Episode #40 – Invest Into Pre-IPO Real Estate With 16x Potential Returns

 

Invest Into Pre-IPO Real Estate With 16x Potential Returns

I’m excited to announce that I’m finally offering the ability for you to work with me. Many of you, probably every single one of you reading have been thinking every day when you wake up, “When do I get an opportunity to work with Jack? That fucking guy is so awesome.” Very few of you are thinking that but I do want to give you the opportunity. It is open. I’ve got two options that you can finally pick my brains so to speak if you’d like to get more in-depth mentoring and coaching.

You go to my website, MyIndestructibleWealth.com and there’s a tab that says Work With Jack. Click that and you’re going to have two options. There’s going to be a one-on-one and you can book a call with me. If you want to book a single and you’re like, “I want to pick your brain for an hour to see if I’m on the right track, bounce some ideas off you or talk about some strategies in building my business,” great, however I can serve you.

I’ve built 4 LLCs or S corporations to over $2 million. I have fourteen different multiple streams of income and a multi-million dollar portfolio. I’m not telling you that. You already know probably all of that. I’m telling you that I know what I’m doing. I have so much to learn but if you want to pick my brain, do it. If you don’t, keep reading the free content and engage. That’s great too. I don’t care. I’m not doing this for the money as you probably are well aware.

It’s a passion project but at the same time, I can’t do things for free like you don’t want to do anything for free either no matter how much you’re passionate about it. Go to the website, click on the link and follow along. You can watch a video that tells you a little bit more about the mastermind course that I’m offering. That’s an affordable way for you to get in-depth training on multiple streams of income and debt paydown.

I talk about all kinds of real estate, particularly the specific opportunities that you can do. Speculation-type plays like crypto, tech stocks and pre-IPOs. We’re going to talk about retirement accounts, the fundamentals of investing in you and charitable giving in that course. It’s a complete course that’s going to take you quite a bit further along in your knowledge of what you need to do to build indestructible wealth.

A Background On RAD Diversified REIT

It’s very action-oriented and there’s a basic mindset but it’s not just like, “You need to think more positively or work on your mindset.” It’s about how you’re thinking about your strategy. It’s also specific opportunities that you can take advantage of and start building your portfolio of assets. If you’re interested, hit the website. If you have any questions on that, feel free to email me at [email protected] or hit me up on Instagram, on direct messaging. I respond to those on a daily. This episode is all about self-storage, which is my favorite investment for multiple reasons.

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I’ve got in my hand a check that I’m about to drop off at the church for $15,000 made payable or in the memo. It’s for Fixate PHX, which is a new church that my good buddy Micah Schoeplein is going to be building in Phoenix. He’s moving out, so I want to give him this check before he leaves. This is what this platform is all about. We’re building churches. That’s what we’re doing.

In all seriousness, in everything that we’re talking about, we want to design and live an extraordinary life. We want to be building wealth so that we can be able to do what we want to do when we want to do it with whom we want to do it. That only is going to happen by intentional design. It doesn’t happen by accident. However, there is something much bigger here at play. It’s called purpose. A sense of purpose is when you take on something much bigger than yourself. I said on a podcast that I was on as a guest that when you build wealth, you can build a church. There are a lot of things you can do but that’s one of the things I said.

RAD’s Cashflow Projections

This opportunity presented itself to be able to be a contributing founder of capital to getting this church off the ground, which I’m very excited and proud to be able to do. I’m only telling you this so that you can think about what are some of the causes that are stirring within your heart when, not if, you build wealth and create incredible streams of income. You take those streams of income and invest them responsibly to create even more gains in your net worth. What are some things that you have in your heart that you would like to be a part of making the world a better place?

