EP 40 | How to Use Blockchain Technology to Stay on the Cutting Edge of Real Estate Investing with Michael Flight

On this episode of the Passive Income Attorney podcast, Seth is joined by proptech real expert Michael Flight as they discuss how you can utilize blockchain technology to take your real estate investing to the next level. Michael is an expert in real estate tokenization, real estate on the blockchain, retail real estate and more, and he gives you a guide from the basics of blockchain technology to cutting-edge tokenized funds.

“Blockchain technology is going to change the future of finance. . .My years of experience in real estate says that this is going to open up an entirely new frontier.”

HIGHLIGHTS:

Here’s a breakdown of what to expect in this episode:

Your limited landlord responsibilities with a single tenant net lease
The difference between a fund versus a typical single property syndication
Learn the basics of blockchain technology
Uses of blockchain technology in real estate investing
Current and potential advantages of blockchain technology for investing
What is net-leased single tenant retail real estate
What is the Liberty Real Estate Fund and how is it trailblazing the real estate investing landscape
And so much more!

ABOUT | MICHAEL FLIGHT:

Michael Flight is a founding principal of Concordia Realty Corporation, Concordia Equity Partners LLC, and more recently Liberty Real Estate Fund, a net leased property fund curated to create a conservative, safe haven portfolio of long term, single-tenant net-leased properties designed for geographic diversification, tenant credit diversification and industry diversification.

Michael is a real estate entrepreneur who is an expert in retail real estate (shopping Centers and single-tenant net-Leased) investment, leasing, operations, and redevelopment. Michael has been active in commercial real estate over the past 34 years and has handled more than $600 million worth of real estate transactions. Michael has extensive experience in development, leasing, sales, property management, and innovative financing techniques, including Security Token Offerings (STO).

FIND | MICHAEL FLIGHT:

Website: https://libertyfund.io/

LinkedIn: https://www.linkedin.com/in/michael-flight/

CONNECT | SETH BRADLEY:

Snag | The Freedom Blueprint: http://www.attorneybydesign.com

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FULL TRANSCRIPT:

Seth: [00:00:00] What’s up Law Nation as always. I hope you’re having a fantastic week. If you’re feeling stuck, but want to start taking back control of your life? A great place to start is by going to escapethebillable.com and downloading our Billables to Abundance Bible, a field guide to getting started with passive investing.

All right. I’m sure you’ve heard all the rage about cryptocurrencies like Bitcoin and the underlying technology behind it called blockchain. Right. I mean, it’s hard not to. That’s all you hear about nowadays. We’ve seen Bitcoin skyrocket and overnight dogecoin millionaires.

In later episodes, we’ll dive into the good, the bad and the ugly about investing directly into cryptocurrencies. But today we’re going to prime the pump with a unique aspect of real estate investing that utilizes the blockchain technology. Our guest of honor Michael Flight. Is a founding principal of Concordia Realty Corporation, CEO of Liberty Real Estate Fund, LLC, the world’s first net lease security token fund.

Michael is a real estate entrepreneur and security token evangelist, who is an expert in retail real estate investments, redevelopment real estate, tokenization, and real estate on the blockchain today. He’ll guide you from the basics of blockchain all the way through cutting edge tokenized funds.

All right, let’s get it on.

Seth: [00:02:00] Michael flight. What’s going on, man. Welcome to the show.

Michael: [00:02:05] Hi, Seth. How you doing? It’s really great to be invited here.

Seth: [00:02:09] Yeah, really appreciate you coming on today. Well, let’s, let’s jump right in. Tell us a little bit about your background.

What’s your story?

Michael: [00:02:17] I’ve been in commercial real estate since 1986. I actually, um, did apartment rehabbing while I was in a senior in college. Uh, been primarily in retail real estate since 1986. We founded our own company back in 1990. Uh, I have worked with large institutional investors. Uh, we’ve done everything from, um, what’s called the modeling, taking, you know, 800,000 million square foot malls and, um, repurposing them to strip centers or completely tearing them down.

Right. And doing change of use with them. Uh, we’ve also done, uh, you know, apartment investing, uh, single family flips on my own with a partner. So I’ve done just about everything, but my specialty really is with retail real estate.

Seth: [00:03:09] Okay, awesome. Awesome. Um, and I think that that’s kind of the, the subject matter of the elephant in the room here, man.

Tell us about the Liberty real estate fund.

Michael: [00:03:18] Well, Liberty real estate fund is the world’s first net leak net lease security token fund. Um, so a security token is just basically like a normal, private, real estate investment, but it has this extra layer on which increases options for investors. It’s really a phenomenal thing for investors.

Because they’re not locked up in what typically could be a five, seven or 10 year real estate investment. Uh, and the other cool thing is it does a bunch of other things that we will probably get into later. Uh, but at the base of it, uh, we are a super stable cashflow real estate fund. We’re a core plus fund.

Uh, we are investing in billion dollar corporations and they’re guaranteeing the leases. So, if you look at a occupancy chart, uh, with all the different asset classes, single tenant net leases, uh, are always at the top of highest occupancy and, um, through thick and thin, it’s just printing out cashflow. Uh, we like to call it the, uh, mailbox money machine.

