093 | Faster Funding, Lower Risk: A New Approach to Real Estate Finance with Dave Kotter

Patrick: [00:00:00] Have you ever looked at a real estate deal and thought, man, if I had access to more capital or the right partner, I could have made that work. Maybe you’ve got cash sitting idle, and you’re tired of the same old stock market rollercoaster. Wondering if there’s a smarter, safer way to grow your wealth. If either of those sound familiar, today’s episode is going to blow your mind.
Welcome back to another episode of the Vital Wealth Strategies Podcast, the show where we help high earning entrepreneurs build and protect lasting wealth with strategies that the mainstream never talks about. I’m your host, Patrick Lonnergan, and today I’m sitting down with Dave Cotter, the founder of Hybrid Debt Fund and Integrity Capital, and someone who’s rethinking how real estate deals get funded.
And how savvy investors can get a piece of the action. Whether you’re a developer looking to move quickly on a deal without jumping through the bank’s red tape, or an investor who loves the idea of being first in line on a secure asset and earning equity style returns, you’re going to want to listen all the way through.[00:01:00]
In this conversation, we dig into how Dave’s fund gives real estate operators access to fast, flexible capital and gives investors the kind of risk protected upside it’s hard to find anywhere else. You’ll hear how they structure deals, how they manage risk, and how they’re filling the gap that traditional banks are leaving wide open right now.
And here’s the best part. We’re not just talking theory. We’re giving you a behind the scenes look at how seasoned investors are finding asymmetric opportunities where downside is protected and upside is almost unlimited. Now if you’re listening to this because you know you’re overpaying in taxes or feel like you’re missing out on strategies the wealthy use every day we built something for you, head over to vinyl strategies.com/tax to start building your custom strategy.
It’s where we share the exact tools, frameworks, and little known tax plays. That are saving our clients hundreds of thousands of dollars every year, and it’s where your next smart move begins. Alright, let’s jump in. Dave Kotter, thank you so much for joining us here today. I’m [00:02:00] excited about this conversation.
We’re gonna get into, I’ll say debt, which is, is good. It’s how businesses grow. We look at the uh, um, any kind of leverage just allows us to, to grow. And also thinking about on the other side of the equation, I’ve always wanted to own a bank, right? I love the idea of. You know, deploying my capital and earning interest on it.
And so I, I think we’re gonna get into all of those things today. But thank you so much for joining us here.
Dave: Thank you for having me. I’m excited.
Patrick: Yeah. So I think through, um, you know, some of the problems that the entrepreneur has, and I think there’s two ways to look at this, and we’re gonna start off on the debt side.
Mm-hmm. Traditional finding financing options are, are hard. They’re slow, they’re bureaucratic. I feel like I’ve got a turnover. Blood samples and you know, I mean, my first child. And it’s, it can be just frustrating that, you know, the lenders don’t understand the entrepreneur, the speed they need to work at.
Mm-hmm. The real estate opportunities out there and how quickly we need to move. And then, I dunno. I, I also [00:03:00] feel like, you know, philosophically capital should be something that shackles us and slows us down. It should reward competence. We think having a, a financing partner that knows how to handle those things is, is good.
So, uh, I think that’s one side. And then the other side is. You know, I just look at where my options are for deploying capital. Mm-hmm. And I can put it in the stock market, but that mm-hmm. Sounds somewhat risky. Right? Like, I don’t have any control over those businesses and they go up or down where if I can.
I have some peace of mind about putting my capital out there and getting, you know, a consistent rate of return back. Mm-hmm. It’s like that is more exciting to me and it doesn’t feel fair that I’ll say the, the big players get all of the advantage with the opportunities. So I think it’s gonna be fun exploring these things.
Can you tell us a little bit about your business and how hybrids works and, yeah, that’d be great.
Dave: Yeah, a hundred percent. So just as, as a quick foray, I mean, I’ve been in the business since June of 2003, so we’ve been [00:04:00] financing commercial real estate, uh, you know, over 22 years now. I guess. I’ve done over 500 deals.
