In this episode of The Passive Income Attorney Podcast, Seth discusses with passive investing legend Jeremy Roll how to diversify your investment portfolio utilizing truly passive investments and retire from the rat race in 5 years or less. Jeremy explained the importance of focusing your investment strategy to match your goals. For him, reducing exposure to volatility and freeing up his time are at the top of the list. Enjoy!
“I could go to an office and I used to have a great job, but I never really felt like I was maximizing my potential. And now I don’t have to go to an office, which is more efficient. I get to be at home, surrounded by my kids…and I basically get to create my own schedule if I want to take off next week, I theoretically can.”
HIGHLIGHTS:
2:01 – Jeremy talks about his background
5:00 – Seth asks about Jeremy’s “a-ha” moment
5:37 – Jeremy talks about taking a passive approach to real estate as opposed to an active approach to buying property
5:47 – Seth asks Jeremy about how to effectively diversify your passive investing portfolio
9:57 – Jeremy explains his perspective as an investor and how he diversifies his passive investments in commercial real estate portfolio (across asset classes, geographies, and operators)
10:12 – Jeremy enumerates the top four asset classes right now for the next 10 years
18:38 – Jeremy talks about his process on deciding on what to invest in from a passive investor standpoint
23:47 – Jeremy shares tips on how to get started with passive approach on investing, getting exposure to those deals, and who to talk to
28:15 – Seth asks the difference between investing in a crowdfunding site and investing in a real estate syndication
21:27 – It’s time for the Freedom 4 – What’s the best thing you do to keep your mind and body healthy?
33:06 – In an alternative world where you weren’t involved in real estate, what would you be doing?
34:10 Where were you 5 years ago and where do you see yourself in 5 years from now?
35:35 – How has passive income made your life better?
FIND | JEREMY ROLL:
LinkedIn: https://www.linkedin.com/in/jeremy-roll-655107/
Email: jroll@rollinvestments.com
FULL TRANSCRIPTION:
Seth:
What’s up. Y’all welcome to the next episode. I hope you all have a fantastic week. Thanks for joining in on the fun. If you’ve ever thought to yourself, I’d love to get started in real estate, but I just don’t have the time nor the desire to manage properties, manage contractors, and manage property managers and all that other stuff that comes along with investing in real estate. Well guess what this episode is for you, Jeremy Roll is a legend in the passive investing real estate community. He started investing in real estate and businesses in 2002 and left the corporate world and only five short years to become a full-time passive cashflow investor. He is currently an investor in more than 60 opportunities across more than $1 billion worth of real estate and business assets. He’s the founder and president of roll investment group, which manages a group of over 1500 investors who seek passive and manage cash flowing investments. Jeremy has an MBA from the Wharton school and is licensed in California as a real estate broker. All right, let’s get started.
Seth:
Jeremy nice to have you on the show, man. Thanks for coming on.
Jeremy:
Yeah, thanks for having me really appreciate it. Yeah.
Seth:
Yeah, of course you are. You’re a famous guy in, in my circles.
Jeremy:
I don’t consider myself famous. My kids would laugh if you said that, I think,
Seth:
Well, for our listeners that don’t necessarily know who you are, you know, tell us a little bit about your story and feel free to brag.
Jeremy:
Yeah. Yeah. I, I’m not the bragging type, but okay. I am originally from Montreal, Canada, and I moved to Philly in 1998. Graduated in 2000 over to an MBA at U Penn or Wharton, and then came out to LA and I’ve been here since 2000 and basically on the investing side in 2002 I started to look at these types of investments, what I call passive cashflow investments in alternative opportunities like real estate and other things after the.com crash for anybody out there who remembers that, because I know it was a while ago and really I was sick and tired of the stock market for two reasons. One was the the volatility. So, you know, for the stock market to go up and down 30% of your, just not for me, I just a very low risk personality, like a slow and steady guy.
But I think more importantly, frankly, and more bothersome was the lack of predictability of where my retirement account was going to be in 10, 20, 30 years with the lack of predictability of the stock market. So I started looking at different ways to invest, and I kind of concluded eventually that the low-risk passive cashflow route was the best fit for me because I thought I’d be able to get more predictability. And it was really that predictability I was looking for. So I ended up starting investing in 2002 and these types of opportunities in real estate. And then long story short is that by 2007, I ended up leaving the corporate world after I had enough cashflow built up to live off of now, to be clear, I didn’t have a plan. Like I talked to a lot of people have a plan. You say like, I’m going to invest X amount per year.
I’m going to get out after five years, 10 years, whatever the number is. I actually didn’t intend on leaving the corporate world. I actually intended on staying in the corporate world and having the paycheck and the cashflow just again, the cash flows for more predictability on the, on the savings side and on the retirement side. But I had lost her a moment in the corporate world, had enough cashflow built up to live off of. So I took the risk of leaving and you know, as it turns out the last or a moment, I ended up being like the best thing that ever happened to me after 10 plus years in the corporate world. And so I’ve got a full time, passive cashflow investor since mid ’07. And I think we’re recording this now, like end of to 2020. So it’s been, I guess, about 13 and a half years now. But I’ve been investing in these types of deals. I think in February it’ll be 19 years. So it’s been a long time. Yeah,
Seth:
That’s incredible, man. Congratulations for getting out of that W2.
