Do you want to know what the right investment is for you? Then listen to this episode with Jay Tobey! Join us now to explore a range of things to consider when selecting an investment, plus the intricacies of raising capital and communication when engaging with potential investors.
Key takeaways to listen for
Resources mentioned in this episode
About Jay Tobey
Jay is the founder and CEO of FlowStreet. FlowStreet is an alternative asset manager investing in areas of the market underserved by traditional financing methods, such as commercial banks and institutional managers. Jay’s mission is to expand access to private investment opportunities. He has experience syndicating individual investments in real estate, private equity, and private credit.
Connect with Jay
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To learn more about growing your wealth through multifamily investment opportunities, visit Monument Real Estate Capital and schedule a call!
Follow our social media pages!
Facebook: Monument Real Estate Capital
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Do you want to know what the right investment is for you? Then listen to this episode with Jay Tobey! Join us now to explore a range of things to consider when selecting an investment, plus the intricacies of raising capital and communication when engaging with potential investors.
Key takeaways to listen for
Resources mentioned in this episode
About Jay Tobey
Jay is the founder and CEO of FlowStreet. FlowStreet is an alternative asset manager investing in areas of the market underserved by traditional financing methods, such as commercial banks and institutional managers. Jay’s mission is to expand access to private investment opportunities. He has experience syndicating individual investments in real estate, private equity, and private credit.
Connect with Jay
Connect with Us
To learn more about growing your wealth through multifamily investment opportunities, visit Monument Real Estate Capital and schedule a call!
Follow our social media pages!
Facebook: Monument Real Estate Capital
LinkedIn: Monument Real Estate Capital
[00:00:00] Jay Tobey
The biggest thing is that it's illiquid asset. You're in there for a longer period of time. You don't normally have a good exit strategy unless there's a secondary trading or secondary market. You need to be kind of able to understand I'm strapping in with this group and their investment thesis somewhere between five and 10 years.
[00:00:18] Podcast Intro
You are working professional but struggling to balance the workload of your career, family obligations, and preparing for your financial future. If so, this podcast is for you. You've spent years learning your craft, and now it's time to focus on your financial future. This podcast will teach you what you need to retire wealthy and happy. Let's dive in.
[00:00:41] Ben Waller
Have you thought about starting your own business but worry that you will fail and lose it all? Welcome to the retire wealthy and happy podcast. We created this podcast to provide financial tips and tricks to help you build up your passive income and also provide methods that you can use to protect your wealth so that you can plan a better future for yourself and your family. We're grateful to have this podcast sponsored by Monument Real Estate Capital. Monument Real Estate Capital, helping you retire 10 years early through real estate investments. On today's episode, we're excited to have Jay Tobey with us. A brief background about Jay, he previously worked at Reeder Asset Management.
[00:01:21]
He's funded many syndications and is currently sponsoring several investment funds. He's also funded various businesses. Such as meat, drinks, and cookies, and he's the co founder and CEO of Flowstreet. A brief overview of what we'll cover in today's episode. We're going to talk about investing in a business. We're going to talk about how to choose a business, and also how to raise money and talk to investors for a fund.
[00:01:43] Roger Jacobsen
Welcome to the podcast, Jay Tobey. Thanks for having me, you guys. Why don't you take a few minutes and introduce yourself to us? Yeah.
[00:01:50] Jay Tobey
So as you said, Ben, my name is Jay Tobey and I'm the co founder. I'm the CEO co founder of Flowstreet, which is a fund that takes accredited and non accredited. We can take check sizes from all different walks of life and all sizes. And what really got me interested in kind of that path when I was younger. I was always very interested in real estate and investing in general. I grew up in Cache Valley. Many of you know, it's a very small town. And I would think to myself, I think, how are people flying in private jets? Or how are people investing in that building? Who owns that random business? On the corner and I started figuring out just like neighbors did people. I knew that I didn't feel like we're that much different than me.
[00:02:34]
I mean, age wise, they were owned all these stuff in the private market. The difference between the private market and the public market is public market is like stocks bonds and the private market is like privately held real estate, privately held businesses. And luckily, as I was kind of thinking to myself, how do I break into the investing world as a late high schooler and probably started thinking more at the beginning of college, I was surrounded by some neighbors that had started their own businesses. They were entrepreneurial, had rentals, were some of the early employees of a couple of companies that blew up and then made really smart investing decisions. And they really took under their wing, which helped immensely, right? I was a young guy and didn't know what I was doing and they were, they would kind of take me along or show me.
[00:03:21]
I remember one time I sat down with a mentor and he showed me some of his books. He had done some oil investing and I did not understand one thing, but I knew it was awesome. Just a binder, super thick of all the prospectuses. All the financials. And I was like, that's awesome. The only issue was you needed like 25 to 50 K to start in that. And I was like, well, I don't have that. I just barely graduated high school. Like, I don't know what to do. And so that just kind of started my journey. I worked for a handful of kind of fun, awesome CEOs that had great businesses. And I tried to, every time I tried to work for someone. You had mentioned reader and Cody readers, a dear friend, I worked for him and I just really wanted to learn from him.
