The Agent Podcast - EP 74 - Chris Odegard
[00:00:00] Chris Odegard: Try going to a bank and say, hey, I'm starting my mutual fund portfolio. I've got $30,000. I'd like you to loan me the other 70,000 to build my portfolio. What is it that banks know that they will not loan money against conventional investments, but you go there and say, hey, I want to buy this $100,000 single family rental.
[00:00:19] Chris Odegard: And I've got $30,000. They'll loan you that $70,000 all day long. So now we take our $30,000 and we acquire a hundred thousand dollars asset instead of taking our $30,000 and acquiring $30,000 of stocks, bonds, mutual funds. So, leverage is one big thing.
[00:00:36]
[00:00:47] Ray Sjolseth: Hello and welcome back to another episode of the agent podcast.
[00:00:50] Ray Sjolseth: Today. I have a special guest. He's the founder of the prolific investor. And I'd like to introduce Chris, Chris, welcome to the show.
[00:00:59] Chris Odegard: Hey everybody. [00:01:00] Hey Ray. Thanks for having me on. I appreciate it. And looking forward to this, it'll be a lot of fun,
[00:01:03] Ray Sjolseth: Chris. I'm glad you're here.
[00:01:05] Ray Sjolseth: You have a very unique and diversified background of the majority of guests that I typically have. So, I'm excited to dive into it. My first question is why real estate?
[00:01:15] Chris Odegard: Whew, man. So, there's a long, there's a long kind of build up to the answer to that question.
[00:01:20] Ray Sjolseth: Chris, you are not a proponent of traditional investments that are sold to the public 401ks mutual funds, stocks, bonds, that type of scenario, right.
[00:01:31] Ray Sjolseth: For a lot of good reasons. And I'm in a hundred percent agreement with your strategy because I think we are all sold a bill of goods. Mm-hmm for, for lack of a better term. Right? Why did you choose real estate as your alternative investment vehicle?
[00:01:47] Chris Odegard: It has, it has a ton of advantages. The conventional investments, which is pretty much everything that's publicly traded.
[00:01:55] Chris Odegard: So, with a, with real estate you know, one of the factors that [00:02:00] determines how much wealth we accumulate and how quickly we do it is how much money we have to invest. Well, if you're investing in stocks, funds, and mutual funds, you pretty much have you. And eventually we all run out of our money, but if you want to invest in a, in a real asset, something right real estate, you have the ability to use leverage, which is other people's money.
[00:02:21] Chris Odegard: Try going to a bank and say, hey, I'm starting my mutual fund portfolio. I've got $30,000. I'd like to lo you to loan me the other 70,000 to build my portfolio. What is it that banks know that they will not loan money against conventional investments, but you go there and say, hey, I want to buy this $100,000 single family rental.
[00:02:41] Chris Odegard: And I've got $30,000. They'll loan you that $70,000 all day long. So now we take our $30,000 and we acquire a hundred thousand dollars asset instead of taking our $30,000 and acquiring $30,000 of stocks, bonds, mutual funds. So, leverage is one big thing. Another thing is that. [00:03:00] Let's say you, you go into your insurance broker, and you say, hey, I've got this, I've got this half a million-dollar 401k portfolio of mutual funds.
[00:03:10] Chris Odegard: I'd like to protect it in loss, sell me an insurance policy to protect this valuable asset from loss. So, what is it that insurance companies know that these assets, stocks, bonds, and mutual funds are uninsurable. Now you go to the same insurance person, you've got a half a million-dollar multi-family apartment building, and you say, I want to protect it from loss all day long so you can get leverage.
[00:03:32] Chris Odegard: You can inure it. And real estate comes in with built in tax advantages called depreciation. So, you know, if you're a, especially if you, if you buy stocks, bonds, and mutual funds through a 401k, guess what you've done, you've just taken. What otherwise would be investment income and turned it into ordinary income.
[00:03:54] Chris Odegard: You've forced yourself into higher brackets. So, if you took a hundred thousand dollars and put it a Schwab account and let it [00:04:00] grow for, you know, 20 years, when you pull it out under their turn tax code, it would be taxed at 15% long term capital gains taxes. Now you take that same amount of money.
[00:04:10] Chris Odegard: You put it in a 401k and when you pull it out, it gets tax at ordinary income, which might be 24, whatever it is, depending on your tax bracket. So, the 401k lock. You into a higher tax bracket. I mean, investors under the tax code, get rewarded for putting their money at risk. Except when you put it at risk in a 401k, then you get screwed by a higher tax bracket.
[00:04:33] Chris Odegard: Let's see. So, there's three. Another thing is just higher returns. The average annual return of the S and P 500 over its history is just around 9.8%. But studies have been done on in, on the average in investor, you know, not people like you and me, but the average conventional investor. And just because of the way they go in and out of the market in emotions and things like that, they average a little bit more than [00:05:00] 5%.
[00:05:01] Chris Odegard: So, especially in today's environment at 5%, you're not even maintaining buying power between inflation and taxes. And, you know, people that invest in real estate are routinely making 20 to 30% returns on their money before you even consider the tax benefits. So, I could keep going, but those are just a, those are a handful of the reasons.
[00:05:23] Ray Sjolseth: So, let's, let's unpack that a little bit, right? You didn't just step into this knowledge based upon what I read; you learned the hard way.
[00:05:32] Chris Odegard: Well, yeah,
[00:05:33] Chris Odegard: I did I was a conventional investment for most of my adult life. I was an E if you read the cash flow quadrant, I was an employee. I was raised in a family of employees.
[00:05:43] Chris Odegard: I didn't know any, I had no interest or desire of being an entrepreneur, entrepreneur, or a business owner. And then in 2009, I had what I finally referred to as my illiquidity event, where I lost 55% of my assets through a divorce, and it could have been [00:06:00] anything, but in my case, it was a divorce. And coincidentally, around that time, a friend of mine said, hey, you should read this book.
