fbpx

Passive Investing with Jim Pfeifer of Left Field Investors

October 5, 2022

chrisseveney

v

0

CWS 220 Jim | Passive Investing   You’ve probably heard of the term passive investing, but is the income you’re earning truly passive? Here to explain what passive investing is and should be is Jim Pfeifer. Jim is one of the founders of Left Field Investors and the podcast host of Passive Investing from Left Field. In this episode, he joins Chris Seveney and Lauren Wells to share his definition of passive investing and his wealth of knowledge on how to truly make your money work for you. He is committed to helping others achieve financial freedom with different ways to approach passive investing in a way that works for you and your money. It all starts with educating yourself and being part of a community that helps you learn and grow. Tune in to this episode for valuable tips on where to put your money and diversify your portfolio.

Watch the episode here

 

Listen to the podcast here

 

Passive Investing with Jim Pfeifer of Left Field Investors

I’m joined by my cohost, Lauren Wells, and Jim Pfeifer, who is one of the Founders of Left Field Investors and the host of the Passive Investing from Left Field Podcast. For those that don’t know Jim, he is a former financial advisor who became frustrated with the one path fits all approach of the standard financial services industry. He now concentrates on investing in real estate assets that produce cashflow and is committed to sharing his knowledge with others who are interested in learning a different way to grow your wealth. It sounds similar to what we like to preach as well. Thanks for joining us. Thanks for having me. It’s great to be here. Lauren, good to see you again. It’s great to be here again. Chris, that was a beautiful intro. Why don’t you tell us a little bit more? Chris mentioned you were a previous financial advisor. Can you talk a little bit about how you got into that, what led to your exit, and where you are now? I’m on career number four. The financial advisor was number three. I will jump to the beginning real quick so you get a sense of it. Right out of college, I was a Finance major. I was always interested in finance, the stock market, mutual funds, and making money. I worked for a reinsurance company for several years. I had an educational role as soon as I could in there, where I was mentoring people and teaching. I found over the years that education is my passion, which leads to my second career. As a high school Finance and Accounting teacher, that is what I have always wanted to do, but teachers don’t make much money. I went and made some money first. I became a teacher, and I was teaching in Columbus City teaching life skills. While I was doing that, I figured I was struggling teaching kids because they are not super excited about learning. I thought, “I will be a financial advisor, and then I can teach adults about money.” I found out that was even harder than teaching kids is teaching adults. While I was going transitioning from being a teacher to a financial advisor, it was about 2008, and we had our third child. We needed more space. We built a house. It was 2008. We couldn’t sell our old house because the market was horrible. We rented it out, and I was an accidental landlord. I did that for about several years and hated it because you get the calls on Christmas morning to come to fix the bathtub or something. I don’t know how to fix anything. It was a disaster. After the market corrected, I went to my realtor and said, “I want to sell this property. I don’t want anything to do with this.” He said, “How about you buy two more? I will manage all three.” I had that house paid off. He said, “Get a loan on it. We will buy three more, and I will manage them for you.” It changed my life and my whole perspective here. I had a house that was paid off, which is a bad economic move and a bad financial move. Your home equity always earned 0%. He said, “Let’s take that equity out and buy more.” He managed them. Those were the best house rentals I ever had because I built quite a portfolio. At the same time, I was transitioning into being a financial advisor. I was learning all about money. I thought I knew everything about money, but financial advising, they taught me again. The funny thing is the more they taught me about paper assets. While I was starting my real estate journey, I started putting 2 and 2 together. I found that paper assets were not what I wanted to do. I wanted real assets to produce cashflow. I went more into real estate. Finally, I transitioned to a full-time active investor because I took pride in investing in what my clients did as a financial advisor. As I matured, learned, and found out that real estate was the place to go, I couldn’t recommend anything to my clients that I was doing. I couldn’t recommend real estate cause I’m not licensed for it. I wasn’t incentivized because I don’t get paid for it.
CWS 220 Jim | Passive Investing

Passive Investing: Paper assets are not what you want to do. You want real assets to produce cash flow.

