Podcast Summary
Exploring Multifamily and Commercial Real Estate Investing: Educate yourself through resources like BiggerPockets forums, expand knowledge, and seek opportunities for financial growth in real estate investing, including programs like rent to retirement.
Investing in real estate, particularly in good locations, can lead to long-term financial success. The Bigger Pockets Podcast episode 317 features a deep dive into the world of multifamily and commercial real estate investing, emphasizing the importance of education and understanding industry terms. The hosts suggest taking notes and utilizing resources like the BiggerPockets forums to expand knowledge and grow as an investor. Additionally, they discuss the potential of investing with no or low money down through programs like rent to retirement. Overall, the episode encourages listeners to educate themselves, seek opportunities for financial growth, and remain persistent in their real estate investing journey.
Partnering with trusted companies in real estate: By partnering with trusted companies and considering goals, landlords can secure best insurance coverage and investors can build generational wealth.
Whether you're a landlord looking for rental property insurance or an investor seeking opportunities in multifamily real estate, partnering with trusted companies can save you time, money, and provide peace of mind. For landlords, Steadily.com offers customized insurance solutions tailored to the unique needs of the industry, with consistently high ratings and competitive pricing. Their focus on the rental property market allows them to secure the best coverage for various types of portfolios. For investors, BAM Capital's track record of success in navigating market challenges and delivering strong returns, along with their disciplined investment strategy, makes them a trusted choice for accredited investors looking for long-term, generational wealth opportunities. Chad Doty's story illustrates the importance of having a clear goal and understanding the asset class that aligns with your objectives. For him, multifamily real estate offered the potential for ongoing cash flow, tax advantages, and the ability to build a scalable business. Overall, the key takeaway is that by partnering with trusted companies and carefully considering your goals, you can make informed decisions that lead to time and financial savings, as well as long-term success.
Focus on the right business model, understand your target market, and build competency: To succeed in real estate investing, focus on the middle income earner market and build competency before chasing deals in evergreen multifamily properties for cash flow, tax benefits, and freedom.
Success in real estate investing comes from focusing on the right business model, understanding your target market, and building competency before chasing deals. The real estate business is evergreen because it provides essential services that will always be in demand. The speaker specifically targets the middle of the bell curve in income earners and works with assets built between 1985 and 2005. Evergreen businesses, like multifamily real estate, offer cash flow, tax benefits, and the freedom to not be tied to trading time for dollars. To excel in this field, the speaker emphasizes the importance of asking yourself how to become the best in your market and serving your clients better than anyone else. Contrary to common misconceptions, money doesn't flow to good deals, but to competent people. Therefore, it's essential to build your competency first before seeking investment opportunities.
Understanding markets and personal growth are key to successful real estate investing: To succeed in real estate investing, focus on local market knowledge, use resources for data, look for markets with above-average growth, and prioritize personal growth.
Successful real estate investing involves aligning your market approach and capabilities, understanding the local market conditions, and focusing on personal growth. To make informed investment decisions, utilize resources like Census data, BLS, Texas A&M University, NeighborhoodScout, CoStar, and Axio. Look for markets with employment and population growth above the national average. Additionally, consider the nature of the jobs being created and local policies. Personal growth is crucial as well, as it can impact your ability to secure deals. Remember, the real estate market is local, so understanding the specifics of a market is essential. Don't overlook the importance of being financially and personally prepared before diving into the deal hunt.
Building a successful commercial multifamily real estate business: Commitment, capital, deals, and management are essential components to a thriving commercial multifamily real estate business. Focus on one area and seek external partnerships or team members to support the others.
Building a successful business in commercial multifamily real estate requires a strong commitment, similar to the unconditional love and commitment we have for our children or pets. This high-barrier-to-entry business involves four key areas: business architecture (optimizing your business), capital development (obtaining financing), deal development (sourcing assets), and asset management (managing and improving the property). To succeed, you need to secure financing, find the right deals, manage them effectively, and run your business efficiently. It's essential to focus on one area to build your business around and seek external partnerships or team members to support the other areas. Commitment, capital, deals, and management are the four essential components to a thriving commercial multifamily real estate business.
