How to Diversify Your Real Estate Portfolio | Passive Investing with Tom Schmidt

Tom Schmidt (00:00)
of course, real estate is the same thing, right? If you people tend to get good at something, right? I’m good at flipping houses or I’m good at commercial.

⁓ retail strip centers or whatever. And they do those over and over again. What happens is you wake up one morning and 90% of your net worth is in strip centers, and all of a sudden something like COVID happens and you’re wiped out, right? So you gotta focus and make sure that over time you’re self-correcting and diversifying into other types of real estate. First, you need residential, you need commercial, you need businesses. We do a lot of things like car dealerships, emergency rooms, surgery centers, medical office buildings.

Sort of ongoing businesses that are also ⁓ have that real estate component.

Issa Hanna (02:14)
Welcome back to another episode of the Real Estate Pros Show. I’m your host, Issa Hanna and today I have Tom Schmidt with Ticker Tape Investments here to share his knowledge with us. Tom, welcome to the show.

Tom Schmidt (02:24)
Hey, you said thanks for having me.

Issa Hanna (02:25)
I’m super glad to have you. ⁓ you are a wealth of knowledge in not just the real estate industry. You are a wealth of knowledge in the investment space. So with that, can you kind of run down ⁓ what ticker tape does?

Tom Schmidt (02:39)
Sure. So Ticker Tape Investments is really just a loose affiliation of a bunch of individual investors and family offices and trusts that invest together in deals. ⁓ there’s no ⁓ formal structure. ⁓ we operate on a single-purpose venture basis. So each investment is its own LLC, and investors contribute capital to buy into that LLC for a particular asset. And the idea is just to help.

busy professionals who don’t have time to evaluate deals, don’t know how to evaluate deals, and don’t have deal flow, see more opportunities and kind of quickly be able to deploy their assets across a diversified portfolio.

Issa Hanna (03:23)
Amazing, amazing. So in other words, you you you doctors, you you high value earners that want to invest in something and don’t really know how to speculate. ⁓ a company like Tom’s will will literally let you invest. And and the one thing that stuck out with me in our conversation earlier, they’re not just investments you’re you’re finding. You’re putting your own money up. They’re your own investments and you’re offering them the limited partnership and then the passive income. So you’re doing a lot of the heavy lifting.

yourself for them. So can you kind of elaborate on that?

Tom Schmidt (03:54)
Sure. So so ⁓ people ask me, you know, well, you know, why do you do this? Are you you making lots of money on the deals? And we do charge fees because there’s a lot of work to manage all the investors and so forth. But the real reason we do it is to deploy our own capital across a diversified portfolio of deals. You guys in real estate know that if if I’m an investor looking at your deal and I come to you and say, Hey, I’m willing to put in a hundred thousand dollars, I don’t get a lot of special treatment.

But if I said, hey, I’m I’m gonna write a check for four million dollars, all of a sudden I can negotiate better terms. Maybe you reduce your carry a little bit or give me some sort of preferential benefit. So what we’re doing is we’re aggregating capital amongst a bunch of different investors, and then we have negotiating power, we can shop more deals, we get access to more deals because we have more money. But I’m putting my money in every single deal, either me or my family trust or ⁓ one of my LLCs in every deal.

because the whole point is for me to build my own diversified portfolio.

Issa Hanna (04:54)
And also it means that you are not gonna just ⁓ take the bright shiny object that that looks cool. You know, you’re gonna do your speculation, ⁓ because you’re putting your own money up and and you’re you know, you’re investing on your own. It’s not just investors’ money. It it’s your own money. So you know you’re gonna take care of it.

Tom Schmidt (05:12)
And and one of the things yeah, one of the things that it really drives is is the fact that there it’s not one decision maker. So if you have a fund and there’s a fund manager who makes all the decisions, he’s in his little dark room analyzing paper. I’ve got 20 people or 30 people that I have to answer to on the due diligence side. And sometimes we have them do it, right? So maybe we have oil and gas experts who look at an oil and gas deal for us and and give their opinions. So that the due diligence

is better just by having more participants in the process. but yes, I’m before I’m talking to you about participating in a particular multifamily property, I’m either very certain about the comp my confidence level in the deal because I’m putting my money in, or I’m gonna tell you, and we’ve done a couple of those. We invested in a multifamily property in Illinois where there it had been built on top of a coal mine and the land had subsided eight feet, which is crazy when you think about it.

