Another year has come and passed. What better way to commemorate and celebrate our wins than by a year-end review? Join Chris Seveney and Lauren Wells in this episode of the Creating Wealth Simplified podcast as they delve into a comprehensive overview of the 7e Investments fund and share insights into the dynamic market landscape. Discover the notable successes and achievements the company has celebrated throughout 2023 and get a glimpse into the thrilling prospects that lie ahead for 7e Investments in 2024. Tune in to gain exclusive insights into our strategic decision-making processes, the expansion of our investor network, and the ongoing development within our tight-knit team. Don’t miss out on the inside scoop that reveals how we navigate asset decisions and propel continuous growth.

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2023 Year-End Review: The 7e Investments Fund And The Dynamic Market Landscape With Lauren Wells

Lauren, how are you?

Good. I’m in the middle of Holiday Madness. Kids are out of school. Grandparents are visiting to help with the kids. It’s crazy.

I’m feeling pumped because I haven’t recorded with you in ages.

Yeah, it’s been a while.

We are going to talk about our CWS investments fund, the past quarter of 2023, and where we have gone because when we look back at everything, We always are trying to look ahead, but when you do take a moment to look back and reflect, it’s impressive.

What we want to touch on is a year in review. We’re going to get to what’s new in our portfolio, what’s changed in the market and in assets we’re acquiring, where on the investor relations side we are with capital, how many investors, and all those fun things. I want to take it back a little bit and talk about how we got here and how that hasn’t changed the core mission of what we’re doing. It’s fun to see it play out this past few years but more aggressively in 2023.

As most of you may or may not know, maybe this is your first time tuning in to us. Maybe you’ve tuned in to us since we first launched the offering almost two years ago. Chris and I both come from the note space. We both invested in notes with our own capital. We were probably sitting in our seats listening to all the podcasts and trying to figure out which direction to go in real estate and generating passive income. We built our portfolios. We met at a conference and started working together and collaborating, which then led to this offering.

As both of us, Chris, more than I had done some joint ventures with people who weren’t accredited. They didn’t have access to a lot of the traditional funds that are only open to accredited investors. That’s where the Reg A was born. How do we take an asset class that is typically an asset class and a way to invest in that asset class that is only typically available to family offices, institutional investors, and accredited investors? How do we make it accessible to anyone who wants to get their feet wet with alternative investing who has capital but isn’t accredited? How do we open the doors? I don’t love this term, but I’m going to use it because I know everyone has probably heard it. How do we democratize alternative investing?

That’s where the Reg A came from. It’s been wild over the past year and a half. We launched CWS in February 2022. We’re qualified to offer this Reg A to the public in July of ‘22. Here we are a year and a half later, and it’s been great to see both in the first six months of the raise, we raised $6 million. We’ve tripled that. We’re over $20 million in capital raise. What’s most amazing about that is that $20 million has come from anyone who wants to get in, invest, and learn what it’s like to invest in something that pays you a dividend. Those who haven’t necessarily had the option to do that are now able to do that.

Running through the investor relations stats, we’ve gone from zero to over 500 investors. This is the interesting part. Our reinvestment rate, meaning the number of people who have reinvested into our fund, is 22%. People are sometimes investing the minimum to start, which is $5,000. They are getting to know us, how we work, how we operate, and do we pay distributions on time. They come back and allocate anywhere from $25,000 to $100,000-plus once they get to know us, our processes, and our team a little bit better. It’s been incredible.

 

Chris, I’m hogging the mic now, but I want to share this story I had. I was running through distributions about two months ago, checking everything. We like to get them out on time, if not a day early. I was going through, and I saw an investor’s name pop up. I looked at his investor profile and realized that this investor started with us last December 2022 with a minimum investment of $5,000 and has been investing every single month since.

He started with $5,000. When I checked a couple of months ago, when I was going through this process, he was at over $75,000 invested. He went from a small dividend check to over $500. He’s receiving a month. It’s cool to see how he got started. Every month, he would allocate a little bit more. Some months, it was $5,000. Some months, he was able to put a little bit more in. It’s that power of consistently showing up and investing. It was incredible to see the impact of someone who started with us and continued to contribute over the last year.

Two stories this past year on the investor relations side that ring a bell with me are investors who have invested within the past, hear that $5,000 minimum, or you go to somebody, and it’s a $5,000 minimum. It’s shocking to them because they’re used to seeing offerings that are $25,000, $50,000, $100,000, and $250,000. They’re like, “I can’t even get involved in any of these spaces, and it doesn’t allow me to diversify my portfolio as much as I’d want to.”

