JF1750: How To Diversify Your Investments Away From Wall Street with Alina Trigub

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Alina had a need of her own, and as many entrepreneurs do she started her own business. She began investing in real estate for herself because of a need to diversify her own portfolio, now Alina also helps other investors do the same. By working with other passive investors she can help others diversify without having to be active. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“There is no Nostradamus to tell us if the recession is going to happen tomorrow or 3 or 5 years from now” – Alina Trigub

 

Alina Trigub Real Estate Background:

  • Founder and Managing Partner of SAMO Financial, a boutique equity firm
  • Help clients over 1,200 doors, over 500 storage units and a $10M mobile home park fund
  • Works with high earners to passively invest in real estate
  • Based in NYC
  • Say hi to her at https://www.samofinancial.com/
  • Best Ever Book: Compound Effect by Darren Hardy

 


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.

We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? 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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Alina Trigub. How are you doing, Alina?

Alina Trigub: Doing great, Joe. Thank you. I’m very happy to be here, and thank you for inviting me.

Joe Fairless: Yeah, looking forward to our conversation. A little bit about Alina – she is the founder and managing partner of  SAMO Financial, which is a boutique private equity firm. She’s helped clients get into over 1,200 doors on multifamily, over 500 storage units, and into a ten-million-dollar mobile home park fund. She’s based in New York City. With that being said, Alina, do you wanna give the Best Ever listeners  a little bit more about your background and your current focus?

Alina Trigub: Absolutely. Thank you, Joe. As Joe mentioned, our clients get into commercial real estate by passively investing with us. I started out my career as a tax accountant in the big four environment, with Ernst&Young, and later on I switched to the technology world and became a liaison between business and technology professions.

This field made me realize that we are, for the most part, working with other people, so if you wanna achieve anything in this world, having a full understanding of how the relationships get established and maintained is absolutely essential for success. With that in mind, and with a personal problem to solve, which was to diversify out of Wall Street, I started my journey of finding a way out of the stock market.

This has been my concern for many, many years, and partially because I’m a former tax accountant, so I always think about taxes… And I have seen a number of significant stock market crashes in my lifetime, and some of the smaller stock market crashes as well… So my main concern was always to find a way to conserve the wealth, and then find a way to save in taxes.

Real estate has been on my mind for many years, and finally I decided to give it  a try, and I started conducting an extensive research, which led me to Bigger Pockets, which in turn led me to find syndications. I started about 5-6 years ago as an equity partner in someone else’s deals, and over time I realized the value and the conservatism of this strategy; not only that it allowed to preserve wealth, it also allowed to save in taxes, and in addition to that, it was giving me residual income.

Out of this business idea was born, I decided to start my own company, whose mission would be to strictly help other investors to preserve their wealth and to build passive income by utilizing the tax saving strategies. So that’s my main concentration today – working with investors, helping them select the appropriate investment based on their needs, based on their interests, whether they wanna diversify, invest in one commercial real estate asset class or the other, and help them understand the tax consequences without giving them advice, just explaining to them what I know and what I’ve seen based on my personal experience with the industry overall.

Joe Fairless: So you’ve helped your investors get into a lot of different opportunities… Are you in all those opportunities, the same ones that your clients are in?

Alina Trigub: I am.

Joe Fairless: So I imagine that you’ve seen some ups and downs on projects… Tell us about a project that didn’t go according to plan.

Alina Trigub: Sure. I’ve seen a project where we started out really well, but then about a year or so into the project we got a notice from the general partners (I was LP in this project) saying that there was apparently a big hole behind the apartment complex and the tenants started using that hole as their garbage dump, so they started dumping garbage… And unfortunately, the people that noticed that garbage pile were not the property management company, but rather the town, and the town imposed a really big fine on the property, and in turn that fine would be a burden for the investors… So the deal sponsor has hired the legal team to fight against the town to lower the fine or get rid of it altogether. While they couldn’t get rid of it altogether, they were able to lower it by almost half. Even with that, it was still a pretty big burden; the dividends weren’t paid to investors for a few quarters, and they had to bear the legal costs in addition to paying the fine to the town… So that was kind of  a challenging disappointment.

Joe Fairless: Do you remember how much the fine was?

Alina Trigub: No, but it was in the hundreds of thousands of dollars. It was pretty big.

Joe Fairless: Dang. So it’s one thing to be fined for people dumping garbage into a hole on the property, it’s another to have a city official discover it and not the property management team discover it… So did you or anyone (to your knowledge) ask the general partner why they didn’t discover this or their on-site staff discover it first?

Alina Trigub: Yeah, the question did come up. We didn’t get a clear answer, and obviously, we weren’t happy with what the property management company was doing overall. After a little while, after the fine was paid off and this was settled, they decided to sell the property altogether. So the property was sold, and it was all more or less hushed out… But they did not give us a clear answer as to why the property management didn’t notice this.

Joe Fairless: Anything that you took away from that experience that you applied to future deals or future general partners that you partnered with?

