JF2626: 5 Parameters to Qualify Syndicators with Ruth Hiller

Ruth Hiller is no novice when it comes to multifamily investing, as the third generation of investors in her family. Now she’s syndicating her own deals all across the U.S. Ruth is discussing how she became an accidental businesswoman, investor tax benefits you may not know about, and how her mentorship program skyrocketed her success. 

 

Ruth Hiller Real Estate Background:

  • Full-time multifamily investor and syndicator
  • Syndicator in one multifamily deal in Texas (143 doors), passively involved in 8 syndications totaling over 1900 doors, 50% co-owner of 118-unit multifamily in Los Angeles, CA, and 20% owner in NYC retail space
  • Based in Boulder, CO
  • Say hi to her at: www.yesmfnow.com
  • Best Ever Book: Think and Grow Rich

 

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TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m with today’s guest, Ruth Hiller. Ruth is joining us from Boulder, Colorado. She’s a full-time investor and syndicator. Ruth has invested in eight syndications and is a JV partner in properties in LA and New York.

Ruth, thank you for joining us, and how are you today?

Ruth Hiller: Oh my God, thank you so much. I’m honored to be here. I really appreciate it. I’m fabulous. I had a nice hike with my dog this morning.

Ash Patel: Awesome. Well, it’s our pleasure to have you. Ruth, before we get started, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Ruth Hiller: Well, it’s an interesting background. I have to preface it that my grandmother invested in multifamily in 1940, and was able to support her family her whole life through those investments; and she’s not alive today, so I can’t ask her how she knew to do that. And then my parents continued the tradition and bought a multifamily property in 1968 in Los Angeles, California. And then about five years ago, I wanted to start to improve the properties that I had owned. So I searched for a mentor that could help me grow in multifamily quicker, and improve the business that I already had.

Ash Patel: That is incredible. Three generations of multifamily investors. When you got started, what was your holdings? Did you inherit any properties?

Ruth Hiller: I did. I inherited a family property 20 years ago, the property that my parents bought in California. My mom purchased it with her brother, and I inherited that 20 years ago. And up until about five years ago, I wasn’t really that interested in running the property. I just kind of let it run itself, basically.

Ash Patel: And did you grow up in the business? Did you actively work in multifamily management?

Ruth Hiller: No, I’ve always had a full-time property manager. I’m a trained artist. That’s been by profession for like the last 30 years, and I call myself the accidental businesswoman because I’ve bought and sold real estate since I’m in my 20s, and I just never thought of it as a business until recently.

Ash Patel: That was just your family obligation/hobby, so to speak.

Ruth Hiller: Yeah, exactly.

Ash Patel: Awesome. Alright. So, you are now actively investing in your own properties and a syndicator, and you’re also an investor.

Ruth Hiller: Yes.

Ash Patel: Tell me, what are your holdings right now?

Ruth Hiller: I own large multifamily properties in Texas, Alabama, Florida, Georgia, Tennessee, and California as a limited partner. That’s where I started with a mentorship group about two years ago, and I met people in the group, and it was a way for me to go further faster. So that’s where I’m currently invested.

Ash Patel: And Ruth, is this the same GP on these deals, or is it different?

Ruth Hiller: That’s an LP deals, the eight deals, I’m an LP. The GP deal is 143-unit C-Class multifamily in Carrollton, Texas, that we’re about to close on.

Ash Patel: Okay, what I meant was, are they different operators, or are you just with one syndicator as an LP in multiple deals?

Ruth Hiller: One syndicator, I’m invested in three deals with them; and the rest of different people that are different syndicators, and I met them within the group that I’m in.

Ash Patel: And how do you qualify the GPs or the syndicators before you put your investment in their deal?

Ruth Hiller: Well, I’m a relationship person, and I’m very intuitive. So when I joined my mentorship program a couple years ago, one of my outcomes I wanted was to build relationships, and find out who are the best people in the group to invest with. So I took about a year to do that, and then this year, I’ve invested in about seven of them.

Ash Patel: What kind of due diligence do you do?

