Young Scrappy Money Podcast Ep. 027: Real Estate Regrets and Revelations with Nichole Stohler of the Richer Geek

Investing in real estate has become a hot topic nowadays, but it comes with both potential rewards AND potential risks! This week’s guest, Nichole Stohler of The Richer Geek, is no stranger to both. Join us as she shares her insight on what went wrong with her first foray into real estate–and how she overcame that experience to build a robust and thriving real estate portfolio!

Resources from this episode:

• TheRicherGeek.com, home to Nichole Stohler’s work as a real estate thought leader and podcaster. Be sure to check out the quiz on her home page to help you figure out what type of passive income strategy might be right for you!
• Rich Dad Poor Dad by Robert Kiyosaki, the book that opened Nichole’s eyes to a different way of thinking about personal finance. 
• Meetup.com, a great resource for finding like-minded, local communities around real estate or other topics 
• InvestHER Community, a rad Facebook group for women who want to invest in real estate.
• The Young Scrappy Money Academy Digital Subscription Service
• Young + Scrappy, home to Michelle’s work as a financial advisor and financial coach
• Jesse G, my editor. If you ever need audio/video editing work, give him all your love and money

Full transcript:

INTRO: [00:00:00] Hello. And welcome to the Young Scrappy Money podcast. I’m your host, Michelle Waymire. And each week, I’ll be bringing you tips and tricks to help you take control of your finances as well as interviews with people who made big financial changes in their own lives. So join us. And we’ll help you get your financial s**t together. 

MICHELLE: Hello, everybody. Welcome, welcome to the Young Scrappy Money podcast. We are back with another episode on real estate. I heard a lot of positive feedback from our first episode on real estate, that you guys really were interested in this. 

I’m getting a lot of information about folks who want to learn about passive income. And so I just wanted to go ahead and throw out that we’re gonna do another episode on that. So that’s pretty exciting. 

As always, if you have episode requests, if there are topics you wanna hear more about, or if you just have questions that you wanna make sure are covered or answered on this podcast, please don’t hesitate to reach out to us. You can always find me at [email protected]. Hit me up. I’m so, so excited to answer those things for you in a future episode. 

Today, with me to talk about real estate I have Nichole Stohler. This is a badass lady. We actually met on a panel for another podcast about real estate where I felt very out of my element. My feedback was basically, hey, guys, I’m buying my first house. And I felt a little bit, uh, a little bit B team. But it was really, really fun.

Um, she’s such a badass. She’s the founder and host of The Richer Geek podcast. She lives out her mission of educating and empowering high-income professionals to find creative ways of building wealth and financial freedom. Welcome, Nichole. 

NICHOLE: Wow. Thanks so much, Michelle. Great introduction.

MICHELLE: Of course. So I know a little bit more about what you do than the rest of our listeners. So maybe you could walk us through. Um, tell us your story. What— what initially got you into real estate? 

NICHOLE: I think it’s a great question. And there’s almost— there’s a part one, two, and three to that story.

MICHELLE: Lay it on us. 

NICHOLE: The part one starts in 1999. And this is when my husband and I read a book called Rich Dad Poor Dad by Robert Kiyosaki. And it kind of opened our eyes to a different way of thinking about personal finance. 

Now, we were just out of college right at that point and didn’t have a lot of money, read this book. And the concepts were just something that we had never been taught. We’d never learned any of that entrepreneurial mindset in college. And then no one in our family— uh, no one was an entrepreneur. 

MICHELLE: For those who are not familiar with this book, can you maybe just give us like a brief 10-second synopsis? Like what are the key principles? 

NICHOLE: Sure. So the key principle in the book is that you have to find ways where your money is working for you, that you’re not always having to go out and do something to make an income. And that could be anything. That could be active real estate investing, or that could be that you are, you know, working in a full-time job. So the concept is build up your assets that basically generate income so that you’re not having to go out and spend time to make money. 

MICHELLE: OK. Awesome. Thank you. 

NICHOLE: And the— the premise of the book, basically Robert Kiyosaki talks about starting a business. And he has a heavy emphasis on real estate investing. But it is important to note he’s not saying that is the only way. He does in— he talks about some businesses that he’s owned as well. So he— he talks about all the advantages of doing that. 

