Hunter Thompson is a return two time guest from episode JF1545, and JF1220. In this episode, you will learn a ton from Hunter on attracting the right investors, how to establish credibility and fund your future deals. This exact same information has helped him raise more than 30Mil in private capital. He has a book called “Raising Capital for Real Estate” so be sure to check his book out to ensure you can get more info on this topic.
Hunter Thompson Real Estate Background:
- Founder of Asym Capital, a private equity firm
- He has raised more than $30 million in private capital
- Listen to his previous episodes:
- Based in LA, CA
JF1545: 7 Due Diligence Items For Passive Investors & Passive Investing Opportunities #SkillSetSunda
- Say hi to him at https://asymcapital.com/
Best Ever Tweet:
“Content creation is one of the most efficient ways to build your brand but also raise capital.” – Hunter Thompson
Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, and today we’ve got a two-time repeat guest, back for a third time, Hunter Thompson. Hunter, how are you doing today?
Hunter Thompson: Hey, Theo. Thanks again for having me on.
Theo Hicks: Absolutely. I’m looking forward to our conversation. Today is Sunday, which means it’s Skillset Sunday, where we go over a specific skill that our guest has. Today we’re gonna be talking about how to attract investors, establish credibility, and fund deals.
A little bit about Hunter before we begin – he’s the founder of Asym Capital, which is a private equity firm. He has raised more than 30 million dollars in private capital. As I mentioned in the intro, he’s been on the show two times before; listen to his episode 1545, “Seven due diligence items for passive investors and passive investing opportunities”, as well as 1220, “He took his money out of the stock market to syndicate self-storage and mobile parks.” Both of those links will be in the show notes as well.
He just had a book come out. We’re recording this in the past, but when this episode airs, the book will be live. That book is “Raising Capital for Real Estate: How to Attract Investors, Establish Credibility and Fund Deals”. You can buy that book by click on the link in the show notes.
He is based out of L.A, and you can say hi to him at asymcapital.com. Hunter, before we get into the main skill of today, do you mind giving us a little bit more about your background and what have you been focused on since the last time we spoke?
Hunter Thompson: Yeah. So it’s interesting, there’s so many ways to make money in real estate. I mentioned earlier about conducting due diligence, which is obviously critical; if your deals don’t perform, no one’s gonna get paid… We talked about mobile home park businesses, self storage business… But in my opinion, this element of real estate is the most important, sought after and lucrative part of the entire business. I was at a conference recently where someone said “Is the money in the deal, or is the money in the money?”, and man – the money is really in the money.
Now, that could be the case that not everyone agrees with that and not everyone wants it to be that way, but it certainly is, at least for right now. In those earlier interviews I had been focusing on very much of the same; we have been focusing on the recession-resistant real estate asset classes, most notably mobile home parks, self-storage, and workforce housing, or C and B class apartments. I’m really comfortable with those, from my perspective. I know that a lot of people are more and more interested now in the “recession-resistant” real estate asset classes.
From my perspective, it’s always a good time to invest in recession-resistant real estate, not just late in the cycle. Because when the economy is booming and the capital markets are loose, you’re going to get the advantages there. But when the economy is correcting or there’s a recession, you still get the advantages of the stable demand for that product. So more of the same – I experienced a lot of success and a lot of growth and a lot of scalability, and that’s what we’re really gonna talk about today.
Theo Hicks: And you wrote a book, which is a great accomplishment. I’ve written three, working on the fourth right now, so I totally understand the work and effort that gets put into that, so… It’s always great to talk to the fellow authors who’ve gone through that experience.
Hunter Thompson: I appreciate that. I’m going through the experience that most people go through when they write a book, which is — you know, I have waited a long time to build up the knowledge to feel comfortable sharing with people, because I want to make sure that I was bringing a lot of value to the table. So I wrote the 60,000 words in about 60 days… And I was like “Wow. When is the next one gonna be?” And then I started the editing process and realized “I’m never gonna write another book in my entire life.” That’s where I’m at right now.
But no, I’m really proud of it, and also I have been really fortunate in the sense that I’ve been able to give back to the community… But I’m really happy and looking forward to the response to this, because there’s so many key takeaways. I’ve spent $100,000 on legal fees in 2018. A lot of what I’ve learned in pursuit of that is in the book, and of course, the strategies and systems that I’ve outlined are what has enabled us to get to where we are today… So I’m really happy to hear both of those responses.
Theo Hicks: So the title of the book is, again, “Raising Capital for Real Estate: How to Attract Investors, Establish Credibility and Fund Deals”. You did kind of drop a bomb that you paid 100k in legal fees and you learned some lessons, so do you wanna walk us through what happened, and the lessons that you learned?
