131 | How Busy Entrepreneurs Are Quietly Building Real Estate Empires with Matthew Ricciardella

Patrick: [00:01:00] I’m excited today. We’ve got Matt, Rick on the show. Uh, we’re gonna talk about some real estate. Uh, I personally love real estate, and, uh, it’s been, I think it’s one of the greatest wealth creators, uh, on the planet that, uh, people can get into.
So, uh, this is gonna be fun. Matt, thanks for joining us here today.
Matt: Absolutely. Thanks for having me, Patrick. I’m excited to be here.
Patrick: Yeah, this is, uh, this is gonna be fun. [00:02:00] So when I, when I think about, uh, the opportunities that are out there, uh, there’s limited access to high quality, I’ll call ’em institutional grade real estate deals. Uh, it’s also difficult identifying that, like, where do I find some decent yield versus over-hyped investments?
And then. Underperforming capital. You know, as a, as an entrepreneur that I’m, I’ve, I’m like all in on my business. I’ve got these dollars stacking up. Uh, I don’t like the fact that it’s just sitting in low yield or we’ll call it mismanaged assets. So, uh, those are my external problems. Internally, I’m, I’m frustrated with just not knowing who to trust with large amounts of money.
Uh, it’s also really hard, like, man, if I wanna go do a deal on my own, do I have the time or energy to do that? Uh, I also don’t wanna make the wrong moves. Uh, just ’cause it, it erodes wealth if I, uh, pass my money on to, uh, let somebody manage that and it just doesn’t work out. Uh, and then there’s also the desire for more control and clarity in the investment decisions.
And then I think philosophically just looking at, you [00:03:00] know, entrepreneurs who’ve worked hard, deserve access to transparent. We’ll call it aligned and disciplined investment opportunities, not, not these opaque deals that, you know, it’s really hard to tell if the, the sponsor’s benefiting more than the investor.
So, uh, I’m excited that you’re here today to, uh, help us, uh, clear up some of these things.
Matt: Yeah, happy to be here. I’m, and I’ll help in any way I can. Patrick.
Patrick: Very good. So, can you give us a little bit of your, your, your background? Uh, I, I know you’ve got a extensive background, but, uh, we’d love to hear more about that. Yeah.
Matt: Yeah, I
Patrick: I mean, I,
Matt: started
Patrick: in
Matt: real estate back in 2002 as a, actually a salesperson
Patrick: mm-hmm.
Matt: Southern California.
Patrick: And
Matt: um, I, I
Patrick: kind of
Matt: my sales practice out as a realtor through direct prospecting.
Patrick: what that means.
Matt: is, um, a lot of cold calling, a lot of
Patrick: Mm-hmm.
Matt: contact via door knocking, so very aggressive sales.
Patrick: Yep.
Matt: Um, and just putting in the time and the energy to build the book of business. And, and that
Patrick: Well,
Matt: well [00:04:00] for me
Patrick: in the beginning I was very young when I got started.
Matt: I
Patrick: I was 20 years old. Mm-hmm. And, um,
Matt: you know,
Patrick: one day
Matt: a
Patrick: cold call, I actually,
Matt: up contacting somebody
Patrick: somebody
Matt: a duplex. And they said, well,
Patrick: don’t
Matt: just buy it? And, um, you know, I had no money, no credit, but luckily for me, this was the
Patrick: the time where they were.
Matt: stated doc, you know,
Patrick: Mm-hmm.
Matt: um, stated income and almost
Patrick: Anybody
Matt: get financed at that time. And I was one of those people and, um, you know, ended up
Patrick: buying a Nuplex for 30 sold couple years
Matt: for 700 and that. of launched my
Patrick: my investment.
Matt: career.
Patrick: Yeah.
Matt: didn’t focus on sales as a, as a realtor anymore. I really focused on investing and
Patrick: Yeah.
Matt: in residential real estate and that kind of morphed into more passive income via commercial real estate. um, you know, did that really well for, for a [00:05:00] number of years, and then had a real business model that I wanted to scale.
So started raising outside capital. Back in 2014 through, uh, crystal View Capital, and that’s where
Patrick: We’re actively.
Matt: um, equity from the private markets today.
Patrick: Yeah. Great. So this is, this is fantastic. I, I’d love to get into, uh, sort of the direction that, uh, you see the most opportunity in the real estate market right now. Uh, ’cause I, I think there’s the, the, the wonderful thing about real estate is you can make money doing just about anything you want. You want triple net, you know, Walgreens leases.
Okay. You can, you can do that and you’ve gotta. Uh, pretty, you know, it’s kind of like a bond, right? Like it’s gonna do its thing. Uh, but there’s, there’s not a lot of upside to that. Uh, I’ve also had friends that have owned, um, rough property and rough areas, and they, they go door to door every month and collect all the rent, sometimes week to week, depending on how their tenants get paid.
And. And they figured out how to make money doing that too. Now that’s, that’s not necessarily my [00:06:00] cup of tea. You know, my, my wife and I, um, my wife runs this business, but she’s got a senior housing, uh, management, uh, business that, that owns and operates the property and, um. You know, that’s a complex business.
