Are you tired of working hard and not achieving the financial freedom you are searching for? Have you ever dreamed of being able to do anything you want with your finances and with your time? That's what Emily Cortright and Adam Roberts were looking for when they took control of their own destiny. By investing in real estate, these two highly trained aerospace engineers found a way to reach true financial freedom. They want to pass on their knowledge and help people like you find the same financial freedom through smart investments.
Table of Contents:
- Where To Listen To The Podcast
- Road to Financial Freedom: From Aerospace Engineers to Real Estate Investors
- Giving Back Through Teaching Multifamily Investing Classes
- Property Management 101: Save Money in Expenses
- Multifamily Investing Is a Lifestyle Business
- Financial Freedom by Finding the Right Partners
- Financial Freedom Is a Long-Term Game
- What’s Next for Emily Cortright and Adam Roberts?
- How To Reach Emily Cortright and Adam Roberts
Road to Financial Freedom: From Aerospace Engineers to Real Estate Investors
Darin: Emily Cortright and Adam Roberts are married. They have a young daughter and they live in the DFW area. They’re both aerospace engineers who found financial freedom through investing in real estate. They have a proven track record, and more importantly, they have a heart for helping others reach their financial freedom goals.
Just a little bit on how we know each other. All three of us are part of the same multifamily mentorship group, the Brad Sumrok group in the Dallas market. I met both of them when I was very new to the space, about five years ago. These guys have been killing it since, I'm very interested to hear what they've been up to.
With that, can each of you guys just share a little bit on your background, and why did you get involved in multifamily?
Emily: Yes. Thanks, Darin. Again, my name is Emily Cortright. And we got into real estate investing because first, I watched my dad go through a life-changing event. He worked at his job for 30 years and he was not able to retire yet because he had only invested in stocks and mutual funds, and that was supposed to provide for his retirement. This was 2009. And he could not retire after 30 years in a physically demanding job because of his investment strategies. He had to work for an additional five years.
Real Estate Investing Provides a Very Solid Retirement and Financial Freedom
Emily: I watched that process happen and I was like, that is not going to be me. We are going to do something different. I don't know what it is yet, but we're going to do something different. And luckily, I met Adam here and he invited me to an investing class. I show up and I find out it's a real estate investing class. I'm like, what are we doing here? We're not going to invest in real estate, we're engineers, we work corporate jobs, we're climbing the corporate ladder.
He's like, "No, no. Just stay, just listen." And I'm so glad I stayed because that two-hour class literally changed our lives. It started a quest for knowledge and it showed us how real estate investing can provide for a very solid retirement and can provide a lifestyle.
Adam: This was back in 2010. Emily and I came from the aerospace industry. We were engineers, manufacturing operations, like she said, corporate athletes. Going to a weekend event on real estate investing was like, you just didn't tell your coworkers about that. They'd look at you funny. But to Emily's point, it was just fantastic.
Darin: I didn't realize that both of you guys were aerospace engineers. I thought you both were single family realtors and then got into the multifamily space.
Adam: When we moved to Texas, the company we worked for in aerospace ended up divesting our manufacturing.
Darin: You both worked for the same company?
Adam: Oh, yes. We worked at GE.
Darin: Is that where you met?
Adam: We met at a fondue party.
Emily: A work party, yes.
Darin: I digress.
The Retirement Plan for Financial Freedom
Adam: We moved to Texas when our company, GE, closed its doors on the west coast. I found another aerospace job in Fort Worth, and Emily did not go back to corporate, she just started buying rentals and flipping houses. You are correct, Darin. Before we met in multifamily, we did about five years or so of single family investing and built up a small rental portfolio and did a whole bunch of fix-and-flips.
Darin: Got you. I'm so glad to hear that story, the story about your dad and after 30 years of working he wasn't able to retire. I think there's so many people out there, it could be their parent that's going through it, or it could be them. For me, I put 10, 20% aside all the time and was climbing the corporate ladder. And it just didn't grow as fast as I was told it would. That's awesome. Maybe share how many properties, how many units, you guys are invested in, because you guys have come a long way.
