Allison has always been an entrepreneur, with her first business being a pet sitter at 9 years old. After different entrepreneurial ventures, Allison had a desk job, was making great money but was not fulfilled. She went back to being an entrepreneur and got into real estate investing. She got her first private investor at age 22 who invested $100k in her very first self storage deal. Allison has a ton of information to share with us today about being an entrepreneur and self storage investing. From raising money to managing the assets, there is something for everyone in this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Allison Kirschbaum Real Estate Background:
- CEO of Luo Media Group, providing targeted marketing services for real estate private equity funds
- Success Obsessive with 16 years of sales, marketing and business expertise
- Master of capital-raising for new investors and rapidly scaling RE businesses through effective systems
- Based in Denver, Colorado
- Say hi to her at www.allisonkirschbaum.com
- Best Ever Book: Three Feet from Gold
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Allison Kirschbaum. How are you doing, Allison?
Allison Kirschbaum: Hey, Joe. I’m doing awesome, how are you?
Joe Fairless: I’m doing awesome as well, nice to have you on the show. A little bit of background, Best Ever listeners – I met Allison two years ago at the Best Ever Conference in Denver. She asked the best, most intimidating questions out of any person who attended, and then last year she delivered on that once more. And she wasn’t – I don’t think, Allison, you were asking to be intimidating, but your questions are so pointed and well-researched, it just blew me away… So every time I saw Allison stand up this past year at the conference when she attended, I started sweating if I was on stage, because I didn’t know what she was gonna ask. Fortunately, none of them came my way… But a little bit about Allison – she is the CEO of Luo Media Group, which provides targeted marketing services for real estate private equity funds.
She is a master of capital raising for new investors and rapidly scaling real estate business through effective systems. Based in Denver, Colorado… With that being said, Allison, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Allison Kirschbaum: Sure, absolutely. And just so you know, no, I was not asking those questions to be intimidating; I was doing it because I was afraid that I would ask a stupid question, and I wanted to be as good as possible. I had several mentors in my lifetime, and one of my earliest ones was a digital mentor, John Maxwell, that I listened to on CD while I was driving back and forth from work, as a 16-year-old… And he always said “Prepare when you’re gonna take your mentor’s time.” You and all the other people that get up on the stage of Best Ever, you work so hard to make it THE best ever, so if I’m gonna stand up and take your time and take a question spot away from somebody else that could have had a great question, it’s gotta be a really great question… So I’m so glad that you guys thought that was the case.
Joe Fairless: You delivered on that.
Allison Kirschbaum: Thank you, I appreciate that. I have to make that a branding thing – “The girl who asks great questions.” [laughter] My background – I’ve been an entrepreneur since I was 9. I started my first services business at the age of 9, I was a pet sitter. We lived out in the country, so I’m not talking about just running to the neighbor’s house and feed the cat, we’re talking like four cats, and five dogs, and horses, and goats, and chickens, and if they mix with each other, they’re gonna eat each other…
So it was a huge amount of responsibility for a nine-year-old when you live in the country and you’re a pet sitter. But things really started getting kicked off when I was 12 and I started my first products business selling handmade jewelry and soap. I would go door to door, I would chase down the garbage truck that came through our neighborhood because I knew the owner of the company drove, and I said “Hey, I’ve got this great incentive program, especially for your female drivers. You can get these great gifts to give away as incentives from my little business.”
I thought myself how to cold-call so that I could put my goods in. I eventually ended up with ten shops that were selling my [unintelligible [00:03:50].08] I think I called like 80 or 90 shops in my area, as a 12-year-old, and I eventually ended up with 10 that were selling my product for me… And I also learned how to speak from a stage and sell to small groups when I was around 15 or 16, and my parents were into network marketing, and they got me into it just to get into the entrepreneurial mindset.
That continued after I’d been in the corporate world for a little while. I was 21-22. I had been a sales trainer, the sales manager for all of the currency exchanges in the state of Texas, for the world’s largest foreign currency exchange brand. I’m the little 19-year-old kid running around training people twice my age on how to be a better salesperson, because I was that good. I loved sales that much, and I had a really entrepreneurial spirit.
But after that job, I got my first ever desk job, and it paid a ton of money. I’m this 22-year-old kid with no degree, and I’m making 76k, 77k a year. It was unheard of.
Joe Fairless: Wow.
