In this episode of Executive Connect, host Melissa Aarskaug sits down with Brian Burke, founder and CEO of Praxis Capital, to break down how successful investors navigate market cycles, manage risk, and build long-term wealth through real estate syndication.

With more than three decades of experience and over one billion dollars in acquisitions, Brian explains why most investors fail by chasing returns, overleveraging deals, and ignoring capital structure. He shares lessons from the 2009 collapse, today’s multifamily downturn, and his strategic shift into senior housing.

From sponsor selection to diversification, this conversation delivers a clear framework for investing with discipline, patience, and precision.

If you want to protect capital, avoid emotional decisions, and invest with confidence in any market, this episode is essential listening.

Chapters:

(00:00) Why timing matters in real estate investing
(01:01) Brian’s background and building Praxis Capital
(03:33) Lessons from the 2009 financial collapse
(05:49) Capital structure and surviving downturns
(07:30) Real estate syndication explained
(08:27) Why sponsor selection is critical
(09:21) Matching capital to investment timelines
(11:07) Active versus passive investing
(13:16) How high earners approach real estate
(14:46) Evaluating sponsor track records
(16:49) Verifying performance and due diligence
(18:56) Why senior housing is a strategic shift
(22:54) Separating operations from ownership
(25:41) Where risk lives in syndications
(27:51) Why systems create leverage
(31:00) Control versus return
(31:56) The danger of chasing projections
(33:13) Why diversification matters
(35:42) Best asset class for beginners
(36:18) Biggest myths about passive investing
(37:16) Financing and long-term survival
(39:23) Mistakes even smart investors make
(40:53) Choosing better versus doing more
(41:50) Final advice and how to connect

Brian

(0:00) I think by choosing better and by timing, and this is something that people will try to dismiss, they’ll say, well, timing doesn’t matter in real estate. (0:10) Oh, yes, it does. (0:11) Tell someone who bought their primary residence in 2005 that timing doesn’t matter.

(0:17) Tell someone who bought their first large multifamily deal in 2021 that timing doesn’t matter. (0:24) So I think timing, understanding what you’re investing in, I think matters more than almost anything. (0:33) So it’s not about quantity, it’s about quality and quality is achieved by understanding what you’re doing.

Melissa

(0:39) Most people think real estate investing means toilets, tenants and 2am phone calls. (0:47) Today’s guest proves that it does not have to. (0:50) Brian Burke is the founder and CEO of Praxis Capital, a vertically integrated real estate private equity firm he started back in 2001.

(1:01) Over a 36 year career, Brian has acquired more than a billion dollars worth of real estate spanning multifamily senior housing, single family homes, land development, and even lakefront resorts. (1:15) He is also the author of Hands Off Investor, a guide to passive real estate syndication, and one of the clearest thinkers in this space when it comes to how everyday investors can participate in industrial institutional quality deals without being a full time landlord. (1:33) Tongue twister.

(1:35) This episode is about real estate syndication and how to make it work, where the risks actually live, and why senior housing has become one of the most compelling long term plays in real estate today. (1:49) Welcome, Brian.

Brian

(1:51) Hey, thanks for having me here, Melissa.

Melissa

(1:54) Now you’ve been in real estate for over three decades, a long time, you’ve seen all the things. (2:00) Take us through the evolution from your early years to building Praxis Capital.

Brian

(2:06) Well, the early years were kind of like anybody else’s early real estate years floundering around trying to figure out what you’re going to do. (2:13) So when I first got started, I was flipping houses, and then I tried land development, I tried building new houses, I tried some commercial real estate, I tried a lakefront resort renovation, built a self storage facility, just kind of all kinds of different things to figure out what am I really good at. (2:34) And one thing that real estate will do very, very quickly is teach you in a very impactful way, what you’re good at and what you’re not good at.

(2:44) So I finally figured out what I was best at. (2:47) And that’s when I built Praxis Capital around my core competency, which was twofold. (2:53) You know, we built a really good house flipping business, and we built a really good commercial real estate investment business.

(3:00) And we put those two things together and formed Praxis Capital like what, 26 years ago now, if you can believe it.

Melissa

(3:07) Ready to lead smarter and invest wiser? (3:10) On the Executive Connect podcast, we unpack executive strategies for wealth and influence. (3:17) Hit the subscribe button now.

