Journey to Multifamily Millions

An Experienced Passive Investor Helping Others Do the Same with Spencer Hilligoss, Ep 99

• Tim

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You aren’t going to want to miss this conversation with Spencer Hilligoss. It’s been a while since we’ve had an experienced passive investor, but Spencer has deployed 7-figures of his own capital into passive investments in the past 6 years! 

A co-founder of Madison Investing, in 2019 Spencer retired from a 13-year career in Silicon Valley tech companies to show others how to invest in the same niche investment opportunities where he deploys his own money.

Spencer talks about shifts in priorities and the moment he knew he needed to not just save, but invest for his future. He was honest about mistakes like overspending on a Bay Area rental and how those mistakes all led to his growth as an investor.

We bonded over our belief in the importance of financial literacy for our families and society writ large! Come for the great insights but stay for the truly candid conversation.


Episode Topics

[01:06]  Meet our guest, Spencer Hilligoss
[01:57] Spencer's Background and Real Estate Journey
[06:37] Financial Literacy and Early Career Challenges
[10:16] Phases of Real Estate Investing
[18:13] Challenges with Property Management
[26:07]Madison Investing: Business Model and Philosophy
[32:46] What is one red flag every investor should look out for?
[33:08] What is a myth about the real estate business?
[35:42] Connecting to Spencer



Notable Quotes

  • "Financial literacy comes from experience." — Spencer Hilligoss
  • "If it's not taught in the home, it's certainly not taught in school." — Tim Little
  • "Five digits is a big number, no matter how big a person's net worth is." — Spencer Hilligoss
  • "People get stuck at phase one education because they're scared to pull the trigger." — Tim Little
  • "Someone needs to manage the property manager. Otherwise, strange things will happen." — Tim Little
  • "A rental property is a great way to build wealth if you're willing to do the work." — Spencer Hilligoss

 

👉Connect with  Spencer Hilligoss

👉 Connect with Tim

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[00:00:00] Spencer Hilligoss: Getting comfortable buying anything, not really knowing how to set goals for cashflow. And we went and bought a rental in the Bay area, overpaid for it. a $430,000 rental that generates about $200 a month in cashflow is not a cashflow win. but we learned a lot. We still have it. It's appreciated a whole lot, but still that was a mismatch phase two. We got comfortable buying rentals long distance. and we bought up to five, single family rentals in the Midwest. Much better economics, $60,000 average purchase price, which is mind blowing for the Bay area. 250 bucks a month in average cashflow, which is pretty darn good.

[00:01:06] Tim Little: Hello, everyone, and welcome to the journey to multifamily millions. I'm your host, founder and CEO of ZANA Investments, Tim Little. And on today's show, we have with us Spencer Hilligoss. Spencer is a passive investor who has deployed seven figures of his own capital into passive investments in the past six years. In 2019, he retired from a 13 year career in Silicon Valley tech companies, To focus on serving fellow investors with Madison investing, a club where passive investors gain access to the same types of niche investment opportunities, where Spencer deploys his own capital. Spencer, welcome to the show.

[00:01:44] Spencer Hilligoss: Tim honored to be here. Thanks so much for having me on.

[00:01:46] Tim Little: Yeah. And it's great to have you. So I gave everyone that high level overview of your background. But they'd rather hear from you. How did you get started? And how did you get to where you are today? Yeah, my gosh. I wish I could say it was like a clear cut journey and I knew every step along the way. entrepreneurship, parenting, business, and life tip rarely works that way, as That's rare

