Jerry Miller: Syndications, Single Family & a Journey of Investing to Financial Freedom
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Jerry Miller is a real estate investor with almost 20 years of experience doing a wide variety of strategies ranging from single-family homes, BRRRR's, rent-to-own and utilizing Section 8 through his company Largo Group. A couple of years ago he was introduced to real estate syndications as a limited partner investing in value-add projects as well as new development. Because of the success he's sustained, he's begun raising capital as a general partner. He continues to do all of this while still maintaining his full-time role as a consultant in the IT industry. Jerry loves working with IT professionals that are looking to get started investing in real estate and provide them with passive options to invest in.
In this episode hosted by Mike Swenson, we discussed:
- Jim's start investing into single-family homes
- How 5+ multifamily apartment complexes should be valued of their cash flow & income instead of based on comps for smaller properties
- Advantages of moving your 401K and existing IRAs to a self-directed version
- How to identify a good syndication
- Why your property manager the absolutely critical one to your success
- How hiring a property manager is actually buying time so that you can focus on the things that should be prioritized
- Why Jerry suggests commercial real estate to not outlive your retirement plan
Timestamps:
0:00 - Intro To Jerry's Career
2:15 - Getting Into Real Estate
8:04 - Passive And Active Investment
16:26 - Evaluating The Market
24:33 - Property Management And Analyzing A Deal In The Future Potential
32:03 - The Future
35:58 - The 4% Rule
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Minnesota Real Estate
Read the full transcript here:
Mike Swenson
Welcome to The REL Freedom Podcast where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some real freedom together.
Mike Swenson
Hello, everybody, welcome to another episode of The REL Freedom Show where we talk about building time and financial freedom through opportunities in real estate. And what I really love sharing with you guys is everybody has a different story. Everybody has a different background, people take different paths. And so what I really want to inspire you with is finding that path that fits where you're at fits your giftings and what you want to do, and then understanding that that path can change over time. And so today's guest I think, is a great example of that somebody that you can learn and see how their path has has changed over the years, and also how they're serving a certain niche and how their their gifts and abilities and passions have changed as well. So today, we've got Jerry Miller, Jerry has been a real estate investor with over 18 years experience. You've done single family homes, birds flips rent to own section eight, and then you moved up, I guess kind of scaled up into some larger properties on syndications, both on the limited partner side and now moving into the general partner side. For those you that don't know syndications, we'll cover that in a little bit more detail. And so your goal is to eventually replace your income your full time IT consultant and that's another cool piece is you're focusing on helping people in it to be able to invest in real estate. And I love how you take where you're at, and connect with the audience and your network and what you have and grow to the future. And now you have the Largo group where you're building and growing your real estate investment holdings. And so we'll let you share more about that. But thanks, Jerry, for coming on the show.
Jerry Miller
Thanks, Mike. Absolutely glad to be here. I love real estate. I love talking about it. So happy to be here.
Mike Swenson
Why don't you share a little bit about your background and kind of how you got into real estate investing? You know, I think so many people struggle to make that first step paralysis by analysis, and they don't really know what to do. And so talk about kind of that, that getting over the hump and getting into real estate and how that's changed and developed over the last few years and kind of where you're at today.
