Do you want to learn how to raise capital for real estate? Hunter Thompson has been in the business of raising capital for over 8 years. He raises millions of dollars from investors for each project he gets involved with. He's learned what works and what doesn't. He's learned how to build trust with investors. And the best of all is that he openly shares his knowledge in his book, Raising Capital For Real Estate!
Hunter will teach you everything about raising money for your next project. You will learn how to attract investors to you rather than searching for investors!
Listen in as Hunter shares his story and his tips and advice to help you achieve your capital raising goals!
Table of Contents:
- Where To Listen To The Podcast
- Recession Resistant Capital
- Raising Capital for Real Estate With Ultimate Flexibility
- Gamifying the Process of Raising Capital for Real Estate
- Inspiring the Investors
- A Strategic Partnership
- A Great Group to Pursue When You’re Raising Capital for Real Estate
- Tactical Ways of Raising Capital for Real Estate
- The Hot Markets Today
- Raising Capital for Real Estate From First Time Investors
- How to Reach Hunter Thompson
Recession Resistant Capital
Darin: Hunter Thompson lives in Southern California. He runs a private equity firm called Asym Capital that raises millions of dollars from investors. The company's focus is on capital raising for recession resistant, cash flowing assets such as multifamily, self storage, mobile home parks, and others. He's carved out a very nice niche. He shares his knowledge and wisdom both in his book and in this episode.
Just a little bit about how I know Hunter before we get into everything. This is the first time that we've talked but I watched a video where Hunter was on, BiggerPockets on a YouTube live. Really liked what he had to say and thought that he could add a lot of value to the listeners. So, I asked him to come on board and he was gracious enough to agree to do so. First question, how many properties and how many units do you currently own?
Hunter: I know we want to talk about raising capital today, but this is kind of an interesting question when you ask me. The way that we're positioned as a company, we raise capital for, in a large degree, other people's deals. So we have been minority or sometimes majority equity participants in some very well-known very large sponsors.
Example, we may have an equity partner that's going to have a $100 million fund and purchase let's say $400 million worth of real estate. We may participate to the tune of $20 million. So we act as a capital placement arm of some institutional quality players.
Fund of Funds
Hunter: Cumulatively, we have an interest in at least half a billion if not a billion dollars worth of real estate. But it's not that we own the majority of that real estate. We’re happy to be minority owners or minority equity partners just to be as diversified as possible, and that's across multiple sectors. Don't want to go too far down this rabbit hole. I'm happy to do it if you think your audience will be interested.
Darin: Actually that's very interesting. You are the first person that I've had on the show that exclusively focuses on that. We can talk more about how you typically structure that if you're a GP partner in that deal. I read your book and whether you're a fund of funds. That's extremely interesting and I think that you're going to add a lot of value. How did you get in the business and how did you pick that niche part of the business?
Hunter: I started in the business as an LP investor. I was very fortunate in terms of the timing of the market. Graduated college around 2010 in the peak of the great recession and moved to California where it was very pronounced. The volatility of the California market is something for people that were around at that time. A lot of people lost their shirts even if you kind of knew what you were doing.
When I started to go to networking events and try to form an investment thesis, I was quickly surrounded by some very influential people that were able to weather that storm. So my first investments were not in single families and fix and flips, which is very typical.
The Model Used in Raising Capital for Real Estate
Hunter: But the only people that really made it out of that to a large degree, especially those in California, were buying hundred unit properties. Fannie Freddie kind of financed assets, mobile home parks, self storage, multifamily, et cetera. So I built an investment thesis around recession resistance, five to 15, sometimes to $50 million properties, and started investing passively.
Recognized if I can create an opportunity where investors could defer to my expertise in terms of the contacts I've developed, the due diligence process I have, et cetera. Perhaps I could create an opportunity where they can invest through an entity that I create. Then I could invest in these other people's deals.
That later came to be known as the fund of funds model, which you kind of alluded to. I just found it very compelling if I can be as diversified as possible and also not be a Jack of all trades. That's a very hard thing to do. In this business, in order to be good at anything, you got to be very specialized. You got to be “the guy” at something. If you're not, you're just kind of middle of the road.
So, I wanted to be diversified. But that's in stark contrast with that kind of over allocation from a specialization standpoint. And I was able to build a business that was able to accomplish both by deferring to other people's expertise in their various niches.
Darin: You've been around for a long time in this business. I've seen a lot of syndicators and a lot of the partnerships that are formed, to your point, are formed in that manner. Two people come together, maybe one of the individuals is very good at building relationships with brokers.
Raising Capital for Real Estate With Ultimate Flexibility
Darin: Getting deals, getting deal flow, being an asset manager. Then the other one is more the capital raiser, the one that is investor relations. What you did was, instead of forming a partnership and locking myself alone with one partner. I'm going to build a capital raising company. Then I can have the flexibility to invest in multiple different deals with multiple different sponsors. That gives you the ultimate flexibility.
Hunter: This was something that now makes sense, to have a conversation like this now. I'm sure your audience is familiar with most of the terms I just used. Going back to 2011, crowdfunding wasn't even legal on the internet at that time. It was a kind of walking on the moon scenario. But some of the moves I made early on, not because of my own intuition but just because of the mentors that I got put me in a good position to do exactly what you just outlined.
Darin: You say that times are different, but I've been around a lot of syndicators. There's not too many that focus just on that niche. There's a lot of people that basically look at, if I'm going to scale this thing, I'm going to have to start hiring employees. Build a company and have asset managers, and not everybody wants that lifestyle. So, from reading your book, it sounds like you wanted to not only build a good business and help other people grow wealth. You wanted to bear in mind what kind of lifestyle you wanted to have.
Hunter: That's so true, and I appreciate the email that you sent. It's always great to see people that read the book and take it very seriously. There's a lot of people out there that have written books and there's always different goals.