They’d had a bunch of repairs done before we got into it. And I literally told our investors, I said, guys, this is a high risk, right? Who knows what could happen? This thing could fall down and there could be some sort of problem. Fortunately, it’s one of the most lucrative deals we’ve ever done, but you’ll get that sort of feedback.

Issa Hanna (06:25)
Definitely. And and I love that the honest feedback. it’s not just like, hey, you’re gonna make all this money. It’s like here’s what can go wrong. investors investors love hearing an honest guy, ⁓ and they love knowing that you’ve got, you know, ⁓ you’ve got some skin in the game, like they say. So I so I love that. ⁓ and I wanted to pivot a little bit. I wanted to get a bit of history on you, you know.

Not everybody starts off with the knowledge that you have, right? So so how did a young Tom get started?

Tom Schmidt (07:40)
Well, first of all, I’ve been a lawyer now for 30 years and ⁓ I I handle a lot of different kinds of commercial litigation, but the closest thing I have to a specialty is representing investors who have lost money in a deal trying to get their money back, whether there was fraud or there was some other problem or whatnot. And I’ve represented everything from franchisees who got cheated in a franchise scheme.

To doctors who invested in a in a mental health hospital, to ⁓ individual and just a whole spectrum of investors that got taken in a big Ponzi scheme. And so in that process over the years, I kind of learned all the ways, all the mistakes you can make as an investor getting in a deal, overlooking this, not paying attention to that, not asking these right questions. And so just kind of compiled all that knowledge.

And eventually I when I started wanting to, I’m also an entrepreneur and made a little bit of money. So I I got to the point where I wanted to start investing. So I was using all of that knowledge and I said, hey, why not start teaching it to other people? And so that’s kind of how Ticker Tape Investments was born. Most of what we do is sort of educating investors on ⁓ tips and tricks for how to to build a successful diversified portfolio.

Issa Hanna (08:56)
Amazing. You’re sharing your knowledge. ⁓ it’s not easy to come by such a broad spectrum of it. So I I love that you’re giving back and and definitely the right person to be involved in in an investment with. and now I want you to talk to the real estate guys. ⁓ we have a lot of them obviously here at Investor Fuel. Sure. the importance of diversifying, ’cause we love to just stay in our lane. If it’s rental properties, we’re gonna keep buying the rentals. If it’s flips, we’re gonna keep doing that. So

Give the importance as to why you need to diversify.

Tom Schmidt (09:27)
Yeah, so we we talk about this a lot, and you can, you know, find stuff about this on our website as well. people have a very narrow view of what it means to be diversified in your portfolio. ⁓ I don’t know if y’all know ⁓ Jim Kramer on Mad Money. He does a little game, Am I Diversified? And the person names five stocks and he says, Yes, you’re diversified. And I’m like, my God, no. number one, all your audience, I’m guessing, has already figured out.

That the one of the biggest things that an American can do is diversify away from the publicly traded markets, right? We all have our 401k with some stocks and bonds in it, and and that’s okay, but we need significant diversification away from that to private equity deals. We use that term very loosely to include companies and investing in companies, but also real estate when you’re taking an ownership stake in some business or piece of land. And so

One of things we talk about is look look at your stocks portfolio. That portfolio needs to be diversified among itself. Then look at your crypto assets. Is all you own is Bitcoin? That’s not diversified, right? You need some smaller crypto, maybe some dollar back coins to diversify your crypto holdings.

And then, of course, real estate is the same thing, right? If you people tend to get good at something, right? I’m good at flipping houses or I’m good at commercial.

⁓ retail strip centers or whatever. And they do those over and over again. What happens is you wake up one morning and 90% of your net worth is in strip centers, and all of a sudden something like COVID happens and you’re wiped out, right? So you gotta focus and make sure that over time you’re self-correcting and diversifying into other types of real estate. First, you need residential, you need commercial, you need businesses. We do a lot of things like car dealerships, emergency rooms, surgery centers, medical office buildings.

Sort of ongoing businesses that are also ⁓ have that real estate component.

⁓ but then you need to get some of your assets out that are not in the stock market, not in real estate, but still in private equity, whether it’s early stage venture capital funds or we do a lot of late stage pre-IPO investing, things like SpaceX, SoFi before they go public. we have an open AI ⁓ round that we did.

⁓ and so th we think that’s a really good place for real estate investors to diversify because you’re not taking the stock market volatility risk, but you’re also getting out you have a hedge against the real estate market.

