Changing The Way We Invest In Commercial Real Estate Investing with Rettex – Chris Moris

If you want to get down to 10 thousand dollar minimum, you’re already at hundreds of people and it’s manageable to manage five people on pen and paper. You probably need a couple assistants to manage, you know, 50 up to a hundred and then you want to manage 500 investors? It’s just not possible today and that’s what it takes to get down to 10 thousand dollar minimum.

Hey everyone, and welcome to another episode of the Everything Real Estate Investing Show with Sean Pan. Today. we have Chris Moris. Chris is the co-founder and CEO of Rettex, a commercial real estate investing networking platform that hope to connect investors with commercial real estate syndication opportunities. We’ll talk about the different types of syndications as well as how the Rettex platform can help investors learn more about syndications and how syndicators can get access to a pool of accredited investors. If you enjoy this episode, subscribe to the show and leave a review. We release episodes every Wednesday and Sunday and release the show notes on our site everythingrei.com. Enjoy!

Sean: [00:01:13] So thank you so much for being on the show today go ahead and introduce yourself and let us know. What do you do and how you get into it?

Chris: [00:01:19] Hey everyone. So, this is Chris Moris. I’m the CEO of a company called Rettex. My background actually is in, a little bit in real estate, but really in technology and so I’ve been working for the past 10 years in the solar energy sector. So this would be home solar primarily. If you want to get a solar system, save with the sun, reduce your energy bill, that product’s been out for a while. But I was most recently working at a company called Sunrun and commercialize the first home battery storage system, so you can get a solar system with a battery on it and power your house in blackouts avoid surge pricing. That’s really kind of a piece of the real estate puzzle, but really the tech side. And so what I’ve gotten into here now with Rettex essentially is we’ve created an online real estate investment market place with the goal of connecting everyday people to high-quality double-digit returning real estate.

Sean: [00:02:14] How did you even get into it?

Chris: [00:02:15] Actually, it’s a funny, funny journey. I was working in product when I was doing the solar business and I have this knack for seeing things that are just kind of broken in society and figuring out “hey, I should go after that and turn that into a business model”. And what I came around to was actually buying a house. And I don’t know, I think actually a lot of listeners probably have bought a house before but it’s definitely a broken process. First you have to get to the 20% down payment which is hard enough for most people, but the pre-approval for the loan, the compression in the bi-cycle. Everything is compressed into a couple weeks and you don’t really even know if this has been a well-managed property you’re kind of going on a lot of gut for what could be a million dollar purchase. And then you have all these hidden fees on the back end. And so I was looking into getting a home and I was, like as a millennial, like “this cannot be the way that homes are going to be bought in the future”. And I started on this journey going into real estate and I kept researching more and more and I really realized that the wealth gap in America comes down to whether or not you can do two things. And the first is can you save consistently and the second is can you get into your first home? If you can save consistently and get into your first home, then you’re a have if you cannot do that you essentially are a have-not. And this is why the wealth gap is opening up: it’s just increasingly difficult to get into a home. What I realized going through this journey though is if we start with retail investors and start with homes that has a certain scale, and when I looked at real estate investment broadly, really realize that there isn’t even a search engine or a marketplace for even commercial real estate Investments. And so we decided that that was the better place to start, was in the more mature market, bigger ticket sizes, bigger deal sizes, with investors who know what they’re doing, but they still don’t even have a search engine. So this just look like an obvious opportunity for us and applied my software and technology background as well as my business partner John who’s not with us, but he’s a he’s the CTO and I’m CEO.

Sean: [00:04:24] Awesome! Coming from that story you have no commercial real estate experience yet.

Chris: [00:04:29] Yeah, so I don’t have a wealth of commercial real estate experience. I actually think that’s a strength rather than a downside. And the reason I think this is, if you look over history being good at something usually required you to have that specific skill. So if you’re a really good painter, a really good carpenter, like if you’re not from a carpentry background, you try and be a carpenter, you’re going to be really bad at it. Software is not the same thing. If you know how to do software and do software well, it’s data fields, it’s social networking, it’s e-commerce, it’s all these things and those are much more uniform. Take Elon Musk for example, he started PayPal and now he’s managing Tesla, an automobile manufacturer. That’s really a software based manufacturer as well as a rocket company. So I think the world is changing a lot from software and just from our connection to learning. Where I think actually it’s a biggest strength for our team is that we’re not approaching real estate investment from a real estate background. So that means while our competitors are looking at real estate as a legal and transactional problem, we’re actually looking at real estate from a tech angle, which means we’re thinking of it as data and community. And so what I mean is if you want to invest in commercial real estate today, that requires you either to know a sponsor or go to a funding portal. And most people don’t know of private equity real estate sponsor for commercial real estate. Or you go onto funding portal and your barrier to entry is $50,000, maybe $100,000, on a website with a company you’ve never seen before. What we’re doing instead is we’re essentially creating like a LinkedIn of real estate. We’re creating a community where you can actually go meet other like-minded investors, talk to the underwriters, talk to the team, leave a review of an investment opportunity. And so you can actually see right there what people are saying about these investments. And so your barrier to entry now is a post in your networking. And then when you’re ready to invest then you can decide to invest from an informed position. So the barrier is no longer 50,000. It’s a post.