[00:04:05]
I mean, he had been a very successful real estate investor and also that position gave me the opportunity to talk with other investors and I started learning real estate was usually the foundation of someone's portfolio, but it wasn't the end all be all with most people. And so I started saying, what do you do? How did you do it? And what I've learned as advice for people is that most everyone, especially if they've been somewhat successful are always willing to give back. I mean, that's not always, but most cases, they're willing to sit down, give you some advice. If they see that you are hungry for the advice and want to actually make changes in their life, in your life, then I've seen most people are willing to sit down and help out.
[00:04:51]
So I actually started doing it with a family. My very first investment, very first thing I tried was I was going to a lot of meetups. Which met Roger at a meetup, which led to this and a long history of us working together. And I highly recommend any sort of local meetups. And I had a high school friend, married a guy who had been doing some flips. He had a crew, knew what he was doing. He was very professional. He had actually just sold his company and my grandpa was moving. And the issue my family had was my grandpa's house. We put it on the market. I mean, he had owned it as that generation did for his entire life. So well paid off by that. And the issue my family had was if they put it on the market, they felt like even though it was a super hot market back in, I'm throwing out, I think 2018, 2017, we didn't think you'd get the fair market value because it was his old grandparents house.
[00:05:43]
There was a lot That needed to be done to it. So we actually worked out, me and my friend worked out a way we could sell or finance a house from him and actually do a flip. So my friend brought in the expertise of how to do a flip and he kind of said, your way to partner in this is to bring in the funds. To do the flip. And so I had been talking with these guys about business for my entire life. I felt like at that point. And so I finally went to them looking back. It's a small check size, but I was super nervous. It was about 15, 000 and I asked him and they were one of them, which had been a really good investor was very nice. And he sat me down, wanted to look at all my numbers, probably make sure I wasn't doing anything dumb. And he saw it and said, okay, I believe you. I see your partner's experience, which is very important. Someone who's done it before. You're not the guy swinging the hammer, Jay. So I think I trust this. And so we made up the little promissory note.
[00:06:36]
We got it over. And I spent probably at most three to four hours on the project. And then got my grandpa got more money than he was going to if he listed his house. And I got a big check. And so it was kind of the first time in my life where I said, wow, someone else's work. If we put pieces together, if you kind of help connect. You can get paid pretty handsomely for that. And so I did one other flip kind of in the same scenario, brought in the money from family this time so that they could participate, got another good check. But I did find out, and this is what is very important is I did not like certain things because when people look at real estate specifically. They either see two things. I feel like this wide market that you can, should I get into multifamily? Should I get into storage? Should I flip? Should I wholesale? Should I drive for dollars? Should I, should I, should I, or they just see everyone is a flipper or everyone is doing multifamily syndication. So like I should do that.
[00:07:35]
So anyway, I learned very early that I did not really enjoy flipping, even though I wasn't the one doing it. I didn't enjoy, like, calling distressed homeowners. I didn't enjoy walking through. I'm no John Maxim. I don't like wearing my flip flops and walking through garbage. That's just not what I enjoy, but I did enjoy raising buns. And I enjoyed the feeling of helping out those projects and kind of doing my own thing while those projects are going and the money's working for you and then having a reward at the end. That's kind of what started my investing journey. And so I had some disposable income from those flips. I think flipping is a great way to do that, to get kind of some lump sums or, or wholesaling. I've never wholesale to get some money kind of quickly. And I had enough money to go and buy, like what you said, we went and syndicated A couple of crumbles when Crumble was all the rage. I'm from Logan. I saw Crumble when it was one store on main street. I have met the founders and funny enough, one of my first jobs in college was working for a competitor called Baked.
[00:08:39]
A friend of mine started it. So I've been in the cookie game since the very beginning, it feels like. I know the whole back end and now we own some crumbles. Who would have ever thought? And so anyway, that kind of just was our first that and buying a drug rehab in Arden was our first investment. Our Crumbles are up in the northwest. That's a short synopsis of kind of my path in investing. Obviously, there's a lot more, but that's kind of the beginning.
[00:09:06] Roger Jacobsen
That's pretty cool. I think you've told me that you've invested in about 30 businesses. Is that correct?
[00:09:10] Jay Tobey
Yes, at this point, probably somewhere between 30 and 40.
[00:09:14] Roger Jacobsen
So what else have you invested in? It seems like there's a meatpacking plant that I've heard about.
[00:09:18] Jay Tobey
Yeah, so this is me personally up in Idaho. We invested in a meatpacking facility. I didn't wake up that morning thinking I wanted to ever do that. But everything looked right. It was the right kind of market conditions for that. And so we invested in that, which is pretty wild. They move 500 heads a day. A bunch of it is like Wagyu. So it was Wagyu bison. I have never actually seen that asset. I drove by it one time, but I just get quarterly reports. And that's something that I looked for in my investing is I wanted a hands off approach. I've never been to our crumbles. I haven't been to a majority of the assets that we have. We partner with solid operators. And then what's the word trust, but verify. And so we just verify the assets are going well and trust our partners that we did enough due diligence on the front end. And so we owned a couple of brick, like we've invested in a couple of food and beverage brands. So one's called Hello Sugar.
