Prashant Kumar, CCIM - Founder, MyRealtyGains

Prashant Kumar, CCIM – When you see Real Estate Investments as part of somebody’s portfolio and I like diversification,  I just want to reassure, does it mean that you are suggesting our listeners go buy real estate themselves and manage it themselves? Is that what you are suggesting?

Arn Cenedella – Yes. Real Estate, like any other profession, takes knowledge, skill, experience, and expertise and so many people have that expertise but if you have not invested in real estate and developed that experience and expertise, in my mind, it’s better to let Real Estate Professionals manage the properties and your money.

For example, I would say about half of my net worth is in the stock market and the other half is in real estate and that’s a decent diversification for me. 

I have a financial planner that handles the stock portfolio because I don’t know anything about stocks. I trust him implicitly. So I let him handle that side of my portfolio because that’s what he’s an expert in, I’m a Real Estate expert, and so I see great value in working with experts in a variety of areas to best manage your money. 

Prashant Kumar, CCIM – You are saying that folks like us I mean. We should start trusting those people who do Real Estate business and sort of invest with them and let them do the job correctly because they know what they are doing. Whatever they are doing, your Investment is secured by Real Estate and you are getting returns and a considerable part of the returns. Yes, those professionals do make some money out of it, but the returns that you are getting and the time freedom that you would get are way more worth, more than potentially you doing it by yourself and potentially making mistakes also.

Arn Cenedella – Yes, I could go to Google, I could go to YouTube and try to learn something about medicine. But that’s why I have a general practitioner, that’s why I have medical specialists and so I trust them to make recommendations to me for my medical and health care. Real estate is no different.

Yes, I agree and I think you hit on an appropriate point. The important point is there has to be an element of trust. You need to develop a relationship with people in the Real Estate industry and make some kind of assessment about their ability and knowledge, but also their character and integrity. I’d say the personal connection is very important. The other point would be yes, as general partners, as syndicators, we are compensated for our efforts but if you look at how and when the general partners are compensated, you will see most of their compensation comes at the back of the deal. Only if they perform you your projected returns, then yes, they get some compensation. If they do not perform, that adversely impacts their compensation where your returns are taken care of first. It’s fair compensation and it’s only paid if we earn it by doing a good deal and providing good returns to our investors.

Prashant Kumar, CCIM – You hit a very good point for the listeners, for the folks who are listening their returns are paid out fast before the sponsor gets paid. The sponsor’s returns depend on how the property is performing. In a normal scenario, investors’ returns will get paid. Unless this guy is falling apart, anything could happen in the world. But in a normal scenario, investors’ returns do get paid irrespective of whether the sponsor gets paid or not. So that kind of gives a mental satisfaction that from my money Somebody else is not making money, I am making money first then somebody else may make money if they do a better job.