Jun 24, 2022
Is it possible to invest overseas?
Bernard Pierson proves that you certainly can.
Bernard, Managing Partner at Equiti Partners has over 10 years of real estate experience. He has specialized in ground-up development and investing opportunities. Most recently, he led the development of over 100,000 square feet of single-family homes and condominiums, including land and infrastructure works. In this episode, he talks about his experience being a developer in Latin America and eventually focusing on multifamily and working with foreign clients.
[00:01 - 06:52] From Food Broker to Real Estate Investor
- Bernard explains his background in food brokering
- Developing in Latin America
- The political and economic risks they experienced
- Transitioning to active multifamily Investing
- Investing passively first and building relationships
[06:53 - 17:45] International Investing
- The advantage of knowing the native language and the culture
- Getting a CPA and attorney with expertise in international tax law
- How to start investing with Bernard and his team
[17:52 - 19:32] Closing Segment
- Reach out to Bernard!
- Links Below
- Final Words
Tweetable Quotes
“It's not going to be like your US or domestic investors where they can sign a PPM online and they can wire the money into the next day. It takes time and I encourage them to talk to a CPA.” - Bernard Pierson
“If you're a syndicator or you're trying to raise money from, foreigners, it just makes your life a lot easier if they invest as a US person through a US entity.” - Bernard Pierson
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Connect with Bernard at bpierson@equitipartners.com and follow him on LinkedIn and Facebook. Know more about the work they do at EquitiPartners.com.
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Bernard Pierson: I mean, there's great benefits of investment with a huge operator, right? There's nothing wrong with that. There's plenty of good big shops that you can invest with and get good returns. But if you want to do this actively you're going to need relationships. This is a very relationship driven business and networking is, great. And one way that worked for me at least to network and build relationships was to invest passively with other operators first.
[00:00:33] Sam Wilson: Bernard Pierson has been in real estate for 10 years. He started off in development and has since transitioned to full-time multifamily investing and syndication. Bernard, welcome to the show.
[00:00:43] Bernard Pierson: Thanks, Sam. Happy to be here.
[00:00:44] Sam Wilson: Hey, the pleasure's mine. There's three questions I ask every guys who comes to the show: in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?
[00:00:52] Bernard Pierson: I started in, I used to do food brokering. That was basically, I mean, I had a job out of college for, W2 for one year, but right into, you know, pretty soon I, I quit. I was an accounting job. I was bored out of my mind, so I quit. So I like to say I started off with food brokering, which is kind of like my entrepreneurial path that I took. We did pretty well.
[00:01:11] Bernard Pierson: Very transactional. And I figured that out pretty quickly. And that's how I found real estate and ended up partnering with some guys that, great guys, great partners that had experience. And that's how I got into development. And we did some developments in Latin America specifically Nicaragua and Costa Rica.
[00:01:29] Bernard Pierson: And I've then transitioned over the last five years or so, just a full-time multifamily investing in the US. Because I found out that there was a lot of risk and a lot of things that I was not thinking about before that Latin America exposed us to basically. So yeah. I think that was around 90 seconds.
[00:01:48] Sam Wilson: No, I think that was perfect. Well done. Thank you. Yeah. Food brokering. Can you, that doesn't mean anything to me. I'm just really curious. Can you give me a ten second highlight? What does that mean?
[00:01:59] Bernard Pierson: Yeah. So we would source the suppliers and, find buyers for beef. We get coffee, we did sugar. I'm from, I'm a half in Nicaraguan, part Nicaraguan part American. And I, I grew up in Nicaragua a lot of my life. I lived there from like six years old to 18. So I, just know a lot of people, it's a small country. It's a very agricultural country and a lot of food production. So that's how I got into that.
[00:02:23] Sam Wilson: Got it very, very cool.
[00:02:25] Bernard Pierson: Very transactional though 'cause it was, it was based on finding the seller and the buyer. And as technology, you know, and globalization has grown, the value of being that intermediary is, is not as, as valuable, I guess, anymore. So we used to have a transaction here and there where, and we used to make a lot of money on the transaction or good money. But it was very transactional. We weren't really building a, a sustainable long term business that would work without us being there.
