May 3, 2022
Looking to retire on passive income?
Just a few years ago, this was not in the cards for Emma Powell. But when her husband suddenly got laid off from his tech job, Emma made the jump to real estate and started her own business. Now, she’s working on building her passive income portfolio and is well on her way to financial freedom.
She’s here to share her story of being a stay-at-home-mom-photographer turned real estate investor and her unique perspective on raising capital and finding deals.
[00:01 - 06:52] Bouncing Back and Getting into Real Estate
- After her husband was laid off, they moved to Salt Lake City, Utah
- She went to real estate just to have a new source of income and to have a hedge for unemployment
- Emma soon realized the bigger possibilities with real estate
[06:53 - 13:41] Transitioning from Active to Passive Investor
- Here’s where Emma is getting ideas and inspiration from
- Shortening their timeline
- She breaks down the 4% and 8% rule
- Diversification is key
[13:42 - 18:24] Creating An Investment Club
- Emma was struggling to find limited partners
- Learn how she overcame this challenge
- She explains the investment club model
- More than raising capital, it’s become a place of resource and mentorship
[18:25 - 19:55] Closing Segment
- Reach out to Emma!
- Links Below
- Final Words
Tweetable Quotes
“You can retire on passive income, just from being a passive investor. You don't ever actually have to own your own real estate.” - Emma Powell
“Just being well-diversified, sticking to your lane, and letting other people do what they do best but trusting them with some of your money so that your money can be working for you as well as you're working for yourself.” - Emma Powell
-----------------------------------------------------------------------------
Connect with Emma for passive commercial real estate investment opportunities! Visit the Highrise Group website now.
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!
Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
Emma Powell 00:00
It doesn't matter what you're doing. You could be doing anything to make money. It doesn't have to be real estate-related. For me, I chose real estate because it was a high-earning type of job that I could do without having to go get a professional degree like a medical degree. And also because I just like real estate. I mean, I was a real estate photographer. I like houses. I like buildings. I like architecture. I like business. For me. I actually like it. Some people in this business don't really like real estate. And I feel like do what you like they can make money and then anything that you make, you invest. You can retire on passive income, just from being a passive investor. You don't ever actually have to own your own real estate.
Intro 00:33
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.
Sam Wilson 00:45
Emma Powell is a stay-at-home mom of four, photographer, and a multifamily syndicator and capital raiser working on financial independence. Emma, welcome to the show.
Emma Powell 00:54
Hey, thanks for having me on.
Sam Wilson 00:56
Pleasure is mine. Same three questions I ask every guest who comes on the show: in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?
Emma Powell 01:04
Well, the stay-at-home mom-photographer describes it pretty well. You know, always running like a little cottage business, got a degree online when I was 40, Bachelor's Degree in Entrepreneurial Management. And my husband is in the tech industry he got laid off. So we sold everything in Texas, moved to Salt Lake City and super short notice. And when I got up here, I didn't want to restart my photography business, it was a lot of hustle and grind. And I'm just getting to the point where I wanted to spend less time working, more time with my family. But I still needed something that could make a really good income. And so real estate and business, you know, you want to build wealth, you want a business or you invest in real estate and running a real estate business puts those two things together. And so I decided that I wanted to get enough passive income to retire my husband is my new endeavor after we moved. And so I started a real estate business in order to be able to do that. And so I'm mostly retired now, I am still wanting to do deals, obviously, as a passive investor, as a limited partner, but not completely step away from the business, just to be able to boost my earnings a little bit from what I would be doing as a limited partner. So we started a club recently where we just pool our money and do deals together. So allows me to be still involved in the GP, in an advisory or capacity, watching over things without completely stepping away. And it also gives me a chance to do a little bit less work per deal, as well as bring other people enter the deal so they can finally get their first deal done. Or if they're like me, and they want to just take a step down for being an active sponsor. It's a good middle ground for a lot of different people.
Sam Wilson 02:34
When did you move to Salt Lake City?
Emma Powell 02:36
It was in like the last week of January and 2018. And we got from this beautiful Austin, Texas weather. I think it was 25 degrees that day, we drove out. And when we got into Salt Lake, it was like 25 degrees. And I was an angry, angry person for about three weeks. And then we got our first blizzard. And I thought I love it here. So it's been actually a really good move for us.
Sam Wilson 02:57
So if I'm understanding this right, stay-at-home mom-photographer, you said, Hey, I'm going to step away from this entirely. So from 2018 to now you've done enough deals to basically retire yourself.
