From Student To Syndicator (audio transcript)

Posted: 12/02/2020

Robert Helms 9:39
Welcome back to The Real Estate guys radio program heard every weekend on this great radio station all the time, real estate guys radio.com, and of course your favorite podcast outlets. Oh my gosh, the downloads keep coming. We appreciate that. Our guest today is a successful real estate investor and syndicator. But when we met him, he was basically neither. Let’s say hello to Mr. David Zook.

Dave Zook 10:00
Hi, Robert, thanks for having me on.

Robert Helms 10:02
Absolutely. Well, we go back now quite a few years, and it’s been great to watch your evolution. We thought you’d be the perfect guy to kind of kick off this series of lessons learned really, in real life. When we met, you were interested in real estate for a very particular reason. I remember you said, well, here’s why I’m interested in real estate. And it’s not the same reason that everybody has. Why are you attracted to real estate investing.

Dave Zook 10:22
So I had a real tax problem. I was…I came out of sort of a time in my life where I had built a couple businesses and some of them were really successful. One in particular was just a cash flow machine that didn’t have a lot of depreciation benefit to it. And so through educating myself getting around the right people reading Rich Dad, Poor Dad, listen to you guys, I realized that although all my life, I’ve been taught that if you make a lot of money, you got to pay a lot of tax, I got to the point where I realized that wasn’t necessarily true. So it was through that experience that I realized that real estate had a real tax shelter benefit to it — something I didn’t realize before. And so that was a real draw for me, I really got chased into the business because of a tax problem I had.

Robert Helms 11:17
So you know, Dave, we often say we don’t let the tax tail wag the dog, but here was a tax issue you had and through study, and you figured out, well, this is a thing I need to do. And now I better go get educated about real estate. And I remember you came on our Memphis field trip. We do these field trips to markets to learn about them. And you had your eye on Memphis up until then?

Dave Zook 11:34
Not at all! I was listening to you guys, there was some kind of connection, I remember, I downloaded the first show. It was this kind of immediate connection that I had with with you guys. And so I heard you talking about the different markets that we were doing field trips to, and it just happened to be that the next one, you know, when I was ready, the next one coming up was Memphis. So I was very pleased with my experience at summit at sea and the connections that I made there. And I thought, Well, you know what, I’m just going to continue that education and join you guys in the Memphis field trip. That’s where it all started.

Robert Helms 12:10
Before we get to what you’ve done in Memphis, you know, we talk a lot about the field trips when there’s one on the calendar, and there’s always seems to be one on the calendar. You’ve been to several of them now, from your perspective, what is the advantage to going in and kicking the dirt — learning about a market before you’re committed to a property?

Dave Zook 12:25
Well, the number one thing for me was not only the education on the market, but really getting introduced to the right teams. So after being around you guys, and being introduced to some some folks in your networks, I got this sort of feeling that the guys that I was being introduced to were just really good guys. So I figured what better way to not only go learn about the market, but also get hooked up with with the right teams in that market. So that was a big one for me.

Robert Helms 12:52
You know, in every market we go into, we search for what we call providers, those are folks that can help people about education for effective action. They might be real estate brokers or developers or turnkey operators, in this case, a commercial real estate broker we’d really enjoyed for a long time. But let’s take folks through because you started investing in your own account. But before long, you figured out that there was an opportunity to bring other people along and jumped into syndication, but not everyone listening is interested in syndicating. But everyone listening is probably wanting to figure out how do you get into investment? So you came with a tax issue. You found a market that seemed good, what happened next?

Dave Zook 13:32
Yeah, so it’s interesting. You know how when something kind of burns in your mind? so I was at the New Orleans investment conference. I remember I was on the phone and you walk by and it was kind of that moment, like, wow, this is a guy that hooked me up with the team that I’m now doing my very first deal with in Memphis, I was on the phone with Steve. So we were doing our very first deal, which was a 92 unit building. So yeah, so we went down that path, did a 92 unit deal with a client of Steve’s so we partnered on a deal, Steve made the connection there. And that’s the thing. That’s the lesson is when you get around really good folks, they also have really good folks in their network. So we ended up doing a deal. My partner at work really liked the deal. We were making double digit cash flow on this investment. So we did another one! We bought a 252 unit deal together and after buying a couple hundred units together, I got my family involved. Then it got to the point where eventually we had to slow down because of obvious reasons. Cash was getting low. And it was then that you guys were talking about syndication. I got invited to sit on the board of a local bank startup. And I heard the conversations about people who were invested in CDs. And at the time, they were making like point 02 percent or something like that. Being around you guys, hearing about the syndication thing, and then getting around that kind of talk, I was like, man. Surely there’s some way we can connect the dots here between what we’re doing and making double digits in the multifamily space and what they were doing and CDs. And so there was there was kind of defining moments in my life where I was able to connect the dots. It was about getting around the right people and then seeing the opportunity in the marketplace.