Allison Kirschbaum: But I’d sit down in that grey, lifeless cubicle, in that deathly quiet office. Do you know what that feels like, Joe? It’s like being in a morgue; it just suffocates you. So the first day I sat down in that cubicle – it was my first and last ever desk job. I told myself, “I’ve gotta be an entrepreneur again.” So that night I went home and I looked at my bookshelf, and I’m one of those people, Joe, that my books take over everything. I’ve always got like half a dozen books all over my bed, there’s never any room to sit or relax.
I’ve got dozens and dozens of books on bookshelves everywhere in the house… And I went through all my books and I’m like “What have I studied or what have I read before that would be a great entrepreneurial venture to take on as an adult?” and my eyes landed on Robert Kiyosaki’s book Cashflow Quadrant, and I said “That’s it! Real estate. Robert’s a smart guy, I’m good at sales, I’m sure I can do this. Let’s try real estate.”
Nine months later I bought my first rental property. I ended up buying a single-family here in Denver and running it like a multifamily, because as you know, Joe, real estate in Denver is super expensive. I didn’t want to buy a multifamily as a 22-year-old kid; I could afford a multifamily at $100,000 a unit, that was just too much for me. So I ended up renting out this little six-bedroom house to young professionals coming into the city to take jobs in Denver by the room, and I ended up making double the rent on that house than I would have made if I had rented it out as a single-family… And I would be able to leverage that expertise and creating that unique approach into getting my first private investor as a 22-year-old.
It was not family, it was not a friend, it was somebody I’d met through my broker. He believed enough in my business plan for a self-storage facility to become my first private investor for over $100,000. He’s still my investor today. That was eventually what led to running private equity funds in the other systems that you talked about earlier.
Joe Fairless: First private investor – and you’re how old now?
Allison Kirschbaum: I’m 25.
Joe Fairless: 25. So three years ago your first private investor – he invested $100,000 into it. You said self-storage?
Allison Kirschbaum: Yes. A little self-storage facility outside of [unintelligible [00:06:34].20] Kansas.
Joe Fairless: And is that all the equity that was needed for a self-storage facility?
Allison Kirschbaum: Yeah, that was it. It was kind of a special deal. The bank was local to the area. They only needed 15% down, and they actually lowered that from 20% on the day of closing. I’m sure that’s the only deal I’ll ever do where the bank lowers the amount you have to put down on the day of closing. But that was all we needed to get into that deal.
Joe Fairless: How did you find that deal?
Allison Kirschbaum: To be perfectly honest, Joe, I’m not sure I remember. I think it was actually through LoopNet. Yeah, I’m pretty sure it was LoopNet.
Joe Fairless: So why do you think other people didn’t buy it, especially if it was on LoopNet, but then you did?
Allison Kirschbaum: Well, I know LoopNet’s reputation, but every now and again you find a diamond in the rough. This one – it wasn’t exactly a diamond; maybe it was a ruby. It’s not a spectacular property, but it had a lot of things that appealed to me. Number one, it was in a secondary market; I only buy storage in secondary and tertiary markets, because that prevents me being basically stomped out by the big guys, like Public Storage and Greenbox [unintelligible [00:07:27].26] It had a lot of room in operational upside; in self-storage, that’s what we refer to when we’re looking at raising rents and increasing efficiency of operations.
We had about 30% to go from the way the rents were currently being charged at that facility to the market rate. We’re not even talking about “Hey, let’s be the highest-charging facility in the market in this little town of 30,000 people”, or whatever. We’re talking about 30% to go from where those rents were, to market rates, to where everybody else with completely comparable facilities, almost identical facilities were charging.
So we saw a huge amount of upside, and I had – and still have to this day – a great operating partner who has more years of experience in self-storage than I have even being alive, so… [laughs] It was just a great combination for us.
Joe Fairless: And that operating partner is different from the private investor, correct?
Allison Kirschbaum: That is correct, yeah. Her name is Pamela Alton. She runs Mini-Management Storage, management services, and any of you that are in the storage industry, any of your Best Ever listeners that are listening to this that are in the storage industry will probably know Pamela. She’s been an industry fixture and expert for 27 years now.
Joe Fairless: How did you come across Pamela?
Allison Kirschbaum: I called her with a cold call; I went through the Inside Self-Storage website looking for somebody to do a feasibility inspection on the property to make sure that it was a good property, that I knew what I was getting myself into, and Pam and I just kind of hit it off; she came in and inspected the facility for me, and she actually approached me about four months later when we ended up at the Inside Self-Storage Conference that goes in Vegas every year… And she asked me “Hey, you’re going great places. I wanna partner with you, I wanna go those places with you”, and that’s a partnership we have to this day.
Joe Fairless: Is she based in Kansas?
