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Syndication Series #6: Investing In Climate-Resilient Markets With Dina Buchanan

REW 88 Dina Buchanan | Climate Resilient Markets

 

There are more reasons to invest in climate-resilient markets than just the climate piece. Here to tell you all about them is Dina Buchanan. Dina is the Director of Investor Relations and Business Development at PCRP Group. In this episode, she joins Moneeka Sawyer to share the value in investing in climate-resilient markets not only for the environment but also for your wallet. Dina highlights the strategies to incorporate energy efficiency in your multifamily investments to create value and do good for the community. Stay tuned!

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Syndication Series #6: Investing In Climate-Resilient Markets With Dina Buchanan

Real Estate Investing For Women

Welcome to the Syndication Series, where you’re going to learn all about what syndication is and how you can utilize it to build cashflow and grow your wealth. It’s an exciting strategy and I’m looking forward to sharing all of our guests with you. Let’s get to the show.

I am so excited to welcome to the show Dina Buchanan. She is the Director of Investor Relations at PCRP Group, a firm that provides direct access to tax advantage and passive income commercial real estate opportunities. Dina has been investing in residential and commercial properties in the United States and internationally for years and has been responsible for overseeing approximately $200 million of assets under management. Dina, how are you? Welcome to the show.

It’s so great to be here. Thanks for having me.

I’m so looking forward to this conversation. It’s something we’ve never talked about on this show. I’m super excited. Dina, why don’t you give us first a high-level version of your story? How did you get into real estate?

I’m probably like a lot of other people out there. My husband and I wanted to start a family. We had these high-level corporate jobs. We went to school, got our education like we were told to do. We realized we didn’t own our time. We wanted to have more time. We love to travel. We want to start a family. We searched out opportunities for businesses and it all kept coming back to real estate. I don’t know why. Everything we looked at, from franchises to even in real estate, we were like, “This is what we’re resonating with.” We took a class and we got some education. Everyone should do it.

It’s a great idea. It’s like we went, “Poof.” Originally, we were thinking it’ll be me that stays home with the kids and my husband would keep his job but he ended up leaving his job first. I went on maternity leave with our first child and never went back. That was awesome. We did fourteen residential transactions in our first year. That was enough to replace his income.

We started to get involved with passive and did our first apartment community three years later. That’s when it started making like, “This is intoxicating. This is getting good with passive income.” That led to a series of other deals in syndication opportunities. I’m so excited to always talk about real estate and get everyone excited and knowledgeable about it because it’s changed our family’s financial DNA rather than having to go work for money, having money work for us.

Your first fourteen deals in the first year, what were they?

They were residential single-family homes. It was interesting, I thought that you had to start with residential. It’s what everybody did. We’re like, “We got to do it.” We did that first apartment building. I was like, “I wish we did fourteen of those in the first year.” Not that we were doing poorly, we did well. It was such a game-changer when you look at cashflow diversification over 27 units, which was our first one versus 27 single-family homes. When you look at the cash-on-cash return per door, it’s not that much of a difference. It’s a lot less to get in than 27 single-family homes if that makes sense.

Did you flip those homes? Did you buy and hold? What were you doing with those fourteen homes?

The power of syndication allows an investor to have their money duplicate itself faster and not have to do any of the work.

We did a strategy called flip, flip, hold. Our coach was very helpful in helping us reallocate those funds into passive income properties because he said it’s great to have all this capital at some point. He said something to me that was interesting. I didn’t get it then but I do now. You always want your money working and working harder for you.

Holding on to a whole bunch of capital, which probably would have been more of what we thought we were supposed to do back then would have been the thing. Having that opportunity to learn how we can take this money and buy three more properties, spread it out, leverage, use private money and use bank funding. Get a cashflow on these properties and then buy some more, flip those, move that money in and increase our passive income so that we could retire from a job.

You were actively involved in a couple of flips and then you would hold a couple of flips. Talk to me a little bit about climate-resilient markets, the thing that you talked about that nobody else has. Could you first describe what that is? Define it for us.

One of the things my business partner and I are very passionate about is reducing the carbon footprint in our world. People can agree or disagree that it’s necessary and it’s not what we’re here talking about. The big piece that is very interesting to everyone is how it impacts the bottom line for us as investors on all of our projects across the board. Regardless of where we are on the great debate of our generation, the numbers don’t lie when you do the math.

The opportunity in climate-resilient markets tends to be better because we don’t have issues with funding or refinancing. Insurance can play a part and things like that. If we’re going into a market and renovating that building and putting in some energy-efficient appliances or products and using those types of things, it can be great tax advantage for the project. A climate-resilient market would simply be one that doesn’t experience the extreme weather patterns that other markets may face, coastal markets, hurricanes, extreme heat, tornadoes or deep freezes.

They don’t experience those things?

Not to the same level. For example, I live in Florida. A lot of people associate Florida with hurricanes. It’s true. They happen. I live in Central Florida so there could be a hurricane East Coast or West Coast and maybe we’ll get rain and wind. I’m in the middle of Florida and Florida is not that wide so I could be at a beach on either side within an hour. Being 60 to 80 miles inland is a huge difference in what the damage will be or won’t be. It’s fascinating when you think about it. Same product, same state, it could be completely different.

What is the pricing like? You’re in Central Florida, I thought it would be a different product. It’s not a beach product. It’s a different product and location. It’s got to have different pricing, appreciation and demand. Does it have all of those things? What are you finding?

It’s interesting when we talk about Florida because it feels like the entire state is in demand. The beach, waterfront property, people love living on the beach. We had some Airbnb units on one of the beaches. They could be powerful generators of cash and good investments. However because I live in Central Florida, we live where there is a lot of international tourism. We’ve got Disney, Universal, Legoland and Sea World.

The short-term rental business in Central Florida has exploded because there is equally a demand because there are many people who want to come in. Hotels are booked up as well. It’s interesting people want to buy second homes here. A lot of them want to buy them and maybe live in them for four months out of the year and then rent the rest of the time. That used to be reserved for the beach properties but we’re seeing it inland too. It’s interesting.

REW 88 Dina Buchanan | Climate Resilient Markets

Climate Resilient Markets: A climate-resilient market would simply be one that doesn’t experience the extreme weather patterns that other markets may face.

 

You’re investing in Central Florida. Are there other areas that have similar types of demographics and demand?

Every market is different. The market is in demand. We’re doing multifamily properties. Those are always, in my opinion, and what I’ve experienced over the last couple of decades, always in demand. They keep getting more in demand as we see housing shrinking as far as availability. There is less. We will see that demand. We do have properties in San Antonio and Dallas. I’m talking apartment communities. We have seen a huge demand there.

Our occupancy in one of our properties in San Antonio, for example, hasn’t been below 97% in 1.5 years and it keeps getting higher. I see it in other markets as well. Whether you’ll see the same price point in other markets, that might be different as far as beachfront being inland. The dynamic with Florida’s a little different because of the tourism that we have in the center of the state. If you went to any of the beaches in Florida, you’d see the same.

In one of the questions you sent me, you said that climate-resilient markets tend to give you higher returns. Can you break that down for us a little bit?

Let’s break it down into pieces. Multifamily, we do multifamily mainly. Anytime we can have cash flowing door under the same roof, there is an opportunity there. Whether it’s a climate-resilient market or not, that’s number one. It’s the same principle as if we were going into a market that wasn’t climate-resilient and we’re going to go in and buy a Class B property. We’re going to buy that property below market value so it would be a property that was 10 to 20 years old that needed some upgrades. Where this gets powerful is the ability to do the upgrades because we already are going to pick a property that’s going to be in a high-demand market even though it’s an older property.

We’ve got the opportunity there like any other market to add value. Where the environmental and social governance piece comes in is we will put in our sponsors that we align with. If we do energy-efficient appliances, materials, paints and flooring that are more environmentally friendly, tenants love that because it reduces their overall monthly cost. Your demand and occupancy are going to be higher. We’re looking at the big picture and setting ourselves up for success that way.

How does it reduce their cost monthly? I’m a contractor. I run a construction company also. My experience is that if we do all the green types of things, it’s significantly more expensive to do the improvements that way.

