0:01

Mike Stohler: What if you could be doing something smarter with

0:04

your money that creates income. Now, if you're wanting to get

0:08

ahead financially, and enjoy greater freedom of choice, if

0:13

you want a comfortable retirement, and you know you'll

0:16

have more choices, if you can do more with your money. Now, if

0:22

you've wondered who else is creating ways to make their

0:24

money work for them, and you want actionable ideas, honest

0:29

pros and cons, and no fluff. Welcome to the richer geek

0:35

podcast. We're here helping people find creative ways to

0:40

build wealth and financial freedom. I'm Mike Stoller, and

0:44

in this podcast, you'll hear others who are already doing

0:47

these things, and learn how you can

0:56

Hey everybody. Welcome back to another episode of The Richer

1:00

Geek Podcast. Today's episode is brought to you by REI Words,

1:04

your go-to SEO Agency for increasing traffic to your real

1:08

estate website. Check them out at reiwords.com. Today we have

1:12

Spencer Hilligoss, the CEO of Madison Investing. It's a real

1:16

estate investment club. With bespoke curated real estate

1:20

deals, Spencer founded Madison Investing with a singular

1:24

mission to help busy, successful professionals. Anybody know any

1:29

of those? I bet you do. He's going to help you invest

1:32

passively and secure the most valuable asset of all time,

1:36

which is time. How are you doing Spencer?

1:40

Spencer Hilligoss: Doing great, Mike. You know, I mean, starting

1:43

conversation off like you and I did talking about guitars was a

1:46

wonderful way to start it off.

4:13

Spencer Hilligoss: Yeah. And thanks for having me on Mike. It's just great to have a conversation. So naturally I think, you know, I sit here feeling very blessed. As an example, use a quick story like this past summer, our two young

4:16

kids and my wife, Jennifer, who's also the co-founder. Madison has the best thing with me, my COO and my better half. We all went and were able to go live in a different country. We

4:18

lived in Portugal for 30 days. And that kind of thing is mind blowing. If I could go back in time and try to tell that quick story to myself when I was working in tech and I was

4:21

leading and building operations groups 80 hours a week in the office. I would have been like, man, you're like, what are you smoking? You know, it's a pipe dream. And so here I sit just

4:23

feeling very fortunate because I did work in tech companies for 13 years and ended up leaving that behind in 2019. I think the month was October about five months before COVID hit. And

4:26

that was never the plan, I was grinding it out in those companies and I won't bore people too much with this, but I'll say as a kid that grew up in a real estate household with

4:28

a dad, who was a broker that scared me into tech. And I never thought I'd find myself here again, somehow within the world of real estate, where I focus on investing passively and putting

4:30

our capital into stuff that is long view, truly long view. Is it going to produce cash flow distributions that can replace my income? Is it going to be something that is ultimately

4:33

risk adjusted to, see through whatever kind of volatility is happening in the market. And we're certainly getting some battle testing moments between coven, in 2020 and certainly in

4:35

2020, starting in 2022 through now in 2024. We've been started off by buying a local rental. Initially a modest start, I was still working full time, bought a duplex, paid 430 grand, the

4:38

California prices. For 200 bucks a month in cash flow, it's not what you call a cashflow win. But we still have it and hey, it's steady, it's appreciated a lot. We then went on to buy

4:40

some term key rentals in the Midwest, built up a bunch of great looking cashflow on those 60 K a pop on average, getting 250 250 bucks a month. Cash flow from each of those and then

4:42

eventually realize we didn't want to own rentals because they're semi passive at best. Right. At least while our kids are young, we have a nine and six year old now, but we found

4:45

our way to passive investing as LPs. And that's where the real, real journey begins now with Madison Investing in our passive investments, et cetera. Mike Stohler: Yeah, that's a great deal for everyone's like,

4:49

there's so many of us like how can I get out of thumb of being

4:53

told what to do and you work your butt off just to get a 20%

4:58

larger quota than Next year, congratulations, here's the new

5:01

quota. And it just drives you insane. I have over my wall

5:08

hanging right in front of me and I see it every day. It's my

5:11

motto. And it goes right along with what you're saying. It

5:14

says, build a life that I don't need a vacation from. Yes. And

5:21

everyone, that's why, you know, why do I just not sit on my

5:25

401k? My IRA, people think that they can't get out from the

5:31

grind. And it's just like, Yo, do I want to rent an RV for two

5:35

weeks don't want to go to the cabinet, I want to do anything

5:38

in the world. All I need is an internet and a laptop. And I can

5:43

run my business talk about the importance of switching to that

5:48

now I've gone kind of the other way from an LP to a GP. And then

5:53

I've built a team that has finally allowed me to kind of

5:57

step back. So I kind of did it. I went from a grind to no grind

6:01

the bigger grind. It's talk about people dreaming about

6:07

that. It's like how can I build wealth? Get out from that grind?

