Unlock financial freedom with Rob Natale, founder of North Square Capital, as he reveals how medical professionals can build wealth through passive real estate investments. From syndications to debt funds, Rob shares strategies for generating income while safeguarding valuable time and navigating today’s financial challenges. Listen in to see how passive investing could transform your financial outlook!

Key takeaways to listen for

• [16:38] The power of real estate syndications over traditional investments
• [21:36] What a "Financial Health Checkup" can reveal about your wealth goals
• [26:58 ] Why medical professionals are embracing passive income to balance work-life pressures
• [31:14] How passive income can help you achieve time freedom
• [48:30] Why private credit is thriving in today’s market

About Rob Natale

Rob is the founder of North Square Capital. He is dedicated to helping medical professionals achieve financial freedom and combat burnout through passive real estate investments. With years of experience in asset management, Rob saw a need for more accessible, high-value investment strategies tailored to healthcare providers. Inspired by his family's dedication to medicine, he now brings top-tier wealth-building solutions to those seeking financial security and balance.

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• Website: North Square Capital
• LinkedIn: Rob Natale
• Instagram: Rob Natale
• YouTube: North Square Capital
• Facebook: Rob Natale

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Takeaways:

• Rob Natali emphasizes creating a second engine of wealth through passive real estate investing.
• Passive real estate investments provide medical professionals with additional income without requiring extensive time commitment.
• The importance of understanding financial goals before diving into real estate syndications is crucial.
• Rob discusses the unique challenges faced by medical professionals in today's healthcare landscape.
• He highlights the significance of due diligence when selecting investment opportunities and operators.
• Real estate syndications can offer attractive tax benefits, particularly through depreciation strategies.

Links referenced in this episode:

• northsquarecapital.com
• passiveinvesting.com

Mentioned in this episode:

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Rob Natali: 00:00:42

So the whole idea of then creating that second engine of wealth or wealth generation is in case something happens to that first engine, you have an other engine there that's keeping you going. And that other engine being utilizing real estate and passive real estate investing to fuel that engine.

Neil Henderson: 00:00:58

Welcome to Truly Passive Income. I'm Neil Henderson.

Clint Harris: 00:01:00

And I'm Clint Harris. And today we're excited to welcome Rob Natali. So he's the founder and CEO of North Square Capital.

Rob helps medical professionals achieve financial freedom through passive real estate investing. He's got a background in Wall street asset management.

Rob now focuses on providing time strap professionals with smart hassle free investment opportunities. Rob, thank you for joining us. How are you?

Rob Natali: 00:01:23

I'm doing great. Thanks guys for having me on. I appreciate it.

Clint Harris: 00:01:26

Absolutely happy to have you here. I've got quite a few questions I want to jump into as I usually do.

But before we get there, why don't you tell us a little bit about yourself, your background, how you came to find the syndication world and what your role is in that world these days.

Rob Natali: 00:01:41

Yeah, so I'll give a combination of personal professionals.

So I'm based in Boston, Massachusetts, went to college, University of Rhode island, studied in finance and ever since graduated from college now many moons ago, almost 20 years, I've started in the financial services industry more in the back office role, very much a square peg in the round hole for me, 100%. And that eventually led me to work at Columbia Thread Needle Investments.

So that is a pretty prominent a global asset management company and more or less in the Wall street world where they're managing about 500 billion in assets under management.

And my role and responsibility there was to work and call financial advisors out in the Pacific Northwest, that's Washington State, Oregon and Alaska.

And the products that we were selling and offering were mutual funds, separately managed accounts, ETFs, et cetera, based in Boston, travel out to the territory a week at a time every two to three months. We work for the wide range of folks.

And you can be talking about a solo practitioner from an advised perspective managing a book of business of $20 million to these mini family offices that are managing 3, 4, 5 plus billion dollars in assets.

And what I noticed was in working with these teams that we're managing the billions in assets is they're utilizing strategies that 90% of the population has no idea exists. And then when they find out they exist, there's a whole lot of skepticism around because I've not heard about it.

And they learn about the return profile and says this seems really good. And one of those specifically is that we're both in your audience list is involved with is the real estate, the syndication.

So it felt to me a little bit very much like a good old boys club. The wealthy keeping strategies amongst themselves.

And I have three family members who either are or were medical professionals, worked in the healthcare world. And I would talk to them about what their financial advisors were doing for them. And it was very much a cookie cutter approach.

You know, 60% stocks, 40% bonds, they're collecting an asset under management fee of around 1%. And if the market goes down, it's buy and hold, which can be a good strategy. But in this case there was no strategy behind the strategy.

