Overcoming MS and Depression to Becoming a Sponsor with Jeanne Allen

You thought you had challenges? Jeanne Allen shares how she overcame challenges with Multiple Sclerosis and Depression to invest in commercial real estate during her retirement years. 

Here are some highlights of today's show:

• How she raised $6.5M from a hospital bed
• How rising interest rates affected her properties that currently have bridge loans
• How she turned everything around to became a real estate coach and sponsor

After retirement from her apparel management career, Jeanne reinvented herself as a multi family operator helping investors reach their financial goals. A full-time wheelchair user she does not let her disability get in the way of her success, or the success of people she surrounds herself with.

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Transcript

Ciaara: 0:00

Hi, everyone. Welcome to commercial real estate bosses, where we interview bad ass investors who are crushing it in the commercial real estate space. I'm your host, Ciaara Hoffmann. And on today's call, we have Jeanne Allen of the Valley of the Moon Investments. So thank you so much for being on the show today.

Jeanne: 0:16

Thank you. Ciaara. Glad to be here.

Ciaara: 0:19

I'm glad you're here as well. You have a very interesting story. I would love for you to tell us all about it, what you did before and how did you get into this commercial real estate business?

Jeanne: 0:29

My husband and I started the business about four years ago and we are retirees from the real world. So we reinvented ourselves. My joke is that we don't have kids and we don't have grandkids and we don't play golf. So what are we going to do in retirement? And my husband and I had always had an interest in real estate investing, but we just really never pursued it. Didn't really pursue it. We didn't have any role models around us and, we considered buying a duplex and living in one unit and running out the other didn't do that. We considered fix and flipping, didn't do that. But in retirement, we said to each other if not now, then when. We did join a mentorship group to learn how to do single family fix and flips. And we did all the courses, boot camps, flying all over the country. And in that process, they introduced us to multifamily and we just decided to jump ship from single to multi and never did a single family fix and flip. So

Ciaara: 1:31

how long were you, how long were you trying the single family before you flipped to multi?

Jeanne: 1:35

You know, we probably were in six months, nine months into our education. Spent a lot of money for the course and it was a fabulous course. If anybody wants to do single family fix and flips. It's a fabulous program. It's not a course, it's a program. Several boot camps and they were creating a multifamily arm as well. And once we saw how the numbers worked, especially in retirement, we're not in our twenties and thirties and we just decided to graduate ourselves to multi-family. Yeah. No,

Ciaara: 2:03

that makes sense. Awesome. So that was about four years ago that you took that course. Yeah. So tell us about that journey. Where are you at today?

Jeanne: 2:12

So they did have some multifamily training, this original group. So we took that. Flew to Charlotte, North Carolina to do that. And it was a terrific course, but it just scraped the surface. And so we knew that we needed more multifamily training. So we started looking around. Went through a couple of possibilities before we landed on the ultimate education group that we joined. And it is a mentorship program. We're still very active in, in that group. And and just started taking their courses and doing the coaching. And what was the difference? The difference of having a coach and having a program behind you doing this business is night and day because we were surrounded by a network of people who were of the same mindset, of the same goals of real estate, multifamily, and we ended up meeting partners through that group. And that was the thing that put us on the path to success.

Ciaara: 3:14

Perfect. And so you have some challenges that maybe more so than other people. So can you tell us how you overcame some of those, physical and mental challenges and what that was like?

