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In this episode of Alt Investing Made Easy, Roland and Sarah host Jay and Rebekah Personias from South Silver Group. Jay and Rebekah discuss their personal journeys into real estate, the legacy of a family lake-side resort, and the current investment opportunity in marinas around the country. The conversation covers the dynamics of marina investments, including cap rates, revenue streams, and insights on how they plan to stabilize revenue through annual leases and the potential for significant returns in the marina space. In this conversation, the speakers discuss the intricacies of investing in marinas through a fund-of-funds strategy. They explore the evaluation of marina investments, the importance of management teams, and the challenges faced in regulatory environments. The discussion highlights the significance of due diligence and the benefits of investing in a fund compared to individual deals. The South Silver Group Recreation Fund is introduced as a promising investment opportunity, emphasizing the potential for high returns and the importance of investor education.
More information can be found at:
Marina Investment Opportunities Worth Exploring: https://southsilvergroup.com/a-brief-history-of-marinas-and-their-current-market/
Defining A Typical Marina Investment: https://southsilvergroup.com/defining-a-typical-marina-investment/
A Brief History of Marinas and Their Current Market: https://southsilvergroup.com/a-brief-history-of-marinas-and-their-current-market/
For past projects, see Yielding Impressive Returns, halfway down this page: https://southsilvergroup.com/archive-page/
Contact details for Jay and Rebekah can be found at: https://southsilvergroup.com/home-page/contact-us/
Takeaways
- Jay started investing in real estate at 59 and a half.
- Rebekah's journey into real estate began with self-education about financial independence.
- The family resort legacy influences their current investment strategies.
- Marinas offer diverse revenue streams and unique investment opportunities.
- Cap rates are crucial for understanding investment value.
- Annual leases help stabilize revenue for marinas.
- The marina market is underrepresented by large funds.
- Investing in marinas can yield high profit margins.
- Understanding the seasonal nature of marina investments is key.
- Financial education is essential for younger generations.
- Investing in marinas requires understanding operational strategies.
- Not all marinas are viable investments; due diligence is crucial.
- Regulatory challenges can significantly impact marina operations.
- A strong management team is essential for successful investments.
- Investing in a fund allows for diversified risk and potential higher returns.
- The South Silver Group focuses on well-managed marinas with growth potential.
- Investors should be aware of the importance of legal support in transactions.
- The fund-of-funds strategy can provide better investment opportunities.
- Investors need to understand the dynamics of the marina market.
- Education and transparency are key to building investor confidence.
Creators & Guests
Host
Roland Wiederaenders
Co-founder of the Alt Investing Made Easy podcast, investment advisor, and corporate securities attorney with expertise in private investment funds, corporate/securities issues, mergers and acquisitions, partnership structuring, and federal income tax matters. Roland is also a member of Grable Martin PLLC.
Host
What is Alt Investing Made Easy?
Join attorneys Sarah Florer and Roland Roland Wiederaenders as they navigate through the maze of market jargon and reveal the secrets of diversifying your portfolio. Whether you're a seasoned investor or taking your first step toward financial freedom, we empower you with the knowledge and insights you need to thrive in the dynamic landscape of alternative assets. Get ready to transform how you invest, inspiring a new way of thinking about your finances, and discover how to make your money work harder. Dive in with us, and let's make investing in alternative assets easy, giving you the confidence to navigate the financial landscape, one episode at a time.
Roland:
Hi, everybody. It's great to be here on a new episode of Alt Investing Made Easy, and I'm really excited. We're really excited today to have Jay Personius with us and Rebekah Personius -they are with a company called South Silver Group, and we're really excited to have them on today because Jay and Rebekah are law firm clients of ours, and we've helped him work on a couple of different deals, and they actually have a live investment opportunity now that would be available for an accredited investor to invest in and they're going to tell more about that here in a little bit. But Jane, Rebekah, welcome to Alt Investing Made Easy. Thank you. We want to hear about you all and I, we were talking a little bit before we started recording and I love stories about family, family members working together.
And so Jay, you're Rebekah's father in law and you all work together on this. So maybe just tell us each of you a little bit about yourselves and your background, how you got into real estate and what's it like for you guys to work together?
Jay:
Well, very good. Well, thank you for that introduction. Yeah, I'll just go ahead and start and then I'll have Rebekah pipe in here in a moment.
I've always been interested in real estate, but never did anything about it until I was 59 and a half. I woke up and realized the 401k IRA thing wasn't working. So I jumped in with both feet and joined a couple of groups, one of which was the Big Dogs, which you're very familiar with and got involved in that started with some single family investments. And started getting into commercial a little bit, which I'll go into a little bit here shortly, but I'll go ahead and give Rebekah a chance to say, hi,
Rebekah:
Thanks, Jay. Yep. I'm Rebekah. I borrowed Jay's last name from his son and that was my segue and introduction into the world of real estate investing. I was involved in the same Big Dog networking group as Jay a couple of years ago. And at the time I looked at all the various opportunities within the investing world and decided I'm just going to jump right in the deep end with structuring funds and syndications alongside Jay. Although my husband and I have dabbled in private money lending stocks, crypto, and we have an ever growing list of ways to grow our portfolio that we're learning about.
So that's a little bit of my history on the subject. And it's been a delight to work with Jay and navigate this process.
