Rethink Real Estate. For Good.

FinTech

Andrew loves real estate.

Andrew Luong has deconstructed the often lengthy and confusing process of small scale real estate investment, making it accessible to everyone.  He and his partner, Justin, created Doorvest as a turnkey service built entirely online. They help their clients find a property, borrow the funds to renovate it and then sell the finished package to them. Keeping it as simple as possible, they have flat fees and even provide a rent guarantee for the first year. Their track record has allowed them to purchase and renovate properties in poor condition, or in neighborhoods that bankers might not normally like, thus opening the door for new real estate investors who might not have the wherewithal to take those first steps on their own.

Although Andrew began by working in the start-up world, his “squarely middle-class” upbringing led him to decide early on that real estate would be his path to financial security. In his early 20s he started buying and fixing up single-family homes in his spare time. Over just a few years his portfolio grew into the double digits, and he became not just a real estate investor, but a realtor and mortgage loan officer as well.

Over time it dawned on Andrew that the long laundry list of items that comes with purchasing a property, and keeps many people from considering investing in and managing a real estate portfolio, could be rebuilt into an almost frictionless service … bringing real estate investing to everyone. This is what ‘proptech’ is about, and Andrew’s bet is that within a few years most aspects of real estate will be transacted entirely online.

Insights and Inspirations

  • The bigger mission is to democratize access to financial security for all.
  • Andrew mainly sees two kinds of investors through Doorvest, neither of whom has invested in real estate directly before – those recently out of school, gradually building up their savings; and those mid- to late-career, looking towards retirement.
  • Doorvest serves as sort of training wheels for people to get their feet wet, get the exposure, learn about the processes along the way.
  • Andrew thinks most online real estate services are still a bit v1.0. Doorvest is looking towards aggregating far more data and streamlining services, all to empower people to invest in many kinds of real estate “within a matter of clicks.”

Information and Links

  • A quote Andrew lives by: “Your problems never go away, they just change.” It helps him put things into perspective, that no matter how much one “accomplishes,” that satisfaction can really only come from within.
  • Andrew is a fan of “The 4-Hour Workweek,” by Tim Ferriss, which shaped much of his views about work and how to live an optimal life.  (Disclaimer: He spends much more than four hours working per week 🙂 )
  • He is a big proponent of the concept of “work-life integration.”
Read the podcast transcript here

Eve Picker: [00:00:09] Hi there, thanks for joining me on Rethink Real Estate. I’m on a mission to make real estate work for everyone. Real estate can help to solve climate change, can house people affordably, can create beautiful streetscapes, unify neighborhoods and enliven cities. So I’m on a journey to find the most creative thinkers and doers out there. I’m not the only one who wants to rethink real estate. You can learn more about me at EvePicker.com or you can find me at SmallChange.co, a real estate crowdfunding platform with impact real estate investment opportunities open for investment right now. And if you want to support this podcast, join me at Patreon.com/rethinkrealestate, where there are special opportunities for my friends and followers.

Eve: [00:01:16] Today, I’m talking with Andrew Luong, the CEO and co-founder of Doorvest. Andrew loves real estate. Growing up in a lower middle-class family, he decided early on that real estate would be his path to financial security. So he started buying and fixing up single family homes in his spare time. While he honed his skills as an entrepreneur in a variety of start-ups, his portfolio grew into the double digits. He had honed his skills as a real estate investor as well. It dawned on Andrew and his co-founder, Justin, that the long laundry list of items that comes with purchasing a property could be deconstructed and rebuilt into a frictionless process to bring real estate investing to everyone. And so Doorvest was launched to provide a turnkey real estate investment service online. You’ll want to listen in to learn more. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to Patreon.com/rethinkrealestate to learn about special opportunities for my friends and followers and subscribe if you can.

Eve: [00:02:46] Hello, Andrew, thanks so much for joining me today.

Andrew Luong: [00:02:50] Excited to be here. Thanks for including me.

Eve: [00:02:52] Yeah, I’d heard about your brand new start-up, Doorvest, and I was interested in knowing a little bit more about what you’re doing, what you’re trying to provide.

Andrew: [00:03:03] Right. Our mission as a company is to make, is to democratize access to financial security for all. Kind of where we’re at today is we make real estate investing easy, affordable and accessible to anyone, anywhere, sort of entirely online.

Eve: [00:03:21] So that’s your elevator pitch, right? Right.

Andrew: [00:03:25] Right.

Eve: [00:03:26] But what is the main mode to make? Because there’s so many different ways to make real estate investing easy for people nowadays. What does that mean, Doorvest?

Andrew: [00:03:36] Yeah, I guess to dig into a layer further, we’re essentially a tech enabled turnkey provider. So effectively we begin with our customers. What we’ll sort of learn more about our customers, often everyday individuals that have never participated and owned real estate directly before. We’ll learn more about the individual, kind of what they had earmarked as a down payment. So, what sort of returns or cap rates were they hoping for to what’s their general risk profile? And then with that, we’ll ask for deposits upfront. At that point, we’ll sort of get into what we call production. So, we’ll, based on customer objectives, we’ll then go out into the market. Identify, underwrite and acquire usually distressed, uninhabitable homes. We’ll purchase it. We’ll renovate it and we’ll lease it out. So, the home has sort of completed an income generating from day one. At which point we’ll kind of walk the customer through the mortgage and sort of the third-party transaction process. As the customer closes and takes title, we’ll take on operating. So, we’ll manage the homes for them once they close and take title. Where we position ourselves is that hopefully we will get our customers into again, oftentimes their first rental, hopefully if we perform. So they’re generating the returns that they expected and they like working with our team, hopefully that they come back as they sort of build out their nest egg and portfolio.

Eve: [00:05:09] So let’s back up a little bit. So, what you’re doing is actually helping people buy a piece of property that is going to be income producing for them. And you’re sort of getting rid of all the stress and anxiety of finding the property, renovating it, finding the mortgage. You kind of package all of that up front and turn over to them a fully renovated income producing property, is that correct?

Andrew: [00:05:38] Right. I didn’t think I could have said it better myself, but that’s absolutely correct. The goal is to make it really easy for them because oftentimes our customers are really busy people that have never done real estate before. So that’s sort of the three constraints that our customers see. And I think where we fit in nicely is being busy, being an experienced and oftentimes not having a lot of capital to begin with are kind of the three major points that I think we touch on.

Eve: [00:06:10] Oh, interesting. So, you’re taking the fix and flip out of fix and flip through them.

Andrew: [00:06:15] Right. And giving them the ability to kind of have and lean on a company that has some scale efficiencies. So generally, our appliances are cheaper, our flooring is cheaper, et cetera.

Eve: [00:06:29] Interesting. So what prompted you to launch this?

Andrew: [00:06:33] Right. I’d say it’s sort of my story and or the Doorvest story goes back roughly maybe seven or so years ago. At the time, I was in school studying chemistry and trying to be a doctor. Certainly, you could say that that didn’t work out. But I think I was fortunate and found my way to my first job at a start-up company, ultimately ended up doing okay. And I think I walked away with sort of two learnings. Number one sort of wanted to be spending my waking hours building companies from the ground up, but I really enjoyed the thrill of it, felt like I was okay at it. But secondly, I grew up squarely middle class and grateful that we never had to worry about where sort of dinner was coming from, for instance. But we were certainly by no means financially secure, so experienced firsthand financial security or maybe the lack thereof and its ability to sort of inhibit one from pursuing their dreams. Maybe for my parents, it was the dreams of having a happy family because you’re arguing over sort of the vacation plans. Maybe for others it’s to do something entrepreneurial or work at a non-profit or launch a podcast, what have you. And so, kind of found that that looked for an avenue to kind of generate some income security, build a long-term nest egg for myself. That’s where the two worlds collided. Found my way to real estate investing. Kind of did okay for myself. Built up a small double-digit portfolio for myself sort of nights and weekends while my day was sort of busy working person. And then along the way, through lots of organic conversations, coffees, dinners, what have you, saw others similar to me. And maybe these are folks that traded some stocks on Robinhood and maybe they had a 401k and brokerage account, high yield savings account, et cetera. And we’re thinking about sort of the next progression in assets. Real estate, it’s kind of natural there. But I think and you’ve been in the space arguably a lot longer than I have, but due to sort of the friction filled process along with sort of the capital barrier to entry, weren’t able to participate in sort of America’s number one source of wealth generation. One of those folks along the way was my good friend and now good friend and co-founder, Justin. But as we kind of went through the process together, it kind of dawned upon us that hopefully if we can build a sort of modern, easy way for anyone anywhere to buy and own income generating real estate entirely online, hopefully we could sort of bring this to the masses.

Eve: [00:09:20] Well, you know, you just said something really interesting and that was, you know, access to capital for people who normally can’t access capital. I mean, how does that work? How do you get them access to capital?

Andrew: [00:09:34] A part of it is investing in sort of affordable markets, encouraging our customers and giving them the resources and tools to be able to save and then sort of leveraging that into a market that’s affordable for them. That’s kind of one. I think the second component to that is sort of guiding them through and coaching them through sort of the mortgage financing process. That, in and of itself, is a pretty convoluted process. We hope, longer term to be able to impact sort of the financing process more more directly. But as of right now, we kind of see ourselves as a coach in that aspect.

Eve: [00:10:14] Do you go out and borrow money for the renovations or is that up to your customers at the moment?

Andrew: [00:10:19] We do it. So, we borrow debt as we acquire and manage the renovation.

Eve: [00:10:26] Does that make it easier for them because they are then borrowing or acquiring debt on an already renovated property that a bank can lay eyes on.

Andrew: [00:10:36] Exactly. So that’s one of the ancillary sort of value propositions for us is…

Eve: [00:10:43] That’s huge.

Andrew: [00:10:45] Right? Yeah. So, we’re doing pretty extensive reno. Like for context, we’re doing about 30 percent of the acquisition price as renovations to that number works itself out to roughly 40 or so thousand customers able to roll this into their conventional mortgage. And like you said, the banker is able to sort of have this finished product.

Eve: [00:11:07] Yeah, but I think what I mean by that’s huge is now, you are putting buildings back into circulation that most banks would not probably lend money on, especially not to a first-time fix and flipper. And so that really does expand opportunities for people in a pretty significant way.

Andrew: [00:11:31] Right.

Eve: [00:11:32] Oh, yeah, I was just putting it together because, you know, when we started, I wasn’t quite sure where the impact lies, but I can see the impact really lies here in the ability to help people build wealth. Because, you know, I’ve done this myself. I’ve gone to a bank with a property in a pretty rundown neighborhood and talked about my visions for the property and the bank, scratching their head, saying we definitely don’t want to lend money on this. And then I come back and show them the renovated property and they say, oh, now we get it. So, you are bridging that gap for people.