[00:02:49] Sam Wilson: Let's jump into the next section of your story there. Developing in Latin America, it sounded like there were some risks or some lessons you learned the hard way.
[00:03:00] Bernard Pierson: Oh yeah. There's two reason. I ended up going back to Latin in America. So when I was 18, I came to the US. I lived here for a long time. But when I got back into real estate, there was two things I was looking for. One was partnering with someone who had experience.
[00:03:12] Bernard Pierson: So development, in my case, checked that box. My partners or my potential partners at the time had experience developing for many years in, in Latin America. And the other thing was going, in my case, I was going back to Nicaragua, originally, at least at the beginning. And this was home, right?
[00:03:29] Bernard Pierson: It was a place I knew a lot of people. I knew my, the area very well. So I checked those two boxes. I was local to Nicaragua and, and I had partners with experience. The part I missed was Latin America can bring money risks that we, we just aren't aware of here in the US and those are specifically going to be politically and, or just political risk. And just the economy in itself is not as robust as it is here. Investments are going to be a lot less liquid. There's just a lot more risk in general. And I did a lot of research into that at that time, right? And I really found out that risk adjusted return, at least for me, or from my point of view or the analysis I did was a lot better in the US than in Latin America.
[00:04:15] Sam Wilson: Right. So if I'm hearing you, right, you're saying that there was, you were taking on a lot of additional risk without the additional return that would be involved in assuming that additional risk. Was this something, when you were doing these development projects, is that where you cut your teeth in raising capital and bringing in outside investors?
[00:04:33] Bernard Pierson: Most of our developments, what we would do was the seller of the land would get some sort of, we, we would creatively finance the deals where the seller of the land would some, that's either equity or, or maybe. I don't know if we were building a condo building on the seller's land.
[00:04:49] Bernard Pierson: Well, then they would've got a condo or two, depending on the value, right, of the land in payment for, for their land. So we didn't really work with investors much. It, they didn't require tons of capital. A lot of the capital we put up, which was just a at risk capital of the preconstruction phase, which is the designs, the architectural work and all that stuff.
[00:05:07] Bernard Pierson: The seller of the land put up most of the equity. An d then the bank put up the rest, which was just a construction, right., Or the, the bank would basically finance our hard cost. We would finance the soft cost and the seller would just finance the equity or the land.
[00:05:23] Sam Wilson: Got it. Got it. So you did a few of these projects. You said, man, there's way too much risk in that I see g reener pastures in investing in the United States multifamily markets. What did you do to transition into that space?
[00:05:36] Bernard Pierson: Right, so, the reason I found out was while I was developing in Latin America, I was also investing passively in real estate. I was, I was an LP. And I was seeing, man, I'm getting great returns on these LP deals. And not putting much work into it, right, or if, if any, at all. No work into it, except the due diligence, right, at the beginning and signing the paperwork and all that stuff.
[00:05:56] Bernard Pierson: I was traveling. When I was developing, I was still living in the US. I wasn't fully living in Nicaragua or Costa Rica. I would travel every week, Monday through Friday. It's a two hour flight from Miami, so I was based out of Miami and I would just travel every week. Sometimes I would say the week, and my wife would come over.
[00:06:13] Bernard Pierson: And, but I was basically, we were half and half between the two countries, right? So as I was seeing my LP investments, maybe not out, outperforming, but at least matching, and in some cases outperforming my active work in development. So, so my LP, my passive stuff was doing better, you know, when I was doing nothing. I was like, no, did you know, this is something I have to transition to at the time also Nicaragua, back in 2018, we had a pretty bad social economic, political crisis that the economy came to a standstill.
[00:06:41] Bernard Pierson: It still hasn't recovered. And it was just a perfect time to transition full time into active multifamily. Let's call it.
