Accelerated Real Estate Investor with Josh Cantwell
Aired: August 24, 2021
It was a pleasure to join Josh Cantwell from the Accelerated Real Estate Investor podcast. We dig into the reasons I became registered with FINRA and why working with a Broker Dealer is important. Add this podcast to your playlist!
Transcription:
Josh: [00:00:00] So you guys, welcome back to accelerated real estate investor with Josh Cantwell. So excited to be with you. I just want to say thanks to a number of our members who have watched those ratings and reviews lately. We've had a number of new ones come in, and I really appreciate that. And our viewership and listener group has been growing and expanding each and every week. So I just want to tell you how grateful I am to be able to share this information. Sure. Great strategies, all for free through our YouTube channel and our podcasting channel. It just means so much to me. I've been able to meet so many amazing people, both active operators, investors, passive investors, coaching students, vendors, third party lenders, title companies all through this podcast. So if you don't have a platform, if you don't have a thought leadership platform, you need one. It is definitely working for me. So I appreciate that. Listen, today, I have a fantastic interview for you. The gentleman that I'm interviewing, his name is Spencer Hilligoss. Spencer is the founder and CEO of Madison Investing. Spencer is a passive real estate investor, a co-sponsor of multifamily deals and a former technology leader. His company, Madison Investing, has co-sponsored deals totaling more than five thousand units for more than 600 million dollars. He invest in syndications as a limited partner and then also uses his platform, which is called Madison Investing, to bring other passive investors along with him to invest in multifamily syndications. He formerly worked at Lending Home, where he achieved over four billion dollars in origination, working for Lending Home and funding over six hundred fixed and flip transactions per month. It's pretty, pretty wild and amazing. So here's how it works with Spencer, and we're going to talk about in this interview. He helps busy professionals like you generate passive income. This is made possible by directly investing in commercial real estate projects, primarily multifamily, with their teams of co-sponsors and co-syndicators that are embedded in local markets. So they essentially partner with operators in local markets and they help them stand up all of their funding.
Josh: [00:02:29] These are opportunities that typically pay out monthly or quarterly distributions. And Spencer basically works to consistently be finding and vetting out deals and finding and vetting out operators. So if you're an active operator looking for additional ways to grow your investor base, you're going to learn a lot from this interview. If you are a passive investor and you're looking to invest in multifamily projects and you're looking for deal flow, you're going to love this interview with Spencer Hilligoss. I'm super excited to have him on. So here we go.
Announcer: [00:03:05] Welcome to the Accelerated Investor podcast with Josh Cantwell. If you're looking to retire early, with forever passive income. You're in the right place. This podcast is the go to destination for real estate investors, both active and passive, and multi-family apartment investors, both new, intermediate and advanced. Now, sit back, listen, learn and accelerate your business, your life and your investing with the Accelerated Investor podcast.
Josh: [00:03:45] So, hey, Spencer, listen, I'm so excited to have you on the show, so excited to learn more about your business. Thank you so much for joining me today on accelerated real estate investor.
Spencer: [00:03:54] Yeah. Josh, honored to be here. This is a wonderful way to spend a Friday. So thank you so much.
Josh: [00:03:58] Absolutely. Thanks for carving out some time. And now listen, I know that you and I have a lot in common raising a lot of money. Got a lot of multifamily investments. Eight thousand units that you've invested in with yourself and your Team and your limited partners. But what I'd love to hear is something that you're working on right now, like a deal that you might be underwriting today or next week or a property that you're touring or an operator that you're interviewing. What is something that you're working on right now that you're passionate about that kind of gets you going?
Spencer: [00:04:24] Yeah, you know, I think I'm a framework guy. We were joking about this before we kicked off a little bit. Just I love a good framework. I think it makes great decision making, really clear, and particularly when you got make big decisions quickly. So we are working on, you know, an awesome single asset deal. It's actually one that I can probably back to Florida. You know, I was a little bit, you know, not looking super closely at that market for a while just because we didn't really know where Covid was headed in the big picture last year. But I would say that what allowed me to get clarity in a very busy market, I mean, who could have thought the 2021 was going to be as as packed with deal flow as we're seeing right now? It's a very competitive market. A lot of people going out to these properties. But the thing that brings me clarity, I would say, and also I educate people that I connect with, whether they're investors with us or just other people looking to learn about this space that I have a passion for. I think of of what kind of a five point framework that I look at, you know, and I didn't come up with every single one of these buckets. I just put them together in a way that made sense for us. And so with all of the many people that are out there trying to figure out, like who are the right partners to work with and trying to pass along this education to other people to say like you've got to look at people's track record, you've got to look at things like even frankly, like their values.
Spencer: [00:05:32] Like I'm one of those guys who actually talks about values, like being values, talking about communications, the team dynamic, talking about their their approach. When you're talking about investing capital as a passive investor in particular right now, which is in growing popularity, and we have people reaching out to us saying like, how do you decide who, who and where and what to invest in? Frameworks matter. You know, and I kind of pick that up from my technology career and my startup world, which is like great decisions are typically not made quickly. Big, great decisions are made slowly usually. But but you have to be able to move quickly in this business, particularly if you want to pull the trigger on something. So that is what I'm excited about right now, is because we're able to review enough deals, we're able to talk to enough partners and like build relationships over time because of like a five hour framework that we put together. And it's kind of getting battle tested just because we feel like we're having to look at a lot of deals to find a good one.