Andrew: [00:12:12] Right, and I think sort of the second letter to that is sort of the operational component to, again, sort of our target sort of customer and that we serve our folks that are busy, oftentimes with a demanding sort of day job and our folks that sort of haven’t done much real estate investing directly. So, we kind of serve as sort of training wheels for them to get their feet wet, get the exposure, learn about the processes along the way. And then the second component is that we do the heavy lifting for them to kind of have that finished product.

Eve: [00:12:51] So where are you doing this?

Andrew: [00:12:53] Right, we’re focused on Texas as of right now, it’s sort of an operating market.

Eve: [00:13:00] And how many times have you done this for customers so far? If you’ve been… you launched when, in the middle of the pandemic?

Andrew: [00:13:09] I’d say more or less we were born out of  Covid. So, I’d say Justin and I were sort of working out our best early last year kind of got started, maybe March or so. So that’s squarely at the beginning of the pandemic. And yeah, we’re at sort of low, sorry, mid double digits, sort of homes transacted. I don’t have the numbers top of mind, but we’ve been growing steadily. It seems like customers, kind of what we have to offer has been compelling to customers. It’s whether, the question then lies, how do we do this at sort of greater scale, serve more customers?

Eve: [00:13:52] Right. Right. Do you have repeat customers yet?

Andrew: [00:13:55] We’re soon to. Actually, we have a couple early ones, and we actually have a handful of them that are expected to buy their second home through us this month. So that’s sort of validation of our model and we’re really excited to have that and see that.

Eve: [00:14:14] That is exciting. So what do you, what do your customers generally look like? Are there any anomalies or is it pretty squarely one group of people?

Andrew: [00:14:25] Right. So as of right now, there’s two core groups of Doorvest customers. So, number one is busy working person, maybe call it five years or so out of college. They’ve been gradually building up their savings and are kind of thinking about real estate for the first time ever in their lives. That’s sort of one group. The second bucket is, I would call them mid to late career. So again, busy working person. Maybe they own their primary. Maybe they’ve got a couple of primaries over the course of their career or looking forward towards retirement and thinking about income streams and nest egg and what have you. They’ve never invested in real estate directly ever. They’ve always been sort of intrigued by the idea, but never had a vehicle or the time to do it themselves. And so Doorvest’s kind of serves as a retirement vehicle for them.

Eve: [00:15:26] Interesting and do you have a second market in mind already or you’ve got plenty to do in Texas?

Andrew: [00:15:34] We have plenty to do, but we are eying a number of other markets. I think market number two, whenever that, it’s a matter of time, don’t have sort of a concrete timeline. But at some point, we will expand into our next market. I think the way that we’re thinking through that, number one leads with customer demand. So, what are our customers asking of us? And what would sort of the early hypothesis being? It’ll be either a market similar to where we’re at in Texas or maybe a more yield focused market. Call it a Memphis, Tennessee or so, or maybe a sort of growth market, call it a Phoenix or so. Yet to be determined. Hopefully in the coming decades we end up in all of those markets and hopefully more. But we have plenty to do at this point.

Eve: [00:16:28] Yeah. So, you’re building a technology around all of this, right?

Andrew: [00:16:33] Right.

Eve: [00:16:34] And what does that look like? What do you have to build? What have you built so far?

Andrew: [00:16:38] Right. I think we have a long way to go. I think kind of where we’ve gone so far as customers are able to buy homes entirely online, leveraging the data sources that are either proprietary to us or data sources that we as an organization are able to access. Along with lots of sort of ways to analyze the home online, whether it be integrating Google Maps Street View, so they’re able to to do a brief walk around the neighborhood or whether it be having Mattermark reports, so they’re able to walk through the house. Whether it be crime or school data, et cetera. I see our work as sort of aggregating various data sources. I think that the first generation of sort of real estate companies, such as the Zillows and the Redfins of the world, brought a lot of real estate online. I think I see it as our sort of job is to organize that data, sort of make sense from it in a digestible, sort of actionable way. To kind of where we’re at. Today’s customers are able to buy a home entirely online. It takes many, many clicks, many emails, and many phone calls over time. Our sort of aspiration as a company is how do we get it to the point where an individual can be anywhere earning any amount of money and able to participate in America’s number one source of wealth within a matter of clicks. I think we have a long way to go, but excited about sort of the progress we’ve made so far.

Eve: [00:18:17] Yeah. So, I have to ask you, how many of your customers have gotten off the sofa and actually gone to look at the property they’re going to buy?

Andrew: [00:18:25] Right. Low single digits. Yeah. So, we’ve added a number…

Eve: [00:18:31] About 60, 50 percent, 40?

Andrew: [00:18:34] Sorry, sorry. I think it’s about five percent or so. So, the number is pretty low. The majority of the folks that we’ve served have sort of leaned on us, given sort of our business model and where we positioned ourselves to kind of do the heavy lifting for them.

Eve: [00:18:53] Interesting. So, then you’re also operating as a property manager and…

Andrew: [00:18:59] Right.

Eve: [00:18:59] So what does your team look like?

Andrew: [00:19:02] Right. So, I guess in terms of the entire team as of today, where we’re 17 folks, small but mighty, I think, and sort of gradually growing. Spread across sort of the many different facets of the business. About a third of our team is on what we call success, which is sort of property management, traditional property management. I think with the twist, yes.

Eve: [00:19:30] The traditional property management can be labor intensive and frustrating.

Andrew: [00:19:36] Right, right.

Eve: [00:19:37] Yeah. Yeah. So how do you hope to scale? Have you, must have thought about that as a start-up.

Andrew: [00:19:45] Oh yeah. Lots, lots of thoughts about that I think sort of beginning with our mission, but really to democratize access to financial security for all. As of right now, we’ve made it accessible to anyone, anywhere with roughly thirty thousand as a down-payment is able to participate in real estate directly, entirely online. I’m proud of that. But I think that still means that we have a long way to go to sort of make real estate accessible to anyone, which means sort of driving sort of the capital barrier to entry down. I think over time, our aspiration is to make it so anyone can participate in real estate with call it 30 thousand, maybe 20, maybe 10, maybe five, maybe 500, maybe 100. Again, I think we have a long way to go to get there.

Eve: [00:20:37] Oh, interesting. Yeah, yeah, yeah. So wow, that’s quite an enterprise, Andrew.

Andrew: [00:20:46] It’s a lot of work. And I’m fortunate that our team is really sort of thrilled and excited and cares deeply about sort of what what we’re hoping to build for the world. Again, I certainly see that we have a long road ahead, but I’m confident if we’re able to succeed, I hope we can impact the lives of many, many people for the better.

Eve: [00:21:10] Because it’s really three businesses in one. I mean, the property management business, you can have a fix and flip business, or you can have a technology start-up. Right?

Andrew: [00:21:19] Right. That it’s funny that you say that you mentioned the three businesses and one, this is something that I talk about with internal and external, whether it be our investors or our future investors or partners, et cetera. But effectively, we’re gluing three businesses into one and three very complex businesses. I think if we succeed, we offer our end users sort of the, a really nicely packaged, really nicely packaged experience.

Eve: [00:21:51] I could see you adding in the fourth, and that’s real estate brokerage. Your missing…

Andrew: [00:21:57] That. That’s right. We’ll get there, I think.

Eve: [00:22:00] You will. I’m pretty sure you will. So so what’s the biggest challenge you’ve had?

Andrew: [00:22:08] Right. I think it evolves. I remember I was talking to Justin a little bit back, and I was like Justin, it feels like things we’re encountering more challenges than ever before. Is this because we’re not good at kind of what we’re doing? And somehow ,we’re facing more challenges. And as we’re talking, I think it kind of surfaced that as a small business that’s trying to be a bigger and bigger, more impactful business, the way that we get there is by unlocking ourselves a new set of challenges. That’s a long-winded way of me saying I think the challenges evolve. If you ask me four weeks ago, maybe I would have said the ability for us to consistently raise the real estate debt to be able to fund these transactions. Thankfully, I think we’re kind of past that now. As of right now, I think I mean, this might be outside of our control to a certain degree, but sort of the macro, as we’re seeing in the real estate industry. So, lots of competition, which makes inventory really tough, lots of delays, supply chain delays. So it feels like every step along the way is adding two or three days, which amounts to really long delayed timelines for our customers, etc.

Eve: [00:23:31] We’re experiencing that ourselves. Supply chain delays seem to have gotten worse in the last, I think, in this year than they were last year somehow.

Andrew: [00:23:40] Right. I’d love to see some numbers behind it, but this is certainly what we’re feeling internally, too.

Eve: [00:23:45] Yeah, it’s almost like people are trying to build their businesses back up and they’ve got to start from scratch. They’ve got to be reborn. We can’t get contractors to perform, yet, but that will go away, surely.

Andrew: [00:24:00] That’s a hope. Yeah. And I want to be sort of intentional and careful about us sort of having this hope and hopefully it’s validated. It sounds like I mean, based on conversations like our conversation right now and others that I’ve had, it sounds like this is a matter of time, in which case I feel good about that. But everything from appraisal delays to appliances taking a week longer to flooring taking a little bit longer, etc. Like that kind of adds up for our business.

Eve: [00:24:31] What part of the business do you love most of?

Andrew: [00:24:36] There’s many areas. Honestly, I’d say number one is, so I came from sort of the sales and business development background. What that means for us is sort of working with our customers who are oftentimes folks that have never sort of participated in real estate, nor did they think that they were able to right now. So, seeing and hearing their stories, whether it be, hey, my wife and I have been thinking about how we’re going to supplement our retirement and our 401K based on our number crunching just isn’t enough. And we hope that if over the course of the next 10 or so years, if we buy a handful of rentals and kind of get that paid off through Doorvest. Like, we have this sort of extra layer to our income streams, et cetera, and you all make it so easy for us to do this while we could still focus on our busy lives, which is our jobs. We both have jobs and our children who we care deeply about. Like hearing those stories and spending time with sort of our customers, it never gets old. I, believe as we go from mid double-digit customers to hopefully triple and quadruple etc. customers, I believe this will stick with me. So that gets me really excited.

Eve: [00:26:01] So what’s your very big, hairy, audacious goal?

Andrew: [00:26:07] Right. Our hope is to impact the lives of, I mean, every American, given the fact that we’re interfacing with busy working people, we’re interfacing with our residents, et cetera. I think sort of in the nature of the space that we’re in, we impact and touch a lot of lives, even beyond sort of these direct folks that we’re working with day to day. We’re impacting the lives of our general contractors and our vendors and our partners, et cetera. The big audacious goal, I think, is to sort of be cognizant of the position that we’re in and driving sort of win-win solutions across the board.

