If you’re looking for smarter ways to put your capital to work in real estate, the latest episode of Raising Private Money offers valuable insights. Jay Conner sits down with seasoned real estate fund manager Mike Zlotnik, CEO of TF Management Group, to discuss the mindsets, risks, and strategies you need to consider before writing that first check into a real estate deal or fund. Here’s what you need to know and how you can benefit from Mike’s expertise in today’s market.
Why Real Estate? The Power of Predictability and Cash Flow
Mike’s journey into real estate investing began after a long career in technology and risk management. What set real estate apart for him was predictability—the opportunity to build fortunes steadily over time, particularly compared to the volatility of stocks. Initially investing passively in New York City, Mike realized real estate’s unique advantage.
Real estate offered both appreciation and, when chosen wisely, dependable cash flow—something stocks rarely provide. This predictability, says Mike, is the cornerstone of financial freedom for investors seeking long-term stability, especially as compared with the unpredictability of the stock market.
Raising Capital Is Harder Than Ever—So Don’t Ignore Investor Mindset
In today’s post-pandemic market, securing capital is more challenging than finding deals. Many investors have become gun-shy after recent market resets and rising interest rates. Mike points out that many real estate investors fail here by not communicating the right story or preparing investors for a contrarian approach. He explains that it’s now critical to demonstrate why real estate offers better value today—not just through numbers, but by appealing to “predictable income, downside protection, and prudent diversification.”
Mike warns against relying solely on fear, but recognizes that with stock markets at all-time highs, now may be the time for investors to diversify into more stable assets like real estate.
Scaling from Tens of Thousands to Millions: The Mindset Shift
What’s the difference between raising $50,000 from a private lender and millions for a fund? According to Mike, it comes down to scalability and connection. Raising larger amounts requires robust systems, credibility, and constant engagement with investors.
The foundation, Mike says, is building “know, like, and trust”—without this, capital raising cannot succeed. Education is key, as is establishing authority through books, podcasts, and sharing expertise. The focus should always be on genuine connection, not simply selling your deal.
Risk Comes First: Three Things to Ask Before You Invest
Before even considering projected returns, Mike advises investors to invert their thinking. The main question: How could you lose money? Drawing on the wisdom of Charlie Munger, he advocates starting every analysis by considering downside scenarios:
- How could you lose your principal? What needs to go wrong (interest rates, operations, tenants) for things to fail?
- What due diligence is needed? Analyze leases, tenant quality, local economic factors, and supply-demand balance.
- Mitigation tactics: Can the risk scenarios be realistically addressed and managed?
If the worst-case scenarios seem unlikely or effectively mitigated, only then should you evaluate the potential upside.
Ask the Tough Questions—And Focus on Integrity
Mike emphasizes that due diligence is less about seeking perfect answers and more about detecting inconsistencies or dishonesty. Questions like “Have you ever lost money? Why? What did you learn?” matter because integrity is more important than any projected return. If you spot a lie or evasion, walk away. The very best investors are those who answer tough questions with honesty and humility.
Where Are the Real Opportunities Now?
In today’s shifting market, Mike advises against catching falling knives in highly volatile asset classes. Instead, he suggests focusing on regions and strategies with consistent performance, such as medical offices, industrial properties, and first-lien lending. His current projects, for instance, emphasize predictable cash flow and downside protection over high-risk/high-reward gambles.
Final Thoughts
Success in private real estate investing isn’t about chasing fads or quick wins. It’s about disciplined due diligence, honest relationships, and focusing on predictable, stable returns—even in uncertain times. If you’re considering investing in a real estate fund, take Mike’s advice: prioritize risk management, build real trust, and seek out opportunities that stand the test of time.
10 Discussion Questions from this Episode
- What aspects of real estate investing does Mike Zlotnik find more appealing than stock market investing, and why does predictability stand out to him?
- How has the current economic climate impacted the process of raising capital for real estate deals, according to the conversation?
- What are some common mistakes that real estate investors make when attracting private investors, as identified in this episode?
- How important is the concept of “know, like, and trust” in raising capital, and what strategies do the speakers suggest to build it?
- Why is leading with education a key approach for successfully raising Private Money, and how has it worked for the speakers?
- What does it mean to “invert, always invert” when evaluating risk in a real estate investment, and how can investors apply this mindset?
