You should know what you are investing into!

Newsletter - You should know what you are investing into

Top questions to ask before investing into any fund or syndication. Big Mike answers these top questions for Tempo Opportunity Fund LLC and Tempo Growth Fund LLC.

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Mike Zlotnik, fund manager for Tempo Opportunity Fund (TOF) and Tempo Growth Fund (TGF), shows how you can use these funds to benefit your IRA conversion from Traditional to Roth, for example, and go through many of the frequently asked questions we have received about the funds.

Fund Objective

While both are IRA-friendly, the TOF focuses on growth and income, with approximately 2/3 income and 1/3 growth. The TGF is growth only.

The target annual return for TOF is 10 to 13 percent annually, while TGF’s target is 12 to 18 percent annually. Since TGF is a growth fund, there are no initial distributions. When trying to convert net worth to cash flow, the income and growth TOF is more suitable for the strategy. When growing your self-directed IRA money, with cash you’re not going to need for a number of years, consider TGF.

Investment Objective and Targeted Annual Return

With TOF, capital gains supply most of the return. TOF contains a mix of income-focused investments along with value at growth projects. We look to generate 78 percent in the form of distributable income on an annual basis, with approximately 3 to 5% in the form of CRO for appreciation.

One important point: TOF is an open-ended fund, with no maturity or expiration date. Distributions are paid on a quarterly basis. New capital is subscribed and previous investors redeem on a quarterly basis. The lack of a maturity or expiration date allows us to continue acquiring assets, run them through the full life cycle, and pay realized income as quarterly distributions. The fund distributes all net operating income (NOI) every quarter after we set aside necessary loss reserves.

TOF is both tax efficient and with good depreciation benefits. Some of TOF’s return comes as capital gains, while nearly all of TGF’s return is via capital gains along with massive depreciation benefits. These are valuable for real estate professional or those with passive income needing passive losses through depreciation.

We use no leverage on these funds, helping IRAs avoid UBIT.

One important point: TOF is an open-ended fund, with no maturity or expiration date. Distributions are paid on a quarterly basis. New capital is subscribed and previous investors redeem on a quarterly basis. The lack of a maturity or expiration date allows us to continue acquiring assets, run them through the full life cycle, and pay the fund. The fund distributes capital and we invest the capital that is not returned in the next set of projects.

TGF is different, working in a similar way to most growth funds. It began raising capital in early 2020. The first subscription date was January 17th.   Subscriptions continue for up to 24 months with a 12-month initial period and two six-month extensions. The final subscription date has to be on January 16, 2022 or before. Should it reach its primary capital objective it can close early. It is able to close at any time if there are adverse market conditions.

Once the fund invests all the raised capital, it stops making investments and the returning capital becomes distributable.  

TOF makes investments, gets repaid, reinvests the money and keeps going. TGF doesn’t do that. It makes investments that go through their life cycle with the value-add strategy. That means apartment renovations or conversions of hotels to affordable housing. All that work creates value. Once complete, the project may get refinanced. Some capital may be returned or and then sold. When it is sold, the money comes back and distributions are made. These are “clumpy” distributions. This is typical for close-ended funds in real estate. Fund life-cycle: Raise capital, invest in deals, close, run the deals to their exit point. TGF distributions waterfall: 8% cumulative Preferred return, then full return of investor capital, and then Performance Split (80/20 for Class A units and 70/30 split for Class B units).


TGF distributions are likely to start in 2023. That’s after all capital is deployed on investments and the fund is past its investment period, ending in Jan 2023. The fund may decide to end new investments in late 2022. Once the fund is no longer making new investments (past the investment period), It will start distributions based on received income distributions from investments, and upon receiving capital back from the refinancing events, and finally, from the sale events (return of capital and profits). When distributions take place, they are likely to be clumpy as we receive capital from sale or refinancing – these are substantial checks. There will be smaller distributions relating to net operating income. Since we invest in value-at-projects, they are not projected to generate immediate income. Some may, most will not.

TOF allows for investment of distributions, an easy subscription option. If you want to reinvest distributions until you start taking them, that is also an easy process during the subscription or any quarter.

After subscribing to TGF, your capital doesn’t go to work right away. Instead, the capital has to be ready for investment when we issue a “capital call” to fund one or more upcoming deals.    The capital either stays in the subscription account or your own account for when we have the next deal and issue a “capital call”.   We have been successful issuing capital calls every 1.5-2 months on average.   Most investors haven’t had to wait too long to get their money working.