Uh, there’s, you know, apartment building, you’ve got healthcare, you’ve got a restaurant effectively in there, and you’ve gotta be able to manage all those things well, and that’s an operational, um, headache. You know, they, they’ve got over 500 employees. I want nothing to do with that. Uh, but they, they do it really, really well.
And so there’s, there’s lots of different ways to make money. I’m, I’m curious about, uh, what Crystal View is doing and, um, where you, where you all see the opportunity.
Matt: Yeah, we, we see a tremendous tailwind in affordable housing.
Patrick: Mm-hmm.
Matt: Um, you know, and, and where we are in the US right now is a lot of folks have been just priced outta the marketplace. Um, you know, look at where interest rates are, look at inflation. Um, look at the cost of gasoline, look at the how [00:07:00] much, um, rents have gone.
Patrick: Mm-hmm.
Matt: So
Patrick: For us,
Matt: us, we
Patrick: we focus on manufacturing, housing, and that is really the lowest form of affordable housing
Matt: And we
Patrick: we’re in 32 different states. Yeah.
Matt: US right now.
Patrick: So what we’re doing,
Matt: uh,
Patrick: Patrick, is we’re going
Matt: into the marketplace. We’re finding real value. We acquire communities. from legacy owners, mom and pop owner operators,
Patrick: Yep. And.
Matt: our focus, we’re vertically integrated, so we manage everything that we own.
We don’t outsource any of that,
Patrick: And we bring in new homes,
Matt: So typically
Patrick: brand new manufac
Matt: housing
Patrick: product, set it up on the,
Matt: sites within those communities.
Patrick: mm-hmm. And then we have a dedicated
Matt: in-house that focuses on
Patrick: selling those homes
Matt: to
Patrick: these individual.
Matt: who really can’t buy a stick-built home,
Patrick: Yep.
Matt: who are priced out of
Patrick: The,
Matt: market, and we allow them to a piece of the American dream.
Patrick: yeah.
Matt: could actually buy a home. It’s a mobile home within a community, but [00:08:00] they’re still building equity.
Patrick: Yep.
Matt: the rents are very affordable. In a lot of our communities, rents could be 400 and $600 a month
Patrick: Mm-hmm.
Matt: And
Patrick: um, you know,
Matt: they
Patrick: they have their,
Matt: lot.
Patrick: they don’t have above.
Matt: They, they have a decent, uh, lifestyle
Patrick: Mm-hmm.
Matt: of ownership
Patrick: Yep.
Matt: our investors well because we have tremendous demand. There’s, again, there’s a tremendous tailwind for what we’re offering in the marketplace. So that is where our focus is right now.
Patrick: Yeah, I love it. And, and just to highlight that point, um, so we’ve got a, uh, a men’s group do bible study every Monday night and, and one of the guys was talking about his mom is trying to move back to the area, but. The pricing is just almost impossible for her to, to make that move. And, uh, uh, for all the reasons you’re talking about.
It’s like, you know, housing prices have gotten outta whack. It’s really challenging to, uh, find something that, that people on maybe a fixed income can afford. And, uh, [00:09:00] yeah, I, I think this is great. I also wanna highlight, I I, I’m seeing you marry together a few different concepts here that, uh, are really, really cool.
So, um. I think there’s tremendous opportunity in the owner finance space and, and I’m gonna put owner finance in a pretty big bucket there. Uh, I used to, when, when I first got started in real estate, about the same time you did early two thousands, um, we were buying property, no money down, and we were selling it on owner financing, either rent to own contract for deeds, something along those lines.
And there was, uh, there’s just something about, and we still see this in the, I’ll, I’ll call it the, the consumer space in general. People are more interested in their big purchases. What is my monthly payment versus how much does the thing cost? And so that, that, that creates some, uh, financial opportunity.
And then also thinking about Cody Sanchez and the Main Street millionaire, she’s talked a lot about, uh, these mom and pop businesses are, are sort of out there ripe for the, the picking. And, uh, somebody that has a, a good business mind and can come in [00:10:00] and take advantage. And I, I think about what you’re doing on the, the owner finance space coming in and going, Hey, mom and pop operator that are.
Just tired, right? They’re, they’re tired of running this business. And you can bring systems and processes to that to run it efficiently and effectively. And, and, and we look at the value of those assets, and they’re all cashflow based, right? And if we bring in more properties, we bring in more cashflow. Uh, now the, the value of my asset just went up dramatically.
So I think you’re doing a bunch of cool things there. I don’t know if there’s any parts of that that you want to, uh, pick on and talk more about, but, uh, this is good.
Matt: Yeah. No, I appreciate you pointing some of that out. You know, the, the legacy owners, as we call them, know, a lot of them. Hit a life event,
Patrick: Mm-hmm.
Matt: it’s, uh, an illness, a partnership that’s breaking up. Um, you know, there it’s estate planning where they’re kind of at that stage in their life where they’re looking to wind down their assets, their, their kids don’t want to get involved in the business anymore.
You know, not too many kids wanna run mobile home [00:11:00] communities. Um, so
Patrick: so that’s kind of where you come in.
Matt: we
Patrick: We pride ourselves on structuring win-win
Matt: That’s fair
Patrick: for both parties, but to your point,
Matt: we
Patrick: bring in a, a professional management framework.
Matt: New systems, um, professional marketing. We invest capital.
A lot of these folks, they’re, it’s kind of
Patrick: Like running. Mm-hmm.
