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Fighting Cybermonsters™ With Mindfulness With Sandra Estok

 

Technology is present in everything you do, which means no one is safe from cybercrime. This is why you need to practice mindfulness because hackers will try every trick to get to you. Join Moneeka Sawyer as she talks to Sandra Estok about cybercrime and cybersecurity. Sandra is the Founder and CEO of Way2Protect where her main goal is to simplify cybersecurity for everyone. She is also the author of Happily Ever Cyber!. Listen to this episode to fully protect yourself from all the cybermonsters™ out there.

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Watch the episode here

 

Listen to the podcast here

 

Fighting Cybermonsters™ With Mindfulness With Sandra Estok

Real Estate Investing For Women

I am so excited to welcome to the show, Sandra Estok. Sandra, Founder of Way2Protect, is a cybersecurity keynote speaker, corporate trainer, and author of the international bestselling series Happily Ever Cyber. Through her publication, Sandra is committed to share her journey, experience and expertise, using simple concepts and inspirational stories to help others protect what most matters to them against hackers, scammers and cybermonsters.

She brings years of multicultural and cross-functional experience in the US, Latin America and Europe in the areas of cybersecurity, IT and data privacy. Sandra has held numerous positions in Fortune 500 companies, private and public organizations. Sandra holds an MBA, Industry Certificate in IT, cybersecurity and data privacy.

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Sandra, how are you? Welcome to the show.

Thank you so much. I am so excited to be here with you.

This is such an interesting topic. I never even considered having anybody talk on this show about this until I met you. First of all, most people talking about cybersecurity make my brain feel like it’s going to blow up. They are often very boring, which you are not. I see a lot of relevance with regards to real estate. I’m excited about what you are going to be talking about with your relationship to real estate. Before we even get into that, could you tell us your amazing story about how you even got into this?

It started many years ago. I was returning from visiting my mom when I was in Columbia. As we were landing in Miami, the pilot announced that Homeland Security Officers were boarding the plane. I hand in my passport with my work visa. The next thing I know, I’m the only one being marched off the plane and thrown into a room. That room exists in every airport and every country. There is a room. I was escorted there. There are no phone calls. I don’t know what’s happening. My husband was waiting for me in Chicago and I’m about to miss my connecting flight. Ten hours later, they handed back my passport and it was revoked.

I did not know what was happening. A few weeks later, I’m back in Venezuela, where I am from. I have everyone supporting me. I have attorneys. We are in the interview trying to get a new visa. In this interview, the officials kept asking me about China. They were like, “Why were you in China? Who do you know in China? Who is your contact?” I don’t know what they are talking about. I have never been to China. Somehow, a smuggler in China got ahold of my information and has been smuggling women into the US using my identity.

Any industry that has money, big or small, is a target of cybercrime.

I convinced them that I’m not a small smuggler. I get my new visa. I come back home and everything is okay. Two weeks later, I’m returning from Europe. My job was to travel. That was part of her idea at the time. I’m returning. I get off the plane. I get to passport control and I’m right back into the same room because I have to prove that I’m the real me over and over. Every time I travel for six years. When I go, my name and everything was in Chinese. I had the import and export companies under my name. Nobody wanted to travel with me, not even my husband.

Finally, I got my US citizenship, passport and my new name. I changed my name. A year later, I entered the world of cybersecurity after I got my US citizenship. At the time, I did not realize what happened to me. I was like, “This is probably normal.” This was back in 2006. We didn’t have a lot of news about cybersecurity. It was not every day we see it now, back then was not. Being only IT, I did not connect the dots. A year later, I joined and it blew my mind. Understanding the cybermonsters, we can talk about that later, but understanding how it works, what, why, how and who is behind all the cybercrime. It became a passion.

I was in the corporate world for a long time. The more I learn about cybersecurity, the more I got passionate about it. The more I wanted to share that passion differently. I had many different positions and having building a team or building a program and teaching the employees of those companies that I worked for. I discovered that I enjoy that part. It is boring, it is not something appealing. Nothing is exciting about cybersecurity. That is what I want to change because the reality is identity theft or cybercrime can happen to any of us. Unless we know how and what to do, it could happen to any of your audience or you as well.

Many people in my family have experienced identity theft, not cybersecurity and such. It’s a big deal. It happens to so many people. Cybersecurity, we don’t think of it on a small scale. We think of that as that happens to the big companies, those are the targets. I would contend to say that the onesies and twosies, us that’s normal person people or consumers, we are the bigger target.

Forty-three percent of all the hacks in 2021 happened to small businesses. If you think about the industries like the financial industry, healthcare and small businesses. You can include all companies from 0 employees to 1,000 employees. That is usually considered small businesses or 2,000. Forty-three percent of all the hacks happened there. Real estate, your industry, is one of the industries that is impacted because any industry that has money, it’s a target. It’s a good place for hackers to get what they want. It’s either your identity or the way to impersonate you so they can get what they want from you, which in most cases is money.

Talk to me a little bit about how your approach is different from cybersecurity.

 

It starts with that realization that cybersecurity is very personal. Everything that we do every day in our lives somehow relates to technology. Why my approach is different is because I’m using that personal connection or stories that we all have and connecting them into the cybersecurity, cybercrime and identity theft world. I didn’t even realize that, but throughout my life, many things have happened to me that connect to cybersecurity in a way.

I’m a cyclist. I do yoga. My identity was stolen, but somehow each part got a connection. That is what I want to share because this is not my story only. The most amazing thing that happens to me when I share either the stories or training is that each person discovers their story. When we start making that connection that cybersecurity becomes personal. It’s not something super technical. I don’t have to be a geek. There are many things we all can do to reduce the chances of identity theft and cybercrime every day. That is the muscle that I want to develop and all of us to start training. When we see it that way, it’s not overwhelming anymore.

Could you tell us the biggest misconception that people might have about cybercrime?

It cannot happen to me because I’m not rich. In real estate, for example, I’m just selling a small house or I’m renting this property. It won’t happen to me. The reality is it can happen to anyone. The amount of scams that happened, especially in your industry in 2021, $149 million were lost in scams related to real estate. There are so many parties involved. In this case, you have a buyer, seller, titles and you have all these many companies. If every person in that chain thinks, “It won’t happen to me.” Unfortunately, if it happens to at least one of those all parties involved, your whole deal could be in jeopardy. That is where the loss happens. The money does not go to the seller, it goes into a different country and you can recover it.

Thinking that it won’t happen to you is one misconception. The second misconception is thinking that it’s all about technology and technical. When we were kids, we learned how to cross the street. We learned how to look both ways. We learned probably not to stick things into electrical outlets. I learned that I should not be doing that. In the same way, if you think about cybersecurity, there are things that are common things that we all can do that can reduce the chances of becoming a victim of cybercrime. The misconception that it is only technology is not true.

When we have a phone call for a deal, you are expecting a transaction to happen in your selling or buying a property. Someone calls you and says, “Your Social Security or any of the information that is related to that property. We are going to validate that. You are going to get the best rate on your mortgage. You are going to have the best deal that you can have for these new investments.” Most of us can recognize that it is a scam, and most of the time, we hang up because they are easy to spot. You know that the IRS is not going to call you. The Social Security surveys are not going to put you in jail.

Most of us have developed that. When we see a call and it’s a scam, we react to it and we hang up. There are many other things like that we will start developing. One common thing is using your password and using one password that has meaning to you. I do yoga and I do all these things. I use a password with an intention and affirmation. It helps me to get centered.

A common misconception about cybercrime is that it’s all technology and all technical. That’s not true.

A password, you won’t think that it could be used in a fun way. You might think it always has to be a lot of characters and boring but you could use that password in a way that has meaning to you. If you are an investor or buying a property and you want a big house on the beach or you have a dream of something bigger for your life, you could use your password in a way that gets you to that dream.

That is a super tip right there. I use that one. My password is also a declaration of how I’m feeling or something that I want for the future. What is funny about that is that normally, you should be changing your password every three months. If it is a declaration or affirmation, it’s fun to change it every three months, too. That is a good security tip is you don’t want to keep the same password for all your accounts. You want to have some different ones that have meaning, but the other thing is you’re wanting to change them frequently. This is a good way to encourage yourself to change them frequently.

A different password for every account is important. I love that you mentioned that. If you get hacked and compromised, you have an account where you have a rental property. You have a password that lets you go into the portals to watch or monitor what that rental property is doing. Somehow, you use the same password for your Netflix account and your Netflix account is compromised. If you are using the same password, your other place where you have sensitive information about your real estate business could be compromised as well.

Using a password manager is one of the best ways to have a very long-phrase with your declaration, but then you don’t have to remember all the other passwords because we have so many other things that we have to do remember and think about. A tool like that allows you to keep track of your passwords and make it easy for you.

Talk to us a little bit more about the password manager. Do you have a favorite? They are going to be a lot of ladies that are reading to this that this is the first time they are knowing it. Tell us a little bit about what that is.

A password manager is a tool and there are many different types, either free versions or paid versions. When it comes to something that protects my password, I would feel more comfortable paying for a service that I know is going to have a more secure solution. This is where one thing that I will caution on free, however, if you are an Apple person, there is a password manager that is embedded into your iPhone or iPad. It is part of the iOS system. There are many other versions and companies that do this. This is their business. A password manager is a tool that you will integrate all of your passwords that are associated with your email address.

If you are using five different email addresses, you can put it into your password manager and it will scan every word you have a password and it will bring that information to you. The good thing is you have a dashboard and you have a tool that will tell you where you repeating the same password. When was the last time you changed that password? How strong that password is?

 

One simple password of seven characters can be broken in less than point .29 seconds. A password manager allows you to have that phrase, your big declaration, inspiration or affirmation. You change everything once you achieve that declaration. It’s one more tool that you can use because you have to type it so many times. I say that phrase to myself every day, “My password makes me happy.”

Do you have a password manager that you particularly like that you might recommend?

I use Dashlane. It’s one of them, LastPass or 1Pass. What I like about that one is it includes a VPN. It’s a way that makes your connection more private. Think about you are going on a highway and when you are on the internet, there are no roads. All the cars are everywhere. When you are using a VPN, it’s like you are on your own freeway. All the information you are sharing goes only through that tunnel or lane that you are going through. Nobody can enter your lane. Especially in real estate because you do so many transactions that are very important with money.

I will suggest when you do those transactions, you activate your VPN. There are either antivirus tools that will have a VPN included or a password manager will have it or you can have a VPN on its own. Every time you do a sensitive transaction, what I recommend is that you use that VPN service because that way your information cannot be taken. Let’s say you are in a public place and using public Wi-Fi. Unfortunately, when you use public services in the same way you have access to those public services, cybermonsters, hackers or cybercriminals have also access to that.

Even if you are sending a simple email, they can intercept that information. Why is that important for your business and real estate? You are buying or selling a property. You are connecting with your buyer or seller and you are interchanging emails. If I am in a public place and I saw that house went for sale because it’s all public records. It goes to the MLS, you see that. I can start watching the communication between the two parties. When I intercept that information, I can know more details when that close is going to happen.

As that date approaches, this is one way the scams have happened is that the person that is supposed to transfer the money receives an email with fake information on the account, but you are seeing it real because it is impersonating that other person. You talked with that person. If I’m watching your email, watching how you communicate, what language did you use and how do you greet each other, it is easier for me to impersonate that agent, lawyer or person and send you a bank account that it’s not real. It sounds like a movie, but if you search online, you can see how many people have fallen for this. In real estate, many people have lost all the money because it went to a foreign country and it cannot be recovered.

In EXTRA, you are going to be talking specifically about how to protect your email. Ladies, make sure that you stay tuned for that because this is a horrifying story. Are there some other basic things that we can do that can help us to protect ourselves?

You’ll use your password every day, so choose one that’ll make you happy.

I love your show because you have a lot of guests that always are bringing positive, good vibes and there are many different topics. One topic that comes to my mind, which is connected to cybersecurity is mindfulness. If I’m going to do an email, go into social media or do this deal I’m practicing mindfulness and less at the risk of becoming a victim of cybercrime. Something that simple as being present when you do your work can be a game-changer for identity theft or cybercrime.

Give me an example of that. I’ve got about ten that I can give you, but I’m sure you’ve got some good ones.

I love to know yours, too.

Frequently, you will get something that says in your email, “It’s time for you to change your password. Please press this link.” You have to put in your old password and you have to put in a new password. If you look at the page that it goes to, it is not the actual page where you are changing the password. It was masked and it’s different. That is one.

Don’t ever put in a password unless you go to the site. Use yourself, go to that site and change the password there, don’t do it through a link that is sent to an email. The thing is that sometimes we are moving so fast, we are like, “I got to get that done.” You get it done. You move on and then you’re like, “I gave somebody my password.” You go through and you have to change all your passwords. That is one of them.

Another one is entering your email address for a similar situation. You are asked for your email address so that they can send you a verification, but you sent that email address to someplace that is not where you thought and suddenly, your email has been completely hacked. Those are a couple that I know my husband and I have experienced. How about you?

 

Congratulations for being attentive to all of those. Good job on keeping an eye on those emails or those things that can happen. I can give you one example that has happened a lot. It is related to when you do your banking. Most banks will have two authentications or a two-way to verify that you are you. They send you a text message and they say, “Someone is trying to get into your account. Is this you?” Even if you are not trying to get into your account. When you have to sign up for your banking, you will ask to validate that you are you and it will require a PIN that you have to enter to say that is you.

One way that cybermonsters check you out is they will try to impersonate you. There is a lot of information available to all of us for data breaches or hacks. They call the bank and they try to log in to your bank account like you. They are not going to have that PIN. That PIN, they are going to request the bank to send you a new one. When you go to your online banking and you say, “I forgot my password.” It will email or text you that validation. That scammer or cybermonster will call you and say, “We are from this bank. We sent you a verification code.”

You will be surprised how many people didn’t read the entire text. That is a request for your password to be changed. You give that PIN to the person that is calling you to validate. In some cases, they call you and say, “We are seeing transactions in your account. We are going to stop the hacker.” They are pretending that they are saving you when in reality, they are hacking you. Mindfulness is going to so many levels because whatever situation you are in, my advice is don’t take an action. Breathe.

