It is key for every entrepreneur to have an awareness of where the market and the economy is going, so that switching business strategies can mean taking advantage of what’s happening at the moment. Working with other companies to get the job done is one way of shifting gears quikcly. Tom Braegelmann of GCA Equity Partners believes that if everyone pulls in the same direction, then everyone can get to the next level with ease, a bigger network and new partnerships. Learn why it is critical to listen to business advisers and people who been through the inevitable potholes so that you can do better.
Listen to the podcast here:
Switching Business Strategies And The Abundance Mindset with Tom Braegelmann
I am excited to have an old friend on the show talking about what he has going on and what he’s doing in the note space and how his business has evolved over the last five, six, seven years. I want to give a big shout-out and a big congratulatory welcome to my good buddy, Tom Braegelmann.
How are you doing?
I am doing great. I know it’s a little earlier out there in sunny California than it is here in Austin, but you’ve always been an early riser anyway, knocking stuff out like you do.
It’s another beautiful day in paradise here in California.
You’re up in the San Jose area?
Our office is in Campbell. We also have an office in Puerto Rico and San Juan. I’m in San Jose, Campbell area right now.
Tom, as it comes up, GCA Equity Partner. Do you want to talk a little about what you’re doing?
We’ve been doing short-term lending on new construction, renovation projects, some with performing and non-performing notes. We’ve been doing that now for about eight years. It’s been quite an interesting track. We’ve learned a lot but we’ve had a lot of really good success with some of our projects and just basically doing short-term lending. It’s really a lending model where we lend to developers and contractors or investors who would like to get involved in any one of those areas.
You’re doing primarily California projects. You’re basically coming in and funding the rehab portion for the most part. Is that correct?
I would say we have almost half of our deals are in California, but we’re in about a dozen states right now and Puerto Rico, of course.
What do you love about Puerto Rico?
The people, the weather, very nice. They’ve gone through some really challenging times here. They still are in the midst of that. My son is down there full-time helping out with FEMA for the last month and a half now. He gets to see first-hand everything that’s going on. With adversity, with challenges, there are always opportunities as well. That’s one of the things we’ve found. We’ve been able to get to some of the people that really needed help and helped them out with some short-term bridge efforts and things like that. Definitely the people, the culture, the weather, it’s been great.
I’m a big fan of Puerto Rico too. They’ve also got some really cool tax advantages if you’re running a business down there and do some cool stuff. It’s also a whole lot warmer down that neck of the woods than where we’re both originally from.
You have been in the process of getting something major done. You want to talk a little bit about what you’re excited about right now that you’ve just gotten accepted?
It’s our new regulation named Plus Fund which has been about fourteen months in the works and a lot of time and effort. We just got a notification. We’re going to be starting it up first of January. That’s exciting because what it does is it allows us to bring investors in who normally don’t have access to some of the really nice deals that the big boys or the high network people play in that arena. It offers some opportunities, $5,000 minimum investment. It opens the doors to a lot more people to be able to invest in real estate or in notes in ways that they never were able to before.
This is not your first fund you put together. When we met and we’re working together on some things, you were putting on another fund together a few years back. How is this a little bit different from that?
It’s actually our fourth fund but for practical purposes, it’s our third fund. One of our funds, we already have closed on that. We’ve stopped accepting investors in that one. Our first one was a California offering which meant we could have investors from California only and we could invest in California only. That was a bit restrictive one and we wanted to start expanding. Then we did our 506 Reg D and that one allowed for us to have accredited and non-accredited investors up to 35 non-accredited, no advertising, can’t promote that at all. We also had the 506(b) which I think I have those right, B and C. That one it’s accredited investors only and that one we could do some promotions on. The difference now with this Regulation A Plus is that we can get word out to everyone and share what it is. As you know, I think you’re well on your way with yours, that there’s a whole lot of scrutiny. It’s definitely some very high hurdles to get over to get to that point of being approved by the SEC. They go through everything and anything. You get to prove your track record, prove your history, prove everything that you’ve done, and prove what you’re going to be able to do going forward. It was a lot of work, a lot of effort, but it feels really good to be on the other side now where we’ve been completely approved and ready to go.
