What is the alternative investor mindset? In this episode, co-host William Bonati turns the mic over to Jack Krupey to give a proper introduction to the podcast and the last straw moment that led to its creation. The two discuss the inspiration and the motivation behind the show and why they should be your go-to for advice on alternative asset investments. Tune in as Jack also lists the different asset classes they’re into that you may or may not have heard of yet and what’s to come in future podcast episodes.
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Last Straw Moment
We wanted to take this time to talk about why we’re launching a show. Many of you may have been following us through our company JKAMInvestments.com. We’re very active in real estate, alternative private fund space and syndication deals. Ultimately, we’ve been masterminding with a lot of our friends, clients and investors for several years already.
There are a lot of superior investment opportunities that are not in the mainstream and that majority of the country doesn’t know about. Most investors are still traditionally using stocks and bonds, working through traditional financial systems. It’s important for us to be able to share some of this knowledge and help the community become more knowledgeable about alternative investments, which is going to be key to taking control of their financial futures. We’re very excited about it.
For this episode, we want to talk about our story and some of the asset classes that we’ve been involved in over the last years and in most cases, very active the last few years. Over the coming months and years in this show, we’re going to be highlighting various opportunities in the syndication space. Hopefully, you all get to know a little bit more about us personally.
We’re going to share what we’re doing with our capital, both personally and in our funds capital, what we’re reviewing in diligence on that we may not have invested in yet, a little bit about lifestyle, as well as some of the perks and benefits that come along with being business owners and having passive income and wealth without Wall Street. We’re super excited. We hope everyone follows along on the journey.
Jack, thanks for sharing. What can our readers expect in terms of the types of asset classes or alternative assets that we’re going to be talking about?
A big part of our focus over the last few years has been syndications in general with a big focus on multifamily and large apartment complexes that are too big for mom-and-pop investors but too small for institutional or public traded companies. These are typically 100 to 500-unit apartment buildings. Our fund has done over 30 investments into these large complexes.
We’re going to do some deep dives into why the multifamily is one of the best investment opportunities still with a combination of strong returns and significant tax benefits. Mobile home parks are another area that we’ve been aware of. Watching for several years, we expected to do more in our last fund. The timing and opportunities didn’t fully align but we’d love that space.
Self-storage is another recession-resistant space. We love the self-storage industry. A high number of self-storage facilities are still owned by mom-and-pop investors. There’s a great opportunity to acquire self-storage that is leisurely managed and run a little more professionally. There are a few groups we’re involved with that will pull together facilities, buy a bunch of them and sell them to larger private equity investors. We’ll do a deep dive on storage in the coming episodes. It’s a great asset class.
Industrial and triple-net leasing somewhat go together. It could be a triple net on various properties but with the growth of Amazon or eCommerce, there’s a huge demand for industrial and warehouse space, especially with more onshoring, manufacturing and at least distribution coming back to the US. It’s a great asset class and has very consistent cashflow. In senior housing, we were involved in a ground-up development for a senior housing deal. Even with COVID, certain senior housing developers had some challenges. Others did well. The newer construction is a great asset class. There’s certainly a need as Baby Boomers continue to age.
What do they call it? Incoming gray wave?
Yes. Unlike prior generations, most of the guests in our 30s to 50s are not as equipped to have our parents live with us as they get older. People don’t live in the same area as much anymore. People moved all over the country for work and it’s harder to do so it’s a great need. Through our fund, we’re in a hotel conversion deal. We’re going to follow along with a hotel that’s being converted into multifamily apartments and condo conversions. We’re in condo conversion in Cape Coral, Florida. We’re going to do a deeper highlight on that in the coming episodes with distressed debt, nonperforming and re-performing loan space.
Both of us have ten-plus years. That’s where we met originally in a prior company. We’re not as focused on that at the moment because values have been increasing so much. There’s a lot of equity and not as much distress. As the market adapts over time, we’re certainly going to talk about the NPL industry. If we come into a recession where there’s a lot more distress, we’re going to have a ton of knowledge and training on how to capitalize on the NPL market.
There are a lot of superior investment opportunities that are not in the mainstream that majority of the country doesn’t really know about. Click To Tweet
There are lots of interesting stories in the NPL and RPL space that we can share. We’ll be opportunistic with those assets as well.
We’ve been getting a lot of requests on our fund aside from more fixed income and debt-type offerings. You had a conversation with some of your friends and investors. Maybe you could share real quick some of the desire for cashflow from investors who can’t get any more.
