In this video, I will discuss with you the things to consider when investing in multifamily real estate passively and how the economic downturn has created opportunities for investors.
Transcripts:
Chris Bounds 00:00
For those that wanna be more passive, they don’t want to be in the trenches, negotiating deals, managing properties or raising $20 million for the next deal. Passive investors, what should they be looking for before getting into in multifamily investing?
speaker 2 00:21
Would say you’re always looking for a track record, right? Everybody’s the slick salesperson and they can throw up great metrics. And you know, you can you can sell the sizzle a little bit, right?
Chris Bounds 00:31
But so the pitch deck is not always, not-
00:35
It’s not always and I’ve seen some really slick ones. And you know, once you dig just a little bit beneath the surface, you realize it’s all BS, right? Like, at the end of the day, you have to have a great team and it doesn’t meet. So these are, this is actually an a piece of advice for people to start off. It doesn’t mean that you’ve had to sold or refinance 20 deals for anybody to take you seriously. You know, everybody started at zero. I’ve been the, you know, I had to talk people into my first deal, right? You know, why the hell would I invest with you, you never even done this ship before. But, I’m gonna tell you a key to success when you’re when you’re kind of dealing and at least in the syndication world that I’m in, right? Is you can leverage other people’s experience too, right?
So, the reason that people gave me $800,000, on my first deal was because I was partnering with a guy that had been doing it for the last 10 years, right? So I leveraged his track record and his experience, and he was there to kind of help and coach me along the way, right? You know, so you have to kind of take that into consideration when you’re when you’re, you’re kind of coming at it from a passive investor standpoint. But also find out what’s your box is a lot of people are just, they find out about it, and they get all excited, and they just throw their money into the first person that throws them a deal, right? You know, don’t do that, right? Figure out what market you want to be in, you know, what type of product you want to be in? How long you want to have your money tied up in, right? Because there’s projects that are, you know, short is maybe a year to up to 10 years actually shit, I’ve seen stuff that’s longer than that, right? You know, so you need to be very, very aware of like, okay, I want to be used in, I want to buy, you know, Class A property, and I only want to have my money tied up for five years, right? And I want to have these types of returns. Like you can, yeah, it might take you a little bit longer to find that deal. But at least you know, what you’re getting yourself into right, instead of just throwing money at whoever throws you a deal.
So I think that that’s important from a passive investor standpoint, right? You know, look at the track record, ask the questions. This is your hard earned money, you know, me we have a lot of questions, investors on our deals, right. You know, this is the retirement funds, you know, you’re entitled to ask a couple of questions, right? About somebody’s track record, or about the deal or about the market, but also, you know, getting yourself educated and understanding what you’re what you’re investing into. And what you want to invest into is important, too, right?
Speaker 3 02:41
Okay, so obviously, you know, I don’t take any personal investors. I don’t, I don’t, you know, pitch any investment on deals that I have. So, what I do wanna say, though, is if you’re thinking about passive investment, just please ask yourself, “Could I do it better?” I know, I have a full time job. And I’m an engineer, and I don’t have any time. But is there any other way that I can own real estate, right? How to depreciation and go through a forced appreciation and everything like that? Just ask it this, just ask yourself, how hard can it be? And if if the answer is still, you’re not gonna have any time, you’re not gonna be able to do it, then obviously, passively invest, you got to at least do that, right? If you wanna start generating wealth is, you know, invested with a really good team, like disrupt equity. Now, again, some of the one of the biggest and best companies to invest in I’ve always said that if I was going to invest passively, it would probably be with them. So, yeah, definitely just but but at least ask yourself like, “Okay, do I really just wanna leave my money tied up for years on end? Or could I get to my goal a little faster if I just actively invest?”
Chris Bounds 03:56
Thank you sir. Do you take- Do you work with private money lenders?
Speaker 3 04:01
Yeah. So, I work with hard money lenders that lets you borrow up to 100% of the cost of purchase and rehab. So, that’s zero down all you bring to the closing is, is your closing costs, right?
Chris Bounds 04:13
So there’s, there’s by buying passive investors, there’s really two ways you can be an investor, it’s either equity or debt. Now been probably primarily on the equity side, whether you’re raising money from folks that are they’re essentially business partners, passive business partners. And the 90 million that I mentioned earlier, most of that has been raised and raised for the flips that we’ve done and our rentals has been primarily debt partners, folks that we had a buy a deal it’s gonna be $150,000 plus another 50 to rehab it and they gave it 200,000 And it will be worth 350. So just keep kind of keep that in mind. And I think maybe we make a distinction between them.
Yeah, I don’t know whose ultimate an end right but obviously equity, you know, they’ll get some kind Sometimes they’ll have some kind of cash on cash, you know, expectation. So if they put $100,000 in, maybe they’ll get 10,000. But they share in the upside, right, which is the refinance and the sale proceeds versus if it’s dead, which we’ve kicked her out to. And we can probably structure our deals that way, too. And I actually know syndicators that do it that way, right? Where you’re just, it’s essentially, they’re getting a second lien on the damn thing.
And they’re getting their 8% coupon every year, right. But they don’t get any participation in the upside. So there’s, there’s a distinction between the two. And I wanted to make that because, you know, I mean, how you structure your deals, you know, could make or break the deal, first and foremost, but it’s also you need to know that going into if you’re going to raise money or structure even in, like you said, even flips, right, you know, knowing how all that works is important. So, just want to make that distinction.
Speaker 3 05:46
Yeah, it’s all risk adjusted returns.
Chris Bounds 05:47
Yes.
Speaker 3 05:48
And you become more attuned to it, as you looked at, look at multiple opportunities and see what folks are offering out there and get more educated with different assets.