69 Hughes Private Capital Funds

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69 Hughes Private Capital Funds

Wendy Sweet (00:01):
Now we are!

Bill Fairman (00:04):
You know, we do this all the time. We think we’re live and we’re not.

Wendy Sweet (00:07):
It feels like I am.

Bill Fairman (00:07):
Apparently we’re live now. And then of course, Wendy needs to turn her phone off too.

Wendy Sweet (00:13):
Sorry. That was really rude.

Bill Fairman (00:16):
Professional as you know. Bill Fairman and Wendy Sweet of Carolina Capital Management. Thank you so much for joining us this afternoon. Don’t forget to subscribe, share, like. What else?

Wendy Sweet (00:31):
Twitter. Twatter.

Bill Fairman (00:35):
Definitely subscribe to the show! By the way, you guys can ask any questions you like. You just put it in the chat box. And if we have time, we will definitely go through those questions. We have a great guest today. Our friend Greg Hughes. He is from, and by the way, he’s doing us a great favor being here because he’s out in Nevada. So it’s a little early in the morning for him.

Wendy Sweet (01:01):
It’s not that early Greg!

Bill Fairman (01:03):
He’s in one of the great parts of Nevada where they actually have trees and grass.

Wendy Sweet (01:07):
That’s right! And the early bird gets the worm. So he’s got lots of worms.

Bill Fairman (01:11):
So, welcome to the show, Greg!

Greg Hughes (01:15):
Thank you guys! Yeah. Good to be here. So how did you know how to say Nevada? Nobody says it right. Unless you live here.

Bill Fairman (01:23):
Really? What did they say?

Greg Hughes (01:27):
No, it’s not “Nev-AH-da”. It’s “Nev-AD-a”. Congratulations you guys! You know how to say it.

Wendy Sweet (01:34):
I think it’s five points for that.

Bill Fairman (01:36):
We are a world traveler.

Greg Hughes (01:40):
Pretty big time.

Bill Fairman (01:42):
Puerto Rico. I’m a world traveler. So we’re focusing on you, obviously.

Wendy Sweet (01:52):
Since you’re the only one here.

Bill Fairman (01:55):
That would be helpful. So you’re a turnkey provider and you have a opportunity for people that can and we’ll explain what a turnkey provider is. But, why don’t you give us a little background on how you got started and what it is you do and where you do it and all that good stuff.

Greg Hughes (02:15):
All right. So we’re based out of Reno, Nevada. And yes, we have trees here, which is pretty cool. High desert. So it’s hot sometimes during the day, but always cools down at night with everything. But, you know I’ve been in the business now for 11 years and the way I got into this is prior to that. I met a friend. Well I had a friend. And. Well, this is going to be rough, isn’t it? But we started doing hard money lending. So that’s how I knew about that. And in 2007, we started the business when everything was crazy and we were doing all vacant land. And in that little short period of time, 18 months, we raised $65 million. Because you know, real estate couldn’t go back, right. And then we all know what happened. So at that point it was things started to melt down. Him and I didn’t see really eye to eye. And so I had built a fund for him just before we left first time ever, you know, spent the time with the attorneys doing all that and then went to start Hughes private capital. And so, but part of that was I was an investor in most of the things that we were doing.

Greg Hughes (03:32):
So I was always putting money in and being an investor in. And you learn a, a real fast lesson that vacant land does not produce you any money. In fact, it’s an expense, right? So and one of the, the, one of the big pieces of vacant land, which was 21 and a half acres up by Squaw Valley, very famous ski resort. Very, very high end stuff. Was one of them that we took over. And I say, we, because my partner, Steve Sixberry was an investor in there as well. And so we ended up taking that over and having to foreclose on it and taking it back. And, but we had 65 other investors that were in there and that took six years of our life to do that. And you know, at the time it was appraised at $37 million. And when everything melted down, people are offering us about four, four and a half million.

