TGCI 7: Want to be a passive investor? How to take a leap of faith?

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TGCI 7 – Want to be a Passive Investor? How to Take the Leap of Faith?

Show #7 - Julie Lam and Annie Dickerson - Episode Art (1)

Summary

In this episode, Pancham interviews Julie and Annie of Goodegg Investments. Julie and Annie share the pros & cons of passive investments, and reveal how you can overcome various objections to invest in your first passive deal.

This show starts off with our guests, Julie and Anne sharing their background stories. You will learn how our guests made some wise investment decisions early on in their careers to acquire their first investment properties. 

Next, we segue in passive investing and real estate syndications. Why did our guests transition to real estate syndication? Can you earn more returns in a syndicated deal? Here, we discuss the importance of vetting a real estate sponsor. We also caution listeners about rushing into their first deal, and highlight the importance of proper education.

PanchamHeadshotTGCI
Pancham Gupta
TGCI 7 - Julie Alone
Julie Lam
TGCI 7 - Annie Alone
Annie Dickerson

This interesting show wraps up with our “Taking the Leap” round. This is a show that you do not want to miss.

Tune in for some excellent insights!

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Show #7 - Quote Art (2)

Timestamped Shownotes:

  • 00:42 – Paralyzed by inaction, are you earning poor returns on your investment?
  • 01:32 – Pancham welcomes Julie and Anne from Good Egg Investments to the show
  • 02:29 – How did Anne make her first real estate investment?
  • 04:53 – What about Julie? Julie reveals how she ended up making her first investment right after the real estate crash
  • 06:39 – Was is a challenge for Julie to manage her out-of-state investments?
  • 07:48 – Julie discovers real estate syndications; how did Julie find investors for her first syndicated deal?
  • 09:21 – Julie explains passive investing in simple terms
  • 10:32 – Are you a good candidate for passive investment?
  • 12:00 – Is it difficult to become an active investor in the real estate sector?
  • 12:48 – Pros & Cons of passive investments
  • 14:53 – Can participating in a real estate syndication earn you better returns?
  • 17:53 – How to vet a good real estate sponsor whom you can trust with your hard earned money
  • 19:05 – Educating yourself is critical before investing in your first real estate syndication
  • 22:14 – Tips & Tricks for evaluating a real estate sponsor
  • 24:20 – What is a “pref” or “preferred return”? 
  • 25:12 – What returns can you earn if the deal is structured as a 70:30 split?
  • 26:24 – Taking the Leap
    • 26:28 – When was the first time you invested outside of the Wall Street? 
    • 27:00 – What fears had to overcome when you made your first investment property?
    • 30:38 – Can you share one investment that did not go as expected?
    • 35:00 – What is one piece of advice that you should give to people thinking of investing in the Main Street?
  • 37:12 – Julie and Anne share their contact information
  • 37:42 – Sign up for the “Gold Collar Investor Club” to schedule a call with Pancham
  • 38:58 – Who is an accredited investor? 

3 Key Points:

  1. Pros & Cons of Passive Investments
  2. How to vet and find a real estate sponsor whom you can trust with your hard earned money?
  3. How to invest in a real estate syndication?

Get in touch:

Read Full Transcript

Introduction

Welcome to the gold collar investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams.

Here’s your host, Pancham Gupta.

Pancham: Welcome to the Gold Collar Investor Podcast. This is Pancham. If this is your first time listening, then thanks for coming. The Gold Collar Investor Podcast is produced every week for your learning and enjoyment. Show Notes can be found at thegoldcollainvestor.com. All links are in the show notes. Now let’s get into the show. More often than not, I come across people who feel that they need to be actively investing in order to make their money work for them. They have the desire to invest but do not know where to start. They want to learn but because of their busy lives, they never end up spending time on educating themselves. What this leads to is inaction. In some cases, procrastination kicks in and investing is always put on the side. However, the money is money and it sits in their bank account earning close to zero percent interest and losing value every day because of inflation and the opportunity cost of capital. If this is you, then you are not alone. It happened to me when I was starting out many years ago. This is why I’ve invited Julie and Annie to discuss the world of passive investing. It is simple, yet so powerful. Julie and Annie’s company Good Egg Investments help people invest passively in commercial real estate, without the hassles of being a landlord. Good Egg has co-syndicated over 3000 multifamily units and 1500 Self Storage Units worth over $300 million and continues to work with experienced partners that have proven track record of success. Julie, Annie. Welcome to the show.