Emma Powell 03:08
Mm hmm. Yeah, definitely, I make a lot more money now than I did as a photographer, like I make more money than my husband. But he is not comfortable quitting his job for two reasons. One, he works 100% remote, and he can work remote anywhere in the United States. The other thing is, he has a lot of time freedom, even during his job, they have something called flexible time off. And so it's not like PTO where you have to save up days and all that they just come in and come out. As long as their work is done. He can work early in the morning late at night, he can take lunches off he can go places with us so it's not a part time job, he does work full time, but he can schedule it like a part-time person would be able to. So the other thing that he wants is a lot more security and our income stream. And so selling a deal or doing a deal that's active, that's my job. And he doesn't want to just have to replace, if he quits replace his job with my job. He wants it to be completely passive have a foundation of passive income that comes in at somewhat regular intervals. That W2 type of security, so monthly or quarterly distributions is what would be making him feel more comfortable. So between those two things, and you know, also just really liking his company and feeling like they're working on something really important, unusual, and they have a great company culture. So he's like, you know, let's just wait until we can really feel like we have that kind of a constant income security that you're not having to work for, it is truly passive. And then if we want to work after that happens, that's our choice is being financially free, not necessarily retired.
Sam Wilson 04:35
Right. That's really awesome. Did you expect in four years time to be able to step away yourself?
Emma Powell 04:42
I don't think I realized that the first six to 12 months. I really thought that it was a way for me to bring in another stream of income that would protect us from another layoff because in the tech industry, it's not if it's when and he was lucky with his first layoff because at the time he was contracting or working for California company and they had to give him 60 days notice like a plenty of time to go find a new job. But when that new job was a Texas when they laid him off, it was like he came home in the middle of the day 10:30. And he's like, Hey, can we talk and I mean, every wife knows, with a husband in tech knows what that means. It's just such a common trope almost. So for me, I just felt like I wanted to protect us from that my photography was definitely not going to be able to do that. And that was one of the reasons I didn't want to restart the business when we got to Salt Lake. But it didn't take very long for me to realize that this income earning potential wasn't just a hedge for unemployment, or layoffs, it could not only replace my need to work full time, or even part-time, and completely replace his income many times over. And I think that what we've done is the same thing with syndication kind of blows the lid off of what you can earn, with a W2 job, as we're looking more into fund creation, fund management and capital raising, that again, blows the lid off your income potential that you would have as a syndicator as an operator. So that's kind of what we're looking at next. It is a lot of work. So I'm a little work adverse right now. I'm definitely anxious and ready for retirement. So it's hard for me to plan a lot farther, I know that I'm gonna have to take a gap year and take some time off and reevaluate. But thinking about maximizing your income for the time that you're spending is something that you have to do if you claim you want passive income and to spend more time with your family, which everybody does. But then when they say that the next thing you do is go out and start a syndication business.
Sam Wilson 06:27
Right. He's guilty, guilty as charged. Yeah, you don't want to, you know, have more time, freedom. Yeah. Okay. Out of the gate, that's not exactly how it goes.
Emma Powell 06:38
No. So I transitioned pretty quickly, from active operations to more passive and consulting, because I just realized that I wasn't being true to my own goals by saying, I want passive income to spend more time with a family, and then just build this huge business that takes me away from my family.
Sam Wilson 06:53
Yeah. How did you because, there's a tipping point there but there's also that like, where you have to chase one and not the other at some point? How did you navigate that? And then talk to us a little bit about that, that question even make sense.
Emma Powell 07:06
Hanging out with people who are doing what you want to be doing and seeing them doing it successfully, you have to determine who those people are. And so I came across a couple of people who were basically full-time passive investors, you know, Jeremy Roll, Travis watts, people in that category, and just watching what they did. I mean, they don't really know who I am, but I know who they are. And they're my imaginary mentors, if you will. And so just watching those types of people, there are few other I talked to who are running syndication businesses, or capital raising funds, but they had previously retired on their passive income. So even though they are working now, they don't have to. And so knowing that about them, I can ask them questions and see how they did it. So just kind of following them around and replicating what they were doing helped me figure out really quickly that to retire on passive income, you don't have to be running a real estate business, you can do it from a job. And I remember my son when he got his first job when he was 16 at Sonic, and I was driving him to work one day, and I said, you know, if you just work hard, save up your money and start purchasing investments really young, like 16-18 years old, you could if you wanted to work at Sonic the rest of your life and be very, very wealthy, because you hold a lot of cash flowing assets. And he looked at me and he said, I don't have to work at Sonic the rest of my life, do I? No, but it doesn't matter what you're doing. You could be doing anything to make money. It doesn't have to be real estate-related. For me, I chose real estate because it was a high-earning type of job that I could do without having to go get a professional degree like a medical degree. And also because I just like real estate. I just really, I mean, I was a real estate photographer. I like houses. I like buildings. I like architecture. I like business. For me, I actually like it. Some people in this business don't really like real estate. And I feel like do what you like they can make money. And then anything that you make, you invest. You can retire on passive income, just from being a passive investor, you don't ever actually have to own your own real estate.
Sam Wilson 08:58
Right? That's a valid point. You know, was there a number that you had to have as a nest egg and you said, Hey, this is my investable assets.