Eve: [00:26:53] Well, this sounds some really amazingly exciting, and I can’t wait to see where you are in five years from now. You’re very young. You just starting out. It seems like you’ve made big strides already. So, congratulations. And I look forward to hearing more.

Andrew: [00:27:09] Thank you. Yeah, I appreciate it. Sometimes it feels like we’re just getting started. And I certainly think that’s the case. I think if we kind of all align ourselves about what we care the most about in this world, I hope and I think we can do sort of amazing things for the world. So, hoping to stay in touch as we rebuild away.

Eve: [00:27:36] That was Andrew Luong of Doorvest. Andrew and his partner, Justin, have deconstructed the often lengthy and confusing process of small-scale real estate investment, making it accessible to everyone. Their turnkey service is built entirely online. They try to keep it as simple as possible with flat fees and even providing a rent guarantee for that first year. They help their clients find a property, borrow the funds to renovate it and sell the finished package to them. Their track record allows them to purchase and renovate properties in poor condition or in neighborhoods that bankers might not like. Opening the door for retail investors who might not have the wherewithal on their own. We’ll be watching Doorvest as it grows.

Eve: [00:28:38] You can find out more about this episode on the Show Notes page at EvePicker.com or you can find other episodes you might have missed, or you can show your support at Patreon.com/rethinkrealestate, where you can learn about special opportunities for my friends and followers. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of Andrew Luong/Doorvest

The JUST Podcast.

The JUST Podcast tells the stories of the people working to build thriving communities rooted in justice.

In this episode, Derigging the Real Estate Game (Season 3, Episode 3), Eve Picker, founder and CEO of Small Change, is interviewed by JUST co-hosts Jes and Rob. Eve shares insights on the nature of exclusivity in real estate, and what led her to pursue Small Change.

You can listen here or wherever you stream your podcasts! 

Image from The JUST Podcast.

Just is powered by Coastal Credit Union & the Cap

Between renting and home ownership.

Home ownership has traditionally been considered a part of the American dream, providing economic benefits such as wealth accumulation, access to credit and a built-in saving system. Home ownership also provides housing security and a connection to place. But many Americans may never own a home. The challenges for first-time home buyers, skewed worse for minorities, include coming up with a down-payment, overcoming regulatory burdens and obtaining adequate credit.

The alternative to home ownership is renting a house or apartment, which has a lower barrier to entry. Renting provides more flexibility by allowing tenants to move without penalty at the end of a lease. On the flip side, it decreases housing security. A landlord might suddenly decide to sell, causing tenants to have to vacate. Or gentrification could cause rents to increase until they become unaffordable. And saving money without the advantage of a mortgage can be daunting.

Max Levine’s organization, NICO (Neighborhood Investment Company), wants to create a new housing typology – something halfway between renting and home ownership. Modeled as a B-Corp, NICO has launched what they believe is the world’s first neighborhood REIT (real estate investment trust) in Echo Park, Los Angeles.

Echo Park, like many other neighborhoods today, has experienced a significant amount of gentrification. This means that many members of the community are excluded from home ownership. NICO wants to help them to build wealth and belonging and let them participate as primary financial stakeholders. Using a REIT structure and applying it at the local level allows every day people to have a financial stake in their own neighbourhood.

Shares in NICO sell for as little as $100 and stakeholders can choose to make either a one-time investment or a long-term commitment through monthly payments. Open to both locals and non-locals, the REIT offers two classes of shares with some additional benefits attached to those for local shareholders. In addition, each of the tenants in the buildings owned by NICO have been given $1,000 worth of shares. 

Listen in to my conversation with Max Levine as we unpack this interesting new model.

Image courtesy of Max Levine/NICO Benefit Corp.

Get in on the GROUNDFLOOR.

In 2013, Brian Dally co-founded GROUNDFLOOR with the seed of an idea born out of the Jobs ACT of 2012.  From humble beginnings, funding their first $50,000 loan with just 50 investors, Brian and his partner have built GROUNDFLOOR into the go-to funding platform if you want to fix’n flip property.  And now they’ve added in Accessory Dwelling Units as well. Last year, with the pandemic looming over their heads, 90,000 investors invested $145 million into fix’n flips through GROUNDFLOOR.

Brian has a diverse educational background, from political theory to business to law. He worked as an entrepreneur back in the dot-com boom of the 1990s, and for communications companies in product management and VC strategy. In starting GROUNDFLOOR, based in Atlanta, he and his team broke new ground as the first company approved by the SEC to offer real estate debt investment, via Reg A, to accredited and non-accredited investors alike.

But Brian isn’t planning to stop at fix’n flips or ADUs. He thinks the GROUNDFLOOR model can be used on a much bigger scale, and on a much more varied asset class. He is optimistic about where they are headed, and after successfully weathering a pandemic year, which included reducing fees and interest rates for borrowers to reduce the financial burdens, he says, “‘We emerged from it stronger and better.”

Insights and Inspirations

  • With GROUNDFLOOR, Brian has opened the door to investors of all types, truly democratizing investment. You just need $10 to invest in a GROUNDFLOOR loan.
  • GROUNDFLOOR was an early adopter of one of 2012 Jobs Act regulations that seeded the investment crowdfunding industry – Regulation A.
  • Last year GROUNDFLOOR raised $145 million in tiny fractional amounts, and made 90 loans to developers fixing and flipping properties. And this with the pandemic raging.
Read the podcast transcript here

Eve Picker: [00:00:16] Hi there, thanks for joining me on Rethink Real Estate. I’m on a mission to make real estate work for everyone. Real estate can help to solve climate change, can house people affordably, can create beautiful streetscapes, unify neighborhoods and enliven cities. So I’m on a journey to find the most creative thinkers and doers out there. I’m not the only one who wants to rethink real estate. You can learn more about me at EvePicker.com or you can find me at SmallChange.co, a real estate crowdfunding platform with impact real estate investment opportunities open for investment right now. And if you want to support this podcast, join me at Patreon.com/rethinkrealestate where there are special opportunities for my friends and followers.

Eve: [00:01:24] Today, I’m talking with Brian Dally of GROUNDFLOOR. GROUNDFLOOR started with the seed of an idea born out of the Jobs Act of 2012. From humble beginnings, funding their first 50,000 dollar loan with just 50 investors, Brian and his partner have built GROUNDFLOOR into the go to funding platform if you want to fix and flip property. And now they’ve added in accessory dwelling units as well. Last year, with the pandemic looming over their heads, 90,000 investors invested 145 million dollars into ‘fix-n-flips’ through GROUNDFLOOR. You might learn how to fund your next ADU. It’s an unusual model and worth listening in. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to Patreon.com/rethinkrealestate to learn about special opportunities for my friends and followers and subscribe if you can.

Eve: [00:02:44] Hi, Brian, it’s a real pleasure to have you on my show today.

Brian Dally: [00:02:48] Great to be with you, Eve.

Eve: [00:02:50] Yes, so you and I are kind of in the same business, we both founded companies based on the 2012 Jobs Act and we both care about democratizing investment in real estate. So I want to just start talking about what you do first today and that is GROUNDFLOOR.  Why don’t you just explain what GROUNDFLOOR is.

Brian: [00:03:13] Well, as you said, we realized back in 2012-2013, you and I didn’t know each other back then, but you were tracking the same trend. You know, the world of investment and capital formation was undergoing some very early change back then, and it continues to go through change, even today. But what started back then is Congress and the SEC put rules in place that for the first time allowed everybody, regardless of your income or wealth, to participate in a whole class of securities offerings that haven’t been open to people who don’t meet the definition of an accredited investor.

Eve: [00:04:00] Let me jump in.

Brian: [00:04:01] Sure.

Eve: [00:04:01] Because people don’t know what an accredited investor is. It’s probably about three percent of the adult population in the state, which in itself is pretty shocking and it’s anyone who has income of 200,000 dollars a year and has had for three years. Or has net worth of a million dollars, at least a million dollars without their primary residence. That’s right. Right?

Brian: [00:04:26] Yeah, exactly. And that’s a very small slice of the American population. And if you meet that definition, if you’re in that club for a long time, you have had access to investments that the other 97 percent of us haven’t had. And which started to change in 2012 is Congress and the SEC put forward rules that would start to open that up. Now, since then, they’ve continued to improve those rules, spell them out a little bit more. Companies like Small Change and GROUNDFLOOR have been built. Republic is another one that allows you to invest in startups, for example, or StartEngine or SeedInvest, there are a bunch of portals now where you can go invest in a wide variety of securities offerings that weren’t open to us all before. We saw that coming, we started a company to help open up that market and we’re still going. Now, we’ve got about 90,000 investors who are investing. Last year put in about 150 million in aggregate into our investments. We’re funding 70 or 80 different real estate projects per month now using this model. And I mean, we’re really just getting started. I think you would agree, right, with Small Change we’re just in the early innings even still.

Eve: [00:05:43] So what is your model? Because we both have real estate platforms, but they’re pretty wildly different, right?

Brian: [00:05:49] Yeah, we looked at the market for investments and we said, look, what’s missing out there is sort of a short term high yield secured investment that people could get their hands around. You know, so many times you invest in real estate or you invest in a startup or something, and your capital is locked up for a very long period of time. Typically, the terms of those investments don’t give you a lot of control over it. Like, for example, if you put money in any of the eREITs like Fundrise or RealtyMogul, any of these new kind of funds that have launched, you weren’t able to access your capital when you probably wanted it. And you’re in Covid. Because they shut down redemptions out of those funds. And we looked at the landscape of investments and realized what was really missing was for all of us to invest the same way that hedge funds and banks do, which is on a per deal basis, on a short term, a short term loan that that has a high yield. So where we started with GROUNDFLOOR was with value added renovation to single family houses that were being basically built by independent entrepreneurs. Right, so you have somebody who had a real estate project that they wanted to fix and flip, for example, or fix up and rent out and create rental housing out of it. We make a loan to them and then we turn around and allow individual investors to participate in that loan, ten dollars at a time. So, most people invest about an average of two or three hundred dollars. But you can start with a minimum of just ten. And what that means is if you have 1,000 dollars to invest, you can invest in 100 loans, which is a very nicely diversified portfolio. You’re as diversified as a lot of small private equity funds or hedge funds. So you get the same benefits of diversification and the loans repay on an average of about nine to ten months. And the average rate that people are earning ranged between 10 and 11 percent. So it’s a very high rate of return on short holding period in an asset that if you watch any house flipping show, you can understand what’s going on there.

