Latest / The Academy Presents podcast / From Passive Investor to Portfolio Freedom with Prolet Miteva

Transcript

From Passive Investor to Portfolio Freedom with Prolet Miteva · The Academy Presents podcast

• 0:01
  Did you know that 90 % of the world's millionaires
• 0:05
  invest in real estate? Well, I'm Angel with the
• 0:09
  Academy Presents Real Estate Investing Rocks,
• 0:11
  and I'm here to help you if you want to go for
• 0:15
  your piece of that pie. Are you new? Are you
• 0:19
  new to this and you just don't know where to
• 0:20
  start? It's okay. Are you someone that has invested,
• 0:25
  but you feel stuck, you feel like you've lost
• 0:27
  momentum, you don't know where to really head
• 0:30
  from here? Are you a seasoned real estate investor
• 0:33
  who is doing great but maybe you just want to
• 0:35
  hone a few skills here and there? This is the
• 0:38
  place for you. The Academy Presents Real Estate
• 0:41
  Investing Rocks podcast will connect you with
• 0:44
  industry experts so that you can save time, avoid
• 0:48
  costly mistakes, and begin living the life you've
• 0:52
  dreamed of all through real estate investing.
• 0:56
  You're already taking the first step. just by
• 1:00
  joining us here today. When I started, that was
• 1:04
  like almost nothing. It was the desert out there.
• 1:09
  And one of the biggest lessons for me was to
• 1:14
  actually try and learn more. Because when I started,
• 1:19
  I waited until I was an accredited investor.
• 1:22
  And I'm pretty sure that people who are listening
• 1:24
  to your podcast know what an accredited investor
• 1:27
  is. But if not, it's very quickly is basically
• 1:31
  an individual who is considered to be very sophisticated
• 1:36
  and has a net worth of at least 1 million, or
• 1:39
  they're making $300 ,000 a year. As a couple
• 1:44
  or 200 as a single. As a single. And those people
• 1:49
  can go and invest in certain offerings that are
• 1:53
  out there. They're advertised and they're available.
• 1:56
  Majority of the public cannot invest that. Now,
• 1:59
  when I started, I only learned about 506C and
• 2:03
  I didn't learn about 506B, which is the sophisticated
• 2:07
  investor bucket where you can go and invest with
• 2:11
  somebody if you have a relationship, if you know
• 2:14
  each other, the deals cannot be advertised. but
• 2:18
  oh my god such a missed opportunity I think I
• 2:21
  waited for two extra years to jump in because
• 2:25
  I didn't know and I didn't know because there
• 2:27
  was literally almost nothing out there in back
• 2:31
  in 2014. Now the information is truly out there
• 2:36
  and in a way it's a little too much out there
• 2:39
  and a little too fluffy so all I can say is like
• 2:44
  You really need to learn and you really need
• 2:48
  to figure out how to ask those hard questions
• 2:53
  from your sponsor, hard questions about your
• 2:55
  deal before just jumping in. And I'm gonna do
• 3:00
  a little self promotion here because when I was
• 3:06
  building the syndication tracker, that was one
• 3:08
  of my other passion points. It was... I personally
• 3:13
  in theory knew what to ask and I did ask some
• 3:16
  of these questions. I didn't really understand
• 3:18
  until I repeated the process like dozens of times.
• 3:22
  But I also didn't really have a structured way
• 3:25
  to do it. So I built that into the syndication
• 3:28
  tracker where there is a structured questionnaire
• 3:32
  for sponsors grouped into categories and the
• 3:37
  same idea for per investment, where it kind of
• 3:43
  helps you ask not just the main question, but
• 3:46
  kind of like the follow ups and tells you what
• 3:48
  to listen for in order to try to fully evaluate
• 3:53
  that sponsor or that deal better. And one thing
• 3:58
  that I would definitely say that I've added and
• 4:02
  I don't know if many people talk more about that,
• 4:06
  but you know, you go through the standards like
• 4:09
  no market business plan, debt, blah, blah, blah.