Roland:
Well, that's great. You know, the, the Big Dog network is significant and we hope to maybe have Phil and Shenoah on as well, I guess, but what, what I like about their program is that they help people start out with really investing in single family homes, all the different ways that you can do that, but then, you know, you can kind of extrapolate from there and grow your investment into, you know more commercial oriented strategies, but still employ those same, you know, good fundamental underwriting characteristics and you're part of a good network.
Sarah:
So, Jay and Rebekah, we didn't have the one-to-one we talked about before, but Jay, you had, talked a little bit about the fun that you have now and the history and why it means something to you personally the asset class that you're starting to work in and and also you shared with us a presentation where you had some really nice photos of the the marina, I guess the, the, the seaside resort or lakeside resort.
So would you like to share a little bit more about that personal connection to what you're investing in now?
Jay:
Sure. Back in the early 1900s, early 1930s, up to that time frame, I'll show a slide here coming up. We actually had a family resort on South Silver Lake in Minnesota. Quite interesting. In the background back then there were no six flags over America or Texas or America or anything like that. And OSHA did not exist. We had on this West side resort. Which was on the west side of the lake. Of course, we had the dance floor bar boat rentals bait for sale.We could rent the dock for people to fish off of it and had a picnic area rooms underneath the dance floor right there by the lakeside. And it had an outhouse. It really was not very modern at all. On the right, you see that it had a toboggan ride. And depending on what year it had to be rebuilt, because in Minnesota, the weathers is kind of harsh, the weather is kind of harsh, and things freeze and crack and break things.
And so they would replace that toboggan ride every couple of years and the dock every couple of years. And you actually wrote down on a wooden plank basically and there were no railings. There was nothing safe about it at all There was a diving tower and a diving board and as you can see people are standing on the bottom of the lake So i'm not sure it was all that safe to do any diving either. Also it was on a farm homestead that was in our family for over a hundred years. It's now been sold off.
All those buildings are gone. But they used to also sell strawberries, sweet corn, raw honey, eggs and other farm fresh produce. So I remember the place as a young child and I always enjoyed the outdoors and grew up that way. My dad was an outdoors type and he eventually went on to be a test pilot and we basically quit being country folk and started becoming more of a city folk.
So that's kind of our background. And so I have a very strong interest in being in the outdoors and that kind of thing.
Roland:
Well, I love that. And it's great how you've been able to turn this kind of family history into investment strategy. And what I liked about that slide is it showed all the different revenue streams that were coming in. It was, you know, boat rentals or dock rentals, but then also some sale of produce. And I know that's one thing that is really relevant for the marina investing that you'll probably tell us about in just a second. Absolutely. Go ahead.
Sarah:
So Rebekah, maybe you have a little bit of a different story since you've married into this family. Do you want to give us some of your background?
Rebekah:
Yes, absolutely. So I'm sort of a 1st generation investor in my side of the family. But growing up, we've had a long history of love for the outdoors and recreation in general. So my husband and I just recently moved to Utah specifically for that reason, because we love to spend time outdoors. And so it's been an awesome opportunity to work alongside Jay in this particular project, because it's something I'm passionate about. And until a couple of years ago, I had no idea what diverse revenue streams meant or what it meant to the investor. So it's changed my quality of life and my perspective, just learning about it. And I'm excited to pass that on to future generations as well. It's really cool once you can start understanding. It's a understanding more about how the world works around us, right? Yes. Always useful to keep learning about that no matter what. And I'm just glad I got started before 59 and a half, so.
Sarah:
Well. Indeed. It's never, never too late. You know, it's something that just as an aside for this project that Roland and I are doing is this, the financial education part of it for younger and younger people is so important because it gives you stability for your future. If you know how to start investing when you're younger, right?
And we've talked about that on other episodes and about how important it is to have financial education as soon as possible for young people.
Rebekah:
A lot rely on a W 2 job or stability politically or economically. And so learning how to navigate the highs and lows of that is really critical. And that's something I'm definitely passionate about as well.
Sarah:
Yeah, that's I totally am with you on that. So, Roland, moving on..
Roland:
Yeah, yeah. And so we want to get to this investment opportunity and, you know, we have created this webcast for a couple of different reasons. And Sarah, you brought up one of them - investor education; we also want to promote our legal services, but the way that we're doing that is by bringing on you all as clients and you actually have a real live investment opportunity, and we're going to include in the show notes of a link to where people can contact you. And if they're interested in finding out more, you know, we have to give the disclaimer that there's no attorney client relationship established by this webcast.
And we also, while we're investment advisors, We can only recommend an investment in anything, you know, whether it's Jay or Rebekah's fund or anything else. If we have a specific investment advisor relationship with you as an audience member. So, you know, this isn't a Jim Kramer, you know, buy buy or whatever, but it's more just an education and what we can do. And we can attest to the integrity of Jay and Rebekah and their process. And that's what what we found to be the most important with all, all the managers, all the deal sponsors that we work with is, you know, there are some that really do demonstrate exceptional integrity. And that for sure is, is part of Jay and Rebekah's story.
Well, how I want to hear about it, it's the SSG Recreation Fund. Jay and Rebekah, tell us about that.
Jay:
Okay. Well, why don't I give a real brief history of how I got into this, because that. Helps explain why I've focused the company in this direction. Once I started the Big Dogs, I had already been involved in multifamily and bought in at a good time so that when COVID came and some of those sold, we did really well as a family.