I want you to know that it’s not only part of what we’re about like giving but I want it to be a piece of this whole platform and concept of indestructible wealth. I’m excited about being able to be in that position where we can give that money and it doesn’t alter our life at all. It’s a sacrifice. I’m sure there are things that we could do at that $15,000 if we didn’t do this but at the end of the day, I have the ability and skills to replenish the money. If I do my part in blessing other people’s lives, then I found that God will always continue to bless me. We will get what we want when we help other people to get what they want first.

What I want to talk to you about in this episode is pretty exciting. It’s a cashflow-producing specific investment opportunity. Many of you are interested in getting stage three of the wealth-building process into action because you’re asking me. I love it. I want you to interact and ask questions. As a reminder, if you’re only getting started on the show and you’re like, “What’s stage three?” Stage 1 of my 5 stages is to invest in yourself to amplify your earning power. Stage two is to hyper-focus on building your cashflow-producing business or your side hustle. Stage 3 is that you take the income from stages 1 and 2 that you’ve created and you invest that into cashflow-producing assets.

Most people and a lot of the trolls that I experienced late want to skip stages 1 through 3 and go right to stage 4 because stage 4 is exciting. It’s where you invest in highly speculative assets that have a chance of popping and moving the needle on your net worth. However, they’re risky and have a chance of going in the other direction. Once we’ve got these first three stages firmly in place, we’ve got an incredible foundation that we can then take on responsible risk in going into stage four. If a stage 4 investment doesn’t work out, it’s okay because our income is going to be replenished from stages 1 through 3 in short order.

We’ll then be able to fire away, yet again, it won’t affect our current lifestyle. Stage five is the giving stage. This is where you give back. This is philanthropy. You don’t have to wait until you’re at stage five to take part in philanthropy. I suggest that you start exercising this muscle right away. If I hadn’t started giving money away years ago, it would be very difficult for me to write this check. It’s very easy to write this check because this is a muscle of giving that I have been exercising for a decade. My hands aren’t shaking when I give this check as I did for my very first one.

You're always going to have pros and cons to any investment that you decide to go with. Click To Tweet

It’s a bit overwhelming on where to start in investing in stage three cashflow-producing assets, especially if you’re still working with pretty limited starting capital. I believe that this is a great opportunity for you to invest in cashflow-producing real estate from a proven operation and company for as little as $1,000. I’m going to give you a broad overview of how this works and then dive into the details.

If you’re not interested and this doesn’t excite you after I go through the overview, then skip and move on to the next episode. Not everything I’m going to put out there is probably going to hit you and be right for you at this particular time in your life and that’s okay. There are three steps to it. With $1,000 or more, you can buy shares and own a piece of a real estate investment trust. These are commonly referred to as REITs.

Step two is the portfolio properties that you’re investing into generating rental revenue from credit-worthy tenants. Step three, this company pays you cash dividends from the rental revenue they collect. The company is called RAD Diversified. It’s not a publicly-traded real estate investment trust. Since they’re not publicly traded, the value of their shares is unaffected by the day-to-day fluctuations of the stock market. RAD Diversified has developed a proven reliable system for investing in residential multifamily properties in key real estate markets across the US.

They not only focus on residential properties but also invest in farmland like their survivalist project, which is pretty exciting and commercial real estate. They offer investment partners the opportunity to invest in cashflow properties with substantial value-add opportunities. I’m going to dive into that as well. Here’s a little background about their performance. RAD has produced a 33% return in a few months. The return since inception is at 47.8%. In 2020, they hit a 36.7% annualized return. That’s super strong returns.

There’s only one downside that I can see. In my humble opinion, I have not found an investment yet that doesn’t have a downside. You’re always going to have pros and cons to any investment that you decide to go with. The downside is that this is not a liquid investment. It means that once you buy in, you are in and until the company either gets sold or goes public, you’re not able to sell your shares. However, if you approach investing the way I do, this doesn’t matter to you because you’re buying in with a minimum 5-year hold time with the real plan being a 10-year hold.

