Private Equity, Private Lending, and Becoming a Passive Real Estate Investor with Heather Dreves

Heather Dreves: 0:00

So what I tell people is I don't know that this investment is not good for anybody. But what you need to do is you need to not be investing dollars you're trying to live off of either, you know, the guy that only has disposable income of $1,000 shouldn't be putting his last $1,000 into our fund, relying on earnings from that. We have a great track record, but it's not any different than any other investment. There's risk, there may be the possibility that you may not get an earnings statement. So I think you have to look at your own financial situation. And I think it's more identified as how much should you be investing.

Announcer: 0:36

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Jason Muth: 0:59

Welcome to another episode of The Real Estate Law Podcast. My name is Jason Muth. Thanks for once again, checking us out I'm here from the Newburyport office where you often see Rory. Rory is at the South Boston office where you sometimes see him on camera. Rory, what's going on?

Rory Gill: 1:16

Hey, Jason. So we traded two places, I think from the last one, but just to keep everybody's eyes all over the place. If you're watching the video feed. You know, I'm very much looking forward to today's conversation because we're going to be talking about something we haven't really discussed too much in the past. And that's another way to invest in real estate in a much more passive way. But before I explain it instead in my simple terms instead of the better terms of our guests. Jason, would you like to introduce our guest for today?

Jason Muth: 1:40

Absolutely. We're going all the way out to the beautiful city of Coeur d'Alene, Idaho. And we're speaking with Heather Dreves from Secured Investment Corp. She is the Director of Funding and Fund Management. Heather, welcome to the podcast.

Heather Dreves: 1:53

Thank you for having me. I'm excited to be here.

Jason Muth: 1:56

Yes, we're excited to have you and I mentioned this before we hit record that I have been to Coeur d'Alene, Idaho. Unfortunately, my time there was very, very, very, very short. Just a couple hours. And the story goes I was doing work in Spokane, Washington. Did I said that correctly? Spokane?

Heather Dreves: 2:12

Yup, it's Spokane.

Jason Muth: 2:12

I was out in Spokane. I think this was when I turned. Geez, I think I turned 30. I think I did like a trip out there. I was going out to I'm sorry to Spokane for a project with a job I did many jobs ago. And I decided to fly into Seattle and road trip across the state, and then do the project and then road trip to Portland to fly out of. And when I finished up in Spokane, I remember looking at the map saying boy, I'm as close as I've ever been to the state of Idaho, I need to go to say I've been there. And then once I drove into Idaho, I realized how close I was to Montana. And I said I have to go to Montana. Also, just to say I've been there. So I legitimately drove across the border of Montana took a picture of the sign out of the car to say that my feet were on the ground there. And then I drove back Coeur d'Alene to enjoy the sunset over the Lake Coeur d'Alene. Is that right?

Heather Dreves: 3:07

Yes.

Jason Muth: 3:08

And then went back to my hotel in Spokane. But you know, it told me that I need to spend a lot more time in Idaho and Montana once I eventually get back out there. So that's the long drawn out story about my relationship with Coeur d'Alene, Idaho and it's probably a lot different from yours since you live there.

Heather Dreves: 3:21

Yeah, well, that's a great story. I'm actually originally from Spokane. I grew up in Spokane, you know, went to high school and all that good stuff. But I always spent time in Idaho because my parents have a lake place on a lake called Ponderay Lake, which is probably 30 minutes north of Coeur d'Alene Lake and one of the deepest lakes in the United States. They test submarines on it. So I kind of consider myself part Washington part Idaho, but now currently reside in the state of Idaho. And I think I mentioned it to you before we got started, as lots of people have discovered this hidden secret. We try to we try to detour people, we tell them, there's bears and there's bugs and lots of snow, but nobody's really listening. And I don't really blame them for wanting to move here. It's a wonderful place to live and raise kids. And if you like four seasons, yeah, I don't know that there's much better.

Jason Muth: 4:11

And then all the evil podcasters out there started talking about hot real estate markets in Idaho was on the top of everyone's list just the past couple years. And you know, now now the secret's out. Everyone from Los Angeles is out there and secret's out. It's a lovely part of the country. So yeah, well Heather, you know, tell us a little bit about what you do with Secured Investment Corp. And you know, how you got started there.

