Jeremy Kuchenbecker, an active investor and LP in over 27 investments, joins Joe Cornwell on the Best Ever Show. In this episode, Jeremy discusses his path to financial freedom via real estate, including his first deal, scaling his investment portfolio, and avoiding lifestyle creep. Her also discusses investing in alternative assets like car washes, oil and gas, and ATMs and what LPs should look for in investments.
Jeremy Kuchenbecker | Real Estate Background
- VP of APCO Holdings
- Based in: Orlando, Florida
- Say hi to him at:
- Best Ever Book: Fooled by Randomness
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Transcript
Joe Cornwell (00:02.202)
Best ever listeners, welcome to the best real estate investing advice ever show. I'm your host, Joe Cornwell. And today I'm joined by Jack Thomas. Jack is a president of Jetway Financial. He's a financial strategist, private lender, and manages real estate, private equity funds. He is also investing in a resort and some hotel developments and is also a mortgage note investor. So he's got a wide variety of experiences. First time on the show, Jack, thank you so much for being here today.
Jack Thomas (00:31.586)
So thanks for having me, I really appreciate that.
Joe Cornwell (00:34.99)
Well, I appreciate you joining us and sharing your wisdom. I guess, since it's your first time, why don't we start with your background, where are you from, and how did you initially get into real estate?
Jack Thomas (00:46.442)
I'm from the Windy City from Chicago. Um, I got into real estate when I left college. I had, uh, I was doing some IT network design and business sales from business to business. And my target demographic, my market vertical was financial. So I would sell, I would design a network and sell it to like banks, hedge funds, traders, medical and insurance companies.
And so along the way I had to figure out, you know, like what the pain points were, how the business models worked, what is it that they were doing with the money to get, stay in business. So within that I found real estate and I found it pretty quickly. So as I was able to form those relationships with those chief technology officers and chief financial officers, I just pumped them for information, Joe. And I was fortunate enough to that they were willing to share with me how the businesses work. And from a banking perspective, money is truly debt and you're just leveraging debt to give out loans and you duplicate that over and over again to get passive returns.
So most people think that the real estate is the actual asset, but the note is the asset. The real estate is just collateral for it. So I learned that pretty quickly. I became an accredited investor at 29. And before you know it, the company that I had been working for those six or seven years, it was just interfering with me making my real money, which was real estate. So at that point, I just had to get, just jumped on in full speed and now a full-time entrepreneur have been in this space for over 20 years at this point and we're rocking and rolling, you know.
Joe Cornwell (02:33.414)
That's great. So when did you go full time in real estate and investing?
Jack Thomas (02:37.934)
In '05, you know, so I jumped in and 2003 and you know in debt two years or that 18 months or so I jumped right on in head first And it was enough for me to go ahead and walk away from corporate from a good paying corporate job at that. So
Joe Cornwell (02:57.966)
Yeah. So this first few years and when you went full time, what was your, you know, primary asset that you're investing in? Like, what did your strategy look like back then?
Jack Thomas (03:08.134)
So back then, this was before the 08 bus, right? You know, I was doing a ton of fix and flips, you know, and got kind of caught in 08 actually to be fully transparent. So like I was doing a bunch of single families and at the point when 08 rolled around, I think I was doing like three or four projects at the same time and the market had dropped. You know, like in Chicago, we were on we were on pace to get the Olympics. And the deal fell through, so the area that they were targeting, I was buying a lot of property over there.
Easy point of entry, but when we didn't get that Olympus bid, it was a bloodbath. Maybe not the first hard lesson, but it was a hard lesson. But the secret is if you buy low, then you cash flow essentially.
But make sure that you know your numbers, make sure that you know what your rehab costs are, and make sure that you know your after repair value. So even if the market shifts, then you'll still be, even if you were at the floor of the market, as far as your debt service, you'll still be able to keep your head above water.
So yeah, that was one of the lessons that I learned from dealing with that.
Joe Cornwell (04:31.47)
Yeah, I saw a note in your background, and I'm assuming you're alluding to this, where it was, don't speculate on gentrification. Is that the same deals?
Jack Thomas (04:42.366)
Absolutely, Joe. You know, it's funny, you know, as we speculate the markets, right, we don't know what's going to happen on the overall market. So we're anticipating we got hope ism, right? But hope isn't necessarily good business strategy, right? You know, you've got to go with what's concrete or what's actually working today. And the event that if something does pop, you know, that then that's great, right? You know, then you just got the cherry on top of your sundae. But you need to know what your numbers are.
