When investors think of diversifying their portfolios, the immediate thought often veers towards stocks and bonds. However, as markets evolve and become increasingly volatile, alternative investment strategies are gaining traction among savvy investors. The podcast episode featuring Thomas McPherson, led by Jay Conner, provides valuable insights into how real estate and private lending can serve as powerful tools for financial growth and stability.
The Value of Private Money
One of the key themes discussed in the episode is the role of private money in real estate investments. Unlike institutional financing, which can be laden with complex processes and stringent requirements, private money offers flexibility and a more personal touch. Tomas McPherson emphasizes the advantages of using private funds, which often result in uncorrelated returns compared to traditional stock investments. This aspect of diversification is crucial, especially in uncertain economic times.
Lukrom I Fund: A Case Study
Tomas McPherson outlines the workings of the Lukrom I Fund, a private money loan fund dedicated to real estate investors. The fund is heralded for its conservative approach, aiming for consistent and reliable monthly income. With a Loan-to-Value (LTV) ratio of 52%, the fund provides a layer of safety for investors, safeguarding their interests unless the market experiences severe declines exceeding 65%.
Investors in the Lukrom I Fund can expect returns between 7% to 10%, which, while modest, are stable and less prone to market fluctuations. The fund’s “first loss commitment,” where owners absorb losses up to $5 million, further underscores the alignment of interests between fund managers and investors.
Expanding Horizons: Aggressive Lending and Opportunity Zones
Beyond the Lukrom I Fund, Thomas McPherson introduces the concept of more aggressive investment vehicles, such as the soon-to-launch Lukrom Mending Fund. These funds offer higher pay rates but also carry increased risk, which is suitable for investors with an appetite for bolder endeavors.
Moreover, opportunity zone projects are highlighted as significant undertakings for long-term wealth accumulation. Thomas McPherson’s involvement in over $100 million worth of these projects showcases the potential of strategic real estate investments. Opportunity zones provide tax benefits and encourage investments in economically distressed communities, aligning financial gain with community development.
Building Trust and Confidence
Another intriguing discussion in the episode revolves around the psychological aspects of investing. Thomas McPherson recounts his challenging trek—a metaphor for the investment journey—emphasizing the importance of self-belief and validation from supportive networks. His advice of “gathering positive affirmation” and engaging in personal interactions rather than relying solely on digital tools resonates deeply in a world brimming with virtual connections.
Educating Investors: A Shared Goal
Jay Conner’s approach to attracting private lenders through education, rather than solicitation, was another focal point. By teaching prospects about private lending and the nuances of self-directed IRAs, investors are empowered with knowledge that shapes their financial journeys.
Both Thomas McPherson and Jay Conner stress the importance of relationships based on trust. Personal connections, whether established through investor dinners, unique networking strategies, or shared interests, form the backbone of successful investing. This emphasis on relationship-building is integral to sustaining long-term partnerships.
Conclusion: Embrace the New Era of Investing
The insights shared by Thomas McPherson and Jay Conner are not just about embracing alternative investments but also about reshaping how we think of risk, trust, and community involvement in our financial endeavors. As more investors seek to navigate beyond the traditional confines of stocks and bonds, private money and real estate investments offer promising pathways to sustainable growth and financial independence.
Embrace these strategies, understand the risks and rewards, and build your financial future with confidence and integrity.
10 Discussion Questions from this Episode:
- In what ways does Thomas McPherson’s background in the Navy and real estate contribute to his approach to investment and raising private money?
- How did Thomas McPherson’s experience of losing trust in conventional investment systems in 2008 shape his current investment strategies?
- What are the benefits Thomas McPherson sees in private money over institutional money, and how does this perspective align with Jay Conner’s views?
- What strategies do Thomas McPherson and Jay Conner use to attract private investors without directly asking for money?
- How do Thomas McPherson’s investor appreciation events and private dinners contribute to building trust and attracting new investors?
- Discuss the significance of aligning incentives between the investor and the fund manager, as mentioned by Thomas McPherson with his first-loss commitment.
- How does Thomas McPherson ensure trust with his investors, particularly in terms of investment risk and potential losses?
- How does Thomas McPherson leverage personal interests, such as aviation, to connect with potential investors?
- Discuss Jay Conner’s approach to teaching potential investors about private money and how his method differs from traditional investment solicitation.
- Considering the financial strategies discussed, what are the risks and rewards of shifting from traditional investment vehicles to alternative assets like those managed by Thomas McPherson?
Fun facts that were revealed in the episode:
- Lukrom I Fund’s Safety Net: The Lukrom I Fund has a unique “first loss commitment” where the fund’s owners absorb losses up to $5 million before impacting investors’ money. This structure provides an added layer of safety for investors.
- Building Connections with Style: Thomas McPherson uses creative approaches to make connections and stand out at events. From unique personal styles like a mohawk to metal business cards, he knows how to leave a memorable impression.
- Physical Feats and Real Estate: In addition to his financial acumen, Thomas McPherson shared a personal story about completing a grueling 40-mile trek at 5,000 feet. This challenging endeavor took 14 hours, highlighting his determination and resilience, traits that likely serve him well in his investment strategies.
Timestamps:
00:01 Phoenix Private Capital & Distressed Debt
03:27 Real Estate Investing Insights
07:34 Private Money vs. Bank Loans
12:43 Seeking Success with Service Mindset
14:46 Wise Caution for New Entrepreneurs
17:46 Building Trust After Financial Loss
21:59 Metal Business Cards Elevate Networking
26:43 Conservative and Aggressive Investment Funds
28:50 Connect with Thomas McPherson:
30:29 Military Memories and Business Reads
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