Whitney stumbled into real estate by accident. After purchasing her first rental in 2002, and hitting a home run, then nearly losing it all on her second deal, she took control and figured out how to invest in real estate the right way. She realized that success must leave clues. So, she studied and replicated the very personal finance and wealth creation strategies the wealthy use to create financial freedom. Today, Whitney is a partner in $700M+ of real estate —including over 5000+ residential units (MF, MHP, SFR, and assisted living) and more than 1400+ self-storage units across 7 states—and experience flipping over $3.0M in residential real estate.
- Getting Started In Single Family
- Multi Family Cash Flows Better Than Single Family
- One Bad Seed Ruins A Community
- Third Party Property Management vs. Self Management
- The Coming Recession
- The Coming Bridge Debt Trouble
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
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Full Transcript Below
Intro
Hi. My name is Rod Khleif, and I’m the host of “The Lifetime Cash Flow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars and we talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.
Rod
Welcome to another edition of How to Build Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif and I’m thrilled you’re here. And I know you’re going to get tremendous value from the dynamic woman I’m interviewing today. Her name is Whitney Elkins Hutten, and she’s in Boulder, Colorado. Now, she actually is the director of Investor Education at “PassiveInvesting.com”, which is my friend Dan Hanford’s company. And we cross paths. We didn’t get to meet, but we crossed paths at their conference a couple of weeks ago called MFIN. But, she’s– that company has acquired over 4000 doors and Whitney has been in this for quite a long time, so I’m very excited to get into it with her. Whitney, welcome to the show.
Whitney
Thank you so much for having me. This will be amazing.
Rod
Yes, it will. Well, so, why don’t you just take a minute and give us a little more background? You can do a much better job than I just did about, you know, who you are and kind of bring us current, just kind of high-level overview of your bio, how you got into real estate, why you love it, blah, blah, blah.
Whitney
Definitely. Well, as you stated, I’m the Director of Investor Education at “PassiveInvesting.com” and that has not always been my course in trajectory in my career in life. I actually started out in my career path, in the medical field, public health field, and stumbled into real estate entirely by accident in 2002. I purchased the house with a significant other and about a month later the relationship fell apart and the house was all under my name. And as you can imagine, you know, back then, it was the wild, wild west. The lending, you know, is 103% financed. I didn’t have any reason to actually own this house. Long story short, YouTube didn’t exist. The house needed rehab. So I bought a “Home Depot 1-2-3” book and rehab the house myself. Did a lot of things I probably shouldn’t have been doing but learned a lot along the way. And when I actually sold the house, which I think is probably my number one investing mistake, but, you know, hindsight is 2020, I made a $52,000 profit and realized I hadn’t been paying for anything. You know, I stepped it full of roommates. I hadn’t been paying for the mortgage or utilities. If anything, I’ve been putting my money in my pocket every month. And it was after I closed that the light bulb went on. I’m like, how many were these properties could I possibly do? So that just really launched me down the path as a real estate investor. I was able to make an eleven months more money than I was making in my day job. I spent–
Rod
When was that? Forgive me. When was that?
Whitney
That was 2002.
Rod
Okay. Got it. So this is all in 2002. Forgive me. Please continue.
Whitney
Yeah.
Rod
Okay.
Whitney
Yeah, no, definitely. And, so, I did several more projects of my own, live-in, flipping, and house hacking. I mean, I was young, single, and then met my husband, we did a few more together. The house we’re actually living in– guys, if you’re watching live, this is not my house. It’s a green screen. This is my–I manifesting a dream here, but we’re actually still living in one of our last flips because we still [inaudible]
Rod
This is all in Boulder. Was all this work in Boulder?
Whitney
Boulder, the Front Range, Fort Collins. Boulder, north part of Denver.
Rod
Okay, you know, well, we make fun of people from Boulder. I’m from Denver. I lived in Denver for 30 years. We called you guys the granola bars. Okay, because this is–
Whitney
Fair enough.
Rod
I’m sorry.
Whitney
Because we are. I totally get it.
