Phase 2 - Real Estate 101 (How to or one big idea)

Podcast - Industry Challenges And Thoughts On Risk

Tyler Stewert
September 7, 2021
Podcast - Industry Challenges And Thoughts On Risk

Adam Hooper, Co-founder and CEO of RealCrowd sat down with Bill Manassero of the Old Dawg's Real Estate Network to discuss the RealCrowd Story as well as his take on industry challenges and risk adjusted returns. 

Having founded two national platforms for brokerage, consulting and joint venture equity investments, Adam has worked on over $1 billion of real estate transactions with a wide spectrum of real estate professionals, sponsors, lenders, investors, developers and institutional clients. His experience led him to conclude that current real estate practices are rife with inefficiencies and in need of a major technological overhaul. As CEO, he leads the day-to-day charge of growing the platform and ensuring its position as the premier solution in the industry.

Thank you to Bill and the Old Dawg’s REI podcast for having Adam on. You can checkout out the Old Dawg’s podcast by clicking here.

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Announcer - All opinions expressed by Adam, Tyler, and podcast guests are solely their own opinions, and do not reflect the opinion of RealCrowd. This podcast is for informational purposes only, and should not be relied upon as a basis for investment decisions. To gain a better understanding of the risks associated with commercial real estate investing, please consult your advisors.

Tyler Stewart - Hey listeners, Tyler here. Before we start today's episode, I wanted to quickly remind you to head to to enroll into our free six week course on the fundamentals behind commercial real estate investing. That's, thanks.

Adam Hooper - Hey Tyler.

Tyler Stewart - Hey, Adam, how are you today?

Adam Hooper - Tyler, I'm doing well.

Tyler Stewart - Oh yeah? You look well.

Adam Hooper - Thank you. Yeah, I feel great.

Tyler Stewart - Yeah, you did something with your hair, I like it.

Adam Hooper - Thanks. And I also had the opportunity to switch roles here today, I was in the hot seat for once.

Tyler Stewart - You were, you were on the other side of the table.

Adam Hooper - I got the opportunity to jump on another podcast, Bill Manassero with the Old Dawg's Real Estate Network. Listens to our show and reached out and wanted to learn more about what makes us tick at RealCrowd. I jumped on the podcast.

Tyler Stewart - You did. It was a fun listen, I got to hear the origin story of RealCrowd. I was with RealCrowd early, but I got to hear what happened before I was here, which was kind of fun for me.

Adam Hooper - We talked about the origin story, we talked about some of the challenges that we see in the industry, we talked about, again, kind of our perspectives on risk, starting with risk, and not focusing just on the numbers but really understanding at your portfolio level, kind of how that looks across the deals. A really good overview of kind of where the industry's at and some of the stuff that we're looking at and hope to see in the future.

Tyler Stewart - If you're looking to learn more about RealCrowd, how we got started, how we operate, this is a great episode where, you heard it from the source, founder and CEO Adam Hooper.

Adam Hooper - Again, it gives you a little different perspective when you're on the other side of the mic, so, hope you guys enjoy the show today, we'll drop a little nugget here if you listen to the end. My kids even make a little cameo in the episode. It was a great time, we appreciate the opportunity with Bill and certainly check out his show as well, we'll put links here in the show notes to his podcast. I would say that's enough of me talking, but, sorry, you're going to hear a little bit more.

Tyler Stewart - You're getting a little bit more.

Adam Hooper - So let's get to it.

Announcer - This episode of the Old Dawg's REI Network is brought to you by Meno Studio. In a world where jobs are how most people make money, one man, one desire, one challenge, Dares to break the mold. Welcome to the Old Dawg's REI Network, where we don't work for money, money works for us. Coming soon, viewer discretion advised. Welcome to the Old Dawg's REI network, where cashflow is king, real estate investing the means, so you can enjoy your retirement dreams. This is the show where we cut right to the chase. No sales pitch, no long monologues, just simple how-to real estate investing advice. You can earn the passive income you need to enjoy your retirement today. Now, your host and chief Old Dawg, Bill Manassero.

Bill Manassero - Welcome to the Old Dawg's REI Network. I'm your host, Bill Manassero, and this is a show where 50 plus-ers and anyone else who wants to join us gets solid, no sales pitch real estate investing advice. To help generate real cashflow. This podcast airs twice weekly on Mondays and Fridays, and if you aren't already a subscriber, which you should be, go to iTunes, type in Old Dawg, spelled D-A-W-G, find our podcast, and subscribe. We've got a fun show for you today. This is an area that we really haven't talked a lot about, but I think it's an area that our listeners have been asking a lot of questions about. We have a gentleman, his name is Adam Hooper, and Adam Hooper is the founder and CEO of RealCrowd, an online real estate equity marketplace that has brought its members access to 4.5 billion of investment opportunities. We're talking about crowdfunding here today, so just in case you're not sure. Founded in 2013, RealCrowd is a Y Combinator backed company that has grown to be a leader in the real estate crowdfunding space. RealCrowd operates as a direct investment marketplace where investor participate directly in the underlying asset, rather than a platform sponsored entity. This benefits the investor by increasing efficiency, transparency, and most importantly, reducing fees and layers of middlemen. Prior to founding RealCrowd, Adam was a partner at a leading real estate capital markets firm, where he was involved in over one billion of transactions, sourcing and structuring joint venture equity investments.