We’ve done over 2.1 billion, and we decided a couple of years ago that, you know, through this experience to one of the points you just mentioned is that this is a very archaic. Business. I mean, you’re talking about banks and all these different groups that hey, they lend a lot of money. The challenge is the red tape, the slowness, and it’s very difficult to walk through quicksand.
So we decided that we want to do a couple things, do a fund, that we could start to build a process that was much more streamlined, expedient. Actually give the ability to not have things that don’t matter. And there, plus we wanted to also have something that was nichey unique and different. We didn’t want to just be a private money lender.
And so this is really what [00:05:00] is considered a stretch senior loan. And so if you think about when you go in, you get a 65% loan, you raise the rest of 35%, whether that’s pref or common. Mm-hmm. That’s the normal deal. What we do is, it’s a spinoff of a couple life companies do this, which is what’s called a participating mortgage.
So what happens is we take a first deed of trust, we stretch it all the way up the stack, and we could go up to 90%, sometimes even higher. And it’s one loan. Uh, we have the first deed. We are not in the limited partnership at all, so we don’t have ownership. And so what happens is we do a three year note.
We do it on construction and bridge situations where there’s upside, and then we take a 30 to 35% upside participation with the developer. So that means that when you get to cash flow, if you do during the time, we take 35% of that. If we get to reversion, we take [00:06:00] 35%. It’s not complicated waterfalls, it’s just straight.
Mm-hmm. 35% reversion. What it does is it offers and solves for the problem of a couple things. One, you know as well as anybody that when you have to go tie up a property, then go figure out debt, then try to coddle together, like there’s so many moving parts. Mm-hmm. That how can we consolidate that and simplify and then also it provides for somebody not to have to try to go give as much away.
To somebody as well. So there’s, there’s a lot of benefits that I can go to. That’s the genesis and the impetus of the hybrid debt fund for this specific product.
Patrick: Yeah. Yeah. I think this is fantastic because I, I think there’s so much opportunity out there to take advantage of deals, but like you said, the slowness of the process, by the time you get it all together, like the deal falls apart.
So, so, uh, just to. Get some clarity on how these opportunities work out. Mm-hmm. Are [00:07:00] you looking specifically, so these are development deals, right? Mm-hmm. Like it’s a project that, is it typically ground up? Is it a Yeah, I’m gonna buy this, uh, you know, old building and gut the thing, renovate it completely.
Like, is it, is it any kind of development? Do you, can you give us some specifics on those types of deals?
Dave: Yeah, so I would say a couple of food groups. So. Apartments, whether that’s ground up construction or rehab. Our preference is rehab. And the reason why I say that is just because we can get dollars out quicker.
We’re not having to go through the slog of construction, but we’ll do it. Yeah. Uh, retail is at the top of the food chain right now. So retail rehab or retail construction. Uh, industrial, small bay industrial too. It’s a big, big fan of that. And we can do medical office. Uh, I would say we could do storage, although that’s a little tricky ground up just because it’s a longer process.
Takes usually four years. [00:08:00] Gets tricky on some of the the IRR hurdles. And then the ones that we’re really starting to explore now that I’m a big fan of is mobile home parks and even rv. And ironically, I actually we’re dev, we develop RV Park. So I understand that world a little bit as well. Yeah. So yes, those are the food groups and we can do construction and rehab preferences.
Rehab,
Patrick: yeah. Got it. And just to preferences reiterate, we’re typically looking for projects that have a. A value of $5 million and up, like when we’re all said and done, we need to be at least at that, that threshold. Otherwise, it just doesn’t make sense to, to get involved.
Dave: Yeah. Our scale is five to 15 million in loan sizes typically.
So you could end up around 18 ish, give or take, but yeah.
Patrick: Great. Now I, you highlighted something that I think is important and I’d like to dig into that on maybe all the different food groups. So one of the things you said was we develop RV parks. Mm-hmm. [00:09:00] I’m fascinated by RV parks. We went and visited a friend that rented a space and borrowed a, rented an RV and parked there ’cause their kid wanted to like enjoy the weekend camping.