That was one. On the flip side, when I talk to sponsors, we tell them about our offering. They’re like, “You’re nuts. Why would you want 500 investors? Why would you go that route?” They’re only looking at those big-ticket investors. Part of our whole, when we started this, was to open up the blue ocean strategy to everybody to give everybody that opportunity to invest, which is based on having now over 500 investors over the past year. It’s tripling the amount of investment dollars that have come in the door. That’s an owe to you, the investor relations team, and everybody for getting the word out and working with the investors.

You make a good point there. I didn’t even think about that. Even if you’re accredited, you may not have or want your first investment in an alternative to be a $25,000, $50,000, or $100,000 minimum. My husband and I first hit that accreditation status. That didn’t mean we had a ton of extra cash lying around to go and throw into alts. Even if it did, would we want to put a huge chunk of our cash into something that we hadn’t done before?

It gives people the ability to test the waters and get more comfortable with the idea because alts need a huge rebrand. When people think of alts, they think of something scary. That’s a whole other episode we can talk about. Chris, why don’t you tell us the acquisition side in January 2023, where we are now, and where we are looking to go in 2024?

I’m going to steal one of your lines now because you came up with this. It is a perfect example of, as we’ve grown the relationships, we’ve also been able to grow. For people out there, in the first quarter of 2023, we saw approximately $300 million in assets come across our desk. The second quarter was about $300 million a month. In this whole third and fourth quarter, we’re seeing $300-plus million a week in assets. The inventory has been ramping up.

As we've grown the relationships, we've also been able to grow. Share on X

When you compare that to the other asset classes, and you look at everybody in self-storage, multifamily, triple net lease, and all these other asset classes of real estate, there’s no inventory. What is out there is expensive because of the lack of inventory and a lot of unknowns because you’re playing with interest rates and cap rates that don’t correlate or have an impact on our portfolio. We’ve been able to see that increase in the market where everyone else has been seeing a decrease. Lauren, I don’t know if you want to chime in and add anything to that.

What does that mean? I’ll ask you. I know the answer. We have inventory increasing. What does that allow us to do in terms of our acquisition?

It allows us to cherry-pick our assets. When we are looking at buying assets for our portfolio, 2023 has been an interesting year. We topped out at about 125 assets in the portfolio. We’re about down to a hundred, and that’s because we’ve been rebalancing where when we were starting out. I’ll call it lower balance loans that we have now either exited in some fashion. If there were two $50,000 loans, we’re replacing that with a $100,000 loan. We’ve been able to rebalance the portfolio while also being able to cherry-pick assets specific to our portfolio because of the amount of assets that are available.

I was going to say, overall, a little bit more about the portfolio. We are still consistent in under 30 states. We haven’t broadened out into additional states. We’ve been in 40 states overall. The 30 is where we typically do most of our work. The interesting thing when we talk about growth and part of what we focus on in our portfolio when we talk about cherry picking is those loans that have more seasoning to them pre-COVID.

What that allows us to do now is when we look at our loan balance compared to the actual value of the real estate, the loan-to-value is under 40%. Our portfolio has about $55 million of real estate backing the loans that we have. If there was a catastrophic pricing decline in real estate, we have that equity coverage that allows for slight to even moderate to significant decreases.

When you look at other asset classes, which we’ll talk about, what we’re going to see in 2024, a lot of those asset classes are getting pounded because of the rise in cap rates, which devalues those asset values. That’s something that, as we’ve grown our portfolio, we still follow that balance that we’ve always wanted and had. It’s because of this inventory increase. It’s allowed us, and I don’t want to use this term to make it easier, but it feels like it. I don’t want people to think, “What you do is easy,” because, trust me, it is not.

Something that I want to touch upon and something that I’m looking back on is what we’ve learned over the past years. There’s a lot of education that we’ve put into. As someone who started investing in alternatives several years back, I didn’t understand all the options. What does this mean? What does that mean?

Something that Chris and I have spent a lot of time on and our team is the education component of what mortgage notes are. How does this work? How do we make money? As an investor, how are you involved? There’s the education of the asset class. There’s also the education on things you should be asking when you’re going to invest or looking to invest with a sponsor.

