How can the relationship between the operating team and investors make or break a real estate deal, especially in challenging market conditions?

 

In this episode, Angel Williams and Randy Langenderfer discuss the importance of trust and relationships in passive real estate investing. They share their experiences with different operating teams and how a strong team can help a deal survive even in tough times. The conversation also delves into the differences between cash and accrual accounting, the pros and cons of vertically integrated property management, and the significance of creating a sense of home for tenants. Throughout the discussion, Angel and Randy emphasize the value of knowing one's strengths and relying on the expertise of others in areas where one may lack knowledge or experience.

 

Randy is Founder and President of InvestArk Properties and general partner in 1,500 doors representing $250M in assets under management.  He has invested in a total of over 3,000 units in TX, OK, AZ, SC and LA. His investment strategy focuses on providing the passive investor significant returns by improving communities using a safe and time-tested approach. He is passionate about helping the busy professional achieve their goals in real estate and has been a part of several national educational programs and is currently a private multi-family coach.

 

He is a board member and previously served as the Chief Compliance and Audit Officer for a large academic medical institution in Houston, TX. He has a bachelor’s degree in accounting, Information Systems, an MBA in Finance, and is a CPA.

[00:00:00] - [00:02:00]  The Importance of Trust in Passive Investing

-  Trust in the operating team is crucial for the success of a real estate deal.

-  A strong operating team can help a deal survive even in challenging market conditions.

-  Building relationships with the operating team is essential before investing.

 

[00:02:00] - [00:06:00]  Cash vs. Accrual Accounting in Real Estate

-  New investors should educate themselves on the differences between cash and accrual accounting.

-  Accrual accounting aims to smooth out income and expense variations over time.

-  Understanding which reports are cash basis and which are accrual is crucial for investors.

 

[00:06:00] - [00:10:00]  Vertically Integrated Property Management: Pros and Cons

-  Vertically integrated models, where the property management company is part of the GP team, are becoming more common in larger deals.

-  The success of a vertically integrated model depends on the performance of the property management company and the ability to remove them if necessary.

-  Some investors prefer third-party property management to avoid potential conflicts of interest.

 

[00:10:00] - [00:15:00]  Creating a Sense of Home for Tenants

-  Using language that emphasizes "home" rather than "unit" or "tenant" can help create a sense of belonging for residents.

-  Creating a sense of home can lead to lower turnover, increased renewals, and reduced costs.

-  The concept of home resonates with people across different classes of apartments.

 

[00:15:00] - [00:18:00]  Leveraging Expertise in Real Estate Investing

-  Investors should focus on their strengths and rely on the expertise of others in areas where they lack knowledge or experience.

-  Empowering local teams to make decisions is crucial for the success of a real estate investment.

-  Partnering with experts in specific markets can help investors navigate unfamiliar territories more effectively.

 

quotes:

- "You need to 100 percent know that you can