And I was like, yeah. The place was packed. It was insane to me. And there was, I dunno, I was just driving around looking at the business model and I’m like, this is so interesting. So, yeah. The reason I bring that up is you have experience in RV parks, so you’re comfortable making loans on, in that side of the equation.
Mm-hmm.
Patrick: Can you tell me how you manage the risk on, I’ll say the, the multifamily, like, because. Being in the real estate game myself, we look at there’s good deals.
Yep.
Patrick: And then you need execution to make it all come together. Right. Like you have to have somebody that’s on top of that development and making sure it’s on schedule, on budget, otherwise the whole thing starts blowing up.
And so, oh yeah. How do you make sure that, uh, you know, those things all work themselves out?
Dave: That’s a great question. I would say our philosophy, [00:10:00] and this has been formed over the 22 years. We always start with the sponsor. Mm-hmm. Because I’m just a big believer that it all starts there. That sponsor that is really dialed in and understands their craft.
Right. They become a little bit of a geek around it. They know their backyard, they understand the neighborhoods and what’s a good area, what’s not. They are financially sound, meaning that. You know, they have the appropriate net worth. They have some cushion with liquidity. So it, to me, it always starts with the sponsor because that is the person who does the due diligence.
That’s the person that’s going to execute or not execute.
Mm-hmm.
Dave: And have the makeup, I’ll say the design, to really already be wired to say, I’m going to be executing and managing this. Otherwise, it just flops. The second component obviously are the economics. So for us. The way we [00:11:00] mitigate risk for our investors is a couple ways.
That’s the first one. The second one is we look at the economics, so we always look at what is the delta between the yield on cost that you’re developing to and that exit what your estimated exit cap is. We have to have about 150 basis point or higher spread. Just because we know that things don’t go as planned, there’s gotta be room for error.
I know that sounds surprising, that things don’t go as planned in
Patrick: a construction project, right? Shocker. Yep. So
Dave: just having that cushion is really, really important. And then we obviously go to that third layer of what I would call. The wave that you can’t control, right? Mm-hmm. So if I go into an economy or a location where feet are coming in and you have jobs that are coming in, it’s just moving in a [00:12:00] direction that’s way outside of your control.
And so those are the things we’re saying. Are we in the path of growth that’s just gonna take its natural course, or are we going to a place that’s dying off or just doesn’t really have anything for that matter? So those are things that. We tend to look at to start, and then you start getting into little nuances.
But I’d say overarching, that’s how we try to mitigate risk at the end of the day.
Patrick: I love that. And, and that’s one of the things we’ve talked to our clients about. You know, we’ve had clients approach us saying, Hey, can we be invested in some of your deals? And we’ve sort of pushed against that just because I, I sort of like to keep, you know, we’ve got one deal that we’ve had, uh, people invest in and it, it’s worked out fine, but, um.
Uh, I’m, I know the deal that we open up to people will be the deal that blows up Right. In a bad way and they’ll be like, well, dang it. Right? So, uh, we always tell people, go find an operator, somebody that’s really good at, you know, their craft, just like you said. And [00:13:00] then second, I think the numbers matter, right?
Like looking at the proforma, and not just the proforma, but is there realistic? Yep. Data in there. Is there realistic assumptions? Right. And I think having somebody that can help. Analyze those that seen a number of deals is critical to the equation. And then again, economically, are we investing in a place that is, is trending in the right direction?
Mm-hmm. Versus like dying a slow death. So that, that last piece leads me to a question. Is there areas of the, of the country maybe that you’re like, it’s hard to invest there because the economics don’t work out as well as, you know, over here?
Dave: Yeah, it’s a great question and I think it depends on, obviously, you know, the location, the timeframe we’re in.
Like for example, right now in Phoenix, if you had bought, I don’t know, a year, [00:14:00] two ago for an apartment complex, probably not a great time just because the rents are soft. You have oversupply right now, flip that narrative a little bit. If you’re going into develop right now, probably not a bad idea because what’s gonna happen is when we get to the end of 26, that is gonna flip.