Emily: We have. And over the past six years we've done eight large multifamily syndications, so group purchases. We currently still have six of those properties, and that totals about 1,400 units. We also invest as passive investors. We took our retirement funds, we put them into self-directed accounts, and then we took some of the investible cash that we knew we wanted to set aside for retirement, and we've invested so far in 17 passive investments totaling over 4,000 units. And literally, that's our retirement plan. That money will snowball and will continue to roll over and grow to really meet our financial freedom goals for our future.
The First Investment Is the Scariest
Darin: It's taking the first step. Did you have any idea that you'd be invested in 4,000 units passively, 17 deals, and over 1,400 units as a general partner?
Adam: Every time we make financial decisions and look at the movement of money or investing in this asset or that, I always look at Emily and I'm like, “Did you ever think?” We both grew up in households that were modest, working-class households and, as they say, raised right, and that kind of thing. Those topics were never discussed. You're right, it's an eye-opener when you think about it.
Darin: It's an eye-opener. I've interviewed a lot of people that have 1,000, 2,000, 5,000 units. When I ask, what was the scariest investment? A lot of times it was that first investment, that first single family or passive deal or syndication deal where they were a GP.
The first time doing anything is scary. Then, after you did it the first time, you're like, “What's next?” We could do something bigger. We can do something different. And it snowballs. And then, what you guys are doing right now, you're sharing your story, it turns out to be not just about growing your wealth, but teaching other people how to do it.
Adam: That's basically Emily, that spends maybe 80% of her time helping others get involved. Because to your point, either people don't know about it or once they know about it, there's a fear factor, or there's a lack of education, or there's a lack of trust. But that's Emily's focus.
Darin: Actually, before we hit record, Emily says she's traveling tomorrow because she's teaching, right? Do you get paid a check for that?
Emily: I don't.
Adam: I spend money to do it.
Emily: They're reimbursing.
Giving Back Through Teaching Multifamily Investing Classes
Emily: This has been a big passion of mine. When I moved to Texas and started single family investing, I got my real estate license and went with a Keller Williams office that's local to DFW. I learned from other investors in that office, they have supported me through my investing goals over the years, and I have become the investor in the office.
About five years ago, I started teaching investing classes. It started with single family investing classes, now it's multifamily investing classes, then it branched into wealth-building classes in general. Because of COVID and Zoom coming out, now I'm teaching virtually across the nation at Keller Williams offices. Memphis was so impressed with my virtual presentation, they're like, "We want to fly you in to teach two classes."
It's been a great learning opportunity, a great networking opportunity in the ability to get real estate agents involved in real estate investing, when a lot of times they just don't know where to start. A lot of my classes revolve around how you start in real estate investing.
Darin: I could attest that Emily is a giver. The first time I met her, it was an Old Capital networking and speaking event. We're in the lobby and we knew we were in the same group. We're just talking, and I shared a challenge. Being new, I was trying to get a property budget from a property management company, and I wasn't getting the response. She was like, "Just do this. Reach out to this guy." The next day I did, and got the response. I was so thankful. She didn't get anything for that, she wasn't part of the deal, she just wanted to give back. Thank you for that.
Trust and Relationships
Darin: Talk about some of the learning lessons. You learn along the way. You learn how to push yourself, and you also learn by managing these properties. Maybe talk about some of the learning lessons and how you tackled some of the challenges that came along the way.
Adam: I think one of the biggest lessons we've learned, and we continually talk about this because, Darin, to your point, there's always the next deal. We learned that there's a whole lot of trust and relationships involved when you're investing your retirement funds, your hard-earned cash into any investment, or other people's deals, essentially. That's our biggest learning lesson. To Emily's point, we invest in other investors' properties. We started doing that early just as a learning experience.
And when we look back at our portfolio of, let's call it, passive investments, the ones that have done the best are the folks we have the best business and personal relationships with. We know their teams the best. We know their track record. And then on the other side, the ones that haven't done the best, or maybe we just got our principal back, we look at each other, I had a SEC-compliant relationship with that person, but that's about it. I didn't really know their team, their track record of success.
I always tell folks, “Man, before you invest with me, let's get to know each other, ask some other folks about my track record or my reputation.” Because I now do the same thing for my own investment funds.
