How Smart Passive Investors Protect Themselves From Sponsor Failure | Ep 129

James
I have a really fun, exciting, uplifting, lighthearted topic this week.

Jessi
Yay.

James
We're gonna talk about death.

Jessi
Oh.

James
Or disappearing. Getting burned out, getting sued. Yeah. No, it's not. But yeah, we're gonna talk about that problem with the Those types of problems with the person is running your property. Today on the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing, including topics that sometimes don't want to talk about. And our mission is to equip people to invest wisely in both property and people so that But together we can build wealth while improving housing, even if someone dies in the process. I'm James and this is my wife, Jessi.

Jessi
Okay, I have something fun to talk about uh before we talk about death.

James
Let's do it.

Jessi
I mean, I guess Yeah, I was trying to tie it in, but nope, no, doesn't have it. I'll help you. So I have always had a fascination Well, I've had a fascination with bugs, but that kind of lends itself to like looking through microscopes or like inspecting things or I don't know, observing sometimes dead thing. Dead things are easier to That's true. But um yeah, so I I got a microscope and I've been like looking at stuff and the kids have been looking at stuff. I've been learning about like front lighting and backlighting, getting the best dial-in. That has nothing to do with anything. It's just way more fun than death.

James
Oh that's fair. That's fair. But it is important to talk about those type of things because it can happen and it can have a significant impact as on passive investors because I it's it's uh because it's a single asset and it's often not very liquid. And so you might be trapped in it where it's like, man, we're no longer getting distributions or we're not getting any answers. And and oftentimes your investments depend very heavily on a key person. And so yeah, even though we don't want to talk about it and we wanna get back to the microscopes and fun things of inspecting, right now we gotta inspect this really bad.

Jessi
Yeah, my investments over there. They're fine. I'm just gonna look look at tiny stuff in the microscope.

James
Yeah, yeah, yeah. Exactly. Let's talk about dead bugs, not dead people. I get it. I get it. So what's interesting is that there are there's two different scenarios really where you need to worry about this. The first one is if you are a private money lender. Essentially you've you've You you're the blender, you're yeah, you're the blender, you're the bank, and so you have debt on a property, or you don't have the debt, you've provided the debt for a property. And then you have the passive investor who's in a syndication, right? They have an equity position. And and those are two fundamentally different scenarios.

Jessi
Yeah. I mean, let me make sure if I get my brain around it. I mean a bank a bank loan or like a private money lender essentially is like they gave you the money. And then lent you the money, but yeah. Well yeah. They lent you the money with with some terms that you laid out in paperwork somewhere, and then you give it back to them.

James
Regardless of the property's performance.

Jessi
Right. Yes. The loan is separate. They're like, you will pay us back no matter what. This amount with interest. Correct. Sure. And then the equity is dependent upon the property, I think. Yeah, and the sale of the property.

James
And they actually have an ownership interest in the property or the LLC that owns the property. Sure. Yeah, so it's it's much more tied. Yeah. Yeah, yeah, yeah. And so you can kind of see there's different risk profiles with the different things. And so I actually want to run through the four scenarios of an operative of of the operator. That's the sponsor. That's the person who's running the entire investment. That's me. Yep. Either dying, disappearing, burning out, or getting sued. Because those are four different events that are very negative. Yes. And so we're actually gonna talk about because of the math of how math works, eight different scenarios. So we're gonna look at all four from the two different perspectives.

Jessi
Oh I see. From the yeah the two different ways you you could potentially put money in. Correct. And

James
the implications. And it's just kind of a pros and cons, honestly. Like it's just like anything. Alright. Yeah, that is my very first one. Death, okay. So, death for a uh from a private money lender, a PML perspective. If you will, I know, so fancy with my acronyms. So uh basically the note survives. Nothing changes there. The deed of trust, which is the piece of paper that's officially filed with the uh with the local county saying, Hey, this guy owes him money. Yeah. Uh that like nothing changes there. And it's the estate that inherits the debt of whoever that borrower was. And if there's guaranteers Again, the estate is still personally liable for that. Now there are certain things where lenders they can accelerate Uh based on they can accelerate the loan being due, potentially, depending on how good you negotiate and what's written down. The I don't know. So they can say, hey, if this person Dies or whatever, the notes do sooner rather than later. You could write that in. It's an option. It's usually not, but it could be.