I was doing one thing, and my clients were doing another. That was uncomfortable for me. I ended up getting out of financial advising. At that time, I was transitioning from active to passive. Active because I was not a good asset manager. I had 10 or 12 single-family homes. I had 22-unit multifamily, an 8-unit, and a 4-unit. I was a horrible asset manager. None of those properties cashflow like they should have, but fortunately, I was rescued by the market. The market kept going up. I sold all those for pretty large profits. What I did with all of the capital was I went full-time as a passive investor in real estate syndications. I didn’t pay any tax on my gains because I invested in syndications that gave me depreciation benefits and bonus depreciation. I ended up eliminating and deferring all of my taxes and went full-time passive. That is what I have been doing since then. I didn’t want to interrupt you when you started, but you talked about educating kids was hard, but adults were harder. You mentioned how paying off your house is not economically smart. That is such a common misconception that people are like, “Once I pay off my house, I won’t have any debt. It’s great.” We had a whole episode on how Not All Debt Is Created Equal. Not all debt is bad, but I thought it was interesting that you brought that up. That was like, “I should have been leveraging that equity that I had.” That’s what I knew about those other rentals. I knew what I was doing financially. It was such a comfort not to have a mortgage. For an investor, the point of a loan or mortgage leverage is you can use capital elsewhere and get into more deals. When I was a financial advisor, it was the same thing, “Don’t pay off your house.” I would tell people, “Whatever, you are going to pay off your house, build up that cash invested in something. If you ever get nervous, you can’t sleep at night because you are upset that you have a mortgage, then you can go pay it off if you slowly invest and build that cash up.” Sometimes people make the wrong financial decision because it helps them sleep at night. That is okay. If you are a person who needs your house paid off because that’s the only way you sleep, as long as you recognize that’s not the best financial move and you understand what you are doing, it’s okay. Not having a mortgage that sounds awesome. I can get why a lot of people think that. Several years ago, I thought the same thing. I was like, “How can we pay this off as quickly as possible.” Where people run into that challenge is if they pay it off and they go to use that equity, they are using it to, “We are going to go on a nice vacation. We are going to buy cars. We are going to go do this.” They are depreciating assets. They are not investing in it. They are blowing it. You went into teaching and financial advising and became a passive investor. That is where I started Left Field Investors. Why I was talking about education at the beginning because what Left Field Investors do now is help people get into and understand that passive real estate investing to syndications is accessible to anyone, it’s like this mystery, these alternative assets, this super scary thing it, and it’s not. What we try to do is introduce people. We have people that are nonaccredited trying to get into their first deal and who are part of our community. We have people who are accredited and in 100 deals. We all share information. People are always looking for who’s the best sponsor. That’s a huge topic of conversation in our community. What I tell people is if you are going to be a successful investor in real estate syndications, you need a community. It does not have to be Left Field Investors, but you need people to talk to. If you're going to be a successful passive investor in real estate syndications, you need a community. Click To Tweet Lauren, as we talked about briefly before we jumped on here if you walk out your front door and you are talking finance with the neighbors, it’s going to be 401(k) or IRA. What interest rate did you get on your mortgage? You come out and say, “What about real estate syndications?” All of a sudden, everyone is looking at you like you are crazy. Take it a step further and be like, “What if you had a self-directed IRA that you could invest in real estate?” They were like, “Nevermind.” I feel like that’s the conversation I have had a lot. I’m like, “No, but it’s a great move. What are you doing?” I sound like a crazy person. I thought I saw that quote about walking out your door and talking to your neighbor. I was like, “That resonates.” Let’s say they are not part of Left Field Investors. Where do people get started finding this community of like-minded individuals? Passive investing is different from what you mentioned, buy a rental property and become a landlord. It’s different types of people, outcomes, and goals. How do you find people that want to invest passively? I invested in turnkey single-family homes when I was an active investor. If you would have asked to be then what I was doing, I would have said, “I’m passively investing in real estate.” It was not passive. I was buried in spreadsheets and fighting with my property manager all the time. It was not passive at all. Now I understand what passive is. I do a bunch of work upfront to qualify the sponsor, vet the deal, and all that. As soon as I send my money, I’m done. I’m sitting there waiting for reports and distributions. Right. That’s passive investing. The first thing is to get the definition straight. As far as where people come to us, they come to us from everywhere. It’s curious people who want to build wealth so they can become financially independent. You can have a W-2 optional or no W-2. That’s the goal. A lot of them come from BiggerPockets, or they are doing turnkey. That’s passive, and it’s not. They have been in real estate, but now they don’t want to have to deal with tenants. They come from everywhere. People want to do something different and recognize that you can invest in real estate, legally not pay taxes, and make more money than you do invest in paper assets.
CWS 220 Jim | Passive Investing

Passive Investing: You can invest in real estate, legally not pay taxes, and make more money than you do investing in paper assets.

