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Show Summary
In this episode of the Real Estate Pros podcast, host Michelle Kesil interviews Mike Zlotnik, CEO of TF Management Group, LLC. They discuss investment strategies in real estate, focusing on the importance of connecting capital with opportunities. Mike shares insights on passive investing, the significance of building a solid foundation for new investors, and the value of networking in the real estate industry. He also provides perspectives on current market trends and the long-term benefits of real estate as an investment.
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Investor Fuel Show Transcript:
Mike Zlotnik (00:00)
I’m working on a new book and I’ve been working for over two and a half years and finally coming to a completion. And really in thisI thought quite a bit about this whole topic, right? When you’re starting, what do you start with? And you have to build simple and basic foundation. So no matter what you’re looking for, you may be thinking you could do reach for stars and get great returns. You got to build a foundation, solid foundation.
simple foundation of predictable, stable, downside protected deals that start generating some cashflow for you.
Michelle Kesil (02:10)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Mike Zlotnik, who is the CEO of TF Management Group, LLC, and a real estate fund manager and passive investor. So, excited to have you on the show today, Mike.Mike Zlotnik (02:33)
Thank you, Michelle, for having me.Michelle Kesil (02:35)
Of course, think our listeners are really going to take something away from how you’re approaching investment strategies and creating the broad network that you have worked on. So let’s dive in.Mike Zlotnik (02:51)
Sounds great.Michelle Kesil (02:53)
First off, for those not yet familiar with you and your world, can you share what your main focus is?Mike Zlotnik (03:02)
Sure, the best way towhat we do is marry money and opportunity in real estate. So we’ve been doing this for many years. ⁓ We are capital partners to the folks who looking for capital. So we bring in capital into deals, mostly commercial real estate, industrial, open air shopping, multifamily, storage, ⁓ loans, various types of niche loans. And on the other side of the spectrum,
to folks who are looking to invest capital, we bring the opportunity, we bring deals forward that ⁓
meet their requirements. So we’re constantly learning of what our ⁓ capital investors are looking to deploy their capital into, and on the other side, what kind of deals would meet. And we have an extensive network of ⁓ operators and sponsors that we’ve developed over many years with various ⁓ specific niches.
as I mentioned, strategies like industrial, open-air shopping, multi-family, and other asset classes. It’s all real estate, and ⁓ we do some business with residential folks too, and very simple private credit, hard money loans, so we deploy some capital into those asset classes too. But the most basic approach is just marrying money on opportunity. That’s what we do day in and day out.
Michelle Kesil (04:30)
Yeah, amazing. So when you mentioned this connection of the money and opportunity, where is the money coming from? Like private investors and people who want to have these deals that you support them with? Or can you just expand more on what that looks like?Mike Zlotnik (04:51)
Actually, of the capital is high net worth credit investor capital. It is not institutional capital. We don’t work with large institutional firms. We work with very few smaller, let’s just call them ⁓ larger investors or their own smaller family offices, smaller RIAs.But quite majority of folks are individual doctors, dentists, technology professionals, ⁓ other professionals who
have made their ⁓ capital through their primary business. And then they’re looking to build a portfolio of cash flowing, defensive, downside protected, income oriented investments in real estate. Some of them look for some tax benefits, some of them don’t care about that, they just look for safety and cash flow, as well as some level of growth through rent growth, rent escalation clauses, etc.
So that’s where majority of the capital comes from.
Michelle Kesil (06:42)
Understood. So this is more for people that are looking to passively invest and you’re supporting them and guiding them on that journey.Mike Zlotnik (06:53)
Yeah, that’s what we do. We provide opportunities for those mostly passive investors, but we do have plenty of real estate professional investors. From time to time, we have deals with heavy depreciation benefits. So real estate professionals, ⁓ especially this time of the year, we’re recording in December. They need tax deductions and the conversation is kind of late now to try to find a deal, but I have the discussions with folks.In Q3, they’re looking for the CPA told them you’re making too much money. You got to get some depreciation to help offset some gains. So we have some deals that focus on heavy depreciation and other tax benefits. But it’s an outlier. It’s a specific subgroup who needs that. A wide majority of people just looking for passive income with some depreciation, stability, predictability.