Ruth Hiller: I have five parameters when I’m investing in a multifamily. One is, do I know, like and trust the sponsor team, that’s number one to me; and the location is super important, and the track record of the sponsor team. Then I do another thing… What is the median household income? It needs to be above at least $44,000. I’d like it up in the 50s. It has to be a proven market.

The sponsor team has to already have a track record, at least one other the person in the group; it has to have a good track record, and someone has to be boots on the ground. And the most important thing to me is that someone has a very strong asset management background, because to me, that’s the most important thing in a GL. Because I see a lot of deals and no one’s ever run an asset like this, and having owned multifamily forever, I know how much work that is.

Ash Patel: I love that. So one of the GPs has to have their boots on the ground?

Ruth Hiller: Yes.

Ash Patel: And location, what do you specifically look for?

Ruth Hiller: That’s funny, because originally it was just going to be Texas and Florida, but like I said, for me, the sponsor teams important, and now with multifamily as crazy as it’s been, the rent growth has been ridiculous. If I really like the sponsor team, I’ll look in other markets. I’m in Colorado, and I’ve been looking for some of my own deals here also, but the price per unit in here’s like double what it is in Dallas.

Ash Patel: Ruth, if somebody had a deal in Nashville or Bentonville, Arkansas, would you consider it? Or is that just off the table?

Ruth Hiller: Actually, I just invested in a deal in Nashville last week.

Ash Patel: Alright, Nashville is on fire. Bad example. Sioux Falls, South Dakota, or Bentonville, Arkansas. If the numbers look good, operator looks good, would you invest in it? Or it has to meet all five of that criteria?

Ruth Hiller: It has to meet the five criteria; they have to have experience… But honestly, if I really liked the sponsor team, I will invest in it. I did invest in one in a really small town in Alabama.

Ash Patel: How did that deal do?

Ruth Hiller: It’s just not closed yet. So we’ll see.

Break:  [06:12] to [07:45]

Ash Patel: What types of returns do you typically expect?

Ruth Hiller: I expect at least 8% to 10% cash, and then I expect either 90% total return or double my money in 3-5 years.

Ash Patel: Well, that’s a big difference, 3-5 years. So—

Ruth Hiller: Yes.

Ash Patel: Do you want to double your money in three years?

Ruth Hiller: So some of the sponsor teams — it just depends especially on the deal that we’re sponsoring if they can meet their business plan. Let’s say they’re giving you 90% return; after three years, sometimes they will sell the property. It always depends on the sponsor team. I prefer to hold it for five years, and create more equity, since multifamily has been on fire. One sponsor who I invest with I wasn’t in this deal, sold the deal, and she tripled the investor’s money in three years. So if you invested 100k, you walked away with 300k at the end of the deal.

Ash Patel: What was the asset on that?

Ruth Hiller: It was a C-Class multifamily in Texas.

Ash Patel: Do you know where in Texas?

Ruth Hiller: Cleburne.

Ash Patel: And what was the value-add there, where you were able to triple investor’s money?

Ruth Hiller: They redid a lot of units. They rebranded stuff, and then the market’s just gone crazy. Stuff that you could buy for $80,000 a door now is going for $130,000 or $150,000. So, just the inflation and the craziness in the market.

Ash Patel: That builds some high expectations for investors.

Ruth Hiller: It’s does. It does.

Ash Patel: So you currently have a deal that you are the operator and GP on.

Ruth Hiller: Yes.

Ash Patel: Can we dive into that?

Ruth Hiller: We can dive into that a little bit, yes.

Ash Patel: Okay, let’s go. Where’s the deal?

Ruth Hiller: The deal where I’m the 50% owner—

Ash Patel: The one that you’re syndicating.

Ruth Hiller:  Oh, the one I’m syndicating, yes. I’m a co-sponsor, and it’s basically a women-driven team, which I’m super excited about. It’s in Carrollton, Texas, which is about 30 minutes northwest of Dallas. It’s a type C asset, 143 units, and when we were doing our due diligence, when I was walking the property, I found three extra rooms that we’re going to convert [unintelligible [00:09:47].15] So we’re really excited about that. That one’s going to be closing next week.

Ash Patel: How did you find that deal?

Ruth Hiller: So I’m in this mentorship group, and I identified people in the group that I wanted to work with… And one of my top skills is people, so I was invited into the deal to help raise capital and do investor relations based on our previous relationship.