Conversations with friends are going through this. Some friends and colleagues have a significant amount in cash. They need liquidity from that. They have shorter time horizons than the typical syndication deal, which is 3 to 5 years. They’re looking more on two years or less. There are not a lot of options that have yielded out there for those timeframes.
It’s frustrating because inflation is at an all-time high. If you got money in a savings account, you’re getting crushed. The alternatives are liquid options, money market accounts, municipal bond funds or short-term bond funds. Yields on those are horrible. Everyone knows that interest rates are going up. The Fed has been pretty clear on signaling the rise in interest rates. If you know anything about bond funds, that’s not a great alternative or option when interest rates are going up.
There are not a lot of great, traditional investment options that people are able to participate in that are going to give them any yield. We’ve got to look at alternative assets and debt funds are a great solution for that. Not a lot of people are knowledgeable or comfortable enough to be participating in those types of asset classes. We’re hoping to do a deeper dive there. We’re also planning on participating in that space and making it available to our community.
Thank you for that. Most of the asset classes are funds that are already invested in and are mostly real estate-focused. We are going to have a greater amount of investments in the structured debt to provide more immediate cashflow and liquidity to investors, secured primarily by real estate. We’re looking at an abridged or hard money lending fund that focuses heavily on the cannabis space. It has nothing to do with the operations. They just land on the real estate for cannabis operations in states where it’s legal.
We’re looking to provide likely double-digit returns on that asset class paid monthly. We’re excited about that. We’re also going to cover a lot of stuff that I either do personally or in researching personally that is not as real estate-focused. For example, I’m invested in the ATM fund. Many people are like, “Are you crazy with Venmo and PayPal? Are you taking a time machine?” It turns out the revenue from ATMs is stable if not growing. It’s just not typical.
The community of our readers is probably not the type of person using the ATM often. However, there are a lot of people using it. For example, any government subsidy checks, a lot of times go on a debit card. The under-banked or the unbanked often are given a debit card and are going to use the ATM at McDonald’s or Walmart to take out $50. That demographic is growing. It seems counterintuitive but it’s been a solid cashflowing investment earning back about 22% annual on my initial investment.
With that said, it is a depreciating asset. Unlike real estate, in seven years or so, the ATMs lose most of their value but it is a high cashflow investment. It’s also great for taxes. In the very first year, you can take 100% write down on your taxes. If you have passive income, sold a building and have a lot of capital gains or any large amount of passive income, it’s a way to lower your tax bill and get your money back.
I’m involved in some pre-IPO or small-cap company private lending as well. Similar to real estate, it’s syndication but it’s a syndicated loan. They convert at a discount to the stock price. These are either very small companies with maybe a $1 to $2 stock price where they’re not listed publicly on NASDAQ but they’re listed on Over-The-Counter exchange, OTC or they’re private companies that are about to go public but not big-name companies.
It’s nichey. We’ve got a great partner on my 8th or 9th deal. What I’m going to share with the community is something unique and cool that’s very nichey and has very solid returns. I’m based in Puerto Rico so I’m surrounded by crypto people. I have a lot of smart people that are in all facets of the crypto space.
When people think of crypto, they think of Bitcoin, maybe Ethereum, Dogecoin or some of the more trendy coins. There’s a lot more going on with the technology. The decentralized finance area and NFTs area are intriguing. These are all interesting areas that we’re going to explore and learn alongside our audience. We’re putting some cool guests and information in front of our group.
The revenue from ATM machines is stable if not growing. It seems counterintuitive but it’s been a solid cash flowing investment. Click To Tweet
There’s a couple more there too that you didn’t touch on, maybe the oil and gas and the carbon capture stuff that we’re going to be exploring.
I mean oil and gas deals. We’re looking at a carbon capture deal. The oil and gas, similar to the ATM are very strong in depreciation for tax purposes. The crazy benefit of oil and gas compared to anything else is that you can still offset your active income. I got into this because I have a bunch of friends that have high-earning W-2 jobs. They’re doctors and lawyers. I also have some business owners that own seven-figure businesses and need additional write-offs. I was curious, dove in, did well on it and I’m educating some of my high-earning friends on different opportunities.
Lastly is venture capital Angel investing. I was an Angel investor and also in a venture capital fund. With true venture capital, you make your money on maybe 10% to 20% of the deals. The big moneymakers and a lot of the other deals fail or lose money. My take is if I’m going to be a true venture investor, I need to be part of a fund because I need diversification. I’ve done some unique things with smaller businesses that are closer to cashflow positive.
