Savannah Arroyo (02:11):
I got started real estate investing after I had my second daughter. My husband and I really just started looking for different ways to start growing our wealth, creating multiple streams of income. We didn’t want to be so dependent on our W2 jobs. We wanted a little bit more flexibility when it came to spending time with our daughters and we were looking into creating different streams of income to make that happen and real estate was really just a perfect fit. We started buying single-family homes to begin with, and then afterwards we fell so in love with it that we wanted to create a real estate business, and right now we’re doing multifamily syndications.

Robert Leonard (02:48):
There are a lot of different things that you could have invested in or started to generate more income streams. You could have started a side hustle. You could have invested in the stock market. I mean, there are so many different things. Why specifically real estate?

Savannah Arroyo (03:01):
I had always heard about real estate. I mean, I think they say, I forget the percentage, but how many millionaires or billionaires own real estate. Like it’s really just such an essential I’ve been discovering of like really creating that long-term wealth. I mean, it’s not a get-rich-quick thing by all means at all, but it’s really just with the different strategies within real estate, there’s a lot less risk and higher return. So really just educating myself, I mean, primarily on YouTube when I first got started, and then just listening to podcasts and reading books, it really just felt like the perfect fit for what we were looking for.

Robert Leonard (03:37):
When you were first getting educated, you just mentioned YouTube and podcasts. What were the specific resources? Were there certain books or YouTube channels or even podcasts that you listened to that really helped you out?

Savannah Arroyo (03:48):
Definitely. BiggerPockets on YouTube was one of the biggest things. The Rich Dad, Poor Dad quadrants that he kind of shows in terms of being an investor in that bottom quadrant and creating your own wealth that way, a business owner as well. Those were the big YouTube videos, Graham Stevens. And then for the podcasts, it was again, BiggerPockets, Michael Block, reading books. It was Brian Murray’s Crushing It in Apartments. Robert Kiyosaki’s book again, some of the BiggerPocket books. Really just a plethora of real estate investment tools.

Robert Leonard (04:23):
A lot of people get stuck in paralysis by analysis and feel like they don’t know enough to get started. At what point in your education process did you know that you were ready to get started and do your first deal?

Savannah Arroyo (04:37):
I think pretty early on. And I think that was really just from listening to these podcasts. I was on maternity leave at the time, so I’d listen to like three or four hours of podcast a day. I’m one of those people that listen to them on like one and a half, two times speed, but I would listen to them and get so motivated by other people’s stories. Like there are people from all walks of life, all different backgrounds, all different skill sets, especially the BiggerPockets Podcast, which is a really broad podcast. Just it felt like anyone can do it. So I was listening to those on a regular basis and getting so inspired that we really started taking action immediately and started kind of getting organized in terms of setting goals for ourselves, three to five-year goals, 10-year goals. We started creating an action plan of what we needed to be doing to get started kind of right now.

Savannah Arroyo (05:27):
After we bought the single-family homes, and then we were switching into multifamily and just thinking about syndicating. Syndicating, as you know, pooling together resources from multiple investors to buy these apartment complexes. We felt that would be so awesome. We love working in teams. We had kind of generated some interest from friends and family who are maybe interested in investing with us but didn’t want to do a lot of the heavy lifting and my husband and I wanted to do a lot of the heavy lifting. So it was really a perfect fit, the syndication model. And as we started looking through it more, just kind of like the legalities that go behind it and the underwriting that takes place and the business plan and strategies, we ended up investing in a coaching program.

Savannah Arroyo (06:05):
And for us, I mean, we both work full-time jobs. We have a three-year-old and a one-year-old at home. For us, it was super important to invest in a coaching program to have an extra set of eyes looking over all our underwriting, making sure that we weren’t missing anything, that we weren’t going to make a huge, drastic, expensive mistake with our money and our friends and family’s money. So we ended up investing in that and that really gave us the confidence to start so many of those offers. As we were underwriting deals and looking at different properties, it was helpful to have a coach with 20+ years experience looking at our underwriting and saying, “Yeah, this is a good deal. You should submit an offer.” And that really gave us the confidence to take that first step.

Robert Leonard (06:46):
I’d like to learn a little bit more about that coaching program that you invested in because a lot of people ask me if it’s worth it to buy coaching programs or masterminds or things like that. So I’d love to learn a little bit more in terms of maybe the cost and exactly how it all worked. Were you sending him deals and you guys were kind of one-on-one or what exactly did that look like? And you don’t have to share his name or the course or any of the specifics like that if you don’t want to, but I’d love to get as much detail about it as you’re willing to share.

Savannah Arroyo (07:15):
Yeah, definitely. Honestly, when we started looking up coaching programs, we didn’t vet out a lot of coaching programs. We ended up just kind of going with one of the first ones that we were looking into, and it was a $30,000 price point. And for us, knowing that you can easily make a $30,000 mistake in real estate, for us that price point was worth it. We felt that investing in a coach could potentially save us like a $30,000 mistake essentially. And so we ended up doing it. We’re super motivated. We didn’t really need that accountability piece. I know a lot of people that invest in these coaching programs specifically for the accountability piece, but we had that already and we had each other. We’re really motivated in terms of taking steps. So that piece was there for us.

