How do you make the jump from being Limited Partner to General Partner? Maggie Cheung, co-founder of Sage Investing Group, took the same leap and now is GP of over 2,800 units. Maggie reveals how she went from LP to GP, and discusses her business’ strategy for targeting financial experts as investors.
Maggie Cheung | Real Estate Background
- Co-founder of Sage Investing Group, which provides multifamily real estate investment opportunities to investors who are auditors, accountants, or finance by trade.
- Portfolio:
- GP of ~2,800 units ($227M in AUM)
- LP of ~1,700 units
- Based in: Bergen County, NJ
- Say hi to her at:
- Best Ever Book: Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones by James Clear
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TRANSCRIPT
Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and today's guest, Maggie Cheung. Maggie is joining us from my home state of New Jersey. She is the co-founder of Sage Investing Group, which provides multifamily real estate investment opportunities to investors who are auditors, accountants, or in the finance industry. Her portfolio consists of $227 million of assets under management. Maggie, thank you for joining us and how are you today?
Maggie Cheung: Good. Thank you for the intro, Ash.
Ash Patel: It's our pleasure. Maggie, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Maggie Cheung: Yeah, definitely. As you mentioned in the background, before I joined this three years ago, this real estate investing journey, I was a full-time corporate employee. For almost 13 years I was in the audit field; I audit the banks, and I audit the bank's investment vehicles such as multifamily commercial business. But there are just a lot more zeros in those terms. Now I do the same thing, but I'm actually acquiring assets with less numbers in the back, but nonetheless, it's 100 plus units. We try to acquire 100 plus units with good value-add, and those are things that we like to offer to our investors and bring other people like us along to the journey.
Ash Patel: Maggie, I had to reread that intro a couple of times. I didn't believe somebody actually caters to auditors, accountants, and people in the finance industry. My only thought was you had to have come from that background to be able to relate to those people. Nothing against those industries, but it's almost like walking into the lion’s den and pitching these savages. Explain to me the challenges of having those people and some of the benefits of having people in that industry.
Maggie Cheung: You actually seem like you have some experience with those people.
Ash Patel: Just no different than any other real estate investor. We should stop calling them "those people".
Maggie Cheung: Yes, my people.
Ash Patel: Okay, we'll call them your people. Perfect. I don't know if that's any better, but alright.
Maggie Cheung: Yes. You do know [unintelligible 00:05:12]. Originally, I know myself, I'm the worst critic and I'm an auditor and so a skeptic at heart. So we weren't sure if this is really the way we want to go, this is the identity that we want to do with Sage Investing Group, which is what our company is. But after a few years in, we just started attracting the same people with the same mindset, and then ultimately, we're like, "Okay, I think we just can't shy away from ourselves." I think most of the time it's just that getting ourselves comfortable around a deal takes a while, because we're such a skeptic; we question everything under the sun.
So I think we're in the best position to pitch the deal because we know what others, accounting and finance people, are thinking ahead of time, and we're trying to get ahead of that, because I feel people like us hold ourselves back from investing. So the more that we can provide, the more education we can provide to our investors, and the more they feel more comfortable, they are more likely to see the opportunity to invest in real estate, which has tremendously changed our lives, change my life personally. So we would like to bring that to our people.
Ash Patel: Yeah, I admire that approach. Auditors especially, their job is to find things that are off. Day in and day out, they're looking for anomalies. So it's great that you're pitching to that level of sophisticated investors. What are the benefits of having these very stringent, analytical, financial background people as investors?
Maggie Cheung: I think I enjoy it because as much as I feel like I think I cover everything, I'm sure there's always something that I haven't seen or haven't uncovered. So I do appreciate it when investors are bringing up these questions. We do take it seriously and we consider it in our own underwriting or any deal, or any future deals that we look at with that critical eye. We do collect that information and also take that into consideration.
Ash Patel: Maggie, in the past, I've had the pleasure of interviewing a number of people that have come from the financial planning field, and asked them, “Why have you never pitched real estate to your clients?” Often, it starts with they never knew the potential returns of real estate. But even when they found out about those returns and other aspects of the investment, there's no way for them to make money on pitching these deals, there are no kickbacks. So how do you get people in the finance industry to look at real estate, and in your case, multifamily investment options?
Maggie Cheung: That's a great question, Ash. I usually present it the way... Because I invest in a lot of the deals myself and it's been a few years now, so I know I started to see the potential growth of it. I think people in my, I guess, former life and people who are my friends now, they're starting to see a little bit more of the traction and potential long-term benefits of investing in real estate. So I think through my own experience, I'm able to connect with them. Because I am like them, they see a little bit more outside of just stocks, investing in stocks, and investing in just single-family homes around the backyard. I think that element helps a lot in that conversation.
Ash Patel: I would love to roleplay a cocktail party with you. Imagine your home or somebody else's home and it's just a pre-dinner cocktail party full of people from the financial industry. Specifically, I want to say financial planners, let's make this a challenge. How would you strike up a conversation and how would you lead that into investing in real estate?
