Working Capital The Real Estate Podcast
Managing Real Estate Investments and Investors with Travis Watts|EP15
Aug 11, 2020
In This Episode
Travis Watts is a full-time passive investor. He has been investing in real estate since 2009 in multi-family, single-family and vacation rentals. Travis is also the Director of Investor Relations at Ashcroft Capital. Travis has invested in over 25 passive syndications between 14 different firms. Travis now dedicates his time to educating others in the world of investing and has made it his mission to share passive investment strategies in order to help others achieve and maintain wealth in real estate.
In this episode, he shared how he started in real estate after reading the book “Rich Dad’s prophecy”, his first property in 2009 in Colorado from credits of $8000 from the IRS, type of deals he’s done, working 100 hours per week in an oil company, house-hacking strategies, transitioning from full-time employee to full-time passive investor, FIRE movement and MANY MORE!
- “I love the idea of just taking something fixing it up making it better and then be worth more.”
- “We all need to have enough passive income somehow to be able to quit our jobs and retire.”
- “I just find that real estate’s a far better vehicle for creating cash flow and passive income.”
Resources and Links:
Welcome to the Working Capital The Real Estate Podcast. My name is Jesse Fragale. And on this show, we discuss all things real estate with Investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time working capital listeners. We have a special guest on the show today, as we always do. Mr. Travis Watts is a full time passive investor. He’s been investing since Oh nine in multifamily, single family, as well as vacation rentals. He is also the director of investor relations at Ashcroft Capital and Travis now dedicates his time to educating others in the world of investing and has made it his mission to share a passive investment strategies in order to help others achieve and maintain wealth in real estate.
Okay. Ladies and gentlemen, I have Travis Watts on the show. Travis how you doing? Hey, Jesse doing well. Thanks for having me. Yeah, no worries. No worries. I I’d be remiss not to ask. It’s 2020 in April right now. How are you handling everything with the lockdown? Yeah, interesting times all around, both from investing in just a personal perspective, but not too bad, you know, leading up to this, I was out on the road a lot, so I was flying all the time. I was doing a ton of conferences and so it, in a lot of ways that is kinda nice, you know, just to kind of kick back and be at home a little bit more on the flip side of that, you know, I missed some restaurants and, and stuff like that.
Travis (1m 29s):
Yeah. I feel like a lot of people are just dying to, or a dime to order an appetizer or just have somebody go in and get it for them. Yeah. You gotta make friends with a Uber eats. Yeah know for sure. For sure. Well, like I said, thanks for coming on in the intro. I talked a little bit about your current position, your, the director of investor relations at Ashcroft Capital. Is that correct? Yeah, absolutely. And you kind of, you have an interesting journey. I was kind of just through researching a little bit for the Podcast interesting how you started with a, a, a Kiyosaki book, but not the normal one that everybody starts with. So maybe for listeners, you can talk about, you know, how you got into the world of real estate investing and what that experience was like for you.
Jesse (2m 12s):
Yeah, yeah, absolutely. I guess, to, to start that story off, you know, I was raised by two very frugal parents. So my upbringing was a lot to do with a personal budget and using coupons and buying off-brand things and, and stuff like that. So I always have this underlying interest in finances to an extent, my parents were not necessarily Investors by any means, but they were very aware of money and, and what that meant and teaching me some of those principles and lessons, there was this one particular summer when I was in high school, my dad actually bought a, a Kiyosaki book cause he alluded to from a, a garage sale and it was a rich dad’s prophecy.
Jesse (2m 57s):
So a lot of people obviously start with dad, poor dad, which I read later, but Rich Dad prophecy was basically this big prediction that we would have this huge stock market meltdown. A at some point it’s hard to pinpoint that. Cause the book was written, I think in like the year, 2000 or something like that. So a, this was around 2006 may be that I had read this book. So write before the last financial collapse. And I had some money in the stock market, not a lot, I was pretty young, but all of that book really taught me was pull your money out of the stock market. That’s it. So I didn’t know what to do,
Travis (3m 36s):
But you know, I knew I could hit the ceiling
Jesse (3m 38s):
Button. Right. So that’s basically what I did. I sold most of it. And then, you know, sure enough the, the, the financial collapse, right? So as I kept reading, cause that really peaked my interest. Obviously its like how did I have that kind of insight is what people are wondering. Ah, and, and they didn’t. So I kept reading the Rich Dad books and that’s what led me to get more involved with real estate and want to somehow participate in that at some point. But meanwhile, I was in college and that didn’t really make a lot of sense for me to get involved at that point. And I was going to school at a place that didn’t want to buy a home, all of those kinds of things. So 2009, it was around September, 2008.