And then I would talk to them about what was going on at work and all the headwinds that they're experiencing in the medical world between insurance companies dictating how patients are being treated, insurance companies as far as how reimbursements are working with physicians, the employers not having their physicians back, high degree of mortal injury. And I just saw all these headwinds in the high levels of burnout that my family was facing and experiencing.

And the last piece for me that really was where I knew I need to make a shift was, and this isn't for any advisors that might be out there listening, there are good ones out there.

But in my experience in the day to day, for five years in person and then on the phone, I found it not necessarily being a bad seed, but more or less a bad tree where folks really weren't operating as true fiduciaries, not operating in the best interest of their clients. It was more or less what you can do for me. So it got to the point where I said this.

I do not want to pursue a career and continue to grow within this industry. In my role in the wholesaling capacity, moral compass is no longer aligned. So I decided to leave.

But in that time and in that role, what you asked Clint was how did you get involved in syndications and what you do now? That's where I first got my first taste and experience with the syndication world.

I said, what if I start a company that can help folks like my family start building passive and supplemental streams of income outside of their primary source of income, their W2, if they're a business owner, what if I can show them away how I feel that they should be treated from a financial services standpoint? And that's what led me to start North Square capital about now.

lf years ago is the spring of: 2022

And my role within this whole operation is to do the vetting out of the teams, the individuals and the opportunities and present those to my client base to see if they want to partner alongside myself and my company in those specific opportunities.

Neil Henderson: 00:06:16

Rob, I'm curious to hear your take on this. Coming as someone who came from the financial services industry, why there is that separation?

Why is it you described it, I think as an old boys club that knows about real estate syndication, whereas in the financial services industry it's very rare that you'll see one recommend real estate syndications. It's always equities, it's always insurance, it's always those things like that. I'm curious to hear your take on that.

Rob Natali: 00:06:44

Yeah, so I have a couple different thoughts on that.

So one being a lot of these firms, let's say a Morgan Stanley or Merrill lynch as an example, they don't have the ability to hold private placements on their platform.

And if they don't have the ability to hold private placements on their platform, they're going to be less apt to talk about them because they're getting compensated based off of their assets under management. So if they're recommending clients invest in something else they don't manage, that can impact directly how they're being paid.

nstream until the Jobs act of: 2012

And because of that, some advisors are not maybe up to speed or as well versed or as comfortable. Maybe talking about this type of investing is another thought that I have around that.

So it's the ability not to hold it on their platform and they might not have the knowledge or expertise to speak of it.

And then the other component being is some firms, if you're selling their own specific models or investments, an advisor gets compensated a higher percentage of that. And that's where that is another what I call inherent conflict of interest with involved with the industry.

Because there's two different buckets where advisors and folks can operate from. They can operate from the fiduciary standard or the suitability standard.

The fiduciary standard is when they are truly operating in your business in your best interest from a legality standpoint that they're doing what is best for you, where the suitability standard is, they could put you an investment that's going to get you towards your goal. There might be other investments out there that they have the knowledge about that they've been presented on and have been educated on.

And they don't necessarily move their client to that investment because of the relationships they've built, maybe with wholesalers or.

And this is one of the things I experienced was, you know, take you out to dinner enough, we're not giving you enough what we call tchotchkes, or let's say it's golf balls. It's that kind of component to it which also feeds into as well.

So it's all those different factors that I personally feel why they're not being discussed with folks.

Clint Harris: 00:09:05

So you're following a lot of the logical process that a lot of people have feel are going down these days when they find syndication.

It's like you start to see some of the pitfalls with the traditional financial advisors or the traditional strategy of trying to save your way to retirement. And a lot of times that's been taken away from our generation.

So with something like North Square Capital, let's say somebody just got to the point where they've identified, wow, there's this whole opportunity out here of alternative investment strategies. You can invest in mobile homes or RV parks or multifamily or self storage or car washes or vineyards or whatever.

It's a whole new world and it's wide open. It's really easy for that person to get Shiny object syndrome. And they're looking, look over here, look over this.

And a lot of people fall in the trap of looking at the deal.

And I think after you've been doing it a little while, you realize that the really important thing is making sure that you're keeping your focus on the operator. Right.

Did we use the analogy of it's a difference between betting in a horse, on a horse in a horse race versus betting on a jockey who's going to ride five or six horses in five or six different races. Right.

You want to make sure you're picking the person that they're aligned with what you're looking for morally, ethically, and from a financial goal standpoint as well.

