SHOW NOTES FOR EPISODE 655: HOW TO GROW A MULTIMILLION DOLLAR PORTFOLIO WHILE WORKING FULL-TIME

Creating multiple streams of income as a full-time employee is a smart “Plan B” strategy – especially if one of those streams is real estate.  In today’s podcast, Dr. Jeanette Birnbach shares how real estate investing has and continues to generate millions of dollars in additional income, all while working full-time.

What You Will Learn

• The value of understanding the Cashflow Quadrant mindset
• 40 questions to ask a potential syndicator
• Why flipping is not good for full-time employees investing in real estate
• The limitations of single family rental property investing
• Why passive investing is better than rental property investing for full-time employees
• How old dawgs benefit most through passive syndication investing

About Our Guest

Dr. Jeanette Birnbach

Dr. Jeanette Birnbach has been a Chiropractor and Clinical Nutrition Provider for 24 years.  She is currently living and working outside Seattle.  She has been an investor in real estate for 10 years and an active investor/syndicator for 2 years with Blue Ring Investors.  She has been married 23 years and has a 16 year old daughter.

More About Jeanette

• Jeanette grew up outside of Philadelphia, PA
• Was raised to go to school, get an education, get a good job, save your money, work for 40 years with a company and, hopefully, one day, retire
• And she did just that
• She went to school at Penn State, finished her education but still didn’t know what she wanted to do
• So she decided, in the early 90s,  to move to Japan with some friends and work as English teachers
• It was a transformative and amazing time for her
• It impacted her later decision to go into healthcare
• In the house she lived in in Japan, her neighbors on both sides were over 100 years old
  • The gardened
  • They did tea ceremony
  • Bought their own groceries
  • They exercised
  • They did natural healthcare treatments like acupuncture, chiropractic and Tai Chi
  • It changed her perception of what growing old would be like
• Jeanette would do Tai Chi with them every morning
• After 4 years in Japan, she came back to America and entered Chiropractic College

Pursuing a Chiropractic Career

• She went to 3 1/2 years of Chiropractic College
• Her husband also went to the same college and they graduated together
• Jeanette and her husband started a practice together
• After 3 years of practice, Blue Cross/Blue Shield cut back on their coverage of Chiropractic services and she saw many practices really suffer and even close down as a result
• These doctors had that only stream of income to sustain them
• This made Jeanette think of the importance of creating another or other streams of income for the security of her family
• At that time, she also went back to school to get a Master’s degree in Human Nutrition to help patients with chronic conditions
• Also, at that time, she picked up the book “Cashflow Quadrant” by Robert Kiyosaki and “Multiple Streams of Income” by Robert G. Allen
  • Both books jolted her thinking from the “get an education, get a good job, etc.” line of thinking to thinking more like an entrepreneur
• Then, they moved to Charleston, SC
  • It’s so beautiful there
  • Also beautiful houses and properties
  • She was busy starting a second practice
  • She also got a jet ski
• Real estate interested her but her other interests and activities were definitely making that difficult
• Also, there were not a lot of resources to help first time investors at that time
• Three years later, they moved to Tampa, Florida to open a third clinic
• In Tampa, she had her daughter and had a weekend teaching job
• Now, she was really busy!
• Still thinking about real estate
• Fully in the “S” quadrant (referencing Kiyosaki’s “Cashflow Quadrant“)
• After two and a half years in Florida, in 2006, they then moved to Seattle, WA (where she still currently resides)
• Now she had had 4 practices (she sold each of them when she would move – she also signed a non-compete clause – if not, she would have returned to NC)
• She loved her work but, at the same time, was starting to feeling burnout
• She realized, she needed “back-up systems and an exit strategy
• She realized, she had to take better care of her own health so she could help her daughter
• She also started listening to podcasts at that time

Becoming a Real Estate Investor

• When her daughter got older, she felt like she could start investing in real estate
• Now there were a lot of real estate investing podcasts available for her to learn from
• Her first purchase was a house flip in 2014
  • They found an old log cabin (over 100 years old – brought down from Alaska) in a town called North Bend, WA
    • Had 150 ft of riverfront
    • They updated it to maintain the old look but up to modern standards
    • The rehab was supposed to take 3 months but it took 9
    • She learned a lot from the experience
    • They still turned a profit on it
  • She knew she couldn’t keep doing it – especially at the scale it would require to allow her to retire or quit her practice
• After that, she decided to focus on single family rental property purchases
  • She was buying turnkey properties
  • She also bought new construction properties
  • She bought these homes Florida, Alabama and Illinois
  • She bought 7 homes within a year and a half
  • She loved rental homes and the fact that she could do it while working full-time
    • She could hire other people to manage the properties
    • And she would manage the managers
  • She found out that she could only get 10 Fannie Mae loans and she had already used 7
  • She realized that, although there was some benefit to single family homes, they were going to scale very slowly
    • Also, she realized that she didn’t have 25 years for the homes to appreciate
    • As you get older, you appreciate cash flow over appreciation
  • She wanted a way to scale this faster
  • She had 3 loans left
    • She used those loans to buy 3 fourplexes
    • She quickly saw the difference
      • If 2 of the units were occupied, all the bills were paid as opposed to single family homes that have 100% vacancies

Out-of-State Investing

• In Florida, one property manager covered both properties
• And one in Illinois and one in Alabama
• She relies heavily on her local property managers

