LP Roundtable: Self-Lending Funds, Capital Calls, Securitization, and Fund Risk

(upbeat music) - Welcome to Passive Pockets, the Passive Real Estate Vesting Show. I'm your host, Chris Lopez. And today I'm joined by Adam Krammer, Pascal Wagner and Kristi Burkowski for another Passive Pockets portfolio round table. We're gonna compare what has changed since our last check-in, including new investments and a portfolio update. Plus, we talk about different offerings out there and would we invest or would we not invest? Talk about fund administration, a boring but important concept and talk about, hey, do you fund a capital call or not? All right, it's a great conversation, let's jump in. All right, so our first topic today will be a discussion around a fund opening up an income fund so he can borrow against his own income versus like third party lenders. So this came up, Adam was having a conversation. So Adam, give us some more color on that and tee it up. - Yeah, thanks, Chris. Good to be back again for another monthly update. So this is an income fund that is being opened up first to existing investors in this syndicator's other funds. The intention of this is that they can borrow in the open market for 13, 15, 17% in this asset class, manufactured housing. Instead of going to the primary investment companies that lend to manufactured housing, they're actually going to go to their fellow investors in an income fund. And honestly, I reached out to this group, to Pascal, et cetera, to say, what should I be thinking about on this? Because even though we're the talking head experts here, we're clearly not on everything and would love to kind of get people's thoughts on, how do you think about lending income funds, lending to funds in the same syndication group, right? We know they purpose, it's lower the cost of capital, but are you taking on too much risk for that lower cost capital? What questions are you asking to those syndicators, et cetera? I don't know, Pascal, you have an exact example that of a fund you may be in or you know about. It's something that I'm considering but would love to kind of talk to the group about. - I think you brought up a great point. Why does any investment firm, if they are doing equity-based deals, why would they open up an income fund? They're doing that because they think it'll be easier to raise capital at a better rate from retail investors than it is to go to a bank or an institution that just does these types of loans. If you look at it from that perspective, I think in general, you kind of need to be asking yourself, okay, why would I do this if a bank is requiring more? Like, do I think I'm better than a bank's underwriting process? I'm not saying that is why, I'm saying this is a perspective I think you need to think about. It's not inherently wrong to do this. I think if I were an investment firm, I would absolutely be doing the same thing. If you have been working with an operator for a long time and maybe you understand the dynamics or you have a certain perspective or you just feel like your money is safer with them than someone you don't know and you don't have the time to do, that's what some people choose to do. There's another fund called the DJE Income Fund that a lot of people I know were all kind of investing in this fund where Devon Elder, who has now been convicted in a huge amount of trouble, he had an income fund that would loan money to his own portfolio. And so there are a lot of easy ways to hide all of these things happening. And like, I think from one perspective, you might say, oh, I know the guy and this diverts a fight across a bunch of assets, but like, you still have an incredible amount of operator risk with one person. And so I think in this industry of being in private debt, I think it's much safer to be diversified. And so if you think about it, a different kind of fund, like let's call it, like a DLP lending fund I'm most familiar with, they loan a portion, I think up to 20 or 30% to their own portfolio, and then they loan out to all other types of operators. And so now you have diversification across projects and operators, and I just think like that is a safer approach. - I agree, and you can kind of start mentioning something that, and a question I ask is ultimately like, which master do you serve, right? And that means hey, when everything goes to hell, which pay hopefully a dozen, but we all know there's that chance when it goes to hell, like, is it the LP equity investors, they're debt fund, like which one's the master, right? And I think there's a clear answer on that, but it's like, how do you handle those situations? - I don't know, my gut is, I like having that separation on there, even if it's like, okay, maybe things have pointed to last or something, I think, I think it's more just checks and balances and just eliminates a lot of things where, oh, hey, this one time we just have to do this or do this and that slippery soap leads to something. - So all the way in on this too. So when you first mentioned this to me, it