- What specific questions should investors ask before deciding to invest in a real estate deal or fund to assess risk?
- In what ways does location contribute to mitigating risk in real estate investments, based on points raised during the episode?
- If you were starting a real estate investment business from scratch today with little capital, what first steps would you take to build relationships with private lenders?
- How should investors balance the pursuit of cyclical market opportunities with the desire for predictable cash flow and downside protection, according to the episode’s discussion?
Fun facts that were revealed in the episode:
- Tech to Real Estate Switch
Mike Slotnick, the featured guest, spent nearly 15 years in information technology, managing risk and complex systems, before becoming a full-time real estate fund manager in 2009. - Education Over Sales
One key strategy discussed was that both Mike and Jay Conner have built their capital-raising approach around leading with education rather than pitching deals, believing that teaching investors builds stronger relationships and trust. - Big Mike’s Website Joke
Mike affectionately refers to his website as “BigMikeFund.com” and even jokes that if you forget the “D” at the end (typing “BigMikeFun.com”), you’ll still land somewhere safe—he promises it’s not a “kinky site”!
Timestamps:
00:00 Raising and structuring private capital
04:33 Raising capital for real estate
09:43 Building investor relationships
13:15 Evaluating risks in real estate investments
17:33 Real estate investment considerations
19:51 Assessing investment risks and scenarios
25:00 Starting a Fund: Initial Steps
28:21 Investing for steady cash flow
32:26 Connect with Mike Zlotnik
34:21 Sharing episode with fellow investors
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Raising Capital and Managing Risk in Real Estate Funds with Mike Zlotnik
Jay Conner [00:00:01]:
Are you Raising Private Money but wondering if there’s a smarter way to structure the deal? Or maybe you’ve got great real estate, uh, investing opportunities, but you’re looking for more sophisticated ways to fund them, manage risk, and create consistent returns. Because today’s guest has spent more than 2 decades doing exactly that. My friend, fellow mastermind member, and guest is Mike Zlotnik, CEO of TF Management Group. Now Mike’s been investing in real estate debt and equity all the way back to 2000. And here’s what makes Mike’s story especially interesting. You see, before real estate became his full-time focus, he spent nearly 15 years in information technology managing risk. Business intelligence and complex systems. Now, in 2009, Mike moved into real estate fund management, and since becoming CEO of TF Management Group back in 2014, he’s launched 4 real estate investment funds focused on income, growth, and opportunity.
Jay Conner [00:01:16]:
So in this episode, we’re going to dig into how Mike thinks about raising capital, managing risk, structuring investments, and creating opportunities in real estate. Now, if you’re a real estate investor looking for smarter ways to put capital to work for you, you’re going to want to hear every second of this conversation. In just a moment, you’re going to meet my guest, Mike Zlotnik, right after this.
Narrator [00:01:46]:
If you’re a real estate investor and are wondering how to raise and leverage Private Money to make more profit on every deal, then you’re in the right place. On Raising Private Money, we’ll speak with new and seasoned investors to dissect their deals and extract the best tips and strategies to help you get the money, because the money comes first. Now here’s your host, Jay Conner.
Jay Conner [00:02:14]:
Hey Mike, my good friend. Welcome to the show.
Mike Zlotnik [00:02:17]:
Hey Jay. Thanks very much for having me.
Jay Conner [00:02:20]:
Absolutely great to have you back again here on Raising Private Money. Mike, you’ve been investing in real estate, um, oh shoot, since 2000, and you came from a technology and risk management background. What did you see in real estate that made you say to yourself, this is where I want to put my money and build my career?
Mike Zlotnik [00:02:47]:
Well, I moved to real estate investing, uh, being a passive investor for 9 years. From 2000 till 2009, I was a passive investor, and I thought real estate was the best thing after sliced bread. It was, uh, I started investing in New York City, had no cash flow at all, but I had appreciation, and it was steady, steady. And basically, you could build fortunes slowly over time by buying real estate and holding on and getting no cash flow in coastal markets like New York. Then I discovered cash flow, and a combination of the two kind of said This is all very appealing to me. And I really— before real estate, I was only a stock market investor. That’s all I knew. I was a tech guy, so I knew how to buy tech stocks.