Sean: [00:06:47] Okay. It’s a very interesting conversation we’re going to have now. So obviously the first thing that I want to ask you is, I guess maybe just go through the entire company like Rettex, what are you guys trying to do exactly? And you know, who are you really servicing?

Chris: [00:07:02] Yeah, totally totally. Yeah, so we’re an online real estate investment marketplace. And so I just say that again because we’re not in the deal itself. We’re through marketplace. So commercial real estate developers, sponsors, those who are raising money to buy commercial real estate and improve it or build it; they’re doing this offline today. And what we do is we provide a web toolkit for them to essentially digitize their offer. And so what that means is they have their PPM, they have their deal documents, instead of being limited to only the investors in the Rolodex, they can bring it online to Rettex, create their offering online. It forms a digital cap table. It makes a webpage where investors can see what the offering is, look at the deal documents, and you can click and invest right there online. So that’s very similar to a lot of the other funding portals out there. I think CrowdStreet would probably be the closest one because they do form a marketplace. FundRise actually creates their own funds. So they are in the deal. We’re not in the deal and nor is CrowdStreet. Where we really start to differ is in the formation of community and user reviews. So you can talk about our offerings. You can leave a high risk to low risk rating. You can message anyone on the team. You can even form your own group and we have a meetup.com integration. So actually you can bring your meetup.com, you can bring your meetup group into our platform and you’ll now have a message board and a group that can review real estate offerings. So if you’re on meetup.com right now and you’re using that community, we’re simply joining that community adding message board to it as well as real estate specific functions and then allowing you to invest right there as a team.

Sean: [00:09:00] My knowledge for commercial raise is pretty limited. But I have heard that unless you guys registered as like a 506C, you’re not allowed to just publicly announce things like this and also with 506C, now everyone has to be an accredited investor. I mean I’m talking about how are you guys are able to have this open?

Chris: [00:09:20] Yeah, totally. Okay, so. I guess first disclaimer. I’m not a lawyer. None of what I’m about to say is to be interpreted as like gospel or as a recommendation or legal advice.

Sean: [00:09:34] Do your research first people.

Chris: [00:09:36] Do your research first for sure, but this will probably be the quickest and to  the most point explanation of accreditation as I know it to be and if I’m wrong let me know shoot me an email. But essentially in 2012-2013 through the passing of the Jobs Act for the first time since I believe the Great Depression, we were allowed to rely on certain exemptions to market private securities to the public. And so what that means is a private security would be essentially shares in a real estate for example would be shares in a real estate investment. So to actually offer that to the public, typically, you would have to go and file as a public company with the SEC, have quarterly conference calls and earnings reports, so on and so forth, just like Tesla and all the other car companies on the public Stock Exchange do. The Jobs Act was actually incited to promote essentially business. There’s 4 regulatory exemptions that are included now today. The first two that are worth mentioning would be Regulation CF which is crowdfunding, and Regulation A+. Both of these categories of exemptions require coordination with the SEC. Regulation CF for crowd funding allows you to raise only up to 1.07 million. So unless you’re raising for single family homes this is typically not enough for commercial real estate. Reg A+ requires a lot more diligence in expense with the SEC and this is what I believe what FundRise is doing where they prepare a fund and get that certified with the SEC. The SEC says this is an acceptable risk for the general public and then they can market that to the general public. It requires you to be in the deal though. The last two exemptions Regulation S and Regulation D. Those are what are starting to be more commonly used for syndicates. Regulation S is that you can market your syndicate to any foreign non-US citizen regardless of accreditation status. That opens up another can of worms, which is anti-money laundering and you have all these foreign investors and practically speaking it’s not used a lot today. It may be in the future. And then the one that we’re using and the vast majority of other funding portals are using is Regulation D. Regulation D has 2 options. And that’s what you were getting at. So 506B requires that you have a pre-existing relationship with the investor. And if you have a pre-existing relationship with the investor, you can have an unlimited number of accredited investors in your syndicate and up to 35 sophisticated investors. A sophisticated investor is someone who’s not high-net-worth which means they’re not worth a million dollars or more or make two hundred thousand dollars a year or more. But you could have a pre-existing relationship with them and up to 35 and then can come into your syndicate. You can have an unlimited number of accredited investors in this too and you can actually rely on their self-certification that they are accredited which means if they say they’re accredited and you had a prior relationship with them, that’s sufficient. In the case of 506 C which is what the crowdfunding platforms in Rettex is using, you can only accept accredited investors. And we actually have to verify your accreditation status. So it’s not enough for them to self-certify. It has to be checked either you have to make a reasonable effort which typically means looking at to W-2s or a letter from your CPA or you can look at the assets to ensure that there’s more than a million dollars worth of assets. Practically speaking we use a third-party service for this and so there’s a nice web flow. You can handle it online. But yes, you do need to be accredited.