Ash Patel: And how did you raise the capital?

Ruth Hiller: Through my network. I was at Tony Robbins Platinum Partner for a year. I’m an influencer, people really trust me, which is awesome, and so I just have been building my database, nurturing my database with the emails that I send out, “What is this syndication?” So people have seen my success, and they want to get involved. So this was my first capital raise, and I was excited that I did so well.

Ash Patel: Is this a value-add, where units have not been renovated?

Ruth Hiller: Yes, some of the units have not been renovated.

Ash Patel: And do you have a property management company identified for this?

Ruth Hiller: We have a property management company identified for it, and they’ve overseen our budget and agreed that all the pro forma rents can be implemented. So I’m excited about that.

Ash Patel: What are the household income numbers in that area?

Ruth Hiller: $57,000 is the median household income in that neighborhood.

Ash Patel: Which one of the GPs is going to be the boots on the ground?

Ruth Hiller: There’s three of them.

Ash Patel: I want to make sure this meets your five criteria.

Ruth Hiller: There’s three boots on the ground; two of them are great asset managers, and the third one is a great CapEx manager.

Ash Patel: Awesome. I know Carrollton well. My very first investment with Ashcroft and Joe Fairless was in Carrollton. It’s a great property that they turned around and sold years ago. Great area.

Ruth Hiller: It’s a great area and the values keep going up, and the last two ownership teams didn’t give a lot of TLC to it. So we’re excited to take it over and rebrand it.

Ash Patel: Ruth, in all of the deals that you’ve been an LP in, what do you see that GPs could do better?

Ruth Hiller: More education.

Ash Patel: Educating the investors?

Ruth Hiller: Educating the investor. I think that for me, that’s one of my missions, is to have people not just give me their money, but be educated on what they’re investing in and why. Why it’s so good, and what are the benefits. I think a lot of GPs do that on the webinar, but again, I’m not sure beforehand that maybe they do that as much.

Ash Patel: And what are you specifically doing to educate your investors?

Ruth Hiller: I provide a newsletter that explains everything. I’m in the process of writing an ebook with my partner. We’ll do a lot of educational zooms to go over deals, so people understand how the deal works; even if it’s a past deal, just like if a new investor comes to me, “Let me take you through this deal, and it shows you how this type of investment works.”

Ash Patel: Do you educate them on this specific deal, or in multifamily investing in general?

Ruth Hiller: Multifamily investing in general.

Ash Patel: Okay.

Ruth Hiller: So that they can decide that it’s right for them. And my favorite thing about it is the cash; I love the cash, but for me, the tax benefits are one of my favorite things about it.

Ash Patel: I love that, because I don’t think GPs do enough of that. Can we dive into that a little bit, all the tax benefits to investors?

Ruth Hiller: Yes, I would love to dive into that.

Ash Patel: Let’s talk about that, because really, when I talk about—and I don’t syndicate multifamily, but when I ask other people about it, they don’t know the tax benefits.

Ruth Hiller: Well, one of the things is – and I’ve been learning a lot about this… If you’re an active real estate investor and you’ve spent at least 750 hours a year in real estate investing, managing properties, you get a lot of tax benefits. So on this deal, they do something called a cost segregation study, and what that means is a company goes in, and there’s a law that expires next year – they can depreciate 100% of the property on year one instead of over 27.5 years. So as a real estate investor, if I invest $100,000 on our deal in Texas, I’ll get $100,000 off my [unintelligible [00:13:36].19] off my income tax.

Ash Patel: Well, is it $100,000 on the property, or do you have to specifically identify accelerated depreciation items?

Ruth Hiller: Yeah, we hired a Cost Segregation specialists, and they already did the study and they identified the accelerated depreciation.

Ash Patel: Right. Okay. So, yeah, there’s a process to get to that point.

Ruth Hiller: Yes.

Ash Patel: But it’s not 100% on the entire asset.

Ruth Hiller: No, it’s 100% on the capital raise, so  whatever that was… And so that for every investor, they will get 100% bonus depreciation for their investment. If you’re a W-2, it’s not as easy to use the tax benefits. You’ll need to speak with your accountant. I’m not 100% certain, but you can write any of that losses off against your passive income. You cannot write it off against your W-2 income.

