The Power of Passive Investing with Annie Dickerson

 

The COVID-19 pandemic may have devastated the world, but looking at the bright side of things, it did the real estate industry a tremendous amount of good. Joining Lisa Hylton on today’s show is the Cofounder of Goodegg Investments, Annie Dickerson, who talks about her fair share of passive investing in real estate while explaining why now is the time to get into real estate. Sharing her experience of what it’s like going into the industry without the proper knowledge and know-how, this episode covers the important role education, information, and the correct systems play in the success of your business.

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The Power of Passive Investing with Annie Dickerson

I am excited to have another amazing guest on the show. Her name is Annie Dickerson. She is a real estate investing expert with over a decade of real estate investing experience. She and her business partner, Julie Lam are Cofounders and managing partners of Goodegg Investments. A company that helps people invest passively in real estate syndications. Together they have helped hundreds of investors across the country to invest in commercial real estate assets totaling over $870 million. Annie and Julie are authors of the book called Investing for Good: The Surprising Strategy For Building Wealth While Also Making An Impact. They are cohost of the podcast Investing For Good and creators of the Real Estate Accelerator, a top rated online course, designed to help people learn how to raise private capital for real estate investments. Welcome to the show, Annie.

Thank you so much, Lisa. I’m thrilled to be here with you.

I’m super excited to have you on. I want to share how I met Annie and the Goodegg Group. I got introduced to syndication through another person in this space. I remember going to her website. Annie was a guest on her show. I remember listening to that interview and I was like, “I had no idea that there were people and women who were doing this.” Going to her website and seeing her business. It was so inspiring. I’m happy to have you on. To kick things off, can you share with my audience your story about how you got started investing in real estate.

It’s surreal calling myself a real estate investor because I never set out to be one. When I was growing up, my parents always lived in apartments. I never even lived in an actual single-family home. The whole time I was growing up, we always lived in apartments. That’s all I knew. I thought, “Maybe someday I’ll buy a house of my own,” but I didn’t understand how it worked. After I graduated from college, my husband and I had just got married, and we went to go buy our first home. We were living in Washington DC at the time. Being in our early twenties, we thought we’ll buy something trendy like a condo or a loft. It will be cool and have lots of parties. Luckily, we had a realtor who stepped in and he said, “Condo is nice. Loft is nice, but it comes with some HOA fees and things like that that you may want to consider.” He said, “In Washington DC, there are these row homes that are very popular. They’re like townhomes, but you buy them each separately. A lot of them have two units, a main unit and then a basement in-law suite. You could live in one unit and rent out the other. If you were to play your cards right, someday you could get that to be cashflow positive.”

That was the first time I had ever thought about getting money out of real estate. It never crossed my mind. I was like, “I’m going to grow up. I’m going to go to college, get good grades, get a good job. Maybe buy one house and that’s it.” That conversation introduced me to this whole other model of thinking about real estate. That was the first time they call it house hacking. That was our first house hack. We then went on to house hack a few more properties. We’re still house hacking. Even though we have young kids, we’re still living in a duplex and renting out the other unit. Along the way, we started dabbling in other things. We’re investing out of state and learning how hard that can be. We then went on to invest passively in real estate syndication. We loved it so much that we started sharing it with other people.

That brings me to how you play in real estate these days. What made you decide to start playing in syndication like investing passively?

I never even knew. I had invested in real estate for years and I didn’t notice that syndication was a thing. It never crossed my mind. I would look at big apartment buildings or office buildings and I think, “Big companies own that. Somebody like me can never own that or a piece of that. It’s not possible.” What happened was we live in Oakland, California in the San Francisco Bay area. It is incredibly competitive and expensive. All we’ve ever done is house hacks. I thought, “We could house hack, but it would take a long time for us to save up the money to buy another duplex here.” I said, “Okay, what other options are there? Maybe we could invest out of state.” I started doing all the research, looking at all these different markets all around the country. That takes a long time.

The very first thing that every passive investor should think about is their own investing goals. Share on X

I finally found a market that I liked in Huntsville, Alabama. It fits a lot of our personal criteria. We started investing there. When you live in the San Francisco Bay area and you try to invest pretty much anywhere else. It looks like everything is on fire sale. You go and you look. You’re like, “I can get four units for $200,000? I’ll take ten of those please.” It was like that. I was looking at all these properties and I was like, “Look at all of the property I could get.” We quickly amassed a portfolio in the Huntsville area of about twenty units quickly. Everything looked great on paper. When we ran the numbers we were like, “We’re going to make so much money off these properties.” We acquire the properties and then all of a sudden, we started learning that even though people were living there, they weren’t always paying rent on time or at all. Things started breaking. Things started happening. We were dealing with things like tenant vandalism and theft.

