The Real Estate Syndication Show

WS1933 Impact Investing | Eric Most

February 05, 2024 Whitney Sewell Episode 1933
The Real Estate Syndication Show
WS1933 Impact Investing | Eric Most
Show Notes Transcript

In today's episode of the Real Estate Syndication Show, we had the pleasure of continuing our conversation with Eric Most, an expert in stewardship and impact investing. We delved deep into the concept of impact investing and how it can be utilized not only with private capital but also with charitable funds to create a significant positive impact.

Eric shared with us the essence of impact investing, which is about making a difference through our investments. He emphasized that more investors are now looking for opportunities to see their money doing good in the world. Eric explained how charitable capital can be used to invest in organizations, funds, or private deals without personal gain, providing a unique way to contribute to meaningful causes.

We heard a compelling story about a giver from Grand Junction, Colorado, who used his charitable capital to transform an old motorcycle dealership into a thriving event center and Christian dance studio. This investment not only served the community but also created a cash flow that could be reinvested or donated tax-free.

Eric also highlighted other ways people can engage in impact investing, such as pooled investment funds, direct investments in social enterprises, and even equity stakes in for-profit ventures with a social angle, like the crowdfunded show "The Chosen."

One particularly touching example was the introduction of tunnel farms at orphanages by Rod Brenneman, former CEO of Butterball. These farms not only provide food and jobs but also help keep families together by addressing financial struggles that often lead to children being orphaned.

It's clear from our discussion that impact investing offers a creative and strategic way to make a difference while still considering financial returns. It's not just about giving money away; it's about making investments that continue to grow and benefit various aspects of society.

Thank you for tuning in to the Real Estate Syndication Show. Don't forget to like, subscribe, and share the podcast with friends who might be interested in learning about real estate syndication and impact investing.

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Whitney Sewell: This is your daily real estate syndication show. I'm your host Whitney Sewell. We're continuing the conversation today with our stewardship and impact investing expert, Eric Most. We're going to dive into just that, you know, and we're today it's about impact investing. What is that and why you need to know. Eric, a lot of us have heard people talk about impact investing. I know that's something you all are big on as well, and are helping a lot of other people do that well, better than they ever imagined, I believe. Give us an overview of that.

Eric Most : Sure. So impact investing, when we, there's a lot of people talk about it in different forms, but it's how are we making an impact with our investments? And it can actually be with your private capital, your personal capital, and also your charitable capital you can use to make impactful investments. And frankly, that's what we all want to do, right? Like we want the investments that we make to make an impact. And I think we see that more and more today with investors is the desire for seeing good being done. And so we're able to actually use your charitable capital. So we talked about capital that comes into the giving fund, that you can't use that for personal gain and personal benefit, but you actually can use it to make investments in organizations, in funds, or also in private deals. And so let me give you just a quick example because sometimes it's easier with examples, as we talked about before. So we had a giver who had a medical practice down in Grand Junction Colorado beautiful place you've never been you should go to the western slope of Colorado. Um, and he sold his medical practice and then he, then he got in contact with us and he's like, Oh, Hey, how do we do, you know, we want to do a gift. It was like, sorry, you're too late on this, but what else has got entrusted to you? And they had their medical building. And so he says, Hey, let's give our medical building before we even think about selling it. And that's what they did. So they gave their medical building. This building was worth about a million dollars. So gave the building to NCF. It then was sold under contract. The million dollars comes into the giving fund at NCF. It was a very tax efficient thing. It offset that gain from the sale of the medical practice. And so that was a beautiful thing. And so now he has a million dollars roughly sitting into his giving fund. Well, they're a family in Grand Junction is not a large town in Colorado, and they, they have a daughter who's really passionate about dance, and there is no Christian dance studio in in in in Grand Junction. And so they said. And there was also a lack of event centers. And so they said, hey, what would it look like if we used our charitable capital to purchase a building that we can be used for this for these purposes and so we help them do that and so they actually identified the Indian motorcycle dealership had been closed and been for sale for some time. And so they literally created an LLC and then utilized the Impact Foundation, which is an organization that NCF asked to get started from NCF to make a investment to their LLC to be able to purchase the Indian real estate, the old Indian dealership. And so they gave themselves a loan. That can be a market rate. That could be concessionary. That could be a 0% interest rate. They literally get to set the term. And so they made it kind of a little bit below market. And so they weren't having to pay as much as they would had they taken the money out of the bank, but they were still wanting to get interest and have growth in that. So they gave it as a loan to their LLC. And this could be to theirs or it could be to somebody else's. They then use that money to purchase the real estate. Today, there's now an event center that two churches meet in. They host community events in a Christian studio, all because of their utilization of their charitable capital to make an investment that then, here's the thing, that cash flows, right? And so they're paying off their loan note with interest, and that comes into their charitable bucket, back into their bucket, completely tax-free, that they can now reinvest or they can then give those dollars away. And so that's a high level kind of overview of some impact investing that can be done with your charitable capital. There's many, many other ways to do this, and we can talk more about it at another time maybe.