Heather Dreves: 4:35

Well, my path here is kind of interesting. I always feel like everybody has a story and you know, actually went to college to be a teacher never taught a day in my life discovered that was not really my calling. My kids can attest to that with helping them with homework over the years. But I had a friend that was in the private money industry and had no idea what it was. Like honestly, when he reached out to me, I decided to stay home with my kids till they were in school. That was my husband and mine's decision was to, you know, stay home with the kids raise them always enjoyed working in kind of a sales position but had a friend in private money. And you know, when my youngest got in kindergarten, he's like, Hey, come to work for me, I said, I don't even know what private money is. I just had no idea this world was out there. I thought, you know, when you went to buy a piece of real estate, you went to your banker, and you got a loan from the bank, if you needed, you know, funds for that. And I always was brought up by my parents that if you had money to invest, you called your financial advisor, and you have them invest your capital. And so when I went on board with this other company, my eyes were just like, I couldn't believe it, I thought, well, so you mean that if you have a good enough deal, there's other funding out there that isn't as cumbersome as a bank. And if you have capital, you can actually earn higher yields and be backed by real estate. So that was kind of my path into this industry. And you know, did a lot of things was a loan officer's assistant, ran our escrow company, had my securities license, but really, where my passion was, was helping these investors that had capital. So they, you know, came to a point in their life where they have this nest egg, and they don't really want to start just living off of that, and depleting those resources, but that there was opportunity to put that money to work for them, and be able to live off of their earnings and never touch their nest egg. And so I just really, you know, I'm a people person, I like the relationship side of what I do. And I mean, I have clients I've worked with for 20 years in this industry, helping them deploy capital. And I see, you know, how they've created wealth for themselves and created generational wealth to pass on to their kids. And so came on board with Secured Investment Corp eleven years ago. After 2008, I thought for sure I was getting out of this industry. I thought this is not for the faint at heart, I stayed with my clients got them out of their deals that they were in. As we all know, 2008 was rough and got recruited and thought I'm not I'm not doing this again and got sucked right back. And but it was honestly the best thing that's ever happened to me, you know, I still get to work with these amazing clients and continue to create new relationships, helping them deploy their capital, I'm very active in real estate, me and my husband. And we've included our kids in that we've done some fixing and flipping, we've purchased rentals, we have a rental portfolio now. So although my path I feel like was like this and not ever planned, I'm very grateful. And you know, just have a passion to share with people, you know that there are alternative investment options out there. Not here to say that I'm a financial advisor, or tell everybody to exit everything they have out of the stock market, but just really to encourage people to educate themselves that there are some other options out there.

Jason Muth: 7:45

How old are your kids?

Heather Dreves: 7:46

I've got a 24 year old who just got a full time, fireman's job. So that's super exciting. We've got two boys, you know, starting to realize, okay, I can get paid to be a fireman and work very little. And I can do other things like real estate. So that's exciting to see that the lightbulb has kind of went off. And then our younger son is 22. So he just graduated with his bachelor's and is working on his master's.

Jason Muth: 8:11

I think it's fantastic to get your children started early. And you probably got them in the mindset of investing earlier than their 20s as well. But you have a 24 year old son, that's a fireman. And he now also has that sensibility to find a path to allow his income to work for itself. And not just at his job and, you know, no discredit to any of our parents. But you know, my parents never taught me this stuff.

Heather Dreves: 8:37

Mine didn't either. Yeah. And they did well, and they were in real estate, but I don't ever remember having those conversations with them. So yeah, it's been nice to be able to expose our kids to that.

Jason Muth: 8:47

Yeah, Rory, I mean, this is definitely a good lesson for any people listening with children to try to involve them in investment decisions. I mean, money is always a, it's a weird subject. In families, it's a weird subject with friends, employers, you know, they don't like the transparency of what people are getting paid. And now there's laws getting passed in many states where you have to put job ranges of salaries there. But having these conversations with family members is more of a good idea than a bad idea. If money is tight? Explain why. If you're investing in things, you know, explain why as well. If you had your children in the culture of fixing and flipping and investing alternative assets, and you know, putting a little bit of money here, here, and here and explaining while you're doing that, you're passing that knowledge on to them and you're putting them in a really good position when they're getting started earning their own money in their 20s. And you know, that's something that we're hoping to do with our daughter.

Heather Dreves: 9:41

Yeah, absolutely. I couldn't agree more.

Rory Gill: 9:43

And you know, there's certainly a role for a lot of the traditional W-2 employment there's a role and all this for the traditional retirement vehicles, but I think the vast majority of people really confine themselves to just those two paths to investing and to earning money. We're going to take a look at you know, the the opportunity that you provide people in private lending. But before we get there, I want to ask kind of a really basic question about it. And that is, you know, who should be considering investing money in this area, and maybe contrast that with who really shouldn't be investing money with organizations like yours?

