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MoneyTree Podcast: Choosing Real Estate Syndications over Technology

Listen to Spencer's interview with Kirk Chisholm about why he quit his lucrative technology career to focus on real estate investing full time.


Speaker1: [00:00:01] Welcome to the Money Tree Investing podcast, Stock market wealth, personal finance value stocks invest in your life.

Kirk: [00:00:11] Hello, Smart Money Tree Podcast. Listeners, welcome to this week's show. My name's Kirk Chisholm and I am going to be your host today. So today we have the pleasure of bringing on Spencer Helga's Spencer.

Spencer: [00:00:21] A great honor to be here. Thank you so much for having me.

Kirk: [00:00:24] Spencer, want to tell us a little bit about your background here?

Spencer: [00:00:27] I actually am a full time real estate investor these days who helps other folks kind of get into this new space of real estate investing. But for 13 years, I was out here in Silicon Valley, where I live now as a Silicon Valley tech leader across five different software companies. That was my chosen path. I went across all these companies building big teams, operations groups, sales groups, just kind of the traditional narrative that people think of when they think of a Silicon Valley career. The long hours came along with it. And so a very traditional sounding path. But truth be told, I used to be embarrassed to also share with folks that I did grow up in a real estate household as well. My dad was a broker out here for 30 years and I was working in his business. And that's part of the reason why I ended up running into tech. I didn't really enjoy doing open houses when I was 15 years old. And so technically, I don't know if that scared me into the Silicon Valley world necessarily, but I didn't really get the exposure to real estate on the investing side at that point. But I did get a lot of learnings when I watched his business

Spencer: [00:01:27] Rise to great heights, one of the top brokers in the 90s and then came back down and unfortunately kind of crumbled because we had a really hard patch as a family growing up. We won't go deep into that now. But just to mention that I take all those learnings now and I apply that to our own business, where we help other investors who are full time tech folks, just like I used to be. I left my career of 13 years in tech just five months before the global pandemic hit us. And a lot of co-workers and a lot of colleagues and friends in our network thought I was absolutely crazy. But thankfully, our chosen investing strategy, the same one that we help other folks with now, has been the reason why we're doing better now than we ever have been despite the economic headwinds that we're all facing. So it's been quite a journey, but there's probably more TMI than you asked for on that one

Kirk: [00:02:11] That's kind of deep in your background. So you're in tech. So you obviously made a decision to move from tech into real estate. I mean, would kind of drove you to make that decision. That's kind of a big shift

Spencer: [00:02:23] When you look across the landscape of the real estate investing community and whether it's residential, commercial and folks with a lot of zeros behind their net worth to the vast majority of them came up within that business. You know, they didn't have a W-2, corporate grooming, because most people that go that path, you know, traditional big company, Fortune 500 path, they go in deep and they never really come out. That is their path. It's a very traditional one. So maybe it's a little contrarian inkling in the back of my mind from watching my dad and working with my dad growing up. Maybe it's playing into many punk and metal bands when I was younger, but there's a little bit of contrarian chip there for me somewhere deep in my mind. But it really came down to the fact that I was following and our family was following whether it was explicit or not, a Silicon Valley wealth plan that was just kind of broken. And it's incredibly common. We were banking on the fact that dumping money into our four one case for more than a decade, you know, doing some index fund, investing, very traditional stuff, really strong W-2 income. So we had a comfortable lifestyle. We want our home in the Bay Area, all that stuff. But I was not able to spend much time. We have now two boys at a six year old and three year old boy, and I want to be present for them.

Spencer: [00:03:31] And I was not getting any time with our first born when he was an infant. I was working the kind of grind that you hear about when you hear these kind of hero hustle narratives about Silicon Valley companies. I was working eighty two hundred hour weeks in the office at a couple of these early stage a series startups. And so I'm excited to have equity in these companies. Absolutely correct. But at the same time, something had to give something had to give that I didn't see an exit strategy from that path. And unfortunately, many people I care about personally, whether they worked for me previously in other companies or their colleagues or other just leadership and tech, I don't think they've quite caught on that there is a shelf life to that path for themselves. I mean, I'm only thirty seven right now, you know, high tech standards, although that sounds young by most standards nationally across all industries. I am ancient in the tech world and it's a little bit it's a little ridiculous to say it that way. Right. But I'm not a spring chicken in tech anymore. So there's folks out there running with the same plan that we were running with. And there was just a moment where I was like, I can't do this anymore. I'm seeing my son in weeks and I was getting home after the sun went down. So that was definitely a piece of it.

Spencer: [00:04:35] It also came down to the fact that I spent thirteen, actually ten years in FinTech. That's the cool way. I guess I'm saying financial tech companies are two wonderful companies like Intuit, very thankful to spend five years. Their company makes Turbo Tax in quick books. I'm not being paid to say that, of course, but, you know, and then a bunch of competitors of theirs. And so I stumbled my way into the biggest fix and flip real estate lender in the country. They weren't the biggest at the time. They were the biggest when I left, and that was my boot camp into real estate investing at the company called Lending Home, and I got to see all the zeros behind the transactions that I wasn't getting. Of course, the investors were, but I didn't want to become a flipper because I can barely swing a hammer. I thank the stars for YouTube every single day, man. I can barely pick up around my house. And so a flip is not what I wanted to go do. Despite all my co-workers, even people that reported to me were trying to convince me to go do that. But I looked at the numbers and I just couldn't get past this narrative. And what I saw, which was people that were leveraging some version of real estate investing to get significantly larger amounts of net worth growth than I was ever going to be able to achieve in my forecast, despite the fact

Spencer: [00:05:46] I was getting incredibly strong W-2 income, along with my wife, who's also my co-founder for our company. She's doing great, too. So that was it. It was the combo of the pushing, the pull. I didn't see my kids and I wanted a new lifestyle. But frankly, I saw the numbers and I was like, there has to be something that is more risk adjusted acceptable for me. I don't want to be a flipper, but I really like the narrative of passive income and I want to find out if it's a myth or not. And it turned out that it wasn't. But we did stumble through some really interesting steps along the way before we landed on our final chosen strategy right now, of course. But we don't have to go there unless it takes us there.

Kirk: [00:06:19] When people look at real estate, they look at real estate from different angles. One of the reasons why I wanted you to come on, because we have people from different angles. We wanted to get kind of more of an angle from somebody who's been in two worlds, kind of moved into real estate. So when you kind of got into real estate, you said there's certain parts you want to be a fix and flipper. And we have a lot of those people on the show and they are very successful. But if you have from your approach, like how is your approach different? Why did your approach make sense, where fixe and flipped?

Spencer: [00:06:46] And here's where I've realized the vast majority of folks who get into real estate and they go all in, they go pay for coaching programs. And this is coming from a guy who, no joke, has paid for four different paid real estate coaching programs at this point. So I'm speaking from personal experience here for Shirker. You look at the active versus the passive nature of that strategy, like the first question, if I ask a person whether it's you or someone else out there, have you ever thought about investing in real estate? The first thing that comes to mind for the vast majority of us, and it was for me to do, is go buy a rental. At least that has been the experience when I've talked to hundreds of investors. Now, whether they're ours or other peoples is they think of a rental or they think of a flip. And both of these are already pigeonholed into the very narrow window. That is just two different types of strategy and a flip, a super active it's the most active of all strategies. It's a job. I didn't want to go find another job necessarily on top of my day job that was already doing very well financially for us. So I was trying to figure out something else. I wanted to figure out how do we go and create a lifestyle where I want to be a more present dad, I want to be a more present husband.

