Josh Cantwell: So, hey, guys, welcome back to Accelerated Real Estate Investor with Josh Cantwell. So excited to be with you. Just want to say thanks to a number of our members who have left us ratings and reviews lately. We’ve had a number of new ones come in. I really appreciate that. And our viewership and listener group has been growing and expanding each and every week so I just want to tell you how grateful I am to be able to share this information, share great strategies all for free through our YouTube channel and our podcasting channel. It just means so much to me. I’ve been able to meet so many amazing people, both active operators, investors, passive investors, coaching students, vendors, third-party lenders, title companies all through this podcast. So, if you don’t have a platform, if you don’t have a thought leadership platform, you need one, it is definitely working for me. So, I appreciate that. 

Listen, today I have a fantastic interview for you. The gentleman that I’m interviewing, his name is Spencer Hilligoss. Spencer is the founder and CEO of MadisonInvesting.com. Spencer is a passive real estate investor, a co-sponsor of multifamily deals, and a former technology leader. His company, Madison Investing, has co-sponsored deals totaling more than 5,000 units for more than $600 million. He invested in syndications as a limited partner and then also uses his platform, which is called Madison Investing to bring the other passive investors along with him to invest in multi-family syndications. He formerly worked at LendingHome, where he achieved over $4 billion in origination, working for LendingHome and funding over 600 fix-and-flip transactions per month. It’s pretty, pretty wild, and amazing. So, here’s how it works with Spencer we’re going to talk about it in this interview. He helps busy professionals like you generate passive income. This is made possible by directly investing in commercial real estate projects, primarily multifamily, with their teams of co-sponsors and co-syndicators that are embedded in local markets. So, they essentially partner with operators in local markets and they help them stand up all of their funding. These are opportunities that typically pay out monthly or quarterly distributions and Spencer basically works to consistently be finding and vetting out deals and finding and vetting out operators. 

So, if you’re an active operator looking for additional ways to grow your investor base, you’re going to learn a lot from this interview. If you are a passive investor and you’re looking to invest in multifamily projects and you’re looking for deal flow, you’re going to love this interview with Spencer Hilligoss. I’m super excited to have him on. So, here we go. 

[INTERVIEW]

Josh Cantwell: So, hey, Spencer. Listen, I’m so excited to have you on the show, so excited to learn more about your business. Thank you so much for joining me today on Accelerated Real Estate Investor. 

Spencer Hilligoss: Yeah. Josh, honored to be here. This is a wonderful way to spend a Friday so thank you so much. 

Josh Cantwell: Absolutely. Thanks for carving out some time. Now, listen, I know that you and I have a lot in common, raising a lot of money, done a lot of multifamily investments, 8,000 units that you’ve invested in with yourself and your team and your limited partners. But what I’d love to hear is something that you’re working on right now like a deal that you might be underwriting today or next week or a property that you’re touring or an operator that you’re interviewing. What is something that you’re working on right now that you’re passionate about that kind of gets you going? 

Spencer Hilligoss: Yeah. I’m a framework guy. We’re joking about this before we kicked off a little bit, Josh. I love a good framework. I think it makes great decision-making really clear, and particularly when you got to make big decisions quickly. So, we are working on an awesome single asset deal. It’s actually one that I brought you back to Florida. I was a little bit not looking super close-knit in that market for a while just because we didn’t really know where COVID was headed in the big picture last year. But I would say that what allowed me to get clarity in a very busy market, I mean, who could have thought that 2021 was going to be as packed with deal flow as we’re seeing right now? It’s a very competitive market clearly, a lot of people going after these properties. But the thing that brings me clarity, I would say. And also, I educate people that I connect with. Whether they’re investors with us or just other people looking to learn about this space that I have a passion for, Josh, I think kind of a five-point framework that I look at. And I didn’t come up with every single one of these buckets. I just put them together in a way that made sense for us. 

And so, with all of the many people that are out there trying to figure out like who are the right partners to work with and trying to pass along as education to other people to say like you’ve got to look at people’s track record. You’ve got to look at things like even, frankly, like their values, like I’m one of those guys who actually talks about values like vetting values, talking about communications, the team dynamic, talking about the other approach. When you’re talking about investing capital as a passive investor in particular right now, which is in growing popularity. And we have people reaching out to us saying like, “How do you decide who and where and what to invest in?” Frameworks matter and I kind of pick that up from my technology career in my startup world, which is like great decisions are typically not made quickly. Big, great decisions are made slowly usually but you have to be able to move quickly in this business, particularly if you want to pull the trigger on something. So, that is what I’m excited about right now is because we’re able to review enough deals. We’re able to talk to enough partners and build relationships over time because of like a five-part framework that we put together. And it’s kind of getting battle-tested just because we feel like we’re having to look at a lot of deals to find a good one. 

Josh Cantwell: Nice. So, you’re putting this five-part process into play on deals all the time, vetting through deals. So, why don’t we go there? Why don’t we talk about this five-part process that you’re using? And before we jump into that, though, Spencer, tell me a little bit more about your kind of money-making strategy. What do you guys do exactly in your words? We’ve already obviously kicked this off with the introduction but what do you do in your words? I know that you guys raise a lot of money. You’ve got involved in a bunch of deals. You’re underwriting deals but you come from the technology world where you invest more as a limited partner. So, help me understand the role that you play kind of in the capital stack and how your business model is built. 

