Randy Smith's Guide to Financial Liberation: Mastering Real Estate Investments and Syndication

Embark on a transformative journey with Randy Smith of Impact Equity as we uncover the seismic shifts a career in real estate investment can herald for your financial landscape. Randy's captivating narrative of transitioning from a successful corporate sales career to dominating the realm of real estate investing with out-of-state rentals and the BRR strategy in Atlanta serves as a beacon of possibility. His path to commercial real estate investments and full-time investing is not just a personal triumph but a testament to the unparalleled freedom that escaping the 9-to-5 grind can offer.

Peek behind the curtain of real estate syndication as I share my own evolution from hands-on property flipping to the exhilarating world of strategic investing. Harnessing my strengths in sales and communication, I joined forces with seasoned operators to navigate the nuances of asset classes and the power of networking. This episode is rife with insights into setting investment objectives, understanding the learning curve, and the delicate balance in vetting operators. Whether it's the allure of cash flow or the promise of growth, our discussion sheds light on the initial steps and choices that shape the syndication journey.

Due diligence emerges as the cornerstone of savvy investing, and we dissect the key questions every investor should ask before committing their capital. From the intricacies of real estate fund models to the active role needed in 'passive' investments, the conversation provides cautionary advice and strategic guidance. With Randy's profound expertise, we delve into how to sidestep the pitfalls of real estate investing and ensure you're equipped with the acumen to thrive in this sophisticated venture. Join us for this masterclass on passive investing and step confidently into the dynamic world of real estate.
Reach out to Randy Directly.  
randy@impactequity.net



Tony Johnson is a Commercial General Contractor.  Timeless Properties Construction Co. has been in business since 2007.  He does all things commercial.  Developing, Building, Upfits, and Renovations for Retail, Office, Industrial, and Multi-family.  Timeless Properties is licensed in North and South Carolina.  Contact them today for your construction needs.  www.timelesspropertiescc.com
info@timelesspropertiescc.com

Discovering his passion for construction when entering the industry over 20 years ago, Tony obtained his general contractor license and created Timeless Properties Construction Co in 2007. The company has performed an Proving that grit and passion can overcome any challenge, Timeless Properties Construction Co navigated the worst real estate collapse in our lifetimes under his leadership. Coming out of the recession Tony made sure he kept a strong focus on building relationships, quality work, honesty, and integrity.  With over 160 million on construction volume to date Timeless Properties Construction Co has grown to an area leader of Commercial Construction in eastern North Carolina.

Tony launched Timeless Capital Investments LLC in 2022.  This company was formed to create an avenue for partners to invest alongside Tony Johnson on commercial development and value add of existing commercial buildings.  Tony aims to help fellow investors take part in profitable projects that they otherwise would not feel comfortable undertaking.  By leveraging his construction and development knowledge Tony offers his partners a leg up against less experienced investors.  Offering the ability to self-perform Construction, Construction Management, Entitl

To learn more about Tony Johnson and Timeless visit us at:
https://timelessci.com/
https://timelesspropertiescc.com/

If you would like to discuss investing in Commercial Properties create a profile and schedule a call:
https://timelessci.investnext.com/

Reach out to us directly at:
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Transcript

Speaker 1: 0:00

Coming to you from the Tar Heel State. This is the Carolina Commercial Real Estate Connection, bringing you industry insights and hot takes from Carolina real estate experts, helping you begin, grow and scale your commercial real estate portfolio. And now your hosts Tony Johnson and Cameron Pearson.

Tony Johnson: 0:33

Welcome to another episode of Carolina Commercial Real Estate Connection. Today we have Randy Smith with us. Randy is with Impact Equity out of Phoenix, Arizona. Randy, thank you so much for joining us today.

Randy Smith: 0:45

Yeah, thanks so much for having me, Tony. I'm really excited to be here.

Tony Johnson: 0:49

So, randy, if you could I know we just did a quick synopsis Could you give me a quick background on how you got into real estate and what you've been doing with your career prior?

Randy Smith: 0:59

Yeah, yeah, yeah, absolutely. So I am a corporate America sales guy. I spent 25 years in various sales and sales leadership roles, primarily across two main Fortune 200 companies over the last 22 years or so, and I actually started getting into active real estate investing. As you get to that point in your career where you're maxing out your 401k, you're doing your IRAs, and I started accumulating a little extra cash because I was doing very well in my sales role and decided to start placing some of that capital into some single family rentals out of state. And we ended up doing out of state because here in Phoenix the market was just on fire and you'd be upside down every single month. It'd be no cash flow whatsoever here in Phoenix.

