Good evening.
Hi everybody and welcome to our monthly meetup, our, our monthly meetup where we're going to be talking about private equity versus private lending, my name is Judy parade.
I'm one of the signature mastermind coaches and I'm happy to take a deep dive into the differences between private equity and private lending. We're going to have a great time today.
We're going to spend lots of time talking about the differences and some of the key factors that you must consider when you're looking at doing a passive investing or passive investment particularly private equity or private lending.
I am here with Joe and Gabrielle your program advisors and Jason.
Other key spire coach and host extraordinaire, who is going to support me in this in this monthly meetup, and I'm excited to be here I'm excited to share this information with you because I know that there were a lot of questions.
So if you please come on camera if you'd like, have yourself muted, we are going to give you an opportunity to talk and to share and to discuss and we'll do a breakout room today.
And then come back as a group as well after the breakout room and and you'll have an opportunity to ask myself, myself and Jason and Gabrielle Joe all kinds of questions that you have and more here to support you.
So let's just take a deep dive let's jump in and talk about what the differences are in private equity versus private lending there's there's a there's a couple of big differences but what we're going to do today is talk about the five core things that you should
be looking at and I've got a really great tool for you later that outlines this it's a quick reference guide that's going to give you the key differences between private lending and private equity.
So we're going to get into some details around risk and return the investment structure of a private equity deal versus a private lending deal. We're going to talk about the time horizon is this a short term a mid term a long term.
How do you know what the term is, how do you know the time horizon, we're going to talk about your level of control and involvement in each of these investments as the investor of a private equity or a private lending deal.
And we're going to teach you some things about the control and involvement and the differences the very key differences between private lending versus private equity.
And then we're going to talk about liquidity.
Liquidity is really just, it's, it's more about.
How do you get out of the deal can you get your money, how, how locked in, are you when you're in a private equity versus private lending deal.
And we're going to talk about the two very different investment options in the real estate industry, where private lending offers lower risk and a shorter time horizon while private equity offers the potential for higher returns and a more active role in the investment
options have their own advantages and disadvantages and it ultimately depends on the investors risk tolerance and their investment goals.
Let's, let's take a little look at risk and return.
You know it's funny I talked to our lawyer. Recently, Kyle Hampson who is one of the key spire preferred service providers and in your, your key spire connect, and I said what would you say are the biggest differences between private equity and private lending
talked about was risk and return private lending is considered a lower risk investment compared to private equity. This is because private lenders have a secured interest in the property, which serves as collateral for the loan.
So they're giving you a mortgage. When you are in a private lending situation. And in the case of a default, the lender can foreclose on the property on the property to recoup their investment.
Private equity on the other hand involves a higher level of risk, as the investment is tied to the success of the real estate project. However, private equity offers some sexy returns it's got some
them, you know, it offers that potential for higher returns
compared to private lending. In private, in private lending,
you've got some guaranteed returns, it's all documented in
your mortgage agreement in your mortgage terms, it'll say, I am
getting 11%, or 10%, or 8%, it'll say specifically what
your guaranteed return is. Whereas in private equity, you
may have preferred returns. And what a preferred return is, and
I'm going to get into this a little later, but a preferred
return will be outlined in the document that says, hey, you
and I are partners. And I, as the person who's investing in
this deal, is going to be getting 12% return in this
investment, regardless of how much money it makes. Okay.
caveat being if it makes less than 12%, you're going to make
less than 12%. So let's say, you know, I did a land development
deal, and I had a preferred return of 12%. If the deal only
makes 11%, how much are you making? Well, you're only going
to make 11%. Right? Because your preferred return is up to a
maximum number. Okay, so it's important when you're looking at
land development deals, that you read your document, are you
getting a preferred return? Or are you getting a variable
return? And what that means is, based on the success of the
project, you get your split. Now it can be 6040, it can be 7030,
it can be 5050. It can be whatever the document says it
is. So when you're looking at your subscription agreement or
your agreement for a private equity deal, you need to read
the document, I can't even stress that more than I'm going
to say in today's presentation is it is all around the
structure of the deal that defines what your return is
going to be, whether it's fixed or variable. So let's get into a
little bit of that. Let's talk about the investment structure.
Okay, whether you're an owner or a loaner, private lending
typically involves a direct one to one relationship between the
lender and the borrower. Okay, the the lender provides the
funds directly to the borrower, and earns interest on the loan.
So private lending is typically a mortgage, and it is secured
against a property. And it has a defined term and a defined
return. So you're going to get either, you know, 12%, in a
second mortgage for a one year term, for example, it's defined,
it has an end date, we know when it ends, because it is a one to
one relationship in a mortgage for private lending. Okay,
private equity, on the other hand, involves a partnership or
a fund structure, where multiple investors pool their money
together to invest in a real estate project. This allows for
larger investments, and the diversification of risk. So
imagine you're doing a, you know, you're a part lender, or
you're bringing in, you're a part owner, and you're bringing
in your funds, let's say it's $100,000. Okay, I just did one.