Josh: [00:06:20] Nice. So you're putting this five part process into play on deals all the time, vetting through deals. So why don't we go there? Why don't we talk about this five part process that you're using? And before we jump into that, though, Spencer, tell me a little bit more about your kind of money making strategy. Like what do you guys do exactly, in your words? I already kicked this off with the introduction, but what do you do, in your words? I know that you guys raise a lot of money. You've got involved a bunch of deals. You're underwriting deals, but you come from the technology world where you invest more of is a limited partner. So help me understand the role that you play kind of in the capital stack and how your business models built.
Spencer: [00:06:59] Yeah, happy to. And I am the guy who is 100 percent open book transparent on everything that we do. It's always been a core value of mine for my corporate world. And we carried that through to Madison Investing because the company that I run now, my co-founder and CEO of Jennifer, who is also my wife.
Spencer: [00:07:13] So right now what we do is we connect investors to some of the strongest cash flowing multifamily storage assets across the country. So like limited partners, and we co-invest with them. In fact, I would say our number one responsibility, if you're a passive investor, I mean, you're betting on the jockey just to use the very common platitude that you're betting on the asset manager. And so we connect investors to go find these people. We invest along with them. Before we even do that. We put our own money into them as LPs first, and then we get to know them over a period of time. So it's our job to go out and find out who are the right people to work with. If you're going to go invest a sizable amount of capital into these opportunities, and then when an opportunity comes, we've vet that. You know, we look at the market, we decide, is this a market, is this a submarket? Is this a neighborhood that is worth taking the investment risk? Right. And risk adjusted returns are a very distinct thing.
Josh: [00:08:04] Right.
Spencer: [00:08:05] There's lots of returns out there on paper, risk adjusted returns for what we are actually seeking. I think particularly in the current market context. And so that is what we do. That is what I do. And it's not just me solo doing this. I mean, there's a team around us as well. So my very specific role has evolved. I mean, in the last two years, to be specific, Josh, so I previously have been a co-sponsor or Co-GP, taking on a handful of different roles within a bunch of big apartment deals and some storage deals. So, you know, pulling together capital investor relations. Sure. Also literally flying out and being a walking property properties, being part of the asset management team on these deals. Now, over time, we decided, you know what, we want to be able to do this more frequently. We want to be able to connect into a broader audience and help more people do this. So we took the additional step and I also became a registered representative with FINRA. So now I'm also a co-GP and a placement agent. And that means everything that I do very much on the grid. You know, that means like all my emails, like completely transparently tracked and all that stuff that comes along with being a registered representative. And if some people are like, what the heck are you talking about, man?
Josh: [00:09:08] Yeah.
Spencer: [00:09:08] Which is probably fairly common. A lot of folks out there that might be more familiar with that from like the stock investing world, that just basically means that all the transactions that we work on, we share them to our investors. And we often invest in them at the same time because because we believe in the deal. And it also just means that I have to get through a few extra approvals and there's a little bit more paperwork involved. And so that's all in service of being transparent and doing things the right way. You know, I very much strive to live in the black, in the white in terms of doing things the right way. And I think that that's how we try to scale this businesses, you know, bring connecting investors with deals and doing things the right way.
Josh: [00:09:44] That sounds great. So let's peel back the onion a little bit more on that. So I'd love it. I'd love to hear that you've taken the step to be a registered representative. I was a financial advisor in my early days and early 20s, series six licensed, 63, 65, sold financial plans, worked with clients, but worked for a big brokerage firm, was kind of under the met life with our broker dealer. Their banner basically did everything except for stocks. And you had to kind of sell what the brokerage approved. Right. So Register Representative is different because now under FINRA, you're able to represent the deal that's coming in, the operator, work with the passive investor, be the registered representative that connects the dots very legally. Whether it's fees or equity or whatever for doing so, investing your own money into the deal.
Josh: [00:10:36] I know there's a lot of guys out there that quote unquote, co-syndicate, co-sponsor. And a lot of times they're just raising money for a deal that needs money raised. And they're not necessarily supposed to be doing that and getting a quote unquote commission for it. So I'd love to hear that you've taken the extra step to be a registered representative. So before we get into this other conversation, just talk to that for a minute about what you're seeing in the market and some of the dangers of just being like a capital raiser, taking equity in a deal. You know, that kind of is very much in the gray area, according the law with the SEC. Talk to that for a quick sec.
Spencer: [00:11:12] Yeah, helping to you know, and I can only really speak for myself. You know, I came from a background where I was deep into start tech startups that were doing relatively dry things, but solving key problems that some people are like, oh, well, that sounds important, but I don't know how interesting that is. We're talking about things like payroll software for small businesses. I started my career Intuit, you know, where we are doing tax and financial stuff there. And later on, I led the origination groups Lending Home, which is the biggest flip lender in the country. And that's relevant to the question, Josh, because I find it very familiar to go through formality and process. And I think that doing that that process, doing things by the book, I think that things that are arguably probably the number one theme that I would say is most important for folks who are interacting with investors in this in this private placement, private real estate deal space, is the notion of disclosure. And I think disclosure is just key. And that means like if I'm an investor and I mean, this as an LP too because like like we just wired funds just literally yesterday into another deal, we're purely investing in his LPs because it's a great looking deal. I even have to disclose that. Like I have to disclose when I'm just investing, And you already know all this stuff Josh, but I just want to make sure that the audience understands it.