Hunter Thompson: Oh, jeez. If you wanna start with the securities law stuff, that’s gonna probably bore your listeners to death. It’s one of those things where — when you’re dealing in the world of securities, you’re entering a new dynamic, where not only pooling investors together has significant legal implications. You have to stay within the SEC’s guidelines. But as an investor, it’s very favorable, because not only do you get the economies of scale going along with pooling investors together… In the sense of if you lose $25,000 in a syndication, it’s very hard to pursue someone and spend less than $25,000 on legal fees. But if you cumulatively invest in a syndication, there’s much more ability to pursue someone if they act in bad faith… Because cumulatively, each person may invest $25,000 and you may cumulatively be able to come up with a quarter million dollars, which is gonna actually do it.
But from a big-picture perspective, I’ll give away something that took me a lot of money to realize – and maybe not everyone listening to this agrees with this, but I’m a huge proponent of the 506(c) offerings. Those are the offerings which allow you to publicly solicit. It doesn’t necessarily mean that you “don’t wanna know your investors” or that you’re actually interested in publicly soliciting investors… But the solicitation or the 506(c) offering requires that you have a third-party verification of your investor status as an accredited investor. I think that level of scrutiny really adds to the protection of the [unintelligible [00:06:48].05] the person who’s actually creating the deal.
I don’t have to worry about going on a podcast or going on a webinar and conducting an in-person dinner – all of which I talk about in the book – I don’t have to worry about saying the wrong thing at those events, which can cost me later down the road. If you’re using 506(b) – and please don’t take this wrong, this is just my perspective – there’s so much grey area surrounding it that I just don’t feel comfortable with it. Once you do create your 506(c), I think you’ll never create another 506(b). Just my opinion, of course.
Theo Hicks: I actually just did an interview earlier today – I’m not sure if it will air before or after those one – with Ryan Gibson; he does 506(b), and he basically mentioned the exact same thing. He has a really good process for making sure that he is going by the book. So make sure that if you are doing 506(b) you check out that episode and learn his process for making sure that he has that pre-existing relationship with them. Alright, thanks for sharing that.
Let’s go into the book… Attract Investors, Establish Credibility and Fund Deals. In the context of — let’s say I have not done a syndication deal before, but I do have previous real estate experience. So I’m not a complete newbie; maybe I’ve done — let’s just use me as an example – I’ve done 15 units worth of multifamily before, and I want to scale up and raise capital for a 50-unit building, and I want to attract investors. What should I do?
Hunter Thompson: I’ll tell you what I did, and you can use it as a playbook of what not to do, when I started thinking about scalability. Back in 2011 I saw a great opportunity in the mobile home park business. I spent about two years learning every single thing I could as an investor, flying around the country, doing due diligence, taking it very seriously, as a full-time job. By 2013 I figured I had established a track record, I had created some amazing relationships with some high-caliber operating partners, and wanted to create my first fund.
Basically, what I did is I had an investor luncheon where I invited extended friends and family and their plus-ones or plus-two’s (they had to be accredited investors), I went through a 30-minute presentation, and at the end of the presentation I handed out a piece of paper so that people could write how much money they are interested in investing. I agreed with my partner that we’d at least raise half a million dollars; I thought I could raise up to a million dollars. There was 30 million dollars of net worth in this room.
I went through the presentation, I was very comfortable speaking in front of people, I answered some questions, and resulted in me raising a total of zero dollars. This was heartbreaking. And really what the book is about is realizing what I did so wrong, and then creating the infrastructure to do the opposite of that.
What I did wrong was that I envisioned myself going out and finding investors, converting them to investors in real estate – which is basically like a pseudo-religious experience, to say “Okay, I’ve invested my whole life in the stock market…” Now in this 30-minute luncheon this person is gonna start investing in not only just real estate, but the mobile home park business.
So I’m thinking about it in the wrong way. I needed to create an infrastructure that attracted the right people, that were already interested, converted them through education and indoctrination to a certain extent, and then close them through this sales process. So there has never been a more favorable time to create that infrastructure now. So if you haven’t really started doing this content creation — it is so asymmetric; it’s one of the most efficient ways to build your brand, but also raise capital… Because if you go through the process of writing ten articles, which we can talk about in a second how to do that, just writing the articles alone will help you communicate more effectively to future investors, so much so that it’ll pay for your time. That’s if no one even ever reads the article. So the book is really about how to create that infrastructure and then funnel people through the sales closing process.
Theo Hicks: Alright, so let’s talk about the infrastructure for a second. Content creation – basically, what you’re saying is that you want to have some sort of thought leadership platform where you pump out content, and then use that to educate people and attract people who are already interested in investing. Then once you have those people who are already interested, that’s when you close them.
Hunter Thompson: Exactly. And that’s how you create a system that’s actually scalable. Because a lot of these sales strategies may take you from closing 40% of your investors to 60%. That’ll be a remarkable increase. But if you only have ten people in the room, that’s going from four people to six people. I don’t wanna go from four to six. I wanna go from 4 to 4,000, and the only way to do that is to attract the right people.