Michelle Kesil (07:50)
Absolutely. What advice would you share for someone that’s newer into the space, that’s looking to get into investing and building more of that predictable income? How can someone get started?Mike Zlotnik (08:04)
Sure. SoI’m working on a new book and I’ve been working for over two and a half years and finally coming to a completion. And really in this book, I thought quite a bit about this whole topic, right? When you’re starting, what do you start with? And you have to build simple and basic foundation. So no matter what you’re looking for, you may be thinking you could do reach for stars and get great returns. You got to build a foundation, solid foundation.
simple foundation of predictable, stable, downside protected deals that start generating some cashflow for you.
And ⁓ you also will learn on the way as you look at deals. It’s one of the most important elements of investing is ⁓ you need to invest into learning. you learn to invest and then you invest to learn. Both of these things happen in parallel.
And the way they happen in parallel is by you making investments and actually ⁓ learning how to review deals, how to underwrite deals, how to select who you invest with, who comes way before the deal. So who you invest with, then what kind of deals can you bring ⁓ capital ⁓ and negotiate terms? Sometimes you can, sometimes you cannot, but you’re turning this into a learning experience.
So the most important thing to get started is to get started. It’s already fire aim, right? So you need to fire. If you’re going to keep aiming, you’re going to be analysis paralysis for long time. So at the same time, you’re not looking to ⁓ lose money. So the best way to do it is look for downside protected conservative deals, understand why, right? That’ll help you. ⁓ If you understand that, if you understand what you’re investing into, how it makes money.
How is downside protected? All these are the questions folks should be asking to get confidence and comfort in their investment decisions. So as you go to the process and you learn, always think about how can I lose money? It’s kind of, if you go back to, one of the most, what I call them, I’m a scholar, I’m a constant scholar of the best minds and
Warren Buffett, Charlie Munger, Benjamin Graham, they are the godfathers of value investing. And Charlie Munger ⁓ is a, ⁓ he basically teaches us avoid stupidity and ⁓ figure out how you could lose money. So he inverts, how can you lose money on a deal? By asking these questions, you will, you will create ⁓ a mindset where instead of looking for stars, you’re looking for great returns.
you’re going to try to avoid losing money. And that whole concept will make you a much better value investor. So as simple as it sounds, ⁓ looking at any deal with any good marketing materials and promotions, it’s easy to ignore and not to understand. But that’s the whole exercise is at the beginning investor focus on understanding fundamentals, principles, and write your first check and monitor and see what happens.
Michelle Kesil (12:01)
Yeah,Thank you. is great advice for people that are wanting to grow and expand and learn more about investing.
Mike Zlotnik (12:15)
Yes, for sure.Michelle Kesil (12:17)
What are you most focused on solving or scaling to next in your business?Mike Zlotnik (12:27)
Well, it’s a scalability and simplicity ⁓ of the product and offering and expanding and getting more folks to take a lookreal estate. ⁓ I see significant opportunity in ⁓ the greatly appreciated portfolios in stock market, crypto, ⁓ other asset classes have done remarkably well and Magnificent 7.
There can be a bubble there and I’m not going to spend any more time beyond this. It’s been a lot of volatility and certain discussions already concerns. Are we getting over our skis in AI? The investment is outpacing potential for earning capabilities that people are paying insane valuations and prices. So that whole ecosystem has a lot of appreciated capital and I see a significant opportunity to tap into
these folks who have made ton of money and maybe looking to take a step back, maybe take some chips off the table if they’ve done so well and diversify. I literally had people who reached out to me that they’ve done really well in crypto and say, what do you got in real estate? So I’m looking to connect. I’m not looking to sell them anything. Let them connect. Let them ⁓ learn who I am. I can learn who they are and connect on whatever level.
that folks want to connect and if the benefit to them is that they learn something and I and I I get to know another person there’s already ⁓ Value there and it’s a one step at a time. The investing business is all about connection and of course people have to do the diligence, but you you need to The the step number one and whoever is doing this on both in the investing side and on the other side can never transact until
No-Like-and-Trust is established. We put out actually a lot of educational content, a lot of educational materials, both the book, the videos, the articles. So we try to ⁓ help folks get better at this and at the same time connect and as they build No-Like-and-Trust, after some time, we’ll hopefully have an opportunity to bring a deal to them. So that’s simple.
