Getting to Know Your Sponsor: Key Questions for Real Estate Investors

James: Welcome to the Furlo Capital Real Estate Podcast. It is so hard not to say welcome to the Furlo Bros Tech Podcast. Oh my gosh. Every single time. Welcome

Jessi: to the Furlo bros tech podcast.

James: Yes. Wait a second. It's not that. It is the Furlo Capital Real Estate Podcast where we talk about the intricacies of passively investing in real estate.

And our mission is to help people invest wisely in both properties and residents so that together. We can build our wealth and improve housing. I'm James, and this is my wife, Jessi. Hi! You're smiling. Is that because I delivered it really well?

Jessi: No, I'm just smiling because I'm on camera. Oh, okay. I don't want to have, have like my RBM go viral somewhere.

James: That's fair. You're

Jessi: smiling. It's making me

James: nervous. Well, I thought you were like, Oh man, you just said that really well. I love the mission. Yeah, man. I'm on board. That's so good. No. That's fair. Oh man. I like it. I mean,

Jessi: yes, that's exactly why I was smiling. Great job, babe. Thank you.

James: I appreciate that. So today, what I want to talk about is something that I wrote a little bit ago where I wrote this ebook that is designed to help passive real estate investors understand if they have a good deal or not.

And actually titled it. Only good deals because the idea is if you go through these questions that we're about to talk about Then you will only invest in good deals because as a passive investor it is mostly passive But at the very beginning you just need help identifying and figuring it out And honestly, this is true for every single investor, you know, you talk about it like why is Warren Buffett?

a great investor is because he does a great job of asking these kind of questions. And now he's big enough that he gets access to things that you and I don't even get access to. Like he can actually go talk to management and they'll pick up the phone because well, you know, he's Will Buffett. But that's something every single investor has to worry about.

If you're, I don't know, buying gold or silver or investing in another company or doing real estate yourself or stocks, bonds, all that stuff, there are certain questions that you need to ask and educate yourself up front. So this is no different outside of just the area, the domain of expertise. is different than all of those.

And so today, what I want to do is just focus on the sponsor, which is one of eight different categories. Okay, let's see if I can do this left on my head. So you've got the sponsor itself, who's the, the person who like puts it all together. You got the property manager. You have the physical property. You have all sorts of questions about that.

Around the surrounding market, about halfway now. And then you have about like the business plan and the projections. There's questions about the loan and the financing. There's questions about the legal documents. And there's one more mystery one, which you will have to listen to. Oh! Figure it out. Cause you don't remember.

Oh, I remember. It's the, it's the construction plan. Which is different than the physical property and the business plan. It's how you're going to improve. Are you actually going to like physically get after and do this? But today, all we're going to do is focus on the sponsor. And this is

Jessi: all you're putting it, putting together a syndication.

And I, as the passive investor investor am like, what am I getting into here? How do I know this is a good deal? And so I can use this list of questions to figure out. Yeah, that's great. Do I want to do

James: this? Do I want to give you my money? Yeah. That's a good idea to kind of set the scene. So yeah, it's myself, like say I'm the sponsor and I come to you and I say, Hey, I've got this awesome investment.

It's going to get you a 20 percent average annual return. It's 40 units. It's, you know, it's awesome. And we're trying to raise, I don't know, 2 million. Are you in or are you out? And the minimum is 50, 000. I need your decision in two weeks. Right. That

Jessi: kind of thing. And I could just go. Hey, yeah, I like you.

Here's 50 grand. Yeah. But that may not be the wisest thing in the world if I don't really know you. Correct. And don't know some things

James: about you should ask. And there's kind of an, there's a hierarchy of questions. Sure. Like the sponsor. The person is probably number one person putting it together and then all the other things start to come together.

Then you want to know more about like, okay, tell me about the business plan, the projections, tell me about the property, how are you actually going to achieve the thing through the construction stuff? Tell me more about the financing. I mean, they're all important, but I think like that number one is the sponsor, so that's where we're going to start today.

So what I've done. is, I have given you an excerpt of that ebook, which is essentially 196 questions. And I gave you all the questions related to the sponsor and kind of said, Hey, if you have anything that's confusing or that you particularly think is amazing, let's talk about it. Yeah. So

Jessi: what do you got for me?

