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Educating People on How to Enhance Their Investing by Using the Tools that the Wealthiest 1% Use

Updated: Jun 20, 2022


Note: transcription provided by Otter.AI, which is a technology company that develops speech-to text transcription and translation applications using artificial intelligence and machine learning.


Christopher H. Loo, MD-PhD: Today, we have a special guest, Stephanie Walter. She is the CEO of Erbe Wealth, a capital raiser, and syndicator in real estate investing. She recently retired and sold her insurance agency of 16 years by following the key principles she teaches professionals to use. And she teaches professional people to unlearn what most of us have been wired to think about money. So important and re-educating people on attaining lasting wealth. That's so important in today's age, financial freedom. And she is a gateway between those professionals and well vetted deals. She lives with her husband and young son in Colorado. So welcome to the show, Stephanie.

Stephanie Walter: Thank you so much for having me.

Christopher H. Loo, MD-PhD: Yeah, we're just talking backstage. And I'm just so happy to bring a lot of different viewpoints to my guests and audience. So I know we're going to talk a lot about things like wealth strategies, wealth preservation, real estate syndication, I'll let you talk about all that. But let's tell us where you got started. And we'll go from there.

Stephanie Walter: I started like most people, I had a W2 job. And right when I got out of college and had worked there, I was an insurance adjuster for about eight years and had gotten my last job raise was about 2%. And I went back and talked to my dad, who was an entrepreneur, and it just really bummed me out. And he was like, Well if you stay in the corporate world, what you can expect, or you can go out on your own, and then what you achieve is really up to you. And so, from that I I gave my two weeks notice and became an insurance agent, and did that for 16 years. I always loved real estate, and didn't have a lot of education. So I acquired a portfolio during the crash of 07/08/09 in Denver, and just bought homes that I thought would be really good as far as location and future growth for Denver. And I was pretty lucky in the way that that turned out.

But just a few years ago, about five years exactly, I was asked to go to a boot camp for apartment investing, and I went and that's where I learned the term syndication, which I had never heard in my life before. And it really is just a group of people that get together and buy something bigger than anyone can do on their own. And after I learned about that concept, I was just sold. I went to educate myself as much as I could, it was pretty much the next two years of just solidly educating myself. Put my first syndication together in 2018, decided I never ever wanted to put one together again by myself again and found a really great team member at that time. And yeah, just we're on our twelfth syndication together. And I love talking to people, because most people I speak to have never heard of this concept just like I hadn't. I was 45 before I heard the concept and working. I work with a lot of wealthy investors and also notice that they do things very differently with their money than I was taught to do. And so eventually I kind of modeled what they were doing with their money and I was able to retire from my business in July of last year, 2021. And so now I just raise money for deals that I feel are warranted. And then I educate in the remainder of my time.

Christopher H. Loo, MD-PhD: That's a fantastic story. It's a very wonderful story of entrepreneurship. And you brought up a couple points during your intro that I'd like to highlight. So the particular thing that stood out to me was, you said you had to unlearn a lot of the money mindsets and ways of thinking. So tell us more about that. What mainstream, what the narrative is, versus what you discovered?

Stephanie Walter: Yeah, I mean, it took a while for me to really wrap my mind around it and put words to it. But there are two different views that I see that people have in our society. I and most people are of the accumulation mindset. And that is just we're going to accumulate our money, put it in a 401(k). My strategy was actually to buy rental homes and just keep managing them and paying them down for 30 years, and then I'd have the cash flow coming in to retire. So it's really just putting your money in a place where you don't have a ton of control over it. I mean, in the 401(k) world, that's much more clear, of not really being able to move the money where you want it to be. And, whether that's in your bank, or 401(k), or under your mattress, it’s accumulating the money, letting it grow into your little nest egg, and then when you're ready to retire to go get it.

But what wealthy people do is I call it utilization. And they are using their money, their money is working for them at all times. And when I say working for them, it's providing the here and now, cash flow, appreciation. But a lot of them tell me more importantly than anything is they have really great tax strategies. The bad thing about the 401(k)'s or even me owning these properties until I retired is, you have all this equity sitting unused. And if I wanted to sell it, there'd be a huge tax consequence. I mean, I could do a 1031 or something like that if I still wanted to just be a landlord, or something like that. But what I found interesting, as the wealthy know, when they're going into a particular investment, they want to know what tax benefits are going to be to them throughout the whole investment.

And I don't think most people think about taxes. Until it's too late really, to do much about it. And so they're constantly one, I guess having their money work for them. And they're developing tax mitigation strategies all throughout their investment, what they're investing in. And when you invest for cash flow, I guess, which really seems to be their goal, I was investing a lot for my net worth, which looked great on paper, but didn't give me a whole lot in the here and now. If you're investing for cash flow, it gives you a lot more freedom, the more cash flow, you have to make a decision of, Do you want to keep working? Or, hey, would I like to work part time? Or would I like to do something that I love to do? Rather than what I'm doing right now.