Seth: [00:04:25] Yeah that’s awesome. Well, that’s a lot to unpack there. Especially if we don’t know anything about funds or, you know, tokenization or even triple net leases. So let’s start with piece by piece. Let’s start with the real estate. So why single tenant? Triple net leases. First of all, what are they?

Michael: [00:04:40] Okay, well, um, Retail real estate, which has shopping centers, malls, and individual single tenants.

So the best example of a single tenant net lease property would be the McDonald’s that you see on the corner or the Walgreens or the, the dollar general or any one of those. Uh, and it could also be. A net lease with a casino. So MGM grand and those guys are all sold off all their real estate. And so their real estate is actually on a complete net lease.

And why we like net leases, especially if you’re looking for passive income is there’s no tenants, no toilets, no trash. Okay. The tenant pays for the real estate taxes. The tenant pays for the insurance, which includes the liabilities sheruts cause I know you’re talking with attorneys and they’re always looking to see, so, uh, It it, uh, they pay for not only the property insurance, but also the liability insurance, um, and the tenant maintains the property.

So if there’s a parking lot out there, the tenant is snowplowing. It, the tenant is sweeping it, uh, if there’s a roof leak, the tenant is fixing it and everything inside the tenant store is absolutely 100% the tenant’s responsibility. Gotcha.

Seth: [00:05:59] So what is the landlord’s responsibility? If we’re just, we’ll single out, just one property, let’s say you’re the landlord.

You own the property. You’ve got a single tenant net lease. Um, what do you have to do? I mean, what, what are your responsibilities from the landlord’s perspective?

Michael: [00:06:13] Well, let’s say we had at a McDonald’s or a Walgreens. Um, number one, you would, uh, be responsible. They, they typically, um, wire the money to your bank account directly every month.

They don’t typically do checks anymore. So they’re called ACH payments. So it gets. And it’s also typically in your bank account, uh, anywhere from seven days to, to one day before the beginning of the month. So it’s not like you have to chase these tenants. The other thing that you’re responsible for. Is, you need to make sure that the tenant pays the real estate taxes.

So you need to check and make sure that those real estate taxes have been paid, especially if you have a mortgage on the property. Um, and then you have to make sure and request that the tenant, um, send you a certificate of insurance, naming you as the landlord. So let’s say it’s Seth Bradley, Walgreens, California, LLC.

Uh, they should be naming you as the, um, As the additional insured on that, just in case somebody slips and falls or anything else. Um, and then the other thing is you want to, if they’re maintenance free, but you at least want to, once a year, maybe twice a year, I would recommend sometimes four times a year just confirm that the tenant is maintaining the property.

Uh, we also request that the tenant send us a, um, HPAC, which is heating ventilation and air conditioning. Uh, system, we, uh, say that they need to have a, uh, a, a contract in place to maintain that. And they need to send us proof that they have that contract and that they’re doing so that they every quarter, somebody up there changing the filters, fixing it, checking to make sure that there’s nothing major wrong because you get that equipment back at the end of the lease.

So you want to make sure that the tenant maintains it.

Seth: [00:08:08] Gotcha. Yeah, that sounds really appealing to many of our listeners who are full-time W2’s and they don’t want to deal with the tenants, toilets and trash. Um, so this asset type seems like it could be a really good option. Um, so why were these types of properties chosen as the target asset type, this particular fund?

Michael: [00:08:27] Truthfully, it’s all I know how to do.

No, uh, it it’s, it’s been our progression. As I said, we were doing larger shopping centers. We were doing extensive redevelopment of shopping centers. Uh, we have a history of, of doing, you know, thousands of leases. Um, so we know the retail space, uh, really well and, um, what we wanted to, and there’s been a migration from malls.

To what we call strip centers, which are open shopping centers that you could drive up to and park in front of, to out parcels. And especially with COVID, um, tenants now want some sort of drive-through. They want some sort of, uh, opportunity where people don’t have to go in the store, they can just pick something up.

And so we were looking at this as a preferred route to go back in 2018. Uh, we also really liked, uh, what we call med tail. Uh, tenants, which are, um, medical. Dental, uh, like for sinneas or DaVita dialysis or Aspen dental, or you guys have Pacific dental out there. So those tenants are corporately guaranteed.

Uh, plus they’ve got like, you know, long-term leases and typically doctors and dentists don’t move because once they establish their location, Um, it’s really hard for them to move their practice. So that kind of in a nutshell is how we got to, uh, and we wanted to put together the perfect internet resistant portfolio.

So, and that kind of ties in with, um, the security token part of it.

Seth: [00:10:06] Cool. Yeah. Let’s, let’s keep building this. So let’s, let’s just ask the question. I mean, what is a fund for those that don’t know?

Michael: [00:10:13] A fond is a collection of property. So you could look at it as a portfolio. Um, or you could look at it as like a mutual fund or an ETF.

And so with this particular fund, since we’re investing in different industries and different brand named tenants, um, you literally are getting like a bond portfolio because we’d like to describe net leases as bonds wrapped in real estate, because the tenant is guaranteeing that income just like they would.

