68. Why You Can Retire Faster Through Real Estate With Taylor Loht

PILF 68 | Retire Through Real Estate

 

With stocks and bonds, you’d have to sit on your investments for years only to get a 1% dividend or so. But with real estate, you can retire faster with both short-term and long-term gains. Jim Pfeifer and Left Field Investors welcome Taylor Loht, the Founder of NT Capital and host of the Passive Wealth Strategies podcast. Taylor talks about the importance of building your mentality of turning money into more money. Go to events and have fun learning more about real estate investing. Meet people, network, and watch real estate deals go full cycle to gain more understanding. If you want more valuable tips on retiring fast through real estate, this episode’s for you.

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Why You Can Retire Faster Through Real Estate With Taylor Loht

I’m happy to have Taylor Loht with me. He’s the Founder of NT Capital and the host of the Passive Wealth Strategy podcast. He teaches busy professionals how they can invest in real estate without dealing with tenants, toilets, and termites. Taylor, welcome to the show.

Thank you so much for having me. I’m excited for the opportunity to be on the show and share my journey and the lessons that I have learned along the way.

I appreciate you being here. Your podcast was one of the first ones I was a guest on. It took me too long to get you on here but we are pleased to have you. We would love to learn about your journey. How did you get into investing? How did you get into real estate? How did you get into syndications, the podcast, and the whole nine yards? If you can give us your journey to start, that would be great.

I love talking about my journey. This is something I was thinking about and reflecting on. I had this realization that the earliest money decision I remember making was, back in the days when banks paid something, switching to a bank where I could get a money market account. At the time, it paid 5%. I had a job at Sears. It wasn’t my first job. It was my third job. I had a little bit of money coming in back in high school. That was also back in the day when banks again paid something when interest rates were a little bit higher.

I made the decision, “I want to turn this tiny, little bit of money that I make into more money.” The only way I knew how to do that was through interest paid on a bank account. I went and found another bank that was paying 5%. I made that switch and got a little, maybe $100, for setting up the direct deposit. That’s the first decision that I remember making targeted toward turning my money into more money a little over half a lifetime ago. Since then, it has been building on that mentality of turning money into more money.

That’s your start. You are earning some interest. How did you then go into real estate? How did you find, “A bank will pay me 5%. The real estate will presumably pay me more with all these other benefits?” How did you make that transition working at Sears to what you are doing now?

That was in high school. I ended up going to college. I’ve got a degree in Chemical Engineering. I took some classes in Economics as well. I’ve got out and got a big boy job and thought, “Now I’ve got more money coming in than I have ever had.” It was a pretty modest salary at the time. How do I turn this into more money? I need to upgrade. I need to find something else. Plus, this was in the wake of the great recession when banks were paying nothing. Still, to this day, they are paying nothing.

I went out and got a copy of The Intelligent Investor by Benjamin Graham. I read through that. It’s a very dense book. It teaches you about value investing in the stock market. I was a frugal guy at the time, and I’m still frugal now. I had a lot of money leftover. I was stocking it away in the markets, investing as much as I could in retirement accounts and then in brokerage accounts with an eye on value, index funds, and all those things.

Years went by, and I was looking at it and thinking, “I’ve got all this accumulated.” I’m doing the math and looking forward. I’m also considering any benefit that I’m getting out of my stock investing at the time. I’m realizing, “This isn’t going to do anything for me in the shorter-term or before I’m in my 60s. It’s not providing me any benefit. I’m stocking it away when I’m old. I need to find another way to get passive income coming in and get my money working for itself.”

I was listening to podcasts. I was learning about real estate investing. I was at a crossroads at a certain point. I had this degree in Chemical Engineering and I thought, “I need to go earn more money.” The way most people are familiar with earning more money is to go down the typical path of getting more education. I worked on getting an MBA. I studied and took the test and applied for business school. I took the GMAT. I’ve got a pretty good score. I was starting on my applications.

I happened to hear about this book on a real estate podcast. I have one of my copies sitting here, Rich Dad Poor Dad. I read that book and thought, “Now I’m not going to business school. I have my new path in real estate investing.” I dug into real estate investing. I learned about all the different strategies there. I started with single-family investing, at least learning about single-family investing. I instinctively knew that wasn’t the path for me. It didn’t give me that spark of excitement about the possibilities in the space.

Build your mentality of turning money into more money. Click To Tweet

I continued learning. I was listening to podcasts at the time. Eventually, I learned about real estate syndication. I had a light bulb moment when I heard about real estate syndication because it helped me see how people invest in all these big assets that we see around us. Specifically, I remember the realization that I had at the time.