It’s been over a year process for you, is that correct?
Yeah, it’s been close to fourteen months.
A nice six-figure expenses on it. I have an experience with that ourselves with our Reg A too so I totally understand that. That’s the beautiful thing because now that it’s approved, you were able to go out and solicit. You’re able to market. What are some of your plans to market for clients there? I know that you were doing regularly. You changed things up quite a bit. Are you doing webinars, talking to your existing client base, do an email blast? What are you doing? A lot of people are scared initially. We have on here our new and they’re like, “Huge Reg A. That’s huge. I can’t do that.” We all started doing individual deals when we got started, right?
Right. I’m actually working on it with my daughter. She does some marketing and we’ve got a couple of people on our team that are really strong in marketing. I’ve already started the podcast of Bank Free Blueprint podcast which we have been going for probably about the same amount of time as you have with yours. We’re working on that. With the approval from the SEC, we also have a lot of broker-dealers now that are interested in following us and offering our product because they know the level of scrutiny that we’ve gotten through and they know what they’re working with. We think based on the signs we see so far, there’s definitely a lot of interest from broker dealers to move our products. It’s going to be a little bit of wait. I wouldn’t say, “Wait and see,” but we’re going to ramp it up fairly slowly with our marketing because we don’t know exactly what we’re going to be bringing in from broker-dealers. We don’t want be to the point where we’re holding everybody off and saying, “No, we don’t have enough deals to get funded.” It’s a matter of ramping both up at the same time. Money deals, money deals.
It’s like this. You now have too much money and not enough deals or you wanted too much deals and not enough money. It’s a good balance for you.
With the fund, what I’ve come to learn is that the only thing worse than not having enough money in the fund is having too much money in the fund. That draws is returned down from everyone if the fund is not placing the capital as fast or if it’s not regulated so that it gets placed in relation to the deals that are coming in.
You’ve been doing projects outside of California. You’re in California but also out of California with the fund. What is your sweet spot that you’re looking for? If you had typical parameters of a deal, what are you looking for?
Our pipeline right now has deals anywhere in the range of $300,000 up to $7 million or $8 million is our top end in our deals. Some of those were funding the entire stack, some of them were doing the gap or the mezzanine or bridge, whatever terms we want to use. We do that where we team up with either senior positions or other lenders or other investors. We do like some of the smaller ones too. We just haven’t been doing quite as many of those in the $75,000 to $150,000, $200,000 range. We do like those that are nice little bread and butter deal.
You have to keep churning through things, keeping the money playing and stuff like that.
One of the things that our model is, it’s a dead equity model where it’s more like a joint venture than a borrower-lender relationship, but it still is a borrower-lender relationship. By that I mean, we team up with developers, borrowers, investors who have the deals and they want to get more projects done so we bring more capital to a deal typically than what some hard money brokers would or certainly more than what banks do. We’re able to offer more flexibility with those active investors who are doing the deal. It’s a great way for the active investors. I always look at active and passive. Active is the one with the deals. Passive is the ones with money. We’re able to really help the active investor expand their portfolio and grow with additional capital.
You’ve been running a Meetup group out there for quite a while. Are you still running it on a regular basis?
Yes. As a matter of fact, we’ve got our second Tuesday of every month at 7 PM in San Jose. That’s exciting.
It’s grown from where you got this small but very rapid growth. How many members do you have right now as part of it?
I started December 2010 and I think we had three or four people there. We’re up to over 3,000. I think we’re right at about 3,100 members now. We have maybe 80, 85, 90 people to our monthly meetings. We send out messages, send out information to the other members.
So going from 3 to 3,000 in seven years. Real success, would you agree to that?
