Jun 4, 2022
In this episode, Jeff Greenberg, CEO and founding member of Synergetic Investment Group, LLC, joins us to talk about his move from active syndicator to full-time fund manager. He goes in-depth about the customizable fund, a mutual fund that allows investors to pick and choose which investments they want to be in. He also discusses why they are currently investing in Bitcoin mining and other assets outside of multifamily. Tune in to know what they are doing to protect their downside risks!
[00:01 - 05:35] Educating Investors to Get Into Quality Deals
- Jeff on finding the part of real estate that he’s passionate about
- Transitioning from active investing to equity raising and being a fund manager
[05:36 - 13:52] The Beauty of Customizable Funds
- Customizable funds vs typical funds
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- Having a broader spectrum of investments
- The costs of a customizable funds
[13:53 - 20:50] Looking at Investments Outside of Multifamily
- Going into Bitcoin mining
- The importance of protecting downside risk
- How they are buying good self-storage deals
- Jeff’s thoughts on the current state of the multifamily space
[20:51 - 19:55] Closing Segment
- Reach out to Jeff!
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- Links Below
- Want to learn how to vet sponsors? Grab a copy of the 46 Questions Passive Investors Should be Asking Deal Sponsors e-book for FREE at sigcre.com/sponsor!
- Final Words
Tweetable Quotes
“I look at deals now to protect the downside and say, okay, all your projections are beautiful. They're nice. What are you doing to protect on the downside? What's going to be a deal-breaker?” - Jeff Greenberg
“Everybody shows their wonderful track record that they've had for the last five years. and everybody's doing great. But at some point, something's going to happen and that's where we need to be cautious.” - Jeff Greenberg
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Connect with Jeff! Shoot him an email at jeff@synergeticinvestmentgroup.com or jeff@synergeticIG.com and visit the Synergetic Investment Group website. Check out their FREE e-book: 46 Questions Passive Investors Should be Asking Deal Sponsors at sigcre.com/sponsor!
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I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Jeff Greenberg: I look at deals now to protect the downside and say, okay, all your projections are beautiful. They're nice. They're all these returns. What are you doing to protect on the downside? And so most of the time I go looking at deals trying to figure out okay, you know, what's going to be a deal-breaker and I'm going to throw this deal out.
[00:00:22] Jeff Greenberg: Right. And I go and look at it that then if I don't find any, that, that caused me to do that, then I'm going to look okay. Now let's see what the rest of it is. And I'll start looking at the upside. I'll start looking at the assumptions and all these other things, but mainly I'm protecting the downside.
[00:00:37] Sam Wilson: Jeff Greenberg is a recovering syndicator. Now helping high net worth individuals get into high-quality opportunities. Jeff, welcome to the show.
[00:00:58] Jeff Greenberg: Well, thank you. Thank you for having me.
[00:01:00] Sam Wilson: Pleasure is mine. Three questions I ask every guest who comes to the show: 90 seconds or less, where did just start? Where are you now? How did you get there?
[00:01:08] Jeff Greenberg: Well, I started out looking at bank owned properties probably about 14 years ago. And so that was my start, but it was a bad time to be investing in a bank owned properties back then when things were dropping. And then I got into multifamily, bought my first. Property that I had ever bought besides my own personal residence.
[00:01:32] Jeff Greenberg: And that was a 20-unit property and we syndicated it. Been syndicating for the past 12 years. And decided that the part that I liked best was working with investors and helping them, helping educate investors, helping investors get into quality deals. And it wasn't on the operation side, broker relationships. I've done that. I know how to do it. Analyzing deals, I've done all that. I still do it, but that wasn't my favorite thing.
[00:02:02] Sam Wilson: That's cool. Was there a time earlier on where you feel like if you could go back to the Jeff of, you know, 6, 8, 9 years ago that you kind of already intuitively knew what you loved about this business?
[00:02:14] Jeff Greenberg: No, not really. In fact, when I first had to raise some money, I was freaked out. The first raise we did was $350,000 and my partner and I had no clue where we were going to get that. And she raised half, I raised the other half and it took us a long time. So I never thought that that would be the part that I would be going towards and enjoy.
[00:02:37] Jeff Greenberg: I enjoyed working with numbers. So I thought the analysis part would be good for me. But after you've done hundreds and hundreds of deal analysis you know, that's old stuff. Now I had, I had a group working for me. I had a team doing that stuff for a while and that way it got me out of it. But yeah, it never came to me that this would be where I'd end up.
