To start, Jason’s mother joins Creating Wealth to speak on the latest in the real estate market and rent to value ratios. Today’s Creating Wealth guest is Managing Director of Dandrew Partners New York, Salvatore Buscemi. Dandrew Parnters specializes in non-performing residential mortgages. Salvatore talks about why the real estate market collapsed, dealing with inexperienced investors, real estate crowd funding, and more on today’s show.

Key Takeaways:

2:00 – Jason’s mother will be joining the Memphis property tour.

19:05 – Jason is waiting for space flights to be cheaper before he goes.

21:20 – Jason welcomes Salvatore Buscemi to the show.

30:20 – Not everyone is a crook, they just may be inexperienced.

40:05 – Many crowd funded deals are dealing with a less experienced investor who might not be able to bring a lot to the table.

48:30 – Foreigners still see America as a safe place to put their money.

60:50 – It can be hard to find legit real estate deals. Always ask the hard questions first.

Tweetables:

“I want to help people form friendships where they can do deals together. That’s the primary focus of Venture Alliance.”

“When the sub-prime loan machine stopped issuing loans that’s when the house of cards fell.”

“What’s great about real estate is it’s an imperfect market and that imperfection is what breeds opportunity.”

Mentioned In This Episode:

JasonHartman.com

Transcript

Jason Hartman:

Welcome to the Creating Wealth show. This is episode 503 and this is your host Jason Hartman. Today our guest will be Salvatore Buscemi who is going to talk about making the yield about fund scams, hard money lending uncovered, just some interesting stuff I think you’ll enjoy. For the intro portion of the show today, we have got my mom on the phone. My mom is back. Mom, welcome. I think this is maybe the fourth time you’ve been on the show. Maybe the 5th, even, I don’t know. How are you?

Joyce:

Hi, I’m fine, Jason. I don’t want to get over exposed here on your show.

Jason:

Yes, yes, you gotta keep up your mystery, your mystic. Hey, as we were talking about what to talk about during this intro for a few minutes before. First of all, the big announcement is that you are coming, you are joining us for the Memphis property tour and you’re going to join us for dinner at Graceland, Elvis Presley’s Graceland, right?

Joyce:

Yes and I can’t wait to do that. I mean, I really did like Elvis when I was a teenager.

Jason:

Elvis changed everything. Now, I’m curious, did you like the Beatles, let me see, you were a teenager, yeah, you would have been a teenager around the Beatles time. Well, Beatles are forever, but did you like the Beatles too or really just Elvis.

Joyce:

I liked Elvis much better.

Jason:

Yeah, how come?

Joyce:

I guess you like the things that occur to you when you are teenager better than when you get into your 20s and I was maybe 21, 22, when the Beatles came to America. So, I just liked Elvis a lot better.

Jason:

Interesting. Interesting that you’d even qualify that statement say when the Beatles came to America, because nowadays if a musician publishes something it’s world wide instantly.

Joyce:

That was a terrifically big deal when they came. They were on the Ed Sullivan Show. I mean, it was an amazing thing.

Jason:

Oh, really? Interesting. Well, anyway, I’m glad you’re joining us for the Memphis property tour and folks, if you have not yet registered, it’s only a couple of weeks away. Go to JasonHartman.com and by the way, one of the things our Venture Alliance members, you know, my new mastermind group, mom, I haven’t really talked to you much about this, if at all maybe, but my new mastermind group the Venture Alliance, the tag line for it is: Your Financial Friends. It’s possibly the only mastermind group dedicated to doing real estate deals together to avoid the pitfalls and the scams that come with investing and funds. I want to basically help people form a bunch of friendships where they can do deals together and that’s the primary focus of Venture Alliance.

Joyce:

That would be fantastic.

Jason:

Yeah, it’s going to be great. I’m super excited about it and Venture Alliance members don’t even know this is one of their perks, they get to come to all of our property tours and our Creating Wealth seminars and our annual Meet the Masters event for free! So, you know, Neil, Elizabeth, Chris..

Joyce:

Well, they can meet a lot more potential partners.

Jason:

That’s true, they can do that, but you know, the forum won’t be where they really, like, talk about it during those events as much, but anyway, those are all free for them. So, Venture Alliance members, of course, just let us know when you want to come. We will get you free tickets for those events, but gosh, what did we want to talk about today? So, you’ve been reading some interesting books, mom. You finished Harry Dent’s book recently, the Demographic Cliff. James Rickards, you’ve been reading, I don’t know which one of his, gosh..

Joyce:

The death of money.

Jason:

Yeah, I loved that book. James Rickards is really interesting. I want to get him on the show. Of course, Harry Dent has been on the show maybe four times and the president of his company was also on the show, Rodney Johnson, and he was just as interesting, really, as Harry, because, I don’t know, just a different take on Harry’s philosophy.

Joyce:

I think Harry Dent is just off in the years, you know. His predictions aren’t following what is happening, you know? He thinks there should be a big crash and it should have been a big crash in 2014 or early 2015. Well, it hasn’t happened.

Jason:

Crash, wait, you gotta define crash though. Is he talking about real estate or stock market?

Joyce:

A crash in the stock market and everywhere.

Jason:

Harry Dent has been famously wrong and famously right about a few things, but he might be off in the years, for sure, you know, I started studying his stuff back in 1995 and I remember he predicted that the stock market was really going to start to have problems in like 2009 to 2012 as the retiring baby boomers would pull their money out, he predicted the same thing for the real estate market and in the Demographic Cliff book, he’s not bullish on real estate by any means either, is he?

Joyce:

No, not at all, but it’s things like in California real estate is really doing very, very well.

Jason:

Doing well needs to be properly defined.

Joyce:

Well, the prices are going up. I have realtors that send me, you know, what’s happening in real estate in West LA where I have property. It just seems as though houses that I can recognize just on the one street over from Kelton Ave. I mean, one of them that was ugly, it was ugly as sin, just sold for a 1.5 dollars.

Jason:

Here’s the problem, mom, and this is the debate we will have for eternity, I think. That million dollar house, only rents for $4,000, maybe $4,200 a month and that doesn’t work.

Joyce:

Well, I agree.

Jason:

You..wait, listeners, did you just hear that? My mother agreed with me on the air. I’m so glad I got that.

Joyce:

Well, that’s a no brainier.

Jason:

I’m so glad I got that on tape. This is awesome. Oh my gosh. So, you know, here’s the funny thing about it is that like, look it, if these cyclical markets like pretty much the whole state of California, just every expensive market in the US is a cyclical market and every expensive market really on planet earth so far as I can, so far as I can see.