was sort of a novel concept to me, so I didn't have any experience or thoughts on it. Pascal, I like what you just described, but my very first thought was thinking through the opportunities that this would now present for there to be an overreach or some sort of a, even if the intention upfront, right, wasn't to go bad one way versus the other way, the opportunity is now there. And I had done a tremendous amount of work and compliance and risk mitigation in my former career, and one of the things that you always look for is the opportunity there, right? And the best way to mitigate risk is to get rid of the opportunity to have it in the first place, right? And so that was the very first thing that I thought of, and then when Pascal threw out the DJE fund, I did a little bit of research on that. I came across exactly what you just mentioned. Oh my gosh, this guy's been convicted of fraud, and I've seen good people with good intentions do really bad things when they were put in a situation where the opportunity was there. So that was kind of my very first thought on it, which I think sort of tends to be the feeling of the group from what I've heard. And then my other thought that I had about it immediately was I just started scratching my head on, okay, hold on, so probably in line with what you're mentioning, Chris, like how does that work, right? Who's the priority here? Who's capital is the capital that's gonna be respected in the event of a downturn, things go south, all that sort of a thing, and then that sort of led me into the path of, as an LP, I wouldn't wanna be in both of those things, right? Like I would want to not be on both sides of that table, effectively. That doesn't seem like risk hedging to me, so that just seems like, I don't know, too much risk at all across the board. - That was the interesting part, Christie, is that they're leading with existing investors in the other five funds, right? And it's, to me, I'm looking at that going, okay, it's an equity position versus one of a debt lending fund, if you will. And you already have a fund that's currently open, if I wanted to put more money into this, and I don't have a significant amount of wealth with this group, I could just put it into one of the open-ended funds. That's a close, hard-to-close-in and fun, sorry. I could just put it into the close-in fund and not lend to myself. The other side that I was thinking through is who benefits among the three parties, the syndicator, the income fund, and the growth fund? Is it purely to where you're capped at a 7% return in the lending fund, and then the growth fund is going to see some semblance of lower cost because of it, or is that syndicator in the middle kind of take enough pieces from both to where you raise the risk a little bit, and there's a tiny amount of gain on both sides, but it's probably not worth that inherent risk. I don't know. They haven't done the webinar, they haven't really released a ton of information about it, so I don't have enough to kind of push into this further yet, but I am excited to kind of hear about it. Well, I won't be investing in it because it's, I don't invest in anything that people do for the first time. - I would love to see the details of like their PPM or node offering, whatever the structure is, and how they're just doing all the stuff we talked about, right? You know, who's doing what? And how do you have some controls there? 'Cause the nice thing about the third party lender, they do their own checks and balances, right? And they're gonna get market rate. - I think all things being equal, why would you choose a fund that lends to itself versus one that lends to all other people? It's not like they're offering 12, I mean, maybe people are offering 12 plus percent, you know, some more else, but like there are enough funds that lend to other people that you can get the same type of return. So I just don't see why you would invest in that. - To go after cheaper capital is, I think, great, right? I do like the fact that they're doing that, right? Like, hey, we have an opportunity to go after cheaper capital and great. And in my experience with any funds across the board, as they grow, as they evolve, to start to look at other places to bring in cheaper capital, and to start to look at ways that you can continue to produce the same returns, or possibly even have increased returns, or create additional capital to grow more. All of those things are great. So I like the fact that they're thinking about cheaper capital in the first place, and I'm invested in a lot of funds that have multiple capital sources, right? And so I think that that's completely fair, but to what you just said, Pascal, in those situations in my experience, bringing on that third party brought on a whole new layer of due diligence. That, to me, as an LP was beneficial because that was just another set of eyes now that has come across this. And again, I'm a risk person, so that's another place where they have to dot that eye and cross that tee as well, and their books, make