One more example is a fund called a search fund that buys existing profitable businesses. Their typical target is a business where the owner is getting older and maybe doesn’t have a family member to take it over. They’ll buy the business along with an MBA from Harvard or Stanford who’s looking to buy a business as opposed to work in a corporate world. They’ll buy the business together, install a great CEO and then try to grow the company. Sometimes the companies are just cash houses.
The expectation for us is that we’re going to be providing guests of the show here with a lot of fresh ideas on alternative assets that they can participate in that are outside the mainstream, are super interesting and can provide great yield or returns. In many cases, they’re almost less risky than traditional stocks and bonds. That’s super exciting. The other thing would be why you and I are qualified to be sharing and talking about this.
First and foremost, we’re actively doing this with both our own money and the fund’s money. On top of the fact I have had a Kellogg MBA in real estate for many years, the biggest thing is we’re active in doing this full-time. Those are some of the key conversations that we’ve had with some of our investors as far as why they work with us. We’re at multiple conferences a year and masterminds. We’re deep in the weeds, reviewing deals, meeting sponsors and seeing new deals. It’s our full-time focus. A lot of our investors that are very savvy with investments don’t have the time to do the diligence, review and vet. That’s why we’re qualified to do this.
We crowdsourced some of that, even from our investors and network. We look at this show as a mastermind as well. If there’s a good investment opportunity that one of our industries housed elsewhere and they’d had success, those go to the top of the list for us to review and represent to other investors where it may make sense. That’s my two cents. Let me know if you have anything to add to that, especially since you have a unique background, which adds to this as well.
It’s all good stuff there, Jack. It’s important to note that Jack is putting his capital into a lot of these alternative assets. With the experience, the intention is to have experts within each of these niche or alternative assets as guests. In many cases, we’ll be learning alongside our guests on specifics and getting into the weeds. The intention is to bring the conversation to the forefront so that we’re not just the only ones learning about it but our guests of the show also have the opportunity to learn the information as well because it is not mainstream.
Speaking to my background a little bit as a prior financial advisor, the traditional way of investing in stocks, bonds, mutual funds, wrap accounts, equities and insurance makes sense for a certain portion of your portfolio but ultimately, it’s not going to help you achieve wealth. I don’t know anyone who’s gotten super wealthy from their financial wealth advisor. This is always small business owners, real estate investors or alternative assets that have led to people becoming wealthy. I have some unique experience and take on what it looks like from the traditional mainstream point of view of the products and services that people get pitched regularly.
I’m hoping to bring to light that these alternative assets are not as risky. There’s this connotation that alternative assets, private real estate, oil and gas and all of these alternative classes are risky. The reality is that they are not that risky. If you are knowledgeable in underwriting and vetting these opportunities, they can be significantly less risky than putting your money in a mutual fund. I bring that perspective to this and hope to be able to share a little bit more about that and those experiences as we go through some of our episodes.
Thank you so much for that. Lastly, we’re going to be talking a little bit about the things we’re doing and other hobbies. Like many business owners, we have a lot of expenses. I am into points miles. I’ve been able to travel the world for close to free in business and first-class and taken some amazing trips that I probably would have never taken if I had to sit in steerage.
Can I share some tips and tricks? A lot of our readers are business owners and/or have the ability to take some of their expenses, use credit cards efficiently and more importantly, transfer the points efficiently. I talk a little bit about some of the ways that I’ve been able to move Amex points to some of the obscure foreign programs and get good deals to fly Cathay Pacific first class. I’d never eaten caviar at sea level. I only ended on the airplane. It’s been fun. I know you like to travel, golf and hunt.
As we do this journey, we’re hoping for people to follow along and enjoy knowing what we’re investigating and doing and hopefully engage with us as well. We’re on all the social media platforms. We’re syndicated on iTunes, Spotify and YouTube. We have a Facebook page and Instagram. Tell us what you’re looking for, what you like and what you could care less about. We’re going to try to make sure we’re bringing good content to the community. We encourage you to please follow along on your platform of choice.
Try to have some fun with it too. We’re hoping that we can share some interesting, unique stuff in a casual, fun way and try to help bring more of this stuff to the forefront. A rising tide lifts all ships. I’m so super excited about it.
This is a good time to conclude this episode. Thanks as always for joining me as a cohost and as part of this business. Please provide us with a review of your platform of choice. We’ll be back for another episode. Thanks, everybody.