If it is your bank that is calling you. What I will do is I hang up and I take my credit card number or I have my contacts in my bank and I will call them directly. Whatever it is, you can have a few seconds where you can breathe and then think about, “What actions do I have to do?” Call the bank. Call whoever you need to call and validate that the information that you are receiving is valid.

What I love about what you said is often, we will get a phone call from our bank or credit card company, “Is this charge valid? Are you in this location?” We think, “This is an authority. This is the bank. I don’t get my money unless I cooperate with the bank.” What you said is it may not be the bank. It’s okay to say, “Hold on. This is not a great time to chat. Let me call you right back.”

You hang up and you call the numbers that you know. It’s the same thing as verifying where you are putting your passwords online. Make sure you check the URL. I have never done that before. That’s amazing. You can say, “I’ll call you right back or this connection is not good.” You don’t need to be rude, but you do need to take a couple of more minutes. This is going to be more time out of your schedule, but is it worth it?

If you think about that for a few seconds, it can save you. In my case, six years from the nightmare. If you put it into perspective, how much can you lose for making that extra phone call and whatever transaction you are doing, validating what it is that you are doing?

Pick three things you care about the most. Know what matters most to you and start there—no need to overwhelm yourself.

Tell my ladies how they can reach you if they want more of this good stuff.

They can visit me at HappilyEverCyber.com. They can get in there. I have a gift for them. It’s the three critical but super-simple steps they can take to start protecting their information. They also have access to download a checklist. I did this checklist with all the years working in cybersecurity, data privacy. I incorporated all the things that at minimum, we should be doing to keep ourselves safe. I love for them to get that information. You don’t know, something that you have never heard before or you don’t know how to do it, do not worry because what I am committed to do is to develop content. My book is a book series where I will be creating books that are more specific about different areas.

A book only about social media and how to protect your identity, passwords or computer. You can’t protect everything. You have to know what matters most to you and start there. Pick three things that you care about the most. When you protect those three, you can pick another three and another three. You don’t have to overwhelm yourself with, “I got to do all of this.” That is the misconception that I want us to acknowledge. Don’t let the cybermonsters hack you. Start taking the action to end that. When we are training, you don’t start with a marathon. In the same way, that is how we are going to build a muscle and to make it as easy, fun and relevant to what matters most to you as possible.

The thing that comes to mind for me is technology is changing so fast. What was relevant in the past is not relevant now. Do you feel with regards to cybersecurity, things are constantly evolving and what we need to do changes? Do you feel there is a baseline of things that we need to do and then we can improve it later by working with a professional like you? Is it always changing? Is this something I constantly have to be thinking about and be aware of?

The answer is both. Things are always changing, but there are many things that when we don’t take care of the basics, that’s when we make it easy for cybermonsters to get into our lives. If you are in your house and you see holes in the walls of your house. You get up the next day and see another hole. People can sneak through any of those holes and show up in my living room where my kids, family or business is. When we see all of that, most probably, we will take action right away and close those holes. In the same way, when we don’t update our computers and our phones, they have holes in the programs or operating systems.

Those are the holes that cybermonsters take advantage of. If you are using a computer and you never update it and that is one basic thing. No matter how new technologies come and your refrigerator is talking to you, if you don’t do that basic thing, which is updating your devices and computer, you are leaving with open holes that allow cybermonsters to break in easily. It is both. New technologies are here and cybermonsters are always looking for ways to break in and to innovate, but at the same time use technology and we don’t do the basics, we will make it easy for them.

We are going to be talking about email in EXTRA. I’m excited about that and how to avoid the situation that you talked about where there is a transaction, the emails get intercepted and our money goes somewhere that it should not be going. I’m sure there are many other examples, but that’s a good one. Before we close the show, are you ready for our three rapid-fire questions?

Yes.

Tell us one super tip on getting started in real estate investing.

Be passionate. If you are going to invest either being a buyer or having a business, make sure that is your passion. When that happens, you will breathe, dream and live for that. There is no better feeling than being passionate about and doing what you love to do.

What is one strategy for being successful in real estate investing?

If you are a beginner, have someone that can guide you through your journey. In my case, I have so many mentors and people helping me through the process. Whether in real estate or business, I always seek someone that knows what he is doing. I’m buying and selling a house, so I will never do it without the help of experts because this is what they do and they can learn if that is my passion. If it’s not something I want to do, I want to do it right. Always seek someone with that expertise that can take you much faster to wherever you want to go.

Always find somebody that can get you faster to the place that you want to go. That is so good. I love that. That is a good soundbite. What is one daily practice you do that contributes to your success?

Gratitude. There is not a single day that I wake up and I am not grateful for another day. Grateful for another opportunity to play and serve. Even in the tough moments, when you are not happy, something didn’t go right, I use gratitude. It is amazing how fast I get off whatever negative emotion I have and how much clarity I get even if the situation was tough, how much I understand that it was for good that it happened that way. I am always grateful for everything.

Thank you so much for everything you have offered on this portion of the show. I can’t wait to talk more in EXTRA, but thank you so much.

Always find somebody that can get you faster to the place you want to go.

Thank you. My pleasure. Remember, practice mindfulness. Be present and that alone will help you so much to reduce the chances of being a victim of identity theft for cybercrime. It makes you enjoy much more of what you are doing, which is investing.

If you are subscribed to EXTRA, stay tuned. We are going to be talking about how to protect yourself in the email. This is that thing that we use all the time, every day for everything we are doing right. It makes us vulnerable in certain ways. We are going to be talking about how to reduce that vulnerability in your email in EXTRA. This is relevant for everybody. If you are not subscribed to EXTRA, go to RealEstateInvestingForWomenEXTRA.com and sign up. You get the first seven days for free.

Get this EXTRA and find out how to protect yourself. You could read to as many as you like in the first seven days. If you love it, then you stick with it. If not, you can unsubscribe, no big deal. For those of you that are leaving us, thank you so much for joining us. You know how much I appreciate you. I look forward to seeing you next time. Until then, remember, goals without action are just dreams. Get out there, take action and create the life your heart deeply desires.

 

Important Links

• Way2Protect
• Happily Ever Cyber
• Dashlane
• LastPass
• 1Pass
• HappilyEverCyber.com
• RealEstateInvestingForWomenEXTRA.com

 

About Sandra Estok

Sandra works with organizations to increase their cybersecurity programs’ efficacy by making the content relatable and personal. As a result, companies can increase engagement and awareness of their first line of defense again cyber threats: its people.

She utilizes her journey combined with her 20 plus years of experience in the Cybersecurity, IT, and Data Privacy industries to empower your teams to take charge of their cyber safety. Throughout her career, Sandra has held numerous positions in Fortune 500 companies in the United States, Latin America, and Europe in private and public organizations.

Sandra is the author of the international bestseller and award-winning book series Happily Ever Cyber!™ and the Cyber Literacy Series for children. In addition, she is a keynote speaker and corporate trainer. Her latest project, the Inner Cyber online course, combines a unique, purposeful, and long-lasting way to adopt a cyber safety-focused lifestyle.

 

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To listen to the EXTRA portion of this show go to RealEstateInvestingForWomenExtra.com

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How Bezos, Buffett, Musk, And YOU Can Pay $0 In Taxes Legally With Mark Willis – Real Estate For Women

 

Taxes take a lot from you – your finances, your time, and your energy. What if you’re told you can legally pay zero in taxes today? Believe it or not, there are ways you can enjoy retirement freely without worrying about the IRS. Mark Willis is a man on a mission to help you think differently about your money, your economy, and your future. Mark is a certified financial planner, a three-time number one bestselling author, and the owner of Lake Growth Financial Services. Mark joins Moneeka Sawyer to talk about how you can grow wealth in ways that are safe so you can enjoy tax-free income in retirement. Listen in as Mark shares how you can become your own source of financing so you can have financial control over your future.

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Watch the episode here

 

Listen to the podcast here

 

How Bezos, Buffett, Musk, And YOU Can Pay $0 In Taxes Legally With Mark Willis – Real Estate For Women

Real Estate Investing For Women

I am so excited to welcome back Mark Willis to the show. You’ve heard from Mark several times on this show. We’ve even had webinars with him. He’s shot me an email and said, “I’ve got this new strategy. It’s called BBD.” I’m not going to tell you what that is. I’m so excited to share this strategy with you and include you in this conversation.

Before we move forward with BBD, let me reintroduce Mark to those of you who have not met him yet. Mark Willis, CFP, is a man on a mission to help you think differently about your money, your economy and your future. Mark is a certified financial planner, a three-time number one bestselling author, and the Owner of Lake Growth Financial Services, a financial firm in Chicago, Illinois.

As cohost of the Not Your Average Financial Podcast™, which I’ve been on, he shares some of his strategies for investing in real estate, paying for college without going broke, and creating an income in a retirement that you will not outlive. He works with people who want to grow their wealth in ways that are safe and predictable, to become their own source of financing, and to create tax-free income in retirement. That’s all very exciting. It’s no wonder I always want to have Mark on the show. Mark, welcome back to the show.

Thanks for having me. I’m excited to see what we do here together. It’s always fun to see what sort of magic we can create together.

It always is magic. We were having a conversation before in the green room about this idea of the new year, and you had a question for me. Could you remind me what that was? 

I had been tuning in to your show like all smart real estate investors should be tuning in to your show. In one of your episodes on the very first day of 2022, you brought up a theme or an inspiration toward this year that we’re living in. There was a theme of matching the masculine and the feminine together. Maybe you can speak more eloquently about this than I could.

The world has been so masculinely dominated that even women feel the need to do business as men.

2022 is year six. I studied Numerology many years ago. It’s a very Indian thing to study Numerology. It’s where it came from originally. The six stands for balance. Specifically, the balance between the masculine and the feminine. In year six, what happens is this energy of melding the masculine with the feminine comes into the energy space of the planet. What’s so fun about that is because our world has been so masculinely dominated, even as women, we feel we need to do business as men, this is a year where that balance happens both for the men or the women if we’re able to focus on it. It’s easier to bring that closer. 

This is one of those years where we women can step forward in our power. I am not a feminist who says, “Up with women, down with men.” I have never ever been that person. For me, we both need each other. We all need the masculine and the feminine because they’re both parts of who we are. Women by default experience more of feminine characteristics than masculine, but as you said in the green room, we have both. The true bliss and massive success in life happen when you’re able to plug into the resources of both of those, and this is a year for us to do that. Does that make sense? 

It sure does. There’s a little island in the Nordic countries where the men would go out and fish all day, every day. The women ran all the businesses in town. It was all women-owned businesses. Globalization happened and all the men were put out of work. The women run that whole town now. They run the whole island. They’re the mayors, the politicians, the bakers, the candlestick makers, all that. The point is we need each other. We need each other for these times when the unexpected happens like globalization or a pandemic to help us learn both masculine and feminine in our lives and in our work.

They bring different resources. We bring different skills and different talents, so it’s a big advantage if you can plug into both, and this is the year to do that. Women, step forward in your power. Claim the feminine along with your masculine. Thank you so much for asking that question. Let’s get back to you. First of all, tell us what BBD stands for because it makes me laugh, and then let’s talk all about why are you bringing this forward to your clients and out into the world? 

Tax-Free Wealth

I’ll only tell you and the audience what it stands for if your audience promises not to unsubscribe as soon as I say what it stands for because it’s a little off-putting. The BBD stands for Buy, Borrow, Die. You’ve got to listen a little more to get some context here. Let me ask you, what if you could build massive amounts of wealth and never pay taxes? We’re going to guide you through these three steps to invest completely tax-free even when you’re taking cash out of your investment and you’ve got cashflow to fund your lifestyle here and now, but also in the future in retirement. If we think taxes are even going to be the same or even certainly higher than they are now, this is going to be a very important show for anyone wanting to build wealth.

Let’s dig in. Mark and I are friends now. We’ve been working with each other for a long time. We spent all this time in the green room, and then he suddenly told me, “I got to be gone at this time.” I was like, “We got to go fast.” I’m going to let you jump in there and I’ll ask questions as I go along the way, but why don’t you take it away so that my ladies get all the information that they deserve on this one?

 

Thank you. You’ve done such a great job with your show. I will get right to things here. ProPublica, which is an investigative newsroom, obtained a vast trove of IRS tax data on the wealthiest Americans. It covered more than fifteen years. This data dump, leak or whatever you want to call it, provides an interesting look into the true nature of America’s titans like Warren Buffett, Bill Gates, Rupert Murdoch, Mark Zuckerberg, and Elon Musk to name a few. It provides an interesting look at not just their income number, which is astounding, but also how they avoid legally any taxes on their investments, stock, trades or gambling winnings.

In 2007, Jeff Bezos didn’t pay a penny in Federal income tax. He did it again in 2011. In 2018, Elon Musk also paid no income taxes. Michael Bloomberg did it in the last few years as well. These are legal and perfectly legitimate ways to avoid paying taxes, not evading, that’s a clear distinction there. There are ways to do it that are well-known and established fundamental parts of the IRC or the Internal Revenue Code. As I say this, my guess is your audience has 1 of 2 responses. They might either say, “How could they do that?” out of anger. They might also say, “How can I do that?” out of curiosity. I hope it’s the latter. There are reasons to have both sides of that conversation.

This is not a political episode, I promise. The goal will be to teach your readers a little bit about how this happens. Most Americans pay income taxes on their paychecks. Most Americans do live paycheck to paycheck, so we’re paying the highest tax rates on the vast majority of our earned income. In fact, the 25 wealthiest Americans only paid 3.4% of their income tax whereas the average American or the median household paid 14%, and the highest bracket is 37% tax. That’s something interesting that the wealthiest are paying 1/10 as much as us mere mortals with earned incomes. What are your thoughts so far?

I do have a quick question. Thank you for that. Clarify avoid versus evade. That’s very important.

The Internal Revenue Code was established in 1913, which is an interesting year because it’s the same year the Federal Reserve was created. Before we had the Internal Revenue Code of 1913, there was no income tax at all. Starting in 1913, it was there to pay for covering the cost of World War I and beyond. It was there to establish itself permanently after World War II. In the 1950s and 1960s, it became a series of incentives for us to follow. It’s sort of a psychological experiment, but in many ways when you think about it, why does the government tax you at all? It can print its own money. Let that sink in for a minute. Why does it need our tax money if it can print endless amounts? That’s interesting.