(3:20) Don’t just watch, act. (3:22) I can’t believe it. (3:23) Time is sure flying fast for me.

(3:25) Now, what was the first deal that truly changed how you thought about risk?

Brian

(3:33) Well, you know, risk is, there’s so many facets to risk, right? (3:39) And at first, I didn’t give risk much thought, you know, it was like, I don’t have anything to lose. (3:48) I’m going to try everything.

(3:50) And if I lose big, I’m losing my own, you know, future, really, because it was all on borrowed money anyway, back then. (3:59) But you know, in 2009, I had a multifamily deal that I had bought right before the economic collapse. (4:07) It was after the real estate collapse.

(4:09) I thought I was timing it right, but before the economic collapse. (4:13) And when Bear Stearns and Lehman fell in 2009, after the economic collapse, and jobs got lost, and the economy went right into the toilet, I really realized then that, you know, I had this, it was a 60 unit multifamily apartment complex in the Dallas market. (4:35) And I thought that, you know, buying it for half what the last guy paid was genius.

(4:40) And I thought that the fact that it was in foreclosure, and the bank was basically going to 100% finance it for me, that getting in with no money down was genius. (4:51) And it turns out, neither of those two things are really all that smart. (4:55) You know, you find out quickly how impactful an adverse economic cycle is.

(5:01) And that changes your thought process on risk, because you realize how much you really have to lose. (5:07) Thankfully, I didn’t end up losing anything when it was all said and done. (5:10) But I spent four years paying the mortgage payment on that property out of my own pocket, and it was a $15,000 a month mortgage payment.

(5:17) And that’s not something you ever want to do again. (5:20) So from that point forward, it’s like, I never want to be in that situation again, I’m going to make sure that I structure all my investments in a way where I don’t find myself in that same position.

Melissa

(5:32) I love that. (5:34) Now, were there skills that you, that matter more now? (5:40) Or are there skills that matter more now than they did previously?

(5:44) Like things that people should know now that didn’t so much matter early on?

Brian

(5:49) I don’t know that I caught skills necessarily, as it was just capital structure. (5:53) You know, one thing that you learn when you have, you know, an adverse cycle is you learn the structure of your capital is more determinant of your outcome than anything else. (6:06) And we’re seeing that play out again right now.

(6:08) In fact, you know, we’re recording this in early 2026. (6:12) For the last four years, multifamily has been in an adverse economic cycle. (6:19) And we’re seeing multifamily syndicators losing properties to foreclosure, we’re seeing 100% wipeouts of LP investments, amongst sponsors who had capital stacks that were just not built for resiliency, in other words, high loan to value ratios, multiple layers of capital, such as preferred equity, mezzanine debt, different share classes for investors, and all those different things.

(6:49) They’re really elevated their risk profile. (6:52) And meanwhile, you know, there’s some of us that are holding on to our properties just fine, because we’ve got in with low LTV loans. (7:00) You know, we didn’t have as much risk at the outset.

(7:04) And that is helping us survive the adverse cycle. (7:07) And that for me came from a lesson I learned back in 2009 about over leveraging.

Melissa

(7:14) I love that. (7:15) So let’s talk a little bit about what real estate syndication actually is. (7:21) So for someone hearing this term for the first time, what is real estate syndication?

(7:26) And why is it important? (7:28) And why is it not important?

Brian

(7:30) Real estate syndication really is just a method of financing real estate acquisitions. (7:35) And, you know, syndication isn’t limited to just real estate, anytime a bunch of people get together and collaborate with their funds to accomplish a purpose, that’s a syndication. (7:48) You know, you could be putting together money to invest in real estate, oil and gas, a racehorse, a business, anything is a syndication.

(7:58) But specific to real estate, it’s when a group of investors contribute funds into a funding vehicle. (8:06) And there’s a manager that is acquiring real estate using those funds, managing that real estate and making investor distributions. (8:15) That’s kind of the, I call it syndication 100.

Melissa

(8:23) What should investors never assume about a deal?

Brian

(8:27) Never assume that the sponsor knows what they’re doing, you know, always verify the track record and experience of who you’re investing with. (8:38) You can’t just assume that because they’re out there in the industry that they have your best interest at heart and that they’re doing everything correctly. (8:48) This is a trust but verify kind of a business and maybe not even a trust yet because it takes a long time to earn that trust.

