JF1141: How RealtyMogul.com Consistently Delivers Great Returns to Their Investors with Jilliene Helman
As Co-Founder and CEO of RealtyMogul.com Jilliene has been working hard daily to make the company what it is today. With over $300 million invested from investors and $1 billion of financed properties, Jilliene has done an amazing job, with the help of a great team, building a company that puts their investors first. Hear what she says separates her company from the many other passive investment opportunities out there. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
– CEO and Co-Founder of RealtyMogul.com and is responsible for the company’s strategic direction and operations
– Has underwritten over $5 billion of real estate and was previously a Vice President at Union Bank, where she spent time in Wealth Management, Finance and Risk Management.
– Since launching, the company has funded more than $260 million in real estate transactions and raised more than $45 million from notable investors
– Certified Wealth Strategist®, holds Series 7, Series 63, and Series 24 licenses
– Based in Los Angeles, California
– Say hi to her at: https://www.realtymogul.com
– Best Ever Book: The Everything Store
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
With us today, Jilliene Helman. How are you doing, Jilliene?
Jilliene Helman: Doing fine, thanks!
Joe Fairless: Nice to have you on the show. A little bit more about you – she is the CEO and co-founder of Realty Mogul and is responsible for the company’s strategy direction and operations. Their company has been busy, and here are some stats that are quite staggering – over 140,000 investors have joined her company as a website and platform; over 300 million dollars invested through her platform, 65 million dollars paid out to their investors and 0 dollars of principal loss by their investors. Holy cow, that’s impressive! Tell us a little bit more about your background and your current focus.
Jilliene Helman: Absolutely. I grew up in a real estate family, so at the benefit of talking about real estate at the dinner table, and really learning real estate from the ground up, which I feel very blessed to have been able to do. I went to work in banking coming out of business school; I spent about five years in banking and then realized that I really wanted to do something where I could help people. I wanted to build a company where I could help people get access to commercial real estate, help people make money through commercial real estate, generate income and passive wealth through commercial real estate to launch Realty Mogul.
Today, Realty Mogul is an online marketplace for individual investors to come to our website and invest in a whole variety of different types of commercial real estate: apartment buildings, office buildings, storage facilities, industrial facilities… We partner with real estate companies all over the country to bring their investment opportunities to investors all over the country.
Joe Fairless: Okay. How do you differentiate your company from other platforms out there?
Jilliene Helman: I think there’s a couple ways. One is track record. We’re one of the larger real estate investing platforms, and that’s really beneficial because it allows us to work with our clients and build a really stellar team. We’ve got 80 professionals at the company.
I think one of the other big differentiators is how we think about real estate investing. We are boots on the ground on every single piece of real estate. There are some platforms where they’re not actually going out and kicking the tires (if you will) on the real estate. We’re doing site visits on every piece of real estate that we invest in.
I’ll interlude with a funny story – one of our guys in our underwriting team has just come back from a site visit, and one of the things we were concerned about with this specific property was the parking ratio; was there enough parking for this multifamily apartment building to support all of the tenants? So he comes back and he knew that that was one of our concerns, and he says “We woke up at [2:30] in the morning, we drove the parking lot, we counted 22 open spaces. I think we’re good on parking.” That’s one of those things in real estate that you can’t figure out unless you really go boots on the ground.
We’re really proud of our underwriting process, we’re really proud of the fact that we step foot on every property. Yes, we’re this digital marketplace, yes, you can invest with us on the internet, but we’re a real estate company as well.
I think we really differentiate in our underwriting, I think we differentiate in our track record, I think we differentiate in our team, and also kind of white glove service. We build long-term relationships with our investors. We stay involved in the life of every investment, we have an asset management team that is monitoring all of our investments on a monthly and quarterly basis, so we really wanna be that white glove provider, as opposed to having an investor invest online and then never hearing from us again.
Joe Fairless: You said your team does site visits for every piece of real estate you invest in. Am I hearing that right that you all invest alongside the investors?
Jilliene Helman: In most instances we’re not investing alongside the investors, unless it’s coming [unintelligible [00:04:49].08] We have two ways that investors can invest. One way is through a public, non-traded real estate investment trust; we have two real estate investment trusts – one is focused on income, and one is focused on growth. We have investments in those entities. The majority of that capital is still investors.
The other way that investors can invest with us is via private placement. A private placement – that’s where they’re investing in a specific property… A specific apartment building, a specific office building. The REITs are diversified pools of investments, while the private placements are specific transactions.