Rod
Because there’s a lot of eclectic stuff on that Pearl Street Mall and everything in Boulder, Colorado. It’s a beautiful place. If you’re listening, you’ve never been. It’s beautiful, but anyway sorry I interrupted. Please continue.
Whitney
It’s alright. We’re definitely a mountain town that’s in the middle of a metropolitan area, for sure. But yeah, so it took us a few years to really realize that if we wanted financial independence to unlock those golden handcuffs, we actually needed to create stabilized, repetitive income coming in, which meant we needed to hold on to some of these properties that we were rehabbing. And we started doing that in Colorado. And then that’s when I learned how to actually underwrite a property for cash flow and various other metrics and realize that Colorado was not the best for rental real estate. So we started renting–excuse me, buying properties out of state and scaled to a portfolio of about 30 units. Still doing flipping on the side to replenish capital, executing what we call the BRRRR method. And we can go into that. So reusing our capital. And then it dawned on me one day that we had enough cash flow coming in, that what I wanted in life, 20, 30 years from now, I could actually start having some of that today, being home with my daughter, taking care of my family. And I started to step away from my job, spent more time at home, my husband was like, I want some of that, too. And I’m like, wait. We need 80 properties to do that. So I didn’t want to own 80 single-family properties. So we transitioned to multifamily real estate and bought a 52-unit building with some partners. And that’s really when the doors just flew off on the scaling piece for us. And we got into multifamily real estate both actively and passively. And what I get to do today is really just educate investors or budding investors on the power of making that transition to act as a passive or even just leaping into passive investing in general. And just all the benefits that real estate can bring to them in their investment portfolio.
Rod
Sure. You know, I got interviewed on a podcast yesterday and kind of got into it with the host because I said multifamily is just so much better than single-family. I would love to get your perspective because you shifted from single to multi. You know, what I found in my–you know, I’ve owned 2000 houses. I had 500 houses in Denver at one time, actually. I can still name every street between Kipling and Havana because I have houses on most of them. But, you know, what I realized was they just don’t cash flow as well as multi. What was your experience?
Whitney
Yeah, definitely. We’re actually in the process of continuing to unwind our single-family portfolio, at least the long-term rentals, and get into more lifestyle type of assets, ones that we can short-term rent and we, you know, can utilize ourselves, but also position that into more larger projects. Now, as far as directly answering your question, I think there’s a benefit for somebody having both. Right? Single-family properties, you know, for somebody just getting into real estate, it’s accessible especially if they bought their own primary residence before– I even challenge if they’ve even rented. They understand it. It’s tangible to them. It’s not that hard. It’s also an asset that you 100% control. Right? You’re maintaining all the day-to-day operational decisions on it.
Rod
Right.
Whitney
So I, wholly believe somebody should keep controlled real estate in their portfolio. At some point in time, at least this is my journey, and a lot of other investors, you know, I know have gone on the same journey. You realize that you just can’t reach your goals as quickly as you want to through single-family rentals because you’re either– it’s not you’re 100% occupied and 100% vacant. You’re either making money or losing money and it’s that– you know because if you’re vacant, you’re still paying the bill. You have nothing to offset it. You don’t have another tenant on the property to offset it. You have no scalability, you know, having multiple units under one roof, you know, however many single-family units you have, that’s how many roofs you have, how many HVAC systems you have, how many water heaters, all those things can go wrong. But with multifamily, now you’re getting elements to scale. If I have one or two or three vacancies on a 50-unit property, I still have enough income coming in to paying the bills. I just have less income coming in. Now, there are some cons too, you know, transitioning into, you know, multifamily real estate, and that is you’re more heavily reliant on your tenant because you own a mini-community and if you get a bad seat in there, that can really kind of turn the tide on that property. And that’s why I cherish the operators that I invest with and also partner with on the properties because they’re really very skilled at working with these tenants in the communities and keeping them, you know, elevating them, you know.
Rod
Yeah, you’re absolutely right. It reminds me of a story. You know, we had an asset in Louisiana. That 403-unit asset was just a train wreck. Should have never gotten into it. I mean, we made a good amount of money on it, but I remember literally offering three bad tenants that living near each other that were just nightmare tenants, $1,500 apiece to be out by the next day. And they took it, you know, just to help turn that thing around. Now, let me ask you a question back to single-family for a moment. Did you self-manage or did you hire third-party property management for your single families?
