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Passive Investing and Long Term Wealth with Prolet Miteva · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great but maybe you just want to
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  hone a few skills here and there? This is the
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today. It's her pet project because
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  it's really neat and I think it could help a
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  lot of people. So Prolette, I'm gonna turn it
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  over to you. If you could just give us a little
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  bit about your background and some information
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  like that and then we can get started. Well,
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  I'm super excited to be here as well. And I'll
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  be short first and then we can dive in. So I'm
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  Prolet. I am right now located in Austin, Texas.
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  And now I'm a full -time passive investor since
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  2022. Before that, I spent over 20 years in tech
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  and I work mainly in engineering and analytics.
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  You probably heard a lot of the companies that
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  I worked for, but I worked for LeapFrog, Autodesk,
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  and DocuSign. And over the last decade, now I
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  have invested in over 25 deals, mostly commercial
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  real estate. I've been through good cycles, bad
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  cycles. And now I am focusing on my new passion
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  project called Syndication Tracker, because I
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  truly believe that every passive investor should
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  have the tools to help them make better decisions.
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  That's my short. We can dive in. Absolutely.
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  So I'm going to make the assumption that, so
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  you were in California, you're in Silicon Valley,
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  like you were doing pretty well. Yes. And I would
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  forever be grateful for tech because it did allow
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  me to build up the capital to start being in.
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  to invest in commercial real estate and before
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  that invest in single -family homes, it gave
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  me that flexibility to be able to invest and
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  not have to go into it as an active investor.
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  So from that perspective, tech was really good
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  for me. But also what was really good for me
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  was frankly, the market. I got into single family
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  home investing around 2010. I bought a couple
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  of properties in California. And I'm not saying
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  do this, because it's like, you know, it's more
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  do as I say, not as I do. But I would classify
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  my early investment period as a little bit more
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  aggressive because investing in some of those
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  single -family properties allowed me to also
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  do things like take the property value up out
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  as it was increasing and investing that capital
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  into commercial real estate. Oh wow so you were
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  wait were you like cash out refining? Yes in
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  in California you can do that. And later I learned
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  in Texas you can't oh We so we've done some So
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  that's the reason why we didn't get rid of our
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  residential portfolio is Because we had been
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  able to pull all of our original investment dollars
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  out and so they're all infinite returns So it
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  doesn't make sense for us to get rid of them
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  because they're literally making they're bringing
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  in a return from none of our money It's making
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  it from all bank money Yeah, the rule seems to
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  be slightly different in Texas than in California
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  Well, there's there's all you can only do it
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  so many like you can only have so many active
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  That's the difference. I think yeah, and there
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  is no such things in California It was it was
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  more of a shock for me when I moved here to Texas
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  So but yeah tech allowed me to do that and tech
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  allowed me to Frankly think about the whole investment
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  thing more as a process and bring me patience,
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  because when we talk about real estate, we are
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  talking about longer term projects. So a lot
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  of those elements kind of built upon themselves.
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  But when I first started, actually, when I first
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  came to the US, I came in 2000. So that was a
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  long time ago. I'm going to dig myself, but I
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  came to study digital design. And when I came
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  to study digital design, I took a couple of engineering
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  classes and that kind of pushed me more into
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  the engineering world. And after that, I got
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  fascinated with the world of analytics. So this
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  whole progression kind of moving from the design
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  and view of things to the engineering and how
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  things fit together to the analysis of how actually
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  things fit together and how do they work finally
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  for the customer. Also gave me a different view
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  on the investment process and on the portfolio
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  building process. Because I would say that in
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  my own country, I'm originally from Bulgaria,
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  The concept of investing in real estate is not
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  that pronounced. The concept of investing is
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  really not as pronounced. So I had to learn a
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  lot of these things on my own when I arrived
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  here and really embrace the opportunity that
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  is really here in the United States. Yeah, I
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  think. I think that's something that we as Americans
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  don't think about as much. And it's not that
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  everybody in America knows about investments
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  or anything, because that's not true. There's
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  still a lot of financial illiteracy. But I was
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  fortunate enough to always have some knowledge
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  of it. My grandparents invested in real estate.