However, some of them didn't sell and so some of them have been sold at a loss and we saw that there was a lot of turmoil going on there. I think the multifamily space will recover in time, but right now it's it's been pretty squeezed. And so the high interest rates and the short term loans and the high inflation and all that kind of stuff just collided for a bad season right now for some of the multifamily.
I got involved with a couple of other Big Dogs that were involved in commercial real estate. And because of my efforts and whatnot, we partnered up and began to work out how we could work together. So I began doing some capital raising under the brand name Engineers in Real Estate. And through that was able to help syndicate several deals. And I learned a lot about becoming a general partner, how to do due diligence on deals. I've been involved in a little bit of a variety of different asset classes, including medical office buildings, self storage, boat and RV storage. I've done the multifamily. Of course, I've done some single family. In the first four years, I was involved in about 45 different deals of different types.
And then one day, a good, good longtime friend of mine introduced me to a team of folks that were interested in the marinas. And I had the same question everybody else does, and they go: Marina's. I didn't know you could buy those. I mean, normally mom and pop shops and whatnot, but they had a plan and I looked into it, which I'll talk to you a little bit about here in the pros and cons.
And I said, well, what's it take to get in on this? And they said, well, X number of dollars for a certain percentage. And I said, well, I'm paying for this one. Let's go. So that's how I kind of got started. You know, the different asset classes have different cycles of their own. We've seen multifamily and single family kind of go through their markets.
And I created a video, which we can show here a little bit later that kind of talks to that and that the different asset classes may not be on the same wave at the same time. There's a lot of other dynamics that get involved in that. How interested is Wall Street? How uninterested are they? What do people's portfolios look like?
What are the risks, the economics, everything else goes into that. And so while I had a great run with multifamily. It was time to look for something different during the COVID era and that really pointed me to this marina space and so that's really what I, I'm pretty excited about what we have to offer here.
So let me kind of go into a little bit about marinas. I can share a couple of slides here. Yeah, please. Let me find those again. Here we are. All right. Well, one of the key things that's different about marinas is they are a very complex asset class. They come with multiple diverse income streams.
The first things that might come to mind is you need a place to park your boat, and that could be a boat slip, right? And then if it's in an area that freezes a lot, you probably need to have some dry storage for that. Sometimes the marinas have that. Sometimes they don't. Those that are in the south don't typically have much dry storage around.
However, there is a big demand for that right now because so many people bought boats and RVs during COVID that they don't have a place to put them and the HOAs are telling them to get them out of the neighborhood. So there is some strong demand in this market. The marinas that we're looking at are usually 100 percent occupied.
When we're looking to buy them. So at lower rents and rates, so there's an opportunity there to expand on existing operations just right off the gate. Exactly. There there's these mom and pops have not wanted to offend anybody by raising the rents. Not a great business model when it comes to making money.
And so while the costs have gone up on them, they're ready to sell. Their kids don't want to own them. They don't want to manage them. And so they're looking to sell them at what we would call a 10 percent cap rate. For those that understand that, I have an article on my website that can explain that better, which is kind of nice.
Roland:
It means you're basically getting a 10 percent net cash flow. Before debt service and a few other things, which is a good, good number when Jay, maybe contrast that with the cap rates of, of some other commercial real estate asset classes you know, 10 cap on the, the Marina is what, what, what, what might we see in a multifamily or other types of assets?
Jay:
Yeah, great question. Just for, for those that might be new to investing in this space, the cap rate in a simple form -What is it? What are the what's the net operating income on the asset compared to its valuation? So if you have a million dollar property, and it's cash flowing 100, 000 a year, we call that a 10 percent cap rate.
So, There's more to it, but that's the simple form, right? The other thing that's really important to know about that is if the banks start to lower their understanding of what is a viable cap rate for purposes in considering loans or whatever, if they lower that cap rate in their thinking, let's, I'll exaggerate.
Let's say they go down to a five cap. That means they value the same property as though the cashflow was only 5 percent of its value. So if you bought it at a 10 cap, they lower that to five after a couple of years because the market's great or the risk is lower. And that same 100,000 is now worth 5 percent of the valuation, which means now it's worth 2,000, 000.
And so there's a strong, strong value add in the direction of those cap rates. And so for the new investor, this is what you need to learn about commercial property. You want to buy high, sell low. So that's very different. And so when multifamily was at seven caps, seven and a half caps, five years ago during COVID, they dropped as low as three.
Now, for those that already own the multifamily, they made a lot of money on those deals. I had a deal more than triple in value in three years. So triple my investment. For anyone else, you don't have a margin to go from there. So there's room for, for opportunity and value add. But if you bought it at a three cap and sold it at a six cap, you lost a lot of money.
So that's where some multifamilies got into trouble because a lot of the loans on multifamilies are short term. So when we buy marinas at a 10 cap and we're already talking to private equity, that's ready to purchase them from us at a seven cap, we've immediately more than doubled our money for the investor.
In the value add there's a lot that goes into that. That's not a guarantee, but that's kind of what we're looking at. So multifamily right now is crept back up to about 6 caps. It depends on what class of multifamily you're speaking about - A class, B class, C class, D class, whatever the cap rates vary between there because the risk is different, right?
So an a class multifamily is going to have a higher cap rate than a C class. Okay. And so there's a lot that goes into that. There's, there's things one as an investor must learn to make sure they know what they're getting into in that space. And then if you talk about self storage right now in Texas, it's around the mid fives.
