NIME 9 | Raising Capital

 

With housing prices pretty much inflating in every major area across the country, there’s not as many deals for flips and rentals. A lot of those investors are moving into the note space to try to find assets that cashflow either through a foreclosure or repossession. Bob Malecki started as a landlord and started flipping homes before he dove head first into real estate investing after coming into an inheritance. Over his years of experience in the industry, he’s learned how critical raising capital is to succeeding in real estate investing. Today, Bob is a Managing Member at the Notable Capital Fund which specializes in acquiring performing, re-performing, or even non-performing assets. Learn more about capital acquisition, finding assets and investors, and how you can make note investing a full time profession from Bob.

Listen to the podcast here:

Bob Malecki on Raising Capital And Finding Investors In The Note Space

I have Bob Malecki with Notable Fund. Bob, welcome.

Hello, Martin. Thanks for having me on.

We’re fortunate to have you here with us.

Thank you. I’m glad to be here. I just got back from the Paper Source event in Las Vegas. It was a wonderful event and I was looking forward to this as well.

What was your main takeaway from that event?

A lot of the asset managers that used to attend were not there, which was interesting. It was indicative that there is a lower shrinkage in the amount of assets available. There are still a lot of curious, new note investors. They had about 450 attendees. There are a lot of people still wanting to get into the space. Because housing prices are inflated pretty much in every major metro area across the country, there’s are not as many deals for flips and rentals. A lot of those investors are moving into the note space to try to find assets that cashflow either through resolution or a foreclosure and repossession.

The point is like anything with opportunity, you look for where people are headed and you may perhaps go the opposite direction. Whereas everyone may have gone for the institutional first, NPN at one point, maybe you look at other types of cashflow and assets that you can get into.

Paper Source is not a strict, institutional paper conference. Bill Mencarow came from the seller carry back world as did Eddie Speed for decades. There was a lot more emphasis on seller carry back debt and being able to acquire that from current lenders who have carried back loans on properties that they’ve sold. That seems to be the new trend.

Let’s take a step back because Bob Malecki of 1998 with Interactive Village and you’re doing a business that is not real estate and note related I take it.

Believe none of what you see and half of what you hear. Click To Tweet

When I lived on Bainbridge Island, Washington, which is across from Seattle, I started an ISP, a web hosting company. I was mainly an IT consultant at the time. Eventually in 2006 or so, I bought a fourplex and a duplex in my local area. I became a landlord and then started flipping homes and dove head-first into real estate investing.

From the point of 1998 to the point of 2006 where you formally get into this space, what was transpiring at that point?

I was running my company essentially. What had happened is both my wife’s and my mother had passed away in 2006 or so. We both inherited $300,000. I was trying to figure out the best way to invest that money for appreciation. I read Rich Dad Poor Dad as everybody else probably has as well as a few other books. It got me thinking about real estate investing. My father was a real estate salesman. I remember when I was a little boy, he would go on Sundays and do the model home open house in order to develop it and he would pay me to clean windows. I guess I have real estate in my blood, so to speak from that experience. That’s when we bought the duplex and the fourplex. I started diving into the whole real estate space at that point.

Rich Dad Poor Dad was almost an extension of your first exposure that you got as a child with the real estate space.

From there I got on BiggerPockets and started reading various groups there, discussion boards. I was a member at the time of our local REIA, which is called REAPS, Real Estate Association Puget Sound, and they have one of the largest REIA groups in the country. There was a great support group there. There was a lot of good networking available, a lot of good education through the monthly meetings and presentations by the usual circuit people. I learned a lot. I got a lot of networking done, delved into commercial for a while, tried to buy some multifamilies. I realized that capital acquisition and raising capital was critical to any large-scale purchase like that. I essentially failed miserably on it, but I learned a lot of lessons about what to do first.