[00:10:16]
And so we've liked the food and beverage business. And then one of the first things we did with the Crumbles, I can't remember which one was first was. Go into that drug rehab in Ogden, and it is a very large facility, the next largest is Davis, or not Davis, one of the hospitals, so it can help a lot of people. And if anyone knows the geographical location of Ogden, or any, what Ogden's known for, it needs some drug help. I'm just joking.
[00:10:40] Roger Jacobsen
You're saying there's a large group of potential clients there. Yeah.
[00:10:44] Jay Tobey
So I was joking about it. Actually, it's a beautiful city.
[00:10:47] Roger Jacobsen
We love Ogden. Don't write us.
[00:10:50] Jay Tobey
No, yes. We love our, I love downtown Ogden and what they're doing. So, and the bench, so cute by Harrison. But anyway, those were some of the investments we've done. We hold about 130 doors. All in multifamily, personally, what percentage of your holdings are actually real estate? I'd say kind of depends. I'd say it's 50 50 right now. We're always open to business investments. I would say they're just very different. What's funny is business investments. I feel like they use the same terminology or similar terminology. If you understand real estate basics of real estate investing, you usually can understand how to invest in a business. They just use different terminology. So like real estate uses this. Business uses this and they mean similar things. So you just have to get used to the terminology.
[00:11:40] Roger Jacobsen
How do you do a feasibility study on cookies?
[00:11:43] Jay Tobey
That one was just, we hit it at the right time. It was definitely the way, and we just saw what the other ones were performing at and we knew the operators and what they had done historically. So that's a lot of what we looked, we look for is track record is a big thing. I mean, the disclaimers. We're always you've done before. It does not show what you're going to do in the future. I'm no lawyer. It's, it's usually written better than that, but, uh, you guys get what I'm saying? The past does not guarantee the future. Yeah, but we do look heavily at the past and how it's performed, um, how the market as a whole. What's the market strategy? Is there market share that you can take?
[00:12:26] Ben Waller
Hey, Jason, since you're telling us about these companies you've invested in, let's focus on that topic of investing in a business. What would you say is the most important thing to focus on when you're looking at a business to invest in? Is it the financials? Is it the operators? What is it that you're looking at when you choose what to invest in?
[00:12:42] Jay Tobey
Yeah, good question. When we look at businesses, there's a long due diligence checklist. But some of the important things are, like you said, operators, if you don't want to be the operator. So a great example of that is like franchise, you usually become the operator. And that's great. And that, again, One mentor said, which I really liked is you can make tons of money in any little niche. You just got to kind of find your niches that you like. Some people go kind of too broad and then they get stuck because they say, Oh my gosh, I can do everything. But then they don't end up doing nothing. So kind of find a niche, see if you liked it. I started out again in some flips, found out that was not really for me, but I liked money raising. I liked aspects of that experience. And so I said, how can I do more of that? So when I look at businesses, you look at operators first, if the operator is going to, if the operator is going to stay, what would it look like if that operator were to just give up and leave?
[00:13:39]
Are you able to take it over? Do you have any expertise? We just looked at Funeral Home and we made an offer and they came back and it wasn't accepted, but we were ready because we understood the strategy. It's very similar to real estate. You make money when you buy. Then when you, if you buy right, usually things work out. Not always. Markets change, but we looked at and said within our internal network, if someone gets hit by a bus, is there a linchpin if that makes sense? So, like, is there one thing that if something goes really wrong, a podcast I listen to is called acquired and they always say optionality. So, does that business have options if something changes in the market? Are there ways that that business can pivot and can, can succeed and resiliency? So you can't always tell resiliency, but like, do they have healthy margins? I mean, if you're talking about a 3% margin business, it only takes a 3% dip. It's all of a sudden be zero or negative. So what are their margins safe for their margins?
[00:14:38]
Are there any other ways that that company can pivot and what we're doing with our funds are, we are actually calling them stable. So we're actually investing in stables of companies. So we'll invest in 1 company that then actually can service or help. Another company that we're purchasing. So we're trying to build a stable so that we can, some people call it vertically integrate. And so that's some things you can look at. I hope that's helpful.
[00:15:05] Ben Waller
Are there other things that you consider when you're looking at business to invest in?
[00:15:07] Jay Tobey
I mean, it's similar to location. What's the strategy? What's the exit strategy? How are we going to end up getting out? Who's the end buyer of this cause just like anything there will be a day when unless you want to hold it perpetually that someone you hope to position to sell so what's the market like in the future is a i gonna come and kill whatever you're trying to invest in or is there always a market. One thing i've looked at even though we were in a massive boom market i was always cognizant because of good mentors. About the recession so i always looked at businesses and said. In a recession like how historically have these businesses done and entertainment comfort food and a couple of the other asset classes that we invested i've always historically done really well because people go when things are good they don't want to just sit there and wallow they want like a mid to low level entertainment that they want i mean unfortunately drug rehabs do really well in food markets.