A Book Designed for People With Different Goals
Hunter: People have different goals for why they want to write something like that. The book is to a large degree my life's work, at least up until this point. It's everything I know about capital raising. That's not the way that most people write books. But the books that really impacted my life, I could tell that the authors just gave away the playbook. Said, if you do this, you're going to have success.
Now, the things written in the book, they're not easy to do, but if you do them, you will have success. It may take a little bit of time and a lot of hard work. Some trials and tribulations, which I also talk about in the book, but it is the playbook for raising capital in today's environment.
But to your point, if I was a video game character, and we all have different strengths and weaknesses. Looking at the video game character, my demand for personal freedom index is just smashed all the way forward. Sometimes where I'll give up income in exchange for personal freedom.
I also mentioned in the book that I wasn't really willing to take on VC funding. That's another option in the crowdfunding world. It's like, okay, here's the playbook. You create a really great website and you get a fee based on transactions and you scale to the moon. Well, it's possible to accomplish remarkable things in this industry without attaching yourself to that type of investment. To have a board of advisors and all those things, which I was really trying to avoid. So, yes, I completely agree with you.
A $2,000 Idea
Darin: I did purchase your book. It's called Raising Capital for Real Estate. Later on in the show I'm hoping that you will give the listeners the opportunity to find a place to get that book. It was very good. If you don't mind, I'd like to just pick out a few things that I read in the book and get your take on it. Would that work for you?
Hunter: Happy to do it.
Darin: You talk about in one part a $2,000 idea, what is a $2,000 idea? What does that mean to you?
Hunter: The first part of that is that most people, especially when you're just getting started in this industry don't recognize how valuable and how potentially lucrative this industry can be. So intuitively, you start to play small ball. This is definitely true of me.
I would think I'm going to go to a networking event and it's only a $30 entry fee. The real goal there is to kind of meet some contacts, for example. But especially in Los Angeles, driving around, you're going to go to these networking events, it is a very burdensome thing to do.
Darin: There's a little bit more congestion there.
Hunter: I felt like my time would be better off spent sitting in silence than going to most networking events. I'm not saying that derogatorily to myself or anybody else, but like the quantum. This business and entrepreneurship in general, it's all about making quantum leaps in your business. You don't want to plug along and give yourself a 3 or 5% raise. You can go do that in corporate America.
The Quantum Leaps of Raising Capital for Real Estate
Hunter: But if your goal is to really grow and to create something impactful not only for yourself but for others as well. All the way from your tenants all the way to maybe the next generation or even the generation after that. You have to have quantum leaps. The concept of the $2,000 idea is basically going in with a minimum requirement. If I'm going to take an evening to go to a networking event, I've got to get at least one $2,000 piece of contact or content or relationships or thoughts or concepts, etcetera.
Now we can have a $2,000 night. Your number may be different based on where you are in your career. But especially back then, I needed to go in with the mentality that where is my $2,000 a night? If I can have $2,000 a night, then it'll definitely be worth my time. I'll give you an example. What person can I potentially partner with? Maybe if it's not directly a partnership with them, maybe they could introduce me to someone.
What is a software that I could use to conduct due diligence? Who is an attorney that I need to know that could potentially create my next legal document? What are some strategies that are more advanced, like constantly leveling up your game. Because if you go in there thinking I paid $30, I just got to get my money's worth. Your time is so much more valuable than that $30. You should be outsourcing $30 tasks in exchange for $1,000 tasks.
A Game Changer in Raising Capital for Real Estate
Darin: I really liked that idea. And I thought about it in terms of, how do I do that and how does that concept apply to my life in different events. I tell people, sometimes I'll pay to go to a speaking conference. There might be eight speakers and the first four speakers I'm like, waste of time. Then all of a sudden, the fifth speaker says something and I'm like, holy cow, what a great idea. If I take that and apply that to my business, that's a game-changer. You have to sift through a bunch of maybe non-value items, but when you get that nugget, that's just huge.
Hunter: I love it. I was just literally closing my eyes. What you're saying is so powerful. Because of the fact that we're living in an age where the information is not the X factor. Everyone has access to it. We have great shows such as yourself that maybe even didn't exist a few years ago. Now everyone knows the playbook, the template, the terminology. Those tools, which are readily available, therefore are no longer the X factor. It’s what you can extract from those conversations and how you can apply it to your own business.
That is a really powerful concept and here's why. In that example you mentioned where you're at a seminar, and there's eight speakers. You're in the room with hundreds of people and they're all getting the same information. But what percentage of those people are going to go and revolutionize their business because of that seminar? Probably 1%. Meaning, if you're in a room with 500 people, five of them are doing what you're doing. Just going, "Where's the value, where's the value, where's the value?"
Gamifying the Process of Raising Capital for Real Estate
Hunter: When you can gamify that process, it makes you always listening all the time. Does that make sense? If you're not gamifying it, you can check out easily and go, "This guy doesn't know what he's talking about. He's boring, or whatever. He doesn't apply to my business, et cetera."
One way I found to kind of maximize that is to even gamify those moments, and this is like the ultimate X factor. If you find yourself thinking, I don't invest in fix and flips, which is true, I don't. If I'm going to a networking event and I start to meet someone and they explain, well, I do hard money loans. I do fix and flips, et cetera, and I loan to wholesalers or something like that.
It's very easy for me to go, what do we all say? "Well, I got to go to the bathroom, I'll see you around." You walk around for several minutes and you don't really do anything. What I like to do is listen and try to extract who I could contact this person with. Who can I connect this person with that'll ensure that they have $2,000 a night? So what ends up happening, I'll go, "Yes, I'm a wholesaler and I work in Orange County."
If I hear someone that's into hard money loans in Southern California, boom, there's the contact that makes it happen. Why this is the X factor is not just because it's fun to do nice things, which it is. It's not just because it makes you listen to what other people are saying, which makes them much more engaged. It is when you make that connection, there's a reciprocity that exists on both ends.