The tax benefits for some operators that are doing that depending on how they set up can significantly offset the cost of those items. How it affects the tenants is their energy bills will be lower. The other thing to add to that is that you’re building your cost segregation where you can depreciate 39.5 years on a commercial and 27.5 years on a residential. If we’ve got a tenant that stays longer, overall, that’s going to reduce the expense for the owners of that building in that syndication as well.

In general, another area that makes sense is when we’re putting a multifamily building in an environment and we’ve got maybe some mass transportation, situations where it’s helpful for them, we can promote more green areas, we’re doing good for the community as well. It can help on a number of levels, not just dollars and cents wise. The bigger piece is getting these properties, especially how the investors will get out from a syndication standpoint. If we are in a climate-resilient market, we don’t risk having insurance issues and lenders don’t want to finance or refinance because there are some climate risks.

Ladies, we’re going to be talking about that deeper and EXTRA about some of the risks of being in a climate-resilient market avoids. Some of the big benefits of being in a climate-resistant area and also how to find those kinds of properties and those areas. That’s what we’re going to do our deep dive in EXTRA. Thank you for giving us a little bit of that and I’m excited to talk more about that. Could you talk to us more about ESG? What does that mean and how does it provide a benefit for investors?

People that are not factoring in climate risk into their evaluations could be setting themselves and their investors up in a syndication that could be very risky.

Environmental Social Governance is what ESG stands for. It’s something that we’re seeing larger companies pay attention to. People who are not factoring in climate risk into their evaluations could be setting themselves and their investors up in a very risky syndication. As things change and progress with the climate and it is happening, we have a huge problem with it. The worst the climate gets, the more risk effects of flooding. Anytime there is an insurance claim on a property due to weather, that’s going to affect that insurance business.

That’s a little bit more of our deeper dive but to give a bigger picture of why we’ve chosen this, we see larger companies paying attention to this and we know if they’re paying attention to it, there’s something there. There’s got to be a reason why they’re looking at underwriting and, “What’s going on?” The other reason is we as business owners and investors, not only does it help us do a better job for our investors but it’s also doing better for the environment and the planet.

Multifamily housing does reduce the carbon footprint. It’s socially responsible as well. Having a diverse team like our business is a woman-owned business. We’ve got a lot of diversity on our team as male to female. Having a diverse group that understands the dynamics of affordable housing and what we want to provide for the people that are going to be living there and how that’s all governed and plays out. Our motto is, doing good while doing well.

I love that because being socially conscious is such an important thing to my heart.

Mine too. That’s why we connect.

Dina, many people have come on my show and talked quickly about what an accredited investor is. Most of the time they don’t define what that is. I’m so delighted that you can finally define that for my ladies. I want to talk about that a little bit deeper. We’re talking about syndications. They have investments for accredited and non-accredited investors. The SEC has certain rules for the operator based on what investor they will take. The SEC understand that this is not the syndicators doing this.

The SEC decides if you’re going to take accredited or non-accredited investors, what you need to do and provide. For instance, if you’re saying that you’re an accredited investor, you need to show tax returns or assets. You need to be willing to show that information, not because the syndicator is being nosy. If they don’t have that paperwork, they can get shut down and sent to jail by the SEC. It’s a big deal.

We’ll take a letter from their CPA confirming it. There is also a tool that we have in our portal that does help them provide the proof of accreditation and we’ll look at that for them.

We invested in another syndication and they wanted us to use that portal. There was a cost involved. It’s a small little cost, ladies but my husband was like, “I don’t want to do that.” There are lots of different ways that we can do. You can provide this. This is one of those pieces that hits people. They get a little blindsided by, “Why am I having to send this information?” I’m so glad that we had this conversation. We had this series about syndication and I’ve gotten questions like, “The syndicators are asking for my personal information.”

The syndicators are not asking for their personal use. They’re asking for it because it’s required of them from the SEC. Don’t be offended because they don’t want to go to jail and help you make money. They would rather you going to end up with any legal problems. It’s a requirement by the SEC. I’m glad that we had that conversation. Let’s again define what accredited is.

REW 88 Dina Buchanan | Climate Resilient Markets

Climate Resilient Markets: Multifamily properties keep getting more and more in demand as we see housing shrinking as far as availability.

 

An accredited investor is someone who has $1 million of income-producing assets minus their personal residence and/or $200,000 a year income with two years tax returns as proof if they’re single and $300,000 if they’re married, again, tax returns that are proof or Series 7 license as well.

I didn’t know about that. That’s interesting. There has to be the expectation of continued income. It can’t be that I’ve got two last tax returns that show this income and I retired this year, which is great if you retired this year. It has to show the expectation of future income. Those are some of the things. Ladies, don’t get offended when someone starts asking you about your situation. They’re not being nosy.

It’s the way we can all do business and continue to do business for sure. One of the things that my husband and I discovered is we had money and we said, “What do we want to do with this money?” One of the things we’ve learned, and this is a cool way to look at it is the rule of 72. The rule of 72 is a barometer of what we use to figure out how long it will take that capital we have to double based on the current interest rate it’s making or the projected interest rate in the investment we’re looking at. A good way to look at this is if you take a traditional 401(k) and somebody had $100,000 in that 401(k) and it was earning 6% a year.

How long would it take for that $100,000 to double? We would divide 6% by 72 and that would be 12 years. Depending on the time in your life you’re looking at that. We’re talking about age. If I was sitting on the side of 35 or 40, all of a sudden it looks different than it did at 20. Retirement looks a lot different. If the money isn’t working fast enough, that means the person, individual, myself or any of you, we have to continue to work. We’re looking to get the money to duplicate itself quicker. The big reason for that is we want our buying power and the money is inflation. We could have a longer conversation with this but the rate of inflation and it keeps going up.

It’s not about prices necessarily going up. Even though it seems like it is, it’s the value of money going down. It’s losing buying power and it’s everybody’s money. There are smart people and very smart people who want to duplicate their money as fast as they can to keep their buying power in check so they can continue and live the lifestyle they want or better their lifestyle if they want. Whatever they want to do if they want to travel more. When we’re looking at an investment of syndication, for example, one of the opportunities that PCRP is considering has an internal rate of return projected of 18% or 20%.

If you divide that by six, now you’re looking at like 3.5 years for that money to double. Significantly different. That means the investor that invested in an opportunity like that can keep their buying power and increase it, which is the real goal to increase the buying power. They can either retire sooner or retire in a lifestyle by design, whatever they choose. This is the power of syndication because it allows investors to duplicate their money faster and not have to do any of the work.

When you invest in syndication, you get the cashflow, benefit of the appreciation and depreciation on your tax returns every year that you’re invested and you are doing no of the legwork. None of it. Someone else is doing all the legwork. You get your K-1. That’s what you get a year. You get to write all that stuff off. I’ve been an investor for a couple of years. At the end of the year, I’ve been making 10% interest on my money invested every year like clockwork. I get my K-1, we’ve got our depreciation. I pay no taxes on that 10%. We will pay at the end when you sell then you have all of that other stuff that has to be wrapped up.

When we’re doing the 10% each year or whatever that particular syndicator will give you sometimes it’s 7% or 10%. There’s different risks, ladies. I know I’m quoting 10%, they’re high-risk projects. If you want to go with safer projects, you’re going to be getting paid probably closer to 7% or 8% usually. I hope that I’m not making too many quotes for you. That’s the way that it works. A syndicator will give you a quote.

IRR is the Internal Rate of Return. What’s interesting about that is you don’t know what that is until the project closes.

Define that. What does that mean?

Multi-family housing reduces the carbon footprint, so it’s socially responsible as well.

Internal rate of return, that’s how the project is projected to perform. It’s a projection and it should be right in line with that. When you add in the tax, depreciation, cost segregation, all of those things that can get written in there, the Internal rate of return should be very close to, if not above, what’s projected for sponsors and syndicators that understand this process.

What I love about the projects that we look at is we have a line with sponsors that can produce that return. We have the climate-resilient piece, which is a little extra layer of protection. They’re not as necessarily high risk as maybe somebody else’s project could be if it’s not one of those markets. It offers a little bit extra security there too and a better rate so we love that.

I know that people have thrown away around that term IRR and it’s not something that we’re used to hearing. What it does is it takes the interest rate that you’re earning each year on your money. Sometimes they’ll refinance a project and then they’ll give you a portion of the cash out piece. That’s included in the IRR. When they sell the amount that you get paid, all of that is also so that’s your profit, that’s all added in. That’s what your IRR is. It’s all of those pieces together. The other thing that you mentioned that I want to highlight for ladies is on this show we talked a lot about retiring early and blissful. We want to help people to have a blissful retirement.

