Investing Without Borders: G Brian Davis’s Journey to Passive Real Estate

In this episode of the REsimpli Podcast, host Sharad welcomes G. Brian Davis, a seasoned real estate investor with a rich background that spans continents and market cycles. Davis shares his journey in real estate, beginning with his initial foray into the  domain through a subprime mortgage company, leading up to his strategic pivot towards passive investment post the 2008 financial crisis. This transition is not just a tale of professional evolution but also a reflection of adapting to the dynamic real estate landscape, highlighting the resilience and strategic foresight required to navigate through turbulent markets.

The conversation takes a deeper dive into the genesis and transformation of Spark Rental, initially conceived as a landlord software solution. It eventually morphed into a comprehensive educational platform for real estate investment. Davis underscores the importance of flexibility in business, illustrating how Spark Rental adapted to the changing needs of its audience by shifting its focus towards providing invaluable educational content and resources for investors. The segment of the discussion illuminates the iterative process of business development and the need to stay attuned to market demands and customer needs.

The episode is rich with discussions on a number of topics central to real estate investment, including the nuances of transitioning from active to passive investment strategies, the conceptualization and growth of real estate investment clubs, and the intricacies of real estate syndications. Davis offers insights into the risks and opportunities associated with passive investments, the significance of market cycles, and the critical role of diversification in building a robust investment portfolio. Through personal anecdotes and professional experiences, Davis provides a comprehensive overview of the real estate investment landscape, offering valuable lessons for both new and seasoned investors.

Topics Discussed in This Episode:

• Transition from active to passive real estate investment
• Overview of Spark Rental’s evolution from landlord software to educational platform
• The impact of the 2008 financial crisis on real estate investment strategies
• The benefits and challenges of living and investing overseas
• The role of hard money loans in real estate investing
• Introduction to real estate syndications and their appeal to non-accredited investors
• The structure and function of real estate investment clubs
• The importance of diversification in real estate investment portfolios
• Understanding the risks associated with passive real estate investments
• The influence of market cycles on real estate investment decisions
• Strategies for mitigating investment risks in volatile markets
• The significance of educational content and resources for real estate investors

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Transcript:

Sharad Mehta  0:06 

Hey guys, this is Sharad with REsimpli. I’m host of REsimpli podcast bringing you another show with a fantastic guest, Brian Davis. He’s joining us from a very fun place. Brian, welcome to the show, man. How are you?

G. Brian Davis  0:19 

Sir? Thanks for having me. I’m doing great.

Sharad Mehta  0:21 

Yeah, thank you for coming on the show, man. Tell us where you’re joining in from.

G. Brian Davis  0:25 

I am joining in from Lima, Peru right now.

Sharad Mehta  0:27 

Oh, fun, man. Yeah. Tell us a little bit about yourself. What took you to Lima, Peru? Like let’s just start, you know, how you got into real estate and, you know, give us a bit background about yourself? Yeah, so

G. Brian Davis  0:37 

Those are, those are two totally different stories. And how I ended up in brew. I’ll start with brew because that’s an easy one up. My wife is a school counsellor. We moved overseas, but eight and a half years ago, we spent four years in Abu Dhabi. And then we spent four years in Brasilia, the capital of Brazil. And we just moved to Lima five months ago. So yeah, it’s fun, like, you know, so she works at like embassy schools around the world. It’s a great gig really, free housing, free flights home every year, a full health benefits for our entire family. It’s, it’s awesome. It’s great. So yeah, and we can talk later in the show about, you know, investing from overseas and expat life

Sharad Mehta  1:20 

And all that. So yeah, I would love to get into that. Yeah. Yeah.