So as a long term investment multifamily and self storage can still provide you income, but they're not at the right cycle right now, in my opinion. And also buying into Self storage right now, there's a, it's really hard to get the occupancy up on self storage. I'm invested in some of that and it's, it's just hanging on. We have to wait for the cycle. Basically, I have to write it out where with the Marina space. There's not much we have to write out here.
Basically we have the opportunity here, and I'll kind of go through some of the points that are on the slide there. There's almost 10,000 marinas in the United States, and only 2-5 percent of them are owned by big funds. That spells a huge, huge, ripe market for people like us that have the team that can manage these marinas. To really turn these around. Now, the big funds, the people that want to buy into this space, wall street, private equity, whatever, they don't want to deal with a 500 boat slip Marina.It's too small. It's petty. It's only 10 million or 15 million. They're wanting to do a hundred million dollar deals. And so another fantastic thing about the commercial real estate space is called merger and acquisition strategies. There you bundle together assets, you improve them through the optimization of your processes, your procedures, your tools, your analysis, you blend the different asset classes, if they're different, so that you come up with a portfolio that has a really strong cash flow once you've refreshed it in that sense in some spaces, people that are experts at that can do a portfolio that can do a 24 X on their investments in 5 to 6 years. Now, I'm not that expert - above my pay grade at this point, but what we're looking at doing in the marina space is trying to get at least a 3 to 4 cap if we can. And what we want to do there. Our strategy is to buy multiple marinas. Bundle them together, standardize their bookkeeping, standardize their reservation software really bump up their presence on the internet so we can do reservations with boat rentals boat slips, with RV pads with our short term rentals, with our restaurants, with everything else, because our rest, our, our marinas typically have about a dozen different revenue streams.
And so if we can market those well, And people really enjoy coming to them, which we found that they like to do, then we can raise those rents. And we're not afraid to scare away a few boat slip on renters, because at 100 percent occupancy with long waiting list, if we haven't scared somebody away, we're too under far under market, not charging enough.
Rebekah:
Yep. That's exactly right. So, if we can get the prices up.
Jay:
Yep. Which we have been successfully able to do we make the operating income exceed the rate of increase in the expenses that increases our net operating income, which greatly increases our valuation of the property. So we're already looking at providing 8 percent prefs. And in some cases, maybe a little more. It depends to our investors on a cash flow basis and to top that off. And a few years down the road, if we can triple the value of the asset on the, for the investors investment, that's just like a win win. So. We have it's a large market, there's huge profit margins in it.
You know, this slide there says 18%. Well, that's, you know, that's there's still things that you have to pay for after that, but it's there. And so it's quite a, quite a big market. There is I have one more slide here. That talks a little bit about it. Like I mentioned that the cap rates we do have year round cash flows for these marinas, especially the ones we're looking at.
We're looking to buy those that are in the Southeast United States, but are inland, not on the coast. That's our primary focus at the moment that. Relieves us of a lot of the hurricane strategies. There are ways with that, but we're avoiding that at the moment.
Sarah/Roland:
A timely concern. I've heard. Yeah, I've heard something about that in the news recently.
Rebekah:
Well, I don't think it's mentioned here on this slide, but there's very few new lakes being added. So 1 of the things we talked about was this being a wave and aside from the pun, this is an opportunity that won't last forever. Little mom and pop marinas are acquired and turned over to the bigger funds.
This opportunity will largely go away because there aren't many places to add more marinas. There's too many regulations or protected land space. So it is a good opportunity to get on now before it's been overtaken.
Jay:
Absolutely. And we do a lot of things that help address the seasonal nature of marinas, even in the South, even though the water doesn't freeze, it's just chilly to go out on a boat. So there is a very seasonal aspect to it, but it's not just the weather. It's also the school season, right? Families like to boat together Not everybody has kids to, to worry about in the, in their boating experiences, but that does drive a lot of it. And so the, the season really begins about early April and goes through most the end of September. So it's just really about a 4 half month window. And so we have to make sure that we address those ebbs and flows. And the 1 way that we do that. Is that the Marina slips or the boat slips are annual leases. That keeps the revenue coming now. We generally charge them once a year, but then we only take into our budget that which is due for that month.That way we are evening out the flow. The other thing is the R. V. spots at marinas are not nightly stays. Those also are annual leases. We have found that it's just that. A lot less hassle to rent it once a year, even if it's at a lower rate than we could get nightly. But the people that come through nightly are not looking, they might enjoy being at a lake, but that's not the primary thing.
The reason behind the annual leases at a marina for RV pads is people don't want to lose their spot at the lake. I just would rather park their RV there and drive up in a car or they can drive their RV there, whatever. But they own that spot for the year. Not a question if they want to come Tuesday or they want to come Saturday.
It doesn't matter. They're going to have a spot. So, the, the other nice thing about the Marina space is that does cater to a higher net worth type of client. The average income alone for someone doing boating or owning a boat is well over 100,000 a year. And that's that just makes it a lot less risky if you will. Yeah, that doesn't mean hard times don't come, but it's anyway, go ahead. Rebekah, if you had something.
Rebekah:
Now, I was just going to say we saw that happen during Covid as well, that people were willing to cut back on their expenses and a lot of in a lot of areas. But when you buy a boat or an RV, that's a depreciating asset. And it really hurts to let that one go. So it's one of those things that helps with economic fluctuations as well as seasonal fluctuations. It's just the type of person that buys a boat or an RV. You know, they like the convenience of those annual leases. They like the accessibility and it's just a great way to kind of stabilize the asset for sure.