• 4:12
  But one point that I feel a lot of investors
• 4:15
  miss is that part about gut feel. I call it gut
• 4:20
  feel. I don't know if this is more of a female
• 4:25
  thing or not. Maybe no, I'm a woman. It's how
• 4:28
  we started out. It was What was my internal compass
• 4:30
  saying? I did a lot of gut feeling in the beginning.
• 4:34
  I can say like some of my gut feel is not really
• 4:36
  great, so right now, but it's not always right,
• 4:41
  but most of the times it's right, but I do truly
• 4:45
  feel that that idea of thinking about the gut
• 4:51
  feel, like how... What is your impression of
• 4:57
  that person? What is the impression of the teal
• 4:59
  like? How did they treat you because sometimes?
• 5:04
  Sponsors will treat you especially like as a
• 5:06
  woman when I tell them like hey I talk to me
• 5:09
  not to my husband it's like it's kind of like
• 5:11
  this dismissive like talking over your hands
• 5:14
  like First of all, I don't take that crap from
• 5:18
  anyone Second of all you want my money you better
• 5:26
  work for that money and you better show me the
• 5:29
  respect for that money. And that for me is super
• 5:31
  important, right? Are they showing the respect?
• 5:34
  Are they treating you like a normal human being,
• 5:38
  not like somebody that doesn't know anything?
• 5:41
  Sure, you might not know anything, but you know,
• 5:44
  have that compassion and think more about that
• 5:48
  person as a person and not as like, I don't know
• 5:53
  what's the right word. Like an easy mark. So
• 6:00
  I was going to kind of stack on something you
• 6:02
  said. So I was on that panel and someone came
• 6:07
  up to me and said, hey, you know, I just have
• 6:10
  to tell you again, just like I told you last
• 6:11
  year, you know, thank you for speaking the truth
• 6:14
  from the stage. He's like, because everybody
• 6:18
  else sits up there and they paint this rosy picture
• 6:20
  about what's going on in real estate today. And
• 6:24
  he's an operator, he's like, when we as operators
• 6:26
  know that's not the current situation. And so
• 6:29
  to hear you speak this truth from the stage is
• 6:33
  really refreshing. And for me, it's like, I'm
• 6:38
  not going to sugar coat it because yeah, we have
• 6:41
  a deal that's going great. We also have a problem
• 6:43
  child. And the world needs to know that there's
• 6:46
  a lot of problem children out there right now.
• 6:48
  And we're working our tails off to try and correct
• 6:50
  the problem. But it doesn't mean that it doesn't
• 6:53
  still exist. Like it's still out there. Things
• 6:56
  are hard. I can't imagine trying to raise money
• 6:59
  for a deal right now. I just can't. And there's
• 7:03
  how many deals are even good right now. I don't
• 7:05
  even know because we're not looking. But frankly,
• 7:09
  it's like. I respect more sponsors that can like
• 7:13
  fess up and tell me like what did they did wrong
• 7:16
  like why what did they learn how are they fixing
• 7:19
  it what are they doing right because we know
• 7:23
  that that disaster happened I mean there is very
• 7:27
  few deals that kind of went through it without
• 7:33
  a hitch and a lot of it was because yeah okay
• 7:35
  they were in fixed debt and all of that and it's
• 7:39
  like great but everyone was very bullish from
• 7:44
  the run -up of the economy and everything else
• 7:48
  so nobody really was expecting it so yeah so
• 7:50
  I have more respects for the sponsors that can
• 7:54
  fess up and tell me what did they do wrong then
• 7:59
  the ones that just tell me that everything is
• 8:01
  great. And then they just turn around and take
• 8:04
  money from one deal and put it into another.