Allison Kirschbaum: No, she’s actually based on the East Coast. She’s as far away from me as you can possibly get. She’s on Chincoteague Island, Virginia.
Joe Fairless: Okay… I’ve never purchased self-storage, so roll with me on this… But if she’s not local, then why would she be the best operating partner to do the due diligence, versus a local group?
Allison Kirschbaum: Number one, self-storage is a niche industry in many ways still. There was no way to find somebody who was expert enough, close enough to the property to make that connection. I either would have had to use a feasibility group out in Texas, or maybe one from Colorado, or one from the East Coast, which ended up being Pamela. There was nobody (so to say) local enough to Kansas to warrant that switch. Like I said, Pam is an industry leader; she’s been speaking at conferences, writing articles for national magazines, coaching people on how to run their self-storage and operate their self-storage for 27 years.
The reason that I kept working with Pamela and the reason that that worked for us is because the vast majority of our properties, specifically the ones in the private equity funds, are run without managers on site. They’re not run in the traditional way where you think of a nice little lady who sits in an office and takes your payment for you on the first of the month. They’re run with kiosks, so we were able to cut in half the operational margin that most self-storage facilities have, which is already ridiculously low.
Joe Fairless: So that was three years ago… How many deals have you done since then?
Allison Kirschbaum: Oh, boy…
Joe Fairless: A lot?
Allison Kirschbaum: You know, people ask me this, and it’s embarrassing, but I lose count, because we’ve got two funds running right now, and then we’ve got another two — there’s so much demand for self-storage investors… We’ve got another two that we’re starting out, so maybe 40-45 deals.
Joe Fairless: 40-45 deals. Are they all self-storage?
Allison Kirschbaum: They’re all self-storage, yes.
Joe Fairless: All self-storage. Okay. How are you finding these deals?
Allison Kirschbaum: We use a proprietary method right now. We started out like everybody else does – we talked to brokers and we went through LoopNet, and I had a CoStar subscription, and that’s what we were dependent on. And I still do have CoStar. It’s a very helpful program. But right now we’ve brought together a bunch of techniques over the years that are serving us a lot better than working with brokers, because it allows us to not only get off-market properties and to negotiate them on our own, which is the [unintelligible [00:11:07].12] but also to take very specifically the deals that we want and kind of carve out the areas of the market that we want without too much competition.
For example, we like properties that don’t have a lot of the standard self-storage accouterments. We don’t like parking, we don’t like retail, we don’t like other pieces of stuff tacked on the storage.
And if we are working without a broker, we found that it actually is easier to kind of carve pieces of that off and either leave it with the owner, or take it to another investor, or whatever it is… Because we don’t have somebody who’s vested interest is in making that one deal work with us specifically, you know what I mean?
Joe Fairless: How much equity have you raised for your funds?
Allison Kirschbaum: It’s coming under right now about 20-25 million between me and my partners together. I can’t take credit for all of that, because I do have other partners that have raised quite a bit as well, but the fund is overall about 20-25 million.
Joe Fairless: How many partners do you have and how is the responsibility divvied up?
Allison Kirschbaum: It’s soon to be five partners. We’re taking on a couple for some of our other funds. I have a partner who’s just a whizz with Excel. She’s our CFO in one of our funds. The interesting thing about the way we split up the partnerships on our funds is that they’re always people that already have specialties in something else as well. For example, two of my partners – they run a very successful flipping company here in Denver, so in the fund that we run together they are COO and CFO, but they’re not COO and CFO for the other funds that we run.
In another fund that we have we have a CFO that knows COO, so we fill that gap with employees, or in some cases Pam can take over some of the duties, and it’s a custom situation for each fund. Eventually, I think we’ll probably get to the point where I can just hire employees for each division and we won’t have to trade between partners, so to speak, but right now that’s what we’re doing.
Joe Fairless: Let’s just keep it at the three versus the other two, just for my own purposes… For those three, you said one’s good at Excel, so is that underwriting that she’s responsible for?
Allison Kirschbaum: Yes. We have a very specific VA system where we’ll have virtual assistants basically roll in all of the analysis info that she needs, prep it in a specific spreadsheet, and then she goes over the numbers and qualifies or disqualifies things. Then that allows me and our acquisitions person to go out and actually create the deals.