I just did an acquisition recently, and everybody came in,
and they put their, their money together in the fund, it was a
private equity acquisition. And they, you know, they don't know
how long it's going to be, we have a projected term, but
they're an owner in this project, there are limited
partners, they're a partner with me. So you've got the many hands
there is a partnership. These are owners, whereas the one to
one relationship in a mortgage is an a loaner. So know the
difference between an owner and a loaner. A loaner is in
mortgages, and in private lending, whereas an owner is a
limited partner or shareholder of a corporation, where you are
all involved with a project, and your returns are dependent on
the success of the project. So it's really important to know,
who is the originator of this project? Who is the general
partner in this project? How much experience do they have?
Have they built anything before? Have they done land development
in the past? What is their credibility? How does that look?
The same applies to a mortgage when you're offering a mortgage
loan is who is
this? I think when you guys went through, I hope all of you have gone through your first
signature mastermind where we get into the, I think it's in the first session, the what, where,
when, why, who, and how. You know, we've got the five W's and the H. Who is involved? When you're
looking at your investment structure, it's really important to know what is the project,
when is it going to be done? What is the term? Where is it? Because you don't want all your
eggs in one location. When are they going to be done? When is it going to be finished? Why are
they doing this project and why do they need your money? Why do they need your money? That's
really super important. And who is doing it and how are you getting your money back? How are you
getting your money back? That's really important. And this is all going to be outlined in the
investment structure documents. So we've got owners and loaners. Owners are private equity,
loaners are mortgages, and private lending. All right, we're going to get into this a little
deeper. All right, let's look at the time horizon. We got private equity and private lending.
Private lending is usually a short-term investment with the loans ranging from three months to
sorry, six months to three years. This means that the lender can quickly recoup their investment
and earn a return. Private equity, on the other hand, is a longer term investment,
typically holding three to five years, sometimes even longer. Sometimes you're going to be five
plus years. Real estate projects take time to develop and generate returns. So you can be
in a private equity deal for quite some time. I saw a Graybrook one just recently. It's in
Brantford, just down the street from one of my developments. And it's an 11-year project. Why
is it 11 years? Well, they're building 1,100 homes. It's not zoned properly yet. They have
to go to an official plan amendment. They have to go to rezoning. They have to go to site plan
approval. Then they have to get building permits. Then they have to get construction financing.
Then they got to build it. Then they got to occupy it or sell it and do all of those things.
And then the project wraps up. That takes time. Land development takes a great deal of time. So
depending on where you get into the land development deal, whether it's at the very
beginning when it's just brownfields and it's just land and they're doing infill of some sort,
you get into it right at the very beginning. It could get anywhere from three to five years
upwards to 10 years, depending on the deal. If you come into it where they're already site plan
approved, it's going to shorten the timeline significantly. A private lending deal, however,
with mortgages, much shorter. You're looking at shorter timelines from six months to three years.
Typically, mortgages are about a one-year term. They're one year, two years. And what's really
important when you're doing a private lending deal in a mortgage is what is their exit? How
are they exiting your mortgage? Are they doing a bunch of work beforehand and then flipping to
themselves and refinancing? Or are they just kicking the can forward to fill a gap? Those
are questions that you need to ask. You need to figure out and ask how are you getting your money
out? And if they don't know the answer to how you're getting your money out or the timeline,
then you may want to reconsider it. Your control and involvement in a land development deal or a
private equity deal versus a mortgage is significantly different. In an LPGP or a
limited partnership and general partnership structure or a shareholder agreement structure,
the participant acts in an LPGP as a limited partner. They provide capital to the partnership
while the general partner manages the day-to-day operation of the business.
The general partner is the throat to choke and they are the one accountable for this.
And they're the leader of the project and your money is limited to being solely an investment
in it. The limited partner has limited control over the partner's decision. So when you're
getting into an LPGP, understand you are limited. You're limited by the partnership's
decisions. You're not involved in the management of the business. You are
only liable for the amount of the investment, and you do not have personal liability to the
partnership's debts. For example, let's say I'm in an LPGP, and the general partner is
being sued for something, and they're coming after the project. As a limited partner,
you're not involved in that. You are protected, okay? You're outside of the scope of the
personal liability of the partnership debts, okay? Control and involvement as the lender
of a mortgage. Remember, private equity, you're an owner. Here, we're a loaner, okay? So the
control and involvement as a lender in a mortgage is a little bit different. The participant has
controls over the term of the loan and the repayment schedule, okay? They also have the
right to foreclose on the property if the borrower fails to make payments. However,
the lender is not involved in any management of the property and does not have any say in the
day-to-day operations. If you're going to do a mortgage for somebody, ask yourself this very
important question. Would I want to own this property? Would I want this in my portfolio?
If push came to shove and I had to foreclose on this property, would I want to own it?
How liquid is this property? How quickly could I sell it to get my money out? Is the market
going to allow me to sell this property if I can't get my money out? I'm involved in a mortgage
right now. I own the second mortgage on a project that's in foreclosure, okay? This project was
something that I gave great consideration to owning, right? I own the second mortgage. Myself
and a few shareholders own this second mortgage. It's a $2 million mortgage and it's in foreclosure,
but the question was, do I want to own this land? Do I want to own this project?