Eve: [00:08:01] Sure.

Brian: [00:08:01] And I think that’s why it’s been so popular, is those factors.

Eve: [00:08:04] So, a couple of things. One is I get what you’re offering investors. Opportunity to invest in a way they’ve never had before. What does this do for developers who do ‘fix-n-flips?’                             ?

Brian: [00:08:17] So developers who do ‘fix-n-flips’ or who are trading rental housing or we also finance independent builders who are doing new construction. There are a couple of problems with the capital markets, the way that they’ve been built, so far, on the legacy infrastructure. The legacy infrastructure is financed by some kind, what used to be banks. But when banks stopped funding this category of real estate development or or this type of small business, if you will, these types of projects, really who stepped in were sort of wealthy people with checkbooks. In any town, there are probably a couple dozen people who will finance these types of real estate projects. The problem is that the form of lending was not very professional. It was hard to find these lenders. The terms were all over the map, sometimes very lopsided terms for these agreements.

Eve: [00:09:12] Yeah.

Brian: [00:09:12] And I think the problem is if you’re just getting started out as real estate investor, a house flipper, a builder, it’s pretty hard to find your way in those capital markets. And I think the other problem is that a lot of the real estate development that’s getting done in residential real estate, in places where housing stock is aging, for example, when Wall Street steps in, they just buy up blocks of a neighborhood and they bulldoze everything and they build up McMansions or they build up some kind of mass market product. And that doesn’t leave a lot of room for the independent builder or the independent real estate investor. So they’ve been playing at a disadvantage over the last 10 or 15 years. And GROUNDFLOOR’s approach solves that problem because we’re not lending out tens of millions of dollars at a time to one company that’s going to go bulldoze a neighborhood. We’re working with independent real estate developers who know these neighborhoods. They probably live in the neighborhoods. They care about the neighborhoods. And I think that’s a good counterweight to gentrification. Right. I think it’s a way to to renovate the residential real estate stock in a way that is more community friendly. Right. It also allows people in the community to participate in the financing of it, which I think is a novel idea.

Eve: [00:10:32] And so where are you lending now?

Brian: [00:10:35] We lend in about 30 states. Our lending is heavily concentrated in the southeastern U.S. We dabbled quite a bit in the mid-Atlantic and the midwest and we’re starting to expand out west now. We started to finance projects in Colorado. We’ve done a couple in Washington state. We’re not in California, but we’re in about 30 states for lending and then investors nationwide.

Eve: [00:10:59] Yeah, yeah, obviously. And then how do you vet the the developers and the deals.

Brian: [00:11:05] We’re frankly looking at developers on these deals the same way that anybody who’s lending money or investing money in an entrepreneur would look at an entrepreneur. We’re asking ourselves, can this entrepreneur with this plan create the result that they’re hoping to create? And a lot of times we use this expertise to help entrepreneurs realize maybe the deal wasn’t as good as they thought it was going to be. Right. Maybe their plan, they didn’t have a big enough budget. Right. We really look very closely at the budgets for the projects and we look a lot at the valuation at the end. Do we believe I mean, every entrepreneur, myself included, we always believe what we’re doing is super valuable. Right. So GROUNDFLOOR will serve as a little bit of a reality check for those situations where maybe their expectations are a little inflated. We need to make sure that the properties can sell for enough in the end…

Eve: [00:12:00] That investors get their money back, right?

Brian: [00:12:02] Yeah, I mean that and they get it back in a timely manner. Right? I mean, that’s that’s really important to the model that investors can trust the projects that we put up. It’s not that things don’t go wrong. Things do go wrong. You know, when you’re renovating something, you know this well. You’ve dealt with so many interesting projects in Pittsburgh and beyond that, you know, you’ve seen it firsthand. I mean, you can’t plan for every contingency, right?

Eve: [00:12:27] For sure.

Brian: [00:12:27] Things take longer, things cost more money. And so in our vetting, we make sure that the plan covers those major contingencies. And that’s why we’ve had such a low loss ratio. Over time, we’ve lost less than one percent of the money that we’ve loaned out. And the returns of 10.5 percent are net of those losses. So, it’s a pretty low volatility and investment where you really know what to expect.

Eve: [00:12:54] Right.

Brian: [00:12:54] That’s why it works for the investor. Why it works for the borrower, for the entrepreneurs, they get a professional outfit that’s actually looking at the merits of what they’re trying to do. And we’re providing some advice to them and a perspective. And if everything lines up, we’re happy to fund it. We’re doing like I said, we’re doing about 70 to 80 fundings a month right now.

Eve: [00:13:14] Wow. A few years back when I met you, we talked about how hard it was to find your crowd of investors.

Brian: [00:13:23] Yes.

Eve: [00:13:23] And what you have to go through at the beginning. And I’d love to talk about what that was like and how that compares to today and what you think made a difference.

Brian: [00:13:33] Well, I realized early on that, and I think you felt this too, you and I are creating, you know, an unknown product in an unknown category from an unknown company. Right? So it kind of just amazed me in the early days that anybody would, you know…

Eve: [00:13:52] That’s absolutely true.

Brian: [00:13:54] Isn’t that the feeling, though? It’s kind of just amazing.

Eve: [00:13:57] Yeah. And by the way, we just closed an offering today for 890,000 dollars.

Brian: [00:14:02] I saw that. Congratulations. That’s huge!

Eve: [00:14:06] Yeah.

Brian: [00:14:06] That’s huge! Congratulations. That’s got to be one of the bigger ones, I would think.

Eve: [00:14:11] Yes.

Brian: [00:14:12] Yeah, I would think so. That’s that’s a huge success. And that’s a testament to just continuing to persist because I think what I was about to say is, I think you’re probably feeling this too, is that people now are more comfortable with the idea that this exists, you know, this category exists, that they, too, can get access to these deals. And there’s a little less of what I used to call the Groucho Marx problem, which is like I wouldn’t want to invest in any investment that would allow me to. Right? It’s a problem of investor psychology. And I think the category has advanced now enough that people are interested. I also think we’re seeing the rise of the retail investor more generally. I mean, look no further than what happened last month with Robinhood and GameStop.

Eve: [00:14:59] Yep.

Brian: [00:15:00] The retail investor is waking up and as they wake up, they’re also realizing that public markets for a lot of people feel like it’s a rigged casino. And they’re now open to the idea that they can invest, that they should invest, that they can band together to put their capital to work and cause a change. And I think some of these traders are going to become investors. And that’s part of what’s happening, too. And then the third factor that has started to change the game and bring in a lot more growth. And we had a record Q2 and record Q3 last year because of some of those other factors, you know, the retail investor waking up and opting out of public markets. But I think the future growth that’s to come and that we’re starting to see lift off from now is the track record that we’ve all built. Right.

Eve: [00:15:49] Yes.

Brian: [00:15:49] Now that we’re repaying, you know, we have over 1,500 loans that we’ve repaid.

Eve: [00:15:54] Yes.

Brian: [00:15:55] You know, and people now can see what the empirical data tells them about what they can expect. You can go on our website and see a scatterplot of, I think 9,000 portfolios that have returned capital on at least one loan over the years and you can see what returns that portfolio has earned on average based on how many loans they’ve invested in. What you learn is the more you invest, the more you can predict the return. And I think that’s giving people more confidence in the category, in the companies and in the products, right, that we’re building here.

Eve: [00:16:29] Right right right. So along with all of this, but I want to go back to what I originally asked. Sorry. And that was like I remember you telling me a story about what it took to get one person to invest in the beginning. And how many did you have last year?

Brian: [00:16:45] Gosh, we now have 80,000 investors.

Eve: [00:16:47] That’s amazing and really what is a fairly short time to kind of scratching your head over why you can’t even find one investor to…

Brian: [00:16:56] Well, the first loan we funded was a 50,000 dollar loan for a house flip in Adair Park in Atlanta, which is a neighborhood, transitional neighborhood near the beltline. I think we put, it was a 40,000 dollar loan. We put 39 investors in it, you know, a thousand dollars each. And it was a lot of work.

Eve: [00:17:16] A lot of work.

Brian: [00:17:18] A loan that small won’t last a day or two on the platform.

Eve: [00:17:22] Yes.

Brian: [00:17:22] And, you know, people are investing smaller amounts in many more loans. So there might be 500 people in that loan. Three or four…

Eve: [00:17:31] It’s pretty amazing that you can invest just ten dollars.

Brian: [00:17:33] I think just yesterday we hit a new record for I think 1.2 million dollars was invested on the platform just yesterday alone.

Eve: [00:17:41] Oh, wow. That’s that’s amazing. Congratulations.

Brian: [00:17:44] We’ve come a long way. But I’ll tell you one thing that’s exciting to me about that is that now that we have those basics in place is we recently started piloting an ADU financing program.

Eve: [00:17:57] That was my next…

Brian: [00:17:59] Oh, oh good.

Eve: [00:18:00] Question. Yeah. I want to know about your ADU program because that’s a little bit different for you. And I wanted to ask why you are piloting that.

Brian: [00:18:09] I’m psyched to talk about that, because when we started off, yes, we wanted to build a financial product, but more than that, we wanted to build a platform that could be used for good. You know, we wanted to open up this asset class. We wanted to make a great investment product. But we also hoped that people would come to the platform as borrowers or sponsors and investors in order to have a positive impact on the world as well. I feel very strongly that the source of capital really matters to the result that we actually see in the world. And I think real estate plays an important role in shaping our communities. I mean, it’s where people live and shop and work. And I think that who is financing that work really matters. And I think this ADU program is exciting to me because as an entrepreneur, when you build a platform, you have ideas about how people will use the platform. You can’t predict it. If it goes well, people use your platform to create even more value for themselves in the world around you. Then you even get. Right. I mean, that’s the whole idea of a platform. And still with this ADU pilot, we were actually approached by some people in that community who are having trouble finding financing because of the particular borrower situation that sometimes exists where you have somebody who doesn’t want to move out of their house, out of their neighborhood. Home values are changing over. They like to participate in the growth of the neighborhood and they see ADUs as a way to do that because we’re increasing density. I mean, there are two ways of dealing with increasing lot values and housing stock values. Right. One is you can knock everything down and just rebuild it all with mcmansions and more valuable real estate. I think most of us in the impact community would agree that sucks. Right? The other way is to increase density by changing the zoning rules and you change the zoning rules, but then you still need financing.

Eve: [00:20:11] Right.

Brian: [00:20:11] So to support that increased density. And I know you’ve talked with PadSplit, for example. That’s one way to increase density. This ADU sort of approach is another way…

Eve: [00:20:21] PadSplit doesn’t really increase density. They find unused spaces.