Jeremy:
Thank you. Yeah, it was, I, I was very fortunate. I, I, my last job was a Toyota headquarters. I was managing a pricing analysts like across like Lexus Toyota and on pricing. I was at Disney headquarters for several years. I worked across all your brands for DVD VHS. For those of you who are old enough to remember that across all of …Dimension, ABC ESPN,…On set all of these things, right. I had some great jobs, but I honestly always felt that there was something missing for me in the corporate world. I always felt like I was just one piece of 10,000 person organization. Wasn’t making a big enough contribution, but I always had a passion for investing actually. So I’m very lucky because the full-time focus for me is great. Not just because I had more freedom, but I actually always had a passion for investing anyway. And this turns out to be a very, very good fit for me. So I’m just very lucky.
Seth:
Gotcha. Gotcha. So did you have really an aha moment while you were working that W2? Or was it more just your observations of kind of traditional traditional types of investments that got you to start investing in alternative investors?
Jeremy:
Yeah, well, it was really, it was that.com crash. So, you know, watching them, looking down and watching the market go crazy, looking at valuations, that didn’t make sense. And then watching it go down and then wondering what’s going to happen in the next 10 years of my retirement account. Just that whole lack of predictability, you know, 19 years later, my number one focus today is still predictability when I invest. And so that’s what I really honed in on and that’s what I tried to get away from from the stock market. Okay.
Seth:
Gotcha. So why do you think your journey resulted in taking a passive approach to real estate as opposed to getting into flipping or, you know, taking a more active, active approach to buying property?
Jeremy:
Yeah, that’s a great question. So when I first started, I was way too busy at work. I was very, very busy at work, so I couldn’t do anything actively just have enough time to do both. And so I ended up going past it by default. And what I learned actually is because I’m a very big believer that active versus passive is somewhat circumstantial, but a lot to do with personality as well. So for example, when I left the corporate world and I had all the time in the world, I actually didn’t become active. And the reason is because I love analyzing opportunity, vetting opportunities, networking, finding opportunities. And I love like finally finding a good one, right? Cause it’s hard. I mean, I talk to people about this all the time. I would absolutely hate, you know, managing a building because then I’m putting back in the corporate world again, amongst people like the, you know, managing things.
And that’s not what I like. So all the work that I do is upfront and I love the fact that I’m able to leverage people’s time efforts, experience credit. And, and, and also I get to invest across very diversified across a lot of asset classes. And if I was going to go active, I’d be much more concentrated, probably both geographically, but also by asset class. So there’s, there’s pros and cons to both sides, but it just turns out that the passive side is a really, really good fit for me. And I would encourage anyone out there who’s just starting. He hasn’t really thought about it and think really hard about which one is the better fit for you, because there are some people who are active only because they want to be within driving distance of where they want to invest. And that’s very hard to do passively, right?
There’s some people that are active because they want to be able to decide when they want to sell their properties. And if they want to refi sell, hold, you know, hiring firing manager, they just want the control, nothing wrong with that whatsoever. They, I trade control for diversification is my perspective on it, but some people aren’t comfortable trading control. So that’s another good reason. Then there are passive people who either are too busy. Don’t mind giving up control, want diversification, you know, so it’s a really good fit for me, but if it’s not the right for you to be very careful, because once you invest in a passive opportunity, you’re often locked in. A lot of people don’t know, but I believe it’s illegal to sell your shares for the first year. I’m not an attorney, but I think that’s my interpretation and there’s no flipping and sanitize flipping loft shares. I think it’s called rule one 44 and long story short. Is it like it’s, you’re very illiquid when you get into these types of funds. So don’t go down the path of investing in two, three, four, five paths of opportunities, and then wake up, went and say, this is the wrong fit for me. Because coming back down from that path is very difficult,
Seth:
Right? So, you know, some of the negatives, right, there are the liquidity and the control issues, but you know, you get a lot of positives by not having to actively manage the properties and being able to diversify.
Jeremy:
Yes. And I think the liquidity piece is going to change here in the next three to five years. It’s going to start to change, I think next year in 2021. But I think it’s going to really change in the next five years. I think that some of the crowdfunding sites, some of the rules have changed recently. It was actually a company I invested in, I do a handful of startup investing, like 1% of my focus. And I very, luckily I invested in a company called start engine, which is the largest equity crowdfunding website in the U S they just launched the stock market or stock exchange. I call it like the stock exchange for startups. That’s not what they call, I call it. So, and you know, I think eventually there’ll be a real estate offerings on that stock exchange. You’ll be able to invest in a deal on their platform. They crowdfunded, and then within a week, your shares will liquid. Right. And so that’s, I think that’s going to change over time and it will also allow for additional diversification to people who just are used to having regular stocks right now that are available to them. But for now you’re right. The liquidity is definitely a challenge for sure. Yeah.
