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Podcast: Millennial Investing - The Investors Podcast Network

Achieve Financial Freedom Through Real Estate Investing

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Intro: [00:00:00] You are listening to TIP.

Robert Leonard: [00:00:26] On today's show, I talk with Spencer Hilligoss. Spencer is a real estate expert, founder of Madison Investing. A technology executive and part of Forbes 2019 Real Estate Council. As you'll hear throughout our conversation, he is very passionate about real estate investing and helping others achieve their goals through real estate. I hope you really enjoy this thought provoking conversation with Spencer Hilligoss.

Intro: [00:00:28] You're listening to Millennial Investing by the Investor's Podcast Network, where your host, Robert Leonard, interviews successful entrepreneurs, business leaders and investors to help educate and inspire the millennial generation.

Robert Leonard: [00:00:50] Hey everyone, welcome to the show. I'm your host, Robert Leonard. And with me today, I have Spencer Hilligoss from Madison Investing. Welcome to the show, Spencer.

Spencer: [00:00:58] Thanks so much for having me. Robert Really excited to be here.

Robert Leonard: [00:01:01] Let's start today's show by talking about your story. Walk us through your background and how you got to where you are today.

Spencer: [00:01:07] Happy to. So I am based out here in the Bay Area, California, and I live right between Oakland and San Francisco. For those of you guys that are familiar, I, you know, graduated college a number of years ago and got straight into the local business. And, you know, the local business out here, of course, is the tech industry. And so I have gone through 13 years of joining different early stage tech companies. I mean, initially I'd gone through one larger organization kind of learn the ropes from a big company, but then went to four other smaller early stage startups at different stages. And that whole journey has been a wonderful learning experience for me. It's been hard, but I would say I've been building teams, operations groups, sales organizations, hiring, you know, hundreds of people. And these are some of the companies that, you know, people would recognize. So that that has been my career for the past 13 years. You know, the big kind of milestone from recent times, Robert, that we were chatting about right before we kicked off the recording is that this week I actually gave my notice to my employer and it's a very positive goodbye. It is bittersweet, of course, but after 13 years of building this career, which I have loved, I'm actually pivoting from my tech leadership career to go full time into real estate and real estate investing, because for the past roughly three and a half, four years, I have built what started as something passive, as a side hustle, you know, with real estate investing. And it's grown into something that is no longer the side hustle. It is now the hustle, if you want to call it that. And I'm going to just be going full time to grow our own business. So it's been a wild journey. On a personal note, I also just have a couple young kids, two boys that are pretty young in age, you know, two and five and a wonderful partner and wife. She's my business partner as well. Jennifer. And so, you know, we work hard on all fronts, but now I'm excited to go focus full time on just building our real estate business.

Robert Leonard: [00:03:00] That's awesome. Congratulations on that. I want to talk about that a little bit. But before we do, I want to talk about something that I read and that I know you did while you were working full time. And even though you were investing in real estate passively, you stopped contributing to your 401K in order to invest more in real estate. And I want to know why you did that. And you know, what about the 100% instant return on investment that you get from an employer's match? And how has this investment philosophy played out for you.

Spencer: [00:03:30] Man? Yeah, that was a scary moment when I stopped contributing to that 401K. We're talking about a moment after more than a decade of feeling super proud of dumping my money in. You know, I was one of those big nerds that was working at financial software companies, and I was like maxing out my contributions for more than a decade. And I was sitting there talking to my colleagues at the time, and I was my early 20s, mid 20s, late 20s, and they're like, You're using the 401K, And I'd be like the guy who is not only using it, I was enthusiastically throwing money into it. And the day that I decided to turn it off a few years ago was kind of a leap of faith. And so in hindsight, I would have gone back and I actually would have not used it at the companies where I didn't get a match. But I do want to make sure that I hit the point. Your question head on, Robert, which is I actually would encourage folks, please do use the match. Like if you get a match, that is what everybody says when they're trying to give you good advice. That is free money. So, you know, you should max up to the match. You know, I encourage you to I encourage everybody and I certainly did at least contribute out of your paychecks to make sure you get the maximum company match.

Spencer: [00:04:42] My wife and business partner, she still does that for her full time day job. But not every company offers that. And particularly in the startup world, a lot of companies will will not implement programs for 401ks because just they're not they're typically not profitable yet. You're not cash profitable, so they're not willing to go and take on to take on that cost of doing a matching program. But please use the match, but don't. And I can't endorse dumping money into a 401k, unless someone is willing to truly mentally just they just want to autopilot. If they want to autopilot and they don't want to make anything financially a focus in their life and they really don't even want to talk about things like passive investing and amazing returns and tax benefits and all this cash flow, passive income stuff. It's a fine option. And please do that instead of nothing. Like the worst thing that someone can do is nothing and just, you know, not saving, not investing even for a mutual fund or 401k. That scares me a little bit. So I really hope people are not taking that message away. The message is there's better ways to do it, but at least use the match.