Heather Dreves: 10:18

Well, I think, historically, in the past, these types of investments have been really more focused in and available to high net worth individuals. For anybody that knows real estate funds and real estate investments, the Securities and Exchange looks at them as high risk. I disagree with that. I mean, I don't know that you can get much more secure than having a piece of real estate backing your investment, you know, you go invest in a company through the stock market, and that company goes sideways and they go bankrupt, you have nothing. You invest in something that's real estate backed, it's not to say that there isn't risk and that there isn't, you know, the possibility of that investment not paying, but what you can rely on is there is a piece of real estate that's backing that investment. And you can ride out markets. There's a lot of ability to pivot with those types of investments when markets are shifting like we're, we're experiencing right now. So to answer your question, I don't know that there's anybody it's not a good idea for and what I can say is, we have real estate funds. And we'll get a little more into this here in a little bit. But we now have the opportunity for people to invest in a real estate fund, that is not an accredited investor. So the SEC defines anybody that's accredited as somebody that has a million dollars in assets exceeding their primary residence, or they have annual income of $200,000 a year as an individual for the past two consecutive years, or 300, as a married couple. So for a long time, like I said, these funds were only open to these types of people. Now we have the ability through the Securities and Exchange and the Jobs Act changed some of these laws, that we opened up a Regulation A plus fund, and we have a minimum investment of $1,000. So what I tell people is, I don't know that this investment is not good for anybody. But what you need to do is you need to not be investing dollars you're trying to live off of either, you know. The guy that only has disposable income of $1,000 shouldn't be putting his, you know, last $1,000 into our fund relying on earnings from that. We have a great track record, but it's not any different than any other investment. There's risk, there may be the possibility that you may not get an earnings statement. So I think you have to look at your own financial situation. And I think it's more identified as how much should you be investing. I'm not here to tell everybody to put all their eggs in our basket, and I wouldn't tell someone to go put all their money in the stock market either. I think people need to be smart, they need to diversify. And we work with a lot of clients that and we're part of a mastermind with high net worth dentists, and they look at it as quadrants, right? If you're looking at your investments, what are you trying to accomplish? You know, most of the time, you're gonna have some investments that you want to create cash flow, some of your investments are more growth minded, where you're not relying on those earnings every month or every quarter, but you want to grow those accounts, especially with like self directed IRAs. So I think the investment is good for everybody. And but I think you need to identify what kind of dollars you're trying to deploy. Is it cash? Is it you know, accounts that are what we would consider qualified, like IRAs, 401k's, you know, what is your what is your strategy, growth or cashflow? How risk adverse are you? You know, like I said, I don't want people putting their last dollar with us. And then you need to look at some other things like geographically, you know, are your investments specific as far as where the location of the investment and asset is? Or are you more rate driven? Are you trying to hit that 10%? So I think people, and I tell people write these, you know, one to five things down before you really start diving into this so that you can you don't have analysis paralysis, right? If you don't have an idea of what you're trying to accomplish, and what that looks like, you're gonna you could talk to a hundred of us fund operators, and you're never going to be able to make a decision. So I think it's just really specific to the individual investor. I don't know that it's as black and white as who should and who shouldn't, but it's really dependent upon their situation financially and what they're trying to accomplish.

Jason Muth: 15:08

It's interesting that you mentioned that there are non accredited options for non accredited investors as well, which suggests to me that you're working with that $1,000 minimum, you're working with some clients, probably a little earlier in their lives. Maybe they don't have as much capital to deploy, maybe they're homeowners, you know unto themselves. Maybe they have one rental property or they're looking to diversify, like you mentioned. You know, I just think back to, you know, growing up like there was the newspaper that listed all the stock prices and then suddenly CNBC started showing the ticker all the time. And, you know, fast forward to today where we're on our phones, and we can day trade, you know, at a tap of a tap of a screen. And this is very different from that type of investing because you know, you're committing capital to investment for a set period of time. It's not the kind of thing that you can de trade in and out of, is that correct?

Heather Dreves: 15:58

That is correct. Our fund actually has a fairly short what we call a tie up period. And tie up periods are really essentially how long you have to stay invested in it. Because, in my opinion, our investments are more long term, like you said, you're not it's not a savings account where you're pulling money in and out, you're not day trading. But our tie up period is 12 months, which is actually fairly short for a real estate fund. Most funds are what they call syndications where you're investing in an entity and that entity owns maybe a self storage unit or an apartment complex, those are typically four to five year tie ups. So 12 months in in the fund industry is pretty short. But it's also something to be mindful of so that people aren't calling me in 90 days, hey, I had a, we had an emergency in our family, I need access to my capital .It is a 12 month tie up period, and then they can start to divest out of the fund, but still like a year is fairly short in the grand scheme of things.

Jason Muth: 16:57

What would you say is the profile of the accredited investor like, you know, is this someone in their mid 40s? Mid 50s? Like who who is that person? Yeah, I asked that as a leading way, because I almost see the non accredited investor option that you're that you have as almost like that free checking account for a bank or credit union, like it gets them in early or a forced 401k. You know, you sign up for the job 2% of your money goes there, you have to opt out of it as a way of getting them thinking about doing this investment. And then it just kind of scales from there. So yeah, good. My question, you know, what is that typical, accredited investor like? And then how does that contrast with some of the people that are coming in on the lower level?