Bill Manassero - In the commercial real estate business since 2004, he has been involved in launching three prior national platforms for investment sales and brokerage, as well as institutional joint venture equity investments. Well Adam, welcome to the Old Dawg's REI Network.

Adam Hooper - Thank you, Bill, I'm happy to be on here today, and that was quite the mouthful of the intro there, but you did a great job, nailed it.

Bill Manassero - Well, it's some great stuff, I didn't want to miss a thing. Definitely have a very impressive background. This is an area that I really am fascinated with, and a lot of our listeners are. We have folks that are generally 50 years of age and older, some are approaching retirement, some are already in retirement, and they're looking at good investments and good ways to invest. Some are going to be active real estate investors, where they're actually buying properties and managing it, or through property managers managing that property. There'll be others that are more passive that will invest in anything from syndications to notes, deed, liens, things like that, and crowdfunding. We're real happy to have you on here and I just thought maybe you could just give us a little bit about your background and how you came into this space.

Adam Hooper - Crowdfunding is a relatively new phenomenon that was brought about by a regulatory change in 2012 called the Jobs Act, and we can talk a little bit about that in a few minutes. But I got into this space as kind of an evolution of what I was doing before, and a more efficient way of doing what I was doing before, which is helping real estate managers raise capital. For every transaction out there, you've got the debt portion of the capital stack and then the remainder, that being equity. My background was helping real estate managers raise that joint venture equity. Very inefficient process, if it was syndicated it was the country club network, friends and family, very one on one. The Jobs Act came about when Indiegogo and Kickstarter and a lot of these more kind of donations-based crowdfunding platforms were getting started. We kind of took a step back and thought, well, why couldn't we do that for real estate? Why couldn't we take this distribution channel of the internet, leverage this new regulatory environment that allows for private deals to be publicly advertised, and build a platform around that to really bring enhanced access to this asset class. That's really at the core of what we try to do is bring access to both sides of the marketplace. Helping investors access institutional quality deal flow all around the country that before, they couldn't have a seat at the table, and also bringing access to real estate managers to syndicate their deals amongst

Adam Hooper - high net worth individuals all across the country. So that was the spark that started RealCrowd, and that was early 2013, it's hard to believe it's almost six year ago, but we're still here, we'll still running, and there's plenty more to do.

Bill Manassero - Yeah, that's great. Well it sounds like you guys made quite a name for yourself, I mean, 4.5 billion of investment opportunities, that's pretty impressive.

Adam Hooper - It sounds like a lot, but it's still, it's such a small percentage of what happens in the marketplace. It's been fun to watch over the last several years. When we started this, we were one of the first companies to do this and it was very much a fringe experiment on the side, and would this work, is it ever going to get to any volume. Seeing that progression over the years to now, where this is a meaningful source of capital for a lot of real estate managers, and we've got investors that have got some pretty significant holdings diversified across those deals. It's been fun to watch the process, but as I said, there's still plenty of room to grow, and we're happy to be on the shows today to help educate a few more folks and expose them to what we do.

Bill Manassero - That's great. Well, you sound like, you were doing very well in your own ventures, whether it was the institutional investing side or the brokerage and so forth. Going into this, I know you're probably looking at this, is this thing going to fly, is this really going to happen, and what really convinced you that, hey, this is a great place to be.

Adam Hooper - In the crowdfunding space specific, or --

Bill Manassero - Yeah, in the crowdfunding space, and starting RealCrowd.

Adam Hooper - I look back at that decision, and I was young 30s, three kids, good salary, benefits, all that stuff, with the partnership I was at. I remember I sat down with my wife and I was like hey, I've got this idea, I think I'm going to quit, and go do the startup thing. And as crazy and irrational as that decision was, it was actually a pretty easy decision, surprisingly. Every once and a while you come across those ideas that you just have so much conviction that it's going to happen, it's going to work, right, there was this sense of inevitability that we saw with using this kind of a mechanism to raise capital, and providing this access to investors that we just had that gut feel, it just felt like it was something that was going to take off. Was it the most rational thought or the most rational decision to make, probably not. But sometimes you just got to do it, right? We saw this as an opportunity to truly disrupt and have a fundamental impact on how the capital markets function. Those opportunities don't come up all that often. It just felt like it was a perfect storm of the acceptance of managing your money online, E*Trade, Scott Trade, TD Ameritrade, all the different financial platforms that were coming online. This wave of crowdfunding again with a lot of those donation-based mechanisms first. The regulatory change that allowed for these private deals to be publicly advertised, and just a general acceptance of using the internet to invest your capital.

Adam Hooper - It just felt like it was all coming together, and we just had to do it. So we did.

Bill Manassero - That's a big move, especially in the space you came from, which I'm sure you were very much focused on dealing directly with investors and the equity people and so forth. Kind of going into the tech space here, you didn't have a background in tech at all, did that seem a little ominous to a certain degree?