Joe Fairless: Okay. So you’ve got you, the underwriting lady, and your acquisitions person. Acquisitions – they negotiate, they go find deals etc., right? Underwrite…
Allison Kirschbaum: Yes, they mostly help with negotiations. They don’t really do any underwriting; they provide the info back to [unintelligible [00:13:39].12] to put into Excel and make sure that the numbers still work and that it still matches up with our parameters, and that kind of thing. But our acquisitions person goes out and actually takes care of the acquisition of the property. They make sure that we get all the right inspections, that we have all the right paperwork… If there’s something out of line with the deed, or the title, or whatever, they’ll go with a lawyer; they’ve got the ability to talk to them for us and just kind of feed the most important information back to me and [unintelligible [00:14:02].12] so we can maximize our time and we can focus on the things that we’re better at.
Joe Fairless: And then your responsibilities primarily are what?
Allison Kirschbaum: Marketing, and I guess you might call it CEO. I provide the direction for the fund, I provide a strategy, I build the overall operations process and marketing processes that we use in order to get both deals and investors, and also to run the properties as a whole. Then Pamela helps [unintelligible [00:14:25].14] in addition to our maintenance people, which work kind of as the side-helpers, so to speak. Then we’ve got a couple of people behind the scenes that are VA’s, just helping feed us information, answer customer calls, be customer service, all that good stuff.
Joe Fairless: And those VA’s are also helping you with the initial underwriting of the deals?
Allison Kirschbaum: They are, yes. We worked a very long time — although I guess I wouldn’t necessarily call it underwriting in terms of their judging the deals for us. They’re just going out and getting the info. For example, we have a very detailed spreadsheet that shows us the population of a very specific area around each facility, the age of the facility, their current rents, the rents for the market area, current unemployment rate… I think the last time there were about 84 different data points that go into underwriting each facility, just from the very basic “Hey, do we even wanna negotiate this top line?” kind of deal. And over many months, we’ve created a very detailed spreadsheet that shows the VA what kind of information they need to put in each cell, where the information has to come from, what the specifications for the information are…
At this point there’s almost no gaps that we could possibly get incorrect info from.
Joe Fairless: What’s gone wrong?
Allison Kirschbaum: There are obviously times when people mess up. On the first deal that I was telling you about – the deal in Kansas – we almost, due to me misreading the title paperwork, because we didn’t have the system in place at the time (it was my very first deal), we almost accidentally closed on a wrong lot that was across the street from us, instead of the lot that was actually meant for parking on our side of the street. And thankfully, my lawyer convinced me to read everything again, he was like “You really should read it one more time.” I’m like, “Dang, man, we’ve already read it so many times”, but sure enough, it saved our butts.
Joe Fairless: And why didn’t your lawyer catch that?
Allison Kirschbaum: You know, I was asking myself that, but at the end of the day I said “It doesn’t matter”, and I switched real estate lawyers after that.
Joe Fairless: [laughs] Fair enough. Got it. Of the 25 million that your group has raised, approximately how much would you attribute your portion of that to?
Allison Kirschbaum: Me personally I’d say it’s around almost exactly a third; between 7 and 10 million. Some of our investors are in multiple deals, in multiple funds. They’re kind of the type that’s like, “Hey, let’s commit a little bit more when you’ve got another signing with different parameters.” It could even be a little bit higher, we just don’t have all of that money subscribed yet.
Joe Fairless: Yeah, alright. Well, we’ll just round up for conversation purposes – let’s say 10 million. In three years you’ve launched a company and you’ve personally been responsible for raising approximately 10 million dollars… Approximately how many investors does the 10 million consist of?
Allison Kirschbaum: Around 140-150, something like that. Our average subscription amount is between 100k and 150k. And a lot of people like to do that in tranches. They’ll commit 100k, and then they might come back a couple months later, a year later while the fund is still open, commit another 100k, something like that.
Joe Fairless: And of those 150 investors, what are the ways that you met the ones who invest the most?
Allison Kirschbaum: I think the most prominent examples are usually the people that I do either meet initially in person, or they’ve had some kind of touch with me that feels more personal. For example, I do webinars, or Facebook Live, or Reddit Ask Me Anything – that kind of thing, where people can ask me specific questions about self-storage and I can answer them back. On video, real-time, and even if they’re not physically sitting there in front of me, they feel like they have a real conversation with me. I’ve gotten some very large investors that way, in person.
I do speaking gigs, paid and unpaid, on real estate training, self-storage training… I do very limited coaching; I don’t have time for a lot of coaching clients, but I do coach on real estate and self-storage… And all of those are obviously personal touches. Or I’ll meet somebody at a networking event, something like that. So there is a lot to be said for that, but that’s from the initial amount invested.
