean, that's, that's what makes our. Our whole thing that we're doing so good. So communication is like it, that's the beginning, middle and end. 

[00:32:49] Randal McLeaird: Yeah, it's interesting you say that because one of the very first conversations I had when I was going out talking to some investors that I'd never met before.

[00:32:56] Randal McLeaird: They're like, why should we invest with you compared to this other thing or [00:33:00] putting our money in the stock market or whatever? And that was the exact response, you know, it's like, I'm here sitting in front of you at your dinner table. You get to talk to me whenever you want to talk to me. So, yeah, it's an interesting dynamic to be able to say that 

[00:33:10] Tilden Moschetti: the guy who I did my first deal with, he went in on a syndication deal before long before we did our first deal together and he showed it to me.

[00:33:20] Tilden Moschetti: He hadn't heard from the company in 3 years. He only got a K one, like not even an update. I mean, Oh my God. I mean, even if your returns are great, you're going to hate them. Right. Cause you have no idea what the money's doing. 

[00:33:36] Randal McLeaird: Yeah. Yeah. What happened after that conversation? I'm reaching out tomorrow.

[00:33:41] Tilden Moschetti: Couldn't really get it out. He really couldn't get the money out. So I think they finally did sell it and I think they sold it at a good profit. So, but man, they just lost being able to get another investor. You know, getting them to reinvest. So, 

[00:33:55] Randal McLeaird: yeah. Well, let's talk like best and worst. What's, again, you get to see a lot [00:34:00] and that's what I really enjoyed about working with that attorney when I was doing the same thing.

[00:34:03] Randal McLeaird: It was, I got to see a lot of investor transactions. I was doing a lot of the title work and that sort of thing. And, um, and so I had stories just from that. So like, what's the worst thing you've seen a sponsor do? 

[00:34:15] Tilden Moschetti: The worst deal I've, I've seen didn't become a client. We didn't accept them as a client and I'll obscure the facts enough, but they told me that they, they were going to buy a very prominent national park.

[00:34:27] Tilden Moschetti: In the United States and we're going to build condos on it. It's like, okay, you know, you're going to be in the Bahamas going to buy it. It's a national park. I didn't realize that. Right. So yeah, that was pretty crazy. Um, so that was the worst best. There's a lot of best, uh, just because I mean, any great idea.

[00:34:51] Tilden Moschetti: I don't get it. A lot of the things I hear over and over again. And. Um, you know, always happy to work with on, on those, but every now and then [00:35:00] somebody will come up with something that's totally novel and yeah, I guess that's it. That's very exciting. Yeah. I keep it. I can't share. Oh yeah. 

[00:35:10] Randal McLeaird: It's one of those, what's, what's the most interesting thing that you've seen somebody raised capital for, I guess, if you can answer that, it's like a.

[00:35:17] Randal McLeaird: Is it always real estate? Are you focusing mainly on the real estate? 

[00:35:19] Tilden Moschetti: I always try and keep my eyes open on, on everything. I mean, most of it is, is real estate that I see, but there's a lot of cool companies that are, that are raising funds that are, you know, not really startups, but just kind of looking for additional capital.

[00:35:35] Tilden Moschetti: That's fun to see. I guess there's one I can talk about. Cause I've have a YouTube video about it. I think the best idea I have seen in 10 years. This isn't my company. I have no affiliation with them whatsoever. And I don't know any of the specifics about what they're doing. So there's the preamble that is a company called masterworks that, uh, they're doing a lot of advertising too.

[00:35:58] Tilden Moschetti: And so their [00:36:00] thing is invest like the billionaires invest and they invest into artwork. And so they have a whole model of how they. Buy artwork and then resell it. They basically flip it over a period of three or five years by identifying undervalued artwork. That's really like Banksy and like huge names, very prominent artists.

[00:36:24] Tilden Moschetti: They're so slick. Those guys are really good. Great idea. I envy them because I wanted to come on. I've seen 

[00:36:31] Randal McLeaird: it and it's really, it is cool the way they've set it up because you're buying, not necessarily a fractional interest in that, but is it a fund or are you buying fractional interest? No, you're buying, you're 

[00:36:39] Tilden Moschetti: buying the paint.

[00:36:39] Tilden Moschetti: You get to choose on each painting that you invest into, which is so cool. Yeah. I I'm totally jealous. I hope they make billions because it's so good. 

[00:36:50] Randal McLeaird: Well, I appreciate you jumping on, sharing your knowledge, information. I'm gonna link to your contact info in the show notes. So if you're looking to set up a [00:37:00] syndication, um, in real estate or, or for some other reason, then by all means reach out to Tilton and his team and, and talk to them directly.

[00:37:07] Randal McLeaird: I know you have some opportunities coming up as well, so. I don't know if you're raising from outside people or just within your network, but, um, First it's going to be in 

[00:37:14] Tilden Moschetti: my inner network, but it's possible. There'll probably be links on my website ultimately to an offering if it's more public. 

[00:37:21] Randal McLeaird: Okay.

[00:37:21] Randal McLeaird: Sounds good. Well, either way, again, I appreciate you jumping on. It's always good chatting with the legal side of what we do and figuring out, you know, one, if we're in compliance and what we're doing right and wrong and all that good stuff. So. I really appreciate your info and, um, we'll catch you guys on the next episode, right?

[00:37:36] Randal McLeaird: Absolutely. Thanks so much. Did you know that 80 percent of the agents we speak with got into real estate in order to gain passive income so they could obtain financial freedom and become work optional? If you want to stay up to date, the best way is to make sure you're subscribed. So if you haven't done that, go ahead and do it now.

[00:37:51] Randal McLeaird: We'll catch you on the next episode. 

People on this episode

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Randal McLeaird

Host
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Tilden Moschetti

Guest