Greg Hughes (04:30):
We have lent $11 million. So one of the lessons that we learned from that was gee, we really don’t want to do this sort of stuff on vacant land, you know. So we started a different fund which was all about doing lease to owns. And we did it in Reno and we did it in Las Vegas. But we always stayed in what we call the kind of the affordable housing, the core rental market. And then that just Rue from there, that was our first fund. That fund is still going today, but it’s not, we don’t take any new investors. And then, so lots of things happened over the 11 years. And we did different types of stuff. But in the last about, it’s been almost four years now. We started buying homes in the Midwest. And what we really, really like, cause those homes don’t go up and down a value a whole lot.

Greg Hughes (05:30):
Which sounds sort of funny, cause you’re buying real estate and you always think of appreciation, but it also doesn’t get hit. Like we got hit, you know, say here in Reno, I mean some places, especially Vegas too. You might’ve lost 50% to 60% of the value of what you bought. Right? So that’s what, that’s kinda got. That’s how we got started doing all of that. And Steve, who was an investor at the time and they helped me to get rid of that other piece of property with our other investors became my partner. And then that’s how we, we started doing what we’re doing today.

Bill Fairman (06:05):
Excellent! I do love the Midwest because of just what you were talking about is that values don’t go up very quickly. They don’t go down very quickly either. You’re not really looking at these properties for appreciation. You’re looking at them for cash flow. And that seems to be the sweet spot there and in parts of the Southeast, I believe as well. How difficult is it for you to manage those properties from where you’re located?

Greg Hughes (06:43):
Well, they’re just 1500 miles away. No problem at all. Sometimes they need something. So I drive out there. Well, so we’re, so we buy the houses right. And we rehab them. And so we try to bring them up to a pretty high standard. But these are the affordable homes. So out there we’re buying homes in the, you know, $7,500, $125,000 range or so. Again, you know, you always learn lessons and sometimes the lessons come harder and easier to you. Depending on how it goes. But we’ve, today we’ve got about 780 homes in the portfolio. By the time we hit about 300 is the time that we started to put our own people on the ground out there. So as of today, we’ve got a little bit over 60 people that are full time employees with us on our team.

Greg Hughes (07:39):
And 20 of those are out in the Midwest area. So we’re in three cities in Ohio. So it’s Cleveland, Akron, and Toledo. And then we’re also in St. Louis in Birmingham. So those are the main five cities, but we had to hit an economy of scale to sort of be able to afford, to put our own people on the ground out there. So we have now in each one of those cities, we have our own real estate brokerage. Our own property management. And our own construction management. And that’s night or day. And it’s really the difference between being successful or I could say failing because literally, before we were doing that, it’s a tough, tough deal to rely on third party. Especially property managers. Hate to throw them under the bus, but it’s just, I, you know, I, I think everybody’s got their stories right. Stuff, you know, and it just, it’s just a really tough deal. So that’s how we ended up managing. So the other 35 or so people that are on our team are here in Reno, they do lots and lots of stuff from Reno, but we always have the people on the ground when we need them. And, you know, be able to actually, you know, make all that stuff happen. So, yeah, that’s okay.

Wendy Sweet (09:00):
Acquisition people in both places like in Birmingham and in the Ohio area, do you have acquisition people there or are they all working out of the Reno office?

Greg Hughes (09:12):
Well, most of the acquisition people, what we would call our acquisition, people are in Reno, but they’re always utilizing our team members that are, you know, on the ground there. Cause obviously we’ve got to be able to see the properties. We’ve got to be able to figure out what the rehab is going to cost us before we buy it and all of that. So again, what we’re, what we’re really looking towards doing is building a very sustainable model. You know what a BHAG is? Yeah. A Big, Hairy, Audacious Goal, right? And our BHAG is 23,000 homes. So, that’s a lot of homes, but it’s doable. You know, it’ll take time. And in some respects, it doesn’t matter whether we get there or not. But what we do want to do is be able to build it so that we have, you know, into the thousands of homes, because that becomes very sustainable type of business model that, you know, no matter what, we can always be managing those. And if you were doing nothing else you have enough homes under management that, that pays the bills for taking care of, you know, taking care of that. And we’re thinking, we think very long term with this fund because it’s, it is a buy and hold. And so we’re talking 20, 30, 40 years in the future and there’s just, there’s no plan to turn around and sell these properties because they just keep producing. Right? People say, well, what, won’t the houses get old? I’m like, they’re old now! Years on them. They’re still going to look just as good, you know? So…