(8:56) But I think that sponsor selection is one of the most critical decisions that anybody’s going to make in their passive real estate investing journey. (9:04) So I think it’s just critical for people to really understand who they’re investing with and what that person’s approach to investing is, what their skill is and what their experience is.

Melissa

(9:15) Now, how long should people expect for their capital to be tied up?

Brian

(9:21) That depends. (9:22) You know, you could have a situation where people are going to invest in a syndication for the purpose of building a fourplex and then selling it when it’s built. (9:32) And that could take one year, maybe two years.

(9:35) Or you could have a situation where you’re going to buy an income property and own it for a decade or more. (9:42) So it’s really important when you’re investing your capital passively to understand what the time horizon is on the investment that you’re contemplating and matching that with your capital. (9:54) And so you might have a bucket of capital that you need to have access to.

(9:59) It’s not appropriate to put that into a syndication and you might have a bucket of capital that you don’t need for 10 years. (10:05) That’s something that’s really appropriate for investing in syndications. (10:08) But the key is, is matching the time horizon of the investment to the time horizon of your capital.

Melissa

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(10:42) Just visit moneyripples.com forward slash secrets and enter the promo code E-X-E-C. (10:52) The hands-off investor mindset, you literally wrote a book on hands-off investing. (11:00) So what mindset shifts do people have to have when moving from active to passive?

Brian

(11:07) Well, I think even the concept of moving from active to passive is kind of a bit of an oxymoron in a way because you don’t have to actually move from active to passive. (11:17) You can, and many people do both. (11:19) They invest actively and they invest passively.

(11:22) So let’s say, for example, you own a half a dozen rental houses and you actively manage them and you want to have some exposure to retail strip centers. (11:35) But you don’t know anything about retail strip malls and you don’t know anything about retail real estate and triple net leases and all the other things. (11:42) But you know that that might be a sector of commercial real estate you want to have in your investment portfolio.

(11:48) That’s a really good candidate for investing passively in a syndication because you’re going to invest with somebody that really knows that space. (11:56) So generally, people invest passively for one of two reasons. (12:00) Either, well, maybe there’s three.

(12:02) One is that they just don’t want to invest actively anymore. (12:05) They’re just tired and they want to invest passively and just not fool with the tenants, toilets and trash that we mentioned at the top of the show. (12:13) That’s one reason.

(12:14) Another reason is because people want to invest in something that they don’t have in their skill set. (12:24) So, you know, kind of going back to that, a residential investor wanting to invest in retail or in industrial property. (12:32) And then the third category would be someone who just lacks the time.

(12:39) You know, maybe you’re a high wage W-2 earner working a nine ninety hour a week job. (12:47) You’re earning great income and you want to invest in real estate, but you just simply don’t have the time to go out and tour property and, you know, network with brokers and apply for loans and all the other stuff. (12:59) You can invest passively in a syndication and have real estate in your portfolio without having to do all of those things that real estate requires.

Melissa

(13:08) Now, do you kind of to your point, do high achievers struggle most with passive investing?

Brian

(13:16) The high W-2 earners? (13:18) You know, maybe, especially if they don’t have any experience in real estate. (13:23) You know, one thing I have found over the years is that investors that have active real estate experience tend to understand the passive investment that they’re looking into a little bit better just because they’re drawing on their own experience than someone that has zero real estate experience, but it’s just a high achiever.

(13:42) But, you know, to become a high achiever, you’ve you know, you’ve got a fairly wide breadth of knowledge and, you know, the ability to figure things out or you wouldn’t have gotten to where you are. (13:53) So most people are able to grasp the concepts. (13:56) But what I, you know, one of the reasons I wrote (13:58) the hands off investor is because I found that a lot of people, you know, both experienced real (14:05) estate investors and otherwise didn’t always know the right questions to ask or the right (14:10) things to look for when investing passively, because there are some risks to passive investing (14:15) that aren’t present in active investing, specifically sponsor risk and who you’re (14:21) investing with and whether or not they’re doing the right thing or they’re doing a good job. (14:25) And so the book is intended to kind of fill that gap.

(14:29) And so people can ask the right questions and really know what they’re looking for in an investment sponsor.

Melissa

(14:35) I love it. (14:36) Now, you’ve said that sponsors matter more than the deal. (14:41) What should investors really be evaluating?