Matt: they’re, they’re complacent and they’re not bringing in new homes and
Patrick: They know there’s a market for them, but it’s just a lot of work and energy
Matt: capital. But we
Patrick: bring that to the table and that really drives a lot of value
Matt: for, for
Patrick: our investors. Yeah. Um, so it’s a, it’s a great concept
Matt: we set up. Back to
Patrick: point about
Matt: uh, financing. We have, um, various players in the marketplace
Patrick: mm-hmm.
Matt: extending
Patrick: financing.
Matt: For these folks. And that’s that, uh, that market is actually growing where Fannie and Freddie is
Patrick: Now
Matt: talks
Patrick: about,
Matt: extending financing on chattel properties, which is
Patrick: yeah,
Matt: within communities.
So
Patrick: that’s,
Matt: be a boon for us. So [00:12:00] everything’s
Patrick: moving in the right direction right now.
Matt: Um, it’s a fantastic business. It’s, it’s a lot of hard work, but, um, it’s very fulfilling and, and we’ve been able to deliver some pretty outsized returns to our investors in the process.
Patrick: Yeah. So can we talk about, um. I I’m gonna highlight where I see money to be made in, in real estate, and, uh, and then we can talk about how, how you’re providing returns for investors. So I really see for-profit centers every time we, we look at, uh, uh, a real estate opportunity. Um, and maybe, maybe these aren’t all necessarily profit centers as much as they are, like wealth builders.
So, uh, the first one is the, the thing we mostly think about with real estate. Some of the appreciation. You know, I buy the asset for X dollars and it starts to go up a percentage every year. Uh, the next is depreciation. Um, when I’m a real estate professional, I get to write off, uh, all of the depreciation.
And when we think about some of these manufactured homes. Uh, [00:13:00] the big, beautiful bills made that pretty attractive. I get a, I get a push through a bunch of the depreciation to, uh, the investors and if I’m a real estate professional, I get a, I get to write a lot of that off.
Matt: Yep.
Patrick: Then there’s cash flow. Uh, I really like cash flow.
It, uh, uh, is the thing I can put in my pocket. You know, I can eat cash flow. That’s really good. It’s really hard to eat appreciation and depreciation outside of the form of tax savings. Um, and then the, the last one’s just loan amortization. You know, the, the property somebody else is, is paying that, that, that debt for me.
And I’m just, uh, uh, paying that down over, over time. And so I think about all those things factor together and, uh. It, it, it again goes back to one of my early comments. It’s like one of the best wealth building tools on the planet. So, um, how are you guys utilizing, I’ll say that, that framework to, uh, really drive investor value.
Yeah.
Matt: great question. So in, in our mind, the, here’s the way we think about it, Patrick, you know. We, we
Patrick: [00:14:00] have.
Matt: here at Crystal View, and I think it comes back to the vertical integration and
Patrick: In that mantra is we.
Matt: our own destiny.
Patrick: Mm-hmm.
Matt: And
Patrick: here’s what I mean by that. In real estate invest, let’s say you’re
Matt: you’re
Patrick: investing in a fund that’s core type fund
Matt: or a
Patrick: sponsor, that that
Matt: on a, on a core kind
Patrick: kind of strategy, what that revolves around a large part is
Matt: they’re
Patrick: really hoping.
Matt: for cap rate compression. They’re really hoping and praying that the capital
Patrick: Mm-hmm.
Matt: we say we control our own destiny.
And here’s what I mean
Patrick: By that
Matt: We come into
Patrick: assets and value
Matt: player. So we look
Patrick: it.
Matt: we, we understand the landscape, we understand where the systems are broken, and we focus very heavily on refining those systems. And, and
Patrick: And that revolves around filling vacant sites. Where [00:15:00] can we grow rent? Where could we cut costs? Where can we drive
Matt: NOI.
Patrick: Because that increase in NOI has a direct correlation
Matt: the property
Patrick: value. Mm-hmm.
Matt: comes into line with your first concept of appreciation. So cash flow and appreciation.
Patrick: Tethered. Mm-hmm.
Matt: You know, if you could influence the cash
Patrick: flow
Matt: basically control the value, the
Patrick: the value, the value of that
Matt: property
Patrick: rather than, than hopefully
Matt: you’re gonna get cap rate compression or hoping that interest rates go down.
We don’t have any control over that. What we do have control over is our NOI. way
Patrick: that
Matt: is
Patrick: right?
Matt: And
Patrick: Controlling that process,
Matt: versus outsourcing it to a third
Patrick: party
Matt: So that,
Patrick: that
Matt: big part of
Patrick: this.
Matt: for us. And then the other part you mentioned was principle reduction.
Patrick: Reduction. Mm-hmm. Really, the way we set
Matt: um,
Patrick: our financing in is,
Matt: we, we really focus on 10 year IO interest only.
Patrick: Yep.
Matt: [00:16:00] So there really isn’t any principal reduction. And the reason why we do that is we want more cash flow for our investors and more cash to have optionality to buy
Patrick: More profit. Yeah. And the final.
Matt: of that puzzle, as you mentioned, was depreciation.
