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Ashley Wilson, is the Co-Founder of Bar Down Investments, LLC & HouseItLook, LLC, Co-Host of The Passive Investing Show, Best Selling Author of The Only Woman in the Room, Knowledge and Inspiration from 20 Women Real Estate Investors, and a BiggerPockets’ Series Host.
She started investing in real estate in 2009 and has been involved in over $100 million in transactions within both single and multifamily real estate across over 1,500 units. In 2022, Ashley was a Connect CRE Award Recipient. When Ashley is not working on her businesses, she enjoys spending time with her family, including her husband and their two daughters.
Ashley and her husband are strong proponents of leveraging their investments, which led them to the multifamily housing sector. She wants diversification in her portfolio so that she can benefit from multiple markets regardless of how each individual asset performs. By spreading out across many different options, Ashley is able to maximize returns on investment while minimizing risk.
Ashley believes that investing in the right team and taking a patient approach to building wealth is key for developing lasting legacy. To achieve this, investors need to be aware of market cycles and have alternate sources of income as preparation against any troubles with their main asset class.
Take a moment to experience this amazing episode featuring Ashley and her unique insight. You won’t regret it!
In This Episode
- How Ashley’s successful career began.
- The components that Ashley follows to building a strong team.
- Will there be any risks in 2023 for multifamily investors.
- Are there any other ways to have cash flow?
- Ashley’s piece of advice to accelerate your wealth trajectory.
Welcome to today’s show on Wealth Strategy Secrets. We’re joined by Ashley Wilson, co-founder of Bardown Investments and How’s It Look? She’s also the co-host of the Passive Investing podcast and a bestselling author of The Only 1 In the Room: Knowledge and Inspiration from 20 Women Real Estate Investors. Additionally, Ashley is a host of a series on BiggerPockets.
Ashley began investing in real estate in 2009 and has been involved in over $100 million in transactions, encompassing both single-family and multifamily real estate across more than 1,500 units. In 2022, she was honored with a Connect CRE award.
When she’s not busy with her businesses, Ashley enjoys spending time with her husband and their two daughters, as well as competing with her horses. Ashley, welcome to the show!
Thank you so much for having me.
It’s great to have you on board! It’s been a pleasure getting to know you over the past couple of years, and I can’t believe it’s been so long since we’ve had a chance to do this. I appreciate your time today and look forward to our conversation.
Likewise!
Let’s start by sharing your background and how you got into real estate. I know your story, especially your transition from corporate America, is quite interesting.
Absolutely! I began my career in corporate America, specifically in clinical research and development for pharmaceutical companies. I worked for Sanofi Aventis, Wyeth (which is now Pfizer), and GlaxoSmithKline. During my time in pharmaceuticals, I was investing in real estate on the side—not quite passively, but not fully actively either. It was more of a hybrid approach due to my limited bandwidth with everything happening in pharma. I aimed to make my real estate ventures as automated as possible.
I started with house hacking, then moved on to short-term and long-term rentals. Eventually, I partnered with my father to start a flipping business focused on high-end older homes. He’s a general contractor with over 45 years of experience, so it was a natural fit. In 2018, I transitioned into commercial real estate, specifically focusing on large multifamily properties, particularly their repositioning. My background in construction and operational management made it a perfect combination, allowing me to leverage my skills and partner with others to gain entry into the market. Eventually, I launched Bardown Investments with my partner, Jay Scott.
Was there a compelling event that pushed you toward real estate from the corporate world?
Yes, definitely. Both my husband and I were earning decent salaries when we first started working, but we were not firm believers in the stock market for several reasons. First, we don’t like speculative investing. Second, we prefer asset-backed investments. Third, we want investments that come with tax advantages. Finally, we believe strongly in leverage, but traditional stock market investing has very limited opportunities for leveraging.
Real estate, on the other hand, addresses all the issues we have with the typical stock market investment strategies that many people in corporate America follow. We got turned into real estate in 2007 when we discovered BiggerPockets and started listening to their podcast. We spent two years learning before we finally pulled the trigger in 2009.
Great! What were your thoughts on the difference between an active and passive role in real estate? Did that come into your decision-making process? Did you think, “Can we just be investors, or do we want to pursue the active route?”
It’s interesting because most people consider me an active investor, but I have as many, if not more, investments in passive real estate opportunities compared to my active investments. This is largely due to bandwidth issues and my firm belief in diversifying my asset portfolio. I think diversification is the most advantageous way to grow your wealth, as not every asset performs the same in different market cycles. To hedge your bets, it’s best to diversify.