Robert Helms 15:25
What’s interesting when you think about, Hey, I’m gonna bring my brother, my dad, I’m gonna bring my family along, you weren’t thinking real estate syndication. You’re thinking: this is working for me and I’m gonna bring some people in along. Then you do that, and that works. And then you have friends and through conversation, it’s like, hey, what are you doing here? I’d be interested. Before long, it’s like, wow, there is capital out there that needs to be put to work. Today you are a professional fund manager. I mean, you raise money for a lot of different types of projects. Let’s focus still on Memphis, just to give some perspective. When did you close on your first building in Memphis?

Dave Zook 15:57
I think it was 2013.

Robert Helms 15:59
And today, how many units do you guys you and your partners have in Memphis?

Dave Zook 16:04
Around 2400 units.

Robert Helms 16:05
Okay, so that’s pretty good success in watching it happen, right? Some in your own account. And obviously, you had some wherewithal to be able to buy a few hundred units. It’s not maybe as much wherewithal as folks would think because Memphis is a low priced market. It certainly was in 2013. But it took some gumption and you put your own money where your mouth was, so to speak, and then you become comfortable telling the story. So how was that first part of going out and soliciting funds from investors, people you knew, talking the story, being able to show them that it was okay if they did, okay if they didn’t, etc. Talk about that first part of getting people involved.

Dave Zook 16:39
It was incredibly scary to me. I had never asked anybody for money before. And the other thing was, I wasn’t known in the community as the real estate guy. So that was sort of a psychological barrier that I put there myself. But it was also you know, I was known as a local business guy, and not the local real estate guy. So it was something that I had to get through what really helped me, though, was that I had some success in that space. So I was able to kind of point to a couple projects. That was that really gave me the leverage that I needed to go out and talk to folks. You know, the first deal that I did was, we needed $850,000 in cash, and I had 45 days to fund it and never raised a dime before in my life. It was incredibly scary. But what really helped me was I made a decision early on before I even started syndicating that if I was going to do this, I want to do it right. I wanted to get around folks that were deeply ingrained in that space. And that’s when I became a syndication and mentoring club member with you guys. And that’s what really gave me the momentum gets started well.

Robert Helms 17:43
we don’t talk much about our syndication Marian program on the radio, if you come out to our secrets of successful syndication event, then you would learn about it. Basically we put together a small group of folks who are seriously committed to doing the right thing and raising money and understand the rules involved. From a legal point of view, from a deal vetting point of view, from a communication invested all those kinds of things. And so what I want the audience to hear is, it doesn’t matter what type of real estate you want to be involved in this case, syndication, whether it’s multifamily, whether it’s single family, commercial, agricultural. Finding someone who knows that and having a peer group — real estate can be a lonely business of lone Eagle Mavericks who go out there and find deals, and team building is critical. We’ve watched you build a great team, you already given us a couple examples of ways you form joint ventures and strategic alliances. But you also take that approach with investors. It’s more like a partnership — not from the legal point of view, but making sure that they’re in line that it makes sense for them. And for you to talk about how you vet an investor in your project..

Dave Zook 18:43
It’s a little bit different now than it was at first where I was just going out to my local community, people that knew me, I get emails from different folks, maybe friends of friends, or somebody who’s heard me on a podcast or seen me speak somewhere. The number one thing for me is I don’t want to just unload a deal on someone that is open and available at the time. I want to learn what the investors goals and objectives are. I want to get to know that investor and make sure that our goals are aligned, so they don’t put them in a deal that doesn’t make sense for them.