Chris, this is my takeaway. l I have my own whole thoughts on this in education and financial literacy. It’s a big passion of mine. That’s something unique that we bring to the table and focus a lot on. Do we have to? No, but our investors and the people who have chosen to invest with us appreciate that. For people who are newer, I’ve had several conversations with investors or people who have crossed that bridge, from reading about us, hearing us on the podcast, and watching a webinar to taking the leap of faith and investing with us. Something that they brought up is, “There’s a lot of education that you guys provide on how to evaluate a sponsor and asset class, questions you should ask, and education about our specific asset class.”

Over 2024, we’ve done over 24 webinars. We’ve been to fifteen conferences between investor relations and asset management and dozens of podcast episodes, both educating not only on what we do and who we are but also on what else is out there for people looking to invest in real estate. In 2024, if I were to look forward, there’d be a bigger emphasis.

I know there will be because we’re planning our marketing calendar. There’d be a bigger emphasis on education around what we do, working with some self-directed custodians to have them explain how what a self-directed IRA is. There is a lot more in the partnerships that we’re gonna be doing and exciting stuff coming to the show and also to our investor community as a whole.

There is one thing that you mentioned about a lot of that education. One thing we should be proud of is the podcast overall has exceeded a million downloads since its inception. That’s a crazy number when you think about it. You hit the nail on the head on two things when you’re talking about education and everything.

Sometimes, when you’ve been doing something for so long, you look back and realize how far you’ve come now. It was only 7 or 8 years ago when I learned about a self-directed IRA. When I learned about it, I was upset that I had moved from several companies and I couldn’t do things with it. It all comes back to knowing what’s out there.

One of the things that we’re also focusing on is the options that are available out there for people. Most people don’t know what a Regulation A-plus offering is. Most people are so used to hearing 506(c) because that’s all they read on the websites and think, “I’m non-accredited. I can’t get started. I have to try to buy a rental. I can’t invest passively. I have to invest in the market.” That’s one area that we’re focused on.

The other for 2024, and you talked about it, Lauren, is that education piece and showing what questions people should be asking and what they need to look out for. The reality of it is that in the last five years, anybody could have made money in real estate. We printed $5 trillion or $6 trillion. The asset class took off. A lot of people got in and they were like, “This is easy.”

Real estate is not easy. It is challenging and is going to be a challenging environment to get into. We’re already seeing that happen with deals where they started cutting off distributions. You’ve seen in the news the multifamily market and a lot of issues that have come up with sponsors going under. You’re seeing a lot there. It came out that Lennar, one of the largest developers in the country, is selling 11,000 multifamily units. They’re like, “We’re done. We’re losing $20 million in the last six months. We don’t see it getting better. We’re going to sell.”

I don’t know if I should be. I’m going to go there. Something that’s always been interesting to me is when people ask, “What’s your track record?” Anyone can put anything on an Excel spreadsheet and send it to you. It’s always been a little funny to me. You have to already have an insane amount of trust in this person to trust that what they’re giving you is accurate.

Maybe I’m not that trusting, but there is something called a track record verification report. I’ll be honest. This is something that we learned about and have implemented because it’s a third party that verifies that the track record history that you’re putting out to the public is accurate. Moving forward, now that I know that this thing exists and you can get it from like KPMG, ACA, or one of these bigger names and it has that validity to it, if I were to go out and invest in something else with a sponsor, I’d probably ask for that.

There’s been a lot of learning as a sponsor on things that I want to do better for our investors or prospective investors and make it clear-cut when people come and ask about that. We have a spreadsheet we put together. I know that it’s awesome and the numbers in there are accurate, but to now have a piece of paper that says that this has been verified by a big firm and that this is all they do is something I didn’t know that we had the option to create.

That leads me to where we’ve also grown the business in 2023. We took a jump into the broker-dealer world. For those tuning in, if you don’t know what that means, we’ve established relationships with brokers. When I say brokers, think of Schwab as a broker. We’re establishing relationships to work with the financial advisors to allocate into our fund on behalf of their clients.

 

This is huge in that people who have a financial advisor or managed account at one of the brokers that we partnered with will be able to say, “Can you invest in 7e?” There are twelve different steps that go into it, as learned, but it’s another way that we’re expanding our reach to people who want another person to evaluate us and have that stamp of due diligence approval before they invest. It’s not for everyone, but it’s been a great experience to work on that side of the business as well.