Spencer Hilligoss: Yeah. Happy to. And I am the guy who is 100% open book transparent on everything that we do. It’s always been a core value of mine for my corporate world and we carry that through to Madison Investing, which is the company that I run now, along with my co-founder and CEO, Jennifer, who’s also my wife. So, right now what we do is we connect investors to some of the strongest cash-flowing multifamily storage assets across the country so like limited partners and we co-invest with them. In fact, I would say our number one responsibility, if you’re a passive investor, you’re betting on the jockey just to use the very common platitude. You’re betting on the asset manager. And so, we connect investors to go find these people. We invest along with them. Before we even do that, we put our own money into them as LPs first and then we get to know them over a period of time. So, it’s our job to go out and find out who are the right who to work with if you’re going to go invest a sizable amount of capital into these opportunities. And then when an opportunity comes, we vet that. We look at the market. We decide, is this a market? Is this a submarket? Is this a neighborhood that is worth taking the investment risk? And risk-adjusted returns are a very distinct thing. There’s lots of returns out there on paper. Risk-adjusted returns are what we are actually seeking I think particularly in the current market context. 

And so, that is what we do, that is what I do, and it’s not just me solo doing this. I mean, there’s a team around us as well. So, my very specific role has evolved, I mean, in the last two years to be specific, Josh. So, I previously have been a co-sponsor, a co-GP taking on a handful of different roles within a bunch of big apartment deals and some storage deals. So, pulling together capital, investor relations, sure, also literally flying out, walking properties, being part of the asset management team on these deals. Now, over time, we decided, you know what, we want to be able to do this more frequently. We want to be able to connect into a broader audience and help more people do this. So, we took the additional step and I also became a registered representative with FINRA. So, now I’m also a co-GP and a placement agent, and that means everything that I do very much on the grid. That means like all my emails like completely transparently tracked and all that stuff that comes along with being a registered representative. And if some people are like, “What the heck are you talking about, man?” which is probably fairly common. 

A lot of folks out there that might be more familiar with that from like the stock investing world. That just basically means that all the transactions that we work on, we share them to our investors and we often invest in them at the same time because we believe in the deal. And it also just means that I have to get through a few extra approvals and there’s a little bit more paperwork involved. And so, that’s all in service of being transparent and doing things the right way. You know, I very much strive to live in like the black and the white in terms of doing things the right way and I think that that’s how we just try to scale this business is connecting investors with deals and doing things the right way. 

Josh Cantwell: That sounds great. So, let’s peel back the onion a little bit more on that. So, I’d love to hear that you’ve taken a step to be a registered representative. I was a financial advisor in my early days and early 20s, Series 6 license, 63, 65, sold financial plans, worked with clients, but worked for a big brokerage firm. It was kind of under the MetLife was our broker-dealer, their banner. Basically, did everything except for stocks. And you had to kind of sell what the brokerage approved, right? So, registered representative is different because now under FINRA you’re able to represent the deal that’s coming in, the operator, work with the passive investor, be the registered representative that connects the dots very legally, earned whether it’s fees or equity or whatever for doing so, investing your own money into the deal. I know there’s a lot of guys out there that “co-syndicate, co-sponsor” and a lot of times they’re just raising money for a deal that needs money raised. And they’re not necessarily supposed to be doing that and getting a “commission” for it. So, I’d love to hear that you’ve taken the extra step to be a registered representative. So, before we get into this other conversation, just talk to that for a minute about what you’re seeing in the market and some of the dangers of just being like a capital raiser, taking equity in a deal, kind of is very much in the gray area according to the law with the SEC. Talk to that for a quick sec. 

Spencer Hilligoss: Yeah. Happy to. And I can only really speak for myself. I came from a background where I was deep into tech startups that were doing relatively dry things but solving key problems that some people are like, “Oh, that sounds important but I don’t know how interesting that is.” We’re talking about things like payroll software for small businesses. I started my career like into it where we are doing tax and financial stuff there. And later on, I led the origination groups at LendingHome, which is the biggest fix and flip lender in the country and that’s relevant to the question, Josh, because I find it very familiar to go through formality and process. And I think that doing that process, doing things by the book, I think that things that are arguably probably the number one theme that I would say is most important for folks who are interacting with investors in this private placement, private real estate deal space is the notion of disclosure. And I think disclosure is just key. And that means like if I’m an investor and, I mean, this as an LP too because like we just wired funds just literally yesterday into a deal that we’re purely investing in as LPs because it’s a great-looking deal. I even have to disclose that like I have to disclose and I’m just investing – and you already know all this stuff, Josh, but I want to make sure that the audience understands it. 

Josh Cantwell: Yes, please. 