I just kind of flipped through here and I mean, one of the first things that I notice is actually the ending questions. And I would, I would kind of flip that. To the beginning, because I'm kind of, so, so the ending is kind of like what does your gut tell you about

James: the record, I'm not asking about, like, editing feedback.

I know,

Jessi: I know, but I think this is a good place to start, because it's kind of like, why would I ask all these other questions if I didn't feel, if this one didn't check

James: out? Yeah, of course, for the record, like, and the reason why I actually put it at the end of that section was because you kind of need to think through all those other things.

to kind of get a handle for how am I supposed to think about this? Well, kind of. I agree with you, you probably would ask this one first, but all those other questions help inform this last question. Like, without talking to the sponsor about the previous ones, it's much harder to answer that last

Jessi: one.

Maybe so, except if the sponsor gives me willy nilly's from the get go. Well, that answers that

James: question too then, I'd be like,

Jessi: nope. Alright, fair enough. But anyways. I guess we'll get to that.

James: You can go backwards, you can do whatever order you want, I don't care. You have the conch, you're in control.

Jessi: All right, fine.

Let's start at the end. So, boom. At the, at the end, it, it kind of is talking about what does your gut tell you about this sponsor? Yeah. Do you wanna be in business with this person for five to 10 years? Yeah. Can, like, could the sponsor even pass a background check? Yeah. You know, so it's kind of like, is this a decent person?

Do I wanna go into business with this person? So I, I liked that set of questions. 'cause it's kind of like, oh. This helps me to understand that I'm not just giving you money and walking away. I'm giving you money and trusting that you're going to invest it wisely, manage the deal wisely, that I'm going to get a return, but I'm waiting and, you know, hoping and not just hoping.

I'm, I'm actually purposefully thinking about the deal and trusting that you're going to take, take my money and invest it wisely and then give me that good

James: return. Yeah. I agree. It is a good question. That's why I wrote it down. But also just like, this is an absolutely doesn't really matter, but minor, minor, minor point of clarification.

You will never give me money. You will you will always direct you to you've deposited in the escrow and then they will put it into the company. Sure. And a company is the thing that receives the money, it's never me. But other than that. I'm

Jessi: not just going to write you a nice check. I just want to clarify.

James: Blank check. That point. Which should help with giving you the whole like, oh yeah, yeah, I do trust this person. Sure. Because he's not just taking my files. You have a business structure. I agree. It's just that thought that, that it's almost a reminder slash thought of like, oh, this is a long term deal.

Yeah. This isn't a short term transaction. This isn't a six month or one month flip. Like we're in this together and we are effectively in business together because we both own each Like, we both own parts of an LLC. We are, like, by all definitions, in business together. And so it's helpful to be like, man, do I want to be in business with this person?

Yeah.

Jessi: And I think, I mean, that is a great lead in to all of these other questions. You might look at this and be like, oh my word, there's, you know, there's like 50 questions, almost, there's 47 in this section. You know, so it's like, do I really need Ask all these things and it's like, well, yes, you know, if you were to start a business with somebody, you would ask a lot of questions.

And so, you know, things like, is this the right team of people working together? Who else is on your team? Who are those people? Is it just you? Do you have extra people? Are you doing this full time? Is this a side gig? You know all of, all of those are kind of, there you go. All of those are kind of.

questions that you would think through and want to know about. And so there's someone here that I was like, yes, that's, that's fantastic. You want to know who these people are? How many years have they been doing this? They have a great track record. Give, you know, do you have some of that information you can share with me?

Some of these questions on your gear, I was kind of like, This got real specific, real fast. And I was like, I don't even really know what these things are. You know, like some things I get, like, what are you currently managing? And you, you have like a fancy, like assets under management here, but you know, like, what are you currently working on?

Do you like, what experience do you have in this particular market? Have you done any deals that have gone the full range, but there's one on here. Yeah, full cycle. There's one here what's the sponsor's typical acquisition profile? I'm guessing that's like, what do you usually invest in?

James: Yeah, yeah,

Jessi: it's Or is that, you know, like, do you have to have a set market or profile that you're like, this is the only things I invest in?

Is that what that means? Or is it more like, this is what I typically invest in? I don't

James: know. Yeah, no, I think you're on the right track there. Yeah, it's, it's I guess a fancier way of saying like, what do you typically buy or like, yeah, when you're acquiring stuff, what's that thing that you're looking for?

