Financial freedom from single-family rentals to multi-family to passive investing

Whitney Elkins-Hutten ended up investing in real estate by accident back in 2002. Starting off in single-family rentals, she quickly realized that she wanted to grow faster, bringing her to the multi-family space. From there she realized she wanted more time to spend with her family. This brought her to passive investing.  In this episode, Whitney shares her wealth of knowledge in these three sectors through the story of her investing journey. Download her free ebook here: https://ashwealth.com/, and learn more about passive investing with her here: https://www.passiveinvesting.com/whitney/     --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everybody? Welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum. And today with me, I have Whitney Elkins-Hutton and she is the creator of Ash Wealth, and a just powerhouse of an investor with a really cool story and getting into some really cool investments. So she's gonna be talking to us today about her story, what she's doing, and how you might be able to get involved too. So let's get into it.   Whitney, thank you so much for taking the time and joining me here on the podcast. And I really appreciate you hanging out.   Whitney: Yeah, thank you so much for having me. This is gonna be awesome.   Michael: Oh yea, It going to be  a lot of fun. So you and I were just chatting before the recording a little bit about your background, where you are, who you are and what it is that you're doing with real estate. But can you give our listeners a little bit of key into that?   Whitney: Sure. Yeah. I’m a Leo. Oh, no, just kidding.   Michael: Super important!   Whitney: Super important to my passive in my investing journey, no, but I honestly I started off real estate investing in 2002 completely by accident, I purchased a house with a significant other and did a lot of things wrong. And a lot of things ended up working right for me. But the relationship fell apart about a month later. And I had a house. And I'm like, oh, like I would hadn't planned for that. And like we go,   Michael: Here we go.   Whitney: What do we do? So I I am you know, I was young. And I still you know, living with roommates was totally fine. So I stuffed it fully roommates, people who didn't mind living in construction zone. Because this house needed everything done to it. I mean, it had psychedelic flowers painted on the walls like 1960s style. So was fun and super fun to get rid of. Anyways, you know, I and I had I chose to do everything myself. And this is before YouTube. And so I went and bought the Home Depot 123 book and you know, rehab the property myself. Sold it about 11 Yeah, well, I mean, I, you know, when you screw up your plumbing, you go hire a plumber. I did that.   Michael: Yeah.   Whitney: I'm like, why can I get the hot and cold to come on? Right? Oh, cuz I haven't switched works. And so long story short, I sold it 11 minutes later, which was probably one of my bigger investing mistakes that I made. And it was at that point in time, I realized I had made more income in 11 months, through the capital gain on the sell of that house than I had made in my day job. And I hadn't been paying for my mortgage the whole entire time, my roommates had been paying for it. And I'm like, Oh my gosh, how many more of these deals can I do? And so that really launched my journey into investing.   But I you know, it, I had to grow from there, it took me years to realize that, you know, live in flipping and house hacking is just one strategy. And, you know, if I wanted to have passive income, and really unlock those golden handcuffs, I needed to figure out how to generate passive income. So it took, you know, my husband joined me in my antics, and it, you know, it took several years for us to kind of like slap ourselves in the head and go, Wow, we need to rent out property not sell it. And yeah, and then we dove in headfirst in that I scaled a portfolio of 30 properties that way, you know, leverage, Roofstock for uh, you know, reposition those properties. And then then I wanted to spend more time with my daughter at home and realized we had enough cash flow coming in to do that. In that's when I was just like, I don't know if I can do like 80 properties in order to get my husband at his job because all sudden, he wanted to join me.   I'm like, well, we gotta go multifamily. And so you know, I have, you know, began focusing on passive investing through multifamily and self storage, real estate investments. But I still love the single family asset because you can have it in your control and do so many different things with it.   Michael: Oh, my God, I love your story. It seems like I mean, it echoes I think so many investors seemingly organic progression of start somewhere and then you figure it out and then you start owning some rental properties and then you go multifamily and then you end up in passive. So talk to us a little bit about what that progression was going from single family to multifamily.   Whitney: Yeah, so really, it was a skill ability issue that we're having. So I, you know, I didn't know anything really different. Um, we had talked about kind of dabbling in multifamily. But really, you know, we had an inflection point When my husband when I wanted to stay home with our daughter, my husband was like,   Well, I want that too. And I'm like,   Michael: I would also like to not work, please.   