Brian

(14:46) The track record and experience of the sponsor is critical. (14:50) You know, one thing I would be looking for is how long have they been in business? (14:54) How long have the principals been involved in real estate?

(14:58) How many market cycles have they been through? (15:01) You know, have they survived adversity? (15:04) I think is really important.

(15:06) How have the investments they’ve done performed? (15:09) And I say that one with an asterisk, because, you know, performance in a down market looks a lot different than performance in an up market. (15:19) And this is kind of a spot where people get tripped up is they say, well, gosh, this guy is, you know, their average rate of return is 22 percent.

(15:28) So I’m going to go with these guys because they’re killing it. (15:32) Well, yeah, but all the properties that they bought were in 2018 and they sold in 2020 or 2021. (15:40) So they had, you know, a short ownership period, which juices IRR.

(15:44) They had a tailwind in the market, which uses IRR. (15:47) That doesn’t make them better than somebody that bought something in 2019 and sold it in 2024 and made, you know, a zero percent return because just surviving and returning capital could have required an intense amount of skill. (16:05) So you have to look at the performance judged by when those investments were made and what the market conditions were like during the time they made those investments, which is why I stress that people want to invest specifically with people who have been through adverse market cycles and survived them, because that’s a lot harder to do than producing outsized returns in an upmarket.

Melissa

(16:32) I love that. (16:33) I think it’s so true to get people’s track records. (16:35) So how should investors verify someone’s track record?

(16:41) I find sometimes even in upmarkets, people can screw things up versus just the town market. (16:47) So how could they verify?

Brian

(16:49) Yeah, that’s the toughest part, really, is verification, because you’re really relying a lot on what sponsors are telling you and what they’re showing you. (16:57) And sometimes they can tend to be selective about what they share, and maybe they leave off the bad deals and only show you the good ones. (17:06) So it’s really difficult.

(17:08) And, you know, there is no third-party validation service. (17:11) There’s no Morningstar report. (17:14) There’s nothing you can go to that’s going to have that information for you.

(17:20) A lot of this comes down to trust. (17:23) A lot of this comes down to how long they’ve been in business. (17:26) And I know I keep stressing it.

(17:27) You think, like, what difference does it make? (17:29) Well, really, if somebody’s lying to people and or they’re being, you know, they’re being selective about what they’re showing, this stuff comes out. (17:41) And then, you know, they end up going out of business and, you know, people talk and it’s on the internet.

(17:46) You can Google them and, you know, you’ll find message threads online about sponsors and, you know, and you’ll learn stuff that maybe they left off. (17:56) So it is really tough. (17:59) Now, one thing you can do is, you know, you can ask to see the addresses of the properties that they’ve owned and look into that.

(18:06) You can actually verify ownership. (18:08) And there are some specific things you can do, like going into county records and, you know, validating that that company actually owned it or a subsidiary actually owned it. (18:18) And that requires even a little bit more kind of grunt work and digging through documents to look at signature blocks to see who was really signing.

(18:29) So sometimes you have to dig in really deep. (18:32) But if you’re with a reputable company, it’s been around a long time, it’s more likely that the track record they’re showing you is going to be accurate just because, you know, that’s what’s allowed them to survive as long as they have.

Melissa

(18:46) I love it. (18:48) So your current focus is senior housing. (18:51) Why that asset class?

(18:54) Give us the insight.

Brian

(18:56) Yeah, you know, we made a pivot to senior housing in early 2025. (19:04) And this came about because, you know, kind of way earlier back in 2020 and 2021, we noticed that the multifamily real estate market was getting overheated. (19:17) Our core competency was multifamily income property, and we own about 4000 units when the market was peaking in 2020 ish.

(19:27) And seeing the handwriting on the wall, we started aggressively selling our portfolio and we sold 3000 of our 4000 units before the bottom fell out of the market and it went off a cliff. (19:39) And then for three years, maybe three and a half years, we bought absolutely nothing. (19:44) And there was just no reason to acquire assets and catch a falling knife and all that other stuff.

(19:50) So we were sitting out of the market completely. (19:54) And then early in 2025, I reconnected with an old friend of mine who we used to work together 25 years ago in house flipping. (20:02) He left house flipping to go manage acquisitions for a senior housing developer.