[00:02:06] Spencer Hilligoss: rarely. These days I'm a full time investor,proud father of two young boys. My Co-founder COO is also my wife, Jennifer Morimoto. So we lead Madison investing. That's a passive investor club. And this is no longer a hobby, a side hustle, whatever you call it. This is my full time, focus professionally. flashback to my tech career of 13 years that you referenced earlier, Tim,never in my life did I think I would be sitting here doing this. In addition to being able to have full mobility, used to last summer I lived in Portugal for six weeks. This summer we're going to live with our family in another country for another four weeks. It's a lifestyle that sounds a little lofty, a little delusional, but frankly, if I could go back in time and try to convey where I'd be now to the person who was grinding 80 hours a week in tech companies, a decade ago, while trying to juggle. Being a dad, trying to be a husband, trying to wear all those different hats that we all wear in life. I probably would have thought I was crazy. Like it's not possible, but it is very much possible. It just took a heck of a lot of work.going all the way back, I did grow up in a real estate household. My dad was a broker for 30 years and that scared me into tech, to be honest. I was cleaning out fridges at rental properties when I was a kid. I was doing open houses, as a young teenager. and of course some learnings clearly sunk in at that time, but. My gosh, I never thought it was going to be a full circle journey to somehow be back. In real estate, not only from a totally different lens, but have it be a formative, like foundation of how we've achieved financial freedom for our family, and it's been quite a journey and happy to go through some of the phases and steps in that, but, don't want to go too far, too deep right off the bat for folks.

[00:03:43] Tim Little: No, that was a great start. and I can certainly resonate with a lot of things that you're talking about, especially the importance of travel. I think that's very important. I've been Lots of places. And my girls, I have two girls, five and eight. I think it's just as important that they see new strange places because it just provides a level of perspective that books, pictures, and videos cannot provide. So I'm happy to say we just did our first international trip with the kids. Was it last a month ago? I think we went, Thank you. So that was our kind of test run to see how they do on those longer flights. went to Europe, wound up going to three different places in Germany. Also went to Luxembourg, a day trip to France 'cause it was only an hour drive away, which is the convenient part of Europe. But overall, I think it was a great experience for them. And so I can confirm we will move on to the next international trip once we figure out what that's going to be.

[00:04:46] Spencer Hilligoss: Oh, that's a beautiful thing.

[00:04:48] Tim Little: it is. and another thing that you talked about was something that's so important is the lessons that our parents passed down to us. And it's funny because it sounds like it was one of those double edged swords for you,you finding yourself in those rental properties and It's like pushing you away, but deep down, it sounds like those lessons were still permeating your brain and found their way in. And so you still took away all the good benefits of that experience, even if for a while, like any teenager and someone, going out on their own, you wanted to get away and do your own thing. That's what it sounds like to me. And correct me if I'm wrong, those lessons, it sounds like they, they stuck with you. Can you talk a little bit more about that?

[00:05:35] Spencer Hilligoss: Man, do I agree with everything you just said to him and you picked up on something that I'm happy to share, and I want to give TMI to folks, but I think that. And in the end, to your point, we all in some ways want to kind of branch out from our parents. We want to do something, carve our own path. And in hindsight,before the big 13 year tech career and leading hundreds of people in my twenties and, learning that along the way, as well as I'm scarring to prove it, before that, when I was doing stuff for my dad's business, and then also just watching him grow to great heights and our family had a good lifestyle when I was a kid during that era, he was a broker, this one active income coming into our household. a broker is about as active as the income can get. And, if you're not going in, you're not picking up that figurative bucket, bringing the cash, every month, the transactions, then the cash stops flowing. And so living in that lifestyle, and then watching what happened when. Our family went through a very challenging decade. We call it the dark decade in our family. And I don't want to go too grim. I lost a younger brother to cancer and lost three or four people in our family and subsequent years. And, ironically this week was the 20 year anniversary of his passing. but all that stuff led to a very strong downsizing of my dad's business at the time and our family's down, lifestyle.and that was, Making an impact on me.I think now as a dad, who has two kids of my own, very close in age to yours too, Tim,we have a, like a 10 and a 6-year-old, and Jennifer and I have both had so many discussions about like financial literacy and how it was not a priority for us growing up. And, but seeing in action what happens when that's not there. Seeing what happens when a single, income household that's actively earned declines significantly. and now as a dad, how do we build a moat? like that's the question. How do we build a motor around ourselves? How do we build a motor on our family while also enabling great international trips, just like the amazing one, it sounds like you and your kids and family had,we went and lived in Portugal for six weeks, we're going to go do another one in Montenegro this summer, just this lifestyle before we got to this stage. On a more fundamental level only really could begin by taking those learnings from what I saw when things didn't go well, in my dad's business and in our family's life back then. And so it stuck with me for sure, as a dad now, and just to mention this as well, like the irony of it to me, and I'm sure, you and many folks in the corporate world and the two worlds can relate to this on some level. I was in that career for 13 years at five FinTech companies, financial tech companies. The first one was a big company. Everyone's probably going to know. into it, they make QuickBooks and TurboTax, they literally do a third of the country's tax returns. I was in some ways helping bring products to market and leading big teams that imply I should know a lot about financial literacy in a personal household, right? It's if you're surrounded and immersed in it, you're like, Oh sure, I get this stuff. I didn't get that stuff and I don't think, I don't think most people do and I don't claim to have all the answers, but I just know how much I've learned since then. And, my goodness. if I could go back in time and just say, Hey, younger version of yourself, Find a way to get interested and curious as to why you park your money in what accounts you park it in. How do you invest capital? How do you go and choose how much to put in a 401k if you do it all? like these are lessons that I thought that I understood. but I still as a young guy had to go into, 30 grand plus in credit card debt in my 20s and figure all that out the hard way. So financial literacy comes from experience, but I would always want to make that a bigger priority now in our family from all of those lessons along the way.