6:12

Build that life that I don't need to vacation from? Yeah,

6:15

what's the importance of keeping your passive investment

6:20

strategy? Has if instead of getting back into the grind?

6:25

Spencer Hilligoss: Oh, man, we could spend the whole time just talking about that is such a killer question, Mike, I would

6:31

argue one of the hardest ones, if not the artist, you know, I

6:34

look at the key choice that I was wrestling with this is about

6:38

in 2016, making great income w two, Jennifer my better half her

6:43

own distinct career. So we're doing dual income thing in the

6:46

Bay Area, getting great income stock and money away in our 401k

6:49

is maxing it out, really celebrating that for a decade

6:52

plus, nothing wrong with it got to get that company match. But

6:56

ultimately, when we sat there, there was one mentor I spoke to

7:00

out of many tons of networking calls that happen in meetings

7:04

that happened when I was trying to find my way, buying rentals

7:07

and I was like this is going to take forever. If we keep scaling

7:09

up buying one rental at a time. It's going to take us 20 years,

7:12

and I just don't know if my hands gonna function anymore after signing these loan docs that many times this is gonna

7:16

hurt. And the mentor asked me a question. He was like, what kind

7:19

of market do you live in? Do you live in a money state? Do you

7:24

live in a deal state? That sounds immediately derogatory to

7:28

every person that lives in a coastal pricing markets. And

7:30

that is not the intention. I'm not trying to talk down or punch

7:33

down on the truth. Mike Stohler: Yeah, you should not be offended by the truth.

7:39

Yeah. That's why I don't buy hotels in California. There are

7:44

other states and it has nothing wrong with California, it's the

7:47

market is the business. It's the way that California is compared

7:52

to other states. California is not the only one that I would

7:55

not invest in. But you have business truths. It's just the

7:59

way this 100% Spencer Hilligoss: That question is so powerful, and I won't have

8:03

time to give credit to the other formative conversations that I

8:07

had with because you get mentors, and you're my corporate

8:10

life. I look back at that. And I'm not sitting here. Like so

8:12

many folks in real estate investing community, I'm kind of like the they rip your heart on the WT world. And although I'm

8:18

sitting here, and we're talking, and I'm saying it was hard, and it's a grind, we can all go find a grind in every industry. Yeah,

8:25

I look back and I cherish that experience, I had great income,

8:28

that income enabled us to go buy our home to buy other properties

8:30

to go make investments. But I wanted something that said, my

8:33

number one priority. If you were to look at my calendar, until I

8:37

quit, it was work. It was not my family. And that's messed up. I

8:44

really believe that moment that spark of like knots, there was a

8:47

time and about 20 2017 around there. I didn't see my son for

8:51

like two weeks. You know, I was going in early sign was not up.

8:56

I was coming home late. So I was well down. And I was like this

9:01

is something's gotta give here. It's not just make more money.

9:03

And so ultimately, when it comes to forming, like, do I want to

9:07

go build a business? Or do I want to go invest in another

9:09

business? And that's the question when it comes to real

9:12

estate and folks will jump headfirst into going and

9:15

building a business. The moment they see a great paid ad on

9:19

Facebook, the moment that we read a book, I read 24 books and

9:22

listened to over 400 podcasts in an 18 month period while working

9:26

full time. No one needs to go do that either. That was

9:30

procrastination. Yeah. But I will say I tried to educate

9:35

myself so I didn't make a stupid decision like one of the biggest

9:38

stupid decisions which is let me go dive headfirst into building

9:42

a completely different type of grind that I don't want to lean

9:46

into. And and that's why we started investing as LPs. You

9:50

know, we invested as LPS as passive investors limited

9:53

partners in a multifamily deal and we got doubled our money

9:57

within a two and a half year period that has not happened

9:59

every I'm big disclaimer, very different market now than it was

10:03

then. Mike Stohler: But yeah, believe me, yeah, my goodness.