Spencer Hilligoss: Like, I had to get my fingers fingerprinted into the FBI database. You have to have all your emails literally tracked and occasionally audited, like all these things. I’m 100% comfortable being in that environment because really we’re doing things the right way. So, I think that when it comes to disclosure of risks in deals, this is a space where you can go so far in depth. You can helicopter pilot down all the way from at the high level, an investor reads an investment memorandum that they say, “Wow. This summary, this deal looks incredible. I like the market. I like the property. I like the team. I understand half of that.” And so, that’s around where I want to make sure that our investors and the folks that we work with and the people listening understand that’s probably not enough. I think the average person would really benefit from hearing more, understanding more, even if that means a little bit more conversation, even if that means a lot more depth, and then certainly stuff said in writing about what are the real risks included. There’s a lot of exuberance in this market. I mean, it’s incredible. I mean, some economists might debate this but I think we are still in the longest single bull run ever if you don’t count 2020. In the markets, some people say that doesn’t count but I would argue it does, longest bull market ever. And as a result, some folks are literally only expecting things to go up. So, how do you go and educate without me just being the curmudgeon in saying, “You know what, yes, I believe in multifamily, yes, there’s killer opportunities to be found out there?” That said, read this and understand this list of key reasons why do you know what an illiquid investment means. 

Josh Cantwell: Yeah. Interest rate risk, inflation risk, refi risk, CapEx risk, operator risk like there’s a lot of risks. To me, the biggest risk is if you’re doing a value-add deal, it’s the CapEx risk. And typically, on a CapEx value-add deal, it depends on what your exit strategy is. We like to refi and keep. So, that’s the two main risks that go together. CapEx risk meaning hiring the right general contractor, executing the business plan, turning the units in a timely way, sealing, striping driveways, doing landscape like literally the roofs, the hard CapEx items, and making sure they’re done on time and on budget. We have a VP of construction that’s got 30 years of commercial construction experience, $50 million budgets. We were happy to steal him and he does that for us and we feel very confident in the scopes that we put together. But then there’s the refi risk of okay, well, even look like right now we’ve got a deal. We’ve been going into this refi for four months. Fannie Mae and Freddie Mac keep kicking it back and asking for more information because we bought the deal less than 24 months ago for 9.2. It just appraised for 13.5. We force depreciate with a lot of value add and with COVID, now before COVID they probably would have stamped that sucker and done the refi. It would have been done within 60 days but with COVID they’re very like they’re second-guessing. So, send me the financials for April, send me the financials for May. 

You know, what’s been the lease-ups like, you know, all these extra things that to your point, Spencer, it’s like a lot of limited partners don’t know to ask these questions. So, you either have to be like, in your case, register representative or a general partner that tells the limited partner, “Hey, these are the questions you should be asking that you don’t even know to ask. These are the questions that you should be asking.” Matter of fact, I go so far, Spencer, that when I need a new investor whether I get referred or they register on investor portal or whatever that first call is all about that like I don’t spend time talking about us or our deals. I don’t even know if they’re qualified to invest in our deals. I said, “Look, whether you invest with us or someone else, here’s the questions that you need to be asking that you don’t even know to ask. So, whether you invest with me or someone else, write this down, make sure you ask these every time.” And guys are like, “Oh, great, that’s great.” And by doing that, what have I done? Of course, I’ve earned their trust. There’s a more likelihood that they don’t invest with us. So, I love to hear the fact that you’re going the same line. I feel the same way. This is a long, long business. It’s a long game, an infinite game, and sort of take the extra steps not only does it help that customer or that investor but they’re probably going to invest more with you, invest more often if you take it slower at the beginning. 

Spencer Hilligoss: Yes. 

Josh Cantwell: Too many people are like desperate to close a deal and they’re skipping over all the detail. So, I’m sorry for that rant. I’m sure you can relate 

Spencer Hilligoss: And just to pile on very briefly, I will say we are seeing that reflected in our business growth, which is that I deliberately tell folks very similarly in some ways, Josh, just the way you onboard new investors, when they reach out and they say, “Hey, I’d like to join your passive investing program. Can you send me the information on that deal that I found in your portal?” And I say, “I’m happy to but I would prefer – can we just have a call and get to know each other? I’d like to understand kind of what you’re solving for first. I can send it to you but honestly, I typically don’t talk about the deal. I would rather have you ask me questions that you might consider taboo.” I want to have that person ask me things like, how do you guys make money? Like, what is your incentive to be involved in this? These are the most important questions that people could possibly ask. So, I want to make sure to double down on that. 

Josh Cantwell: Love it. Love it, Spencer. So, talk for a brief second about why. And I asked this question. We kind of got away from it. I want to circle back to and ask it again, why did you become a registered representative when you knew that you were going to kind of co-syndicate deals, raise money when other people haven’t gone that extra step? Why were you convinced that that was the extra registration, the extra designation that you should have? 