Where now there has not been construction going on for the last three years. Yeah. And so, you know, there’s a little bit of strategy that goes into there, I would say, depending on, you know, that sub-market and so on and so forth. So those, those are areas I would say there’s areas in Texas mm-hmm. That are a little concerning.
I mean you get into like DFW, it’s good, but then you start to get on sort sort of these outskirts. I’ve looked at a couple things in Midland and I’m like, I don’t know it. It’s just you get into oil boom and bust. All of a sudden things go up and then they can crash real fast. So in tertiary markets, I’m not necessarily [00:15:00] afraid of ’em.
I would say there just has to be a really good story of why. What’s the justification? Because when things get soft, that’s gonna be, obviously there’s parts of California that you’re kinda like, I don’t know. Maybe, maybe not. Uh, yeah. You know, uh, I just hired, I hired a couple of people out there and I’m getting like, tax bills every, I’m like, what am I, why did I do that?
So, you know, there’s, there’s areas that definitely have a question mark on them for sure.
Patrick: Yeah. Yeah. No, that’s great. And one thing that I never really thought, because we’ve been investing in real estate for over 20 years, I never really thought insurance was going to be a factor. And when you bring up California, I’m like, man, you know, the cost of insuring a property is is expensive.
If you can get coverage, you know, it really is interesting. So. The economics definitely make a difference there. Yeah. And one thing you, you highlighted that we, I remember reading this book probably 20 some years ago and talked about building permits and you could almost see, and, and they liked [00:16:00] this book’s methodology was around, we’ll say major metros with the university key employers, you know, that type of thing.
And it would look at, it was like, every city will go through ebbs and flows of building and then it’s oversupplied. Then no building permits are issued because people are like, oh, I can’t, now is not the time to build. And then when that is at a trough, it’s like, okay, now is the time to start the development process.
And uh mm-hmm. Uh, and I think you, you highlighted that with the Scottsdale example. So I think that’s, there’s a lot of wisdom to that. I think it still holds true today.
Dave: Yeah. I call ’em wisdom wounds. So if you can see my gray hairs, they all have a story to ’em. Mm-hmm. That’s where part of the advantage of coming in with some wore gray hair, they go, I’ve seen that rodeo before.
Patrick: Yep. Yep. And you know, my hair all fell out, so it’s, uh,
Dave: who knows which one’s better. Right.
Patrick: That’s right. But I’ve learned just about every lesson in real estate on what not to do by just screwing it up. Yeah. You know, uh, personally, so
Dave: totally agree.
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Dave, we’ve talked through the, how you sort of mitigate the, the risk. Now. Can you talk us through, ’cause I, I think it’d be interesting to talk through the other side. Okay. Mm-hmm. So, um, I’m an investor and I’m like, Hey, I like the idea of investing in. These projects. Mm-hmm. And can you walk us through what that looks [00:18:00] like?
Dave: Yeah, so for an investor coming in, and this is part of the reason we fell in love with this, is that, you know, when you invest in something, it’s always, you know, people say, well, I’m making X amount. And I’m like, well that’s good. But you always have to look at what is the risk adjusted return. Like what mm-hmm does that mean and what kind of risk are you taking on?
So somebody comes into an equity pool for us and it’s uh, obviously Reg D offering, someone has to be accredited investor. But what happens is they come in and for us that equity pool is what ends up taking the first deed of trust against the real estate. So it’s here you have this secure instrument against the real estate.
Someone gets a consistent 5.5%, you know, income that is paid out quarterly. It’s just sort of ebbs and you know that’s what you get. Mm-hmm. And then what happens is when we go to reversion, whether that’s the cash flow. Or that three year mark comes up, then we end up doing a pro rata share that goes [00:19:00] 80 20.