[00:02:59] Sam Wilson: Interesting. That's really, really interesting. At what point in time did you shift? From, Hey, we're going to go out and be an active syndicator to now, I guess you would describe it more of yourself as a fund manager. When, when was that transition?
[00:03:14] Jeff Greenberg: Well, the concept of me being an equity raiser came to me probably about three years ago. It was just before COVID with going through the ups and downs of a property that we had purchased, first, getting the property, which was. A traumatic experience, but we got the property, 225 units. And then when I brought on a person to be my asset manager, I enjoyed not be in the asset manager so much that I realized that.
[00:03:46] Jeff Greenberg: She was so much better at it than I was that maybe I was doing the wrong thing. And so when I realized that there's other people that could do it a lot better than I could, I decided, okay, you know, where do I fit in and realized that I enjoy working with people. I enjoy education. I enjoy educating people. And that's part of the investor relations business.
[00:04:11] Sam Wilson: Oh, it very much so. It is almost all education and a little bit of explaining details on potential deals. But I feel like it's a lot of times just, just teaching people along the way. So you guys are you've switched. Have you closed out all of your existing syndications that you had of all those gone full cycle and now you're full-time fund manager? You still got...
[00:04:31] Jeff Greenberg: No, I've got one property in Ohio. That we should be closed out on that by the end of May. And I'll be out of that. And I've got another one up for sale once I've gotten that one sold then I'm pretty much just on the equity.
[00:04:47] Sam Wilson: Wow. That's really cool. There's a lot of talk around people becoming, and I'm probably going to butcher the words here, registered investment advisor, or working under a broker-dealer. Have you had to, or do you see any need to go down that road?
[00:05:00] Jeff Greenberg: I don't, not at this point. Because there's certain limits that I can do. There's certain things that I can do and not be a registered investment advisor and also not going through the broker-dealer piece of it. I know people that have done that and I'm at a stage in my career that I don't need to try to raise that much money and to really go to that level. I am very happy with the private equity fund that would have and keep it at the level that, that I'm able to legally do that.
[00:05:34] Sam Wilson: Interesting. Tell me about the fund. What are you guys investing in? What's the size of it? What's the structure of it? How do you guys underwrite and pick deals? Just kind of give us the breakdown. Maybe even all the way from conception, like what's it cost to get a fund put together?
[00:05:48] Jeff Greenberg: Okay. So there's, there's all different kinds of funds. The fund that we're doing, where. Pretty much a deal segregated fund or a what we call like a customizable fund, which it didn't cost us that much to get it going.
[00:06:03] Jeff Greenberg: 15,000 bucks to get it going that's legal fees and setting it up in the portal. But what, and it's a little, a hundred, a hundred million dollar fund, but because it's customizable, what we're able to do is to bring deals in one by one and our investors can pick and choose if they want to be in a particular deal or not.
[00:06:25] Jeff Greenberg: They don't have to be in every single deal, which is your typical fund. Your typical fund, you have a thesis on what you're looking for, and basically, it's blind as far as, you may see the first one or two, and then the rest of them are all blind. You are in those deals, whether or not you like it or not.
[00:06:45] Jeff Greenberg: And the beauty of the customizable fund is, one, the people get to pick and choose which ones they want to be in. But one of the beautiful things, as far as, for both the deal sponsor and the investors is, I could go into a broad spectrum of investments where not everybody may like those. Maybe not everybody wants something that has a high cash flow, but maybe no back end.
[00:07:18] Jeff Greenberg: Maybe somebody wants more on the backend. They're not, they don't care about the cash flow. Well, we could throw all those different kinds of deals in there, including. The Bitcoin mining fund, what we're doing, which is pretty much all for cashflow or a development deal where you don't get any cashflow for two or three years.
[00:07:40] Jeff Greenberg: And people can pick and choose which one of those they want to be into which one or many of those that they want. In addition to multifamily though, I also like self-storage, mobile home park, assisted living. And maybe there's somebody that doesn't like a particular asset type and they're not forced to get into it. That's the beauty of the customizable fund.