Dividing Roles and Responsibilities
Emily: Then I would say, through our journey, one of the things we did from the beginning is, we both were the asset managers on a property and we shared all of the responsibilities. That was great for getting to know all the different aspects of the business, but it created a lot of conflicts. Because something would come up and it's like, are you going to manage it, am I going to manage it? I would manage it this way, and you would manage it that way. We would butt heads on things.
Darin: You guys would butt heads?
Emily: Can you believe it?
Adam: Because, Darin, I didn't know, until someone told me, that she's always right.
Emily: We have very different management styles. We learned from some of the other husband-and-wife groups that we work with that we really had to divide our roles and responsibilities, create the swim lanes, and make sure that we each knew what our role was in the business.
It was January of 2020, and we said, we've got to do something different this year. We divided up the roles and responsibilities. Adam is now focused on operations and working with the property management company, the CapEx implementation. I do more of the backend, the banking, the investor relations, the acquisitions. And after that, the relationship and the ability to work together was so much smoother.
Adam: The property started doing better. Go figure, right?
Emily: Nothing was slipping through the cracks. That was a huge lesson learned for us over the years. Because we both wanted to do it all at the beginning, but finding those distinct swim lanes and roles and responsibilities was really a game changer that allowed us to work better together.
Focus on What You Like to Do
Darin: That's great. Any husband-and-wife combos that are considering getting into this space and both being active, that is great, great, great advice. And the ones that are not a husband-and-wife combo, that same advice can be applied to your partners.
You pick partners to work with, and you can divide up responsibilities within those partners. Because like you said, it's not just husbands and wives that have different ways of managing things. You're going to handle something one way and he's going to handle it a different way. It's the same with business partners, right?
If you can divide that up and then focus on what you like to do, and then somebody else that's a partner focuses on what they like to do and it's what you don't like to do, that's the best of both worlds.
I remember I was on a networking event with you guys, and Emily, you brought up something, we're getting into a little bit of detail now but, it was on one of your deals and it had to do with utility bills. And it was something I hadn't heard anybody else talk about. Can you share a little bit about that and what kind of impact that had?
Emily: Our second deal, it was an all-bills-paid property. Which means that the tenants just pay one bill per month, and the owner is responsible for water, sewer, trash, electricity, and gas. And that is unique because that means that any savings that we realize on our utility bills go directly to our bottom line.
Property Management 101: Save Money in Expenses
Emily: For this property we own in Northwest Dallas, it was a 208 unit, we did a water conservation program. We put in low-flow toilets, low-flow shower heads, and low-flow aerators on the faucets. That project cost us about 110,000 to outfit the entire property. Almost immediately, the water bill cut in half. It cut from 22,000 a month to 11,000 a month. It essentially saved us, that year, 120,000 of savings.
When you talk payback periods, it was less than one year, which is pretty phenomenal. The savings on the water bill increased our profits, which then increased the asset value by probably about three to $4 million, just from doing that one project.
We did the same thing with electricity. The electricity wasn't as impactful, but doing the combination of the water savings and the electricity savings with LED lights and smart thermostats, launched the asset value because we were saving so much on utility bills, and getting to realize all those savings because it was an all-bills-paid property.
Darin: Even in a non-all-bills-paid property, where you're billing back to the tenants, there's some people that will argue that if you're able to save the tenant money in the other income, the bill back on utilities, they have more ability to pay a higher rent. The combination between the rent and the bill back, some tenants will hit a ceiling where they can't afford pay anything more.
Most people that I talk to focus on the top line, renovate the interiors, get the higher rent. That's one way to increase the value of the property. The second way is to save money in the expenses. That's a huge valuation. Three to four million, nothing to sneeze at.
Review Financial and Budget Items
Darin: But in addition to that play, you guys felt like something was off, and I don't know if it was on this property or if it was on a different property, on utilities, and then you guys did an audit. Based on that audit, you found that something wasn't right. I don't remember the details.
Adam: Yes. This is one of those good asset management learning experiences. On the first asset that we bought, and have subsequently sold, that was a property that was not all-bills-paid and the tenants actually paid their own electricity. They had to call electric companies, set up their own service and things like that.