So we do an 80 20 waterfall to the investor that goes up to 13, and then everything after 13 is a 50 50 split. So, pretty simple, not too complicated, but the, again, the benefit is you get the benefit of having a deed of trust, a secure instrument against a property that if things go south, you can.
Foreclosed. Hopefully that never happens. Yeah. But you have the ability and control. You don’t have the risk and the legal risk of being in the equity side of it as well. Mm-hmm. Yeah. And so you mitigate that plus you get the, that pop that upside mm-hmm. That you get to share with them. So it’s a little bit of the best of both worlds, uh, where somebody comes into multiple projects as well.
So that’s the, that’s the genesis of how it works. Yeah. For the investor.
Patrick: Great. And just to clarify and maybe ask a few questions there. Yeah, please. So, a deed of trust and a mortgage. Mm-hmm. What we’re saying there is I’m in a first position from a collateral point of view, right? That’s correct. So [00:20:00] if, if I think about, uh, the first rule of lending, it’s collateral, collateral, collateral, and maybe for second and third rule, right?
And so we never want to put money into a deal that. We think is going to go bad.
Yeah.
Patrick: Okay. But the reality is sometimes they do. They do. And so it’s like, let’s, let’s look at the worst case scenario and how do we protect ourselves? And the way you protect yourselves is you have a collateral position that says, cool, I’m first in line, right?
Mm-hmm. Like if this deal goes poorly, I foreclose all of the rest of the equity can do one of two things. They can come pay me off, or I just get the asset with all of that equity sort of baked in. So. I just wanted to highlight that piece. ’cause I think that’s awfully valuable from understanding the, the risk profile.
Right? Yeah. I’m in a different position here when the certainty that, you know, I think of Warren Buffet. Warren Buffet says the first rule of investing is don’t lose risk principle. Yeah. Second rule of [00:21:00] investing is don’t forget the first rule. And so like that’s what you’re doing here. You’re protecting that principle.
And then also when we start thinking about, you know, the additional upside layers on top of that, it’s, uh. Uh, it looks attractive, so, um, good. Anything else to add
Dave: to
Patrick: that?
Dave: Yeah, I think it’s important too. It’s interesting you talked about stock market earlier. I just did a little piece on this that that’s coming out next week on, you know, the stock market.
You know, and I’m not a, Hey, it’s this or that. I mean, people mm-hmm. Do it all the time. I’ve done it myself. But just as a supplemental thing, I mean, you look at the private credit. Market. Mm-hmm. It’s a really interesting market. It’s 2.1 trillion. We are considered a private credit instrument, but there’s a distinction between, most private credit are against businesses or credit cards.
Mm-hmm. So that is a very nuanced piece of this is to know that like, yeah, you do have collateral, uh, that is tangible that you could actually do something with, [00:22:00] as opposed to in the stock market, you, you don’t, you’re just kind of floating around in the space. So I think it’s important when people do their due diligence to really understand like.
What am I investing in? What’s the collateral? What does that look like? Risk, risk adjusted returns. So,
Patrick: yeah. Yeah. That’s great. And then one thing to just clarify, when I think about the investment, am I investing in a particular project? Is there five projects? Is there 20? Uh, when I, when I put in my investment?
How does that get
Dave: Yeah, it goes into multiple projects. Obviously we’re in the genesis of our fund, so it’s gonna start here and go to here. Mm-hmm. Mm-hmm. But the idea is that it’s going into an expansive pool of deals. So it’s, it’s that that’s what we are doing is building a pool of deals that someone’s going into that’s spread amongst multiple things.
Yeah. Which is the idea of diversification.
Patrick: Yeah. Yeah. I like that for a few reasons. A, if one deal goes bad, now I am, I’m protected in that deal with my first position, but it [00:23:00] can take a minute for me to get my money back. Right. Uh, just going through the process. But when I’ve got that spread around, um.
That, that spreads out the risk. And then another thing that I also think is interesting is I’ve gotten into deals that I’m like, this deal is the best deal I’ve ever done, and it works out to be an average deal. And then I’ve gotten into deals, I’m like, this is a pretty good deal, and it can turn out to be a home run.
