How Safe is Real Estate Syndication?

Aviva (00:00)
This week's listener of the week is JNC Rush. JNC Rush, thank you so much for leaving us a five-star review. And for those of you listening, if you leave us a five-star review below, you might be next week's listener of the week, week. This week on Commercial Real Estate Secrets, we have Natasha Falconi. Hi, Natasha, thank you so much for being on the show.

Natasha Falconi (00:22)
Hello, thank you for having me. Looking forward to our conversation.

Aviva (00:26)
Yeah. So I met Natasha last year in Orlando at a, at Beth 8th, not just any conference or summit, Beth Azor's summit for women investing in real estate. What does Beth call it exactly?

Natasha Falconi (00:41)
It's the Women Investing in Real Estate Summit.

Aviva (00:43)
Thank you. I knew it was some iteration of those words. Anyway, so Natasha has a really, really impressive story of syndication and I get a lot of questions about syndication, how to do it. And I know we're gonna bring you a lot of value here in chatting through Natasha's.

Natasha Falconi (00:45)
Yeah. Yes.

Aviva (01:00)
strategies and stories. So thank you for being on the show, Natasha. Will you tell the viewers a bit about yourself, who you are, where you come from, what you do and what you do today?

Natasha Falconi (01:10)
Of course, so I'm Natasha Falconi. What I do today is I am a multifamily real estate investor in the South Florida market and I do syndicate as well. I am focused on having ladies investing in real estate and where I come from is I started my career as a CPA, as an accountant in one of the big firms. Then I went to work for a client

was a commercial developer owner of a few different asset classes. Started as their controller and then I by the time I left I was there 18 years I was the president of their company.

And that's when we realized and in speaking with my husband, we said, well, wait, generational wealth is a thing. Legacy wealth is a thing. And we want to do this for ourselves. So in 2019, I started my own shop, if you will, my own company.

Aviva (02:01)
And by starting your own company, what did that look like and what do you do? What does a day to day look like for that?

Natasha Falconi (02:07)
Yeah, I mean, I say started my own company, but I would I would I guess what I really mean is I started focusing on investing in real estate for ourselves. And so but, you know, opening the company is the first step that says, yeah, I started I'm here now what do I do? Well, started looking for opportunities looking for deals and

When I started, I was all over the place in the sense of that I didn't really know what asset class I wanted to invest in. I understood of the different asset classes, but I didn't know where my I guess passion was or what I was interested in And you're super passionate about your asset class and I'll invest in that passively. I will never do it. So so That's that's I so I had to find something for myself and that was multifamily so

I started doing that.

Aviva (02:50)
So for somebody who doesn't know what syndication is, can you explain it in layman's terms?

Natasha Falconi (02:53)
Mm-hmm.

Yes, so a syndication is basically when someone finds an asset, any type of asset, doesn't matter, finds an asset and then they bring other people along with them to invest. But that one person is making all of the decisions for the asset and that is the general partner or the sponsor, so there's different words used for that, and all of the other individuals are passive investors.

So in a syndication and then there's certain things that you look for in a syndication, but basically in a syndication the person finds the asset and then you go to your friends and family and you ask them to invest alongside you if they like the opportunity.

Aviva (03:34)
So say you want to be the general partner and you wanna buy an asset and raise money from friends and family. How have you found the assets that you have since acquired?

Natasha Falconi (03:44)
Mm-hmm.

So the way I have found the properties that the properties that I've purchased has been few different ways

I have brokers that I have really good relationships with and they've brought me opportunities both that they've listed and that they haven't listed. So sometimes a broker will go to a potential seller and they'll say, well, I'm not going to list it for you with you but or listed at all but bring me a buyer. And I've been really lucky that some of these brokers trust me and they know that they're going to get paid either way. So they bring me to the opportunity and we've closed on opportunities like that.

and then just calling owners as well. So those are kind of the ways that we've I've found those opportunities. I have right now seven buildings in South Florida in Hialeah and Little Havana two markets that I'm very passionate about and doing it.