We didn't put a bid on it when it went to foreclosure. We had an opportunity to put a bid
on this property and we did not put a bid on it because nobody else was competing. We're now
looking at the market and saying, okay, let's let the first lender finish the project and we'll get
our money out later, right? We had to make some business decisions about what is the strategy we
want to have. When you're a lender on a private mortgage, you have some controls. You can foreclose
if you wish, okay? The limited partner in a land development deal, the participant has very
limited control over the project. They have the right to receive a share of the profits and losses,
but they do not have a say in the management of the project. The general partner is responsible
for making all of the decisions related to the development, while the limited partner's involvement
is limited to providing capital and receiving returns on their investment.
When you're in an LPGP, there is no guarantee that you're going to make money. It's not a
fixed term. It's not a fixed return. Your success or your return is based on the success of the
project, okay? So, it's really important as an LPGP, as a private equity investor, when you're
an owner in the project, that you decide who you're going to invest in because their credibility
is going to be amazingly important, okay? You want to invest in private equity with people
who have credibility and who have a history and who have raised capital in the past,
who have never lost an investor's money, who has returned 100% of the investor's money. You may not
get the return that was projected, but did this individual or organization perform in the past?
Were they able to protect and de-risk your capital when push came to shove, okay? That's what's really
important here. As a mortgage lender, however, you're in a little bit more control, okay? But what's
important here to understand is you are in control of your decisions. You're in control of what
you invest in and your decisions, and it's important that the main difference here
is the level of liability and potential for personal involvement in the project or
the business. So, when you're in control and
You have a choice.
The choices really comes down to what is your tolerance to risk?
And are you diversified?
Are you laddering your investments?
You don't want to put all your eggs in one basket
and then find that somebody else is
in control of your portfolio and everything
is with that one individual.
You want to diversify, because this
is what you're in control is.
You're in control of your choices.
Liquidity.
This is a big one.
Private lending is a more liquid investment
compared to private equity.
All day long, it's more liquid.
This is because private lenders can sell their loans
to other investors or institutions
if they need to exit the investment.
I was talking to a guy in the US, one of the coaches,
and he was talking about how he gets
into mortgages all the time.
Actually, it was Steven Libman.
So he's out of Montreal, but he was talking about how
he does a lot of mortgages in the US
and what he does is short-term mortgages.
So what he'll do is he'll do a short-term rental mortgage,
and then he'll sell that note.
So he's out of the deal.
He'll sell the note during the refi process
or while somebody else, he'll sell it
to another private lender who ups the ante,
maybe gives more money in the refi,
and he sells it to somebody else,
and somebody else comes in.
So he's in and out of these private notes
within 90 days.
And what that does is it allows him
to be in and out of a deal and be liquid.
And he sets a specific flat rate.
You're gonna give me 12% or 6% or whatever it is.
This is the flat rate.
You need $25,000 of my money.
That's great.
I'm gonna charge you 2,000 bucks, okay?
So I don't know what the math is on that.
I'm just talking off the top of my head here,
but you're gonna pay me 2,000 bucks.
You're gonna borrow my money for 30 days.
You're gonna finish your rental.
Somebody else comes in, buys that note for 27,000,
and you get your 2,000 bucks back.
He gets his profit plus his 25,000.
That's the liquidity of a mortgage and private lending
is you can sell the note.
In private equity, on the other hand,
it's much less liquid as it involves
a longer holding period and may require finding a buyer
for the entire project or your subscription agreement.
In a private equity deal, there's a section in the deal
that is really important for you to review
and for you to read.
It's called redemption rights.
I want you to write that down.
Redemption rights.
What redemption rights are,
it's your ability to ask for your money back.
So say you're in an equiton REIT or a plentitude REIT.
And you've invested $25,000.
Everywhere in these offering memorandums,
there's a clause that deals with redemption rights.
This is private equity I'm talking about.
Land development or private equity or mutual fund trust,
those are private equity deals.
In the contract, it'll say redemption rights
and what your rights are.
So it could say, ours, for example,
will say you have the right to redeem at any time.
In the first year, however,
it's gonna cost you 7% of your investment.
Now, what if this opportunity that you're in
isn't bringing you any cashflow yet
and you put $100,000 in it
and now your redemption to get out
is gonna cost you 7,000 bucks.
So you just lost because you didn't,
because you need that money out.
And it's actually up to the general partner
whether they can exit you with the redemption right clause,
because what if there's not enough money
in the project at that time, right?
There's not enough money in the project at that time
because they've just bought the land,
they've raised only enough to buy the land,
to go get permits or to go do zoning
or to do whatever it is in the phase that they're in,
and they've raised for phase one, okay?
People don't generally raise more money than they need.
So if you're trying to redeem at a time in the project
where there isn't any excess,
of capital, you're not going to be able to get out of the deal. Right? So the redemption right is,
is the general partner has the right to say no, or has the right to say not now,
you could have, you know, $25,000 in and you've been in it for three years. And now your redemption
right says, Oh, there's a 3% penalty after three years. So I'm going to take 3% of that. Now,
there could have been a return in the meantime, and you could have got some money out and you
gotta got, you could have got dividends or distributions. But when you go to redeem,
there may be a clause in there that has a fee that you have to pay, that you have to pay. So
check your documents, check what your redemption rights are in private equity, because if you
don't have the right to redeem, it's going to be difficult for you. I have somebody right now
in a limited partnership, and we have a redemption right clause in the document. She passed away.
