Rob Natale - Helping Medical Professionals Passively Invest
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Rob Natale is the founder of North Square Capital, a privately held real estate investment firm in Boston, Massachusetts. He spent numerous years at Columbia Threadneedle Investment, collaborating with financial advisors and their teams, overseeing assets from $20M to $3B. He felt that the financial services industry poorly served a more sophisticated audience, like several of his relatives who dedicated their lives to medicine. He decided to make his mission to help medical professionals buy back their time, expand their wealth, and redirect their funds from Wall Street to Main Street through passive real estate opportunities. He currently resides in Boston and enjoys spending time with his family and exploring the city's many food options and staying active.
In this episode, you will be able to:
- Unlock the potential for increased wealth and financial stability through passive real estate investing.
- Discover the numerous benefits and tax advantages of syndication in real estate investing.
- Explore the lucrative opportunities in multifamily and rental properties for diversifying your investment portfolio.
- Learn about effective investment strategies in real estate debt funds to maximize returns and minimize risks.
- Diversify your investment portfolio through syndication to achieve long-term financial growth and security.
The key moments in this episode are:
00:00:00 - Frustrations with the Financial Services Industry
00:10:37 - Matching Investment Preferences
00:08:12 - Types of Real Estate Opportunities
00:12:17 - Financial Hippocratic Oath
00:14:40 - Syndication vs. Local Investments
00:14:53 - Benefits of Syndication Model for Investors
00:17:49 - Reasons for Not Choosing to Invest
00:21:02 - Future Investment Opportunities
00:23:11 - Fund of Funds Model for Larger Deals
Follow Rob:
https://www.instagram.com/robnatale_
https://www.northsquarecapital.com/
https://www.northsquarecapital.com/playbook
https://www.linkedin.com/in/robnatale1/
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Rob Natale
I had asked them what their financial advisors were doing for them, and it was very much a cookie cutter type of approach. It was, we're putting you in a 60 40 portfolio. The financial advisors collected an asset under management fee of 1%. The market goes down. Then, hey, we just got to ride it out and buy and hold. And I just really saw how poorly the financial services industry he was treating them and just how it's the complete opposite of really the medical community. When something is for the benefit of the greater good, that information is shared versus what I was experiencing, and I just no longer felt comfortable working in that industry anymore.
Mike Swenson
Welcome to the REL Freedom show, where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some REL Freedom together. Hello, everybody. Welcome to another episode of REL Freedom, real estate leverage Freedom. We're talking about how people build time and financial freedom through a different opportunities in real estate and how they can help other people do that as well, which is what we're going to talk about today. If you guys are interested in starting your financial journey, go to our website, freedom through realestate.com, and get started and learn how you can start your financial freedom through real estate. But today's guest here, we've got Rob Natale. He is the founder of North Square Capital, privately held real estate investment firm based out of Boston, Massachusetts. And your goal is really to help medical professionals buy back their time, expand their wealth, and redirect their funds from Wall street to main street through passive real estate opportunities. And you've got a wide variety of how you do that. We're so excited, Rob, to have you on the show and share your story.
Rob Natale
Yeah, thanks, Mike. Thanks for having me on. Looking forward to it.
Mike Swenson
Talk a little bit about your background and kind of how you got into real estate and why, and we'll go from there.
Rob Natale
Absolutely. So, historically, my background really was in the Wall street world. I worked at a large asset management firm called Columbia Thread Needle Investments, and I covered and worked with financial advisors, really on a daily basis based out of the Pacific Northwest. And they had a wide range of assets that were under management. These fas could be managing 20 million in assets, all the way up to in excess of $3 billion in assets, almost like a minifamily office. And what I really found and experienced was these teams that were managing billions in assets really were utilizing a lot of strategies and techniques that a lot of sophisticated investors out there weren't being educated about, they didn't know about. Even if they did hear about them, they always thought it wasn't for them. And what I'm really speaking to specifically was real estate and real estate syndications. We're pooling assets together to get an acquirer into a property they wouldn't be able to afford on our own. And after a while, I was talking to my three family members in the medical field their financial advisors were doing for them. And it was very much a cookie cutter type of approach. We're putting you in a 60 40 portfolio. The financial advisors collected an asset under management fee of 1%. The market goes down, then, hey, we just got to ride it out and buy and hold. And I just really saw how poorly the financial services industry was treating them, and just how it's the complete opposite of really the medical community. When something is for the benefit of the greater good, that information is shared versus what I was experiencing. And I just no longer felt comfortable working in that industry anymore. So what I ended up doing was, okay, I like this financial advisory aspect. I want to help and educate folks how they can really diversify their portfolio and truly build their wealth, buy back their time and expand it through passive real estate investing without the hassles of being a landlord. And that's what led me to start my company now, almost two years ago.