It’s been educational. I’ll jump back a little bit about that track record verification because I’ve been heavily involved with working with the firms on this. It goes back to me like, “This is how you calculate IRR.” They’re asking me all these questions about like how to calculate things. I’m like, “It’s transactional based on the dates. Why?” They’re like, “Some people lump everything into a year at a time. It’s not a transaction of this happened on this date, and this happened on that date.” I’m like, “How can you do that?” They’re like, “You can’t, but some people do because it makes a number look better.”

It’s like anything redefining print, like buying a car. It’s like starting at X, Y, and Z MSRP but doesn’t include steering wheels, tires, or anything else. Anyone could put numbers on a spreadsheet. There are certain ways that it should be calculated or industry standards that way things should be calculated. We followed those, but it’s another component of the investment realm that we’ve gotten a lot more familiar with and educated on.

I have two trains of thought about where I want to go. Let’s start with looking forward. Where do you see us going in 2024? Is there anything significant you think will change, whether it’s the market or what we invest in? Go for it.

I’ll give my brief synopsis of the market. I’ll say that because I want to be brief but also because of how that plays into what we’re going to be doing. The market is different. I don’t see the economy getting better over the next twelve months. It is an election year. What can happen? We have more deals to fund now. We see more deals. We could fund many deals, but we’re choosy and picky. We’re starting to see more defaults.

As part of those defaults, you may see statistics that say, “Foreclosure numbers are down.” All these magic numbers are getting thrown out there. The reason is that borrowers have so much equity and are filing for bankruptcy. That’s not included in a lot of those foreclosure numbers. We’re seeing less competition. People are like, “What do you mean? Every time I turn around, there’s somebody starting a private credit fund.”

That is also KKR, BlackRock, or $20 billion-plus entities that we’re not there yet, but within where we play, we’ve seen a decline in the number of competitors. Part of that is because a lot of them based a lot of their investing on lines of credit where they had lines with other institutions that would lend them money to go out and buy these loans. Two years ago, they would be getting loans at 6% and 7%. Nowadays, all those loans are at 12% and 13%. They now have had to shrink their portfolio.

For us, I don’t see any major shifts in what we do. Our strategy has always been target-focused on staying on note. I know others started peeling off, not us, oil and gas, crypto, or pick your cup of tea of the day. Short-term rentals were hot for a period of time. We’re not chasing the shiny object. We are staying focused on this asset class.

We're not chasing the shiny object. We are staying focused on this asset class. Share on X

Can I add a few more things because I can keep talking? What I will tell people who are tuning in and are looking to invest in 2024 is a lot more people are hesitant to put $100,000 or $250,000 into these new investments because the sponsors out there who have two deals, syndications going on, one asset, one deal that those deals aren’t going well, but they’re raising money for that other asset now. People are like, “I’m not getting my money out of these deals. Why would I go into this one?” People who are looking to allocate money to other investment opportunities can no longer do so because of delays in other asset classes. Those assets aren’t being liquidated or they’ve cut distributions.

We’re starting to see overall some interesting things shaping up in some of these other asset classes that are significantly impacted by interest rates, which, for those who have listened to us talk, we’ve beat that dead horse a thousand times on how we go after yield and the interest rate doesn’t have a significant impact.

I want to do a quickfire question to wrap it up. Maybe 2 or 3. What do you feel most proud of looking back in 2024? What’s the biggest win for you?

The biggest win for us is our team growth. We’ve had the same team intact the entire year. Everyone has grown and learned. Is it easy? No, but we’ve been able to. The bond that we’ve formed is we continue to grow. It’s been immensely positive for us in the company.

I’m going to answer these. I have given myself a little bit more time to think about them. I would have to agree with that. The team is a consistent win. The biggest win I feel in 2023 has been the impact I feel like we’ve had on some of our investors. We receive investor testimonials, not actual testimonies, but emails from them saying, “This has been my journey from where I started to work with you and what it’s allowed me to do because I’m getting X amount to subsidize my retirement, retire early, or pay for my kids’ daycare.” That impact to me has been a big win.

Another big win because I’m on the IR side of the house is tripling our capital raise tripling and the impact that it’s having on our investors. I’m young and naïve, as some might say, but the impact, the emails that we get from our investors, and seeing the reinvestment rate have been awesome to see and a big win for us. My second question is, what was the biggest lesson learned in 2023?

