Latest / Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love / 197: Seth Bradley | The Passive Income Attorney

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197: Seth Bradley | The Passive Income Attorney · Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love

• 0:00
  Seth: I think it's really risky to be unhappy with the rest of your life. I think it's really risky to have one income stream that you're totally dependent on. You know, we have this set mindset that we grew up with that getting the best job that you can get, putting away to your four zero one k as much as you can, and just saving until you're 60 years old is safe. To me, that's risky in my mind. It's like Yeah.
• 0:24
  You're banking that, one, you're gonna live till 60, and that when you get to 60, that you're going to be in good health, and everything's going to be great, and you're going to live another at least twenty years so you can maybe be retired and live off of that money and that sacrifice that you made over the last forty years. That sounds like a pretty big risk to me. So Yeah. For me to take quote unquote risks to, let's say, start my own law firm or, you know, put a lot of money into different real estate investments or, you know, start a podcast and, you know, put myself out and do all these different things, to me, that's just living life, and that's not taking a risk. That's, hedging my bets a little bit, really.
• 0:59
  Intro: Welcome to the Wealthy Woman Lawyer Podcast. What if you could hang out with successful women lawyers? Ask them about growing their firms, managing resources like time, team, and systems, mastering money issues, and more. Then take an insight or two to help you build a wealth generating law firm. Each week, your host, Devina Frederick, takes an in-depth look at how to think like a CEO, attract clients who you love to serve, and will pay you on time, and create a profitable, sustainable firm you love.
• 1:30
  Devina is founder and CEO of Wealthy Woman Lawyer, and her goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund and still have time to enjoy the lifestyle of your dreams. Now here's
• 1:50
  Davina: Hi. This is Devina. And before we jump into today's show, I'd like first to introduce you to some of our sponsors. Over the last four years, Noble Marketing has tracked more than two fifty law firms and discovered 60 to 80% of new client calls were generated through Google my business and Google ads. Basically, you need to be on Google, noble marketing can help.
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• 3:26
  Contact them today at optimizemyfirm.com or click the link in the show notes. Hi, everyone, and welcome back to the Wealthy Woman Lawyer Podcast. I'm your host, Devina Frederick. And today, I am really excited to have Seth Bradley here. Seth is a real estate entrepreneur and an expert at creating passive income while working as a highly paid professional.
• 3:50
  He's closed billions of dollars of business in real estate transactions and as a real estate attorney, investor, and broker. He's a managing partner of Law Capital Partners, a private equity firm focused on multifamily and opportunistic real estate acquisitions. He's a former big law attorney and is now the managing partner of his own firm, Bradley Law Limited, helping his clients with their real estate and asset protection needs. He's the host of the Passive Income Attorney Podcast, educating attorneys and other professionals on how to stop trading their time for money so they can practice what they do, what they want to, not because they have to. Seth, thanks so much for being here with me.
• 4:29
  I am a fan of your podcast. I wanted to have you on for a long time, so I'm glad you're here.
• 4:33
  Seth: Davina, thank you so much for having me on. Really appreciate it. Fan of your podcast as well.
• 4:37
  Davina: Good. Good. Well, let's just go back to when you thought that being the attorney was the dream, and that's what you wanted to do. Is it something that you always thought, well, I wanna be an attorney where there are attorneys in your family, or did it just come to you? I'm not doing anything else.
• 4:52
  I should go to law school. What was your journey like?
• 4:55
  Seth: Yeah. A little bit of all that. Okay. So, you know, I come from a blue collar family in West Virginia. My dad's a retired coal miner, my mom's a retired school teacher, so, you know, I was always taught, you know, trade time for money.
• 5:08
  That was the only way to do it. So, growing up, I was just like, what's the best job I can possibly get? And to me, at the time, I thought it was being a doctor. So I went down that pathway first. So I went to med school for about a year and a half before I just had enough.
• 5:24
  I knew it wasn't for me pretty quickly, but it was such a commitment to get in and all that. Then I'd gotten through my first year that I still didn't know what I wanted to do. But by the time I got halfway through my second year, I just got up in the middle of class and left with no plan. I knew this was not the plan.
• 5:40
  Davina: What was that thing that the straw that broke the camel's back for you that caused you to get up and leave class?
• 5:45
  Seth: Yeah. I don't know. I don't know if there was anything specific. It was probably just something that one of the professors said, I just had enough. Or maybe they were talking about you know, a lot of times they talk about in med school, get through the first two years because that's kind of the educational piece, and then the next two years are more clinical, and that's when it starts being more hands on and people enjoy it more.
• 6:06
  I really wasn't looking forward to the clinical part. So, at that point in time, you know, everybody's like, Just get through these first two years, but I'm not looking forward to the next two years either, and I knew I needed to get out. And then I ended up going to business school first. I got my MBA. I kinda just went to law school afterwards, because I thought that was just something else I needed to do for my own personal progress, But it turned out really well because I actually enjoyed law school to a certain extent.
• 6:32
  I like the challenge. I like, you know, the influence from business folks and, you know, different types of ways to think about things. So a little bit of all the above in what you mentioned.
• 6:42
  Davina: You're highly educated. I can relate to that because, you know, my dad worked for the state government and my mother worked for the county government, and they came from poverty. So for them, the steady paycheck was the thing, and we were sort of taught that steady paycheck. Go to work. We were taught school was our job.
• 6:59
  You go to work and this is what you do. And so they raised three very obedient daughters who definitely went out and got jobs and worked. And fortunately, we also were taught that education was important. And the more educated we became, the more we began to make other choices. So what was that for you?
• 7:18
  You worked at a law firm. Did you enjoy it? Did you feel like you had found your path, or was there something still missing? How did that come about?
