Earlier this year I found myself in a rut. A real estate investing rut.
I had my head down focusing on buy/hold rental properties for so many years, I never really took a step back to consider my overall strategy and general position as an investor.
In addition to this rut, a couple new factors popped up in 2018:
- I quit my job. So getting a traditional loan from a bank is near impossible.
- The housing market is so inflated, it’s becoming increasingly difficult to find good value deals.
- The properties I currently own are starting to weigh me down. Before I go buying more of them, I want to seriously consider any new workload added to my plate.
Soooo… What do I do now?
Getting Out of a Rut
After training myself to think/act a certain way for over a decade, I found it very hard to break the cycle. It took several months of denial, bad attitudes, and complaining before I pulled my head out of my ass. But, I eventually came to these realizations:
- Instead of wishing things were easier, I need to wish I was better. There is always room to learn and grow.
- Real Estate won’t magically become cheaper over time. I can’t just wait for a market correction… and then invest. I need to take action within the environment I’m in.
- Being unemployed doesn’t mean it’s impossible to get a loan. I just need to work harder and figure out new ways of borrowing money.
- I need to set and define NEW goals. Starting from the absolute beginning if necessary.
Starting From Scratch with Coach Carson
In early September I came across Coach Carson’s free 7-day real estate investing course. (find it online here). What I thought was going to be a basic course tailored to beginners, turned out to be a very detailed investment guide applicable to any investor at any stage of their journey.
I found it a HUGE help. Below is a high level summary of the course steps and how I used them to help pick a new strategy, and take action.
Step 1: Identify Your Wealth Stage
First thing’s first. Why am I investing in real estate in the first place? And what do I want the real estate to do for me exactly? Determining my wealth stage helped me filter down the best investment strategies for me.
Coach Carson breaks down and explains each of the stages – check out the overview picture below.
I believe I’m currently in or around Stage 4. I’ve already saved a good amount of money and it’s ready to deploy.
Step 2: Picking a new Strategy
Analysis paralysis is probably the #1 reason most real estate people give up, fail, or never get started in real estate. There are hundreds of investing strategies, and most people flip-flop between them without realizing. Step 2 of the course helped me narrow down the best strategy within my wealth stage.
I ended up choosing Investments in Private Partnerships, also known as Real Estate Syndications. This is when multiple experienced investors pool their money together and purchase large properties. Syndications are similar to crowdfunded deals (think public sites like FundRise, PeerStreet or RealtyShares), except they are private and usually invite-only.
The reason I chose this strategy is to give me exposure to large building purchases as well as working directly with experienced gurus. Most syndications are put together and run by well known real estate professionals with wicked successful track records. I want to hang with and learn from these people!
Step 3: Pick a Market
Coach Carson first recommends looking into markets close to where you live. Mainly because local knowledge gives you a big advantage. Then he dot-points out things to check in both the ‘bigger picture’ and ‘smaller scale’ location criteria. Coach has all this information online here also.
Because I picked a strategy that includes buying large apartment complexes, there are really only a handful of ‘booming’ cities that interest me. Most of my research in the past few years has been in Texas, so I chose to focus on major cities in TX.
My preferred (big picture) markets include: Dallas, Austin, and San Antonio. As far as local submarkets go, I’m looking for anything in the ‘path of progress’.
Stuff like this is a good sign for my market: Why is Apple Opening a Campus in the Austin Suburbs?
Step 4: Choose your Criteria
“Riches are in the niches”
The more clearly defined your investment criteria is, the easier it becomes to sort through the riff-raff and focus on good deals. My investment criteria needs to be directly related to the long term goals I’m trying to achieve.
Here’s my main criteria I chose for new investments:
- Property Type: Large Apartment Complexes, (via Syndication/Private Partnerships)
- Property Class: B-Class properties (Attracting good tenants, new-ish buildings built in last 20 years, modern amenities etc.)
- Deal Type: Cashflow + Value Add. New purchases should be cashflow positive, and have opportunities to force appreciation via unit rehabs and upgrades.
- Investment Time Frame: Shooting for a 5-10 year investment timeline.
- Ongoing Management: Ideally, I’d like to have a fully passive investment that takes little ongoing effort on my part.
- Cashflow Income: I’m looking for properties that meet the 1% rule at minimum, and provide a 7%+ cash on cash return
- Appreciation/Equity Growth: My expectations are pretty low here. If I can double my money over a 10 year period with appreciation, I’m happy.
*Important note: Some new investors skip over this step because they don’t know what good criteria is yet. This is a mistake!! Good investors have solid criteria and tools they use to analyze deals. Coach has a HUGE guide here to help run numbers.
Step 5: Building your team
The good news for me is that private Syndications usually have a full team already in place… Carefully chosen experts in finding, buying, rehabbing, and managing apartment buildings.
The bad news: Remember how I said many of these Syndication deals are invite-only? Well, how do you get on a private invite list? And, who are the people running these deals anyway?