Julie and Annie: Thanks for having us, Pancham.

Pancham: Thanks for coming. Are you ready to fire up my listeners break out of Wall Street investments? 

Julie and Annie: Oh, yeah.

Pancham:  Great. Great. So before we begin, do you want to give us a quick overview of how you both started out?

Julie and Annie: Sure, sure. 

Annie: I can start. This is Annie. Well, I started in real estate. I fell into it really about 10 years ago now. When about, trying to buy my first place after my husband and I got married. And we were going to buy a condo, or a loft because being the cool newlyweds that we were at the time we thought that was the thing to do. And thankfully our realtor talked us out of it. We were living in DC at the time. And those row homes are very popular in DC and many of them come with an in-law suite in the basement. And we didn’t know anything about being a landlord. But my realtor said these magic words. He said, if you play your cards, right, someday you can get this property to be cash flow positive. I never heard that before. But I thought I like those words together. And so we did it. We bought a duplex. It was a row home and we lived in the top unit, and we’ve rented out the bottom unit, and that was our first foray into house hacking. So we love that and we loved our tenants. We’re still good friends with our tenants to this day and we, after turning over that first duplex, we bought another one and then another one and so on and so forth and got into slightly larger multifamily with four  plexes and eight plexes and so on. And then…

Pancham:  This is all in DC?

Annie: This was, its, that’s a good question. IT started in DC, and then we moved out of DC. So then currently, we’re in Oakland, California. So we have some duplexes here. And then we started investing out of state because barrier – real estate prices are ridiculous, and so we started investing out of state predominantly in the southeast. And that’s when friends and family got interested and wanted to invest with us and so that’s when I stumbled upon this concept of real estate syndications and how to help friends and family to invest passively alongside us. And that’s when I met Julie. And I’ll let Julie tell her story.  

Pancham: Great, thanks.

Julie: Yeah, so my story about how I got into real estate is very similar to Annie’s. It was about 10 years ago. So it was a great time to get in back in 2009, and my husband and I were doing the traditional narrative of, you know, to get married and look to buy your first home, and we came across a property. Nothing was selling at the time. Of course, this was 2009. Bottom of the market here in the Bay Area. And we came across this property, or my real estate agent did and it was a three and a half bedroom, two and a half bath townhome. And it was about 50% off of what it had been a year and a half prior right because of the crash. And we were looking at that place. And then we were also considering buying a loft, very similar story to Annie’s. And I wanted to live in the co-loft. But my real estate agent suggested the idea that if we bought this townhome that had all of these bedrooms and bathrooms that we could potentially offset our debt payments and have other people rent the rooms from us. Like Airbnb or whatnot. And so we ended up going with that townhome and that was sort of my first introduction into real estate investing and house hacking and understanding how real estate allows you to leverage your time and money and all those kinds of things. Because we were, you know, our mortgage debt was being offset by the income that was coming in from renting out these other rooms. And it was an eye-opener for sure it was that was like my first, like, wow, this is…I need to learn more about this. And definitely, do more of this. And so we started buying more properties here in the Bay Area between 2009 and 10. And then as the market cycles started to mature, we started to exit those deals in 2014 and 2016. And we wanted to we thought about investing here I live in San Francisco. And we thought about investing here. But at that time, and this was back in 2016, I would have been lucky if I would have earned a 3% to 5% cash on cash return for all the work I would have been doing. Managing the asset and managing the property manager and all that. So it didn’t make a whole bunch sense to me. And so I thought maybe if I invested more for cash flow outside of California, that that would be a better idea. And so that’s what we did. In 2016, we started buying single family homes and smaller duplexes outside of California and then realized that those investments, we’re going to take a whole bunch of work for us to manage the rehabs and just manage the property from so far away. And the returns were great. But it was just very time intensive. And at the time, I was working full time. I have three young kids. And so it was not really the ideal investment strategy for me. And it was a little bit after I made those initial investments that I discovered passive investing in multifamily syndication. And that was for me sort of a game changer. I did have a ton of research leading up to that point and then decided to pull the trigger on my first passive investment on a syndicated deal. And that was it that sort of changed the trajectory of my investing strategy forever. I became very passionate about it and started talking with friends and family about that first investment that I had made. And I kind of organically started to build an investor list. And they had said, you know, the next time you do another investment, like this syndicated deal, let us know. And we’ll invest alongside you. And so that’s what I did. That was my first introduction into capital raising and helping syndicate a multifamily deal. And that was in 2017, August of 2017. And since then, I did about three deals on my own. And then I met Annie and we co-founded Good egg Investments together. And since then we’ve done about seven or eight deals since then. It’s long short story.