[00:08:54] Tim Little: First of all, I would say, don't feel bad. you're not the only one. at least, you caught on and you realize that you needed to learn those lessons that unfortunately, yeah. most of us are not taught, right? Because if it's not taught in the home, it's certainly not taught in school. and sometimes it's no fault of our own parents, right? Because they didn't have those lessons. So how can they pass 'em on? I thinkI was similar in the sense that I tried to focus on the lessons that I could. Not having parents who are active in real estate. What I did notice though is the real estate ladder, right? And the potential for real estate because my dad started off in an apartment. And then we went from an apartment to a townhouse. That townhouse appreciated significantly and he was able to sell that. And have enough left over for a down payment on a decent house in the suburbs and so that stuck with me in some respect because I remember how much he made from the townhouse and how each time he was able to move up that housing ladder. And so even something as simple as that can stick with you later in terms of the potential of real estate and figuring out ways to leverage that so it's all about trying to find that silver lining and you know Pull those lessons that we have from the past all right. Let's move on though to your current business Actually, let's not move on to your current business. I want to get into the part where you were passively investing in You for a while. And it sounds like you were doing it pretty aggressively once you caught on, right? That, that saving and investing are things that you need to do to mitigate the risk that you talked about, you observed, in your young life. So talk to me more about that. Say that first passive investment into real estate, what did that look like? And how were you convinced to put your hard earned money? Into that deal because for most people that's the biggest obstacle because I get It's a lot of money in most cases, if we're talking about, syndication deals, for example, whether that's a you know a car wash or storage unit or An apartment building a lot of times the minimum 25 50 hundred thousand dollars and even if people are making decent money, putting that kind of confidence into someone and a deal is really hard for a lot of people to do. So can you talk about that?