The journey to get there should also be blissful. I’m all about bliss, all through your entire life. For me, I’m on that edge where I’m looking at retiring. There is a lot of stuff going on in my mind that a lot of people don’t think about. Since you brought it up, I’d like to mention, we do have inflation. Whether it’s talked about or not, the prices of goods seem to keep going up. It’s not that prices are going up, although sometimes they are but the buying power is what’s going down. Our money does not have the same value than it had 20 or 10 years ago. I call this a grocery store inflation.

You go to the grocery store and see how much you could buy now with $20 as opposed to what you could buy 10 years with $20. I know this is a little off, ladies. I’m not accurate in all of the things that I’m saying. I’m giving you a high level of how to look at this. When you’re thinking about retirement, a lot of people say, “If I have $2 million and I’m getting 10% that will give me $200,000 a year, that’s what I’m living on right now. That will be able to maintain my lifestyle.” If you don’t continue to grow that $2 million, you’re not going to be able to keep up with inflation and the loss of value of the dollar.

When you’re calculating that retirement number, you need to calculate that you’re going to continue to save 10% a year. Ten percent goes to you. You always pay yourself first before you pay anybody else. Even when you’re calculating that number, let’s say now it’s $200,000 a day, make sure that you can calculate that you’re going to save at least, maybe even more, $20,000 a year and it’s going to go up. Would you say that’s true or would you give me even more numbers or would you say even more?

I would say more. It’s not about what you’re saving, it’s about what your money’s making. If you take that 10%, that could be good. The problem with saving it is we still have this depreciation going on of the dollar. We did a big number of stimulus package and that money is important to everybody to realize that it’s not money that was set aside for these things, it’s money that was printed. They continued printing where they’re at a place where they’re going to continue to print, that’s a whole other subject but the reality is they’re still printing.

The more they print, the same amount of money it would take to retire. If your retirement date was in ten years from now, I believe what you’re saying is, would this be enough? If it’s saved, my answer is no. The money is not going to go as far. However, if it’s invested and it starts to duplicate itself, it could be. It’s probably going to be individual, depending on what type of lifestyle that you’re planning for. Is it the same? Is it better? Does it not need to be as much as you’re making right now. Everything, cost-wise, it’s going to take more dollars to do the same things tomorrow as it does today.

Thank you for that clarity. I always say save because for me, it’s synonymous and I realize that it’s not for others. For me, save means invest. It’s synonymous for me. Ladies, when you hear me say that, save 10%. What I’m saying is invest 10%. I’m always like that. I understand that I misspeak because it’s not precise. You do want to be investing and continuing to have your money grow. There’s a couple of reasons why I love what Dina was saying. The first reason is the value of the money goes down. We have to have that increase to make up for inflation. The whole thing of inflation is a completely different story.

The other thing is, understand that you don’t have a lot of free time when you’re working. When you’re retired, you might want to travel more to see your grandkids and eat out more. You’re tired of cooking. You might want to get someone to clean the house. There are a lot of expenses that we don’t have as working people that we will possibly have when we’re retired. I’ve seen this with all three sets of our parents that they spend a lot more now that they’re retired than they did because travel is expensive. They’re still paying their mortgage and all these other things. Understand that that increase not only should account for inflation but you want to know that your lifestyle can go up.

REW 88 Dina Buchanan | Climate Resilient Markets

Climate Resilient Markets: There are smart people and there are very smart people. Very smart people want to duplicate their money as fast as they can to keep their buying power in check so they can continue to live the lifestyle they want or better their lifestyle.

 

You’ve worked all these years that you can live the lifestyle that you want in retirement and that you’re not restricted by, “I only calculated as much. It was not the right calculation.” As we talk about syndication as a possibility for helping you retire, keep it in mind that it is also after retirement as a strategy to continue to grow your income, portfolio and assets so that you don’t get stuck with this ceiling of what you can afford after you retire. I feel like syndication projects are a big part of my plan as I’m looking at retiring. I wanted to interject that.

Looking at 2020 with COVID, I’ve taught many real estate investing classes and one of the things I was talking to my class about once was everybody was in the same storm but not everybody was in the same vessel in that storm. If you think about it from that perspective, if your worst problem during that time when you were sequestered, which was our family, we’re bored, that’s a good problem. There are people that were not in that same boat. They were in a situation where they couldn’t leave to go make money. They didn’t have any passive income but ours looked a lot different from maybe somebody else’s because we did have passive income.

I’m certainly not saying that to impress anybody but to impress upon you with passive investing and syndications. Those types of opportunities that we can have allow us to have that freedom. Who could have predicted a pandemic? There are going to be things that happen in life that none of us can predict. 2008 wasn’t exactly predicted per se. During those times, not just retirement but important to say, even now, starting to build that passive income, think about how much less you have to trade time for money. It’s almost like an insurance policy of cashflow because it’s going to come in. You don’t have to do anything for it.

I always say, if cash is king, cashflow is queen and the queen is always right.

I used to say cash isn’t king, cashflow is king. That’s so funny but I like queen better.

I can’t believe that this conversation was so good. Ladies, the conversation is going to continue and we’re going to go into EXTRA and we’re going to be talking more about the questions to ask when you’re looking for a climate-resilient project? How to evaluate those projects? How to find those projects? What are the trends and how to find those trends? We’re going to be talking all about that in EXTRA. Before we move into our three rapid-fire questions, Dina, could you tell us how people can reach you? I know you’ve got some gifts for us.

For anyone who wants to learn more about syndication, passive investing, climate resilient markets, how we pick them and why we picked them, go to our website, PCRPGroup.com. Sign up and you can download our free eBook. We are going to have an educational webinar series that I’m going to be leading with my business partner.

We’re going to do shorter snippets of 20 to 30 minutes because we know everybody’s busy and we want to get the facts out. When you’re spending your valuable, precious time learning, you want it to be quick and to the point so that you can get the good information in and go apply it. That’s the goal. Anyone that’s on this episode, please go ahead and sign up. It’s complimentary for you and learn.

Where do they go for the website?

PCRPGroup.com. If you want to reach out to me, it’s Dina@PCRPGroup.com. You can email me and set up a time to schedule a phone call about your investment goals and passive investing. I’m happy to help out any way I can.

It’s not about what you’re saving, it’s about what your money’s making. The problem with just saving it is we still have this depreciation going on of the dollar.

Dina, are you ready for our three Rapid-fire questions?

I’m ready.

Give us one super tip on how to get started in real estate investing.

The first thing I would do is educate myself. It could be a book or a course. I’m a big fan of classes, seminars, 1, 2 hours, 3 days even. There is a lot of opportunity and knowledge that gets dropped in an environment of people of like-mind. I’m a big proponent of educating yourself. You got to know what you’re going to get into.

What is a strategy on being successful as a real estate investor?

It sounds so simple but it’s have a system. If you’re looking at properties, have a system or checklist. A checklist is a great, simple but very powerful tool to make sure you dot your Is and cross your Ts and have somebody that’s already doing the business maybe look at that checklist. Maybe they’ll add some items that you didn’t have on there. It’s not a how-to renovate a house or a building but it gives you key things that get forgotten or could be harmful in a deal but it also gives you key things to remember to do.

I believe that systems are the key to bliss, simply because they allow you to unload all those things in your brain. Honestly, I have invested in syndications but I might do one a year. Each year when I go back to evaluate syndication, there is a whole process. I don’t want to have to reinvent the wheel every single year. That’s stressful. There is a way that we deal with that. I take notes and then I can go back and look at my notes and read my notes, “Those are the things that I thought about. This is what was important. This is what I’ve learned I add to my notes.”

Each year, it’s a little bit easier. Doctor Sam talked to us about a tool on how to evaluate syndication projects. We could add that in there. We get new tools. We learn more stuff. We find out what’s more important to us, what worked and didn’t work. Creating those systems helps us to feel less stressed and more capable.

SYSTEMS. Save Your Self Time Energy Money Stress.

I’m going to use that one, Dina. Thank you. Tell us one daily practice that you do that contributes to your success.

It’s going to take more dollars to do the same things tomorrow as it does today.