I know what your worst case scenario is and pretty much plan according to that way you don't lose your shirt, right? So
Joe Cornwell (05:20.302)
Yeah. And what I love about the whole debate between cashflow and appreciation and the last 10 years has been predominantly focused on cashflow until the recent years with COVID. And then the market started to shift. Obviously we saw massive values increasing during COVID years of 10, 20, 30% in some markets. And what's interesting to me is, yeah, hyperinflation, right? All those things that are adding to that. And it's interesting to me where, you know, I know, I know we'll obviously we'll get into this, but you're investing in the Midwest.
I'm a Midwest investor as well. And the key difference I see when I talk to people who invest in the Midwest or maybe in the Southeast versus like the coastal markets or Southwest is that those areas do have more traditional appreciation, more reliable. I don't want to say, I say reliable loosely, because obviously it's cyclical like everything else, but historically they've appreciated much more rapidly than a lot of the Midwest and and the old kind of rust belt markets.
Now the difference though is historically and traditionally Midwest markets have cashflow better because your values are gonna be lower and your rent to cost ratios are higher. So what's interesting is as I've grown as an investor, you can find those pockets where your floor is kind of safe. You know you're gonna have some cashflow and if you're on good fixed debt, it lowers your downside, but the contrast is maybe you don't have as much possible appreciation upside as you may have in other markets. So how has that driven you in determining the market you have invested in over the last 20 years?
Jack Thomas (06:59.426)
Fabulous question, right? So for me, like, because I'm a private lender as well, right? So as we lend money, we lend money all over the United States. So I'm fortunate enough to actually see how different markets work. So I see that Southeast market. I see that California market. I see what the Midwest does. And then you see kind of that southern belt. So what it does is it allows for me to have a unique understanding of what's going on nationally.
And so you could hedge your bets, right? To your point, the Midwest is blue collar, right? Not that it's anything against blue collar, but it's the core of what really drives and makes America work. So from that standpoint, the cost or the base of property value is lower. So it doesn't necessarily appreciate as much because those properties do have to maintain and be affordable for those, for that working class.
So you don't see a lot of great appreciation there, which is, which for the national market is good, right? You know, because it keeps the U.S. balanced from that standpoint. But to your point, it keeps good cash flow, right? So like cash flow is what you need when the market shifts at it, I think of the Midwest as great for cash flow. You want to get in at a low price point, you want to make sure that you get your cash flow, but you might want to invest in other markets if you're looking for appreciated growth.
You know, so you got to kind of mix your plays and think about strategy and form your strategy of how you want to park money, you know, in the time frame that you want to park. You know, so if you really want to set yourself up to be on the polar opposite of whatever the market is commanding and multiple markets. So like if you're investing in multiple markets and you have a Polish strategy in the Midwest versus a different strategy in say California or the Southeast, it allows you to get the best of both worlds.
So when the market shifts over here, you're still winning and the market shifts over there, you could go ahead and cash out and get your cash and then use that cash to go down and buy some more, you know, cash flowing assets that are lower price point.
You've got to think through it. You've got to think for the long term and mix your plays as you're analyzing that.
Joe Cornwell (09:37.286)
Yeah, and what's interesting to me is that, and I'm sure you have experienced this with markets all over the country, as you mentioned, but when you break down Midwest markets, and I know you said you started in Chicago, I know you said you're investing in Indianapolis as well, and I'm in Cincinnati, all kind of similar Midwestern cities and have similarities. So what's interesting is when you break down all those neighborhoods, right?
Because these metros are almost always made up of like, you got your core, proper city, proper limits, and then you got your suburbs, and they got a lot of diversity in all of those neighborhoods and job types and incomes and all those things. You know, most of these have some really high in suburbs, some have some lower end, you know, where it's lower incomes and higher crime. But when you make these diverse investments all over even in one city, let's say, you get access to some of that upside.
And the point you made about the Olympics is like a prime example, right? I mean, you could you could use that type of Black Swan event or whatever right or something you didn't even think could happen and then all of a sudden it happens and boom Your values double triple so like one example here in Cincinnati was when the FC Cincinnati team became pro, right? so they were a Like, you know a semi pro team for however many years and then all of a sudden boom They got they got brought up into the MLS and they had to build this You know like what however five hundred million dollar stadium and they built it in the West End which is like historically low income, high crime neighborhood and boom, all of a sudden people holding in that neighborhood, you know, four or five, six X values on their properties overnight. So it's wild how some of these events can happen.
Jack Thomas (11:14.834)
So let me piggyback on what you're saying. So, and think about this too, right? You know, like this is a low hanging fruit that a lot of investors don't even realize or even go after. So like if you go to like the put meetings, you know, or to any of the community organizations to where it's, or even if you go down to the urban planning office, right? You know, all of this information is public information, right? You know, so you could go to those urban planning offices what they're targeting, what areas that they're targeting to do some growth in. That's where you might wanna go ahead, get involved in at an early pace.