Building the Momentum You Need in Raising Capital for Real Estate
Hunter: So now they're trying to make you have $2,000 a night. But it's even both of them and it's even stronger because you already gave them the gift of that connection. So what happens after that is that the next time you walk in that networking event, you are famous.
The new people that don't quite know you yet, they recognize that you're the famous guy that's so good at knowing everybody. Then the momentum just starts to grow. It's exactly how I built my career going to networking events.
Darin: You said something there that I didn't even catch from the book. It's not only that you get reciprocity from the first guy, but you took him and introduced him to somebody else. Now you have two people that want to give back to you. That's massive. You mentioned meeting somebody, and I remember reading in the book that you flew into town to meet him.
Somebody said, "Hey, you got to meet this guy," and you flew into town and went and met him. That kind of changed your life. Can you share that story, because I think that some people, they don't see the value in meeting somebody that can change their life.
Hunter: It’s funny you just said that out loud, isn't it?
Darin: Yes. Or they don't see the value in themselves. They're not where they think they need to be. Whatever the case may be, they're basically limiting beliefs. Tell your story because I think it's key. Everybody is just one person away from really opening the door.
The Advantage of Attending Events
Hunter: It's been a while since I've gotten to talk about the book in detail like this. I appreciate the opportunity to do so because I'm really proud of it. And I have a high standard for my kind of output, but what you're talking about, it's so powerful. There's an interesting tie into a recent story that just happened.
But basically, I was going to networking events. During COVID, this has kind of slowed down, but it's about to open up in a big way. My wife is in the event planning business. These things are coming back with a vengeance in the next coming months. I started going to events and I met someone at an event that was investing in and purchasing and operating ATM machines.
I quickly became very interested in it. There's a lot of nuances of the business, which we don't have to get into now. But it's an asset class, which is depreciating. There's a technology risk. The cash flow is very high. Usually it's unleveraged, very predictable cash flow, just nuances there that I really liked. You don't sell the asset at the end, so you're not really dependent on market dynamics.
It's all about cash flow, very interesting play. I was like, "Okay, forget real estate for a moment. Tell me about your network, your business. How'd you get into this, how'd you finance these? Who was involved in raising capital for these?" He said, "If you're interested in these more niche kind of recession-resistant plays, you should meet this individual named Jeremy Roll."
Jeremy's a guy who if you haven't had him on your show yet, you should certainly. I ended up going to a meetup with Jeremy and very quickly I recognized that he and I saw the world.
Counter-Cyclical Recession Resistant Capital
Hunter: Particularly the investment space, very similarly. He's very risk-averse. Very focused on counter-cyclical/recession-resistant assets, mobile home parks, and self storage. He had just thought these things through to a larger degree than I had. Because he'd been in the business for about five years full-time before me.
What ended up happening was as soon as I started to build a relationship with him, I reached out. I said, "Hey, look, I want to be in your position as quickly as possible. I want to build a business that's kind of similar to yours in terms of your passive investing strategies. If you're interested, I'd be an intern for you, $12 an hour. That'd be great, whatever." This is the key. It goes back to what you mentioned about the book.
He said, "Hey, I think you're great, but I don't really have a lot of menial tasks to do. All the tasks I do are super high-level tasks. I don't need your help with those tasks." And I was like, I met the right guy. Going back to the fact that I didn't want to build some massive business which required all this overhead and all these employees. I wanted to build a business which was focused on passive investments.
That's the whole key. It sounds like an infomercial, but it's true. If you're in a passive investment and the operator knows what they're doing, you're just supposed to get checks. Now it's not even checks, it's electronic deposits directly to the bank account. He had set up a business like that. I can talk about the details of how that relationship evolved, but Jeremy is an influential person in this space.
Hundreds of Investors Secured From Raising Capital for Real Estate
Hunter: He was very patient with me and was willing to schedule bi-monthly calls with me to kind of outline his investment thesis. That started in 2010, and we have done these calls at least once a month for the last 10 years. He watched me go from really struggling to raise my first half a million dollars. Now we've raised more than $50 million all from accredited investors, not one institution or family office.
So we didn't go out to one company that gave us half of that. No, it's hundreds of investors all over the country. And because of that, we've purchased at least $100 million worth of real estate directly. I've also purchased another $50 million of other assets that are not real estate.
Darin: That’s fantastic. What a ride. There are two things I want to talk about related to your relationship with Jeremy and mentors in general. Some people have limiting beliefs like, why does that person want to help the next guy? Can you talk about that? My experience in people who are successful, if they find the right people that have drive and passion, they just genuinely want to help.
They don't want to waste their time, but if they find somebody, it just sparks. "Hey, that was me five or 10 years ago. I want to help this guy." But some people think that you can't find that person. Talk about what's in it for Jeremy being connected to you.
Hunter: Something that I've found in this business is that successful people are very busy people. By their nature, they're busy. So even Jeremy, who said he didn't have a need for an intern, for example, still his time is extremely valuable.
Inspiring the Investors
Hunter: Hundreds of dollars an hour, if not more.
If you're trying to get someone to give you the one resource that they can't make more of, you have to really inspire them. That inspiration from my perspective comes from momentum that is self-created.
Meaning, if you can paint the picture that you're going to go 150 miles an hour with or without their help, but with their help perhaps you could go 160. Then later on the road, they could attribute a lot of their success to you. That's a very compelling thing.
Now, I'm not saying that Jeremy did all that math. I think he just liked me intuitively, we saw the world similarly. He saw this person is going somewhere. This is worth my time. It's worth the investment to later create something great down the road. That did create something fantastic for him down the road. We've done millions of dollars of deals together. But that's how you do it.
You show that if you have the opportunity to let's say work with a mentor and they say, "I'm kind of interested in the relationship between interest rates and cap rates." You hear them say that in offhanded conversation. If you just go all in on trying to listen to every podcast and interest rates and cap rates, listen to economics on interest rates and cap rates in articles and so-and-so.