Savannah Arroyo (08:00):
We were also looking into ways kind of just to create like more resources within kind of our network because as you switch, I mean, from doing single family, we’re used to doing these deals on our own. And then as you switch into multifamily and specifically syndications, it’s very much a team sport. I mean, I heard people say that and I was like, okay, I got to develop a team. But like now if they’re doing multiple deals, you realize how important it is that you have great relationships with brokers, that you have a great lawyer that you’re working with, a property management team. And that’s super important to kind of create that team, and these coaching programs usually have some sort of network, like a slack channel that you can go on and kind of create connections and relationships with other people who are looking to do kind of what you’re doing. So that was a helpful part of the coaching program as well.

Savannah Arroyo (08:48):
And we really primarily used it for the underwriting piece. Looking at the spreadsheets for analyzing and underwriting these multifamily syndications are pretty intense. I mean, they’re like eight different tabs, all these formula-driven kind of sequences. And so for us, it was helpful to have someone look at, okay, how do you evaluate taxes? What realistically are you able to increase rents every month? What other costs and expenses do you need to take into consideration? And honestly, at that point, it’s just practice. You’re practicing it over and over and over, the underwriting piece of it. And then having a one-on-one coach session where you’re able to sit down and look through your underwriting and take into consideration things that maybe are missing, that was a really helpful piece for us as well.

Robert Leonard (09:35):
I want to talk a bit more about your syndications, but before we get to that point, what was your very first deal? It sounds like it might’ve been a single-family. How did that come about?

Savannah Arroyo (09:45):
Our first deal was a new build townhome, a build to rent project in Atlanta, Georgia. We’re in Los Angeles, California, so the price point to entry is just a little bit higher here. So we naturally started researching different markets to invest in, and we fell in love with Atlanta, Georgia for a lot of different reasons. And so we were originally looking to do the BRRRR Method over there, which most people know you’re buying a property really below market value. It really needs like a full renovation. B, buying it, R, renovating. Renting it out. So putting a renter in there so then you start collecting that monthly rent. Refinancing with the goal of essentially pulling out all the capital that you put into it because now the value is a lot higher. So you’re pulling all that equity out and repeating it. So it’s a great way if you have a fixed amount of income or capital to really snowball and scale.

Savannah Arroyo (10:35):
And so for us, that was the perfect plan. But then when it came to overseeing a renovation across the country, for us that was going to be very stressful. We were a little bit nervous about it. And although we did start submitting offers and were looking at properties pretty heavily for a few months and had a good realtor over there, we just, when it came down to it, we didn’t want it to be a very stressful experience. We didn’t want to have something happen for us to like ruin our taste of real estate. And so we ended up going with a new build townhome project, which is cash flowing. It’s a really good deal. We were able to get in with a 15% down payment and buy two of them in the same community. It was really just an awesome way to get our feet wet and start collecting some of that cash flow every month.

Savannah Arroyo (11:19):
And then it allowed us when we switched into multifamily to go, as we were starting to have conversations with brokers, now we have this experience behind us. Even if it was just a couple of single-family homes, it still made a difference when we started having those conversations with brokers about multifamily deals.

Robert Leonard (11:35):
Was it two single-family deals that you did before you made the jump to multi-family?

Savannah Arroyo (11:40):
Yes.

Robert Leonard (11:42):
What made you make that jump? Why were you done with single-family? Why didn’t you continue to scale? You had two things that were working. Why not continue to do that rather than jump to an entirely different model?

Savannah Arroyo (11:53):
Just because of how we bought them. With the BRRRR Method when we were going to do it, we were essentially going to pull out all that capital and keep going. But because we bought the new built townhomes, our capital was now in these deals and we didn’t have another resource of capital to pool to keep investing. Since then, we’ve become very educated on different ways that you can tap in a different capital in your life, second mortgage, pulling out retirement, tapping into self-directed IRA accounts, and even life insurance policies. Like now we’re super well versed in tapping into all of these different equity sources, but then we didn’t have it. And so we were like, okay, we did those two deals and we wanted to keep going. We didn’t want to stop and wait around for another year to collect enough money for another down payment.

Savannah Arroyo (12:36):
So we started looking into ways that we could scale and create a business and we found multifamily. And then as we just started researching it and looked into what it took to do a multifamily deal, it was just so aligned with our skillsets and what we do with our W2 job. Like right now in the hospital, I oversee operations for multiple departments. So I’m used to process improvement, working on a lot of different projects at once, like communication piece is huge for me. So when it came to running a real estate business, we felt it was very feasible and would be a really great fit for us.

Robert Leonard (13:09):
Did you sell those two single-family properties to put that capital into a multifamily syndication?

Savannah Arroyo (13:15):
We did not. Those were kind of a buy-and-hold strategy with those ones. So we did not. We ended up learning about tapping into your retirement account under the CARES Act. Last year in 2020 due to everything going on with COVID, you could tap into your retirement. And this I really just learned from listening to podcasts and being really emerged in different real estate networking groups and that sort of thing like in the community. I heard a lot of people who were tapping into their retirement accounts penalty-free under the CARES Act. And so when we started researching it more, we obviously talked to our tax professional about this. But I mean, we had a big chunk of money sitting in our retirement account because since we started working, we were putting 15 to 20% of our paychecks towards it every month.

