Host: Welcome back to the show. Today I’m joined by syndication and fund attorney Tilden Moschetti. Tilden is the managing attorney of Moschetti Law Group and has helped hundreds of syndicators and fund managers navigate securities law and capital raising. What makes him unique is that he’s also been a syndicator himself—so he speaks from both sides of the table.
We break down the differences between a syndication and a fund, when to use each, key distinctions between 506(b) and 506(c), plus Reg A and Reg CF. We cover the core documents you need to raise capital legally, how sponsors and LPs can protect themselves when deals don’t go as planned, and the common mistakes that have landed people in legal trouble. It’s a start-to-finish overview in plain English with practical strategies to keep your deals compliant and your investors confident.
Tilden, thanks for being here.
Tilden Moschetti: Great to be here—thanks for having me.
Host: For anyone new to this, what’s the difference between a syndication and a fund?
Moschetti: People often separate them, but legally they’re very similar: both are securities where passive investors rely on the sponsor’s efforts. Practically, a syndication is usually one specific asset (“We’re buying 123 Main Street”), while a fund is a pool raised to buy multiple assets under an investment thesis. The legal framework is similar; the main difference is the story and structure you present to investors.
Host: When should someone use a syndication vs. a fund?
Moschetti: If it’s a single asset with a defined timeline, a syndication is typical. If you’ll buy multiple assets over time, accept and deploy capital in tranches, and possibly admit or redeem investors over a longer life cycle, a fund may fit better. Choose the structure that matches your asset plan, capital plan, and investor expectations.
Host: Walk us through the main offering paths and why most choose Reg D.
Moschetti: About 90–95% of private offerings use Reg D (either 506(b) or 506(c)). With 506(b) you can accept an unlimited number of accredited investors and up to 35 non-accredited sophisticated investors, but you cannot generally solicit or advertise. Investors self-certify; onboarding is lighter. With 506(c) you can generally solicit and advertise, but all investors must be verified accredited through a CPA, attorney, or verification service.
Other paths include Reg A, sometimes called a “mini-IPO,” which requires SEC review, audited financials, and long lead times, often costing $100,000 or more. It’s good for large consumer-facing raises or businesses headed toward going public. Reg CF requires using a registered funding portal, has caps on raise size, and often high platform fees. It can work well for very early-stage startups but is less practical for most real estate deals.
Host: What documents are required, and what’s the typical cost and timeline?
Moschetti: Under Reg D, three core documents: the Private Placement Memorandum (PPM), which outlines terms, risks, and conflicts; the Operating Agreement, which governs distributions, voting, and governance; and the Subscription Agreement, which is the investor’s commitment. You also file a Form D with the SEC and make state “blue sky” notices where investors reside. Timelines vary, but drafting is often 2–4 weeks once terms are set. Fees are typically $10,000–$30,000 depending on complexity, though large firms may charge much more.
Host: How does compliance get enforced?
Moschetti: The SEC doesn’t pre-review Reg D filings. Enforcement is largely complaint-driven: if an investor sues, the SEC may investigate. States monitor their filings more actively and may request clarifications. As long as you disclose thoroughly and operate transparently, these interactions are usually straightforward.
Host: What are the pros and cons of working with accredited vs. non-accredited investors?
Moschetti: Accredited investors generally bring fewer suitability and communication challenges. Non-accredited investors can be included under 506(b) (up to 35), but they often require more education, more updates, and more reassurance, since the money they invest often represents a larger share of their wealth.
Host: What gets people in trouble?
Moschetti: The first big mistake is calling something a “joint venture” when it’s really a security. If it’s reclassified as a security later, you may face rescission—investor money due back immediately—and major damage. The second mistake is aggressive underwriting or unrealistic pro formas. Conservative assumptions and full risk disclosure are key.
Host: If a deal underperforms, how can sponsors protect themselves?
Moschetti: Disclose risks clearly in the PPM, over-communicate with investors, and operate cleanly through proper entities with transparent books. Sponsors who keep their investors informed rarely face lawsuits. Silence and poor communication almost always lead to legal trouble.
Host: What can LPs legitimately request?
Moschetti: They can usually request detailed financials. Best practice is quarterly updates with narrative and key numbers, and annual full financial statements with tax docs. If someone asks for the general ledger or clarifications, provide them—it builds trust and shows transparency.
Host: Any guidance on co-GP or “raise capital for a slice” structures?
Moschetti: Pure “pay-to-raise” is dangerous. If you bring in partners, make sure they have ongoing, substantive duties beyond fundraising—like asset management or acquisitions. Structure it so roles are real and defensible.
Host: How should a sponsor vet counsel?
Moschetti: Fit and focus matter. Work with someone who does this full time, communicates the way you prefer, and ideally understands deals from the sponsor’s side. Many attorneys can draft; fewer can coach you through investor interactions and practical hurdles.
Host: What are the main steps for setting up a raise?
Moschetti: Clarify your investment thesis, line up investors and deals, choose your exemption (506(b) vs. 506(c)), engage counsel to prepare the documents and filings, raise and close, and then operate with consistent communication.
Host: Where can people learn more or connect with you?
Moschetti: Visit moschettilaw.com or check out my YouTube channel, which has around 150 videos on syndication topics.
Host: We’ll link those in the show notes. Tilden, thanks for breaking this down so clearly.
Moschetti: My pleasure—thanks for having me.
Host: If this helped, please share it and leave a review. For links and resources, see the episode page at millionairemindcast.com. Accredited investors can text DEALS to 844-447-1555 to see my deal flow. Thanks for listening—keep investing in yourself and your wealth. Cheers!
Tilden:
The mistakes that are not correctable start happening when you don’t take your responsibility to investors very seriously. If you make a mistake but you’ve always done the very best you possibly could for your investors, you’re probably in a pretty good spot. Nothing bad is really going to happen to you.
John Kasman (Host):
Welcome to Multifamily Insights. I’m your host, John Kasman, and I want to thank you for joining us for another great episode. If you’re getting value from these shows, I’d appreciate it if you left some honest feedback with a rating and review. It helps us, and it also helps other listeners find the show. If this is your first time listening, be sure to hit the follow or subscribe button so you don’t miss an episode.
Today we’ve got a great show—we’re talking with Tilden Moschetti.
Before we jump in, I want to tell you about a transformational event this April: the Real Estate Wealth Builders Conference, hosted by my buddy Dustin Heiner. I attended last year and it was incredible—40+ speakers, including myself. If you want to join us, go to ruban.com, use promo code JOHN to save 10%, and I’ll see you in St. Louis.
Now, on to today’s guest.
Tilden Moschetti is a syndication attorney focusing exclusively on Regulation D offerings for real estate syndicators, business owners, entrepreneurs, and private equity funds. He’s also a syndication coach, general counsel to two private equity funds, and an active syndicator himself. He’s been featured on NPR, NBC News, People Magazine, the National Law Journal, and many more.
John:
Tilden, welcome to the show!
Tilden:
Thanks, John. I’m really happy to be here.
John:
I went over your bio at a very high level. Why don’t you take a couple of minutes and fill in some of the gaps?
Tilden:
Sure. I’m a syndication attorney, and my firm focuses exclusively on Regulation D offerings—what people normally think of as syndications or real estate funds. I help clients put together the legal documents so that they are compliant with SEC and state rules.
At the same time, I’ve done many deals myself, and I bring that experience to my clients. Beyond the legal work, I help them think about marketing, scaling their businesses, and setting themselves up for success.
John:
For listeners who may be new to this, can you describe what a syndication is at a high level?
Tilden:
Anytime you make an offering to people who invest money and rely on you to generate profit for them, that’s a security. Securities must either be registered with the SEC or fall under an exemption. The most common exemption is Regulation D.
A syndication is basically breaking up an asset—say an apartment building—into investable units. Investors put money into the deal, and the sponsor (the syndicator) manages it. The syndicator profits but also ensures that investors profit as well.
John:
Some people try to just structure a joint venture. Can you explain the difference between a syndication and a JV?
Tilden:
A joint venture must truly be a joint venture. All parties must actively participate in decisions and management, not just contribute money. If someone is purely passive, that’s a security, not a JV.
Some people think they can just put investors’ names on an LLC and avoid SEC rules—that’s not correct. If investors are passive, it’s a security. If they’re truly active, then it’s a joint venture.
John:
That’s a critical distinction. And what are the key legal documents in a syndication?
Tilden:
There are three:
Private Placement Memorandum (PPM): Lays out the investment, terms, business plan, distributions, risks, and conflicts of interest.
Operating Agreement: Governs how the investment entity (LLC) operates—rules for distributions, decision-making, and management.
Subscription Agreement: Where the investor formally agrees to invest, stating how much they’re putting in and acknowledging they’ve reviewed the PPM.
John:
Those three are critical. What are some of the biggest mistakes you see new—or even experienced—syndicators make?
Tilden:
Most mistakes happen at the outset. People underestimate how much needs to be done: finding deals, lining up investors, preparing legal documents, notifying the SEC and states, managing the deal, making distributions, and investor communication. It can feel overwhelming.
Common mistakes include skipping key steps—like not preparing a PPM or not filing Form D with the SEC. Others fail to take investor trust seriously. If you’re always acting in your investors’ best interests, you’ll be fine even if mistakes happen. Problems occur when sponsors focus only on themselves.
John:
Great point. It’s about managing both the process and the investor relationships. When should someone bring in a syndication attorney?
Tilden:
As early as possible—ideally before you even have a property under contract. That way, we can structure things in advance. My turnaround time is about two weeks, but some attorneys take longer. If you wait until you’re under contract, the timeline can get very tight.
John:
That makes sense. What should people look for when choosing a syndication attorney?
Tilden:
The most important thing: find someone who does only syndication law. Don’t go with a criminal lawyer or a general real estate attorney who occasionally drafts a PPM. You want someone who lives and breathes Regulation D offerings.
And ideally, find an attorney who is also an investor. Because I’ve done my own deals, I can spot when something looks off or won’t attract funding. Many attorneys don’t have that perspective.
John:
That’s a big advantage. Let’s talk about investor protections. What should operators and passive investors look for in documents?
Tilden:
Two key clauses:
Capital Calls: How will additional money be raised if needed? This happens more often than you think. Everyone needs to understand the rules.
Redemptions: Inevitably, investors will need to exit early due to life events. The documents should outline whether redemptions are possible and how they’re handled.
John:
That’s excellent advice. To wrap up, who should consider syndicating?
Tilden:
If you have a strong pipeline of properties, syndicating is a no-brainer. It lets you scale, diversify, and make more money. But it is a service business—you must focus on investors, not just on your own profit.
John:
Perfectly said. Tilden, this has been a fantastic conversation. Where can listeners connect with you?
Tilden:
Visit my website at moschettilaw.com, or check out my YouTube channel where I share videos on syndication law.
John:
Great! Thank you again for being on Multifamily Insights.
Brian (Host):
Welcome to the Real Estate Explainer Podcast, where we talk about anything and everything real estate. I’m your host, Brian Kulet. Take notes today—I’ve got Tilden on the podcast, and we’re going to be talking about raising capital to buy real estate, specifically Regulation D offerings.
Can you tell the listeners what a Regulation D offering is?
Tilden:
The Securities Act of 1933—the main act that governs securities—says that everything defined as a security has to be registered with the SEC, unless there’s an exemption. Regulation D is the most commonly used exemption; about 95% of all private offerings go through it.
It’s a set of rules that allows people to put together and sell securities without the extraordinary expense of full SEC registration, which involves many attorneys and a lot of money.
Brian:
So why are we talking about securities when raising capital to buy real estate? Most clients I work with think in terms of joint ventures—set up a JV and buy the property together. What’s the difference between a Regulation D offering and a joint venture?
Tilden:
A lot of times those so-called “joint ventures” really are securities, and people don’t realize it. A security can be thought of broadly as an investment contract. Anytime there’s a common venture where someone contributes money, expects a profit, and relies on someone else to do the work—that’s a security.
So, for example, if the sponsor or syndicator is making the decisions and the other party is passive, that’s a security. Securities either need to be registered or fall under an exemption like Regulation D.
Brian:
Let’s say I’m buying a mobile home park with you. You approach me and say, “I’ve got this great deal, want to invest?” I put in $100,000, but I’m not managing day-to-day operations—I’m just writing a check and expecting a return. That’s a security, right?
Tilden:
Exactly. Even if the paperwork says “joint venture” but one party is passive, it’s still a security. I’ve even seen loans between family members where the “lender” had no involvement and just expected passive returns—that, too, can qualify as a security.
Brian:
So a true joint venture is when all parties are actively participating—identifying property, contributing money, managing, and making decisions together.
Tilden:
Right. In that case, it’s a joint venture, not a security. That happens all the time and is perfectly fine.
Brian:
At what point in the process should someone like me bring you in? Before we have investors? Before we have a property? After we’re under contract?
Tilden:
Most of the time, I get brought in when a property is under contract and investors have expressed interest. That’s the majority. But I prefer to be involved as early as possible. Early discussions can influence not just the property you choose, but also how you approach investors, the deal structure, waterfalls, equity split, or whether to use preferred vs. common equity.
We do unlimited revisions, but getting involved earlier makes things smoother.
Brian:
That makes sense. In real estate, once you have a contract, you hit the “start moving” button. It’s better to have everyone in place before that.
Tilden:
Exactly. The main restriction is that you can’t take investor money until the offering documents are ready and proper subscriptions are signed. It usually takes my firm about two weeks to generate those documents. If you wait until just before closing, you’re probably too late.
Brian:
Once you have the documents, how do investors fund? Through escrow? Through a separate LLC account?
Tilden:
Nearly always into the investment entity’s LLC bank account. That’s clean and simple. I tried using escrow on my first deal and never did it again—it created unnecessary complications. The investors are already trusting you with $100,000 or more, and the LLC account is in their names as members. Adding escrow just complicates the process.
Brian:
What if a deal falls through? You’ve raised money, set up the entity, but the property doesn’t close.
Tilden:
We almost always draft the documents to allow substitution with a “similar” property. But the right thing to do is always go back to investors, explain the situation, and give them the choice to either stay in or take their money back. That preserves trust.
Brian:
Once you’re actively soliciting investors, can you advertise? For example, could I put up a website saying I’m looking for investors in Tennessee car washes?
Tilden:
It depends on the exemption. Under 506(c), yes—you can openly solicit, but every investor must be accredited. Under 506(b), no solicitation is allowed; you must raise through pre-existing relationships, and you can accept up to 35 non-accredited investors.
Brian:
Got it. What about securing commitments from investors?
Tilden:
Ideally, you collect funds upfront with the subscription. If you’re raising into a blind pool (no property identified yet), you may accept commitments and call the funds later. But without penalties, you’ll lose a lot of that money. A 10% deposit or similar ensures investors are serious.
Brian:
What’s the minimum investment amount?
Tilden:
Usually $25,000 on the low end. More common is $50,000. For larger deals, minimums can be $150,000–$250,000. Taking very small investments isn’t ideal—the costs of administration, communication, and tax reporting add up.
Brian:
And do investors need to be accredited?
Tilden:
Again, it depends on the exemption. 506(c) = accredited only. 506(b) = you can take up to 35 non-accredited investors, but you can’t advertise.
Brian:
What happens after the deal closes? Do you stay involved?
Tilden:
I don’t manage the entity long-term, but I stay available for issues that come up—buyouts, sales, disputes. Many of those conversations lead to future deals.
Brian:
What about the exit strategy?
Tilden:
There’s always a plan, usually to sell in 5 years, but real estate doesn’t follow exact timelines. Sometimes it makes sense to exit early, sometimes later. The asset manager monitors and makes the decision, but it’s always good practice to involve investors in the conversation.
Brian:
And if an investor needs to exit early?
Tilden:
It happens in every deal. There’s usually no legal obligation to redeem early, but sponsors often accommodate by buying them out directly or letting other investors step in. The key is transparency and fairness to all investors.
Brian:
Final question—anything important we missed?
Tilden:
Syndications can look intimidating because of the legal requirements, but with proper structuring they’re safe, enjoyable, and profitable for everyone. Don’t let the rules scare you—it’s a proven model.
Brian:
Perfect. And where can listeners reach you?
Tilden:
Visit mwlaw.com or my YouTube channel, which has over 100 videos on syndication law.
Brian:
Great. Thanks for joining us today!
Mike (Host):
Welcome to the Mike Litton Experience! Today, I’m joined by Tilden Moschetti, an attorney who specializes in syndications and also works as a syndicator himself. I’m excited to dig into his story, his law practice, and how he helps others protect themselves while raising capital.
Tilden, welcome to the show. Where were you born?
Tilden:
Thanks, Mike. I was born in Hot Springs, South Dakota—which isn’t the answer most people expect. My family moved when I was two, so I grew up mostly in Arizona. Then, in eighth grade, we moved to the San Francisco Bay Area.
Growing up in Arizona was idyllic—I could ride bikes, explore parks, and my parents never had to worry. Moving to California was a big adjustment, but it was exciting to be near the tech boom.
Mike:
Who were some of the most influential people in your life growing up?
Tilden:
Teachers, without question. My third-grade teacher was the first person who taught me to see possibilities beyond what was in front of me. Later in high school and college, I had incredible instructors who encouraged curiosity and exploration.
Mike:
What were you drawn to academically?
Tilden:
I was strong in science and math, so I originally thought I’d be an engineer or a doctor. I started college at the University of Oregon as a pre-med major. I loved the theory, but I struggled in the labs. Eventually, I switched to theater after being inspired by a professor, Grant McCarney. He had this incredible ability to weave stories, history, and performance together—it really stuck with me.
Mike:
So how did you go from theater to law?
Tilden:
After college, I worked in video production with doctors, then joined Lawrence Berkeley National Laboratory. It was an inspiring place, surrounded by brilliant people. Later, I worked in the tech industry and even thought about pursuing a PhD in astrophysics.
Instead, I chose law school at the University of San Francisco while working full time. It was grueling, but I thrived. I interned at the District Attorney’s office under Kamala Harris, gaining trial experience. Eventually, I became a litigator focused on real estate-related disputes. I did that for about 10 years—intense, stressful work, but I learned a lot.
Mike:
What made you pivot from litigation into syndication?
Tilden:
Litigation burns people out. I earned my CCIM designation and thought about brokerage, but a partner approached me with a great real estate deal in Alabama. We decided to syndicate it. I had to figure out the legal side myself—and I loved it.
I kept writing my own PPMs, and over time, other syndicators started asking me for help. That’s when I realized I could combine my legal skills and investing experience into a practice dedicated to syndication law.
Mike:
For listeners new to the space, how do you define a syndication from a legal perspective?
Tilden:
Anytime someone invests money passively with the expectation of profit, it’s a security. And securities must either be registered with the SEC or fall under an exemption.
The most common exemption is Regulation D. It allows people to raise capital without going through the full SEC registration process, which is long and expensive.
Mike:
So what do you actually do for clients as a syndication attorney?
Tilden:
The main job is preparing the Private Placement Memorandum (PPM). That’s the disclosure document that outlines the investment, the risks, the business plan, conflicts of interest—everything an investor needs to know.
The PPM protects the syndicator, almost like an insurance policy, while also giving investors transparency. Along with the PPM, I draft the Operating Agreement for the LLC and the Subscription Agreement that investors sign when committing funds.
Mike:
And who can invest in these Regulation D offerings?
Tilden:
They’re generally limited to accredited investors. That means either an annual income of $200,000 ($300,000 with a spouse) for the past two years, or a net worth of at least $1 million, not including the primary residence.
Syndicators usually verify this through third-party services—I often connect clients with providers who handle that process.
Mike:
That’s really clear. If someone wanted to connect with you, what’s the best way?
Tilden:
The best way is through my website, moschettilaw.com. I also run a YouTube channel where I post educational content on syndication law.
Mike:
Perfect—we’ll share that in the show notes. Tilden, thanks for joining us.
Tilden:
Thank you, Mike. This was great.
Mike (Outro):
That wraps up another episode of the Mike Litton Experience. If you enjoyed it, please subscribe, share with a friend, and leave us a rating. You can connect with me on Instagram @LittonRealty or visit cle.com/r760 if you’d like to meet with me.
Host:
So like a long-term triple-net lease kind of scenario, what stood out to you about that deal that said, “Hey, this is a great deal”?
Tilden:
The location was great. There wasn’t an existing dialysis clinic within maybe 30–40 miles of it. It was a brand-new lease with a pretty big operator. The medical director had other operations as well, so it looked like a good deal. It was new construction, and we knew the developer just wanted to keep building to become a preferred vendor for that clinic—which they did. Their main interest was in building, not even making a huge profit.
Host:
Welcome to the Real Estate Mogul MD Podcast. Thanks for tuning in and taking control of your financial future. This is a show where we not only motivate and inspire, but we give you actionable real-world experience to help you live life by design. You’ll hear journeys and stories from physicians, investors, coaches, consultants, and entrepreneurs. And now, here’s your host, Brett Riggins.
Today’s guest serves exclusively as legal counsel to securities and Regulation D syndications. He has been investing in syndications himself for almost 10 years. On top of that, he has been a real estate attorney for the past 19 years. This is an amazing conversation where we’re going to break down the walls, pull back the curtains, and really understand the safe-harbor regulations around syndications.
We’ll talk about what documents are required, what the process looks like, when we should see these documents, what a “soft commitment” means, what a subscription agreement is—so many things that, personally, my eyes glaze over when I see them. But it’s so important to understand. And for those thinking, “How can I be a sponsor? What do I need to do to create a syndication?”—you’ll want to listen closely.
What an awesome resource to have on our side. Everybody, please welcome to the show, Tilden Moschetti.
Host:
Welcome to the show, Tilden. What a great day to talk real estate! I’m excited to jump into this. How’s it feel to be Tilden today?
Tilden:
Absolutely great. I’m always happy on a day I get to talk about deals and help people make money.
Host:
For the listeners, let’s build some background and authority. You’re both a real estate investor yourself and you’ve got the legal background to really understand what we’re discussing today. Tell us a bit about your professional experience and how you got into real estate.
Tilden:
After getting an MBA, I decided I wanted to be a real estate developer. My idea was to create assisted-living facilities using modular home construction. Great idea, but I had no idea what I was doing. I noticed a number of developers in my community were also lawyers, so I thought, “That’s smart—let me get a law degree.”
I focused my classes on property and contracts, but ended up becoming a litigator. The adrenaline rush of litigating was a big pull. I litigated for about 10 years, mostly real-estate-centered cases: ownership, bankruptcy, family law, whenever real estate was the main asset.
About 10 years in, I was burnt out from litigation. I did some commercial real estate brokerage, enjoyed it, but didn’t want to be a broker. A partner on the brokerage side showed me a development deal for one of the large dialysis providers—a single-unit medical office. I looked at it and thought, “This is a really good deal.” He said, “We should syndicate it.” I had heard of syndication but had no idea how to do it.
So I figured it out. One deal led to another and another. Eventually I realized, “I enjoy putting these deals together. Why am I still litigating?” I shifted my practice entirely to syndications and fund formation.
Now my law practice focuses on syndications, and my personal investments are mostly in real estate, though I’ve branched into other businesses as well.
Host:
That first syndication—you said it was a single-use medical office with a long-term triple-net lease. What made it attractive?
Tilden:
The location, the lack of other dialysis clinics nearby, the strong operator, and the new construction. The developer wanted to build to become a preferred vendor. Their interest wasn’t big profit, but continuing to develop. It turned out to be a great deal with plenty of upside. The plan was to buy it with a 15-year lease, hold for five years, then sell with 10 years left, right after a rent increase. That worked perfectly and gave investors a good return.
Host:
What about the partnership in that first deal? Did it shape how you structure future partnerships?
Tilden:
Pick your partners well. There were four of us. The guy who showed me the deal was great—we’re still friends and would do deals again. The others, probably not—we had conflicting values. The lesson: align on vision, strategy, and how you want to handle investors. Even in my law practice, most syndicators don’t work alone—they partner. I often draft partnership agreements. Thanks to my litigation background, I can spot misalignments early.
Host:
Do people hesitate to partner with you since you’re an attorney?
Tilden:
No, usually the opposite. They see me as an ally. I can shoulder a lot—finance, law—and I enjoy it. I have a clear value system and consistent approach. I live by the “givers get” mentality: the more I give, the more comes back.
Host:
In your experience, how do new syndicators mess up?
Tilden:
The most common mistake is ignoring legal requirements. Under Regulation D, which is an exemption from registering with the SEC, there are rules that create a “safe harbor.” Many people think they can skip steps. It might not ruin a past deal, but moving forward you need to do it right.
The other mistake is getting too emotionally attached to a deal. My philosophy emphasizes the story of a property, which makes it easy to get attached. But the best thing a syndicator can do for investors is be willing to walk away when it’s not right.
Host:
What documents should investors expect?
Tilden:
The Private Placement Memorandum (PPM) is the core document. Think of it like the big disclosure book you get when opening a bank account. Most people don’t read it—but they should. If you’re investing and don’t get a PPM, run. Just an operating agreement isn’t enough; that could mean securities law violations.
The other key documents are the Operating Agreement and the Subscription Agreement, which is the binding commitment.
Host:
And what’s a “soft commitment”?
Tilden:
It’s simply, “Yes, I might be interested.” It’s not enforceable. Sponsors use it to gauge interest before sending full documents. The process usually goes: intro and general summary, some marketing materials, then once interest is shown, the sponsor provides the PPM, Operating Agreement, and Subscription Agreement. If the investor signs the subscription and wires funds, they’re officially in.
Host:
What happens if an investor signs but changes their mind?
Tilden:
If they haven’t wired money, usually it’s just canceled. Even if they have, most sponsors will return funds if someone changes their mind. Sponsors want long-term relationships. Forcing an unhappy investor isn’t worth it.
Host:
What about disclosures and NDAs when sharing financials like rent rolls or T-12s?
Tilden:
Most of the time, NDAs aren’t needed unless the seller requires it. These deals aren’t usually that secret. Sponsors should provide document rooms with as much information as possible. The PPM covers risks, but good sponsors prefer investors to have full access to data so decisions are informed.