Jerry Miller
Well, let me take you way back when I was right out of college, went to work for you know, traditional for a power company. And one of the senior engineers and I were having a conversation, it was really downcast. And I was like, Well, what's up normally, he said, Well, you know, my financial adviser says that I can't afford to retire, I was supposed to retire in two years. And now I need to work a little longer. And I remembered thinking, that's not going to happen to me, I had no idea as a young man, anything about retirement, you know, I was I was putting away the 6%. And the company was matched to 3%. And everybody's just said, do that, keep your heads down. And you know, in 40 years, you have a comfortable retirement and I and I kind of bought into that it was like, Okay, fine. I went about being good at being an engineer getting promotions, getting raises, doing a good job. And my retirement was just simply a line item in my paycheck that was being taken out. But I really wasn't actively managing anything only, only to say I was an aggressive growth guy, and I wanted as much money as I could get. And that was kind of it. It wasn't real. And somewhere fast forward. I had an opportunity in about 2005 2006 to buy my first single family home. It was something my dad suggested it was very, very affordable. I bought it with my brother in law and boom, we are property owners. And you know, you learn single family, kind of by doing I mean, yes, you got to figure out can you afford this and all that other stuff. But at the end of the day, you learn a lot of things in single family, by by trying and doing. And you know, and I think any reasonably committed person can can own and operate a single family home. I don't call that passive, by the way, that's an active job. And that's okay. But I do get a little miffed when I hear passive homeownership of rental properties. It's not passive. So fast forward a little farther, I thought, hey, if I could get five or 10 of these things and pay them off, well, then hey, there's my comfortable retirement together with my 401k. So security, life is good. Well, I blew past 10 doors about five years ago, because at that point, I realised if I can buy and, you know, cashflow these things immediately, then I should buy, frankly, as many of these as I can afford. And so it started to be where I started redirecting just about all my available discretionary cash into single family homes. And that was a good decision. Until one day, I'm looking at my 401k. And I'm like, I'm really not happy with the performance of my 401k. And I started looking around and looking around and I actually ran into a friend in the IT community, who was doing syndications almost full time. He still had his full time day job, but he really had a foot in both camps. And I saw LinkedIn posts. I'm like, Hey, what are you What's this Cindy? Jason told me all about that. And that's where I began to understand that I could invest passively as a limited partner. You know, it was about a $10 million asset, I think it was, that first one might have been 98 doors. You know, it was a traditional kind of Class B property, it was a value add multifamily deal. And, you know, when I saw the proposed 15% In annualised return, I'm like, wait a minute, I don't, I don't get that with my single family. And so I kind of slowed down. And I thought to myself, if he's paying me 15 percentage, because he's making more, right, because everybody's rational, right? If you're getting 15, then they gotta be getting 25 Or better, because it just doesn't make any sense. Nobody does anything for free. And so the more I studied single family, I'm sorry, the more I started the multifamily and began to understand how a good operator can really move the needle on net income and, and do different things both on the on the increased rents, as well as decrease expenses side, I really began to understand how the multifamily apartment complex is valued, like a business, it's valued about its cash flow. And that's a fundamental difference from the way that most people look at single family, single family, yes, you might cashflow $100 a month. But you know, usually we don't buy the properties based on the cash flow. Although to be honest, once I started getting into multifamily, I reevaluated how I looked at single family. So that's kind of a long version of how I got to the point of the limited partner. And then once I was introduced, it was really it's like getting getting addicted to something, I realised, this is something I really, really want to do. And and you know, over a period of time, I moved all of my 401k into a solo 401k, I have my own company. And now I'm fully invested in about four different syndications. Very happy with that we can talk about diversification strategy, but at this point, all of my 401k is, you know, not in the stock market.
Mike Swenson
It's interesting to hear your story and fun at the same time, because doing this podcast, I hear a lot of different stories. And you see kind of the pain points, I wouldn't necessarily say the pain points, but maybe like the evolution of your mindset and how that works. Maybe the evolution and active versus passive, you know, a lot of people have kind of get burnt out on that active side slinging fingers, single family homes, and they start to scale up, and then to how you moved into the limited partnership to be more passive. And then you see, okay, on the general partner side, there's more opportunity. And for some people, they they might make that journey, and maybe they just decide to stop somewhere in between, because they're really excited about whatever asset they're in or whatever, you know, opportunities they have. But for you, it's kind of a, I guess I would say a natural evolution and a growth pattern over your investment journey as you've kind of moved from a little bit more hands on active to a little bit more hands off passive and kind of moved up the chain a little bit to the larger properties.
Jerry Miller
Yeah, I agree. I think one of the cool things about real estate is I can be, I feel like my rental portfolio now is passive for me, I spend less than an hour a month, I'm not interrupted during my day job for any issues, because I've got property managers to do all that. And so I'm kind of now managing the manager. So that piece is now passive for me, my obviously my LP positions with with different syndicators is passive to me. But now that I'm on the GP team, that's an active to me. So you don't have to just be all or nothing you can, you can spend your time where you want to, you know, the ultimate goal, of course, is to build passive income. And some of the some of the GP activities are sort of one and done, you get you get some paychecks here or there. But you don't necessarily produce a linear step, you know, function of increasing passive income. So you just have to make sure you're spending your time according to what you want to do in the future.