The real estate piece of that really appealed to me. So I signed us up for a seminar on real estate investing. So the part one of our story is that we didn’t know what we were doing. And just reading a book and going to one seminar is probably not enough. And so, in our case, it ended up sort of disastrous, kind of humorous now when I think about it. 

But at the time, it was not funny. And it was not a great situation. Ended us— ended up getting deeper into debt and had to move back in with my parents and all of this kind of thing. So, you know, that— that’s part one.

MICHELLE: Can I ask you a couple more questions about part one?

NICHOLE: Sure.

MICHELLE: So you say it ended disastrously and that you got into more debt. Can you— can you tell us what happened?

NICHOLE: Sure. The entire premise of that real estate investing seminar was how to find properties creatively. And that is great. And if you think— if you talk to anyone who invests in real estate, finding a good deal is important. But that is not everything there is to know about real estate investing.

[00:05:04] So the challenge was we were taught how to creatively find properties but not actually how to evaluate or manage properties. So I’ll tell you exactly how that worked. We went to this seminar. We came back. And we implemented the strategies, which were— we didn’t have a lot of money.

As I mentioned, we were straight out of college. And we went to a local university. And they actually— sometimes, this happens, where universities are given property in somebody’s will or trust. And this is just with the intention of, you know, leaving some kind of asset or value to the university.

In this particular case, the university didn’t have resources or really a desire to focus on having a real estate portfolio. They wanted to focus on their core mission. So they were trying to offload these properties. And they were willing to do them in creative ways.

And my husband was able to negotiate seller financing, which meant that we didn’t have to go get a mortgage. We didn’t have to find, you know, that kind of funding, which we would not have been able to qualify for. Right? We didn’t have the income. And we didn’t have the reserves. We would not have been able to get a mortgage.

And he found these properties that they were willing to give to us— or, well, sell to us, I should say— under selling financing. Now, the only requirement was we had to have some kind of down payment. They weren’t just gonna let us do it with, you know, no money invested in some way.

But we didn’t actually have money for that down payment. So what we did is— this was 1999. And we were able to get credit card cash advances. So I would say— let’s see. We— it was four different properties. And the properties were like a fourplex, a threeplex, a duplex, you know, kind of in that range.

And we probably pulled out about $20,000 in credit card cash advances for each of the— you know, basically for the down payments, $5,000 for each of the properties. The challenge with what we didn’t learn in that real estate seminar was we were just so excited to get properties that we didn’t really understand, were they good properties? Did we really want to own those properties? And the answer was no.

MICHELLE: Oh, no.

NICHOLE: They were not good properties, meaning they were not in the right parts of town. We weren’t going to easily be able to maintain tenants. They weren’t going to cashflow as much as we would like. So we just didn’t understand those pieces of a real, true deal analysis. And then, we also didn’t understand how to manage the residents, how to make sure that you were getting paid on time, how to make sure you weren’t getting nuisance calls.

Uh, and then the other piece that started to happen was, because we didn’t fully assess the properties, they needed things to be done to them. Like one of them needed a roof to be repaired. Well, we didn’t have the funds to do that.

So my husband’s trying to do this on his own. So he’s up on top, trying to replace a roof— which this is not his core— this is not his core competency. This is not what he knows how to do. And I’ll never—

MICHELLE: Yeah. 

NICHOLE: I’ll never— 

MICHELLE: Roofing is not— not a dabbling exercise. 

NICHOLE: Exactly.

MICHELLE: That’s not like putting— putting in, uh, new paint or something.

NICHOLE: Right. Exactly. And I’ll never forget. You know, we were dealing in, I would say— you look at properties. They’re categorized different ways. We were in D-minus kinds of properties, so, you know, not in the best areas, again not— definitely properties we would not buy now.

And my husband is up on a roof trying to, you know, replace the roof. And he’s got the residents of that— that particular I think it was a threeplex sitting out in lawn chairs watching him, drinking beer. And I— I just will never forget this image of this is what we’re dealing with now. This is— there are so many things wrong with this whole situation.

The overall situation then ended up being, hey, we’re not— we’re not actually making any money. We’re losing money. And we don’t know what we’re doing. So we took the— a kind of a step and said, OK, you know what? We need to learn this business.