Spencer: [00:07:53] I want geographical autonomy, meaning the big picture stuff, big picture goals, like what if in ten years we want to live in a different country, bring our boys with us, potentially work remotely like true lifestyle by design stuff. And that's not just a buzzword. Maybe it is for some folks. But but for us, we were sitting there asking those questions like how do we make some big changes? But it doesn't have to be a rush. I'm not one of those folks in the real estate investing community who gets on here and says, I didn't enjoy my career in W2. I love my career. And there was some hard moments for sure. But I think that that's one of those misnomers, is that if you hit Google and you are dabbling in real estate investing, you're just kind of get the bug. You go to a cocktail party, you go to a dinner, you talk to a friend and they say, what is real estate investing? You go on Google and you and you see all these coaching programs you're hit with to say, go become a full time real estate investor. The reason that happens is because most people who are out there doing it didn't come from the W2 world like me. And so they can't relate. And so I don't want to go and become a full time real estate investor necessarily by managing utilities. I don't want to go out and take service calls on a broken toilet at 1:00 AM. That is a reality. If you want to go become a rental investor and or flipper, if you're going to go install some stuff and build stuff on your own or hire contractors, that's a lot of hands on work. That was all out the window for me right out the gates. I was like, I know enough about myself to know what I don't know. But then I looked into it. I researched heavily and I started finding these other things after we even stumbled our way through buying a rental. We still own it now. It's in Vallejo, California. It's a duplex. We're not going to sell it, but it's not exactly a home run. We just moved from that to go and buy single family turnkeys in the Midwest. So we had five single family rental units in the Midwest. We had them a few years. We just sold them because they were still too much work, even with a property manager. So we stumbled through stage one rental, stage two, long distance investing, stage three. Eventually I realized, well, passive investing is not just like this myth thing. You can go and buy pieces of apartment buildings or pieces of maybe a self-storage facility.

Spencer: [00:09:57] As crazy as that sounds, that is our primary focus these days. Our business is like you can participate in these bigger real estate deals and you can get the best of both worlds, you don't have to necessarily go and do all that stuff, DIY style yourself. And soon as I realized that and I can go and participate for a much lower dollar amount, you don't have to come up with one to two to three or four million dollars yourself because you're pooling your funds with other people. So now we found this strategy of syndications and we just started investing in the Marcellus. That was kind of stage three for us. And it changed my perspective entirely as to what it meant to be an investor in real estate, because I thought it just meant you go buy a rental and you manage it yourself. You take the toilet phone call at 1:00 AM, not the case. And so you can actually just go find the hard part is finding competent people who are actually trustworthy based in these other states which are not in my backyard anymore. We don't put any of our investment money in California anymore. From a real estate perspective. We've got to go find places like Texas in North Carolina, South Carolina.

Spencer: [00:10:56] These are all markets in Colorado, Idaho. Those are some of my favorite markets these days. And it's because they're growing markets. They're strong markets. They have job supply. Those companies literally moving their covid even accelerated some of these trends. So I was looking at those numbers. Population growth wise, job wise, I get excited to talk about this stuff. So I'm going zero to 60. But that in the nutshell, that was it. It was like, wait a sec, I can participate in these other deals. And there were more risk adjusted than just trying to go do it all myself, because my time has a dollar value and that is the first big mistake I consistently see people make. And I made it, too, which is they immediately say, oh, real estate, cool, I'm going to go buy a rental. And the fact is, you just pigeonholed your strategy without even really thinking about do you have the time, do you have the interest? Like, do you want to go do this stuff or do you really enjoy your day job? Because most people in the corporate world, believe it or not, they actually enjoy most elements of their day job. So anyways, long your question.

Kirk: [00:11:53] Yeah. Let's talk about why you would choose that strategy over other strategies. You know, there are many ways people can make money in real estate and we have a lot of them on the show. You know, how would somebody determine and not just kind of listen to this podcast and say, are I'm going to do syndications because Spencer did a good job at it? What would you recommend people do is kind of a pathway to determine the best approach for them?

Spencer: [00:12:16] That is truly my favorite question on this topic, because if you go out and you do what I did initially and you make some mistakes, you sign for some coaching programs, they will push you toward an active path. And that's not necessarily the right path for everybody. What I would first do is take a look at your time. Your time availability is a goal setting exercise. You truly do have to have and I'll tell this from first hand experience as to what Jennifer and I did. Here's my wife and my co-founder, our company. We sat down and we asked ourselves how much time do we actually have available on a weekly basis? And it came down to I had ten hours, I had ten hours available. And we're talking nights and weekends to research, to work on this stuff. Now, that's still a heavy lift. A lot of our investors that we work with these days, they don't even have that amount of time. But ask yourself, do you have time to work on this stuff? Because if you're going to go semi passive or semi active, same thing in this case, then you're gonna want to go take a look maybe at like rentals or even if you're trying to accomplish a different goal, if you're trying to go and let's say you want to buy something to leave to your kids. The duplex that we have just speaking from personal experience that actually solves the need like that, because you can but there's things you can do, such as hang onto it for decades. You can just hang onto it and eventually pass it on to your kids and maybe they'll do the same beyond that different strategy. But if you want to stay fully passive, then you're going to want to look at not just indications. I'm not going to sit on here and be the myopic guy. I don't subscribe to the notion that if someone ever says you've got to do my way or the highway, I'm the one that says great investing is a portfolio approach for sure. And in all senses, right. It comes down to still investing in the stock market, still investing in bonds, still investing in everything. It just depends on matching to your strategy. And so for me, I got to just encourage folks to say, ask yourself what level of participation- is this going to be a hobby? Because if that's going to be a hobby, don't jump in and try to be a part time hands on investor, because that's kind of painful to ask yourself. Do you want income like cash flow? Cash flow is like a big question. I think a lot of people, the majority of them are looking for cash flow. What that really means, if that's a new term for folks as simple as that sounds, it's just that means you put money into the investment and it's actually producing income back to you. That is usable right here and now. Some folks like the high net worth folks. If you have really great income, you're working full time. You don't feel like you need to increase your income any more on top of it. Then you may not necessarily care about putting an investment into putting capital into an investment that produces cash flow because you don't need it yet. But most people do. Most people want to produce more income so they can use it to go either have more fun or they want to go and prepare themselves for a life pivot or be able to reinvest it into other places.

Kirk: [00:14:53] We talk about this occasionally on the show, but there's kind of a mindset element here that you needed to have in terms of making your. Position, but also to be an investor. So can you describe what you think people need is kind of having the right mindset to be an investor in real estate?

Spencer: [00:15:09] It's about the numbers. It sounds so rudimentary. And I know it's been covered even recently in a great previous discussion on your show. Real Estate, for some reason, it does have this emotional quality to it and it's tough to put your finger on. We see whether it's HDTV and we love watching, you know, flip shows or it's about house hunters. Like there is an emotional component because every one of us out there in some way, shape or form has participated in real estate, usually as a person that has rented or lived in a home. So we have a connection. And that connection can be blinding. It can be blinding to the fact that buying your first investment rental or going and investing in a syndication or maybe buying a mortgage note, these are all different strategies it comes down to. Does it actually achieve your outcome that you want to achieve financially? And so that's just a numbers discussion. And so I think that there's a three part framework that I would encourage folks just just to imprint in their mind. And this is not something I can take credit for whatsoever. This was made up at a high level by people far smarter than me years ago, which is there's three ways to look at a real estate deal at an investment.

