LUR 96 Elisa Zhang | Multifamily Real Estate

 

If cashflow is your one metric when investing in multifamily real estate, you may end up with unwanted results. Assess more than one metric that is aligned to your goals for better outcomes. Lisa Hylton’s guest in this episode is Elisa Zhang, founder of EZ FI (Financial Independence) University. Elisa discusses with Lisa how she began to add valuation to her assessment. Valuation increases your wealth, while cash flow creates jobs. Join in the conversation and expand your metrics! 

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Assessing More Than One Metric When Investing In Multifamily Real Estate With Elisa Zhang

I have Elisa Zhang. She’s the Owner Principal of over $100 million in holdings across 1,000-plus apartment units in her portfolio. Many of these apartment buildings were acquired through 1031 exchanges and syndications. She remains fully involved in the multifamily investing world through the pandemic and has never stopped looking for and finding deals for the benefit of her investors. She focuses her time and expertise on helping typical 9:00 to 5:00-ers quit their jobs by using the power and infinite opportunity of real estate investing. Elisa herself quit her corporate IT job because of multifamily real estate investing. She’s committed to helping others learn how to do the same through her course offerings at the EZ FI University and her podcast 10,000 Roads to Financial Independence. Welcome to the show. 

Thank you so much, Lisa. It’s great to be on the show. 

I’m super excited to have you on. There are so many good nuggets here. The readers know that the show is broken down into three parts. We get into the background so we get to know you a little bit. We are going to get into the meat of the episode and then close things down with our Level Up questions. Where in the US do you live? 

If you’re chasing a single dimension, you tend to overlook some other criteria and you end up with unexpected results. Click To Tweet

I live in Seattle. Most of my investments are out-of-state, in Dallas and Phoenix. We have over 200 AMU and more than 600 units. The resume gets shorted all the time. 

You all are buying faster than you can update this resume, this one-pager. I did see on Facebook that you guys announced that you had a new acquisition. I can’t remember where that one was but it was in Texas as well. 

Our first deal in Houston. 

What do you and your family like to do for fun? 

It’s a little sad. The kids always say, “Mom is always working.” We love regular things like going out to eat. We love traveling. We traveled for five months during the COVID-19 because at one point we were all holding up at home and I’m like, “What are we doing? We have the flexibility of time and state. Nobody is traveling now. We should be traveling.” I have an article on my website, too about how I traveled with one suitcase with the two of my kids and my stuff in one single carry-on suitcase and traveled five months with it. My husband had three bags. Let’s not talk about that one. Having the minimalistic of living was a hot thing in 2020. We went to Cabos, Phoenix, California but stayed at the places long-term. That was good because you change sceneries and all that stuff. 

That’s a part of the contrarian. When people are hold-up in their homes, it’s like, “This is the time to go travel. Let’s go. Let’s hit the road with kids in tow.” 

We did precautions. Nobody is on the airplane. Who’s going to give you the attention? 

Let’s jump right into your story. I am fascinated by it. You were in corporate IT and you were able to transition out as a result of multifamily real estate investing. Can we touch on how that happened? 

Change doesn’t happen overnight. I always say this, this is my frequently used quote, “Rome is not built in one day.” In American culture, there’s always the now mentality. It’s like, “How would I do this sooner?” That’s when people get into a bind oftentimes. I started in 2009 investing in single-family homes. Like anything, there’s always a motivation behind why you do certain things. At that time, I had no motivation other than, “It’s the right market to buy something.” We don’t have the knowledge nor do we have the motivation to learn more knowledge so we continue to buy single-family and went from there. 

LUR 96 Elisa Zhang | Multifamily Real Estate

Multifamily Real Estate: Properties in locations with better median income perform well.

 

In 2015, my daughter was born. I’m the only single income in the family. I and my husband have discussed we want to spend time with our children. We want to see them growing up. We decided that my husband will stay at home. He’s our primary childcare. I had to go back to work. Even after six months on maternity leave, it’s not enough time that you have spent with a newborn. It was a hard moment to go back to work, which prompted me to start looking for how to quit my job investing through real estate because that was the only way I know how to invest. Every time I look at my stock portfolio, it’s not going up. The 401(k) account is still the same but the real estate is doing well because we bought three gold. 