Mike Zlotnik [00:03:35]:
And then I discovered there’s no cash flow in stocks. The dividend yields are very low. So real estate that is bought right predictably generates cash flow. You could build freedom, passive income that meets your, uh, spending needs through real estate. That’s what was really exciting to me. So as I, uh, ventured to build my financial freedom and help other folks achieve their financial freedom through real estate. I discovered the keyword is predictability. It’s not a guarantee, but real estate is generally very predictable relative to the stock market.
Mike Zlotnik [00:04:12]:
That’s one word that, that separates investing in real estate versus operating businesses or versus the stock market. And that’s it. That’s what got me going. It got me excited about it, and, uh, I went to real estate full-time in 2009. And, uh, wrapped up my, uh, tech career, and I never looked back. That’s my story.
Jay Conner [00:04:33]:
So what I hear you saying is that what you love about real estate, uh, in contrast, say, to the stock market and some other, um, investment strategies is that, one, not only are you building wealth over the long term, but along with that, it’s more predictable than, say some other, uh, investment opportunities, stock market, et cetera. And you get the cash flow. And of course, depending on the asset class you’re in, um, you know, we haven’t even talked about the tax advantages, uh, that real estate has, uh, say, you know, as opposed to, uh, stocks and et cetera. Well, let’s talk about what I call the elephant in the room, and that’s raising capital. What do you believe? And you have observed a lot of real estate investors over the years and all the masterminds that you are a member of. In your observations, what do you believe most real estate investors get completely wrong when it comes to, say, attracting private investors and getting people comfortable investing with them?
Mike Zlotnik [00:05:43]:
Well, now is the perfect time for that. So it’s difficult to raise capital today. It’s gotten way harder. It’s kind of funny how it is. Sometimes it’s the reverse. Sometimes, uh, it’s harder to find deals, and sometimes it’s harder to find capital. Now it is way harder to find capital than deals because the market reset in a massive way, and, uh, especially the multifamily market. So if you follow what has transpired, a lot of people are scarred from, uh, kind of the market reset in 2022, the Fed hiking rates fast and furious, and many valuations resetting with higher mortgage rates.
Mike Zlotnik [00:06:20]:
This is partially true for residential. Of course, market by market is different, but commercial obviously, um, suffered quite a bit. So what people get wrong today is a little bit of recency bias. So they, they’ve had difficulty with some recent deals, and, uh, they’re not communicating the right story to the investors. It’s not an easy story. It’s a little bit of a contrarian play. It’s a little bit of, you have to scare investors that the stock market has done too well. And, uh, if you’re a contrarian thinker, if you’re looking for deeper value, real estate is an extremely better buy today versus a few years ago relative to the stock market.
Mike Zlotnik [00:07:02]:
Again, why compare? Because everything has a better meaning in comparison. Stocks have done remarkably well, but I, I lived as a technology guy through the dot-com boom. And bust. And I am concerned about AI, uh, ballooning and being so overblown. So for those folks who have done well doing whatever they’ve been doing- either Bitcoin, crypto, or stocks- it’s time to take some chips off the table and diversify into what’s likely going to give very predictable cash flow and will be a great long-term, predictable, uh, wealth-building and cash-flowing, uh, asset class. And you mentioned something about, uh, investors getting, um, you know, right or wrong. Uh, the key message is, is you have to appeal a little bit to fear. Uh, and the reason I say this is because there’s extreme complacency, and until investors start losing money, the fear is not there.
Mike Zlotnik [00:08:06]:
So when I talk to investors, I don’t try to scare them, uh, into moving capital from the stock market to real estate. It’s really all about predictable income, downside protection, and prudent diversification. And these are funny kind of words, but they’re true, and the stock market doesn’t deliver it. So, um, that, that’s what I think of real estate today. The times are harder to raise capital; whatever deals you’re doing, it’s a little bit harder. But if you get the right message across and you appeal to people’s a little bit of fear, a little bit of greed, a little bit of common sense, investors will realize that there is no better time than now to write a check into real estate, being both residential and commercial opportunities.