• 8:06
  And that's how they pay people. And then hopefully
• 8:12
  at some point they get to jail. Speaking from
• 8:17
  experience, what? People are doing some shady
• 8:21
  stuff right now. Yeah, there's a lot of shady
• 8:24
  stuff going on. And it comes, I mean, a lot of
• 8:28
  it comes from that place of fear and fear from
• 8:33
  being honest and fear from being viewed as a
• 8:39
  failure. And some people are more afraid of admitting
• 8:44
  to failure than kind of like going at it and
• 8:48
  then they go the wrong path. But I would say
• 8:51
  that one thing that I can tell you tech talks
• 8:56
  a lot about it, but then I can tell you the reality
• 8:58
  because in tech you talk a lot about like, Oh,
• 9:01
  AB testing. It was like the biggest thing since
• 9:04
  sliced bread when it came out. Oh my God. Everyone
• 9:07
  was supposed to rely on the AB testing and doing
• 9:09
  it and doing it, doing it. And everyone was talking
• 9:12
  about like, Oh, you, we like right. We'd rather
• 9:15
  learn fast and we'd rather learn from failure.
• 9:18
  Okay. And all of those executives are all BS
• 9:22
  in this all the time. And in reality, when an
• 9:26
  A -B test fails, they go and it's like everyone
• 9:30
  is losing their mind. So tech likes to talk about
• 9:35
  a lot about that failure. So the spirit is there,
• 9:38
  right? And I wish that more people would embrace
• 9:41
  it, like truly embrace it. It's like, yeah, failure
• 9:43
  is good. You learn from it. It's just that you
• 9:47
  need to be aware that there might be some people
• 9:50
  playing politics and some people that are more
• 9:53
  concerned with saving face than actually embracing
• 9:57
  that failure. So same with AB testing is like
• 10:00
  when it's done correctly. And then when it's
• 10:03
  you truly learning from failure, it's amazing
• 10:06
  tool. It's the same thing in real estate. It's
• 10:09
  like if you failed and you truly learn from it,
• 10:12
  and now you have new tools to deal with and to
• 10:16
  work with in the next deal, good for you. And
• 10:21
  Frankly, now if you're a sponsor that has gone
• 10:24
  through that and weathered the storm in a way,
• 10:27
  now you have a good story to tell. Just like
• 10:30
  I have a good story to tell with I have three
• 10:32
  deals that are going to become complete crap
• 10:36
  and probably complete loss. And am I happy about
• 10:40
  it? Hell no, I'm not happy about it. Is it a
• 10:43
  lot of money? Yes. If you're talking to me back
• 10:51
  20 years, would I consider that even like crazy
• 10:54
  amount of money? And it's like, how can I even
• 10:56
  conceive losing that in like couple of years?
• 10:59
  We'll be like, oh my God, this is crazy. But
• 11:03
  when you look at it with a lens of time, things
• 11:07
  change. And the point is you learn and you go
• 11:11
  forward. And now you have... better idea of how
• 11:14
  to invest so now your next deals that you're
• 11:16
  choosing will hopefully be better and they'll
• 11:19
  perform yes maybe they'll be a little bit more
• 11:21
  conservative and maybe you're not gonna fall
• 11:25
  for the like oh we're gonna like give you 22
• 11:29
  % IRR which if anyone tells you this right now
• 11:32
  don't believe them but uh right you don't you
• 11:37
  wouldn't fall for that you might go a little
• 11:40
  bit more on the conservative side of things and
• 11:44
  be happier there because your risk is lower.
• 11:46
  Because yes, the higher the risk, the higher
• 11:50
  the returns. So you need to determine as a passive
• 11:54
  investor, as an active investor, where does your
• 11:56
  risk lie? So for me, my risk tolerance did change
• 12:01
  over the years and it changed for multiple reasons.
• 12:05
  When I first started investing, I was investing
• 12:07
  in anything. granted, because for me, it was
• 12:10
  also if I put my money into it, I will learn,
• 12:12
  right? I'm forced to it. I put something in,
• 12:16
  I need to monitor it, I need to pay attention
• 12:19
  to it. But now, I am in my next phase of life
• 12:24
  where I am no longer working W2. I am living
• 12:29
  on my portfolio. And now what I'm looking for
• 12:33
  is different. I'm not crazy chasing the crazy
• 12:36
  returns. I am chasing cash flow first. I am chasing
• 12:43
  also equity because I feel like I'm too young
• 12:46
  to only be chasing cash flow because everyone
• 12:50
  keeps trying to sell me or debt funds. And I
• 12:52
  always say like, no, not for me. I need equity.