Spencer: [00:16:14] You look at the team, think of that as the who. That's number one. So you look at the who is involved, right? You look at the market and then you look at the deal or the business plan is those three pillars. I nerd out on that down to a level of kind of obscene depth when we're analyzing opportunity and we don't have time to go into that. Now, if anyone wants to reach out and kind of hear how we do that, I'm happy to to give you some pointers. But that's it. And you got to look at it through that lens, because if you are the one managing the investment, then the WHO is a little bit easier. Right. But it's a question of self awareness, like, what do you know, what are you prepared to go learn if you don't know it? And what are you prepared to do competently and relentlessly to go make it work? That said, that's not most people. Most people I don't think that should go and absolutely don't dabble in managing real estate. We should do is find people who are competent and experienced who can help educate you on the numbers because the numbers are what really tell the story. Unfortunately, I think a lot of folks go by the rental. The common story is they go buy a rental. They don't run the numbers on it. They don't realize that it's not going to pay for itself. And suddenly they're paying the bill for mortgage taxes and insurance that they didn't realize wasn't going to be covered with the payments from the tenants. And that ends up being a big mistake. I think that there was a quote which I wanted to also kind of give you kudos for Kirk, because it really, really resonated with me on a prior show, which was by bludge. That's just tell me. I think it was there's no such thing as bad assets. There's just bad prices. And so it's so well said because you think of the context that we're also in right now with a global pandemic.

Spencer: [00:17:43] This is not the 2008 crisis necessarily. And there's still a ton of activity. I mean, arguably, I would say this is the most positive and enthusiastic investor sentiment that I have ever personally experienced, both from our other investor hearing other investors. And that's super relevant because people are sitting there thinking, oh, I'm going to go to the market and wait to participate. And in truth is, there's always investments to be made, whether it's in the stock market, whether it's in the real estate market, whether it's saying I'm not big on crypto crypto like all these things. And so it comes down to does it pencil out, does the investment pencil out? And so if you don't know how to do that yet yourself, I encourage you to connect with people who can help you make sure that those those are numbers driven decisions.

Kirk: [00:18:24] They'll just kind of comment on your comment. It's the most positive investor sentiment. This is actually very reflective of the late nineties for people who were not experiencing that this was exactly like it was then, which is scary to think about. But it's a conversation we have every day. Just because you feel the market is risky doesn't mean it can't go up a lot from here. It's not logical. Markets don't operate on a logical basis. It's all emotion, as you pointed out. But I do want to touch on the WHO because you had made the comment about syndications and it's really important to find competent people. And I find that to be one of the hardest things out there is when you find competent people, you just keep doing business with them because it is so hard to find good people. So how do you go about finding good people when you're looking at syndications?

Spencer: [00:19:12] When we first got into this business passively, so I actually put together a big framework in terms of decision making. I borrowed that from my tech career framework, meaning it's most great decisions are not made quickly. And this is a side note that I think is critical for people if they're thinking about this or just kind of dancing around the topic of investing in a new asset class, whether it's real estate or otherwise, great decisions are made slowly, usually unless you have a way of helping protect yourself from emotional decision making. So long story short, I put together a framework when I was going out there trying to find who who was I going to invest with? And it has like a five part big bucket and subquestion. There's like seventy questions on it. That's how nerdy I am, unfortunately. And so I wanted to look at this person's track record. I wanted to look at their meaning, the deals they've done and how to. So I wanted to look at their team if the person I'm going to go invest with. Do they actually have a competent team around them? Do they have the infrastructure to be able to manage this thing that I'm putting my money into with them? I want to make sure that they have great communication and that is not hard to get. By the way, you can always ask someone, hey, send me some of the stuff that you sent out to your other folks that you've worked with. Like how do you communicate three years into a five year investment in other stuff like that? And the way that I found folks once I put that framework

Spencer: [00:20:26] Together, including values, by the way, I don't want to forget that. Like, I am one of those very few folks out there who proactively brings up what many folks consider kind of corny. This is the same guy five minutes ago, by the way, who just told you make unemotional decisions. It is important to vet values when you're talking about other people. And so there are ways to do that. We don't necessarily have to go there.

Spencer: [00:20:45] But I do. I've had values and I think I originally went out to a website, a couple of websites you can go to. You want to find some folks to invest with, such as, really funny sounding name I like. What the heck is that? When I first heard about it, probably the best single source social media network for real estate investors. And you still got to dig deep to find the right content that you want to find. There's a bunch of ninety nine percent of them are competent, great people out there out to do good. Of course, there's just a couple of weirdos on there. You got to make sure you filter out or ignore, but go take a look there. But also, I would just say that when we got further along in our investing career and we started to actually become active, we built our business. Now we have folks approach us. It's a blessing. I knock on wood and I kind of pinch myself every day that we now get approached every single week by people who are the managers of deals and they're trying to help to partner with us, to joint venture with us so that we can present our investors with their real estate deal. That took time for us to build. But I would encourage folks to go check out bigger pockets. There's a ton of real estate specific podcasts that are out there, arguably too many. And I would say that those are all wonderful sources just to kind of get your feelers out there and start listening for good themes and who to work with. But if you find like a power connector, there are some folks out there who can help you kind of find other competent people with backgrounds you can invest with. There's a lot of info out there.

Kirk: [00:22:01] You talked about some of the values. Actually, I'd be curious to to hear when you say values, because I understand what you mean, but I think a lot of people may not. So maybe kind of talk a little bit when you like. How do you vet values?

Spencer: [00:22:14] I had to borrow this one heavily from my career in leadership. And this is because all the way back in terms of like the twins hiring people, there's this thing, this technique or approach that you use in the corporate world. I again did not come up with this. I've done it hundreds of times. And so I've kind of applied it over to real estate, which is behavioral interviewing. And you can go and find out from a person when you're first getting to know them, like, hey, tell me what you done. My favorite question is based on this theme of something called failure response. That's not some kind of academic term that I pulled out of a book. That's just the way I think about it and branded failure response. What that means is I want to ask someone like if I was asking you this question, tell me about a time when you launched a new venture, whether it's in real estate or not. Ideally, I would love to hear about real estate, but tell me about a time you did that and it didn't go the way you want and tell me about what went wrong and tell me about what you learned about it and how are you going to plan to improve and change in the future. And then you ask, you know, enough deepening, ever deepening follow up questions with that person to find out if it's true, number one. And then further than that, you want to find out if, like, did they actually learn from this thing? Because I think what's the tragedy is that so many folks don't and so many of us don't either. Right? I mean, I I'm not perfect. I hate to admit how many times that I failed forward, quote unquote. And in some cases, I probably didn't learn the lesson. I could be a little dense and stubborn sometimes, but that's it. People's prior decisions and prior behaviors are incredibly telling, far more important and telling than anything that they can sit there and pitch you. And so that's what I'm interested in. I'm also interested in third party

Spencer: [00:23:47] Validation, the beautiful and all. If you're trying to vet the WHO, you got to get referrals, you got to get references, you got to get other people speaking on that person's behalf. I will forever remember when I failed on hiring a competent manager in the working world and I didn't trust my gut because I could not get a great reference for that person. And they said they have like a a storied career with all these big companies. And it turned out that not a single person would vouch for them. That's the kind of stuff you just can't ignore. Look for recommendations, testimonials. Ideally, people are willing to vouch for that person. That's how you vet values through the lens of other people's experiences with that person and what they have learned in the past.