[00:11:23] Spencer Hilligoss: Yeah, happy to and agree on every point. A five digit number is a big number, no matter how big a person's net worth is. So in hindsight, this sounds super clear, like a three phase. journey at the time it was not clear. It was as clear as mud. So around, let's say 2016, I was still working full time. Jennifer had her own career full time. We were making good W2 income, Bay area lifestyle and here in California, coastal markets. It takes a dual income a lot of times to be able to do the basics, buy a house and try to thrive with a family. but we were doing well. dropping a bunch of money or 401ks and really celebrating that. And there came a time where I joined, actually a financial tech company that was also a lender. and they are lending to fix and flippers and shout out to Kiavi formerly known as lending home. So I was brought in to lead originations there and I didn't know what that meant, I had to go in and learn that business, learning a broker lifestyle or in business with my dad is not comparable to going inside and learning what, how do you lend? On a fix and flip project for a single family home. What does loan to value LTV mean, all that stuff. So I learned enough. I see the numbers from folks doing a single flip from as a HDTV watcher or as big scale businesses. And I was sitting there going, I've never worked so hard in my life and spent so little time with my family that I was, and,I, something had to give. And ultimately I was like, wow, there's a lot of zeros behind some of these transactions. These guys are doing very well. These guys and gals that are leading these businesses. And I, but I can't swing a hammer. Like I, I rely on YouTube, around the house. So it's, flipping is not an option for me. but I understand. Business well enough. I understood the numbers, partnerships, analysis, all these things. And ultimately that led me down to the devourer, 18, no, I'm sorry, 24 books. In an 18 month period, all about investing, I'm in, in real estate and, syndications and multifamily and trying to figure out which way is up, devoured like 400 podcasts, just like yours, like quality education, quality, learnings from other people that have walked the path. No one needs to go do that. I don't think anyone truly needs to go and do that much. Some of that was procrastination after a point, but I, I eventually said, Hey. Like Jennifer, she and I went and drove around for an entire summer with our son in the car used as an infant and tried to find a local rental. So phase one, phase two, phase three, if I were to break them into phases, phase one was getting comfortable buying anything, not really knowing how to set goals for cashflow. And we went and bought a rental in the Bay area, overpaid for it. a $430,000 rental that generates about $200 a month in cashflow is not a cashflow win. but we learned a lot. We still have it. It's appreciated a whole lot, but still that was a mismatch phase two. We got comfortable buying rentals long distance. and we bought up to five, single family rentals in the Midwest. Much better economics, $60,000 average purchase price, which is mind blowing for the Bay area. 250 bucks a month in average cashflow, which is pretty darn good. But then you learn, the tenants leave once a year, if it's a C class property, and that kills your economics for the entire year on that single family rental, et cetera. So we have since sold those properties at a profit, modest one, but a profit nonetheless, cause. That was our lesson on the key lesson for rental investors, which I will hold firmly in any conversation, but, a rental is a semi passive period, at best. And that doesn't mean they're bad. It means that just people need to be aware going into it, that even if you have a property manager, you got to manage that manager, right? phase three. We got up the courage and started to deploy some capital into some multifamily syndications. And so we actually put 25 K in, in the first one. and two years into that, we were like, wow, that thing already turned around.it turned around like a double equity multiple on it. And, in parallel, we were starting to deploy capital into those types of deals in Alabama, Texas, and. It became very clear very quickly that it was working well at that time for us and, organically, it just really became a conversation piece because we were, I was so fired up about it. It was actually working for us and we couldn't take on more overhead. If you want to call it that in life, we couldn't absorb more tasks related to hands-on management. Of rental properties because of a very full plate, as you can attest to him,those are the three phases. If I were to break him into that, that got us into, comfortable enough to go pull the trigger on that first, multifamily investment and then going on from there into things like storage and other niche assets.

[00:15:42] Tim Little: Yeah, I love that. And I think you could technically call that four phases if you want to include the education as that first phase,

[00:15:51] Spencer Hilligoss: Totally. It's a big phase.

[00:15:53] Tim Little: And like we were talking about, I think the problem is, and you alluded to this, that some people get stuck at phase one education because they're scared to pull the trigger. they're like, Oh, if only I know a little bit more, if I read one more book, if I listened to three more podcasts, then I'll be ready. And it always just becomes this delay game. even though they know they need to do something. Otherwise, they're not actually real estate investors. They're just real estate aficionados. I don't

[00:16:23] Spencer Hilligoss: I agree. Wholeheartedly.

