Investors or Deal First? Where to begin?

[Jonathan Dicent]

I'm looking for someone's professional advice on this. I'm interested in starting a Limited Partnership to purchase large apartment buildings here in NYC as a buy and hold strategy for income/cash flow but not sure if I should begin with setting up the LP and begin sourcing investors/partners, or attempt to source potential deals first. Full disclosure: I'm a complete newbie, but I figured if you're going to buy a house you can buy an apartment building, and if you're going to buy an apartment building you can buy a large one. I figured this way the income potential is more attractive to investors and if there are a few vacancies here and there it doesn't completely kill the investment. My fear is to not be taken seriously by investors due to my lack of experience or not to be taken seriously by sellers for the same reason and lack of capital. By trying to implement this strategy(buy & hold large apartment buildings for cashflow) would I be in over my head as a newbie? If not what would come first, investors or sourcing deals? Whichever it would be how should one begin? Appreciate the advice in advance.

[Will Fraser]

Hi @Jonathan Dicent, welcome to the Bigger Pockets forums!  

I completely agree with your logic on the "if you can buy a house then . . ." progression, and I'll modify it a bit to show you why I personally wouldn't be a partner here.

"If you bought a house, then you can buy an apartment.  If you bought an apartment, then you can buy a big apartment."

If you are a total newbie (meaning you haven't come from an adjacent industry with lots of exposure into the processes, like commercial lending, appraising, GC, etc) and your parents weren't large apartment complex owners or operators, I would run from this deal UNLESS there was another general partner who DOES have a track record.

However, if you pitched aa 150 unit building in NY to me and showed me the duplex you bought to start out and how that led you to buy aa 8-plex, then a 50-plex, and since that and the 120-unit you bought are stabilized and cashflowing so well you thought it was time to take down the next one then I'd be WAY more apt to listen to the deal and take the underwriting claims seriously.

The thing that is lacking if you have no experience and start quarterbacking these big deals is credibility.

You can get credibility in at least two ways;  earn it or buy it.  

Essentially, when you bring in a GP who knows this space and give them equity to guide you, you're buying credibility.  When you scale and learn through doing you are earning it.  Either way, if you want to bring other people's skin into your game, they'll always want to do that with a credible partner.

I hope this is spurring you towards a path of zealous growth, Jonathan!