00:04:19 - Mike Swenson
It's interesting hearing people that have focused on different niches within syndications, whether it's medical professionals, tech professionals, that sort of thing. It's a job or an industry that a lot of people would aspire to be in because they think they make a lot of money. And like, oh, once I've achieved that, once I'm in the medical professional field, now I've made it, I'm good. And what we find out is, yeah, they don't have the freedom of time. There's a lot of bureaucracy and issues they have to overcome, and they're actually looking for freedom. They're looking for kind of a way out or to leverage maybe the high incomes that they have to be able to build that freedom. And a lot of them turn to real estate, which is awesome.
Rob Natale
Absolutely. Even to add to that, like, you're speaking about some of really the headwinds and the challenges the medical community face, and adding to what you said, dealing with insurance companies, I know it's just becoming more and more of a stressful situation. Reimbursements, rvus changing, dealing with M A's in the healthcare space now, when that happens, contracts are getting renegotiated. Physicians, dentists, nurses, everyone goes into this field to help and serve others. And now in the current environment, there's so much other stuff, bureaucratic stuff going on, where it just makes it more of a challenge and adds stress to the situation.
Mike Swenson
And at least real estate investing gives them, they can start to build up a nest egg or start to build up a little bit of opportunity where, yeah, you have a little bit more freedom of choice in how you spend your time in the medical profession.
Rob Natale
Absolutely.
Mike Swenson
Talk a little bit then, about how you help people find great opportunities.
Rob Natale
So what I do is I am vetting out the opportunities and vetting out the groups that really bring those opportunities to me. So, for example, let's say it's 100 plus unit apartment building before I want to talk with that group who acquires those type of assets, 100 plus unit apartment building. So I want to really do my due diligence on the group and on the team, whether that includes doing criminal background checks, learning about their past experience of, okay, when something that has gone wrong, because something's always going to happen during an investment, how did they handle it? What did they learn from it? Get a better understanding, too, of conflict of interest, how they handle that within their company as well, because I want to determine, is this a group that I feel comfortable working with and if they're going to be good stewards of capital, not only for my clients money, but my money as well, because I'm a real estate investor myself. And then if that box is checked, then it's really okay. If a deal comes an opportunity, specific opportunity comes vetting out that individual opportunity, looking through the underwriting, does their projected business plan, based on the area of where we are in the country make sense? And if I have the confidence, after going through those two scenarios, do I feel comfortable working with a group? Do I feel comfortable in the individual deal? What I then do is then I present that to my clients and say, hey, would you like to partner along myself and North Square capital in this investment opportunity? We all go in together as limited partners. Again, we experience the cash flow, the appreciation, and the tax benefits that comes with real estate investing, and we're relying on the general partners to execute the business plan, and that's what we do at a very high level.
Mike Swenson
So what types of opportunities then? You'd mentioned 100 unit plus apartments, and I know the answer to this, but for our listeners sake. Yeah. Where are you looking and what types of opportunities maybe would be those strong ones that you put in front of people?