Randy Smith: 1:52

So decided to buy out of state and I bought a couple of turnkeys in Kansas City and then I found out very, very quickly that I wanted to be more involved with that process. So I ended up doing some Burr single family in Atlanta. And then COVID hit and it got really, really difficult to find properties. So I started investing passively in commercial real estate and fast forward a handful of years and fortunately, when I got laid off from corporate America for the second time, I had created enough passive income where I didn't have to go back and chase another job so went all in on the passive investing and since then I've been helping others kind of figure out the same path and helping other folks decrease their dependence on that W-2. In the event that their layoff comes, they have some options if that were to occur.

Tony Johnson: 2:53

That's fantastic. So just to kind of touch back a little bit, so you, the minute we're in sales, what kind of stuff were you selling? What were you selling?

Randy Smith: 3:02

Yeah. So for the last 10 years or so almost 11 years I was working for a large credit card company Okay, I'll just say don't leave home without it without mentioning any names and I was helping business owners integrate their payment tools into their accounts payable system, so it was B2B sales. I got to meet with a bunch of entrepreneurs in middle market what we call middle market sized companies, so folks with revenues under 300 million. So Awesome.

Tony Johnson: 3:35

And then what did was COVID portion of the reason that you exited. Was that the timeline when you exited corporate America?

Randy Smith: 3:44

No, it was 2022 when I ended up leaving American Express and it was actually COVID. Years were fantastic for the industry. We actually did very, very well during those years, just like a lot of the economy did. Of course, a lot got hurt, but no, it had nothing to do with COVID. This was more restructuring, reorganization, awesome. And when corporate America decides they're going another direction, they're going another direction.

Tony Johnson: 4:15

Yeah, whether you like it or not, somebody way up top makes a decision and clop 30,000 people.

Randy Smith: 4:22

Exactly Right yeah.

Tony Johnson: 4:24

So let's back up a bit into the real estate. When did you start the single family out of state rentals? What was the timeline on that? How long ago was that?

Randy Smith: 4:35

Yeah, so I think that was 2018 when we bought that first single family. Now, of course, I sat on the sidelines for probably three years, maybe even four years, where I was thinking about getting into it, but finally pulled the trigger, I think in 2018.

Tony Johnson: 4:55

Yes, that is pretty typical than what I hear from people. A lot of people will get interested and start educating themselves. Hopefully, people are listening to this, educating themselves, and it takes years to really build up the courage sometimes to make the dive into something right Because you want to do it educated as possible or if you want to do sooner. It's always something to consider is finding somebody that has that experience that you can leverage their experience to get in and you'll be a little more comfortable in the very beginning. So I think that's pretty standard, though, for looking for that long period of time.

Tony Johnson: 5:33

As you were saying, once you kind of max out your income and look in further places to invest, it's a great opportunity to go in there and start to give yourself some ability to lower your taxable income when you invest in real estate. So we love that idea. All right. So once you built up a few things, you're saying in 2022, so from 18 to 2022, we have four-year timeline that you had kind of started diving in and getting into where at this point in 2022, you're saying you didn't even need to go back to a job. So can you establish how many properties did you build up during that timeframe?

Randy Smith: 6:13

Yeah, yeah. So I actually let's see here I bought two single family and a total of two in Kansas City and a total of four in Atlanta. But with the assets that we bought in Atlanta, we did the BRR strategy. So we were buying really ugly properties, like certainly the ugly house on the street, renovating them, putting renters in there, and we made all the mistakes that people make when they do these renovations. We had watched way too many HGTV shows and we definitely over. We fixed these up much nicer than they needed to be for the class attendance and for the areas that we were renting.

Tony Johnson: 6:53

But fortunately, so you went from the worst house on the block to the best house on the block.

Randy Smith: 6:59

Pretty much, yeah, pretty much, and yeah, it's exciting, we had a lot of fun doing it and all of that. But no, when I look back at it, we could have spent much less on the rehabs and probably got the same results. But fortunately though, the market was just exploding in Atlanta when we did it. So, one house as an example we bought a house for like 50 grand and we put 50 into it and I think we sold the thing for 220, 230 grand, we'll call it a year and a day later, a little bit more than a year. So we were just in the short-term capital gains. But we did that a handful of times and created quite a bit of capital. And then we had shifted. We sold all of those houses and we shifted everything into passive income.