And yes, um, this asset class is very
Patrick: At,
Matt: from a cost segregation standpoint. You could
Patrick: could break it up into its
Matt: its components with an engineer and, and
Patrick: in some cases
Matt: you’re
Patrick: you’re getting 80, 90% allocated to
Matt: personal property, allocated to equipment infrastructure. So depreciation is quite substantial. this asset class.
So when you bring
Patrick: That.
Matt: together, this
Patrick: Is extremely compelling
Matt: and, uh, from
Patrick: many different.
Matt: kind of viewpoints.
Patrick: Yeah, yeah. No, that’s, uh, that’s, that’s fantastic. Uh, one of the things that I, I think is worth discussing, ’cause this, this might be the most important part of the whole thing. You talked about how [00:17:00] when you put more cash flow to the bottom line, it forces the appreciation.
Love, love, love that strategy. I think it’s the way to like accelerate your wealth. That all, uh, depends on the operations.
Matt: Yep.
Patrick: we’ve, we’ve done, uh, like I mentioned, we’ve been in real estate for over 20 years. Uh, we’ve done really good deals. I bought a deal that on paper was a, a home run, uh, that we didn’t execute on that well, and so it was a mediocre deal.
We’ve also bought mediocre deals that we just crushed it on the execution side, and it was a home run deal. And so it, it, like on paper, the things can look fantastic, but it all comes down to. Uh, operations and execution. I love that you’ve got all of the, uh, management in-house. You’re, you’re, you’re running, owning, controlling that.
Can you talk us through like operations and how you, uh, optimize those to make sure that we’re getting all the, the cash flow, appreciation, other factors we were talking about?
Matt: Yeah.
Patrick: Um,
Matt: so a lot of our [00:18:00] peers and competitors, uh, I’ll tell you what they do, Patrick, um, they look for a
Patrick: third party. Mm-hmm.
Matt: these assets. And when I say manage, a
Patrick: A property manager
Matt: typically
Patrick: collecting,
Matt: They’re, you
Patrick: you know, they’re paying
Matt: expenses. They’re
Patrick: they’re
Matt: keeping clean
Patrick: keeping
Matt: records, a
Patrick: profit and loss
Matt: a balance sheet working
Patrick: on,
Matt: things of that sort.
Patrick: we bring to table
Matt: that plus a vision
Patrick: For value.
Matt: And, and
Patrick: And what that is, is
Matt: a
Patrick: a property manager really isn’t gonna focus on growing
Matt: in a manufactured housing community
Patrick: because
Matt: it’s a
Patrick: a very in
Matt: and
Patrick: management.
Matt: um, discipline. You’ve gotta have an entire team dedicated to buying homes, prepping sites, laying concrete slabs. Logistics of moving
Patrick: those homes into those sites, setting up the utility, having having a marketing team in place
Matt: a
Patrick: call center to [00:19:00] take incoming calls.
Matt: convert those into sales, arranging financing.
Patrick: you could see there’s a lot of moving parts.
Matt: there.
Patrick: That’s what our team does.
Matt: that’s what we’re focused on.
You know, we’ve spent the last 17 years building out these systems, refining them, getting
Patrick: the,
Matt: out of them, and
Patrick: now
Matt: it’s
Patrick: really ai.
Matt: and
Patrick: Mm-hmm.
Matt: Where a
Patrick: A lot of that
Matt: has huge margins associated with it, because we’re able to cut back on labor, we’re able to cut back on a lot of these inefficiencies with some bespoke AI systems that we’ve developed internally.
We
Patrick: we
Matt: have a whole team that’s focused around
Patrick: ai, so.
Matt: lot more than what a property manage. Company brings to the table. We’re really an
Patrick: An asset manager,
Matt: kind of built into a property manager, and we have a whole team
Patrick: professionals
Matt: that are dedicated to different facets
Patrick: of those
Matt: All
Patrick: with the same mindset of
Matt: how do
Patrick: do we increase revenue, how do we cut costs?
Matt: how do we drive N NOIs so we can make outsized [00:20:00] returns for
Patrick: Yep. Yeah. I, I love it. ’cause here’s the thing, we found out, uh, you can hire a third party manager. They’re not gonna manage it like you’re gonna manage it, right? They, it’s not their own. And even if you manage the manager, right, like the squeaky wheel gets to grease. We’ve, we’ve seen that, uh, time and time again.
They’re still, when, if there’s a proper problem, operationally, they’re not that concerned about it, right? Like, sure if they collected a little more rent, they might get paid a few more bucks. But at the end of the day, like they’re getting paid. Um. Regardless, you, you know, whether you can make your mortgage payment or not.
You know, they’re, they’re still collecting their, their fee. And so, uh, I, I love that you’ve taken it top down and we, we’ve just seen the most success with that in our, our portfolio. We self-manage, um, everything. Uh, we don’t do. Um, my wife has one third party management contract, friend of a friend, but it’s like the last one they’ll ever do.
And, uh. Uh, and [00:21:00] so I, I think that’s a, just such a key factor in, uh, making sure that you, you start to execute on, on the deal and, and, and realize those, uh, those pro forma numbers as reality, so.
Matt: Well, I have one word for you that kind of sums it all
Patrick: Mm-hmm.
Matt: that word is incentives. when you, and, and I think
Patrick: You kind of hit on
Matt: just a moment ago, but when you have a property manager, they’re incentivized to collect rents,
Patrick: Yep.
