Lance Pederson, Managing Partner of Verivest, joins us to discuss selling his IT startup and moving into commercial real estate, pros and cons of fund structures vs. syndications, and helping connect sponsors and passive investors with the Verivest platform.

Connect with Lance at https://verivest.com/

 

Transcript

 

Devin:
Lance, welcome. How are you?

Lance:
https://youtu.be/Z2OoTROR-1cGood, man. How are you doing, Devin?

Devin:
Oh, doing great. Doing great. It’s a beautiful spring day in Texas here so can’t complain.

Lance:
Very good. Same up here in Portland. We’ve got high 70’s, 80 degree weather so no complaints up here.

Devin:
Love it. Love it. That’s perfect. Well, thanks for jumping on. We’re going to talk a bit today about about Verivest, your company, about deal structure, putting projects together, vetting sponsors, lots of different things we’ll dive into. But just to kick it off, I would love to have you share with our listeners your background, number one, and then how did you migrate into real estate? Was it something you always did? How did you end up in this space?

Lance:
Yeah. I started my first company. It was an IT services company when I was 20 years old and I’ve always been an entrepreneur and I built that business up to about 5 million in revenue and sold it to my partners when I was 27. But the organization I was involved in, and you might be familiar with it, Devin, is Entrepreneurs Organization, EO. I got in on that really early and my mentor was a member and he was also a client of mine at the IT company. But I ended up… In my EO forum group was this guy named Matt Burke. Matt Burke was a commercial hard money lender and forum member. When I sold my business, Matt recruited me to come over and work with him.

Lance:
And so, Matt had two debt funds that they were raising capital into to fund their deal flow. I didn’t know much about real estate. It just so happened in my EO forum, I had a home builder. I had a developer, a commercial developer, and then I had Matt, the home builder. I ended up figuring out how all this stuff worked and it’s probably one of the reasons why I decided to get out of IT, is I realized that I wasn’t as passionate about IT as maybe my partners and many of our employees were, and I was more heady and intellectual and finance and those things are more interesting.

Lance:
I came on board there really not knowing much at all and really got into the fund management side of it. That was my role, is all the back office stuff and just trying to help grow and scale the business. And then we got this senior credit facility from Wells Fargo a week before Lehman Brothers went down and we all know what happened after that. 2008 to 2011 was pretty messy, right? And so, we just hung on for dear life. The portfolio performed… Unfortunately, the Wells Fargo pulled the plug and they didn’t renew the line in 2011. And at that point, especially finance market was basically dried up and we couldn’t find anyone to refinance. And so at that point, we basically had to wind the fund down and sell what were great assets.

Lance:
We realized quickly that the capital structure matters, right? Even though you’ve got great assets underneath, in a portfolio, if you get the capitalization, I think, you and I talked about this on our podcast, if you don’t get how you build the cap stack, whether it’s a single asset deal, portfolio deals, lender loans, whatever, it can kill you, right? And so, we’d experienced that and lived to tell the story. At that same time, as all the distress was starting to surface and people were buying… They could buy all these homes and off auctions. And we had a bunch of people just showing up and saying, “Hey, you guys have run funds. I think I need to start a fund. I need to raise capital into a fund. Can you help me out?” Then after about the fifth time with someone… It’s funny because you see a pattern, of people asking for something, “Hey, maybe there’s a there, there.” We realized that we could advise and consult them and help them structure these funds and do that.

Lance:
And we partnered with our securities counselor and we basically created a turnkey, go from not having a fun to launching a fund and advising and consulting around that. At the same time, we realized, “Hey, why don’t we just be more of capital allocators and decided to turn up our own funds that could allocate capital into other funds, syndications, really have a much broader mandate, and then pair that with this advisory practice where we were helping guys once again, create a more efficient capital structure. And we did that and that was in 2012. And since that time, I’ve worked with, I think, it’s over 180 different real estate entrepreneurs around the country, just on the advisory side of helping them figure out how to make the leap from syndicating deal-by-deal into more of a blind pool structure, whatever they’re trying to accomplish.