Now it might take a little time for it to come around, but that's what it is that you're looking at if you're doing projections or if you're doing speculating. So, you know, food for thought, right? Sometimes it hits off like a grand slam, and then other times it's a slower drag depending upon whatever that metric that they're gonna place into that market.
Joe Cornwell (12:20.398)
And I think that's why the cashflow conversation is so important, because again, if you're buying in some of these fringe areas where you're hoping on appreciation, maybe you're hoping on gentrification or you're hoping on some big investment from a corporation or the government or whatever, if you're cash flowing, if you're in a stable asset, then you have that long runway if you need to hold on 5, 10, 15 years for some of that upside to maybe happen.
Jack Thomas (12:45.462)
Exactly.
Joe Cornwell (12:49.042)
All right, so shifting gears a little bit, you mentioned how you got into node investing. So tell me how that even started for you. Why did you get into node investing? Because obviously not a ton of people are doing that.
Jack Thomas (13:00.938)
It was God, really. I don't know how spiritual you are, but I stumbled into it. So this was after 08, right? I made it through the real estate downturn. Did pretty good. At that point, I was probably, you know, maybe almost 10 years or so. Yeah, I was about 10 years into my real estate career. I had made it through 08. I had migrated and I picked up some insurance licenses. So I was, you know, selling some high-end, sophisticated insurance products, you know, to, you know, really as a financial tool.
And what happened was, you know how it is, you're a credit investor, you get all of these calls from, and at that time I wasn't sophisticated enough to acquire assets and an entity name. I was still out there buying them in my personal name, so I got called from a lot of these investors, or whoever you know that targets credit investors. What they're...
So anything from Oil Wells to Disney Pixar movies and stuff like that, I didn't know anything about any of that stuff, right? So I was leery, didn't get into the market, and then especially after 08, I'm shy, I'm gun shy, right? Risk averse. I ended up getting a call from this private banking school out of Silicon Valley.
And it's my phone, so I'm answering my calls, right? And then you get some good deals sometimes that way. And so they go into the pitch, and I'm listening, I'm entertaining them, I'm a nice guy. And the guy was like, hey, well, do you know how banks make money?
Jack Thomas (14:57.326)
Of course I know how banks make money. You know, like I sold them network infrastructure for years. So I'm like, yeah, they make money on loans. They loan in four different areas, and then they leverage that and they do it over again. You know, that's how banks make money. And so then it was like, have you ever thought about what banks do with their profits? How they turn that money into more money? And I was like, actually, no, I didn't think about that.
And it's like, well, that's what we teach. I was like, when is class?
And then it gave me the data, I'm like, I'll see you on Monday. You know? So that was the beginning of it, right? So it was a class and the guy was extremely intelligent, extremely smart, had been in private banking for years, and was doing private lending. And for me, I quoted immediately because I had the experience of working with those traders and lenders and chief financial officers.
Joe Cornwell (15:34.967)
Yeah, yeah, yeah.
Jack Thomas (16:01.796)
But then I also had the additional experience in working in assurances for years at that point. And so what I knew was that at the core of what we think is money is actually the notes. And I didn't realize that how it's all essentially the same. So Joe, I learned what a core concept is and what I realized is very few core concepts. And everything else is just an application of that concept.
So I was able to catch the concept of notes at its core and the application of how money is made from understanding what the note is at its core. And so from that standpoint, it was like, oh shit, I'm shifting. I'm sorry. Yeah. So I'm shifting everything about my business to be centered around, you know, like these new strategies and that's what it looks. So it helped me migrate from single family to multi units to, you know, to private lending, hotels and now to resorts.
So it's understanding what money truly is at its root, understanding the several applications of it and being able to duplicate that process over and over again and that's what creates the passive income and once you automate that, you put a faster velocity on your return. And so it's from understanding the core and learning things along the way in the right spaces, in the right rooms, and just applying that information in it, and before you know, and forming relationships, you know, like, with scaling out your team, you know, like I got a team of attorneys that, you know, have, that I leverage their intellect and their resources to get me into further spaces and the further asset classes that I didn't even anticipate or know that I could even get into, you know, so, long-winded story to your question.
Joe Cornwell (18:04.41)
Now I appreciate the background. So, when you started, you said this was about 10 years ago when you started doing the note investing, is that right?
Jack Thomas (18:12.245)
Yeah, probably a little over 10 years at this point, yep.