[00:06:06] Chris Odegard: And I bought the book, and I sat it aside for too long. And I finally picked it up one day and read it. And of course, it was Robert Kiyosaki's rich dad, poor dad. And now my mind was open to all these other things that I didn't grow up with different types of investing and real assets. And so, I quickly started moving in that direction.
[00:06:25] Chris Odegard: I did an in-service transfer of all the 401k matching money that the Boeing company had ever done over the decades. I'd worked there and I rolled it over into a self-directed IRA. I started, and that was my, the way I jump started that into real estate. And then you know, I was doing performing a non-performing note, single family rentals, multi-family rentals, and pretty much now I'm a multi-family syndication guy and around 2018 when I was getting ready.
[00:06:52] Chris Odegard: Fire the man also NS retire from my job at the Boeing company. You know, I, I had had kind of developed into a pretty [00:07:00] sophisticated investor. I had bookkeeper, I had a tax person. I had, I've got balance sheets and profit and lost things. And I was looking at this balance sheet and I was, wow, this is awesome.
[00:07:09] Chris Odegard: It's too bad. I didn't have a balance sheet from way back when from that illiquidity event. I just wasn't that sophisticated. But that light went off. It's like, well, when you get divorced, the attorneys come in and they make you do an accounting of everything, so you can split it. And so, I actually did have a record in lo and behold that 55% I had made it up and multiplied it many times over in, in nine short years.
[00:07:33] Chris Odegard: And that wouldn't have happened. Had I stayed on the 401k highway to mediocrity. And so, I started my blog at the prolific investor, and I thought more people need to need to know about this. And, and I've got some real life, you know, experience that I could share. And if I could either prevent a young person from getting on the highway to mediocrity or get even an older person like myself off, we could, we could set them up for much better success.
[00:07:57] Ray Sjolseth: So, I think a lot of people, even [00:08:00] real estate agents and real estate brokers are afraid of investments. You know, mm-hmm and I think a lot of it just comes from what they don't know. Right. And often they don't know what they don't know, but. They're afraid to take that leap or they're like, I don't want to be a landlord.
[00:08:15] Ray Sjolseth: Right. I don't want to call it two in the morning because of a toilet problem or a pipe broken. Right? How do you educate people that that's not the only way you don't have to go and just buy a single-family home and become a landlord?
[00:08:29] Chris Odegard: yeah. There, so there's I guess in my mind, I kind of, I go, there's two different, there's kind of two different, but there's lots of different paths, but I kind of break it down in two main paths.
[00:08:38] Chris Odegard: If you're a credit investor, you know, where you have a million dollars of net worth outside of your primary rest residents and an income of $200,000 a year as a single person or 300 as a married couple, you are what the sec calls that credit investor. And you can invest in these private real estate syndications, where [00:09:00] you don't have to do anything more than wire off money.
[00:09:03] Chris Odegard: And you, you are a partial owner of something. It could be real estate, you know, it could be apartment buildings, it could be self-storage. Could be ATMs. It could be business equipment, but you get all the benefits of that asset being professionally managed, as long as you pick the right syndicator by people who are experts in that.
[00:09:23] Chris Odegard: So, you're a percentage owner and you also get a pass through of that beautiful thing called depreciation. So, you get, you know, you get all the benefits and all you have to do is, is wire the money nobody's calling you. Now, if you are if you're not an accredited investor there are, there are these provide what they call turn pre turnkey, single family rental providers through the country, throughout the country.
[00:09:48] Chris Odegard: And these are people who typically specialize in a specific market, and I'll use Memphis as an example, a good cash flowing market. And what they do is they go in and they sometimes they build new, but [00:10:00] mostly they buy existing single-family housing. And I go, look, this three, two, you know, 1200 square feet is perfect for this market.
[00:10:06] Chris Odegard: They buy it. They do their proper renovations. And with knowing that the end client is going to be a tenant. And so, they put in durable stuff and, and they and they have their own property management company. They put a tenant in it, and then you walk in with your down payment in your bank loan, and you buy what's called a loaded rental.
[00:10:25] Chris Odegard: That's had a, a, a good rehab. It's got property management in place. And all you have to do is, is show up and buy it. Now you're going to be involved. There will be rules between you and the property manager that say, okay, yeah, you make any decisions that need to be made that cost less than $500 above that you call me.
[00:10:42] Chris Odegard: But people do this all day long and you know, people in this country and other countries, who've never seen these properties never been to that location. And so, if I was a young person, instead of putting that money into a 401k, I'd save up that $30,000 and, and go buy a hundred thousand dollars [00:11:00] single rent family rental in some part of the country and, get started that.
[00:11:04] Chris Odegard: I
[00:11:04] Ray Sjolseth: love it. I think that's great advice. What has been one of your better tools that you've been able to educate yourself as you've kind of built the life that you have built your portfolio that you have and learned, right. Learned with boots on the ground kind of school, a hard knock. What are a couple tools that you can share with us that have really been influential?
[00:11:26] Chris Odegard: Do you mean like outside tools or just practices or principles that I follow
[00:11:31] Ray Sjolseth: or maybe any and all is the truth? I, I think that all of those would have value, so yeah. Wherever you want to start.
[00:11:38] Chris Odegard: Well, I would have to say one of them is you have to, you have to change the people that you hang out with.
[00:11:44] Chris Odegard: Right. So, and, and that. In today's environment that doesn't necessarily be in person, but you start reading the books, let's say you want to be a successful real estate investor. Well, you got to hang out with those people. You got to get in their heads. And that's through the books that they write and the [00:12:00] podcast that they, they run like yourself or are interviewed on, and you go to the local real estate investment association, and you go to the conferences all across the country and you just start, you know, we become what we think about.