For you find that the people that come to you fit a certain demographic, age range, or stage in life because, for me, what I find is when we are talking about investing, people go, “I want to manage properties. I want to fix and flip. I want to wholesale.” That active investment that they think is passive because it’s glorified and the returns are big. When you look at passive investing, if you don’t have a big chunk to start with, it can take a bit longer to get to where you want to be. For people my age, it’s a slower burn. There are other ways to do it. You need money to do it. You can’t go and wholesale a deal. You can’t do seller financing or these creative things to get into passive real estate syndication. What you need is cash. You do need money. It’s not good for someone starting out who says, “I don’t have money. How do I get started in real estate?” Go to BiggerPockets because they will help you there, but there are other ways too. For younger people, we use a company called Tribevest, and they help you invest as a group. You can get 5 or 10 people together and invest together in syndication. Maybe the minimum is $50,000. If you get ten people together, the minimum is $5,000 for you. You can get into more deals and diversify. One of the best parts is now you have created a small community of your own. When you bring a deal to that group, you are going to have to defend it, explain it, and answer questions about it. You learn because you are teaching it. Most of our group are W-2. A lot of them are high earners. They can get in multiple syndications, but we also have quite a few people who are getting into 1 or 2 deals a year using Tribevest and investing smaller amounts. What they are doing is they are learning and preparing. Once their income starts rising and they get that snowball growing, because that’s what happens, this thing snowballs into something larger, and they are ready to maybe do a deal on their own every year. Maybe five deals on their own. It’s a growth pattern. You can start with very little if you set yourself up right. Do you think that is an expectations thing? It’s like having the right expectations when you are going into it and knowing as much as people glorify, “I did a fix and flip and made $50,000 overnight.” You can also lose that. It’s a bigger risk. I do feel like with syndications and passive investing that if I don’t have $200,000 to throw it something, is it worth it? Does it make sense? Can I put that somewhere else? I’m in a tribe through Tribevest that has ten people in it. It’s what I call a training tribe. They are people who want to learn what is syndications. How does it work? We invest in one deal a year. The minimum is $25,000. We put in $25,000 total once a year. We are in two deals, and they both pay an 8% prep. We are collecting $166 a month times 2, $333 on $50,000 invested, divided by 10. If you are an investor, you are looking at that, “I’m earning $33 a month.” That’s nothing. What you are doing is you are starting the snowball. Now it’s $33 a month. A year from now, it could be $66. You have a deal go full cycle, and your capital is reloaded because that is when you can expect it to maybe 1.7% or 2.0%, double, maybe in 5 or 7 years. It is a slow start, and you have to be ready for that, but it builds. What you are not going to have is, let’s say, you are putting the same amount into a 401(k). Now it’s worth $50,000, and tomorrow, it’s worth $25,000. That is not going to happen to your real estate. There is a difference there. You do have to be patient if you are starting out small, and you have to persevere. You will see that after a few years, you will be shocked by the extra income streams that are coming into you. There is a lot of the BiggerPockets crowd that wants to get rich quickly and understand the play. The analogy that popped into my head when you were talking about it is like having a baby. It’s awesome, but it is an awful lot of work, and it’s more work than you could ever have anticipated. It’s also nonstop. It is 24/7. If you want to own real estate, that’s what it is. You can’t take weeks off at a time, or whatever the case may be unless you have a partner. That’s where people try it. They get frustrated and get out of it because they are not making money. They didn’t do research ahead of time, and they ended up getting crushed. I’m curious to ask you this question. You own rentals, and now you are in syndications. I’m guessing you probably do as good investing in syndications as you did with your other investments. You are doing that upfront work. You are not spending all that time. If you took and paid yourself that time, you are probably doing much better on the syndications. To continue your analogy, if investing in active real estate is like having a baby, passive