[00:16:05]
And they do really well in down markets for different reasons. People have more money. They buy, unfortunately, more drugs and then down market, they turn drugs. It actually doesn't do as well in the middle of the market. So we've always looked historically, if something, if a recession or some downturn happens. What does that actually do to a business? One thing I always liked a mentor said is the upside will always take care of itself. So if you protect your downside, you'll naturally either come out ahead and the upside will take care of itself. So always protect your downside. What's your, what's your total downside risk? Oftentimes with companies, are there ways that you hold an asset that usually will never get to zero? With companies you want to look at, will this go to zero? What does that look like? Those are some things we look at personally. Historically, how have they done? How do we think they're going to do operationally?
[00:16:56]
How strong is the team? That's probably the biggest one. And oftentimes we'll join boards. We will be on the board of the business. And we want to just see how strong are the people, because if you have, I'll say, I have not seen that much in business. Like, this is I'm younger. So I want to be surrounded by people that have either they can tell us where the cliffs are before we even get close to the cliff, because unfortunately, there's some decisions in business that you can make. You won't know the outcome until 2 or 3 years. And then, oh, man, we shouldn't have made an outcome two years ago, or we shouldn't have made a decision because it doomed the business in now that you're dealing with it. So you want to make sure you have people that are aware of that industry and the cliff falls.
[00:17:42] Ben Waller
Some foresight into what could happen.
[00:17:44] Jay Tobey
And that's where I think a lot of people hung up is they feel like they have to do everything. And I don't want to knock my strategy has always been own small pieces of a lot of pies so that within my portfolio, if I have one eye that is not performing, and this is also what we do with most of our investments. That's why I'm in, we're in real estate, we're in private equity, and we're in private credit or debt. Is because we want to diversify our risk portfolio so that if we put all of our eggs in one basket, I can own a lot of one underperforming asset. We'll get to that between syndications and fund structures, but that's kind of what I've always looked at. I don't need, I'm not a type of a person who needs to own an entire piece of the pie. I understood if I owned the entire pie. I would probably make more money from that asset, but I was okay saying I'll spend a small time piece of my time on it, but it'll reward me. My time value of money is going to be higher because I mainly just put it in the capital, kind of make sure it's doing okay. And then some other people can take a bigger upside, but they're going to spend more time on.
[00:18:53] Ben Waller
One of the things I wanted to comment here, Jay, is you're obviously doing a really good job being successful with the stuff that you're working on. And something for our listeners to consider is that you have made the conscious decision to. Surround yourself and build a team and focus on what you're good at and what you like doing, because in my opinion, you can back me up if you want here, to be successful and to really grow, you can't do it by yourself. It's a team sport, whether you're talking about real estate or businesses, you need other people that have skills that, uh, Help the weaknesses that you have so that you really can be successful and take it to a much higher level than you could on your own. Would you agree with that?
[00:19:31] Jay Tobey
Totally. I would totally agree with that. I'm not knocking anyone's investment strategy. I think you can get there's always people that can get very far because they own entire assets. I would say that's a slower path because usually you run out of capital when you're doing it yourself. So we've just tried to take an accelerated path, but I agree with you that there, I've definitely come to learn. There's no such thing as a self made man.
[00:19:53] Roger Jacobsen
We were talking yesterday, Earl and I, and a potential partner investor. I brought out the analogy that, uh, we were growing a team and he asked, why are you doing this? Why are you willing to portion off some of your company? To do this, and I said, well, basically right now, we're a good 3 on 3 basketball team. You got me and Ben and Earl. What we want to do is we want to be the 1994 Chicago Bulls. So, I'm Michael Jordan. Ben is obviously Scotty Pippin and Earl is Dennis Rodman.
[00:20:31] Jay Tobey
I could see those comparisons.
[00:20:33] Roger Jacobsen
We had a little fun with that, but the point is it's still not just Michael Jordan. It's still not those three. It's the whole entire organization. And you've got to have somebody doing all the different parts. It doesn't matter how good Michael Jordan is. There's not a cameraman taking, uh, video of it. It doesn't matter how good he is. If nobody turns the lights on in the stadium, you know, you've got a lot of different parts to cover. So realistically you're just implementing parts of it and funding parts of it that are a key part and then able to maximize your time value by getting in there and doing it when it needs to be done and then letting the players play.
[00:21:13] Jay Tobey
I wouldn't a hundred percent agree with that analogy.
[00:21:15] Roger Jacobsen
And then able to maximize your time value by getting in there and doing it when it needs to be done and then letting the players play.
[00:21:22] Jay Tobey
Yeah, you and Ben can talk off air.