Every morning when I wake up, I’m a big proponent of gratitude. I have a quick moment of gratitude for everything that I have and I’m about to create. In my day, after I have that little meditation moment or a mindful moment, I pick out one thing that I want to focus on for that day and feel what it feels like when I’ve accomplished it. I take that energy and use it and ride that momentum so that at any point in the day if things happen, I got to pick up the kids, this practice was canceled.

This throws off this timing, go back to that mindfulness and click into that feeling because we all have these things no matter who we are. This is life. Anything that can take away from our bliss, we want to remove that because it takes us off track. It takes us down a tangent that we don’t want to be on. I’m very focused on mindfulness every day about what we want to accomplish and what it feels like. I can tap into that feeling and shift it and go about my day. That’s something I do every day.

This show has been amazing. We’ve talked about so much good stuff. Thank you, Dina. Ladies, thank you for joining Dina and I for this portion of the show.

It’s my honor to be with all of you.

We have more, ladies. We’re going to be talking about finding and evaluating climate-resilient properties and one of the big benefits of that. We’re going to do a deeper dive on that. If you’re in EXTRA, if you’re subscribed already, please stay tuned. It’s coming next. If you’re not subscribed but would like to be, go to RealEstateInvestingForWomenEXTRA.com. You get the first seven days for free so check it out.

If you’re leaving Dina and me now, thank you so much for joining us for this great conversation. I loved having you here with us and I look forward to seeing you next time. We will see you then. Until then, remember, goals without action are just dreams. Get out there. Take action and create the life your heart deeply desires.

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PCRP Group Director of Investor Relations and Business Development

 

 

 

 

 

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

REW 87 | Scaling Multifamily

 

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:

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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.

REW 87 | Scaling Multifamily

The Only Woman in the Room: Knowledge and Inspiration from 20 Women Real Estate Investors

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.

REW 87 | Scaling Multifamily

Scaling Multifamily: We’re not going to start investing in a business that we have no idea, because that’s a whole another level.

 

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.

REW 87 | Scaling Multifamily

Scaling Multifamily: You’re going to need a good property management company if you’re investing out of state.

 

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?

REW 87 | Scaling Multifamily

Scaling Multifamily: Everyone gets stopped after they lose money and something bad happens, but don’t give up.

 

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:

About Liz Faircloth

REW 87 | Scaling MultifamilyLiz Faircloth co-founded the DeRosa Group in 2005 with her husband, Matt. The DeRosa Group, based in Trenton, NJ, is an owner of commercial and residential property with a mission to “transform lives through real estate.” Liz is the co-founder of The Real Estate InvestHER® community, a platform to empower women to live a financially free and balanced life on their own terms through over 40 Meetups across the US and Canada and an on-line community and membership that offers accountability and mentorship for women to take their business to the next level!

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

REW 84 | Financial Independence

 

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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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?”

 

REW 84 | Financial Independence

Financial Independence: Freedom of choice is our true wealth. Real estate allows that.

 

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.

REW 84 | Financial Independence

Financial Independence: Next Level Income was born of this desire to curate information around financial literacy and education.

 

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.

 

REW 84 | Financial Independence

Financial Independence: Syndication is very simple. It’s an operator going out and bringing in investors alongside them to invest.

 

 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.

 

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About Chris Larsen

REW 84 | Financial IndependenceChristopher 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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Syndication Series #2: Build Strong Passive Income with Monick Halm

REW 83 | Passive Income

 

Love to create passive income streams through real estate investing but don’t know where to start? On today’s show, returning guest Monick Halm does a presentation about real estate syndications and how to passively invest in real estate and earn double-digit returns. Monick is a real estate investor, syndicator, and developer with over 15 years of real estate investing experience in multi-family, industrial, mobile home parks, RV parks, flipping, and vacation rentals. She is also a bestselling author and host of the Real Estate Investor Goddesses Podcast. Tune in to find out how to get high returns with relatively lower risk. Plus, discover how you can avoid having to deal with the three T’s – tenants, toilets, and termites!

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Syndication Series #2: Build Strong Passive Income with Monick Halm

Real Estate Investing For Women

Welcome to the Syndication Series where you’re going to learn what syndication is and how you can utilize it to build cashflow and grow your wealth. It’s an exciting strategy and I’m looking forward to sharing all of our guests with you. Now let’s get to the show.

Welcome to the show. We are going to do things a little bit differently. I am bringing back to the show, Monick Halm. We’ve had Monick on the show before and I had an interesting conversation with one of you guys. The question was, “I have money in my retirement program. I cannot afford to lose it but I want to have high returns.” You’re 65 and you want to retire soon. You can’t afford to lose the money but you want to get high returns with very low risk and you want to be very hands-off.

That was a tall order and I have no idea how to answer you but I do have resources. Monick is the resource that I actually reached out to because I know that she talks about ways to invest with high returns, low risk and hands-off. I wanted her to share her expertise with you. Also, it was very funny because I got that one question and then the same week, I got a very similar question for somebody else. It’s so funny how things come in groupings. This is the topic that people want to hear about.

I’m excited to present this to you. I’m going to have her introduce herself. I know you ladies have met her before because she’s been on the show. I’ve also asked her to do a full presentation because I want to make sure that I’m not interrupting and she captures everything that’s important for you to hear. It’s going to be a little different than normal. She’s doing a presentation. I will interrupt with some questions.

The other thing is she is actually doing a slideshow. If you’re a visual person and you want to see the slides, you can go to YouTube and look up Moneeka Sawyer or Real Estate Investing for Women and then you’ll be able to find this video. You can also go to Roku with Real Estate Investing 4 Women. You can look us up there. I’m going to turn it over to Monick. Monick, welcome back to the show.

Thanks for having me back to talk about one of my favorite things. I love to invest in real estate. I found it a little bit by accident, which I’ll talk about that. I’m going to share my slides. I’ll try to be as descriptive as I can for those who are reading. I’m going to be talking about real estate syndication, how to passively invest in real estate, earn double-digit returns and not have to deal with the three T’s. The three T’s are Tenants, Toilets and Termites. This is a way of possibly investing in real estate that is a pretty high return and lower risk.

Nothing is risk-free. I want to start by saying that. It can’t guarantee you returns. If anybody says that they will guarantee you a return then run in the opposite direction and we will guarantee it. This is a relatively lower-risk investment and I will share why. Before we get going, I’m going to briefly introduce myself and why I talk about this. I am a Real Estate Investor and I’m a Syndicator. Basically, syndication is crowdfunding real estate.

I bring groups of investors together to purchase real estate. I’ve been in real estate for many years. I have a little over 1,300 rental doors in seven states, raised over $35 million with my partners since 2016, with a real estate portfolio worth over $220 million. I’ve written the book, The Real Estate Investor Goddess Handbook and Wealth for Women: Conversations with the Team That Creates the Dream. My newest book is Investing in Real Estate from $1 to $1 Million, which is available as a digital download for free on my website, REIGoddesses.com.

I also have a show Real Estate Investor Goddesses. I’m a Real Estate Investment Mentor, Educator and Coach. That’s me in a nutshell and a little bit of my background for why I’m talking about this. First, let me briefly describe what is real estate syndication. In the simplest terms, syndication is a structure or relationship between multiple investors pool money together to fund a project, real estate or otherwise.

Investing in real estate syndication is essentially investing in a real estate enterprise as a passive investor, alongside multiple other investors. In English, it’s basically we bring together a group of investors that will passively invest. We’ll talk a little bit more about what all of those different roles are in a second.

First is syndication something for you? Maybe you can relate. If your real estate vision is big but you’re not sure if your bank account balance is big enough to fund it then you might be interested in syndication. If you have some money set aside but you’d like to be able to leverage it, spread the risk and you don’t want all your eggs in one basket then syndication might be a good fit for you. If your life is full and you’re not sure if you will have the time or other resources necessary to invest successfully then syndication could be a fit for you.

If you fit any of those things, I totally understand because that’s where I was. I want to share my story, which you may relate to. As with Moneeka, I’m a first-generation American. My parents are from Haiti. I have super supportive parents who were always like, “You can be anything you want as long as you’re a doctor, lawyer, professor, engineer.” I wasn’t into Math and Sciences so I went to law school. I ended up at Columbia Law and I was on a partnership track.

Success is doing what you love with who you love when you want to do it.

