Should you go big or go home or Start Small and work up?

Question

Who do you know who moves big deals such as 25+ Units and does this by raising funds? This is something I have always been interested in but might have been guided in the wrong direction by so called Guru's. I would like to get your opinions.

Starting out with a go big or go home mentality, shooting for 16+ Units by raising money for your first deal VS just shooting for a duplex and using personal funds to get started.

We all know Grant Cardone would say 16+ all the way but I would like to get some of your opinions on the topic and of course BACK UP YOUR REASONING.

Thanks everyone!

Aaron K. · Answer

Start small and work your way up, if you use your own funds that is one less excuse you can give yourself for not getting started, there are also a lot of legalities involved in raising money especially from strangers, larger multifamily inventory is low so you may have to go farther afield, and you usually make your biggest mistakes early so best to limit those to smaller amounts and your own money.

Darius Ogloza · Answer

@Jake Pengelly  The question you pose begs the following additional questions which you might profit from pondering for a while:

Why should I trust you with my money?  I know a dozen successful investors who would be willing to cut me into a deal, why should I invest with you?  What's your unique value add?  What do you personally bring to the table?  What makes you think you can distinguish a good deal from a dog?  I can source deals thought an agent for a few % points; what makes you think you deserve equity/why should I pay you anything more than that?

Jake Pengelly · Answer

@David

Account Closed

You guys are right. Makes sense! Thanks again!

Alexander Szikla · Answer

Start small, easier to unwind if it isn't for you. Also, better equity creation (typically) on these smaller deals. Way easier to manage and learn about your property.

Andrew Carlson · Answer

@Jake Pengelly

I did the biggest deal I could right out of the gate which was 12 units. I will say that I feel less exposed by having 12 units instead of say 2 or 3.

Dennis Wayne · Answer

I would say both . Start out small the first year but get past 10 units as quickly as possible once you get a grasp of how this thing operates and systems are in place . There is safety in numbers!! . It actually gets easier the more you have because you can absorb a hit without it crushing you and you have the cashflow to get things done instead of kissing a banks butt . Once it snowballs you will be fortunate enough to be buying property for cash without a lender which further grows your portfolio exponentially

Evan Polaski · Answer

@Jake Pengelly, track record is one of the most common questions from potential investors, and a feature in nearly every pitch book I have seen.  But, if track record was required, then no one would be in the game.

Looking at household names, what was Mark Zuckerberg's track record of running websites that span the world or Jeff Bezo's track record of retail and logistics before they just got started?  Growth is by nature stepping outside of what you have done in the past.

Besides that, as mentioned all over BiggerPockets, this is a team sport.  You do not know everything, nor will you be able to do everything at the property yourself, even if it is a single family rental.  Therefore, you are not only focused on your track record, but your partners' track record.  Are you using a management company?  If so, what is there record look like?  What about a general contractor for renovations?  These are all (hopefully) competitive advantages that can and should be highlighted when bringing any deal to outside investors.

I bring this all up, not to say there is anything wrong with scaling slowly and gaining experience, but there are also many that have jumped from having a few single family rentals to selling those and buying a 150 unit complex with outside investors, and the track record was not made in those few single families.

Joe S. · Answer

Natural progression is how things typically work. With most big overnight stories someone is usually not being honest.

Jake Pengelly · Answer

@Tina Tsysh thanks! If you don’t have the track record, FIND someone who does. love it!

@Darius Ogloza The unique value add is really key 🔑. Thanks for that!

Tina Tsysh · Answer

In order to start big, your investors will want to see at the bare minimum some track record. It is very uncommon that investors will trust someone who they don't know with thousands of dollars, especially someone who has never done a deal. On the other hand, if you can find a partner who has the knowledge and experience, now both of you can show investors that you have experience and this will help you in raising money. I have worked for a start up developer and I have sat in on many of his meetings with investors / capital raisers and the first thing they ask is "what is your track record?" They want to know what other deals you did and how those turned out. I do not think that you will run away from this question unless the people you are raising money from are your family or friends.

Feel free to reach out with more questions!

Should you go big or go home or Start Small and work up?

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