Yeah. It’s month after month but it’s great. I really enjoy it. We get some really good topics, good speakers. I think people really enjoy it because one of the things we push very hard is collaboration, working together, getting that alignment of interest. Everybody is pulling in the same direction, everybody does better. If we can help each other do better, it raises everybody to that next level. It comes from the abundance mindset where there’s plenty for everybody rather than the scarcity and fear and, “Nobody can get my deal” mindset to have. There’s plenty out there for everybody. That’s been one of the key reasons I believe that it’s been successful.
I think it starts at the top. You’ve always had an abundance mindset on things. Knowing you and knowing how hard you work, I remember back a few years ago seeing you how hard to do, I was actually worried about you, “You’ve got to take some time off.” I remember you took that trip to Africa. You were gone for a week or two. When you came back, there was just a different look on your face.
It was a little over a week. As you well know, it takes a lot to get a business going. Once it’s up and running, you can’t pull away too much. In the end, it’s really all worth it because everybody does better, every business is good, and helping other people really feels good.
I want to take you back. I always like to ask people, “Where you’re at today, what was your first real estate deal?” You remember back what your first real estate deal was?
Yeah. I feel like I have two real estate lives. My first life was starting out at the age of nineteen or twenty when I bought my first mobile home. It was a small home in Minnesota. I grew my portfolio, did really well up until 2008 when I got clipped a bit. The only reason I got clipped was I lost focus. I got involved in other business ventures and oversees different types of things. My first time around it was a mobile home then I got a duplex. I lived in one of the units of the duplex, fixed it up, fixed up the other one, and then switched. Then the duplex next-door became available and I started doing that. I did it by way of owner financing, which is very similar to some of the things you can do with the notes that you work with. Then again, after I basically lost everything in 2008, 2009, I started over and in that process, I went through and did more of the joint venture structure where I brought other investors along. Both of them were without banks, both of them were with collaboration with other people that were willing to work together. That was a lesson that I learned that we can’t do it alone. Let’s work with somebody rather than feeling like it’s not possible to get it done.
A lot of people have had that built up, and then 2008 kicked a lot of people in the shins or other places, where you can get people to refocus and I will do the same thing too and then refocusing and now you rebuild your stuff up. It’s going with the market and changing your strategy and your focus. You’ve got to be solely focused because if you lose sight of what you’re focused on, you can lose everything you worked hard to get. Let’s talk about what you’ve got your Reg A. Where do you see the market being in this next year? A whole lot of people have been asking me that.
In California, to me it feels like it’s definitely towards the top end where I think there will be some correction I’m guessing within the next twelve to eighteen months. Who knows but that’s what I’m thinking. I don’t think it will be anything like it was eight, nine, ten years ago. In other parts of the country, I don’t think there’ll be quite as much of an effect. I think a lot in areas in the Rust Belt states have a lot more stability. It doesn’t have all the swings. It doesn’t go up really as high but it also tends to not go down as extreme as fast. I still feel really confident in the market and this goes back with something you just said, with every market, wherever the economy is, wherever anything is going, if we can be very aware of what’s happening, we can change our strategies, we can change our techniques, and there’s money to be made in every single market. If the market’s going up, if the market’s going down, if it’s slow, if it’s fast, whatever it is, it’s a matter of being able to switch strategies or adjust strategies enough to be able to go with it and to be able to take advantage of what is happening at that point.
I think it’s really critical to keep an eye on what’s happening and then listen to advisers, listen to people who know, who’ve been through it or maybe who have a few scars that can tell you what it was like and be willing to adjust your strategy. Even though something was working really well right now, it may not always be that way, so being able to shift. I know that with what you do, one of the things that I’ve always realized and appreciated with you is that you have that creativity, that flexibility, that knowing how to adjust things so that if a market does switch, you’ve got so many different strategies in your tool chest of how to deal with notes whether they’re performing or non-performing. Those can be really powerful in any economy, but certainly in the turning economy.