[00:21:26] Roger Jacobsen
Here comes the alley oop.
[00:21:28] Jay Tobey
Yeah, we'll see. You need that Steve Kerr who makes that, that clutch shot with the championship.
[00:21:33] Roger Jacobsen
Yeah, I could have used others, but it was fun calling Earl Dennis Rodman. So we have a few questions about funds, but how do you value businesses? When you're looking at them for the first time, good question.
[00:21:46] Jay Tobey
There's a really easy way to look at them, which is EBITDA earnings before interest taxes deductions. I don't know. I can't remember the rest, but EBITDA is a good way to look at it. Just gives you a very quick, it's kind of like a cap rate in real estate. It gives you a quick overview. It doesn't give you the whole picture, but it helps you understand what's the standard for the value. Am I buying it at market value or am I, cause even in business, you want to get a good deal. You want to, you know, leave some appreciation in there and some value generation. You're like, am I buying it at a good price? Does it have a good EBITDA? You can always get business evaluations from a, there's actual companies that are like appraisers that go in and actually value the business. Um, those are always some solid ways of looking at them. So oftentimes it goes off of cash flow, just like most assets, how much, what are the assets they own? What's that value?
[00:22:41] Roger Jacobsen
So on the price to earnings ratio, what's the widest variance between years of recollecting all the earnings that you've done? Is it a two year earnings to five years or is it more varied than that? I don't know if I quite understood when you look at stocks, it's always P E so priced earnings ratio. So when you buy a company, you're usually giving up a multiple of earnings for how many years for the value. So a very small business that was owned by an owner operator without him in it, it might be a price to earnings ratio of one. So you would get your earnings back in one or two years. With a major company like, uh, Apple or something like that, it could be 23 years because you also know, it's going to grow and everything else.
[00:23:28] Jay Tobey
And it's a very stable. Okay. I see what you're saying. Yeah, we oftentimes look at somewhere between year 3 and year 5. If we can get all of our capital back. We try to invest in cash flowing companies that was also a big thesis I had for my investing was more cashflow based than appreciation based. That's why I've never done any ground up construction. One, I don't have a history and two, I don't feel like I have a good, like you mentioned, Ben, I don't have a good team or a good mentor and each different asset class. I have a board of directors that I'll go to and kind of pick their brain and use. We have a board of direct, we have a advisory board for our company flow street, but I, in my head early on, I said, I need an advisory group for each thing. I do that. I can run past and say, is this a good investment or not? You have more experience. Might not be in this specific field and I've had advisors tell me, Hey, you should not invest in this. And here's why. And I learned a lot. And then it's on me to say, do I want to go down that road or do I not? And so that's kind of what we looked at three to five with kind of seven being, uh, being a very long time. Is there ways that you can get your cap, get your full capital out? That's great. Thank you.
[00:24:42] Ben Waller
Just a reminder to our listeners on today's episode, we're talking about investing in businesses, how to choose which businesses to invest in. And we're also going to talk about how to raise money and talk to investors for a fund. So Jay, we want to ask you, why should somebody, or let's start even broader. What is a fund?
[00:25:00] Jay Tobey
That is a broad question. I would divert to our good friend, Bridger Pennington. We didn't go through his program, but if you are wanting to learn of a fund, most, a lot of our employees have watched his videos. I'm just going to give you the dictionary definition. Which is a sum of money saved are made available for a particular purpose this is maybe a better one an investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as a part of a group such as reducing the risks of an investment by a significant percentage so. That's what kind of got me interested in funds. I was doing syndications before, and I personally like the syndication model more for a couple of reasons. But it's hard to scale in a fund. So, or it's hard to scale in a syndication. So that's why I went to a fund. We had more demand for our product. Which was our investments and we had spaces available.
[00:25:59]
We said, how could we scale? And with syndications, you usually go by project by project, which is, you know, you do, you do a deep dive into that project and you have to come to, you know, if I was going to you, Ben, I would say this is why this project is the best with the greatest operating team with the greatest expertise. And you invest directly into that asset or that business, whatever it is, or the real estate, let's say multifamily complex. But I started to look and say, my investors had a ton of risk exposure to that because if that one apartment complex underperforms. And I'd always try to say, Hey, keep some of your money, put it into this investment. Like, don't throw it all into this one. Let's do multiple kind of vary it out. But I started seeing that, you know, if they put a big chunk into this one project, they were living and dying off of that, the performance of that asset. And so I said, what is a good way to also diversify their risk? And that's why I kind of started learning.
[00:26:55]
I truly never thought I would go the fund route. And again, we changed our model to be able to accommodate unaccredited and why that's important. We went through the SEC process. And it was an absolute animal to go through that. And I see why most people don't. But personally, that's what I loved. I almost wanted to make an investment for, let's just say, my mom. I started seeing my family, who had done really well in life, had saved really well, had disposable income, she couldn't get into these bigger investments because she wasn't maybe accredited, or she didn't have enough to meet their minimums. And even if she did, if you would have the same issue I had with, I feel like syndications, she put a big chunk in and she is hoping that that she's writing and dying off the success of that investment.