Jay Conner [00:08:57]:
Mike, I want to talk a little bit about mindset here, and here’s what I mean specifically. You know, you have built, you’ve managed multiple real estate investment funds. Uh, you started 4 brand new ones. Here’s my question. What is the biggest difference? Mindset. What’s the biggest difference between raising $50,000 from one private lender and raising millions of dollars from investors? Uh, in other words, what has to change in the mindset of attracting just $50,000 versus raising millions for a fund or a project?
Mike Zlotnik [00:09:43]:
Well, it’s economy of scale if you think about it, right? When you’re raising capital into a fund, you need it— you need systems to be able to, uh, reach out to investors, warm them up, uh, build know, like, and trust. And that’s rule number one in capital raising. You can’t raise any money without building know, like, and trust. So the key is to make it scalable. Um, obviously you could raise capital through relationships, and, uh, that is always a part of the equation. But at the same time, building a, uh, a marketing machine, a follow-up machine, making sure that you have systems and processes to, uh, communicate to investors, get in front of them often, and, uh, don’t try to sell; try to connect. So connection, in my view, is the biggest thing that you are looking to accomplish. As you connect to more people and you establish your leadership— so when you’re raising $50,000, $100,000, a million, you’re just connecting on a small scale.
Mike Zlotnik [00:10:45]:
When you, uh, raise millions, you need to have more credibility. So you have to have more of an educational platform and, um, uh, so books, podcasts, everything else you can do to help investors get better, and then it will naturally connect to you. So for those folks who are raising capital, don’t try to raise capital; try to, uh, build expertise, um, uh, and continue to educate and be in front of investors and help them, um, uh, help them see that, um, there’s a lot of opportunity in real estate. And it is, of course,e all about working with the right, uh, people and being one of these people who they want to work with.
Jay Conner [00:11:30]:
Yeah, Mike, you’ve heard me talk about it all the time. And that is the way I go about raising capital ever since I started way back in 2009: leading with education. Leading with education. You know, our 47 unique, uh, private lenders in our deals- none of them ever heard about Private Money, private lending, self-directed IRAs. And so yeah, leading with education. And another keyword you just said a moment ago is relationship. You, like myself, you know, we focus on building the relationship first, the relationship first, not the deal. The relationship first, then the deal, the opportunity comes along.
Jay Conner [00:12:12]:
Mike, you have spent a lot of time, uh, thinking about risk and communicating with your investors about risk, risk tolerance, et cetera. So when a private individual is considering putting money into a real estate deal or a real estate fund, what are the first 3 things you would tell them to look at before they ever worry about what kind of projected return there might be in the deal?
Mike Zlotnik [00:12:45]:
So, Jay, it’s a great question. Think about it this way. What is the definition of risk? The word itself. And in a traditional, classic way, it’s the possibility of a loss. So what I really like is I like to go to these wise old guys. One of them just passed away, but he was extremely wise and extremely well respected— Charlie Munger. And Charlie Munger always said, invert, always invert. Look for the ways you could lose money.
Mike Zlotnik [00:13:15]:
So when you’re looking at risk, instead of looking at possibilities of making money, look at the possibilities of losing money, how you could lose money on a given deal. So that’s, that’s the question you need to be asking. And 3 things are as follows: under what conditions can you lose your principal? What needs to happen with interest rates, with operations, with, um, rents, uh, with tenants? Any deal— obviously, real estate has well-defined key characteristics, but if you’re dealing with commercial real estate, what are the leases? Uh, how likely are these tenants to stay for the term of the lease? When will the lease mature? And what are the possibilities of them leaving? So, going through basic questions of due diligence, trying to understand under what circumstances this investment can malfunction, is the essence of, uh, risk mitigation and due diligence. And it’s not one-size-fits-all. It’s understanding a specific asset. Real estate is always local. No matter what people say, real estate- the reason people love it is that it has a location. So what is happening in the local economy, obviously what is happening in the broader economy, what the interest rates are doing, what are the—
Jay Conner [00:14:34]:
Oops, Scott, did we lose Mike?
Mike Zlotnik [00:14:36]:
I’m still here. Can you hear me? There we are.
Jay Conner [00:14:44]:
I thought, I thought I’d lost you, Mike. Maybe it was me that jumped off. But anyway, do you mind starting over and answering that question? I’m sorry.