I stumbled upon BiggerPockets and learned all about cashflow. I read Rich Dad Poor Dad because everybody on that podcast had talked about Rich Dad Poor Dad so I read it. It was an interesting read. At that time, I already had all these podcasts. It wasn’t a revolution because you can learn cashflow. It helped clarified in terms of where the side of the quadrant where you want to be and how that whole thing can potentially work. 

I read a lot of business building and real estate investing books. I also spend a lot of money online. At first, we bought fourplexes as what they said on BiggerPockets what we should do. Do the whole add value, value adds methods, and then go turn around the refinance. That was pretty easy. My husband has a Marine cabinetry background. He turned that goodness into renovating the units. I managed the tenant. We are going at a slow pace because he’s also watching our daughter at the same time but it got us to learn a lot of the detail work on the ground level. We rinsed and repeat it and bought more fourplexes. 

Our source of funding is coming from our single-family. We can transition out of the single-family, 1031 exchange into fourplexes. We cross-collateral our other properties and got HELOC loans and got into the fourplexes. That’s how we’ve got there. After more podcasts listening, I start to get bored and don’t feel stimulated. I wanted to buy a commercial property because they said that’s where you can scale but it was scary. I want also not to manage anymore and I don’t want my husband to be renovating them anymore. These are the goals in my mind. I wanted to take on a partnership knowing in the future that to grow fast you probably need to take partners. 

I was talking to a colleague of mine and he always asked me, “What are you doing this weekend?” I was like, “I have these units that I’ve got to renovate.” That’s how we have these competitions. It’s interesting because I have a single-family home. I never want to own a multifamily home but I will be interested in investing. Many conversations later, I found a twelve-unit property in Tacoma. I was chasing cashflow hard. One thing I would tell the investors if you are chasing a single dimension hard, you tend to overlook some other criteria and then you end up with a product that maybe not as expected. 

Finally, after finding all the properties, I found this property that is a twelve-unit in Tacoma at a cap rate of 8% and I was like, “Great, there are no 8% cap rate properties anymore.” It turns out the property is in the ghetto. After we bought it, there are a lot of headaches with it even with the property management company but I did reach my goal. I was able to get it managed by the PM. It retired my husband out of renovation and it was further away. It’s my way of building on a system, which is forcing ourselves to be removed from the equation. I took on a partner and did a commercial loan. 

All these boxes were checked but when we were operating them, it was not as planned. We wanted to buy it for cashflow but it was not a cashflow play. It was more of a value play. We renovated the units as we’ve got vacancy and then we were able to deal in about a month or so with 100% equity. My partner probably gets paid more from this deal than I did who is passive. I was like, “I don’t know how I did that,” but there are some learnings on the deal structure that needs to be learned there, too. 

Twenty months later, you sold it? 

Yes. We 1031 exchanged their first property in Phoenix. We put partial ownership like a tenant in common ownerships together. These are all jargon. You co-own with another entity but you can potentially 1031 into these structures. From there, we were in the right market at the right time. In the Phoenix market, we were able to sell that property again in about 20 months, 18 months to 21 months or so and made another 91% profit. Now we are maybe on to our third, 1031 exchange again and got into another property and we may be looking at selling or refinancing after having it for about seven months and reaching about the same returns. 

Cashflow, not valuation, helps you quit your job. Click To Tweet

There’s an astronomical power to be had in 1031 exchange, which I heard Joe Biden is going to put some limits on that. It’s something to look into if you are looking to exit your property. Simultaneously, we also wanted to invest out of state because I went to a lot of meetups locally in 2017 and wanted to rinse and repeat our other small multifamilies. It was hard to find a deal based on the criteria we were looking for. In hindsight, if you are a more sophisticated investor, you can find a way to bring value to certain properties that may be more than just cashflow. We weren’t looking at that before. We weren’t that sophisticated. We were only chasing cashflow because that’s what BiggerPockets tell us. We have missed out on a few properties that we would otherwise have been making a big profit on. That’s the downfall of only looking at a single metric when you return. 

Has your investing strategy changed over the years, specifically in the multifamily space? Once you’ve got into multifamily, that first twelve-unit to then after what you invest in now, has there been a change? What has driven that change? 

