020: Alternative Investments Explained: SEC Regulations, Real Estate, and Building Wealth with Christopher Nelson

Christopher Nelson (00:00:00) - Private equity has historically been private. When you analyze the portfolios of the ultra wealthy, you find out that many times private equity alternative investments are 45, 50, even 60% of their portfolios. And why is that? That's where the returns are. That's where the tax efficiency is. So we need to learn how to do this. I'm just so excited to be able to share with you today everything that I've learned as far as this subject goes, because this is going to be incredibly powerful. Hey, I wanted to say today in today's episode, we are going to be talking about private equity. We're going to be talking about alternative investments. We're going to be talking about real estate, some of my favorite subjects. But I do have to include the fact that I'm not a financial advisor, I am not a wealth manager. I am somebody who has been there, done that. And I am just trying to pass on everything that I've learned. I want you to go get educated yourself and then I want you to talk to whatever professionals that you are working with that are helping you succeed financially that are on your team.

Christopher Nelson (00:01:06) - Discuss this with them. First, thanks. Onto the show. Welcome today to Tech Careers and Money Talk. I'm your host, Christopher Nelson. I have been in the tech industry for 20 plus years and after climbing my way to the C-suite, working for three companies that have been through IPO and investing my way to financial independence, I'm here to share with you everything that I've learned, including the secrets. Yes, there are secrets when you are on this journey to financial independence. It's not a straight road. Not everything is written down and it's important to understand our topic today, private equity, alternative investments. It's hard to find out the truth. It's hard to find out a lot of details about this. And this is where I have been spending time for the last 11 years doing a lot of research. And I want to share everything with you today that I have learned on private equity, alternative investments in especially real estate. So the first half of the show I am going to break down for you what is private equity and alternative investments? This is going to be a crash course on what it is and why.

Christopher Nelson (00:02:22) - There's not going to be a lot of how to invest in this particular show because there is so much detail that you need to understand on what are our alternative investments, what is private equity, how is that related together? And then the second half of the show is going to be really exciting because we're going to deep dive into one of the key assets that people invest in from an alternative perspective, and that is real estate. Everybody wants to understand, I talk a lot about real estate. People want to understand what it is, what is the value to your portfolio and how can it be used as a tool to get you to financial independence? We're going to dig into all that today. So let's start with my story. I want to start with how I learned about this, because a lot of people, it the same way. There's just really literally a trail of breadcrumbs. That's all there is. And for many of us, it starts with the book Rich Dad, Poor Dad in Rich Dad, Poor Dad.

Christopher Nelson (00:03:25) - Robert Kiyosaki lays out this framework of the cashflow quadrant. And it's amazing because you understand very quickly when you look at this on the left hand side, you have the employee top left who is trading their time for money. You also then below that have the consultant trading time for money. Arguably, the consultant has more freedom, but both of them, they stop working, no income. Then on the top right, you have the business owner. The business owner owns the business. They get some income from it. They also have this asset increasing in value. And so even if they stop working, they still get income, they still have value being created. Growth. ET cetera. On the bottom right hand side, you have the investor, they have money invested in assets that give them money, that pays them checks. This is what I read when I was going through college and the concept became clear to me. If I have enough money that I've saved up and I buy these assets that pay me, that's how I can replace my check.

Christopher Nelson (00:04:40) - That's how I can reduce risk in my lifestyle and in my life. So if something happens with a job, the job gets removed. I've got checks coming in. I got it. But then the step of how do you go from this book to investing in real estate is not clear. Now, today, in addition to tech careers and money talk in tech careers and money news, the newsletter, I also have Wealth World Capital, which is a private equity company that I own that has invested over time in $400 million of real estate. We currently own $230 million of assets today, so 1700 doors of multifamily or apartment buildings, 5000 ATMs and 900 mobile homes. Those are the assets under management for the private equity company. When people hear this, they ask, okay, what is private equity? I've heard that term a lot. I don't understand what it is and why. Why would you go do that? You have had a good tech career. You are gaining responsibility, climbing the ladder to the C-suite.