G. Brian Davis  1:23 

As for real estate, so I, I got, I fell into a job out of college, I had no idea what I wanted to do with my life, like most 22 year olds are like, like a lot of 22 year olds anyway. So you know, I was just asking around among my parents, friends, like, hey, what do you do? Can I have an informational interview? Can I just learn more about what you do for a living? And I ended up working at a subprime mortgage company, which was all the rage in 2003, if you remember, yeah. But it turns out that the, the two owners of that company, they didn’t need another loan officer, what they really needed was someone to handle the hard money loans that the two of them were making on the side of their normal conventional mortgage. Business. Yep. Yeah. So so I just fell into that, you know, they, they offered me an internship when I went and talked to them. And at the end of the summer, you know, I had been, I had been kind of filling different roles around the company over the summer. And then at the end, they said, you know, hey, do you want to work as a, an account executive and loan officer doing hard money loans to real estate investors? And I was like, Sure, I don’t really know much about it. But I’ll yeah, sure, why not? I’ll do it. And, you know, at that time, in history, real estate investors were making money hand over fist. So it was, I’m watching all these guys just just making money left, right and centre. And I’m like, I could do this too, you know, what’s, what’s to stop me from going out and investing in these properties and doing flips and, you know, doing the burr method and all that stuff. So I went out and I started putting all my money into fixer upper properties, keeping most of them you know, refinancing most of them as rentals. In the burr method, flipped a couple and, and then 2008 hit, of course, and the rest is history, totally lost my shirt on those properties that I, I never properly learned how to invest before just diving in headfirst. And all my my day job income dried up as well, because no one was taking on hard money loans anymore, as of, you know, second half of 2008. Right? Because suddenly, no one was flipping houses anymore. So it was it was a tough moment in my in my young life. But you know, as with all things, you know, one door closes, another one opens, ended up going I’m working for an E commerce company that specialises in working with mom and pop investors and landlords. And I learned a whole new set of skills in the online marketing space and, you know, selling services for investors online and ended up splitting off and launching my own company with a former colleague of mine in 2016. And that’s how spark Runner was born.

Sharad Mehta  4:04 

Oh, that’s cool, man. So you went from hard money loans, doing your own flips to working for an E commerce company providing some services to other investors?

G. Brian Davis  4:14 

I did. Yeah. The company specialises in legal forms for landlords actually. Got it. But and you know, the only reason that I got hired for that was because I was a landlord myself. So even though I was going through a lot of pain and suffering with my rental properties,

Sharad Mehta  4:28 

Anytime you’re getting an employee and a customer, right,

G. Brian Davis  4:32 

Right, yeah. So it helped me get that job. So, you know, again, you think that something is a total disaster, but it turns out that, you know, there’s always a silver lining if you’re willing to look for.

Sharad Mehta  4:45 

Absolutely. So tell us a little bit about Spark, right. What do you guys do? And you know, I mean, what was the inspiration behind spark? Righto?

G. Brian Davis  4:54 

That’s an interesting question that I never quite know how to answer because what we originally set out to do our original vision for the company is so different from what we do now. But that’s a whole business lesson in itself, right? That you know what you think your business’s is not necessarily what your customers need, or you know what the market needs. So we originally set out to offer a one stop shop, landlord software for like Mom and Pop landlords are just a couple properties. Because there’s some great property management software options for larger property management firms and bigger landlords with 50 Plus units. At the time, there wasn’t really a great option for Mom and Pop landlords. The problem is that neither my partner nor I are really technical founders. So you know, neither one of us write code. And you know, to start a software company without either founder being technical, is, in retrospect, that was, you know, something that we should have thought twice about. But over the years, what we what we found is that the content that resonated or the service that that resonated most with our audience was educational content. So we started doing, we start expanding our blog, and doing more video broadcasts and podcasts, and earning more money from affiliate revenue. And then we started offering online courses. And we’ve reached a point where people started asking us like, Hey, can I just invest money with you guys? And some of the projects that you’re investing in? And, you know, we kept saying, no, no, no, because, you know, at this point, I was living overseas, I was not actively investing in any new properties at that point. And finally, Danny, and I looked at each other. And we were like, well, what would it take to be able to say yes to these people, and to actually work with some of our students from our online courses, work with them on some real estate projects, and let them get some hands on experience, without having to cough up 50 grand for, you know, a down payment and closing costs, and cash reserves all that stuff. So we found a an on the ground boots on the ground investor in Michigan, who was open to doing a couple of properties in like a big, kind of, like, pooled investment pool is the wrong word, because the SEC gets tricky about that. But it was a group investment, where, you know, we each invested small amounts of money in a couple properties. And they went fine. From a from a ROI standpoint, you know, the returns were fine, but it was way too much work. And then I quickly realised that there was, there was a reason why no one else was doing that. Right. It was just, it was too much work to do that with these affordable single family investment properties. So we went back to the drawing board, and it was around this time that I had started investing passively in real estate syndications. It took me a long time to figure out what you know, the whole private equity world and real estate syndication road was all about, you know, like, so many people who aren’t familiar with it. Those terms were very intimidating to me. But once I got over that initial hurdle of that, I realised it was actually a lot easier than investing, actively going out and buying properties myself. So I had invested in a few of these. And I turned to my partner, Danny one day and said, Well, why don’t we try offering up one of these like passive real estate syndication investments to our investment club that we’ve been investing with, because someone else is doing all the asset management, all the property management, all of that, all we would have to do is, you know, bring in a sponsor and, you know, vet the deal together as a club, and invest together. So she was like, oh, okay, I’ve never really heard of these. But let’s, let’s give it a try. And we have not looked back, since that has become our main service. And our main business is running an investment club that lets everyday people, you don’t have to be accredited, participate in these group investments and become a fractional investor in, you know, apartment complexes or self storage facilities, mobile, home parks, and all these kinds of properties that ordinarily you wouldn’t go to go out and just buy by yourself. So