Travis (4m 21s):
About a decade ago is when I bought it My first piece of real estate. So at this point I’d read four or five books. I had been intrigued by this idea of passive income and real estate and the tax benefits in all this kind of stuff. So I pulled the trigger when they had a, like a government stimulus at the time where they were trying to incentivize first time home buyers to purchase real estate. So I got a, like an $8,000 tax credit from the IRS and this was the owner occupied home that I ended up house hacking, renting out the spare bedrooms to other people which basically paid my mortgage, which again, really piqued my interest. That was pretty exciting for me. All of a sudden I’m living for free and I’m living out on my own a so that just kept the ball rolling.
Jesse (5m 4s):
Kept reading books, you know, got into more like fix and flip models, vacation rentals. I had some buy and hold single family. And meanwhile, by the way, for anyone that’s wondering, you know, where’s this money coming from? I was working in an oil field jobs. I had a really high income job and I was living well below. My means I had virtually no housing costs, minimal food costs, no kids, no family. So, you know, I’m banking at all and I’m putting it all into real estate and in a very uptrending bull market out in Colorado. So a what I didn’t realize this was like my big breakthrough came around 2015. I didn’t realize that to be truly a passive investor to be truly hands-off and to have a scalable business model that you could go infinite amounts with wasn’t going to happen doing the model I was doing with a fix and flips vacation rentals, all of his hands managed stuff.
Jesse (5m 59s):
Why was Working 98 hour work weeks in the oil field, away from home. And you know, I was building myself, this is part time job. So the single family homes and it just kept getting more involved and more involved, more involved. And so, you know, it started closing in on me and I thought, yeah, there’s no way I’m going to get to 50 homes or a hundred homes doing this. Just like impossible. That’s how I felt. And so that’s what led me back to the education space podcast, books, networking real estate group to learn about apartment syndications, where you can actually be completely passive in your approach to real estate investing. So around 2015, 2016, that 12 months ish, I started selling off all my single family homes.
Jesse (6m 44s):
I sold the house I was living and I just, I went liquid and in the process I was taking all that equity and, you know, dividing it up and then putting them into syndication deals. So maybe, you know, 25 K their and 50 K their and 50 K here. And so since a 2016 through today, that’s got me around 30, a passive deals that I’m involved with. Now, a lot of which were with Ashcroft Capital to do a lot of value, add a B class multifamily stuff, things like that. And so, yeah, I mean, it’s made the biggest impact to realize that you really can be truly passive in real estate. And you can do that.
Jesse (7m 25s):
Not only through syndication, there’s a lot of different models out there. And in this self-education space, I’ve learned a lot about the FIRE movement, which I’ve always really been part of, but didn’t realize it. I’m not sure that was really is actually a thing of a decade ago, but I don’t think they have the acronym yet. No, no, but, but, but the mindset and the philosophy was their, and that’s how I was brought up. So anyway, all of these things combined kind of leads us through through today.
2 (7m 51s):
Well, there’s, there’s a few points there, a one it’s kind of eerily similar to, to my story. So we, we bought around the same time. My first property is at 2010. I was in school. I worked in a company, an oil company based out of Calgary. So a similar thing that you were able to save Capital and, you know, use that. I’m curious a couple of questions on a, the passive side. I assume that you’re investing as a limited partner on these passive deals. You’re not, you’re not sponsoring them, right.
Jesse (8m 21s):
That’s correct. So I have not been in the multifamily space active, so to speak, never been a general partner or anything like that. So yeah. In LP.
2 (8m 29s):
Yup. Okay. And when you say that you were taking out equity and then you kind of divided it up over your next investment, was that strategy, was that a taxable event or were you using a 10 31 exchanges? How did you, how do you make that migration of capital from your first set of real estate and then towards your, your passive
Jesse (8m 47s):
Yeah. Good question. Potentially the smartest move would have been to do 10 31 exchanges. The problem that you may into in the syndication world is a lot of syndicate groups have a very high minimum. If you’re rolling funds into the syndication deals, sometimes it’s a million minimum, sometimes it’s even higher. So number one, that’s difficult. And number two, once you start this process of 10 31 is whether we’re talking single family or multifamily, you really can’t stop. I mean you can, but now you’re throwing all of those back taxes. And so my personal philosophy was that I may be able to pull this off once, twice, three times, four times, but one day when I’m 50 and I can’t roll it, cause there’s no deals out there, boom, there’s a million dollar tax hit or something ridiculous.