• 7:24
  Seth: No. So, you know, I got into the big law firm life, and I'm sure a lot of your listeners are familiar with that. That also was not for me. You know? I mean, having 50,000 bosses, you know, keeping track of every six minutes of your time, it's just, you know, it's stressful.
• 7:41
  I'm a laid back kind of guy, so like that life was just not for me. I knew that pretty early, but at the same time, I was still kind of intent. At that point, I was like, you know, graduate from law school, finish as high as you possibly can, get the big law firm job, the biggest law firm you can get into, and make partner. I was still kind of in that mindset. And I had already went through med school and business school and all that, and I was like, This has got to be it.
• 8:06
  I'm going to make this work So, no matter stuck with it for a few years and kind of went down that typical associate pathway to partnership. But along the way, I started investing in real estate on the side, and that's where I started kind of seeing that there's another way that I could do it and another way that I could you know, start buying back my time a little bit piece by piece.
• 8:27
  Davina: What was the reaction from family and friends who knew you sort of growing up? Did you get any pushback from them, or did they say, dude, you're crazy? Or were they like, we're just enthralled watching you? What was their reaction?
• 8:40
  Seth: Yeah. I mean, definitely, it was a mixed bag. I mean, I will give my parents a lot of credit because they were totally supportive even though that was a very hard conversation to have, hey, I'm gonna drop out of med school, and I don't know what I'm gonna do next, they were very supportive. They said, you know, do what you wanna do. We support you.
• 8:58
  We know you'll make the best decision. So that was excellent parenting, I might say.
• 9:02
  Davina: Right. It is.
• 9:03
  Seth: So, you know, they were very supportive. You know, friends were probably questioning what in the hell are you doing? I certainly was as well. So it was kind of a mixed bag for sure.
• 9:12
  Davina: I was wondering kind of because, you know, people talk about mindset so much, and we often, you know, wonder what separates achievers and risk takers from people who follow different paths and not to say any one path is the wrong path because I think everybody's on their own journey and their own path. I just wonder like what that quality was because, you know, I know for me, always got a lot of pushback. Everything I did, I got a lot of pushback from different people and because I would do things that they didn't understand. And I think a lot of people have those experiences no matter what they do. Right?
• 9:42
  But it takes a certain mindset to not let that get into your head. It sounds like your parents, you credit them a lot with sort of that, you know, strength that you had. I think a lot of people would look at that and they would worry, oh, you know, I've invested in this. Now I've invested in this. Now I'm investing in this.
• 9:58
  But none of those are cheap.
• 9:59
  Seth: Right.
• 10:00
  Davina: What thoughts did you have?
• 10:01
  Seth: Yeah. I mean, I've always had a decent perspective in life. I can kinda take a step back and just think about, you know, what makes you happy. Like, this life is short. You know, you shouldn't be stuck in something that you're not gonna be happy doing.
• 10:15
  So, even if it's just because you are afraid to, you know, take that next step, or to take that jump, or to take that risk, you know, life is short, and things happen every single day that can't be undone. I just always kind of take a long term perspective on things and think, you know, long term, what is this going to look like, and is it going to make me happy? Is it good for, you know, my life and my inner self? You know? Because in the long run, you don't know what tomorrow's gonna bring.
• 10:44
  So if you're stuck in a job, whether that's being an attorney or being whatever it might be, maybe you shouldn't necessarily just jump right out because I think a lot of attorneys think that they should. But maybe you should figure out what part of that job do you not like, right? Like, because a lot of times, maybe you're in a big law firm and you don't like having 50 bosses or having every single person that's one year older than you be your boss. Or maybe it needs some more autonomy. I mean, it's usually not the whole package of being, let's say for instance, an attorney.
• 11:13
  They're usually just little pieces, and you need to really think about what those small things are that are making you unhappy and change those. Maybe you start your own law firm. Maybe you invest in real estate and start buying back your time so that you don't have to bill as many hours. I mean, there's different ways that you can approach it.
• 11:29
  Davina: Right. Right. And I wanted to dig a little deeper in that because I think what we're gonna be talking about today, some of it is making investments in passive income opportunities and things like that. And risk is always a discussion among lawyers. And, you know, I work primarily with women lawyers now and it's real big discussion among women lawyers.
• 11:47
  There's always it's a discussion that's constantly going on in their head. We are taught to evaluate risk and analyze risk and we can make arguments for both sides. But when it comes to our own lives, we may be reluctant to take risks, whether that's growing your own law firm business or making investments. And so it's just always interesting to me how the thought processes of people who are more risk takers versus the thought process of people who are like very skeptical and wanna play it safe and all of that. Because I think your career has evolved because you've taken some pretty, you know, significant risk.
• 12:22
  Right? Although maybe at the time you didn't realize it or whatever, but looking back on it, let's talk about your law firm, your choice then to start a law firm.
• 12:32
  Seth: Sure. I mean, I think it depends on how you look at risk. I think it's really risky to be unhappy with the rest of your life. I think it's really risky to have one income stream that you're totally dependent on. You know, we have this set mindset that we grew up with that getting the best job that you can get, putting away your four zero one k as much as you can, and just saving until you're 60 years old is safe.
• 12:57
  To me, that's risky in my mind. It's like Yeah. You're banking that, one, you're gonna live till 60, and that when you get to 60, that you're going to be in good health, and everything's going to be great, and you're going to live another at least twenty years so you can maybe be retired and live off of that money and that sacrifice that you've made over the last forty years. That sounds like a pretty big risk to me. So Yeah.
• 13:17
  For me to take quote unquote risks to, let's say, start my own law firm or, you know, put a lot of money into different real estate investments or, you know, start a podcast and, you know, put myself out and do all these different things, to me, that's just living life and that's not taking a risk. That's hedging my bets a little bit, really.