Seth:
I think the introduction of blockchain technology as well, we’ll be able to make that liquidity problem go, go away as well. Have you heard anything about that?
Jeremy:
No, I, I really know very little about blockchain. It definitely fascinates me. You know, it’s funny. I don’t know if you heard about this, but this, I think the second largest bank in the world in China okay. Just was about to do a bond offering for billions of dollars blockchain based. And I think they just have them pull it now. I think they pulled it because the government put some type of pause on it, but the point is like the blockchain’s real. I mean, that’s the second largest bank in the world that was about to issue billions of dollars of bonds on the blockchain. Right. Or using the blockchain. So I think it’s real and it’s going to probably end up to your point helping a lot of transactions, but I’m not, you know, I, I don’t quite know enough about it to really give anybody here. Good insight about it.
Seth:
Yeah. Gotcha. Well, let’s, let’s go back to the diversification point. So, you know, a lot of our listeners know how to diversify their portfolios with respect to their traditional assets, but, you know, how have you diversified your passive investing in commercial real estate portfolio?
Jeremy:
Sure. Great question. And I, you know, I just want to give everybody to kind of, I’m not an investment advisor or financial advisors or anything I’m sharing here is just my perspective as an investor. So I tried to diversify across asset classes, geographies and operators, and I think all three of those are really important. And so for geographies, it depends on the asset class, I’m asset class. I’m willing to invest in certain geography. Some of them I avoid because of weather because of economic condition because of where the population is projected to migrate to there’s all different types of reasons, right? Operator very obvious. I don’t want to have all my eggs in one basket or too many eggs in one basket. I want to try to avoid a Madoff type situation. And unfortunately like you can never get that risk to zero in this type of investing, right.
There could be fraud, mismanagement all different types of things. And you could diversify to get the, to reduce the probability of a problem, but you can never get it to zero. And I really think diversification across operators is critical. And asset classes to asset classes are tricky because the society needs change over time. And I think one of the hardest parts about determining asset class diversification is, you know, if you’re investing for the long-term like me and I’m typically looking at a lot of five or 10 year deals, look at a 10 year deal. You have to have confidence that if you’re going to go into an asset class today, there’s going to be demand for it in 10 years and society won’t change enough. So for example, can anyone tell me how self-driving cars are going to affect where office space is located and demanded is someone gonna be willing to sit in the car for longer and do work on the way back?
Or they’re going to have a coffee? No problem. What’s a TV show, no big deal, right. Or they got to want it right next to them. So there’s a lot of questions out there about evolving technologies and evolving consumer needs. And you’ve got to be, you know, kind of take all those into account. You’ve got to do as much research as possible about the future and think as far ahead as possible to avoid what I call like the landmines, right. That, you know, you could potentially avoid the biggest problem with passive investing is that you’re kind of like on this afraid or ship, it’s got a thousand containers on it and it can’t turn very quickly. Right. So I’ve got to think way ahead. It’s true. Because once I put my money and I’m locked in, it’s, e-liquid, it’s very hard to get out.
It’s not impossible, but it’s hard to get out. And you know, you’ve got to really think far ahead. So I think that piece is very important to for someone like me who looks for predictability, I could tell you like the top four asset classes right now in my mind for the next 10 years are apartments. Mobile home parks, self storage, and senior living. Now the re I can give you the reasons behind each of them, but the point is all four of those, I believe have the most predictability compared to a really easy example, you know, retail and mall or office building, what is demand going to be for those in 10 years, much harder to predict if I’m looking from the Nashville up. So by the way, those core asset classes, it doesn’t mean I’m just going and investing in any of those asset class.
Doesn’t mean I’m doing it right now in the middle of pandemic. But I do think that those are going to provide the most predictability over the next 10 years. So now when I’m thinking of diversification, there’s a lot of different factors that come into play. And you know, I, I’m honestly like a bit of bias towards the versus like I’m a bad person to ask because I’m currently in over 60 LLCs, I’ve been in over a hundred LLCs in the past 19 years. Very easily, much more than that. In fact, I was in over 30 sales in the last four years and I’m still in over a 60 LLC, so hyper diversified. And it’s not what I recommend for anyone else. It’s a lot of work. I do it full time and I love the diversification concept. So that’s why I do it to that extent. But I think most people probably end up slicing their passive investment pining to maybe 10 or 20 or 25 slices as the most common.
Seth:
Yeah, yeah, yeah. Your pie is much larger than, than most folks. Yeah.
Jeremy:
You know, again, it’s a choice though, so I can actually make my life a little easier, but I love being diversified across a ton of asset classes, a ton of operators, even some geographies, it just it’s in some sense, theoretically, it should increase the predictive.
Seth:
Yeah. Yeah. I’d love for you to go into those four asset types and just kind of briefly say, you know, why, why you’re bullish on them.