Wendy Sweet (10:54):
How do you choose the areas that you go into? What are some of the, what are some of the guidelines in an area that would peak your interest in that particular market?

Greg Hughes (11:07):
Well, we call it a rental matrix is really, I mean, it’s probably not really what it is, but that’s what we call it. And so it’s really, our buy box is what it is. So we’re looking and we’re, it’s a simple deal, right? You’re just looking to say, okay, I can buy the property for this. I can rehab it for this and I can rent it for this. And then, you know, taking into all the consideration, whether you’re paying for sewer or it’s part of, you know, this or that, or, you know, et cetera, et cetera. And then we’ve just, we’re looking for a yield and, and by the time we’re done, we want to be able to have a yield to our investors of somewhere between about 7% and 9% before the depreciation side of it. And that’s a way that we put everything together.

Greg Hughes (11:52):
I’m looking at that. So, you know, those properties again in the Midwest, you can’t do that here in Reno. You can’t, you know, I get a little bit better than 1% of, of rent than compared to the value of the property. Sometimes more than that depending on the, the, the value of the property, you know, in Reno here where we would get, not 1%, we’d get maybe half a percent. Probably be break even, and we wouldn’t have any cash flow. And then you’d just bet the farm on appreciation, which, you know, a lot of times that pays off, but you know, you also gotta be smart enough to figure out exactly when to buy and when to sell. And that’s the other thing I think people always miss with appreciation. Maybe you can kind of figure out when to buy and do a lot of that stuff, but who’s the say when you’re going to sell it is the right time, you know, you might be forced to sell it at a certain time. So you know, I, we, we will get appreciation on these homes in the mid West, but it’s a little tiny bit it’s, you know, 2%, maybe 3%, but you got to hold them for a long time too. You know, they just don’t, they don’t have those big, well, they don’t have that. Volatility, you know, I guess is it’s so funny because 10 years ago, 11 years ago, maybe, you know, all of us would’ve said, there’s no volatility. Now there is!

Wendy Sweet (13:16):
That’s so funny because what you’re referring to, I call it excellent.

Greg Hughes (13:23):
Have I been that inspirational to you that you choked up, Wendy? I love it.

Wendy Sweet (13:28):
He just wanted to hit me. Is what it was. So I call that gravy or the cherry on top. And I tell people never, never, never buy a house for the gravy or the cherry on top. It has to stand on its own. Like you’re talking about with the, with the revenue that it’s bringing in. And, but, and I’m just, just curious, are you looking at the employment in the area. What the median income is. The cost of living. Do all of those things make a difference for you when you choose an area to go to?

Greg Hughes (14:01):
They do, you know, you’re always looking at that. I mean, your main thing really is to know that not only can you hit the numbers that we talked about, but you have the domain, right? That’s it, it doesn’t do you any good to get the property and then not have the demand for the rental side of it. So we’re always looking at all that stuff. We also, you know, every city you’re in, you’re buying in multiple neighborhoods. And then of course being in the five cities really helps us to have that diversification. Cause I, I actually do think that’s probably the biggest risk that we run is that one or more of certain neighborhoods just lose the demand, right. And employer leaves, it really is instrumental or something like that. And it’s just hard then to rent those properties out. You’ll have to drop your price and do all of that.

