Are you looking to invest in multifamily properties? Alex & Sarah May are a married couple that went from being engineers in the space industry to full-time investors in multifamily. They started with single family rentals and have grown to five syndications with close to 500 units. If you want to learn about the Colorado market and how mindset matters, they are the perfect people to learn from. Investing in multifamily can be a great way to grow your portfolio and see returns on your investment. But it’s important that you have the right mindset going into it. That’s why Alex & Sarah May are such valuable resources – they know what it takes to be successful as an investor, and they’re more than happy to share their knowledge with others. Listen and learn!

Table of Contents:

• Where To Listen To The Podcast
• Why Mindset Matters in the Market of Colorado
• Your Mindset Matters in Building Confidence
• Commitment and Mindset Matters in Doing Deals
• Why Shifting Your Mindset Matters in Real Estate
• Things You Need To Know Before You Invest
• How to Reach Alex and Sarah May

Why Mindset Matters in the Market of Colorado

Darin: Alex and Sarah May live and invest in Colorado. They both started as engineers in the space industry. Both had an interest in growing their wealth through real estate. They started on their own, purchasing single family rentals. Then they joined a multifamily mentorship group and partnered with an experienced investor on their first syndication deal. They have since completed five syndications and they are off to the races.

I know these guys. They're part of the same multifamily mentorship group that I'm a part of based here in Dallas, the Brad Sumrok group. I met them several years ago and they've been doing great things. One of the things that I'm excited to talk to them about is they're actually in a different market. They live in Colorado and they do deals in Colorado. Actually, I just invested in a deal with them at the end of the year, and they're doing fantastic. Alex, Sarah, typically, the first question is, how many properties and how many units are you guys currently invested in?

Sarah: We've invested all three ways. Individually is how we started out. We have some of those properties. We're in about 10 passive deals. Then we're working on our fifth syndication where we're the lead sponsors and asset managers. Total number of units for those syndications is around 470 units. So we've been in the business and excited to keep working and moving forward.

Darin: Let's just jump right into the market. Talk a little bit about Colorado. One, are you guys from Colorado? How did you end up in Colorado? Two, what's it like from an investing standpoint in Colorado?

One of the Strongest Markets

Sarah: Colorado is one of the strongest markets in the US. Last year rent growth was over 10% in all the major metro areas. Lots of people are migrating into Colorado because we have good weather, lots of outdoor activities, lots of employment growth. That population growth has been fueling a big housing surge and housing demand here in Colorado. The average single family home price in Denver now is over $600, $650,000. To be able to provide more affordable apartments to people is definitely something that the market has demand for in Colorado.

We've been investing since 2007 actually. We saw a little bit of the crash just with a couple of rental properties that we have. We're able to ride that out just because of the strong cash flow and rents never really went down. The last 10 years have just been up, up, up and lots of great demand drivers here in the state.

Darin: That's consistent with what we're seeing in Texas now, the migration. We're seeing a lot of people from California moving into Texas. Where is the migration coming from? I hear New York, Chicago, and California are the three areas where people kind of are moving out of. Are you seeing those three coming into Colorado in the Denver area?

Alex: Those are all some of the big players coming here to Colorado. We know a lot of Californians. I'm actually from Iowa, and every day I meet someone new from Iowa who moves to Colorado. It's just a Midwest draw. People like coming to Colorado because there’s a lot of fun activities, strong job growth. I moved here originally for my career. I was in engineering, doing aerospace engineering for Lockheed Martin.

Mindset Matters in Dealing With the Pros and Cons of the Market

Alex: I moved out here about 20 years ago. Between those areas, we also see a lot of people even from Texas coming up here. Texas is getting a lot of growth from all these other markets. Some people probably want to escape the heat, and they come up to Colorado. Depending what your preferences are, there are definitely pros and cons of both places.

Darin: I live in the Dallas area. I was just talking to my wife about trying to rent some place up in Colorado for about a month this summer. We'll see if we make that happen, but it's a beautiful country. Colorado is a very attractive place. One of the things I wanted to get your take on was, it's expensive.

In the Dallas market, when I first started in the investing side about four years ago, I ran into people that were like, "I was buying at 30, 40 a door." They're like, "I'm out, right." Then I'm like, "I'm in." I bought at 80 a door. Well now it's like 140, 150 a door. But Denver is significantly higher than that. One, what do Denver apartments look like in terms of per unit and cash flow, and total return? What's your forecast? Do you think it's going to continue?