We were not prepared for this because all we had done was house hacking. When you house hack, your tenants are much like you because they’re seeking to live in the same neighborhood that you are and paying the same rent or about the same rents as you would pay for mortgage. They typically have a steady job, steady paycheck, and they let you know when things go wrong. This is not the case with our tenants. We quickly realized that investing long distance in these rental properties wasn’t the best fit for us at the time because we had our own businesses. We had young kids and life is too busy to add one more thing on top.

What happened during this time was our friends and family were asking. They were like, “You got all these properties in Alabama. How did you do that? Teach me your ways.” I said, “Come on over, pull up a chair, and I’ll show you exactly how to do it.” I’d walk them through the process. I would say, “First, you got to look at all the markets and you find a market that you like. You reach out to brokers. You find a broker you like. You look at the properties, you talked to a lender, you fill out the paperwork, you do your due diligence, and going down the list.” Their eyes are glazing over. They’re like, “Do you mean I have to do work? I thought this whole real estate investing thing was supposed to be passive. I just put my money in and then I get the cashflow.” I’m like, “It gets to be passive but you got to do all this other stuff first.” They’re like, “No, forget it.” I have had enough of these conversations where I realized that people had money that they wanted to put into real estate, but they didn’t have the time to learn how to do it. They weren’t interested in learning how to do it.

I then said, “I know how to do it, and I know these people with money, so maybe there’s a way for me to bring them into a deal with me.” At this point, I still didn’t know anything about syndication. I was like, “Instead of a fourplex, maybe I can do a ten unit. Have a little bit more room in the deal.” As I started doing digging about these different types of structures that you could use for these group investments, that’s when I learned about syndication. I realized that there’s this whole other investment vehicle that the wealthy have known about for generations and never bothered to tell the rest of us. I tried passive investing and I realized that’s what fits so well with our busy lives as young parents. We could put our money in and do not have to do any work. That’s where I play in real estate.

It’s funny because I had a conversation with someone who is a working professional as well. They were sharing that they’re interested in investing in real estate. They feel like they don’t have the time to be a landlord and take care of tenants. What you shared right here, hopefully it speaks to those people who are saying, “I have a lot going on my plate. I don’t have the time to be flipping a property.” Their interest is now piqued and they’re wondering what is this syndication stuff? How do you help people? What does Goodegg do?

Through Goodegg, we find great deals in great markets and we bring them to our investors. The thing about being a passive investor is it’s great if you have money, but it still takes time to find good partners who are operating these deals and it takes time to find good markets. If you’re a busy professional who has money on the sidelines that you want to put into real estate. You can’t just snap your fingers and magically have your money in a great deal that’s cashflowing for you. You still have to have those connections, and those connections take time to establish.

What we do at Goodegg is we know that our investors are not going to real estate conferences. They don’t have time for that. They don’t have interest in that, but we do. We love real estate. We go to those events and we network with people. We have those connections and we’re always trying to stay on top of the trends, the data, the markets, and finding those great markets with good job growth, population growth, and job diversity. Within those markets, finding the good operators and the good deals. Once we find them, we then bring those deals to our investors. Our investors can then invest in those deals alongside us.

As someone who might be reading this are thinking, “This sounds amazing, but what are some of the things that a passive investor should think about if I want to get started investing in these syndication?”

 

The very first thing you should think about is not the deal, not the market, not the asset class, and not the terminology. Don’t get caught up in any of that. The very first thing that every passive investors should think about is your own investing goals. That’s something that most people skip over. They think, “I’ve got $50,000 or $100,000. Where do I put it? Do I put in this market, this asset, or with this partner?” Before you look into any of that, because all of those investment summary decks will be very glossy and pretty. They will grab your attention. If you don’t know what you want, you will get swayed by those marketing packages. First, you have to take a look at your finances and your life. Think about what you want from an investment like this. Are you investing for short term or long term? Are you investing for cashflow? Are you investing for appreciation down the road? Perhaps you’re investing because you want tax benefits. It’s important for you first and foremost to look at your own personal investing goals. That way, when we show you a deal, when you find another deal, you can look at that deal and compare it to what you’re looking for. You can then decide whether it’s the right opportunity for you.

You guys have invested in over $870 million in real estate. There’s been a ton of lessons that you’ve learned along the way, as well as achievements and challenges. As you reflect back on your journey, what would you say are some of the lessons you have learned that would be helpful to investors?