[00:16:25] Tim Little: But no. And I think buying local things makes sense, right? For most people, I think a lot of the folks in the New York area, California area, maybe some of them skip that step because there's just nothing where the numbers work. or it's hard to even save up for the down payment for a rental property in those areas. Cause in most cases, you need a 20, 25 percent down payment. There are exceptions. generally speaking, and that's a lot different on a 500, 000 property than it is for a 100, 000 property. I think it, for a lot of us, we have to go outside that bubble. I was living in Washington, D. C. when I really started getting into real estate and I was looking around and I was set on a multifamily property, not something huge, but even a duplex. I was like, I wanted to mitigate my risk even a little bit. By having two units that way when the inevitable happens, like you're talking about, that tenant is going to leave and the lower class property, the higher likelihood they're not necessarily going to stay very long. and so I at least wanted a duplex and it just was cost prohibitive in the DC area, as you might expect. So that's when I started looking in that bubble and landed on Richmond. But that brings its own set of challenges whenever you start talking about your phase two, which is buying long distance because then it becomes that much harder to manage that property yourself. And then you're dependent upon. third party property managers. Why don't you talk really quick about your experience with third property managers, and if that,expedited your movement into more passive ventures.

[00:18:57] Spencer Hilligoss: Yeah. Happy to Tim. And, but what could you possibly mean by that question? and I'm being a little facetious, and playful on that one because I greatly appreciate the hard work done by any real estate professional, particularly in a hard job. Property management is a very hard job, very thankless, hard job. And I would say that's an important one. And I'm grateful for the partnerships we now have on that front. I'm talking about residential, commercial and residential. This is one very big area. I would say a difference between the two, but on residential, when we've owned rentals and we have one property manager we work with now, for example,you do have to inspect, you have to inspect what you expect as it were. and that just means paying attention, paying attention to the financial reports that the property manager provides, you are paying them I don't know, typically 10%,of the revenues you're getting from that.and so I would hope to get value from that 10%, but I will say it does occasionally. And certainly on some of those properties we had in the Midwest, it's more of a reflection on the property manager than the market, by the way. But I would say that. We felt like we were paying them to manage them. And that's not a great experience, particularly when you're in the middle of a very busy work day, to lead people and manage teams for a company that's relying on you to show up well for your job and you have to duck into a minimum and say, okay, I know I need to feel this phone call property manager about why there's a couch in front of one of the single family rentals that we have. I have no idea why that couch is there. I have no idea why you're calling me property manager. You're supposed to be handling this. That's why I'm paying you those just to give people a taste. Those are the types of moments that you deal with, even though you're paying for them to handle it for you. So hopefully not too candid for people, sometimes you get a notice from a county or a city in another state saying, Hey, you haven't done this action or this thing exists on your lawn that should be fielded by the property manager. But I digress. there's endless small examples as to what happens when you think you're fully hands off in a passive investment. But that is why rentals are semi passive at best. Yes.

[00:20:49] Tim Little: Think, we can come up with a million stories of random things you would never think could happen at a property. But, I appreciate that you're holding firm on your rental properties being only semi passive. And it's true, right? Someone needs to manage the property manager. Otherwise, strange things will happen to your income, on the property itself. or perhaps nothing will happen, which is also a problem. so I think that's what moves most people in this direction. Almost naturally. I think the problem is there's like this invisible wall. Of knowledge in that people don't know what other options are there. They only know. what is most readily available, which is the, buy a single family, maybe a duplex or triplex and then continue to rent out. Maybe refinance whatever they understand all that stuff. They don't understand the different models that are out there because they just haven't been exposed to it. And some of it's random. I think I randomly heard about it. passively investing through syndications, for example, on one podcast I was listening to, and I was like, that's weird. I've never heard of that before. Is that legal? I don't understand how that works. and so then I started to dive into it myself, and then I went to a conference, right? And it just snowballs from there, but it's like one of those things that sounds so cliche, but, if but most people don't know. So I think that's a problem.

