Table of Contents - How to Overcome Lack of Experience When Syndicating Your First Deal with Ellie Perlman
Dave Debeau [00:00:09] Welcome, everyone. This is Dave Debeau. With another episode of the Property Profits Real Estate podcast. And today, it is my pleasure to introduce you to Perlman. And Ellie is a very, very accomplished real estate entrepreneur who focuses on what quite large multifamily properties, one hundred plus units in the states, primarily focusing on buildings in Texas and Georgia and Florida and is originally from Israel to the United States and really started as a real estate lawyer and then got into investing herself. I believe it was in 2007 that she started early Yelle.
Ellie Perlman [00:00:51] Yeah 2007 was the year that I don't know, fortunately or unfortunately, I was an investor in mode back then. I was representing other investors and other real estate companies as their lawyer, as part of their legal team. So I got to experience the the financial ruse of some of the deals and and learned, I think, from that experience that made me very, very cautious when it comes to investing in real estate and kind of shape the way that I look at a deal and maybe made me very conservative. But, yeah, that that's the year when I started my first steps in real estate.
Dave Debeau [00:01:28] And this year, everything kind of crashed in the United States. But the real estate market, right?
Ellie Perlman [00:01:33] Yeah. Yeah, exactly. Exactly. So my clients did pretty well. They were pretty established firms in Israel, one of the largest developers in Israel. So they were fine. But we had some rough times,
Dave Debeau [00:01:49] definitely, I would imagine. So how did you kind of make that leap to go from being legal representation to becoming an investor yourself? What what really sparked that for you?
Ellie Perlman [00:02:00] Well, when I was sitting across the table and negotiating with banks and drafting contracts, I kind of felt that I was on the wrong side of the table. I wanted to be my clients. I wanted to be there looking for projects, evaluating deals. And it took me many years to do that because you go from a very comfortable place to start something completely new. So it took me a few years to get there. But that's that's basically where it all started.
Dave Debeau [00:02:28] I must have been fascinating because there you are. You're working for a big developer. You're you're in the legal side of things, but your context right off the get go would have been so much bigger than everybody else's who's getting into real estate investing because you're you're used to seeing these big, big numbers. You're used to seeing these big projects. I think that would have been a massive advantage for getting started. But my question would be, so when you decided to make the leap and start investing yourself when it comes to the financing of it and the capital required for your deals, how did you get the ball rolling with that?
Ellie Perlman [00:03:08] So my start was actually and that's the advice that I gave everyone who is asking me, I really want to serve, what should I do next? I actually partnered with someone that was much more experienced than me. And I do two things. One, I vetted sponsors until I got to the right person that I wanted to partner with. And that was good, because when you do your first deal, basically investors like some of them, know you and like you already. But you still have the lack of experience that you can't you can buy it anywhere, but you can borrow it. So when you partner with someone more experienced than it, it helps bringing capital to the deal, help. It helps investors say, OK, you know what? We know you. We trust you. We trust your judgment when it comes to who your partner was. And because you might not have you have experience in real estate, but maybe not in investing, but you're partnering with someone who does. And that definitely helps. And then the second part of it was I didn't wait until I had to deal with my partner to actually start raising money. I started very early on before I had any deal on the table. And that was helpful because the way I did it, it was helpful because it was actually shorten the the time that it would have taken me to actually raise money when the deal was relevant was on the table. And the way that I did it is basically I made a list of all the people that I knew that I thought that could either have money to invest in real estate or are already investing in real estate. And I reached out to them and I said, hey, this is what I do now. This is, you know, how I'm this how I look at a market. And these are the deals that I'm looking at and the basically held because some of a very small percentage was not interested in real estate at all. So I knew not to quote unquote, waste my time when I actually had a deal. So I was targeting exact people that are interested in real estate. And in addition, some of them didn't really know what syndication, especially people. All that are from outside, that are not from the US, so foreign investors don't always know what syndication is, and when you talk with them about investing in real estate in the US, they immediately think about single family homes and buying large multifamily properties. Even 40 units is something that is really hard for them to digest. So you kind of explain to them what is syndication is. And then from there, basically the last part was, hey, now I know that you're interested in real estate. I know that you have the money to invest. And you know what a syndication is. Once I have a deal that is similar to a simple deal that I showed them, would you be interested in investing in 10 out of 10 times? They said yes, no. So by the time I had a deal, I went back to them and it was a lot faster because they already knew that I was doing this. They already knew what a syndication was. So they their only focus right now was, do I like that specific deal and am I liquid at this point?