So it makes a lot of sense when you have a group like North Square Capital that I, as a consumer, looking to place capital into syndication through you, I'm getting due diligence that I may not know how to do on my own. Right. You're picking these operators and you're looking at who. Who's operating in the field and who can you partner with in a meaningful way.

But more than the due diligence aspect, what does this look like when someone comes to you and says, hey, I want to place 100 grand or 500 grand or whatever? Are you having a conversation about financial goals, what they're trying to accomplish?

Are you helping them map this out and then pick winners based upon that? And then is it basically you guys together are wrapping up, rolling up capital into one big ball and trying to get better terms with it that way.

From that investor standpoint, what does it look like when they come to you and they say, I want to partner with North Square Capital? What does that journey look like?

Rob Natali: 00:11:07

Yeah, so the first thing we always do is have what I call a financial health checkup, essentially a consultation. And the way I always explain it to folks is think of it as a physician, patient, initial appointment. This time, the roles are reversed.

I'm really operating as the physician, you're the patient.

Because everyone out here that is listening, et cetera, myself, we've all gone to see a physician and there are questions that we should have asked that we did not ask. And we didn't ask them because we didn't even think to ask him. It's one of those concepts of, right, you don't know what you don't know.

So that's one of the pieces where my role comes into play from the due diligence aspect.

And when we're having that initial conversation, that financial health checkup to it is really peeling back the layers and really understanding, okay, what's the current problem? Right. Think of it. When you go again, see a position first time, what's the problem?

How long has been going on for you, some sort of examination of where you want to go, and let's see if I'm the right person that can help you or I need to refer you to somebody else who would be best suited to help you. So it's all about the reverse engineering aspect of it.

So outside of when folks want to get into passive and start investing in real estate in a passive manner, it's really understanding, okay, you know, why real estate, I want to start generating passive income. And I'd say if you ask other people to tell you that same answer, but it's more or less, you know, what do you want passive income to be?

What do you want that outcome to be? What do you want that be the vehicle for?

Is it to spend more time with family people, travel more and more time in philanthropic missions, really just trying to understand what the why and the is around, the thinking. And it's also understanding what their current investments are and what's working and what's not working overall.

And then what we also do is we really put together a budget. That candle you may have know yourselves, a lot of folks don't have a good sense of what they're spending on a monthly basis.

A lot more than I can't remit speaking to folks just have no idea where their money's going. So it's mapping out, okay, how much are you spending on a monthly basis? What is your living expenses? Strap lay that to a year.

So let's just use for even numbers. It's $100,000 that they're spending. That's what their living expenses are.

Now we can back into and say, okay, if you want to start generating $100,000 to become what we call work optional, financial independent. Now let's determine based on some different return projections or models how long this would take for you to get there.

I think once folks can actually see the road, the journey to get to the destination, that's when the lights can really come on.

But that's where this work that is requiring them say, hey, you need to know what you're spending and how, where you want to go and what certain period of time.

If we determine together that this could be a fit for the type of investments and this type of overall investing is, then we'll put them on an educational sequence in email structure where there's getting more of a sense of how real estate syndications work, the risks, the benefits.

I provide them a educational resource called the Financial RX Playbook, which is how medical professionals went through passive real estate investing. And then if we have an opportunity that's we'll discuss it together if this specific opportunity is right for their goals.

Because at the end of the day, I view it as. I'd be curious to see if you agree from this perspective.

When you're looking at these opportunities and anything in real estate, self storage, multifamily, RV parks, they all have their own unique strengths. I feel like they all boil down to four different buckets. Is it appreciation, cash flow, tax benefits, liquidity. Where are you in that spectrum?

What's most important for you? Because some asset classes are going to be much higher in one area than another.

So it's all about the conversation and determining a true consultative approach.

Neil Henderson: 00:14:59

So you work a lot primarily with white coat professionals. What sort of unique challenges are white coat professionals facing that real estate syndication solves for them?

Rob Natali: 00:15:10

Yeah, so it's a variety. So one of the being the corporation of Healthcare is a huge one.

So contracts are being renegotiated where, say, physicians are working the same, if not more hours, but they're getting the paid the same or less is a major pain point that I hear from my clients right now. So that's one component of it.

So there's a little bit less from a job security perspective, albeit there is a shortage, but there's that component now that comes into play. Another piece that I hear that we like to help our clients with are some of the pain points that I spoke to before.

With the high degree of moral injury and the rate of burnout that's increased, especially since COVID that has exploded. It's over 52%. If you did it by Medscape, that did a poll of how many physicians and nurses are experiencing burnout. Right.

And I categorize burnout in three ways. Okay. It's you have a lack of personal professional autonomy. You've lost your sense of belonging, purpose, and competency.