When we first got started, we were unaware of passive investment opportunities. Being a bit of control freaks, we opted for the traditional, more active path that many people associate with real estate. Most newcomers think of wholesaling and flipping as the gateways to investing, and we were no different. So, we started with that. While we have continued to actively invest, we also increase our passive investments every year.
As you consider your overall lifespan, there are different times in life when either active or passive investing might be better suited to your situation and desires. I won’t always be an active investor; I believe there will come a time when I transition to a more passive role. But for now, I truly love real estate. Not everyone shares that passion, but for me, active investing is a perfect fit.
That’s a really interesting dynamic. Many people might be inspired by a book or podcast and want to dive into the active side of real estate, but I think they should reflect on it deeply. It’s like running a business; it will consume your time and energy.
Do you have the necessary skills? Does it align with your unique abilities? Is it something you genuinely enjoy and are passionate about? You can see that enthusiasm in top-notch operators—those who get out of bed excited to do what they love.
It’s also a great way for people to enter the space through a side hustle, like managing an Airbnb or a single-family rental, to create alternative income streams. But I always encourage people to think about their position in the active versus passive spectrum and what suits them best, as there’s also an opportunity cost involved. For instance, if you’re managing a few rentals but you’re an anesthesiologist, that time commitment might detract from advancing your career.
I completely agree with everything you just said. You don’t always have to grow your wealth through active involvement. There are numerous opportunities to grow wealth passively. As I mentioned earlier, we invest passively to leverage other people’s skill sets.
When people think of leverage, they usually consider it in a financial sense, like getting a loan to purchase a primary home. For example, you might leverage your buying power to purchase a $300,000 home with a $60,000 deposit. But leverage can also extend to many other components of a business.
One of the most important aspects is leveraging someone else’s skill set and expertise. For example, I’m not an expert in the alcohol industry, but I’ve invested in a startup rum company called Clear Rum, which is local to our area. I went to high school with the founders, and they are incredible people. Although I would never have considered entering that industry on my own, it’s a natural connection I was able to tap into because I was open to leveraging others’ skills.
This concept of leveraging expertise is applicable not just in real estate but across various asset classes. It’s essential to maximize your reach to grow your wealth.
That’s such a great point, and it’s often underestimated. Since syndications came about, investing has become a team sport. Leveraging those other skill sets is critical, as you mentioned. Many inexperienced operators or those new to the game often don’t have a complete team in place. Can you share some insights into the success you’ve achieved by having a well-rounded team, including acquisitions and asset management, and how these components come together to make you a stronger operator?
Building a strong team doesn’t happen overnight. For anyone listening who’s just starting and wondering how to grow with a team like that, I understand that question. When I first started, I was often asking myself which lever to pull first. We need everyone, but who should we hire first?
The key to identifying the right hire is determining who will have the biggest impact on the business and supporting future hires. We aim to hire individuals who can not only generate a profit that covers their salary but also contribute to our next hire. This approach positions us for continuous growth.
When it comes to selecting team members, we place significant emphasis on a personality test called the Predictive Index, rather than just focusing on skill sets. After interviews, our first question in discussions about a candidate is whether they pass the “beer test.” Essentially, this means asking ourselves if we would want to grab a beer with this person in a social setting.
We work in a nontraditional industry with hours that often extend beyond the standard 9 to 5, including weekends. Given that we spend a lot of time with our colleagues, we must enjoy each other’s company. While we don’t need to be the same people, it’s important to choose to enjoy working together.
Next, it’s about finding individuals who possess the expertise necessary for the position. This isn’t just about the specific skills required; it’s about the underlying characteristics suitable for that role. For instance, an underwriter typically isn’t going to be a naturally outgoing person. They tend to be more introverted, enjoy working with data and spreadsheets, and prefer crunching numbers alone. Conversely, someone who excels in networking with brokers or raising capital is usually not cut out for underwriting tasks.
So, if someone approaches you, eager to be your underwriter but also very sociable and uninterested in repetitive tasks, that’s a sign they may not be well-suited for the role. That’s just been our experience: people who are good underwriters tend to be very precise and highly objective. You want them to be objective; subjectivity is not desirable in that role.
You can have someone who performs quality control on the underwriting and audits it who can afford to be subjective. So there’s a yin and a yang there. However, you want someone who will follow a set of rules and minimize errors. Essentially, we dissect the role first to identify the necessary characteristics and personality traits, which weigh more heavily than simply asking if someone has underwritten for the past 25 years.
