RealEstateMogul.com Special Report: Partnering...

RealEstateMogul.com Special Report: Partnering With Hedge Funds


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“Partnering With Hedge Funds” He’s a fictional, London-based detective with ridiculous and uncanny abilities to solve impossible cases through logical reasoning, disguise, and brilliant use of forensic science. What’s more…the guy pulls off plaid better than any man in history.

I am speaking, of course, of the one and only Sherlock Holmes.

So what does Sherlock Holmes have to do with Hedge Funds, you ask?

Here’s the deal. If you haven’t thought about heading down the Hedge Fund path yet, chances are sooner than later you will. There’s a huge opportunity right now for investors to make out like a fox in a hen house by capitalizing on the Hedge Fund phenomenon all around us.

But to do so, you’ll have to get a little “Sherlock”.

What’s Going On with the Hedge Funds?

These financial behemoths have gotten into the real estate investing game, and done so with a mighty force. Sure, they’re trying to be stealthy about it – quietly scooping up foreclosures all over the MLS, showing up in trench coats at the courthouse steps, cloaking their names on deeds.

But the fact is, it’s downright near impossible for these property-eating machines not to make a splash, when they’re actively buying BILLIONS (yes, with a “B”) in residential real estate, in markets all over the country. Literally these mammoth funds are buying many thousands of properties a week, often paying 80 or even 90 cents on the dollar.

As a result many mom and pop investors are flat-out going out of business right now, because all of their tried-and-true sources for deals have suddenly dried up – you simply can’t compete directly against these guys.

But there’s another group of investors – a savvy group of dealmakers who have turned the tables by learning how to play ball with these Hedge Fund mammoths rather than competing against them.

Imagine if you could seize the day and start selling houses directly to these funds? How much more money could you make, flipping deals at 80 to 90 cents on the dollar to these guys?


But the real key to getting a piece of the Hedge Fund action is figuring out how to “Sherlock Holmes” your way in.

So what does this mean, and how do you channel your inner detective?

It’s not as complicated as you may think. You just need to know where to find Hedge Funds, who to contact, and how to reap the rewards through effective and proven communication tactics. And we’re about to share with you one very powerful, tested, and proven way you can do just that.

The Modern Day Sherlock Holmes of Hedge Funds

If anyone knows how to sleuth his way into Hedge Funds, it’s Jason Lucchesi, co-founder of the real estate and marketing company Global Fortune Solutions, LLC and one of our trusted Real Estate Mogul insiders.

I don’t know if he wears plaid as well as the original “Holmes”, but Jason has been in the real estate industry since 2002, where he began his career as a Loan Officer in Illinois. After years of feeling his way around the real estate industry in roles from Account Executive to Branch Manager (he excelled at all of them) Jason began pursuing his ultimate dream of becoming a full-time real estate investor in 2007.

He began investing heavily in REOs in 2008 and has since been involved with many aspects of real estate including short sales, tax sales/deeds purchasing, purchasing homes in distress, wholesaling, and many other avenues. Jason has closed over 150 short sale transactions and 60 “Asset Manager Deals” within the last year alone, thanks to his savvy, Sherlock Holmes - like know-how.

He currently flips 10+ distressed real estate deals monthly, and lucky for us, Jason has shared some of his best techniques and closest-to-the-vest tactics with us privately, within the inner sanctum of RealEstateMogul.com.

Before we grab our magnifying glass to bring Jason’s tricks of the trade into focus, let’s talk a bit more about overcoming that seemingly substantial Hedge Fund barrier.


Breaking Down the Hedge Fund Barrier

In a perfect world, fried food would be good for you, the Kardashians would disappear forever, and Hedge Fund Hunting for Dummies would magically appear on your coffee table to help you uncover, manage, and master these private, often open-ended investment funds.

…and then we woke up, right?

If you’re not lucky enough to find Hedge Funds by accident or the head honchos who execute Hedge Funds, then you’re going to need to do some homework. Going after Hedge Funds requires knowing (1) where to find the key players (2) who to contact once you know where to look, and (3) how to approach them to get your foot in the door.