There’s nothing I do investing-wise anymore where when I buy, I’m prepared to go in for at least a minimum five-year hold but the plan is I’m going to be holding for a decade. I’m going to dive into the details, talk to you about the founder of the company and give you a background on exactly how this works so you can feel more educated and confident about this.

Let’s think about real estate. Some of the greatest fortunes of all time have their roots in real estate like monarchs and conquerors. The elite owes much of their wealth to it. Modern-day people like Donald Bren, Stephen Ross and Donald Trump built their dynasties on it. Those dynasties are still appreciated. Real estate is a finite resource. There will never be more real estate that will be produced. All the real estate that has ever been made is already in existence. Some of it has yet to be developed. We know that but the land is certainly limited in nature, which is good. That’s why it’s always been appreciated over the course of human history. Done correctly, it’s a tried and true wealth creator.

 

With the public stock market, the investors were able to buy into these real estate funds and ride the coattails of savvy investors and operators. Getting involved with these companies allows investors to get some exposure with the quick click of a mouse and without the hassle of owning and caring for physical property. The problem is with these public rates, the time to get involved for the maximum gains is before a company goes public. Until lately, that was nearly impossible for main street investors.

Let’s talk to you about the Founder of RAD, Dutch Mendenhall. He came from very humble beginnings and grew up in a small suburban home with two alcoholic parents. Early life was tough. Mendenhall committed himself to a promising career in baseball. He was able to build a career in the sport. He ultimately became a college baseball coach but the pay wasn’t too great. I’m sure most coaches say, “Yes, very true,” unless you’re a very elite Division 1 college coach that we read about getting millions. 99.9% of college and high school coaches don’t make squats.

Mendenhall wanted more. One of his best players, Aaron Poreda, went on to play for the Chicago White Sox. On a trip to Chicago to watch him play, Mendenhall decided to invest in some beaten-down real estate not far from Comiskey Park, which is called Guaranteed Rate Field. I’ve been to this ball field and I know this area pretty well. It’s pretty rough. I’m going to tell you that much. This is not a place where you want to take the wrong turn. It’s very rough. Most of the murders that happen in Chicago are around this area.

The price was cheap. The seller was eager and in no time, he found himself the proud owner of a three-bedroom home on the Southside of Chicago. As soon as he got the keys, he went over and drove to it. He did a double-take across the street. There was a boarded-up home and what he found to be a notorious crack den. Under the watchful gaze of these drug house guards, Mendenhall pulled into the driveway of his proud new purchase and walked into a dilapidated home. The place was in shambles. He knew it would take a major overhaul.

This was his rough start. In time, we found a local partner to handle the renovations and dumped a lot of time and capital. We sold it for a tiny profit. We learned a tough lesson and then threw ourselves headfirst into learning how to do this game the right way. That’s how RAD Diversified REIT was born. After he had this somewhat successful profitable flip in Chicago, he focused his efforts on flipping homes in markets like Southern California, Philadelphia and Texas.

He also expanded into tax liens and deeds, as well as commercial property acquisition and management. He was active in the downturns. We had the 2008 and 2009 crashes. 2020, during the COVID-19 pandemic, became a banner year for RAD. He formed this deal that’s called the American Survivalist Project. Investors were able to buy in or lease 1-acre tracks from RAD throughout the US. These tracks contain shelter, water, food and safety. They appealed to those who desire a bolthole in the event of any public scare pandemic.

To continue his momentum, Mendenhall launched what’s called a Regulation A+ campaign. I talked about this in previous episodes. The one I’m thinking of was in episode twenty about pre-IPOs. If you haven’t read that and you want to understand the backstory on this particular investment a little bit more, go back to that episode.

If done correctly, real estate is a tried and true wealth creator. Click To Tweet

What these Regulation A+ campaigns do is where it gets exciting. These allow non-accredited investors to be able to invest in companies that are private placements. This means before they go public on an exchange. Not only that but RAD is one of the few Regulation A+ pre-IPO deals that pay a guaranteed distribution of 5% per year because they got a special amendment they filed during COVID-19. We could also see a short-term catalyst on the rise and that could send shares higher in the next 60 to 90 days. This is also very rare because, for the most part, Regulation A+ remains the same until the round closes and a new round opens. With RAD, it’s able to stair-step its share price higher as the underlying value of its real estate holdings increases.