Michelle Kesil (14:53)
Yeah, absolutely. Is there a specific networking strategy that you are using ⁓ when it comes to gaining more of these connections and growing your network?Mike Zlotnik (15:49)
Yeah, it’s a… So we live in the day and age of obviously ⁓ YouTube, TikTok and so many social media platforms and AI is now taking over. It’s very difficult to, you know, for the authentic connections to develop. ⁓ So we try both the old-fashioned connections with existing investors and then you try to ask who do know that weknow? Human introductions.
It’s one of those things where as much as people want to connect through a technology platform, I still feel that good old human connection matters, especially when it comes to investing. I’m meeting with one of our, one of the friends and long time investors in a dinner set up in a couple of weeks and
He’s actually reached out to me and said hey, I got a golfing buddies. We golf a lot and You know, that’s the best way to think about this, right? You’re not trying to sell you just trying to connect. So if you got golfing buddies make the introduction happy to chat with them better to understand what they’re looking for and The good old human connection in the age of technology and rapid ⁓ AI driven
social media type of marketing. Almost the old-fashioned way of doing this. So I’m not gonna tell you anything spectacular use this AI tool. We do use the tools every day, right? But it’s just a, it’s fascinating how much ⁓ bogus and fake content is created using AI. And the trust is very low there, but a human interaction is still human interaction. So we’ll see where we go. Of course, AI will be part of it.
but I still feel that the best way to connect is through personal connection.
Michelle Kesil (17:48)
Yes, most definitely relationships are one of the most important aspects of this space and yeah, AI cannot replace those relationships.Mike Zlotnik (18:01)
We’ll see. We’ll see people a little bit concerned about, you know, the, the, the judgment day, the Terminator and other concepts. yeah, a little bit scary sometimes, but at the same time, listen, Hey, what I’ve seen over the years, and that’s why it still feels like a bubble. remember the.com bubble. ⁓ and I was in a tech world and I remember, you know, how there was a massive reset. People always, ⁓ they dream. It’s easy to dream. People dream wonderful future.Michelle Kesil (18:07)
Yeah, I understand.Of course.
Mike Zlotnik (18:31)
And then, uh, I don’t know if you remember the good old movie back to the future. And in that movie, he, I think it was movie number two, he went into the future, uh, 30 years out and there were supposed to be flying cars everywhere. So he went from 1985 to 2015. Well, we were 10 years past 2015, then we don’t have too many flying cars. We have a few prototypes here and there, kind of drones, et cetera. So people often overestimate.Michelle Kesil (18:36)
Mm-hmm.Mike Zlotnik (19:01)
⁓ or over dream where things gonna go how fast and that’s where it feels like AI is powerful as it is. It’s a revolutionary technology, but it’s a little bit ⁓ overblown of what it’s gonna do and how fast it’s gonna do it for us. We’ll see.Michelle Kesil (19:18)
Yeah, time will tell.Mike Zlotnik (19:22)
For sure.Michelle Kesil (19:24)
What do you foresee when it comes to the real estate market? Is there any sort of trends or observations you’re noticing as things have been shifting in that space?Mike Zlotnik (19:37)
So real estate, one of the beauties of real estate is it’s incredibly, ⁓ it’s old ⁓ and investing in real estate can actually be very simple and predictable. So it’s not a new trend, it’s, you know, we’re going back to the past ⁓ investing into predictable, stable, downside protected technology. So I would stay away from data centers for a simple reason. It could get overbuilt.And you can’t even compete that they require tremendous capital. They require required billions and billions and billions of dollars of investment to build them out while good old industrial some good old open air shopping. ⁓ Some of the older ⁓ real parts of real estate are much more attractive today because they they’ve survived the the age of building over building and rapid kind of expansion. So
The way I think of this is stick with what works, stick with the predictability, but you can play around or nibble around with some new innovation and technologies and see what will stick because you don’t know what will stick. In fact, I don’t know if open AI, Chai GPT is going to be around in 20 years. The same way during the technology, the dot-com boom, certain leading companies, they disappeared completely.