Heather Dreves: 17:41

Yeah, so I would say, you know, our typical accredited investor profile is typically, I would say, average age is probably 45 to 50. And if not older. A lot of our clients are dentists and doctors and physical therapists and chiropractors, or business owners. They're people that own their own company, or ex real estate investors, you know, that have in the past owned, owned rentals and fixing and flipping and have built up this amount of capital. And now they don't want to deal with tenants and toilets and contractors, but they still are, you know, it's almost like, you get addicted to the real estate side of things, right, they still like real estate as an asset, but they don't want to be boots on the ground dealing with it. And then your more professional people like the dentist and doctors, they come into a large amount of capital, especially dentists, you know, they will typically sell their practice, which most of the time they own the building. So now they've got a building that they're selling, they're looking for, like a 1031 exchange, they've got this massive amount of capital, because they've sold their practice, but now they're trying to replace their income, you know, and so they're trying to continue living the lifestyle that they've come accustomed to, and they understand real estate, for the most part, and, you know, are becoming a lot more educated. There's all these mastermind groups, you know, that are educating high net worth individuals about the opportunities in real estate, you know, and they're saying, Hey, I'm, I'm tired of my financial advisor telling me what to do, and to write out these, you know, waves through the stock market. And, you know, they're starting to look at other options. So, you know, most of the time our accredited investors are one or two things, they're either trying to replace their income, you know, because they've retired or sold their businesses or practices, or they're really growth minded, where they've just got this large amount of capital. A lot of them have become very sophisticated and opening up solo 401k's through self directed custodians. They've got very large IRAs that they've, you know, tucked this capital way in, and now they're putting that money to work to grow those accounts even bigger, you know, than they originally started with. And, you know, in comparison to our and I don't like to even say unaccredited investors, but I, you know, our other fund is just open to the general public. We have accredited investors in that fund that don't want to prove that they're accredited. So I feel like that kind of has a negative connotation, but those clients are younger, you know, they're like my fireman, son, you know, they're 24 They've started watching podcasts and webinars and they're educating themselves about these things. Or they're people that had like old 401k's from five employers ago that said, God, I never I didn't ever did anything with that and it's like, move that account over to a self directed custodian and get it working for you. So I just think the demographics of those two types of clients are very different. I would say the the younger, you know, people that are in are other funds are also probably more risk adverse to you know. They're at an age where they can take some risk on, you know, rather than the guy that's 50 that's, you know, wanting to just get that money working for him. So yeah, just very different. And, you know, like I said, we, for a long time only had an accredited investor fund. And so when all this stuff changed about four years ago, Rory probably knows about this being an attorney is we jumped all over it. Opening a regulation A+ fund is not an easy task. Nor is it cheap. But we felt like we were doing a disservice to clients that didn't qualify as an accredited investor. It's like, why shouldn't everybody be able to take advantage of an opportunity like this?

Rory Gill: 21:20

Organizations and lenders investment funds really either had to go in that direction completely, to make all the hurdles worth it, or just kind of scrap it altogether? But it's definitely it's been a boon for all those who are willing to jump through the regulatory hurdles to get there. You know, I know you alluded to this earlier, when we first started the podcast, but this being a real estate podcast, I have to ask about the other side of this transaction, and who would approach you to borrow money from you for their deals? I mean, I have a few different types of investors in mind. But who your clients on the other end of the lending equation?

Heather Dreves: 21:58

Oh, I think that's a great question, because it also explains how our funds make people money. Like, as an investor, if you're investing in something, you should understand how you're going to earn on your investment. And so what we've done it at Secured Investment Corp is we have created these funds, when I came on board, eleven years ago, I dialed for dollars. It was hilarious, because we would get these people wanting to borrow money from us. And my job was to take the deal and get on the phone and start calling clients to get the deal funded. And as a real estate investor, you guys can imagine that's extremely clunky. When you got a transaction, you need to close and your lender saying hold on, I got my guy, but waiting for him to wire. So we we created these funds, where we can originate our loans in. And that way we can get our active investors taken care of quickly in our brokers, and then on the backside of things, we can work with our passive clients to invest. But I would say our avatar borrower is a real estate investor. We are a short term lender. So these loans that we are originating are 12 months on average. So we're a bridge lender, a lot of people will use us to go, you know, buy a piece of distressed real estate, you know, that maybe needs some rehab, we can see the vision and say, okay, that property's worth this right now. But we can see that once you rehab it, it potentially would be worth this. And so we'll back into the deal from there. Most of our clients in the past have been fixing and flipping, you know, when the market was hot, it was pretty easy to make money, buying a distressed property, putting a little bit of money in it and reselling it, what I'm starting to see just over the probably the last four months, is a lot of those clients are now holding those properties as rentals, you know, to cash flow, they, there's a joke out there that says what, as a real estate investor become in a downturn market, they become a landlord. And so still the same kind of borrower, you know, the guy that's finding off market deals, they're not buying off the MLS, they're finding out of state homeowners, you know, distressed sellers that need to get out of their property, you know, tax sales, some of them go to auction, you know, that kind of change through COVID. But regardless, they're all buying as them as investment properties. But I will say that their exit strategy has now shifted more to a buy and hold. And so what they'll do is they'll they'll use us to get funding the to, for the purchase price, they'll use us to get money to rehab it, we do require them to bring some skin into the game. But then once they get that property stabilized, they do a value out and they get it cash flowing, then they'll go refinance it as a rental and exit our loan. So like I said, we're really a bridge lender.

Rory Gill: 24:43

In how many states does your organization lend in?

Heather Dreves: 24:47

We are in all states, but about five of them. So we are we pretty broad, we're nationwide just about. Again, we only lend for investment purposes only. So we're not going to lend to an individual. You can't have your kid living in the property. we shy away from any owner occupied concerns in that sense, and then we only went to entities so LLC so they have to have an entity in place and then personally guarantee the loan.

Jason Muth: 25:16

So, you know, I see the direction of where things are headed also this year, you know, I'm not surprised to hear that people are hanging on to their properties and becoming landlords in the market that we're in the market that we're entering. You know, crystal balls are easy to look into. But you know, predictions are tough, but where are things headed for your business this year? Is it more of what you've described? Or do, do you see something shifting back later on in the year? You know, maybe we once were able to comp against last year?