[00:12:13] Chris Odegard: So, you have to just immerse yourself in this new knowledge base and hang out with people. I think it was Jim RO that said, you know, you're your income is the average of the five people you spend the most time with. So, the next time you're in a room look around and say, are these the kind of people that are going to, that are going to lift me up?
[00:12:30] Chris Odegard: So, I'd say that is one thing. The other thing is having a childlike curiosity. Lots of times I have come across so many situations where something sounded too good to be true. And so, people's natural inclinations. Well, that sounds too good to be true. So, it's got to be a scam or illegal or whatever. So, I'm going the other way.
[00:12:51] Chris Odegard: And one example, I kind of already mentioned, you know, I had been working at the Boeing company for a couple decades and, and I had, and, and I had surrounded myself with [00:13:00] these people. I was in a, a couple investing mastermind groups and like a lot of people, my money was tied up inside the company's 401k.
[00:13:07] Chris Odegard: And I had, I had money outside that, but the majority of it was over here. And the guy said to me, he said, Chris, can you do an in-service transfer? And I said, okay, what's an in-service transfer. And he explained, well, that's where, you know, the, the company in that plan might let you take some of that money and transfer it out to another administrator on the outside where you can invest in anything.
[00:13:30] Chris Odegard: Including real estate, not just mutual funds. And I kind of laughed. I'm like I've been working here for 20 plus years if, if this was possible, certainly I would've known about it and that could have been the end of the story. Right. And it was for a little bit, I just kind of didn't do anything with it.
[00:13:46] Chris Odegard: And then one day I re I remember that conversation and I started checking into it and sure enough, the company plan would let me take out all of the companies matching money that they had ever put in which after a couple of decades was a [00:14:00] pretty significant amount of money. And I rolled that out first into a self-directed IRA.
[00:14:05] Chris Odegard: And later I learned that actually having your own 401ks, a better vehicle, if you've got money like that in there. And then from there started investing that money into, you know, real estate related assets, but I could have just gone, oh, well, that's too good to be true. So, and you know, when.
[00:14:20] Chris Odegard: If I tell people, you know, that I'm routinely making 20 to 30% return on my investments, you know, and that's before tax benefits, people are like, yeah, come on. That's that, that doesn't happen anywhere. What happens all the time? And you, you know, the, how, how much wealth you clean light depends on again, how much money could be your money in combination with, you know, other people's money, loan money and, and how, how well that investment performs for you, what's your ROI.
[00:14:50] Chris Odegard: And then how much of it is going to taxes. So, all these things, you, there's all these different levers that you can pull to really accelerate things like I did in that, you know, nine, 10 [00:15:00] year period, you know, after that illiquidity event,
[00:15:03] Ray Sjolseth: where does somebody start? If they don't have money of their own, you know, if they are maxed out, living their life, figuring it out, doing what they have to do, scrape and buy, but they want to get started in real estate.
[00:15:14] Ray Sjolseth: What are some vehicles or some avenues, however you want to address it, maybe on how they can go down to actually get started. Yeah,
[00:15:23] Chris Odegard: You know, I'm not the expert on this because you know, when I started this, I had been a successful corporate guy for a while. So, you know, I had some resources.
[00:15:32] Chris Odegard: I'll give you an example. When my oldest child, my daughter she had gone off to college, and I kind of knew this was going to happen. She was living in the dorm, and I knew that after a certain period of time, she was she was going to want out, move out the dorm. And I thought, I'll be damn it I'm going to pay somebody else's mortgage up there for the next three years.
[00:15:50] Chris Odegard: You know, I had this training matter. In fact, this was the first, this was the first piece of real estate that I bought. And this was after the divorce and I didn't have a lot of money [00:16:00] and so there was this, the looming down payment problem. Right. And so, I called my dad and I said, hey, how would you like to be a part owner with me of this this duplex up in Bellingham, Washington.
[00:16:12] Chris Odegard: And so, I put the up the money I had, he put up the money, me, he hadn't together. You know, we bought this thing, and it lasted through college and quite a few years after. So, somebody once said to me that if you, if you're in this real estate investing business and you have money, there is a disadvantage to that because you don't get as creative as the people that don't have money.
[00:16:33] Chris Odegard: You've got to find a way to get the deals done without just being able to write a check. So, there's always friends and family. And this is just from, you know, the stories that I've heard from people talking about this is look, if, if you either have to have money or time, if you got money, that's great.
[00:16:48] Chris Odegard: You write the check. If you've got time, you go find somebody who's got the money and doesn't have the time to do some of the groundwork and you start working for them in exchange for a piece of some deal or even, you know, [00:17:00] just to, to kind of be mentored by them. So, you, you have to get creative
[00:17:04] Ray Sjolseth: well, I think Robert Kiyosaki himself talks a lot about using other people's money.
[00:17:08] Ray Sjolseth: Right. And there's a lot of different ways to do it, but. I do think you're right. You have to be creative, and you have to be willing to do the groundwork to go find it or find somebody that's willing to partner with you on a deal to get it done. Right. Well,
[00:17:22] Chris Odegard: and you know, kind of a, a, just an overarching life principal people find money for the things that are important to them.
[00:17:30] Chris Odegard: You know, if the house needed a roof tomorrow, or the car needed a transmission tomorrow, people would find a way to get that fixed. If, if buying your first single family rental or whatever it is, is really important to you, you'll find a way to get it done. If you're not really motivated to get done, then there's always an excuse, right?
[00:17:45] Chris Odegard: Yeah, you're right.
[00:17:46] Ray Sjolseth: It's true. How has your mindset evolved over the course of time? You know, as you made this shift because you didn't make this shift from 18 to 22 years old, right? Like you, you were [00:18:00] established, you had kids, you know, you have some habits, some disciplines good or bad or relevant, right.
[00:18:05] Ray Sjolseth: How how's your mindset evolved and what type of work have you really had to dive deep into push forward and create what you have today?