[00:06:51] Sam Wilson: Got it. How, how did you build your team members? What, what did that process look like to go, 'cause it's one thing to be a passive investor. And it's another thing altogether to say, all right, now I'm going to go actively start taking down deals. What are some steps you took that you feel like other people should take?
[00:07:05] Bernard Pierson: If you have the opportunity to invest with another operator, someone, got to know an operator, invest with them. If you can invest with one, that's not a huge operator, I mean, there's great benefits of investment with a huge operator, right?
[00:07:20] Bernard Pierson: There's nothing wrong with that. There's plenty of good big shops that you can invest with and get good returns. But if you want to do this actively you're going to need relationships. This is a very relationship driven business and networking is, great. And one way that worked for me at least to network and build relationships was to invest passively with other operators first.
[00:07:39] Bernard Pierson: And I got to meet them. And my first active investment was actually with one of the sponsors or operators I used to invest with passively so that my LP relationship with this operator ended up being a GP or co-GP relationship.
[00:07:53] Sam Wilson: That's cool. I love that. You already know the deal sponsor. When this goes live, it's not like you're going, oh, okay, well, let me get to know you and see if we can work together. I said, no, I already understand how you work. I've seen all your deals up front. I've participated with you. Now, is there a way to join the team and help take these down together?
[00:08:10] Bernard Pierson: And the sponsor also wants to know you, too, if they're going to team up with you, right? And even if you're just going to be an investor, they'll want to get to know you because there can be some LP investors, which are not desirable to some sponsors for different reasons, you know, that I'm not going to get into right now.
[00:08:26] Bernard Pierson: But a relationship forms. You know, if you've been investing with sponsor for 1, 2, 3 years, they'll get to know you you'll get to know them. And especially if you, not that you're going to call the sponsor every day, right, but maybe you speak once a quarter or just once every six months, whatever, you know, like these guys used to have quarterly call, you know, for the investors and I used to log into the calls and I would see them there.
[00:08:45] Bernard Pierson: And. Yeah, I, I 've seen four or five deals before I went into an active deal with them. So yeah.
[00:08:51] Sam Wilson: Right. That's a great way, great way to get to know somebody up front. We talked about this off air and I, I want to make sure that we spend probably the rest of this show talking about what it's like raising capital from foreign investors, you know, 'cause you, you told me that the majority of your investors come from Latin America.
[00:09:10] Sam Wilson: What has been the process for you? I mean, how, how does this work mechanics of it? What's the investor education like? Can you just tell us what, because that's a very unique, you know, the aspect of this business that, that you bring that many of our guests in the show just don't have any experience in that. So I'd love to hear how you do that.
[00:09:29] Bernard Pierson: Right, yeah. So it's very different for several reasons. and one thing that's important is that an investor from the UK is not the same, or from Canada, or from Nicaragua, Venezuela, they're all different. They're all going to be different. Tax purposes, legal reasons, culturally, language they're, they're going to be completely different.
[00:09:47] Bernard Pierson: I'll start off with how I met them and, and why they invested with me. For me, it's simply because I'm in Miami and there are other multifamily operators that speak Spanish and, and are from that in America. But not many, there's a lot less.
[00:09:59] Bernard Pierson: And I'm one of the few that speaks the language. The multifamily language in Spanish if it even exists, right, 'cause just a concept of multifamily that doesn't even exist in Latin America. This rental, like, a rental building or a rental community, we don't really have that much.
[00:10:14] Bernard Pierson: We may have a little bit of that in countries like Chile, maybe Mexico. Columbia is starting to see some of that, but it It's rare, right? You won't see it in Nicaragua or the rest of Latin America. And if you see it, there's very little of it. So first it's, that education part, right, and trying to educate someone in a language that's not their, their native language is not easy. So I have that advantage that I, can educate them in Spanish, or I can tell them about the industry in Spanish. And what I've done specifically to get to know these investors is I've been invited to speak to, to groups of investors and, and conferences or meetups, or gatherings where, and here in Miami, right, 'cause Miami is like we call it sometimes a capital of Latin America. It's the perfect place to be if you want to be exposed to Latin American investors, and I just got invited to these conferences, I speak in Spanish, talked about the industry, talked about what I think, talked about from the basics up to more advanced stuff, depending on who the audience is, right? But I do it in Spanish. And after every event, at least four or five, you know, individuals from the audience come up to me and the conversion rate of investment is 50 to 60% of the people that I, that come up to me after the, I don't even have to reach out to them.