So the subscription agreement is to the estate of the individual. The project is mid project
and is not in a phase where we can redeem. So this family has to wait,
because there was an unexpected loss in the family. And they can't get out of the deal
at this time. Now, of course, we're making our best effort to ensure that the family is,
you know, is taken care of. And it's the general partners discretion on whether they're going to
charge them redemption fees or not. We won't in this case, but we could. Right. So there are lots
of reasons why people will want to get out of a deal. It could be the loss of a family member,
it could be the subscriber was the the investor and they passed, it could be a divorce,
or separation, it could be loss of a job, it could be all sorts of things. So liquidity is really
important. It's important that you diversify your portfolio, and you ladder it so that you have
liquidity in it. This is why I don't know if you've seen my presentation on laddering. I don't
know if it's it's around somewhere, but we I typically teach it at the summit. But laddering
your investments that I think we have it in the LFD course, right, Jason, we've got in lifestyle
freedom day, we've got a presentation on laddering that that is really important to review.
So if you can get your hands on that, and go visit that, it's going to help you de risk
your investments. Because if you ladder your investments, and you do an investment,
you know, and you do them in five year, let's just say it's a five year investment, you've got
one in year one, one in year two, one in year three, etc. You got five investments staggered
around five years, you've just reduced your risk by 80% in that year, because you only have money,
you only have 20% of your money tied up. Okay, so liquidity is really, really important. All right.
You know, and going back, if I can, if I may, I'm just wanna I just want to talk a little bit about
this thing here is these are the five key points, right risk and return, the investment structure,
the time horizon, your control and involvement and liquidity. These are the five most important
things that you've got to be thinking about when you're doing an investment. Are you an owner?
Or are you a loaner? And how can I get my money out? And when will I get my money out?
We're going to go into a little breakout group. I'm going to give you a discussion point. And
you guys are going to talk about what's the better investment may want to write this down,
because I know in a breakout group, you don't get the slide. So what is the better investment?
Is it a five year land development deal with a projected timeline of five years with an expected
ROI of 20% or more? Or is it the 14% fixed second mortgage on a land development deal with a one
year term? I want you to have this discussion in your group and just talk to each other about
what your risk profile is and what's important to you. So the five year land development 20%
percent ROI or the one year land development in a fixed mortgage for 14%.
One of these lovely folks, Joe or Gabrielle, are going to throw you
to a breakout room.
We're going to do it for, I'm going
to say, about eight minutes.
And I want you to discuss this.
I want you to discuss what you think
is the better investment, private equity
or private lending.
I've given you two examples.
You can pull out some of your examples
if you want or some of the deals you're in
and have a discussion about that as well.
And then we're going to come back
and we're going to have a group discussion
and answer any questions you may have.
All right.
So let's throw them to the room.
If you haven't accepted the room, the breakout room,
please accept it when it pops up so that you
can participate with other folks.
Your participation is really important.
So I ask that you please go into the breakout room.
Wow, we have a lot of breakout rooms, but we got seven of them.
Carlos, can you go to a breakout room?
Is Carlos here?
Oh, there we go.
Joe, could you go off speaker?
Hey, Joe, what were you saying?
I don't remember.
Was that OK, guys?
It was fantastic.
Yeah, you were great.
I feel like I flew through it and then I looked at my watch.
It was 10 after and then I was like, whoop.
And all of a sudden, it's 7 30.
I was like, holy shit, I'm flying through this, Judy.
Like, you need to add more beef, add more meat and potatoes to it.
And so, yeah, so then all of a sudden it was 7 30 and I was like, damn, OK.
Yeah, it happens all the time.
I remember going through presentation like, oh, my God.
We've got people in the waiting room.
It's 10 after, what am I going to do?
I look up, it's like it's quarter two.
It's like, are we going to take questions?
Yeah, we got four people in the waiting room.
Hi Lisa, did you want to join a group or was there anybody in your group?
Bye, Lisa.
Someone just asked for help.
I'm going to jump into that room and I'll be back.
OK, what room?
What room did he go to?
I don't know.
I'm not sure what room he went to.
I think he went to the laundry room.
Where did he go to?
I don't know.
Yeah, I have no idea.
He was asking me if I wanted to do the breakout rooms
and I was like, I'm not the host anymore,
so I don't have the ability to do that.
I'm going to join group seven.
That's where Joe is.
Jump in a, oh no, we've only got Joanne Todd in there
and Rosa Maria.
That might be why he jumped in there.
That's fine.
OK, and we got Carlos and Holly Henderson and Melissa.
Tatiana's here.
Oh, I didn't see her.
Hi, Bernard, are you there?
Hi, yeah, I'm here.
I'm here just listening.
That's cool.
Did you want to join a breakout room?
Yeah, I can.
Yeah.
OK, can you put them in group seven?
I don't have permission to assign someone
to a breakout room.
I'd have to get Joe to do that.
I will message Joe, though.
He's back.
Here comes Joe.
Joe's back.
Can you put Bernard in group seven?
We're trying to find a home for Bernard, I think group seven,
or do we move Joanne Todd, because she
seems to be by herself.
You're on mute.
Hi.
And then we're moving Bernard to room seven.
Well, no, nobody's there now.
Oh.
So let's move him to a different room.
Yes, we'll bring him to room five.
We'll bring him to room five.
There we go.
Yeah.
Sorry about that, Joe.
As a co-host, I don't have permissions
to do that for some reason.