(20:12) And then ultimately, throughout a 20 year career became the president and CEO of Real Estate REIT that acquired senior housing. (20:21) And he was in a position where he became available to join my team. (20:27) And there was an opportunity I couldn’t pass for a couple of reasons.

(20:31) One, I’ve got a great guy who I know very well and for a long time, who has an extensive track record in senior housing that I can put on my team to manage a platform in senior housing, coupled with absolute perfect timing in a commercial real estate sector that, A, fell way down into the basement after COVID. (20:54) Values tanked, occupancies tanked, income tanked. (20:59) And now it’s all bottomed out and it’s climbing out of this hole.

(21:02) And we can buy properties at a deep discount to what they were selling for at the peak of the market just before COVID. (21:11) And as if that isn’t good enough, you’ve got this amazing demographic story where the aging population is increasing at such a rapid rate where the 80 plus population is forecasted to double over the next 15 years or so. (21:30) And nobody’s really building any of these facilities that we’re buying, assisted living, skilled nursing, and memory care.

(21:38) And so when you’ve got increasing demand, you don’t have increasing supply and you’ve got bottoming prices. (21:45) It’s such an incredible story from a timing perspective. (21:50) And if you can do that with the right skillset, which I happened to at the time, be able to bring in, this was the absolute perfect scenario.

(22:03) And it’s validation to that. (22:05) Just yesterday, in fact, I got an excerpt from a report from Green Street that ranked 20 different categories of commercial real estate. (22:14) And guess which one was number one, senior housing and skilled nursing, number one and number two.

(22:21) And multifamily, my good old friend, multifamily, was like fourth from the bottom. (22:26) So it really validates that we made a really good shift at the exact right time.

Melissa

(22:34) I love that. (22:36) Why do you think senior housing is so operationally misunderstood? (22:41) Because I often hear a lot, it’s so risky, it’s not always a good investment, you have to have the right staff, it’s hard to manage.

(22:49) So talk to me a little bit about that, it sounds like you’ve made it work.

Brian

(22:54) Well, if you’re buying a single family home, what’s the operation? (22:58) You select a tenant, you collect the rent, you make sure they pay, you got a maintenance guy once in a while that might have to go over there once every six months to fix something. (23:09) Pretty simple on the simple and complex scale.

(23:14) And senior housing is at the opposite end of that bandwidth, because here you’ve got patients living in your facility that require 24-hour care for feeding, toileting, all of the activities of daily living they need help with. (23:31) And so that’s a very intensive business. (23:35) And people think, well, I don’t want to invest in real estate and have to worry about hiring nurses and doctors and dealing with 24-hour care and staffing issues and people calling in sick, and now there’s patients with no care.

(23:51) They don’t want to have to deal with all that. (23:53) And I don’t blame them. (23:54) And the beauty of this investment is we’re real estate guys, not patient care guys.

(24:01) And we’re not going to change that just because we’re in senior housing. (24:04) So the way that we approach this business, and this is something that my partner specifically has learned after 20 years of being in this business, is the business of patient care and resident care is a different business than real estate ownership. (24:25) And that’s how you do it.

(24:27) You separate the two out. (24:29) You bring in professional, best-in-class operators that operate in the area in which you’re acquiring real estate, that manage all of the patient care aspects and assisted living aspects and memory care aspects. (24:46) And all you do is own the real estate.

(24:48) And we’ve even gone a step farther and simplify that even further where we’ll buy, let’s say, a skilled nursing facility. (24:55) And we triple net lease that facility to an operator that does all of the patient care and so forth. (25:03) So our ownership is no different than if we bought a pad building in a strip mall and leased it to CVS to operate a pharmacy.

(25:14) I don’t have to sell pharmaceuticals and bring up the checkout counter to check out groceries. (25:22) No, you just collect rent from your tenant. (25:25) And that’s exactly what we’re doing.

(25:27) That’s exactly how we’re approaching this business.

Melissa

(25:30) I love it. (25:32) So the risk in real estate syndications is something we always learn best by talking about risk. (25:38) Where does that actually live in a syndicated deal?

Brian

(25:41) Well, there’s risk everywhere in a syndicated deal. (25:44) So I think that the top risks in syndicated deals are the sponsor. (25:49) Sponsor risk, lack of experience, or just improper structure is probably the biggest risks in real estate syndications.