Kirk: [00:24:27] And I love the phrase failing forward. We use that all the time. I think it's such a such an important way to to look at it. And actually, I'm curious in the third party validations, because I always found this to be one of those areas that I guess if you can't find anybody that's telling but know, I remember anybody starting in any industry, if you're looking for validation or references, mean people, you could get anybody. I mean, nobody knows who this person is. And the hole in the wall that can be their brother for all you know, or their cousin. So I always found it to be kind of. When you're hiring somebody, you're like, oh, give me some references and give you references and they're not going to give you somebody who's a bad reference, but those are people I want like I want to know, like, what's the worst thing I can expect from this person? So you kind of know where the boundaries are, but I don't know if you found any ways to do that. But this is the nature show. But I kind of feel like it's important when you're doing due diligence and you're talking to people.

Kirk: [00:25:23] There's these little nuances that we've come up with in these little questions that we've come up with and doing due diligence on funds and managers. And it's not the obvious stuff because you're never going to get anything with the obvious stuff. It's always like these little nuance questions that just are so telling, like, hey, how much of your own money do you have in your own fund? Like that is hugely telling. And if somebody just says, oh, I you know, all my money's tied up in this other thing, like when you put that other thing in this fund, like, you know, why are you separating out your assets from. And that to me is always a telling sign, like you're not buying into what you what you're cooking immediately. That's like a disqualifier right there. If they're not putting most of their money in their own stuff. I don't know if there's any other questions you found, because I think this is such and the questions are so important when you're really trying to get to the answers you're looking for.

Spencer: [00:26:13] Gosh, I love the example that you just brought up. And that is part of our firm criteria. When I'm investing with someone with investing my own money or for working with a partner for our business, which is what's the skin in the game, man, is that person putting in a meaningful amount. And we have like thresholds on what we consider meaningful. To answer your question and expand on it a little bit, there's a couple of things that are just what I consider nuts and bolts. Got to do it when I'm working with a person, particularly if, like, you know, the minimum amounts on the stuff that we work with now are like a bare minimum. Fifty thousand dollars, which is not chump change. I don't care if someone is a high net worth investor or not. That's a meaningful amount of money. We definitely do a background check. We as a firm that's worked out quite well. It's very worth paying the, you know, somewhere between seven hundred to a thousand dollars to go do a background check on every person who sits in like a management seat within a particular deal. So we do that.

Spencer: [00:26:57] And we chatted about this very briefly before we kicked off today. Correct. But it was our decision as a business to go and become also like a registered representative with FINRA. And that's going to be probably a bunch of industry speak that people either will get or not get in that kind of glaze over when they hear that. But why does that matter? That matters because I can tell people point blank, I had all ten fingers fingerprinted into an FBI database and one hundred percent of disclosures are legally required, not just ethically required on all of our deals. And so, like, that's pretty hard to find in the real estate syndication space. Those are the types, though. Those are the types of things that are really concrete. And if you can actually go and wherever you happen to go and deploy your capital, make sure that you get like the facts, like the facts as to what they've done, facts as to what this person were, their relationships like the key relationships involved in these things. But the question that you brought up is really critical because like is the person walking the walk is a funny term in the software world within Silicon Valley, deeply in a startup called Do They Dog Food. And it's like a verb. And also former startup that I worked at, they made payroll software super dry. Most people are like, that's pretty boring, super hot startup, and they're probably gonna do great. We would use the same payroll software that we would sell to other people in the company to run payroll for that company. Very specific example. Just to give people a sense of what I'm getting at here, same ethos. Like if you're out there saying to other people this strategy works or this asset class is great, I hope you're using that strategy and investing heavily in that asset class. That is literally how we live our full, integrated family life right now. We have this ethos of like financial offense and financial defense within our family, just as a side note and literally like we are our walking embodiment of the very strategy that I'm so enthusiastic about educating other people on now, because that is how we're building our own wealth journey for our lifestyle and our kids and our future and helping a bunch of other folks that work at companies such as Facebook and Salesforce and Uber and Google and all these other big tech companies and folks that were walking a similar path to us is like, are they doing the same thing? Are they seeking to do the same thing? Then find partners who can actually speak to real experience in the working world, see a third party validation testimonials. I've highlighted this more recently because I don't think a lot of folks in the real estate investing community, I think they undervalue this. Look for testimonials or recommendations like I'm big on LinkedIn, my social media network of choice. I'm not saying it's the best. It just happens to fit what we're doing.

Speaker4: [00:29:23] And if you look

Spencer: [00:29:24] At the bottom of people's profiles, I'm not saying everyone takes LinkedIn that seriously, but those that do, if they really can't find a single human being, if they worked at a company for over like two years, like a year or two years, and they can't find a single human being willing to write a thoughtful, normal recommendation as to their working experience with that person, whether they were managing them up, down, sideways, diagonal, whatever. That's a little bit interesting to me. Third party validation comes in so many forms, testimonials, referrals, recommendations and beyond.

Kirk: [00:29:53] I will point out LinkedIn, though, that if you're looking at that for financial professionals in. Many of them are not even allowed to hold that, so I actually had to turn mine off because I'm not allowed to by compliance, just be aware of you're looking at a financial industry. You probably won't find it. And if you do it, someone is probably not paying attention to their compliance.

Spencer: [00:30:11] That is true. It very much depends. That's a great comment.

Kirk: [00:30:14] I do want to kind of come back to something comment you made about financial affairs. First, financial defense. Can you kind of describe how you look at that and what that means to you?

Spencer: [00:30:24] Eventually landed on the ethos, but I wanted to just comment briefly as to where it came from. It came from the fact that I mentioned up front. I grew up in a basically an entrepreneurship household, the ripe old age of six. I got my first exposure to real estate. I don't think that counts as meaningful, but I watched my dad build an incredibly high flying business and that eventually I was working inside of it as a teenager. That was one stream of income coming in to our family. It was an active form of income, much like the majority of families in the world. I mean, and in the US, rather, one large stream of active income. He was a broker broker stops working income stops long, same as a W2 job. When we hit some headwinds, meaning more and more people at this too much. But we had a kind of a dark decade as the what we call it in our family, like my lost my younger brother to cancer. Our parents got divorced, business crumbled on my dad, all that stuff. And I watched that happen. And I realized, wow, OK, what if I was him? I have my own kids now. It's my job to build some kind of moat around my family. What if I get hit by a bus? What if I unfortunately faced a major health issue like a debilitating health issue that's stuck with me for years? I didn't act on it. Am I going to say I was aware enough as a teenager to be like, let's go put together this ethos of financial offense and financial defense? But what it means is that those a strong and lasting impression on me. So I was and now I have my own kids went through a thirteen year career in the tech world and I'm sitting there going, I define risk for a family. Not as how well as my S&P investment doing my index fund I define risk is how many income streams do I have flowing into my family in the event that one stream dies

Speaker4: [00:32:01] And usually

Spencer: [00:32:02] In the form of active income? And so there's ways to start changing that ratio of income that is active versus passive. The ethos of financial offense and defense is holistic. And so for defense to be specific defenses, this isn't going to be a broad comment on frugality, but you can't ignore it. So here's a fun fact, and this is the least Bragi Bragge point ever. We have three vehicles. One vehicle has two hundred thousand miles. That was a commuter car. We have another vehicle that was an eleven year old Audi A4. We have another vehicle that is like a nine year old Mazda. So they all were great. I love cars. I would love to buy a Tesla. Do we buy a Tesla now? Now we don't need to. So no judgments out there. I would love to go buy into. Like, right now you have to

Speaker4: [00:32:45] Just think about car payment.