No, that's OK.
I tried to just remake you host.
Do you want to take host permissions back?
Sure, if you want to.
I have no problem with that.
Sure, yeah.
I'm just.
Make me co-host.
Yeah, this is good.
We got four or five people in each room.
And, um, I've never had anybody ask for help before.
That's a cool feature.
Yeah.
So what do they need?
Uh, actually it was Rosario Rosario and, and Joanne was not talking.
He's like, she's like, I don't know where Joanne is, but that was
the only two of them in the room.
And so I moved, I moved both of them.
I moved first, I moved her thinking Joanne was by herself and
then she asked for help again.
So I moved her to another room.
Okay, good.
Yeah.
Cause they want to participate.
And if somebody is not participating, you got to move them.
Yeah.
It sucks.
One of the painful things that we have in the virtual workshops is so
many people turn their cameras off and then they end up talking to a blank
screen and screen and the experience is quite negative for those who are
participating.
And that's why I started actually, um, putting a separate breakout room.
Everyone with their camera off goes in the same room.
Yep, exactly.
You're in a separate room.
You're not participating.
You're somewhere else.
It's really, uh, it's a really weird thing to talk to a blank screen.
I've had to do it on coaching calls.
Oh my God.
I shut it off.
I would just say, I'm sorry.
I'm not going to sit here.
If you're not going to come on camera, I'll call you from my car.
Yeah.
I get to go grocery shopping, grocery shopping.
I got shit to do as well.
I'll be right.
I'll be right back.
Yeah, exactly.
Let me take the dog.
I'll actually be right back in here.
Yeah, it's, uh, you're still a host, Joe.
It's not a good experience.
Oh, and one of us be host.
He just left, left.
You'll have to take back host.
He has to give it to me and he didn't give it to me.
He said, well, as a co-host, we're okay.
We can share screen.
We can do what we need.
He'll come back because he left.
I'm able to reclaim host.
Oh, there we go.
Good.
Perfect.
Okay. That works.
All of a sudden, all my controls just came back on my screen.
It's great.
He's in room six.
That's where he went.
Oh, maybe he granted me.
I don't know.
Ronald just missed a breakaway.
He's in room six.
Yeah, there he is.
Okay.
Interesting.
I've never seen where no chat say nobody put a, even a comment in the meeting room.
Yeah, nothing.
No, that is strange.
Isn't it a little bit?
Yep.
I would think.
Well, I didn't do a welcome and say, Hey, tell us where you're all from.
The it's a quiet group today.
They're observers.
What's Heather's last name.
Does anybody know who Heather is?
Curtow.
Ren.
Oh, Haley, Curtow, Heather.
No, I don't know.
Heather's last name.
Sorry.
Well, we've got a us member in here.
A couple of us members.
My guess is that this is really important information because a lot of people are
either raising funds or passively lending in other people's deals and they want to
know the difference.
They're probably just really intently listening to the content.
Yeah.
Some of these people like Pedro, I know his last name is Torres.
He's from Florida.
Um, I think it's your SMP is up now or damn near crew.
We lose crew.
She is from California.
She has been a member for a while now.
She has, oh, there's a lot of us members in here.
I'm surprised.
Yeah.
I think she has an English accent though.
Mm.
Um, she attends all the weekly focusing calls.
She's really sweet.
Nice.
I know Joe.
I mean, I know Roy, um, and Maria don't know Karen Higdon.
I don't know.
Lisa Truong.
No Monroe.
No, Sarah, Eric.
I've never met Pedro crew.
Rosaria.
I've never met Roy.
I know Darren Lee.
I don't her Hernan Sanchez.
Rosie does Sarah McFarlane.
I know she's in my class.
Bryn is Bryn.
I don't know that person.
Haley's my coach Haley.
And then there's Heather.
there's maria martinelli i don't know tatiana was in mine and carlos in my last one um
uh francis hi josie
are you there josie yeah so should we um will it close automatically the breakout rooms
uh well whenever you want me to close those breakout rooms i don't know what the timer was
set for it but i can close we have a timer on it like do they have a timer in there
we usually do but i don't know if we did okay so let's bring them back yeah it's been what it's
been 10 minutes let's bring them back okay should i broadcast that first or just automatically
bring bring them back just close all rooms okay done
because when you do that they get the one minute warning yeah okay sounds good
sorry i was just checking to see if anybody needed help in the in the
um room that i went to that i appointed people so yeah are we recording uh no but let's start
again okay there'll be a break in the recording yeah where is it in 24 seconds oh i think it's
gabrielle has to start the recording uh i'm actually oh no that's pause share so i think
it's gabrielle that has to record okay ready yeah
so
how are we doing has everybody come back looks like we have looks like a bunch of us have come
back that's great um we have a few offenders that have not turned on their camera can i get
hi guys nice to see you let's have everybody on camera um bernard's driving so he doesn't
have to i see you um but uh thank you for joining us and can we get uh can we get the rest of yous
on camera um just we got a few people that aren't on camera i get that sometimes we don't have hair
and makeup done that's cool no problem i always show up with uh with my hair in an absolute mess
every morning when i do these things um you guys are lucky you got me at 6 30 at night i've had
chance to do the hair and makeup um it is great to see everybody it's so great to see everybody
i'm going to open the floor up to questions so we had a chance to just sort of um in groups
talk about private equity versus private lending and i just want a show of hands
if you can click on your hands how many of you have invested in a passive investment in the last
year okay watch your thumbs up or your hands up okay excellent excellent um good we've got a
couple of uh experienced people that have gone through this this is great and now what i want to
do is i want to ask the question um if you can put it in the chat why was this session important to
you why was it important for you to attend the private equity and the private lending discussion
i just want to know um why was this important to you so let's just take a a quick peek here what do
we got it wasn't important nobody is writing a thing i want to know um you're here for the
networking oh excellent sarah that's great i haven't done private lending but plan to in the
future wanting to learn more excellent okay brand new to real estate investing previous to this
didn't know what private equity or private okay awesome learning about different deals risk and
return here to learn it's new for me excellent learning more about both um this is great um
because that's what we're here for right we're here to learn and that's what these monthly meetups are
for is to to learn and to network um it is important to scale your business um it does involve other
people's money to grow bigger um and it's really important to just know the difference okay know the
difference, understand your risk tolerance.