Lance:
It’s always been on the capital side, but that’s how I got into real estate. And then of course, with our discretionary funds, you end up learning all these different property types and how to underwrite them. And I’ve never really been on the investment committee per se, but just getting comfortable with… We’ve got industrial. We’ve done hospitality. We’ve done retail. We’ve done multifamily obviously, and single family and debt funds. And you’ve got to learn it and you’re teaching it all day long and your clients are teaching you how they do what they do. And so, that’s really how I’ve come about, got into the business.

Devin:
Yeah, that’s great. I imagine you’ve got a lot of education happening for you over the years by talking to different sponsors, right? I remember that happened to me early on. Learned one way and then talk to a different sponsor and see, “Wow, they’re really structuring this differently. There’s pros and cons.” And I feel like the more variety you have access to there, you can pick and choose the pieces you like best. And you working with that many sponsors over the years, it’s just no substitute in terms of understanding the space for… No substitute for having that exposure to that many different operators.

Lance:
Yeah, definitely. I mean, it’s been a great opportunity that I’ve had. I mean, the ability to be a fund manager ourselves, we wake up every day and we were doing it. I mean, I don’t do it anymore directly. I’m more of just on the service provider side with Verivest but you live it. You walk it. You teach it. You coach it. You’re trying to help people. You see all these different things and what works, what doesn’t work, what the market wants. It’s an interesting perspective. But yeah, I mean, the big thing for me is just like anything, if you’re teaching it all day long you become really good at it. I tell people all the time, it’s like, “I’m not very good at many things, but this is my thing.”

Lance:
In fact, I’m really bad at lots of things, but learning and teaching and talking about these things and helping people through this is the part I really enjoy about it, being consultative and how do you help people grow and scale their businesses? And that really has been our North Star when Matt and I decided to pivot the business. That was really what we decided to do is we just said, “Well, you know what? Raising money is hard.” It was hard for us and it’s hard for everyone I’ve ever talked to and we just felt there’s a lot of really good, worthy people out there that are good stewards of money. And so, we said, “Hey, if we can do our part to help create a flood of capital to worthy, real estate entrepreneurs, whether that’s from us raising it for ourselves and allocate it to them or helping them be discovered by other people,” and this was all the way back in, like I said, oh, the end of 2011, early 2012, and that’s really been what’s guided us since then to where we now have what amounts to two distinct businesses.

Lance:
Fairway America, that’s really a private equity real estate shop and then Verivest, which really was the accidental business where we realized quickly that one of the things that most real estate guys aren’t very good at was that middle and back office stuff. And so, if we’re going to help them structure their funds and invest in them, we learned fast that we probably have to do that stuff for them or it won’t get done right on time when we need it. And so, we ended up offering that as a service to our clients. And then eventually we spun that business off in 2017 and we’ve really run with that now where we’ve got a partnership tax practice and fund administration practice, indication administration, a proprietary investor management platform, sponsor directory, sponsor due diligence as a service. We really have end to end, all with the intent to make it as turnkey and frictionless as possible for real estate entrepreneurs.

Devin:
I love it. Yeah. Thanks for the overview. There is so much that goes into the back office piece, especially as it grows. That is not a core competency. You’re not fun for an entrepreneurial sponsor who likes to go chase and take down deals. And maybe he’s really good at operations, but you start growing the investor base and the back office becomes this whole other really critical piece that’s, I think, easy for people to overlook. When you guys were putting together the debt funds in that 2008, 2011 timeframe, was the intent that people wanted to spin up distressed debt funds to where there’s blood in the streets, they’re going to go take advantage of this? And if so, did that come to fruition or what was the outcome for a lot of these new funds that you guys were helping spur?

Lance:
Yeah. I mean, I think it did. Yeah, I think that the biggest thing we saw was obviously just the proliferation of private money lending, right? More of those guys ended up being the lenders to the borrowers that were acquiring that, which is super commonplace now, but not so much then. I mean, as is now. I mean, the banks backed off. But yeah, definitely helping guys turn up distressed note funds where they’re going to the bank and buying them from out of special servicing and then basically working them out and saw a lot of that stuff. And I think that when you do go into that, I mean, when the market is on the upswing, acquiring directly from the owners is what, I think, most of us know. But when the market goes down like that and you have something like that occur, that’s the best way to get access to the asset sometimes is to basically buy the senior debt and basically work them up for closing to get access to the assets.