I’m rewinding back to my value stock investing days. One day, I was driving to work at, frankly, a job that I didn’t like. This was many years ago, back in 2011 or so. In the morning, I was driving my 2001 Volkswagen Jetta to work. I drove past the office of the townhome complex that I lived in at the time. I happened to glance and look at the car that was parked in the parking lot of the office. It was an Audi A8.

I lived in a decent townhome complex but not a townhome complex where Audi A8s were parked. I liked cars. I thought, “I bet whoever drives that is probably the owner of this townhome complex.” I don’t know how they did it. Maybe they had a lot of money. How do you even buy a townhome complex? I don’t know. I know I like Audi A8s. I filed that memory in my mind.

Years later, I learned about real estate syndication, and it hit me, “That’s how that person owns that Audi A8. I bet they didn’t have all the money to buy this townhome complex. They probably syndicated it. They probably put the funds together from passive investors to buy this property, and that’s how they’ve got that awesome car.” That hit me. That’s what gave me that spark, that feeling of, “This is the strategy for me.” I took it from there and kept going from there.

That is a great story. I also went through a similar journey in some ways. I also found out syndication was for me. I was at a syndication seminar and was positive I wanted to be a syndicator. I went to that seminar, dug in, learned everything, and left that seminar knowing absolutely I did not want to be a syndicator. I wanted to be a passive investor. I know how your story goes. You became a syndicator. When you heard about syndications, you thought, “I want to be the apartment owner rather than the investor.”

It’s a little bit both. I wanted to do both. Truthfully, if I could do the passive investing and live on that passive cashflow, it would be awesome. That is a great end goal. I would certainly love to be able to retire but I don’t have the desire to go sit on a beach and live on passive cashflow for the rest of my life. I’ve got a lot ahead of me. I’ve got a lot of goals that I want to go after. Plus, this stuff is fun. We are on this show, having a great conversation.

I post my own podcast with great people like you. I get to talk to you guys. I get to have fun. I get to learn. I get to go to these events and learn more about real estate investing. I get to build my own brand and real estate investments. Doing the stuff on both sides, both as a passive investor and an active investor is fun. I’ve got no problem playing both sides of the coin as a passive participant and more on the active side as well.

The secret to podcasting or the unknown benefit of being a podcaster is I get to interview people like you. I get all of this knowledge. Podcasting is great because you are constantly talking to people, learning, and sharing ideas. That’s a huge benefit. The other thing you said that I liked was there’s no current benefit from investing in some of those retirement accounts and the market when you are doing the stock market. That is well said. It’s powerful to think of it that way.

Many people are working at their W-2 jobs and putting all of their money into retirement accounts so they can use it when they are older. With real estate, you do both. You are collecting the cashflow, and then the appreciation is on the back end. Throw that into your retirement account if you want to. Talk a little bit about how you look at that from the aspect of getting cashflow, and now you are getting the benefit now rather than the benefit later or maybe you are getting both.

You can have both. What’s right for every individual investor is they need to think about their own priorities and figure that out. The realization that I had was that I’m buying these stocks or these index funds to sell them to somebody else for more later because maybe they will be willing to pay more later for these index funds or whatever I’m investing in.

PILF 68 | Retire Through Real Estate
Retire Through Real Estate: Go to events and have fun learning more about real estate investing.

 

The whole time I’m sitting on it, I’m not getting anything back out of it. Maybe I’m getting a 1% dividend or something like that, which is fine. I’m not complaining about that but it’s also not that much money. Once I learned again about cashflow through reading Rich Dad Poor Dad and then learning more about real estate investing more broadly, different strategies, how you can build cashflow, use leverage, and invest for the long-term while getting benefits in the short-term, that made a lot of sense to me.

That helped me understand how people are able to retire in a shorter time frame through real estate investing than through stock and bond investing. I know a lot of people who have retired through real estate investing. I can’t think of anybody that I know who’s retired early through investing in stocks. I’m sure they are out there but I don’t know them. I haven’t found them.

It’s not common. We have a lot of the same viewpoints. For me, investing in the stock market is speculation. You are hoping it goes up in value. You are hoping to sell more to somebody else. It’s hope. Hope isn’t a strategy. With real estate investing, you are investing for cashflow and that’s what’s feeding your money-making machine.

