REIA 54 Stephanie Walter: Learning Investing Secrets from a Premier Capital Raiser

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now, here is your host, Dr. Allen Lomax.

Hello, enlightened investors. I'm happy to be back with you again today. I'm your host, Dr. Allen. Today we delve into the investing secrets of a premier Capital raiser. Our guest, Stephanie Walter, is a capital raiser, syndicator, and the CEO of IRBY Wealth. She recently retired and sold her insurance agency of 16 years by following the key principles she teaches professionals to use. She teaches professionals to unlearn what most of us have been wired to think about money and reeducates us to learn the secrets of the wealthy investor that are life-transforming. Stephanie builds gateways between professionals and well-vetted deals. So Stephanie, before we get into the secrets of real estate investing, share a memorable experience from your formative years that helped you to be the person you are today.

It's a good one. I think that probably my dad Passing on. That was early or late in my 20s, but I hadn't yet realized that I wanted to be a business owner at that time. And when he passed away, I kind of had to come into the family business. Long story short, they gave us about a week to decide whether we would sell the company back to the main company or whether I would take it over and really didn't have a lot of time to process it, but made that decision because I I wanted to carry on my dad's legacy. And from that, just realized that, that I loved being a business owner and was one for 16 years until I just recently sold the business. So without that happening, as awful and terrible as it was, but it certainly changed my trajectory and in my life and to realize that, you know, being an entrepreneur and a business owner was really my calling.

Well, that's a really young age to lose a parent. And then on top of that, stepping into a business, taking over an entire business, that's really quite a responsibility for anyone, particularly someone in their 20s. Had you worked with your dad in the business before suddenly stepping in?

I, you know, I hadn't, I mean, maybe when I was a teenager, but I had just been working in the claims department for several insurance companies. And I remember about almost about 6 months before my dad passed away, it was a sudden thing, so we didn't see it coming. I remember sitting down with him and going over— I had gotten a 2% raise at my current job and was fairly frustrated with the corporate world and just kind of talked to him just about like a long-term strategy. And he was just like, well, will that 2% be in the next 20 years, Stephanie? And so I was just— that really made me think about things differently and about what I wanted to do, which was to transition into this business. But I wasn't prepared. I hadn't yet quit my job and hadn't yet started to kind of train under my dad at that time, but we had had those conversations.

Wow. Had to be a very huge and overwhelming challenge in front of you. How did you make it through that time?

For me, and I was just talking to my sister about this earlier today, is I, I feel like I've always really taken to heart to have a good group of people around me. And thankfully, I've always had a knack for picking out people that knew more than I did and then kind of attaching myself to them. learn what they know. And so I had a mentor in the insurance business who happened to be a close friend of my dad's, who sort of stepped forward and helped me with some of the logistical things. I knew insurance very well because I was an adjuster, but actually running a business, that was, that was a lot different and definitely had guidance from other people.

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Yeah, I mean, that's a big step from a claims adjuster to running a business. 2 totally different kinds of things, for sure. Well, it's a good thing you did have a mentor there, but I'm sure as a mentor, he could only give you so much time. There was a lot you had to pick up in a very, very short time to keep that company going. I'm impressed. That was definitely quite an undertaking. Well, let's get into the real estate here and, and what it is that the wealthy do differently in regards to money and their investments than what a typical individual does.

Well, I started investing in real estate, just single-family homes in Colorado, around the same time as I took over my dad's agency because I always loved real estate. Then in 2016, I was invited to go to a boot camp where they tell you about investing in apartments, which I was very interested in, and they explained how syndication worked. And from that, I was like, I was sold. I knew that I just absolutely loved that concept of a group of people purchasing something that no one could do on their own. I just love that concept. So from there, I just trained a lot and closed on my first syndication in 2018 while still having my business. Realized I never ever wanted to do a syndication by myself again. And luckily partnered up with my current partner, and we realized that we had different skill sets. I like to raise money. He did not like to raise money. He liked to find the deal. And so our skill sets were very aligned. So by me being the capital raiser, I work with accredited investors, which means people that have a net worth of about $1 million. But many times I worked with people that had much larger net worths than that. And I would sit down and we would go over kind of their finances and to determine if they wanted to invest in our deals. And I started noticing some similarities in their financial pictures. And it took a few years to kind of sort that out. But in general, I guess the easiest and the first thing I saw was that largely the wealthy don't have 401s. They don't invest their money so that it sits for a long period of time. There are 2 theories of the way that I think people look at money accumulation, which is, you know, our traditional 401. We're just gonna accumulate that money and not touch it, build our nest egg. And then go and get it. But the wealthy do not ascribe to that. They use the utilization theory, which is that their money is being used at and invested at all times, and they know exactly what that money is doing for them at any time. They know how much it's making for them. They also know what the the tax ramifications, the exit strategies mean for them. And so for me, that was pretty. Significant because I had a lot of properties that had a lot of equity sitting in them. I wasn't cash flowing a lot. So from watching how they use their money, it made me use my own money differently.

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That's interesting how, I mean, you had started out by saying that you have a knack for finding people who know more than you do. And not only have you found people that know more than you do, but you learn from them. By watching and seeing what it is that they are doing. And you learned a very important thing from them, that wealthy people treat their money entirely different than those who have not accumulated wealth do. A good secret to learn there. So you mentioned that the wealthy don't use 401s. That is probably very, very surprising to many people. To myself, to a degree, because I would think that Uh, wealthy people would use a lot of different vehicles for their money. So why is it that the wealthy are not using 401s?