Josh: [00:12:24] Yes, please.
Spencer: [00:12:24] Like, you know, like I had to get my fingers fingerprinted into the FBI database. You have to have all your emails, literally tracks and occasionally audited like all these things. I'm 100 percent comfortable being in that environment because really we're doing things the right way.
Josh: [00:12:39] Right.
Spencer: [00:12:39] So I think that when it comes to disclosure of risks in deals, this is a space where you can go so far in depth. You can helicopter pilot down all the way from at the high level. An investor reads an investment memorandum that they say, wow, this summary, this deal looks incredible. I like the market, I like the property, I like the team. I understand half of that. And so, yeah, that's around where I want to make sure that our investors and the folks that we work with and the people listening understand that's probably not enough. I think I think the average person would really benefit from hearing more, understanding more, even if that means a little bit more conversation, even if that means a lot more depth. And then certainly stuff said in writing about what are the real risks included. Right. There's a lot of exuberance in this market. Yeah. I mean, it's incredible. I mean, we're on, some Economists might debate this, but I think we are still in the longest single bull run ever if you don't count 2020.
Josh: [00:13:32] Yeah.
Spencer: [00:13:32] In the markets. Some people say that doesn't count, but I would argue it does. Longest bull market ever. And as a result, some folks are literally only expecting things to go up. Yeah. So how do you go and educate? Without me just being the curmudgeon in saying, you know what? Yes, I believe in multifamily, just there's killer opportunities to be found out there. That said, read this and understand this list of key reasons why. Do you know what a non or illiquid investment means?
Josh: [00:14:00] Yeah. You know, interest rate risk, inflation risk re5 risk CapEx risk operator risk like. There's a lot of risks, right. To me, the biggest risk is if you're doing a value add deal. It's the CapEx risk. And typically on a CapEx value add deal. It depends on what your exit strategy is. We like to refi and keep. So that's the two main risks that go together. CapEx risk, meaning hiring the right general contractor, executing the business plan, turning the units in a timely way, sealing striping driveways, doing landscape like literally the roofs, the hard CapEx items, and making sure they're done on time and on budget. We have a VP of construction that's got 30 years of commercial construction experience, 50 million dollar budgets. We were happy to steal him. And he does that for us. And we feel very confident in scope's that we've put together. But then there's the refi risk of, OK, well, even look like right now, we've got a deal. We've been going into this refi for four months. Fannie Mae and Freddie Mac kicking it back and asking for more information because we bought the deal less than 24 months ago for nine point two.
Josh: [00:15:01] It just appraised for thirteen point five. We forced appreciate, you know, with a lot of value add. And now before Covid, they probably would have stamped that sucker and done the refi. It would have been done within 60 days. But with Covid, they're very like they're second guessing. So send me the financials for April. Send me the financials for May. You know, what's been the lease ups like? You know, all these extra things that to your point, Spencer, it's like a lot of limited partners don't know to ask these questions. So you there has to be like in your case register representative or a general partner that tells the limited partner, hey, these are the questions you should be asking that you don't even know to ask. These are the questions that you should be asking. Matter of fact, I go so far, Spencer, that when I need a new investor, whether I get referred or they register an investor portal or whatever that first call is all about that. Like I don't spend time talking about us or our deals. I don't even know if they're qualified to invest in our deals. I say look whether you invest with us or someone else. Here's the questions that you need to be asking that you don't even know to ask. Right. So whether you invest with me or someone else, write these down. Make sure, ask these every time. And guys like, Oh, great, that's great. And by doing that, you know, what have I done? Of course, I've earned their trust. Now there's a more likelihood that they'll invest with us.
Spencer: [00:16:11] Right.
Josh: [00:16:11] So I love to hear the fact that you're going on the same lines. I feel the same way. This is a long, long business, is a long game and infinite game and sort of take the extra steps. Not only is it help that customer or that investor, but they're probably invest more with you, invest more often if you take it slower at the beginning. Yes. Too many people are like desperate to close a deal or skipping over all the detail. So I'm sorry for that rant. I'm sure you can relate well.
Spencer: [00:16:36] And just to pile on very briefly, I will say we are seeing that reflected in our business growth, which is that, you know, I deliberately tell folks very similarly in some ways, the way you onboard investors when they reach out and say, hey, I'd like to join your passive investing program, can you send me the information on that deal that I found in your portal and I say I'm happy to, but I would prefer can we just have a call and get a get to know each other? I'd like to understand kind of what you're solving for first. Yeah, if I could send it to you. But honestly, I typically don't talk about the deal. I would rather have you ask me questions that you might consider taboo. You know, I want to have that person ask me. Think of things like how do you guys make money? You know, like like what is what is your incentive to be involved in this? Right. You know, like all of these are these are the most important questions that people could possibly ask me. So I want to be sure to double down on that.
Announcer: [00:17:22] Are you ready to automate and explode your real estate investing? We're searching for extremely motivated individuals who are sick and tired of wasting time and want to finally see real results from their real estate investing business. We're searching for investors looking to get to the next level and become a bigger, better version of themselves while being a more successful real estate investing entrepreneur. Apply for mentoring and coaching at JoshCantwellcoaching.com/podcast. That's Josh Cantwell coaching dot com forward slash podcast.