I was putting offers on multifamilies but not raising the capital. I realized you need to syndicate first before you chase down a deal. I abandoned that after about a year and $10,000 of expenses later. Right now is not the greatest time to buy multifamily. Cap rates are compressed and prices are high. I chased down self-storage for a while. I love the idea of owning self-storage. Raising the capital was always an issue. I went through that cycle with Scott Meyers. He was teaching that during the during the circuit at the REIA’s and has a good course on it. I just went back to flipping houses and owning my rentals. I started a self-directed IRA from my wife and I about 2009. We created a checkbook control LLC with another family member, and we bought four turnkey rentals in Memphis that cashflow very nicely. I also flipped a few homes in Memphis with my IRA.

I stayed away from the checkbook option because my CPA had just forewarned me that you can get into technicalities that might hinder you out at a later point, not knowing unintentionally of course.

Checkbook control is great, but you can mess it up if you do any shelf dealing through ignorance. I was fortunate that in about twenty miles away from where I live is an attorney who specialized in self-directed IRA checkbook LLCs. He created the operating agreements, set it up for me and was available for questions and answers and I asked him a lot of questions thereafter, “Can I put this expense through the LLC?” He was referred to me as, “A Thousand Questions Bob.” I encourage anybody who is considering a checkbook control LLC, you definitely want to have an attorney who knows that space and can guide you as you go along. If you get audited and you’ve done anything that violates the IRS regulations on that, they could force you to cash out your entire IRA, pay taxes on it and pay penalties. It could be very brutal.

I’m going to ask you one last question because I’m curious. I assume that where you started in your younger years with investment, with being a business owner and where you are now, you have to have a sense of great accomplishment. What are some of the things that you perhaps picked up with your father that when you saw him in the real estate industry that you say, “I carried that through, I picked that up from my young days?”

NIME 9 | Raising Capital

Raising Capital: Everybody’s got their pitch and their story that you to do the old “trust but verify.”

 

Don’t become a real estate agent was my first one. I try to sell a little Willy Loman in Death of A Salesman because he always had to sell properties to create income. That was one lesson I learned. I don’t have an agent or broker license. The other thing he always said was believe none of what you see and half of what you hear. I love that. From a relationship standpoint, everybody’s got their pitch and their story and you have to trust but verify. That was a big thing I picked up as well.

We’re going to fast forward back to 2006. You start getting into the real estate and note game. When did you move to start a fund?

That was in 2013, 2014. I had attended a live weekend bootcamp in San Francisco from Scott Carson. I sat next to who would eventually be my partner, Ben Cote. We sat together through the two days and had the lunch and got to know each other and then we kept in touch for about a year after that. We’re just talking about our deals and getting advice from each other. By that time, I’d already started a small private equity fund and raised about $200,000 from local investors. We bought some flips and a couple of properties. We bought his rentals at a good price. One was a foreclosure, the other was a short sale. I got my experience and cut my teeth on that small fund.

I learned how it works, how securities work and how to raise capital to some degree. At the time when I was working with Ben on a casual relationship basis, I realized that if we raised some capital, we could probably get better pricing on the notes. He agreed to partner with me. We spent about six or seven months putting the PPM together and getting it all registered. At the time, then Ben has twenty years of experience as a mortgage broker. He knows due diligence and evaluation. I’ve got a lot of experience in operations and how to set up everything virtually. Both of us realized that neither of us were good sales guys and not good at capital acquisition. We had the cake baked and the restaurant open, but no customers coming in to sit at the table.

What’s interesting is that there are a lot of folks and they’re on the newer side. To many folks, picking up a few deals and getting a few wins is a good day. In the whole scheme of things, the long-term play, you went after it. You went big with a fund and you thought with the mindset to go big with raising millions of dollars to where you got. What would you say to someone that is satisfied with onesies, twosies? How would they cross that barrier to go big?