The hope part is the appreciation. Even that’s not hope because the syndicator, presumably, is doing something to increase the value of the property through forcing equity. Even if that isn’t hope, you have two fairly certain things that are going to happen. The markets can change. It’s not like the stock market. Real estate is investing, and the stock market is speculating. It’s interesting that we are both on the same page there. That’s why we are both doing the same stuff. It makes sense.

I want to talk about your meetup. Community is one of the things that is important to me. That’s what makes a lot of us at Left Field Investors better at investing because we are sharing ideas, sharing trusted partners, and learning together. I was doing a little bit of research, and it looks like you started a meetup. Are you still doing that meetup? Can you tell us a little bit about it, what you’ve gotten from it, and where it is now?

I started that meetup in 2017 or 2018. It’s a little fuzzy. I’m getting early-onset dementia or something like that. I can’t remember when it started. It was a number of years ago. COVID hit and threw a wrench in the thing. We were no longer able to meet in person. We are in the spring of 2022, and some of the spaces still haven’t opened back up. We are hoping to get back the space that I use soon. I want to bring it back in person soon, hopefully, this 2022.

When COVID hit, we paused for a little while. I’ve done a number of online meetings as well. I’m bringing in guest speakers and doing breakout rooms. People are a big fan of those. Put four people in a breakout room and give them a topic to discuss, and get to do a little bit of networking. It’s not quite the same as meeting in person, of course.

Meeting in person is the best option. We will be able to get back to doing that soon. As far as the benefits it had for me and my business and for our attendees, it’s so much. You meet a lot of great people. I brought investors into our deals that I have met through hosting my meetup. We have helped people learn about different strategies that they might not know about.

In 2019, Paul Moore from Wellings Capital came and spoke for us. He lives a couple of hours away from me. He lives in Lynchburg, and I live in Richmond. We had one of the guys from the Spartan Investment Group come out. Ryan Gibson came out and spoke for us about storage property investing. We have had other people from the area come out and talk.

My goal was to talk about real estate at a higher level than the typical real estate networking event. There’s nothing wrong with this but this is not the discussion that I wanted to have. What I mean by that is I didn’t want to have the conversation about getting into real estate with no money down or teaching people about how to wholesale real estate. It’s those different strategies that are maybe a little more dime a dozen.

Meeting in person is the best option for networking. Click To Tweet

I wanted to talk about bigger deals, commercial deals, and more advanced topics that the average networking group might not get around to. Also, higher dollar types of activities that are a little more niche and nuanced than somebody selling a wholesaling course, not to denigrate on that but if you go to enough real estate networking events, you are going to run into a lot of those guys. That went well. It was a lot of fun. It’s also a lot of work to manage that event. The best way to build connections is to meet people in person.

I completely agree. Left Field Investors probably wouldn’t exist in its current form without the pandemic because that put us online and allowed us to branch out throughout the country and even overseas. It doesn’t replace in person. Zoom breakout rooms are rough but they are necessary. I would encourage you and anyone else reading.

Steve Suh, one of our founders, found a site called Wonder.me. It’s awesome because you put topics on a blank webpage and you can drag your avatar from one conversation to the other. When you drag it in there, you are in that space. It’s like breakout rooms but you can move from one to the other easily. That’s not on the topic of investing but it is a topic of community. It’s so much better than Zoom breakout rooms. You should check that out.

I want to pivot a little bit to sponsors. You are a sponsor. When you do your own passive investing for yourself, how do you vet a sponsor? On the flip side, as a sponsor, what questions sometimes do you get that people ask that aren’t necessary or aren’t helpful for them? What questions could we avoid? What questions do you ask and what questions maybe aren’t necessary?

First off, let’s start with what questions I ask. My goal is to understand the sponsor, know the sponsor well enough, and understand the deal well enough that I don’t have that many questions to ask at the end of the day when a deal comes up. I look at these things from a long-term perspective. I want to build a relationship with the sponsor before I dive into investing with them on a deal. I want to understand how their business works.

I want to understand how they operate, if they behave in an ethical manner, and things along those lines. I want to know what they look for, how experienced they are, and how well-focused they are on particular markets. Are they scattershot all over the place? Do they focus on a handful of markets to invest in, meaning they understand those markets well? Those are things that I want to understand upfront.

I want to make sure I speak with some of their passive investors before I invest. I don’t ask them to give me references because they are going to give me the best references that they can find. I wouldn’t blame them for that. That’s what anybody would do. This is where we go back to networking. I get out there and talk to people. I ask them, “Who do you invest with? How has that experience been?” If you ask people about offline, non-recorded, and private conversations, they will tell you everything.