Robert Leonard: [00:05:48] So that's exactly going to be my follow up question. When you did this, was it at a time where you didn't have a match and that's why you were able to earn better returns from real estate than in the market through a mutual fund or ETF?

Spencer: [00:06:01] Yeah, it was a mix of things and you hit on part of it. So I was not getting a match. But even if I was, I would have reduced my contribution down to to just max the match. So I was very fortunate in my tech career. Robert to like stumble my way in. I can not claim this to be like a deliberate, awesome mastermind plan. Four years ago, I joined a startup that happened to be a real estate startup, and my mentor in my corporate career nudged me to go into this place, take on a leadership role. I was like getting licensed as a loan originator at a at a lender that was also a tech company. So it's a lender that lends to flippers, house flippers, just like you see on HGTV. If someone is trying to buy like a distressed house and flip it and make some cash. So I went into this company and I was quickly exposed to a bunch of other people that were really passionate about this stuff and learned the ropes about real estate investing from that environment. So I bring that up because that's what was bouncing around in my brain and the noises that I was hearing and the advice that I was getting from all these co-workers saying, Wait, why are you dumping more money into a 401. K when like they just got 20%, 30%, some remarkably higher rate of return from their investments in real estate? And then they tell me that they're not paying taxes on a lot of it. And I was like, is that legal? And it certainly was. And so it's stuff like that that really perked my ears up and was like, okay, on my own. 401K Yeah, I was probably getting maybe 8%, 9%. And it's not bad for sure. It's pacing the stock market historically or pretty close to it, but still found stuff that was quite a bit stronger. And also I think the most important thing to Robert was we're all on this earth for like a grand total of what, on average, maybe 80 years. Not to get too heavy, too fast. But I would say I was wondering how I could make that money. I was dumping into a 401K applicable to my life now. And it's not cheap to live in the Bay Area. I mean, there's plenty of other coastal markets and pricey markets that are out there right now because we're at the top of a real estate of a economic and real estate cycle right now. But if I dump money into a 401K, I can't touch it for decades. You know, I can't touch that stuff for, you know, for, you know, 30 years in some cases, for some people out there, probably 40 years. So I wasn't okay with that. You know, I wasn't okay with the fact that I couldn't touch it. And so and I was wondering, like, how do I put this to work for me? Like now I don't want to necessarily make any silly assumptions either because we don't have to go too far down this one unless you want to. Robert But there's some interesting call outs every single 401 K marketing piece of collateral that's out there or a website around 401. S And one of the assumptions that you'll find if you look closely, is that they assume things like your tax rate will be lower when you're in retirement. And why is that? Well, they're assuming you're making less money. Why are they making that assumption? I don't want to be making less money when I'm in retirement. I'd like to think that I'm actually making more money in retirement. I'd like to have a more comfortable life. We're going to have a lot more time on our hands when we're in retirement, so you're probably going to spend more. So it's those types of assumptions where I was sitting there going, How do I put these funds to work today? Or in the short term to change the way that I, you know, give a house, a family environment for my kids? Like, how do I help my immediate family, have a comfortable life, all that stuff.

[00:09:20] Let's take a quick break.

Robert Leonard: [00:12:41] I think this whole idea is so interesting. And the reason I wanted to talk about it is because I follow actually a very similar strategy. I historically, I had been such a stock investor that was completely my MO. That was everything I believed in. I thought that was my way to wealth. And so my first job that had a company sponsored 401 K with Match, I was not only contributing to the match, but I was contributing. And again, I wasn't making a lot of money. I was just out of high school. I hadn't even graduated college yet. This was my college job, but they had a 401K match and I was contributing 60% of my paycheck just into my 401K. I didn't have any bills and, you know, I was young, all of that. But that's what I thought was the best. And then just about a year and a half, two years ago, I stumbled upon real estate investing. And it was kind of like an epiphany for me. My mind was kind of blown because I was like, Oh my God, real estate is the Holy Grail. You know? I just absolutely blows away the stock market. And for me, it was it was really crazy because the stock market has been everything I believed in or studied for the last decade. So it was really a big shift for me. And so what I did was exactly what you said. I started only contributing to my 401K up to the match just so I got that 100% free money. And then everything else goes into real estate. And that's essentially how I've handled my portfolio. And that's exactly why I wanted to dive into that a little bit, because I don't hear a lot of people talking about that. So to see you talk about that and have that same philosophy was really interesting to me.

Spencer: [00:14:07] Well, kudos to you on on contributing that much. You know, although it sounds like we have that in common where we kind of look back with like, why? Why did we do that? At least we were doing it. It's better than not doing it.