Mike Swenson
And I also love your perspective of, you know, for some people, maybe they got started in real estate early and only invest in real estate. And for some people, maybe they invested in stocks and mutual funds, and have continued that. And so for you to kind of see the path of both opportunities together and look up and say, Hey, this one's not performing as well as this other one. And to make that transition. That's pretty cool to to have that experience of seeing both side by side and to experience the real estate side doing better than the stock market side. And then because you're already in the real estate side to make that switch, I think a lot of people have those 401 k's and they're like, I don't know, I haven't experienced that I could make more in real estate, they don't know what they don't know. And so you had the ability to see both paths and to make that switch and to double down on the real estate side.
Jerry Miller
Yep, yep, that's actually one of my arguments. You know, when I'm when I'm chatting with investors, a lot of people don't realise that they can actually tap you know, their 401 k's and their and their existing IRAs. Obviously, they have to move that to The self directed version of whatever wherever they are. But you can and my position is you should. Now I'm not a financial adviser, but I can tell you what I did and why I did it. And I feel like a lot of the things that I did are universally true. And so what do I mean by that? In my late 40s, I kind of looked up and realised, I'm not going to get to the comfortable retirement number that I thought I was I was heads down. I think I made a lot of people like this smart, hardworking, dedicated, driven, not paying any attention, my retirement account. Well, it's not going where I need it to go. And so if you're, if you're in you're probably early to mid to late 40s. Now is your time to course correct. And where I really love the the syndications as a part of a 401k is, you know, probably the strongest argument against investing in syndications is that they're illiquid, meaning that, you know, you put your money in and you kind of gotta wait three to five years to sort of really get the big, the big payday out, well, your 401 K, money isn't going anywhere. So what you then really have to compare it to is, you're not going to withdraw it in the next five years. So the question is, is it going to perform better in the market or an eye, you know, in a syndication, and I think, you know, diversification is the right way to go take a piece, probably the smallest piece my recommendation to brand new people that are brand new to syndications, go in, dip your toe in the water do not go all in, I did over about a 12 to 14 month period. And that's I'm super aggressive. Because I've got a lot of real estate background, I would recommend take a piece, put it in a position and you learn as you go. And you see you see there, hey, there's some there's some there's some tax benefits, there's, there's things that you learn by doing that you wouldn't necessarily have learned otherwise. And once you understand the process, it's just like buying a house, you bought your house. The second time you buy a house, it gets easier because you understand all the parts and pieces that go into buying the house. So second time, it's not so scary. Third time, it's even easier. It's kind of the same way the syndications. Plus, if you did allocate your, you know, your 401k across three, five, however many syndications you're sort of diversified. I say, sort of because you got to make sure that you are intentional about that just like you know, buy all your stocks in the tech sector and say I'm diversified because I got seven different stocks like you there are ways to sort of balance, you know, the investments in such a way that you wouldn't expect any single event to negatively impact them all. And so yeah, I definitely think that's, that's a position that a lot of people should consider, they should consider the, the returns. And I think the returns are fairly stable. But there are some things about syndications that you deeply need to understand before you just jump in. This is not this is not gambling. But there are some great investments out there. I think commercial real estate is going to be around for a very long time,
Mike Swenson
I think to your point talking about 401k plans matching up well with a syndication strategy that makes a lot of sense, because like you said, from a liquidity standpoint, if I was going to try to have you fund a syndication that I'm doing and you've got, let's say cash, or you had something in the bank, or CDs that just came due or something like that, and I say, hey, go put this money in this investment, you can double your money in five years, which is kind of a general rule of thumb that syndicators like to find those opportunities. Right now you're thinking, well shoot, I got this super liquid capital sitting here. And now it's going to be illiquid for five years. That doesn't make sense. But the 401k makes absolute sense, because you're not going to touch it anyhow, you don't care whether you got your money back in three, five or seven years, if it was the right opportunity, because you can't touch that money anyhow, without a taxable event. So I think the syndication to 401k conversation just makes a lot of sense for people.