Alex: That kind of doubling you mentioned is something we've seen similarly here. In fact, rents have gone up everywhere, but here it's gone up a lot too. The price per unit here is definitely higher than in the Dallas area. When we got started, often, we'd be going after deals in the 100 to 150K per door range.

Going After Assets

Alex: Our first syndication was about 150 a door. All of our investor friends from Texas, it was hard for them to stomach because we showed them the financial projections and the rationale for why those prices are what they are. Sure enough, we're actually selling that first deal we syndicated for upper 200s now. It's essentially been a double in the valuation of properties around here over the last four or five years.

The Math all makes sense. Some of the expenses here in Colorado are lower, especially insurance and taxes. The incomes and rents here are a lot higher. It turns out cap rates are pretty comparable to the Dallas area and other strong markets. So it pretty much all makes sense. We try to keep an eye on if we're going after assets, making sure that we understand what the replacement cost is for construction. To build new property around here is typically 350 per unit.

Sarah: 450.

Alex: Yes. Maybe in the last year it's gone up now closer to 450. If you're buying stuff in around the 200 to 300, that makes a lot of sense, especially given the demand.

Sarah: What makes a good deal to us when we do our financial analysis on a property is we like to be able to provide over a five-year hold period somewhere around seven to 8% annual distributions. An IRR for the hold period around 14 to 16%, total return to our investors around 70 to 100%. That'd be up to a doubling of the money. That's what we like to see. We like to use the conservative underwriting to make sure we can get to that number safely and conservatively.

A Good Indicator of a Strong Market

Sarah: I know you asked our projections. For the Colorado primary markets, there's going to be continued rent growth with all the demand for housing. There's also a lot of development going on. I've been to several market analysis and economic projection seminars. Everyone's still saying, "They're building a lot, but still not enough to keep up with the demand." It should be a good indicator of a strong market for years to come.

Darin: The other thing that Alex said was knowing the local market is so key. I'm invested in a lot of properties in Texas and I wanted to get some exposure to Colorado. Being in Texas, buying a two or 300 unit is difficult for me to get comfortable with. When you live in that market every day, you see where things are trading. You see the income, you see the expenses, you understand it, and you see the migration patterns coming in, it gives you the confidence to go after that deal. As an investor, I wanted to partner with people that knew the local market very well such as yourselves.

Sarah: It's definitely important to know the market and what's going on. We follow a lot of newsletters for local news. Just last month, we got a list of all the recent transactions across Colorado with more than 10 units. Alex and I both looked at each other and said, "Can you believe this? Anything built after 1990 was selling over $400,000 a door in Colorado." It's a hot market. There’s lots of demand here. When you're comfortable with it and you look at the numbers, the number projects a healthy financial return. It's still exciting and a great market to look into.

Your Mindset Matters in Building Confidence

Darin: It also comes with experience. Now, you're on your fifth syndication. As you get more experience, the confidence grows as well. Talk a little bit about going back to your first syndication. One, did you have to partner with other people and did they have experience? What were some of the mindset shifts that you had to do to get comfortable to actually pull the trigger?

Alex: Our first syndication deal, we did partner with some folks out of Dallas who were looking to get into other markets. We were local here. It's easy for us to go tour deals. We know the good areas and any areas we should avoid. We’ve built some great relationships with brokers and whatnot. At first, and we were underwriting lots of deals and touring. We pulled some partners together with us to go after our first one that we got. It was about four and a half years ago.

It’s definitely a mind shift because it was going from stuff we'd done previously. Doing a lot of four to eight, maybe 10 unit type properties around here. We jumped up to 100 units, and it was a nice 100 unit property. The purchase price was 15 million at the time, which was a lot. It was a big mindset shift. Fortunately, it was great having the good ecosystem that we had in the group that you're a part of Darin. Great partners that we knew we could do this as a team.

That's exactly what happened as we pulled together a great team. We are able to qualify for getting lending and build up this syndication team for raising the funds and purchase the property. We’ve been doing a great job managing it.

Why Mindset Matters in Understanding the Real Estate Business

Alex: And Sarah, it was the first syndication she has done. She spent a lot of focused effort just making sure we really understand the business and we're giving it our full attention. That deal has gone really well and we're selling it now. After that first one, we just started looking for more. The next couple we found were smaller ones compared to the first one as far as the capital raise. We just felt confident that we could do it and have done the rest on our own.

Now we're at a point where we're realizing, we need to start partnering potentially with other folks to go after. Even the prices are getting so much higher and just building teams up again. It's been our new focus now, to start looking for other people who want to be partnering. To go after bigger assets that we can do as a team again. We're still keeping our eyes open for anything we can tackle ourselves. But definitely, we’re open to strategic partnerships and growing.