Robert Leonard: [00:14:18] Yeah, you know, it's kind of funny not to go down the loopholes of retirement accounts too much, but it actually worked out in my favor because I was contributing to a Roth 401. And then when I left that employer, I was able to roll it into a Roth IRA and with a Roth IRA. And again, consult tax advice if you're going to do any of this, but you're able to withdraw your contributions to a Roth IRA tax free no matter what, as long as you don't take out any of the gains. And so I had some gains, but I took out some of that money from my Roth IRA, and I used that to invest in real estate once I found out about real estate. So it wasn't a completely a lost cause for me.

Spencer: [00:14:57] More recently, I've also been able to access some of those funds that I was contributing to because there's these alternative types of accounts that you can use to still access your retirement funds and put them into things like real estate. And people just don't know that. I certainly didn't know that five years ago. I really wish I had. My return would be even stronger. But like, you don't have to be subject to just putting all of your retirement eggs in the stock basket because people, they hear that that term. And I look back at this term as as a as a kind of an interesting one for me and how I interpreted it. But in diversification, you know, it's like if someone in investing one on one, when we all first start thinking about it, we're all told, oh, just say say the word diversification and portfolio and you sound like you know what you're talking about. But in reality, diversification to most people, we're all educated to think it means, well, make sure you diversify within stocks and bonds. That's not how I define diversification now, because diversification truly means there's other asset classes out there to fill out the pie of a fully well-rounded portfolio. There's real estate. There's even like precious metals, you know, there's all these other things that you can do. There's crypto. And so, you know, things like diversification and like actually trying to invest holistically. It's just a different, broader lens outside of our comfort zones that we're traditionally educated to, to view it that way.

Robert Leonard: [00:16:16] Yeah, I mean, they're self directed IRAs, which I think is probably one of the accounts you're probably exactly referencing here. And yeah, I mean you can invest in real estate that way. So there's a lot of great ways we'll save that for a future episode. But there is a lot of ways out there that you can invest in real estate and in the stock market in your retirement accounts. Now, I want to go back to the beginning of your journey, because I know you started with single family rentals and turnkey properties, but you quickly realized that that wasn't scalable. So I want to know why it wasn't scalable. But first, what is a turnkey property for those who may not know?

Spencer: [00:16:48] Yeah. And I appreciate you kind of segwaying into this topic because it's just a fun thing to talk about for me. And it's also one where we kind of skinned our knees in the right way, meaning like we went through these stages of growth. Other rental investing strategies or other real estate investing strategies before we realized it wasn't the ideal one for us. And when I say us, of course I'm just referring to my wife, who's my business partner as well. So we live in one of the most expensive markets in the country in the San Francisco Bay Area. The housing prices, if people are not familiar, they are just bonkers. I live in a personally, just as you know, not too much TMI for folks. I live in a 100 year old house. That house when we bought it was much lower. It is now like over $1 million. And that's not a bragging point. That is a sad fact. The price is out here. So just think in that context of why we want to go buy a rental and we're looking around this local area going, how the heck are we ever going to go and buy a rental property? How are we going to go invest in something when it costs that much money? So we looked into a couple different options. First, we just drove around and looked for a year and we ended up finally finding a real estate agent that's also an investor, and they were willing to help us go and invest in a in a local duplex. So we did invest in that duplex. I've got some more learnings around why I probably wouldn't have done that again after I realized that the economics were not as strong as if we had gone outside California, you know, just somewhere that is, you know, a more friendly state for a profitable deal that can generate this thing called cash flow, which just means income. How do I go buy a property that creates cash for us every month that just pays us kind of like an employee that we're hiring? So we found this thing and researched this thing called turnkey properties. So coming back to your question, a turnkey property is basically you go buy a rental like a home and it comes already with a property management company that has been that has placed a tenant in that property. So they've done all the legwork. It is literally supposed to be turnkey, so you're supposed to basically buy this property. It comes with a person who's happy, who's already living in the unit. They've signed the lease and the condition of the house is supposed to be so good that there's no maintenance, there's no big scary deferred maintenance waiting. So it's turnkey, it's painless, it's mean. And that's the idea behind it is it's a really good fit for people that are first getting into real estate investing because you can go and do it way more economically and without a ton of expertise. You can do it in kind of an accessible, lightweight way. So we've got a handful of those. We didn't just buy one. We bought like a small portfolio of them because it's so much more affordable. If you go out to places like Kansas City, Missouri, where we bought our turnkey properties and they're doing well, they are cash flowing. But that basically means is we're making something like 250 bucks per door on properties that we probably spent on average of about 50 to about 60 K and we also got loans on them too. So like we actually didn't spend nearly that much cash. We spent way less than that. So anyways, it's it worked out quite well, but it still took a lot of work to acquire them. It was a lot of hustle.

Robert Leonard: [00:19:55] Yeah, turnkeys are definitely a great way for somebody that's just getting started. Like you said, it's a great way to really get your feet wet and learn what real estate investing is all about. But it's also really good for people that just have capital and don't have a lot of time. You know, like you said, people in the tech world, out in the Silicon Valley area or even just high earning professionals, whether it be doctors, lawyers, you know, things like that, that they don't have a lot of time, but they generally have have some cash that they want to invest. Turnkey is a is a good way for them. But why aren't turnkeys or single family properties in general the best and why aren't they scalable?