Emma Powell 09:07
Yes, if we go off of the 4% rule, which means that you're drawing down your portfolio at 4% per year of the total value, we needed something a little over 2 million, almost $3 million. Before going on to 8% roll which I also see is becoming more commonly accepted because your portfolio is going to continue to grow. You're going to be taking out less as time goes by. So if you go with the 8%, we were somewhere in the million and a half to 2 million range. What if we were going off of the average annual return of 10% to make 120k a year which is $10,000 a month, we needed about a million dollars invested in cash flowing assets. And so I set the base one as that million dollars in play. When we sold our little ranch in Texas we had just under half of that between our retirement fund, our emergency fund, the equity that we got out of that house, it was both cash we put in an equity that we forced from renovations and also just live in it for a couple of years. So we took and piled all of that together and went out and started our business. And like I said, I had about half of that million that I needed from those savings and activities. And I knew that I could double that by the year, by the rule of 72. At 10%, a year would take 7.2 years to double that. And to me, 7.2 years was too long, my husband was starting this brand new job, we didn't know if he was going to like it, we didn't know if he was going to like the company and 7.2 years seemed like an eternity me, plus, I had no job. And so I thought I would be a good candidate to be an active investor, because I want to shorten this timeline down to three, four or five years, not 7.2 to double that. And I need some to do. I mean, when we first moved to Utah, I was literally watching cat videos on YouTube, I was so bored. And so I spent a couple of months just figuring out, what I wanted to do. My house was spotless, it was just ridiculous. I thought my kids just don't need me at the level that they needed me when they were younger. And so I went out and basically started in a real estate business. For all of those reasons. I like doing one thing that checks a lot of boxes. And for me that checked a ton of boxes.
Sam Wilson 11:07
I love that. And that makes a lot of sense. Thanks for breaking down the four and 8% rule that you know, because even if you're at 8%, and you're you're checking off at 10%. Theoretically, it's growing still every year, you're never touching principle because a lot of deals, especially right now finding something that throws off 10% cash on cash is kind of challenging. A lot of this stuff is baked in IRR with a 6% cash-on-cash return. Are you just being hyper selective? Or how are you finding the opportunities that meet your criteria?
Emma Powell 11:37
It's been really difficult, because to find something that throws up the yield that you need to have a high cash on cash return like that, it's really challenging with cap rates compressing, and you're seeing total returns go down and you're definitely seeing cash on cash return go down. It used to be 10% was the minimum that people needed to do a deal at all. And now if you can find 10%, you're doing well. And I'm not talking about 10% from like things that you're doing yourself, like you can get that off of AirBnBs, you can get that off of a lot of things. But if you're going in as a passive investor, where you're just investing for cash flow, it's a difficult thing to find in commercial real estate right now. So I think the advantage of putting money into a deal and not as much time like I still like putting my time into multifamily, because that's my niche. And that's what I know. And that's why I like to do what I understand. But being able to diversify your cash into other things that you maybe don't understand as well, because you don't have to run it. I'm never saying that you should invest in something that you don't understand. But you don't have to understand it to the deep level that you would if you were actively managing that actual deal or that portfolio. So looking into assets outside of real estate and talking to other real estate investors because they're not 100%, real estate maxis, we have to be in other things, it would be... Just like we tell all the crypto people don't go 100% into crypto, you shouldn't be 100% in real estate either. And so being able to diversify into things that really specialize in high cash flow like ATM funds, oil and gas. Those are the notorious ones for high cash flow. There's no upside, but you do enjoy some depreciation. I do like the upside to get off of commercial real estate. So I think a 70 to 80% of your portfolio and asset class you really understand well, and then you've got some percentage in some diversified things for hedge also, but just because it does something different, in this case, high cash flow. And then you have a little bit leftover for some more speculative investments, like tech startups, crypto, things like that. So just being well-diversified, sticking to your lane, and letting other people do what they do best but trusting them with some of your money so that your money can be working for you as well as you're working for yourself.
Sam Wilson 13:37
Absolutely. That's brilliant. I couldn't have said that better if I had tried. So plug your mindset behind that. With the last few minutes we have here. I want to talk about your investing club and your group mentorship. How did you build a following around that in order to get that launched?