Christopher Nelson (00:06:00) - Why would you go and start a private equity company? And so the story behind that is interesting because I was doing a lot of research in understanding how to invest in private equity myself with my wife Régine, as a family. And then as I started having some success, I had other technology employees and executives who came to me and asked to put together investments for them so that they could co-invest. And that's really the story behind the company. Like many things that I do, I want to show people what great looks like. I want to show I want to demonstrate something tangible. And so today, I really want to break down what private equity is. Now as the word denotes private private equity. Has been very private for many years. This is why you haven't heard about it. You may not understand it, but I think it's important that we understand the complete landscape of investments or the top down level, which is what is a traditional investment and what is an alternative investment. And this is going to lead us to define what private equity is.

Christopher Nelson (00:07:21) - So traditional investment stocks, bonds, money market accounts, certificate of deposit, CDS, savings account, cash. Those are traditional investments, not the cash is an investment, but it's a, you know, something traditional that we really understand the value of. And all of those investments, the things that they have in common is they are all managed or monitored by the Securities and Exchange Commission, the SEC or the FDIC. Right. Which is the Federal Deposit Insurance Corporation. All of those have some type of government oversight, government backing behind them. And they're traditional, considered low risk, with a lot of liquidity. And there is a system in a way that they are evaluated, monitored, so it's clear on what they are. Alternative investments are everything that sit outside of that. And this delineation was carved out in the 1930 in the Securities Act. And there was a regulation that was written that said if an investment meets that qualification of regulation D. It is what's called a private placement. It is private equity.

Christopher Nelson (00:08:58) - It is an alternative investment. Meaning it's outside the purview of this government oversight. So this is why. You don't really hear a lot about private equity or alternative investments. We're hearing more and more. I'll explain why in a moment. But it's because. The traditional investments are able to be bought, sold, traded by the financial services companies. They buy and sell traditional investments. They don't normally buy and sell alternative investments. Now, we do know that REIT's real estate investment trusts, they do have large REITs that are. Oversaw by the SEC and those are traded so that's how real estate can become a traditional investment. And then on this other side, you have alternative investments that fall outside the purview of the SEC. And that is also what's called private equity, because you have this private money, not public money, that's traded that you have visibility into, but you have this private money that's going and purchasing investments. So that is the broad delineation between traditional investments and alternative investments and hence what private equity is.

Christopher Nelson (00:10:28) - It's also important to understand that this regulation from the 1930 up until 2012. What it stated is that if you wanted access to this private investment, it had to be within your network of friends. That if I was going to tell you about my investment in something that was this private placement. We had to know each other for at least 30 days. That's called the seasoning period. So it's not like I could just get to know you. And I also couldn't advertise this. I couldn't go out on television, on the Internet. I couldn't advertise it. Private equity was very private and it was done in networks. And so this is why it was really exclusive to the ultra wealthy for many, many years because it was private. And you think about it was in boardrooms, it was in private golf clubs that all of these transactions were taking place. Now, a lot of this changed in 2012 when there was the Jumpstart Our Business Startups Act, also known as the Jobs Act. And so this was some legislation that came in and changed this regulation.

Christopher Nelson (00:11:49) - D. Now, it's also important to understand that private equity has always had a limit as well on what's called accreditation, meaning that you have to have a certain level of wealth to be able to participate. So the current qualifications to be an accredited investor is three again, for people. There's three different qualifications and they're all or statements. So you need to have, as an individual, $200,000 a year gross income. So for tech employees that can include salary and RSUs for over two years, that's as an individual or as a married couple, $300,000. Or you need to have $1 million net worth outside of your primary residence. Don't want to put that at risk or you need to to qualify through education so you can actually get some believe it is the series 65 exam. If you pass that and you keep that current through education, you can invest in these private placements. So private placements have been private. They've also had a level of qualification. And then in 2012, all of this changed.