[00:08:05] Sam Wilson: Yeah, I think that's really cool. What's the feedback you get from investors? Just throwing this out there is that one of the ideas or the nice things about say a mutual fund is that you can invest in it and once you put it in, it's kind of set it and forget it. It's like, okay, like here's the investment thesis. I don't know. We're making money. Cool. Is there any challenge in getting investor feedback on, Hey, do you want to invest in this or don't you, I mean, is it, is it every time that you have a new deal, they have to wire new money? Is it, what, what does that, how does that process work?
[00:08:37] Jeff Greenberg: Well, first of all, if they wanted to invest in one deal, that's a set and forget, you don't have to worry about it. The money would come back to them. But what we would encourage is them to be in other deals and yes, they would have to bring in new money. But the beauty also of this is they don't have to take the distributions.
[00:08:56] Jeff Greenberg: The distributions can come in, sit in their account or sit in an account that's allocated to them. And when other deals come in, use that money as well, such as you would in such your, your E-Trade account, where you have money sitting there, that's maybe not allocated to any particular stock. I really haven't received any feedback, negative feedback on the fund concept. It certainly is possible that people don't like it. And then they're just not going to invest, but I have not heard anything as far as anybody giving me anything negative on it.
[00:09:33] Sam Wilson: Is this the type of fund where you sign a PPM, you signed your, all your docs one time? And so from this point forward, all it takes is another initiation of a wire transfer. And maybe there's a deal-specific doc they have to sign, but they're not signing a 200-page document every time they put money in. Is that the way this works?
[00:09:55] Jeff Greenberg: Absolutely. And that's, that's another beauty in it. They get to wade through that hundred-page PPM once and the rest of the time, on this particular one, which, because it's a Bitcoin mining, it's a little different, I have a one-page disclosure, or I think of maybe a page and a half disclosure. They read the disclosure, they have the opportunity. If they want to, to read the PPM that I'm going to be signing in representing the fund, but they don't have to, but they can read the operating agreement and the PPM of the deal that we're going into, but essentially once they're in, all they have to do is sign that a one or two-page document and wire, the funds and the rest is left up to us. And also at the end, at the end of the year, they'll get one K1 for all of the deals that they're in instead of a dozen K1.
[00:10:53] Sam Wilson: Right and my gosh, chasing down is the bane, I think, of every passive investor’s experience and it's even in its own right the bane of us as sponsors. I mean, getting all these put together and it's like, oh my gosh. You know, from how many deals, especially if you're in multiple deals, it just, I was talking to some other day and they said, yeah, they're waiting on 26 K1s from 24.
[00:11:17] Jeff Greenberg: That's quite a few.
[00:11:19] Sam Wilson: It's quite a few. And he goes, I go, yeah, you're filing an extension. I guarantee it. I was like, we've got all our K1s out to our investors, but I know you don't have all 26. He was like, no, he goes, no, I'll be lucky if I'm done by September. Like good grief, man. That's a, that's a fiasco.
[00:11:34] Sam Wilson: So that's solving a very real pain point, you know, that people probably don't think about, especially newer, newer investors don't think about until it becomes tax time. And they're like, where's my K one for this project, anybody? Anybody have it?
[00:11:46] Jeff Greenberg: Yeah. No, absolutely. Well, I won't blame it totally on them, but CPAs sometimes just don't get it out.
[00:11:54] Jeff Greenberg: And you know, three months later, you know, all of a sudden, oh, here comes a K1 came in. Well, where the hell was that?
[00:12:01] Sam Wilson: Absolutely. Yeah. I've been there, been there before. Yeah, I got a limited partner. I got one and I'd already sent all my stuff in. I, you just reminded me. I need to send another one in too. My CPA is not doing my taxes. Thanks, Jeff. I think it came in yesterday. I'm like, oh shoot, I got to send that in.
[00:12:16] Jeff Greenberg: That was one, there was one I was getting, I thought, I thought we were out of the deal. I thought the deal was done. Here comes a K1 I said, holy crap. We're still in this?
[00:12:26] Sam Wilson: This is buttoned up and done, where, where am I getting this from? Yeah, those are always interesting things. I know we're probably, we're probably exposing a little bit of our, chinks in our armor here, but it's just the reality of this is that it's hard to chase down. I mean, it is hard to chase down and keep track of, especially as a passive investor, all of these, if you've got a lot of investments. I mean, getting five different investments is really cool. What are the expense sides of this maybe that you guys run into and administering a fund like this, maybe that some other people wouldn't encounter on a single asset investment?
