Combat Volatility with Real Estate
On this episode of Next Level American Dream, Abigail and Sean are joined by Lindsay Hambright. She has 20 years of finance experience ranging from investment banking on Wall Street at Cowen & Co., to corporate finance at Frito-Lay and MCI, to turnaround and bankruptcy consulting at FTI Consulting. Today she will be sharing her knowledge on the stock market and how real estate could be a great way to diversify.
Key Topics
Diversifying with real estate investments
Making money work for you
Cash flow assets
Connect with Lindsay:
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SUMMARY KEYWORDS
multifamily, investing, real estate, investments, investors, mike, people, american dream, money, business, stocks, property, invested, buy, asset, day, finance, rental property, podcast, experience
SPEAKERS
Sean Thomson, Abigail Thomson, Lindsay Hambright
Abigail Thomson 00:00
Welcome to the next level American Dream podcast brought to you by Thomson Multifamily Group. Your hosts: Abigail and Sean will discuss how you can take your American dream to the next level, the real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish their goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. On today's episode of Next Level American Dream we are joined by a certified financial wizard Lindsay Hambright. She has 20 years of finance experience ranging from investment banking on Wall Street at Conan Co. to corporate finance at Frito Lay and MCI to turn around and bankruptcy consulting at FTI consulting. And for the past 12 years Lindsay has served as CFO of the companies owned by her and her husband, Mike Hambright. Today she will be sharing her knowledge on the stock market and how real estate could be a great way to diversify.
Sean Thomson 01:07
Hi, Lindsay. How are you doing?
Lindsay Hambright 01:09
I'm great. I'm great. Thanks for having me on the show.
Sean Thomson 01:12
Yeah. Well, thank you for joining us on the show. We really appreciate it. So we'll just jump right in. Now we'll start with some questions, and we'll just see how it goes.
Lindsay Hambright 01:22
Okay, perfect.
Abigail Thomson 01:24
Your background and experiences are absolutely incredible from your experience on Wall Street, to your father's influence in your life. Can you just tell us where that led you now and what you're doing right now in your life and your career?
Lindsay Hambright 01:38
Yeah, so I went through a pretty typical background where I graduated from high school, I went to college at Georgetown University. I had a double degree in finance in accounting, I took an auditing class and realized immediately I did not want to be an auditor which is why I went into investment banking up on Wall Street. And so from there that kind of gave me a lot of financial background and experience. But the thing about finance is that there's so many different things you can do within the field of Finance. And so I have a corporate finance experience at Frito Lay. I've got some turnaround bankruptcy experience at FTI. So I went, I helped a lot of companies that were going through bankruptcy. And so that particular experience really helped me what with what I'm doing right now, right now, I, Mike and I started investing in 2008 because we were complete idiots and didn't know that it was supposedly a terrible time to invest in real estate. But for us, it was a great time to get in because people were leaving and so you have less competition. And so from for us, we kind of divvy the duties where he'll find the houses and I am more of a finance person. I handle all of the accounting the bookkeeping and keeping him in check. Making sure he knows that he's making a profit. So, but all that experience really helped me because we focus on cash. And that's a critical component in terms of making sure that you're profitable to keep the doors open, as well as building long term wealth.
Abigail Thomson 03:17
That's awesome!
Sean Thomson 03:19
I just want to throw in there. So my camera is your husband, your camera. And Mike is well known for his flip nerd podcast stuff. He's done for like four or 500 episodes of that. So he's, he's kind of the face of, I guess, the operation, really, but so that's who you're referencing when you said, Mike, it's my camera. Yeah, and I've been I've known Mike for a long time. He's been he's been a mentor to me quite a bit of my career in real estate. So he's been extremely helpful and helping me guiding me through my business and stuff as well too. So and he's helped a ton of people through his podcast and just through his training and coaching programs as well. So But anyway, so I just want to bring that make that note, when you said Mike, you're talking about your husband like him, right?