Sharad Mehta  9:02 

Can you walk me through, like what a typical investor looks like and what it typically looks like?

G. Brian Davis  9:07 

Yeah, absolutely. So typical investor is someone who is a middle class professional, who has a decent income, a strong income, but not necessarily an enormous income. They want to diversify their portfolio to include real estate. But they don’t necessarily want to go out and build an entire side hustle around real estate investing. You know, as you know, it’s a lot of work to learn all the skills that you need to become an active real estate investor to network with lenders and learn how to manage contractors how to manage tenants to advertise vacant units. You know, how to work with local city inspectors and pull permits and you know, the list just goes on and on if you want to go out and buy properties yourself, especially if you want to renovate them. So, our typical Club member, they want all the cash flow and the appreciation and the tax benefits of real estate, but they just want to read it deck or send a wire, you know, in the 21st century, any

Sharad Mehta  10:03 

Minimum investment that they need to combat? Yes.

G. Brian Davis  10:05 

So, in our club, the minimum investment per deal is 5000. And that is not challenging, right. But it’s a lot less than the typical lockless. Yeah, yeah. So in the real estate syndication world, the typical minimum investment is between 50 and 100,000, which makes it really hard to diversify, right? If you have to put 50 grand 100 grand in each deal. Like going out and buying properties yourself and putting that much done on a down payment and closing costs. It just makes it hard to spread your money among a lot of different markets, a lot of different types of properties you’re at, because you have to put so much money in each basket, raise it five grand a pop, you know, again, it’s not a trivial amount of money, but it’s way less than you would otherwise be able to invest in real estate. That’s very reasonable. Yeah. Yeah. So every month, we bring in sponsors to present deals, and we vet those deals together as a club. And anyone who wants to participate in those deals can do so with five grand apiece, or more if they want. And, you know, they don’t, no one has to invest in anything. You know, if you if you don’t like the sponsors that you see this month, or the deals that you see this month, you wait for next month. So very passive, but it’s still a group process of vetting these deals together. And

Sharad Mehta  11:18 

Putting the investors connecting the investors with the sponsors.

G. Brian Davis  11:22 

Yeah, we are not sponsors ourselves. We’re not taking a cut of any of the money invested quite the opposite, actually, like we invest our own personal money in these deals alongside of our members. Keep our interests 100% aligned with our club members. But yeah, we are not sponsors ourselves. We’re not selling securities, we charge a flat membership fee for the club. And that’s our only form of revenue from the club. And how much is it? It’s $59 a month or $497 a year. Okay,

Sharad Mehta  11:51 

So these people become members. And then you have sponsors coming to you and saying, Hey, Brian, you know, I have this deal. And what kind of deals are these sponsors coming with? I’m sorry, I’m not very familiar with this word. But it sounds very fascinating. Yeah.

