The Power of Passive Investing Through Real Estate Syndications
Updated: Apr 22, 2022
Alina Trigub (Samo Financial, LLC)
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: So today we have Alina Trigub. And I'll let her introduce herself. She's going to be talking about investing real estate in syndications. So Alina, take it away.
Alina Trigub: Chris, thank you so much for having me on. I'm really excited to be interviewed here and share my journey with your audience. So as Chris mentioned, my name is Alina Trigub. I'm a real estate investor. But my professional journey started many months ago, almost 30 years ago when my mom and I immigrated to this country from what used to be the Soviet Union. And I was at the point where I needed to get some sort of degree. I had just finished high school before that, and I actually decided that since I was good with numbers, I should do accounting since it was a career that would pay the bills, where people were needed. And I assumed that you know being good with numbers will make me enjoy accounting, or that was the stereotype that I had in my mind.
So I went and got that degree and got my first job with one of the Big Five accounting firms at the time. Didn't really like it and I thought maybe it was the job so I changed jobs and tried something else within tax accounting and still didn't like it. So I decided that it wasn't me. I just simply didn't enjoy doing tax accounting. So I decided to try something new and went into the world of technology where I had had 20 plus years of successful career and did a lot of different things mainly being the liaison between the world of technology and the world of business, as I knew and understood both worlds really well. And while I was doing that, of course being a former tax professional and having that degree in accounting, I kept thinking that my career, so was my husband's, were growing, and so were our tax brackets. And I was not thrilled with that, as you can imagine. So I kept looking for ways to lower tax implications, and real estate kept coming up.
So I finally decided to take action. about eight years ago. I did my research and came across the so-called syndications, which is a way to passively invest in real estate without essentially any interruption to your day to day life. So that looks attractive for someone who lives in an expensive state. My family and I live in New Jersey. So as you can imagine, taxes are pretty high here, from property taxes to all other sorts of taxes. And so after doing the research, I realized that this was something that I wanted to take action on. And I invested in my first syndication. And after that, I felt like there was the snowball effect, if you will, there was the second and third and so forth. And after doing that for a number of years, essentially passively investing in various real estate syndications, I realized the multiple benefits.
First of all, it is completely passive. With no interruption to my day to day, personal and professional life. Second of all, I was able to take advantage of all those tax breaks that were available to me as a passive real estate investor. And third, it was allowing me to build passive income, which was in addition to our successful two careers, my husband's and mine. So all in all, it looked like a great way to add to our portfolio. And every time I was talking to my colleagues at work, or to friends, who for the most part were in financial services, because of my background, undergrad and accounting and being finance, people were clueless, they were like, what is a syndication? Nobody essentially knew what it was. And I thought to myself that I need to change that. I want to be able to help other folks, regular folks like myself, you know, take advantage of this best way to invest, create this wealth with a great additional stream of income and save on taxes.
And so, with that idea in mind, I started my own firm, SAMO Financial, where I've been educating people to this day as to how they can do this, how they can add this additional passive stream of income, build wealth, save from taxes, essentially do all of that without any interruption to their day to day life, regardless whether they're business owners or W2 professionals, and so forth. And then SAMO has been growing. And in addition to that, earlier this year, I joined TF Management Group, which is a real estate fund management company where we essentially allow folks to invest not just in one asset through a syndication but invest directly into a diversified portfolio. So they sort of kill two birds at once. They invest in a portfolio, have access to being fully diversified in real estate, and do it through a variety of funds that we offer. So that's, Chris, in a nutshell, my professional life story.
Christopher H. Loo, MD-PhD: Wow, that's an amazing story. There's so many similarities to mine, because I was encouraged to pursue a high paying profession, to be a doctor. I did that and I absolutely hated it. So there's a lot of similarities. And I've been an active real estate investor, also involved in syndication. So you brought up a lot of excellent top talking points.
So first thing I think one of the listeners would like to learn about is what's the difference between active real estate investing in investing in a syndication?
Alina Trigub: Sure, absolutely. And yeah, Chris, I agree. There are a lot of similarities in our journey. I also hated what I was taught to do. Taxes, accounting, I couldn't stand that. And more or less I was forced into the profession. Because it was my mom and I, when we came, we were poor immigrants and I wanted to find a profession that would pay the bills. Accounting definitely paid the bills. While I'm sure you can relate that from a medical professional, but I just, I couldn't bring myself to do it all my life because I just hated it. So definitely go very relatable in that perspective.
Going back to syndications and active versus passive investing, so essentially, when someone is active real estate professional, the folks have to allocate the time and resources to be able to find properties themselves and whether they want to flip or do short term rentals, long term rentals, they have to actively manage the properties, manage the property management company, find contractors and find other people that would be supporting your properties. And that takes a lot of time and resources. There is less personal and professional time that you may be spending either at your job or your business or with your family and other places.