Biggest Mistakes

• She bought a property in Illinois that was actually sitting on 2 lots
• What she didn’t realize is that she had twice the tax rate that showed on the pro forma
• Plus, if you are an out-of-state owner, your taxes are doubled as well
• So what she was getting was a tax rate that was 4 TIMES what was on the proforma
• Both the underwriter, lender and other advisors missed this fact
• She then had a property that had no cash flow because of the property taxes
• She couldn’t sell it because the buyer, whether local or not, had to qualify based on Jeanette’s tax rate
• The lesson learned:
  • Keep a fair amount of liquidity and cash reserves
  • Look for creative solutions

Biggest Success

• On the Illinois property with the tax issues, she was able to find a tenant who came in on a “rent-to-own” basis
• That way, the tenant is paying rent, which is going toward the purchase price of the house
• In two years, he was paying down the price of the house
• When he qualifies for the mortgage from the lender, the property will cost less than it will appraise for
• So, that’s how she was able to sell that house

Becoming a Passive Investor

• With all her loans used up she took a look at passive investing through multifamily syndications
• Her properties were providing her with good income but she needed some good tax benefits
• Becoming a passive investor allowed her to continue investing, without doing all the work and provide tax benefits to write-off the income from her other properties
• It was a win-win proposition
• She needed to learn a different form of due diligence
  • She started going to a lot of conferences and seminars
  • She also wanted to become a GP (General Partner) eventually on a deal
• She loves teaching and saw how those skills would work well as a GP presenting deals to potential investors
  • She could help speed the process up for new investors through education
• With passive investing, she enjoys the:
  • Returns
  • Tax savings
• She wanted to learn how to put her own deals together
• She had a year of intensive coaching on
  • How to become a General Partner
  • What the types of jobs and general work a team is supposed to do
• One thing she wanted to do was to specialize in working with health care providers
  • She offered to a number of groups of General Partners to bring them health care professionals who are investors
  • Unfortunately, some things they are know for is being stingy, hard to work with and want to do everything themselves
  • None of the GPs took her up on her offer
• One day, she was listening to a podcast and heard a pharmacist named Sanjay Hegde who is a passive investor and who also wants to work with health care providers in syndications
  • So she called him and they had a number of different conversations over a period of months
    • They decided to work together, put together a company called Blue Ring Investors and that was about 2 1/2 years ago
    • It has been going great
    • Most of their deals are multifamily value-add but, in June of 2022, the became GPs on a 700 unit storage outside of Charlotte, NC
    • They have about 190 units under management right now with a number of deals in-process
    • They have helped a number of people to get educated and invest
    • They mostly do 506 (b) syndications
      • A 506(b) offering allows a startup to raise an unlimited amount of money from an unlimited number of accredited investors and up to 35 nonaccredited investors. Also, sponsors may not advertising.
      • Rule 506 (c) may engage in general solicitation and advertising. The trade-off, however, is that all investors must be accredited investors and the startup must take reasonable steps to verify that the investors are in fact accredited.
• Regarding her active investments, she has kept all her fourplexes and new construction rental homes but she is selling off the other single family homes and is putting that money into syndications
• She is also still working full-time
• Her daughter still has 2 years of high school left.  After her daughter graduates, Jeanette and her husband want to travel
• She wants to continue being a syndicator another 5 years or so and then move completely into passive investing

Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years

• She would encourage people who are older to avoid single family investing and focus on syndication investing for:
  • Cash flow
  • To avoid dealing with banks
  • To avoid the liability of being a landlord and rental property owner
• In light of the uncertain economic environment, passive investing looks even better
  • Syndicators are ramping up activity because they see significant opportunities
  • Fear could prevent some from taking advantage of the opportunities
    • If you have fear, Jeanette recommends that you research two things:
      • The relative stability multifamily has had in past recessions
        • In the the last 40 years, there have been 5 recessions
          • Multifamily has a great track record
            • Check out the
              • CBRE website
              • National Council of Real Estate Investment Fiduciaries website
      • How syndicators work hard to protect their investors’ money
• If you are a passive investor, you have more freedom to do other things
  • Travel the world
  • Spend time with family
• You can just move your investment when a syndication is through, into another deal – that’s all the work that’s required required!

How to Find a Good Syndicator

• Personally interview your prospective syndicators
  • On her website, she has a webinar on 40 Interview Questions You Should Ask a Potential Syndicator Partner
  • She has talked with investors who, after just a few questions, act like they feel guilty taking up her time
    • This is your hard-earned money
    • You should not be timid about asking questions
    • Jeanette recommends that you ask every question you have, sleep on it and go back to ask more questions the next day

Current Business

• Jeanette plans to continue to stay in syndications
• She will hold on to her new construction single family rental homes until:
  • She gets an amazing offer for them
  • Or, they start becoming a pain

Rap-It-Up

• Favorite real estate book: Multiple Streams of Income by Robert G. Allen
• Favorite business book: The 15 Commitments of Conscious Leadership by Jim Dethmer
• Most valuable web site for success (other than your own): LinkedIn
• Favorite app: Audible and Podcasts
• Favorite quote: “The best investment on earth is earth.” – Louis Glickman
• If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to re-launch your real estate investing business? I would immediately start building and/or rebuilding my network. Multifamily is a team sport.

How to Reach Jeanette

• Website: BlueRingInvestors.com

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