I think a lot of reasons. One is the money is not liquid. The money has to be stuck in this vehicle for a very long time, depending on when you want to— how old you are. Secondly, the fee structures aren't necessarily very apparent. You know, if you look at your expenses and everything on your 401, you have several, you know, people with their hands in, in the pot taking money, which ends up being rather significant over time. Could be, I don't know, I think they say the average is about 1.5 to 2% a year.

Hmm.

And that is something that they're not crazy about. But I think the most important thing is the unknown tax exit strategy in a 401, which is they— yes, you have a certain amount of money in your 401, but when you go to retire, do you really have that amount in your 401? And if you ask your financial planner, there isn't one that can honestly tell you what they think the tax rate is going to be in the future. I can guess, make an educated guess, that it's going to be a lot more than, than what it is right now. And so for those, I think those 3 things are, are fairly significant deterrents for them.

Well, there's a significant difference between the traditional 401 and the Roths because you pay the taxes as you go with the Roth, but you still don't see the wealthy involved in the Roths. Is that correct?

I don't see a lot of money put into those. I might see like having started one a long time ago and it just kind of sits there. If it does, it's used a lot of times to be a self-directed IRA so that again, they have some ability to go in and invest that money the way that they want to invest it, as opposed to having a financial group look over the money.

And I guess another reason what I have from understood from others is that 401s are sheltered. And even if you are investing in real estate, then you essentially have 2 shelters and there is no reason to have 2 tax shelters. You're just losing money because of that. So 1031 exchanges are talked about frequently. How is it that you see those used particularly by the wealthy people?

They definitely weigh their options as far as tax strategies is the best word that I can use, is to determine what is going to work best for them in whatever investment they're in. They rarely look just at what an investment will do for them as far as what kind of returns they're getting. They're looking at the whole picture. They're looking at the tax strategy for getting into it and the tax strategy for getting out of it. So owning a fairly large piece of real estate and selling it, the 1031 definitely makes sense to go into a syndication with. I do have a lot of people that have single-family rental properties, and the 1031 is something you can use, but there often are better tax strategies to use than a 1031. And the one I'm thinking of, most people have not heard of, which is called the cost segregation. So a cost segregation is basically a study that's done by an engineer when you buy a large piece of property. For us, it means multifamily apartment building. And it's just a study that they do that where they show that they can accelerate depreciation. In a normal investment, you have, you know, basically a 39-year or a 27-year schedule of depreciation. With a cost segregation study, we actually accelerate those up to 1, 5, and 7 years, just depending on what property we're talking about within what we're buying. And that itself, a lot of times, can be enough tax liability for them just to go straight from their rental property into our investment, and then they're able to use that tax liability from the cost segregation to bypass the 1031 altogether. But that might be, you know, a little bit too deep. But there are definitely other strategies other than the 1031.

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Well, yeah, the 1031 works well when it works, but there are a couple of stipulations that make it extraordinarily difficult and it primarily is the time constraints.

Yeah.

And everything just has to, you know, work out perfectly in order for those to go through. Do you know right off the top of your head what percentage of real estate exchanges actually go through 1031s? Do you have any idea about that?

Oh man, I don't know that off the top of my head. I can tell you that, you know, as far as our syndications, I mean, that we're on our 7th syndication right now. And I would say there are 2 investors I can think of that have used 1031s into our syndications. They had large 1031s, so, you know, over $1 million and over $2 million to put in. But like the average person that sells a home and has $100,000 or $200,000 worth of profit and you know, their tax liability isn't, you know, much more than that, then definitely the cost segregation appeals to a lot of people on that too.

Well, a lot to learn in conjunction with that. I mean, cost segregation is a good idea, but it's complicated, and that's why there's engineers there to do that for you who specialize in that kind of thing. Well, we're just about out of time here, but what is it that you mean by this concept of accumulation versus utilization?

Yeah, I think that is the difference. It's sort of a mindset that people— in which they look at their money. The average person looks at their money as accumulating over time, just as I was saying, like in a 401, whereas utilization is largely the wealthy, how they view their money, which is they're using their money at all times. They're using it sometimes in several places at the same time, but their money is a tool and they use that tool to work for them at all times.

I'm not sure I've ever heard it put that way. That, I mean, I think I've heard it put that money is a tool, but not quite as succinctly as that. And I think that really is a big difference between the way most of us look at money. We look at money as something to get luxuries and pleasures and our everyday needs and so on and so forth. And I guess somewhat that is a tool, but most of us don't look at money as a tool to make money. And that's really, I guess, the key difference there between the average person and the wealthy people there. Well, Stephanie, share with us how we can get in touch with you.

Yeah, you can reach me on my website is www.erb. On that first page you come to, you can download our most recent investment report, which is the 5 reasons that passive investing might be for you. But there's a ton of content, a lot of great— I have a video series in which I answer the most common questions I get from investors. And so it just seems like a nice place for people to start when they're thinking of possibly investing in some of these alternate investments.

Sounds like a great place to go and it's free.

Yes.

That's always a good thing. Well, Stephanie, for our last question, when it comes time for you to leave this world, what will you look back on with your greatest sense of fulfillment and satisfaction?

Oh, definitely my family. I had my son when I was a bit older in life. I was 42. He's 7 now and he is absolute my, my greatest joy. But, you know, second behind that, besides my, you know, my friends and my family, is definitely what I get to do now, which is talk to people about changing the way that they think about money and empowering people to use their money as a tool that works for them so that they don't have to work behind a desk 40 hours a week. So I get a lot of fulfillment doing that.

Yeah, I can hear your passion when you're talking about those things. And you've certainly enlightened us today. And I really do appreciate you being on the show with us today.

Well, thank you.

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