Jeanne: 3:25

Yes, so Ciaara knows a little bit of my background here. So not only am I 68 years old and my husband is 78 years old. Actually, he's 79. He had a birthday. We always keep getting older. Geez, Louise. In addition to us being in our retirement years. I am also in a wheelchair full time. I have MS, multiple sclerosis, which I've had since I was 30 years old. And the first 10 years of my disease, it didn't really affect me to the extent that other people were aware of it. It was just numbness and tingling. It is a progressive disease. And through the years I was using a cane in my 30s. I was using a walker in my 40s. I was using a scooter in my 50s. And and now I'm using a wheelchair, so I don't walk at all, but the message here is I could have just curled up and died. I could have just said life is unfair and I, it was not meant to be for me. I had a very successful career in the clothing business. Retired from Levi Strauss. And was a department store buyer before that. So I didn't let my disease get in the way of my career success. And in retirement, I'm not going to just curl up and die or wait to die. I'm very active in the real estate world. Yeah. So that covers my physical challenges. And you also mentioned mental health challenges. I have not had mental health challenges until the past year, and I attribute it to multifamily. It is stressful. You guys, this is not for the faint of heart. We were in our 2nd deal as, as far as the lead sponsors and the capital raise, just we had to raise 6.3 million and the first deal that we were in, it was a 2.3 million raise and 2.3 million is challenging. That was our first time raise. We had two partners to help us do it, but we got it across the finish line and then I was all full of confidence and went out and found a bigger property. And that was a 6. 3 million dollar raise. And I'm here to tell you that 6. 3 is exponentially more difficult than 2.3. Raising potentially, you're raising 100, 000 at a time. We have 50, 000 minimums. So 50, 000 at a time 6. 3 million. That's a lot of talking to people and it's the pressure of the deadline. You have to have the money in before you close the property. You have to close the property on deadline. In fact we blew through both of our extensions had to come up with additional hard earnest money. We can talk about that if you want. And the stress of that. And and if you don't get it across the finish line, if you don't raise that 6. 3 million in time, you lose your hard earnest money deposit. I'll talk about it now. That was a quarter of a million dollars. And that was my husband and my money and if we did not raise$6.3 million by the deadline to meet closing uh, we were out of extensions. The sellers were fed up with us at that point and they weren't going to give us another extension. So in these sleepless nights, much stress, I have MS. Stress is not good for me. I ended up in the hospital maybe because of the stress. And it was a bad thing that put me in the hospital for three weeks. At the end of closing I'm staring this deadline in the face. And I'm now in a hospital bed and I was in the hospital for three days and they stabilized me and was in skilled nursing for three weeks. Wow. So I am now trying to raise money from my hospital bed. It was already stressful. Yeah. So we did it. We did it. We got it across the finish line. We in fact had to turn investors away at the end. And It took its toll on me. It just took the wind out of my sails and I said, I need a couple of months rest and then two months went by and three months went by and four months went by and I'm not talking, I'm not contacting my brokers. I was just exhausted. I mentioned we had to use the two extensions. We had troubles with our loan. Thank goodness. Thank goodness. This was before the loan rates started going up. So we were at the tail end of good loan rates. Boy, that would have been the straw that broke the camel's back for sure. Yeah, but we had issues with our loan won't go into that just this moment and then we had this capital raise. So there was a lot of pressure for a lot of months. I think we went into contract on the deal, possibly in October and we closed in March. So five months of stress. Five months of heightened stress, and I just needed time to recover from that. In that recovery time, I started going into a depression. So that's your reference to the mental health issue. I've had mild depression in the past. It's very common with MS to have mild depression, and I've always felt fortunate that I didn't have it more extremely, but it just started becoming extreme. And I had a little bit of recovery, and then I slipped back into depression. And the second time around into depression, it was worse than the first time. I felt like I was at the bottom of a well, and I was never going to get out. I was not sleeping. I went to the doctor, was put on sleep medication so at least I could get sleep. Then I started sleeping too much. I was sleeping like 10 hours, 12 hours a day. I was taking three hour naps. I was bored with life. I was a mess. And I didn't really see a way out. I did a Tony Robbins course online, Tony Robbins course. If Tony Robbins can't pull you out of it, it was like a hopeless case here. And and I started reading positivity books. And I knew I had an issue and I needed to pull myself out of it. And I was taking action to do that and here was my saving grace. My doctor, I did not tell him about the depression all these months. I go see my primary care every three months because one of the medications I'm on and I hadn't told him about it because it's embarrassing. It's embarrassing to be in a deep depression. And finally, I told him. And he said, we can take care of this. And I was like really? He put me on a prescription. And the prescription within days. I would say within five days. I came out from the bottom of the well. The next day, it didn't even really take that long. I would say by a couple of weeks in, after taking this vacation, I am back. I am cheerful and loving life and having a social life again and laughing and joking with my friends and enjoying living life. So I wouldn't have thought that a pill, it's just a little tiny pill. I wouldn't have thought the pill would have brought me back to life. And I'm so excited about my follow up visit with him to say, Dr. Sebastian, It worked. I'm here. I'm back. Awesome.