sure everything lines up. So I struggle with the same question, why would you forego that extra layer of risk reduction if you don't have to? - Yeah, I mean, I hate to talk out of both sides of my mouth, but I'm only human, and I have friends that I've offered on secured loans to, one of my friends is a wholesaler, you know, and I've given him a couple hundred K for the last three years, and he's as transactional funding. And like, I know him and trust him, and like, I know he lost the money, he would make it up to me. So yeah, I mean, I think there is a room for these products. right? I think good on them. I think what you're talking about is right, Kristi. Like good on them for looking for other sources of capital and there are going to be people who trust those operators. You just got to know what all the options are and figure out, you know, are you willing to do a little bit more work and find other opportunities? We'll take a quick break, but more powerful updates from Adam Pascal and Kristi in a moment. You know that thing where you discover a feature you wish your software had and it turns out it already exists just on a different platform. Like, oh, you want rent payments processed in two days. Rent ready does it. Oh, you want to block tenants from making partial payments mid eviction. Rent ready does that too. Oh, you want full accounting and tax ready reports without paying for a second tier. Rent ready does it. And oh, you want tenant screening that doesn't overcharge your applicants. Rent ready also does this. Basically, if you've ever complained out loud about your property management software, rent ready probably already built the fix. It's $12 a month. You're welcome. Sign up right now for $50 off your first year of rent ready with promo code BP cash. Bigger pockets pro members get it completely free. Sign in through your pro account at rentready.com/biggerpockets. That's rent r-e-d-i.com/biggerpockets. Welcome back to pod. Let's keep the conversation going. You know, shift in this into, you know, the second topic, what portfolio updates do we have? Any notable exits or wins or headaches or losses or new investments? It sounds like none of us are investing in, no, the fun we're just talking about, right? But any of the things you guys are or aren't investing in, Christie, start with you. So just existing investments, one of the funds I'm invested in, this is a really cool learning car for me and something that I got to be part of over the past couple months from through a securitization, which was just fascinating to learn about and just understanding the mechanics of that and how everything comes together. So, speaking of searching for other sources of cheaper capital, right? There you go. And so that's, I think, pretty cool, just something that's existing that's happened. Talking about researching certification, what is a securitization? Okay, so this is going to be me trying to give you the version of it as I understand it in my head. Okay, so if you have a product, I'll just call it that. So in this case, this is a portfolio of loans that's generating recurring revenue, right? That in and of itself can be looked at as an asset. So you can take that revenue generating asset and you can securitize it, which is there's a lot of legal framework that comes into that. You're essentially making it like a bankrupt remote isolated vehicle that can then be taken apart and separated into tranches of varying risk or you can kind of keep it all together. And you can then basically issue those tranches out for investment to another party. And the idea there is, hey, this is having some recurring generating revenue and you're going to buy into this, which brings in cheaper capital to the person issuing the securitization for some upside return by taking a de-risk position in one of those tranches. So hopefully I said that correctly. People out there who are securitization lawyers and experts go easy on me here. So that's more or less what this is. So in this particular situation, the funded grown to a point where they had the ability and they had a track record, I think that's another thing to point out that they had a track record that made them even eligible for this type of a product. And so they were able to go out and find some partners and actually go through the process of doing the securitization on their existing portfolio, generating some, you know, capital that could be immediately loaned back out and put to work to grow the portfolio. So pretty cool. From a LP perspective on that, I obviously had a lot of questions around, hold on, like, what is this going to do to me? What is this going to, how's this going to impact my capital, you know, which I did lots of research and got a lot of answers on those sorts of things. And so, yeah, hopefully that answers the question. And this is why I'm happy that I'm in the same fund that Christie's in for that one because I didn't do a lot of research on that and I just let her do it. I'm like, if she has a lot of questions and she's scared, I