Josh: [00:18:03] Love it. Love it, Spencer, so talk for a brief second about why. And I asked this question. We kind of got away from it. I want to circle back to it and ask it again. Why did you become a registered representative when you knew that you were going to kind of co-syndicate deals, raise money when other people haven't gone that extra step? Why were you convinced that that was the extra registration, the extra designation that you should have?
Spencer: [00:18:26] Yeah, I mean, I think that if you look at the space from the past decade, roughly as a guy who was I mean and admittedly, I was in tech. I grew I grew up in a real estate household, which we can probably talk about in a second in a different lens. But I would just say I've been in the space for, you know, roughly in the syndication space specifically now for coming up on like, you know, four and a half, five years. And aside from residential, what other investing stuff? And so now all that said, you look at the span and the legislation and all the macro elements that allowed this space to thrive, like putting together apartment deals with other people's money with OPM and growing this space. I would argue it's actually still maturing and barely even reaching its full potential for what the market will look like in the five, five to 10 to 15 beyond years. And no one knows for sure what's going to what's going to come. I don't have a crystal ball.
Spencer: [00:19:13] I just see, You know, what? I believe deeply in doing things. But I what I declare and I don't have I don't you know, I'm going to get a lot of disclaimers here, but I'll just say I don't know what the right way really is. I know the way that I look at it and I look at doing things the right way is very, very black and white. You doing things in a transparent, openly disclosed, fully, fully business savvy, business informed way. And I think that that's just beginning in the market. Right. And I think the syndication space is really relatively immature in terms of its business growth. And so I think in five, 10 years, I think there's going to be a lot more people on this path and in their business model, and they're going to be wishing that they actually took the steps to go this path much earlier, because also we just worked on I mean, now we have the flexibility as well, if we want to, to go work on other things. Examples would be we partnered on three separate funds in January and we've been working those funds are still working in some cases. I have been a co-GP in some of these and some of these other partnerships in the past. But now I'm able, if it makes sense, to just partner purely as a placement agent, still investing our own money into the deal, still working in some cases with investors that are repeat investors with us six to seven times over three years. And that model allows the flexibility to do it and to do it the right, what I deem is the right way. Nice. So I just want to give a couple of the benefits of it.
Josh: [00:20:33] Yeah, love it. So, Spencer, let's talk for a quick second about your day to day. I'm interested to hear as a day to day operator of your Madison investing business. I imagine there's two trains going down to separate tracks. One is finding deals, finding operators to invest with, and the other one is finding limited partners that register on your portal and getting to know them. And then you're trying to connect the two of them. So they arrive at the train station at the same exact time. So just describe what does that look like in your day to day operation? Like how are you sourcing deals? How are you finding operators? How are you finding limited partners? And what do you do to kind of bring them together, meaning vetting each one of them out simultaneously? Give us some color about what that looks like.
Spencer: [00:21:21] By the way, I think I love a good vehicle analogy. Yeah. So that's I think that that resonates with me as a guy who's done that quite a bit for building rocket ships or flying them in the startup, you know? Yeah. Sure. And so I think very different speeds on those two trains. And I would say the speed of sponsor when we're building relationships with these awesome asset managers, and then there's more and more coming out every day. Right. Because there's an enthusiasm for the space. And that's awesome. However, when we first started, you know, you're you're going out there, you're building your name. And I came in with like an upbringing in real estate growing up in that household and then also being part of the single family world in a very, very significant way that built an origination group that had four billion dollars in loans and all that stuff and becoming into commercial. You first go out and you're like, hey, please take me seriously. Asset manager, that has thousands of units. Yeah. You know, and and eventually that dynamic shifted. Right. And now we're very blessed to be reached out to be a primarily, you know, introduction and referral and otherwise from from sponsors that are interested in partnering either on a deal. But usually we're not interested in like we literally will not jump into a deal no matter how good that it looks. We have passed on probably maybe a dozen to two dozen deals just in the last six months. That looked great. We had never invested in that sponsor before personally, and I had not gotten to know them over time. So we wanted to just simply say, let's start the relationship and start talking. I would love to get to know you better. Yeah. And and then we'll we're going to earmark some of our own personal capital before we actually get to know you. We'll invest in one of your deals and then let's just get to know each other over time. And so that train, it's a slow the world. It's a protection against shiny object syndrome. It's to make sure that we understand how does this asset management group actually communicate? Are they operating with modern professionalism standards? But, you know, did did they know how to, you know, text messaging, email, MailChimp works, all the all these different things? And I just found, in addition to can they asset manage, can they go out and actually do what they say that they do? Do they have this track record? And frankly, there's I think one of the biggest learning lessons that maybe we can revisit later is style, style of communication fit. You know, just a bit of partnership. I think the best stuff matters a lot, because whether it's within a GP team or in, you have three, two or three guys worked with. If I'm joining a team or whatever the assemblage of that team is, you're in it for years. Sure. You got to make sure that everyone understands each other so that my day is comprised of, you know, building and deepening those relationships over time. It's not a high volume game, though. It's not like we're we're fielding thousands of of new sponsors.