People in this space, in particular, want to spread that knowledge. They want to help you out. I have learned the most about individual sponsors by asking people. “I have friends who listen to your show, and I asked them about sponsors that they have invested with,” and they will tell you. The biggest thing to do is to get out there and ask other passive investors who they invest with and how their experiences have been.

When we are digging into a particular deal, I will look at the deal and google the actual property. I will look the property up and make sure it’s there, that’s number one. By that point, I know that the sponsor exists, so I have a lot of trust in them. I will look at the market. I will dig into the underwriting. One of my favorite books is What Every Real Estate Investor Needs to Know About Cash Flow… And 36 Other Key Financial Measures by Frank Gallinelli. That talks all about underwriting commercial real estate.

Some of the numbers are dated because the book was written a while ago. Cap rates have compressed, and things along those lines. Understanding how underwriting works is important, in my opinion, for active investors and passive investors as well. I will check the sponsors’ math. I will do a spot check. Engineering, I’ve got no problem plugging stuff into Excel. I’m making sure that they ran the numbers correctly.

PILF 68 | Retire Through Real Estate
What Every Real Estate Investor Needs to Know About Cash Flow… And 36 Other Key Financial Measures, Updated Edition

Believe it or not, I have found math errors in sponsors’ underwriting and deals that they put out. Sometimes those math errors are effectively rounding errors. It doesn’t make that big of a difference at the end of the day. Some of the time, they are a little bit more consequential, if you will to the final return. In my opinion, if you are going to be investing $50,000, $100,000, $200,000-plus in a deal, why not take some time to check the math?

Coming back to the sponsor with questions, if that math doesn’t come up right, I’m out of the deal. I might point that out and ask a question about it. When we get into the legal documents, I read all of those if I’m following up with questions about them. A lot of the time, if I have a major question, I’m not going to invest in the deal. If it’s something minor clarifying, then I will go back and ask for clarification about it. I suppose that’s my thought process for going through a deal.

Most of the work is on the front end, understanding the sponsor, what they go after, the types of deals that they look at, and avoiding the feeling of FOMO. If they send me a deal, even if I’m interested in investing with them, maybe the deal is going to fill up quickly. I’m purposefully not going to feel the FOMO. I’m going to read everything. I’m going to make my decision about whether this is a type of deal that I’m interested in and how they do these deals.

Next time, I can evaluate the next deal from the same sponsor much more quickly and be more prepared to make a decision about it. Vetting the sponsor, reading through everything, and trying to avoid the feeling of FOMO. The best sponsors will always have another deal. There’s going to be one coming down the line. It might be a little while but that’s okay. I want to be ready for the next one.

There’s some great advice in there. Finding sponsors, you are asking your community. You are going to your network and you are asking other investors who have invested with them, “What did you like about this sponsor? Tell me about that sponsor.” That is the most powerful thing about the Left Field Investing community or any community. You can’t walk out your front door and talk to a neighbor about real estate syndications. They are like, “Real estate? That’s super risky. What’s syndication?”

Where do you go? You create these communities, and that’s where you go, and that’s where you use other people to find out. Instead of asking the sponsor or the syndicator, “Tell me some people who are satisfied investing with you.” You are going to get all the best ones. Talk to real people who have nothing to gain from sharing this but people love to share information. Good and bad experiences, that’s super powerful.

The other thing I liked about what you said is the FOMO, the Fear Of Missing Out. I had M.C. Laubscher on the show. He says that instead of FOMO, he has JOMO, which is the Joy Of Missing Out. It’s powerful to know that. What it means is it’s okay to miss a deal. They are going to have another one. If there’s pressure and you know that these deals are going to fill up in a day, underwrite that one afterward and wait for the next one because it probably fits in the same box.

You also talked about that if there’s something big that you don’t like about the deal, you are out. Can you talk about maybe what some of those things would be the deal-breakers? I would get it if they did all the math wrong. You are not concerned about their math skills. You are concerned about their attention to detail. What are some other deal-breakers when you are looking at a deal or even when you are evaluating a sponsor where you say, “There are plenty of sponsors out there. I’m moving on. There are plenty of deals out there. I’m moving on?”

Looking at an individual deal gets into a lot of the nuances. I want to understand the plan. If we are talking about a multifamily value add syndication, the plan is probably to acquire the property, do some renovations of the units over time, raise the rents, and then sell down the road. It’s a pretty standard business model, a lot of people are executing on it now, well-proven but there are plenty of same mistakes that can be made along the way.