I mean, it’s a pretty big world, so I may have missed some in there, but you know, all the major sort of world class cities that are really expensive. All of those markets. If you can time them right, you’re going to make a fortune, okay. You don’t need to invest for cash flow if you’re investing in these cyclical markets and you can accurately predict appreciation and depreciation. The problem is, I just don’t know anybody, I’ve never met anybody, heard of any expert that can really do that in any reliable way.

Joyce:

But don’t you remember when you had, I can’t remember what the meeting was, but I think the guy’s name was Joel and he really had it just knocked about which way the housing prices were going to go in Los Angles.

Jason:

That’s one of my very first seminars and that was, I believe, and it was my first seminar in general, but it was my first seminar with my current philosophy, I’ll say, okay, and that was about 11 years ago. In fact, I remember, I’m pretty sure it was right away possibly, I should look up, see if it was a Saturday, because I know it was a Saturday, March 12th of 2004, I’m going to guess or it was..

Joyce:

I remember we were all having lunch and he had these statistics with him and we all should have listened to him.

Jason:

We did. I listened to him,

Joyce:

Well, I didn’t. I checked my properties.

Jason:

So here’s the thing I want the listeners to understand on that, first of all, is that over time the cyclical markets actually under perform the linear markets, which is almost counter intuitive, because the linear, inexpensive markets, if you look at it over the course and, of course, you can pick whatever time frames you want and make the statistics kind of look the way you want. I completely understand that’s what everybody does, so you just have to look over longer periods and adjust for crashes and booms and stuff like that, okay, but generally speaking, the linear markets will slightly out perform the cyclical markets, which is amazing.

No one would think that and the reason no one would think that is because, you know, in the linear market where prices are going up maybe 5% annual, you know, that’s nothing to write home about, it’s nothing that exciting and the cyclical market where you might have a year where they’ll go up 20-30% or 15% or maybe even a crazy bubble like we saw in Phoenix in 2004-2005, where we saw 50%, literally, 50% appreciation in a year. I mean, that’s just..

Joyce:

Really?

Jason:

Oh yeah. That’s just insanity. I reported on that on the show when it was happening at my seminars. Depending on which time frame you looked in Phoenix back then during the absolute crazy boom, it was either a 49% increase or a 55% increase. What I mean by that, let me just clarify, is if you looked at a calender year or if you looked at a trailing 12 months and based on which quarter, you know, you trailed those 12 months for that number, it was psychotic. No wonder it crashed, obviously. So, the point I want listeners to take home is that in the cyclical market that has the big peaks and the wonderful peaks and then the awful, terrible lows where the market just crashes, you give so much back in the crash, it’s that concept that you gotta remember listeners, is that, you know, it’s easier to take in a stock metaphor, okay, and compare it to a stock, because if you have a stock that is a $100 and it loses half it’s value and goes to $50, you lost 50% of your value, but in order to get back the money you lost, you have to gain 100%, right?

Joyce:

Right.

Jason:

Yeah, so you have to gain so much more on a percentage basis to make up for loses in those cyclical markets, those roller coaster ride markets. All of those expensive markets, South Florida, California, you know, the Pacific North West, the North East, all the expensive places that over time you do better in the linear markets and that most people won’t believe, because they will think, well, I never hear anything about Memphis on the news, you know, nothing impressive happens there, but here’s the reality, it’s the tortoise and the hare. So, number one, you don’t have to make up those big loses, but number two, all along in the linear market like Memphis, you’re getting such good cash flow. I’ll just give you a great example.

One of our clients, a very wonderful lady, her name is Joan. She emailed me just yesterday, we were trading emails, and she said that she inherited a house in Riverside. The value of the property was about $625,000 and she asked, you know, Jason, do you know a property manager there? Now, she lives in Southern California, okay, so she’s already probably got that Southern California mindset. Well, apparently so, I mean, you be the judge with what I’m going to tell you. She says, do you know a property manager and before I answered the question, I wrote back to her in the email and I said, how much is the property worth, and she wrote back and said, well, it looks like worth about $625 and I said, okay.

So, I bet that property will rent for somewhere between $2,800 and $3,300 a month and I don’t even have to know the address. I don’t have to know anything about the property, I just know it, because that ratio is always true. It just holds true, okay. Now, maybe, you know, I’ll be off a little bit, but that’s somewhere in that range is what it’s going to rent for. So, I basically went through the explanation and a few emails back and forth in saying, look, you know, if you were to sell that property and you could earn about $6,000 pr month.

So, if you basically, if you rent that house, you’re going to make it very hard to sell if you rent it, so really consider this decision carefully. You’re going to be about losing $36,000 per year and she says, what do you mean, how am I going to lose $36,000 a year? The property is free and clear. There’s no mortgage. I thought, now I feel like I’m talking to my mother, again. Right? Oh my gosh, this must be punishment for something that I have to keep, keep repeating and having the same conversation over and over again, right? What do you think mom?

Joyce:

Well, the thing of it is is that you have to deal with a lot more tenants and it just, it’s so much nicer to have a $4,000 in the check deposited into your bank account and then..

Jason:

Well, first of all, it’s not..hang on, hang on. Hang on, you completely illogical mother here. Listeners, don’t you like? You tune into my show and you just get to my mother and I laughing. Alright, Jason, I’m waiting for your explanation. Okay, alright, alright. Well, thank you for humoring me, but yeah, that’s not a $4,000 check on that $620,000 house. It’s going to be about..

Joyce:

No, no. I was thinking of one of my properties, okay.

Jason:

You were thinking about your $850,000 property in Kelton Ave in West LA, okay, which, listeners, just notice that the ratio happens to be about the same, right? You get $4,000 for a $850,000 house or you get $3,300, maybe as low as $2,800 for a $625,000 house, because it’s all about the ratio. It’s the ratio. The ratio holds around the world. It is amazing to me. 74 countries I’ve visited and the ratio holds up everywhere you go it seems like. It’s an amazing thing.

So, you know, it’s going to be about a $39,000 of less revenue and yes, you don’t have as many managers or tenants or properties to deal with. I do agree with you, but when one of the six $100,000 properties goes vacant, you only lose a $1,000 per month whereas when your one $600,000 property goes vacant, you lose all $3,000 per month. You have a 100% vacancy rate, so you’re not diversified and you can diversify geographically too. So, with $600,000 buying six properties, I would buy those in two or three different cities and I think you’ll be much better off. So, anyway, that will be the continuing discussion that we can have in Memphis as well, mom. How do you like that?

Joyce:

Well, at least I’ll get to look at a lot less expensive houses in Memphis.