G. Brian Davis  12:06 

Well, you know, and that’s the thing is, most people outside of the wealthiest 1% are not familiar with this world of private equity real estate syndications. But this is the primary way that the wealthy invest in real estate. So you know, that’s really our, our mission with this club is to make it available to everybody make it available to normal, everyday people. So these, these typical deals, I would say the most common deal is a value add multifamily property deal. So you could think of it as a glorified flip, where someone finds, say, a 200, unit apartment complex, that’s, that’s dated, needs updating and renovating. So they’ll go in, and they’ll update the signage and, you know, update all the common areas and renovate all of the units in the in the building. And then in a few years, that takes a couple years, right, and then they raise the rents, of course, as you make the property nicer and nicer. And after a couple of years, you have added a tonne of value to this property, you’ve forced equity and appreciation. And at that point, you can either sell it again as like a glorified flip, or you can refinance it. And in that case, they give all of our initial investment or not, maybe not all, I don’t wanna say, oh, in sometimes sometimes all, sometimes some of our initial investment capital back to us, but we keep our ownership interest in the property. It’s kind of like the burr method, right? With single family rentals, or small multifamily rentals where you refinance it, you get your initial capital back. So you can go out and reinvest that elsewhere, but you keep the property, you keep the investment, keep running cash flow from it. So investors talk about infinite returns. With that, since you can keep reinvesting the same capital in all these different deals. And it’s, it’s a great way to invest. So I would say that’s the the most common scenario is multifamily properties that need some sprucing up, or maybe even deep renovation. But we’ve done mobile home park deals, we’ve done industrial deals, we’ve done retail properties. So it’s just a mix. We aim for diversification above all else with these deals, we try to bring in different sponsors every month, different types of properties, different cities and states across the country. So yeah, that is one of our core missions is just as much diversification as possible in every sense of the word. That’s

Sharad Mehta  14:35 

Fantastic. So the $5,000 Let’s see if I can do and say, Brian, I want to put 5000 in the $5,000 is getting me you know, a tiny fraction ownership in that project. I’m not lending money, I’m investing in getting ownership, is that correct? Correct.

G. Brian Davis  14:52 

You are an equity investor in that in that deal. And that property, it’s not a debt investment. Oh,

Sharad Mehta  14:58 

Wow. Yeah, and When do your investors start making money? Not your investors. But when do people in the Investing Club start making money?

G. Brian Davis  15:07 

Yeah, so it depends on the deal. Some deals, start planning paying cash flow distributions very quickly, within a couple of months of the property selling others, it could be a couple of years, it depends typically on how much value add is required for that property, how much renovation is required. If it’s a property that needs very deep renovation work, it’s gonna take a year or two, to renovate the units stabilise the rents. So it might be two years or even more before you see a dime in cash flow distributions for that property. Those deals tend to offer also to the you know, the better returns on the back end, because they have more opportunity to force equity, right, but it’s just deal by deal. So in this market, we have been favouring deals that cashflow pretty early. Rather than waiting on that, again, it’s just deal by deal. And some of our investors are more interested in cash flow quickly. Others are more interested in higher total returns on the back end. So you know, so they don’t mind waiting a year or two before they start getting distributions. So it just depends, depends on the deal depends on what you want as an investor. And again, that’s it’s part of what we’re trying to do with the diversification right to bring as many different types of deals as possible. How much

Sharad Mehta  16:25 

Does a typical investor in terms of annualised return, an investor is making like, what’s the range? Yeah,

G. Brian Davis  16:31 

So these deals typically target between 15 and 30% annualised returns, and that’s a combination of cash flow, yield, and then the the payout on the back end when the property sells. So, you know, as far as the distribution yield the cash flow yield, that’s usually in the four to 8% a year range, and then the bulk of the returns come when the property sells. But you know, again, every deal is different. So that’s just sort of a typical range that we see in these deals.

Sharad Mehta  17:04 

And what is your writing process looks like for the sponsors? Yeah.