Alina Trigub: Absolutely. When I talk to future partners that I partner with, and people that I know that I do business with now, I always ask them about the property management company they have, the relationship they established with the property management, and their interview process – what kinds of questions they ask the property management company, whether they stay on top of not only the regional managers, but also the managers that are in charge of each specific property; what kind of follow-ups are done and what kind of reports they’re getting from the property management, to make sure that they’re staying on top of things within the property itself.

Joe Fairless: What are some good answers and bad answers to those questions?

Alina Trigub: The good answers: “Yes, we get weekly meetings with the property management company, and they give us weekly updates, and we travel to the property either every month, or at least every other month.” The bad answers is “Oh yeah, they send us periodic reports. We look at those reports, and sometimes we talk to them once a month.” To me, that’s a red flag. You should be on top of the property management company and be in touch with them every single week, if not more often than that.

Joe Fairless: And do you recommend to your investors that they go check out the properties before investing in them?

Alina Trigub: I offer it to them. It’s not my recommendation. These days with Google Earth they can see the property themselves virtually, and actually the investors that are local to the property sometimes do decide to take a trip and take a look at the property, but if it’s outside of their immediate area, or if it requires a flight, most of them don’t really wanna go. But yeah, I always tell them that it’s open if you’d like to go, join the deal sponsors, take a look at the property. The option is there.

Joe Fairless: So you’re in a lot of doors and units, and you’ve got multifamily, self-storage and mobile home. Of those three, which one was the hardest to gain a firm grasp on in order to be comfortable to not only invest your own money, but also recommend it to others.

Alina Trigub: I don’t know if one or the other was the hardest one, but I would say naturally I started with multifamily because for me personally it was close to home. I could relate to the asset class. I lived in an apartment building at some point in my life for a very long time, so I could understand it much better than the other two classes; I knew what the apartment buildings were about and what to expect from them, I understood the difference between different neighborhoods… I lived in Brooklyn for a very long time, and I’ve seen drastic changes when you literally cross the street from one block to another, so I can relate and understand the difference between going, say, from a D+ area to a C+ area. There’s a huge difference… And so forth.

But over time, and after speaking with a number of my investors, I realized that there is a need to help them to diversify, and not just stick to multifamily  and going to multiple markets, but also go into other asset classes. Naturally, I started doing research and looking into other asset classes, which are the asset classes we can attack forward… And by being a former accountant, I’m very conservative by nature, so I wanted to find something that would be conservative enough to sustain any recessions, if we had any… So storage is the first one I stared looking into, I believe. And again, I’ve done research, I’ve talked to people that have been investing in storages, asked them what is it about that asset class that they like, and some of the things that I was told is that most people, when they’re downsizing – downsizing normally happens, again, during the recessions, when people wanna go from a large house into a small apartment…

They don’t wanna get rid of their stuff, they wanna store it, because they think that it’s a temporary thing; they’re gonna store it for a couple years and then come back and buy another house… And that in most cases never happens. They put their junk in a storage and let it be there for a very long time… So it makes this asset very profitable, especially during recession time, and they continue keeping it in the storage because the rent is not as significant as for the apartments. It’s a much smaller amount. And they just continue keeping the junk, because they never wanna get rid of it, and it stays in storage for a very long time.

I would say a similar concept of being more of a conservative asset class applies to the mobile home park. What I’ve found with mobile home parks is we all have this preconceived notion that a mobile home park is this dilapidated building that’s gonna collapse when the next wind blows its way… But it’s not that anymore. There are mobile home parks that from outside look like regular homes, but they’re just a lot more condensed, a lot more small, and they are built specifically for people that are looking for affordable living. They wanna live in a good, decent area. These are good, working folks, but they cannot afford the high prices of, say, Arizona, where the rents are astronomical, so they go rent or even buy this mobile home park, so they can live there with their kids, and  kids can potentially go to decent schools. That allows them to stay in a decent community.

And again, if you find tenants like that, that will stay with you for a very long time, especially when the mobile homes are owned by the tenants because they don’t wanna pay the price of moving their mobile home from one location to another – to them, it’s a lot more expensive to move than to stick to the same location and maybe pay a small increase in rent for the land that they’re paying.

Joe Fairless: What’s a disadvantage of each of those three?

Alina Trigub: The disadvantage of multifamily is yes, it’s dependent on the location, depending where it’s located; say you’re looking at a D area… While it could be a a good income source, it’s gonna be very labor-intensive. You have to constantly stay on top of either your property manager, or if you’re self-managing, then you have to stay on top of the tenants all the time. It’s very hard to manage the property when it’s in a really bad location.

When it comes to storages, again, storages could be hit or miss, depending on where it’s located and depending on where we are in the economy. Like I mentioned, if the economy is doing well, and people are buying larger houses, then the demand for storage may be not as significant as during the downturns. So that may impact the storage as a class altogether.

