How Passive Real Estate Investors Can Avoid Bad Deals w/ Sarah of HYLEE Capital

Sarah Miskelly (00:00)
where you don’t actually control the property. You really need to be careful about who you’re giving your money to. Just making sure that you’re doing your due diligence. know, on the deals that we’re doing now, we have background checks on the partners, you know, a pretty thorough review of the underwriting, a lot of back and forth over months with a lot of these teams before any money is deployed. But I really want people to understand is there’s risk to this, just like investing in a stock, just like investing in a business. And the biggest risk

Michelle Tack (00:20)
Uh-huh.

Absolutely.

Sarah Miskelly (00:29)
risk

is loss of So I think that that is a frame of reference. People should really understand because the pitch decks can be very appealing and have some very big numbers on them.

Michelle Tack (02:13)
Hi, I’m Michelle Tack. am the podcast leaders for today’s podcast from Real Estate Pros. We’ve got a great operator with us today. Sarah, why don’t you say hi?

Sarah Miskelly (02:24)
Hi there.

Michelle Tack (02:25)
Sarah has a wealth of great information to share with us today. She is running an investment fund for real estate and has great progress so far. And ⁓ let’s dig into that Sarah a bit. So for those that don’t come from your world, that may not be ⁓ in a real estate investment fund, ⁓ but you

are looking for potentially to invest or have interest in partnering with you or leveling up their game. Can you talk about what exactly you do and how you do it and what markets you serve? Please.

Sarah Miskelly (03:10)
course, yeah. So essentially what my fund does is I’m fund manager and I’ve created a fund where

you know, in this world of, you know, looking for different real estate investments, it can be very confronting for a lot of people. There’s a lot of emails that they’re getting. You know, you’re getting blasted from your cousin Bob who wants you to invest in something. You’re getting told something’s great, but a lot of people aren’t really able to understand, you know, where the risk is and what is a good option for them based on what they actually need, which some people need cash flows. Some people need tax benefits. Some people are more interested in like long-term upside. So essentially like what my fund does

is

I help people, everyday people, invest in commercial real estate without having to actively manage it on their own. So how it works, very high level, is I have partners I’ve built over the 20 years. I grew up in real estate in the 20 years I’ve been hands-off investing in real estate. And now I have a fund where I help people, get educated on how it works, and then B, get access to opportunities they wouldn’t typically get, because obviously we’re bringing in much larger.

checks typically one to three million and then we’ve negotiated preferred returns for our investors and investors will then get you know cash flow and upside on exit while also understanding a little bit more about the risk profile and you know just getting more involved in real estate and diversifying without like I said having to actively be a property manager which is what I did when I was a kid growing up in property management.

Michelle Tack (04:38)
⁓

That’s awesome. Is there a level of entry? would be the investment of someone that came into and want to take advantage of your success with the fund? are your requirements for that?

Sarah Miskelly (04:57)
Yeah, so some deals have about a hundred K minimum. do sometimes have deals around a 50 K minimum. Some of my investors are deployed in like six or seven deals and they’re putting in two 50 per deal. So it kind of ranges depending on somebody’s current liquidity and what they’re looking to do.

Michelle Tack (05:13)
I appreciate

that. What areas do you cover from a ⁓ country basis? Can you talk to that at all?

Sarah Miskelly (05:26)
Yeah, for sure. So I’m in Costa Rica, but I always joke with people that, you know, you’re not actually money to Costa Rica. This is just where my family decided to reside. have three kids and this is just a good fit for our lifestyle. But essentially all the assets are in the U.S. All my partners are in the U.S. So I’m back and forth quite frequently and we’re all SEC regulated. you know, sometimes we have multi-family properties in Texas or, you know, some, some industrial properties in the Midwest. So there’s options.