Guaranteeing a, um, a payment. And so instead of getting your principal back, uh, at the end of the lease, you actually have a hard, tangible asset that has some value to it. Um, but typically these tenants rollover, we have a Walgreens that. We did the least, uh, well, I didn’t do it so I wasn’t alive, but th the lease was done in 1957 before zip codes.

Um, we relocated them, uh, out to an out parcel and now they have another 50 year lease. And, uh, you know, Walgreens is going to be there as long as Walgreens is a business. And we think that, you know, pharmacies have, have some legs. Uh, you know, not only in the pharmacy business, but also because they’re kind of like a convenience, you know, little mini grocery store in the front.

Seth: [00:11:31] Got it. Yeah. So w what’s kind of the difference, or what are some of the pluses and minuses, uh, comparing a fund that you just described to, uh, you know, a typical single property syndication that, that our listeners might be familiar with.

Michael: [00:11:44] Well, I can tell you that the, the fund, you have a diversified pool of assets.

So some people will do an apartment fund and they might have apartments in all in the same state or in different states are fond, is going to be geographic, geographically diversified in. Um, what we like to call the smile states or Southern states, um, because they’re lower regulation, lower taxes and higher population growth.

Uh, so we’re geographically diversified we’re industry diversified and we’re tenant, you know, credit diversified. Uh, but the, the great point about a fund is, is that, um, you do get this diversification of income. So it’s not all one tenant. Uh, it’s kind of like the difference between doing a single family house versus doing a 200 unit apartment building.

You’ve got your risk spread over a number of tenants. The drawbacks to a fund can be if the, uh, sponsor. Or the manager of the fund doesn’t know what they’re doing or make some mistakes are, doesn’t know how to operate the fund. So that’s one of the drawbacks and, you know, I’m sure you’ve got some other questions on, you know, potential drawbacks that you might want to ask too.

Seth: [00:13:02] Yeah. Well, I think of what goes into putting your trust in the sponsor. Right? You’ve got to, if you’re, if you’re going to participate in a fund, you need to make sure that the sponsors, like you said, know what they’re doing. Um, no, the right properties to buy, because that, that’s what it is. It’s a blind fund.

So you don’t know exactly what properties your participating in. So you put a lot of, uh, a lot of trust in those sponsors to, to, uh, execute the business plan.

Michael: [00:13:26] Yeah. And I would say that you also, um, so I, I know you’ve talked about multi-family in the past and it’s been something that you were interested in.

You’re also putting a lot of trust in somebody to actually execute on their business plan, even on a single asset. So no matter what, anybody, no matter what you’re investing in it, if it’s one property, if it’s 200 properties, um, it’s really, do they know what they’re doing? Do they have experience with the asset class?

Have they been through. Some downturns, uh, have they been through w what I like to ask, um, our employees is tell me, you know, a difficult situation that you’ve dealt with that. Um, and, and how did you deal with it? And how’d you come out of it? And I invite our potential investors to, to ask us, it’s like, tell us what some of the things that could go wrong and tell us some of the similar things that have happened to you.

So I can tell you stories about environmental issues. I could tell you stories about. You know, tenant bankruptcies. I could tell you about, you know, um, changes in zoning, uh, all kinds of, I mean, you name it, uh, we’ve been, or actually personally I’ve, uh, had a very expensive education and mistakes, but, uh, we’ve, we’ve never lost a property, so good way to gauge the, the operators, honesty and transparency too.

Seth: [00:14:40] Right. If they’ve been in business for 20 years and they don’t have any story to tell you that something went wrong, then they’re probably lying to you. Uh, so it’s just a really good way to kind of gauge their honesty. And that’s obviously really important. Yeah.

Michael: [00:14:59] Sorry to interrupt you, but I’ve never seen any property that’s been flawless.

I mean, maybe there they are out there, but, um, you know, you, you there’s little quirks on, on every deal, even if it was a home run. Yeah.

Seth: [00:15:12] Yeah. Now with a fund though, you know, you don’t necessarily get to see the properties upfront, what they’re going to buy, but there are certain parameters that are associated with it, um, that the sponsors can set.

What are some of those parameters for the Liberty real estate fund, other than triple net single-tenant leases.

Michael: [00:15:28] Okay. So we have very specific industry criteria. We have very specific state criteria. So we’re only investing in certain states. Um, we have very specific criteria in terms of, um, how expensive it is because we don’t want one particular asset or one particular set of tenants, um, being too much.

So what we’re trying to do. Is get complete diversification in the portfolio, complete, uh, diversification in the tenant mix and complete divert. I shouldn’t say complete, but as you know, good of, you know, diversification as you could possibly get in in terms of doing, um, you know, the, the individual tenants and their credit.

So, for example, with us, we have a we’re we’re trying to stay away from, cause there’s a, a top end, which if you get above $5 million in the triple net space, you’re competing not only with individual investors that are, are wealthier, but you’re also starting to compete with institutional investors and we try and stay, uh, above a million dollars because below a million dollars.