Randy Smith: 7:44

So I think by the time I got laid off, I was invested in either 12 or 15 passive investing deals and we had been oh, what do I say? So we were Dave Ramsey folks up to that point. So we had a very small monthly number we needed to hit because we had paid off literally everything at that point. So now I share that the income we had covered the majority of our expenses, but it didn't replace my income by any means, because I was making very, very good money. But it gave us the cushion to give us options that we wanted to have without those extra dollars coming in. So I think we had a lot of money that we had without those extra dollars coming in.

Tony Johnson: 8:31

So okay. So let's dive in on that a little bit. So you went from, you got the, you had the burr, you flipped out, you created a bunch of wealth that you had generated from the burrs in Atlanta. Did you still hold on to the pieces in Kansas during this?

Randy Smith: 8:50

We ended up selling all of the yep. We sold everything, so-.

Tony Johnson: 8:54

You were flipping through everything and just basically building up a pile of cash. With the pile of cash that you'd built up over the few years, you started doing passive investing. You said 12 to 15 deals. For people that don't understand, could you kind of give me an idea of what were you investing in? How did you invest in that? What brought you to that? Could you give somebody who has no idea about what a passive investment looks like, what they should be looking for and what you looked for?

Randy Smith: 9:21

Yeah, yeah, absolutely so. That's that question. Could be probably eight different podcast episodes in and of itself, but yeah.

Tony Johnson: 9:30

At a high level.

Randy Smith: 9:31

You know, yeah, yeah, of course. So you know, at a very high level. Ultimately, when I was doing all these single families, I found out pretty quickly I wasn't going to be able to scale that to the amount that I wanted. My time was better spent focusing on my job, because I was making very good money in the job. So, and to top it off, like the market had just blown up and I wasn't able to find the type of deals that I was finding just a couple of years prior, okay, so I had been listening to a ton of podcasts, reading a bunch of books and came across this idea of syndication, which was really, really appealing to me, because what I found out during that burst of process was that I was not a flipper, I was not a project manager or a property manager. I very much. My kind of superpower is sales and working and communication and those types of things.

Randy Smith: 10:24

So found out very quickly that probably wasn't something that I was going to scale to the level that I would need it to scale to really decrease my dependence on my W2.

Randy Smith: 10:35

So I started looking at the syndication model.

Randy Smith: 10:38

It was really appealing to me because you're essentially you're taking your own dollars and then you're investing in an operator that has an established business, that has expertise, that has credibility and has a track record and, quite honestly, they're gonna be much better stewards with my money than I will be if I go out there and try to be a weekend warrior doing the HGTV flip.

Randy Smith: 11:05

That I had no business doing in the first place. So by spending my time and energy finding and vetting the best operators and ultimately the best places to invest my money, I found that I could actually increase my wealth much quicker because they're much better at doing that than I am. And so it really comes down to finding asset classes that one you have some interest and excitement about and two, you have a network where you can start finding the biggest and the best operators out there. So when you place your capital with them, you feel confidence that your dollars are gonna come back with some friends. As a buddy of mine likes to say, put the dollars out there and watch them come back with some friends. So that's kind of the path.

Tony Johnson: 11:55

Yeah, that sounds fantastic. So for someone that hasn't done this, you go out. The syndication is a lot larger now than it was a decade ago, so there are a lot more operators out there. So if you determine an asset class you like and maybe you wanna learn more about it and you're not comfortable investing completely on your own or you feel that it's a much higher risk with you investing on your own, you can find someone that has a track record like Randy that's been doing it for multiple years, that has built up connections to people, even if it's not him.

Tony Johnson: 12:31

He's built up connections to people that are doing this for years and years and years to have a track record of going through full cycle on projects and can show you the profit that they've received, which gives you more comfort when you're going in and investing. They have access to a lot more deal flow than someone like you or me when you just go out, because they have a track record and they're carrying multiple millions of dollars of property already. So people are reaching out to them with all the good opportunities, and these are much larger opportunities than you could ever obtain on your own or with a friend doing something like that. So those are kind of a quick synopsis of why you look at this and so when you got into it, let's kind of understand. You're saying you jumped on 12 to 15 passive investing deals. What did you look for, how did you vet those and what made you comfortable to get involved in the beginning?