Sean: [00:13:35] Now, that’s a great description of all the different classes. I’m glad you brought this up.

Chris: [00:13:40] Hopefully that wasn’t too much. I mean it’s a can of worms like it’s just not that simple.

Sean: [00:13:45] I’m sure the newer investors who aren’t familiar with syndications will have to really listen to this part multiple times. I’ve been through a lot of this before so I have a good grasp of what you were saying. So for Rettex purposes, you guys are 506C and everyone on the site pretty much has to be an accredited investor and when they decide, “I want to invest in this syndication here”, you guys don’t have like a minimum amount that you guys allow?

Chris: [00:14:11] Most of the offerings on the Rettex site, or all the offerings on the Rettex site requires 506C to invest, but you can join our social community, join the groups, and have the messaging board and all that kind of stuff without passing accreditation. And so again, we’re really trying to go towards something similar to like the LinkedIn of real estate like a BiggerPockets attached to an investment platform. Because everyone on BiggerPockets, you have a million people talking about investment and talking about real estate, and then you have these totally disjointed investment platforms. Like let’s bring them together so that you can talk about, you know specific opportunities either in the past. If you want to kind of go back and see what the historic was like or live offerings as you’re trying to decide if you want to invest or not.

Sean: [00:14:56] So I guess going back to the actual investment portion of it, do you guys have a minimum? Because typically syndications don’t want to bother with an investment of lower than $50,000. Otherwise it’s just too much paperwork to handle.

Chris: [00:15:08] A hundred percent. So right now essentially the minimum is set by the sponsor and so we’re a two-sided marketplace, which means we’re not actually in these deals at all.When you invest online with Rettex, you sign a subscription agreement with the sponsor directly. It’s digital, it’s e-signed and it’s all online and all managed for you. But you’re still making an agreement fundamentally with the team that is raising money and managing this offering. So to that end the team sets the specific deal terms. So not only the minimum but the entire private placement memorandum, the equity distributions, everything about how the deal is set up is determined by them. But I think there’s a huge opportunity and here’s why. So with this online investor management solution that we have, it’s built-in and it’s free. It’s just part of the platform, really because we have to have it, right? If we’re e-signing documents having you subscribed we have to form a cap table, you have to do third-party accreditation. So we built this entire suite of tools that sponsors can use for raising money instead of investor management system. And so, you’re right, the reason why we have $50,000 minimums is you can imagine if you’re raising five million dollars, if you have a million dollar minimum, you need five people. If you have a 50,000 dollar minimum, you have a hundred people. And all of a sudden if you want to raise, if you want to get down to 10 thousand dollar minimum, you know, you’re already at hundreds of people and it’s manageable to manage five people on pen and paper. You probably need a couple of systems to manage, you know, 50 to up to a hundred. A hundred’s really pushing it, you have a couple assistance there and but it starts to get out of hand. And then you want to manage 500 investors, it’s just not possible today and that’s what it takes to get down to 10 thousand dollar minimum. And so by creating a digital cap table, we have the banking integration. So it joins into the LLC’s bank account and we can see when money is transferred and who it’s transferred from. And then when it comes time to do distributions and pay them out,”You can say okay. We made 300,000 NOI this quarter”, you type in 300,000, you hit enter and then it actually automatically does all the distributions in the fraction that each of those investors has in equity stake. And so no more cutting checks. It just sends out 60, hundred, five hundred ACH distributions to your cap table. So I think there’s a lot of functionality we’re building in there to solve that problem, but fundamentally, you’re right. At a certain point, you know managing more investors is more work. How can we make it as easy to manage, you know 200 investors as it is to manage five. That would be a success.

