Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job
Our parents influence us in so many ways. In Brock Mogensen’s case, his Dad inspired a passion for real estate and active investing. Brock’s father owned two duplexes, and the money those properties brought in was a big help to the family.
These days, Brock is at Smart Asset Capital, which is based in Milwaukee. Its portfolio of commercial properties includes 18,000 square feet of office space, 20,000 square feet of retail space, and an apartment complex with 89 units. Those numbers are even more impressive when you consider that Brock has only been in real estate for two years.
Moreover, Brock has built up his real estate holdings while working a full-time W2 job. If you’ve ever thought that a regular job would leave you no time for active investing, Brock’s story should convince you otherwise.
Entering the Real Estate Market
When Brock was a college freshman, he came up with a simple plan: He’d save his money to buy a duplex as soon as he could. And that purchase would launch a side career as an active investor in real estate.
About two years ago, Brock accomplished his initial objective. He bought a duplex by house hacking it. Typically, a house hack is when you buy a multifamily home via a mortgage. You move into one of its residences and rent out the other units. With the rent money you collect, you pay off the mortgage until you own the place.
Once Brock owned this residential complex, he began to realize how many real estate options were available to him: wholesaling, flipping, syndication, and more. Ultimately, he chose syndication, which involves collecting funds from a group of investors to buy properties.
Once Brock decided on syndication, the real work began. He took courses and attended real estate events. He read books and listened to podcasts. Altogether, he spent about six or seven months consuming information about real estate and commercial investing.
After that, Brock felt confident about his chances in the real estate industry. He believed he had the analytical abilities and the knowledge to succeed.
The next step was networking. Through the Bigger Pockets online community, Brock met a real estate professional he enjoyed talking to. They went out for coffee a few times. Despite their different backgrounds, the two had similar goals for the future. In fact, they could sum up their real estate plans in five words: “We want to go big.”
Not long after, a broker brought a deal for an 89-unit duplex to the attention of Brock and his partner. However, they realized it was too big for them given their relative inexperience. Brock also felt the price was too high.
Soon after that, Brock met his partner’s friend, a businessman with a large real estate portfolio and a management team in place. The three joined forces, and they decided to start a new company. Smart Asset Capital was born.
The First Deal
About four months later, Brock found that 89-unit duplex on the online real estate marketplace LoopNet. By this point, the owner wanted to sell it as quickly as he could, and Brock’s team made an offer. His group eventually bought it for $3.55 million, which was a real discount.
However, Brock’s second partner, the one with the largest portfolio, had doubts about this duplex at first. He thought the group didn’t have enough cash on hand to make it worthwhile. He also felt that, since Brock already owned a duplex, they should diversify and pursue a different type of building. But Brock was adamant in supporting this deal, and he finally persuaded his partner.
To finance this duplex, Smart Asset Capital raised $830,000 in private equity, which mostly came from Brock’s partners’ network of investors. Given his lack of industry connections then, Brock personally raised less than $100,000. Some of that money came from friends of his family.
The Smart Asset Capital principals soon closed the deal, and the 89-unit duplex was theirs. They then planned to make multifamily residences their core business.
In recent months, however, Brock and his partners learned about two outstanding properties that were on the market: one complex with 20,000 square feet of retail space and one with 18,000 square feet of office space. Thus, the Smart Asset Capital leaders changed course somewhat; they decided to close on those commercial properties.
As a result, the company now has different groups of assets. And its founding partners will continue to bid whenever a promising commercial investment opportunity comes along, regardless of its asset class.
The Secrets of a Thriving Partnership
At this point, you might be wondering what accounts for the success of the Smart Asset Capital partnership. Brock feels that, above everything else, one aspect is key: These three individuals balance each other extremely well.
Specifically, Brock brought his analytical abilities and talents for underwriting and reporting to the firm. For their part, his two partners have sales backgrounds and extensive industry connections; their investor databases contain long lists of names.
Brock feels that it’s vital for every businessperson to collaborate with people who have different strengths and different weaknesses. That way, the resulting group won’t be deficient in any area, and it will be powerful in many.
Indeed, on any given workday, all three Smart Asset Capital founders are able to focus on their strong points. Brock works largely on underwriting, investor relations, and asset management. His partners, meanwhile, concentrate on sales.
At the same time, these roles aren’t completely separate from each other. Brock gets involved in selling from time to time, and his partners help with the reporting tasks and asset management.
Not to mention, this partnership is equitable. The three men split their profits evenly; everyone gets 33.3 percent.
A Week in the Life of Brock Mogensen
Asset management is definitely complex, but Brock has an organized weekly schedule to handle it.
During the day on Sunday, Brock reviews his notes from the prior week and creates an agenda for the workweek ahead.
On Monday morning, Brock analyzes the company’s key performance indicators (KPIs). They include statistics such as tenant turnover rates, operating expenses, and revenue growth numbers.
Brock’s virtual assistant, a full-time employee, compiles the weekly KPI report and sends it to all the partners. At one time, Brock created this report himself, taking an hour out of his schedule every Monday morning to do so.
Then, on Monday night, the Smart Asset Capital founders hold a group call with their property manager. They rely on Brock’s agenda for their discussion points.
Throughout the week, Brock continually checks out the company’s account on AppFolio, a leading property management software program. That way, he can keep track of the KPIs and make sure nothing seems out of the ordinary. In addition, he takes copious notes, some of which he’ll later turn into questions for the property manager or discuss in meetings.
In fact, Brock feels that analyzing real-time data is the most important part of real estate investing. Incorporating this data into models effectively and accurately allows for effective management and planning.
Running a Real Estate Company as a Part-Time Gig
Many people are surprised to learn that, while managing a real estate company and overseeing its properties, Brock works a full-time marketing job. But Brock is used to juggling a packed schedule. When he closed his first deal, he was in an MBA program and taking three classes.
Will Brock ever leave his marketing career to become a full-time real estate investor? He still isn’t sure. He likes having two income streams. If, however, the real estate cash flow hits a certain target someday, he says he’ll certainly consider leaving the other job.
Also worth noting, although he has a steady income as a W2 employee, Brock keeps large reserves of cash in the bank. That way, he has enough funds on hand to keep his real estate business going in the event of an economic disaster or a period of financial uncertainty.
Brock says that many people with W2 positions hold themselves back, believing they don’t have time for business ventures on the side. Or a W2 employee might simply use that job as an excuse to not be an active investor. Perhaps that person is a little afraid to get started.
Do you have a full-time job? Are you looking to become an active investor in real estate during your spare time? If so, Brock recommends that you take the two initial steps he took. First, choose a specific aspect of real estate investing and really study it, just as Brock studied underwriting. Next, find partners to collaborate with, people who are authorities in areas where you lack expertise.
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.