Focus on core business and infrastructure: Sharpen your axe before chopping down trees in real estate investing. Focus on your top projects and build a solid foundation for long-term success.
Focusing on the core business and infrastructure is crucial for long-term success in real estate investing. Chasing after every bright, shiny opportunity without the proper foundation can lead to inefficiencies and increased headaches. Buffett's advice to pick your top 5 projects and say no to the rest applies here. Additionally, while single family investing can be an excellent starting point, it becomes increasingly difficult to manage a large number of individual properties. Efficiency and control are key factors to consider when growing your real estate portfolio. Remember, as Abe Lincoln once said, "Give me six hours to chop down a tree and I will spend the first four sharpening the axe." Brandon Turner.
Exploring Airbnb hosting and real estate investing for extra income: Airbnb hosting can generate extra income and even pay for vacations. Real estate investing doesn't require full-time dedication and can be profitable during challenging economic times. Long-term holding of cash-producing assets and selling when the business model no longer shows potential for growth are important principles.
Starting a side business on Airbnb as a property owner can provide extra income and even pay for vacations. One successful example is renting out a home while the owners went on a trip to Mexico City, covering all expenses. Airbnb hosting might be worth exploring for those looking for additional income. Moreover, investing in real estate doesn't require full-time dedication. The speaker shares their experience of managing ten properties while working a 9 to 5 job. This demonstrates that anyone can give real estate investing a try. Furthermore, the speaker discusses their first real estate investment, a multifamily property in College Station, Texas, bought in 2009. They bought it via assumption due to the challenging lending market at the time. The deal generated consistent cash flow but didn't reach its full potential due to market conditions. Lastly, the speaker emphasized the importance of long-term holding of cash-producing assets and selling when the business model no longer shows potential for growth. The decision to sell the first property was made based on these principles. Overall, the discussion highlights the potential of side income through Airbnb and the possibility of successful real estate investing, even during challenging economic times.
Evaluating Real Estate Investment Returns and Structuring Deals: Regularly evaluate returns, consider deal structures, raise funds, do thorough due diligence, and build relationships for successful real estate investing.
In real estate investing, it's crucial to regularly evaluate your returns and consider the structure of your deals, especially when it comes to distributing profits to investors. Acquiring an apartment building or larger investment requires raising significant funds, and you may need to use various methods such as securitizing the deal or building relationships with potential investors. However, be cautious when considering deals presented in offering memorandums from brokers, as they may not accurately represent the financial situation of the property. Instead, it's essential to do your own due diligence and analysis to make informed decisions. Ultimately, becoming a successful real estate investor requires a combination of qualifications, networking, and a solid business strategy.
Consider multiple opinions and do thorough research to mitigate bias in real estate investing: To make informed real estate investment decisions, seek out diverse perspectives, build a trusted network, and do thorough research on market, location, and management.
Investing in real estate, or any financial endeavor, requires careful consideration and the ability to recognize and mitigate bias. The excitement and potential for high returns can cloud judgment, leading to poor decisions. To prevent this, it's essential to seek out multiple opinions and do thorough research on the market, location, and management before making a commitment. This includes building a trusted network of professionals, such as asset managers or property managers, to provide valuable insights. Additionally, being honest with oneself about one's limitations and seeking education on the industry is crucial. New investors, in particular, should be wary of overestimating potential returns and underestimating expenses, and should strive for a solid understanding of the fundamentals before diving in. Ultimately, taking a thoughtful, informed approach to investing can help mitigate bias and increase the chances of success.
Identifying Opportunities in Multifamily Real Estate: Find gaps in the market, understand competition, add unique value, and execute a value-add program in multifamily real estate to succeed, even in lower cap markets.