When a unit's vacant, the owners have to apply an electric contract on the unit. We'll have anywhere from 10 to 20 vacant units at any given time, so we have 10 to 20 utility bills coming in for those units, and the owners pay that because it's vacant. And what we had happening was, residents would move in, our leasing staff would say, "We need you to get your own electricity." And some residents would either, because they forgot or they're smart, they would just not do that.
I spent a period of time, actually for one unit it was over six months paying for somebody's electricity. I can't quite recall the details of how I discovered that. For us, on our properties, obviously financials are always reviewed, typically, every 30 days. But I also do a process with every property and the management company every quarter. Four times a year I go in and I review the budget items that are just way out there.
Gather More Data
Adam: That helps because some expenses you can't look at on a month-to-month basis, you need more data. I believe that's how it happened. We looked at the electricity bills that I was paying and I said, over a three-month period, we've only got 10 vacant units, there is no way that I'm spending, unless the ACs are cranking and there's parties going on. We had to go back to those folks and say, here's the bill, pay me.
Darin: There's the property management company, and then you as the owner are asset managers, and you have to review the financials. If you're not reviewing the financials, the property management companies, they may just not know, and then just paying the bills and they're doing their job. But it's impacting the profitability of the property and the valuation that you guys are able to potentially resell or refinance into it.
Adam: If you don't have this process in place, anyone who starts a quarterly review of especially the expenses, you can do it on the income side too, but especially the expenses, you learn a lot. Because we all look at the P&L every 30 days and say, that was over by 600 bucks, that's cool. But if you look at it over a longer period of time, you may find some things that are pretty significant.
Darin: Absolutely. We're going to talk more about multifamily, but I like the fact that you guys also have interests outside of building wealth. Because I think that building wealth is something very important. There's some people I talked to, that's all they're doing, is just getting their number bigger and bigger and bigger.
Multifamily Investing Is a Lifestyle Business
Darin: Adam, I see him, he is flying around. He got his pilot's license and he's flying around. Talk about why that was important and how, maybe, this helped you achieve that goal of financial freedom.
Adam: Travel is a big part of our lifestyle. And in parallel, I believe that we got into multifamily investing because it's a lifestyle business. You can work when you want, schedule your meetings when you want, you're your own boss, you run your own schedule. But the pilot's license thing actually happened a long time ago. I did my first flight lesson in 1999.
The funny thing about that story is, my mother would have to drive me to the airport because I didn't have a driver's license, I was too young. She would drive me to the airport so I could go fly a plane by myself. In the state of Pennsylvania, you had to be 17 to drive a car and you only need to be 16 to fly an airplane.
I got my pilot's license back then. It's been a big part of my life. I was a weekend warrior. I never really utilized the certificate until maybe five or six years ago when I just realized that I wasn't flying enough. And it is a hobby that requires you to stay very proficient, because of safety reasons, obviously.
I decided to buckle down. I ended up getting a flight instructor rating, a commercial pilot's license, multi-engine rating, the whole deal. Today we mainly travel with family all over the place. We love going everywhere.
Financial Freedom Comes With Responsibility
Emily: Multifamily investing has allowed us to buy a nicer plane, a small plane. The first one was able to get from DFW to just outside DFW. The second plane was able to get us to Houston or the coast, but it would take eight hours to get you to Cincinnati or Florida. Then we found the right partner. We had a baby, so we needed to buy a pressurized, small airplane so the baby wouldn't have to wear an oxygen mask.
Now we have a small, six-seater plane that's fully pressurized, we go up to 31,000 feet. And we can take the baby, we can take the luggage, and just travel. We still try to maintain that lock-and-leave mentality with our travel and just being spontaneous like, let's go away this weekend, and keep it fresh.
Darin: That's awesome. I love that. I haven't gotten the invite in that six-seater.
Emily: The baby takes up a lot of room somehow.
Darin: I think mindset is such a big thing in going into these large multifamily deals. How did you cross the divide from going to single family to multifamily? Because a lot of people, I think, have these limiting beliefs, these ideas in their head, that that's for somebody else.
Emily: It was a big jump. And the level of responsibility is leaps and bounds higher in multifamily.
Because in single family, if we lost money on a flip, it was our money. If we bought the wrong rental property, it's our money. In multifamily, you are managing millions and millions of dollars of other people's hard-earned funds. There's a respect, there's a responsibility put on you to do the right thing with those funds and build them up for others.