Ciaara: 10:53

No, I'm so glad to hear that that you're feeling much better now. Your story is very inspiring for a lot of people who may be going through their own challenges right now, and they're not sure if they can even do this business, and just your honesty and your willingness to go there with us, I think is going to help open up a lot of people's eyes and vision of what they can do as well. Over this journey, tell us about what you've been able to create over the last four years since you started this real estate journey. Okay. What does your portfolio look like

Jeanne: 11:23

right now? Okay. We, you would have thought that we would have just zoom in our retirement years. We don't have much time and let's zoom through this, but we're methodical. My husband's an attorney. I had a business career. We needed to get comfortable with the education. We needed to get comfortable with the mindset. Mindset is so much of this business. I needed to get comfortable with this being my job, my occupation. Chip's identity was as an attorney. And when we flipped over to real estate, we would be out in a social situation, meeting somebody new. And they would say, Oh, what do you do? And he'd say, I'm an attorney. And I like elbow him and you're a real estate investor or anything aside, you are a real estate investor. So we both needed to create that mindset. Every person you meet is a potential investor. So if they lock it into their brain, that you are an attorney, they're not going to think of you as a potential person to invest their money with. So we both needed to create a mindset change. So back to your question of our accomplishments. once we got comfortable in our skin and in our education and we started meeting potential partners and potential sponsors, that was the real difference. So since then, we really figured all that out. We're slow learners, being very educated, smart people, we're very slow learners. And we started figuring all that out. Two and a half years ago. I'd say. So we got into our first deal, not as the lead, but as a co GP. And this is information that a lot of people don't know as an opportunity. If you want to be an active investor, not passive. First of all, we did the passive thing. We are invested passively invested in several deals as well. So you learn a lot by Passively investing, but you learn a whole lot more from a co GP in an active investment. And so what that means is that one of the people, Rebecca, that we had been networking with, and she was an experienced investor and she was always available phone calls to Rebecca. What about this? And what about that? And at some point she said, Jeannie, we've got a deal. And we're capital raising for it. And if you would bring in X amount of dollars, either from your own investment or from your investor list, we will make you a co GP. And so we did invest our own money at this point we were not comfortable with capital raising. So it was just easier to cash out stocks and invest our own money to get into her deal as a co-GP. And so what that did for us? First of all, our investment is working on the passive side because it's our investment and it's working on the active side as a co GP. So we're making money on our investment. On the passive side, just as if we were a passive investor and we're making money on the co-GP side because we have a piece of the deal. Now it's not a big piece. It's 1% of the GP portion, so it's not a big piece. But the advantage of that is we do have a little cash flow. We participated in the acquisition fee. We will participate in the disposition fee and we will participate in the profits that the co GPs and the GPs make at sale of the property. So this is probably the best investment we've ever made is working on both sides of the equation. And in addition to that, it is allowing us to be part of the operation of the property. So that was an education. It's all well, and good to get education from the classroom and from workshops. But on the job training is so valuable. It is being in on those phone calls with the GPs and the property management team and the asset management team. That is so much learning because that's real life problems that you are helping to solve. So we got in on our first 60 units in College Station, Texas. We live in California, so that makes us out of state investors. And actually Texas is our chosen market. That's where I have the relationships with my brokers is in the Dallas Fort Worth area. So we had our first deal in College Station. And so that gave me the opportunity to go to my brokers in Dallas, Fort Worth and say, Hey, we just closed on this 60 unit deal in College Station. And our team is looking to expand into Dallas, Fort Worth. What do you got for me? And so I didn't get a deal right away, but then a little bit of time goes back and Rebecca has another deal and she says if you bring more money to the table, either your own money or your investors, money, we'll cut you in as a co GP on this one. So now I was able to go to the brokers and say. Hey, we're closing on 133 units in Denton, Texas, and Dallas Fort Worth people know where Denton is. It's a big growth area north of Dallas. And so now we had 60 units in College Station, 133 units in Denton, and the broker's ears are starting to perk up at this point. Yeah. And it wasn't my deal. I was a co GP and you do not need, you do not even hint at what percentage that you have in the deal. They didn't know I had 1% in those, but I'm now part of the management team. I'm part of the operating team and I'm learning and the lingo that I was learning in class. I'm now living the lingo and it's just such a fabulous education experience. So I'm submitting LOIs this whole time. This particular deal was in Fort Worth, Texas. And I submitted on it, got into the best and final, and ended up winning the bid. And wahoo, I've got 60 units of this. These are our units. This is my deal. So this was also 60 units in Fort Worth, Texas. And the broker after the fact told me, Jeanne, you did not have the highest bid. You did not have the best terms, but I recommended you to the seller to win the deal because I knew Rebecca was on your team. And I have closed deals with Rebecca before, and I know she's a closer and she's on your team. We're going to get this over the finish line. And that is the only thing that matters to the broker. They do not earn their commissions until that deal closes. That was the$2.3 million raise. We closed it without a hitch. And now I've got a reputation with a real life broker. And this is a small world. They talk to each other. They go to church with each other. They socialize with each other. They all know each other. The mortgage brokers know them. So we're now getting a reputation in the Dallas Fort Worth market. Because we closed 60 units and it was a fabulous property. It was a townhouse unit property and a lot of people knew about the property. And so then it was actually probably about 9 months until I got into my 2nd deal and that was 1 33 units in North Dallas. So I'm heavily now in the Dallas Fort worth area. I'm. I am a known entity in the Dallas forklift area. And in the meantime we got co GP in another couple of properties that Rebecca and her partner Brian. And so we are, we're in 80 units in Galveston. And I think it's 66 units in Montgomery Texas, which is over on the east side of Texas. So were almost at 500 units. Actually the Denton property has actually sold. So we've come full cycle on our Denton property and that is a feather in my cap talking to brokers because I'm able to say That I've gone full cycle on a property and it was a successful property.