investing is like being the fun uncle who shows up, gives the kids a bunch of candy, and takes off. You are there for the good stuff, and that’s the returns that are coming in. On your analogy, that’s how I look at it. My results now are better because I’m hiring a professional asset manager to manage the asset for me. I’m not having some yahoo me manage the asset anymore because I didn’t know what I was doing. It’s the same thing. When I need legal documents done, I don’t hire myself. I hire an attorney. When I need my taxes done, I hire a CPA. When I want to invest in real estate, I hire a professional asset manager who does that full-time because I have proven to myself that I don’t know what I’m doing, managing an asset. It’s a struggle. It’s full-time and nonstop. Even when I had a property manager, I was constantly fighting with the property manager, telling them to do this, do that. They wouldn’t do it. It was horrible. The returns, even if the proforma had come out and I had gotten the cash flows that I expected, I’m doing better having a professional asset manager managing my assets. The only way I think that you can be an active investor and beat the returns of syndication is if you have some skill or knowledge that gives you a competitive advantage. You know a market better than anyone else. You know how to do something better than anyone else and/or you do it full-time. A lot of people are trying to do this part-time and not have a competitive advantage, not have a skill, and it doesn’t work out. That’s why I went completely passive. The results are better than they were when I was doing it on my own. The only way you can be an active investor and beat the returns of a syndication is if you have some kind of skill or knowledge that gives you a competitive advantage. Click To Tweet We do a lot in a note space. We have our new fund and offering. People were like, “I want to go buy a performing note.” Some of them I will talk to and say, “I see what you are looking to buy. You can get a better after-tax return investing in note funds than you could be buying some of those assets that you are looking at. You are going to have to do the work. I’m not even including the software, your time, and all the other costs that you are going to spend. If it’s something you want to get into and be active in it, that’s perfectly fine. Go do it. A lot of people are on that W-2 side, and they want to dip their toe into it. You want to get the feel of the rush of accomplishing it and doing it on your own, which is what I had 100%, and I kept chomping at the bid at it. A lot of people you mentioned don’t have a competitive advantage. Real estate is a difficult skill like any other type of profession. You learn by doing, but a lot of people think they can learn by doing over the course of 3 to 6 months or even the people who have invested in the last several years. Anybody could have made money in the last several years in real estate. You bought a house several years ago. If you didn’t make money, I can’t find anybody. I probably didn’t make money in real estate. In the next three years, let’s see what happens then. I made money because the market went crazy, but we are going to find out in the next few years which operators and syndications I’m talking about. They have all made money too. We are going to find out pretty soon if we picked the right sponsors because there’s going to be some trouble. There are a lot of inexperienced people out there that are running syndications that we are going to find out if they know what they are doing or not. On that note, with Left Field Investors, when you guys are looking at sponsors and doing your due diligence, what are some things that are red flags to you? That is the thing that everyone wants to know when they join a group like ours. How do we find quality sponsors? The thing that I look for is I prefer someone to be experienced and have been through a down cycle, but that’s not a requirement because that’s hard to find. Most syndicators are recent to this because this wasn’t a thing before they changed the 2012 jobs act. There aren’t a whole lot of syndicators who have the down-cycle experience. You can’t rely on that. I’m doing two things to find my sponsors. One is I require that they be excellent communicators because if they aren’t going to reply to an email in a timely fashion before I have wired them $100,000, there is no chance they are going to do that after they have my money. These are long-term illiquid deals that are completely out of your control. The only thing you have after you send that wire is monthly or quarterly reports sent to you by the sponsor and hopefully some distributions of cash. That’s the only way you can tell how the deal is going.
CWS 220 Jim | Passive Investing