Matt: which generates fees for
Patrick: Mm-hmm.
Matt: You know,
Patrick: For us, it’s different
Matt: We, we think like
Patrick: an because we’re mm-hmm.
Matt: invest a large
Patrick: Part of our own capital,
Matt: as an LP into our funds.
Patrick: we’re managing.
Matt: assets with an owner’s mindset. a property manager’s mindset because I think you hit it. You hit the point well, you know, Hey, I’m gonna collect the rent.
Squeaky wheel gets the grease. I’m not really gonna think about how to drive value. I’m not laying up in bed at night saying, Hey, there’s all these different [00:22:00] initiatives I could execute on. That’s gonna create tremendous value.
Patrick: Yep. When you’re an owner
Matt: think
Patrick: like that mm-hmm. You get your own money.
Matt: stake.
Patrick: Yep.
Matt: When
Patrick: You’re a
Matt: manager, you’re just clipping a fee and going on, and that’s where your incentives are. You can’t knock ’em for
Patrick: Yep.
Matt: So it’s all about aligning incentives properly to get maximum value, and that’s what we’ve done. I
Patrick: Yep. I, I love that. And I, I believe it was, um, there’s a, a book called Influence to Psychology or Persuasion and, uh, by Robert Kini and, uh, I love that book. Yeah. Yeah. It’s a fantastic book, but one of the thing,
Matt: talks about that book all the time. Um, I think those guys were friends and, and, and Charlie is, uh, is somebody I’d consider a mentor and looked up to for a number of years.
Patrick: Yeah. Yeah. I love it. And, but the thing that they, they, yeah. Uh, tremendous financial mind. Um, the thing that I, I appreciate about that book is, you know, people can say all sorts of things, but all you have to do is [00:23:00] look at their financial incentives and you’ll start to understand their, uh, their decision making and,
Matt: percent.
Patrick: Yep. There’s, uh, you know, so when, when our politicians say, you know, yes, they gave me some money, but, uh, it really didn’t influence my, my decision making, we know that’s not true. So,
Matt: Well on that same, in that same vein, I’ll tell you this ’cause you, in the beginning of our discussion you mentioned some of, of
Patrick: your
Matt: followers that perhaps invest in, in vehicles,
Patrick: mm-hmm.
Matt: syndications,
Patrick: Yep.
Matt: um.
Patrick: if they’re investing in a sponsor,
Matt: I,
Patrick: I, I think this is also relevant,
Matt: I
Patrick: I think one of the core
Matt: one of the key questions to ask before making a commitment, how much
Patrick: of your own.
Matt: do you have invested as an lp? it’s,
Patrick: Follow what they,
Matt: follow what they do.
Patrick: right. Yep.
Matt: put your money where your mouth is. If they’re willing to do that, they believe in
Patrick: Mm-hmm.
Matt: it’s just a fee arrangement,
Patrick: Right.
Matt: I, I would
Patrick: Yeah.
Matt: it.
Patrick: Yeah. Yep. And, and thank you for that. I, I [00:24:00] think that is so true.

Patrick: [00:25:00] I don’t know if this is something you can talk about. ’cause one of the things we’ve seen in, um, some of the ppms we’ve read, it’s like, oh, we’ve got. You know, we’ve got so many fees. I don’t know how the investor’s ever gonna make any money.
You know, like, uh, all of this is sort of getting stripped out all along the way. Now, I feel like people absolutely need to get paid for value, right? If you’re showing up and you’re doing management, you should get paid management fees. You should get paid asset management fees. But, uh, um, I like to make sure that, you know, as many conflicts of interest as possible are, are out of the equation.
Is that, I don’t know if you, you can speak to the, the fee structure at all, but I think that’s an interesting topic.
Matt: Well, I can. Um, and it is an interesting discussion, and I
Patrick: I think a lot of people are very shortsighted, and when I say people, I mean mm-hmm.
Matt: because if you fee your LPs to death in a, in a particular vehicle, okay, congratulations, you did quite well on one vehicle. Guess
Patrick: You’re done.
Matt: the last one you’re gonna
Patrick: [00:26:00] Yep.
Matt: You
Patrick: You have to think about,
Matt: like the, these are your customers and you want to, regardless of the way the the legal documents read, you wanna take
Patrick: Customer.
Matt: your customers. If you want longevity in
Patrick: Mm-hmm.
Matt: business, if you
Patrick: Yep.
Matt: out and you wanna launch
Patrick: Subsequent,
Matt: like
Patrick: right now we’re on 24. Mm-hmm. We’re gonna go out
Matt: you know, in the near future
Patrick: and
Matt: launch
Patrick: new vehicles.
Matt: We
Patrick: could be in a place where we
Matt: get to fund four and
Patrick: mm-hmm.
Matt: If
Patrick: We
Matt: feed our
Patrick: customers.
Matt: to
Patrick: Right.
Matt: they’d never come back. you really, the key to this is you gotta think with a long-term lens. And if you do, I think Warren Buffet always said it best be long-term greedy, not short-term, greedy.
And I
Patrick: Yeah.
Matt: of sponsors are very short-term greedy and,
Patrick: Mm-hmm.
Matt: not gonna last.