• 13:34
  Davina: Yeah. Yeah. My husband and are both entrepreneurs, and we often discuss how it seems risky to us for people to work at a corporation for years. And then one day they're sent packing or something happens with the corporation. And then they're like, oh my god, what do I do now?
• 13:51
  Whereas if you know how to make money, you know how to make your money make money. If you have certain skills, sales skills or investment skills, money skills, financial management skills or whatever, right? Then you are gonna probably have a lot more satisfaction in life and also probably feel safer and more secure. Right? So I hear you on the risk thing and I totally agree.
• 14:15
  What was the catalyst for you starting your own firm? Did something happen when you were working in big law?
• 14:20
  Seth: I was graciously shown the exit. You
• 14:24
  Davina: were transitioned out. I've been transitioned out before too. I understand that.
• 14:28
  Seth: Was shown the door. I was fired. I won't say that it wasn't deserved. I was putting a lot of time and effort into other things, into learning about investing in real estate, investing in real estate, starting small businesses. So, it wasn't unwarranted.
• 14:43
  I just wasn't billing enough hours. My head just was not in, you know, the big law firm game at that point in time, and I got shown the door. But it was really the catapult that I needed to just say, Screw it. I'm just going to go out on my own. I'm to start my own law firm.
• 14:58
  I'm to continue doing some of the legal stuff to pay the bills while I get all these other things up and running and off the ground until they can kind of take over as the primary revenue source. I don't know how long it would have taken me to actually do it myself because it's really hard to wean yourself off of that paycheck. So it was great actually in hindsight that it happened when it did.
• 15:19
  Davina: I can relate to that. And I often tell my clients this as they are really wrestling with letting somebody go, and I'm like, you're probably doing them a favor because they're giving you messages. There's something else that they want in their life, and they're just gonna keep hanging on here and nobody's gonna be happy. And once you've already decided in your mind that that person's not a right fit, there's no room for them to grow with your firm, and you might as well just let them go. So I've also been on the side of being I had a boss one time who said, we need to find a way to transition you out, which I thought was the most creative sort of way of saying that I was fired.
• 15:52
  Took me a minute to sort of figure that out. But I've been there before, and every time it has led to better things for me. So, you know, ultimately led me to entrepreneurship, which I absolutely love. So let's talk about real estate. Ultimately, I wanna get into a deeper discussion about what you do with passive income attorney and your investment business.
• 16:13
  So for many people, rich dad, poor dad is the catalyst for thinking about real estate investment. I see that on your bookshelf. But who told you that real estate investment was a good idea? Like, how did you first sort of get exposed to that and start saying, I'm gonna check this out.
• 16:27
  Seth: Yeah. It certainly wasn't from my upbringing. I mean, you know, my parents owned their own house, and that was it. And, you know, I grew up in a really tiny town in West Virginia. So the only people that owned, like, rental real estate was like a local politician, and he kinda had a couple small businesses and owned real estate, and that kinda was the only thing I thought about because I was really good friends with his son growing up.
• 16:48
  So, that kinda put it in my head that, you know, it's possible, but I never really thought I was still on that, you know, trading time for money type of mindset. Right. Was probably the first time it was put in my head that wealthy people own assets, wealthy people own businesses, and that's really how you accumulate wealth. But then, it was actually Rich Dad Poor Dad. I read that book, and it changes a lot of people's mindset almost immediately because you just start thinking about money and assets in a different way.
• 17:13
  Davina: Life in a different way.
• 17:15
  Seth: Yeah. It's just an absolute game changer if you don't already have someone that's taught you that mindset before that.
• 17:21
  Davina: So did you just start it were you sort of fishing around for ways? There's gotta be a way I get off this hamster wheel, and how do I do it? I need to invest money. How do I create passive income? And that led you to real estate?
• 17:33
  Seth: Yeah. I mean, it was kind of it almost happened about the same time that I started practicing that I started investing in real estate. I'd read Rich Dad Poor Dad, and I was motivated to basically, as soon as I get my first paycheck, I am going to buy real estate. So that's what I did. I house hacked into a duplex.
• 17:49
  My wife and I lived in one half and rented out the other. She let me do that.
• 17:54
  Davina: Yeah. And then,
• 17:55
  Seth: you know, we just started buying single family properties. We started doing some fix and flips, all the residential stuff. And that stuff, you know, it's good. I mean, we still own a number of those assets, and I don't discourage people from doing that except, you know, fix and flips from a long distance and fix and flips in general, you know, take a lot of your time and effort. So, if you're billing a ton of hours as an attorney, or you know, you're a busy physician or something, I mean, it's really difficult to run a successful business, or even residential real estate business, while you're kind of doing all that full time.
• 18:31
  And that's when I started looking at bigger assets. I started looking at how to invest in commercial properties. You know, I was transacting as an attorney, commercial properties, but I hadn't bought any myself. And I started thinking, you know, if I'm sophisticated enough to show other people how to do this, I should be able to do it myself. So I figured out, you know, how do I want to get involved?
• 18:49
  I heard about this thing called real estate syndications, kind of started networking. And eventually, you know, I was advised that you should invest passively first, even if you wanna be eventually on the active side, just so you can kinda get a feel for things and see if maybe you just wanna invest passively and not ever really transition to the active side because it's more work, obviously. So I invested passively in a number of deals. And then at that point in time, it was where I started, you know, knowing that I wanted to get out of the legal profession as well, or at least get away from big law life. So I started transitioning to the active side, and now I'm a capital sponsor.
• 19:24
  Davina: Right. Right. Right. Let's talk about passive versus active and kind of what that means, how you would define sort of passive income versus active.