There are many strategy changes. Let’s go back to the beginning. Once we started investing, we had these single-family homes. The strategy was we always buy seven properties and pay them off on a fifteen-year mortgage and then we will be retired free. It would be generating enough income for us to retire and do whatever we want. That’s prior to having the kid. If you are on West Coast, you are like, “I have to do at least three years of hard savings to get into another property because they cost more.” Also, when you put in a fifteen-year mortgage, there’s not much cashflow because your monthly obligations are a lot higher. 

For a lot of investors who are chasing interest rates, that may not a good measure because cashflow helps you create jobs and not the valuation. We went the other way, which is completely cashflow. We only look at cashflow because we are trying to quit our jobs. We did do these fourplexes but the process was always cashflow. There was cashflow property to get into and cashflow even better. It was great until we hit that Tacoma property. If you chase cashflow so hard, you end up in not desirable locations. On-paper cashflow does not equal real-life cashflow, your repair ended up being a lot more for that property. If you didn’t budget enough capital improvement or capital replacement money, then you ended up having to feed in the cashback to the turnovers and all that stuff. You didn’t end up having cashflow. 

We did get an equity gain from there. Also, around the same time, we start syndication because we went outside of the state. Once you go outside of the state, the podcast says, “You are supposed to go bigger because then you can have an on-site manager, have visibility, and all the other stuff.” At least that’s what they say. We follow that route. We don’t have the capital to buy an entire 100-unit. The podcast said that it should be more than 100-unit. You come to realize that maybe it’s not always the rule. 

We followed that path and we subscribe ourselves to a lot of educational programs. I’m not CCIM certified but I did take all the CCIM classes. I joined a few network and mentorship groups to gather knowledge and meet the network of people. Through hard work and going to Dallas pretty much every month, we’ve finally got into our first deal midway through 2018. We were part of a 170-unit acquisition, mostly we brought a small portion of the equity to the table, also underwritten the deals. 

Was that the deal that you went in with your tenancy in common or was it a different deal?  

That’s a separate deal. It’s a syndication deal. It’s not like the ownership. There are two paths are leading to that. It was completely through apartment syndication. We weren’t the asset managers. The asset managers are the boots on the ground. I always had the limited belief that when I go outside of the state, I must have boots on the ground to help me operate these deals. These are my partners who mainly do asset management day in and day out on the side. 

We rinse and repeat the same business model a little bit more and that leads us to pretty good success, getting more unit counts. That’s why when people say, “What is the unit count?” I was like, “It doesn’t matter.” It’s how much do you owe that property and what control rights you have that make a difference. You can have 4,000 or 5,000 units under your resume but you only own a small fraction, you may not be as wealthy or cashflow as much as someone who owns a 100-unit building by itself. It all depends. It’s fantastic. 

In the syndication world, I learned about teamwork. I was a Product Manager. People ask me what I do at my job. I’m like, “I hurt cats, that’s what I do.” Product managers make sure stuff gets delivered. Not project management but also have a vision of where the product is going. That is where I hurt a lot of cats. In real estate, especially syndication, you hurt a lot of cats. I wrote another article about this. It’s transferable between being an IT product manager to transition into real estate as a syndicator. It’s a transferable skill. I didn’t realize that until later. 

We then had a couple of partnerships, some went well in terms of the project and some are not so good because there are challenges in the projects. We observed that they were low-income areas, less than $35,000 a year. Meaning a household income tends to lead to less steady performance on the property unless if it was bundled together with some large portfolio. If you had 450 units in this area, then there are cost efficiencies and it helps you do that. Most of the time, it’s a little volatile. It’s the same premises as our Tacoma property. It’s going up and down. You have to spend a lot more time. 

On the contrary, our B-class properties or the properties in a better location with better media income tend to do pretty well. COVID is an extreme side of it. When March 2020 comes right around, two other projects that we had, had a little trouble with things. COVID helped with that believe it or not because there were a lot of government assistance programs or loans for small businesses. We were able to get that around and helping taper off on some of the hardships on one of the projects that we had. We have to step up to look at how to exercise a little bit more control, helping our asset managers out do a little bit more duty. 