Joe Cornwell (18:15.766)
Okay. And so what did this first couple, you know, investments look like? Give me, give me some examples of like the types of deals or, you know, types of investments you were making.
Jack Thomas (18:25.25)
Listen, you're gonna laugh at this, Joe. The first investment that I did on the note investment, I messed up, I F'd up big time, right? You know, like I did exactly what the instructor told you not to do, right? You know, like I raised money from family, you know.
And then, and you were supposed to lend money to actual for real estate. And what I did at the time, it was some guys had called on me and I took a liking to them. And I liked, and I bought into what it is that they were attempting to do, the hopism that they had, right? They were gonna buy the studio in Atlanta and it was for a couple of million dollars and they only needed the down payment money, right?
And so you're never supposed to lend on the down payment money because that's the money that's the most at risk. But I felt like if I could get some collateral for that capital, then it would end up being, then we could work it out. And that was just simply because I liked the guys. Blew up in my face. What ended up happening is one of the partners that was the borrower, he, um, he had played a game to where as him and his dad had the same name, different suffixes, right?
Like one was the junior, one was the third, and the third was the one that didn't own the asset, but the way that the paperwork on the property and all of the assets attached to it was really the dad's, but he was posing as if it was his because the name and they dropped the suffix. So, long story long, on that deal,
yeah, didn't have any security on it. Did win a judgment on it.
The judgment was only as good as the paper that it was written on, because you couldn't collect, because these guys, they had all of that stuff tied into one of these ironclad trusts, and the trust, once it's in the trust, you can't get it out of the trust. And so, which led me into finding out how to do that trust. You know, so, so like from the mistakes that I made, I was, you know.
I fall forward as opposed to just taking the beating on it. So I was fortunate enough to learn from going through that whole process to stick to your lending criteria, not deviate from that, making sure that you have good borrowers in place, and help through educating your borrowers about what makes money work, what makes deals work, and what protects them, and how that protects us all. And then we could do repeat business over and over again.
And then, you know, I educate them on some other additional advanced strategies, some secret codes of wealth to help them along the way to secure their money, reduce the tax exposure, and, you know, put more money into play for future generations.
Joe Cornwell (21:26.318)
So on that deal, if you don't mind sharing, so you were raising money from others and kind of pulling it to make this note investment. Is that my understanding you correctly? Okay, do you know how much total was lost? How much did you personally lose?
Jack Thomas (21:33.534)
Yep, that's exactly correct. Yep.
Yeah, so on that deal, it was, I think it was, might be been like a total of $70,000 was the down payment that they needed on it. So it wasn't a big deal, you know, so, but I took family money, right? So I did raise money with family. Yeah, so when it went left, you know, they're looking at me crazy, you know, Thanksgiving's were rough, you know? So, yeah, so, you know, so, right. So I ended up paying it, you know, back out of pocket, you know, over a year or two, you know. So, but at the same time, you know, like hell, let's deal with family members now that are looking like, hey, we still remember that and we're not forgetting.
So, hard, tough, but lesson, right? Regardless of how successful that I am at this point, it's still back like, no, I remember, nephew. So that's a real thing. Real hard lesson to learn. I won't make that error and mistake again.
Joe Cornwell (22:43.566)
Yeah, it's tough. It is tough, you know, a little bit different topic, but it's tough anytime you mix family and business, it gets challenging, you know, because there's like, I'll give a couple examples, you know, so I own a construction business. I'm also an agent here in Cincinnati. People call me all the time, friends and family, right? People I've been friends with for 20 years, family, obviously, and they want to work with me and they want to support my business, which is great, you know, and obviously I love that. I love the support. I love working with them.
But then it's like, you know, are people working with me because they want a deal? Are they working with me because they really want that experience because they, you know, they, they want my, my company and what it has to offer. Um, and it gets difficult, right? And then if things don't go as planned, maybe there are a misalignment of expectations and now, you know, maybe you're upset or the customer's upset. And, and so it bleeds over. And then obviously, you know, of course when you're investing money with family or raising money with family, it creates a lot of challenges.
And so it's tough. It's hard for a lot of people to navigate. And then the flip side though, as investors, our job is to go out there and create a return on capital. So whether it's our capital, whether we're raising money, or a mix. And then it's like, well, do you not allow them the opportunity to raise a return on their capital because you're not allowing them to invest with you.
So that can become a challenge, you know? They see you having success, they see you making money, and they want to be included in that opportunity. So there's a lot to navigate there, and it can get challenging, and it's almost like, you know, you can be damned if you do, damned if you don't, so to speak. But yeah, I mean, I appreciate the candidness, I appreciate you sharing that story, and obviously sometimes it's harder to talk about our losses than our wins, so we definitely appreciate you sharing that. So let's continue on the no thing. How did that expand and kind of, you know, bring us up to today, how did that evolve over time?