• 19:33
  Seth: Sure. Passive income, generally, it's on a scale. I mean, you'll hear a lot of, like, specifically real estate gurus talk about passive income all the time, and they might even try to sell somebody that a fix and flip can be passive. Or a lot of times we hear about, like, short term rentals nowadays being passive income. That's not passive, in my book.
• 19:52
  I mean, of course, it's gonna be on some sliding scale, but to me, it's really pretty far on the active side. I mean, fix and flip is probably gonna be the most active. Short term rentals, as far as rentals are concerned, are gonna be probably on the most active side because you've got so many different people coming in and out of your property. So, those kind of sway towards the active side. The passive side, you gotta start looking at I guess the most passive thing that you can invest in real estate wise would be something like a REIT.
• 20:19
  But what happens is when you invest in something like that, you start losing the benefits one by one. And with REITs specifically, you lose the tax benefits, and you start exposing yourself to the public markets because they're traded just like stocks, you know, kind of defeats the purpose. Real estate syndications, on the other hand, are kind of you know, they're a little bit more active than, let's say, a REIT, but you still get, you know, the tax benefit. It's like you own a fractional piece of the real estate, meaning you'll also get a fractional piece of the tax benefits, the distributions, and all that sort of stuff. As far as breaking down the syndication from active versus passive, a real estate syndication is really the partnership between these active investors and these passive investors.
• 21:00
  The passive investors provide the equity or the money, and they just expect a return on their capital. So, it's very passive for them because the only thing they really need to do is make sure they trust the sponsor, the active investors, and then they can bet the market and the deal as well, but the sponsor is really the most important thing. On the active side, you have folks that are raising capital, that are finding the property, that are signing on the loan, that are executing the business plan after the loan closes, you know, doing all the things that, you know, real estate involves.
• 21:29
  Davina: Right. So a lot of people think real estate, I can get a short term rental and that can be a passive investment for me because I'm gonna hire a management company and they're going to manage it. But still problems can arise because ultimately you're the owner of it And it's you and you alone dealing with whatever making whatever decisions around it. And I do think that no matter what you invest in, I don't think anything is a 100% passive because you have to educate yourself to understand. I mean, you can invest in certain things and not be uneducated about it.
• 22:01
  Stock market comes to mind. You know? People will do things, but you'll get an education one way or another. Right? So I do think there you have to educate yourself and and really understand something.
• 22:12
  But when it comes to actual activity to make the thing happen, a fix and flip, there's a lot of activities gotta make that happen. Even if you're hiring contractors or writing checks, the more contractors you hire and the more checks you write, you're still gonna have to manage the contractors and you're gonna lose some of your profit. So real estate can be a wonderful experience for people who have certain skill sets already too. There are a lot of people who are looking to get into real estate that don't have skills. I mean, I'm one of these people who like, I could decorate a place, but I'm probably not gonna be out there sawing and hammering.
• 22:43
  You're not gonna want me to even though my dad has that skill and experience. It did not pass down to me at all. So, you know, so it sounds intimidating to go in and say, you know, I wanna buy something and fix it up and flip it, which led me kind of to your podcast and sort of going down that journey. But kind of explain a little bit more you've you explained a little bit about real estate syndication, but kind of for those that is new to them. Go into that a little in layman's terms, kind of explain a little bit better what that is.
• 23:11
  Give me an example, Yeah.
• 23:13
  Seth: And the great thing about syndications is typically the asset. So you're gonna be able to get exposure to an asset that you probably couldn't afford otherwise. I mean, you can syndicate any deal, but typically the deals that I syndicate are 100 plus unit apartment buildings or, you know, 100 plus site RV parks or, you know, a 200,000 square foot industrial building. These are large commercial projects, industrial, just great assets. Right?
• 23:41
  Like, it's not just a single family house in Cleveland, Ohio, because I used to invest in Cleveland. Know, things like that. It's a high quality commercial asset. Typically, you have a ton of different tenants. So, if one doesn't pay, you've got others that are, you know, making up for it.
• 23:54
  So, you're gonna be able to get exposure to great assets, much better high quality assets. The other advantage, the big advantage versus residential real estate, when I say residential, I say smaller, let's say one to four unit properties, you're dealing with professional property management companies, you're dealing with professional general contractors that are doing the work, that care about their reputation, and they run their business like a business. I've dealt with, you know, contractors doing single family fix and flips, and they'll screw you over for, you know, $500. They just don't care, because they're living day to day, and they don't really care about you or your property or their business. Same thing with property managers to a certain extent.
• 24:33
  You know, you might have a property manager that owns a or that manages a few rentals, you're constantly micromanaging these residential contractors and these residential property managers. When you get into bigger assets, these are real businesses that are helping you run your property and they're more like partners. So, the quality of vendors that you're exposed to and the quality of assets that you're exposed to when you start investing in a syndication. And again, a syndication, it's really just a partnership of passive and active investors. And the key component to finding a great syndication to invest in is finding a great sponsor.
• 25:08
  You know, there's three parts to the deal. There are three parts to an investment, a syndication investment. It's the sponsor, the market, and the deal. And a lot of people really get caught up with looking at projected returns. They get caught up with looking at, you know, where is this property at?
• 25:24
  Those sorts of things, which are very important. But the most important part is vetting the sponsor. Like, really finding out who's gonna execute the business plan. Have they done it before? What's their track record?
• 25:35
  That's first and foremost the most important thing. And when you're doing your due diligence on investing in a project, that's the first thing you should look at. And secondarily, look at the deal itself and, you know, the market.
• 25:47
  Davina: Yeah. So go into a little more detail on who a sponsor is. Like, can anybody sponsor, or is it certain requirements or characteristics of sponsorships? What do they do? Go into a little more detail on that.