Whitney: I'm like, Oh, hold on, I was like, we have 30 properties. And, you know, I was burning the candle at both ends, and five times in the middle just to make that happen. And I was using property management. And so I was like, wow, we've got to get to 80 properties for us to realistically both step away, and I'm like, Okay, we've got to get more properties with each transaction, we have to figure out a way to make this a lot smoother. And then, you know, when I started diving into the multifamily model, especially like, you know, you get up into, you know, 10 units, you know, 20-50 and larger, you know, the way they're evaluated is so much different than single family properties, you know, single family properties are evaluated based on comparable sales, you know, what did the guy sell his property for in the last six months? That's right next to you.   But with the multifamily asset, you're now a commercial business. And I just saw the huge power in that, because I'm like, wow, I can actually get rewarded for the work that I do, like, truly rewarded. If I take 50 units and rehab them and move them to market rent. Awesome, I get rewarded, if I, you know, make some small changes on the profit and loss statement to reduce the expenses, I get rewarded. And if I add additional streams of income, I get rewarded. And, you know, we call that value add strategy. And you know, in the multifamily world, really like you can't add additional streams of income very well to single family properties, or at all right, honestly, right. I tried trust me. Didn't go over so well. I tried to rent out a storage shed in the back of a property one time and they were like, the tenant was like, Nope, no, thanks. I don't want to use it. I'm like, Okay, fine. And then like, when they moved out, I realized they had stored everything. They broke in.   Michael: Sneaky tenants. Oh, man. So you realize that there's this there's this way that you can truly add value and get rewarded for it, not just today in terms of your cash flow, but down the road? And in terms of the value going the multifamily route? Yeah.   Whitney: Well, yeah, you get to control those levers a lot more readily than you do. And, you know, single family and small one to four real estate. Um, you know, you can add value. Absolutely. You go in and do a cosmetic rehab, which I you know, the large portion of my single family properties that I still have, I would do a cosmetic rehab, and I get rewarded with larger rents, I get rewarded with equity bumps on the properties. However, I can't control the market around that very well, you know, and I can't do that at scale. That's another big reason. Why, to consider switching asset classes.   Whitney: Love it. That's I mean, that's really why I made the jump to is I realized, Oh, my God, there are all these levers, I can pull. And I work out the math all the time with students I have in the academy, and I think it's like $100,000 at a five cap, or like a five unit, if you make a $15 incremental shift across every unit, and like the utility bill back, it adds like $18,000 in value at that same five cap. But it's like, it's mind blowing, how magnified these these changes can can become?   Whitney: Oh, absolutely, yeah, I'm working with one of my coaching clients right now, you know, he's working through an 11 unit property. And, you know, he was like, I don't know if I want to do rubs. And I'm like, why wouldn't you do that? You know, I was just like, you just do like five bucks here to you know, 10 bucks here. 15 bucks there. 30 bucks there. You know, by the, by the time we took a look at everything on the profit and loss statement, income, additional streams of income and everything. And I'm like, you know, you could push the value on this 11 unit property by 250 to $300,000 in six months. And have   Michael: That probably got their attention?   Whitney: Yeah, have zero of your refinance, zero your own money in it? Or like, you know, he was worried how do I go larger? Like or sell this property and go 1031 and go bigger? Why not?   Michael: Yeah, yeah. Oh, I love it. We get talked multifamily. All day long. I just get so so jazzed about it. But Woody, I'm curious to learn what you went into, or how you got involved with passive investing.   Whitney: Yeah, so at this inflection point, where my husband was like, hey, you know, I want to stay home as well or not stay home, he wants to go mountain biking a lot. And so   Michael: The truth comes out.   Whitney: I mean, it's all about lifestyle. Right. And I think that's something you know, you know, I really try to help people understand what are your investing goals? It's real estate is a tool, but you have to figure out a tool to what, and for us, you know, you know, great building passive income, but what does that actually get us it gets us our time back to do the things that we're most passionate about. And so when he, you know, we're we're, you know, at this inflection point, trying to figure out like, Okay, we're gonna go multifamily We had to blow apart every single system that we had in place, we needed new reality, we needed new lending, you know, you know, we needed to do property manager.   