Randy Smith: 13:27

Yeah, yeah, and great question and I think that's the million dollar question if you're getting into this space is how do you find and vet operators? And what I'll share with you is I made some mistakes early on and I ended up well. I made some mistakes but fortunately they're done very well. But I think it's very important for investors to know what it is that they're trying to achieve when they come into this. And I remember hearing that when I first came in and I thought it was silly because it was I thought I'm investing, I just want the dollars to grow.

Randy Smith: 13:58

And as you dig in and you learn more, you find out that there's cash flow investing and there's wealth generation or wealth growth opportunities that are gonna grow the capital faster. And I didn't really know. I just knew I was making good money as a sales guy and I wanted these investments to grow. That was literally it. I thought at the time that I was a growth investor because I would always have this great job, that I would never need cash flow. And I always heard people talking about cash flow, cash flow, cash flow, and I thought, well, that's silly. Technically, I'm making all of this money. I don't need any more cash flow right now. But then when you get laid off all of a sudden, you shift from being a growth investor to a cash flow investor because you need that monthly income.

Randy Smith: 14:40

So with that, being said, when I first started, I started looking at ultimately the only places where I saw deals, which were listening to podcasts and listening to people at local meetups, when and if I was able to get out to those.

Randy Smith: 14:57

So I saw some very large brands that had established companies that have been doing this for years and they had podcasts and they were very, very large brands in the marketplace that over the years, I began to trust those folks just simply because I was listening to their podcast, had been educated by him for a handful of years, and then I would meet these smaller guys at these meetups who were essentially trying to do the same thing, but they had no track record whatsoever.

Randy Smith: 15:28

So I ended up pulling some money out of an IRA that I had shifted an old 401K into and I took those dollars and I invested. I actually invested like $110,000 in my first passive deal with one operator that had a fund and he was buying 10 to 12 mobile home parks across the East coast and I heard somebody call up the smile, the United States smile, basically the Sun Belt. So placed some capital there. And then my second deal I placed it with a large multifamily operator that had a fund as well, and then from there I found a local group that was buying very, very heavily here in the Phoenix market. So that was kind of my initial process, was I just placed my dollars with people that I knew and that I had started to trust because I was listening to their podcast and as I became more experienced with it, I learned more and more how to vet those operators.

Tony Johnson: 16:34

Those are definitely three, so the one in Arizona. What type of assets were they investing in? Multifamily, multifamily, multifamily so you had a large multifamily operator, a small multifamily operator and a mobile home park operator, where you're three that we're looking at right, if we're running this quickly. So the first one that you invested in what drew you to them and how did that one? Could you walk us through that one, how it looked and how did it pan out?

Randy Smith: 17:02

Yeah, yeah, and I think the biggest reason that I invested with that one is that I had been listening to the guys podcast for like four years and I felt like I knew him. He had been a big part of the education process for me and my thought, because I had actually worked. I had spent a lot of years in very large organizations so I liked the idea of well-established companies with large brands and the infrastructure in place to manage this huge business, cause these are very large businesses when you're talking about renovating hundreds of units or buying tens of thousands of mobile home units as well. So I ultimately vetted that one just by meeting folks in the online communities and talking to them about their experience with them, with this specific operator, and then ultimately, I called them and had a handful of conversations and made the decision and these were current investors in his deals.

Tony Johnson: 18:02

They were yes, oh great, so you, even so, you, your vetting process was you. You had listened to the podcast, obviously, so you felt like you knew him to a certain extent. Then you found and reached out. How did you find the people that were investing and reach out and able to connect with them?

Randy Smith: 18:18

Yeah, so I just to be transparent through the name of the organization was it was Brandon Turner's group and I'd been listening to bigger pockets and they have a big online forum or bigger pockets at the time not open door capital, but bigger pockets and I was able to find a bunch of folks that had invested through them, just through that community.

Tony Johnson: 18:39

Awesome, yeah, now they're, they're. They're definitely one of the bigger established brands, right yeah, no doubt.

Randy Smith: 18:46

No doubt yeah, and and you know he's, he's just an overall good guy. He seems like a guy that you can trust and you know I I felt very confident that and kind of the mindset there is, like if it's a large, well-established brand, I thought it, thought it was highly unlikely that they could well not do well and not return capital. I know today that that's not necessarily the truth just because they're a large organization, because the market is very, very different today and we've seen some of those big guys fall. Fortunately, all of the investments I've made up to this point, I've not had any negative experiences other than other than some positive distributions at this point.