actually changed my mind on this. So never mind. Yeah, my anxiety drove all of the questions and I got answers to them all and in the end, my anxiety was, you know, released. You almost did as good as Ryan Gosling does at the beginning of the big short when he's explaining what securitizations are. So if you don't know what it is, go watch the first 10 minutes of that movie and you can, but for housing. Yeah, I have a really good friend of mine who actually in his background, he had a debt fund that he was running himself, but he worked and actually issuing securitizations for a bank in his past. And so he kind of gave me the rundown and walked me through it all and had a good, a good long couple of conversations actually out on the beach, which is where I was, you know, joining you guys from last time we met. And you got any portfolio updates? Oh, I got lots of updates always. I like to hear myself talk. So I had three investments that I upped this month. I've got a sticky note with them on there, so don't test me. Oh, that's legit. Okay. Two sticky, two sticky notes. Is that your spreadsheet, treasure my spreadsheet? This is actually all investments I have for just some sticky notes on my desk. I had to bring them to Spain with me. So I added another 100K to the same fund that Christy's mentioning that's led up by the the problem on a group, still really impressed by that one. Love it. Wish I had more money to put into it. Right. That's always that's always the fun thing. It's a debt fund going well committed another 100K a while back to the practice health care fund, that fund that capital call. And again, right, let's remember there are good capital calls and there's bad capital calls. Well, you'll get to that one in a second. The good capital call was I committed this capital and now they're ready to deploy it. I like that when you commit and then you deploy later. Sometimes it's great to commit and deploy immediately, but remembers you're thinking through capital calls and committing cash that if they take your money immediately and they don't deploy it, it's cash drag and it just sits there on the books and earning zero dollars and you're not earning crap for that. So that's a question you should ask if you haven't bought through cash drag. The third, I think we're going to talk about this in a second if we have time, but group on an investment in Atlanta had a bad capital call. It was 8% of the total investment that you made. So I only have 50K invested in that. So it cost me 4,000 bucks. It was kind of a figure it out in an afternoon and make a decision. I ultimately did fund the 4,000 bucks because I didn't want to dilute my position and it wasn't a large enough amount of money to affect my day to day if you will. Got two good distributions. One was from InvestWise Collective on Ivy Green. They're functioning really well. So it's great to see that. It's a hundred unit multi-family in Indiana up there. So functioning well, long term debt. I think we've talked about that one before, but it's going well. So just stabilizing. Stabilizing and functioning. Yeah. And I think it's only been about a year or so. So it's great to see that it's just it's stable and doing its thing and good job Paul. That's the dream multi-family right now. I know you don't see that often. And just in case Paul thinks I'm lying, I did buy his book. It's on my desk. And I told him he should be very, very proud because I only brought like 10 books with me from Florida to Spain and he made the cut. Last one and I'll shut up. I picked on Matheson Capital. Last time is that I did not invest in their Texas fund because I don't think they know Texas. Fair first investment. But they actually, I did invest in a different one before that, which is in South Carolina, which is their bread and butter. They just processed their June distribution and we closed in June as well. So the amount doesn't matter. It was a tiny amount, but it lined up to pro forma. But what I wanted to call out is that it's a HUD loan. And one of the interesting things about HUD loans is that you can only distribute with audited financials in two times a year maximum. Some of them like a USDA loan only that you go once, I think. But this HUD loan is like a 40 year or 35 year fixed twice a year. They were able to get the audit financials done in time for the June distribution. And it was going to be like 250 bucks or something. It's not going to be anything major. But that just shows me the operational prowess that they're bringing to the table. And I was really impressed by that. So operational prowess, I used to be a consultant. That's $100 word in a $50 jersey. I think we should allow it. And that's fair. Because again, you're talking about getting a distribution, which again, I think that that's a dream in a lot of people's portfolios right now. Yeah, mine included. Yeah. I think that's why we're running out of things to talk about during this segment, Chris, is because we're not getting a lot of distributions from a lot of organizations. So you just not 