Jason:

That’s for sure, that’s for sure. You’ve come around a little bit. I gotta say I appreciate that, because you’ve purchased some properties outside of the socialist republic of California in the last several years. So, that’s good. Good news. Hey, you know what we should have talked about is my recent trip to Necker Island and meeting Sir Richard Branson again for the second time, hanging out with him. Got some good pictures of the whole affair. It was really fun, but we don’t have time, mom. So, now you have to come back on the show so we can talk about that, talk about currency wars.

Joyce:

You know, I told you when you were there I read in Fortune magazine a very good article about Richard Branson and his, you know, taking flights into space and Paul Allen, you know, one of the founders of Microsoft, anyway, he funded some of that and I think it was like $28 million dollars or something like that.

Jason:

To Virgin Galactic?

Joyce:

Yeah and he someone asked him if he was going to go into space and he said, no, I’ve learned to be afraid.

Jason:

Yeah, well, I think that’s probably wise. I wouldn’t. I don’t want to go on the first flight. I will wait to it gets cheaper, safer, and longer, because, you know, those space flights. Like, my friend bought a ticket and he paid $250,000 for that ticket and, you know, the plan is that it’s only going to go up into space for just a couple of quite minutes. Yeah, you’re just going to get to float around for a couple of minutes and come down for a quarter of a million dollars. You know, if I’m going to go into space, I want to do at least one full orbit around the earth. I mean, that would just be awesome to go completely around, you know?

Joyce:

I hope we get to be able to fly in space and everything and I really approve of all of the technology and all of the research and all of the people trying to develop that, but I’m staying on the ground for, I think, forever.

Jason:

Mom..

Joyce:

I would not want to go to space.

Jason:

Don’t worry, I’m not trying to talk you into it. I’m not even talking myself into.

Joyce:

Good, I’m glad to hear that, Jason.

Jason:

Well, good. Hey, let’s get to our interview. We’ve got a good guest. You’re going to enjoy this interview, you’re going to hear about how the insiders in these various funds and stuff buy their shares at lower prices and it’s such a scam. We’ve been selling a lot.. you know what we noticed that happens? We’re going to call this the tour effect. Every time we announces a property tour, it’s like all our clients run over there and buy in that market before the tour, so our local market specialists have to save properties for the people who attend the tour and they always do that for us, but do check out the properties at JasonHartman.com in the properties section.

Register for the upcoming tour. You’ll get to meet my wonderful mom and hear about her investments and so forth and it’s just going to be a great tour and dinner at Graceland. A private dinner just for our group at the world famous Graceland in Memphis. So, it’s going to be a lot of fun. You can register at JasonHartman.com. Venture Alliance members, if you wanna come, just email me directly and we will get you your free ticket and look forward to seeing you there. Mom, thanks for coming on and doing the intro portion of the show with me and I look forward to seeing you soon and let’s get to today’s guest. Here we go.

It’s my pleasure to welcome Salvatore Buscemi to the show. He is managing director of Dandrew Partners and co-founder and CFO of Oasis Fractionalized Real Estate Equity. He’s author of Making The Yield: Real Estate Hard Money Lending Uncovered. Sal, welcome, how are you?

Salvatore Buscemi:

Thank you very much for having me. I’m very happy to be here, thank you.

Jason:

Give our listeners a sense of geography, where are you located?

Salvatore:

Right now I’m in New York City.

Jason:

And is that where you’re based?

Salvatore:

Yeah, we’re based in New York and we also have the Oasis fund is based actually out in Las Vegas.

Jason:

So, hard money lending uncovered. It sounds like, is there a scandal there, hard money lending uncovered?

Salvatore:

It is, you know, back there in the past, you know, housing boom that we had, there were a lot of people who were getting involved into deals, they were pooling money to invest in what we call private loans and what happened was is that a lot of these people did not know who they were dealing with and as the result they wound up losing a lot of money, because essentially, they were lending money to people who they didn’t know who didn’t have alignment of interest with them and also, lastly, they didn’t really know the person who was borrowing the money, the operator actually had any experience. So, we’re starting to see this happen again in certain other parts of the industry. You and I spoke about crowd funding and people have a strong interest right now. People are desperate for yield.

Jason:

It sort of the hot new thing, you know? I’m sure there will be many problems in the world of crowd funding, many law suits, many frauds. Get ready, they’re coming.

Salvatore:

You know, I would love to discuss this and really what’s happening is that you can’t take someone $1,000-2,000 and so on and really place that capital meaningfully.

Jason:

Before we go on to the crowd funding thing and I really do want to dive into that. Let’s just finish on the hard money lending issue. So, you talked about the housing, the last housing boom and bust. Were you talking about people who were making direct loans or pooling money into a fund that was making..

Salvatore:

Exactly.

Jason:

Well, which one? That’s different.

Salvatore:

These are people who are making direct loans. So, they would have a brother in law who was a mortgage broker. If you are in southern California, you know, in the south west and the reason why we have the Oasis fund out there, everybody was a mortgage broker and people were saying, hey, you know what? I have a few bucks, why don’t I give you a $100,000 and it’s asymmetric, so the broker is going to be great, I’m going to take my five points off the top and if anything goes wrong with the loan, it’s not my problem.

So, you know, a lot of these people were broker who thought that they were becoming money managers. There was a lot of interest in this because yields are low, right, rates of return are very low, so this is attractive for people who are getting a “guarantee” coupon each month of 12-15%. The problem is that that only works if you’re lending to a qualified operator or borrowing, right?

Jason:

An operator meaning now usually this borrower was who? They were someone who was flipping houses?

Salvatore:

In the best case scenario, yes, at worst, they were owner occupants facing foreclosure, which opened up a whole new set  of, you know, a whole other Pandora’s box of problems.

Jason:

Okay, so these mortgage brokers were out there saying to people, hey look, you know, I’ve got all these borrowers that I can’t get a conventional Fanny Mae, Freddie Mac agency loan for, but you know, would you be interested in loaning them money and they would just say that to a regular person, right? Just an individual they knew or a friend or a family member maybe or a client and then they would loan someone in pre-foreclosure hard money to get out of foreclosure on what, are these usually, those were usually second trustees or even third position mortgages.

Salvatore:

Which is even scarier, but yes, you’re dead on with that. That is correct.

Jason:

So, what kind of rates were they promising?

Salvatore:

They were promising 15%, as high as 15%. They would go as high as the law would allow them to, you know, usury laws, but..

Jason:

So, a lot of these deals, I mean, they were just lending at the peak of the market, they were, you know, not enough equity, what was the problem here or if they were a home flip or when you say operator, that’s probably what you meant and they were a home flipper and they got caught with their pants down, so to speak, right?