Spencer: [00:20:25] Oh, man, that's one of the big questions that we wrestled with. So we ended up going and we got, you know, I think five different turnkey properties in the Midwest. And when we do planning for our lives and like our finances, what we're trying to go for is nerdy as this might sound for folks. We're now targeting a dollar amount that we know is our goal in monthly cash flow that is passive, coming in to pay for our life's needs, whether it's like our own mortgage, whether it's, you know, groceries for, you know, for our family, whether it's childcare, all that stuff. So we're looking for a passive amount of money that we don't have to lift a finger to generate every month. So that's why we went out and we looked at these turnkeys because we wanted to passively invest. So we went out and did that and we ran the goal setting over a time horizon of years. And we said, okay, if we do this, looking at all the work we just had to put in for every single one of those five properties. If we do this over and over and over and over and over, when are we going to hit that monthly cash flow target? And the number that came back in terms of number of years? Robert was not great like it was too long. I'm sure some of the folks out there are going to hear this and be like, Wow, you guys are just impatient. But I'd like to think that impatience can also be an asset. It's not necessarily a bad thing all the time. So we looked at the time horizon and it said something like 10 to 15 years, depending on the scenario that we ran. That's how long it would take before we could sit there and say, Wow, look at our monthly income, that we don't have to do any work to generate, just like employees that we've hired. And they're always working for us. They're making money for us, for our family's needs while we sleep. And that was an unacceptable time horizon. We wanted to compress the timetable, and I've hired multiple different coaches and mentors for my own development and learning along the way. I'm a big believer in them. I'm a big believer in like, you know, get giving back to other people and coaching and mentoring. But look at that lesson that they taught me about time compression as a key reason why we ended up going away from turnkeys. We like graduated from them very quickly because we don't have the time. We don't want to invest more time in every property we would add. We still had to pick up the phone even though they have a property manager and we would have to address questions every month like it just because it's a property manager attached. That does not mean it's fully passive. And so I actually, you know, I get in some debates occasionally in a friendly way with other real estate investors and other investors out here in the Bay Area because they say, of course, turnkey properties are passive. And I say I disagree. I wholeheartedly disagree. They are semi-passive even if you have a property manager because you still have to manage the manager. And that's the case in the corporate world. That's certainly the case in real estate. And so we decided very quickly if we even if we had 100 of these things, let's say somehow we magically waved a wand and we had 100 turnkeys, all of a sudden we would not be fully passive on those. And that's the lesson that brought clarity to us on why we should move on.

Robert Leonard: [00:23:21] So with all that said, if somebody is looking to get started in real estate investing, they don't have any properties and they're really just trying to dive in, would you recommend that they start with a single family property or should they jump directly into multifamily or something that might be more passive?

Spencer: [00:23:36] Oof, that's a good one. I personally think that the ideal state for any of this stuff is people at least build an educational foundation and that doesn't take a lot of super hard work. If you have a full time day job, which I have been doing for the last 13 years and I know plenty of other people that I've even mentored and coached to help get into this kind of stuff, they find the time and at least a little bit of motivation on a weekly basis to listen to like one podcast, just like the one that we're on right now. Robert Like finding great podcasts. There are so many these days and there's great books, there's free blogs, there's all kinds of stuff. Just build a baseline education about this stuff because then you can make an informed decision. And the first point of decision that someone would need to make to get into these and answer that question for you is what is their goal? Right? Are they super busy? Do they like their day job? If they like their day job and they're really busy, they shouldn't necessarily go and jump into something that's really active. Just don't go flip a house. You know, like a lot of times people go down these super active strategies like wholesaling or becoming an agent or becoming a broker or flipping. None of that stuff is what we're talking about here if someone is wanting to be passive. I do think that my ideal recommendation for someone jumping in, they should go straight to multifamily and they should go straight to multifamily, which is what we end up passively investing in still to this day. And we will continue doing it probably for the rest of our lives because there's this inverse relationship between predictability, stability and size. And we're not going to go deep into this here today. But if anyone has questions afterwards, I'm fully encouraged them to follow up and I'm happy to answer more questions. I would say that if you have a, you know, a big apartment building and you look at that thing and it costs millions of dollars, you clearly can't go buy it yourself. And I thought that you had to go come somehow come up with all the money in the world to go and buy these big apartment buildings. As a real estate investor, that would somehow let you to quit your job. And it's not clearly not possible for most of us, certainly not for us. I didn't realize you could go and find a bunch of other people or find like an expert or a partner who will rally all those people together. And you can go buy that apartment building together. It's just called a real estate syndication. It's not a new concept. And that is what we ended up finding. That's what we ended up investing in passively. And we continue to, and that's even what we ended up doing now for our own business, today actively, took us a while to find that that was going to be my calling. But it's such a solid strategy and it's something I believe in at my core, and it's I see it working for us and I see it working for other people. It's not that hard. It's not that scary. It is fully passive and it is something that people just need to get over. That really traditional stigma that we're all have ingrained in us of saying, Oh my gosh, real estate is scary. Oh my gosh, apartment buildings sound really scary. And it's like, I mean, think about it. Most of us have lived in one. We have an active relationship with the thing. It's not like we lived in a cardboard box necessarily. If you're paying rent, you lived in an apartment building, somehow you lived maybe you lived in like someone else's unit. You probably know more about real estate than you realize, and it's not that hard to jump in. So I would say you go straight into bigger. Bigger is better, bigger is more stable, bigger is more predictable. I have the data to back it up. And you know, from the last recession and all that different stuff, but passive via apartment buildings, passive via multifamily, those are the words that people are going to want to look for. That's the way to go.