10:08

Spencer Hilligoss: But that was an eye opener. And so we did, I

10:11

did eventually get a bit more active, we started investing,

10:14

but then we said, everyone in my network was asking me, Spencer,

10:18

you're gonna go hop on a plane and go look at that property

10:21

sitting in the middle of Texas, you're gonna go walk that

10:23

storage facility sitting in the middle of Georgia. What if you

10:27

did some diligence and helped educate us? And then that was

10:30

the genesis of saying, hey, let's get one click more active

10:32

in addition to our passive, it's a journey. And I wish I could

10:35

give a quick and dirty answer to people to say, here's how you

10:37

decide how active you want to be. But it's a labor of love and

10:41

figuring out are you actually curious about this stuff.

10:45

Because I had done 13 years in a career where I cherished leading

10:50

people and managing people hardest thing anyone can do, I

10:53

swear, it's like, brutally challenging, emotionally taxing,

10:57

being a therapist, but also very gratifying. And I was done on

11:01

that front. Mike Stohler: But here's the thing, you've created the grind,

11:07

a different kind of grind, but it's on your terms. Absolutely.

11:11

Right. When you're a W two outside of your own company.

11:15

You're someone else's grind. Yes, you're making someone else

11:20

money, you're making some money, but you're making a corporation,

11:23

you're making some entrepreneur that created that company, all

11:26

the money. And what I say people are like, on my butt, you know,

11:30

own and all this and doing syndications and doing funds is

11:34

to grind. But in the middle of that grind, I can play golf. If

11:38

I right, I choose when I want to work. That's kind of the

11:42

importance in as the differential part. And you can

11:47

do that as the limited partner if he's just stuck, because it

11:51

is possible isn't a semester that you can do enough deals as

11:55

a limited partner, not have to worry about anything, and you

11:58

can replace your income. Yes,

12:00

Spencer Hilligoss: Yes, you can. If to me the biggest guiding

12:03

question, and there was a specific weekend I will reference when I share this my time. It's about time

12:09

compression. Right. And you know this, but we haven't talked

12:12

about this. I don't know if the listeners think of this as it

12:15

was mind blowing to me. So in 2016, Mike, I mean, Jennifer and

12:18

I hired a senator, and we took this super seriously, it was the

12:21

nerdiest exercise you can imagine. We sat down and said,

12:25

how do we break free? completely replace my income, completely

12:29

replace Jennifer's income from two w two careers. And we said

12:33

how do we remove the excuses? Because at first everyone, I'm a

12:36

human being. Everyone says we want instant gratification. I

12:39

want it. I want out now. That makes for so many easily

12:44

grabbable excuses why we can't do it. Somebody said, let's pick

12:50

a very long time horizon. Call it 15 years. And that sounds

12:53

absurdly long. But we picked it. And then the next weekend, we

12:58

did the whole thing again. And no, these were hard sessions,

13:00

man for a married couple with kids. We were sitting there

13:02

getting through cycles of argument. There was tears, there

13:06

was some laughter there was some reconciliation. I don't want it

13:09

to come across like this was some magical answer. We worked

13:11

for that stuff. And we came out the other side of that, saying

13:16

15 years is too damn long. We want to do it in seven.

13:20

Ultimately, we hit it in five. And I want to be candid with

13:24

folks and say like, if they want to do full passive work in their

13:27

career, they're making great income, it is doable, but if you

13:31

want to compress the time, that's the real question. Right?

13:34

For us. It was like if you want to do full passive path, there's

13:36

people in our group to invest alongside us. They don't hate

13:40

their careers. They're not burnt out. They just want to know

13:43

there's an off ramp. Yep. You know, so by the time that they

13:46

get to year five, year eight, maybe and they are in they're an

13:50

engineer or a developer or they're a product manager, and

13:55

they're sitting there saying I just want that to be ready for

13:57

me by the time that I'm ready to get more family focused. Then

14:00

you pull up that timetable a bit further but for us we said the

14:04

team too long. Let's figure out how to get passive and do some

14:07

active run our Investing Club that's how we compress the time

14:11

down to get two to five years are full passive replacement,

14:14

with some acted as a complement to so it's an exercise it's hard

14:18

man we still have to revisit that annually and we are better

14:20

at the exercise now. There's no tears involved. But just to

14:24

illustrate that,, it is absolutely possible. It just

14:27

takes Mike Stohler: It is, it is decision making . Yeah. Yeah. I

14:31

had to readjust mine after Covid also, just bought Hotel 2019.