Sarah: I was just going to add too, we both come from engineering backgrounds where everything is mitigating risk. We typically tend to be risk-averse. For us, taking the step from moving from using our own money to invest in real estate to now leveraging other people’s money to invest with us and using their money to invest in real estate, that was a big mental hurdle for me. You always want to minimize risk and you don't want to put other people's funds at risk.

A Sales Pitch Versus an Opportunity to Invest

Sarah: The two things that really helped me with the mindset was you're not selling people on an investment opportunity. You're providing them with the opportunity to invest in this great project. It's not a sales pitch, it’s an opportunity presentation, if you will. That was one thing. It's not about trying to sell somebody on the idea.

Then the other thing was, if you are nervous about taking somebody's hard earned money and putting it into a project, that means you have the ethics and integrity to be in this business. You need more people like that who are offering this type of investment to people. If you're nervous, that's actually a good thing because it’s a sign of integrity.

Darin: As long as you're still able to take action. There's a lot of people that are nervous about that and that holds them back from ever doing it. You guys were nervous about it, but you were able to push through and still take action. That is so important for listeners to understand. Most people, when they do their first syndication, they're nervous, they're scared. But the ones that are successful, look, you're on your fifth syndication now.

You're at 470 units as a general partner. Prior to that, you were doing four to 10 units, and you could have just stayed there. You ended up finding a way to take that action. That's the difference that I see with people that get into the 500,000, 3,000 units versus the ones that are still doing the fourplexes. They can't get past that.

Alex: Sarah mentioned, we come from engineering backgrounds. We both were aerospace engineers, and we worked for space projects.

Why Mindset Matters in the Space World

Alex: Our mentality there is, in the space world, you have to be perfect. Nothing can be wrong because when you launch spacecraft, if anything is wrong with them, you can't just repair it. There's a lot of risk analysis always being done and really trying to make sure that there aren't problems.

We don't have quite that severe of a risk tolerance to multifamily, but at the same time, we bring that mentality of a lot of the what-if analysis. And the beauty of it is when you can do a what-if analysis and account for all the worst-case scenarios. Show that, "Hey, even if this goes wrong or this goes wrong, we're still going to be okay." That brings a lot of confidence.

It helps sometimes to be able to do all the very analytical work and worry about things. Because then you can prove to yourself, "This is not really something you have to worry about." Maybe the returns wouldn't be what you want them to be, ideally. But at least you know you're going to be fine and it'll do for your investors.

Darin: That makes me comfortable being an investor in your deal. It's that you guys have that background, and nobody can be perfect. You can't be perfect as an individual and you can't be perfect in every investment. But that you guys are taking the due diligence and looking at everything from different angles is comforting from an investor standpoint. Sarah, you said something that is really important. When you talk about opportunity, a lot of people get hung up on when you raise other people's money. That I need the money to do my deal versus what you said you're just presenting an opportunity.

Why Mindset Matters When You’re Growing People’s Wealth

Darin: If they pass, then you go on to the next person. Once you learn that, you really accept it and believe it, then it's completely different talking to different people because it's not a pitch. You're trying to get something from somebody. You are trying to help them. You're trying to help grow their wealth. With that, you're pulling all these people together that have the same goal. You're just being the team lead.

Sarah: That’s definitely a mind shift because, being engineers, we're not sales people by nature. Hearing that, I didn't need to be a sales person. It’s just giving people the information they need to make an informed decision. That really helped shift my perception of the business when I was starting out.

Darin: The listeners on this show, they’re mainly passive investors and syndicators that are looking to scale. From the passive investor standpoint, I'm not sure that everybody knows what the risk level is for a syndicator. These passive investors, they're getting hit by a number of different syndicators. "Hey, invest in my deal." So they just think, "Hey, they want my money."

But you're not going to enter into a contract unless you're pretty certain you're going to close. Talk about the risk for the syndicator from the time they sign the contract to the time you actually close the deal.

Alex: During the closing period, there's risk in the sense of there's a lot of time invested. Really, the financial risks start amounting when you're building up a team. You're starting lenders up to start the loan process. You work with attorneys, and that's not inexpensive. There are a lot of upfront costs that go into these deals.

Commitment and Mindset Matters in Doing Deals

Darin: Who pays those upfront costs?

Alex: The syndicators, the leads will front all that money to help kick off these projects. The loans, the attorneys, you'll do earnest money to let the buyer or the sellers know that you have the funds to be able to support this, make sure you're committed. Sometimes you're doing earnest money essentially hard, meaning non-refundable day one. You have a lot of confidence and you want to make sure you're comfortable with that when you're doing deals. So yes, you're putting up quite a bit of funds upfront.