Lance:
We certainly saw lots of people do that and helped some of those guys structure vehicles to make that happen. We haven’t seen as much of it lately, but a couple people… New York City’s a great example. That whole market was just overheated and it’s just a different animal, seeing more distressed note funds that are centered on taking advantage of those opportunities in the Northeast but, yeah.

Devin:
Yeah, I was going to ask if you’d seen as much. I think people were preparing for that maybe when COVID first hit early, mid-2020, thought there was going to be a flood of distressed assets. From my perspective, that hasn’t really been the case, but I’m not as nationally focused as you guys are. Other than what you just mentioned in the Northeast, has there been a lot of that as a result of COVID?

Lance:
No.

Devin:
Yeah-

Lance:
No. No, it hasn’t come to fruition and it sure is seeming like it probably isn’t, right? Yeah, it doesn’t seem like it’s going to be the boom that people thought it was, or even… I mean, to be honest, even that what I thought it was. I mean, I figured that it would happen. But of course, it shows you, and it’s debatable, but I mean, you do see the impacts and effects of what the stimulus did. I think that none of us could have predicted back in March, April, June. It just would have been hard to imagine that… Yeah, that we would… The stimulus, it’s just mind boggling.

Devin:
It’s mind boggling, Yeah.

Lance:
It’s mind boggling. And so clearly, it did do what they hoped it would do, at least to stave off major short-term issues. Obviously, it’s going to have some impact-

Devin:
No doubt.

Lance:
… one way or another. I think that’s more of what we’re going to see and maybe some people thought. It’s not really sure how this is going to impact, but there will be impact at some point in time, and we might not see it for two, three years, but things will happen. And obviously, some of these hotels are the things that were… You saw a lot of people running in and just working with ownership and recapitalizing deals to stave off… Keep the banks happy or whatever the case may be. I think there was some of that activity, but not as much as people thought there would be.

Devin:
Yeah, that’s right. It’ll be interesting to see. It’s trillions upon trillions of dollars of liquidity flooding in a very short space of time. That’ll be interesting to watch that unfold over the next couple of years. On the fund side, let’s talk about that a little bit. What have you seen operators do in terms of why and when would they go from a deal-by-deal syndication to a fund structure? And then what are the LPs like about one or the other? The passive investors, what’s their temperature on the fund versus one-off approach?

Lance:
Yeah. I mean, starting with the second question, then we’ll make our way to the first. I mean, I think that LPs generally speaking, prefer to pick and choose the deals they invest in right now. Obviously depending on the underlying strategy, some strategies, a fund makes more sense. As example, debt funds. 200, $300,000 loans or whatever, that just makes more sense and I think even some of these more micro-type deals where your acquisition sizes are in the 2, 3, 4, $5 million range, maybe like mobile home parks or some self-storage stuff, funds might make more sense to make that leap sooner rather than. But yeah, I think it is. I tell people this all the time, because everyone calls me saying, “Hey, Lance. I want to start a fund.” Then I’m like, “Of course you do. Everyone thinks they want to start a fund. I don’t know if you really understand what you’re getting into.”

Lance:
But yeah, it’s definitely harder and I think LPs, and for all the obvious reasons, they’re abdicating decision-making to someone else. The bar is much higher and they don’t know what they’re investing in. It’s often a blind pool fund, maybe one asset’s been identified or whatever. It’s harder now. The trend that I see and that I think what I’m seeing more and more of is what I call GP co-invest funds for people with multi-family operators or commercial real estate guys that are doing more than four or five deals a year. Their pipeline’s robust enough where they can do four or five, six deals. I’m encouraging them to tilt up. If they’ve been syndicating deal-by-deal or doing GP, LP, 9010 JV deals with funds, I feel the next progression on your way to doing a full blown LP fund that takes down all the equity and all your deals, it’s hard to skip straight to that from single action syndication.