Spencer Hilligoss: Yeah. I mean, I think that if you look at the space from the past decade, roughly, as a guy who was, I mean, admittedly I was in tech, I did grow up in a real estate household, which we can probably talk about in a second in a different lens but I would just say I’ve been in the space for roughly in the syndication space specifically now for coming up on like 4.5, 5 years as aside from residential, one other investing stuff. And so, now all that said, you look at the span and the legislation and all the macro elements that allowed this space to thrive like putting together apartment deals with other people’s money with OPM and growing this space. I would argue it’s actually still maturing and barely even reaching its full potential for what the market would look like in the 5 to 10 to 15 beyond years. And no one knows for sure what’s going to come out. I don’t have a crystal ball. I just see, you know what, I believe deeply in doing things what I declare and I’m going with disclaimers here but I’ll just say I don’t know what the right way really is. I know the way that I look at it and I look at doing things the right way is very, very black and white. You’re doing things that are transparent, openly disclose fully, fully business savvy, business informed way. And I think that that’s just beginning in the market. 

And I think the syndication space is relatively immature in terms of its business growth. And so, I think in 5, 10 years, I think there’s going to be a lot more people on this path and in their business model and they’re going to be wishing that they actually took the steps to go this path much earlier because also we just worked on, I mean, now we have the flexibility as well if we want to, to go work on other things. Examples would be we partnered on three separate funds in January and those funds are still working. In some cases, I have been a co-GP in some of these other partnerships in the past but now I’m able, if it makes sense, to just partner purely as a placement agent, still investing our own money into the deal, still working in some cases with investors that are repeat investors with us six to seven times over the years. And that model allows the flexibility to do it and to do it what I deem is the right way. And so, I just want to give a couple of the benefits of it. 

Josh Cantwell: Yeah. I love it. So, Spencer, let’s talk for a quick second about like your day-to-day. I’m interested to hear as a day-to-day operator of your Madison Investing business. I imagine there are two trains going down two separate tracks. One is finding deals, finding operators to invest with, and the other one is finding limited partners that register on your portal and getting to know them, and then you’re trying to connect the two of them so they arrive at the train station at the same exact time. So, just describe what does that look like in your day-to-day operation. Like, how are you sourcing deals? How are you finding operators? How are you finding limited partners and what do you do to kind of bring them together, meaning vetting each one of them out simultaneously? Give us some color about what that looks like. 

Spencer Hilligoss: By the way, I love a good vehicle analogy. And so, I think that resonates with me as a guy who’s done that quite a bit for building rocket ships while flying them in the startup. 

Josh Cantwell: Yeah, sure. 

Spencer Hilligoss: And so, I think very different speeds on those two trains, and I would say the speed of sponsor when we’re building relationships with this awesome asset managers, and there’s more and more coming out every day because there’s an enthusiasm for the space. And that’s awesome. However, when we first started, you’re going out there, you’re building your name, and I came in with like an upbringing in real estate growing up in that household and then also being part of the single-family world in a very, very significant way that built an origination group that did $4 billion in loans and all that stuff. Becoming into commercial, you first go out and you’re like, “Hey, please take me seriously, asset manager, that has thousands of units,” and eventually that dynamic shifted. And now we’re very blessed to be reached out to primarily introduction and referral and otherwise from some sponsors that are interested in partnering either on a deal. But usually, we’re not interested in like we literally will not jump into a deal no matter how good that looks. We have passed on probably maybe a dozen to two dozen deals just in the last six months. That looked great. We had never invested in that sponsor before, personally, and I had not gotten to know them over time. So, we had to actually just simply say let’s start the relationship, man, let’s start talking. I would love to get to know you better and then we’re going to earmark some of our own personal capital before we actually get to know you. We’ll invest in one of your deals and then let’s just get to know each other over time. 

And so, that train, it’s a protection against shiny object syndrome, frankly. It’s to make sure that we understand how does this asset management group actually communicate? Like, are they operating like with modern professionalism standards? Do they know how text messaging, email, MailChimp works, all these different things in addition to can they asset manage? Can they go out and actually do what they say that they do? Do they have this track record? And frankly, I think one of the biggest learning lessons that maybe we can revisit later is style, style of communication, fit, you know, just a fit of partnership. I think that stuff matters a lot because whether it’s within a GP team and you have two or three GPs or if I’m joining a GP team or whatever the assemblage of that team is, you’re in it for years. You’ve got to make sure that everyone understands each other. My day is comprised of building and deepening those relationships over time. It’s not a high-volume game, though. It’s not like we’re feeling thousands of new sponsors and then suddenly we pick one out of the pack. It’s like, no, we had a sponsor roster. We’ve worked with them over multiple deals. We deliberately are saying maybe we’ll add one to two that will start working with this year for this asset class. And that’s the time scale that we’re thinking about and working on because that’s the business planning lens through which we’ve looked at our careers in the past and we look at this business as well. 

On the passive investor front, on the LP front, yeah, we feel very grateful that we get a lot of inbound interest now and largely referral. I mean, like our number one lead source right now is referral. I’m not out there trying to become the biggest name in the business. And no judgments to those people that are. We’re trying to do things a very deliberate way, on a very intentional way. And that means I’m okay if it takes a little bit longer to get to know the right folks that we want to partner with, multi-deal, multi-year, multi-decade relationships on the passive investor front because these are five to seven to ten-year hold periods. I mean, we’re talking about building long-term relationships and it’s not about the deal. It’s about the five to ten deals over time that helps this person prosper and hit their goals. That’s the game. And so, anyways, that was a very long-winded soapbox. 