Spencer: [00:24:00] And suddenly we take one out of the pack, one out of the pack. It's like, no, we have we have a sponsor roster. We've worked with them over multiple deals. We deliberately are saying maybe we'll add one or two that we'll start working with this year for this asset class. And that's the time scale that we're thinking about and working on, because that that's the business planning runs through us. What we've looked at our careers in the past and we've looked at this business as well. On the on the passive investor front, on the LP front, that we feel very grateful that, you know, we get a lot of inbound interest now and largely referral. I mean, like like our number one lead source right now is referral. Like I'm not out there trying to become the biggest face, the biggest name in the business, and no judgment to those people that are we're trying to do things a very deliberate way in a very intentional way. And that means I'm OK if it takes a little bit longer to get to know the right folks that we want to partner with, multi deal, multi year, multi decade, you know, relationships on the passive investor front,Because these are five to seven to 10 year hold periods. You know, I mean, we're talking about building long term relationships. And it's not about the deal. It's about it's about the five to 10 deals over time that helps this person prosper and hit the goals. And so anyways that was a very long soapbox.
Josh: [00:25:14] Yeah. No, but I think the message that I'm taking away is, look, you're making investments. I think the last thing you said, maybe the most important relative to how long you take to find an operator, how long you take to syndicate a deal, how long you take to make the relationships with limited partners, it's because you know how much even longer you're going to be in relationship with that person five, seven, 10 years. So if you take six months or 12 months to get comfortable with an operator and you're having multiple conversations with them and looking at some of their past deals, and maybe they pitched you a deal that you pass on and then you follow that deal to see if it ultimately is hitting its targets, even though you haven't invested in it, it's because you're in it for the long haul. One of the reasons why I love multifamily is one of the reasons I love apartments and Self-storage, residential assisted living, mobile home parks, these kind of investments, because they truly create and make wealth, but not tomorrow. Right. So buying the deal is probably the easiest part. So people talk about how difficult it is to find deals. Yes, it's difficult, but it's probably still the most easiest part of the process, because managing the asset, managing investors, sticking with it, having that constant long term infinite game mindset and then sticking with it, not making short term decisions just for short term profits for a win today. But it's got to be a win that makes sense for a huge group of people over the long haul. That's the message I took away from it. So hopefully our audience is learning from that, too. Spencer, let me pivot real quick into your start, right. So you guys, eight thousand units, eight hundred million dollars in assets that you've invested in and your Registered representative is kind of responsible for putting together. But you come from a tech background, right? You come from building tech platforms, even though you were in the lending space for private lending, still very different than syndication. How did you get started? Why did you pivot into this phase? And what were some of the early challenges?
Spencer: [00:27:04] Yeah, happy to speak to it. You know, I think I'm as even pre-tech for brief context for folks I shared earlier. I grew up in a real estate household. My dad was a broker over thirty years. Right. He was, you know, 30 year residential real estate broker. So I was working in that business in various ways that both as a young kid and then a teenager doing open houses. And I was going, well, my friends don't think this is very cool. So tech sounds really cool. If you live in the Bay Area, you know, join the tech companies. You know, it was real. It was a very simple tracked thought process. And so I got into tech companies, didn't know I was going to end up doing it for 13 years and largely spent that in the fintech space. And so that was interesting as a guy who wasn't inherently interested necessarily in like the finance world out the gates and, you know, ended up doing like Intuit, Xero, Gusto. You know, all these are companies that do relatively key back office problems for small businesses. And what I came on the other side of that thing realizing was like flash flash back a few years. I stumbled my way into Lending Home. A mentor of mine nudged me into this company because it was the right time for a sort of role, and I found out, wow, OK, so, you know, we're doing five hundred transactions a month, like single family flips. And we were lending on these deals, and I was the guy who was in charge of scaling their origination groups and stuff. And I'm seeing the success financially of these investors. And these are flips still. Right. I mean, these are one and done. You know, you always have to at some point on a podcast, get back to it, to the Kiyosaki comparison of like the pipe that the pipeline and the buckets. And in terms of income. So I was looking at these flip transactions going like, wow, folks are making a really good one, one time moment bucket of income on his first. That model does not jive with me personally. I'm much more of a predictability guy like I'm an operations guy. I like this. I like the notion of something that you could forecast with great predictability or some. And so I looked at that. I looked at the trajectory we were on personally. We had sizable 401k's, we had the index fund. We had all the bells and whistles personally and of a mainstream employee, successful kind of W2 corporate family. Sure. And the math was too compelling, you know, that the math. And also, frankly, I think that there's a push and a pull in every big decision in life. Right. And I think for me, the pull toward this world was also seeing that predictability, seeing if you can change an entire trajectory of someone's financial fortitude as long as you start pursuing stuff within within real estate. And also, I hadn't seen my son, my infant son at the time for like two weeks, because you when you work at tech companies, you work 80 to 100 hours in an office if it's an early stage, a series or B series company. So while it's the real deal and in terms of working and hustling, I still work hard now. But I would say the hours are a little bit truncated compared to that. And so I'm a little bit more flexible. So anyways, I quit my career in tech five months before the global pandemic hit. That was not obviously in the forecast, but we we thrived through it because of that very strategy. We had already started investing in real estate. You know, before we even found syndication, we found large assets, though, Josh.
Spencer: [00:30:07] I mean, we did go and stumble through the very predictable stages that a lot of people do. We did buy a local duplex in California. We did go buy a bunch of turnkeys in the Midwest. And that's and then we then we sold them later on. Sure. And there's nothing wrong with these strategies. And I'm much more of an and versus more investor personally. And I think that like great investing means you got to do a little bit of everything depending on your goals. But I had this done. We had to stumble through those stages and we had to go through those steps before we found these larger assets and all the wonderful benefits that come along with them. And now being able to apply some of those principles from the tech world, the frameworks and all that stuff, that's been critically helpful for us to make sure that we're making great decisions on behalf of and with our investors. Yeah. On the deals that we look at, because there's a lot of property out there and you have to look at a lot. And sometimes the framework is what keeps you from making a otherwise bad decision, because you're just like, you know what, all these 100 Boxes, all of them except for one is checked. But we just can't move forward because that one is not checked. Right?