Jesse (9m 37s):
So a, so I just chose not to do that.
2 (9m 40s):
Yeah. That’s interesting. Cause you do here a lot of advocates for 10 31 exchanges consistently go no, no, you never, you never stop. Like even after you die, you look at tax strategies for your Estate. I’d like to talk, it’s been a bit of a theme we had, we had Brian Burke on the show and, and Whitney Sewell who I think you’re on his podcast as well. And one of the themes that I find fascinating is the transition from being a full time employee to, you know, maybe having a real estate as, as a side hustle and then eventually having a real estate as a full time job. And what that transition is like. So for yourself, going from your current job, which I take it, you don’t have that your full time now and as a passive investor, what was that transition like?
2 (10m 24s):
And what is there ever a right time?
Jesse (10m 28s):
Yeah. Yeah. That’s a great question. So there’s typically two types of people. There’s the people that are very career focused that genuinely loved their careers. Their jobs might be a doctor, a dentist, lawyer, whatever they don’t want to necessarily leave that profession. They spent a ton of money and time to get these credentials and, and hopefully they like what they’re doing. So those folks, you know, passive investing can benefit them by allowing them to be career focused and not take their eye off the ball. But instead of having, let’s say a hundred percent of their investible assets in the stock market, they could maybe have a little bit in real estate as well, a little less volatility and a lot of pros and cons to that. In addition to tax benefits, the other type of person, his is who I was, which is I’m in a high paying job.
Jesse (11m 14s):
And quite frankly, I hate that job. And, and I couldn’t see myself doing 20 years in it or 30 years in it. It wasn’t that all the money that you really think. Yeah, no, I’m just going to put it the way it is. That’s how it was for me. And so I thought, man, I gotta find a way to get out of this. In addition to, even if I had liked the job, a oil and gas is a boom and bust, you know, industry, I mean, look at what oil is doing today. I mean, you know, it’s hard to cannot give it, cannot give it away and to give it away were going negative. So anyways, so it would have been hard anyway to, to say, Hey, I’m going to do this this job for 30 years. You know? So, so my whole intention was to build enough passive income to offset my living expenses so that I could leave that job.
Jesse (11m 57s):
And that’s what I did. And you know, it took some time and, but it’s possible. It’s possible for a lot of people. Okay. That’s great. In terms of, so
2 (12m 9s):
We’ve kind of alluded to it already to FIRE movement for those of us that don’t know what that is. Maybe you could just talk about what that is and how you got involved with that movement and, and you know, what it means to you.
Jesse (12m 20s):
Sure. I, I’m not, as I said earlier, I don’t know that that even existed before. I know there’s been books written is far back as the eighties on just this frugality mindset of maybe being passive and having enough in your life and stuff like that. But basically for those that don’t know FIRE is an acronym. It stands for a financial independence retire early. And the part where it gets a lot of, a lot of crap is that retire early. Cause you know, it’s, it’s contrary to so many people’s beliefs, number one. And what the hell are you going to do if you retire in their twenties or your thirties write? So the way I look at it as just, just FYI, okay. Financial independence. That’s what I think we’re all after.
Jesse (13m 1s):
Anyway. I mean, you got to get there one day, whether you’re 60, 70, 80, or 20, I mean, we all need to have enough passive income somehow to be able to quit our jobs and retire. So that was really what the goal was and how it works for anyone not familiar is that the basic premise, there’s a lot of ins and outs, but it make as much money as you can make using your highest and best potential for some people it’s like I said, or a doctor dentists, whatever, for me, it was oil and gas for others. It’s a business owner make as much money as you can. That’s number one, live on as little as possible. That’s number two for a period of time, not for your whole life, just for a period of time.
Jesse (13m 41s):
And then take that difference and put it into Investments. Now a lot of people in the FIRE movement, they go into these low cost index funds and the stock market and all that. And you can do that. I just find that real estate, it’s a far better vehicle for creating cashflow, passive income, things like that. And of course, that’s my story too. I’m biased. But a, you know, I just find it to be a quicker, more efficient vehicle with less volatility to get you to your goals. And, and so then, like I said, you have enough passive income or net worth and in an index fund where you can start making withdrawals off of that, maybe 4%, 6% there’s different models out there.