A big thing for me is getting into feelings rather than data, which is what makes it nuanced. When I review a business plan and look at the timing of the business plan, how do I feel about the sponsors’ ability to execute on that timing of the business plan? Plus, their ability to execute the business plan is very important.

You have to take time watching real estate deals and go full cycle to understand what can be done. Click To Tweet

Metrics like IRR are heavily time-dependent. By moving things around a little bit in the underwriting and accelerating a timeframe, you can juice that IRR stat quite a bit. That’s the number that a lot of sponsors are going to present as a metric to evaluate a deal. A lot of passive investors who haven’t dug into the nuances of how IRR works will look at that number and not understand it but see a big number and say, “I’m in.” I’m going to be concerned about whether the business plan can be executed as underwritten.

If I’m looking at their business plan and they can do it faster than they have underwritten, that’s good because that’s a sign that they are probably being more conservative than they need to be in making the business plan. That’s fairly nuanced. You have to take a lot of time and look at a lot of deals and watch a lot of deals go full cycle to understand what can be done.

COVID is an interesting example that, hopefully, won’t happen again in our lifetimes. It’s an interesting example of business plans being able to be executed and all of these supply chain disruptions that we had. Hopefully, we are on the tail end of it but we are not at the tail end quite yet. That hasn’t ended quite yet. Things like stoves not being available, the price of lumber skyrocketing or being hard to find labor delay these business plans and reduce your return since there’s a time value of money in there.

A big one for me is getting a feeling of how conservative I feel the business plan is, particularly in a value-add-type of scenario. Do I feel they are going to be able to execute on it in the timeframe that they projected or faster? Fast is great, there’s nothing wrong with that. Are they saying, “It’s going to be much faster than I think is feasible?” It’s a big one for me.

I haven’t heard that before, the timing of the business plan. That’s critical. Everything functions off of that, especially IRR calculations. Turning a little bit to the market now. How are you dealing with the specter of rising interest rates when you are analyzing a deal that’s on adjustable-rate debt? Everyone is now looking for fixed debt deals. There are still a lot of the bridge debt, the adjustable-rate debt, and some people are buying rate caps. How are you managing all that? How are you looking at that both as someone who is doing deals and also someone who is investing passively?

Buying rate caps is a great idea at this point, especially considering that we can’t predict the future of interest rates. It’s headed upward. The Fed hasn’t indicated that they are going to reverse course. It seems like a reasonable assumption to say they are going to keep heading upwards. We should plan on increased rates. Buying a rate cap is reasonable.

Long-term debt is also a good idea but you need to understand some of the risks there when it comes to potential prepayment penalties and things along those lines. Most syndicators should understand those things. I have seen less savvy multifamily investors, more generally mom-and-pop investors, get burned by prepayment penalties that they didn’t understand.

Specifically, there have been folks that I spoke with that shifted from single-family investing in California and cashed in all that appreciation to invest in the Midwest. They bought an apartment complex with a loan that they didn’t understand the prepayment penalties on. The interest rates tanked. They also didn’t manage the property manager adequately, so the NOI fell pretty considerably under their management, which is a completely different set of issues.

They wound up in a scenario where the property was underperforming and was not able to sell without losing a lot of money because they had a huge prepayment penalty hanging over their heads. They ended up getting foreclosed on. It’s important to be aware of those things. Most sponsors should know about prepayment penalties and have a plan to deal with them. Be aware of the terms of the deals that you are getting into.

I was looking at some of the news and it turns out that Q1 GDP was negative. They were expecting 1% positive but GDP growth was 1.4% negative, which is not a great sign but also not that surprising when we are talking about rates going up. There’s some chatter that people think that will cause the Fed to reverse course and drop rates immediately. I don’t think so. The Fed hasn’t indicated that. Also, that’s not the Fed’s mandate. The Fed has a dual mandate to go for stable prices and full employment.

PILF 68 | Retire Through Real Estate
Retire Through Real Estate: Buying a rate cap is a very reasonable long-term debt.

 

Stable prices have been interpreted to mean modest inflation of around 2%. Full employment is minimizing unemployment getting to a stable level there. Where do we stand now? Inflation is still incredibly high, and unemployment is very low. There are a lot of jobs out there. By my estimation, reading the tea leaves, I don’t think they are going to change course until one or more of those things change. It’s until inflation returns to a reasonable level or until unemployment goes up. We are not there yet. Until that happens, I’m expecting rates to continue to rise.

The rate at which the rates rise is a question mark. I don’t know that anybody can predict that. That’s not a member of the Federal Reserve. We can only listen to what the Federal Reserve Board members are saying and try to make predictions on that. Now, I’m looking at the Fed’s dual mandate. To me, that indicates that rates are still headed upward.