Dave Debeau [00:06:11] Very, very smart. So early for I think a lot of our listeners probably have experience with single family homes, but not necessarily with large multifamily properties. When you had to explain what a syndication was to your prospective investors, let's pretend I'm one of them and explain what a syndication is to me, because a lot of people don't know what they've heard of it, but they don't really know what it is.
Ellie Perlman [00:06:33] Sure. So syndication in the most basic and simple, in a way, is it's a group investment where investors are can be truly passive investors. So as a syndicator, as someone who organizes the group, what I do is that I find the deals. I negotiate with the seller, I sign on the loan and I manage the asset. And the only job that the investors or the passive investors need to do is basically look at the deal, understand, make a decision if they want to invest and then write a check. Could be fifty thousand, could be half a million dollars. But this is where basically their job ends because they don't need they're not signing on a mortgage and they're not they don't need to manage the assets. We do all of that. And in returns, we are being compensated in two ways. One with fees and then the other is an equity split, which means that part of the income of the property goes to us for doing all the work, the front and the back end while we're holding the property and usually in syndication, if the whole period. So the time that we actually hold on to the property before we sell it is anywhere between five and seven years.
Dave Debeau [00:07:49] Very, very cool. And so are you typically working with just accredited investors or going to be pretty much anybody that you that you know that can be part of the syndication?
Ellie Perlman [00:08:00] Well, that's a really great question. It's a question that we keep asking ourselves. Should we open it? Only for accredited investors are also for sophisticated investors. So for those for the listeners who don't know what the investor is and someone who either has a net worth of a million dollars, not including the home that they live in, or someone who has been making two hundred thousand dollars a year or three hundred thousand dollars if the investor is exactly married. And so in some some of the investments we open to sophisticated investors, which are both accredited and not accredited, but they have to have some sort of even basic understanding about real estate investing. And we might open it only for accredited investors moving forward. But right now, we're open for both.
Dave Debeau [00:08:48] So I'm not sure how it works in the States because I'm in Canada. A lot of our listeners are in Canadian area as well. But when it comes to creating a syndication, are there is there certain paperwork that you have to go through with the securities bodies or how does that work?
Ellie Perlman [00:09:09] Well, that's a great question. And to be fully transparent, until today, we've only worked with investors from the US. And the reason is that there's an additional kind of steps we need to take when we work with investors that are out of state. And so one of it is basically and again, it might be totally wrong there. So I don't pretend that I know the right answer for this because I might not know it. But to my understanding, we need to withhold about 20 percent of the profits just to make sure because the IRS wants to make sure that investors that are not in in the US, they don't live here would actually pay taxes. So this is something that we're working on until today. We've only again, we were only open to investors from the US. But starting next month, we're actually going to open it to more investors. So we're in a process of learning that. I would say, however, that LLC might not be the right way to do it if you're in Canada. That's based on the research that I've done recently, but I really think that before anyone invests in a syndication in the US, they probably should speak to a lawyer and a CPA to understand what is the best way to do it.
Dave Debeau [00:10:21] The structure that makes a lot of sense. So, well, it sounds like you've got quite a bit of experience under your belt like this. How many how many syndications have you done over the last few years, for example, to keep track?
