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What’s up, everyone? Today, we’re covering an interview where Lincoln Archibald talks with Jeff Mendez about his fund story and how to build excellent systems.
Jeff Mendez, who joined Vivint before it became a giant and served as VP of Sales, now manages millions of dollars through his real estate funds.
From Knocking Doors to Managing Millions
Lincoln: Where did you make your first investments?
Jeff: One of my first jobs was knocking doors to buy doors, so I’ve always been enamored by real estate. I love the idea of cash flow, appreciation, rental income, etc. I joined Vivint in 2007, and in 2012, Blackstone purchased us for $2.1 billion. We went through a SPAC and then an IPO. Those three liquidity events gave us much more money and resources to work with.
When I exited Vivint, my role was Executive VP of Sales. With my capital, I allocated it personally into storage units, multifamily apartments, and manufacturing housing communities (aka trailer parks). I got into trailer parks in 2016 and partnered up with someone who’d been in the space for 10+ years. I loved the investment so much that my friends heard about it, and a few years later we launched our first fund. It was an opportunity zone fund, which was valued at $100M+.
Launching a $100M+ Opportunity Zone Fund
Lincoln: How’d your opportunity zone come about?
Jeff: We had a network of high-net-worth families, and one of them knew a guy who was helping the government with the legislation of opportunity zones. Using someone who knew OZs front and back was an amazing way to make our mobile home community investments compatible with the OZ regulations.
Shortly after 2017, we launched a value-add fund – just shy of $100M. There was so much demand for OZ investments that we put the extra dollars to work in our value-add fund. It wasn’t a multi-strategy fund, one fund was strictly OZ, and the other one was strictly value-add.
Challenges of Running a Fund vs. Syndications
Lincoln: On this podcast, we mostly talk about the pros of running a fund. Could you share some difficulties you’ve had or are having?
Jeff: I love funds, but I also like syndications because the investor gets to specifically choose the addresses they want to invest in. If you’re sitting at $20M or $30M, I’d opt for syndications rather than a fund. Additionally, as the GP of a fund, you have a strict timeline to follow in calling capital, for example. Syndications don’t bring that pressure.
However, if you’ve got investors with dry powder, it’s much easier to have them throw that in your fund than wait until you have your next syndication set up. Another thing I noticed about funds with their timelines: Sometimes, you underwrite deals that wouldn’t pencil as well as the ones you’d syndicate, just because of the time constraints.
Why Managing Billions Isn’t for Everyone
Lincoln: Many emerging managers have the desire to manage billions, why not you?
Jeff: When you start managing billions, it often comes with a hefty price tag. Your investors start expecting you to follow ESG, underwrite deals in a certain way, and conform to other similar standards even though you’re not “that big.” It’s not a bad thing; it’s just a different way of doing business. This can lead to you performing for these standards instead of your team or investors.
Conclusion
That’s all we’re covering today from Lincoln and Jeff’s podcast, but listen to the rest to hear Jeff explain how to build excellent systems! If you liked this article, visit the “Funds that Won” podcast or check out my YouTube channel! If you want help moving from the syndication model to the fund model, then visit Fund Launch!
Thanks for stopping by,
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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the author