Robert Helms 19:17
Yeah, that’s so, so critical. So important, we always teach, it’s never about you — It’s always about them. You came into the business for a need, it worked for you. You took the time and the diligence to figure it out and now you have some experience. And you made a great point about the way people know you and we talked about this. In fact, you know, a few weeks ago, we had our syndication seminar and you were gracious enough to come up and and be one of our evidence of success stories, right? We kind of had a short version of this conversation then. But you get to the point where you want to be able to bring people along, but it has to be right for them. You’ve got your need. You’ve got your deal that has to be funded in 45 days, but if it’s not right for the person, if it’s not a match in terms of timeline or expected return, or how long they’re going to be in the deal, then it’s very tempting to take the money. I’ve watched you learn front and center that you can say no to money. That’s hard at first, but it’s necessary as your business grows, for sure. So now you’ve been syndicating, you’ve been raising money. And the first several deals you did were in Memphis, and then you decided it made sense to have another market besides Memphis. Talk about that part of it, because you were doing really well in that marketplace. And you’re still very active in Memphis. But today, you’re not a one trick pony, if you will.

Dave Zook 20:29
Yeah. So I mean, the number one thing for me is I look for teams to do business with. And I’ve done that in several areas. But I mean, I remember clearly when you guys invited me down to Belize. And my number one thought was that, well, Belize, I knew nothing about it. And it wasn’t on my radar at all. But I knew that it if you guys were involved in the market that I want to go see it

Robert Helms 20:54
Belize is completely different from Memphis, in terms of you know, everything about it. Yet still being open enough, you decided there was opportunity there. And now all of a sudden, this is the lesson, I think, when you only have one thing to sell, hey, we’re multifamily in Memphis, then it’s either a yes or no with investors. And that’s fine. But as soon as you have even two things to sell, now it’s an either or. Once you have three things, now, let’s pick from the list. That doesn’t mean that you’ve got something right for everybody. But you have two different markets. They’re in different countries. They’re different types and profiles of properties. They’re different exit strategies and hold strategy. So now all of a sudden, you’re not just the Memphis apartment guy. You’re the syndicator into real estate opportunity guy.

Dave Zook 21:36
Yeah. And I was smart enough to figure out that I did not have a lot of the answers. I mean, like I said, earlier, I wasn’t the real estate guy. I was the business guy. So I knew that to accelerate my success, I had to get around the right people that were ingrained in that space, and that really knew what they were doing in that space. So being able to align myself with the right people has been a big part of my success.

Robert Helms 22:03
Now, it’s easy to gather from what we’ve heard so far, that hey, everything’s roses. But of course, folks may remember that you’ve had two Halloween horror stories with us, which means you’ve learned things haven’t always been rosy. This is a path that takes a lot of fortitude and a lot of work. I can remember a time not that long ago where you were throwing up your hands going, man, I I can’t seem to raise money. I hit a wall. Talk us through that part of it when you get stuck.

Dave Zook 22:28
Yeah, well, I think and I clearly remember the time as well. I remember laying in bed one night. And I’m thinking to myself, why am I doing this? I’ve got a successful business. I don’t need to do this from a financial perspective. But I knew in the back of my mind, I knew that it was something that I wanted to do. It was something that I would love doing. It was something that — I mean, I love people, I love doing deals. And so I knew it was a natural fit for me. So I got on our monthly call with a mentoring club and I threw it out to the guys and I said, “Look, I’m hitting this brick wall. I’ve kind of exhausted my network.” And I was trying to reach outside of my initial network to get my momentum back. Also, I didn’t realize at the time that it was slow season — it was around the holidays. And so I didn’t realize that this was kind of a cyclical time of year. I was tempted to throw in the towel. But again, it was about being around the right folks. I was in the mentoring club, got some advice that I was able to really put to work. And it wasn’t long after that that I was able to break through that barrier and get my momentum back.

Robert Helms 23:36
Yeah, you sure did, and we’ll talk about all that when we come back. One of the key parts that you just said is you did the work. It’s one thing to get over it emotionally but then you have to stick to the plan and it does take work. But as you’ll see shortly, it’s worth it on the other side. We’ll continue our conversation with Dave, we’ll come back we’ll also play real estate trivia. Next, your turn to the real estate guys radio program. I’m your host, Robert Helms.

We’re talking about David Zook. He is an investor and syndicator. And Dave, now it’s been since 2013. You’ve been investing in Memphis. And then shortly after that in Belize, today, you continue to look for new opportunities and projects and meet investors. How much capital have you raised as a syndicator?

Dave Zook 29:03
It’s around $26 million so far.