[00:18:14] Chris Odegard: I can think of a few things. One is that I used to be the kind of guy that if, if, if I was going to go do this and they were 10 steps, I had to know exactly how each one of those 10 STEPSS worked before I would ever get started.
[00:18:28] Chris Odegard: Well, you actually never get started in that method, because the only way that you can learn some of these things, you can read the books, you can listen to podcasts, but the only way to do it is to actually experience it and work through it. So that is a mindset that I got over and it's okay. Let's get started.
[00:18:45] Chris Odegard: And I, I know the first step and half of the second one, and I'll figure out each step along the way as I get there. So not having to understand the whole process in order to get started. So, I would, I, I wouldn't say it's as bad as what's [00:19:00] the, the saying you know, you know, aim fire I forget
[00:19:04] Ray Sjolseth: how, oh, ready, fire aim, ready, fire,
[00:19:06] Chris Odegard: ready, fire, aim, fire.
[00:19:08] Chris Odegard: You know, it's not completely backwards, but you know, be willing to jump out there and to, to get into things before you actually know how it's all going to, it's all going to flow. Another one is and I think a lot of people probably have this after people kind of. Leave their formal education, whether that ends at high school or, you know, a college degree or postgraduate degree or whatever.
[00:19:31] Chris Odegard: Most people's education kind of stops right there. And if I told people how many tens of thousands of dollars, I have spent on a mentorship program or a training program or a real estate course, people would be shocked. But if I told them I spent that same amount of money and got a master's degree from X, Y, U, Z university, they wouldn't be shocked, but guess what?
[00:19:55] Chris Odegard: I'd still be working for the man with that bachelor's degree. So, the [00:20:00] money that I spent on alternative education, you kind of see a theme here was way better spent than, than going out and getting another college degree. When I was working at Boeing, I worked right alongside with guys and gals in the same job who had MBAs and lawyers.
[00:20:16] Chris Odegard: And I was the guy with the lowly Bachelor of Science degree. And didn't, it didn't hurt me at all. Right. And so continued to education and spend money on it. Travel, go, you know, do what you need to do to learn what you want to learn. It's but there's kind of this, well, if it's not inside this formal, you know, educational structure, it doesn't really account well, it's in a lot of cases.
[00:20:36] Chris Odegard: It's better,
[00:20:38] Ray Sjolseth: Chris. All of that like warms my heart so much, man. Like, I am not. I think our education system in this country specifically is just so broken in so many ways, you know, and I know people that are getting their PhDs and like, what are you going to do with it? Okay. You make another 15 grand a year, like big deal.
[00:20:58] Ray Sjolseth: You know, what does that actually mean to you? [00:21:00] And I'm not trying to knock education, like education is important, but I think the type of education, depending upon what your goal is, right. Is the real conversation. Yeah. Right. So, like you're a hundred percent, right? Like I've spent hundreds of thousands of dollars on courses and training for mindset for real estate, for yeah.
[00:21:20] Ray Sjolseth: Design, like all sorts of different stuff that I have interest in that is relative to what I do on a daily basis. Right. Towards building the life that I'm trying to build. So, I don't know, man, for everybody out there, if you're listening, I hope that resonates that whatever you have interest in, spend the money and invest in yourself for education.
[00:21:39] Ray Sjolseth: Right. Because the. The ROI is one hundred-fold easily. Yeah.
[00:21:43] Chris Odegard: Yeah. Well, that just reminds me of a saying, you know, I've, I've heard this many times, what's the best, what's the best investment you can make and it's the investment you can make in yourself right here. Yep. And matter of fact, I feel so strongly about this.
[00:21:56] Chris Odegard: When I, when I run out of my current business cards, I decided I'm going to put some kind of acronym behind my name because everybody's got some kind of acronym, right. You usually have with a certification or an advanced degree. So, the one I'm thinking of is N.A.D., no advanced degrees.
[00:22:13] Ray Sjolseth: I like that one.
[00:22:14] Ray Sjolseth: Yeah. Chris Odegard, N.A.D.
[00:22:17] Chris Odegard: N.A.D., Well, it's a conversation starter. Right. And, and again, I, I I'm, yes. I'm poking plan at a, a segment of the educational, you know, the, the formal education and, you know, I mean I think, I think most people will take that in stride and if they Don. A couple words I could use for that.
[00:22:36] Chris Odegard: oh, and then you, you were talking about back to the tools and mindset. The other one is having an abundance mentality. You know, I don't, I don't clip coupons and I don't worry about having a $5 cup of coffee if that's what I want, or, or as Merle Haggard would say in one of his songs, drinking my beer in a Tavern instead of at home, because I know that I'm just getting a, you know, my cash flow and my balance sheet, you know, even [00:23:00] as I sit here, semiretired is just going to grow over time and I'm just not worried about money.
[00:23:05] Chris Odegard: Matter of fact, one of the hottest, I, I don't know if you're a car guy, one of the hottest things that's come out right now is Corvette is releasing the zero six performance model of the mid-engine Corvette this year. Guess who's getting one and already has this deposit down.
[00:23:21] Ray Sjolseth: good for you, man.
[00:23:22] Ray Sjolseth: Congratulations. Yeah, they did a good job with that. New design with the mid-engine be. Yeah, like it is a competitor. So, it's to some vehicles out there.
[00:23:30] Chris Odegard: Yeah. I've got a 2003 red, zero six. So, I'm going to add to that. The 20, 23, if I get one in this model year the, the, the new mid-engine zero six, I think I'm going to keep both of them, but at least initially
[00:23:42] Ray Sjolseth: anyway.
[00:23:43] Ray Sjolseth: Yeah. Why not? It's great. So, everyone needs a brother and sister, huh? Yeah. There you go. So, abundance mindset is hard though. Like that is not easy. It's not something that you turn on and to somebody out there struggling right now to pay their bills or in debt, or whatever's happening, how do they push [00:24:00] forward on that?