Where a passive real estate investor is someone who is investing in syndications. And that can be done without any interruption to our day to day life. Essentially, what's needed is the upfront learning to understand what syndications are, and how they work. And then reviewing either an individual deal where it's only one asset, or reviewing the fund and deciding whether that's the investment that you want to invest in, once you put the money in your work is done. You just relax and watch someone else do the work. And you reap the benefits of being a passive investor.
Christopher H. Loo, MD-PhD: So, in your opinion, if someone's interested, can they jump right into syndications? Or would you recommend that they learn more about active real estate and get a good idea of valuations and managing and then jump into syndications? Or is it that you can go into one without the other?
Alina Trigub: Excellent question, Chris. I actually have put together multiple resources and am happy to share them with you also. First of all, I have a training course that I put on Udemy, where I take a person through the process of determining whether they want to be an active or passive real estate investor. I also have a bunch of articles. And then I also do animated short videos, literally 1-3 minutes long, where I talk about this and many other topics. But in summary, if you were to summarize briefly, I would say a few factors need to be taken into consideration.
First of all, it's a person's bandwidth. How much time do you have in your day in your week, available for things outside of what you're doing now. And that now could be again, your business, your job, your family, your hobbies, whatever you're doing, you're volunteering, everything that you do, just add it all up and see how much time is left. And then out of the time that's left out of that bandwidth. How much time are you willing to put into another business because active real estate investing is another business, it could be full time or part time, but it will take your time. So if you're willing to put that time in and have the time to put in and have interest in doing that, by all means do it. Just know that just like any business, there will be some ups and downs, there will be a ton of obstacles, just like in any business. It's not any easier or harder, better or worse. It's just like starting a brand new business. So be prepared for that.
One of the things that typically helps folks is knowing your Why as Simon Sinek put it in his book a while back, or knowing the reasons why you're doing it. When you have those reasons, especially if you put those reasons on a board in front of you on a vision board and you look at those reasons. Ideally, they should be visualized. that typically helps you to move forward with whatever business or adventure or undertaking you've put together. And the reasons could be various for some folks. It's family for some folks. It's for personal reasons and for others. It could be maybe helping a community or something else. But if you know exactly why you are starting and why you're doing what you're doing, and that reason is strong enough to keep you pushing to move forward, no matter what the obstacles on the way are, that will help you significantly in your undertaking and will ensure that you move forward no matter what.
Christopher H. Loo, MD-PhD: I like that. And for all of the listeners, all of Alina’s resources for example, Simon, cynics book, Why, will be involved in the show notes. And another question our audience may have is with active real estate, most of the risk is you do your due diligence, and the financing. So you're very aware of them. When you're involved in syndications. What are some of the things to look for, to do your due diligence, to reduce your risk to losing money?
Alina Trigub: Excellent question, Chris. Yes, I have a specific set of steps identified that I typically go through myself, and I encourage folks to do it. And I'll share a funny story about that once I share the steps. So essentially, if you have decided that you want to invest in a syndication, what needs to be evaluated are the three things.
First of all, the operator, why? Because you're not investing in a project, you're investing in people that you're going to be putting the money with together. So first and foremost, you need to determine whether this is an operator or a team that you want to work with, whether the values are aligned, what kind of track record they have, have they operated in this in other markets? Have they implemented the strategy they're trying to implement in the past? And but they in general, your values are aligned with their values. So after reading and researching them, have a conversation with them. And I also have a list of questions for the folks that would like to leverage my resources as to what kind of questions to ask the operator, I can share that as well. And see whether the answers are aligned with you, whether the operator sounds like someone you would want to put the money with for a long time and you trust and rely on them.
Second, is reviewing and evaluating the market. The market where they have a project is in the area that is on the path to progress. Does it have the infrastructure in place? What are the major employers in the area? Are the jobs coming in, or are they decreasing? Is the population in the area increasing? Because you want to invest in an area that is developing or has developed, you don't want to go into a market that has people leaving the area or where there are no major big employers. And so it would be hard to get a job. Those are some of the critical factors that need to be looked at and evaluated when deciding on the market, the fundamentals and also the risk level.
And lastly, the third and final step is evaluating the deal itself. So when evaluating the deal itself, I always encourage folks to look at the two sets of criteria, the qualitative and the quantitative. Why? Because numbers don't tell a story but numbers together with the strategy and the plan, do tell a story. So let's say hypothetically, the operator said that this is a value-added multifamily in so and so market, and we need to change the roofs of the buildings. We will probably add a path park and we'll probably change 60% of the units to renovate them. Well look at the underlying fundamentals and look at the financials. If they try to change 60% of the units or they're showing a vacancy that is higher or low enough to support those renovations? For airing for replacing roofs, that's pretty significant demand. So do they have the financial resources allocated in their underwriting showing that, yes, there is enough funds for those roofs. And granted, you may or may not know what those numbers are. But all it takes is calling a few contractors and asking how much that would be. And yes, the number will be different in a different market, let's say, Alabama vs. Texas. But the ballpark would be more or less identical. And so what you want to get is the ballpark.
