Episode Summary:
Overview of Episode 85
Ron Phillips started wholesaling and flipping homes 25 years ago. Eventually, he pivoted into rentals after HUD regulation changes. He embraced out-of-state investors and scaled turnkey operations before the term existed.
By 2005, his team sold 250 properties in Kansas City alone. After that, they expanded into new markets like Omaha and Oklahoma City.
2008 Crisis: A Crash Course in Survival
All of a sudden, the 2008 housing collapse changed everything. Ron shifted strategies again, focusing on auction properties in overbuilt markets. Meanwhile, Jack BeVier sold turnkey properties in Baltimore for cash flow, not appreciation. Both navigated through thin retail markets and skeptical lenders. At that time, cash buyers ruled the courthouse auctions.
Early Real Estate Syndication Lessons
Afterward, both hosts raised funds to scale investments, encountering resistance and patronizing advice. If investors didn’t trust the math, they dismissed the deal entirely. Eventually, they learned to persevere and sharpen their messaging. Not only did they survive, but they also built reputations as operators who delivered.
Misunderstood Boom: 2013–2020 Growth Explained
Following the crash, home values surged in unexpected ways. Government interference distorted appraisal standards and slowed recovery. However, once construction returned, demand quickly overwhelmed supply. COVID then supercharged that pressure. Consequently, rents skyrocketed, blindsiding even seasoned investors.
Today’s Office Market Mirrors the Past
Jack drew a parallel between post-COVID office buildings and post-2008 homes. If no new offices are built by 2030, today’s Class A buildings could become prized assets. Nevertheless, the outcome depends on lending stability and remote work trends.
The Hype and Hysteria of Pre-Crash Events
In earlier buying events, crowds threw checks to reserve pre-built properties. By comparison, today’s investors act far more cautiously. At the time, properties sold faster than developers could build them. Indeed, speculative flipping fueled the overbuilding in Vegas, Phoenix, and Florida.
Real Estate Syndication: The Modern Reckoning
Syndications flourished in recent years—but not all were ethical. Evidently, many sponsors bought at aggressive cap rates and faked pro formas. As a result, rising rates and mismanagement caused painful failures. Furthermore, some syndicators co-mingled funds across deals.
Where Ethics in Real Estate Syndication Draw the Line
Another key point: Ron distinguishes between honest mistakes and outright fraud. If a syndicator is transparent and still working, they deserve grace. Conversely, those hiding failures or raising new money to plug old holes are unethical. Eventually, deception leads to lawsuits and, possibly, jail time.
Investor Due Diligence and LP Frustration
Before investing, both Ron and Jack advise verifying the operator’s track record. Also, many limited partners (LPs) now vent inside private Facebook groups. After all, transparency is rare in the private capital world. Jack stressed: most people lose money in syndication because they trusted the wrong people.
The Emotional Toll of Real Estate Syndication Fraud
If a syndicator steals funds, justice is slow and expensive. Accordingly, victims carry emotional scars for years. At length, Ron vowed to pursue accountability out of principle. By the same token, Jack admitted the personal toll of litigation and betrayal.
Current State: Real Estate Syndication Volume Is Down
At this point, few deals pencil out, and even fewer get funded. Both sponsors and investors are licking their wounds. Unless pricing resets or cash flow improves, volume will remain low. For this reason, real estate syndication is in a holding pattern today.
In Conclusion: Real Estate Syndication Still Holds Promise—If Done Right
Despite recent turmoil, real estate syndication remains a viable model. However, it requires ethics, experience, and transparent communication. Otherwise, investors may repeat mistakes of the past.