“Network, network, network.”
Time to get on the phone, cold call around, send intro emails, get my name out there, ask for referrals, shmooze people, stroke egos, and get in front of the right players. I’ve mentioned before my biggest resource is BiggerPockets, a free online network for RE investors.
I simply typed in “Syndication” into the search bar on the BP website and wrote down the top 30 people that showed up. Next I took about 3 minutes each to research these people, find who they work for, what cities/states they specialize in, any blog posts they have written, referrals they have given/gotten, and website if they have one. Then I filtered the list down to about 15 people that I wanted to talk to, and shot them all this basic introduction email:
“Hi Mr XXX, I found you on the BP forums and see that you put together syndications for large apartment complexes. I’m an investor from Los Angeles and would love to hear about any current and future projects that you are trying to fund. Can we schedule a quick 15 minute phone call to chat? Are you open this Thursday or Friday morning?”
It’s almost unbelievable the success rate in sending basic emails like this. The very next week I set up about 10 introduction calls, many of these people giving me over an hour of their time. From there about 4 people stood out, and I asked to please be included on any upcoming deals they were working on.
Step 6: Financing, Down payments etc.
This step was kind of skipped for me and my chosen strategy. Syndication deals require cold hard cash from investors. Once all the investors pool their money together, the managing partners use this as a down payment and get any further financing from a bank.
*Note: Although I wasn’t applying for a loan personally, I can’t just blindly trust the managing partners. It’s very important that the partnership doesn’t plan to over-leverage and borrow more than it can handle. More on this another time.
Step 7: Finding good deals – “Deal Flow”
Coach Carson’s final step talks about setting up systems to find new deals. Ideally, you want to know about deals as they hit the market, or even before that. Good deals can be found in any market.
For me, constant networking is the best way to get new deals.
On my introduction phone calls with the people in Step 5, I made sure to collect their email addresses, as well as ask to be included in any new deal alerts. Over the past 3 months I’ve already received about 8 invitations to invest in private syndications.
Step 8: Pull the trigger!:
This is the final step. Once you’ve found an investment that meets all your criteria, it’s time to move forward. Just do it!
In the last few months I found 2 x Syndication deals that met my criteria and invested in them both. One is a 350 unit apartment complex in Dallas, TX. The other is 284 unit apartment complex in Austin, TX. Stay tuned for another boring real estate post explaining the deal details!
And now, I’m officially out of my rut!
Thank you Coach Carson!
You’re already an experienced real estate investor? That’s great, but remember that as time goes on, things change. Your knowledge changes, economies change, your wealth stage changes, risk tolerance changes, your partners change, your tenants change, and keep in mind that the millennials are taking over the world. Adjust your strategy accordingly!
8 thoughts on “Changing Real Estate Investing Strategies”
Definitely something we need to get involved with. I need to spend the time a look at the details around some of this stuff.
I’m happy to help when you’re ready. I already got my first dividend check from my first investment so can show you the complete process.
Wow – it makes me feel really good when someone explains my own stuff better than I did:) Congrats to you for making progress and getting yourself out of a rut by doing the hard thinking and work. I have not done syndications but the right ones certainly have good potential. And the good news is you can find partnerships in all different niches within the real estate market.
For researching syndications I’ve really enjoyed learning from Ian Ippolito at Real Estate Crowdfunding Reviews. Here’s his due diligence guide: https://www.therealestatecrowdfundingreview.com/single-post/2018/04/29/The-Conservative-Investors-Guide-to-Picking-Real-Estate-Investments-Part-1—Portfolio-Strategy
Thank you. Really appreciate all the help and looking forward to your next online course too!
This is really good information. I wonder the exposure require in this type of investment strategy. I’m assuming you’re not required to be an accredited investor but I would like to know if you can share, at least at a high level, the type of commitments to participate in a syndication. Thanks
Absolutely! I’m writing a separate post on syndications and my research so far. Feel free to email me directly and I can tell you more if you’ve got specific questions.
I can also share the contacts I made, but I’d prefer to have a quick intro call with you first before referring you. Some offer very specific stuff and some are just ‘brokers’ of various other syndications.
Out of the 10 or so opportunities that I’ve seen so far, only a couple are opened to non-accredited investors. These full up quickly, but you can definitely get in if you have your criteria all organized.
I just found your blog via Coach Carson. I’m interested in investing with a syndication. I have talked to a few, but haven’t pulled the trigger yet. The information they provide looks good, but I’m not sure how to properly vet it. Looking forward to your syndication post(s).
Before I invested I read a ton of blogs and stuff related to vetting out the best syndication sponsors. I also spoke with references and wrote BP members to ask who they invested with and why.
Here’s a pretty good post that helped me ask some good questions: https://www.biggerpockets.com/blogs/9145/blog_posts/53959-vetting-an-apartment-deal-sponsor—10-tips-from-an-insider. (Read all of Dave Thompson’s stuff – he’s great)
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