Jessi
Okay.

James
And honestly, this is the clear scenario for a lender because the rights don't depend on The person being alive.

Jessi
So what if the person doesn't have enough in their estate to make good on the loan?

James
Yeah, then uh I guess you go through the regular foreclosure process. Yeah, and you probably get the property at the end of the day. Sure. Yeah, here's the important part. It's It's like the borrower, it whatever the borrower agreed to, whoever inherits that has also agreed to it. Yeah. Essentially. It's kind of how that works.

Jessi
Right. That makes sense. Yeah.

James
Okay, we're gonna talk about it from a syndication LP, a limited partner perspective now. Again, they die. So uh there's gonna be an operating agreement, and this is the thing that's gonna spell out everything that happens. So Usually there's a key person like my and and I should say there's there's a couple different scenarios where you have like a one man shop Which is more like what I am versus hey, this is an organization that's running the investment. So two very different things. So if you have a one-man shop, which is the one honestly, that's the scenario that we that we're caring about right here, you have uh they're known as a key person. And and so you then have some some some options that have been there. Uh one of the things um Usually what happens is what they call a strategic pause period. So there's no capital calls, there's distributions will continue as normal. unless somehow those are suspended. And um and so there's like we're just gonna take a pause and go, what's going on? And it's usually about ninety days for that. Now

Jessi
So no big changes in ninety days But distributions so happen if

James
you're going to just keep things going as normal. Let's just take a breath, figure out what the next step is instead of instantly reacting and saying, okay, I gotta do all this. Yeah, okay.

Jessi
Yeah. Like we're gonna close it down or sell it or whatever. Exactly.

James
Take three months.

Jessi
Let's all breathe.

James
Figure out what we actually want to do. Now, my est let's say I'm the o um I'm the guy. My estate has no automatic right to continue as the manager of the syndication. And so that means that the members, they got a vote. And they got those 90 days to say, hey, who do we want to to be running this thing?

Jessi
So essentially they vote For a new key person? Yeah, essentially. Yeah. Is there anything within the paperwork where you could designate a key person ahead of time? Like in the event of my death, it will be this person.

James
Totally is a thing. Yes. Yes. The other thing, which is what I've done, is you get key person insurance.

Jessi
Yeah, I've heard you say that. And I'm like, I don't know what

James
that means. Yeah, so essentially it's an insurance policy on my life that says if I die My insurance company is going to just give a big chunk of money to that syndication. Well, not to close it out, but to just recognize, hey, this like this whole entire investment was dependent on this one person performing They're not here anymore, so we're gonna make you whole. In my case, I got out enough to pay for the loan. Okay. So the loan If they wanted, that doesn't have to, but if they wanted to just pay off the loan and we go, man, we're just gonna have like Rick in the cash flow. Cool beans That's an option. They still gotta find someone to then handle those positions, make decisions, that kind of stuff.

Jessi
But they have the but they have the option to step out.

James
Not no. What do you mean?

Jessi
Well, you said if if you die and the insurance pays for stuff. Yeah. then one of your investors could in theory could buy out other people. Yeah. I guess I'd I wanted to invest if James was here, but He's not somebody else.

James
That would require the other members to then buy out that person or and person. More likely most likely scenario, what happens is you go, hey, we just need to sell this asset and sell it pretty quick. And because we're making enough money, we're not we don't need to necessarily need we don't necessarily need to be greedy and they just sell it to another organization and they then they run with it from there.

Jessi
Okay.