Rob Natale
Yeah. So the three right now that the major focus is one talked about the multifamily and apartment buildings. A couple of brief bullet points I'll list on each, folks. There's such a supply demand imbalance as far as single family homes, and the cost to buy into a home is extremely high. Mortgage rates are six and a quarter to 7%, so the affordability isn't there, so people always need a place to live. Another component, another group that we just partnered with, is on the short term rental portfolio. So working with a group who is really institutionalizing a space that as of right now, is extremely challenging to do, think about those who own an Airbnb out there, who own a short term rental. The work that's required not only from the turnover perspective, when you get new guests to come in, so the property management upkeep, or if you have someone who unfortunately does some damage to your place, you got to fix that. This is a group that has brought everything together in house to bring this to marketplace. The name of group is Techvestor. They are really the only ones that are mastering this. And the last is a real estate debt fund. So think of that as a high yield savings account. On hyperdrive right now, you can find a high yield savings account, five and a quarter percent. This pays somewhere between eight and percent. Nine. It's got 90 day liquidity, and it's all backed by real estate on the first position, meaning in case if the borrower ever did default, the group, the operator that I'm partnering with, they can take control of that property. So those are the three asset classes, multifamily, short term rental portfolio, and then a real estate debt fund that we're focused on currently in the first half of the year, in the foreseeable future.
Mike Swenson
That's great. And it's such a great service because if I'm a medical professional, I don't have time. I might have the interest in real estate. I know I want to invest. I might have a little bit of time. I might have a few connections to agents or brokers or people that do invest. But for you, you're really doing all the heavy lifting of vetting out the people. Obviously, people want to invest with people they know, like and trust and have built up a reputation. And so you're doing a lot of that work for them. And so they need to trust you and know that you're doing a good job of vetting these people out. But it saves them a ton of time and a ton of hassle to be able to kind of have pre vetted out opportunities that they can just say, here we go.
Rob Natale
Yeah. No, and another way to think of it, too, from an analogy perspective, is like a patient physician, when you have a conversation, you go in to see a doctor, right. You don't know what you don't know. Sometimes for those out there, right. There might be questions that you should be asking or things that you should be thinking of that you just don't because it's not in your peripheral. And it's kind of the same deal with Mike, yourself, and myself. Like being in this day to day as professionals, doing that vetting and asking the questions that we know to ask to make sure that we're vetting out these opportunities properly, to then present them to our prospective clients and our clients.
Mike Swenson
Yeah. And I know what's interesting, having worked with investors for a while now, is people have different preferences, they have different risk tolerances, and so they may feel more comfortable investing in something that's a better fit for what they're looking to get out of it. It also might matter, too, what type of money that they're putting in, whether it's cash, whether it's self directed Ira, whether it's home equity lines that they're pulling from, whatever that might be. And so you get to kind of match the desired outcome with where they're comfortable putting their money in and give them some options.
Rob Natale
Yep, exactly. Whether cash flow is, number one, if it's appreciation, it's liquidity, or spot on.
Mike Swenson
So if I was on the outside here and I was looking to invest into some of these larger opportunities, what advice would you give to people?
Rob Natale
Yeah. So the first thing is definitely get educated, right? Number one, as far as listening to podcasts like yourself, Mike, or reading different blogs or articles, I myself, which I'm happy to share with everybody, I've created an educational ebook. It's called the financial RX playbook, how medical professionals win through passive real estate investing. And really what that covers and goes over is some of the current challenges that the medical community currently face, and then also talks about the benefits and the risks that come along with this type of investing, because this type of investing isn't for everybody. So kind of go back to Mike. How would people maybe want to invest outside of getting educated? The first time I ever speak with somebody, we always have what I call a discovery clarity call. And again, I want to use that physician patient analogy. Whereas if we're just doing a little role reversal, where let's say I'm kind of acting as the physician and you're the patient where I'm asking you questions about your financial background, your experience, what your goals are. What I want to determine is, hey, is this type of investing right for you? If it is, great, then we can keep you abreast of future opportunities. But then if it's not, then let's talk about some different ways that we can help you in the financial aspect in the investing world, kind of making a referral to somewhere else. Again, using that medical analogy. So every time we get a first conversation with somebody, it's always a discovery, clarity call to discuss this to see if it's a good fit.
Mike Swenson
Yeah. And right fit is the right word because you're not going to make somebody put money into something they don't want to do. You're just going to help give them some good opportunities and let them make a good, educated decision.
Rob Natale
Correct. I know when physicians, they're going through their schooling and they take the hippocratic oath and first, do no harm. So for me, I've kind of adopted something more. For me, the financial Hippocratic oath is one is do not lose money. It is protecting my investors money, first and foremost, and obviously then helping it grow through real estate.