Invest in Multifamily Mentorship
Emily: It's the best feeling in the world to be able to give back returns and profits, but the responsibility level was so high that we pursued an education program to learn how to do multifamily syndication. It's the same one that you're in, obviously, and where we met.
Looking back, that was the absolute best thing that we could have done to protect ourselves, protect our investors, to make sure that we're doing the right thing for everybody in the transaction to be fully knowledgeable on the process and the financial freedom goals, the risks and the analysis, everything like that. We pursued education.
It took us a year to get our first deal. It was a year journey from the day we said, I want to go into multifamily till we got our very first deal. And a big portion of that was learning, meeting the right people, forming the right team. Looking back, we took our time, we did it right, and it allowed us to be more successful going forward.
Darin: I wholeheartedly agree with you. I think joining a multifamily mentorship group is critical. I think it shortens the timeframe to be successful. It also surrounds you with people that have been successful. I don't know about you guys, but for me, once I was around a lot of people that had done it, I'm like, they're smart, but I can do it too if I follow what they did. But if you're swimming alone, you can have a lot more of those negative thoughts where you may get. At least I got a lot of encouragement from people saying, you can do this, just take the next step.
Having the Right Team
Darin: The other thing is, I've had people reach out to me on Instagram or otherwise and say like, "These groups are really expensive." They are, they're an investment in yourself. I'm not an engineer, and so I was always fearful of what if I buy a building that has structural issues that I don't know. I would bring up that to other people in the group. And consistently the answer was, "That's simple. Just hire somebody to do the inspection that knows what they're doing, that we've all worked with." And then they gave me the referral to Brian Amos.
He was able to go out and bring his team, that's what he does for a living, and then give you advice. That seemed like an insurmountable task, but it really wasn't because you were able to find the right team member to come and help.
Emily: And I specifically remember when we joined, going to one of the first events, and you had your property management company there, you had your insurance provider, you had your inspector, you had your lender, and you're like, I don't even have to shop. Everything is right here. All the resources, all the team members I need for this business are right here in this room. It was five less things I had to worry about while I was learning the business.
Adam: Darin, your point's spot on, that the abundance mentality in a group like ours that we're all in, it really helps push you off the fence for certain risk aversions, which we all have. No one is completely averse or completely risk-free. We all have our fears. But yes, the group is very good at that.
Financial Freedom by Finding the Right Partners
Darin: Absolutely. Had I been doing it alone, if I had bought a property, yes, I would've saved not having invested in that group, but maybe I bought a property that did have structural issues that I didn't know about, and that would've cost me and my investors so much more. Sometimes it could be a little shortsighted. Talk about how you guys pick partners, because I've seen you guys have picked really good partners. You're very diligent on who you work with.
Adam: It really starts with business and both personal philosophy, the way that folks work with and treat the residents and work with the property management firms. You can see that. Once you meet folks and you hang out with them a little bit, you get to know them, you start talking shop. These real estate events, that's all we really talk about, is multifamily and operations and what's current events. You get to know how someone operates and what their expectations are of their investments and things like that.
That's a leading indicator for me. You'll never get to really know somebody totally, 100%, until you start working with them, but you really want to ensure that the scenarios that might come up, the challenges. I know there's a lot of folks today that are having balance sheet issues and lending issues and things like that. You want to make sure that everybody can see eye to eye on how to manage those things, prior to getting into a partnership.
Emily: Personally, the goals from the beginning, when we got into multifamily, was to do the asset management ourselves. And that was a unique goal because, one, we had never done it before, so our very first deal on multifamily.
Emily: We were meeting potential partners. We were very intentional with what we were looking for. Here are the roles we want to play, here's the role we're looking for our partner to play. The first six conversations we had, the answer was no. It was either, "I'm working with somebody else," or, "No, that's not my style. I can't just give you the reins, I don't trust you."
Then we had a phone call with who ended up being our partner, Aaron, and he said, "I'd consider it, but let's get to know each other better." The phone call turned into lunch, which turned into dinner with him and his wife, which turned into social events and concerts. Through these engagements we talked roles and responsibilities, and compensation structures, he got to know our work ethic, our corporate background. Then he said, "I would agree to work with you."