Josh Cantwell: Yeah. No, but I think the message that I’m taking away is, look, you’re making investments. I think the last thing you said may be the most important relative to how long you take to find an operator, how long you take to syndicate a deal, how long you take to make the relationships with limited partners. It’s because you know how much even longer you’re going to be in relationship with that person five, seven, ten years. So, if you take six months or 12 months to get comfortable with an operator and you’re having multiple conversations with that and looking at some of their past deals and maybe they pitch you a deal that you pass on and then you follow that deal to see if it ultimately is hitting its targets, even though you haven’t invested in it. It’s because you’re in for the long haul. It’s one of the reasons why I love multifamily. It’s one of the reasons I love apartments and self-storage, residential assisted living, mobile home parks, these kinds of investments because they truly create and make wealth but not tomorrow. So, if you have like buying the deal is probably the easiest part. So, people talk about how difficult it is to find deals. Yes, it’s difficult but it’s probably still the easiest part of the process. Because managing the asset, managing investors, sticking with it, having that constant long-term infinite game mindset, and then sticking with it, not making short-term decisions just for short-term profits for a win today but it’s got to be a win that makes sense for a huge group of people over the long haul. That’s the message I took away from it. So, hopefully, our audience is learning from that too. 

Spencer, let me pivot real quick into your start. So, you guys have 8,000 units, $800 million in assets that you’ve invested in and your registered representative is kind of responsible for putting together, but you come from a tech background, right? You come from building tech platforms, even though you were in the lending space for private lending, still very different than syndication. How did you get started? Why did you pivot into this space and what were some of the early challenges? 

Spencer Hilligoss: Yeah. Happy to speak to it. As even pre-tech for brief context for folks I shared earlier, I grew up in a real estate household. My dad was a broker over 30 years. He was a 30-year residential real estate broker. So, I was working in that business in various ways both as a young kid and then a teenager doing open houses and I was simply going, “Well, my friends don’t think this is very cool.” So, tech sounds really cool if you live in the Bay Area. I can go join the tech companies. It was a very simple thought process. And so, I got into tech companies, didn’t know I was going to end up doing it for 13 years, and largely spent that in the fintech space. And so, that was interesting as a guy who wasn’t inherently interested necessarily in the finance world out the gates and ended up doing like into it zero gusto. I mean, all these are companies that do relatively key back-office problems for small businesses. And what I came on the other side of that thing realizing was like, okay, flashback a few years. I stumbled my way into LendingHome. Mentor of mine kind of nudged me into this company because it was the right time for a certain role. And I found out, wow, okay, so we’re doing 500 transactions a month like single-family flips. And we were lending on these deals and I was the guy who was in charge of scaling their origination groups and stuff. And I’m seeing the success financially of these investors. And these are flips still.

I mean, these are one and done. I mean, you always have to get some point on a podcast, get back to it, do the Kiyosaki comparison of what the pipeline and the buckets in terms of income. So, I was looking at these flip transactions going like, “Wow. Folks are making a really good one-time moment bucket of income on these flips. That model does not jive with me. Personally, I’m much more of a predictability guy like I’m an operations guy. I like the notion of something that you can forecast with great predictability or some. And so, I looked at that. I looked at the trajectory we were on personally. We had sizable 401(k)s. We had the index funds. We had all the bells and whistles personally and of a mainstream employee, successful kind of W-2 corporate family. And the math was too compelling that the math and also, frankly, I think that there’s a push and a pull in every big decision in life. And I think, for me, the pull toward this world was also seeing that predictability, seeing that you can change an entire trajectory of someone’s financial fortitude if you start pursuing stuff within real estate. And also, I hadn’t seen my son, my infant son at the time for like two weeks because when you work in tech companies, you work 80 to 100 hours in an office if it’s an early stage A series or B series company. 

Josh Cantwell: Yeah. Wow. 

Spencer Hilligoss: It’s the real deal and in terms of work and hustle. I still work hard now but I would say the hours are a little bit truncated compared to that and so a little bit more flexible. So, anyways, I quit my career in tech five months before the global pandemic hit. That was not obviously in the forecast but we thrived through it because of that very strategy. We had already started investing in real estate. Before we even found syndication, we found large assets, though, Josh. I mean, we did go and stumble through the very predictable stages that a lot of people do. We did buy a local duplex in California. We did go buy a bunch of turnkeys in the Midwest, and then we sold them later on. And there’s nothing wrong with these strategies. I’m much more of an and versus or investor, personally. I think that like great investing means you got to do a little bit of everything depending on your goals. But we had to stumble through those stages and we had to go through those steps before we found these larger assets and all the wonderful benefits that come along with them. And now being able to apply some of those principles from the tech world, the frameworks, and all that stuff has been critically helpful for us to make sure that we’re making great decisions on behalf of and with our investors on the deals that we look at because there’s a lot of property out there and you have to look at a lot. And sometimes the framework is what keeps you from making otherwise a bad decision because you’re just like, “You know what, all these 100 boxes, all of them except for one is checked but we just can’t move forward because that one is not checked.” 