Christopher H. Loo, MD-PhD: Yeah, that's so important. Because we're just brought up with the whole, just be an employee, you go, you show up to work, 9-5, get your paycheck, but it doesn't work in this day and age to be frank. So I'm glad that your guests such as yourself are bringing these to the point and you really have to have financial literacy. It's not just going to a job and working for 60 years. And the idea of money. We're taught to think that money is a scarce resource, but money is a man made construct. So if you can think in terms of abundance.

I know, you do self directed IRAs to invest in real estate. So talk a little bit about that. And also, I know you talked about cost segregation. And we can go from there.

Stephanie Walter: Yeah, well, the self directed IRAs, that's a great thing, a great strategy for someone that doesn't want to cash in their 401(k), and pay all the penalties and everything like that. In this day and age, I think people are changing jobs so rapidly that a lot of people might have an old 401(k), that's just sitting. And the sad thing is, it's probably not doing very well. I look at some of these that my investors bring to me, and maybe it's been returning 4% over the last 10 years, or I don't see that it's performing really well. But what you can do is just roll it over to a self directed IRA. And in the self directed IRA, you're able to invest that money into, well, anything. I mean, not anything. But you can invest it in real estate, you can invest it in nodes, you can invest it in a lot of things that are not traditional things that you would put in, if you found your 401(k) is invested in.

It's nice, because you can take that money and put it into something that isn't tied to the market. And real estate is not. So for example, I have an investor who took about 100,000 in the self directed IRA and put it into one of our investments, he gets a percent return every month on that. So now it's up to about 10% a year is what he's getting on that. And so then that money goes straight back into the self directed IRA, it never goes to him directly. But then at the end of this investment, which we're looking at that being in the next year, is that when we sell it, he gets all those proceeds, and that goes straight back into his self directed IRA. No taxes at all. So he doesn't have to worry about capital gains or anything like that, because that's just not going to affect it in a self directed IRA.

But the benefit is that he's invested for about four years, and the total return, including the cash flow that he bought every month, and the appreciation at the end of the investment is over 20% a year. So he's basically going to double his 100,000 in that four year period. And so he's ready to do it again. And it's a great way to really do some good things for your retirement that you can control in your self directed IRA.

Christopher H. Loo, MD-PhD: Wash, rinse and repeat. A cookie cutter approach. I love that.

Stephanie Walter: Cost segregation, that's a different beast altogether. That's usually used for people that just want the tax benefits in the here and now. Which iis, most people want that. And so what we do is on every multifamily property we buy, we do what's called cost segregation. It's an actual thing someone comes out and itemizes each and every piece of personal property that's located in a multifamily structure. And then instead of, maybe most people being familiar with having a rental property and being able to depreciate that over 28 years, we're able actually to accelerate that depreciation to 3, 5, 7 years, depending on what type of personal property there is, because they all have different schedules.

So what that means for my investors is, say they invest $100,000 in the deal, in that first year, they're going to get the tax segregate the tax segregation the paperwork and they'll get a K1 at the at the end of that first invest submit year, where are they right off probably about 35 to $45,000 of their investment in that first year. And then, each year after that, the cost segregation goes down significantly after that first year. It comes through as a loss, but you will have still received the cash flow. So it's a paper loss, but it works just fine on your taxes to pay less.

Christopher H. Loo, MD-PhD: Yes, yes. You made very smart decisions to go out on your own and then to start your own insurance, because you realized the limits of W2 employment. And then you made very good decisions in the up and coming Denver area, which is now a booming market. So what made you go from direct active real estate to passive real estate? Describe that transition, because I know, a lot of real estate investors, they're just thinking, Oh, just buy a single family but what you're talking about is a little bit more strategic and has more leverage.

Stephanie Walter: Yeah, for sure. That, I mean, that's all I knew. I just kind of modeled what I saw my dad doing, so that the single family and it made a lot of sense to me. And I was a native Coloradan, and so I had my ideas of where the growth would have the most impact. So yeah, I had some good choices or results there for my choices. But I managed all my properties, didn't have a ton of them, I had, like five of them. And I have done that since 2005. And I just became worn out, tired. And I actually had some really great properties, I dealt with some really nice people, but I mean, you could still have, just all the day to day, I was running my business as insurance and then had a call of, well, the sprinkler head went out. Or I had one duplex and they would complain about the other side of the duplex, too much noise.

Just a lot of stuff to me, it just wore me down over time. And when I learned about syndication, and I learned about Okay, so I could, I could sell property. This is how I see actually most investors doing it, they're like, this sounds good, it’s almost too good to be true. So they'll buy their first rental and sell it. And that's what I did. And I sold my last property a year ago and put all the equity into the different deals that I manage myself and that I raise money for. And yeah, after that first time you do it, and you get that cash flow every month, it's usually between 7-9%. And you get that every month without having to worry about dealing with anyone. You look at a report once a month, a really nice detailed report that tells you who's moving in, who's moving out, what kind of things have been happening at the property, what work orders are going on, if there's any overall renovations going on, or anything like that. And just a nice profit and loss statement and a copy of the bank statement showing money, the rents going in and the expenses coming out. So very transparent. And let me tell you, I would much rather look at that report once a month than deal with all the other stuff.

