In this conversation, Fuquan Bilal, founder of NNG Capital Fund, shares his extensive experience in real estate investing, emphasizing the importance of communication and education in building investor relationships. He discusses the evolution of his firm, the transition to impact investing, and the challenges of balancing investor expectations with community revitalization goals. Fuquan highlights the significance of a long-term mindset in real estate investments and the necessity of transparency and regular communication with investors to foster trust and confidence.

Impact Investing for Cash Flow and Capital Preservation with Fuquan Bilal

Joe Guidi (00:00.834) Fuquan, thanks for joining me.

Fuquan Bilal (00:02.797) Appreciate it. Thanks for having me, man.

Joe Guidi (00:05.034) Yeah, excited to have you on. You've been on the platform for a while and I wanted to take some time to connect with you here.

Fuquan Bilal (00:12.801) Yeah, I'm enjoying the platform. It's the Google of investments.

Joe Guidi (00:18.938) Yeah, we're getting there—not quite Google status yet, but we're moving that direction. Well, thanks for joining me. I want to start out just for any of our listeners who might not be familiar with you. I would love to have you introduce yourself and tell a little bit about your firm.

Fuquan Bilal (00:36.237) Yeah. So Fuquan Bilal, NNG Capital Fund. The company is 13 years old, but I've been investing in real estate since '99. It's been a 26-year journey. I kind of jumped out the window and grew wings falling down, if you will, back then. I went through the GFC, the dot-com boom and bust, and also COVID and everything else. And what I've learned from that is communication is everything. That's what I learned on my journey: that being able to communicate with your investors through the good, bad, and ugly, they really appreciate that.

Joe Guidi (01:16.47) Yeah, definitely. I mean, we're hearing that loud and clear from investors. I'm sure you've seen some of the reviews on the platform. Communication seems to be the key to investor sentiment, good or bad, to your point. So talk to me a little bit about—I know we were talking recently—you moved into 506(c)s. Bringing in investors, theoretically, you're bringing in new LPs from different sources, like maybe outside of your network.

I'd love to talk a little bit about the evolution of your firm, like how you got started in raising capital and how that's changed over time as you've shifted towards accepting capital from people outside of your network.

Fuquan Bilal (01:56.759) Yeah. So first, I started off dealing with hard money, right? Like the typical fix-and-flipper dealing with hard money, building out my track record from there, then friends and family. And my biggest investor was actually the owner of a building that I was leasing. I was a tenant in the building and the owner saw contractors coming in and out. He actually had some success in the dot-com boom and he cashed out before the bust, so he had money.

He started to deploy some of that capital into real estate. He started to leverage lines of credit. And he had a conversation with me one day and was curious about what I was doing because he saw the contractors and a bunch of movement. He knew I was a real estate firm and he gave me an opportunity and started to invest alongside of me on projects. It still was sort of like hard money, but it filled up the gap. So I would have the hard money lenders give me 75% and the draw for construction. He would come up with some more of the money to give me the ability to do multiple projects.

Then his friends got involved and then it was a network of people. At that time it was just the traditional way where you just put a first and second mortgage on a property. And then we had the global financial crisis where things got out of control. I had to liquidate a lot of the assets and what I was alluding to earlier—that communication is important—is because I was able to stand up in front of my investors and let them know, "Look, we're going to have to fire sale everything. I'm not going to file bankruptcy, I'm going to make you guys whole, we're going to get through this, but it's going to take time."

And they were very grateful for that because back then people were just not communicating at all, filing bankruptcy, running for the hills; it was a disaster. And it was common, so it was acceptable because everyone was going through it; the world was coming to an end, so to speak. But getting through that process over two or three years, I transitioned to learning how to buy notes. And that came accidentally from doing short sales because short sales back then were booming. I transitioned around 2009, doing a lot of short sales in 2010. And I had discovered the note business by being on the phone with a negotiator and he had asked, "Why don't you just buy the note?" So doing research on notes, I stumbled across a hedge fund that was actually selling notes and became inquisitive. It's a funny story, and I always tell this story.

Fuquan Bilal (04:20.14) I remember my son at the time asking me, "Why don't you just become the bank?" And I was like, "That's impossible." He said, "Anything is possible." So I was like, "Okay." So I started to research that and consulted with an SEC attorney, put them on retainer, and learned a lot. Back then there weren't so many shops like there are today—one-stop shops that will help you set up your PPM and help you raise capital and all this. I actually liked the version of going directly to an SEC attorney, explaining what you're trying to do, letting them teach you—a $5,000 retainer to get you like 10 hours—and you can learn so much during that process.