• 25:59
  People who are new to this won't understand Sure. What a sponsor is.
• 26:03
  Seth: One thing to probably clarify is, like, you'll hear sponsor, you'll hear general partner, you'll hear active investor, you'll hear principal. These are all the same people. It's basically the people that are doing all the work. They're finding the property, they're putting it under contract, they're doing the due diligence on the property while it's in escrow, they're signing on the loan, they're guaranteeing the loan, and then after you close on the deal, you know, they're raising capital as well to close on the property. They might be putting a lot of capital in themselves, and then after you close on the deal, they're the people that are gonna execute the business plan.
• 26:39
  So, it's called asset management, and they'll be managing the property manager, managing the contractors and the construction, and then ultimately refinancing or selling the property and also handling all the back office things like, you know, the accounting and the legal and all those sorts of things. They're managing the whole project. It's funny that you said, can't it just be anybody? Because there's been kind of an explosion of the syndication space in the last, well, really five, six, seven years where there's just so many new people entering the market. And that's why you have to be very careful about who you invest with because a lot of people are just anybody.
• 27:16
  They're literally just, you know, they're watching YouTube and they're like, hey. I wanna do this. And they're raising capital, you know, which brings you under SEC guidelines and regulations, and they don't even realize that you can't just willy nilly raise capital from people. Don't even realize those laws exist, and that's something that I've seen quite a bit in the space, is just new people just coming on board all the time. They have no idea what they're doing.
• 27:40
  They're not partnering with people that do have the experience. So that's why it's, again, really important to figure out who you're investing with ultimately and that you properly vet that sponsor to get comfortable with, you know, their track record and if you believe that they're going to execute that business plan and return those projections.
• 28:00
  Davina: I hope you're enjoying the Wealthy Woman Lawyer Podcast. We'll get back to the show in just a moment. But first, I'd like to thank some of our sponsors. In the next ten years, 90% of legal services will be delivered online. Gavel is the software lawyers are using to streamline internal document automation and build online legal products like landlord legal or hello divorce.
• 28:27
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• 28:59
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• 30:10
  And now back to our show. It sounds like that requires a high level of skill and experience. Like, you would have to I mean, everybody's gonna have to do their first deal. Right? But you're hoping that the people who are doing their first deal are being guided by people who have done many deals.
• 30:24
  Some things to look for when sort of doing your due diligence on a sponsor. What kinds of like, for instance, are they putting their own money in the project? You know? What kinds of things do we need to look for to do diligence on a sponsor?
• 30:39
  Seth: Yeah. I mean, they will offer you a call. So a lot of people don't take advantage of that, but certainly jump on a phone call with them or a Zoom call with them before you invest. Get to know them. Figure out exactly who you're investing with.
• 30:51
  And I mean that because a lot of folks get involved, and I'm not gonna dive into SEC laws and capital raising laws, but, you know, a lot of folks get involved in, you know, primarily what they're doing is raising capital, which is, you know, again, I'm not gonna get into the legal structure, a lot of people are just, let's call it, raising capital, and they're not the ones that are ultimately going to run the property. And if they're not, that's fine because there's a need for people to bring in capital. But if they're not the ones that are gonna be executing the business plan, if they're not the ones that are underwriting the property and coming up with the assumptions and the projected returns that they're promising you, find out who is and vet them as well. You definitely wanna vet the person that you're in contact with, but also make sure that the person you're in contact with is a decision maker and the person that's gonna be running the property. And then once you find out who's actually in charge and who's gonna be making decisions, bet them as well.
• 31:44
  And when I say bet them, I mean, it can be as simple as look them up on LinkedIn, listen to their podcasts, see what kind of what shows up when you Google search them, ask people in networking groups, on Facebook groups, things like that, because reputation travels fast in this industry, because a lot of people are, you know, putting themselves out there. A lot of people have podcasts like mine and like yours. A lot of people are posting on social media daily. So if you start developing a bad reputation with investors and with other sponsors, people find out pretty quickly.
• 32:15
  Davina: Yeah. Yeah. I mean, that is the wonderful thing about the age we live in is that the Internet is a double edged sword. It can be a great way for social media, the Internet is a great way to get yourself out there, and it's also a great way to fall on your sword if you're doing something that shady or not above board or, you know, betrays people's trust, you know. You started out as an active real estate investor and grew into this sort of opportunity.
• 32:41
  Right? Do you recommend people start out, you know, investing in real estate in sort of the more common ways to invest in real estate and, you know, cut their teeth on that before they dive into something like a real estate syndicate even as a passive investor? Or is it something that people can do who don't really wanna go the route of learning through school of hard knocks?
• 33:03
  Seth: Yeah. I mean, it's definitely not something that you have to do. It's how I did it, but it depends on where your interests are. I mean, a lot of people want to invest in real estate. Like, they understand that real estate's a great investment, and they want to get some exposure to it outside of, you know, their investment portfolio in the stock market or, you know, something like that, but they're not necessarily interested in real estate.
• 33:25
  I love real estate. Like, I love touching it, feeling it. Like, I love it. I'm in it. But some people don't want that.
• 33:32
  They just want a great investment. And if you want a great investment, I certainly and you don't love it or you don't have an interest in it, I definitely wouldn't recommend going into a single family rental or doing a fix and flip or something like that because it's a lot of work. And if you don't have an interest in it, it's gonna be even more work.
• 33:48
  Davina: Now A grind. Yeah.
• 33:49
  Seth: Yeah. For sure. And if you do have an interest in it, why not? Go for it. But the problem is, again, depending on where you're at in your career and what your aspirations are, it might not fit.