Jack Thomas (24:35.39)
So from that experience, what I ended up learning is how to properly secure a deal.
Well, I knew how to execute a deal. Now I knew definitely how to execute on the deal. But along with that, it also made me tighten up the way of which that I raise capital. So now we have to get a more defined structure to your participation agreements, joint venture agreements if you're using joint venture, and then if you migrate into the private equity space, then your private placement memorandum.
So, you know, so I had to get more sophisticated with how I was structuring my deal. So like when you look at anything that you do in real estate, right, it sounds like you've been in it a long time, you know, from owning your own construction company to being a realtor. You know.
When you create companies, entities, whatever, it's all about the structure and the strategic plan that you have for where you're going to take your business, right? So with that structure, you know, whatever entity it is that you create, you wanna make sure that you have the tax strategy for it, right? Good accounting for it.
And so when you place whatever the asset is, it doesn't matter whether it's a paper asset or whether it's the real property, the asset but for me because my asset were paper I had to make sure that the structure was good, right the execution on how I raised money how I deployed money was good and making sure that the that the other elements that we had to make to make sure that if there was a default how we could protect ourselves from the default without damaging the borrower so when they...
So if we chose to work with the borrower in the future, as we rehab the borrower, then we could go ahead and get them back into play after we teach them the right tool sets so that it could be effective and actually, you know, be profitable in this business. So... Did that answer your question? I'm not sure. Yeah, yeah.
Joe Cornwell (26:52.57)
Okay, so, you know, yeah, and I have a follow up question because, you know, I'm trying to visualize like this and I'm sure our audience is as well. So walk me through an example deal where from start to finish, what does it look like? What is the expected returns? How do you make your money? And then how do you exit that? So give me an example.
Jack Thomas (27:14.115)
Sure. Okay, yeah. So say for example, right, let's say that we're originating this loan, right, meaning that we're creating the loan. So I get a call, you know, um, I'll give you a real case scenario.
So it was some college buddies of mine, right, that wanted to go ahead and create their own investment club, that wanted to buy a multi-unit apartment complex in Chicago, right. So what I did for them was, I said, okay, well, you know, well, my company will lend you guys some money, but, you know, we have lending criteria, make sure that you hit the lending criteria, we'll get you 65% of the loan of value, property needs any improvements will give you up to 65% of the after repair value. It needed like some cosmetic stuff they ended up finding a great deal. Their deal even with their debt on it they were going to net like 36% you know on the money so those guys did great you know with how they sourced deals.
So I lent them the funds and it was a low value too. I think this particular, if I remember correctly, and this was over a decade ago, but this property was like, I think the acquisition cost was like $55,000. I think they only needed like 10 or $12,000 for the paint and the cosmetic and changes fixtures and stuff like that.
Um, and then, um...
And then at that point, you know, they were going to go ahead and hold the property for a period of time. So, so for them, I gave them the 65% of whatever the after repair value was. And it was, and so the total loan, a loan, a loan of cost on it was under 55%. So it made it extremely attractive to us. Right. So, um, a few. So, so we could go into this. I got a feeling you're probably going to ask a follow up question on this, I'll let you get to it.
So for us, the lower that the leverage is, lower that the loan cost is, it lowers the risk for the investor, it lowers the risk for us as the lender. So it was attractive, it was great. So we gave them a low rate. I think that rate might've been 10% or something like that.
No, actually, this was this was right after, you know, oh, eight. So they might have paid like 13, 14 percent or something like that. But but for those for those guys like the cat, again, I went 36 percent. So it was, you know, it was cast one of those four units.
And they were able to get out of that deal with and like, like they had, initially they had a 24 month note and they were able to get out of that thing I want to say like within the first 10 months or so you know, um Yeah, so once the rehab was complete once the um Once and they are some of some of the tenants were already in place They um, they updated and replaced some of the tenants that had left and then we refinanced them into a permanent loan situation. And they ended up selling. They ended up selling out of that property, actually, like maybe a few months right after they had refinanced. I think it was some internal situations with the group, but yeah, but they got out of it pretty good. So they exited pretty well, yeah.
Joe Cornwell (30:46.296)
Okay, so 24 month term on the note. Now, is this interest paid monthly? Is it interest only payments? How do you structure that?
Jack Thomas (30:57.062)
Yeah, so that's interest only. Yeah, so I think there were maybe between 10% to 13% interest only for that 24 months.
Joe Cornwell (31:04.355)
Okay, so similar to like hard money terms.