Christopher Nelson (00:13:09) - In 2012. All of a sudden now there's this regulation D has 506 B, which is again private. And so that means that in a network without advertisement, you can start letting in a number of non accredited investors. So if we're in a network, we have some type of a transaction, some type of an investment going on. I can, through a network, bring in some non accredited investors or 5 or 6 C if you have a third party that is validating that you are accredited. So now there's a lot of service providers that are providing this service that will go in and they have lawyers that look over things and say, Yep, this person is accredited and it's relatively easy, very similar to a DocuSign type experience. Load some things, get a certification and you go now with 506, see if there's a third party validating that you're accredited. Then you can advertise online. So this is where you see post 2012, you see a lot more advertisements around different private equity investments, especially around real estate, real estate, private funds, real estate, private syndications.

Christopher Nelson (00:14:26) - And I'll talk a little bit about those when we get to the real estate side of the conversation. But this is so important to understand because I know for myself, when I read Robert Kiyosaki and I knew, okay, these, you know, alternative investments are really important, add a ton of value to the portfolio. But I hadn't I didn't know where to get access to them. And especially I went through my first IPO in 2012, started looking for these things in 2013. There hadn't been a lot there, so that's where it was hard to discover it. And before that, that's why it was so difficult to find different types of investments or even hear or understand about it. And so this is why it's so important to understand what private equity is. It was private for very long and now. We are technology employees. Many of us meet the qualifications of being accredited investors through the salary requirement. Now we have access to these private equity and alternative investments. So then the question becomes why? Why alternative investments? In.

Christopher Nelson (00:15:45) - What is their importance to my portfolio? So let's think about what's going on with traditional investments and what has happened in traditional investments over time. So traditional investments, especially in the stock market, it's very interesting that in the stock market there were for many years dividend bearing stocks that would provide the owners cash flow as well as growth in appreciation in the stock. There was also a bond market that was giving five, six, seven, 8% cash on cash return. You had traditional investments, you had income generating assets as well as growth assets. However, over time, dividend stocks fell out of favor. A lot of institutional investors in stocks, they didn't want the money back. They wanted more increase in value. So what you saw was a lot of pressure on boards of different stocks to not provide dividends, but to reinvest that in the company and to provide more growth. So over time, stocks have evolved from having a portion of them that provide dividends, and they're still great dividend bearing stocks today to stocks that are mainly growth.

Christopher Nelson (00:17:12) - So they give you growth. So it's not this, you know, type of asset that Kiyosaki was talking about that sent you checks. Also, if you think about history, in 2008, the bond market as interest rates plummeted. The bond market went down, too. So where a lot of people were getting income from their portfolio, that dried up. And so then the opportunity started shifting to alternative investments. Okay, if I want income and income in my portfolio is really the key to be able to replace the paycheck and not be in a cell cycle all the time, which has a level of risk to it. When you're managing your portfolio, you need to find these income bearing assets. Now the market's changing today. Interest rates are going back up. You have savings accounts that are generating 5% cash on cash return that are paying out monthly. You're also seeing bonds continue to strengthen their returns as well. But that doesn't mean that there's not a lot of opportunity in the alternative investment market. So let's talk about alternative investments and let's talk a bit about what they are.

Christopher Nelson (00:18:28) - So alternative investments in private equity is a whole new world. It's huge. So, yes, everybody knows and understands or many people know and understand about real estate. And I'm not just talking about single family residences, which are an alternative investment, but I'm talking about commercial real estate where you can go buy warehouses, you can buy self storage hotels, right? There's hospitality. You can invest in medical buildings, medical, retail, retail and so there's a whole list of real estate, but then there's more. In private equity, there are debt funds. So you can invest in equity. You can also invest in the debt side, too. So you can be a part of institutions that are lending money, you know, having a first position, lean on different assets and you're getting cash flow immediately. There's also royalty funds where you can invest in ownership groups that own music that is getting cash flow. Whenever that music is played, you can invest in purchasing small businesses solely or as a group.

Christopher Nelson (00:19:39) - I mean, the list goes on and on. There's litigation funds where you can actually contribute to funds that are funding litigation that then when it wins, you share in the upside. There's life insurance funds whereas people are selling, they want to pre-sell their life insurance, that then when that life insurance is closed in on, then everybody gets paid as well. The world of alternative investments in private equity is huge. And so why do we invest there is because in this particular world, you can find some asymmetric returns. You can find some operators that have deep, deep skills that really own or manage a market very, very well, and they're able to provide great cash flow. So I'm talking eight, nine, ten, 11, 12% cash on cash return. Very powerful when you want to generate income. And I'm also talking about, you know, multiples, equity multiples to where you can double or triple your money in short amount of times three, five, seven years. Because these operators, you know, have great relationships and and and understand it.