The other part is this is where it made us realize that we didn’t have a lot of control for our investor’s sake. We looked into getting more controls. Also, that experience made me realize that we are pretty good at doing asset management. I don’t know why I didn’t think about that before. I was out of state. I didn’t want to do asset management because my life goal is to live anywhere I want and then work the hours I want. In my mind, at that time, it didn’t fit that goal. 

Simultaneously in Phoenix, we had that project and we are growing in that market. After we take our first syndication deal over there, I was tasked unexpectedly to do most of the asset management. We have to do it. It was a great blessing in disguise. It helped us to learn how to asset manage being the only asset manager and the sole responsible person for these remotely in Seattle was a good setup our PM put in place. We have frequent communication with our PM. We have a photo passing around our PM that puts it in place. After you do this enough times through all different projects, you have KPIs, key metrics that set up to see and have a good idea of the health of your project and then seeing where you can move them. 

A lot of secrets are in the books. You are seeing the expenses, the incomes and all that stuff. We were good at that. For the twelve-unit, we manage our financials. I don’t do TurboTax but I manage all the bookkeeping before I give it to my CPA. That gives me a lot of knowledge into what does the lender look for? What am I looking for when we do a refi? What are the buyers looking for when we are selling? I’m learning through my job. I realized I was pretty good at that and being foot on the ground is not that important. It is important that I still fly there often and also Phoenix is closer. 

These can tighten up some of our criteria and then we also only focused on acquiring. After the first two projects that were in various C locations, we have adjusted our buying criteria to buy in the better locations at the medium income, household income, $40,000 or above. That was one of the criteria. We have some properties that are almost in A location with medium incomes above $60,000, $70,000 or $90,000. These are stable and that strategy seems to be paying off during the COVID. You can see a difference between these portfolios in terms of elections and all that stuff. 

My follow-up question on that is by choosing to invest in some of these better class areas, what is the impact on returns? 

LUR 96 Elisa Zhang | Multifamily Real Estate

Multifamily Real Estate: In a growth market like Phoenix, you see strong growth in valuation.

 

It’s more stable. In a growth market like Phoenix, you see stronger growth in valuation as well. Remember, I was talking about our strategy was cashflow only. The Tacoma deal swings back more into the middle. Syndication made us realize that there’s money to be made in valuation as well, which is why people buy single-family homes because all they do is valuation. It’s high risk with single-family homes because your valuation is not dependent on you. Your valuations are more dependent on the market. Whereas multifamily still depends on the market but as long as you have the cashflow, you can continue going and not have to be forced to sell your property at a less valuation. That was one good thing about it. 

Also, valuation increase some multifamily based on a formula, which you have some control over. If your property is operated more efficiently, then the valuation uses a multiplier out of your operation numbers. That gives you a higher valuation. That’s the difference between multifamily and single-family investing. Even when you invest in multifamily, you should still look at a valuation increase because that’s where you make wealth. Valuation increases how to become wealthy and cashflow helps you quit your job. 

I always teach our students like, “You’ve got to be clear on the goal in life and what you have in mind.” If it’s established wealth, then you want to bat a little bit heavier on the valuation if you are sure in the next five years or so. “I like my job. I’m not going to leave them.” Cashflow is only evident if the project is doing well. You don’t want to be on cashflow-heavy deals that have less possibility valuation. That’s why we only invest in the growth market. That’s what we observed. A better location valuation tends to recover quickly as well as a collection because your tenant profiles are going to be more responsible and they have more savings. They are going to withstand the hardships a lot better. In our A-class locations, we have delinquencies. It got caught up faster and overall, it’s more stable. In the C-class, the chart goes up and down. We’ve got new people in there. We’ve got more collection issue, which goes up and down and it makes a little bit hard to manage. 

This is so good, lots of good stuff on asset management here. Taking a step back, misconceptions passive investors have about asset management if any. 

Passive investor pretty well understands what you are doing. A lot of investors were like, “You are remote in Seattle. You are in Phoenix.” Now they don’t ask that question because we have three portfolios going. They are like, “Whose foot on the ground here?” If you look at these big institutions, what they have is they were a partner or they own a property management company. If you ask them, “Is your asset manager foot on the ground?” They are like, “No. Our asset manager lives in New York and sits on a New York desk. They are good with debt and financial stuff. Our PM sits in the market and they are around the projects. Our asset management makes sure the PMs are doing right. They all come in and check on certain things.” 