The next time you talk, you go, "I've been thinking about this a lot too, and this is what I think now. I think most people probably think that there's an inverse relationship with interest rates and cap rates. But if you actually look into the data, there seems to be more of a correlation."
A High Demand for Excellence
Hunter: "The lower the interest rates are, the lower the cap rates are, but it's only over a 12 month period. In the short term, there can be these divergences." It's like you went from not knowing about this topic to being obsessive on this topic, and with a high demand for excellence quickly.
Those are all the makings of a successful person. You can even tie that into a personal story where you can even show what's on the table with your success not only for yourself but for others as well, how can I not help you out if I'm in a position to do so?
Darin: That's a great point. I love that you said, inspire them because that's it. This is going just like human nature. It's like you need to just connect with somebody and inspire them. I agree with you and I want to add something to it. If he talks about interest rates and cap rates, you have to be authentic to yourself and you have to be you.
If that topic is not something that you're passionate about or that part of the industry, he's probably going to see through it even if you do all the research. So find something that is part of you that's authentic and then go all in on that and connect with somebody that really loves that.
Hunter: Even before going into that type of relationship, I want to be very dialed into who that person really is. If I can see them and I working together for the next multiple decades to come. People always talk about getting mentors and you can be mentored by people that don't know you directly.
An Asymmetric Relationship
Hunter: You can have an asymmetric relationship with your mentors. Think about Robert Kiyosaki, for example. That's a book that I'm sure has come up on pretty much every single interview you've ever done. Yet Robert Kiyosaki likely doesn't know most of your guests. So that's one thing.
But when I'm talking about the mentors that are in your life, you want to have one or two in your whole life that are your professional mentors. Think about it with that kind of care when you go into those relationships. The closer the proximity of what they're doing in terms of what you see yourself later down the road, the less likely it is that those situations are going to come up. Where they're asking you to do something that's way outside of your area of expertise or interest, you can be yourself more reasonably at that point.
Darin: That totally makes sense. So you built a business on raising capital, and this is funny. Tell the goose egg story.
Hunter: The goose egg story is really a story that's happened many times in my career. It just started to matter less and less. It’s also a really important lesson for entrepreneurs, particularly real estate entrepreneurs. As I mentioned, I started building up a track record with my own personal capital. Investing passively in some pretty advanced operators starting in 2011.
By 2012, 13, 14, I started to grow some confidence and started bringing in friends and family additionally; my mom, my sisters, my aunt, et cetera. Around 2013 or so, I decided to create my first fund of funds. Like a formal syndication where I'm the owner of the fund. But don't be confused.
A Special Vehicle for Raising Capital for Real Estate
Hunter: Just because we use the term fund, it doesn't mean it's a multiple property opportunity. Just the typical vernacular in the investment space. It's called a special purpose vehicle, there's a special purpose. That special purpose is to only invest in another deal basically. In this case, it's someone else's deal.
The reason I wanted to do this is that there's securities and laws around how you can be compensated and such. I didn't want to partner with a new team. I wanted to partner with a very savvy advanced team, but they had no real need for me.
They're in the middle of a $20 million raise, I'm thinking, maybe I can raise a half million. They didn't want to make me a formal member of the GP. What I did was I went to them. I said, "Hey, instead of me trying to be a member of the GP to avoid these broker-dealer challenges, why don't we do this?"
"I'll invest a minimum of half a million dollars in your deal, which is probably about 10 times what you're normally getting. And because of that, let me get a more favorable waterfall structure. So instead of an eight pref, I'll get a nine pref. Instead of a 70/30 split, why don't we do an 80/20 split? Something similar to that. And then at the SPV level, I'll take 10% of the deal."
So the investors in my deal are getting the same economics as if they had gone direct, and I can still basically get 33% of the GP if you can make sense of those numbers. Because I'm keeping the additional 10%. Does that make sense?
Darin: It's very smart.
A Strategic Partnership
Hunter: Appreciate it. I went ahead and did that. But the whole point was that this was only economically viable or interesting to the sponsor if I could raise a half a million dollars. Which to me was going to be no problem because of what I have. I had a track record with my own personal portfolio, I had friends and family investing. And I had an operator. I was not relying on my expertise. The fact that this would be my first fund was inconsequential.
Because this group is buying 100 millions of dollars of properties a year and has been doing so for five years. So it wasn't a Hunter Thompson show. It was all about this strategic partnership that I had created. We all have different strengths and weaknesses. One of my strengths is being able to communicate complicated ideas effectively. So put me in a room with people that have money to invest, it's on.
I basically sent out a letter to several of my friends and family, like high net worth individuals. They could even invite their plus ones, plus twos, and I had lunch. I got as many people to come to this lunch as possible. They had to be accredited investors. There's about room for 20 people at this lunch and 30 people showed up. All were accredited, all had a net worth of at least a million.
Darin: You're feeling good at that point.
Hunter: Oh yes, it's on. It's a standing room only. I texted the person who was my friend at the time that is now my wife, Chrissy to basically kind of preemptively celebrate this is going to happen. Not only am I going to raise a half million, I'm going to raise a million. And it's on.
Getting Your First Million From Raising Capital for Real Estate
Hunter: Like once you get to your first million, everybody knows you can compound on that. Then you've got a great career ahead. I went into this room, gave a presentation that in all sincerity I would give today.
It was a very good presentation on a very good asset class. Keep in mind, we're talking about the mobile home park business in 2010 or 2011 where they're trading at 10 caps. If you bought them with no debt and did no value add whatsoever, you're getting a 10% return. I'm presenting in a room full of people that have most of their money in a CD or worse. So this is going to be a landslide.
I gave a presentation, I handed out a piece of paper to each attendee and said, "Write the number that you're interested in investing. Fold it to keep it private and hand it back to me." I gave them some food, told them goodbye, thanked them for coming. Went up to my room, unfolded the paper to count everything, and I had raised a grand total of $0. Nobody. Actually no one even wrote anything.