Tony Johnson: 19:23

So that's great. So so you vetted and you got to speak to some of the people and what was, what were some of the questions that you asked? Did you what did you feel like you figured out that was. You know that you look back now that was important. What do you wish you would have asked? Maybe that you didn't? Could you kind of dive into that a little further for someone that hasn't ever done it?

Randy Smith: 19:47

that would kind of give them a little kind of a time track record of what they should maybe ask for, what you did, yeah, yeah, I think probably the most important questions on the front end are track record, and you know, what I found with the folks that I was investing with earlier is sometimes those groups did have track record, but more often than not they were partnering with groups or individuals that had quite a bit of track record. Like, like yourself, you're in the construction space. You've got years and years and years and years and years of construction. I know when and if I invest with with your group, that construction is going to be handled Like. I don't have any doubt about that because of your expertise. This particular, my first investment he partnered with somebody who was like the ultimate expert in the space where they were working. So you know, brandon Turner, very large public figure, didn't have the experience in the mobile home part community, but he partnered with somebody who had that experience. So they brought their superpowers together and that was what allowed them to grow as fast as they did.

Randy Smith: 20:53

Now, what I didn't know to ask early on, and one of the early mistakes that I made, is I I and this is just simply I didn't do the research that I should have done is that I thought that the average cash on cash was going to be my cash flow throughout the hold and you found out very quickly that average annual return, average cash on cash, irr all those metrics are very, very important, which ties back to my initial my initial point that you've got to know what it is that you're trying to achieve so that you go out and find the operators and the asset classes and the business models that give those types of results. So if I was depending on that monthly or quarterly cash flow to support the household, then I should have gone out and found something that was doing very consistent cash on cash returns right out of the gates. So that was probably one mistake. Secondary, I invested initially in a fund which meant he was going to go out and buy a bunch of different mobile home parks and I think it's fantastic from a diversification standpoint.

Randy Smith: 22:06

But if your goal is to grow your capital faster, I find personally that single asset investments give you the ability to do that faster, because more often than not in a fund, they have to sell all those assets.

Randy Smith: 22:21

On that one, they have to buy all those assets, they have to execute their business plan, and then three, they need to sell them all before you get your big payoff at the end. If they're just buying one asset, it increases the likelihood that they can do that quicker compared to having to do that five or 10 or 12 different times. So that was one of the big mistakes. And one of the other mistakes that I made early on is I invested more than the minimum on that first investment and in hindsight, what I do today is I will usually invest, I usually ask to do half of the minimum on the first investment and then, as I get to know the operator more, I'll go back and invest in additional deals with them. So instead of putting $100,000 to some $1,000 with them, I would have preferred to have done maybe $50,000 across a couple of deals or $25,000 across four deals, just to decrease my risk and increase my diversification across multiple asset classes and multiple opportunities and multiple geographies and potentially even business plans as well.

Tony Johnson: 23:34

That's a lot there. That's very interesting. Yeah, I've never. Yeah so typical.

Tony Johnson: 23:38

I didn't even know that was something you could do, so that's news to me. So you're saying that if they, they have a minimum investment, let's say a 50k, so you would say, okay, first time, best of you, I'm not gonna give you 50k, I'll give you 25k. And you know, one thing that you brought up that I think I'd love to talk about is you know the difference in the fund model to the single investment model. So it's just like you know putting your money in a mutual fund to putting your money in an individual stock, in essence, right. So yeah, pretty much in a mutual fund you're tied to a bunch of different items and then you know you're more Tolerated for ups and downs but you're also not going to get a really substantial return. So if you are willing to risk a little more, then your return can obviously be higher and you can, you know, move. And so you know understanding that this is an investment and there's no guarantees either way. It's more of a comfort level, right, establishing and understanding that. And then something else that you brought up that we want to touch on is you know you went in they project.

Tony Johnson: 24:39

So when someone's giving you, you know a layout of what they're showing you, they're gonna think it's gonna return.

Tony Johnson: 24:45

You were looking at the cash on cash and who's saying, oh okay, wow, here's the cash on cash. This is gonna give me this much money every month for this that I invest. And so what you need to understand if there's someone's going in and they're doing a renovation or repair on the property, you know the cash flow is not coming in while they're renovating and repairing the property. So that is a blend of what they think the full timeline that they're giving you you're going to get as a return. So you might get no returns if the renovations take a year prior to getting your first return but then over the five-year period that they're saying the investment is, it's going to go back and average you the return that they're saying that's what they're projecting, not guaranteed, but Understanding that if you are in a position and then you get laid off or, you know, quit your job and you've got a couple of these and you don't understand that then you might have no money coming in.