So I set up a fund to buy notes in 2013. And that was my first fund, friends and family. It was non-accredited at the time. I remember my cousin invested with me—it was like a $10,000 minimum. Every time I'd see him at every family function, it was, "Is everything all right? Am I making a return? Am I going to lose my money?"

So going from that evolution to like, you know what, I'd rather deal with people who are a little bit more sophisticated, who understand investments. And it's an evolution. So you start off with that. And today, we've raised more than $50 million dealing with just accredited investors. It's a mindset challenge thinking that because those people are not in your circle at first, you won't be able to attract those dollars. But if you're knowledgeable and you have a track record of what you do and you walk the talk, so to speak...

Joe Guidi (05:24.344) Right.

Fuquan Bilal (05:48.471) People can see that. They can sense that you have this experience and that you have this track record because ultimately I believe it's really based off of the operator. What are they going to do when things get tough? How are they going to communicate? Do they have the track record experience? Because people are eventually investing in you, the sponsor. So regardless of how good or bad the investment is—nothing is perfect—what is the sponsor going to do when things get tough?

Joe Guidi (06:19.598) Yeah, that's something we're hearing a lot. I'm hearing a lot from other operators that the most important thing is giving LPs a sense of what happens if things go wrong and how you handle that. So you dug out track record. You talked about communication. You talked about your cousin, which is—obviously we have these people who know us, maybe invest with us in the early days, taking a shot on us, they've known us forever. What I'm wondering about is for someone who hasn't invested with you—obviously you can show them your track record—but how do you give them a sense of how you're going to communicate with them prior to investing?

Fuquan Bilal (07:01.984) Yeah, I mean, it's a nurturing process. It's all education. People have to get to know, like, and trust you, in that order. I can talk what I do. Some people are good marketers; some people get online and have all this marketing—you see them all over the place in Facebook feeds and they have their Canva artwork done. Some people are just great marketers, but you want to invest with the doers, the people who are actually doing.

Joe Guidi (07:05.774) Yeah.

Fuquan Bilal (07:32.109) For me, I'm a boots-on-the-ground operator. So a lot of the things that I do to build that education process is showing investors what I'm doing. I'm not just telling you what I'm doing; I'm actually showing you what I'm doing. I'm out in the field at one of my projects. I'm educating you on how I underwrite deals. I'm giving you case studies—real case studies—that you could go online and research on your own through the Zillow records: when I purchased it, how much I purchased it for, when I sold it, how much I sold it for. All that is public information.

So if I'm giving you that data and you're an intelligent investor that's going to do due diligence, you're going to figure out who's the real deal and who's not. So going through that process of education, webinars—there's so many, 10 to 16 hours of content, videos, messaging—the education of the investor is like a song you hear on the radio.

Joe Guidi (08:00.206) Mm.

Fuquan Bilal (08:26.46) You hear it over and over again, you start singing it. So through that process, it's nurturing the investor to get them to make a decision whether they're going to invest with you or someone else. That can take years. I've had investors that have watched me for years and go, "Hey, I've been watching you for three years. I met you at this conference here in New York. I want to test you out with $50,000."

Joe Guidi (08:43.926) Yeah, I think that happens a lot, honestly. Sometimes the cycles, the investor's journey, it gets viewed on too short of a timeline for many, or we want it to happen faster than it actually happens. So you're buying—are you buying distressed debt? Walk me through what you are investing in.

Fuquan Bilal (09:04.842) Well, today our model is a bit different. We have two verticals now. Before COVID, we had three verticals. One was distressed debt we would buy. After COVID, we kind of pivoted from that because you were the "bad guy" foreclosing on people. It's like you can't really control a homeowner unless you foreclose. If we foreclosed, we failed. The model was to get the homeowner back on track so we can be the bank, and we can share our discount with them and that whole thing.

Joe Guidi (09:20.011) Yeah.

Fuquan Bilal (09:33.901) And we stayed in the note business from 2010 all the way through. I kind of stopped that a bit right after COVID and focused more on multifamily. We found some great opportunities in the Southeast and we started to divert the capital there. A lot of the rental stuff we were doing was here in New Jersey, where I've been investing for the last 26 years, but after COVID, because it's a blue state, it was more tenant-friendly than landlord-friendly.