For instance, if we’re comparing someone who has five years of underwriting experience to another who has 25 years but the five-year candidate is a better overall fit, we would choose the person with five years of experience. Longevity is not weighted as heavily for us as the quality of the candidate overall.
Those are fantastic points when it comes to building a team. It parallels real estate and building legacy wealth, right? Everything is long-term. It’s interesting because Wall Street conditions everyone to think short-term. Things change weekly or monthly, and people often want to react quickly.
That’s where many investors lose money because investing involves psychology and can be very emotional. People want to act swiftly. However, when you invest with a team—investing in their business and those assets for the long term—you, as the passive investor, can take advantage of that strategy.
That’s a significant leverage point that’s sometimes not fully understood. All the roles you mentioned come together to source amazing opportunities, manage those opportunities, and deliver great returns to investors.
I agree. To wrap up our discussion about interviewing, which closely mirrors investing, I’ll share a bit from my experience in the pharmaceutical industry. I moved from one department to another, and in the first department, I observed that the interview process painted an unrealistic picture of the job. It depicted the role as rainbows, sunshine, and butterflies—essentially a dream job. The reality, however, was that most people would leave within two years, often within just one year.
When I transitioned to the other department and was in charge of hiring, I took a completely different approach. Although it was essentially the same role, I painted a starkly realistic picture. I would tell candidates, “This is going to be the worst job you’ve ever had. It’s extremely difficult, involves long hours, and is fraught with bureaucracy. Only highly driven individuals who can let things roll off their backs will thrive in this position.”
It did one of two things. First, it self-selected people who wanted to continue. Some individuals stopped me in the middle of the interview and said, “This isn’t the job for me. I didn’t think it would be like this. I can’t sacrifice weekends or evenings.” That was great; it saved me time at that moment because we stopped the interview. But more importantly, it saved me the time I would have spent training that person after hiring them.
The second thing it did was set clear expectations for that person. In my experience, when reality doesn’t meet expectations, it creates discord. Conversely, when reality aligns with expectations, you foster a thriving environment. That’s essentially what happened here: we painted a realistic picture of the job, and it matched their expectations, so they stayed.
Interestingly, other departments would ask, “How are you getting all these people to stay? They don’t leave you. Is it just because of you as a manager?” I would tell them, “No, it’s because of the framework I set up before they even entered the building.”
We apply the same approach to investing. When we have an offering, we don’t say, “This is going to be the best investment you’ve ever had, with no risk involved.” If anyone has watched our presentations, we outline not only the risks—which are legally required—but we also go a step further. We show a sensitivity analysis that illustrates how our operations might be impacted if something goes awry internally. We also discuss how changes in cap rates can affect returns. We are very upfront about these risks.
When people ask us what the greatest risk of the investment is, we always identify it. This brutal honesty allows people to make informed decisions, and it instills confidence when they have all the necessary information. They feel more in control of their decisions, which is crucial.
People need to have that information. We can’t paint a picture that suggests we’ll always come out of deals successfully. The reality is that over the past three years, cap rate compression has affected most people’s returns. This compression has contributed to the impressive 20%+ IRR returns that many are quoting.
When reality doesn’t meet expectations, you have discordance. But when it meets expectations then you have thriving environments.
At a recent BiggerPockets conference, I shared insights on this topic. I asked the audience of about 400 people how many had invested in the past three years and had their deals sold within the past year—approximately 75% raised their hands. Then, I asked how many had exceeded their original projections, and everyone kept their hands up. However, when I inquired how many had requested the original pro forma, specifically the original NOI and cap rate projections, only two hands went up.
This shows that people don’t ask for those underwriting assumptions when things are going well; they only seek them out when issues arise. Yet they make decisions based on assumptions that suggest things went well with specific operating groups over the past three years. In reality, it was the market that performed well, not necessarily the operators.
This creates a situation similar to Pavlov’s Dogs on two fronts. Investors continue to invest in groups that essentially failed to perform because the market carried them. Meanwhile, operators are rewarded for not knowing how to operate effectively. So, when it comes to their next deal, they’re unlikely to learn how to improve because they believe they’re succeeding based on previous outcomes.
I know I’ve gotten a bit off-topic from our initial discussion, but I think investors must be discerning and choose the right operators to invest with, rather than relying solely on statistics like the 20%+ IRR returns from the past two years without examining the underlying details.
Those are great insights, Ashley. It’s a good segue as we approach 2023 and face some major headwinds in the multifamily space. How are you positioning for next year? What are you seeing right now?