We can’t pay our taxes in Bitcoin or rubber chickens. We have to use US dollars. That’s the one thing there’s an infinite supply of at and at the US government, so why do they tax us? Part of it is to get us to do certain things like buy a house, have children, start a business or invest in real estate. All of these incentives are dancing with your partner, which is the IRS. If we can avoid stepping on the IRS’ toes in this dance and not evade, because we’re not running from the dance. That’s where you end up in jail. You got to dance with this dance partner. As the old saying goes, “You got to dance with the devil who came with you.” We want to avoid stepping on their toes but not run away from the dance party.

Massive success happens when you’re able to plug into the resources of both masculinity and femininity.

I love the analogy of the dance. Thank you for that. 

Buy

Guys and gals, get out a sheet of paper and write down three words for me. The words are Buy, Borrow, and Die. Each of these steps represents a key feature to the IRS Tax Code in the American Tax Law, and where you can live totally income tax-free if you do it right. Let’s talk about each one. The first is buy. You’re supposed to buy assets. Buy an asset that goes up in value. Let’s say you buy a piece of real estate or stock, but it has to be an asset that does not produce cash. It cannot produce cashflow, which is an anathema to us real estate investors. If you’re going to buy an asset that produces cashflow, that’s going to generate an income. That income is taxable.

The buy step works because we’re realizing appreciation but we’re not experiencing an income flow. This would not be your typical mutual fund or a dividend-paying stock. Warren Buffett’s stock, Berkshire Hathaway, hasn’t paid a dividend since 1965. How is that possible? They’re very profitable as a company, but they haven’t paid dividends. Why? It’s so that Warren and his team do not have to realize any income on their income taxes. There are a lot of examples of how much he would have had to pay in terms of his taxes. Multiple billions of dollars of taxes would have been paid if Berkshire Hathaway had paid a dividend. The first step is to buy assets that go up in value that do not generate an income.

Borrow

The second step is to borrow against that appreciating asset. You’re supposed to buy and then borrow against it. Strangely enough in the IRC, loans are not considered income. Any kind of loan you receive whether it’s a credit card, mortgage or business loan is not considered income when you simply borrow money. That’s true whether it’s a credit card or borrowing against highly appreciated stock like Elon Musk does. In fact, he was jostled by Elizabeth Warren because he was not paying his fair share. I’m going to stay away from that conversation and tweet-storms that Elizabeth Warren and Elon Musk might have had. Her basic complaint was he was taking all this income but he’s saying, “I didn’t take income. I simply borrowed against my Tesla shares.”

He said if Tesla was to go down in value, he would immediately and instantly go bankrupt, which is an interesting statement to say from the richest person in the world. Borrowing against your appreciating asset allows you to live with no taxes due. That’s how you’re able to buy your groceries, gas, or in Elon’s case, your tenth yacht, and gives you a chance to live on that without experiencing any income tax. Do you have any thoughts on number one or number two so far?

One of the things that I want to emphasize is we can all borrow on our stock. It’s available to all of us. We can also invest our portfolios on margin with this 50% leverage, which is also borrowing on the value of the stock. You can do those things. However, the stock market is extremely volatile. When you do those things, when you borrow on your stock or go on margin, you have the situation which Elon talked about, which is if the stock goes down, there’s a call on that loan or margin.

 

This is what happened. I believe it was 2001. Many people had so much stock that they had gone from the boom. They had all these options, and now those options had exercised them, but their value was down, so the brokerage firms called them on it because they were out of money. All these people had to sell their homes, go into foreclosure or file bankruptcy. That’s what happened in that part of the financial crisis back then.

When you’re looking at stocks, you have this volatility that you have to deal with. That’s why I love real estate, because first of all, your leverage is you’re putting 1/5. You got five times the leverage rather than double, and you cannot get called on. Banks do not want to own real estate. If the market plummets as it did in 2007, 2008 and 2009, the banks are not going to call out those loans.

That’s a situation where if you can manage to continue to pay your mortgage, you’re in a good market, and the market is going to rise so that your property values will recover, it’s a situation where you can stay in. You never get called and you never go bankrupt or lose your shirt because you’ve taken a loan on a hard asset, and then that hard asset stays a hard asset. They’re not going to call your loan on it unless you stop paying. That’s a big difference in what kinds of loans you’re taking. There are many other kinds of loans. Those are just two examples that Mark gave. I wanted to highlight the differences there and why I love real estate for this sort of thing.

That’s so true. Not to point out political figures, but Donald Trump is a great example of doing exactly this. Regardless of his politics, that’s one wealthy guy or he claims to be anyway. He used it off the back of the real estate and borrows against it for his lifestyle, needs and otherwise. It’s not like he’s flipping burgers at McDonald’s to make his income. You’re exactly right.

The other piece to that puzzle is no income tax is due when you borrow that money. Let’s say you earned $1 at your day job flipping burgers. You might end up with $0.70 when you walk home due to the taxes due on that $1 that you earned. When you borrow $1, you get 100 cents, and you can use that for additional investing, buying your groceries, your yachts or whatever you might want to do with your money. There’s an efficiency standard there when you say borrowing against an asset versus earning income to do it.

You bring up a great point that there is an inherent risk. Even the wealthy understand this. They understand that they could possibly go belly up. If you think about Mark Zuckerberg who had to buy into the strategy. He had to pay billions of dollars in 2013. He paid between $1 billion and $2 billion of taxes in that year alone to buy his ticket. To get on this Buy, Borrow, Die train, you have to buy your ticket. That’s another key element to this BBD strategy. You got to make sure you’re getting on the train. Once you’re on the train and you’ve paid your dues to society with these massive tax bills, you now have this highly appreciating asset that’s growing in value.

Women, step forward, gain your power, and claim your femininity along with your masculinity.

Whatever happens to Facebook stock, Meta stock or whatever they want us to call it now, it will continue to go up and down and he’s got that risk where it might plummet. There’s nothing guaranteed about Facebook or Metaverse stock. In the meantime, borrowing against that asset is a tax-free way to do it. I truly think that even if he was to pass away, which I don’t want to give away the farm here for letter D, he can give that highly appreciated asset to his children, and then the gain continues. The grandma or grandpa does this, and the kids and grandkids get to stay on that train as long as they’re able to keep that wealth and not sell those stocks.

Die

There are a couple of things that come up for me on this. The first thing is I have never recommended borrowing to live your lifestyle. I’d love to address that if we got the time. The other thing is you might be thinking it’s appreciating. Eventually, you have to pay capital gains on that. That’s where the die piece comes in. The tax laws now are very favorable where your basis goes up to when that person died, so your taxes get completely eliminated from that appreciation. We’ll get into that a little bit more in EXTRA because we want to talk about the die piece. We’re not going to die. We’re not going to talk about the morbid subject of dying, but to give you clarity more on how this whole thing can work. Can you address the whole thing about borrowing for lifestyle stuff? 

Yes. I’m playing a little bit of devil’s advocate here because I don’t recommend that your Average Jane or Average Joe does exactly what we’re talking about on borrowing against your stock account or borrowing heavily for consumer purchases, for example. I agree with you, Moneeka. In fact, I specifically specialize in an asset class that has no risk for loss. It builds and grows on a guaranteed basis every single day, every single year. The asset of whole life insurance grows on a guaranteed basis every single year, and there’s nothing that we can do to stop it in times of good, in times of bad, the market crashes, the market is booming.

A whole life insurance policy of all things in the financial universe grows on a guaranteed basis. Interestingly enough, the cash value does not automatically spin-off income, so it meets the criteria of not churning out an income. You can borrow against the life insurance cash value. When you borrow against the life insurance cash value, it continues to grow. The life insurance cash value will continuously compound and grow uninterrupted like a house but guaranteed.

If I’ve got a house worth $500,000 and I use a HELOC on my house to go invest in another real estate deal, people sometimes do that. I’m not saying it’s a good idea or not. For all people, it’s certainly not, but sometimes it works. Now your money is doing two things at once there. Your house is still growing as if there was no HELOC. Zillow doesn’t care if we have a HELOC or not, but we also use the HELOC money to go buy this other real estate deal. What could possibly go wrong? See reference 2008.

As long as you can hold it, you’re okay.

 

That’s right. As long as you can hold it and pay those HELOC fees and everything, you’re okay. The risk of going underwater with a whole life policy is zero. There’s no way to go underwater with a life insurance policy because it continuously compounds. You can lapse a policy but the worst that could happen there is you just get to keep the house purchase that you made and the life insurance goes away. You have to watch that, but it’s guaranteed to grow for you on every day or every year basis. It can be used in the Buy, Borrow, Die way. We’ve got clients that are putting a couple of hundred bucks a month into one of those whole life policies. You don’t need to be a billionaire to do this strategy. Maybe there’s a thought there that you have or feedback on that.

I love that you brought that back in. For me, there’s a resistance to thinking about borrowing for lifestyle. Maybe that’s a different conversation that we have. Ladies, so you understand that that’s something very definitively to think about, for me, the paradigm shift that’s happening at this moment is I have a resistance to that because I’ve built my financial world based on we don’t borrow to live, but it sounds like the rich really do. 

The goal of the use of that policy especially as you’re working and in your younger years is to simply use it for increasing your assets, leveraging your assets, and using it to buy cashflow producing assets like real estate and whatnot. This is a key difference between a credit card and a regular loan. When you borrow against a life insurance policy in retirement, let’s say I’m 75 years old and I want to live on $150,000 this year, for example, I can borrow against my life insurance policy, pay no taxes on that, and it’s a non-recourse loan. If I was to borrow against life insurance, I don’t have to pay it back. There’s no requirement by the insurance company for me to pay it back during my lifetime.

If I take that loan to my grave, my death benefit is simply reduced by whatever I borrowed against the policy. Let’s say I’ve got a $5 million death benefit and I borrow $10 million over ten years. That’s $1 million a year tax-free, then I pass away and die. I’d still leave my family $4 million income-tax-free even though I had borrowed against those policies for the policy cash value for all those years. There are no taxes due on that money when I simply pass away. I could use that to invest in real estate, but I could as easily use it for the grandkids, groceries or whatever I might need. I wouldn’t recommend that when I’m 35 or 45 though.

It’s a $5 million cash benefit and you take $1 million for ten years, so that’s $10 million.

I did my math too quickly there. There’s a $5 million death benefit. Let’s say I took $1 million over ten years, so that’s $100,000 a year, and you spend that money over the ten-year period and you pass away. $5 million minus $1 million is $4 million tax-free.

Find assets that grow on a predictable schedule.

We’ve got buy and borrow, which we covered in the first part of the show, and I want to make sure that we can get to EXTRA. We’re out of time a little bit, but is there anything you want to add regarding Buy and Borrow? I’ve got a couple of things that I want to share with the audience about you and then we’ll move to EXTRA. 

The best thing we can say here is to find assets that grow on a predictable schedule. Real estate and whole life insurance have more wealth created. The fundamental underlying idea between real estate and whole life insurance is they are both contracts. If you think about it, the real power of the real estate deal is the contract. The real power of whole life insurance is the contract, and that’s where real wealth is built. It’s not paper wealth like Wall Street. From a philosophical standpoint, that’s where I particularly love to build real wealth. It’s on the contract and not just on paper up and down on Wall Street.

Mark is this huge resource of information. He loves chatting with you, ladies. I know many of you have already called him. For those of you that have not and would like to get in touch with him, go to BlissfulInvestor.com/mark. You can go do that. That’s his personal calendar so you can get on the schedule to chat with him.

I am so excited about this whole concept. We touched the tip of the iceberg here. There’s so much information. I don’t even feel complete with this conversation. Mark warned me that it’s a big topic. We’ve decided that in order to go deeper and answer the questions and understand this, we’re going to be doing a webinar. That webinar is going to be on February 3rd, 2022 from 1:00 PM to 2:30 PM Pacific time. To sign up for that, go to BlissfulInvestor.com/markwebinar. We will be talking much more in-depth about the BBD strategy. Is there anything you wanted to add after that before we go into your three Rapid-fire questions? 

Everybody, give Moneeka a super awesome high-five in your heart and give her a five-star review because it really makes a difference. Thank you, Moneeka.

Thank you so much. Tell us one super tip on getting started investing in real estate. 

 

It’s about scaling up. Here’s a simple thing to do. Find your bank account balance, print it out, and then draw two zeros at the end to see how it feels.

Give us a strategy for being successful in real estate investing.

Pick one area and make it your niche. Don’t listen to 10,000 gurus. Make it one person that you know is doing it for real and chase after it with all your heart.

What is one daily practice you do that contributes to your personal success? 

Starting with an affirmation that says something against what the world would want you to believe about yourself or the world itself. It’s something that is true and good and focuses on the positive.

Ladies, thank you so much for joining Mark and me for this portion of this show. We’ve got more in EXTRA. We’re going to be talking about the D portion of BBD. It’s a little bit morbid but it’s such an interesting conversation because you need to know what happens as you move forward building all this wealth. We’re going to be talking about the die portion in EXTRA. Stay tuned if you’re subscribed. If not, go to RealEstateInvestingForWomenExtra.com and you can sign up there.

Remember, we’ve got a webinar. Go to BlissfulInvestor.com/markwebinar. Sign up for that. If you want to talk to mark specifically about your own strategy, go to BlissfulInvestor.com/mark. Thank you again for joining us. I will look forward to seeing you next time. Until then, remember that goals without action are just dreams, so get out there, take action, and create the life your heart deeply desires. I’ll see you soon. Bye.

 

Important Links

• Lake Growth Financial Services
• Not Your Average Financial Podcast™
• BlissfulInvestor.com/mark
• BlissfulInvestor.com/markwebinar
• RealEstateInvestingForWomenExtra.com

 

About Mark Willis

Mark Willis, CFP® is a man on a mission to help you think differently about your money, your economy and your future. After graduating with six figures of student loan debt and discovering a way to turn his debt into real wealth as he watched everybody lose their retirement savings and home equity in 2008, he knew that he needed to find a more predictable way to meet his financial objectives and those of his clients.

