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Family Office Ringleader. Looking for Flows & Vibes. "The Real Life Cousin Greg" Investing/Tax/RE/Estate Planning/Alts/Memes
Tax Haven, USA
Joined December 2020
For anyone watching the latest Ponzi collapse in Sonoma CA by a couple of guys that bought up 100+ properties totaling ~$250m (which they did nothing with & allowed to rot), this little nugget was recently disclosed. Ken Mattson was not only scamming elderly folks but also
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I'll give the long-form counterpoint to SMG's buy & hold argument. First, I'll give Don credit for what seems like an honest answer and saying what many GPs won't, which is that he is getting paid on the promote and is not interested in subjecting his payday to timing or.
Sorry. I donโt believe in buy and hold. Why?. Skip to 37:11 in the video for my explanation ๐.
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@rohindhar I know this property well - new construction, built literally right on the highway, zero land, and frankly butt-ugly. Cut the price in half again and maybe they'll find a buyer that thinks the road noise is tolerable at a 75% reduction. ๐คฃ.
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@EllliotttB Should have gifted that hot turd to a non-profit before the FCL sale to avoid the recapture. This sounds like a grifty 503c - we'll be the dumpster for your worthless LP interests loaded with recapture - just gift us 50% of what you would have owed the IRS.
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This whole sell vs hold debate revolves around different investors with different motivations. @realEstateTrent is a GP/Operator running a business. He's found an inefficiency in strip retail, he's exploiting that, adding value, and monetizing it. That exit cash pays his
Appreciate this ๐๐ป. Like many, we typically buy and sell in under 5 years. If you take our 29 exits and apply a 50% LTV and our fees, the net annual return to investors is 23% (IRR). We use our niche expertise to buy them right, hustle like crazy to add value, and donโt take.
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@rohindhar Pretty good odds that barn was once a grow house and now priced at $420k. I think they'll get their bid here. ๐คฃ.
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@cre_cole Love everyone in replies is hating but at the same time looking to build "generational wealth" and thinking this won't be their kids/grandkids if they succeed. ๐.
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@rohindhar The winner on this transaction is San Francisco County - Property taxes going from $2400 (!?!?!) up to $35,000+. Prop 13 is a hella of drug!
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@LeylaKuni I get the point but I'd respectfully take the other side here and say that pro-formas are just a (hopefully reasonable) best guess by the GP going into a deal. There are a ton of risks going into these deals, some esoteric (ie, did you scope the sewer lines on this unrenovated.
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@moseskagan One of my fav stories is that we once paid $1 for an extremely derelict (but v historically significant) building which we subsequently restored into a boutique hotel. What do you think it appraised at?. Negative $250k. which was demo cost plus land value!?!?!.
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IRR zealots are in the feed again. Still don't understand why this metric creates such division in the GP/LP world. I think we can all agree that LPs who blindly invest on IRR & GP's who spoon feed them high IRR projections with rediculous assumptions should die a firey death,
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@rohindhar Not at all. Most lakefronts are fairly deep/narrow lots and have some setback from the road but obv depends where you are along the 72 mile road! This is prob the skinniest lot I've seen built on & no way it would have been approved by TRPA w/out the grandfathered old building.
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@Levijameshere Bad look IMO. If it's such a smoking deal, increase your co-invest to show your conviction.
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LP's - when you're out there looking at private RE deals at 2&20, 2&30, or 2&40 fee & promote structures, remember you can go buy listed REITs like PLD that charge you 35bps, zero promote and you even get to share in their JV GP income from their private deals. .
Prologis G&A is 35bps as a % of Gross AUM. How much better do private returns need to be to outrun the fee drag?.
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@chernobelskiy Wouldn't bother - no reputable GP worth investing with is going to negotiate small checks that your customer base is likely writing. Frankly, if they are offering side letters on 5/6 figure checks, it's probably more of a red flag. .
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@Levijameshere Counter argument is that 90+% of OZ investment dollars are going into the top 5% of OZ census tracts that probably shouldn't have been in the program to begin with. This coming from a big OZ investor. ๐.