Josh: [00:31:07] Right. I love it. I love it. Yes. Spending the time to be the underwrite at this point, like using Ptak, using tools and strategies because numbers never lie. Right. Numbers never lie. Where numbers could lie is in the prediction of the future, which nobody really knows. But there's the numbers today. The numbers today don't lie, because we know those are very relevant or very on demand. They're very timely. And we can get them right at our fingertips if we have the right tools or software to be able to get them and put them into spreadsheets or input them into sort of tech algorithm. It tells us if it's a good deal or not. The question then becomes is do we believe and you talk about risk adjusted return. Do we believe in the operator? That's something in the future that we have to try to predict with some reasonable confidence. We have to be able to predict rent growth if we invest excellent dollars in CapEx. What does that look like? Where can we add other income? Where can we reduce expenses? Now, this business plan has to come to life. Those are the unknowns. But the numbers today never lie. That will give us a story. Some deals look really good right now. Some deals were really terrible right now, but it's all about the future, right? Some of the the very best residential deals I ever did look horrible today.
Josh: [00:32:18] Some of the very best apartment deals I've ever done looked horrible when I bought them. But it was all about the future. Right. So Spencer, for you now that you've had this success and done all these deals and your co-syndicating, bringing people together, looking at a lot of deal flow, underwriting, a lot of deals done, a lot of limited partners. What advice would you give our audience or what advice would you give your kind of younger self on your entrepreneurial path? Like, would you go faster at a certain time? Go slower at a certain time? Did you make every decision exactly the way you should of and at the right time? What would you do differently? What is your story? Your journey told you to say, you know, if I could do this differently, I would or, you know, I did this right. So what advice would you give your younger former self? For our audience, from the stories and lessons that you've learned. Yeah.
Spencer: [00:33:05] Two points on that one. Probably the first would be as an entrepreneur. I would say analysis paralysis hits everybody a different way. For me, I read twenty four books, you know, 400 podcasts before I really went all in. And I was still kind of in side hustle while doing while doing very demanding career, starting to get involved in deals, but not really going all in and treating it like a business was still treating it like a part time exploratory hobby. Right. And I think that the earlier you can just break through and realize, like pay very close attention to why am I learning what I'm learning right now and I'm actually going to apply it to something else. And if because if you're not going to apply it, you're actually not moving forward. You're stalling.
Josh: [00:33:49] It's just entertainment. If you're just learning to entertain yourself.
Spencer: [00:33:52] Exactly right. And so that has to be number one. I mean, even just I would say, you know, 400 plus podcasts, I mean, high quality podcasts like this one, you have to make that part of your education journey. You know, if you're early on in the journey or even, you just need a refresher on core concepts and you want to hear like other people in the business, like Josh, like talking about the stuff. You have to do that, but then go do something with it. I mean, really the moment you take that action. I know Massive Action is a very catchy buzz phrase, and there's something to that. And I think that you have to put out your push periods. Massive action aimed without a strategy is relatively useless.
Josh: [00:34:26] Suicidal. Yeah. Like lots of action with no direction, lots of action without like some KPIs, some numbers, some goal to get, some framework to fit it into. I mean, I've seen guys go really fast right into the dumpster fire because they just didn't have like, what am I doing this for? So like, let's just go make a bunch of money. Yeah, not really. When I was much younger and a lot more immature,I used to do that, too, now. To me, massive action could be sitting and thinking. Yes. For like two, three, four hours about jotting down notes and writing up strategies and thinking through comparisons. Like one of the comparisons we're going through right now is, is three different third party property management companies versus our own property management company. So it's a four way horse race. And we're looking at this decision as a potentially a 10 year multi-million, I mean, tens of millions of dollars decision. You don't take massive action and just make that decision a week. Right. That's a decision you take massive action on. But it's super slow to make the decision. Right.
Spencer: [00:35:32] It's such a great example. And on the personal front, just to briefly add to this, I think we talked a little bit about massive action and making sure it's just deliberate action. Right. As like deliberate action taken is the first one. The second one on a personal front. And I'd say that I've gotten feedback from so many other folks that said that this was useful. Now I'm like, OK, I thought it was rudimentary and I thought it might just be wasting someone's time if I share it. But it was so meaningful to us, which is what are the goal setting moments. Right. If someone is getting early is early on in the journey, no matter which direction you're going to go running. We took the time to say this is the actual monthly dollar amount of income we are targeting as a lifestyle. And what else is that like? What is that income number? What is passive income? What is active income? This is not financial advice whatsoever. I'm just sharing literally what we did. But I would say that that is a very key element, because the hardworking, inspired folks that are out there that are, you know, signing up for coaching programs. I mean, as a guy who's gone through four, I'm not anti, but I'm also not not full bore jumping in doc drop in five digits of money into something you don't understand. You got to find what works for you. And I think before you go and do all that stuff, have you sat down with your spouse, your partner? If it's just you, that's going to be a very easy goal setting discussion. I mean, is figure out what what do you need? What do you want out of this stuff, man? You're going to go out and take all this action, because if it all doesn't tie back to that single most important KPI, and financially for us, it was a income monthly number. It's very tangible. It's very simple. And I think that that was a helpful and if not critical goal setting exercise for ourselves, because it keeps you honest. It just keeps on us. You know, if you can't tie all your activities back to that stuff, then maybe, maybe the activity you're looking at at that moment is not worthwhile.