Lance:
But tilting up a GP co-invest fund, that will at least invest 10% of the equity in each deal and then you can either syndicate that deal or you could do a JV deal with another private equity fund or family office or whatever. And then at least now you’re bringing in a co-investment of 10% and then the other benefit of the GP co-investment is that you can put in the mandate that you can use the capital in the fund for pursuit costs. I think it just makes it easier than balance sheet management for the operator and then it allows them to at least… I just think it gives you more flexibility. It gets you a little bit more certainty of deals because you could even take down a deal with more equity and then backfill. We see guys doing that, where they can basically go out, use the fund equity, take it down, backfill some with other JV partners in the deal.

Lance:
It just gives you lots of flexibility and then you’re actually building a fund track record because the hardest thing about it is you syndicate too long, everyone gets used to, “I just want to pick and choose my deals.” And then all of a sudden, you go to launch fund one and then they say, “Well, you’ve never managed a fund before. You’ve never done a fund before so why would I invest in this?” Whereas this way, it’s a bit of, I call it training wheels. You can do that. You go to your investors and say… You sweeten the pot a bit for your existing LPs and investor base and say, “Well, listen. If I were to promote off of the underlying asset, I’ll kickback 5% of the promote I earn off the other LPs.” And so, you have a waterfall structure at the GP co-invest fund level. That meets the standard structure that you might’ve been using, some PREF with some split above that and then you kick in a little bit of the juice that you’re getting off of the LPs to compensate them for the risk and the pursuit costs or whatever.

Lance:
But those are the things I think one can do just to… Once again, in the spirit of more efficiently capitalizing your deal flow, because it is hard to just syndicate, especially the more and more deals you do. I mean, that’s like every time you’re dong a deal, passing the hat and… On the Fairway side, I mean, I think one year we did… We had the funds and they were doing single assets syndications. We did 12 syndications, man. The team was just fricking wiped out. They were just exhausted. It’s a ton of work.

Devin:
It’s an intense month of getting through it.

Lance:
Yeah, not for everybody. Once again, you don’t just start a fund to say you started a fund or be the fund manager and you don’t start a fund because it means that there’ll just be money sitting there for you to invest. That’s not how it works. And that’s usually what the conversation is. “I want to start a fund, so I have money so that I can do deals and I can… Not losing out on these bids because I’m a cash buyer.” I’m like, “No. No, that’s not how it works.” Yeah, you got to get that out of your mind.

Devin:
Right. Right. How are sponsors mapping the funds to the deal flow? I mean, if you’re going to start a fund, you’ve got to be pretty bullish about your ability to keep a pipeline of deals that you actually like, which is tricky. How are sponsors, I guess… Is there a standard approach for, “We’re going to raise X amount for the fund,” and then you got a clock ticking on some sort of a PREF payout or something if you’re sitting all of those capital before you actually execute on a deal or are sponsors telling investors, “Hey, we’re going to start paying on this when we close a deal,” because that’s an interesting thing to try to map your capital to an actual deal in a fund structure. How are sponsors accommodating that?

Lance:
Yeah. I mean, I think that’s the issue, is that the pitch to the LPs goes “Okay, it’s 50 or a $100,000 minimum. You make the commitment.” Okay, a 100,000 committed to the fund, but now it’s going to be called in at some point in the future, during the investment period. That’s a bit of the issue is that it’s not ticking. There is no PREF ticking until the capital’s called in but you, as the LP don’t know when the capital’s going to be called in per se. Now, the way that it works, it always ends up working on more of adjusting time deal, where you need 5 million in equity for that first deal. You go out. You get $5 million in commitments. You call it all in to do the first deal and then you’re out there and you get the next batch of commitments. That’s how it works, practically speaking. But yeah, I mean, from investor’s standpoint, they’re like, “Okay, great. Well, when’s the first deal,” and then the [inaudible 00:21:04] are like, “Don’t really know.”