(25:59) And then the next would just be asset specific and it’s well, sector specific and asset specific, right? (26:06) So if you’re investing in multifamily, you’ve got risks that are specific to multifamily like development. (26:14) That’s the biggest risk that’s taking place right now is they’re building apartments everywhere.

(26:19) And that’s taking demand that otherwise would have gone to existing properties and reallocating that to new properties. (26:27) And now you’ve got increasing vacancy and declining rents. (26:31) So construction and development can be a risk.

(26:35) The financing structure can be a risk. (26:38) So it really just kind of depends. (26:41) In senior housing, construction isn’t so much of a risk because there’s hardly any of it going on, but there’s operator risk.

(26:48) What if the operator that you’re triple net leasing to has some kind of a problem? (26:54) What if they mistreat a patient and end up in a lawsuit and lose their license or they lose patients because they’re a bad reputation and they can’t pay the rent. (27:07) So there’s, again, kind of going back to who’s in charge, there’s kind of a dual layer.

(27:13) In our senior housing thing, an investor in our senior housing fund has a dual layer risk, right? (27:18) There’s sponsor risk. (27:20) Will I screw this up?

(27:22) And then there’s also operator risk. (27:25) Will the operators that we’re leasing to screw this up? (27:28) So it’s really important to invest with someone that’s experienced in the space who’s bringing in people who are also likewise experienced in the space.

Melissa

(27:40) I love it. (27:41) So you’ve built proprietary software to manage these acquisitions. (27:46) Why do systems matter so much in this space?

Brian

(27:51) Systems matter more than you would think. (27:53) I mean, and this just goes back to my early, early years in the business. (27:58) When I first started in real estate, I was going to the courthouse steps to acquire properties at foreclosure auctions.

(28:05) That was my model. (28:07) And I would show up and, you know, you’d see all the other bidders are there with a briefcase full of manila file folders. (28:15) And they, you know, when a house is coming up for auction, they’re rifling through all these papers, trying to figure out which house it is and what they thought it was worth.

(28:23) And, you know, they got all these papers flying everywhere and that auctions are getting postponed and they lose track of what date the new date is. (28:30) And there was just was such a information intensive business that I’m like, there’s got to be a better way. (28:37) So I wrote my own database software that would allow me to track all these foreclosure sales, every data point on every property we were bidding on so that when I would show up to the auction, I had one piece of paper in my hand that had every single bit of information I needed on every house that was going to auction.

(28:56) And we never lost track of an auction. (28:59) There would be a lot of times where we’d buy a property and people would be like, what property was that? (29:02) I didn’t even have that on my list.

(29:04) And it’s like, oh, yeah, this postponed from nine months ago. (29:07) And I’ve been following it, you know, ever since because we had it in our system. (29:12) And so ever since then, I realized the value and power in having systems in real estate investing.

(29:17) And every time I’ve gotten into a new line of business like multifamily, like senior housing, I’ve written specific software for those lines of business that have given me an edge against the competition in one way or another. (29:31) And we still continue that tradition to this day and still use the systems that I built two decades ago for using on the courthouse steps.

Melissa

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(30:18) To learn more and get a free white paper, oil and gas demystified, just visit www.summitven.com forward slash executive connect. (30:33) I love that. (30:35) I totally agree systems in all parts of my life.

(30:37) I have a personally professionally, it game changer. (30:42) I love it. (30:43) So I think when I think about investing, I think a lot about investors not wanting to give up control.

(30:54) Talk to me a little bit about how you think about control versus return.

Brian

(31:00) Well, you give up some control, you give up operational control, but people think that when they invest passively, they give up all control. (31:08) And that’s not true because you have control over which investments you invest in and who you invest with. (31:14) So if you’re afraid of giving up control to an operator, you’re probably investing with the wrong operator because you should have such confidence in the person you’re investing with that you don’t mind giving up control because you know, they’re going to do a fantastic job, probably a better job than you will.

(31:31) If you don’t feel that way about it, then you’re just simply investing with the wrong person. (31:35) So giving up control should not be an issue whatsoever. (31:38) You should have full control over who you’re investing with.

(31:42) And if you’re making the right decision, you should have no apprehension about giving up control to that person.

Melissa

(31:48) Now, what are the most common mistakes new passive investors make when they’re first getting into it?