Whitney
You know, when we first started transitioning our live-in flips into rentals, we started off self-managing.
Rod
Okay.
Whitney
And that was– because we were looking at the numbers we’re like, we can’t pay a property manager. Now, when we started investing out of state, we needed to have third-party management. And that really came with one of the properties that we had here in Colorado, in Broomfield. You know, Broomfield, as you know, it’s probably like 15 minutes away from Boulder. I have had a job, I had a child. I had all these responsibilities in Boulder. I’m like, when the toilet broke, I’m not going to go down there and fix it. I’m still relying on other people, third-party people to go in there. And I’m like, well, what does it matter if I have, you know, I’m not maintaining control of that anyways. I’m delegating it out. I might as well go through third-party management and figure out how to pay for that within the underwriting of the property.
Rod
Sure.
Whitney
It was such a lifesaver for us.
Rod
Let me ask you this. Did you have a good experience? Because I can tell you, I’ve had lots of bad experiences with smaller management companies that just manage single-family in multiple markets. I’ve had these experiences and so have a lot of people that I’ve spoken with. Did you just have a great experience with that, or did you have some turnover in that management company?
Whitney
I just actually switched managers on my last ten units. And here’s the thing, working with all of my property managers, you know, when I had my properties in Indianapolis, I’ve had some great property managers that were, you know, amazing from the beginning to end at the hold of the property. And then I’ve had others that were amazing at the beginning. And then I had to transition because they had some sort of issue in their business growth or, you know, the trajectory of their business went a different way and they started working with a different type of customer. So even if you have an amazing property manager right now, I always educate investors to plan for secession, have somebody else in the clip, you know, in your back pocket you’ve already vetted that can at moments known as take over your properties if, you know, the initial property manager is not doing very well.
Rod
Yeah, that happens a lot. And it happens in the larger assets as well. Not as much because they’re more professional and sophisticated, but in the single-family world, I’ve seen lots of problems. You’ve got a broker doing it on the side or, you know, a very small company and it’s very easy to have an issue with it. So, you know, talk about raising capital because that’s kind of what you do. Talk about, you know, Dan has his “Know, Like, and Trust” model. Yeah, why don’t you speak about that because, you know, I think moving forward, finding the deals isn’t going to be the problem. It’s going to be raising the equity because investors are afraid. And, you know, if you’re an accredited investor and you’re listening right now, now is not the time to be afraid. Now is the time to get excited because, you know, I got– in our case, I’ve only purchased one asset in the last year in San Antonio, 296 unit asset that broke even at 59% occupied day one. It’s even better than that now. And just been in best and final on numerous deals and scratching my head when I’ve seen what some of these properties traded for. And now we’ve got two properties under contract, I mean because it’s just opened up. The whole world has opened up. We’ve got a phenomenal deal in Nashville right now that we’re going to do the due diligence on next week. But, you know, talk about raising equity, if you would.
Whitney
Yeah, definitely. So, you know, for me and my background, I come from public health, and, you know, that– by no means, there’s any sort of sales position. I mean, I didn’t go to school in real estate or even have private equity. I had no background in that. But what I did have a background in is how to relate to people and change behaviors because that is the root of public health and like in getting people to change their behaviors, you know, to prevent sexually transmitted disease or obesity, whatever. And I brought that skill into my work when I started taking on the roles with the previous equity group, director of investor relations and operations. And it’s very similar to what Dan, you know, his “Know, Like, and Trust” triangle, I mean, I would say it’s exactly the same. You know, people won’t make a buying decision, you know, until they actually understand who you are as a person. Very few people are. And once they understand who you are as a person and who you are as a company, they have a decision to make. Do they like you or do they not? And whenever they can make that have enough information to understand if they like you or not, now they can move on to the next phase which is–are you– can they trust what you’re telling them about the deals, the conservative underwriting. You know, how the lending is going to work. How the business plan will work. And once they can actually check off those three things in their head, then they move on to investing. Now here’s the thing. One investor has actually got a diagram sitting there, okay, I know them, check. I like them, check. Now I trust them, check. Right? This is all happening at a subconscious level. So when it comes to actually driving that behavior change, you know, for anybody here listening that is, you know, trying to raise capital, you have to actually purposely lead the investor through this process. And so, how do they get to know you? Well, you know, this was by, you know, kind of being everywhere at once, right? Being at conferences, being online, doing YouTube, doing a podcast like you are here. You know, can they get to know you? Are you, you know, authentic and genuine, relatable in these conversations? Because, you know, even then they’re going to get to understand, do I actually like this person? Is this somebody I want to, you know, do business with?