Savannah Arroyo (13:58):
So we were really saving primarily for this retirement. And then as we started evaluating our investment goals and kind of just our life goals moving forward, we wanted to have more access to that capital now. We didn’t want it to be sitting somewhere that we couldn’t touch till we were 65. It just wasn’t really feasible with what we wanted to do in our lifestyle. So it was a good decision for us to tap into that retirement penalty-free. You do have to pay taxes on it, but it’s over a three-year period. So that’s kind of how we got the capital to do our second deal.

Robert Leonard (14:31):
When you did that second deal, and it being a multifamily syndication, how did you know you were ready for that step? A multifamily syndication is a big step up from doing a single-family house. So it was two properties, but really one deal under your belt. How did you make that leap and how did you know you were ready?

Savannah Arroyo (14:47):
Like I mentioned before, the coaching program was a huge piece in that. But honestly, it really comes down to education and mindset. I mean, if you educate yourself on something enough, I mean, I’ve learned that in my nursing career and just different things I’ve done in my life. If you educate yourself enough, it eliminates a lot of the risk that you would have going into something new that you’ve never done before. So for us, it was really that education piece of reading books, we were attending webinars, listening to podcasts, connecting with other people who are doing what we were wanting to do, having conversations with our coach and making sure that we were really considering all possibilities when moving into multifamily syndications.

Savannah Arroyo (15:27):
And then the mindset piece of being able to take risks, to encounter new territories. I mean, that’s something that I’ve just kind of done professionally throughout my career and my life. Just really strong-willed in terms of kind of Law of Attraction stuff, like setting my mind to doing something. I mean, if you’re really specific on your goals and what you want out of life, I mean, for us, it was like, okay, in five years we want to move my husband into a full-time real estate professional. We want to have the flexibility to be able to take our daughters to soccer practice and pick them up from school. Like we need to be in a position where I can work part-time.

Savannah Arroyo (16:02):
And so our goals and our whys were so strong and we knew what we needed to take to get there. So like five years we were like, okay, we need to own this amount of multifamily deals at five years. So what do we need to do at three years to make that happen? What do we need to do in our first year of real estate investing to get to that point? Because we were so emotionally invested in our why behind our goals and then we had an action plan to get there, it was a pretty easy blueprint in terms of what steps we needed to be taking on a daily basis.

Robert Leonard (16:33):
Did you buy that first multifamily syndication in Atlanta where you already had those properties and kind of already developed a little bit of a team?

Savannah Arroyo (16:40):
No. We ended up buying it in Oregon. I have family in Oregon. When we first started learning about multifamily and practicing our underwriting, we were just looking at a bunch of different markets to just get practice. We were looking in Oregon because we have family there, we know the market and just kind of curious more than anything, but we ended up creating an amazing relationship with a broker in that time. I mean, a young, hungry broker. He was ready to get deals done, was sending us really good deals. And as we were underwriting that first one, it was a 12 unit up there at a million-dollar price point. We were like, oh, I think we can do this. And so we ended up pulling the trigger for that first deal up there.

Robert Leonard (17:18):
How are you finding other deals that you’ve done? Are you relying on that same broker or are you going into different markets, and what resources are you finding actually buying those deals?

Savannah Arroyo (17:28):
For us, it’s been really that broker, that first broker that we met. I mean, we’ve since done two more syndication deals with him. He continues to send us really good deals and they’re all up in Oregon right now. And although we do consider other markets, I mean, we still look in Georgia, Reno, Nevada, a couple of other markets. We have relationships with brokers there and that’s how we’re getting the majority of our deals although we’ll occasionally look on different websites, I mean, even LoopNet just to look to kind of see what the inventory looks like out there and just to see what people have to offer.

Robert Leonard (18:01):
How did you find that broker in the first place?

Savannah Arroyo (18:04):
Marcus & Millichap. He’s a Marcus & Millichap broker and I’ve listened to so many podcasts who are like, don’t go to the Marcus & Millichap, or their proformas are always out of control. But we were really just trying to find OMs, the operating memorandum. It has all the financials, so you could start underwriting deals. We were just going on websites trying to find these OMs so that we could keep practicing doing our underwriting. We found him through Marcus & Millichap or LoopNet and then got his contact information and started talking to him about the deal. I know for a lot of people to get started, there’s a huge hurdle in terms of not having the experience and getting brokers to take you seriously.

Savannah Arroyo (18:43):
But because we got on the phone and we were really specific about what we were looking for in the area, just gave him specifics in like the price point, unit size, value add components, he felt like we knew what we were talking about. He never asked us about our years of experience or kind of how many deals we’d done. In other markets, I mean, we’ve talked to probably 50 brokers at this point. Other brokers will definitely ask you your experience. And if you tell them you’ve never done a multifamily deal, maybe then they don’t take you as seriously. But then that’s not a stopping point. It’s just onto the next one or either keeping that conversation going to get them to take you seriously or moving onto someone that can kind of better develop that relationship. So really at this point, all our deals have been sourced from that same broker.