I appreciate you said that because every market’s a little bit different. Like you said, what’s going on in California isn’t necessarily going on in the Rust Belt states, where I used to buy assets and non-performing notes in California, I had to change my strategy. We’ve bought a lot more this year in Ohio and in Indiana and Michigan and stuff like that. Previous years, we’ve bought a lot in Florida, a lot in South Carolina. It just varies on what the economy put on your way and having your ear to the grass and to figure out what’s going on and listening to what the asset managers and things they are saying out there. It’s important to keep up with. I still see this to this day, a lot of people are still trying to do business like it was 24 months ago. They’re still doing a lot of the same things they were doing trying to find or squeeze blood out of the rock if they can. We’ve seen that here in Austin. Austin is such a hot market and inventory is so low and people are just dying to try to do anything and then they’re overpaying a lot of the times.
Very similar to what’s happening here.
The same thing, all up and down, California. It makes for an interesting time just to pull back from investing here and wait around until that correction takes place and then investing.
It’s so easy to get caught up especially for people who are new in the business to get caught up in the excitement of a deal and to see things only from the potential, the upside. A mentor had told me quite a few years ago, “Take care of the downside and the upside will take care of itself.” Always watching for those risks, always identifying anything that could potentially go wrong and figuring out a way to mitigate those risks. The upside will always be there if you can control the risks and control the project to make sure it goes as planned.
Who are some of your mentors, Tom?
George Antone was the one that was really key in my switching over to the lending side of the equation, going from a full-time investor to actually a lending model. Gary Boomershine was his partner early on. I had Gary on one of my podcasts and he had some really interesting things with wholesaling and was able to do really well in that. Willie Hooks. Then there’s always the Kiyosaki Rich Dad Poor Dad that I never went through their courses but I read the books. Alex Arriaga is a business partner of mine and a very good friend. He had been working with that organization for a lot of years and had access to a lot of that information. Those are some of the ones that come to mind.
George Antone had been on the podcast. I saw him out in Cincinnati Ohio REIA Expo. He was teaching there. We were visiting and talking about some of his transitioning and things like that too. We ran into John Hurley. John is the buyer behind all the Kiyosaki stories. John’s been a friend and I’ve known him for a few years. We’ll then share like there’s a co-author of the book as well. We have a lot of similar mentors out there and similar mindsets that keep up with our wacky brains. You’ve come a long way in the last nine years since you took the shorts like you talked about and had lost some things there for you. Where do you see yourself in the next five years?
I think we’re at a turning point right now where I think we are moving up to a little bit bigger-sized projects. We see ourselves growing from that perspective. I think we put together probably about $210 million worth of deals over the last years. I think that we’re going to be able to do that pretty quickly here in the next year or two. We won’t be able to double that, I’m sure. So that’s the business side of it. The other thing I had personally want to do is be able to get out there. I love mentoring. I love being able to help other people get to not have to make mistakes, not have to make mistakes that I made or really help them grow and expand. I see myself doing more of that and probably getting to the point where I can start taking a bit more time off as well. I think that’s right around the corner. My son is in Puerto Rico full-time, my daughter’s in Colorado. I’d love to be able to spend more time with both of them, although we do a lot of things already, but I still would like to be able to do even more so.
That’s a good thing because I think there aren’t enough people that are actually doing the business that are actually teaching and they’re trying to help people, mentor people. You’ve always got the big heart. You don’t have to be writing 1015 just to realize that, especially with how passionate you are with your networking group or the Meetup group there that takes place there in the San Jose area and stuff like that. You’re growing that and just seeing how people just come together. You’re just a great giving guy. You do a lot. There’s been times where you’ve had investors invest in something that you weren’t in control of but you also took some of your own funds and make sure that everybody made a whole because you felt accountable for that. Really taking care of your investors. You wouldn’t talk about that. I remember I’ve always admired you for that because you’re like, “We’re going to take care of these people and help people avoid mistakes.” Everything worked out fine in the long run. You have a big heart that is important to everybody.