America Online is one of the examples, right? They were the leader of a space and then they’re completely gone. So all that said is that if we invest in real estate, it’s one of the reasons why many years ago I switched after a successful technology career to real estate investing is because technology was moving and evolving very fast. And it feels like you constantly have to be on your toes. So you’re to get thrown back.
In real estate, you can actually move slow. You can make decisions that work for you for years to come. So you can make slow, well-planned, conservative investments and they’ll work for many years in the future. So that’s the beauty about real estate. ⁓ I hope I answered your question.
Michelle Kesil (21:56)
Yeah, of course that perspective makes sense that, you know, the asset of real estate isn’t necessarily going to go anywhere, right?Mike Zlotnik (22:06)
Yeah, and I’ll just tell you this was one of the recent, ⁓ we put out a lot of educational concepts and literally yesterday I was recording a video and I was listening to Ray Dalio. So Ray Dalio is very famous for his great work. He’s the founder of Bridgewater, one of the most ⁓ profound hedge funds, but he’s done great work on ⁓ navigating ⁓ the principle of navigating big debt crisis, the principle of navigating changing world order.principles, number of other works and I was intrigued. ⁓ I’ve heard this video a few times, but over the summer he was on a podcast with David Rubinstein, another podcast on a stage and he was asked if real estate is a great hedge against inflation and for years most of us in real estate have always thought that real estate has always been a good hedge against inflation and then Ray Dalio says no, it’s not a great hedge against inflation.
⁓ because it’s sensitive to the interest rates, because local governments can tax you and because it’s immobile. It’s kind of slow and you’re stuck with the property for long time. Everything you said is completely correct. But as I thought about this, I yesterday recorded a different video and I back to differ that on a short term basis, Ray’s right, but on long term basis, estate actually works as a great hedge against inflation because inflation typically means random inflation too.
So you can have inflation, high interest rates, which is basically creates negative pressure on real estate. But in the long run, if interest rates don’t go up and down too fast, they just go stay at the elevated level with high inflation, you’re going to see higher rent inflation. And that will take care of the business too. It’s just one example of you always got to have the right perspective and a time horizon. So real estate is typically longer time horizon, illiquid, slower moving.
but it does work ⁓ on a long-term basis as hedge against inflation in a matter of speaking.
Michelle Kesil (24:12)
Yeah, absolutely. That is a really wise perspective. Thank you for sharing that.So before we wrap up here, if somebody wants to reach out, connect, learn more about what you’re doing, where can people find you and connect with you?
Mike Zlotnik (24:30)
sure now it’s gonna get very easy and cheesy. So people do call me Big Mike. I am 6’4 and I do run a podcast with a cheesy name Big Mike Fund podcast and the website is bigmikefund.com. We have a corporate website but it’s way easier to remember bigmikefund.com and I will use my standard spiel. If you forget the D at the end and you go to bigmikefund.com I promise it’s not a kinky site.Michelle Kesil (25:03)
Amazing. Thanks for sharing that. I appreciate your time and your perspective. Thank you for being here.Mike Zlotnik (25:13)
Yeah, thank you. very simple offer for no other reason. I’m finishing the book and I’ve been thinking about the book and the book is intended not to be sold, but really to be to help enhance people’s ⁓ perspective. So for folks that will go to the website and will register, we’ll get them ⁓ a copy of the book when it comes out.Michelle Kesil (25:34)
Thank you for sharing that for the listeners. I’m sure they’ll get a lot of value from what you’re writing.Mike Zlotnik (25:41)
You’re welcome.Michelle Kesil (25:43)
Awesome. So for the listeners tuning into our show, if you got value, make sure you’ve subscribed. We have more conversations with operators like Mike who are building real businesses and we’ll see you on the next episode.
