Stephanie Walter: Real Estate Syndication & 1031 Exchanges

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After getting a 2% raise at her W2 job, Stephanie Walter realized that is not the life or future she wanted year after year. So she started an insurance agency back in 2006. Soon after, she decided to begin investing in real estate, with the goal to owner-occupy a property each year and move onto another property to do the same. After a few years, she discovered real estate syndications and her life drastically changed! Today she is the CEO of Erbe Wealth, where she focuses on helping clients generate passive income through real estate investments and has acquired roughly $80 million in real estate properties. In addition to sharing her story, we spend some time discussing 1031 exchanges, how they work, and how they can be a great tool to use in your investment strategy. We also discuss Self Directed IRA's and how they can be a great alternative to those looking for something different than investing in stocks and mutual funds.

In this episode, hosted by Mike Swenson, we discussed:

• Stephanie is the CEO of Erbe Wealth. She specializes in syndications. She's a large-scale investor and they've invested $80 million in real estate over the last four years.
• Her dad encouraged her to become an entrepreneur and she became an insurance agent for about the last 15 years, prior to her time at Erbe Wealth.
• She invested a lot in single family homes around the Denver Metro Area. About 2016 she started investing in apartments.
• She went an informational seminar and, in that seminar, they explained what a syndication was and she was so surprised.
• Going from a single-family concept, she has learned a lot about syndications and she loved the idea of it. And in her syndication, they have provide 20% annualized return each year she has been a part of it.
• She discusses 1031 exchanges and self-directed IRA’s.
• People can learn more about Stephanie and what she is working thru her website (erbewealth.com)

Timestamps:

00:00 - Intro and overview on Stephanie’s career
01:10 - Talking about Stephanie’s background, how she started in real estate and how she loves real estate.
4:44 - Stephanie’s progression from the beginning until how she grew in real estate.
8:38 - How Stephanie built her professional group or team and how they manage their business.
13:27 - Learning how to get started in syndication.
15:25 - Discussion about 1031 exchange.
21:01 - Talking about self-directed IRA.
26:16 - How people can find out more about Stephanie.

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Full transcript here:

Mike Swenson 

All right, welcome everybody to the REL freedom podcast where we talk about building time and financial freedom through opportunities in real estate. And today I am so excited to share with you Stephanie Walter. And Stephanie is the CEO of Erbe Wealth . She specializes in syndications. She's a large scale investor and they've invested actually $80 million in real estate over the last four years so prior to that, she had an insurance agency for about 15 years and recently sold that and so we're gonna talk about investing syndications and we're also going to touch a little bit here on 1031 exchanges because I know a lot of people have questions about that about that as well. So we're so excited to have you and why don't you just share a little bit more about you

Stephanie Walter 

Okay, great thank you so much for having me um yeah my my stories probably like a lot of people I started you know, I'm in the W2 worlds and you know, had did that for about eight years and kind of got to the point to where I was given a raise of about 2% and was told that was you know, the best that you know, I could expect and went home and really thought about it talk to my dad at the time and was like dad I can't believe I'm gonna mean if I'm making 2% for the rest of my life I mean, what does that look like and he was an entrepreneur and actually my grandfather was an entrepreneur straight um, came over from Germany and ended up starting several businesses and so he you know, encouraged me to go ahead and and become an entrepreneur which is what I did and became an insurance agent for about the last yeah 15 years.

Stephanie Walter 

I always loved real estate I didn't know what the heck I was doing but I would I invested a lot in single family homes around the Denver Metro Area all along and then in about 2016 I realized that I wonder what investing in apartments would be like or getting a little bit bigger and so I went to like oh, an informational seminar and in that seminar they explained what a syndication was and I was blown away it was like you know, the heavens shone down I knew this was what I should do I loved love the concept of a group of people buying something that no one could do on their own just loved it so from that on I just you know really learned the business closed on my first syndication in 2018 and realized I absolutely would never do one of them by myself again and connected shortly thereafter with my partner who loves to find the deal he you know loves to negotiate the deal he's really fantastic and I found that I really love to raise money