Rod
Right.
Whitney
And once they start kind of checking those boxes now, they’re going to hop on the phone with you, and then they’re going to get to intimately know your company, take a look at your deals, and really, when you get them on the phone, they already know you to some extent. They probably have already formed some sort of decision in their head if they like you. Now, they’re really–they’re already well down that rabbit hole actually investing with you. They’re actually filling in the trust part of that triangle.
Rod
Yeah, very nice. Very nice. Yeah, Dan did a really nice job presenting that at the conference. So, what sorts of things do you typically communicate when you’re talking to– well, actually, let’s back– no, actually, let’s finish that thought. But I do want to go back to BRRRR if there’s just a handful of people that don’t know what that means, I can’t imagine but I do want to cover that really quickly. But let’s just do that right now and then I’ll go back to my question. What is the BRRRR method?
Whitney
Yeah, so, it’s a–I mean, the BRRRR method has been coined as a term probably recently in the last five to seven years by Brandon Turner, turn it into BiggerPockets, but it means you buy a property below value, you rehab it to force the value on the property, you rent it and you put a tenant in there. Now, you have a stream of income coming in, and now you can take it to the bank and utilize the income that’s coming in on the property to offset the property expenses. And you can refinance all or part of your money out of it and re-utilize the capital. Either maybe you’re just switching loan terms, which is probably more what’s happening right now for operators or, you know, individual investors. You know, but in certain phases of the market, you can actually pull capital out of the property and take that capital into the next deal. So it’s a great way to build a portfolio if you have limited resources.
Rod
And it applies to multifamily as well.
Whitney
Yes.
Rod
Yes. Okay.
Whitney
And self-storage and mobile home parks.
Rod
Right.
Whitney
Like, it’s just not multifamily. And it’s not new as the last five to seven years. This is what, you know, investors have been doing with real estate for hundreds of years.
Rod
Right. Like in our assets, you know, we buy them, we reposition them, we get the net income up because all commercial properties valued on a multiple net income, and then we, you know, refinance in three to five years, get the investors all or most of their money back and we’re onto the next one. And then the returns are infinity. You know, and so, it’s a fantastic model and I know you guys do the same thing. It’s a fantastic model that’s been proven for decades like you said, and you know.
Whitney
Well, to kind of stack on what you’re saying there, I mean, you as the operator are doing that, but think about what you just did for the investor, the limited partner investor.
Rod
Right.
Whitney
They need to participate in that because now they have, you know, some portion of their capital returned and now they can actually earn returns in two places, not only in that particular deal but maybe a future deal. You know [inaudible]
Rod
No, they can reinvest and just keep stacking that return. And like I said, if they’ve been paid back on one deal, then the return is infinity because they don’t have any investment in there and they can keep rolling that money. It’s a phenomenal business model. Let me ask you this. What are your thoughts on the recession? How do you feel about what’s coming? I know I’m more bearish than most and I know at the conference most of the people were not bearish because of the pent-up demand for housing and the job market and so on and so forth. I just–you know, you don’t know my story, but I lost a lot of money in 2008, ’09. And so I’m dragging that bag of negative experience behind me. But, you know, I got to tell you, the last two years have felt like 2006 and ’07 to me. And, you know, that frothing, that–you know, and reminded me of Warren Buffett’s quote, you know, “Be fearful when others are greedy”. It’s been a lot of greed the last couple of years. And then, of course, people are starting to become fearful now. And the second part of that quote is “Be greedy when others are fearful”. So what are your thoughts on all that?