Host:
For someone new who wants to become a sponsor, where do they start?
Tilden:
Desire is the first step. Yes, it’s work, but it’s well-compensated work. The next step is contacting a securities attorney who can walk you through compliance and strategy. My practice is unique because I bring my own syndication experience, not just legal knowledge.
Host:
What does it cost to structure a syndication legally?
Tilden:
Big firms may charge around $40,000. Boutique firms like mine are much less. Templates online exist, but I’ve never seen one worth using. Better to call an attorney and discuss your specific deal.
Host:
If you could go back 10–15 years with what you know now, what would you do differently?
Tilden:
Do more deals sooner. Confidence comes from experience. Early on, it took me hours to strategize how to pitch investors. Now I can look at a deal and know immediately. The more deals you do, the faster that confidence comes.
Host:
What’s been your best source of opportunities?
Tilden:
My internal network: colleagues in law, partners, even people in my office building. Doctors especially make great partners—they often buy into medical buildings together and raise capital successfully. Many of my clients have created slam-dunk deals this way.
Host:
Real estate is the business of relationships. Aligning values in those relationships means everything—for the current deal and for the next one.
For listeners who want to learn more about syndications—structuring them, 506(b) vs. 506(c), advertising rules—you can find all of that on Tilden’s website: moschettilaw.com. There you can also schedule a free consultation call and watch over 100 educational videos he’s produced.
Host:
Tilden, thank you so much for your time. You’ve really helped clear away the haze around syndication law.
Tilden:
Thank you. Having an attorney on your team not only helps you get through the process, but your investors will appreciate it.
Host:
Exactly. To the listeners, thank you for your time and attention. These documents may look long and intimidating, but there’s a reason for them. Get some deals done, do more deals sooner, and build relationships with people whose values align with yours.
This is the Real Estate Mogul MD Podcast.
Brandon (Host):
Hey everybody, welcome back to another episode. I’m your host, Brandon Cobb, co-founder of HBG Capital. Today I’ve got a very special guest, Tilden Moschetti. He’s a highly regarded expert in real estate syndications, a syndication coach, general counsel to two large private equity funds, and an active syndicator himself.
Something I always stress when working with attorneys is the importance of them being actively involved in the thing they’re advising on—and Tilden is exactly that. He’s also been featured on NPR, NBC News, People Magazine, the National Law Journal, the San Francisco Chronicle, and the Los Angeles Business Journal. We’re going to have some fun today. Tilden, welcome to the show!
Tilden:
Thanks, Brandon. I’m really excited to be here.
Brandon:
I’m excited to have you on. We’re going to dive into raising capital—not just for real estate but also for businesses. There are so many questions in this space. Why do a syndication versus a fund? Why not just a joint venture? I see a lot of people skating in the gray area, raising money improperly, and frankly, I think some are breaking the law. I’m not an attorney, but you are—so I’m excited to get the real blueprint for doing this correctly.
Before we jump into the technical side, tell us your story.
Tilden:
I originally went to law school wanting to be a developer. Many developers in my area were also attorneys, so I thought that would give me a good foundation. I had a great law school experience, but toward the end I got pulled into trial advocacy. The adrenaline of litigation hooked me, so I became a litigator and did that for about 10 years.
Most of my cases centered on real estate disputes—valuation issues, divorces, bankruptcies, partnership disputes. It was tough work, and honestly, litigation is miserable for everyone involved. After a decade I was burned out.
I did some commercial real estate brokerage on the side, and a partner showed me a great deal. He said, “We should syndicate this.” I barely knew what that meant, but we figured it out. The deal was a single-tenant medical office in Alabama—new construction, good operator, and we got it slightly below market. It worked really well.
After that, I did another deal, then another. At the same time, I was still miserable litigating. Eventually I thought, “Why am I doing this when I love putting syndications together?” So I pivoted my practice about 10 years ago. Now I help clients put together compliant syndications and funds, and I still run my own deals as well.
Brandon:
For those new to raising capital—whether for real estate, tech, or a new business—walk us through Regulation D offerings. What are the vehicles people can use to raise money without needing a Series 7 or broker’s license?
Tilden:
It starts with understanding what a security is. A security exists whenever investors are putting up money and their return depends on someone else’s efforts. If that’s the case, it either has to be registered with the SEC (like a public offering, which is hugely expensive and complex) or it has to qualify for an exemption.
The most widely used exemption is Regulation D. About 97–98% of private offerings use it. It’s flexible, allows you to raise unlimited amounts from accredited investors, and gives you two main options:
Rule 506(c): You can advertise publicly, but only accredited investors are allowed, and their status must be verified.
Rule 506(b): You can include up to 35 non-accredited investors, and you don’t have to verify accreditation, but you cannot advertise publicly.
Brandon:
So basically, if someone gives you money but isn’t actively involved in the deal, that’s a security.
Tilden:
Exactly. If investors are passive, it’s a security. If they’re actively involved in decision-making or operations, then it may be more like a joint venture.
Brandon:
Makes sense. Now, one gap I’ve seen working with syndication attorneys is around education. Many are great at producing documents—PPMs, subscription agreements, Blue Sky filings—but when we were new, we had tons of compliance questions. I didn’t want to break any rules, and frankly, most attorneys didn’t want to advise us beyond the paperwork. Why is that such an issue, and how do you approach it with clients?
Tilden:
The problem is many securities attorneys haven’t done their own deals. Their mindset is purely legal compliance, not “How do we get this deal across the finish line?” My approach is different—I’ve sat across from investors and pitched deals. I know the balance between compliance and getting the raise done.
My job is to help clients have successful offerings, and part of that is being a team member. That means not just drafting documents but also advising on things like advertising, investor communication, and strategies that keep them compliant while still moving forward.
Brandon:
Give us a real-world example of where people try to cut corners and how you guide them.
Tilden:
A common one: a sponsor is raising $5 million, has $4 million raised, and someone offers to bring the last million—if they can be paid a performance-based fee as a “finder.” That’s generally prohibited.
The simple solution is to structure it so that person becomes part of the sponsor team and takes on active responsibilities—like investor relations or marketing. As long as they’re truly active, it’s compliant. But if they just want a cut for raising money, it’s a violation.
Brandon:
So the bottom line is: if someone is raising capital for you, they need to add real value beyond just bringing money.
Tilden:
Exactly. Otherwise, it risks crossing into broker-dealer activity, which requires licensing.
Brandon:
Another area I see a lot is house flippers borrowing from friends and family. How does that fit?
Tilden:
If you borrow money from friends and family for your business, it’s still a security, even if you use promissory notes or deeds of trust. Banks and professional hard-money lenders are different—they’re in the business of lending, so the Supreme Court has said that doesn’t count as a security. But if your aunt loans you $100,000 with interest, that’s a security and should be handled under Regulation D.
Brandon:
Got it. What are other common mistakes you see?
Tilden:
Using unlicensed “finders” to raise money.
Mislabeling something as a joint venture when it’s really a security.
Funds of funds structured incorrectly—especially customizable ones that act like investment advisors or broker-dealers without licensing. I expect regulators to crack down on that.
Brandon:
This has been a treasure trove of advice. If people want to learn more about you and your services, where should they go?
Tilden:
Best place is my website, moschettilaw.com. I also have over 200 educational videos on YouTube covering all these topics.
Brandon:
Perfect. We’ll put that in the show notes. Tilden, thanks so much for coming on today.
Tilden:
Thank you, Brandon. I really appreciate the opportunity to connect with your audience.
Brandon:
And to the listeners: if you got value from this episode, show Tilden some love, subscribe, like, and share this with your friends and family. We’ll see you next time!
[Intro]
Welcome to Zen and the Art of Real Estate Investing. What if you could learn from experienced real estate investors, find out what got them to where they are now, and get insight into their daily habits? Each week, Jonathan Green shares an in-depth look at the mindful approach to real estate investing. Jonathan is a lifelong real estate investor, adviser, and coach, as well as the founder and team leader of Streamlined Properties. Whether you’re starting from scratch, looking to level up, or just want a straightforward and honest approach, this show is designed to provide a free mentorship program you can take anywhere.
Jonathan Green (Host):
Thanks for tuning in. We have a great show for you today—a syndication show with a twist. My guest is Tilden Moschetti. He’s a syndication coach, a syndication attorney, and a very experienced syndicator himself. We’re going to talk about expert legal guidance to become a “syndication lion,” and by the end you’ll hear exactly what that means.
This is also a legal episode, so if you’re interested in syndication now or in the future, you’ll want to listen closely. This is episode 185 of Zen and the Art of Real Estate Investing with my guest, Tilden Moschetti.
Jonathan:
Tilden, welcome to the show!
Tilden:
Thank you very much for having me. I’m excited to be here.
Jonathan:
We’ve had a number of syndication episodes, but yours comes with a twist because you’re both an attorney and an active syndicator. Let’s go back. When was the first time you remember thinking seriously about real estate?
Tilden:
Since I was a kid. My hobby at seven or eight years old was drawing floor plans. My parents had giant graph paper, and I would measure our house, draw out the plans, and even use them to find new hiding spots. I must’ve done it a hundred times.
Later, when I went to get my MBA, I was already thinking about development. My idea at the time was to build modular, assisted-living facilities. To really understand how to do it, I figured I needed to become a lawyer—so I went to law school.
Jonathan:
That’s interesting. I remember property law in law school being mind-blowing because I grew up with a father who was an investor. Did you have the same feeling?
Tilden:
Absolutely. Property law was my favorite class. I might’ve been the only one in my class who loved it, but I did. I didn’t care for torts, but anything tied to property and tax fascinated me.
Jonathan:
Were you already thinking about buying property while in law school?
Tilden:
Yes. I was constantly on LoopNet, looking at land deals. I didn’t have money at the time—everything went to tuition—but I loved thinking about what could be built on certain parcels.
Jonathan:
So from the beginning, you were thinking commercial, not residential.
Tilden:
Exactly. Residential sketches were just fun. But when it came to investing, I was always drawn to commercial.
Jonathan:
When did you actually start investing?
Tilden:
It took a while. After law school, I became a litigator instead of going directly into development. I practiced for about 10 years, mostly cases tied to real estate—valuation disputes, divorces, partnerships, bankruptcies. Real estate was always the underlying asset.
But I didn’t like litigation. Everyone was unhappy: clients, opposing parties, even my own clients hated calling me because they’d get billed.
Jonathan:
When did syndications come into play?
Tilden:
About 10 years in. I was doing some brokerage to work with more “normal” clients, and a partner showed me a deal in Alabama. He said, “We should syndicate this.” I knew a little, but not much. I figured it out, and it worked. Then we did another deal, then another, and I realized I loved this area. That’s when I shifted my practice to focus solely on syndications.
Jonathan:
That’s a big pivot. For listeners new to this, can you explain what a syndication is?
Tilden:
Sure. At its core, a syndication is pooling money from investors who are passive. That makes it a security. Securities must either be registered with the SEC or fall under an exemption. The most common exemption is Regulation D. Reg D lets you raise unlimited funds from accredited investors, sometimes from non-accredited investors, and in some cases advertise the offering.
Jonathan:
Social media has put syndications everywhere lately. Have you seen the landscape change?
Tilden:
Definitely. My first deal was around 2012–2013, right when the JOBS Act opened the door to broader advertising under 506(c). Since then, revisions have made things even simpler. That’s why you see so many people advertising syndications online today.
Jonathan:
And with that, you also see inexperienced operators.
Tilden:
Yes, and that’s where problems arise. Most of my clients are legitimate and want to do it right, but some operators jump in without understanding the legal requirements. They think putting investors into an LLC operating agreement is enough. It’s not. That’s a securities violation waiting to happen.
Jonathan:
What about the biggest issues you’re seeing now?
Tilden:
Poor underwriting. For example, I reviewed a deal in Houston where the operator planned to convert workforce housing into luxury apartments in the middle of a workforce-housing neighborhood. The assumptions were unrealistic—double rents, complete repositioning—and it collapsed.
Jonathan:
So conservative underwriting is key.
Tilden:
Always. Promise 13% and deliver 17%. Never the other way around.
Jonathan:
Let’s talk investors. Do you find they fall into two camps: cash flow seekers vs. appreciation seekers?
Tilden:
Exactly. Some investors don’t want quarterly checks—they want the big payoff at the end. Others want steady, predictable income. As a sponsor, you need to know who you’re pitching to.
Jonathan:
That’s great advice. What about “syndication lions”—I saw that term associated with you.
Tilden:
It’s about mindset. Syndication lions are operators who take responsibility, protect investor money, and attack opportunities with focus and drive. It’s action-oriented. I treat my investors’ money more carefully than my own, and I want to outperform expectations every time.
Jonathan:
Where can people connect with you?
Tilden:
Visit moschettilaw.com, check out my YouTube channel with over 100 videos on syndication law and strategy, or connect with me on LinkedIn.
Jonathan:
Perfect. Tilden, thank you for bringing both legal expertise and syndication experience to the show.
Host:
Good day, fellow dealmakers! Welcome to The Deal Scout. On today’s show we’re going to have a conversation with a securities attorney who’s going to talk to us about Regulation D. If you’ve been learning about raising capital through our past shows, this is going to unpack it even further.
Mr. Tilden, welcome to the show.
Tilden:
Super nice to meet you, I’m very excited to be here.
Host:
Good to see you! Where are you calling in from today?
Tilden:
I live in Raleigh, North Carolina. I’ve got an office in Los Angeles and one in Washington, DC, but the reality is my practice is national—I can live anywhere, so I choose to live here.
Host:
Very cool. So what the heck is Regulation D? Let’s dive straight in.
Tilden:
Let’s start first with what a security is. A security is really any time somebody is looking to raise money and their investors are going to take a passive role. More likely than not, that’s a security. And a security either needs to be registered with the SEC or fall under an exemption. One of those exemptions is Regulation D.
Reg D lets you raise an unlimited amount of money from an unlimited number of accredited investors. Sometimes you can raise from non-accredited investors, and sometimes you can advertise.
Host:
Right, so within Reg D there are different parts. Some allow general solicitation, some don’t. Can you break down when you can publicly talk about it and when you can’t?
Tilden:
There are really three rules. One, Rule 504, we almost never use anymore—it’s clunky and not practical. The two rules we do use are Rule 506(b) and Rule 506(c).
Rule 506(c): You can raise unlimited money and advertise all you want—put a billboard on Main Street, market it online—but every single investor must be accredited, and their status must be verified by a third party.
Rule 506(b): You can also raise unlimited money, and you’re allowed up to 35 non-accredited investors in any 90-day period. Accredited investors can self-certify. The catch is you cannot advertise—no general solicitation. It’s all within your existing network.
Host:
Got it. So 504 is basically obsolete, and the real choice is between 506(b) and 506(c). Why do they even allow 35 non-accredited investors in 506(b)?
Tilden:
It’s essentially a limitation to protect the public from fraud. If there were no limit, it would be easy to solicit on the side and pull in a bunch of people in shady ways. So the SEC created a gate—35 non-accredited investors within a rolling 90-day period.
Host:
So how do you choose between 506(b) and 506(c)?
Tilden:
The first question is: where are your investors coming from?
If you know you can raise the money from your own network, 506(b) is simpler. You don’t have to verify accreditation, and you can allow in some non-accredited investors.
If you need to go outside your network and advertise, then you must use 506(c).
You can technically start with a 506(b), close it, wait 30 days, and then re-file as a 506(c) to advertise—but once you switch to 506(c), you’re done with non-accredited investors.
Host:
Makes sense. Who is Reg D really for? What’s the sweet spot?
Tilden:
Really anyone who needs to raise capital in a straightforward way. If you’re raising large amounts—more than $5 million—it’s almost always Reg D. It works well for real estate syndications, funds, and business ventures where the returns are intended to be reasonable and not overly speculative.
If you’re raising small amounts or want lots of small investors (say, $100 each), Regulation Crowdfunding (Reg CF) or Regulation A+ might make more sense. But Reg CF and Reg A come with higher costs, more review, and often take longer.
Host:
What about friends and family investments?
Tilden:
That’s still a security. Even if Grandma gives you $10, it’s technically a security if she’s passive. Now, the SEC is not going to prosecute over $10 from Grandma, but legally it still qualifies. These issues usually come up if there’s ever a lawsuit, because then it gets scrutinized.
Host:
So let’s talk about accredited investors. What qualifies someone?
Tilden:
There are two tests:
Income test: $200,000 annually for the last two years (or $300,000 with a spouse) and a reasonable expectation to make it this year.
Net worth test: $1 million in net worth, not counting the equity in a primary residence.
Host:
So when you’re doing a 506(c), how do you actually ask someone if they’re accredited?
Tilden:
Most people put it right in their materials: “For accredited investors only.” That way they’re not wasting time. Later in the process, you require verification by a third party (CPA, attorney, or verification service). It’s not a first-date question, but it should be made clear early on.
Host:
You call yourself “The Syndicators and Fund Managers Attorney.” What exactly is a syndicator?
Tilden:
A syndicator is someone who puts deals together and raises capital for them—whether it’s a single asset (like an apartment building) or multiple assets in a fund. The legal framework is the same.
Host:
What about finders fees? I’ve been asked a million times, “Hey, raise money for me, I’ll pay you.” How does that work legally?
Tilden:
If someone is paid a percentage based on the amount of money they raise, they need to be a licensed broker-dealer. Period. Paying unlicensed finders is prohibited, and if discovered, it can void the entire offering. Sponsors would have to return all the money plus damages.
What you can do is pay a flat fee or hourly fee for marketing, branding, or general consulting. But no success-based compensation unless you’re licensed.
Host:
That’s huge. Okay—let’s pivot. How did you personally get into this field?
Tilden:
I originally went to law school to be a real estate developer. I ended up litigating for 10 years, mostly real estate disputes, but I hated it. Everyone was miserable. Then I stumbled into syndication through a partner who showed me a deal in Alabama. We syndicated it, it worked, and I realized I loved this kind of work. Eventually I pivoted my entire practice to focus solely on securities law for syndications and funds.
Host:
That’s a big shift. How has your life changed since moving from litigation to syndication law?
Tilden:
Completely. Back then, clients didn’t even like calling me because they knew it meant getting billed. Now, I genuinely enjoy my work, my clients are happy, and it’s all about creating win-win deals instead of tearing people apart. It’s a much better world to live in.
Host:
What advice do you have for someone who wants to start raising capital?
Tilden:
Don’t let fear stop you. Everyone worries—“Am I good enough? Can I raise this money?” But it’s a well-trodden path. Unless you commit fraud, there’s very little downside for the sponsor if a deal fails. And the upside is huge.
The most important thing: learn to tell a compelling story. Investors invest based on emotion first, then justify with logic. Numbers alone won’t sell the deal. A clear, inspiring story will.
Host:
That’s gold. Where can people connect with you?
Tilden:
Visit my website at moschettilaw.com, check out my YouTube channel with over 200 videos, or connect with me on LinkedIn.
Host:
Perfect. Fellow dealmakers, Tilden’s contact info will be in the show notes. Thanks for joining us today!
Host (Gabe):
This is The Money Seed Podcast where we discuss all things investing, plain and simple, the way it should be. Please remember this show is for educational and entertainment purposes only and is not intended to be investment advice. Welcome back to The Money Seed Podcast. My guest today is Tilden Moschetti, and we are talking about syndications. Welcome to the show.
Tilden:
Thanks, Gabe. I’m very excited to be here and looking forward to our chat.
Host:
You’ve been a real estate attorney for about two decades, and a while ago you transitioned into being a syndication attorney full-time. In a nutshell, what does a syndication attorney do?
Tilden:
Basically, I help real estate developers, people who want to start in real estate, real estate professionals—really anybody who’s looking to raise money from investors who are going to be passive. I help them stay compliant so they don’t get in trouble with either the state regulators or the SEC, and make sure they’re providing the level of service they should to their investors.
Host:
A lot of people invest in real estate—maybe they move and rent out their home, or get into an Airbnb. The next step might be getting together with a few friends, starting an LLC, and having the LLC own a property or two. From a legal perspective, what is a syndication?
Tilden:
By definition, a syndication is a group of people coming together for a common purpose. In practice, we’re usually talking about one person—or a small group—running the show and bringing in passive money to make the investments. That can be real estate, but it isn’t limited to real estate; it could be a business or something else. Most of my work is real estate—probably about 80% of my clients are real estate developers and professionals.
Host:
You mentioned passive money. What’s a legal definition of passive money?
Tilden:
There isn’t a hard-and-fast definition. It’s about the totality of the circumstances. If someone is putting together a deal and says, “Give me your money, we’ll go into an LLC together, and I’ll run the show and make the profits,” that’s likely a security, regardless of how they try to label it as “active.” It’s a “does it look like a duck, smell like a duck” test. If all the decisions—leasing, property or asset management—are made by others, that investor is probably passive, especially if someone is getting paid fees or bonuses to run it. That’s when it’s a security.
Host:
Tell us about your first syndication and how you got into this space.
Tilden:
I was a real estate attorney focused on litigation—cases tied to real estate, usually around valuation, ownership disputes, or rights, often in bankruptcy, divorce, or partnership fights. It’s an unhappy world, and after ten years I was burned out. I noticed real estate agents were doing well, so I started doing brokerage while still litigating. I earned the CCIM credential and did well, and then a partner on the brokerage side brought me a deal. He said, “We should syndicate this.” I’d heard the term but didn’t know how to do it. I spent a lot of time figuring it out, launched the deal, it was successful, did another, then another. I realized I was good at the legal and practical sides—reading the law, applying it, and talking to investors. I didn’t enjoy litigation anymore, so I moved to helping syndicators do their own deals.
Host:
Let’s say someone finds a really good apartment building deal. They see an opportunity to upgrade units, increase rent, and make money, but they don’t have enough capital and want to raise from friends, colleagues, or acquaintances. High level—what does it take to put a syndication together so no one gets in trouble with the IRS or the SEC?
Tilden:
If you’re bringing in investor money, it’s probably a security. You have two choices—one you’re not going to take: registering with the SEC, which is like going public—expensive and slow. The other is using an exemption. There are several, but I specialize in Regulation D, which allows raising an unlimited amount from an unlimited number of accredited investors. So once someone identifies the building, the goals are: how to bring investors in, and how to move the deal forward. We handle compliance and also make sure the deal is structured so the sponsor is compensated fairly and investors still want to come in. You can’t keep all the money—no investors will come. You also can’t give away the farm or you’ll work for nothing. There’s a middle ground. Our work is compliance and also designing compensation so everyone makes money and feels good about it.
Host:
What’s a good split? A lot of people say investors want 10–15% before they’re interested—because you can probably get 8% in the stock market. Let’s say investors want ~15% to start thinking about joining a syndication. On the back end, the sponsor puts in a lot of work and wants compensation too. What compensation models work in practice?
Tilden:
Many people do a preferred return with a split, but I don’t start there for my own deals. I start with what investors need, based on experience. If it’s a stable building, investors might need a 15% IRR. If it’s super safe, maybe closer to 10%. If it’s riskier, maybe 20% or above. If my target is 15%, I work the math backward: all-cash, debt-only, or debt plus investor equity—how do I maximize sponsor compensation while ensuring investors still get their 15%? Sometimes that results in a pref and split; sometimes fees off the top. The key is mathing it out to a design you can stand behind when talking to investors: “You’re going to get this 15%, here’s why we structured it this way.” In general, investors probably need 10–20%+, depending on risk. Some sponsors with strong trust can pay less—8% or even 6%—because trust and risk trade off.
Host:
How long does it take to put everything together—agreements, legal structure—before you can execute?
Tilden:
My turnaround is generally two weeks. I think I’m the fastest—maybe not, but I think so. That’s from hiring to the point where they can raise money without legal problems. In a pinch, we can shrink it to about a week. Then comes the raise. If investors are lined up with commitments, it can take a couple of days. I have one sponsor who can put out a huge deal—last one was around $500 million—and raise it in two days. Most people aren’t that fast. So it varies, but on my side it’s one to two weeks—one week at the absolute fastest; two weeks is more reasonable.
Host:
In terms of legal structures, are some states more investor-friendly than others? Which states do you prefer?
Tilden:
I don’t have a state preference. Tax rules sometimes influence where we form the company, depending on structure. A few states have more zealous regulators—again, not in a bad way—and I prefer to avoid filing in those when possible. But Regulation D preempts most state rules; states can mainly ask for notice filings. A few states occasionally seem to forget that preemption, but it’s rare and has to be pretty strong for them to push it.
Host:
Maybe the trickiest question: how do syndicators find investors? Finding the deal and doing the paperwork is one thing, but how do you find people with money to invest?
Tilden:
There are two pools. With Rule 506(b), it’s people you already know—that’s your core, whether you’re doing 506(b) or 506(c). Even if you advertise under 506(c), you’ll still tap your network. The number-one job is constantly building and growing that network. Bigger network plus more trust equals easier raises. With advertising (506(c)), you have to move prospects from cold to trusting you with $100,000. That’s harder but doable—formal advertising driving to calls and meetings, or content like webinars to grow the network before asking. It’s about proving you’re worthy of trust.
Host:
For your very first syndication, how did you get the money together?
Tilden:
It was a 506(b) raise—people within my and my partner’s networks. It was a lot of conversations. The first person I thought would say yes said no. I learned a lot—especially about risk tolerance. The second person said yes, and I learned how to align deals with what specific investors are looking for and how to talk about it.
Host:
You’ve worked with a lot of syndicators. What sets successful ones apart?
Tilden:
Work. They do what it takes to bring investors in, make deals, and get it done. They think long-term. I’d rather have someone say no to this deal and yes to ten later than burn a bridge today. And focus on the story. You can’t just pitch “15% IRR and an 8% pref.” Someone else will say 16% and 9%. The way to compete is by building trust and belief in you and the project. That comes from storytelling and the emotional reasons to invest, alongside the numbers.
Host:
What red flags should first-time investors look out for?
Tilden:
Sloppy documents—obvious templates—signal they don’t care enough to show up as professionals. Too much pressure—“It’s sold out in four hours, sign now, don’t read the docs.” Run from that. Syndication can move quickly, but not so fast you can’t think for a week. And trust your gut—if something feels off, walk away. There are plenty of other syndicators with good deals. I use the same rule in my practice when deciding whether to take a client.