A few things. First, we’re still in acquisition mode; that doesn’t change. What does change is how we underwrite, especially in terms of being more conservative with interest rates. I think the Fed is cooling off on rate hikes, but I wouldn’t say they’re done yet. We’re trying to gauge where we believe interest rates will land, which influences the loan products we consider. Previously, we were looking at more floating-rate debt with rate caps because interest rates were so low.
In this environment, you might want to consider a fixed interest rate or a bridge loan, especially if you think interest rates will come back down. This way, you have the opportunity to refinance without facing huge penalties, which you would incur with agency loans like those from Fannie Mae or Freddie Mac.
One of the recent pivots we’ve made is the launch of our preferred equity fund, which you can find more information about at preffund.com. The way this preferred fund works is that we carve out a small portion of the total raise in partnership with a group, and we come in before the common equity. Typically, in a capital structure, you have the debt and the common equity, but we have a slice that comes before common equity. This means our investors receive their returns before the common equity holders do.
This arrangement applies both during the holding period and upon sale. When the property is sold, the mortgage gets paid off first, and then the investors in our preferred fund receive their basis plus their return before the common equity gets their basis back. This structure provides a layer of protection for investors.
The fund is diversified across different assets, operators, and markets. We created this fund because we were frequently asked what Jay and I were investing in personally. We realized we could help our investors by vetting deals and getting involved in them.
For investors in the preferred fund, it’s treated similarly to debt in that they receive monthly payments, akin to a coupon. This structure offers our investors the certainty of regular payments. However, the trade-off is that they do not participate in the upside. So, if you are looking for investment opportunities with high upside potential, this might not be the best vehicle for you. But if you seek something more steady and reliable with very low risk from market fluctuations, this could be a good option.
We believe that, given the current market conditions, this fund provides a solid opportunity for investors to have low risk. Essentially, the deal would need to be almost foreclosed upon for investors not to see a return. Additionally, if two consecutive payments to our investors are missed, we take full control of the deal, which adds multiple levels of protection for investors.
We launched this fund last week, and it has different branches. The first tranche includes a multifamily asset, but we will be adding self-storage facilities, more multifamily properties, and RV parks, and are exploring other asset classes as well. This allows for diversification across asset classes.
As we move into 2023, it’s going to be very interesting. Cash flow is going to be crucial—whether in your finances or within your business. Do you have enough cash flow to manage rising expenses, which could stem from supply chain issues or increasing debt service costs?
Some operators are potentially pausing distributions and taking various measures to preserve cash flow as we approach the new year. We start with a solid operational reserve, which I believe is quite different from most operators. Many operators are freezing returns because they lack the operational oversight to maintain sufficient reserves from the beginning.
To be transparent, one of our investments has a rate cap, so it has a floating interest rate. We opted for a 1% strike rate, meaning it’s 1% above the interest rate we signed on. Whenever the interest rate exceeds that, we receive a refund of the difference. This is favorable for day-to-day operations. However, since we have a three-year term, there’s also an accrual requirement that the lender imposes for the next rate cap. Even though it’s our money going into a fund, this can be significant.
Let me break that down with some numbers. When we first purchased the property, we were accruing $303 a month for the rate cap. In October 2021, I received a notice that the accrual was increasing to $1,100 a month. We started in September 2020, when it was $303. In March, the accrual increased to $9,200, and in the first week of October, it jumped to $54,000. The way rate caps are evaluated is based on debt volatility.
When the Federal Reserve was implementing all of its rate hikes, there was a lot of uncertainty about where those rates were headed. This volatility risk gets factored into the rate cap, adding an element of unpredictability to interest rates. To put it in perspective, if we only purchase a one-year rate cap instead of a three-year one, the cost savings won’t be simply a third; it might be significantly more. The pricing is structured this way because predicting interest rates a year out is much simpler than projecting three years ahead.
Some might argue that it’s essentially a gamble either way, but traditionally, that’s how the pricing works. Currently, we’re accruing $54,000 a month for the rate cap, which isn’t sustainable in the long term, even with our operational reserves. As soon as we received that notice, we decided to put our distributions on hold.
This isn’t because we’re currently in a cash crunch, but if we continue to pay $54,000 each month, that adds up to a significant expense over a year. Although we can tap into the rate cap when we purchase the next one, it’s crucial to be mindful of upcoming expenses.
I believe it’s always better to over-accumulate for interest or operational reserves and hold back, rather than face the difficult conversation of having to initiate a capital call because we are short on cash. If you’re managing funds, it’s common for some people to be unhappy about the lack of distributions. However, making responsible decisions is key.