[00:11:25] Bernard Pierson: It's, it becomes a very, a very good connection. I, I guess. And so from there, the interesting part is that if most of the members of the audience at these events, or even if it's not an audience, even if they're just in Miami and they're interested for some reason or another, they're interested in investing in the US, they're usually here for a reason. And that reason is very similar to my reason, which is I found out that Latin America has a lot of risk. We have a lot of political issues. We have a lot of social unrest. There's unlimited number of things that can go, you know, I can go on all day here, so we identify very easily, right? I've been where they're at right now. And, and recently these are countries like Peru and, and Chile where they're having ,they got swings politically where they're nervous that they may, I'm not saying they will, they won't, but they're nervous that they may become like a Venezuela or something like that, right? So, so yeah, so they're nervous and we can help, right.? They're getting exposed to, to real estate in this country. I explained to them how I went through the same and how I measured, I have all these measurements I made and indices and all this research I did back in the day on, on why the risk adjusted return is better in the US, at least in real estate, specifically than it is in Latin America.
[00:12:38] Bernard Pierson: And I show 'em all the data and explaining it to them. And I wrote a thesis on this, right. So I know my numbers pretty well. And which is another thing, right? When you speak to your investors, know your numbers, even if it's not the deal numbers, Just know your numbers of the demographics, the city, whatever you're trying to bet across.
[00:12:52] Sam Wilson: Are you bringing capital in from out of the country?
[00:12:56] Bernard Pierson: Yes, we are. If you're going to accept money from a foreign investor, there's a lot of things you have to consider. Most countries in Latin America do not have a tax treaty with the US. The only two that will have a tax treaty with the US are going to be Mexico and Venezuela. So Venezuela, you can't even do business with them for other reasons. So you can scratch that one off. So you're left with Mexico. I think there's, I don't know if it's Peru or there's another country that's negotiating a tax treaty, but not that I know of, at least there's no other country that has an active tax treaty other than Mexico.
[00:13:30] Bernard Pierson: You would have to talk to your CPA about this, but usually if they don't have a tax treaty, you're going to have to withhold when you distribute back to them, right? So that withholding is, is just going to kill their returns or their cash flow. The only way, usually, again, that they'll get that money back, if they invest individually, is if they file a tax return in the US.
[00:13:47] Bernard Pierson: And a lot of these investors don't want to just because they, they don't want to have to deal with, another tax return or there's different reasons why foreigners don't want file taxes in the US. And what we do is we have a team of, and this is what, if you're interested in working with foreign investors, find a CPA or an attorney or a tax attorney that knows this area very well, not necessarily real estate, but just taxes, just international tax law and has worked with foreign investors before. And they can help you and they can help the investors. And that's basically what we do.
[00:14:21] Bernard Pierson: We refer our investors to a CPA. They sometimes have their own, but if not, we have the players that we can refer them to that can help them. And, and that's the only solution we can give them and it's going to take them time. So that's the other thing you have to know.
[00:14:33] Bernard Pierson: It's going to take them time to structure themselves. It's not going to be like your US or like your domestic investors where they can sign a PPM online and they can wire the money into the next day. You know, not that it's all it happens most of the time. Right. But technically they can fund, you know, in a day or two.
[00:14:49] Bernard Pierson: That's not going to be the case for Latin America. It's going to be a lot longer than that. They're going to have to get the appointment with the CPA, with the lawyers, talk with them. It takes time. It's going to take a couple weeks, two months, three months. So it's just going to take time and just encourage them to talk to that CPA.