Joe Fairless: And in which one of the scenarios are you investing alongside the investors?
Jilliene Helman: In the REITs we have a co-investment from our parent company.
Joe Fairless: But on the property-specific, the private placement ones, you’re not co-investing; you’re gathering everyone and connecting the dots. Cool. With your growth – I mentioned briefly before we jumped on the call, I was just watching an interview on YouTube with you on Fox TV, the woman interviewing you; this was published in June 2014. When she interviewed you, she said that she met you a year and a half prior, so was that like maybe 2012… And she said that you had six employees, and now you’ve just said you have 80 professionals. So six to eighty people – what would your attribute your growth to, if that is a different answer than what differentiates you?
Jilliene Helman: Yeah, I think we would attribute our growth to investor demand. You’ve got all of these investors all over the country that are struggling to find good investment opportunities, and there’s real risk in every type of investing – in our company, in real estate, in all types of different investments, whether it’s stocks, bonds, private/public etc. But I think that you’ve got investors who are really hungry for investment product that makes sense, and real estate, in my opinion, makes a lot of sense. It’s tangible, you can touch it, you can feel it, people are living in it, people are working in it. So we have a lot of demand from investors who have raised their hands and said “Hey, we wanna invest. We want exposure to that apartment building or that office building”, or otherwise… Without that, we wouldn’t have a company. We’re in business to serve our investors every single day.
Joe Fairless: With some of the stats that I see on your website and that I was repeating to introduce you, one of them – the $0 in principle lost certainly stands out, especially given the amount of volume that you all have done; over 300 million dollars invested on your platform. Surely there has been a deal that has gone sideways, and maybe it’s a wrong assumption, but if so, then how was that handled?
Jilliene Helman: We absolutely have deals that have not met the mark. I’m a very transparent CEO; we don’t try and hide any of that. In real estate there’s real risk. So what we do when we have challenges with deals is we step in to the extent that we can. When we’re looking to invest in commercial real estate transactions, we’re gonna negotiate rights, what are our rights.
One of the beauties of investing collectively is that you have bargaining power. If we have 100 investors that collectively all want to invest in an apartment building, we’re gonna get collective bargaining power on behalf of those 100 investors. That gives us power on teh asset management side.
I’ll give an example of a transaction that didn’t work out well. It’s actually related to probably one of the biggest mistakes that I’ve made in real estate in my career. We ended up investing with two real estate companies that had never done a transaction together, and that was a big mistake; we don’t do that anymore. You’ve gotta have partners who have done business together, who know the rules of the road of working together… But these two operating partners – we invested in a transaction alongside them, and they were at war. They were threatening to sue each other, one wouldn’t let the other spend money to fix the parking lot, one would let the other spend money to actually execute on the business plan… This thing was a nightmare.
We had some rights because we were a large investor in the transaction, so we went in and we said — there was no ability to reconcile this. First we asked one partner if they wanted to leave; no, they’re not leaving. We asked the other partner if they wanted to leave – no, they’re not leaving. So we had to sell the asset. And we didn’t sell that asset because it was a bad asset. We actually bought very well on that asset. The investors ended up making money on that transaction, but the moral of the story was we had to sell the asset because we had bad partners.
The outcome of that was directly related to our asset management efforts. So it’s not to say that we can solve every transaction – again, there’s real risk in real estate – but we pride ourselves on doing everything we can, and having a dedicated team of asset management professionals, having a dedicated team of real estate professionals to step in and sort of muscle around a little bit to try and get to a great outcome.
Joe Fairless: As the CEO and co-founder of a company that has had just phenomenal growth, tell us the story of a very challenging time within this growth period.
Jilliene Helman: We go all the way back to the beginning. We’ve had investors invest over 300 million dollars via RealtyMogul.com, and we’ve also raised 45 million dollars in venture capital for the company. So an aggregate since starting the company, I’ve been involved in raising (let’s say) 350 million dollars. I cannot tell you how hard raising the first million dollars was for the company. We didn’t have a website, we didn’t have a business; it was my co-founder and I… We were the small, teenie company that really doesn’t have much to show for themselves. I had 100 coffee meetings to raise our first million dollars. And I don’t drink coffee, okay? No caffeine.
Joe Fairless: I don’t, either.
Jilliene Helman: And it was just wild. I think back to the perseverance that you need to be an entrepreneur, and the perseverance you need to be a real estate investor. Real estate operating companies – they’re entrepreneurs, too. And that was really, really challenging. There was a lot of times in the early days at the company where we could have just thrown our hands up and just said “This is too hard, we’re not gonna do this. We’re not gonna keep moving forward”, but I’m grateful that we did.
