Which way to go for my 1st investment??

Question

Hello BP,

I am currently a new investor and have narrowed my first investment property type to be a multi family 2-4 residence.  On a separate note, I have learned that based on my finances I would be qualified to be an Accredited Investor.  Now, I would like to know if the better route for someone new would be to go the route and become an OOS RE owner of a multifamily doing my research, making contacts, etc or is it wise and financially smarter to join a syndication or invest in a company like what Brandon Turner or Greene currently are offering?

Thank you for any advice, tips or help.

Tomas Buedo · Answer

Hi @Marc S.

It depends on your goals and the time you can / are willing to dedicate to investing.

Buying a small multi will require to study a market, build a team there and then manage the whole process from getting a deal, to a potential rehab and overseeing the property management company you decide to work with. You'll definitely learn a lot more by going down this road and the growing equity on your properties will help you fund more deals (cash out refi...) but it will require time and dedication.

Investing in a syndication requires work up front to vet the sponsor your investing with and it's very passive from then on. You're basically in the back sit enjoying the periodic payments and hoping for a juicy exit when the property / fund is liquidated.

Why not do both? If you have the funds to do so I'd try both paths and figure out which works out better for you. Plus this is a way to diversify the risk.

Brock Mogensen · Answer

It really depends on what your long-term real estate goals are. If you ultimately want to build a portfolio that is truly passive, then syndication is a good option.  If you want to build a portfolio that you will be actively involved in and be able to make business decisions in, the active route may be best.

Melissa Robbins · Answer

@Marc S. - What a good problem to have, right? I agree with what everyone says. You could do both, and also depends on your age and goals. I own three SFHs OOS. I have a mgt team I respect and trust. I still have the cash to spend and also just received accredited status. I thought about buying small MF or investing with others. I had a few meetings with other interested investors here and there. But I ultimately decided to start seeking syndication options and invested in my first deal last week. The homes I own need some capital work. I've had to evict one group of renters, and they caused some damage, which they paid for, but another set of renters are chronically late. So there are hassles, and you have to decide if you want to deal with those. I love my day job and am not ready to quit yet, but I hope to retire in the next 5-to 7 years. How far away are you from this stage? Do you still have a W2 job you enjoy?   For me, the syndication route made more sense for my goals and my stage of life. But if I was younger, with more energy, risk tolerance, and time in the day, I wish I would have gone the MF route and scaled. Maybe today, I wouldn't have a day job, and I would be retired. So it's all about your goals.

Feel free to connect with me here, and happy to chat through my experience. I'm in property management for a global company, so that experience has come in handy in choosing syndicators.

Miguel Diaz · Answer

Hello @Marc S. , I will go first with a little of education about both options, because I believe they are totally different, If I were you, I will educate more and set the goal more specific, plus a good network, I think that will definitely lead you to where you want to go. Hope this help!!

Colton Hahn · Answer

I think it depends on how much capital you are looking to offload. Typically the best operators have minimums of 50k for syndications, the economies of scale and diversification that syndications offer (not to mention being able to finally get out from under the properties and live your life) syndications do offer quite a lot of benefits.

Really it boils down to: Do you want to be more active in your investing putting in work for the return, or do you want to park your capital with an expert and let them do the work while you reap rewards from it.

E. C. "Stony" Stonebraker · Answer

Hello @Marc S.,

I agree with Tomas.  Do you have long term goals?  How much time do you want to spend on RE investing?

Many people who want to invest in commercial real estate already have a job from which they are earning a good living and want to diversify from strictly  stocks, bonds and mutual funds in a company 401k or IRA.

Being active in real estate is very time consuming to do right and keep up with market conditions, property analysis, acquisition and management, financing alternatives, etc.  The most successful spend so much time investing, it's like a second job.  If that's your passion, then go for it.

Passively investing in a syndication is an excellent way to take advantage of professional real estate investors while still getting a solid return and continuing to focus on a job.  The key is to find a sponsor with integrity and transparency.  If you take this route, interview investors and people who know the syndicators you are analyzing to find out more about the person/company.  And have a personal conversation to be sure you are comfortable with the syndicator.

Good luck!

Which way to go for my 1st investment??

Most Popular Reply