James
It's sad, it's a bummer, but Hey, you made some money, so it's okay. Or vote for a new key person and keep it going. 100%. Totally an option. Yeah. Could totally be a thing. And um Yeah. And so like one of the things I've done is I've given the contact information for all of my investors and my syndication. So I'm like, hey, just so you can all reach each other just in case. Yep. And by the way, here's my insurance person's contact. Here's my lender's contact. Yeah. Uh There's a couple others in there as well. But just trying to help people make those connections just in case this scenario arises. But yeah, but but as you can see, it's also a lot messier. Yeah. Because you're like, ooh, okay, now well.

Jessi
Yeah, it's definitely a lot A lot messier there. I mean, there's just different options, I guess. And it it really does depend on the motivation why someone chose you to do a syndication with. You know, it's like if they chose you because of who you are, not like I like this company It's great. Like if you're no longer in the picture, that could change whether they want to stay invested or not there.

James
Yeah. And honestly, that's one of the reasons why I have a separate property management company running it as well. Cause it just would have stacked on the the the key man problem. But at least with this day-to-day operations won't stop. Now it's just a question of hey, who's gonna deposit these checks and kind of gotta go from there. Sure. So yeah, it's kind of interesting.

Jessi
Yeah. There's a plan. It's not comforting to think about death happening. I know, but we gotta

James
be worried about these.

Jessi
Nobody wants to think about that, but it's it's good to have a plan.

James
Alright, let's talk about the other weird scenarios. If I disappear. If you take all the money and leave. Just go to go to Mexico. That doesn't sound like fun. Where would I where would I go? I'm off to Morocco. Morocco. Please. Bali beautiful. Bale. Bale balay balay. Yeah, so private money lender situation where that happens is harder, but it's still structured. There's a if they if If I, as the borrower, stop making payments, there's often a time period where I have to to catch up. And if I don't We just move on to foreclosure.

Jessi
Yeah.

James
Essentially. And that's where the the lender, in order to protect their collateral, they're probably gonna have to pay the taxes and insurance, which they can add to the debt. But they're not like essentially they're gonna get the property back if the person just disappears. There's no need for any member votes or anything like that because they just there's like a lender. Again, it's as if someone says, I'm not interested in this property anymore. They just leave. A lender goes, hey, you stop making payments. They serve notice. Yeah. Go through the full closure process. Whatever.

Jessi
Huh.

James
Yeah. Pretty wild, huh?

Jessi
That's weird that it's different than you being than than the person being dead. You would think it would be the same. Although it's like you know you're not hitting the same thing.

James
To some degree it is. It kinda is. But the responsibility doesn't move on to the estate. Sure. If the estate decides to not do anything with it Exact same process. Yeah. Yeah. Huh. Yeah. All right. Okay. There you go. Let's talk about from a LP perspective. Okay. This one, honestly, it's just messy, right? The operator just kind of fades away. Right? Distribution, let's say that those just stop. Communications stop. There's no formal like super event in the operating agreement. So usually there's a vote by the remaining members to remove the manager without cause or potentially with cause. Um, which could be like for fraud or gross negligence or whatever. And there's there's gonna be some percentage of how many people need to vote to switch them out. And it's usually not small, maybe like 80%.

Jessi
Oh wow. Yeah. So I would think it would just need to be the majority.

James
It it it it could be.

Jessi
It's all depends on

James
how it's what they wrote. But you gotta like, there's a weird balance there because you don't just wanna have Someone come in and be like, We don't like this guy, we're gonna overthrow. Yeah. Yeah. So uh and there's just a practical thing, just like all the other stuff. That means you gotta get the other investors on board, you gotta get them to coordinate. It just Someone's gotta be lead this thing out. Sure. It's it's genuinely messy, which is why it is so important who you invest with, right? Like We we've hounded this over and over and over again. And I'm gonna say it again. Like the operator, the sponsor, that's the thing. The investment vehicle, less important, you are investing in the person because of things like this. If they just if they disappear. Dude, you're kind of hosed for a little bit. Yeah. Again, for mine, I got a property manager, so day-to-day stuff doesn't stop. But here's the other problem. You're you're a passive investor. How do you know? Right. W until it's like until it's been a really long time.

