Adam is a repeat guest and is here today to share a fascinating story. He was in a situation where he was supposed to close in 4 days, but needed $1 million more to do it. It was time to get grinding and raise that money! Hear how he was able to do it and what he would do differently in the future. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
Adam Adams Real Estate Background:
- Repositioned his first apartment community in 2007 as a property manager
- Bought his own multifamily property in 2008 and now owns hundreds of units through syndication
- Recently earned the Master Investor of the Year award from Think Realty
- Listen to his previous episode here: JF1238: From Seller Financing To Loan Mods – Getting Creative For More Deals with Adam Adams
- Learn about his upcoming Raising Money event at RealBlueSpruce.com/bestever
- Based in Denver, CO
- Say hi to him at https://realbluespruce.com/
Get more real estate investing tips every week by subscribing for our newsletter at BestEverNewsLetter.com
Best Ever Listeners:
Do you need debt, equity, or a loan guarantor for your deals?
Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.
I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com
TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
First off, I hope you’re having a Best Ever weekend. Because today is Saturday, we’ve got a special segment for you called Situation Saturday. The whole purpose of this is if you’re in a similar situation, you’ll know how others have handled it, and in some cases overcome the challenge, in other cases just learned a whole lot… And in today’s episode, it’s how they overcame a challenge – we’re gonna be talking about if you need to raise a lot of money in a short period of time, how someone did it. Who that someone is is Adam Adams. How are you doing, my friend?
Adam Adams: I’m fantastic, how are you?
Joe Fairless: I am doing fantastic as well, and nice to have you back on the show. If you recognize Adam Adam’s name, well, one reason could be because you’re a loyal listener. He gave his best ever advice in episode 1238. You can learn more about Adam and his advice there.
Today we’re gonna be talking about a specific situation that he was in. I don’t know the circumstances, but I do know that he had to raise a million dollars in four days… So please, fill us in. What happened?
Adam Adams: Alright, so we are fairly new syndicators still. We’ve syndicated a few deals and helped other people raise money for their deals. And when you’re new at syndication, it isn’t always easy; that’s just gotta be the truth of the matter. Some people say if you find a deal, the money will come; that might be a little true, I’m not gonna argue against it… I’m just gonna say there’s a lot of work involved, as well. There’s a lot of mindset, and there’s a lot of work.
At the time, this was our second syndication. We did one syndication on a small property, 16 units in Connecticut, and it took us about three weeks to raise 300k. Then we got better at raising money, so on the second syndication that came up — I’m supposed to be the money raiser in my company, similar to you. I’ve got a podcast, and that’s supposed to be my role. I raised a couple hundred thousand in the first few days, and at the time I didn’t really know that this was my role, so I went on vacation, literally. I went out of town, and then I came back, and I was like “Hey guys, how are we doing?” and they were like “Oh, you know, we’re at 300k”, and I’m like “But we were at 300k before.” They said, “Oh, yeah… Yeah, yeah.” So I said, “Hey, I’m gonna go out of town for another ten days next week, so let me teach you all what I would do to raise the other million.” So I taught everybody what to do, and then I went on vacation with my girlfriend, had a great time at the Jazz Fest in New Orleans…
Joe Fairless: Did you say “girlfriends”, multiple?
Adam Adams: Oh, I did maybe subconsciously say that… And now I’m gonna get in big trouble. No, my one single girlfriend.
Joe Fairless: Okay, just wanted to make sure… [laughs]
Adam Adams: My one, and she knows who she is… Anyway.
Joe Fairless: Both of them do.
Adam Adams: Both of them do. [laughter] Now, I don’t think that there was a Freudian slip; we’ll have to rewind and see if I did say that, but I should only have one girlfriend. I only know of one.
Joe Fairless: [laughs] Fair enough.
Adam Adams: So anyway, I went out of town to the jazz festival, I came back after ten days, and I was like, “Great, where are we?”
Joe Fairless: 300k.
Adam Adams: 300k. You know it. You know the story, Joe.
Joe Fairless: I saw that coming. I don’t know the story, but I saw that coming.
Adam Adams: So everybody was talking about “Okay, what are we gonna do? How are we gonna do this?” We had some motivation, they believed in me and I didn’t know what to do exactly, but I always felt that we need to have a strong mindset. I’ve always felt that way. What’s his name — he just came on your podcast; he’s a friend of mine, and for some reason I can’t think of his name because I’m on the spot…
Joe Fairless: Because you’re friends with everyone.
Adam Adams: I try to be, yes. So Tim Bratz was just recently on your podcast…
Joe Fairless: Yup.
