REIG Sarah Mae | Escaping The Rat Race

 

Do you feel like you are on a hamster wheel at work or feel like escaping the rat race? If so, you will really appreciate Monick Halm’s guest, Sarah May, the Managing Partner at Regency Investment Group. She managed to escape the rat race one step at a time. While working as an aerospace engineer, Sarah began investing in real estate in her free time after hearing about the incredible financial and tax benefits it provides.  She is a passionate real estate investor who has been involved in flipping houses, owning, and managing rental property, and, most recently, putting together a 100-unit apartment complex syndication with a group of investors.  She talks about syndication, investing in commercial property, and refinancing. Listen to Sarah as she highlights the power of creating passive income so you would not have to work anymore and achieve true financial freedom.

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Escaping The Rat Race – Interview With Sarah May

This show where we share stories and interviews with amazing Real Estate Investor Goddesses, women who are killing it in real estate investment. Our guest, Sarah May is certainly no exception. What I love about her story is, she was able to get herself out of the rat race one doable step at a time. If you ever feel like you’re on a hamster wheel at work, stuck in the rat race, or don’t know how to get out, Sarah’s story will inspire you. While working as an aerospace engineer, she began investing in real estate in her free time after hearing about the incredible financial and tax benefits it provides. She’s a passionate real estate investor who has been involved in flipping houses, owning, and managing a rental property.

She puts together a 100-unit apartment complex syndication with a group of investors. I first met Sarah at a syndication seminar. We’re both starting to get into syndication. It’s been amazing watching her explode since then. Even before she did this 100-unit syndication, she was able to leave her corporate career to pursue apartment investing and spend more time with her husband and her son. She was able to escape the rat race and created enough passive income that she did not need to work anymore, which is the goal. That’s financial freedom. When she’s not looking at deals or rehabbing properties, she enjoys spending time with her family, playing tennis, and exploring Colorado outdoors. Welcome, Sarah. I’m excited to have you here.

Thanks, Monick. It’s great to be on.

I always love to start at the beginning. Tell us a little bit about how you started. Why did you get started in real estate investing?

I got the bug in college. I was hitting the books hard. I was studying mechanical engineering. Somehow, I went to a free real estate seminar put on by Rich Dad Poor Dad. What I learned in that free seminar is about how real estate can provide you monthly income, be somewhat passive, get the benefits of appreciation, and lower taxes. I started reading everything I could get my hands on and going to as many seminars as I could go to. I read Rich Dad Poor Dad and had my mindset change from wanting to get a job and work the next 40 years in a cubicle to leverage my future career to invest in real estate. I continued educating myself for a while. In 2011, that’s when I got my first investment property along with my husband. We were married and both interested in real estate. We did a fix and flip in 2011 on a single-family home. We learned that fix and flips were not for us after that experience. We saw that property that we sold appreciate and value significantly even if we had held on to it a year. From that experience, we decided that we wanted to be more buy and hold investors and went from there.

I love that you started learning in college. A lot of people like me take a little bit longer. I was in my 30s before I started investing. It’s amazing that you learned about it and started so young. You flipped that first house and thought, “I’d rather buy and hold.” What was the first property that you bought after that?

We figured out that we wanted to look at a property that my husband, Alex, and I had purchased ourselves. We set the goal to buy a 2 to 4-unit property that needed minimal rehab and that would meet the 1% rule, which a lot of people use. That means you get monthly rental income equal to 1% of the purchase price. We set up alerts on the MLS to get notified when properties came on the market. We ran across this one that way. It was on an MLS listing. It was 2011. The market was a little slow. In the description, they said, “Twelve percent cap rate.” We were like, “How has this not been snatched up already? It’s been on the market a couple of weeks.” That’s an awesome return. We went and saw the property and at first, it was like, “It’s simple and basic. This is boring,” because we’ve never bought a property before. We slept on it and realized it would be a perfect rental property. The place was indestructible. Vinyl on the floors is Vinyl Trim and indestructible wood cabinets from the ‘60s. This was a perfect rental property. That was our first property. We kept saving up for a down payment to buy the next one.