Spencer: [00:32:46] Do we need it? We want it now. We also still have in our first house we've decided not to upgrade like those choices around frugality that do matter. Second, massive comment that has to come into financial defense taxes. And I can't go deep into this one because of compliance. But I'll just say that I'm not your CPA. I'm not any one you in the audience. The CPA is not financial advice. I just will comment that say like I worked in roles that were heavily taxed for the duration of thirteen years and there are other ways to earn income and generate income that is not subject to such intense taxation. And so looking at more holistically and asking yourself what are the changes in our lives and the structure of our income that can actually be more tax efficient because that is the biggest expense. And I used to look at that like it's a given. Well, it's a given if you're willing to employ and you're not planning on changing. So that was a question for us. Financial offense that has to do specifically with adding income streams. And so if your income streams are too, you know, from your day job, just like they were for us and my wife and co-founder Jennifer, you know, she's still working as a marketing executive currently.

Spencer: [00:33:53] But who knows, maybe that'll change. Figuring out how we can risk our family's volatility based on having income streams that let's say one W2 job goes away. We've got more coming in. Other job goes away. We're doing fine because we have other income streams coming in. You can buy income streams, meaning investing for cash flow or you can build income streams. There's some really remarkable ways people can do that in these days as well. I mean, we're talking about stuff that people might laugh at, but they really shouldn't, such as to go take a look at how much income some you tubers are making by making kid videos on ad revenue. And we're talking low budget, low production people writing an ebook for and selling it for a dollar. There's a remarkable income coming in passively for some of these things. So that's the way I think about it now. And it's had to go down. That tangent is financial often simply means how are you insulating your family's livelihood from purely just active incomes that if you unfortunately can't generate anymore, you're still staying afloat?

Kirk: [00:34:52] I appreciate the distinction because I think it's a really important way to look at it. I think what most people do is they look at one of the other. And it's usually based on some life experience, whether it's current or past, where they look at it and say they're either offense oriented, meaning I need to make more money, I need to grow my assets, I need to do this. And they don't look at the defense side or somebody has a different kind of money script. We talk about in the show or kind of the emotional side of money is a little bit skewed where they're really more defensive. They don't want to lose it. They had a bad experience growing up and they're just really, really conservative and cautious and they're really risk focused. But then they lose out on the opportunity that is out there. So I think it's really important to kind of look at both so that people get a well rounded point of view and you can make money and not lose it and focus that way. Like you're saying, I think is a really healthy way to look at it in the of time we get to wrap up here. But any kind of final thoughts you'd like to pass along to our listeners, you being an active listener yourself to the show, what's kind of your final thoughts and what do we miss? You think people should know?

Spencer: [00:35:53] What I encourage people to do is take a step back and try to find what actually gets you curious about financial management for your own money. And what I mean by that is I got to give credit to how, gosh, I can't remember who said this quote, but it really stuck with me recently. The recent quote. And it had to do with the fact that, OK,

Spencer: [00:36:12] Why are we all conditioned to go and pay someone else to manage our money for us? But then we're encouraged to go and do our own taxes where it should ideally be the opposite. First know meaning I really encourage folks to go hire competent tax advisory, but also interested in your finances enough to make good decisions yourself if you can't outsource it entirely. So go just go and really try to find a reason to be interested because diversification does not mean how many different stocks are invested in. That is one narrow band of a portfolio. And you can really go into de-risk, your family's volatility by coming up with other ways to generate income streams. There's new ways to think about this stuff, but just find a way to get interested

Kirk: [00:36:54] Spencer, where can people find out more information about you

Spencer: [00:36:56] Yeah, so we have a website, is a passive investing club. You can create an account. There's an obligation thing mean. That's where we share deals for folks to invest and if they're qualified, get to be accredited to be able to do that. I'm also very active on LinkedIn, usually like a try to do a daily post, usually on the topics of financial literacy, real estate, investing in education and sometimes just being goofy because you got to blow off steam. But please come connect.

Kirk: [00:37:22] ey, MoneyTree podcast listeners, do you wish you were an early on, some of the best performing IPOs of twenty, nineteen and twenty twenty, the investors in our crowd were and now you can join them with our crowd. Accredited investors invest directly, easily and most importantly, early. Our crowd investors have benefited from their company's IPO going like beyond meat or limited. Some of their other companies have been bought out by companies such as Intel, Nike, Microsoft and Oracle. What's interesting about our crowd is that this is not just a list of companies you can access, but it's a way to piggyback on the due diligence of others. What do we talk about a lot on this show? You have to do your own research or find someone else to do it for you. Well, this is your chance to have the experts doing the research for you. The best part is that they're eating their own cooking because they're allowing you to invest alongside them. They do all the hard work of doing the due diligence on the deals and you get to show up and right alongside them. Now, you need to be accredited investor to participate in these deals. But it's a great way to get started. Take advantage of their expertise, resources and access to pre-IPO deals. You can participate in single deals with as little as ten thousand or one of our crowd's funds for as little as fifty thousand. You can get in early on some of these unique opportunities at our crowd. Dotcom slash wealth, two thousand twenty one. The our current account is free. Just go to oh you are s.r.o.. W.D. dot com slash wealth two thousand twenty one. Well, now we're into the panel portion of the show. That was a great interview with Spencer. And now we have our resident experts here. So this week we have one of our resident experts, Barb Freeburg. Hey, Barb

Speaker5: [00:39:09] Aycock, excited to talk real estate,

Kirk: [00:39:13] As always. Love having you on the show, Barb. We also have our very own Meghan Gorman. Hey, Meghan.

Speaker6: [00:39:18] Hi, Kirk. How are you doing this week?

Kirk: [00:39:20] Good, good. Doing great. Really excited to talk syndications.

Speaker6: [00:39:24] I am, too. And I'm actually more interested I you to hear what Mindy said, our other guest actually has to say, but I'll let you introduce her first.

Kirk: [00:39:32] Well, Meghan started it. So we're going to introduce also our very own Mindy Jensen, our resident real estate expert. Hey, Mindy.

Speaker5: [00:39:38] Hi, Kirk. I am delighted to talk about syndications.

Speaker4: [00:39:41] This is why I love

Kirk: [00:39:42] The panel portion of the show, because we get the real nuts and bolts from people who who have opinions, which is what we like to hear. So let's start off with Mindy. What did you take away from the interview with Spencer?

Speaker5: [00:39:55] I want to say that I have no personal experience investing with Spencer. So this is not anything about him or his company. But about minute twenty two, you said, how do you go about finding good people in syndications? And this is honestly the most important question that you asked and the most important answer that he shared. He put together a framework. He says, I put together a framework with seventy questions. And if that seems like overkill to you, don't invest in syndications. Your syndicator can absolutely make or break your entire deal. And I have invested with syndications. I have had some fabulous experience with investing in syndications. I've had some pretty crappy experience. I have a couple of syndicators who have done over and beyond what they predicted, which is always awesome. I have some syndications where they have done exactly what they predicted, which is also awesome. That's why I invested in the syndication. But I have one in particular that is just an absolute dog. And it's in Austin, Texas, and the syndicator is not local to Austin, Texas, which you don't have to be local to to the city that you're investing in. But one of the other syndications that's really going great is local. The syndicator is local to Austin. And they said, oh, I know exactly what building that is. Nobody bought that building because it is south of I can't remember what expressway it is, but it's south of this expressway and everybody knows that those buildings are terrible. If you're south of the expressway, nobody wants to live there. And that's a really location specific bit of information. The numbers looked great on paper when they pitched it. Oh, we could raise reds. You can't if nobody wants to live there. So I would say if you are considering investing in a syndication, do all the due diligence that you can possibly do. Seventy questions. Spencer is a good start.