Jerry Miller
I agree. I agree. And once once you have the confidence that you can identify a good syndication, you know, it's, I liken it to the to buying your house. You know, hopefully you didn't buy your house, because it was the first one you saw, hopefully you looked at 10 and then you're like, I know what I like I know what I don't like I know a good deal. I know a bad deal because I know everything else that's in the market at this time. And syndications are no different. You almost don't want to just buy the first one you want to you want to get an education process what are the benefits what you know, what are the strengths and the weaknesses of you know, a value add versus, you know, a brand new development versus, you know, you know, there's there's ground up there's, there's a lot of different flavours and you want to you want to stick with the simpler ones, and you want to stick with what I call the more stable ones. I like a value add where there's not significant, you know, renovation budget, it's a it's more of a bring the rents up to market rents. That's a pretty straightforward asset strategy that a lot of people can execute very well. But there's a lot of little things that you need to do before you get to the place of actually pulling the trigger to invest So you need to make sure that that opportunity, not only is a solid opportunity, but it's it's the best opportunity for your circumstance. And that's where there is no one best. I have investors all the time asked me, you know, what's the best thing to invest in? I said, Well, let me tell you what I've invested in. But more importantly, let me tell you why I invested in these different deals. I'm in a deal. That's a new development deal, Scott great. It's just like a growth stock. It's got tremendous upside potential. It's pre entitlement. It's completely at risk. Like it. It's not the kind of thing that I even really talk about what my new investors because people get so enamoured with the rates of return, they don't quite understand the risk reward mechanism. And so that's, that's not a good starting position. Talk a
Mike Swenson
little bit about the markets that you've chose. Now. You know, before you got into syndications, you chose markets to invest in and then when you're in syndications, you've had markets but talk about weighing out the different factors, you're in multiple states, multiple areas, different communities with job growth, and, and, you know, population growth. So talk about how you're evaluating different markets and deciding what would what would be worth me spending time considering investing in and then maybe what would be something that isn't a fit for you, and then realising everybody's different, right, just because you like a certain market might not mean everybody's gonna like a certain market. And so we'd love to hear kind of your perspective on evaluating markets.
Jerry Miller
Cool. What is more important than markets is your partner's I have found great partners. My first general partner activity was syndicator at a Charlotte, North Carolina, it sage equity. I knew the principal. In fact, I had invested with them as a limited partner, and they did their job of answering all my questions. And I was probably, I might have been a tough limited partner, because I asked so many questions, I really wanted to understand how these things worked. And that was a very healthy exchange, I did learn a lot. And I learned, you know, what they were doing and why they were doing it. And it was a it was a win win that we were able to partner together on a couple of projects in the Charlotte area. So they they exclusively focus on the Carolinas, so mostly North South Carolina, and central Charlotte area, North Carolina. So they have you know, they have people that find deals and people that analyse deals that they know those markets extremely well, knowing the you know, the taxes and the water cost per door. And all of that minutia that is so important to make sure that when the seller presents the rose coloured glasses version of a deal, you can say, hey, that actually isn't right. You know, we should see maintenance at this, this number, not that number. So I'd say the partners are more important, but to your point, I've got a set of partners in in that Charlotte area. But then I've also got a development partner in the Texas area, specifically Dallas, although we've looked at a couple of the different metro areas. And what our secret sauce is, if you will, because you've sort of got to have a specialty to do well, is we are looking for value at apartments where there's some development component, whether there's raw land that we can put more units on, or we've actually looked at deals that went belly up before they were completed. So there needed to be you know, that construction budget to come in and manage that. Not every syndicators got the experience to have a strong development construction partner. And that's where, because of the skills of the team, we're able to go after projects that other people wouldn't necessarily. So back to the markets, I there's a number of great growth markets, but at the end of the day, to me, it's all about who am I partnering with? And sort of what markets are they already into, because I'm rarely the guy that's finding the deal. So I'm usually the guy you know, helping to analyse the deal, helping to raise capital, and then of course, the asset strategy side of managing the asset. So it kinda doesn't matter where it is, as long as they have boots on the ground for the you know, for the finding of the deal.