Mark is a CERTIFIED FINANCIAL PLANNER™, a three-time #1 Best Selling Author and the owner of Lake Growth Financial Services, a financial firm in Chicago, Illinois. Over the years, he has helped hundreds of his clients take back control of their financial future and build their businesses with proven, tax-efficient financial solutions. He specializes in building custom-tailored financial strategies that are unknown to typical stock-jockeys, attorneys, or other financial gurus. As host of the Not Your Average Financial Podcast™, he shares some of his strategies for working with real estate, paying for college without going broke, and creating an income in retirement you will not outlive. Mark works with people who want to grow their wealth in ways that are safe and predictable, to become their own source of financing, and create tax-free income in retirement.

 

 

 

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To listen to the EXTRA portion of this show go to RealEstateInvestingForWomenExtra.com

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Syndication Series #5: Scaling A Multifamily Portfolio With Liz Faircloth

 

Multifamily is the ultimate goal of many real estate investors in America. Achieving the dream is possible, but how about scaling? That’s where Moneeka will help as she discusses scaling multifamily investments with the cofounder of the DeRosa Group and the Real Estate InvestHER community, Liz Faircloth. Liz talks about getting into real estate, how she and her husband pivoted into multifamily, and what you need to know about out of state investing. Learn more from Liz and Moneeka about the multifamily market by tuning in.

—

Watch the episode here

 

Listen to the podcast here

 

Syndication Series #5: Scaling A Multifamily Portfolio With Liz Faircloth

Real Estate Investing for Women

In this episode, I am so excited to welcome to the show, Liz Faircloth. She Cofounded the DeRosa Group in 2005 with her husband, Matt. The DeRosa Group, based in Trenton, New Jersey, is an owner of commercial and residential property with a mission to transform lives through real estate. DeRosa has vast experience in bringing properties to their highest and best value, which includes repositioning single-family homes, multifamily, apartment buildings, mixed-use, retail and office space.

The company controls close to 1,000 units of residential and commercial assets throughout the East Coast. Liz is the Cofounder of The Real Estate InvestHER community, a platform to empower women to live a financially free and balanced life through over 25 Meetups across the US and Canada, an online community and membership that offers accountability and mentorship for women to take their businesses to the next level.

She is the co-host of The Real Estate InvestHER Show, which I will be on too. They published their first book, The Only Woman in the Room: Knowledge and Inspiration From 20 Women Real Estate Investors. Liz has been interviewed for many articles and top-rated podcasts, including mine, including being a two-time guest on the top-rated BiggerPockets Podcast and the Best Ever Show. On the personal side, Liz is an avid runner, has completed several triathlons and marathons, has two adorable children and is a New York Mets fan. Liz, welcome to the show.

Thank you so much for having me.

It’s nice to see you again. You and Andresa do so much cool stuff with the investor community. I love what you’re doing together, but I haven’t gotten to chat with you about what you’re doing. Why don’t you give us a high-level version of your story of how you got interested in real estate and what your path has been?

It wasn’t a linear path. My husband and I at the time had started dating. Before we started dating, I was in graduate school for Social Work. I got my Master’s in Social Work, wanted to open my practice and help people. That’s always been my passion. I grew up in a great family but middle-class family. My dad was a school teacher. I was never introduced to entrepreneurs or investors. That wasn’t in my sphere of any context growing up. Hard work ethic was there, but certainly the business piece of it, I was not familiar with or didn’t have a lot of exposure.

Until I met my brother-in-law, who was an entrepreneur, started a business and handed me Rich Dad Poor Dad. I’m 23 at the time. He’s like, “You got to read this.” I liked personal growth books. I started in college reading different books and always enjoyed them. I liked learning and growing. I’m a dork in college. I’m reading Awaken the Giant Within and everyone’s like, “What are you reading?” I’m like, “I don’t like fiction.” I still don’t like fiction. I have to learn something from it.

Long story short, I read that. My eyes were open to this idea of passive income. I honestly never heard of that before like, “I can have money working for me, not me working for money.” It was a whole new opened my eye concept, which I know a lot of people have said, but what got us involved, I then started dating my now-husband. We lived about two hours from each other. Every weekend we’d go to all the REIA meetings and start learning.

Make sure you’re mitigating risk for yourselves, but most importantly, your investors.

We’re in our twenties and didn’t know anything. We didn’t have any money to invest, but we said, “Let’s just give this a go.” We start taking courses. They told you to like the door knock. This was before Facebook Marketplace. It was literally opening the newspaper, go to the foreign ads and calling tired landlords. That was the million-dollar tip we got at one of the events. That’s what we did.

Every weekend, literally, we are knocking on doors, right outside of Philadelphia, where my husband lived when I visited him. One day, we got someone to say, “That’s interesting. Let me think about that.” We called them back and struck up a deal. A year into us taking courses, door knocking, cold calling and bootstrap whatever we could do, we struck up a deal and bought our first property. It was a duplex for $150,000. We learned everything on that property. We’d go with people.

When you buy a property, the tenants that are there may not be your tenants ongoing because of a new sheriff’s in town. We learned the whole multifamily. It opened our eyes. It was only multis in this neighborhood. It wasn’t like we chose a duplex. It just happened because it was older homes right outside of Philadelphia. There were only duplexes and small multis. Long story short, we got our start there, we moved to New Jersey and started our business. We focused on New Jersey in buying properties there.

We sold that property and did a 1031 into a four-unit and then that started our trajectory in New Jersey. Over many years I’ve been doing this, we had lots of twists and turns. I wished we focused on multi, but we didn’t. We got involved in a lot of different things early on, like people who get distracted as they do and people that are probably a little naive, little young as well, can do. We flipped houses.

We got into tax liens. We bought a commercial building. We bought raw land. Every random thing you could possibly think of, we probably have done it until we doubled down on multifamily. Our business is focused on multifamily. We went from a 2-duplex to a 10-unit. We grew very steadily. We didn’t go from a 2- to a 200-unit. We did, but over time and now we focus on larger multis and we’re starting a fund where we’re investing with other operators and things of that sort.

We’re diversifying a little bit outside of multi but more from a fund perspective. I’m involved in that, not day-to-day but more from like strategic level, helping build our team out and exciting to be able to invest in different sectors of real estate, not just multifamily, but we love multifamily. We have a letter of intent on a property in the Southeast, which is where we focused on.

Tell me a little bit more about this fund. Let’s dive a little deeper into that.

With regards to the fund, we talk to people all the time. People are like, “This sounds like a great opportunity for a passive investor.” You’re like, “I don’t have a building. I don’t have anything under contract right now.” We refer them. We know a lot of people we like and respect in the business. We have no problem with that. There’s a lot of good syndicators out there.

We wanted to have another flavor of ice cream if you will. The fund will obviously be an ongoing rolling fund and it will give investors what we’re going to invest in and all things that we know and that we’ve vetted. We’re not going to start investing in a business that we have no idea about because that’s a whole other level. It’s like mitigating risk. We want to mitigate your risks. You want to make sure you’re mitigating risk for yourselves, but most importantly, your investors.

Hard money loans will be one. We’re going to start to work with hard money operators that we like and respect, that we know to do good business. We were not the hard money lenders. They are and we’re going to do that. Multifamily will be a piece of it. If we have a project that comes up, we’re going to almost invest in our own projects. That will be a piece of it. Those are the two main pieces.

I want to say, even self-storage, there have been operators. That might be another sector. It will be all related to investing in real estate on some level, but it will be in a way that we are not the sole operators of everything. That’s where, as we evolve, it’s like, you don’t want to do everything yourself. Once you figure that out, you got to focus on that. That’s what that looks like. We’re building out a team and that’s been in the making for some time, but that’s the goal.

I’m so fascinated by that idea because I feel like for me too, there’s something that I do well. I do executive homes in Silicon Valley. I’ve got my entire system. It’s all built out. It runs itself. I don’t worry too much about it. I was telling you before that I’m taking all of May off for my birth month because that’s where my birthday is. We’re traveling to Hawaii and going to a spa in Palm Springs with my sister.

I get to have that lifestyle. It is fantastic. I’m not particularly interested in working significantly more. I do get bored because we have construction projects. We have some other stuff going on so that my entrepreneurial mind doesn’t slow down or get bored. What is happening is I’ve found several different syndicators doing different things. I’ve invested in storage, multifamily and a variety of different things like what you were talking about.

I don’t know how this is going to work for you guys, but every single time I invest, it’s a minimum of $100,000. That’s great for us because we have that money. We’re looking to retire. We’re moving that way, but not everybody who’s reading to this show has access to $100,000 for this and that. They want to be able to diversify without spending that much money. What is that fund look like for you? Is there going to be a minimum investment? Have you worked that out? What does that look like?

One organization we’ve started working with is called Republic. Basically, what they do is, in essence, have a similar type of approach in that people could invest $10,000, even down to $1,000. Don’t quote me on that but I’m not familiar. What’s fascinating though if that for our last syndication, it was a 336-unit apartment building. To your point, our minimum was $50,000 on that project. Not everyone has that, but they want to invest in real estate.

Don’t do everything yourself. Do what you do and do it well.

We found this company and what basically they’re doing is they’re the investor in that project, but they’re the ones going out to the accredited investors because it was the accredited investors to then say, “We are all pooling all this money to gather,” then they are the investor in that project with us. Just so Jane Doe, who’s got a $1,000, they’re all pooled in this together in this company called Republic. Republic is ultimately the investor, if that makes sense. It was really cool because that was the first time we’d ever done that because we thought about it. We have a 336-unit apartment complex. We had close to 80 investors. It’s a lot of people and that’s even at a minimum of $50,000.

You had some people who put a $500,000 and some people put any amount. There’s a lot of money assigned. I’m the cheapest person. I would be putting $1,000 at anything. I’m like, “That’s me. I’m in that kind of money.” I know. I get it. That was interesting. We were pleased to see that. It’s a neat approach. That’s the future, to be honest, because I love that concept and I was intrigued by it. As we do other deals, we’re going to be working with them. I’m not sure the relationship exactly and how that’s going to play out in the fund, but those are the neat example for our last syndication that gave everyone the opportunity and that’s cool.

Are they more of crowd funders, syndicators or do you have any idea of their structure? I’m interested.

I’m not too sure which level they are. I heard about it conceptually and was intrigued, but I know that they’ve been around and they’re not just at the start of the company. There are a lot of different pieces around it to ensure how you do it because some funds are accredited and not accredited. There is an of legal stuff and a lot of money to the SEC attorneys and all that kind of stuff.

I know this is a project we advertised because we only accepted accredited. It’s a project that you can’t solicit. It’s illegal to do that. We have these other projects from friends and family, but I know with this particular project, we advertise because we only accepted accredited. It’s a neat approach, but I’m happy to get more info.

Let’s put our heads together. I’d love to know a little bit more about that because I’m always looking for ways. When I get phone calls from my ladies, when they say, “I’ve only got this much, what can we do to that, for that and with that to benefit them in the biggest way?” Another topic that I’m getting a lot for my ladies is this idea of out-of-state investing, especially here in California. There are a lot of markets where people feel like, “I can’t invest in my backyard.” They’re scared to go out of state. I know that you do a lot of multifamily out of state. Let’s talk a little bit about that, share your perspective and how to look for projects and stuff like that.

For our first seven years, we invested locally. We don’t invest more than 30 minutes away. We had a team. We had a leasing agent. We had our bookkeeper who did all the accounting. We have a tenant relations person and a maintenance person. We had literally four people on our staff besides my husband and me, helping us manage our local properties. We bought a property in Philadelphia, which was an 18-unit and now it was 35 units. It’s like, “We can still do it.” The market shifted. I’m in the Northeast and New Jersey is not the most favorable state on taxes in this country. Even in Philadelphia, the projects that we were looking at were getting outbid.

 

It was getting more expensive and we raised money. We work with investors. The returns are important to ensure that we’re going to get into the right project. We’re not just parking millions of dollars from a relative. we’re constantly looking at, “How are we going to get into the right area for our investment goals and our investors?” A broker had brought the same broker. That’s the first thing I’d say as a good tip is to start building relationships with commercial brokers.

Sometimes it’s tough, especially now. You think about a hot market. Everyone’s calling commercial brokers saying, “I invest in multifamily. Do you have anything for me? You and 90 million other people.” You got to like differentiate. Keep that in mind too. We had closed that eighteen-unit with the same broker who called us about a property in Lancaster, Pennsylvania, which is about an hour and a half from where we were living at the time.

He said, “Are you interested?” We like, “One hour and a half, we’re not going to send our leasing agent there. We’re not sending our maintenance person there. We need to look into property management companies.” After betting the deal and that’s a great story in and of itself. The first domino always is a good property management company. You’re going to need that. Some people successfully invest in properties and they self-manage the properties. I’ve heard of it. I know a lot of women who do it successfully.

We knew at a 49-unit, it wasn’t going to be our best strategy. We knew it was going to be important to have a local property management company. Why I say that’s a great person to have on your team? Let’s say your sourcing an area in Alabama or wherever you’re sourcing deals. Before even looking for property, start getting to know the property management companies there because that’s going to follow.

If you cannot find a property management company in a geographical area, that might be a sign for a lot of reasons that something is off. Even with Airbnb, I know that’s very hot vacation rentals and luxury vacation rentals or whatever the people are interested in. If it’s a hot area, there are people managing in that hot area. That’s a great source and a great team member to start to talk to. Number one, they know the area, what streets are good or aren’t good? What areas are up and coming? What areas are just too hot and too expensive because we know that’s the case.

In it exuberant, everywhere is like, “Hold on. What do you want?” On my way to Target, at the end of the day, you’re a real estate investor. You never turn it off. I saw a lot for sale. I’m tangent. I saw a sign that said For Sale and a handwritten phone number. I’m like, “That’s a good sign.” It’s a great area and what county where I live. I’m like, “That’s an interesting area.” I texted the person. I said, “How much is the lot? What’s the size?” All the things you ask. “We’ve done a bit of new construction a time, but we could probably pull it off $250,000.” I’m like, “I don’t even know if you’d get $500,000 for the property. That’s just for the lot.”

People are not even with their prices. Going back to out of state, property management companies are helpful to have on your team. What commercial brokers care about is if you’ve closed deals. They do not want to work with people who are going to get to the finish line and not be able to pull the money together because they want their commission. That’s what they care about.

Beyond everything else you want to talk about with them, they care about if you’ve closed with them or with anyone of them. If you or someone on your core team has closed deals that you’re looking for. If you’re looking at 100-unit, you better have someone that you’re bringing to the table that, “This is the kind of team we have and we’ve done. This is what we’ve closed.”