Kirk: [00:42:08] I love that you pointed that out, because when I

Speaker4: [00:42:10] Look at this, we do due

Kirk: [00:42:12] Diligence on fund managers or funds and there's due diligence questionnaires that we we generally ask and they're very thorough, some companies. Will actually put them together for you, which I think is extremely thoughtful and I think it just tells a lot about them and what they're looking for, because if they're willing to do that in advance means they're you know, they put a lot of thought into it because most people don't don't ask these questions. So I think it's a great point. Barb, what about you? What are your thoughts or takeaways from the interview?

Speaker5: [00:42:41] Well, first, I want to go over some basics. First of all, what is this syndication? So it sounds like a really fancy word. A syndication is pretty much a management group when a project is really big and it's too much actually for one person to handle. You might need a group of experts to put the deal together. So that's all a syndication is. And then it'll have a legal structure and you want to understand what that is. The other thing do you want to know about is syndications are typically available only to accredited investors, and an accredited investor is someone who either earns two hundred thousand dollars a year, an individual three hundred thousand dollars a year as a couple, or has a net worth of a million dollars individually or as a couple, excluding their home. Now, a new definition of of accredited investors has just come into play. And that is if you are an expert in investing and have some sort of credential like a series sixty three or a sixty six, which are stock broker licenses, or you're a registered investment advisor, but you don't meet the income or net worth qualifications, you could still be an accredited investor. And the reason they have this qualification is because these investments are riskier. So because of the greater risk, the Securities and Exchange Commission wants to make sure that you can afford to lose a part of your investment if it doesn't go well. Those are kind of the basics of syndication and who can invest in them. I'm going to tag onto this and say, if you are not an accredited

Speaker4: [00:44:38] Investor, you

Speaker5: [00:44:39] Should not be investing in syndications. And of course, there's always exceptions to every rule. But if you're just now hearing of syndications, now is not the time for you to be investing in them.

Kirk: [00:44:52] And there's actually a question I'm going to ask after we give it a shot is why would somebody put together a syndication to begin with? But, Megan, what are your thoughts where your some of your takeaways from the interview?

Speaker6: [00:45:03] I think this is incredibly interesting, right? I like real estate. I think it's an interesting way to get exposure. I have not done any syndication, nor have my clients. You know, going back to some of the basics, one of the things that people need to be very aware of is how this will impact you tax wise, because whenever I'm introducing clients to an investment that's different than a normal stock and bond and, you know, the stock market I'll talk about it is I like to set expectation on what the tax experience will be. So a lot of these syndicates are LLC and LLC. These are great flexible entities. And what happens when you're an equity holder in an LLC, you get a pro-rata share of these profits and losses. That's a great thing. But one of the watch out here is that a lot of times these partnerships aren't always getting their key ones, which is what they will generate you for tax time out by the April 15th deadline. So one of the things you should be always sort of aware of is that you will need to make sure that if you're not, when will you get the K one? And if not, will you be able to get a reasonable estimate in order to calculate your extension payments? So, I mean, I think it's just always being aware of the tax implications.

Kirk: [00:46:30] I think that's a great point, Megan, and I think anybody who's gotten questions, especially after that, the tax time or maybe a little bit after, and they get mad because they weren't expecting it and they have to refile, it's really important because a lot of people don't like it and some people have. I'm sure some of your clients, they have so many that they don't even file on time because it's just there's there's waiting for so many of them.

Speaker6: [00:46:50] Correct. And I think the other thing that gets confusing for investors is what you might be experiencing from a cash flow standpoint, like a distribution might not match up to what appears on the K1 because a lot of people get confused with how distributions occur with these investments versus the basis they have in the investment. And so sometimes you get a distribution, but you'll still be getting a passive loss on your tax return. These things are nuanced. And so I would tell anyone who wants to do this, it's probably a good idea to work with the tax professional to help you because the basic issues are complicated. And I say this to someone who does this with client returns.

Kirk: [00:47:33] The ones can be confusing and there can be some great benefits to it as well as you're alluding to is you may get, let's say, ten thousand dollars in income and it may be taxable at like five thousand because you're returning to the basis as opposed to income.

Speaker6: [00:47:47] Exactly. And one last point on this. What people don't realize is sometimes you have to look back on all of your pay one year after year to make sure that the basis is being done correctly. But I know that's enough tax talk for everybody. So I'm going to leave it there.

Kirk: [00:48:00] Yeah, I'll leave that responsibility to Megan because I don't want to do is go back and look at all the business. I want to ask the question as well. Kind of following or what many said was why put together a syndication? Like, why would somebody do this to begin with? What are you thinking on that, Mindy?

Speaker5: [00:48:16] All the indications that I'm investing in are large apartment buildings like two, three, four hundred unit apartment buildings that cost 10, 20 million dollars. And I don't have a huge network of people who have 10 or 20 million dollars just to throw at one asset. So the syndicator is running in the same circles. I am and doesn't have that kind of liquidity either. So they grouped together several investors to throw money into buy the property. It's a great way to diversify your portfolio. It has a lot of upside in

Speaker4: [00:48:52] Theory right now.

Speaker5: [00:48:54] I don't know if you've noticed, but the real estate market is a little bit warm and finding a really good deal is extremely difficult. I don't know of any home run deals going on right now, especially in these larger spaces, because it seems like and I know I've run in real estate circles, but it seems like everybody in their mother is a syndicator right now. And just calling yourself a syndicator doesn't actually make you a syndicator. But these people who may not know what they're doing are buying properties that don't make sense and, you know, using other people's money to do that. So that's way more than your original question is why do people put together syndications to buy large apartment buildings that they could not otherwise buy?

Kirk: [00:49:40] But I think you also touched on part of it, right, is that it makes a lot of money for the syndicator.

Speaker5: [00:49:45] It does. And that brings up another good point that Spencer mentioned in his episode. He said, as the syndicated sponsor, if they are putting any money in of their own, how much of your own money do you have in your fund? And if they say none, that's definitely a pink flag. Could even be a red flag. You don't believe in this deal strongly enough to put in your own money? Well, I'm investing my time. I'm you know, I'm getting everything together. But put your money where your mouth is.

Kirk: [00:50:17] I would agree. I think it's definitely a red card. Any time we have conversations with funds or sponsors or whatever, if they're not putting their own money in is an immediate. No, I've heard so many excuses and stories about why they don't and they're always comical. But so far, have you invested with the syndications in the past?

Speaker5: [00:50:38] I knew this question was coming, Kirk and I kind of want to skirt it because I have a hard time trusting other people, I put it out there. Let me just say that I'm not saying I wouldn't invest in a syndication, but I have invested in deals on my own or with my sister or my family or people that I know and trust and you know who you're dealing with and you know the type of work that goes into the deal. But investing with strangers, I don't think we can stress this enough. You have to know who you're investing with. You have to know their qualifications. And you also have to know what kind of fees you are going to be paying and what kind of fees they are getting. So you have to ask yourself, am I comfortable giving someone 15 percent of the deal when it may or may not come out the way that I wanted to? And so this is a very niche product. And I also want to piggyback on what many was saying, because it's not easy in this market, this market. It's I've seen real estate deals for 30 years. And this is among the craziest markets I have ever seen because interest rates are so cheap, the availability of really good deals are getting snapped up left and right because money is so cheap. And if you don't like Kirk said, like we said in the podcast, if you don't get it a deal at the right price, it's not going to work out.