Jessi
You you'd probably be on top of your distributions or

James
what about us? So we're passive investors in a large whatever it is, it's a hundred and nineteen Units, right? Something like that. Right? I we've gotten one distribution check in the in the what year and a half that we've been investors for. Sure. Yeah.

Jessi
That's if it's not like a regular thing.

James
So I didn't expect anything the first year. Sure. We got one, which was really a refund from hey, we didn't spend all the money for construction. Here's your money back.

Jessi
Yeah.

James
I've gotten I don't I might have gotten one more check just from operations. That's it. If they've decided like we don't care about this anymore, I how do I know?

Jessi
You're like I was just waiting for the timing. Like I don't know I it's super messy.

James
I mean I'm pretty sure they're still around and they're still doing stuff.

Jessi
Yeah. I

James
I'm

Jessi
I mean you could reach out and be like, are you guys still around?

James
I totally could. Though for the record I I have sent messages and been totally ignored by them. So I'm also like, I don't know. Now there's one guy, there's one guy who if I send a message to him, he responds. Yeah. To which he's usually like, yeah, they're bad at responding. I'm sorry But which I know. I know. Which it's we're busy. We're doing stuff. Yeah. But but again, like if things are going off the rails, I honestly don't I don't know.

Jessi
Yeah, that's super interesting. You probably wouldn't know until it was Way off the reels, and you were like, What in the world? Like this guy's been paid me for six months.

James
Yeah. A drive by the property, I guess. Like, what the hell?

Jessi
Yeah.

James
Yeah. No, it's pretty crazy. Again, weird. Investing as a as a I I'm like, I'm really selling it on this episode. Um, investing in a syndication as a passive investor, like it's a thing. Like you really gotta trust the operator in what they're what they're doing for the project. It's a thing. Okay, kind of related to this is burnout. Yeah. So again, and it's especially risky for or They just focus on other projects, which is kind of similar, right? They just decide like, man, I'm just tired. I can't do this, or I can't do it to to the degree at which I was doing it, maybe, I guess. Um, so private money lender situation again. It's mostly invisible to you as long as the payments keep happening. Right. You're like, I don't don't know, don't care. Payments come in, cool. Until The person stops making payments, in which case, okay, now we're just into that regular default thing. Uh yeah, you got your normal cure times, and again the exposure is limited to the deal, not their state of mind. I think so you can kind of see the the advantages of being a lender, but and so just for the because you're I'm I can hear you in your mind thinking, why would you do anything else but be a lender?

Jessi
Right.

James
Is that I

Jessi
that's kind of you 're saying that I feel like that is the best scenario. If anything does go south, you just totally foreclose, you get your money, you're done.

James
Which honestly some Investors good. But if you're an an owner, there's potential to make a lot more. And that's why people

Jessi
Which I get. Like more risk, more reward. That's that's typically How it's laid out. So

James
yeah. And often as a as a private money lender, you're not necessarily in that first position. You're in a second, third, fourth, whatever. And so there's there's there's there's pluses and minuses. But when things go bad, yeah, you want to be a money lender. A hundred percent. Like that's that's the position And foreclosing, it's not exactly like the easiest thing in the world to do. So yeah. Okay, burnout for the limited partner. Mm-hmm. Okay, and honestly they said uh according to my research, this is the most common failure mode, which I get it because it's not necessarily burnout, it's Oh, I'm moving on to the next project. They give it more like distraction, shiny object. Okay.

Jessi
Yeah, you got this one going and now you're kind of neglecting it because you're Doing other projects.