Whitney
I think–I sit somewhere in the middle, I’m not 100% bearish because you know– the underlying fundamentals are very different from 2008 and 2009.
Rod
Oh, yeah, completely different.
Whitney
Completely different, right. But, you know, you can even harken back to like you know, the Great Depression. And I mean, I remember talking to my–my grandfather actually gave me a down payment on my first property. He thought I was nuts. He was like, why would you do this? And I was like, it was that transitional fear that–or experience. Not even fear, right? That experience. Every investor is going to carry that, that whatever that belief system is forward.
Rod
Sure.
Whitney
And that’s the thing, is that that is meant to keep you safe, right? So it serves a purpose.
Rod
It’s a primal thing, really.
Whitney
Absolutely.
Rod
It really is. Yeah. And I agree with you is that–you know, that it’s completely different. But let me throw this in there. You know, there’s been a lot of bridge debt in the last year or two.
Whitney
Exactly.
Rod
And it’s adjustable-rate and it’s 18, 24, 36-month term. And they didn’t require caps a year ago. They required them more recently. I think there’s going to be some pain there. That’s my two cents. That’s my opinion.
Whitney
I think there is. I mean, you know, that doesn’t relieve– even though the market is different, I think things are actually different from 2008 and 2009. If somebody is swinging for the fences on the deal and isn’t underwriting very conservatively, maybe they’re you know, grossly overpaid for a property or grossly, you know, overestimating their business plan or getting, you know, unrealistic.
Rod
Hold on, sorry to interrupt you. Like I’ve seen pitch decks where they literally double the rent, year one. I’m like, really? Come on. I mean, you know, in two or 300-unit asset. I mean, come on. Or 10% rent increases for five years straight. Really?
Whitney
No. I mean, I’m sure you’re like us. We’re very much under conservatively [inaudible]. I’m like [inaudible]
Rod
Oh, yeah. Totally conservative.
Whitney
We’re doubling market vacancies on our deals because you know, even though you mean–
Rod
Operating reserves, cash in the bank on each asset.
Whitney
Exactly.
Rod
You know, all of that. You’ve got to do it. And, yeah, well, you know it’s funny, you mentioned the Great Depression and you triggered a memory for me. You know, I lost my dad a couple of years ago. He was 90, but he lived through the Great Depression. And I remember asking him about it. This is, you know, four or five years ago, we had like a ceremony for my mom and dad. And I asked him, you know, what was it like to go through that? And he said he remembered a horse that he found on the side of the road and he brought it home and he wanted to keep it. And his parents said, there’s no way we can’t afford to feed it. And my dad started crying. He said, wow, I don’t understand why I’m emotional about this. It was a really beautiful moment. Like it triggered a memory that he hadn’t thought of for, you know, decades and decades. But anyway, that’s totally off topic, but when you mentioned the Great Depression, it reminded me of that. But anyway, yeah, so I kind of cut you off. Did you have some more thoughts as far as the current climate, you know, with this recession?
Whitney
Well, I think, you know, just to kind of finish my thought process there is– and you’ve already touched on it. There are a lot of people swinging for the fences. You know, you need to be, you know, focused on, especially if you’re investing as a limited partner.
Rod
Right.
Whitney
You’re giving up that day-to-day operational control of the deal. And so, you know, you need to be with somebody, you “Know, Like, and Trust” that is actually underwriting very conservatively. That, you know, the [inaudible] increases the vacancy, using debt wisely. Now, I do like real estate in a recessionary environment because you have multiple ways that you’re getting paid.
Rod
Right.
Whitney
You have the cash flow, you have the equity, and you have capital preservation. I mean, you know.
Rod
No greater hedge against inflation, you know. Right.
Whitney
You can pass through those costs to the end consumer, the tenant.
Rod
Right.
Whitney
So as far as, you know, really, in my mind, you know, if you’re looking for something to invest in, you know, with all the other options out there, cryptocurrency, stock market, stocks, bonds.
Rod
Stocks are down 30%, crypto is down 60%.
Whitney
Exactly.
Rod
Come on.
Whitney
Cash [inaudible] we’ve already known that.