And the returns are amazing. They're 20%. I aim to find deals that return over 20%. If people go to my website, they'll see I have them all listed and I know I had one person contact me and he's like, Well, that's good that you showed all your winners but show some of your losers. And I'm like well, that's all I have all I've managed to put together ones that have returned over 20%. So that's, I think, a really strong strategy. And that doesn't even include the benefits that I've gained from the tax. So between all of that stuff, it made the choice very easy to go over to. I call it, we do it yourselves, a lot of entrepreneurs do it yourselfers. And I took a lot of pride in that. But then, when I got into this type of real estate, I realized that it's called Done for You Real Estate. You have the professionals that have done this over and over again, doing this for you. And I prefer that.

Christopher H. Loo, MD-PhD: Yes, yes. So to the listeners, what you're leveraging is time. So you're not stuck with the [rest]. The three tenants of landlordship are tenants, toilets and trash. So basically, if you invest in a syndication, it gets rid of all of that. And you have people that deal with that. And you get to get involved in bigger deals. So I know a lot of people are interested in syndicates, becoming syndicators. Do you need any sort of qualifications or licenses or certifications? Do they do these if you want to become a syndicator?

Stephanie Walter: Nothing. That's a bit of a scary thought, but nothing. So yeah, if you're an investor, I strongly suggest you look at someone's track record. But at the end of the day, our first deal, we didn't have a track record. So then you just really look at who the team is, and what their experiences are on their own. And make sure that someone has a business plan, a strong business plan of what they want to do with the property and also an exit plan. So you have an idea of how long the money will be tied up. But no, I mean, for a prospective syndicator, my advice is always get involved with a team, do maybe your first couple deals with, because there is nothing better. And I've been lucky, just a very lucky person in this business. I've had wonderful mentors, and I have a wonderful, wonderful partner. And yeah, there's so many people in this industry that are willing to help the new people. So there's tons of little groups, I started with RE Mentor. But there's a lot of groups out there that you can get involved with, and specifically, you get involved to find your partners.

Christopher H. Loo, MD-PhD: Awesome. This was such a wonderful conversation. And if I know a lot of listeners, they would take a lot of great advice. So what are some of the ways of contacting you, getting in touch with you and learning more about you?

Stephanie Walter: My website is the best place, You can sign up for our monthly newsletter but besides that, I'm trying to put a ton of content, educational content up there that really educates the new investor. And so I have a lot of articles that have been posted up there. And yeah, if you want to join our email list, that's where you can do that. Or you can reach out and I'm happy to talk to you.

Christopher H. Loo, MD-PhD: Awesome, awesome. And for all the listeners, all of Stephanie's resources will be in the show notes. And Stephanie, any parting words of wisdom or advice before we call it a day?

Stephanie Walter: Doctors are actually pretty dear to my heart. When I went to undergrad, I roomed with a whole bunch of medical students. I know how difficult and how much debt a lot of them went into. And then now how hard they're working and everything like that. And so I would just encourage this type of investing actually has only been available, really to the mass market since 2012. Before that, there were laws that were put into place that allowed us to talk about our deals publicly.

And that was all included in the American Jobs Act that Obama passed, I don't know what his intention was with it. But it opened this type of investing up to a whole bunch of people that never before were able to be involved in it. Before, if I had a deal, prior to 2012, I would have to only go to people who I had an existing relationship with. So that was sort of the country club type of investing that people did. And so I'm, I'm really passionate about letting people know, because I had seen what it did to me, I've been able to just have so much more freedom with my time, which is hugely valuable. But, yeah, I highly recommend looking into it.

Christopher H. Loo, MD-PhD: Yeah, that's beautiful financial freedom, economic inclusion, equal access, democratization. So that's, that's what this podcast is all about as well. So, Stephanie, thanks so much. We really enjoyed you on the show. This was a fantastic conversation. And until next time, thank you.

Stephanie Walter: Thank you.

Christopher H. Loo, MD-PhD: Many thanks again for being here. If you’re new, you can find me online at Christopher H. Loo, MD-PhD, where I have links to other episodes or links to online resources that will support you on your financial literacy journey. I’ll see you there in on next week’s show. While I bring you thoroughly vetted information on this show regarding a variety of financial topics, I cannot promise you a one size fits all solution. This is why I caution you to continue to learn. Educate yourself and seek professional advice unique to your situation. If you want to talk to me, I welcome it. Please reach out via my website or email at I read and personally respond to all of my emails. Talk soon!


Editor's note: This transcript has been edited for brevity and clarity.


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