Mike Swenson
Yeah. And maybe we back up half a step before syndications. Because, yeah, you're you're right, the partner is important. You're kind of going into marriage or, like, a long term relationship with somebody because this is five years. And this is what I tell people when, you know, I hear people, like I just gotta go find the money, I gotta find the money. Well, no, it's not a bank. The money is a relationship. And so your account, you're being held accountable for being a steward of that money. And so you better do a good job for five years. And I tell people, you know, with a partnership deal that we have, every month I have to answer the questions of where are we at on this property? Are we better than or worse than or what's the strategy? How do we need to adjust and so it's not just, Oh, I got somebody's Money, it's, I want to do a good job with that money and stewarding it for the life of that deal, because if it works well, you're the easiest one to just roll into the next one. But if it doesn't go, well, they're gonna go look elsewhere. And so you're right, that partnership piece is important. But yeah, maybe people that aren't doing syndications, maybe just talk through a evaluating a couple different
Jerry Miller
markets. Oh, absolutely. So I mean, there's really three criteria that we look at, when we're trying to evaluate, you know, the strength of a value as strategy it's going to come down to is the population increasing in that metro area, or the, or the number of jobs increasing, and is the average wage increasing in that sector. And so really, what those there are more, there are more metrics, you know, we look at, there's sort of a qualitative factor of, let's make sure that this town isn't a one horse town, like, you know, in Texas, there's a few towns there, basically, oil towns, I don't want to be there, like when the price of oil goes down, it will eventually, then your entire town, you know, is is related to that, that oil depression, if you will. So I want to see good diversity of major, you know, major manufacturers, major employers, so that there's a stability of the workforce. But at the end of the day, if there's more people moving into the area, if the if the, if the wages are increasing, you know, because there's there's strong demand for jobs, and the total number of jobs is growing. So what you have is a recipe for not only an upward pressure for demand for housing, but people that can afford to live there. And we've got a few more metrics that we look at, depending on whether we're looking at like a Class A property, so like the nicer you know, more expensive, you know, amenity driven, versus Class C, which is more of a more of a lower income housing, like, we look at a few other metrics, depending on the class A, B, or C. But in general, those are, those are probably the big three. And there's a lot of markets, Florida, Texas, South and North Carolina, every single top 10 list has got major cities, I mean, you see the same cities over and over the back. One thing that that you'll often see Phoenix was on the list, I think last year, but this year, they're like, they're they're actually they're not as good because last year, they so expanded their their, you know, the increase in rents. So if you do seem to kind of ebb and flow, if you were the top of the list last year, you may not be, you know, in the top 10 This year, but there's a number of cities out there with very strong population growth. That that we tend to, we tend to stay in those markets, the the numbers tend to work, you know, a big part of every success is can you drive rents can rents increase, you know, to what level, if you're just looking at inflation, it's a little harder to to make really good money, I would say we really liked the properties that are already 150 to $200, a door below market value, those are a little harder to find, because most people have woken up and said, Hey, rents have gone up. Typically, it's either it's more of a hands off owner, or it's a property manager that's maybe spread a little bit too thin, that's just not keeping up with, you know, the market demands for that particular property. And I'll just say that, sometimes the reason is because they've let you know, some deferred maintenance come in, and there's some money that really needs to be spent that the owners just don't want to spend. You know, I salivate over that I'm happy to spend $100,000 In a repaving a parking lot. And then being able to drive market rents, because it always it always pays, it pays for itself quick putting
Mike Swenson
a bow on the market peace. You're right, you you want to plant in a fertile soil. And yeah, those those hot markets aren't always going to be the hot markets for the 510 15 years down the road. But at the same time, you're aligning a much better chance of success when you're putting yourself in those markets. Fiat funny you mentioned talking about management, because that's where I wanted to go next. So talk about property management, because for so many people, they they do get hung up on, you know, what's the price that I'm paying. But there's also an incredible value of that, that property management because this is a multi million dollar asset that this person or this company is going to be in control of for the foreseeable future. And it's a huge part of the margins that you're looking to gain if you're doing a value add component. So how are you assessing? Okay, what's the current property management situation? Are we just going to come in and flip it and bring in our own people? So talk about kind of looking through the lens of property management when analysing a deal in the future potential?