Ciaara: 19:34

Well, you know, I love your story and how you were able to overcome so many challenges that the average investor is probably not going through. So thank you for sharing your story with us. And I'd like to switch gears a little bit here and do a deal walkthrough. You've spoken about a few of your deals already, but maybe just going a little bit deeper into one of your deals things that you learn from it and maybe some of the challenges you overcame and how you were able to do that.

Jeanne: 20:01

Okay. Let's go with deal number one. I've got challenges on both of my deals at this point, but let's go with deal number one, the Fort Worth property. And in fact, the challenge I'm going to talk about is the challenge that we have on both properties, which is they're both value adds, C class properties. And that is a terrific class to get into. But what it means is that you have to have a bridge loan and most bridge loans are not fixed rate. They're variable rates. And as we all know, the rates in today's market are extremely variable. So the Fort Worth deal, we did buy a rate cap on. And so this was a year almost two years ago. And interest rates were at their lowest all time lows and we weren't really concerned about interest rates because nothing was on the horizon that they were going to increase, but we did buy the rate cap. Thank goodness we bought the rate cap and at that point it was about I think we paid$25,000 for the rate cap. Which seemed expensive at the time, but in today's market is a jumbo bonus. Yeah, like low. And so we did buy the rate cap. Interest rates are now all over the place and we have bumped up against our rate cap, which the good news is we bumped up against the rate cap. And we now know what our mortgage is going to be. How it works is, you have to pay the mortgage and then the rate cap insurance gives you back the difference. So you have to have cash flow to pay the mortgage in the 1st place and at the same time, our insurance costs have gone up because the weather in the United States is hurricanes and tornadoes and et cetera, et cetera. Texas, we have freezes. We have tornadoes. Certainly the hurricanes in florida. Insurance costs have just skyrocketed. So those costs have gone up more than we anticipated. And our property taxes have gone up more than we anticipated. So all of those expenditures are affecting our cash flow and we have suspended our distributions to our investors. And that's something that no operator wants to do. A lot of operators, we are not in this boat by ourselves. Many operators are having to suspend their distributions to their investors because everybody is having these problems of insurance and mortgage rates and property taxes. Those are the big 3. We've kept our occupancy up, so our occupancy is doing what it's supposed to do as far as income, but our expenses have just increased so dramatically. The other thing that's affected in addition to distributions to our investors is we're not being able to do as much CapEx work. The capital expenditures work is what is in our business plan because that is borrowing more money from the lender. And as you borrow more money, obviously, your mortgage payment goes up. So we're already hitting up against the the DSCR, the debt service coverage ratio that the banks are allowing us to do. And if we borrow too much money, we are going to exceed our debt service coverage ratio and be at risk for them calling the loan. We plan to paint the exterior of the building. It will be so much prettier when we paint it, but we can't paint it right now because we don't want to exceed our debt service coverage ratio and the investor communication is so important. We do have a monthly newsletter. We have been telling our investors the challenges and our investors are being patient with us and we are sure to tell them that we will make the money up in the end. It may, in fact, take to the sale of the property because unless interest rates come down, we're going to have these challenges for the entire time of holding the property. But we're not in trouble. We're not in trouble with the property. It's just operating more leanly than what we anticipated. So in the end, the investor gets paid. We have a pref preferred rate to the investor. They will get their cashflow when we sell the property, they will be made whole on their cashflow they should have been getting this whole time and they get their money before we get our money. So we are working this property. We have zoom calls every week with partners. We have zoom calls with our property managers. People are out to the property, walking the property, we're problem solving. It's work. They don't teach you this part. The asset management part in your education. This is pedal to the metal and we are working and we get paid after our investors get paid. So this is not a paycheck.