Christopher Nelson (00:21:03) - I know that I did due diligence on a company that built warehouses that once they got the land entitled, they would already have a contract to sell it to an Amazon, to Kimberly-Clark, to these large companies that needed logistics centers right away. So they had relatively low risk once they got the land entitled. And there the way that they executed was really, really straightforward. So it's truly this type of specialization that can add so much value to a portfolio. And I always go back to Litan Yahav, who I had an interview with a while back that said, I want to have the traditional side of my portfolio, the stocks, the bonds, those accounts. I want that managed, you know, by someone or by a robot, and that's taken care of. And I want to focus my time and effort where there's more risk, but there's also more return. And so let's pause right there for a second, because private equity, as you know, is outside of the purview of the SEC.

Christopher Nelson (00:22:18) - There's a swath of investments there that you can invest in. And as I just articulated, the reason that you would invest is higher income. Higher returns, asymmetrical risk, meaning that you can find specific operators that you know are removing a lot of risk because of their experience, because of the relationship and because of the impact that they have in the market. The other thing that's important to understand is. Is there's risk with these things as well? So when you are dealing with alternative investments, there's going to be risks. A lot of these investments do have they're illiquid. And that's one of the things that it's important to note, is that you're putting your dollars in there and it's going to be tied up for three, five, ten years. It's going to be a long term hold. So that's where it's really important that you have a portfolio that's set up where you can have your liquidity needs met somewhere else because this is going to be illiquid. It also comes with a lot of risk and the risk is mainly on operations.

Christopher Nelson (00:23:33) - Many of these investments are going to be complex. It's going to be literally managing a business, whether that business is property management, whether the business is a car wash, you know, it's going to be managing a business. And depending on the complexity, that's going to add risk to the particular business. And so understanding that. There is risk, there is upside is important when you're making these decisions. I think ultimately, though. These types of investments. As you continue to grow in your net worth, you'll find that high net worth individuals allocate. 25%, 30, 50, 60 large percentages of their portfolios. And these are large portfolios, mind you, but they allocate large percentages to that particular asset class. Of alternatives. And again, then they diversify within that. But they put a large portion there. And the reason being is that they're going to be able to get better returns and they're going to spend their time there and invest there. So you may be asking, why is my financial advisor not telling me about alternatives? And it's important to understand that when you have financial advisors in financial services companies that are taking exams and they understand traditional investments, there's two main reasons that they're not going to tell you about.

Christopher Nelson (00:25:16) - Alternative investments. And I'm talking about direct alternative investments. And I want to speak to that in just a second. They're not going to tell you that because they have been trained to focus only on traditional investments. So they don't many of them don't understand it, and they're just going to label it too risky. Stay here. The other reason is because they're not invented. The majority of financial advisors, if in wealth managers, if they're doing an asset under management. Uh, type of fee structure. They're not going to be incented to have you move 40% of that outside of their purview to something else that they can't manage. It's just an incentive. Why would they do that? They're losing 40% of their income from you to go somewhere else. And I'm not saying that this is again, I'm not trying to label all wealth managers, all financial advisors, because there are some fees only that want you to participate in this. But I'm just trying to, again, speak up if you have a financial advisor that does assets under management and they don't understand it, they're not trained, they don't invest themselves, then that could be why they're not telling you about it.

Christopher Nelson (00:26:36) - And that's important that you understand, because if this is something that you want for yourself, then it's important that you get the education that's necessary. And this is why I advise everyone that you are the CEO of your financial future. You are. You own all of the decisions and essentially you're assembling a team to execute your vision. And so if this is something that you want, I think it's important that you understand that. So. At a high level. This is private equity and alternative investing, and this is what they are and why we invest and why we invest directly in private equity. It's important to note that when you invest privately, when you invest directly in private equity, there's more upside, as I mentioned before. The other key thing is there's more tax benefits when you go through a REIT. And you're investing in real estate. Very broadly, it's almost like buying into a real estate market, but you're not going to get the direct effect of appreciation. There's also going to be more fees included there, so you're not getting the benefit.