Issa Hanna (12:32)
if anybody talks to the real estate investors, me being one of ⁓ we are probably the most conservative type of investors because we like to predict our money. So ⁓ I love that. And then there’s a minimum, you know, it’s actually cheaper to diversify than to keep buying these rentals because you you can get into to a group like yours with a minimum on an investment. So can you give us a rundown on that?

Tom Schmidt (12:55)
Sure. So we ⁓ we don’t operate any assets, right? So we are simply passive investors. So for instance, if you guys in your audience have a multifamily or some other real estate related deal ⁓ that they’re looking for outside investors, we’re we’re a candidate for that, right? Bring us the deal. We look at as many as we can. ⁓ now I’ll I’ll have to admit we’re very selective because of our process is difficult to kind of get through because we’re trying to invest in just a few of the deals that we see.

But we’re certainly potential investors. And ⁓ and so what we’re you know, we’re out there looking for deals, and our let’s just say doctors and lawyers and other investors that invest with us, they don’t have to take the time to go look at multiple deals. They can wait, see what we decide. Hey, listen, we found these 10, we pick three, here’s three options for you, kind of thing. And so we we narrow down the scope, we assist with the due diligence, and then we we

Invest our capital in that deal and we invite others to participate with us on a voluntary basis.

Issa Hanna (13:59)
It. I love it. the more the merrier. What do they say? You know, you got one here, but you got five. Five makes a fist. So you can do a lot more dancing. That’s right. There you go. Than this. There you go. So I I I love that. ⁓ now I want to talk a little future. Five years down the line, the classic five year plan. where are we going to see you at, Tom?

Tom Schmidt (14:17)
Well, so I’m in the process of slowly personally, I’m in the process of slowly but surely transitioning into ⁓ semi-retirement. I’m I’ll obviously have an active law practice that I’m gonna close down, and then my entrepreneurial activities I’m looking to phase out. And then what I’ll be doing in my retirement is continuing to find deals, putting deals together for investors under ticker tape. So you’ll see me

focus more on investing deals than my other activities. one of the things for talking about the future, of course, everybody’s, you know, kind of wowed by the new technology that’s advancing and AI and all these things. And so we’ve done a lot of work internally on ⁓ how does someone invest today and make sure that they don’t find themselves hung out to dry later. For instance, you may invest in some business that all of a sudden no one needs anymore and so you lose all your money, right?

⁓ and we don’t want that. ⁓ you know, if if you set aside for a minute, hey, I don’t want to take the risk of or deal with the volatility of investing in an AI company, what is the world gonna look like if all these things come to pass that I can take advantage of? And so one example I can tell you is farmland, right? We start thinking about well, farmland’s never gonna go away, but then you start thinking about you’re like, wait a second, they can build vertically 50 story buildings with hydroponic.

plants growing and robots running up and down doing all the farming. So maybe farmland’s not the best idea, right? What we ultimately came down to is vacation rental properties in areas that don’t tend to be seasonal. So that they have winter and summer visitors. ⁓ number one, it has the land component. Number two, if we all if we all get put out of work and we get universal high income like Elon Musk talks about, where are we going to do? We’re going to travel and go on vacation, right? And where are you going to go?

You’re gonna go to the Floridas of the world. You’re gonna go ⁓ maybe to Mexico, you’re gonna go places like that. And so ⁓ that’s kind of our next focus is to start increasing our vacation rental properties. Now, of course, housing is still always gonna be a thing, right? So ⁓ apartments and single family homes and those kinds of things, high-rise and otherwise are great, but you know, pay attention to what happened in COVID.

Where ⁓ what happens if you don’t have to work in Manhattan every day, right? Are you gonna live in an apartment in Manhattan? Maybe not. Maybe not. I live in Houston, maybe not even live in central Houston. Maybe you start moving out north of the woodlands or south of Pearland out into the what we call the boonies today, because you’ve got self-driving Ubers that are super cheap, will take you anywhere and you don’t have to pay attention. Number two, you don’t have to go to work anymore. So you want to live in kind of a nicer place.

So make sure you’re paying attention to that when you’re investing in in real estate.

Issa Hanna (17:07)
One hundred percent. And just great, great advice you’re giving you’re giving our viewers ⁓ about just such a broad spectrum, like I’m saying. ⁓ I want to pick your brain about something now for the for the people just starting out, right? Our business, business in general, is all about relationship building. It’s all about establishing, you know, that business relationship, growing it, cultivating it, and growing your network. So can you give our young viewers ⁓ a few tips on how to start doing that?

