Street Smart Success

Investing in single family dwellings and three to four-unit apartments can generate cash flow and appreciation, but they tend to be time consuming to manage.  If you want to better leverage your time and your capital, it can be more profitable to invest in larger syndications for economies of scale and better returns. Dan Rowley, a Real Estate principal and passive investor, has invested in over 25 passive deals with a dozen sponsors. The lion share of these deals have performed as expected, or even better. Dan is now beginning to General Partner on deals of his own in the Carolinas where he moved from California in 2020.

No matter what the economic trends, there’s always an opportunity to make money. You just need to see where the market’s heading. It’s not always in synch with the media and where everyone else is investing. Bob Fraser, Founder and Principal at Aspen Funds, has a very successful debt fund which has provided investors predictable, monthly cash flow for several years. Bob is also offering great opportunities for his investors to participate in other attractive asset classes including neighborhood strip centers, new construction industrial, and Oil and Gas.

Contrary to all the success stories, Real Estate is a hard business that requires resilience in order to be successful. It’s not a matter of if things will go wrong, it’s a matter of what will go wrong and when, and how you deal with them. That’s why it requires grit in order to prevail in the long term.  David Mcillwain, Founding Partner & Managing Principal of MAC Assets, has learned from hard knocks many of the lessons it takes to be successful and costly mistakes that need to be avoided. MAC Assets specializes in value-add Multifamily investments.

Operating properties directly makes sense for people who want to be hands-on in the daily operations of a property and who have the time and experience to be successful at it. There are many cases, however where people acquire properties and then encounter hidden challenges like bursting pipes, termites, cockroaches and other unforeseen headaches. That’s why many people are better off and able to get better returns investing in other people’s deals. After the due diligence of an operator, and the specific opportunity, the work is done, and the cash comes in. Craig Stevens, Founder of GroundBreaking Real Estate LLC, started out buying small residential units on his own but has transitioned to investing in and raising capital for other syndicator’s deals. 

Real Estate is a local business that requires intimate knowledge of a market. This knowledge, plus being an expert on the daily nuts and bolt of operations, mitigates risk. Further risk is mitigated by in-house management to make sure no corners are cut, expenses are managed tightly, and tenant maintenance requests are responded to promptly. With all these things in place, plus assets acquired patiently at the right price with fixed debt, investors will most likely not lose money. Dave Codrea, Partner at Greenleaf Management, has built a vertically-integrated company with incredibly conservative discipline that owns and operates 125 assets across Multifamily, Mobile Home Parks, Medical Office and Flex Industrial.

It’s no secret that precipitously rising interest rates took many Real Estate operators by surprise, especially those who utilized shorter-term floating debt. As their loans are coming due and they’re being confronted with the reality of much higher rates, many operators are lowering or stopping investor distributions. Over the next several months and quarters, there are operators who will have to raise very expensive rescue capital, conduct capital calls from existing investors. or in worse-case scenarios, even foreclose. Rob Beardsley, Founder and Principal of Lone Star Capital, is doing a great job managing a 2300 unit portfolio in Houston, and is navigating this challenging situation responsibly on behalf of his investors and is positioned well to come out way ahead over the next several years.

If you’re willing to be patient and methodical with passive investing, and avoid undue risk, the rewards will compound over time beyond your wildest expectations and change your life. It just takes delaying gratification, keeping your living expenses below your income, investing in quality assets that appreciate over time, and redeploying capital for continued growth. Today’s guest, Jeremy Roll, left his steady corporate job in 2007 to become a full-time passive investor, and has lived 100% off the cash flow ever since and has built his net worth considerably over that time.

Unless you have a very long time horizon, in which case time cures a lot of ills, being right on your timing will make you the most amount of money in Real Estate. Although Light Industrial has been white hot over the past few years with few attractive deals, prices are starting to moderate as loans are maturing, and larger institutions are starting to rebalance their portfolios towards more liquid investments. Rich Kent, President and Managing Principal of Avistone, has a steep track record in the Flex Industrial asset class including two very successful recent funds. One and a half years ago, however, Rich pivoted to hospitality because prices of industrial had become too high to generate enough yield for his investors. Today, with prices coming back down to Earth, he’s pivoting back to Flex Industrial with his third fund in this asset class.

Property management makes or breaks deals in every asset class, but no asset class is more challenging than large multifamily. There are so many people involved, and so many components to the operations, that things are always going wrong, and the risks are high. Surprisingly, there are not a lot of property management technology solutions for multifamily that address all functions within one app. That’s why Daniel Cunningham, CEO and Founder of Leonardo 247, created an app that principals and property managers can run their entire buildings from. Leonardo 247 makes property management easier with smart software that streamlines and simplifies tasks while also lowering costs and risks and generates more profitability.

Many investors over the years have built portfolios of single family rentals that have ultimately enabled them to quit their jobs and build legacy income for their families. Single family homes in the right neighborhoods can always attract good renters and some stay for many years with not a lot of management required. Dustin Heiner, Founder of Master Passive Income, has built a portfolio of single families in Northeastern Ohio, Houston, and Phoenix since 2006 and never sells a home. Dustin also offers a FREE Real Estate investing course online at masterpassiveinvesting.com.