Mike Zlotnik [00:14:52]:
Yeah, let me start this again. So risk is the possibility of a loss, by definition. The key is to make sure you look at scenarios of how you could lose money. That is by far the most important thing. So as you are looking at risk, look at under what conditions you could lose money. What would happen if interest rates spiked? What would happen if a key tenant or tenants left, or what would happen if inflation gets out of control, or other key variables that could impact the deal. So the key way to think about risk is, uh, identify the scenarios under which you could lose money. And if you can mitigate those scenarios, if you look at a property based on cost per pound, what are you buying versus reconstruction cost? What are you buying relative to the income it produces? What are you buying relative to the current rents and the tenants? And you can convince yourself that it’s very difficult to lose money on this deal even in a worst-case scenario.
Mike Zlotnik [00:15:52]:
Then you’ve covered your back. That’s downside protection. That’s a good risk mitigation approach. After that, you could look at the upside. You could look at the higher return potential, the cash flows. So without looking at the possibility of a loss, you cannot evaluate the deal relative to its upside. That’s the key approach in my view. And that’s how Charlie Munger approached all his investing.
Mike Zlotnik [00:16:20]:
He was always looking for the way to lose money first. If you can eliminate those scenarios or reduce them to something you understand really well, then the rest will be a journey with very few losing propositions, and you will make a good return over time. By avoiding the losses.
Jay Conner [00:16:37]:
Mike, is that the same thing as asking what’s the worst that can happen?
Mike Zlotnik [00:16:41]:
You have to ask more specific scenarios. Yes, you’re looking for the worst-case scenario, but you have to dig. You have to look at a specific real estate. What is it? Is it a residential property? What could happen, uh, with local markets? Uh, I’ll give you examples. Some people love Airbnb, uh, short-term rentals. And then towns and cities change their rules, and suddenly you cannot, uh, continue to rent. That’s a risk, right? If you look at, uh, if you look at a, um, self-storage facility and, uh, there’s a lot of land around it, the current property is doing great, but somebody else builds another property nearby because the area is doing so well, right? Those are the risks that you need to consider. Uh, or you look at a multifamily and suddenly, uh, uh, we saw COVID, inflation, and the costs to operate went higher while there was a lot of oversupply.
Mike Zlotnik [00:17:33]:
People built a lot of properties in the Sunbelt. So all those questions are important to understand when you are starting to invest in a project. Obviously, key variables like the level of interest rates, um, uh, location, and supply-demand balance, um, overall tenant quality. Quality in commercial real estate, for example, a lot depends on leases, the lease quality, and the quality of tenants. This is what I really like about real estate in the traditional, classic sense. In commercial real estate, people invest in it because it’s truly passive and because you have great long-term tenants and long-term leases. If you can analyze those and talk to the tenants and get confidence that they’ve stayed in this location for the last 25 years and they’re going to continue to stay, that’ll mitigate a lot of risk. So part of due diligence is looking at all these key variables, and it’s not one question— what’s the worst-case scenario, right? That, that question is so high-level you can’t even answer it. Well, the worst-case scenario is you’re going to lose all your money, right? Is that a good answer? No.
Mike Zlotnik [00:18:43]:
But you’ve got to truly look at the possibilities, and You’re not trying to eliminate, uh, all, uh, ways you could lose money, but what you’re trying to do is dig into the real, uh, scenarios and possibilities and see what would happen. So in commercial real estate, just one more quick comment: people buy and sell properties based on capitalization rates, cap rates, and it’s basically an unlevered rate of return without mortgage computation. And there are current rates of return, um, and they depend very much on the level of interest rates. So, uh, one basic thing that people can do is sensitivity analysis. What happens if interest rates go meaningfully higher? What happens with cap rates? So that analysis is not necessarily going to give you a guarantee that you can’t lose money, but it’ll give you a good path forward. Uh, and it was definitely a great way to look at things when the interest rates were very low. Today the interest rates are sort of in a balanced environment, so it’s a much more— much less of a risk. But it was a big risk when the interest rates were very low.