A lot of it comes down to also investing with the operator that you know, like and trust. And this is someone you have invested with multiple times and already know them. Granted, you're not going to go through all of the three steps, you will probably just look at the last step evaluating their deal, because you already trust them. And because they've invested in a market where the deal is, and you've looked at that market before. So your work is actually decreasing the further along you get with the separator, and the longer you work with them, essentially.
And the story that I wanted to share is what happened to me when I started investing, initially as an equity partner, passive investor. So I was evaluating this project and the operator and I never met them before. So everything I was reading about them was online, just checking their background education, their personal life, on Facebook, and whatnot. And then I was trying to learn a little bit more about them. And by accident, they happen to email all their investors. And this was years back when the CRMs weren't that popular.
And I guess by accident instead of BCC their investors, they CC’d their investors. So what I did is I took all of the email addresses and emailed every single personal list essentially asking for reference on this operator. And I was checking this operator and I was asking them for references to whether they work with this operator, and they could give me a couple of minutes or respond to my email and tell me anything. So a couple of people have responded and the response was positive. So I went ahead and invested with the operator. But it was ironic that the operator's minor mistake essentially helped them to make me their investor for many years ahead. So that's my story.
Christopher H. Loo, MD-PhD: You know, that's a great story, very inspirational, very motivational. So, I think the listeners will get a lot of value from what you just said. So, the other thing is, to point out that these syndications are almost always private syndications, meaning they're not public. But some people may wonder, well, why not just invest in a REIT or what's the advantage of going into a REIT, which is a publicly traded entity, versus a syndication?
Alina Trigub: Sure, sure. I don't want to sound like a broken record. But I do have articles on that as well that essentially compare REITs, Real Estate Investment Trusts to private equity, real estate funds, which is what we do at TF Management. So in general, REITs are, as you said, publicly traded which means that whatever happens on the stock market, REITS follow that progression and all of the stock market fluctuations are impacting REITs as well. REITs are also higher on fees typically than the syndication. Syndications may run on anywhere between 1 to 2% as the acquisition fee and then 1 to 2%. Asset management fee and maybe 1% disposition fee. In general, REITs fees tend to be higher than that, anywhere from like 5%+.
In addition to that, if you were to look at REITs versus private equity real estate funds, REITs typically do not disclose all of their investments, they talk about read performance in general terms. And I can tell you from my personal experience, while working at TF Management group, when we do our quarterly updates with investors, we typically go through every single project in the fund. So each fund has its own quarterly updates time scheduled. And within that time we go through every single project and we talk about how the projects are performing. What else is going on, whether we have any upcoming acquisitions or dispositions. All of that is discussed. We have a live call. And then we share the recording with investors. And the list goes on. Again, I'm happy to share my articles that cover the differences between REITs, real estate investment trusts, and the private equity syndications.
Christopher H. Loo, MD-PhD: Awesome, yes, I think you've given so much valuable knowledge, all your links, all your resources, all your courses will be included in the show notes. And how would the audience get in touch with you? I know a lot of people would be interested in learning from you by contacting you and investing with you. So how would they reach you?
Alina Trigub: Thank you, Chris. Yeah, I can be reached through my personal website, SAMO Financial. www.samofinancial.com. Or through TFmanagement.com. Or LinkedIn, Facebook, I think I'm on a few other social media platforms, but pretty active on LinkedIn. So excellent. I can find it there.
Christopher H. Loo, MD-PhD: All right. And last words of encouragement, inspiration or advice to the audience before we call it a day?
Alina Trigub: Absolutely. I always encourage folks, if anything sounds interesting to them, educate yourself before you take action. There is an old proverb that says, measure it seven times before cutting it once. I always encourage folks to educate, educate and educate yourself, and then take action. And you're pleased with yourself because, when you are educated and when you know what you're doing, you're making an informed decision, and you're a lot more confident in your decision making.
Christopher H. Loo, MD-PhD: Excellent. Well, that's it for today. We thank you for your time for being on the show and hope to have you as a guest in the future.
Alina Trigub: Thank you, Chris, for having me. It's a pleasure to be here. 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 Chris@drchrisloomdphd.com. I read and personally respond to all of my emails. Talk soon!
Editor's note: This transcript has been edited for brevity and clarity.