Lance:
And that’s why I go back to, if your pipeline isn’t somewhat robust, meaning that if you don’t feel good about your chances of getting a deal in the door in the next 6, 8, 9, 12 months, then it just demonstrates that maybe the fund isn’t the right thing. You got to know that you’ve got all the things that you’re doing are going to lead to eventually a deal landing in your lap that you want to fund sometime in the next three or four months. It does work out. It’s the whole thing of, it’s harder to get people to say, “Yes,” to that, and that’s why I say it’s a little bit easier, because when you think about it, if… Let’s say you had a pretty robust pipeline and you could do five deals a year and their average equity check is 8 million bucks.

Lance:
Then this fund’s portion of it will be 800 grand or whatever. I mean, we’re talking about $5 million funds or something that would be decent size. I mean, the good news, is it’s a great way. I mean, can you go get commitments for 5 million bucks from investors? Some guys who’ve been at it, yeah. That’s not that big of a deal.

Devin:
Right. Yeah. It’s interesting, because from an LP’s perspective, once I wire the funds, it’s effectively tied up. It’s not earning a PREF and there’s an indeterminate period there before it gets deployed, but-

Lance:
Oh to clarify, yeah, I mean, when they wire the funds, if and when they do wire, the PREF starts that day.

Devin:
Okay. Gotcha. Gotcha.

Lance:
But the issue is more of the fact that, “I don’t know when you’re going to ask me for the money. It’s sitting in my bank account earning zero and going backwards.” I have to have it there because I don’t want to default on the capital call when you call it in. And so, that’s a bit of the issue. Now I think that it’s a bit overblown because I think from an investor’s perspective, that’s just how it goes. I mean, even if you’ve got your favorite syndicator like DJE and they’re waiting for you to find a deal, it’s the same thing, is that if they go and invest the money, then they don’t have the money to invest in your next deal.

Devin:
That’s right.

Lance:
They’re always playing this game of, “Who’s got something available today? Depends on how you look at things, but cash isn’t your friend. Cash, especially these days, it doesn’t earn anything and inflation is much greater than that. But at the end of the day, if you want to be in the game, you have to have some amount of cash sitting around to invest.

Devin:
Yep, always a balancing act. Always a balancing act. Well, I want to talk a little bit about Verivest. Maybe you could give the audience an overview of the genesis of that and what it is and what you guys are doing today with that platform.

Lance:
Yeah. I mean, we rebranded. We used to be called Redwood Real Estate Administration. We rebranded to Verivest last July and the impetus for that was what happened similar to back in the days, that I kept… It was a different group this time I get, I had a bunch of LPs and investors calling me and saying, “I’m invested with X and Y and Z and they’re clients of yours. And I like those guys. And I’m assuming that you have other clients that I would like to invest with, but I don’t know who they are. Could you send me your client list?” I’m like, “That’s an odd request.” I’m like, “I’m not sure I’m going to send you my client list, but what are you looking for?” And they’d say, “I’m looking for a multi-family guys who do this or debt funds that look like that.”

Lance:
And so this happened two or three times, and then it happened another two or three times. I’m like, “What is going on here?” And then I started digging in more and I’m like, “What are you trying to do?” They’re like, “Well, listen. I’ve been at this long enough to know that yeah, there’s real estate crowdfunding sites. They’re fine. But I’ve realized that the real juice is figuring out these guys who are active, that don’t use the real estate crowdfunding websites that I don’t know about. But figuring out who they are is hard to track them down so that’s what I’m looking for.” And then I’m like, “Well, that’s interesting.” They’re like, “Lance, there’s no place,” and I’d heard this before from other investors. They’re like, “There’s no place to go to figure out who does deals in this middle market space. It’d be great if that existed. I figure you’ve got a big, robust list of clients so that’d be a good source.”

