An Investor’s Secret to Doing Large Apartment Deals with No Experience
The more investors you speak with, the more you realize that a lot of the traditional real estate advice simply is not true.
For example, “you need to have experience in order to do large apartment deals.”
The main reason? We are told that sellers and brokers prefer to work with established apartment operators because their proven track record increases the probability of a close. Whereas a sale is more uncertain when working with a less experienced apartment investor, or one who has not taken a large deal full cycle in the past.
Therefore, we are told to focus on smaller deals (single family rentals, duplexes, triplexes, quadplexes, etc.) to build a reputation of being a closer and someone who can successfully manage multifamily properties.
However, I have spoken with countless real estate investors who have gotten into the large multifamily space without following the above advice. They didn’t slowly acquire larger and larger properties. Instead, they either made gigantic leaps or skipped the smaller properties and started off investing in large multifamily properties.
For example, I was able to go from single family rentals to a 150+ unit apartment community.
Another example is Hamza Ali, who Theo interviewed on my podcast, Best Real Estate Investing Advice Ever. He currently owns 1,000 doors in Houston, TX.
Hamza Ali of Gray Spear Capital is an example of an investor who went straight to multifamily investing. He acquired a 24-unit apartment community from a broker without any previous multifamily experience.
How was Hamza able to win over both the seller and the listing broker?
He brought a large, local multifamily investor to broker meetings.
Once Hamza decided to pursue larger multifamily deals, he joined a local apartment meetup group. At the meetup, he met a local apartment operator who owned 1,000 units in the Houston, TX area. After establishing himself as someone who was serious about buying apartment communities, he invited this larger apartment operator to broker meetings.
One of the broker meetings was with an individual Hamza met at the meetup. This is the broker who sold Hamza his first deal – the 24-unit.
After putting the 24-unit under contract, the large apartment operator even walked the property with him.
Overall, Hamza was able to leverage someone else’s experience to close on his first apartment deal with no multifamily experience.
The large apartment operator didn’t have an official role in the deal. He didn’t sign on the loan nor was he given a stake in the deal. However, by attending broker meetings, he was implying to the brokers that Hamza was a trustworthy individual who would be able to close.
If Hamza attended the meetings alone, chances are that we isn’t awarded the deal. But the presence of a well-known, big-time apartment player instantly increased his reputation in the eyes of the brokers.
Now, Hamza applied this strategy to winning over apartment brokers with no apartment experience. However, the concept can be applied elsewhere.
Want to raise money from passive investors but lack experience? Bring a big-time player onto the General Partnership.
Having trouble finding this big-time player? Do what Hamza did, which is to start attending local meetup groups. Even better, start your own. The strategy at the meetup group is to establish yourself as a serious real estate professional. Show up to every meetup on-time. Ask educated questions. Offer valuable information to others. Maybe even offer to work for free for the big-time player from which you want assistance.
Thousands of investors have skipped the beginning or intermediate steps and jumped straight to large multifamily investing. Almost all of them did so by leveraging the experience and reputation of an established operator.
If you use Hamza’s strategy, you will be on your way to building a 1,000 or more unit apartment portfolio.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.