Christopher Nelson (00:27:57) - So the advantage to investing directly in private equity is because you're going to be able to remove a lot of fees. So that means that you get more dollars back and you're also able to get more of the tax benefits as well. And so we're going to take a break right now. But when I come back, we're going to spend the next half of the show double clicking into private equity, real estate and understanding what it is and why that's important for people's portfolios as well. So stick around. We'll be right back. All right. Welcome back to the second part of this episode on private equity and alternative investments. And we want to spend this half talking about real estate. Real estate is hands down the darling of alternative investments. Everybody loves real estate. And I'll tell you why right now. It's because there are four different ways that you can make money off of this asset. Number one is cash flow. Income minus expenses, minus debt service gets you to cash flow. Buying a cash flowing real estate asset is very, very powerful.

Christopher Nelson (00:29:08) - Number two. Appreciation: The asset while you own it can increase in value. So you can own assets where you're getting cash flow and appreciation. And the third one is equity paydown. If your debt is interest and principal, every amount of principal that's being paid by your renters is actually paying down or paying off part of the loan. So you're getting more of the building when you sell it, so you're actually getting more equity. The fourth way is depreciation. Now depreciation is an asset that goes on to your taxes because it is really the loss. Every year you can get on a schedule, you can get on a straight line depreciation or you can get accelerated depreciation. But it is this negative value that says here's how this asset is going to devalue over time. That goes on to your taxes and is very, very powerful because depreciation can offset the cash flow. Cash flow and real estate is considered by the IRS. Passive income has a special way that it's treated so that then the depreciation can offset this.

Christopher Nelson (00:30:23) - Why is this so powerful? Well, because if you have depreciation in a tax year that's greater than your passive income, you don't pay any taxes on that. That's right. Let that sink in. As you start transitioning from your 9 to 5 income, your W-2 income, I say 9 to 5 for my international people. Sometimes people ask, what's the W-2 mean? So I want to make sure everyone's aware. For international people, it's 9 to 5, 9 to 5 income. As you're transitioning it to your passive income inside of real estate, you can get to a point where you need less. Real estate income, then you need W-2 income to replace your paycheck. Your paycheck is $120,000. $20,000 would normally go to taxes. That means that you need to replace $100,000 in passive income. It's very, very powerful. So this is why people love and rave about real estate because of these four different ways that you can make money off of it. So you have one asset, but there's all of these different ways that you can generate income.

Christopher Nelson (00:31:42) - Now, I do want to make a couple comments. Number one, buying cash flowing real estate assets is the most powerful because then you're getting that monthly cash flow, quarterly cash flow, depending on how things are structured, you are getting those checks being sent to you and the bonus is then the asset value going up and down. I don't ever buy assets for appreciation. I think that there's a lot more risk there. I think when you buy something that's cash flowing and you know that you're going to be able to get checks, that income then provides you flexibility and things that you want to do. So just a side note. So you have real estate as an asset class for different ways that you can make money. Now, there's two different ways that you can own it. You can be what's called an active investor where you go and purchase real estate with your money and you can buy single family homes. You can buy anything for five plex. That's where you'll get residential financing. So it's treated as residential, like you're just buying a residence or six units and above.

Christopher Nelson (00:32:50) - That's where you get commercial financing. So even if it's a multifamily apartment building, it's not considered a residential asset. It's considered a commercial asset because of the financing. But you're going in there, you buy it as an individual and then you need to manage it. Now we have some single family homes that we manage directly. And we know that if something happens, if you're in Texas and your AC goes out in the summertime, people are going to call you even if it's at four in the morning, we know this. Or if you have a property management company, even if they're not available or something goes wrong, you're going to have to manage it like you're directly responsible for managing that asset, whether it's through a third party or yourself that is active ownership. The key thing I want to explore today is private equity and leveraging private equity to purchase real estate. So we want to talk today, we're really trying to describe what private equity real estate is and why would you invest in real estate through private equity? Private equity.