Brian: [00:20:26] Right.

Eve: [00:20:27] A little bit different. And by the way, I feel bad, because we we haven’t told everyone what ADU stands for. It’s accessory dwelling unit. And it’s also what we know as a granny flat. It’s just an additional unit on your property, on your piece of land.

Brian: [00:20:44] I think the reason we were excited about it is we saw it right away as a valuable approach to urban development in certain situations, especially with gentrifying neighborhoods where homeowners don’t need to be displaced, but they can participate in what’s happening around them as owners and grow their equity value without having to be displaced.

Eve: [00:21:06] Yeah.

Brian: [00:21:07] Right. So, selling their property and taking that money and moving elsewhere, we think is a suboptimal outcome for many people who would rather stay right where they are. You know, stay in their neighborhood, retain the character of the neighborhood, but open up some more housing opportunity in that neighborhood, too.

Eve: [00:21:24] Yeah.

Brian: [00:21:26] We’ve got excited about it, mostly because we saw a place where, you know, the traditional financing sources weren’t going to step in. We thought that investors on our platform would like it. And we were right. The first two ADU deals that we’ve put out there have sold very quickly. Had a really enthusiastic reaction. And so, you know, we we have a little ways to go to kind of build up the pilot. But I’ll tell you, we piloted new construction two years ago, and it’s already, I think it’s on track to be about a third or maybe even 40 percent of our volume this year. And I mean, the same thing could happen with ADUs.

Eve: [00:22:01] The most difficult thing might be that the person who wants to build an ADU, accessory dwelling unit, the homeowner may have absolutely no experience building anything.

Brian: [00:22:13] Right.

Eve: [00:22:13] What do they do? And this is probably one of the most difficult things to crack about accessory dwelling units. How do people who have no development, no real estate experience, go about adding that value to that property?

Brian: [00:22:28] Happily, there’s an ecosystem of builders, contractors, architects who are ready to meet the needs of the people who want to do that. The problem is that those people cost money. The projects cost money.

Eve: [00:22:44] Yes.

Brian: [00:22:44] And a lot of people don’t have the money. So even if you know about the idea, you know, first of all, you have to get connected into the ecosystem of people who work on these things and do them right. Right. Do them within the zoning standards, you know, do them in a way that will be good for long term value. People who are inexperienced that I think have to tap into that network. But then even if they tap into that network, what’s been missing is the money. Where do you get the money to do it?

Eve: [00:23:12] Right. And, you know, the whole business of financing something as complicated as well.

Brian: [00:23:19] Agreed.

Eve: [00:23:19] You know, provide something consistent and easy to understand, that would be really helpful.

Brian: [00:23:25] And that’s the goal, right. So we’re we’re looking to partner with contractors and architects who know how to get these projects off the ground. And so, when someone has an interest, there’s already a network of providers that know how to plan it out, design it, and, of course, finance it, because we’re we’re out there offering that fund.

Eve: [00:23:51] That’s fabulous. Yeah, yeah, yeah. You know, I was on a panel with a CDFI a few months ago and was horrified when they explained with great pride how they had spent the last three or four years developing a program which looked like it would, you know, finance a couple ADUs, maybe four a year. And I was just like, how do we even get this to work if there’s no financing out there?

Brian: [00:24:14] Right.

Eve: [00:24:15] Yeah.

Brian: [00:24:16] Yeah. I think people on our platform, investors on our platform have a lot of appetite for it. I think it’s a it’s a really attractive investment. I think it’s a really attractive initiative for homeowners in certain situations where they want to stay put and they want to grow their equity value in concert with the neighborhood around them. And I like it because we think that one of the benefits of crowdfunding for financing as a way to finance real estate is that people should be involved, directly involved in deciding what gets financed and how. This is a way that that can happen. Right?

Eve: [00:24:56] I like ADUs because I think they build on infrastructure and community that’s already there, which is a great thing. You know, the bus stop that’s right out there on the street or grocery shop or a school or anything like that is already there in that community. And we’re adding density around those really important pieces. So it’s a fabulous idea. So I want to go to your background now. Your background is very diverse. Communication technology, gaming, political theory, business and law, but not real estate. So I wonder how you came to this real estate platform from your background?

Brian: [00:25:36] Well, I have been an investor since about age 15. And one category that I had never really invested in was real estate. You know, you always hear it’s it’s almost like a trope in American life, right? Like, well, the way to build cash flow is through owning real estate. Right. And so there’s there are no shortage of real estate investing seminars and whatever out there. So I feel like real estate investing is kind of in the air, you know, in America, more or less. I mean, it’s amazing to me that we still have house flipping shows that are watched. You know, people people are interested in it. And I think that drove me as an entrepreneur because what I was looking for after leaving the wireless industry in my previous startup, by agreement, I could no longer work in the wireless industry. But we had built this wireless company that was structured in a way that allowed people to route around, you know, the cell phone network, except when they absolutely had to have it. And then they could, you know, the calls would switch from the Wi-Fi network to the cell phone network. And the company that we built, it’s called the Republic Wireless it’s still around today. One of the things I noticed and I think this is true in politics, in philanthropy, I know it’s true in finance, people when you give them a platform where they can band together, I mean, this happened on Reddit, right? You give them a platform where they can band together and cause some change by voting with their dollars, by buying differently, by investing differently. They will do it because we can all debate whether people are smart enough to make their own decisions or whether they know what they’re doing or not. The truth is, regardless of whether they are or not, they’re going to behave as though they are. And that’s what can drive a lot of change in the world. And I think we start to get a closed loop feedback system where people do get a lot smarter. And so, you know, as an entrepreneur, I was very attracted to that. I didn’t quite know what sort of financial product we could build and what would be underneath it. But pretty quickly, Nick and I realized that if you’re building this new type of product and you’re trying to open up this type of investing, you should probably do it in a space like residential real estate that’s tangible, that people can understand, that people are excited about. And I think that’s what really led us there. Now, once we got there, you know, also as an entrepreneur, you need to have something as a beachhead that, you know, makes up for the perceived risk, like, for example, at Republic Wireless, we’re launching phones, we said, look, this is an unlimited plan that’s going to cost you 20 bucks a month instead of 150 bucks a month. And you’re not going to be locked into a contract. Well, people really like that. They saw some advantage in that. So they were willing to try the technology. With GROUNDFLOOR, we said, look, you know, you’re not going to lock up your money, you know, for years. You’re going to lock it up for months. You’re going to get a really high rate of return. If this thing works, over ten percent and you’re going to get to control it, you’re not turning your money over to a fund manager.

Eve: [00:28:46] Um-hm.

Brian: [00:28:46] You get to make the decision. And I think because it was residential real estate, they believed it. Right? It was tangible and they could buy into it. If we had done it in some exotic category that nobody understood, like financing receivables or something, I don’t think it would have been as successful. So I had to learn about real estate. I’ve spent a lot of time with people with many decades of experience in real estate. And now very shortly as an operator will have made a billion dollars worth of loans in this category.

Eve: [00:29:16] I think that’s fantastic.

Brian: [00:29:16] You know, which is not an insignificant number. So I had to climb the learning curve. We have a lot of advisors and executives around the company with deep experience in this. And as an entrepreneur, you know, a lot of us want to learn something. This was an exciting area for me to to learn. And now I guess I don’t get to claim that I’m not experienced in real estate anymore.

Eve: [00:29:36] I think that would be true. What do you love doing the most about this?

Brian: [00:29:41] I love working with people who are putting themselves out there and taking a chance. So the people who I’ve most enjoyed interacting with are the entrepreneurs who are financing projects on our platform. I can really identify with them and equally the investors who are venturing off into this unknown. I really identify with those people. You know, we started raising money from our customer base to finance the growth of the company. So we have a crowdfunded equity offering that’s still live today on SeedInvest. I love talking to people about getting involved in angel investing. So I really like engaging with the people who are drawn to these platforms because I admire them for being intrepid enough to take the risk and vote with their dollars to change the way that we finance, in this case, real estate. And we’re startup. I think that’s that’s what I love about it.

Eve: [00:30:41] I think that’s great. And actually, there’s still a relatively small number, because one of the reasons this is hard is there’s still a pretty big group of people out there who don’t trust online investing and…

Brian: [00:30:54] It’s still the early innings, it really is. 

Eve: [00:30:56] Early innings. Yeah. So what is your big, hairy, audacious goal for GROUNDFLOOR?

Brian: [00:31:04] The big, hairy, audacious goal is to take the model that we’ve pioneered for these private capital markets and to show that what we’ve done in these first couple of sub asset classes in real estate can be done at a bigger scale across a broader scope. You know, the big, hairy, audacious goal would be to infect other asset classes with this model. You know, it’s a very disruptive model. It’s easy for people to look down on it and say, oh, it’s underpowered, but that always happens with disruptive technology. So my big, hairy, audacious goal for this is to see how many asset classes at what level of scale this model can produce, the kind of results that it’s producing in this market. And I don’t know where the endpoint for that is. I think it can go very, very far. So I don’t have a specific quantification of that. But that’s the idea, is I’d like to take what I think we’ve proven in this one market and see how many more markets we can extend it into.

Eve: [00:32:08] And I have another question for you that may be a little bit difficult, but is there anything else that you’re noticing out there that really excites you about the way we might do things differently, live a lot differently, what we what we can change?

Brian: [00:32:22] I look at our own market and I think it’s true in digital assets, I think it’s true in the securities that we’re offering online, I think it’s true and how we transact in real estate. I see a lot of opportunity to remove friction from the system. I mean, you look at something like title and how much time and money.

Eve: [00:32:44] Oh yeah.

Brian: [00:32:45] Is put into clearing title and then battling the insurance company when there’s a defect in title that comes up later. I think this is the bane of real estate investors everywhere. And I think it’s true in private market transactions with illiquid assets generally. And I think it’s something I’m excited to see change because I feel like it’s a very difficult change to effectuate. But I think as a community, we’re going to keep chipping away at it and eventually we’re going to have to knock down the barriers to I mean, title is a great example. But I would just say in general, these kind of transactions in illiquid securities need to, the friction needs to come down.

Eve: [00:33:28] Yeah, I totally agree with you. Well, thank you really so much for talking with me. I really enjoyed it. And I’m really wondering what’s going to happen this year if you did so well last year as well, too. Right.

Brian: [00:33:42] I think things are looking up, you know, in 2021. And and I hope we get to work together.

Eve: [00:33:48] Yes.

Brian: [00:33:49] Eve, I really admire the work that you’ve been doing and been persistent enough to keep doing over the years. And I hope we get to join forces someday and do some work together.