Salvatore:

Here’s what happened, when sub primes, when the sub prime loan machine stopped issuing loans, that’s when the house of cards fell, because there was no exit strategy for these investors or private lenders to get out and that’s what caused the problems. Phoenix, Las Vegas, those very hot markets, people who were marginal buyers were getting a 125% loan to value using a sub prime loan.

However, when those loans dried up, guess what, people were holding the bag and that’s what caused prices to drop. You can’t give someone a 125% loan to value in a hot market and not expect some thing bad to happen and that’s what happened to a lot of these hard money lenders is that often times the appraisals were inflated so that it would justify more money, meaning more fees in to the pocket of the mortgage broker. That makes sense?

Jason:

Yeah, yeah. Okay. So, certainty many people have been burned, but these were direct loans, they weren’t funds, right?

Salvatore:

They were. It’s interesting you bring that up. The reason why we have the Oasis fund out in Las Vegas is because that was a triage fund that we setup to buy out hard money funds facing receivership, fraud, all sorts of other issues.

Jason:

Okay, so, these are funds. So, you set up a fund to buy other funds?

Salvatore:

Yes, facing distress, that’s correct and this is the mess that we solved. It is terrible, you know, that people were, you know, you as a the private lender, some of them were direct loans, some of them were through a fund structure, a LP or LLC structure and what happened was is that sometimes you would be told that they’re lending on a single family home, but now they’re doing development deals and the person doesn’t really have the experience to be doing a development deal and these loans are being made outside of the core brokers, you know, areas of expertise. What he specializes in in the sub asset category for real estate.

Jason:

Right, right. Yeah, okay. So, that’s what happened, you know, I’m just not a fan of funds because these fund managers, they can just do whatever they want. Like, one day they say they’re going to do lending on single family homes and then they’re suddenly doing a development deal as you described.

Salvatore:

It’s terrible and that’s the novice. I mean, institutionally in New York and people who I grew up on Wall Street or Goldman Sachs, they’re very good fund managers, but you have to be careful of the people who tell you they’ll do anything and give them what we call 100% discretion. When you’re giving them a blank check and they can do anything they want, that’s where the problems come in and a lot of these fund managers that have come in and they were, you know, promising all sorts of returns and fees, but they just didn’t have the dexterity or the experience to do that. So, you wound up, you know, these guys, feel as though they can take the risk, they want to be the next Donald Trump swinging for the fences and that’s where all the problems happen.

Jason:

It’s easy to swing for the fences when you have somebody else’s money with which to do it. You know, worst yet, worst than everything you mentioned is a lot times the fund managers are just crooks, they’re just greedy crooks. They’re just basically ripping people off.

Salvatore:

It is true and even worse than that and I’m sorry to go back to the crowd funding, but you’re starting to see this happen is that real estate is a wealth creation tool relies that it is very inefficient, right, and it’s inefficient because it has a human element to it and if that human element can not perform that asset is going to not perform correctly.

So, now you’re starting to see people who want to get real estate, they see there’s a lot of money out there, people don’t trust the stock market, they don’t understand it, but they also need coupon, they need monthly cash flow coming in and so they’re going real estate fund managers who really have no experience whatsoever in this space. Just because someone worked for ten years at Pepsi Co. doesn’t necessarily mean that they’re a real estate entrepreneur. They’ve always had top cover from the parent, they probably have no real estate experience, they’ve never had to manage a PNL and worst yet, they’ve never had to lay in a pool of their own sweat.

So, that’s why it’s so important that when you do qualify these fund managers and there’s many of them that are very, very in depth and very sophisticated, is you have to look at their track record. Have they done this before or are they are computer software engineer who said, hey, this is a great time to get into buying apartments right now.

Jason:

Yeah, right. It’s unbelievable. Yeah, I know, I know.

Salvatore:

No, that’s what you’re talking about though. They’re not just, not all of them are crooks, they are inexperienced and they pry upon their friends like, hey, he’s a good guy, I’ve known him for awhile, he’s great, I go to church with him or I’m in the club with him or something, but that doesn’t, you know, people are investing in a person, they’re not investing in a deal, because the investors don’t know anything about how to value a deal or what it looks like and a lot of times these syndicators will go out there and they would just bid up because they were making fees, but they would just bid up the asset and that’s where a lot of them came into problems, because they were overpaying stuff that they didn’t know what they were doing.

I’ll give you a quick example. There was, in our fund, we had to bail out a team of, you’re not going to believe this, plastic surgeons from Southern California who bought and apartment complex in Texas and they bought it at a one cap. They overpaid for it, because the broker told them that pretty soon, you know, Texas, you know, apartments are going fast and they’re going to be priced the same as in they are in California.

Of course, location, location, location is really what dictates supply and demand in pricing of this housing stuff and they wound up overpaying, because they got hoodwinked by someone who didn’t have an alignment of interest with them, someone who was going to take a fee on the sale, not necessarily be there and be a good manage and that’s what happens is that people just don’t understanding what they’re buying and then they mismanage it and they fire the management company and now the Indians are in charge of the reservation, there’s no chiefs around, and that’s really where you see the distress. It all comes down to the human compound to it, which is why I love real estate, because somebody is always screwing up.

Jason:

Yeah, right, and that’s what’s great about real estate and why I love it to. It’s an imperfect market and that imperfection is what breeds opportunity and, yeah, no question about it. So, you know, one of the things I say is that I have ten commandments of successful investing and commandment number three is Thou Shalt Maintain Control, because when you are not a direct investor, when you don’t maintain control, you live yourself susceptible to three major problems. Number one, you might be investing with a crook. Number two, you might be investing with an idiot and number three, assuming they’re honest and competent, they take a huge management fee off the top for managing the deal.

So, you made the comparison, which was a good one, you know, about the people on wall street who could be good fund managers at Goldman Sachs, etc, and you know, they may be good, but they take such huge management fees off the top of the deal. You know, is there any way to win here with these funds?

Salvatore:

You know, it’s, you have to read the docs. You have to know.

Jason:

But even if you read the docs, they don’t have to follow the docs, right?

Salvatore:

Well, they do. When things go problematic, they always go back. I mean, the operating agreement is really a prenuptial agreement. That’s really what it is.

Jason:

That’s a good way to put it, I like that.

Salvatore:

Yeah, no body reads it until the divorce happens or something blows up, but you know, not everybody in these funds pay what I call rack rate. There’s a lot of people in these limited partnerships for example and they, you know, their allure is that they’re able to get you in the deals and invest alongside qualified people in other sophisticated investors who you would never be able to invest with anyway.