I have a picture of me walking. I’m in Japan, walking to our firm there. I was working for big international law firms, partnership track, six-figure income. I checked all the happy immigrant parent boxes. I’ve done everything right but I was miserable. At one point, I found myself in the emergency room. I remember that Tuesday morning and when the doctor told me that my appendix had ruptured, I’d have to spend several days in the hospital. I ended up spending nine days in the hospital. He said I’d have at least 30 days afterward to recover. My first thought when he said that was, “Thank God. I don’t have to go to work for at least 30 days.”

I had this incredible sense of relief. It didn’t hit me until that second how unhappy and miserable I was. I had taken it for granted that I was meant to be that unhappy but it took that moment to give me clarity about that is not normal. That is not good. That’s not okay. I had done exactly what I was told. I had followed the path exactly. I was that miserable and that unhappy. I knew I had to find a different way. They don’t know what causes appendicitis but I was sure it was stress from my job. That job was literally killing me. I had to find a different path.

That was not an easy thing to do because I did the path that I was told would lead to success. I did the path that my parents believed would lead to success. They didn’t know better. They taught me what they knew. I fell into real estate completely by accident. The only thing they’d ever taught me was to buy my own home. That was what they knew about real estate. Moneeka, you were lucky because your parents knew about real estate investing. You were born into it. I was not. My parents just knew to get a job, trade your time for money and then buy a house that you live in but it gives you no money.

At least, they said buy a house. I don’t know how many people whose parents didn’t even know that much.

At least I had that.

You had so much. It sounds like your parents adored you and wanted the best for you.

They did and they’re great parents. I love my parents. They definitely did the best they knew to do. They were very supportive.

I wanted to highlight something that you said, which I think is valuable. Ladies, this is something to think about. We’re talking about real estate but one of the things that Monick found in that hospital and I know I’ve been here too is how do we define success? She did everything right. I did the same thing. I did everything right. Our parents told us what success was going to look like and how we were going to get there because that’s the best that they could do. That’s what they knew.

The way that they define success is different than how we define success. We have had to create a new life based on our vision of success. That’s an important key for you ladies to keep in mind. How are you defining success? I love what Monick was talking about, “This might be for you, if.” If that is you, how are you defining success and what are the next steps? I wanted to highlight that success looks different for everybody.

For me, success is doing what you love. Being able to do what you love with who you love when you want to do it. That is success. After having spent lots of time doing things that were killing my soul, that was what it felt like being a lawyer and it literally was killing my body too. After having spent that much time being miserable, now I have the freedom to do work that I love and I’m passionate about and I have a passive income stream so I don’t have to work if I don’t want to.

I get to make a difference and spend time and vacation and do all of those things that I want to do when we’re allowed to leave the country and our homes. I have freedom. That’s success. I didn’t start there. I got there by a series of happy accidents. I was sharing that when I went to go buy my home. This was in 2005, towards the top of the last bubble. I live in Los Angeles, a very expensive market.

You understand being an expensive market. Those of you out there in the much cheaper markets probably cannot conceive of the prices that we have to pay. Even back in 2005, a starter home in a semi-decent neighborhood was upwards of $600,000, $700,000. I had a low six-figure income so that was challenging for me but a friend of mine that was in a similar boat suggested that we buy a duplex together. He would live on one side. I’d live on the other side.

The original plan was to get a property with two equal sides but we ended up finding this old craftsman that had a larger downstairs unit, a two-bedroom unit upstairs. It had a converted garage in the back which was a one-bedroom. We ended up each taking a bedroom in the bigger unit, renting out our upstairs, renting out our back house, even renting out our basement. I started the house hack before I knew that was the thing. I went, “This is awesome.” We’re paying our mortgage and I got tax benefits. This is great.

REW 83 | Passive Income

Passive Income: If you don’t want all your eggs in one basket, syndication might be a good fit for you.

 

My husband had a duplex. We got a single-family rental together. We started to flip houses when houses were on sale. By 2015, houses were not on sale. It was getting frustrating. Flipping houses is a short-term job. It’s like a short-term contract. You do it, fix it up, sell it and hopefully at a profit and then you have to start over.

I wanted something more passive. I started to look for a fourplex, which at the time was the largest thing I could think of. In LA, you cannot find anything that cashflows. It was pretty much impossible because it was going to cost a fortune and there was no money coming back from that. I ended up being introduced to this man that would become my mentor, Robert Helms, who is the host of The Real Estate Guys Radio Podcast.

He’s done hundreds of millions, maybe even over $1 billion worth of transactions at this point. We had a mutual friend. When I was telling our mutual friend, Kyle, how frustrated I was, he said, “My friend Robert Helms is going to be in LA tomorrow. You should come and meet him.” I met him and he’s the one that changed everything. It’s one ten-minute conversation and why I’m here talking to you. This is exciting.

He was super nice. He asked me what I was doing. I told him about the flipping and how that was getting challenging and looking for the fourplex in LA that that would not make cashflow. He said, “LA is a tough market. I always say live where you want to live, invest where the numbers make sense.” That makes total sense after you hear it. I always thought you had to invest where you could drive to your property, touch it, self-manage it. It never crossed my mind that I could invest outside of where I lived. Literally, that opened up the world to me.

The other thing he said was, “You can buy that fourplex by yourself but you’re limited to your own capital and credit. Alternatively, you could bring a group of investors together and you’d get 100, 200 units.” He started telling me about the benefits of that. My brain exploded right there. I was like, “What? That’s a thing? You can do that?” I got chills, “I want to do that.” That was very exciting to me to find out. I went home and told my husband that night. It’s like, “There’s a thing called syndication. We need to learn how to do that.”

The Real Estate Guys, Robert Helms and his partner, Russell Gray, were teaching a seminar on it in January of 2016. We went to that seminar and signed up with their program. We met Brad Sumrok. He was our apartment syndication mentor. We signed up with him. We went to tons of different events throughout that year and since to learn how to do that. I probably invested over $60,000 in education but it paid off.

We ended up syndicating and getting into a 109-unit mobile home park in North Carolina. We did 318 units in Dallas, 514 units in Atlanta, a 50, 51-unit townhome community and then 77-unit apartment community in Albuquerque, all in that first year. Over 1,000 units in that first year through syndication through bringing investors together. Two of those deals were passive.

Monick, you take things slowly, don’t you? You said only two of those were passive?

The mobile home park and the two in Albuquerque that we syndicated, we’re actively investing. We still passively invest in things, as well as actively invest in their benefits to both, which we’ll talk about in a minute. Other than the mobile home park, all of those things have been sold. We have new ones, a little over 1,300 in different asset classes, different states. It’s allowed us to diversify. It’s allowed us to scale, grow and a quantum leap in ways that I had never imagined possible. That’s why I’m very passionate about it.

I have a picture in a slide. It’s me but I’m actually wearing a tiara and I’m surrounded by a bunch of men. It was at a mastermind that I was in. First of all, 90% of our investors were men. I had been working with women but it came as this divine download to bring women into this game and especially invite them into syndication. I created Real Estate Investor Goddesses to bring women into this game.

My mission of helping 1 million women create financial freedom through real estate investing came as this divine download but not the how of it. I’m still figuring out the how. We’re ways from that but the what of it has come. It’s been great. The word’s been going out. As with you, Moneeka, I’m passionate about getting more women into this lucrative game of wealth-building. One of the ways that are great for women is with syndication because a lot of us are busy.

We have jobs, we have to homeschool, we have parents and kids to take care of and all of this stuff. This is a way of being able to get into real estate that is passive, that doesn’t take time past the vetting or some of you might be interested in being on the other side of it too, where you get to bring groups of investors together. You can benefit a lot by being on the active side, which is the side I mostly play on. Either way, there are a lot of benefits. Why would you want to do that?

First, it allows you to buy more than what you could afford by yourself. As a passive investor, you get to leverage OPM, other people’s money. It’s not just your money. It’s the money of all the other investors and often a bank too. We usually get financing as well as all of these investors that come in. You’re able to leverage OPM to get something much bigger than what you could afford by yourself.

Invest where the numbers make sense.

You also get to leverage OPT, other people’s time because somebody else is going off and finding the deal and putting it together and bringing all the investors together. You have to vet the deal and then send in your funds and wait for it to come back with friends. It allows you to spread the risk. It’s not all on you. The risk is spread. Also, as a passive investor, you have very little to no liability. You spread the wealth.

