All Forum Posts by: Brian Burke

@Arn Cenedella I suspect you're right and that's in line with what I expected too.  I might add inexperienced sponsors, preferred equity, and partnership breakups to that list, too.

@Robert Rixer come to the summit!  Easy trip from Miami to Columbus.  :)  

I took a 3-1/2 year break from raising capital for investments because raising money for multifamily, our core business, made no sense in a rapidly declining market.  But I just launched a new fund last week, so it's good to be back in the saddle.  But it's not for multifamily--I still think that sector is almost un-investable and just has a bit more of a struggle before recovery.  Maybe next year...

I always used 506(b) up until 2020.  In 2020 I switched to 506(c) not because I had any plans to advertise, but because my book was published by BiggerPockets and I wanted to eliminate any risk that the SEC could interpret my book launch to be a general solicitation and find me in violation of 506(b) guardrails (even though I think my book is really more of the opposite of a solicitation!).  

Fast forward to 2025 and I think enough time has passed for me to safely go back to 506(b)--but I'm not.  I still have no plans to generally solicit, but I might change my mind and now I'm able to do so.  Plus, I'm somewhat well known and have a presence on BP and 506(c) allows me to be a little less careful about what I say.

What do I give up in exchange?  Two things.  1. I have to verify accreditation of my investors.  That's not hard, and most of my repeat investors will be exempt because of the 5-year rule.  2. I give up the ability to raise from non-accredited investors.  OK--I'm limited to 35 in a 506(b) offering anyway, and if every non-accredited investor committed to $100K that's a max of $3.5 million.  In a $50 million fund, that's not significant enough to move the needle, and if I were to generally solicit I could likely raise much more than the $3.5 million I traded out.

As to your question on splits, prefs and target returns: I think right now investors want four things: 1. Highly competent sponsors. 2. Simplicity--meaning not 100 different categories of fees and hurdle tiers. 3. No financial engineering to manufacture outsized returns. 4. High cash-on-cash returns--meaning none of this 1% cash-on-cash yet 20% IRR stuff where all of the return is speculation on appreciation that never comes. Give investors high CoC day one and throughout the hold. Our fund is targeting 15-16% IRRs but 12-13% cash-on-cash. Only a sliver is speculation-driven IRR. I'm using an 8% pref and 70/30 split--doesn't get much simpler than that.

Finally, to your question about how do I stay competitive while still making deals pencil--that's also easy.  I'm not doing multifamily.  This nonsense of buying 4 caps and financing at a 6 is not rational investing.  If you can't get deals to pencil, it might be your strategy, not your structure...

No one likes to talk about deals that don't go according to plan, but one thing we can do is learn from them.

At the upcoming PassivePockets summit I'm hosting a workshop on sponsor/investment selection. In preparation for this, I'm researching syndicate failures and investigating clues that could potentially help other investors avoid losses.

I'm seeking marketing decks, proformas, and so on for syndicates that have resulted in total or partial principal loss. I have a few, but I would like to have more.

If you've experienced a syndication failure, I'd be grateful if you'd share some information with me via direct message. No judgment, no names, and complete confidentiality. I'm not seeking to name names, just identifying warning signs and trends to help fellow investors.

Thank you in advance!

@Kyle Vogeler I’d say it’s a mixture, but has all boiled down to word-of-mouth and referrals.  That’s a slow road to growth, but it works.  Another avenue is podcast appearances and speaking engagements at conferences.

Some RE lawyers have securities experience, if you find one, sure.  Otherwise you’d be better off with an attorney that specializes in securities work. Better yet, one who has a lot experience specifically in real estate offerings.

Then there is the question of whether you want attorney review at all.  It’s unlikely that you’ll be able to negotiate the terms of the deal so all the lawyer will be able to do is point out what they see and then it’s up to you to decide to accept the terms of the deal or pass.

A good securities lawyer will run you somewhere in the neighborhood of $500/hour.  It can take at least a couple hours to read an operating agreement, then you have a subscription agreement and PPM, plus drafting an opinion…my guess is a review runs you $2,500 to $5K.  If you are investing $1M this is a de minimis cost.  If you are investing $25K, the calculus changes.

You can do your own review if you know what to look for. Start by reading The Hands-Off Investor, and check out the PassivePockets podcast—there is a recent episode with passive investor Jeremy Roll and securities attorney Mauricio Rauld that discusses this exact topic.

I've seen mixed results from these asset classes over the last several market cycles.