[00:12:57] Jeff Greenberg: Well, the nice thing about the fund on our side of it, as far as the sponsor of it is we only have to deal with the one PPM costs. So that's a one-time shot for us. Now on this particular portal we're in because the, all the distributions and all the numbers for the K1 are calculated through the software and the ownership shares and all that stuff is calculated through the software. So this portal is a little bit more expensive than some other portals out there, but it works out because we would end up paying an accountant to take care of a lot of this stuff that the software is able to handle. So, you know, it's, it's part of doing business. But it's still, it's still only about a half per year, you know, for, for the ongoing expenses. Plus of course, you know, your CPA costs, a couple of grand there for, for doing that.
[00:13:52] Sam Wilson: Right. Tell me about, tell me about the things that you guys are investing in. I think this will be an interesting conversation. You've invested in all sorts of reasons. You're kind of turning left or not turn left, but you have, I heard you mentioned earlier a Bitcoin investment going on right now.
[00:14:07] Sam Wilson: Let's talk about that. And then tell me what else you guys are getting into right now that you think that make sense.
[00:14:11] Jeff Greenberg: We're doing the Bitcoin mining which is exciting for the cash flow that you get, that you get your money back in about 18 months and the rest of the cash flow. We, we, you know, it's supposed to, it's supposed to be a five-year investment.
[00:14:26] Jeff Greenberg: But I don't care if it goes 10 years, I've got my money back. You know, once I get my money back, they can keep on going, as long as those machines can turn it out. Right. So that could go forever. But one of the things that, that I mentioned, you know, on our webinar that we did about the Bitcoin mining is I'm concerned about some of the downside protection that I'm not seeing in some of the multifamily deals and my big thing right now, because we've had such a bull market for such a long time.
[00:14:57] Jeff Greenberg: We've got hyperinflation, interest rates going up, we've got all kinds of things going on. I look at deals now to protect the downside and say, okay, all your projections are beautiful. They're nice. They're all these returns. What are you doing to protect on the downside? And so most of the time I go looking at deals trying to figure out okay, you know, what's going to be a deal-breaker and I'm going to throw this deal out.
[00:15:26] Jeff Greenberg: Right. And I go and look at it that then if I don't find any, that, that caused me to do that, then I'm going to look okay. Now let's see what the rest of it is. And I'll start looking at the upside. I'll start looking at the assumptions and all these other things, but mainly I'm protecting the downside.
[00:15:41] Jeff Greenberg: And that was one of the things that attracted me to Bitcoin mining. And so I'm not out of commercial real estate by any means. I still want to find some good quality deals, but I'm looking for ones that fit my criteria that you know, have the downside protection in case. We can't raise rents, in case the occupancy is going down, in case, you know, the market isn't at a point where we really want to sell, what kind of loan do we have?
[00:16:10] Jeff Greenberg: What kind of reserves do we have? You know, all of those things that will protect the investors in case, when the music stops. That's kind of where I am right now, but that's why I got excited about the Bitcoin mining because of the downside protection. And it was a whole new thing for me, right?
[00:16:29] Sam Wilson: No, I think, I think it's great. I mean, I, I personally as well you know, hold a wide variety of alternative investments. That being one of them actually and it's a, it is an interesting place to be certainly on that front, what are you guys looking at? I know in your fund there, you've talked about self-storage and assisted living. Self-storage is I think going through a similar bull run, like, multifamily has, so what are you doing on that front?
[00:16:56] Sam Wilson: When you guys are looking at self-storage deals, what are you doing there, you know, to, to make sure that you're buying properly?
[00:17:01] Jeff Greenberg: Anything that I'm doing, I'm looking first at the operator. And so basically what I'm looking at is for good operators that can use some extra funds. You know, if they, some operators have their own resources and don't need to have additional equity raisers bringing in funds. But I do want to find good quality with good track records of operators. And then from there, I'm looking at the deals themselves, but first thing is, is, you know, good quality operators.
[00:17:34] Sam Wilson: Right, right. Yeah. Is there anything you're seeing in the self-storage space giving you pause?
[00:17:39] Jeff Greenberg: No, I haven't looked at too many self-storage. To be perfectly honest, this Bitcoin mining is the first deal that I've put into the fund. So I'm working out all the kinks on just bringing people into the fund itself, and then I'm looking at a few other things.