Don’t panic. The truth is, Hedge Funds aren’t as obscure as you think, and you might even be stumbling upon them by accident through your daily communications and the networking you’re already doing for your business. And surprisingly, the leg work doesn’t require much heavy lifting.

There’s more than one right way to Sherlock Holmes your way into Hedge Funds, but an incredibly stealthy yet proven method is by using LinkedIn.

About LinkedIn

LinkedIn is an effective business networking social media site founded in 2002. It’s kind of like Facebook, but for business, and with far fewer pictures of cats or annoying political rants.

If you’re actively using the internet at all (who isn’t?) then chances are you already have a LinkedIn account. Maybe you use it for casual business networking with random colleagues, friends or partners. Or maybe you set it up once upon a time because you thought you needed some “social media” – and you filled out your profile a little, then promptly forgot your password or even that you have an account.

But today we’re going to take a look at how to use LinkedIn the way it’s truly meant to be used – to make valuable, profitable business connections. For you, this means Hedge Fund connections you can smooth talk into wheeling and dealing with you.


The Process: In a Nutshell

Before we get into the nitty-gritty, it’s always best to start with the big picture first. So let’s take a quick look at what you’re going to do from 10,000 feet up.

As mentioned, one of Jason’s unique specialties for a while now has been what he calls “Asset Manager Deals” – that is, acquiring distressed properties directly from bank/REO asset managers that no one else even knows about. And by far, one of his most effective tactics for doing this has been connecting with bank and REO asset managers through…you guessed it…LinkedIn.

But it just so happened in the normal course of business, that he stumbled upon “asset managers” who didn’t work for banks or REO liquidating companies – they worked for the big funds. This let him to realize that the very same technique he’s been using to tap into bank asset managers can be used to connect directly with the hedge funds – which can otherwise be very difficult to locate and get your foot in the door.

So by smartly using LinkedIn as the point of entry, Jason has been able to connect with literally dozens of Hedge Fund managers, hungry to buy the right deals from him, and even selling him some of their own distressed assets.

The basic process looks like this:

1) Search LinkedIn for the right contacts (with Hedge Funds) 2) Connect with them (as industry colleagues) 3) Reach out to them directly, interact, and sell yourself to them (the right way)

That’s it really – these are the three basic steps Jason uses that work so marvelously for him. But fair warning, there’s a hard way and an easier way – a “right” way and a “wrong” way – to do all this. So let’s take a closer look at the finer points of how it’s done.

The Process: Linking Up with LinkedIn

Let’s just get right to it. Navigating your way through LinkedIn isn’t rocket science. Here’s the step by step of exactly how to do it, so that you ultimately connect with the right people.

You have two basic search methods to use in hunting down key Hedge Fund players:

1) You can do an advanced people search with the title “Asset Manager” 2) You can search for and connect with “Asset Manager” groups

More on that in a moment. But first, a word on “Asset Managers”.


Why “Asset Managers”?

Clearly it’s important that you reach out to the right people, and “asset managers” are the right people.

Asset managers are the gatekeepers that most people don't know how to get access to; they control assets going in and assets going out of the institution or fund – the REOs, the distressed notes, the bulk packages, etc.

Now if you were searching for bank/REO gatekeepers, you have some other possible keywords to consider besides asset manager, such as “special assets”, “loss prevention”, or “risk management”. You could go after vice presidents of these departments. Banks have different titles, and it just all depends on the bank as to what they might be called.

But with the Hedge Funds specifically, the gatekeepers you want will almost always be called asset managers, so “asset manager” is the keyword you really want to really focus on.

Method 1: The Advanced People Search

Here’s how it’s done, step by step:

1) Start by setting up an account at www.LinkedIn.com if you don’t already have one.

2) Login to your LinkedIn account.

3) Click on the word “advance” in the upper right corner, beside the search box. (Be sure that “people” is selected from the search drop down.)

4) From the Advanced People Search page, type “Asset Manager” into the “Title” field and select “Current” from the drop-down menu below it.

http://www.linkedin.com/


5) Click the search button to see thousands (wow) of results to start mining through.