Tom Schmidt (18:14)
well, I’ll tell you one you’re gonna love, ⁓ which is in it’s in the category of I wish I knew this 30 years ago, is join ⁓ mastermind groups. Any kind of networking group, but particularly those that are tied to some sort of education. And, you know, I know you guys operate one ⁓ for real estate, and and maybe some of the young people listening, they they want to know how to grow their network, but they’re not interested in real estate. Go find some other category. There’s there’s some sort of of

⁓ of industry network or mastermind training session that brings with it you want two things, right? You want education because you’re gonna learn from people older and smarter than you. And number two is the networking. You’re gonna meet people who can then help you. And one of the things I’ve found in my 30 year career is that I’m always surprised by the thing I wasn’t looking for, right? So I would go to a trade show and we’re going there for one reason. We just want clients, but I would find some vendor

Who was in the booth next to me, who ended up changing my business for the better, I didn’t even think about the product or service that they offered, right? And so it’s that surprise thing you find just by getting up and going to the trade show. Same thing in masterminds, right? I I’ve been through a couple real estate masterminds in particular, where you know, I learned some stuff. There’s always something new you learn. But the networking and the connections and the people that I can now call on the phone and say, hey, I’m having trouble with this thing. What do you think? That’s incredible.

Incredibly, incredibly valuable. ⁓ but on the on the investing side, for the young young folks out there, I’ve seen so many Instagram videos, and you probably have too, of old guys like me going, Man, I wish somebody had punched me in the face and forced me to invest when I was 18 years old. You gotta, gotta, gotta do that. ⁓ some of the expert guys will tell you, Tony Robbins will tell you find forced ways to invest your automatic 401k deposit.

⁓ build buying a house where you’re having to pay down the mortgage every month, that’s a way of force savings. Find things like that so you start saving when you’re young. ⁓ you know, you may have heard the story if you start at 18 and put $300 every month into a into the stock market for eight years. So when you’re 36 years old, you stop investing forever. By the time you retire, based on very conservative estimates, you’ll have 1.8 million dollars.

and never have to work again. Well, imagine if you do more than that and you grow the amounts over time and you invest all the way to retirement. And so the the number one thing to say is make sure you’re investing. And the number two thing is find masterminds and participate in them and and squeeze them for all that you can get out of them because they’re incredibly valuable, especially when you’re younger.

Issa Hanna (20:55)
Definitely. i in in our industry in in business and investing, ⁓ knowledge is you know the the top level people, you know. ⁓ when you can talk to them and you’re not afraid to come up to them, ask them questions, expect nothing in return. ⁓ offer them something. Right. ⁓ it goes a long, long way and that’s how you build yourself. So great, great advice, definitely. And now

If we do have and and we do here at Investor Fuel have some high value earners that ears probably perked up when you were talking about diversifying and and how you vet the the deals and everything. so if if they wanted to get a hold of you, where could they reach you?

Tom Schmidt (21:34)
Super easy. the website is tickertapeinvestments.com ⁓ two places to go when you get there. One of them is at the top, there’s a link for news and updates, and that’s where we post a lot of our educational content. The other place is the contact us page, which of course has a form and our phone number. But more importantly, it has links to all of our social media accounts. So you can follow us. Again, you’ll see more deal flow, ⁓ case studies, lots of educational content.

We talk about how billionaires invest and why they do better than us. ⁓ we talk about diversification, volatility in the stock market, why real estate works, all these kinds of different things that literally anybody who’s an active investor, I don’t care how long you’ve been doing it, you’ll you’ll learn something. I didn’t even mention tax strategies, estate planning, all sorts of valuable content ⁓ at ticker tapeinvestments.com.

Issa Hanna (22:24)
Amazing. Amazing ⁓ group you’ve you’ve made. ⁓ such a wealth of knowledge you brought to the show, Tom. I mean, ⁓ unbelievable. ⁓ I’d like to really, really thank you for coming on the show today. I’m all out of time. I do wanna invite you back on the show and and and maybe we can go a little bit deeper into some things if you’d like.

Tom Schmidt (22:42)
Happy to do it. Happy to do it.

Issa Hanna (22:44)
I’ll be happy to have you anytime. And to the viewers at home, if you enjoyed my conversation with Tom and want to see more just like it, make sure to hit like and subscribe. I talk to people every day that can bring us different knowledge on every aspect of the real estate industry. Until next time, the Real Estate Pros are out.