2020. Well, about you, Pascal. I'm invested with a syndicator. Let's call like a hundred unit multi-family project in Denver, Colorado. First, you know, know the area well, walk by it. And they just had an optional capital call, which I thought I had, I mean, I guess I've seen before, but it's always unique when it happens to you. They basically said like their lender was requiring more reserves. And so they had to come up with an additional, like 400K, which is not much. And they were offering six or six and a half percent on this loan. And I was like, why would anyone do that? Wait, so it's structured as as a loan. And like if you did it, it would be a loan from those LP or multiple piece to the fund or to the asset LLC. That's my understanding. Yeah. So optional, you could or couldn't, but in the event that not enough people chipped in, was there backup plan? I mean, who knows? I mean, look, I think if I were an operator, I've that would be the first thing you would do, right? You would see like, all right, is anyone here interested? Let me ping my already existing investors. That's the logical thing to do. I mean, who knows? But what were you in the cycle? A lot of times they'll like, they'll offer that. And if they get a taker, they fund it. If not, like, hey guys, now we're doing a real equity capital call, right? Right, right. But six, six percent interest. Yeah, I thought, uh, you know, to lock up your capital. That is so not exciting. And then, you know, not much different. It's not like, I feel like I make deployments in batches, as I'm sure most people like, like you get money and then, you know, I'm trying to sit, sit on some money for a while. You know, one thing that I thought was interesting is yeah, I've invested in all these new debt funds recently, the four new debt funds. And I'm glad I started with funds that did monthly distributions. I think it gave me the confidence to invest in funds maybe more with like a quarterly distribution 'cause most of the funds I just invested in are quarterly. So think like, just deployed 500K and you gotta wait like minimum three to six months to get anything. So definitely, I can understand why many beginners. And I also think I'd probably recommend it like starting with funds that do monthly distributions so you like get the confidence and see it's real. And is that perspective changed for y'all recently? So it absolutely changed for me with the last kind of my nerves that I think this stuff's gonna hit the fan at some point, like I almost ignore anything that's quarterly now, and I know I shouldn't and I certainly still look at 'em 'cause while I don't have a headset on, I'm still a nerd. Sorry, Christie. - You are wearing the headset, Adam, to be clear. (laughing) You're wearing, and you like me are even plugged in today. - Yeah, you're hardwired, isn't it, man? I don't like. - I'm sorry I care about, I'm an audiophile and I care about the quality for this show. - I think Christie said she's rubber, so just bounce a little bounce back on you. Are you thinking about that in your investment decisions right now, the monthly versus quarterly versus, I mean, this HUD loan that gives me something every six months? Like, I understand dad funds, you're expecting more, but maybe the question is, have you eliminated things that are not hitting a certain threshold of today money? - Well, to jump in, I mean, I think, for me, it was like, you have your funds, and then it's like, all right, I've picked the best ones at the top, but I'm trying to, you know, go cross 10 different debt funds, you know, and after a certain point, there are other trade-offs, and it's like, okay, I would rather that trade-off of going quarterly than to maybe go with a fund that has more leverage or, you know, whatever. - It's interesting for me to hear you say that, though, Pascal, because of your experience, and I think the breadth of investments that you have, because the monthly piece and that feeling of, I'm waiting now to see what happens. Like, I've talked with a lot of LPs, I myself have gone through that, and I've seen a lot of people go through that from the, okay, I've now seen this happen, I've seen this, I think one of the things I've often seen paired up against that that helps with the, I'm feeling a little bit better about having made this investment and potentially investing more is the communication that comes along with that, though. I'm just curious if that was also helpful in that, or was it literally just getting the distribution every month? - Look, I think it comes with all of it, right? I mean, when you first start, it's like, you know, I'm afraid of throwing away money, you know, it's easy to lose money. Look, I mean, even with these other funds, if you really think about it, to give a monthly update, like now that I've done some fund admin, you know, you have to have your, all of your processes dialed in, it's a big lift. Like, it is probably one of the big things, if you go and like, talk to a bunch of different firms, I'm just kind of like telling the