Now this is where your “forensic” skills will come into play. The results you’ve just uncovered are a cavernous mine of opportunity for you to cull through. You’ll find asset managers of all flavors, shapes and sizes. Time to start mining for the Hedge Fund gems.

One option is to just go through them one at a time, briefly looking through their profiles and seeing what jumps out to you. Anything with the words “private equity”, “fund” or “financial” should be especially noteworthy. This is how Jason found his first hedge fund.

You could also refine your search further if you wish, using the “keyword” field or even narrowing down to specific industries (like “banking”, “financial services” and “real estate”)


Now in case it’s not already apparent to you, in your searches, you will also come across asset managers for banks, and that’s ok. You should strongly consider reaching out to them too, but make the focus of your “let’s connect” messages about buying distressed assets from them, like REOs, distressed notes, bulk packages, etc. It’s the opportunity within an opportunity.

Method 2: The Group Search

Here’s how it’s done, step by step:

1) Start by setting up an account at www.LinkedIn.com if you don’t already have one.

2) Login to your LinkedIn account.

3) Select “groups” from the search drop down then search for the title “Asset Manager” once again.

4) Now it’s time to start mining through your groups. Look for groups with Asset Managers who control real estate, real estate related funds, and distressed notes. Note that your results will be significantly less, but by searching “groups” instead of individuals, you are targeting multiple Asset Managers and key Hedge Fund players simultaneously.

http://www.linkedin.com/


Once you’ve targeted your Asset Managers, it’s time to start making request to “connect”. We’ll go into more detail on how to best connect shortly. First let’s talk about…

Why Size Matters

When it comes to connecting with asset managers, you will likely find some of them very easy to make a personal connection with, but near impossible with others. Often this has to do with the size of their operation. Typically it’s much easier to interact and do business with asset managers of smaller funds, smaller banks and smaller REO management companies.

You may be tempted to only go after the whales – like asset managers for Bank for America, for example – after all, they have a whole pile of them. But for most people, it’s just not going to happen.

For starters, these guys tend to think a little too much of themselves (there, I said it) and put a number of barriers of entry between you and them. Secondly, unless you have millions of dollars on hand, you're not going to be able to talk to them because they only want to deal with “accredited investors” with $100 million or more.

If you do have that type of capital, then you'll be able to talk to what's called the “trading desk”, let them know what you're looking for, and they'll put a package together for you that is customized and tailored to what you’re looking for.

For the rest of us, a rule of thumb is this: You’ll get your best results steering away from the top banks and hedge funds, and more towards the state and regional banks, and the smaller hedge funds – and truth be told, not only are these guys easier to connect with, but they can provide more than enough deal flow for you both ways.

The smaller operations also don’t mind buying or selling a single property – which they call a “one-off” – a perfect play for the smaller, tactical real estate investor to make out great on.

LinkedIn Best Practices: Selling Yourself the Right Way

Now that you’ve got a grasp on the step by step process of navigating your way through LinkedIn, and which of the seemingly enigmatic Hedge Funds to zero in on, let’s talk about how to effectively contact and communicate with the right people….the right way.

Let’s start with how you look.


Your Profile: You Only Get One Chance to Make a First Impression

You now know where and who to connect with to “Sherlock Holmes” your way into Hedge Fund success. But before you take steps to connect with Asset Managers, you need to create a “sexy” profile of your own.

First impressions are everything, or so they say, so you need to impress these Asset Managers from the first point of contact. Chances are they’re going to review your profile once you reach out to them, so you’d be wise to “dress up” your profile in a way that talks directly to them.

Here are some tips on how to create a profile that stands out and demands attention:

• Use an appropriate, attractive photo of yourself (It doesn’t have to be a glamour shot, but also not a photo of you with a beer in your hand or that shot of you on the beach in your speedo)

• Thoroughly complete your work history and current activities to reflect your experience, credibility, and capabilities – especially as it relates to your real estate related activities.