What I like to talk about the most is,
I asked this question, what was the better deal?
Okay, what's a better investment in your opinion,
this private equity deal or this private lending deal?
Let's just get in the chat, tell me what you think,
and then I'm gonna get you to put your hand up
and we're gonna ask you why, okay?
So if you're gonna be brave, I'm gonna put you on,
depends on your liquidity, great, private lending.
We said it depends on your risk tolerance,
private lending depends on your risk tolerance,
depends on what your circumstances are, that's great.
Can I have, okay, we've got a couple of people here,
Rosaria or Haley or Pedro,
you guys have all participated here,
you chose equity, Sarah.
Let's get somebody to put their hand up,
I wanna talk to you about it.
Let's talk about what your group did,
can we just have somebody be a spokesperson
for their group and share what your thoughts were?
Okay, Rosaria, thank you for sharing.
You go ahead and you share what your group talked about.
Well, we talked about both the private equity
and the private lending, and I joined the group
a little late, because I got moved around,
but I think most of them referred to private lending,
and if anybody's in my group and I'm wrong, just speak up.
It's a lot of it is where you're at in your life
and your risk tolerance.
I was sharing with them that in the North end of Barrie,
about five years ago, there was a new develop going in
near the college and the highway,
and it was all big town homes and this and that,
and it was about a year into it, the whole thing collapsed.
There was not one townhouse built.
I don't know what happened,
because I wasn't investing in it,
but now it's a plaza with a McDonald's and a Tim Hortons
and a grocery store, I can't remember which one it is,
and a bunch of other smaller stores.
So I think that the private equity is a little bit riskier
and unless you've got the stomach for it,
I don't know what the remedy is for anybody
that put money in, for anybody that pre-purchased
one of these townhomes, but private lending,
if you're someone that's just getting your toes wet,
is a lot more for someone to stomach.
It's shorter-
Because there's collateral, right?
Because you have collateral in it and you're in,
the property is the collateral.
I wanna talk a little bit about something you said
and it's having the stomach for it.
Did you all know that a REIT, a real estate income trust,
like Equiton has, like Plentitude has,
like I think Scott's got one as well.
Did you know that a REIT is private equity?
You're an owner.
So you may see all this advertising about,
hey, own this apartment building or be an owner of this
and without the risk, without the headache,
we'll be the landlords, we'll take this over.
A lot of real estate income trusts,
and one of the biggest things
that the Ontario Teachers Federation
or pension plan invests in is private REITs.
They invest in REITs and those REITs are private equity.
You become an owner and you get distributions
and you get dividends and you get all of that stuff.
Now, I use the example of land development here
in this example, because I wanted you all to think
about that risk in the land development, which is great
because you all came to a very similar conclusion.
Sarah wants private equity because she wants to be an owner.
She doesn't wanna be a loner.
She wants to be an owner in it.
She wants private equity and she wants the general partner
to go and do all the heavy lifting and all of the work.
And she likely invests with people that are reputable,
that she can trust to do that work and that have credibility.
REITs are private equity.
And a lot of people don't know that.
You can invest in an apartment fund and get income
and have income returns and distributions.
One of the things I didn't talk about or I didn't mention,
and I'm gonna ask the question out there,
is did anybody in this group,
when discussing private equity or private lending,
discuss the income tax implications?
Sarah, you're nodding your head.
So share with us what you talked about.
So I don't know what, I know there's capital gains issues, but when it's real estate, in
the US, depending on what it is, if it's capital gains against real estate, there's like a
limit you can get that you're not taxed on, 250 for individual and 500k for a married
couple.
But with, and even with the private equity, it's the same thing.
Both of them are non-taxable events.
Like the income coming in is taxable, like the cash flow, but the actual return of your
money and the, yeah, it's non-taxable.
And that the equity that you earned, the money that you earned that was equity money is non-taxable.
The cash flow that comes in is taxable.
Yeah, up to a certain amount.
So the way, so the way capital gains works, so let's talk about return of capital first,
because quite often you get a, you get a slip, a tax slip that says return of capital.
When you're getting a return of capital slip for income tax purposes, that means you're
just getting paid back.
It's like your IOU is being paid back, right?
I owe you $10,000.
You invested $10,000.