Robert Leonard (19:26):
For that first one, did you end up purchasing it for $1 million?

Savannah Arroyo (19:31):
Yes, we did.

Robert Leonard (19:32):
And what did the numbers look like on that? Did you have to put 25% down, 15%? Was it a BRRRR and you were able to take out a bunch of capital, even though it’s a bigger multifamily? How did all the numbers work?

Savannah Arroyo (19:44):
That was a $1 million, price point 12 units. It was a very strong value add. It was an older gentleman who was selling it. He owned a few different properties in the area and he was 1031ing almost all of them to go buy land down in San Diego. So he was motivated to sell. I think it was his smallest multifamily deal, so he didn’t really prioritize it. It kind of sat on the back burner. Rents were 25% below market. There were a few out-of-control expenses. He kept very good care of CapEx. The roof was good, different big spending items like that, like the HVAC, all that stuff was pretty good in good shape, but the rents are below market and some of the expenses were out of control. So we could go into this property and increase the rents, decrease those expenses and get great returns for our investors. We still have that deal. We raised money from four different people, friends and family, to get into it. And yeah, we’re just continuing to carry out our business plan on that one.

Robert Leonard (20:46):
Was the asking price a million as well or were you able to negotiate it down from the asking price to your purchase price of a million?

Savannah Arroyo (20:53):
It was a million asking price. This one was on market, I believe. It was $1 million asking price and it was good. We made it work with our numbers. We weren’t really interested in low-balling people and going back and forth with negotiations. We felt comfortable submitting a full offer price. What we did do is we submitted a personalized letter with our offer. And so we put a picture of our family, my husband and I and our two daughters. We just wrote a letter to the seller just saying why we wanted to buy this apartment building.

Savannah Arroyo (21:22):
We own single-family homes. We wanted to get into multifamily really just to provide time, freedom, and flexibility with our children as they grow up. We wanted to be not stuck in a job for 40 hours a week. We wanted to be able to be with them more than not. And so we kind of just wrote a personalized letter and made it less transactional to the seller. He said that he got an offer that was $50,000 higher and he told our broker to tell us that he ended up going with our offer specifically because of that letter.

Robert Leonard (21:53):
So that’s essentially a $50,000 letter.

Savannah Arroyo (21:55):
Yeah, exactly.

Robert Leonard (21:57):
And it probably took you an hour or so to write it or less. I mean, $50,000 an hour, that’s a pretty good return on investment, I’d say. When you were raising the money for the deal, how have you structured that? What is the legal entity around raising the money and how does that whole process work?

Savannah Arroyo (22:15):
Yeah. Syndications, as you start kind of learning about syndications, the majority of them are pretty much structured very similar. I mean, it’s usually an 80/20 split with investors getting an 80% of the deal, operators and GPs getting 20% because they’re the ones either signing on the loan, getting the financing, raising the capital, acquiring the deal, doing the due diligence, putting up the risk capital and then managing it throughout the lifetime of the investment, distributing communications to the best sellers on a regular basis. So it is a decent amount of work. There is a split, yeah, usually 80/20. You have GPs who are general partners coming in the deals who are kind of operating the deal and then LPs who are limited partners.

Savannah Arroyo (22:55):
So these are people who are investing passively in the deal. So basically they’re handing over their capital, usually about $50,000 invested in the deal, and then they’re getting amazing returns. I mean, they’re usually getting all of their original investment back within three to five years. So they get that $50,000 back, plus it’s usually around another $50,000 throughout the lifetime of the investment. So we usually do like 100% return on investment throughout usually five years. So it’s like a two times equity return at the end of our investment when we go to exit the property. And that’s pretty standard amongst multifamily syndications. I mean, cash flow is around 7-9% depending. So those are the numbers that we really look at to get for our investors and creating relationships with our investors.

Savannah Arroyo (23:42):
They’re really people in our lives like friends and family who knew we were getting involved with real estate. They trust us, they know what we’re doing and want to invest with us. And it gives them the opportunity to diversify their investments. It gives them the opportunity to invest in real estate, which has, I mean, usually better returns than any other investment out there. So now they’re getting better returns than they would be getting in their stock portfolio or something like that, and it helps diversify for them. So it’s a great opportunity for them to get into real estate and not have to do a lot of the heavy lifting and we do that for them. So it’s really a perfect fit since we started doing it, and we were originally doing it with friends and family.

Savannah Arroyo (24:20):
As I started talking about it at work with some of the nurses and doctors I worked with, I just felt that there was so much interest there. I mean, these are busy working professionals who don’t have a lot of time to be investing in real estate and doing a lot of like the management, tenants toilets, that sort of thing, and dealing with all the problems of it. But they were super interested in the syndication model, which allows them to invest in an apartment building. And now they’re a part-owner in an apartment building. And so then that motivated me to launch The Networth Nurse to create really just an educational platform for people to learn more about real estate investing specifically through multifamily syndication, some of the returns you can get, and really just how easy it is to get started investing in real estate through this specific strategy.