Aviva (04:31)
How many units is that?

Natasha Falconi (04:33)
108.

Aviva (04:35)
We have, I think we have 108 industrial units. So different world, but that's 108? Wow, that's unbelievable. So are you managing and leasing all of the properties yourselves? Or once you buy the deal, what does it look like?

Natasha Falconi (04:42)
Yeah.

So once we buy the deal, the answer is yes. We do everything ourselves, me and my team. I do cooperate, we cooperate with brokers. So we put it on the MLS and we put it out there on all the typical websites that you know. But if a broker brings us a great resident, we will take that resident. But if we get the calls directly, we do it ourselves as well. And we do all the management because I believe,

that even though we buy C-Class and turn it into B, B-, depending on what the acid is like, the way that you treat a resident matters. And I have found that when we do it ourselves, we just give, we give A-Class service. I believe in that.

Aviva (05:29)
I remember you talking when we were in person at the summit, you have sort of for all intents and purposes found a niche in Hialeah and Little Havana that is somewhat authentic to you in dealing with Cuban families. Am I? Okay.

Natasha Falconi (05:41)
Mm-hmm.

Yes, well, I'm Cuban and I lived in Hialeah. So I lived in similar, I lived in not the same buildings, but similar buildings to the ones that I am buying and improving. And so I understand the demographic. I understand how they live. I understand how we wanted to live. And that's what I'm creating for our residents.

Aviva (06:06)
And I remember you talking about how when dealing with owners of properties, um, like you said, having come from Hylia or having family from Cuba, you have been able to relate more to owners in.

Natasha Falconi (06:11)
Mm-hmm.

Oh

yes on the on the buy side that's on the like when we're once we're in on the buy side I have I mean it's a beautiful thing that many of the owners that I bought from in some cases they've they're they've had great properties they did great for their families and they owned them for 20 plus years and so they did a great service for the people that were there when they were there but it was it's you know time to pass the baton and so then that's when I'm able to not only relate

as far as understanding what they did for their families but there's a connection because I'm trying to I'm replicating what they did as far as the generational wealth aspect of it.

Aviva (06:55)
Wow.

Natasha Falconi (06:56)
And then in addition to that, and in many cases, some of these opportunities have no loans because they've owned them for as long as they have. I'm able to secure seller financing as well, which is, you know, very beneficial for the returns on the opportunities.

Aviva (07:10)
Can you explain seller financing for a new investor?

Natasha Falconi (07:12)
Yes. Yes, it's pretty simple. So instead of going through the process that we normally know of going to the bank, the bank is the seller. And so the seller sells you the building and they take back a note. And so the difference is, is that you're writing your monthly check to an entity or a person, or basically the person that sold you the building, as opposed to sending it to a bank.

Aviva (07:33)
So, you know, you're very sophisticated. And I get a lot of questions. I get a lot of people who ask me, do you have videos about syndication? Where can I listen to a podcast about syndication? How did you learn all this?

Natasha Falconi (07:45)
Oh, I guess time, right? I worked in the real estate tax department when I started my career. I think I learned this and I didn't know I was learning it. That's the actual right answer. Doing all of preparing tax returns, working on planning, estate planning. So I started learning just by doing and by being grateful to be on the teams that I was on when I started my career. And so...

Aviva (07:58)
Wow.

Natasha Falconi (08:09)
That's how I did it.

Aviva (08:10)
Yeah, I think it's so funny. There can be this like analysis paralysis where a lot of people just wanna read a book and learn how to do it. And then, you know, they want the 10 step guide. But the reality is you have to just jump into the trenches and you might not learn A, B and C, but you might learn X, Y and Z. And it's like you said, everything is cumulative to get you to where you are now.

Natasha Falconi (08:15)
Thank you.