Eve: [00:33:59] That would be fantastic. Thank you so much, Brian. Bye.

Brian: [00:34:02] Yeah, you too.

Eve: [00:34:06] That was Brian Dally. Brian isn’t planning to stop at ‘fix-n-flips’ or accessory dwelling units. He thinks the GROUNDFLOOR model can be used on a much bigger scale. And on a much more varied asset class with 145 million raised in 2020, I can’t wait to see where he takes the company in 2021. You can find out more about this episode on the show notes page at EvePicker.com. Or you can find other episodes you might have missed. Or you can show your support at Patreon.com/RethinkRealEstate, where you can learn about special opportunities for my friends and followers. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Image courtesy of GROUNDFLOOR/Brian Dally

The impact accelerator.

From ecologist to impact investment guru, Dr. Stephanie Gripne has had a singular career arc. Originally trained in wildlife management and conservation, she went on to work on issues surrounding the built environment, in conservation real estate, environmental markets, and in the wonky world of financing strategies and historic tax credits. At the same time she was working as a research fellow, studying impact investing and philanthropy, and she became involved in the Colorado impact investing scene.

In 2012, it all came together when she founded the Impact Finance Center (IFC), based in Denver, as a nonprofit academic center with a mission to identify, train and activate philanthropists and investors to become impact investors. In 2019, the IFC added on an Impact Investing Institute, to provide education to organizations, family offices, foundations and other funding groups. Today, Stephanie’s big, hairy audacious goal is to move a trillion dollars into impact investing.  

Stephanie believes that impact investing is all about educating people – and the IFC is quickly becoming the go-to place for every level of investor, from the well-endowed non-profit world to individuals who have never invested before. We know you’ll be hearing more from Stephanie and the IFC, for sure.

Insights and Inspirations

  • Stephanie wants the Impact Finance Center to be the place to go for agenda-free and trustworthy investor education.
  • The Impact Finance Center is an accelerator for impact investors.
  • Stephanie believes there is a gigantic audience of potential impact investors out there we can reach.
  • The IFC provides impact education through portfolio evaluation, educational offerings (with 200 classes online), training and an ever-growing number of themed impact investor clubs.
  • And you should check out the Impact Real Estate Investing Club.
Read the podcast transcript here

Eve Picker: [00:00:14] Hi there. Thanks for joining me on Rethink Real Estate. I’m on a mission to make real estate work for everyone. Real estate can help to solve climate change, can house people affordably, can create beautiful streetscapes, unify neighborhoods and enliven cities. So, I’m on a journey to find the most creative thinkers and doers out there. I’m not the only one who wants to rethink real estate. You can learn more about me at EvePicker.com, or you can find me at SmallChange.co, a real estate crowdfunding platform with impact real estate investment opportunities open for investment right now. And if you want to support this podcast, join me at Patreon.com/RethinkRealEstate, where there are special opportunities for my friends and followers.

Eve: [00:01:09] Today, I’m talking with Dr. Stephanie Gripne. In what seems to be an improbable amount of time, Stephanie has gone from ecologist to impact investment guru. Her big, hairy, audacious goal is to move a trillion dollars into impact investing. Ten years ago, about four years after getting her doctorate, she became director of the Initiative for Sustainable Development at the University of Colorado’s Real Estate Center. There she was immersed in issues surrounding the built environment and socially responsible investing. In 2012, she took the leap and founded the Impact Finance Center as a nonprofit academic center with a mission to identify, train and activate philanthropists and investors to become impact investors. I’ve already learned a lot from Stephanie, but I’m going to learn more and so might you. So, listen in. If you’d like to join me in my quest to rethink real estate there are two simple things you can do. Share this podcast. Or go to Patreon.com/RethinkRealEstate to learn about special opportunities for my friends and followers, and subscribe if you can.

Eve: [00:02:40] Stephanie, I’m so happy to talk to you today.

Stephanie Gripne: [00:02:44] Eve, I am so happy to talk with you today.

Eve: [00:02:47] So, you have a supremely cool resume and it’s pretty clear how driven you are. There’s a lot to talk about, but I wanted to start by talking about what you’re working on today. You lead the Impact Finance Center. What is that?

Stephanie: [00:03:01] That’s a great question, Eve. For those of you in the audience who have heard of an accelerator, you might have heard of TechStars or 500 startups or Y Combinator. Those accelerators are essentially boot camps for people who want to start a startup or a small business. So, they identify, educate and invest in entrepreneurs. When I was a professor in 2010-12 at the University of Colorado at the Leeds School of Business, I was actually the director of the Initiative for Sustainable Real Estate Development. I just kept wondering why isn’t there more money flowing into good things? And I finally kept unpeeling the onion and realizing there are not entities out there providing investor education that is non-conflicted or trustworthy, in that most of the investor education is actually trying to get your business. So, it comes from Wall Street and they’re trying to become your investment adviser or raise a fund. And so, my hypothesis was that if we started providing non-conflicted investor education from the inside of a nonprofit, where we weren’t going to try to raise a fund or become your investment advisor, we could actually educate and activate these investors. So, going back to the accelerator analogy, Impact Finance Center is essentially an accelerator for impact investors. Instead of identifying, educating and investing in entrepreneurs, we identify and educate individuals and organizations who want to become impact investors. And those typically are: private foundations, community foundations, high net worth individuals, companies and family offices.

Eve: [00:04:51] So, that’s really how you and I started talking way back on the plane ramp, where we met, right?

Stephanie: [00:04:58] That is true. We did mean on a plane ramp in California. And yes, we are. I had been following the crowdfunding movement for some time and figuring out what my role in it was going to be.

Eve: [00:05:10] How do you accomplish investor education and accelerate those impact investors? What is it you actually do?

Stephanie: [00:05:17] That’s a great question. We really offer five ways for people to get education. One, and this is the the holy grail of it all, is we can evaluate your investment advisor portfolio, and that is pretty brutal. We evaluated a 100 million dollar foundation in Seattle and found out their investment advisor had charged them in excess of fees of one million dollars over five years to underperform by five million dollars.

Eve: [00:05:49] Ohhh.

Stephanie: [00:05:49] We have a 15 million dollar foundation in Denver … where we evaluated their investment advisor and found out they had been charged in excess of fees of $240,000 over seven years to underperform by 1.4 million dollars. So, we have, that is number one. We can evaluate your portfolio and investment advisor for governance and fees and evidence-based decision evaluation and impact. And then, the next phase is just education. We’re putting our 200 classes online. We have 47 recorded webinars up there. So, if you’re a do-it-yourselfer … sign on our Impact Investing Institute and train yourself. We also offer one-on-one training, small group training and large group training.

Eve: [00:06:39] Wow. That’s a lot of work, Stephanie. When did you launch the center?

Stephanie: [00:06:43] I was a professor at University of Colorado in 2010-12. And I realized then, once I had essentially collected evidence and accidentally discovered that the financial return of a grant is negative 100 percent loss. I determined that this impact investing was legal; and determined that, also, that people were interested, but there wasn’t a place for them to go learn. And then, the other piece, I realized, is asking somebody to do a first investment, cutting a 25,000 dollar check, even if you have a lot of money, is scary. And so, the key was, that’s in my, I use a baseball analogy, that’s a major league investment. And so, how do you create a T-ball opportunity for people to learn by doing. And so, that’s either using simulations like business case competitions or kind of monopoly. We do some simulation type activities, where you get to pretend you’re an investor or you actually do a small dollar amount. And we often have people take money they would have donated and pool it together in a giving circle model, and then they learn how to invest together.

Eve: [00:07:55] Interesting. Interesting. Who are you trying to reach? Like, who do you think your audience is? How big is it?

Stephanie: [00:08:04] Our audience is gigantic. If you just Google the number of millionaires in states like Colorado or Georgia or Massachusetts, and you’ll see a range from 150,000 millionaires to over a million millionaires … that’s a great question, Eve. People often ask me, oh, would you rather not work with a foundation or, versus a high net worth individual? And there’s two criteria that we look to partner with people. One, they have to be motivated and willing to take action. If you’re going to be on the slow boat will still help you, but you don’t get to be first in line. So, you have to be willing to move and take action. And the second thing is, you have to be an independent thinker. If you’re somebody who likes to have the crowd go first and you join the crowd, you’re probably not the right individual organization to come find us. And so, those are difficult to go find. But it’s great. We’re really nice about it. When people get stuck, we’re like, hey, it’s OK, go back and do this homework, and when you’re ready to get back into it, move forward. But what that means, Eve,  is that I have worked with foundations where 20 trustees, oftentimes family members, are in unison, and I’ve worked with a grumpy high-net worth individual that’s difficult to move. So, it doesn’t have to be an individual or a foundation or a family office or a corporation. It just has to be a willingness to take action.

Eve: [00:09:29] And beyond the gigantic audience of accredited investors, as you know, they are only about three percent of the population, there is now a growing audience of people who’ve never invested before and sit in the non-accredited group. So it’s huge, right?

Stephanie: [00:09:45] It’s endless. And it’s interesting, because I was trying to think the other day about how I got started. And I know my dad, when I was 12 or 13 years old, we invested in Micron Together Technology Company. I’m 47 years old. I don’t know how I found, it had to have been at the library, found a book on Motley Fool that taught direct investing. So, direct investing with public companies. And I still have some of those stocks I first invested in. But I actually did an investment in Enron, because it was a renewable energy company. So, I kind of like to think of myself as an early adopter in the modern-day crowdfunding.

Eve: [00:10:25] Since have you started seeing a shift towards impact investing?

Stephanie: [00:10:30] Oh, absolutely. In Colorado, for example, we started the Center in 2012, and I’ll go back and answer your your last question in a little bit. When we started the Center, I realized when I was at University of Colorado when I had that ‘aha’ moment that, wow, people do need education, and I thought every entrepreneurship center needs an innovative finance center. And then I took a step back, and I’m like, wait, every university that’s going to struggle financially needs innovative finance center to stay financially viable. And then I took a step back, and I thought, wait, every association of, I call them ‘clubs of money,’ a community foundation association, a YPO, family office association. They need this curriculum too. And there was, at the time, only 15 centers and really only two of us that actually do transactions. And so, that was my idea, to leave in 2012 and then start a nonprofit, multi-university academic center where we could essentially provide a curriculum in a box. And just to give you a sense of how long it takes to get going, at least in Colorado …

Eve: [00:11:46] Are you telling me how long it takes to get going?