If somebody commits $50,000 and you’re making them 12%-14% or whatever it is in their first year, and it’s self-storage funds, which is something that we can do, they’re obviously gonna be a lot more willing to come back later and say “Hey, here’s another 200k out of my savings” or “I sold some stocks, here’s 200k”, or whatever it is. We can still end up with roughly the same amount of invested money from either somebody that I didn’t meet in person the first time around, or somebody that I did. You never know.
Joe Fairless: If there was one approach that you would fight someone for if they told you you can no longer do that approach, because it’s so valuable to you, what would that approach be?
Allison Kirschbaum: It would absolutely be webinars, or Facebook Live, something like that. Something where I can be on video, online, in front of people… Because think of a room full of 100 people, or 50 people, like the panel that you did here in Denver that day before Best Ever. In that room you’re talking to 50 people, and even if you have an amazing conversion rate – let’s say you convert 10% of those people into doing something with you, whether it’s buying an eBook, buying some kind of content that you have, that shows your expertise in the niche, or whether they invest with you – if you get an amazing conversion rate of 10%, you’re still only talking about five people out of those fifty in that room… Whereas if it’s 200, 300, you’re talking 20-30 people.
On a webinar, especially with the software that I have, which is a little bit advanced, you can fit up to 1,000 people on a webinar. And if my conversion rate, which is typical for webinars of any type – if my conversion rate is 10% of 1,000 people, we’re talking 100 people that are either going to purchase from me and become investors today, or they’re gonna buy a little bit of content, or they’re gonna get a consultation for coaching and they’re gonna become investors later.
So we just have so much more potential to reach people in a personal way through a webinar or a Facebook Live or what have you, something like that.
Joe Fairless: The thought process for most people isn’t “Okay, great, I can have 1,000 people”, the process is “How do I get 1,000 people?” So how do you get 1,000 people to be on those webinars?
Allison Kirschbaum: It is not instant. The best way to start – and this is something that I teach all of my private equity clients and all of my personal branding clients to Luo Media Group as well… You need to start with some paid traffic. Everybody thinks “I wanna go organic. It’s sleazy to do paid traffic.” It’s not sleazy. You open up your Facebook feed every single day; I guarantee you there are hundreds of people paying for your eyes to fall on their ad, and I guarantee you’re clicking on some of them.
So people do it all the time, every day; it’s not sleazy, and it’s really the only way, unless you already have a great list of loyal people that are reading your content, they read a blog, they read your LinkedIn updates, whatever it is, or they listen to your podcast, something like that… Unless you already have that list of people or you can borrow it from someone, that’s the best, fastest way to get a jumpstart on it. Then as soon as you’ve got people on your e-mail list, they’re getting your newsletter, they’re reading your blog, whatever it is – as soon as that begins to snowball for you, then it’s very simple to get a thousand people on a webinar. Not just once a week or once a month, but multiple times a week. Imagine the multipliers on that, Joe.
Joe Fairless: With your approach, I imagine you registered the fund so you can publically advertise it?
Allison Kirschbaum: Oh yeah, absolutely. We always use 506(c) funds, yeah.
Joe Fairless: C as in cat?
Allison Kirschbaum: C as in cat, yeah.
Joe Fairless: Cool. Yeah, because then you’re able to shout on the top of the mountain, “Hey, this is what we’re doing.” I’m thinking through this with the stuff I do, because we always do 506(b), so I can’t publically advertise the funds. Clearly, you’ve thought through pros and cons of b versus c, so why not b and why c?
Allison Kirschbaum: I have two main reasons for liking 506(c). The first one is that it’s much riskier as a syndicator in a lot of ways to use unaccredited investors who may or may not be sophisticated. An accredited investor, as you know, Joe, is somebody who has a very specific net worth, a very specific income, and they basically are ruled with the SEC, a setup that says “If you make over X amount per year or you have over X net worth” – this is something the Best Ever listeners can look up online as well, it’s all over the internet, the definition of an accredited investor… If you are over this threshold, the SEC basically thinks “Hey, you’re a smart enough person. You’re qualified to be in a little bit more advanced investments”, and that means that there are a lot more investors open to accredited investors than non-accredited.
And that’s not always the case. Sometimes somebody inherits money and they’re not any smarter with money than some people who’ve never made a dime to their name… But unaccredited investors, in a lot of cases, simply don’t have as much financial experience. Maybe they’ve never invested in funds before. Maybe they don’t even own real estate. Maybe they ended up with an insurance settlement from a death in the family (God forbid something like that), and they’re renting right now, and they want to invest in something because they’ve been told that’s what they should do. And even if they seem like a really great candidate overall for the fund – if they’re smart people, if we have a good rapport, and if they check out in every other way, it tends to be harder on the investor and harder on the syndicator to work with unaccredited investors, for most of those reasons.