• 12:57
  I, I want What do we say in the US? I want my
• 13:04
  cake and I wanna eat it too. So, yes. So I want
• 13:08
  my cashflow now, but I also want equity at the
• 13:12
  end because I still want my portfolio to grow.
• 13:15
  I don't want to just be consuming the dividends
• 13:20
  that I'm receiving from my portfolio without
• 13:23
  the background growing as well. So. I am now
• 13:28
  more in the bucket of cash flow and equity. I
• 13:33
  don't know. When I'm 70, I might turn to debt
• 13:36
  funds. I'm too young. Right now, I still need
• 13:40
  equity. But things change over time, right? The
• 13:44
  way your life changes, your risk profile changes,
• 13:49
  and it's really up to you to define that and
• 13:53
  what you're comfortable with. So I was going
• 13:56
  to ask, So I've heard people say everything from
• 13:59
  10 % in alternative assets up to 30 % in alternative
• 14:02
  assets, but what is considered an alternative
• 14:05
  asset? Is that just anything that's not Wall
• 14:08
  Street? Well, that's what I consider alternative
• 14:12
  assets. I know that people might divide it into
• 14:15
  different buckets or not. And okay, I am probably
• 14:19
  not the best person to talk about portfolio allocation
• 14:22
  because people tell me that I'm crazy. Uh, but
• 14:26
  I already said that my, I'm a little bit more
• 14:28
  on the aggressive side of investing. So I'm actually
• 14:32
  about 60 % in alternatives. And that includes,
• 14:35
  that doesn't include my primary home, which is
• 14:39
  by the way, an investment because at all the
• 14:42
  age now I'm house hacking. So I bought a duplex
• 14:46
  or I'm renting half of it and then the other
• 14:50
  half. Um, I wish I did that when I was younger.
• 14:54
  Another big mistake that I did when I was younger.
• 14:58
  So I am about 60 % in alternatives and that includes
• 15:03
  real estate, that includes some oil, and that
• 15:08
  includes some play money for crypto. And I have...
• 15:14
  You use startups too, don't you? Yeah, I did
• 15:16
  couple, but that's it. And it was mostly because
• 15:19
  it was friends and it's like... Why not? Play
• 15:23
  money. Play money. That's what, like, for some
• 15:26
  of those things, including crypto for me, it's
• 15:27
  like play money. I will tell a story because
• 15:30
  I had almost like a big fight with my husband
• 15:32
  because he's like, it's pretend money. It's like
• 15:36
  nowhere. It's nothing. It's like, it's play money.
• 15:40
  So we finally agreed. It's like, he was like,
• 15:44
  OK, don't invest anything you're not willing
• 15:45
  to lose. I was like, OK. We'll do that. And right,
• 15:50
  that's me. So for me, those platings are a very
• 15:54
  small percentage of my portfolio and pretty much
• 15:59
  majority of my portfolio is in commercial real
• 16:02
  estate. I do believe in diversification by including
• 16:08
  stocks because frankly, without having stocks
• 16:12
  in these last few years, I would have had to
• 16:15
  go back to work. Because guess what happened
• 16:18
  with all, well, not all, but most of my distributions
• 16:22
  for all of my investments in real estate. Exactly.
• 16:27
  Big Fed zero, especially from multifamily. Everything
• 16:30
  just disappeared. And it hurts, but that's where
• 16:36
  when you have access to other asset types, you
• 16:40
  get the access to money. So thankfully. Knock
• 16:44
  on wood. I didn't have to go back to work because
• 16:48
  that book had sucked. I'm too used to not working
• 16:50
  now. Exactly. So for me, my portfolio is 60 %
• 16:57
  in alternatives. That might be a little too aggressive
• 17:02
  for a lot of people. I also do not do any bones.
• 17:09
  I feel that I'm too young for that. So I know
• 17:13
  people talk about like hedging the market and
• 17:17
  blah, blah, blah. Yes, I don't really believe
• 17:20
  that. And I do believe some of the Monte Carlo
• 17:24
  simulations that basically even with 100 % portfolio
• 17:28
  in stocks, you're pretty much good when you have
• 17:32
  your safe withdrawal rate at the right percentage.