We’ve been doing this for a few years and have done about 25 deals in that time. We’ve gone very fast. That means we’ve been flying by the seat of our pants. We’ve had to build a lot of things along the way and we’ve learned a lot. One big thing that we’ve learned, and we always tell our investors this too, it’s not about the deal that you’re investing in, it’s not even about the market you’re investing in. It’s about the team that you’re investing with. Anybody can make a deal look good on paper. All it takes is a PowerPoint, some pretty pictures, and some numbers that you can change.

When the rubber meets the road and unexpected circumstances come up, you want that team to make the right decisions on your behalf. We always take a lot of time to vet the teams that we’re going to work with. We make sure that they have a strong track record, that they are investing in great markets, and that they have had situations where unexpected things have come up before. We asked them how they dealt with it. How did they inform their investors about that? We take that time to look into their background, to look into their integrity, and see how they’re communicating with us as we’re getting to know them. We try to read between the lines to make sure that it’s going to be a strong partnership. When you invest in a syndication, it’s not a 30-day thing. It’s 5 to 7, sometimes 10-year investment, so that’s a long-term partnership. You want to make sure that those people are upstanding team.

Some readers are big time stock market investors and are probably thinking, “This real estate syndication sounds interesting. How does it compare to the stock market?” What information would you share with someone who’s comparing between the stock market and real estate syndication?

Now is the perfect time to talk about this. As we’re having this interview, we’re right in the middle of this COVID-19 pandemic. The stock market has been up and down and it’s a crazy rollercoaster. It’s very turbulent and unpredictable. Over the long-term, it will level out and continue on its path. For those people who need the money now, those people who may be just retired, it’s an unfortunate situation. It’s like luck of the draw based on your timing. I don’t know about you but that is not how I want my money handled. I lose money based on something that’s completely out of my control, that’s not okay with me. That’s what the stock market is to me. There are many external factors that I cannot control. The stock market doesn’t feel as safe as a physical asset like real estate.

With real estate, I can put my money and I know that at the very least, even if everybody moves out of the building. There’s still the building itself and that’s worth something. It’s not like all of my money will go up in smoke. There’s still the physical asset and the land. At the very least, there’s still that. With a real estate syndication, as a passive investor, you’re also called a limited liability partner or a limited partner. It means that your liability is limited just like it sounds. That means that if I were to invest $50,000 into a syndication, the worst that could happen is I would lose that $50,000. I wouldn’t lose more than that. With a syndication, you get the chance to choose the types of assets, the teams, and the markets that you’re investing in. For me, investing in these real estate syndication gives me a lot more control without having the responsibility of being a landlord.

It's not about the deal or the market you're investing in. It's about the team that you're investing with. Share on X

A couple more questions here primarily on building a business. There might be some readers who, in addition to investing passively, might also be interested in investing in real estate playing an active role. What advice would you give to someone who is interested in getting their feet wet like maybe buying single-family homes, and then advice in getting into more active syndication or more active side, similar to how you play?

In terms of getting started in rental properties, I can only speak from my personal experience. One of the best ways that I found to get started was through house hacking. Buying a small multifamily property, living in one unit, and renting out the others. What I love about the house hacking model is it’s a great introduction to being a landlord because you are living in the space with your tenants. You don’t have to drive across town. You don’t have to call in to check with them there. You’re sharing the property with them. You can see all the little things and you can practice how to communicate with them. You can deal with any maintenance issues that come up and build those connections with plumbers and electricians, which you will need as a landlord.

It’s not easy being a landlord. There’s a lot of stuff that you need to learn and a lot of things that you will need to deal with. Once you’ve learned that and established that network and those connections, it can run smoothly. House hacking is a great way to get started. It makes your own personal living expenses more manageable and it also gets you into real estate investing. As far as getting into syndication, one of the best ways to get into syndication is to invest passively first. It does require some capital. Most of our investments have a minimum of $50,000 to invest. It’s not like you can just throw $500 at it and be done. There is a high minimum investment, but what you get in exchange for that is you get to learn the ins and outs of what it means to invest in a syndication.

You get to step into the shoes of a passive investor. You get to ask all the questions. You get to listen to the questions that other investors might have. When I was first starting out, this taught me so much. I had invested in a course to teach me how to syndicate. I learned a lot through that course, but when I invested passively for the first time, I really got it. I was able to step into the shoes of my passive investors. After that point, whenever I spoke with passive investors, I knew exactly what they were thinking because I had been there too.

What advice would you give to people who are interested in building a business with a partner? What advice would you give about how you’ve gone about building that relationship out?