G. Brian Davis  17:07 

So first and foremost, we want to see experienced sponsors want to see people who are not, you know, this is not their first rodeo, right? We want to see a deep track record of success, and ideally, through multiple market cycles. You know, I as someone who lived through 2008, for example, I, I like to invest with other people who were investing in that time, people who have just Yeah, yeah, yeah. Because you know, when you’re when you’re new to investing, and this could be in any type of investment, you, you don’t know how painful those downs cycles can be, until you’ve had a bunch of your own money lost in it, or at least at risk of being lost in it. So someone who has been through multiple cycles, multiple market cycles, they just tend to be a more conservative investor, a more conservative underwriter, they have more contingencies in place for different types of risks. So yeah, that’s something that we look for as well. And, you know, we, but I don’t want to make the claim that we are vetting these sponsors on behalf of the club. The club is really vetting the sponsors and the deals together as a community. Danny and I are just facilitating these these deals. And

Sharad Mehta  18:28 

How many members do you have in your club? If you don’t mind sharing? If, you know,

G. Brian Davis  18:32 

As of this morning, we have 184 members in our Investing Club

Sharad Mehta  18:36 

Gaussian. And do you have any vetting process for the members also, or anybody who wants to join in join?

G. Brian Davis  18:42 

There’s no vetting process for the members, anyone can join? You know, we originally restricted it to just students of our course. But we spoke with an attorney and he said that we can open it up to the public. So we did.

Sharad Mehta  18:56 

I’m curious, like, why not? You be the sponsor? Also, have you thought about that? I mean, it’s gotta be tempting, right?

G. Brian Davis  19:03 

Not as tempting as you might think. I I spent many years as a landlord, and as an active real estate investor. I don’t miss it. So yeah, I, like you know, like we touched on earlier I live overseas, I am not, I’m not there in the US to go walk these properties and to, you know, do all the due diligence that’s required on these myself, my my partner, Danny, she’s in her 60s, and she also has no interest in that at this stage in her career. So we’re, we’re just as happy investing passively alongside our members.

Sharad Mehta  19:40 

And then do you own the properties that you had bought before 2008 Or even after that, do you still on any of those properties? Are you just doing passive investing?

G. Brian Davis  19:50 

I sold my last rental property a couple years ago. So yeah, there was a whole process of you know, graduate unloading my my portfolio but nowadays I only invest passively in real estate.

Sharad Mehta  20:01 

Do you ever miss the excitement? If I want to call that of active investing? No.

G. Brian Davis  20:11 

I mean, no, not really. I mean, I, it was just it was so much work when it was all said and done. I mean, I Yes, I’ve got fond memories of that excitement when you find a good deal that you’re excited about taking down. Nowadays, I would just assume spend time with my daughter, or hang out with friends or travel, travel around the world. So no, I don’t miss it.

Sharad Mehta  20:37 

How old is your daughter?

G. Brian Davis  20:39 

She’s three.

Sharad Mehta  20:42 

Yeah, so it’s my daughter is three and a half to such. Oh, yeah, that you’re funny. So let’s say someone who’s looking to get started. It’s very fascinating, by the way, like 15 to 30% return. That’s, that’s fantastic. So someone who’s looking to get started? What would you tell an investor that wants to join your club and say, Hey, Brian, I’m interested. What should they be careful about? Well, you know, what do they need to know before investing? Sure.