Thank you. It’s one of the things where short-term it would have been so much easier to just say, “That’s just the way things go.” In the long run, to run a business, that’s really going to help everybody and really grow and expand the way it can. I think it’s about the collaboration and working together to be able to stand behind things even though it was things out of our control, whatever it might be. I think we still have the ability to stretch and really make sure that everybody comes out in the end in a way that’s positive for everyone. Thank you for recognizing that. Sometimes that can be a challenge but it’s part of good business. I know that’s how you operate as well.
You always take care of the people. You always take care of them. Sometimes it means you’re not doing things that you want to do, but you always make sure so you can do bigger things in the long run, so you can open up a Reg A fund in good nature and doing some great things and closing on projects and stuff like that. You talked about bigger projects. Are you going out and buying larger assets or are you buying portfolios or working with banks on portfolios? Are you doing more the aspect of just funding portfolios and investors?
It is still where we are funding the developer contractors with bigger projects. We’ve got one in Myrtle Beach right now. That one will probably be in the $80 million to $90 million range once it’s all completed. Depending on how we do it, it’s three or four phases. We’ve got a handful of them in the hopper right now where we’re ready to roll as soon as the capital starts coming in even faster than before. Rather than getting hundreds and hundreds of small deals, we’d rather have maybe less in quantity but higher value. I do still think though that we’re always going to have a portfolio of smaller projects that are just everyday base hits. Not everything has to be a homerun.
You’ve got your bigger projects lined up. You’re still doing things on the side there with some of the smaller projects and other things like that. I think a lot of investors, when they get the commercial bug or the bigger project bug, they get so tied into one deal then focus everything on it. They fail to keep bringing home the bacon with their regular residential or their note deals or whatever that might be. They got one, they forget about the others. A lot of times, you and I both know these, commercial projects can take months for due diligence and other things coordinating to get them approved, right?
Exactly. Along with that, there is diversification going in different parts of the country, going with different-sized projects, going with different types of projects. That’s all diversification within a fund. That’s what one really wants because if one of the sectors starts not doing as well, the others are there to keep it. Diversification and spreading risk is really what a fund is about, that part of the management of that.
In the time that you’ve had your podcast specifically, were you starting to see results from the marketing from that or people getting word of what you’re up to?
Yeah, there is some. I haven’t been doing a lot of pushing or promoting of the podcast. I still get to learn how to do some of those marketing things or have more people on my team to be able to do that type of thing. One thing that, if nothing else, I have certainly gotten to the point where I feel more comfortable getting in front of a video or getting in front of a microphone. I can’t tell you how seven or eight years ago, if I had to get up and speak in front of anybody or do something like this podcast, it’s like I couldn’t even say my name. It makes absolutely no sense. Logically it’s like, “Why in the world is it that way?” It’s a lock up. It’s something that happened to me. It was my way of forcing myself to get out there and really practice I guess and realize that I’m not going to die if I’m in front of the camera or speaking in front of a group. That has been probably one of the bigger benefits. We do get a lot of good comments about the podcast because like our Meetup group or our real estate investing group, the purpose of the podcast is really just to bring a lot of good content, a lot of good information to people so that they can increase their business or improve their business or grow whatever it is that they’re aiming to do. It’s been a good experience and I definitely plan to continue it. I’m excited for the next podcast interview I get to do.
Give out the name of your podcast so they’d go out to iTunes and Stitcher and all that good stuff to subscribe to it because you’ve got some great things and I love what you’re doing with it. You’re doing the recording. It’s live as you’re recording it, and then uploading it to Facebook and sharing that. You had some really great speakers and guests on there. I’ve come back and watched quite a few of your episodes that I would say popped up. I definitely jumped on and listened to them.
It’s called the Bank Free Blueprint podcast. We can do a lot of things with active investors and passive investors working together. It can be done without a lot of the hassles of banks. That’s a very collaborative platform where we try to bring in resources from speakers. Just going to Stitcher, SoundCloud, iTunes, any one of those you can go on or go to TomBraegelmann.com, there would be episodes on that. Definitely feel free to jump on.