Jason:

Wait, explain the rack rate thing. You didn’t really explain what you meant there.

Salvatore:

So, think about, you’re flying from Phoenix to New York. The guy next to you bought his ticket on Orbitz for $280. You paid $580 and the person in the aisle in front of you paid $900, he bought it yesterday. All these investors sometimes don’t pay the same fees and their incentives are different and that’s the secret that no body really knows in these funds is that, just because the docs or the terms, what they’re offering, isn’t necessarily what is going to happen and that’s negotiable.

Jason:

So, in other words, I want to make sure you really, people really get what you’re saying there. So, if a fund comes to you and says, hey, you know, I’ve got this LLC we’ve setup and we’re taking on investors to do this deal, whatever the deal is, okay, you know, they do that and they say the minimum to invest is $25,000 or $50,000 and that will buy you one share, okay, but you know, and then they pull out a list or they drop the name, hey, I’ve got so and so and so has also invested and suddenly, you know, there’s this social proof value in it so you think, oh, well, if so and so is in, this must be a good deal.

Here’s my money, right, but what you don’t hear is that so and so that name that they just dropped on you. That person maybe got a free share or their just got their share for half price, because what they did is that, you know, that wealthy guy in town that everybody knows, you know, they just wanted to get his name on board. That’s basically like a celebrity endorsement, if you will. Maybe it’s a small local celebrity, but it’s someone you know and respect, right?

Salvatore:

Well, let’s put it a different way, Warren Buffet invested in your fund, but you weren’t going to make any money off of his investment as the fund manager, would you take his money?

Jason:

Yeah, because that would be great for my brand, right?

Salvatore:

Absolutely, because you would be screaming down the street that Warren Buffet is in your fund and now everybody is going to dog pile into it. So, you’re absolutely correct there. Absolutely.

Jason:

Okay, so that’s the rack rate issue. Anything more you want to elaborate on that? That’s very interesting?

Salvatore:

I’d like to hit on the experience and I’m very scared today with what I’m seeing with crowd funding is that people have embellished resumes or something. The guy who is doing knocking ten, putting together houses, does not have experience to manage an asset, a multifamily asset overseas. The operators should only be local to the asset, always, unless it’s some sophisticated huge management team like a Goldman Sachs or something like that, but you know, if you’re dealing with these mom and pop retail, you know, the rehabbers, the retail investors, the retail guys we call them, not institutional, I would be very scared, I got a great apartment complex, it’s 90% occupied and it’s in Columbus, Ohio, but we’re in Phoenix, Arizona today. That’s a problem, because that’s a very difficult problem to manage. That’s very important.

Jason:

Right, yeah, I agree, especially when I’m doing, you know, intricate rehab. I mean, almost every apartment deal, every multifamily deal, includes rehabbing the units, increasing rents as the units turn. I just did one myself. I just closed on an apartment complex that I went in on with a client of ours, you know, 125 units, owned it for like three and a half years, rehabed, but see, there, we had a general manager and my partner and I say we never want to do a deal with a general manager again like that, because they were just, you know, at least we thought, of course we had arguments about it, but we just felt like they were double dipping everywhere you looked.

Salvatore:

Yeah, they were, but here’s the other thing too is that do they know what they’re doing? You bring a great point on..

Jason:

They didn’t then, they learned a lot on our dime, so we gave them an education too.

Salvatore:

Yeah, you became the research and development department.

Jason:

Exactly, we were the R&D, yeah, right.

Salvatore:

So, this is funny. So, we see these deals all the time and I’ll ask them, you know, what are the sources and uses for it? And then they say, sources? Dandrew, uses by apartment. Okay, but what kind of repairs are you going to be doing? There’s real value out of repairs and then there’s repairs that don’t add any value. Everybody who moves into an apartment automatically assumes they’re going to have a light bulb and a toilet seat, right? That’s not value added. That is maintenance, general maintenance, but what they don’t expect is maybe to have like a part time concierge in the lobby or a newly paid parking lot or two and a half horse power whirlpool tubs in the bathrooms. That’s real value added that’s attractive to the tenant.

So, when you talk to these guys, they’re two busy dealing with like the muck, they don’t know where to start first and sometimes a lot of these value added deals will blow up because they didn’t know what they were doing. They were doing things that were maintenance rather than value added and by the time they get to the value added stuff, they’re already out of their slush fund.

Jason:

Right, absolutely. Okay, what else?

Salvatore:

I’d be very worried of crowd funding. If we can talk about this now.

Jason:

Okay, so now make the distinction though. We started with the hard money lending and then we sort of went into, we talked a little bit about direct hard money lending, then we went into funds and how you rescued funds and also funds to just buy deals or LLCs, you know, I don’t know, it’s sort of all one and the same, really, you know. Make the distinction for the listeners, if you would, as to what, if there’s any difference there and then why is crowd funding different? You know, it’s basically kind of the same legal vehicle. The structure is not different.

Salvatore:

It is, but the problem is the crowd funding today in real estate is what we were talking about with these funds worth minimum investment, $50,000, you have to be accredited, okay, whatever that means, accredited today. That definition changes. It got a little tougher after Bernie Madoff, but you know, now all of a sudden because of the Jobs Act, people know can get in who maybe aren’t accredited. So, you don’t know if their dealing with their last $1,000 or not. So, they don’t have the sophistication. So, now, you’re dealing with investors for as little as a $1,000 can get into this multifamily deal. If you’ve done any sort of partnership whatsoever you know just to pay for the deal and do the accounting costs about $1,000 an invest to do that.

So, how is that money actually going to be used to provide value for you as an investment, that’s number one, number two is anyone with that kind of small money generally is not sophisticated and that means that these fund managers who are now trying to crowd source or crowd fund a lot of these real estate deals to buy are dealing with a less sophisticated investor who doesn’t understand it and probably thinks that they can just redeem their shares, you know, their $1,000 investment for face value, $1,000, any given whim.

So, that’s going to challenge the entire partnership because now this fund manager is getting calls from this guy and he’s chasing attorneys there and I want my $1,000 back and he’s not doing what he should be doing, which is operating the asset, managing the investment, that’s where I see a lot of problems come in. People with short money always have, you know, they don’t bring any value to the deal. They actually take value from the deal. Does that make sense?

Jason:

People with short money, you said?

Salvatore:

Yeah, it’s a term. People who don’t have a lot of money. Small balance investors like this, micro balance investors, those are the people who you do not want to be partners with in an investment.