Lindsay Hambright 04:00
My Husband, yeah.
Abigail Thomson 04:01
That's actually a great segue to what I was going to ask. But you took all that and you're now into educating others and how to do kind of what you guys started doing. So what was that transition like? And what kind of led you to go actually I want to help other people do exactly what we're doing.
Lindsay Hambright 04:18
Well, this is primarily driven by Mike Mike. He's very interesting person. He's what I call the wild person. He's extremely creative. And he loves helping people. He's got a little bit of a teacher instinct about him. And I'm more of the how person where I he'll come up with an idea and I I'm the one that's thinking in my head about Oh, okay, well, how do how do we execute that? How do we bring it from a thought to an actual reality? So that going into coaching and mentoring people was a natural fit. We used to be home investors franchisees for a long time, and he helped actually develop their system. In terms of bringing on new franchisees and training them, so that's how we first got cut the taste of it. And then from there after we left, how investors, he started, he wanted to continue to mentor and coach people because it brings a lot of personal joy for him.
Sean Thomson 05:16
So you have, yeah, it's a really good he was my DA too. So he was the one that got me started and sort of brought me through the system as well. So let's talk about you've got this background in in high finance and Wall Street stuff, investing and, but you've also been on the streets buying and selling and investing in real estate for a long time. So you kind of have a unique perspective in, I guess, the two worlds of investing for and most people are on the conventional side with their stocks, bonds, mutual funds, investing for their retirement. A lot of people aren't really in this real estate space or even know that you can use this as a retirement vehicle. So talk a little bit about I guess, what you've sort of come from and saw in the past with people And how they invest their money. And then what the benefit of what you're doing now or how you're doing it now, and how that is, in your opinion, either better, or some of the challenges to that as well. So maybe you kind of give us a crossover between the two. And what you're kind of what you're doing now and how you like it.
Lindsay Hambright 06:16
I'll be honest with you, I'm invested in both. So I'm invested in the stock market, and I'm not too happy right now with that, with everything that's going on, that I just checked, pretty much the s&p is down 5%, the NASDAQ is flat and the Dow is down 10%. So lots of volatility going on right now, just given all the uncertainty with the market. But I'm also invested, we're also invested heavily in real estate. And so to be honest, our best investments have always been real estate. And that's because, number one, you can use leverage. You can't use leverage or debt when you're investing in a stock you have to have all the money to buy As opposed to buying a property, you have the opportunity to grow the number of how big your investment is with leverage. And so yeah, real estate has been really good for us. So that's one reason. And then the other reason is that we loved real estate is because you can actively manage it. When you put something in the market, you cannot I mean, it's basically like throwing money. It's almost like gambling in a way you can select which companies you feel confident in, but anything could happen and the thing with when with a public stock, everything is contingent upon those quarterly earnings estimates and if they miss those quarterly earnings estimates, the stocks gonna go down because the market is going to react and you have to take into account that volatility. So whereas with real estate, you can buy something that is distressed, you can improve it. And specifically with commercial property, you can have forced depreciation So if you increase the the operating income, a lender or even a new buyer that comes and looks at that is based off of cap rates, but that's going to value it the asset much higher. And so that's forced appreciation.
Sean Thomson 08:15
So you're still invested in the stock market, just as a sort of a as a method of diversification for your investments. Is that where you're still with it?
Lindsay Hambright 08:22
Yeah, part of it is method of diversification. And the other part is, it's easy! A place to stick my money for you know, somewhere so at least it's working for me, whether through dividends or you know, where it's working for you as opposed to just sitting underneath a mattress, you know.
Sean Thomson 08:43
And let's talk a little bit about the leverage part you mentioned to in real estate so you can buy let's say, $100,000 piece of property and use someone else's money for a percentage of that. That property is put to work say, as a rental property, that debt gets by bought down through the rent payments and the sort of the business that you operate for that asset. And so that leverage allows you to, I guess, buy much larger or much more assets that will eventually become worth more because that debt gets paid down by someone else essentially as a rental, right? Is that what you're talking about?