Maggie Cheung: Yeah. I typically don't like to present something if I can't help them. I would like to have the conversations like -- if it's a financial planner, I definitely like to ask like, "What are your investing? What are your returns like? What type of asset are you investing in?" I would like to see if they have experience in multifamily real estate. If this is something that I can help with, I would definitely like to share that. Not everyone I think will be able to satisfy everybody's investment profile, investment appetite. Because like you Ash, I know you invest in commercial and also multifamily. So I know in commercial you probably are looking at a higher return, like 30% or more, than multifamily, where it's more around 20%. So you definitely will have to consider that person's risk appetite, and risk profile, investment philosophy. I do like to pitch -- not pitch, but I like to try and see that they have a diverse investment asset. That might be something that I can help out with on that angle.
Ash Patel: Got it. Alright, so let's dive into you. How did you leave that industry and get into multifamily?
Maggie Cheung: As I mentioned, I was working in corporate, I was an auditor for a bank. I was working quite a bit, and I had two young kids, and working 80 hours a week. My husband is also an auditor, so imagine the conversation we'd have at home. So we decided that after having my two kids, one of us had to step back. It doesn't make sense to have a young family and also continue our corporate careers in both angles. So I decided to take a step back on my side, but I actually thought about going back maybe a year. But during that time, I was thinking it just didn't make sense. I was pretty much on top of my career, I was a VP. I don't know if I could dedicate the same amount of effort to corporate life and also to my family.
So I decided that, okay, I have to have something more flexible, and we always wanted to do real estate investing. So I sat down with my husband, "Okay, give me a year to figure this out." I did exactly that. I tried different types of real estate investing, I became a real estate agent, I joined a lot of meetups, I invested in private lending. I also shadowed a builder, who was also a former accountant, and she showed me the way how to flip the home. In the midst of that, I also invested in limited partnerships and syndication. That's when I really understood the power as far as syndication. It also is very familiar to me, because I have seen these deals package on the bank side when I was working in the bank.
Now coming as an investor, I looked at the deal, how was it pitched, and how was it put together... The SEC filings - because these are private offerings, have to be filed with the SEC... All that was very familiar to me. So I just thought, "Okay, how can I get from limited partnership to general partnership?" That took me a year to figure it out. Finally, throughout the year, I decided, okay, multifamily makes the most sense in terms of my background. I know the background, and how my corporate life [unintelligible 00:12:22.22] I feel like there are a lot of things that I could offer in multifamily, and also bring our investors along.
Break: [00:12:29] - [00:14:26]
Ash Patel: How did you make that transition from LP to GP?
Maggie Cheung: I think, like most investors, I recognized that I cannot do it alone, and especially my whole entire life was in corporate audit. A lot of my peers and family members do not have any experience in multifamily real estate, so now I recognize that pain point. I know that I need another circle, another network. So I did join a mastermind group, so that I can come within the same realm as other real estate investors who are also hungry and also excited to take down these larger deals.
Ash Patel: So you grew your network... And what was the first deal that you were a GP on?
Maggie Cheung: The first deal was a 156-unit property in Kansas City. It was three years ago, and it was owned by a church, so the rents are really, really, really low. I will say that the three-bedroom was like $600l; now the last time I checked, it was $1,100 for three bedrooms. But needless to say, it was one of the best deals that invested in.
Ash Patel: How did you find that deal, or who found that deal?
Maggie Cheung: Yes, I just connected with another real estate investor through the network. She's amazing, she was almost sort of like a mentor to me. She invited me to the deal, invited me to learn about the deal as a general partner. I was really fortunate that I was able to relate to her and connect with her through this mastermind group. We hit it off right away, we met, she just invited me to the investments.
Ash Patel: Maggie, what was the value that you brought to become a GP?
Maggie Cheung: I think, like all auditors, we point out all the risks. So I think early on when I view the deal, I scrub through it this way that I also did at my previous job. I look at the risks of "Okay, is the property in a flood zone? What is the breakeven point?" So I scrub through the entire deal from beginning to end, I just list out all my questions. But of course, I definitely appreciate that she takes the time to take a look at my questions, but also sharing with her that these are the questions I'm asking, because I wanted to make sure I'm helping her to find all the risks in regards to a deal. I think that's why she appreciates my honesty.
In terms of that, I'll also help her with the investor relations side. A lot of the post-acquisition, we helped her on putting investor emails together. So those are the things that I contributed from her angle. Also, because I have a finance background, I look through the financials and ask those questions, making sure the PM is booking the right entries, so we can make sure that we have all the financials in order to help the K-1 deliver timely.
Ash Patel: And on today's deals, do you still have that same role, or has that expanded?
Maggie Cheung: It did. Last year, we acquired Sage. Sage acquired the first deal where we actually sourced the deal from the beginning to the end. It's 126 units in Dothan, Alabama. We actually are acquiring another portfolio there right now. We're under contract for another portfolio deal in Dothan, Alabama.