[00:17:57] Jeff Greenberg: There's some development deals. I'm looking at a multifamily development, as well as the self-storage. Just in general, I see on the, mostly on the multifamily, just some questionable assumptions that, you know, knocks me out of the game on those.
[00:18:15] Sam Wilson: Yeah, no, I hear ya. I hear ya. You're not the only one seeing a lot of deals come across your desk and the multifamily space and going, this is maybe a little bit aggressive. And the other interesting thing that I'm seeing as well is just the number of investors that are reaching out to me because we are not in multifamily going, wow, okay, cool. Something else, something outside of probably where your Bitcoin mining fund comes in, something outside of multifamily. And you're kind of hearing that rumbling on the street, whether it's right or not, none of us know, but that there is the potential that, that you know, multifamily is, well, it's, it's hot. It's hot.
[00:18:52] Jeff Greenberg: Yeah. We know real estate is cyclical and we've been on a high, we've been on a high for a long time and that's it. And I've been saying this for a couple of years. So one of these years I'm going to be right. You know, Yeah. You know, it's, it's, it's got to correct at some point we just don't know where.
[00:19:11] Jeff Greenberg: You know, I know that value add deals, you keep raising rents, raising rents at some point, you know, where's that going to stop? You know, I don't know. And, and the thing is, is right now, there are many, many geniuses out there. You could buy terribly and still end up being a genius.
[00:19:31] Jeff Greenberg: And that's wonderful. Everybody shows their wonderful track record that they've had for the last five years or whatever. You know, and everybody's doing great. But at some point something's going to happen and you know, that's where we need to be cautious.
[00:19:47] Sam Wilson: Yup. Yup. And I liked what you said earlier about looking at leverage, looking at the loan terms, looking at all the things that go into this, to where if the music stops and you're caught looking at a refinance and you can't.
[00:19:59] Sam Wilson: I mean that's, that's when we saw a lot of pain, you know, in the in the '08 crisis was just people with loans that they just couldn't get out of. And they end up giving properties back that maybe were completely salvageable, but you know, they just couldn't get the financing worked out.
[00:20:13] Jeff Greenberg: So there was, there was people that, you know, ran great, great deals. They were, they held on to them, you know, but the problem was, you know, all of a sudden their loan came due. And then when loan terms changed loan requirements changed, all of a sudden these good operators couldn't even refinance their properties.
[00:20:36] Jeff Greenberg: Not because they had mismanaged and not because they had done anything wrong, but now they didn't qualify for the loans. And now they're stuck. You don't want to be there. Not, not when your value has gone down.
[00:20:48] Sam Wilson: No, no, certainly not. Certainly not. Jeff, thank you for taking the time to come on today and really break down the nuance of where you've been as a real estate syndicator, kind of why you've transitioned.
[00:20:58] Sam Wilson: How you've kind of found your sweet spot now as a fund manager doing a customizable fund, which I think is, is a, is really interesting, obviously, conversation, just talking about how you're able to put deals in investors, sign one PPM. I mean, what that's, that's just brilliant from an investor experience standpoint.
[00:21:15] Sam Wilson: Like that's, that's really cool. I love that. And I love, you know, hearing about some of the alternative assets you're getting into and yet what your thoughts are currently on the market and how to protect downside risk. So certainly appreciate you breaking all of that down. If our listeners want to get in touch with you and learn more about your fund and what it is that you guys are doing, what is the best way to do that?
[00:21:33] Jeff Greenberg: They could get me a jeff@synergeticinvestmentgroup. So J-E-F-F@synergeticinvestmentgroup. And you can see that behind me. I also have an email jeff@synergeticIG.com. It's a little bit shorter and synergetic is S-Y-N-E-R-G-E-T-I-C. And that's probably the easiest way to get ahold of me.
[00:21:55] Jeff Greenberg: And, and if they wanted to get a free e-book on how to vet or what questions to ask deal sponsors, I do have a giveaway for your listeners. If you go to sigcre.com/sponsor, you'll be able to get a free ebook on what to look for when you're looking for deal sponsors.
[00:22:22] Sam Wilson: Awesome. I love that, Jeff. Thank you so much for your time today. I do appreciate it.
[00:22:27] Jeff Greenberg: Well, thank you, Sam, that was great.