Pancham: No, it’s pretty cool. And it’s a coincidence that both of you started very, very similar way, beginning and that at the same time about like 10 years ago. That’s great. You both touched on a little bit, you know, on multifamily syndication, and in the middle, one of you mentioned about passive investing. So no investor left behind. Can you guys explain, either one of you, what is passive investing? What does that mean? To my audience?

Julie: Sure, yeah. I mean, I think passive investing in a quick nutshell is basically when you leverage your capital to earn an income without having to participate in the management of the investment. I mean, in a short one sentence, that’s pretty much what it is.  

Annie And I always like to tell people, you know, syndication is essentially a group investment. So whereas when I’m investing actively, you know, I buy a single family home on my own. But when I’m investing in syndication, you know, I, I may have 50,000, you have 50,000, somebody else has 100,000. And instead of each buying our own separate properties, we pull together our money. And now suddenly, we’re not buying a single family home, we’re able to buy something much larger, like an apartment building. And so we’re able to leverage the economies of scale and efficiencies and things like that to get us all better returns. So that’s, that’s part of the win of investing passively into syndication.

Pancham: Okay, great. So who would really make the best candidate for passive investments?

Annie: Oh, that’s a good one. 

Annie: Yeah, I mean, I would say the best person really is somebody who’s pretty busy, right, and who, you know, has some kind of a business or a company they run or a family, you know, that they have to take care of, and they’re pretty busy, and they don’t really have the time to manage the investment, but they maybe have capital to invest into a deal. 

Pancham: Okay, so anyone who doesn’t want to be involved actively in the whole day to day management of the property, like you were doing, Julie, back in the day, yourself out of state, it was very, very time-consuming. You left your job since then. But there are people who really, really like their jobs, and don’t have the time. So would you say those are the best candidates to be investing passively? 

Annie: Absolutely, yeah.

Annie: Yeah, we see that people like to start out, trying it by rolling up their sleeves and trying their own investment actively first. It’s not a requirement, of course, but lots of people like to start that way just to try it out and get their own rental. And then often, from that experience, people will see, “Oh, this, this is really a lot harder than I thought”. This all this I am getting all these papers all the time I call for my property manager. I don’t want to deal with this. And then they know, then they really know that they want to be a passive investor. 

Pancham: Right. So what I’ve seen, in my experience, right to your point, people who start off actively, and then they realize. Right? I’ve seen a group of people where they actually are thinking of starting actively, they never end up doing it because they are very busy. And then as investing is always put on the side, and never ever takes off the ground. Right. So I think this is a great, great way to get your hands dirty. With the investments where you get all the benefits of investing, but don’t have to do any of the work, you just have to write the check. And there you go. I mean, it’s not that simple. Even writing a check. You know, you have to be very careful who you’re writing it to. But yeah, we’ll talk about that. So what are some of the pros and cons of passive investments?