Jesse (14m 23s):
And that then you’re, you’re financially independent. So what does that really mean? It’s not really about money to me anyway. It’s about having choices, right? So some people want to leave their job. That was me. Some people want to go to part time work instead of full time. Some people want to move into consulting roles and not be w two employees. Some people want to volunteer more, be more charitable, spend more time with their church, their friends, their family travel more. Everybody has their, their thing that they would do if money wasn’t a factor. And I think that’s really the purpose and the point behind the FIRE movement, you don’t have to necessarily subscribe to that movement or do anything with it. But that’s the idea is that it’s, it’s our choice.
Jesse (15m 4s):
2 (15m 5s):
Yeah. It’s not a, it’s not a cult, you know? Yeah. It’s, it’s funny too. Cause the way you were talking before, it kind of, it’s kind of a get back to basics in terms of, you know, delayed gratification and working hard in, in what you find that you are the best at or Excel at. But then it also, I love what you said about choice because it is a choice or freedom piece. And sometimes it’s not necessarily necessary that if you have that freedom or a choice that automatically you’re going to go ahead and retire. A lot of people, you know, like us young people that are, you know, passionate about real estate are something else. They often times are busier, but it might be a passion project. It might be the work that they do, but you’re right. I think it is that flexibility.
2 (15m 46s):
That’s kind of the key part about it.
Jesse (15m 48s):
It is. It is. And, and so as it pertains to, to my story, so what did I do? Well, I quit a job that I didn’t like to pursue work, that I was interested in. The first thing I did believe it or not was worked for a brokerage firm. Cause I wanted to learn stocks, bonds, and mutual funds to a higher extent. So I got some licenses and I kind of went through those motions, but I wasn’t there for the salary. I wasn’t there for a 30 year career. I was there to learn because I had the flexibility to do it. And the minute that I decided this isn’t for me, this isn’t something I wanna pursue longterm. I’m taking the knowledge I want to get out of it. I left and that’s again, freedom of choice, right? Is the possibility to do other things which leads us to Ashcroft Capital who I’ve been an investor with for, for years.
Jesse (16m 34s):
And I thought, what better way then to join forces with a group that I support that I’m an ambassador with and then share education around what we’re talking about, passive income syndications, how to be, you know, not so active in real estate. And so to me right now in my life, that’s where I want to be. And that’s what I want to be doing. And I thankfully am grateful to have the ability to do that, but it’s because of the passive income that, that backs me up to where if you don’t have a salary or something, you know, you can afford to do things like that, that you love. So
2 (17m 9s):
Yeah. You know, and I want to get into that because you have somewhat of a unique story that, you know, oftentimes you’ll hear Podcast about the, the syndicators, the sponsor’s of the deals, the GPS, but you don’t hear so much on the other side, but before we go into that, I’m curious how initially, you know, you mentioned through Investments you got involved with Ashcroft, what was that process like? You know, going into maybe even your first LP deal, you know, maybe walk us through for, for a lot of people out there that, that actually maybe invest in real estate already, but have never seen the passive side and how that works.
Jesse (17m 45s):
So all of this stuff is really done through your own. Self-education, there’s, there’s a huge amount of folks out there that, you know, they don’t wanna read a book and want to listen to a podcast. They don’t want to go to real estate conference or meetups. So it’s going to make it really difficult to paint the picture, have all these benefits, right? So that’s kind of where, what my focus is, is trying to get education out in small tidbits, right. To do these different outlets. So my first LP deal is kind of a funny story to be asked for the I was very skeptical. I was almost one of those folks that, that I just described and that it seemed too good to be true. I was doing my own, you know, flips my own real estate.
Jesse (18m 27s):
I knew my numbers and my returns. And then here comes someone saying, Hey, did you know, you could potentially get that same return and not do anything. And I’m thinking whatever, you know, what is this? And, ah, so it was, it was a big learning curve of due diligence and, and things like that. And I always point this out. This is the biggest mistake I made. So anybody thinking about syndications pay, close attention to this, I put way too much emphasis on the deal itself. When I got started on a proforma on a projected return and I took it for face value, you got to remember, these are projections, right? These are, if everything goes perfect and according to plan, here’s what could happen.