Jack Thomas (31:09.016)
No, I think they had a 12-month term. I don't think they had a 24-month. I think they only had a 12-month term.
Joe Cornwell (31:14.498)
Okay. So similar to like a hard money loan, you know, like a hard money term company. Okay. And, you know, I can think of a couple reasons, but I'll let you answer why are people coming to you for these type of notes versus the bank?
Jack Thomas (31:29.873)
I'm certain you could answer that. Yeah, so it's pretty much, you know, they don't qualify for conventional lending, right? You know, they might not have tax returns, you know, they may not, the credit might be, you know, a little challenge. You know, they may not have the experience that shows to the traditional lender that, hey, that I could go ahead and get out of this, right? So we give an asset-based loan where the amount of loan is based upon what the true value of that property is worth.
So we're able to move quickly, we move as quickly as they can shuffle the paper, right? So if they have the necessary documents that we need, most of it is gonna come down to appraisal and title and insurance. If they have, if they could produce all of those docs at a short period of time, we could close right after title clears it. And title could clear it for three days, so yeah.
Joe Cornwell (32:26.958)
Now, is, okay, now is this in a like a real estate fund where you're raising money from outside investors and then you're finding deals to lend these into? Is this just all personal money? Like how does that side of it work?
Jack Thomas (32:41.346)
Great question. So when I started out, it was really like a combination of all of the above. It was some of my own money. It was some money that I raised from other people. We did joint ventures, we did participation agreements when we got a little more sophisticated. And then...
And then we just lent money. So like, if I found a good deal, then I would send it out to a list of my capital partners. And they had the first right of refusal. We had done business with them before, whether it was whether they participated on some fix and flips from years before, or we used to do a lot of lunch and learns and a lot of different things to educate on different strategies.
So we had a short list of preferred partners. We send that out to that short list of those preferred partners. They like the deal, and the first ones to raise their hand and get their money in, that's who made the interest on that deal.
You know, sometimes it went quicker than others and, you know, and that's how it was. You know, now I've, you know, grown since that space, you know, we're doing private equity where we raise money through a fund and, you know, but it's still a similar process. You know, it's, I think we've got a short list of, you know, of limited partners that want to get that passive return if they'd like the deal once I'd submit it, you know, to the group. You know, the first guy's in, you know, the...
They get the return, if it feels out pretty fast, then, hey, we'll put you in line for the next deal and the next opportunity. But you gotta be ready. You know?
Joe Cornwell (34:50.294)
It sounds like a lot of these deals, you're pairing one passive investor to one borrower. Is there deals that may be larger where you're pairing like, you know, three, four passive investors into one note?
Jack Thomas (35:00.966)
Oh yeah, absolutely. You know, most definitely. Like, so for example, right? So when we, when we participated, now we participated as a limited partner into a hotel package. And so I know it was through what they call a syndication. Are you familiar with how a syndication works? Okay. So, so, so with that syndication, you know, you know, we had to create a fund for it.
And with that fund that we created, we took multiple investors and they, you know, whatever the comfort on the investment level, some came in at the minimum, some came in at greater, you know, but we raised, we had a target amount that we were looking to raise for that hotel investment. And once we hit it, you know, then we ended up investing directly into that hotel package. But on that, on for that hotel package, we did it amongst four investors.
Joe Cornwell (36:04.05)
Okay. Yeah, and that was going to be my next transition. So let's talk a little bit about some of these hotel deals you're in. Are you lending on these in your note placement company or are you personally investing actively in these hotel deals?
Jack Thomas (36:22.282)
Yeah, so the answer is yes and no.
You know, but so like with it, when you raise a, so we're doing it again through syndication and we created a private equity fund for it. So we have a private placement memorandum which gives you, which gives the investors those limited partners, it outlines exactly what the deal is, the summary of the deal, and it outlines all of the risk factors that are in the deal.
So it doesn't just give them the hope-ism, it also lets them know that, hey, by the way, could happen, this could happen, this could happen, this could happen. And if those things happen, you know, we might not necessarily get the return of which that we're anticipating, you know, because we are, we're absolutely projecting, you know, the type of returns that the property is going to generate.
We're only projecting it based upon previous experience and then whatever property improvement programs that we put into the hotel for it to garner a return, well, for it to garner a higher nightly rate, which would increase the NOI, right, the net operating income, and then that's where we could go ahead and pay the dividend returns quarterly. So what I learned, so probably what you're thinking is, like okay, when I initially started off with private lending or raising money, now whereas I didn't have a complete structure, sophisticated structure to set expectations with your capital partners so that, A, you need to understand that we're all in this together, but because we're all in together, yeah, you're gonna get your return before we get our return, but we're also sharing in the risk that goes along with it, and here are the risks so you're not shooting in the dark, so you're not blinded to the fact of something that we might face along the way.