There’s something that you said that I want to highlight for people who are reading. A lot of people think that they need to get an investment property that they would want to live in. For you, you thought, “That’s boring looking.” It doesn’t need to be a place that you’d want to live in a place that a tenant could live in. They won’t cause too much damage for you. Live where you want to live and that’s where the numbers make sense. That was a great insight that you got. You saved up and got another one. I heard this story before and wrote about your story in my book, Real Estate Investor Goddesses Handbook. It’s beginning to win the best seller. One of the things I loved about your story is how you were able to refinance and buy more. Tell our readers a little bit about that.

Figure out what you want to do, narrow it down, and then set goals. Share on X

One thing that’s helped us to build our portfolio is this method of buy, rent, rehab if needed, and refinance. I don’t know the exact cadence but we would essentially save up the down payment and buy two properties. We refinance one of them and buy another property. We kept doing it that way. We’ve probably refinanced half of our properties at this point. We own ten. We’ve done nothing on our rental side. We’ve done things traditionally. We’ve got traditional bank financing and bought most of the properties from the MLS. We’ve done traditional refinances to pull the money out and cycle that into the next property.

You don’t have to learn the 101 methods of creative financing. Some people and gurus will try to tell you that you need to know before you do anything. You can be a traditionalist and still make this business work. The first 1 or 2 is going to be tough because you’ll have to save up that whole down payment. If you do it the traditional way, you’ll have to make sacrifices like cut your expenses to save up. Once you get that momentum going, have properties a few years, they’ve appreciated and gained in value, you can use that equity to buy your next property.

That’s great and the other nice thing about refinancing is, it is a modest taxable event so you can pull out the cash. You don’t have to pay taxes on it and you can buy another one. That’s how you are able to leverage. You have a lot more than ten properties. Those are the things that you did by yourself, you and your husband, Alex. You started getting properties through syndication. Tell us about where you are now.

A couple of years ago, I ran across Ken McElroy’s book, The ABCs of Real Estate Investing. That was the first real estate book that I read out of reading hundreds of books that talked about this idea of working with a group of investors to buy larger commercial properties and essentially, split the profits from that property. I never even heard about that before. I got intrigued because of the business and financial aspects, the economy of scale, and going into a larger apartment building as opposed to a 2 to 4-unit type property that we had been doing. We dove in, I met you at a syndication event, and joined us with a mentoring program in Dallas hosted by Brad Sumrock. I got some great mentors and I educated myself on syndication. Once diving into that world, I found a ton of people who are successful in that business.

Before I ever put together an apartment syndication myself, I invested passively in four other deals with investors that I knew. One of them is a 400-acre resort property in Belize, which is exciting, a mobile home park, which has great returns, and two apartment complexes in Dallas and Tulsa. It’s across the board with passive investment. After getting comfortable doing that, I wanted to dive into putting together a deal myself. Alex and I, along with our two partners, had been looking tenaciously here in Colorado for a while and ended up finding a great property, getting a bunch of investors on board with us, and close on a 100-unit apartment deal. It’s been a huge learning experience, a ton of fun, and loving it every step of the way.

You’ve done the gamut in terms of real estate investment. You’ve done the smaller properties, the 1 to 4 units. You’re in larger properties, offshore investing, mobile home park, and apartment building. You’ve done a lot by yourself in the syndication realm. What are some of your likes and dislikes about those different types of investing?

I know it’s a popular debate which one’s better, multifamily or single-family. One of the biggest benefits of commercial property is, you can control the value of that property much more directly than you can with a single-family home. For single-family houses and even up to four units, the property is valued based on what similar properties are selling in there. If you’ve ever sold your house, the realtor talks to you will say, “Comparable sales and area are selling between $100,000 and $120,000, we think that we should list yours for $120,000.” That’s the approach that they use for single-family and small multifamily. With commercial buildings, you have much more control over the value of your property because it’s all based on the income that the property generates. That’s called net operating income.