Stephanie Walter 

I really love to work with investors and raise capital and so with both of our skills like that we started purchasing you know real estate and I what I've loved the most about it is really learning about what wealthy people do with their money because that's changed my life in the in the sense as I've repeated what a lot of them do and I was able to sell my agency in July of this year and I could be retired but I just love what I do so much I would never consider it

Mike Swenson 

so I know you had mentioned you know, kind of started out with single families and I know there's a lot of people that will be listening to this that have always wanted to get into an investing and some people say start small and you can you can get bigger some people just say why spend your time small when you just jump right in. But talk about your progression here from your early beginnings here to how that grew so people can kind of understand that and see like, okay, here's here's a path that I could potentially follow. Well,

Stephanie Walter 

my goal was, well, real estate for one always made sense to me and I know there's probably to two sectors of people one where real estate makes a lot of sense and the other people think, no, it's it's just me, I'm gonna put all my money In the stock market right so for me real estate always made sense it's tangible it's you know, it's in an area I can know you know, in Colorado anyways I could really have an idea of where the growth was going to be and stuff like that and so my goal at that time in that was in 2006 seven when I started doing that was I wanted to buy a property every year and so that was sort of the goal was and I was single at the time so I had a little bit more flexibility in the sense that of my lending I could purchase the property live in it, you know, for a year and then move on to the next one and and do it that way.

Stephanie Walter 

I got married about half you know, a few years in so then that that kind of threw through that plan off, but it was great for me because I got to, you know, I threw myself into being a landlord. And that I was just, I learned a lot of things doing that and a lot of things you learn the hard way. So I don't know that I'd recommend doing it that way if you could do it differently, but I just didn't know there was another option out there to invest differently. So that was sort of my goal was I was just going to invest and hold on to them for 30 years have them be paid off and then I'd have money coming into me.

Mike Swenson 

So were these kind of all in the same general area. The first couple that you did there is in the same spot and you'd kind of pick Okay, now I want to live in this area and so you rent out the other one and then go buy the next one.

Stephanie Walter 

Yep, exactly. I really liked the area in Colorado is called Sloan's lake and when I was purchasing and Sloane's like it was very, not yet what it is today. But it was kind of on the I know my real estate agent I worked with to purchase them called the me the the slumlord of Sloan's lake. I was not a slumlord, but he just felt like that area was not a good area. But sure enough, it it's, it's come along. And so yeah, I had a really good feeling about that area, which was just west of Denver. And, and it did end up you know, developing into, you know, a fantastic as far as my investments went there.

Mike Swenson 

Well, that's interesting that that, that that neighborhood changed, because I still remember when I moved up, I grew up in a small town and I moved up to Minneapolis and St. Paul area. And my dad always told me about, you know, where when he lived up in St. Paul, there was this area that was really bad and, and I think he even told me a story about how I don't know if he it was him or a buddy, but they woke up in the middle of the night and somebody was in their house stealing their TV and, and it wasn't good. Well, the funny thing is, is, you know from when my dad lived there to now when I live there, it had totally changed and it was kind of the yuppie area now where there's a lot of you know, young professionals moving in and there's a lot of shops opening up and those neighborhoods can turn and change. So it's kind of having an eye for how is this neighborhood going to change over time? And yeah, you can you can benefit from that. Yeah, there's a lot of risks associated with it. And yet you you get to reap the reward as those those neighborhoods turn like that,

Stephanie Walter 

Correct. Yes, for sure.

Mike Swenson 

Okay, so then moving on from single family where kind of where's the next evolution there?

Stephanie Walter 

Well, once I learned about syndications, I was like I said, it was really I love the idea of them. And I wanted to put them together. And that was kind of my goal was I'm going to you know, I closed on my first syndication in 2018. and realized, you know, this is this is i'd love doing it, but I needed more help, which is why I got my partner. And then I could focus solely on raising money, but what I really noticed was once I started working with investors, and some of them are really wealthy, and some of them are, you know, just you like an accredited investor, so someone that just has a net worth of a million dollars, so, but I noticed that the really, really wealthy people invested in these in these syndications like almost solely and I found that really interesting and once I started like examining my own rental properties that were sitting, you know, um, Park, you know, had gotten a lot of equity in them but weren't necessarily cash flowing a ton and by just realizing that Money probably should be spent in the syndications to where I could be getting.