Adam Hooper - Of course. Luckily I had two great co-founders, very deeply technical co-founders, family friends of mine, that ran the idea by, and they saw the same potential too, and they both quit where they were at and came onboard. It was a very different industry. Real estate and underwriting commercial real estate assets is a very rational, numbers-based approach, and that was one of the things that attracted me to the industry very early on, getting into the real estate business, was the kind of financial and fact-based underwriting that commercial real estate had versus some of the other, residential or leasing or anything like that. That was what attracted me to it originally. Transitioning that to the venture world and the startup world, very little ration. Very little rationality. In startup investing and in the tech world, building companies from the ground up, so it was a very interesting culture shift, coming from a very traditional, conservative, fact-based underwriting to moving down to Palo Alto, being right down the road from Stanford, and just, the conversations and the way, the way people's brains are wired down there. You have those conversations with people that just, you can tell their brain operates at a different level, almost. It was just a really really fun time, really interesting time, and a great environment to be down in Palo Alto, to start the company and really immerse ourselves in the technology space.

Adam Hooper - Still keep a lot of the kind of core fundamentals that we loved about the real estate space, one of which being the relationship. That's why we operate on that direct model is, we still believe there is a very relationship-focused component of the real estate investing world, so we didn't want to lose that, but we just wanted to make it more efficient. We wanted to bring the ability for people to build those relationships to a scale that hadn't been done before, and that's really I think something we're proud of, and something we want to definitely continue to foster is that ability for investors to build relationships with professional real estate managers, and as they access those opportunities they can have that personal touch and that personal connection that we feel is still very much important in the real estate investing world.

Bill Manassero - Sure. Well, getting a startup off the ground like that, I've also had that experience, we launched an internet company right before the bubble burst, but, so I'm familiar with that. Of course, you get in there, you've got to raise your money, just to get the company going, right, to be able to fund the infrastructure and everything. You finally got the funding, you got it together now. You have to obviously bring in now companies that are going to want to, I guess to post, or list their companies on here for investors, right? Did you establish particular criteria before you did that, or were you just kind of going to see what happened and who came and that kind of thing?

Adam Hooper - Yeah, so, building two-sided marketplaces are, it's one of the most challenging companies to try to build, because you always have this chicken or the egg problem. If you have the biggest pool of investors but you don't have any assets for them to fund, then neither side is going to be happy. And conversely, if you have all the real estate in the world but you don't have the investor pool to fund that, again, neither side's going to be happy. So that I think was one of the biggest challenges of getting it started was how do you build both sides of this marketplace in tandem? And so early on, again, coming from the real estate world, having a lot of relationships, being in the business for quite some time, we had the ability to attract real estate managers and to be able to tell the story and kind of get them to understand what it is that we were doing, and how it impacts their business, and how they can access this new pool of capital. Finding the investor side in the beginning, that was a little bit more of a challenge. Luckily we were part of a very well-known technology accelerator called Y Combinator. We were very early on in the crowdfunding industry so we got to ride a lot of that press wave. From the very beginning we had a pretty good base of younger, more technology-forward investors, Bay Area Capital that were comfortable with technology, they were comfortable with investing online, and they saw this as an opportunity to diversify their concentrated portfolio into assets outside of their exposure to tech.

Adam Hooper - We were in a good spot at a good place and time to be able to leverage the relationships that we had on the real estate side, and also ride, again, a very early wave of this whole crowdfunding industry through press, to build that awareness, that helped us kind of see the investor side of the marketplace, and then from there it's been a, any way and every way to attract investors. And we've kept a lot of discipline on the real estate side. One of the things that we take a lot of pride in is the caliber of groups that we work with. Starting from our roots in the institutional real estate world and really trying to keep the focus on top-tier real estate sponsors, and keeping the caliber of groups that we work with as high as we can, because ultimately that's who investors are picking, right, you're choosing the partner that you're going to invest with in the real estate manager. That's something we place a lot of importance on, and people that are looking at getting into the space, if they listen to our podcast or have read any of our material, so much of our education and awareness about the space is really doing the work to pick a good manager. Make sure that you're investing with someone that you trust, that you have, you can build that relationship with, and that you feel will be a good steward for your capital. We've taken a lot of great pains and we've turned away a lot of business to people that we don't think are necessarily meeting that caliber, but that is something that we take very,

Adam Hooper - very serious here at RealCrowd, and I think has been a key to the success that we have seen.

Bill Manassero - Seeing the importance of that, what are your key requirements or criteria that you have established for those that do post their assets on RealCrowd?

Adam Hooper - We require a minimum of 50 million dollars of transaction value, as a principal. 10 years minimum of principal level experience combined amongst the company, and then one of those principals has to have at least five years of experience. We define principal experience as they've got their own personal capital at risk in those deals. If someone was a broker or a VP at a big investment bank, maybe they've done billions of dollars of deals, but they don't actually have their own capital at risk in those deals, we don't count that towards the qualifications. Those are the minimum qualifications, and we'll do full background checks, bankruptcies, foreclosures, litigations, lender reference checks, capital partner reference checks, and really run them through the ringer to make sure that they are who they say they are, they've got the established track record, they've got the experience, so that when investors from RealCrowd invest with them, we know they're going to be in good hands. There's a real, a quality sponsor on the other side that's making those decisions on behalf of these investors, and again, I think that's been very core to our ethos from the beginning is making sure that we're working with very reputable, well-qualified real estate managers.

Bill Manassero - Is there a minimum asset size or project size that you require?