Jesse (19m 7s):
And I was just looking at that and going, well, heck yeah, man, this, this one’s got a higher return than this one. So I’m going to do the one with a higher return. And I wasn’t thinking about the group who is actually executing on this, you know, like what’s their track record, what’s their experience a, you know, who’s on the team. Do I get along with them? Do I want to be in a five year, you know, committed relationship with these people? Cause these are illiquid investments, you know? And a, so now it’s a reverse. Now its all about the vetting, the team and the sponsorship then vetting in my opinion, the market and then vetting the deal lasts. That’s kinda my hierarchy. So you’re
2 (19m 45s):
First a uniform as a limited partner. Was it with another, another group prior to Ashcroft. Yup. And that, and that was a kind of the experience for you to be like, okay, we have to look at the, the sponsor a and the sponsor’s team.
Jesse (19m 59s):
Yeah, exactly. I found Ashcroft through a few, I wouldn’t call them bad experiences, learning curves, which was like I said, because I didn’t bet the team out. It turns out the team really couldn’t execute the business plan, the way that they thought it was. MORE, you know, more motivation and, and, and a little bit of hype and, and sales and you know, they they’re just who Ron and let’s go get ’em and then they didn’t know what they were doing. So, so that taught me a lot. You know, the deal was fine, actually ended up making money on those first deals, through these different groups that had no track record, but that’s because we bought at the right price and we bought in the right markets. Right.
Jesse (20m 39s):
But they couldn’t execute the business plan. So someone that started out as a five to seven year hold, it ended up being 12 to 18 months and we got to sell because we don’t know what we’re doing. And at least there’s some profit that we could make if we sell now. And so the,
2 (20m 54s):
So they got a couple of those, you know, the old, the three, a three legged stool, a word that Bi-Rite manage rate finance rate. You know, if you do a couple of those, you can, you can get a couple investment’s that work for you. But if you consistently forget a couple, it’s not a great, not a great plan for a long time.
Jesse (21m 9s):
Yeah. Yeah, absolutely. Absolutely. So that’s what happened. And so because of that importance of the team, that’s, that’s where Ashcroft kind of took over at, at that point, were these, these two properties we’re going up for sale. And I started thinking, man, I ended to find a team that can better execute on this stuff. So, you know, they, they have the, the, the track record and they could show a lot of proof and numbers to show that they had a great reputation, all those kinds of things. So, so yeah, I’ve invested just in transparency with a lot of different groups out in this space, over 14 different syndicate groups, but Ashcroft has been the most that I’ve done deals with. So their not the only shop in town, but their, you know, a great from in my experience.
Jesse (21m 50s):
2 (21m 51s):
Just back to kinda the uniqueness of, of, of what you’ve done, how does that be an LP or an investor or a passive investor with Ashcroft. How did that transition from there to then being a team member? Not, not exactly the, the normal path. So can you, can you talk a little about, about that?
Jesse (22m 8s):
Yeah. Yeah. It’s also kind of a funny story. I, I, I was trying to map out kind of what was next for me on my horizon. What did I really want to get involved with? What did I want to learn from where would I find fulfillment? You know, what was my next step? So I reached out to Joe Fairless, co founder of Ashcroft through a video message that I made in my living room on my phone. And it, it, you know, I obviously going to paraphrase here has probably a five minute video, but it was something to the extent of like, Hey Joe, you know, I was, Travis one of your investors and just wanted to thank you guys for everything that you do. And these are the things I think you guys do really great. And I’m really appreciative of that. And just want to let you know, I’m interested in partnering with you guys and some type of way, I don’t know exactly what that would be, but here’s kind of my skill sets and my background, you know, whatever.
Jesse (22m 57s):
Right. And then, so he, he chimes back. Joe is great at communication. He times back like an hour later. Oh, thanks so much for the video. That was very thoughtful. But unfortunately we don’t have anything, you know, that we can offer you at this time. And so I’m like, so crushed I’m like, I shouldn’t have had such high hopes for that. Right. But so anyway, so I was like back to the drawing board and kind of lost and like, well, I don’t know what I’m going to do then. And like a month passed by and Joe reached back out to me and said, you know, we are going to open an investor relations role and a, you know, we should discuss that, you know? And so it kinda went from there. I ended up, you know, partnering that way, but ah, just kinda funny, you know, sometimes planting those seeds, you know, can, can really meet a lot longer.
Jesse (23m 45s):
So it may not mean anything today, but fast forward three years, you never know.