And what we did is we ended up— we had to give back those properties. We— we just weren’t going to make them— they weren’t gonna cashflow. They weren’t a good investment. We gave them back.

So now we’re in debt for the repairs that we had to, you know, use credit card against, the down payments, the fact that we weren’t getting consistent cashflow to cover our monthly payments to the university. So we were very much in debt from those properties. Uh, we gave them back.

[00:10:07] We ended up moving in with my parents. Because, you know, your, uh, living expenses can be reduced. And we needed to pay off a ton of debt. And then my husband went to go work in property management so we could learn the business.

MICHELLE: Oh my gosh. What a story. So I’m really glad that you took the time to unpack all of that because— OK, so I’ll be super honest. I’ve learned a little bit more about real estate in the last few months. But when I think of real estate investing, and I think of like horror stories associated with it, basically what you’re telling me is exactly what comes to mind.

And so I want people to learn the good stuff. And I want people to learn the benefits. And like we’ll kind of get into that here. But I think it’s really important to also hear the flip side and get the cautionary tale. I mean it’s— it can be a really fun, rewarding, enriching business. But you gotta be prepared for it.

NICHOLE: 100%. And I don’t ever paint it as glamorous. And there are— there are definitely gotchas. And there’s even gotchas today, you know, as we’ve grown with experience. But I think the thing is is there’s a lot of things you can do to mitigate your risk and to not have those horror story situations. And it is, you know, learning from mentors and community and developing a network of people that can help you so you don’t make some of those mistakes. 

MICHELLE: Yeah, totally. OK. So at this point, you’re— you’re living with your parents. You’re crunching through debt. Um, what are— what are you doing at your time? What does your career look like at that point? 

NICHOLE: So I have really for about 23 years now been in technology sales. And at the time, I was just starting that particular career. And that has always— that has been my focus. And it’s a great place to be. I love technology.

And this is the interesting thing too. Because a lot of people ask me. And it’s kind of the genesis of my podcast. I believe that you can do both. You can be doing something that helps you build wealth that’s a business— which real estate investing is a business, or owning a business, uh, which, you know, may be a franchise or something like that— and still work full-time.

And I— and I also believe you should. You should have a plan B. You should be doing something that gives you income right now in addition to all of the financial planning for building for your retirement, etc. So that’s the strategy that we really deployed, which is, you know, I work full-time and have a W-2 income in technology sales and then work to grow our real estate business. 

MICHELLE: That’s great. And I think that gets back to one of the fundamental principles of investing is diversification. Don’t put all your eggs in one basket. And we tend to think of this in terms of like an investment portfolio, making sure you have like a good mix of stuff.

But I think income diversification is just as important. So where are you getting your money? How much of it is super reliable? What are you building for the future? I think that’s exactly right.

NICHOLE: Yes. I believe— I believe that 100%. The analogy I always use is you know that if you were a business, and all of your income was coming from one client, wouldn’t you tell that person that’s crazy? Right? No matter what the business is, you can’t just have one client.

Because now you’re very vulnerable and very much at risk. That’s how I feel about if you only have your job. You— I think you’re— I’m not saying that your job is threatened. But I feel like you— you mitigate your risk by finding other income sources.

MICHELLE: Yeah. I think that’s exactly right. So that was like part A of the story. And then you said there’s like a part B. So tell me what happened after that. How did you get back into real estate after this sort of like first fiasco, we’ll call it? 

NICHOLE: Sure. So my husband, uh, went to go work for that property management company. And it was very interesting. Because he basically worked for a company that developed large multifamilies apartment complexes, so 300 to 600 units. 

They developed them, and they managed them on their own. So they— he was not doing property management for a bunch of individual owners. He was working for these big, large developments that the company was doing. So he was very used to large apartment complexes and very comfortable in that particular space because that’s what he learned. 

[00:14:50] And I say that because there’s so many niches within real estate investing. And a lot of it is choosing a niche, and learning about it, and getting that expertise is gonna serve you well as you look to continue to invest. So that was the niche that he chose and really, really enjoyed.

We— we took a little bit of a hiatus or a break from real estate investing. My husband actually went to become a commercial airline pilot. And he did that for several years. And we had a few properties. So it’s not like we weren’t doing anything.