Rod
Right.
Whitney
And so, [inaudible] compared to what?
Rod
Right.
Whitney
What are your options? And so that’s where I still see real estate as a very– the best investment is pretty much with [inaudible]
Rod
Yeah. No question. Completely agree. Completely agree.
Whitney
Yeah.
Rod
So here’s a couple of things, guys. You know, if you’re going to invest passively with someone, you should know a little bit about what the heck you’re investing in. Now, I’ve got a resource for you. It’s a list of questions to ask a GP before you invest. If you just text “GP Questions” to “72345”, it’s a list of about 50, 60 questions. Because you got to–you know, you don’t give your hard-earned money to someone without having some understanding of what it is, for God’s sakes. I mean, people put their money in the stock market and a stock broker convinces them to do that and they’re just a glorified salesperson. You know, they’re not analyzing the markets and whatnot. But the other thing is if–you know, I’m not sure when this will air. But if it’s before my July boot camp, for God’s sakes, even if you’re investing passively, come to Denver. Spend a few days with me. Learn this business so that when you see a broker’s–you know, I’m sorry, when you see an operator’s pitch deck, you kind of know what you’re looking at and you know whether or not they’re being too freaking aggressive. Like, you know, these 10% rent increases every year and no increases on the expenses or, you know, low vacancy while they’re doing a reposition or, you know, no operating reserves and so on and so forth just you know–so that you don’t– because there’s going to be some people losing their money over these next couple of years. I know it. With some of this bridge debt, I just know it. There are going to be some of these deals that go into receivership and get in trouble. So, you know, I hate it, but it is what it is. I’m probably less– what’s the word I’m looking for. Oh, gosh. Because since I lost $50 million in 2008, ’09 it’s not as painful for me to envision it because, you know, people need to take their hard knocks and move on and learn and grow from it like I did. But there’s still going to be some pain. Now, I know that you’re really good at investor relations. Talk about some of the things that you do to enhance the investor relationship. Dan did a beautiful job at the conference I was at and I would love to have you expand on some of that stuff for my listeners.
Whitney
Yeah, definitely. So I’m really approaching this from an educational piece, you know, not so much, you know, from the sales side. So I’m really meeting the investor where they’re at and trying to really listen to what they need. And sometimes get you know, what they actually should be asking for. So, you know, really, you know, I’m putting out a ton of educational content around making sure the investor wholly understands, like, what you’ve already alluded to. Do you understand what a syndication is? Do you understand–you know, how to actually formulate your goals? I think a lot of people come in as a limited partner investor into a deal and they’re starry eye. They’re looking at the numbers, but they get into assets that actually aren’t going to help them meet their goals.
Rod
That’s really good.
Whitney
I mean, I really help them back it up and actually focus there first because if you understand what you need from your portfolio and what is available out there now, you can create alignment and you’re going to sleep well at night whenever you have that alignment. And so I help them do that. I help them understand, you know, the different business plans within, you know, passive real estate because a lot of people, you know, get themselves in trouble. They invest in the business plan because they’re chasing a return when they– and really in their mind, they want to have a very core asset.
Rod
Yeah, and let me say this, operators can make returns look any way they want. And that’s another reason you’ve got to educate yourself because, you know, they can, you know, throw out these returns and just by tweaking a few numbers, make a proforma look fantastic. And if you don’t know what you’re looking at, you could really be in trouble. And I know there’s going to be people in trouble over these next couple of years. I just know it. So, no, that’s really good. I love the goal piece. That’s really, really great advice. You know, Dan also talked about, and this isn’t in your part of what you do there at your company, but, you know, talk about some of the things that they do to, you know, enhance the relationship with the investors. Put out a really nice high gloss newsletter, for example. They do in-person events, they—you know, and try to verbally communicate with every investor rather than just have them, you know, sign up on a portal like a lot of people do. And just, you know, there are a lot of great pointers. I was really impressed with the presentation he put on about–you know when he was teaching other operators on how to do this properly.
Whitney
Yeah. We’re very hands-on with our investors. And so, you know, we do have a lot of automation that runs in the background so we can again, you know, help, you know, people get the information they need and the time that they needed. But at the same time, we’re really trying to meet them where they’re at and reach out to each individual investor individually.