Once you close the deal, it's just like all the other closing costs. It's just one of many costs that go into the overall project that everyone's sharing once you get the deal. There's a lot of upfront risks there for the sponsors.

Darin:  People don't understand that you're putting up typically six figures hard money, day one. Then you're paying for the attorneys, for the inspection, for the loan deposit, to get that started. When it closes, those are on the closing schedule and you're refunded. If you're not able to raise the funds to close the deal, that money is lost.

You lose it as the syndicator. The syndicator isn't just trying to put any deal under contract. They have to be confident that they're able to raise the money and that it's a solid deal. Or else they're out all that upfront money. I'm not sure that every passive investor understands that.

Alex: That's very true. There's a lot of risk upfront. Another risk is not even the financial piece of expenses. It's just the reputation of the business. This business is so relationship-dependent.

Lessons Learned From Syndication

Alex: If you don't close a deal, that can run pretty bad because once you have a deal under contract, the whole world knows. At least the world being the local community and everybody. All the brokers and staff know this is under contract now. It quickly gets out who's working that deal. If it falls through, that could definitely be a challenge to recover from. I'm sure it could happen.

We've made it a point to make sure we're really careful on what deals we're going after strongly. When you're doing that best and final offer, you're ready to go and put hard money down. You want to be committed and know that it's the right deal.

Darin: So now you guys are in five syndications. Can you share with listeners any lessons learned?

Sarah: Lessons learned on the syndication side is just know your timeline really well. There's a lot of moving pieces when you are working with the title company, the attorneys, and doing your due diligence and your fundraising simultaneously. That's at least the way we've done our deals.

We find a property that we like, and then we raise the money after we get it under contract. Some syndicators raise a fund, they raise the money upfront before they go and find the property to buy. Pros and cons to each method. Just understanding the timelines really well and what needs to happen at each of the different stages is key.

The one that throws off most syndicators is setting up bank accounts. You have to have a bank account for your investors to send their funds to. Once you own the property, it’s for your property manager to operate the property with.

Setting Up the Prerequisites

Sarah May: The first time we did things, thankfully, we had experienced partners. We were able to get that set up but you first have to have your LLC set up. You have to get your tax ID number and then you have to go to the bank and set up your account. That's just one little thing, but just knowing the timeline while you're under contract is important.

Alex: I like that a lot. Just drafting out all the steps that have to happen to get to closing and how you are going to do your fundraising. If you're working with an attorney for that, putting together all the subscription documents and the time it takes them to do that. How are people going to subscribe and how are you going to do your marketing for letting investors know about the deal. We like to do a webinar to walk through the business plan.

What's the timeframe for building and then opening up for subscriptions to start bringing funds in. That's a good lesson learned for sure. Just having a really well-defined schedule when you're going into something just to be able to keep track.

Darin: You mentioned webinars. If you're looking to invest passively, decide what market you want to invest in. Then meet a number of syndicators in that market. Get to know them and get on their investor database. When they have a deal, they're going to send it out to the investors that are on the list. Sign up for that webinar, even if you're not ready to invest. You watch the presentation of their business plan. What are they planning to do with the property? That's how you learn by watching those presentations.

What Properties Need To Get to the Next Level

Darin: You have five syndication deals. I have to imagine that each property was a little different. Maybe, one thing was more important in terms of rehab at one property versus another, maybe putting in dog park. Talk a little bit about how you guys look at these different properties differently. Determine what you think the property needs to go to the next level.

Sarah: There's interior and exterior renovations. It’s usually the cosmetic improvements that you look at. The first syndication we bought, the exterior looked really nice and was well taken care of. So we didn't have to do much there. But we renovated every single unit when someone would move out and did a really nice modern renovation. That way, when people came looking for a place to live they saw the property, everything was cohesive. The outside of the property looked nice, the interiors looked nice. That was our value add plan.

Our second property we did, it needed both exterior and interior. That was definitely your great before and after story because it didn't look the most attractive. We were able to completely repaint, redo the parking lot, and rebrand for the exterior. Then on the interior, update all the common spaces like the office and fitness center, hallways, and things like that.

So when people came in, it just had a totally different look and feel than it had before. When somebody is just coming for a half-hour tour, you want their experience to be enjoyable. That they can imagine living there and bringing friends over, and being proud to say that they live there and that's their home.