• Be honest about the information you share (don’t embellish to make yourself look better – chances are it will bite you where it hurts later on)

Jason’s Proven Asset Manager Methodology

Whether you’re reaching out for the first time, or you’re following up, there is absolutely a right and wrong way to reach out to your target contacts. Here’s Jason’s specific approach, which he’s tested, refined and proven – so model it!

Step 1: Search & Recon

Of the two searches previously outlined (LinkedIn advanced people search and group search) Jason strongly prefers mining the groups, because they serve as a kind of social media watering hole for Asset Managers. Jason actually belongs to a group that has upwards of 10,000 active members!

While culling through the herd, he takes the time look at the person’s profile first (if it’s public) and then narrows it down to the prospects that seem to be actively working as an asset manager for a hedge fund, bank or REO management company.


Step 2: Send a Connection Request

Next is to make your initial approach by sending a connection request through LinkedIn.

• Keep it friendly, direct, concise, and professional and not spammy sounding

• State your name, your commonality, and why you are reaching out

• Use the phrase “at your convenience” to show respect and consideration

• Conclude with a brief “thank you” statement

Here’s the exact connection request Jason uses to approach these Asset Managers:

“Hi __________, my name is __________ _____________. I saw that we were both

actively involved in the _________________ group on LinkedIn. I'm always looking to

network with like-minded professionals. At your convenience, please add me to your list

of connections here on LinkedIn. Thank you.”

LinkedIn messages are limited to just a few hundred characters, so you’ll be forced to keep your message brief and direct, and the message above should be right in line with the character limit. This is really a good thing in the end. These guys are busy professionals dealing with an overwhelming amount of information on a daily basis. So short and sweet is really your only shot at cutting through the clutter to get through to them.

Step 3: Follow Up to Connect, If Necessary

Once you’ve sent your initial a “connection” request, a courteous and typical rule of thumb is to wait 24 hours or 1 business day for a response. If you reach out on a Saturday morning, don’t expect a reply until Monday close of business.

If you don’t receive a response in 24 hours, follow up with a personal email recapping your original request to connect. You can typically get their business email from their public profile on LinkedIn.

Example: Follow Up Personal Email

Hi ______________,

I recently send you a message through LinkedIn to connect at your convenience. When

you have a moment, please email me. We’re both active members of the same

________________ group, and I’m always looking to connect with others in the industry.

Looking forward to connecting with you. Thanks again.


If you don’t get a response to your email within an additional 24 hour period, you could consider dropping them a quick call on the phone, which is also sometimes openly visible on their public LinkedIn profile, though you may have to be “connected” to them first.

Example: Phone Conversation

Hi ______________, my name is _________________, and I recently reached out to you

on LinkedIn. I also sent you a follow up email a couple of days ago hoping to connect

with you to discuss some common business interests we may have. I’d love to speak with

you briefly please if you have just a few quick minutes. I’d love to pick your brain about

any non-performing assets you may have, or if you’re in the arena to buy investment

property. Either way I know you’re busy so I won’t take up too much of your time, and I

appreciate you taking my call……

A few others handy rules of thumb:

• Consider revealing anything you and the Asset Manager have in common to create camaraderie

• Consider explaining why they should connect with you and how it will benefit them

• Request specifically how you would like your response: email, phone, text message etc.

• Also mention how and when you reach out to connect previously, which may encourage them to feel a little more accountable to reply.

• Also be sure to acknowledge his busy schedule, and assure him that you won’t take up much of his or her time. Showing respect and appreciation speaks volumes in any business.

Step 4: Once Connected, Reach Out Again – via LinkedIn and Email

Once they accept his invitation to connect through LinkedIn, Jason sends them a new direct message via LinkedIn and also sends an email directly to their personal email as well.

Why both? Well therein lies two beautiful things about LinkedIn you may not realize:


1) Once your connection request has been accepted, you can now see their profile contact info, including phone number and best email. So you now have a direct contact info you never would have received by cold calling – use it! This is just another reason why LinkedIn is such a valuable resource and research tool.