Robert Leonard: [00:27:09] Yeah. And I've heard a lot of real estate experts say that bigger deals aren't harder. The numbers are just bigger. So you might as well go big and start with bigger, bigger units. You know, like you said, you can raise the money from other people, especially in today's day and age and where we are in the cycle, money is all around you and it's relatively easy to be able to find that money to do that investing. Now, you might not want to do that for your first deal. You might want to work with somebody else first. But but yeah, I mean, like I said, a lot of experts have said the deals are not harder the more getting a mortgage is the same. You know, filling out all the paperwork is the same for a hundred units or a single family. You just it's just bigger numbers. So yeah, I completely agree. Now, let's assume that somebody listening to the show has decided what type of property they want to go with, whether it's single family, smaller multifamily or or even a large apartment building. How should they analyze that deal and how can they determine if it's a good deal or not?

Spencer: [00:28:08] Ooh, I like this topic. It's a lot of fun. So the way to look at this is there's three lenses to analyzing and deciding. Is this a good deal? The first one, it is the most important. It is. You analyze the operator. Second one is you analyze the market, third one, you analyze the deal. And that's actually inverse than what most people think. Most people think, Oh, I got to stare at that property and really like look at every crack on it and really figure out like, how old it is. And there's a time and place for that for sure. But the first thing you do is you vet the track record of the people that are actually doing this thing and so or the seller. So it depends on the type of property you're going for. But that's really the three things. And so layer one, who is the person involved in this project? And if you're buying a property turnkey single family home, who's this property management firm and who is the seller selling this? Like let's look at their track record, let's get to know them. I have an extraordinarily nerdy framework that we use in our own business and for our own investments. It's a nice looking spreadsheet and all that good stuff. It's taken us years to develop, but it goes into things like, Has this person done this before at least three times? Does this person have an answer for for a question around failure? Response, Meaning if something goes wrong with this property, I want to know that they are not going to make really rash decisions because they've been through other hardship in their entrepreneurial career or in their real estate career, yada yada. So that's the first layer and there's a lot more detail can go into there, but we'll keep on moving. The Market. So this is just a high level point on this one. There's so much media noise right now about where we are in the economic cycle. Yes, it's been a really strong bull market for like a decade. And it's going to at some point it will correct, because that's what history teaches us. It always goes up and it always comes down and it will come back up again. But real estate is a truly hyper local business. And what that means is that you can't just necessarily look at, Oh, okay, here's an example of an active market that we have invested in. We just invested in one here is in the Dallas Fort Worth part of Texas, and it's enormous. As like a Californian who's lived outside of California for many years. But I didn't have a ton of exposure to Texas until about 3 or 4 years ago. And I got to tell you, huge area, the Dallas Fort Worth, when you say Dallas Fort Worth is a huge area, you can't just analyze it at that level. You got to go way down to the neighborhood. And the cool thing is there's free YouTube videos on how to do that, on how to analyze that publicly available websites like, that's a website you can go to right now. You can look up information about like the stuff that's happening in that market, the crime, the the income levels, the rent rates. You can look at all that stuff and it's just sitting out there. So people should first and foremost to seek out some basics on YouTube and look out how to analyze a property that's just that simple. So that's a good segway to the last point, which is the property you want to do. I won't go too far into this one because it depends on the type of property they're trying to analyze. But, you know, understand, is it a rental? That's a good first step. We are talking about rentals here mostly. So, you know, is it a single family rental that's going to be analyzed a little differently than like a, you know, 400 unit, 100 unit apartment building, a 20 unit apartment building. There's there's wonderful frameworks and free resources out there on the Internet these days by the thousands. Yeah. And if anyone wants to reach out, I'm more than happy to kind of give them some pointers and like links and even just a phone call around how to, how to start that process because it doesn't have to be scary. The first time is going to be a little slow for you, but afterwards you're going to catch it in no time.