We did it where he would look at anything over 200 for himself, and we would look at anything under 200 units, so he would send us anything under 200 units. That was the perfect partnership for us. I think it was very important that we were intentional with what we wanted. It's okay that we got Nos because not everybody is the right partner, and because we wanted to learn, we wanted to do the asset management.
Fast forward on deal number three. Then we realized we want to leverage. We didn't want to do all the asset management ourselves, so we pursued a different partnership structure with another married couple who was able to split the asset management responsibilities 50/50. We had known them for three years. We'd built a relationship. That was a very solid foundation that we had with them before they then agreed to work with us.
Specify the Value You Can Offer
Emily: We've been fortunate, but we've also been intentional in, here's what we're looking for in a partner and for our partner to do, and here's what we're interested in doing, and here's what we bring to the table. And I think that that's a really important aspect of finding the right partnership.
Darin: I completely agree, is being intentional, telling people what you do, what value you bring, and what roles and responsibilities each of you are going to take on. And what you didn't say, but I think is, I'm sure you met some great people.
When you're looking for partners, you can meet great people, but they may not be the best partner for you, that you may just be looking for something different in the business relationship. Don't always just focus on, this is a person that I really like and respect. Because if they want to do the same thing as you, it may be all of a sudden add friction rather than be comfortable. You were very intentional on what you were looking for and what value you guys were going to bring.
For people that haven't gone on these conferences or joined a multifamily mentorship group, it's a little bit like speed dating. You can get to these questions, these conversations, really fast with people. I'm looking for deals in Dallas, 200 units and plus, and this is what I want to do. Does that fit? No? I completely get it. All right, I'm onto the next. After a while it's going from having thick skin to just understanding that that's the game, that's the whole thing about trying to weave through the room to find something that's going to work for both parties.
Build a Relationship
Adam: Especially the conversations where you meet somebody, maybe once or twice, so they go from an acquaintance to someone you know, and then all of a sudden, there's a deal on the table. I always find that interesting, because that's just not me. I don't know if I'd ever be able to do it. I'm a coach in the program that we're all in and so I talk to a lot of students, and it happens a lot.
A lot of folks will say, I met this person, they seem like they're great, and then they called me the other week and they've got a deal and they want to partner with me. And I'm thinking, do what's comfortable. If you like the deal and if you know the person, do what's comfortable. But man, I got to get to know the person a little bit and understand where they're coming from. But, to each their own.
Darin: I get it. I had somebody from Instagram say, "I got this deal in the Midwest, we want a partner." I'm like, I don't even know you. Next time you're in Dallas, let's get together for coffee.
You guys are going from building your own wealth to now. You're continuing to do it because you like to do it and you're going to be building generational wealth, but now you're helping other people. This is a tricky question. Because I ask people this question and people are like, I don't ever want to pressure people into getting or doing something either, but I think that this world is so different than take your money and put it into a 401(k).
Financial Freedom Is a Long-Term Game
Darin: I want to get the word out and I want to help people. Because it is scary doing your first deal. It is scary. How do you help people? I don't care if they do it with me or they do it with you guys or they do it with somebody else, but this is a completely different world, and the returns are phenomenal. I want to let other people know that they can do it. How do you help somebody in that situation? Because there's people that, analysis paralysis, they're just going to continue to be scared to take the next step.
Emily: When I teach in my classes, one of the slides that I show is our passive investing journey, and it's a little bar chart about the passive cash flow that we got year over year as we started our journey. And I think seeing it helps people realize this isn't a get-rich-quick, it's not a one-year-double-your money, this is a long-term game. And some of the returns come sooner, some of the returns come later.
What I show in this graph is, we invested 100,000 that first year, and then we got $1,300 of cash flow. And then we invested another 100,000, and then the next year we got 10,000 of cash flow. Ooh, it's getting better. And then COVID hit and the cash flow went down, and then it went back up. But then on the five-year mark, three of our deals sold, our passive deals went full cycle. And we went from making this measly $10,000 a year to almost $260,000 in passive income in one year, just because three of the deals sold.