Stephanie: [00:11:48] Well, just to just have a sense, in 2010-12, our first two transactions we supported were the Museum of Contemporary Art and the Alliance Center, and those both were real estate transactions, and one was a foundation and a couple of board members. So, they got 101 percent return. And we financed the Museum of Contemporary Art and saved them 550,000 a year. The other one was a project I led with the Alliance Center in partnership with the Denver Foundation, and we used a donor-advised fund to do a loan at zero and one percent that essentially saved that nonprofit six million dollars and gave the donor 101 percent return. I worked on those two transactions for three years and they all moved when the bills were due. They tried everything else for years and years and years. And then, when the adjustable rate mortgage was going to be due, or the building renovation COP bill was going to be due, that’s when they were finally willing to move. So, that there was a negative-like desperation as the birthplace of innovation. It took three years for two transactions. And I do believe Colorado’s probably done 100 impact investment transactions in the last three months.

Eve: [00:13:02] Wow. The story you’re telling is much like mine. I think if you build something new and I suppose on the cutting edge, it takes a really long time and you have to have stick-to-it-ness. Right. Just have to keep going.

Stephanie: [00:13:15] You do. You have to have the Stockdale paradox. You have to have this eternal knowledge you will prevail in the end. And I had great advice from a friend, Dan, whose dad said, you need to stick past three and a half years and go to five years. Most people give up at three and a half years. And there’s a great metaphor. It’s like paddling an iceberg with flippers on. It takes a long time to get that iceberg going.

Eve: [00:13:38] Yeah, it really does. It can be a little depressing but there it is.

Stephanie: [00:13:42] Um-Hmm.

Eve: [00:13:42] This is a pretty unusual place for a Ph.D. in forestry to end up. That’s what you have, right?

Stephanie: [00:13:49] Yes.

Eve: [00:13:49] So I have read about Fish and Wildlife and spotted owls on your resume. Tell me about the journey that took you from wildlife to impact investment.

Stephanie: [00:14:01] It was great. I was watching an interview this morning with Heather McGhee, and she’s approaching this conversation from a race issue. I grew up in an environmental issue, and she’s framing it using a zero sum game. And I grew up in central Idaho, in Sun Valley, Idaho. And there was a zero sum framing where it was, either we either could save the endangered species of the wolves and the salmon, or we could have jobs. And I just remember knowing deeply in my heart that there was enough resources for both of them, and my friends would literally threaten the lives of my other friends with guns. And there was a river guide I used to work for that, a bunch of the river guides, made a sticker that said ‘Happiness is the fisheries’ biologists’ face on a milk carton.’ And it was a very tumultuous, and in some ways, violent way to grow up. And I just I didn’t know. I thought it was about the wildlife at that point. And now I’m really clear it was a resource allocation issue. And I deeply believe there’s enough money for communities and the environment and jobs. And so, that just has motivated me since I was 16 and I’ll never forget. I do like woodworking. And I announced when I was 16 or 17 that I was going to become a carpenter and make furniture. And my dad, who was incredibly supportive, my late dad, of whatever I would choose, said Stephanie, what about architect? I said, I said no. I said, what about wildlife biologist? And my dad said, you have a mind for business, Stephanie. Why don’t you go make a lot of money and then you can have influence on the environment. And my dad, actually, he was a workout guy that would take companies through bankruptcy, but the last 10 years of his career, he took a company out of bankruptcy, a precast concrete company. So, for 10 years, my family made every precast concrete box in the state of Idaho, electrical box, etc., and air conditioner pad. And I said, Dad, I just don’t have the constitution to do it the way you did it. I’m not willing to go make money in whatever way I can and then do what I want to do. I’m going to do what I want to do along the way.

Eve: [00:16:22] Yeah, I think this must be part of being a parent, not really understanding what your kids are doing. Right. What would be good outcomes, do you think, if more people invest in important change making projects, what are the outcomes you hope for?

Stephanie: [00:16:41] I’ll actually, answer that question and continue my last answer a little bit. My dad would end up being quite wealthy, becoming homeless for two years, and then at 24 years of age, he would come back to live with me. And so, the roles were reversed, for those of you who cared for your parents, except my roles were reversed for me when I was 24. And I remember I was doing my Ph.D. in seven states with ranchers and, a socioeconomic analysis, a conservation project, and I got to study with my hero, the chief of the Forest Service, Dr. Jack Ward Thomas. I was also working for the Forest Service in multiple roles all around the country based out of Lander, Wyoming. And my mom came down with pancreatic cancer and my dad was living with us in a home in Lander, Wyoming. And I remember coming home one day and I said, I don’t care if you walk dogs or volunteer or you get a job, but you can’t just stay in this basement apartment. You have to do something. And he would get a real estate license and a mortgage broker license. And he didn’t cost a lot of money to support him at that time because he was living in a basement apartment of our house. And so, essentially what we did is we were used to being poor graduate students. And so, instead of taking all the excess money of having two salaries and a grad’s stipend, we would buy a house. You could buy a house in Lander, Wyoming, for six to eight thousand dollars from down payment, 120,000 dollars house from 2000-2005.

Eve: [00:18:17] Wow.

Stephanie: [00:18:18] And the reason I’m saying this is my mom passed in 2003 and I wasn’t emotionally ready to sell the house. My sister was. So, I bought the house from my sister. And I think most of us, our road to becoming an investor in a meaningful way, is that second house. The first house is, I made it. I’m an adult. I’m building wealth. But that’s a, it’s a very different experience to get your second house. And I don’t know that I would have offensively purchased my second house. It kind of came to me because my mom passed. But once that second one happened, I talked to several people who’ve had this experience, you’re like, wait a minute, I can do this. I can own an asset and make money. And so, we bought a third house and then, on the fourth or fifth house, my dad came home and he said, Stephers, he’s like, there’s these families coming into our mortgage business. A lot of them have bad credit, but there are some that have bad credit that actually used to have good credit. They just had a medical situation and they didn’t have the right medical insurance. And now they’re in this bankruptcy called a medical bankruptcy. So they’re not allowed to buy a house or car, even though they are people who paid their bills. And so we ended up doing a lease option with these families and we had a family meeting and agreed that we wanted a 10 percent return. And so we would set aside 10 percent of their rent as a partial equity. And if the house appreciated above 10 percent return during their medical bankruptcy, essentially get the upside of that. And the houses during that time period appreciated fifteen to twenty five percent. So we got the joy of philanthropy, a job for my dad, an amazing tenant, a solid 10 percent return, and they got dignity. Got to move into their home three to five years early and get partial equity upside. And so I think that all of us are on this quest of connection and meaning. And when you realize, like I did then at twenty four, twenty five years of age, that you can do well by doing good. I don’t think most of us can go back from that.

Eve: [00:20:27] I think you’re a rock star. You probably made some friends for life as well in that process, right.

Stephanie: [00:20:34] Absolutely. That was about three hundred transactions ago and I’m I have lots of friends along the way. Three to four hundred. I’ve lost count. I kind of stopped keeping count after two hundred. As as my colleague Todd James says, 60 percent of what we do has been visible and behind the scenes. So there’s a lot of lovely, incredible, awesome people out there that don’t even know that we were helping push and pull to make their dreams happen. And, you know, it’s it’s it’s an incredible role to play in people’s lives.

Eve: [00:21:03] You really did shift from fish and wildlife to real estate, and then you dragged me into it recently, which I’m really enjoying. But we’re working together on one of your many projects, which you didn’t mention before when you talked about the five ways to educate people. You’re also creating impact investing clubs, which are really fascinating, they’re themed clubs where potential impact investors gather and you’re educating them with a particular focus. And we’re on the journey of building a real estate impact investing club.

Stephanie: [00:21:38] We are, Eve. I didn’t mention this at the beginning. So Impact Finance Center does two things. We identify, educate and activate individuals and organizations to become impact investors and we also build what we call community infrastructure, which can be replicated, scaled and customized. And in that bucket of community infrastructure, you just mentioned investor clubs, which is one piece of it. We also stood up the first statewide marketplace for impact investing, which is the second time I met you when you came out to Impact Days.

Eve: [00:22:11] That’s right. Yeah.

Stephanie: [00:22:11] Our Impact Days, and that’s, you can think of it is, imagine everybody who needed money in the state, doing good, shows up and they create a farmer’s market booth and we activate new investors and organize existing investors and we bring the investors to go shopping in the farmer’s market. We call that Impactings. A Bodega is a subset of that marketplace. And that’s what we’re branding as our Investor Clubs. And then we also have two hundred classes, which we refer to as our Impact Investing Institute. And one of the most exciting pieces of infrastructure that we created was, are you familiar with The Who’s Who Under 40 that business journals do?

Eve: [00:22:49] Yes, yep.

Stephanie: [00:22:50] Yeah. We reached out to our business journal and we said we’re going to do Who’s Who in impact investing for the Rocky Mountain region. Do you want to be our media partner? And that was exciting because the first year we did it, we had 300 people apply.

Eve: [00:23:03] Oh, wow, that’s great.

Stephanie: [00:23:05] The second year that we had 1,300, and so that builds the book. And then the last piece, which is really the key, is our impact investing, giving circle or investor accelerator, and that’s in partnership with civil society organizations like Community Foundations. So, right now we have 34 women that could be middle-income or high-net worth, or connected to a company or family office or foundation, who are major league when it comes to intelligence, and major league when it comes to alignment, and major league when it comes to admission, and major league when it comes to access to money. But they’ve never actually written a check to support a sutainable real estate project, or a small business, or a startup. And so in this case, we make it low cost, easy and fun. We say, let’s participate in a giving circle, donate two thousand dollars in and we end up getting a kitty of seventy five thousand to one hundred and fifty thousand and we say, who needs money? And this year we had a 111 women apply, 112 women apply, for over 50 million dollars of need. And then we go through a selection process and they do due diligence, and they invest in a couple investments for their first investments. Because it’s a pooled donor-advised fund that the Women’s Foundation of Colorado, they don’t get the money back, it’s essentially a learned by doing fund experience where hopefully they walk in is that as a donor, they walk out as an investor and then they say, I want to join the investor club. So, yes, Eve, the investor clubs are…

Eve: [00:24:38] This is especially important, this educational piece, because because women don’t invest. And I can tell you that with certainty on Small Change, women, just a tiny minority of investors. It really kind of puzzles me.

Stephanie: [00:24:53] You know, it’s interesting because I am counting on my fingers right now and hopefully going to my toes. I have several women who will be investing in Lyneir’s project who have been spreading the good news on Lyneir and some of the other great offerings you have on Small Change right now. And I’ll be completely honest with you, we we started the Investor Club as a response to Colorado’s CDFIs, Community Financial Development Institutions and nonprofit lenders, who basically said Steph, that’s been great. The three year pilot, we had a goal to move one hundred million. We’re up to three hundred million. Success. But we need to still keep helping raise capital for the CDFI’s and non-profit lenders. And so the first Investor Club was a Main Street Lender Club. The second one was our Indigenous Investor Club. And then the third one was with the federal government’s Sustainable Forestry Mass Timber CLT Investor Club that connects with real estate. And now we’re starting clubs in California and Massachusetts and with the New York CDFIs.   But I have to say Eve Picker, the most popular one, has been the Real Estate Investor Club.