Whitney Sewell: Yeah, I think that's so creative. I love that. It was kept in the family, but it still had major impact. It just continued to grow, right? It wasn't just a rush to give it away, right? Like often happens like you talked about, right? Uh, very strategic, uh, and yeah, impact on numerous fronts. They're like numerous things happening within, within that building as well. Love that. Uh, are there, uh, you know, what other ways that you see people invest? I don't know. Maybe give us a couple other ideas there. So help, help the listener to think out of the box a little bit.

Eric Most : I mean, that was a situation where a, you know, an individual, we call them givers, because we're not the end recipient of any of this money, by the way. So this giver had a passion for this specific project. And that's a great use case for impact investing. Um, we also have, there are many and there's growing more and more, um, pooled investment funds that you can invest in. And so you could have another, uh, kind of like the work that you do with real estate syndication. You could have somebody else that's doing that and you can literally use your charitable capital through the impact foundation to make an investment in, in deals. Um, so you can have one offs. Um, it could be somebody that says, Hey, there's a, So, you know, there's this great organization that has a coffee shop and they employ, I know this group, but they, they have a bakery and coffee shop. It's in Boulder, Colorado. and they are employing foster kids that are about to age out of foster care. And so they're providing them with job, they're providing them with on-the-job training, they're providing them with resume work, and then this bakery also feeds the homeless, and so it's just this beautiful place. And so you're able to use your charitable capital to help invest in the startup of that cafe. And so that's kind of like a direct investment that you can make. It could be an equity or a debt investment as well. And so these don't all have to be debt instruments. They could be an equity instrument as well and get a return. Many of your folks that are listening here might've seen the show, The Chosen. Very, very impactful story about Jesus. A lot of people might think that because it's on Angel Studios that it might be, they see this as crowdfunded. It's the largest crowdfunded show in the history of crowdfunding and shows. And a lot of people, my dad included, said, hey, how do I use my charitable capital to give to them? It's like, well, you can't, they're a for-profit. Um, but what we did is we actually worked with the impact foundation and we created a fund. And so if you want to give, you can use your charitable capital and you can give to the impact foundation for the chosen. If you give less than $25,000, it's for, it's, it's just a tax deductible gift to them. So you're not going to get a return. If you give more than $25,000, it's actually an equity stake in the chosen and you get a return. Um, that's tax free back into your charitable pocket. And so that's just another type of example of what you can do. There's also an organization that I love, it's called Talatin, and they're an impact investment firm that focuses on small to medium enterprises in the developing world, primarily Africa. And they're focusing on job growth in African entrepreneurs, and it's a debt fund. And so you can make an investment using your impact investment, using your charitable capital in that organization, that's then really working to seek to create great jobs. And it has a return, they have a targeted return of about 8% as a debt investment, that's going to come back tax free into your charitable pocket to invest again, or to be able to give away.

Whitney Sewell: These examples are so helpful. I'm having all kinds of ideas, Eric. You know, that good man. I should have thought of this before now. Right. Or I'm glad we're talking about this stuff now.

Eric Most : And we have talked about it a little bit, but I can't give you one more because I think this one's near and dear to you. Um, So, um, um, one child is, uh, adoption organization. And, um, there's, uh, uh, one of their board members is a guy named Rod Brenneman. He was the former, uh, CEO of, of Butterball, the, the turkey company, uh, that we all know in Thanksgiving time. Um, except for those, uh, like, uh, you and Roanoke who maybe go out and get your own turkey. So he introduced tunnel farms at all the orphanages that they have around the world. And so they put up these open air tunnel farms that they're farming fruits and veggies. And these actually are profit generating within three months to six months. their job creation machines. The one that they have in Africa, they have one at Zimbabwe maybe, it employs almost 300 local community members. Well, one of the main reasons for children being orphaned is actually because of finances. Families can't afford to keep the kids. And so here's a beautiful case where the orphanage is building a sustainable community and job infrastructure, where actually people are getting their kids back out of the orphanage and fewer kids are being orphaned, to begin with. This is also profit generating. And so it actually pays for the complete work of the orphanage there in country within a very quick period of time. And so Rod Brenneman goes around to his friends and says, hey, I want to invite you to invest in this tunnel farm, and it's going to be a zero return investment. But here's the deal. I'm never going to come back and ask for another penny from you ever again. And so at $500,000, they're able to literally build up one of these tunnel farms that then is self-generating and is going to completely sustain the work of the ministry there in that country in perpetuity now going on. And so that's another case of impact investment.

Whitney Sewell: Love it. And again, love the examples. I think it helps us see that there's good options, right, that we should be taking advantage of. Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.