No one wrote, "Hey, I'll think about it. I'll call you later. I've got some questions." No, there was not a pen to paper that took place after that presentation. First of all, I was emotionally completely destroyed.
The financial implications are one thing, but just the sheer embarrassment of you moving out to LA. Everything's going well, you're doing these investments and you're a real estate entrepreneur too. Yes, you raised capital. How much have you raised? Goose egg. Well, you can't raise less than that, so it couldn't be going worse.
When You Get a Goose Egg From Raising Capital for Real Estate
Darin: I got to tell you when I was reading that story, I was expecting it to be a big number. Then all of a sudden you ended up with a goose egg. I was like, oh no. But you kept going.
Hunter: It was a really important learning lesson. I took about six months to recover from that emotionally. And I'm being serious. I almost didn't move on with my career at that point because I envisioned how I thought this was going to go. I came from a great family. I'm from the United States, I have access to the internet, I was able to reach out to people in country clubs.
I had everything that you could possibly imagine for someone getting into the world of capital raising. And I fell flat. So, what did I do? What most people do when they fall flat in a capital raise. They think it's them, they think they failed, they think it's not for them. And they think it can't be done. Then they start making excuses about why other people could do it and not them.
I recognized not only do I want to chase around investors and try to convince them. I never even want to present in a room with only 30 people or even only 30 million again. For the last 10 years, I've built an infrastructure to attract hundreds of thousands of people.
Capture thousands of emails and nurture them through automated sequences through internet marketing, et cetera. Marketing tactics generally that are very intentional. And now, we've raised tens of millions of dollars from hundreds of investors.
Darin: What was the big lesson learned?
Super High Buy-in Moment
Hunter: Number one, I don't want to try to convince anyone to invest with me. Since writing the book, I've kind of thought about this even deeper. I think that the movie Inception has a lot of really important true takeaways. One of them is that ideas that come from within, our own ideas are so much more powerful than those who feel like they're planted in our heads.
Especially for us weirdos who at some point, decided the mainstream way of blank AKA insert the most important thing in the world. Either money or religion or politics or education, everybody listening to this probably has some very unique ideas on all those things. We recognized we had been lied to and we figured out the way for ourselves. But on the route to figuring out that, we had that super high buy-in moment.
So what's going on is that we had that super high buy-in moment about real estate. What we're trying to do is to do exactly what all those people that lied to us about everything are doing. We're going, "Hey, get in a room. Guess what? This is the truth. I'm smashing you over the head, your financial analyst is an idiot." You're just doing the exact same thing everyone else is doing.
What we're trying to do is to put ourselves in a position so that our marketing allows people. Number one, people that are attracted to us that have already taken the red pill. Or are going through the matrix and we want to get them in a position so they can uncover these truths for themselves as opposed to force it down their throats. And I can give you some examples of that. That's such EMO marketing.
A Great Group to Pursue When You’re Raising Capital for Real Estate
Darin: To summarize, like you had it in the book. You were like, I'm going to focus on people that are trying to find out about real estate investments and investing in real estate. Instead of trying to convince somebody that has never invested in real estate. Haven't made the personal decision themselves that they're even interested in that. You started going after a group of people that were in search.
I thought that made a lot of sense. There's still a ton of people out there that are accredited investors, that have money, that have interest in real estate. But they just haven't been introduced to the right people or the right know-how. I think that those people are still a good group to go after. But the people that are leaving their money under their bed and for 30 years have kept their money in an interest bearing account is probably a harder sell.
Hunter: 100%. It's a really important kind of conversation. Because if you're trying to convince someone that they should take a percentage of their portfolio out of this thing that's probably generally been working kind of well. I mentioned that I was talking only to accredited investors. These people are people that have generally done quite well in life, especially financially.
Now, it may be that they're not using all the tools that you and I would advocate that they use. But why would they risk it if they're not really, really bought in? So what you're trying to do is have a pseudo-religious experience for these people in like a 30-minute presentation. Looking at it through that lens.
The Conversations You Need to Have
Hunter: Of course they didn't move forward with someone who's relatively young that hasn't had the type of success that they had had at that time. It's just not going to work. But I don't ever have conversations like that anymore, because of the things that I outline in the book.
Attracting your dream clients, creating webinars and articles and touchpoints and interviews such as this that can be repurposed, reused over and over again without taking my one-on-one time. If I ever get to an opportunity where I talk to an investor, their beginning of the conversation sounds like this.
"Oh my gosh, are you the Hunter Thompson? Are you the guy that I have been listening to for the last several hours? You're the guy who I've read your book, I've read your articles, I've seen you all over the internet? Well, that's amazing."
It's not about, well, now you convinced me to invest with you. No. If I talk to an investor, the thing they want to make sure is that I actually am who I say I am. That the wire instructions are what they say they are. I know that sounds like an infomercial, but it's taken me 10 years to get to that point. Now we have things that on paper seem ridiculous where a few months ago, someone sent me a wire for $620,000. We didn't even have a phone call.
They had sent me another wire for another $620,000 three months before and we didn't have a phone call. So that's what can be created if you focus on the marketing side of the business. It's a really important segue to what we were talking about at the beginning.
Raising Capital for Real Estate Requires a Different Skill
Hunter: That capital raising is a different skill set than operating real estate, raising money is about the top of the funnel. Raising money is about attracting attention, nurturing that attention. Then turning that attention into $100,000+ repeat investors. That's a very different skill set from underwriting assets.
Managing property visits, talking to brokers, which by the way I do, but it's important to be known in this space. Half of my time is focused on real estate, half my time is focused on the side of the things of marketing. It's a really good mix when you have a partner who's only focused on operations. It is what we do when we have our partners and strategically partner with them.
Darin: I really like how you structured the economics such that your end customer, the investor that's investing with your company, you're putting that money into another deal. Had that person gone direct, they're getting the same economics. How do you protect and nurture that relationship? I'm an investor, I invest with you. Now you put me in the XYZ deal and now I'm like, next time, I'm just going to go to XYZ. Even if the economics are the same, there's a piece that says, well, why deal with the middleman?