Heather Dreves: 25:46

Well, I mean, one of the things that we're looking at right now is our funds are what I would call a hybrid fund, meaning they are debt, so 75% of our balance of our funds we lend out and those are the loans that I just spoke about. And that's a big revenue generator for the funds, you know, you get things like origination points, our borrowers make interest payments every month. So that will continue. Like I said, the biggest change I'm seeing is a lot of these clients wanting to hold these properties. We do have a 30 year rental product, so we do have the ability to refinance them. So I don't know that that's going to change. What I think we're going to see though, with that side is some of your newbies and your first time, you know, real estate investors, they're going to, we're starting to weed them out, you know, we're looking stronger at the underwriting process and making sure that these people are very experienced, just given the market, you know, as as prices are changing so quickly, you know, the, the average real estate investor that doesn't have a ton of experience is going to have a tough time right now. So we're really focusing more on the sophisticated repeat clients of ours. So that's the debt side of things. But we also do acquisition through the fund. So we take 25% of our fund balances, and we buy real estate, specifically in Spokane and Coeur d'Alene. So we have an acquisition team, we have a contracting crew, we actually have a property management division to manage any of them that we hold as rentals. And, you know, for the last probably two months, we've kind of been sitting on the sidelines not buying anything, because what's happened is prices are starting to come down. But sellers aren't quite convinced that their house is worth less than it was six months ago. That shift just hasn't happened quite yet. And so we're kind of just sitting there, we've got quite a few rentals in our portfolio, so we're cash flowing those, but we're actually going to start marketing some of those as turnkey, so we have a lot of high net worth people that need a 1031 exchange. So we're going to start to sell some of those to free up capital, because we believe, probably in March or April, we're going to see some pretty great deals in this this area as prices, you know, continue to fall a little bit. I mean, Coeur d'Alene and Spokane is not the same as you know, some of these other markets, and I don't think we're gonna see, you know, a 30% decline, but they are starting to soften a little and, and it's taken a little longer to sell houses. Like right now we're in the middle of winter, we have snow everywhere. So take that plus the market, plus rates increasing, you know, that that has slowed down. But we also believe that there's going to be some great opportunities to buy some properties at a big discount. And you know, we may just cashflow those, and then as interest rates come down and houses start selling again, then we'll sell them off. So always looking at ways that you know, is going to be the biggest return on investment for the fund and be the most profitable. So you have to, I think be willing to pivot and change your strategy. You can't be so siloed and, you know, focused on hey, this worked 12 months ago because what worked out months ago is not working right now.

Jason Muth: 28:53

Hey, Rory, can I ask a law question? Even though you're the attorney?

Rory Gill: 28:57

You can go ahead.

Jason Muth: 29:00

So Heather, there's so many tentacles to your business, right? There's so many different things you've described, you're working with investors, you're working with people that are accredited, non accredited, you're actually talking about property management owning properties, selling them in the future, if not now. What is your staff of attorneys? Like? I mean, is it one or two people that have to do all these different things? Or are you working with a team of specialists that are either employed by you or contracted by you, and then you know, when do you engage those attorneys for all these different types of transactions? Because everything you've described definitely has a level of complexity to it that requires another set of eyes and people that could pour over fifty page documents.

Heather Dreves: 29:42

Yes. So I think that's a really good question. We do have one on staff attorney. So we have a gentleman named James Lutz, that is our counsel and he works for the company. And then we have an individual that has a law degree that isn't licensed as an attorney yet, but he of our servicing company. So one of the things I didn't mention yet is all those loans that we originate, we service, which means we collect the payments on them. We manage a foreclosure process if need be. So he oversees that, that division of our company. It's called Lake City Servicing. We service about 500 notes, and he's got a staff of 10 people underneath him that do everything from, you know, day to day collections and applying payments to managing rehab draws, to managing a foreclosure process and a post closing price. assess. And then because we are in so many states, obviously, our attorney is not licensed in every state in the United States. So what he does is he's going to manage the process if we do need outside legal for evictions. Washington state is very hard to evict people in. And so we use an attorney out of Spokane, that helps us with evictions, and then also foreclosures. So we have a database of attorneys we've worked with all over the United States, because I think the key thing with foreclosures and Rory, you can probably get tested this is you got to start it quick. You can't, you can't drag it out six months, like if they're not paying, and they're not responding within like 40 to 45 days of missing a payment, we will immediately start foreclosure, because we have a fiduciary duty to do the fun, that asset is owned by the fund, and we are the fund manager. So we don't we don't mess around on that type of stuff. And so we have a fairly large staff. And then, as far as the property management side of things, we've got three people in that department. Right now, I'd say we probably, I don't know manage 40 rentals in the Spokane and Coeur d'Alene market. And that is increasing. We do own a part of that as an apartment complex with 22 doors. So we will continue to grow that portfolio too. But you're right, Jason, it does take a pretty large staff. And to be honest, we've tried to outsource a lot of that stuff. And it just, it's very challenging. It's challenging to outsource servicing, you don't really have a handle on what's going on, you're relying on a servicing company to collect payments. Most of those servicing companies aren't great at collecting, they really just are keeping records of payments that come in. So we have a pretty sophisticated software system that we use to manage payments, collect payments and disperse to investors. And then on the property management side of things. We tried to outsource that. And that didn't go as well as we wanted it to either. So we decided to create our own company and just manage it internally. So we're pretty organic in the sense that we have a lot of this in house. So we have a staff of over 100 people in Coeur d'Alene, Idaho.