You don’t get, um, some of the asset quality. Now we are taking a look at some because you do find some asset quality, but there’s a lot more competitive, uh, interest from individual investors there. So our sweet spot is between 4,000,001 and a half million dollars for an acquisition price. Uh, we are looking at automotive services, uh, car washes, uh, convenience stores.

Uh, drug stores, dollar stores, as we said, medical retail, we really, really like medical, uh, retail. So that’s, um, dental and medical and uh, there’s oh, and we really like, uh, uh, mobile phone stores. So sell your stores. Um, because you get, uh, some really nice deals, uh, in great locations and they’re, uh, eight T and T Verizon credit or T-Mobile, which is, you know, uh, backed by Deutsche telecom.

So that’s the type of things that we’re, we’re looking at. And we really like states like, uh, Texas, Florida. Uh, those Southern states, Tennessee. Uh, we, you know, if we could find assets in Washington since it’s a tax-free state, but it’s a little harder to find stuff out there. Um, but, uh, we’ve loved the Carolina.

So that, that whole area up into Virginia, because Virginia, um, while it’s not the greatest on regulation is expanding because as we know, the federal government keeps expanding.

Seth: [00:18:09] Yeah. Yeah, definitely. And what I’m hearing there, at least with respect to the tenants, trying to build up that, uh, internet resistance, right?

Michael: [00:18:22] These are businesses that are not going to sustain major losses or go out of business because, um, the internet boom, and the internet economy, that is 100%. The reason why we developed the fund with the tenants that we did was we wanted services and we wanted retailers. Oh, I forgot grocery stores. Um, and so we, you know, put together the portfolio selection and said, we’re going to do this back in 2019.

And so internet resistant has also proven to be, uh, pandemic resistant.

Seth: [00:18:48] Yeah. Yeah, that makes a lot of sense. Well, let’s jump into the blockchain, which you’re going to have to help me guide this a little bit, because I don’t know a lot about it. I know everybody’s talking about it. Everybody’s talking about Bitcoin and it’s going through the roof.

And then, you know, the underlying technology behind the Bitcoin is actually the blockchain. So tell me from the start, what is blockchain technology?

Michael: [00:19:09] Well, blockchain technology in a nutshell is a, what’s called a distributed ledger. So you are familiar with spreadsheets. Um, so this is basically like a giant spreadsheet.

Um, and then furthermore, every time, so let’s say you’re working on a Google sheet. Um, and so if you make an entry into that Google sheet, um, that Google sheet has to be updated. And confirmed by a bunch of other computers. So it’s basically this network of computers that verifies every transaction in the ledger.

And so if a new transaction is added all the other, um, computers on the, the, um, the network need to confirm it and come up with a consensus. So if you think about it, um, it’s like a block here. And then when the next block is added, all these computers confirm that, and then it keeps just adding on. So you can look back through the chain and see all the transactions.

So it’s really works well for real estate, especially titles at some point, um, because people are going to see that. This particular real estate title was put on the blockchain here. And then it’s like a fly in Amber, you know, when they find these prehistoric, um, you know, flies stuck in the middle of a, uh, you know, a, um, a petrified, uh, You know, honey or petrified SAP, um, it stays there.

So it’s forever there on the blockchain and you can’t, it’s very hard to, to change the blockchain. Um, so that’s why they call it a distributed ledger and they call it basically trustless because it’s not one central bank telling you that all these transactions are correct. It’s the entire network that has to agree that these transactions are.

Seth: [00:21:02] Gotcha. Gotcha. So it was like having a million proofreaders.

Michael: [00:21:04] Exactly. Exactly. You’ve got it. Perfect. So that, that’s great.

Seth: [00:21:09] I need that for sure, and then once you get it down that it’s confirmed that it’s correct. You can’t change it, right?

Michael: [00:21:15] That’s correct.

Seth: [00:21:20] How is this technology being utilized in this fund?

Michael: [00:21:24] All right. So what we are doing is we are, uh, issuing a it’s a normal 506(c) offering in the US, and we’re also offering it to non us investors as a regulation S um, uh, investment. But, uh, the, the really cool thing is, is that it’s going to also have this added benefit of being a security token.

So once the security token is put onto the blockchain, that’s an individual asset that somebody owns. So you’ve taken in our case, this fund. And divided it up into $50,000 increments. And so, however many of those tokens you have as a 50,000 hour increment, that’s a tradable asset now. So you personally, if you’ve invested in a real estate syndication in the past, which is a group of investors coming together, Um, that is tied up for a number of years.

Uh, you still have that share, which you can pass on to your relatives and everything like this. But with the token you can actually, uh, uh, so let’s say you’ve got a hundred thousand dollars. Worth of tokens at $10,000 each, you can actually do your estate planning, you know, while you’re still alive and divide up the tokens and give them to your kids, give them to your wife, uh, or donate some of the tokens.

Uh, but the other cool thing is the sec. Has allowed that after a one-year lockup period, us investors can trade their tokens. So you and I can go and do what’s called a peer-to-peer trade. So I have, you know, $50,000 worth of tokens. I might have 100,000. I want to, you know, take 50,000 to make a new investment in something else.