One of the things I talk about in the book which is a reoccurring theme is time batching. I’m hyper-obsessed with productivity, so I like to do things only in increments of 60 minutes to 180 minutes. And I don’t like to shift gears cognitively when I do these tasks. So what I’ll do is I’ll block out the 60 to 180 minutes, and all I will write is up to 100 topic article titles. These are things like “Five reasons to invest in self-storage; is the mobile home park business actually recession-resistant; what does low interest rates mean for housing?” Those are three, so if you wanna use those three, go ahead; you’re only gonna have to come up with 97 more.
And then I go and sort those articles up, put them in Excel, put them in numeric value in terms of how quality I think they are and how aligned with my business they are, sort in terms of numeric value and then write an article about the first ten. And that is the beginning of your lead nurture process. I’m telling you, just going through that process alone is gonna help you. And then if you still have some below that ten that are still compelling, I would write outgoing emails – these are probably 300 to 500 words – I would write those emails about those remaining topics. And you’ll probably work your way down to where it doesn’t make sense to write about topics about things that are low on the numeric value. Stop that, put those emails in an outbound drip campaign so that your new investors receive one every single week, and that’ll give you time to focus on other areas of your business.
Three months later you come back, you’ve gotten a lot more knowledge, you’ve got a lot more topic ideas… Do the same thing again and constantly push those emails that aren’t as aligned with your business out months and months and months, and eventually you’ll have an entire year of outgoing email campaigns, so that you can spend your year focusing on operating the actual real estate or other things regarding content creation.
Theo Hicks: That’s a fantastic strategy, very specific. I really like that. But that’s kind of step two, but first I need to have my list of these investors. So you said that what you did wrong was you were trying to find people who weren’t interested in real estate and converted them to real estate. Instead, you wanna find people who are already interested in real estate, educate them on the deals that you do… But it seems like that’s what the article part is. But how do I actually find these people and get them on my list in the first place?
Hunter Thompson: Yeah, so the way that I’ve been able to do this is in effort towards those content creation strategies. So we did not do paid marketing. I used to go to 3-5 networking events every single week; that’s fine, but it didn’t really help the scalability. So from my perspective, the pursuit of actually creating that content will attract thousands of people.
Now, of course, the content has to be quality, but write the content with that in mind. The goal should be to write something that your friends and family, and also the people that are interested in investing are interested not only in reading, but sharing with your friends. This is how you get things to become viral.
Now, if you wanna supplement that with paid marketing, that’s totally reasonable. I know a lot of people that have done that and have had success, but that just hasn’t been the route that we’ve used. So from my perspective, really the creation of the content will attract the right people.
Theo Hicks: Perfect. So you create the content, you’ve got the emails going out, you’ve got the blogs going out, people are reading these… How are you converting them into investors?
Hunter Thompson: You kind of work your way up in terms of sophistication. I’m a huge proponent of writing a really quality eBook. This is something that’s probably 10,000 words. If you have a topic that you think is really compelling that’s kind of evergreen — like “Stock market versus real estate” I think is the name of Michael Blank’s book. It’s a great example. That’s always going to be something that he can use.
In an eBook I like to use more things like detail, data, graphs, back up the claims that you’ve made in some of the articles that you’ve mentioned, and be very aware of who your readership is going to consist of. I don’t think it’s wise to hyper-niche yourself into “Single moms with dogs” type of stuff, but you definitely wanna have an idea of who your ideal investor and who your ideal reader is.
Now, if you don’t really like writing, for example, you can outsource this. One of the things that we’ve done – and I know that you guys have done as well – is have a friend interview you on a topic that’s very specific, do a one-hour interview, then convert that interview into a transcripted eBook. Just go to Rev.com, it’s about a dollar per minute of audio. If you wanna email me at email@example.com, I’ll shoot you an email of one of our transcripted podcast interviews we’ve done… It’s the easiest way to do that.
By the time that someone goes through reading an eBook that you’ve written that’s in that 10,000-word range (about 45 minutes to read), they’re going to be very interested in moving forward with you. Then you can move forward with the actual sales process, and looking at the particulars of the deal… But from my perspective, having a combination of articles, maybe some interviews that you’ve done on podcasts and this eBook will get you so far along the lines that by the time you get on a phone call with someone, if that’s required, you’re going to be basically answering questions that they have, as opposed to trying to hard-close them, which is not scalable and not a good idea in the real estate sector.
Theo Hicks: Do you wanna walk us through what a typical conversation would be like for someone’s who’s read your eBook, or read some of your blogs, and then you schedule a call with them and you’re kind of having a conversation with them to get them to invest? How would that conversation go?