Another thing that I will throw out there is I recorded an episode for my podcast about data that’s come out from the Mortgage Bankers Association that mortgage applications are down. That’s something that we would expect, frankly, in a rising interest rate environment that’s going to keep people from buying. Things are behaving as expected, in a way. The single-family residential market is going to cool off but that’s probably going to take a while. Personally, I’m still involved in that market.

We are away from data. Now, we are into anecdotes. My fiancé and I are house shopping. We own the place we live in now. Frankly, we want more space. We have been involved for the last few months. We have been watching mortgage rates go up. We have made a ton of offers. We are putting in strong offers but we are still getting outbid.

With all these rates going up, we are still losing on the bids. People see rates going up, and they get more desperate because the rate is going to be higher. They want to get in. They swing at the ball much harder for going off of the baseball metaphor. That’s what I see as far as interest rates go and the impact on the economy. Overall, I still see rates going up until something changes with inflation and/or unemployment.

That was a great explanation. I want to go back to the prepayment penalty you were talking about. You said sponsors should know about the prepayment penalty, and I agree with that. What should an investor look for? We can say, “Is there a prepayment penalty?” What is it? Is there anything else? Do we need to dig deeper?

When we are talking to the sponsor, do we need to ask more questions? Everyone is looking for fixed-rate debt. There are posts on our forum all the time, “Does anyone know sponsors or using fixed-rate debt?” That’s great if they are but the prepayment penalty can be a big issue, as you said. How do we underwrite for that? How do we think about that as investors?

I’m not the best person to explain these two things. It’s best to have a banker or mortgage person explain to you. Two things to look up are yield maintenance and defeasance. We have talked about that on my podcast but I would recommend looking up those and learning about them to know the two of the main types of prepayment penalties that are out there.

Interest rates will continue to go up until something changes with inflation or unemployment. Click To Tweet

You asked me about questions that investors ask me that aren’t useful, and I couldn’t name one because I don’t think there are any questions that aren’t useful. Maybe there are questions that are naïve, and that’s okay. It’s not a great sin to be naive. We all start from where we started in terms of our knowledge. The thing to do is to, in my opinion, go out and get educated on the topic before asking a question.

Frankly, you can save yourself a lot of time by listening to a podcast for half an hour where somebody explains these things, and you have a better understanding rather than asking the sponsor a question and waiting for a response and maybe not quite understanding it. Take a little bit of time. There are so many free resources out there like podcasts where you can have somebody explain prepayment penalties to you.

As far as somebody asking a question that’s not useful or anything like that, I don’t think those exist. There are naive questions but that’s okay. A lot of that can be handled through education. To address the question about prepayment penalties, it comes down to getting educated on what they are and then making the decision for yourself. I’m not going to go out and say that people shouldn’t look for deals with long-term debt for reasons X, Y, and Z.

If you understand what long-term debt is versus short-term debt and you understand how prepayment penalties work, then make your own decision about it. If that’s what you want to invest in, go for it. I’m not going to say one is better than the other because we all have different goals in our real estate investing and are investing more broadly with our portfolios. Understand it and then make your own call.

I like how you answered the question when people ask naive questions. I term it unnecessary questions, there aren’t any. It’s nice to learn that from a sponsor. A lot of investors, especially when they are new, they are nervous about talking to a sponsor for the first time. At Left Field Investors, we have a checklist. It helps you with some of the stuff you want to be answered. Knowing from your perspective as a sponsor, if I asked the “stupid question or naive question” that’s okay.

We are all starting from somewhere, and we don’t have perfect knowledge. Don’t worry about whether your question is a good one or not. If it’s a question you have, ask it. You can tell a lot by the answer. If you get an answer where someone is like, “That’s a stupid question.” I’m sure they wouldn’t say that but that would be like, “Conversation over. I’m moving on to somebody else.” With the FOMO thing, there are plenty of sponsors out there. If they are not answering the questions the way you like, move on to the next one. That would make sense to me.

You also talked about interest rates and how you think they are going to keep going up until some of those other things change like unemployment or inflation. What asset classes are you looking at now that you think will perform better than others over the next few years in this environment? I know that’s a hard question to answer but what are you looking at?

We had a conversation about Shiny Object syndrome, whether individuals are prone to having Shiny Object syndrome, it’s different for everybody. I’m prone to having Shiny Object syndrome but I understand that. I take active steps to limit myself from feeling Shiny Object syndrome. The primary asset classes that I’m interested in and I invest in are multifamily and self-storage.