The idea of the diversity of jobs is even more important than job growth.

That is what they’re thinking right now when you call them. This broker brought us this project and we started to talk to property management companies in the area. What helped and I’d always say this, is if you have somebody in your family or network who lives in the area, it is helpful. You don’t need to have a degree in real estate. They don’t have to have ten years of investing.

If you have some boots on the ground and feet on the street, people that aren’t just property management because our property management company is a vendor, we always like to offer our property management companies potential ownership in the building. Every time we buy a building and we say, “We’re syndicating this. Would you like to own part of it as well?”

It’s not the best sign if they’re like, “No.” Even if they put $25,000 and maybe they think that’s chump change. Most of all the property management companies we’ve worked with have invested in our deals. That’s a good sign. That’s skin in the game, so to speak. I would say the second, start to look at, “Is this an up-and-coming area? Do I know anyone in my network that can help me? Is there a reason to go there? Do I want to go there?” If you’re going to invest in an area that those are questions to ask. If I have to now get on a plane, is that on the way to my aunt or my parents? Is this an area where my kid’s going to college for the next four years?

I don’t know, but make it make sense versus an area that literally you know no one. That can work, but if you can blend a few things in there and it is an up-and-coming area, you’re going to want somebody that’s 10 to 15 minutes from the property, whether it’s a realtor, you got to pay them hourly. If you can’t get there, someone needs to get there because fires happen. Things happen. We have a cousin in this area, Lancaster.

When we’re looking at it, we’re like, “What do you think?” He’s an investor, which was even better, but he was able to be our boots on the ground. He’s part of our general partner. It has been huge. We had a fire there years ago. We want to be to make sure everyone’s okay. We couldn’t be in one hour and a half. The fire is probably going to throw a little more damage than ten minutes.

You said so much there, but a couple of things that I want to highlight is I think that people think that you hear about an amazing market and you should just invest in there. I remember before 2008, in the mid-2000s, everybody was in Henderson, Nevada, outside Las Vegas. I have close friends who are all invested. There was also Florida and Chicago.

Those were some big hubs where they were marketing to investors from out of state, especially California, because California had a bunch of equity and wasn’t working for us. Everybody could get loans by just stating things, so there were these pockets that were trending. People were making money hand over fist.

 

I thought I always play the longer trend. I don’t play the short short-term trends. I will admit I would probably be a lot richer if I got that right more often, but there are so many people that get that wrong. Part of it is they didn’t do some of the things that you talk about. It wasn’t a place that I would ever want to visit. It wasn’t a place on the way to anything Las Vegas, Chicago or Florida. A lot of people didn’t have that mentality of, “Would I want to go there? Would I vacation there? Would I want to live there? Would I want my kids to go to college there? Is there any reason for me to go there?”

Even in Henderson, it’s not like people were like, “I’d like to have something in Henderson because I like to go to Las Vegas.” It was, “I’m investing in Henderson because everybody else is investing in Henderson.” I love how you talk about this, especially in your first few deals. This is hugely important is as you’re getting to know what this is like, the very first time you step out of state, you don’t want it to be in a market that you completely don’t understand that you get a bunch of numbers from someone that’s a vendor. They’re interested in selling these properties.

They’re not going to lie to you, but they’re definitely going to paint a very pretty picture. If you don’t know the market and you don’t know anybody who’s there. We had a friend that moved to Henderson and we went to visit them one time when we went on a trip to Las Vegas. He was like, “There are all these crazy investors coming in here.” All around town, people are like, “This bubble’s going to blow,” because there weren’t as many people in the restaurants anymore and there were things that were closing down.

We’re like, “How is it possible that all his expansion is happening, but the Asheville economy is shrinking?” There’s no way to have known that if we hadn’t had this conversation with our friends that had just moved there. There’s all this hype about Henderson, but they just closed down the local, Whole Foods or whatever market it was. I love what you talk about as we don’t have to have boots on the ground all the time, every time. Eventually, you do develop a skill and get to know markets or you focus on certain markets.

Especially in those first few deals that you’re going out. That is all such good advice. Make sure that it’s someplace you would want to go. It’s like basic, intuitive, common sense stuff that we don’t think about because we get whisked away in the excitement of what’s possible. That basic comments and stuff, I like to go there. Is there anything there that I appreciate? Do I have someone that’s relatively close by maybe within a half-hour that they’re not going to be boots on the ground? Just have the conversation once in a while, see how things are going in that market or whatever.

Thank you so much for that because normally, people are like, “You need to look at the colleges, employers or the average income rate.” You do need to do all those things, but it’s not the end of the story. Especially when you’re starting, it’s not necessarily going to give you the comfort that you need to get out there and do it because nothing happens for you until you take action. If it’s just the numbers and that’s not inspiring you to take action, then nothing is happening for you.

Many people do get caught up. There are so many important numbers as you analyze markets and deals, but even just the idea of what COVID brought is the importance of diversity of jobs. Are there different jobs that people can be employed by? They’re literally all in on the tech, government or in whatever industry. The idea of the diversity of jobs is, to me, even more important than job growth.

They’re both important, but just to know that people can get different jobs. These are positive things. There are many markets that don’t have that. Even high-priced areas don’t have that. We probably invest more in the workforce housing, more up-and-coming areas, not areas that are on any hot market list. If those are the two expensive areas, we’re like, “No. We don’t want to invest in an area that’s on any list.”

Your mistakes are going to just make you propel you forward and you’re going to learn from it and you’re going to grow from it.

It’s much more practical advice. My ladies learn a lot of good advice here from very smart people because sometimes we got to ground it. This is how you make yourself comfortable with that. Ask yourself some real common sense questions because so much of building a real business is common sense. There’s a lot of fancy languaging. There’s a lot of people that say things that sound smart, but in the end, it’s a common-sense business. Thank you so much for grounding that for us. That was helpful.

Ladies, we are going to do EXTRA. Liz and I are going to be talking more about building your team. Finding partners, building teams, when you’re in-state or out of state. She likes to say, “Who’s on the bus,” and then team-building with all those people that are on the bus. I love that picture because you’re all going out on a field trip and you’re all on this bus. Where are you going to go? How are you going to get there? Is it going to be fun? Is it going to be profitable? That to look forward to. Before we move to our three rapid-fire questions, could you tell everybody how they can get in touch with you?

In terms of some of the active multifamily projects or funds or to learn more about some of the day-to-day real estate projects, you can go over to my DeRosaGroup.com. My husband got a lot of teaching as well. We’re both love teaching and helping. You’ll see a lot of YouTube content and things of that sort from him. In terms of women who are interested in getting more support from women and getting connected, check us out, TheRealEstateInvestHer.com. From there, you can learn all about our meetups that are across the country and our Facebook Community, membership and things we got going on with helping women.

Are you ready for three Rapid-fire questions?

Yes, definitely.

What’s one super tip on getting started investing in real estate?

Don’t get distracted. Focus on a niche and go all-in on one thing.

What’s one strategy to be successful as a real estate investor?

 

Don’t give up. I hope you don’t lose money, but you may lose money, like many of us. You’re going to see it potentially. In many years, I can tell you a lot of interesting stories. It had money like the mini Bernie Madoff situation where literally hundreds of thousands of dollars were stolen from us. We don’t give up. That makes anyone that’s successful in any line of business or anything in life, don’t give up. Know that your mistakes are going to make you propel you forward. You’re going to learn and grow from it. If you don’t have that attitude, then everyone gets stopped after they lose money and something bad happens. Don’t give up. That’s the key.

What would you say is one daily practice that you do that contributes to your personal success?

It’s something I’ve always done, then go back and forth and don’t do it consistently. I do daily prayer. I read a little spiritual and think about it. I’ve been doing like ten-minute meditation. I’d like to increase that eventually. For me, it’s been super helpful. I focus on whatever I learned in that prayer. I focus on that in my meditation. If I miss a day, it’s rare, but I have maybe missed 1 or 2 days for four months. Every day, I get that in.

My meditation practice has gently worked its way into my life, to where I don’t even think about it. It started just to happen, then I missed three days. My husband and I were on edge. I lost my temper at a restaurant. I didn’t yell at anybody, but I didn’t have the patience to wait. Nobody saw it, but I felt it. I’m like, “What is going on with me? Who is this person?” My husband was like, “Are you stressed out?” I was like, “I haven’t been meditating. I haven’t been taking Moneeka time.” I have been taking Moneeka time. I got a pedicure. I still do, but that piece that starts my day has been so important. I’m glad you mentioned that.

It’s constant. It’s like going to the gym. You can’t do it once and you’re good.

I always say about bliss, like all of our bliss practices. You can’t just brush your teeth once in your lifetime and hope your teeth are going to be good. You got to brush it every day. You got to keep doing those little things. Liz, as always, I’ve loved our conversation. Thank you for everything you shared in the show.

Thank you so much for having me. This is amazing. I hope I was helpful and gave some content that your audience will help them with.

Liz and I have more to talk about. We’re going to be talking about building teams, who are on the bus, and all of that good stuff. Stay tuned for EXTRA. If you’re not subscribed, go to RealEstateInvestingForWomenEXTRA.com. You get the first seven days for free. Check it out, see if you love it, and if you don’t, that’s totally fine. For those of you that are leaving Liz and I, thank you so much for joining us for this portion of the show. I look forward to seeing you next time. Until then, remember, goals without action are just dreams. Get out there, take action and create the life your heart deeply desires. I’ll see you soon. Bye.

 

Important Links

• DeRosa Group
• The Real Estate InvestHER
• The Real Estate InvestHER Show
• The Only Woman in the Room: Knowledge and Inspiration From 20 Women Real Estate Investors
• BiggerPockets Podcast
• Best Ever Show
• Rich Dad Poor Dad
• Awaken the Giant Within
• Facebook Community – The Real Estate Investher
• RealEstateInvestingForWomenEXTRA.com

 

About Liz Faircloth

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Syndication Series #3: Fundamentals Of Investing To Achieve Financial Independence With Chris Larsen

 

Real estate is the best path towards achieving financial independence. Becoming financially independent means having the choice to do what you want with your time. In this episode, Moneeka Sawyer sits down for some great insights into real estate with investor, author and entrepreneur, Chris Larsen of Next Level Income. We hear Chris narrate what got him into real estate, starting from single family to commercial real estate.  Chris also shares his investing strategy and how Infinite Banking works, and how to leverage your insurance policy for cashflow. Drop by and listen in as Chris and Moneeka share valuable information for investors to  use.

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Watch the episode here

 

Listen to the podcast here

 

Syndication Series #3: Fundamentals Of Investing To Achieve Financial Independence With Chris Larsen

Real Estate Investing For Women

In this episode, I am so excited to welcome to the show, Chris Larsen. He is the Founder and Managing Partner of Next-Level Income. Chris has been investing and managing real estate for several years. While still a college student, he bought his first rental property at the age of 21. I love people that get into this industry young.

From there, he expanded into development, private lending, buying distressed debt, as well as commercial offices and ultimately syndicating multifamily properties. He began syndicating deals in 2016 and has been actively involved in over $225 million of real estate acquisitions. He is passionate about helping investors become financially independent. Chris, welcome to the show.

Thank you so much for having me. I’m excited to be here.

I’ve been looking forward to this show and you’ve been so patient with me with all the rescheduling. Thank you. I’m glad we’re finally here. Chris, give us a high level of your story. I know it’s very exciting.

First off, I love that you bring up to get started early. Now it’s early, whenever you can do it. I was 21 when I was in college. My passion at the time was racing bicycles. I went to Virginia Tech for Biomechanical Engineering. I did pretty well in school and I was told like, “You should be an engineer like your grandfather.” All I want to do is race bicycles.

Cycling is like a real engineer sport because it’s all about numbers and power to weight ratios. At that time, drug which I wasn’t into. That was the end of my story in a lot of ways because I didn’t want to do that. Along the way, at that same time, when I was at this turning point, trying to decide what to do as I was looking towards a professional career, my best friend, roommate and training partner passed away. He had a massive brain hemorrhage between my freshmen and sophomore year in college.

I poured another year into the sport and then I realized even after I was winning more and more races, that I wasn’t happy. Even though my team went professional, I didn’t. I stepped away from the sport, went back to school. As a junior in college, I thought like, “What the heck am I going to do with my life? I don’t want to be an engineer. I was going to go race and then figure out what I wanted to do.” While I was racing and even when I was young, the first thing I remember and probably if you’re reading, you think the same thing. You hop on your bike and you have this tremendous sense of freedom. That’s what I wanted.

I wanted the freedom to live life on my own terms to respect not only the life I was giving them but also the life of the friend that I lost. I turned towards investing. I was introduced to it by the same gentleman, Clint Provenza, who introduced me to cycling. My father passed away at five and he was a real mentor to me. I started looking into investing. I was day trading, and one of those nights/mornings that 3:00 AM, when I was laying there in bed, thinking about what I should do with my trades. I thought like, “Do I want to be doing this twenty years from now?” The answer was no.

I looked at other investments. I read over 250 books on money, investing and settled on real estate because you could control it. I bought my first property at 21. I built and managed a portfolio of single-family rentals for fifteen years but ultimately transitioned into commercial real estate. That’s what we focus on. I try to enlighten people and share my mistakes, so they can take the fast track to get towards financial independence, which took me a couple of years.

It’s so interesting. I have a very similar story in that. I wanted to be a dancer and that was my thing. I came to investing for a similar reason. I wanted a life of choice. I think that freedom of choice is our true wealth. That’s what I wanted and real estate allowed that. It did take me several years before I could say I could retire, my husband and I, but I couldn’t do with the lifestyle that I wanted in California. We would have had to move, so we continued to grow our portfolio, but it was the same thing. After several years, we are doing everything now that we’re doing because of the choice and we want to do that. There’s nothing more liberating than that.

At some point, income is important, but it’s the freedom to choose that brings happiness.

I think studies show. I teach a financial literacy course here. It’s high school students coming out of underprivileged homes. Most of them are living below the poverty line. We had a conversation about, at some point, income is important, but it’s the freedom to choose. I cited the study that shows the janitors that have freedom in their day-to-day choices are happier than the CEOs that are making 10,000 times now what they are, but they’re not happy because they don’t have freedom.