If you have ways to raise income or revenue by raising rents, renovating the property, cutting expenses, you will directly impact your property’s worth. The higher that net operating income, the higher the value of the property. That’s a huge benefit. There are also economies of scale, both for being able to hire a property manager. This hundred unit building only takes one manager to manage the property as opposed if we had 100 single-family homes scattered around the Metropolitan Denver area, you can imagine how much bigger a headache that would be to manage those properties. It’s the same thing when it comes to tax time and professional bookkeeping. Apartments are a little better there.

REIG Sarah Mae | Escaping The Rat Race

Escaping The Rat Race: One of the biggest benefits of a commercial property is that you can control its value more directly than you can with single-family homes.

 

As far as residential, it has a lot of benefits, especially for the newer investor. For one, it’s easier to understand. People have lived in houses and apartments in their whole lives. It’s easier to understand how you would go about buying a property. There’s a lower cost of entry and some people, when starting out, want to self-manage and get that experience. You wouldn’t want to self-manage a 100-unit apartment building if you’ve never done it before. That’s a big benefit. The other thing, which I don’t think gets talked about much, but it’s easier to do a 1031 exchange with a property that you own 100% of the property. If you own a single-family home and want to sell it, take those profits and buy a four-unit. You can do that without a taxable event. That’s usually when you’re doing syndication and have multiple partners, it’s much harder to get the benefit of the 1031 exchange.

They’re all good points. Going a little bit in a different direction, what has been your biggest challenge so far in real estate?

Some tenant issues in the past have been challenging, but one thing that’s fresh in my mind is the workload of our apartment acquisition. It is a business and as being a business, there’s quite a lot of work involved with initially underwriting the deal, getting the loan quote, negotiating the contract, doing all the physical inspections, adding bids, working with investors, etc. There’s a lot of moving pieces. I could list three dozen more things, but a lot is going on. You typically only have 60 days to get everything done before closing. It’s a marathon sprint for those 60 days. That was a lot of work, but all went smoothly. That was one challenge in my memory.

There’s a lot to do when you are actively syndicating as opposed to when you are a passive syndicator, which is nice. When you’re getting invested into a bigger property, the only thing you have to do is fill out a little bit of paperwork and write and send or wire money or write a check. For those of you who want to get into bigger properties, and don’t necessarily want to do all that work, you can passively invest. What is your biggest mistake so far and what did you learn from it?

One story I’ll share is, we had a triplex. We still do have that triplex and have some problem tenants in it. We had done several evictions. One tenant went to prison. The property wasn’t in the best area when we bought it. It was attracting not the best tenants. It was also one of our earlier properties that we maybe weren’t running things as well as we should have. We ended up having an issue, where one of the residents would get drunk frequently. My husband would go out there and the guy would threaten Alex and everything. We were like, “This is not a good situation.” We talked about it but at this point, we didn’t have any partners.

We were self-managing everything and came up with this idea of turning it over to a property manager, get us out of the picture, and essentially not renew these tenants’ lease when it comes due in six months’ time. We didn’t want to be involved in a non-renewal period being something that we were the owners. Long story short, it went great. We got the problem tenants out and remodeled the entire property. The area has become trendy, and I got much better renters in it. The property manager made our life so much easier. Sometimes it is helpful to manage your properties by yourself when you’re first getting started, but don’t do it too unless you love property management. That was one mistake we made, which was not getting third party property management soon enough. It could have saved us a lot of headaches when we were getting started.

Third property managers can be great if you have the right property manager.

Some are not great.

Property managers can make your life as a real estate investor much easier. Share on X

They can make your life so much easier. They have to be the right ones. Your property manager can make or break your property. Make sure you get a good one. What are you most proud of?

None of this would be possible without having such a great team and support structure around. I mentioned Brad Sumrock’s training program. I have a great group of investors that are putting their faith in me and my co-sponsors for this apartment deal. I don’t want to say it’s been me by any means. At the same time, if you told me a few years ago that I’d be purchasing a 100-unit apartment building, I would have thought that was crazy. Originally, I was thinking a lot smaller. Start with a 20-unit property and go from there. Over the course of the few years that I have been doing this, it shows what a great team can do.