Host:
I’ve heard you talk about something called the “Founder Investment Theory.” What is that?
Tilden:
It was born from that first meeting where the investor passed. It ties directly to selling the story of the investment. You need a clear “because.” “I’m investing in ground-up development of this product in this location because…” Without the “because,” it’s hard to explain why anyone should invest. The theory connects the emotional and rational reasons to buy. Are we matching the investor’s risk tolerance—steady cash flow vs. big risk? Is it a cash-flow deal or an appreciation play? Cash-flow investors won’t invest in pure appreciation, and vice versa. Speak the right language to the right people and you’ll find better-matched investors.
Host:
Tell us more about your practice—where can people find you?
Tilden:
We specialize in Regulation D offerings and do a ton of real estate. We prepare the private placement memorandum, operating agreement, subscription agreement, investor questionnaire, file Form D, and handle state notices—all the compliance pieces. What sets us apart is my boots-on-the-ground experience. We work on a flat-fee basis—no hourly billing—so clients can talk strategy, including how to find investors. Best places to find us: YouTube (lots of videos) and online at mkyLaw.com. On YouTube, search “Moschetti Syndication Law” or “syndication attorneys.”
Host:
Sounds good—I’ll put those in the show notes along with your URL. Tilden Moschetti, thank you for joining us today.
Tilden:
Thank you for having me—I really enjoyed talking with you.
Host:
Thanks for joining us for another episode of The Money Seed Podcast. Please click like and subscribe—it helps spread the message to other investors and attract new viewers. We appreciate your support.
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Host (Steve):
Welcome to the Cash Flow Project Podcast. Are you looking to better your financial situation by increasing your cash flow? Too busy to hunt for real estate deals or don’t know where to start? Then you’re in the right spot. Join us as we dive in and talk about investing for cash flow using multifamily real estate. Welcome to the Cash Flow Project Podcast—I’m your host, Steve, with Tri-City Equity Group. Today I’m excited—we’ve got Tilden Moschetti on the show. He’s a securities attorney who helps fund managers, venture capitalists, and syndicators of all types of deals and sizes ensure that their deals are legal, their documents are SEC-clean and compliant, and their business models work. He’s been practicing law for 20 years, exclusively for investors and syndicators. He’s an active investor himself and fund manager, and understands the needs and mindset of real estate syndicators. Hey, Tilden, welcome to the show.
Tilden:
Thank you so much. I’m very happy to be here and excited to talk today.
Host:
I appreciate you taking the time and jumping on—sharing your experience and knowledge with me and our audience. I always like to start off with some backstory for listeners who may not be familiar with you. How did you get involved in real estate, and of course you’ve got experience on the legal side—what’s the story there? Are you a third-generation attorney or something? What’s going on?
Tilden:
No. I’d finished an MBA and decided I wanted to do real estate. My idea was to use manufactured housing for extended care for active seniors and adults, but I had no idea how to do it. I looked around at other developers and saw a number in my area who were also lawyers, and thought, “That makes sense. I should get a law degree—it’ll be easier to raise money and know what I’m supposed to do.”
So I went to law school, focused on real estate and property. Toward the end, I did a trial advocacy project and loved it—it was an adrenaline rush—so I became a trial lawyer instead and did that for about 10 years. I worked everywhere from the District Attorney’s office and ultimately opened my own shop, focusing on disputes around real estate—ownership, valuations, things like that.
But the adrenaline wore off. Trial work is painful and not fun for anyone in a lawsuit. I burned out, started doing some brokerage, and one of my brokerage partners came to me with a great deal. He said, “We should syndicate it.” I had no idea what he meant, but said, “Okay, I’ll figure it out.” We did the deal; it was successful and really enjoyable. I did another, then another. At that point I thought, “This is going well and I enjoy this. Why am I litigating?” So I stopped litigating altogether and focused on helping syndicators put together deals.
Now I merge that with my own deals—I still do them—and I help other syndicators, bringing real-world experience. I’ve been where they are: I’ve sat across from clients, answered questions, figured out how we’re going to raise money. It’s a great process.
Host:
Love to hear that. It’s always a testament when someone in the industry is actively doing deals. Not only are you providing a service, but you’ve been in our shoes—that’s a tremendous help. Kudos to you.
Tilden:
I don’t know why there aren’t more attorneys doing deals. We see deals every day. It’s fun, it makes good money—why wouldn’t you? For me, legal costs are free, so that’s not a problem.
Host:
You’ve got a competitive advantage there. It also sounds like you went into law already with a deal-maker mindset. Most professionals start the career, then later think about diversifying. You came from the other angle.
Tilden:
I’ve always had that entrepreneurial bent. Out of college, I helped people put businesses together. None became huge while I was in them—some did later—but I loved the ideas. That’s the best part of working with clients. We work with about 100 clients a year; I talk to 200–300 people a year about what they’re working on. I love hearing all the great deals and ideas I’d never think of on my own.
Host:
Given all those contacts and exposure to operators and syndicators—even if they’re not in your target markets—have you been able to team up beyond just being the attorney?
Tilden:
Yes. I’ve worked with a few clients on their deals as more than just the attorney. My practice is growing into more teaming and joint ventures, while keeping the law practice, just to expand my reach and do more interesting, fun things.
Host:
You came out of trial work—any crazy stories? That must’ve been an adventure.
Tilden:
It’s a hard world. You don’t want to be in a lawsuit—no one does. Even if you’re the one suing, it’s not pleasant. My cases involved a lot of fighting—divorce, civil disputes, etc. I was in court two or three days a week, which is a lot. You do learn perspective—how other people see the world—and that pays off when dealing with investors: figuring out where they’re coming from, whether it’s a good fit. If it’s not, that’s fine—they probably won’t invest, so don’t waste time. I’ve also gotten great ideas from clients and investors about ways to offer things I might have missed if I wasn’t listening.
Host:
Right—everyone has different strengths. You can handle legal, others are great at marketing or negotiation, and you can learn from them. Also, compared to trial, deals feel less life-or-death.
Tilden:
Totally. Clients’ deals are extremely important, and I take them seriously, but no one’s business is going under in an hour. You don’t need to answer that email in an hour; a day is okay. You stop freaking out. In trial, no one’s happy—clients hate the situation, and you’re just trying to get to a resolution. Settlement is usually better. That’s similar for syndication: be adaptive, move around, and serve as many needs as you can while still making money yourself.
Host:
Win-win negotiating applies in both worlds.
Tilden:
Exactly. Most sponsors I work with put investors first. That’s good for the industry and keeps you out of court. Even if investors lose money, if communication is great and they feel heard, and they believe the sponsor did their best, they usually won’t sue. The mindset of working together to make money is what’s great about syndication.
Host:
Let’s switch gears. You’re running your own deals and effectively managing a fund. What’s your business like on that end?
Tilden:
Right now we’re putting together a logistics deal in Texas. I’m also putting together a fund of income-producing properties—more of a cash-flow fund, which isn’t my normal thing (I’m usually focused on upside). And I’m looking at ways to work more with my existing client base and grow the business.
Host:
Market’s been volatile for almost two years. How are you and your clients navigating it?
Tilden:
Rates are the biggest challenge. I’m incredibly bullish on alternative investments. A lot of people are burnt out on public markets. In public companies, retail investors have little control. You can’t call the CEO and ask why a decision was made. With a sponsor, you can. As we democratize investments, alternatives only get better. There isn’t a lot of fraud—it happens, but it’s rare. With good diligence, there are many good deals.
Host:
Most investors haven’t had exposure to these options before. Now there’s more access than ever.
Tilden:
And they’re more interesting. Ownership in a public company isn’t that interesting. Ownership in the strip center down the street is cool.
Host:
People think real estate is cool but don’t want to be landlords. There are other ways to become part-owner. You’re also not limited to your backyard.
Tilden:
Right. I’m agnostic on location and property type. My first deal was in Alabama. I did a couple in California when I was there—though I’m not looking in California now. I like stories; I want interesting deals. Cookie-cutter isn’t my thing.
Host:
Because you see so many deals, trends must pop. What are you seeing lately—asset types, strategies—and any solutions to rising taxes/insurance?
Tilden:
Two big trends the past year or two: more interest in debt funds, and more investors wanting fixed payments over equity. Development is still hot, but not so much multifamily apartments. I’m not sure I have any clients building apartments right now. There’s a lot of single-family development, retail has been strong, and short-term rentals and large hospitality/resorts are hotter than before. Five years ago, almost everything was multifamily value-add; now good deals there are harder to find.
On increased costs—insurance has jumped dramatically in many states. Carriers say they’re barely breaking even due to disasters. My advice: be very conservative on underwriting. It’s better to under-promise and over-deliver. If you tell investors 15% IRR and hit 13%, it doesn’t feel as good as if you’d set 12% and beat it. Investors are smart; no one buys into “100% IRR” hype. Honest, conservative underwriters win trust, and you can’t get investors without trust.
Host:
There’s still a lot of capital, but it wants solid homes with people it likes and trusts. Repeat investors are key.
Tilden:
Exactly. About 70% of my investors come into my next deal. That’s what you want—repeatability—so you’re not starting from scratch each time.
Host:
Time for the Fire Round—brief Q&A. First: best book you recommend (other than Rich Dad Poor Dad)?
Tilden:
The Sports for the Soul series by Darren Donnelly. They’re motivational, using sports stories and analogies for life and performance. My favorite series.
Host:
What’s your superpower?
Tilden:
I’m good at moving deals into sellable, interesting stories. People decide emotionally before rationally. I can find the hook so marketing teams can make it compelling.
Host:
Biggest lesson learned?
Tilden:
Always, always over-communicate. It keeps you out of trouble and keeps everyone happy. Quarterly updates are fine, but also encourage phone calls and ongoing communication.
Host:
Advice for the busy professional working toward financial freedom?
Tilden:
Do it. If you’re doing the right thing and you work at it, the odds are in your favor. If you need partners, bring them in—but take action. It won’t happen through planning alone.
Host:
If our audience wants to reach out—what’s the best way?
Tilden:
Call my office or visit our website, moschettilaw.com. If you have questions about how this works, I have a bunch of YouTube videos. Don’t be afraid to reach out and set up a time to talk.
Host:
Tilden, I really enjoyed having you on the show. I love conversations with people out in the field making things happen—thanks for taking the time.
Tilden:
Thank you—I appreciate your show and getting to talk with you. I’m excited.
Host:
Great conversation with Tilden Moschetti of Moschetti Law—working with syndicators and investors who need legal help structuring deals. He’s an active investor too, which I find super valuable. If you’re interested in investing with us, go to TriCityEquity.com to learn more about the team, our business, and what we’re working on. If you’re on Oahu—whether visiting or based here—come join our monthly meetups: multifamily and more. Great people, organic networking, and real connections.
If you found value in the podcast, we’d love a five-star review and your feedback—how can we improve? We want to keep making the content better, expand your network, and provide great value. That’s it for today—go out, take action, and we’ll see you next time. Aloha.
Brandon Bruckman:
Welcome to the Retiring Real Estate Investor podcast where we will discuss how to defer taxes on the sale of your property, earning passive real estate income and everything you need to know to go from active investor to passive investor. Join us as we interview passive investment sponsors, explore the journey of other retirement real estate investors and share our due diligence process we performed to select passive investments.
Investment Advisory services provided by Insight Investment Advisors, LLC registered investment advisor. This podcast is only intended for clients and interested investors residing in states in which we are registered to provide investment advisory services or exempt from registration. Please contact us to determine if the firm provides investment advisory services in the state where you reside.
All content in this podcast is for informational purposes only and should not be considered investment advice. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. Insight Investment Advisors LLC and its representatives do not provide tax and legal advice. Nothing herein should be construed as such – always consult with your tax advisor or attorney regarding your specific circumstances.
Welcome everyone to another episode of the Retiring Real Estate Investor podcast. I’m your host, Brandon Brockman. I’m excited to be joined by our first legal eagle to bring on to the pod – Tilden Moschetti. Thank you so much for hopping on and talking to us today. I was looking at your LinkedIn before the show. You are the syndicator and fund managers’ attorney. You are the guy, yeah?
Tilden Moschetti:
I hope I am the guy. Yeah. Thank you for having me on your show. I’m really excited to be here and hopefully can help your listeners with some great stuff.
Brandon Bruckman:
That’s awesome. We were talking a little bit pre-show about the structures that some of our investors are facing, for many of them the first time they’ve ever seen anything like this before. They’re very unfamiliar with it. So it’ll be very helpful. First, let’s give our listeners some background. How’d you get here? What was your journey? And how did you end up in this space?
Tilden Moschetti:
Sure. So out of college, I got an MBA, and I had kind of decided that I was going to be a real estate developer. As I looked around, I saw a lot of other developers in my area at the time were also attorneys and I thought, okay, that makes sense. You understand property law and those things. So I’m gonna go to law school as well. It’ll make it easier for me.
So I went to law school and took all the courses primarily focused on real estate or securities, or business-oriented stuff. Towards the end of my law school career, I got a little sidetracked and did a program in basically trial law. I really liked it. I liked the adrenaline rush from it. But it was also a closed community and it wasn’t real life.
So I got out of law school, I worked for the district attorney for a while. I then hung up my own shingle, doing just litigation on real estate. So if it dealt with real estate as a property or valuation type issue, those were the kinds of things – partnership disputes, divorces, bankruptcies, whatever it was, as long as it had an undertone of real estate. I did that for 10 years, and it was very painful. The world of practice mock trials is very different than the real thing. It’s a lot of stress. And so I didn’t like it very much.
I started working on transitioning out and started dabbling in some real estate brokerage and things like that. During that time on the real estate brokerage side, one of the people I worked with came up to me and showed me a deal. It was in Alabama, and he said that you got to see this deal. It’s really great. So I looked at it and was like, wow, that is a really good deal. How are you getting it so cheap? It was still under development and had some real great possibilities.
He said, “Yeah, we should syndicate.” And I was like, “Oh, sure. I have no idea what that is, but it sounds awesome. We can do that. I can figure out basically what he was talking about.” So I’m a lawyer, I can figure out how to do this. That took a little while. It ended up, we put the deal together and made good money and clients made good money, and everybody was happy. We did another deal and another deal.
I thought, oh, well, why am I trying to close my law practice when I’m good at this, and I enjoy this side of it? So why don’t I transition over to just helping syndicators out? And so that’s what I did. That was about 10 years ago. And it’s been really great since.
Brandon Bruckman:
That’s awesome. It’s a great story of kind of wandering down this path a little bit, but with some guardrails, right? You knew you were kind of headed from a real estate perspective, and you stumbled upon the syndication side. Let’s get into that maybe as a starting point. What are the top things investors coming to this, maybe for the first time, should be watching out for as they look at the structure? A lot of our investors are coming out of active real estate to passive. It’s the first time they’ve seen a syndication, they’re saying “What’s a syndication?” It’s the first time they’ve seen the structure.
Tilden Moschetti:
The biggest thing that I tell my clients who are those syndicators, and that I would certainly tell your clients, is it all comes down to trust. Syndicators are never going to get anybody to invest in their deals unless the investor trusts them and unless they’ve earned that trust. The flip side of the coin is, don’t go into any deal if you don’t trust the people behind it. Just don’t do it. It’s not gonna go well. But if that trust is there, then it starts being interesting.
So that’s kind of the most important thing that needs to take place. It is a legitimate system, there are a set of rules. Almost everybody uses Regulation D from the SEC, which is a set of rules that have kind of evolved over time. Really started in the 80s but was very unworkable in the 80s. Got much better with the JOBS Act, got even better in 2013, and then even better again in 2017, which is the same set of rules that we’re using now.
So investors are able to come into these deals, and they’re buying what is a security. Rather than owning the actual title to the property, what investors are actually getting is a piece of an LLC or a limited partnership or something like that. When you break things up like that, it stops being that fee simple title that you think about when you’re buying real estate. Now you’re buying a security. So there are certain rules that the sponsors are required to follow in order to make those available and so that they can get paid. Those are the rules that are underneath Regulation D.
Your listeners definitely want to know that this is a legitimate thing. There are rules that govern it. And it’s important to make sure that the rules are being followed, not only because most of the rules are there to protect the regular investors anyway. But if the rules aren’t being followed, there’s probably more systemic issues at play. Like if it’s under Regulation D, but there’s not going to be a filing with the SEC, that’s kind of strange. Or if there’s people getting paid finder’s fees, which isn’t allowed. Then why is that going on? Those are like chinks in the armor that maybe this isn’t the best deal. And maybe there are other deals that are better.
Brandon Bruckman:
You mentioned a couple of those pieces in Reg D. Can you walk through some of those from a high level? What are the high-level rules that we should be looking for? Definitely the registration and the finder’s fee type things that may be going on. What else is sort of red flag-ish for investors?
Tilden Moschetti:
Sure. So there are two big main rules that these investments tend to fall under – Rule 506(b) and Rule 506(c). Both let the sponsors raise an unlimited amount of money from an unlimited number of accredited investors and sometimes up to 35 non-accredited investors. If they choose to go with non-accredited investors, that’s great under Rule 506(b), but they’re not allowed to advertise. So they can’t put it on the internet.
So if you are a non-accredited investor and you see an ad on the internet, you’re not allowed to go invest in that. And if the sponsor thinks you are, then they’re wrong. It fits under Rule 506(b), or it could be under Regulation A, which is different.
Under Rule 506(c), they can advertise to their heart’s content. They can put that on billboards on Main Street. But when you see in that subtext, “This is open for accredited investors only,” that’s kind of the tip-off it’s probably under Rule 506(c). And they’re going to need some sort of verification that you’re an accredited investor. That’s good that you see that because that tells you, okay, this person knows what they’re doing. And they put together the deal at least that much in the right way, so it’s probably legit. Take comfort in seeing that kind of language.
Brandon Bruckman:
I think first blush for some folks is that it seems restrictive from an accredited investor perspective. And I agree with you, it’s a good thing. And we have evolving accredited investor rules that may be coming down the pipeline as well. So things may be changing a little bit.
You mentioned Reg A. I just saw some of these things yesterday in some offerings. Can you talk about Reg A and how that’s definitely different?
Tilden Moschetti:
Sure, Reg A is also sometimes called a mini IPO or something like that. Under Reg D, it is just a filing. It’s about a five-page form that gets filed with the SEC. And that’s it, there’s no review, they do not look at these pieces of paper unless there’s a problem.
Under Reg A, it’s different. A form is filed with the SEC and the staff attorneys at the SEC review it. They make sure that it’s adequately described, that there’s a reasonable basis that people can make money, that this does look like a legitimate thing, and that all the boxes are checked if they provide the right financial information, et cetera.
Because of that status, because it’s been reviewed by the SEC, from a formalistic point of view, it’s not the same as going public. But it’s been looked at pretty closely. The SEC says, okay, you can raise under Regulation A, you can raise up to $50 million. But it needs to go through all these checks in order to do it. We don’t mind that non-accredited investors are coming in, that’s fine. You can advertise and they can still come in, because we’ve done this review. And so the chances of fraud are much, much less.
Brandon Bruckman:
It’s fascinating that you can democratize some of these investments in that way by going through the Reg A route. There are just a few more hoops to jump through there.
Tilden Moschetti:
More hoops and a lot more money from the sponsors. It takes a lot longer, it takes between six to nine months to get it through and costs somewhere in the neighborhood of $100,000 to $150,000 to get that stamp of approval.
Brandon Bruckman: That kind of dovetails a little bit into what I’ve always been wondering from a sponsor/syndicator perspective. It seems like there are a few different options and ways to structure the deal. How should they think their way through that? What’s best for them? Is it GP/LP syndication? Is it Reg A? Is it a fund? Is it a REIT? How do you help them sort of think through which one of those avenues to run down?
Tilden Moschetti:
Sure, so let’s separate REITs from the others. REITs are either public or private offerings. You can do a REIT through Reg D or even through Reg A. It’s more of a tax status than anything else. But I would think about putting REITs in the umbrella of “if I’m expecting to make cash flow on this deal.” A REIT might be an appropriate structure for that thing that we’re investing into.
If it’s not a cash flow deal, it’s not a REIT. It just doesn’t fit in there. It’s outside of what the whole benefit under the tax code would be. So if you’re looking for that cookie-cutter or that mailbox money check, REITs are a great choice.
If you’re looking for something where you don’t really need the cash necessarily, but you’re looking for that big mass of appreciation either from development or from just regular appreciation or value-add going on, then it’s probably in this Reg A space, or probably even more likely in the Reg D space.
If it’s Reg A, those tend to be larger portfolios of money because it takes so long to put the deals together. So they tend to be portfolios with some sort of pop at the end. They might have some cash flow, but it’s still going to have a limited duration of probably five to seven years for that investment.
Brandon Bruckman:
Makes sense. I watch a lot of syndicators struggle between “Should I do a fund or continue to raise for single assets?” How do I sort of think about that? Do you watch most syndicators make that evolution where it’s one asset syndication and then to fund, or how do you see that used?
Tilden Moschetti:
It used to be, now it’s so mixed. I mean, my client base, of the first-time clients that I represent, it’s really mixed. It used to always be do several direct deals, and then you can go to a fund. Now I’ve got a lot of people who are just doing funds. That has a lot to do with just inventory.
So if they are trying to raise a pool of money because they need to buy property, but that property isn’t there yet, they’re trying to get ready for it, it’s going to be kind of in a fund structure just because of the nature of the way that money is. Whereas once that property is identified, and they know that’s the deal, it’s going to be a direct deal. And then you probably aren’t going to even do a fund anyway, it probably doesn’t make sense to even think about it that way.
So it’s more a matter of, well, how long does it take me to close this deal? How quickly do I need the money? A lot of times that’s part of the decision-making.
Brandon Bruckman: I think I watch folks, the syndicator sponsors, thinking about the fund side and thinking, “I’m raising every time I want to purchase an asset and do a deal. I’m raising for one, for two, for three, why don’t I just do that once, raise once in the fund, and it’ll give me the flexibility to do what I want to do there from an acquisition perspective, and it cuts down on my raise time.”
Tilden Moschetti:
The harder part, the reason why it’s harder is because if I go to your investors and I say, “Hey, give me $100,000 and I’m gonna go buy a bunch of stuff and make you some money,” it’s not that appealing, right? And that’s the fund model – I’m gonna go buy a bunch of stuff and it probably will look something like this. That’s not nearly as appealing as building that level of trust as, “Hey, give me $100,000, I’m gonna go buy 123 Main Street, here’s the whole plan, and this is why I think we’re gonna get out with a 20% IRR, and you’re gonna make some money.”
That’s like, “Oh, okay, now I know what the plan is.” They need to trust me a little bit less because I’ve already built in that trust since this is the plan. So there doesn’t have to be this blind trust that goes along with it.
Brandon Bruckman:
It makes us nervous from our perspective when I can see the asset. Okay, I can do due diligence. I can do the homework on it. With a fund, we sort of stop our homework and go, “Okay.”
Tilden Moschetti:
You don’t know what it is. You can look at sample deals and past history, but it’s very little that you get to actually see about how it’s all gonna shake out.
Brandon Bruckman:
We talked a little bit about the GP/LP structure and how investors should look at that. How should they look at the docs for a fund differently or differently at all?
Tilden Moschetti:
I think you want to read into the documents, primarily it’ll be in the PPM, to figure out what the plan is. Typically, when I’m drafting, I’ll put it in my executive summary certainly, kind of what the big picture plan is. So I guess that’s where to start – to see how does this make sense? And then go to the distributions and make sure that the distributions feel like they match up with what that general overall plan is.
Like if it’s “Hey, I’m gonna go buy a portfolio of properties. I’m gonna buy 10 properties and they’re gonna be like this. They’re not gonna be the big pops, all they’re gonna do is provide 10 nice good Class A buildings.” And I go to the distribution section and all I’m seeing is about capital events and payments on capital events, or they’re paying me out every three years or something strange, something’s odd because the distribution model doesn’t match with what that fund model is. That fund model should be paying quarterly, regular distributions, and then on sale, it’s going to do this.
On the other side, if it’s got a lot about distributions on cash flow, but really, we’re doing a ground-up development, you’re not getting cash flow on the ground-up development. It’s super unlikely. I actually do include it in my PPM, so that’s a long story why. But it shouldn’t be like, “This is the main thing. Wow, we’re getting all this cash flow,” because you’re not. It’s just not real. And again, that’s part of that whole trusting the syndicator as well.
Brandon Bruckman: That’s good. When you are drafting some of the PPMs, what’s often the biggest piece of advice you’re giving sponsor syndicators, and maybe tilt towards some of the first-timers. What are you telling folks as you put those documents together?
Tilden Moschetti: This will be a little strange for investors to hear, but I say it publicly on YouTube and stuff, so it’s not hidden. My advice to sponsors is always make as much money as you can, but still make that investment something that’s investable. I’m always telling them, if their fees are too low, I make it clear that they could ask for more. Sometimes they don’t want to. I don’t have any skin in the game on what their choices are, but I want them to know, “Hey, you can make more money here.” Because your product is probably still very marketable, based on what I see out there in the market.
I think that’s also a good thing for investors to kind of get in their minds – that the sponsor needs to be properly incentivized to do this. If they’re not making money, you’ve probably got a dud. I mean, why is anybody doing this? The sponsor should have never put the deal together if they’re not going to be interested in it. You’re not going to make as much money. I see the fact that the sponsors are making good money as a very positive thing. Especially if it’s on that proceeds side, it’s nice to have the fees section less and then the proceeds section high.
So that’s probably the one thing that we talk about with probably every client. And then I don’t really need to go on with my clients about it much. They’re very good and trustworthy people. But I always say, “Disclose, disclose, disclose everything. Your investors are gold, do not mess with them. They deserve lots of communication, they deserve to know exactly why everything’s going on. Give it to them. All you’re gonna end up with at the end of the day is more investors as long as you treat them well.” That’s the other part of the talk I give them, not that they really need it, but it’s a good thing for them to always remember.