G. Brian Davis  21:09 

Well, you know, like all investments, real estate syndications come with risk, right? There’s market risk, interest rates could keep shooting through the roof. Right. And, and keep expanding cap rates, which is great for buyers, but it’s bad for sellers. Right. So yeah, there is there’s all kinds of risk involved. You could have an incompetent sponsor, for example. And again, you know, we try to try to mitigate all of these risks as a club when we when we vet deals and vet sponsors, but these are all risks that are on the table. You know, we we wrote a case study within the last week or two of a real estate syndication deal that we saw go bad. And you know what went wrong with that deal. And you know, what people should be looking out for, as they, as they vet deals moving forward. But there is risk and you have to understand that, you know, there are the flip side of that is that investing passively in real estate syndications doesn’t come with some of the risks that you face as an active real estate investor. And I’ll give you a couple examples. One is that you don’t take on any legal liability. When you invest as an LP as a limited partner, a passive investor, in a real estate syndication deal. You can’t be sued personally, if something goes wrong at the property, for example. And that’s not true when you are a landlord, right? I mean, I’ve been sued several times as a landlord, and it sucks. But as a as an LP as a as a passive investor in these deals, you don’t have to take on any of that legal liability risk, you also don’t take on any loan and liability. So you are not signing as a guarantor for any debt associated with these properties. And again, that’s not true when you are a landlord or a direct property investor. When you take out a loan to buy an investment property, you’re selling a personal guarantee and 99.999% of cases. So you know, you you’re on the hook for that. And if you default, the lender can come after your personal assets, assuming that they don’t recover all their money from the property itself. So those are those are two examples of risks that passive investors don’t have that active investors in real estate do have. So yes, there are absolute risks when you when you invest passively in real estate syndications. But there are some some risks that you don’t actually take on as well. What would

Sharad Mehta  23:33 

You say? Some of the disadvantages are investing, you know, passively said, rate of return, or what would you say? Those would be?

G. Brian Davis  23:43 

Ah, no, I would. So I think the returns are actually quite strong.

Sharad Mehta  23:49 

15 30% is very impressive. Yeah,

G. Brian Davis  23:52 

Those are those are strong risks are strong returns, the high minimum investment if you’re to invest by yourself, that’s the downside. That’s a hurdle to these, you know, 50 grand, 100 grand per investment, it’s a lot of money. And of course, if you invest through a club like ours, that drops down to five grand, that’s still a lot more than going out and investing in shares of a REIT, for example, but the flip side of that is that you don’t have volatility with these investments that you do have with publicly traded REITs. You don’t have the same correlation with stocks that publicly traded REITs have either but other disadvantages a lot of real estate syndications only allow accredited investors to participate. So as a quick rehash on that to count as a an accredited investor in the eyes of Uncle Sam, you have to have a net worth of at least a million dollars, not including any equity in your home, or you have to have an income over $200,000 a year for the last two years. If you’re single, over $300,000 a year if you’re a married couple. So that restricts a lot of these deals if you are not an accredited investor. Now in our club, we only have Bit deals and present deals that allow non accredited investors because inclusivity is one of our core values as a club. And that’s part of the service that we’re providing is we’re going out. And we’re networking with a whole bunch of sponsors who do allow non accredited investors. But if you are trying to invest by yourself, and you’re not an accredited investor, that can be a challenge for you there, they’re out there. But under SEC regulations, these sponsors can’t advertise those deals to the public. So if if they allow non accredited investors, they can’t advertise it. So that that’s a bit of a catch 22 If you’re a non accredited investor, and you’re trying to trying to find deals, but you can’t find them, because sponsors aren’t allowed to advertise them. So that’s another hurdle. If you are an investor trying to get into these other downsides, you don’t have control over these investments, the way that you do when you’re an active investor, and you own these properties directly. So if you’re a direct owner of a property, you control when you sell it, right, or when you refinance it, you have complete control over that no one else can tell you what to do with that, as a passive investor. You know, again, it’s all it’s all in the word right? Passive, so you do not have that control. And once your money is invested, it’s locked up. So

Sharad Mehta  26:14 

So people that are investing with you through your club, you’re not they’re not, I mean, like, if only use the word competition, they’re choosing between whether they should invest in stocks, bonds, or, you know, this passive real estate investment. They’re not competing between, Hey, should I invest in passive real estate investing through this club? Or should I go out and do wholesale deals? Or buy my own rental properties? Is that correct? A lot of the

G. Brian Davis  26:40 

Members of our club have, they invest actively, and they invest passively. So it’s not necessarily an either or thing. And it’s certainly not an either or when it comes to stocks or other paper investments, paper assets. I mean, I actually have more money tied up in stocks, and I do in real estate. So their stocks play an important role in everybody’s portfolio, you know, regardless of your age, or everyone should own some stocks. So yeah, this is an additional option for investing alongside your stock portfolio, potentially, alongside your active real estate portfolio. So yeah, I would not, don’t consider it an either or proposition. This is another option on the table another way to diversify and have different types of investments can