Annie: Um, yeah, so I mean, I would say like, pros are definitely and that allows you to leverage your time. Right? Um, you know, at the end of the day, what’s happening is your money is out working for you, so that you don’t have to go to work and or so that you can focus on your work wholly, and completely and not have to really think about, you know, what, where’s the next dollar coming from? Or, you know, is my money working the most efficiently out there for me? And so, you know, allows you to focus on family or personal time or work or whatever it is, that’s important to you, rather than thinking about, you know, what, what’s the maybe next business venture I could do that’s going to net me the biggest return or, you know, things like that? So, yeah, that’s, I think that’s definitely a pros, the pros and the cons, I would say, you know, with passive investing, it’s just really not built for someone who wants to have that control. So that could be a con for you if you’re the type of person who wants to have control over the investment. 

Pancham: Absolutely.

Annie: And it’s also fewer returns too. You know, I, in my opinion, and from my experience in me, I don’t know, if you want to add anything, but I mean, I think at the end of the day, it really comes down to whether you have more money or time. Right? And depending on what you have, that should be, you know, your investment strategy should follow that. So, you know, if you have more time on your hands than you have money, you could probably make a much more significant return if you were to purchase the investment yourself or you know, manage the investment yourself, rather than handing over your money and then having someone else do it for you. So those things come in my mind too. Yeah.  

Annie: About the returns. Do you make a good point? And I think in most cases, in my experience, your returns are can be slightly more if you were to invest actively, however, I recently, just out of curiosity, did a case study on my mom’s condo that I helped her purchase back when I started investing in real estate. I said, Mom, you got to buy a condo is a great investment. And so this is in 2009, and got it for a pretty decent price in DC and convinced her to hold on to it and rent it out all these years, which turned into my job, of course, not hers. But so I helped her hold on to it for all these years. And then, and then I discovered passive investing, which fits her much, much better. And so I was able to help her sell that and get into a syndication. So then I took a look back at the returns that she had gotten from that condo over the years. And it was significantly less than if she had invested in syndications during that time. I don’t remember the exact numbers. But it was I was surprised at the difference. So if I had discovered syndications way back then, and convinced her to put her money there instead, she could be a lot wealthier at this point then she is.

Pancham: Right, you know, I would like to add to that, you know, returns being lower. So that is you know, very, very relative, I would say. If everything as being the same, where the investment is the same. The guy who is actively managing it for you, where you are passive Investor, his skill set is very, very similar to your skill set, and you can run the place and the building or the condo or the property, exactly the same way or are better than that guy, then absolutely, you would be better off doing it actively. But if your skill set is not exactly the same, then or you know, all the other things are not equal, then your returns could still be lower because you could make a lot of mistakes along the way, which the other guy would not make.

Annie:  Yeah.

Annie: And I think it also is dependent on where you live and where you’re investing too. Right. I mean, as I said in the beginning, you know, my experience, and I was looking at investing here in the Bay Area in smaller multi-families. And I would have been lucky if I was earning a 3% to 5% cash return. Right? Whereas on the syndicated deals we do, you know, you’re earning an 8% plus cash on cash return for doing nothing. So yeah, it’s relative. But then again, on the flip side, I also have single family homes that I’ve purchased for a decent price through a wholesaler, did the renovations myself, and I’m earning ridiculous returns there. 

Pancham: Right, right. 

Annie: So I think it depends on how you buy it, where you buy it, and what your skill set is. And you know, all of those kinds of things.

Pancham: Exactly. True. True. All right. So what if I’m a passive investor, right, and I’m, this is my first deal. And I’m really looking to put my $50,000 hard-earned money into my first syndicated deal with someone, what do I really need to look for? What should I be careful about?  

Annie: Well, I think first and foremost, we always talk to people about trying to find a sponsor-operator partner who has a strong track record. So unless you know the person really well, you probably don’t want to invest with somebody on their very first deal that they’re doing. No matter how good they say that they are, you know, because there’s always going to be unknowns, and you don’t want to be paying for their learning curve. And so, if possible, find sponsors who have done this sort of thing before, who have a proven track record, who can show you examples of projects that they’re currently holding, or they that they have exited already. And what those returns are, so you know that they’ve done this before, it’s not their first time at the rodeo, and that they can provide you some references for current investors who have invested with them. So you get an idea of what that experience would be like if you were to invest with them. So that’s first and foremost, we always tell people to take your time and vet the sponsors.  