• 17:38
  So yeah, but I'm more on the aggressive side
• 17:40
  on the portfolio. I think what I've heard is
• 17:45
  usually 10 to 30. And that Edmund spouts those
• 17:51
  numbers out a lot. Yes, I know. I had a very
• 17:54
  professional conversation with him at your Marvelous
• 17:57
  Meetup. It's Marvelous Mondays. We have all sorts
• 18:00
  of conversations. It's hard because when alternative
• 18:08
  assets are doing well, They're doing really well
• 18:12
  and there is nothing out that they can touch
• 18:14
  them and When they're not doing well, it's not
• 18:20
  good And it's not just not good because it doesn't
• 18:25
  pay out it You learn the failures of your own
• 18:30
  internal compass Because as things start going
• 18:36
  wrong people start doing shady things and maybe
• 18:40
  communication goes to zero, or maybe you start
• 18:43
  hearing that they're doing these, I don't call
• 18:45
  them back alley deals, but they're like doing
• 18:46
  these weird things. So if you've been in this
• 18:50
  space for any length of time, you've heard of
• 18:52
  deed in lieu of that if you're new, you don't
• 18:55
  know what that is. And that's literally just
• 18:58
  handing the keys back to the bank. So you avoid
• 19:00
  foreclosure by handing the keys back to the bank.
• 19:04
  So when things turn around, And that person's
• 19:08
  raising again, they don't have a foreclosure
• 19:09
  mark against them. And so they don't have to
• 19:12
  say, oh, yes, I lost 100 % of investor money
• 19:14
  because I have a foreclosure on my record. Maybe
• 19:18
  they offer up the information. Maybe they don't.
• 19:22
  But at the end of the next cycle, if they didn't
• 19:24
  learn their lesson with this one, the same thing's
• 19:27
  going to happen. And so there's this alternative
• 19:31
  playbook out there that exists that the majority
• 19:35
  of people coming into this space have no clue
• 19:38
  about like we came into this pretty close to
• 19:41
  when you did like 2017 and I had never heard
• 19:44
  Dean and Lu of until probably two years ago and
• 19:50
  so like we were coming in on you know seven years
• 19:53
  in the space and we'd never heard of that before
• 19:54
  it's like late what yeah no it's it's really
• 20:00
  sad but that's where from Passiveness to perspective,
• 20:06
  if to talk about myself, and it's a little unfair
• 20:10
  because frankly, I had a lot more time to focus
• 20:13
  on that after I quit my job. And when you're
• 20:17
  working full time, right, it's hard. And if you
• 20:19
  have kids and you have other things that take
• 20:21
  your time, it's hard to focus on some of these
• 20:23
  things. But it's super, super important to connect
• 20:27
  with. other passive investors, other active investors.
• 20:31
  So you have some kind of a network. So if you're
• 20:35
  evaluating an investment, you can go and ask
• 20:38
  somebody and be like, hey, have you heard of
• 20:39
  that person? Or if they haven't heard, they might
• 20:41
  be like, okay, I haven't, but like, let me ask
• 20:43
  around. People are usually super, super willing
• 20:48
  to help in the community. If nothing else, the
• 20:53
  other thing I learned as I started going to a
• 20:55
  lot of the in -person meetups too here in Austin
• 20:58
  is people in real estate talk. It's like they
• 21:04
  talk. So if you want to know somebody, you can
• 21:07
  find somebody to tell you something. Find other
• 21:12
  people like find other people go to some like
• 21:14
  if you don't have time for In -person meetups
• 21:18
  or if your city doesn't have those in person
• 21:20
  meetups go to some of the online meetups like
• 21:23
  I'm not an active investor But I love going to
• 21:27
  the marvelous Mondays right because it's like
• 21:30
  first I get to hear about the market I get to
• 21:32
  hear about the struggles of the active investors,
• 21:36
  but I also get to hear the lowdown on potential
• 21:39
  investments that I can go into or that I should
• 21:43
  avoid. So learning is great, getting information