Speaker5: [00:52:23] It just won't happen. You will be paying too much for the property. You won't get the rents. You won't be able to sell it for enough of a profit. So long story short, I think syndications can be very, very good. They can be lucrative is can almost any investment. But if you think I'm pulling my resources with someone else and they'll do all the work and that absolves you of your responsibility, forget about it. You have to go through and you have to read all of the documentations. And let me tell you, these documents are not fun. It's kind of like if you were investing with a financial planner, and I tell this to my contacts all of the time, that even if you invest in a finance with a financial planner, you have to understand what you are investing in, why that planner is making the choices. And you have to have an oversight to say, does this make sense to me? So I love that we're talking about this topic. This can be a great alternative. As was discussed on the podcast, the Bigger Pocket's website is a great resource for real estate information. But you want to dig, dig, dig. And if something doesn't smell right, if I've turned down deals that don't smell right, there's just something off. And I look at the people's background on LinkedIn and I know that's like a very basic place to start. But if something doesn't feel right, you walk away.

Speaker6: [00:54:00] I love that you brought up gut instincts because I feel like so many times and I see this and other things too, right? People get excited about all the upside, but they don't take a step back and think about does this make sense for me? I think it would be hard for me to invest with others in this sort of circumstance because I like to have more control. But I think it's just understanding who you are as an investor. And I'm sorry, Kirk, I know you're about to jump in there.

Kirk: [00:54:26] No, I was just going to say really quickly in summary for Barb, don't talk to strangers. I think there's a lot of people out there that feel this way. And it's really hard. It is for me. I mean, especially if people are doing things themselves, it's really hard for them to trust others or to. I think the challenge for most people is how do you know you can trust them? And it's not like you follow these five steps and you can determine whether it's a good fit or not. Like in some ways you're taking a chance. You're taking a leap of whether you can trust this person, whether they have a good track record, whether this investment's going to go off well and it may not go off well. You might be investing with the Warren Buffett of real estate and you might do a bad deal. And it's just in some cases, it's just bad luck if they're doing 100 deals and one of them turns out bad. And so happens to be you, you know, I mean, there's a lot that goes into this and there's a lot of chances that you have to take with it and just understand that you you can't always know everything. But, you know, as Barb said, you really just have to do your research. Mindy, I know you don't invest in syndications, but you have high net worth clients and they're probably investing in larger deals. You know, syndications in some ways, a way to wrap a bunch of investors together. And so just finding one. So how do your clients look at investing in real estate? What kind of structures do they look at?

Speaker5: [00:55:47] You said Mindy, I think you met Megan. I don't actually have it.

Kirk: [00:55:50] I actually yes, I am sorry about that. Apparently, it's lunchtime. Meghan and Meghan. Yes. The two M's, you guys are next to each other. Obviously very easy to confuse you.

Speaker6: [00:56:01] You're saying how to clients, how to clients. Look at this.

Kirk: [00:56:04] You know, how do your clients look at this from a structure because you're not doing syndications. So how do you like high net worth clients? Look at investing in structures for real estate.

Speaker6: [00:56:13] It's a couple of things. One, I think they look for women. They put together these funds of funds that invest in real estate. What is the due diligence process? And if you ever see any of these presentation marketing decks that go out to high net worth investors, I would tell you usually these decks are like 50, 60 pages. And the first 30 pages is just usually about process. How do they get the investments right? How do they decide to put something in a portfolio? And that's really important. And I think it came up today on the interview. The due diligence is key to success, doesn't guarantee success, but you really can't just be putting money into something willy nilly and hoping for the best. You want to understand how do they go into it? What is the process? And what I experience is a lot of times that's what they're paying for, the challenge that high net worth investors have. And I run into this and it's funny, the real estate market is hot right now. Everything's hot right now. People got a lot of money and they got nowhere. Put it it feels like is people get hit up all the time by friends, business colleagues that have an investment. But how do you pull out from the investment if it makes sense to do the investment versus the fact that it came in from a certain relationship? And for me, in working with clients, that's the hardest part, is to try to make clients be objective about how some of these investments are sourced to them. And so that's where I'm supposed to come in and do the due diligence in explaining the risks. I see. And this is true not just in the real estate investing, but in private equity venture, all of that investing.

Kirk: [00:57:54] That makes a lot of sense. And actually, one of our recent guests to talk about angel investing and people invest in deals like that. They look at they might look at one hundred deals before they pick one. And some of the things you mentioned, Meg, and I think what I see a lot is people see one deal and they think, oh, this is the best deal I've ever seen. Well, compared to what you know, if you've seen one hundred deals, you know what the best deal is? Because you've seen one hundred of them. You've seen one. How do you know what a good deal looks like? And, you know, because real estate's relative. Right? Right.

Speaker6: [00:58:24] And I think the other thing is I tell this to clients all the time. Sometimes being a good investor means saying no and deciding not to do an investment. And it's hard it's hard for people. I mean, I'm going through that this week. I have somebody who is very eager to do an investment and I am trying to slow them down because there are some reasons for concern. My bigger concern is they're just so caught up in the emotion of it that they are unable to say no. And at a certain point in time it's their money. But I can just point out the potential pitfalls that lie ahead.

Kirk: [00:58:58] Yeah, it was funny. I was watching the movie. The yes man the other day with Jim Carrey, with my boys and, you know, it's about somebody always says no and they're going to start saying yes, I feel like I want to be a no man with all these deals. Like you almost have to be you kind of have to just assume that it's a no and look through it and be really convinced because there's so much that you have to get over to to have this to become successful or I should say, a high probability of success, because you never really know. Animals feel like you have to kind of take the negative and have to overcome a higher hurdle to get there. Whereas most people look at it and say, oh, I want to find a deal, I want a yes versus maybe looking at it the opposite way and looking at it as you know, how many no's can I find until I think somebody mentioned this on one of the earlier shows? Like, I like saying no because it's one step closer I can find to a yes. You have to look at a bunch of deals to see that. So one thing I find interesting, and I was listening to a podcast the other day of a real estate investor that probably a lot of people would have known his name, but he kept talking about how he wanted to do bigger and bigger deals. And this is in a time where real estate has already peaked and this person's looking at just keep doing bigger and bigger deals. So Mindy is bigger, better now.

Speaker5: [01:00:16] I like what you just said. You have to look at a bunch of deals when you get a syndication pitch. I can't remember what the actual term is, what they'll give you a pitch deck. Maybe that's what it's called. It's a bunch of documents like Barbes that it's boring to read. If you can't make it through the pitch deck. You have no business investing in that. You shouldn't really invest in the first syndication that you are pitched. And it's so much better to be in the position where, oh, I wish I would have invested in it instead of the oh, I really wish I didn't invest in it. And there's always going to be another deal. I mean, real estate is everywhere, so you're going to be able to find something to invest it. But I cannot stress enough to your research and, you know, do your due diligence and read. And I like what you said. You want to be a no man. Look, for reasons to say, no, I do this when we're hiring somebody. I look for reasons to say no. If I can find a lot of reasons to say no to your resume, I don't even want to interview you. If you can find a lot of reasons to say no to a syndication pitch deck, it's not the right property for you. And just because you're saying no doesn't mean the other people are saying no. But this is your money. You treat it like it's important.

Kirk: [01:01:32] You're the real estate expert here and you've invested a lot of different structures. You've obviously done some syndications. But like what's your preference of your investing in real estate? Like, why why would you do the syndication? Why wouldn't you just buy additional properties?