2) On the other hand, a message sent through LinkedIn goes directly into the person’s email inbox (LinkedIn emails them your message) and has a near 100% deliverability rate. Meaning, they’re more than likely going to see it. This is not always the case with a regular email, which has a greater chance of being snagged by their spam filter.

So for this reason, once they’ve accepted his initial contact request, Jason prefers to reach back out through both LinkedIn and email simultaneously.

Example: Follow-Up Email After Connecting

Hi ______________, this is _________________, and thanks so much for connecting. I

know you're probably extremely busy, but I just wanted to follow up with you and

discuss some common business interests. I own an investment company in

_________________, and I'm looking to acquire non-performing notes or properties,

and also have access to some distressed properties at a very low price as well. If you’re

looking to liquidate or acquire any real estate assets, I’d love to connect with you briefly

about it. I know you’re busy so I won’t take up too much of your time ……

Now that they’ve accepted your connection invitation, and you have either their business or mobile phone number (from their profile) you may be tempted to just pick up the phone and give them a call. And that’s fine, but Jason’s method is to always reach back out via LinkedIn and email first. It just feels a little less “uninvited” from their perspective if you do it this way.

Step 5: Make the Call

So thus far you’ve (i) got them to accept your LinkedIn connection request and (ii) sent a follow up message via LinkedIn and email. Whether they responded to your follow-up message, or if they haven’t responded to you within one business day, now it’s time to go ahead and give them a phone call.

Just start with a quick introduction like…

“Hey, ___________ I sent you out an email a couple of days ago. I know you're probably

extremely busy, and may not have had the time to get to it, and I just wanted to follow

up with you. I own an investment company in _________________, and I'm looking to


acquire non-performing notes or properties, and also we have access to some distressed

properties at a very low price as well ……”

From there, once you’re talking to them, just connect the dots for them. Find out what exactly they want – whether they’re buying or selling, what their needs are, and how you, as a real estate investor, can leverage your skills and resources to meet those needs for them, and get paid handsomely for it.

Speak Up: Don’t Be Afraid to Ask Critical Questions

You’ll want to keep your conversations brief, friendly, and on point, but now that the lines of communication are open, don’t be afraid to start probing for information, gently. Take time to ask the following questions, do a little Hedge Fund “recon”, like…

• What are you looking to sell right now?

• What are you looking to buy right now?

• What is your investment goal at the moment?

• What does your fund primarily focus on investing in? (If a hedge fund)

• Do you have any distressed assets – real estate or notes – you’re looking to liquidate? Either in bulk or as one-offs?

Don’t worry too much if your first few attempts at this feel awkward and clunky. It’s always that way at first. Asking the right questions over time will help build your knowledge base, demonstrate your credibility and genuine interest, and strengthen your relationship with key contacts.

Jason says, “I’m the type of person, if I get somebody on the phone it's pretty much game over. They’re either going to want to sell me some of their assets, or they're going to become a buyer for me. So either way it's quickly a win-win situation from that point.”

Bonus: Send a Follow Up with a Letter

Jason also shared that one of the most effective marketing strategies he’s probably ever used to this day, was when he started sending the asset managers letters as well.


Once you’re connected via LinkedIn, you typically have access to their direct mailing address (which they published on their profile). So in addition to everything else covered here, why not send a letter – a handwritten one even – to make an even bigger impact, and increase your odds that much more of getting a response?

This was one Jason shared with us in hushed tones for a reason. Do it.

A Real Success Story, For Real

You now have the knowledge, a solid foundation with which to build your own successful Hedge Fund portfolio. By applying Jason’s “Sherlock Holmes” techniques and best practices, you will have one powerful tool to slice off your piece of the Hedge Fund pie.

Let me share with you a typical “asset manager deal” Jason completed recently, to hopefully bring all the pieces of the puzzle together for you. Jason really put his niche for discovering ways to tap directly into bank Asset Managers to work in this scenario in a very profitable way.

While searching for Asset Manager Groups on LinkedIn recently, he came upon a particular Asset Manager who he ultimately connected with after following the communication chain of command described in this report.