Robert Leonard (25:05):
Some of the educational resources that you mentioned that you use when you got started. Michael Block, for example, we’ve had him here on the show. We’ve had Graham Stephan. A lot of these guys, not necessarily Graham but specifically Michael, a lot of the syndication people that we’ve had on the show are doing hundreds of units. And for a lot of people listening, that probably seems out of reach. Even for me, it seems a little bit out of reach. I’m not ready to do a hundred-unit apartment building myself.

Robert Leonard (25:31):
So I think what’s really interesting about your story is that you’re doing a million-dollar 12 unit, which a million dollars isn’t a small amount of money by any means, but it’s probably doable for a lot of people that are listening to the show rather than a hundred unit that’s 5, 10, 15, $20 million. So I want to dive into a little bit more of the specifics. When you’re forming this syndication structure, what does it typically cost from a legal perspective? How much does it cost for an attorney and what exactly are they doing for you and how does all of that piece work?

Savannah Arroyo (26:03):
That is a big price point in doing these syndication deals. We have had people, even when we did that first 12 units a million dollars. Yeah, definitely that was something we could have potentially JVed, especially with the amount of capital that we put into it. But we were invested in that coaching program primarily to learn how to syndicate deals. So for us, it was worth it to go into that first deal with the numbers knowing that we were going to syndicate it so we could learn exactly how the legalities work, how to create those investor relations and distribute the communications and disbursements. We wanted to learn that from our first deal.

Savannah Arroyo (26:41):
So we calculated those legal fees into the deal from the beginning. And I mean, they vary. We’ve worked with one lawyer for our first three, we’re switching to a different one now just for different reasons. But I think that first one was like maybe $10,000 for legal fees, maybe eight to 10, somewhere around there. Depending on kind of how your lawyer structures it and what entities they’re forming, it can vary. But it was worth it for us to go even into that smaller deal doing that. And like you said, it’s intimidating to come into syndications and hearing about people. I mean, those people do preach like go big or go home. Like why waste your time with a 12 unit when you could be doing in a hundred unit? It’s the same amount of work, you’re getting better returns.

Savannah Arroyo (27:29):
We felt like we kind of knew that, but that just goes to show that you take every advice with a grain of salt and do what works best for you. Like for my husband and I, we had a couple of people of close family members who were interested in doing the syndication. So we had an idea of like the capital amount that we had raised and we knew going into it like, okay, a $1 million price point in the Oregon market, that’s going to be a sweet spot for us to do this first deal. There’s not a one path fits all for every one of getting started. There are so many different ways you can structure deals. There are so many different ways you can make it work. So just know that going into it, that you can make your strategy work for you.

Robert Leonard (28:10):
I realize that every deal and every person’s situation is going to be different like you just mentioned. But what type of legal structure does your attorney typically use for syndication? Are they using an LLC, an S-corp, is it a partnership? How are they structuring it?

Savannah Arroyo (28:25):
We do LLCs. When we buy the apartment complex, we’re forming an entity in the name really just of the apartment complex. I mean, like our first one, Marion Avenue Apartments, LLC. Forming the LLC in the name of that and then that’s how we purchase the building. We’ve done loans with local credits up to this point. We haven’t done any agency debt. So we are signing on the loan. And then we offer a piece of our GP to another investor that’s willing to sign on the loan with us. So this is usually someone who maybe wants to get started in multifamily syndications but doesn’t want to sign up for a coaching program. These are kind of the people that are investing in our deals passively, but then we’ll give them like maybe 5% of the GP for signing on the loan. And then they get that credibility moving forward talking to brokers saying that they GPed on a deal.

Savannah Arroyo (29:14):
So that’s kind of how we’ve gotten creative of structuring these deals and motivating people to sign on the loan with us by giving them this opportunity. And then in terms of the legality, like our first deal, they did a 504, which you don’t really hear about it too much. That’s because we had investors all from the same state. They rely more on state laws as opposed to federal laws with the 504. So it made sense for that first deal to structure it that way. But now moving forward as we’re incorporating investors from a lot of different states, we’re switching into the 506(b).

Robert Leonard (29:46):
You mentioned a few minutes ago that the GPs often have to put up the risk capital. For those who haven’t heard of risk capital, what exactly is that?

Savannah Arroyo (29:55):
Not necessarily risk capital, we put up all the risk capital for our own deal. So we’re putting earnest money deposit. So when you get a deal under contract, you’re submitting over an earnest money deposit, I mean, just to show that you’re taking the deal seriously. So it’s a chunk of money that you’re putting into escrow with the title agency just that you’re moving through due diligence on this deal. So we put up the earnest money deposit, all the inspector fees, all the due diligence fees. So things that come up in terms of like traveling out to the property to do the inspection, paying the inspector, getting the legal documents up and going. So that’s the risk capital, we always put that upfront in all our deals.