Brandon Bruckman:
As many times as you’re gonna say that, keep saying it. Just to comment on the fee side, I’m 100% with you. And we’re very, very transparent with our investor class about where the fees are, who’s getting paid, and why. We’re paying someone to perform a service for us, and they expect to be compensated for that service, period. So when we’re nickel and diming from my desk on fees and fee structure, it’s a factor. But it’s one factor of many factors that should lead us to making a good investment decision. It is not the factor. So I definitely roll folks back from that, like stop staring at those and stare more at the quality of the assets that we’re purchasing. And expect to pay people to do a service. It’s not free.
Tilden Moschetti: Yeah, I mean, when I do my own deals, I put out the terms. I don’t negotiate terms at all for my own deals. It’s, “This is the deal. I’d love to have you in it. If it doesn’t work for you, that’s fine. Let’s talk about the next deal.” But certainly, the nickel and diming is something I don’t like.
Brandon Bruckman:
Yeah, and there’s a line there, right? I mean, there are some – we have looked at a variety of investments that we’ve not put in front of our investors where there are issues in fee structure. And there are some misaligned incentives there. It happens. But it’s pretty rare. It’s rare that I see that. More often, if we do reject things, it’s more about the property and economics and the plan that we have qualms or issues about. It’s very rarely the fees and the fee structure.
A lot of our investors are listening or have utilized DSTs inside of a 1031 exchange. Maybe a different animal here than GP/LP litigation Reg D. Maybe talk a little bit through that from your lens and your perspective as someone structuring those PPMs about DSTs.
Tilden Moschetti:
Yeah, DSTs are fantastic for what they do. It’s really the only mechanism that works for doing a 1031 exchange into a property that has multiple owners like a syndicate. I always get the other side of the coin of, “Hey, can I get people to 1031 into my regular Reg D offering?” My answer is always, “Well, kind of, but don’t do it. It’s a nightmare.”
In the DST world, it’s really not a nightmare. It’s really quite a good system. The challenges on it are mostly technical and really fall on the sponsor more than the investor. It’s very challenging to make the whole management plan of the property work properly. If there are loans that are going to be coming on, that’s a whole other nightmare for the sponsor. It’s not really for you as an investor.
And it is a system that is really, really well tested. So from an investor point of view, fantastic. They work great. There are a lot of companies that do DSTs that are very reputable, have tons of repeat work, and are terrific. And because of the challenges of putting DSTs together, you do not see a lot of fraud going on. It’s too difficult for a sponsor to put it together when it’s legit. So if you’re trying to put something together that wasn’t good, boy, I don’t know that you’d ever be successful in doing it. So that’s the good news. DSTs are great.
Brandon Bruckman:
Talking about some of those challenges from the sponsor perspective, I think it’d be good for investors to understand – putting this thing together is not easy.
Tilden Moschetti:
Well, I mean, the big sort of problem is that you cannot really have more money and more capital coming into the DST after it’s gotten started, which can be a real problem. If down the road, you would typically be able to do a capital call, now you can’t. And so all that needs to be kind of decided upfront about how we’re going to structure this so there’s enough money if we do have some sort of event that needs it.
Dealing with tenants and how we’re going to deal with tenants if there are tenant improvements that need to be made – what’s that structure look like? And then putting a loan together so that when the money comes in, it doesn’t just trigger a whole new set of problems. It becomes the real challenge.
So it’s really coming up with the plan that cannot change during the five, seven years that you’re gonna own this thing. Things can happen really easily, and the manager can’t get paid for it after the fact. So from a sponsor point of view, it’s like, you got to make sure that you made your money because you’re not getting more. Makes it super challenging to do it right.
Brandon Bruckman:
Do you see in that structure – here comes a way too technical question for folks, but we’re gonna ask it anyways. In the GP/LP syndication structure, we often see some level of profit sharing which you can’t technically do on the bottom line inside of a DST. But we do see some revenue hurdles, notional rent bumps, and additional sponsor splitting of revenue at the gross line. Is that okay? Or are folks kind of wandering along a gray line there?
Tilden Moschetti: You probably need to talk to a tax attorney about that. That’s beyond my level.
Brandon Bruckman:
We’ll throw that one out. I know on the bottom line, it gets – you cannot be handling, you cannot be doing that down there. Because there’s no 70/30 splits, can’t do that in DST land.
Tilden Moschetti:
And that makes it really hard. I mean, there’s so much more wiggle room in a regular Reg D offering. When things get – if I’m trying to raise $10 million, and I’ve raised $9 million, I can get creative on that last million if I need to by making, you know, incentivizing other investors to invest more and things like that, and give away GP share and things like that. Don’t ask your sponsors to do it. This is only desperate times. That’s the aside. But I know it’s doable. It’s not doable in the DST world. It’s this is the raise, this is the amount. That’s it. We’re gonna sink or swim.
Brandon Bruckman:
And this is why we don’t see value-add properties in the DST. It’s too difficult.
Tilden Moschetti:
Oh, because you never – because even the cost, even like if I suddenly needed to buy a nail, but I didn’t know I was there. If it’s not part of the budget and part of the plan, you can’t do it. You can give it away for free. So that’s what sometimes the sponsors will do. But yeah, there’s no way to charge it back to the investor.
Brandon Bruckman:
You mentioned the DST being an optimal structure, great for what it is for 1031 exchange investors who want passive income into it. You also mentioned that it’s sort of a nightmare to think about those investors coming into a syndication. Walk through that for our listeners, for folks that are trying to do – I assume you’re alluding to folks in addition to the GP/LP fees. Walk through that nightmare for us.
Tilden Moschetti:
Well, I mean, it really comes down to you’re trying to fit a round peg in a square hole. So you’re basically taking this thing that’s a security, and then you’re trying to cram this real estate component on top of it. That’s because you need to have a TIC, whoever’s 1031-ing needs to have that as a TIC. It just has to be that way. Otherwise, it’s not a like-kind exchange. Most investors coming with that money going into a syndication is not like-kind for the security. So if you tried to do it, you’d blow their exchange, they’d owe money.
So when you build this structure, you also can’t do a management fee properly. All the cash that comes into a property needs to go into an account that is proportionate to the ownership of the TICs, or it’s gonna blow their exchange. If you’ve got one major tenant, and let’s say it’s an industrial building, how are you going to even do it? I mean, you’ve got this big check coming in, somehow you’ve got to get the money over into the TIC account, and then get the money over into the syndication account.
And then you’ve got the problem of how does the TIC guy pay out the manager, the sponsor of the deal, because they’re not really supposed to have anything more than maybe like a property manager type role. But you’re paying them more. And if you’re trying to do profit splits, it just gets way out of hand.
I’ve done that a few times. It’s never gone well from a – I mean, the syndication part goes fine, but it does not go well from structuring the TIC time. I always have to insist, “Okay, you have to have whoever’s doing the exchange have their own tax attorney, and you need your own tax attorney. And you guys work this out.” Because I don’t do taxes. I don’t do that kind of level of thing. And where it’s going to blow up, it’s going to blow up on that part right there. And it’s going to kill somebody’s exchange and there’s going to be a lawsuit for not doing it. So it’s a big task. The typical answer is don’t do it. Just don’t. There’s more money out there to raise. Those people can go into DSTs, it works fine. This stuff doesn’t.
Brandon Bruckman:
We’ve been harping on this with syndicators for a long time that the old “We’ll just do a TIC” – like, that’s easy. And it’s like, “Huh, no, it’s not.”
Tilden Moschetti:
Putting that on title is about the easiest part. And that’s about it. The rest of it is not. And it’s not the syndicator who suffers when there’s a mistake. I mean, it’s gonna be their investor. They’re gonna blow their exchange. Some states are like itching to blow it up, right? They would be happy to just destroy – they hate 1031 exchanges that they exist. Some states like California make you file every single year a statement on your exchange thing, even if you’re gonna hold it for like 30 years. They’re just mean about it. So they would be happy to blow your exchange. They want to.
Brandon Bruckman:
You’re making some government official’s day. Don’t do that. Don’t make them excited.
Tilden Moschetti:
That’s really my job. The happier I keep the people who keep track of the rules, the better. So sponsors need to be crystal clean and keep all the regulators at bay. Regulators have no problem with people following the rules. They only have a problem when people don’t follow them.
Brandon Bruckman:
And we feel the same way about the regulators that come to our door too. Yeah, they’re very happy with us because we’re transparent. Follow the rules. And we’ll have a good time having those conversations. Absolutely.
It sounds like – so I want to talk a little bit about the customers that you’re serving, the syndicators and sponsors you’re serving. It sounds like it’s up and down the spectrum in terms of experience. Maybe talk a little bit about what the typical sponsors are that are coming to you. What do they look like? Who should come to you?
Tilden Moschetti:
So I’ve probably about 80% of my business is real estate syndicators or funds. A lot of developers, a lot of people coming out of fixing – like, I’ve done a lot of fix and flips and are now trying to put together either a fund or trying to scale up from fixing and flipping single-family homes to doing that with larger multifamily properties or commercial properties and things like that. Fair number of hard money lenders looking for more capital to lend out. That’s about 80%.
The other 10% is probably businesses looking to raise additional capital. And then the last 10% is just sort of a mix of things from hedge fund kind of models to weird private equity-like acquisition models or some crypto stuff.
Brandon Bruckman:
Sounds like fun. The 10% is the interesting bucket where you never quite know what might hit your desk any given day, huh?
Tilden Moschetti:
At this point, though, it’s pretty unusual. Normally, it’s about once every six months I’ll get some guy. It’s always great. One of those one-of-one, they’re the one, they’re the person.
Brandon Bruckman:
Exactly. Tilden, this has been awesome. I would ask you where investors can find you, but I don’t think we want them to. This is not for you.
Tilden Moschetti:
If you want to put together a deal for yourself and bring, you know, start a syndication, then they can find me online at Moschetti Law.com. And otherwise, yeah, I don’t work just for syndicators and sponsors just in the Reg D space. There are attorneys out there that do work with investors and getting a review of the PPM and things. They’re a great resource. A lot of accountants also are pretty well versed. People in finance are well versed. They may not be able to give you the legal nuances, but they can probably walk through the deal and tell you if the deal looks like the right thing or not. And then just ask around on those. But if you wanted to put together a deal for yourself, then I’m your first call.
Brandon Bruckman:
We got there. We got a few syndicators, sponsor folks listening too. So this is the man to reach out to, come in contact with. Thank you again so much. This is great information for folks. These are so important. These are the building blocks of the deals that we all do – making sure that these structures are correct. So thank you for what you do. Thank you for the information and thank you for hopping on with us.
Tilden Moschetti:
You bet. Thank you very much for having me.
Brandon Bruckman:
And to our listeners, thanks for listening. We will talk to you again. Take care.
Intro:
Welcome to the Westside Investors Network—your community of investing knowledge for growth. This is the Real Estate Professionals Investing Podcast—for real estate professionals, by real estate professionals. Our show is focused on the next step in your career: investing. Thank you for listening, and please, if you like our content, rate us on your podcast provider.
Quick disclaimer: The views and opinions expressed in this podcast are for educational purposes only. They should not be construed as an offer to buy or sell securities, make or consider investments, or take any other action.
Host (Trent Werner):
Welcome back to another episode of the Deal Deep Dive segment on the Westside Investors Network Podcast. I’m your host, Trent Werner. In this segment, our featured guests share their unique stories on specific deals they’ve invested in. We’ll dive into defining the deal, financing, writing an offer, and due diligence. Please subscribe, leave us a rating, and share this episode.
On today’s episode, we’re joined by Tilden Moschetti. Tilden is both a practicing lawyer and a syndicator, based out of North Carolina. He’s done deals ranging from medical offices to multifamily apartment complexes. Today, we’ll talk about a medical office in Los Angeles, California that he bought in 2018 and sold in 2023.
Host:
Tilden, welcome to the show. Thank you for joining us. Before we get into the medical office deal, I’d love to hear about how your law career has transitioned into real estate syndication.
Tilden:
Thanks so much for having me. I’m excited to be here. My law career started about 20 years ago. I originally went to law school with the goal of becoming a developer. I noticed a lot of developers had legal backgrounds, so I thought it would be a good foundation. I focused on property law, business transactions, and financing.
I took a detour when I got involved in advocacy and trial skills, thinking it would be useful for pitching deals to investors and working with cities. After law school, I became a litigator, working in the district attorney’s office and then opening my own practice in real estate litigation. I did that for 10 years, but litigation is exhausting and not particularly fulfilling.
At that point, I came across syndication. A partner brought me a single-tenant medical office deal in Alabama. He suggested we syndicate it. I barely knew what syndication meant, but I dove in, taught myself, and we got the deal done. It worked out well—investors made money, and so did we. That led to more deals, and I realized I was especially strong on the legal side. Eventually, I wound down my litigation practice and focused full time on helping people put together syndication deals.
Host:
That’s quite a transition. How does your legal background influence the way you analyze and approach deals?
Tilden:
Litigation made me very methodical. When I look at a deal, it has to meet benchmarks—not just financial, but also in terms of the story. If I were presenting it to a jury, would it persuade? That discipline carries into underwriting and structuring deals.
I also see about 100 deals a year through my clients, on top of my own. That gives me a broad perspective and a kind of accelerated experience. Negotiation skills from litigation also help in working with partners and structuring terms so everyone’s happy.
Host:
And how many deals have you sponsored so far?
Tilden:
About 15 so far. I’m pretty agnostic when it comes to property type. I’ve done multifamily, medical office, general office, retail, and even flex properties. Retail is especially interesting to me—I had a mentor from that world early on. I haven’t done a hotel yet, but it’s on my list.
Host:
The deal we’re focusing on today is a medical office in California. You’re now based in North Carolina, but this one was local to you at the time, right?
Tilden:
That’s right. When I bought it, I was still in California. My first syndication deal had been in Alabama, so I was already comfortable investing out of state. But this one happened to be nearby. Generally, I look for markets with strong population growth—that’s one of my baseline criteria.
Host:
Tell us about how this deal came to you and what stood out.
Tilden:
A broker friend of mine was trying to get the listing and showed me the deal. At first glance, it looked average—nothing exciting. But when I dug into the rent roll, I saw it was full of medical tenants. Medical tenants are sticky; they often sell their practices rather than move. That adds stability.
Then I noticed a cell tower lease on the property. Many people would see that as just extra cash flow, but I thought differently. The tower tech was aging, and I worried it wouldn’t support 4G. Verizon was shifting its model. My strategy became: buy the property, then sell off the cell tower lease immediately. That gave us a cash return to investors right away and de-risked the deal.
Host:
That’s creative. What were the numbers like?
Tilden:
The purchase price was about $2.7 million. After selling the cell tower lease for roughly $700,000, our effective basis in the building was around $2 million. I funded the deal entirely with cash—no financing. That turned out to be a blessing during COVID, when rent collections became uncertain. Not having a loan eliminated that pressure.
Host:
How many tenants were in the building?
Tilden:
Five, all medical. The property was under-parked for medical use, but it had been grandfathered in. That was one consideration—we didn’t want to lose that zoning flexibility. Overall, occupancy was solid. Toward the end we lost one tenant, but medical tenants often sell their practices, which keeps the rent roll steady.
Host:
What was your original plan for the hold?
Tilden:
I told investors it was a conservative, all-cash deal we’d hold for about 10 years. In reality, we sold after five. The plan was never to refinance; I had positioned the deal to investors as safe and stable. Pulling cash out with a refi didn’t fit that story. We sold in 2023 for about $3.5 million.
Host:
So you achieved your projected returns in half the time.
Tilden:
Exactly. I had targeted a 15% IRR and ended up delivering closer to 20%. Selling the cell tower lease upfront boosted returns significantly.
Host:
That’s a great outcome. Did you structure it with a preferred return?
Tilden:
No. In this deal, I structured it by taking equity off the top. We raised $2.7 million, but I valued the deal at about $3 million, keeping some equity as sponsor. It dilutes investors upfront, but it’s conservative—they know they’re buying into a property worth more than the raise amount. Plus, the immediate cash return from the cell tower sale reassured them.
Host:
How did you handle communication with investors throughout the hold?
Tilden:
Transparency was key. I provided regular updates and emphasized safety. Even with challenges like COVID or a tenant lawsuit, we never lost cash flow, never needed a capital call. Investors trusted me because I delivered exactly what I promised: a safe, conservative deal.
Host:
That’s a strong track record. Any final lessons from this deal?
Tilden:
The big takeaway is to stick to the story you tell investors. I pitched this as safe, and I ran it that way. That consistency built trust. Every deal should have a clear story that guides decisions.
Host:
Great advice. Where can listeners find more from you?
Tilden:
Visit moschettilaw.com for resources on syndication law. I also run a YouTube channel with around 150 videos on syndication concepts—search “Syndication Attorneys” on YouTube.
Host:
Perfect. Tilden, thank you for sharing this deal and your insights. It’s been a pleasure having you on.
Tilden:
Thanks for having me.
Outro:
Thank you for listening to this episode of the Real Estate Professionals Investing Podcast from the Westside Investors Network. We hope this added value to your path toward financial freedom. Please take a second to rate us so we can reach more investors. If you or someone you know would like to be on the show, visit westsideinvestors.com and fill out the form.
Host:
Tilden Moschetti joins me today, and you can learn how his team can help you by visiting moschettilaw.com—that’s a clickable link in the show notes. We’re doing a Syndication 101 session today. I really appreciate your time, Tilden.
Tilden:
Thank you so much for having me on the show. I’ve heard quite a few episodes and really enjoyed them myself.
Host:
I appreciate that—it’s great to hear feedback. At the end of the show, I’d love for you to share some direct thoughts on how I can improve.
Tilden:
Absolutely. Honestly, you’re doing a great job.
Host:
Thanks. Now, we’re going to focus on syndication today. As I mentioned before we hit record, a lot of investors start in wholesaling or single-family homes, then move into multifamily. Syndication feels like the aspirational next step, and I want to arm people with a high-level thought process for what they’re getting into.
We won’t spend much time on your background since listeners can learn that on your website. Let’s get into the meat of it. Where should we start?
Tilden:
Let’s start at the beginning. Typically, people come to me after they’ve done some homes or a few multifamily deals. They’re either looking to grow their business and go full-time, or they want to offer opportunities to friends who’ve expressed interest in investing alongside them.
At every point in the syndication journey, you’re always doing two things: looking for deals and looking for investors. Even if you think you’ve got both lined up, you still need more of each.
Once someone decides to start a syndication or a fund—it’s essentially the same thing—you need to develop a plan. I call it the founder investment story. This is the narrative you’ll share with investors: Are you doing value-add apartments in a specific location? Assisted living projects? Industrial properties? And why you? Why are you the right sponsor? There are many others out there, so you must be able to answer “Why me?” convincingly.
After that, you begin lining up investors, having conversations like, “If I did XYZ, is that something you’d be interested in?” That builds a list of soft commitments. On the other track, you’re searching for deals. Ideally, both sides develop together, but often one comes first and the other follows. Either way, you’re running both tracks hard at the same time.
Host:
That’s a great overview. Now, let’s dig into some specifics.
Tilden:
Sure. Regulation D is the exemption that allows you to avoid registering securities with the SEC, though you still file a Form D notice. The two most common rules are 506(b) and 506(c). Both allow you to raise unlimited money from unlimited accredited investors. 506(b) also allows up to 35 non-accredited investors, but you cannot use general solicitation. That means no ads, no public posts, no billboards. 506(c) allows general solicitation—you can advertise publicly—but all investors must be accredited, and you must take reasonable steps to verify that.
Verification can be done through third-party services or by obtaining a letter from an accountant or attorney confirming accreditation.
Host:
So one of the early steps is deciding whether to go with 506(b) or 506(c)?
Tilden:
Exactly. It depends on where your investors will come from. If you know your investors personally, 506(b) may make more sense. If you’ll need to advertise, then 506(c). But once you start advertising, you can’t go back to 506(b).
Host:
If someone chooses 506(c) and wants to advertise, are there rules on what they can or cannot say?
Tilden:
Yes, though it’s not overly restrictive. The main rule: never promise guaranteed returns. Investments are inherently risky, and you must make that clear. I also encourage clients to include “For accredited investors only” in ads, which saves time by discouraging inquiries from non-accredited investors.
Host:
How have you found the best approaches for getting those first investors?
Tilden:
It always starts with your sphere of influence—people who already know and trust you. Even with 506(c), your closest relationships will be your most cost-effective investors. From there, leverage referrals. If your investors are influencers in their own circles, they can help bring more people to your deals.
Host:
Securities laws and taxes seem to change often. Are there any recent or upcoming changes we should know about?
Tilden:
Tax law changes frequently, so we refer clients to tax attorneys or CPAs for that. In the securities world, I expect future tightening of the accredited investor definition. The SEC’s goal is protecting the public—making sure people aren’t risking everything on high-risk investments. I also anticipate more scrutiny of “fund of funds” structures, where sponsors essentially act like broker-dealers. Regulators want to ensure offerings are fully compliant, especially when non-accredited investors are involved.
Host:
For investors reviewing a syndication, what questions should they ask a lawyer to ensure the deal is solid?
Tilden:
Look at the deal through two lenses. First, the emotional lens: if you had the cash to buy it yourself, would you? If not, walk away. Second, the analytical lens: do the numbers and documents make sense? Or are they promising unrealistic returns with no clear plan? Also, pay attention to the professionalism of the documents. Sloppy paperwork is a red flag.
Host:
If I’m a first-time syndicator, what should I ask when choosing a lawyer?
Tilden:
Fit and communication are crucial. You need a lawyer who understands syndication, not just general real estate law, and who’s available when urgent questions come up. I’m one of the few syndication attorneys who also does deals myself. That gives me insight into both the legal and practical sides. Make sure your attorney can guide you through the process and answer questions quickly—because investors will expect you to have answers.
Host:
Once a syndicator is raising capital, how often should they communicate with investors?
Tilden:
Legally, once a year is required—but that’s far too little. Best practice is quarterly updates, including bank balances, upcoming expenses, photos, and progress reports. Investors want to know their money is being treated seriously. Communication builds trust.
Host:
Is there a key takeaway we should leave listeners with?
Tilden:
Syndication can feel overwhelming—lots of acronyms, rules, and moving parts. But it’s absolutely doable. If you have good business sense, honesty, and trustworthy deals, you can succeed. With the right team guiding you, it’s approachable.
Host:
Let’s wrap up with some quick-fire questions. What’s a common lie real estate investors tell themselves?
Tilden:
That a deal is good just because they’ve already invested time in it. Sometimes the best choice is to walk away.
Host:
Book recommendation?
Tilden:
The “Sports for the Soul” series by Brian Donnelly. It uses sports as a metaphor for success and personal growth.
Host:
Advice to your younger self?
Tilden:
Start sooner. I’ve been an attorney for 20 years but only started syndicating 10 years ago. I wish I had begun earlier.
Host:
Biggest time-saving tool?
Tilden:
A CRM for investor follow-up. Consistent processes for staying in touch are critical.
Host:
This has been fantastic. One more time: moschettilaw.com is the place to learn more. Tilden, thank you for joining me.
Tilden:
It was great being here. Thank you.
Randy Mbouge:
Welcome to another episode of The Road to Wealth Podcast. I’m here with an honestly distinguished guest who has a reputation that holds its own weight, one of one in terms of the attorney space for syndications. I would definitely love for you guys’ time and attention to be spent listening and learning at a very high level with Mr. Tilden Moschetti. Hopefully I pronounced that right. Let’s get right into it.
Tilden Moschetti:
Thanks for having me on your show.
Randy Mbouge:
Thank you so much for even gracing us with your presence. I want to ask and kind of get right into it. What did your beginning look like? How did you know this was something you wanted to specialize in?
Tilden Moschetti:
I didn’t. Well, I kind of did and I kind of didn’t. I didn’t know really about syndication much at all before law school. I wish I knew I wanted to be a developer, that was sort of my goal. I came up with a whole plan about how to build assisted living facilities. I was going to use manufactured housing as a way to do it on a lower budget and it seemed like a great idea. And probably still is. But I knew I wanted to be a developer, didn’t know how I was going to raise the funds.
So I looked around and looked at other people who were successful at putting together these sorts of things. A lot of the people who were there were attorneys. And so I thought, okay, well, that makes sense. You learn about the law, you learn about how to get a deal done. I should go to law school so I could increase my chops. And so I did, and really focused mostly on real estate and property law and contracts and those sorts of things.
But still I ended up as a litigator. So I was a litigator for about 10 years. I specialized in real estate disputes, not your landlord-tenant stuff. But what I did was if there was property underneath it, whether it was valuation or something like that, as it related to partnership disputes, or divorce or bankruptcy or anything like that, those are the kind of deals I did. It was miserable. Litigation is not fun for anyone.
And I had started doing just some brokerage just to kind of make things a little bit more palatable and kind of evened out the money flow. And one of my partners came to me and showed me a deal. And he said, “Whoa, this is really great deal, we should syndicate it.” I looked at it, and it was a good deal. I thought, okay, we can syndicate this, and I had no idea what that meant. So I learned on that deal. I figured I was a lawyer, I could figure it out. And it was challenging. So that deal was successful. And then I did another one and another one. And as they came together, I got really good at putting deals together.
And I thought I should change my practice area and not practice litigation anymore. And so about 10 years ago, I stopped litigating and started just helping syndicators and fund managers put together these deals and help them understand how to raise capital.
Randy Mbouge:
That is phenomenal. If you could break down that first deal and what it looked like for you, maybe like how many units do you remember, kind of like how much cash flowed?
Tilden Moschetti:
I don’t remember, that was a while ago. It was a medical office, triple net building in Alabama. It was being developed at the time and so it was able to buy it at a good cap rate because there was still some risk on whether the development was going to be successful and things like that. And also it had a nice time horizon, which was great. It was off market. The price was around three and a half million, I think. And then we raised just over 2 million for it, had probably about 20 investors. Between me and my partner we brought in mostly people we knew and kind of held the deal that way. Held it for maybe three or four years. It was a good property. The market looked good and we ended up selling. Made investors their money back. It was good.