Mike Swenson
And why would somebody consider doing a syndication or something large like this in another state that they don't know, versus working with a local person that's flipping or something like that? Talk a little bit about the economies of the scale with these large people, these larger investors, versus kind of the mom and pop opportunities.
Rob Natale
Yeah. So one of the benefits of going through, let's say, a larger investor doing a syndication model is the tax benefits piece and keeping more of what you earn. So one of the features when you're getting into this side of investing is everyone's familiar, I think, more or less, with depreciation of real estate, straight line depreciation at 27 and a half years. Well, without getting too deep in the weeds on these commercial type properties, you can utilize something called a cost segregation study. And what happens is an engineer will go, you bring them in and they are hypothetically tearing down the property and breaking each individual bucket or component into a lifespan. So personal properties, five to seven years, land improvements, 15 years, then you have your straight line. So what happens is you are speeding up essentially the lifespan of the overall building. And what that means is you're increasing your upfront appreciation. You're taking a paper loss, a higher paper loss while you're investing. And why is that? Good is you get a k one every year that shows your ownership in the property you can take those paper losses and offset them against some of your other passive gains that you might have with some of your other investments.
Mike Swenson
There's a lot of great benefits. And then obviously the passive piece, right. I can't be involved in the decision making or any of that back end stuff. And so they get to be there and essentially just receive updates and know what's going on with the investment. But you're not going to get the clogged toilet call in the middle of the night. You're not going to get the. What do we do here strategically? Because that's all being handled by the people that are running and managing that asset.
Rob Natale
Correct? Exactly. Because when you go in as a limited partner, you are limited. And that is to your point, Mike, you're not dealing with, I say the three t's, like the trash, the tenants, or the toilets, and dealing with the operations of executing the business plan. That is where you relying on the professional expertise of the general partners to do that.
Mike Swenson
Yeah, I always explain it like an assembly line of a real estate investment. Each person kind of has their own spot on the assembly line. And the person providing the capital is equally as important as the other folks, but they don't have to handle all the other stuff. And the people that have the experience have managed multiple assets, maybe seen some upturns and downturns in the real estate cycle, they can handle that stuff. And then you're utilizing your capital for it. So it really is kind of the best of a lot of worlds. What would maybe be some reasons that you've heard from folks of maybe why they're not choosing to invest in some of these deals?
Rob Natale
Sure. The biggest piece I've heard is the lack of liquidity. So these are eliquid investments. So typical hold period is somewhere between three to five years. So if it's individuals who they maybe want to invest, typical minimum investment, somewhere around 50 to 100,000. But they like all the ideas and components of it. But three to five year time frame, it's too long for them then no, that definitely makes it not a good fit for them for this type of investing. On the syndication real estate side. Now, the debt fund is different. The debt fund is 90 day liquidity, which that's where it's like high yield savings on steroids component. The other piece is if individuals are, they want to be the pilot versus the passenger. I've encountered some individuals who are extremely, extremely type a, where they want to be in control of everything, they want to be doing things, and they want to be the one running the show. And if that's the case, then being a passive investor obviously isn't going to be the best fit for them. Those are the two.
Mike Swenson
For people that have been successful in the medical field, you're used to calling the shots or used to doing your own thing the way that you want to do it for the most part. I mean, obviously you still have to answer to higher powers in the field, but I can see that. But I think too, part of it is just recognizing, I'm a pro in the medical field. I don't have to be a pro in the real estate field. And yet I can trust them. We trust medical professionals with our bodies, right? They come in and say, hey, I know what I'm doing, I can help you. In the same way, hopefully the real estate professionals can say, I know what I'm doing, I can help you. And the medical professionals can kind of trust that and move forward. But, yeah, it isn't a right fit. But you also don't get an opportunity to be a part of these big deals with $50,000 without being a part of a syndication like this.
Rob Natale
Yeah, no, you make a good point too, Mike. It's kind of similar to if someone wants to go about in learning this on their own. Right. Well, as opposed to then if you want to go and try to become as knowledgeable in, let's say, in the real estate world as you are, as your current profession, let's say, right. As a physician, what if you spent that time on your current role? How much better could you potentially become as a physician and impact the lives of those that, versus trying to really become? That just comes down to the time trying to. There's just not enough time.