Why Shifting Your Mindset Matters in Real Estate

Sarah: Really important on the exterior and common features as well as the interior to make sure that those two are consistent. Because even if you renovate units and they look amazing, but the parking lot's falling apart and the building hasn't had any exterior renovations done in 50 years, you're not going to get the rents that you need. Just make sure that the two match.

Darin: You may not even get them to stop by. That's the one thing that I heard from a lot of different syndicators, do the exterior as fast as you can. Then, you start to get the drive by traffic that, "Oh, wow. They're putting money into this. Let me go take a look at it." Versus, they drive by and the parking lot is full of potholes. Then they're like, "You know what? I don't want to live here. It doesn't matter what the inside looks like."

Talk about networking and going to conferences and masterminds. What do you guys do and why do you do it?

Alex: We joined Brad Sumrok's mentorship program. It was about five years ago. That was a mind shift thing, it got us into the syndication business. It was something we were trying to figure out on how to do ourselves for 6 to 12 months. We knew we wanted to do bigger stuff and we heard about syndication. But it was really hard to find out all the specifics we needed. We always would run into a roadblock if we start going down the path of pursuing it. Everything felt new and complicated, like dealing with syndication attorneys. It's like, "Oh gosh, what does that mean?"

What Builds Immediate Trust For Investors

Alex: When we got into the ecosystem that Brad created for us, for his whole group, it was amazing to see all the other people who were having such success. I connected with someone who was an engineer, the same company who had done this and it built immediate trust. It can be like, "Oh wow, this is for real. People are doing this and they're buying 100 unit buildings." It is not that big a deal.

It's not when you have mentorship and people show you the ropes. Make sure you're not missing anything and that you're taking on other investors' money. That was honestly one of the hardest things when we first did that. It's easy for us to buy our own deals and we know the market. We can use the gut feel a lot of times. We'll do analysis, but like taking on other investors, we really want to be rigorous to make sure we know what we're doing. Getting all the training and learning there, guidance from coaches and just seeing other people doing it.

Sarah mentioned we've been in over a dozen passive deals. That's been a really good experience to see how other sponsors are running their deals, their business plans, and how they communicate with investors. We've learned a lot through that, both the things we like and don't like. We want to set ourselves apart and do good as a syndicator. The mentorship groups and just going out and networking with people.

That's where we've built up a lot of our core investor folks. Like people who are in the business, they know they want to be doing multifamily. It's easier to either build partnerships or find investors who want to be joining us on opportunities.

Creating Opportunities in the Community

Alex: We're starting to reach out to the community more. These are opportunities. We need to be telling more people. It's not just the people who are at the real estate meetings because they already know about this stuff. We can at least teach them about our deals and what we're doing.

There are so many people out there who don't know anything about real estate investing. Or they've heard of it and they know it's probably a good thing, but how would they be a part of it? They have to find a realtor, a duplex, or a condo they're going to rent. It's like, "No, there's much easier, lower risk ways of getting involved." That's why we're getting excited to start sharing this more with other people.

Darin: There are so many people out there that still don't know. I didn't know until four years ago and I didn't know you could do it. So a few things that you said, one was when you saw all the people that were doing all these deals, you're like, "Wow, this is for real." That's a powerful thing, being part of a group of like-minded people. Surrounding yourself with people, that one success story after another, that gives you more confidence to press forward.

Some people question whether they should go to a conference or join something. It's an investment in dollars and in your time. But you have to ask yourself, will you do it without it? When you surround yourself with other people, it gives you confidence and they root you on. I've met so many people that have helped me along the way. I know you guys are in that same boat, then we all grow together.

Why Having Your Own Style and Mindset Matters in Syndication

Alex: It's really fun to be a part of that community and growing together.

Darin: The other thing you said was you thought being a passive first was good for you guys. I would agree with that too. You said, "You look at what you like and what you don't like." It’s important that each syndicator has their own style and their own communication style. There are certain people that you'll continue to invest with and there are other people that you may not.

Even the ones that you may not, the returns may be great. Maybe you just didn't click with that syndicator as much. You're probably going to allocate funds to a different one that you click with more, that has more of your style. It's important if you're looking to become active in the space. You want to become a syndicator, go and be a passive first to learn from the other side.

Sarah: We've definitely learned a lot, even underwriting tips from being a passive investor. A couple of things we look at now in any deal, whether we're sponsoring or investing in someone else's is are they treating the property taxes appropriately? Are they accounting for the future increase in property taxes at the next county assessment date?

