In this conversation, Jeff Revenaugh emphasizes the importance of an active mindset in investing, particularly in passive income streams. He argues that investors must engage in due diligence and hold sponsors accountable, treating their investments as if they were their own money. This shift in mindset is crucial for successful investing.

Identifying Sponsor Maturity with Jeff Revenaugh

Jeff Revenaugh (00:00)

I think it's the mindset of passive, right? It's in the name, but this really should not be passive. I know the IRS tabs it as passive because we are not actively engaged in the business, but as investors, we have to do due diligence. We have to be involved. We have to hold the sponsors accountable and not just close our eyes and blindly throw money into it. Obviously, we're not going to fly to their headquarters and go into the office and do anything for them, but there needs to be a mindset shift. These are businesses that we're investing in, and we need to treat this like our own money.

Pat Zingarella (00:41)

There you go. All right. Awesome. All right, Jeff, thank you very much for joining. It's been really awesome getting to know you and having you support Invest Clearly. Before we really jump into things, I'd love to have you tell us a little bit about your background and the start of your journey into investing.

Jeff Revenaugh (00:58)

Yeah, thank you, Pat. Nice to meet you. My name is Jeff Revenaugh. I am a W-2 employee living on the West Coast in Northern California. My journey started about 20 years ago like everybody else. I got into a single-family home and did some flips with a buddy from work. I made a little bit of money there and then started leveling up. I bought a quad, then took a break and got married. I had to save up money to buy a house because I live in the most expensive place in the world—sounds like California. I had to save for multiple years to get a down payment and then got back into it. At some point along the way, I got into a passive deal and was hooked. I loved the concept of mailbox money—still real estate, but I don't have to worry about toilets and tenants. Then I got burned on bad sponsors.

Pat Zingarella (01:29)

Yeah, I mean, I have to laugh. Yeah.

Jeff Revenaugh (01:55)

It was just getting started. I think that was on a platform called RealtyShares, which some people have probably tried, and that flopped. I got burned by that, but I had the bug. I realized this was the way to go because I want to retire early. I just had to find better sponsors. That led me to start digging in deep, getting into networks, and finding those better sponsors that can actually perform and lead deals. That’s about a 20-year journey.

Pat Zingarella (02:29)

That's awesome. How many deals are you in currently across how many sponsors, and how is it performing? You mentioned a deal you got burned on, but how is the portfolio as a whole?

Jeff Revenaugh (02:41)

I'm probably in 12 or 13 deals across about six sponsors. Fortunately, the ones I got burned on were about 10 years ago when RealtyShares flopped. I've recovered from those, and they were all small minimum deals—$5,000 or $10,000. Some are doing great now, and some aren't. Some got burned by the great interest rate hike of 2022. That’s definitely impacted them. There are no capital calls, thank goodness, but we're having a hard time with expenses because loan costs have gone up. We're breaking even and still getting some money, but it definitely slowed them down.

Pat Zingarella (03:31)

How do you think about that? There's a distinguishing factor between the sponsor and the market. As you're thinking about reinvesting, how are you telling the difference? Was this a good sponsor that just got hurt by a black swan event? Did they not underwrite risk well enough?

Jeff Revenaugh (04:01)

It’s a great question. I remember getting into those deals that had interest rate caps. I didn't know what an interest rate cap was, so I looked it up and thought, "Okay, this makes a lot of sense." If rates go up, we have that cap in place to limit our risk. I thought I was covered. We were for a year, until the cap had to be renewed. You have to buy another cap after that 12-month window, and the caps became so expensive that they were prohibitive. That was the risk—I thought it was mitigated, and it wasn't.

I think the intentions were good, but they didn't expect that big of a jump in that window. I don't know that any of us did. We thought if rates went up, it would be a slow, steady climb from the Fed. Instead, it skyrocketed. I don't necessarily blame them. I think it’s now about how they recover and how we stay afloat until rates get back down. But definitely now, with some recency bias, I’m looking for fixed rates. That’s not always feasible either, and five years from now there might be value in not having those, so I don't want to overcompensate, but that's human nature.

Pat Zingarella (05:39)

Bridge debt may be attractive in the future versus what just happened where it's blowing everybody up. That's a really interesting take. As you're evaluating new sponsors, what's changed? You mentioned RealtyShares, and it seems to be the journey a lot of people start with—small crowdfunding sites before moving to bigger deals. What's been the biggest learning curve?

Jeff Revenaugh (06:28)

The biggest learning curve was that first foray. I didn't really do much due diligence on the sponsor themselves. I was relying on the platform to explain things and show documentation. They were new and breaking ground, which I appreciate, but the learning there is that the sponsor is so important. You have to treat this like a business because it is a business. I'm investing in a business, and I have to know who's doing it to get enough confidence that they can succeed over the long run.

Pat Zingarella (07:32)

I hear that from a lot of new LPs. You're not just investing in the asset; you're investing in the business running it. What does underwriting the sponsor look like for you now?

Jeff Revenaugh (07:57)

I’m certainly spending more time talking to them. In the past, I would just read the PPM and the operating agreement to look for technical details like the capital stack. Now, I’m still doing that, but I’m also having conversations to go with my gut a little bit. After I've slept on it, do I feel like I trust them? Do they have my best interests in mind?

I'm also using ChatGPT as a tool. I'll tell it to vet a sponsor—look up reviews, lawsuits, and content that isn't on their own website. Everything on their site is going to be rosy, so I filter that out. I think that's a game-changer for due diligence. I live in Silicon Valley, so I'm surrounded by AI, and I think that's the next frontier. But it doesn't replace that face-to-face call. I’m asking hard questions: "Tell me about your funds that have not gone well," "What's your best deal?" and "What's your worst deal?"