Randy Mbouge:
Now in that, as you mentioned that you raised $2 million, what is something that you noticed when raising money that people ideally should be mindful of? Or can be or need to be mindful of?
Tilden Moschetti:
Sure. Well, I think what’s most important is what I call the founder investment theory. So that kind of thing that came out of this deal. The first time I pitched this deal was to a doctor. Had lunch with him and he told me this deal just wasn’t for him. So this was my first rejection, my first pitch. And I learned a valuable lesson from that. And it’s that not only at the end of the day, investors aren’t just looking at what the IRR is going to be or what the preferred returns are. It’s easy to think that they are because if you look at ads on LinkedIn or Facebook or something like that, that’s all you see. Those numbers and bullet points.
In my experience, that’s just not the main mover. What really moves is not only does it fit in with what they think is a good opportunity. So is the risk profile match what they are interested in? Is the situation similar enough to something that they’ve done that they’d feel comfortable doing it? But at the end of the day, also that story. So why is this a good deal? Because if they don’t understand that story behind it, then they’re just not going to invest. There are plenty of other deals. I mean, maybe this one has two points better in the IRR. But IRR is a projection anyway. So why should they trust this and go for this rather than something else? So it’s that founder investment theory that I think is the most important thing that’s masked.
Randy Mbouge:
And you said the founder investment theory?
Tilden Moschetti:
Yeah, it was just a phrase I came up with, really.
Randy Mbouge:
I think one of the things that I’ve noticed when dealing with clients is like, do they actually understand why they are looking to make this purchase? Like, is it important for them? Because while I can consult them and say, “Hey, you need to, this is a unicorn,” they’re like, “You know, I got this bill, or I gotta pay off this debt.” And it’s like, oh boy. So I think that’s something I’ve also noticed. Do you feel as if that, what would you say, are some of the fears you see people kind of internalize in terms of investing in a syndication?
Tilden Moschetti:
Well, I think that there is, I mean, the number one thing that anybody who’s interested in investing has, they have to trust the guy they’re investing with. Once you overcome the trust hurdle, it gets a lot easier. If you don’t know this person, if you’ve never had any dealings with them, it’s gonna be really hard to convert them to an investor, even if it’s a great deal. Just because there’s other deals where they probably could find more trust out there if they haven’t built that up.
So I think trust generally overcomes most of them. I think another kind of roadblock is, they just haven’t heard of this before. So a lot of people think, well, we can just, you know, my brother-in-law did a syndication and we just all put in money. Why is there all this paperwork involved? Well, the fact of the matter is, you need all the paperwork that we do. But there’s also this kind of insecurity about, well, what is it exactly that we’re actually giving money for? And how can I hold that syndicator responsible to give me my money back at the end of the day?
Randy Mbouge:
Right. And I think that’s something that may be of course, based off of the structure of the deal, and maybe one of them giving profits out or returns is that monthly or quarterly, maybe even yearly? I think that, you know, I like what you said, when you mentioned about trust, because it’s like, how can if somebody doesn’t even have some embedded trust within the deal or within the person that they’re looking to do business with? How can you expect them to just give you money? You know, I think that’s something.
Tilden Moschetti:
That’s very normal.
Randy Mbouge:
So you mentioned something too that in the first deal that you did, there were 20 essentially investors. Do you feel as if that’s too many, or did you feel like based off that first deal, it is what it is?
Tilden Moschetti:
It was okay. I didn’t want to do a Reg D. Here’s where I was over asking. It was the first deal. So I didn’t want to ask most investors for $50,000, I didn’t really want to ask for 100 or 200,000. It was uncomfortable because I hadn’t done it before. And so getting myself over my own fear hurdles was a challenge. And getting good at talking about, you know, essentially you’re selling. So getting good at the sales process and pitching the product was a hurdle certainly for us to overcome.
I think 20 is fine, though, in terms of a number. It becomes way too many once it’s like over 50. And certainly if you haven’t done one before. Now, 50 wouldn’t be a big deal because I know what investors are looking for. The reason why it gets lopsided or why more investors isn’t necessarily better, is because you need to communicate. So unless you really know what you need to communicate to them, and really help them know what it is, you might have more phone calls. And phone calls are fine. But when you have too many of them, it can become a little bit challenging to just field them and answer them. That’s also just hard to bring the money in when you’ve got 50 people that you’re all trying to report to all at once.
Randy Mbouge:
Now, how do people go about finding the money? Because, you know, one of the limiting beliefs now seemed like just one of the limiting beliefs is that a lot of people say, investing? Yes, I want to invest, but it’s just so hard to find the money. And it’s like, you know, and then on the other hand, you hear well go get the deal first, and then go look for the money. So I think like based off of your experience, which one do you kind of cater towards?
Tilden Moschetti:
I mean, you’re always looking. I mean, as a syndicator, you are always, always, always looking for investors, you’re always looking for deals, it never stops. Because the best deal may be the one you haven’t heard about yet. And you know, more investors is good, right? So it will make your job easier in the future. So I think you’re always kind of doing them both at the same time. And when that right deal comes along, or at least the right founder investment theory, then that’s when you start putting a deal together.
I know what my next deal is, but I don’t know at this point, I don’t know the property. But I know where I’m gonna get it. I mean, I know how I’m gonna source it. So it’s not really much of a challenge. But you know, it’s still more okay, well, how am I gonna get these investors? And how am I going to talk to them about this opportunity, so that they’re interested in coming in the first place?
Randy Mbouge:
So it’s kind of like, it’s, of course, citing or sourcing the opportunity. And then you’re always looking for investors. So then by the time you do look to pitch, it’s kind of like, “Hey, this is something we’ve already talked about,” or “This is something that I’ve been working on for X amount of months.” Okay.
Tilden Moschetti:
It may or may not be explicitly saying, “Hey, are you interested in investing in x, y, z,” but I’m always talking to people, I’m always improving my visibility and looking at so that way, more and more people are in my network. That when it’s time for that raise, it’s like, “Okay, so here’s the deal. You know, we talked about me being a syndicator. Here’s what I’m working on. Is this something you’d be interested in?”
Randy Mbouge:
Okay, okay. And then, in doing so, is that something that you look to put in writing or just the honest conversation?
Tilden Moschetti:
No, it’s not enforceable in writing. I mean, it’s, well, if you get it in writing only to the extent that people are more willing to follow through, if like, they send an email that said, “Yeah, I’d be willing to invest.” Maybe they’re 10% more likely to follow through. But you’d never, I mean, even if it was a binding contract, you’d never sue them on it. You’d never get that investor again ever in your life.
Randy Mbouge:
Right, right, I see that. So it’s like, don’t look to screw the person over, just because it just, I see what you’re saying. So it’s kind of like it’s just the honest conversation to say, “Hey, here’s this opportunity that I’ve been thinking about, you know, is this something you’re willing to invest into or know anyone else who is?”
Tilden Moschetti:
Yeah, exactly. I mean, you’re always just trying to do… you need to know who your investor pool is. I have a pretty good sense of who I’ve got and I know these kinds of returns are probably right. But, you know, it’s got to be, you know, in my case, the next deal is not cash flowing, it won’t cash flow at all. So I don’t want the person who’s going to be relying on cash flow. But I need to know, are they in this pool? Are they not? And so if they’re just purely cashflow people, I’m not even going to bother talking to them about that specific deal, because it’s going to erode their trust in me. They’ll say, “Well, we told you, we only want cash flow deals. Why are you showing me this?”
Randy Mbouge:
Right. So what’s the alternative if it’s not a cash flowing deal? Are you more so talking about you’re banking on the appreciation of the asset?
Tilden Moschetti:
Yeah, appreciation buy.
Randy Mbouge:
Okay. Okay, which I think is very solid, too. So, you know, in terms of actually looking to then raise money, what are some things that you would tell someone to set up their LLC in such a way where it’s able to then raise the capital? Is that something that you’re able to get into?
Tilden Moschetti:
Yeah, absolutely. So kind of over the surface of all of this are securities rules. Common misconception that you can borrow money, or you can have a limited number of friends and family or today, I heard a new one on me – as if you’re only raising 1.2 million, you don’t have to get paperwork. That one was new to me. The reality is if you’re raising $1 from anybody who is taking a passive role, it’s a security. And as a security, that means that it either needs to be registered, which nobody here is going to do – registered means you’re going public, you’re going to hire about 50 lawyers, and you’re going to spend a million dollars putting together this deal with SEC or with Goldman Sachs as your underwriter. That’s a totally different animal we’re talking about.
So we fall under the exemptions. Not everything needs to be registered. So the biggest exemption of all is Regulation D, which allows syndicators to raise an unlimited amount of money from an unlimited amount of accredited investors, and either have the ability to raise from non-accredited investors, or they can advertise. So it’s one or the other thing. But at the end of the day, they’re always gonna be accredited investors, it’s just whether or not we have those non-accredited investors versus being able to advertise.
So that’s kind of the very high-level view of the regulatory framework that’s there. So new syndicators, what they need to kind of understand is they’re gonna, there’s no problem in doing this. I mean, the advantage of having such a good rule is Regulation D is the SEC basically tells you exactly what you need to do to be in compliance. And it’s kind of like a welcome guidebook. You know, you need to communicate with your investors, these are the things you need to tell them before they invest, you know, you can have this many non-accredited investors and just do this. That’s great.
So once the new syndicator recognizes, okay, this is the framework we’re working with, then it just becomes okay, plugging the deal in, making sure it’s in the right format, that makes sense to me. And then it’s working within that framework of getting investors the information they need, eventually getting their money so that you can put it into the investment.
Randy Mbouge:
Hmm. So in terms of even the structure, is that also something you would then look to put people on as far as the not the structure of the LLC, but kind of like in that certain deal? Or that’s where the documentation comes in? And why you have their attorney?
Tilden Moschetti:
Yeah. So a lot of times, my clients will have like an idea about the way the space primarily that money’s going to be distributed in the deal. So we’ll form the LLCs that are necessary, if that’s what we’re doing. We’ll put together the operating documents, the security documents that need to be there. And then as we’re understanding the deal, as we’re discussing it, you know, I’ll make suggestions about oh, well, this, your fee structure here looks a little lean, you probably could make more, or this looks kind of like you’re taking a little too much. I think maybe you want to think about taking less. I mean, at the end of the day, it’s the syndicator’s decision, but I see a lot of deals. So you know, I’m always kind of helping as much as I can say, this is what our market is. You know, you can be above market if you’ve got a ton of trust, great, you know, you can charge more than market. If you don’t have that tunnel of trust, probably should be at market.
Randy Mbouge:
Okay, this is very solid. This is very solid, because I think that it’s so easy to then look to have a limiting belief around doing a syndication, when really it’s like, you know, how do we position ourselves in such a way we’re able to make a decision? Or if they say that this is a wealth building strategy, you know, what information are you missing to then be able to invest at such a high level? Would you say that, for someone’s first deal, they should maybe look to start out at $1 million to $2 million? Or is it based off what their risk tolerance is?
Tilden Moschetti:
I don’t think that part is about risk tolerance, it’s about finding the right deal. I think a million dollars is kind of like the sweet spot of the low end of the sweet spot. So raising a million isn’t as challenging as raising 5 million. So it’s a little bit easier on that, and the money is still good enough that the syndicator should be able to make money to more than pay for the work that they put in to put it together in the first place. So I think that once you meet that 1 million threshold, you’re certainly going to be successful at it. And then it’s just a matter of making sure that the deal is presented right, and that everything is right, so that you do get the investors at the end of the day.
Randy Mbouge:
And so what are maybe some of the things you look to pay attention to in terms of assessing if the deal is a good deal or not. I know like sometimes we talk about location, but I mean, like, you know, are there certain nuances? Or is it like the type or class the building is in? Does it just depend?
Tilden Moschetti:
Yeah, that’s not so important to me. I think it’s, I mean, certainly location matters, the demographics matter. I don’t want to be in a location where the population growth is going down, right, that’s kind of a major criteria of mine. I’m not going to go into a shrinking city. I’ve just thought, I’ll go to where there’s growth happening. That’s always what I look for first. So I kind of keep track of where those growth areas are.
And then it’s got to be something that has returns that are going to match what my investors are looking for. I have a group of investors that probably need about a 15% IRR, I have a group of investors that probably need a 20% plus. And they’re just kind of slightly different, what each group needs. So it needs to fit into one of those.
And then it needs to fit in kind of with the criteria of how I see deals. If I can’t make sense of it, it’s not going to work. If it’s something totally that I’m not, it doesn’t particularly matter if I haven’t done the asset type or whatever before. But if I don’t have a plan for doing the hard things, like if I was going to buy a 20 unit apartment building? Well, I don’t really want to be a property manager. I mean, that’s personally what I don’t want to do. A lot of people do, and they make great money at it, and that’s great. But me, I would rather pay somebody to do it. Because I don’t want the phone calls or any of that.
And so if it was that criteria, if I don’t have an answer who can be the property manager, and maybe a backup of that person, I probably don’t want to do that deal. Or if I know it’s a development deal, and I don’t have like engineering on board or I don’t have something serious about how I’m gonna actually get the job done, I probably don’t, I’m not that interested in that deal. But the harder deals are generally just kind of because they just fall outside of that wheelhouse. And if you don’t have somebody who can help you with it, then it’s probably not going to work out at the end of the day. That’s kind of how I look at it.
Randy Mbouge:
Right. Right. So I think that so what I’m hearing is that be very intentional with the type of deal that you’re looking for. And focus on the activities that will net you the most money.
Tilden Moschetti:
Yeah, totally. You got to kind of get it. I mean, apartments are great because almost everybody’s lived in an apartment. So everybody kind of gets what’s going on. Retail’s good, but it’s harder, right? Because there’s more nuances in the lease structure and things like that. And unless you’ve been like a shop owner, or you’ve dealt with retail leases before, it may not make as much sense, just because you probably haven’t done a retail lease before, unless you’ve been in that world.
So you’d want to make sure that somebody at least is part of your team that you can bounce ideas off of about when things happen. You know, you can have tenants go out, you can, especially like franchise tenants, see, their franchises are set up very in a very specific way. And you got to understand how what the franchisor needs, what the franchisee needs and kind of need to go into it. And so, you know, a good deal has somebody and if it’s an investor, they need to make sure that the syndicator knows what those things are. And if it’s the syndicator, they need to be able to know it themselves, or they have good resources to be able to pull that from.
Randy Mbouge:
Got it. Got it. That makes a lot of sense. It makes a lot of sense. What would you say are certain laws, I know we touched on a little bit, but what would you say are certain laws diving into actually Regulation D that syndicators need to know about?
Tilden Moschetti:
Don’t touch money until you’ve given them the right documents. So, I mean, investors should be getting a PPM, a private placement memorandum, defines all of the risks of the investment, the terms, conflicts of interest, all those things that should be given to them. They need an operating agreement to understand the investment structure. And ultimately, they need a subscription agreement in order to bind themselves to that operating agreement, say, you know, in exchange for this $100,000, I’m getting 10% of this deal.
And so without those in place, that’s a big problem. Syndicators should know kind of how they’re going to raise money, what that strategy is going to look like because if their thought is, well, I’m just gonna pay somebody a finder’s fee. Well, that’s not going to work either. Because you’re not allowed to pay finder’s fees, unless they are licensed broker-dealer with a Series 7 or a Series 82. I can’t give that money to, you know, my buddy, I can’t give him 10% of every dollar he brings in. And I think not everybody realizes that’s an issue. So that won’t get the deal done.
So those are kind of the big, the most important, like high-level laws as it relates to it. Don’t touch money. And make sure you’re either bringing in the money yourself, you’re not paying people for that money.
Randy Mbouge:
Got it. So I think that’s and then you’re saying that that, of course needs to be signed or understood before any money is actually wired, then is what you’re saying?
Tilden Moschetti:
Exactly, yeah. You need a subscription agreement long before they send you the money.
Randy Mbouge:
Got it. Got it. Got it. Now, you know, with that, too, in terms of dealing with these investors, this is because I remember that you said that you just want people that of course, almost like know, like, and trust you. So how would you then look to raise capital if somebody says, “I don’t have a circle? Or nobody at this point in time trusts me or likes me? How can I make money? Or how can I get money? What do I need to do?” You know, “I’m stranded, I just need to raise a million dollars for this $4 million deal. But nobody likes me. So how do I get the money?”
Tilden Moschetti:
You’re probably doing it under Rule 506(c), which lets you advertise, so let’s just solicit. And the strategy’s going to probably be either like a straight advertisement, like something on Facebook, like on Facebook or LinkedIn. People are doing that very successfully, and there are marketers out there whose job is to help people make those connections between people basically seeing ads.
The other part of it is because a lot of broker-dealers really aren’t playing in this space at the under $20 million level. The fees just aren’t in it for them. And so they pretty much can’t economically be in this sport. So it’s either paying a marketing team that will do that – they’re not taking money like on a performance, they’re getting paid by basically a flat fee or by an hourly or something like that. Or you’re going to be looking at strategies in order to grow that sphere of influence that you have.
Like if it’s a kind of a local deal where it’s a local building, and the investors are likely local, I’ll probably do an event that’s local, and probably cold call high net worth, high-income people in order to bring people to that event. Partner with people to help bring them to the event. That’s very similar. If it’s more on a national level, I might do it with webinars, but still, I’ve got to drive people to that webinar somehow. And that’s the – I don’t find the email lists very helpful. But it’s probably going to be some form of like me putting together advertising in order to find people who would want to attend the webinar. These people are very low on the trust scale yet. They don’t help me at all. So I don’t want to spend a lot of money per visitor, because then you’ll just spend a lot of money and never be successful at it.
Randy Mbouge:
Right. Would you prefer someone doing more so like that public advertising kind of way of raising money or doing it privately just based off of the structure of the deal?
Tilden Moschetti:
As an attorney, it doesn’t particularly matter to me. I kind of – it really is entirely from where those investors are coming from. My next deal probably isn’t even from my existing investors. So I’ll probably – there are some legal advantages to using rule 506(c) over 506(b), that are more – they’re kind of nuanced, but they protect the sponsor just slightly better. Not that anybody’s really particularly vulnerable, as long as they’re doing the right thing anyway. Then lawsuits aren’t an everyday occurrence, by any means. They’re pretty rare, as long as everybody’s being very good. Which most of the time is the situation.
Randy Mbouge:
You might not – yeah, for and also in raising the funds, what would you say is the best type of entity to set up? I know we hear a lot about S corps or LLCs, or whether it’s sole proprietor.
Tilden Moschetti:
It’s almost always an LLC in real estate. So if it’s real estate 99.9% of the time, it’s going to be an LLC. LLCs have straight pass-throughs of all of the tax benefits. So it’s very easy to take advantage of depreciation for the sponsors. For the investors, it’s all very straightforward. The liability protection is there for the sponsors, which it’s not available under a limited partnership, or a sole proprietor for that matter. And S corps typically aren’t tax advantaged for real estate at all. So for if it’s a small business, maybe as long as it’s not going to be, you know, a huge number of investors because there’s caps on the number of investors for an S corp.
Randy Mbouge:
Okay, okay, so you would kind of say, well, if you’re going to just based off of what you’re going to do, and it’s especially being real estate, just get the LLC.
Tilden Moschetti:
It’s almost always going to be an LLC.
Randy Mbouge:
Now, would it matter what state the LLC is incorporated in?
Tilden Moschetti:
Kind of. So, I mean, the state at the end of the day is gonna get the money if the work’s being done there. So like, you know, before before I moved, you know, two years ago, I was in California, which is a high-tax state. So if I did a deal in California, and the property was just in California, well, I’m probably just gonna set it up in California anyway, because California is gonna get the taxes no matter what.
If the property was in, you know, Texas, I probably wouldn’t set it up in California. Because why would I want to subject my investors to paying California taxes when they don’t have to? It doesn’t make sense. So it’s more of a strategic thing just for the investment entity, the one that the investors go into, it’s probably going to be where the property is. Or if it’s a fund, it’s probably going to be in like Delaware or Wyoming as long as the properties will be in different states.
For the sponsor entity, it’s probably more often than not the state where all the partners are. And if there’s diversity there, then it’s probably going to be Delaware or Wyoming.
Randy Mbouge:
That makes sense, that makes sense. And something that I know you mentioned briefly was a series seven license based off of the level of the deal, or the amount of the deal or the money that’s even being raised.
Tilden Moschetti:
Yeah, to be able to take a performance fee, you need a series seven, sorry, or somebody who’s not part of the deal. So you do not need a securities license in order to do this. So syndicators, sponsors of their own deals do not need a securities license. They’re essentially selling their own thing, which doesn’t require a license.
Randy Mbouge:
And now with that, as well, we’ve heard about three different series licenses. So is there one that you would maybe lean towards more than the other? Or is it just based off of what your end goal is?
Tilden Moschetti:
It’s totally end goal. I mean, a series seven is great, because it’s so broad, but it’s, you know, it’s the hardest test. It’s tough. It’s not an easy test. Series 82 is easier than the series seven, but you can’t sell, you can’t sell other more public securities with that. It’s just more restrictions. Series 82 is really for selling alternative investments only. So it’s fine. But if you need to do some of those other things, you’re going to need the seven anyway.
But, you know, for the vast majority of syndicators, they don’t need a securities license. And it actually becomes a little bit more trouble to have one than – I had a series seven for a while and just shut it down. Because it wasn’t – it was making my life harder rather than more helpful.
Randy Mbouge:
Wow, that’s actually very interesting perspective. Now, what if it was like a series 65 license? I haven’t done too much due diligence, but I’ve seen that you can kind of qualify as like a financial advisor. So would that be kind of beneficial for the actual syndicator to have the series 65?
Tilden Moschetti:
Not really, not under most strategies. The where it gives a slight advantage – and the structure changes pretty radically – is if they have, if they’re basically a registered investment advisor, they can take fees. They can charge their clients fees, but they can’t take broker fees. So basically, the registered investment advisor can hold like be the owner of that investment. And then take fees like it’s under management from the syndication, but they can’t get paid like just a regular performance fee. It’ll be like an annual fee.
Randy Mbouge:
Got it. That makes sense. That makes sense. So if you could also then look to tell, you know, the listeners, what was actually maybe one of the hardest deals you’ve come across that you’ve had to work through that you’re like, this is pretty bad, or this has the potential to go really bad if this deal doesn’t close?
Tilden Moschetti:
Of mine, or of someone else?
Randy Mbouge:
Oh, I think both because I think that you’ve been on the end of both of them. You’re like, “Oh, this is my deal.” You know, but the other deals like, “Oh, you got some work to do. This is your timeline, you got about 30 days.”
Tilden Moschetti:
Yeah, not time pressure was – I mean, I had a deal where it was just a terrible, it just wasn’t that good of a deal. And the only reason I did it was I had partners that all wanted to do it and were gung ho on it. And even still, I shouldn’t have done the deal. It didn’t lose money, but it wasn’t a great, you know, certainly wasn’t anything I liked or was happy with. And I left that deal right after it got bought because it just wasn’t part of what I wanted. And it was hard to raise money for, oh my god, because, you know, how do you pitch something that you don’t like at all? It probably was pretty evident I didn’t like it.
For clients, I mean, the challenges that come up with clients is really, the more complicated the deal gets, the harder it is. Like, if there’s way too complicated distribution structure, it just starts getting investors scared off. If it’s a no, if they’re trying to do something fancy, like tie in a 1031 exchange as part of it, gets super complicated. And I wouldn’t advise going down that road for a specific syndication, when only just owning a building and doing it in 1031s is great.
Yeah, I mean, time always gets kind of short in a deal. And it’s not anything to be afraid of, it’s just, you just have to know it’s going to happen that you’re going to have, at the end of the day, there’s going to be a small amount of money, many times, that hasn’t sold, and you’re going to be figuring out how to do it. And there’s a lot of strategies, you know, most of it is giving up a little bit of the piece of your syndicator share in order to get the job done, but it’s not gonna be enough, you’re not giving away enough that you’ll be mad at yourself for doing it. I mean, you’re still going to make great money, you might make slightly less than what you thought you were gonna make.
Randy Mbouge:
Would you say that what has been kind of like a reoccurring theme you’ve seen in people who actually do successful syndications?
Tilden Moschetti:
Theme would probably be they are willing to work, do the work that’s necessary to raise the money. I mean, raising money isn’t hard, but it is work. There I – on the internet and stuff you see, like, “Oh, all you have to do is put this ad up and you get all this millions of dollars.” That’s not true. So everybody who’s really good at syndicating, they are always willing to talk to people, talk to potential investors, that’s what they are good at is just, you know, being open and honest about here’s the deal, here’s what it is, and are willing to do the work. It’s the people that think, “Well I can just put an ad up,” or come up with, “Well, what if I just pay my friend to find all the money on a performance fee,” those people tend to be less successful. Because you have to put in some work in order to raise.
Randy Mbouge:
Right, to actually have some equity in the deal. And with that, too, is there something that you’ve also seen that’s kind of like, you kind of tell some of your clients to be mindful of as they’re putting the syndicate together? Like some advice?
Tilden Moschetti:
Yeah, I mean, there’s a lot of things that go on as we go. I mean, it’s everything that I have in my philosophy, you know, really kind of boils down to one hand, it’s founder investment theory, on the other hand, it’s, you know, open honesty, transparency with investors. So it’s always, always, always, you know, disclose, disclose, disclose. That’s the only way that anybody’s going to possibly be successful, I think.
And so, not that any of my clients want to hide the ball or anything like that, but it’s identifying, okay, this is when we have to tell them something. Versus these are the things that are these little changes, you know, oh, we want to buy this property. And we told you the mailboxes are on the left. Now they’re on the right. I mean, who cares about that? But you know, okay, well, now we’re raising, we were raising 3 million now we’re raising 5 million, even though it doesn’t feel like that needs to is super material, it’s probably material enough that we need to have that communication. And so you can have that communication, we can be positive about it. But it just needs to be straightforward.
Randy Mbouge:
Right. Right. Now, I really do appreciate the perspective and the honesty too. So would you say kind of like it’s getting into being more of a character thing? So like people’s characters are always being tested because they’re in a world where you’re literally raising money.