Hunter Thompson: Yeah, certainly. I’ll start by saying this – not only is it good for credibility, it’s actually good for you and your time as well to make everything as systematized as possible. So if you’re gonna be doing anything, whether it be having a phone call, writing an eBook, writing some articles, ask yourself “Why am I doing this? How can I make this systematized?” So for calls, I like to say there’s only two reasons to jump on a call with an investor. It’s either to have an introductory call, which is usually 30 minutes, or a due diligence call, which is usually 30-60 minutes, depending on the types of questions that they’re asking.
So when I jump on that first introductory call, my goal is to listen to their story, establish if they’re accredited, I want to learn about their experience investing… And here’s the really important part – I wanna hear their motivations for investing. Now, if you do 100 of these calls, you’re gonna hear the same things over and over again, so don’t block out the actual answers that they say. Listen to the nuances, because the nuances are gonna come up voluntarily.
You may hear things like “I really like the cashflow, because I wanna pay off my expenses in order for me to retire.” Or “I wanna invest in deals that have predictable outcomes, as opposed to the stock market, which I don’t really trust.” Then the conversation will transition over to me, and I’ll talk about two really important things here – my last straw moment, whether it be in the stock market or when I realized that my other career wasn’t going to get me the financial freedom that I was looking for, why did I transition out of a typical lifestyle into the world of real estate.
The reason this is important is that we didn’t learn about alternative investments in high school and college. Everyone that’s having this conversation with you – they have that moment when they realize “This typical way of thinking about money is not going to get me anywhere.” So I transition from the last straw moment to my key motivating factor, and really address what motivates me to help people invest like this.
Then I directly address their reasons to invest, whether it be the cashflow, the lack of predictability of the outcome, or the fact that they think the stock market is too high, and say “That is absolutely correct.” I affirm that those fears are genuine, but there’s another way… And that’s when I outline our general investment thesis, answer any questions that they have, and make sure to stick to the time commitment, which is that 30 minutes.
The introductory call – half of it is about creating that credibility, and the way to create credibility is ensuring that they know that your time is limited, as well as the investment availability. So that’s kind of a brief introduction to introductory calls.
Theo Hicks: Perfect. Is there anything else as it relates to how to attract investors, establish credibility and fund deals that you wanna talk about before we close out the call?
Hunter Thompson: Yes, I’ll say this – your willpower is limited. There’s been many scientific studies about this – people have limited willpower throughout the day, but also over the long-term as well. The reason I say this is that it’s absolutely critical to find a mentor that you can inspire them to share their playbook with you… Because that’s gonna help you get over those humps when you run out of that free will. You’re gonna feel exhausted. But if you have someone that you know has succeeded and they’re depending on you to succeed, it’s absolutely helpful to have them push you along. The number one way to inspire this is just to have a real significant sense of urgency about accomplishing your goals.
Mentors are so drawn to momentum… So if you can show that mentor you attract the right people… And that’s someone that not only has helped me in my career, but I’ve also helped other people, when I’ve seen their momentum and wanna help them along.
Theo Hicks: Well, Hunter, very powerful content. A lot of these things I hadn’t heard of before, I hadn’t thought of in this way, so it’s been a very good interview for me as well. I’m actually looking forward to taking a look at your book as well. Again, that is “Raising capital for real estate: How to attract investors, establish credibility and fund deals.” A link to that will be in the show notes.
Thanks again for coming on. Just to summarize — I can’t summarize everything, but some of the big takeaways that I had… I really liked your time batching concept. How you implement that is you will do things in increments of 60 to 180 minutes. The specific example you gave was you will write down 100 topics for articles in that timeframe, and then you’ll put them in Excel, and then assign them a numeric value based on how powerful you think the article will be. Then you will write an article about the top 10 articles, and then you will write smaller, shorter emails about the remaining topics. You repeat this process every three months, with the goal of having a year’s worth of content, so you can focus on other aspects of your business.
Something else I really liked on the content creation was the eBook idea. If you don’t like to write, a perfect way to overcome that is to have a friend interview you on a topic that you want to write about, that you’re very knowledgeable about, have it transcribed and turn that into an eBook.
Then lastly, we talked about when you’re actually talking to an investor on the phone, and the only two times that you believe you should talk to an investor on the phone is [unintelligible [00:21:43].10] or a due diligence call, and you walked us through exactly what you will do during that due diligence call. Basically, the outcome is to figure out what their motivation for investing is, making sure you’re listening to those nuances, and figure out what they’re (in a sense) fearful of; then affirm that those fears are genuine, that there is another way, and that’s when you present your option to them, and always making sure that you stick to the time commitment.
So again, Hunter, really enjoyable conversation. Looking forward to checking out that book. Best Ever listeners, thank you for tuning in. Have a best ever day, and we will talk to you tomorrow.