audience, it's like, everyone would way prefer quarterly, but investors prefer monthly, and there are firms have basically done the work to be able to do that, but, I mean, at least in my experience, I think quarterly is way more common across all private deals, maybe not just that firms. - Well, from a fund admin perspective, there is a tremendous lift that comes along with a monthly distribution, versus a quarterly distribution as well. And so that's one of those things that, I don't think it's probably often talked about, but yeah, like an operator, anybody's gonna tell you, they would far prefer to do quarterly, because there's also that component of it that comes in to trying to do that monthly piece. Once you learn how these things work, then it's like, all right, I just go through my checklist. They're audited, they're a big institution, I know a lot of people doing it, I've asked them spend a bunch of time with them. It's like, okay, now I don't need the monthly distribution anymore, that like prerequisite has gone away, 'cause I have more experience and feel more comfortable. - Well, I think one of the things, my bestie, Chris and I discussed for, I don't know, we talked for an hour and a half, on Friday or something, was, I think there's also some diamonds in the rough here, where these people don't have the best fund administration, they don't have all their crap together, they're not like perfectly operating, but they're like, yeah, that's not my forte, like I'm good at doing acts, I'm good at finding the right debt, I'm good at making the loans and underwriting the loans, and all the things associated to the distribution of capital, the communication about the audits and going through that, and this was very, very difficult for us, because we're still really small, we're, you know, a two human shop or whatever it may be, sometimes you can find the diamond in the rough, but damn, do you have to be really good at finding the diamond in the rough, because like, I personally don't love it, I like to go exactly like Pascal, is that if the audit of financials, I know these people, they run a great fund, they've run a great fund for a long time, like if you don't have data before 2019, I'm like, eh, maybe not, unless they are truly that diamond in the rough, so really 2019, huh? I think mine is like 2020, they have to go through the COVID cycle and the interest rate rise. - And proven that they can survive that. - No, it's not a hard line for me, but that's in my head, that's what I think of as like, man, you're about to go through that run up in Nitsica, is about to get real weird in about three years. Good luck. - I mean, a lot of great thoughts in there, and for better and worse, I love finding like, the diamond in the rough. - Yeah, you're a deal junkie. - Well, yeah, that's why, but like, I tried doing the stock market, couldn't do it in 15 years, that's why I got in real estate, right? I think it's not easier to make really good deals in real estate than in the finance world. I know, I think you can fund some great risk of just deterrence, but part of it too is like, it's just fun to do, right? It's just like, it's the hunt. Like, it is fun to do, and then you get like, ah, it's amazing, like, oh my gosh, this is fun. How the hell is this amazing, right? And then Chris, he can talk about too, and this might segue into the fun admin, because a lot of times, hey, they are great operators, but they're also, you know, they're not mature businesses, right? They don't have a lot of times mature accounting systems, right? Hey, start with one group, you know, and I was investor 13 with them, right? Chris, he was right around the same number, right? Very early investors, and they were on a six or seven million dollars, now they're doing securitizations, right? So their accounting system has progressed quite a bit as like one thing. I mean, right, Christie, and then this has been very interesting to learn, just in, you know, that, but just as we've gone through all this like third party fun admin, a little terrifying too. - It is terrifying. So prior to that comment, Chris, Adam and Pascal, you guys both said audit financials, auditid financials, which is great Arthur Anderson. I'm just gonna throw that out there. So auditid financials are wonderful. It's a piece of the puzzle. - I need you to tell me this Arthur Anderson joke, because it's falling flat on me. - There used to be the big five accounting firms. One of whom was Arthur Anderson and Ron. - And Ron, I know the big four accounting firms. - The reason why there's four is because Arthur Anderson is no longer in the mix. - Got it, understood. - Again, I'm the risk person, right? I nodded if financials are fantastic, but there's like a whole other side to that. Like, can I please meet your fund accountant? Can he meet your controller? I wanna talk with that person. - Oh man, I couldn't do that. I just like way too much work. - I would never do that either, Chris. - Yeah, I think these are all shortcuts, right? Like everyone's trying to find