Pat Zingarella (09:29)

How are those conversations going? Do GPs spin it, or is it an honest dialogue?

Jeff Revenaugh (09:55)

I've seen both. Some are very open and honest, which is refreshing. Some try to sugarcoat it or claim they don't have a good example of failure. If you don't have a good example of failure, I don't want to be your first example. That helps separate the wheat from the chaff. It shows who has been on the road before and shows a level of maturity.

Pat Zingarella (10:33)

What kept you in the game after those early beats? Plenty of LPs get smoked and then leave the industry.

Jeff Revenaugh (10:51)

I was already hooked on real estate. I had 10 years of hands-on experience before that first passive deal went south. I already had a quad and liked the model. My first quad was in Reno, Nevada, because I heard Tesla was building a Gigafactory. I realized that area would be a hub and bought 20 minutes away. We did great and 1031'd it. I realized this is real-life Monopoly, and I want to play it for the rest of my life. That built up my resilience. I tasted the passive side and knew it was my next level. Because the losses were small—$5,000 or $10,000—it was less of a hit as my W-2 income grew. I knew there were better ways of doing it.

Pat Zingarella (12:26)

What are you looking at moving forward? You're a W-2 employee with assets on the side—are you looking to go full-time as an LP?

Jeff Revenaugh (12:42)

My kids are still young, so I'll be balancing both for a while. Eventually, instead of just retiring, I want to turn into a full-time LP, spending maybe 20 hours a week managing those as I transition out of W-2 life. I have a great job that I love, so I'm blessed there. I think it's fun to be an LP and watch a business model be executed. I think I have about a 10-year window.

Pat Zingarella (13:33)

What does your investment thesis look like right now in terms of cash flow versus appreciation?

Jeff Revenaugh (14:01)

Right now, the thesis is focused on growth in a five-to-seven-year window. I'm looking at growth funds, but I'm also doing some cash flow stuff to balance it out. I don't strictly need the cash flow right now, but I like the security of it. I reinvest that money. For me to reach my ultimate goal, I have to have those deal exits. I know that the illiquidity of a growth deal is what's really making the money. That’s what gets that 1.5X cash-out pop at the end. Currently, I'm about three-quarters growth and 25% cash flow—mostly through private credit. When those growth deals start exiting in five or seven years, I’ll probably go 50/50, and then eventually move to all cash flow for retirement. I want that base pumping out an annualized return.

Pat Zingarella (15:31)

How are you thinking about asset classes right now? A lot of LPs are having a hard time making multifamily deals cash flow. What are you pursuing?

Jeff Revenaugh (16:02)

Right now, I am focused on mobile home communities and self-storage. I started with multifamily, but I realized self-storage is more recession-resistant. I’m not worried about tenants; it's just stuff inside a box. There's no toilet, no plumbing, no power—just metal walls and metal doors. It’s "sticky" because people are less likely to move their stuff out.

Mobile home communities were the next level—a hybrid of both. I'm supporting housing, but the residents own their homes. I just own the land and provide amenities. It’s like a triple-net lease for multifamily. There are still a lot of mom-and-pop operations that can be stabilized. No one is building more mobile home communities; no city is saying, "Let’s build some more mobile home parks." With housing affordability issues, there's going to be more demand there.

Pat Zingarella (17:58)

Where are you finding these GPs? What sources are you leveraging for deal flow?

Jeff Revenaugh (18:22)

The two or three I initially found are killing it. My first exposure was through a fund called Wellings Capital. I watched that unfold and saw the value. Then I began looking for my own sources to go straight to those companies. Now, there’s the power of a site like Invest Clearly that is opening our eyes. It's so much easier to do research and hear from people outside of a block like Passive Pockets. None of my friends were investing in mobile home communities—they thought I was crazy—so I had to go outside. Using reviews from real people and seeing the bad ones is huge.

Pat Zingarella (19:58)

You brought up an interesting point about leveraging a fund manager. Some get a bad rap, but the great ones are worth their weight in gold for access. What led you to go that path to start?

Jeff Revenaugh (20:53)

I would love to say I had this awesome strategy, but it was just luck. I was listening to podcasts and hearing different sponsors talk about their stuff. Diversification inside this sphere was cool, and I started with minimums. My advice to everybody: start with just the minimum amount and test it. If you love it, you put more into the next fund. I’ve had some in-person meetings with fund sponsors when they are on the West Coast; we'll go out to dinner. You get to shake their hand and develop that relationship.

Pat Zingarella (22:17)

Awesome, Jeff. We're nearing the end, so I have to ask: what part of passive investing do you think needs to die?

Jeff Revenaugh (22:28)

It’s the mindset of "passive." It's in the name, but this really should not be passive. We have to do due diligence, be involved, and hold sponsors accountable. We can't just blindly throw money into things. These are businesses we’re investing in, and we need to treat them like our own money because this is our future and our retirement path.

Pat Zingarella (23:32)

100%. That's the most repeated answer. "Passive income" has been the buzzword marketing campaign for years, and it's transitioned into a need for trust and transparency. Don't take those words at face value. Is it passive? On paper, yeah, but not in action. Drive to make sure you are receiving actual transparency. Jeff, this has been great. If people want to get in contact with you, where is the best place?

Jeff Revenaugh (24:56)

LinkedIn is probably the best way. Search me up, ping me, and let's talk.

Pat Zingarella (25:03)

Awesome, Jeff. Thank you so much. I've really enjoyed getting to know you.

Jeff Revenaugh (25:10)

Thanks, Pat. Have a good one.