Greg Hughes (14:52):
But you know, that, that’s another thing that we do is you look at the, we call it the stress test, right? You stress test what’s going on. Which is super easy. All you do is take your, if you’re getting $850 today, you say, well, what happens if I can’t do that, right. If I can only get 600, you know, what’s out look like, and you know, we usually, when we run those numbers, you can be anywhere from believe it or not 20% to almost 50% of last rent and just hit the break even point. So, you know, there’s a lot of room in there now that drops, you to turn down, but you’re at least not losing money. And you know, if you’re not forced to sell the properties, hopefully that neighborhood will start to come back or whatever. Right. Then you can just hold onto them. So that’s it. So, yeah.

Bill Fairman (15:40):
So, Don Harris has a question for you. And I think you may have covered it earlier. How many doors do you have now?

Greg Hughes (15:49):
We have 708. And we’re bringing on between about 40 to 50 more each month as what we’re doing.

Bill Fairman (15:56):

Wendy Sweet (15:57):
That’s not bad!

Bill Fairman (15:59):
So we talked about you know, scaling earlier anyway. So a lot of people in this industry choose multifamily properties because it is a little better to manage a lot under one roof versus, you know, kind of being spread out in single family. Is there positives and negatives to that? I know the values of each door are going to be higher in single family, but does the rent that you, do the rents offset a little bit of extra expense of being spread out?

Greg Hughes (16:42):
Yeah. You know, sometimes we’re accused of always doing things the hard way. And I think that accusation’s pretty accurate. You know, sometimes I do wonder about that and but I guess the other side of that really is we’re, you know. We talk a lot of times about efficiencies and inefficiencies and, but within the market, right. So in other words, the stock market is a very efficient market. Very difficult to outperform other people that are in there. And then you go to the, kind of the alternative investment market that we’re all in. Right. And there’s a lot of inefficiencies there. And that’s what gives us a leg up on a lot of things. But then even within that market, what can you do to be, you know, something that is less competition and that, that is partly why we’re, we’re going that direction.

Greg Hughes (17:37):
There’s a lot, lot more competition on the multifamily side of the business with obviously very, very large players that are out there. Doesn’t mean you can’t be really successful and work that, and you know, maybe someday that’s something we’ll do too. But as of right now, we really like the single family. The other thing is just kind of interesting because you don’t think about this quite hard as much, but, you know, with everything that happened with Covid. And people having to hunker down, you hear about some people actually leaving apartments and trying to get into single family homes to just, you know, because of that problem. Now this is probably all temporary or let’s hope it is. But you know, that, that’s another thing. There’s nothing like having your own home. So and I think sometimes you get a little bit different tenants and all that sort of stuff, but yeah, it just, it ended up being a place that we started to go down the path and really liked it and liked what we saw. And we just see a little bit less volatility in there as well, but it’s a lot more to manage. There’s no doubt, you know, it’s more,

Bill Fairman (18:47):
Yeah. The reason I bring that up and that was, you know, back in 2011, 2012, I guess. The big hedge funds came in and started buying up all the single family foreclosures in the suburbs. They started paying way too much for them. So the you know, the individual fix and flippers or the buy and hold people, they kind of stepped back and said, you know, I can’t compete with this. I’m going to have to go into another area. Cause they were paying way more than they should have for them. And you know, in the back of my mind, I’m going, alright, so they’re paying too much. And now they’re going to have these extra cost of managing far-flung empires as it were. And I said, there’s no way, this is a good model. Well, I was completely wrong. Number one, their cost of capital was pretty low.