Jerry Miller
Absolutely. Number one person that you'd better get right is your property manager. I liked your analogy of a marriage. I would totally agree that you need to go into it with the seriousness of a long term relationship that you don't change other people you need to make sure that the right people, you know, on the front side and the property manager is one of the people that's absolutely critical to your success.
Mike Swenson
And to just a quickie Add in. Like, if you're talking about single family, duplexes, there's a lot of opportunities out there, there's a lot of people that could manage that asset. When you're talking about 100 units plus, there's not as many, the list of names is not as strong. And so like you said, You've got to get this, right, because there's just not as many people out there that could handle an asset of that size.
Jerry Miller
I totally agree. It reminds me there's a lot of things I learned in single family, I see a lot of people and single family when you pivot to commercial, it is there are more differences than there are similarities. There's a lot of people that think, Oh, well, you know, I did this, you know, I managed 100 doors that were single family, I can manage this one apartment complex, that is 100 doors, and I would say, you may be able to do it, but you're gonna find that the things that worked with single family are not going to work with that, with that apartment complex. And there's a lot of different dynamics, it's just something you learned through experience. So I would agree with you there. I don't think there's a magic formula. There's not one set of metrics that I would say we use on all property managers, I would say that you have the conversation, there's some key areas, how are you marketing? You know, the, the units, because a lot of people are doing the exact same thing, they're posting the exact same website? So then the question is, well, how are you? How are you catching the one person that's not, you know, on all the other websites, and there's a lot of different ways to get your, you know, get your get your product out there and get your inventory out there, you need to look at how quickly you're filling, you know, vacancies compared to your competitors, you need to look at is your is your vacancy rate, you know, better or worse than your competitors. I mean, those, those all have some very significant numerical type of thing. I like to look at things like handoffs, like, if if you've got one person that's handling all the marketing and somebody else is handling all the leasing, and then a third person is handling, you know, unit turns? You know, my question to you is, what are you doing to ensure that nobody is slipping through the cracks, right? We don't want a unit that's ready to be marketed. And we forgot. So, you know, two weeks goes by, we weren't marketing it was sitting there empty. That's, that's lost revenue. Right. I want to see very clear handoffs list something that says, hey, you know, Jerry's got these 10 units. And when he's done, he's gonna hand them off to Mike. Okay, Mike, how do you know, those 10 units that Jerry's gonna hand you this week? Right? What are we doing to ensure that, you know, there's immediate activity when they need to. So there's a number of things honestly, face to face is my favourite with with with property managers, I've met people that they say all the right things over the phone, and then you realise their follow up skills are just not where they need to be. And so I, I feel like the face to face is the absolute best way, I did have to make changes, I've got two different portfolios of single family homes, and I changed both of my property managers, just before I jumped into commercial as a full time, you know, general partner, because I was finding both of my portfolios were taking up way too much of my time. So I had to onboard new property managers, and kind of, you know, I empowered the first set, but I empowered the second set to say, hey, I need you to take all the headaches off of my plate, I'm willing to let you use your best judgement, you know, if it's over, use $500. For my single family, if it's over $500, just just give me a heads up that it's coming. I'm, I'm not asking you to ask for my approval. If there's an emergency plumbing repair, get it done. And just give me a heads up that we just spent $2,000 Because there was water damage and dinner Dinner, like, you know, I don't need you to ask me to do what has to be done. Right. But I do appreciate a heads up when it's an unusual expense, if there's something that's not normal that, you know, that I just needed to know about. So that was a really good decision. Because that has allowed me to make my single families truly passive, I just look at the rent roll reports. Occasionally I'll get a phone call, Hey, heads up, this is what's going on. It's more of a letting me know than it is like they're asking my permission. And sometimes, you know, it's a day or two behind when the event actually occurred. So yes, property managers are absolutely key. And you're correct that the the number of really high quality, you know, large unit, property managers is a much smaller pool than in the single family space to
Mike Swenson
just a quick point out for people that are maybe looking to get started or starting smaller with the one unit, the two unit type stuff, property, a great property management is not an expense. It's a it's an investment into your time, because I just got back from a showing earlier today with an investor looking to purchase their first property. And they're like, Yeah, you know, we're really busy in our day job and We think we want to hire a property manager at X percent. And in my head, I'm thinking, I'm glad you came to that realisation because I was going to press you if you didn't, because it's time, like, do you want to learn how to screen tenants find tenants market to tenants deal with hassles, when there's non payments, try to figure out how to find great vendors to repair the units, like, that's a whole second, third, fourth job that you're taking on. And to hire that property manager, you're gonna get your time back, and then you're gonna be able to grow your investment portfolio more quickly, by having that time back. And so if you're somebody looking to start out, managing, having a property manager early on, it's gonna save you a tonne of headaches versus trying to save a little bit of money or get a little extra cash flow by trying to take on that property management yourself.