Adam Hooper - We don't have a minimum project size, I think our average, average project size on the platform, somewhere, 25, 26 million total value. Most of the deals, if it's smaller than seven or eight million, a lot of times it doesn't really fit on the platform. Most of the deals we'll see will be kind of between 15 and 30 million, I think we've got a 70 million dollar apartment complex on right now. We've had deals up to 150 million plus. So we don't really have a minimum size to list on the platform, but most of them work in that kind of sub-institutional space. Once you start doing deals that are 40, 50 million plus, you can do what I was doing before, you can access more institutional capital. There's a lot more money chasing those deals, returns tend to be a little bit more thin at that, because there is more capital chasing those, and so the space that we ended up playing in is that kind of sub-institutional size. Bigger than what you'll see from your local mom and pop buyer, but sub-institutional size, which is anywhere between, maybe five to seven million on the low end, 35, 40 million on the high end. Very inefficient part of the capital stack, which provides for more opportunity by way of enhanced returns versus, outside of that range you'll see typically a lot more capital coming in, which bids up prices, and tends to kind of compress some of those returns.

Bill Manassero - Are people coming to you after they already have an offering memorandum in place, or do they come to you very new, and then actually do all the documents and so forth with the attorneys to establish that offering?

Adam Hooper - We'll usually get involved once somebody has the asset in escrow. Once they're under contract, they're going through their due diligence, they're raising their capital offline, getting their debt capital structured in place. That's usually when we get involved. And so we'll kind of help them along concurrent with these other activities. That would be on an acquisition. We've also done a number of recaps, so maybe they already own the asset or maybe the closed with it on their balance sheet, and they're looking to syndicate some capital that they've already closed the asset with, we'll do those, again, much less of a time pressure in that case. Then the third thing that we do are funds. Those are co-mingled real estate funds anywhere from 25 million to 250 million dollars, and they'll raise capital over the period of 12 to 18 months and then deploy that over the period of maybe three to four years. Then it'll be either an evergreen or a closed end fund, where you're having access to the entire pool of assets in that fund, versus just a deal by deal, specific asset capital raise.

Bill Manassero - Do you take projects where the person, let's say they just need to plow five, ten million into rehabbing their property or doing a total repositioning. Would that be something that you guys would accept?

Adam Hooper - We get involved on the, we would call that kind of like a value add opportunity. A lot of the deals that we do, seen a lot of value at multi-family. Usually on those, though, we're getting involved on the initial acquisition where they're going to acquire it, they've got an improvement plan and they're going to rehab the units, they'll usually capitalize that all up front. Occasionally we'll see a deal, I know we did a big office portfolio where they owned three office assets, it was like 125 million dollar portfolio, and yeah, they were raising additional capital to go in, do some re-teneting, renovate, and that was additional capital for an asset that they already owned. We see all different types of strategies, everything from single tenent net-lease core assets, all the way up to ground up development.

Bill Manassero - Do you pretty much run the gambit of commercial asset classes?

Adam Hooper - We do. We don't do any single family resi(dential) and we don't do any land. But outside of that, office, industrial, some retail, again, a lot of multi-family, and funds. Kind of the main food groups there.

Bill Manassero - Do you do developments like, a single family community or something of that nature?

Adam Hooper - We haven't done any single family. We've done a number of developments, most recently some storage, some industrial, some multi-family developments. Developments are a little bit more challenging for our investor base because of the lack of cashflow. You're going to have a much higher return at the end, typically, but you're not going to have that cashflow throughout the development process. I will say most of the investors that are using platforms like ours are looking for yield. There's not a lot of places that you can get yield in the market right now. They're looking to real estate as a way to fill that need for current cash, which makes developments a little bit of a more challenging fit for what people are looking for, but again, it really all just depends on what they're looking to do with their capital.

Bill Manassero - Sure. One of the things we're experiencing, and we're in the multi-family space, myself and a lot of the people that I work with. We're seeing a real shift in the environment over the last couple of years. Are you seeing that as well, since you do cover a variety of asset classes, are there some that are just really booming and other that are kind of slowing down? What are you seeing in the various asset classes that you guys cover?

Adam Hooper - That's a big question.

Bill Manassero - That's why we ask, yeah, get the good stuff here.

Adam Hooper - We've done deals I think in 38 or 39 different states, so we see a lot of different product type in a lot of different markets. Multifamily space has been the most active that we've seen, we'd love to see more industrial. Generally, people are a bit leery of retail right now. And if there's room in the show notes, we did a great podcast episode with Eric Homan about the state of retail. Don't necessarily need to be as fearful as some of the doom and gloom headlines would lead you to believe, if you're buying the right kind of product. Multi-family space, I think we've seen, the bifurcation between class A, new product, and class B, B minus, C. A lot more opportunity in the class B than there is in the class A, right? Rents are in most markets pretty peaky, and to develop new product, you have to be so high on the rent spectrum that there's not much more room to grow. There's more downside potential, necessarily than what you might see than upside, if you're talking about new construction class A product. A lot of the activity we've been seeing has been repositioning of maybe slightly older vintage product where you can get in, maybe it's been mismanaged, maybe it hasn't had the capital reinvested in it that it needs. And so the opportunity to go in, acquire deals that, you know, attractive cashflow going in, and then be able to add the value and see some increase in that cashflow. From a strategy perspective I think that makes a lot of sense right now, and we do see a bunch of that on the platform. Again, it varies by market.