Sharad Mehta  27:31 

Only people from us part of the club or people from other countries be part of the club,

G. Brian Davis  27:36 

People from other countries can join our club. That being said, they need to have a US tax ID number. So they either need to have their own social security number, or the foreign equivalent of one here in the US, or they need to have a business registered in the US and have an EIN number for that business. And then they will need a US bank account as well. But that’s easy enough to do you know, anyone can can open an LLC, open an LLC bank account, you know, get your EIN for the LLC, and you’re good to go. So yeah, and people from other cities or from overseas can join our club. They just need a US taxpayer ID and a US bank account. That’s

Sharad Mehta  28:16 

Great. Have you had any deal that lost money? No, not

G. Brian Davis  28:21 

Yet. That case study that I was talking about a few minutes ago, that was a deal that we did invest in, in our club. So that’s that’s how we know what went wrong with it, you know, because we had front row seats for watching it implode. But that deal has not. It has not sold yet. And we don’t know what will end up happening with that deal. The sponsor got in over their head and mismanaged the deal. And, you know, it did not underwrite the deal particularly well. So we don’t we don’t know what will happen with that yet. The sponsor is trying to bring in outside an outside equity investor, a new partner on that, which will certainly improve that will dilute our ownership of it. But what they really need is they need time for that deal to, you know, if there’s any chance for that deal, to not lose money. They need more money to buy them time to finish the renovations get cashflow positive, and then they’re gonna need to hold it for a while to appreciate. So yeah, that is an example of a deal that went bad. We have not had any syndication deals go full cycle, because these are long term investments. Some of the early deals that we did as a club, which were single family investment properties, those have those, those are all sold, and those all had strong positive returns. So there’s a long answer to your question. No, we have not had any deals lose money yet. There’s one that I would I think is is at risk for losing money. I mean, technically they’re all losing money, but there’s one that you know, that risk is visible. So now most of the deals, the cashflow, and they’re doing great

Sharad Mehta  29:58 

And how long you’ve had them longest investment for in since you pivoted to large multifamily mobile home park.

G. Brian Davis  30:05 

Yeah, so the first passive investment deal that we did as a club was in mid 2022. So we’re coming on a year and a half now.

Sharad Mehta  30:12 

Right? Yeah. So this should be like in a year or so they should be kind of getting to the point where they refinance. And then you guys make a good chunk of cash from that.

G. Brian Davis  30:21 

Yeah, so I suspect just looking out at the the market, as I see it over the next year or two, I suspect that a lot of those deals will be refinancing rather than selling, because it’s hard to imagine that it will be a good market for selling in a year, from now, you know, even year and a half, or maybe even two years from now, probably will not be a fantastic market for selling. So I suspect that those deals will refinance, we’ll give some of our money back to us, maybe even all of our original investment capital back to us. And we’ll keep earning cash flow on it. And we’ll just be able to redeploy that capital somewhere else and keep reinvesting it.

Sharad Mehta  30:57 

And where do you see the market going, you know, for my family, like with the interest rate environment that we’re in, you know, at the end of 2023? Where do you see the market headed?

G. Brian Davis  31:07 

Yeah, so cap rates have risen in multifamily. It’s not a great time for selling right now, of course, it’s hard to imagine interest rates dropping over the next year, you know, short of a recession. And of course, a recession would have other negative impact on on these properties, performance as well. So, yeah, I think I think there will be opportunities for buying at a discount, there’ll be some of these deals that are in distress over the next year, you know, as they have short term debt coming due. And they knew that they really weren’t prepared for this kind of interest rate environment in this kind of cap rate environment. So I think there’ll be good opportunities for buying and investing less so for selling, but you know, my crystal ball is no clearer than anyone elses. So I years ago, I realised that every time I tried to get like clever and time the market, or pick individual stocks or any of that stuff, I got burned. So today, I just practice dollar cost averaging. Every month, I invest five grand, 10, grand, you know, whatever I happen to have available at that moment, in these different deals. And, you know, by spreading small amounts across a lot of different properties and, you know, steadily investing each month. It’s one way of protecting myself against you know, that the ups and ups and downs of the market. I do the same thing with my stock investments. You know, every week, I have a robo advisor that just pulls money out of my checking account. And it’s formed dollar cost averaging.