Tilden Moschetti:
You are. I mean, it’s interesting as a sponsor, when you look at your bank account balance and you see, you know, $5 million in there, it’s sort of like, “Oh, I see.” But it’s not your money, right? So not your money.
Randy Mbouge:
Would you – oh, man I think that’s really good though. I think because – do you would you say that money would expose who people really were the whole time?
Tilden Moschetti:
Well I fortunately haven’t had – I haven’t had any of my clients have any issues fortunately. I did have an issue or not an issue but I had a client who, not related to syndication at all, but he had put money with a 1031 Accommodator and he had like $10 million. And it was an Accommodator and the Accommodator left town, and that money is gone. So that was a big issue. Oh, man. So, I mean, certainly, that person couldn’t take the heat of it. I don’t know, I would hope that nobody would do such a thing. But now I’ve seen somebody who’s done, you know, absconded. You know, there can be checks put in place to make sure that sort of thing doesn’t happen. But sometimes, you know…
Randy Mbouge:
Yeah. What, so first and foremost, I do want to reiterate, thank you so much for your time and attention. And one of my final questions is, what would be a piece of advice you would give to your younger self?
Tilden Moschetti:
Starting the syndication world earlier. I didn’t even know at the beginning that I would be doing a syndication to raise for that assisted living facility. So I didn’t know where the money was gonna come from. That was kind of part of the problem, I ended up with law school. So I probably would say, you know, get started in the syndication world sooner. But also just don’t have as much fear about all these things. I mean, people don’t get mad about talking about investments and things like that. They, you know, almost everybody’s quite pleasant in this world.
And talking to potential investors is easy. I mean, you’re trying to make lives better, by giving them something that will make them money. Nice things about syndicating, is we’re in the business of making people money. What’s the – there’s no downside to that. You know, you may not get every investor and you certainly won’t. But there’s no, I’ve never had anybody yell at me or curse at me for, you know, as a rejection. So there’s really nothing to be afraid of in doing it. These deals just generally always work out. And if you’re working with a good team, and a good, you know, attorney and everything, it can work out so that even the worst case scenario is really not bad at all. It isn’t bad. It’s just the deal doesn’t happen to go through.
Randy Mbouge:
Right. I really do appreciate your honesty, your transparency, and the way that you were able to articulate the wisdom that you’ve gained over the years. I think it’s something that is not only remarkable, but I think that a lot of people will gain a lot of value from this, surely.
Tilden Moschetti:
Oh, well. Thank you so much for having me on your show. I mean, it’s a great podcast that’s out there. Billions of listeners.
Randy Mbouge:
Thank you. I’m hoping for the same. Thank you so much, Tilden.
Tilden Moschetti:
You bet.
Aileen Prak:
Welcome to the “How Did They Do It” real estate podcast. Have you ever wondered how people succeed in real estate and what steps they took to get there? If so, this podcast is for you. Your host Aileen Prak interviews top experts in the real estate community to share with you their real estate journey and how they achieved massive success. Our goal is to provide you with valuable real estate resources and to help you apply it to your own real estate goals.
Welcome to today’s episode of the “How Did They Do It” real estate podcast. I’m your host Aileen Prak, and today we’ve brought on another great guest for you, Tilden Moschetti. He’s a syndication attorney that focuses exclusively on Regulation D offerings for real estate syndicators, business owners, entrepreneurs, and private equity funds. He’s highly regarded in syndication as an attorney, a syndication coach, general counsel to two private equity funds, and an active syndicator himself. He has been featured on many different news outlets, including NPR, NBC News, People Magazine, The National Law Journal, and several other notable publications as well. Tilden, welcome to the show, and how are you doing today?
Tilden Moschetti:
I am great. Thank you for having me. I really enjoy your podcast, so it’s definitely a pleasure to be here.
Aileen Prak:
Thank you, Tilden. Can you share a little bit more about your background? And how did you get started with real estate?
Tilden Moschetti:
Sure, I actually went to law school with the idea that I was going to become a real estate developer. I had seen around me a lot of real estate developers who were also attorneys and thought, “Okay, well, that’s a good way for me to not only raise money, but also to kind of know what I’m doing.” I got into law school, and really loved property, loved community property, really anything that had to do with businesses and real estate.
Then I had an opportunity to learn how to be a trial lawyer. That sucked me away for a while. After law school, I worked for the district attorney’s office for a while, and then hung out my own shingle doing real estate litigation. That was about 20 years ago. It was stressful and not the happiest time because, as you know, anything about litigation is every side is unhappy. Every side is fighting, and there’s nothing positive that ever comes out of litigation. It’s always blood and tears at the end for everybody.
I was pretty unhappy. I was married, had a baby on the way, and was thinking about leaving the practice of law altogether. A partner of mine came up to me and showed me a deal and said, “Hey, do you think we can syndicate this?” So I looked at the deal and thought, “Wow, that really pencils out good. Yeah, let’s syndicate it,” having no idea what to do. I basically taught myself how to do it. It took a little bit longer than I had hoped – six months rather than the two or three months I was hoping for – but we got the deal done. It ended up being a really successful syndication.
Once that was up and running successfully, and investors were happy, I decided to do another and then another, and it snowballed from there. I thought, “Okay, this is going great. So I’m going to transition my law practice away from litigation, which I didn’t like anyway, and start helping syndicators put together their own deals.” That was about 10 years ago, and it’s been really terrific ever since.
Aileen Prak:
Going into syndication, especially from a law background and the legal perspective, you must have had a different lens of how you should approach syndication and how to place things and do the proper paperwork and follow certain steps. Can you share a little bit about what you had to do and what you did in order to set up that deal, that syndication for success?
Tilden Moschetti:
Yeah, I had to wear two hats that I suddenly had to wear. I had a very good financial background that helped a lot. I understood finance very, very well, and I understood the contract and the legal side of it very well. So it really was starting to put together what I call the “alphabet soup.” There’s a whole bunch of different codes and regulations that all kind of fit together, but it’s not apparent how they necessarily all fit together. I think that gets really confusing for people when they are trying to do their first deal.
Fortunately, my background made it easier, because I had a little bit more resources to be able to support and kind of make sense out of it. It was really about building that overall framework of how all the pieces go together. Once that was done, then it was really just, “Okay, how do we make the deal into something that people would invest in?” That came together pretty seamlessly.
The real challenge came when it was time to raise money for it. I wasn’t experienced at the time in doing sales and selling securities. To me, it sort of was like what you see on the internet, right? You see whether you offer this preferred return, you offer this split, and then magically, some investors are supposed to come. And it doesn’t actually work that way at all.
My biggest aha moment was sitting across from a doctor who had been a former client and was invested in a lot of different things. He invested in real estate and businesses. I knew he was going to invest. It was just a no-brainer – he liked me, he knew me, he trusted me. Our returns were decent. Everything was great. I took him to lunch, sat down and said, “Hey, you know, here’s our deal. Would you like to invest?” And he said, “No.” I was like, “What? Why not?” And he told me, “Well, it just doesn’t seem that interesting.”
I had never thought of that before. As a lawyer, we see things where there are shades of grey, we try and paint things as black and white. In financing, the numbers make sense, or they don’t. So why was this deal not good? It was there and then that I started developing what I call the “founder investment theory,” which is about the story behind the investment product that’s being sold.
That got developed more and more as I did more deals. I started seeing that’s really what investors are actually looking for at the end of the day. They’re looking for somebody that they trust, certainly. But even more than a return on investment, they’re looking for a story that they can buy into. Investors invest emotionally first, then they look to their rationality to determine if it’s worth it.
It took me a while to realize that, and it became more and more prevalent until now it’s one of the big things that I talk about all the time. It makes your investors’ lives so simple. When you’re putting a deal together, that becomes the most important thing to put together first – to understand why you are selling it in the first place and why an investor would want to invest.
Aileen Prak:
Going back a little bit, you talked about the alphabet soup. As you’re putting all these deals together, trying to understand how all these pieces fit together, what are the first things that you typically have to do to get that across? Or to make sure that all the pieces are laid out correctly? And then how do you convey all these pieces to the investors as well, making sure that they understand all the moving pieces, while you’re also making sure that all the pieces are moving along and fitting together?
Tilden Moschetti:
Yeah, so with any deal, you’ve got multiple things happening literally all at the same time, and you’re trying to get it all done. On one hand, you’re trying to find the right deal to invest in. If it’s real estate, you’re trying to find that property. If it’s a business like a venture capital type thing, you’re trying to find that business to invest in. You’re trying to find whatever that asset is that’s going to be invested in. So you’ve got that going on in one lane.
In another lane, you’ve got meeting investors, making sure that investors are starting to trust you and be interested in investing with you. You’re building out your network, making sure you understand your network and what they’re generally looking for. So that’s another part that you have to be doing.
The third piece of it is the whole deal structure itself. That goes from not only the acquisition of the asset but also the legal framework. Every syndication, every fund is dealing in securities. A security is anything that basically has a passive investor on one side, and they have an expectation of getting money.
When it is a security, it either needs to be registered with the SEC, which is a very painful, expensive process, or it falls under an exemption. An exemption like Regulation D basically allows people to raise an unlimited amount of money from an unlimited number of accredited investors. Then they can choose between whether they want to have non-accredited investors or whether they need to advertise.
That decision really comes down to where those investors are going to be coming from. If you already know them all, maybe 506(b), which allows for those non-accredited investors, makes more sense. If you don’t know them, then really you don’t have much of a choice – you’re going to be advertising and marketing and putting it out to the outside world, so it’ll go under 506(c).
That kind of determines itself just based on who those investors are likely to be. Once those are built out – so you find the asset, you find the investors who are interested – then you start putting together all that legal framework and the acquisition of the asset. Then you’re kind of just on the track of making sure that you’re compliant and that the asset acquisition goes right.
Aileen Prak:
One of the things that you were talking about earlier was your founder investment theory about how investors think about investing and how they invest first emotionally. As you’re looking at your own deals and you’re putting together the story and understanding why people would want to invest in it in the first place, what is your typical process to dive down and get into the understanding of what is actually important to the investors?
Tilden Moschetti:
Sure, well, first few topics. You get to know them all and you kind of understand syndications. Funds, even as you grow really large, you always got to know who your investors are. It’s not one of these things where you get to set it up on the internet and investors just magically come to you. Nobody wants to give anybody that kind of money without having some sort of trust built there. That comes by talking to them, talking to them about kind of what they’re looking for and getting to understand the framework.
The framework for founder investment theory is deciding what the general strategy looks like. Are we talking about development? Are we talking about a value-add? Are we talking about just a pure cash flow deal? What does that look like? What do I want to do in my investment product? What do I want it to look like? And then from there, what tactics am I going to be using?
If it’s a real estate deal, am I going to be doing something like cost segregation? Am I going to be doing something that’s very tax-oriented? Am I going to be focusing more on cash flowing to my investors? Or are they going to be wanting more just appreciation at the end? Because investors are different. Some investors don’t want any cash flow at all – they want the big pop at the end, and they don’t want any cash. Other investors rely on the cash flow, and they really need it. So they’re two different people.
There’s also the risk profile. Some investors like really, really risky things with a big payoff; some investors want no risk at all, very, very safe. Starting to put all those pieces together, you start to understand what the opportunity is. And then you put the story behind it.
Whether it’s a property that has some sort of special magic to it, what is that magic? Defining that is what investors ultimately are listening for and wanting to hear. They don’t know, necessarily, that that’s what they’re listening for. But if it’s a multifamily building, there are a lot of multifamily opportunities out there that they can choose to invest in. Why do they want to invest in this one?
Are they just choosing a number? Because if they’re choosing a number, they’re not going to be that attached. But if they’re buying into the story and the reason why – like if they really believe in workforce housing, or student housing, or maybe it’s luxury, or whatever it is – and they really buy into the vision that you have, that’s what’s going to latch them on, make them want to invest the first time and the next time and the next time, especially as you start delivering on those results.
Aileen Prak:
As you’ve been working with other syndicators, and you being a syndicator yourself, what does it take to be successful in the syndication world, setting everything up and then operating it going forward?
Tilden Moschetti:
Really, it’s always doing the right thing. There are going to be times in every deal where you’re going to have to really act like a true fiduciary. This is where the trust that your investors have come to you with comes to fruition, and there are going to be times where the right decision is going to be to do what’s in the best interest of the investors, and it’s gonna be different than what’s best for me as a syndicator.
Sometimes it’s when we sell, sometimes it’s should we do this rent increase, sometimes it’s should we dispose of this little part. Whatever it is, it’s gonna come up. That’s a huge part of it – investors need to see that you really are in it for them 100%. When they see that, they trust you more, they keep investing with you more, because it’s not easy to find investors, and you want to keep the ones you have, and you want to keep them investing.
I think 99% of the people go into this business because they want to do the right thing. They want to make money with their investors, not at the expense of their investors. I think there are very, very few actual fraudsters that want to do bad things out there. We still need to protect investors, but I think ultimately, almost everybody is in it for them.
The other component is communication. It shouldn’t be constant – that’ll drive your investors a little crazy because they won’t be able to see the important stuff from the non-important stuff. But certainly, at least quarterly emails that are really, really good and explain exactly what’s going on, good, bad, or indifferent. So that they can understand, “Hey, this is where our money is, it’s with this person, and they’re really monitoring it. They care about the asset, and they’re watching out for it.”
Involving them in the decision-making and always inviting communication back is important. My emails to my clients and my investors always say, “If you have any questions, just please call me. We can talk anytime you want.” Just to make it really clear, it’s an open door. It’s their money, and I take it very, very seriously. I think that’s kind of the most important thing to make sure that trust keeps going.
Aileen Prak:
As syndicators are working with attorneys and securities attorneys and setting up all the legal documentation and getting all their ducks in a row, what makes a securities attorney differentiate themselves from other securities attorneys? What are some of the questions that syndicators should be asking? And then some information that they should also be relating to investors as well?
Tilden Moschetti:
I think probably a big differentiator is the experience of actually doing deals. There aren’t a lot of syndication attorneys that have done their own deals. And I don’t understand why, right? Because syndicating is actually a pleasurable thing. It’s fun, it makes you money. It’s great working with investors. I don’t understand why there isn’t a large number of attorneys that do this.
That experience is crucial because a lot of the calls I’ll get in the middle of the process will be something like, “Hey, I’ve got this investor who’s asking me this.” Without having sat on the other side of the table from an investor that you want to invest in your business or in your syndication, it’s hard to know how to give them guidance in terms of what to do.
Another thing is just being a deal maker. Compliance is extremely important – we all want to protect our syndicators. But at the end of the day, the syndication needs to go forward and it needs its own momentum. If there’s not a sense of urgency from the syndication attorney to get their documents done and get their syndicator out actually doing the deals, it slows it down. And it’s harder for the syndicator to sell, to find investors, to keep their own project moving. So they need that momentum of the whole thing.
Being a deal maker is a part of being a good attorney. Whatever needs to get done, making sure it gets done, communicating with clients, and having systems in place to get the work done – it’s all very important for the syndicators to know. They should be asking about these things when they’re talking to syndication attorneys to pick the right one.
Aileen Prak:
What are the most common questions that you typically get from syndicators that they’ve received from their investors that they need clarification on?
Tilden Moschetti:
A lot of times, it’s financial terms, or “How does this work?” Or a lot of times it’ll be not even in my realm, but in the realm of accountants where it’ll be specific tax questions. So those most of the time we refer out to the accountants or the tax attorneys who know that area better than I do.
Or it’s, “What happens if, in the middle of the deal, if it’s a five-year hold, and I’ve got to get my money out in three years?” That’s not going to happen. That’s one of the conversations we always have with our syndicators. And most of the time it’s incorporated in their documents depending on their own strategy. But it’s a common question. Or it’s just deal terms that they just don’t understand.
So in an operating agreement, it could be talking a lot about allocations. This happens all the time. They see the word “allocations,” and most people when they hear about allocations, they’re thinking it’s about distributions – they’re thinking about getting the cash. For attorneys, allocations really means taxes. So where do we allocate the loss or the profit from it?
A lot of times, it’s just explaining, “Okay, well, this is what we mean by allocations. This is where it explains that. This is why you don’t need to be concerned necessarily, or you should talk to your own accountant about how it’s gonna affect you.”
Aileen Prak:
In the syndication world, what is one of the biggest things that syndicators typically make a mistake on or one of the biggest trip-ups that they typically have run into?
Tilden Moschetti:
Yeah, two things. The number one – I don’t know, they’re both equal, I guess, but tied for number one – is they don’t think they need to do a PPM. Everything where there is a passive investment is a syndication or a fund or whatever you want to call it. And it is a security and it needs to be done in the proper manner. It doesn’t matter if it’s just your friends, or just your immediate family who’s investing in this, or you’ve got a promissory note, or whatever it is. If there’s an investment of money with the expectation of profit relying on you as the syndicator, it’s a security and the proper things need to get done. You need a PPM, you need an operating agreement for that entity, you need to file a Form D with the SEC.
The number two thing is reliance on finders. So thinking that people can just pay for people to find them investors. And that’s just not the case. You cannot pay finders who are not licensed broker-dealers. They need to have either a Series 7 or a Series 22 that’s active in order to be paid a performance fee. There are ways to incentivize people to try and find you investors by paying them hourly – that’s fine – or paying a flat fee and not really having them as part of the negotiation. Those are fine, they’re not really finders. But paying for performance is a big, big, big no-no and a lot of syndicators fall victim to thinking that it’s okay.
Aileen Prak:
So two things. One, going back to needing a PPM, if a syndicator or an opportunity deal does not have a PPM, what happens?
Tilden Moschetti:
Nothing happens until something bad happens. The SEC doesn’t look up anything. They don’t do any research as it relates to the Regulation D or what could be Regulation D opportunity. Something bad happens when a lawsuit is filed. When a lawsuit is filed, the first thing that’s going to happen is the plaintiff’s attorney is going to say, “Well, where’s the PPM?” And if they hear that there isn’t one, they’re going to immediately notify the SEC, “Hey, look, I think we’ve got a problem here. We’ve got a lawsuit, there’s no PPM.”
The SEC looks at their Form D. They say, “Ah, yeah, we don’t see a registration Form D. Let’s investigate that.” Ultimately, if it’s been done not in the right way, the SEC will join in that lawsuit. And at that point, the plaintiff’s attorney’s work is done. The SEC is going to win this case for them almost hands down, and then their work is done. They get paid and everybody’s happy from that side.
The syndicator’s left in a really, really bad situation. And that’s really the worst that happens – when the syndication completely falls apart, and it will completely fall apart when there’s a lawsuit. You know, at some point in the syndicator’s career, a lawsuit might happen. And when the chips fall out like that, it gets really, really ugly.
Aileen Prak:
And then for the second piece of it, the second number one item that you had mentioned earlier about the reliance on the finder’s fee – what’s the difference between a fund of funds model, because we’re seeing a lot of that popping up now in the syndication space, versus a finder’s fee for someone who’s looking for capital and you’re paying them a percentage or a fee?
Tilden Moschetti:
Yeah, there’s not a lot of difference. And so that is definitely a thing that’s been really heavily scrutinized. It’s not being scrutinized as heavily by the SEC right now as it is by other state regulators. State regulators are seeing the fund of funds model happening, and they’re saying, “I’m sorry, you’re acting as a broker-dealer. And so therefore, you’re not able to do that.”
It’s starting to shake out. Some states are much more aggressive about requiring registration as a broker-dealer, or specifically as a dealer, which may have different requirements for individual syndicators. But funds of funds are very, very sticky because of that. If it’s just me, and I’m trying to put a wrapper around somebody else’s deal, I don’t think it’s going to fly. I think a sponsor is going to be under scrutiny, probably from a state regulator first.
I’ve had state regulators call and say, “You know, we’re looking at this fund. Can you talk to us about it?” Fortunately, we’ve been able to handle these situations – we haven’t had any situations where it’s not been a very simple answer – but they’re out there. They want to protect the public. They take it very, very seriously if somebody is accepting money that basically acts as a performance fee. Funds of funds are tricky, tricky business. So most of the time I steer clients away from it and find other ways to do it. Like truly becoming a joint venture partner is typically the way it’s structured. But yeah, they’re complicated.
Aileen Prak:
What happens to the investors who have invested in a fund of funds or with a person who has participated in a finder’s fee? What happens to the investors investing with that particular person or group?
Tilden Moschetti:
So they’re not in the worst position. They now have an option. In a way, they kind of have a little bit more of a benefit, because what they’ll automatically have is, if a finder’s fee is found to have been paid, they’ll have what’s called a right of rescission. So basically, they’ll be able to say, “Well, there was no contract whatsoever, because there was an illegal finder fee paid.”
If there’s a right of rescission, they immediately need to get all of their money back. And they probably have a lost opportunity cost that they need to get reimbursed for as well. That puts the syndicator in probably the worst possible situation, because coming up with $5 million instantly is very difficult. For every investor, it’s kind of an advantage in that respect.
The bad part is all the other investors also have the same right of rescission. They may be happy with their investment, but the whole thing is about to fall like a house of cards.
Aileen Prak:
What are some of the questions that investors can ask up front to determine what kind of situation they are getting into and understanding their role and the syndicator or person that they’re investing with’s role in the deals?
Tilden Moschetti:
They should ask, “Is anybody being compensated for finding other investors?” That’s a very straightforward question. If the answer is yes, then it’s not very difficult to see if they’re a licensed broker-dealer. They can look on the FINRA website on BrokerCheck or something in order to see if they’re a licensed broker-dealer. So that’s one thing they can do.
They can look at the overall structure. How is this exactly working? Who’s getting the money? And how’s the money flowing? Certainly, with a 506(b) offering, there needs to be a very detailed use of funds. So where is that money going? If I invest $200,000, is that $200,000 getting paid somewhere else? Or is it being paid for the acquisition of land, or a building, or something like that? If it’s something like that, it’s probably pretty safe that it’s going into this one thing.
If it’s going into, well, some other company that’s going to be doing XYZ, it’s starting to look a little bit unusual, and they may want to seek legal counsel to see if it’s something they want to get themselves involved in.
Aileen Prak:
So Tilden, what is your next focus? And are you optimistic about the real estate market in the future here?
Tilden Moschetti:
Okay. I’m incredibly optimistic. And I’m optimistic because the public investing world – so your stocks and bonds right now – are in a lot of disarray. Something like 80% of all transactions are not made by humans. They’re made by algorithms and AI that’s making decisions. That means that we’re taking that whole component and we’re giving it over to something which should work, but there’s no real rational human at the end of the day making decisions.
I see that as a negative thing. I think most people do, which means that the best place for money in the future is alternative investments, where you have actual people where you can call them up on the phone. Like if I want to invest with Apple, I can’t call Tim Cook, right? I don’t know him. I’ve never met him. I don’t have his phone number. I can’t call him even if I did. But if I am part of a syndication, I can pick up the phone and call that syndicator anytime and say, “Hey, why did you make this decision?” or “How’s it really going with XYZ?” and so they can really be a part of the process.
I think alternative investments are incredibly – I think it’s the future. I think it’s what most people are going to be investing almost everything in pretty much anytime soon.
Aileen Prak:
Tilden, how has real estate investing impacted your life?
Tilden Moschetti:
Oh, it’s great. I love it. I mean, it’s impacted me obviously by giving me a great profession that I love. But I really love the opportunity to help people make money. So whether I’m a syndicator or whether I’m a syndication attorney, whichever hat, at the end of the day, I’m helping people make money, which is never a bad thing. Right? So there’s only good karma that comes from that. Whereas litigating was completely opposite. It was tearing people down, and it wasn’t fun. I like making people money – it makes people happy.
Aileen Prak:
If there’s one thing that you wish you knew now about real estate that you wish you knew when you first started, what would that be?
Tilden Moschetti:
I wish I knew that it was scary to go into. There’s some sort of fear about taking it on. It feels risky to put together your first deal or to go into your first syndication. It just seems scary because it’s an unknown. And I wish I’d known that it’s gonna feel that way, it’s okay that it feels that way. But it’s never gonna be perfect. You just get it done and you see how it goes. And 99% of the time, it goes great. You know, 1% of the time, it may not go great, but at the end of the day, real estate is always worth something. The ground under our feet – they’re not making any more of it. And so it really shouldn’t be as scary as it always was. It’s just gonna feel that way.
Aileen Prak:
Tilden, what sets the successful real estate investor apart?
Tilden Moschetti:
I think that they invest in things that they are comfortable with. So they need to be formal in making decisions. They not only allow those emotional decisions that they do, but they also check themselves with rational decision-making. You know, they’re promising me a return of 18% – is that realistic? Do I think that’s actually going to happen? What kind of evidence do I have that’s going to happen? Because the story can be great, but it may not come to fruition.
Successful investors – one of my mentors taught me – always pay your taxes and always do things right. And always, you know, just think about everything before you do it. I think that’s what makes a successful real estate investor.
Aileen Prak:
So Tilden, where can our listeners find out more about you and what you’re doing?
Tilden Moschetti:
Sure, the best place probably is our website, MoschettiLaw.com. Also, I put out a lot of content on YouTube. It’s available there as well.
Aileen Prak:
Awesome. Tilden, thank you so much for all of your time today and your expertise. Really appreciate it.
Tilden Moschetti:
Oh, thank you. I really appreciate getting to be on your show.
Aileen Prak:
Thank you for listening to our podcast today brought to you by Bonobos Capital. We’d really appreciate it if you can go to iTunes right now and leave a rating and written review. Also, please don’t forget to subscribe so you can always get the latest episodes. You can also connect with us on Facebook – How Did They Do It Real Estate. We’d love to hear your feedback and any topics that you’re interested in for future episodes.
If you’re anything like Sayla and me and believe that real estate investing is a great way to create passive income and build long-term wealth, check out our free apartment syndication due diligence checklist for passive investors at BonobosCaptial.com/checklist. Sayla and I created this checklist for ourselves as we evaluated different multifamily syndication opportunities as passive investors. So we would love to share it with you so you can use that as a resource as well. Download your free copy today at BonobosCaptial.com/checklist.