You're not good at what you do. Okay. So the opposite of that is what I like to call really the ABC method, which is A is autonomy, personal professional autonomy.

B is belonging more proud of the name of the front of New Jersey than the back, and C is competency. You are good at what you do.

So for me, where I like to help is on the really much in the autonomy standpoint, where I want to be able to provide additional streams of income and sources of income, where they're not just relying on, whether it be if they're working in a major hospital or if they're at, let's say, a private practice. Right. Another way where they can build wealth without them having to do the work. Right. We want their money to work hard for them.

Is that expression versus them working hard for their money.

So that's where I like to come into play and help and educate, show folks how they can get involved and how we can help alleviate some of the pain points that they're experiencing.

Clint Harris: 00:17:06

I don't know that the average person realizes the significance of what you just said. I spent 16 years implanting pacemakers and defibrillators.

I was in the cath lab, the EP lab, the or, and most of my closest friends are cardiologists, electrophysiologists, surgeons, ER doctors, pulmonologists. It's the group that we ran with because that was our social life for so long. And I was on call working nights and working weekends.

And it started before COVID The healthcare system used to be fairly fragmented, but was very quickly consolidating. I was in Columbia, South Carolina for 11 years, and I was the heir apparent to a very successful medical sales territory.

And the hospital system started consolidating and getting bought out. And along with that comes contracts and leverage. And they're buying. Different groups are buying out and creating.

Instead of the doctor used to have the choice of, okay, there's these four different pacemaker, defibrillator companies, and I'm going to choose the right product for the right patient and match it up to give them the best benefit. And then all of a sudden, it's, the hospital says, we're making a bulk purchasing order to buy this product because we can shave 30% off of it.

And you're being forced to use that even if you, as a physician, don't think it's the right thing for this patient. That's what pushed me out of that territory and into the Wilmington, North Carolina territory. And it worked here for another six years.

And we saw something similar of that. That hospital got bought out by a new healthcare system, and they're dictating the contracts and they're dictating the pricing.

And physicians are put in a position where they're practicing defensive medicine, just doing everything from a fear standpoint instead of doing what's best for the patient. And then you had Covid on top of that, there's an unbelievable amount of pressure that they're under. They're overworked, they're understaffed.

And then there's this brain drain factor that kicks in that they are actively telling younger people, don't go into medicine.

Like, I have physicians that I worked with for, you know, almost two decades that are telling their kids, don't do this, go do something, get a finance degree, go be a home builder, whatever it may be. And there's this brain drain where the people that are in it, a lot of them are looking for an escape hatch, right?

People are talking about, I'm going to go part time. I would rather make half as much money, and I'm going to go half time and split my call with this other physician who also wants to go half time.

And we've created this situation where the healthcare system right now is staying alive based upon travel nurses, because that comes out of a different budget.

And it's this downward spiral where, look, the sky's not falling, things are going to stabilize, but that industry and especially that lifestyle is not what it once was. And the number one thing that the physicians that I talk to and hang out with, and I was hanging out with several of them yesterday.

And it's often the same conversation. It's not about money, it's about time. They are required to spend more and more time for less and less money.

But ultimately it's not the money that makes the decision, it's the amount of time. And they're all looking for that time freedom. And I think it makes sense that real estate is a fantastic vehicle for that.

But you can't just make that switch if you don't have experience.

So the idea is, who can I meet or who do I know that lives in this world that I can entrust with my capital so that I don't have to use my time to get experience, that I can slowly start creating an off ramp from this lifestyle that is very different than what I signed up for 10, 12, 15 years ago? That's absolutely. What you just said is the truth. It's happening.

And especially the people that are in that world all the time, it's depressing because it's hard to find. A lot of times it comes with the golden handcuffs, right? It comes with the lifestyle and the paycheck and everything else.

And they get the standard of living that they like and then it gets to the point where they can't really go do anything else that's going to replace that.

And the traditional model of saving and your 401k match very rarely is going to get them there unless they dedicate the next 20 years of their life to it. And that's what people don't want to do right now. Right. Because it's only getting worse.

So I think it makes a lot of sense for that population to look at this as a vehicle because you're going to have to get better margins than you've traditionally been able to get in order to get ahead and start buying some of that time back. So let me ask you this.

In terms of that population, a lot of what they're looking for because they're higher earning income individuals is depreciation.

So from the tax benefit side of things, is that something that you end up having that conversation a lot because of the population that you're typically working with?

Rob Natali: 00:21:33

Yeah. One other thing too, before I answer that question that you spoke about Clinton, spot on.

Like you said, everything you just echoed about what's going on, it's right.