2 (23m 49s):
Yeah, for sure. I think it’s all of these little things that, you know, whether it’s book recommendations or contacting somebody that it’s those little touch points that, you know, sometimes as a broker myself in commercial real estate, you know, we constantly do that because you get that person that three years ago you were like, wait who’s The Oh yeah. I sent him a note and now he, you know, maybe I came up in some way. Yup. But that, that’s a really cool, so in your role at Ashcroft, what is it like, you know, kind of nuts to soup, do you do in terms of, I guess Managing kinda the limited partners, are you involved in the marketing different deals? We’d love to hear a little bit about that.
Jesse (24m 24s):
Yeah. So w we have two, a two folks myself included in the investor relations role. So we actually have an internal investor relations and his name’s Evan at Ashcroft. And so he’s handling more of what you described there with, you know, existing limited partners and, and things like that. My role is really boots on the ground travelling at at least leading up to COVID. So it was a lot of speaking engagements, attending seminars, attending conferences, being a sponsor to various outlets I’m in helping to build and spread the education. I create a, a fair bit of the content through the best ever community and whatever you may have seen me out, their Instagram, YouTube, wherever.
Jesse (25m 9s):
And so that’s kind of, my focus is more the education piece to this whole thing. Just being that one additional voice out there through Podcast or everything. So a, so that’s more of my role is just helping answer peoples questions and helping people understand, sharing resources with people of how things work and, and what things look like and how they get done. Things like that.
2 (25m 32s):
So in terms of the investment geography, I think if I remember correctly, where are you originally based out of Colorado yourself, right?
Jesse (25m 40s):
Yeah. So it’s, it’s always kind of been back and forth between Colorado in Florida. So over the last decade, it’s been back and forth quite a bit. Yeah.
2 (25m 48s):
<inaudible> they are in assuming multi-state or is there one area that they’d like to
Jesse (25m 55s):
As crops headquartered in New York city? So we’ve got a Frank Rosler, the other co-founder in addition to Joe, and then the whole underwriting acquisition team based out there, Joe is out of Ohio I’m back and forth between Florida and Colorado and most of our deals are dropping all of these geographic places. Both of our deals are Texas and Florida as far as Ashcroft goes. So, yep. Okay.
2 (26m 21s):
So, you know, we’re obviously the only be going to be able to scratch the surface here, but when you do go out too for this education component for Ashcroft, and when you’re talking about being able to the vet, you know, the syndicator from, you know, the limited partners point of view, and actually look at the market, you know, what is, what is it that you’re telling them through that education and what are some, some key points maybe about how to choose a, a, a syndicator?
Jesse (26m 46s):
Yeah, I think first and foremost, it starts with your own goals and in your set up your own philosophy. Okay. There’s people out there that love the idea of new construction, new development class, a luxury, you know, Midtown Manhattan type projects. And that’s cool, but that’s not at all what Ashcroft does. So, you know, you wouldn’t even know if Ashcroft, we’ll be a good group, not a good group until you knew that about yourself, right? So you start with your own criteria. For me, it’s value. Add, I love the idea of just taking something, fixing it up, making it better and be worth more. I’ve done that my whole life, even outside Real. I mean, whether we’re talking about a car, bought a car, really cheap repaired, what needed to be fixed, and now it’s worth more and runs great.
Jesse (27m 32s):
I love that concept. I hate the concept of, let me buy a brand new car and lose 30% the next day. I don’t like that philosophy. So everybody’s kinda got their own thing, you know, and, and self storage and mobile home parks and, you know, different. Some people, I find that a lot of people, just my own observation, hear that live in California. I love California. And so they want to invest in California and there’s just an and whatnot. But for me, it’s like, you know, you know, tenant, landlord, laws, tax situations, all of these in, and it’s like, I don’t, I don’t want to have anything to do with California as far as an Investor. So everybody’s different and, and it’s not right or wrong and, you know, whatever, its just know yourself.
Jesse (28m 17s):
Right. And so that’s first and foremost, and then look for a group with, with track record experience, or at least somebody’s on their team that can bring that to the table. Maybe they have a mentor or a coach or something. And so I’m not anti investing with people who are new, not by it by a long shot. It’s just, I want to know that there’s someone there that’s helping out and that their not just, you know, they’ve read a book yesterday and now today it’s raising money. Yeah. Things like that. Oh, by the way, you know, I have a, a free passive investor resource guide. If any of your listeners want it, it, it goes into so much more detail. We could go on for hours about this, but its how to get a sponsor, how to buy at a market and how a better deal primarily along with some industry terminology, that’s important to understand that’s an Ashcroft capital.com forward slash passive Investor and its about a 20 page PDF.