So I go to you, Seth, and I say, Seth, would you be interested in this cash flowing asset? And here’s what the returns are. And you say, yeah, And so we go and we can just go into the portal and just trade it. Peer-to-peer. And so, as long as you put up the money and I put up the tokens, the trade goes through, so there’s no human intervention.

The other cool thing about it is you could be in Japan, um, 12 hours time difference from me. Uh, or 13 hours time difference for me. And, uh, these, these trades can go through 24 seven. You don’t have to wait for a market to be open. These trades happen instantaneously it’s in, as soon as it’s written to the blockchain, it goes through you now control that asset.

Um, There’s other really cool benefits. If you want, we can keep going or you can ask me questions there and then we can go onto the next.

Seth: [00:24:04] So I just wanted to unpack that a little bit. So 506(c) meaning it’s for accredited investors only for those that don’t know. Um, alienability sounds like the big thing, right?

I mean, whenever you participate in one of these. Uh, typical traditional syndications you’re locked in for that time period. I mean, there may be a way to, to sell it to somebody or the company might buy it back, but it’s really difficult. You’re really locked in for that five or seven year hold period or however long it might be.

And what I’m hearing is, because you’ve been able to implement this blockchain technology, you will be able to trade your shares and get out of the deal. Really, if you want to?

Michael: [00:24:39] This gives investors extra options, which is why we really like it. And which is why we’re doing it because it gives investors the options that they don’t currently have in private real estate investments.

It also is going to open up worldwide access to not only us investments, but also us investors investing all over the world. And at some point they’re going to be able to invest in, you know, London, real estate on their smartphone. So, you know, and right now it’s really difficult to do that. This is going to be, you know, so the blockchain is like the rails that this all runs on.

Um, and so it’s, it’s like the it’s going to be the next financial system, just like the internet changed communications. Uh, the blockchain is changing the financial system. And so that’s the way the, the things in the future are going to run. Um, the other cool thing about this is, is that you can invest in us dollars and potentially take your money out in like a us dollar stable coin.

Or you could take your money out and Ethereum, so you can actually, um, dollar cost average out of the dollar, so to speak, um, or you for a non us investors, they can invest in this and get into dollars, or just have an asset that’s stable cash flowing, tangible asset someplace else, which is very, um, Appealing to some investors in, let’s say Africa, Southeast Asia and different parts of south America.

They just want to get their money out of a depreciating, um, uh, currency. And so they can get this and they’ll get a stable, you know, basically. And the other great thing is even if you’re a us investor, You can re your money can go into what’s called a wallet. Um, so when you invest in cryptocurrency and it’s an electronic wallet, so you don’t have to have your money sent to a bank, you can have your money sent to a wallet and then get that money out of there anywhere you are in the world.

Seth: [00:26:46] Yeah. Very cool. Very cool. There are a couple of all of the things that I wanted to point out there too. It sounded like you’re, you’re going to be able to cut out. Um, uh, a lot of the middlemen out of the transactions, which meaning you’re going to be able to cut down on the transaction costs too.

Michael: [00:27:00] We hope that’s going to be the case.

Um, I’m just going to be honest with you right now. Um, it, it is not the case, but at some point, um, there’s a lot of paper shuffling that goes on and there’s a lot of, you know, things from here to there that go on. And at some point, um, you know, that’s not going to be there. The, the money is going to be put in a bank from the fund.

The fund is going to, you know, distribute it through the security token. And you’re not going to have this entire army of people having to cut checks and everything like that. So hopefully it’s going to be, uh, a better, easier investor experience. Um, and like I said, there’s also ways to trade it. So it’s not only me.

And you. Uh, you could go to a, uh, a, a securities broker. And have him try to sell your, your, uh, saying the securities brokers. Also some of them are licensed for alternative trading systems, which are like, um, a, uh, a smaller market, so they can list them on there. And other brokers can see that these assets are listed on there, so you could sell them through there.

And then there’s security, token exchanges, which are just coming into maturity. And we’ll probably have a lot more assets on them over the next few years. So there’s going to, like I say, there’s going to be extra options for you to achieve liquidity. Yeah.

Seth: [00:28:26] Yeah. And because of the tokenization, it sounds like you would be able to, um, sell and trade, uh, Small pieces of, you know, that federal investment, let’s say the full investment is $50,000.

Um, eventually you’ll be able to trade and sell, you know, let’s say $5 or $25,000. You’ll be able to break that up.

Michael: [00:28:44] Right. So with the tokenization, um, you could theoretically take. You know, a hundred million dollar property and break it down into individual dollar units. Like you could even break it down in to square footage and somebody could buy a square foot of the property, which would give them a right to a square footage of the cashflow.

Plus, uh, if it’s a private syndication in the U S uh, they get the, uh, benefits of depreciation and other things. So, um, that’s the other, you still get all the tax benefits of a regular, uh, private syndication. And then there’s one more thing that I want to talk about, which is just coming into fruition.