Josh Cantwell: Right. I love it. Yes. Spending the time to be the underwriter at this point, like using tech, using tools and strategies because numbers never lie. Numbers never lie. Where numbers could lie is in the prediction of the future, which nobody really knows but there’s the numbers today. The numbers today don’t lie because we know those are really relevant. They’re very on demand. They’re very timely. We can get them right at our fingertips if we have the right tools or software to be able to get them and put them into spreadsheets or input them into sort of tech algorithm. It tells us if it’s a good deal or not. The question then becomes, and you talk about risk-adjusted return, do we believe in the operator? That’s something in the future that we have to try to predict with some reasonable confidence. We have to be able to predict rent growth if we invest X amount of dollars in CapEx, what does that rent look like? Where can we add other income? Where can we reduce expenses? Now, this business plan has to come to life. Those are the unknowns. But the numbers today never lie. That will give us a story. Some deals look really good right now, some deals look really terrible right now but it’s all about the future, right? Some of the very best residential deals I ever did look horrible today. Some of the very best apartment deals I’ve ever done looked horrible when I bought them but it was all about the future. 

So, Spencer, for you now that you’ve had this success and done all these deals and you co-syndicating, bringing people together, looking at a lot of deal flow, underwriting a lot of deals and a lot of limited partners, what advice would you give our audience or what advice would you give your kind of younger self on your entrepreneurial path? Like, would you go faster at a certain time, go slower at a certain time? Did you make every decision exactly the way you should have and at the right time, what would you do differently? What has your story, your journey told you to say, “You know, if I could do this differently, I would,” or, “You know, I did this right.” So, what advice would you give your younger former self for our audience from the stories and lessons that you’ve learned? 

Spencer Hilligoss: Yeah. Two points on that one probably. The first would be as an entrepreneur, I would say analysis paralysis sets everybody a different way. For me, I read 24 books. I did 400 podcasts before I really went all in. I was still kind of in side hustle while doing very demanding career, starting to get involved in deals, but not really going all in and treating it like a business, was still treating it like a part-time exploratory hobby. And I think that the earlier you can just break through and realize like pay very close attention to why am I learning what I’m learning right now? And am I actually going to apply it to something else? Because if you’re not going to apply it, you’re actually not moving forward, you’re stalling. 

Josh Cantwell: It’s just entertainment. You’re just learning to entertain yourself. 

Spencer Hilligoss: Exactly right. And so, that has to be number one. I mean, even just I would say 400 plus podcasts, I mean, high-quality podcasts like this one, you have to make that part of your education journey. If you’re early on in the journey or even you just need a refresher on core concepts, if you want to hear like other people in the business like Josh talking about this stuff, you have to do that but then go do something with it. I mean, really, the moment you take that action, I know massive action is a very catchy buzz phrase and there’s something to that and I think that you have to put out your push periods. Massive action aimed without a strategy is relatively useless. 

Josh Cantwell: Suicidal. 

Spencer Hilligoss: Yeah. 

Josh Cantwell: Like lots of action with no direction, lots of action without like some KPIs, some numbers, some goal to hit, some framework to fit it into. I mean, I’ve seen guys go really fast right into the dumpster fire because they just didn’t have like, what am I doing this for? It’s like, “Let’s just go make a bunch of money.” Yeah, not really. When I was much younger and a lot more immature, I used to do that too. Now, to me, massive action could be sitting and thinking for like two, three, four hours about jotting down notes and writing up strategies and thinking through comparisons. Like, one of the comparisons we’re going through right now is three different third-party property management companies versus our own property management company. So, it’s a four-way horse race. And we’re looking at this decision as potentially a ten-year, multi-million, I mean, tens of millions of dollar decision. You don’t take massive action and just make that decision in a week. That’s a decision you take massive action on but it’s super slow to make the decision. 

Spencer Hilligoss: That’s such a great example. On the personal front, just briefly add to this, I think we talked a little bit about massive action and making sure it’s like just deliberate action, right? It’s like deliberate action taken is the first one. The second one on a personal front. And I’d say that I’ve gotten feedback from so many other folks that said that this was useful now. I’m like, “Okay.” I thought it was rudimentary and I thought I might just be wasting someone’s time if I share it but it was so meaningful to us, which is what are the goal-setting moments? If someone is early on in the journey, no matter which direction you’re going to go running, we took the time to say this is the actual monthly dollar amount of income we are targeting as a lifestyle. And what else is that? What is that income number? What is passive income? What is active income? This is not financial advice whatsoever. I’m just sharing literally what we did but I would say that that is a very key element because really the hard-working inspired folks that are out there that are signing up for coaching programs. I mean, as a guy who’s gone through before, I’m not anti but I’m also not full for jumping in, dropping five digits of money into something you don’t understand. You’ve got to find what works for you. And I think before you go and do all that stuff, have you sat down with your spouse, your partner? If it’s just you, that’s going to be a very easy goal-setting discussion. 