Ciaara: 25:12

Yeah, it's definitely, it's a long term game plan. And right now, obviously, since the investors aren't getting paid, you're also waiting to get paid on this as well. So probably when you exit is really when you're going to see the fruits of your labor. So when you originally went into this deal, was the plan to keep the bridge loan, like the entire time you held it? Or was there ever a refinance involved in

Jeanne: 25:35

the plan? We were planning a refinance, but and we continue looking at the refinance options to see if it makes sense with the rising interest rates. It's a little bit tricky to do refinance because. We would refinance into a six or 7% loan, but at least it would lock it in, but we've bumped up against the rate cap. So we're already locked in, but we were planning to take money out of the project at a refinance. So that's probably not going to happen. We just on a weekly, monthly basis, monitor it and where are our expenses? We're trying to trim the expenses. We actually moved our leasing manager out of the property. We don't have an official leasing office. We have a unit that was converted to a leasing office. So 60 units includes that leasing office. We only were able to lease up 59 units out of the 60 because we had a property manager sitting in the 60th unit. So we moved her off site and are now leasing out that apartment to try to maximize our income. So that's the kind of thing that we're making major decisions, moving your leasing office off site is a major decision, but we decided it was more important to lease up that 60th unit than to have our property manager on site.

Ciaara: 27:03

Thank you. So thank you for sharing your stories with us today. What is next for you? Are you looking at your next acquisition?

Jeanne: 27:10

I am so excited for the future since I have gotten my mental health back. I am in the saddle and I'm chomping at the bit. The interest rates are an issue. Though I've taken a year off through all the things that we talked about I haven't really missed out on any great deals because the interest rates are so high and the sellers are for the most part, not coming down on their pricing to balance out the interest rates, but we have an opportunity in North Texas right now. It's a 22 unit, which is a much smaller property than I would have even considered. But a broker brought it to me a couple of weeks ago, and it was an intriguing project. And I think we're going to do this one. What's the intriguing part of it? It's a new build that the developer got into trouble financially because of the rising interest rates because of the rising. Oh, we didn't even talk about the rising costs, inflation. I didn't even throw that in there and all the expenses. Both on the labor side and the material side. So the developer got in trouble with his financials and brought in a hard money lender at high interest rates. And now the hard money lender is calling his loan. So they need out. The property is about 80% complete. We would take it over as a distressed property because they're out of money. So we would do the completion. So this kind of would turn us into developers. That is exciting for me. And it's Like baby steps for being a developer to finish off 20% of it means we didn't have to go through all the infrastructure and so forth, but we can still get experience as developers by doing this project and this will not be a syndication. This will be a joint venture, a JV. So I'm talking with some of my partners about them coming in as a JV and basically we're going to be working with our broker and going to the hard money lender and working a deal with them to take over the property. And, for the horizon. So Chip and I, my husband Chip with our education group, we are now coaches. So that's a dramatic change from being the student to being the coach and we are also now sponsors. And so sponsors means that for the newbies, for somebody in their first deal, they can come to us and have us sponsor them. And that gives legitimacy for them to the lenders. That gives legitimacy for them to the brokers and so yeah, in a short amount of time in my mind, but a long amount of time in some other people's minds, three to four years, we've gone from newbie students to being sponsors and coaches.

Ciaara: 30:01

I love it. Awesome. Thank you so much for being on the show today with me, Jeannie. Where is the best place for people to find you online if they want to connect with you and learn more about what you

Jeanne: 30:11

do? I'll give you my email address. It's J E A N N E.@ValleyOfTheMoonInvestments.Com. It's very lengthy, but very easy to spell valley of the moon investments, plural dot com.

Ciaara: 30:29

Perfect. All right. Thanks everybody for tuning in today. If you guys enjoy today's show, please write us a five star review on Apple podcasts or Spotify. Every review helps us to be able to reach more and more people looking to get involved in commercial real estate.

30:43

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