Robert Helms 29:05
Wow. Well, congratulations. That’s a bunch. And what that means isn’t just, “Wow, that’s great for David’s investors.” It means that there’s $26 million worth of investment capital that has been wrestled out of the places that sometimes it goes that may or may not be as trustworthy. We have a lot of folks today that aren’t sure that bankers, Wall Street, hedge funds and those folks are exactly the right choice for them. And so really what syndication does is it gives folks a chance to invest in main street. Talk about the first time you were able to send a check back to your investors and what that was like.

Dave Zook 29:41
Oh, it was so much fun. And it still is, you know. The most gratifying experience in this whole deal is that, once a quarter, I get to send checks out to my investors. When you can over deliver what you projected, it’s even more fun. I’ve got relationships with people in my county. I’ve got relationships with people all over the United States that I wouldn’t have had had it not been for getting into this business.

Robert Helms 30:11
Yeah, it is a great way to expand your network — a way to do more deals to get exposed to folks. Also, you know, as you have attracted more and more investors, I’ve just noticed that you started to work with kind of a higher caliber of investor and you know, no disrespect to anybody who isn’t at the level that you have. But you’re able to talk to wealthier people, you’re able to raise your minimums. Talk about that part of the of the transition, you know, early on most of your deals were maybe, what, $50,000 minimum? Today, there’s guys putting half a million dollars in your deals. Talk about making that jump.

Dave Zook 30:43
Yeah, so a couple things. I mean, I never want to forget my roots. I always like to do business with guys in the community and help people in my community that otherwise wouldn’t have access to deals like this. But I’ve also had a lot of fun reaching out, getting to know new people and getting into smaller networks that I didn’t have access to at first. Some of that is just relationships, some of it is experience. Some of it is track record. And then some of it’s just getting in getting around the right folks and getting introduced to other folks. But it’s been fun to kind of tap into other networks and be able to get to know new people and higher net worth people that also like to play in this space.

Robert Helms 31:23
You know, if you’ve decided you want to get into syndication then one of the things we always counsel people about is the wall. You spoke about the exact same thing. I’ve run out of my warm network — people that already know me. I’ve talked to them and NOW who do I talk to? It’s been great watching you break through that and be able to approach new networks of folks by giving value — not just asking, “Hey, do you want to invest in my deal,” right? It’s always a two way street. And I think in their evolution as an investor, many people find the next step is “I’m going to syndicate, I’m going to raise money because I’ve run out of my own funds.” However, the vast majority of people only invest in their own account. For some of them, hey, buying an individual property is awesome. But I think what you’re discovering is many of the investors that you have are folks who would rather have you do all that heavy lifting for them.

Dave Zook 32:10
I remember a time in my life when I was in exactly that same situation. I was building my business. I had some traction there — I wasn’t plateaued. I was experiencing some major growth. And I didn’t have time to take my eye off the ball. At that time, I didn’t have a team that could really carry that ball and run with it. I’m blessed today to have some really good people on my team. Because of that, I’m able to go out in the market and do more of the deals and the syndications and real estate projects that I’m doing today. So things change for me, but I can always look back and see how it was for me 10 years ago, and I can so I can relate to that business owner that’s busy. He’s got his plate full, he’s making a lot of money, but he don’t have time to go out and research the market and look for deals. So I know exactly where that person is at. I can deliver value to that person, he’s back home, he’s done the thing that he’s really good at. And so I’ll be able to come in and just invite him into the deal with us. You know, it’s a little different than it was at first when I felt like I had to fund my deal for 850,000. Today, it’s much more like, “Hey, we’re doing this thing and I’d love to have you come with us.” It’s not about me, it’s about adding value to that business owner, that investor.

Robert Helms 33:22
It changes when you no longer worry about the money — meaning that you’ve got a network that’s big enough that when you have a new deal, you’re going to get it funded. And in fact, many of the people that you talk to and have along the way, go, “This looks good. You know, I like you we’ve known each other a long time you’re doing it, you’ve got your own money in the deal, which you always do. So let’s do it.” Then you’ve got people who maybe they weren’t sure and so forth. But now that you’ve been doing it, I’ve seen some of those friends of yours come along, either double down put more money in the deal, or people that said no, three years ago are saying, hey, Dave, what was that again?