Ash Patel: Maggie, I forgot to ask you, the deal in Kansas City - why did the church own a multifamily property? Was it just an investment?
Maggie Cheung: I think they looked at it more like a charity and they operated like a charity. The rents are extremely, extremely low. As I mentioned, it was $500 to $600, and there were people there, they were there for a long time. There was a guy there that lived since 1970.
Ash Patel: How do you raise rents on somebody that's been there for 40 years?
Maggie Cheung: Yeah... I'll say we don't go in there and kick everybody out. That's not really typically what we try to accomplish. On this front, we try to explain there is new ownership. What we try to do is put in place value [unintelligible 00:18:36.07] that people can see. Sprucing up the landscaping, fixing up the roof, fixing up [unintelligible 00:18:42], showing people that we actually care about the property and we're actually working towards creating a community there. So we spent a lot of money up front, but we did not raise rents, we did it on a gradual basis. Then when the timing comes and the lease is up, it's an easier discussion. They get a little more buy-in from the tenants; ultimately, they’re our customers as well, so we want to make sure that they feel we're putting value in their eyes before we raise those rents over time. So it's three years in the making.
Ash Patel: Got it. Maggie, what advice would you give somebody that wants to become a GP on a deal?
Maggie Cheung: I think first it's just to surround yourself and see if you can get in close contact with other people who are GPs themselves. Because it might be something, a shiny object, but it might not be a fit for everybody. I think having that conversation - we understand what is involved as a GP, because it is a lot of work. I don't think being prepared for that before you jump in is really helpful. So connecting with people like yourself or myself and anyone else in that position, and hear them out on their journey... And listen to your podcast, of course, to really understand that that is a role that you want to play.
Ash Patel: If somebody came to you, let's say at the Best Ever Conference, and said, “Hey, Maggie, I would love to GP with you on a deal.” What would your response be?
Maggie Cheung: I think, like your yourself, Ash, it will be what value that person can provide in the general partnership. Whether their background, or net worth, or something that they will be able to provide in our next deal, that will be helpful. Ultimately, it's not just that; I also want to assess the person as a character. Are they a man or a woman of their word? It's really -- I don't know what to say, like hunger or excitement; they're really putting in all the efforts upfront in order to make the deal happen... Because you have to be dependable.
So it takes time for me to assess that, but I am happy to maintain that relationship to see. The thing is, with auditors, things take time and relationships take time. It takes time for me to assess if that individual is really fit for a partnership, because it is like a four or five-year relationship.
Ash Patel: I got it. So really, if somebody wants to become a GP on a deal, one, they have to identify what kind of value they would bring, two, they've got to find somebody that's got a need that matches those values, and three, there's got to be a personality fit. Three simple rules to becoming a GP, right?
Maggie Cheung: Yeah.
Ash Patel: Awesome. Maggie, what is your best real estate investing advice ever?
Maggie Cheung: You just have to start somewhere. People like me, my people, I think you can assess all day and get analysis paralysis, but at some point, you have to make a move in order to move somewhere.
Ash Patel: Maggie, I forgot to ask you, did your husband quit his auditing job, or is he still an auditor working 80-hour weeks?
Maggie Cheung: He's still in his full-time job, but we're making plans.
Ash Patel: Alright, good. Maggie, are you ready for the Best Ever lightning round?
Maggie Cheung: Yes.
Ash Patel: Alright. Maggie, what's the Best Ever book you recently read?
Maggie Cheung: It will be Atomic Habits?
Ash Patel: What's your big takeaway from that?
Maggie Cheung: Just implement something small every day, and focus on that. Just do one thing at a time, but build upon the habit.
Ash Patel: Maggie, what's the Best Ever way you like to give back?
Maggie Cheung: I like to mentor other people. I like to give back based on what I learned, and hopefully, that will help them get to their goal faster.
Ash Patel: I would imagine you have a lot of people wanting you to be their mentor. How do you qualify who you choose to spend your time with?
Maggie Cheung: I do talk to kind of assess what they've done. What action are they doing in order to reach their goal. I do give people the benefit of the doubt. If I connect with somebody who mentioned that they want to reach a goal of acquiring a property for Airbnb and so forth, I would keep in touch with them the next time I talk to them. If they show that, or they visited the market, they actually presented an analysis to me, I see their potential. But if the next time they show me okay, they haven't moved the needle anywhere, I'm probably going to distance myself a little bit more on that.
Ash Patel: Great advice. Maggie, how can the Best Ever listeners reach out to you?
Maggie Cheung: It'll be maggie@sageinvestinggroup.com, or you can reach me at my website, sageinvestinggroup.com
Ash Patel: Maggie, thank you again for being on the show and sharing your story with us. Three years ago, you were working 80-hour weeks and now your GPs on deals. You've got a tremendous number of assets under management. Thank you for sharing your story with us.
Maggie Cheung: Thank you.
Ash Patel: Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five-star review and share this podcast with someone you think can benefit from it. Please also follow, subscribe, and have a Best Ever day.
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