Be very clear on your goals in life. Click To Tweet

A lot of people don’t know what asset management is. They say, “What’s the duty of asset management versus property management?” Property management does day in, day out managing tenants, getting the contract, getting the vendor and all the stuff a good property manager does. The asset managers are responsible for the strategy, business plan of the property, reposition, refinancing, the exit, where you moving to and what the rents are. Oftentimes, investors who are doing their properties are like, “My PM is not doing anything. My rents are below market.” That’s your job. Your job as asset managers is to have a good POS with the rents and asking your PMs to push it for you. It’s people who are rolling the pedals. 

At this point, I would like to pivot a little bit to talk a bit on the investor relations side of the business. People who are reading are probably thinking, “She’s now in syndications.” You have mentioned you have a couple many different units, close to 2,000 and $200 million in assets under management. The big-ticket question that a lot of people have is where do you get the money to buy all these different assets? Can you talk about the capital raise? 

When people ask me a question, they are like, “How do I do syndication?” What they mean is how do I invest in large apartment buildings. Syndication is simple. It’s the method of raising money. You can do a joint venture, which is partnerships. You can do a tenant in common as I talked about before, which is not a partnership but it’s a way to buy a fraction of the properties and then you stay in your little part. It’s still partnerships because you are going to talk to the other guy but it’s a little more restricted, legally. Also, you can do syndication, which is raising money to buy property properly. Some people raise money and buy properties without going through syndication. It’s not legal. Don’t do it. 

We went through syndication. We found capital through the 1031 exchange. We also put not joint venture tenant in common deals together but also joint venture inside of tenant in common deals together. People always say, “How do you structure it? You did all these different structures.” I’m not trying to be creative over here because you don’t want to reinvent the wheel. After all, a tenant in common is the hottest thing. There are pros and cons to any method of structuring a deal. 

The reason why certain things make sense has to do with the goal of the investment. If you are going to do a long-term hold, it’s probably not a good syndication deal because a syndication deal is when you have a large pool of investors coming in. Sometimes 80 to 100 investor comes in. It will be hard for you to say, “We are going to hold this indefinitely and we don’t know when we are going to exit. When you exit, you may get this amount of return and mostly we are doing it for cashflow.” That’s not going to go well. People want to know what your business plan is. If there’s a plan, how quickly can I get my money back? That’s the audience that we have. 

We have two properties in Old Town Scottsdale, I don’t know if folks know it but it’s a great place, with great bars. It’s an A location. It’s a hot spot. There’s limited inventory. When we bought the property, we want to hold it for a long time. That’s when we had a few VIP investors that we have. We put a tenant in a common deal together and we structure it so that I am the manager of two tenants in a common party. In the future, people can 1031 in or 1031 out to facilitate that. In addition, we also co-own properties because we were doing 1031 as well. Through 1031, there are powers of being able to own all properties by yourself or maybe with another partner and continue rolling a snowball as long as you are investing and be sensitive about how long you are holding and exit quickly and leverage the tax. 

LUR 96 Elisa Zhang | Multifamily Real Estate

Multifamily Real Estate: Syndication is raising legal money to buy property.

 

One item there on the 1031 exchange, that property where you bought and there were 1031 exchanges and you said people can then 1031 exchange out. They can 1031 exchange out when you as a group decide to sell the property. 

No. They can 1031 out by themself. That’s the beauty of a tenant in common and the rest of the group may still want to hold the property. When you are taking out $1 million, you’ve got to replace it. Maybe the people in the group will be able to buy that. They can say, “No problem. You 1031 exchange that. There’s no tax event occurring over here. We are going to create another tenant in common come in and buy it.” Anyone can buy that little piece. 

Essentially, that person who’s leaving would say, “This is how much I want for my piece.” It’s like leaving a partnership. 

You probably have the broker getting involved. You would do a fair market evaluation that you agreed on. 

Granted, you said you did it for a certain selection, you kept the group small, select VIP investors. I feel that this is powerful because it’s not necessarily syndication but it is syndication with a take involved. 