Robert Leonard: [00:31:49] Yeah. The more deals you analyze, the quicker you pick it up. I think one of the things I'd highly recommend is analyze three deals a day for a month or so, and then by the end of that month you're going to be a pro at analyzing deals, whether it be markets or specific properties. You'll be able to do an analysis and be able to make an offer in 15 minutes and be confident in it. So definitely, I agree. The more you get more you get familiar with it. You can definitely do those analysis more confidently now. Spencer One of the things I really like about your story and I think you're a great example of what's possible for many people who are looking to get started investing in real estate. Since you were doing all of this while you worked full time and had a family, how does someone find time to analyze deals and then go through all of the steps to purchase the property while working full time and having other responsibilities that require a lot of their time?

Spencer: [00:32:42] When you ask it that way. Guess I have to say the first step is you have to lose your mind, right? It's in all seriousness, it's just about prioritization. Think you know, if I walked up right now to if I can go back in time and walk up to a the version of myself in my mid 20 seconds and I was very, very intensely ramping up in my career. You know, as a guy sitting here at 36 now and I'm sitting there going, I would probably say to myself, like, you know, you you have so much time and you don't understand what your priorities are. And that's why it feels like you have so much time. So right now, two young kids, leading a very demanding full time job in a tech company that's been growing rapidly. It was sacrifice. The first thing was what is not essential. I look across my week, I look across my month and I ask myself, what are the things that I have been spending my time on that is not essential because it's got to go and it's got to go for now. It's not going to go forever. I'm not going to give up my wonderful Xbox forever. I do miss it a lot, but it's it's going to come back. So I audited my calendar, audited my time. And when you have young kids, this may not resonate unless you have kids, but I'll say I have to get up early to actually get work done. So that means for me, not everyone has to do this. But I was waking up sometimes at 4:00 because that was before they'd wake up. So I woke up and hustled hard and that means sometimes I had to set an alarm to go to bed. I had to make sure I went to sleep early enough so that I could then get up the next day and be able to be mentally focused enough before I touch anything related to my day job. And I was prioritizing ruthlessly. So ruthless prioritization is really the first key. Think the other one though, just to call this out. You know, my wife is also my business partner, as I've mentioned so far. I think the alignment with your significant other, if there's a significant other in your story, like if it's a spouse, if it's a boyfriend girlfriend, you got to talk to them openly and figure out like what are you going for? Like, what are your goals? Because you need that support system. There's going to be times where you're probably working really hard, you know? And so for me, I was sitting there four in the morning, five in the morning, and before anyone else woke up underwriting those deals, just like you talked about. Robert, like I was sitting there in the morning underwriting deals like like and some people would probably think, I'm never going to wake up that early to go do something like that. I found that to be inspirational because I had set the goal and I knew exactly the quarter in the year we followed our plan that we would have financial freedom. You know, we had the clear goal so I could wake up and prioritize and get all the work done. I did have to say no more often to people that I would love spending time with. I did tell them, Hey guys, I can't hang out as often for a little while. And they were super understanding about that. It's not necessarily saying go and, you know, tell your friends that they can't be your friends. It's not the message. The message is people understand when you're trying to do something and you got to hustle hard outside your office, you know, if you're a night owl, put the work in on the afternoons. On the weekends I gave up or I should say I swapped my hobbies for this and I made real estate my hobby. So I went all in. You kind of have to give yourself a brain transplant of sorts to do that. I read 24 books. I listened to 400 podcasts, and I'm not making those numbers up. You got to rewire the way you think and then suddenly your priorities will shift. You know, we could probably talk ad nauseam about tactics like time blocking, because I do that religiously. I have to integrate four different Google calendars into one unified view. And there's all that other stuff that you can do. But it's really those things, prioritization, alignment with your significant other and making sure that your tribe, the people in your life, understand what you're going for. You can't have them blowing up your cell phone every week and saying, Oh, let's go and you know, let's go see a show or like go to the bar or something. And then suddenly every weekend you're telling them you can't. Like, they just need to understand you're going heads down for a while and it's going to be that way for a while. So don't take it personally. And the real friends will understand that.

Robert Leonard: [00:36:41] Yeah, I completely agree that prioritization is such a big key of it, and I think the other component, at least for me, is passion. It has to be something that you're passionate about. And maybe it's not real estate, maybe it's not investing in the stock market. Maybe you're not passionate about those things, but maybe you're passionate about financial freedom or leaving your full time job or whatever it may be. And you just need to have something around this mission that you're passionate about. When you couple passion with prioritization, then anything is possible and you won't find it hard to wake up at 4 or 5 a.m..