Ash Patel: Right. That’s a challenge. So people that are high earners, that don’t have any other options, they can only write it off against passive losses, not their active income.

Ruth Hiller: Correct. That’s the toughest part. So there also are some accountants out there that will help you work on that and make it work to your benefit. I have a real estate specialist accountant that focuses just on that, and how to make it worked for people.

Ash Patel: Ruth, what kind of returns will your investors see?

Ruth Hiller: Well, we’re looking at a 5.5 exit cap. If you invest $100,000, after five years, you’ll have $190,000 return on your investment. That’s $100,000 of your investment, and $90,000 profit, which is delivered in quarterly distributions and equity at the end of the deal.

Ash Patel: Is there a preferred return?

Ruth Hiller: No, we just do 80/20 split. That’s why I like these deals, 20% to the sponsors team, and then 80% of the passive investors.

Ash Patel: Interesting. And then are there the traditional fees on top of that?

Ruth Hiller: We have a 1% acquisition fee, a 2% asset management fee, and there’s no refinancing fees. There’s none of that. That’s it. Just those fees.

Ash Patel: No disposition fee?

Ruth Hiller: No.

Ash Patel: Interesting.

Ruth Hiller: Yeah. We like to keep it as simple as possible, and I just think it’s better for the investors.

Ash Patel: I like that. Very simple, 80/20. Perfect. You own property in LA and New York as a JV partner. What are those?

Ruth Hiller: Yes. I own an apartment in New York City, and I also own a retail store. So I’m a 20% partner in a retail store in New York City that I’ve had for 29 years, and the Los Angeles property, I’m a 50% owner, with family members. So we’re working right now to put that one on the market, which I’m excited about.

Ash Patel: What type of retail in New York?

Ruth Hiller: It’s a ground floor retail in Soho. So it’s in a cast iron district. It’s a really great neighborhood, and we’ve had a lot of fashion stores in our building.

Ash Patel: And amazing rents?

Ruth Hiller: Oh my god, it’s crazy. Am I allowed to say the amount?

Ash Patel: Yeah. I mean, go ahead.

Ruth Hiller: We were getting $35,000 a month. Now, because of COVID, retail’s really tanked. So we’ve had that just to get some tenants in there… Because if you walk through Soho right now, it’s just empty. It’s kind of sad.

Break:  [16:40] to [19:32]

Ash Patel: What’s the value of that property, retail value?

Ruth Hiller: The value of that property? I’ll have to tell you interesting stories… Probably about $5 million, but about eight years ago in Soho on the corner of, I think it was, Greene and Spring, which is like the center of Soho… This 10,000 square foot retail space, not even a building, sold for $120 million to a REIT. So we are trying to get it together. So we kind of missed the boat on that one, but we were just like, “Wow. That’s crazy.” There was a lot of that going on, I think that was like eight years ago. Not so much anymore.

Ash Patel: Do you know the price per square foot on that building?

Ruth Hiller: I don’t.

Ash Patel: I’ve talked to people who rent retail spaces in New York, and this was years ago. I asked, “What are you paying, $40, $50 a foot?” They’re like, “No, $400 a foot.”

Ruth Hiller: It depends — depending on the size and location… Yeah, I think it was $300 a foot at one point, but now, no.

Ash Patel: Which was exponentially higher than here in the Midwest…

Ruth Hiller: Yes.

Ash Patel: Awesome. Ruth, what advice would you give to somebody starting out that’s wanting to syndicate deals?

Ruth Hiller: Find a mentorship program. That would be my advice; find a mentorship program, or study. I couldn’t be doing what I was doing unless I had joined that mentorship program.

Ash Patel: And what was the program that you joined?

Ruth Hiller: I joined Brad Sumrok’s Apartment Investment Mastery. I met him randomly on a bus during a Tony Robbins event, and we’ve been friends ever since, and so I joined his group, and it’s like, cut time. I’m GP-ing already in two years. I didn’t want to be a GP; I just wanted to invest passively. Then when I made the decision to be a GP, at the beginning of this year — I’m also in his Mastermind. That happened within four months.