• 34:02
  It certainly didn't fit with my career. I got fired. And with a lot of people, especially attorneys in big law firms where they've got a bill a million hours a year and, you know, every six minutes is accounted for, investing in fix and flips and single family houses typically is just going to be a time and energy suck that you're not going to want to deal with. And those people that are able to generate cash flow from their active investment or their active income and it's significant, like from an attorney or a doctor or someone like that, they're probably better off just investing passively because all they have to do is learn how to invest in one of these deals and you're gonna learn a lot quickly. And then once you figure out how to do it maybe one time, you'll know how to evaluate a sponsor or market a deal really quickly and it won't take as much work.
• 34:47
  And it's truly passive. You've made that investment decision, you don't have to do anything else.
• 34:52
  Davina: I wanna go a little deeper into that before we do. You know, I just think the older I've gotten, the more everything sounds like another job. Like, if you're already building a business and you start thinking of ways to increase your income streams as an entrepreneur, the natural knee jerk thing is what else can I do? Like what other business can I start? What other to create income streams?
• 35:16
  And then, you know, people start to realize, well, you know, I don't have time. Like you have to have a luxury of time to do that if you're running a business or something else. So you can scale yourself out of your business and then you free up a lot of time to explore other opportunities. But if you are still working in your business or working for somebody else's businesses, you like the money, you like the job, but you're also looking for a way for your money to make money for you, then you really do have to start looking at more passive approaches. So passive approaches, the stock market.
• 35:44
  You know, I can buy into an index fund and it's fairly passive other than, you know, rebalancing or something, right? It's just thinking about another way for your money to be working for you so you are not working for more money. Because even when you're doing buying something for a long term rental, short term rental, even if you have people managing the property for you, there's still work involved and you have to think about how much time do I realistically have for that kind of thing. Right? And some people are passionate about it and have a skill set for it and all of that.
• 36:15
  And then other people are just going, I wanna make money on real estate, but I don't wanna build that work. So Yeah. Enter real estate syndicates. That's an opportunity. So tell us about something like some of the apps that we see online that are real estate that seem to be real estate asset income where you're developing in I'm not gonna name a name.
• 36:34
  That's what I'm trying to, you know, ask this question about naming names. But you see an app that is where they're investing in real estate, and you can put money in to that and let that grow, and you are then an investor in that property, in that real estate. Give us an idea of how that's different, or do you know very much about that?
• 36:53
  Seth: Yeah. Yeah. I can definitely comment on that. So, you know, a lot of these, I'll call them crowdfunding platforms, websites, the apps. A lot of times, the assets that are behind them are real estate syndications, but there might be another layer on top of that.
• 37:09
  So there might be, you know, there may be a JV, a joint venture with, let's say, a real estate syndication private equity company, along with this crowdfunding platform that brings in other investors. I mean, there's different ways to structure it. Primarily, the problem with those types of investments are that those things are pretty, and they're expensive. So, like, there's a lot of overhead that you don't necessarily have if you invest directly in a real estate syndication with an active sponsor, compared to if you invest in one of these crowdfunding platforms that are really they're kinda half tech companies, so they have a lot of employees, they've got a lot of overhead, you know, they've gotta run this platform. So that all takes away from the investors' returns, because that's where it So, comes they are similar to a certain extent, and you actually can invest usually smaller amounts, which is great.
• 37:58
  You can diversify a little bit better. But the problem is the returns are gonna get watered down quite a bit just because of all the, you know, the bells and whistles that come along with that rather than investing directly, with a sponsor.
• 38:09
  Davina: Right. So let's talk about what is required to be an investor in a real estate syndicate. What is required for that? Because there are, you know, monetary limits. Right?
• 38:21
  So tell us kind of about that and the difference between accredited investors and non accredited investors and sort of that kind of thing.
• 38:28
  Seth: Yeah. So, you know, you don't necessarily have to be an accredited investor to invest in a real estate syndication, but you will be limited to the investments that you can invest in if you are not. So accredited investors will be able to invest in any of them, basically. The most simple definition is you've made 200,000 or more over the last two years with a reasonable expectation of the same, or you have a net worth of a million dollars or more not including the equity in your primary residence. There are other loopholes of that and other ways that you can qualify as an accredited investor, but that's usually the main financial hurdle that people go through to become quote unquote accredited.
• 39:08
  But, again, you don't have to be accredited for to invest in syndication. There are other deals that are set up so that you can be a quote unquote sophisticated investor, and sophisticated investor is kind of a loose definition. It's really, do you know enough to know what you're getting yourself into? It's a self qualifying term.
• 39:24
  Davina: It'll work against you in court if you try to sue people later. Because I'm like, well, you are a sophisticated investor.
• 39:31
  Seth: So Right.
• 39:32
  Davina: You can't claim innocence here. Yeah. Okay. So it has to show that you're somebody who is confident to understand what you're getting into when you're sort of making these investments. I'm sure of a financial barrier requirement there, like a certain amount that you, you know, similar to an accredited investor, but maybe a little less.
• 39:49
  Right?
• 39:50
  Seth: Yeah. And I was gonna comment that, you know, the reason that the SEC has these regulations and sophisticated versus accredited and, you know, these financial hurdles is because they're trying to protect the investor from themselves. Know? Just because you have $50,000 doesn't mean you know what to do with it, or that you should be allowed to just invest it in, you know, with this person that you just met, and maybe you don't know enough to not know anything. They're really to protect investors from themselves.
• 40:18
  You know, that's why they exist. Now, you know, another financial hurdle to get involved in syndication, typically there's gonna be an investment minimum. A lot of times with the deals that I sponsor, it'll be $50,000 They may drop down to 25, some of them may be 75 or $100,000 When you get into, you know, large syndicated funds or, you know, really big class A multifamily properties, you might see a $250,000 minimum, a $500,000 minimum, even a million dollars. And sometimes you'll have to pool there's different strategies where you can pool together with other investors and get to that threshold. But, you know, it's not cheap to invest in these things, but they're great investments if you know how to look for the right ones.