[00:24:00] Chris Odegard: Well, and it's not a, and so if, if I go back in time, when I was, you know, married two young children, you know, one, one income I didn't have that mindset. So, I think it's just something that evolves over time. And. You know, I mean, if, obviously if you're really in a tough spot and you're just barely getting by then you, you probably have a scarcity mentality, but as you start to grow and, and get smarter and make more money and, and invest better, and you start to see the, the, you know, the, the fruits of that labor, then it's like, okay, you, you know, you're, you're just growing year over year and don't sweat the little stuff, enjoy your life.
[00:24:41] Chris Odegard: And if it's the $5 cup of coffee or the Corvette, or, or I, I don't know this, isn't a Rolex, the Breitling watch, whatever it is that you like, you know, enjoy it, and just keep doing what you're doing.
[00:24:53] Ray Sjolseth: What do you do when you don't know what to do?
[00:24:58] Chris Odegard: I play the piano.
[00:24:59] Chris Odegard: Oh, [00:25:00] so then I've been, I've, I've been I've been teaching myself to play the piano and I had some of my first actual instructions down here.
[00:25:06] Chris Odegard: And when I, when I get tired of writing or looking at, you know, private placement memorandums, or, you know, you know, reading whatever I'm reading, I sit down and, and practice the piano. And, you know, I, I, I have, it's one of those leisure activities that I have no guilt about. It's not like sitting start watching, watching you know, breaking bad all over from of season one, again, you know, sit down, and play the piano.
[00:25:33] Chris Odegard: And I know sons, sons of a whatever. Yeah. So, yeah, that's one of the things that and music is really good. It works both sides of your brain. So, it's a really, it's a really good brain tool, but I just, that's the thing that I say, I, I don't know what I want to do. I don't feel like doing anything that resembles work anymore for the day.
[00:25:51] Chris Odegard: What but let me go do something that's. Semi guilt free and productive, and I'll go sit the piano for an hour.
[00:25:57] Ray Sjolseth: Can we talk about syndication a little bit? I think [00:26:00] absolutely. That that's something that is not widely talked about in general. Like, you know, you don't see your feeds getting hit by ads for real estate syndication, right?
[00:26:09] Ray Sjolseth: Yeah, there's a lot of material out there, but I just, I don't think it's a topic that is explained very well in general. Right. Can you kind of walk us through, like, what is syndication and how does that work?
[00:26:20] Chris Odegard: Sure. So, we talked about, you know, you know, single family rentals and, and a turnkey provider and maybe a small apartment building.
[00:26:30] Chris Odegard: But if you, if, if you're driving down the street and you see any large real estate project, like an apartment building or a shopping center or a self-storage unit, it's very unlikely that a one person put up all the money for the down payment. To make that thing happen. It was a group of investors that got together and pooled their money and said, let's all be part owners of this.
[00:26:58] Chris Odegard: Let's come up with a [00:27:00] down payment, go get the, the bank loan and buy this property, get operated. So, in its simplest form, a syndication is just when a bunch of people who would like to buy some big, giant thing, like a, like a self-storage place or an apartment building pool their money together to buy an asset that they wouldn't be able to buy by themselves.
[00:27:20] Chris Odegard: And that's a syndication and there's kind of two parts to the syndication. All of the investors who only put in money are called the limited partners. And then the general partner is either the syndicator or, the person who is basically doing the fundraising. And that's going to be the person that's going to manage.
[00:27:40] Chris Odegard: Or hire the vendors and, and you know, the people that are going to run this thing and it's very, some people might get it confused with a reach R E I T real estate investment trust a real estate investment trust is a publicly traded stock. It just happened to be happened to be a company that makes their investment real [00:28:00] estate.
[00:28:00] Chris Odegard: These are completely different things. When you own a REIT, you own a stock certificate. When you are in a syndication, you are a partial owner in a percentage basis, depending on how much you put the deal of that property. You know, you are entitled through this structure, you get the tax benefits and depreciation pro rat share of that.
[00:28:21] Chris Odegard: So, you get all the benefits of You know, owning a property without having to have any, anything to do with that property. And it's perfect for it's perfect for high paid professionals who, and they're typically limited to accredited investors, not all the time, but most of the time. So, if you're a, you know, a very busy, high paid professional, and you want to own real estate, you know, owning real estate under your own name is really a, another business, and a job all unto itself.
[00:28:51] Chris Odegard: Right? So, unless you want to take on another job syndication is a great way to go. But just like anything else, you have to be very careful because there are good [00:29:00] syndicates and bad syndications, and you're putting all of your faith and, and trust. And whoever's putting this deal together.
[00:29:07] Chris Odegard: You could have two identical apartment buildings on opposite sides of the road. And, and there's no difference in the building, except for who's managing that building. One could be wildly successful, and one could just be run completely into the ground. And it all depended on it's the people you're investing in the people in this general partnership thing.
[00:29:26] Chris Odegard: So that's kind of my view of 10,000 view of a of a syndication.
[00:29:31] Ray Sjolseth: Yeah, that was a great explanation. Thank you. I think that was perfect and very, very well simply explained. appreciate
[00:29:38] Chris Odegard: that. And I'll just add one more thing to that. And the problem is, is. And especially with the popularity in the multi-family space right now, there's all kinds of money.
[00:29:48] Chris Odegard: A multi-family has performed and continues to perform so well. We've got a supply and demand issue in the country. And so, everybody wants to be in this space. And so, anybody who can put together [00:30:00] $15,000 to have the lawyers draw up the appropriate paperwork and legal structure can say, I'm a syndicator.
[00:30:05] Chris Odegard: Would you like to give your money to me? So, I can go buy this asset and make lots of money for you? So, you have to be very, very careful. These are unregulated investments. And it would be easier to get in a bad one in this private space than it would be in the stock market, where everything is very regulated.