Anybody who has ever managed a business will understand. Whatever you think, the effort and time it’s going to take, triple it. If you think something can be done with two people over three weeks, you better focus on having six people over nine weeks. In the beginning of 2023, the first six months of 2023, we were a little bit more aggressive on certain things that decisions we made, but we learned quickly towards the end of 2023.

When we did, we had a major shift in software from our accounting systems. I look back at that. We knew going into that. Let’s take what we learned and let’s reshift it to make sure we have the right resources so that it goes smoothly, which it did. Understanding that component from a business perspective is the lesson learned. I’m sure yours is the same thing. If you think it’s going to take a week, it’s going to be a month or longer. I’ll let you answer that one, Lauren.

Patience is always a lesson. I’m continually learning. I won’t say that’s the biggest lesson I’ve learned. It’s a continuous process. The biggest thing that I took away or learned from this year is that it’s about consistency, communication, and showing up. I say that in quite a few ways. Consistency with your investors and the communication that you’re providing them as far as how responsive you are. It’s something that we pride ourselves on. What is our response time to investors? Who is answering the phone? Who is speaking with them?

That consistency is more important than hitting a home run every now and then. On the asset management side of the house, it’s the same thing. It’s like, “This is what we do. We are focused. Stay focused. Show up and do what we know works. We want to make things better and iterate on them, but it’s about consistency, patience, and showing up for your investors and your team.

The other thing too that I’ll add back into this is highlighting and thinking about our loans, our borrowers, and other things. There are a lot of people out there who are struggling and financially trying to make payments. Treat them with respect. What we’re good at is coming up with creative solutions and understanding that not everyone may live the life you live or people don’t have as much of an advantage. They might be at a disadvantage in some areas, locations, or skillsets.

Understand that and try and come up with solutions. That’s one thing that everyone is always focused a lot of time on their self and their growth and trying to understand that process but also look around and be thankful because there are a lot of people out there, especially as we are in the holiday season, who are not as fortunate.

My last question is, what is one thing you hope to accomplish in 2024?

I always make a year-end prediction about what’s going to happen next year. I’ve been somewhat accurate.

This is your goal for the company and yourself for 2024. Looking back a year from now, on December 18th, 2024, what do you want to say on the show?

We have more than doubled our size and are now over $50 million within our fund.

I’m answering that myself. I would agree with that as far as doubling the size, if not tripling the size of our fund. This goes to what I learned. It is that continued trust in our team. We have this now. That’s been awesome to see but to that continued growth of everyone being on the same page and working together.

Being a sports fanatic, you look at a company in a year over time. It is like going through a season in any sport. As the season moves on, the team grows, the bond grows stronger, and people understand and can work off and feed off of each other. As that continues to happen, you continue to get a lot better. That’s where I think we’ve been over since we’ve been together. We go back well before the two years mark and so forth. We’ve grown a lot.

 

These are quickfire responses, and I’m like, “I have another thing.” I would love to double our investor count. I say that because if we can double our investor count, that means that more people who typically have not had access to this investment will have experienced passive income, mailbox money, or whatever you want to call it, what it’s like to invest in an alternative.

For me, it’s doubling the investor count, and I don’t know how I would know this. If you’re an investor and you’re tuning in to this, and one of these things has happened to you, feel free to email me. This is part of the mission behind why we started the Reg A, but more people are saying, “This is helping pay for my kids’ daycare. This is helping me pay off student loans.” With inflation where it is, hearing those things makes it more impactful in a way for me.

I don’t know how I’m going to measure this. I’m not going to send out a survey to all of our investors and be like, “What did this help you do?” How I’m going to measure it is if we can double our investor account twice as many people, we’re able to impact positively in whatever way that helps their lifestyle, whether that’s retirement, loans, or paying for kids’ stuff. That’s important to me.

Any final thoughts?

I don’t have any final thoughts. I’m excited for 2024 and we’ll see you in 2024.

Thank you all. Take care.

Thank you. Bye.

 

Important Link

• Lauren Wells – LinkedIn

 

About Lauren Wells

Lauren leads the strategic evaluation of market research and implementation and heads business strategies. Lauren brings over 10 years of business development, sales and project management experience to the company. Prior to joining the company, she worked as a senior consultant with SAAS startups including Procore and LinkedIn to build and scale their sales organizations. This included developing forecasts, defining target markets, identifying acquisition opportunities, and establishing new sources of revenue. Lauren has also been a real-estate investor since 2010. During this time, she has helped grow and manage a portfolio of over 100 assets which include both residential real-estate and mortgage notes.