Christopher Nelson (00:34:00) - Real estate is where. You are purchasing real estate that somebody else is truly going to operate and you're doing it through a series of contracts. The main contract is called a private placement memorandum or a PM. In this PM, private equity real estate is structured with a set of partners that are going to operate the investment, whether that's an apartment building, whether that is a self storage unit, whether that's a mobile home park, you know, industrial warehouse. The operating partners are also called the general partners or sometimes managing partners. They're going to operate it. As investors, we invest through limited partnerships, otherwise called LPs. So private equity, you invest as a limited partner. However, when you invest directly in private equity, you get the same benefits as somebody who owns the property directly. So I get the same benefits off of my limited partner investments in apartment buildings. I get the cash flow, I get the appreciation, any equity pay down, and I also get the depreciation of an LP investment limited partner, private equity investment, as I do from the single family homes that we own.

Christopher Nelson (00:35:29) - That is incredibly powerful. So let me continue to articulate what private equity investing is? You're investing as a limited partner, meaning that you get the full financial benefit, but you have limited liability. The liability is only to what you have invested, meaning that's the maximum that you can use. So you have limited liability, but you have a lot of upside. That is what private equity investing is. And so you're going in and this is again, you're investing in a piece of real estate or multiple pieces of real estate. We'll talk about how you do that in a minute. And you're coming in as a limited liability partner and you're using your money and putting it together in an investment that falls under the Regulation D, either a 506 Bravo 506 B or 506, C, 506. Charlie 506 Bravo means that we have to have a pre-existing relationship so that I can provide you access to this investment. It means that you can just sign and say that you are accredited. It also means that. I can accept a certain amount of non accredited investors.

Christopher Nelson (00:36:50) - Then there's 506 Charlie, which now came in 2012, which means that. I can only accept accredited investors. They need a third party to verify that they are accredited. And I can advertise for it. I can tell people that I have this investment. And so limited partners, there's two different types. There's the 506, B 5 or 6, Bravo, 5 or 6, Charlie. And those are the ways that you can learn and understand about an investment being available. Now the next level is how do you invest? Well, there's ways that you can invest in a single asset, like a single apartment building. You can go purchase that together in what's called a syndication. A syndication is where this private placement memorandum or contract is written to create an entity, limited liability company, an LLC or a limited partnership. And those partners, again, arranged with general partners who are managing it, limited partners who are investing in it. They come together to create a single entity to buy a single asset that's a syndication.

Christopher Nelson (00:38:06) - So again, you can invest in 506 B or 506 C syndications to go and purchase apartment buildings or to purchase a self storage unit or to purchase a mobile home park. So that is a syndication is a vehicle for which you can purchase as a group, a single asset, or you can invest in a private equity fund to buy multiple assets. And again, this is a private equity fund that is going to be either a 506 B fund or a 506 C fund, meaning 506 C fund, which I've run a few of these. It means that we can go advertise, we can go run advertisements. We can talk about this on public webinars on YouTube and we can tell people about what we're doing and then they just need that third party verification before they invest. Now you're investing in the fund. You're a limited partner. You still get all of the four. Um, ways that you can make money from real estate. So you still get cash flow, you get appreciation, you get any equity pay down and then you also get depreciation.

Christopher Nelson (00:39:26) - So that is what private equity investing is, if you can go and now you can look online at different crowdfunding sites where those are doing a lot of 506. Charlie 506 C investments. You can go and look at those different types of assets, their return profiles, their operators and you can go purchase those investments and you can get all the benefits of owning those investments directly. That's incredibly powerful. So this is why people use private equity to go and invest in real estate because they get all the benefits of direct ownership. Number one. Number two is their liability is limited. Number three. It's because they also do all of the work up front. So when you're going to make a private equity real estate investment, you are spending a lot of time up front vetting the sponsor, vetting the operator who is actually going to be doing the day to day management of this asset. And you're spending a lot of time. Looking over the actual investment itself. Where's the property located? What's its current condition? Let me run my underwriting to see what are some of the assumptions that you're making.