Mike Swenson
It's a challenge. So, yeah, you certainly have to trust people. So that's where the relationship building is really important, because if you have a great relationship with somebody, it's like, oh, I know Rob's done a good job of vetting out these people. I can trust that. Well, then you do get the best of all worlds by being able to trust the work that you're doing. Talk a little bit about the future, maybe some opportunities or some things that you're looking to do as you continue to grow North Square capital and help investors out.
Rob Natale
Yeah. So as far as in the future, as far as investment wise, we just launched, we're raising in on a short term rental portfolio that we're partnering with a group called Techvestor, which we're really excited about. That's 50,000 minimum investment looking at equity multiple of really 8% or excuse me, that's an average cash flow eight to 9%. Equity multiple 1.9. And again, what I'm excited about is for all those who've stayed in Airbnb, how many of you out there have stayed in Airbnb and the pictures weren't what they looked to be or just like the experience left a lot. This is, this group is really bringing an institutionalizing this. Like I said, without getting too deep in the weeds. I can share more info if anyone, please feel free to reach out to me. I'll share my contact info at the end that I'm really jazzed up about. And the other again opportunity that's going to launch in a couple of weeks is, and this is as of end of February of 2024, a debt fund where it's individuals who just have money sitting in a savings or checkings account, but they want to get some decent yield on that money. But if they need to get it out, they can within let's say 90 days. Average four to six weeks. That's the other opportunity we're having. So like you asked before, Mike, everyone's got different flavors and tastes of what they're looking to accomplish. Right? Investing in real estate, that's what I'm looking to do is provide different opportunities within the real estate world. That's going to be a fit for whatever you're looking to accomplish.
Mike Swenson
Now how does that work? Real quick on you're taking part. If somebody's having, let's just say for extreme circumstances, like in 1000 unit complex or whatever, you're not bringing all the money for that deal, you're bringing a portion of that. Correct. So like your investors are bringing some sort of percentage of the total raise. So kind of talk about how that works, you partnering with other people to do these larger deals.
Rob Natale
Yeah. So what we do, Mike, is we create something called a fund of funds. Okay. And what that means is I am creating a specific fund for a specific investment opportunity. So what happens is my prospective clients, and I refer to them also as partners, they will invest into my fund and then my fund then will go invest in that specific opportunity. Now why we do that is a couple of really major reasons. One, from a compliance standpoint. Two, by us all pooling our assets together and coming in one fund, I'm able to negotiate with the general partners better return profiles for not only for myself but also for my clients. Like for example with Techvestor, if you invested directly through them, it's a 7% preferred return and then a waterfall structure of 70 30 versus someone invests through my fund. Then we go through tech, and then it goes into tech vestor, they get a 9% preferred return and an 80 20 waterfall. And really the other bucket, too, is by investing directly through, let's say, one of my fund. I have a very well established relationship with the general partners where if I need to get in touch with them, I can get in touch with them very quickly, whether it be phone call, text, et cetera. And I am acting as the champion for all of us through these. So it's communication, it's investment returns are some of the major benefits. Why we really in the compliance piece for why we're doing the fund to.
Mike Swenson
Funds model, so they get the feel of a much larger footprint in the deal based on the percentage of capital that they're investing into that deal. So they get to kind of be a bigger player while still putting in a smaller portion.
Rob Natale
Yep.
Mike Swenson
Awesome. Well, thank you so much, Rob, for coming on and sharing and talking about your company. People that want to reach out to you, how can they do so?
Rob Natale
Yeah. So across a variety of different social media channels, I'm most active on Instagram. So it's my first name and last name. It's Rob Natale. And then underscore they can also find [email protected]. Again, I am also on LinkedIn. Those are the major three, but for the most immediate, you can just ping me right on Instagram. Rob Natale underscore. And they can also message me about that ebook I spoke to about earlier. Again, it's the financial RX playbook, how medical professionals win through passive real estate investing.
Mike Swenson
Great. Well, thank you so much for coming on and sharing and excited to see how you're helping people in the medical professional space. And best of luck as you continue to grow.
Rob Natale
Awesome. Thanks a lot, Mike. I appreciate you taking.