Josh: [00:37:14] Yeah, I think that's great advice. And what kind of resonating with me is listening to you as I'm thinking about, like all the people that are like take massive action, but without goals, without a goal setting session first. And then the next thing that happens is shiny object syndrome, because they've taken so much action. Everything looks good. So they start doing everything and then they eventually get to the point where they're ripping their hair out because they probably may have started three or four or five businesses and none of which are making money. They're all bleeding cash. And they're like, why did this happen? Like, why am I? I took massive action. How come I'm not successful? It's because you missed what Spencer said at the beginning, which was the goal, setting action to make sure the goal that happens first. You take massive action that has to be in line. With the goal? Yes. Most people just take massive action and they're like, I. And then I hear you probably see this Spencer. People are like, well, I met this guy. They could be part of my business. And I met this person and they could fit in this role. And I met this person and they could be a great sponsor. That is shiny object syndrome, because they're just taking all these balls and shoving them onto the same court. But one could be a basketball, one could be a volleyball, one could be a golf ball. And none of them play well together. Yes. They don't even know what game they're playing because they never did a study session first.
Spencer: [00:38:29] Yeah. And it's not a I want to make sure it's clear for folks to how hard fought that this moment of clarity is and was for us, like two whole weekends. Jennifer is my co-founder and my wife. And then that's not for everybody. I'm not saying go out and vote just with your spouse, because that is a very distinct, separate podcast discussion. But like there were tears, there was reconciliation, there was laughter, there was all those cycles happen in the course of two weekends. That was a deliberate series of like, are we sure we want to go do this? And this is years ago now? Well, I think when people talk about goal setting and they said, cool, I wrote down my goal on a piece of paper. That ain't what I'm talking about. I'm talking about really wrestling with big questions about how the configuration of your work and your income is all set up. And that doesn't mean you have to do it in a vacuum either. I mean, I personally, by the way, I don't have my own coaching program. I'm not planning on starting my own coaching program. There are wonderful coaches that are out there that can help you if you want to if you need help with this stuff and tons of resources out there, even you do it. But I would just say that I wanted to make it clear for folks what we're talking about. It's not just pick the number and go. It's reflecting on it's reflecting on what it means. It's sort of like it's all of that stuff, because if you can't tie it back to that, no. Does it mean just as like you were hitting on in a wonderful way, Josh? Like why are you doing what you're doing?
Josh: [00:39:43] Yeah. Yeah. I got to tell this one quick story and then we're going to finish with our final five is one of our companies is called 950 Management. So it's one of our property management companies. And 950 management has a specific reason, 950 has a specific significance. We make on average about thirteen hundred and fifty dollars per year per unit that we own. That's after expenses. It's after debt service after limited partners. That's the net free cash flow. OK. Mm hmm. Thirteen hundred and fifty times 950 is one point two million dollars a year. So we started that company years ago under the premise of we need to buy 950 units to make thirteen hundred and fifty dollars per year per unit to make one point two million dollars. It was to make an extra hundred thousand dollars of net free cash flow per month. And all we talked about when we first started our company is how do we get 950 units? How do we get the benefits by really good, smart 950 units? Because it had a significance, it had a purpose and a mission. And then that one point two million dollars of net free cash flow was doing things personally for me and for my business partners. We knew what the significance of that was. Yes. That aligned us in that we're only going to buy these kind of deals, B-Class class areas, value add and these specific parts of the country, these specific cities, because it all ties back to 1950, which ties back to one point two million. So that's the type of stuff that Spencer and I are talking about that had a certain significance. It wasn't just, hey, I found this partner and this broker and this lender, and I hope this mishmash of stuff all works together. Yeah, it's the opposite. Right.
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Josh: [00:42:30] Spencer, this has been really fun. You're getting me thinking, I love the back and forth dialogue here. It's been fun. Let's finish Spencer with the final five. And again, you'll be able to find Spencer's information. You know, register on his investor portal. It's called MadisonInvesting.com And we'll put all of his Information links in the show notes as well. But the final five, Spencer, really quick. Let's jump in. You ready for these? The final five? Give me. All right. Number one, what's your favorite way to find deals or operators to invest in?
Spencer: [00:42:58] Yeah, I say for operators first, I'll just say the other people that we know in the business, referrals are a wonderful way to to find other operators in the business for deals from the operators. I serve the Bay Area, and so we rely on our partners that are based in these other markets. Once we align on the criteria, they find a deal. They send it to us. We take a look at it. We decide to put it to our vetting process. So that's that that's the way that we actually the first sponsors sponsorship deals. Nice.
Josh: [00:43:20] How about favorite ways to find capital, to invest in your own syndication or to find partners that invest alongside of you as a limited partner?
Spencer: [00:43:28] Yeah. You know, I'm going to sound like a broken record, but now our number one source of new investors is referral. And so happy investors is the best way to find more more investors. This is be a referral, I would say, secondarily to that going on. You know, I did focus heavily on places like LinkedIn. I don't think everyone needs to go out heavily and do social media across the board necessarily. But I leaned on heavily to doing things like like like LinkedIn. And I did that for I posted daily for years, and I'm getting back into it now. But there was like eight hundred thirty eight posts that just put the number the other day. And so it's that that was a great way to also connect with both new investors and also potential sponsors when we were first, like, building our brand and our our awareness.