As a syndicator, I get to create an opportunity for many people to benefit. As a passive investor, you get all the benefits of being a real estate investor, like the tax benefits and otherwise, without the work. With a real estate syndication, there are a lot of benefits. It gives you the benefits of passive cashflow. You get a share of the monthly cashflow and equity that’s at the end when we sell. You get federal tax benefits. A lot of people don’t realize that. You have the assumption that the more you make, the more you pay in taxes. That’s what we’re told.

Higher-income, more taxes, except when it comes to real estate investing because of the way it’s structured. With the tax code, you often end up paying less. A lot of people will get into real estate, especially when they have very successful businesses. A good stabby CPA will say, “You should start investing in real estate because you’re paying too much in taxes.” Even though you’re making money with your real estate because of the way real estate is, it looks like a loss for tax purposes. You’ll pay less.

I have a very good friend. He’s a successful businessman. He found himself one year owing $500,000 to the IRS. He had always assumed the more you make, the more you pay in taxes. He had multimillion-dollar businesses and he found out about real estate. He bought an apartment building in Memphis. The apartment building is making money.

It was making six figures a year of income but it brought his tax bill from $500,000 to $0. He’s making more money. Not only did he make money but he saved on the money that did not have to go to Uncle Sam. It’s not what you make. It’s what you get to keep. In real estate investing, even as passive investors, you get to keep more.

I’ve said on this show many times that no matter how someone becomes rich, the rich always invest in real estate. That’s where they make the majority of their money. They make a huge amount of money in real estate. They also save a lot of money in real estate, which they can then grow again in other ways whether it’s in their business or real estate.

Monick has given you a cool breakdown of why the rich invest in real estate. What’s cool about real estate is that you don’t have to be rich. This is available to everybody, especially here in the United States. This is the most amazing country that way because this is not true elsewhere. The government actually supports everybody from a single mom all the way to the richest person on the planet in investing in real estate. We’re supported to do that. It helps us to grow true wealth and it helps to lower our tax bill. There are many good reasons to invest in real estate.

The government wants you to invest in real estate. That’s why they give these incentives in the tax code. It’s to get more people to invest in real estate. There’s a book called The Color of Law. It started in the 1940s after World War II. They thought that if people owned real estate, they would not be communists. It was a way of helping stop communism. Whatever the reason, it’s a good thing if you’re a real estate investor. It helps you out.

People who have a lot of money shift from being about income to being about wealth preservation. Real estate helps you preserve wealth, not just because it appreciates and some of these other benefits but because of the enormous tax benefits. That will help you save money off of your real estate income and it helps you pay less on more of your income, not all. I’m not a CPA but it helps you. Check with your CPA.

It is very beneficial, tax-wise. As I was talking about before, you can leverage OPM, other people’s money and other people’s time. When you’re in syndication, you’re able to do much bigger properties and their economies of scale and leverage in that way. Retirement savings came up because people are saying, “I have this money in my retirement account. I’d like to be able to find investments that make sense and that are lucrative, relatively safe and with self-directed retirement accounts.”

Not the account that your work’s going to put you in normally, which gives you a very limited menu of things that you can invest in, like some mutual funds and bonds. If you can self-direct your money then you can put it into real estate and get better returns. Also, with real estate, you get appreciation over time. Properties tend to go up in value but you can also force appreciation by doing targeted rehab, which is what we do with syndication.

We have a business plan. When we buy a property, we plan to add value to that property and appreciate the value. It’s worth more after a certain amount of years. We’ll sell and be able to recapture that. Even on paper, as the value of the building grows so does your net worth. It allows you to leave a legacy, which for many of us is one of the main reasons why we want to do this. Real estate since time immemorial, has been the main way that people have built, preserved and passed down wealth. It still remains the same way. That’s one of the best ways to build and leave a legacy.

It’s the feel-good business. That’s a win-win. I only invest in ways in which I can leave a property in a community better than we found it. In our syndications, that’s the focus and it feels good. It’s a wealth-building opportunity for everyone touched by our deals. That’s why I love it. Those are the benefits. Think about what are the benefits for you. What’s your why behind real estate investing or syndication? Depending on what are the why’s that are more important to you, there are certain deals that will give you more of those benefits or less so tap into your why behind them.

REW 83 | Passive Income

Passive Income: Don’t try to do a syndication without a qualified securities attorney. They make sure you know what you’re doing when you take on other people’s money.

 

What types of properties can be syndicated? Basically, anything can be syndicated. You can syndicate debt. Sometimes, it’ll be a fixed return. It’s a debt or a loan that we’re syndicating. You can syndicate equity, ownership stake in the property, raw land or single-family residential properties. I put an asterisk on the slide because syndications are generally for larger commercial projects. There’s a lot of expensive legal work that has to be done. I’ll talk a little bit more about the legal ramifications of this. It’s not something that I would recommend you go out and ask a bunch of people to give you money for a deal.

They’re governed under the Securities and Exchange Commission. It can be pricey to put one of these together. The numbers have to be justified. The deal has to be large enough to justify the legal costs of putting together a syndication. You won’t find a single-family residential property that is syndicated, unless it’s going to be used for something like a residential assisted living facility, a facility that where people are paying upwards of $4,000 a bed to be there and it’s a very high cashflowing business. Those get syndicated. Otherwise, it’s like a house to flip. Normally, you won’t see that but they could be if somebody wanted to do that. Multi-family apartment complexes, that’s very common, office space, retail, industrial, you name it, can be syndicated.

Who’s involved in the syndication? You’re going to hear the terms syndicator, sponsor, active investor and general partner. Those are all used interchangeably. That is to describe the individual or company or team that’s finding, acquiring and managing the real estate. They should have a history of real estate experience and the ability to underwrite and do due diligence on the properties. They’re the active investors. They’re the ones doing the work.

There are joint venture equity partners. Sometimes that’s my role in deals, where we have a group of investors and we’re not on the operation side or bringing in funds for the investment. We’re connecting our investors to operators that were part of the sponsorship team. With a JV or equity partner, it might help with financing. They’re reporting communications, tax documentation, that sort of thing.

Last but not least, there are passive investors sometimes called limited partners. Those are individuals who will invest in the syndication. They own a percentage of the real estate as a result. If it’s an equity deal or they’ll have a percentage, they’ll be part of the loan. If it’s debt, they’ll get all the benefits of property ownership, not involved with acquiring the property, arranging financing or doing any of the day-to-day management. They cannot be.

Think of it more like if you’re buying stock in Apple. You own a piece of Apple. If they do dividends then you would get your dividends. Otherwise, you have that ownership stake but you’re not going to call the company and say, “I want you to change this feature on the iPhone.” Our passive investors can call us and tell us what they’d like to change but if there is someone who’s managing it, gets to decide when to sell, what to do and who’s the team then that’s on the active investor side.

I’m going to share a fairly typical example of a 100-unit apartment building. This is one that we did. I’m going to round out the numbers to make this easier to understand. This is not a guarantee of results. This is not atypical for syndication. It’s fairly typical in terms of returns. This deal was a $5 million purchase price. The rehab budget was $500,000. We’re buying an apartment building, fixing up the units, getting them nicer so we could raise the rents to market rates because this property was underperforming.

There was a loan. We got a loan, 75%, $4.125 million so the interest rate was 5% at the time. It’s lower now. We had a downpayment of $1.375 million, closing costs of $200,000 and cash reserves of $75,000. We were raising $1.65 million. We rounded up 33 investors at $50,000 each. I won’t go through all of the various numbers. I’ll highlight the end result. After the total cash flow, the whole profit was $51,575 after five years. Basically, it more or less doubled the money of the investor after five years. Part of that was in cashflow, a little over $23,500 in cashflows. Sales proceeds were close to $78,000. That was the profit.

That’s not bad for something that is passive. That is not atypical for these types of syndications. On the active investor side, that also invests $50,000 in the same deals as an active investor, you get a share of the cashflow, the acquisition fee, there’s also asset management fee and you get a share of the equity for putting together the deal and then there are fees for managing it. In this case, an active investor who also put in $50,000 had the same profit that all the other equity investors did, $51,575. There’s a 3% acquisition fee of $49,500, 1.5% asset management fee, $60,257, 15% deal sponsor equity share of $116,700. The total sponsorship return was $287,032 on a $50,000 and sweat equity.