First of all, learn to be fearless but not reckless. That’s one of the things I do. I’m starting another fund in a different asset class. It’s a $100-million fund. I sometimes think, “Can I do this?” Somebody might go to me, “Go ahead.” I might come back with, “Why not? Go massive.” It doesn’t mean I have to raise $100 million, but at least that’s my target. To the person who is working on individual deals and wants to go bigger, first of all lose your fears. Second of all, partner with people that are smarter than you, that have experience. What do you bring to the table? What do you lack? In that example, dealing with Ben and I, we realized we wouldn’t have the interest to work with investors and do sales.

I brought on a third partner, Kevin Moen, and who’s Eddie Speed’s student. He’s an excellent sales guy. He’s very transparent and sincere. We had now a full complement of skills. For somebody who wants to go big, partner with people that you’ve known for a while and that have skill sets that complement yours. They fill your void. Don’t feel like you have to do it all because you can’t, especially as you start growing and if you’re going to raise any capital. I would say maybe start with a small target like I did. I had $500,000 target raise. We raised $200,000. We had five investors in the fund. It was easy to manage. I didn’t have a ton of investors asking questions after they’ve contributed their capital. I learned in baby steps how to go along and grow my skill sets and my operations. In my newer funds, I’m partnering with people who are very good in their space. They have the relationships. They have the experience that I need and I have the experience they need. It’s a win-win all the way around.

I see a progression happening here. You start with a $200,000 raise and then you get the five investors, $40,000 a pop or whatever, and then you progress to the next fund level. Now you’re at a point where you’re looking to raise $100 million. Would you say that you’ve proven yourself at each stage and that’s been exactly what you’ve based your next leap from?

I’ve made mistakes. I learned from those mistakes and move on. I don’t sit in regret or if somebody else doesn’t cooperate or doesn’t treat me well, I don’t sit in animosity. I just move on. Moving forward on those stepping stones has provided me the level of confidence that I need internally to go forward and keep my fearless position on all the things I’m doing.

Grow your skill sets by partnering with people who are very good in their space. Click To Tweet

Fearless but not reckless. What are some of those mistakes you’re referring to that you either made or you avoided making?

In the first fund, I selected an accounting company who’s fairly local to me and I didn’t interview enough resources in that area. They ended up charging $4,000 a year for tax preparation. Since then on my second fund, we founded an accounting company that only charged $2,000 a year for tax preparation, which is about normal. I got embedded in the first fund with the expensive accountants. I would say it would be difficult to switch. Those expenses eroded a lot of the profit in the fund. My return to my investors wasn’t as high as I had wanted it to be. Managing income expenses, balance sheets, all of that I’ve learned.

I can read a balance sheet, I can read a P&L. I run QuickBooks for all my other LLCs that I have but frankly, I don’t have the passion that perhaps another partner would have. When I partnered with Ben, I know he also has a tax preparation background. I know that I had a partner who had a good tolerance for data and financial statements and everything, and I could let him ride with that skillset. I don’t have to learn it and deal with it because to me it was a big pain in the butt. In the first fund, I made the mistake of not managing the capital and the expenses as well as I could have. I learned from that and I implemented my learning in my subsequent ventures.

Let’s say that someone read this and they understand the fundamentals. They say, “We have to take care of the operations and the systems of putting the fun together, get correct tax preparation, get the right legal.” You go ahead and build the fund, but that’s probably the easy part. It’s raising the money and then buying assets that are going to feed the expenses and make you money.

Raising the capital is a challenging part in general because the SEC has regulations that you’re not allowed to advertise. Now you are in certain exemptions, but in general you’re not particularly allowed to advertise in a 506(b). You have to have relationships built and even on new relationships, you have to have some dialog, some interaction with the potential investor before you can take their capital. Essentially what the SEC wants you to do is ensure that investor is capable of understanding what they’re doing. They’re not ignorant and you’re not taking their last $50,000 for instance. Building those relationships, going to meetings, networking. I created a Meetup group in Seattle for notes and I was able to attract investors to me through my knowledge and leadership. I would give away a lot of information, and that goes into what comes around goes around or I paid it forward so to speak. By providing a lot of leadership and information, I became an expert in my little fish pond of Seattle and I attracted investors to me. It’s the same thing on BiggerPockets and the same thing at conferences. Basically, creating a leadership position in your community in that space you want to attract investors is one of the keys.