Dave Zook 33:54
Yeah, so we did have a lot of that. Most of our deals get funded primarily by current investors. In fact, there was so much so that I had to carve out a little piece of each deal, so that I could invite new folks, you always want to kind of expand that investor base so that when you do get a bigger deal, at some point, you have a kind of a bigger bandwidth. So I’m talking to some of my advisory team, I was able to come up with a plan, like, “How do I expand my investor base, but at the same time service my current investors?” So now today, what I typically do is carve out a 20% piece of the deal for new folks. I always give my current investors first shot of that 80% of the deal, and normally I give them about 24 hours to get into the show before I send it out to other folks. So it’s been a challenge and it’s been a learning experience, but we were able to get through some of them hurdles and again, it was about getting around the right folks getting advice from folks that were in that space. For me that’s what it’s always about. It’s about knowing where to go to get the answers. You need I don’t have to have all the answers, but I got good people around me that I can get those answers from

Robert Helms 35:05
Such an important point, you know, so many lessons here. And there’s been a lot of them. But one of these we asked Dave to do you know, now that you’ve been lots of podcast, you’ve been asked to speak places, we’ve certainly highlighted you at our events, because you’re having success. And you’re doing great business, which I think is critical. A lot of folks who get attracted to real estate don’t necessarily have the best motives. So it’s easy to start to figure that out as you’re around the business, right? The best folks hang out together, brainstorm together, network together. They’re connectors, they have abundance mentality, which you absolutely do. And other folks, right, they’re going to do what they’re going to do. But I think always having that peer group is important. We’ve asked Dave, if he would solidify some of these thoughts into a quick paper that you did about the eight great lessons that he’s learned going from student to syndicator. Dave is not a guy that spends a lot of time writing. Although you are a published author, we should mention that. If you ever wanted to know how to make a chicken coop, Dave is the author of chicken coops for Dummies.

Dave Zook 36:02
That is correct. You know, it was it was at a point in time in our business where we were just coming out of the 2008 recession and a lot of people’s minds were getting a little more self sufficient. They were they were realizing that they were too dependent on the system. We got chicken coops in all the lower 48 states. It was about that time in 2008, where I was doing business with a friend who had just written raising chickens for Dummies. And it was a massive success. So they decided to do another series which talks about chicken coops. Wiley and a friend of mine approached me about writing the book — it was a good experience to go through. But I decided it wasn’t something that I wanted to focus the rest of my life doing.

Robert Helms 36:44
Well at the same time you definitely are a teacher, because I watch you mentor folks and just conversations, you’re now doing presentations and webinars for folks. We’ve asked Dave to call on those past writing skills and come up with this quick paper he put together on eight real life lessons that he’s learned in going through this process. If you’re interested in that, we’ll tell you how to get that quick little paper and we’re also will do is give you Dave’s contact information. So you may be interested because you’re in the same kind of path — “Hey, I want to become Dave Zook.” Or if you’re interested in what you guys are doing, and maybe you want to come alongside Dave and invest, that also could be a great way to do it. I mean, you’ve been out there raising money for your own deals, you’ve actually helped us raise money on some our deals. You’re always meeting new people. So if you’re a passive investor, and you’d like to put some money to work, I can’t think of a much better guy to do that with Dave. Before we’re out of here, you know, you have had great success, and you’ve raised a ton of money, and I watched the business you’re doing and the caliber of business and people and it’s awesome. Yet there was a time where you were just sitting there with a problem. So if there’s someone out in the audience, and they haven’t made that step there their problem, it might not be taxes, it might be I don’t have enough income, or I’m worried about my kids college, or I hate my job. What advice would you have for someone who’s thinking I’m not sure and I don’t know if I can do this? What would you say to that person?

Dave Zook 37:58
The number one thing for me — and I’ve tried this in several different asset classes, I’ve tried this in several different niches that I was involved in — I always like to seek out people who are successful in that space and get around those folks. So the number one thing I would recommend is getting around those people. Surround yourself with mentors, people that are successful in that space and really lean on them and their expertise. And it’s going to help you avoid many of the mistakes you would make going out there and trying to do it by yourself.

Robert Helms 38:27
All right, good stuff. Well, we sure appreciate your time today. And of course, putting together this report. It’s the Eight Real World Secrets that Dave Found Out (the lessons he’s learned.) And also that’s a great way to get his contact information in case you’re interested in investing in what he’s doing. Dave, we always appreciate you It’s great to see you and thanks for sharing today.

Dave Zook 38:45
Thanks for having me on. It was fun!

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