• 40:59
  Davina: Yeah. Falling for attorneys, if you have a wealth generating law firm or if you're working in a firm and you have a wealth, you know, source of money coming in that that you're looking to say, what can I do with this money that will be maybe tax advantaged and also give me some good returns? Right? We're gonna talk about returns in a minute. Before we do that, I wanna touch on liquid and illiquid because I think that's something too that people sort of need to be aware of this type of investment.
• 41:24
  So can you talk a little bit about what that is and the difference and that kind of thing?
• 41:28
  Seth: Yeah. Sure. So, you know, whenever you get involved with real estate, any kind of real estate other than maybe something that's really tradable on the public market like a REIT, you should consider it illiquid. Meaning that once you've made that investment, that it's gonna be really difficult to get that back out until some sort of sale event or refinance event. I mean, even let's say you invest in a single family property, that's illiquid.
• 41:53
  Sure. You can sell it tomorrow, but it's gonna take some time to be able to do that.
• 41:58
  Davina: It could take you six months to sell it or a year to sell it, depending on what the market is and that kind of thing. So it's not like going to the stock market and just say I'm selling off these trades, I'll get it within the week or whatever kind of thing. Right?
• 42:10
  Seth: That's right. And it's the same thing for a real estate syndication. I mean, these deals usually last anywhere between three to seven years. Some of them can even last longer. Some of them might have an expectation of a ten year hold or an indefinite hold.
• 42:22
  If you're gonna invest in one of these deals, plan on being in the deal for a long time. You won't be able to sell your shares unless it's approved by the sponsors. At that point in time, you might be able to go to them and say, hey, it's an emergency. What can we do? And maybe you might be able to sell your shares at a discount, but obviously that's not the optimum way to exit.
• 42:41
  So, you're gonna wanna understand that once you put these funds in, you're gonna start getting them back through cash flow and distributions a little bit at a time. And maybe when you go to refinance the property, you'll get anywhere between 40 to 70% of your investment back. But just know that or just consider it illiquid because that's just the best way to look at it.
• 43:01
  Davina: Yeah. So let's talk about how one gets their money back and makes money on this type of arrangement.
• 43:09
  Seth: Yeah. So there's a few different ways that you can capitalize on this. Let's just use a $100,000 investment as an easy example. We strive to, in most, I would say most investments nowadays, strive to double your money in five years, which equates to about a 20% return per year. Now, you're not gonna get 20% every year, meaning, you know, you invest a $100,000 every quarter, every year you're gonna get, you know, $20,000 back because there's gonna be cash flow.
• 43:39
  We call cash flow distribution from the operations of the property, not from, let's say, a refinance or a sale. And then there's the actual return of capital and the big return at the end whenever you sell it. All that equates to about a 20% return overall. As far as cash flow, though, you do get cash flow depending on the type of deal you invest in. You know, if it's a let's say, if it's like a development deal or something, there's no property, there's no cash flow yet till it's built and it's rented out, you won't see any.
• 44:06
  But if it's, you know, a cash flowing property from day one, which are the types of assets that we like to invest in, you should expect anywhere between a, you know, five to 7% return, let's say, a year or even more. Once it kinda gets up and going, maybe 5% year 7% year two, and then it jumps up probably. Then it probably jumps up to, like, eleven, twelve, something like that for the last three, four, or five years. So, you can expect returns and distributions at least every quarter. Usually, there's a little bit of a layover from when the property closes to kind of get it under control, so you might wait six months for your first return, but then every quarter, or maybe even every month, you'll get an ACH deposit in your bank account.
• 44:46
  So it kinda works a little bit like dividends from a stock.
• 44:50
  Davina: Right. Right. So the goal is going in with the idea that ultimately we're going to sell this. Is that the case with everyone?
• 44:58
  Seth: Not with everyone. I've been seeing kind of a movement lately where sponsors structure the deal, and they let investors know beforehand, hey, this is a lifetime asset for us, so we don't plan on ever selling it. That could change. We reserve the right to do it, but just think of this as a really long term investment. So, we're going to do all the improvements, we're going to lease it up for higher rents, and then we're going to refinance, and we're going to return a big piece of your capital back, but we're gonna hold onto the property and just keep generating cash flow, and then as the property, you know, ten years from now, let's refinance again, and you get another big chunk of change, and then fifteen years down the line, we do it again.
• 45:38
  Some people do look at assets that way. That's not most investments. Most investors actually dictate that they want their money back as soon as possible, and, you know, it's up to the individual investor what they're looking for, but typical investors want their money back quickly. So, we as sponsors are encouraged to sell the property as soon as possible at the highest value. And that's typically somewhere between three and five years.
• 46:01
  Davina: How long did you operate as a passive investor before you decided to sort of flip to the other side?
• 46:07
  Seth: Not long. Probably about a year more. I invested passively in a few deals with other active sponsors. I still invest passively, so that never really stops. So I'm always any deal that I'm actively involved in, I'm typically gonna be investing passively as well.
• 46:21
  Then I'll invest passively in other asset types that maybe I'm not as much of an expert on, like ATM deals and things like that.
• 46:30
  Davina: Yeah. Yeah. So it's something that you do. Even though you're an active investor, you also still passively invest. It's something that's kind of a whole strategy for you.