It’s different than syndication. Why would you want to do syndication? It’s because it allows you as an asset manager to have full control over how you want to run the asset. In syndication, you only want to have 1 to 3 managers. You don’t want too many parties in play. There may be other parties that are equity partners but the asset manager should only be about 2 to 3 parties. Otherwise, you have too many cooks in the kitchen syndrome. 

These asset managers have full control over the property. Your passive investors who contributed equity do not have mostly any rights. That’s one thing that a passive investor needs to understand. Your income is passive but also you don’t have a lot of control rights over it. You have a little bit more control rights over REITs if you were to invest in REITs. For all intents and purposes, you can think about your investing REITs. Risk is involved in all that stuff. It’s beneficial for the asset manager to be able to run the deal without too much influence from 80 to 100 investors. There is a structure in this format, which they pretty much don’t have a lot of managerial rights. 

As a result of having no manager rights, they also limit their liability because the bank is going to come after them if there’s a bad boy clause that is violated. 

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They don’t try or any of that, and then when the tenant wants to sue you, first of all, they are going to sue the LLC. A common question I get was like, “How am I liable? Should I use the LLC to invest or not?” It’s similar as a passive investor does not much liability and if the tenant was to sue, the tenants will go after LLC, the host of the property first, before they’ve probably got to maybe crack open that they try to go after the manager. Who’s the asset manager? Who’s more liable for this? The last person that we will ever think about is the limited partner. Also, in syndication, it’s a security offer. You are protected by SCC. There are only cases where people would sue us through SCC. We haven’t been sued. It’s through suing the active managers and there is no other way around because you have no control over your destiny. Nobody else does. 

The 1031 TICs sound more like joint ventures in a way. 

It’s stricter. A party cannot perform services for the other party for free. There’s no manager. There is a TIC manager but it’s a formality. Nobody is running the property. Let’s say you have four TICs. All four parties have a unanimous vote on decisions on the property. Select your partner carefully because all you guys need is to be on the same page when running this stuff. We select our VIP investors to come with us and we are the manager of each tenant in common. 

We have that control rights when we are running it but also our investor has a more front seat involvement. They participate more in decision-making because you are running this as it is. You have an open conversation with that. It’s rounded differently for these units. It’s a legit tenant in common. Each tenant in common will make their own decision and they would cast a vote. That’s how we do all the stuff. As you can imagine, the legal cost, the bookkeeping, the tax filing because you’ve got to file four tax returns instead of one, each year could increase the operation cost. 

All of that has to be checked out to make sense to see, whether it’s the best thing to move forward. 

The IRS will not contest you to say, “You are not a tenant in common. You are a partnership.” You have to file that way so it nullifies your 1031. You have to do all the documentation to make sure that files correctly. 

I did not know this. I have seen syndications out there that are selling, and then they offer people to 1031 into the new opportunity. Personally, I haven’t had that experience myself. I didn’t realize the kinds of things that end up happening when that happens. 

The tenant in common is not offered for syndication at all. We truly do it legitly. When we sign on the lender loan, it’s the four parties that get signed on the loan. Any time where it gets a little gray, then they create an issue. Interestingly, you can put a tenant in a common deal together and syndication. We are exploring that on one of our projects but we don’t know when are we going to do it. How to do it correctly is, let’s say I’m selling my four-unit property into my next deal. Let’s say I’ve got a big deal coming and I’m at the right time to sell one property that I own. I need a tenant in common to get into a deal because the deal is large. I’m not going to be the only buyer. 

For the other party of the tenant in common, I’m going to structure within that part as syndication. For that, I’m going to do syndication. For this, I have a couple of dollars to move into this. The other one, I raise another tenant. That could be done and then you would have been syndicating just that portion. Lisa, you do the farm potentially and that’s syndication. It’s like a farm for syndication. In this case, you are offering as only that fraction piece of ownership of the property. 