Having a great mentor, finding great business partners, and having access to a lot of people interested in multifamily who want to be investors. It’s been exciting to see all the pieces come together and have this great team who has enabled me to exceed my expectations in this business and be successful. I’m proud of that. I’m proud of sticking to it. This business can be challenging. When I first got started, I thought, “We’ll find a deal within two months and be under contract.” It took a year, analyzing 100 deals, putting in a dozen offers, and getting rejected a lot of times before ever getting a property. It’s sticking to it even when the times were tough. That was another thing that I’m proud of.

You should be. I’m proud of you. I’ve been watching your journey and it’s been amazing to watch. One last question before we get into the trinities. What advice do you have for a woman starting out? A different way of asking that is, what do you wish you’d known at the beginning that you already know?

Know your investor’s DNA. What I mean by that is, know what you want to do and what you like doing. You’ll find that one of the challenges when you get started, is narrowing down the possibilities in real estate and picking 1 or 2 things that you want to do. When I first started learning, I felt I had to learn two dozen new careers before I could do anything. You have to learn how to buy from the auction, do foreclosures, wholesale, lease options, and all these other crazy things. The people who I was getting educated on, they made it seem you’ve had to know everything, which is not true. It’s great to know options are out there and focus on 1 or 2 things.

Know what fits your goals and your personality. For me, I thought wholesaling sounded a great business. You could make some good quick cash when you’re getting started. For me, I don’t want to be walking into strangers’ houses and talking to them about how I want to buy their home, especially if they’re under duress and in a foreclosure situation. For me, that’s a great business model for somebody but it is not for me. I talked to you about the mobile home park. I’m a passive investor in that. The financial upside can be huge with mobile home parks, but I didn’t want to be the one putting the deal together and managing a mobile home park.

My advice would be, figure out what you want to do, narrow it down, and set SMART goals. Everybody’s heard of that, Specific, Measurable, Attainable, Realistic, and Time-Bound. An example, when I was first starting out, my SMART goal was, for the next twelve months, I’ll buy a 2 to a 4-unit property with 3 to 4 bedrooms per unit and the Denver Metro area that requires a little fixing up and will provide at least 1% of the purchase price and monthly rents. I read that in case you can’t tell, but that’s an example of a goal that you can for yourself. Surround yourself with people who are doing what you want to do and get a mentor, if at all possible. That’s what my recommendation would be.

Sarah, if people want to get in touch with you, how can they find out more about you and what you do?

REIG Sarah Mae | Escaping The Rat Race

Escaping The Rat Race: The great thing about refinancing is that it is not a taxable event.

 

My company is Regency Investment Group and you can find our website at www.RegencyInvestmentGroup.com and you can find our phone number and contact us through that. I’m also on Facebook or LinkedIn.

We have time for a quick trinity. A trinity is a brag, gratitude, and a desire. What are you celebrating now? What’s one brag?

I’m celebrating being able to live the life I want and do work that I find fulfilling and exciting. It’s a huge blessing to be able to do that and have left my corporate career to focus more on real estate, which gives me a flexible schedule and lets me spend more time at home with my son. I know that’s been great for me and I’m excited about that.

What’s one thing you’re grateful for?

I have to say, family. That’s been a huge factor in everything. Having my husband, Alex, who’s as like-minded as me and interested in real estate is huge. Having him as my support person and my brainstorming partner has made this business fun. He’s my best friend. It’s so much fun and also our son. He makes us laugh more than anything. I like having a child around the house. It’s never dull. I’m thankful for my family.

Finally, what is one thing that you desire?

I feel blessed with everything in life. One thing that would be cool in the future would be for Alex to join me in our full-time real estate investing business. He still works his engineering job and loves it, but it’d be great for him to have more free time and get to be real estate together. That would be fun.

So shall it be or even better than you can imagine. Thank you for that wonderful trinity. Thank you for that amazing interview. It has such great information and such an inspiring story. Thank you for being here. Thanks to all the readers for joining us. Join us on the next episode we’re going to have another incredible interview with another Real Estate Investor Goddess. If you want to get in touch with Sarah, you have her contact information. To find out more about Real Estate Investor Goddesses go to RealEstateInvestorGoddesses.com and check out the Real Estate Investor Goddess Handbook, which is now available on Amazon. Have a great week and stay pleasured, people. Bye.

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