My TED Talk is about this and there’s a lot of research about there’s a threshold where money does buy happiness to a certain threshold. The original number they came up with within 2010 was $75,000, but a study was done in January 2021 that said it was $100,000. It’s gone up because of inflation. Whatever that number is, it’s $100,000 now.

Up until then, the number of dollars that you bring into your household does relate directly to the level of happiness in the household or the level of satisfaction. After that, now we have freedom and excess income. We are taken care of and now we can focus on joy, bliss. I’m so glad we’re on the same wavelength around that. Tell me about this concept of infinite banking.

Next-Level Income was born of this desire to curate information around financial literacy and education. As I built it out, we have three main areas. We talk about how to make, keep and grow your money. Those are the three steps. I have coaching clients and that’s what we work through like, “How can you maximize how much money you’re making? How can you keep more money?”

 

 

Thank you so much. Talk to me about your perspective on multifamily. This is a hot topic with my ladies.

I call multifamily real estate the holy grail of investing. If you look at my book, it says How to Make, Keep, and Grow Your Money Using the ‘Holy Grail of Real Estate’ to Achieve Financial Independence. I’ll send you a copy for free if you go to the website. I’m so high on multifamily. I was the person that managed my portfolio for fifteen years.

I was the person that got the phone call on my honeymoon in Costa Rica and paid $40 and collect call fees to deal with a problem tenant. I was the guy that stayed in too long and didn’t get a great return on my properties. I was also the guy that was fortunate enough to run into somebody that introduced me to this space. I started to investigate multifamily real estate and I’m a demographics guy. I spent eighteen years in the medical device industry. That’s how I made the money to invest. I got into a medical device.

I moved and lived in Asheville, North Carolina, because we have great demographic trends. When I started to investigate multifamily being an engineer, day-to-day guy and analytical, I found that multifamily was supported by these terrific demographics by what we now call the Millennials. They rented and guess who’s supporting multifamily now? It’s their parents, the Baby Boomers. They’re selling their homes and renting and now Gen Z is renting as well. We’ve turned into this nation that we like to own the American dream, but also flexibility.

I jumped into multifamily because of the demographics and the analytics. My MBA is in Portfolio Managementhat I found is something that Ray Dalio calls The Holy Grail of Investing, which allows you to increase the Sharpe ratio. The Sharpe ratio increases the returns of your portfolio and decreases the risk. It’s like a boat that goes faster and it has less bumps when you’re on it. I thought, “What is better than that?” Ray Dalio calls that The Holy Grail of Investing. I call multifamily the Holy Grail of Real Estate because it allows you to increase the returns in your portfolio and allows you to decrease the risk.

I know that in EXTRA, we’re going to talk a lot more about multifamily. We’re going to go deeper to the pros and cons of multifamily and then he’s going to do some number breakdowns for us. These are things that I get asked about a lot. It’s not my strong suit. My husband and I have not been involved yet in multifamily. The commercial evaluation of the numbers is not his strong suit, so he hasn’t had to do it yet. This will be fun. EXTRA will be talking a lot about that stuff, but why don’t you give us a high level on why you like multifamily? What’s so exciting about it?

There are a few things. If you’re reading and you’re like, “I love real estate, but I don’t want to be the person that has to go in and fix toilets, find new tenants, screen people and do showings and all that.” I get that because I’ve done it. The big thing is if you invest in multifamily with an experienced operator, it’s 100% passive. You can invest, be a direct owner, get the income, the depreciation and the depreciation of great tax benefits, especially if you’re a high-income earner, but you don’t have to deal with it all yourself. That’s fantastic. It’s scalable.

You could buy a 100 unit multifamily building for $10 million. You could buy a $1 billion multifamily portfolio. Whether you’re investing in your first deal or you’ve been investing for twenty years and you’re looking to place $1 million or $10 million of capital, you can use the same strategy. It’s very scalable. There’s something that I like even more, it’s the control. You might’ve heard me talk about laying in bed at 3:00 AM feeling like things were out of control with my money. I like real estate because you can control it.

We’re acquiring a property in Greenville, South Carolina and we live in Asheville, which is about an hour away. We were down in South Carolina for my son’s 9/11 lacrosse game. I took him to the property and we drove around. It was built in 1997. It’s a little beat up. The stairs needed to be replaced. They need new paint. We can control all of those things. If you own a business, apartments are valued like a business. They’re valued by net operating income. If you live in your home or you have a rental home and it’s 1,000 square feet, and it sells for $300 a square foot, it’s worth $300,000. It’s easy math.

 

The bank figures that out because they say, “The home on your right is worth $305 a square foot, on your left is worth $295 a square foot.” Yours is about $300 a square foot. You don’t control that. The market goes up and down. If we go and buy an apartment building for $10 million and it has $1 million of net operating income, that’s probably not a great metric. Call it a $20 million apartment building with $1 million in net operating income.

We increase the net operating income 50% from $1 million with a $20 million to $1.5 million new valuation. You’re probably thinking to yourself when your cap rate is $30 million. We control that when we’re able to move the rents by the renovations, operations, being more efficient, bringing better management and those sorts of things. Again, it’s passive and scalable, but most importantly, it’s controllable.

I’m sure some of you are like me going, “Wow,” but we will break this down so you can go through this again and we’ll break down more of that in EXTRA so we can take it a little bit slower. I feel like you already covered this. What are the important metrics? What exactly should we be looking at?

I’ll dive a little deeper again. We can unpack this a lot more in the EXTRA section. I started as an investor in these deals. I was called a limited partner before I syndicated these deals and became a general partner. If you’re a limited partner and you say, “I’m interested in this.” You need to look at three different things. You need to look at geography. Are you investing in an area of the country that people want to move to? I wrote a whole blog post about this. I talked about how you can identify these. It’s very easy to see with reports from companies like United Van Lines. You can go on our blog at the beginning of 2021 and read the post I put on there.

You want to be in large cities where people are moving, that is growing faster than the national average. Where are these cities? A lot of these are from the Southeast. I moved to North Carolina for the demographics, the Carolinas, Florida, Georgia, Texas, Phoenix, Colorado and Boise, Idaho seems to be a big one here. Why are people moving here? They’re moving out of California to places like Colorado, Texas and Idaho.

They’re moving to the Southeast from places like California, LA, New England and New York. The places that are cold and don’t have a great quality of life. Taxes are going up. I have a coaching client. He told me and he’s like, “We’re looking at South Carolina to move. Taxes are going up. We don’t want to live here anymore.” Number two, the operator. Are you working with an operator? This is somebody that’s going, finding and buying the property. That’s going to bring you in alongside them and then they’re going to operate it. They’re going to increase that net operating income.

Have they done it before? Have you done it in the geography that you’re invested in? What is their experience there? You want to ask him some tough questions about what’s their strategy. You look at the metrics in the deal. That’s pretty complex. We looked at over two dozen different metrics on the deals that we’re in, and there are a lot of different variables that come into play. Again, if you’ve ever invested in a business, if you’re a business owner or professional, you can read a financial statement.

That’s the thing. If you call me and say, “I’m interested in this deal.” As an owner of this property, you’re entitled to all the same information that you would be entitled to if you own a single-family home. You can go through those and you can call the operator and say, “Walk me through this. What am I seeing here and there?” Don’t be afraid to ask those questions and understand the numbers, strategy and why an operator is going into the market.

Talk to me a little bit about ROI. Different operators do this differently. Tell us a little bit about how you structure your deals for your investors.

What we do is called syndication. Syndication is very simple, it is someone, an operator going out and bringing in investors alongside them to invest. What’s important is how that syndication is structured. What we do is we do what’s called a preferred return. If you look at deals, say 6% to 8%, what does that mean? That means investors get the first 6%to 8% of the returns coming from that property. Investors are preferred in front of anybody else. They’re going to be subordinate to the lender.

The other thing that’s nice about these properties is it’s called non-recourse debt. I work with a lot of doctors after spending several years in the medical device profession. They don’t want more risk, more debt and a bank to come after them for something. They have patients that are out for them if something bad happens. That’s a nice thing about these properties as well.

After taxes, the next biggest expense that a lot of people don’t think about is financing.

After the lender, the investors get that preferred return. There’s an equity split. That split is a large part that goes to investors and then the partners that organize these deals get the minority position in there, but that’s the incentive. You want to work with the group, in my opinion. How we do it is we give the investors the first big portion of the returns, about a half of the returns upfront. The other half comes from that split on the backside and then we as partners get a piece of that split.

We’re incentivized to maximize the profit of that property on the backend. You asked a question there and I’ll address this. There are a couple of different ways to look at this. You can look at a total return. You’re going to get a 10% return comprised of half cash and half appreciation on a property. There’s also an equity multiple. You’re going to double your money over a certain period of time, it’s another way to look at it. There’s also what’s called the IRR, the Internal Rate of Return.

We can dive deeper into the EXTRA portion of the show or you can go ahead and check out my book, which goes deeper into this as well. You can always read on a site like Investopedia, which dives deeper too. It depends on what type of investor you are. Maybe cash or the total return is important to you. It all depends on what type of investor you are.

Do you pay investors immediately? When they first invest money, are they guaranteed a certain return each year while the project is happening? How do you structure that for your people?

One little red flag is we never say guaranteed because these are investments that have a risk associated with them. If you ever hear me say guaranteed, you should either slap me on the face with a stick and a paper towel or something in my mouth too. We have a couple of different types of investments. We have investments that we pay investors a fixed return based upon the performance of the property. Our group pays out monthly. We like to pay out monthly. There are groups that payout quarterly. It’s not necessarily better or worse, but personally, I like to get money in my account every month.

You then get some stuff on the backend depending on how the project goes.

In multifamily syndication, you’re going to get regular cashflow monthly, quarterly or annually. When the property sells, think about it like a rental property. You’re getting rent. If you’re renting it out for $1,000 a month and your expenses are $900, you might get $100 a month. When you sell it, if you bought a property for $100,000 and you sell it for $150,000, you get that $50,000 profit on the backend. It’s very similar to that.

Do you guys do the whole refinance structure piece too or do you go for the sale?

When we model out the returns on a property which is called the pro forma, we don’t assume we’re going to refinance the property. If you’ve ever owned a rental property or you have a property of your own, what’s nice is if you have a HELOC, a Home Equity Line Of Credit and you pull money out of your home or an investment property, you don’t pay taxes on that when you pull that money out.

You might pay taxes when you sell it, but you don’t pay taxes when you pull it out. It’s very similar to what we do. A lot of times, we look to do that if the property is performing. We don’t tell investors that’s part of the plan because we want to be a little bit more conservative than that but that is a very optimal way to pull an investor capital out in a tax-efficient manner.

While we dove pretty deep into all of that stuff and I know we’re going to get even deeper, so definitely stay tuned for EXTRA. We’ll be talking more about the fundamentals of multifamily investing and the numbers around that and also the why or why not to do it.

Before we move into our three rapid fire questions, I want to let you ladies know how you can get in touch with Chris because he’s amazing, isn’t he? He’s got two awesome offers for you today. First of all, he’s going to give you his book for free and he and I are holding a webinar together so that you can meet him live and ask as many questions as you’d like.

Learn how you can invest like the rich to create true freedom for yourself by getting a free copy of his book nextlevelincome.com/bliss, where he’ll send you a copy of his book for free.

Also join Chris and me for a free webinar designed just for you to get informed and ask questions about how Chris does syndication and how he can help you to save the date. December 2nd, at 4:00 PM Pacific time. Go to blissfulinvestor.com/syndicationwebinar. That’s blissfulinvestor.com/syndicationwebinar.

 

 

 I didn’t tell you this, Chris, but we have three rapid-fire questions. Are you ready?

I love it. I’m ready. I told you I’m wide open here, so let’s do it.

Tell us one super tip on getting started investing in real estate.

The best tip I can think of is to find somebody that has gone down the path you want to go down and either ask them for advice or hire them to help be a mentor.

What would you say is a strategy to be successful in real estate investing?

I think success, in general, is habits. Whether you want to be successful in real estate, successful in life, losing weight or whatever it may be, you need to focus on your daily habits. If you want to be successful in real estate, that may be in as far as syndications or passive investments or reviewing a deal every day or every week. If you are going out and buying your own properties, that may be contacting brokers, making phone calls and getting options out there that are coming in towards you on a regular basis.

What would you say is one daily practice that you do that contributes to your personal success?

I’ve learned a lot over the past years. I bought my older son The Five Minute Journal for Kids. It is basically a gratitude practice. I know you’re big on this. I think happiness comes before success. You have to get in that right mindset, the abundance mindset, which is what you share. You know that success and that money will come to you and there’s always a deal out there. You don’t have to worry and fight over these things. Share, help other people and other people will help you get in the right mindset. That’s what I try to do every day.

This has been an amazing show. Thank you so much for all you’ve already contributed, Chris. This has been great.

It’s my pleasure. Thank you so much for having me.

Before we close out the show, I want to head off any confusion we might have about upcoming webinars. So in order to make this series the most valuable possible for you, I have arranged to have two webinars during the next couple of weeks.

The first one is going to be with Dr. Sam, who you heard from a couple of weeks ago. He is an investor just like you ladies. And he has figured out how to evaluate syndication opportunities that come across because he gets a lot of them. And if you’re interested in them and you put your name out there, you will start to get a lot of them. You’ll learn how he evaluates them so he can figure out which projects are the best for him regarding his risk tolerance, his capital availability, and what kinds of projects he’s actually interested in, like location and that sort of thing.

Dr. Sam has developed a tool he’s now sharing. So we’re going to do a webinar with him and you can talk to him about what it’s like to be an investor in syndications and what to expect. And then also he’s going to go through his tool specifically and show you how he’s evaluating different projects. So I’m really excited about this because you actually get to have a conversation LIVE with another investor who’s actually doing investing in syndication projects. So in order to sign up for that webinar, go to blissfulinvestor.com/Samwebinar. So that’s for Dr. Sam, right? So blissfulinvestor.com/Samwebinar. And that webinar is going to be held this week on Thursday, November 18th at 5:00 PM Pacific time. So again, that’s Thursday, November 18 at 5pm pacific time.  Go to blissfulinvestor.com/Samwebinar.