[00:15:04] Bernard Pierson: What we usually do is that we ask them to invest as a US person and they can do that if they either get an ITIN or some sort of us entity. Again, they have to talk with their CPA to do it right. And I'm not saying, just go get a n entity online or anything like that. It won't work if you do it, especially if you're a foreigner, 'cause there's a lot of different things that you have to do, right? But if you're a syndicator, or you're trying to raise money from, from, foreigners, it just makes your life a lot easier if they invest as a US person through a US entity.
[00:15:35] Sam Wilson: Right. Right. And just to reiterate your advice is to find a CPA and an attorney that really knows international tax law and is quite familiar with this process, it sounds like that's the way you've gone about, one, relieving yourself of any risk or giving bad advice, but also ways to streamline it and make it easy. Just say, Hey, go talk to person you know, X and Y,
[00:15:56] Bernard Pierson: Right and also talk to that CPA or that attorney before, so, you know, you start forming that relationship and they already know more or less what you do. So that'll save a lot of time that it's not going to be your investor, them coming to you. So, how does this work? What's the mechanics? How often are you going to distribute? When are you going to sell? When are you going to do that? Right? So it, there's a lot of specific things. Like there's certain tax laws that allow you to, if you dissolve an entity, then there's a lot of tax advantages to the foreign investor, for example, right? So they're going to start asking you, when are you going to dissolve it? And, and you might as well have answered that before if it's the CPA you referred them to.
[00:16:33] Sam Wilson: Right. Right. So is there a dollar amount, like when an investor comes to you? I mean, we see in most syndications, 50 to a hundred thousand is a minimum investment, you know, and obviously they go up much higher depending on, you know, what it is you're getting into, but is there a dollar amount for a foreign investor where this just doesn't make sense? I mean, is, is there a minimum?
[00:16:52] Bernard Pierson: A hundred percent, yeah. So in our head, if, for Latin American investors, that amount is going to be about 250,000. If it's less than that, it'll probably be more expensive to structure everything than to invest. I've heard other operators say that they can do 50 or 100k and, and they they're fine with that.
[00:17:10] Bernard Pierson: I don't know how they do it, right, but for us, that number is closer to 250. Tha t doesn't mean it has to be 250 on every deal. Once they have, they start building the structure, they can become more efficient and reuse their legal structure or, or whatever, right there, there's certain economies of scale that they can start and join.
[00:17:26] Sam Wilson: Right. But out of the gate, in your opinion, if it's less than, than 250 grand. It just doesn't make any sense because of the administrative burden of getting everything set up you've, you've diluted your returns to the point where it's kind of like, okay, well this was an exercise.
[00:17:41] Bernard Pierson: A hundred percent. Yeah. Just the entities that they have to form the, you know, the, the legal costs you're going to have. On all levels, it's just going to probably be, it's not going to take any returns.
[00:17:49] Sam Wilson: Yeah. Right? Yep. Cost prohibitive. That's really, really awesome. Thank you, Bernard for taking the time to break down this, this process and how, how you've gone about bringing foreign investors into the US. I think that's really cool. And again, certainly it's something we haven't talked about a lot on this show. So I appreciate you kind of giving us the insight on how that works for you down to the dollar amount that maybe it makes sense for. And then you know, just the, kind of, some of the risks that you also see in investing in other countries. I mean, you have, you personally have experience in doing development in other countries. So I think that's, that's also something really cool that we've learned here from you today. So thanks for taking the time to share with us. I certainly appreciate it. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
[00:18:30] Bernard Pierson: I'm on all those social media platforms, Facebook, Instagram, LinkedIn. Look me up, Bernard Pierson. Pierson is P I E R S O N. So just look me up, my company, and you can send me a message. I'm, I'm pretty responsive there. You can also email me, my email is bpierson, B P I E R S O N, @equitipartners.com. And we spell equity with an I at the end for international, not a Y. So @ E Q U I T I partners.com.
[00:18:59] Sam Wilson: Awesome. Bernard, thank you so much. I do appreciate it. We'll make sure we link all of that there in the show notes. Appreciate you coming on today. Have a great rest of your day.
[00:19:06] Bernard Pierson: Thanks a lot, Sam. Great being on here.