Passive Investing: If they aren’t gonna reply to an email in a timely fashion before you’ve wired them a hundred thousand dollars, there is no chance they’re gonna do that after they have your money.

I want to make sure that these sponsors are going to be proactively communicating, and when I send them an email, they will respond, and it will be a quality response. That is number one. It sounds trivial, but I have been in deals where I haven’t been communicated to. Even if the results were great, I’m not investing again because I have been sitting there for several years wondering what’s happening and why aren’t my emails being answered. The way I first started finding sponsors was I went to my first seminar, and I had a self-directed IRA, burning a hole in my pocket. I met people, and I said, “You are a syndicator. Here is some money.” Not a good approach. I did not vet them or analyze the deal. I did nothing because I didn’t know what I was doing. I wanted to take action and see what happened. That didn’t work out. Some deals did and some were not as good. I moved to phase two, where I started listening to podcasts and reading books. That’s how I found sponsors. That was better, but still, I don’t know if these sponsors are great marketers, great podcasters, or great operators. Are they both, or are they neither? I don’t know. A 30-minute conversation doesn’t tell you much. The way I find sponsors now is I only invest with a new operator if they are referred to me by someone I know, like, and trust in my community who has already invested with them. It doesn’t have to be a full cycle but invested with them. They sent a wire, and they know it was received. They have started maybe getting some distributions because what that does is trust transfers. If they trust the person and I trust them, at least, I’m still going to do all the same due diligence, but I’m starting so much farther ahead having that base of trust, knowing that this is a legit operator. I know those aren’t exactly red flags, but communication is key. The track record is great. How you find the sponsor is the most important thing, and we have changed how we do that to where we are only working with operators that we meet from others that we know, like, and trust. Communication is key. Track record is great. The most important thing is only working with operators that we meet from others that we know, like, and trust. Click To Tweet If an operator comes into our circle that we have never met and no one knows, that doesn’t mean we are going to ignore them. It means it’s a long process. It will take six months or a year before we will dig into a deal because we want to get to know you first. It’s weird. It is a relationship business. I’m taking $50,000 of my hard-earned capital, and I’m sending it through the ether, hoping you get it and do what’s right with it and send me more back later. There’s a huge element of trust. Having a strong relationship makes a difference because I feel comfortable. I can call you up and say, “What happened with his deal?” If the deal is going in the wrong direction, you are going to feel comfortable enough with me to call me up and tell me why or email me. That’s how I look at finding sponsors. Lauren runs our investment relations side. When people call her, and she answers the phone, they are like, “I get to speak to a person.” My phone rang, and I was like, “Hi, this is Lauren.” They are like, “Is this not a robot?” I’m like, “No, do I sound like a robot?” They are like, “No, I didn’t think I would get a real person.” For me, coming into this from a tech background, where there is so much emphasis on customer support and account management, I realized that that was a big hole in the industry in this syndication world. Investor relations, not only getting investors through the door but communicating, keeping them happy, and answering their questions. We have a few other members on my team who are solely dedicated to answering emails that come in from current investors, making sure they have access to their portal, tax statements, and dividends. They can see everything that is transparent. Syndicators who started in 2012 have had to adapt to all the new technology that has come out because now the upcoming way of new passive investors. They want to see and know that they can have that transparency. They are going to want it. That is something that we realized and invested heavily in. On our end is not only communication but transparency because technology allows for it these days. It sounds so trivial in what we are talking about, like communication, portal, and transparency, because what we are talking about is, “I want you to make money for me. I don’t care if you talk to me at all.” That was my initial attitude. That is completely the wrong way to look at it. I like to make money, but I want to know that my capital is in a good place. Having someone who communicates is critical because there are a couple of syndicators out there who have great results, but it takes them forever to answer an email. Where is my K-1? I don’t know. It’s April 14th, 2022. They still haven’t sent it and it’s not worth it. I can go somewhere else, and maybe the returns are slightly less, but the return on my stress is non-existent. It’s a bunch of different things, but you want to find people that you are comfortable doing business with. I know that’s a cliche, but it makes a difference. That’s why meeting people in person, going to events, and things like that is a huge benefit because you are able to do the transaction a lot more smoothly. The one question when people ask me like, “What to look for in syndicators?” We have syndicated deals. I’m an investor. I see both sides of it. The first question I was telling them is if you are getting to talk to them, I say, “Send me a copy of the last statement or investor summary update that you sent your investors and cross off the name. Show me the statement that shows somebody invested and what do they see and so forth.” If they can’t send you a statement, that should be a red flag. How are they reporting? That’s usually the first sign because a lot of people do the marketing, and they are good at getting that money in the door, but they are not good at managing the funds, the ones that get in trouble. They can’t provide you with that information because they do what I always call bucket accounting. Money comes in. They put it out the door, but every time they take that money and put it out the door without recognizing they are allocating it or classifying it to realize how much we have. It’s critical to analyze all those things. You should be asking for those documents. Every time you are with a new sponsor, send me a copy of past deals, the pitch decks, and all that stuff, including investor communications. We ask for that because you got to see because some of them send three sentences, and maybe that’s enough, but you are someone who wants more. Some people send the entire financials every month. Personally, I’m not going to look at the entire financials. I’m going to trust that the sponsor I picked has it handled, but I might dip into them once a year something to check things out. There are different levels of comfort for different people, but you have to match yourself up with a sponsor who is going to satisfy your communication needs. Otherwise, you are going to be incredibly frustrated during the whole time of the asset.
CWS 220 Jim | Passive Investing

Passive Investing: You have to match yourself up with a sponsor who’s gonna satisfy your communication needs. Otherwise, you’re gonna be incredibly frustrated.