Brian

(31:56) Chasing return, I think is probably the biggest one. (31:59) There was this fad, I guess, maybe it’s even still popular called crowdfunding, where there would be websites you could go to that would offer you a menu of different investments that you could passively invest in. (32:14) And people would, it was inevitable, they would, you know, just human nature, I guess they would always do the same thing.

(32:19) They would pull up the grid of 20 investment choices, they’d find the one that has the highest projected rate of return. (32:26) And they’d go, that’s the one I’m going to invest in, because that has the highest projected rate of return. (32:30) And they don’t take any account to the fact that, well, that particular sponsor has no experience, it’s their first deal.

(32:38) They’re using high leverage debt. (32:41) They’ve got, you know, all these different layers of capital that are senior to your capital to juice return. (32:47) And the risk factor is off the charts.

(32:50) So I think the biggest mistake is just chasing the shiny object, chasing projected return, without looking deeper into the investment opportunity to see who’s behind it, what the strategy is behind it, how it’s structured, and what the risk level is.

Melissa

(33:07) So why does diversification matter more than deal selection?

Brian

(33:13) Well, you know, there’s nothing, no real estate works 100% of the time. (33:19) And you could be investing all in on multifamily. (33:24) And in 2002, second quarter of 2002, to be exact, the bottom falls out of the market.

(33:32) And now all your investments are going in the toilet. (33:35) And I know I see this time and again, we have investors in some of our funds that are invested with other sponsors, and they’re calling us and going like, all my other deals are going to zero. (33:46) I mean, I’m losing all my principal on these other deals.

(33:50) And it’s because they invested all their assets into multifamily, and they didn’t have any diversification. (33:57) Meanwhile, while multifamily was going in the toilet, single family was just fine. (34:01) So if they had some single family investments, they’d ride it out.

(34:04) If they had some senior housing investments, they probably would have been hurting in 2020. (34:08) But doing great in 2025 and 2026. (34:12) So you can’t perfectly select any property and you can’t perfectly select any market.

(34:19) And you can’t perfectly select any sponsor. (34:22) So I think, you know, a long term strategy of survival is to try to eliminate any single point of failure. (34:29) So that means you invest with multiple sponsors in multiple asset classes, in multiple geographic locations, you know, in multiple property types, all those different things, so that you’re exposing your investment portfolio to real estate overall.

(34:48) In addition to other things, invest in stocks, bonds, mutual funds, gold, all the other things, that’s fine. (34:54) Have a nice diversified balanced portfolio, not say like, I’m going to take all my chips and put them on multifamily, I’m going to take all my chips and put them on, you know, data centers or industrial property or any particular investment, mix in some oil and gas, mix in some, you know, startup businesses, right there, you know, there’s a whole world of investing out there. (35:17) And I think investors need to spread their assets around a little bit and not get too concentrated.

Melissa

(35:25) I love that. (35:27) So that brings me right to what I want to do next with you is just some rapid fire questions, which makes me think of the first question I want to ask you, best asset class for beginners.

Brian

(35:42) If you’re actively investing as a beginner, the best asset class is probably single family homes. (35:47) And why? (35:48) It’s because that’s the asset class you probably understand better than any other thing in the world, right, is single family homes, because you’ve lived in one, you know, you know that and you’ll learn a lot from it that will allow you to grow into other asset classes.

(36:04) But I think if you don’t know anything, keep it simple. (36:07) If you’re investing passively, it kind of doesn’t matter what asset class, what matters is your due diligence on who’s running it.

Speaker 2

(36:13) I love that biggest myth about passive investing.

Melissa

(36:18) That there’s no risk, people think you can’t lose, they think rents only go up, they think real estate only goes up, and they forget that real estate sometimes goes down, which is fine. (36:29) But if you invest in something that’s over levered with a short term loan, and the adverse market hits when those two things are kind of, you know, all at the same time, it can be a disaster.

Melissa

(36:42) I agree. (36:43) Best question every LP should ask.

Brian

(36:48) Track record, how long have they been in business? (36:51) Have they ever lost principal? (36:54) And if they have lost investor principal, why did that happen?

(36:59) What did they do to prevent it? (37:02) And try to understand, you know, kind of what went down and what they’ve learned from it, what they do differently now.

Melissa

(37:07) I love that. (37:10) What kills most long term deals?