I don’t base my choices on making every investor happy with monthly distributions; instead, I focus on how to ensure their satisfaction over the lifespan of their investment. It’s about making marathon decisions rather than sprinting for milestones.
Yes, maintaining that long-term investment perspective is crucial. There’s so much media out there filling people’s minds with reactive thoughts, making them feel they need to change their approach immediately. We often receive calls from investors worried about market fluctuations. But true legacy wealth is built by looking 25 years into the future and navigating through various market cycles. Understanding that these cycles exist and being prudent about capital preservation is paramount.
People aren’t looking into true legacy wealth, 25 years into the future with investments. They are only reacting to what the media giving them at that instance. Life unfolds for our viewing pleasure.
That said, it raises the question of cash flow. As we approach a potential recession, what alternative income streams do we have if income from these multifamily investments isn’t coming in?
Are you asking me for my thoughts or passive investors?
For passive investors, most have some other source of income—usually a W-2 job. They typically invest with us for reasons like retirement, generational wealth building, or funding a college education, rather than for immediate cash needs. This context influences the answers to questions about cash flow management.
We only accept accredited investors, meaning they generally earn over $200,000 individually or $300,000 jointly, or have a net worth exceeding $1 million (excluding their primary residence). Those investing with us are usually well-established financially, so they have a certain buffer.
Regarding preparation for cash flow challenges, that’s a great question. For those actively involved in passive investing, diversifying income streams is crucial. For example, while we have the fund, we don’t charge traditional fees; instead, we only earn when the fund performs well. This aligns our interests with our investors, as we both benefit from the fund’s success.
Additionally, we’ve recently invested significant energy and resources into our coaching program. We believe this is an optimal time for education. Typically, right before or during a recession is the best time to gain knowledge about an asset class. This education positions investors to take advantage of numerous opportunities as they arise during such market conditions.
Discounted properties are something I think we’re going to see a lot of very shortly. I believe many people are exiting the game right now, so this is a good time to equip yourself with all the necessary tools, resources, and teams. Identifying partners and choosing your target market for investment are crucial. By focusing on these elements now, you can start to build a presence and a reputation that positions you well to grow during the next recovery cycle. This way, you can ride the wave when the market shifts.
It’s really about timing the markets, and we firmly believe that education provides you the opportunity to do that better. If you look at truly successful investors—those who have sustained success over a long period—it’s not because they did the same thing every single day; it’s because they made the right moves at the right times. This requires adjustment while maintaining focus.
For example, our fund illustrates this concept well. I’m not trying to toot our own horn; rather, I want to paint a picture of how we’re pivoting without deviating from our core mission. We remain in the multifamily sector and within real estate, but we’re offering a different investment vehicle. It looks different on the surface, but all the essentials behind it—our knowledge of multifamily operations and our ability to position equity favorably for investors—are still strong. These are small pivots that enhance our strategy without derailing our overall direction, creating an additional income stream.
I completely agree, Ashley. Education is paramount, even in a good market. One of the core pillars of our wealth strategy is educating ourselves about various investments as well as cultivating the right mindset. This mindset will be a significant factor for those who emerge from this recession and who can transfer wealth in their favor. Ashley, if you could give investors just one piece of advice on how to accelerate their wealth trajectory, what would it be?
Take action. People often don’t take enough action. If you’re constantly moving and looking for ways to improve—even if you’ve already invested—consider how to leverage your existing skill set. I always say lead with value; use your skills to benefit an existing group. For instance, if you have a marketing firm, you could come into a real estate group and market for them. Even if you’re then considered an active investor in that group, you could negotiate equity ownership in return for your services.
Remember, when investing in multifamily properties, you’re buying businesses. You need to identify how to run these businesses optimally. Everyone has a skill set that can contribute to making a business run better, whether you’re in accounting, law, marketing, operations, construction, or sales. Leverage what you’re good at; you don’t need to be a real estate expert to partner with someone who knows the investing side.
Too many people approach me and, I’m sure, you as well, asking, “How do I get involved? How can you help me?” Instead, if they spent that energy highlighting their strengths, I could direct them toward someone who needs their help or identify any gaps we could fill together.
Awesome insights, Ashley! I appreciate your thoughts today. If people want to connect with you or learn more about Bar Down and the fund, where should they go?
If you’re interested in learning more about our company, visit bardowninvestments.com. You can explore the fund there or go directly to the fund at thepreffund.com. Additionally, if you’re interested in coaching, our program is called Apartment Addicts, which you can find out more about at apartmentaddicts.com.
Thank you so much, Ashley!
Thank you so much.