Pancham: Great. Anything else you would like to add to that?  

Annie: I mean, I guess I would say I would kind of back it up a little bit. And I would say that, you know before you even get a deal in front of you that you’re seriously considering evaluating and thinking about investing in, I would say, do your research, right? Like, educate yourself on what passive investing really is. Understand the risks and the benefits on your own. Don’t let the sponsor tell you what the risks and the benefits are, because they’re always most likely going to tell you from their sort of a biased opinion right on what they think the risks and the benefits are. So I just feel like if you educate yourself first and familiarize yourself with these kinds of deals first, that’s, that’s really like the first step. And then I would say next, you really want to start by researching the market that you are interested in investing in and understand why. And you know, usually the fundamental things we look for is job growth and population growth and any kind of, you know, occupancy, vacancy issues, and the event will have some kind of a downturn, that’s like the first thing. But I would say, once you do your research, you identify a market you want to invest in, and then start talking to sponsors who are hyper-focused on that market that you’re interested in investing in, and then start, you know, sort of vetting those deals across those few sponsors, and then identify a sponsor whose, you know, business plan and business strategy is a sort of an alignment with what you think is right. And I think that when you do it that way, and you start with, you know, what market do I want to invest in, what sponsor do I want to invest with, then you once the deal is presented to you and it’s in front of you, then you’re less likely to pull the trigger on a deal that isn’t very attractive, right? Because you’ve already sort of narrowed things down, you started off with the research, you understand the deals outside of what a particular sponsor is telling you, you researched the market, you know, it’s a market you want to be in. Now you’ve identified a sponsor who you know has the track record, operates in such a way that’s in alignment with your values. And now you have this deal. So it’s kind of like you, you’ve done all the research leading up to this. Rather than, you know, someone just handing you a deal, you don’t really know much about the market, you don’t really know much about the sponsor, and you’re just trying to evaluate the deal on face value. That, in my opinion, is tough to do. It’s tough to make a good decision or not, right. 

 

Pancham: Absolutely.

Annie: So I think when you’re able to sort of look at it this way and narrow it down, you’re more likely going to invest in a deal that you really, truly believe in on all fronts, right?  

Pancham: Yes, that’s such a great, great point, you know, you would not know whether a deal is good or bad. Unless you educate yourself, even if a deal is really, really good. Or someone is telling you its really good, and you don’t know how to really validate it, then it’s just those words in front of you. You really won’t have anything to validate. Alright, so let’s move on to the, like, typical investment. Can you guys give me one example of how typical investment looks like? I’m ready with my $50,000. And I want to, you know, see how the deal looks like, what should I look for in a deal? And what do you kind of present to your investors or a typical investment?  

Annie: Yeah, I mean, I guess I would say that when you’re looking for a deal, I mean, it’s so relative, right? Because everyone has heard of their own opinions about what makes a good deal and what doesn’t. But I would say, let’s, again, like back it up, I would say that evaluating the deal is important. Yes, it is. I mean, evaluating, doing the underwriting and evaluating the potential of a deal is important. But I think more important than that, is that you want to make sure that you research the sponsor operator, the person who’s going to execute this business plan – that’s where you want to start. I feel like that’s so much more important than all the fluff that’s in an investment summary. And things to look for, oh, well, is the 8% crash there? Is it a 70-30 split? Is it a, you know, what are the loan terms? I feel like often times when I talk with investors they get really caught up in sort of the details of the intricacies of the deal and the way it’s structured, and it’s important. I think it’s important, for sure, but I think it’s more important to evaluate the sponsor that you’re going to be working with. What is their track record? What is their business plan? What’s a priority for them? Is it you know, capital preservation is that their number one priority? In my opinion, it should be if capital preservation is not at the forefront of their mission, and maybe making the asset nice and pretty is more important to them, I would be worried that I could potentially lose my investment. And at the end of the day, you know, the worst thing that could happen is that I lose my investment. And that’s like, I obviously wouldn’t want that to happen. Right? So, you know, it’s really evaluating the sponsor, I feel like then moving on to the deal. Right? Because if the sponsor is operating in such a way that they’re sort of values about how to run a deal and manage the asset is in alignment with what you think is right. And comfortable for you. I think that’s really like the starting point. My opinion. 