Hunter: I'll give you some tactical answers, but I want to give you a framework to view this. Because it's much more powerful than the tactics as always, by the way. Goldman Sachs, JP Morgan, a lot of private equity companies, they don't own and operate real estate. They act in a large capacity just like the structure that I just outlined. But you know what the difference is, the marketing.
Who the Investors Go to and Choose to Deal With
Hunter: We have co-invested alongside multi-billion dollar real estate companies that are doing exactly what we're doing. It just has more zeros, meaning that they recognize the opportunity as well. They have some other partner that has a great deal flow in Texas, for example, they don't have the deals in Texas. They’ve split with an equity partner.
They split with an operations partner and we have a great partnership. This is happening all the time. So number one, the economics aren't necessarily less favorable. But number two, and this is also really powerful, is we start to feel like we are in this echo chamber. That everyone is like us.
No one is like us is the reality. Remember that presentation I gave where everyone had their money in the CDs and such. That's the reality of the 12 million accredited investors in the United States right now. They’re overwhelmingly not nearly invested in real estate as they should be.
They don't even know about these types of deals, nor do they want to. They’d much rather defer to your expertise, defer to your strategic partners. Defer to you flying around the country looking at these properties.
Do you think my investors want to go and do a mobile home park property visit all across the Midwest? No, but I've done a couple. They would much rather not. Even if the economics weren't as comparable, then they would certainly want to defer to my expertise. Are there going to be investors that, as you work your way up in terms of scalability?
Tactical Ways of Raising Capital for Real Estate
Hunter: As you get further and further away from your friends and family that are going to be inclined to do such a thing. Yes, there's tactical ways you can work around it. By the time you grow to that level, by the way, you'll have overcome those things in different ways. As an example, we no longer do a lot of those types of deals. I am a registered representative and I have a series 22.
I can actually tell people, go invest with them. The them in this scenario can pay us a placement fee, a percentage of the GP. They can pay us whatever they want because we're licensed to do so, though that's not the exact correct terminology.
We have the registration with the SEC to do so. I am also a sponsor for deals where I am not just a capital partner, but truthfully involved in the operations side of the business. The reason for that is that these are tools and I want to make money the same way that everyone listening to this wants to make money, every way I can.
As long as it's favorable for the investors over the long-term, I have found the fund of funds model is a great model. The placement agent model is a great model and the direct sponsor model is also a great model. I want to do all of them.
Darin: You did quote Warren Buffett's, buy when blood is in the streets. You quoted that in the book. When I think about last year, COVID hit. Multifamily held up pretty strong but everybody was pointing to hospitality and office and retail as like tanking.
On the Brink of a Great Opportunity
Darin: I'm in the midst of trying to book my family vacation and I'm telling you like resorts are at capacity. Nightly rates are through the roof right now. So hospitality has come back. Travel is back. My question is, did you or anybody that you know invest when blood was in the streets in hospitality and get in at really good valuations? I'm just curious.
Hunter: My network mostly consists of people that have a very similar perspective on investing than I do. There's so many takeaways for this. First of all, our investment thesis was that our asset classes, mobile home parks, self storage, not office; mobile home parks, self storage, multifamily apartments in particular would hold up well during recessions, and also ATMs.
We ended up doing quite a bit of ATM capital as well. We paused and I sent out an email to our investor base saying we could be right on the brink of a great opportunity. I've been through this once before with 2008, and this requires a lot of strength and courage. But it could be the kind of thing that could be in a great position. But guess what happened? That opportunity did not come.
The distress did not exist. In fact, there was a real fall-off in the volume of transactions because collections were high as well as unemployment. Buyers and sellers could not meet in the middle to a large degree. No one could make sense of it, which is fine. But where you did have distress, this is so true today. In 2008, it wasn't the way most people think it's going to be. It's not the way the stock market works, for example.
Raising Capital for Real Estate in the Peak of COVID
Hunter: I made a significant investment in the stock market in the peak of hysteria COVID, March, 2020, 30% reduction. I put in what I would typically put in a real estate deal into the S&P 500. It is something I hadn't done in 10 years. But that's not how it happens in real estate. For example, in retail, which I had been talking about for years. Because I felt like there was a disequilibrium between the mainstream media's take on the retail apocalypse.
The reality of most grocery-anchored retail centers in the United States with tenants like Dollar General, mixed martial arts studios, and pizza places. This is unrelated to the Amazon threat. I was kind of talking about that publicly but not necessarily making investments because we just didn't find the right deal. Part of that was luck, but we're very cautious about where we invest, especially in a space with those question marks.
However, when the real retail apocalypse happens and the government says you can't go into retail stores, then it's on. Then it's really the distress. But what happened? Could you just go out and buy a retail center at a 50% discount? No, not unless you're going to buy it in cash. You know what I mean? So like that's the reality of the market when it comes to real estate. You don't have to be the first at all.
This moves like a barge. That's the whole point. To answer your question about hospitality, I don't want to be in sectors that experience those types of boom-bust cycles. The whole point of our thesis is to avoid that. So anytime someone goes, there's a great opportunity and blank.
Raising Capital for Real Estate That Offers Asymmetric Returns
Hunter: If they're right, I don't want to participate. Why do I want to expose myself to those types of risks of asset prices? When I can achieve a mid-teen type of IRR in an asset class that's historically held up exceptionally well during those types of corrections. Why in pursuit of a high teen IRR will I drastically increase the likelihood of foreclosure? That is a back of the napkin version of the name of my company. The name of my firm, our private equity company, is Asym.
It's short for asymmetric, as in asymmetric returns. Without going into a whole Excel model, if I can predictably produce something in the 12 to 15 range. If you put that in a financial calculator, you're talking about significant wealth creation in 7, 10, not to mention 60 years. So from my perspective, it's not worth pursuing those extra 3% per year when every decade you get hammered.