Jason Muth: 32:48

Hey, Rory, it sounds like you might need to get a degree or your license in Idaho and Washington help these guys out. I mean, they have an awful lot of need for some some legal help with everything that they're doing. I'm sure that's not atypical of any kind of, you know, alternative investment or private lending company like yours.

Rory Gill: 33:08

Yeah, but this portfolio. It mean, I mean, she didn't say one thing that I would underscore for any of our investors here in Massachusetts, where it takes such a long time to process a foreclosure or an eviction, where you really need to start it as soon as you can, just because you can't afford to let weeks or months go by. Because whenever you start the process, you're starting from the very beginning. Some states are a lot more efficient. Unfortunately, we're not one of them.

Heather Dreves: 33:36

Yeah, there are some other states that are challenging. Also, we've, we've discovered very quickly, Illinois, Florida, Pennsylvania is rough to foreclose in right now. Louisiana. So you'll learn as you go.

Jason Muth: 33:53

Do we think we're going to see a lot more foreclosures this year in 2023?

Heather Dreves: 33:57

We're kind of anticipating and I mean, with all the layoffs, I don't know, if you've guys been in tune with that. But there's a lot of big tech companies that are laying off and we believe that there is going to be unfortunately, you know, the only thing that may save people is most people have equity right now, you know, I think that's much different than it was in 2008, where people had negative equity. Unemployment was high. I think we're in a little bit different situation. So I think people could, you know, if they're willing to just sell their properties to get out from under them. If they're having some challenges. I think that is the the one saving grace right now. But we are we are preparing for that. I think, you know, you've got what's going on in the market. And then we had COVID prior to this, right? So it's a little bit different situation. You know, a lot of people have forbearance and you know, were allowed to not have to make payments. And I think that's all going to start to come to a head.

Rory Gill: 34:54

Yeah. But you know, I would caution people when you start to hear reports about the increase in mortgages, if they're going to have a year on year comparison, it's going to sound really dramatic, you know, a 200% increase in foreclosures based off last year. But what we need to keep in mind is we had kind of a record low number of foreclosures in the past few years. So any, you know, an increase in foreclosures, even to something that's less than the historical average is going to seem like such a dramatic increase. So, you know, don't be alarmist when you hear those news reports. You know, she mentioned the saving grace here is that most homeowners have a good amount of equity in their properties. But that doesn't necessarily mean that every homeowner with equity is going to act rationally when faced with foreclosures

Heather Dreves: 35:35

Good point.

Jason Muth: 35:38

Especially when people were watching the news every day and watching their 401k's go up and down. I mean, I know rational behavior is I mean, is not always there. Yeah, and you know, generationally I think about I'm Gen X, unabashedly Gen X. I love saying that. They're, you know, the generation that's older than me that Baby Boomers, you know, they're retiring. And if people are getting laid off and out of the workforce, a lot of them are saying, screw it, I don't need to be 65 when I retire, like I'll retire when I'm 55-60, even earlier, they're coming out of the workforce as Millennials that are coming, you know, deeper in the workforce, and Gen Z deeper in the workforce, those the people that are buying a lot of the homes right now. I think it's partly why unemployment is low, because even if some of the jobs are disappearing, you know, there's people that are filling those jobs. And, you know, that's, that's what's helping real estate is that there's this underlying demand there, even if the supply isn't there. And, you know, so what we'll see how things turn out this year in 2023. You know, my get my gut is that there are going to be some more foreclosures in some markets, but it's probably not going to be as steep was we saw back in 2008-2009, for exactly what you said. I mean, you know, people just had such a run up in their equity, consumer confidence is still good, because even if prices are going up, you can look back at like how much real estate's worth and say, Alright, well, I still have some money here. So I'm not gonna freak out right now. But it's a changing environment. You know, it's glad that it's good that you guys have diversified way to make money in lots of different ways. And, you know, offer investments up to people, as they also look to diversify their portfolios, and become stronger than just relying on, you know, the the NASDAQ, or the Dow Jones and their primary. So why don't we get to our final couple questions. And then either you could tell everyone where they can reach out to you if they want to learn more information about you or Secured Investment Corp. We ask these of all of our guests who come on the podcast as a way of wrapping things up and getting to know you a little bit more. The first of these is if you can get on stage for a half an hour and speak about any subject in the world with zero preparation. What would that be?