Adam Hooper - In Portland there's a lot of opportunities on the market right now, new supply pipeline is looking a bit thin. Portland has got some interesting dynamics, and then you look at, Seattle, pricing is pretty hot, San Francisco, pricing's pretty hot, and then you get maybe some of the more secondary, tertiary markets, and that's where there's not as much institutional capital chasing those deals yet. And so that's where you can find some opportunities. And I think that's again reflective in a lot of the product that we see on the platform.

Bill Manassero - With your investors, everyone knows that there's going to be some sort of correction that's going to happen sometime. It's just a matter or when. Are you seeing investors gravitating towards certain types of deals because of that? Anticipating that there's going to be a correction, there may be, it may impact the equity, it could impact rents overall, anything that seems apparent to you in that investing?

Adam Hooper - This is a bigger issue or concern of ours that we have in the space, beyond just an upcoming correction, is an investor's ability to make an appropriate risk-adjusted decision based off of their current situation. What I meant by that, that there are some deals that are just inherently bad, and you should stay away from those at all costs. But other deals are right for or they're better for some people than they are for others. And so that's one of the things that we're really working on with the education and a lot of the materials and content that we produce is helping people understand what is the right risk allocation model for themselves, and how should they look at the risks that they're taking when they invest in these deals. Rather than just purely looking at a return number as their decision factor. I don't know if that specifically answers your question, I don't know that we've seen a marked shift in behavior, trying to protect against an upcoming event. Generally real estate should be looked at on a longer term horizon, unless you're at a very quick value add, rehab and get out in the next couple years kind of an opportunity. With that comes an enhanced risk profile, should hopefully be rewarded for that additional risk you're taking. But if you're capitalizing projects responsibly and you're working with a sponsor that's well-capitalized with a more conservative business plan, whether that correction happens in 2020, 2024, if the deals are structured correctly and they're not over-levered and you have a prudent manager,

Adam Hooper - when that cycle happens, you should be able to weather that. I think when we get some concerns is when we start seeing projects that are getting hyper-levered, 80, 85, 90% in some cases. That's reminiscent of what we saw in the last run-up before the '08 crash, and I think that's when we'll start to see some more concern and hopefully some investor pullback, but we haven't seen that yet. Maintaining conservative underwriting, maintaining conservative debt levels, should hopefully position a lot of these assets where you can ride that out. Is now the best time to start a spec office development? Maybe we're getting a little late in the cycle for that. But if you're keeping it to more fundamental real estate, people always need a place to live. If you're acquiring assets at an attractive basis compared to replacement cost, those are some of the things that I think investors are starting to pay attention to, and looking at some overall market trends in terms of where they choose to invest their dollars.

Bill Manassero - One of the things that we're seeing, just with other investors, is that, it seems to be a shift in a certain degree to longer-term holds, too. People aren't doing the typical three to five year exit strategy that they were doing a few years back. Do you have any longterm hold type of assets on your platform?

Adam Hooper - We do, and I hope to have more. Much of the early days in the real estate crowdfunding space was geared towards hard money loans, single family fix and flip debt, that was super, super short-term. Six to eight months, 10, 12 months. A lot of investors in our space got conditioned to think that that's a normal real estate investment, these much shorter, 12 to 24 months, super quick turnarounds. Which, historically, that's not a typical look at real estate. Real estate is usually a much longer term hold where you can have that ability to ride out those cycles, you're not necessarily trying to time it as much. We've seen that shift a little bit, I don't think we've seen it shift as much as we had hoped. We always wish there was more appetite for more conservatively underwritten, longer term holds, again, for that risk adjusted reason we talked about before. But I would say the investor expectations for today's underwriting, I don't think has necessarily kept pace with the reality of the deals that are out there right now. A lot of investors that this was their first time into this asset class in 2013, 14, 15. There was a lot of juicy deals out there that you could get in, you could add your value, in 12 to 18 months and exit, see a huge IRR. Those deals are harder to find these days, and so the underwriting has tightened, returns have tightened, hold periods have extended. Trying to get investor expectations to more closely match the reality of today's market is something that, again, we try to do through the podcast

Adam Hooper - and education, to get people more on the same page as the reality of what sponsors are seeing out there in the market. You can't manufacture those returns like you used to back in the good old days of 2012, 13. It's just those deals are more difficult to find right now.

Bill Manassero - What would you say for those folks that are looking at crowdfunding, what has been traditionally sort of the biggest mistakes that investors make in crowdfunding? I'm not referring to your platform, just in a general sense, what kinds of tips could you kind of give people that would help them to avoid falling into some of those problems that could harm their investment dollar?

Adam Hooper - A lot of it, as we talked about before, goes to manager selection. Who are you investing with? One of the things that we've taken a different approach than a lot in the space, and we believe firmly, is establishing a direct relationship between the investor and the underlying real estate manager versus, some of the other platforms operate under what we call kind of an aggregator model. In the aggregator model, the crowdfunding company themselves will form an LLC, and the investors are investing in that LLC. There's no direct connection between the investor and the manager, that comes with an elevated fee. The underlying security isn't in the real estate itself, and so structurally, really understanding who you're investing with is one of the biggest things that we see and wish more investors would do is really diligence, who they're investing with in that manager.

Bill Manassero - Is that information readily available on your platform so that people could do the same kind of due diligence through the resources you provide before they invest in a particular property or project?