Joe Fairless: As far as the 100 coffee meetings and eventually the first million appeared – was it from one group or person, or was it cobbled together?
Jilliene Helman: No, it was cobbled together. 25k here, 50k there, 15k there… It was absolutely cobbled together. Anyone who had an inkling of believing in us we wanted money from, because we wanted to get the company off the ground.
Joe Fairless: Thinking back to the people who did invest, what was your relationship with them? Because I imagine they were more investing in your and your business partner, as much as the business plan.
Jilliene Helman: I think that that’s absolutely true. The interesting thing that I’ve found – and this is kind of angel investing now, where they’re investing in the company, not in real estate transactions unless they were angel investors in the parent company. I didn’t know them very well, frankly. I mean, there were folks that I would meet one or two times and they’d invest $25,000 or $30,000 because they were interested in the business.
I didn’t really have a big network of angel investors when I left banking. I left banking to start this company, so that wasn’t my network, that wasn’t my environment or the kinds of people that I kept company with. For many of them, I met them one or two times and they have high risk tolerances; you have to have a really high risk tolerance if you’re doing angel investing… And one thing lead to another.
Joe Fairless: What would you say is important for a Best Ever listener who’s listening to this and has a company, they’re looking to raise money for their company – what are some important talking points, or having a certain mindset that you can give tips about?
Jilliene Helman: I’d share a couple of things… One is perseverance. The key trait to entrepreneurs is perseverance and resiliency. And don’t be discouraged when you hear no. I heard no a hundred times. That can be very discouraging, and you’ve just gotta keep going. You’ve got a mission and you’re on that mission, and you’ve gotta keep going.
The other thing that I would recommend is forcing an answer. I used to sort of force an answer out of these angel investors, and the best investors are the ones who say no quickly. That’s a gift, because they’re giving you your time back to be able to go raise capital. But I would say ask for the answer; don’t be afraid to say “Hey, are you in or are you out? I need to know by Friday.” And it’s not like there’s something happening on Friday, if they gave you a check on Monday you wouldn’t take it, but you need for your own sanity and your own peace of mind “Do I spend more time with this person or do I not spend more time with this person?”
So I’d say persevere, be resilient and ask for the answer.
Joe Fairless: Let’s talk about your focus now as CEO and co-founder… What do you do during the day?
Jilliene Helman: The beauty of being a CEO is every day is different. I spend a lot of time with our team. I’m spending time with our real estate team, I sit on the investment committee, I’m working one-on-one with folks that are bringing in real estate transactions, I’m working with our underwriting team, I’m working with our asset management team… Then maybe the next day I’ll flip over and I’ll work with our technology team, and go through what the core priorities are for technology for the next quarter.
From there I might spend the next day working with our marketing team, and thinking through how do we best present ourselves, how do we ensure that we have consistency across the brand, how do we make sure that our messaging is effective for investors to know what we do and how we do it.
So every day is really different, and that’s the exciting part. I travel quite a bit as well, so I’m usually out of the office at least a couple of days every other week or so. We have offices around the country. Because we’re investing in real estate around the country, we wanna have a presence in a lot of different markets. We have folks in New York, Atlanta, Utah, San Francisco, Texas… That’s an important part of our strategy, so I’m also traveling quite a bit. But every day is different, and there are times when I spend really concentrated time with our real estate team, and there are times when I spend really concentrated time with technology, or accounting, or finance, or budgeting.
I also spend a lot of time communicating. It’s really important to me that all of our team members know the strategy of the organization, know why we’re making decisions the way we’re making those decisions. And then also the board level, too – the board understanding our strategy… And our investors, too – our investors being aware of how are their investments performing, how is the company doing. Communication is a big part of the CEO role, too.
Joe Fairless: Yeah, that’s a lot of different areas to dive into on a regular basis. What would you say is the area that you’re strongest in, and what is the area that you have the most opportunity for improvement in, of those you’ve just mentioned?
Jilliene Helman: I’d say I spend probably — if I was gonna break it out of “Where do I spend the most time?”, it’s probably with the real estate team. I came out of a real estate family, kind of came off the ranks in a bank and got a lot of exposure to real estate there as well, and… We’re diving into every transaction. We’re holding investment community meetings three times a week, talking through deals, talking through structuring… I still approve every legal document, every operating agreement that governs, that controls on the real estate side, so that takes up a bit of my time. We’ve got attorneys obviously as well, but I’m helping to manage the attorneys and approve those transactions.