Spencer: [00:37:12] Exactly right. I mean, I'm not a morning person. I forced to become one because of my kids, but I am not the person that just springs out of bed and says, let's take on the world. But suddenly became that with the clarity of purpose. You know, it sounds corny, but if people think that that goal setting is corny and purpose driven stuff is corny, they're probably going to really struggle to ever achieve like a level of knowledge or a level of hustle that they want because it has to be taken seriously. Find a way to take yourself a little more seriously. Because I think you're worth it. As corny as that might sound. You got to just say it's not a pipe dream. You go and figure out how you can retire from your day job within about a five year period. We did it. I never thought we would do that. And it worked really, really, really hard for, you know, a period of three and a half, four years. We're getting there. We haven't fully arrived. But, you know, you got to just keep putting the work in. And it's absolutely possible for people that are willing to sacrifice and put the prioritization down on paper.

Robert Leonard: [00:38:08] And I think we just talked about a few different components that could answer my next question. But I'm curious to see if you think there are anything else. So what have you found to be the most common reason for people to not get started investing in real estate?

Spencer: [00:38:23] Traditional stigma. You know, if I were to ask you, you know, Robert, like, who are the first time you ever heard about, you know, the risks about real estate? Like you might say, a common answer I hear all the time, particularly from people who are not kind of investing in real estate and they're more on the tech crowd, like my tech brethren. They love investing in startups, but they really don't want to touch real estate with a ten foot pole, typically. And it's because we all in our families growing up, we probably had Aunt Sally or Uncle Joe, and they say, Well, you know, I invested in real estate that one time 20 years ago, and I lost all of my money. And that one moment, that one story is like a little bit of like a seed that grows into this thing in most of our collective minds to become the notion that real estate is risky and real estate is sleazy and real estate is slow, and real estate is what old people do. These are the things that we generally talk about as a society when we bring up the terms real estate. And that is what stopped people. And it's just so incorrect categorically.

Robert Leonard: [00:42:31] I absolutely love that you said that because that is exactly how I think about it. That is exactly what I think holds people back. That was what held me back for the longest time. I never like I said, I was a stock guy forever, and then I never thought I could invest in real estate. And then I learned about it and I learned that those stigmas weren't true. And now when I tell people that I own properties in states that are 2000 miles away for properties I've never seen, never been to their mind just is blown. And yeah, it's just it's just that stigma. And so I really love that you said that because I think that is so, so true. It's also funny because one day I'm going to write a book about this concept. I really want to do that sometime soon. So yeah, absolutely. Love that you say that. Now let's talk about your real estate investing. Specifically. What has been the biggest mistake you've made throughout your investing journey? And if you could go back and do it again, what would you do differently?

Spencer: [00:43:31] I would have started ten years earlier. I'll bring up that example first because granted, I hadn't started yet, so I'm not sure if it's truly a real estate mistake. Here's the example. I was living in Denver, Colorado in 2008, at the beginning of 2008. I just saw this data a couple of weeks ago. I can't remember the source, otherwise I would source it. It was a reliable source. It was a chart and embedded data that showed which top ten cities in the last ten years have had the biggest increase in property value. And Denver, Colorado was number one, and I bought nothing in 2008. Robert I bought absolutely nothing and I was working full time for a reputable company. I was making good enough income. I moved out to Denver from California into one of the priciest flashiest apartments in the downtown Denver area, thinking I was some kind of hot something. You know, I bought a car and I look back at that and I'm like, Man, you dummy. I try to live without regrets. So I look at that and I'm like, I could have basically, if I had started investing in real estate, then I would not have to work anymore for the rest of my life. And if I would invest thoughtfully throughout that period of time. So that would be number one, I would say a short number two would just be we went and bought that first duplex locally in the Bay Area a number of years ago. When we were first, we just weren't comfortable with buying sight unseen. You know, you just mentioned that you have a portfolio with some property that is 2000 miles away, which is a beautiful thing because in this modern world you can do that kind of thing to de-risk it and do it thoughtfully and appropriately. We weren't ready for that. And so we had to go and buy locally. And the result of that and the mistake made there, which I'm still thankful we went through it. We still own this property. It's cash flowing positively, which is hard to pull off in the Bay Area, by the way. That means we make a couple hundred bucks per month on it. We spent well, this is the purchase price. This is not the cash outlay, but we spent $430,000 on that property and it generates a couple hundred dollars a month in cash flow. It's a different strategy we hadn't put down on paper. We want a passive amount of monthly income. We want these properties to generate. So we went in and we bought the property. It's going to appreciate it already has and I'm thankful we got it. I've even gotten like handwritten notes from our tenants and they say, We love having you as an owner. Thank you for being so great. And we're like, Wow. Well, we can't really buy anything with that note, but it sure makes it feel worth it. So I digress. But I think that that has to be another one, which is, you know, my message to people on that front is if you're so scared of getting into real estate that you're not quite ready to go out of state yet, try to find ways to find a compromise in between because am thankful we made that mistake. So at least we got started. We would never have this business now. I would never be quitting my day job to go run this business and grow it and help other people get into it. But, you know, go out of state if you can find the courage, find the conversations, find the education, and look at all the wonderful economics that you could find. You can go buy properties for less than a down payment in the pricey markets and it's very achievable. And there's so many people that are willing to help just vet them, you know, reach out for help if you'd like some help and how to do that.