In today's competitive real estate market, particularly in multifamily, it's essential to add value instead of just relying on market conditions or interest rates. The speaker shared that they've achieved $425 billion in transaction volume and aim to reach $1 billion in assets under management. They currently focus on deals in the $15-$35 million range and have seen success by identifying gaps in the market and catering to those needs. The speaker emphasized that there's a science to finding opportunities and that it's not about guessing. Instead, it's about understanding the competition, determining what unique value can be added, and executing a value-add program even in lower cap markets. While returns may be less than in the past due to rising interest rates and cap rates, real estate still outperforms other asset classes like stocks, bonds, and paper-based investments. To get started in multifamily, the speaker suggested focusing on a process for identifying opportunities rather than relying on one specific criterion. This might include examining local comps, understanding the needs of potential renters, and determining how to add value to the property.
Maximizing Net Operating Income in Multifamily Real Estate: Focus on increasing NOI by decreasing expenses or increasing income, with more elasticity in rent growth and other income sources. Explore additional income sources and implement strategies at a lower cost or with added value.
In the world of real estate investing, particularly in multifamily properties, the name of the game is to increase net operating income (NOI) to add value and ultimately increase the property's worth. This can be achieved by either decreasing expenses or increasing income. The focus should be on the elasticity of rent growth and other income sources, as there is more room for maneuvering in these areas compared to operating expenses. The 50% rule of thumb suggests that about half of a property's income goes to expenses, but this can vary depending on property taxes and other factors. To create consistent growth when market rents can't be increased, exploring other income sources such as renter insurance programs and cable bundling can be beneficial. In essence, the goal is to "draft" behind successful competitors by implementing similar strategies, but at a lower cost or with added value, much like drafting behind a semi-truck on the freeway to improve gas mileage. This concept applies primarily to multifamily properties, as opposed to single-family homes, where value is determined more by square footage comparisons.
Building a Successful Multifamily Real Estate Business with a Strong Team and Effective Partnerships: To build a successful multifamily real estate business, prioritize a well-structured team with experienced asset managers, effective partnerships with third-party property managers, and a focus on capital development, asset management, and marketing in desired markets.
Building a successful multifamily real estate business requires a well-structured team and effective partnerships. The 37th Parallel team, based in Richmond, Virginia, has 13 members, including asset managers with extensive experience, an office manager, a controller, a technology financial analyst, and co-managers. They prioritize working closely with third-party property managers, treating them as an extension of their team. Their structure allows for management-intensive operations, with a focus on capital development, asset management, and marketing. To build a business outside of their backyard, they look for markets with strong job growth and desirable locations for potential tenants. By partnering with experienced property managers and building a strong in-house team, the 37th Parallel team has been able to successfully manage thousands of units and grow their business.
Focus on building a strong foundation in capital and deals before expanding a real estate business: Effectively sourcing deals and securing capital are crucial for real estate entrepreneurs to succeed, as the market remains strong due to population growth and immigration trends, with renters making up a significant portion of the US rental market.
For real estate entrepreneurs looking to build a successful business, focusing on identifying and excelling in a specific area, such as deal sourcing or capital formation, is crucial before expanding to other aspects like business architecture and asset management. The speaker emphasizes the importance of having a solid foundation in capital and deals before building the rest of the team and business infrastructure. Additionally, the real estate market remains strong due to ongoing household formation, driven by population growth and immigration trends. Immigration renters make up a significant portion of the US rental market, and the privilege of homeownership is becoming less prevalent. Therefore, the real estate market still presents opportunities for investment, especially for those who can effectively source deals and secure capital.
Demand for multifamily real estate driven by demographics: Strong demand for multifamily real estate due to renters and aging population, but concerns about oversupply and financing markets.
The multifamily real estate market is experiencing strong demand due to demographic trends, particularly the large population of renters in the 18-35 age range and the aging baby boomer population. However, there are concerns about potential oversupply and the impact of financing markets. The fundamentals of the real estate market look strong, but there is a risk of market volatility. The low-income housing sector presents a significant opportunity, but it requires government intervention and comes with unique challenges. To succeed in any real estate niche, including low-income housing or mobile home parks, it's essential to educate yourself, learn from successful operators, and build a network. The deal deep dive will provide insights into a specific investment opportunity. Stay tuned.