Patrick: Yep. Yeah, I think that’s great. So Matt, can you talk to us a little bit about your funds? You’re on fund four, I think that’s fantastic. Can you give us a little bit of, uh, of track record, how you like to structure the funds? ’cause I, I think there’s, uh, [00:27:00] I, I wanna, I want to, before you do that, I, I wanna highlight one thing that, uh, we’ve had people.
See before, and they push against, but I don’t know if it’s a wise thing to push against. Um, so the, uh, one of the funds we were, uh, one of the investments we were looking at, I think they were, they were talking about, uh, a longer term payout, like, you know, expect to be in this seven to 10 years. Something along those lines.
Now, I think that’s a fantastic opportunity for, uh, the, the deal to, uh, mature, really start to accelerate the cash flow. You might be able to refinance. Once, maybe twice in there. Uh, and so I, I think. A long-term hold makes a lot of sense. I, I’ve seen my, my, uh, I’ve got a family member that has made tremendous amounts of money in, in real estate, and, uh, uh, he’s highlighted a few of his mistakes and he sold a couple properties and those were the mistakes.
And he was like, I sold that. I bought that one for 45,000. I sold it for 56,000. I thought I was [00:28:00] rich. Uh, it just sold for 1.3 million. You know, he was like, I should have hung on to the thing. So, um. I, I don’t know if you can give us a little bit of your, your thinking on like how long the funds last and how to, um, you know, the investor can really, um, make money over the long term here.
Yeah.
Matt: I, I think you asked first track
Patrick: Record. Mm-hmm.
Matt: of hit on that real briefly and then we will talk about the, uh, the duration of the vehicles.
Patrick: So
Matt: our first fund, we
Patrick: realized about
Matt: gross IRR.
Patrick: irr
Matt: And that was a six year hold and
Patrick: that, that,
Matt: has gone full cycle.
Patrick: so we sold off all those investment
Matt: That fund is now closed. Um, we have funds two, three, and four. That
Patrick: are still open,
Matt: but
Patrick: but only
Matt: four is we’re raising capital.
Patrick: so
Matt: three
Patrick: and two
Matt: are
Patrick: are fully
Matt: We’re not raising any more
Patrick: capital. We’ve sold off
Matt: a
Patrick: a lot of assets
Matt: in those
Patrick: in those. Mm-hmm.
Matt: off more in two just because of its vintage.
Patrick: Yep.
Matt: Um.
Patrick: but [00:29:00] we still have several hundred million
Matt: of, of investments in both of those funds that are
Patrick: are
Matt: in various stages of that value creation process. those are typically 10 year vehicles, but just given how diverse the, the funds are and how many assets each one holds anywhere from 20 to. To 40 different
Patrick: Assets
Matt: We
Patrick: we have
Matt: events
Patrick: all during the life span.
Matt: the fund.
Patrick: So in year two you could have an exit. Mm-hmm.
Matt: a large distribution. You could have a
Patrick: cash.
Matt: refi in year one or year three. And we’re always making like distributions to our investors. And Fund two is an example we’ve already returned. the form of preferred distributions, return to capital and special distributions, all of the capital back to our investors. We still have
Patrick: More
Matt: of a
Patrick: million
Matt: of assets. We’re still throwing
Patrick: throwing off,
Matt: an 8%, um, preferred return. So that fund is,
Patrick: you know,
Matt: you
Patrick: have to
Matt: have to
Patrick: wait.
Matt: the
Patrick: Mm-hmm.[00:30:00]
Matt: event because you have different investments that you’re buying in different stages during
Patrick: The life span,
Matt: of the fund.
But
Patrick: typically these are
Matt: these are 10 year vehicles. Um, just to put things into perspective and I’ll, I will add one
Patrick: More things
Matt: Kind of
Patrick: of back to our conversation.
Matt: something,
Patrick: uh, that made me think of,
Matt: This is
Patrick: is my favorite
Matt: strategy,
Patrick: by the way,
Matt: for
Patrick: buying.
Matt: and, and holding real estate, is really to never sell.
Unfortunately, I have to
Patrick: Mm-hmm.
Matt: structure, but if you could buy an asset, you could control the NOI
Patrick: That’s
Matt: going to push
Patrick: that appreciation
Matt: and then
Patrick: instead
Matt: it, refinance it.
Patrick: Mm-hmm.
Matt: Pull your equity out and some pay no tax.
Patrick: Take advantage of.
Matt: depreciation.
Patrick: Yep.
Matt: have cash flow and incremental cash flow that grows year over year and just sit there and ride it out into the sunset.
That’s by far my favorite strategy.
Patrick: Yeah. [00:31:00] Yeah. I love it. And it seems like once somebody’s been in the game of real estate for a while, they, they start to figure that out and they’re like. This thing’s just a money machine and it’s a tax free money machine in lots of different ways. So, um, I think that’s, uh, that’s fantastic. Um, one thing you also mentioned, and, and I’m, I’m gonna nerd out on the tax side for just a minute.
Uh, I assume if, if we’ve got $200 million into the. The fund and, uh, I invest some dollars and then a, you sell an asset, uh, that did, gets distributed out to me in the form of like capital gains tax. If there’s, um, uh, appreciation there. Is that, is that how that would be or is it Yeah,
Matt: Well, when you have a fund,
Patrick: not necessarily.