Michelle Tack (06:43)
Yeah, I was really impressed when we were preparing for the podcast that number one, you were very definitive about your goals for the future. And for the podcast team, that was increasing, you know, year over year to a ⁓ large number, but you had that very clear in your sights of where without a…

of more than two seconds you had said that, what you’re looking to do with the fund. And I thought that was really impressive because ⁓ you’re very focused, which is great. In addition, ⁓ as you pointed out, the fact that you’ve been in real estate, it’s a familial, ⁓ not to a pun there, but in your family, the amount of real estate that you’ve looked at and then the property management piece is a whole nother thing. So you’ve seen the good, bad and ugly of real estate itself. ⁓

to help educate you as to what obviously over time what you would invest in. Can you talk about what keeps your machine running? And we think about the machine, the business operating smoothly, what you’re doing to ⁓ get handsome returns and also operational life from an infrastructure perspective.

Sarah Miskelly (08:01)
Yeah, for sure. Well, I think it all starts with my European work ethic that was instilled by my father, where you get up and you work hard every day. But essentially from like a more systematic perspective, you know, in this day and age, the beauty of how we can operate is we can build a business essentially online. So my whole business is with my laptop. ⁓ And, you know, essentially, you know, you have kind of CRMs, you have investment portals, have SEC filings, you have compliance teams, you have accounting teams, you have administrative assistants.

Michelle Tack (08:05)
No.

Sarah Miskelly (08:31)
So there’s a whole team behind it, but I would say the direction that I’m more interested in pursuing is more of a solopreneur type of business, which is quite beautiful that that is kind of possible in this day and age ⁓ while having various partners handling different pieces.

Michelle Tack (08:43)
Mm-hmm.

Right, you have very aggressive goals, but it sounds like you’re very organized with the different infrastructure pieces from the apps, from CRM to ⁓ probably your accounting system, et cetera, and also know the different laws that you need to know for financial ⁓ efficacy reasons. So that’s great. ⁓ Tell me a little bit about, if you can,

every operator as things get, every operator I’ve talked to and every operator that continues to grow ⁓ in their process of growth, like we all do just as people, there’s been a time when a deal went sideways and that you had to pivot quickly or if you weren’t able to pivot for whatever, there were reasons for that, there was something that you fundamentally are having your kit now because it was challenging.

Can you talk to that? I’m sure the folks listening would love to hear about that.

Sarah Miskelly (09:49)
Yeah, for sure. Well, I’m definitely still in some lawsuits seven years later for deals when I was very young. So I think one of the things that I bring to fund management is I am pretty much paranoid about everything. And from my own experience with my own capital, like from a long time ago, I’ve kind of seen what can go wrong. And I think that people getting into real estate investing in general, especially investing as an

Michelle Tack (09:54)
my gosh.

That’s good. That’s good.

Sarah Miskelly (10:19)
where you don’t actually control the property. You really need to be careful about who you’re giving your money to. Just making sure that you’re doing your due diligence. know, on the deals that we’re doing now, we have background checks on the partners, you know, a pretty thorough review of the underwriting, a lot of back and forth over months with a lot of these teams before any money is deployed. But I really want people to understand is there’s risk to this, just like investing in a stock, just like investing in a business. And the biggest risk

Michelle Tack (10:39)
Uh-huh.

Absolutely.

Sarah Miskelly (10:49)
risk

is loss of So I think that that is a frame of reference. People should really understand because the pitch decks can be very appealing and have some very big numbers on them.

But really digging in a little bit more deeply into like who is actually managing the deal because it all comes down to the operator and their ability to actually execute. And then additionally, not only that, like, well, what do they do if something goes wrong? And, you know, some things like having enough capital or being well capitalized enough to actually solve a problem.

because you know money does solve a lot of problems. You know there’s things that you need to look at in the teams you’re investing in and that’s the work I’m doing with my investors making sure they’re educated, making sure they understand the upside, the downside of every deal. And then at end of the day that they know you know the biggest risk is a loss of capital and that’s where we always make sure that they’re in a financial position to only you know deploy funds that are appropriate to deploy into the deal so they have to be accredited legally. So there’s a lot to it but I would say just making sure that you’re aware of the

risks ⁓ and also you know there can be very attractive upsides but it’s just important overall to understand what you’re getting into.