Jack Thomas (38:23.806)
You know, so, like that strategy a whole lot better because everybody comes to the table with knowing what it is, because it's a hefty page doc that we tell them, look, review this with your attorney, review it with your accountant, you know, like make sure that you follow up with it. But I wanna highlight these things for you.
So it's not anything that you do miss so that we're all on the same page because we can't afford any confusion in this process because it's a lot of balls in the air and it's a lot of things that are moving to make any real estate transaction work. But most definitely when you're talking about an asset class such as hospitality whereas you're dealing with the...
You're dealing with people, right? You know, like if people show up for the hotel or not. You know, you're dealing with contracts that there's conventions in towns or there's all of these other factors that are drivers that, you know, that manager of that hotel could capture that business. So, and then that's another thing. We gotta make sure that we got the right operators that are in place, you know, so they could go out and hire and train and make sure that the staff that runs and manages the hotel are there, and they're actually capturing business that's above and beyond what they call the star report and that star report just gives you know it's a it's a it's a report i think it comes out maybe monthly or quarterly well it comes out monthly and it gives you the um the updates as far as what your occupancy rates are what's your what's your um your average daily rates that you'll see within utilize all of your tools to make sure that you get the returns that you're projecting that you're going to get.
Joe Cornwell (40:25.558)
Okay. And, and, you know, kind of my last line of question here is why did you transition? What was, you know, the motivation or the experience that had you transition into investing into hotel development? And then obviously, I know we briefly mentioned the resort development you're working on. So yeah, take me through that, that process.
Jack Thomas (40:43.634)
So, um, you play Monopoly, right?
Joe Cornwell (40:48.034)
Yeah, of course.
Jack Thomas (40:51.099)
So, you know, I'm a strategist, right? I love strategy. I love thinking through process. I love thinking through, you know, like how to reverse engineer from where you are currently to where you get into the winter cycle, right? You know...
You know how it is, Joe, the bigger the asset class, the bigger the return, the bigger the rewards are. You're doing the same level of work that you are doing with a single family. You're just not getting the reward for it.
You know, so coming from that space, it was like, okay, well, I want to create more wealth for people that I care about, right? You know, for the legacy that I leave behind as well. You know, so to do that, you know, I need to step it up, right? I need to scale. You know, that's the whole point of business. You want to scale your business. You want to scale the asset class. You want to scale, you know, like the teams that will help you do that.
And um...
And that's what it was for me. So from having success in those areas, the next thing was, okay, well, yeah, we're successful, but what kind of impact are we really, truly leaving on the world, right? What kind of impact are we leaving in the markets that we're investing in? What kind of impact are we creating for those people that may not necessarily get, like, sometimes when you, over-improvement area, the people that were there before you got to that area, it might create some financial hardship for them, right?
So from being in the space to investing for 20 years and then being in the space for lending for 10 years, it was like, and then having success in it all, regardless of whatever ups and downs that you have, like...
What is it that I'm going to do that's going to create the best impact that could sustain those areas of which that we live, work, and play in, right? So, got my strategic thinking head on, like, okay, well, what makes these areas that are affluent, what makes them sustainable? What makes these areas that are not affluent, what makes them not sustainable?
You know, and so what I ended up forming and formulating is a sustainability model, right? So now when we look at developments, it doesn't matter whether it's residential, commercial, hospitality, special purpose like college dorms or student housing, or whether it's assisted living or, you know, or something for vision and hearing impaired. You know, what we apply is the sustainability model.
And from that sustainability model, it's sustainable luxury property development, sustainable materials, sustainable practices of which that we build in, sustainable utilities. So we do wind, water, and solar. Sustainable sustainable economics, right?
So we have, we created a community development corporation, a community development corporation that's international, and that's a nonprofit that's attached. We partner with that community development corporation so that we could get some additional grants and some additional funding that we could use for small business development, workforce training, access to capital, and then, oh, and sustainable food, one of the most important things, right?
So when you look at certain communities, some of them are in food deserts, right? The more affluent are not. And then when you look at diet and what's available to their creates, if you look at the different studies behind it, you'll see that disease and illness states are heightened in areas that are not sustainable. So the sustainable food is hydroplenic, like in aquaponic farming and urban areas, and we do agricultural neighborhoods and rural areas.
And so that's our four-legged sustainability stool, and we apply it on all aspects of real estate development. So that's us having a bigger vision, a bigger goal, so that we could create more impact, and it just so happens from creating that impact and bringing that value, it increases the value on the developments ratio, you know, so it becomes more profitable for us, more profitable for our investors, more profitable for our partners, and it's more effective for the habitants within those communities or within those countries. So you know, yeah, that's what we do.