Eve: [00:26:02] This was unexpected, wasn’t it? We have to keep up.

Stephanie: [00:26:06] Yeah, I was only mildly surprised. I saw there’s a quest to need. Nobody gets paid to do the work we’re doing. I think that’s the difficult part.  If Wall Street had figured out how to get paid to educate investors we would have money flowing like hotcakes to Main Street investments.

Eve: [00:26:23] And, you know, it’s been pretty stunning because some on our club meeting announcements for mid-March, there’s something like 1,800 people signed up on LinkedIn and I have no idea where they’re coming from. It’s pretty big. It’s pretty astounding, so we better put on a really good show, right.

Stephanie: [00:26:43] Yeah, it’s well it’s easy to do. I mean, people who are either investing or working in community real estate, creating real estate, affordable housing, mass timber CLT, all of the all the good stuff. Is there some of the most inspiring people you’ve ever met.

Eve: [00:26:58] Yes, I agree.

Stephanie: [00:26:58] So so it’s pretty much you just have to set the stage and let them shine.

Eve: [00:27:04] Let me ask you, so what happens to the club meeting and how it happened? What’s your formula?

Stephanie: [00:27:10] Yeah. And and for those of you who are familiar and who’ve gone to like a pitch competition or an expo, that’s what I think about it. I think it is essentially a virtual farmer’s market. And our goal is investor education specifically and also some social venture education. But what we want to do is we do an investor panel and we want to showcase different types of investors so people can see themselves in the crowd and go, wait, they’re just like me. I could do that, too. And so really, that’s about getting diverse, interesting investors up there so we can make it seem more accessible to people sitting in the crowd that they can go from not identifying as an investor to becoming an investor. And then the same is true for the social ventures like community real estate projects. It’s a way to educate people about what’s possible. Most people I mean, Eve, you know better than anybody, but if you and I walked out of our front door right now and and just talk to the next hundred people that walked by and said, are you an investor? All of them are investors, but most of them would probably we’d probably get five to ten of them who would say that they identify as an investor?

Eve: [00:28:24] Yeah, maybe less, actually.

Stephanie: [00:28:27] Maybe less. And that is the challenge. Like I remember when Mitt Romney was running for president, the Mormon Church put up signs, they had a campaign and put up billboards and they put up everyday faces and they called I’m a Mormon campaign. And I feel like we need to put up do a similar campaign, that I’m an Investor campaign.

Eve: [00:28:46] Yeah, that’s right. I think that’s a great idea because an investor could be someone who invests ten bucks in their friend’s startup or an investor can be someone who invests a million dollars into something big.

Stephanie: [00:28:59] I would even argue a mom who goes to the grocery store and decides which milk she’s going to buy for her child as an investor. She’s invested in the supply chain of…

Eve: [00:29:08] Oh, yeah.

Stephanie: [00:29:09] Are you buying organic or not organic or how are the companies trading?

Eve: [00:29:13] Or if they decide to go purchase at a farmer’s market instead of the grocery store.

Stephanie: [00:29:18] Every time a dollar changes hands, you’re an investor.

Eve: [00:29:24] Yes. I think you have a broader description of investor than I think of. But you’re right. So the club meetings are like a mixture of panels with investors, large and small, talking about their experiences and what it means to them and social ventures. And then a little pitch round right. Of deals that are looking for money.

Stephanie: [00:29:43] Yeah. So we we essentially, because we’re in Covid, we can’t do this in person. And so I think that’s to the benefit of this, Eve.

Eve: [00:29:50] I agree.

Stephanie: [00:29:52] And because in Colorado, when you came out to Colorado, Impact Days, we physically have a farmer’s market, you know, where…

Eve: [00:29:59] I don’t want to travel that much. I kind of like this Zoom thing.

Stephanie: [00:30:02] Absolutely. So we’re essentially putting the farmer’s market online. And so we created an investor catalog. And it’s really the social venture panel is to give five to 12 minutes casually for people to learn about a couple of the investment opportunities. And then we do a speed round of two minutes. And it’s shocking to me sometimes that people actually shine better in the two minutes than they do when they’re given seven to ten minutes.

Eve: [00:30:29] Yeah, it’s pretty fun. And people get an opportunity to ask questions, too. I think it’s exciting for me. I mean, what’s your ultimate goal with these clubs? What would be a fantastic outcome in five years for you?

Stephanie: [00:30:41] I’ll put my geeky academic entrepreneur hat on for a second. We actually wrote a paper called Laying the Groundwork for the National Impact Investing Marketplace. So we published in the Foundation Review. And we’re pretty confident now that if you take our infrastructure and combine it with some other infrastructure, such as Lenny Lavis up in Seattle, he has realized impact investor flow, a Fleg regenerative accelerator. If you take some of our joint infrastructure together, we can actually completely fix the capital markets and move a trillion dollars into impact. I can do it two ways. I can go fundraise 20 million dollars and take what we did in Colorado and expand it to all 50 states. Or we can earn money from some of our social ventures, such as our Impact Investing Institute, and use it to self-fund our expansion to all 50 states. So what’s exciting about the Investor Clubs is most of our Investor Clubs are actually being purchased or supported by foundations who want to do economic development and Covid recovery. Federal government, USDA, Forest Service. And we’ve had interest in state governments, too. So I think if I was in state government or foundation interested or family office interest in Covid recovery or a corporation, I would be basically investing in as many Impact Investing Giving Circles and Investor Clubs as I could afford to support. I think that getting one percent of our wealth to invest in Main Street as an example in Colorado, that would be five billion dollars that could be leveraged through CDFI’s and banks for a 15 billion to 50 billion dollar year investment. It wouldn’t take much, just one percent of the wealth.

Eve: [00:32:27] Um-hmm. Fantastic. I’m going to change gears again. Just ask a few more questions to wrap up and they’re about you. And what do you love doing the most and why?

Stephanie: [00:32:39] I love most partner dancing. Ballroom dancing is my favorite joy in the whole world. Which I feel like it’s going to be the last activity that comes back to us after Covid. So I’m sort of isolated. I’m single in Denver, Colorado, and I Waltz and Cha-Cha and Two-step and learning the Latin dances and I Swing and I just can’t wait to get back to partner dancing.

Eve: [00:33:04] So I have to ask, have you watched my very favorite Australian movie called Strictly Ballroom?

Stephanie: [00:33:09] I have seen Strictly Ballroom. Yes.

Eve: [00:33:13] So, the Star of Strictly Ballroom used to live next to me in Sydney.

Stephanie: [00:33:17] Well, I can’t wait to be traveling with you to Sydney.

Eve: [00:33:20] I don’t think he lives there any more.

Stephanie: [00:33:24] We can go have lunch.

Eve: [00:33:24] And what are you excited about the most?

Stephanie: [00:33:27] I am excited, two things. Is, as I used to feel like that from 2012-20, I felt like I know there’s an answer and we just have to develop the answer. And now I feel like the answers there. All the puzzle pieces are on the table. Now, we just have to put the puzzle pieces together. And so I’m excited about all of the amazing impact investors and all the amazing social ventures out there. There is so much goodness and love and light and inspiring people who are showing up in the impossible ways to make the world a better place. And so I’m very fortunate in that I get to hear from people with resources and people needing resources, doing amazing things and have the the joy of being able to connect them together. And our phone has just been ringing off the hook. Especially a lot of middle aged white women, just between the combination of the global pandemic and our civil rights crisis have just called. And many of them have got a text once that says, what can I do to help my sisters of color immediately? And she made an investment quickly. I had another woman call. We do a fellowship of ten sessions. And on her first session, she’s like, I’m ready to make a first hundred thousand dollar investment today. I’m like, OK, there we go. And so, yeah. So it’s just great to see how many people are showing up and going, now’s the time. I can’t wait any longer.

Eve: [00:34:59] It’s been really wonderful talking to you and I really can’t wait to see what becomes of the Impact Finance Center and our club and what’s next for you.

Stephanie: [00:35:09] Oh, well, and likewise, Eve. I just want to give a gratitude and compliment to you, because I don’t know that we’ve discussed this, but when this movement was getting off the ground, I was very aware there’s a role to activate new investors, educate and organize existing investors and build the financial fintech solution. And I chose to be on the education of investor side, and I couldn’t be more happy to be collaborating with you. You’re just somebody who is a visionary and a joy and has incredible integrity. And I think,

Eve: [00:35:44] I’m blushing now.

Stephanie: [00:35:45] Oh, I think that what you do and what I do are two pieces…

Eve: [00:35:51] Perfect match.

Stephanie: [00:35:51] Of a puzzle that literally will democratize and provide that pathway to solve the problems that I had as a 15 year old, 16 year old watching.

Eve: [00:36:01] You know, you’re right. I mean, I think investor education is the most difficult part of what I do, and I can’t do that and investor education. So I’m extremely grateful to have you around.

Stephanie: [00:36:14] Well, let’s go find what should our goal be in the next five years.

Eve: [00:36:18] We should build humongous impact investor club and just showcase thousands of projects. And, you know, I’d have to quantify that goal clearly.

Stephanie: [00:36:30] Well, I’m going put a goal out for us. It’s February 18, 2021. How about a year from now, our goal will be able to have a list of twenty thousand investors that are actively investing in and community real estate.

Eve: [00:36:43] I think that’s a fantastic goal. I’m happy to add to it.

Stephanie: [00:36:48] Fantastic. It’s a true honor and joy to be in partnership with you.

Eve: [00:36:51] Thank you.

Stephanie: [00:36:52] Thank you.

Eve: [00:37:04] That was Dr. Stephanie Gripne. Stephanie believes that impact investing is all about educating people – trustworthy, non-conflicted investor education. The Impact Financial Center is quickly becoming the go-to place for just this type of education and for every level of investor, from foundations to individuals who have never invested before. You’ll be hearing more about the Impact Finance Center, I’m sure. Please share this podcast so that more people learn about Stephanie and the Impact Finance Center. You can find out more about this episode on the show notes page at EvePicker.com, or you can find other episodes you might have missed. Or you can show your support at Patreon.com /RethinkRealEstate, where you can learn about special opportunities for my friends and followers. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker, signing off to go make some change.

Image courtesy of Dr. Stephanie Gripne/IFC and CO Impact Days