Think about this as a refresher. Regulation A+ deals let private companies raise funds from everyday investors. The qualified companies post their opportunity online. Investors can choose whether to entrust the project with their money. RAD is looking to raise $50 million through its Reg A+ offering. When I bought in, it was selling shares at $15.66 per share with a $1,000 minimum. With a minimum purchase, you could buy 64 shares for $1,000. RAD is doing two things that we’ve never seen another pre-IPO company do.

It’s readjusting its share price quarterly based on its underlying value and it’s guaranteeing yearly dividends. RAD is a real estate investment company. Most of its value is in real estate. It’s pretty straightforward to appraise the value. Every quarter, RAD reappraises its portfolio properties to find its market value. It then divides that value by the number of shares outstanding and that’s its new share price.

Let’s give you a hypothetical example. Let’s say RAD buys a home for $250,000 in April. RAD puts $25,000 into the home and in June, it appraised for $300,000. The value of that home has appreciated by 20%. I’ve done this many times in my real estate company, High Return Real Estate. The difference is we are not able to offer an opportunity like this for you to invest with us at $1,000 increments. Most of the deals that I do, I keep for myself and that business.

We don’t have anything else to sell in Indianapolis of properties that we’re buying and renovating. The value of the home appreciated by 20%. If that was the only property RAD owned, its shares would also appreciate 20%. If the shares were $10 apiece in April, they’d be $12 in July. Early investors would have a 20% pay per gain and investors coming in after July would be behind that $12 per share. That’s a hypothetical example.

RAD holds over 240 properties. They also use strategic leverage, AKA bank debt, which helps to increase your returns exponentially. This is where you put a small amount of money down and borrow the rest through a mortgage when you find a very compelling property. Also, through its American Survivalist Project, it’s adding steady high margin cashflow to its business model.

Since it launched in October 2019, its shares have appreciated by 56%, so it’s from $10 per share to $15.66. I bought-in in July 2021. It was selling shares at $15.66. As I checked and recorded, in September 2021, it jumped up to $16.39. That’s not a gigantic jump but keep in mind that it also has a unique and huge perk that guaranteed 5% distribution on cashflow. RAD is a real estate investment trust, so it has to return 90% of its profits to its shareholders to qualify for a special tax exemption. Its business model is so reliable. Its management is comfortable guaranteeing a 5% distribution.

 

How huge is this? Let’s compare it. The rate on the 10-year Treasury note is around 1.4%. We’re getting paid 3.5 times the yield on the 10-year note to wait for this rate to go public or get bought out potentially. We’re getting at 4 times higher than the 10-year note and more than double the average dividend yield of the S&P 500 with the potential to make 10X gains. This is the difference. We’re getting cashflow. We’re getting in early and able to potentially 10X our capital.

REIT distributions are similar to dividends. However, the distribution is considered a return of capital. That means the IRS taxes distributions differently than dividends. Consult with your accountant determine how investing in this deal will affect your taxes but RAD’s commitment to adjusting the share price to its value and guaranteed distributions make it the first of its kind in terms of Reg A+ offerings.

How are they using the cash to continue growing the business? RAD is using most of the money it’s bringing in to buy and fix up residential properties as well as to expand its American Survivalist Project. In May 2021, RAD had $7.4 million in cash assets that are spread across 240 plus residential properties in Texas, Florida, California and Pennsylvania.

With the power of using smart leverage, RAD controls $40 million in real estate assets. That’s the power of utilizing bank debt, good smart debt. It helps you to expand your ability to control more real estate assets. Its goal is to continue expanding its portfolio of properties in these growing urban centers of those four states, as well as its ASP program in these other inexpensive rural areas.