Robert Leonard: [00:46:53] Yeah, as I mentioned, I wholeheartedly agree with this. One of my all time favorite real estate investing quotes is live where you want to live, invest where the numbers make sense. And I've taken that to heart and I think it is so great. And I just mentioned this a few minutes ago, but that's exactly what I want to write my book about is I want to write a book about investing in today's day and age. So how you can invest in out-of-state markets in today's day and age. And I know it sounds scary to a lot of people, but again, that goes back to the stigma when you put the stigma aside and you really have a conversation about it. It's not different than investing in your own backyard. And I'd love to talk to anybody that wants to go into that a little deeper. Feel free to shoot me an email or talk to me on social media or Spencer as well. But we both wholeheartedly agree on this, so I would definitely recommend you look into it. That might be your answer to this next question. But if it's not knowing what you know today, if you could go back and give yourself one piece of advice when you were getting started, what would you tell yourself?

Spencer: [00:47:49] Go straight to multifamily. Just go straight to multifamily. It's so much stronger on every front, and I'm not going to say that I don't regret going to single family. I don't regret like we still have those properties and we're not going to sell them necessarily because they're profitable for us and they're cash flowing. But like, here's a stat for you. We are like right on the brink of some kind of economic correction. But if you look at the last recession, everyone that's going into real estate, you know, it's funny because they get more nervous about this on real estate than they do the stock market, which is just inverse of how people think about this when it comes to recession impacts. But we're on the brink of some kind of correction. No one has any idea what's going to actually happen. Anyone who claims they do, you should run away from. But like if you want to talk about recession resilience and what is the best investment for recession resilience, just look at single family homes versus multifamily homes back in around 2008, 2009, and you're going to find that people that went delinquent on their payments for these properties think there was a 4% rate of delinquency on single family. It was a 0.4 delinquency rate on large multi-family. And so the difference of these asset classes is measurable. The difference between these asset classes is so not up for debate in terms of like predictability, in terms of recession, resilience, in terms of accessibility, just because people think single family homes are smaller and simpler, it's not the case. Single family homes are smaller. They're not simpler. You're still signing a really hefty mortgage packet. You're still doing all the headaches, you're still dealing with a lot of other stuff. So you already hit on so many of those wonderful key points earlier. That's got to be it is. I would go straight to multifamily and just bigger is better and in fact, bigger is boring in the best way. It's just predictable and it's a moneymaker and it's going to generate income. If we had done that, we would definitely be able to retire at this point if we had gone there earlier.

Robert Leonard: [00:49:47] Yeah. You know, like I said before, a lot of real estate experts have said that. I think, you know, that's a very common piece of advice I've heard, not only through the interviews I've had in the podcast, but people I've talked to in the real estate world, books I've read. A lot of people that have been really successful in real estate. They've said if they could go back and do it again, they would have started bigger. And so just really, if you're listening to this today, really take that to heart and really think about where you want to start and where you want to go with your journey. Spencer, thank you so much for your time. I really appreciate it. Where can the audience go to connect with you and learn more about all the things that you have going on?

Spencer: [00:50:22] Yeah, so they can come and connect with us at Lots of great information there. Some educational content. We also have a mailing list and that mailing list is where we send out a monthly newsletter with educational resources for folks. And so if you're curious, head to Also if you have any questions or just want to reach out and connect, my email is Spencer at Madison And you know, thank you, Robert, for bringing me on. It's a blast to talk about this stuff with a person who's so like minded on the topic, but also going into some of the stuff on traditional 401k's like it's just fun to talk about for me and I really appreciate it. It's been a lot of fun.

Robert Leonard: [00:51:01] Yeah, my pleasure, Spencer. And for those listening, I highly recommend you take up Spencer's offer to shoot him an email. Let him know how much you enjoyed this episode, let him know what questions you have, and I would definitely take advantage of that resource. It'll be very helpful for you. So Spencer, thanks so much.

Spencer: [00:51:17] Yeah. Thank you. Robert.

Robert Leonard: [00:51:19] Before we wrap up the show today, I wanted to share a few exciting things that are happening with millennial investing right now. First, over the next few weeks, I'll be adding a new section to the show where I answer questions from the audience. If you have a question you'd like to have answered on the show, you can ask the question by going to ask the and recording your question there. Again that's ask the I also wanted to invite you all to join our millennial investing Facebook group. There is a great community of people having great conversations. You can find the group by searching millennial investing on Facebook and just looking for the shows graphic. I'll also put a link to the Facebook group and the site where you can record your questions in the show notes. And that's all I had for this week's episode. I look forward to seeing you all again next week.

Intro: [00:52:06] Thank you for listening to Tip. To access our show notes, courses or forums, go to the investors This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investor's podcast Network. Written permissions must be granted before syndication or rebroadcasting.

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