Another one is, whoever is leading the deal accounting for adequate working capital, we call it. It is just extra money that's not allocated to anything upfront. It's just there as a rainy day fund if something goes wrong, like an unexpected boiler went out or roof repairs. That's really important for a deal. To expect everything to go exactly as planned for a five-year hold period, that's not how real life works.

Things You Need To Know Before You Invest

Sarah: It's nice to have that extra security of extra money on hand for a deal and realistic rent growth, realistic cap rate projections for when you sell down the road. Those can make a big difference in whether the deal's underwritten conservatively or if it might be too aggressive.

Darin: You may not know all of those things the first time you invest. You try to learn as much as you can, but over time you see these learning lessons. The first syndication deal I underwrote, we bought in Tarrant County in the Texas market about 20 minutes south of Fort Worth. We underwrote at 80% of the purchase price for property taxes. The county went and valued the property higher than our purchase price.

That's a big number differential in your business plan. Now we were exceeding our rent increases on the turns, so we were able to absorb it. But we had to hire a company to go and fight that, and we ended up bringing it down. To your point, if somebody had underwrote that at the existing property tax value, that would be huge differential in the business plan. Understanding which county really pushes the envelope on property tax valuations is very important.

There’s another thing that you didn't mention, which is near and dear to me because I have another business that trades loan portfolios. It’s the loan that you're going to put on the property. A lot of passives don't really focus on that. Personally, because of my background, the term of the loan is important. During the 2008, 2010 recession, I saw loans go bad and banks take them back when a loan came due in a recession.

Mindset Matters in the Face of Recession

Darin: Cash flow was down, maybe cap rates are up, valuations are down. All of a sudden the loan comes due. You're forced to either refinance or sell the property. I don't want to ever be in that position. I've invested in a couple of deals with short loans like two and three-year bridge loans with extensions. But I knew that that's a risk. It is important for investors to know what the term of the loan is. It's not like a 30 year fixed rate loan.

The loan is going to come due. Most of these deals, even if they have hiccups, you even said it before. You went through the recession with your existing portfolio, your small deals, and you were able to ride it out. And you wouldn't want to be forced to sell in that downturn. That's another thing that is important to me. What kind of sacrifices have you guys made to get into this business?

Sarah: After we joined Brad Sumrok's mentoring group, I left my job as an engineer and I went full time. I just went full time and wanted to focus on real estate, have a bit more control over my schedule. But it was hard. I thought with our existing real estate experience and joining the mentorship group, we'd have a deal within a couple of months.

It ended up being close to a year before we closed on that first deal with our partners. That's the sacrifice, just staying with it even if the going gets hard. It sometimes seems like it's just not going your way. It’s a tough business to get into. Most of the brokers know the big buyers in town, and they've done business for years together.

Why You Need To Prove Yourself First

Sarah: When you're the new kid on the block coming to buy these larger properties, there's a little bit of, "Well, prove yourself first, and then we'll take you seriously." It's a little bit of that, then also growing as an investor. Coming right off that uber conservative engineering background where you basically want to minimize risk to zero. Then realizing that we don't have to be as conservative in some of our underwriting metrics.

Let's be more realistic, not aggressive. But realistic in some things that we can win deals and just refining what was realistic and what could still win deals over time. That's just a matter of experience and gaining the experience. But we really love the business. It's a ton of fun. We're in that mentoring group, and just last week we did a mastermind in Lake Tahoe.

Half the time you spend in sessions, learning the best about the business, shifting your mindset, and talking about goals. The other half, we were out skiing and snowmobiling and just having a great time. So it's a great business. I feel like people are very good at integrating the work with fun. It's been great. We can't think of anything else we'd rather be doing. It's been a great journey.

Darin: There's a few things that you said that is really important. One is you thought it was going to be easy. It actually was hard. That's one thing that I'll say when people reach out to me on Instagram or whatever, I'm like, "Look, I would highly recommend you to join a mentorship group. Surround yourself with like-minded people." But just know that striking the check is not going to get you a deal.

Your Mindset Matters in Winning a Deal

Darin: It gets you in the door, it gets you access to all the people, all the resources you need. But you still have to fight, kick and scratch to get your first deal. It doesn't just get handed to you. Another thing you said was realistic. It's a natural process for new investors in the market when they start underwriting deals. Underwriting is just taking a bunch of data and putting it in an Excel spreadsheet to see if the returns are there.

In the beginning, it's really easy. I fell into it and I've talked to a lot of people when they first started underwriting. There's a lot of decision points. If you are conservative on every one of those decision points, guess what? The deal doesn't look good and you don't pursue it, and somebody else buys it. Then you see that they turned it around and made a bunch of money. You're like, "How are they doing it?"