Sean: [00:17:52] Right. Because if you think about it, it’s just kind of like a mutual fund right now where they have all these dividends. They don’t, you know, they don’t do this handwritten based on their thousand to thousand people subscribed to our mutual fund. You just have the dividend checks, send them to the account. That’s how it should be for commercial real estate. But I think one big problem is that there’s a big investor relationship part as well. I don’t know if you know what I mean, but a lot of the investors get nervous I guess because it’s one particular deal and so you have that constant investor relationship. I don’t know if you have any comments about that.

Chris: [00:18:26] Yeah, no, I do. I mean I think so if you take where we’re at today, and we look 10 years from now. So the way things are going to be done in 10 years from now or not going to be the way they were done the past 10 years. If you look 10 years out, I actually think well, let’s go to today. So today I have to know a real estate developer. And once I do know one of them, I have a data point. And I don’t really know if this is the right deal or not. Maybe I take their word for it. I might invest and go find out. Well to find out takes three to five years before I really know how that deal went. And if I wanted to cross shop, so say I know one real estate developer, if I wanted to cross shop I need to know 4-5. By the time you know four to five real estate developers, you’re in real estate and even once you know these four to five you can’t really compare them in equal terms. So with the creation of this website and this online funding portal, you can look at tens of deals, you know, that’s where we’re headed. And so you would imagine that instead of having to choose to put $100,000 into one deal where you don’t have a lot of data points and a lot of comfort, in the future I’d imagine you’d be able to take that hundred thousand and put ten thousand in ten different deals. Thereby giving you a diversified portfolio, reducing your risk and really solving the problem you were talking about which was if I have a hundred thousand dollars in one deal, you better believe I’m going to be messaging this person all the time, right? But if I’ve spread across 10 different deals and everything’s transparent, I’m getting consistent distributions from them, I get an update and a broadcast message every month, like this starts to check my boxes and it becomes a certain point where you know, you really can create your own fund. You can create your own own destiny based on what your investment thesis is and where you’re trying to go and that’s just not really possible today without knowing tens or hundreds of sponsors.

Sean: [00:20:23] So from what I understand, it seems like your platform besides being like a social network portion, the actual marketplace part is more like a congregation of all the 506Cs that are out there because if they have 506C, might as well go on Rettex to advertise as well.

Chris: [00:20:39] Yeah, exactly, right. And so I mean if you’re already raising 506C anyway, you’ve already created all these documents, all we do is we digitize that for you and offer it online. And so now would be a great time it’s just sponsors out there. If you’re looking to raise Capital, you know, our hypothesis is probably 60 to 70% of sponsors are legit and then there’s probably a bottom 10 to 20% which you probably don’t want to be working with and there’s maybe 1-20% which you’re somewhere in the middle. We want to be working with, you know, the sixty percent that are legit. I want you guys to bring your projects in and then we want the community to decide within that band of legit sponsors what are the deals that win? What are the deals that we’re interested in? And you know that might mean some of these deals are medium risk. Some of them are low risk and some of them are somewhere in between. But we want to have all those deals on the platform because we truly believe that the community will decide. If some people might want to take a riskier deal for the opportunity of better returns.

Sean: [00:21:42] Can you remind me again of the differences between you and your competitors? I think you said that FundRise they’re in the deal,CrowdStreet is pretty similar to what you have?

Chris: [00:21:53] Yeah. So CrowdStreet would be similar to what we have in that they do direct investment and they are a two-sided marketplace for the most part. The reason I say for the most part, CrowdStreet pride itself, and they’re doing a phenomenal job by the way, so kudos to CrowdStreet. Great great product, great website. Took a lot of inspiration from them. We just we have a different way of thinking about it longer term. So CrowdStreet though they do pride themselves pretty heavily in you know, rejecting 97% of deals I think they have that as a quote somewhere. And well, I definitely do think it makes sense to do the filtering and we’re doing those filtering, we’re doing our due diligence. We really want to provide transparency. So we don’t want to say, “hey, we think this deal is good or we think this deal is bad.” We want to say, “this is a legitimate sponsor or it’s not” and if it is a legitimate sponsor, we actually want to have third-party reviews either professional or amateur, which would be amateur would be anyone goes on there, they answer questions, they leave a rating review. Professional would be third-party underwriters. And so we want third-party reviews and we want transparency and from that, the belief is then that investors will choose the right Investments for themselves. So rather than saying, “hey, I reject 97% of deals and these last three percent, these are good.” You can’t really make that promise. You know, I think they recently had a deal goes south. I saw it come in my email. It’s gonna happen. Right? And so we think rather than trying to figure out which deals are the best deals using lawyers and underwriters, we believe that the community can do a better job of that over time.