14:36

Bam. Average of 86 percent occupancy down to about seven

14:40

and a half. You're like you know let's learn

14:46

Spencer Hilligoss: I reach out, it's not automated, I myself

14:46

Spencer Hilligoss: shocks to the system Mike Stohler: Right, shock to the system on made me a better

14:50

hotel and yes it ladies and gentlemen that hotel is still

14:54

going it never shut down. It continued operation even during

14:57

reach out to every person that actually takes the time out of

14:58

COVID He just think outside of the box and you become, you

15:02

know, half the hotel, you do whatever it takes to keep the

15:06

their busy day just to say, hey, I want to learn more. And we

15:06

investors happy and keep the asset open. So let's talk a

15:10

little bit about your club and everybody again, Spencer

15:10

have grown, our club membership, the bit of the old fashioned

15:12

way, it's been building long term relationships, similar to

15:13

Hilligos, madisoninvesting.com. We're going to be talking about

15:18

the com. Right now. What's the website about what do people do

15:22

I go to madisoninvesting.com, request the invitation, what happens?

15:42

what you and I were chatting about offline before we kicked off today, Mike, that has served us incredibly well. We're not

15:49

sitting here trying to push growth. This is not a startup,

15:54

much akin to the VC backs wonderful companies that I've

15:57

worked for my career that creates this pressure cooker

16:00

need for growth, like we're trying to build authentic

16:02

relationships with real human beings that are figuring out

16:06

their financial path forward. So reach out and have a human

16:09

conversation with me. And we sit there and just figure out where

16:12

we both wanting to head. And in the club, we'll share a handful

16:15

of the types of opportunities that we invest our own money in

16:18

throughout the year. Some of its multifamily storage, some other

16:21

niche assets, short term rentals, ATMs stuff, the cash

16:24

flows. And it's like, yeah, Mike Stohler: Yeah, but no hotels yet. That's a whole other

16:29

beast. Spencer Hilligoss: But yet on there. Yeah. That's a whole

16:32

other beast. Yeah, Mike Stohler: it came from, I don't know, 20, some years of

16:35

multifamily hotels, and they're just like, they're not quite the

16:39

same. Spencer Hilligoss: I want to mention to Mike is, I have found

16:44

it to be incredibly valuable to stick to one thing that I did

16:48

something I know. And before I jump into something, taking the

16:52

really taking the time. And so I just wanted to mention that with

16:56

my caveat yet for hotels. Mike Stohler: There you go. Alright, so someone wants to be

17:00

an LP limited partner with Madison Investing, some

17:05

multifamily, some other assets, the known assets, the cash flow,

17:09

that has a history of cash flowing? What's the minimum? Do

17:12

they have to be accredited? What are some of the requirements in

17:16

order to invest with Madison Investing?

17:20

Spencer Hilligoss: This requirement number one, please

17:22

be a reasonably friendly human being. requirement to

17:28

requirement to accredited investors and happy to chat with

17:32

non accredited, we're all human. And frankly, those rules are set

17:35

up with the best of intentions. But just because one, one little

17:38

number changes, it doesn't mean it changes the human so happy to

17:41

build relationships. This is a long game, limited partners.

17:45

There's a reason it's called limited partners. Right? So it's, it's not just passive investors. It is LP.

17:49

Mike Stohler: You're a partner. Yeah, the this is not something

17:53

the cash out in six months, and say, Hey, Spencer, you know, I

17:57

need my car payment Cash me out in six months? Yeah, yeah,

18:00

exactly. About five years, five to seven, five to seven, maybe

18:05

10, depending on another COVID or something like that. What are

18:09

some of the future projects that you guys are working on? Or if

18:13

you can talk about if they're under paperwork? What does

18:17

Madison Investing doing currently?