PILF 68 | Retire Through Real Estate
Retire Through Real Estate: Learn more about how the business works and which deals can go right versus wrong.

 

I may start investing in mobile home parks. We are going to see about that but not get distracted from those two main asset classes. That’s what I’m focusing on. I’m not personally allowing some of the fears of rising interest rates, inflation or anything like that. My asset class may change the way in which we invest in those asset classes and the strategies that we employ. I’m still focused on those asset classes.

In a broader sense, more macroeconomically, setting interest rates aside, we still have an enormous shortage of housing in this country. Most cities, frankly, don’t have enough doors to house all the people that live within them. I still see that as a bullish sign, especially from a multifamily investing standpoint. Furthermore, going back to this experience of buying ourselves a new house, it’s competitive out there. It means people are having a hard time shifting from renting to owning. That’s going to force people to remain renters.

If I could wave a magic wand and fix that problem, frankly, I would because that would be better for everybody. The reality is that a magic wand doesn’t exist and that scarcity and housing are still going to favor housing investors. We need to always have our eye on our business plans and the financials, especially the debt. We should be aware of it. At least for me, I’m still staying focused on those asset classes to not get distracted by Shiny Object syndrome.

That’s always a challenge for me to stay away from shiny objects as well. You are going to change the way you invest in those asset classes, perhaps but you are going to focus on those same asset classes. I love that approach. What are some of the things that you are doing differently or that you envision that you might do differently as the markets change and interest rates go up if inflation keeps going? How are you going to invest in those asset classes like self-storage and multifamily? What are you going to do differently?

I’m a pretty conservative investor and that’s the way that I have been, generally speaking. In particular, we talked about buying rate caps before. That’s more relevant now than it was years ago. For myself, the changes in my investing strategy have come less from shifts in the market than from learning more about how the business works and ways in which deals can go right versus wrong. My investing strategy has been more influenced by my own learning and development, building my network, and learning from talking to other passive investors.

I get so many more lessons and multiply my ability to learn by having a half an hour or an hour-long conversation with people who passively invest in real estate syndications. To give you an example, I attend the Best Ever Conference every year out in Denver. In 2023, it’s going to be in Salt Lake City. During the pandemic, it was online. One of the things that they provided was little mastermind groups. That was back in 2021. Here we are in 2022.

My mastermind group still meets. We meet every six weeks, and we have an hour or two-hour-long conversation. It’s people from all over the country. We learned from each other and talked about sponsors that people are investing in, how those deals are going, and whose K-1s were late. K-1s are late sometimes, and that’s okay but how did they communicate that? How did they handle those things? We have those detailed conversations.

It’s not just the people in that group who we get to learn from but it’s the people that they know. This is where you get into a little bit of a game of telephone. You have to be a little more careful about what you learn and pick up in those groups. You can still learn a lot of information through networking and getting to know each other.

Building those lessons, learning, and building my knowledge base in the business has had more of an impact on my investing strategy than changes in the market. Maybe I will be a little more focused on hedging against increased interest rates. It’s important. That’s less of an impact than my own personal development in the space.

You are talking about the power of community, the power of a network, and that’s what we talk about all the time at Left Field Investors. That little mastermind that you turned into something ongoing, how powerful is that? With Left Field Investors, we have all kinds of networking opportunities that we are trying out to see if it works. We have our Mound Visits for Infielders, which is an informal meeting where people get together on an audio app and chat for an hour. It has been phenomenal. We have another one where we are connecting people one to one for networking.

PILF 68 | Retire Through Real Estate
Retire Through Real Estate: Take active steps to limit yourself from feeling shiny object syndrome.

 

Your knowledge grows as your network grows. You said it wonderfully. I have learned that through the community that we have. I’m a much better investor than I was a few years ago and it’s all because of the community. That was well said. The last question I always ask is, what’s a great podcast you listen to? You cannot say Passive Wealth Strategy show. That’s a fantastic podcast. That’s your podcast, so it can’t be yours. Give me another podcast that you like to listen to.

Probably one of my favorite podcasts to listen to is The Jordan Harbinger Show. It’s not an investing show but he gets into a lot of human interest stories. He talks with former FBI agents, undercover operatives, and YouTubers. He had one YouTuber that formerly lived in China and talked about how we’ve got out of China and came back to the United States. There are many interesting stories and people. You can learn a lot about maybe the seedy underbelly of things that go on in our society by listening to former CIA agents, undercover operatives or things along those lines. It’s fascinating stuff and great to listen to.