Sean: [00:23:44] Yeah. That makes sense.

Chris: [00:23:47] Yeah, right. I mean like think about what other products do. When you go on amazon.com and you’re buying something on Amazon, it’s five to a hundred dollars typically ticket size. And you go there and you see a ton of reviews about this item. What $50,000 to $100,000 purchase can you think of where there isn’t some form of review mechanism built into it? And that’s the world we’re living in today right? You go to CrowdStreet, your kind of trying to rely on testimonials or like I want to see direct comments. I want to see a conversation. I want to see what people are saying.

Sean: [00:24:25] I think I’ll be hard to have a conversation on this direct deal. Probably better to have a conversation about this person or the company that’s behind the sponsor, right? Especially the deal they have open window of maybe one month. So it’s hard to have comments during that time frame when nothing is really happening, you’re just trying to close the deal.

Chris: [00:24:42] Let’s see. So definitely past performance. Past performance matters a ton and that’s definitely what the majority of people are relying on today. I do think you can get a lot of value though if we had and we’re going to do this, two to three third-party underwriters review a deal and they are professionals, independent of the deal and have a track record. I think that painting those 223 underwriters and what they think the deal will return provides a lot of value to someone whose prospective investing right?

Sean: [00:25:14] That’s true. And plus you might have some locals to be like,”hey, I know that neighborhood sucks.”

Chris: [00:25:19] Exactly. I think a lot and I think the most useful comments would be, “Hey, I looked at this deal. These are the three things I think it has going for it. Here’s one downside sensitivity that if you’re sensitive to this and you think that this is gonna be a problem, then you should not invest in this deal. If you have no sensitivity to this potential downside then this is a great deal for you.” I think that’s the super useful Insight that is just honestly missing today that a community can bring.

Sean: [00:25:47] Yeah, how are people doing 506Cs now, how are they like advertising their products?

Chris: [00:25:53] Yeah. It’s really interesting. So I when I got into real estate, especially commercial real estate, it’s all networking 100%. And because you can’t just advertise, you can’t run down the street and say “hey want to get in on my deal ?”,right? You have to be talking to accredited investors. So it’s a lot of meetup groups, podcast like this, a lot of talking about education, all of that on the way to building a relationship to getting towards investment or on the way to understanding whether or not your accredited and then getting you to invest and so it’s inefficient. That means honestly just super inefficient. And that’s one of the things that were really trying to solve because being a millennial myself I’m used to going online and clicking one-click buy on Amazon and having the the product show up the next day. This is you know, really the opposite of that and so it’s a little bit of the Dark Ages, but there’s also reasons for that too, right? I mean, it’s really important that you form deals with the right team and so the solution in our mind isn’t let’s get out and run a ton of webinars which you know, that’s that’s fine too. But the solution is: let’s provide the tools so that you can find the right team and that’s what Rettex is doing.

Sean: [00:27:20] Yeah, and plus imagine if you make this, like really this concept is amazing, if you made this concept work, now you have a whole network of accredited investors. Yeah, how valuable is that? Totally. If you gotta 506C and you know, there’s a place full of accredited investors were, you’re going to push yourself obviously in that same website. The platform companies are very hard to create but you know if you can make it happen, dude, you’re going to be killing it.

Chris: [00:27:44] Well, Amen brother. It’s definitely hard to create. I mean, I feel like we have three customers we’re trying to fulfill all at once. We gotta raise money from a VC for the company. We have to get sponsors on board, which I think we just got our third yesterday so it’s super exciting. Get sponsors on board. And then once you solve those two things, now you’re off to the races and you’re trying to get all these investors in and then as soon as you get those investors and you need more money, so you go back to them, right? So it’s like you’re always balancing these three customers, but if you can do it, the amount of change we can have together in real estate through forming a community and getting people into these high yield, high returning properties is it’s amazing, it really is. And now is a great time actually to get into if you want to invest or if you just want to join a new community and be at the start of a brand new community, this is a really good time because we have these user groups. We have these reviews. We also have a newsfeed. And so while you’re reviewing in the group and you’re discussing and you’re creating topics, kind of like Bigger Pockets, you have you know reputation, you have likes, you have a number of posts,etc. Well, there’s also an unstructured side which is a news feed. And so it’s delivered to you just like LinkedIn where you can see what people are saying about deals you’re interested in, point you to other people you should network with so if you say, “hey, I’m interested in multifamily in Utah.” It’s going to direct me towards other users who are investing in Utah or investing in multi-family. Maybe even directly to sponsors that are offering those kind of deals. And so all of a sudden you’re getting actually targeted content, but this targeted content isn’t there to get you to click ads. This targeted content is there to get you to invest, to get you wealthy and so I think maybe the first time that there’s a social network that is actually intended to build wealth.