Put yourself in a position where you’re surrounded by people that you can help and serve in and can lead to potential investors. That’s one of the benefits I found from this group that I formed. It has over 3,000 members and every day, people are requesting to join the group because it’s a private group. I have people like you on because it helps move me and my altitude. I want to be up there with Bob. I want Dave and Mark Pantak and all these other folks that are out there hustling, doing wonderful things. I do have a question. What is the course again that you referenced for self-storage investing?

That’s Scott Meyers’. If you just look up self-storage, he has a course. He’ll teach you the basics of how to evaluate, the whole nuts and bolts thing. He’s a nice guy. He knows self-storage. He owns a lot of storage properties. He’s probably the foremost expert in the space, but he does have his students out there hunting down properties, then he’ll JV with you. It’s a bit of a networking system he’s got, but he’s a good, straightforward guy. No BS.

If you raise $1 million fund and then you go to look to raise them $100 million fund, I assume you’re not working a hundred times harder.

Not at all. That’s the absolute magic of raising capital. I do JV’s on the side as well, and those are individual one-on-one. I have to manage my JV partner, their capital, the asset and so forth. That’s two or three JVs. It’s two or three times the work. In a fund, you’re essentially pulling capital together. You hire a funded administrator to handle the financial side, communicate with your investors on their account statuses. You now have a pool of capital to deploy. One of the partners, like in Resolution Capital, Kevin would handle all the investor relations newsletters contact. Also, raising capital in that private equity fund, the investors are agreeing and cognizant that they will have no control over the debt that we’re buying or the assets we’re acquiring.

NIME 9 | Raising Capital

Raising Capital: When you’re working with somebody else’s capital, communicating and keeping them updated is extremely important.

 

They trust that we know what we’re doing and they’re coming into our funds knowing that we have a good performance history individually and with previous projects we’ve done. They’re investing in us as managers in the fund as much as they are in the space. One thing that somebody once said, and it is true, is they need to know, like and trust you. Outside of saying, “Bob knows the nonperforming notes space and can get those assets performing,” they also want to be able to like me. That’s where the networking comes in. I’ve had incidences where investors come in because they liked me. They’re like, “It’s a good fund but I like you, Bob.” That’s an important part of it as well.

It’s not just having a competency in your field of expertise, but it’s being approachable, being likable and I assume being responsive. If they have ongoing questions, you want to be quick.

Whether it’s a JV or a fund, when you’re working with somebody else’s capital, communicating, keeping them updated is extremely important. In my JVs, I’m constantly communicating with my co-investor, letting them know where we’re at on the project. If I’ve received their money, now I’m looking for assets. You don’t want to keep anybody in the dark, especially if it’s a new relationship where they know and like you, but they still are learning to trust you in that respect.

When you’re raising capital or you’re putting X amount of effort into raising capital, do you also want to match that intensity with finding assets at the same time? How do you balance those two?

In the Resolution Capital Fund, we raise capital. As we went along, we’d get $50,000 here, $100,000 there. We would then deploy that as quickly as possible into assets so we can get those assets reworked or by performing assets, some performing to get cashflow in to start providing a return to our investors. There’s a balance there. Focus on income. Finding the assets, over past few years has gotten to be more and more of a challenge because the inventory of the stress debt has been shrinking slowly. One of the more frustrating things is you can buy a small pool of nonperforming loans, which are going to get typically some diamonds and some junk.

We took another approach and we did the cherry picking. We are very conservative and out of ten offers, one might get accepted because my offer is too low to fit our fund model. We move very slowly. You need to make a decision at the beginning of the fund or at least a directive. How are we going to model this? Are we going to buy pools, take out what we want and then set up a trade desk to sell off what we don’t need? That creates more overhead and more expense. That’s the shotgun, or do we want to take the rifle approach and just buy assets that we know are going to work for us? That’s what have worked for us and it’s taken longer to deploy the capital than we want it to.