Speaker5: [01:01:46] So what are the things that I do? I have a self directed solo for one K and with the self directed, I can invest in real estate, but I can't have any hands on participation in that real estate. So I have had a hard time finding just regular deals. I live in Colorado. Our market is hot, hot, hot. So I took some of my 401k money and put it into real estate syndications because I don't want to do any work on large apartment buildings. It's easier for me to release control. I'm just like Barbara making. I want to have control over the real estate that I'm investing in, if at all possible. And it's not possible for me to have any control in the forward case. So it's easier to invest in these larger deals. And I've had some success. I've had some not success. I think right now we are not investing in any future syndications for the time being just because deals are so difficult to come by right now. And there are other ways I mean, I can throw all that for one K money into the stock market and an index fund and get past performance is not indicative of future. And this is not a recommendation. But I can get a really great return right now. My husband's in love with Tesla. We've owned it since 2012. We didn't just buy into it right now. I don't know way. I feel like I have to qualify that. But he's in love with it and wants to put a little bit more money into it, and I'm OK with that. But most of what we're doing is index funds right now. Well, I don't even remember what you asked,

Spencer: [01:03:23] But

Kirk: [01:03:23] Music to my ears that you're using your self directed area to invest in real estate.

Speaker5: [01:03:27] So, I mean, that's one of the reasons why we opened it up. And I do want to correct you. It's a 401k, not an IRA, because the forward cash has different and better, in our opinion, tax advantages. But we also have self employment income that allows us to qualify for that.

Kirk: [01:03:44] That's awesome. I appreciate your your depth of knowledge on that. So that's actually a great reason to have a 401k versus an IRA for real estate. Barbe, you invest in a lot of real estate in your life. What kind of framework do you look at when you're looking at deals since we kind of mentioned framework? Earlier.

Speaker5: [01:04:01] Well, there's a couple of things to consider, first of all, if the deal is not going to be lucrative, in other words, if you're not going to get a return on your money after you pay your expenses with your rental income and you're just counting on appreciation for profits, well, that's an unknown and it's not a given. So you may want to wait till the market is better. Don't be afraid to pass if you just can't find a real estate investment that has the potential to make money ongoing for you because you're not looking. It's almost like you invest in something and then you think, well, it's going to go up. So then I'll make my money later. Well, maybe yes, maybe no. You have to be really careful. And like we have all said, the market's very difficult now. So don't be afraid to just sit on the side with cash. You don't have to do anything. The other alternative that I'd like to throw out that we really haven't mentioned for real estate investors, there are a lot of what are called real estate crowdfunding opportunities, which are kind of like syndications, but some are open and open to both accredited and non accredited investors, and they invest in larger projects that individuals typically don't have access to.

Speaker5: [01:05:24] So, for example, diversity fund equity, multiple ground floor farm together. A lot of these platforms offer real estate, equity and debt investments with an opportunity for cash flow and return on your capital at a later date. So I might encourage you again, do your due diligence, see if any of these might fit your real estate needs. I am not recommending them. I have recently written about them on an article and Barbara Freedberg, personal finance and Accredited Investment Opportunities. This is not a pitch for myself, but just to widen your knowledge and information about other ways that you can invest in real estate. And then there's a point that we've all touched upon, but haven't really said outright that I want to revisit, which is the possibility for losses. If you are an investor in anything other than CDs, you will have lost money. That is a part and parcel of striving for higher returns. When you strive to gain higher returns by investing in stocks, bonds, real estate, any type of investment, you're going to lose money sometimes, and that's all part of it. So just be aware of that factor that in and attempt to minimize the losses. The reason we all love to invest is if we are smart, sensible, our gains far outweigh our losses.

Kirk: [01:07:01] So, Megan, one thing that I see in a lot of these real estate deals, and you probably see this because you look at a lot of different sponsors, investment sponsors, as they always have this proposed return, like, oh, we expect that the internal IRR is going to be 20 percent. I guess maybe you can talk a little bit about that. What in these funds or similar type of funds, proposals like the IRR, the cash in cash, or what does that mean? And but more importantly, can people just look at that and say, oh, that's going to be my return? How do you look at that?

Speaker6: [01:07:35] I mean, it's great of a fund can show you past performance, but even if it's a different vintage of a fund, it's no guarantee of that same IRR is going to happen. I think it's it's having the discussion that you have typically when looking at any investment, which is there is great potential in this type of investment for upside, but for great return. It means you also to take on great risk, which means there's some serious downside risk for the typical investor out there. I always think it's important to think, how would you feel if this went to zero or if it got cut in half? Would you be able to survive in? This goes to diversification, because I would also make the argument that to do these types of investments, you need like high credit quality, fixed income as well, to act as a buffer against the volatility. There's no guarantee what's going to hit you. And people only ever really talk about their home runs. They don't like to talk about when things go really south or it's just a single or a double. But I think it's just going in with reasonable expectation and the fact that this is probably a long term investment. So we might not know for five, seven, 10 years if it hits that IRR, but it's really about setting expectations.

Kirk: [01:08:53] I think that's a great point. So as we kind of get close to wrap it up, Barb, final thoughts from you.

Speaker5: [01:08:59] Real estate is a exciting investment class. It's also a way to diversify your portfolio from a typical stock and bond portfolio. There are many, many ways to invest in real estate from your basic real estate investment trust or read to crowdfunding to syndications. So it's wise to have some exposure there. But again, do your due diligence. So thank you for having me on. It was so much fun. You can find me at Barbara Freedberg, Personal Finance and our robo advisor pros. You can also see me at Barbara Freedberg on YouTube. See you next time. Bye.

Kirk: [01:09:40] Thanks for coming on. Our Mindy, what about you? Final thoughts about syndications?

Speaker5: [01:09:46] I think that Barbara is spot on. Do your research, absolutely research and Spencer gave some really great suggestions in the episode. Ask them their track record. Ask them about their team, their infrastructure. Ask them for specific examples of the communication they've given to past clients and past syndications. Talk about their values if that's something that's super important to you. But be slow to invest in syndications at first. This is a big learning curve. It isn't just somebody saying, oh, I have this hot stock tip, you could lose all of your investment and they can actually ask you for more money down the road. So make sure you are confident and well-funded before you start investigating indications. You can find me all over bigger pockets. Starcom, I'm the community manager there and I co-host their money podcast called Bigger Pockets Money. And thank you for having me. It's always a delight to talk to you.

Kirk: [01:10:49] Always a pleasure to have you on the show here, Mindy. Thanks again for coming on. Megan, final thoughts from you.

Speaker6: [01:10:54] You all said the same thing that Mindy and Barb said. Do your due diligence and in doing your due diligence, understand how this is going to impact you from a tax perspective, because, again, these types of investments can be really intriguing, but they can cause a lot of frustration if you have unintended tax consequences. So I'm Megan Gorman. You can find me on Twitter at Megan underscored be underscored Boreman or at the wealth intersection. Dotcom, thanks so much for having me here.

Kirk: [01:11:21] Yeah, thanks for coming on, Meghan. Yeah. So that's the show for this week. Thanks again for joining us on Monetary Investing podcast. My name is Kirk Chisum, wealth manager of Innovative Advisory Group. We don't just manage your wealth, we make your life better. You can find more about me at Innovative Wealth Dotcom. And of course, you can find me every week here on the show. Please remember to subscribe to the podcast on the podcast app. If you're choosing, you can also check out the show at Monitary podcast Dotcom. On our website, you'll have access to the resources, show notes and the archive shows. Lastly, please leave a show reading and comment on the podcast app of your choice. Have a great week ahead. And remember, no one will care about your money like you do, so invest in your life.

Speaker1: [01:12:04] Thank you for listening to the Money Tree Investing podcast. Visit us at for more free investing resources.



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