Adam Adams: He had a similar situation where he had to raise a lot of money in a very short amount of time… It was all mindset. The power that he had was the power of saying “I can’t fail. I just have to do this.” You ask yourself how can I, how can I – so I just said, “I’ve canceled all of my other appointments for the next few days…”, because we had four days to close, so I canceled everything.
I remember calling everybody and saying “I can’t go to lunch with you anymore, I can’t talk to you on the phone anymore, I can’t do this with you. We have a great podcast interview coming up, but I’m gonna have to postpone that for another couple of weeks, because I have something that needs to happen.”
So I locked myself in the room from about 10 AM to 6 PM for four days in a row, and that’s where it starts out… People would walk into the room while I was in between calls, and they were like “We’re getting down to the wire.”
I remember it was the day before we were supposed to close, and we still needed 500k. So three days, maybe about 500k. And this is all estimates, because I don’t have the specifics, but I remember thinking that I had about 500k more that needed to go in the bank tomorrow, so that we could close on time… And I had several investors that I was talking to on the phone say “What happens when you don’t close this?” and I was like, “We’re closing it.” And they’re like, “Yeah, but what happens if you don’t close it?” and I just had to politely say “We’re gonna close it. I don’t have time to talk about there being a possibility of anything else… So I’ve just gotta respectfully let you go, so I can keep making these phone calls.”
Then I actually truthfully had two different of my partners walk into the office. They were like, “Hey, Adam, what happens if we don’t close?” and to them I wasn’t as nice as I was on the phone. I was like, “You can’t effin’ tell me that! You’ve gotta get out of my office, and everybody in this office has to know that we’re gonna close. We have to know that.” Honestly, it was kind of crazy, because — this is a totally true story, it’s just mind-boggling how down to the wire it was.
So the day of, we still needed 250k, and one of the 1031’s that I think was 200k backed out. So that put us at needing a ton more money… I just kept calling — and when we get into the questions, I wanna talk about the sales pitch that I used when I called people, because I do think it is beneficial for anybody out there. It’s not just the mindset and it’s not just the grind, but the psychology behind asking for money also needs to kind of come out in the interview today, so that we can really learn, not just that we need to have some tenacity and never quit.
The end result is literally and truthfully the day that we were supposed to close we got that last wire in about two hours before close. My partner DJ ran to the bank, made our wire, and just in time we barely, barely closed. Then the next day — and this is all just… I don’t know if it’s really ten million; I don’t think I’m exaggerating, I don’t think I’m lying, or either way… I never even wrote it down. But the very next day after we closed, that’s when I got all of these people call me and said “Hey, we want in on that deal, and I assume you didn’t close, so now we’re ready to get into it”, and I’m like, “It’s gone.”
Again, this is not literal, but I feel like the very next day I had ten million dollars that wanted to go into it; I only needed one, which I guess helps a ton for the very next deal that we do. Ever since those days, raising money is a lot easier now, but… I’ll give it back to you.
Joe Fairless: Let’s talk about what you said to the investors, and then we’ll go from there.
Adam Adams: Okay, so this was 506(b), which is important to note that I had to know them already. I couldn’t advertise this; I had to have a prior relationship, which kind of painted me into a corner. I was stressed, but I wasn’t willing to say anything else. I thought “I’ve gotta only talk to people that I know, and I’m running out of people that I know. This is hard”, so I started going back, and I started to try to figure out what could I say to change it… And I kind of took a page out of your book; something that you do naturally, I figured that I would have to also do.
Having to figure out a way to tell somebody who’s also a syndicator why it makes sense for them to give ME their money… Because that’s all I had left, is other syndicators. So here’s the pitch, and it worked like a miracle. I would dial the phone, and when they said “Hello”, I would just say — let’s see, I’d get one of their cards, and I would say “John, it’s been a while. I haven’t seen you since we were at the Ultimate Partnering Events, or since we were at that sponsor event. I just wanted to touch base with you… How’s your syndication business going?” So that’s the first thing – “It’s been a while. How is your syndication business going?” Very, very important question, because now you have to start to listen, and when listening, you have to start asking more questions.
They were like, “Oh yeah, I haven’t been doing it lately because it just got too hard, and I had to go back to work”, or whatever they said. Whatever they say, you really have to be intentionally open-minded to understanding more about that situation, whatever it is.
So “How’s your syndication going?” “Oh, it’s not okay.” “Well, what happened?”, and then you’ll get into a part of the conversation where it’s kind of like this “Well, I know you have the money, I know that you have the drive for it, so what you’re telling me is that the reason you haven’t been successful is because it’s just been really tough to find a good deal. And the reason that it’s tough to find a deal is because you didn’t have the track record” and then they usually answer “Yes.”