MHPs do seem to have some resistance to recessions and some stability, in part due to the reasons you gave.  They do have some risks, however--such as big-ticket capital improvements like water/sewer systems and roadways.  This can be mitigated to some extent by thorough due diligence, but for long-term ownership you'll probably get hit with these eventually.  This can be especially painful when the cost of labor and materials is high--as is the case now.

Self Storage has seen rent declines in the last couple of years.  I'm not sure that this is recession-related because we haven't been in an recession (officially?).  I think it has more to do with over-building, which can be just as bad as a recession.

I agree with your thesis on medical office, however I've noticed a lot of doctor consolidation in my area with doctors either leaving the area due to high costs or partnering up with other doctors and/or larger medical groups.  Our class A medical office seems to be doing quite well but I see a lot of vacant B&C class medical office that wasn't vacant a few years ago.

My addition to this list is senior housing, specifically assisted living, memory care, and skilled nursing facilities.  I believe in it enough that I'm about to launch a fund for acquiring just that, and have ten assets in contract already.  This is a needs-based use, so it has recession resiliency, but many states also have development restrictions so you don't see the over-building problem like we've recently seen in self storage and multifamily.  The downside here is you need specific industry knowledge and relationships to make this strategy successful, so it's out of reach for a lot of sponsors.

I don't read a lot of books so I don't have a great answer for you. But I did hear from one of my investors who is a Princeton grad--he read my book in draft form to give me feedback on the content and he said that it should be required reading for anyone in a graduate or post-graduate real estate program. I can't think of a higher compliment.

www.biggerpockets.com/syndicationbook

They were acquired across 7 different LLCs, but not because of liability segregation—it was for investor segregation.  And yes, always liability insurance.

Here are a few ideas:

1.  Raise phase 1 with a debt offering.  Offer a personal guarantee (reduces investor risk if you have the balance sheet for a PG to be worth anything).  Cross collateralize your other real estate if you have equity.  Then for phase 2 you raise $1.6 million and pay off the phase 1 note holders.

2.  Raise all $1.6 million at the outset, but call for the capital in stages. In other words, you get $1.6 million in commitments and call for 37.5% at closing and the rest when it’s time to start construction.  This means an investor that commits $100K contributes $37,500 at close and $62,500 at construction.  This way, all investors are on an even playing field as to risk, and there is no dilution because everyone is contributing pro-rata.

3.  Raise the $600K, do the pre-development work, then “sell” the property to NewCo.  Original investors are taken out plus profit in the sale.  NewCo is funded by new investors. Downside is setting the “ sale” price such that the original investors get fair value and NewCo investors aren’t getting a bad deal.  And you essentially have to raise the same $600K twice. This is called a “Recapitalization.”

4.  Do a side letter with Phase 1 investors to give them an extra X% pref and/or split.

5.  Charge phase 2 investors a funding fee, which gets distributed to phase 1 investors pro-rata to compensate them for their risk.  (You don’t get any of this fee).  Maybe it’s 3-5% of the new equity or something.

And forget about that 30/70 split after an 18.  I get why you want this but knowledgeable investors despise anything over a 50/50 split even if it’s over a hurdle.  If you want the 70% you could do a 50/50 over an 18 and co-invest 20% of the capital—then you’ll get 100% of 20% and 50% of 80% (over an 18).

Paul, the deportation efforts aren't overly concerning personally because the few assets I have left in my current portfolio don't have a high immigrant resident profile (nor do the submarkets).  

Having said that, I am a bit concerned as it relates to the overall market, especially in class C properties and most especially class C properties in border states.  C class in general is in for a major correction in my opinion (a lot of which has happened already but I think there is more to come) and this will be another nail in that coffin.

But as with all chaos, opportunity breeds.  C properties may become investible again in another year or three, for those who have the stomach for it.  And at a much better basis than any time in the last several years.

Class A and B I'm less worried, but there is still a chance that in some areas there could be some temporary absorption disruption.  But I think the market overall will take it in stride.

As for tariffs, it's hard to say.  Who is tariffed, what is tariffed, what exemptions, and how much all play a role.  Would tariffs cause the 10-year to tumble?  Will it spark the fed to act, and if so, in which direction?  No one knows, even the people saying they know might not really know.  Remember after COVID the consensus was rents would suffer and property values were in trouble?  That bet didn't pay...

At the end of the day, deportations and tariffs are things us RE investors can't control, so instead, focus on things you can control.  Buy quality properties in strong submarkets, finance with low leverage, bulk up on cash reserves, diversify geographically, and you'll be positioned to survive whatever the economy throws at you.