Jeremy:
Absolutely. So again, this is just with the idea of what’s going to have the most predictable stabilized cash flow because I look for stabilized cash flow, right. For the next 10 years. So mobile home parks, one of the easiest, because mobile home parks has the lowest turnover, any asset, major asset class that I’m aware of. So for that alone, plus the fact that a lot of people don’t know, there’s a very small supply in mobile home parks in the U S and there’s actually a reducing supply every year because a lot of them get bought out. And they’re kind of in the path of progress as let’s say, you know what’s the word I’m looking for? I’m blanking on the word, but when like a city is expanding further out, right. So they get bought out and then they get turned down and maybe single family homes are developed on them.
So the number of the supply reduces every year, the turnover is very low. And so therefore, because the turnover’s low cashflow is pretty predictable compared to a lot of other asset classes, relatively speaking. Right. So, and I also think there’s going to be a continued need for affordable housing. And unfortunately, I think there’s a huge lack of affordable housing, a lot of markets in the U S so I think there’s going to be strong demand there, right? So apartments, I think everybody has to have a place to live. I think that’s the fall place for a lot of people who aren’t in a position to buy a home or don’t want to live in a home. And I think that if you’re in a high demand economy, as long as you’re choosing the right economy with the right population growth, that’s projected for the next 10 years, if you’re in an infill market, especially, and you’ve got a good manager, I think there’s going to be a lot of predictable demand, especially if you’re going into a building that’s highly occupied at the moment, even a hundred percent occupied.
For example, right now, I wouldn’t say this one thing I’m being very careful with though, is I tend to target class B buildings and in those buildings you know, some of the 1980s and seventies buildings tend to have eight foot ceilings in some of the 1990s in two thousands building have a nine foot ceiling. So that to me, I’m staying away from anything that doesn’t have a nine foot ceiling as a, as a rule because thinking 10 years out, given that younger people are demanding higher ceilings in general, if you have to go sell that property in 10 years, it could turn from a class B to a class C property in 10 years. So that’s an example of thinking ahead, and that’s one thing I would just put aside. That’s an important thing to think about if you’re looking at apartments and you’re looking at them like I am and then so senior living.
So if you look at the population statistics as of 2023, roughly there’s meant to be a pretty big surge in demand for senior living. And I frankly think senior living the best time to have gotten into was probably between 2017 and 2022 on a 10 year horizon to sell into that wave down the road. But there’s still a little time and think that even without that, you’ll still probably be in good position now it’s to you’re living in the midst of COVID, I’ve been completely waiting on and delaying on because COVID can still hit a senior living facility. And that could be quite devastating. And, and also if, if that does happen, then you know, when you have turn getting those new people in and a place that just had, COVID people tend to stay away from it, right. They’re not running to it.
So but once that’s done, I think that that’s going to be a really good luck with the right manager. Now it’s complicated. Senior living has many, it’s a very unusual asset class. I mean, there’s literally as simple as like age restricted community, which is basically a 55 plus apartment, very like almost like an apartment building all the way through to like memory care and major, you know, care where you have like a lot of intensive care that requires a lot of employees. And it’s a very difficult to run business. Now throughout that spectrum, the returns are all different and there’s a lot of different verticals in between assisted living and all that type of thing. And so, you know, you’ve got to really research that, that asset class and understand where you want to play. Like what return risk, risk, return, or ratio are you looking for?
And which, which verticals make the most sense for you even within that asset class, it’s a little tricky and it’s hard to operate for sure. Self storage, I think in the Southern States, I think that a lot of people are either aging and going to be retiring and having to downsize and maybe source some stuff, or there’ll be moving further South, which is already happening and they may need to source some stuff if they’re moving down, especially if they’re moving down to retire and downsize. So I can see self storage being pretty popular for the next 10 years. I will say, though, that you’ve got to pick your locations, right. With self storage, self storage has low barriers to entry as far as new construction. And because of that, it’s kind of well-known to have some overbuilding in some pockets at times. So you’ve gotta be very careful about your supply of the market that you’re going into. So those are the four. Yeah. I like those for a lot of, not a couple of, are not the easiest to run. So you’ve gotta be very careful if the operator you’re picking.
Seth:
Thanks, man. Jeremy, there was so much knowledge in there so much.
Jeremy:
Yeah, no problem. Yeah.
Seth:
Let’s switch gears a little bit. So, you know, let’s say you come across an interesting deal. Maybe you haven’t haven’t worked with that sponsor yet. You know, how do you start conducting your due diligence to decide if you’re going to invest from a passive investor standpoint?
Jeremy:
Yeah. So that, that we can talk about for like three hours, but I’ll try to keep it high level. So I’ll say the first thing is that, you know, a, if I’m looking at opportunity, doesn’t fit in my box is at 80 to a hundred percent occupied stabilized class B property and kind of an a minus or B area with an experienced sponsor and with a diversified tenant base, that’s pretty stabilized and maybe may or may not have any value at upside, right? That’s my boss. So a lot of them won’t meet that box because in development or too high value out, or maybe it’s in the wrong location, or maybe it’s the wrong type of asset class or, you know, w not class, but type or quality within the asset class. So I’ll filter that. The next thing I do, because remember, I invest for cashflow and predictable, more stabilized cashflow is I’ll look at the cap rate, which is the inverse of the multiple that we’re paying on the cashflow.