Ash Patel: Then what are some of the hard lessons you’ve learned along your path?

Ruth Hiller: I lost a ton of money in a multifamily business I bought 20 years ago, and I didn’t do the due diligence, because I didn’t know how. I wasn’t educated. So for me now, I just get specialized education in anything I want to do, and talk to people that are experts in the business. Success leaves clues, so if I do what my friends are doing, if they’re successful, then I want to know how to do that. I don’t need to reinvent the wheel. So trying to do it on my own is—

Ash Patel: Do you mentor people?

Ruth Hiller: Yeah, I do, and that’s something I want to do more going forward, because I feel like the last years have been on hyperspeed. So I’d love to impart information. And one of my goals is to either contribute or set up some sort of fund that teaches financial literacy and mindset to young people.

Ash Patel: How would somebody get your attention enough to where you would want to mentor them?

Ruth Hiller: That’s a good question.

Ash Patel: Because I’m sure a lot of people have approached you, “Hey, I’d love to learn from you.”

Ruth Hiller: And I’ve just been teaching. I really just have. But if it was like a full-time gig, “Can you help me understand this?” I just kind of love doing that; but if it was a long-term thing, I don’t know. I’ve heard other people say, “Well, they need to add value,” but I just really love to help.

Ash Patel: Yeah, I think at some point though – I ran into this, where you give away a lot of your time, and then you find people that don’t do anything with it. So one, you’ve got to qualify the individual that you’re mentoring, because you want to make sure you’re not wasting your time.

Ruth Hiller: Right.

Ash Patel: And you want to find those outliers – at least from my perspective, find those outliers that go above and beyond. They don’t necessarily have to add value to me. I just have to see that they’re hungry, and they’re already putting in time and effort into that.

Ruth Hiller: It’s funny, because I met an Uber driver last time I was in Texas, and he’s like, “So, what do you do?” And I’m like, “I’m doing multifamily.” And he’s like, “Oh my God, I want to do it.” He signed up for all the events and he’s always sending me questions, and I would totally mentor him. He’s amazing.

Ash Patel: Awesome. Ruth, what is your best real estate investing advice ever?

Ruth Hiller: I’d say, learn as much as you can before you invest. Get laser-focused. There’s so many different types of deals out there – there’s syndications, there’s duplexes, there’s single-family. Pick something and get super focused on it. Learn about it, and then be ready to make the investment, and then take action.

Ash Patel: Ruth, are you ready for the Best Ever lightning round?

Ruth Hiller: I am.

Ash Patel: Let’s do it. Ruth, what’s the best ever book you recently read?

Ruth Hiller: I love the book Think and Grow Rich by Napoleon Hill. I’ve read that a couple of times.

Ash Patel: What’s your biggest takeaway from that book?

Ruth Hiller: The mastermind. And I’ve been in a few, and it’s really shot me way up.

Ash Patel: Are those typically paid masterminds, or are they not?

Ruth Hiller: Yes, they are pay-to-play. I’m going to tell you, it’s been worth every penny.

Ash Patel: And are they masterminds that are perpetual, or is it just for a period of time?

Ruth Hiller: They’re perpetual multifamily masterminds, and it’s been ongoing for the last few years, and I just recently joined in that, and it just 10x’d my growth just in the last year.

Ash Patel: Ruth, what’s the best ever way you like to give back?

Ruth Hiller: Again, I like to mentor people, and I like to donate money to causes that I believe in.

Ash Patel: Ruth, how can the Best Ever listeners reach out to you?

Ruth Hiller: They can reach out to me on my website at yesmfnow.com, and my tagline is, I don’t know what you’re thinking, but MF stands for MultiFamily.

Ash Patel: That’s what I was assuming. Awesome. Ruth, thank you so much for joining us today, and sharing your story from being a third-generation multifamily real estate investor, and this fast-track to syndication. We’ve learned a lot from you, and thank you for joining us.

Ruth Hiller: That was fabulous. Thank you so much for having me. I hope to see you soon.

Ash Patel: Awesome. Best Ever listeners, thank you for joining us, and have a best ever day.

Ruth Hiller: Thank you.

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