But it was not— it was not a huge core focus. He was, you know, obviously traveling quite a bit and, uh, not as available. And then I was, you know, continuing to work in my career.

And then we really started to ramp it up again, our investment and our focus, in about the 2011 time frame. And, you know, we basically put a lot of effort and capital into moving into multifamily and apartment complexes at that point in time. And of course we had built up capital. And we were able to do so. So that— that’s kind of part two, which is during that time frame, 2011 to about 2017.

MICHELLE: OK. So you mentioned that you had a few properties. Are those sort of just single-family homes or something else?

NICHOLE: Yes, yes.

MICHELLE: OK. Um, and how did you— how did you apply your lessons from round one to sort of make better decisions the second time around on single-family homes?

NICHOLE: Single-family homes, we— they’re— well, that first time we actually didn’t ever have— we didn’t have any single-family. That’s what’s interesting. We had, you know, fourplex, threeplex. They were all these little, uh, smaller type of multifamily.

But the single-family, essentially we knew how to manage residents. Uh, you know— and— and this comes down to, like any kind of business, policies and procedures. You can’t really— you can’t really take excuses, so setting up those and adhering to those, which my husband really understood, being in property management.

And the other piece is just making sure that we were buying properties more in B class neighborhoods. So we— we like to have, you know, those properties that are in working-class, safe neighborhoods. You will go into those neighborhoods and not be scared. You— you— uh, but they’re not— you’re not super high-end.

You know, we really wanna be in that middle where, if the economy changes, people want to move into those neighborhoods. Or, if the economy is super positive, people are trying to move up into those neighborhoods from maybe an apartment or something like that. So we just learned to be in the right place and how to manage residents. 

MICHELLE: OK. And so your decision to kind of move into larger properties really kind of came from a desire to— to expand beyond that?

NICHOLE: Yes.

MICHELLE: OK. And now, you mentioned also that you had some capital built up. So why don’t we talk about maybe some of the investment aspects there, to say, you made this decision to move from single-family units into multifamily properties? What did the capital look like? How much did it take for you to get started? And kind of what was your role in those investments?

NICHOLE: Sure. Let me talk through all of those steps. So, um, there was initial capital required, especially during 2011, which is the time frame when it was also difficult to get funding. Right? Because this was, you know, right after kind of the blowup. There basically had been a huge bubble built up, especially in the Phoenix market, as a result of people speculating and buying homes.

And nobody was actually going to live in the homes. The entire intention, at least in our market, was people were buying homes in new developments and then selling them two months later. There was no intention to rent the home or do anything with it. It was simply kind of an asset to hold onto for a couple of months. And a lot of people got burned in that situation because they didn’t have a plan for cashflow right now. 

Anyway, that made the lending markets after everything blew up became very tight. And there wasn’t a lot of appetite or desire to lend to investors— unless they had more capital, or they were putting more into the initial commercial loan or I guess if you were doing a 30-year fixed single-family home loan. So in our case, we needed more capital for one of the first projects. 

[00:20:07] And one of our first apartment complex was more— how do I explain this? If— you can get a 30-year fixed mortgage on a property that’s four units or less. So you can buy a fourplex and get 30-year, fixed, traditional, kind of single-family home mortgages. Once you get above four units, you’re now in a commercial lending space. And you are not gonna see 30-year fixed terms. 

So terms are very favorable when you’re buying quote, unquote, what would be considered “single-family” type of properties. So we bought a apartment complex that was a fourplex, a threeplex. So it was really seven. But they were two different buildings and counted as two different mortgages.

So we bought into that property. And were able to get, you know, 30-year fixed funding. But we were buying it from a distressed seller. And the seller ran into a situation where they had financed it with like a five-year ARM. And they couldn’t get financing to— to refinance at the end of the term.

And that’s because, again, the credit markets had really, uh, shrunk. And there was higher scrutiny around people that were asking to borrow money. So in that case, we needed more capital to be able to get the 30-year fixed mortgage on that property.

But the numbers looked really good, even with the incremental investment, because of the 30-year fixed. And it was a very solid and stable property. It was actually just such a great property. So we owned that for about— really only about a year and a half.