[00:30:24] Chris Odegard: Things also go wrong in the stock market. I feel like this is a place where you have to be more careful.
[00:30:30] Ray Sjolseth: Sure. So, going to multi-family for a minute, right? If you follow grant Cardone as an example, the 10 X guy yeah, the 10
[00:30:39] Chris Odegard: X guy, a big, a big real estate syndicate big
[00:30:42] Ray Sjolseth: real estate syndicate. Who's just,
[00:30:43] Chris Odegard: who does take some?
[00:30:44] Chris Odegard: He does take non-accredited investors too. I believe in some of his stuff.
[00:30:47] Ray Sjolseth: Yeah. He has a couple different programs. I've looked into some of them, you know, he says don't buy anything less than like a 16- or 32-unit building. What are your thoughts on, you know, a five unit or a 12 unit or 13 unit [00:31:00] versus something that's bigger?
[00:31:01] Ray Sjolseth: How do you feel about.
[00:31:03] Chris Odegard: So, when I, when I had you know, some small single families and duplexes and fourplexes like that, I was looking to move up to the next level and get into apartments. And I started down that path and I guess luckily; I was never successful in putting one under contract.
[00:31:20] Chris Odegard: One of the problems was I was living in Seattle. Seattle is not a good market for cash flow. You're, you're basically betting on, you're like a stock market vesting you're, you're hoping for appreciation. And for a lot of times that works, but not a cash flow place. So, I had to, I was looking to invest in these larger or, or smaller apartment buildings in other.
[00:31:39] Chris Odegard: Places in the country. And I made the mistake of trying to buy before I had a team in place on the ground, in that location, because what I've come to learn is the property manager is what's going to make or break your investment. Assuming you bought the right building in the right market. It's the property manager.
[00:31:58] Chris Odegard: And, and I have talked [00:32:00] with quite a few people who have done this and have been successful. And my question to them is how many units I need to have before I'm going to have a dedicated property manager for, for my building. And I'm not just going to be, you know, another number and the answer varied, but I'll just say in round numbers, it was a hundred.
[00:32:21] Chris Odegard: So, if you want to be in that apartment space and you're going to have somebody else manage your proper property, you. Get up to that a hundred number pretty quick, so that you're in this market and you've got a dedicated person to this. That's managing your 100 units. Maybe those are two 50-unit buildings.
[00:32:39] Chris Odegard: How, however, they're however they're spread across. The nice thing about those turnkey single family rental providers is that people that do that, they are experts in managing a whole bunch of single-family properties in that area. So that's again, another way to kind of get started, why that works very well, as opposed to [00:33:00] you are buying a single-family rental, you know, you know, somewhere, and then trying to find a property manager, as opposed to these guys manage 2000 single family homes in Memphis.
[00:33:10] Chris Odegard: That's all this property management company does type of thing. So, yeah, I think, I think it's tough. You got to get up to the numbers where you, you can have an impact on the property management company, and they're going to give you the right amount of attention.
[00:33:22] Ray Sjolseth: Right. That it makes sense. Yeah. I like attention.
[00:33:25] Ray Sjolseth: That's a key word. It's another grant Cardone keyword right there. Attention, is it? Yeah. Okay. Let's go to, let's talk about real estate agents and investors, and some of that interaction, some of that, that knowledge some of that collaboration for, for lack of a better term, what's your experience with the real estate agents and investors?
[00:33:45] Chris Odegard: I've since, since I don't have to do that anymore, because it's all about syndications, but when I was, I always, it was, it was I found that lawyers and real estate agents were kind of the hardest ones to just, you know, form a good team with and say, this is the [00:34:00] guy that the lawyer that I go to and this is the agent.
[00:34:03] Chris Odegard: It just was really hard for me to kind of, you know, lock up and, and team up with one person. After I had my illiquidity event, my son and I took a series of classes that were put on by the Robert Kiyosaki, rich dad organization. And, and we traveled all around the country learning about various ways of investing in real estate, you know, lease options and, and flips and multifamily and single-family rentals and creative financing and mobile home parks and mobile homes and stuff like that.
[00:34:30] Chris Odegard: But one of the first classes was just kind of a generic mindset class that was taught by this young cocky guy, very successful. He's still out there. And he talked a little bit about this. He said, okay, so you're a, a newly minted real estate investor and you go out and you you're interviewing or, talking to realtors to figure out who you're going to, who you want to work with.
[00:34:50] Chris Odegard: And he said, the first question you need to ask them is how many how many rental properties do they own? And if the answer is zero. You move on because [00:35:00] what you have is a person who has a job buying and selling real estate but doesn't understand the value of that asset being, frankly, the best asset there is to invest in and they don't own any, they're just a, they're just a person, you know, working in an industry that they don't really understand.
[00:35:20] Chris Odegard: And I thought that was. That was really amazing. And I actually have a friend who's a commercial real estate broker. And to my amazement, I can't come, you know, I'm, where's the next money I'm going to come up with to go into this deal in Phoenix or Dallas or Atlanta, whatever the place is. And I can't find enough money.
[00:35:38] Chris Odegard: And I, and I see these guys that are, commercial real estate brokers that have zero investment in, in multifamily or any other kind of real estate assets. So that's, that's the big thing to kind of watch out for. So, if, if some of your, some of your listeners are agents and they want to work with investors, they better figure out the value of, of the industry [00:36:00] that they're working in.
[00:36:01] Ray Sjolseth: What am I not asking you that I should be asking you? You know, you have a, a very diversified background. You've spent a lot of time educating yourself, getting your N a D as we discussed a minute ago. what are some, what are some things that I'm not asking you that I should be asking you, that you can share with us?