Joe Fairless: I’m with you on that. I only do accredited investors, even though I do 506(b), so what’s the other reason?
Allison Kirschbaum: Oh, do you?
Joe Fairless: Yeah.
Allison Kirschbaum: Okay. Well, the other reason – and this is the reason that I think 506(c)’s are the only way to go, but this is just me… 506(c), you can advertise any way you want to. You can stand on a stage at a conference and say “Hey, this is what I do.” You can put up a billboard on the side of a highway; you can do social media ads. There’s some restrictions as to what you can and cannot say on those ads, but nevertheless… Where if I was a (b), you can’t even put up an ad, you can’t even say “Hey, we’re the experts in self-storage investing. Come talk to us and learn more.”
That’s all we can sometimes do with our ads because of those restrictions, but we can at least put it out there. We can reach millions of people, versus with other types of funds they’re either much more expensive, like a Reg A+, in order to get the same kind of reach, or you can’t do that kind of advertising at all, like with a 506(b). That’s why I love 506(c).
Joe Fairless: Great stuff. What is your best real estate investing advice ever?
Allison Kirschbaum: My best investing advice ever is to read on a subject until it starts to repeat itself, and then keep reading until you find something that refutes what’s repeating itself.
Joe Fairless: Will you give an example?
Allison Kirschbaum: Yes. So when I was first starting to learn about creative deals — creative real estate generally has two or three different topics that you would read about: lease options, seller finance, or wrap. Everywhere you go, everybody talks about creative real estate as being those three things. So I read and I read and I read; I read for hundreds of hours a year, trying to find other ways to do creative deals. I said “This can’t be all that’s out there.” So I read until it started repeating itself, which is the point at which you realize that you’ve probably read enough; you’ve read enough to get started, you’ve read enough to know what you don’t know and to be careful. And then I kept reading, because I wanted to know what else was out there. Because the weird thing about any industry is that the it’s the people that tend to go against the grain of the industry, the people that take a niche market, the people that work outside of hot areas, whatever it is, in any industry – they tend to be the people that have some kind of expertise that nobody else knows. They’ve got like the secret sauce.
So I wanted to find that secret sauce for creative deals. And I kept reading, and I kept meeting random people, and I kept just pushing forward, looking for that thing, until I met a broker who was actually advertising a property on Craigslist; he was a totally legit broker, he’d been in the industry 30 years, his expertise was in 1031 exchanges… I met him at this property, and we spent about 30 minutes looking at the property and two hours talking about creative deals… It turns out there’s a whole society of really experienced brokers called The Society Of Exchange Counselors that focus on creative deals. And there are literally hundreds of ways to do a creative deal… And I never would have figured that out if I had stopped at just reading lease options, seller finance, wrap mortgage.
Joe Fairless: What’s one approach that you didn’t know through the reading, but you learned from that gentleman?
Allison Kirschbaum: I learned that you can use what’s called OPS, or other people’s stuff – it was a kind of parallel to “other people’s money” – as a down payment. In a deal that me and my dad were looking at doing about a year ago, it started out as a seller finance deal, and then it got even a little bit more creative, because a story that I had heard from this broker was somebody had put down as a down payment a Camaro for an apartment building. I don’t remember the exact details, but I know the down payment was a Camaro. The guy selling the building was seller-carrying it, and the guy wanted a Camaro, and it worked out perfectly.
So my dad has this great truck, and the seller of this property was like “Hey, what about the truck as part of the down payment? We’ll cut out some cash.” That didn’t end up the way that we went, but that’s the magic of what happens — we still ended up with a great deal… 5% down at the time of buying, 5% down a year later, and then a complete seller carryback deal; there was no bank financing whatsoever. So even though we didn’t go quite as creative as using the truck as a down payment, that was an option; that’s just an example of the magic that can happen when you have a creative seller and a creative buyer working with each other.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Allison Kirschbaum: I’m ready, Joe. Hit me.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:27:02].26] to [00:28:08].10]
Joe Fairless: Okay, you read a lot of books, you’ve got them all over where you live… What’s a couple best ever books that you’ve read recently? …or in life. It doesn’t have to be recent.
Allison Kirschbaum: Oh, my… Well, most of my best ever books are technically not about real estate, they’re more about mindset or about business in general, because I believe that if you’re great at business in general and you have a great mindset, whether you’re in real estate or whatever it is you branch out to, you’re gonna be great at it. So one of my favorite books is Three Feet From Gold.