So we kind of divested the portfolio, especially when the New Yorkers started to come over and values were 30% over list. I knew from experience that we would never see a market like this again. It was like a dead cat bounce. So I said, "Let's just offload this—smaller two-units, three-units, six-units, 10-units, smaller multifamily—and go for bigger multifamily so we can do our impact." Which is: I come from the hood, the ghetto, whatever you want to call it.

So for me, my point of importance is going back to those communities, revitalizing the area, putting them back on a tax roll, giving the residents a better place to live. I get to stick my chest out and go, "I've made a difference here." Taking a community from a "complex" to a "community." Not only making a difference on how the grounds look or curb appeal, but the mindset of the people there—extra programs you can be doing, teaching them how to do their resumes. I'm really into that because I come from that.

But transitioning the portfolio down there to do rentals on a larger scale is what we pivoted to. And we do luxury spec homes here in New Jersey. So those are the two verticals: luxury spec homes in New Jersey—we do ground-up or additions with a luxury product at the end—and multifamily in the Southeast. Those we could control. We can make sure we hire the right people. We can give them the proper training and support. We could do marketing to try to increase occupancy. So many things that we have more control over versus the note business. You see, it's the human on the other side.

Joe Guidi (11:25.72) Got it, got it. Yeah, that makes total sense. I love the impact investing focus. How do you handle—and I'm not sure if you've gotten into any cycles like this where you're in the process of stabilizing—maybe the numbers aren't right where they should be? Again, I'm putting out a scenario, so let me know if this doesn't resonate.

Most investors that invest in impact investments love the idea of it. But then if the growth happens slower than they want it to, or the numbers aren't on pace, or it takes a little bit longer... we all think the long-term growth of an impact investment is good, right? It provides a more secure future. But obviously you have to invest in that; you have to invest in the community side of it. Have you ever had to balance those things with your investors?

Fuquan Bilal (12:22.348) Well, I mean, it's "purposeful capitalism" at the end of the day is what I like to call it. And not everyone is for that. Some investors are drunk off yields and this may not be the opportunity for them. They're yield-driven. They're trying to get the highest return possible. And I get that; it's true capitalism. So you have to be able to connect with those capital partners that are in alignment with the goal that you have.

Joe Guidi (12:26.264) Sure.

Fuquan Bilal (12:49.58) Your core values and everything else. And that's not for everybody. Some people are at different cycles of their investment journey. Some people are older when they need cash flow. Some people are younger when they need growth opportunities to get there faster to retire—if they're a doctor, dentist, or busy professional—faster. So you will meet investors at different parts of the cycle of their investment journey. And you will connect with those who have the same alignment with the goals that you have.

It is tough. There are things you have to go through. If you are doing impact projects, you have to connect with the local municipality, figure out what they're trying to do there. There are deed restrictions involved so you can get certain financing and certain benefits, whether it's from Section 8 or some type of housing that they have there. It's a lot that's involved with it, but there are benefits at the end as well. It's the impact to the community, which is the goal. We want to make money, but we want to make an impact more.

And there are some people who have more of a purpose—they want their dollars to make an impact. So they're good with a 9 or 10% return, or 12%, whatever. Some people need that 18% or 22%. So they're drunk off yield and they're chasing that 22% IRR that's being marketed. I've been in a few syndications. I think the best I've ever received was 11 or 12%, marketed at 22. But at the end of the day, it's 11 or 12. I'm still happy. 7 or 8% is good for me as long as I didn't lose principle. I think that's what's most important. Capital preservation, especially now in this part of the cycle, is key.

Joe Guidi (14:31.682) Yeah, 100%. Well, I guess you have an offer for folks if they do want to just go pure capitalism: they can do luxury real estate in New Jersey, right?

Fuquan Bilal (14:40.588) Yeah, for sure. We pay 12% all day, per annum. That's a 24-month term. Basically, when they cash out, they get paid and they can chase those yields and be a part of that. And then what I've found—it just depends—some people have money, so they're not looking to just make a bunch more money. They want to create impact and preserve the capital as well. So they make 9 or 10%; their money is still making more than they would make in a CD or anything that's traditional.

Joe Guidi (15:10.998) Yeah, I think that's really interesting. Obviously—I mean, I keep coming back to this so let me know if I'm off base—but I keep coming back to this idea that impact investing... I know some folks pretty close with some folks that work with big impact investment funds, more on the institutional side. Their argument is always, "Well, if we make a better values-based investment in a company that has solid fundamentals, it's likely going to outperform in the long run." Is that kind of the same thing you're saying? Like if we stabilize the community and provide better living, you're ultimately going to see rent appreciation over time? You're going to see better communities? Is that part of it?