Jason:

Okay. Like, if you’re the bigger investor or if you’re any investor, maybe you’re a crowd funding investor that put in a $1,000 also. I mean, I can’t imagine though it costs a $1,000 per investor. Like, say someone’s raising $300,000 to invest in a deal. Can they take on $300 investors at a $1,000 each?

Salvatore:

That’s way too many.

Jason:

I know that’s a lot to manage an investor’s relation problem, which is what I want to ask you about, but I don’t even know if that’s legal in the crowd funding laws to have that many, you know, they just changed again and now I haven’t, I’m not totally up to date on the new change, because now you can do non-accredited investors.

Salvatore:

Correct. So, that makes it even worse now. For me, when I’ve done this, when we’ve had one time and at any one deal, we’ve had 32 LPs, limited partners or investors, yeah, to do the K1s and everything, it’ll take, it costs money to do that.

Jason:

Yeah, there’s a lot of accounting and compliance, I agree.

Salvatore:

Oh, absolutely, but that is, you know, at the smaller investment increments, it doesn’t make sense to do that.

Jason:

So, you don’t want to be partners with the small investors, you’re saying, and what do you consider small? I mean, a lot of these crowd funding sites will say, well, you gotta put int $5,000 per person.

Salvatore:

That’s still too small. I would say $50,000. If you’re investing along side other people who don’t have the same financial strength as you, that’s a problem. That’s going to be a problem. One of the things our investors, again, a little more sophisticated will say, you know, for one of our latest offerings is that we don’t want anyone coming in to less than $250,000, otherwise I’m in violation of the operating agreement and I can get sued for that. The smart money knows how to pull the strings, because they don’t want me having to burden with dealing with so many investors to become a nightmare like you said before. That’s the problem.

When you’re doing with sophisticated investors, they know it’s real estate, you can’t sell it, and they are also not buying a lottery ticket too, which I think, unfortunately, a lot of these crowd funding investors do is that they just go out there and they start, you know, dreaming that. You know, it’s more like a Shark Tank episode that they’re going to hit the lottery and it’s not a steady Eddie coupon clipping type of investment.

Jason:

Yeah and I agree with you. I think some of these funds and some of the people taking advantage of all of these crowd funding laws, they’re basically like a version of the modern casino, you know, where they’re just going to take money, they’re just going to be ripping off small investors, you know. It’s so desperate. You go to these casinos, I mean, I can’t believe this crap is legal, they’re just destroying people’s lives. It’s so sad. All these poor people sitting there in the slow machines, a lot of them elderly, you know, I mean, I just, you know, this is just disgusting what these companies are allowed to do, you know, it really is.

Salvatore:

Well, I mean, you can thank the fed reserve for this, because they actually had zero rate interest rate polices, negative interest rate policy. Banks in Australia now are going to be charging you money for the privilege of holding it.

Jason:

Yeah, I know, and Germany too.

Salvatore:

It’s happened in Germany already.

Jason:

It’s negative interest rates.

Salvatore:

Yeah. So, people are desperate and that’s the drive, you know, the fed is desperate to have people take risk.

Jason:

I’m glad you said that and recognized it and let me just elaborate on that and you can finish my thought here for the listeners, but what he’s saying, listeners, is that because of this environment, because we have these, you know, greedy, disgusting central banking scams, okay, what they’ve done is they’ve created this no yield environment and older people, specifically, they get burned the most because they are the people who did the right thing, they saved money all their life, they were prudent, they didn’t, they delayed gratification and then they retire, they got a few bucks and they think they can just live off their money by putting it in to really conservative bond or a savings account, a CD, and they can ladder those CDs and they can live decently now. Granted, that’s not a very good investment plan, obviously, but this is what a lot of the world planned on and because there is no yield out there to get from these really save things, all these people have been pushed into the risk arena and they shouldn’t be taking risk. So, is that what you meant to say?

Salvatore:

Absolutely. 100%. You hit the nail on the end. Yes. You know what, I being a money manager, being the cynical guy that I am..

Jason:

I think you’re an honest guy! I like what you say.

Salvatore:

No, but I look at everything cynically and as an investor you can’t look at everything through rose colored glasses, you have to see what the risk is in a structured way, but this money manager’s view is that rates will not increase any time soon, probably not in your life time, Jason.

Jason:

Right, yeah. Wow, wow. So, you think we’re in a low rate environment for the duration, huh?

Salvatore:

Exactly, because there’s no catalyst for rates to go up.

Jason:

Well, c’mon, you’re kidding. With all this debt we have? You don’t think inflation is going to come? You know, wow.

Salvatore:

I could be wrong, but it’s not just my view, but a lot of people and if you see how these bonds trade and everything, they have the same view as well. The problem is people keep buying treasuries and as long as – because there’s an applied safety with the United States. We have all this money just going into treasuries because there’s no real place for it to go. America is still a great place for rich people to invest, politically stable, all of that, but you know, you start seeing the yield. I mean, the two year drop alone, you know, two handle at one point. I mean, this is just really ridiculous and so that’s what is happening and I think the market mechanism as you know it does not exist any more for price discovery. Everything is manipulated and everything is really a function of someone governing the market, not the market governing themselves, if that makes sense.

Jason:

Right and see, that’s what happened during the last crisis. We couldn’t have, I would argue we still don’t have price discovery, because everything, you know, when you’ve got all this, everybody is trying to make predictions, but you can’t make predictions in an era of massive intervention by governments and central banks. They completely screw up the market and it’s just very hard to predict anything, you know, I don’t think the economy itself is really, you know, like incredible hard to predict, the business cycle, things like that, but when you get all this intervention, you can’t predict a thing!

Salvatore:

No, you can’t and that’s the problem and now different capital sources have different needs, you know, my apartment – I sold my condo in New York. I wanted to buy a new one. The guy who bought it was someone from Brazil, didn’t speak a lick of English, he just showed up with a brief case, literally, full of cash, and he offered over asking price, because for him, he’s using real estate as a wealth protection vehicle, he doesn’t care if he over pays or not, he’s hiding money, and that’s a whole other conversation we can have.

Jason:

I’m glad that’s happening though because that does show you that much of the world as messed up as America is still looks at America as what’s called as the brinks truck, you know, it’s the safe place to put your money, because we do to some extent have rule of law, except when it comes to government lobbyist and central banks, they don’t have to obey the law and wall street doesn’t obey the law either, because they basically own the government. See, I’m pretty cynical too.

Salvatore:

Yeah, that’s the mindset you have today to be a successful investor and that’s what people don’t understand.

Jason:

Okay, so what else about crowd funding. Other thoughts on that?