Lance:
Then I started asking more questions and said, “Well, if you could wave a magic wand, what else would you have?” And they’re like, “Well, you know what, for me, the due diligence thing is a bit terrifying even if I do find them. I’d love to run background checks on these guys, but it’s an odd request. It’s weird.” And then they’re like, “The other thing that drives me nuts is that they all say they’ve done all these things and I have no way of verifying. I have no way of validating whether or not these track records they’re reporting to have done are real and that’s terrifying. And then, oh, by the way, the reason I like your guys as clients is because you guys are administering these things and that gives me peace of mind knowing that all the money’s going where it should go.” They’re like “Secretly, when an investment I’ve made is always paying a shot and doing its thing, even though it’s working, I’m just terrified of investing in a Ponzi scheme.”

Lance:
And I heard the Ponzi scheme thing over and over and over again. I’m like, “Oh my gosh. We can solve all those problems from where we sit.” I mean, the last piece we already do it. The oversight and monitoring of investments, vehicles to make sure that they’re adhering to the operating agreement and the terms, that’s already what we do. I’m like, “We can run background checks on behalf of sponsors. They can pay us. We’ll run the background check and then we can verify track records because we have the tools and the databases and the wherewithal and the accounting and all that stuff to do those things as well. Let’s just offer it as a service, but let’s make it public and let’s give the validation to the sponsor.” For those sponsors who are willing to undergo background checks and have the track record validated and be monitored, let’s give them something to go out and toot their horn about, right? Let’s help them be found and give them a badge and go out and market it.

Lance:
And then the benefit was that we had a bunch of clients already in the database where I’m saying, “They’re looking for you. They don’t know to find you so you could participate.” They’re like, “We’re all in. We’ll run background checks and you can verify a track record and let’s throw them up there.” And we did that. And so, that’s the big piece of it. And so for us, our business model now is, we’ve structured as a membership program and it’s dirt cheap, right? To be a member, if you pass the background checks, which are $208 per principal, it’s 65 bucks a month. And then you list on the site and you can be discovered. And then for us, hopefully you get new investors and they invest with you, but then we’ve got all of our back office stuff, the investor management platform, onboarding investors, the tax. One leads to the other where we then like, “Hey, if I help you find new investors, then we’ve got all these other services to help you.”

Devin:
Yeah. You know all the sponsor pain points and you’ve got a product waiting in the wings for a lot of it, right?

Lance:
Yeah, that’s right. And so, I think it works all around, right? I think we help them solve their problems of validating them and helping them be discovered and get new leads and so far, so good. The investors love it. The sponsors, it’s different. I mean, it’s asking a lot, right? There’s public accountability. It’s transparency at levels that they haven’t done before. There’s certain guys who hear it and they go like, “You can sign me up right now. I can’t believe this exists.” There’s other guys who argue with me endlessly as to why it’s a dumb idea and I just say, “I don’t care. I don’t care if you like my idea.” It’s like, “I don’t care.”

Devin:
Yeah, take it or leave it.

Lance:
Yeah, every investor I talk to thinks it’s awesome. And so, at the end of the day, if that’s what they want, then let’s give them what they want. And if you want to participate, it doesn’t bother me. I’m not here to argue about it, right?

Devin:
Right. Right. Yeah, there’s a lot of a lot of sponsors to work with. If t’s not a fit for any of them, that’s great, right? Move along.

Lance:
Yeah, that’s right. Exactly. The same guys who are arguing about it are the guys who are hiding things and don’t want those things to be discovered. I’m like, “It’s clearly working.”

Devin:
Yeah. It’s interesting in this hyper-connected world we live in, technology, and everything that it’s still, “You got to know a guy business,” in a lot of ways, right? I mean, if I look at all the sponsors that I invest with as an LP, it’s like guys I know really well and that’s just how I’ve evolved as a passive investor. And now I’ve been living and breathing real estate for years and years so it’s easier for me to plug into that because I’m always going to conferences or networking, whatever. But for just a pure LP, you’re a dentist or something and you’ve got a day job, it’s tough to plug in and find a network of sponsors, because you want to diversify as a passive investor. You don’t necessarily want all deployable capital with one sponsor. Maybe that is a fit for some people, but you want them spread around. A lot of LPs do, and that’s a lot of hoops to jump through, a lot of trust for just, I would say a part-time LP that wants to just play some capital because they’ve got a full-time day job or something.