Adam Hooper - It is, and that's something, we're going through improvements right now as well, and making as much of that information as transparent as possible. Hopefully by first part of September we'll have a much more enhanced sponsor diligence section on the offering pages so that the investors can see all the work that we do behind the scenes, have access to the reports, have access to any responses from the manager if anything should come up, on a background check, for instance. Making sure that there is total transparency, and the ability to get to those questions, that's a big part of it, for sure.

Bill Manassero - Got it. Conversely, the people that are investing crowdfunding, that are doing well, I'm sure you have certain levels of risk associated with the particular project. Are there people that have, just seem to be doing it right, and if so, what things are they doing that are making them even more successful in that platform?

Adam Hooper - Knock on wood, of the 180 deals we've done, we've had about 20 go full cycle, all really solid returns, no losses. It's been a really good market, though, right? It's been a pretty unique run-up that we've had over the last five, six years in the real estate space. That's been in everyone's favor in terms of the performance of their deals. To me one of the biggest benefits of a platform like ours is people can now diversify in direct real estate investments unlike they ever could before. You can diversify across product type, you can diversify across manager, across geographic location, across strategy, all for far far less dollars per deal than you could before. Typical syndications, depending on the size of the deal, maybe your 250 or 500k checks to get into a deal like that, a lot of the deals on RealCrowd are down to 25 thousand dollar minimums, maybe even some down to 10 thousand dollar minimums. The ability to take what money they would traditionally allocate into a single deal, or a whole asset that they're going to purchase in their own market, they can now take that same amount of money and distribute that across 10, 15, 20 different deals, and really build a well-diversified portfolio of assets that can kind of, again, protect them from any specific market or any specific product type challenge that might be seen. Those that are really taking advantage of platforms like this are using it to really diversify their allocation into this asset class, and access deals on a really broad spectrum,

Adam Hooper - unlike what they could do before.

Bill Manassero - What kind of average yield are people getting, maybe in the fund, as opposed to individual projects?

Adam Hooper - There's a lot of variance, just between strategies and product types. The debt fund that we had on RealCrowd, they ended up raising 24 or 25 million dollars for their fund through our platform. They were returning somewhere around, somewhere between 10 and 12% annually in cashflow.

Bill Manassero - Pretty good.

Adam Hooper - Again, I mean, that's a pretty unique strategy. Most of the deals we see, they're going to target a cashflow somewhere in the high single digit current cash yield, and then all in IRRs somewhere high teens, mid-teens. We've had a lot of deals that have exited that are 20 plus IRRs, but again, like we said, those deals are getting harder to come by just with the way the market's maturing. If you can get into a deal and you're going to get a mid to high single digit cashflow and a mid-teen IRR, pretty attractive I think.

Bill Manassero - Compared to the other types of investments out there, especially. There's just a lot in the crowdfunding space right now. There are just, seems like there's new companies popping up all the time, here. How would you differentiate yourself from the others out there in terms of things that make you different, make you better?

Adam Hooper - The biggest is something we touched on before, which is that direct model. We're completely fee-free for investors, so we get compensated by the real estate manager. Again, back to the very beginnings of our company, we've always felt the importance of having that relationship between the investor and the real estate manager. That just we feel is crucial, and also, as an investor, to have the security of what you're investing in is the entity itself, it owns the asset, right. You're not investing in crowdfunding company 75 LLC, you're investing in the real estate itself. That's a really big differentiator that we've taken from early days and have continued to do so. I'll toot our own horn here a little bit and say that some of the content that we produce, whether it's through the podcast or through the RealCrowd University, I think we've taken a pretty unique approach in trying to help investors out there familiarize themselves with the asset class, and start to kind of figure out the mind of a real estate investor. We kind of pick the brains of the best in the business and get their feedback on different product types, different markets, how to underwrite a manger, how do underwrite a deal, different parts of the capital stack. We've got a bunch of economists that we've had on there, some talks around tax treatments, opportunity zones, 1031s. sent through the content that we've produced and the education that we try to bring to our users and investors.

Adam Hooper - It's a lot of work, but it's something that we feel is very important to help people get in a good position to be able to make smart decisions with their capital. That's ultimately what we want to see is people allocating their dollars wisely, and on a risk appropriate way, for their personal financial situation.

Bill Manassero - Do you ever have projects that don't reach their goal, maybe they got a 20 million dollar raise and they're only able to get 18 or something?

Adam Hooper - We do have those. We're not a full replacement for the capital, for the LP equity. If you've got a 20 million dollar deal, able to get a 13 million dollar loan and there's seven million of equity that needs to be raised. Typically that manager's only going to raise maybe 20 to 40% of that equity through RealCrowd and the rest is going to come from their existing capital sources, friends and family, offline capital, smaller institutional family office type of groups or their own balance sheet. They're not relying on a specific amount of capital from RealCrowd to close the deal, that deal's going to close regardless. They're coming to us to basically augment what they're doing on the capital raise side. So I think of the, again, maybe 180 deals we've done, oh, maybe less than five have not closed for one reason or another, so it's a pretty high close rate for deals that are on the platform. They're going to go through, and they're using RealCrowd, again, to meet a new pool of investors, they're not necessarily relying on that capital to get the deal done.

Bill Manassero - Gotcha. Our audience, as I mentioned, are those folks 50 plus in age, either approaching retirement or in retirement. And there's a lot of different reasons why they would invest. Just from that standpoint, these are people that might not have a lot of experience in this space or even in real estate investing in general. What advice would you give to somebody like that, that's looking at crowdfunding and considering this as a means to either supplement their retirement, or at least to get a good return on their nest egg that, it's going to support them through their lives there. What advice would you have for those folks?