Lindsay Hambright 09:21
If you wanted to buy $100,000 of stock, you have to have $100,000,
Lindsay Hambright 09:26
if you buy $100,000 of a house, you need $25,000. So, that's the difference.
Sean Thomson 09:35
And if they turn that into a rental property, the renter is paying that debt obligation down for you. So over the course of that 30 years or 20 years or 15 years, you have a mortgage on it, that debt just gets paid away by someone else. So it's essentially I guess, I don't know if you want to call it free money because you have to work for it. But you know, it's not cash that you've got to put into it, just like you said, with a stock You know, so it's it's someone else's money to begin with, and it's someone else's actually paying it off for you.
Lindsay Hambright 10:05
And not only that, as long as you buy it as a cash flowing asset, the other thing is appreciation. So, you know, as the longer you hold it more likely that property is going to appreciate it as long as you keep it up to date, you know, there's not a lot of deferred maintenance.
Sean Thomson 10:21
Right? Yeah. And your stocks aren't? I don't, it's not honestly called appreciation. I mean, you do get growth and things like that, but it's market driven. I guess appreciation technically is market driven and real estate too, but it's also just sort of cost of living, you're going to get these incremental increases, you know, unless you get an anomaly like a 2008 or something like that, or actually what we're going through now, we're probably gonna price depreciation, I would think in the next few quarters, but unless something like that drastic happens, the real estate market has historically just sort of incrementally grown year over year. So it's a pretty I don't know if safe is the right word, but it's a pretty structured, historically proven, growth.
Lindsay Hambright 11:01
It's very volatile, is how I would say it.
Sean Thomson 11:09
What are the some of the benefits of the investments that you're doing now? I guess we just touched on a couple of them with appreciation and things and I guess you're moving more into multifamily as well, right? Is that correct?
Lindsay Hambright 11:24
Yes. So we have rental properties, single family, we own a couple notes of properties, just the bad rentals that we didn't want to deal with anymore. It's just the multifamily deals so far.
Sean Thomson 11:43
And so what is it that you like about the multifamily, what is what is it that's sort of leading you in that direction? You you're in stocks, bonds, mutual funds kind of stuff now, you've done single family rental rentals, and like you said notes and things so you've kind of had a lot of experience in that area and now you're moving into multifamily. What is it that's driving that?
Lindsay Hambright 12:01
The thing we like about multifamily is that it's just, it's the same thing as single family, but it's just bigger deals. And so you just get a lot more scale. When you're dealing with larger properties, you can start to afford good property management. And so you'll still be involved in the multifamily apartment in terms of creating value. But you can you don't have to be involved in the day to day you know, you can afford to have effective property management, collecting the rents going out chasing after tenants, evicting tenants and stuff like that. Whereas if you just own one single family more likely, chances are you're gonna just be managing that yourself and nobody really wants to deal with. It might be good, but in the long run, that's just going to burn you out.
Sean Thomson 12:58
So you like the idea of scale. The scale gives you the opportunity to go from a hands on day to day operator to a more asset management level, where you're just, you know, you're checking your monthly reports, and you're checking your quarterly reports, you're maintaining and monitoring what your mind is my company is sort of executing on a day to day basis. Right?
Lindsay Hambright 13:17
Yes.
Sean Thomson 13:19
So what would what would be the best benefit for someone coming from the perspective of, you know, stocks, bonds, mutual funds, and working their IRAs and their retirements through that system? What would you say would be an important consideration for them, and why they should start to consider investing in alternative investments like real estate?