Joe Fairless: I love it.
Allison Kirschbaum: It was endorsed by the Napoleon Hill Foundation.
Joe Fairless: I love that one, yeah.
Allison Kirschbaum: I loved it too, because it’s one of those books that no matter where you’re at in life, it makes everything better, because it’s exactly what it sounds like. You could be in the middle of the worst storm you’ve been in, and you can think “Hey, I might be three feet from gold. I’m gonna get through this and I’m gonna hit gold.” Or you could be having the time of your life, you could be on top of the world and get lots of deals, lots of capital, and you can say “Hey, I could be three feet from gold. I could be three feet from getting even better.”
Then another book that I’ve been reading lately and that I really enjoyed [unintelligible [00:29:05].25] 10X Conference in Vegas last week (Grant Cardone 10X Conference) is a book called Relentless, by Tim Grover. It has also an amazing mindset point – people think that perseverance is all about Braveheart; they think of Braveheart when they think of perseverance, or something like that. You’re just on the top of the mountain, yelling, screaming, “I’m gonna do this! You can’t stop me!”, whatever it is. Relentless is about taking that calm, cold, icy center of yourself that’s so sure of yourself, it’s so sure you’re gonna get it done, whatever it is, that you don’t need to yell and scream. You’re just sure of it. You just walk into the room like you already own it, and you do that deal. That’s relentless.
Joe Fairless: What’s the advice you gave to people you were training who were two times your age for how to be a good salesperson?
Allison Kirschbaum: The only objection the customer has is trust. Yes, they can say that they don’t like the price, they can say that they don’t like the terms, whatever it is. That is all overcome by trust and like. So if you can overcome that barrier, you’re good as gold.
Joe Fairless: What about if they don’t have the money?
Allison Kirschbaum: If they truly don’t have the money, then you should probably help them figure that out as fast as possible nicely, so that you’re not wasting each other’s time.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Allison Kirschbaum: I have all my answers scripted out, Joe. You throw me for a loop.
Joe Fairless: [laughs] Good, I want to!
Allison Kirschbaum: I made a mistake when I bought into an industry that I thought I knew. I thought I’d done everything right – I bought into an assisted living property; four of them, actually. It was about eight months ago. I had all the right experts, I thought I knew everything about it. When I go into an industry, I read about it like crazy. I read 100 books a year. When I wanted to learn social media marketing, I read over 65 hours of content in eight days. I read 32 books in eight days to learn social media marketing and various other stuff.
So when I wanted to learn assisted living, I did the same thing – I attacked it, and I thought I knew everything there was to know, and I hired the best experts to manage the property. We get into the property, and I thought my perseverance is gonna pull it out; I thought I could be relentless enough to make it work, and it just didn’t. It kind of all fell apart really fast, all at once. In a way, I’m not sorry about it, because it’s led me to some other really great breakthrough things that — as my mom likes to say, “When you get squeezed, but you get to see what’s in ya…” I found some great things that I’m capable of that I didn’t know I was capable of until this happened. But at the same time… You know this – if you ever had a deal fail, you keep going over it in your head, like “Man, what could I have done differently? There’s something else I should have known. If it’s my fault, then there’s something else I should have done.”
So that’s a mistake I’ve made, and apparently, even with all my preparation, I didn’t prepare enough.
Joe Fairless: I love the quote from your mom, by the way. I wrote that down, among other things. How much money did you lose on that one?
Allison Kirschbaum: I have still yet to find out. This happened really recently, but it sounds like it’s gonna be around 280k, something like that. It could definitely be a lot worse.
Joe Fairless: How do you make money in your fund?
Allison Kirschbaum: How do we make money as sponsors?
Joe Fairless: Yeah, as sponsors.
Allison Kirschbaum: We take an equity share in each of our funds, and each person that invests with us gets an equity share based on the amount that they initially invest. And the more they invest, the bigger the equity share they get. So we end up owning between 45% and 50% equity in each fund. We also get a buy, refi and disposition fee, because we have a structure where we refi fairly frequently in order to be able to buy in cash and then pull that value out and redistribute it to other properties, instead of using loans upfront, because it’s much faster that way. It makes the process a lot smoother for everybody.
Then we also have a disposition fee, because in most cases, for the funds that we have now, we’re gonna have to sell at some point, unless we change the structure somehow, and we’re not planning to at this point. I’m just leaving an option open there.