Adam Hooper - Just get started. There's a lot of misnomers, or misunderstanding, I guess, when it comes to the crowdfunding industry. What we do is exactly how capital has been raised for decades, it's just we're doing it online now versus the guy you play golf with calling you up and saying, "Hey, I got a deal." There's nothing to be afraid of when it comes to this, again, I'm speaking for RealCrowd. There's been other platforms out there that have done some different structures or maybe some more you know, kind of, off the wall strategies or whatever that are a little bit non-traditional, I guess, we'll put it that way. I'm trying, being politically correct here. But if you're investing in other LPs right now I think that would be one of the biggest decisions. Are you in a position where you want to buy a whole asset by yourself and be responsible for the management and the operations that come along with that? Or are you interested in partnering with a professional real estate manager, that that's all they do, day in day out is manage real estate. If the potential investing as a limited partner, as a passive investor in these deals, is interesting, then it's a space that your listeners should take a look at. With that obviously comes educating yourself on typical deal structures, on some of the different markets, of how to look at a manager. If you've never partnered with a third-party real estate manager before, what are some of the questions you should ask when you have those conversations,

Adam Hooper - and what are some of those things that you should look for. The track record, their team, their staff, their backgrounds, their bios. But all in all, real estate, most people have an understanding that real estate is a good thing, and they want to have some of their money at work in this asset class, they just don't necessarily know how to do it. Or historically they've been limited to liquid equities, REITs. That's one of the things that we're trying to change, is again giving people access to direct real estate investments across the country to be able to build that diversified portfolio. From that sense, if listeners are interested in taking an LP position in some of these deals, absolutely, I would suggest to take a look at the crowdfunding space, but don't think that comes without having to do a little bit of work. Reviewing managers, reading PPMs, getting comfortable with the strategy and the assets, that's a big part of it. And never, never put full faith in anything you read on the internet. Do your research, do your background checks, and do educate yourself on what you're investing in and, you know, I think it's a pretty good opportunity for folks that are looking to augment the historic access to bonds and equities.

Bill Manassero - That's great. Well, RealCrowd has just done amazing, and is growing and is healthy, and a lot of good stuff happening there. Where do you see your company going in the next, the next five, 10, 20 years?

Adam Hooper - Again, another big question, you're asking the hard-hitting questions here. For us, again, a lot of it's helping people make smarter decisions with their money. We've got a platform that we're about to launch that will absolutely help with that, we've got some projects that we're look at in the advisory space to can help people understand on a risk-adjusted basis, what are the right deals for them. As we talked before, some deals are inherently bad, other deals are just better for other people given their financial situation. That's going to be a big focus of ours going forward is how to help people make good, or better risk-adjusted decisions for their allocation into this asset class. From there, we'll just continue to grow and hopefully have more great managers on the platform and work with more great investors, and see where it takes us.

Bill Manassero - That's great. Well thank you, I appreciate that update there, and we are kind of running at the end of our show here, it's a shame, because I have too many other questions here. But I may have to catch you at another show, how's that?

Adam Hooper - Happy to do that.

Bill Manassero - This is where we have what we call our wrap it up session, where I ask you a series of quick questions and you can provide your personal expertise and experience to share resources that will be of value to our members. If you are ready, we can go ahead and wrap it up.

Adam Hooper - Let's do it.

Bill Manassero - Favorite real estate book.

Adam Hooper - This one's a mouthful. It was written under a pen name by a guy named Paul Kaseburg, who we've had on our podcast quite a bit. Very, very intelligent guy, and just decided one day he was going to write a book on real estate investing. If you go Amazon and search for "Investing in Real Estate Private Equity, an Insider's Guide to Real Estate Partnerships, Funds, and Joint Ventures."

Bill Manassero - Whoa.

Adam Hooper - It's a long one.

Bill Manassero - It's okay, the link will be on our show notes so they don't have to worry about writing all that down.

Adam Hooper - Perfect. And I think his name on that one was Sean Cook. But that's, we've actually based a lot of our podcasts off of content that he's put there, so very very good book in terms of the fundamentals of investing as an LP. Couldn't recommend that book enough.

Bill Manassero - That's great, first time I heard that one. So that's one I'll have to take a look at.

Adam Hooper - Good.

Bill Manassero - Favorite business book.

Adam Hooper - Years and years and years ago, The E-Myth I think was one of those books by Michael Gerber.

Bill Manassero - Michael Gerber, yeah.

Adam Hooper - It's just a, I think one of the two biggest takeaways for me in that book, working on your business versus working in your business. I think that's a trap that entrepreneurs get stuck in. It's very hard to pull yourself out of working in your business to work on your business, I think that was one of the big takeaways. There was a passage at the very end of that book that really struck me was, you can't change the world around you, necessarily, you can only change how you react to it. That's been a pretty big, outside of business, just kind of general life philosophy that I try to instill in my kids, too. The only thing you can really control is how you react to the world around you, and so I think that was a pretty big, pretty big takeaway from that one, as well.

Bill Manassero - How about most valuable website for success? Of course, other than your own.