Oh yeah. And so it’s like, I never know if they’re gonna work out, you know, there’s luck involved. There’s all sorts of interesting pieces. So,
Dave: uh, variables. Yeah. Well, well, and I think. From a ri, from a risk perspective too, what we’ve done is, so let’s say that something doesn’t go awry. We actually bake into a loan loss reserve.
Mm-hmm. So that gets billed into this bucket. So if all of a sudden there was a default, it first goes to that loan loss reserve, right? Then it flows over to the management company, up to their contribution. Then the final is back to the investors, right? So [00:24:00] it sort of goes through this process that you have to, there’s so many layers of things that happen before something goes completely off the rails, but, mm-hmm.
Um, you know, you just have to think through those things and when you first get into it, you try to look at, it was funny. I was just on the phone with a vendor and I was laughing because they were presenting something to me and it was not accomplishing what we wanted at all. What she said to me, she said, well, I think you just need to be really positive.
And I looked at her and I said, but this isn’t accomplishing what I did. So I said, there’s a difference between being optimistic and delusional. So there’s this, I said, I’m a realist. So you just have to walk through like, what? What could potentially happen here outside of an act of God? That you could really get your arms around.
And that’s just a little bit of how my mind works, so,
Patrick: yeah. No, I, I love that. So there’s, there’s a few different things I want to, I wanna think through. So the, the next thing is, um, so I invest my money in a deal.
Mm-hmm.
Patrick: What, what does the communication look like? Yeah. What can I [00:25:00] expect from, uh, I don’t know.
Yeah. Reporting, updates, that type of thing.
Dave: Yeah. Somebody comes into a deal, they make a capital commitment that does a draw down, that starts the clock on the returns. We communicate every quarter, so they get all the communication what’s going on in the fund. They get all the financials, everything gets uploaded into a portal, so they get to go into this nice clean portal where they get all their reports.
They get everything on a consistent quarterly basis so they know what’s happening. Plus they get all of their K ones and everything goes into a portal. So it’s nice and centralized. It’s communicated real clear, and there’s a cadence to it. Yeah, there’s probably more frequent communication than that, but that’s the tagged quarterly communication so people know what’s going on, plus they know where their money’s out.
Patrick: Sure. Yeah, and I think that’s good. And especially with development projects, it’s like there actually isn’t that much information that can be distributed. It’s like Correct. Still on track, right? [00:26:00] Still on budget. I think that’s good. So we always love the tax angle. Uh, sure. So I don’t believe there’s probably a huge tax angle outside of maybe investing.
I could see if I had, you know, a quarter million dollars in my Roth IRA and I’m like, Hey, this could be a cool opportunity to mm-hmm. You know, invest those dollars tax free and get some really good upside. But I don’t assume that I’m participating in any of the, we’ll call it depreciation or any of the tax benefits of the underlying real estate.
It’s debt.
Dave: Yeah, the, the, this has been an interesting discussion because it, there’s this tension point of like, we’re not in their lp, so we have withdrawn ourself from the risk. Mm-hmm. We’ve also withdrawn ourself from the benefit of the depreciation. Yeah. So which one do you do for now? We’ve just said that’s better suited for the investors.
We also are considered additional interest, right? So it’s really ordinary income. At the end of the day. It’s not capital gains. One of the things that we have [00:27:00] not quite cracked the code, but we’re getting closer, is if there’s an opportunity for us at the very last minute to clip into, uh, what would be called non-binding ownership at the very last minute.
So where all of a sudden it turns into capital gains. Mm-hmm. It’s something we’re trying to figure out. We actually looked at a warrant. And it got way too complicated. I was just like, after about, you know, six iterations of like, this is gonna get way too complicated to try to figure out a warrant. But anyways, for now, that’s what it is.
We are trying to work towards something where it might turn it into cap gains. We’ll see.