Josh: [00:44:08] Nice. Love it. So what's your favorite place or favorite way to think
Spencer: [00:44:13] A 10K run at an embarrassingly slow speed
Speaker2: [00:44:17] Yeah, I love it.
Spencer: [00:44:19] You know, I just say I'm not I'm not a fast runner, Josh, but I do do it consistently. And I and I have done and I track them and all that I do probably three to four runs a week when I want to really hummin, which I'm not doing now. I'm very squishy right now. But I would say that know usually I want to be doing, you know, four ten hours a week and might want to really humming. And I'm just sitting there thinking they might be listening to a podcast is the best possible way to reflect on things for me, because the blood's flowing and you're you're getting some solace in.
Josh: [00:44:46] Absolutely. I'm right along with you there. I love to work out and think. Favorite book, Spencer, or piece of advice that you've ever been given.
Spencer: [00:44:53] Yeah. Favorite book would be at least on the business front, I would say is essentialism. Essentialism is probably my favorite one by Great McEwen. Just if you're talking about, you know, people feel like they don't have enough time in the day to do X, that book just cuts out all the excuses really well. And it gives you reasons. It gives ways to specifically saying no. And that's where most people miss on prioritization. So I'd say that's the best. The book on a piece of advice, I just got to say, go slow. To go fast is a relatively overused term from the startup world. But I still believe in it now. And I think go slow to go fast. And what that means is don't you dare rush through the most important stuff, particularly when it comes to making decisions about people and projects and investments. And just take your time. The bigger the decision, the I'm for the decision, the more time that needs to be taken. And so invest that time. Go slow to go fast.
Speaker4: [00:45:47] Love it. Final question. Who has been the biggest mentor in your life? Entrepreneurial outside of business. And why have they had such a big impact?
Spencer: [00:45:56] Yeah. You know, out of respect for him, I don't know if I even discussed about not to mention his name on a podcast. I'll keep him anonymous. All the states. A longtime friend of mine, it's actually a little younger than me. And he has got to be probably the most meaningful mentor in my life that I knew him from. I've worked with in like zero two or three other companies. And he has been a sounding board. He's not a big real estate guy. He's not a real estate guy. But I will say that probably the most significant leadership and management mentor in my life, and it's just one of those things that has consistently come back as a recurring theme on values and why I placed a premium on working with people that are value driven and mentors are key man. And I'm just I feel very lucky because so many people don't bump into what I define as a mentor in their life. And they go out and they try to find them. And some sometimes they don't. But I feel very grateful to have this mentor.
Josh: [00:46:42] Most fantastic stuff. Spencer, listen, I know our audience can find your information at Madisoninvesting.com, any other places that they can go to connect with you.
Spencer: [00:46:50] Yeah. So if you can't find me in Madisoninvesting.com, or you'd rather go to like Linkedin instead at LinkedIn, like send me a message there. You could also just email me directly if you'd like to reach out. I'm happy to be a resource. And even if it has nothing to do with like one of our deals or anything. Spencer at Madison Investing dot com.
Speaker4: [00:47:05] Fantastic stuff, Spencer. Listen, it's been great. I love the conversation in the back and forth today. Thank you so much for joining me today on accelerated real estate investor.
Spencer: [00:47:13] Yeah, I had a blast. Thank you so much, Josh, and enjoy the rest of your weekend.
Josh: [00:47:18] Well, hey, guys. Listen, I really enjoyed that interview there with Spencer Hilligoss from Madison Investing visit his website MadisonInvesting.com. And I look forward to really having guys like. Answer on, because I like to hear about the technology that you're using, the platforms that you're using to bring in passive investors. Now, for Spencer, you know, he's not necessarily an active operator with boots on the ground actually doing the deal, meaning the property management to CAPEX, the asset management. But he's partnered up with other sponsors and other syndicators who are bringing the deal flow, running the deals. Spencer is spending his time vetting those deals out and matching up the active investors and passive investors. So lots of amazing tidbits in that interview, if you enjoyed it, man. Don't forget to subscribe, right? Go in to iTunes or wherever you get your podcasts. Hit the subscribe button. If you're in YouTube, hit the subscribe button. So you never, ever missed another episode. And also, if you feel compelled to open up your phone right now, go out and open it up. Go search, accelerated real estate investor in iTunes or wherever you get your podcasts and leave us a five star rating and review. It would mean so much to me. Thank you so much for that. Listen, guys, I hope you enjoyed this interview with Spencer and we'll see you next time. Take care.
Josh: [00:48:39] Hey, Josh Here. And do you want to win a free accelerated investor T-shirt? All you have to do is give accelerated investor. Our podcast Accelerated Investor a rating and a review on iTunes. OK, do that now, then send us a screenshot on Facebook or Instagram or Twitter. What we're going to do then is every week we're going to pick our favorite rating and review and we're going to send that person a free T-shirt. And maybe, again, some other cool, fun stuff as well from accelerator investors. So, again, don't forget to take a screenshot liberating rating review, take a screenshot, send it to us so we know exactly who you are. And then once a week, every week on the podcast, we will announce a new winner. Don't forget to take a screenshot and send it to us so we know exactly who you are. We'll announce a new winner every week.
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