Sharad Mehta  32:42 

That’s fantastic. Hey, Brian, thank you so much for sharing this. I mean, I honestly had no idea about this kind of investment opportunities. And I think it’s great for like you, you said it perfect. Like your perfect avatar would be, you know, a professional who has money saved up they want to get into real estate. But syndication is the investment. minimum investment is too high. They have like 510 $1,000 saved up that they want to invest in, you know, my family. I think that’s that’s a fantastic way to get get started or diversify your portfolio. Oh, man. I mean, I’ve travelled over the phone question about you. So you live in Peru, you have left in Brazil lived in, you know, Middle East. What do you do for fun?

G. Brian Davis  33:24 

Well travel of course.

Sharad Mehta  33:27 

Yeah. You know, so less than in South America. Ah, yeah.

G. Brian Davis  33:30 

So right now, we are primarily travelling in South America because we we spend most of the year here. When we were living in the UAE, we did more travel around Europe and the Middle East, and a little bit in Africa, because that’s, that’s the part of the world where we were living. So every time we flew back and forth from the US to Abu Dhabi, we would do a stopover in Europe spend, you know, 345 days hanging out in Paris, or Amsterdam or some other European city. And it was great. It was a lot of fun. Nowadays, we’re doing more travelling Central America, South America. We were in Cusco and Machu Picchu last month, which was a lot of fun. So yeah, travel is the short answer to that question. We try to do a mix of adventure travel, you know, hiking and wine wine country. My my wife and I both love wine. And, you know, so gastronomy, travel, restaurants, all that kind of good stuff.

Sharad Mehta  34:24 

That’s great, man. That’s great. And what’s the book that’s had the biggest impact on your life? It could be a personal book, it could be a business or it could be one of each.

G. Brian Davis  34:35 

I like personal success made simple by Brian Tracy, you know, he got to a point in his career where, you know, he could afford to bring in more mindset stuff. And I don’t want to say like woowoo because it’s really it’s not woowoo out there the way that some personal finance advice is, but he incorporates that into it. So a lot of that mine is at work and you know talks about things like the law of attraction, but he does it in a way that’s very hands on and tangible and grounded in, in other foundational personal finance advice. So yeah, I like that one as sort of a mix of, you know, the gritty tactics, but also some of the broader mindset, work that really helps to succeed. And, you know, if, if I’m gonna throw a work of fiction out there, I love a Gentleman in Moscow by immortals. Oh,

Sharad Mehta  35:31 

Yeah. Great book. Alright, last question. If you could spend a day with anyone dead or alive? Who would you want to spend the day with? And why? Well,

G. Brian Davis  35:47 

Um, you know, I, I’m gonna have to, I’m gonna go a little basic here. And I’m gonna say Buddha, just because I’m sure that he would challenge me to think far outside of my comfort zone. And to think about the world very differently than I’m used to thinking about it. But, you know, there I feel like there’s no wrong answers to that question. You know, there there are so many people who be Yeah, who would be fascinated spend a day with and force you to, you know, just think bigger than them were in the US then the habit of thinking of in our day to day lives.

Sharad Mehta  36:21 

That’s a great answer, man. Oh, man, I Brian, if someone wants to learn more about, you know, be part of the Investing Club or just connect with you. What’s the best way to do that?

G. Brian Davis  36:32 

Yeah, come to spark rental.com you’ll see our are co Investing Club right there front and centre on the menu bar. You can also reach out to me personally, Brian at Spark rental.com I answer all those myself. It’s not like I have a VA answering emails for me. You can also reach us through Facebook or LinkedIn. In all the traditional channels at Spark rental. You’ll find us so yeah, reach out. Don’t be a stranger.

Sharad Mehta  36:57 

Thank you, Brian. Thank you so much for being on REsimpli podcast. You shared some fantastic information. I really appreciate that. Sharad, thank

G. Brian Davis  37:05 

You so much for having me on. This was a blast.

Sharad Mehta  37:07 

Thank you, man.