So when it comes down to that point, then you say “Well, I’ve got a deal right now. Why don’t you just go the minimum in that deal…”
Joe Fairless: Which was…?
Adam Adams: 50k.
Joe Fairless: Okay.
Adam Adams: “Why don’t you just go with the minimum in that deal. That gives you the track record to have some more doors to your name, and then hopefully the brokers will start taking you more seriously, just because you’re invested in a deal. It always got this “A-ha!” moment for them, where they were like “Huh… I never thought that it could be that easy to just get experience.”
So really diving deep into this question, people who are listening might have the thought process that it’s way easier than what I just told you. They might just assume that it’s super, super-easy. “All I have to do is say ‘How’s your syndication business going’ and then I’ll be like ‘Invest in my deal”, but you have to find a way to sit back and first ask enough questions.
Here’s the analogy I have for you – if you walked into a doctor’s office and you said “Hey, I’m not feeling well”, and they just said “Alright, we need to give you a cast for your ankle”, that’s not a solution to your problem. They haven’t diagnosed you well enough yet. So when somebody says “Oh, you’ve got measles/mumps” and you walk in and you’re like “Nah, it’s just my nose hurts, and I just didn’t know what’s going on.” They’re not solving your problem, and that’s because they’re not asking enough questions first. That has to be you. When you start by asking somebody “How’s your syndication business going?” and they start to answer, you really have to respond back and forth with a lot of dialogue.
You know how the doctors say “Does it hurt here? Does it hurt here?”, and they keep touching different places, or they say “What happens if I turn your neck like this?” and when they ask enough questions, they’re like “I think I know where this pain point is.” That’s you as the salesperson, allowing people into your deal. You have to see “What is it? Are they having trouble with brokers? Is it a different reason?” There’s so much that’s to it, but if you don’t understand how to ask all of these questions repetitively to draw out the real diagnosis, that’s when you’re going to fail.
I don’t know exactly how to teach that 100%, but if you have questions for me, Joe, that might help bring that out, I would be happy to help… But the point is, you have to ask enough to really understand what it is, because when you solve the problem, it needs to sound completely genuine; it needs to be completely genuine. “Well, I could help you by you being involved in my deal.” You say you have a bunch of doctors/attorneys/whatever that have a huge liquidity and they’re waiting to get into your deal; why don’t I put you in on my deal, and you let all of your doctors and attorneys come in on this deal that we own together, because you’re on the general partnership now. You know them personally, so that makes it legal by the definition of 506(b), and now I’ve solved your problem. You own the real estate, you’re on the deal, and your investors are going into your deal, so it solves their problem, too. That’s kind of what I’m trying to get out or help other people to understand.
Joe Fairless: Yeah, it’s very helpful, and one other thing to point out here is that you have a Rolodex of a targeted list of syndicators, because your concept certainly works, regardless of if you’re talking to a syndicator or a W-2 professional or an entrepreneur who’s not in real estate, and that concept of asking them to talk about themselves, so that you can learn more about them, and then as you talk about your opportunity, you can match that up with challenges that they have. “Oh, I’m looking to decrease my tax burden, I’m looking to get more consistent cashflow, I’m looking to diversify from stocks, I’m looking to get a track record so that I can eventually do this on my own, but I don’t have any experience so far. I’m trying to find deals etc.”
So the key from a macro level is, from what I’m taking from this and from how I approach conversations too, is listen and learn when you’re talking to someone. That makes the conversation so much smoother and more real, because you’re simply customizing the benefits of the opportunity to whatever is most relevant to them, versus having these bullet points that they don’t care about at all, because they’re interested in other bullet points that you don’t know about because you didn’t ask questions and listen. But in your case, in this example, you were reaching out to syndicators, so the challenge with doing deals is what you’ve just described, for the most part – finding the right deal, and getting the right credibility in order to do that when you’re starting out. So it’s a beautiful approach for that particular group, and I’m glad that you shared that.
Adam Adams: Thank you, I appreciate that.
Joe Fairless: The couple follow-up questions, taking a step back just about the opportunity – it sounds like you raised one million in four days, but even drilling down more, you raised 450k in half a day, it sounds like. So my question is, the amount – let’s just call it that million bucks that you had four days from now; let’s put yourself in that situation – you’ve gotta raise a million dollars in four days… Is that million dollars all the equity that was required for the deal, or was that million dollars the equity required simply to close the deal?
Adam Adams: Super-good question, and there is a good distinction. Let me respond by saying this is our second syndication, and because of that, we hadn’t yet learned a lot of the different costs that are associated with a syndication… So how much we raised wasn’t really how much we will raise on the next one that’s the same price. We probably would’ve raised at least another 100k, knowing about prepaid insurance, knowing about utility deposit… These expenses jumped at us. Even though we were taking an education through somebody who has had thousands of doors, they never really told us to prepare for that. So there’s a multiple answer to your question.