Jerry Miller
Yep. Mike, I've got a bit of a tagline, you know, you can use your money to buy time, or you can use your time to buy money. And it's very true. And in this particular case, you know, what you're paying the property manager clearly as is, you know, income that you're not collecting, but it is buying time, so that you can focus on, you know, hopefully your day job, maybe maybe there's a point where you hit that financial freedom number and your, your passive income is paying all the bills, I hope to be in that category. I'm not too far away. But I've still got a couple in college, and I've got a number of expenses that will go away in the coming years. But I just I just enjoy the real estate, I love the chase. I love the acquisition. I love when you think hey, here's what I think I want to do to this property and then you actually make it happen. And it actually pays off. That's that's such a cool feeling that it just never gets old for me.
Mike Swenson
So talk talk a little bit about the future here with Largo group and what you're looking to do kind of more on the GP side some of those goals for the future and being a GP and a capital raiser and then working with you know, people in it that probably are where you were a long time ago, and hopefully they don't have to go through the same learning curves that you did.
Jerry Miller
Absolutely, Mike. So yep, Largo group is my company. Little plug there Largo group, it's 2011. That year, we founded it.com, is our website. And so it's it's our our goal is, you know, we've we've really focused on again, the value add multifamily, with some development components seems to be our sweet spot. They're the types of projects that not everybody else is looking at. The returns are pretty good. You know, yes, I'm involved in the capital raising side, I've talked to a lot of investors, you know, I was in the IT community and what I found a lot of smart, hardworking people that paid no attention to their retirement, just like me, you know, and I straight up asked him, I said, Well, how are you going to ensure a comfortable retirement and they're like, Jerry, I don't have time, think about that. I'm like, Hey, you're, you're 48, you need to be thinking about this, you need to make sure you're on track to get there. Because guess what, you know, most people know that their employer's loyalty to them, you know, kind of went out somewhere in the 90s, it stopped, you know, the the idea of employee loyal loyalty ended. So everybody kind of knows, hey, it's up to me, Well, your retirement is in that same boat. You know, the 401k is a great vehicle, but it's, it's meant to be guided, it's meant to be driven. It's not meant to be on autopilot. So if you leave it on autopilot, well, you know, then it's gonna go somewhere, and you have nobody to blame, but yourself. So I just like to help people say, Hey, I think commercial real estate is definitely worth looking into. I share a lot of my own experience, why I invested in it, I can't make the decision for you. I have talked to people that were so nervous about this, I said, Hey, I'm your friend. I don't want you to invest. Because I need you to be able to sleep at night. But that's one in 10 people, right? I you know, it's it's not about greed. For me, it's about helping people do what they want to do with their money. And if you if you are excited about commercial real estate as I am, then invest with me, I invest in my own deals. So I just feel good about helping people invest, because you're letting them know of a solution that they didn't necessarily know. I mean, you look at the market right now, there's not a strong guarantee of any real return in the near term. Now, I'm a big fan of the fact that the stock market is you know, over time is average 9% For the last 100 years, it probably will average 9% For the next 100 years. But we don't know where it's going to be in five years. So if you're five years from retirement, and you need it to make 9% for the next five years to get a comfortable retirement, then you need to be looking at alternatives that might be a little bit more predictable.