Savannah Arroyo (30:32):
And then what we have for our GPs is they sign on the loan so now they’re a guarantor. To be doing multifamily deals, the financing’s a little bit different. You need to have the net worth liquidity in the amount of the building that you’re purchasing. So even for that million-dollar property, my husband and I were just getting started in real estate investing, we didn’t have the net worth liquidity to meet the requirements by the credit union for that. So we had one of our investors who was willing to sign on the loan with us and with us and them combined in our net worth liquidity, we did meet the million dollars. So that’s kind of how we structure it in terms of the GP really just signing as a guarantor. Another phrase is like a KP, key principal, or a sponsor. Someone that has the net worth liquidity on these deals to come in and then they usually get a portion of the GP for doing that.

Robert Leonard (31:23):
On a million-dollar deal, what is the typical risk capital that somebody has to put up? Are we thinking $5,000, $10,000 or are we talking more like 30, 40, 50,000?

Savannah Arroyo (31:34):
Like 30 probably. I forget what the earnest money deposit was. I think it was like maybe 3%. It was like close to maybe $15,000 or so for the earnest money deposit. Then we had to do a good faith deposit for our credit union to get us started on the financials. That was another $5,000. The travel was like $1,000 with flights, getting a rental car. We stayed with my parents, but lodging, that sort of thing. And then the inspector fee, $1,000 to $1,500 for that. So those are kind of the basic risk capital fees.

Robert Leonard (32:07):
You mentioned travel and I’m glad you did because that was one of the things I wanted to ask you about with even going back to your single-family properties that you did and your multifamily syndications, are you traveling to all of these properties when you’re buying long distance or are you managing them strictly from a distance?

Savannah Arroyo (32:23):
This was all during COVID when this was happening. So travel was a little bit more difficult. For our single-family homes that we bought in Georgia, they were new build, brand new. We had an app that they were regularly putting up pictures and videos on. So we could see the whole process of how these were getting built. And then we had an amazing inspector who went in there. Even for our newly built townhome, you’d be shocked at the amount of stuff that he found in there. It was insane. But he did a very great job going through it. He took all these pictures. We submitted it back to the builder so that they could correct all that stuff. We had a good realtor who was very willing to drive by whenever we needed to. So that was super important for us. We have never been to Atlanta, Georgia. So we still haven’t seen those. It’s definitely a priority for us to go over there at one point and see them just to kind of check out the city. So that was those ones.

Savannah Arroyo (33:11):
For the 12 unit up in Oregon, we were unable to attend the due diligence. So that was something that my dad was able to go to for us. He did the walkthrough and inspection on that building. And then after we closed on that one, we did fly up there to see it and walk it and, yeah, just visit in-person. And then since then, doing these multifamily deals, because you’re like usually walking in every unit and there’s just like a lot, it’s a way bigger piece. It’s definitely essential to be visiting these.

Robert Leonard (33:45):
A few minutes ago, you also mentioned that you could have potentially JVed this first Oregon property versus doing a syndication. Before we get into how that might’ve worked specifically for that deal, explain to us what the difference is between a JV and a syndication.

Savannah Arroyo (34:00):
JV or joint venture is going into a deal pretty much with a partner that you’re kind of just splitting the pieces of the deal. So with these deals, there are usually four main pieces. The due diligence risk capital piece of like acquisition. Finding the property, acquiring it, going through the due diligence. That’s actually kind of two. Finding the deal is like its own separate thing that takes like sometimes months and its own underwriting. So finding the deal, then acquiring the deal. Then asset management. So that’s overseeing the management piece and business plan for the property over the lifetime of the investment. So that’s a pretty time-consuming piece, that’s a big chunk of the project. And then the capital is usually the last piece. So if you’re syndicating, that’s bringing the capital to the deal.

Savannah Arroyo (34:46):
When you’re joint venturing, most people develop these relationships strategically with other people who are able to kind of balance out what you’re bringing to the deal. So say if I’m going to be finding the deal and I want to run it throughout the lifetime in the investment, it’d be both strategic for me to partner with someone who’s willing to do the due diligence phase, put up the risk capital, and then also bring the financing and the money to the deal. And then that’s kind of how you structure these joint ventures.

Savannah Arroyo (35:12):
This piece was so confusing to us when we first got started. We were like, how do you even begin to have these conversations with people in terms of joint venturing? But now since we’ve been doing it, it’s like networking and being a part of these masterminds, when you’re talking with people, tell them what you’re looking for, tell them what you’re doing. Like, “Hey, we’re looking at smaller midsize apartment deals up in Oregon. This is what we can bring to the table. I can bring capital to the table. I have investors ready and willing to invest. I can find the deals. I have a great relationship with a broker. This is what we’re willing to bring.” And when you have these conversations with people, you start to create relationships where it’s like, “Oh, okay, I can make a strategic partnership work.”

Savannah Arroyo (35:49):
So that’s kind of how we could have potentially done that first deal of like split it. Maybe someone else brought as much capital, splitting the capital piece, and maybe they’re willing to asset management. So that’s kind of how you structure a joint venture. A syndication is really general partners and limited partners. So there is that piece of people wanting to invest in these deals without doing any work. That’s a selling point for these limited partners coming into these deals of them being able to plug in their capital with a vetted-out operator who knows what they’re doing, someone they trust who’s willing to run this project. And so they have a very much passive approach.