I’m not suggesting people say, “Bring a large investor. Bring the 1031 money into this deal by setting up a tick for them and you syndicate the other tick.” That’s not recommended because the person you brought in be better be your partners or already the active syndicated meaning asset manager. Otherwise, that person brings in an amount of risk. This is how I assess it. For me, I would only do tenant in common if only I was to 1031 exchange one of my property. Combine two properties into one. I will syndicate the other part, which I’m also in charge of. You don’t have the promo, the margins and all that recalculation. It’s a lot easier to handle it that way. The investors don’t have to worry about, “Who’s this other guy in this other large part who has a unanimous vote in my investments?” All this works beautifully. 

Don’t complicate it. You don’t need to reinvent the wheel. Don’t do it. Do straight syndication. That’s why everybody is always like, “I’ve got 1031 money.” I can find a small property for you to get into. They are like, “Can I use 1030 into your investment?” We always say, “No, sorry.” I’m going to do some digging into this I don’t know it yet. Apparently, there are ways for you to exit a deal and 1030 the entire part into the next one, preserve the LLC structure, and these opportunities and have your investor come along with you. This works beautifully if you have lots of cooks in the kitchen. Let’s say your main syndicator decides to part their ways, then it’s a little bit hard to execute. Create a long-term relationship with your investors and partners. All these things need maneuvers, flexibility and trust. Only after promises of long-term deep relationships you can do all these maneuvers for your investor. 

The thing about real estate is it is a long-term relationship. When people approach it from a transactional point of view, they realize quickly how much they have left on the table because there’s so much more road to go and you don’t know what other opportunities are ahead in the road. It’s like sowing those seeds to build strong relationships going forward. This was good. I love it. Thank you so much. We covered a lot. At this point, I want to move into my Level Up questions that I ask all of my guests. The first one is what are you grateful for in your life right now? 

I’m in a good state. I’m grateful for the folks who work for me and my family. My husband takes one for the team watching our kids. Also, we have two beautiful children, life can be better. I like working from home. I could be able to use Zoom and all the online tools to reach more people. I’m in a pretty happy state. I continue working on myself in terms of getting to the next level of coaching. I read a lot of books and get into the organization on how we create a company that fulfills the visions that we have in the future. 

That brings me to my next question, which is a bonus question because this isn’t one of my questions. Can you talk about the vision you see for yourself in the future for your business? 

I have big visions of being able to touch millions of people’s life. Mathematically, it turns into about $100 billion assets owned at some point. At some point, it’s probably ten years for lack of better judgment. It may be there are on 10 or 20 years. The main reason is it’s not the AMU. It is to some degree unit counts because it directly associates with life impacted. We have visions to create communities that may bridge the gap and bring resources in. It’s not costly bringing the resources in and connect our tenants with resources that otherwise don’t have access to, like financial educations. There are free sessions from Wells Fargo who will come in and give you financial responsibility courses. All we do is become facilitators and gateways. Our housing becomes gateways for them to be connected to these concepts. That’s the vision we have. 

On the investor side, with all these things, conservative projection, that translates to about helping 10,000 people reach financial independence should they decided to only passively invest with us. Along the way, there’s going to be a lot more people who decide to go more active and that their journey can accelerate a lot more. That’s like the full circle over here. The way you have these visions, magic things happen. All these resources somehow appear to you. We want to help our employees reach a degree where you are helping their financial independence. Financial independence oftentimes is associated with a boring job that you have. That’s why you are thinking about wanting to get to financial independence. Coming from that world, I thought it was silly that I was five minutes late for my meeting. It’s a matter of what you deliver. 

We want to create a company vision for our workers. We don’t care when you are going to show up for the work, what are you going to do and what hours are you going to spend on this. As long as you are hitting all your KPIs and results, that’s all we care about. We want to create that for people. Not only is our company creating investment opportunities for people to go financially free but also job opportunities for people to have that financial-free lifestyle. Helping our tenants to up-level their fiscal responsibility, which translates into better tenant retention and fewer vacancies. 

It’s powerful because it’s all a full economical circle and being able to help people wherever they are in the process. You are going to have people who are wanting to be active but there are going to be tons of people out there who still want to invest passively. It’s like being able to meet those people where they are and be able to provide those opportunities. 

LUR 96 Elisa Zhang | Multifamily Real Estate

Multifamily Real Estate: In syndications, you only want to have at most three managers. You don’t want to have too many.