And I had two passive investments in my self directed IRA already. I was like, kind of like a mutual fund, you know, I'll worry about them later. I mean, I really, honestly, I hadn't really educated myself very fully on them. I, you know, somebody else had suggested that, that there would be good investments. I don't suggest doing this guys. In that way, don't do it. Do your due diligence. I'm super passionate.   Um, but when I started under kind of like reverse engineering, what these operators were doing with those investments and like, wow, like, Yeah, can I beat the returns, if I do this all myself? Sure. But my return on my time, I just, it just, I can't get back into you know, you have a small child at home, and I was still working full time. At that point in time, I was like, this is this is amazing. Like, where's my highest and best use of my time right now is with my family in earning an income and trying to figure out how to grow these other parts of my business.   And so that's really what launched us into passive investing. And, you know, we slowly, you know, had to add, like, you know, capital that we're getting from our day jobs and stuff like that, and invested in passive investing. But then we saw this opportunity to leverage those 30 single family homes, and kind of use them as like little mini ATMs in order to harvest out the income and equity out of those properties in order to continue to invest in scale passively.   Michael: Oh, my God, I love it. So what kinds of investments passive investments were you making? I know, you mentioned multifamily and self storage, is that really where you went, you jumped in both feet?   Whitney: Multifamily in news probably makes up the largest part of my portfolio, self study, self storage, the second largest, I do have other investments in residential assisted living and land and stuff like that. But I, you know, I come from public health, and I'm like, you know, you get down to Maslow's hierarchy of needs. For me, it was a no brainer, you know, you get down to first principles, right? Somebody is always going to need a roof over the head. Are they gonna need a self storage unit? I mean, technically, no, maybe the United States yes. But really you don't need it, but you will need that roof over your head. So that's where you really dug dug in.   That's why I love like, even single families still, like people are always going to need a place to live and a roof over their head. And we have such a housing shortage right now. So I mean, this is   Michael: Massively.   Whitney: I hear so many investors asked me, you know, all the time, like, Oh, do you think you know, things are topped out or you think the real estate's about to crash, you know, the hearkening back to 2008, but very different story. We're so under built by a wet, it's like 5 million homes, almost five and a half million homes like, no. Like, you know, even I don't even I think it's still gonna take like, you know, seven to 10 years, even with the pace of current building to catch up with the supply. I mean, this is a golden opportunity to to still get into the real estate space.   Michael: Yeah, I think so too. I think so, too. So I'm curious to know how, in your opinion, do you go about evaluating a passive investment opportunity?   Whitney: Well, it that's interesting, because I love working with investors on this, because you know, especially if you come from the single family or small, like one to four world, and you're so focused on the asset, and why, like, what makes a good deal? What is the cashflow? What is the return is going to be and when you translate that into passive investing, that can really land you in tons of hot water, because the model is different. It's not about the deal, right? We all are chasing returns, we all we all want great returns. But with passive investing, it's not about the return, it's about who's running the business, you're not investing in a deal. You're investing in an operating business.   So who is that operator? Who is that sponsor? And, you know, even before that, you need to understand what your goals are, you know, do you need cash flow? Do you need appreciation? Or do you need some balance blend of both, which is really where I help. I'm all about, like, let's try to hit you can get both you can get a cash flow, and you can get appreciation.   Once you kind of check that box, what's your risk tolerance? You know, are you wanting, you know, kind of a core asset that has no business plan risk to it, or you wanting you know, ground up development. There's a whole continuum in between there to have risk tolerance, and to check. And once you have that, check, now it's time to go find the operator that meets that strategy that you want to be in that risk tolerance set. You're you're willing to your band of risk tolerance you're willing to be in and then start learning how to vet that operator.   Michael: Okay, and what does what does that look like if someone's new ever done a passive investment? What does vetting an operator mean to them? Or what does it mean to you?   