There's a lot of great books and I wish I would remember the one that I won in particular that I read. It's about shopping centers, but it applies to everything. But I agree with you in addition to reading. I mean, I also sometimes I tell people like if you want to learn about syndications, well invest passively in one, not find an opportunity that you like invest passively because that shows you, you know, really like you're really looking behind the curtain like how the deals put together.

is like how the sponsor communicates and then you can get ideas on what your what how you would do it or decide you don't want to do it

Aviva (09:07)
So.

So say I'm listening to this podcast and I wanna find a sponsor. How do you find deals as a limited partner to start?

Natasha Falconi (09:18)
Wow, that's a great question because I would never want to say get on the internet and start finding people It's like you have to put it out there You have to put it out there talk to people meet other people that meet other people that maybe have done it Most importantly because you can find many people that are doing what we do

Aviva (09:24)
Hahaha

Natasha Falconi (09:36)
I would say get to know the sponsor. So if you see, let's say you see somebody online and you really think that they match your criteria or they match what you feel you would want in an opportunity, I would say reach out to them, talk to them, maybe see if you're a match on all fronts. People, first you look at the sponsor, then you look at the deal.

Aviva (09:56)
It's so funny. Last year when Beth was raising money on a deal.

after having met her and talked to her, it was a no-brainer. But then when I was explaining to people at home, it was like, this is a woman I met on the internet. It was like, wow, that is like such a crazy thing to explain to my father who's like so traditional. And he's like, you're giving money to a lady you met on the internet? And it was like, no, no. Oh, shh.

Natasha Falconi (10:03)
Right.

Right!

Right.

Like, meet them on the internet. I'm just saying, like, don't blindly send money to somebody, but actually, that's a great example. You met her on the internet, then you spoke to her a few times, and you were at her event. So, like, you develop the relationship. That's actually a textbook perfect situation.

Aviva (10:25)
Yeah.

And that's why to me it made complete sense to do it because Beth comes with receipts and trust and I just could talk all day about how wonderful that woman is. So before we go into Beth's summit, which I know was last week or the week before.

Natasha Falconi (10:40)
Yes.

Yeah.

You're not kidding, you and I both.

Yes, two weeks.

Aviva (10:55)
There has been this joke on the internet about GPs people raising money in 2021 well 2020 2021 and 2022 and Now they might be having issues. Can you explain the problems that we've seen in syndication as of recent

Natasha Falconi (11:01)
Yes.

Yes.

You know, there's so many different things that have happened, but I think what has caused the main problem is the changes in interest rates, because everyone...

You heard all these great stories. IRR, 20 something, our returns are fabulous. And we're in the 20 range and our averages are this. And then when you look a little deeper, they were doing deals from 2020 to 2022. Well, a lot of people were making those kinds of returns during that time where we know where the rates were. And if you got floating rate debt.

Aviva (11:41)
Right.

Natasha Falconi (11:43)
and you thought rates were going to stay that way forever and that's how you underwrote your opportunity then you're in trouble and if you're in trouble then now the opportunity is in trouble and depending on what kind of GP you are and how you communicate and how liquid the opportunity is things are going bad a lot of GPs are making capital calls or tossing keys back to banks it's happening

Aviva (12:06)
Can you explain how to make sure that your partners are, that the risk is mitigated for your partners when you are putting together a syndication?

Natasha Falconi (12:16)
I always like to say the risk is always there because an investment is an investment. So we all know that the business that we're in has risk just like any other business that you're going to get into. But I also believe that if you underwrite things in a certain way that you're able to ride through the bad times because there's always if you look at the cycles and you just study the last 30 years, there's always ups and there's always downs and they just maybe look a little different but they're always there.

So what do I do? One thing I do, I don't do floating rate debt. I pay a little more upfront, but we know what this is going to look like. So that's one thing that I think I would look... So if I was an LP or when I invest passively, these are the things I look at. What does the debt look like? How long is the debt?

Aviva (12:49)
Yeah.

Natasha Falconi (12:59)
How are we going to improve the property and is there really money to improve the property? Are we using cash flow from the deal? Well is the opportunity something that we're saying rents are going to be X but we know that's not what the market's saying. We're guessing.

