Real Estate Investing - The Ultimate Team Sport

I grew up playing basketball. As I got older and continued to grow, topping out at 6’5”, I played more and more competitively. I played year round—traveling around the country to tournaments in the summer and playing for my high school team in the winter. Basketball is not a game you can play by yourself, and the biggest and best life skill I learned was the value and importance of being part of a team.

Being on a team, I learned about the importance of communicating. Buying into a shared vision and strategy. Defining the roles for everyone on the team. Sacrificing my own goals for the good of the team. And of course the thrill of victory and agony of defeat.

Over the last year, I’ve realized how many parallels there are in multi-family investing to playing basketball--and specifically to being on a team.

When we started our real estate journey, I was a one-man team. Yes, I had the help of a broker in finding deals. But I was buying duplexes and fourplexes with my own capital. I was managing the properties myself. I was doing most of the maintenance. As we’ve transitioned into large-scale (100+ units) properties—the value of and need for a team are readily apparent.

So what does a successful team look like in the multi-family space? Below are the roles and people I’ve surrounded myself with that make up my team, and roles I believe will contribute immensely to your success if you’re heading down the real estate path.

Coach. Every great team starts with a coach. Coaches hold players accountable, point out things they can’t see for themselves, help set the game plan, and make in-game adjustments. When you’re playing the game day in and day out, it’s important to have a coach that’s watching how you play the game. In my case, I have a life coach who helps me focus on my mind and my goals, and then assists me with strategies to ensure that those goals will be reached and new goals will be set. John Wooden, the legendary UCLA coach said “Don’t measure yourself by what you have accomplished, but by what you should have accomplished with your ability.” Having a coach on your team will ensure you are maximizing your ability—in Real Estate and in Life.

Partner. Real Estate isn’t golf or tennis—where a star individual can crush it, with the help of coach. Real Estate is a team sport—and you need teammates. The most important part of your team is your partner(s), so choose wisely. You need to mesh with your partner philosophically, attitudinally and make sure you have complimentary skills. Make sure you have a similar vision for the future—what you want out of business and out of life. Make sure that you don’t have too many redundant skills. Make sure that you have complete trust in your partner(s), that they have incredible integrity and ethics.

In my case, I’ve partnered with someone that checks all those boxes. We met at a conference, kept in touch, crossed paths some, and after many months of discussions, and having grown to really like and respect each other—we decided to partner on a few deals and see how things would go. The partnership makes sense because we make each other better and expand our individual capabilities.

We buy deals in Texas. I live in Texas and can easily go tour properties, while he's out of state and this was a challenge for him.

We only buy great deals. He has deep experience in financial underwriting and a team of analysts that lets us evaluate more deals more often to find the best ones. I've got an advertising background and was slow and not totally confident in the underwriting. Collectively we can look and see more deals.

We have different pools of investors, which expands our ability to raise capital and close on more deals.

The list goes on, but the important thing is to pick your teammate wisely.

Brokers. In each region or city, there is a small group of commercial real estate brokers that will focus on multi-family assets. They have spent years building relationships with the owners of multi-family properties and the groups that want to buy them. They hold the keys to your success, and having them on your team is vital.

Once you identify the geographic area(s) you are going to focus on, identify who that small group of brokers are—and start building relationships with them.

The latest deal we were awarded came to us largely because of the relationship we had built with the broker, and the fact we view them as an indispensible part of our team, not some service provider.

Mortgage Broker. One of my favorite things about investing in apartment communities is the ability to leverage your investment dollar. Where multi-family stands out from other asset classes is the ability to get government backed, non-recourse debt. 30-year amortization schedules, 7 to 10 year fixed rate loans, etc.

In order to get those attractive terms, you need to build a good relationship with a mortgage broker who has access to these Fannie Mae and Freddie Mac programs. We have 2-3 sources that we do business with. Once you have a deal under contract, this part of your team is incredibly important to get your financing lined up and get the deal closed.

Property Manager. To scale our business, we use 3rd party property management. This group is going to run the day-to-day operations on your property, and execute your business plan. Obviously this link is critical to your team. They are the ones that will have daily contact with residents, are managing the daily operations of the community.

When we sat down to start interviewing management companies, we looked for the following traits:

• Relevant Experience. Our business model is value-add investing. We turn around, improve and often re-brand assets after we purchase them. There is a lot of work and chaos happening during the first 12-18 months we own the property, and we wanted a property manager that had experience in such turnarounds, and not someone that was just excellent at operating a stable new property.
• Size. We wanted someone who had a good book of business with the relevant experience mentioned above. But, we shied away from the really big groups where we might be just another client in a portfolio of 50,000 units. I would recommend looking at companies that have between 5,000 – 20,000 units under management.

Capital Sources. When I really think about “Real Estate being a team sport”, this is where that team expands. We are buying properties with other people. Our average purchase price is between $5,000,000 - $25,000,000. Just like when you buy a home, you need to bring a down payment. Often that is between $3,000,000 - $10,000,000. Not the kind of pocket change I find under the couch cushions.

We raise the majority of that money from outside investors, who all become our teammates in buying and owning a specific community. Before you can get serious about pursuing and buying apartments, you need to have this part of your team lined up. Where will your equity come from?

Having grown up playing a team sport, I think it was natural that I would find my way into a career that was dependent on having a supportive team around me. I’m grateful for my teammates, the social interactions and outlets they provide, and the relationships we have built.

If you are considering getting into the multi-family real estate space, I’d encourage you to start thinking about what your ideal team would look like, and which skills you are lacking that teammates should provide.

If you are someone that is interested in joining in our team, whether as an investor or some other role, please reach out and let me know. The great thing about real estate is there are no rules on how big of a team you can field, and we’re always looking for potential teammates.