Then we sold that property. And we did what’s called a 1031 exchange. And what that is is a huge benefit in real estate where you can take all of the capital gains, and you don’t have to pay back depreciation. There’s not a depreciation recapture, which I’ll talk about in a second. So you basically sell the property. And you roll all of that into your next property.

Now, when you own real estate, uh, physical real estate, you get the benefit of depreciation. What— and what this happens is when you— when your accountant prepares your taxes each year, you get to basically deduct a depreciation expense. And where it can work out very much in your favor is, let’s say you accumulate, um, $5,000 in cash in rental income after all expenses, after your mortgage is paid, per year.

But you may be able to have a depreciation expense that’s $6,500. So you actually get $5,000 in cash that you’re making because that’s your— your income after debt service. And yet, you’re showing paper losses of 1,500. So that is meaning that that $5,000, you’re not really getting taxed on that. And you— you get that kind of free and clear. And that 1,500 may also deduct from your W-2 and other income.

Eventually, if you sell the property, though, you would need to re— the government would come back and say, OK, I need to recapture some of that depreciation expense. Because now you’ve sold this property. You’re not— you’re not keeping it.

When you do a 1031 exchange, not only do you get to keep the capital gains between what you paid and what you are selling the property for, but you also get to further delay that recapture of the depreciation expense. And I can’t emphasize that enough because that can be a big number, and it is very beneficial to do a 1031 exchange if you can. I’ll stop there. Because that’s— that’s a lot of information.

MICHELLE: No. That’s great. It is a little bit technical. But hopefully, listeners, you’re still with us. If you are getting a little bit lost, know that you can always go to youngandscrappy.com/blog and find a full transcript of all of our podcast episodes along with all of the resources that we’re gonna share today. 

So if you need to go back and read it a second time, I do not blame you. I know this stuff can get a little bit heady. Personally, my key takeaway there is get yourself a good CPA who specializes in real estate.

[00:25:00] NICHOLE: Absolutely. And— and I would say too, start to— if you— if you want to be involved in real estate investing, the biggest thing you can do is get involved in the real estate investing community. And there’s a lot of different ways to do that. But there are people that can help answer these questions or provide this guidance, which, by the way, did not exist in 1999 and could’ve helped us maybe figure out a different strategy. But there— there weren’t the kind of resources that are available today to help you with these steps.

MICHELLE: Yeah. So I guess while we’re on this topic, can you dig into a couple of those resources? Are there any that you recommend, um, wholeheartedly? Or, you know, maybe some avenues for searching where you were able to find good resources that are a little bit more local?

NICHOLE: Yeah. I would say that is one of the first things I would recommend is go on Meetup and go onto that particular website. And in your location, uh, put in real estate investing. And look for groups that, you know, meet your schedule, and you can— and you like what they say. Because a lot of times, those Meetup groups will talk a little bit about the group and where they focus and the discussions that they have.

And go join or attend some of those Meetups. And you may attend one, and it’s super valuable. And another may not be. But the key premise here is that you will learn a lot. People that are coming together in those Meetups, generally the entire focus is to share, make connections, understand people in your local market that are doing these things. 

So, you know, you would find a, you know, maybe a CPA, or a real estate agent that focuses on investors, or insurance agents. Like there— there is a team of people that you’ll need. And you can generally meet them at a Meetup. In fact, I host a Meetup for women who want to invest in real estate here in Scottsdale. And that is our focus. It is 100% in support of them. 

They tell me what they wanna know about, and I find people to come and speak about that. And then we all share updates on our projects, and what we’re working on, and our struggles. So find a Meetup. That’s— that’s number one locally that I would recommend. 

MICHELLE: Meetup.com, all right, cool. We’ll definitely make sure that makes it into the show notes. 

MID-ROLL ADVERTISEMENT: Hey, friends. Michelle here. And I’ve got a little present for you. It’s called Unf**k Your Finances. And it’s a PDF guide filled with some of my favorite tips for paying down debt, controlling your spending, planning for goals, and more. Go to youngandscrappy.com/tips to download your free copy today.

MICHELLE: So you said something just now that kind of sparked another question that I have. You mentioned that you run a real estate Meetup group specifically for women. And I have heard this from other folks before, that real estate in general can be a little bit of a boys’ club. What can you tell us about navigating those spaces as a female entrepreneur? 