Perhaps another term that investors like to use is what's your buy box. What is this box of features, conditions, whatever that I'm willing to buy. You might

Jessi: be an expert in, in apartment buildings or in like, I don't know, mini malls or

James: whatever. Yeah. Yeah. Okay. Yeah. Which, and there's. And there's all different types of it too, like you might have some people, like for example right now, I'm like, I'm in Oregon, and that's it.

There's some who are like, I don't care, I'll go anywhere in the United States. I don't, maybe I'll go international, I don't know. So it's just the different

Jessi: types of criteria of what you typically

James: do. There are some who are like, I only do storage, I only do multifamily, I only do industrial, I only do small multifamily, I only do the large stuff.

I tend more towards the, I only do things that I think in terms of like vacancy risk, I don't necessarily want to go off and buy one big building that has one tenant. That scares me. Sure. But I will have to buy a big building that has 30 tenants. Sure. That scares me less. You lose one and it's not so bad.

Same with like industrial, right? Like, sure, I might buy a big warehouse, but if there's like one tenant in that warehouse, you go, ah, man, I don't know about that. But if there's a way for me to turn it into something. That's a lot of tenants. Okay. I'm that's more interesting to me. So I tend to think in those terms.

So like from day one, you and I have stayed away from single family homes, right? We've always been like, no, I want multifamily. And it is like because of that vacancy risk. And so that's big, that's a big part of my buying profile, but then, and just like, I like the returns, that kind of thing. And then, but mine starts to get flexible in terms of, well, what's the type.

I don't, I'm less concerned about the age. Like there's some people would like if it's less than 20 years old, I don't care, like that's what some people do. I don't care about that. And I'm looking, Oh, for me also you know, we joke about this all the time, but like we say like cat urine is the smell of money and that's just a very.

A colorful way of saying, I'm looking for value at something that can be fixed up. Like, that's part of my profile. I want something where when you look at it, you go, ah, man, I don't know about that. Like, I don't know if I would live there. Yeah, I know. But it's not because of the surrounding market. It's because of the property itself.

And, and so those are, I, I have, we have invested in small markets. There have been some issues with the, with that, just getting contractors is. It's all a lot more difficult and so that's, I'm

Jessi: less market being like a smaller city

James: or town or whatever. Yeah. Yeah. Just low population. Sure. Or growing or decline or I'm sorry, flat or declining population.

Like those kind of, those make me weary. I get it better be an awesome deal. Part of it's just the exit strategy. How do I get out of this thing? There aren't a lot of people like what's that? So that's what I mean by. Profile. Got it. Acquisition profile.

Jessi: Yeah. That was super helpful. And I'm, you know, there's a bunch of questions on here that would help clarify that even more, you know, that you can ask your sponsor for materials on previous deals that they've done.

Give me some numbers, give me some types of properties,

James: which by the way, Furlo. com slash pro What is it for low. com slash portfolio. Oh, I've got every single thing that we've listed out. There's a picture of the property and like some quick stats.

Jessi: Everything we've bought. Yep. There you go. That's your acquisition profile.

That's

James: my track record. Oh, that's your track record. But it informs my profile.

Jessi: There you go. Yeah, so you can ask for that, that type of stuff. I highlighted this question because just the other day. You were showing me that graph about, you know, it had the ups and downs and then it had the gray bars where there was a recession.

So one of the questions on here is like, have, has the sponsor ever experienced a recession and kind of what happened there and did they lose everything and how did they recover? And so I, I just found that interesting based on kind of where we are in history and. Whether or

James: not, you know, if I'm being a hundred percent transparent, I mean, unless you, we count technically, there was a, a gray bar right after COVID.

I would not call it a recession though. You and I haven't lived with through one. Yeah. We started investing in 2009. So I mean, they're like, well, yeah, you did like, no, like we didn't have investments. We caught the bottom of the market and in a lot of ways, we wrote it to the top. And yeah, I'm not going to say like, I'm, I'm a super genius investor who like figure something out that no one else did.

No, like I saw the market and went, Oh, this is an opportunity. And I feel actually very similarly right now. We're at that top and it's like, man, it feels like something's going to happen and it's going to have a reset. And yeah, it will affect our existing portfolio potentially but it'll create just all new opportunities.

And part of the point of that is, again, everyone feels like a genius when markets are heading up. And it's just, they talk about like, it's hard to lose money when Like, these last couple of years, prices have been rising so much. If all you did was buy a house and never take care of it, never rent it out, and then you sold it six months later, you could still make money.