Salvatore:

I think it’s, I think we’ll see what happens with it. I think when people, you know, you gotta check the bios of these people. The first thing I always ask if somebody is looking for money for me, we’re discretionary, right, we’re not a bank, so we don’t make people, we don’t care about their credit, we care about the asset, that’s what a discretionary capital provider does. You know, you want to buy a retail center, you have experience, you can show a bio and deal sheet of stuff you’ve done, it’s almost certain you’re going to get a loan from us, but if you don’t have any experience, you’re not going to get a loan from us, because we are not in the business of teaching you and becoming the research and development for you to learn how to piece together a retail deal or a value-added multifamily deal.

So, I would look, there are, I’m sure there’s some good crowd funding things that are working, but the two things I would check is what is the minimum investment. How many of those investors are in on that floor, that threshold, you know, the smaller money, that’s when you what you want to move away from, because that means the operator is desperate and because the smart money is turning them down, but the stupid money, which is unfortunately the unsophisticated money with the less dollars, the shorter money that we talked about before. He’s opening the flood gates for the masses to come in and that’s where the problem is.

Jason:

But the smart money will be glad to be on that deal as long as they don’t pay the rack rate that the stupid money is paying, so again, like you said, and that was so well put, that they’re using this smart money as a, it’s a head-fake, you know, because it makes you think that, oh, well, this deal has been vetted, all the smart people are in it, so I’m going to go in to. I mean, look it, Bernie Madoff did that for decades. He made a career out of that and you know what blows my mind though? Is, hey, look, I gotta call you out for a second here, feel free to debate me, but you’re saying, check the guy’s resumes, right, you gotta be kidding me though, because look at the resumes of Bernie Madoff.

Bernie Madoff was president of NASDAQ. I mean, he was networked in every country club, in all the highest level circles, but wait, there’s more. Looks at Jon Corzine, he was freaking governor of New Jersey, okay.

Salvatore:

He was also my ex-boss too.

Jason:

Was he really? Okay. Yeah, he ripped a bunch of people off and nothing is going to happen to him probably, right?

Salvatore:

Yeah, they’re invisible, you’re right, but I think, when you’re talking about Jon Corzine, you’re talking about these bond trading funds, these real hedge funds. I know that word is abused today and what he did was he took a lot of risk with other people’s money that was suppose to be segregated. You’re right with the experience, you’re absolutely right, but I think you’re going to see a lot of fraud, because people are just so desperate pensioners and savers need to – they need a return. They’re desperate for yield.

That’s why I named the book, Making the Yield. It’s for someone who wants to get into this business and learn to make direct loans, this is your gateway drug to do that and to do that efficiently is basically off the wall of my years of experience seeing everything that has gotten bad, but yeah, there are some people and that’s just the way the money management industry is, but the FCC though is not in a hurry to prosecute a lot of these people. I think they’re under funded, I don’t think they have the sophistication, you know, they’re just not going to be chasing after a lot of people, I think.

They choose their fights and they choose them, you know, the lowest hanging fruit. When you see the most sophisticated frauds like the Jon Corzine, he’s still free, he’s still out there. He got a hand slap maybe, but nothing really is going to happen to that, well, because he’s very politically connected too, which is something that we forgot to mention.

Jason:

Oh yeah, no, of course. It’s all political. I mean, all of this stuff gets political and that’s the problem. The little guy doesn’t have any political power, so he’s going to get nailed while the big guy, it’s like too big to fail, you know, if you rip a lot of people off and you do it on a really big scale or if you have connections in someway, there’s a good chance you’re going to get a pass, okay, so you can go out and commit your frauds with impunity, you know, or your indiscretions.

Another thing that just blows my mind is the way that, like these funds, they’re all setup in Delaware and Delaware, you know, for its share, I mean, it has good business practices and it’s business friendly, that’s why all the businesses are there, right, and there are other business heavens too, but one of the things in Delaware that you can do is you can contract away your fiduciary obligation, so you can just say, hey, I don’t owe you anything as an investor, you know, that doesn’t seem right to me.

Salvatore:

Yeah, you’re more sophisticated than the rest of the guys. You’re hitting the nail on the head, exactly, and that’s usually what happens.

Jason:

I learned that because there’s this company in Phoenix called Caliber and they got a bunch of funds out there now. We did some deals with them, didn’t have very good experiences at all. First thing he says is, oh, you know, we put them in Delaware, because then we don’t have to be liable. Like, oh, wonderful. I’m really going to rush to invest with you guys again.

Salvatore:

I mean, if that’s not blazingly honest.

Jason:

They brag about this stuff, it blows my mind.

Salvatore:

We’re reaching, I think, right now the golden age for if people really do want to pool money to invest in real estate, this is the time to do. This is the golden age for that.

Jason:

Well, I kind of thought you were just saying it wasn’t. Isn’t that the crux of this conversation, okay?

Salvatore:

No, it is if you do it correctly. If you do it correctly. If you’re pulling $1,000, $500 dollar chunks from smaller investors, that’s not going to work, but as far as people like you, the more sophisticated guys and you have a good track record and you have good ethics, you’re going to be very successful and we’re seeing that happen right now. People are buying apartments complexes, these REITs are popping up all over the place and they’re just people who, you know, they don’t have to go to the bank any more. They rather go to the guy down the street who has a self-directed IRA with $500,000 to fund his deal.

That’s where you’re starting to see it right now is that it’s taking on, and really what people want and the alert of this is that people want more intimate money management. People who invest in you know you, they have your cellphone number, they see the asset, they can kick it, they can touch it, feel it, spit on it, but conversely, you gotta put yourself in a mind of the investor now. The saver, the pensioner who is a loser, not morally or ethnically, but they’re just losing money, we haven’t even talked about inflation with that, but they are just losing money by having it sit in the bank.

They’re like, well, I’m going to invest with this guy rather than put it into Martha Stewart on the media if I buy 200 shares of Martha Stewart, guess what happens, she does something stupid again, insider trading goes to jail, that stock will drop probably 50%, but they have no control over the investments and that’s what people really want today is that they want control over the investment. Good luck calling Martha on her cellphone and asking her why your 200 shares dropped 50%. There’s not a chance in hell you’re going to get her on the phone, but what people’s main attraction to is I want something I can sell, touch, fell, and understand. I don’t understand the stock market.

Jason:

From my part, and listen, I agree with you and that is good that it’s more intimate and it’s getting closer to the investor and they can really talk to the management, that’s good, that’s an improvement, for sure, but from my part, you know, I say for most people just buy some single family homes and rent them out and you’ll make money and that’s your retirement. You know, that may be really your big wealth creator, you know, you can move up, you can move up and buy your own apartment building or buy it with a partner rather than having some fund manager that’s skimming the profits off the top of the deal.