Sean: [00:29:43] Yeah, I mean people have created their businesses based on creating educational content on BiggerPockets. So if you can establish an authority type presence on this platform, especially one with so many accredited investors and people with high net-worth, dude, you’re going to do very well. So I mean, what’s your business model? How are you guys going to be generating revenue? Are you guys charging fees for members to join?

Chris: [00:30:05] No fees for members. So no fees for investors or for members who just want to post and join the community. Yeah, no fees there. We do take a technology service fee from the sponsors. I wouldn’t think of it as a percentage of the raise but it’s more like managing customers’ cost money, managing investors cost money. And so we take a dollar fee per investor that’s managed. But it’s charged to the sponsor.

Sean: [00:30:33] A dollar?

Chris: [00:30:36] No, not one dollar.

Sean: [00:30:37] Okay. I was like

Chris: [00:30:40] No, no. No, it’s more than a dollar. But I’m confident that the cost of our service is long-term less than our competitors, so less than CrowdStreet and actually for sponsors for your first raise right now, we’re actually throwing those up for free. We will we will charge something probably close to what would be the equivalent of one percent or so. Where we see it going longer term actually though is as we grow, we would imagine that we want to offer more premium services, you know, both to sponsors and investors. So if you’re an investor and you’re looking for hand-picked deals, Rettex will probably offer that as some kind of subscription service in the future. And if you’re a developer that is only able to raise one point five million dollars right now and you’re a legitimate developer. You have a bunch of projects at 1 to 2 million dollars and you can’t crack through. You find an awesome project that’s six or seven million,we’ll help you go raise that right? So as a premium service, if you only have enough reach to raise two million, but you have this awesome multifamily complex you want to do that’s going to be five or six and you got the right deal and you have the right skills, then what we want to do is we want to multiply your business and you know we’ll charge incrementally more for that.

Sean: [00:32:05] It’s crazy that. We’re talking about multifamily complexes for five million dollars. Today. I was on the phone with an agent and he’s talking about property that’s half rehabbed in like Palo Alto for four million dollars. It’s a family house,

Chris: [00:32:17] But just to be clear I’m talking about dollars in equity. So you’re still gonna go take… so usually what in this case on Rettex you’re typically raising equity from which to borrow against. So if you raise six or seven million dollars at a 70% LTV, I don’t know what that is, like a total ticket size of 25 million or something similar. Yeah, but you’re right. Real estate out here in the bay where we’re at is kind of ridiculous right now.

Sean: [00:32:50] Well think about this someone is making enough money to be able to buy these houses. So there’s opportunity out here for sure, right?

Chris: [00:32:58] Yeah totally

Sean: [00:32:59] So I guess walk me through the next steps for Rettex, like where are you guys at now And where do you hope to be the next six months or so?

Chris: [00:33:06] Yeah, great question. So where we’re at right now. So we actually… fingers crossed. Well, I think by the time this comes out, just secured our third anchor developer, our sponsor. So the first is a company called Aaron developers on the peninsula here in think it’s Mountain View and they’re looking to raise for an apartment complex and the second is a hospitality group out in Ohio and they got some offerings up too and the third I can’t list yet. But essentially we now feel like we finally have a good set of reputable high-volume sponsors out there, which is really the key. Right? Like we got to start with high quality developers, high quality opportunities. And between these three guys, they’re doing over a hundred million in equity a year. So, you know half a billion dollars of project value a year and I think they’re most interested in our service actually one because they see that that times are changing. Times are changing what I mean by that is that the future of raising capital is going to be on the Internet. It’s going to be a lot more transparent and there’s going to be a lot better tools for managing that. And so I think that’s the first reason. The second reason that they’re interested in us is those investor management services we provide like having an online wealth portal for an investor, they’re not really able to provide that to their investors easily today. And you can imagine if you have 60 investors on a deal, they’re all messaging you, emailing you, calling you. Even just the document handling for that is super annoying and the fact that we can do it digitally included all for free is a huge upside for them. So super excited we got our sponsors on. Where we see ourselves in six months from now? Yeah, I think what we want to do is we want to close out the opportunities we have on the platform quickly and prove that we can raise capital that’s like number one. Number two to that is all about scale. I would love to see a really healthy community regardless of whether or not you’re investing. I would love to see users on the platform talking about real estate investments, getting comfortable, and then more and more as they’re comfortable getting wealthy by investing online. And so I don’t have any specific numbers, but yeah, I think that’s it’s proving out that model and proving out that networking and community can lead to better investments.