Joe Cornwell (45:46.083)
That's great, man. It's a win-win-win and yeah, I like it. I appreciate you sharing that with us. Alright, we're running up on time here. So let's uh, let's switch over to the best ever lightning round. You ready?
Jack Thomas (46:00.342)
Let's do it.
Joe Cornwell (46:02.15)
All right, give me your best ever book recommendation.
Jack Thomas (46:05.846)
You know, I'm an avid reader, right? So like I could do this all night. But one of the best books that I read was a book in college and I was, you know, I'm dating myself. It was in the late 90s. So, so, but the book was strategically thinking. So, and what it taught was to get outside of the box and think of creative ways to create strategies that you create win-win-win solution. So, still applying it to this day.
Joe Cornwell (46:30.894)
Well, yeah, I'll say that seems like to be your mantra. So I'm glad you could share that with us. All right, best ever way you like to give back.
Jack Thomas (46:40.922)
I like to help. You know, like I'm a servant, you know, like God put me here to be a servant, so I just serve. You know, I give him whatever capacity that he commands of me. So if it's resources and information, I give it willingly, I give it freely, you know, don't expect anything in return. It just so happens that, you know, that I end up getting blessed from it. Not the reason why I do it, but it just so happens that that's how it works. It's crazy that way, so.
Joe Cornwell (47:07.147)
Give me a different mistake you made and a lesson you learned from it. I know you told us a good one, but do you have another one?
Jack Thomas (47:16.254)
Um choosing strategic partnerships right choosing your partners you know um sometimes you know like you get involved with people that you like you know you get involved with people that have like mindedness and have have good vision as far as goal or you know you have the same goal, but you know execution you need to make sure that they're good at actually executing so making sure that you know that you fetch your partners and you and you get the good partnerships in place and you get the structure in place to make sure that everybody you know stays within the parameters.
Joe Cornwell (47:57.294)
Yeah, couldn't agree more. And, you know, as I've gotten more experience and did more partnerships, it's like finding someone who's truly complimentary. I think that's one of the hardest parts because it's like, you know, I have a lot of investor friends who I love and I'd love to partner with them. But if we have all the same skillsets and abilities and resources, it doesn't really necessarily make for a good partnership just because you like and trust somebody.
Jack Thomas (48:20.17)
Yeah, yeah, you know, it sounds like a lonely way you've had to, you know, exit some partnerships as well. So yeah, it's unfortunate, but it happens.
Joe Cornwell (48:30.018)
And my last question for you is where can people connect with you and find more about your business and what you guys are doing?
Jack Thomas (48:40.734)
Yeah, you can find me on LinkedIn. That's Jack Thomas, the third on LinkedIn. I think you have my LinkedIn link. You could post it as well. You can find me on jetwayfinancial.com, and that's J-E-T-W-A-Y, financial.com. I'm still trying to get this website off the ground. And that is Code of Wealth, and that's where I'll just dump a bunch of just content that's part of what it is that we're giving back, and it's just resources on top of information, on top of strategy, anybody that's there that could join it and get all of the insight for different strategies that we put together for friends and for clients as they were building their businesses or building their brands or building their developments.
We got some good guys that one of which, based upon the strategy he went on and created a company that's now a billion dollar company. We've got one guy that, you know, went on and you know from some of the things it is we talked about strategy or just setting up strategy he went on and created a development that went from zero dollars to you know to thirty million dollars in eighteen months you know so we'll let them tell us stories and all of that stuff will be available on the coldofwealth.com website but we're still working on it so hopefully, you know, by the time it's here, it'll be up and running.
So yeah, and then of course, if you wanna follow what we're doing in the Caribbean with our resort development, you can see that at azumanuar.com, and that's E-X- and you can follow along and check us out. And if you wanna join us in it, then there's a possibility for you to do that as well.
Joe Cornwell (50:33.346)
Awesome, and we'll be sure to link to your websites there. I really appreciate your time talking to us about your notes and your 20 years of experience. Jack, I appreciate your time and joining us today.
Jack Thomas (50:45.33)
Joe, I really appreciate that you for inviting me along on this podcast. This has been amazing, bro. Like you, you're definitely good at this.
Joe Cornwell (50:55.87)
I appreciate that. Thank you so much. And audience, thank you all for tuning in. Best ever listeners. If you enjoyed this episode, please be sure to share it with someone who may gain value from it. Make sure you follow and subscribe to the podcast, so you don't miss anything. Thank you all and have a best every day.