Salvatore:

Oh no, absolutely. You know, there are people who think there’s a allure and I’m one of them, you know, I don’t want to cut my nose off despite my face, but I’m wearing two hats here and the point is I’ve seen some fund that are very well managed and I’ve seen some that are not. There’s a company in Phoenix, I can’t remember, but they blew up because they over paid for everything and then the banks called the loans due. You know?

Jason:

See, that’s the thing, what I like to see is the fund manager having a lot of their own money in the deal.

Salvatore:

You always have to do that. You always have to ask and that’s what it comes down to the alignment of interest and the institutional world, it goes like this, well, if I get hurt, I want to make sure you get hurt too, and that’s really what it is. So, I’ve been in some ten years conversation in some institutions here in New York, you know, with people who I know, I say, okay, what are you putting in? I am putting in a fresh one, you know, fresh million or something, you know, and where’s that money come from? Is it coming from you or is it coming from your brother in law or from people you don’t know?

And not all equity is the same and, you know, people sometimes will say, oh, well, it’s my money. Is it really your money or is it your mother in law’s money? That could be consider your money, because you never want to lose your mother in law’s money, but if it’s being pooled from people who you have no idea who they are, you have absolutely no alignment of interest with your investors and that makes it so you can walk away. That’s the hard questions you have to ask and that’s what investors don’t ask and that’s what investors don’t ask is that they never ask the hard questions, but your absolutely right, you gotta have this proverbial skin in the game, because they want to know you have your feet in your fire and that’s how grown up deals are done. Now, it’s not bad to raise money and syndicate money for bigger deals like that, but again, putting on my investor hat, this is what I wanna see is, okay, I’m going to invest in this Sal, what’s he got he into and where it’s coming from?

Jason:

But here’s the thing, I just want to point this out because, Sal, you brought this up before when you talked about the rack rate issue, right. A lot of these guys, they are in the deal and what the investors, it’s so hard to sort through and really understand the capital structure on these deals and the alignments of interest because, you know, they are in the deal, but they don’t pay the rack rate a lot of times.

Salvatore:

Yeah, that’s a whole other story. I mean, these syndication sometimes, you know, that blew up, and this is what we would fund these, we would provide these triage financing for this, is not all equity is the same, so I remember one time some guy came to me and he had a deal and I said where are you in the capital structure, where are you in the caps. Well, I’m common, but I’m treated like preferred. I said, no, no, no. That’s not how it works, that’s not how it works.

There’s remedies for different parts of the capital structure and this guy saying, well, you know, they treat me like preferred, but I’m common. I said, no, that’s like the girlfriend saying at her rich boyfriend funeral when they’re reading the will that she deserve to get the millions of dollars and not the wife sitting next to her because he called me his wifey or something.

It’s totally different and that’s why people, you know, I actually wrote a book on this that I’m finishing up, but it’s important to know where you are in your capital structure. What are your rights and remedies and people don’t ask that question. They don’t. Sometimes they don’t even know what they’re getting. Sometimes they have, you know, I see investors offer what’s called a cash flow certificate. That means nothing to me, because there’s no recourse and no remedy, but you hit the nail on the head right there.

Jason:

Yeah, good stuff. Sal, this is really informative and in this world in which you operate everyday, you see all this stuff, I just want to thank you for sharing this with our listeners, because there are just so many scams and some of them don’t raise to the level of being a true scam, they are just, you know, people who have their hand in the cookie jar.

Salvatore:

They are asset aggregators and they make money by sitting on assets, that’s what they do. They make money on sitting on assets. That’s what they do.

Jason:

And they make money because, you know, they got the management deal over here and they got the rehabber, you know, the contractor company over here and, you know, they’re like triple dipping and all these, you know, they’re referring the business to themself, it’s self-referential. So, once they get of that money and control of that deal, they say, hey, well, my contracting company will just rehab the apartment building and then my management company will manage it, but all the investors got to pay for management on site too, that’s what we found this Caliber company doing when comforted with it, they just made kind of excuses, you know, sort of ‘that’s the way it is’ stuff.

Salvatore:

Yeah, but to the uneducated investor they’re, oh, cool, he’s fully integrated, you know? Oh, this is great, he can take care of everything. Not so fast, not so fast. You’re absolutely right. Always read the fee agreements too if anybody is thinking about getting into these things. What are the fee agreements. There should be 1% flat rate in most real estate deals. That’s acceptable, that’s fine, and the reason for that is because, you know, the investors want to make sure you’re keeping the lights on. They don’t want you to have to go outside of investing and managing their money to make money to keep the lights on. You know, anything more, I have seen them as high as 5%-10%, you know, why? Why? And that shouts inexperience to me. You know, they show their true colors.

Jason:

Yeah, wow, just 5-10% versus 1%. Realize that’s not a 4 or a 9% increase, that’s a 500 or 1000% increase. It’s a multiple of five or ten times! That’s insanity.

Salvatore:

But people pay it because they’re desperate, they’re desperate.

Jason:

They’re desperate and they’re busy and they don’t have the skills or the ability to evaluate all these things, you know? So, it’s a sad story, it goes back to the casino analogy and I agree with pretty much everything you’ve shared with us today. Sal, give out your website.

Salvatore:

Yeah, for people who are listening on this, we’re giving away – we have 20 books that we’re going to give away for free print copies of the book and they can go to MakingtheYield.com. There’s a little video there and I talk a little bit, but you can go to MakingtheYield.com and if you’re one of the first 20, we’ll ship you a book out. All we ask is a couple of bucks for shipping and handling, I think it’s like $3-4 or something like, but there’s also a lot of other cool stuff on their too like infographics and how these funds should work and all sorts of things that will really open your eyes as to whether or not, you know, whether or not you’re being played or not. It’s sort of like the old addage of the, if you’re playing porker and you can’t tell who the fool is at the table, it’s probably you.

Jason:

It’s you. Yeah.

Salvatore:

It’s to get people smart. We call it intellectual capital and that’s the sexy term of the industry and on wall street, but they’ll say, you know, this guy had the intellectual capital to pull this deal off, that’s really what it comes down to, but if you go to MakingtheYield.com, the first 20 get a copy of the book.

Jason:

Okay, so get a free book at MakingtheYield.com and Salvatore, thank you so much for joining us today. This was very, very enlightening, Sal.

Salvatore:

My pleasure. Any time. I really enjoyed this. Thank you.

Announcer:

This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected]. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

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