the shortcuts. And to me, like an auditid, it's not like this is gonna be an amazing investment, but I think it's a shortcut. And there are still things like and Ron, you know, that happen. - The other side of that and like maybe back to Chris' point about like watching, okay, if you're gonna find that your rare fund that's gonna do well and kind of, you know, emerge from everybody else out there. For me, my shortcut, if you will, is really feeling like that operator has a deep understanding, right? From the financial perspective as well as the asset perspective, right? Whatever it is that you're hawking, whatever it is that's out there, you might understand the industry, you might understand the assets, but seeing a lot of operators that don't understand or don't understand the financial component of it well enough. And I don't know that we ask those questions as frequently as we should, but when you're going through a business that's small and that that is gonna grow, they're not gonna have that great accounting team. They're not gonna be able to afford the fancy auditor, like those sorts of things aren't gonna be there up front yet. And so you are relying upon them to have their arms around that financial piece or someone on the team closely that can at least for those first maybe, I don't know, 12, 18, 24 months. That gets them to the point of now, you can go back to 2020, 2019, right? There's a reason why somebody who was around then survived until now and part of it, I think is that component. Okay, I will not talk about financials anymore. Clearly that is not the topic of choice. (laughing) - You hit us with a fraud triangle to start out. - When there's an opportunity, you can. (laughing) - Let's pause for the short break. We'll be right back. (upbeat music) - We're back. Let's wrap up this conversation. Talk a little more, Christie, I mean, like, Christie, it's not a lot. And I, you know, I get the cliff notes, right? But like, just shine a little more context on just, you know, we've worked with a handful, different third party admins, right? And just the frustrations and, I don't know, there's not repeated mistakes, it seems. - Let me say this first. So I know you guys have all three history with being business owners, business management, that sort of thing. And so business management, there's a component of that and just being good at managing your business. Then I think it's critical to the overall success of how you are gonna become an operator if you're gonna have a fund, if you're gonna become a syndicator, right? Are you good business manager? So I just wanna throw that out there first, 'cause I think that that's also important. But to bring you back down just to the fund admin perspective, the industry is very used to quarterly. I'll just kind of start with that. And can monthly financials, can daily be done absolutely? And in the, you know, larger market, market, the larger private equity out there in the world, of course. But when you're in the middle and you're talking about people that are tapping into accredited investors as an equity source, you're talking about a middle band, right? And the fund admin that's accessible to them, right, that they're using when you are under a certain AUM, when you don't have a certain track record, maybe as it is, I've not found that fund admin to be great. I have found there to be a lot of the holes in deficits and in that it's kind of because either they're coming at it from an approach of just too big and not really bringing it down to the level of at the end of the day, there's an individual LP with a $200,000 or $100,000 investment here whose distribution should be accurate. And looking at things down to that LP level and ensuring that your financials truly tie down not just that they look good at the aggregate level, I have found that to be missing. And I have found that to be a place where there is a lot of room for improvement across the industry without getting too we did. That is very well said. It's just been, it's been just a fascinating world to go through all the, you know, the nuances of fun admin portfolio updates of my end. Yeah, Chris, what are your portfolio updates? I'm glad you asked Pascal. So nothing big, but about once a quarter, I'll kind of talk a lot of times right now, I'm sweeping a lot like my retirement counts the traditional side and in doing it like Roth conversions, right? So it'll be two, three, four months of, you know, like, oh, I'm monthly contributions and then you know, distributions that kind of come back and there are a lot of times I'm just converting over. So it'll be like, you know, 20, 30, $35,000 chunks of the time, you know, doing that right now, I got to actually transfer it today or tomorrow and then convert to Roth. I'm up one of the, the debt positions I'm in. But it made me want to bring up the question because I always debate this, right? Okay, right, I'm doing a lot of Roth conversions, just kind of doing the straight cash conversions because it's, it's small amounts. And every time I do