Capital Calls: What to Know Before You Put In More Cash · On The Market · Radar

What Capital Calls Mean1:05 – 5:13

James DainardHost

1:05

Yeah, and capital calls, like, I mean, to keep it kind of simple for everyone, it's when you're buying a property, you're using a pro forma.

James DainardHost

1:12

These are your projections on the deal, whether it's a rental property, it could be a development deal, it could be a flip home.

James DainardHost

1:18

During those projections, you need a certain amount of capital that's anticipated-

Kathy FettkeHost

1:22

Mm-hmm

James DainardHost

1:22

... to do that deal.

James DainardHost

1:23

Now, if you're the individual operator, like a flip, and I need more cash, I just gotta bring more cash to the table or go borrowing.

James DainardHost

1:30

But when you're in a formal partnership, like a joint venture partnership or a formal syndication, this is where the operator is asking the investors more for the capital to bring it in, and it's always a question of, is it the right move to bring the capital in or not? And so the deal's out of money.

James DainardHost

1:47

It's more than you were expecting to put into the deal, and you gotta write a check to keep this thing going or look at either selling the asset or just taking the loss.

James DainardHost

1:57

But it, you know, it's something that happens across the board, but we've been hearing a lot more about it, especially the last 12 months.

James DainardHost

2:03

There's been a lot of different capital calls going on, especially with the floating interest rates-

Kathy FettkeHost

2:08

Yeah

James DainardHost

2:09

... people's projections, the slowing of the economy.

James DainardHost

2:10

And Kathy, you're probably one of the most experienced people that I know that has been-

Kathy FettkeHost

2:15

[laughs]

James DainardHost

2:15

...

James DainardHost

2:15

in a lot of syndications.

James DainardHost

2:16

I mean...

Kathy FettkeHost

2:17

I'm, I'm really happy to say we have never, uh, issued a capital call at Real Wealth.

Kathy FettkeHost

2:22

We haven't, um, done that.

Kathy FettkeHost

2:24

And, uh, but I was in a deal where i- in the documents, and again, when it comes to a syndication, that syndication is ruled by the documents.

James DainardHost

2:33

Mm.

Kathy FettkeHost

2:33

You can't just willy-nilly decide to change things.

Kathy FettkeHost

2:37

When you go into a deal, there's a framework of how, how the money flows, basically.

Kathy FettkeHost

2:43

How you get paid out, uh, who gets paid first, and if there is, you know, a r- a requirement for a capital call.

Kathy FettkeHost

2:51

And a lot of new investors don't maybe read through the PPMs.

What Capital Calls Mean1:05 – 5:13

James DainardHost

1:05

Yeah, and capital calls, like, I mean, to keep it kind of simple for everyone, it's when you're buying a property, you're using a pro forma.

James DainardHost

1:12

These are your projections on the deal, whether it's a rental property, it could be a development deal, it could be a flip home.

James DainardHost

1:18

During those projections, you need a certain amount of capital that's anticipated-

Kathy FettkeHost

1:22

Mm-hmm

James DainardHost

1:22

... to do that deal.

James DainardHost

1:23

Now, if you're the individual operator, like a flip, and I need more cash, I just gotta bring more cash to the table or go borrowing.

James DainardHost

1:30

But when you're in a formal partnership, like a joint venture partnership or a formal syndication, this is where the operator is asking the investors more for the capital to bring it in, and it's always a question of, is it the right move to bring the capital in or not? And so the deal's out of money.

James DainardHost

1:47

It's more than you were expecting to put into the deal, and you gotta write a check to keep this thing going or look at either selling the asset or just taking the loss.

James DainardHost

1:57

But it, you know, it's something that happens across the board, but we've been hearing a lot more about it, especially the last 12 months.

James DainardHost

2:03

There's been a lot of different capital calls going on, especially with the floating interest rates-

Kathy FettkeHost

2:08

Yeah

James DainardHost

2:09

... people's projections, the slowing of the economy.

James DainardHost

2:10

And Kathy, you're probably one of the most experienced people that I know that has been-

Kathy FettkeHost

2:15

[laughs]

James DainardHost

2:15

...

James DainardHost

2:15

in a lot of syndications.

James DainardHost

2:16

I mean...

Kathy FettkeHost

2:17

I'm, I'm really happy to say we have never, uh, issued a capital call at Real Wealth.

Kathy FettkeHost

2:22

We haven't, um, done that.

Kathy FettkeHost

2:24

And, uh, but I was in a deal where i- in the documents, and again, when it comes to a syndication, that syndication is ruled by the documents.

James DainardHost

2:33

Mm.

Kathy FettkeHost

2:33

You can't just willy-nilly decide to change things.

Kathy FettkeHost

2:37

When you go into a deal, there's a framework of how, how the money flows, basically.

Kathy FettkeHost

2:43

How you get paid out, uh, who gets paid first, and if there is, you know, a r- a requirement for a capital call.

Kathy FettkeHost

2:51

And a lot of new investors don't maybe read through the PPMs.