Pancham: Okay, so you mentioned something – eight pref. Do you want to just expand on that, what that means for the people who know what that is?

Annie: Yeah sure.     

 Annie: Yeah. So an eight pref. is basically a return that the limited partner passive investors earn on their investment. And it’s, it’s called a preferred return because any cash flow that’s generated from the property goes to directly to the limited partner passive investors up until they reach that 8% return on their investment. Right. So that’s, that’s something that a lot of investors that I talked to look for is they want to make it sort of a risk mitigation strategy. Right? It’s, it’s a way to make sure that the general partnership is going to work hard enough to generate that 8% preferred return and at least pay the passive investors something before they take anything. So…

Pancham: Okay. Alright. So, so that’s that. And then you mentioned something 70-30 split, and expand on that a little bit? Like what that means?

 Annie: Yep. So basically, it means that any cash flow that’s generated from the property goes to…After so after you pay off your debts, and your mortgage expenses, and all that kind of stuff, you pay off the limited partner passive investors up to that 8%. And then any additional cash flow that comes in from the property after that gets split 70% to the limited partner, passive investors, and 30%, to the general partnership, and the general partnership is the folks who, you know, manage the asset.  

Pancham: Great. So that sounds like a pretty good deal for limited partners because they will get 8% before anyone else gets paid. 

Annie: Yes. Yes.

 Pancham: Right.  And then on top of that, if the sponsors do a good job, they were, you know, get 30% of those additional cash flow. And the limited partners will get 70%. So that’s more than 8%. And you know, the interests are very, very aligned. And great partnerships. 

Annie: Yeah

Pancham: Great. Great. I think that explains everything that I wanted to cover on passive investments. Let’s move on to the next section of the show, which I call taking the leap round. 

Taking the Leap Round

I asked these four questions to every guest on my show. My first question, which I think both of you answered already, when was the first time you invested outside of the Wall Street? I guess for you it was the condo, and for Annie, I believe it was the townhome. Correct?

Annie: Yes, that’s right. Yes, I actually invested in real estate before I ever invested in Wall Street. Okay.  

Pancham: All right. So the next question is going to be very interesting than in that case. What fears did you have to overcome when you first invested outside of the Wall Street?

Annie: I had no fears of going into investing. Actually, I was so young and naive, that I was just like, “Hey, I’m making money. Let me have a bucket of money”. Let’s do something with this money. And to me, when we bought that first row home in DC, it wasn’t really, I didn’t really view it as an investment. I just viewed it as Okay, we’re buying a house and let’s try this thing. And we, you know, the first one, we didn’t have Bigger Pockets back then, and we didn’t have a podcast to listen to. I didn’t know what a cap rate was, I didn’t have a spreadsheet. I just, I just did you know, we knew that we could rent the basement apartment for roughly X amount of dollars. And we did a little rough math. And we said, “Well, our mortgage is going to be this much and we rented out for this much then”. Yeah, that’ll help. But we had no sense of like, what is going to be our return on investment, and we have to make it this amount, and we have to renovate on this budget and this timeline. We were just young kids having fun making mistakes. You know, we sure we didn’t probably make the most money we could have out of that investment. We still hold it to this day, that first one actually. Wow, that’s pretty cool. Yeah, yeah, we still have it as a great investment still to this day. But could we have made more money on it, possibly? But for every cent that we didn’t make, we learned so many valuable lessons. And that’s the thing is like, when you’re first starting out, you can’t expect to hit it out of the park. Because most likely, unless it’s a fluke, you’re not going to, you’re going to make some mistakes along the way. And you just have to expect that. That’s just part of the learning curve. And eventually, you will get to a point where you will be able to hit it consistently out of the park. 

Pancham: Great. So they say, ignorance is bliss. Yeah.

Annie:  I wish I could go back to that time. Now I can find a house and run all the numbers and spreadsheets, and stuff. I miss that. 