Adam Hooper - I don't know if it's a cop-out, but I'm going to go with Google. There is just so much information out there at our fingertips that, you just, it's hard, sometimes you can get bogged down and you get get down some pretty odd paths, but the ability to just access information with such ease is such a huge resource for us that just wasn't there 10, 15, 20 years ago. So I don't know if that's a cop-out, but I think that's a --

Bill Manassero - Not at all. I think I forget, sometimes. I'll be struggling to find the answer to something and I go, why don't I just Google it? I get the instant answer, digging, it's crazy, but yeah, it's true, it's true.

Adam Hooper - Yep.

Bill Manassero - How about favorite app?

Adam Hooper - I use, for my calendar app I use Fantastical, which is just a really good calendar and planning app. Outside that I'd have to say probably Spotify or the podcast app, those are my go-tos.

Bill Manassero - How about favorite quote?

Adam Hooper - I think from a motivational quote I'd say, "There's no Plan B, because that only detracts from Plan A."

Bill Manassero - I like that.

Adam Hooper - Whether it's good or bad.

Bill Manassero - That's great.

Adam Hooper - And then my other go-to is, "Never confuse a vacation with a family trip." They're very very different things.

Bill Manassero - Love that. I love that, that is great. I got to remember that one. I got seven kids I got to deal with here, so.

Adam Hooper - Oh nice, yep.

Bill Manassero - Great. Our last one here is a little bit, it's kind of a heavy question here, but let's say you lost everything. Every asset, your home, your car, pretty much everything. And all you have is one thousand dollars in cash. What would you do with that one thousand dollars to rebuild your business?

Adam Hooper - I would go buy a computer so I can get on Google and figure out what the heck to do.

Bill Manassero - Type it, "How to save my life?."

Adam Hooper - Right. Just get started, right, like we said before. You just have to do it, right, the hard work is getting it done. No amount of money can offset the drive and just relentless desire to just do, you just got to get it done and, finances help, money helps, but if there's a will there's a way, right? You just got to get in there and do it sometimes.

Bill Manassero - That's great, that's great. One of the things that we talked about offline I thought was really interesting, too, is that, with the folks that invest with you, you also have an educational component. Not only do you have your podcast, which we'll have a link to in our show notes here, but also you have something called RealCrowd University. Could you kind of elaborate a little bit on that and what that is, is it a free university, is it something people can, anybody can access?

Adam Hooper - Absolutely, 100% free. It's a six-week course, and it really came from, we had so much content that we were producing with different e-books and blog posts and articles and the podcast, we really just wanted to try to condense it into a manageable format and kind of give people a plan to get through those basics. It's, you can go and sign up and get access to the best of the best of the content that we've put out there. Totally free, six-week course, you'll get a series of emails from us that has, we've even got some homework in there, to really help kind of drill in some of those points that we discuss, both in the podcast and through some of our other content out there.

Bill Manassero - Great. Well how can people find, I'm sure there's a lot of people listening here that want to find out more about RealCrowd and probably ask questions and that kind of thing. What's the best way for folks to reach you?

Adam Hooper - You can go to just, or if you want to send me an email it's ahooper [ a t ], A-H-O-O-P-E-R at

Bill Manassero - Wow, that's great, so thanks for sharing that.

Adam Hooper - For sure.

Bill Manassero - Well we have come to the end of our interview here, and we have a tradition, as the Old Dawgs that we are here, all of our guests get to close us out with their best old hound dog howl. Okay, so this is , I hope you were warned about this in advance, but if --

Adam Hooper - I was, and I'm going to do you one better, I'm going to throw another curve ball here. I told my kids that I was going to be on the podcast and we had to do the howl, and they wanted to do it so bad that I recorded them, and if it's okay, I'm going to play my daughters howling for you if that works.

Bill Manassero - You know, usually it's got to be the guest, but I think we'll make an exception because it's so unique.

Adam Hooper - Okay, here we go, ready? We'll get it started three, two, one. There you go, there's my two daughters getting their Old Dawg's howl on.

Bill Manassero - Got to love it, got to love it, that was great, oh my goodness. That's really fun, what a bonus for folks listening here, that's great. Well, Adam, this has been really fantastic, I thank you, you've given a lot of great information. I think for those that were really not sure what crowdfunding is and how it works, I thought you did some great informational, foundational stuff there too, so thank you for that.

Adam Hooper - Glad we could get on the show today and thank you so much for your time. Like we said, if anybody has any questions, feel free to reach out, check out RealCrowd University, and hopefully we'll get to talk to you here in the future.

Bill Manassero - Oh, fantastic. Well, I thank you Adam, I also want to thank all our Old Dawg listeners out there for joining us today, I know there's a lot of other things you could be doing right now, but the fact that you've taken the time to join us means a lot, and we greatly appreciate it. Please note, as I mentioned earlier, everything we talked about today, and all the links and resources that we addressed, as well as a link to RealCrowd, that will all be listed in our show notes which are at And you're going to look for the episode with Adam Hopper. That is the show for today. Remember, cashflow is king, and real estate investing the means. Until next time, keep moving forward, and may God bless.

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Tyler Stewart - Hey listeners, if you enjoyed this episode, be sure to enroll in our free, six-week course on the fundamentals of commercial real estate investing. Head to to enroll for free today. In RealCrowd University, real estate experts will teach you the important fundamentals like, the start with risk approach, how to evaluate real estate sponsors, what to look for in the legal documents, and much more. Head to to enroll for free today. Hope to see you there.

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