[00:22:15] Spencer Hilligoss: Yeah. I think you're hitting on it so well. It's not only an awareness thing,there is a little, there's an acumen thing too. And so it is the biggest disconnect I think for most folks and many will never make this leap. And frankly, that's absolutely fine. A rental property as an example is a great way to build wealth. If you're willing to do the work, we will probably buy more in the future too, when we have the capacity to do two young kids, full life, a lot of stuff going on, a lot of irons on the fire. We don't, I don't have that time. So we're not doing that right now, but if you look at what it takes now to evaluate a passive investment, you have to read some pretty beefy documents, like there is some due diligence on the who, you know, and then that's that key difference. I would say for a lot of folks when they're getting into it is even if they can move it, like when I moved from this idea of I'm going to own these properties outright, I hold the title myself and it's 100 percent mine, right? Most people will just freeze up when they say, I'm going to go invest in this other big thing. I want a piece of something. That's way bigger instead of owning 100 percent of this thing that's smaller. And I just don't know if I like the sound of that. If the pie is much bigger, if it's an apartment building, a self storage facility, whatever the asset happens to be, and they get comfortable with that, they then also have to get comfortable, as did I. With the fact they're not going to be managing this thing. They have zero control over what happens once they fund their money. And I like that, but I also know how now to vet the team that's doing it, and that is really the biggest blocker is folks, the due diligence on the, who is really a tricky blocker for a lot of people. And I don't claim to have all the answers, but we have learned a lot about how to do that well. And that's one of the reasons I'm so fired up about doing what we do.

[00:23:54] Tim Little: Yeah, and that's something that I think is so ironic is the hesitancy,in most people's retirement accounts, they have plenty of stocks, so they already Own securities and I wonder how much in depth research they do on the CEOs? and everything else associated with those stocks, but they have no problem at all pulling the trigger But here's this asset that is something physical, like you could literally see it and see pictures of it and talk to the people who will be running it and ask them any questions you want because you have that right as an investor and that same level of,All of the hesitancy is there, unlike, when they're pressing the button for their Vanguard account, it's just this strange psychological dynamic that I don't fully understand.

[00:24:51] Spencer Hilligoss: it's, these assets have an address. Another way I think about, what you're hitting on here very accurately to him, which is that I flew out last week, across the country, I was looking at some properties and meeting with the team as part of the due diligence process for a property we're investing in now. And, it takes effort. It takes time, but Not everyone's going to do that. But when I do it, it reminds me why we do what we do and invest in what we invest in. As part of our portfolio, because of all these things you just said, like it's physically there, and I, does everyone go and take a look at every piece of, company level performance before they've invested in Apple stock, these are the, those kind of formative questions I think about apples and comparing apples and oranges, stocks versus, real estate investments from private investments and syndications, Okay. There's all an eyes wide open dynamic available for people as to how much diligence they want to do, but I definitely encourage people to take their time and educate before they jump into getting a, into this indication. But that's why folks are out here to help. There's education to help. It's like it shows like yours tend to be able to, learn and start the journey, at least to realize. Yeah. It is possible to demystify this stuff. It is possible to risk a good chunk of this stuff. Not all the way. There's risk in any type of investment, but I love these assets and that's why I ramble about them like this.

[00:26:03] Tim Little: Yeah. and, going off of, what it is you do. Why don't you explain the model for Madison, for us? Cause there's a couple of different ways this can be done. It can either be, you guys are active and you're buying and managing these assets yourself, or it could be more of a fun type model where you're underwriting and vetting these deals on behalf of a group of investors. So what does it look like for you guys specifically?

[00:26:30] Spencer Hilligoss: Correct. Yeah. And we do the latter, the thing that happened right up front at the beginning of this journey years ago, seven years into this journey of running Madison investing as a passive investor club and It occurred to me like from the mentorship, frankly, it has nothing to do with real estate. This came entirely from 13 years in leadership and management and growing big teams and working with brilliant people in that world who taught me. It's very important to know what you don't know, and it's even more important to know what you don't know, And then it is to go lean into your strengths at first. So I knew that I wasn't going to move to the markets I wanted to invest in. And we have deep roots here where we're living. I lived in Colorado for 10 years, but we're sticking around California. Yeah. I was not going to invest in Bay area properties. There's not good cashflow. I don't want to offend every Californian real estate person here, but that's how I feel. So our model is that we look for great teams that have been doing this. They have a great track record in the sunbelt and in the rocky regions and in different parts of the Midwest teams that are apartment owners and who want to be boots on the ground. And they've done this before and they've done it repeatedly across assets with the same business plan. We're looking for strong teams. And there are places where we're going to invest our own money, five digit, six digit numbers of our own capital. And we put them through a rigorous due diligence process. As I alluded to just a couple of weeks ago, I've been flying out to meet with teams and walk their assets and they have to put up with a laundry list of my very nerdy questions and requests for documentation. but once that happens. We find great teams, then we work on looking at their deals on a case by case basis. If we see one that makes sense, whether it's a fund or a single asset deal, we work to negotiate better terms so that our club members can invest alongside us and get access to that deal in an even better way.