Michelle Tack (12:31)
Well, I appreciate what you’re saying because, you know, we see as a group, you know, folks that come in and, you know, sort of got the tick tock on real estate, buy this now and invest here now. And everything’s going to be great. And there’s no talk about a downside or potential, you know, length of time that you may, you know, may want to think about in terms of year over year commitment.

to whether any storms that may come about. And so I’m happy that you talked about that. In addition, if I was listening, obviously the fact that you even bring this up on the call and talked about the research, ⁓ knowing that there’s risk, but there’s also, of course, upside, that talks to your character in a lot of great ways.

In the future, ⁓ I know that you want to grow. ⁓ Help me before we conclude today, talk about two things, your network and the future of your business, not just in terms of the level of revenue you want to get, but can you talk about how you visualize the future for your company going forward?

Sarah Miskelly (13:51)
Yeah, for sure. I think that’s

the very succinct number you mentioned. So like my goal is to get to 100 million AUM. You know, I started this fund about three years ago after, you know, doing this for myself as an LP investor, which is a limited partner investor. So there was a very logical path of progress. I have a real estate sales background and a real estate background, as you mentioned, to get into fund management. So it just also selfishly gave me the ability to vet deals for myself while also, you know, making money off of it. essentially, I’m

My goal is to get to a hundred million AUM. think the path of progress with this is definitely in this day and age, leveraging as much, I hate to say the word because it’s such a buzzword, know, leveraging as much AI as possible, leveraging, you know, technological platforms, leveraging all the, ⁓ you know, kind of ⁓ service providers that are now being created for this expansion of this model. ⁓ So I think, you know, every day is just getting up and looking at what’s needed next. You know, I just had a consultant I worked with for a month to just clean up my system.

Michelle Tack (14:42)
Mm-hmm.

Sarah Miskelly (14:51)
lot of investment that goes into even a digital business, ⁓ the IP, etc. So that’s kind of my path and you know my goal is to get there in about five years so gotta keep working.

Michelle Tack (15:01)
Yeah, absolutely. And then if we conclude with your network, the network of people that you rely on that has contributed to your success, can you talk about that a little bit about how you’re using them and, you know, et cetera?

Sarah Miskelly (15:56)
Yeah, so I mean, you essentially when you’re getting into any kind of industry that you have to have be deeply connected. In my case, I have to be deeply connected with sponsorship teams that have deal flow. you know, essentially there’s five partnerships that, you know, I’ve developed over many, years. And those are my now partners who have the deals available that, you know, I’m then able to help my investors access. So definitely in terms of the sponsorship partnerships, but then as well, there has to be an accounting team. There has to be tech

Michelle Tack (16:09)
Right.

Sarah Miskelly (16:26)
platform team, there has to be an administrative team, you know, there’s a lot of different teams that kind of support a seemingly solopreneur business, which is what I like to create because I like to surf in the morning and I like to work from my laptop. ⁓

Michelle Tack (16:38)
cool. That’s awesome. That’s awesome. That I didn’t know about you, I,

yeah, but when you said it was a surfing community, I’m like, yeah, okay. That’s awesome. That’s really great. ⁓ You know, before we leave and conclude the session today, I’m sure there’s a bunch of people who want to contact you. Sarah, can you give the contact information and spell out any ⁓ emails or links or what have you that you’d like people to know about you or from you?

Sarah Miskelly (17:08)
For sure. So my website is HyleeCapital.com, which I will definitely spell out. it’s H-Y-L-E-E, capital C-A-P-I-T-A-L.com. And my email is Sarah with an H, S-A-R-A-H, [email protected] as well.

Michelle Tack (17:30)
You’ve been a wonderful guest. You’ve had some really pointed content that people I’m sure can avail themselves of. And certainly those that are interested in investing in your fund have the contact information. For those that are listening on the podcast today, we encourage you to continue your subscription and those that have find value of this podcast today, please subscribe. Thanks again, Sarah. Good luck in the future.