You can get a buying partner, someone that’s going to pick up what’s outside your parameters. You said something interesting, buy within your fund model. Do you see that common mistake could be that you have all this capital and you need to deploy it? People go outside their fund model just to catch up lost ground.

When you say go outside their fund model, do you mean outside of the actual directives that we’ve put in the fund?

Yes, but go outside your buying parameters. That’s what I took for your fund model.

We’ve all made mistakes. Learn from those mistakes and move on. Click To Tweet

The buying parameters, it’s tempting to say, “I’ll spend more on this and hope that I make money on it,” but that may not work. We bought a couple of assets that didn’t work out as expected and now we’re having to deal with foreclosure in New Jersey. You know how that can go. That one bit us in the butt. Saying that we’re going to spend more than we intend to would not be beneficial to our investors. I always look at what’s going to benefit our investors. The way our funds set up is we don’t make money until our investors get their preferred return. We’re working for free until we can get an asset performing above that preferred return threshold. It forces us to be very diligent and buy assets that we think have the best upside. I would say don’t go outside of the parameters. Don’t fall into that temptation of, “I want to get this capital deployed and get these assets,” because that’s the lazy man’s way out and it may not work out for you in the long run.

I had Mark Pantak. The secret to success seems to be within regards to inventory. It seems to be just a lot of phone pounding with banks and hedge funds just nonstop, all day, relentless phone calls.

We don’t necessarily buy from banks, but we have relationships with asset managers, the usual suspects in the market, reviewing tapes and making offers. We had to create a platform for peer reviews, which partner did what as far as initial due diligence, making the offer and so on. That’s a lot of work acquiring the assets. In the meantime, you’re sitting on your investor capital and until you get their capital deployed, they don’t see a return. If you have $100,000 and you’re sitting on it for six months, that investor needs to be very patient and it takes some care and feeding to let them know, “I know you haven’t seen a return for the past two quarters. We’re trying to find assets that fit our model. In the long run, you’ll see a return but we appreciate your patience.” Having patient investors and telling them upfront that this is a slow dime, not a fast nickel, and they need to be patient is one good thing to prepare them. They’re not anxiously wondering what’s going on and why they haven’t seen a return in the first quarter for instance.

Do they get to share on any of the upside with the fund given they might have to wait on the front end?

Yeah. In Resolution Capital, we do have a profit split model where we share some equity with the investors after they get their first 8% preferred return. There are so many ways to design a fund, with preferred returns, with profit splits with backend shared equity. You can do a closed-ended fund or perpetual fund. There are so many variables and that’s just on that point. It’s good to get with a securities attorney who can help you design the fund based on your parameters and your market.

We’ve touched on the fund and we’ve touched on passive investors, hedge funds. We even touched on you as a young man, washing windows at the model home. One thing we haven’t touched on is partnership. How have you used the like and trust model in finding partners?

Frankly, on the first fund I did. I went through two partners and there were conflicts. My first partner, we didn’t agree on a couple of things and we got into some heated discussions and we agreed to separate. That partner completed a dissolution agreement. Then I brought on another partner locally and that worked out pretty well, except he was a corporate employee with a fairly large company in Seattle and got a little fearful on the responsibility he had in the fund. He didn’t seem to have the ambition that he needed to continue with me. He resigned as a partner and then I just went on my own on that fund. By then it was a year or two down the road. I learned that interviewing partners, selecting partners is very critical because you don’t want to have to break up mid-stream in the project for instance. That’s a tough one.

That’s why I say, find people that you’ve gotten to know for a while and you know what their quirks are, you know what the sensitivities are, you know what their appetite for risk is. This is a high-appetite risk model. You’re not getting a paycheck every day. You’re dealing with people’s money, you’re dealing with securities and you’re dealing with attorneys and accountants. You have to find people that can roll with the wave and not feel like they have to have certain assurances in the project.

