Syndication Attorneys Podcast

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.