Real Estate Syndication Risks: Bridge Loans, Interest Rates & Stopped Distributions

Verna Staggers (00:00)
Because of the way that they funded their deal, it was a bridge loan. Interest rates had spiked more than they expected. And they paused all the distributions for all of their investors. That’s when it got real. Because before that time, I was getting a lot of money every month.

Without having to do anything. I would just open my account and I would have thousands of dollars. And so that was my first real moment that wow, this has risk too.

Freddie Steen (02:03)
Hey everyone. Welcome to the Investor Fuel Podcast. I’m your host, Freddie. And today I’m joined by someone I’ve been looking forward to chatting with. Verna Staggers, who is the CEO and founder of VLS Enterprises.

She’s not just into real estate, folks. She also has a thriving book that is out now. And that is on the career coaching side. So we’re going to learn a lot today. I’m glad to have you here, Verna. And I think our listeners are really going to take something away from how you’ve approached the real estate industry as an investor, leveraging your corporate background to build a real estate syndication that incorporates the Sunbelt and even the DMV.

Now I’m an Adams Morgan fan. And you’ve done this while still maintaining margin. Let’s dive in. First off, for people who may not be familiar with your world, give us the short version. Verna, what’s your main focus these days? And what markets are you operating in?

Verna Staggers (03:07)
Yeah, thanks, Freddie. So my main focus these days really is to I’m a workshop facilitator and speaker on career strategy. And so I help individuals decode, demystify, and navigate this complicated AI-driven hiring market that we have right now. And so that’s my main focus. I am also a very active investor and I’m a very active passive investor.

And I have my primary markets where my investments are are Washington, D.C. DMV, as you say, as well as the Sunbelt region, which includes Phoenix and Dallas and Atlanta and some of those areas.

Freddie Steen (03:46)
Tell us and we want to know because our real estate pros are from all over the country and they’re listening from all around the world. How did you manage migrating from the DMV area to the Sunbelt area? That’s a pretty competitive market, isn’t it?

Verna Staggers (04:01)
It is. I actually started out as an active investor where I was the landlord and I had I bought my first condo, rented it out. That went well. So I thought, let me keep going. Then I bought my first apartment building in Washington, DC. That went well. So I said, okay, let me keep going. So I bought two apartment buildings in Washington, DC. And then I held those for 10 years and I realized this is another job. This is

I already have a full-time job. This is hard. And I realized that I did I wasn’t so sure that I wanted to continue to be so active. And so I’ll spare you the details unless you want more details. But a lot of things happened during that 10 years that told me, you know, I think I want to be more passive. So in 2021, I sold both properties and I went all in on real estate syndications. I wanted to be passive. I didn’t want to have to deal with toilets, I didn’t want to have to deal with broken pipes.

I didn’t want to have to deal with lawsuits and I love the idea of being a passive investor and having true mailbox money, meaning all I have to do is go to the mailbox and there’s my monthly check.

Freddie Steen (05:54)
Verna, I think you unlocked a key there for our real estate pros. We never talk about this enough quietly in the corners of our groups and our networks. But having passive, being a passive income investor in real estate, would you say, Verna, that that in and of itself is an asset class that marries to the kind of lifestyle you want?

Verna Staggers (06:16)
Absolutely. And that’s exactly why I pursued it. I wanted to have more freedom. I wanted to have less stress, if you will. I I didn’t want to have to make decisions every day. But one thing that I learned is that even though that’s what attracted me to passive investing, there are trade-offs. So when you are an active investor, there are certain trade-offs, but when you’re a passive investor,

there’s still the same amount of risk. It is just a different level of risk. So it’s not the it it’s not the fairy tale that I thought it was going in.

Freddie Steen (06:49)
Verna, we had a chance to spend some time before the podcast. And I know this is one thing that would really help our real estate pros that have backgrounds that are similar to yours. Tell us how your background in tech has helped you marry that to the innovation that’s happening now, not just in career coaching, but also in real estate. What have you seen? What’s the trend?

Verna Staggers (07:17)
Yeah, there’s a lot of trends. First of all, there’s a there’s a couple of questions there’s a couple of things in there that you said. So first let me just say that none of this would have happened without my career. Like my career funded all of this. It every down payment my down payments were funded by my bonuses, right? My sometimes it was my salary that kept me going each month when I wasn’t getting the cash flow that I should have gotten.