This is interesting because we did two episodes on Top 10 Questions To Ask Before Investing With A Sponsor and Questions You Should Be Prepared To Answer As A Sponsor because people don’t know syndications are not new, but newer in the past decade, people are starting to realize and come around to it. How long has left Field Investors has been around? We have been around for two years in 2022. We started we are going to be a dinner club in Columbus, Ohio, where I live. Twelve people once a month meeting talking about investing. Our first meeting was going to be on March 18th, 2020. You are the third person that we had on the show, and I have my own story similar to this. I feel like in March 2020, people were launching things, doing things, and we are all shut down. Now we have over 1,200 members. It worked out. It was not intentional. The reason that we developed into this community is because the twelve of us got together on Zoom calls, and we started on how do we make ourselves better. We came up with a checklist for questions to ask a sponsor. On our website for our members’ group, there are questions to ask. We have a deal analyzer to help you analyze the deal and make sure all the metrics fit the parameters that you like. We slowly developed these tools. We were like, “I guess we got to get a website to put it on.” Nothing we did was intentional, but we have grown this group into a place where you can go to learn about passive investing. Not only that but there’s a network of people. People are getting together in different parts of the country. There is a group that meets in Boston of Left Field investors that meet in person periodically because they all met through our online meetings. All of these tools that you need to be a quality investor, you can get if you are part of a community, and that’s why I think the community is important. All of these tools that you need to be a quality investor, you can get through your community. Click To Tweet Way to pivot with the times and everything that was thrown at you. That is pretty great. You have grown substantially in the last several years. Do you have monthly meetings or webinars? When people are interested, and they might have a deal, do they come to you? Does that syndicator or sponsor come and speak? What’s involved with being part of Left Field Investors? There is one big umbrella group Left Field Investors. There is a paid membership group for people who want to dig in deeper. Most of the stuff that we have is available to the free audience. We do a monthly meeting. On the fourth Monday of every month, we always have a monthly meeting. Once every two weeks, we do a Lunch and Learn, which is at lunchtime, with somebody coming on and talking about an asset class or an investing strategy. We also do Deal Webinars where if the sponsor that we know, like, and trust will give better terms to our investors, if we hit a certain threshold, we will allow them to present the deal to our group. Sometimes our group will get better terms that way. We try to network. We do some different networking things. People can get to know each other. Our membership group is called the Infield. We do some special meetings with them. Everything is baseball-themed, even though we are not baseball fans. Are you a big baseball fan? How did that come up? When I was a financial advisor, my colleagues would always look at me when I started talking about alternative investments. They would look at me like, “You are way out there in left field.” That’s how we got our name. Everything we do is baseball theme, but everything we try to do is educational and networking in our group. We record all of our meetings. If someone is interested in checking this out, they can go to our website and look at the recorded meetings. I tell people, “You got to find a community where the culture of that community fits your personality.” It doesn’t have to be left-field investors. I’m biased. I think our group is great, but others might be more comfortable in a different group. Many of us, myself included, are in multiple groups. The power of a community and what it can provide you, especially with respect to something. You are not going to hear it advertised on the radio or TV. You are not going to hear people talking about syndications like they do the stock market. You need a community to go to educate yourself. That is what we try to provide. That’s true. The point about not hearing about these syndications on radio, TV ads, or whatever. We launched a Regulation A offering, which does allow for marketing. It is interesting because we can market, but we are having to also educate on how does this work. A lot of people are like, “Is this a REIT?” We hosted a webinar about that. Here’s an introduction to how this works. Here’s an introduction to how the fund works and how it’s structured. It’s not talked about. Talk about trying to break through into a community like advertising for something that people don’t understand what it is in general. Even if it sounds great, they are like, “Is this real? Are you sure you can do this?” That also speaks to the power of community on both sides. That’s why sponsors and operators are interested in us because you can come to Left Field Investors and do a Lunch and Learn or some presentation. You know you are getting an audience that already at least knows what syndication is and has some basic knowledge. You are preaching to people that are reading and understanding. We always want new people in there too. I admire you for reaching out to people that wouldn’t otherwise get this, but it’s nice to go to a place where you don’t have to explain syndication right out of the gates. I speak with people all across the spectrum, people who are asking me, “What is a mortgage note? How does this work? If I give you my money, what’s the return?” I’m walking through every aspect of the deal versus people who come and know exactly what syndication is. They were like, “I’m looking at $300,000.” Those are different conversations. Technology again has allowed us to talk about what it is, how we operate, and get that out there. Our minimum is only $500, and we provide an 8% prep. We get questions of, is it guaranteed? It’s an investment. We are not a bank. We don’t FDI ensure it. Some people think 8% monthly, and I’m like, “I wish.” “Can you tell me where you are finding 8% monthly? I will give you my money.” It’s a mindset thing, and why I brought up that snowball effect, you said, “Split ten ways. That is only $33 a person.” I’m like, “That’s pretty much our minimum. At our minimum, you are only getting $3 a month.” It’s that starting out and getting comfortable. We had a lot of investors who have come, and their market research is like what you did. They started like, “Here’s some money.” They will give us a smaller check. Make sure that they are getting the communication they want. The return is real. It’s not a scam. I hear that a lot. They were like, “After a few months, this makes sense. I like these people.” They will put in more, but it is interesting because a lot of people were like, “That’s only $50 a month.” I’m like, “You got to start somewhere.” If you put it in your bank account, it’s not getting anything. If