RAD’s Advantage

Let’s take a look at RADs advantage. Like Warren Buffett, the legendary investor, you want to see a company that has a durable, competitive advantage or what’s called a business moat before pulling the trigger. What’s the moat? I look back at medieval castles. Have you ever seen Game of Thrones? They have the castle and then the moat of water that’s surrounding the castle with one entry point on the drawbridge. This helps fend off the attack because people have to go through the moat to be able to make their attack on the castle. This is the same way we want a durable business moat to protect our investment.

This moat is buying homes at discount prices in urban areas with growing demand, to find the discount, RAD shops at tax lien or deed auctions. A quick definition if you’re wanting to know what a tax lien or tax deed is. A lien is an official claim filed with the government against a debtor’s property. Leans hold until the property owner pays the amount owed. If somebody owes you money and they haven’t paid you, you can file a lien against their property, so when their property was to sell, then you would get paid off at the closing.

This happens all the time with contractors. If they don’t get paid, they’ll file a lien against your property. Eventually, when you have to sell, to be able to sell and clear that title, you have to pay off that lien through the closing proceeds of the property. Tax deeds are different. They’re issued when an owner fails to pay their taxes on a property. It grants legal ownership to the government. You owe the government money on your property. If you don’t pay after 2, 3 or 4 years, the government essentially takes over your deed.

Good, smart debt helps you to expand your ability to control more real estate assets. Click To Tweet

The government doesn’t want to own your property. They want to liquidate it and get as much money as they can. They sell these at a tax auction. Investors come in. They bid on these properties and acquire the property directly for the cost of the back taxes or if it gets picked up higher than that, which can happen, they pay that amount. This is different from buying a foreclosure. In a foreclosure, the bank has taken the property back because the owner failed to pay the mortgage. These are where the government has taken the property back.

Buying at tax auctions isn’t anything close to what most people are used to. There isn’t a realtor or an open house to walk around. The government lists these by parcel number and address. You’d be lucky to even get a street photo of the property. I’ve done this process before. It is very difficult. There can be a ton of hidden problems in the home. You’ll have no way of knowing that.

The situation can be made even harder because there are often still people living in these homes like squatters. People that are not even welcome are there. The whole process is way too much for the average person to ever want to consider. I did this process when I started High Return Real Estate back in 2016. I purchased twelve properties at a tax sale auction and it ended up being my biggest loss by far in my investing career, particularly in real estate, because I didn’t know what I was doing but I thought that I did.

Essentially what it came down to was I didn’t have the right team in place to rehab the crappy properties that I bought. That challenge is an opportunity for RAD because they’re experienced and, unlike me, they know what they’re doing. Tax auction buyers need to be experts. They have to be able to size up a property in a matter of moments and know what their max bid is going to be all at the rushed pace of an auction.

When I was at that auction, paddles were going up left and right. People are bidding on these properties left and right. You got to know, “I’m not willing to pay much more than this amount,” and you have to stick to that discipline. Even with that, this is a confusing rule to navigate. Tax auctions are not easy but these guys are experts at them. They continue to run three funds that explicitly target tax auction sales. Their success at that game is why they founded RAD.

RAD’s Second Step To Success

In 2021 alone, they bought $1 million in tax auction properties. When they took possession, they had them appraised and came in at $1.4 million. That’s a 40% jump in price without any renovations. This discount is what they’ve spent years perfecting. Let’s take a closer look at RADs second step for success. We know they won’t buy a property unless it’s offered at a significant discount with plenty of upsides. They also want to make sure that it can find another buyer or a renter. They only buy in booming markets like urban areas with a growing population and/or markets with booming rental rates.

That’s why they’ve identified Texas, Florida, California and Pennsylvania as their areas to focus on. These cities are going up like crazy and it boils down to one thing. There is no shortage of renters for these properties. That means these properties can start generating income for RAD and its investors as soon as possible.