Lastly, to learn more about us, you can go to BonobosCaptial.com and fill out the contact us page so you can speak to us directly. Nothing on the show should be considered as specific personal advice. Please consult your legal, tax, and real estate professionals for individualized advice.
Gabe Petersen:
Welcome to The Real Estate Investing Club. This is the place everyday real estate investors gather to share their best stories, biggest insights, and favorite tactics to grow a portfolio of cash-flowing properties in today’s market. Here’s your host, Gabe Peterson.
All right, good morning, everybody. And welcome back to another episode of The Real Estate Investing Club. It is a Friday here in Seattle. And we are just getting into the spring, we had our first truly sunny day yesterday. And it is glorious in Seattle when we have sun because during February, it gets very, very cloudy. And then the sun starts to peak a tad out in March and we are just euphoric. So it’s a good day. And it’s a good day for another reason, because we have Tilden Moschetti with us. He is a syndication attorney and an investor so he has both sides of the spectrum there to impart his wisdom on us.
Syndication, you know, a lot of you guys want to start bigger deals. And in order to do that, you have to syndicate the deal. You don’t have to, but it’s the easiest way to do it. The easiest way to raise capital and structure it. So Tilden is here to take us through that process. Tilden, thank you very much for hopping on the show.
Tilden Moschetti:
Thank you for having me. I love your show. It’s fantastic. So I’m really honored to be a guest here.
Gabe Petersen:
Right on. I told you before we got on here, we’d like to start with stories. I’m sure you got a good one. So take us to the beginning of your story. How did you get started in real estate?
Tilden Moschetti:
Sure. About 10 years ago I had been an attorney practicing in real estate litigation. So anytime there was a big fight and property was at stake, that’s what I would do. I didn’t do evictions, I did the bloody battles over property, whether that was a divorce or a bankrupt getting angry. Whatever it was, it was awful. So I did that for 10 years. And it was kind of torture. So I was very unhappy.
I started doing a little bit of brokerage because I saw clients were doing pretty well. And it seemed like easy money. At the same time as I was practicing law, I had a partner come up to me and show me a deal. It was a triple net medical office in Alabama. And it was being developed. And it was at a really, really good price point. And he said, “This is such a great deal.” I said, “Yeah, looks really good.” He said, “Well, let’s syndicate it,” having no idea what he was talking about.
So I thought, okay, well, I’m an attorney, I can figure this out. And I got super into the weeds and tried to make sense of it all. And at the same time find investors and get the loans done and do everything. And finally, the pieces started coming together about how syndication works from the legal side. And so as that started coming along, the deal ended up happening. It took us about six months that time because I didn’t know what I was doing.
Gabe Petersen:
And it closed.
Tilden Moschetti:
Yeah, so fortunately, since it was being developed, we had some extra time. So we were able to keep pushing the closing, which was needed.
Gabe Petersen:
Generally, yeah.
Tilden Moschetti:
Yeah. So I managed to get it done. And it was great. We had about 20 investors and ended up making them good money. So that worked well, next project came around, worked even better. My process was smoother, making legal docs, getting it all done, getting it put together. Third deal was super easy, and so forth to fifth deal.
So about 10 years ago, maybe eight years ago, I thought, okay, well I’m gonna start helping clients full time on putting their own syndications together. So I’m gonna make that part of my legal practice and get rid of this whole portion of litigation. And it’s been great. So that was sort of my foray into it. Now, I do my own deals, but I also am a syndication attorney. And yeah, the rest is history.
Gabe Petersen:
Love it. Yeah, I can imagine being a litigator can be a stressful experience. Especially if that’s all you do every day, day in day out. So it makes sense.
Tilden Moschetti:
Nobody’s ever happy with you. They’re always mad no matter what. They’re winning, they’re mad because they’re paying so much. They’re losing they’re even more mad. It’s awful.
Gabe Petersen:
So you did dip your toe into brokering deals. Did you ever do that fully or?
Tilden Moschetti:
Not fully, fully. I’ve done quite a few different transactions, mostly just finding good deals and partnering people up. I had a good investor base, just because I had litigation. So I knew people, I could match people up. And so with the broker’s license, it was pretty simple for me to make some money.
Gabe Petersen:
So let’s go back to that first deal that you syndicated. The one you know, you didn’t – you’re a lawyer. So you understand law, but you just didn’t know how to do a syndication, you didn’t know how to set it up, all that stuff. Go back into that headspace. For everybody listening, take us through the steps of how you got it structured, how you put it together. And step by step, take us through exactly what happened. Actually, before that, explain to people what a syndication is, and the different ways you can syndicate and then why they would choose one or the other.
Tilden Moschetti:
Sure. So anytime you take money from a private person, or from a person who’s going to be taking a passive role, so they’re not actively in the deal, making decisions, doing the work, doing those sorts of things, it’s considered a security. So securities need to either be registered with the SEC, which really means going public, which nobody is going to do for this purpose, because it’s going to take about 40 different lawyers, and it’s very expensive, or they fall under an exemption.
So the security rules have exemptions for people. There’s really three that are used: Regulation D, Regulation CF, and Regulation A. Most people are using Regulation D, about 98% of the private money that’s raised goes through Regulation D. So that is an exemption to the security rules of registering it. And what it allows people to do is raise an unlimited amount of money from an unlimited amount of accredited investors, and a choice between really either taking some non-accredited investors or being able to advertise to being able to solicit openly. So really, then it becomes a choice between those two different rules which dictate how I’m going to market this, how I’m going to find investors. And that’s kind of how the decision point comes.
Gabe Petersen:
And at what point do you need to set up a Regulation D in an actual syndication versus just putting together like a JV doc or something like that?
Tilden Moschetti:
As soon as it becomes clear that you’re going to be taking money from investors, and those investors are not going to have a super active role. That’s when it needs to be a syndication or a fund or whatever you want to call it.
Gabe Petersen:
The activity of the people involved dictates whether they are an investor or a partner?
Tilden Moschetti:
Yeah, I mean, if you’re taking a management fee, they’re just sitting idly by, they just gave you some money. That’s a security, it needs to comply with the rules. If it’s five friends all coming together and buying this property and they meet once a week to talk about it, that’s not a security. That’s like an investment club. So it doesn’t need to fall under it.
Gabe Petersen:
Makes sense. And I apologize, everybody, I’m going through a bit of a cold, so it might sound a little nasally. But alright, moving on. So we understand syndication now. Take us again, to your first deal. How’d you get it set up? What were the aha moments that you kind of ran into that you realize, like this needs to be done, this needs to be done. Just take us through that first deal.
Tilden Moschetti:
So when you just get started, then you start trying to make sense of the rules. It’s really kind of tricky to do it if you don’t have somebody to help you. So I call it the alphabet soup, because you’ve got 506(b), 506(c), 504, Reg A, Reg D, Reg S, I mean, all these different things, and all kind of going on at the same time. And just when you think you have it all figured out a new one, a new thing comes, a new bunch of letters or numbers.
So it was kind of like the alphabet soup trying to put everything together. Finally, I did. I mean, I went to – I had a mentor in the real estate world who always said somebody just look at the lease. So in the same manner, you just look at the law. So when there’s a question, just read the law, it’s clear. And fortunately, the SEC makes it really pretty clear.
I like to think of the rules of Regulation D as a real big benefit. Because not only do you get to do all these things, but the SEC tells you like explicitly, this is how you do it legally. It’s like in the rules, it’s a clear guide. In the actual like documents and stuff, it’s really hard to figure out. So really it was reading the rules, and then I finally understood, okay, so I’m doing a rule – in that case, it was Rule 506(b). So it was gonna be from friends and family. So me and my partner, we raised money, we went out to everybody we knew and just, you know, raise money, raise money, raise money, raise money. And then at the same time, I was writing up real-
Gabe Petersen:
Real quick, going back. So you raise the capital, you’ve gone out? How did you do it? Like, what did you present them with? You know, a lot of people, they don’t understand real estate. So how did you do the presentation?
Tilden Moschetti:
Yeah, that was a big learning experience, too. So most of it was, you know, send an email blast, nothing happens. Start calling people and then people started being interested. Yeah, relying solely on email blasts doesn’t work. Nobody says “here, I want to give you $50,000” from an email. Phone calls were pretty good. And then ultimately, meeting with people individually was the ticket that really started working.
Gabe Petersen:
How much were you raising on this first deal?
Tilden Moschetti:
It was about two and a half million. So it wasn’t a huge deal, was certainly enough to make it worth my time doing. And we ended up with keeping about 10% of the equity in the deal ourselves. So maybe I think it was wound up to be like 12% of the equity.
Gabe Petersen:
So it was a small percentage, 88% to-
Tilden Moschetti:
Yeah, that’s what it kind of worked out to be. And then we had a loan above that. So I think the total purchase price was about four.
Gabe Petersen:
And when you made that split, were you aiming for a certain IRR for the investors or what was the real-
Tilden Moschetti:
That’s kind of the next thing that I learned. So I knew we were gonna hit about a 15% IRR. So I mean, 15% was really good at the time. And for a super safe – this really was a very safe deal. The tenant was, you know, an investment grade company that we had a 20-year lease from. So it was really good real estate, we were gonna sell it in five years, still about 15 years left, you know, so it was still gonna trade really nicely. And we’re buying it under market because, you know, it was still being developed. So it was a great deal.
So my first meeting was with a doctor who I had done a lot of business with, both as a litigator and I sold him some properties as well. And I sat down across from him and I was so excited because I knew – I thought this guy was gonna come in for like, 500,000, maybe 700,000, 2 and a half million and take it all. It was gonna be great. You know, this is like, okay, we’re gonna do great here. I sat down with him, and we had lunch, and I was telling him about the deal. And yeah, well, it’s got a 15% return. And so “how much can I put you in for?” And he’s just like, “Nah, not for me.” Like, what? It’s 15% return. He’s like, “Yeah.” I knew what he was buying before. So I knew his real estate. And so a 15% return was fine for him from my point of view. And he’s like, “Yeah, it’s just not that interesting.” I’m like, “Well, it’s got a 15% return, it’s, you know,” He’s like, “No, I, that’s not how I invest.”
He said, “First, I invest for cash flow, right, so half my money goes to cash flow. So it’s got to generate more cash and not that I really need it. But it’s just, you know, that’s what I look for. The next little bit’s got to be a little pop of appreciation. So just properties that are only going to just appreciate. So I get a pop at the end, and then about 10% is just my mess around money.” So that’s putting in some crazy deal that I’m sure he ended up going into crypto or something strange and just, you know, put it grown at risk things and you know, if he loses it, he loses it. If he makes it, he makes it big.
And so that kind of led me to really part of my investment philosophy, which I call a founder investment theory, which is there’s gotta be more to it than just an IRR. And that’s kind of a mistake I see a lot of syndicators make is they come up with a deal. It’s okay, you know, it’s 12% and 15% 20%, whatever it is, and that’s what it is. That’s what they tell people about it. That’s not how investors think. I mean, an investor needs to get emotionally attached before they’re gonna give you, you know, 50, 100, $200,000. So it was developing that idea of that motivation on how people invest that kind of made it. So, okay, now I need to know what I need to do. I need to do the numbers because they need to rationalize it. But at the end of the day, syndicators need to be putting in that story about why this deal because there’s 30 other properties that the investors are looking at that are 15%, higher than yours.
Gabe Petersen:
And I found that a lot of investors, they kind of fit into different personalities. And a lot of the people, you mentioned it with this doctor, cashflow is paramount to a lot of investors out there. Even if they could have a 25% 30% IRR, but if there’s no cashflow, it doesn’t seem real to them. Because they’re not going to be getting money every month, they have to wait five years and five years is too far out for people to even consider to be real, even if they are going to get a great return. It’s just not real to them, because it’s not here.
Tilden Moschetti:
Yeah, and then you’ve got like high cash flow people, like your doctors, those kinds of people, and they don’t even want the cash. They’re like, “Well, you have to pay me.” They don’t want it, right. And so those people just want appreciation. “I don’t want any cash.” And you got to match it up, right? Because if you go to a cash flow person, and they want appreciation, or you go to a cash flow person with an appreciation deal, they’re never going to do it ever, doesn’t matter what the deal is, like you said, or and vice versa. They just won’t do it.
Gabe Petersen:
So after that first deal, how has your philosophy and your approach to raising capital kind of changed?
Tilden Moschetti:
It’s been – it’s all story. I mean, story is the most critical thing. So I’m very agnostic on the actual property types that I like. I don’t, you know, multifamily is fine, I don’t find there’s a lot of pop in it. So it’s kind of hard for me to get the numbers up enough. Unless there’s a huge add value component to it. So I like more like industrial or retail or things like that. Because there’s more things I can do to make some money. But I’ve got to develop a good story, especially when you start taking them outside of, you know, they hear about multifamily, and they hear about self storage, you start taking them into retail, and it’s like “I thought retail was dead because of Amazon, because of COVID.” Or because of whatever, you better have-
Gabe Petersen:
Nail salons, there’s still all those people with medical space. Totally.
Tilden Moschetti:
Totally. And they make a lot of money. And then if there’s a business component to it, like car washes or things like that, you know, suddenly I can give them a better return, slightly higher risk, but there’s a business component tied to it. And you have to figure out how to manage it and things like that.
Gabe Petersen:
Well, I mentioned before we got on here, we do keep this as a short podcast. So we have already our time. So I appreciate everything you’ve shared, but it’s time to jump into the quick question round. Are you ready?
Tilden Moschetti:
Absolutely.
Gabe Petersen:
Alright. Starts with education, could be any form could be books, movies, YouTube channels, whatever, I just need two recommendations, one for general life wisdom and then one for real estate.
Tilden Moschetti:
General wisdom, I would say Darren Donnelly has a series called “Sports for the Soul” that I love. That’s really about getting your mindset right, uses sports as a metaphor for it. Absolutely fantastic series of books. And then for real estate, it’s actually more of an investing. But man, it fits right in with real estate investing would be “The Most Important Thing” by Howard Marks.
Gabe Petersen:
Good recommendations. Next question is for your younger self. So let’s go back to the Tilden who was, let’s say, just getting to the point where he realized that his litigation career wasn’t fulfilling him, go back to him, look him in the eye, give him one piece of advice moving forward.
Tilden Moschetti:
You’ll never actually fail. So just work it, just do everything you can, take a lot of risks because you never actually fail.
Gabe Petersen:
That’s good advice. And that’s something nobody said yet. And also, I feel like I’ve been kind of realizing that more in my own career recently. You can have deals that don’t hit the return that you want. But you’re not gonna – you know, you’re still there. You can still do more deals. So just keep moving forward and real estate-
Tilden Moschetti:
I mean, come on, never hit zero.
Gabe Petersen:
Buying an asset. Yeah. Still got something.
Tilden Moschetti:
Yeah, exactly.
Gabe Petersen:
All right. Next question is about the United States. It is a big place, lot of opportunity out there. Give me the single Metro, the single city you’re most excited about investing in today.
Tilden Moschetti:
My current hometown, which is Raleigh, North Carolina, Raleigh-Durham area. Astronomical growth, it’s going to be even more so. What’s coming in the future is great. We’ve got a huge population influx. We’ve got high tech coming in, left and right. Apple’s being built here. And it’s a great place to live.
Gabe Petersen:
Nice. All right. Next question is about finding deals. It all starts with reaching out and getting in contact with sellers and then picking up that purchase agreement. So what is your favorite way to generate leads and find good deals?
Tilden Moschetti:
I talk to a whole lot of agents and incentivize them to help them work with you. So I keep a CRM of real estate agents, I reach out to them regularly. Let them know what I’m working on. And I make it very clear, I take care of the people that helped me.
Gabe Petersen:
Perfect, I love it. It is a relationship business. This brings us to the second last question, this is about deals that did not go the way you expected. A lot of times there are wrenches thrown into the mix. But in those deals, we learned our biggest lessons. So what was the deal that went a little sideways for you? And then what was the lesson you pulled from it?
Tilden Moschetti:
I guess it’s sort of the lesson that Charlie Munger came up with where if a deal is too hard, you should just walk away. So yeah, I had a deal that was just too hard to make it look right, man, it was and it was awful. So didn’t lose investor money, fortunately, didn’t make them anywhere near what they should have made. But it was – yeah, I knew when I saw it, it was bad. Shouldn’t have done it.
Gabe Petersen:
Yeah. Trust your gut. And that’s, that’s also I feel like that’s true for sellers too. If a seller is being too difficult in the negotiation then just walk. Just don’t even deal with it.
Tilden Moschetti:
Yeah, there’s plenty more.
Gabe Petersen:
We’re dealing with that right now on a single family that we’re flipping, but it’s a good deal. But the seller, he wants like 25% in earnest money, and it’s just all these little things that he’s requiring. And we’re just, we’re at the point where we’re like, nah, just we’ll go to the next one.
Alright, that brings us to the last question. This is for the listeners. I’m sure people want to reach out, get in contact with you. Two-parter: Where can they find you? And then what can they expect when they reach out?
Tilden Moschetti:
Yeah, so best place is either my website Moschetti law.com. It’s M-O-S-C-H-E-T-T-I law.com. I also have a YouTube channel with, you know, hundreds of videos that just talk through everything about syndication, it’s a free resource out there, you should take advantage of it. When people call they get my system. We set up a time to talk. It’s, you know, how I am here is really how I am on the phone and how I do business. So, you know, I’m not a – I’m a very low pressure lawyer, but I get the job done. I get it done perfectly.
Gabe Petersen:
All right, I will put that link in the show notes. So if y’all want to reach out to Tilden, just click the little “more” in the description. It’ll pull down that full description and there you can find his link. Last time and that wraps it up. Thank you very much for hopping on the show.
Tilden Moschetti:
Absolutely. I really appreciate getting to be here.
Gabe Petersen:
Absolutely. Everybody who’s here with us today, thank you guys for showing up. You are the reason we do this. So if you guys have questions, reach out to me, Gabe@therealestateincestingclub.com. If you want to support the show, just give us a like, subscribe, share. Other than that, I hope you guys have a great week, keep rockin’ real estate and I look forward to seeing you on the next episode.
All right before I officially sign off, I have a quick announcement to make. If you’re interested in becoming a passive investor in one of my deals, my own company Kaizen Properties is looking for Capital Partners for our upcoming projects. We invest in what are known as recession-resistant assets, mainly self-storage facilities, mobile home and RV parks, and industrial properties.
If you’re interested in investing and would like to learn a little bit more about my company, our investing criteria and some of the previous projects we’ve done, go to The Real Estate Investing Club podcast at therealestateincestingclub.com and scroll all the way down to the bottom of the page, click on the “invest with us” button. That’ll pop up the investor form. Fill that out and we will reach back out to you as soon as we can. Or if you prefer a little bit more of a personal touch, you can reach out to me at Gabe@therealestateincestingclub.com.
So really, that is it. Again, it was a pleasure hanging out with you guys during this episode and I look forward to seeing you on the next episode.
Joe Fairless:
Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Tilden Moschetti. How are you doing, Tilden?
Tilden Moschetti:
I’m doing great. I’m glad to be here and talking to you and your listeners.
Joe Fairless:
Well, I’m glad to hear it. And a little bit about Tilden and then we’ll get into it… Tilden is the managing partner of Moschetti Syndication Law Group, which is a boutique syndication law firm. They’ve got two offices, one in Raleigh, North Carolina, and one in sunny Los Angeles, California. They have been focusing on syndication for eight years, and been a law firm for 19 years. So the first question I have for you, Tilden, is why the double down on the focus with syndication eight years ago?
Tilden Moschetti:
Sure. So before that, I was practicing primarily in real estate litigation. So litigation is a world that’s very unhappy, it’s a world where there’s a lot of fighting, and it was always taking things down and breaking things apart and destroying the other side… And it did not make for a lot of sleepful nights… So that was my practice. And I didn’t even know what really real estate syndication was until a partner of mine said, “Hey, look at this deal here.” And I was like, “Oh, yeah, that’s a pretty good deal.” And he said, “Well, let’s syndicate it.” I didn’t really know exactly what he meant, other than I’d heard about it… So we proceeded to put that together.
Joe Fairless:
So are you a securities attorney?
Tilden Moschetti:
I am. I fashion myself as an ex real estate attorney. I don’t really practice in the real estate law side anymore. It’s primarily in securities, and really just in Regulation D is where my practice is.
Joe Fairless:
And we’ll get into Regulation D in a moment, so that everyone’s aware of what that entails. Is it less exciting now, over the last eight years, than the first 11?
Tilden Moschetti:
Oh, it’s a lot more exciting. I love looking at deals. It’s not only real estate we do; we also do businesses, even sometimes cryptocurrencies… And I get to hear a ton of new ideas. And just about when you’ve heard every way to structure a real estate deal, and someone will come in and be like, “I’m gonna do this.” “Okay, that’s pretty neat… So you can do that.” And so to be a part of that is really exciting.
Joe Fairless:
Regulation D, you said you focus on it… Will you elaborate on what that is for, non legal people?
Tilden Moschetti:
Sure. The shortest summary is everything that’s a security needs to be registered with the SEC, unless there’s an exemption. One of those exemptions is Regulation D, which says you can raise an unlimited number of dollars from these kinds of investors, as long as you follow these kinds of rules. If you follow those rules, then it’s not deemed to be a public offering, it’s deemed to be a private offering, which means you do not need to register it with the SEC. So it’s much more abbreviated, and it makes access to capital much easier.
Joe Fairless:
And there’s 506(b) and 506(c) offerings [00:04:39.13]
Tilden Moschetti:
Yeah, they’re part of Regulation D, and everything falls really under those two, and the other rules that are within Regulation D really are adjuncts. There’s also rule 504, but nobody really does those anymore, because regulation C and B are so good.
Joe Fairless:
Okay. You said often you get surprised. What about if we structured a deal this way? …and it’s a dynamic situation. Will you talk about some interesting structures that you’ve seen for how real estate deals have been set up?
Tilden Moschetti:
Sure, and a lot of it comes from both the increase of technology and these things, as well as some of the newer ideas. Like, we now have short-term rentals as a major topic. A lot of my clients are doing short-term rentals and different ways that they’re thinking of packaging them. I can’t really go into too many specifics on how they’re packaging them, but there have been some really creative ideas that really have been eye-opening. I was like, “Oh, yeah…” Or some ideas of just — something that a lot of people are doing now is they’re taking old hotels and converting them into multifamily; or they’re taking large houses and converting those into shared housing, and then turning those into syndicated deals. Those are pretty exciting new ways to fund these things, to change the way that people are living, working and shopping.
Joe Fairless:
Okay, so that’s interesting… Whenever I heard you mention the structuring the deals, I was thinking from a legal standpoint, but you were talking about more of a business model, where maybe you’re renovating hotels and converting it into multifamily, or renovating the office and converting to multifamily, or…
Tilden Moschetti:
Yeah, exactly. So a lot of people get really latched on to the legal side of it… And it’s interesting, and “We’re going to do an LLC versus an S-corp”, or whatever it is… But at the end of the day, what everybody who’s putting these deals together wants is they want to put together a deal that makes them money, that makes their investors money, so they can do the next deal, and to let the process work itself out. So we’ll make sure that you’re structured right, and if it’s LLCs that’s appropriate, then we’ll do that. All those little nuances is really why you hire a lawyer in the first place, to take care of those details… And you definitely need to be involved, but they’re not really the important thing to work on, which is working with investors, finding good deals.
Joe Fairless:
Well, let’s talk about from a legal standpoint, some mistakes or some misconceptions that clients of yours come to you with for what they think they can do, or what maybe they think they can’t do, but they can.
Tilden Moschetti:
The biggest one I hear almost every day, “Well, this is our first syndication. We’ve done this before with singl family, so we didn’t need to –“
Joe Fairless:
…illegally.
Tilden Moschetti:
It’s like, “Well, you do. It’s still a security.” And it’s really hard to go back and unwind that clock… So that’s a big one. The other is, “Well, I can just get a template and put things together that way.”
Joe Fairless:
Let’s talk about that first one, and then we’ll continue with the second one. So the first one – if memory serves me correct, it is a security if others are expecting a return based on your expertise and they are passive. Is that it?
Tilden Moschetti:
Yeah, those are the two key elements for syndicators of the Howey Test, which was the big Supreme Court case… So these are the four elements to be a security. And that’s expectation of profit – if you’re doing a nonprofit, you’re not expecting to get your money back; not a security, SEC is not concerned. And you’re relying on the work product of another. So the syndicators is the one putting the deal together, making the decisions. Most of the time, those investors are all passive; that immediately makes it a security.
Joe Fairless:
Fair enough. Let’s see… Investment of money, common enterprise, expectation of profit… Well, we kind of combine those…
Tilden Moschetti:
A common enterprise, so they’re putting it into the same thing, and it’s an investment of cash. Like, if you’re investing something that’s not cashe, it probably doesn’t apply… Except if it has some sort of overwhelming value. Like, if occasionally somebody will do some sort of 1031 operation where they’re getting the 1031 in an exchange, but really, that’s cash that we’re talking about, and it’s still going in. Or they’re dedicating the property to it, but it’s still probably a security there; it’s probably close enough to cash.
Joe Fairless:
Why can’t we use a template?
Tilden Moschetti:
You can… What you’re getting when you hire a lawyer is you’re getting the insurance policy that you’re going to be compliant. So using a template is like going out there without that insurance policy, and basically hoping that everything works right. We spend a lot of time go going through all the things that need to be disclosed, all the conflicts, all those things that are necessary, that an investor really needs to know, and then we back that up with our expertise, and not underwriting, but sort of a sign-up, which gives the syndicator confidence that they’re going to be compliant.
So using a template, you don’t get any of that. You’re just basically putting in what worked for somebody else, and it might be okay, but chances are there’s going to be something that isn’t there, that shouldn’t be, and possibly that thing will be very important. Perhaps you should have disclosed this thing and you didn’t know to, or perhaps you needed to describe this use of funds better about how we’re going to be spending it, or about how marketing fees work, or… All those things could suddenly be missed, and that could change everything from “Okay, we’re going to be fine even if we were to get sued” to “Nothing’s going to be fine, and everything will fall apart.”