you put it in the stock market, it’s $250 the next day. You didn’t get any cash in your pocket. At least you are getting money in your pocket. I love the entry point that you have there because if I’m investing with somebody new that I don’t know and wasn’t introduced by somebody I know, like, and trust, a $50,000 investment is difficult, but if $500, I can throw it in there and three months later, I will know whether you guys are legit or not. I can put in my $50,000. That is a whole new ballgame. I like that approach because it doesn’t require this huge amount of trust out of the gates. You can test it out, and that’s a nice way to do it. By having it available to nonaccredited and accredited, if you started it the $25,000 or $50,000 for nonaccredited, why bother getting nonaccredited because we went from a pool of 200 million Americans over the age of eighteen or whatever it is, down to a much smaller pool once you have that target range. We find the fact that there are a lot of investors that have an extra $2,500 sitting in their IRA that I can’t do anything with. You don’t want it in the market. Here is a real estate deal that you could get involved in. You can get interested in and get that money working for you versus having it sit in your custodian’s account. Something you mentioned earlier when you were talking about your journey to where you are now was being saved by the market. Would you agree that the timing of everything is important? What would have happened if the market hadn’t saved you? Would that have changed where you are now? You have to go on your journey to get where you are going. Communities like ours might offer some shortcuts. People don’t have to go the route I did. If you are now getting into your first single-family home turnkey, you might want to pivot and look into this syndication stuff a little bit more. I’m glad for my journey. We are trying to maybe shortcut other people’s journeys. If everything would have tanked, I probably would have been done with real estate. Maybe I’m still a financial advisor and speculating in paper assets, which is what I call the stock market, instead of investing in real assets. I was fortunate to get into real estate at a time when things were going up so I could realize the value of it. Now, where things are uncertain, this is where I’m not going to stop investing because things are uncertain. I’m much more cautious. I might evaluate things better and have different strategies, but I feel like I still want a $1 cost average for whatever’s coming because as soon as you stop investing, what are you doing? You are losing to inflation. You have to be more careful. I did luck out entering the pool when the waves were big. As soon as you stop investing, you're losing to inflation. Click To Tweet Do you invest in other asset classes besides real estate risk syndications? People invest in other companies, venture capital, and cryptocurrencies, or is it strictly real estate? It’s mostly real estate. We cover all the asset classes that you can think of, from multifamily to Bitcoin mining, to self-storage, mobile homes, triple net lease notes, and all that stuff. Outside of real estate, some people in our community are interested in crypto. We have a little crypto group in our membership group. We usually think about 5% to 10% putting it into the fun stuff. Ninety-five percent of what I do is boring. It’s going to return the money. Hopefully, it’s investing in boring old real estate or notes. To have fun, we go 5% to 10% on pre-IPOs and interesting small companies. There are a bunch of different crowdfunding websites now that you can go to that have these companies you can invest in for $500 or $5,000. You are probably going to lose 9 out of 10 times, but if you hit that one, it’s exciting, and it’s fun. You do need a little bit of risk in your portfolio. That is where I go to get that. You mentioned crowdfunding sites. For our fund, we had to go through a broker-dealer and it is called a company called Baltimore Financial. on their website because ours is a Regulation A offering. They do a lot of broker-dealers for these, and they got the whole gamut of a lot of Regulation A. It is like pre-IPO. There’s a lot on there. The benefit to some of those is they do not have to pay all the fees to the crowdfunding sites. They can raise more money. I know they spend a lot more money upfront because I know what it costs to do Regulation A. It’s a lot more than crowdfunding. They might have a little more money back to them, but there was one on there called Miso Robotics, where it’s the machines that flip hamburgers. They got Boxabl, which is that modular home company that folds. It’s interesting that I found it because I like to play with a little bit of my money and stuff like that. I didn’t realize I was looking into crowdfunding sites. I realized, “These other broker-dealers that do this type of stuff.” You can go off to their websites and realize the sponsor is not paying as many fees to the crowdfunding sites because they are hosting it all on their own platform and stuff, which is something to mention. I did invest in Boxabl. That’s a great one, but I did it through one crowdfunding. Those are easy. I don’t know if you are familiar with Republic, but I try not to go on that website because the minimums are small. It’s like $200, and I see three companies. I’m like, “That one because it’s small minimums, and it’s fun.” It’s not fun investing in a multifamily deal because it’s another apartment. That’s where I make my money. If I have ten minutes of free time and I want to have some fun, I go to Republic, StartEngine, or something like that, and invest in a couple of small companies because it’s entertaining, and one of them will hit, hopefully. There is another website, 70Investments, you could go to and hit as well. That was such a softball right there. I had to take advantage of that one. I’m doing your job for you, Lauren. For people who are reading that maybe are starting to realize they do want to do more passive investing, how do they get in touch with Left Field Investors? Give your pitch. I don’t do the hard sell, either. I’m not a financial advisor anymore. If people are interested, they can go to our website, LeftFieldInvestors.com. There is a subscribe button at the top if you want to get our newsletter, which has information about all of our meetings, deals, and everything that comes up. I talk to 3 or 4 investors a day. Feel free to send me an email at Jim@LeftFieldInvestors.com. There is a contact us button on the website. All that stuff comes to me, and I’m happy to schedule a call and chat with anybody about passive investing. It’s a passion of mine. What I want to do is allow regular people to get into this so they can build wealth for their families. Our goal is financial freedom, which means different things to different people. What it does is it makes the W-2 job optional. If you have multiple income streams, you can build it up, but it does take time. The younger you start, the sooner you will get there. I encourage people to find a community and use that community to make themselves better investors and build themselves towards financial freedom.
CWS 220 Jim | Passive Investing