Heather Dreves: 37:42

Yeah, I think that's a good question. And it's hard to just narrow it down, I've got a couple things that I'm pretty passionate about. But if I had to pick one, I think I would talk about Self Directed IRAs and 401k's and especially for the younger generation, the Roth IRAs, how powerful those are, I think people are really missing the boat if they haven't opened up a Roth if they still have the ability to do that. So I don't know, I believe that a lot more people are educated about that right now. Because of and we talked about this before we started. I mean, just there's so much education, online podcasts webinars, you know, and a lot of these self directed custodians put on a lot of free education. But I would talk about that, you know, I would talk about the power of those, and especially if you're younger to get started, like our son's 24. I'm like, go open your Roth right now get that thing working target to get a 10% yield, it doesn't matter how much money you put in it, and sock that away. And, you know, I wish someone would have gave me that advice when I was in my early 20s.

Jason Muth: 38:46

Right. Me too. I mean, no better time than now. And, you know, I'm looking back at it saying, I wish I had somebody that could have walked me through that process in my mid 20s. But, you know, that didn't happen. But, you know, I found a different vehicle. Personally, I was working, I worked for 25 plus years, you know, and just put money away in 401k's and transfer that over to IRAs as I left jobs and everything, and then we have a real estate portfolio separate from that. But you know, we're looking at, we're looking at the retirement funds and saying, Okay, well, you know, let's start doing some conversions into Roth, you know, and let's figure out a way to use some tax advantages of our real estate and active income and, you know, pretty complicated stuff that we're looking into right now. But the easier way would have been starting a Roth IRA when I was 25. So yeah, agreed. Yeah. And self directed IRAs and real estate. We actually had an episode about that a couple episodes ago with a gentleman named Tony Unkel and we'll, if I'll put that in the show notes as well. But you know, you can certainly speak to our audience about that as well. So they can reach out to you about some ways and all the different rules and things like you can't paint the place you got to hire somebody.

Heather Dreves: 39:53

All your prohibited transactions. That's the trick with those you gotta stay in good standing with the IRS. You don't want to risk having your account unwound.

Jason Muth: 40:03

I think that I remember relistening to the episode a couple of weeks ago that we published and one interesting thing that came out of it was, you know, the recommendation to go buy a retirement home. Like go buy a home in Florida now and let other people do all the work on it, rent it out the entire time. And when you retire, you know, I believe that you transfer the deed into your name or whatever it is out of that IRA and now you have your retirement home probably, you know, debt free at that point. I know. Yeah. Again, things that I haven't been told until now. Second question of the final ones we have for you - tell something that happened early in your life or career that impacts the way that you're working today?

Heather Dreves: 40:41

Oh, I would probably say that really actually, even how I ended up in this industry was my husband and I were buying a business that he had worked for, for many years, he ran three indoor soccer centers. And we were young. And you know, it was a great job. But we were relying on the owner's promise to sell us these businesses, when he decided to retire, and not an uncommon story that never transpired. And we could never come to an agreement that at the time, we were building a big brand new house, and I wasn't really working and very quickly had to pivot and decide how we were going to create cash flow, and ended up in the private money industry. And that was like the pivoting point where I said, Okay, I'm never going to rely on somebody else. For income, you make your own destiny. And it was the best thing that ever happened to us, honestly, you know, we learned a lot of life lessons with finances, thank God we were smart with our money. And we survived that storm. But that was in 2008, when we had built a big brand new house, and even if we wanted to sell it we could not have, so but like I said, that was the path to where I am now. I don't know that I would have been as active of a real estate investor had we that not happened, I would not have been exposed to the private money industry and the alternative investment industry. And so that that would probably be the the biggest pivot and my husband and my life is when that happened. And you know, it rattled us. And at the time, it was awful. And you know, the worst thing that could have ever happened, but actually, in hindsight, it was probably the best thing that ever happened to us.

Jason Muth: 42:29

Yeah, Rory, we've we've heard from guests also about pivots in 2008, that were forced upon them. And you know, everyone seems to have a good story after some crazy event where lightning strikes the forest and everything burns down. And that's what you described there. Right. Our final question that we have for you tell us something you're listening to, or watching or reading these days?

Heather Dreves: 42:53

Yeah, well, I've got a couple of things I'm reading Leaders Eat Last. Our company at Secured Investment Corp we actually do a book of the month club, and we pay our staff $100 to read a book, sometimes it's reader's choice, sometimes it's assigned. And they have to do a four paragraph essay on it and do a one minute presentation in front of the staff. We have 100 employees. And we do this every month. It's shocking how many people don't do it. But Leaders Eat Last is actually a book that was our assignment. I don't know, two, three months ago, and I'm reading that right now. And it's just you know, about leading and leading a team. You know, I have a staff underneath me and you know, you can always learn. That's the book right now that I'm pretty into. As far as podcasts go, I'm listening to Huberman Lab, I'm trying to be a little healthier, you know, fell off the wagon through COVID. And getting back on track. But he's got a great podcast about a lot of different things. You know about hormones and nutrition. And the one I just recently listened to was about supplements. So kind of really trying to dive into that and be a little healthier version of myself.

Jason Muth: 44:06

I feel like I saw somewhere in one of your bios, maybe on LinkedIn that you did CrossFit.

Heather Dreves: 44:10

Well, the first rule is if you do CrossFit, you have to talk about it all the time.

Jason Muth: 44:14

Yeah. Which you didn't even bring it up. I'm the one that brought it up. But you know, I could she's a CrossFitter.