 

Let’s talk about the other part of it, the American Survivalist Project. This came from Dutch Mendenhall’s desire to have a backup plan. He wanted to have a plot of land where he could provide for his family, even in the event of a massive shift in the American way of life. This was purely hypothetical until COVID-19 happened. That’s where shortages of vital goods and mass protests show that Mendenhall’s idea of a survivalist project was well-founded and he heard as much traveling across the country.

During his seminars on tax auction investing, he kept getting questions about his survivalist project. People wanted to make money in real estate but they also wanted a backup plan in case the shit hit the fan. His original 454 acres have grown to over 2,000 acres. It has water rights and opportunities for vacation and hunting. This is the key to the 10X opportunity with RAD.

What he does is lease 1-acre plots to individuals for $200 per month. For a family, this is a small price to pay for peace of mind. In all, RAD stands to make nearly $5 million by leasing the land through its survivalist project. With only over $7 million invested in the land, RAD will break even on the property within 18 months of it being fully leased out. After that, RAD is looking at almost a pure profit and it can replicate this process in rural areas all over the country.

This is the exciting part. What could RAD be worth over the coming years? We’ve got the rehab properties where they’re buying attack sales. We got the American Survivalist Project. They have $40 million in real estate assets in 4 states. They’re going to raise $50 million in its Regulation A+ offering. Since it only has to make a 20% down payment on the properties it buys because the bank is going to loan them the other 80%, it can leverage that $50 million to acquire $250 million in real estate.

This is only from the Regulation A+ offering. You also have the ASP. Each acre of the RAD Survivalist Project can generate $24 to $100 in income per year. If we multiply that by the industry standard cap rate of 10%, we get a value of $24,000 per acre annually. The cap rate is net income. Think of it as a property costing $100,000. To get a cap rate of 10%, it is generating $10,000 of net income after all expenses per year.

For 2,000 acres, that’s nearly $50 million in land value. Generating $5 million in cash flow each year, RAD can invest that $5 million per year into new opportunities, whether that’s tax auction homes or more acreage for the American Survivalist Project. In conclusion, based on RADs cashflow projections, the research team I subscribed to Palm Beach Research Group estimates that the entire company could be worth $1.7 billion in 2026.

At a $1.7 billion valuation, RAD shares would be worth $250.56. That’s a 15X profit or increase from 2021’s prices. This is before accounting for an IPO where it goes public or a buyout from a larger firm that’s going to buy out the entire company. Not only do we have a chance to make 15X to 16X gains on what could potentially be the next US real estate dynasty but we get paid cashflow that 5% guaranteed mark to watch it all play out.

It’s not often that this setup comes around in the pre-IPO market. I’m already in. If you’re interested in getting in some cashflow-producing assets with a huge potential upside, you want to get in before RAD goes public or is bought out by another company. Where do you go? What’s the website? It’s Invest.RADDiversified.com. If you go to that website, you can learn a lot more about the company. There are FAQs there and you can invest right through their investor portal. I hope this wasn’t too much. I dove into a ton of details on this.

I wanted to make sure that you had the whole backstory. You always want to understand what you’re investing in. You never want to go into something where you’re buying something, holding it for 5 to 10 years and not understanding what you’re buying. That’s why I went into more of the details, the backstory and all that. Stage three is a cashflow investment. I don’t make any money. There’s nothing in it for me for you to do this investment. Most of the stuff I recommend, I don’t get any type of kickback on it. I’m trying to create more value for you, help you cross the wealth gap and make sense of the money game. Have a great day.

 

Important Links

• MyIndestructibleWealth.com
• [email protected]
• Instagram – Personal Finance – Jack Gibson
• RAD Diversified
• American Survivalist Project
• Episode 20 – The IDEAL Investment
• High Return Real Estate
• Palm Beach Research Group
• Invest.RADDiversified.com