James
Yeah, so maybe there's just slower reports to come out. Maybe they're defensive in their updates. There's delayed distributions, that kind of stuff. Yeah. And again, there's There's a spectrum on what burnout equals. It's not like, man, I'm just I'm just done zo. Yeah. You can have some sort of performance based removal in the operating agreement that says, hey, if they don't reach this NOI by this percentage for this amount of time, boom. Like maybe maybe that or they have the potential to be out. Yeah. And um

Jessi
are those Is it realistic to have clauses like that in there? Totally. Okay. Yeah. I would think I would think to a certain extent, you know, because the The sponsor should know if they're doing a good job and if they're managing things well, they should be able to read the market and make good wise decisions and and be able to promise like Here is when I'm gonna give you distributions and all of that. So it they shouldn't get off track. But I w I would imagine like sometimes things happen.

James
Well sometimes the investment doesn't go as planned. Yeah Like for example, in Baker Tower, we've got a unit that's vacant that's just been vacant for a long time. And we've been I think we're actually gonna get someone in it, which is super exciting. Um there's a law firm that's interested in the space, which is fantastic. We just gotta finish fixing it. And we were done. And then there was a water leak. So we're now redoing it. Like that kind of stuff happens. But again, like You expect the person to report, hey, this stuff's happening. Here's what's going on.

Jessi
So if you just hear nothing and don't hear just yeah, don't get distributions for updates, then that's concerning.

James
That's it's concerning. And honestly, it's this weird gray zone Where you're like, man, we may not actually be able to do anything about this. It's just kind of a bummer that they're not focused on anymore. I definitely felt that for the one that we're passively invested in. Whereas like they got the construction stuff done and they're like because it's a construction company that was doing it all. Like I totally get it. And for the management stuff, they hand it off to a property manager, like, we're moving on to the next project. Here we go. Which I they were like fundraising hard us and others. Yeah, dude, you haven't returned anyway. I don't want to get my money back first. Whatever. I mean I get it. I I do the same thing. Yeah. It's fine. Okay Now, what if they're in a lawsuit or like a personal legal crisis? Oh yeah, that's just that's a great situation to be in. So messy. Okay, a private money lender. I bet you can guess what the answer is for that one. Uh you just don't care. Don't care.

Jessi
Yeah, you just get your money. Like

James
Assuming it's with a separate entity.

Jessi
What does that mean?

James
So let's say the borrower is that I borrowed it personally from you to go do a deal and then I personally get sued. Or my LLC borrows the money from you and then my LLC gets sued.

Jessi
Okay, I understand.

James
Now you might care a little bit more, but Uh not necessarily. Yeah. Because you're still like it's the title of the property. Sure. In that situation. So it's kind of a, hey, let's wait and see. And here's what's cool. I think that I write this down. Um I saw this when I was doing my research. I believe that a judgment Against me. So I get sued. I lose. I owe someone money. That creates a judgment that says, hey, eventually I have to pay them when money comes in. Yep. I believe that that is still secondary to the loan. investor. The loan still has a first position because it was recorded first. That that judgment doesn't usually doesn't there's there's exceptions, but it doesn't usually jump the line to the first position.

Jessi
So so I as the lender would get my money back first Correct.

James
Yeah. So it's kind of a, all right, you know. Yeah, that's right. Yeah. Now they could potentially intercept the judgment could present could potentially intercept Distributions. But again, as a lender, I guess it's just it's that same process. Did you make your payments? Yes, we're good. Did you not make your payments? Bummer. Moving on to the next step. It's like it's crazy simple. Uh oh yeah, there was my there's my note. It was at the very end. Yeah, the DATrust is senior to most unsecured judgment creditors. Yeah. So uh so yeah, that was uh Being a lender when things go bad is a good thing. Okay. Now and again, the converse side is if the project does amazingly well and they make a ton of money, you still make the same amount. Which again is totally fine. Still fine. That's what you agreed to. Yeah, yeah, yeah. Okay. Time for the LP side of things.