Sean: [00:35:52] It’s going to be a very interesting time because this is when it’s like you need to find a way to hit critical mass as soon as possible. Like I tried to create startups in the past. So personal story, I created a platform too and I remember so hard getting like the listings but also getting people to buy the listings and it was like a balance. So definitely, you know kudos to you for taking on that challenge. And by the way, I think I might know both of those those sponsors. Is ARON Adam and Bobby?

Chris: [00:36:18] It’s Navneet Aaron.

Sean: [00:36:20] Oh, it’s not…

Chris: [00:36:23] He’s there in Mountain View. So Aaron developers actually started from I believe flipping houses and has been developing single family homes and then started developing, I wouldn’t call it tracks of homes, but they buy like a piece of land that they can put ten houses on or four houses on but they’re still not apartments and now they’re getting into commercial. So, you know, they’ve hit scale, they’ve been around for six or seven years. And then you mentioned Bobby?

Sean: [00:36:54] No, Adam and Bobby are called like the Valley Investors, but also called ARON homes. They flip here in the Bay Area. It’s not the same people right?

Chris: [00:37:01] Oh, no, I don’t think so.

Sean: [00:37:02] Okay, cool. And then yeah the Cincinnati ones that’s like Daniels’ crew, right?

Chris: [00:37:06] Yeah. Exactly. That’s Daniel.

Sean: [00:37:07] Shout out to Daniel. First of all, thank you for connecting us.

Chris: [00:37:12] Yeah cool. Sal Invest and the Hospitality Group, doing really cool stuff.

Sean: [00:37:18] Very nice. How did you even get connected with these two groups?

Chris: [00:37:22] Meetups. So actually my co-founder John. He’s our CTO. He was connected through a networking circle to Aaron developers, are kind of first opportunity and then I connected to Daniel over meetup.com. You know, it was really surprising to me coming out of consumer products and technology and hardware and seeing that the way that real estate was set up was really a lot of it is done on meet up in person and through networking circles. And yeah, our original hypothesis was not to include the community side and not to include the networking side in our funding portal and it just became obvious to us that if you don’t do that, that you’re missing a lot of the point like commercial real estate unlike single family homes, it’s built in teams. I mean, you have to have a team. There isn’t one person who’s good at property management, underwriting, sending out tax documents, rehabbing the property, X,Y, & Z. Like it takes a full team and so finding that team is super important. And it really comes down to that networking. And so trying to get into commercial real estate and treating it as an e-commerce product and a one and done, we just didn’t see how it could be possible. And so that’s why we added that functionality in really from actually just observing.

Sean: [00:38:55] Dude, networking is huge. I’m thinking about it, if you’re going to put down 50 thousand dollars of your own money, you’re not going to just give to somebody you don’t know on the internet, right? I guess we can do that for stocks though.

Chris: [00:39:07] Yeah, but stocks are still public, right? So you have quarterly reports in there held to a certain standard by the SEC.

Sean: [00:39:14] Exactly. We know Apple, we know Google, we know Facebook.

Chris: [00:39:17] Yeah at the end of the day like it’s just so much more of a nuanced offering. You’re not buying a t-shirt. Right? Like you’re not like, “hey, I like this t-shirt. I don’t. What’s the quality like?” You’re buying into fifty thousand to a hundred thousand dollar commitment that’s going to last three to seven years. And to do that in an e-commerce fashion as if you were just buying a baseball cap, I just don’t see how it could work. I mean, I think that’s why funding portals have not fully caught on. I think it’s been a big buzz and people have been talking about it for a while and there’s a lot of great things that have been developed, but they were all developed thinking about this problem as a purely real estate problem and not as a human problem to be honest.

Sean: [00:40:07] By the way, where are you based?

Chris: [00:40:08] San Francisco. So not so far.

Sean: [00:40:11] Well I’m kind of far. I’m saying I have meetups in South Bay, San Jose. It’s not too far.