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  They were very average people. My grandmother
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  was 100 % Mexican. And so she only went through
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  eighth grade because her family was migrant farmers.
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  And so they would go every year to go and pick
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  cotton. And so she wound up getting her GED later.
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  And then my grandfather worked really, really
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  hard for those C's. And so he went into the army.
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  He was an MP and then he was a fireman, but they
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  were To me, it was very blue collar jobs. And
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  so for them to come back and then still pick
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  up investing in real estate is really neat because
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  I got to see it from a different perspective
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  than my husband because his dad was a professor,
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  his mom was over like big regions in the US for
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  financial aid for different companies. And so
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  they invested, but it was like from a different
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  angle. And so there's kind of this assumption
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  that It doesn't matter where you come from. You're
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  still going to have some level of financial literacy.
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  And I don't know that that's 100 % accurate.
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  Well, actually, I do know it's not 100 % accurate.
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  But it's hard for me to see how inaccurate it
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  is, because it's not my reality. So to have to
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  come into something and have to teach myself
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  would blow me away. Yeah. And frankly, it's such
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  a missed opportunity, like the whole financial
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  education here. and I see it I think for me it
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  was a little bit more of a forced option because
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  it's like you know you have to you're here you
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  have to figure it out you need to figure out
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  how to get a job you need to figure out like
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  what you're gonna do uh you need to figure out
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  what's the deal with like social security do
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  you even gonna are you gonna have a social security
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  when when you're older and frankly when you're
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  20 and you think about something that's like
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  65 look so so so far in the future but realistically
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  it's time flies after after your 20s and 30s
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  i think that what people say like time flies
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  it's totally true and um it's a missed opportunity
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  for a lot of the younger people to actually embrace
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  that uh what do you call it? The magic of compound
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  interest because - The eighth wonder of the world.
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  Yeah, eighth wonder of the world. Truly, if you
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  start early in your life, even if it's something
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  small, it can grow to something really, really
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  big. And most people don't realize that. And
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  to kind of, I guess, bring it a little bit more
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  into commercial real estate, One thing that I
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  would say that I feel that a lot of operators
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  and sponsors miss the opportunity on is when
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  they're educating their potential passive investors
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  is to talk about the longer game, right? Everyone
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  wants to talk about their one deal. And it's
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  like, oh, my deal is going to double your money
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  in five years. Now it's a little bit more like
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  1 .8, 1 .9, whatever. But yes, still the same
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  kind of idea, double your money in five years.
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  But realistically, that sounds good. But Do people
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  realize what does that mean for their portfolio
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  in the long run? Do they realize what it means
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  for them in 15 years? Because let's take 10 for
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  easier calculation. In 10 years, it's not like
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  your money is just quadrupled. It's even more.
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  It's such a missed opportunity on the educational
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  part and how we think about our portfolios. That
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  is partly when I was having this crazy idea about
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  syndication tracker, what drove me to it. And
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  the very first thing I created was this just
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  like very basic calculator that's like, hey,
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  put your deal in a calculator and see what it
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  will mean for you in 15 years, because it's very
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  meaningful. When you just talk about five, you
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  don't understand the bigger picture. And I partly
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  built it. I frankly built all of that stuff for
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  myself, because it's like, I wish I have that.
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  And it's like, oh, it's not there. Let me build
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  it for myself. And a standard compound calculator
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  doesn't really work for syndication deals, right?
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  Because we all know you usually can't just turn
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  around and reinvest. your distributions, you
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  have to wait until you have certain threshold
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  for the next deal and so on. But really, you
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  have to think about that larger, longer timeframe.