Jessi
This seems like it would get very messy and dramatic.

James
Or it could. So it could potentially, and I will admit The more I was researching into what happens in these situations, I was like, huh, this is kind of interesting. So because I'm the manager and I have an LLC that's managing it, and I'm a it's a single member LLC. Potentially if something happens to me, it could impact this other one, even though they are separate entities. But this is weird because you're the because we're getting into case law and other weird stuff. Yeah, because I'm Because I'm the sole owner of

Jessi
this LLC.

James
Yeah. The more I've the more I've done research on it, it's like if you have a partnership, that's a totally different beast. It is genuinely treated as a third party, this is not related to you thing. If you are the sole owner of an LLC, again, it's gray area. There's not actually a lot of laws on the book. There's just a few case law. Things have gone to court and the judges made a ruling. And then so people make decisions based off of that judge's ruling. That's kind of like what case law means. And so That is a lot less of a oh yeah, you're totally cool because it's a separate LLC. If it's if you have multiple LLCs and you're the single owner for all of them There is a good likelihood that the judge is gonna say, uh, you're all just one. This is yeah, this is just a paper thing. It's not true. It's not really true. There's certain things you can do, which is why this becomes gray area. If you've got separate books Separate accounts, separate tools, and like if things are genuinely separate, okay. Now and now you can make the case to say, no, no, no, these things are they are not the same. But like let's say Um yeah, things are shared. You have a shared bank account. That's like that's a that's definitely a a no-go. Right? But that would be one where a judge was like, dude, this is the same. What are you talking about? Yeah. But now what about things where it's like, again, this is This impacts me. I drive the same car. Now I track my miles in an app and I actually distinguish which entity I'm doing things with. I have the same computer and I use the same browser and some of the same software for stuff.

Jessi
Yeah.

James
So it gets

Jessi
You don't necessarily have it

James
all. Right. If I wanted to be like super, super good, I would have two computers, two accounts. Stu I actually I use the same email for stuff because it's an awesome email. Yeah. But that would be one where it'd be like, no, no, no, no, no. A hundred percent. Yeah. So that's kind of the this is why it's a gray area. Cause it's also like, well, a reasonable person you wouldn't use, like you wouldn't have two computers. Like that's not a thing. Because even you, I mean you use your computer for personal stuff and for your job stuff. I do. But I do know people who have a a house computer and a

Jessi
work computer because of like security reasons and things.

James
Totally. Which makes sense. It's like it has to be separate. And so that's kind of yeah. It's where. So all that to say, here's the whole point of this, is if If I were to get sued and it impacted me personally, there's a chance that it could impact me on the legal side. Um

Jessi
Yeah, potentially. And it could it could impact your limited partners.

James
Uh only in as much as I may not be able to is weird Because like I still it's distributions would still happen. Their ownership percentage still stays the same. There's just potential that I am no longer capable or able to manage because I got other stuff going on in my life.

Jessi
If that is the scenario, can you treat it kind of like the disappearance where they're like, we are gonna vote somebody else Into leadership could because this guy's not capable of doing it anymore.

James
Yeah. Um trying to think. Yeah, that's essentially I was trying to think of a scenario, but yeah, I I think you nailed it where it's yeah, they would go, mmm, I feel like you got too much going on in your life right now, so we're just gonna get you out. And we're gonna bring someone else in. But in theory, like there's still other distributions. Now me as the manager, my distributions might get intercepted by this judgment. Your own personal. Which would then impact my Enthusiasm for running the project well. Yeah, because you're not gonna pay. Yeah, essentially.

Jessi
But you probably did something dumb and now you're in a legal battle because Right. Yeah, yeah, yeah.

James
Yeah.

Jessi
That's stinky.

James
I've yes, I've you're right.

Jessi
But uh yeah. It makes sense to have those different protocols in place that's like You're you're protected essentially.