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@JohnJBlatchford Guys that invest solely for pro athletes also throw big red flags. So many nightmare stories in this space. .
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Got my paws on one of these "feeder funds" that raises capital for Rise deals & its just a Rise deck with an extra page for the dentist putting the thing together and charging you an extra 2% acquisition fee and 50 bps/yr. This bio is literally all the value they are adding.
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@TheRealEstateG6 I'm not against screening your LP's and finding value-add partners but I'd argue *most* GP's prefer truly passive limited partners. and I'd prefer to invest with a GP i don't need to actively manage. Not being a PITA to the GP has more value than meets the eye. .
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@ScottChoppin #2 is ridiculous. lots of great people in the world that aren't married and/or don't have kids whether it be their own choice or reasons beyond their control. ๐.
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Its the "Best Ever" time of the year again, where LPs somehow get duped into paying $4k to listen to these capital-incinerating GPs pontificate on the market & if that's not enough, you can even eat a "VIP" breaky w Mr. Rise himself & ask about the status of the 38 other assets๐
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It's a shame that investors can't get self-storage exposure without subjecting themselves to illiquid private syndications that have 3% acquisition fees, 50% promotes and giving up 50% of their depreciation allocation. Maybe the free markets will figure it out one day. ๐
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@realEstateTrent LPs not proceeding based on final K1s by 3/15 are not savvy & short-sighted if they'd commit otherwise. Filing on extension is part of the deal investing in privates, esp in any secondary funds. Better question is what prelim tax reporting the GP does in both Dec & April b/c. .
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@Wildlaw406 Lesson here seems to be that insurance coverage is critical at every entity layer. That said, it seems the LLC structure did protect ownership from personal liability? To me, that that is key liability protection with an entity wrapper.
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What a gem this is, courtesy of our fearless leader @mu2myoc aka "Boomer Mindset" who actually responded to this hard hitting reporter's inquiry. ๐คฃ. Web archive link since we know no one subscribes to this garbage (RIP Fortune) -
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@scottyo21 Where do we start. - State level K1s & filing requirements.- Tax planning in general - very hard to plan around tax events within a fund that you have zero control & limited insights into. - Most PE managers are tax insensitive & focus on pre-tax IRR performance which is a.
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@steven_segal88 Reasonable request if you're getting a substantial discount on the deal. If not, no dice, buy the asset. His poor tax planning shouldn't be your issue.
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@moseskagan If you are looking for pure deal-by-deal syndicators, I'd say MG Properties out of San Diego. 30-year history, conservative fixed rate debt, big co-invests, reasonable fees, 1031 friendly. That said, they bought deals from 2020-2022 that were way too skinny for me, and.
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@realEstateTrent They can be but it's extremely nuanced. Tax nexus is a huge issue (esp for RE folks), unrealized gains coming in, and the fact that you're relying on a contract with a bankruptcy territory that is notoriously corrupt.
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Map of all the properties they acquired in Sonoma over the last 9 years with a link to google maps.
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TFW you realize investing in privates means you'll never file taxes by April 15th ever gain.
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@Levijameshere How about return zero capital and 14-16% ๐. Honestly, if I write a $1m LP check, get it back in 3 years. 1st - have cash drag & redeployment issues. 2nd, have a tail asset throwing off $20-30k which is now a PITA to track and deal with taxes on for little upside.
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This takes the cake for the worst financial advice on the internet surpassing the advice of buying your baby whole life insurance. Instead of having a childhood filled with toys & fun, your kid will turn 18 and be given a closet full of vinegar bottles since 99.9999% of wine.
This sounds pretentious but is genuinely good advice:. When your kids are born, open a wine storage account for them, and add to it every year. And instead of getting useless toys and redundant gifts from family, tell them to buy a case; it fits near all budgets. In 20 years,.
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Gentle reminder to everyone that permanent life insurance agents make the worst Real Estate GPs look like saints. .