Passive Investing: Find a community and use that community to make yourself a better investor and build yourself towards financial freedom.

One last question. You talk a lot about speculating versus investing. Can you define those, and how do you make the leap from one to the other? What is the biggest push? Speculation, to me, is like investing in the stock market. You are investing in a paper asset. You buy a piece of paper, and you hold it with no current benefit or little current benefit. You hold this piece of paper, this electronic, whatever ones and zeros, and you are holding it, hoping that eventually, you could sell it to someone else for more than you paid for it. Hope is not a strategy, but that is what you are doing. Investing is where you put money into something, real estate, in this example, you get a current benefit in the form of some cashflow. The appreciation or the parts you are hoping for comes on the back end. I’m not counting on the appreciation. I’m hoping for it and expecting it, but I’m getting a current benefit. That’s the difference between speculating and investing. There is a place for speculation. We talked about pre-IPOs and all that stuff. I speculate all the time, but when I want to make money in a clear and consistent way, that’s when I invest. I invest in real assets that produce cashflow. How do you get from one to the other to close it all up? You find a community of people that can help you learn how to invest in syndications. You go to Left Field Investors, or you go to 7EInvestments.com and invest in those deals. That’s what I would do. We brought someone on our show who pitched us for us. You are welcome back anytime. Thank you so much for joining us. Chris, do you have any final thoughts? I love providing people with available places to go learn about other syndications and other ways to invest in the amount of information that’s out there and giving people a place where they can go find it because there is so much. Sometimes you can get lost in the shuffle of it. A group of 1,200 plus individuals where it’s not the pressure of getting pitched all the time. It’s going to educate, learn and understand where to invest because I hate hearing the horror stories where people were like, “I invested in this deal, and the money is gone.” I had someone on BiggerPockets reach out to me to call it a crowdfunding/group that raised money to invest in land deals. That sponsor from several years ago is offering people $0.25 on the dollar for everything. I hear that, and it’s like, “I feel for them.” If you are interested in Left Field Investors, you can go to their website or email him if you have any questions at Jim@LeftFieldInvestors.com. Thank you, everybody, for reading this episode. If you enjoyed the show, share it with a friend, subscribe, or leave us a review. Until next time. Thank you. Thanks, Jim. Thanks, guys. That was great.  

Important Links

About Jim Pfeifer

CWS 220 Jim | Passive InvestingJim Pfeifer is one of the founders of Left Field Investors and the host of the Passive Investing from Left Field podcast. Left Field Investors is a group dedicated to educating and assisting like-minded investors to negotiate the nuances of the passive investing landscape and world of syndications. Jim is a former financial advisor who became frustrated with the one-path-fits-all approach of the standard financial services industry. Jim now concentrates on investing in real assets that produce cash flow and is committed to sharing his knowledge with others who are interested in learning a different way to grow wealth. Jim not only advises and helps people get started in passive real estate syndications, he also invests alongside them in small groups to allow for diversification among multiple investments and syndication sponsors. Jim believes the most important factor in successful syndication is finding a sponsor that he knows, likes and trusts. He has invested in over 95 passive syndications including apartments, mobile homes, self-storage, private lending and notes, ATMs, Bitcoin mining, commercial and industrial triple net leases, assisted living facilities, resorts, and international coffee farms and cacao producers. Jim is constantly looking for new investment ideas that match his philosophy of real assets producing cash flow as well as looking for new sponsors with whom he can build quality, long-term relationships. Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, and financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

You May Also Like…

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *