Seth: Hey, everybody, how’s it going? This is Seth and Jaren from the REtipster podcast and today we're talking with Annie Dickerson and Julie Lam of Goodegg Investments. I met Annie a few years ago at a conference that we both attend each year and I've known about Goodegg Investments for a while. So, I thought that she and Julie would be great guests to have on the show.

So just a quick backstory. Goodegg Investments is basically an apartment syndication company. They find deals in the multifamily space. They educate investors on each opportunity and they connect the sponsors with the investors all in an effort to help busy people earn passive income from real estate without having to do all the hands-on work themselves. Julie and Annie have helped numerous investors along the journey and passive investing and have co-syndicated over 23 multifamily properties valued at over 700 million. So, with that, Julie, Annie, how are you doing?

Julie Lam: We are doing good.

Annie Dickerson: We're great. We are thrilled to be here.

Seth: So, maybe we can just get started with your story. How did the two of you involved with real estate investing? How did you get to where you are today?

Annie Dickerson: This is Annie. I will take the first crack at it and then Julie, you can add on. But it's funny, Julie and I didn't meet until, gosh, about two years ago now and we didn't know that we were walking very parallel lives as far as real estate goes. So, I first fell into real estate investing, I think about 12 years ago now in 2008 and timing was on my side because there were a lot of great deals to be had at that time. And I didn't know this. My husband and I, were just married and we were looking to buy our first home. We went out and we were in our 20s and we thought, “Okay, well, we're going to buy something trendy like a loft or a condo”.

And we started looking at those and our realtor thankfully pulled us aside and he said, these are nice, but they come with some fees and there might be some other things you could consider. And he said, DC, which is where we were living at the time. He said, Washington, DC has a lot of these row homes, and these row homes often have two units, not one. They have the main unit as well as an in-law suite in the basement. And he said you could buy one of those instead of a condo, you could live in one unit and rent out the other, and that way you could get your tenants to help you pay down your rent.

This is before anybody knew that this was called house hacking. So, we were like, “Oh my gosh, we never heard of this before”. It sounds brilliant to get other people to help you pay down your mortgage. And so, we tried it out. We found a foreclosure. The basement had previously been a brothel.

Seth: Wow, really?

Annie Dickerson: We rolled up our sleeves. Yes. We renovated that basement unit, we got it rented out and we started to see these checks every month. And that's when we were hooked. So, we did some more house hacking. We did a few more duplexes, both in Washington, DC, and now in California where we are now. And then along the way, we then got into out of state investing and when that became too much of a hassle, then we got into real estate syndications. But Julie, I'll let you tell your side of the story and maybe then we can tell people about our partnership and how we met.

Julie Lam: Yeah, yeah. My story is very similar to Annie's. I happened to get in in 2009. It was like great timing and was just doing the traditional narrative of my boyfriend at the time, husband now, we're thinking about getting married and we thought, what you're taught to do is you go out and you buy a primary home because that's how you grow your wealth. And it just so happened for us. It was 2009. We live in the Bay Area in San Francisco. And so, it was a great place and a great time for us to buy a property at a discount. And then in 2016 we started exiting all of our California properties. And I laugh at this because I thought we were at the top, in 2015 and 2016 and here we are four or five years later finally moving into that.

And I started buying single-family homes like duplexes out of state because I wanted cash flow, which was like this novel idea, right? Being a California investor, I was like, cash flow? You mean I can buy a property and actually have income coming in every month? I was like, this is crazy. So, I went on a little bit of a mission, went down that road and didn't get too far before I realized that it was just a whole lot of headaches and a lot of work that I wasn't really prepared for. I have three kids. I was commuting two to three hours a day and it was just a lot. And so, I kept thinking, “Okay, I want it, I know I want to do real estate, but I want to scale and I want to go bigger”. So, I thought multifamily is the way to go.

But when you think about getting into multifamily, you got to have the broker relationships. You got to have the money. There is a whole long laundry list of things, asset management experience. I didn't have any of that. And so, I started networking with people in Bigger Pockets and naively asking them, “Hey, do you want to partner up with me? I have some money. I want to buy a multifamily apartment.” And one person was kind enough to tell me about syndications. He said, “I don't have anything active that you could do, but I have something that you can do that is passive”. And I was like, “Passive? Well, tell me more about this”.

And so, we start talking about multifamily syndication, what it means from a passive standpoint, and talked about 20% annualized returns. And I'm like, okay, this guy, this is a joke like there's no way I'm going to handle over a penny to this guy. But I was really intrigued by the idea and spent probably the next six to eight months just researching multi-family syndications, really trying to wrap my head around what is syndication, who are the players, how do they make money, how do I make money?

Just trying to understand if it was a legitimate thing. And then finally pulled the trigger on my first deal. And I'll never forget because about a month after I invested in that deal, I got my first distribution and I was just like, “What is this?” Because I had been doing some other real estate before and I was like, “What is this?” My husband asked me, he says, “What is this larger deposit for?” And I was like, I have no idea. And I realized at that moment what a powerful thing this was. Because in any other situation you either manage the property, you went to work, you did a job to get paid and you knew that money was coming to you. And I knew that I was going to get my distribution, but it had come earlier than it was supposed to and a little bit more than it was supposed to because of the prorated adjustment for when we had closed.

And I just knew in that moment that I needed to find out more about this and do more about this and become an active part of that. And that was kind of the introduction for me into doing what we do today in the multifamily space. But I'll let Annie tell our quick story about how we partnered up and all of that because she's much better at telling that story.

Annie Dickerson: Well, it was about two years ago and Julie had already had a business. She had already started her business and I had just quit my job and I was going to go full force into this real estate thing because I was starting to see the impact of the real estate investments and the passive income. And I was like, “I got to jump into this all the way”. And so, I just quit my job. It's about to launch this business and Julie and I happened to meet up at this real estate investing conference. And if you've ever been to a real estate investing conference, you know that it's almost all guys in suits. It wasn't hard to find pretty much the only other Asian woman at the conference. We started chatting, we both have kids and then we started talking about what it's like to be a working mom in this business. And we talked about what we had each set out to do in this business, why we were starting businesses, which was named to help other moms to learn how to create passive income for their families.

We started talking about this and then we didn't partner up right away. What happened was we just stayed in touch. Julie was still running her business and I had started mine and a couple of months later we got together just for a working session, just a coffee date to catch up. And Julie sits across the table from me and she goes, “So, now that you're in this business, what do you like about it?” And I said, “Oh, my gosh, I love creating content. If I could just create blog posts and videos all day long, I would be in heaven. If I could just take one thing away from my calendar, it would be all the investor calls and the meetings. Like, I enjoy that, but it breaks up my day and sometimes they ask these tough questions and I feel awkward”. And she's like, “Are you kidding? I love those conversations”.

And Julie's got a legal background. So, she loves those tough questions. And she's like, “I would do that all day long if I could. I sit in front of a blank screen and I know I'm supposed to write a blog post but I don't know what to write about”.

And so, at that moment we looked across the table at each other and we're like, “Oh, so you'd like that and I like this and we're both trying to do the same thing and help the same people”. And so, it was at that moment we realized that perhaps it would be better if we partner it up. And so, we did. And that's what has accounted for this astronomical growth that we've seen over the last couple of years.

Seth: Wow, man. Yeah, that's awesome. When you can find that kind of synergy, find somebody else who loves doing what you don't want to do, that's super powerful.

Julie Lam: Yeah, I had heard on a podcast, a real side note for anyone listening, I had heard on a podcast years ago that if you can find someone whose weaknesses are your strengths and vice versa, that together you guys would become this superpower team. I thought when I heard that, I was like, “Oh, my gosh”. Because I think so often, we spend time trying to perfect our weaknesses. And if you perfect your weakness all it's ever to be is a strong weakness for you.

And so this idea of really being able to leverage the strengths that you have and have someone else leverage their strengths that which are your weaknesses and you come together and just create this really powerful team I think is a good side note for anyone who's listening. That partnerships can really take you from here to all the way over here for people.

Seth: Yeah. It kind of reminds me of the Robert Kiyosaki quote, “An intelligent person hires people who are more intelligent than he or she is.”

Julie Lam: Absolutely.

Seth: Not exactly the same thing goes in hire each other. But still, it's finding somebody who is better at certain things than you are. It goes a long way. Annie, you had mentioned, and Julie maybe this is your story too, I don't know if I missed it. But Annie, I know you said you had quit your job to focus on real estate. When you quit your job, did you have enough income from real estate to replace your income, or was it like a huge leap of faith just figuring it would work out? How did that work?

Annie Dickerson: Great question. I thought about this long and hard and what happened was I was working this job. I was working as a creative director. I love all things designed, but this particular role and the projects I was taking on at the time were just not a great fit for what I wanted to do. And then I had real estate on the other side. And I was seeing all this growth. I was having so much fun. I had such a passion for it. And one day I had heard on a podcast, this exercise where you write down your fears and your obstacles and then your potential opportunities.

And so, I said, okay, well let me sit down. I got all these ideas swimming in my head about quitting my job. Is it a good idea? Is it not? So, I sat down and I wrote down all of my fears, all the things standing in my way and all of the opportunities. And when I looked down at that paper, I saw what seemed to be these huge fears in my head was just a couple of small line items. And then over here in the opportunity column, it was full. I had all these potential opportunities.

And at that moment when I saw it written in black and white, I was like, “I got to do this thing”. And I started sobbing right there at my dining table because I was so scared to do it. But then I made a plan. I said, “You know what? This paper is telling me that I need to do this thing”. And so over the course of a couple of months while I was still working my job, I did everything I could to set myself up for success. I took courses, I reached out to people, I did everything I could think of so that when I quit my job, I would have as much of a head start as I could possibly have.

But to answer your question, when I did quit my job, no, I had not reached financial freedom. My passive income did not cover my income from my job. I was really just burning all the boats. So, I set out to do this thing and I was like, “To give it a full chance at success, I have to go all in”.

Seth: Yeah, that's a really interesting thing. Jaren and I have talked about that a little bit.

Jaren: Literally we have a podcast episode about that.

Seth: Yeah. That concept of burning the ships, that's like a really compelling story I guess or a narrative like, “Don't give yourself a chance to go back. Commit”. I can see why people say that and there's probably many times and places where that makes sense. But I don't know, is that ever just like not a smart thing to do? Do you really want to dirt of all your options and paint yourself into a corner and just pray that thing works? I don't know. It's probably not a simple question to answer.

Julie Lam: It's funny because Annie and I are so different and this is what I think makes the partnership work out so well is I definitely did not do it that way because I was so scared that if this thing did not work out, that I wanted to have a place to go back to and a place to run back to. But I think that that's such an ambitious way to approach it. And that's how Annie is, that's how she rolls.

And actually, a funny story kind of related to that is that I wanted to quit my job and I tried to quit my job a year before I actually did. And they basically said, “Well, where are you going?” And I said, “I don't know, I'm just going to take some time off and be with my family”. And they said, “Well, what do you want? What can we do to get you to stay?” And I said, “Well, I want this, this, this, and that”. And they said, “Okay, done. What else?” And I said, “Well, you just gave me everything I could've asked for. I don't know”.

So, in hindsight, kind of a bad thing because then I ended up staying on another year longer. And then I met Annie and when I met her, she had said, “Yeah, I just quit my job”. That ambition I saw and that desire to succeed, I saw in her eyes. And that weekend after I met her at the real estate conference, I went home that Monday and quit my job. So, it was her being that ambitious and her being like, “Yes, I'm going to go do this and I'm not turning back from here” is very much what inspired me to do the same.

Jaren: I want to peel back the onion a little bit on that because I'm curious at face value when you both say that you just quit everything and you just like pursued it. Did you guys have any amount of savings in place at all? Were you guys in a spot where, “Okay if this thing doesn't happen, I'm good for six months, two years?” Did you have any kind of contingency plan at all in place or were you just like, let's go?

Julie Lam: I definitely did. I definitely did have a contingency plan in place. I had invested already in some real estate as I mentioned with the cash flowing properties out of state. So, I had a few of those. And then I had already invested in a couple of syndications already. I would say I probably replaced about maybe 40% to 50% of my income with cash flow. And the other part coming from the equity on the backend. So, I kind of had replaced most of it, but I didn't burn any bridges. I always made sure that when I left, I left on good terms and whatnot.

But as far as the money part goes, yeah, my husband makes good money and I pretty much didn't really even need to work. So, for me, that was my safety net. It was like if even the passive income dried up, at least my husband is there and he works another job. So that was kind of for me, my safety net was having the little bit of passive income. And then if it didn't work out, then I had my husband there and then back up if I had to go back to work. But that wasn't even really an option for me at that point.

Jaren: Yeah. What about you Annie?

Annie Dickerson: Same. I'd like to say that I was like all in guns blazing like $0 million in the bank account. Like this was it, this is my last thing. But no, I also had built up a safety net. So, I guess in that sense it wasn't burning all the ships. We sort of had a life raft there. But, yeah, it was the same in the back of my mind. I was working in learning and development here in the Bay Area at the time and I knew it's a fairly close-knit community. So, I knew that if I ever needed to go back that with my skillset and my experience, I would be able to find another job fairly easily. But I also knew that starting this business was really sort of a once in a lifetime thing for me because at that moment I had that energy, that drive, that passion. And I knew that if I didn't take advantage of that, that that might not come back. So that's why. That's why I did it.

Jaren: Yeah. I'm really glad that you guys shared that because I know a lot of people in real estate, it's crazy that we're talking about this because we literally were going to have a podcast yesterday all about this, literally bringing up the “burn the ships” analogy, the whole thing. And every person that I've seen successfully transition from either a job or a career they didn't want to be in full time into their own thing. Whether it was online content or whether it was real estate. There has always been a very logical transition period that doesn't look sexy. Like it doesn't work on a stage for inspiration. I know people who in the pursuit of entrepreneurship turn their noses to people that are employees or they even use language like “the employee mindset”. And I totally get it because unfortunately a lot of people just kind of clock in, clock out. But generally speaking, there's a lot of people on the spectrum of employee mindset – “Oh, too bad, shame on you” to living the life that, what I have in my mind, probably Tim Ferriss and the four-hour workweek.

In that spectrum I just want people to hear when they hear stories like this about burning the bridges and going after your dreams, totally do it. But if you have a family and you have responsibility, you're totally okay to have savings in place and to make sure that if it doesn't work out, you don't fall on your face. Because I know a lot of people reach out to me in the community here at REtipster and just friends and stuff but I know those professional like “want to be” entrepreneurs. They've spent years pursuing different things, whether it's the MLM marketing or it's like oils or it's this or it’s that or real estate. They're always jumping in that out of stuff and their family suffering because of it. Because they're not making sure that they're taking care of their responsibilities.

So, if you're a young kid who is living in mama's basement, go for it, man. You got time, you got stability, make it happen. But if you are somebody who's built a career and you have some people that depend on you, there's no shame. It's very inspirational to be like, “I'm just going to go after my dreams”. But every single person that I know personally who's actually made the transition out of working for somebody to doing their own thing full time, did it very slowly and very methodically and very safely. And that's totally a good thing.

So, I just want to set everybody free from shame. You don't have to be like Gary V. Gary V was hustling in his dad and mom's business for all of it is on his and built stability before anybody knew who Gary Vaynerchuk was. So be at peace guys. You guys are good where you're at. Do what you need to do and go after your dreams. So I'm down with my soapbox.

Seth: Thank you Jaren.

Jaren: I wanted to ask you guys about the name, Goodegg Investments. Why Goodegg? It's a really unusual name.

Annie Dickerson: Yeah. So Goodegg has two parts. It's building up your nest egg and investing for good.

Seth: Can you go into a typical apartment syndication deal, maybe one that you've done, like where do you find him? Where do you find the investors? Where do you find the sponsors? How does this all come together? And do you guys invest your own money into these personally or you just are kind of the facilitator that makes it all happen?

Julie Lam: Nope. And that's actually kind of how it started. When I had my business first, I started investing first and really ran through the experience of what it was like to get into syndication. All of the questions that I had, all of the doubts, all of the skepticism, all of the “How do I understand the markets? How do I vet the team?”, all of these kinds of things. And that's really that six to eight month window was spent on researching all of that. And then when I finally pulled the trigger, it was coming up with like a 20-point, 30-point checklist of all the different things.

At that point I had reviewed a ton of deals and kind of had seen what are the things that I'm starting to see as normal. What are the things that stand out to me and ask the questions “why” and do all of that legwork. But that's actually how it started was that we started investing first ourselves. And Annie, I think it was like that for you as well, right? You had started investing first.

What happened was as we got into the space, we started to network with other people. The group that we had invested with first was a sponsor. And then the more we got into real estate, we were attending a ton of conferences back then. And we just met a lot of people in that time and we started to understand who the good people were and who the not so great people were and who are the people we might want to work with and who are the ones that maybe we don't want to work with.

And over that period of time, that's how we built those relationships with not only people like us who are looking to get into deals, but also people who were doing deals. And so that's kind of how it all kind of came together was I started off as just being a passive investor and we went to a ton of conferences like I was saying.

Networking played such a big role I think in the early days of getting to understand what syndication was, who the players were, how it all worked. Networking was I think such a big piece for me. We started to get to know people in the industry that way. That's how we met the sponsors.

How we met our investors kind of started out a little bit different. It was more just like friends and family immediately. And then once we kind of went above and beyond friends and family, it was like, “Okay, how do we spread the word?” And part of us partnering together was the desire to achieve that, to reach more people together rather than apart.

But initially in the early days it was really just me contributing value in Facebook groups. That's really how I found a lot of my early investors. It wasn't just Facebook groups related to real estate. It was Facebook groups specifically for mothers. People would post in Facebook groups about mothers. They'd say, “Oh well I just had my baby. I'm dreading going back to work. I'm thinking about a work from home job. I'm thinking about this”. Or it could be, “I'm thinking about a five to nine plan, what are your thoughts?” And it could be all kinds of different topics like that. And I would go in and say one thing like I'm using a real estate instead of a five to nine as an avenue to create savings for college down the road and here's a blog I wrote about it. I linked to a blog. And my Facebook messenger inbox would just go bananas because so many people, not even just regular people, but moms don't have the time to uncover and discover this kind of stuff. When I would post these new ideas, that's really where a lot of the initial following came from was just taking a little bit of a different angle. It wasn't going into real estate groups necessarily. It was a lot of like, “How can I resonate with people who are like me so that I can help them learn the same things that I've learned.”

Annie Dickerson: And for me, it was very similar, but what happened was, earlier in our conversation I talked about how my husband and I started with house hacking. And then once we moved to the Bay Area we realized and now we have two young kids, we realized it would be such a hassle to continue house hacking and it would take years to save up. So, we started investing out of state. And when you live in an expensive market like the Bay Area and you buy anywhere outside of the Bay area, it looks like things are on fire sale. We started investing in Huntsville, Alabama. We looked around and we were like, “Oh my gosh, by this one and I'll take two of these”.

And we quickly amassed this big portfolio and our friends and family started to take notice and they were like, “Oh, can you please teach me how to do that? I want to do that too.” And so, he said, “Sure, come on over, I'll show you exactly how to do it”. First you got to research the markets, then you talk to the brokers and you look at the properties, you underwrite the properties, you look at the numbers, you do the inspection. We're going down the list and they're like, “Wait, so you mean I have to like give up my nights and weekends and do work to get this money?” And they're like, “No, no, no, no. I just want the money”.

We had enough of these conversations where I realized there are people out there who have capital that they want to put to work for them. They don't have the time or the interest to really learn how to do it. And I thought to myself, “Well, I know how to do this. Surely there's a way for me to bring people into these deals with me”. That's when I started down the syndication path at first naively thinking that I could do it an entire syndication by myself. Which as Julie knows, we quickly realized that there's a lot of moving parts, which is why at Goodegg Investments, we now focus on a specific piece of the overall syndication and that's the investor education and helping to connect the investors to these deals.

To your question about how these works, really there's the two aspects of our business. There's the investor education. We get out there and we teach people what these opportunities are about, whether or not they decide to invest with us. We just want people to know what syndications are, how they work, and how to determine whether they're right for you and your investing goals. So that's one aspect of the business.

And then the other aspect of the business is if and when our investors decide that they're ready to invest in a deal, then as Julie was talking about, we're out there all the time networking with different sponsors and we're really looking for the cream of the crop in terms of the best teams and the best markets and the best deals. We find those and we bring those to our investors. Those are the passive investors who don't want to have to go out and network with people. They don't want to have to go to the conferences, they don't want to have to sort through all these deals. We sort of serve them up these great deals that have passed our criteria and our deals that we would invest in ourselves. In fact, I just invested $50,000 of my own money into a deal that we put out to our investors just a couple of weeks ago. We are continuing to actively invest right alongside our investors.

Seth: Gotcha. No, that's awesome. I'm wondering if somebody in our audience is listening to this and hearing about what it takes to be the facilitator and connector who finds the people and the opportunity and the funding and put it all together. Can you make a lot of money doing that? How hard is it to do those things and how much can a person make doing this kind of thing?

Annie Dickerson: That's a great question. A lot of people ask us how we make our money because we don't charge our investors a fee. Our minimum investment is $50,000 but it's not like they invest $50,000 and then they pay us $5,000 on top. All of the fees are underwritten already into the deal. As part of the general partnership, we share in the general partnerships split of the acquisition fee on the front end, the asset management fees ongoing throughout the life of the deal, and then the equity on the back end.

As far as how much money you can make, it's really, it's up to you and how much work you put into it, how passionate you are, how big your network is, and how much hustle you've got. It's really about the two aspects. Going out and finding the deals. And then on the other end, finding the investors and making those connections. Or if you want to syndicate your own deals, hustling and going out and talking to those brokers and the lenders and finding the deals and putting those together. But yeah, there are people who have made quite a bit of money in this business, but the hustle is a big part of it.

Seth: Would you say right now is it harder to find the deals or the investors? I'm sure this probably fluctuates depending on the market and that kind of thing, but what is currently the bigger challenge?

Julie Lam: Deals for sure.

Seth: Yeah, that makes sense. Do you think that's going to change quite a bit in the next 6 to 12 months with the whole covert 19 thing going on?

Julie Lam: I think it's going to even out a little bit. I don't think it's going to flip flop, but I think it's going to even out where there's going to be more deals and it's going to kind of catch up to the number of investors who actually have money. Because there's a lot of people who have been sitting around on the sidelines for the last four or five years. Like I have thinking and waiting for this day to come, who have a lot of dry powder sitting around. So, it's just because we're in the middle or in the brink of a recession, it doesn't mean that the money disappeared. So, a lot of those people still have the money. I think what's going to start to happen is that over the next 6 to like 36 months, there's just going to be a ton of deals that are just going to start to come online. And then it's going to kind of catch up to the number of investors that are out there who have the money.

Seth: Now in one of these syndications, at what point in the process does your work stop? Is there ever a point when you pull out and you're like, “Okay, I'm done”? Or are you just staying with the thing until it's resolved someday?

Julie Lam: Yeah. Yeah, once you're in it, I mean like, well for us, like Annie had mentioned, a lot of the work that we do is the education and so a lot of our work actually happens before even have a deal. It's like educating the investors, making sure they know what they're getting into, us hopping on multiple phone calls with them to get to know them so that we understand what their investing goals are. And then once they actually invest in a deal, that's when a lot of the work for both of us, the investor and for us, the big part of it, there's not too many. That doesn't mean we don't do anything, but it just means like the bulk of the work for both of us has really come to an end. And then after that it's the investor collects their distributions and then after that we're involved in the asset management piece. And so, we still have work that's ongoing for the life of the deal. But I would say the bulk of what we do at Goodegg is really before we even have a deal. And that it’s always ongoing.

Seth: I gotcha. Is there a minimum amount that each of your investors has to commit to one of these deals if they want to participate? Or is it like, “Hey, I got $50 in here, can I be part of this?”

Julie Lam: $50? Come hit us up.

Annie Dickerson: Write a check out to Annie Dickerson, mail it right to me.

Julie Lam: No, the minimum is $50,000. It may vary. Sometimes we can go lower, it just depends on the opportunity. But I would say generally speaking, industry-wide, like $50,000 is kind of the minimum. And you'll see other sponsors who have done like a ton of deals, and maybe doing much larger deals where the capital raises much higher than the minimum will be a little bit higher. Probably double that at a 100k.

Annie Dickerson: But at a 50k minimum you can imagine, these types of investments aren't right for everyone, which is why we take so much time to educate the investors, make sure they understand the risks, and that we know what their investing goals are going in. Because if you only have $50,000 to your name or you have less than $50,000, people have come to us and asked us if they should take out a loan to invest in a syndication to which we say, no, no runaway, no, no, no, go save up some more money or invest in some other types of real estate or other assets first. So, it's not the perfect fit for everyone. Syndications are really a great fit for people who have built up quite a bit of capital and are ready to put that to work in a passive way.

Seth: Is there like a certain return a person could reasonably expect for putting $50,000 bucks in?

Julie Lam: It's roughly about 7.5% right now. Three years ago, four years ago, you were looking at a 10% return cash, on cash return and now it's probably about 7.5% return. But I think that over the course of the next couple of years, six months, a couple of years, that number, I think we'll see, maybe start to creep back up as those really good deals start to come online. But as of right now you're probably looking at 7.5% with somewhere around like a 15% internal rate of return or like about a 16% annualized return after you include the equity on the backend when we sell.

Seth: Is it typically get resold like within five years or something or what's the turnaround time?

Julie Lam: Yeah, it's typically, I would say somewhere between the first and fifth year something could happen. And the reason is that most of the value-add renovations that we do is completed within that first year to year and a half. And once you've completed those renovations, you've increased the rental incomes across 300 units. Now your property is valued differently because commercial properties are valued differently from single-family homes. It's valued on the amount of money it can produce.

Once you've increased those rents across 300 units, now a property that you bought for $15 million is maybe worth $25 million. You can either do one of two things. You can take it to a bank and do a refinance or add a supplemental loan or you can just exit the property and sell. And I would say traditionally speaking, you usually see one of those two scenarios happen about 50% of the properties that we've done and that we've seen in the industry.

As we move forward, I don't know how likely it would be that we would do a refinance or a supplemental just because we're not on this upward trend as we were in the years before.

Jaren: I wanted to ask you guys kind of some selfish questions because I actually saw Annie at The Best Ever conference, and I've been on, I don’t know, three to six-month pursuit of really trying to wrap my head around the syndication game. And I've had conversations with syndicators that looked me dead in the eye and say, “Never buy a property that is less than 80 units, it's a stupid idea. Don't do it. You can get better financing, the deals are better, blah, blah, blah”. They tell me, “I'm dead in the face”. However, I still can't figure out the barrier to entry. Specifically, on the deal side, putting on the acquisition hat, right? Whereas if I look at like 10-15-25 units, especially being in Northwest Indiana, there is places I can do a direct mail campaign and I can find mom and pop owners and really capitalize on my skill sets coming from wholesaling and land and I can leverage some of that stuff.

I understand that you're not going to get the most optimal financing that non-recourse loan stuff, but I don't even know if I really care about that. So, I want to ask you guys, especially since the majority of our audience, like when they hear syndications, it's kind of like this high-level ether that they don't understand it. It's confusing and the way the human mind works when they're confused, they just don't trust it. What I like about you guys is you're very down to Earth, very approachable. So, I'm really excited to get your feedback on it. So first off, would you say that if somebody really wanted to get on the active side of syndications that they should go after larger stuff? Let's start there.

Julie Lam: I would say no. That would be my answer is I would say no. You don't have to. I've heard many people who are standing on stages right now talk about that their first deal was like a 10 unit or a 30 unit. I mean those people are telling you that maybe in hindsight saying like, “God, I wish I just went straight for it” and there's some truth in that too. But if your comfort level is not there and your know-how isn't there yet and you're not ready to do that, I don't see any reason why you couldn't go out and do a smaller deal.

Because those smaller deals are the ones that can take you to those bigger deals. It's like you read all over Bigger Pockets, you hear it on podcasts, right? -  I bought a 15 unit and then I flipped it around and made the renovations, sold it and took the equity maybe a million or more, and moved up to a 40 unit. Took the 40 unit, did the same thing, rinse and repeat, took that up to an 80 unit, and so on and so forth.

So that's my opinion. I don't think there's anything wrong at all with starting smaller if that's where your comfort level is. Now, I don't know if that it makes a ton of sense for somebody, a big syndicator who's done traditionally 200 to 300 units to shift their focus and go to smaller deals because they already have all the pieces in place and they already have the connections. They have the know-how, that's their specialty. So, I don't think it would make sense for that specific person to go backward and do a smaller deal.

And the reason they say “less than 80 units” is because property managers generally don't want to manage properties that are less than that because it's just a bunch of headaches for them really is what it is. And when they manage a property that's 200 or 300 units, then they make more money and it's less of a headache because it's more akin to like buying a business than it is to buy a smaller property that you have to, it's like a small business you have to run. So, I don't know. That's my take. Annie, what do you think?

Annie Dickerson: I totally agree. I think it really comes back to you and your investing goals and your comfort level because it's as a serious business. Once you get into this, there's like lots of paperwork you got to fill out. Especially if you're doing a syndication, there's not only the lender side, they're asking you for all your financials and they're looking through everything and you've got to fill out tons of paperwork, provide lots of evidence of your net worth and all of that stuff.

And then there's the legal paperwork. If you're doing a syndication to put together a PPM or a Private Placement Memorandum (aka - Offering Memorandum) that goes out to all your investors, that's a big cost on your end. And also, it's a lot of work to go through that. If you're not comfortable doing the bigger deals and you want to start smaller and you feel more comfortable, do that.

Look at this, I started with the duplex and that was my first deal. I didn't go from a duplex to a 100 unit. I went from a duplex then to a fourplex. And fourplex to an eightplex. And then once I figured out how this all works and I took some courses on syndication, that's when I jumped into the deep end. But it certainly wasn't like a “jump all in” all from the start.

Jaren: Well, I really appreciate you guys, your guys' take on that. I did have just a clarifying question about property management for Julie. I know that there are mom and pop property management companies that do duplexes and triplexes and quadplexes. Like when I was a wholesaler in Indianapolis, our work for a large wholesale operation, I would connect people to really good property management companies that did small stuff a lot. One of them explicitly did not do anything more than a single-family home. They only wanted single-family houses. When you say, property managers don't like to do things underneath 80 units, I'm assuming that's like the professional, like high-level kind of guys. But is it possible to find one of these smaller guys that do a good job?

Julie Lam: It's possible to find them but do a good job part? I don't think so. I think that's the tough part. It’s that there are very few people to choose from. And the ones that are out there I've heard are not the best, which is why a lot of people go into this and they try to vertically integrate everything and they just do the property management themselves because it's very difficult to find a good property manager who will essentially work hard and work for less is kind of what you're looking at. Is it out there? Is it available? Yeah. Is it harder to find? I think so.

Jaren: Okay, well that helps clarify it. One of the things I wanted to ask you guys before we move on is the exit strategy for syndicators. Because most people when they're in the syndication game, it seems like the goal is to essentially flip an apartment building. Very similar to flipping a house, except instead of it being a single-family house, you're taking five to eight years or however long it is to increase the income, which increases the value so that you can either refinance or sell. What if your goal is to hold? Would it not make sense? As a syndicator when you make these big paychecks from the back end, when you sell and you make the equity, do you just continue to do more flip-type deals or do you guys save the money to actually hold some, like a hundred units or something like save up and hold that 100 unit that is just going to be shared between Julie and Annie for kingdom come.

Julie Lam: Yeah. There are different operators out there who have different approaches. And for some of them, their approach is to buy it and hold it with their investors for a long because it's a great cash-flowing asset and why not? I think for us and a lot of our investors, our approach is more that we want to grow our wealth as quickly as possible with the least amount of risk. The way for us to do that is to do these sorts of what you just said, these longer-term flips and apartments and that's essentially what we're doing. When you have an apartment and you increase the value and you hold it for an exponentially long amount of time, there's a ton of equity that gets trapped in that building that you can get it out if you were to do a refi or you did a supplemental, but there's still a good chunk that's left in there that you can't get out. Usually 25%, 30% that you can't get out.

The scenario, like what I was talking about earlier, where you're taking one and then you're buying double the number. That's been our approach is we want to grow our money as quickly as we possibly can. And when you “buy and hold”, you're not able to scale is essentially what it is. You can still buy and buy a few more, but not like you could when you exit a deal completely and you 1031 exchange it because that is something you can do. It’s 1031 from one apartment to another. Oh my gosh, the equity that was in that first building that you've now scaled up to this next one is huge. And so, it allows you to scale faster, but there are a number of operators out there who just do the “buy and hold”.

And I think as an investor you have to understand what your goals are as well. If your goal is just to get in and you don't want to scale as quickly and you're more comfortable just investing and letting it sit and you're not looking to kind of grow and scale and do more and more, then potentially that could be a good fit.

But that's always something really important that we talk about with our investors too, is really getting to know yourself as an investor and what you want. Because if you don't know what you want and you just think syndications are a great deal and you get into one that isn't a good fit, that maybe isn't doing the refi and you're like, “Man, I've been in this deal for seven years and all I've been getting is $600 a month”. I think knowing on the onset, really asking yourself who you are and what you want out of your investments and what you expect out of them, is really the key to finding and feeling like you being successful in syndications.

Annie Dickerson: I want to add on real quick because Julie, what you said there is so important. I want to go back to it real quick. The return on investment, the ROI versus the return on equity. I think this applies, whether you're a passive investor in a syndication or you're investing in rental properties, it applies across the board. I think what most people focus on when they invest is, they focus on the ROI, the return on your original investment.

So, let's say I put $100,000 in and I have an 8% return. So, I'm getting $8,000 every year in cash flow, let's say. So, okay, we're going along 8%. I'm like 8% that's pretty good. And a few years go by, I renovate the property. Now the property is worth. Now maybe if I were to sell it right now, maybe I'd have an additional, let's say $50,000 in equity. Now my return on equity plus my original investment is now not $100,000. It's $150,000. When you think about having $150,000 in the deal, suddenly $8,000 a year, that's not as big of a return. I think that's what people have to stay on top of. Whether you're a rental property investor or you're a passive investor in a syndication, you have to stay on top of that return on equity, not just the return on your initial investment.

Jaren: One major question there before we move on. I really like what you said, but I was watching your guys’ video earlier, your promo video on your website. It seems like the goal for you guys is not necessarily how much money you have in the bank, but time. You guys really value time as a core value, which I totally resonate with. Would it make more sense if the ultimate goal is not to be a mega-millionaire but to live a lifestyle like the four-hour workweek where time is truly the biggest commodity that you are going after? Would it not make more sense to just instead of continuing to grow your nest egg, just taking what you have, buying it and building a lifestyle around, I don't know, let's say, if you had a portfolio of 125 units, you could easily make it $200 a door, a $25,000 a month. And maybe that's not enough, depending on where you live.

But maybe let's say, you build it up to where you're making $30,000 or $50,000 a month. And then you build your life around that and you're done. At what point do you stop growing perpetually just because that's what everybody's telling you to do and it's like enough for you to be like, Alright, I don't need to sell this thing because I don't care about the equity. I just care about the cash flow”. And how do you determine that?

Julie Lam: I think that's what Annie kind of had touched on earlier is who these investments are right for. And I think that these investments are not a good fit for somebody who has less than half a million dollars in net worth. It's really made more for somebody who's got a million or more in net worth and they've hundreds of thousands of dollars lying around that they could essentially put into the deals that will generate enough cash flow to start to really make a dent.

Because when you think about 7.5%, 8% annually every year, $100,000, $8,000 a year, you'd have to invest a pretty significant amount to even replace to get to not $25,000 but even $8,000 to $10,000 a month. These types of investments I think are a good fit for those folks who have a little bit more cash kind of lying around. Annie, did you have something to add to that?

Annie Dickerson: Well, I was going to add, the other part of it is they need the cash, but they also are people who want to be passive. Often our investors are busy doctors, attorneys, engineers, nurses, teachers. There are people who have busy jobs, busy lives. Oftentimes they love what they do, so they don't want to quit their jobs. They also don't want to be full-time real estate investors. They don't love real estate. They just love what real estate can do for them. And so, they really just want to be passive.

Yes, there are people who absolutely should go and just focus on lifestyle, build up a portfolio of a hundred units or so and then call it quits and live on the beach if they want. But for most of our investors, that's not the case.

Seth: I know a big part of apartment investing is buying and improving a property. Buying it with the expectation that somehow, you'll be able to make the value go up. And given what's happening in the world with Covid-19, do you have any thoughts on how this might impact the value of real estate for these particular types of properties? Have you seen Mr. Rent Payments since this all started happening? What do you think is this going to go?

Julie Lam: I don't know. I don't think that much is actually going to impact the multifamily space immediately. It's kind of like what I said before. I think a lot of this is going to start to become apparent. The long-term effect is going to start to become apparent somewhere in the 6 to 12 months at the earliest. Just because there's so much money that's coming in to people right now, stimulus checks and whatnot, that everyone's so concerned right now with April and May rents. And I just don't think that that's the real concern because I think there's so much money. Either people have savings or they've gotten stimulus money. In some cases, they're getting stimulus money that's more than they were even making at their job. So, in a lot of cases, people are actually better off right now in April and May.

I think the truth of all of this is going to start to become more apparent here in 6 to 12 months. Stimulus money has stopped and now people have to go actually go back to work to earn less than they were getting when they were not working. So, I think that we're going to start to see the impact of this here in the next 6 to 12 months.

But right now, we haven't really seen too much. A lot of the operators are doing something where they kind of hold on to the distribution checks that they may have otherwise put out. But that's mainly just in the best interest of the investment just to make sure that in case things start to go wrong down the road, that we're not then in a situation. And so, you do see a lot of operators doing that. But otherwise, April and May's rents are projected to be… April was fine. I think overall multifamily saw like 70% - 75% payment. I think across a lot of our properties, Annie, correct me if I'm wrong, but we were somewhere in the low 90s. Few percents off from what we typically do. Yeah, it's not bad. And May is projected to be the same.

Annie Dickerson: And I think part of the reason for that is that we focus on B class assets. Commercial properties are graded from A to D. With A being the luxury tier and D being sort of the riff-raff. We focus on B class because it always does well. In good times people from C class tend to move up. They get their raises and they get a little more cash in the bank. They move up to B class a little bit nicer. And in not so good times, then the A-class, they might need to move down to B class. But the one thing that's ongoing throughout human history is it turns out that people like to live indoors. So, I think regardless of what happens with Covid-19 I think there will always be a strong demand for housing.

Seth: Well, Annie and Julie, we appreciate very much you taking the time to sit down and tackle this. If people want to find out more about both of you and what you do, maybe they want to get involved with something like this, where could they go to find out more?

Annie Dickerson: The best place to go is our website, goodegginvestments.com. And we have something for both passive investors as well as active syndicators. If you're on the passive side, especially if you're just starting out, we have a passive real estate investing one on one, free email course that you can sign up for. And then if you're on the active side and you want to learn how to do what we do, we will show you, we will give you everything that we've built in our business through our course called The Real Estate Accelerator, which you can also find on our website.

Seth: Awesome. Thanks again, we appreciate it very much. I hope the listeners out there got something out of us. I know I definitely did. We'll be sure to link to all that stuff in the show notes for this episode. And by the way, this is episode 71. So, retipster.com/71.

Seth: That was a pretty cool conversation. What was your biggest takeaway, Jaren?

Jaren: I really like their style. We've talked to a handful of syndication people recently on the podcast and so far, I just really resonated with their vibe. They really actually seem to just want to legitimately help people. I really liked how they were like, “Hey man, depending on your goals, apartment syndications might not be your thing”. And I love that honesty. I feel like that's something that if I was interviewing Seth Williams, he would totally say. You can just be honest. Not to knock anybody that we've talked to in the past, because they've all been great and awesome. But people that I've spoken to off-air before, if you come against like their stick, the thing that makes them, them. Like “I'm an apartment syndicator no matter what. No, no, no, no, no. My strategy is the best one ever”. So, I just appreciated their humility.

Seth: Yeah. No, it seems like it's kind of a hard thing to mentally separate in one's mind because obviously if it just shows one thing, you're going to believe in it and you can have no reason to downplay it or say it's not the right thing. But at the same time, I think a wise person would understand and acknowledge that not everybody is built the same. Some people are better equipped to do other things and have different interests so they got make room for that table. That was good to talk to people that seem to understand that.

Well, Jaren let's do our little outro question. The question that we are going to answer today is, “What is the most beautiful drive you have ever taken?” Be as descriptive as possible. What comes to mind for you?

Jaren: But I don't know if it's going to be descriptive, but when I moved from the San Francisco Bay Area to Indianapolis, Indiana a number of years back. Now I'm in Northwest Indiana, right outside of Chicago, but I lived in Indianapolis for about three and a half years, I think. That drive, we went through Nevada and Utah and then Colorado. Utah was one of the most incredible landscapes. It's just weird out there, man. The sand is different colored. So, it's just gorgeous. I can't even describe it. It's like you're on a different planet. And Colorado, some parts in Colorado are literally just nothing but postcards everywhere. Like you could be the worst photographer in the world and you're going to get an epic shot no matter what. You're just going to do like this. Like, “Oh, man, Colorado”.

Now I hear that there's a part of Colorado that's like really lame people tell me. But the parts that I've been to, even visiting Lucas Hall awhile back who lives right outside of Denver and up in the mountains, I mean it's just like… I remember we were driving and we just go up this hill and it's just like this epic sunrise. There's just this blue sky and like this, oh, man… So far in my life, I have really, really enjoyed that part of the country. That Colorado kind of deserty kind of mountainous vibe.

Seth: Yeah, I know. I think especially being from Michigan, there is not a mountain anywhere within several hours' drive of where I live. If I just see like a slight change in elevation, like a slight hill up or down, I'm like, “Whoa, cool”. Yeah, when you have to go to a place like Colorado or Montana or any place that has mountains, it's like, I'm almost in a shock for the first hour or so that I'm there. I just can't believe what I'm seeing. So, I can see how that'd be pretty remarkable.

I think for me it's kind of a toss-up between two different places. One of them was the 17-mile drive that goes through Big Sur, California. That's an amazing drive. I'm sure anybody who's done that could agree with me. I think they shoot movies and commercials there all the time. It's just a very iconic looking landscape right by the water. And the other one would be going to the sun road in Glacier Park, Montana. There's not so much water there, but just driving through all these mountain ranges, it's amazing. Those are the ones for me. If I had to pick one man, I don't know, maybe Big Sur just because the ocean is right there. I don’t know. But they're both pretty awesome.

Jaren: Now, I do want to stand up for the Midwest because Northwest Indiana going into Michigan half the year, it's terrible. Like 60% of the year it's terrible. But around right now and going into the summer months, it's pretty special man. The overgrown grass and you hear the crickets and the birds. On a hot summer's day, it's pretty awesome here because it doesn't ever get super crazy hot or humid. I don't know about Michigan because I haven't spent as much time there but I'm assuming it's going to be similar because we're only a couple of hours from each other. But in Indiana, some of the best memories I have is having summer strolls in different parks and stuff, both in the Indianapolis area and then even here. This morning was a gorgeous day and me and my wife just decided to take our mother-in-law and my son and go for a stroll and it was just epic man. I think everywhere you go except maybe Kansas has something good to offer. I just like alienated half of our audience.

Seth: Wait, what made you single out Kansas of all places?

Jaren: Well, I have a friend that lives in Kansas. I lived in Kansas for about six months. And I think the border of Missouri is okay, like Kansas City, but it's super flat. But it's not only flat, but there's also just like nothing. Like there's just like no trees. It's just kind of like the dust bowl, like prairies of nothingness. I always make a joke that when God was spending too much time on Colorado and then when he got to Kansas, he's like, “Man, I just got to get this done”.

Seth: The one thing I remember of Kansas and Missouri, I guess when I was there, it was in July of like around 10 years ago. I could not believe a hot it was. My mind was blown. I had no idea it got that hot. I think it was like the humidity or something, but for some reason I expected it to be sort of like, I don’t know, maybe Indiana or something like that. But it was just insane. Like I walked outside and just couldn't even… It was like getting hit with a ton of bricks with how hot it was. So, that's what I remember the most.

Jaren: And if you are from Kansas, I'm sorry if I offended you. I did not mean. Maybe you think Kansas is beautiful and amazing. It's just not my cup of tea.

Seth: Well, deal listener, if you happen to be listening to this on your phone, do me a favor, pull that thing out. Text the word “FREE”. That's F-R-E-E to the number 33777 and you can stay up to date on everything we got going on with REtipster. We're not going to be sending you a bunch of text blasts. It's just a way to sign up for a list and get access to some things that not everybody gets. We get some really cool free and actually super valuable tools that you can't get unless you sign up. So, if you have any interest in that, be sure to check it out.

And again, this was episode 71 of the REtipster podcast. If you want to check out the show notes with links and transcripts and all this stuff, you can get that at retipster.com/71 and you'll find all that there.

So, thanks again everybody for tuning in. I hope you're doing well in business and life. I hope you're staying safe and healthy. We'll talk to you again in the next episode!