Had a 22 yr old reach out the other day saying he saw my post on permanent life insurance & was unsure what to do . His college buddy at NW mutual told him he NEEDED a perm policy . Yet he had no emergency fund, student loans, hadnโt started a Rothโฆ . Donโt fall for it.
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@GoodGuyGuaranty @rhunterh Generalizing but tend to agree. "Elites" tend to realize wealth signaling consumption (Range Rover lease, Hampton Rental, Mich Rest) are not adding happiness/joy/value, so it tends to be the simple/cheap stuff or the 'extravagant' splurges that are actually worth the expense.
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@PinkPoloShorts Go through enough litigation and you realize why the boomers prefer phone calls over email. ๐.
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Let me get my Due Diligence Checklist straight. โ
BX buys unrelated public REIT but 10x-man thinks it relates to him. โ
BX won't partner w me, but can literally own BX as a shareholder. โ
$1.5m min investment is lower than BREIT's min of $2.5k . โ
Buying better assets than BX๐คก
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My high-level 2 cents on Alts exposure for most retail/HNW portfolios buried in the replies. This is worth a bigger discussion but any alternative investment decision should start with "WHY" and if you can't answer that, you probably don't need it in your portfolio. .
@investing_law The correlation and absolute returns of equities and RE on a long-term basis are pretty high, so I'd argue a separate RE investment sleeve (excluding personal RE) is not needed as a portfolio default for the vast majority of Retail/HNW that are investing for retirement, and not.
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@EllliotttB Agree 100%. Blows me away how many investors (big and small) seem to think the grass is greener in privates and there is some magical alpha unicorn after paying 2 & 50-80 and then paying taxes/recapture after the GP decides to exit because it favors them. Live & Learn I guess. .
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@MattLasky For LPs - I think many overlook public REITs for whatever reason and probably get lower after tax returns in the long run. Privates are sexy and REITs are not. .
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80/20 is still the market out there folks. And since we're on Twitter, I guess I need to clarify that it's 80% to the LP.
If your carried interest percentage is above 20-25%, thatโs fine, but you should have a story for why youโre higher than market. โก๏ธDo you deliver outsized returns?.โก๏ธDo you have specialized experience?.โก๏ธ Do you have lower than market fees?. The market for most institutional.
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GP's raising money - Remember that your target audience is a Rich-as-F boomer who still has an Aol email address and likes to print out documents. Live look here at your potential LP when they learn they have to go to a specific site, enter a password and can't print it out.
@StorageDataDev I'll push back and say, send a PDF or allow the LP to download the DocSend file. GPs that have online view only DocSend pitches drive me nuts. We have a process for reviewing decks and if you make me break that so you can see what page I'm reading, its an immediate neg strike.
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Matt hitting the nail on the head here - I think every LP needs to hear this over and over (myself included).
Not sure who needs to hear this, but if you're investing in private CRE deals, you should be paying for a combination of unique sourcing/differentiated lens & operational chops. Otherwise go lever up a REIT and enjoy higher quality w/ lower fees.
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@KHendersonCo Nice to see him add the extra $20 to the end of the rate for a little extra juice. ๐.
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I'll add that if this was such a smoking deal, this GP wouldn't be working with some 2-bit Dentite fleecing group to raise capital. Red Flag #67
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"Ruh - Roh"
Hearing about two large syndicators that are months away from (officially) losing hundreds of millions of equity capital. Likely thousands of LPs in these deals that have no clue this is coming. If you know anything about the situation please reach out.
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@moseskagan @ahueh Proactive planning. Estate tax is 100% optional w enough time & right advisors. Crazy the moves that can be made. If not done, borrowing against the properties, or partial sale are options. Life insurance can be used for illiquidity but would fall into the proactive camp.
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Rise's latest social media post proudly stating that. 13% of capital raised has been returned to investors since their inception. ๐ง. And this is supposed to entice LPs into investing? I think we've entered Bizzaro world.
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@patefortworth @stillwell All ski areas prohibit paid lessons by 3rd party instructors. Huge cash cow for them.
