I understand all too well how confusing it can be to just get started in real estate. Most people go through the same thought process –
- You’ve seen the success others have and decide you need to invest in real estate also.
- You begin looking at what’s affordable – condos, single-family houses, duplexes.
- You consider different strategies – Fix and flip, the BRRRR method, Air BNB, wholesaling…
- You feel that multifamily is the most scalable and sustainable! So you get excited… And then you get stuck.
Let’s try and “unstuck” you today!
For simplicity’s sake, I am going to split you, the readers up into a few categories to hopefully alleviate some of the concerns or limiting beliefs you may have and to give you some clear, concrete direction.
Do you have –
1. Lots of money – Invest passively in apartment syndications and live off the returns.
2. Zero money – Invest your time and energy in putting deals together to get equity. When you have acquired enough equity in multiple deals; put it to work for you passively.
3. Some money – If you have some capital, your approach can be to invest both passively and actively.
For those looking for a more detailed explanation of each scenario, keep reading. Skip to the section that best fits your current situation.
1. Lots of money. In this case, I recommend beginning your search for reliable apartment syndicators. Some can be found on the NMHC website here. I recommend speaking to a minimum of 3 apartment syndicators. Have a conversation with them to see who you would enjoy working with. Your relationship with this person is important and you should get a good “vibe” right off the batt. You will also want to review their track record, their current offerings, as well as how they structure their deals. Make sure you also discuss your goals with them and see what strategies they offer you in accordance with your goals. See how well they understand your needs and are willing to work with you to help accomplish your goals.
It is also important to do your homework. Although it is called “passive investing” you should at least have basic knowledge of underwriting and deal structures. For this, I highly recommend two books – The Best Ever Apartment Syndication Book by Joe Fairless and Theo Hicks, and Passive Investing In Commercial Real Estate: Insider secrets to achieving financial independence by James Kandasamy. They will give you the tools you need to understand how to invest your money.
2. Zero money. Ok, you are going to have to work pretty hard, and it could take you some time. I would say a minimum of 6 months, so be patient and persistent.
During this time, you will have to go deep on educating yourself and networking. The goal is to immerse yourself in the community, culture, and lifestyle of syndicators. You have to be seen as a pro… and fast! Keep in mind that you may have to get into your first deal(s) with little to no equity and that you must be offering some sort of value if you are not offering capital (ie bring investors into the deal, put the deal together, find the deal, asset manage the deal, etc.)
Ok, let’s talk about education. Grab as many books as you can, and listen to as many podcasts as possible. I also highly recommend a mentorship program like the Wheelbarrow Profits Academy from Jake and Gino. This will accelerate the education process, get you connected with the right people, and get you into deals quicker. You will also have a higher success rate, and have access to professional guidance along the way.
Yet if you have no money, I understand that this may not currently be an option. However, I can tell you from experience, that it would absolutely be worth it to borrow some funds from a family member or even in an extreme case charge this mentorship to a credit card. (Yes, I said it, and I believe it)
Alternatively, look for highly successful investors that you would like to emulate and figure out how you can provide them value. What can you offer them that would compel them to return the favor in the future? There is always something you can give… and give, give, give away! I have heard of some great stories like that from Will Coleman of Rand Capital who offered top syndicator Joe Fairless to mow his lawns! Don’t be afraid to think outside the box.
For networking – Create an elevator pitch for your new title as a multifamily investor/syndicator and practice it. You need to share this with everyone you know. For example “I am a multifamily investor/syndicator. I purchase apartment buildings in (market/city) with a range of (x-x number) units. I target value-add properties with deferred maintenance. I offer solid returns to people looking to invest with me…” Something along those lines.
Donald Miller, best selling author of Building Your Storybrand can help you with this pitch here
Your investor base!
This is important. Begin by making a list of friends and family members in your current network. This is the beginning of your ever valuable email list (these are your investors!). Call every person and share your plan and ideas. Ignore any negativity or naysayers.
Also, attend every free meetup group you can and talk with others and listen intently. Begin acquiring contact information and add them to your list.
**Pro-tip – Start your own meetup group and get a ton more people to add to your list!
If you are not comfortable networking, I recommend listening to the podcast Build Your Network with Travis Chappell. He will help you gain skills and confidence!
When networking, keep in mind that you should always approach people from the mindset of “how can I help this person”, and firmly know, and believe that this is what will make you successful.
3. Some money. In this scenario, and to simplify things, I am going to assume that your goal is to leave your current job as soon as possible.
Realistically this can be done in a couple of years (or sooner depending on your education, network, and capital).
Here is how –
If you plan on retiring in 2 years, you will have to syndicate deals be and extremely aggressive in your approach. Seek to replace your current income with fees you will receive as an apartment syndicator – Acquisition fees, asset management fees, and disposition fees.
Here is a more complete list of how you can get paid as an apartment syndicator.
To expedite the process of becoming a syndicator, I recommend buddying up with an experienced operator and hiring a mentor as stated in the previous section.
Use some of your capital to invest with them and try to get on the general partnership (active) side. If this isn’t possible, I still recommend investing with an experienced syndicator passively and working alongside them to learn as quickly as possible. During this time, education and networking are paramount. Continue to seek to put together deals, learn the process and build an investor base. Depending on the size of the deal, you may be able to quit your job after your first acquisition!
Summary
In the end, I hope at least one thing is clear – you will have to put in some real work. This is not 100% passive work even though you will be earning “passive income”. Even for those who have “lots of money”, if you do not learn the ropes and keep on top of your game, you could end up losing money.
So get pumped up, go out there, and start buying multifamily apartment buildings!
Call me and we can chat some more!
˜Nico