Whitney: Yeah. So So what is the operator doing there? You know, think of them, like if you're the CEO of your passive business, right? passive investment business, then the operator is your COO. Right? So you are you are essentially hiring out operations on a multifamily asset. So what do you look for in that COO? You want to know? Do they have a track record? Like, have they been doing this? Right? What is their investment strategy? does it align with what you need? Right? Like, you're not going to go talk to the operator, who's doing ground up development, if you if your view just can't tell it that type of risk? Right? Do you have an alignment in the business strategy in the investing thesis?   Then you're getting down to like, who's on their team? Right, I, you know, operators that are only working part time still maybe still working their day jobs? You know, that's fantastic. I mean, ever there are new operators coming into the market all the time for me, I want to invest with operators are doing this full time. They're taking care of my money, not as if it was theirs, is that that is if it's mine, right there. They're what have their eyes on it all the time. You know, again, you know, what is their background? And the investment strategy? You know, maybe they're pivoting from another industry, and they're bringing the skills in from another industry, that's totally fine, too. But, you know, somebody there needs to be have a background. First learn.   Yeah, and then, um, you know, just, you know, their track record, like what are you know, have they been able to perform with the assets? You know, how many have they gone through refinance? How many they've gone through sale? And then there's kind of the gut check. Right? Do you just know, love and trust them? At the end of the day? Yeah. Right. Your gut, I mean, call me female, I don't know. But like, I listen to my gut, right? Like, I'm, you know, I want to, I want to know that this is somebody who's gonna be my true partner, and and who is not put off if I like, reach out to them with, with, with maybe like, a seemingly silly question.   Now, it's on me to do my due diligence, and to, you know, educate, you know, educate myself, and, you know, everything. I don't expect the operator to educate me on everything. But you know, if I have a silly question, like about a tax question, you know, it should be Hey, great to hear from you. Like, you know, let's get your question answered. You know, you know, if you don't hear from them, like, their communication is, you know, lackluster or takes a really long time. That's challenging, you know, I would kind of put that, you know, in the not so cool category.   Michael: Yeah, absolutely. And that's, I mean, that's so you bring up a really great point. And a question that I wanted to follow up with is, most of these operators are providing an OM an offering memorandum to show showcase what the investment is, what their track record is, what the highlights of that particular investment are. And I think for so many newer investors, they're maybe overwhelmed with just that information itself, or definitely feeling overwhelmed with asking reaching out asking questions, but you're saying no, it should, we should kind of turn that on its head and say, okay, as the investor, we're the bosses, we should feel very comfortable to reach out to the person, the COO that we're hiring, and ask them some of our questions.   Whitney: Yeah, absolutely. I mean, I mean, it's not like, you know, they're your, your partners, new ones, a general partner, that's going to be running operations, you're the limited partner, right? And so your role is fairly limited. I mean, you're not going to be able to direct them and say, hey, now put this tenant in this property or do this on the property. But you definitely ask question, do you want to be in it? You know, think about this, like when you invest? You know, you're in that deal for 3-5-7 years, maybe even 10? Right? This should be something that you you've you see yourself getting along with, for that time period, and able to communicate with for that time period. So if you're just like, oh, wow, I got it on that deal. So I can get like a, you know, 12 or 12% cash on cash return, I hope I never have to talk to him. That's problem. That's a big red flag.   Michael: Now, that's so good to know. That's so good to know. So I'm curious to get your thoughts. I think there's two schools of thought around passive investing. One is that it could be really great for somebody that's newer and just getting started so that they can see how a successful operation runs. And then the other school of thought, I think is is kind of more traditionally and how you ended up in passive investing towards the end of an investment career, not the end, but after you've had some experience and built up some cash flow, because I think one of the issues with it is that you can't use leverage. You can't go to a bank and say, hey, I want to go invest in this person's deal. Will you loan me 80% of the money to do so? What are your thoughts around where in investors lifecycle they should pepper in or utilize leverage? Maybe not leverage is a bad word because you can't use leverage   But participate.   