I saw an opportunity once that they underwrote late fees and for 10 years they raised it for 3% and then they capped it at the end as so half a million dollars of the value was late fees. I'm like so we're gonna buy a property and our tenants are gonna suck for 10 years. Like wow what?

Aviva (13:28)
That's crazy.

Natasha Falconi (13:30)
You know, no, you underwrite, you never underwrite that and you do things assuming that you're gonna do a good job with the people or businesses that you put into your deals.

Aviva (13:41)
heard and you know, I deal more in the industrial space, which is very different than residential. I've heard residential since the pandemic has had higher evictions, all-time evictions, and less rent growth overall. Have you experienced any of that in your market?

Natasha Falconi (13:45)
Mm-hmm.

I think no, I think it depends on the market. I think that that's another thing that I think is very important. There are like we'll see studies, you know, the country is 5% higher or 4% lower, whatever it is that is going on. When you're investing, you need to look market specific. So I have not had any issues with receivables. I'm not telling you that we don't have that from time to time the tenant that, you know, something happens.

and we have an issue but for the most part we have not had that and then as far as rent growth is concerned it has flattened a little bit but it's still doing but it's still doing well it's still doing well now it all depends how did you underwrite it did you underwrite at the top of the market and then created that growth in your underwriting or did you underwrite a little lower than the market so that if it's a little flat you're okay and that's

That's kind of, that's part of like, it kind of weaves itself into the, what you were asking me before, but you see how it's all interrelated.

Aviva (14:53)
Oh, it's a matter of being conservative in your underwriting verse being aggressive. And I see it with.

Natasha Falconi (14:58)
Mm-hmm.

Aviva (15:00)
offer memorandums all the time where brokers get really creative in, for all intensive purposes, you know, underwriting late fees, really creative in lying. Ultimately, it's just lying and trying to fabricate and boost numbers on the deal. And you have to be able to spot that in ideally before you go under contract, but at least in your due diligence.

Natasha Falconi (15:07)
Yeah.

Yes.

Mm-hmm.

Aviva (15:23)
Is there, do you have any indicator, like red flag indicators that make you, that just raise the hair on the back of your neck when you're looking at a deal?

Natasha Falconi (15:31)
You know, as far as the underwriting, no, because I do it myself. I accept what you provide me, but then I do it myself. So I there are, you know. Yeah, there are things, I guess, if, you know, on the repairs and maintenance side, depending on how old the building is, if I know there's certain things that are going to need to happen. A roof is a big one, but there's nothing I would say.

Aviva (15:37)
Yeah.

Natasha Falconi (15:52)
out of the ordinary when you're buying a building that you would say, oh, this, I was tricked here. No, you need to do your due diligence. You need to make sure that if you're buying the building, that you have the right professionals with you during due diligence to check the building and make sure. And I think if you do all of that, again, nothing's guaranteed, but you should be okay.

Aviva (16:11)
hey, I love it, I think it's super valuable. I always learned, you know, my dad is a syndicator, he was a syndicator, he's still with us, but he's over it. But, you know, he always came from the same standpoint, which was.

Always do good by your partners, right? If you never ever want to do a capital call, you never want to underwrite aggressively because if you lose money for your partners, they'll never be your partners again. Whereas if you make your partner's money, you have partners for life. And so I think it's...

Natasha Falconi (16:25)
Mm-hmm.

right.

Yep.

Aviva (16:40)
It's so interesting this phenomenon that we talk about of syndicators jumping into the market in, you know, when interest rates were 2.5% and looking like superheroes. But then when, I'm trying to think of the...

Natasha Falconi (16:50)
Mm-hmm.

Aviva (16:54)
They say like when your pants fall down or when the curtains fall down, you don't have any pants on. When the interest rates flop, these people who were looking like superstars now, like you said, are returning keys to the bank, calling their partners for more money. And that's, yeah.

Natasha Falconi (17:02)
Yes?