We’re going to see where the market goes with this. Uh, but let’s say you have a hundred thousand dollars of our font. Um, you’ve that basically is a a hundred thousand dollar asset. If you didn’t want to sell that asset, there’s this other crazy stuff going on, which is called defy, which, you know, we’re adding another level of complexity to it.

But, um, these five platforms you can put your money up and then borrow against your security token, or you can borrow against your cryptocurrency. So it’s another way. If you don’t want to have a sales event, you could potentially borrow against that. And you’ve got a liquid asset then.

Seth: [00:30:05] Gotcha. Gotcha.

Where are we at from a technology standpoint right now? I mean, just all this stuff we’re talking about being put to use as we speak.

Michael: [00:30:15] Um, the technology is all there. Some of the technology, um, works as they say it does. And then some of the technology w th that’s why it’s taken us so long. Um, because we’ve gone through a few different iterations.

We’ve talked to, uh, most of the major technology providers out there. Um, it’s taken us a long time also to make the, the fund tax efficient. So we’ve spent a lot of legal fees and a lot of attorney fees. I’m sorry, a lot of accounting fees to make sure that the fund is completely tax efficient, especially for the non us investors.

It probably would have been much easier for us just to do a us fond at first and then, you know, but I’m like, well, let’s make it, you know, higher level of complexibility and, you know, like dive into the deep end of the pool. So it’s but, um, so yeah, but, but the, the technology, uh, has been developing. Since 2017 and the regulations have been pretty much put into solid, you know, that was the other thing is, is confirming that all these regulations are in place.

Um, so they’re ready to go. The technology is there and, um, you know, stuff is actually active. So there’s a, um, There was a, uh, an asset called the Aspen coin, which is a St Regis hotel in Aspen, Colorado. And that was tokenized, I think, back in 2018. And it is now actively trading on an exchange here in the United States called teas T zero.

So somebody that is an investor. Could go and buy a piece of the Aspen St. Regis, if it’s, you know, since it’s listed on P zero, which is a security token exchange. That’s incredible.

Seth: [00:32:06] That’s incredible. Um, so let’s, let’s break it down really simple to finish out kind of, kind of this discussion, you know, from the investor standpoint, what are just kind of the big advantages of using, utilizing the blockchain tech for this fund?

Michael: [00:32:21] Well, the biggest thing, uh, for the investors is number one, worldwide access to two new investments. Uh, number two, worldwide access to the, uh, investment income and to, for portability of your investments. So you, if you happen to have to leave the United States, or if you happen to have to leave Venezuela or something like that, You can take your investment with you.

It’s not going to be stuck there, or they’re not going to take all your gold jewelry and things off of you. So it’s portable. Well, that, that does happen. It’s like, sometimes you want to leave. It’s like you can leave, but you know, just leave all your assets here, you know, with this, your assets, aren’t really there, they’re out, you know, on the blockchain so that you’ve got control over your assets.

Um, the other thing is, is that we believe there will be liquidity. I’m not going to tell anybody that. You know, there there is liquidity because right now it’s, it’s an untested theory, but, um, there are a bunch of ways that you can get liquidity and then. Like I said, the extra options in terms of, uh, number one, just getting your money into a different spot so that you can use your money much more, plus the ability at some point to borrow against it and leverage against it.

So let’s say, uh, you’ve got a hundred thousand dollars tied up and you know, one of your kids wanted to come to you and open up like a hotdog stand or something. Um, If you wanted to like, leverage that and borrow against it, you couldn’t do that with a normal, private, real estate offering. Whereas you could potentially do that.

I’m going to borrow the 50,000, I’ll loan it to them and hopefully they’ll pay me back really right away.

Seth: [00:34:04] it seems like you’re ahead of the curve, man. And you’re, you’re like right on the brink of, of technology. I mean, where do you see, uh, in the near and distant future blockchain technology and real estate kind of colliding and interacting intersecting.

Michael: [00:34:17] like I said, we are way too far out in front of the curve right now. So we’re, we’re on the scary edge of the curve. Um, so the, the biggest issue is educating people. To say that no, this isn’t cryptocurrency. So no, this isn’t a big point. I mean, and, um, we don’t see it like going crazy and going insane with the pricing like Bitcoin.

Uh, but it’s also, there’s hard assets behind it. It’s not some sort of algorithm behind it that you hope the software works. This is hard assets, you know, backing this. And so you get the benefit of the hard asset. Plus you get the benefit. Of the, you know, ability to trade it and all the rest of the things that you can do with cryptocurrency, uh, where I see it is, uh, right now there’s probably about $280 trillion worth of real estate.

Um, that you know, is open for potential. I mean, even if somebody has like a favela in the middle of Brazil and they can show title to that, they can potentially borrow against that or list that on the blockchain and then use that as a cash asset to borrow against, um, and start a business or something like that.

So it’s going to unlock. Uh, generational opportunities in terms of wealth. Uh, the other thing I really like to talk about is, is that billions of people have come out of poverty in the last, um, since 1990. And those billions of people are working their way in, are in the middle class, and they’re going to need a place to put their money.