Patrick: Yeah. Yeah. No, that’s, that’s great. And you know, I, one of the things that we like to do for our clients is work on that, that, uh. That income tax number, right? Mm-hmm. And so on average, we’re saving our clients $280,000 a year in income tax, and typically they’re running out of cashflow before we run outta strategies.
Wow. So it’s like, hey, if you’re kicking off new cashflow, it could just open up new opportunities [00:28:00] for people to offset some of that income. Now we do love our capital gains tax strategies as well, but they’re not as regular as the income tax. Right. The income tax shows up every year whether we like it or not, so.
Correct. Very good. Let’s see. So I’m just thinking through, if somebody’s listening to this and they’re like, Dave, this is a fantastic opportunity, what would next steps be? Yeah. How would they, if they go about sort of learning more and getting plugged into the process?
Dave: Yeah, a couple of ways. Easiest one is go to hybrid debt fund.com, which is H-Y-B-R-I-D, debt fund.com.
The other one is just to reach out to me at Dave dot cotter@hybriddebtfund.com and either one of those ways you can connect with us to walk through the processes stuff on the website that you can download to get more information as well as connect with us personally.
Patrick: Yeah, no, that’s great. And we’ll have links to all of that in the show notes.
Yeah. And Cotter is spelled with a K, not a, a c. So that’s, uh,
Dave: welcome. Welcome back. [00:29:00] Welcome back, Kotter.
Patrick: That’s right. It’s good. Yeah. ’cause I, I think this is a fantastic opportunity. We have clients that are regularly looking for new opportunities that aren’t in the, you know, traditional mold. They’ve got excess cash flow and they’re like, Hey look, I can tie it up for a minute and I don’t necessarily need to.
My dollars backed. And I guess that’s a question I have. Like what is the commitment timeframe if I put my dollars in? Yeah. When can we expect those to return?
Dave: Yeah. That’s the other part of it, which we think is good, but it’s not like a highly liquid instrument, right? Mm-hmm. Like you can’t get outta 90 days just because we’re doing, you know, construction and rehab.
So we have a fund that has potentially a two year, you know, sunset to it, just depending on where projects close out. Mm-hmm. So somebody comes in, it’s more of a long-term commitment. You gotta know that we’re building kind of a portfolio of these. And, uh, so that would be the time horizon. I think there’s some ways to get out with some minor penalties, but yeah, that’s, that’s the timeframe.
Sure.
Patrick: Yep. And I think that makes sense. Like that’s, that’s the direction this is [00:30:00] and people need to be aware of that. Like, this is not your, you know, Amazon stock or Yeah. You know, ETF bond funds. Yep. That’s how you can buy and sell today and tomorrow, so, correct. Okay. Yeah, no, I think that is great. Dave, is there anything else we should be thinking about, talking about, uh, before we, before we wrap up?
Dave: Yeah. I think overall, I think we’re at a really unique time right now where we’re just excited about what we’re doing because it’s really hard to get equity and we’re in this weird precipice. You know, banks aren’t really lending that much. They want tons of deposits. You’ve got, you know, institutional equity on the side.
So it’s just a, it’s a great time. Mm-hmm. I think right now to be getting into the market. Because we think there’s tons of opportunity that we’re seeing, so,
Patrick: yeah. Yeah. No, and I, I just wanna echo that. Like we’ve seen some lenders that were very aggressive when interest rates were really low. Mm-hmm. And now they, I’ll say, made some bad bets on mm-hmm.
How they were investing their portfolio [00:31:00] and they had loans and their investments sort of not lining up from an interest rate perspective. And, you know, FDIC starts coming and looking closely and, you know. Putting the clamps on those, those organizations for making really any additional loans. Like we’ve seen some commercial lending departments completely shut down at banks.
It’s like,
Patrick: wow, okay. That’s interesting. That’s hard. You know, we think about the economic engine of our, our country, and it’s how freely cash flows, right? Mm-hmm. And if the banks are shutting that down. I love that you’re stepping into that gap going, Hey, we can help make projects work and get things off the ground and sort of keep, keep our country going.