Matt: Um, because
Patrick: Let’s just say that, uh,
Matt: you know, in
Patrick: any given you
Matt: could be
Patrick: buying
Matt: and selling various different assets. [00:32:00] Patrick, so
Patrick: That’s your example of let’s say that you sell. Mm-hmm.
Matt: gonna do north of a hundred million dollars in acquisitions in in 26.
Patrick: Um,
Matt: So
Patrick: yes, you,
Matt: you,
Patrick: you’ll sell an asset
Matt: there.
Patrick: there.
Matt: be a gain
Patrick: But when
Matt: but when you
Patrick: you look at the fund as a whole mm-hmm.
Matt: it’s gonna
Patrick: gonna be offset you’re gonna be doing.
Matt: cost segregation
Patrick: Yep.
Matt: you’re gonna accelerate that depreciation. So you could make a nice distribution from that exit,
Patrick: But that doesn’t necessarily mean
Matt: you’re gonna have a taxable event that flows through to your K one because you’re gonna have losses,
Patrick: mostly paper losses. Mm-hmm.
Matt: that’s
Patrick: Gonna offset that. Yep, yep. No, that’s, that’s great. And. Again, maybe a nerd question Do if, if I’m a real estate professional, um, do those losses from the cost [00:33:00] segregation study flow through to me? Uh, ’cause sometimes, like if I’m not a real estate professional, just to give listeners context, um, they’re, they’re treated as passive losses.
I don’t have passive income to offset those. And so they, uh, they just kind of sit there until my. Uh, passive activity starts to show up, and then it, then it offsets, uh, those losses. So, yeah. I’m, I’m curious about that. Would, if I’m an active, uh, if I’ve got real estate professional status, do those losses flow through to me or do they they stay at the fund?
Yeah.
Matt: I, I try not to opine in these
Patrick: It’s probably smart. Yep.
Matt: CPA or
Patrick: Sure.
Matt: However, with disclaimers and asterisk involved,
Patrick: Mm-hmm.
Matt: you my.
Patrick: Just my personal position, I’m a real estate professional. Mm-hmm.
Matt: I
Patrick: Check the box on that designation
Matt: so I
Patrick: I can use those.
Matt: I
Patrick: I think your question is
Matt: when I generate, would, would
Patrick: the
Matt: generate NOLs through accelerated depreciation [00:34:00] that could be used to offset gains from different real estate investment activities?
I think is the question.
Patrick: Yeah.
Matt: I, I do that.
Patrick: Um,
Matt: Um,
Patrick: I don’t wanna say that you could Sure.
Matt: Smith could
Patrick: Or anybody else could. Yep.
Matt: tax situation is slightly
Patrick: Definitely.
Matt: theory, based upon what you said, as a
Patrick: a real estate.
Matt: my understanding is yes, you can do that.
Patrick: Great. Matt, this has been fantastic. I feel like we could talk about, uh, opportunities all day long. Let’s say somebody’s interested in, in learning more, uh, I’m looking at crystal view.
capital.com. Uh, we’ll have links to that in the show notes. Uh, you got a ton of resources here. Where should people go to figure out what is kind of the next step in the process? Yeah. Wanted to learn more about what we do
Matt: our strategy, our approach, um, if you ever wanted to make an investment into, into one of our vehicles, you could, um, visit our website as you said
Patrick: Mm.
Matt: at [00:35:00] www.crystalviewcapital.com.
Patrick: reach out to our investor relations.
Matt: team at invest@crystalviewcapital.com.
Patrick: you could ask for a deck. Mm-hmm.
Matt: more information, perhaps some case studies on some deals that we’ve been involved in to help you
Patrick: Get a better idea.
Matt: of, uh, again, what the strategy is and what the return profiles look like.
Patrick: Yeah, no, that’s, that’s great. And, uh, I also see there’s a on-demand webinar too that, uh, people could, uh, plug into and just, uh, uh, learn a little bit more about, uh, all the good stuff you’re doing. So.
Matt: Yeah, there’s a lot of resources out there, a lot of webinars. Um,
Patrick: So, yeah.
Matt: we’d love to, uh, to talk more if there’s interest.
Patrick: Yeah, no, this is, uh, this is great. So I, again, I’m, I’m biased. I love real estate. I’m also, uh, aware that, uh, most entrepreneurs should stay focused on the main thing and the main thing is their business. Uh, when I go out and buy a duplex, like you were talking about at the beginning of the show and how you got [00:36:00] started, that’s like running a small business.
I need to go give my time and attention to that thing. And if I don’t. Uh, it won’t be worth anything near what I bought it for. Uh, the tenants will consume it. Uh, it’ll, it’ll just fall down. It’ll be a disaster. So, uh, when I think about that, it’s like I need to figure out how to leverage other people’s expertise.
Uh, I can bring my capital to the equation and then that expertise can go and turn that capital into a multiple of what I, I started with. So, uh, I think what you’re doing here is, uh, crystal V. Capital is exactly that. Uh, as an entrepreneur, I can come and I can go. Matt, you and your team do your thing. Uh, I’m gonna go stay focused on the main thing and, uh, it, uh, it works out,
Matt: Well, you know.
Patrick: for everybody involved.
Yeah.