So I wanna that’s why I merge careers and investing because it’s very important. In terms of the trends, there there are a lot of macro trends happening right now for passive investing, right? So we, as everyone knows, we are in a we we’ve had the highest interest rate spike in 40 years. Okay. And so that’s in affecting a lot of multi-fam large multifamily investments, which is where I’m at right now.

We also had a bunch of oversupply and over de development that happened after the pandemic. And they were just building all of these apartments. Well, now we have an oversupply of apartments and less renters. And that’s putting rent pressure on all the apartment buildings because they can’t charge top dollar. And so fortunately, according to CoStar, that absorption is happening and they expect the supply to come back in line probably by the end of twenty-six, early twenty-seven. So that trend is

is is working its way through. But the biggest threat for me is gonna be the interest rate uncertainty, because we don’t know what the Fed’s going to do. And unfortunately there’s a direct correlation between interest rates and how my investments perform.

Freddie Steen (08:51)
To the interest rate hike you speak of, due to the building and the superfluous building that went on during the period of time you’re talking about, how do you feel about this trend toward more density? In other words, working with architects that build multifamily dwelling spaces that may be in a tighter land space, but actually on the inside, provide more space for more tenants and more profit.

Where do you weigh in with that?

Verna Staggers (09:20)
You know, that’s an interesting point, Freddie. I mean, I y I see it’s interesting because despite these pressures, there still is a shortage of supply of housing. I mean, we still don’t have enough housing in the United States. That’s a problem. And so I think that’s an interesting I don’t have I never really gave that much thought. I I mean I think it sounds reasonable.

The density issue, that’s not something that I’ve given a lot of thought, but I do know that we still have a supply issue in in this country and we don’t have access to affordable housing from for most people.

Freddie Steen (10:25)
Well, here’s a good one, Verna. Tell us about your thoughts on the entrance of AI in our space of real estate and superfluous vibe coding, these agents that are just getting up in the morning and making an agent and have no idea what they’re doing. What’s the danger with that?

Verna Staggers (10:44)
Yeah, I think that that’s a that’s an interesting question. I do think there’s a place for AI. I think that I I think that disrupting real estate and in entirely and replacing it with AI is probably not realistic, at least not in the foreseeable future. I I do th I do think that there are places where AI can be helpful.

You know, I I’ll be honest with you, I use AI right now to decode and summarize a lot of the investment sup reports that I get from my syndicator operators every month. I mean the documents are like eighteen pages and so I use AI like give me the five things I need to know. So I think it depends. I think it depends. I think it depends on what you use it for.

Freddie Steen (11:28)
Love it. You know, Verna, what caught my attention about you and VLS Enterprises was the way that you’ve been able to marry a career in tech with real estate investments that have been profitable in multiple markets and still keeping your margin strong, being able to pivot into career coaching in a book. Can you tell us the title of your book and how have you kept that machine running smoothly in this climate?

Verna Staggers (11:57)
That’s great question. So the title of my book is What Companies Don’t Want You to Know: 39 Insider Secrets from a Former Corporate Recruiter. And basically, I just took 39 things that would shock you that happen in the hiring process behind the scenes. And I thought, why don’t I share this? And so to help give people an advantage. And so I put all of that into a book. It’s available on Amazon. You can get that immediately if you want.

But yeah, and so that’s I I see a correlation. There’s a chapter in the book where I talk about everybody, I don’t care what your career is, I don’t care what your level is, everybody needs a side hustle. You just do. For me, it happened to be real estate. Okay. It may not be that for others, but I recommend real estate. But yeah, everybody needs a side hustle. It goes hand in hand with your career. And I talk about that in the in the book, but

again, I think it’s interchangeable. I don’t think jobs are a bad thing. I think jobs can fuel your investments and jobs can fuel your financial freedom.

Freddie Steen (13:00)
Verna, that’s exactly what I wanted to get back to because so many of us are around our investor groups and our peer groups and our network groups that shame us for if we had to come from a corporate and figure out how to cut the cord to become entrepreneurial. But you leaned in on that in that moment. Here’s my question. The real estate chapter in your book, which is flying off shelves right now, you should download it, all of you.

What has been the commentary from real estate pros all over the country about that chapter?