 

I also want to provide more opportunities specifically for domestic violence victims or women equality. In our communities, we can provide a possible connection with career options or a better opportunity. It’s a touching point or a connection point for people to discover. They could transition their careers or take their careers into high-tech careers, for example like codings. Women are a fantastic workforce for high-tech work. 

That then brings me back to my next question here, which is what has attributed to your success and continuous growth? 

It’s networking and continuous self-education. The two elements go hand in hand. The network brings you knowledge and concept you haven’t even heard of before. Another analogy is like your wielding your knife for ten years and then go into one battle. You are learning, and then reading different subjects now other than just only multifamily. If you want to get into multifamily, maybe reading some different subject that lines with your passion, and then things are going to align together like magic. Knowing the right people and creating a vast network of connections that you have allows you to go into a toolbox to figure out who can help you get to the next level. 

In real estate, relationships are super important. Last, is what do you now know that you wish you knew at the beginning of your journey? 

You don’t necessarily have to go through the small stuff before you invest in large stuff. Mindset is everything. Every step of the way when I look back, it’s myself that’s blocking me from the next big step. I told myself that I couldn’t manage remotely. I told myself like, “What are these larger partners? How do I even do this?” I told myself that I need to own a few small properties before I get the large ones. I have seen people who didn’t do it. Don’t jump into a Titanic. It’s still prudent to learn the basics but maybe there are many different ways to learn that. Maybe there are ways to passively invest or partner up but learning the same thing. 

One thing that I took was when you talked about chasing cashflow and how to be cognizant of that because you could be missing other opportunities along the way. 

Here’s a neat thing. This is where I lose your readers probably. I will go into my math mode. I want to give an example. I was buying that twelve-unit and then I was chasing that 8% cashflow. Let’s say I put $300,000 into the deal with 8% cashflow. It’s $24,000 a year. In a year and a half, I doubled that money. Now I have $600,000. All I needed to do is invest in a deal that generates 5% cashflow. I’m at $30,000 a year. That’s more than $24,000 a year. The asset I invested in at a 5% cap rate is probably going to be a great location. The better location, the rate is lower with a steady investor. On that $24,000 I’m getting, I’m probably only getting $12,000 because the rest goes back into turnovers. The 5%, I’m already making more. There’s power on equity doubling and then putting that back into the cashflow. If you are looking at only cashflow, then you can be stuck in that property for 8%. Whereas if you are releasing your lazy capitals out and leveraged it up well, then you could go faster and further. 

That example at the end, I’ve got that. Especially in the environment where sometimes the returns are trending on the lower side, people might be like, “It’s cash-on-cash now.” Not losing focus of the fact that their money is still growing and can continue to appreciate. 

Time, it grows. 

Know the right people, create a vast network, and figure out who can help you get to the next level. Click To Tweet

Thank you so much, Elisa, for coming on. I appreciate it. There’s so much good knowledge. This show is packed with good knowledge. I love it. If my readers want to learn more about you, where’s the best place they can go to learn more? 

They can check us out on EZFIUniversity.com and that’s how you primarily find us. We have a lot of free blogs and webinars that we posted over there. They are going to create individual pages for the podcast over there as well. There are lots of free materials. I write long articles. My marketing team always comments that any of my three articles can be put together as an eBook. It focuses on showing people through, mathematically, how I take one example and showing multiple scenarios on how that would work. 

Thank you so much, Elisa. It was a pleasure having you on. It was good. 

Thank you so much, Lisa, for having me. 

You are welcome. 

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About Elisa Zhang

LUR 96 Elisa Zhang | Multifamily Real EstateElisa Zhang is the owner/principal of over $100M in holdings across 1,000+ apartment units in her portfolio. Many of these apartment buildings were acquired through 1031 Exchanges and syndications. Elisa remained fully involved in the MultiFamily investing world through the pandemic and has never stopped looking for and finding deals for the benefit of her investors.

She also focuses her time and expertise on helping typical nine-to-fivers to quit their jobs by using the power and infinite opportunity of real estate investing. Elisa quit her corporate IT job because of MultiFamily RealEstate Investing and is committed to helping others learn how to do the same through her course offerings at EZ FI University and on her podcast, 10,000 Roads to financial independence.

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