[00:36:20] Chris Odegard: You haven't asked me what things went horribly
[00:36:22] Ray Sjolseth: wrong. okay. Let's talk about that. When things went horribly wrong, I always love talking about failure. That's like my favorite subject.
[00:36:31] Chris Odegard: I, and actually I've got a, I've got an article on my website. It's called my worst investment. So, people could see all the gory details there, but I was I was very enamored with notes, performing in non-performing notes.
[00:36:42] Chris Odegard: When I first started, I ran into a guy who taught a class and had a company. And, and I was, I was in my girlfriend, always says, you're just such the easiest sucker. When you see these things, she knows I'm off to the races, right? Here's how much do I have to pay? Let's get started and don't get me wrong.
[00:36:59] Chris Odegard: It's a great investment. A lot of people love it and make a lot of money doing it, but just didn't, it didn't work for me. Didn't fit my personality. So, I had was buying Bo. And if your audience doesn't know what a note is, a note is a promissory note. So, a mortgage is a note. So, if you own a home a bank might own that mortgage, or I, as an investor might actually own that mortgage.
[00:37:24] Chris Odegard: So, after the kind of the 2008 housing debacle you know, banks found themselves with all these mortgages where the owners weren't paying, that would be a non-performing note. And in some cases, they foreclosed, but pretty quickly they realized that, geez, Liz, I'm not in the business of owning empty property that I foreclosed on the numbers were just so huge that what they would start do is they were just selling off these non-performing notes.
[00:37:51] Chris Odegard: So. If somebody had a mortgage with a, with a, a FA an unpaid balance, a up B [00:38:00] now an unpaid balance of a hundred thousand dollars. That's an asset that, that somebody owes that bank a hundred thousand dollars and the bank says, I don't, I don't want to deal with this. I'm just going to get rid of it. I'm going to sell it for $30,000.
[00:38:14] Chris Odegard: So, I could come in and buy this note. For $30,000. So, I've, I've got it at 70%, you know, less than its unpaid balance. Now I have got all kinds of room to approach the home homeowner and work out a deal, because I've just got to get my $30,000 back plus a good return. I don't need to get the whole hundred. And so, and then you can also buy performing notes.
[00:38:37] Chris Odegard: So, let's say I bought that note and, and I took it from non-performing and turned it into performing and now the tenant is paying and now I could go around and sell that again as a performing note. And somebody's just getting, you know, something that's delivering a, a really good rate of return. Well, I had purchased a performing note in Indiana, and it was [00:39:00] presented to me as an owner occupied.
[00:39:03] Chris Odegard: Oh, no, let me take it back. Owner, owner occupied. Now I'm trying to remember if it was, it was, it was performing or not performing, but key is it was supposed to be owner occupied and let's say it was performing. And by the time between the time I, bought the note and by the time I got somebody out there to actually look at it, this place, there was no tenant.
[00:39:27] Chris Odegard: It had been used as a crack house or something. It was a complete disaster. And it was like in December, and I was getting ready to go on a vacation to so in Hong Kong. And so, I had to get somebody out there to secure the property, boarded up, take care of the water. And I think I paid, I think I paid, like, let's use the same numbers, you know, $30,000.
[00:39:49] Chris Odegard: And, and, and the under the collateral, the house was worth like 55. Right? So, when I, when I got back from my vacation, I had to deal with this and I. I [00:40:00] got a call of a couple realtors. I said, I need a, I need a broker price opinion, a BPO on this asset. And the first answer was, donate it to the fire department and let them burn it to the ground.
[00:40:11] Chris Odegard: right. and so I wasn't, I was just not going to let this, I was, I was determined that somehow, I was going to plow through this. So anyway, I, I, I did turn what could have been a $30,000 loss. I, I did get the property rehab. I did get a buyer for it. I sold it with owner financing, and I sold the performing note, and I ended up only losing about $12,000 instead of $30,000.
[00:40:40] Chris Odegard: so that was one of the things that went horribly wrong. And another thing. I was very enamored in the, in the very beginning with private equity. And that's just a fancy word for, you know, being a private a shareholder in a, a private business, not publicly traded. Yeah. And of course, most businesses that start up fail.
[00:40:58] Chris Odegard: And I [00:41:00] became very enamored with some of these companies with very great products or services that just had to succeed. And there were three of them and all three of them, you know, could tip over one way or the other. They're, they're all still sitting on the fence of 50, 50 might succeed or might fail.
[00:41:16] Chris Odegard: But I put too much money into too few companies instead of spreading out you know, making smaller investments in, in a bunch of companies, because these are, these are kind of the, you know, the, the hit for the fences instead of being three, there should have been 10. With that same amount of money that by put in three is spread across 10.
[00:41:34] Chris Odegard: And if, if nine of them failed and one of them hit the jackpot that one of them would've taken care of. All of them. But now I got three that are all questionable. So, I do things a little bit differently in that area now.
[00:41:46] Ray Sjolseth: Yeah. I feel that I made that mistake. not once either. Like I learned lessons hard.
[00:41:52] Ray Sjolseth: Yeah. And some of them are my own companies, my own brands that I just, yeah. Poor planning, bad decisions, wrong people around [00:42:00] me. Not doing my research, not really a defined audience. Like it was a total shit show.
[00:42:05] Chris Odegard: Yeah. Yeah. So now I'm now, you know, now I'm so you know, when you first get into this alternative investment world, it's like shiny object syndrome.
[00:42:13] Chris Odegard: Oh, there's ATM machines. There's oh, there's yeah, there's fourplexes. There's self-storage. There are apartment buildings, there's car washes, you know, laundry. I mean, laundry, you know, there's everything. And, and, and I was just, you know, I was doing a little bit of everything and now I'm just like, and so now I have, and everybody should have this, some type of investment criteria.