Jay:
Definitely. Thanks for bringing that up. That's asset class also has a very high barrier to entry as you've probably already gathered. There's a lot of moving parts to this and anything that goes wrong can affect all the rest of it. So we have we just closed this last week as of this recording on Friday, the 18th of October, we closed on our fourth marina. So, we are pretty excited about that. We've got a very experienced team. We are being very successful with this. We're really enjoying this. We have several more in the due diligence pipeline. So I'll transition here to the fund in just a moment, but I guess some other considerations that need to be taken. And effect here is that a lot of lenders don't understand their space. A lot of investors don't either.
Roland:
Yeah. It's like, what really? So I think it's even for the investor, there's, there's ways to kind of break this down into cookie crumbs, if you will, to understand how it all goes together. So both slips are very much like a multifamily, but just with some different eviction laws.
Jay:
Right? So people can identify with multifamily or single family and renters. If you're looking at the ship store, that's like a small convenience store. We have sometimes alcohol for sale there, but the drinks that people would take out on the lake with them, the life vests, the sunglasses, the hat, they forgot at home, but t shirts, all that kind of stuff.
We have a store for that. We also sell fuel. which is kind of like a little miniature gas station. It's actually pretty nice in that it's about a 50 percent mark up in the fuel sales. So there's some nice margins there. We have restaurants typically these, not, not every marina has a restaurant. That's, that's a big endeavor to put in place. So we buy them already there. But the other thing is that when a marina is floating out on the water in a dry county, you can still sell alcohol and alcohol has about an 80 to 90 percent markup. So it's just there's great opportunity here to minimize the risk of all of this. You also have. Let's see, what else? So we have boat rentals, we have other aquatic equipment, as we call it, which of those beginner tubes, skis, whatever else you want to rent. There's also boat clubs. A lot of people cannot afford a boat of their own. I was out on the lake a few weeks ago with a very good friend of mine, who's actually one of the members of one of the Maria deals that I'm in. And he bought his used boat toward the end of COVID for well over 200, 000. It's like not everybody can afford that he's retired. And he's been actively investing for many years in real estate and he had the money to go do that. And, you know, for, for the average person, having a boat club is like a timeshare.Right? So you don't have to own the whole thing. You don't have to maintain the whole thing. You don't have to worry about reserving. All you have to do is reserve your spot. And maybe you're entitled to four reservations per month. Whether you use them or not, they're there and if you can make it to the lake, you got it, you return the boat, we pay for the fuel, whatever, maybe, maybe not.
Sometimes that depends on the voting agreement. And so that's another way to kind of look at that space. We also have cabins, we have camping, we have just a lot of different things that we can do to bring in different revenue streams and capture that audience while they're there. Well, Jay, this is a fun to fund strategy, and I think that's an important thing for people to understand that you're investing in.
Marinas that are operated by other people, but, you know, maybe you negotiate some control provisions or are you get you, you understand from them specifically how they're going to be using the investment proceeds that you turn over to them. And one thing that we talked about in getting ready for this is that not all marinas are good investments.
Roland:
So maybe tell us a little bit about you know, when, when you look at one, what, what are the main things that you look at? I'd imagine 1 is, you know, can we apply money to this and make it grow and better? Or is it, are they already maxed out? But yeah, let's, let's hear you talk about, you know, what's a good investment in a marina and a bad marina investment.
Jay:
Well, right now, it's really tough to have a marina in Florida.
Roland:
That's a great answer.
Jay:
It's not that you shouldn't you just have to have a different game plan. The thing with hurricane damage in a marina. Is that the first one that's fully operational again is the first one to be 100 percent occupied. And so the strategy there really is to be prepared for that so that you can rebuild instantly. I won't go into a lot of those details, but that's, that's one thing that has to go into it. But another thing is, is it big enough to really sustain a staff? I mean, our staff fluctuates seasonally. We have full time staff, maybe for the first two marinas we bought, we bought them together. They're on Lake Norris in Tennessee. They are not part of this fund, by the way, but they might be later on. We're still trying to decide how that might be best for the investor or not. Well, so we bought our first two to get our experience and pull things together. And so we have a staff of about five full time people for those two marinas.They're about 20 minutes apart across the lake. And that works out pretty well. In the. Middle of the year, though, we may have 40, 50 employees, right? We have a restaurant and all those other things. We got maintenance and whatnot. Another thing is, what is the season if it's further north? And the boats need to be taken out of the water.
You really kind of have to have a dry storage plan. You get to north end of Kentucky, a little further north. It's probably better on the boats to take them out of the water. You have a lot of different jurisdictions to deal with. For example, Tennessee, the marinas that we have on Lake Norris Norris Lake, excuse me, are all governed by the Tennessee Valley Authority. You'll have lakes that are governed by the Corps of Engineers or the Colorado River Authority or whatever it is. You have to be acquainted with that. You have to understand how those work. For example, when we bought our first 2 marinas, we had a really tough time getting the Tennessee Valley Authority to do something about it. We had to have their approval or we couldn't close. We raised 5 million for that opportunity, and they were all home working from home as a bureaucracy.
Sarah:
Oh, wow. How did that go? Right? Yeah, I know. I know how that went.