First off, we were allowed to raise up to 1,3 million, and we raised 1,28 million.
Joe Fairless: What do you mean you were allowed to?
Adam Adams: I mean that on the private placement memorandum there’s a maximum, so we can raise up to 1,3. And there was a minimum, but we raised more than that. If we needed to, we could have closed with $200,000 less than that (1,1), and then we just used our money for the rest of the syndication. So we would have been able to do that; I didn’t want to do that and I specifically, when I was making the calls, I didn’t allow myself the freedom of thinking that I could stop at 1,1. I just had to get the entire amount and then some, or else I felt like I was failing at it… So I just knew that I had to go with the whole amount. But like you asked, we could have legally gotten to 1,1, still closed; we would have had our money into the deal, just fine, and then we could have raised the last later. But we raised 1,28, which is basically 1,3 (I always round it). So we raised about the full thing, and then again, on the next deal, we will know better on some of the closing costs that kind of bit us in the butt, and we will absolutely raise at least those things that we found on that last deal.
Joe Fairless: And you mentioned a couple of closing costs – prepaid insurance and utility deposit… Anything else that stands out that was something that it was like “Oh, shoot, I’ve gotta account for this”?
Adam Adams: I don’t have it in my head right now, but those were the two big ones that we didn’t get. On the last deal before that we learned a few other things… But I’ve had a podcast simply on just all of the closing costs, I just don’t remember all of those… But there’s a lot that I think surprise new syndicators, so I’d always be very cautious to see if you can have a good mentor with you, somebody who’s learned the ropes or listened to Joe’s podcast… Or read your dang book; that book is crazy. I’m buying it today, Joe.
Joe Fairless: You haven’t bought it yet?
Adam Adams: I was planning on purchasing it before —
Joe Fairless: Interview over. Interview over.
Adam Adams: [laughs] I was planning on purchasing it before this interview, but I had a longer interview go on… And I’m dyslexic, did you not know that?
Joe Fairless: I didn’t know that.
Adam Adams: I’ve read one book, Joe. I’ve read one book. It was Rich Dad, Poor Dad, and it changed my life. Now I’m gonna get through your 400+ page book, and pay $50 for it, because I know the value is there.
Joe Fairless: Read it before your next deal, too. It will be helpful for you, before you put your next deal together. Well, thank you so much for being on the show, talking about a million bucks, four days… How many people make up that million dollars, by the way? You might now know the exact number, but roughly.
Adam Adams: There’s 20 people exactly that makes up 1,3.
Joe Fairless: Got it.
Adam Adams: So 16-ish, 17-ish is what changed in four days.
Joe Fairless: Well, congrats on that. You’ve got an event coming up?
Adam Adams: I absolutely do. We’re starting to promote it on your podcast. We’ve probably already heard a couple of them, and a couple more after this interview, but I would love if anyone wanted to join us… It’s a Raising Money Summit. It’s a two-day summit… I asked you, Joe; I said, “Hey, you’ve gotta come here.” It sounded like you wanted to; I’ll take you at your sincerity that you did want to…
Joe Fairless: I did.
Adam Adams: But you have a baby coming out – not from you, but from your wife – around the exact same time as the event… This is the first annual Raising Money Summit, 2018, and then I hope that you’ll accept my invitation to come to the next one.
Joe Fairless: Cool. And what are the dates of it?
Adam Adams: November 17th and 18th.
Joe Fairless: November 17th-18th. I imagine it’s in Denver?
Adam Adams: It is in Denver. Everything I do is in Denver. If I can not travel, I will.
Joe Fairless: Alright. Well, it sounds like a great summit, and I’m grateful for the invitation. I’m sure there will be a lot of value for those who are able to attend and do not have the arrival of their first child during that timeframe.
Well, thank you, Adam, for being on the show, talking about the psychology and how you approach the conversations… And then we took a step back and talked about the psychology and how to approach conversations regardless of if we’re talking to syndicators or not… And the importance of caring about the questions you ask and the responses, and listening to those responses, because it’s so much easier to have a conversation when we listen, because then we can bring up relevant things to them based on what they were talking about; it’s a breeze, and it’s fun, because when you get someone talking about something they care about and they get passionate… And who doesn’t wanna talk to a passionate person? That’s fun. Those are good, lively conversations.
Thanks for being on the show. I hope you have a Best Ever weekend, and we’ll talk to you soon.
Adam Adams: Thank you.