There’s a lot of sweat equity in that but that’s the return. If there was a team doing that, all the acquisition fee, asset management and deal sponsor equity would be split amongst the team members. You can get three times or more of the returns by being on the active side and doing the deal. It can be very profitable either way. Does this sound like something you might like to try?

It’s one of the nice things about it as a passive investor. You can learn but you have to vet the deal and then wait for it to come back with friends. For those of you who are interested in being on the active side, I have a warning slide here. Do not try to do a syndication without a qualified securities attorney. You could win yourself a very hefty penalty, an orange jumpsuit and some jail time. I want free housing but not that way.

They make sure you know what you were doing when you take on other people’s money. You can’t usually advertise an opportunity. It’s very regulated in terms of who can invest with you and how. It’s going to be people with whom you have a substantial pre-existing relationship and they have to be sophisticated enough to understand the deal or you’re only dealing with accredited investors. For those of you who don’t know what an accredited investor is some people think it’s like, “I’m not accredited. I haven’t taken the test. I don’t have the certificate.” There’s no certificate and test. You qualify either through your income or through your net worth.

If you have an income as an individual of $200,000 or as a married couple of $300,000 per year, you’ve had it for at least two years with a reasonable expectation that you will in the subsequent year, you are an accredited investor. If you have a net worth of $1 million or more, not including your primary residence then you are an accredited investor. Congratulations. You are part of the 8% of the population who are. Most people do not fall under that but if you do, you’re an accredited investor. That will allow you to take advantage of more of these opportunities.

Invest in ways in which you can leave a property in a community better than you found it.

Some of them are for accredited investors only some are for both but you do have to have a pre-existing relationship with the person bringing the deal. If you are trying to syndicate then you need to understand when you can take credit, when and how you can take people. If somebody is talking about this on Facebook, be wary unless it’s accredited investors only and they could do that.

You can’t take anyone’s money, even if they want to invest it with you. I’ve had certain deals where we had to have that pre-existing relationship. Suddenly they come and I’ve met them after I already have the deal. They’re like, “I wanted to put money into it.” I was like, “I wish I could take your money but I can’t. There’s a next one. We’re going to get to know each other. Next time, you could, if you feel like it but I can’t now.”

If you want to find out more about these passive investing strategies, we have an Investor Club at Real Estate Investor Goddesses. I created this club because I wanted to get more women to know about these types of opportunities. The Investor Club doesn’t cost anything to be part of and you’re not obligated to do anything but it allows us to get into that pre-existing relationship. You then get access.

A lot of people are like, “How do you find out about this? How do you get access?” We have to get into a relationship with a syndicator. I deliberately set out to get more women into this game because when I started, 90% of our investors were men. I’m happy to say 90%-plus of our investors are women. I would love to be able to get more women into this because they’re great investors. I’ve done better on my passive investments than I ever could have done in investing in LA or these expensive markets where I was doing all the work. They can be lucrative.

Let me talk a little bit about the risk for a minute because there are risks. Here’s where the biggest risks are and how to mitigate the risk. They can be great opportunities. It’s important that you invest with the right people. The team is everything with real estate. There are three things to look at in order of importance. First is the team. Next is the market. Next is the property and the plan. It’s in that order of importance.

Your team is very important. You want a team that has a good track record. You want a team that’s trustworthy. A good track record does not necessarily mean they’ve never lost money. Robert Helms, my mentor, would say that he would not invest with anyone who had not lost money before. He wanted to invest with somebody who had lost money and stayed in the game. He wanted to know what happened when it went bad? How did they deal with it? Are they still playing in the game?

Things happen like in 2008. It was very bad for a lot of people. There might be some deals that people bought that are not quite as right a year ago that might not be doing well right now and how are they handling it? How are they going to get through it? That tells a lot about somebody. It’s not necessarily that they’ve never had a miss. That’s not a bad thing. You want to know that they’ve been able to handle it. They have a long track record. They know what they’re doing, trustworthy, following the rules and they’re doing it right. The team is important.

The market, where are they investing? You start to look at their business plan. What is the property they’re looking at and some of the assumptions they’re making? I like to under-promise then over-deliver. Not everyone has that. How are they underwriting? Those are the things. You’re going to want to be able to vet the people who will get the deals and make sure it makes sense for you.

If it does then you raise her hand, say, “I’m in,” and you invest and wait for your money to come back with friends. That’s how you do it. We tend to buy properties that are already cashflowing. A lot of these deals, they’re already stabilized and they’ll plan to increase cashflow. When things tend to go bad, you may not meet the mark that you wanted to but it’s unlikely to lose your money. They’re great in investments.

Do most of your projects take five years?

Five years is a fairly typical hold plan period. For the past few years, we were getting out more quickly because of the way the market was going. We’re paying more money for the same amount of income. It became a very good time to be a seller. I like to be a seller when it’s a sellers’ market and a buyer when it’s a buyers’ market. We started to sell because we could hit our returns more quickly. It’s better if I could get somebody a 100% return in 2.5 years versus 5 years. We were selling more quickly when it made sense.

Looking at where the market is going, it might be closer to our five-year period or it might not make sense to sell in five years. We may hold on for a year or two. As the sponsors, we’re going to do what’s best for our investors and we’ll sell when it makes the most sense. If it doesn’t make sense to sell, if we’re going to sell down or at a loss then we hold off because we’re always cashflowing. That 5-year plan might become a 7-year plan depending on what’s happening in the economy or sometimes it’s a 2 or 3-year plan if that makes sense.

Is there a particular class that you invest in?

Most of our investments are in class B multi-family and we’re also doing a lot of industrial. In fact, we’re doing more industrial as there’s a lot of uncertainty in the rental market because more and more people are losing jobs and not able to work. That’s harder. Industrial is one asset class that has been the least affected by what’s going on. One of the things that we’re doing a lot of is the types of deals called sale-leasebacks.

REW 83 | Passive Income

Passive Income: Three things to look at in order of importance – the team, the market, and the plan.

 

Basically, it’s a company that has a facility. We did a frozen pie company, baby food company and we have a couple of others but they’re essential businesses. Their businesses are doing super well in this crazy economy. These facilities that they had built and they wanted to get equity out of them. They couldn’t refinance to get the equity that they needed so they’re selling it but then they lease it right back as our tenants with these triple net leases.

For those of you who don’t know, what’s great about the triple net lease is they tend to be very long. These are twenty-year leases that we have with our sellers/new tenants. They pay a triple net lease. Not only do they pay rent, but they also pay property taxes, insurance and all of the maintenance. They basically take care of all of the expenses with the exception of any debt service. We have loans on the properties and they’re not going to pay for that but all other expenses, they cover. There are no surprises.

We have built-in rent increases in the leases as well year over year. You know what the income’s going to be and what the expenses are going to be. The plan is we sell them to institutional buyers after 3 to 5 years. It’s very similar returns to multi-family, cash returns in the 8% to 10% range with cumulative annualized returns in the high teens, low twenties. We like them and they feel a lot more safe and stable, especially in this type of climate. We’ve been doing these.

How do you find those?

We have partners that have been doing this for many years. They’re one of the very few people who do this. It’s a very niche segment of the market, which is great. I don’t like going where a lot of the herds go. I try to look away from where the herds go and into places that are a little more open pastures. These companies will contact our partners. The big part of the due diligence on these is due diligence on the company to make sure that it’s a company that’s going to last a long time.

The good thing about these long triple net leases is you have a tenant and they’re super easy. They almost know property management. There is very little to do but when you do lose a tenant, it can take a while, some months sometimes a year or more, to find a replacement. The important thing is to have a very steady tenant that’s not going to go anywhere. We do a lot of due diligence on those tenants. We make sure that the seller/tenants, the company is very solid and then we do the deal.

How big is a deal like this usually? How many investors are you looking for? How often do you do this?

They will vary. We’ve done syndications where we’ve raised as little as $500,000 and as high as $8 million. I think that was our largest raise so far. It’ll depend on the raise. A fairly typical minimum investment is $50,000. We’ve had somewhere it was a $100,000 minimum and we’ve had a couple where it was a $25,000 minimum.

How many of these do you do per year? How often can someone get into this?

Our goal has been to do two a quarter but because of COVID, we’re about to do our fourth one. We have at least one a quarter.