I get people to reach out with a bunch of questions all the time. I was talking to this gentleman and he was asking me about a certain JV. He wanted to go in passively with a certain JV person. He asked what my opinion was and I’m like, “I can’t speak for that person. I don’t know. What I can tell you is that when you find that JV partner who’s on the expert side, make sure that they do this perhaps for a full-time profession. Perhaps they’ve been doing it for a while, they’re seasoned and they have results they can show you.” It’s those kinds of qualifiers. I do have a question for you. What is Bob’s greatest challenge? What would he do differently knowing what he knows now?

NIME 9 | Raising Capital

Raising Capital: In this day and age of cell phones and the internet, learning how to use all the virtual platforms and cloud services will be of benefit to you as you build your business.

 

I started earlier in my life investing in notes, first of all. I just started a few years. I’m late to the game so to speak. Also on self-directed IRAs, I started late in the game. When I worked for companies, I had the 401(k) and all that fund stuff, but I wish back in 1998 when I started my first company, I would have opened the self-directed IRA and started contributing to it. For all of you who are younger and have kids, open up a self-directed. Open them up to your kids, start contributing $50 a year or whatever, but get that going now. When you get to be my age, you’ll much more appreciate having that. Those are the two things I would’ve done differently. Getting into notes and real estate in general, I wish I would have come in earlier, especially before 2008. It would have been much more comfortable life.

I know some folks that did it before 2008 and they’re very comfortable. It’s interesting because the two things you mentioned are not things that are lessons learned or course corrections, but you just wish you would have done it sooner.

That’s mostly the timing part of it. If I have any regrets, that would be one regret. I can’t think of anything major that I would have done differently outside of maybe not marrying my first wife, but that’s a personal thing. Getting organized is one of the keys. On this day and age of cell phones and internet and what we’re doing right now, learning how to use all the virtual platforms, cloud services will be of a benefit to you as you build your business. I work from home, I’m sitting in a home office. Occasionally, I have to go to a meeting and put on a shirt that has buttons. That’s my joke. I can sit around in my sweats all day because I’m just working email and the phone. That to me is magical. I could’ve been done this years ago like this with just in the age of pagers, faxes and rotary phone.

We have a question, “How much involvement do you allow your investors to have?”

In the private equity funds, very little. We’ll let them know financial reports. We’ll send them data sheets on the notes we bought. We’ve got our PPM and our operating agreement written so that they understand that it’s totally passive. We’re driving the ship and they’re just passengers reaping the benefits. In the JVs, it’s the opposite. I enroll them immediately into a tape. We look at the assets, I recommend some assets. I put it in my offers. If we get an accepted offer on one of the assets, then we review that and make sure it fits. I walk them through all the way from cradle to grave. A lot of times that’s why they’re venturing with me. They want to learn as they go through a project. If I was very successful, they wouldn’t JV with me because they know everything. They don’t need me anymore so to speak, so I’m setting myself up for failure.

You touched on how cautious you are when raising capital and not to put yourself out there in any way that violates any rules or regulations. We’re talking about JV. It’s interesting to see how people are freely asking for money out on Facebook and LinkedIn. It’s everywhere. Do you see that?

I’m not a big Facebook user. I have an account but I just don’t have time. It’s the same with LinkedIn to some degree. You have to be very careful when you are looking for capital. You can’t advertise, you can’t state what return you’ll provide. I’m on a newsletter with a local company that’s a flipper. It’s a guy and his wife and they’re always saying, “This is going to have a 20% return.” I just cringe because that’s essentially violation of securities regulations. You have to be very discreet and also very transparent. When I set up a venture, I set up a separate bank account. I don’t commingle funds between JV partners. I have separate bank accounts, separate statements. I use Google Docs. I have my virtual assistant download the bank statements every month so my JV partner can see our balances. Having that level of transparency to me is essential. It’s not necessary per say, but it creates a better foundation for trust. Capital need is okay, but you have to be very discrete on how you handle it in the public view.