Tony Johnson: 25:43

Exactly yeah you're gonna call an operator and they're gonna be like well, I can tell you when the money was good, that's just an average. So, yeah, those are great points for somebody that's not Versed in looking at these things that they need to understand. So those were very important points. That's why I kind of wanted to reiterate them. So Something else. So let's go back to the fund model. So For people that don't have a full understanding of a fund model and what that all entails, could you kind of go in a little deeper on that and and so they can understand?

Randy Smith: 26:18

Yeah, yeah, so that it's. Let's see here. So there's a bunch of different structures that are used in these models. You've got you know, the most simple type of model that exists is a joint venture, where a handful of guys come together and they decide to go buy something. It's the same basic principle of syndication, but it's at the smallest smallest level, I guess. So as you move into syndication, the operator has the ability of buying bigger and bigger assets because they're using other people's money in order to do that, and From that point, generally what will happen is the syndicate will find an asset and then they will go, they'll get it under contract and then they'll go out and they'll raise the money and then they'll close on the asset. And it works perfectly if they have the ability to raise capital quickly.

Randy Smith: 27:10

The challenge that comes up, and especially in this market, is that it's become more and more difficult to raise capital. So operators have started leveraging this fund model, where they go out to the market and to their investors and they say these are the type of investments that we're going to be buying. We may or may not have found an asset, or two or three, but our goal is to buy eight or ten or twelve over the next twelve months, and you can get involved in those deals right now by investing today. So what they do is they raise a bunch of capital, which makes it much, much easier for them to go out and then close on assets much quicker, because they're not waiting To raise the capital on the back end and it's it's very, very beneficial to them because it gives them some more clout when they go and make offers on on Specific assets, because the people they're buying from know that they don't have to go out and raise capital because they've already got it Okay so lots of benefits for them.

Randy Smith: 28:12

For me, the challenge has always been with funds is that I Don't know the specific assets that they're buying and the only due diligence I can do is on the operator. I can't do any due diligence on the asset. I can't go drive the properties, I can't talk to the property managers and, you know, get to know those assets before I invest. So there's good and bad in those models. To the passive investor there's benefit in that, yes, they're getting diversification across a bunch of different assets, but again they're losing because and not necessarily losing, but it's it's because it depends on the preference of the investor. So that's kind of a different model.

Randy Smith: 28:52

Now, something else we're starting to see, and something that I actually got involved with after finally leaving my W2, is I am a fund manager where I Partner with operators that their expertise is executing these business models and my expertise is Educating and communicating my investors. So I go out and find the best operators and I find the best deals from those operators and Make the decision to bring investor capital to some of those deals through my fund. So my investors invest with me and then I turn around and immediately invest those dollars into a already identified asset and our fund investors get better returns because we're bringing a bigger, bigger chuck to the table than what the traditional investor brings. So those are just a few models. There's also a blind fund. I'm hearing a lot about customizable funds Lately as well, but those are kind of the main structures that an investor is going to run into. If, if, if they're out there looking to place capital today, you yeah, that is definitely a good quick overview, and stop Now.

Tony Johnson: 30:08

Let's dig in a bit on your model, on what you're doing, for people to understand that, because I find it interesting and I feel like it adds an extra layer of protection for someone, especially if you're newer. Just to break down a little bit more what you're doing, you can do what we just talked about. You go out, you look, you vet these operators, you get understanding, see what they have, what they have for history, and then choose maybe I invest in their deal. When you're investing in them, you're doing all your due diligence. You're searching around for operators. You say, okay, this operator is someone I trust, like you did initially, and then say, okay, let me invest in them.

Tony Johnson: 30:50

You're the person that is saying, okay, I'm the expert, I'm going to find these people, I'm going to take a checklist that someone else gave me and this is the operator I'm going to choose based on the questions I ask in my comfort level.

Tony Johnson: 31:03

That's what we discussed and that's what you did initially.