Matt: Yeah. Yeah. And, uh, not, not to use, you know, buffet and Munger analogies all the time, but you know, these, these are two people I really looked up to, but they had a term for this, Patrick. It was circle of competence,
Patrick: Right? Yep.
Matt: So what you want to do is, this is
Patrick: My opinion, this is their [00:37:00] opinion.
Matt: You
Patrick: Wanna really focus on what you’re best at. Mm-hmm. Right? And
Matt: what you’re not the best at. Don’t fool yourself really understand what your circle of competence is.
Patrick: yep. Real estate is really a fantastic investment.
Matt: but you could see that the decades we’ve put into building our infrastructure here to really generate the returns that we have. I think it’s gonna be extremely challenging for somebody to kind of start from scratch,
Patrick: To go out there and build the ip,
Matt: and the systems and the.
Team, um, the
Patrick: the database, the relationships that we’ve built over two decades to generate the type of returns
Matt: in Alpha that
Patrick: we yeah.
Matt: if you just become an
Patrick: LP
Matt: you get access to all of what we’ve built. Yes, there is a fee.
Patrick: Yes,
Matt: is a carry,
Patrick: but the end of the day
Matt: those
Patrick: returns.
Matt: make sense to you, it’s a win-win for both sides.
And that’s, that’s why we’ve developed the funds the way we have. I wouldn’t try to go out there to be a heart surgeon.
Patrick: No.
Matt: I,
Patrick: Yeah.
Matt: what I do
Patrick: [00:38:00] Yep.
Matt: it’s this, and
Patrick: I’m not myself.
Matt: into thinking that I could do something better than somebody else who’s had years of training and practice.
Um, so it’s circle of competence. Understand where tho those boundaries lie. Yeah.
Patrick: Uh, I, I love it. And, and we’ve seen examples of this with our clients. Uh, we had one in particular that had. Uh, he had a, he had a business, he also had a mastermind group. He also owned three or four real estate deals, and once he sold off all the stuff and focused on the business, he just had an $80 million, uh, exit.
It’s like, yeah, that lean into your circle of competence, let everybody else do the other stuff. So,
Matt: A hundred percent.
Patrick: I love it. All right. So, Matt, I, I appreciate this. I think it’s so good. You know, if I, if I think about the stakes that are out there, you know, if the entrepreneur listening to this. You know, if you don’t get your dollars to work, you know, your, your capital remains explo exposed to volatility of the markets or maybe even underperformance if it’s just sitting in money market, there’s just missed oppor, [00:39:00] right?
Inflation. Just, and, and that’s another thing that we could probably have a whole conversation on, you know, uh, real assets, uh, are such a fantastic real estate hedge, especially when we’re collecting, um, uh, revenue from those. So. We, we have a missed opportunity here to build generational wealth. You look at people on the Forbes list, they’re doing one of two things.
They own a business or they’re, uh, invested in real estate. And so, uh, most of our listeners are doing the business side. Uh, compound it with the, uh, the real estate side and then just. Uh, we think there’s a fantastic diversification opportunity, you know, continued reliance on a single income stream or business exit.
It’s, it’s, um, you know, why not, why not diversify a little bit? And then, you know, when you think about what happens when you do take action, you, you’re building predictable, scalable cash flow outside of their business. They gain exposure to institutional quality real estate strategies and create long-term durable wealth with, uh, I’ll say aligned partners.
So, uh, Matt, I, I think this is, um. Uh, what you’re doing here is, [00:40:00] is, is fantastic and, uh, I, I appreciate it. Any, any last thoughts or comments before we wrap up? No.
Matt: I, I think this was
Patrick: Great. I really appreciate our time
Matt: together.
Patrick: Um,
Matt: happy to be a resource for you any of. Your listeners in, in any way we can.
Patrick: um, and.
Matt: and, uh, yeah, we’re, we’re available. So I thank you so much for having, having me on the show today. This was a lot of fun and, um,
Patrick: Happy to help you wherever I can. Wonderful. Thanks a lot, Matt.
Matt: Thanks Patrick.
Patrick: And that’s a wrap on today’s episode. Matt, thank you so much for your time, your transparency, and for sharing the kind of insight that most people simply don’t have access to. Genuinely one of my favorite conversations we’ve had. And to you, the listener, thank you for tuning in. I hope you walk away from this episode with at least one idea that shifts the way you think about your capital, your wealth strategy, and what’s possible when you stop leaving money on the table.
If this episode brought you value, do me a favor and share it with one person, a fellow entrepreneur, a business partner, a friend who’s been wondering what to [00:41:00] do with their money. One conversation can change everything, and you might just be the person who starts it. And if this podcast has been adding value to your life, please take a moment, leave us a review.
It generally helps us reach more entrepreneurs and keeps this community growing. Come back next week. We’ve got another incredible episode, and you won’t wanna miss it. And remember, you’re a vital entrepreneur. You’re vital because you’re the backbone of our economy, creating opportunities, driving growth, and making an impact.
You’re vital to your family, creating abundance in every aspect of life. And you’re vital to me because you’re committed to growing your wealth, leading with purpose, and creating something truly great. Thank you for being a part of this incredible community of vital entrepreneurs. I appreciate you, and I look forward to having you back here next time on the Vital Wealth Strategies podcast, where we help entrepreneurs minimize their taxes, master wealth, and optimize their lives.