[00:27:44]
And so I really wanted to look for a way of how can we lower minimums in a scalable way. So that's what we put together at Flowstreet and we love the individual investors. We could have. 50, 000 investors in our opportunities or more, and most people would look at that and just absolutely want to throw up because, which is normal. We could have one very rich guy, right? One check the size of our entire company, Jeff Bezos could write and check the size of our entire company. And then you're only working with one individual. One to one or one to a few, most people try to go for largest check size, smallest amount of investing group, uh, investors, we kind of flip that. And we said, we want to work with a ton of investors. We want to open the opportunities to people because we love 2 things. We love raising the capital and we love the investor management. That's kind of what we like. That's why we normally don't go operate the assets because. We let the operators, the specialization of labor, let's go let the operators do what they do best, and we will try to do what we do best, which is the investment, investment management, fund management, and, you know, raising capital. So that was a long way to get around. I hope that answered your question.
[00:29:03] Ben Waller
That's a great, great answer. And, uh, since you're talking about, you're focusing on raising the capital in the fund and you're partnering with operators, you've talked a little bit about finding businesses to invest in. Is there any different things you would add into what you do to find operators to work with and how you flush that out?
[00:29:20] Jay Tobey
Yeah, good question. We look at the operators almost as much as we look at the asset class itself because they're your success in the asset and they're how you scale quicker. So we, we can Multiple different operators in an asset class and say multifamily and see how they do and then track their success and say, oh, these guys historically crush it, we're going to divert more capital to them on this project. We're very data focused on our back end. We're really trying to see, you know. Why? Why did that investment work? What were the data points we can take? Was it location? Was it type of tenant? Was it type of, you know, asset? And then we can give it to our operators to say, Hey, as you're marketing or as you're looking for other projects, maybe let's look at some more like this.
[00:30:11]
Was it, you know, did it have a good location? Was it next to something desirable for the tenants to raise the rent? They usually have a pretty good grasp on that, but we try to come in with any extra help. That we can as well. When you're looking at operators, we want to verify historically, have they done? What, how strong is their team? What does that, what does their internal infrastructure look like? That if their director of ops leaves, are they, are they siloed enough to withstand some of the, the waves?
[00:30:40] Ben Waller
All good points there, Jay. And when I'm talking to people about investing in stuff, I use the simple three pieces of deal market and team. Which is mostly for real estate, but I'm sure you could use it when you're talking about other businesses as well. So would you agree that, as you're trying to summarize, that looking at the deal, the market, and the team are three pieces you should strongly consider when looking at investments?
[00:31:01] Jay Tobey
Oh, for sure. I think that's a great way to summarize those. Thank you.
[00:31:05] Ben Waller
Jay, I want to ask you this question. What risks would you say people need to be considering when they're investing in a fund?
[00:31:12] Jay Tobey
Yeah, I would say the biggest thing is that it's usually an illiquid asset, meaning that you're in there for a longer period of time. You don't normally have a good exit strategy unless there's a secondary trading or secondary market. So you need to be kind of able to understand I'm strapping in with this group and their investment thesis. For somewhere between five and 10 years. And depending on the investment thesis, we've tried to focus more towards giving out in dividends. You have to understand as well that there's a lot of funds out there that are looking for big exits. They're buying assets in year two, they're raising money in year one to buy assets in year two, three, four, stabilize and maximize those assets. And then in year 10, let's just say is the year that they plan to be done with their fund. They are going year 8, 9, and 10, they are positioning and liquidating assets. So that you get a bigger exit. So you just have to be really cognizant of what type of thesis you're going into and who you're getting in bed with.
[00:32:15] Ben Waller
What I'm hearing you say is that there's many different types of funds. And if you're going to consider the investing in a fund. To help your wealth growth, make sure you understand what it is that the fund does. And if it applies to your investing goals, is that correct?
[00:32:29] Jay Tobey
Totally correct. Look at that team. We invested in a few businesses and I feel like their team lacks a few things that I wish I would have. Done more research up front, they're really bad at transparency. We don't get things on time. We don't really understand a lot of the back end what's happening. I think they're fantastic operators, but they're terrible customer service. Maybe investor services like me as an investor. I'm in the wind. I trust that they will at the end of the day, perform and do what they need to. But the journey along the way is rougher than I would have liked.
[00:33:03] Ben Waller
Makes it not a great experience. And when you're investing your hard-earned money, you want a great experience in every aspect, right?