That’s very important to me because I’d like your value ideal, where you’re going to add a lot of padding. If, if we’re not adding much padding in the business plan that I’ve got to buy it, right, because that’s where I can create some padding or at least avoid having a problem down the road. So I’m very, very honed in on the Capra. And I get through a filter, a ton of stuff out based off the multiple. After that, that works. I’ll take a look at the investor structure and fees to make sure that I think they’re fair from an investor perspective. And then if all that checks off, which by the way, a lot of stuff, most of the stuff we dealt from just those steps alone, Dan, we’ll start to dive into the pro forma. I’ll ask a ton of questions. I’ll read the entire business plan.
Do I agree with the location? Do I agree with the comps that they ran for rent and sales comps and all kinds of other stuff? I ask a ton of questions. I am trying to size up from a very high level. Am I making a bet on someone who’s conservative and experienced? Who’s trying to under promise and over deliver for our investors to build a long-term relationship with investors, or am I looking at deals being presented to me with someone who’s being aggressive, making the numbers look really good because you can definitely, there’s a lot of assumptions and that means you can make the numbers look real. So am I looking at a deal that’s being very aggressive and maybe over promising setting itself up to under deliver, and therefore the person I’m making a bet on is not conservative, maybe a really good marketing machine?
No, he was just kinda like trying to attract investors and maybe going to go onto the next investor when you know, their deal under-performance with me. So at a very high level, that’s what I’m looking for. And I also tend to be very conservative. So it lines up well with my personality. You know, I’m going to do background check for sure, always on the managing members, I’m going to read the operating agreement and the PPM, make sure I agree with the rules and understand the risks and asked a lot of questions and size up who I’m making a bet on. I typically will not invest with someone unless I’ve met them in person at least once. So I like to fly to the property and meet them in person, have me walk the property with them and even the area and get a sense for how thorough they are. You get a really good sense for out there either by doing that type of visit with them. And in the end of the day, it’s all about a gut check. So you take all of these things up, add them up, and then, you know, the gut check is, should I make a bet on this person or not? I think the gut check is really important because the numbers can look fine. But if somebody is telling you not to invest with somebody, you just move on to the next one.
Seth:
Yeah. Yeah. I love that. gut-check idea, man. So, you know, you mentioned that there are a lot of assumptions you can make in your underwriting and, and the pro forma. What are some of those red flags to look out for?
Jeremy:
Sorry, I’m just taking a sip of water here. Why am I very dry today? So I would tell people some of the common things to look out for is, is the preferred return high enough that it makes you comfortable. Do you agree with the profit splits? I mean, a huge red flag immediately would make you throw something in the garbage as if the investors are getting below a 50, 50 split of the profits of both the preferred return. I think that’s completely out of market. And once in a while, I see that and just an automatic red flag, another red flag to me is take a look at the cap rate. They’re assuming on exit compared to what they’re buying it for. I saw a deal recently. It was a retail, the retail strip center. And I think it would be purchased about 8.2, 8.3 cap.
But the assumption was that they were selling it a seven and a half cap. And with the way the retail environment is these days, that means that person’s assuming they’re going to get a better multiple down the road for a retail strip center. And if anything, you’d like to think that somebody is going to assume they’re going to get a worst multiple with more and more growing online. Right. So when you see that, you’re like, okay, they’re trying to make the numbers look better, you know, onto the next right. Yeah, we agree with the average rent assumption, inflation assumption that they’re putting together. So if somebody says rents are going to go up 10% a year, that’s going to flag big time and I’m just going to move on to the next, right? So we want to make sure that’s a reasonable and you agree with all the expense assumptions and the expense ratio, does that look reasonable to you compare it to what’s normal in the asset class, because that could stand out in a bad way.
And if you know, again, they can manipulate the numbers by assuming low expenses to increase the net income, right? So that could maybe be a very big red flag. You move on to the next if the business plan is too aggressive, doesn’t have enough padding built in, doesn’t have enough reserve built in doesn’t assume, you know I guess conservative cost structure, if you’re going to do like a rehab, for example all different things can flag very quickly. And I’m a very big proponent of the fact that there’s so many deals out there that unless you feel 100% comfortable with the deal, you really should just move on to the next of any one of these things could potentially make me move on to the next, depending on the degree that you’re seeing it. Now, those are some quick examples.
Seth:
Gotcha. Thanks for that. Thanks for that. So I think a lot of our listeners are thinking, man, I don’t get to see any of these deals. You’re talking there’s deals left and right. And left and right. And some folks just, you know, they don’t have exposure to it. So, you know, how does someone get started? Kind of, you know, getting exposure to these deals, where do they find them? Who do they talk to?