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@moseskagan I'd argue better model would be an RIA sub-advisory shop that specializes in a menu of niche small/medium GPs with full diligence, underwriting, oversight, platform etc. As someone who sources/underwrites/manages privates in-house, i'd absolutely consider and pay for that.
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@seattle_tax You mean the consensus answer was not Non-grantor spendthrift complex discretionary Pet Trust??.
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When ground-up multi-family lease up isn't going well. Short term rentals to the rescue??. I'm sure this work out just fine. ๐๐คช๐
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@imrichardfertig Handle everything except a road less than 8' wide. ๐๐. I get the cool factor but those things are just so big for central American 4x4 trails. i'd go the opposite and take tiny Jimny that can literally go anywhere, including your pocket. ๐คฃ.
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@chernobelskiy Certain Phoenix based syndicator who is very public about their portfolio not being distressed?.
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@credealjunkie Did I miss another recent one? I know there was a ponzi maybe a decade ago and one of our companies had leased office space in one of the Ponzi'd office building but dont remember the details. Hate to say it but prob a good market for criminals. lots of $$$ floating around.
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@rohindhar Love the Prop 19 layer . It's actually insane the amount of value folks over 55 can transfer to their next primary residence when it's this low. .
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@joebjones1982 @moseskagan 110%?? So gov't takes all the assets and slaps on another 10% to punish those little brats? There is a platform to run for public office on. .
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LP Tip of the Day - Got our first small capital call on an RE fund we committed to almost 18 months ago which is a record timeline for me between commitment & 1st call. Usually I'd be annoyed b/c we'd be fee'd to death over 18mos w/ no money at work but this GP structured . 1/x.
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The mystery of who Jesse and Amber Gemstone are based on has been solved. Grifters gonna Grift
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@investingcre These guys are literally a joke on the LP side. Entire firm is literally a cult run by their fearless wunderkind who raises money based on investor events built around winning free vacations, referral programs, in-your-face DEEP religious undertones, and Tim Fucking Tebow.
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@PrivatEquityGuy IMO, the best LPs are the hardest to get to a Yes but once you do, you'll have a much higher bar of conviction, and hopefully a long relationship. The quick Yes is just as likely to be quickly gone (or quickly defaulting on commitments). Right mindset is to hand around hoop,.
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@ZeroBasis Live in a touristy area and am now surrounded by these things. it's literally insane during high season and what people will do "when they are on vacation", they they'd never do in their own neighborhood.
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@BarryRoland19 Not to nitpick, but Id call this scenario an "excess" or "additional" capital call. Capital calls are a normal part of RE funds. Commit $X upfront & you get capital calls throughout the investment period as the GP deploys capital. Regardless of terminology, good points. .
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@credealjunkie Its 99% a people problem and 1% structural. The best way I've seen any assets being passed down is involvement (ie, management), skin in the game (ie, equity early) and some indoctrination (ie, family legacy). Anyone who thinks some entity structure is going to keep things.
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Single ladies - if your boyfriend, who owns 3 B-shares of $BRK and quotes Charlie Munger, invites you on a Spring getaway to Omaha, your worst proposal nightmare might come true. ๐ฑ๐ฑ๐ฑ
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@JoeCassandra @pslohmann This is the biggest lie of this "scheme" - You pay interest like any other loan and the interest goes to the insurance company, not the policy owner.
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Happy extension day to all the tax masochists out there blinding paying the IRS and countless states based on dozens of ballpark tax estimates from partnerships that won't have their K1s done for another 5.5 months. all for the 'alpha'. ๐.
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@mhprvpmvp Anyone surprised by all this should stick to index funds. happens every cycle, and will continue to happen every cycle. .
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40% Estate Tax rate got you down this Sunday Morning? Yep. you and me both. What if I told you you could pay 28.5% instead by simply gifting your assets away while alive instead of dying with them? . "Sure Mr. Anon Twitter Guy, that sounds great, but aren't the gift &.
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@mu2myoc "That's OK. twitter doesn't have the investors you need. try Facebook tomorrow. and We'll always have the coaching income for the Net Jets insta pics".