Bill Fairman (19:42):
At the same time, there was a huge appreciation in these areas that they went into. Now they’re sitting on property, that’s worth a ton. And the timing right now is great for, first of all, there’s not enough single family housing out there. The demand is very affordable arena. And if you look, and this happens all the time, cause it’s very cyclical. Multifamily will be low. There’s demand. They don’t have enough properties. Then they build like crazy and then they oversupply the markets and then they’re competing with each other because they’ve got all these empty apartments. We’re in a position right now where there’s an oversupply of multifamily in most markets, especially if you’re in a larger market, because again, people are trying to get out of the apartments now, because of the COVID. And so you’re going to see a bunch of A-tight properties or A-class properties and their rents are going to be now the B and the B plus rents. So that’s just going to trickle down and hurt everybody else down below. So I liked the single family. I was just going to try and get your perspectives on it. Perspective. It seems easy for me to say. But that you know, it, it is a great market. It’s more stable and you’re right. There’s fewer people in it because they don’t want the hassles that we just talked about.

Wendy Sweet (21:12):
You know, Greg, I love that you are in the buy and hold arena. You were on the freedom founders call on the meeting we just had when we had the opportunity to listen to Dan Kennedy, you know, the legend. You know, just, just share his wisdom with us. And one of the things he really, really harped on was turning your income into wealth. That it’s really important that we do that. And you do that through buy and hold property. There’s the, it’s almost the, it’s the best way to make that happen. So, what I really want to get into a little bit more about is your financing. How you have your fund set up? How is it, you know, how is it that somebody raises $65 million? I want to know. How is it that, that, you know, what positions do people play that are in your financing arena? Tell us how that works.

Greg Hughes (22:22):
Well, that’s kind of interesting. I think maybe what we should do is, and just so you know, the 65 million was back in 2007, so I’ll give you a quick, let me give you a little bit more background on our stuff. So, so we run a real estate investment. Okay. And we, it’s actually the name of it’s called the Guardian. But Guardian, the life insurance company sent us a letter saying, can’t use that name. And we are, we said, and the letter came from a New York attorney. So we said, okay, we’ll use that. And it’s still called Guardian, but that’s just on the backside. There’s a buy and hold on that. Okay. So the buy and hold fund got about 25 million or so of properties inside of it, but we have another 20 million on top of that. So what we do is so, so the buy and hold fund is simply, it’s pretty straight forward, right?

Greg Hughes (23:18):
I mean, we buy houses, we put them into the fund and that’s where they sit investors, you know. Right now the buy and hold funds is paying about eight and a half percent. Plus you’ll get the depreciation. So you might get another one, one and a half percent, you know on your, on your return. But the other thing that we do a lot of is what we call a secured portfolio. And you can do a secured portfolio, a couple of different ways. Now you guys call them turnkey. We use the word turnkey because we do it so, so differently with this sort of stuff, but say, somebody wants to come in and they want to finance. So this is going to go a little bit, your direction, but it’s more with the individual. They want to finance the properties. So what we would do is we would sell them a property out of the fund or multiple properties. Most of the time, it’s multiple people can get a beautiful Fannie Mae, 30 year, 4%.

Greg Hughes (24:15):
Loan today on these properties. But you can only use, you can get 10 of those per person. So if you’re narrowing, you might be able to get 20 if your spouse qualifies. So they come in, we would let, let’s just say, we’re gonna sell them eight properties. We’re gonna sell them eight properties. They get the financing on it. And most of the time, what we find is they get, we try to do it on a kind of conservative basis, basically about for every dollar they’re going to put in. They can buy $3 worth of property on the deal. And then once they get the financing done, what we do is we actually lease the property back from them. And so we take over all the responsibility on those properties. And so the only thing they have as an expense is the ownership insurance.

Greg Hughes (25:07):
Other than that, what we’re going to do is pay them a set monthly income on that property. And then we’re going to take over everything else. So if the property is vacant, it doesn’t matter to them. We’re still going to pay them that set monthly income. If we got to fix a hot water heater, we go out, we fix it and we pay for it. And that’s the deal because we’ve leased that property back from them. And then of course, you know, we have a tenant in there that’s paying the rent on that. So, then that part goes into that other side of the portfolio, not in the fund, but in what we call a secured portfolio. And we call it secured because their name’s actually on the title of those properties. And then we just manage all of those. And then another big piece of all of that is that we do 1031 exchanges.