And, like, that doesn't mean that you're a good investor. So that's kind of what that's starting to get to. And it's saying, yeah, when times get hard, like, are you, do you have a, do you have a solid business plan? Do you have enough reserves? It's, it's getting more into the show not tell type of stuff.

Could I, oh yeah, I totally got reserves. Oh, but in my last, but you know, and, and here's the other crazy part, like if you had an investor who you're talking to and they were like, Oh man, it was horrible. Like we did really poorly. We ended up losing a bunch of properties. Things got repossessed. It wasn't good.

That's not necessarily a showstopper. It's a, okay, what'd you learn about it? Why am I coughing? It's annoying. Didn't cough all day. That's right. It's not a showstopper. If they can demonstrate, Oh, we learned X, Y, Z. Now we have reserves of at least, I don't know, three months just in case. Cause we don't want that to happen again.

Yeah. Stuff like that.

Jessi: Yeah. That's this next section kind of is talking about, you know, asking some real honest questions of the sponsor. Yeah. What difficult things have you gone through? How did you deal with it? You know, what? What did you do? It kind of feels like a job interview, huh? Yeah. I mean, on some level it's, and you, and you wanna know, like, have you ever had to make the hard call and I, and you, you did.

I did. Mark one in here make it capital call. Yeah. Which I'm, I'm guessing is like the deal is broken or something didn't go right and you had to like give people's, I don't know, do something. So

James: Yeah. No, a capital call is when I come back to investors and say, I need more money. Oh,

Jessi: okay. Yeah. Yeah, because.

Repairs were more expensive

James: or, or we didn't, the vacancy was higher than we thought rents were lower than what we thought they were going to be. We had a variable rate loan and the interest rate changed on us and our payment next month is big. We went through all of our reserves. Yeah. Construction plan went long, went expensive, all that stuff.

So

Jessi: that is a good question to know that I don't just put my money in and that's it. There's the potential that I, yeah. Could need to come up with more to make the deal continue.

James: Or, and so this question is kind of getting to, have you ever done it? How did you go about it? Did you exhaust every other, other option?

And if you do like, what are the policies? What if you come to me and I don't have the funds now, what, and how has all that handled, which the PPM, the private placement memorandum, we'll spell that out, but it's good to ask those kinds of questions and their philosophy and how they think about it.

Jessi: Right.

Yeah, it totally does. The next. This whole section is talking about communication and I, I'm, I think that's super important because at just aligning expectations, I feel like, you know, we even in a marriage have to have this expectation of like communication and how we communicate and how are you going to tell me about what's happening in life?

And so this whole section, you know, does the sponsor communicate with you? What do they tell you? What have they, you know, how have they communicated since you first met? How do you learn about the deals that are going on? What is the progress of how things are moving? What does their reporting look like?

Is it readable? Is it helpful? Is it, yeah, useful? There's a

James: lot of these questions I got from our experience passively investing in something. It's going well, I think. But, and they actually, it's, it's, I should, they provide a report every single week. But it's things like, and it's a development project.

And so they'll say like, here were the man hours that were spent allocated by the different types of jobs. Like the electrician spent this much time. The framers spent this much time. I'm like, okay, got it. That doesn't really tell you anything about your investment numbers in this report. It's a really weird.

It's a weird report. It's almost like

Jessi: they're giving the report. They're making the report for someone else. Yeah,

James: I think so. They have pictures, but even then it's never like, here's the far away pictures. Here's pictures from the job site this week. Yeah. And that was one where I was just like, just for me and what I wanted as a passive investor, I was like, this is not useful to me at all.

And I actually went to a meeting. They had like a dinner that they hosted. And it was like, we're going to give an update. I was like, awesome. Finally, here's the presentation. And no, it was a big sales pitch for other investors. And I was just like, like, Oh, it was killing me. So that was I have learned since then, like what I like and I, I mean, it must be working for some people.

Otherwise I don't think they would do it. I don't know. Yeah. I don't know. I mean, I've never given him feedback. So, that's not true. I actually sent him an email once and was like, Hey, I would love to find out, like, how we're doing versus the budget. And just crickets. Awesome. So, it's really important to ask about that, if that's important to you.

Yeah.

Jessi: And then just talking to other people who've invested, you know, can you get information or get references for other people who work at the sponsor?