Jesse (29m 7s):
2 (29m 9s):
In a, in the show notes. So, you know, we’re almost coming up to time here, but I did want to talk a little bit about you benefits from passive investing and maybe just to break it down, you know, if you’re the average person out there that maybe has a little bit of real estate, maybe he’s just getting into it, what would, you know, ideal or a normal allocation of, of their capital, you know, would it be $20,000, $50,000? And what would that investment say? Look like in the first year or two with, with deals like you’re describing value add. Okay. Yeah. So a lot of
Jesse (29m 42s):
Seneca groups Ashcroft included our going to have like minimum Investments somewhere in the 50,000 range, after that it could go up or down. It just depends on the group. Depends on the deal. So, you know, we’re talking about a, a, a somewhat substantial amount of Capital to start with. So if you’re the type of person that’s got 5,000 bucks today, well syndications may not be the right approach, but you could still start educating on passive versus active and, and things like that. I think the biggest thing to, to keep in mind here is there’s a lot of, I wouldn’t call it argument, but there’s a lot of a people who will say, well, why would I do a syndication deal where I’m getting eight or 10% a year cashflow when I could buy my own single family house and get 15%.
Jesse (30m 28s):
And while that may be true in some markets, in some cases, there’s a bigger picture here and that’s your time value? You know, you’re paying yourself that premium of 5%, let’s say for your time. So if you, if you look at the whole spectrum of the year and you had to create the LLC and work with your CPA and do all these filings and get a property manager and Lisa’s put together and vet tenants and background checks, if all that time spent is worth, you know, a thousand bucks, two, you then yeah, you’re right. You know, you could make more doing a single family. So for me though, I it’s, you know, I’d rather have my time. I’d rather have flexibility.
Jesse (31m 8s):
2 (31m 9s):
If, and when I do hear that from people, not that smart people or people on real estate, don’t say that, but I find that most people that say that they haven’t done either, they have been to run a property and they haven’t been a passive investor because it is definitely, you know, when you, when people say real estate, it’s a passive investment. And I, in our initial emails, when I saw the word passive, usually right away, I’m like, Oh, what does that mean? Because there’s no real passive. And it was like, Oh, he’s a limited partner. Okay. That makes, that makes a little more sense. You don’t own a property and manage it and have passive income. True, true. And even in, in full transparency, either being a limited partner, like I am full time, isn’t obviously a a hundred,
Jesse (31m 43s):
A percent passive. I have to wire funds. I have to vet out deals. I have to call sponsors and, and ask my questions, do my due diligence that way. Sometimes, you know, I go and I, I walk the properties, you know, in that some of that stuff’s optional, but I choose to do it. And therefore it’s not completely passive, but here’s the thing. Once you get through due diligence, why our funds in your, and, and you close the deal, it’s hands off for five to seven years. It just is. I mean, minus reading a monthly update or a quarterly update, if you wanna read it, that’s that, you know, so, so sorry, go ahead. I’ll just say it to me anyways. It’s a lot more passive than, than single family. Even if you have a property manager, a in my experience.
Jesse (32m 27s):
Cause when you get to five, six, seven, eight properties, all of a sudden it’s, it’s these little 5% things that start adding up in eating away at your time, you still got decisions to make and things like that.
2 (32m 38s):
No, that’s a great point. Even today, you know, we have management for our multi-families and I just got an email today saying, Hey, something’s wrong with a coin machine. It’s like, I know there’s going to be a manager to fix it. I know he’s going to call somebody, but just having to deal with that interface. Like, and it sounds like you’re the same with me. I’m not going to just go, okay, that’s fine.
Jesse (32m 56s):
Is it what’s going on? And yeah,
2 (32m 58s):
His personal time. So this is a perfect segue to a, the exit strategy. When it comes to syndication
Jesse (33m 7s):
May be using the app.
2 (33m 8s):
As an example, if that person, you know, they invest 50,000 into the deal five to seven years, I’m assuming that there was a refinance or sale. Maybe walk us through that with what exit
Jesse (33m 19s):
It looks like for your Investors. Yeah. First thing to recognize is a, is again, back back to your own goals and philosophy, we talked about 10 30 ones and all these things, everybody kinda has their own, what they would like to see happen. I’ve invested with groups that never project to sell. They go in and they buy it’s a value ad and they say, Hey, look, we’re going to refi when we can, as much as we can. And we’re in it for the long haul could be a 20 year deal. You know? So, and you, you gotta, you gotta put that in perspective for yourself. What if you’re 80 years old? Is that appropriate? Maybe not. You know, and so kinda the sweet spot in the industry are these five-year underwritings right.