Brian

(37:16) I think long term deals really have a tendency to survive as long as the financing matches the business plan. (37:24) So, you know, I’ve seen way too many times where you have a 10 year hold with a three year loan, and they’re counting on a refinance at year three. (37:34) So the capital has to match the business plan.

(37:37) If it’s a 10 year hold, there has to be a road to holding it for 10 years without lender permission. (37:43) So I think that’s real critical. (37:45) Now, assuming that the financing and the capital structure aligns with the long term nature of the hold, most long term holds will be just fine because real estate has a tendency to go up over decades, maybe not over years, but over decades.

(38:03) So you’ll be fine. (38:05) But if you have a sponsor that, you know, it doesn’t have adequate reserves and resources, you could find them abandoning this project. (38:15) And so, you know, one thing a lot of people don’t realize, they think (38:19) that being a syndication sponsor is a really lucrative business, but that’s not always the (38:24) case, because if your income is dependent upon earning a profit split over a preferred return, (38:33) and the profits don’t exceed the preferred return for some period of time, (38:37) the sponsor could be in a zero income situation for an extended period of time. (38:42) And if they can’t afford to ride that out personally, then they have to go somewhere else and go get a job, right? (38:47) And so now the sponsor kind of like forgets about this long term real estate investment that you’ve joined them on, and they’re out working this job nine to five, and they’ve kind of left you in the lurch.

(38:59) Those deals can end up winding up in failure modes pretty quickly. (39:05) So I think, you know, just make sure who you’re investing with has the resources to survive a market downturn with no income for a while.

Melissa

(39:14) That’s great. (39:16) One mistake you see sophisticated investors make?

Brian

(39:23) Chasing the shiny object and going for return. (39:26) I can’t tell you how many times I see even sophisticated, knowledgeable, experienced investors saying, well, I won’t get out of bed for less than 20% IRR. (39:37) And it’s like, well, do you know how much risk you’re taking to get that 20% IRR?

(39:43) And do you know how unlikely achieving it is going to be? (39:46) I think even sophisticated investors sometimes lose track of the fact that sponsor selection, track record, asset selection, and timing all matter a lot. (39:57) And just chasing that 20% return, it might work sometimes, but it might not as well.

Melissa

(40:04) I love it. (40:05) Worst advice investors keep repeating.

Brian

(40:11) Ooh, that’s a really good one. (40:13) I think overleveraging is probably a good one. (40:17) It’s interesting how often people use high leverage to try to boost their returns without giving credit to the risk that they’re taking on with that high leverage.

(40:29) And it’s funny, they just do it again and again and again. (40:33) And sometimes you wonder, like, did you not learn anything from the last time you did that? (40:38) So I don’t know.

(40:39) That might be one of them, at least. (40:41) There’s probably a dozen others that I’m not thinking of right now, but that’s the one that comes to mind.

Melissa

(40:46) I love it. (40:47) Okay, final question. (40:48) Wealth is built faster by doing more or choosing better?

Brian

(40:53) I think by choosing better and by timing. (40:57) And this is something that people will try to dismiss. (41:00) They’ll say, well, timing doesn’t matter in real estate.

(41:03) Oh, yes, it does. (41:05) Tell someone who bought their primary residence in 2005 that timing doesn’t matter. (41:11) Tell someone who bought their first large multifamily deal in 2021 that timing doesn’t matter.

(41:18) So I think timing, understanding what you’re investing in, I think matters more than almost anything. (41:27) So it’s not about quantity, it’s about quality, and quality is achieved by understanding what you’re doing.

Melissa

(41:34) I love it. (41:35) What a great way to end this podcast. (41:38) Brian, thank you so much for being here today.

(41:41) I want to get any final thoughts that you want to share with our listeners, and then please share the best way to contact you and learn more about the good work you’re doing.

Brian

(41:50) Well, my final thought would probably be that it’s a lot easier to lose a million dollars than it is to make a million dollars. (41:58) So take care of the money that you have and choose wisely. (42:02) How do you reach me?

(42:04) Through our website for Praxis Capital. (42:06) The website address is PraxCap.com. (42:09) That’s P-R-A-X-C-A-P.com.

(42:13) You can also find me on Instagram at InvestorBrianBurke or on BiggerPockets on the forums answering questions for other real estate investors and podcasts like this one.

Melissa

(42:28) Thank you so much for being here and sharing your story. (42:32) That’s the Executive Connect podcast.