James: I know some sponsors who are very much like, no, no, no, that's, that's all confidential. I won't share anybody. I'm not going to make

Jessi: sense. Cause it's like.

You don't want anybody else to go and ask them for money, you know, and so if they're trying to get leads or whatever, like I, I can kind of understand that, but if you do have that opportunity, there's some different questions you could ask of references, you know, how did, how did it go with you? How well did they, did your sponsor communicate with you and did they give you all the information that you needed or tax information that you needed on time?

And how did the deal go? And, you know, you can ask all those different things. Which is like, okay, that totally makes sense. Like if you were going to ask a reference, cause you wanted to partner with somebody else, like that's what you would ask. How did it go for you? Do you like this person? What did they do?

And then similarly, I kind of marked this section. Oh, Oh, I marked on here in that section. It said, do you get your K1 promptly? And I'm guessing. That's like

James: tax related. Yeah. K one is a tax form. So when you invest in a syndication, you own a, a fraction of a company. And so the company itself files a tax return.

And then what they do is they then have to essentially divvy it up for each of the owners and that divvying up piece is what they call a K one. So on there, it's going to say, here's the percent ownership that you have, and here's either your profit or loss, and then that gets added onto your. Hmm. Tacked onto your personal return.

Okay, cool. Cool. It's kind of a, 'cause LLCs are flow through entities. Sure. They're, they're kind of separate, but, so the, that's the form that talks what flows to you. Nice.

Jessi: Okay. Yeah. So how you deal with all of those sorts of things. Yep. And then similarly, it's any third party service providers it says on here.

Yeah. Can you talk to the sponsors, other people that they work with? Like their lender, their insurance provider, their tax accountant, Uhhuh, , and then. Some things you ask them, which are, which are very similar, like how well does the sponsor communicate? Does, have they failed to deliver on any promises?

Yeah. Have, have they how do they handle unforeseen problems? Things like that. Yeah,

James: and so, and the sponsor should be more willing to share their information. Yeah, I think, I would think like business partners. There's not, there's not a confidential piece there. Sure. Like if you called me and said, hey James, I want to talk to your lender.

Yeah. Like, yeah, sure. His name is Matthew and he's awesome. Here's his number. Talk at him all you want, and I have actually done that once and yeah, and so totally cool. Same with my insurance guy. He's awesome. I'm careful. He's going to try to sell you, but as he should, I mean, he's like, Oh, I'm friends with James.

I like working with you. That's how I like to think he would react in that scenario.

Jessi: Yeah, and I, there's another. Just really real question on there. That's are you satisfied with the way the sponsor handles difficulties, you know? So it's like, I think that's wise to ask, you know, we, we kind of asked that about tenants and when we're trying to screen and we ask landlords, you know, would you work with this person again?

Yeah. How did it go? And I, I think that's very similar, you know, asking, would you work with this person again? Would you give them your business?

James: And if you talk to a sponsor and they're like, I've never had a hard time or a difficult situation. Ah, that might be a red flag for you. You know, like for us, like we've got all sorts of examples, where we can talk about our very first tenants, which we've talked about in a previous podcast, and just go, yeah, man, that was hard, and here's what we did wrong, and here's how we adapted and have changed, and this has changed our policies on how we interact, and it has been awesome as a result of that.

We can talk about, we talk a lot about problem tenants, I guess, because there's a bunch of stories. And we can talk about investments where we go, yeah, this didn't make a whole lot of sense. I think about like, we could share that one where it was like that 11 plex that we were looking at. We met at the city one day and it was like trouble.

And you know, that was really hard to like have to back out of that and kind of unwind it. And it was, it was a bummer. Ultimately it was good that we didn't buy it. But I think there's stories like that, that we can share. And I'm sure if I spent a little bit more time thinking about it, like, oh yeah, no, there's definitely other stuff that.

So yeah, I think it's important to ask cause you just get a sense for, yeah, here's how we handle the hard stuff. Nice.

Jessi: And then there's, there's just a few others on here kind of wrapping it up. But there was one on there is the sponsor, a member of any trade boards in their respective asset class that I was like, what, like, I'm guessing, like, did they hold any other positions of leadership on for other?

Things that are related, I guess. Yeah, no,

James: that's essentially it. Like, are you, I, I,

Jessi: I, I think like, the question behind this is like, are you actually bought in? Do you care about this industry more than just earning money or like, you

James: know. Yeah yeah, no, exactly. Like, we're members of a couple different groups.