Jeremy:
Yeah, great question. So, you know it depends on their situation, so I am able to network full-time and that’s how I find a lot of deals. I’ve also got the benefit of having 19 years of networking under my belt to make it easier for me to find deals. I will tell you the number one more challenging part of every day I have is actually finding deals still 19 years later, it’s hard, the hardest part of my day. So it never really gets a hundred percent easy, but so there’s a couple of different ways somebody can go about it. If you are interested in networking and have the time there’s local meetings, if you’re in a bigger city on meetup.com is a great resource to search for local real estate meeting, just be very careful. Some of them are sales pitch meetings, and some of them are good meetings.
I would recommend going to the bigger meetings to have a bigger, critical mass of networking. Right? So that’s number one. Number two again, if you have time to network, there’s a lot of very good conferences that have come up in the past few years that are designed for real estate investors to network meet each other, meet sponsors, right? You’re not going to find direct deals there, same thing with the meetups, but these lead you to eventually finding deals through networking. These are currently being done virtually, but I guess then they’re going to revert to being in person maybe in 2022. But for now the great thing about them is that you can attend these meetings without traveling too. You’re not to save time and money on travel. The conferences are costing less online and some of them still use software tools to allow you to get a lot of networking out of it.
Right? So that’s another option. If you aren’t interested in networking, right? And maybe you’re too busy to network. There’s a whole bunch of options as well, but those options you see the D the, the ways I mentioned before are actually finding deals directly, and you’re going to talk direct to the actual sponsors or operators if you don’t have the time or interest to be able to network, but you still want to find deals. There’s a couple of other options, but just note, you’re going to be going through an intermediary and the returns are going to be a little lower for the same level of risk, right. That just makes sense. So you can look at crowdfunding websites. So I’m actually an advisor for a website called Realty mogul, which is, I think the largest equity crowdfunding website in U S real estate.
And you know, that’s just one of many, right? So you visit whichever ones you want. Realty Mogul is a good one, but there’s many other out there, right? You’ll you can go in your pajamas at any time, if you’re an accredited investor and then find deals on there. Even if you’re not an accredited investor, they have funds designed for non-accredited investors, as well as much lower minimums great way to get opportunity exposure very quickly. I mean, you can, you could take an hour in your pajamas and download 10 or 20 apartment deals on profiting sites. You know, that’s how easy it is now. It wasn’t like that. When I started back in 2002 at all another way to find deals is you can enjoy investor groups. So most investor groups are structured as intermediaries and they’ll find deals and send them to their investor base.
Again, they’re going to be taking a portion of the profits and maybe some type of management fees and intermediary, but another great way to find deals. You can also post up like biggerpockets.com. I believe is the biggest real network of real estate investors in the U S online. You could theoretically post up and ask for deals. Now, I’d be very careful with this because you’re going to get a lot of people. I would say, like anybody investments in sponsors, they really like no sponsors respond like no responses from sponsors, you know, like, you know, that’s, and you may get some, but, you know, there’s a lot of people on there. So a lot of them are small single family and small multifamily, active investors, but there are still some passive investors on there as well. And finally if you’d like, you can listen to podcasts just like this. A lot of the times on these podcasts, you’ll find sponsors on there. You can actually listen to what they’re up to evaluate them and decide if you want to contact them. There’s a ton of great podcasts out there, and there’s just endless amount of content. So that’s another great route to look at for potentially finding opportunities.
Seth:
Yeah. It’s definitely easier than ever to find folks to, to invest with. It’s funny, you, you mentioned the bigger pockets post. I remember seeing a couple of posts on LinkedIn, where there was a passive investor said, Hey, I’m a passive investor. If anybody has any deals to invest in, you know, private messaged me, I was like, Oh my gosh, they’re going to get
Jeremy:
That’s something I would be very careful with. Higher quality sponsors are not like going on LinkedIn and actually contacting people, right. They’re already gonna have the investor base. And that’s the tricky part. You know, the ones that are doing a lot of marketing are often the newer ones, whereas the more experienced ones don’t have to do that. And so the hardest part is to find a really good ones by having to do that networking. And so I’m not going to, like, I’m not going to sugar coat it. The networking is a lot of work, but it can yield a lot of really good deals over time. It just takes some time to build it out.
Seth:
Yeah, for sure. You had mentioned crowdfunding. So what’s kind of the difference between investing in a crowdfunding site and investing in kind of a typical real estate syndication.
Jeremy:
Great question. So, you know, the term crowdfunding is a bit of a misnomer for real estate specifically, because if you look at the majority of the crowdfunding websites, they’re actually not using the crowdfunding laws. The technically they’re actually not crowdfunding. So for example Realty Mogul in the traditional deals that it does, you’re being pulled together with other investors into an LLC in what’s called a reg D regulation D offering a five Oh six typically a, B or C. I’m not quite, I don’t remember exactly what structure they use and that’s the same as investing directly with the sponsor. The only difference is that they will have you log in they’ll pre-screen you. And then within that firewall or behind the firewall, the login, then you can look at deals, but they call it crowdfunding, right? It’s like crowdfunding, the real crowd funding, or the laws have passed back in 2015 and 16 that are called reg CF and reggae plus they, weren’t not the best suited structures for real estate syndicators.