18:19

Spencer Hilligoss: Happy to and I'll try to keep it brief. Because I'm excited about the landscape moving forward, we're

18:22

in such a unique moment in the market, where asset prices,

18:28

basically, you and I've been chatting about cash flow and

18:31

cash flow, meaning if I invest $100,000, as an example, into

18:34

something, I want that start producing a meaningful

18:38

distribution rate back to me at least, to be compelling for

18:41

folks back in 2018 2017, let alone earlier, we were all

18:45

looking at deals that were 8% cash flow, wrap your money in

18:49

that, indeed see that in year one, not including what you get

18:51

on the back end, where you get this big growth pop. Those types

18:56

of opportunities are slowly starting to emerge, but they're

19:00

very few of them. Very few. And so I'd say right now what we're

19:03

interested in is really two things. Looking for year one

19:07

cash flow. And this can be from a storage facility, this can be

19:11

from multifamily, there's going to be more niche asset class,

19:14

meaningful year one cash flow, not just with a big loan, but up

19:18

against it on a variable rate loan. Yeah, yeah, trying to

19:21

reduce the risk. And the number to make sure that it actually

19:26

has a tax advantage of some sort built into that structure. And

19:30

what in this, if you had some tax nerds out there, I never

19:33

thought I wouldn't be but I am now trying to avoid the taxable

19:37

moments on the exits. And so buying big assets with other

19:41

people that we appreciate partnering with investing

19:44

alongside having those things cashflow for years. Ideally,

19:48

when the time comes refinancing out and getting a big

19:51

distribution from a cash out refinance, that's a beautiful

19:53

thing. Then you don't have to worry about a huge capital gains

19:56

tax bill and bonus depreciation recapture those types of thing.

20:00

So those are the two things right now we're working on putting together fun, and a couple other one off

20:04

opportunities that we see coming down the pipe. Mike Stohler: Okay, perfect. Now, Spencer, is there anything

20:10

that I haven't hit on, that you'd love to inform our

20:13

audience about? Before we leave?

20:17

Spencer Hilligoss: I would just say that if you haven't nerded

20:20

out on investing literature, which most people haven't,

20:23

because I think it kind of puts them to sleep, I would say, come

20:26

back to the core principles. This is something I have to do

20:29

myself, even though I've been in over 50 deals 50 investments

20:32

passively like this and actively as well. What is the goal? For

20:37

the capital? Right? It's such a simple sounding question. But

20:41

when people start seeing fancy looking investment summaries, I

20:44

do this to beautiful looking deck with an incredible looking

20:47

return as a projection. And the question is, are you solving for

20:51

cash flow? You are a high net worth individual, a family

20:57

office, you don't really need the cash flow. Exactly. You

21:00

know. So, really just sitting there and being honest with

21:03

oneself, I find that guidance to be incredibly helpful. And I

21:06

borrow that very simple question from someone else, of course,

21:09

and that has got to implement it every time I look at a new

21:11

opportunity. So I would just challenge folks out there to ask

21:13

themselves that is it what's the goal for the money? Mike Stohler: Yeah, that well, that's very true. I have

21:19

investors that do self directed IRAs and things like that. They

21:22

don't care about the cash flow, right? I do it staying in the

21:25

IRA. I have some high net worth. They don't need the cash flow.

21:29

What they want is how long can we keep it in? That's right.

21:33

They don't want the five year that. Hey, Mike, you have any 10

21:35

year? Can you have it? Can we reinvest, can we do that and

21:38

just keep it going? Because they don't need a couple $1,000 a

21:40

month, it's not even their car payment? You know, so it's not

21:44

Spencer Hilligoss: life changing? Right? It's not a life change. They don't want to even hounds. And that's beautiful.

21:48

Mike Stohler: Absolutely. Well, Spencer, thank you so much for

21:52

joining us today on The Richer Geek podcast. You be blessed in

21:57

that sunny Bay area where it's probably getting a little bit

21:59

warmer now. Spencer Hilligoss: We finally got some sun today. But hey, we

22:02

needed the water for the past couple of years. So we'll take

22:04

it. Mike Stohler: You definitely you definitely are filling those

22:08

reservoirs. I think that's true. All right. Have a blessed day.

22:12

And thank you for coming on our podcast. Yeah, honored to come

22:15

on. Thank you so much. Thanks for tuning in to The Richer Geek podcast, where we're

22:25

helping others find creative ways to build wealth, and

22:28

financial freedom. For today's show notes, including all the

22:33

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22:37

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22:45

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