Chris: [00:40:17] I will come down to your meetup group and actually in fact, once we get the discussion board functionality finished on the website, I would love for you to bring your meetup into Rettex and be able to, what it does is it actually mirrors your meetup group. So you don’t give up meetup.com. What it does is anytime you make an event on meetup.com. It makes a copy in the Rettex group as well. And any time that you make a post or do anything to meetup.com, it mirrors it, but it adds additional functionality which is now you have your own messaging board and your own reviews section. So as a team you can review offerings and start commenting on them. You can also create topics and say like “hey, we had this meetup presentation where we had speaker X”. Then you can open a thread and say “hey, I want to know what you guys thought about speaker X’s thoughts on multifamily syndication or I want to know is anyone interested in attending this other event with me nearby”. And so it’s like a web forum, right? But that functionality, also surprising to us, doesn’t really exist on meetup.com. You have something that’s there to create a community but you can’t actually converse with your community.

Sean: [00:41:26] Yep. I’m not gonna lie, I actually don’t use meetup.com as my main way to communicate with the group there. I use email or send out the messages, mostly Facebook. Most people I meet at the meetups. I had them on Facebook.

Chris: [00:41:42] Yeah, but what if your community could create a community.

Sean: [00:41:46] Exactly that would be cool. Like if they’re can create discussions and it was in the community that would be great. And I think as the leader I should be going out there to make them talk more. And yeah, definitely if we are on like Rettex, cool, even better, another way to talk more.

Chris: [00:41:59] Just another avenue. And you know, like that’s the way we’re thinking about it like we believe that this is the next generation real estate investing product. It’s up to us to prove that to everyone. So I want to know what makes your business tick. I want to know what investors like. I want to know how sponsors make money and what’s going to solve their problems and I want to just add value continuously. And so that’s what our mission is right now.

Sean: [00:42:22] That’s great. And so what are the biggest challenges that you’re facing right now?

Chris: [00:42:26] Challenges? There’s not enough time in the day. I work probably 13 to 14 hours a day, six days a week right now. Busting hard on getting this done and it’s really what I was talking to you about. It’s we’re looking for investors in Rettex, investors in real estate projects and people who want to raise money in real estate. And you could imagine just the amount of conversations to figure out and confirm you have the right developers or to pitch a VC. The idea is complicated as what we’re talking about. I mean it’s obvious to us in real estate in some ways that like you need networking and you need this investment engine, but it’s not obvious to angel investors and VCs. And so you know raising money is a tricky one right now both for the company and for our projects and then getting the right projects on board because we want to have the highest quality deals. We want to be a place, especially at the start, we want to be a place where you go invest, you know, and you were making a good decision. And once that community starts to kick in and comes into play, then more and more we can let the community decide. But right now we want to want to be double tight on making sure we have awesome deals.

Sean: [00:43:42] And you have any last words before we end our show today.

Chris: [00:43:44] The only last thing is, you know, come check out Rettex. Let us know what you think. Super transparent, candid. Shoot me a message. I’m on there. There’s messaging on the platform and let me know what you guys are working on in real estate. That’s what it’s about. I want to make connections to you and I want to be part of that community.

Sean: [00:44:00] Awesome. So how can people get in contact with you?

Chris: [00:44:02] Yeah, so log in to Rettex.com and then my name is Chris Moris, and you can look me up as a user and you can message me there directly. Otherwise my email’s chris@Rettex.com. So that’s the easiest way.

Sean: [00:44:15] Cool. Well Chris, thank you so much for being on the show today and sharing all of your information about commercial real estate in general, but also on your exciting new platform that I’m sure will blow up very soon.

Chris: [00:44:26] Yeah, so what I’m looking for most actually right now in this moment is in six months or a year from now having come back onto this show and I would love to have amazing things to say about the community. That would be great.

Sean: [00:44:39] I would love to have you back as well and I’ll be so excited to see your growth in the next year, right?

Chris: [00:44:44] Awesome. Cool. Thanks so much man.

Sean: [00:44:46] Thanks!

Here’s some of the key takeaways from the episode. In order to invest in a publicly marketed syndication, you need to be an accredited investor. The real estate industry is often an antiquated space. There’s plenty of potential for new companies to change the way we invest in. If you want a headstart go on Rettex.com and check out the site and you can establish yourself as an authority figure on the platform. You’ll get plenty of opportunities to work with a pool of accredited investors and syndicators. I hope you all learned a lot. You can find the show notes on our site everythingREI.com. Thanks and have a great day.