Verna Staggers (13:32)
You know, that’s a great question. I think the the biggest theme I got from that chapter is, I never even thought about that. I do need to do something on the side. I do need a side hustle. It is really easy to get to get distracted, focused on your day job, head down, trying to deliver, trying to do everything right. And then you wake up up one one day and there’s a layoff and you’re like, what am I gonna do?

Or you wake up one day and you’re burnout and you’re like, I can’t do this for another twenty years. And so the biggest eye opener was the fact that you do need a side hustle and the fact that yeah, this could be a good side hustle to help you know, produce multiple streams of income.

Freddie Steen (14:55)
Love it. Now every operator I know, Verna, has a moment where things got real. I mean, maybe a deal that went sideways or a time they had to pivot fast. You mind sharing one of those moments for you?

Verna Staggers (15:08)
Boy. Ha ha ha. Let’s see. I’ve had a lot of those as an active investor and I’ve had that as a passive investor.

I can share one of both. As an active investor, I had a flood. I had a water main break in one of my apartments and I had an uncooperative tenant who didn’t feel it necessary to cooperate to resolve the water main break. And so I literally had the DC fire chief and I literally had the DC first responders knocking on his door and he refused to answer the door.

And so the apartment was flooded. And so that was that was an interesting situation because the buck stopped with me. I was the landlord. I was the person that was actively in charge. And I would say another, wow, this got real moment from my passive investing is right around 2022, early 2023, a major investment that I have in a very large apartment complex with 350 units in the Sunbelt region.

Because of the way that they funded their deal, it was a bridge loan. Interest rates had spiked more than they expected. And they paused all the distributions for all of their investors. That’s when it got real. Because before that time, I was getting a lot of money every month.

Without having to do anything. I would just open my account and I would have thousands of dollars. And so that was my first real moment that wow, this has risk too.

I don’t have to be the one making the decisions. I’m not the one as the operator on passive, but this has real risk too, because you have no control and they can stop distributions anytime they want.

Freddie Steen (16:56)
Verna, thank you for your transparency. That’s the kind of stuff that people don’t talk about enough. The pivot. And honestly, it’s what separates the folks who just dabble from the ones who stay in the game long term, like you and VLS Enterprises. Verna, let me ask you this as we wrap. What are you most focused on solving or scaling next? I mean, what’s the next real goal for you?

Verna Staggers (17:21)
Yeah, my next goal is to help people demystify this AI driven hiring market. A lot of people are disillusioned, especially here in the DMV. I’m sure you’ve heard we’ve had an unprecedented amount of layoffs in areas where we’ve never had it before, due to factors going on. And so really helping people demystify the you know, AI driven hiring market, a lot of people are discouraged.

A lot of people are being rejected. They don’t understand how AI fits into applying for jobs and really helping to demystify and help people get through that so that they can position themselves favorably and and increase their chances of getting hired.

Freddie Steen (18:02)
Big, especially when you’ve already got your background corporate in tech, you know, in place. I mean, the next move can either compound things or create chaos, depending on how you play it. Verna. Now I know a lot of people listening are either earlier in their journey or looking to level up like VLS Enterprises. And I think they benefit from hearing this like they benefit from reading your chapter on real estate. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Verna Staggers (18:35)
Focusing on and it I I would say doing it, like focusing on relationships and growing your network. What a lot of people don’t realize there’s a lot of fear right now around AI disrupting everything. And it is. But there’s one area that AI is gonna have a hard time disrupting, and that’s human to human contact, human to human networking. And peop today we have a culture, everyone’s on their phone.

Everyone’s on their app. And I think people need to remember, go back to blocking and tackling, pick up the phone and talk to people. Because that is one area that AI cannot disrupt. And so that’s applicable whether you are networking in your career and trying to find your next job. That’s it’s applicable when you’re trying to learn about investments and where the best deals are. It’s applicable if you’re trying to level up and do passive investing and go into real estate syndications. You’ve got to network. And

You know, there’s a lot of information online, but you know, I think I’ve been pretty candid and I’ve told you some of I’m not telling you it’s been a rosy picture because it hasn’t. I’m telling you that some of my distributions were frozen and I was getting thousands of dollars a month and I’m not anymore. You’re not gonna hear that on an app. You’re not gonna hear that, you know, on an article. But if you talk to someone one on one, you may get more information. So I would just say the biggest thing is just to k don’t undervalue networking, because it makes a big difference.