Not only is it the profit over the people, but I can't take credit for this phrase, but I find it so true is the proliferation of the administrative class in healthcare has just exploded and to no fault of anyone in the healthcare, medical industry, they were schooling for 12, 13, 14, 15, 16 years. And there has been no financial education around that whatsoever.

So not only then there's the concern of if I want to branch out, maybe start my own business, how do I go about even doing that? Because there was never any tools or resources to go about even doing so.

So that's another service that I offer for folks that are based in New England is helping them explore going into private practice if they want to, not work in the public side. But then going back to your other question, though, that you asked about from the depreciation standpoint, right.

And it's a great question because one of the things I echoed and you were talking about too, is each asset class has its own unique strengths and benefits. Some of those being some are, have higher depreciation benefits than others.

So, for example, this isn't a space that I play in myself, but right, oil and gas, you invest in that world that you can offset your active income against what the active losses. That's like a Holy Grail type of scenario. Okay. It's not a world that I play in.

And then if you look at, let's say, multifamily depreciation standpoint, depending if someone's doing what we call a cost segregation study, which for those that may not be familiar with a cost segregation study is essentially someone is going, an engineer is going to hypothetically tear down, right. That property or properties, and categorize it by its lifespan.

So personal property is broken down into five or seven years, land improvements, 15 years, and then you have just a straight line of 27 and a half years.

And why that's important for folks to know is by getting into a investment opportunity with a whole period might be three to five years, even 10 years, by you accelerating depreciation, more of those losses, paper losses, are passed off to you, to the investor. So you can experience that and use those passive losses to offset either passive gains or active gains. I talk to about a high level, Clint.

I always tell folks too, I am not a cpa. And that's where you should speak to your CPA about really getting more granular with that.

If they don't have a cpa, I'm happy to connect them with two or three folks that I know that I have confidence in that are well versed in this type of investing.

But that's where I speak to, I speak to at a high level, go over what the benefits can be and in regard to their specific situation, that's where I do recommend they speak to someone, a professional in that specific world.

Clint Harris: 00:24:28

Great. So we've talked a little bit about what you're offering, why what the benefit is to the consumer.

And I want to talk about a little bit the people that you've picked and your track record and who you're partnering with. But before we do, what's the business model that you use to do that?

Are you creating a fund and you're basically doing a fund to fund model or are you doing a co GP model model and you're working on the general partner side of. There's a lot of different ways to do this and a lot of different structures and I would imagine you've probably done a lot of them.

But talk to us about what you're typically doing and how you like that business model before we start talking about some of the opportunities and funds that you might have available.

Rob Natali: 00:25:04

Sure. So I've always done the fund of funds model, always.

And the reason for that is because the code GP model, right from a legality standpoint, if I can't just raise capital right on an opportunity, if I don't have any sort of involvement from executing the business plan perspective. So I know just being in the industry and talking to folks, I'm sure you've heard some folks too. There's 15 cozy piece on an opportunity and it's.

There's no way 15 people are having some sort of managerial responsibility. So to me, someone call it murky water, I'd call it pretty black water where I don't want to be getting involved in that at all.

Just thanks but no thanks. So the fund of funds model is just a legal compliant way to be able to bring capital right into investment opportunities legally.

So the way the structure is, the way I've done it and for the listeners out there who may not be as well versed the fund of fund structure, I'm creating a specific fund on a specific investment opportunity where if folks will invest in my fund and then my fund will invest in that specific opportunity.

So some folks might be wondering, all right, that's great, but why not just invest directly with the sponsor or the general partner versus just investing in my fund? I tell books a variety of different reasons.

ts as opposed to, let's say a: 7030

The other bucket too, that I think some folks, especially in this environment that unfortunately I've talked to some in the industry where they've really seen this because of what's happened in our industry and what's been going on in the market is lack of communication by when folks. If I'm going to a general partner, I'm bringing a certain amount of capital, let's say million to a million, et cetera.

I'm bringing that versus let's say it's just one LP that's going to invest a hundred thousand with them. That general partner A is going to want to work with me and continue to have that sort of relationship for future projects and opportunities.

So if there is something that I need information on about anything, they're going to be much more apt to get back to me in a much more streamlined, in faster manner. And let's just say it's just one LP that's only invested one time and out of hundreds of different investors that they may have.

And by being a fund manager, you're really building up that relationship with the general partner to enhance the overall investment experience.

Because even though they're investing still with the general partners deal, I'm in communication with my clients during the initiation of the investment and throughout the entire hold period, I'm providing the monthly or quarterly updates. If they have any questions about anything, they're coming to me. I don't view this as, this is not transactional at all.

