All Forum Posts by: Bryan Hancock

Think of participating as a co-GP as an apprenticeship program.  They're helping to attract the capital through their track record and you're helping to help them leverage their time.  Then you learn the ropes first-hand and can later say your attribution as part of the overall venture was whatever it was.  Then on the next deal it is easier for you to attract capital and the next deal is less risky for your investors.  Everyone wins.  

Nice list @Don Konipol

Regarding the roadmap I would argue that having a plan you can follow that is measured and tracked properly helps a great deal too so that you're having the right conversations with the right people at the right time.  The right time is generally well in advance of when the capital is needed to help foster the relationship.  

I went to IH-35 in Round Rock during the day yesterday for the first time in a while and it was PACKED.  I've lived in Round Rock since 2007 and in Austin most of my life and have never seen the traffic that bad in Round Rock without an accident.

What would help a lot would be to understand how large these projects are and whether or not you're open to starting a fund.  Regulation A+ (Title IV) could be used to provide for transferrable shares, which would probably make more sense if you were starting and maintaining a fund given the overhead in the filings and audited financial statements.  

Financing long-term liabilities with short-term financing is a really good way to get yourself in trouble so I would not recommend doing this.  It seems a lot easier to solve the transferability issue for the shares instead of trying to shoehorn a non-transferable share structure into your deal type with the exemptions you're used to.  

If you have free and clear assets to pledge you may make sure that is a discussion point early in conversations with small, regional banks.  There are generally people in the area that specialize in brokering loans like this too if you can find them.  Ask around at investment clubs.

Regarding raising capital from LP(s) if you have a long sourcing window you can set up some marketing to help.  This sort of deal is probably easier with either one or a few investors, but it is possible there is demand online for pre-entitlement risk projects like this, especially if the subscription price is sufficiently low to get the risk diversified across a number of investors.  

How much money do you need?

Have you talked to a local, small regional bank about an infrastructure loan?  Some banks lend on this sort of thing.

Pre-entitlement partnerships carry more risk and thus you'd need to give away more to attract LP equity if that's your only source of funding. 

I think most competent attorneys are likely to be able to help you with identifying risks.  The market risks and other systemic risks are likely to be outlined in the offering circular, but understanding the capital account structure and how the deal is structured is probably something worth getting a professional to help you with.  

Keep in mind attorneys think of the world in terms of risk and not upside and they're unlikely to understand how the deals will operate and perform nearly as well as the sponsor.  To a large extend real estate syndication is a play about betting on the jockey; not the horse.  Make sure you feel comfortable that the jockey knows how to navigate the race when conditions are not perfect and it's not their first race.  Have they navigated bad business cycles?  What are the assumptions implicit to their underwriting?  Are they presenting a rosy picture or are they giving some sensitivity analysis or accounting for non-perfect conditions?  Are the conditions they're exploring for stressors the main ones you think are likely to manifest?  What is the sponsor doing to hedge these risks with contingency planning?  To what degree do you feel like they're operating as a steward for your capital and treating you as a valued member of the team instead of a box to check on the way to underwriting?  

Apologies for the unabashed ad, but RealStarter is looking for additional software developers with sponsorship and real estate knowledge if any of you brainiacs want to check.  Let's connect.  I too an a recovering electrical engineer.  

There ain't no such thing as a free lunch.  LP investing or anything passive reduces liability (and thus some types of risk), but the large tradeoff is yield.  Allow me to introduce the term "perceived yield" in the discussion as well.  Many would-be and active sponsors and dealmakers conflate their time with "yield" in these discussions and laud their necessity as a virtue.  Need it be?  Absolutely not.  

The trick is to account for your time appropriately in the analysis when calculating YOUR returns.  That's it.  They're for YOU and you alone.  How much is YOUR time worth and how are you arriving at that number?  What is the market telling you?  How much is your time with your kids worth?  How much is the optionality to invest the time as you see fit worth in lieu of tying it down to projects that you're "in control of?"  What does control really mean?  If COVID and the government force you to stop collecting rents is that sought-after control really a good thing or would you rather be sitting on fungible capital to deploy elsewhere?  

What you're really trying to do is to minimize time invested and still get optimal risk-adjusted returns net of taxes or other expenses.  Work on the business; not in it.  Think like an entrepreneur and not a lifestyle business owner.  Use your capital as a tool and learn to generate value and overrides on the capital to attract even more of it.  With today's post-JOBS-Act environment there really is no excuse for stalled growth or artificial impediments to capital formation.  The real constraint is your mindset and willingness to work hard in pursuit of some form of actualization.  This normally tugs at autonomy, mastery, and purpose alongside financial returns and making sure you nurture your relationships and health along the way.  

And meanwhile the City of Austin is creating mythical floodplains to keep sellers on the east side from selling buildable land to help.