You haven't made anything until I give you back $10,000.
Anything over and above that you're making money on.
And depending on the partnership structure or the private lending deal, it will determine
how you're taxed.
And in a private equity deal, typically it's capital gains.
Okay.
Typically it's a capital gains.
You get taxed based on your, you know, based on your state, your province, your country,
on how much you're allowed to make tax-free.
I think in Canada, it's about $250,000 before you get into a different tax bracket.
They proposed that recently.
Right now, we're allowed to make 50% of the capital gain tax-free.
If I invested $100,000 and my return was $20,000, I got my $100,000 back and I got $20,000 in
that land development deal, or 20%, and it was a three-year deal.
If it's three years, I'm going to get $60,000, right?
20% per year because it's an ROI that's annualized.
So I got $160,000, but only 100% of it is the return of capital.
The other $60,000 that was my return, because it was private equity and it was classified
as capital gains, I'm going to pay tax on half of that, or a third or two thirds or
whatever it is in your country, okay?
In Canada, it's 50%.
You pay capital gains on 50% of that earning.
So I made $60,000, I'm going to pay on $30,000.
This is why it's important to ladder your investments and ladder when your returns are
coming back because it's a taxable event and you want to make sure that you're paying the
least amount of tax, right?
Private equity gives you the least amount of tax compared to a private lending deal.
If I had made $60,000 in private lending, it would have been income because private
lending and mortgages are considered personal income, okay?
So depending on your tax bracket, you're going to be charged on that full $60,000.
If it was private equity, you would have only been taxed on half of it, okay?
There are thresholds, there are maximums, there are things like that that you need to
take into consideration.
But it is important to consider the tax consequences of your investment, right?
And look at where you are in life when you're making these decisions because if you want
to, you know, let's say I'm doing an investment in private lending in a year that I'm on maternity
leave.
So I'm going off and I'm on maternity leave and my income is reduced, that's a really
good year for me to do private lending, right?
Because now I'm getting income, right?
I'm getting income and it increases my income, whereas capital gains, I'm only getting, I
may have the same return, but I'm taxed differently.
If I'm going to, if I want income, I want it in years that I don't make as much money.
So I don't pay as much, okay?
That's why diversification and laddering is super important so that you get the best
tax efficiency.
So talk to your accountant when you're doing these investments.
good deal for me. Oh, and by the way, should I do this
personally? Or should I do it in my corporation? The answer is,
it depends. Right? I don't know how many times I've had people
lend me money privately, or do an investment with me. In a
mortgage, I had a guy do a mortgage for me recently, it was
252,000. I think it was a second mortgage. But he did it as a
shareholder is he took it out of his corporation, created a
shareholder loan for himself. For 365 days, I had to pay it
back in 364 days. Because if he didn't have that money back in
his corporation, by a specific time, he was going to be taxed
as taking $252,000 as an income with his corporation. So this
is why it's important to talk to your accountants to talk and to
understand the deal and know the tax implications of it. Okay,
so it does come down to those five things. You know that we
talked about the and I'm get we're giving you a guide here.
Did that come up the quick guide? There we go. We're going
to talk about the we only show a portion of it here. But it's
risk and return investment structure, time horizon, control
and involvement. What's the fit? Tell me somebody tell me what's
the fifth one? Anybody? Oh, did it show up in chat?
Liquidity.
Liquidity. Thank you. Exactly. liquidity is that other is that
other fifth one liquidity. Thanks for sharing that. Joe
just put the tool in to the chat if you want to. If you want
to download that, I think it's in your connect as well. Your
key spire connect. But we got a quick just a quick review here
on the quick reference guide, private equity versus private
lending. Jason, you can talk to us about where we can find these
things and tell us what's coming up.
Yeah, so we had a few events already take place this week,
you guys are probably getting sick of seeing me. But guess
what? You're gonna see more of me. So a couple of things going
up. Actually, there was one that was just announced that you're
not going to see on the May calendar right now. And that is
May 20. And it's us financing with Chad tunic way. So I'm
looking forward to that. He's a great speaker. And he'll he'll
talk about how you can use private money to fund your
deals. And then next week, we have Addy. So I'm also looking
forward to that. And that's with Steven Jagger. I hope I said
that right. It could be even Jagger. Yeah. So yeah, busy
month. So what's Steven going to be talking about? Oh, he's with
Addy and Addy. Oh, yeah. So Addy is really cool. Because and the
way that Addy works is it's private equity, folks. It's
you're, you're an owner, you're a loaner. Actually, sometimes
you're a loaner. Sometimes you can do private lending deals
there. And sometimes you can be a private equity investor.
Very cool tech platform that allows you to invest with not
not very much money. Yeah, just very, very cool concept. So
yeah, looking forward to that.
Yep. And that's amazing. And I'm going to just ask one last
question here. This is a quick Canadian question. So I
apologize to the US folks that are with us. Does anybody know,
from a private equity perspective? What is the amount
that any investor can invest and is qualified for in Canada?