Emma Powell 13:51
It was actually the plan B. Plan A was to build a network of limited partners who would want to passively invest in deals and I thought, oh, I want to be a limited partner. I know how to speak to limited partners. But really the only people I was speaking to and reaching who were reaching out to me were other entrepreneurs like how can I do a deal with you? How can I Co-GP? I've got $100,000, I've got $200,000. How do I do a Co-GP and at 200,000, it's really just difficult to get a large multifamily or large commercial operator to even talk to you about Co-GP. You need to start from three, four, or 500,000 before you can even have that conversation, especially if you don't have any experience. I'm a little bit different position because I have some experience and I can help out on a GP in various ways. But it just was not going anywhere. And I felt like, where are all my LPs? I went to go do a raise for a large deal. And I raised almost nothing. It was just almost a complete and utter failure. And I just realized I do better raising money for joint ventures. But as the deals got bigger, the joint venture partners have to have more and more cash and I just, I didn't know anybody or not enough people in the 500 to a million-dollar space to put in one single deal. I know people with 200 who needed to diversify that $50,000 at a time because that was the only 200,000 we had. And so as I was, as that deal kind of went down the tubes, we weren't able to get the money raised for it, I had a partner on another deal joint venture, you know, who was a securities attorney, and have a lot of experience in the private equity fund space for real estate syndications. And he suggested the investment club model, which is basically you pool capital with up to 99 other investors, including yourself makes 100. And as long as you stay under that and follow certain rules, it's not an SEC, you're not basically dealing with the SEC, because you're not dealing in securities, we buy securities, but we're not offering them, we're not giving any financial advice, I don't charge any fees to join the club. If I did, then that puts me in a registered investment advisor territory. And so I don't charge any fees weekly, for free, we look at deals we decide do we want to pool our capital into this deal. And we do negotiate our way into the GP to protect that investment, namely, but also because a lot of us in the club do have experience and can offer valid and legitimate skills into a general partnership.
Sam Wilson 16:04
That is really, really interesting. So you're gonna rely on the operator, then go find the deal, and they bring it to you, they bring it to your club, as you as a club? Are you guys going in as a fund to funds plus getting a cut of the GP? Or are you going in just strictly as a GP member and bringing all the capital?
Emma Powell 16:21
We go in as individual limited partners, we cannot create an investing company for the purpose of investing in securities, that's illegal. It's also a way that people would try to do that's like the clever idea they get, well, if I was in your company, even though I'm not accredited, I could still invest in 506C deals, absolutely not, you still need to be accredited. If it's an accredited entity, every person in the entity must be accredited, or the entity has to have $5 million worth of value. And we're never going to do that because we create a new entity for every deal that we go into. So you have you're basically dealing with all of us individually as limited partners, we all sign a PPM we all make our own decisions. That's one of the rules. And then we create an entity that then negotiated into the GP, again, to protect that investment, keep an eye on it. And also to be able to contribute our skills as necessary. I would say it's a non-managing member, typically more of a board position.
Sam Wilson 17:13
Got it. That's awesome. I love that. How, what has been, you know, you said you built it really from out of necessity, because you were trying money from limited partners and found that all your limited partners wanted to be general partners, not limited partners. You built that out of necessity. What has been, in my small mind, I don't understand this model that well, it would, you know, most of these people wouldn't need a group mentorship, weekly meeting, talking about, you know, the mechanics of deals, but it sounds like that's still an information gap you're able to fill.
Emma Powell 17:43
Yeah, definitely, I think because it's free, there's a lot of value there. And we have fund managers, we have experienced operators, we have people who've been in the space for several years learning and taking courses that maybe they've never done a deal. So they're looking for their first deal, they definitely want to build a syndication business, or some sort of capital raising fund. But then we have people in there as well who just want to get into this, but they don't want to build a big business. It's just not something, it's like me, it's just not something that's in our long-term plan. And so people can get into the club, and really turn it into exactly what they need. If it's just education, if it's just networking, if it's deals, it doesn't really matter. Again, it's one of those things that I had a lot of different little problems that I was trying to solve. And this one thing check all those boxes.
Sam Wilson 18:25
Absolutely love it. Emma, thank you making the time to come on today and really break down your business, your kind of story, how you've achieved retirement really, you know, in just a few short years. So I think that's absolutely awesome and love the investing club model.
Emma Powell 18:38
Thank you.
Sam Wilson 18:39
If our listeners want to get in touch with you, or learn more about you what is the best way to do that
Emma Powell 18:42
My website, actually here, www.highrise.group. And if you go to /contact, I have links to all my socials there. I have my phone number, my email, you can also book a time in my calendar to talk whether you want to be a limited partner or a Co-GP Club member, we can kind of put you in whichever bucket more appeals to you. I definitely still am raising money from limited partner capital, I always will be doing that. And then if you go to highrise.group/podcast, it has all my interviews that I linked there if you want to go through and has tons of, you'll hear the backstory like 100 times. But anyway, that's the best way to get in touch with me. And then you can choose the platform that works best for you, texting, social platforms, whatever, because it's all listed there on that contact page.
Sam Wilson 19:24
Fabulous. Emma, thank you so much for your time. I do appreciate it.
Emma Powell 19:27
Hey, appreciate it. Thank you for having me on. This is great.
Sam Wilson 19:30
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories so appreciate you listening. Thanks so much and hope to catch you on the next episode.