So I’d say real estate is where I spend a significant amount of my time. Opportunity for improvement – it’s probably in engineering, just because I’m not a classically trained engineer. I spend a lot of time with our product folks who are translating between the business and the tech team, but can I sit down with an engineer and look at a line of code and know that that’s a well-written line of code? I can’t. Can our CTO? He absolutely can, so I rely obviously on my executive team to be able to do those types of things. But it’d be fun if I could write more code, I guess.
Joe Fairless: [laughs] With your overall focus, when you come across a challenge, [unintelligible [00:16:00].14] what’s the challenge where you or your team had to come up with a solution? And can you walk us through how that was handled?
Jilliene Helman: Yeah, I feel like you have challenges every day as an entrepreneur. Sometimes they’re small challenges and sometimes they’re big challenges. I’ll share kind of a silly one – right now we’re running out of space…
Joe Fairless: For people?
Jilliene Helman: Yeah, for people. And we’re hiring, and we’re growing the team, and we want more people to help us come and run the business, and expand the business, and physically we need more space.
Joe Fairless: If only you had some real estate connections…
Jilliene Helman: I know, seriously… The problem is I’m locked into a long-term lease, so shame on me. But [unintelligible [00:16:40].13] new chairs, we need new desks, and there’s no one — in a small company there’s no one assigned to facilities, if you will; it’s no one’s responsibility to buy new chairs when the chairs break. That’s a simple example, but you’re fighting those little micro-challenges all the time. We need parking; we don’t have enough parking in our building for all these new people that we need to hire, and we also don’t have any space to put them… So how do you figure that out? Do you break the lease and go rent something sooner? Do you get a new suite in the building? Just simple stuff like that, but it’s a challenge, and it’s inhibiting our ability to grow, so that will land of my desk, of “What do we do? Do we break the lease? Do we go find a new space? Do we take a new suite? What do we do and what’s the right move forward there?”
Joe Fairless: Is there a thought when you come across those questions and someone’s like “Hey, we need new chairs, we need a new desk. We’ve ran out of space”, is there a thought where it’s like “Why the hell am I having to deal with these chairs? I should be talking to investors or board members, I should be coming up with a strategy…” – is that a thought?
Jilliene Helman: Well, the chair is really not landing on my plate. It’s the “Do we lease new spaces?”, but the chairs I’m not having a say in. But it’s interesting, I used to make a lot more decisions at the company, and my emo now is someone will walk in my office and say “Here’s the issue, here’s the situation, here’s the data – what do you think?” I try not to answer. I turn it back and I say “Well, what’s your recommendation?” So the team is now trained that if they walk into my office, they walk in with a recommendation; they’ve thought through it, I haven’t thought through the scenario, whatever the challenge may be… Whether it’s a real estate challenge, or something comes up in due diligence that we didn’t expect, or a technology challenge where somebody’s gonna take a month longer to deliver than we expected… Whatever the challenge is; these always pop up, so I turn it back on the team – “What’s your recommendation?” and it shortens the conversation pretty dramatically.
Instead of having a two-hour conversation, it might be a 15-minute conversation where whoever is in my office is gonna say “These are the five options. This is why I didn’t choose option A, B and C. This is why I think we should choose option D and we shouldn’t choose option E.” And that makes it a lot faster and it also takes the pressure off of me.
I’ve got people who are empowered, an executive team that’s empowered, a VP level that’s empowered to help make those decisions and make those calls.
Joe Fairless: Is the goal to be purchased?
Jilliene Helman: The goal is to build a great company, whether that means that we’re purchased, whether that means that we look to take the company public – who knows? But really, the goal is to build a great company, help investors grow wealth. And again, there’s always risk in real estate investing, there’s always risk in any type of investing, but the goal honestly is to build a great company, and an exit will come. Or we take the company public, or there’s some other opportunity for the business and the company… But it’s really to just build a great business.
Joe Fairless: Based on your experience building a business, what is your best advice ever for real estate investors or entrepreneurs who are wanting to successfully build something?