He asked the Asset Manager if he had any distressed properties to purge. Often times, there are a handful of properties, but in this case, one was the magic number.

It turns out this Asset Manager had some distressed notes he would love to liquidate – and one in particular right at the top of his naughty list.

After a little light banter, Jason was able to negotiate to purchase the distressed note on this particular property for $15,000. This was a first position mortgage – no additional liens on the property. The value of the note (the balance that the homeowners owed) was $71,000, and after comparing to area comps, the property’s ARV (after-repair value) was deemed to be $115,000, which was a 30-day quick sale price.

Here’s where things got interesting.

Jason agreed to pay the bank $15,000 for the distressed note, and to close in a few weeks. He then introduced himself to the homeowners to work out a new deal – cash for keys.

He explained to the distressed homeowners that he would soon be their new mortgage holder. But he realized that even though they were so far behind, he could tell they were good people who could really just use a fresh start.


He explained that by working with him, they would no longer face bad credit marks or foreclosure. All they would have to do is find a new place to live within a few weeks, and then sign the deed over to him – known as a “deed in lieu of foreclosure”. And Jason would even give them some moving money to help them out when they signed the deed over to him at closing.

They accepted his offer, with the agreement of $1,500 moving money coming to them, and the transaction was almost over before it began.

With a contract to buy the note for $15,000 in one hand, and a deed-in-lieu agreement in the other, Jason promptly got to work offering the house to his cash investors network for $25,000, with the expectation of $50,000 in repairs.

A cash investor-buyer, who just happened to be a local contractor, bit. He agreed to buy the property as-is for $25,000 (a difference of $10,000 to Jason), but he wasn’t interested in resale. The buyer wanted to add this property to his rental portfolio, and he was able to do the repairs for only $35,000 instead of the anticipated $50,000, thanks to being a contractor and rehabbing to rental standards vs. retail standards.

At closing time, three key people were invited to the party – the homeowner, the buyer/contractor, and of course, Jason. This was a simultaneous closing where the property was both bought and sold at the same time.

After all the paperwork, a few smiles, and some handshakes, the attorney divvied everything up, and everyone walked away fat and happy.

So to review, and using round numbers, the deal looked about like this:

$115,000 Quick sale ARV $71,000 Defaulted note value $15,000 Jason’s price to purchase the defaulted note from asset manager $25,000 Jason’s sales price to investor/contractor guy $1,500 “Cash for keys” moving money to homeowner $8,500 Jason’s profit (for about 5 hours of total work)

Asset manager success story? Why, “It’s elementary, my dear Watson.”


And this deal is nothing special. These deals and much better are a dime a dozen frankly, once you have learned how to tap into these guys.

Exit Strategies

Another key factor to Jason’s Hedge Fund success is that he considers his exit strategy as he begins the deal. When it comes to distressed properties like the one in the example above:

• Plan A is typically to wholesale fast for cash. • Plan B is to rehab the property and retail it quickly at a 60-day price (although he often

goes with the 30-day price to give the sellers a more realistic value). • Plan C is to rent the property.

Bottom line – if he finds a deal with little to no risk, if the property is fit for rehab, and if he has the capital fund providers to support the deal, then he’ll move forward with the rehab.

The Takeaway

The hedge funds represent an enormous opportunity right now for the savvy investor who is able to find and tap into them – both as a source for distressed assets and as a buyer of distressed assets.

When it comes to massaging your way into Hedge Fund deals, the bottom line is you don’t have to be a detective to, well…be a detective. The chances of you stumbling across them by accident aren’t great, but now you’ve learned where to look, who to contact, and how to effectively communicate with them.

LinkedIn is a free business networking site, so use it! Real Estate Moguls like Jason, among others, have demonstrated this with their thoughtful and systematic process that will give you a direct line of contact with Hedge Funds – and ultimately to carving out your piece of their very large pie, before the opportunity is gone.

Carpe diem! Learn these tools, use them to your advantage, and reap the rewards. You may be surprised at just how little time and effort it can take to successfully navigate your way into a high-leverage hedge fund relationship.

Now go make it happen.

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