That was amazing. So much information but really good stuff. Thank you, Monick. I think that was super helpful. If you had one tip to give my ladies about investing in syndication, what would you say?

I would say, if you want to do this then you need to get on the list of people who do syndications. Connect with people. We have our women’s intuition. Tap into that, as well as your learning. Find people, get to know them, who you can like and trust and that can do a good job with syndication. If you’re passively investing, the only way you’re going to get access is to get into interrelationships with people who have these types of deals.

This is part of the conversation I have when people apply to get into the Investor Club. We can hop on the phone. I get clarity on their why. Why do they want to do this? Depending on their why, different investments will be a better fit for them or not. It’s important to tap into your why. It’s important to know what your resources are, what you can invest, where your funds are and have that clarity about where your money is and when you need it.

REW 83 | Passive Income

Passive Income: If you’re passively investing, the only way you’re going to get access is to get into interrelationships with people who have these types of deals.

 

If it’s money that you’re going to need in 1 year or 2 years or if you’re 65 and you want your money in two years, a deal where your money is going to be locked up for five years is probably not the best fit for you. If you’re going to need it that quickly and you’re okay with the cashflow or something then that’s fine. It could be 5 years but it could be 7, depending on what’s going on. It could be less but it could be more. You need to get a sense of when you’re going to need the principal back and make sure that it all makes sense for you. We would have that conversation on our call too so I could get clarity and make sure that you’re getting into deals that make sense for you.

Why don’t you tell everybody how to get in touch with you?

To join the Investor Club and get into a one-on-one passive investing strategy session with me, ladies, go to REIGoddesses.com. Gents, go to VIP-Assets.com. Both will get you in the same place. When you go there, you will understand. REIGoddesses.com is speaking to women. It’s a lot of pink.

That is so helpful, Monick. Thank you for coming back to the show and sharing all this information with us. It’s valuable as always.

It was my pleasure. Thank you much for having me.

Ladies, thank you for joining Monick and me for this conversation. I hope it was helpful. I know we did a little bit of a different format but I hope you got a lot of great information. Contact Monick if this is a strategy that you’re interested in. I look forward to seeing you next time. Until then, remember, goals without action are dreams. Get out there, take action and create the life your heart deeply desires. I’ll see you soon.

Important Links:

About Monick Halm

Monick is the founder of Real Estate Investor Goddesses. Her mission is to assist one million women to achieve financial freedom through real estate. She is a real estate investor, syndicator, and developer with over 15 years of real estate investing experience in multi-family, industrial, mobile home parks, RV parks, flipping, and vacation rentals. Together with her husband Peter Halm, and her investors, she owns over 1300 rental units across 10 states.

She is the #1 bestselling author of The Real Estate Investor Goddess Handbook and Wealth for Women: Conversations with the Team That Creates the Dream, and host of the Real Estate Investor Goddesses Podcast. She is also a Real Estate Strategy Mentor, a Huffington Post contributing author, keynote speaker, recovered attorney, certified interior designer, Feng Shui expert, avid world traveler, wife, and mother of three amazing kids.

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Welcome to the Syndication Series!

 

Hello Ladies!

I am so excited to be sharing with you the Syndication Series!  In this series you will learn all about what syndication is, and how it can help you to grow your cash flow and build your wealth.

The guests featured in this series were picked because of their reputation in the industry and because I trust them.  There are a lot of syndicators out there, so this will help get you started with a few.

Keep in mind that I can’t guarantee any results, so make sure that you do your own due diligence on these operators and any deals you send them.  But at least this way you will have a short-list to start researching.

Here are the guests that will be featured over the next 6 weeks: (links to episodes will become live when the episode releases)

 

Dr. Samuel Giordano 

We will start this series with Dr. Sam, who will share with us a tool he has created to help you evaluate different syndication deals that you are considering.  Samuel Giordano, MD, is a practicing gastroenterologist, author, real estate investor, and co-founder of passiveadvantage.com, a website designed to help physicians and other high-income professionals vet passive real estate syndication deals. He and his partner Terry Kipp have designed tools specifically geared toward passive limited partner investors to help objectify and bring to light the risk points of various real estate syndication deals before choosing to invest. The tool also has built-in functionality for tracking investment performance vs proforma, as well as a separate tool for tracking your progress on the path to financial independence. He has been investing in passive syndication deals as a limited partner since 2017, and initially developed the tool for himself. Now, he is focused on helping other physician investors and bringing it to the masses. His ultimate goal for himself and others is financial freedom and to be able to live the life of our choosing on our own terms. 

Listen to Dr. Sam’s episode here.

LIVE now!

 

Monick Halm

Monick Halm (one of the sponsors of this series) is the founder of Real Estate Investor Goddesses. She is an educator and advocate for female real estate investors, and has a mission to help 1 million women achieve financial freedom through real estate. Monick is herself a real estate investor and syndicator, and owns, together with her investors, over 1300 rental units across six states.

She is also a #1 bestselling author, podcast host, Real Estate Strategy Mentor, wife, and mother of three amazing kids. 

Listen to Monick’s episode here.

LIVE now!

 

Chris Larsen

Chris Larsen is the founder and Managing Partner of Next-Level

Income. Chris has been investing in and managing real estate for over 20 years.

While still a college student, he bought his first rental property at age 21. From

there, Chris 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. Chris is passionate about helping investors become financially independent. 

Listen to Chris’s episode here.

LIVE now!

 

 

 To further support you, I am holding 2 webinars where you can ask questions LIVE.  ATTEND BOTH to get both perspectives (investor and operator)  and ask all your questions LIVE!

Webinar 1: Speak to Successful Syndication Investor LIVE!

Dr. Sam is a passive investor in Syndications and will show you exactly how he evaluates deals to make sure they are safe and meet his goals.

This webinar will be held on Thursday Nov 18 at 5pm PST.

Sign up at blissfulinvestor.com/samwebinar

 

 

Eng Taing

Eng Taing is the CEO & Founder of Touzi Capital, a real estate investment company focused on investing in Kansas City who believe that your money should work for you. Touzi Capital have been investing in commercial real estate for many years and trust that this is one of the best ways to predictably build wealth through passive income.Touzi Capital focuses on high cash flow investments and providing passive income to investors by acquiring and optimizing multifamily, industrial and senior living assets. In doing this, they want to make real estate investing accessible for the everyday investor through a technology and data driven platform along with our dedicated team that puts you first. In this episode we explore the vast opportunities that Opportunity Zones provide. 

Listen to Eng’s episode here (when available)

To release on 11/23

 

 

Liz Faircloth

Liz Faircloth co-founded the DeRosa Group in 2005 with her husband, Matt. The DeRosa Group, based in Trenton, NJ, 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 use, which includes repositioning single family homes, multi-family, apartment buildings, mixed-use, retail, and office space. The company controls close to 1000 units of residential and commercial assets throughout the east coast.  Liz is the co-founder 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 and an on-line community and membership that offers accountability and mentorship for women to take their business to the next level! She is the co-host of the “The Real Estate InvestHER Show” and recently published their first book, “The Only Woman in the Room – Knowledge and Inspiration from 20 Successful Real Estate Women Investors!”

Listen to Liz’s episode here (when available)

To release on 11/30

 

Webinar 2: Speak to a Syndication Operator LIVE!

Chris Larsen. He is an Operator and is actually the guy putting investors together to fund deals.  You can ask him any questions about how syndications run, what to look for in an operator, and what he is looking for in investors.

This webinar will be on Thursday Dec 2 at 4pm PST.

Sign up at blissfulinvestor.com/syndicationwebinar

 

 

 

Reed Goossens

Reed is a  REAL ESTATE INVESTOR, BEST SELLING AUTHOR, ENTREPRENEUR, PODCAST HOST AND ALL-ROUND GOOD BLOKE! In 2012, Reed quit his job in Australia and moved half way across the globe to the US to change his life, and to chase a dream. With limited funds, no investing experience, and no credit, Reed went from purchasing a small duplex to growing his own real estate investing firm, Wildhorn Capital. Reed now syndicates large multi-million dollar deals across the US. He has also achieved financial freedom, and has taken control of life.  IF REED CAN MOVE- HALF WAY ACROSS THE WORLD and achieve financial freedom, then so can you!

Listen to Reed’s episode here (when available)

To release on 12/7