[00:33:08] Jay Tobey
If everyone can historically pull out massive returns, that fixes a lot of issues. It also doesn't, knowing what's happening, even if you're getting returns. Sometimes you aren't enjoying, you know, you're just like, oh, I appreciate that that hit my bank account, but I feel like I've grown some gray hair over the last quarter. You just told me what was happening. Yeah, if you could just send me an email, let me know. And so that's really where what's been nice is we've seen what other groups have done. And that's what we're really trying to be very good at is the things that I personally have and I know some of my investors. Have had rough experiences with so I want to say we want to nail those aspects Because one last thing is, is sometimes when people are like, one thing like you said, is are people looking to start a business? If you're looking to start a business, usually you need capital. So you're going to go raise capital. Personally, I love raising capital. So that's something I love. Most people don't like talking about politics, religion, or money. I'm definitely okay with the money part and probably the religion. Most people don't think down the road.
[00:34:12]
They think I need to go do this business and I need money to go do that. Or I need to go buy this apartment complex because it's a great or anything. I need to go buy this real estate because it's a great deal. So this money unlocks the deal for me. What they don't understand is, do you have a strategy? You have to do reporting. You have to do taxes. You have to, there's a whole load of things that happen. A good mentor of mine really talked about most people think money's the thing that's stopping them. But no, if you had all the other backend things, if you were to come and tell Roger, this is a helpful tip on money raising, you were to tell Roger, I need this money because I need to execute this. And here's how you'll get your money back. And this is what it'll look like. And this, and this, and this, and this is how we'll be successful. This is a customer we're going to grab, or this is a tenant we're going to grab. And this is how the whole package is put together and you answer their questions. A lot of them and a lot of questions people will bring up and that's good.
[00:35:08]
But if you answer a ton of questions and they really feel comfortable with the whole package, money will come. Oftentimes why people have hard time raising money is because they're pitching only buying asset executing on this plan is truly what we're talking about. Buying this asset is just an outcome of what we're actually talking about, which is this plan, the strategy. Yes, we need money to go purchase this asset, but mainly to implement and execute on this strategy and plan. And here's how you'll get your money back. The three things investors I feel like care about are, how's my money protected? What's the downside? And when will I get my money back? If you can answer those three questions, most people will be a little bit more easy to work with. So again, those things I feel like I always try to hit is how's the money protected? How are you not going to lose your shirt in this investment? Again, downside protection, the upside will take care of itself. Everyone, if you pitch something, everything's up and to the right. No one's going to show you this business is going to be okay for a bit and probably hopefully do good.
[00:36:15]
How are you going to protect the investor's money? What's the mechanisms for that investor's money to get back to them? Because that's what they care about. At the end of the day, they want to return. So if you can answer, what are the mechanisms in place that will get their money? Either it's a sell or refinance. It's the cash flow of the business. If you can answer those very simple questions, you will go a lot farther because that's what people really care about. They don't care about the stucco on the side of a building. That's just, they care about what's your overall strategy.
[00:36:45] Ben Waller
Having a plan in place is extremely important in all things in life, but especially when you're talking about raising capital and helping people invest their hard earned money.
[00:36:52] Roger Jacobsen
Yes. And you can definitely see in the newbie investors, maybe on social media and stuff where they're like, I need such and such for a flip. And then they don't go into the investor's point of view. The investor is going to want to know what's in it for me. What's the upside? What's the downside? And can I handle the downside? And when you start to speak to that, you're actually having more of a conversation instead of just a sales pitch. This is how we're going to do it. You're going to get a preferred return. We'll start paying in year one, then you'll be able to cashflow off of this at six, 8% or whatever that is. And then in the end, you'll sell it and you'll get a percentage of the profits. We'll list it through such and such business or real estate broker. The valuation will be right about here. We think, and you'll get 20, 80. Whatever percent of that really helps you to talk better when you're raising money and talking to investors to just see their point of view.
[00:37:48] Jay Tobey
That's a great way to summarize exactly what I was trying to talk about is most people do. They say, I need this money to go do this thing. They're not really talking about the overall strategy. They're just saying, I need money to go take down this flip and all my problems are solved.
[00:38:02] Ben Waller
Hey, Jay. In respect of your time, is there other things about funds that you feel our audience should know about?
[00:38:09] Jay Tobey
No. And honestly, Ben and Roger, and you know, you could cut this part, but funds are new for me as well. I mean, we just got sec approval like two months ago, maybe even less than that. And so I've definitely had more time in the investor relations syndication space than I have had in this fun space. We can do another podcast next year when we've raised in place the 300 million. I'll have a lot more experience.
[00:38:32] Ben Waller
So you're saying we got to bring you back is what you're saying.
[00:38:35] Jay Tobey
Yeah. But one thing I've focused on, and this is for anyone trying to do a business because that's what we've done for the last year and a half is really focus on our business before we've worked in our business. And that's taken cash. We've had to raise, I guess you call friends and family precede round. We've brought on a very solid board altogether. Our boards probably sold 12 billion worth of assets and businesses. Um, and so they can tell us our pitfalls before we see that. But 1 thing that we've really focused on is working on the business where we've worked in the business. So our processes and procedures are in place again, going back if I raise. Twenty million dollars and i have no processes and procedures even if i raise a hundred fifty thousand from friends and family to go do this thing what is my process and procedures during that process and so that's what we've worked a lot on is. Working on the business before we've worked in the business so that when we're working in the business, which is what I feel like we're doing right now, it's going a lot smoother because we've spent a lot of time architecturing the different divisions, the different processes. Now, if things break. The classic Facebook line is move quick and break things. And that's what we try to do as well, but it sure helped to at least have a game plan.