Let me tell you about how Julie and I met. When I first set out to start a business, I thought, “I’m never going to find a partner.” It’s like finding a needle in a haystack. I’m so particular and I have such high standards. How will I ever find a partner? I knew what my strengths were and what my weaknesses were. I knew the things that I liked doing, and the things I don’t like doing. Julie and I met at a real estate conference a few years ago. We hit it off right away talking about our family, our kids, and our mutual love of real estate. We didn’t talk about partnering up. She was running her own business. I had just launched mine. We’re like, “Let’s keep in touch.”

We got together a few times over the ensuing months. At this one particular meeting, I remember sitting across the table from her. She said, “What do you like about this business?” At this point I had been doing a lot of blogging. I said, “If I could create content all day everyday, I would be in heaven. I love it. I love teaching people about how all of this works. If I could take one thing off my calendar, it would be meeting up and talking with investors. It breaks up my day. I got to travel. I got to deal with tech issues. I got to answer all these random questions.” She said, “Are you kidding? I love meeting with investors.” She has a legal background. She’s like, “I love all their tough questions. On the flip side, I sit in front of a computer and I’ve got a blank screen. I’m supposed to blog about something but nothing comes out.” When you’re looking for a partnership, it goes back to knowing your investing goals. It’s the same with starting a partnership, you have to know your personal goals, your personal strengths, and your weaknesses. When you find that person you’ll know instantly. You’ll say, “Your strengths are my weaknesses and my strengths are your weaknesses. It’s perfect.” That’s exactly how it happened.

 

For the final round of questions, and these are my level up questions that I ask all my guests. The first one is, what are you grateful for in your life right now?

Despite all the craziness with COVID-19, I am grateful for this extra time that we have together as a family. My mom lives with us and we have two young boys. This is a time that years from now, when all of the memories of the tantrums will have faded, we’ll look back on this time and think, “Wasn’t that magical that we got to spend every day together as a family?” I’m very grateful for this extra time.

I did make a note that I’d wanted to ask you something about COVID-19, but as you brought it up again, I need to explore that with you as well. What advice would you give to investors who are either some of them are already in the market, they’ve been investing in real estate, or people who are getting started? They’re seeing the current environment. Given your experience over a decade of playing in the real estate space, what advice would you give to people as they think about investing in real estate?

This is the time. As a real estate investor, we’ve been talking about this for years. We thought we hit the top of the market in 2014, 2016, and 2018. Here we are and we are at the precipice of a potential recession, downturn, and correction. This is what a lot of us have been waiting for because I think over the next several months there are going to be a lot of great deals that will come on the market. This is the behind the scenes of how that happens. When things are on the rise, property values are going up, rents are going up, anybody and their mom can invest in real estate and be successful at it. You don’t need to do a lot of work. It’s good times. Everybody’s like, “I’m so good at this. This is so easy.” What happens is you hit a peak and then you hit a recession.

All of a sudden, people can’t pay their rents or you can’t pay your mortgage. This happens at every recession. It exposes the landlords and the owners who maybe don’t have as many reserves built in or their operations aren’t as strong. All of a sudden they’re unable to hang onto the property because they’re losing money every month. Their options are to continue losing money or to then sell. They’re selling at a time when their property might not be worth as much as it was maybe a few months ago or a year ago. That’s when those deals come on the market. I do think that within the next several months and years, we will see those deals come online.

Going back to my level up questions. The last two are, what has been key to your success and continuous growth?

One of my mantras is to fail fast. That’s something I’ve learned from my days back in working in startup. You can’t be too precious about things. If you have an idea, you figure out the fastest way to test out that idea, get it out there and see what about that works and what doesn’t work. You take the parts that work, you move forward with those, you iterate and you keep going. That has been key to my success. It’s not being precious about any one thing. It’s not trying to build it up and make it perfect, but just trying to go fast and keep going. It’s putting things out to our investors and our community, seeing what they like and what they don’t like, what works and what doesn’t work. It’s having them tell us rather than spending so much time designing the perfect thing and then releasing that to them.

Lastly, what do you know now that you wish you had known when you were getting started?

I wish I had known that there was more than one way of investing in real estate. I said all through growing up, I lived in apartments. The first time we bought that house hack or that duplex, I thought, “This is how you invest in real estate. You have to buy property and you rent it out.” That’s it. That’s the only way. I can either buy a property that I live in and rent it out or I can buy a property that is single-family home and somebody else lives in it. I thought that was it. For years I thought that’s the only way. I got to save up enough money to buy another house. I wish I had known that I could invest passively, that I could invest in apartments, self-storage, ATMs, laundromats. I wish that I had known that there were all these asset classes out there and all these ways that I could invest in them.

If you have an idea, figure out the fastest way to test out that idea. Share on X

Thank you so much for coming on the show. I appreciate it. If my audience would like to learn more about you and Goodegg, what are some of the best places that they can go to find out more information?