Lindsay Hambright 13:43
Well, I think obviously, you want to know the person that is the asset manager. So I think the first thing is getting to know that asset manager pretty well. How do they operate their business? Who's going to be running the property? How often are they going to be visiting the property? That's probably the first step if you're interested in transferring maybe some of your capacity that you have in stocks in the market over to a multifamily investment. So, really it depends on the operator and how hands on are they going to be because the the lead syndicator for a multifamily deal, they're really responsible for making sure that that asset is performing. So they're in charge of the property manager that is doing all the day to day - they're responsible. So working with that lead syndicator I think and feeling confident that they'll be able to fulfill whatever that pro-forma plan is when they acquire the property. That would probably be the most important and then the other thing you want to look at with that lead syndicator I think is the communication that they deliver. How frequently are they communicating with you as the investor? What kind of reports are you getting to see to confirm that your investment In that property is performing? So that is another thing that I look for when I started to invest passively in some of these multifamily deals, I started to look at the operator, I started looking at the financial reports that I got every month because that provides a little bit of comfort to me that the asset is being managed effectively, and you can see the progress. So, that for me, was very important.
Sean Thomson 15:26
Yeah, so your suggestion is to make sure that the operator that you're sort of getting involved with or that you're giving your money to is a good operation, very smooth operation, understands the business, has very proactive approach those Investor Relations. Things like that, right?
Lindsay Hambright 15:42
Yeah, I think all that is important.
Sean Thomson 15:45
Yeah, we do that. I know that we do that. I know you guys do this too, as well in your single family business. Having your investors you know, my investors are pretty much friends of mine. The relationship that you have with your investors at this level is a much more intimate relationship than you could ever have with your mutual fund manager, you know?
Lindsay Hambright 16:05
Right! My investor, who is my father? I would die before I he loses any money. So, I can't sleep at night. That's the kind of person you want, you want someone that can't sleep at night if you're losing money.
Sean Thomson 16:27
Yeah, my investors are not my father but that that I have a really son, I don't know what you call it just it's a very it's a very close relationship. We don't really hang out every day but we have lunches together and I and I'm happy to share information with them. anytime they call me, they get me directly. It's just a much different sort of investment style. The biggest struggle for someone that is out there that has you know, money to invest in this type of thing is finding people like me or like you, that operating a business. You know, I don't even know that I have a place for people to go to find guys like me other than the podcasts that we're doing and things like that. But it's, I think that is a critical thing is to find out who you're investing with, because you're really investing. It's different than it is with a stock, you're really investing with a person and a little, a mom and pop operation. So, yeah, but it's good advice, I think.
Abigail Thomson 17:22
So your advice on how to navigate the world of different investments like traditional which is stocks, bonds, mutual funds, and then trying to kind of shift that perspective to real estate was absolutely incredible. But we're going to switch gears just a little bit. And I wanted to talk to you about your experience with Rich Dad, Poor Dad. That has been a major turning point in both of our lives and I just really want to know how it kind of changed your mind and change the perspective of your of your life and how you kind of approach your career?
Lindsay Hambright 17:52
Yeah, well, it's funny because I'm reading the Cashflow Quadrant, which is Robert Kiyosaki, another one of his books here. Similar in the vein, and it was really eye opening to me, because as I was reading it, I was like, Oh my gosh, Mike, we are, we're still on the left side of the quadrant and we need to move over to the right side. So the quadrant is on the left side. You have someone that's an E who is an employee, and you have someone that is an S, who is self employed, okay? These are people that work for somebody else, they get a steady paycheck, or in the case of a self employed person, you may not work for somebody else, but if you go away, your business basically stops. So a lot of these are doctors, you know, dentists, attorneys, you know, people that rely on their actions in order to provide income for themselves. So what Robert recommends is moving over to the right quadrant, which is a B, a business business owner. This is someone that owns a larger business that has systems and processes in place to generate the cash flow for you, you don't have to be there day to day in your business. If you go away for a month, it's still going to run because you have the systems and people in place. Then the last is an investor. So someone that invests passively, that has excess cash, and their money is actually working for them. So for the most part, Mike and I have investments on the right side, but still the day to day is we're still running as a self employed person. And so that's why we're looking at other investments such as multifamily to move us over into the B quadrant where you have systems and processes and people in place, your "A team" in place to be able to generate that income for you. So it was really eye opening. I recommend everybody read it. And then the other thing that was really critical about that book was just realizing that no matter how much education or college you go through, when I was going through nobody ever really taught you about the importance of generating passive income, investing, so that you have this passive cash flow coming in, regardless of whether you work or not, and that, in my mind is his true freedom when you can get up and not have to work if you don't want to, but still have money coming in.