Lance:
Yeah. You nailed that and that’s what it is. And that’s what I tell all the investors, because see, many of them want to believe that what I’m saying is that this is real estate crowdfunding, that they’ll go to the site. Now we have plenty of guys who have 506c opportunities, like the fund guys.

Devin:
True.

Lance:
They’ve got lists. Yes, you can find stuff to invest in today. That’s great. And we make that accessible and allow them to share those opportunities. But every investor I’ve talked to, I let them know. I say, “This isn’t armchair investing that you don’t have to talk to anybody.” I’m like, “What I’m hoping you do is that you go and you find someone on our site that fits what you’re looking for. You’re looking for value add, multi-family guys and you’re bullish on San Antonio. Then I want you to bump into DJE and I want you to hit play and watch the video or whatever. And then I want you to click connect and say, “Hey, Devin. I’m so-and-so. Nice to meet you,” because that’s the relationship. I’m not trying to remove that. I’m telling them, “You have to do that.” If they don’t know you exist, which many of these LPs, they like to remain anonymous forever.

Lance:
I had a guy call me other day and he’s telling me all this stuff about one of the members on the thing and I’m like, “Wow.” I’m like, “Have you talked to her about that,” and he’s like, “No, I haven’t actually met her yet.” I’m like, “How in the world did you have all that information? We don’t have all that on there.” And he’s like, “Well, I dug around and I talked to so-and-so and I triangulated this and that. I’m like, “Dude, how about you do this? How about you pick up the phone and you call her?” “Oh my gosh, okay, yeah. Great idea.” I’m like, “Because you’re asking me stuff that you should be asking her and I could appreciate you’re trying to do your homework, but…” I think that I’m encouraging them to say, “There’s deals that exist.” Like you said, it’s a who you know thing. They never see the light of day and if they don’t know you’re there, you’ll never have an opportunity to get into them.

Lance:
I know we’re in COVID and we’re all over the country now and the world is flat and all that, but it’s a relationship thing. You’ve got to meet people. You’ve got to get comfortable with them. We’re taking some of the things off the table. They’re not crooks and someone’s watching where all the money’s going and they’re not lying about their track record, but ultimately, you got to figure out, do you like these people? Is it a good fit? Do you like how they do what they do? And it’s different for everybody. Yeah, it’s all about the relationships.

Devin:
Yeah, that piece doesn’t go away. It’s just you’ve made some of the matchmaking and discovery a lot more efficient, which cuts out a lot of cycles for everybody. We’re talking mid-2021 right now. Looking back on the last year of just a wild year for everybody, what do you see looking forward in terms of asset classes and just economic outlook for the next year, plus? You guys see a lot of operators and a lot of markets. What’s your outlook?

Lance:
Yeah. I mean, I think the big thing that I see just from talking with people it’s that we are and have become a nation of renters. And ownership as we knew it, which used to be something that was revered, like owning your own… I mean, I’m stating the obvious at this point, but owning cars or owning boats or owning anything, owning homes, all of that is becoming a thing that people are like, “Eh, not as interested,” in just owning assets that once again, that don’t work for you. You’re better off… You’re seeing that with build-to-rent in popularity and I mean, all of these things are just saying… And then the people wanting to be more mobile and go where they want to go when they want to go there and all that stuff.

Lance:
I feel like that, independent of the impact of appreciation and construction costs, I mean, I guess that’s part of it too, right? That’s not going away, right? Multi-family, and even the notion of self-storage, which is where you keep your stuff when you’re going to to fro and all those things are going to… Vacation rentals and all that stuff is going to continue just to take hold and become part of how things work and it’s not fully baked yet. I mean, it’s just even more so. I think that, that’s the biggest thing that I see happening. And obviously all the other stuff that’s already happened, just the changing of how retail works and all that stuff. But that’s the big thing I see is just people, multi-family and the rentals and self-storage. Yeah, and then of course, all this migration to these new, what were secondary markets, is fascinating too, right? Just seeing the people moving out of places like California and in the Northeast and migrating to places like Tennessee and Austin and San Antonio. I mean, Austin and San Antonio are going to be this metropolis in the future, right?