Tony Johnson: 31:07

Then, to break it a little further, what you're now doing is you are focusing all your time on speaking to operator after operator after operator after operator, looking at this operator's work, what they've done, where their returns, what's their track record, what's their history, and this is what you're spending every day, all day, doing, speaking to all these people. Through that, you're building up okay, this person has the great track record for this. This person has a great track record for this. So you are building more and more and more connections than most anybody just doing that, so you can then have investors come to you and they say what are their investment criteria? You're able to then say, okay, based on your investment criteria, this is what we would try and invest in, and I have such and such operators and they would give you this type of return. I've negotiated probably a little bit better structure than you would be able to do, because I have more money that I can put into the deal cumulatively with all of my investors. Is that?

Randy Smith: 32:09

right, that is it exactly. Yes, you just summarized my entire world and my life right now. I would love to say that I'm working full time, 40 hours a week, but it's probably more like 70 hours a week. Oddly enough, I'm working more now that I don't have a job than I ever have in my life, but it's a ton of fun. So yeah, basically, I've spent a lot of time getting to know these operators much, in much more detail and much more depth than I ever have before. I'm getting to go drive properties, I'm getting to sit on asset management calls, I'm truly understanding the underwriting models and the asset management plans and getting to know these guys and it is very much a full time job.

Randy Smith: 32:56

And if you're placing capital into these deals, I think if you're going to do 50 or 100 grand or three or four deals, I think it makes sense to read the books and the podcast and get to know some people locally.

Randy Smith: 33:10

But if your plan is to place a large amount of capital, it makes more and more sense to become more and more involved in those deals. And we call it passive investing, but it's anything bust, but unless you're just working your W2 and you want to place some capital. So if folks are interested in getting into this space, I caution them from jumping in and throwing a bunch of money at deals before they really get to know folks or before they get to know somebody like me that can really help guide them through that process, because there's a lot of players out there and not everybody. I don't think anybody approaches things with negative intent, but I think there's a lot of people that go to conferences and they sign up for their three day weekend event and pay for their $30,000 guru and they think that they can start raising capital and syndicating. But this is a very difficult business with very large businesses behind them, so it pays to do the due diligence and invest in the right operators, for sure, yeah.

Tony Johnson: 34:12

I mean, there is no guarantees in this. So we've seen a lot over the past few years and, of course, this gets attractive. This was attractive back in 06, 07. When you watched, everybody was making boo-koo's of money here. Everybody made tons of money over the past four years. It's just exploded and it has a lot to do with the inflation and real estate being a great inflation hedge to do, and I don't foresee there being some massive crash just because of the devaluation of the dollar over all this time.

Tony Johnson: 34:44

But where do we look at on a growth perspective from here? So you have to right now. It's not just you can't just do it like it was in a few years past, where you just throw money and everybody's making money and everybody looks like a genius. Right now it's critical, but you have the stock market. That's very unstable. We don't know where that's going, so there's a lot of instability throughout with any investment right now. So finding someone like you that is spending day in and day out looking at these things should make you a little more comfortable than you doing it yourself and give you a little more options. But I do think it's important to understand a couple of things. So when you talk to someone, randy, so if someone's calling you and they're looking and saying, let me vet you as far as, let me see if, what you're legit and how I would invest, what is it? If someone's coming to you, do you only deal with accredited investors?

Randy Smith: 35:38

No, I deal with both non-accredited and accredited investors, which brings up a whole different slew of questions that can occur there. But I can only work with folks that I have what is called a preexisting and substantive relationship, and unfortunately that definition is not clearly defined by the SEC. So it seems like if you line up 10 different SEC attorneys, you'll get 12 different answers on what a preexisting and substantive relationship is. But yes, you need to have that relationship and it's important that there's an established policy that the operators are following, and ultimately, what ends up happening is people are getting so desperate for money is they start to get very lenient with what they call a preexisting and substantive relationship. So, all that to be said, if you're investing with somebody, make sure that you've had multiple conversations over 30 days, plus maybe you've met with them in person or on Zoom a few different times and that you've got to know them as an operator as well. And then there's also a requirement on the non-accredited investors that they be considered sophisticated, and again, it's a very broad and general definition that you'll get many, many different answers, but at the end of the day, these sophisticated, non-accredited investors need to know that these are illiquid investments.

Randy Smith: 37:07

You can't invest the dollars and then call back in 30 days or even two or three or five years and ask for your money back. And it is possible and you've said it a few different times here. These are risky investments and it is possible for you to lose all of your capital on these. It's unlikely if you do the right due diligence, but it is always a possibility and we're seeing a lot of people lose money now because they didn't vet the operators as they should have on the front end. So, yes, I work with both credited and non-accredited and I spend quite a bit of time getting to know and educate my investors before I feel silly kind of thing, but before I'll allow them to invest in our deals, because you never want to take anybody's last $25,000 and you never want to put somebody in a situation that's going to hurt them financially if things don't go as planned.