Savannah Arroyo (36:24):
And these people, the majority of the time want to be passive. They are looking forward to getting the quarterly disbursement, that check in the mail or in their bank account, and their updates on the financials. Like our passive investors just look forward to that quarter where they get the check and then we give them a video on all our financials and they can see, okay, cool, this is awesome. And then they go back to their work. For my case, it’s a lot of doctors and nurses, and they’re busy doing that and creating income that way.

Savannah Arroyo (36:49):
Those kind of are I guess structured in a way where there’s the general partners who, like I said before, kind of like 20% of the deal, 80% go to the limited partners. And then the operators are solely responsible for all those pieces I mentioned before; finding the deal, acquiring the deal, doing the due diligence risk capital, bringing all the capital to the deal, raising the money for the deal, and then managing it throughout the lifetime of the investment.

Robert Leonard (37:13):
In addition to your 20% as the GPs, do you collect the management fee?

Savannah Arroyo (37:19):
It depends on the deal. So we’ve structured our deals very differently. I mean, that first deal, we didn’t take an acquisition fee just because we were getting in it with like really close family and friends, so we didn’t feel like we needed to do that. And we had a big chunk of money invested in it. So that one we took like I think a 3% asset management fee that we do collect monthly, but in our case like quarterly because that’s how our disbursements work. For the second deal, we did take like a 1% acquisition fee and no asset management fee on that one. So it just really depends on how the deal looks and how the numbers work for investors. We’ll kind of structure it differently.

Robert Leonard (37:53):
When I first got started in real estate, I struggled with limiting beliefs. Limiting beliefs actually held me back from starting to even study real estate because I never thought that I could do it. I thought it was only for the rich. What were some of the limiting beliefs when you were getting started in real estate and how have you overcome them?

Savannah Arroyo (38:10):
This is something, like the mindset piece was something that I have just been really strongly doing for myself since I graduated high school college. Like me, it was like Law of Attraction. Think and Grow Rich was one of the most life-changing books that I’ve ever read because I was reading it at a point when I was graduating from college. And that really just changed my mindset of like I can do anything. There’s nothing I can’t achieve if I put my mind to it. And that mindset piece is so instrumental in everything that I’ve done since then, especially with real estate.

Savannah Arroyo (38:45):
I mean, for me, that was a big piece in getting started in nursing of applying for jobs that I didn’t have any experience for and growing and climbing the leadership ladder and then moving into administration as a nurse with no supervisor experience and now supervising and overseeing huge teams within a hospital and healthcare system. Like that is a huge mindset piece for me of being able to kind of overcome those barriers of you thinking that you’re not qualified to do it.

Savannah Arroyo (39:12):
And when it came into real estate, I mean, that was a huge hurdle for me of even launching my brand when my husband and I were wanting to start this real estate business. At first we were thinking of strategically partnering with other capital raisers. But then as we started learning more about it, we were like, okay, we need to build a brand. We need a platform to stand on with our educational material. And as I started researching kind of like how to do this and what other people were doing, I was like, wow, there’s already doctors out there doing what I’m doing. There are already big well-known doctors who are doing syndications and appealing to medical professionals. Like there’s no room for me in the space.

Savannah Arroyo (39:46):
And that was like a big hurdle that I had to jump over. Thinking there’s already too many people out there doing it, I didn’t fit in. Like total imposter syndrome. And it really just kind of came down to definitely the support of my husband and then really talking to other real estate professionals who are such entrepreneurial mindset, super positive people. When I launched The Networth Nurse, ironically I didn’t get a lot of support from my friends and family. But in the real estate community, the overwhelming support from the people of like, “Oh my God, this brand’s amazing. This is so cool. I love what you’re doing.” Just that networking within the real estate community itself was so empowering and encouraging.

Savannah Arroyo (40:26):
Another piece of the mindset was listening to podcasts and listening to people’s stories. Going on BiggerPockets and listening to all these people making it work was so inspiring for me. And that’s a huge motivation for me now coming on and doing these podcasts because I hope sharing my story of working full time, being super invested in my nursing career, having two young children and I’m still making it work, to give other people the motivation of like, “Oh cool. I can do it too.” I mean, that’s the huge piece.

Robert Leonard (40:52):
Even though you’ve done deals and you’ve come a long way from your limiting beliefs, do you still struggle with them today? Do you still find yourself being stressed when doing deals or even questioning your abilities to do what you’re doing?

Savannah Arroyo (41:05):
Definitely yes. And I know it comes with launching a brand and putting yourself out there. But I mean, some of the feedback and comments I’ve gotten on my stuff haven’t always been super positive. I mean, for instance, I was doing this video. I’d put something on my Instagram page about me talking about kind of alternative investment strategies, not solely focusing on your 401(k), me giving them a personal example of me pulling from my retirement to start investing in real estate. I had someone close to my life who watched the video and was like, “You’re giving bad financial advice. You shouldn’t be telling people to pull from their 401(k). Especially with an employer-matched program that most employers have, people should be investing in it.” And it was just, the comments were taken so out of context, and for someone to tell me I’m giving bad financial advice, definitely, it did sting a bit in terms of, “Wow, do I need to rethink what I’m doing?”