James
Mm-hmm. Mm-hmm.

Jessi
And you have options to make changes.

James
Correct. Yes. Yeah. All right. So here's my actionable takeaways for you. Just uh questions to ask, things to consider. We'll start with the private money lenders. Just confirm that your notice secured by a de D of trust and that it's recorded, because then it's tied to the property. And if you have a personal guarantee, is that person credit worthy? It's kind of important. And you just want to make sure to read what triggers a default. And what that cure window is. Like what yeah, when do you get to go, hey, you're in default? And how long does that person get to timelines? Make it right. And you got your three paths to recovery. There's your note enforcement, which essentially like, dude, come on, you gotta pay. There's the deed of trust foreclosure, which means I'm gonna Take the property back, or you can go after that guarantee as well. And all those it's not super easy. They've, you know, lawyers of money just get involved. Yeah, things like that. And you also want to ask, what happens if the borrower entity dissolves?

Jessi
Oh.

James
Okay.

Jessi
Yeah.

James
Uh often the guarantee survives, but It could potentially cause issues otherwise. So if you're a limited partner in a syndication before investing, you want to ask, well, what's that succession plan for the key person? Which was a good question that you asked. Yep. You really want to read that operating agreement and you want to ask like, does it have that key person clause? What's the vote threshold to trigger a replacement? What are the reasons for which you could trigger a replacement? Uh you so you ought look for things like that strategic pause or an interim manager, your member votes rights, like those kind of things. Uh Let me think here. Um and you want to ask that question: who runs this deal if that person can't? Which is kind of that succession type of plan.

Jessi
Yeah. I know you've talked about this before and I'm just like blanking on the official term. There's like documents. You probably even said the name of them, and I'm just like, I just don't remember. So there's documents that that lay all this out. What is that called?

James
Yeah, so that's the operating agreement.

Jessi
The operating agreement.

James
Now there's also something called a private placement memorandum. That's the one I was like, okay, where does that fit in again? Essentially that is That's the thing that says risking in this or investing in this is risky, and here's how it's risky.

Jessi
Okay.

James
It's like a full disclosure. And often usually a huge overlap with the PPM and the operating agreement. Okay. Just because the two are gonna play together. Because it'll say, hey, if this thing happens, here's the result. And that's and that's where it's pulling from the operating agreement.

Jessi
Okay. Yeah. So they go hand in hand, but you should actually read those. Okay.

James
So like your private placement memorandum is gonna say, hey, there's a chance that the operator dies. Bummer. Yeah. We're gonna have key man insurance on this. And your operating agreement says

Jessi
here's what the key manager is.

James
We've got key man insurance on this. Yeah, that's that's what it is. So for both of them, you want to ask, would my capital be safe if the operator had a heart attack tomorrow? And that's a good question. And um Yeah, that's like that's essentially that's the that's the question. Yeah. What happens? What happens in these situations? So I I I um I thought of this. I don't know where to put it, so I put it in the conclusion. Which was a deal doesn't run itself. There's someone who runs it and that person is often a risk factor. Yeah. So you just want to think it through. But it's yeah, a deal doesn't just magically happen. There's someone who makes it happen. And you gotta figure out well what happens if that person's not around anymore to make it happen. Sure. That was a lot, but yeah, that's what it is. Makes sense. So there you go. It's just super fun, encouraging, uplifting topic. Uh I think the main takeaway was, yeah, man, being a debt lender is pretty sweet for that downside. Again, it's not a magic bullet. Things don't quickly resolve. It's all always slow and messy because messy stuff is happening. Yeah. But it's less messy. But you don't share on the upside. So that's kind of the the plus and minuses of it all. There you go. Alright, well, thanks for listening and if You're excited to learn about how we handle that kind of situation. I don't know. Yeah, just thanks for listening. And if you want to learn more about us and what we offer for investments, you can check us out at Furlo.com. So with that, have a great day.