[00:28:09] Tim Little: Yeah, that all makes sense. And, for my side, I'm still doing the more hands on side of things. And, we make sure, we partner with other folks who are boots on the ground if the deal is not in one of our hometowns. but it totally makes sense for an operator like myself to, to build those relationships, because you are able to bring those bigger checks to the table and you're still providing that service for your investors, right? Just like I'm providing a service for mine. So I appreciate that insight. and I guess I want to ask why, right? if you were seeing these amazing returns. When you are a passive investor, what you're doing is work. you alluded to that. right?So why bother? giving up that completely passive attractive returns in order to take on more work And yeah, I get it. there's obviously going to be compensation on your part, too but otherwise Is that an is that enough for you of To have made that switch or was there some other incentive at play?

[00:29:13] Spencer Hilligoss: Yeah. on this front, you're getting into one of my favorite discussions. really a question that's philosophical, so I'll try not to ramble, the question of what is enough.and what is fulfillment. and in the end, when Jennifer and I started this journey, I'll keep this brief in 2016, we were at wit's end working those jobs and we sat down and we had enough self awareness to know we were not in a place we wanted to be, and we didn't see this trajectory going the way we wanted to. We didn't have enough time with the kids. Health was declining. work was at the priority. So we took two whole weekends, got a sitter, blocked our calendars, had the kids go hang out somewhere else safely for a while, and we hashed it out. And that means picking a time bound number, like a number of years to hit a set number of passive income that we would get per month. And we. Those were, that was like some of the hardest discussions we'd ever had. We'd been married happily for many years now, but the output of those discussions after tears and arguments and laughter all cycled through on multiple weekends together, the output was we'd, we initially said we're going to be financially free. Fully replacing our income in 15 years. It's pretty far out. And the second weekend we came in, we're like, Hey, we're going to chop that thing in half. So how do we do it in seven? We ended up hitting it in five and that the long time horizon was because I've learned that like you said, a long out goal. Far enough out and you remove all the excuses,like you don't overpressure yourself. If I see, if you say one year financially free, that ain't going to happen for anyone.so we set that goal and once we started getting on track, we saw things happening. It was like, this is going really well. We never planned on creating a business around this. We never planned on creating an investor club back in, seven years ago, but it became a thing where plenty of folks in our network were legitimately curious and like wanting our help and wanting my education. Now that I've gotten deep into it and like really nerded out on how we have a vetting framework for sponsors we have, and we have the ability to go and fly out to look at properties and help to do diligence. And so it became something where we were adding real value for people. And in the end, that was something I found quite fulfilling and I still do now. Yeah. And. Now, just to bridge back over to your kind of, your other question of like, why do it now? The incentive is not only that it compresses our timetable because you could do passive income, of course, in addition to adding some complimentary active income, that's helpful to get down to brass tacks about the economics of it. But even furthermore, anyone who has the rare opportunity in this life to be able to have the chance to hit financial freedom and ask the question of, do I have enough now? We'll realize the other side of that. Sitting on a beach is incredibly boring after a very shockingly short amount of time. And I don't care who is out there, this applies in my opinion to 100 percent of human beings because that's just how our brain works. We are here for a purpose. Unfortunately, most people won't ever, on planet earth, get the chance to even wrestle with this question. And that's a shame. so I want to be very self aware. I know it sounds lofty as heck for a lot of people, but I enjoy doing this. and I enjoy doing this and it's also about balanced days where one can spend time and some time with family. Stay healthy, add value back into the world, add back, add value back into the role in a business context and in the business context, the free market will reward that individual if they do it well over a long period of time, and so thanks for bearing with the soapbox, but that's, that's my wife.