Stephanie Walter 

I mean, in our syndications, we give at least a 20% annualized return. So that's like, that's kind of a no brainer. So as I realized that I started repositioning my money. And I have to say that syndication definitely opened a whole new world for me, but my wealthy investors really showed me how to make my money work for me. And, and give me that cash flow that a lot of people just don't think of. But I think the even the bigger thing is that I sleep really well at night, when I had a lot of rental properties, you know, when the weather would get cold, or, you know, just, I, you know, I was out of town, it seemed like, every time you're out of town, something would happen. And, you know, you get that call at two in the morning. And it just, you know, it's not, it's not something anybody wants to have.

Stephanie Walter 

So with investing in syndications as people, you put the money in, and you have a professional team that manages it, so you don't ever have to deal with anything. And you just get your cash flow every every month. So that was, once I started doing that, and rolling my money into that I was like, this is this is where I want my money to be because I don't have to have that stress anymore, that I didn't realize what a stress because I was a landlord part time. I didn't realize kind of what a stress that was until it was on.

Mike Swenson 

Yeah, so then just to kind of recap for folks that maybe have heard of syndications. And I know you kind of dug in a little bit deeper, you know, instead of, of you being the landlord, you being the potentially the property manager and getting all the calls. It's a professionally managed group, where they take care of all that. And essentially, you're just saying, take my money, and you want to align with good people, right? Because there's there's syndications out there that that don't work as well. But it's professionals doing what professionals do. And so you get a chance to just say, here's my my money, and it kind of depends on the syndication how much money you can put into it. But you're essentially just putting your money with a group of people and you're getting more of a return.

Stephanie Walter 

Yeah, and that's an I think that takes that's definitely a mindset change. Because I've always been like, I need to do everything myself, I need to manage everything myself. But if you I mean, we're talking about people like my partner has almost 40 years of experience in real estate. These are some of the best minds if you can find the right syndications that will be running these deals and they are running them because they want you to invest with them again. So they want to give you you know, 20% return, you know, to where you can double your money in like for four years and then do it again. You know, that's their goal. So they're working to get the best, best return for it for you, which I hadn't experienced. It was just me working by myself, right? I'm trying to do what I could do with my single family homes.

Mike Swenson 

So what kind of if I'm new, and I'm hearing how awesome syndications are, how do I get started? How do I find people and then kind of what are the financial requirements to get into one?

Stephanie Walter 

Yeah, the syndications are the ones it all comes down to team and that's actually something you learn from the wealthy people as well is that they they do their due diligence on teams that they work for, they look for teams that have an excellent track record. For us, we're going on our seventh syndication where we have returned, you know, never returned less than 20% a year on our investments. But yeah, there there are, you know, some moving parts but I think starting with the team and and learning what they're what they've done, and what kind of track record they have, is the most important thing, but to do most indications, you have to be accredited investor. And that just means you have to have a net worth of a million dollars, or you make like $200,000 as a single person or 300. Or Yeah, or $300,000 as a married person. And that's the qualification and then as the each investment is a little bit different, but I would say in general, you'd need to be ready to put in about 50 to 100,000.

Mike Swenson 

So then, kind of shifting gears a little bit, because I know I mentioned that we were going to talk about this 1031 exchanges, because I know I get so many questions from people, they don't know what it is. And this is an area that you do have some knowledge. So I'd love to just tap into that for a second. So, so real quick talk about the 1031 exchange. And why that is beneficial for investors.

Stephanie Walter 

Yeah, 10  31s are great, I find there's just a, for most people, there's like a cycle of where they buy maybe one or two or three investment properties, and they run them for a period of time, but then they get to that landlord fatigue syndrome, and they're just, they're done. And then when they are done, they're done. They want out. And but then they're like, well, if I sell this then a math to pay all these taxes as a result. And there's actually several tax strategies that the wealthy people use 1031 being one of them, to where you can sell your property. And you can basically after you after you sell it, you have about 45 days to identify property, or replacement property. Now that can be that's where people get confused, it really can be anything, it can be any anything land, it can be vacant land, it can be apartment buildings, it can be retail centers, that can be basically industrial, it can be any type of real property. So a lot of people think, Oh, well, I have to, I have to roll it into another house another rental, right?