I mean, figure out what do you want out of this stuff, man. You’re going to go out and take all this action because if it all doesn’t tie back to that single most important KPI, and financially, for us, it was an income monthly number. It’s very tangible. It’s very simple. And I think that that was a helpful, if not critical goal setting exercise for ourselves because it keeps you honest. It just keeps you honest. If you can’t tie all your activities back to that stuff, then maybe the activity you’re looking at, at that moment is not worthwhile. 

Josh Cantwell: Yeah. I think that’s great advice. And what kind of resonating with me as I was listening to you is I’m thinking about like all the people that are like take massive action. But without goals, without a goal-setting session first, and then the next thing that happens is shiny object syndrome because they’ve taken so much action, everything looks good so they start doing everything. And they’ll eventually get to the point where they’re ripping their hair out because they probably may have started three or four or five businesses and none of which are making money. They’re all bleeding cash. And they’re like, “Well, why did this happen?” I took massive action. How come I’m not successful? It’s because you missed what Spencer said at the beginning, which was the goal-setting action to make sure the goals that happens first, you take massive action that has to be in line with the goal. 

Spencer Hilligoss: Yes. 

Josh Cantwell: Most people just take massive action and then you probably see this, Spencer, people are like, “Well, I met this guy. They could be part of my business. And I met this person and they could fit in this role. And I met this person and they could be a great sponsor.” That is shiny object syndrome because they’re just taking all these balls and shoving them onto the same court but one could be a basketball, one could be a volleyball, one could be a golf ball. And none of them play well together. 

Spencer Hilligoss: Yes, that’s right. 

Josh Cantwell: Because they don’t even know what game they’re playing because they never did a goal-setting session first. 

Spencer Hilligoss: Yeah. And I want to make sure it’s clear for folks too how hard-fought that this moment of clarity is and was for us like two whole weekends. Jennifer, who’s my co-founder and my wife, and then that’s not for everybody. I’m not saying go out and build a business with your spouse because that is a very distinct, separate podcast discussion. But like there were tears, there was reconciliation, there was laughter. There was all those cycles happened in the course of two weekends. That was a deliberate series of like, are we sure we want to go do this? And this is years ago now but I think when people talk about goal setting and they said, “Cool. I wrote down my goal on a piece of paper,” that ain’t what I’m talking about. I’m talking about really wrestling with big questions about how the configuration of your work and your income is all set up. And that doesn’t mean you have to do it in a vacuum either. I mean, I personally, by the way, I don’t have my own coaching program. I’m going to plan to start my own coaching program. There are wonderful coaches that are out there that can help you if you need help with this stuff and tons of resources out there, even YouTube, man. But I would just say that I want to make it clear for folks what we’re talking about. It’s not just pick the number and go. It’s reflecting on it. It’s reflecting on what it means. It’s all of that stuff because if you can’t tie it back to that number, it’s just like you’re hitting on in a wonderful way, Josh, like then why are you doing what you’re doing? 

Josh Cantwell: Yeah. I got to tell this one quick story and then we’re going to finish with our final five is one of our companies is called 950 Management, right? So, it’s one of our property management companies and 950 Management has a specific reason. 950 has a specific significance. We make on average about $1,350 per year per unit that we own. That’s after expenses. It’s after debt service, after limited partners. That’s the net free cash flow. Okay. 1,350 times 950 is $1.2 million a year. So, we started that company years ago under the premise of we need to buy 950 units to make $1,350 per month or per year per unit to make $1.2 million. It was to make an extra $100,000 of net free cash flow per month. And all we talked about when we first started that company is how do we get to 950 units? By really good smart 950 units because it had a significance, it had a purpose, it had a mission. And then that $1.2 million of net free cash flow was doing things personally for me and for my business partners. We knew what the significance of that was. That aligned us. And to say we’re only going to buy these kinds of deals, B class areas, value-add and these specific parts of the country, these specific cities, because it all ties back to 950, which ties back to 1.2 million. So, that’s the type of stuff that Spencer and I are talking about that had a certain significance. It wasn’t just, “Hey, I found this partner and this broker and this lender and I hope this mishmash of stuff all works together.” It’s the opposite. 

So, cool stuff, Spencer. This has been really fun. You’re getting me thinking. I love the back and forth dialog here. It’s been fun. Let’s finish, Spencer, with the final five. And again, you’ll be able to find Spencer’s information. It’s been registered as an investment portal. It’s called MadisonInvesting.com and we’ll put all of his information links in the show notes as well. But the final five, Spencer, really quick, let’s jump in. You ready for these, the final five? 

Spencer Hilligoss: Hit me. 

Josh Cantwell: All right. Number one, what’s your favorite way to find deals or operators to invest in? 

Spencer Hilligoss: Yeah. I’d say for operators first, I’ll just say other people that we know in the business. Referrals are a wonderful way to find other operators in the business for deals from the operators. I sit in the Bay Area and so we rely on our partners that are based in these other markets once they align on the criteria. They find the deal. They send it to us. We take a look at it. We decide to put it through our vetting process so that’s the ways that we actually look for sponsors and deals. 