[00:39:58] Ben Waller
That's great points. Jay, Jay, we really appreciate you being on the show today. We have questions. We ask everybody that Roger's going to go into.
[00:40:04] Roger Jacobsen
It's now time for the final four. Jay, what is your favorite business book?
[00:40:09] Jay Tobey
My favorite business book is one called Play Bigger. It's called How Pirates Dreamers and Innovators Create and Dominate Markets. So if you want to go dominate your market sector. You should definitely read, Play Bigger. And then caveat to that is a book Sam Newell introduced me to, which is called Great by Choice. So Play Bigger is definitely like go own your market sector. And great by choice is like you have to do 20 mile marches like you. Explosive growth usually actually sometimes kills a company. They're good balancing books. That's awesome.
[00:40:45] Roger Jacobsen
What brings you happiness?
[00:40:45] Jay Tobey
I would say the internal, my family, my connections with friends. So a lot of interpersonal relationships brings me happiness, my close circle. That's really what I enjoy spending time with them and experiences with them. What does your future retirement look like? One thing we've really want to do is actually retire early and go serve in our church. So that's one of our big goals is to go serve other people. That's why we created our fund is to serve. I would say an underserved population. And so we kind of want to just do that. But in a more hands on approach, just go serve people, obviously enjoying the ride, going to beaches, hanging out in that regard. But that's one of our big things we want to do in retirement.
[00:41:32] Roger Jacobsen
You served on a mission when you were 19.
[00:41:36] Jay Tobey
Yeah, I was probably 20, 21 went out a little later. I played lacrosse in college. I went to Eastern Washington, which was, it was an incredible experience. Very nice. I'd say Eastern Washington was kind of a, don't knock it if you live there, but it was kind of a boring place. Wasn't fun. Like if you went to Japan or some cooler, more exotic place. But it was a good experience.
[00:41:58] Roger Jacobsen
Where would you choose to serve on this next mission?
[00:42:00] Jay Tobey
I know my, my wife would love to serve in like, she's got family from Puerto Rico. She'd love to serve in that area. Europe would be awesome. There's benefits of staying. This is a joke I always make is everyone wants to be called foreign. They serve an LDS mission, but then serve. They want to be called forward because it's cool and then serve local because I had times when I slept in a king sized bed with a memory foam mattress and had a recliner and you hear other people that went to like Africa, which was way cool. But then they're sleeping, they get all sorts of viruses. They have to eat dogs. I mean, it's crazy once you're out, people kind of forget about you for two years, other than your family. So the experiences you have anyway, I don't know. I think Ben might've served. Yeah, I did.
[00:42:51] Roger Jacobsen
That's awesome. Ben had the cushy, cushy mission. So where did he go bad? Southern California. I don't think he got a king size mattress though. So he probably needs to write his mission president, but he also, again, same thing.
[00:43:04] Jay Tobey
Like what a fun place to serve. Eastern Washington was fun, but it was like a lot of farmland. It's not like palm trees, great weather.
[00:43:15] Roger Jacobsen
Like Ben had question number four. What do you think is the best way to give back?
[00:43:19] Jay Tobey
That's a good question. I think giving back is what I'm trying to do on this podcast. Try to give back your knowledge. Give back financially to whatever charities donations that you personally like and agree with I don't know if you have to go out and serve Other people sometimes that's just giving back to your children so that when they grow they can be a good member of society I think you just kind of have to look at what how you want to give back in some way again I'm trying to do it by by giving back my some education. I've learned along the way now. I'm no professional. I haven't Ended my career and can look back, but we've had some solid experiences. So I'm just trying to give back starting from zero, not knowing anything about investing. Hey man, we've had some success. So let's try to help those people like I was in their shoes.
[00:44:08] Roger Jacobsen
You say you're not a professional, but you lost your amateur status the second you got paid.
[00:44:13] Jay Tobey
Oh, I like that.
[00:44:15] Roger Jacobsen
I like that. Thanks for being on the show today. Jay, where can our listeners find you online?
[00:44:21] Jay Tobey
Let me try that again. You can find me on LinkedIn and they can find me on low street. com. Instagram is Jay period, Tobey 18. Let's all just come and learn together. Thanks so much, Jay.
[00:44:36] Roger Jacobsen
Listeners. We have a very popular YouTube channel. We have at least three views on almost every single one of our video episodes because Ben's not on camera today because his power's out. I'm going to wrap up. But on today's episode, we learned with Jay Tobey about investing in a business. How to choose a business and how to raise money and talk to investors for a fund. Thanks for joining us today. Jay on the Retire Wealthy and Happy podcast. We'll see all you guys next time. Thank you. Thanks, Jay.
[00:45:07] Podcast Outro
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