The best place to go would be our website, it’s GoodEggInvestments.com. If you’re new to passive investing, we have a great free seven-day email course, it’s called Passive Real Estate Investing 101 and you can sign up right on our homepage.

Thank you, Annie, for coming on. I appreciate it.

Thank you, Lisa.

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There’s a lot of good stuff. Goodegg are great people overall. Some of my insights from this episode was the advice she gave to passive investors. The first thing to think about is figuring out what your investment goals are. What brings you to the table to play in real estate? Do you want cashflow? Do you want appreciation? Are you investing for the long-term? Are you investing for the short-term? Do you want tax benefits? Do you not want tax benefits? What brings you to the table? It’s understanding clearly what it is that you are looking for.

That way, when you’re starting to look at deals, you can start to say, “This makes sense. This is in alignment with what I truly want.” As opposed to being swayed by the deals that are coming to you. The next important thing that she mentioned was the importance out of everything when looking at a deal. She’d mentioned making sure that you’re comfortable with the team. Whether these are people that have a good strong track record, they are operating in good markets, and how they’ve handled situations that have not gone as planned. She noted that this was important for her when looking at teams.

Then the next key item was talking about the difference between real estate syndication versus the stock market. Given the environment, we’re deep into quarantine. Everyone knows the stock market has experienced a lot. The rollercoaster has been severe coming up to this point. We know that in the long term, the stock market will level out. However, for people who are investing and are looking for diversification or another place to put their money in addition to doing the stock market, real estate many times comes through as one of those alternatives that’s worth looking at. Primarily because you have more control over real estate, as opposed to you don’t have any control over the market.

 

You’re at the whims of what happens. From a perspective of being a passive investor in a real estate syndication, you have limited liability. Your liability is limited to the money that you put in, as opposed to the bank’s coming after your assets. In these investments, that’s not the case. You get to control who you choose to work with, the markets you choose to invest in, and the deals that you choose to invest in. All things that are part of the control that you’re getting when you choose to invest in real estate.

The last couple of things that she talked about that I thought was insightful was for someone who’s getting started and thinking, “What would be a place for me to start?” She talked about house hacking. For her, she found that house hacking was a great way to start because then you’re dealing with people. You have a little bit more control over that investment. It’s close to you and you’re able to build relationships with contractors, plumbers, electricians, etc. You gain the experience of communicating with tenants and getting that exposure of dealing with putting the lease together, etc. For people who are interested in actively participating in syndication, she talked about the importance of investing passively first to get that experience of what it feels like to be a passive investor in one of these deals. When you are a part of managing that deal, you have the experience and exposure of what that person might be looking for. What are some of the things that might be important to your passive investors to make their experience to be optimal.

In addition to that, we touched a little bit on COVID-19. She mentioned the impact on her business and real estate as a whole was continuing to build and develop in this area. This event is exposing the importance of having good solid reserves and also the operations of various assets. Regardless of whether you’re going into recession or not, you should have adequate reserves on your property. For property owners that don’t have those reserves, then the economic climate can prove to be a situation that can put additional stress where they might end up having to sell their properties as a result.

The last key thing that I enjoyed was when she talked about the keys to her success and continuous growth. She mentioned to fail fast. For her, when you have an idea, get out there, troubleshoot it and do it. See what works, what doesn’t work, make the changes, make the adjustments, and keep going. If you’re focused on making it perfect, you’ll never get it launched. When you might think that it’s perfect and you bring it to the audience, the audience might have a lot of different things that they want changed anyway. You might as well get it out there, get the changes made, and be nimble to change. Make the changes that you need to change in order to make things happen. Once again, this is such a great episode. If you’d like to learn more about her as well as Goodegg, check this episode on www.LisaHylton.com. Until next time. Have a great one and keep leveling up. Stay safe.

Important Links:

• Investing for Good: The Surprising Strategy For Building Wealth While Also Making An Impact
• Investing For Good
• GoodEggInvestments.com

About Annie Dickerson

Annie Dickerson is a real estate investing expert with over a decade of real estate investing experience. She and her business partner Julie Lam are co-founders and managing partners of Goodegg Investments, a company that helps people invest passively in real estate syndications. Together, they have helped hundreds of investors around the country to invest in commercial real estate assets totaling over $700 million.

Annie and Julie are authors of the book Investing For Good: The Surprising Strategy For Building Wealth While Also Making An Impact, co-hosts of the podcast Investing For Good, and creators of Real Estate Accelerator, a top-rated online course designed to help people learn how to raise private capital for real estate investments.

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