Josh Cantwell: Nice. How about favorite ways to find capital to invest of your own syndication or to find partners that invest alongside of you as a limited partner? 

Spencer Hilligoss: Yeah. You know, I’m going to sound like a broken record but now our number one source of new investors is referral. And so, happy investors is the best way to find more investors, is via a referral. I would say secondarily to that, going on, I did focus heavily on places like LinkedIn. I don’t think everyone needs to go out heavily and do social media across the board necessarily but I leaned in heavily to doing things like LinkedIn. And I posted daily for years and I’m getting back into it now but there was like 838 posts. I just pulled the number the other day. And so, that was a great way to also connect with both new investors and also potential sponsors when we are first building our brand and our awareness. 

Josh Cantwell: Nice. Love it. Spencer, what’s your favorite place or favorite way to think? 

Spencer Hilligoss: A 10K run at an embarrassingly slow speed. 

Josh Cantwell: I love it. 

Spencer Hilligoss: You know, I’m not a fast runner, Josh, but I do it consistently and I track them and all that. I do probably three to four runs a week. When I’m really humming, which I’m not doing now, I’m very squishy right now but I would say that usually I want to be doing 4K, 10Ks a week when I’m really humming it and I’m just sitting there thinking they might be listening to a podcast is the best possible way to reflect and think for me because the blood’s flowing and you’re getting some solace. 

Josh Cantwell: Absolutely. I’m right along with you there. I love to work out and think. Favorite book, Spencer, or piece of advice that you’ve ever been given? 

Spencer Hilligoss: Yeah. Favorite book would be at least on the business front I would say is Essentialism. Essentialism is probably my favorite one by Greg McKeown. Just if you’re talking about people who feel like they don’t have enough time in the day to do X, that book just cuts out all the excuses really well and it gives you reasons, it gives you ways to specifically say no, and that’s where most people miss on prioritization. So, I’d say that’s the best book. On a piece of advice, I just got to say, go slow to go fast is a relatively overused term from the start-up world but I still believe in it now. And I think go slow to go fast. And what that means is don’t you dare rush through the most important stuff particularly when it comes to making decisions about people and projects and investments, and take your time. The bigger the decision, the more important the decision, the more time that needs to be taken. And so, invest that time. Go slow to go fast. 

Josh Cantwell: Love it. Final question. Who has been the biggest mentor in your life, entrepreneurial, outside of business? Why have they had such a big impact? 

Spencer Hilligoss: Yeah. Out of respect for him, I don’t know if I even discussed if I was going to mention his name in a podcast so I’ll keep him anonymous but I’ll just say he’s a long-time friend of mine. He’s actually a little younger than me and he has got to be probably the most meaningful mentor in my life. I’ve worked with him like two or three other companies and he has been a sounding board. He’s not a real estate guy but I’ll just say that probably the most significant leadership and management mentor in my life, and it’s just one of those things that has consistently come back as a recurring theme on values and why I placed a premium on working with people that are value-driven and mentors are key. I feel very lucky because so many people don’t bump into what I define as a mentor in their life. And they go out and they try to find them and sometimes they don’t but I feel very grateful to have this mentor in my life. 

Josh Cantwell: Fantastic stuff, Spencer. Listen, I know our audience can find your information, MadisonInvesting.com. Any other places that they can go to connect with you? 

Spencer Hilligoss: Yeah. So, if you can’t find me in MadisonInvesting.com or you’d rather go to LinkedIn instead, I had LinkedIn like send me a message there. You can also just email me directly if you’d like to reach out. Happy to be a resource even if it has nothing to do with like one of our deals or anything, spencer@madisoninvesting.com. 

Josh Cantwell: Fantastic stuff, Spencer. Listen, this has been great. I love the conversation, the back and forth today. Thank you so much for joining me today on Accelerated Real Estate Investor. 

Spencer Hilligoss: Yeah. I had a blast. Thank you so much, Josh, and enjoy the rest of your weekend.

[CLOSING]

Josh Cantwell: Well, hey, guys. Listen, I really enjoyed that interview there with Spencer Hilligoss from Madison Investing. Visit his website, MadsonInvesting.com. And I look forward to really having guys like Spencer on because I like to hear about the technology that you’re using, the platforms that you’re using to bring in passive investors. Now, for Spencer, he’s not necessarily an active operator with boots on the ground actually doing the deal, meaning the property management, the CapEx, the asset management. But he’s partnered up with other sponsors and other co-syndicators who are bringing the deal flow, running the deals, Spencer spending his time vetting those deals out, and matching up the active investors and passive investors. So, lots of amazing tidbits in that interview. If you enjoyed it, man, don’t forget to subscribe, right? Go into iTunes or wherever you get your podcasts, hit the subscribe button. If you’re on YouTube, hit the subscribe button so you never, ever miss another episode. And also, if you feel compelled to open up your phone right now, go and open it up, go search Accelerated Real Estate Investor in iTunes or wherever you get your podcasts, and leave us a five-star rating and review. It would mean so much to me. Thank you so much for that. Listen, guys, I hope you enjoyed this interview with Spencer and we’ll see you next time. Take care.

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