Yes.

Still charging fees, still getting paid. And here's another one. Here's another one for the question you asked before. Make sure that the syndicator has money in the deal too. They need to have skin in the game so they're aligned as opposed to many that don't. And so they're making fees and they don't have any skin in the game. So what's the benefit of trying to save the opportunity?

Aviva (17:12)
OI

Right, so if somebody who's listening right now doesn't know anything about syndication, can you explain the fees that you're talking about as a syndicator?

Natasha Falconi (17:39)
Oh, yes. So as a syndicator, there are many fees that are charged because they're a part of doing business. You find a deal, you get an acquisition fee. There's a disposition fee. There's construction management fees. There's property management fees. There's asset management fees. And that's, I think, I listed four or five.

I think the way to approach it is not to say, oh, there's too many fees and the opportunity. I think the way to approach it is to say, what does this, if this syndicator charges these fees and this is what they charge, well, what does the opportunity look like with that and are the returns, returns that I'm willing to accept and that I like, and then it's fine because syndicators should charge fees and they all do it different and they all charge different fees. You just need to know them. The most important thing is for you to know what they are.

Thank you.

Aviva (18:26)
It's so funny because when it comes to syndication fees, it's like the Wild West. I've seen every, there's not a one size fits all. I mean...

Natasha Falconi (18:32)
Mm-hmm.

Yeah, no, there isn't. There isn't. I mentioned five, but if I were to sit down, and I should probably do this. There's like, I'm sure you could find a list of like 100 different types of fees. And it doesn't mean that it's wrong. It just needs to be disclosed. You need to know, because that's really where...

Aviva (18:37)
Hi.

Yeah.

Natasha Falconi (18:51)
I think that the issue is that many times all those fees exist in the opportunity, but they're not disclosed anywhere and you don't even know they're being charged. So that's also a question that you want to make sure if you're going to participate in a syndication, ask what are the fees? And if they don't want to share it and say, because I mean, I list them in my offering memorandums, here are all the fees. And if they don't want to share them, red flag, you need to decide if that's something you want to be a part of.

Aviva (19:15)
Yeah, I think it's something people don't realize is an aspect of syndication, as you're right. It is work to acquire a deal, and the syndicator should be paid. It's just a matter of, like you said, trusting the syndicator, yeah, trusting it, making sure those numbers underwrite appropriately, and making sure they have skin in the game, because if they don't wanna put out their neck for their own investment,

Natasha Falconi (19:18)
Mm-hmm.

Say it!

Aviva (19:38)
Like you said, red flag. So with your syndications, do you have any strategy to sell eventually or are you a buy and hold? What's your?

Natasha Falconi (19:38)
Right? Yeah.

No, I'm a long-term holder of real estate. We're not selling.

Aviva (19:51)
Yeah. Ha ha ha.

Natasha Falconi (19:53)
I think you know a little bit about that.

Aviva (19:55)
I know you get like the defensive that I get when people call me and it's like just save your time.

Natasha Falconi (19:59)
Yeah.

Oh my strategy is I'm not a seller but I'm a buyer so call me with the deals that you're gonna you know other deals.

Aviva (20:05)
Ha ha ha.

This is, I'm gonna go off on a personal question. Do you do depreciation on your properties and for every property every year?

Natasha Falconi (20:16)
Yeah, is that personal? I guess. Yes, I do. I do cost aggregations on our on our properties and do depreciation as the cost aggregation states.

Aviva (20:18)
It's not personal, but it's a little level two.

Okay, for all the listeners listening, we could talk for an hour about cost segregation and I did on a few episodes back. So go listen to that one and we won't bore you, but cost segregation for all intensive purposes are it's tax saving strategies that Natasha could probably speak more eloquently about than I could.

Natasha Falconi (20:33)
Yeah.

It's accelerating depreciation. You're allowed to depreciate your property, different lives depending on different things. We won't get into it, but it's basically, the tax code allows you to accelerate it.