Mike Swenson 

Like I have a single family now I need to get another single family.

Stephanie Walter 

And you don't necessarily have to do that. And so then you I bet you have that 45 day period after you close on your home to identify replacement property you can even you, you can identify up to three properties. And then you have from there you have 180 days to close on the property. Now a lot of people come to me and want to know if they can do that with syndications. Absolutely, you can do that with syndications. And it's it means then that you have no tax liability for selling your property. Now people ask me, well, is that what you did with your rental properties? I say, No. And the only reason I is because when you get into this world, there are lots of different tax strategies that the wealthy use since I was around a lot of wealthy investors, I learned a lot about cost segregation. And that is something that, you know, I probably don't have time to delve into it super deep here. But just in general, it's when we purchase a property, we get an engineer to come out and do a study, which is called the cost segregation study.

Stephanie Walter 

 And basically what we're doing is we are accelerating depreciation, we're, and by accelerating depreciation on a property that's worth like 10 million $20 million, it ends up being an enormous tax savings that rolls over equally to all of the investors. And because of that's the way I did it, I was able to not even have to go through the trouble of a 1031 exchange. I just talked to, you know, my partner and was sure that I would get enough tax segregation, to offset my tax liability. probably way too confusing. But just to let people know, you have options. So don't I hate to see people being stuck being a landlord when they hate it, and just know that there are a lot of options that you can do to get out of it?

Mike Swenson 

Yeah. And I think the key is, is Yeah, talking, talking with a CPA, somebody who understands tax at a level higher than we do, right, just asking what those options are. Because Yeah, if landlord isn't your thing, and you want to get out, yeah, you don't want to have a taxable event if you can, if you can help it. So there are some other opportunities there. And like you said, if if landlording a single family home or a townhouse or something like that isn't right, you can put it into a different type of class and still experience those tax benefits. So it's not like Well, I don't like this house. Now I got to sell it and get a different house and still do the same thing. There's opportunities there. So I think that's something that that people need to hear. And, and if you look at the life of you know, as you're building wealth, to not have those taxable events is huge. It's going to save you a lot of money that you can pour back into more and more property.

Stephanie Walter 

That is a key of what you just said is Is that one of the keys of the wealthy that I've learned is they're not concerned solely with how much they're gonna make on an investment, they are looking several steps ahead, as to seeing what their exit strategy is and what their tax liability will be. And by doing both of those things, that's why they get wealthy.

Mike Swenson 

Now, I want to quick ask another thing, because I know that you've covered this in videos on your website, self directed IRAs, because I know that people also have questions about that, because as you talked about, right, like, I can invest in real estate, or I can invest in the stock market. And some people feel it's maybe like an either or type thing. So if I've been, you know, contributing to my, my IRA, my 401k, at my, at my employer for a long time, and I was like, gosh, I've saved all this money, I now want to do something with real estate, potentially, there are self directed IRAs that are out there. Can you talk about that for a little bit?

Stephanie Walter 

Yeah, that self directed IRAs would apply to, okay, if say, You've you have an old IRA that's sitting or 401k, that's sitting like that you change jobs, and you have a chunk of money that's just sitting there. And if you don't want to cash it in or, you know, liquidate it, the I think the best thing that you can do with it is turn it into a self directed IRA, just contact a company that does that super simple. All it means is, like I'll use my brother in law for an example is he had one that was just sitting and he put the money into one of my first syndications and he then what happens is the cash flow comes back to his IRA custodian, so he never gets the cash flow that that is the bummer of it. But he, the cash flow goes back into the self directed IRA.

Stephanie Walter 

But the benefit now is we're gonna sell this property, and he has doubled his money in three years. So he's going to get all that profit going back into his IRA, with no tax implications whatsoever. And then from there, we've found another property that we're, you know, a small group of us are going to invest in and so he could take all that money and put it into the next one, and then potentially double that money in, in the next, you know, we're hoping for the next three years. So it's a great, it's great, he'll he will blow away what his what his stock portfolio can do. So yes, if you have that option, I highly recommend it. Yeah, yeah.