Pancham: Right. Right. How about you Julie did you have to overcome any fears? Or you know…

Julie: I mean, yeah. I mean, I think back way back then in 2009 you know making that first investment for me, it was really like believing that real estate really was an investment and I mean, like as a primary home, right? I mean, think we’ve all been taught that. So, you know, your first real estate investment should be owning your own primary home when in reality if you are on the hook for paying off that mortgage, that’s not really an investment. Right? That’s a liability. So, you know, it’s like, it’s like, I’ve learned now that if you’re ever going to get yourself into significant amounts of debt, that somebody else should be responsible for paying down that debt. Not you. Right? So I think for me, it was really believing that real estate this purchase that I was making was a true investment. But I think it all depends on you know, how you buy it, and you know, what your business plan is? And in that case, you know, we had gotten some, like Obama Refunds through buying, so we had very little into the deal, you know, into the investment. And then we had a strategy. Right? We knew to go in that we were going to offset our debt by renting it out. So, yeah, so I mean, I think really, the fear was is real estate investment and trying to get over that hump of like, is this really the best place for me to put my money? So…

 Pancham: All right, great. Next question. Can you share with the audience one investment that did not go as expected?

Annie: They all go exactly as expected.

Julie: Exactly.

Annie:  Nothing ever goes wrong. Nothing ever goes wrong. We don’t have an answer for that one. No. I can talk about a personal one that I made out in Indiana. It was one of the couple of single family homes that I was buying on my mission to buy cash flow and real estate outside of California, and I purchased this home single family home, super-cute two bedrooms, one bath home on a huge corner lot. It was actually zone for two properties at all these big plans to put another property on there and make it a duplex and bought that property and renovated. Bought it in like October, November and then renovated it and threw it on the market the first week of Thanksgiving. And, and it’s making trying to get it rented for three, four or five months finally got a new problem. Or in there? Yes, it was. This is the worst. And if you know, it’s tough because it was over the holidays. So it was like November, December, and January and I just kept putting things off saying it was the holidays. And that’s why we couldn’t get it rented. Finally thought, “Okay, this is an issue with the property management”. Got a new property manager in there and finally got the place rented out and the guy paid rent for probably like two months, maybe two or three months and that pushed us into the summer. And then all of a sudden September’s like three weeks in and hadn’t seen the rent. So I called the property manager. He’s like, “Oh, yeah, we’ve been in contact with him. If we don’t get payment will have to evict”. And we never received payment and had to evict. And that went on for about two months until the eviction hearing came and finally got the guy out in the holidays again and then. Yeah, and then I was just like, I’m so done. I think I had a break in somewhere in between there too when it was sitting vacant. Someone had broken and stole our refrigerator. That was like 50 years old. I don’t know why anyone would do that. But apparently, they-they was going through a tough time. So they needed an old refrigerator. But yeah, so that deal, I then I ended up just selling and I said I took a loss and just sold it because it was a huge headache. But yeah, you know, and the lesson learned from that is that, you know, I bought that property, site unseen. I thought I knew the market pretty well. And I feel like I did but I didn’t know that sub-market and as we all know, real estate is very, you know, block by block. Sub-market by sub-market and you know, you turn a corner and you know, things can be vastly different from where it is around the corner. So, you know, do your research. I can’t emphasize that enough to do your research and make sure you understand the markets and the submarkets you’re investing in as well as you can to help mitigate any potential losses like that.  

Annie: And I just wanted to add on one thing to that, which is, I, of course, have lots of stories like that, too. But I wanted to make a distinction because we did have lots of experiences with house hacking where we lived in a unit and rented out the basement or the upstairs unit. And versus these experiences investing out of state. And what we’ve found, our personal experience is that it’s completely different. When we house hacked, because we were choosing the neighborhoods, we were choosing the tenants, we knew exactly what we were getting into and the tenant profile we would have in those units. We had a much smoother experience and still continue to have a great experience with those properties. With the ones that we’ve invested out of state, even though we’ve gotten great property managers, we’ve visited the markets multiple times, and we’re trying to be as hands-on as possible, we’re finding that it’s just it’s a little more difficult than we had originally thought. Things happen. The weather is different, even you know, there’s vandalism. The tenant profile is different, developing neighborhoods, all that good stuff. So while the cash flow can be better at times, those properties have also given us bigger headaches. 