It's not, hey, someone invest with me and then we'll see you down the road.

This is very much a long term relationship approach and building where I'm with my clients really every step of the way, from beginning, middle to end.

Clint Harris: 00:28:21

Let me unpack that a little bit because fund of funds is not something that we've really dove into.

So I want to talk to this from our listener base and unpack that just a step farther and talk about it from the operator side because we're general partners. So basically what we're talking about is let's say that we want Rob to go raise a million dollars for our deals.

I can't pay Rob a commission to go out and raise money. It's called unlicensed brokerage.

It's illegal to do, but there is a loophole that one of the quote unquote loopholes that people use is something called the CO GP model. Hey, put me on your paperwork and say that I'm a general partner as well. And then That'll be my role.

Although it does not count for you to be a general partner, just for you to go out and raise capital, you have to have other responsibilities.

That is something that in years past people have used of, oh, you're going to be a co gp, co general partner, and you just go do what they say is illegal to do. But because we put a title behind it, we'll probably be okay.

Like you said, it's a gray area at best, something that's frowned upon, something that our legal team is highly recommended against. It's not something we've ever done. But I'm not here to point fingers.

A lot of times the SEC is very vague on purpose because they want people to come to their own interpretation. I think this is an area where people have been very excessive and pushed the boundaries on that.

And it's certainly not something we want to get caught in. There's another model that's popped up over the most recent years called the fund of funds model.

And that's essentially where we have all of our documentation, our private placement memorandum, operating agreement, subscription booklet, everything written up by our legal, and that's registered with the sec. We could take someone like Rob. He basically is taking our paperwork and mirroring it into his own legal entity. A fund. Right.

So then we're going to say he's going to raise capital. He's going to raise a million dollars in his fund. And this, his fund is going to do a fund of funds investment into our fund.

So it's still coming in as basically one investment for us, but it's a whole different fund. And that creates some arms link transaction there. It's a legal separation. Again, we can't pay him a commission based upon what he's bringing in.

But here's the thing. Just like Rob mentioned, if you, the listener, come and invest into our fund with $100,000, you're going to get a certain return profile.

In the current fund, it's a 3.2 to 3.4x equity multiplier with a 6% preferred return. If somebody comes to us with $1 million, they're getting an 8% preferred return.

It's a 3.4 to 3.6x equity multiplier, and it comes with a 5% equity bonus. So when somebody cuts us $1 million check, we put $50,000 on top of that.

That 50 grand is going to multiply through just like they put it in themselves. So the idea is, if Rob does the work of pooling together a group of capital in his fund is investing as one large amount into our fund.

You're pooling your money together with other people and the whole is greater than the sum of its parts because that investor with a million dollars is worth more to us as a general partner. The communication is easier, there's less paperwork to do and things like that. So you're pooling money together.

And again, this is something that wasn't really available to the common man until the last 12 years or so before then, these are opportunities that were pretty much just for the ultra wealthy. We still have requirements on our end that beyond a certain level we have 506B offerings.

But as a 506 offering we still are responsible to make sure that everyone is accredited. And let me talk about this from the operator standpoint for just a second. It's important for us to have capital for our deals.

And in the last year or so that's been a bottleneck. It's an election year. You can make 4 and a half or 5% in a savings account. Because of the interest rates, it's been hard to raise capital.

The most important thing if you are going to go down the partnership road and the fund of funds model is making sure you are partnered with someone that has ethics and a moral compass and communication. Because there may be a group of investors invested into a fund with an operator who's then doing a fund of funds with us.

Ultimately, the way that they treat their investors is still a reflection on us. People can say, oh, I had a bad experience with this group over here and this has happened, right?

There's an operator that we're close with that they started getting blasted on social media and they're like, who is this person talking about us? We don't even know who this is.

Come to find out that person had invested into a fund of funds with an operator who was not doing a great job with communication and K1s and distributions. And then that guy was invested with the main syndication operator. The general partner didn't even know who that person was.

So it looks like an easy option. Oh, if you need money, just get people to go raise the money for you. That's not what this is. This is a two way street.

We need to offer better terms to make the fund of fund manager look like a hero to his investors.

And we need to make sure that we're partnering with someone that has the best interest of their investors in mind and that this is a long term relationship. So I went off on a little bit of a soapbox there. I didn't mean to do that.

I think that's very important and that's something that we've been searching for a while and it's not something that we've done. We've gotten close several times, but that's the number one thing is how do we make sure that what we stand for stays intact?

And I think it comes from having a really close relationship with whoever that person is.