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  And I would encourage you and anyone else actually
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  on the active side, think about how can you educate
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  people on that side because then the story becomes
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  even cooler. Most passive investors don't realize
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  how cool this can all be, assuming it all works
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  out, in the long run and how it can completely
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  change the trajectory of your portfolio. So it
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  just kind of dawned on me, like I actually said
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  this yesterday on that panel, that a lot of people
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  are in situations now where they're real upside
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  down. And they don't want to lose all their investor
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  money. So what was supposed to be a three to
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  five year is now a long -term hold. And people
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  weren't prepared for that. And I'm wondering,
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  so do you have like a part of your calculator
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  that's like future value of money? Because the
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  money that you would have gotten in a big distribution
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  in five years is going to be very different from
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  a distribution in 10 years just based on the
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  time value of money. Or does it even have to
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  get that complicated? Do people think about it
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  at that level or is it more top level? You can
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  think about it at that level. It might get into
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  a complicated realm. There's a couple of things.
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  The simple calculator that anyone can actually
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  go and see on syndicatorcalculator .com slash
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  calculator is just put the typical deal size,
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  it will show you what your portfolio would look
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  like and what your distributions would look like
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  in 15 years, 20, however many years you bring
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  up. And it will show you how is that compared
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  to the S &P 500, the typical return, which is
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  about 11 % over the last 30 years. Inside, if
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  you sign up and you actually load some of your
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  deals, there is a more advanced simulator that
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  you can actually turn on certain things like,
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  hey, show me this in current dollar values versus
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  future dollar values because then it accounts
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  for the inflation and what it actually means
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  in current money. I would say that's another
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  thing that probably a lot of people don't. understand
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  when they're doing calculations around fire.
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  Okay first let me let me say fire what fire stands
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  for because I realize as I talk to more people
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  a lot more people do not know what fire is. Fire
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  is financially independent retire early. Now
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  everyone gets scared about the retire early first
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  of all don't be it's amazing but It's retire
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  early. You don't have to retire. It's optional.
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  But in a lot of the financial independence calculators
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  or FIRE calculators, a lot of people don't understand
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  that. That when you're doing the calculations,
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  you usually do the calculations and sometimes
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  you would actually lower the expected return
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  to account for inflation. And then when you're
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  comparing your value of your portfolio in the
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  future is actually in current dollars. So you
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  need to kind of like think of it a little bit
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  more from that perspective. So you would do something
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  like instead of doing 10 % return in the stock
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  market, you will do seven to account for the
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  3 % inflation. And then it's a little bit closer
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  to in theory current dollar amount. So you can
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  say like, hey, you know what, I'll be spending
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  $100 ,000 a year. Well, you know what? $100 ,000
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  in 10 years is not going to be $100 ,000. So
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  it's a different route to think about your money
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  in the future. Yeah, because it's you're so you're
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  more manipulating a nominal dollar calculator
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  to make it give you closer to a real dollar value
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  or a future value. Not a real value. Yeah, most
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  of the calculators do that. And it is because
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  I mean, it's it is hard for us as humans to imagine
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  that, you know what, when you have 3 % inflation
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  over 10 years, what's that? I forgot the formula.
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  Say it was 100, then it would be 97 next year,
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  and then 3 % of 97 the next year, and then 3%.
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  It compounds like that, too. It's more complicated.
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  It's not straight line like that. And so there's
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  a lot to figuring it. But the other thing is
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  my question is like what about on a year like
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  this this past year where number one nobody can
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  agree on what the inflation was and Even though
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  I don't believe that what's being reported is
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  the true inflation Because generally they don't
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  they don't include food. They don't include include
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  fuel They don't they don't include the things
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  that those are where people feel the inflation
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  Like they don't they don't include the things
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  where we feel it. And so I think there's some
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  inaccuracy there, too So this is when you invest
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  in real estate. A lot of people say it's like,
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  oh, it's a recession resistant thing. Okay, unless
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  the interest rates go crazy and then you get
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  nothing. But that's a different story. But in
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  theory, investing in real estates is supposed
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  to hedge you against inflation because in theory,
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  when inflation goes up, rents go up and your
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  income goes up, right? And I'm gonna... like
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  let's forget the craziness with what happened
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  with the interest rates in 22 and 23, right?