So you’re, you’re doing a patriotic duty there. I
Dave: appreciate it. There we go. We’re contributing to the us right? It’s, yeah, I mean, I, you know, banks used to be 15,000 of them, now we’re at 4,000. Mm-hmm. And it’s just, everything’s kind of moving to that private world, and I think we’ll keep seeing that.
Patrick: Yeah.
Very good. And then on the other side of the equation, let’s say we’ve got lots of real estate friends and mm-hmm. Clients that are, are [00:32:00] listening that could be listening to this. If somebody’s interested in like, Hey Dave, I want you to take a look at our project is what, what is the process there?
Obviously they can email you, but is there a better way?
Dave: Yeah. Uh, you can reach out 6 0 2 3 6 7 8 7 9 5 and we are actively wanting to deploy right now, so mm-hmm. We are, yeah. We’re looking for deals and we, you know, those are the general tease points that we talked about. Yeah. But I would say we’re active, so if someone wants to look at a deal, we’re ready.
Patrick: Wonderful. That’s great. And I mentioned before we started recording that I might have to reach out. Sure. ’cause we’ve got some projects we’re working on and this could be a great fit. So there we
Dave: go.
Patrick: You know, I’ll, I’ll, you’ll be funding one deal and then I’ll be putting money in as an investor on the other side.
So
Dave: we’ll have a podcast on the post script, how when it goes. All well.
Patrick: There we go. I love it. I love it. All right, Dave, this has been great. We will have all of your contact information Thank you. In the show notes. I think this was fantastic. And you know, I, I think about just the opportunity that you’re [00:33:00] presenting.
Mm-hmm. I think there’s opportunity to invest in these projects. We’re keeping the risk profile lowest possible. Mm-hmm. But we get to enjoy the benefit of the upside, which is the best of all worlds. Yep. So, uh, I think that’s great and we think about the wealth building in general, that that can generate.
And when we don’t take advantage of those opportunities that have, you know, anytime I have a floor on my downside and I’ve got almost unlimited upside, I, I like those risks. That’s fun. I think about, uh, Nain Tale, uh, came out with a book called Antifragile and he likes those bets. Right? Like there’s a floor to my downside.
Mm-hmm. And there’s, uh. You know, no cap to my upside. Like those are, those are fun. And so I think you’ve done a great job putting together opportunities like that. Yeah. And so we just appreciate that. And then on the other side, if you’re making poor investments, like where you’re taking on lots of risks without a ton of upside, I look at, uh, a good example, some of the.
Some of the revenue [00:34:00] numbers that are coming into like sales figures coming into like Tesla and that type of thing, and the multiple they’re trading at. Mm-hmm. They would have to shut off operations, not buy any raw materials. And it’s still gonna take you a decade for them producing the same revenue without any employees or any raw materials to get your money back.
And I’m like, in what world does that investment make any sense? Wow. Like there’s not much upside there and lots of potential downside. And so I appreciate you bringing opportunities like this to the marketplace. I think it’s can make somebody, you know, really sort of transform from the average investor to the accredited investor that they are, right?
Like that needs to be, they gotta be over that threshold, but like, hey. There’s some real wisdom to taking advantage of these opportunities. So thank you. I appreciate it.
Dave: Yeah, thank you. And yeah, it’s interesting in the stock market because you, it’s almost this story narrative that you’re trying to buy into as opposed to the mm-hmm.
Like being able to, in fact, I had a friend who was on the board in a company owned. As the top guy and he said, I [00:35:00] still don’t know what’s going on. I thought that’s not good.
Patrick: Yeah. Uh, so yeah, absolutely. Good stuff. All right. Thanks so much, Dave. Thank you. Thanks so much for tuning into this episode of the Vital Wealth Strategies Podcast.
I truly hope you found value in this conversation with Dave Cotter. Whether you’re thinking about accessing capital for your next real estate deal, or looking for a smarter way to grow and protect your wealth outside of Wall Street. This episode sparked any ideas for you or reminded you of someone who needs to hear it, go ahead and share it with them.
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