• 21:49
  fed by a sponsor is great, but ultimately you
• 21:52
  have to also find other people that you can talk
• 21:56
  to and that you can get information out of. And
• 22:00
  that's why it's like I go to conferences, I go
• 22:01
  to meetups, I go to Zoom meetups and just kind
• 22:06
  of try to keep my a year open and make sure that
• 22:12
  before I invest in somebody new, I actually do
• 22:16
  my homework on that. Yeah and you can still get
• 22:19
  blindsided. I mean yeah true you can always get
• 22:22
  blindsided because some people are pretty damn
• 22:24
  good liars and that that's why I also tell people
• 22:28
  it's like If somebody has a great marketing presence
• 22:31
  online, and sorry, I don't know what your marketing
• 22:33
  presence online is, because I gave up social
• 22:35
  media. But if somebody has a great marketing
• 22:40
  presence online, be a little skeptical. Are they
• 22:45
  all marketing? Or do they actually have substance,
• 22:49
  right? Because you want the substance, you don't
• 22:51
  want just the marketing. Because in these days
• 22:54
  with AI, everyone can do like crazy marketing
• 22:58
  stuff, right? You go and you tell judge your
• 23:00
  PT club, whatever. It's like, Oh, do my blah.
• 23:03
  And, and it does. And then you post it. And then
• 23:06
  it's like, it feeds all of these passive investors,
• 23:10
  but just think critically and be skeptical. I
• 23:16
  know it's, um, it can be really tough. And I
• 23:20
  fell into that trap myself. When I say that I
• 23:22
  had feelings in the moral compass, it was a lot
• 23:23
  of that. And you see the sparkly and the glib
• 23:28
  tongue. You're listening to people. They can
• 23:30
  say all the right words. But then when things
• 23:35
  start going sideways, they don't necessarily
• 23:37
  have the chops to deal with things going sideways.
• 23:40
  Because when they entered the space, it was 2017.
• 23:44
  And everybody was doubling up in two to three
• 23:46
  years. And so they didn't. I will say, the people
• 23:50
  that are entering right now, or even in the last
• 23:53
  year, that are seeing any level of success, they
• 23:57
  are going to be incredibly strong operators on
• 24:00
  the uptick of the next cycle, because they learned
• 24:03
  when it was hard. That is definitely true. So
• 24:09
  I think that that is really important. I would
• 24:13
  also say, as you're seeking out information,
• 24:18
  I had heard from a lot of different people that
• 24:20
  there were people that didn't want to talk to
• 24:21
  me or come to my events because they thought
• 24:24
  I was negative. And I would say seek us out because
• 24:30
  it's not that we're negative. It's that we're
• 24:32
  a little jaded. And realistic. Yeah, because
• 24:36
  our own deals aren't going well. I know everything
• 24:39
  about being negative and being jaded. But I mean,
• 24:42
  it's like we have deals that aren't going good.
• 24:44
  We're in deals that aren't doing good. Yeah,
• 24:47
  I'm jaded. And do you want to know who I'm jaded
• 24:50
  about? I'm not I mean, I'll tell you about it.
• 24:53
  I'm not going to send it to you in an email.
• 24:55
  I'm not going to text it to you on the phone.
• 24:57
  But I will talk about some of our experiences
• 25:01
  because those are my experiences and I should
• 25:04
  be allowed to help people learn from my experiences.
• 25:08
  Yeah, I think that's the right thing to do. But
• 25:12
  I'm with you. It's like I'm not going to put
• 25:14
  it in an email. But come and ask me and I'll
• 25:16
  tell you. Yeah. That's why I say there's people
• 25:20
  in real estate talk. No, they do. And, um, you
• 25:27
  can, you can save yourself a lot of heartache
• 25:29
  and a lot of money if you just do your own due
• 25:33
  diligence. Yeah. Just don't be one of those little
• 25:36
  suckers that hear from one sponsor and then just
• 25:39
  dive straight into them. It's like, yeah, don't
• 25:42
  be that here. Multiple things. evaluate multiple
• 25:46
  things, learn, learn, learn.