So surrounding yourself and learning. That's why I said in those webinars before, watching the webinars and saying, "How are they winning the deal?" Even if you're an active person, an investor and you lose on a syndicated deal. You know the party that won, get on that webinar, see how they underwrote the deal. That might help you on the next one.

Sarah: Lots to learn from everybody and share ideas. Even just one good idea can make the difference between losing out or being able to make a deal work. Some of the other income sources can be huge. We didn't really factor that in when we first started underwriting deals, but things like billing back for water and sewer charges. That's an easy one.

How To Grow Your Investor Database

Sarah: It's pretty mainstream anymore, but then more creative things like car ports or package lockers. There's one property we're talking about adding an electric car charging station. You can make a little bit of residual income from that. There's lots of ideas and the more people you talk to, you'll get more of those great ideas.

Darin: That's part of the networking. The networking part of it is trying to grow your investor database. Part of it is networking with other syndicators, and why would you do that? They are your competition. Well, everybody shares ideas and can learn from each other. Like, "Hey, I did this on my property," and, "Wow, that's a great idea. I haven't implemented that." Another syndicator may have five or 10 other properties that they implement that one idea on, may be substantial revenue.

Another thing is having that Rolodex, you come up with a problem at one of your properties. Maybe you have a fire at one of your properties, and never had that before. This other syndicator had that problem and you just call them up. They talk you through, "Hey, this is what I did. Okay, now I'm at peace. I'm not having to try to figure this out on my own." The community is very giving in terms of sharing information.

Alex: We've really enjoyed getting to know the other syndicators, just getting to grow together. We're always looking for other new opportunities too. So we're in Colorado, it’s our main focus. We do a lot of our syndication here and we're saying, we purchase deals for ourselves here. We're very focused on the Colorado market.

How Do We Get Our First Deal

Alex: We know other people who are doing great things in other markets that we actually want to be joining their deals. We want to diversify our portfolio a little, whether it's Dallas or Phoenix or Florida. All these other markets that are doing really well, we'd like to keep growing our portfolio in those areas too. We join passive deals and then we're starting to get to the point back when we got started. We’re trying to figure out, "Hey, we're local here. How do we get our first deal?" We had folks in Dallas who wanted to join us.

Now we're like, "Well, we're doing passive investing in other places. But we'd be interested in helping other people who are trying to get started in other markets that were not necessarily going to be out meeting all the brokers and touring all the deals." Now we have some of the experience to be able to bring to the team to help go after deals that are interesting.

Darin: Isn’t the crazy? It's like you didn’t think four or five years ago that you'd not only be doing all these large deals.  Now, "Hey, I would be open to partnering with somebody that has less experience." Now you're the experienced folks. It can go in a snap of your finger. All of a sudden, "This has grown and my confidence level is so different. My knowledge level is so different than it was before that you're able to say something like that." That's the way it happens. People taught you, and now you're turning around and helping other people learn. How do you continue to get uncomfortable?

Sarah: There's plenty of ways in the business.

Why Getting Uncomfortable and Shaping Your Mindset Matters

Darin: You think that once you get your first deal, you're going to know everything, but it just keeps layering on. Talk a little bit about getting uncomfortable.

Sarah: The way everybody thinks is just going bigger. Instead of doing a 100 unit, what about doing a 200 unit property, for instance? The size of the deal, both in number of units and also total dollars invested. A lot of people in our group, which started out as more workforce housing, older properties, which everyone was going after, now people are buying brand new 2020s built properties. We're really excited to see people figure that out and know how to run that business model. You can buy nicer properties. You can buy bigger properties, you can raise more capital.

One thing Alex and I are interested in too is learning a little bit about development. I don't think we'd be at a point where we'd do that on our own right now. It’s something that we are keeping our eyes on. Just learning how the construction process works and how that goes. Other ways to grow, there's so many different types of renovation projects.

We've done a lot of the cosmetic renovation projects and have experience with that. There's a lot more intensive work that can be done, like adding sprinkler systems or changing out plumbing lines. These older properties sometimes need a full plumbing change out. We haven't done that yet, but there's always ways that you're learning and growing.

Alex: One of our key focuses is going after potentially newer or bigger properties, whether it's unit count or just purchase price, and getting uncomfortable.

Your Mindset Matters When You’re Going After Bigger Deals

Alex: We've seen in a lot of our peers too, they get uncomfortable by going after bigger deals. It's like, "Okay, how are you going to raise these funds?" Whether it's partnering with other folks or how we can get out there and meet more people to share these opportunities with. That's an area we’re looking to just keep growing and getting uncomfortable with.