Greg Hughes (25:56):
So somebody wants to sell an investment piece of property, not want to pay any taxes, which we pretty much all want to do. And they come in and do the exact same thing. So they’ve sold the property for a million dollars. They come in, we get them X amount of homes. If we’re going to do some financing, we’ll do the financing and then we lease those properties back. And then those all go back into the portfolio. So that’s 780 owns is the entire portfolio. And that’s what sort of gives us all the consistency of the return, but also the safety too, as well, because we’re very well diversified in geographical areas and everything else on that. So, that gives you kind of a background of the way that we work all of that. Now, from a financing stand point, is actually really kind of hard for us to get financing for the fund, because that’s where we would be getting the financing.

Greg Hughes (26:53):
The other financing is just happening with the individuals. And when the individuals go get the financing, this is kind of an interesting thing. Cause we know that, you know, that, that part of the financing so cheap today, right? Is they can usually increase their return by about double. So they’re going to make anywhere from 12% to 16% return on those homes. And they’re not going to have any landlord hassles or anything else that come along with that. So from our stand point, it’s always been a challenge because we’re sort of that strange in between when we buy a lots of single family homes. And we actually did this with our first fund. And we all even go back to that one for a few minutes, we probably went through a hundred banks to try to get financing.

Greg Hughes (27:46):
Cause we needed a longer term financing at a lower price, you know, cause for like compared to what you guys do, your more short term. Perfect sense. Like if I’m flipping or doing something like that, that makes perfect sense. But for us, we had to, we had to look for more longterm and then we would be put into sort of the residential part of the bank, but then really the commercial part of the bank. And they never knew what to do with us. And so over the period of time, we ended up using a one company called five arch. Wasn’t a bank, but kind of, I always call them private equity. Five arch as you guys probably know, got bought or acquired whatever it is from Corvettes. And so from our perspective, that’s where we’ve gone now. Those terms are never as good. For us, we just did about a $3 million deal with them and we got it at 5.9%, I think, but it’s, that’s not even, that’s okay.

Greg Hughes (28:48):
I mean, that works pretty good for us that can help to increase our return. The bad part is, is it’s only a 10 year loan. So it’s amortized over 30 years. And we were able to actually for us, cause we’re cash flow, we were able to get the interest only on that, which was great. But then it has a six and a half year prepayment penalty. And so, yeah. Yeah. So, you know, there’s some commitments going into that and at the same time, I don’t know what, you know, I know 10 years is a long time, but we also know it’s not very long. 10 years look like, right.

Bill Fairman (29:27):
Murphy’s law is that, when you have to refinance, you’re not going to qualify.

Greg Hughes (29:34):
It’s always the same thing when you need the money, you know, nobody wants to give it to you, you know, same old stuff. So yeah,

Bill Fairman (29:42):
I know this is kind of in the weeds for fund managers here for us, but are you, the pieces that you’re selling off, are you putting that, that part of the portfolio in a special purpose vehicle? Or is it just a separate entity, but it all works together as a group?

Greg Hughes (30:01):
Yeah. It’s not even a separate entity because what ends up happening is those homes are titled in the people’s names. So, and that’s required with the 1031s anyways. That’s actually how we got going on that part of it. Cause we started trying to figure out how to do the 1031s. So we don’t really end up putting those into a separate entity. So you have one, right. And then all those are just basically leased back from each one of those, those investors.

Bill Fairman (30:32):
You’re the master lease holder.

Greg Hughes (30:34):
Yes, exactly. We do a master lease that’s right. Yeah.

Bill Fairman (30:37):
All right. Yeah. Well that makes sense. And that gives people that want the peace of mind of having a, you know, a deed of trust or, or a mortgage or ownership if they pay cash. Versus being in a fund. You still, and this is the beauty of your fund as well, is that you still get the appreciation because when you’re in a fund, you own the assets in the fund, you know, your percentage of them. And so the properties still get depreciated either way and you still get the same tax benefits of being in the fund or not. So on the fund side, it’s an open ended evergreen fund. I’m assuming.