Does anybody know the amount that you're allowed to invest on
annual basis in Canada for private equity? Every individual
is allowed to invest $10,000 in private equity, whether they are
eligible, non eligible, or accredited or business
associates or whatever. If you invest if you don't know if you
want to try private equity, you can do it for as little as
$10,000. Everyone is eligible for that once a year. Or you can
do two $5,000 investments or whatever. But just keep in mind
that you're allowed to do $10,000 a year. And when the
anniversary comes up, you can do another 10,000. Right? So
everybody is about eligible for private equity. A lot of people
think, Oh, I'm not eligible for Greybrook. I'm not eligible for
this. I'm not eligible for that. Addy is going to show you next
week, that you're all eligible for up to $10,000 per year.
Okay, so that's a quick fun to know, and you can get into a couple of investments, just
small ones, 5,000, you know, usually it's about $5,000 is the minimum.
Most are around the five or $10,000 one.
If you don't know where to go to find investments like that, ask your coach, talk to your coach
and they'll direct you in the right place.
But every one of you is eligible to do that.
And I encourage you to try just a small investment.
Just do a small investment.
You don't have to go big or go home.
You can do a small one, get to know the process, learn the process and pick something that's
within your risk tolerance.
Joe, go ahead, you're up speaker and Jason.
So just a couple of questions in the chat, just wanted to make sure that didn't go unanswered.
Brynn, I hope I said that right.
She wanted to know what time was the, were the two inner circle lives that Jason was
talking about.
And Darren Lee would like to know where he could find the link for the U.S. financing.
8 p.m.
So we're going to consistently, you'll get an Eastern Standard Time.
Thank you.
We're going to consistently try and have them at 8 p.m.
There'll be uncommon occurrences when they're not, but for the most part, they will be 8
p.m. on Tuesday evenings.
Maybe not every Tuesday, but most.
And it looks like on Wednesdays on this calendar, they're at 7 p.m.
For the MM, for the monthly meetup, the mastery meetup.
Yes.
Correct.
Yeah.
I would like to pipe in for a quick second.
For those of you who are interested in our live events, please sign into your Keyspire
Connect account and click on the corresponding tile.
So if it's inner circle live, monthly meetup, weekly focusing call, and you can see there
under the events tab, you will have the day and the time in your local time zone as well
as the link to join us.
We've made it so easy for y'all.
Yes, we did.
There's also a couple more questions that were put up there a little bit earlier in
the chat.
If I may point them out, there's some people that were looking for investor focused accountants.
We have one in Canada, one in the States, Jason and Judy, how would you recommend that
our members find an investor focused accountant that's local to them?
Well, I do a lot of interviewing.
So one of the things I do is I ask my peers, for one, other investors in the area that
are using an accountant, a real estate focused accountant, that is super important.
Please don't go with your brother or your cousin or your newly appointed kid that just
got their license to do this.
This is big business.
You know, working with the right accountant will save you so much money.
They'll help you make really good decisions.
I mean, I had one that helped me.
My lawyer and my accountant helped me set up my portfolio a couple of years ago.
And just in the way they set it up saved me almost a quarter million dollars in taxes
that year.
So it's really important that you have a good accountant and interview them and talk to
people in your circle.
Who are they using?
You want to ask them who they're using.
When I interviewed mine, so my accountant is multilevel.
So we have an internal bookkeeper.
We have a controller in our company.
And then we have an accountant CPA.
And then we have our other accountant that does all of the audits of our books because
our books need to be audited every year.
So like I have four levels of accounting in my business.
And you know, some of it is just bookkeeping.
You know, you may only need a bookkeeper to begin with.
You may not need a CPA and you only see your CPA once a year, right?
And you use a certified bookkeeper for the rest of it.
I don't know.
I think I covered it.
But I think you talk to people locally and don't do it on a spreadsheet for the love
of Judy, please use like QuickBooks or some other application.
For the love of Judy.
One of the other things that a lot of people will do is they'll just search investor-focused
accountant using the magnifying glass tool in Keyspire InnerCircle.
And there's a lot of good feedback there on investor-focused accountants, who's using
who.
Please look at the most recent posts because things change.
And then yeah, the cool thing is that if you find someone that highly recommends an accountant,
you can also DM that person and just ask them for a little bit more insight on their experience
with this person and that kind of thing.
So, yeah.
And if you have a really great accountant right now, why don't you post it in the Keyspire
InnerCircle?
Why don't you share with others and say,
Hey, I'm using this really great accountant.
This is who I use.
I'm from wherever and this is who I use.
There's nothing wrong with doing that.
There hasn't been a whole lot of activity
in the Keyspire inner circle lately.
I challenge you all to do a post and update
and do something exciting and let us know
who you're using as an accountant
or share something that you've done recently, okay?
So that we can get some activity in kick
so that you guys can be talking to each other.
If somebody said that you're here for networking,
well, get on there and start networking.
Okay, was there another question, Gabrielle?
No, that was everything.
Thank you very much for covering that.
I think that was very thorough.
Okay, thanks.
I'm gonna give people one opportunity.
If anybody has a final question, put your hand up.
And if you have a final question,
please book in with your coach.
All polling stations are closed.
Yes, because we know that the coaching team
can answer all of your questions
and it's really important that you book in with your coach
and that you make the decisions
that are right for your portfolio, okay?
Well said.
Awesome, thanks.
Are we out, Jason?
That's a wrap.
We'll see you all on the inner circle next week
at 8 p.m. Eastern Standard Time.
See you then.
Awesome.
Thanks, folks.
Bye-bye.