Freddie Steen (20:00)
For our real estate pros listening, don’t undervalue this podcast because we have brilliant podcast guests like Verna Staggers. Okay, now I know a lot of people listening are either earlier in their journey or looking to level up. And I think they would also benefit from hearing this. What made you keep going when times got tough?

Verna Staggers (20:24)
I went back to my why. So when I first started doing this, I actually tried to envision the life that I wanted for myself five years from now. And so that pulled me through. So I still have hope in that. We’re going through a tough market dynamic right now, but I still have hope in that. That I think anchoring back to what my vision was, anchoring back to what my why is. Like, why am I doing this? Like I wasn’t.

You know, answering the phone when my apartment was flooded just because I do that in my spare time. I don’t really particularly like dealing with tenants. I’m doing it because I want what that gives me. I want the multiple streams of income. I want the more freedom as I get older. I want more options, right? Instead of being confined to a job. So really what pulls me through is anchoring back to that. You know, why are you doing this to begin with?

Don’t look at the bumps in the road, just anchor to why you’re doing it and that’s what keeps me going.

Freddie Steen (21:20)
Yeah, you can’t you can’t fake that. And you’ve already spoken this, that relationships are everything in this space. All right, before we wrap, if someone wanted to reach out, connect with you, or maybe collaborate or learn more about VLS Enterprises and Verna Staggers and what you’re doing, what’s the best way for them to reach you?

Verna Staggers (21:38)
Yeah, so there’s a couple of ways. You can email me directly at [email protected]. You can also hit me up on LinkedIn. My handle is Verna Staggers. And you can also go to Amazon and type in my name or What Companies Don’t Want You to Know, and there’s my book. So there’s a couple of different areas. You can just email me directly. I respond to all of my emails within a couple of days.

Or you can also hit me up on LinkedIn as well.

Freddie Steen (22:09)
Verna, before we wrap, is there anything that you would want me to know that we have not covered?

Verna Staggers (22:14)
You know, I think we’ve covered most of it, Freddie. I think you’ve been pretty detailed. I would just say to the listeners, there’s no perfect investment, right? All investments have pros and cons. And if somebody tells you, you’ve got to go into this investment because it’s the you know, it’s it’s it if it’s too good to be true, it probably is. And just understand that there are pros and cons to everything that you do and you just need to look at both of them and just see which one is

the most valuable for you, but there is no perfect investment. And also the other thing I would say is there is no get rich quick. That that’s a myth as well. It takes time. It takes time. I think that real estate has produced more mil millionaires historically, but it’s not going to happen overnight. It will take time.

Freddie Steen (23:00)
Well, Verna, I can’t let you go yet. You gotta tell us why are there no get rich quick schemes?

Verna Staggers (23:07)
Because there are no shortcuts. There are no shortcuts. And even I will just share one anecdote. When I got into passive investing, I did network and I talked to people who were in the same deals, the same operators as me. And I heard stories around two nineteen ninety nine no what two thousand, right around the pandemic, two twenty, two twenty one or no two nineteen, two thousand eighteen, people were getting their money back.

Within a year and a half and they were doubling their principal. They were doubling their investments. And they and they were credible. And I was like, wow, I, you know, this is amazing. Those same people are now struggling because the market has turned and we’re in a different part of the market cycle. So there’s no perfect investment. And even if you’ve had early success and you have one of those amazing stories, you probably have a similar story that’s not so amazing, right?

On the flip side. So I just, you know, it’s not again, just evaluate the pros and cons and understand that there’s going to be risk and you just need to ac accept the risk or not accept it.

Freddie Steen (24:11)
Verna Staggers, thank you for giving us these nuggets and getting us closer if we’re leveling leveling up early in our journey. We know now more about real estate syndication than we did when we started this podcast. So thank you for that.

Verna Staggers (24:25)
Thank you, Freddie.

Freddie Steen (24:25)
And for those of you tuning in, if you got value from this, make sure you’re subscribed. We’ve got more conversations coming with operators just like Verna Staggers, who are out there building real businesses just like you. We’ll see you on the next episode. Thank you, Verna.

Verna Staggers (24:45)
Thank you, Freddie.