NICHOLE: It is a great question. And you’re right. Uh, so I will say a couple of things. There is a online community called the InvestHER, H-E-R capitalized, Community. And that, you can find it on Facebook. And— and that group is for women who want to invest in real estate.

And then we have these different chapters where I’m a host, and there’s folks all over the country that host Meetups that are in support of that mission. And the reason I point that out is our mission is we’re not selling anything. We are not promoting our products and services. We are there to serve women who want to invest in real estate. So, um, and because we have a network across the United States, I’m able to tap into different kind of resources for that. 

So I— I’m gonna give you a really specific example. All of the people that come in and present, all of the different experts that are speaking at these Meetups, are women. And I had a request to get deep into construction and talk about how to really assess what a scope of work might look like and all of the details around construction in a property. Especially it was coming from people that wanted to fix and flip properties. 

Can I just tell you to think about who do I know in construction that’s a woman that can come into my Meetup, I completely drew a blank? Like I asked my whole network of people here in the Phoenix market. And we couldn’t come up with anyone. Uh, but the benefit of that particular group that I mentioned is that one of the co-founders has her degree in construction management and does a ton of fix and flips. So we brought her in to speak. 

[00:30:08] So I— I would say when you talk about how do you navigate, you— I think finding a group of women to help support you is one of the ways you can help navigate. And we’re becoming, uh, stronger voices for each other. Right? And supporting each other, that— that is one way to really help navigate the overall real estate community. And get advice. 

MICHELLE: Yeah. I love it. And I love that example. I think, again, the more specific, the better. But it really, really is telling that, you know, the importance of a network is to help you find resources in places that you might not expect them and from people who are going to really connect with you. I mean, that’s— that’s really, really awesome that that happened that way.

NICHOLE: Yeah. It’s such a— it’s such a great, supportive group. And, you know, honestly, we have the same thing. So my full-time job is in technology, which is also— there are— it tends to be much more of a male-dominated field than other fields, just like real estate. And we have a similar— we have women’s support, you know, support and encourage each other, women in technology.

And there’s huge focus. And we all give back, people that are part of these organizations, and go speak in the high schools and make sure that, you know, young women understand, what are the opportunities in this field? And I feel the same way about real estate investing, that kind of giving back and letting people know that there are ways to get involved.

MICHELLE: Yeah. So I think that brings us to— to part C or part three, whatever. I totally lost whatever numbering system I was using. Um, tell us— tell us where you’re at now with your real estate investing journey.

NICHOLE: It’s such a great question because people may, as they listen to this, and they think, OK, part A, I don’t even ever want that to happen to me. And— and we’ve talked about resources. So that doesn’t have to happen to you.

Uh, part B, which a lot of people do do. And a lot of people, you know, build up. And they’re— they’re— you’ll hear people talking about, I have 20 homes. Or, I have, you know, four duplexes. And they— and they build up their own real estate portfolio.

Um, part C for us is basically, as we built up this expertise— and we also learned about hotel investing, which is a transition that we made in 2017. And one of the things that, um, as we talk about our experiences, we don’t do anything now without support, a network, and someone to help guide us. So when we moved into hotels, we had someone who helped guide us into that. Now, what we’re doing is, how do we accelerate and grow our business, not just our own capital?

And so— and we had a lot of people come to us and say, how can— how can I get involved? How can I invest with you? And we didn’t really understand how to do that. We do now because we are doing a syndication around another hotel. And that is an opportunity where people can passively invest.

And we do know a lot of people who really have no desire to own the property themselves. They don’t wanna go through the whole process of getting a mortgage, qualifying, showing that they know what they’re doing. They don’t wanna go to Meetups. Right? They don’t wanna invest the time in learning about real estate investing.

But they still wanna invest in real estate. And so the difference is passive versus active. So our part three, or phase C as I mentioned, is that we are doing a hotel syndication. But that only comes after years of experience and knowing what we’re doing to be at the point where now we’re building that into another piece of the business.

MICHELLE: When you say hotel syndication, for listeners who might not be familiar with this concept, like what does that mean? Can you walk us through this?

NICHOLE: Sure. Basically— and it could be— let’s just take the asset class. It could be— we could be talking about multifamily. We could be talking about self storage, mobile home parks. It doesn’t— it doesn’t matter the actual type of niche in real estate investing.