I like that. I definitely will give that a try. If the readers want to get in touch with you or learn more about NT Capital, what’s the best way to do that?

Thank you so much for the opportunity. Once I realized I was going to be on your show, I thought, “I wanted to put something together for your readers that’s going to deliver value for them.” I put together a free seven-day video course on passive real estate investing red flags. A lot of times, when people say that, it’s BS. It’s content that they have that they rebrand. I made this for you guys. I’m going to be talking about it on other shows and give in other places.

Coming on this show was the genesis of that content. It’s seven real estate investing red flags for passive investors. You can get that by going to PassiveRealEstateCourse.com You can get links to my show, my podcasts, and everything like that. Get in touch with me and learn about our investing club and all that kind of thing.

First off, there are a lot more lessons that I get into and specifics that I talk about in real estate syndication investing, a few lessons that I have learned, and also lessons that I have learned through my network, going that we discuss in that course. It doesn’t take long to get through. I worked to hone that down to make sure it’s lesson and knowledge packed.

PassiveRealEstateCourse.com, I’m going to check that out. I recommend everyone else do the same. Taylor, thank you so much for being on the show. This was a great conversation. I appreciate it. We will talk again soon.

Thank you.

I’ve got quite a few great nuggets of wisdom there from Taylor. What a great conversation. He talked about no current benefit from investing in the market or putting all of your money in retirement accounts. I could not agree more. You need to save for retirement. When you are doing it in the market, in these papers, speculative assets, there is no current benefit. With the syndications we are doing, we have a current benefit, and we have a benefit later when the assets sell. I liked him talking about that.

He talked about how we find sponsors similar to how we were talking about it at Left Field. He asked his network about sponsors rather than asking the sponsor for references, and that is exactly what we are doing at Left Field Investors. We encourage you to use the community to find sponsors, ask about sponsors, and help in your vetting process. We matched up on that.

He talked about the Fear Of Missing Out, FOMO. More deals are coming. There are other sponsors out there. If you are feeling pressure to get into a deal, wait for the next one. Go to a different sponsor. You don’t have to feel pressure for this deal or that deal. There’s always another one coming down the road. Turn FOMO into JOMO, as M.C. Laubscher says, The Joy Of Missing Out. Relish that you missed this one. Get more prepared and get ready for the next one. That was good advice.

He does not only evaluate the business plan but he evaluates the timing of it. As you know, that can affect the IRR and everything else. I thought that was super powerful how he looked at the timing of the business plan and not just the business plan. Talking about debt, he likes the rate caps more than long-term debt because of the penalties that come with long-term debt. That’s a question we should be asking.

Everyone is concerned with interest rates and is looking for agency debt and long-term debt. Maybe short-term debt with a rate cap is better than long-term debt with a big penalty. Each investor has to make their own decisions and analyze them themselves. Rate caps aren’t looking so bad, and maybe long-term debt, we need to start asking more specifically about prepayment penalties. That’s great advice.

Finally, back to the network, Taylor changes his investing strategies the more he learns. He’s doing most of his learning from his network and his community. That makes sense. To recognize that, to see, “We are making changes to our strategies maybe because of the market but more so because of what we are learning.” Everyone is going through that.

That was a great conversation with Taylor. I appreciate him coming on the show. He was gracious enough to have me on his podcast long ago. He was one of the first ones, so he got me started on that podcast circuit. I do appreciate that. Also, you might notice a little bit louder volume. That’s a shout-out to Chad. He said I sound like I whisper when I do my after-talks. I talk louder when there’s somebody in the room. I will try to make the volume more consistent. Thank you all for reading, and we will see you next time in the Left Field.

 

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About Taylor Loht

PILF 68 | Retire Through Real EstateTaylor is on a mission to teach busy professionals how they can invest in real estate without dealing with tenants, toilets, and termites. He highlights and distills the knowledge, experiences, and lessons of expert real estate investors through his podcast The Passive Wealth Strategy Show.

His goal is to help his listeners and investors build lives of abundance and escape the Wall Street Casino. He believes that building passive streams of income is the best path to wealth generation, not the typical, boring, “Don’t have that $4 latte you enjoy twice a week.” Enjoy your latte and buy some property!

Taylor helps busy professionals passively invest in real estate syndication through his company NT Capital. His asset classes of choice are multifamily apartment complexes and self-storage facilities. Outside of real estate investing, he is passionate about Brazilian Jujitsu and has been training since 2015.

 


 

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