So with that in mind, I want to segue to who you've partnered with and the track record that you've had, how you've picked those partnerships and the different types of offering that you've had available in the past and anything you're working on now.

Rob Natali: 00:33:51

Yeah. So how in depth would you like me to get with regards to that?

Clint Harris: 00:33:55

So give me just a couple different operators and asset classes that you've invested in the past and maybe a couple reasons of why.

And then tell me based upon the current debt environment and where we are with interest rates and everything else, what you're bullish on and what you're working on right now.

Rob Natali: 00:34:09

Okay. Yeah. So for asset class raised with a group called Rise 48 Equity, I invested with them as an LP and I was one of the pieces too.

When I saw how well their communication was with me as an LP and I went through I said this is a group I want to start talking to.

So without getting too deep into the weeds like you spoke about Clint, it's very much a two way street back and forth really interview process really if you feeling each other out make sure moral compass line running background checks to make sure everyone says who they say they are too. I think it's pretty important and often I'd argue under not utilized enough or underlooked.

So it's been multifamily down in Texas, the Dallas Fort Worth area specifically was one group another group in on the short term rental side of things. The group called Tech Vester on their second fund specifically. So that market is spread across nine different markets across the country.

It's about 140 different properties across two different funds. The fund that I partnered on again Fund 2 has about 70 properties, 56 are live. So I was raising on a specific fund of funds through that.

That opportunity now has been filled where it's now closed.

So those are again two previous ones and then the current opportunity and what I'm now focused on now is much more on the debt side of things and the private credit fund. I want to make sure too Clint, as I answered all that was there pieces of that you asked that I might have missed.

Clint Harris: 00:35:39

That's pretty good for now. I think I understand all of that. Go ahead and walk us through the debt fund that you're currently working on.

Because the debt fund is also something that we haven't really talked about here. It's usually we're talking about certain opportunities and maximizing net operating income and selling something every three, five, seven years.

We've obviously had some significant challenges in the debt market recently with a lot of bridge debt and variable rates. So tell me about the debt fund that you're working on now and what that looks like for someone that may invest in it.

Rob Natali: 00:36:04

Yeah. And actually this is now jog my memory. So with regards to. You're talking about the investment the your opportunity. Right. It's 10 years.

The multifamily opportunities have been three to five years. The short term rental opportunities been three to five year hold. Right. And why even those specific opportunities multifamily?

As far as the cost of how much it is to get a mortgage in this country, the difference between the average rent to the average mortgage has never been higher from a Sprint perspective.

And that concept of always folks needing a place to live and then looking at job growth, population growth and determining the different types of markets that one could look to invest in. Short term rental side why we focused on that specific niche is Tech Fresh is looking to institutionalize the short term rental space.

If you read the overarching headlines, it's very much Airbnb. Is it? It's Airbnb Boston. This consolidation and markets aren't allowed anymore. York doesn't allow it.

But however, it's really about getting into the nitty gritty of the details and finding out what type of markets, what type of property types. We focus on four single or four bedroom properties, 500,000 or above.

It's catered towards families, bachelor and bachelor parties and secondary and tertiary markets. So those are just some of the pieces. Why we like those at a very high level. On the debt side of things, what you spoke about.

Yes, debt in what's been happening as far as quote unquote free money like you mentioned, I think you could be getting park your money in a high yield savings account of money market account at 4.5% with no risk FDIC insured.

So what we're seeing now is right you had the Fed cut rates by 50 basis points a couple, two, three weeks ago and the expectation is that they're going to be cutting one to two more times for this year and then three to four times next year. That's what the expectation is. Again, take that with I know, a gallon of salt because I feel like it's a very fluid situation.

But that's what the expectation is, that rates are going to be coming down and because of that those accounts were you're getting quote unquote free money and risk free rate return. That's going to start to diminish.

So what we did was we partnered with a group down in the Carolinas that is provides a private credit offering and the mechanics of how it works and why we liked it was they are hard money lenders.

They're lending out money between 13 and 3/4 to 14 a quarter percent to professional fix and flippers and then those folks right, six to nine month loans, that money's then being turned around. It's $100 million fund.

And what we're doing is then we're providing that spread between that rate on the debt to our LPs between 8, 9, 10% backed by real estate, the collateral being single family homes. So we saw that as okay, that's really where the collateral is being pledged and it's a good way for folks to get some now good yield on their money.

That comes with 90 day liquidity and a compounding option.

So it's a really good compliment to let's say a self storage strategy like yourself that offers depreciation and it offers tax benefits and it offers more of a long term type of play.