[00:42:36] Chris Odegard: For example, you might say that I want to invest in appreciating assets. Well, that would rule out ATMs and, you know, business equipment, because those are just like used cars. So, I want an appreciating asset. Let's see that that would be any kind of real estate. Number one. I want something with a built-in tax advantage.
[00:42:55] Chris Odegard: Okay. Real estate falls in that category. No conventional, no stocks, bonds, or [00:43:00] mutual funds have any type of tax advantage nor does really the 401k. When you look at it in the long term. So, appreciating asset built in tax advantage, the ability to use, leverage the ability to ensure the asset X amount of return.
[00:43:16] Chris Odegard: And so, if you say this is the type of asset I'm looking for, then every time you can really quickly go, oh shit, that one doesn't work. It doesn't have that. It doesn't have that. And it really makes it easy to say no to all those things that you other might otherwise say yes to. And I have, I have a couple of exceptions.
[00:43:35] Chris Odegard: One would be like a lifestyle type of investment. Like if I, if I want to spend, you know, eight weeks out of the year in Belize, maybe I would buy something in Belize or more likely someplace domestically. And I also think that for myself, I always want to be making. Some small investments in that that grand slam, whether it be private equity or [00:44:00] cryptocurrency, or even a publicly, you know, traded company that's just, you know, in its early stages.
[00:44:06] Chris Odegard: So, I still make some of those investments, but I'm, I do it a lot smaller than I did on the ones that I talk about before those three companies. So,
[00:44:14] Ray Sjolseth: well, that's a good segue. So, what are your thoughts on where the world is going and digital real estate and buying, you know, real estate in the quote unquote metaverse right now?
[00:44:25] Ray Sjolseth: So,
[00:44:26] Chris Odegard: so, my, my disclaimer is that my crystal ball is about as good as everybody else's and I don't give, I don't give financial advice, but I think that there's actually a, there's actually a, a summit coming up that I'm going to go to in Austin. It's it? It's about. You know, real estate ownership being on a blockchain.
[00:44:44] Chris Odegard: And I think that, I think that is coming, you know, instead of that's very real. Yeah. Instead of you know, your ownership in a syndication being at the county courthouse on a piece of paper, that's then been digitized, I think it's going to be, it's [00:45:00] going to be tokenized on a blockchain. So, I think that's coming, I'm trying to, and one of the reasons I just wanted to go to this summit is go, well, what are the disadvantages of that?
[00:45:07] Chris Odegard: And the first thing I think about, and one of the advantages of, of real estate is, it's illiquidity. Means it's non-volatile. So, while the stock market is going like this, you know, my real estate assets are just, are they changing value? I don't know. It doesn't the, the value of the real estate doesn't really make any difference except at two points in time when you buy it.
[00:45:29] Chris Odegard: And when you sell it, as long as its cash flowing or breaking, even all during that time in between. Yes, I don't. I don't. Karen, matter of fact, I had some small single family and multi-family units at right beginning, you know, all through 2008. And I had a, I had a condo in, in the Seattle metropolitan area that lost 50% of its value during that time.
[00:45:53] Chris Odegard: But guess what? It was full of paying tenants and the rent kept going up all during that time and, you know, half a [00:46:00] decade later, whatever it is, I sold it for more than what I paid for it. So anyway, where we were going, we were talking about a digital real estate. Yeah. Yeah. Well, I, I had heard a story about That a that somebody had created a, a digital yacht that sold for more than a million dollars.
[00:46:17] Chris Odegard: And, and you think, well, what does that mean? And, and I go, well so what that means is that, you know, you could maybe find your, you know, if you're running in their white circles, you could get invited to a private invited to a party on a private yacht, but instead you would get on your, you get on your 3d goggles and you get invite.
[00:46:37] Chris Odegard: You get a ticket for a thousand dollars to get on this digital representation of, of this yacht and go for a cruise. And there are a generation of people that are younger than us that have always had an iPhone and an iPad and do everything online. I've heard some people talk about those people might not want to travel.
[00:46:59] Chris Odegard: They might [00:47:00] just be satisfied with the virtual experience. That's what they've grown up with. So, there's, there's something to.
[00:47:05] Chris Odegard: Hm, interesting. That that might not bode well for the travel industry. and especially as, as hard as the governments are making it for us to travel these days. Yeah, yeah. Right.
[00:47:15] Ray Sjolseth: Interesting. Okay. Chris, I want to be conscientious of your time. Where can people find you?
[00:47:21] Chris Odegard: You can find [email protected] and there's a handful of ways you can interact with me there at the very top.
[00:47:30] Chris Odegard: There is a conventional investor quiz, conventional, make sure I get it right. Conventional. Oh, The conventional wisdom quiz. That's a 10-question quiz and they're, they're kind of trick questions. So, you can take that quiz and you'll get an email with the answer. All my articles there. I write one a month.
[00:47:48] Chris Odegard: There all there, all the resources are there. I list you know places where I invest and I haven't done turnkey rentals, but some companies I know that have a really good reputation. And [00:48:00] there's also a, a flashing star on the front of it where you can go and get my book called, get off your ass and manage your money.
[00:48:07] Chris Odegard: Why you need alternative investments. It's available on Amazon. If you type in my name, Chris, Odegard, the book will come up quicker that way, or you go to my website and that's there. I've also got all the YouTube videos. Oh. And if you want to schedule a, a free 30-minute virtual coffee with me, there's a place where I put aside Thursdays on my calendar.
[00:48:27] Chris Odegard: So, anybody who wants to just, you know have a conversation about this kind of stuff, wherever they are in the journey, they, they can do that. So, the prolific investor does. I love that. And all the social media links are on there as well.
[00:48:41] Ray Sjolseth: Chris, thanks for your time today, man. This has been amazing. Thanks for sharing your wisdom with us, your failures and everything that you've been
[00:48:47] Chris Odegard: through.
[00:48:47] Chris Odegard: My pleasure. Thanks for having me on. It was a lot of fun
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