Greg Hughes (31:18):
It is. Yeah, exactly.

Bill Fairman (31:20):
So, is it an accounting nightmare for you to have people going in and out at different times and figuring out what their equity and stuff would be at the time they exit?

Greg Hughes (31:33):
Bill you’re throwing in a, that’s a really big question! That has been what would I say debated for the last 11 years since we’ve been open as a company, because even our first fund kind of fell into that. And so, and really, you know, the answer to that is probably more than what we can really cover here because you’re talking about setting or striking a net asset value for all of it. There’s no way we could do. Just think of 780 homes. Yeah. Okay. And Joe wants to get out of the fund, so let’s go appraise all 780 homes. Right? By the time you get done, you’ve got to start again because, you know. You know what I’m talking about. Yeah. Yeah. So we just look at it from a cash flow standpoint. And, you know, and again, since it’s such a long term deal at some point down the road yeah. Probably it will dismantle and you will sell off either pieces or all of it at some point. But yeah, it’s just, it’s just not a really easy thing to do to, to strike that nav. But yes, I don’t know how well I answered that question.

Wendy Sweet (33:00):
That was clear as mud!

Bill Fairman (33:06):
We’re kinda, we’re simple folk over here. So…

Greg Hughes (33:11):
Well stop asking the hard questions!

Bill Fairman (33:16):
A lot of people will do a closed end fund when they own property, just to make it easier on the side and then do the open-ended funds when you’re doing lending, because it’s easy. There is no value unless you made a poor decision and now you own some property. And that happens. And sometimes it’s not a poor decision, it’s just things happen. Listen, that’s a great opportunity. There are a lot of funds that own property in it that you have to keep your money in for a certain period of time. And you don’t get the benefit of you know, your payout until the end of that period. Right? So while you may not get the same type of equity play in a closed end fund, at least you’re able to go in and out and be able to get money right away and start earning. And you can’t do that in those closed end funds. So…

Greg Hughes (34:18):
They all kind of play a different, different role. And yeah, I mean, that’s one thing we didn’t mention is, Oh, within 90 days, are you, if you want to get dollars out of our fund, you just give us a 90 day notice and then we’ll get the dollars out. So you know, that gets a bit different too.

Bill Fairman (34:38):
No, what I meant by that was, you’re getting cash flow right away.

Greg Hughes (34:42):
Exactly. You’re getting cash flow too.

Bill Fairman (34:44):
You’re not getting a whole lot of cash flow. You’re kind of waiting until a payoff. Yeah. Some sort of action takes place. That’s either a value add, say for an apartment complex where you’re going to refinance and pay your investors out that way or your value add where you’re going to sell it. And that’s where the payoff comes in. And at least with this it’s ongoing cash flow when you get in. So…

Wendy Sweet (35:10):
I really love the way you have taken this and turned it into a great option for 1031, because, you know, we get calls all the time, people that are just in a hurry to try to identify properties and get that 1031 taken care of within the time frame that they have to do it. That you’re like a shooting fish in the barrel with that, because it’s, it’s just perfect. I mean, look that if you’re getting 40 new houses a month, look what they have to choose from. And it’s just, it’s just amazing that, I mean, anybody who has a 1031 exchange to do, I wouldn’t think twice about, you know, picking up and picking up the phone and saying, Hey, Greg, what’d you got?

Bill Fairman (35:56):
So your list consists of, and I’ll say Rolodex, but nobody has those anymore. Your list is probably full of a bunch of 1031 exchange administrators. Right?

Greg Hughes (36:10):
It is partially believe it or not too Bill, we just started our own 1031 company as well. Yeah. I figured that that would actually, you know, really work into the whole mix. So yeah. Yeah. But we, we really use one 1031 company here in Reno. Until we we’re just now getting our own started for the most part. But most of the people find us not through the 1031 companies. They find us through mainly our marketing and, you know, the things that we put out there or, you know, referrals and all that sort of stuff. But let’s talk the 1031 just for a second, because I do think this is always an interesting thing.