So we make money through the acquisition, refi and disposition fees, and through the ownership of equity. In one of our funds we take a management fee, in the other we take a salary, so that can vary just based on your preferences as a sponsor.
Joe Fairless: Best ever way you like to give back?
Allison Kirschbaum: I really like – and I end up doing this a lot… This is how I got into coaching, actually; I find myself mentoring people that just didn’t know anything about real estate and they would hear me talking to somebody maybe at a networking event or whatever about something that I do. And most of what I do is really different, and I’ve engineered it that way. I specifically, when I got into real estate, told myself, “No offense to anybody out there who does this, but I don’t wanna be just another single-family investor or just another multifamily investor, because that’s Red Ocean.” People who read the book Red Ocean, Blue Ocean… Red Ocean is a place in the market that’s really saturated; there’s a ton of competition, there’s a ton of really good people out there, and I don’t wanna compete with the people in the industry that were already real good as a 21- year-old kid with no credibility in the industry. So I wanted to specifically take a niche that not a lot of other people were in, which led me to self-storage. Now, obviously, I’m in private equity, I’m in marketing for private equity… None of those things are extremely common.
When I sit down at a networking event and I’m talking with somebody, and I throw out those words, inevitably at least one or two other people at the table that are kind of new or are brand new will lean over to me and say “Hey, I’d really love to learn more about self-storage, or this, or that, or whatever it is you do… Can we sit down and have a conversation?” and I would end up having literally between five and eight 30-minute free conversations with people per week, just educating people, because I’d love to educate people.
And that’s obviously what I do now through content and books and white papers and blogs and podcasts and all of this stuff… But I was taking up so much time doing it, spending it on one person, I said “I’m gonna continue to do this, but I’m also gonna start doing it as a paid service, so that people who value their time can value my time, and show that they are by paying me a little fee.” But I still like to do that for certain people; I still meet people, especially young people, my age or a little bit younger, millennials that show that they have initiative and wanna get into this industry, and they just need to know a little bit more; they need to know some of the options they’re not familiar with.
Every time I go to a networking event, which is very frequently – I went to one last night – I’ll pick a new person in the room and I’ll sit down next to them and I’ll get to know them and I’ll make them feel welcome, and I’ll find out what I can tell them that they don’t already know about the industry, I’ll kind of open their eyes a little bit.
I sat next to a wonderful lady last night who didn’t know what capital raising was, what private equity was, and as soon as I explained it to her, she was like “That’s what I wanna do in real estate. Thank you for opening my eyes.” So that’s what I like to give back, is just sharing my knowledge.
Joe Fairless: That’s cool, and you’ve certainly taught me a lot during this short conversation; I’m sure most Best Ever listeners have gotten a lot of value from this… And the ones who didn’t, they probably just were maybe distracted, or something. So how can the Best Ever listeners get in touch with you?
Allison Kirschbaum: I am very easy to find, I’m all over social media. I have multiple brands, as well as my personal brands – all over Twitter, LinkedIn; I’m on LinkedIn as Allison Kirschbaum. I have my personal website, AllisonKirschbaum.com. If you wanna learn a little bit more, get some great free content on how to market your private equity funds, maybe some tips on how to get out into social media yourself if you have a 506(c) fund – you can visit us at LuoMediaGroup.com. And for the people that wanna learn just a little bit more, listen to one of my podcasts or get some free content like “The Top 10 Mistakes That Self-Storage Investors Make and How to Avoid Them” – you can get resources like that at my website, YDKSS.com (which stands for You Don’t Know Self-Storage), which you’ll know after you read the site. And you can also find us for more general real estate investing advice like “Why do I need an LLC?” or “How do I find my first investor?” at YDKRE.com, which of course stands for You Don’t Know Real Estate.
Joe Fairless: Awesome. Allison, thank you so much for spending some time with us and talking about your funds that you have put together, how you got to this point, how you make money in those funds, lessons learned when you’ve taken different directions… I love the quote from your mom, “When you get squeezed, you get to see what’s in ya…” That’s actually very profound.
Also talking about how with the funds that you have, or the investors, you’ve raised approximately 7-10 million of the 25 total, and how you found them, how you’ve developed those relationships; you are able to publically advertise because you do 506(c), so then you’ve got the webinars and Facebook Live, as well as some other things… And then many other things that I didn’t even summarize, but those are some of the things that I’ve put in bold in my notes.
Thanks so much for being on the show. I hope you have a best ever day, I really enjoyed it, and we’ll talk to you soon.
Allison Kirschbaum: Sounds great. Thanks for having me, Joe.