Jilliene Helman: I think on the real estate investing side, figure out how to invest passively. Figure out how to invest in real estate without the hassles of tenants and toilets and trash. Part of that probably sounds self-serving, because we offer passive investing, but whether you do it with us or you do it with another firm or a friend or otherwise… I started managing an apartment building when I was 16 years old; a family apartment building that my grandpa had built and it’s been in the family forever. I live in Los Angeles; I would remember phone calls at 2 in the morning that the sewage is backing up, and the gate was broken, and the parking garage got stuck… All these sort of horror stories around real estate where if you are not a real estate entrepreneur, if that’s not your passion, if that’s not where you wanna spend 100% of your time, and you’ve got a great job in an unrelated field and you can make money there and focus there, I’d say on the real estate side figure out how to invest passively.
I started investing passively. That’s kind of what helped kick off Realty Mogul – this idea that I could hire operating partners around the country to invest passively and to not have to deal with the day to day management.
On the entrepreneur side, hire great people. At the end of the day, your company is a combination of all the people that you hire. So hire great people, don’t be afraid to spend a little more for great people; they’re worth their weight in gold. One person who’s making one-and-a-half times the salary of another person who can do three times the work, that math works out all day long.
Joe Fairless: Absolutely. I wholeheartedly agree with both approaches. On the passive investment front, you all do only commercial real estate, right?
Jilliene Helman: Correct. We do multifamily as part of commercial, but we don’t do any single-family residential.
Joe Fairless: Okay. Have you noticed that there’s more participation with multifamily than others? I have a follow-up if you have noticed that, and I don’t have a follow-up if you haven’t noticed that.
Jilliene Helman: Meaning investors are more interested in investing in multifamily?
Joe Fairless: Yeah.
Jilliene Helman: Probably 50%-60% of what we do is multifamily, and I think that I would agree, because investors seem to really understand it – you need a place to live, you have the roof over your head, you have short-term leases, you have good diversification… So I would say yeah, there’s definitely a concentration of multifamily across our investment books.
Joe Fairless: Okay. So the follow-up question, and you kind of already alluded to the answer – it’s more easily understood, so I’m gonna revise my question, too… Do you all proactively educate your investors on the other types of asset classes, like storage, office, industrial, that sort of thing?
Jilliene Helman: We absolutely do, and that’s really important to us, because we want investors to really understand the risks of the transactions that they’re investing in.
Joe Fairless: Got it. And how do you do that?
Jilliene Helman: We do a lot of blog posts, a lot of content about different transaction sizes, transaction types; we do webinars – for every investment that we’re doing via private placement, if an investor is investing in a specific transaction, we’ll do a webinar to talk about the strength of the deal, the risks in the deal and other aspects of the transaction.
Then we’ve also got a team of registered representatives through a broker-dealer that are on the phones with our investors; kind of like that white glove service that I was talking about. We love talking to investors, we love walking them through transactions and really getting to understand the pros and cons of specific deals.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Jilliene Helman: Let’s do it!
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Jilliene Helman: Everything Store, which is the story of Amazon.
Joe Fairless: Everything Store?
Jilliene Helman: The Everything Store, yeah.
Joe Fairless: The Everything Store. Best ever deal you’ve personally invested in?
Jilliene Helman: The best deal that we’ve invested in at Realty Mogul is a deal called Metro Quest; it was a 150-odd units in Dallas, super interesting strategy. They did cultural updates to tailor to the Hispanic client base. They turned the basketball field into a soccer field, they built these beautiful laundry rooms so that people could socialize in them… We ended up selling that deal and it was just a home run.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Jilliene Helman: I talked about this one earlier, but investing with real estate companies that had never done a deal together. New partnership, didn’t know the rules of the road of working together.
Joe Fairless: Best ever way you like to give back?
Jilliene Helman: I love cooking and I love food, so I love working in soup kitchens, and actually sitting down with people and having a one-on-one conversation. I find that people really wanna share their story, they many times just don’t have someone to listen.
Joe Fairless: How can the Best Ever listeners either get in touch with you or learn more about your company?
Jilliene Helman: They can visit us online at RealtyMogul.com. If you wanna reach me, it’s firstname.lastname@example.org, because my name is long and spelled funny, so that makes it easier.
Joe Fairless: [laughs] Well, thank you for being on the show. Thanks for talking about how the first million of your 45 million dollar in venture capital that was raised was the most challenging, and perseverance being first and foremost of most importance, and then also forcing an answer, at least in that environment. I’m not sure if it would work if you were raising money from passive investors – I think it is more of a softer play – but for angel investors and more Wall-Street types I think that’s the perfect fit.
Then just the overall approach that you take as the co-founder and CEO, where you spend your time, how you focus it and then the overall evolution of the company.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Jilliene Helman: Thanks for having me.