Heather Dreves: 44:20

Well, the funny story with that is I always said it was a cult, and I had all these friends that did it and colleagues, and I'm like, Absolutely not. That is a cult. I am not getting involved with that. And within like a month of doing it. I was like, Yep, it's a cult. And I'm sucked in.

Jason Muth: 44:38

Well, at least you admitted it, though. Yeah, that's the that's the first step of joining a cult being Yeah. Rory, anything else you have for Heather?

Rory Gill: 44:47

Um, no, I think we covered a lot. So if you are kind of thinking about where to go next, or if you're kind of I think this is helpful for a lot of people who might find those kind of selves kind of stuck with their next step and their real estate investing, whether they're just getting started, or they're further along, because this is a complicated year, you know, in large part because a lot of things changed so fast and so quickly, that we need a little bit of time to catch things up in the market and have kind of the the normal investment opportunities make sense again. So if you're looking around for other opportunities, and you want to stay in real estate, you know, I hope that we brought our listeners in that one option that that they could use.

Heather Dreves: 45:24

Yeah, absolutely.

Jason Muth: 45:26

So Heather, where can people reach out to you we will put all this in the show notes, you know, what are the easiest ways?

Heather Dreves: 45:31

Okay, if people are looking for funding or if you're more of a passive investor that you know, is looking to deploy capital with even as little as $1,000, they can go to our website at securedinvestmentcorp.com. And they can learn quite a bit about us on there, and they can even get access to me and schedule an appointment with me we do 15 minute consultations. You know, our funds, like I said, are probably going to be your most passive alternative to really get your foot in the door with real estate, if you're not at a point where you're, you're ready to be an active investor, or maybe you're already are an active investor, and you just want to diversify and, and get some passive routes. The funds are an easy way, you know, average yields are 8% to 10%, which, you know, is much better than what's held in the marketplace. In a real estate fund that is all backed by real estate. So you're not investing in our company. It is a fund that holds all of those real estate assets. And we've got an 11 year track record. So again, visit us at our website securedinvestmentcorp.com. And like I said, our information on the fund is on there, you can get access to me there and schedule an appointment with me. And we just love to educate people. We're not financial advisors, we're not tax accountants, we're not experts at self directed IRAs and those things, but we know quite a bit about it and have a lot of experience at it. So we'd love to share what we know and people feel like it's a good fit for them, then we can help them with the process to get their money working for them. So we do help people with liquid funds, and then also really good at self directed IRAs and helping them navigate those types of accounts.

Jason Muth: 47:13

Excellent. And if you'd like to meet in person, a trip to the beautiful city of Coeur d'Alene, Idaho, I'm sure Yeah,

Heather Dreves: 47:18

Especially summer. Summer is amazing here. If you like boating, and lakes and all that, it's it's wonderful.

Jason Muth: 47:29

Great. Well, who doesn't like boating? My favorite boat is the one that my friend owns not mine.

Heather Dreves: 47:34

We are boat owners and our friends tell us that - we love that you got a new boat. I'm like, Well, I'm glad I could accommodate.

Jason Muth: 47:41

I'll bring the drinks you bring the boat.

Heather Dreves: 47:44

I have a nice boat so that my kids stay around me and want to hang out with us. That's why we have a boat

Jason Muth: 47:50

Way to entice them also, right? You know, they can bring your buddies over there and get to hang out their parents. You have all the answers. Heather, I really appreciate your being here on this podcast. Rory, where can people hear from you if they want to reach out to you?

Rory Gill: 48:03

People could find me either through my real estate brokerage NextHome Titletown nexthometitletown.com Or my law practice UrbanVillage Legal that's UrbanVillagelegal.com.

Jason Muth: 48:15

All right. And if you want to reach out to me, you can reach me jason@nexthometitletown.com. If you have comments about this episode, you want to be a guest on a future episode, you have questions for Heather and you're afraid to ask her, we can certainly get his question to ask for you. She seems so intimidating, right? But you know, I have a feeling that you can reach out to her. And if you enjoyed listening to this, if you can give us a great rating. We really appreciate that we read all of our comments, and we love five star ratings. So that's it. So Heather, thank you so much. Thanks for sharing all your great information today. And I'm looking forward to following up with you later on this year once the market kind of stabilizes a little bit, we'll see if our predictions came true. And we'll see how things go on with you guys at Secured Investment Corp.

Heather Dreves: 48:57

Yeah, absolutely. for having me.

Jason Muth: 48:59

Yes. Thank you, and Rory, thank you for being here.

Rory Gill: 49:01

Thank you, Jason. That's it.

Jason Muth: 49:03

That's another episode of The Real Estate Law Podcast. So thanks for listening. We'll see you next time.

Heather Dreves: 49:08

This has been The Real Estate Law Podcast. Because real estate is more than just pretty pictures. And law goes well beyond the paperwork and courtroom arguments. were powered by NextHome Titletown Real Estate are Boston's progressive real estate brokerage. More at nexthometitletown.com and UrbanVillage. Legal, Massachusetts real estate counsel serving savvy property owners, lenders and investors more at UrbanVillagelegal.com. Today's conversation was not legal advice, but we hope you found it entertaining and informative. Discover more at the real estate law podcast.com Thank you for listening