With mobile homes – again, the age of the mobile homes has a significant impact on them. If the mobile homes are much older and require a lot of maintenance, then obviously the park doesn’t wanna own them, and the tenants will not be as prone to buy them, because it’s an older home and it will require a lot of work; they will look at homes that are probably newer, or have been built in the last 20-30 years. That’s the disadvantage of the homes that are much older.

Joe Fairless: And out of the three – you have three similar projects that are presented tomorrow. You have the equity for one of those three. How do you decide which of the three to do?

Alina Trigub: In addition to looking at the asset classes, I look at such things as the deal sponsor… What is the track record of the deal sponsor? How long have they been around? Have they gone through at least a cycle or more? Outside of the deal sponsor, I also look at the deal itself – where is it located? For instance, if we take multifamily, the multifamily as an asset class needs to have the infrastructure in place. I’m gonna look whether there is a major airport in the area, does it have colleges and universities in the area? Are there shopping centers nearby? Is the highway easily accessible? What is the job industry doing? Are there jobs coming into the area? Are there people coming to fill in those jobs, so in other words, how high is the demand? What’s the typical vacancy for the area? If all of those components adapt, then that’s the asset class to compare.

Then I go to the next asset class and look at pretty much the same things – what is the demand and what is the breakeven point? That’s another component that I need to look at – what’s the breakeven point for each of the three asset classes, and where it’s gonna lead if we hit the recession tomorrow. Everyone is talking about this recession, but no one can predict — there’s no Nostradamus that can tell us whether the recession is gonna happen tomorrow, or three, or five years from now.

So we need to find ways to mitigate the risks and be able to sustain that poor economy if it happens, and make sure that the asset that we’re buying is still cash-flowing. People can bet on appreciation, but I personally don’t wanna be on appreciation,  for myself or my investors. My main goal is to make sure that, based on the analysis, the asset will continue to cash-flow and the investors will continue to be paid; even if we go through a recession, however many years it is, we can come out and sell it.

Joe Fairless: Based on your experience what’s your best real estate investing advice ever?

Alina Trigub: My best advice would be educating yourself prior to taking action. I think it’s extremely important to understand what you are doing and how you’re approaching the business. In my case – well, in syndication – I think it’s absolutely critical, for myself and for others who wanna learn about syndications, to educate themselves, learn the business first, before taking any action.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Alina Trigub: Absolutely.

Joe Fairless: Well, then absolutely let’s do it. First, a quick word from our Best Ever partners.

Break: [00:16:28].21] to [00:17:12].13]

Joe Fairless: Best ever book you’ve recently read?

Alina Trigub: The Compound Effect, by Darren Hardy.

Joe Fairless: Best ever deal you’ve done?

Alina Trigub: It was a deal where I invested as an equity partner. After about a year in the deal we got at least half of our principal back, and the dividends were above the expectations, so it’s been phenomenal.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Alina Trigub: Our very first investment that my husband and I did – we bought a property without doing the proper due diligence. Basically, our friends had been in it, and we bought the property. It was around Philly area. We just followed that trend – we went ahead, went through the filter and bought property in the same area, and it was an absolute disaster. We had to sell it with a loss. We had everything from people breaking in, to drugs, to stolen pipes… You name it.

Joe Fairless: Best ever way you like to give back.

Alina Trigub: I volunteer by educating kids in underserved communities. There are plenty of such places in New Jersey. I’ve done lectures to these kids on career aspirations, higher education importance, personal development, and I just love to see the sparkle in these kids’ eyes when I say something that touches their trigger points. It’s very rewarding.

I also like to give back through Bigger Pockets. It’s a great community, and I’ve learned a lot by asking other people questions, and now I’m trying to give back by answering other people’s questions.

Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on?

Alina Trigub: Through my website, it’s samofinancial.com. My phone number is there. Or they can find me on any social media – Facebook, LinkedIn… I’m everywhere.

Joe Fairless: Well, thank you so much for being on the show, Alina, and talking about the different types of asset classes that you invest in – multifamily, self-storage, mobile home parks. The pros, as you see, for each of those, as well as a disadvantage, or a potential disadvantage for each of those three… And then talking about the cautionary tale for the one syndication that you were in, where residents were dumping garbage in a big hole, and the town found it before the manager, imposed a fine, well in the six-figure fine, which did hurt the distributions and delay them for a period of time.

That specific scenario I haven’t come across, so it’s always good to hear what could go wrong, so that as operators we know to be proactive and continue to be on-site and make sure we’re checking out the grounds, so that we proactively address those types of things. And then it’s also good from a passive investor – any limited partners who are listening… There are some pretty esoteric things that could come up on a deal where you don’t receive the distributions that you were projected, and here is one of them. I don’t imagine a town fining the general partner because there was garbage being dumped in a hole happens very often across the United States… I think that’s a pretty unique scenario. But there are all sorts of those types of scenarios that could come up, and that’s the point.

Thanks so much for being on the show, Alina. I hope you have a best ever day, and we’ll talk to you again soon.

Alina Trigub: Absolutely. Thank you for inviting me. Great to be here.

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