Pancham: Yeah. I can totally attest to that. I’ve had those. Right. So what is one piece of advice would you give to people who are thinking of investing in the Main Street, that is outside of the Wall Street?

 Annie: Um, for me, I guess I would say to, as I said earlier, do your research, you know, do not skip that part. I think people who are busy professionals, they’re very tempted to take a deal and evaluate that deal at face value and say, sure, this looks like a great deal and throw 50K at it or whatever. And I really can’t emphasize the importance of doing your research before you have a deal in front of you. Understanding the risks, understanding, you know, the benefits, and really understanding the market, you’re investing in everything that I talked about earlier. Do not skip that part because I think that doing that research and doing that due diligence upfront, is really the best way and the only way, in my opinion to wrap your head around these investing opportunities and get to a point where you’re comfortable, you know, to invest. So yeah, that research.

Annie:  The other thing I would say at a certain point, once you’ve got that, that certain level of research under your belt and you feel comfortable enough, not 100% confident, but you know, you feel like you know some stuff, then just do it, you got to do it. At some point, you got to take the leap, and you got to try it, you just got to expect that a certain amount of that first investment is going to be paid towards learning your lessons. Nobody, no, there is no single real estate investor out there who has not made a mistake. And so you just have to expect that going in. Just expect that it’s going to be a class, just not in a class format. You’re learning on the go as you’re doing, and so that’s the only reason that the three of us – Pancham, Julie and I are where we are today is because we at a certain point, we took the leap and we just did it. In doing so we’ve learned our lessons and gotten better over the years. So you just got to do it.

Pancham: Great. Such a great advice. Thank you so much for sharing your wisdom today. How can listeners reach you?

 Annie: So if you want to get in touch with us, you can learn more about Good Egg Investments through our website. Its goodegginvestments.com and you can reach out to either me or Julie. I’m Annie@goodegginvestments.com and Julie is that Julie@goodegginvestments.com. 

Pancham: Great. Thanks for coming on the show. 

Julie and Annie: Thanks for having us.

Pancham: I hope you guys enjoyed that show and got some perspective on passive investing. Do you ever feel overwhelmed by the thought that you have no time after work and family time to learn about investing? Do you feel left behind that you are not putting your money to work for you? Do you want to create passive income but you do not know where to start? Is so I have good news for you. I have created an investor club which I call the gold collar investor club for accredited investors. I will be putting together investing opportunities exclusively for this group. These are the opportunities where I have done my part of the due diligence for you and will be investing my own money alongside you. If you are interested, please sign up on thegoldcollarinvestor.com/club. I repeat thegoldcollarinvestor.com/club. I will reach out to schedule a 30-minute phone conversation to discuss your investing goals. Once you sign up, this can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some cash flow. And in case you are wondering what an accredited investor is, a credited investor is somewhere who has earned more than 200,000 as filing single or more than 300,000 filing jointly for the last two years. Another way to qualify as an accredited investor is if your total network is more than $1 million, excluding your personal home. It includes your stocks, 401K’s, IRA’s, cars, etc. Just not the equity in your personal home. If this is you, I would highly encourage you to sign up. I would end up by saying this if you are a busy professional or a business owner and you have been thinking of investing but did not know where to start. Passive investing may be your answer. Thanks for listening. If you have questions email me at p@thegoldcollarinvestor.com that’s p as in Paul p@thegoldcollarinvestor.com. This has been Pancham signing off until next time, take care.

Thank you for your listening to the gold collar investor podcast. If you love what you’ve heard and you want more of Pancham Gupta visit us at www.thegoldcollarinvestor.com and follow us on Facebook @thegoldcollarinvestor. The information on this podcast our opinions as always, please consult your own financial team before investing.

Show #7 - Julie Lam and Annie Dickerson - Episode Art (1)

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