Devin:
It’s turning into it. Yeah, we’ve been saying it for years and you’re really starting to see it now. It’s pretty wild.

Lance:
Yeah, because like we’ve got two projects in New Braunfels, which are-

Devin:
Oh my gosh. Yeah.

Lance:
… going to be converting hotels, those extended stays or whatever, into multi-family. You’ve got this housing crunch and it’s fascinating, man. It’s really, really interesting and I think we’re going to look at this over the next year and say, “This is the great…” I don’t know we’re going to call it, but everyone’s reshuffled the deck. People are just moving all over the place and going from here to there and… The great reshuffle. I don’t know what were going to call it.

Devin:
Yeah, sure. Florida, Texas, Nashville. I mean, you’re seeing incredible migration across all those. It’s interesting. It’s interesting. We’ll always have headwinds and tailwinds. I think becoming a nation of renters is good for us in the business. Interest rates seem to be a tailwind at the moment. We’ll see what that does in the future and then we’ll see what inflation does in the future dumping, whatever it was, $5 trillion into the money supply here is going to be interesting and then construction costs. I mean, we’re doing some feasibility on some new construction now, and I’ve got a lot of friends that are builders and the lumber looks like a Bitcoin chart. I mean, it’s incredible. Is that going to calm down? We don’t know, but that’s going to change the dynamics of new supply coming online, right?

Lance:
Well, and the types of materials that are used. I mean, you’re seeing more and more of this modular… I’ve got one of our clients up in Dallas and he’s got a whole facility where he’s doing that steel fabrication where they can just fabricate… I mean, multi-family, literally just lift up walls, put it on trucks, put it out and… I mean, that stuff, the feasibility of that now. These are the using stick-built lumber and yeah, it’s just-

Devin:
Yeah, it might accelerate all that stuff just the way lumber prices have gone. It’s just astronomical. I mean, you’re seeing three, four, five X the cost over a year ago and it was just mind boggling.

Lance:
Yeah, it is, and we were already… And that’s just it. And so, the home builders, when that happens they don’t forget what happened in 2008. They’re all like, “Ugh.” They get nervous. Eh, not build the costs up too high, not feeling good about it. The shortage that already existed is even more so and that could cause the prices to go up of existing homes and inventory. But yeah, like you said, there’s ups and downs and we talk about all the time. We’re all investors, whether you’re active, like you Devin, or you’re passive, we have to all view ourselves as investors and we need to pay attention to these trends and these things that occur because it just… And then where we allocate our capital ourselves and our portfolio, we need to pay attention to these as change occurs and it happening more rapidly and be open-minded to these things because like Dogecoin or Bitcoin or whatever, I mean, I get it.

Lance:
Don’t invest in things you understand, but fundamentally, some of these things, you’ve got to spend some time educating yourself about what are these things? And we’re seeing more and more of that as well, which is good. Just seeing people take their own finances and their financial futures more seriously and realizing that they can’t just abdicate that to some wealth manager. That’s just not a great idea. I’m not saying that they’re bad at what they do, but I’m just saying that advocating it entirely and not educating yourself about those things seems to be a bit short-sighted.

Devin:
Yeah. I love that sentiment. I love it and I totally agree. You got to take it in your own hands and educate yourself. This has been a great overview of what you’re up to and the journey and I appreciate you sharing it, Lance. If somebody wants to connect with you or connect with Verivest, what’s a good avenue for that?

Lance:
Yeah, you just go to Verivest.com or email me at [email protected], is the path of least resistance, I guess. And you can find my podcast at the realestateriskreport.com. Talk with guys like Devin, and we have conversations like this with people all the time, and that’s how you can catch up with me

Devin:
Outstanding. Well, we’ll link to that in the show notes, and I appreciate you jumping on today. Really appreciate it, Lance. I enjoyed it.

Lance:
Yeah. No, thanks for having me, Devin. I appreciate it.

Devin:
Alrighty. We’ll see you.

Lance:
See you.