Christopher Nelson (00:40:52) - Do I agree with those assumptions? Do I not? Let me share this with some other investors in my group. Why do they think that they want to invest as well? I do a lot of the work up front Once I place my capital again, we know the risks and the way that private equity operates. It's going to be illiquid. I'm locking up my capital for a while, but I'm doing all this work up front. I'm only liable for what I invest. But the upside is tremendous. I can now get all of those four ways to make money from real estate without actually having to own it and do the work. That's what private equity is and that's why so many people are fixated on it. And so it truly is a way that investments are being created outside of the purview of the SEC so that investors can come together and they can buy real estate and they can then participate as full owners of it. So when you think about putting together a portfolio, taking some of your tech equity and moving it from being in traditional growth vehicles like stocks that will grow, but it won't send you checks to actually transitioning it to an asset that will send you checks can grow as well and is also very tax efficient.

Christopher Nelson (00:42:22) - This is why and how people go and move equity over there to start creating passive income through real estate. And I wanted to make sure and break down all of those different nuances and give you an overview of what private equity is. Now, private equity real estate is truly an investment class where. 90% of the investment is on the operator or the sponsor. They're going to be the key to whether these investments succeed or ultimately fail. So. The more that you can get to know and understand the track record of these particular sponsors, the more that you can get to know them, spend time with them, understand how they're operating their investments and how those trends over time. That is then going to help you understand if you can partner with them and if there's somebody that you can invest with. But that's where the majority of the time is spent. It's also important to understand the different asset classes and how they operate. Now, I don't want to get too much into the how, but I wanted to really break down for you today what private equity is, because we're not taught about private equity in school.

Christopher Nelson (00:43:45) - We are starting to hear about it more and more just because of post 2012. But it's also important to understand that what we're seeing online, there's a lot of people that pre 20 2012 had existing relationships with ultra high net worth individuals who were doing phenomenal transactions. And we don't still don't hear about a lot of them. I know because I'm trying to seek them out. I'm trying to continue to find great operators that are out there transacting in a lot of the different asset classes today that we may not hear about, we may not have access to. Maybe they just take institutional dollars. They don't take retail investors, LP investors. But this is why it's so important that you understand what this tool is and how it can help. And real estate as a whole. You will hear constantly, over and over again that it is one of the key vehicles that can get you to financial independence because of the fact that. You can get these assets cash flowing and then you can also get that tax protection from the cash flow.

Christopher Nelson (00:44:56) - So that's why I wanted you to really understand that today And. In. More than anything, it's important that you also understand that. The passive investing on the private equity side. When you're a busy technology professional, you're a busy executive. It's really this passive side where you're doing the work up front that's more aligned. What I found to be the executive lifestyle. I did not have a lot of time to be going and running around and doing the property management. I mean, my wife runs the property management for all of our investments that we own actively, and I'm thankful for her that that's her passion. She loves to do that. That's not mine. That's where I focus on the private equity side, in the passive side, because I am, you know, engaging in vetting operators and vendors that that's what I did in my 9 to 5 job, right as I was vetting software vendors, I was vetting, you know, account executives and who I was going to partner and who I was going to work with and understanding are they going to deliver on what they say they're going to deliver map those skills right over looking through the contracts, the PMS, understanding what are the key terms, what are the benefits for investors, and then being able to do the underwriting grind through the spreadsheets, understand what their assumptions are.

Christopher Nelson (00:46:23) - Those are some of the skills that really help me become a savvy, passive investor. And so I hope that this episode helped. I think it really will. Because ultimately you need to know what passive investing is. You need to understand what private equity investing is, because this is going to be a tool, not the only tool, but this is going to be a tool that's going to allow you to ultimately gain financial freedom. Thank you so much for your time today. I have one question, and that is please go on to Apple, Spotify, Amazon, wherever you happen to listen in, my ask is please leave us a review because we are a growing new podcast. Your views help us understand are we on target? Are we serving our audience or are there other things that you want to do? So thank you so much. See you next time.