Darin: From your perspective, it's just a focus that you guys won't look at. You won't go outside your focus because why would you for the small incremental benefit to it. Now, if there was true blood in the streets. It could be more than two or three interest basis points per year.
Hunter: That's 100% true. Let me add one thing though because it's just that those asset classes are less susceptible. For example, in 2008, valuations in mobile home parks were very much hit. But we're not super concerned with valuations if we have appropriate debt financing in particular. If we have a valuation which goes from a six cap to a 10 cap, which is kind of what happened.
An Opportunity in the ATM Business
Hunter: But we're chugging along at 90% occupied, we're just going to keep chugging along unless we're forced to refinance or sell at that time. For whatever reason, which can happen only with that kind of debt. The other thing though is that we're not completely blinders on when it comes to our investment thesis. It's just that that's the thesis and the percentages are tweaked.
Recently we have found an opportunity in the ATM business. I am finding it very hard to compete with this type of opportunity. And so the ATM percentage of my personal portfolio as well as the opportunities we've made available recently is overweight to ATMs. I think in two years, ATM play will probably be gone because there's no way it's going to continue the way it is. And we're going to take advantage of it.
Darin: That's the value of going back to the question before in terms of risks that an investor would go around you. But if you're continually out spending your time investing in opportunities, introducing new opportunities that they see valuable, they know if they go around and they've just burned that relationship and they're going to miss those other opportunities.
Hunter: Exactly, 100%. It's something that we just really haven't had much of a challenge with because of the favorable economics. Because of the great terms, but also we have a bit of expertise in the business. In terms of that due diligence process, we take it very, very seriously. And because of our unique positioning in the space, we're well-positioned to deliver that. Most investment firms don't really have a spectrum of what's out there in the business.
The Hot Markets Today
Hunter: They're only focused on what their niche is. We're well-positioned to say in the industry as a whole, "This is what's out there. This is what's favorable and I'm not biased." I'm only biased based on my own thesis, which is very different than most operators. So if I say there's an opportunity in the ATM business, it's because I mean it.
Darin: What about geography? Are you focused on just certain markets? Or you can move to different markets as well because Texas is a hot, hot market right now. But three years from now, maybe it's not and some other market is hot. You have the flexibility to pick a partner in Texas now. Then three years from now pick a partner in whatever other geography is the next up-and-coming area.
Hunter: That's the whole point. We want to be able to be nimble and be sponsor and investment thesis and geographic location agnostic. Because we don't want to have our internal biases impact our investments. And we recognize that human beings are, by our very nature, we look for confirmation bias.
We look for, “I knew I was right the whole time. I know it'll work in Florida because I live in Florida.” It just happens to be that Florida is the best market. That's what the nature of human beings is. We don't invest in California. I live in California, and that alone should tell you a little bit about our strategy.
Darin: The other thing is that, I've heard this over and over from syndicators. I would believe it falls true for a company like yourself as well. That, look, I invest money with you and you give me a very, very attractive return.
A Loyalty and a Referral Network
Darin: Then somebody tries to convince me to go elsewhere. I'm probably like, why would I do that? Like this guy did what he said he was going to do, I trust him and I'm going to look at his next deals. So there becomes a loyalty and a referral network that happens from other people that have positive success with you.
Hunter: Referrals have been a huge part of our business and we've experienced tremendous growth because of that low-risk upfront, putting ourselves in a position to deliver, et cetera. Then of course we've had assets and we've done quite a bit of deals. We've had deals that have underperformed on cash flow, but then are sold at a really favorable valuation and everything in between.
It's really how you manage those more challenging deals where you actually learn a little bit about yourself. If anyone's going through something like that, it's the mark of someone who's starting to get us some experience in this industry. So just keep it up.
Darin: Your book is focused on raising capital. Your business is focused on raising capital. For a lot of people, that's the scariest part of syndication, like, oh man, I gotta go ask people for money. So you talk about the prize. Talk about that because that's so important. It's mindset, how you view your mindset with regards to raising capital for a deal.
Hunter: First of all, if you have the opportunity to get on a call with an investor, for example. A lot of their decisions are going to be made within the first five to 30 seconds.
Raising Capital for Real Estate From Reinvestments
Hunter: Or at least, many of the decisions they'll make within that time period will likely dictate how the rest of the call goes. If that's an investor call, that can mean the difference between $100,000 being invested or it not being invested. In fact, it can mean far more than that, because like we were saying previously. If you had the opportunity for someone to invest with you, it could be the case that they'll reinvest with you over and over again and potentially refer their friends.
In the book, I talk about the first five and 30 seconds being really important moments. Number one, scrub the neediness from your voice and your tone immediately, prior to even the call starting. But more importantly, I want to recognize before I get on a call with them that there are trillions of dollars in the world invested in negative interest rate bearing bonds.
It is not just me and BiggerPockets and Darin. We have a macroeconomic situation where the United States real estate is one of the most favorable investment vehicles in the world. In the history of the world as well for all the reasons that we can get into, but you have access to these deals. You have access to what they want.
Recognize your deals are going to get funded. Even if you're needy now, you've got to wipe it off your personality. That's the number one thing that can kill deals. When I get on a call with someone, very quickly, especially when I was just getting started. I want to make it clear I'm going to set the pace of the call.
Things Investors Want to Know
Hunter: I'm going to tell you when the call starts, when the call ends. And I'm also going to give you an agenda. It's not something where I'm just trying to be super aggressive. I'm just trying to make them know a couple of things. Number one, I've done this a bunch. Two, I have other investor calls that I have to get to. Three, you're not going to be droning on and on for an endless pitch. Those are all things that most investors want to know. I'm just making it much easier for them to do that.
Example, when I get into a call with someone, it sounds a little bit like this. "Hi, this is Hunter with Asym. How are you?" "Good." "Hey, good. Hey, listen, I've got us blocked from 12:00 to 12:30 today. So if it's okay with you, I'd like to hear a little bit about your background. I can tell you a bit about my story, then I'm happy to answer any calls you have, but I do have to run at the end of our call at 12:30. Sound good?" "Good." "Okay, great. Tell me a little about your background."