Aviva (20:58)
Thank you for simplifying that because it's obviously a huge necessary evil in investing in real estate. Not evil, but it's just a little complicated. Anyway, so last week or the week before you were at Beth Azor Women Investing in Real Estate Summit and I want to hear all about it. And

Natasha Falconi (21:15)
Oh my gosh, okay.

Aviva (21:16)
Yes. And if there were any deals, did you bring any deals? Did you invest in any deals? How did it go?

Natasha Falconi (21:22)
So the summit was fabulous. They were.

almost 200 ladies there, all ready to invest in real estate. The best part about that conference is the vibe of the ladies all wanting to help each other. You can walk up to anybody in that conference and you are gonna have a relationship like immediately. It's incredible. And of course, it all starts with Beth. She brings the vibe and we all just, you know, go with it. And it

amazing in that way. In reference to I didn't bring a deal, I need a deal, I have no deals.

Aviva (21:53)
Ha ha

Natasha Falconi (21:54)
But there were a lot of conversations about opportunities in general that people are looking at why deals are not being done. So it was all real estate talk and speaking with the ladies that are not investing in real estate and having conversations on what's holding you up and let's get you there. How can we help you get there? And then seasoned ladies that were talking about the opportunities that they already have. I didn't see any.

deals that was the that would have been fabulous but I think that the time and the way the market is right now created that not being able to happen at least for me

Aviva (22:27)
Sure, it's, yeah, no, it's a fascinating market, but I think people are waking up. 2023, people were really sleepy when it came to, in our market, to selling and buying. We're starting to see more people come out of hibernation, so I think there will be more deals to be had. So, so.

Natasha Falconi (22:39)
Mm-hmm.

I hope you're right.

Aviva (22:47)
If you are in Hialeah or Little Havana, is that Miami that's south? Okay.

Natasha Falconi (22:52)
It's Miami. Yeah, it's South Florida. It's not Miami proper, but it's South Florida.

Aviva (22:57)
Okay, and you have an apartment complex, you're looking to sell, call Natasha up. So this is my last question that I ask everybody. What is currently making you happy in real estate?

Natasha Falconi (23:01)
Oh, yes.

Okay.

I am so happy in real estate that it doesn't matter what day of the week it is. I'm happy to work any day. I'm happy to do things every day. But what makes me the most happy besides the assets doing great and good returns, what really makes me the most happy is what we're doing in these properties and how we're improving.

I believe improving people's lives by giving them great places to live. I just actually handed the keys to these four girls that all work in the same place and they couldn't find a place to live and we, I just finished renovating the unit and I handed them the keys this morning.

And when she walked into the unit and she saw it, she's like, I can't believe I get to live here. And I was like, you have made my day. That is exactly what I want. And it's not that it's like over the top. It's just pretty and clean and looks good. And we take care of the property and that matters. That's what makes me happy.

Aviva (23:50)
Ow.

I know everybody says landlords are evil, but there are these enchanting moments like that where you realize that you are helping people and giving them an opportunity and taking a chance on them that you're right, it's like it makes your whole day week year because maybe the person next door wouldn't have given them that chance. And some people really, really appreciate it, so.

Natasha Falconi (24:25)
I think so and I don't think landlords are evil. I think there are evil landlords, but there's a lot of good ones.

Aviva (24:31)
Yeah. Hey, it sounds like that might just be like everything else in life. So, well, Natasha, I really appreciate you being on the show. For everybody listening, where can the, where can they follow you online? I've seen you really step up your internet presence game recently. Where can everybody follow you? Oh, yeah.

Natasha Falconi (24:35)
Right?

I'm trying to keep up with you, Aviva. So you can find me on Twitter or Instagram. My handle is Nat Falconi, N-A-T Falconi. And if you ever have any questions about investing in multifamily or syndications or I can help in any way, DM me. I love to talk about it. I love to help others get into the game too. So I'm here.

Aviva (24:52)
Bye.

Thank you so much and for those of you listening, we'll see you next week.