Rod
Right.
Whitney
And create that relationship with them, you know.
Rod
Right. And that’s the sales side. You know, you’re in there building relationships and presenting deals and so on and so forth. And you’re on the education side, which is really cool.
Whitney
I get to have a ton of conversations about that goal piece. It’s amazing.
Rod
Yeah.
Whitney
You know, I can remember three conversations earlier this week, you know, and investors are coming to me and they’re very focused. They’ve heard about this deal that we have maybe coming out and they’re like, when is it coming out? I want to be there. You know, give me in on the early list. And I’m like, wait for a second, I’m looking at the notes. We’ve had a conversation about your goals. Just want to make sure that we’re still aligned here. And they’re like, oh, good point. I’m like, and here are some other things that we have available that are better aligned with what your goals are.
Rod
Interesting. And so, how does that come into play? Is that the exit strategy for a particular asset or the returns?
Whitney
Boils down to tax benefits?
Rod
Tax benefits as well. Got it. Okay.
Whitney
Yeah. And potentially the structure, because some of our deals, we actually have a two-tier structure, maybe a structure that, you know, is a high cash flow works a little bit more like a prep equity position. And then we have a second structure that, you know, is a class B that sits behind the class A. You know, inherently, just by the positioning in the capital stack, has a little bit more risk to it, but you get to participate in the upside.
Rod
Right.
Whitney
I really hope, you know, investors kind of connect those two dots based on their risk profile. And again, I’m not a financial adviser. That’s not my rule.
Rod
Right.
Whitney
They’re really trying to, you know, kind of like a coach, turn the mirror back to them and say, you know, hey, we have a conversation. Is this– just double-checking.
Rod
Right. No, that’s really good too, you know. And so, like on the two-tier system, what she’s talking about, guys, is, you know, they might have a prep equity piece where they get–you know, they’re in the A stack. They get paid first in case if something goes south. But also, I’m guessing that the returns are maxed. So it’s like they get a prep of this, say 8% maxed out at ten or 12%, and then they’re out. You know, and then it’s return of capital instead of return on capital versus someone in the B stack. They may not have the priority, but they’re getting their prep and they’re getting to share in the split down the road. So did I describe that correctly?
Whitney
Correct.
Rod
Yeah. That’s a really–and a lot of people just want to know that they’re going to get 10% or 11% or 12%, and then they’re fine with that. Others want to participate in the equity. Well, listen, Whitney, it has been a real treat to have you on the show. I appreciate you sharing your knowledge and it’s a pleasure to meet you. I’m sorry I didn’t meet you in the Carolinas but thank you for coming on and hopefully we’ll cross paths again very soon.
Whitney
Absolutely. You’re going to be in Denver in July. We should connect.
Rod
Oh, that’s right. Oh, that’s right. Yeah, you should come. You’d have a blast, but, you know, it’d be pretty much very rudimentary for you. But actually, I do get a lot of established operators that go and network and whatnot, but yeah, if we can, we should definitely do that. It’s a pleasure to meet you, Whitney.
Whitney
You too. Thank you so much for having me on.
Outro
Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. Now, I know you’ve been hard at work helping our Warrior students do just that, using our “ACT” methodology, which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?
Rod
You bet. Guys, we’ve been going non-stop for three years building an amazing community of like-minded people, and our coaching students which we call our Warriors, have had extraordinary results. They’ve purchased thousands and thousands of units and last year we did over 1000 units with our students. And we’re looking to grow this group and take it to the next level. We’re looking for people who want to follow a proven framework that’s really step by step and then leverage our systems and network to raise equity, to find and close deals, and to build partnerships nationwide. Now, our Warrior community is finding success in any market cycle. So if you’re interested in finding out more about how you can become more of our incredible network and take advantage of the incredible opportunities that are coming very soon, apply to work with us at “MentorWithRod.com” or text “CRUSH” to “72345” and we’ll set up a call so you can check us out and we can check you out. That’s “MentorWithRod.com” or text “CRUSH” to “72345”.