Maximize real estate investing with effective lead management and efficient insurance solutions: Streamline lead generation with DealMachine, simplify insurance with NREIG, persist in negotiations, and build a network for equity investment.
Effective lead management and efficient insurance solutions can significantly enhance your real estate investing experience. DealMachine offers a treasure trove of contact information and phone numbers to streamline your lead generation process, while NREIG caters specifically to real estate investors, simplifying the insurance process with one monthly bill and the ability to add, change, or remove properties without hassle. The story shared involved a successful acquisition of a 163-unit property in Louisville, Kentucky, which was found through a broker but ultimately negotiated directly with the seller after months of back-and-forth. The investor emphasized the importance of persistence and emotional connection in negotiations, as sellers' decisions can change over time. Additionally, the investor raised equity for the deal by educating high net worth investors on multifamily investments and building a group to invest together.
Effective communication and alignment with investment partners: Maintaining transparency and collaboration among investors leads to successful identification, acquisition, and sale of properties, maximizing returns and minimizing risk.
Effective communication and alignment with investment partners are crucial in real estate investing. By sharing the same investment beliefs and conclusions, investors can collaborate efficiently and make informed decisions about equity allocation and deal opportunities. This alignment allows for a clear understanding of each investor's financial capacity and commitment, enabling the group to take advantage of investment opportunities and maximize returns. The discussed example showcases how a group of investors, by maintaining a transparent and collaborative approach, were able to successfully identify, acquire, and sell a property, ultimately resulting in a profitable exit. Additionally, the importance of proper business management, such as maintaining rainy day reserves, was emphasized as a key factor in minimizing risk and maximizing returns.
Understanding Risk Tolerance and Long-Term Goals in Real Estate Investing: To build stable, long-term wealth, consider investing in a reputable real estate manager with a proven asset class. For quicker returns, take on more risk but be prepared for potential instability. Account for all expenses and research markets to make informed decisions.
When it comes to real estate investing, understanding your risk tolerance and long-term goals are crucial in determining the right investment strategy for you. If you're looking for stable, long-term wealth building, consider investing in a proven, efficient asset class with a reputable manager, even if it means a lower initial return. On the other hand, if you're looking for quick returns, you may need to take on more risk and potentially sacrifice long-term stability. Additionally, it's important to thoroughly account for all expenses, including unexpected ones like changes in occupancy and property taxes, to ensure the success of your investment. Finally, doing your research on markets and consulting with experts can help you make informed decisions and avoid costly mistakes.
Build credibility and trust with brokers: Prepare with capital, reputable property managers, and reliable closing counsel to present yourself as a competent and credible investor to brokers
To successfully approach a real estate broker for your first multifamily deal, you need to build credibility and trust. Brokers are paid when deals close, so they want to ensure you have the ability to close and have a competent team. Prepare by having the necessary capital, identifying reputable property managers, and securing a reliable closing counsel. By presenting yourself as a competent and credible investor, you'll attract the right people to your team and increase your chances of a successful introduction to brokers. Remember, borrowing credibility and building transitive trust are essential in real estate investing. Embrace the learning process and put in the work to become a rock star investor. Recommended books for further learning include Gary Keller's "Millionaire Real Estate Investor" for multifamily and Eli Goldratt's "The Goal" for business strategy.
Embracing continuous improvement in business and life: Commit 100% to a goal and consistently work towards improvement to enhance success in various aspects of life, as outlined in 'The Goal' and emphasized by Chad.
A commitment to continuous improvement, as outlined in the Theory of Constraints, can significantly enhance the success of a business. Chad shared his experiences from the book "The Goal" and how this concept can be applied to various aspects of life, including real estate investing. He emphasized the importance of embracing a 100% commitment to a goal and being consistent in the pursuit of it. Chad also mentioned his hobbies and shared his insights on what sets successful real estate investors apart from those who give up or fail. He encouraged listeners to check out his website, 37parallel.com, for educational resources and his book "Evidence Based Investing." Overall, the conversation highlighted the power of commitment and the importance of consistently working towards improvement in various areas of life.