it like I do the math, I'm like, all right, I know I'm longer, I make way more money, but it like it, it hurts every time I do it, right? But I always go back to a long term, like I don't see my tax bracket glowing, hopefully my income trajectory, you know, remains on a good trajectory and also just where I think, you know, the government's going. I mean, Colorado has a tax or a ballot now to go raise income taxes, or I think we'll see more and more of that across the federal and moral states. I think that's just going to be the nature next few years. I go back to like, okay, it stinks now, but I think it'll be more painful later in terms like paying taxes. Are you guys got any thoughts on that or doing Roth conversions? So the reason why I moved to Florida. I literally had this conversation with a friend of mine over the weekend who just moved here from Florida. It is high income W2 earner and he was like, my move back to Florida. So Colorado's potentially geared up to have an increase in the income tax based on income level. So I think I'm in the same boat with you, Chris, and probably doing some of this similar stuff. I am still going down the road of continuing to do Roth conversions each year with the idea of where I'm focusing. And this is a new strategy that I'm taking up this year is doing the conversion on portfolio investments where I can get a valuation on them that's going to be beneficial to me and actually doing that conversion. So hey, I invested 100K over here, but I can get a valuation that says that's only worth 70K today. Cool. Now I'm going to convert that. So that's what I'm looking at. I guess I looked down the road at kind of future income. All of those sorts of things. And I think my expenses are only going to go up once my kids hit college age and that sort of thing. And I was an older parent. So I'm going to be like being able to pull on my retirement the time that my children are in college. I'm in it for the long game. And I'm fine with what I need to pay for right now, at least based on the picture I see around me completely agree. I asked myself one question, do I trust the government? I do not trust the government. What? I want you to think of this way, right? There's think about the average person you know, right? Who's that average person you know? You know, don't say Chris, right? But the average person, you know, 50% of people are dumber than that person. And then below those 50% are the politicians that run our country, right? All of them, both sides, right? So you got average, you got 49% of dumb people below that. And then you've got the politicians in at the bottom. Absolutely not. Do not trust the government. I want to get taxed today and stop them from touching every dollar I can. So that's a silly way to say absolutely conferred as much as you can. I have no desire to have anything tax when I'm 65. Are you doing like the fair market valuations on vestments or you just convert and cash? I split them. So like I sometimes I think about the fair market, but that's a lot of work. Like I wish I had Christie's brain to be able to do all that. I think this was total cash. I don't know what I did last year. I need to look, but some of that stuff is very, very convoluted. And for me to understand, I'm not as smart as Christie. So it's just like how do I convert it into the same damn fun that it was in? One of my worries too is that just adds another layer of friction to my plan. I know from my investing. If I might kind of that stuff now, like kind of like autopilot, I try to like just say be mythology, sweep it, invest it, run my deploy this, you know, chunk every 90 days or so. If friction's added, that money just ends up seeing my checking account, right? And I'm like, ah, it's at least put it somewhere, right? So I try, like for me, it's automation is helps me a lot. And that's kind of the big reason I lean towards that as well. A lot higher easily when I have, but I primarily use it to invest in crypto. Yeah, it's a long-term investment. My crypto isn't cash. I do a thousand dollars a week into Bitcoin. I don't do anything else, but it's just cash. It's not even a cold storage so you can come hack me for my money if you. Oh, you're brave to send it out there, man. Yeah, good. Whatever. Spain takes half my money as we might as well take the rest. Guys, another great episode. Fun debate, fun insights. I appreciate everyone's time. And you guys, you know, I'm just sharing, sharing your thoughts and sharing portfolio updates. So it's a big thank you. Thanks Chris. Thanks guys. Yeah. Good to see you guys again. Those fun guys. Thank you. All right. A big thank you to Adam Pasquale and Kristief coming back on the show and talking more shop with us. Look, if this conversation gave you useful framework for reviewing your own portfolio, do me a favor. Make sure you like and subscribe to us on YouTube and then head over to passivepockets.com to join the community or go get some deals that we have on the platform as well. As always, thanks for listening and happy investing.