I actually led a group for a few years. Yeah. It's like

Jessi: you're, you're passionate about this outside of just the day to day

James: business. And it's like you said, it's, it's that bigger picture. I care about the industry, not just like my own wellbeing, am I going to burn a bunch of bridges? Sure. It's just like, well, if you're a part of these groups and, and not just showing up, but like actively involved, cause you might say like, for example, there's one in Portland that I'm technically a part of, I pay dues every single year because I get their forms crazy stinking cheap.

That's the extent of my participation in that particular group. And part of it's in Portland, I'm just not going to drive there, but the forms are good. Yeah. And so, like, that would not be, like, involved in it. I think that's kind of a, an important piece to ask and just kind of understand. Because it just kind of speaks to, yeah, that level of care and, and other people.

Are they going to play nice with others? That's important to know. Yeah. Yeah. Yeah,

Jessi: so I think, if I were to like categorize these different sections, or just like overall think through if I'm like, okay, I'm evaluating a sponsor. Yeah. What's the goal? It's like, I want to know, do you have been business sense?

Do you know what you're doing? Like, and that's proven like through your track record, gathering numbers, getting references. But then also there's this piece of. Like, do you have good character? Yeah. Are you a good person? Mm-Hmm. . Can I trust you? Are you trustworthy? Yeah, totally. You know, so it's, it's like those two big areas that I'm like, this is what I need to know.

Yeah. And all these questions kind of fill, fill in to one of those different

James: That's, that's a good summary. Spots of what you're going for. Yeah. Yeah. Do you have a proven track record and are you trustworthy? Yeah.

Jessi: Can you do the job? Do I wanna do the

job

James: with you, ? Yeah. And, and that's, that's a great way of.

Summarizing that. And yeah, these questions are designed to help parse those down more specifically to ask those questions. Cause it's, cause that, that may be difficult to answer at a high level. Or I, I'm not, but someone, a sponsor, maybe you're just great at sales and just like talk, talk, talk, talk, really just sell it hard to where you're like, Oh, this is so exciting.

And this helps you to. Take control of the situation or the conversation, but to shine spotlights on specific areas that they may not have, may, may have glossed over and maybe less important, like again, like I, for the one that we invested in. That I'm thinking of, like the sales was great, the numbers look great.

I liked the business plan, like all of it was good, but I totally forgot about the communication piece. And I mean, and it's to a point where I probably won't invest with them again, just because it doesn't match my style. And I didn't even think to ask at the time, because I just bought into the business plan and the pitch.

And I mean, it sounds really weird to say, like I'm pretty certain it's going to pay off and it'll be fine. Because I really feel like they would have told me if things were going off the rails. But honestly, I don't know because they don't tell me about the good stuff either. And that's a, that is a very uncomfortable position for me to be in because I like to know that information.

Yeah. And, and I have, for the record, I did get on the phone with one of the people on the team and I expressed, I was like, dude, I want to know this stuff. This is important to me. And he ultimately was like, well, it's a development project and these things are weird. Like, for example, he was like, we pre buy a bunch of stuff, so technically we're already spent like 80 percent of the budget even though we're like 30 percent done with the project.

But he's like, but that's because we ordered everything. And he's like, so, it just looks different on the spreadsheet than it does in real life. Which I was like, okay, like, make that differentiation. Like, how much, like, Yeah, let me know that. I can handle three columns. You can still make some projections.

Here's the plan. Yeah. Here's what we spent. Here's what's actually been installed. Yeah. And you can have numbers. And then here's where we're going. Estimates. And I don't even need it to the penny. Yeah. I'm just like, this is a multi million dollar project. Give me something. It's okay. You can round to the nearest thousandth.

I don't care. And just something. And I even went down as far as like, okay, fine. Tell me about the timeline. Okay. How are we doing on that? When can we expect this thing to be done and filled and we can start talking about refinance. And. You know, that kind of stuff. And even then it was like, well, you know, these projects are projects.

Yeah. Like,

Jessi: I mean, now that you're kind of talking about that, I, I feel like these questions not only help you evaluate the sponsor, but it helps you evaluate what's important to you. And so there, there may be some things that aren't on this list that you're like, you know, I really would rather know about X, Y, Z.