And, uh, w what better place to put it than a cash flowing, tangible asset. And then the other thing with tokenization is. There’s people doing all kinds of other, you know, really cool and neat things with it. So there was a guy in the NBA, Spencer Dinwiddie, and he tokenized his, uh, contract with the New York nuts so that he sold the forward earnings potential of his contract and got cash right away.

And then the investors get paid out as you know, this contract gets done. And then another guy that. We met out of California has a really cool whiskey fund. And so he’s tokenizing barrels of whiskey. Um, so they’re buying them now and then they’re going to sell them off in five years. And, uh, it’s really, it’s a surprising, surprisingly good return.

And it’s a cool concept.

Seth: [00:36:48] Yeah it’s crazy to think about. I mean, do you foresee a world where everything is tokenized? Like let’s say all real estate is tokenized and then maybe take it a step further where, because people are using it for contracts using it for barrels of whiskey, maybe everything that has value is tokenized.

Michael: [00:37:03] I don’t think everything that has value will be tokenized, but I could be wrong, you know? Um, just like everything hasn’t completely gone to the internet, but, uh, I do see there are, there’s going to be people wising ways to make money with tokenization and to really just slice and dice income streams. Uh, and so I.

I can see one future and there’s financial geniuses out there. They’re going to see an even further future than that. So that’s, I, I do believe that it’s just going to open up opportunities for people to generate wealth. It’s going to open up opportunities for people to preserve wealth, and it’s going to open up opportunities to be flexible with their wealth so that there’s portability.

Seth: [00:37:48] Yeah. When you think about the ways, if this thing works out the way that it should to be able to own these very small fractional shares, I mean, that’s just going to lead to a ton of diversification, which is what we’re all really aiming for.

Michael: [00:38:00] Exactly. I mean, you, you don’t want all your eggs in one basket, just like we design our portfolio to be diversified, but, um, you know, so let’s say you.

Invest in our portfolio as like your, your bond type of investment so that you know, that there’s cashflow coming in, you know, that there’s passive income coming in and then let’s say, well, I want to take a flyer now so they can like, you know, take a flyer on, well, let’s do a value added multifamily that, you know, doesn’t quite have the same cash flow profile initially, but you know, is going to have a higher IRR.

Um, you could just mix and match all kinds of things. My, my main goal. Is, um, you know, I just think that the stock market is rigged. It’s a game and, um, you never know, and that has, you know, been my experience with it, you know, and up and down, and I would just rather see people get something that’s super stable and, you know, that has the tax benefits.

And, you know, the, I can’t, I can’t remember who says it, but, um, he, so right. It’s like real estate is the world’s most proven asset class.

Seth: [00:39:08] Yeah. Yeah. It’s all about taking control, right? I mean, especially if you can tokenize this stuff and just take fractional shares, you can place, you know, smaller amounts of money with different assets and you just really have more control over your future.

So you can create your own economy and not just put all your money into a 401k or the stock market and just pray.

Michael: [00:39:27] Yeah. And, and, and the other thing is these are able to be sold by brokers. So a lot of people are just. You know, stuck into the stock market. Cause that’s all the broker knows, but if there’s these options out there, um, it, it will enable, uh, um, w I forget what the registered investment advisors and stockbrokers and everybody else to, to also offer this to their clients.

Um, so it’ll get, I believe, you know, a more stable situation, but, um, Somebody could go all real estate and, you know, have 10 to 20 different, you know, cash flowing assets, um, and, and make their own, you know, pick their own portfolio.

Seth: [00:40:08] Yeah, definitely. Yeah. Uh, before we jump into the freedom for any one last golden nugget for our listeners.

Michael: [00:40:14] I, you know, just, I’m thankful that you invited me here. Uh, I think that, you know, blockchain technology is going to change the future of finance. Um, I think you’re going to be hearing a lot more about this. And, uh, my years of experience in real estate says that, um, this is going to open up just an entirely new frontier.

Seth: [00:40:37] Yeah, I agree. A hundred percent. I mean, you hear about like Bitcoin and cryptocurrency, but you know that that may or may not pan out as a financial system, but what you really need to pay attention to is the underlying technology and how you can apply that to different sectors.

Michael: [00:40:51] Yeah. And one thing about that, um, security tokens, uh, probably within the next few years are going to completely dwarf all the cryptocurrencies.

So right now I think cryptocurrency hit about a trillion dollars. Um, you know, if you just start opening up a few of these real estate assets, you’re going to fly right past that trillion dollars. Um, and it’s going to be in debt. It’s going to be in, uh, equities. It’s going to be in, you know, like I said, all kinds.

I I’ve also, when I was in Dubai med guys that were, um, tokenizing container ships, you know, these big shipping things. And so they’re tokenizing those as an asset. So anything that’s an asset is, you know, at some point. I’m going to be eligible to be tokenized and you can participate in that. Yeah.

Seth: [00:41:36] Yeah. All right. Let’s jump into the Freedom Four.

What’s the best thing you do to keep your mind and body healthy?

Michael: [00:41:46] Uh, number one, I get, uh, enough sleep. Number two, I, uh, do exercise. Cool. So I, I do walking. Awesome. Awesome. My dog is here. It’s take your dog to the office day.