There's so much communicated in that short little time. If you haven't started doing that, start immediately. It'll drastically increase your close ratio and make your calls go much easier. But one of the things that's really important, of course, establishing the time block is one. Two, establishing the agenda. Three, asking them to describe their background in the industry or their interest in real estate generally. So that you can get a framework for how to communicate during the rest of the call.
Raising Capital for Real Estate From First Time Investors
Hunter: Because if I get on a call with someone who is contemplating making their first investment in a syndication, my response is going to be very different than if someone has made 20 investments in syndications with five different operators. They're thinking whether or not I should invest in my deal or some of my competitors' deals. Should I be talking about debt service coverage ratio? Or, should I be talking about market dynamics?
Should I be talking about the difference between mobile home parks and self storage and whatever they're investing in? Probably a little bit. The reality is, as much as we feel like the tactics and the specifics of our deals are what sells the deals. Anybody that's experienced in this industry knows it's all about the relationship. Setting that call-off on the right foot is far more important than the population growth of your market, for example.
Darin: Anybody that's having investor calls, that's great advice to structure a call quickly upfront. The other thing that I would say is you're presenting an opportunity. You're not asking them for money. It's a mindset thing where some people are so afraid of, how am I going to get the money?
Look, Hunter talked about it. There's trillions of dollars that are at negative interest rates. This is an opportunity for them to make 10 times what they're making now. If they pass on the opportunity, so be it, you move on to the next person. But there's plenty of money out there that wants to find homes for it. That goes to Hunter's advice in terms of getting the neediness out of your voice.
The No-Pressure Presentation
Darin: If you feel like you need $2 million to close your deal, it's going to be heard. Versus, "Hey, I'm presenting this opportunity. I'm extremely excited about it. We'd love to have you on board. But if it doesn't work, then we'll catch you on the next one." All of a sudden the guy's like, "Oh, he didn't pressure me. He's going to do the deal with or without me. Do I want in?" It's a little different. Our time is starting to come near the end. What do you do for fun outside of work?
Hunter: Not a lot, but I like to lift.
Darin: Come on, there's got to be something.
Hunter: Right when COVID happened, in California it's been particularly pronounced where the lockdowns have been long standing. I think till today, as of the recording of this is June 15th. The first time that we're allowed, at least from the government standing, to not wear a mask in private businesses. Working out is really important to me.
When the gyms closed, my wife and I moved to the suburbs very quickly and moved to Sherman Oaks. Got a place that the previous owner had built like a literal home like my dream gym. Like if I had a net worth with three more zeros in it than the one I have today, my gym would be exactly the same gym. That's my dream kind of situation. So that's been incredible. I really do like lifting and running.
I'll make a quick claim to fame. By the way, this is really important from a marketing standpoint, but also from an athletic standpoint. You should create a niche that's so small that only you're in it.
A Critical Marketing Technique When Raising Capital for Real Estate
Hunter: All of a sudden, you have no competitors. If someone's interested in the topic, they have to go to you. That's what I've tried to do regarding raising capital. The same thing is true with athletics. My claim to fame is that I'm probably one of not a lot of people that has both a 3:10 marathon and a 415 pound deadlift.
No one has those two things, not a lot of people focus on those two things. I did run one marathon, I ran the LA Marathon last year. That's an average pace of 7:15/mile. Then in the same year I had a 415 deadlift. So there you go. There's your kind of little hack, and there's a huge positive obvious crossover between athletics and entrepreneurship.
Darin: Anybody that runs a marathon, no matter what speed, it tells you that you're dedicated, that you can persevere, that you're determined. I have not done one. People that I know that have done one, they're all people that I admire for their determination to make it happen. They usually carry that forward into other parts of their life. If somebody wants to reach out to you, what's the best way for people to get to know you?
Hunter: You can go to raisingcapitalforrealestate.com, and you can actually pick up this book. This is my life's work and it's free plus shipping offer. I'll actually pay for the book. The books exist. I already bought them. All you gotta do is pay for the shipping. So it's like $7.99 to ship anywhere in the United States. And there's a ton of great goodies on there. There are several interviews.
A Self-Help Book About Raising Capital for Real Estate
Darin: If you're looking at YouTube, you can see the book. He just showed it up there. But I bought it on Amazon for 20 something bucks. I got a ton of value from it. I'm excited that he's offering it up here for $7.99 to the listeners. So I would recommend anybody that's looking to raise capital for their deals in real estate, it's an awesome resource. So raisingcapitalforrealestate.com. What's the next big stretch goal for you?
Hunter: It's kind of interesting. When I wrote the book, at the time, I had only raised about, not that this is a small number, but I'd raised about $30 million. Then I think we raised about $15 million over the last six months, and we were very slow to do deals in 2020. I've now raised $50 million. In the book, I tell a story about someone who had raised $100 million, and at the time it was like this insurmountable figure that I couldn't really comprehend even.
Now it's very clear that that's very much on the table. We'll probably raise somewhere around another $30 million over the next six or seven months in 2021. That's not because we're pushing the needle. Very much the opposite of that. We've built up quite a bit of capacity, now it's just a matter of finding strategic partners. More specifically touching the strategic partners that we've created over the years. Just instead of taking down 30% of their purchases, taking down 100% of their purchases.
Darin: You gave the book website, is there a website for them to reach you as a company as well?
Hunter: Asym Capital is the private equity group, and that's A-S-Y-M capital.com. And we likely have an opportunity available depending on when you send this out. I'm very bullish on the ATM space, the mobile home park business, self storage, and senior living as well. Make sure to check out that, especially if you're an accredited investor.
Darin: Hunter, I really appreciate you coming on. Listeners, I hope you enjoyed that one. Reach out to Hunter, get his book and until next time, signing off.