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@MicawberCapital @moseskagan @MarcSGilbert @JaretTurkell @EllliotttB @fortworthchris This usually works.
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@mu2myoc I'm not sure if this is an actual recommendation or if you have a "Marlo" vendetta with Ken and are steering every $5k check writing "LP" his way by publishing his email address.
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@skylarromines Don't fall for the Trap! We've owned two of these things in Tuscany, both major reno projects and yikes. what a nightmare. best to just dream. or just rent one!
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Rise deck reviews aside, let's not forget their Instagram page that is a treasure trove of "Retail Capital Marketing" gems. .
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@EllliotttB Literally know a fund of funds guy that belongs to 10+ country clubs - must have $2-3m invested in initiation fees alone plus monthly dues. he must be a VIP member of your RE fundraising course.
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Latest Update on the Sonoma Ponzi Scheme - Kenny Mattson plays the title shell game. Hats off to the reporting by Phil Barber (@Skinny_Post) at the Press Democrat on this story but I'm going to respectfully disagree with the recent PD headlines - KennyMat isn't selling any.
For anyone watching the latest Ponzi collapse in Sonoma CA by a couple of guys that bought up 100+ properties totaling ~$250m (which they did nothing with & allowed to rot), this little nugget was recently disclosed. Ken Mattson was not only scamming elderly folks but also
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@roberthendricks @BanksterLife If you're concerned about claiming hard assets of the underlying companies in the SP500, then its all over, and guns/ammo/food/shelter is the portfolio you should be concerned with. That said, there is a very clear corporate legal system that makes all this tick, and is really.
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@realEstateTrent Hard disagree. Anyone with a brokerage account can invest in $VNQ or a basket of pub REITs with any amount of money to get CRE exposure and 99/100 times will be better returns than trying to select a GP who will accept your $1000 and fleece you.
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Egregious marketing aside. Who in their right mind would invest with a firm named. ๐๐ฟ๐ผ๐ฐ๐ฎ๐ฝ๐ถ๐๐๐. If that isn't a massive judgment red flag of the principals, I don't think anyone is going to be able to help you. .
Guaranteed that Neal Bawa shouldnโt be saying this type of crap and broadcasting it on social media. @investing_law
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@ToryJSheffer Committing 5-6 figures to a smaller GP (no offense) without a single direct point of contact is literally insane and goes to show the lack of work people put into diligencing their investments. If they don't call/email, they sure as hell aren't reading the docs.
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Avoiding sitting next to her in First Class is now the top reason to fly private. .
The most underrated "luxury" purchase. First-class seats. Everyone posting about flying private yet I sat next to 2 billionaires on a commercial flight. I remember buying them before it felt comfortable. Should have done it sooner.
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GPs-Be good guys/gals & please don't charge us poor helpless LPs on $$ you haven't put to work. We all know you're printing mgmt fees on your last vintage fund that is fully called & now earning promote. No need to double-dip us. Sincerely, your very Limited Partner #845 3/3.
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@StorageDataDev I'll push back and say, send a PDF or allow the LP to download the DocSend file. GPs that have online view only DocSend pitches drive me nuts. We have a process for reviewing decks and if you make me break that so you can see what page I'm reading, its an immediate neg strike.
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@MattLasky For GPs - its obviously economics. Throw in a 5% co-invest, and the GP level returns are insane plus fees/etc. It's a lifetime ATM and not exactly able to pull off the the same model buying liquid public REITs.
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@GoodsCapital are niche strategies/exposure we can't get thru REITs and/or don't want to execute on our own but you give up control, which can be extremely important. Bad actor risk is also there which seems to be glossed over entirely on Twitter. Plenty of private deals that go to $0. 4/x.
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ROFR (Right of First Refusal) - Any RE owners/brokers have an opinion on how detrimental these are to the marketing process of an institutional Class A property? Considering giving one to a sophisticated neighbor on a development site we own in exchange for a needed easement. .
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@realEstateTrent As always, it depends. Right family member can be the best solution. On the flip side, I've seen professional executors/fiduciaries absolutely drain an estate. Fees on fees on fees. .
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