• 46:39
  It goes back to that, you know, so should someone flip to becoming a sponsor or an active investor? I think it goes back to sort of that passion for it, a desire to do it or want to do it. And if you don't want to do it or don't want to develop because you have to develop a whole new skill set. I'm sure your law degree and your MBA and all of that, you know, came to as a perfect sort of a storm of skills that you developed. And then your years of experience investing in real estate kind of at a at a lower level, you know, all came into play.
• 47:11
  Seth: Yeah. For sure. I mean, worked out really well. When I partner with other sponsors on deals nowadays, I use my legal degree for sure, and my legal background. I mean, I'll typically do all the legal work in house, so that my law firm still operates in that manner.
• 47:26
  So, you know, me and my paralegals will handle all of the real estate and securities work for the deal, and it's kind of serving almost as a in house counsel type of role for a lot of these groups.
• 47:37
  Davina: And I guess people need to understand too that because we didn't really get into the active investor or the sponsor that as a passive investor, you're paying for other people to do the heavy lifting and the work. Right? That comes out of it. There are fees associated with that, obviously, and that's all a part of analyzing a deal and understanding fees and stuff like that. Is there any sort of insight you can give us if we're passive investors or we're seeking to become passive investors in that or, you know, tips or things that we should look for to understand if the person we're dealing with is acting within a certain normal range of what an active investor does?
• 48:11
  Seth: For sure. This is actually gonna take a little bit of experience, a little bit of kinda learning, is discovering what are typical fees. You know? I mean, so there's gonna be certain fees that are always gonna be part of the deal. There's gonna be an acquisition fee that the sponsors will get whenever the property closes.
• 48:28
  There'll be an asset management fee of some sort that'll be, you know, throughout the life of the deal, And then, there might be some other small fees here and there. Maybe a refinance fee, maybe a sale fee, a construction management fee, things like that. So, you just need to really stay on top of what is customary going on right now, and make sure that if you see something, you know, right now, you want to see like a 2% acquisition fee ish, and a 2% asset management fee. You see that a lot. So, if you're not aware of that, and somebody's deal has like a 5% acquisition fee, that should stick out.
• 49:02
  It should be like, Wait a minute, why are you taking a 5% acquisition fee? What's the reason behind it? There might be a good reason, but at least you need to know when to ask the right questions, right?
• 49:12
  Davina: Right.
• 49:13
  Seth: And a lot of these fees, one thing you really wanna look for, and most deals are structured this way, you wanna see an alignment of interests. So, make sure that whenever the deal is successful, that's when the sponsors get paid. Not necessarily Just because, let's say, they raised a million dollars in capital, doesn't mean that they should get a 2% asset management fee based on that million dollars that they raised five years ago and they're still managing. That's in the past, right? To me, that asset management fee, for instance, should be based on some sort of revenue that the property is generating, so that the sponsors are still aligned with interest with the investors.
• 49:49
  So, the property is successful, then they get paid. There's nothing wrong with getting paid as a sponsor, because if the fees are too small, then they're not motivated to make the property successful, because they've already really been paid, let's say, on the front end, and they'll get paid on the sale. But the little stuff in between that really matters a lot for the investors from a cash flow perspective, maybe they're not as motivated to make it optimal.
• 50:12
  Davina: Seth, thanks so much for being here and discussing this with me. If people wanted to learn more about maybe get more educated on being a passive investor in real estate syndication, tell us how we can maybe find out a little bit more about it and get more educated on it, and then obviously how we can reach out to you.
• 50:31
  Seth: Yeah. Absolutely. So you can find me all over social media. I'm on all the platforms. It'll either be under Seth Paul Bradley or Passive Income Attorney.
• 50:39
  You can just Google me. You'll find it on all the platforms. I actually have a four week program that teaches people how to invest passively in real estate syndications. It's called Passive Income Pro. You can find it at passiveincomepro.io.
• 50:50
  You can actually buy this program, and you'll be ready to invest in two or three days if you want to be. Even though it's a four week program, we design it so there's group coaching calls and things like that. If you have a deal that you, let's say, you want to invest in, and you're just not confident enough to wire somebody $50, I know the first time I did that, was a little bit nervous, You could take this program, and you could be ready for that same deal. So that's how I designed it. I didn't want it to be like a six month program or a one year program or something like that.
• 51:17
  We're busy attorneys. We don't have time for that. We just wanna tell me what I need to know and nothing that I don't need to know so that I can invest confidently and make good decisions.
• 51:27
  Davina: Yeah. I think the key to this is making sure that you're understanding everything you're signing before you sign it. But you know? And so as attorneys, sometimes we're the worst. We're the worst.
• 51:37
  Attorneys will sign contracts all day long because I think attorneys are like, you know, if I need to, I can find a way to get out of this or whatever it is. But it's amazing the amount of attorneys that sign contracts without reading them. This case, I think it's important to educate yourself. And I think it's a great, you know, way to start is and listen to your podcast. I love the Passive Income Attorney Podcast.
• 51:59
  You guys can see the name of it behind you. It's a great podcast to listen to because you get to hear a lot investors' stories of kind of how they've, you know, made the shift in their life. Some people, it's a holistic shift where they've done like Seth's done and said, I'm leaving kind of this day to day drudgery of a law firm, and I'm going all in on passive income investment. And then other people have are, you know, I'm doing this as a way to build my wealth while I'm still doing this thing that I love to do. So thanks so much for being here and sharing with us today.
• 52:29
  I hope people are really, you know, maybe there's a light that's being shined on something that they didn't know was even possible.
• 52:35
  Seth: Yeah, Davina. Really appreciate you having me on today.
• 52:38
  Davina: Alright. Thank you. Thanks.
• 52:41
  Intro: If you're ready to create more of what you truly desire in your business and your life, then you'll want to visit us at wealthywomanlawyer.com to learn more about how we help our clients create wealth generating law firms with ease.