Mike Zlotnik [00:19:51]:
So the best way to think about this is every possibility, every, every, uh, way you could lose money, you have to look at these scenarios and think in your head, is this a possibility today or not? People can say, yeah, interest rates could go to 20%. Is that a realistic scenario today? And the answer is no. But when the interest rates were, um, less than 1%, quarter percent, the risk of interest rates shooting up even a couple percentage points was pretty significant. So again, just as an example, and you could also look at local dynamics: how, uh, each property’s, uh, what are the neighborhoods, is there a possibility of more construction, what would construction look like, could it create problems or not. Or are you pretty well protected? That, that’s one thing about real estate. If you can find the right location, location quite often, uh, does a lot of protection for you. So anyway, it’s— I know it’s a long answer, but you really have to think about, uh, all possible outcomes or, or big, big impacted outcomes and, uh, look from a negative perspective first before looking at what could go right. Uh, and, and if you could find ways to protect your back, uh, any good outcomes will be kind of a tailwind.
Jay Conner [00:21:09]:
Well, my takeaway on your answer, uh, is first of all, to make a good decision, an informed decision on where to put your money, uh, you need to know what questions to ask. You need to know where to dig, where to look. And then, of course,e someone says, well, Jay and Mike, I don’t know the questions to ask. I don’t know where to look. Well, the answer to that is consult with an experienced person like Mike who can tell you the questions that you need to be asking.
Mike Zlotnik [00:21:43]:
So Jay, that is a brilliant, um, way to, to put it. It’s kind of funny, but I’m working on a new book. It will be out. I’ve been working on it only for the last, I don’t know, 3 or 4 years. One of the chapters of the book is exactly that. It’s literally the questions you need to ask as part of your due diligence. The difficult questions, not the easy ones, but the difficult questions investors should ask before they write a check.
Jay Conner [00:22:10]:
Yes, excellent.
Mike Zlotnik [00:22:11]:
I’ll give you one example, and some of these questions are fascinating and simple. Anytime you approach somebody, I’ve seen this rodeo so many times, and they’ll ask, hey, uh, have you ever lost money? Well, the answer is yes, but you have to ask the question. Have you ever lost money?
Mike Zlotnik [00:22:30]:
And what did you learn? That’s a better question. So as you’re asking questions, you need to know, obviously, these types of questions. So whoever you’re investing with, you also need to have more digging questions. So what happened? Why? And what did you learn from that experience? So every question should be sort of formulated to help, um, uh, identify a few things. One of the most important things you’re looking for is if they are— if they have integrity. I, I can’t state enough: whoever you’re going to invest with, what are you looking for? The number one thing you’re looking for: integrity. They do what they say. Obviously, capability, honesty.
Mike Zlotnik [00:23:07]:
But you’re looking for the ways, uh, and you’re not looking for perfect answers. You’re looking for lies. You’re looking for wrong answers. The moment you catch them saying something that is not true or inconsistent, that’s the moment to walk away. So the due diligence is really all focused not on the positive outcomes and positive answers, but about asking the difficult questions and looking for inconsistencies, looking for problems, because initial indication or even indication over time will be a good hint whether this person is worth working with or not.
Jay Conner [00:23:46]:
Now, speaking of asking the right questions, Here’s a question that I know our audience wants you to answer. Here’s the question: if you were starting all over today, all over today with a real estate investing business and you had very little capital of your own, what would you do first to begin building relationships with private investors and lenders?
Mike Zlotnik [00:24:14]:
Yeah, it’s a, it’s a great question. Uh, the first question is always, um, your immediate sphere of influence or your immediate sphere of connection. When you are starting, you’re not starting from zero. You’re not just born, so you’ve been around no matter what. Go to all your friends and family. Go to the people you know, even if they don’t have a lot of money, even if they’re not very affluent, or, uh, uh, they may still have some people that they know that they can connect you to. So the key is to map out kind of your people, you know,w and explain to them what your vision is, where you’re going. And obviously, uh, try to focus on the folks who can write a check, that they can give you some capital.
Mike Zlotnik [00:25:00]:
And every time you get a check, ask the question: who do you know that I should know that may, may be a good fit for this opportunity? So make sure you have a good vision. You have a good description of what you’re trying to raise money for. Um, that’s the first exercise before you start a fund. People ask me, ” Hey, how do I start a fund? I’ve coached people on starting the fund. I tell them the first thing you do is go to your immediate sphere of influence, explain what the fund will look like, explain what kind of returns it’s going to have, what it’s going to invest in, what risks it’s going to take, what potential it’s going to provide, and what strategies, what location. Just describe the fund and then go to your immediate sphere of influence and say, if I had this, would you invest? How much and when? And that will give you a little bit of that initial, um, traction as far as how much you can actually raise initially and give you an indication: is this a worthwhile exercise before you launch a fund? So at the very, very beginning, uh, structure your, your thoughts, structure the opportunities, and talk to your friends and see if this makes sense. If it does make sense, you’ll get support, and you’ll get more introductions.