Whitney: Yeah, but well, by the way, you are using leverage as you're using, you know, leverage you get, we can cover that I have like a whole, like, I love going through all the different six points of leverage, you get an immense amount of leverage in syndication. So let's actually touch on that   Michael: Perfect,   Whitney: I get to leverage general partners time, knowledge and expertise, there's so true credit and lending and other investors money. So I, for me, let's, you know, I'll kind of like draw, you know, draw the little picture here is that I wanted to get into multifamily real estate, I had to re engineer all these systems, I could do it myself, or I can invest in somebody else's passive deal. And they already know about multifamily real estate, they already know all about the market, they already have their team in place, the realtors, the brokers, the lenders, okay, everybody's already in place legal accountants, I get to leverage all of that. And they have an investor base that they've already built up. So you know, if I want to access an $80 million asset, I don't have to go to the bank and get a loan for $20 million, I can actually put in $50,000, and access that asset, you know, you know, for far less than it would be to get to the bank, right?   Michael: Totally, totally.   Whitney: And I don't have to figure out, I don't have to bring the track record, in order to get the loan on that I don't have to, you know, pledge my assets to get that, um, my liability ends at the LLC level, right. So, you know, in an essence, my, I have way less risk on all 38 of my passive investments than I do on my small single family portfolio that I still hold. I'm far more exposed there, I'm way less exposed over here. And then the return, I have leveraged time, right? By the time I mean, I do have to put in time learning about passive investing and underwriting the operator, the market and the deal. But once I write the check, I mean, my responsibilities are generally done until the sell of the asset, and then even then, you know, I'm putting minimal time in just to re review account statements and such totally, and make my election if I want to do a 1031 exchange and go bigger, and they still get to access all of those different Wealth Generators, real estate, cash flow, you know, equity, you know, appreciation, equity, build all the different tax benefits, and I can, you know, and again, leverage can be on the use on the asset as well.   Now, we're in the lifecycle, should somebody consider this? And there's a couple of different questions, there's not really a clear cut, you know, suggestion on where I would say, somebody slides this into their investing thesis. But, you know, one, you know, if you only have $50,000, to your name, you know, I wouldn't you don't put the house on black, right, you don't pledge all your assets to one deal. Right. So, you know, you definitely want to, you know, skill up your ability to invest. That's why I really like, you know, for people that that are just starting out, and they want to build, you know, their asset and their investment base, their net worth, in a single family and small wonder for properties are an amazing way to do that. Okay, but once you have some assets behind you, now, you got to understand, like, what's your return on your time, that's where you might want to start pivoting into doing more syndication deals.   And, you know, kind of like what we did, and, you know, taking the cash flow, and whatever we were able to pull out from refinances and putting it into passive investing. Now, I still get cashflow off of this passive, passive investing deals, and I still get to take advantage of any refinances that occur on the property. So I get cash back to earn money in two places. And I just had five deals cycle out at the end of this year, and you know, I'm four of which are gonna go through a 1031 exchange, I still get to pull that massive lever in real estate.   Now, if somebody is like sitting on, you know, maybe a million dollars of investable cash right now, I would ask, the question is, do you how active Do you want to be in your investing portfolio? If they're like, I don't have the time to deal with this. I don't have the bandwidth to deal with the property manager. I think passive investing, you can skip buying single family homes go right to passively invest.   Michael: Totally, that makes so much sense. And that's so good that you pointed out, you know, you really do get leverage for all those points you mentioned, maybe less so in the sense of traditional leverage of I can't go borrow, I need to have the cash to invest in the deal. That 50,000 Whatever the minimum is, right?   Whitney: Yeah, the barrier to entry is a little bit higher. And that's by design. And you know, I have investors ask me this all the time. You know, why? Why 50,000 Like, can I just do 10 I'm like, well, if I'm raising $20 million, and I have all my investors put in $10,000 That's a lot of people to work.   Michael: Yeah, herding cats.   Whitney: Yeah, I on a good day, you know, even a $50,000 investment, that's still a lot of investors to work with, you're talking hundreds of investors to work with. And so that's why you see some of these operators eventually scale, they might start off, you know, you know, with a two or three or $4 million raise, and it might be $20,000, or $25,000. And then eventually, you see them scale up into, you know, larger minimum investments. I mean, Grant Cardon, I think I like talked to his group last year, and it was like, I think one deal was like seven or $50,000. And like, Oh, that's cool.   Michael: Put that on ice for a little bit later, maybe.   