Financial Freedom Game Plan: Let Money Work for You
Emily: And then, when they see that, they're like, wait, you didn't have to do any work for that? No, you just got to set money aside and let it work for you. And then you talk about your goal. My goal, looking forward, is that every year, one to two or three deals will sell. Because I'm in so many, it's a numbers game. Every year, a couple will sell. This is my retirement plan. This is what's going to grow better than stock markets. It's going to be there for me. They're assets, they're fairly protected. And I think when they see that, that journey.
It opens their mindset to, I may not see the returns next year and I may not see them in two years from now, but in five years from now, I am going to be really, really happy that I invested in multifamily.
Darin: What everybody is probably doing too is, they're saying, they put in 100,000, I've got either double that or I've got half of that. They're taking your numbers and your graph, and in their mind they're mentally thinking about their personal situation and how theirs would look. I love that because it is just helping other people see that there's another way.
The other thing is, I don't think that people have to go all in. Right now, most people are conditioned and are taught to put all your money in 401(k)s and mutual funds and stocks. Just take a piece out and try, and see which is working better for you. It's just a matter of trying to help educate other people.
Financial Freedom Game Plan: Be in a Room of People Smarter Than You
Darin: With that, you brought up, Adam, current events. You guys are in a lot of deals. Do you have any deals that have floating rate debt? We've just went through the largest increase in interest rates in the last year plus that we've ever had. There are multifamily deals that are negatively impacted by having their debt service going up dramatically. Do you have any deals that fall into that camp?
Adam: We do, yes. Three of our deals have floating rate financing. It's interesting, Darin, I don't know if you remember this. This is probably five years ago, if not longer. You and I sat next to each other at a real estate event on a bus and had this exact conversation.
That was when people were starting to do more floating rate, bridge financing. What do you think with this, that? Crystal ball discussion. We knew that to be competitive and to still participate in the marketplace, if we were going to participate, that we would have to entertain the idea of doing the floating rate financing, bridge loans, things of that nature, a loan product where you could get a lender to actually participate with you.
I would say, again, the best part about being surrounded by people who know more than you and being in a room of people smarter than you, is being prepared to take on those deals. We just make sure that we have things in place like additional cash, balance sheet health. This may sound obvious, but an interest rate cap insurance. I know that the rate's going to go up, but I'm going to pay an additional insurance policy to make sure it only goes up to this value.
Financial Freedom Game Plan: Floating Rate Deals
Adam: Today, both on the operations side as well as when we are raising money from new deals, we make sure that I'm going to ask this investor for their hard-earned money and I'm only going to ask for it one time. That comes down to the balance sheet management, making sure that there's cash in the business to get through the other side of the economic storm. Not everybody has that foresight. We prioritize that.
Darin: That's important. I have another business that trades loans between banks, and I don't know if I talked to you about this in that conversation or not. But where I saw people get hurt in the 2008, 2010, '12 great recession was in commercial real estate, when the loans come due and you're in a terrible economy, and at that point the lender has all the leverage.
That's the situation that some people are in right now. I knew all that and I still got into a few deals that have floating rates as well, knowing full well that that's a risk. No one knew that it was going to be the largest increase ever, in terms of interest rate increases. Two years prior, nobody knew what would happen in a COVID situation either. We saw that everybody was scared. I was scared, owning multifamily at that point in time. Six months, a year later, everyone was glad.
Adam: Wish I would've bought more.
Darin: Right. I hope the situation is the same this time. Time will tell. But being able to weather the storm, that I think is key, is being able to weather the storm, whatever the storm is. It could be higher interest rates, it could be lower occupancy. There's a lot of different things. It could be change.
Financial Freedom Game Plan: Preparing for the Worst-Case Scenario
Darin: I remember having a time where people were talking about it's really tough to get the right talent, employees are leaving and moving over to a different property. There's constant challenges, but you own an asset that is generating positive cash flow. If it continues to generate positive cash flow, you're owning an asset. I have stocks too and that stock goes down 20%, it has to go up 40% in order to break even. And that's not the way it works on the multifamily side.
Adam: Usually, you bring up the analysis paralysis, there's always someone that will bring up the question, "This looks great, what am I missing?" Or, "What's the worst thing that can happen?" And to your point, I always tell people, I think the worst thing is just capital preservation. And then they usually respond with, "Oh? How so?"