So he’s here and you know, I’m out for a quick walk after this.

Seth: [00:42:04] There you go, there you go. Um, in an alternative universe where you weren’t involved, uh, with all these businesses and real estate, what would you be doing?

Michael: [00:42:11] I think I’d want to be involved in business somehow. Uh, but yeah, nobody’s ever asked me that.

So I don’t know. My main problem is I, I guess I don’t know anything other than real estate. Um, but the really cool thing about real estate, especially in retail real estate. Is it touches on just about every type of business that you can get in. So you have to know how people run a retail business. You have to know about zoning, you have to know about law.

And so I would say anybody interested in the real estate field is, you know, you attorneys now, um, they’re just like. All kinds of stuff, that real estate touches. So I’ve learned I’ve had to be, you know, quite a wide generalist, um, just to take in all the stuff that we’re doing in retail real estate. So, uh, I, I’m sorry to say, I, I really haven’t thought about, you know, uh, I guess, you know, rockstar is probably the typical one that, you know.

Seth: [00:43:10] There you go, there you go.

Yeah. A lot of people will have a hard time answering that question cause it’s like, well, I enjoy what I’m doing and I love it. I wouldn’t. Do anything differently. So it’s tough to kind of picture yourself doing something completely different. Um, where were you at five years ago? And where do you see yourself and your business?

Five years from now?

Michael: [00:43:26] Um, five years ago, we were coming out of the, uh, um, great recession. And, uh, so we were investing in shopping centers and doing, uh, in the middle of doing redevelopments on, on a number of shopping centers and. It was five years ago that we started pivoting to say, um, it looks like the future of retail is going to be freestanding buildings.

Um, and so we want to start, you know, getting know, so it’s part of our business. Anyways, we, we, you know, do own and have done portfolios of single tenant net lease properties. But as I said, the evolution has been. Um, malls aren’t going to be as popular anymore, uh, open shopping centers, you know, we’re the direction that we’re taking them.

And then we’re just following the evolution of where the retailers want to go. Cause we’re really retailer driven, you know, or operator driven. So we’re, we’re just going to the next logical conclusion and, you know, we’re trying to skate where the puck is going. And so that’s, you know, What, what we’ve been doing.

And, uh, then the other thing five years ago was people were talking to me about blockchain and cryptocurrency. And I said to them, I don’t really know what you’re talking about. Cause I went to a public school and can’t do math. So, you know, I don’t know what algorithm has been stuff are, you know? So I started learning about blockchain because I’m like, there’s so many smart people that I personally know that are talking about this that, you know, I need to know what this is.

Yeah.

Seth: [00:45:02] Yeah. How about five years from now?

Michael: [00:45:04] Uh, five years from now. Now we want to have a, a billion dollar plus fund. And we want to do that, to enable our investors, to have, uh, the super stability of a large number of assets, all cash flowing into the security token. And the other thing is, uh, I want to be, uh, known as a security token evangelist and, uh, you know, educating people on security tokens, and hopefully.

Um, you know, have a book out on, you know, investing in security, real estate security tokens.

Seth: [00:45:41] Awesome, awesome. You’re well, on your way, man. So last question. How has passive income made your life better?

Michael: [00:45:47] Uh, passive income has made my life better because I can sleep at night, you know, knowing that, uh, you know, uh, I’ve got a bunch of assets at risk over here and, uh, we’re, you know, uh, trying to redevelop something here, but especially, um, over the last year, uh, you know, I, my regular business took a huge hit because a lot of the tenants in our shopping centers were not paying rent.

Uh, and so the passive income. On the triple net deals, you know, really carry things through. So awesome. A lifesaver.

Seth: [00:46:22] Yeah for sure. For sure. Uh, man, this has been incredibly enlightening for me and I’m sure for our listeners, I’ve learned a ton, man. So where can our listeners find out more about you more about the fund?

Michael: [00:46:35] They can go to Liberty fund.io. That’s Libertyfund.io. Um, there’s a lot more information on security tokens and the type of properties that we’re investing in, um, and explanations of what a net lease are and things like that. And if they want to contact me, they can contact me investors@libertyfund.io.

Seth: [00:47:00] Sweet man. Michael has been a pleasure having you on today. I really appreciate it.

Michael: [00:47:04] Thank you very much, Seth. I really appreciate talking to you today.

Seth: [00:47:07] Thanks man.

Ladies and gentlemen, Michael Flight. I loved how Michael broke down one of today’s most mystifying topics into simple digestible pieces, and I’m not going to lie, there was a learning curve for myself as well. I think a key takeaway for me is that we as intelligent investors really need to keep a keen eye on blockchain technology and how it will transform real estate investing in the not so distant future. Even if you weren’t sold on trading cryptocurrencies, the blockchain is real.

It’s here and it’s here to stay and we all need to educate ourselves about it so that we’re not left behind. All right. To learn more. I invite you all to join EPIC or Esquire Passive Investor Club, by going to passiveincomeattorney.com and clicking “join the club.”

Okay folks, you know what time it is, enjoy the journey!