Thank you for that. I do have another question here. What are some of your best sources for passive investors?

Having a meetup group, creating a meetup group for your niche. If it’s nonperforming notes or flips or whatever you’re doing and bringing like-minded people to that group will start the seed of the relationship for potential passive investing down the road. I love BiggerPockets. In BiggerPockets, you can’t advertise but it’s a great way to create thought leadership and to attract investors to you. Half of the investors we have in our fund and that I brought into JVs came through BiggerPockets because it’s a magnet for me. It’s a wonderful thing because I can reciprocate. I went to Paper Source and I was able to meet with some of my partners who I’ve already engaged with on ventures but also had more leads and people who want to venture with me that I need to follow up on. A lot of it is social interaction. You’re not going to find passive investors on Facebook and LinkedIn automatically. You’re going to have to at least have a call with them on the phone if they’re not local and maybe two calls and they’re going to check you out. You want to provide all of your social media profiles to them so they can see who you are and maybe even some references so they can talk to other investors that you’ve worked with.

Having a level of transparency is essential in creating a better foundation for trust. Click To Tweet

That’s the transparency factor. What’s interesting is you mentioned the strength, the BiggerPockets and the meetup group, but that’s just the resource. It’s the work you put in to it. I know if I post a question, Bob’s there instantly. You’re always hitting me with some knowledge, the rest of the group and everything else. It’s about the effort.

I can work from home and I’m self-employed. I can get on BiggerPockets once a day and go through the questions and respond or in the morning when I’m doing my reading, but also getting out and getting to these meetings. It takes about an hour to an hour-and-a-half for me to get from my home office to a meeting in Seattle because I have to get on a 40 minutes ferry. I have a 40-minute drive there. Round trip, it’s a big effort. It’s a lot of work. I go because I’ve learned that if I just stay at home, work from home and not network, it’s not going to get me very far. I’m not a very social person. I’m a quiet guy. I don’t like to talk to people but I’ve learned that’s required.

When I get there, I’m fine. I’m not a wallflower but I’m a lazy guy too. I’d rather just stay at home. I joke about note investing that I’d like to have tenants who leave me alone and send me money and that’s called a borrower. I’d like to have investors who leave me alone and send me money. Those are called investors, but I still have to go out and deal with them, talk to them, do some hand holding, establish credibility and also appreciation. Show them that I appreciate their trust in me as well. Sometimes that’s done on a personal meeting or at a meetup.

Speaking of BiggerPockets, I’m writing my third book right now and I took something from Brandon Turner. He does the BRRRR Model. I do it as the GRRR model. I do goals and then rituals that are real and repeated. Give us some of your rituals that the folks here can digest and emulate for their own ventures.

Years ago, I started to meditate in the morning and it’s nothing magical. I get up in the morning, I pour my coffee. I have one of these traveling coffees. I keep it warm. I put it on the side and I will do about twenty minutes of meditation in a dark, quiet room. I have intentions that I’ve developed that I read every morning about success intention. Maybe that’s a little cosmic and all that, but it keeps my mind set and focused on what my goals are. Then I’ll spend a good half hour to an hour just reading. I bought a tablet. I use the Kindle Reader. I read books, I get on my tablet. I have newsletters that come in. I do my reading and research and see what’s going on.

To me, that’s very important both in the note space and any other endeavor that I have. Keeping my finger on the pulse of what’s going on in the market so that I can plan ahead of the game. Not reacting to news, but proactively seeing those and proactively thinking what opportunity does that article have for me? Can I leverage anything that happened in that event that I just read about? Keeping up on reading, I do that in the morning because I’m fresh and focused. I go for a walk every morning with my wife and our dog, so we walk two miles. That gives me a chance to clear my head and also digest all the information I’ve read about the hour before by myself. It also lets me communicate with my wife. We both work from home, but she’s busy in her office and I’m busy in mine. We pass each other in the hallway and she eats her lunch separately. Having time in the morning to just walk and talk about anything that comes on our minds is great.