Darin: There are listeners that are maybe just looking to get in the first passive, or maybe they’re looking to do their first syndicated deal. One side benefit that people don’t really think about when they're trying to get their first deal is, there’s really a ripple effect. If you figure it out, then you bring other people on and you do deals, you help grow their wealth. All of a sudden, other people start coming to you and say, "How did you do it?" Those people learn from you and then they go out and do it. Then people learn from them and then they go out and do it.

Four years ago, I was just thinking of myself and figuring out how to go bigger. I wasn't really thinking that, "Once I figure it out, other people are going to be asking me." But that's what happens. Once you figure it out, other people are asking you, "How did you do it?" A beautiful part of life is to help other people. That's something that people don't even really think about a lot of times.

How did you guys grow up? Did you grow up with this wealth mentality, entrepreneurial spirit mentality, rich, poor? Where did you grow up?

The Little Purple Book

Sarah: Happily middle class for me. My mom was a Math teacher. My dad did mechanical work for factories, and they worked hard. They taught me to work hard, but no investing or real estate in the family. For me, it was all just finding out about real estate in college. I actually went to a Rich Dad seminar before I read the book. Going to that got me to read the little purple book and learn about assets and liabilities.

Darin: That book has been mentioned a lot of times. I got to tell you that.

Sarah: The cashflow quadrant actually made a bigger impact on me. Understanding the difference between an employee and a business owner and how there's actually tax differences if you are an employee or a business owner. That was how I got started on it originally.

Darin: Were you the impetus between you and Alex, or was Alex the one bringing you into the investing world?

Alex: It was pretty mutual. I grew up in a similar background, middle class in Iowa. Both my parents were business owners. My mom, chiropractor; my dad, an electrician, and my dad actually had several single family rentals. I used to bike around town in the summers and mow grass at those. So I was making a little money. He’s also instilling some values in me. He wasn't cash flowing from them, but I remember him teaching me, he never had to even pay anything down. You can get full financing and they'd pay for themselves. At one point, they'd all be paid off. I was like, "Wow, that seems like a good idea."

From Stock Investing To Real Estate Investing

Alex: There was always a nugget in the back of my head back there. Through college, I was interested in investing and went into stock investing clubs. I started my career and did all my stock of how I'm going to grow my 401(k) to retire someday. That same purple book hit me, I got my hands on that, read that and just learned about real estate. I remember my dad had these rental properties. That really got me going and I bought my first house as quickly as I could when I moved out here and had roommates. That was the old school house hack, having roommates and then went and bought a rental property.

Sarah and I, we got married a couple of years after that, but we knew each other. Right when we met each other, we both worked at the same company. That’s something we had in common, interest in real estate and investing and lots of other fun stuff too. We went off and tried to do fun things. I remember putting bandit signs out, almost saying, we buy homes, and in the middle of some busy intersection.

Sarah: I was like, "I am never doing that ever again."

Darin: What's the next big stretch goal for the two of you then?

Sarah: We just did a week of goal setting. This year, we want to do four more deals as the lead sponsor. We want to keep growing our cash flow from these properties, grow net worth. Another goal for us is to put ourselves out there more.

The Magic of Real State

Sarah: We really appreciate you having us on this podcast. That goes hand in hand with our goals. Share the magic of real estate with more people and get out of our comfort zone a little bit. We're hiring some virtual assistants later this month to help with some of the administrative tasks. We are just excited to grow and expand and do more good stuff.

Darin: What do you guys like to do outside of work?

Alex: Skiing and snowmobiling. Last week was a lot of fun. We have two little kids, two boys, three and six. They're super fun. We just love spending time with them, swimming or going on bike rides or hiking or going to the playground. That's our main focus right now outside of the real estate business.

Darin: You've got a young family that you're growing and you are going to be role models to show them how to get into the investing world as well. If there are people that want to reach out to you and get to know you better, what's the best way for them to do that?

Sarah: Our company is called Regency Investment Group and our website is www.regencyinvestmentgroup.com. You can go to the contact us form, which will send us an email, or you can send us an email directly. I'm sarah@regencyinvestmentgroup.com. Alex is the same, alex@regencyinvestmentgroup.com.

Darin: I appreciate you guys coming on. If you're looking to get into the Colorado market, these two are fantastic people. They’re just great people to get to know, and so reach out to them. I hope that you enjoyed that one. Until next week, signing off.

How to Reach Alex and Sarah May

• Website