Jay:
It was a real chore, but we had all the money. We had the bank in line. We had we didn't do seller finance on that one. We actually took over. We had new notes on those. But we had to get an attorney involved to. Get their attention. All right. So that's another thing. You have to have a good legal team. You have to have to good structure and we had that. And so that worked out pretty well. So we only look at marinas that have a minimum number of boat slips. We're looking for at least 8 to 12 revenue streams were right now, because we have the chance to look at the creme de la creme, if you will, Marina from the mom and pops, we can say, no, they need to be running. Well, we don't want to do a lot of fix ups if we don't have to, but we're looking for those higher cap rates.
We're looking for seller finance. We're looking for very low cap raised on our parts so that we can come right in, buy it up, and take it in. And that's kind of what's starting to get in stride for us. So the first two took us over nine months to almost a year to close because of the hang ups with the TVA. And we learned a lot from that. We found their bookkeeping was atrocious on the, oh my God, we're talking Excel spreadsheets for a multimillion dollar business. And that was one operation. And then another operation use QuickBooks and another one use something else. And there was no way to tell what revenue streams were actually making money other than there was positive cashflow into the bank.
Rebekah:
I think they were also using, like, 80 percent of the restaurant for storage space as well. So, you know, it wasn't 80%, but yes, you're right. There was a very high percentage.
Jay:
Yeah, a 3rd of the restaurant was being used to store as I put it ketchup and mustard. And so we actually opened that up. We added 50 percent space basically to our restaurant. We almost doubled the size of their kitchen. We did all sorts of things. And our revenues jumped up dramatically that next year. So we're looking for opportunities to make improvements. As I mentioned earlier, the mom and pops, because they didn't raise the rents, they didn't have the capital to, make improvements.
And so things are kind of stabilizing out, and now they're coming due with deadlines on environmental upgrades. And you have to now encapsulate all your styrofoam. You can't just have styrofoam blocks breaking off and putting little white X all over your like the fish eat them. Not real. Real environmentally friendly. So there's some upkeep to be taken on that. The docs have been getting old. Sometimes there's replacement that needs to be taking place.
So we understand all marinas going to have to have some work to them, but we're primarily looking right now for marinas that are already well managed seller finance, good terms. And have the option to actually add more slips where they've already been approved to do that. That's to us a gold mine. So the third one that we bought, which was the first one in our fund had 500 slips and a restaurant and it was extremely well managed. It has no need for CapEx other than, you know, a couple of repairs here and there, yet it already has permission to add another 250 slips. So you can see a 50 percent jump in our revenue of the boat slips. Right away. That's amazing.
That is in our, in the target fund that my fund is our fund is investing in and we just closed on another Marina, which is now up in Lake of the Ozarks and that one was well that was a 1031 exchange situation. So we can navigate all the tenants in common difficulties with that. And that will be in our fund. And the good news is. that the SSG recreation fund will still benefit from these two recent acquisitions. And I think that's probably where we should say the benefit of being in a fund rather than a single syndication.
Roland:
Absolutely. So as you know, or many investors will know that when you have a syndication, then the good side is, you know, exactly what you're buying, right? And you can do your due diligence alongside that you can get real comfortable with the asset class. And you say, okay, this is thumbs up to thumbs down and you invest well, with a fund, you really have to know your management team. You have to know your sponsor. So here, instead of you're knowing exactly what you're buying, as far as an individual asset. You're saying I am investing in the team. I'm investing in the sponsors. And do they have a track record? Do they know what they're doing? Have they made improvements? Have they had success to have they made mistakes and recovered from them?Do they are they transparent? Do they share with you? What's going on? Do they manage their funds?
Jay:
Right? I mean, unfortunately, I, I go to work every day and I hear of the woes of some of my friends who invested with them. Investors and multifamily actually a few years ago who mismanaged the funds and they're losing all of their investment. Just it's hard. It's gut wrenching. I just said, wow, I'm glad I didn't recommend that person, you know.
Roland:
Sarah and I were having a conversation the other day and Sarah, this is a place where you could probably, you know, ask some questions along the lines of, you know, investing in the management team and versus the individual deals.
Sarah:
But we were talking about this very important part that it is. So you're, you're structured as a fund. And so a critical piece of that is your investment strategy, which is also intimately knowing the assets that you're talking about in the asset class. And that's very clear from talking to you that, you know, a lot of details about marinas that an average person, even a person who likes boating might not have really picked up on, right? And it must also make things very interesting. But in terms of a management team, it's really critical also that you're scalable, that you have a process, right? That, and it sounds like this is exactly what you've been talking about to us, right? Is that you've got this underlying investment strategy or process and some, you know what to do. And so probably each asset that you purchase in the fund gets easier. Because you've already used the same strategy for all the others. It's just a new, slightly variance in the same kind of a project. And that, that is so, so you had mentioned that, and it's, I think, very true believing in the management, but part of what the management is doing for you as an investor is. And bringing these efficiencies of their experience over, you know, successful projects and non success not successful projects also, but and I think if there's anything you'd like to add, maybe Rebekah, maybe you're involved.It sounds like you're involved in the operations of everything. And so you probably are the implementer of the strategy.