[00:34:51] The syndication part of it is essentially where somebody sponsors. And a sponsor is the person who finds the opportunity, vets the opportunity. Right? Does all the numbers, does all the due diligence, puts together the offers, negotiates with the seller, handles all of that piece, and says, OK, this is a good opportunity, and then finds investors who basically put in funds that are used for the down payment on a loan to buy the property.

And there’s many different ways that people can structure this. But the syndication is referring to the legal paperwork around that and the type of investors that somebody can work with in this type of structure. And then the investors basically are putting in their funds for a certain time period.

And then based on whatever the sponsor is offering as part of the syndication, there are returns on the investment. Uh, there are generally equity share. There’s a share in when the investment is sold. So it’s basically a kind of a private equity type of structure that is called syndication in real estate.

MICHELLE: OK. So you’re buying in exactly like you said, as a passive investor. You’re not involved with the management. It’s just sort of helping contribute to the capital in the hopes of getting a return back.

NICHOLE: Right. You— and you don’t have to qualify for the loan. Right? If you can imagine the commercial loan process, you have to show— if you’re buying a hotel or you’re buying a multifamily property, you have to show the bank that you know what you’re doing. They’re not even gonna give you a loan if you don’t have experience. Right? They’re looking at your resume and how much— how much you’re actually bringing to the table that you’re going to be able to run the investment.

So if you’re an individual investor who doesn’t have that experience, right, how do you get it? You start getting involved in those kinds of deals passively so you start learning. But otherwise, you couldn’t even go out and get a loan. So you have this opportunity to passively invest if you’re— if you’re wanting to make a return, or if you’re wanting to learn about the business.

MICHELLE: Awesome. That’s super neat. So you have shared just a wealth of information with us today. What other tips do you have for folks who wanna get started investing in real estate?

NICHOLE: OK. My tip is, if you’re looking to invest, and you haven’t done any investing, uh, start with the Meetups. Absolutely go. But also, there’s a— there’s a series of questions I’d ask yourself about where you are right now. These would be things like, where do you live? Right? Do you live in a high cost of living area?

If you live in the Bay Area, there are— there are certain strategies that you would deploy versus if you live in the Midwest. Uh, because you can buy a home for really, really cheap in the Midwest, and you can’t in the Bay Area. So then that means you’re gonna have to be probably investing long distance. And then there’s a whole set of different strategies around that. So you need to kind of get clear on your situation.

Also, what’s happening in your life right now? Do you have kids that are going to college? Or, do you have young children? How much time do you have to put into real estate investing? That’ll determine what kinds of investment you could do.

What kinds of real estate are you interested in? Right? So some people are interested in mobile home parks, or they’re interested in self storage. There’s so many different niches. So what I would say is real estate is a big bucket. And it’s very overwhelming if you don’t get clear on some goals. 

So I— I would really work to— work with someone to determine what those goals are. And then from there, focus on finding people who are doing whatever it is you want to do. Right? If— if it’s, uh, short-term rentals, Airbnb, find people who are doing that. 

And ask them, you know, how they’re doing it. What’s been involved? How did they get started? And follow their— their process. Follow their lead. 

So I know that’s a lot of information. But I feel like too often people group a lot of different things into real estate investing. And they don’t understand that you do have to kind of start with these goals and understanding where you are and then figuring out what’s the right strategy and approach. 

[00:39:52] MICHELLE: Yes. Oh my gosh. I love it. Nichole, thank you so much. Um, I really, really appreciate you coming on. Folks, if you’re listening, and you want to get in touch with her, please, please do so. Um, Nichole, how can people find you online? 

NICHOLE: Probably the best— best place is my website, which is thericher, R-I-C-H-E-R, geek.com. And there’s connections there to LinkedIn and all of the other places. But that’s— that’s the best way. 

MICHELLE: Awesome. Folks, go check out her website. Nichole, thank you again. And everybody, have a wonderful weekend.

END CREDITS: I hope you enjoyed this episode of the Young Scrappy Money podcast. If you want to read about my work as a financial advisor and financial coach, you can do so at www.youngandscrappy.com. That’s www.youngandscrappy.com. Thanks again for listening. 

Made with love by Jesse in Atlanta. [SMOOCHING SOUND]