Jesse (33m 60s):
They’re projecting out five years. Ashcroft does that typically, historically speaking, they sell before five years, but that’s in no way a guarantee and they don’t project that. So they’re trying to be conservative and say, you know, it’s about five years, but fact is when you’re done with your renovations and, and the rents are now where you wanted them to be, you’re just looking for a buyer. If the buyer comes up the two year Mark. So, you know, if you’re going to hit your projections, you know, why not?
2 (34m 28s):
Is that the, if you do find that it is advantageous to sell before that five years, what type of, kind of like, does it go to vote with the LPs? Are, is it just completely in control of the sponsor to sell at any point?
Jesse (34m 42s):
Again, it depends on the group I’ve been in Investor with a group where we took a majority poll. Do we want to sell here’s our offer price? And there’s other groups that are just you’re at the discretion of the GP, their going to make the best decision on behalf of everybody, specifically the limited partners. But, you know, w you know, me being an LP when I go into a deal and I see some projections, like 8% a year cashflow in 15% IRR, meaning that, that proceeds at the end, plus the cash flow, basically, you know, if, if they can get that to me in two years, well, I I’ll take that. You know what I mean? Versus waiting five. So I think most people would be inclined, you know, to be in favor of something like that.
Jesse (35m 25s):
But it just really depends. So all of this stuff depends. I know nobody wants to hear that. It’s like a, like a lawyer speaking, you know, it depends, but it depends. Yeah. Different models, different hold periods, different a, you know, Ashcroft is now offering 10 31 exchanges on the backend of their deals. And so if you want to go, Ashcroft deal to Ashcroft deal. That’s a smoother transition without having to worry about those million dollar minimums and all that that we talked about earlier, you can Stilton 31 to someone else’s deal is just you’re on your own in a subject two, their terms and conditions, things like that. So, but Hey, if that’s not in the cards for you and you don’t like 10 30 ones, that relatively means nothing.
Jesse (36m 6s):
So that wouldn’t even be part of your criteria. So it just knowing yourself. Yeah, no, that’s helpful. Okay. Travis so we’re coming to the end here. I just wanted to a, normally what I do is that kind of asset or something that we’re talking to here do, you’ve already alluded to the first book you bought, but are there any resources in terms of education, obviously you’re your own, but that we’re helpful to you, whether it’s a book podcast that are still helpful, that you would recommend too to listeners. Yeah. I, I think again, it starts with, ah, like your goal’s in your mindset. I’m a big Tony Robbins fan. So awaken the giant within is a fantastic book. It was written quite a long time ago, but it’s just timeless, man.
Jesse (36m 47s):
That’s just human psychology, motivation goal setting. That’s a great book. He’s got a lot of audio programs to a Joe Fairless. He has written a book, the best ever apartment syndication book. So whether you want to be active, passive, or just know more about the space that’s on Amazon, audible, that’s out there. That’s been a great resource. So yeah, those are two kind of to start with. One is more of a how to do and a practical. And then one is more of a mindset and goal setting. And if listeners want to find, you find Resources to your education work and they go, well, email is best for me. email@example.com. The free passive investor resource guide is Ashcroft capital.com forward slash passive Investor.
Jesse (37m 29s):
I’m on LinkedIn. I’m on bigger pockets. I’m on Instagram, I’m out there. So I like having conversations just for the sake of networking, right? Whether you’re accredited or not, whether you want to go the syndication route or not. I have conversations all week long about fire movement, house acting flips, just anything so happy to connect with anybody and feel free to reach out anytime. Okay.
3 (37m 52s):
My guest today has been Travis Watts Travis thanks for coming on. All right. You bet.
Jesse (37m 55s):
Just thank you.
3 (37m 59s):
Favor. Listening to the work in Capital Podcast. My goal is to help individuals break into real estate investing as well as educate experience in Investors. If you enjoyed the show, please share with a friend subscribe and give us a rating on iTunes. It really helps us. If you have any questions, want to learn more or likely to cover a specific topic on the show, please reach out to me via firstname.lastname@example.org. My name is Jesse Fragale and I’ll see you back here for the next episode or the working capital real estate podcast.