As someone that works by himself most of the day, does your wife acts as a sounding board? Does she hear everything that’s going through here? Do you let it out?

I do a lot. She’s an artist. She’s a polar opposite of me being a business guy and notes, but she understands real estate. She understands notes. She has good information and opinions. I’ll bounce an idea off of her. Generally, she’ll just listen but sometimes she’ll come up and say, “How did you do that? Why are you doing this? I don’t understand what this means.” That dialogue will get me thinking, “I didn’t think about that part of it.” If you were in the same business as me, we might not have gotten along and be divorced by now because we’d be competing with each other. I have a partner in my personal relationship that complements my skill set because she helps me stay transparent. She helps me deal with my inner self, my values and everything. It’s refreshing to have somebody like that to bounce ideas off of who has an interest but not necessarily wants to participate. When I flip a house, she doesn’t want to go in the house before it’s flipped because it’s stinky and moldy. She’s like, “I’m not going in,” but I’ll bring her in afterwards. She’ll come up with ideas on decorating or maybe on various parts of that. That’s an excellent resource to have with a spouse.

You have that foundation for yourself. One of my biggest takeaways from our conversation is that you started in the real estate note space in 2006, so you started years ago. You are a regular guy for the most part. You are highly intelligent. You are a regular guy with very strong morals, very strong rituals and you have partnered well. You’re a student of the industry. You have hustle to yourself. You’re out there on BiggerPockets, you’re out there building a network for yourself in the comfort of your own home. That should be very inspiring for a lot of folks, especially on the newer side that want to come up and just know that you can do this. You don’t need to be on Wall Street in some top office in a penthouse suite. You can do it from your home where you have to take a ferry to go somewhere. I want to say that if you want to get in touch with Bob, do you have a website up for the new Notable Fund?

NIME 9 | Raising Capital

Raising Capital: Keeping yourself educated and taking calculated action will help alleviate your fears.

 

I’ve partnered with Josh Andrews who wrote Paper Profits and his partner, Scott Ruzich. Josh and Scott hired me as a consultant to help them raise capital to create their own fund like I did with Resolution Capital. We agreed for me to come on board as a third partner. You can reach me at Bob@NotableFund.com. I’ve gotten to do some extra pages in the website. I’m very excited because both Josh and Scott are great, high-energy businessmen. They do what they say and they say what they do. After working with them for about nine months before joining up with them, I got to know them very well and I realized that it’s going to be a very successful partnership.

Josh is a great guy with a wonderful book. I know Bill McCafferty definitely connected well with Josh and helped him for his upswing in the note space. Bob, anything else you want to say?

Keep the fear at bay by taking action. Taking a calculated action, not reckless action, will help alleviate your fears. Do your research. There was a movie with Jeff Bridges. It’s probably a ten or fifteen-year-old movie called Fearless. He survived a plane crash and he becomes fearless. That inspired me. Watch the movie. It has nothing to do with real estate, but I like Jeff Bridges and if you like him, it’s worth watching. Keep your fear at bay by taking actions. Keep yourself educated and always keep an eye on your moral compass.

Great advice, Mr. Bob Malecki. Thank you for joining us. We want to thank you once again for joining us here for Note Investing Made Easier.

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About Bob Malecki

NIME 9 | Raising CapitalI’m the managing partner at Notable Capital Management LLC which provides opportunities for investors to participate in the financial rewards found when repositioning distressed mortgage debt. Notable is a private equity real estate and mortgage investment firm offering Single Family Offices and high net worth investors access to the secondary mortgage market and LP opportunities in distressed residential real estate.

I’ve been involved with the acquisition and management of distressed real estate assets including non-performing notes and single/multi-family properties in key markets in the U.S since 2011. My fund management experience includes the creation and management of multiple private equity funds, including Resolution Capital Management LLC which manages a series of private equity funds designed to acquire senior distressed residential mortgage debt, and more recently the Notable Capital Fund where I’m responsible for compliance guidance, business development and operational oversight.