Mike Swenson 

And for those folks that maybe aren't as savvy with investments, I know, you know, when our when back when I worked in a W two job, and the employer said, Okay, here's the stocks that you can pick, there's people like, I have no idea what I'm doing here, I'm just choosing this one, because it's what it's what my friend said that they were gonna choose it. I mean, if you think about it, like, okay, so maybe we get 810, you know, maybe 12% returns, and you're talking about 20% returns, you know, that that's the advantage of doing something like that as you, you can control what you're doing. And if you align yourself with good people that are making good decisions, 20% can grow a whole lot faster than than 10%. And, and one of the things that, you know, I've taught in the past as they talk about the rule of 72, which is, if you take your interest rate of return, and divide it by 72, that's how many years it takes for your money to double.

Mike Swenson 

So you know, if I was getting 9% interest, that would take eight years to double. If you're getting 20% interest, that's three, three and a half years to double. So what what's in it for me, why would I look at a self directed IRA is, if I could make 20% returns that I'm comfortable with the team that I have, and you know, moving forward versus you know, something like eight or 9%, my money is going to grow a lot faster. And so that's why you want to look into potentially looking at some self directed IRAs over just keeping your money where it was and the stocks that you chose 15 years ago at your past employer.

Stephanie Walter 

Exactly, yeah. Yeah. And that's why I try to tell people actually it's it's interesting the wealthy people don't invest largely they don't have 401 K's because they have for for lots of reasons, but that it's there's a lot of unknowns, like what you're saying your stocks or your mean, a lot of times it's mutual funds. There's hundreds or maybe 1000s of companies and that mutual fund. There's no way to know everything about that. I want to tell people that you you can do this. I think people get very intimidated, but look You look at a team and you look at their project, their project tells the story of what they want to do. And boom, you're investing in that.

Stephanie Walter 

They're, that's what they're doing, you're not investing in, you know, a mutual fund that has, how many different companies wrapped up, you have no idea who's running any of those companies. So I think, you know, bringing it down, it's a lot more simple to invest in these types of things once you can wrap your mind around it. One of my favorite investors, I love him, he said, you know, 20% return Stephanie I'm, I'm happy with 20% returns 20% returns will make me wealthy every day of the week. And so I think that not only the wealthy should know these things, but you know, everybody should be able to get into this type of investing, or at least be open to to dipping their toe in.

Mike Swenson 

Yeah. So for folks then that, you know, that are like, gosh, there's just so much here. You know, you've you've obviously have a lot of knowledge and a lot of experience. If they want to hear more from you or learn more about what you're doing. How can they How can they reach out to you? or How can they find out more about what you're what you're working on?

Stephanie Walter 

Yeah, sure, we could go to you can go to my website, which is www.erbewealth.com. And there's so much information I'd say the first thing you could do is go when you go to the website is you can pull down our newest investment report, which is the five reasons that passive investing might be for you. But while you're on the website, there's a ton of content a lot I did a series of videos that were I get asked the most common questions that investors Tell me, uh, you know, ask me on a daily basis, and I made like a group of videos so you could learn about, you know, the most commonly asked questions that I get. And yeah, just, it's a great resource for information.

Mike Swenson 

Yeah, well, thanks so much for coming. I appreciate you sharing. There's There's so much to learn. And I think the the thing that we want to leave people with is, it's all figured out a bowl right? And so if people are like, Oh my gosh, self directed IRAs 1031 exchanges syndications, there's just so much there. I don't even know what's what. Take some time and learn, right? Because at the end of the day, this is your future. This is your future income. And so yeah, it's gonna take a little bit of work for you to figure this stuff out. But once you do like it like for you to now know about syndications, like you said it was it was a game changer for you took all the weight off of your your plate of being a landlord, and just being able to focus on higher end stuff and to kind of get out of the day to day property management. It's worth it. Right. So it's, it's worth learning this stuff, and figuring it out. And you're certainly proof of that and, and all the investors that you're working with as well.

Stephanie Walter 

Yeah, thank you. Yeah, I agree. 100%.

Mike Swenson 

Great. Thank you so much for coming on. We really appreciate it.