Whitney: I was like, they were like, we'll call you back in a week. And I'm like, awesome. Um, but, yeah, I mean, it's, it's, it also helps you, um, you know, we not weed out but, you know, understand if somebody's putting in their last dime. And that's a scary place, not only for the investor, BROSCO for the operator, you mean, the operator, really, you know, will there vetting the limited partner as well knew, you know, or what is their, you know, what are their investing goals? are we aligned? What is their ability to invest? Or, you know, maybe they even have, like, a rigid process of, like, you know, asking for accredited investor letters, where you're actually getting a third party to say, hey, I have net worth, or I have income to invest.   And that, you know, if you're working with, you know, smaller 506 B, B, as in boy, investor, you know, you know, we can take a sophisticated investor at that level, which, you know, there's really no visibility on the finances of that person. And so, you know, if you've set your minimum investment at, say, $50,000, the likelihood that somebody is taking all 50k in their savings account, investing, and investing is pretty minimal.   Michael: Okay, that makes total sense. Whitney, I want to shift gears here a little bit, and I'm very curious to get your thoughts on what it's like, and how you became so successful, being a female in the space, which seemingly is so dominated by males?   Whitney: That is, that is a very interesting question. I'm not sure that I've ever been asked that. Um, you know,   Michael: Yes first!   Whitney: I don't, firstly, you know, I think a couple of things that, you know, I, that stand out to me about it is, I really don't look at it as male versus female, you know, there, obviously, and I went to a conference, you know, probably three years ago now. And I was one of probably 15 women out of 600 people at the conference. I mean, it was the shortest bathroom line ever.   Michael: So good.   Whitney: And I, you know, but, um, that being aside, I met so many powerhouse women and that, that bathroom, like, literally, I have always been so supported by many of the males in the business as well. Now, that said, it's probably because I, that's what I seek out, right, you know, Seek and ye shall find I, you know, somebody is, you know, kind of, kind of a hardcore, you know, rough personality. That's mean, not me, I'm pretty laid back. I mean, you know, I'm not going to be attracted to that, and they're not going to be quite frankly, attracted to me, either. And so, I think, you know, it's what you look for is what you're you're going to find in the space as far as like, you know, how does, you know, being successful at it? I think it's just hard work and dedication. And, you know, if somebody tells me No, I don't mean really, I just say, Oh, that means not now. And then like a month later, I'm like, What about now? Yeah, they're like, no, oh, how about now?   Michael: So good.   Whitney: Persistence. So and those are really, you know, skills. You know, we have a nine year old and those are, you know, a daughter, and, you know, resilience and persistence are, you know, two things that we're really trying to instill in her and really not see quite a gender line there. needed that you can, you know, I think one of the things that we always tell her, you know, especially when she's feeling deprived of something, we're like, you know, you deserve the world. You just haven't earned it yet. And so it's, you figure out like, how you can earn your stripes.   Michael: Love it. That's so good. That's so good. One last gearshift here. Whitney, you created a business and website around real estate investing and you also wrote a book where can people find out about those and what should they expect to find once they get there?   Whitney: Yeah, I actually have a couple of different um, you know, places you know, for, you know, somebody who's just starting off, you know, more of a sophisticated investor and wants to build up those late single one to four units. You can find me an Ash Wealth. You can download my ebook there. Learning How to Build a Six Figure Business Without Losing Your Mind and Your Sanity.   Michael: So awesome very important things   Whitney: Yeah, it's very important but you know um you know we talked a lot about passive investing in you can also visit passiveinvestingwithwhitney.com. And there you can, you know, download just, you know, a quick little checklist that will help you get into, you know, check all those boxes to help you get into either your first or your next investment and make sure you got all your bases covered in. We can also hop on the phone there too.   Michael: Amazing. Amazing. Well, this was so much fun. Whitney, thank you so much for hanging out with me. I really appreciate you coming on.   Whitney: Yeah, absolutely. Thank you so much.   Michael: Thanks and enjoy your trip and you're headed down somewhere fun and doing some mountain biking.   Whitney: Oh, yeah. Yeah, some red rocks.   Michael: Awesome. Thanks again Whitney talk to you soon.   Whitney: Bye.   Michael: Okay, everyone, that was our episode a big big, big thank you to Whitney definitely want to have her back on do a deep dive into passive investments and talk about some other fun things going forward. So keep your eyes and ears peeled for that. As always, we look forward to seeing you on the next one. And Happy investing