Rebekah:
Yeah. And that can evolve quite a bit over, you know, over, over time as you become more aware of options and opportunities and how to streamline and make things efficient. But, you know, Jay mentioned being involved in the Company Engineers and real estate from the beginning, there's a reason that name was used and Jay and I balance each other out really well, because I'm really able to kind of draw his focus together and pinpoint this is the most optimal way forward after he's already spent, you know, 10,000 hours exhausting every possible option. So the two of us, I would say due diligence has been our top priority for the investors. And when it comes to managing people's money and the, you know, hundreds of thousands of dollars range, it does help to have that kind of attention to detail and that commitment to, you know, doing what's best for the investor. And Jay, you mentioned talking about what we look for in a marina that makes it valuable to the investor while also diversifying risk. And I think that's one of the key things to consider with a fund is that if you have that underlying strategy and that vetting process that is standardized, it makes it a lot easier for the investor to have confidence knowing that with every subsequent marina that's acquired, their risk is getting more and more diluted and their opportunity and their upside is going up more and more as well.
So just a little bit of the behind the scenes there. It's been many thousands of hours in the making to get to this point for sure. Yeah. And the other thing about a fund you mentioned the, the dilution of the risk. Does not mean dilution of your investment. Absolutely. When we bring more capital into a fund, we're also buying more assets.
So we are very careful to help people understand that because they immediately think, Oh, you're diluting everything I'm doing by bringing in more money. And it's like, no, no, no, no. We're spending it too. We're lowering your risk and magnifying your returns. That's that's the opposite direction. Yeah. And that you wouldn't get that with a single syndication.It would have to be a fund in order to experience that.
Jay:
Right. And so what I think it's important to position here. What South Silver Group does is that and with Rebekah's help, this is what we ended up doing is we are our motto, if you will. And there's another word for it. But our motto is your curated source for excellent investments. Yeah. So the point here is that South silver group really partners with people who know what they're doing in their asset class. That's why I'm able to bring to the table, multiple different asset classes. In different cycles. So I've been a part of medical office buildings right now.That's a little bit of a tough market. I've been in self storage, but now that's a tough market. So, you know, we have to, we don't want to be going back to where things are going through a struggle right now. We're going to go forward to where that next wave is. And right now, that's no pun intended. That's actually what the Marinas are all about. And so I came across these partners in the Marina space. And I said, I'm in, what can I do to help? How can I be a part of your general partnership? And that's where South Silver Group got involved. So South Silver Group is a member of Windlass Marinas, also known as New Haven Marinas.
So in full disclosure, before we get into the fund that we'll be talking about here. I am a partner of both and that's really important for investors to know that. It also gives me legal inside information in case the SEC is listening. I actually am a part of that. And so New Haven Marinas is the 1st target fund that South Silver Group Recreation Fund is investing in and one of the, so South Silver Group Recreation Fund actually is a fund of funds. And I'm allowed as the CEO of that to direct the funds to different assets, to further diversify what the investors are doing right now. That focus is only on marinas because that is the hot field right now.
And I want to stay focused on that and probably follow what New Haven is doing. Because we are looking to go full cycle. with investments. And that actually brings a lot of credibility to what we're doing down the road. And it says, Yeah, not only do we know how to buy them, we know how to successfully sell them at a profit.
So the South Silver Group Recreation Fund will probably last only as long as New Haven is open. And then what we'll do after that is say, Okay, this is success. Let's create new funds, improve them even more. And go forward from there. But as a fund of funds, I'm legally required to make sure that investors who come through the South Silver Group Recreation Fund get a better position than if they went directly to the target that I'm investing in as the director of those funds.
And so the New Haven Marina fund actually has 3 tiers to it. And we are investing as the South Silver Group Recreation Fundinto that top tier, which has the highest returns, but I'm giving a bump up in equity in the GP/LP split to those investors that come in through me through the South Silver Group Recreation Fund. So, with that, unless you have other questions you want to prompt me with, I'll share the slide on the South Silver Group Recreation Fund.
Roland:
I was just going to say, you know, 1 question that you might get asked is what, what activity level or how active are you in the management of the Marines? And you just kind of answered that. That sounds like. With respect to New Haven, you know, you're, you are actively involved. And while that's a related party deal it's, it's a benefit to your investors because, you know, you're, you're engaged in the management. They're investing with you and they know that you have some degree of oversight and what's going on at the Marina, but yeah, for sure. Let's, let's take a look at, at any, any of the collateral that you brought.
Jay:
Yeah, I've condensed it down to one slide here. As I mentioned, we're focused on marinas that are 30 percent plus IRRs, and we still are holding to that projection for the investments that we're buying through New Haven, which now make sure that we can do the same here in the REC Fund.
Now, I only advertise a 20% IRR. That's just my marketing materials for the REC Fund. But we are actually still on track to keep it 30 and above. So the South Silver Group Recreation Fund is a half million to 20 dollar million fund. We are offering an 8 percent preferred return to all the limited partners in the South Silver Group Recreation Fund.
Now I invest these funds at 10 percent because I meet the minimum requirement to meet that higher tier of a 10 percent prep. If we did have an investor come to us that wanted to put in over a half a million dollars, then I would just simply refer them to the New Haven team, and then they would have to talk with them directly.
So I would just refer them, but most investors are not the half a million dollar investor. So this is an opportunity for all of them that do come to me to have a bump up in the equity. And as you look there at the LPGP split for the A1 class, which is a 300,000 minimum investment into the South Silver Group Recreation Fund, it's a 97 percent pass through on the equity.
