EP. 38 // How to Raise Capital in a Turbulent Market w/ Mike Zlotnik
On today’s episode we have CEO of Tempo Funding, LLC, real estate investor Mike Zlotnik out of Brooklyn, New York. Mike has been a debt and equity investor in real estate for over 20 years, and he brings his enormous wealth of experience and knowledge to the podcast. Mike and David talk about Mike’s transition from the technology industry to real estate, how raising and deploying capital constantly is the only surefire way to “time” the market, and how hope is not a good plan for financial forecasting and strategizing.
Stream This Episode on Your Favorite Podcast App!
Key Points from This Episode:
Mike transitioned from the IT world to currently working in fund management. Mike was burned out in 2009, which around the time when Tempo Funding was founded. Mike was brought in as a managing partner and ran the “show.” It was an easy transition for him, instead of him continuing to push through the technology industry, he happily took a pay cut to follow his passion in Real Estate. They raised a lot of capital for short sale flips. They have since launched multiple funds and invest in commercial real estate. Value add multifamily, storage, shopping plazas, industrial etc.
The transition was gradual and the capital raising was incremental. The stronger your track record is, the easier it is to raise larger amounts of capital.
Fund to funds is a strategy where you can pick and choose syndications, partnerships etc. They allocate capital and dynamically shift with the times. There are single strategy operators that can successfully raise capital for projects and funds since they have focused strengths. Fund to funds find the best operators with strong character. They always start with people and proper underwriting. They continue to invest with these folks in many of their projects. It gives leveraging and negotiating power.
Tumultuous times have created a differential in what sellers are expecting versus what buyers are willing to pay. Capital that is raised needs to be deployed at the correct and most strategic time in order to maximize efficacy. Variables in energy usage, persistence of interest, and other factors ultimately can’t be predicted and it’s impossible to know where the top of the interest rate will be or the bottom of the market will be. Problems and opportunities arise from these unstable factors and it’s important to be smart with the capital that’s been raised. You don’t want to rush decisions but also not sit for too long waiting for a perfect moment that won’t come.
Hope is not a good plan. Mike thinks the Fed started too late and is going too aggressively in compensating.
The tolerance for financial pain has lessened in global economies. If the federal reserve sees too much pain too quickly they may backtrack, thus removing the opportunity for distressed investments. We may avoid another crisis that was seen in 2009.
Into 2023, Mike wants to raise capital continuously. TempFunding believes in their current deal flow. Even if there’s a cap-rate correction they aren’t ultimately concerned. The basis substitution effect, when the Fed raises interest rates people can’t buy and continue to rent. Rents continue to rise. If you can tolerate interest rates today, you can still see the benefit in the future. They continue to invest in properties with good fundamentals.
Relevant Links from Today’s Episode:
ABOUT MIKE ZLOTNIK
Mike Zlotnik has been a debt and equity investor in real estate since 2000. His career began with nearly 15 years in the information technology field managing Risk, Business Intelligence and Quality of complex systems, software and processes.
While building a successful carrier in IT, Mike’s passion had always been real estate investing because of its predictability of outcome and well-understood risks.
In 2009, Mike joined Tempo Funding, LLC (Mortgage Pool Fund) as a managing partner and Vice President of Funding Operations.
Beginning January 2014, Mike has assumed the responsibility of CEO and has since founded TF Management Group, LLC, launching four new real estate investment funds: TF Investment Fund II LLC (Income Fund), Tempo Opportunity Fund LLC (Growth & Income Fund), Tempo Growth Fund LLC (Growth Fund) and Tempo Income Fund LLC (Income Fund).
Mike holds a Bachelor’s degree in Mathematics from Binghamton University. Mike is a member of multiple real estate and investor mastermind groups such as Collective Genius, Freedom Founders, Venture Alliance, and CA Investors (Private).