Mike Swenson
Yeah. Well, and I remember being a finance major and a spreadsheet junkie right out of college. I was 22 years old, and I had my 401 K plan and my match, and I made a spreadsheet of 22 Who 2324. And if I contribute this much, and I get this much of a match, and if I go from 3% to 4%, and if the market does 8% to 10%, here's what I'll have at retirement agents. So I had that spreadsheet all mapped out. And the number wasn't as big as what it can be in real estate is kind of now the conclusion I'm drying. And then at the same time, you know, healthcare is getting better and better people are living longer and longer. What if you outlive your retirement? You know, the general rule of thumb is you pull 4% 4%, a year after retirement age, and you just keep living off of that? Well, what if you dumped your money into assets that spit off cash flow, and that number never had to go down and you could continue to grow that over time, that's the key to is when you hit retirement age, your retirement fund can or your retirement funds or real estate can really grow and blossom versus you're just kind of trying to run on fumes and not outlive the money that you spend your whole life saving?
Jerry Miller
Right? I'm really glad you mentioned the 4% rule. So I've I've written a pretty decent article, I need to turn it into a more formalised ebook. But you know, the 4% rule for those in your audience that don't aren't aware as whatever you've got in retirement, let's say that's a million dollars, you withdraw 4% of it a year. And mathematically they modelled it, this model was only from like the 90s that, you know, 90 something percent of the time, you would not outlive your money. Of course, that's about 30 years old, but it's still a valid. It's a great financial model. I like financial models. But what it lacks is specify specificity. Let me let me say that differently. If Zillow if you are going to buy a house, and you see on Zillow that, hey, that house is worth $500,000, you're not going to look inside the house, you know, has it been updated? Does it have a new roof? Does it have this, you're just gonna buy it on the law of averages, that's kind of what the 4% rule is. But if there's a down year, in the first year, or the second year on that 4% rule, you really get hammered. If you use the 4% rule for last year, those people are in trouble. And so I would just encourage you, it's a great financial model, but use it as a tool for planning. And just know that, you know, aren't the cash on cash returns the most of the deals, I've done six 7% definitely be the 4% rule. And there are a whole lot more predictable. Now, I gotta say that you can't always depend on the cash on cash return. So don't, don't don't put too much on the bank there. But I think is more stable, I think people are always going to need a place to live. I think the inflation is only going to be your friend to drive rents up even even farther. But if anybody's interested in hearing more about the 4% rule, go to my website and give me your email address. And I'll I'll send you what I've written because it's a conversation I've had one of my early investors is a financial planner. And, and he I actually sent him this article I said, Hey, tell me where I'm all wet. Tell me critique me on this. He's like, Jerry, you're right on with all your thinking. I understand the traditional thinking of the 4% rule. But there's a flaw in it actually producing consistent reliable returns. Your the typical annuity payment is so much less than what a typical real estate investment would produce.
Mike Swenson
Well, thank you, Jerry, for coming on and sharing I think we covered a lot of great practical tools, especially for maybe the early investors or people considering investing. And then obviously to show in your journey of how you scale up and learn and what I think is important for most people is you know, you're you're obviously much more sophisticated now in your investment journey than you ever use when you started and the key is as you got started and I think that's the thing that I want so many people to know is you got to get started to get better. And so don't just consume podcasts and and listen about theory and analysis but you got to get in the game you got to get that first property and and that was exciting for me, like I had mentioned about this showing earlier today, helping an investor pick their first property because they're like, we're ready to get going, we're ready to do this. And they understand they're not going to be perfect yet. They're not going to hit their end goal after this first property, but they're not going to figure out how to learn and evolving to get better until they get their first property. So that's what's really important. So congrats, Jerry, on your success and your evolution, how that's grown. And best of luck to you in the future. And yeah, if you're if you're interested in learning more about Jerry and his investments and partnering with him, absolutely reach out tonne of information. Thank you so much for sharing.
Jerry Miller
Thanks, Mike. It's great to talk to you today.