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  Because that was like unexpected event. A lot
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  of people got burned, including me. But in theory,
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  yes, the income of a lot of those properties
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  continue to go up and it can be a good hedge
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  if you're getting distribution. to supplement
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  your income or to supplement your portfolio or
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  to live off of it, depending on which part of
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  your life you are in. So it is a good asset to
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  invest in. You just need to be very conscious
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  of some of the things that can go wrong. And
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  now that we all know some of the... new things
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  that can go wrong. A lot of us are probably going
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  to be thinking about debt very differently in
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  any future investments, but it still doesn't
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  change the underlying fact that the asset itself
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  is probably a good investment. But there are
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  so many things around that asset that can be
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  manipulated to actually make that asset look
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  so much better that And that's where really the
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  dangerous part comes for a lot of passive investors.
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  And when I started passive investing in commercial
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  real estate, I would say I'm so thankful that
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  I started in the good age, or like I kind of
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  started in 2017. And those years were amazing.
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  I had some... crazy returns like you didn't even
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  have to do anything at the properties performed
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  and granted that also brought in a lot of bad
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  actors and bad sponsors that are out there but
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  also it taught me two things first of all there's
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  good times and then the 22 and 23 and 24 years
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  taught me that there can be bad times and it
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  really kind of gave me a different perspective
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  on is that an asset good to hold or not? Because
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  a lot of people that I know that only invested
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  in the bad times, or that's the 22, 23, 24, they
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  are basically saying, I give up on alternatives.
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  I give up on real estate. I give up on commercial.
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  And that is... I mean, for me, that's kind of
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  like a knee -jerk reaction, but I also understand
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  it because you experienced, you lost a lot of
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  money. We're not talking about small amounts,
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  right? A lot of people invest 25, 50, 100K or
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  more, and they're losing that in one big chunk.
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  So I understand the fear, but also... the fundamentals
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  of the asset class are there. It's just that
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  the interest rate really wreaked havoc on that
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  whole market. If the interest rate had not changed,
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  everyone and their mother would be investing
• 21:17
  in commercial real estate now. And now you probably
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  are quite aware everyone is having really, really
• 21:24
  hard time raising money for those investments
• 21:27
  because people are scared and people are scared
• 21:31
  because they have right to be scared. But there
• 21:34
  are things that you can do as a passive investor
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  right to protect against that. Now, I know you're
• 21:42
  an active investor Angel, but now I'm going to
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  tell you about my gripe with some of the active
• 21:47
  investors. And I know that's not you. I know
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  that's not you, but a lot of A lot of active
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  investors talk about education, right? Oh, I'm
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  gonna educate my passive investors. Great, they
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  need education, but a lot of it can be self -serving.
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  And I think that every single passive investor
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  should do their homework and go and study for
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  themselves, go and learn by themselves, not just...
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  but from the sponsor that they're trying to invest
• 22:22
  in. Because as you learn more, you understand
• 22:26
  more of the things that can go wrong. You understand
• 22:30
  what questions to ask both the sponsors and what
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  questions to ask about investments. And you start
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  to get a better feel of, well, does that sound
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  right? Right? Because do you know if If somebody
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  comes and tells you like, oh my God, you're going
• 22:47
  to get 14 % IRR on a deal. Is that normal? Is
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  it not? Right. And as a passive investor who's
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  just entering that world, you don't know. I mean,
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  thankfully now there is a lot more education.
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  I mean, you have a great podcast, you have a
• 23:03
  great newsletter, you have a great community,
• 23:05
  but