And the reason is because reggae plus takes months to get proved on. And so, but at the time that happens, you can’t buy a property. You can predetermined to do that for fun. And some people have done that. The, the advantage, the reggae classes that you used to be able to raise 50 million and have accredited and non-accredited investors now you can actually raise up to 75 million. It’s going to change. I think in January, they just increased it. So that’s becoming even more favorable. Now reg CF, which is the very kind of low maintenance, you can get it launched in a week type of structure and low costs from a legal perspective, that was limited to 1.07 million until recently. And that’s just not practical for a lot of real estate syndicators who buying, let’s say five to $25 million buildings, right. Or 10 to $25 million homes, but there was a law that just changed now that there, I think it’s being enacted in January, that now they raise that the 5 million.
I think that’s actually going to be one of the ways that there’s a lot more real estate deals posted in true corral crowdfunding structure, along with the fact that those would be able to be those are allowed to be traded on the, actually those have a one year restriction as well to be traded, but then it can be traded on the platforms that I mentioned, the stock exchange that will eventually come up, start engine being the first. And so those are the two real crop funding structures that exist right now, but most of the crowdfunding websites don’t use it.
Seth:
Gotcha. Interesting. So there’ll be some changes coming ahead.
Jeremy:
I think that it’s going to change and evolve. I think it’s going to take some time. There’s a lot of tricky restrictions. So for example, Reg CF only allows an issue or to do one offering a year, I believe, are there ways around it? Like, so that’s just one, $5 million offering, but are there ways around it? You know, I haven’t looked at the laws to really understand it fully yet. Cause it just changed you know, the reggae plus of tricky, cause you gotta think of it, you know, way ahead. And there were seven, there continue to be some restrictions. So for example, there used to be a restriction for credit investors invest, I think more than either 10% of their net worth of 10% of their income in a given opportunity or whatever, whatnot. But so there were some restrictions that made it more restrictive than doing a reg D offering, for example, and again, I’m not an attorney, but I know there were some restrictions and I think those just changed as part of some of the law amendments to make it easier.
And I think that the liquidity, I think that whole liquidity aspect, I think what’s going to happen. You’re going to be able to continue to invest in these typical reg D offerings without liquidity or with more difficult liquidity at the current structures. And I think you’d be able to find more liquid structures that are tradable much more quickly, but with lower returns, because I think there’s going to be a trade off. I think you’re going to get a lower preferred return and lower splits probably in exchange for liquidity and investors are going to have to choose. Do you want to have all the liquid e-liquid higher returns? Do you want to have all liquid lower terms? Did you want to have a mix? And I could see like a full-time investor, like me eventually doing a mix of the both.
Seth:
Yeah. Yeah. That makes sense. There’s always a trade off, right?
Jeremy:
Yes. So I, but I think that’s coming up, but I think if we were having this conversation a year from now, we’d probably be able to talk about some live deals.
Seth:
Yup. Yup. All right, man. Well, let’s jump into the freedom for, so what’s the best thing you do to keep your mind and body healthy?
Jeremy:
Great question. So I think the best thing I do is I am very consistent with the StairMaster. I do about 30 to 40 minutes a day. I typically do it six or seven days a week. I bought one and have it in my house. I will say the thing that I do, that’s not good is that I’m very often on a phone call while I’m on. And instead of like just relaxing. But I definitely do the StairMaster six, seven days a week. And I just know for a long time you’re doing it for about 30, about 30 years now consistently. And I’m pretty convinced. It’s very helpful.
Seth:
Nice, nice. In an alternative universe where you weren’t involved in real estate, what else would you be doing?
Jeremy:
I think my best guess would have something to do with cars. I’m a car guy I’ve worked at, you know, Toyota headquarters, GM headquarters. I’m just, you know, passionate about cars. Cars are changing a lot. What, you know, I think in 10, 15 years is going to be a lot more electric and then that’s going to, I’m kind of sad that that’s happening. I like the sound of an engine and stuff, but I, I, you know, I guess the alternative universe is what I was doing before I was involved with cars, but I’d probably doing it in a different way, whether I own a car shop or what it would be. You know, I’d be doing it a bit of a different way.
Seth:
Are you a car collector by any chance?
Jeremy:
No, I, I, I cannot help, but put my money back into investing.
Seth:
Nice smart man.
Jeremy:
Yeah. In fact, it’s funny. I was looking at buying a car just yesterday. Like I, I, I’ve never owned more than one car ever. And so it’s going to be a hard bar for me to like get past like a big hurdle to like say to myself, I have a car sitting here, like I don’t need no money. You know, it’s tough.
Seth:
Well, that’s why you’re where you’re at today, man. Good to see. Just like that.
Jeremy:
Yeah. I kind of very much believe in very delayed gratification, but I’m getting older and I’m starting to wonder whether I should at least have a little gratification, so we’ll see. Yeah. Yeah.