The second webinar we’re doing for the syndication series is with Chris, who we just heard from in this episode. As you know, he’s an operator. So he’s going to be able to answer questions about how syndications actually work, how they’re put together and all the details of what you can expect from an operator. So that’s really exciting because you can ask as many questions as you want from an actual operator LIVE. So that’ll give you more confidence what you need to know with regards to how syndications are run. So I’m super excited about this one too. And this one is on Thursday, December 2nd, at 4:00 PM Pacific time. So that’s Thursday, December 2nd at 4:00 PM Pacific time. And to sign up for this one, go to blissfulinvestor.com/syndicationwebinar. So that’s blissfulinvestor.com/syndicationwebinar.

So to give you a really quick recap, Dr. Sam, who is an investor and is going to be sharing his evaluation tool, we’ll be holding a webinar this week on Thursday, November 18th at 5:00 PM Pacific time . Go to blissfulinvestor.com/Samwebinar.

And then Chris Larson will be holding a webinar as an operator on Thursday, December 2nd, at 4:00 PM Pacific time, just go to blissfulinvestor.com/syndicationwebinar.

I think you’re going to love both webinars because you’ll get two completely different perspectives. So don’t miss them sign up now.

Stay tuned for EXTRA. We’re going to be talking more about the fundamentals of multifamily. If you are not subscribed but would like to be, please go to RealEstateInvestingForWomenEXTRA.com. You get the first seven days for free. Check it out, download as much as you can and you can stay if it’s for you. Thank you so much for joining us for this portion of the show. We appreciate you. I look forward to seeing you and until then remember, goals without action are just dreams. Get out there, take action and create the life your heart deeply desires.

 

Important Links

• blissfulinvestor.com/Samwebinar
• blissfulinvestor.com/syndicationwebinar
• Becoming Your Own Banker
• Next-Level Income
• TED Talk – Who is the Boss of You?
• Ray Dalio
• Where Should You Move? 5 Ways To Take Advantage Of “Geographic Arbitrage.”
• United Van Lines
• The Five Minute Journal for Kids
• RealEstateInvestingForWomenEXTRA.com

 

About Chris Larsen

Christopher Larsen is the founder and Managing Partner of Next-Level Income. Since “retiring” after 18 years in the medical device industry he dedicates his time to helping others become financially independent through education and investment opportunities. Chris has been investing in and managing real estate for over 20 years. While completing his degree in Biomechanical Engineering and M.B.A. in Finance at Virginia Tech, he bought his first single-family rental at age 21. Chris expanded into development, private-lending, buying distressed debt as well as commercial office, and ultimately syndicating multifamily properties. He began syndicating deals in 2016 and has been actively involved in over $400M of real estate acquisitions. In addition to real estate, Chris has invested in equities, oil & gas, and small business lending, as well as being active in Venture South, one of the nation’s Top 10 Angel Investing groups. Chris lives with his wife and two boys (and Viszla, Lucy!) in Asheville, NC where he loves spending time with them in the outdoors and enjoying the food and culture that the region has to offer.

 

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To listen to the EXTRA portion of this show go to RealEstateInvestingForWomenExtra.com

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Using Both Sides Of Your Brain In REI – The Art And Science Of Off-Market Acquisition With Jeff Stephens – Real Estate For Women

 

If you’re following an extremely conventional path of looking only at listed properties, you only get to grow at the rate the market says you can grow. There’s freedom in off-market acquisition that allows you to focus more on connecting with your clients. Moneeka Sawyer’s guest for today is Jeff Stephens, the founder of The Thoughtful Real Estate Entrepreneur. Moneeka and Jeff discuss using both sides of your brain when interacting with your clients. Real estate tends to be very left-brain. Jeff explains you work best when you use both. You need to be analytic but also empathetic. Tune in to learn more! 

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Listen to the podcast here

 

Using Both Sides Of Your Brain In REI – The Art And Science Of Off-Market Acquisition With Jeff Stephens – Real Estate For Women

Real Estate Investing For Women

I am excited to welcome Jeff Stephens to the show. He is the Founder of The Thoughtful Real Estate Entrepreneur and host of the show, Racking Up Rentals. Jeff is a full-time real estate entrepreneur by day and a real estate investing mentor, coach and podcaster. His focus both as a real estate entrepreneur and coaching others is on growing a rental real estate portfolio that builds long-term wealth through the timeless fundamentals of relationship and negotiation directly with the seller to buy off-market properties with seller financing. You can visit him at ThoughtfulRE.com for more information and we’ll talk a little bit more about that. Thank you, Jeff, for coming to the show. It’s nice to see you again.  

It’s nice to see you too. Thank you for letting me be a guest on your awesome show. 

It’s my pleasure. Ladies, when I was on Racking Up Rentals, that was probably one of the nicest, most blissful conversations I’ve had on someone else’s show. You need to go check it out. It was good. I love this whole idea of thoughtful real estate. It’s very aligned with my idea of bliss. Jeff, could you tell us about your story and what brought you to where you are now? 

The right approach to real estate investing is the approach that feels most authentic and aligned. Share on X

I first fell in love with real estate probably in the way a lot of peope did, which is we picked up a book that has a lot of purples and the word Rich Dad in the name. This is going on many years ago. I got excited and I’m a high-action taker. We bought a property. It was a very conventional deal and that went fine. It was not the most exciting transaction but it was okay. I got more excited. I got started, then learning some of the more entrepreneurial ways to do real estate. I went down the rabbit hole of all that education, but I’ve hit two walls that led me to where I am. 

The first wall was when I was attempting to do some wholesaling. Deep down, it didn’t feel super authentic to me, but I was taking action. I thought that’s what you were supposed to do. I had this traumatic experience one day, where somebody showed up on the doorstep of my own home. I had gotten myself into a transaction and I was trying to wholesale it. He was standing on my doorstep, angry, pointing at me and saying, “I see what you’re trying to do here. This is sleazy. We don’t do that kind of stuff around here.” 

Maybe that doesn’t sound that traumatic but for me, my whole life up to this point was like, “Jeff is a good boy. Jeff follows the rules. Jeff does the right thing,” and this was my early twenties. That rattled me to my core. It practically knocked me out of the game for about seven years. I continued to dabble, but I would do very benign types of things in real estate. Eventually, I thought, “I have to do more because I want to learn this.” I got back on the horse and I started learning again. I found that the more I connected with people, the more success I had in the sense that they liked me. We could come to an agreement, but I couldn’t always figure out how to structure the deals. 

The second wall I hit was when I saw that I had some peers who I respected who were getting deals done that I could not figure out how to do. When they would explain it to me, it sounded like they were speaking a completely different language. At that point, I hit that second wall. I did what I needed to do to learn more creative deal structuring. The two things clicked for me, an approach that felt authentic to who I was and secondly, the technical toolbox I needed to be able to get deals done. Those two things together then catapulted my progress from there. 

It’s interesting the way that you talked about that because one of the taglines of this show is, “Goals without action are just dreams. Get out there and take action.” First of all, when I say that, it’s because taking action is one of those barriers. A lot of people won’t act. They want to learn and learn. We get stuck in analysis paralysis. We get stuck in, “I need to take one more course. I don’t know enough.” However, just taking action is also not the solution. We want to take action, but we want to take intentional action. 

What I love most about what you talked about is this thing about feeling inauthentic or sleazy. It doesn’t matter one way or the other what anybody else thinks. What matters is what you think of yourself. A friend of mine, Leeza Gibbons, will often say, “You need to earn the right to your own respect.” Earning the right to your own respect is feeling good about who you are, how you’re showing up in the world, and what you’re doing. There are a million ways to make $1 million in real estate. Choose whatever makes you feel good. Learn about that and then take action. 

It’s the self-image of how you see yourself. I can’t think of anything much more important than either be an enabler or absolute restraints to where you’re trying to go. The right approach to real estate investing is the approach that feels most authentic and aligned. A word I think about a lot is alignment. Until you get that alignment, you’re just trying a lot of different things, but once you get it, for some reason, things seem to take off. 

They’re simpler. You’re more successful. You’re able to stick with it when challenges happen because we both know challenges always happen, then you’re able to get through them. It becomes more of a growth experience rather than a taking you off the horse experience like you had. 

It becomes a North Star. You get to a point. You find that challenge and say, “I know that my guiding light is in this direction because that is authentically who I am.” It does help navigate difficult decisions or situations. 

Let’s talk about what you do. You focus on owner financing, which means your acquisition process is going to be a little bit different. Let’s talk about that acquisition. You do more off-market rather than listed properties. 

My heart is in long-term holds. I love the fun, excitement and entrepreneurial opportunities of things like flips and whatnot, but I primarily look for long-term holds. In that process that I described there when I was stumbling around in the dark, trying to find alignment. I realized that I like to connect with people. I feel I’m an introvert, but I like to connect with people. They seem to like to connect with me. I thought, “There’s clearly a correlation between the success I’m having and my contact directly with the person on the other side of the table.” I started to think, “Do I need people or agents standing between me and a seller?” I started to realize, “No, I feel like it’s almost like I’m a tailor. If I can measure the seller in a lot of different ways, I can propose something that’s going to fit them well.” 

My whole approach now is finding the people with who I can connect and sit down face-to-face to see if we can work something out together. Oftentimes, that does lead to seller financing. I have a belief that as real estate entrepreneurs, we should get to have the right to grow our portfolios at the rate that we want to. I feel like if you’re following an extremely conventional path of looking only at listed properties and going only to banks and credit unions for loans, you get to grow at the rate that the market and lender say that you can grow. I like the freedom of these off-market deals and the seller financing that can come with them. 

 

Talk to me about this phrase that you use, “Solve the person, and then you can solve the deal.” I know you’ve already alluded to that, which is why I wanted to continue that conversation. 

I have a framework called the Y.E.S.S.E.S Framework. The two S’s in the middle are solve the person and then solve the deal, but solving the person comes first. What this means is real estate is dirt, sticks, bricks, but real estate doesn’t sell itself. People sell real estate. To me, even though the words “it’s a people business” might sound a little trite, I can’t believe how true it is. I believe that you have to solve the person before you can solve the deal. If you don’t understand the person on the other side of the transaction, what they’re trying to accomplish, what matters to them, what they think about their own property, what they think about the economic climate, the market or a million things. If you don’t have the empathy to be able to understand the other person, whatever proposal or offer you put in front of them is going to be a version of a shot in the dark. 

I know that so much of the time, when people are teaching real estate, there’s an adversarial attitude like, “I need to get the best deal.” They give a lot of lip service to, “I’m going to help that person.” I’m like, “You’re getting a property at $0.60 on the dollar is helping them get out of a problem.” To me, that feels inauthentic, not because it’s not true. In many cases, it is true but it’s the approach about it. It doesn’t feel like you’re on the same team. It feels like you’re on opposing teams. I love how you talked about when you’re solving the person, you end up being on the same team to make everybody happy. You’ve got something that will make you happy, and they’ve got something that will make them happy. 

One of the most powerful questions I’ve ever asked a seller is, “Paint a picture for me here to understand how you’d like to see this thing come together.” In “normal” real estate, nobody asks that question because it’s more about protecting your own interests. I believe that Jeff is going to get more of what Jeff wants if Jeff helps somebody else get what they want. Not to talk about myself in the third person or quote Zig Ziglar too much, but I do honestly believe that. There’s this coexistence simultaneously of self-interest and helping somebody else. I believe it’s best for me if I do what’s best for them. That’s been my experience. 

Talk to me about this belief that you have that you need both sides of the brain to be successful in real estate. 

Real estate tends to be a very left-brain. They’re very analytical. 

There’s one that’s analytical. 

There’s one that’s relational, intuitive and creative. I think that we are at our best when we have both of them firing simultaneously. A great example is when I’m sitting in a seller’s living room. That’s my venue. That’s my arena. That’s where I go to step onto the stage. I am talking to that person and trying to solve the person, which is very right brain. It’s relational. I’m trying to ask good questions, listen and read between the lines. Meanwhile, there’s this computer apparently in the back left corner of my brain that is calculating like, “Here’s the possibility with this. We could buy it for this. The rents would be that.” 

Both things are happening simultaneously. What we do is like a dance with the seller. Like any dance, you got your arms around somebody. There’s a leading and following that happen at the same time. I feel like that’s the left brain, right brain thing here a little bit too. There’s so much value in thinking through the possibility and then asking a thoughtful question to that seller that may tests out that opportunity. It’s a dynamic balance of the two thought processes. Most real estate people grab a clipboard, and they’ve got a worksheet of questions. They’re like, “How many bedrooms are there? When was the furnace replaced?” They’re just making entries into a database and a computer. They’re going to hit the submit button and come out with an offer. That’s not how I do it at all. 

In real estate and in any kind of investing, the numbers have to work. We don’t make money unless the numbers work, but I agree with you that it is a people game. We talk about selling real estate and people think of it as hardcore, but it’s also buying. We are buying so that then we can sell too. Both sides of those are all about the relationships that we build, whether we’re building with a seller or buyer. There are a lot of other relationships we’re building. We’re building maybe with agents, vendors or a bunch of different people. I love what you’re talking about here that it is a relationship business because once the numbers work, the rest of it is all how we show up and build those relationships. 

I couldn’t even say it any better than that. It’s true. We’re not going to get the level of collaboration, cooperation and flexibility that we need if we don’t have sharp people skills to deal with the most important ingredient in the whole recipe, which is the humans. 

Could you tell me the five myths of seller financing? 

Yes. I love talking about seller financing for reasons we’ve already discussed. When I observe people talking about seller financing, there are a few things that they make as assumptions. These myths are assumptions. These are the five that stand out to me, and then the quick way I can refute each one. Number one, people think that seller financing is what a seller does when they can’t sell their property in the other way. We’re looking at something that’s been sitting on the market forever, funky or not financeable. While those things might be levers that would lead to seller financing, there are plenty of sellers who want to do seller financing. 

With a little light bulb that you could help come on in their brain, they would realize that it is in their very best interest to do so. To put it very simply, those are the people who might have capital gains concerns. A well-structured seller financing deal would help significantly with that. Those are the people who want to sell a property but they don’t want to give up the income stream that they have. I’ve had sellers call me and in the very first contact, they said, “By the way, I want to sell this on a contract.” It doesn’t get any better than that for me, but there are people who want to do that. That’s the first one. 