That will increase the investor's equity. Over the New Haven Marina fund from a 70 percent position to like a 72 to 73 percent position. So you even get a little bump there for those that are coming in at the A2 level, which is a 50, 000 investment. I'm passing through 94 percent and that takes their 65 percent position in New Haven up to a 70.5 percent split. Okay. There's the benefit to the investor for coming right through the recreation fund instead. And this is a special arrangement for me as a general partner in New Haven. Not all of us general partners had this privilege. I'm just primarily a capital raiser and general partner.
And that's why we worked out this deal. So it's important to note too, this, this is an accredited investors only opportunity. So I just want to make sure we get that clarified. It's on the slide, but for anyone who's just listening in, I want to make sure we know thanks for that.
Roland:
We've, we've done a whole episode on what that means and why it's important, but thanks for mentioning it.
Jay:
Yeah, absolutely. So the pictures at the bottom there are from the. First two marinas that we bought. These are not in the fund, but that's typical screenshots of what a marina would look like. We do work to have at least quarterly distribution. Those payments are about 60 days behind the quarter. It takes 45 days for New Haven to get their funds out. And then it will take a couple of weeks for me to get mine out in the recreation fund. But they'll be there and it's still accruing. We already have sent over our first round of funds into New Haven from the recreation fund. And so those investors are already beginning to earn their 8 percent preferred return. We officially announced a 3 to 5 year hold. I just I'm excited to say that, you know, we already have private equity that's looking at buying these things already. And so they want to buy within 12 to 24 months, but that's all talk at this point. It's nothing in writing. So we are hoping to, greatly improve those 30 percent IRRs.
I think any seasoned investor in the commercial space will realize that the longer you hold something, the lower your IRR. So the shorter, the better it gets your money back and we'll have another fund ready to go for you as soon as we do. Well, that's great. It sounds like you guys are doing really well and have a bright future ahead with some of these you know, liquidate or liquidity potential, you know, potential for a capital event buyout from from one of the private equity funds or just continue to operate.
However, but it just seems like you've got nothing but good opportunities in the future. Yes, we're pretty excited about it. And I guess another benefit to mention about being in a fund is you only have to fill out the subscription documents once. Yes. Now we'll finally appreciate as well as another comparison.
Roland:
You know, people will invest in the stock market and buy exchange traded funds. They're doing the same thing. They're trusting the manager. You've never met. You've never been on a webinar with they're buying speculative stocks based on their hunches on graphs and whatnot. And none of that is collateralized.
Jay:
You know, you're buying investments and stocks that could go to zero. And unless you know, some Armageddon happens or, you know, the sponsors are just frauds, which can't happen. That's not going to happen in my, on my watch. Your investment is not going to go to zero, right? That's you have collateralized equity position in an asset. And that's another benefit of being in a fund. We're there to do the work for you.
Roland:
Well, that's great. Well, gosh, is there anything else that we want to bring out?
Sarah:
I was going to ask, is there anything like Rebekah, anything that you'd like to share that? We have we've talked a lot about the fund, but we haven't heard so much from you. So anything that you would want to share, if there is an audience, if you can imagine an audience of potential investors are also just people that are learning about all of this space. Yeah, absolutely. And if I can speak to my own demographic here, if you're somebody who's looking at your future from a financial perspective and running nine to five or even over time for that matter to achieve financial freedom, that may not be your best opportunity.
Rebekah:
So if nothing else, reach out and ask questions. Jay loves to educate people. I love to educate people. So even if you're not ready to invest at this time, reach out to us. Anyways, you can find our information on South silver group. com. We'd love to learn where you're at and bring you up to speed on your options and opportunities.
But for anyone else who is really interested in investing in this opportunity before the end of the tax year is a great time to do so get those capital gains put to work and let us know what you're looking to invest and what entity type you're using. I'll be the one managing investing at South Silver Group.com. So just email me there and we'll get you started.
Roland: That's great. Okay. So we'll be sure to include a link there in the show notes, just like we discussed. Okay. We've got that information there. Yeah, so there's, there's some of our contact information as Rebekah mentioned, www.Southsilvergroup.com
We have that's our website. And so just take a look at the site, go to the investing page, and then if you like what you see, at least fill out the contact us. Okay. Page and that's where we'll get you into our emails and newsletters and Start a dialogue and we'll have a connection with you.
Roland:
That's wonderful. So I guess this is a natural place to stop. We're so Glad that you joined us today. Thank you so much for taking the time out of your busy busy life and taking the time to come on and we really Look forward to working with you in the future. If that is in the cards, but mostly just really wish you well with the success of this project and your fund and your future funds, which I'm sure there will be from what you're talking about and from our own experience with these things.
Jay:
So, well, thank you. It's been a privilege to work with your team already. There are several different things I'm evaluating for 2025. There's hundreds of millions of dollars where the marina is out there. I have additional partners in that space R. V. parks different things that the recreational space is the area I'm really focused on and I have an opportunity zone fund already open, but that's for another time.
Roland:
So we'll get to hear about that. I hope you got an open invitation to come back anytime
Jay: Yeah. Thank you. And you guys are awesome to work with as well. For anyone who doesn't have the services that you guys offer, we highly recommend them. The investing world is largely built based on success of your relationships. So we really appreciate the relationship we've been able to cultivate with you as well.
Roland:
Oh, thank you so much. We, we like working with you all too. Thank you. All right.
Sarah:
Well, thank you. All right. Well, we'll finish up just by doing our close, which is thank you for watching. If you enjoyed watching this video podcast, please hit the like button and subscribe to our channel.
And remember everyone take aim with your alternative investing strategies. See you next time.