Ellie Perlman [00:10:36] Yeah, I do keep track. So we have so I started investing passively. And so my husband and I own I mean, in total we own about two thousand units and some of it is possibly some of that is actively we have about close to six hundred fifty units under management. And when I say we, I mean Blooey Capital, the company I manage, my husband is strictly a passive investor. That's real estate, unfortunately, is not his passion. He's in a water technology business, so he runs his own company. And then and we're on track to actually acquire about a thousand units this year.
Dave Debeau [00:11:14] Wow. That's very impressive. So if you were starting all over again, what, if anything, would you do differently? Because it sounds like you did a lot of things right. Right from the get go. Is there anything that you would do a little bit differently or you're doing it over again?
Ellie Perlman [00:11:29] Things that I would do differently? I usually don't think in those terms of looking
Dave Debeau [00:11:35] back, let's look at a different way then. So let's see what he's interested in doing. What you do isn't how could they get started on the right foot?
Ellie Perlman [00:11:45] I would say either partner with someone more experienced or find a mentor and learn from them because there's so much you don't know. It actually took me longer than I thought when I started taking longer to actually get the first deal, because I thought, OK, I'm going to look into deals, run numbers and figure out, you know, and I'll find a deal. And it took a lot longer than I thought. So I think partnering earlier would have been better for me because it would have probably it would have expedited the process for me. So I would say one of those two or even both.
Dave Debeau [00:12:23] Yeah, that's very good advice. Very good advice. So are you do you work with people who are interested in getting into these? Kind of I mean, I always you do as you work with people want to invest with you. You work with other people who are interested in finding out how to do what you do.
Ellie Perlman [00:12:41] Yeah. So I do work with people who want to get into syndication and in two main ways. Well, one is, is kind of in the works, but the first way would be to partner with people who can bring something to the table. So it could either be someone who has an off market deal that fits our criteria. And then it could also be someone who can help with maintaining relationships with investors on the capital side. So and we, of course, don't partner with just anybody. It's kind of more of a relationship that are being have been built over the years. And then the other part of of working with people who want to get into syndication is a mentoring program that is actually not ready yet. So working on it. But this is something that is in the works because I found out that I spent a lot of time talking with people that want to get into syndication and share my experience with them. And I thought, you know what? If I'm if I spend all those hours every every week when I just put it on paper and make it official and make it easier for people to follow, because it's it's it's kind of nice to conceptually explain to people how to raise money, the things you need to be aware of when you underwrite a deal. But it's different when you actually teach them the basics from A to Z. And so and I know that some people are trying to save money by taking out some syndicators for coffee or Funchal. You can get free advice and it's all going to be good, but it's never going to be enough to help you, you know, run a syndication business from A to Z. And this is basically the program that I'm working on. So I went to MIT. I got my MBA degree several years ago, and this is part of my education and my experience. I actually embedded in this program. So it's not only going to teach people how to raise money or how to underwrite deals or how to manage the asset, but also how do you build a sustainable, scalable syndication business? Because it's it's a business before it's a real estate investment or real estate company. So that's what I'm working on these days.
Dave Debeau [00:14:59] Well, this this might be a little while before this interview comes out, so you might have it ready by that time. So, yeah, we're interested in finding out more about you. How can they find out about Ellspermann
Ellie Perlman [00:15:11] so you can just Google Ellie Pearlman, Ellie and Pearlman is PRL man, you can go to my website, Ellie Perlman dot com, and you'll see all the information. There's also free education for passive and investors and for syndicators. They can read my blog there. They can reach out to me, you know, and read about my program. And everything is basically they're perfect.
Dave Debeau [00:15:37] Ali, thank you very much. It's been a pleasure chatting with you and meeting you online.
Ellie Perlman [00:15:41] Yeah, absolutely. Thank you so much for having me.
Dave Debeau [00:15:44] Take care. Well, thanks very much for checking out the property profits podcast. You like what we're doing here. Please head on over to iTunes. Subscribe read us and leave us to review. He very much appreciate it. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.