Where ours we consider this more singles and double type of scenario where you're looking to have liquidity and either cash flow or appreciation depending on if you want to let your money sit in the fund, let it compound or take monthly distributions.

Clint Harris: 00:39:36

Yeah, that debt fund, that's with passive investing.com, correct? Yeah. So it's Dan Hanford and Danny Randazzo. I actually Dan Hanford's out of Columbia, which is where I'm from.

I was looking at that fund pretty closely. I have a quadplex I'm in the process of selling and then it just got flooded. So I'm Back to square one. I got to do $200,000 worth of renovation.

But the good thing that I like about that is the liquidity option. Right.

Anything else, you're going to be locked up for minimum of three to five years typically and you may be able to get better returns someplace else, but you're not going to be able to touch that money. And so the idea of like it's 90 day liquidity, if you put in a large amount, it's 180 days. You just have to give them some heads up to work there.

So I think that's something that's a little bit unique in the space. I like that as well.

And I think that as long as we have a housing crisis in this country, but they have a really low deficiency or delinquency rate on that on any of the properties. And as long as we have a housing crisis, I think that that's a safe place to park that, at least for the next 10 or 20 years is what I'm seeing.

So great, Appreciate that.

Rob Natali: 00:40:35

Oh, yeah, that's one piece to the mentioned delinquency rate. That's actually. I'm glad you brought that up. Right. This strategy has been around for four and a half years.

They've done over 350 million excess in loans, and out of the 750 loans they've done, they've only had three delinquencies. And they've taken the property back and all sold them at a profit. So their delinquency rate is like 15.

It's too tense of a percent, which is, as far as I know, nobody in history has a better delinquency rate than passive investing in their debt.

Neil Henderson: 00:41:06

All right, final question. This is a little bit odd one. So I've heard you compare passive income from real estate investing to a second engine on an airplane.

Now, I love that analogy, but I want to hear, have you ever. Are there any other analogies you use to describe passively investing in real estate to medical professionals?

Rob Natali: 00:41:25

It's usually just the second engine. And the reason being is I always use a story that ties that maybe for folks who've skydived. Have either of you ever skydive?

Neil Henderson: 00:41:35

Hell no.

Clint Harris: 00:41:36

Okay, so love to fly, but I'll.

Neil Henderson: 00:41:39

Stay with the airplane. Thank you.

Rob Natali: 00:41:41

How the story ties into that is I remember this vividly because I was sweating bullets as we're going up on the plane. I wanted to do it, but I was pretty scared to say the least.

Okay, so we're going up and we're in those smaller planes, the single propellers, and we're about halfway up and all of a sudden we're not going up anymore. We're staying level, then we're going down.

And I'm wondering, this may be my first time, but this does not seem to be the method of procedure and operation to go about doing this.

So come to find out, the reason why we went down is there was some sort of issue with the engine and they didn't have the confidence enough that in order to go up to our level to jump and then for the plane to get down. So at that point, now I'm at from a level 10 of panic to 20 because am I really about to now even reschedule this in the first place?

Which I did end up doing and it was a blast.

But I say all that because the second engine, why that analogy is if you're flying a plane with one engine and something goes wrong, in this case, let's say you're working and you lose your job and you don't even have from a disability type of insurance that's covering your lifestyle, which in the medical field, disability, that is not something that's uncommon by any stretch. You're in trouble, you're in some serious hot water.

So the whole idea then creating that second engine of wealth or wealth generation is in case something happens to that first engine, you have that other engine there that's keeping you going and that other engine being utilizing real estate and passive real estate investing to fuel that engine. So I usually always talk about that analogy because folks, it resonates with them and it makes sense.

And yeah, that's my story too, from the skydiving perspective.

Clint Harris: 00:43:26

Yeah, for sure. That's a good one.

All right, listen, Rob, Natalie, if any of our listeners want to hear more about you have a chance to connect with you, hear more about North Square Capital. What would be the best way that they could do that?

Rob Natali: 00:43:38

Yeah, the best way, just go right to my website. So north square capital.com so you have all my contact information. It's also a free educational resource on there.

It's called the Financial RX Playbook.

How Medical Professionals Win Through Passive Real Estate Investing goes over the risks, the benefits, questions to ask if you're ever vetting a sponsor on your own return, profiles, etc.

Clint Harris: 00:44:00

That sounds great. Rob, thanks so much. We really appreciate your time and your expertise. Thanks for spending some time with us today.

Rob Natali: 00:44:06

Awesome. Thanks a lot guys. It was fun. Take care.

Neil Henderson: 00:44:08

Thank you so much for listening and watching the Truly Passive Income podcast.

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