The second one is the inverse of that. That is seller financing is only offered because the buyer can’t find any other way to pay. That’s not the case either. A lot of people like me could finance a deal in lots of different ways. At the end of the day, I believe a well-negotiated seller financing deal is framed around what the seller wants to accomplish. It isn’t that the buyer can’t do it in any other way. Maybe there are some scenarios like that, but that’s not always true by any stretch. 

Number three is that people tend to think seller financing loans have above-market interest rates. This ties into the first two, which the seller doesn’t want to do this but if they’re going to, they’re going to demand something super high-interest rate. While there are scenarios where I’m sure that that does happen, if you can find a seller who has the proper configuration of motivation, maybe you can unpack that conversation with them in a way that helps them understand the benefits. They will be more than motivated to simply provide very reasonable terms. It very well might not be much different interest-rate-wise than what you could get with a financial institution. 

The fourth one is that people tend to think seller financing loans are for short-terms. That also sprouts off this idea of, “The sellers don’t want to do this anyway. I better be fast if I’m going to have to carry this note.” There were a lot of people who want to sell their property and continue to get an income stream for selling it for a long time. They want to take their capital gains and punt it as far into the future as they possibly can. Short-terms is not another issue for me or for most of the people that I work with at all. 

The fifth one is that seller financing is only possible when a property is owned free and clear. It’s probably simpler, and there might be more options when it’s owned free and clear. Seller financing is a broad umbrella of things that could fall underneath it. Mostly what I do and teach people is about what I call note and trustee investing, “I am becoming the owner. The seller is now becoming the bank and I make payments to them.” There are other things that would be creative deal structures like lease options, land sale contracts or lots of other different things that could be considered seller financing. I think of it as a bunch of tools in a toolbox and based on what the seller’s situation is. One of those elements of their situation is outstanding debt, then you pick the right tool out of the toolbox and get to work. 

I’ve had a few other people on the show talked about they create the notes themselves so they become the bank. They’ll buy a place and put their 20% down. They might get a loan at 4% or 3%. Someone else who might not qualify for a loan but is looking to buy, they’ll then sell it to them and carry it back at 5.5% or 6%. They’re making the delta. They’ve got some cashflow and also helped someone get into a home who wouldn’t normally be able to get into a home. Other people can also be doing this. I know that there are a lot of people, especially here in my area, where their houses have appreciated dramatically, but they’re no longer working. They’re looking for ways to create cashflow. They know in real estate investment, they’re not going to be able to make more than a couple of percents. You’re able to offer them something attractive that helps them supplement their Social Security or whatever it is they’re planning to retire on. 

Solve the person, and then you can solve the deal. Share on X

There are a few simple clues that you can listen for that a seller might say. For instance, they might say something like, “I’d love to sell this property, but I don’t want to deal with the capital gain. I feel compelled to do a 1031 exchange, but the truth is I don’t want to trade one responsibility for another.” They might say, “I want to sell this property, but I don’t know what I would do with all the money anyway. I want to sell this property, but I don’t like the stock market. It makes me feel uncomfortable. I like tangible assets.” All of those things are clues. It can be a very great solution for you to propose to them that is also excellent for you as the buyer. It scratches their itches perfectly. They might not be aware of that yet, but if you unpack that conversation with them in a thoughtful and sensitive way, they’ll get the picture for sure. 

Could you share with me how do you structure it to avoid capital gains? I know you’re not a lawyer or CPA. Could you give us a high level of what that looks like? People have said it all the time and nobody will explain that. 

I will explain it to you like I would when a seller asks me that question. Thank you for the disclaimer. I always make that disclaimer to you. I’m not a CPA. Here’s the big picture as I’ve understood it in a non-technical way. When you sell your property, you will find yourself receiving a capital gains tax bill in a way that’s correlated with when you receive the gain. If you bought a property for $200,000, now it’s worth $700,000, factoring all your things like depreciation and all that complicated stuff. The main idea is you have this big gain of $500,000 or so. As you receive that gain back, that’s when you will be expected to pay the tax. 

The concept with a 1031 exchange is, what if I don’t receive that gain back at all, it goes straight into a third-party intermediary and then I’m not getting the bill? The same idea applies here to our seller financing structures that say, “Let’s make sure that you are receiving your gain on a schedule that correlates with when you want to pay this tax.” As the buyer, if I come along and say, “I’d like to give you a down payment and then make monthly payments to you over time,” the basic idea is if that down payment is going to be part of the gain that they receive, they might have a little tax bill from the down payment. 

If the payments are interest-only, they’re not receiving a principal or gain back during each of those payments. They’re avoiding that capital gain at that time until there’s maybe a balloon payment at the end. You have to reckon with the gain one way or the other. It’s about asking the seller, “When and how do you want to do that? Let’s work backward to structure the timing of your receipt of that gain in a way that works for your financial strategy.” 

I am in the process of creating notes. I’m buying small houses and creating notes. One of my ladies is doing the same thing with me. She was talking about you can structure it so that you pay the capital gain. Let’s say we structure a note for seven years. You can either pay the capital gain at the end of the seven years, or you can pay it annually so that you don’t have this big capital gain that you’re paying at the end. Is that true? 

Part of that is a little above my pay grade as a non-CPA. If the loan was amortizing heavily over seven years, then I can see how that would trigger an equally amortized capital gains bill. Perhaps there are other provisions that allow you to make installment payments on future capital gains. I don’t know how that part works. Most of the people I work with are thinking, “I’ve got this gain. I’ll figure it out later. I know I don’t want to deal with it now. Give me a small down payment, so I know you’ve got some skin in the game, but not too much because there’s going to be a tax bill associated with that.” We’re going to set a ten-year term and I’ll deal with it then. 

I can see why some would be like, “I know I’m going to sell this. I don’t want to have this big bill at the end.” Although if you get the big bill at the end, there are other ways to deal with it too. I hadn’t heard of anybody talking about that. I wasn’t sure if you had heard about it. 

An important point off of that is to do this as the buyer, you don’t have to be CPA-level informed on every nuance of that area of the tax code of the installment sale. There certainly comes a time when, as a thoughtful person who’s dealing empathetically with the seller, you’re going to want to say, “Seller, I want to make sure that you have got all your questions answered and you feel good about this. Do you want to call your CPA and ask some questions? You don’t have a CPA? Do you want to call my CPA and ask some questions? I want to make sure you know what you’re doing.” That’s part of the nature of being a good direct-to-seller type of buyer. You give them the opportunities to check with the outside resources to feel good about what they’re doing, especially on a complicated potential topic like that. 

I love your verbiage around a lot of this stuff. It’s a great demonstration of what talking to somebody to help solve their problems looks like. I’m looking forward to our conversation in EXTRA because we’re going to be talking about this Y.E.S.S.E.S Framework. Could you tell us a little bit more about what that deep dive is going to look like? 

I’m going to talk about how the Y.E.S.S.E.S Framework applies to intentionally source deals that you can buy with seller financing to hold for the long term. There are a few key strategies I’ll share in there about how we’re not shopping for a property. We’re shopping for a person. That’s one thing we’ll talk about. The idea of seller financing is that you buy your financing when you buy the property. That is a very different mentality by itself. We’re not going to talk about that. Overall, we’ll talk about if you want to buy properties with seller financing. It’s critical to start with the end in mind and reverse-engineer the whole marketing process so that from the very first step, it’s all about finding those people for whom seller financing would be an excellent solution. Their Y.E.S.S.E.S Framework will be our step-by-step process for discussing those strategies. 

Can you tell everybody how they can reach you? 

If you look up The Thoughtful Real Estate, that’s who we are, ThoughtfulRE.com. We have a Facebook group called Rental Portfolio Wealth Builders. We’d love to have anybody join us there to talk about this specific way of doing acquisition for investment real estate. 

I know that you’ve got a gift for my ladies. Let’s talk about that. 

I am putting together a download that is called the Three Ways Women Can Have a Real Competitive Advantage in Real Estate Investing as Thoughtful Real Estate Entrepreneurs. These are my thoughts, reflections, and experiences. When you take a look at what it means to be a thoughtful real estate entrepreneur, women are well-suited naturally to be great with those skills. I hope that’s very encouraging to your audience. I wish that I saw more women in my own communities trying to do these things. They’ve got so much potential. If someone wants to get that, they can go to ThoughtfulRE.com/bliss. It will be very easy to download that special guide. 

Ladies, Jeff and I were having this conversation. He’s putting together a gift, especially for you and this show. One of the things I’d like to talk about in this download is empathy. It’s funny because I have never thought of myself as an empathetic person and yet he was like, “Really?” You noticed that as human beings, we take for granted our gifts. We don’t notice them. It’s nice to have someone to shine a light on what your strengths are and what you should be highlighting in a way that maybe you can’t see. Maybe you’re blind to it. I love getting this different perspective. 

Women all have ideas of what we’re good at. It’s fun to hear from the other side like, “What do men do? What do they look at?” Then say, “Women are good at that thing. I wish I was better at that. I need to learn that. That’s a skill that they know and take for granted. I need to develop that.” I know that Jeff, Based on the conversation that we’ve had, I know that Jeff is going to give us some good ideas about what our strengths are and what we can amplify, utilize and value in ourselves. 

It’s such an important point. We can’t help but undervalue the things that come naturally to us. We don’t even necessarily realize they’re gifts. I’m going to try to point some of those things out and see how they can be aimed at being a great real estate entrepreneur. 

Thank you for that. Jeff, are you ready for our three Rapid-fire questions? 

I’m ready. 

Tell us one super tip on getting started investing in real estate. 

Here’s what I would recommend. Maybe this is not common advice. Instead of thinking about, “I want to buy a property. What is available for sale?” I would say, “Everything is available for sale.” I don’t mean, “Everything is for sale at the right price.” I mean, “Everything is available when there’s a relationship.” Here’s what I would like you to do. I would like you to go into your town and identify ten properties that you would like to own, “It sure would be awesome to be the next owner of that property.” Maybe I see potential or think it’s beautiful. You love it, that’s all that matters. Grab a pen and a stack of paper. Sit down and write a simple, nice handwritten letter and send it to the owner of that property. 

Don’t say, “I’ll make you an offer of this. I’ve got the cash. I can close quickly.” It’s none of that stuff. Say, “Hi, this is my name. I see your property all the time. Frankly, I love it. If you would ever consider selling it, would you please let me be somebody who could talk to you about that? Hold onto my letter for whenever the time is right. I hope to hear from you.” Send that handwritten letter ten times. Chances are your phone will ring whether it’s immediately or not too much time. That is a great practice. It’s emblematic of overall what we need to be doing more and more as real estate entrepreneurs. 

I have to ask a question. If someone doesn’t respond, do you write it again and again to the same person? 

Yes. I’d say send it 3 or 4 times a year. Every 3 or 4 months, write another letter to the person. Make it seasonal if you want to. Don’t photocopy and send exactly the same thing. What I used to do is I would go sit in my car in the neighborhoods where these properties were. I would write the letters by hand so that I was soaking up the environment of where these properties were. You could do that. If you ever get to go to a coffee shop again, you go sit down in the coffee shop and do it. 

What is one strategy for being successful in real estate investing? 

It is very much what we have talked about in the broad sense, which is to take a people-oriented approach to real estate. It’s people who sell properties. It’s not properties that sell themselves. I saw in a Facebook group that somebody said, “I’ve identified 3 or 4 properties on the market that would be good for seller financing.” I had to comment, “I appreciate your enthusiasm but properties aren’t candidates for seller financing. People are candidates for seller financing.” Take a people-oriented approach. Don’t be afraid to talk directly with people who own properties. Don’t be afraid of saying the wrong thing, screwing it up, or over–committing yourself. Get comfortable with the idea of talking. Practice talking directly to people who own properties. Good things will come of that one way or the other. 

What would you say is one daily practice that contributes to your personal success? 

I’ve been trying to think of a catchy way for this to be articulated, but you know how they say, “An apple a day keeps the doctor away.” This is a work in progress, “A handwritten thank you card a day keeps the poverty away?” I’m still working on the last part. One of the best things you could do would be to go online or go to your local office supply store, buy a giant box of thank you cards, get a bunch of stamps and have that pen sitting there. Every time I meet with a seller in person, maybe a potential lender or a regular person, I always send a handwritten thank you card. Sometimes people comment about that, but even if they don’t comment about it, just the fact that you did it says so much about you and shapes the way they perceive you in a very positive way. It’s very difficult to send too many handwritten thank you cards. If you send one a day, that’s a great rhythm that you can get into and it’s not a difficult habit. 

It’s also like your own personal gratitude practice in a way. Jeff, this has been amazing. I loved this portion of the show. Thank you so much for all that you’ve shared. 

 

Thank you. I appreciate the opportunity to share this perspective. I know I’m the oddball in the world of real estate investing. This is not how most people do it, but I’m cautiously optimistic that the more people who hear this message will go, “That would be authentic for me too.” I hope some of your readers can have that light-bulb moment. 

Ladies, thank you so much for joining Jeff and me for this portion of the show. We have more in EXTRA. We’re going to be talking about his Y.E.S.S.E.S Framework. I always say, “Say yes because it’s so much more fun than no.” He’s got a six-step process that he’s going to be talking about. We’re going to be doing that in EXTRA. If you’re not subscribed but would like to be, go to RealEstateInvestingForWomenEXTRA.com, and you get the first seven days for free. You can check it out. I appreciate you. I look forward to seeing you next time. Until then, remember, goals without action are just dreams, so get out there, take action, and create the life your heart deeply desires. I’ll see you soon. Bye. 

 

Important Links

• The Thoughtful Real Estate Entrepreneur 
• Racking Up Rentals – Episode with Moneeka Sawyer 
• Rich Dad 
• Rental Portfolio Wealth Builders – Facebook group 
• ThoughtfulRE.com/bliss 
• RealEstateInvestingForWomenEXTRA.com 

 

About Jeff Stephens

Jeff loves delivering presentations to great organizations!  In his first entrepreneurial career, he was a paid speaker at banking and credit union conferences all over the US and Canada, and even spoke at a marketing conference in Latvia, Lithuania and Estonia.

Today, Jeff speaks to groups of entrepreneurs and real estate professionals.

 

 

 

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