Jay Conner [00:26:12]:
Mike, you’ve been through more than one real estate cycle since 2000. Let’s look at your crystal ball. Looking at the market today, what are you seeing that most real estate investors are either missing or perhaps misunderstanding? And where do you see the biggest opportunities for investors who have, who have access to private capital?
Mike Zlotnik [00:26:41]:
So that’s a great question. And, and cycles, um, I love studying market cycles. Um, back to the wise old guys, Howard Marks, uh, uh, wrote the book Mastering the Market Cycle. It’s all about stocks, but at the same time, it’s as applicable to real estate. So understanding, uh, the cyclical nature of, uh, investing is vitally important. So today, uh, we’ve gone through a cycle- the recent cycle- 2022, uh, the peak of the cycle, and, uh, a correction driven heavily by interest rates, um, is something that investors need to, uh, absolutely pay attention to. So today, the way I think of this is don’t try to catch a falling knife. A lot of people talk about multifamily being at the bottom of the cycle.
Mike Zlotnik [00:27:32]:
Agreed, it’s generally at the bottom of the cycle, and you need to be approximately right versus exactly wrong. That’s the best way to think about it. Yes, multifamily is somewhere towards the bottom of the cycle, but, uh, the, the, you know, it’s difficult to catch a dropping knife, knife, and might take a few more years to to, um, for the market to recover. We prefer something different today. We’re not looking for the bottom of the cycle or the peak of the cycle. We’re looking for strategies and asset classes and locations that don’t go through as much of a cycle. Certain regions of the country, for example, the Northeast is less cyclical than the South or Sunbelt, and, uh, the Midwest is a lot steadier, as an example. And the strategies we’re looking for are just much more predictable.
Mike Zlotnik [00:28:21]:
Can they continue to, uh, basically keep climbing without, uh, massive market cycles like industrial or medical office or, uh, some other, uh, strategies like mobile home parks have been steady eddy? So, uh, market cycle is important, but also you need to differentiate between different asset classes with different locations and market cycle conditions where we’re in today. So again, don’t look for perfection trying to buy things at the bottom of the cycle. Look at what you get— can get today that can generate predictable cash flow and give you enough downside protection that you feel that you’re building relationships with your investors over time. If you’re an investor, what is the most important thing to you? It’s the steady cash flow and predictability of a deal. That’s the reason you’re going into real estate, so you’re investing. So to me today, the simplest and the easiest thing to do is to give investors a good taste, steady, predictable taste of cash flow. Of course, the tax benefits through depreciation, bonus depreciation. You do lending, Jay, so in lending, that’s a perfect example.
Mike Zlotnik [00:29:34]:
You do something very similar. You continue to pay investors like clockwork, and then they build confidence, and they build good experience working with you. The same is true for everyone else. That’s why we’ve migrated, uh, away from these growth strategies and really focused today pretty much on income and downside protection, safety, and cash flow. And certain strategies fit really, really well into that. Obviously, debt fits. First lien debt, hard money lending, private lending, industrial real estate, medical office, some open-air retail because of predictable long-term leases with Starbucks or other food concepts or, uh, grocery-anchored, uh, uh, shops. So as a result, these types of deals give investors stability and predictability.
Mike Zlotnik [00:30:24]:
These are more important than buying extremely deep and making a killing on the deal, just to avoid the money losers and create more stability. That’s the journey. This is how you achieve success for yourself and for your investors over time.
Jay Conner [00:30:42]:
Mike, what kind of opportunities do you have going on right now that, um, uh, your clients and new clients, uh, might wanna take advantage of? And, uh, along with that, how can they reach out to you and learn more about how you could offer them opportunities and serve them?