Your capital call is a letter issued by the fund Administrator stating that we are calling the subscribed capital (all or partial capital call).   We are ready for your money, which you can wire in at that time or it is already waiting in the subscription account.    

We are optimistic about being able to issue capital calls on an approximate monthly or by-monthly basis. In a closed-end fund, your money is going to work for five to seven years, so it can sit idle for a month until the capital call is issued.

TOF has a two-year lock-in. An earlier emergency redemption may be considered if there is a genuine problem and you cannot stay two years.   TGF has no redemption mechanism and requires life-of-the-fund investment.   If the liquidity is critically needed in the middle of the fund’s life cycle, you or us must find somebody willing to “step into your shoes” with the consent of the fund manager.  Formally, these units have no market, nor can be traded. 

Superior Risk Adjusted ROI

All projects have risks. Some have high risks; some are low risks. The same holds true for funds. The risk adjusted return number is the critical number for investors to know before making investment decisions.  Fund strategy, asset model, asset selection and other variables impact overall risk adjusted return.   One of the other critical variables to fund investors’ Risk adjusted ROI is fees paid to the fund manager.   

Does the fund manager receive heavy fees upfront, diluting investors or is the fund manager compensated mostly on the back-end, when the investors receive their returns?

This is a fundamental fairness question, and it heavily impact Risk Adjusted Return math.    

Does the fund pay capital raising fees, big asset acquisition fees, big development fees, asset disposition fees, have a strong investor preferred return, and investor favored split?

Regardless of the investment strategy, experience and track record of the manager, asset selection and other factors, oversized compensation to the manager dillutes investor returns when things go well, and investors take it on the chin when things go badly.

Our goal is maximizing returns on your capital investment.  We pride ourselves on the Superior Risk Adjusted Return.  Our funds (TOF and TGF) come with low fund fees and a strong cumulative preferred return. and great investors favored performance splits, all crucial to the risk adjusted return.  

TOF has a 2% annual asset management fee and no asset acquisition fee.   TGF has a 2% annual asset management fee and 1% asset acquisition fee.   That’s all.   No capital raising fees, no development fees, no disposition fees, no junk fees of any kind.

Compare us with funds heavy on fees, enriching the managers while the investors shoulder the risk of investment.

Fee Structure

Each fund charges a 2 percent annual fund management fee paid quarterly at 0.5 percent. Other expenses include a fund administrator. Ours is a third-party administrator (, an important factor for an investor. Using a third-party administrator creates a degree of confidence that books are done properly, statements prepared properly, and all documentation is available on an investor portal.

TOF uses Armanino LLP, a reputable large CPA firm, to perform the annual financial audit. The cost of the audit, administration and tax filing is approximately 0.6 percent. There are no other fees – no asset acquisition fees, asset disposition fees, development fees, nor capital raising fees in the TOF.

For TGF, the approximate cost of administration tax filing is 0.5 percent. There is a 1 percent asset acquisition fee. TGF requires no formal audit. External administration ( by a well known and respected company reduces the need for an annual audit. Conducting an audit requires substantial overhead in time and expense. Completing an audit for TGF is an optional endeavour as the result.

TOF requires an annual audit as part of the PPM. TOF pays a 7 percent cumulative preferred return. The performance split is 80/ 20 for Class A units; 70/ 30 for class B and 60/ 40 for class C.

TGF pays 8% cumulative preferred return, then full return of capital and then 80/20 (Investor/Mgr) split for class A Units, and 70/30 for class B units. TGF’s preferred return is cumulative, an absolute must in a growth fund.  That is because we are unable to distribute in the early years. Investors still accumulate 8% Preferred return every year. 

In a closed-end fund, investors receive the first 8% cumulative pref. They later receive the full return of capital once the pref is met, and then the performance split kicks in. It’s important for us to get investors full pref, then full return of capital. What’s left is subject to the performance split. Our performance fee is last, and investors come first. The low fees and these institutional level waterfalls create that great risk adjusted return. Compare this to other funds to see how we stand out.

