In this episode, Brandon and Thomas are joined by Spencer Hilligoss, an active real estate investor, syndicator, and executive leader for two real estate businesses. His own company, Madison Investing, has co-sponsored deals in excess of 4,000 units and $500M. He also has a track record of building high-performing teams over 5 companies in Silicon Valley.Spencer started his career in the Bay Area working in technology as a leader and developer for sales groups. His passion was hiring, building teams, coaching, and building processes to support the team. Spencer also spent time at LendingHome. Today, Spencer is a full-time real estate investor.
Why Start Madison Investing?
Spencer realized that a level of protection and security is very important. Heaven forbid something terrible happens and you can no longer work the W2 job and the income stops flowing. Spencer realized he needed an exit strategy from the corporate world to bring some financial stability. Spencer and his wife started investing passively with a duplex in the Bay Area. Looking back, there were better investments out of state. This search for properties of a better value and higher cash flow led Spencer on the journey of making real estate investing his full-time job.
First is the notion of financial offense and financial defense. Financial offense is the entrepreneurial spirit of creating a new product or service or looking to grow your money. Getting promoted at a job isn't necessarily financial offense... this is like a 5% increase in W2 income that is heavily taxed.
"There's other ways to place offense, much better ways to play offense. Every hour spent at a full-time job beyond 40 hours a week is something that is not your highest-leverage use of time to go develop more dollars."
For financial defense, it's not about what you make, but what you keep. Your tax burden is controllable. It's based on how you generate your income. After reading Rich Dad, Poor Dad, Spencer realized he had paid so much more in taxes than was necessary.
Team at Madison Investing
Spencer runs lean at Madison Investing. Spencer and Jennifer, his wife, are the co-founders. They use a series of third-party consultants and vendors that help out in specific areas. The first areas they looked at were accountancy and bookkeeping. They had briefly hired marketing firms and various vendors for technology, software, investor databases, and the like. Spencer and Jennifer deliberately decided holding off on hiring anyone full-time until absolutely necessary. During this Coronavirus crisis, Spencer is very grateful that they decided to stay lean.
"There's certain things you can outsource, and it makes total sense to do it because you will do it, as the founder or driver of the business, equally well to something that you would outsource."
Other areas don't make sense to outsource. Spencer gives the example of an introductory piece of written content for a potential prospect looking to learn about the company. If that written content is better by you personally writing it, then it may be wise to use your time in that area or similar areas that need your personal touch.
Spencer's Experience with Over-hiring
"Part of being an effective leader is owning your misses and also being compassionate on the hardest of decisions."
At large established companies, there are many historical data points that can be relied on to accurately project growth and the new hires required to keep up. At a startup, there is often limited to no historical data. Managers are often relying on different projections of growth. There was a period of time where Spencer hired based on a high projection of growth, and the growth simply didn't materialize. Spencer had to fire 12-15 people during this time.
"If you decide to move forward with growth then you need to be there in the time of the wind-down. You need to be the person to sit there and own it fully. You can't be the person that sits there and absolves, like the market forces as the reason."
You must be compassionate and empathetic and communicate to the best of your ability. You need to step in to the leader's shoes. It's easy to lead during the growth phase, but when it starts going down and head count decisions are being made, that's what is extremely difficult. This brutal experience of firing individuals just 8 months after hiring is what made Spencer very cautious about hiring full-time employees at Madison Investing.
You need to make sure that the firing decision is the right one. List out the timeline, sequence of events, dates, reasons, and feedback. What's the business reasoning? Second, get right with the message. The delivery is very important for how the individual feels respected and treated. You need to be confident but really make sure you own the decision.
Challenges in Starting Madison Investing
On building a business while working a full-time job: "How do you keep your time ruthlessly protected and go and focus on your own business?"
Outside of Spencer's full-time career, him and his wife began building Madison Investing on nights and weekends. Spencer believes the first big challenge, and most overlooked issue, is time management and focus. Spencer realized the only way he was going to be successful was to wake up extremely early to get the Madison Investing work done before the day job began.
"What do we go do next? And most importantly, what are we not going to go do next? There's a lot of temptation to go do everything that you see, and to go do exactly what everyone else is doing. That's not going to get you to the altitude that you're looking for."
Spencer notes that there's a huge difference between being productive and being busy. Being productive means that you're driving results. Spencer likes to plan, measure, and move slowly in the beginning so that he can produce more efficiently after.
"You've got to take care of your brain, you've got to invest in your skills, your abilities, and your knowledge."
Spencer has mentors from several different industries and still keeps in touch with coaches from the corporate world. Some people are hesitant to spend money on business coaches, but Spencer thinks of that money spent in the inverse:
"How do you expect to have enormous success and wealth for your family if you're not going to go invest and take your own development seriously?"
Learn more about Spencer and Madison Investing: https://www.madisoninvesting.co/