And I'll say, to me, if people live in my apartment complex, and to your point, if it's a cash-flowing asset, then the worst thing could happen is, my money's preserved, I own the asset. And then, if people start moving out and leaving Dallas and, oh my gosh, Armageddon, then that could be a different situation. But do we see that happening? You really have to ask yourself the question.
Darin: The biggest thing is, can you continue to pay the mortgage, if you can continue to pay the mortgage and hold onto the asset. The people that get in trouble are the ones that don't have the cash to pay the mortgage.
What’s Next for Emily Cortright and Adam Roberts?
Darin: To your point, that's where we pick our assets. We didn't really talk about it. The three things that I look for is, first the market. Some people look for first to sponsor. What market do I want to be in? I want where there's growth. There's more people moving there, more jobs moving there, more income. And then I want to work with good people that I know, like and trust. And then third, look at the deal and the business plan. You guys have done so much now, you're teaching people. What's next for you guys?
Adam: That's something we actually have recently been talking a lot about. Every five years, we do something a little different, even back to the corporate environment. Then when we left corporate, went to real estate. After we went to single family, five years later we jump into multifamily. Now it's magically five to six years later.
We're having a lot of discussions on what we want our lifestyle to look like, let's call it five to 10 years out. It's based a lot more on purely-passive-income lifestyle, and being able to enjoy more time with family, and things of that nature.
Emily: And pursue the passions what are now are our side gigs that are really evolving to be passions. The other realization we had at the end of last year was that 99% of our wealth was in multifamily. The investible money that we had was all in multifamily. And I'm in another wealth mastermind and one of the realizations that I had was that I need to be a little bit more diversified, whether it's 10% in something, maybe, achieving a little bit less returns but safer but still passive.
Emily: We are in the process right now of taking some of those, as the investible money comes back into our pool we're investing them into performing notes. And that provides a lot of cash flow but is more on the passive side. That has been a great learning experience. We're getting ready to buy a portfolio of five notes. We are also doing some private lending to local investors in the Dallas Fort Worth market. We're being the lender, which is one of the safest people in any transaction, and using that mentality as a little bit of a diversification method for us.
Darin: That's very cool. Just talking out loud now, with your teaching, I know there's a little bit of a bad stigma in terms of creating a course. But you could create something that is evergreen. What you're doing with all the Keller Williams realtors, you could create some kind of course that people pay to purchase and they're learning something that can change their life.
You guys could be spending time with family while at the same time that you invest the time once to build that program. You have to have a little bit of thick skin because there's always going to be haters saying, you're just trying to make money off other people. But the reality is, somebody has to invest the time and effort to put that together, and if you can help change somebody's life at a very reasonable price, then that could be something.
Adam: To your point earlier about dropping tens of thousands of dollars, the return is so much more significant than the initial money outlet.
Making an Impact on Others
Darin: I'm sure anything you develop would be priced significantly less. Somebody can achieve similar results, then that's huge. You're a giver. The impact you have on others, is more important than the money, most likely for you guys. It's time and effort to put everything together. That's something that, I think, is an opportunity for you, based on that. How does somebody reach out to you and get to know you better?
Adam: The best way would be our website, aemultifamily.com.
Emily: We were so creative that we took Adam and Emily and just made A&E. I know there's an A&E TV show or TV channel. A&E Real Estate Group is our entity and A&E Multifamily is what we're operating under now.
Darin: That's an important thing also. A lot of businesses, people, think they have to create this amazing website and spend money on all this other stuff. But really, it's finding a good deal, bringing investors, giving them a good return, and then building up that reputation. The other stuff starts to come up, it's not the initial focus.
You don't have to sign a lease at this super high-end office complex and spend all this money. Go out and learn how to do it, then you start building a reputation. Like you said, it's not a get-quick-rich scheme. Some people will say get-rich-for-sure.
It takes time. I appreciate you guys coming on the show. This couple is so down-to-earth and humble and just fantastic to be around. She's a little girl. If you could see her, she's a little girl. But I've seen pictures of her on a motorcycle, you don't want to mess with her. Don't mess with Emily. Definitely reach out to these guys. I really appreciate you coming on the show and sharing. Until next week, signing off.