Wendy Sweet (36:51):

Greg Hughes (36:52):
We solve a real problem! So here’s the problem that we see happen or here’s the challenge, whatever you want to call it that we see happen all the time. Somebody has owned a piece of property for a long time, right? I mean, they bought it 20, 30, 40 years ago, maybe even inherited it. Whatever! But they’ve been there and they have done that, you know, type of thing. And they’re so sick of it. They don’t want to be traveling. They want to be enjoying their life. They don’t want to be getting phone calls on whatever it is, you know on any of that sort of stuff, but they don’t want to sell it and pay all the taxes cause they they’ve gained all these capital gains. They have all this depreciation to recapture and so they sort of feel like they’re stuck.

Greg Hughes (37:36):
And what we do is able to solve that for, because on top of that, they’ve got all this equity, we call it trapped equity. Inside those properties. And it’s not working like it should for them. So, what ends up happening is if they sell that property, do the 1031 exchange for us, it’s super easy because we sit on millions of dollars of these properties so we can identify them within, you know, I mean, literally we can do it in a day. But and then what’s, what’s so interesting is not only do they get rid of all their landlord hassles, but they usually double or more of their net income that they were making because all of that trapped equity was in their investment property. So I mean, it’s like, you know how, well it’s always the old deal of a, it sounds too good to be true, but I mean we do this every day. Right? You know, so it really does solve that problem for people. If they, if they’re, they’re kind of done with it and you don’t want to pay those taxes and move on.

Bill Fairman (38:42):
And the benefit to that is, is I don’t have to pay the taxes on this, let the kids worry about it. When they inherit it.

Greg Hughes (38:51):
Yeah. They get the stepped up basis. So if you’re really smart, you’ll leave your real estate, right in your state. And you never pay taxes, right? Yeah.

Bill Fairman (39:02):
Well, we are getting close to the wrapping this thing up, Greg, tell people how they can get a hold of you for the fund or if they wanted to do the, we’ll call it a sale, lease back.

Greg Hughes (39:17):
Sale lease back. Yes. Alright. Well certainly you can go onto our website, which is, there you go! It’s up on the screen. HughesCapital.com. That’s one way. My email address is Greg@HughesCapital.com. And a telephone number to call us is (775) 234-4001. So those are all the ways to get in touch with us. So we’d love to talk to anybody.

Bill Fairman (39:51):
Oh, we’ll have that in a notes of blog.

Wendy Sweet (39:53):
Thank you! Thank you so much!

Bill Fairman (39:54):
So folks, I hope you enjoyed this. It’s Greg is like a hybrid and we’re not going to call it a turnkey anymore.

Wendy Sweet (40:05):
Well, let me, let us say this too. We’ve known Greg for a while now. He’s in another group with us and yeah, that’s right. He’s a great guy! He does what he says he’s gonna do. He’s honest as the day is long He’s…

Bill Fairman (40:23):
Even though he lives in Reno, Nev-AH-da

Wendy Sweet (40:26):
Don’t hold that Nev-AH-da! He’s you know, he, I, we know like, and trust him. We say that all the time. He’s a good egg. So that’s our referral. Thanks so much, Greg!

Greg Hughes (40:46):
Thank you guys too!

Bill Fairman (40:47):
We are Carolina Capital Management. Our website is CarolinaHardMoney.com. Please. Don’t forget to share, like, and subscribe to the show. And if you have a few more minutes coming up, we’re going to be doing our panel and Greg is gonna join us for that at the top of the one o’clock.

Wendy Sweet (41:10):
Greg Hughes 2.0.

Bill Fairman (41:14):
That’s right! Thanks everyone! Have a great day.

Wendy Sweet (41:15):
Thank you!

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