Savannah Arroyo (41:55):
But I always give disclaimers when I talk to my investors. Especially a lot of people have tax questions and I always tell them to consult with their tax professional or they need to advise with other people in their lives in terms of finances, stuff like that. I mean, there are situations like that that come up. I’ve had someone blast my website and saying all this stuff that was wrong with it. So it’ll happen. I don’t think that ever goes away. But it’s just, like I mentioned, take it with a grain of salt and keep going. Stay true to you. I’m definitely genuine to myself and I take comfort in that.

Robert Leonard (42:28):
Yeah. That’s one of the hardest things about putting yourself out there is you know when you go into putting yourself out there and creating content that you’re probably going to have “haters” if you will. It’s one thing to know it’s coming. And then when it actually happens, it’s like, oh, wow, that actually hurts a little bit more than you expected it to. And it’s the same no matter what you’re doing. As long as you’re putting content out there, those people are going to exist. And it’s definitely a hard beat. I mean, it happens with this podcast all the time: Instagram, social media, Twitter. It doesn’t matter what it is. They’re everywhere.

Robert Leonard (42:56):
You’re doing everything that we’ve discussed so far while working what I would consider be a demanding full-time job, especially during a global pandemic, while also having a family with two daughters. How do you manage your time and how are you able to be successful in all of these different areas of life?

Savannah Arroyo (43:13):
Good question. I mean, I have daily habits that really motivate me and energize me. I’m big on meditating. I do daily juices. I work out. For me, that health piece that comes first is so imperative to everything I do. By meditating and eating good and juicing and exercising, I always feel good. I mean, not always, but I’m usually always feeling good and have good energy to get stuff done. So that’s the first and foremost piece. And then the mindset of, like I mentioned, constantly educating yourself, reading books, feeling inspired and motivated. I still listen to podcasts all the time. So that’s another piece.

Savannah Arroyo (43:52):
And then being specific on our goals. We are so strongly focused on our why and where we want to be in five years and what we want to achieve out of life. When we get stuck or overcome a hurdle or an obstacle and we feel discouraged, yeah, taking a break and having the life balance of being able to kind of come to yourself or step away if you need to and focus on something else, being able to prioritize in that sense. But then coming back with even more motivation and inspiration to keep working towards goals in life, like that’s huge for me.

Robert Leonard (44:28):
How has having a supporting husband impacted your real estate? What has it been like building your real estate business with a spouse?

Savannah Arroyo (44:35):
That’s huge. I mean, honestly, I couldn’t imagine doing it without him just because, well, the amount of time that we spend on it first off. When we put our daughters to bed, we’re really grinding through our real estate. So if I was sitting at a computer on my laptop doing that for like three to four hours every night and he wasn’t, it’d probably feel a little unbalanced. And that’s not to say we’re totally obsessed with it. I mean, if we’re hanging out in our office and both of us on our computers doing stuff, we’ll take a break and talk about other things or do different things in the meantime like play a game of dominoes, take a break, and that sort of stuff. So we have the balance piece.

Savannah Arroyo (45:11):
But like having each other to bounce off of on the goal piece. I mean, it’s just kind of like raising kids and being in a marriage. If you feel that the work or the relationship is unbalanced and you’re contributing more than your partner, I think it’d be very difficult to move through this. But then also the encouragement and support that I got when I launched my brand. I mean, when that instance happened yesterday where it’s someone hating on me, like just being able to vent to my husband about that and him to encourage me and just be the sounding board for me and our relationship and throughout our business, like that piece has been so huge.

Robert Leonard (45:43):
When you think back on your life, whether it be personally or investing-related, what piece of advice have you received that has really had an impact on you and you continue to use it and think of it to this day?

Savannah Arroyo (45:54):
I would say getting the mindset piece first. I mean, that has been so imperative and the people that I hear that either don’t get started in real estate investing or drop out or quit. Like it almost always comes down to mindset. So I’m a strong believer that if you have that mindset piece nailed down, that you can really achieve anything. And that’s by going out there and reading all these cheesy books that everyone recommends like the Law of Attraction, Think and Grow Rich. I read You Are a Badass at Making Money, Crushing It by Gary V. Tony Robbins is huge for me. These self-help gurus that are out there. I mean, I used to feel so cheesy and almost embarrassed to admit that I was consuming so much self-help stuff, but it has really just changed my life in terms of me feeling capable and able to achieve my goals. That piece is huge.

Robert Leonard (46:46):
Savannah, thanks for joining me on the show today. For those listening that are interested in learning more and might want to connect with you, where’s the best place for them to go.

Savannah Arroyo (46:55):
Yeah, you can find me under The Networth Nurse on all social media handles. So that’s Facebook, LinkedIn, YouTube, Instagram. My website is thenetworthnurse. You can email me at savannah@thenetworthnurse. I love connecting with other people. If you’re remotely interested in anything that I’ve been saying, please reach out to me. I would love to connect.

Robert Leonard (47:14):
I’ll be sure to put a link to your website and a couple of your popular social media channels in the show notes below for anyone that is interested in connecting with you. Savannah, thanks so much.

Savannah Arroyo (47:24):
Awesome. Thank you all.

Robert Leonard (47:26):
All right, guys. That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (47:31):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.