Fuquan Bilal (15:57.741) Correct. And they have to have at least a seven-year mindset. They have to have a five minimum, seven-year mindset because that's how long it actually takes to stabilize, to grow that asset, to get it where it needs to go to be able to pass value onto the next investor—like leave a little meat on the bone, so to speak.

There have been opportunities where investors came into an area, they got the deed restrictions, they went through the seven years, and now the deed restrictions are almost up because whatever government money they got, they paid back. And they're passing the torch over to you to continue that and leaving meat on the bone for you to continue that as well. So it just depends on what cycle that asset is in if you were to make the acquisition or not.

In the beginning, I didn't understand it. I was like, "Why would I want to buy something where rents are restricted?" I still had the mindset of adding value, but earlier on in my multifamily journey, I just didn't understand the benefit of that. Now I do, because there are certain funds that give lending especially for that. The institutional guys have to check the box off: "Yeah, we're loaning to minorities, we're doing this, the CDFI."

Joe Guidi (16:53.961) Yeah.

Fuquan Bilal (17:17.004) So there are a lot of opportunities even for minority owners that I had to go through the discovery and go, "Because I'm a minority, I can get this and get that and use it for impact." So just a lot of ways to slice it, but it's a long-term mindset. It's sort of like—I can't think of it now—what was the big thing that came out? It was a type of fund you could have in areas that were designated for certain things where people can defer taxes and...

Joe Guidi (17:45.43) Like Opportunity Zones?

Fuquan Bilal (17:46.252) Yes, Opportunity Zones. There you go. Thanks for your time. So when Opportunity Zones came out, it was a buzzword. "Everybody, how do we do it? How do we do it?" "Oh, it's a 10-year play." "I don't know."

Joe Guidi (17:54.358) Yeah. Well, I think a 10-year play comes back to the theme of trust. I think 10-year plays require that. You're going to lock up LP capital. They've got to believe that you can do what you say you're going to do. So Southeast multifamily—kind of like a... maybe too far to say it's a "hot topic," but it's coming up a lot right now. I'm sure in terms of values and rent depreciation, obviously your strategy probably takes some of the concern away because you're doing this impact. You're going into lower-income neighborhoods, you're stabilizing, you're building up. So maybe it's not as big of a concern as some of these Class A or Class B+ multifamilies in the Southeast. But I'm sure you're hearing from LPs on this.

Fuquan Bilal (18:52.266) For sure. Marcus & Millichap had a Southeast multifamily conference a few months ago and we were there hearing from the guys in the A to B with the struggles and the challenges they're going through, whether it's fraud or a variety of things. Our properties are less than 80% AMI. So basically, we're not there where we're charging an astronomical amount of rent. Our goal is to be $50 to $75 cheaper than our competition and still be profitable. At acquisition, you have to really get a good deal in order for that to work.

So yeah, it's underwritten that way. Plus, you have to think about the affordability of the people. We can say we're going to increase rents $25 every year until we get to our goal, but can that person afford it? Especially if you're implementing RUBS now, and they never had RUBS there.

Joe Guidi (19:30.414) So you're underwritten that way.

Fuquan Bilal (19:48.255) I mean, if you're now implementing that, that's an extra cost to them. And then now you're increasing rents on top of that. So you have to be mindful of that. But there are challenges. There are operators who have to be Class A, which tenants probably can't afford—they're living paycheck to paycheck and they have amenities. They're using amenities like weapons now. So we have to be very strategic and competitive on our marketing to continue to draw the right tenant that's going to stay in-payment long-term because they can afford it.

If you're $50 to $75 cheaper than your competition, it's tough for them to have a mindset to go, "I'm going to pay rent for seven months and then leave." Where are you going to go? You're going to pay more if you go there. Then working our programs... something that we are getting good at—we don't have mastery in it yet—but tapping into the local programs, the Catholic churches and other different programs that give these residents that fall on hard times support.

We learned a lot of that through COVID: how to tap into the municipalities and what programs they have, what paperwork needs to be filled out, filling out the paperwork, and sending it to the tenant just to sign to get it processed faster. So we're starting to implement some stuff like that when we see some of the tenants are slow payers or paying towards the end of the month—jumping in there and trying to help them. It's work. It's a lot of work.