Unit Classes

TOF Class A units are granted to the investors of $1,000,000 or more; Class B, $500,000 to $999,999 and Class C $100,000 to $499,000. TGF’s classes of units are Class A:  $1,000,000+ and Class B: $250,000 to $999,999.

Using Tempo Growth Fund to Convert a Traditional IRA to a Roth IRA

Mike Zlotnik explains converting a Traditional IRA to Roth Conversion through a Growth Fund

Keep in mind when considering converting a traditional IRA to a Roth IRA, or a self-directed 401k traditional value to a Roth component or a SEP IRA, that taxes are owed on the value of the converted investment. Convert them to cash and pay a value based on the cash. For instance, with $100,000 converted from a traditional IRA, you have to pay taxes on a $100,000 worth of income in your tax bracket. The alternative is investing in a fund like TGF. TOF does not have these benefits.

TGF projected returns over time look like a letter “J” (returns follow “J” curve).  That means in the early months and years, the fund loses money, reflected via reduced capital account balance on quarterly statements.   The projects the fund invests in may include conversions of hotels to affordible multifamily housing, or repositioning from big-box retail to self-storage, such as converting an old Macy’s to self-storage or an old office building into multi-family housing. These value-add projects substantially increase the value of these buildings in the long-run.   However, beforehand, these projects lose a lot of money during the redevelopment stage of the value-add life-cycle.  Some of the construction $$ are “expensed”, passing through as the current year tax loss.  Operating losses related to building operation include accountants, bookkeepers, managers, payment of the taxes, insurance, mortgage and other. That portion of the investment is expensed immediately.   Also, some projects continue to pass through operating losses even after full completion of the construction as they are slow to lease up as it is with Self-storage projects.

When the conversion work finishes, some of these assets don’t generate profits for a while. For instance, when converting an old Sears to self-storage, the lease on a self-storage facility could last 30 months. The first quarter of operation, it loses considerable money due to low occupancy and substantial expenses, such as the mortgage and real estate taxes.  These investments are pass-through losses in the early years.

The investor account balance looks like a J-curve. It may start with $100,000. A year later, the counterbalance looks like $85,000. A year later it could look like $70,000 and the investment is illiquid. What is possible is that at some point in the next two to three years, possibly 2022 or 2023, the bottom of the J curve is reached.

At that time, if you consider converting a traditional to Roth IRA,  you may be able to convert at a much lower value than if you wrote it in cash. You may convert $100,000 to arrive at a value of $60,000 to $70,000. Consult your CPA as to what is acceptable between you, your CPA and the IRA custodian. You could save a substantial amount of money if exercising this strategy properly.


Diversification is a critical risk mitigation strategy.

TOF has over 80 assets. In this portfolio, you make a single investment into the fund and receive immediate diversification across 80 investments. These include:

  • Multi-family
  • Self-storage
  • Commercial
  • Residential notes
  • Turnkey houses portfolio
  • Office buildings
  • Shopping plazas
  • Hotel conversions

During COVID, hospitality and retail industries and shopping malls were hit hard.   Investors who were not diversified and were in the hard hit sectors, took it on the chin in a big way.    Diversified funds like TOF, spread the risk between many strategies and can withstand the volatility of a few sectors getting hit hard.   We have both the winners and the losers, but on average a diversified portfolio is what “smoothens the ride”, or creates “smooth sailing.”

With TGF, our objective is to get to 20 to 30 assets by the time we close. You achieve diversification by writing a single check into a fund.

TOF contains a mix of income-focused investments along with value at growth projects. We look to generate 7 to 8% in the form of distributable income on an annual basis, with approximately 3 to 5% in the form of growth or appreciation.

We are a great building block of your investment portfolio because of the fund diversification.  If you write a $1 million check to us, you can achieve the same level of diversification in TOF or TGF as writing ten different checks to ten different strategies. The latter involves achieving diversification among 10 separate sponsors, strategies, and locations.

The math of the diversified portfolio observes peaks and valleys and creates a more predictable outcome. The many dimensions of diversification include:

  • Deal types
  • Locations
  • Operators
  • Sponsors
  • Debt Equity

Best Access Point to Private Real Estate Deals

We invest into many deals that are not available to the public.  We may work with a sponsor/operator needing a $1.5 million investment and write a check for all or most of it. He/She does not need to raise capital from individual investors.   We are a faster, better, more reliable source of capital for them, and so they can give us better terms than raising capital from individual investors.