Seth:
There you go. So where are we at five years ago. And where do you see yourself and your investing five years from now?
Jeremy:
Yeah. Good question. So, you know, ironically five years ago, so where, where I’m at today is I’m kind of on the sidelines I’ve been waiting. I, in fact, I’ve been on the side of things mostly since the end of 2016 from a cycle time perspective. So you go back five years, then we’re back in 2015, I was still actively much more actively investing. I think in five years from now, I’ll be actively gas investing at that time, probably through that cycle. And to be honest though, like, you know, just from a day-to-day perspective, not much, not much has changed. I still network, I still try to find deals. I’m trying to grow my snowball in this exact space that was happening five years ago today and even five years from now. I think so my number one goal has always been to build up enough cashflow to never have to go back to the corporate world and just continue that cashflow growing so that I really didn’t have to worry. And so I am hoping in five years from now, that’ll be a bigger snowball than it is today.
Seth:
Yeah. Well, you’re living the dream right now, man. Well,
Jeremy:
Yeah, and I have a lot of control over my schedule, but it’s still a lot of work because I’m in so many deals and so that takes some work. And so you, everyone, you know, I don’t sit on the beach all day. I live in LA. Like I work very hard. People will be surprised. I think I’m also not that personality, but it’s you know, the flexibility and stuff is fantastic. Don’t get me wrong. That’s for sure. But I I’m I kind of put the pressure on myself is keep evolving, you know?
Seth:
Absolutely. I think that rolls right into the last question. How has passive income mean?
Jeremy:
Oh, it just changed everything. I mean, it you know, I don’t want to sound like an infomercial, but it literally changed everything. I mean, I could go to an office and I used to have a great job, but I never really felt like I was maximizing my potential. And now I don’t have to go to an office, which is more efficient. I get to be at home, surrounded by my kids, especially during COVID, but even without that. And I basically get to create my own schedule if I want to take off next week, I theoretically can. And the best part about it for me is that I always felt like I was able to maximize the long run potential for myself and my family, both just for me personally, but also for our net worth in general. And that’s something that I was not doing neither of those, I think, in the corporate world.
So that’s how the cashflow truly changed my life. It’s done a ton of stuff for me, other, I mean, you know without getting too much detail, like my son was a year, a year and a half old he had a very bad virus actually ended up on a ventilator for seven days. Almost passed away, had to have three surgeries airway and was in the hospital. The ICU for two weeks was in the hospital for two months and then had to go back to the hospital again. So I was able to sit in the hospital 24 seven, either myself or my wife with my other kid because of the cashflow I came in, imagine in the corporate world, what would have happened because I probably would have burned through some paid time off and I would have been on maybe unpaid leave. Right. And then I would have been depending on how the alarm went on for like how much tolerance is the employer have to let you keep your position. Right. So the cashflow has really been helpful in a lot of ways. It can really, you know, be, you know, hugely helpful in really, and overall it just completely changed my life.
Seth:
Yeah. Yeah. Thanks for sharing that story, man. I mean, that just shows how meaningful it can be just in a, you know, even when something bad happens that you’re able to be there.
Jeremy:
Yeah. I mean, I could have cleared my schedule for a year if I needed to, you know, I would have fallen behind on my own goals for, for, you know, what I call work, which is this is work, but yeah, if it was necessary now, imagine if that happened, if you had a job, you depend on someone else give you permission for that and stuff. It just, yeah. It’s it’s crazy. I mean, to be able to do at this point, I take for granted the cashflow because I’m so used to it, not having it, but it’s amazing how much it really just lends to have a ton of free.
Seth:
Probably just as much as you couldn’t imagine, not having your W2 paycheck at the time. Right.
Jeremy:
That’s exactly right. You know, you’re exactly right. Like I was my, my plan all along was just work my way up in the corporate world slowly but surely and have that security and thank God the last straw moment happened that led me to have the courage to leave the cash flow that allowed me to leave. And then you know, that curve, so to speak allowed me to leave as well. But had that not happened, I’d still be in the corporate world today, probably in a pretty good company, but probably not totally happy.
Seth:
Right. Right. Jeremy, thanks for sharing today. Your story is incredible. Where can our listeners find out more about you?
Jeremy Roll:
Sure. So you know, people are welcome to email me for sure. I’m happy to help any way that I can. My email is jroll@rollinvestments.com. So jrole@rollinvestments.com is the best way to reach me.
Seth:
Awesome, man. Really appreciate you coming on today.
Jeremy:
No problem. Thanks for having me on. I appreciate it. I just hope that this episode was helpful for your listeners.
Seth:
Oh, I know it was. Thanks again. Oh, no problem. Thank you.
All right, Jeremy crushed that interview. He successfully escape the rat race by investing passively in only five short years. Just think about that nowadays. He’s busy doing well, whatever he wants, I’ve got something special for you guys. It’s a new free guide. Just go to escapethebillable.com. That’s escapethebillable.com and get your free copy right now until next time. Celebrate the journey.