Tony Johnson: 38:04

So that's a great point. I think it's important to always bring up. Which you don't want is somebody that's just going to take your money. We're not nobody's out here just looking to take someone's money. You have to understand what you're investing in. You have to understand the risks. You have to be comfortable with those risks. You have to understand the structure of how you're going to get money If you get in a bind. You don't want to push so much of your investment capital that if you get laid off or don't have income coming in that you then need to call and try and pull that money out, because odds are you're not going to be able to get that money back out when you need it most. So you have to make sure this is an investment, that you're locking up money, sometimes three, five years. There will be multiple exit plans presented if you're in an investment an individual investment, as we discussed. But those are just performers, what they're thinking, so they're giving themselves multiple exits. They're thinking so they might say, okay, the plan is to exit out of this in three years.

Tony Johnson: 39:11

But all that is dependent upon consistent market conditions, and market conditions, as we've seen recently, shift and go every which way under the sun and you have an election year coming up, so there's a shift. So when you invest in something right now, everything can go one way or another way, maybe just depending on an election. That has nothing to do with anything. That the operator would say the investment itself, anything, but it's just things that happen. Things do happen.

Tony Johnson: 39:38

So you have to understand that this is an investment. It has inherent risk with it and there is no guarantee you get your money. There's no timeline guarantee on anything. Everything is an investment. But the more risky the investment just like with a penny stock for instance then the higher the reward typically. So it just depends on your stomach for it.

Tony Johnson: 40:01

And the nice thing about real estate as opposed to stocks is it's tangible, it's going to be there. The typically the only way you're going to completely lose your money is if the operator really messes up and has to hand the asset back to the bank or something. That's really the worst case scenario. But it's not as easy to lose and somebody has control to be able to try and save that investment, as opposed to a stock, where you have zero influence on what's going on With the real estate. Your operator has the ability to work and manipulate that situation as much as possible to try and save your investment. That, to me, is the biggest difference when you're looking at investing in something tangible or investing in a stock. Yeah, yeah.

Randy Smith: 40:51

Real estate is very. Anything else you have on that, Randy. Yeah, we just say real estate investing or real estate as a whole, very, very forgiving. And if you hold any asset long enough, the value is going to go up.

Randy Smith: 41:04

So, as you mentioned, the operators. Where people get in trouble is if the operators make really really, really big mistakes and what we're seeing today is those really really big mistakes are bad loans. And if you're forced to sell when the market is down, that's when people are going to get hurt. So last piece of advice to folks is make sure that they understand the type of loans that their operators are using on their investments, because that loan is really it's the single most important thing in this space that we're finding out today, because if you have to sell when the market's down, that's when investors lose money.

Tony Johnson: 41:43

So Well, randy, I sincerely appreciate you coming on today. I feel like we have really got to dive into quite a bit and it's been very impressive. I'm impressed with what you've put together and what you've done. It's definitely different from anybody we've spoken to thus far. Very interesting. If people want to reach out to find out more about what you're doing, some opportunities that you may have available. What's the best way to get in touch with you?

Randy Smith: 42:08

Yeah, probably the best way is just simply going to my website. I have my scheduling link right on the website the website's impactequitynet. If you want me to respond right away, I spend the majority of my day looking at my LinkedIn page, so you can always message me there, but I'm always available if anybody wants to chat, and there's no high pressure sales or anything here. I just love talking about this stuff. It's changed my family's life and it's really given us the options, the freedoms that we never got in corporate America. So, yeah, definitely reach out.

Randy Smith: 42:41

Oh, and I've got a podcast as well. It's called the General Art of Crushing it, and we focus on helping to educate, inspire the newer, newer passive investors. So yeah, Awesome.

Tony Johnson: 42:51

We'll put that in the show notes, along with Randy's contact info. Please reach out to Randy, great guy, and I think it gives you plenty of opportunities. If you're not, if you do not have a lot of experience in investing or experience in real estate, he is definitely someone to talk to. So, randy, thanks again so much for joining us. We appreciate it, sir.

Randy Smith: 43:10

Thanks so much, Tony. This has been a lot of fun have a great day, man. You too.