If a well-established sponsor, operator or fund manager is trying to raise more capital, they have different classes of units. Other funds may give Class A units if you write a $2 million check. Write them a $100,000 check and you are in a Class C unit. By going through us, you receive an elevation because we get into Class A fund units. We can negotiate even better terms at times. In some deals, we receive a side letter, which basically says, “We appreciate the relationship. You wrote us a big check, and so, here are further improved terms that they offer to the public via a side letter.”

We get better economics for the fund and you benefit as an investor in our fund. You could go through us or go directly to the sponsor and get into whatever units you can. That investment gets you direct exposure to the strategy while our investment (investment into TOF or TGF) gives you better access point and diversification across many strategies, sectors, sponsors, and locations.

For example, let’s compare you writing $1,000,000 into TOF or TGF, say $20-25M fund vs. writing ten $100,000 checks.    Say TOF or TGF has $1,000,000 investment into the same deal or sponsor as your $100,000 check.    Our $1M exposure on a 20-25M fund is 4-5%.   Your direct investment of 100K on a 1M portfolio has 10% exposure.   In addition, you may be in class C units with $100K check with target ROI of say 15%, while we could be in Class A units with $1M investment with target ROI of 18%+, for example.   You are paying TOF or TGF management fees, but it is well counterbalanced with the Diversification driven risk reduction and better ROI target driven by higher class of Units TOF or TGF receives.

Here is another interesting benefit for Income investors to participate in TOF.   TOF receives all points and fees, and interest on hard money loans it makes.   If you invest directly into a hard money loan, you are likely to receive only the contractual interest rate.    Let’s compare a loan with 10% interest rates and 3 points that lasts 6 months.    An investor going directly would receive 6 months of interest at 10% per year = 5% ROI.   Say the same investor goes into that same deal through TOF:   TOF collects 3 points and 10% rate for 6 months, collecting 8% (3 points + 5% interest for 6 months).   TOF has annual 7% Pref, or in 6 months equivalent to 3.5%.   Effectively, fund investors receive 3.5% first.   Fund manager collects 1% (2% annual management fee for 6 months).   Then what’s left is 8% – 3.5% – 1% = 3.5% subject to the performance spilt.   Even class C units receiving 60% of the upside would get 60% * 3.5% subject to the split = 2.1%.    Total to class C members is 3.5% Pref for 6 months plus 2.1% performance split = 5.6%.   Class B and Class A members would have even better economics.   Annualized difference between 5% is 6 months, vs. 5.6 in 6 months, equals to 1.2% in 12 months.    Effectively, direct loan investors would make 10% ROI, and TOF fund investors in Class C units would make 11.2%.     Fund structure of points and fees going to the Fund (not the manager) enhances overall Risk-Adjusted ROI.

Special Affiliations

We have special affiliations through Freedom Founders, Mile Marker Club, and a few others. These affiliation groups receive additional benefits. For TGF, all members of Freedom Founder or Mile Market Club investing have access to Class A units of the fund without writing a check for $1 million. If they invest $500,000 into TOF and $500,000 into TGF, the combined balance of $1 million gives elevation points for TOF to Class A units and TGF Class A units by virtue of affiliation. These are membership rewards showing our appreciation to this group affiliation.

Want to Learn More? Reach out to us at or by phone at 917-806-5029 if you want to learn more about investing with us.  You can also schedule a time to chat via Zoom.

Also, be sure to check out my latest podcast episode:

080: Why You Should Be Investing On Vacant Land With Willie Goldberg and Paul Hersko

079: What the Post-Election Market looks like from Trends to Market Projections with Frances Newton Stacy

078: Specificities About the Market: sales and rent prices with Marck de Lautour

Thanks for reading,

Mike Zlotnik
CEO, TF Management Group LLC

This newsletter and its contents are not an attempt to sell securities, nor to sell anything at all, nor provide legal, nor tax accounting, nor any other advice. The presenter is a private lending and real estate fund management business, and the information represented herein are purely for educational purposes and represents the opinions of the presented. Prior to making any investment or legal decision you should seek professional opinions from a licensed attorney, and a financial advisor.TF Management Group LLC (TFMG) is an investment fund management company that specializes in both short-term debt financing for real estate “fix and flip” projects, and long-term “value-add” equity deals