Joe Guidi (21:12.162) That sounds like a lot of work, but that's really interesting. And again, back to the theme of building trust, I'm sure these are some of the things that you're positioning to LPs in your strategy. If they did come with a concern—say, "Hey, I'm hearing a lot about Southeastern multifamily. How are we doing on value?"—that's a very interesting roadmap for how to solve that.

Fuquan Bilal (21:34.701) But that's the communication. At least every 30 days or every three weeks, good, bad, and ugly, you should have a communication piece going out. "Here's where we are with our occupancy. Here are the challenges we faced. Here's how we overcame them. Here's what we didn't overcome. Here's what we're doing." And then every 30 days, just giving them an update, good, bad, and ugly. I think that's what sets me apart from most sponsors: the communication.

Joe Guidi (21:58.434) So every 30 days you're communicating with an LP that's in a deal about what's going on? What level of reporting—is it a summary view? Do they have access to financials? What depth of reporting or visibility are you giving the LPs?

Fuquan Bilal (22:13.44) So both. We have an investor portal where they can go in and look at data. There is a summary also, whether it's me coming on talking or just a written summary—some form of communication giving them high-level details. "Here we are. If you want to drill down, you go into the portal, but here's where we are with occupancy and collections versus what we were supposed to collect." Just simple KPIs that make a difference to them to show the performance of the asset.

So that's kind of what we're just giving: a performance of the asset and going, "Hey, we need to hit this target in order for us to do this, in order for us to do a refinance to a HUD," which takes forever. I think someone said, "Think pregnancy—pregnancy is shorter than a HUD refinance." I think I could have a baby faster than a HUD refi.

So the things that we need to do to target that, right? Because we have that tenant base there, affordable housing. That falls in alignment with that type of program for the government. So we're constantly keeping them updated on where we are towards hitting a target so we can do that refinance to get 80% of the value or whatever. And "this is what we project the value to be once we're stabilized at this percentage." Those types of communication pieces are going out.

Or if it's rehabs that we're doing to a particular project. Because we had some smaller projects—our goal is 40 to 150 units—we pin them up against each other so management can service them. We find some really good deals. Of the 40 units—anything less than 100 units—those are like shorter terms, like three to five years. We go in and change the community by helping to relocate those tenants who may have been at really low rents. There's really no way to get them to where the market is at because they've been in there such a long time and they're probably paying $450 for a one-bedroom that we know will go for $750.

Unless you're going to totally renovate the unit, you really can't get them there. So we'll reposition those tenants. We'll put them somewhere else, find a location for them, and then go in and rehab the property and get it stabilized and sell it a year or two after. So we'll keep them updated on where we are with that as well. And that stuff has bridge debt on it. So we have to let them know the timelines of construction, which is very important.

Fuquan Bilal (24:32.972) How are we doing with that to get to our goal, to get stabilized? It's a lot. Multifamily is a lot of work.

Joe Guidi (24:42.392) Yeah, no, that's without a doubt. I think coming back to the consistency... if we come back to the key things you've said, it's like track record and communication. Being honest about where you've been, what you've done, how you've performed, and getting in there and communicating every step of the way with the LPs. It's been really great. I know we're kind of running short on time here. I want to make sure that our listeners know where to find you if they want to learn more about NNG.

Fuquan Bilal (25:10.4) For sure. If they want to go to our website, nngcapitalfund.com, they can go there and schedule a discovery call. I like talking to investors no matter where they are in their journey, if they're just looking for more information or looking to learn more about our strategy. They can schedule a discovery call and pretty much go from there. You can also check us out on investclearly.com.

Joe Guidi (25:32.994) Nice. Thanks for the plug.

Fuquan Bilal (25:38.728) Yeah, that's awesome. And I love the site because it gives investors who may not know you, who may be looking at other sponsors, the chance to just happen to run across you and go, "Okay, well, let's check it out." And it's third-party verification, meaning that someone has to actually be invested with you to be able to give their opinion on their relationship with you. And that's what I like. It's not just fake Google reviews where anybody can just come and leave a review. So I think that's the best thing I like about it, because you're hearing from real investors.

Joe Guidi (26:07.746) Well, thanks, man. We like it. Yeah, we're glad to have you on there and you've got some great reviews. So yeah, check them out on Invest Clearly. All right, well, thanks. Have a great day.

Fuquan Bilal (26:15.893) Awesome, thanks.