[00:32:30] Tim Little: no, I love it. All right. we do need to move on to the turbo round. So I am going to ask you three questions that I ask every guest I have on the show and I just want a quick, honest answer.

[00:32:41] Spencer Hilligoss: Cool. Yeah, I was rock

[00:32:43] Tim Little: Yeah. All right. First one, what is one red flag every investor should look out for?

[00:32:48] Spencer Hilligoss: passive investors. If you're passively investing into a syndication or fund, they should be able to provide you with clear corporate caliber financial reporting if they can't. They're not prepared to be able to field your funds correctly, and that's it.

[00:33:01] Tim Little: even if you can't be bothered reading those,

[00:33:03] Spencer Hilligoss: Correct.

[00:33:04] Tim Little: it should be available to you

[00:33:06] Spencer Hilligoss: Correct.

[00:33:06] Tim Little: All right. Next question. What is a myth about this business? You would like to set straight

[00:33:11] Spencer Hilligoss: Oof. gosh, I would say that it's a myth around the risk level compared to other areas, other businesses, other industries, other types of investing, risk exists in every way that we can go out and deploy our capital into our own businesses, into buying stuff as consumers, into investing into crypto, into investing into the equities markets or bonds. the dinner table that we have all sat at for years, perhaps with an uncle, aunt, grandfather, pick a role. Many of us formed our opinions about real estate because we heard about uncle Bob's bad experience, investing in a development where he lost his shirt. and that is the case for,going back to the great recession that happened for the stock market for the vast majority of retirees at that age too. We could go on and on with examples, but even keel temperament when analyzing any type of asset, including real estate, tells me that there's risk in every type of investing. Real estate is just another great way of deploying your capital. So go in with an open mind and don't just assume it's more risky simply because you've heard a story at the dinner table 30 years ago.

[00:34:04] Tim Little: Yeah, and I think it's a matter of every investor needs to understand what their risk profile Tolerance is. Some people, they're, they want something that's super safe all the time. That's the case. Okay, go buy us savings bonds. And some people are way, way far on the other end of the spectrum. but, I think most folks are in between. And I think it's the responsibility of someone like you or me to explain that level of risk. Of course, they can read the PPM and it'll say that they can lose everything, which is true. it is true, it's possible, but you need, you and I need to explain the true risk as we see it for each deal, just so they know what they're getting into. I think that's the real responsibility

[00:34:42] Spencer Hilligoss: well said.

[00:34:42] Tim Little: All right, last question. And I think you gave us a little taste of this one earlier, but what does success look like to you?

[00:34:50] Spencer Hilligoss: Yeah, I think, success to me looks like a sustainable way of every day on average, not every day, most days. spending meaningful time with the people that I love, family, friends, staying healthy and adding value back into the world in a way that I, sometimes not profit. That's something that's a big priority in our family. financial literacy. We literally have focused all of our philanthropic efforts on the financial literary front. Literacy front in our household, in addition to adding value back into the, on a business front. And that, that's my, that, that's my ideal day, in addition to maybe plucking a guitar from time to time and trying to remember how to do so when I have time, but, that, that's my ideal future.

[00:35:24] Tim Little: All right, Spencer. Hey, I love it. I really want to thank you for this candid and informative discussion. I've really enjoyed it and I hope you have as well. And I hope the listeners have as well. Please tell them how they can get a hold of you. And if there's anything else you'd like to share.

[00:35:38] Spencer Hilligoss: Yeah. This has been awesome, Tim. really great conversation. Thank you so much for having me. If folks can find us at madisoninvesting.com, that's our passive investing club, and we're accepting new members. It is for accredited investors only. but yeah, please do reach out. You can check out the info and sign up for a conversation with me.

[00:35:53] Tim Little: All right. we'll definitely have all that information in the show notes. Spencer, thank you once again for coming on and I look forward to continuing to see you do big things on your journey to multifamily millions.

[00:36:03] Spencer Hilligoss: Thanks, Tim.

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TIM LITTLE (FOUNDER/ CEO)

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