Joe Fairless:
And in court, ignorance is not a defense. Correct?
Tilden Moschetti:
Ignorance is never a defense in this. And ultimately, I think a lot of syndicators — because I think every one… I certainly charge up front. I think all of my peers and all of my competitors charge up front… The thing that gets missed is that ultimately, your investors are paying for it, but it really is a syndicator’s insurance policy at the end of the day. So it protects them. Ultimately, it’s being paid for by the investors… Why wouldn’t you do it?
Joe Fairless:
And it’s not only the legal documents, but it’s also filing them, right?
Tilden Moschetti:
It’s also making sure that the Form D gets filed, that the states get notified… And like what my firm does, I do a lot of deals. And I do deals for myself, because I still syndicate, and I do a lot of deals, obviously, for clients… So I know what everybody’s charging in terms of fees. I know what normal structures look like. And I’m happy to make sure that my clients are successful… So I love it when they call me and say, “Well, what should we do about this situation?” because I know that’s just putting them that much closer to a successful finish line. And you get that at no additional cost.
Joe Fairless:
Let’s talk about the normal fees for getting these documents done with an attorney, and the follow-through process, plus some consultation… What is that the range?
Tilden Moschetti:
I would be surprised if a syndicator could find it for less than $10,000. They go up from there. It’s based a lot of times more on the size of the firm than on anything else. When you go to a very large firm, like you go to one of the huge national law firms, you’re going to pay a huge amount; you’re going to pay 50k, 60k, 70k, 80k dollars. But you don’t need that level. And what you really need is a more boutique level, like a small office that just does these, and doesn’t have to feed a lot of people. So the giant law firms need to feed a lot of people, and they do a good job, but you don’t need that. You need somebody who does this regularly. So you’re looking at a range anywhere from 10k on the very, very low end – and I don’t really even know anybody who’s charging that – probably to maybe 30k at the top; somewhere in there.
Joe Fairless:
Okay. Then the normal structures – what are the normal structures that you’ve seen? And I assume you are referring to the general partner and how he or she structures the deals for their investors.
Tilden Moschetti:
Almost everybody – there’s a set of LLCs, that you have two entities… I like to call it the investment entity, and that’s the entity your investors put money into, that ultimately own the asset or assets… And then that is being managed by a sponsor entity, which is what your syndicator controls. So they’re the ones in control of that, and they manage that investment through that sponsor.
Joe Fairless:
When you are working with clients, what’s a scenario that you can share, that you were presented, where the client was in a tough spot, and he or she came to you, and you had to try and fix it or help defuse the bomb?
Tilden Moschetti:
Sure. Typical tough spots that are complicated, especially like a 1031. I’ve got this investor who wants to give me a large sum of money, but they have to do it in a 1031 exchange. It’s doable, it’s really challenging, and I wouldn’t advise doing it on a small scale, or trying to do it on a small scale… If they’re trying to invest 500,000, it might be worth it. If they’re trying to invest 10,000, absolutely not. So you’ll need a syndication attorney to take care of that piece of it. But at the same time, the investor will need their own 1031 attorney to make sure that they don’t blow their taxes, and then there will probably need to be a real estate attorney as well, to make sure that the [unintelligible 00:16:24.14] agreement works appropriately. You’re taking a round peg, square hole, because the world of title and that world of real estate and the world of securities are very different things, and the way that we think about things and the way that things fit together just are different. So it’s pretty seamless when it’s a single property and everybody’s investing cash, but when a 1031 is involved and the IRS is there, you’ve got to make sure you’ve got everything covered.
Joe Fairless:
High-level, how do you structure that?
Tilden Moschetti:
Most of the time it’s through TICs, tenant in common. So there’ll be two tenant in common — for example, if you had one investor, there’d be a tenant in common that is the investor and a tenant in common that is the rest of the syndication; then there will be a TIC agreement between the two tenant in commons about how things will work. And most of the time, we’ll also bring that investor in that’s doing the tenant in common in underneath the investment entity as a different class of ownership, so that way there’s still a conduit for paying of fees and things like that. But it gets more challenging in terms of making sure that distributions happen right… It gets very complicated very, very quickly.
Joe Fairless:
What’s something that we haven’t talked about, that you think we should?
Tilden Moschetti:
I think the most important thing is – syndication is great. You wouldn’t have the show if you didn’t think so, too. I think that what people who want to get started in syndication need to do is they need to think about what I call the founder investment theory. They need to think about what it is that they’re presenting to investors, and how are they showing up? So what makes them different from everybody else that’s putting together a deal? Why should investors say yes to this particular sponsor, and no to all the others?
So that goes from property type, expertise, what kind of risk model that they’re typically using, and how they present themselves is important in that, too; how that fits in with legal is – that’s how you show up. So when you show up with a really good-looking PPM, you’ve got a really good pitch deck… Which isn’t something we do, but it’s something that’s important. That all just tells the investor you’re for real, you should be trusted, and you’re going to take good care of their money, rather than just showing up expecting everything to work out.
Joe Fairless:
Taking a step back, based on your experience, both as a legal mind and also a real estate investor, what is your best advice ever for real estate investors?
Tilden Moschetti:
Learn to underwrite your own deals. So learn to underwrite everything. The more you know about how to do your own financial analysis of a property, how things work, how risks work – being able to see that is going to give you an enormous leg up on being able to pick the right investments to go, into whether it’s being syndicated, because you’ll know when the things have been put together right or not, to just finding a deal that you’re gonna own for yourself.
Joe Fairless:
We’re gonna do the lightning round. Are you ready for the Best Ever lightning round?
Tilden Moschetti:
Yup! Let’s go.
Joe Fairless:
Alright. What’s the best ever deal that you’ve personally done?
Tilden Moschetti:
A development deal in California that did a 45% return in one year.
Joe Fairless:
Wow. Is that project level or net to investors, if you had any?
Tilden Moschetti:
That was to investors.
Joe Fairless:
Wow, that’s amazing. You were a general partner on that?
Tilden Moschetti:
Yup.
Joe Fairless:
Bravo. What was the business model?
Tilden Moschetti:
A ground-up development of a retail pre-leased property.
Joe Fairless:
Over what period of time?
Tilden Moschetti:
Just over one year, so we could get it —
Joe Fairless:
Wow. In and out?
Tilden Moschetti:
Yep.
Joe Fairless:
What deal have you lost the most amount of money on? And how much?
Tilden Moschetti:
I’ve never lost money on a deal, fortunately. I will one day. I’ve lost sleep on deals… [laughs]
Joe Fairless:
What’s the best ever way you like to give back?
Tilden Moschetti:
I give back regularly. My job is part of how I give back. I like to invest in my clients, invest my time… I really, really do like them quite a bit. I don’t take clients that I don’t like, so I want to over-deliver. I love entrepreneurship. I love people making money and helping other people make money… I think it’s great.
Joe Fairless:
And how can the best ever listeners learn more about what you’re doing?
Tilden Moschetti:
Probably the best way is on my website, www.moschettilaw.com.
Joe Fairless:
Tilden, thank you so much for sharing your expertise on securities law, on the common structures that you’ve seen, and on some common mistakes that you hear apparently very frequently, one of which is that “Well, this is the first time I’ll be doing a syndicated deal.” No, you’ve been doing them all along, you just haven’t properly put it together and registered it. And so hopefully, that helps out some listeners who have that thought process now, and they will course-correct so that they don’t get in trouble. Well, thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.
Tilden Moschetti:
Thank you.
Tilden Moschetti:
So it’s always about relationships. And it’s always about delivering value to your investors and the investors need to see it, right. So it’s always selling yourself, always telling who you are, always telling your story, always making it investor-centric. That’s what makes the difference and will make somebody successful. Whereas if it’s all about just money and just the returns at the end of the day, there are other people doing other deals. There’s a lot of people doing syndications right now. So there are choices on who these people go with and you got to give them a good reason to go with you or nobody’s gonna go with you.
Sam Rust:
This is your daily real estate syndication show. I’m your host Sam Rust. Joining us today is Tilden Moschetti, who is the managing partner of Moschetti Syndication Law Group, a boutique syndication law firm serving both small and growth-bound syndicators, as well as private equity firms. Tilden is also a real estate syndicator himself, and has been general counsel on several real estate private equity funds. He works with his clients’ ambitions and overall vision to help them close the current deal and fill in that quote, “missing piece” – whatever is needed to keep adding more syndication partnerships to their portfolios. Tilden, welcome to the show. Thanks for joining us today.
Tilden Moschetti:
Thank you so much, Sam. I’m really happy to be here.
Sam Rust:
So Tilden, you got into law, you got your law degree back in 2003. Did you always know you wanted to head down the path of securities and real estate and kind of the overlay or intersection of those two? What drew you to that specialty?
Tilden Moschetti:
Yeah, close. I went to law school thinking I was going to be a developer. So I looked around, and a lot of the really successful developers were attorneys. And so I thought, okay, well, this would be a good way for me to not only get money, but also be able to handle the legal aspects of a project. Got into law school, and loved property and all the subjects that revolved around that – securities, corporations. And then I took a litigation course. And that kind of led me astray for a little while, because after law school, I started litigating. So I was a real estate litigator for a lot of years, or really anything that touched with real estate, and it was just not the most happy of worlds, right. In litigation, you’re always trying to attack the other side, you’re not developing anything, you’re always just tearing stuff down. So I realized that I was kind of missing my calling and was looking around. And that’s when a partner approached me about syndication.
Sam Rust:
What was your first thought? I mean, you obviously had some exposure to it probably in your real estate courses. Syndication is not necessarily a new idea. But what flipped the switch for you of going, “Hey, I want to stop tearing down as it were, and I want to go start building stuff and helping people build businesses around this model”?
Tilden Moschetti:
It was really – I had done a lot of finance courses, I got my CCIM while back maybe 8-10 years ago. I love that aspect of it. And I started just looking at all the deals my clients were doing. And when my partner approached me about it, and showed me the deal it was just a small triple net deal in the South. It had great numbers because it was coming in cheap. And I thought, well, you know, there’s nothing that these other syndicators don’t know that I don’t know. So why – I just don’t have the experience yet. So why don’t we give it a try. And let’s see what happens. And so we did, and it was really successful, and actually quite a bit more fun than deposing people or things like that.
Sam Rust:
Where was your first project? And roughly when did you guys get into that?
Tilden Moschetti:
It was in Alabama, and I got into it in about 2013-2014, something like that.
Sam Rust:
Okay, yeah. So you were early, at least for a lot of the retail syndicators that have popped up since then. You’ve rode a good wave over the last nine years.
Tilden Moschetti:
Yeah, we’ve been successful, made good money for my clients and my investors and good money for us.
Sam Rust:
That’s the magic elixir all the way around. In your intro, you talk about working with clients’ ambitions and overall vision to fill in that missing piece, whatever it is. When you’re working with clients who are syndicating deals, what often is that missing piece? There’s a couple of big ones that I can think of off the top of my head. But I’m curious, what do you see most often is that missing piece?
Tilden Moschetti:
Most of the time, it’s a lack of focus. So people come into the real estate thinking that they’re going to syndicate wanting to – most of them are drawn by the money and sort of the hutzpah to get it done. What they’re missing is kind of a guiding principle. And so principle of what they’re – why they’re investing in this or why an investor should trust them. And it’s sort of that vision statement or that motivational statement that a lot of syndicators are missing at the very start. That is the difference between really being successful and not.
You know, I can find a deal – I could go on one of the exchanges and find a property right now and put it in front of clients and in front of potential investors, but unless I’ve got a good story to tell about it, they’re just not going to invest with me. So what I help them do most of the time is if they don’t have that kind of idea what the direction is, is we talk about, well, where’s this going? What’s the next deal and the next deal and the next deal? Where are your fees in line? What sort of returns are you looking at? All those kinds of things that investors care about and are looking for. We wrap it all up in something that I call the founder investment theory, which is that theory of why to invest in this or why to trust this syndicator on why an investor should invest with them.
Sam Rust:
I think that bigger “why” – that’s one of the phrases that we hear a fair amount – it is really important, because like you said, I mean, humans are hardwired to enjoy stories, to communicate in story, to resonate with the emotion of a story. And especially when you’re starting out in this business, it’s – I tell people often real estate syndication is not necessarily hard. But building a business in it is hard. So one-off, maybe you can do that, but building a business that will carry on into the future and have an awesome basket of assets – that’s pretty challenging. And it takes dimension in who you are and the story that you’re trying to sell. Is there any story – you can be anonymous or not – but of someone who added an interesting dimension to their story as a result of talking to you and kind of really driving in on the why?
Tilden Moschetti:
Yeah, a lot of my clients come from diverse backgrounds and from different parts, but they all have real estate at its heart. If I had to come up with a story I would probably talk about – well, I’ll talk about two. So probably one of the most successful regular syndicators I know was an appraiser. And he got his first deal by just – you know, he had seen a ton of big, big commercial real estate deals, one came across his lap, he called everybody he knew, syndicated that deal. And then by the time he did his second deal, it was now a matter of sending out an email, and it’s funded within an hour. And these are big deals he’s doing – the last one he did was over 150 million. So they’re not tiny projects by any means. But he’s always stuck with that. For him, it’s value-add, value-add, value-add, that’s all he does.
For others, it’s coming up with a creative way to reimagine things, whether it’s repositioning an asset from multifamily to some other use, or to multifamily from a hotel or things like that – it’s a creative way to do it. And it’s that little spark that gets an investor’s attention, that makes the difference. It explains the ROI, explains their fees, of why go with this investor. And it really kind of sets them apart from all the other people.
Sam Rust:
I was talking to a guy who’s been in more of the institutional world, you know, and led the acquisition of a multibillion dollar portfolio. But he said, in the retail market, their model was going to get institutional capital for 90%. But then they had to still syndicate about 10%. And in real estate, generally, for the retail investor, there’s two types of investors. There’s the folks who want the biggest highest return possible, right? They’re hanging olefin hunting on the savanna. And then there’s another fairly significant sector of folks that are all about capital preservation, they want to get low risk investments. I’m curious, have you seen that in your career to broadly be true? And how in your experience, would you assign the percentages between those two groups of investors, at least the ones that you work with?
Tilden Moschetti:
So yeah, that’s part of what I think of as founder investment theory too. So I think it’s that spectrum of risk that every investor is looking at. And you need to be consistent with that where you’re at on that spectrum. So I’d say the capital preservation – so there, I have a story, too. So I was going for this first deal. And I was meeting a doctor that I knew, and I was asking him for an investment and our IRR was going to probably land somewhere around 15%. So I showed him the deal. And he said, “Wow, that looks like a really great deal.” And I thought it was done. I was like, great. All right, he’s gonna give me like 400,000 – this is going to be terrific. And I said, “Perfect. So how much are you in for?” And he said, “Well, I’m not going to invest in it.” It might be – he just said it was a great deal. I want you to invest in it. It’s like – now you don’t get it. So you got a 15% return. But that’s not what I’m looking for. When I do an investment like this, I’m looking for – I’m just using my mess around money. I’m just using money that, you know, I’ll hit a few grand slams, but mostly I’m looking to have fun. I don’t want a 15% return. This looks like a pretty normal, safe return to me. There’s nothing exciting about it.
And that really kind of opened my eyes to that idea of that spectrum. So I think on that low end, you have somewhere around 10% to maybe 13% as your very, very safe, very nice typical things. It should not be a development project because the development project should be getting more. It should be something like a triple net, or just a capital appreciation project and multifamily in a major city. I mean, that’s what those people tend to be looking for.
In that middle sector where I tend to be is that 13% to maybe 18-19%. And that’s where I play the most. And that is your normal investors – they’re looking for a good return, but they’re also looking for something that’s reasonably safe.
And then you’ve got your people who are swinging for the fences. And to me, that’s probably in the 20% and above range. Now, if you’re in a tertiary city, developing in the middle of nowhere, something, you know, kind of crazy, you better have, you know, 40-50-60%, you know, big, big numbers. If it’s, you know, just developing a multifamily project in a pretty good area, it’s probably going to be closer to 20 to 30%. So I see I’ve kind of on that spectrum, and so you need to target your theory with what your investors are expecting too because if they’re swinging for the fences all the time, don’t bother pitching them at all on those safe assets and vice versa.
Sam Rust:
Yeah. So essentially, that doctor’s – “this isn’t exciting enough for me, I want something that the risk-reward variance is higher,” essentially.
Tilden Moschetti:
Yeah, absolutely. He did come in on a later project I did that was a big development project, and did invest a good amount of money. So it just was that deal wasn’t what he was looking for. It didn’t match with what his own personal looks were.
Sam Rust:
How would you structure your development deals for your limited partners? We’ve done some development, or we’re in the midst of doing – we’re closing on our final CO on our first development, it’s going to be issued here in like two weeks. And what we did was the standard 70-30 with a pref. But in the 18 months, while we had investor capital, and we’re building this project, we gave a 10% coupon, essentially, that will accumulate and will be paid out in future cash flow slash refinances. How have you kind of tried to bridge that gap, because there’s usually an 18 month to 24 month period where there is no cash flow? Obviously, it’s a high risk investment, the first step to getting a successful development is making sure you’re in the 20s, at least in my opinion, IRR perspective. But just curious, how have you attracted investors to those types of projects?
Tilden Moschetti:
Get as high of an IRR as possible. So know your levers which trigger that. So I kind of start backwards. I advise my clients to start backwards too – is to know your client and know what kind of returns they’re looking for. And then underwrite deals to that. And so if I’m doing an 8% pref, with a 70-30 split, something like that, I’ll draw it out on paper first and see, okay, is this lining up? Am I making money on it? Right? First, the syndicator has to make money, or there’s no reason to do it. And you know, where are my investors going to get it? And what kind of return are they getting with that? If they’re getting a 25% return, or something like that? Great, okay, I know I’m in the ballpark. If they’re getting a 40% return, maybe I have more room to take more money for myself. And if they’re getting a 15% return, I probably need to get put back more into the system that kind of work my way to the middle with the middle being what my investors are expecting.
Sam Rust:
It’s always trying to balance that risk-reward profile. And as you’re in the business, obviously, the network grows, and you’re gonna get people across the spectrum. And that’s why one of the things that we did recently was we did a fund with some development in it and some value-add kind of bridging both those worlds, giving you a little bit of upside, but also raising the floor a little bit as you’ve done with –
Tilden Moschetti:
Yeah, and I have clients that do exactly that. And it’s great. So if they’re doing a fund, it’s, you know, we’re doing 20% swing for the fences, and then 40%, 40%, 40%, you know, the middle of the road, and then 40% super safe, something like that. And they’re very successful, because if they miss for the fences, they’re still giving their investors returns, which keeps their investors happy.
Sam Rust:
You talk a fair amount on your website and a couple of blog posts about selling yourself first, as a syndicator. What do you mean by that?
Tilden Moschetti:
Well, I mean, investors are choosing to go with this syndicator. So I was on a call with a potential client, I think just yesterday, and what my advice is, is this is still a relationship business. It’s all well and good to think that you can just put some ads up on the internet and find investors and never have to talk to them and the money’s gonna come flowing in. And if that works, that’s fantastic. You solved the puzzle, but I’ve never heard of it working. I’ve heard of a lot of people trying that.
So it’s always about relationships, and it’s always about delivering value to your investors and the investors need to see it, right. So it’s always selling yourself, always telling who you are, always telling your story, always making it, you know, investor-centric. That’s what makes the difference and will make somebody successful. Whereas if it’s all about, you know, just money and just the returns at the end of the day, there are other people doing other deals. There’s a lot of people doing syndications right now. So there are choices on who these people go with. And you got to give them a good reason to go with you, or nobody’s gonna go with you.
Sam Rust:
Yeah, that’s something that we’ve talked about often internally is how do you both sell yourself in an attractive way – differentiate yourself might be another way to say it – but also be authentic in that. Like, we’re evaluating our go-to-market strategy right now, we traditionally have done a little bit of development with primarily value-add. But we’ve been generally priced out of the market for the last 12 months, it’s a difficult environment to buy in, if you’re targeting that 13 to 19% spread, right. And so you can either change your assumptions and get more aggressive or you can sit on the sidelines, or you could go after a lower cost of capital and change your business model. And those are the types of things that we’re wrestling through. And just fundamentally not willing to change the way that we do our underwriting because we’re who we are as a conservative nature. I want to be able to sleep at night. I get that. How do you sleep at night with all this money that you’ve raised and you’re stewarding? And? Well, it’s because we’ve gone backwards and forwards, and we’re highly confident in our underwriting, not just you know, because it’s not some random person investing in our deal. It’s my dad, or it’s longtime friends. And you just look at things differently. And I don’t want to lose that aspect. So I think that, yes, selling yourself but also being true to yourself. Absolutely. What you’re trying to accomplish, because investors will pick up on that – everybody has a BS meter. And usually folks with money have a decent one. It’s not always, of course, or you wouldn’t have hucksters all over the place. But I in our way will say that wealthy –
Tilden Moschetti:
A fool and his money are soon parted.
Sam Rust:
Exactly. But that’s not who our traditional investors are. Our investors are usually pretty thoughtful people, working professionals that have a good sense of people. And so you don’t want to put on an act just to raise money – likely will not work.
Tilden Moschetti:
Yeah, I’ve told a lot of people before, if you’re not in this for the investor, and if you’re not willing to think of them first, you might as well not be doing this business. Because if you’re not acting conservatively, and you’re just making numbers up and kind of winging it, you’re gonna lose people’s money, and you’re gonna have a very short business. Whereas if you just do it right, and just do the right thing, and just be as truthful and honest, and you know, check your numbers and take their money more seriously than they do, you’ll always have repeat investors, they’ll always keep coming back.
Sam Rust:
From a national market perspective, you have an office, a law office in the LA area, you have another office over in Raleigh, your first deal was in Alabama. You have visibility into a lot of different markets. Are there any macro trends that you see developing now that you find interesting or informing your investment strategy?
Tilden Moschetti:
So certainly, the rise of secondary markets is very prevalent. Here in Raleigh, we have an amazing market. Austin is, you know, traditionally a secondary market, and is currently still the number one growing market in the nation followed by Raleigh. And that’s interesting to me that the primary markets, people are leaving, and coming to the secondary and even tertiary markets. I get a lot of calls with some really interesting deals from people in those secondary and tertiary markets. So that’s exciting.
Multifamily has always been popular and probably always will be popular. But we’re getting more kind of creative ways to get into multifamily with whether it’s repositioning of hotels or, you know, ground-up construction with some sort of something special about it, like whether it’s eventually condo-izing it or things like that. That’s a new way people are getting into multifamily in an exciting way.
Office and retail are challenging places right now, which isn’t surprising, but retail’s coming back pretty strong. As long as it’s not a mall, then, you know, so now it’s really can we think of good uses for mall space? Those are kind of the bigger trends that I’m seeing.
Sam Rust:
Yeah, makes a lot of sense. And reflects a lot of what we’re seeing as well. It has been interesting to watch retail do pretty well over the last year or so as an asset class. But man, there’s some deals in the office space, and I put deals in air quotes. You know, on a historical basis, it’s amazing. But I think we still are working through what’s the new normal after COVID.
Tilden Moschetti:
No one knows.
Sam Rust:
Unless you’re in a newer building in a big city center. And I just wouldn’t touch office with a 10-foot pole right now.
Tilden Moschetti:
Yeah, and even then I’m not sure I would touch the big even city center. It would have to have some sort of, you know, there’d be basically no office in the area and then then that would be compelling. And I like the executive suite model a lot. There’s a lot of money that can be made in that. And I’ve done syndications where we’ve used executive suites as kind of the way to make more returns for investors, and that seems to work pretty well. Medical office is generally pretty good. But the cost of getting medical office or converting to medical office is really expensive right now. So I wouldn’t really do that at this point, because it’s just, it’s still way too expensive.
Sam Rust:
Yeah. Ten minutes in that space. Exactly. So that’s something to keep an eye on. You know, as we’re winding down here, you’re an attorney, you’re obviously familiar with securities law, real estate law, there’s some folks – some syndicators that will split those roles, right, they’ll have a different attorney for their securities and a different for their real estate law. Where do you come down on that? Obviously, I assume you’re gonna have some sort of a bias answering that question – I do. I’m inviting you to advocate for your bias, convert us here.
Tilden Moschetti:
Maybe it’s self-serving, but I think it’s split. I’ve been a real estate attorney, I practiced as a real estate attorney, I’ve done leases, I’ve done purchase and sales. I’ve done – I’ve litigated. And when you’re doing that, you’re getting one specific mindset that is very important for that role. But it’s also very different thinking that goes on when we’re talking about securities. When we’re talking about securities, I’m always thinking about, okay, how do I protect investors? Or how do I make sure that my syndicator is talking to investors in a way that will protect them ultimately, by conveying the right information to their investors? And they’re just two very different worlds.
So I don’t even try and play in both at this point. It’s – I only do securities, and I work with a lot of real estate attorneys. And for the most part, they refer to me and don’t try and do it themselves, the securities work, just because I wouldn’t be the best real estate attorney right now for them, and they’re not going to be the best securities attorney.
Sam Rust:
Yeah, that makes sense. What’s one habit that’s contributed most to your success?
Tilden Moschetti:
Oh, good question. Just absolute fundamental commitment to my investors. I will lose money, or my clients – I will lose money myself over them losing money. So that way, you know, I’m walking the talk that I’m doing. And it shows that, you know, I’m committed to them. So I think that’s the most successful thing anybody could ever do.
Sam Rust:
Yeah. Well, Tilden, really appreciate you joining the show today. If folks want to reach out, learn more about securities law and the services that you can offer, where can they reach out to you?
Tilden Moschetti:
So our website is www.moschettilaw.com. Or they can send me an email directly and if they have a couple of questions, feel free to send me an email and see if I can answer them. And if not, I will at least get back to you with where to go if I’m not the right person, and so they can just email me at info@moschettilaw.com.
Sam Rust:
Fantastic. Well, thank you to our listeners for joining us – Tilden and I on another episode of The Real Estate Syndication Show. This is your host Sam Rust signing off.