Mike Zlotnik [00:31:01]:
Sure. So right now, literally right now as we’re recording, we have a medical office portfolio in Texas, uh, Houston. 3 assets in Houston and 1 asset in, um, Austin. It’s a very straightforward, simple, downside-protected, cash-flowing-from-day-1, conservative-leverage type of deal. And, uh, it’s got predictable rent growth- average rent growth. They’re all triple nets, meaning that the tenants pay for all the cost increases. 2.9% per year rent growth, and there’s a little bit of value-add. There’s some vacancy in one of the, uh, assets, so there’s still meaningful upside and, uh, well-mitigated downside. And that’s the deal we’re working on right now.
Mike Zlotnik [00:31:44]:
Uh, it’s gonna close most likely, um, soon, probably within a month. We love the deal, and it’s also a short-duration deal. So we really like— and the beauty about this specific deal is that it’s a purchase as a package: 4 assets, and they’re going to be sold kind of one-off. Uh, buying as a package, we’re getting a meaningfully discounted, uh, price. And selling it one at a time, one asset probably will be sold within a year, and the other, uh, 3 assets within a totalof 3 years. So that’s why we love the deal. It’s short duration, it’s cash flow. It’s a volume discount.
Mike Zlotnik [00:32:22]:
That’s what, uh, this current deal is all about. And folks can reach out. They either can go to our corporate website, uh, tempofunding.com, from the word temporary, tempofunding.com, or they can go to the cheesy, cheesy name website, bigmikefund.com. It’s the site that has podcasts, but you could also navigate to our corporate website through this, uh, through this site. You could also reach out also to, uh, to us through an email, uh, invest@tempofunding.com, just like the website. And we’ll be happy to, uh, show you this deal or other deals. We don’t do heavy volume. We do 3, 4 deals a year, and they’re very, very handpicked, selected, uh, type of deals.
Jay Conner [00:33:10]:
All right, those URLs again are, first of all, www. And if you can put it back up on the screen, uh, is it Tempo Funding? Um, Sharub and Scott.
Jay Conner [00:33:22]:
Tempo Funding, T-E-M-P-O funding. There we go. Dot com. And of course my favorite is www.bigmikefund.com.
Mike Zlotnik [00:33:34]:
But you know, every time I do this, I crack this joke. If you forget the D at the end and you go to bigmikefund.com, I promise it’s not a kinky site. That’s right.
Jay Conner [00:33:44]:
That’s right. Listen, if you’re listening to this show, this podcast, and you want to, um, you want to learn how to mitigate risk and get some good returns on your investment capital or retirement funds, uh, Mike Zlotnik, my good friend, is a great person. Very wise, very experienced, very savvy to visit with. Mike, thank you so much for joining me here on Raising Private Money.
Mike Zlotnik [00:34:10]:
Jay, thank you so much. Always fun to be on your podcast. Appreciate you. You always make it wonderful. So, uh, I know your audience loves you as a host, and I love it as a guest. So appreciate you.
Jay Conner [00:34:21]:
You got it, man. Listen, if you got one, just one idea, and I know you did from this conversation with Mike Zlotnik, that could help you raise more capital, structure better deals, manage risk more intelligently, have an opportunity to invest passively. Don’t keep it to yourself. Send this episode to another real estate investor or another passive investor. Seriously, think about the one investor you know who’s looking for more creative ways to fund deals, build relationships with private investors, or become a smarter real estate entrepreneur. Text them this episode. Right now. And if you got value from today’s conversation, do me a favor: subscribe to Raising Private Money, leave me a review, and share the show with another investor.
Jay Conner [00:35:16]:
Post it on your social, because the goal of this podcast is very simple: to help real estate investors like you stop letting a lack of capital stand between you and the deals that you want. And you never know; the person you send this episode to right now might be the one conversation away from changing their entire real estate business. So share it. And until next time, keep finding the deals, keep building the relationships, and keep raising Private Money. I’m Jay Conner, the Private Money Authority. Thanks for listening. I’ll see you right here on the next episode.
Narrator [00:36:00]:
Are you feeling inspired by the knowledge you gained in this episode? Then head over to www.JayConner.com/MoneyGuide. That’s www.JayConner.com/MoneyGuide, and download your free guide that shares 7 reasons why Private Money will skyrocket your real estate investing business right now. Again, that’s www.JayConner.com/MoneyGuide to get your free guide. We’ll see you next time on Raising Private Money with Jay Conner.