Whitney Elkins Hutten is a part of passiveinvesting.com with an amazing gentleman named Dan Hanford, who’s one of our strategic alliances. Commercial real estate investing is made simple. In fact, the beginning of her real estate career went better than most but her first-ever rental in 2002 was a huge success.
She is on passive real estate investing. But she started off on the active side in 2002. She started off as you know, as an accidental landlord, She bought a house with a significant other. And you know, fast forward about a month into owning the house, the relationship fell apart. And here she did, She had a house, all the expenses related to the house and the house needed pretty intensive rehab. She didn’t know what to do. So she stuffed it full of roommates. And back then in 2002, YouTube wasn’t around. So she went to Home Depot and bought the Home Depot 123 book and taught herself everything about repairing a house’s drywall, and electrical plumbing, And then I realized she hadn’t been paying for any expenses the entire time.
Episode Highlights Here:
Whitney:
There are so many different ways that we can actually reduce our tax bill here. But before we even get to that tax bill, we have to understand how is it we’re currently investing? Is that actually the lowest risk type of investment we could take for ourselves?
Brett:
What’s the biggest secret number one secret to making? Is passive commercial real estate simple?
Whitney:
The first step is actually knowing what your goals are, and what is it you’re trying to achieve? And oftentimes, you know, get on the phone and 1000s of investors and they’re primarily chasing yield, they want to get out of the stock market, they have a pain, they want to transition into some sort of like alternative strategy, they or maybe they do already believe in real estate. But they haven’t really quite nailed down what exactly they need, what are their goals. And sometimes it’s actually what they don’t realize what they lead with the investing goals that trip them up. For example, this is a conversation I have all the time and an investor comes in, they’re like I want out of the stock market. It’s too volatile for me, and I’m like, great. Do you need a cash flow? Do you need games do you can use some sort of balanced blend of both with your real estate asset? And they’ll be like, I don’t need the cash flow right now. Just sign me up for the games all, you know, you know, they’re already thinking like, kind of like a retirement plan. I’m going to use this 3040 years down the line. And I’m like, Okay, what happens if you lose your job tomorrow? What are you gonna do? Like, or, you know, maybe you have to downsize? Or maybe you’re you grow your family, you actually really do want to take a step back. I always encourage people to, again, you know, look at their goals, what is it they want? Why do they want it, but also make sure that somewhere in that investment in a plan, there is cash flow? Because it indicates that there’s actually not that asset you’re investing in has said it was stabilized now and is performing in the current environment.
Brett:
So it makes it get that so clarifying your goals and your vision for your investing or what you’re trying to do and what you’re trying to accomplish. And right next to that side by side is actually clarifying your cash flow needs. And taking into consideration like worst-case scenarios, hey, I might lose my job, things might get, you know, I might, you know, someone might want to stay home full time to be a mom or dad or whatever to travel more like clarifying what is your actual cash flow needs? Is that a fair summary of the secret? Everyone?
Whitney:
Yes, definitely. And then when we start diving in, we can kind of roll right into secret number two, which is, you know, understanding what your actual risk tolerance is. So many people like in today’s market, and we were, you know, you know, I just did a talk a couple of weeks ago, and when I was about multi-generational wealth, you and I spoke about it at IRC as well. You know, when people were trained to pay taxes, they were trained to go out and get a good education, get a good high-paying job, buy the house, take the standard deduction, and oh, yeah, by the way, contribute to your 401k. There are so many, so many different ways that we can actually reduce our tax bill here. But before we even get to that tax bill, we have to understand how is it we’re currently investing? Is that actually the lowest risk type of investment we could take for ourselves? Now, if you’re investing in stocks, bonds, and mutual funds, you know, great, but when we move over to real estate investing, we can’t take the same mentality with us, we have to actually understand like, what, you know, what are the type of assets that are available to us? A lot of people come out of stocks, bonds, or mutual fund investing or chasing yield, which give me the highest returns, I’ll take the cash flow later. Well, potentially, that is one of the higher-risk investments you could possibly make in the real estate sector. So I really try to help people understand, you know, do you are you looking for classes, suburban housing, you know, low deferred maintenance, low capital expenditures on the project, but you get a nice high-quality tenant and you can kind of, you know, what we call clip of coupon and, you know, take that cash flow now, get nice equity bumps later, or are you looking for more of a, you know, on the opposite side of the spectrum and development deal where it’s ground up, and you have a lot of potential risks with what we call entitlement and you know, getting all the permitting to be able to convert the land into the highest best use, and then also building the actual product project. We’ve got supply new risks that are coming into the business plan, we have labor risks that are coming into the business plan. And then if you’re going into like a residential project, yeah, hey, just tenant in the project. How do you get it all tentative? So there’s a place for all of those projects potentially in someone’s portfolio, but what I really tried to encourage them to look at like based on what your goals are and what your needs, let’s make sure that your risk tolerance is matching with those before we start like taking a look at operators.
Brett:
So number one is clarifying your goals and cash flow needs number Two is what is your risk tolerance? And how do you properly diversify perhaps based upon that risk tolerance, right, understanding the different options, and perhaps not concentrating on a single asset type or a single product type or single location? And, and really clarifying that, and then what step number three are seeking number three?
Whitney:
Well, that in the operator, right, the operator is the business plan. Okay. You know, I talked to a lot of investors, I actually just got off the phone with one right before we hit record on the podcast. She has 32 properties. Fantastic. And she’s like, Okay, tell me what your returns are on your commercial deals. And I’m like, well, let’s do a little bit, let’s get to know each other. You know, and that’s exactly what investors should be doing is, you know, it’s a different type of mentality, you know, we’re in the market. You’re chasing yield here. You know, in private equity, investing in the ABA, you can also Chase yield on the deal, but you want to know who the jockey is riding the horse, not betting on the horse. And so really, secret number three is learning how to vet an operator that you intently. Okay, case in point, you know, you’ve identified your goals, you identified your risk tolerance, and now you start going online or going to real estate conferences or networking with other investors to get a Rolodex of operators to interview. Gotta hop on the phone with them and actually get to know them. Right? You have to, you know, understand to build that level of trust, and it goes both directions. You know, who are they like, do they have they been in real estate for a long time? What is their track record? Have they had any exits? How have the exits performed on the properties? Who is on their team? Okay, if they’re a solo operator, you know, for me, that’s a red flag. I mean, I want somebody taking care of my money like it’s my money. Okay, so I want them watching over it full time. Okay. Then we can dive into like, what what is their actual philosophy or, you know, again, we call it business alignment is what their investment strategy is and the type of asset they’re going after actually aligned with what your risk tolerance is, and your investing goals.
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About Whitney Elkins Hutten
is a part of passiveinvesting.com with an amazing gentleman named Dan Hanford, who’s one of our strategic alliances. Commercial real estate investing is made simple. In fact, the beginning of her real estate career went better than most but her first-ever rental in 2002 was a huge success.
She is on passive real estate investing. But she started off on the active side in 2002. She started off as you know, as an accidental landlord, She bought a house with a significant other. And you know, fast forward about a month into owning the house, the relationship fell apart. And here she did, She had a house, all the expenses related to the house and the house needed pretty intensive rehab. She didn’t know what to do. So she stuffed it full of roommates. And back then in 2002, YouTube wasn’t around. So she went to Home Depot and bought the Home Depot 123 book and taught herself everything about repairing a house’s drywall, and electrical plumbing, And then I realized she hadn’t been paying for any expenses the entire time.