And it's like, yeah, that's great. This is a starting point. Add your other things, you know, feel free to add twice as many questions on here. If you're like, I, you know, want to know what they ate for breakfast. Cause that's important to me. Like, okay, sure.

James: I don't eat breakfast. Easy answer. There you go. Yeah, no, I think that's great.

And a sponsor. They'll spend time with you. They'll go through these questions and, and answer them for you. And if they don't,

Jessi: you probably don't want to work with them. Like that's a good indicator. Yeah.

James: Now, now I will also say like, if you hit a sponsor up with, you know, 50 questions a, some of them should already be answered just in the presentation.

Like I said, there's part of it where it's like, Oh, you want to know about my track record? I got an entire web page devoted to that. And if you want more information on one of the projects, yeah, sure. I'm happy to dive into the details and share the materials with you. I'm probably not going to do it for all of them, just because that's, that's a lot, but I'll pick a couple.

And as a really good sponsor, I'll probably, at some point in time, say step, take a step back and go, okay, these are awesome things. What are you worried about? What are you concerned about? Yeah. Let's address those things just to make sure we're not wasting each other's time here on what we're doing. And like, and a good sponsor will have that conversation and help you determine what's important to you instead of necessarily just hitting them with everything.

Yeah. And, and that's okay. Right. And honestly, like, When I, when an investor pings me and has questions, I'm like, yes, this is awesome. I love talking about this stuff. Yeah. So anytime someone comes to me and is like, like I was talking with a guy today and he was asking me questions about an investment. Our investment on 14th and he had all sorts of questions and I was like, Oh, love it.

Yeah. Yeah. Here's my plan. Here was the negotiation process. Here's the way they end up doing acquiring it. Here's how we funded it. Here are my potential exit plans. Here's what we're doing right now. Like, and I walked him through the entire thing and I love talking about that kind of stuff. That's just fun for me.

And so like that wasn't a burden for me to go through that. He kind of got done was like, Oh, wow, that was awesome. Yeah. I know

Jessi: you've had several types of conversations, just people interested. Not necessarily even in partnering with you, but just interested in real

James: estate. So it's like, yeah, ask all the questions and I'm going to assume that you're asking because you genuinely care and you want to know a lot and I'm happy to answer them.

And I think, like you said, a good sponsor should, and or at the very least they're going to, again, like I said, they're going to step back and say like, Hey, I want to make sure that I'm like really helping you out here. And we're just not spending a bunch of time on stuff that like only semi matters.

And of course I'm also the kind of guy where like, yeah, I care about all, all 47 of these. And here I can tell you why I care about each of them. And I can be that guy. I also recognize you got to. You gotta be careful. Like I learned a hard lesson. I was interviewing property managers at one point and I had like, I had like, it was ridiculous.

I had like 60 questions and there were first couple of them who I actually, I walked through and I asked almost every single one and I could tell at one point in the conversation where I went, Oh, I can tell I'm annoying them. They're tired of this cause we're like an hour and a half in. And, and they just, they, like, I could just tell that they were like, Oh, this is a lot.

And so I, for the next set, I heavily modified and finally went, okay. And part of it was, for me at least, I was like, I had to ask this questions and kind of hear the answers. to realize, Oh, this is what I really care about. Here's what's important. And so the next time I came back to it and I said, all right, like I got 10 and these are them and they were the most important ones.

And, and I figured if they made it past those first 10, there'd be an opportunity for a second call and I could dive into one of those other areas. And so like on this sheet here, yes, there are 47 questions, but there are, I forget how many, four or seven. Yeah. So there are some that I highlighted four. I highlighted four of them and the idea was like, man, if you only had a little bit of time or like you really want to focus, these are the four that I would ask.

And again, the point of that was so you don't overwhelm the other person and it kind of helps you as the passive investor to kind of to focus and to go, Oh, okay. This is what James thinks is important from his research and experience. You know, I'm going to. I'm going to start with those and then, like you said, kind of expand out to what I think is important.

And so I don't actually expect you to ask every single one, but it's not unreasonable to ask 10 or 15 of them. Sure. So there you go. There you go. Awesome. Cool. Thanks for going through that and for your feedback and what your thoughts are. I love talking about this stuff. Of course you do. I do. Yes. And. If you enjoyed this podcast, we would appreciate it if you would leave a quick rating wherever you listen to your podcasts.

So with that, I want to say thank you for listening and have a great day.