My real estate investing journey has been a long and winding road. I could say, “If I’d have know then what I know now.” It’s true. But I really just want to tell you what I’ve tried, and what I’ve learned, and why I think investing in multifamily syndication deals is amazing. If I can share my experiences and make the road shorter for someone else, I’m happy to do that.
Like many people, I always liked the idea of investing in real estate, but I wasn’t sure I’d like the reality of it. I was the guy who would say: It sounds great, but I don’t want to have to fix a toilet or get a call in the middle of a winter night to deal with a broken furnace. I’ve heard friends say similar things. But I've found out how to make great money in real estate, potentially doubling your money in 5 years or less, without ever having to talk to a tenant, contractor or real estate broker. There's no gimmick. It's not get rich quick. But it does build wealth.
Many years ago I purchased a unit in a condo-hotel in a nearby town that is a popular getaway. I thought this would be a great, hands-off investment. With a condo-hotel, you’re buying a room in a hotel. You’ve got a vacation getaway and no maintenance. It has on-site hotel staff to manage the property and keep the rooms rented when the owners are not using them. The hotel profits are divided among the owners, defraying expenses and sometimes generating a little profit for the owners. I didn’t have to deal with the headache of renting it out, and I could use it when I wanted. Some of the people that I described it to told me they thought it sounded like a great investment. It really was not a great investment. It’s an interesting option to defray the costs of a vacation getaway, but I would not recommend this option to someone looking to invest in real estate.
Some years after that first step, I joined with a partner to do house flipping. I thought, if we fix them and sell them, we can make money in real estate and still don’t have to deal with tenants. This will be great, just like on TV! We used our own money to buy the houses and pay for the rehab work. I made a little, learned a lot. Figuring in my time, it was basically a low paying part-time job where I had my own capital at risk. I didn’t really understand the incredible power of leverage in real estate. I do not recommend this approach for most people. It’s not fun like the TV shows.
I found out about BRRRR and I was amazed by what is possible with strategic selection of properties and using leverage. BRRRR is an acronym that stands for Buy, Rehab, Rent, Refinance, Repeat. It goes like this:
• Buy a distressed or undervalued house;
• Renovate the house to increase its value
• Rent the house out to some great tenants
• Refinance at the new higher valuation, pull cash out at closing
• Repeat the process with the same money you bought the first house with
The BRRRR process introduced me to the concept of infinite returns. If you are able to recover all of your initial investment with a cash-out refi, you’ve got a true no money down deal ... with monthly cash flow! When this works, it works really great! And it worked great for me. I could see that doing BRRRR deals was a winner, but getting the best returns on deals could involve a fair amount of work, and growing that business meant managing more tenants (which I was trying to avoid in the first place) and managing properties that were spread out over a geographic area. So I kept looking and learning.
As I continued to learn, I found out about the benefits of multifamily apartment investing. This really fits what I was looking for from the start: A solid, hands-off real estate investment with great returns. I initially hadn’t considered investing in big multifamily properties. I thought you needed millions of dollars on hand to do those deals, but that is definitely not the case. There are the big players, but I leaned that a big part of the multifamily investing market is a team sport. There is a General Partner team that might evaluate hundreds of deals to find a great one, and then do all of the considerable work to bring the deal to closing. The Limited Partners are huge part of the team, as they provide a significant part of the funding for the deal. They are nicely compensated for doing so, as they should be. Limited Partners don’t have to do any work, other than their own due diligence. It’s the ideal situation for someone who sees the great benefits and advantages of investing in real estate, but doesn’t want to (or doesn’t have the time to) deal with tenants and property maintenance. As a Limited Partner, you get Cash Flow and Capital Gains. You could double your money in 5 years or less, with tax benefits available too.