The things that we know about everybody from spending time and traveling and hanging out. I’ve enjoyed coming out and spend time there in your offices there. I’m very proud of all the things that you’ve accomplished. Glad to see you doing so well and helping so many people out there, not just through the networking but you’ve got a big giving heart. You’re helping a lot of investors get things done. You’re helping a lot of investors make some great returns to their money, put their lazy asses to work in all the projects, and facilitator of success.
Thank you very much. Likewise, it’s been a real pleasure working with you and some of the different projects we’ve worked on and had some very interesting things.
We have a question, “Do you have a product that works for non-performing note investors in the first lien space?”
We can be flexible enough to do something like that. That’s one of the things in Puerto Rico. There are some non-performing notes that we have a really good relationship with a couple of attorneys down there that are helping some of the investors that got clipped where the banks would pull their financing. The businesses were doing really well, the real estate was doing really well, but the bank pulled out and so the financing was gone. Now, we’re helping them get some of their properties back by way of buying the notes, so they’re really considered performing notes. They only turned non-performing because there was no place for the borrower to send the money to anymore once the bank stopped accepting payments. There definitely are some ways to structure so that the non-performing first position could be worked out.
There’s a lot of non-performing down there with Doral Bank, and Banco Popular has a large lending platform down there. We’ve seen portfolios out there where there were banks who are wanting to move stuff six months ago. I said, “I don’t think we’ve come down far enough.” We’ve seen the values drop a little bit on some of the stuff. Residential and commercial projects there as well. You’d see that if you’re asking for it there. I think you’ve got the right idea having somebody there on site to take a look at everything and really facilitate that.
It’s always nice to see that, especially when you can prove that the business and the people were doing really well up until the bank pulled out. That’s where we feel really comfortable continuing to work. What happened is they’re able to get their notes back at such huge discounts. They can get them back at $0.30 on the dollar, $0.40 on the dollar of what they originally owed. Now, their businesses can do that much better because they have a lot more cashflow to work with because of a lot lower payment.
A lot of flexibility there when you’ve get your head around the debt back at $0.30 on the dollar. Tom, I want to thank you for being a part of The Note Closers Show podcast. Once again, go out there and check out the Bank Free Blueprint podcast with him. You can check him out on TomBraegelmann.com. Tom, what’s your website for GCA there?
Thanks for joining us on here. You have a great day. We’ll see you at the top.
Thank you, Scott.
- Tom Braegelmann
- GCA Equity Partner
- Bank Free Blueprint podcast
- Tom’s Meetup group
- George Antone
- Gary Boomershine
- Tom’s podcast with Gary
- Willie Hooks
- Rich Dad Poor Dad
- Rich Dad Poor Dad book
- Alex Arriaga
- Ohio REIA Expo
- John Hurley
- Tom’s podcast in Stitcher
- Tom’s podcast in SoundCloud
- Tom’s podcast in iTunes
About Tom Braegelmann
Passive Investment Expert – Showing busy professionals how to get double-digit returns through real estate investing.
Real Estate Finance Expert – Showing real estate investors and real estate developers how to get their projects funded and grow their business.
Author of “Bank Free Blueprint” a step by step guide to solve the Real Estate Investment puzzle using collaboration to close and profit from every project every time.
Real Estate Finance Mentor – as industry thought leader with 30+ year real estate investing career, facilitating and teaching collaborative real estate investing to a group of more than 480 passive real estate lenders and investors around the country, and Founder and Leader of The Bay Area Private Money For Real Estate Meetup group with over 2,375 members.
Certified Fund Manager – GCA C.A.R.E. Fund, Secured Real Estate Income Fund, and Kensington Fund, funding residential and commercial real estate renovation and new construction throughout the US and Puerto Rico.
Developer of the “National Construction Lending AllianceTM“ program, responsible for funding of more than $120 million in real estate transactions nationwide.