Abigail Thomson 20:29
Yeah, that's my experience right now is I'm learning so much and how to build a business by actually doing it and not actually in my classes that I'm taking in school. And then you touched on that freedom. That's something that I completely agree with and why I'm in this industry. That leads me to my next question is our theme is kind of taking on an alternative translation or definition of the American Dream and kind of bringing it to a whole nother level. How do you say you are taking your American Dream to the next level?
Lindsay Hambright 21:07
Well, we're working on it. So my American dream, in my mind is true financial freedom. So having that freedom, the time to for me, time is such a, it's such a valuable asset to me that I don't want to waste it. There are things that I'd like to do but not have to worry about having, you know, meeting my bill payments. So having that true financial freedom for me is kind of the American dream. With that freedom comes a lot of responsibility. So just making sure that you're making right investments, that your money is growing, you still have to manage it. You have to still rely, in my opinion, I think you have to rely on yourself. Don't rely on Social Security to as your retirement plan. You've got to work and plan for that and start building your plan now so that when the time comes to retire, you can not be stressed about it and not be working back at Walmart.
Lindsay Hambright 22:11
So, it's very important.
Sean Thomson 22:14
Yeah, no door door greeter jobs in the future.
Lindsay Hambright 22:18
I mean if you are that's great, but you want to have the option.
Sean Thomson 22:23
Right, you don't want to be mandatory. You want it to be because you enjoy it not because you have to pay the bills!
Lindsay Hambright 22:29
Oh, that's what life's about.
Sean Thomson 22:32
I know you and Mike do a great job of just living life today too. You guys travel a lot, you're always taking your family out and having great experiences. I think that's how you guys define the American Dream. I think you guys are living pretty good American Dream now and you're working towards even more and more all the time. I see it with you guys a lot. So anyway, I just threw that in there. Tell us I guess how would people or what would you suggest people go to find more information about becoming a real estate investor, or getting into real estate investing, or connecting with with you or Mike and the things you have going on? I know Mike has a lot of coaching and training for new investors, and he has a lot of resources for new investors. Where would someone go to find some of that information from you guys?
Lindsay Hambright 23:16
They can go to our website: www.flipnerd.com . There you'll see Mike's podcast. He's got a lot of good content out there for anybody that wants to learn more about real estate investing. So yeah, come check it out!
Sean Thomson 23:31
Yes, www.flipnerd.com . Yeah, that'll get them started with any direction that they want to go, there's lots of information and resources on there.
Lindsay Hambright 23:40
Not just about single family flipping either, he does a lot of stuff on multifamily, Self Storage, even mobile home investing. Lots of different asset classes inside of real estate.
Sean Thomson 23:53
Yeah. Okay, great. Well, Lindsay, really appreciate you coming on. I know. I know Mike is generally the face and the operation for you guys. So I think it's a real coup for us that you were that you trusted us enough to come and do a podcast with us. We really appreciate you doing that. Your experience and your background is tremendous. And I wanted I wanted to if I could I want people to hear that that perspective. So I really appreciate you coming on!
Lindsay Hambright 24:18
I appreciate it, Sean. Thanks!
Sean Thomson 24:20
Thanks again!
Abigail Thomson 24:20
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly, or are interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com . Before you go, please leave a review. Your comments help us create more episodes for you to enjoy.