Unique situation… Best route to financial freedom?

Question

Hello BP community! This is my first actual post and I wish I would of joined the community sooner, as I have read a ton of BP books, and listened to several podcast!

I’m in a bit of a unique situation… I am a CPA, 25 years old and have been studying real estate for 3 years. I am currently in the rehab process of my first flip! It took me so long to pursue my first flip because I wanted to be educated and feel confident for when I venture out. Once I was ready, I found my first deal within a month through door knocking. With that being said my uncle who also invest in commercial real estate ( he does a lot of hotels) was impressed with the deal I found, the analysis and how organized I was. I told him I’m trying to build capital and eventually use that money as a down payment on small MFH, and eventually apartment complexes. The main thing for me was getting my first deal and pursuing my path to financial freedom $4k a month.

After having that discussion with my uncle he told me that he would be willing to partner with me on an apartment complex. He’d provide the $, and I provide the deal, management, everything else. That is exciting, but makes me a little nervous. I’ve ran tons of analysis on small MFH, and SFH, but not big complexes. If I cash flowed $100 per door then I’d need a 40 unit complex hypothetically. My question to you guys is should I pursue this opportunity now, or wait till I’ve done a couple more flips/ get a couple more rentals? My uncle is a multi millionaire and a great guy, and I appreciate him for wanting to help me, but I want to make sure I do right by him. With that being said it would be a dream come true for me to be able to pursue real estate full time, and this could get me there.

I would love to hear everyone’s thoughts?

Dave Foster · Answer

@Keegan Lawyer, I don't think your uncle offered to partner with you because of your knowledge and experience in SF rentals let alone the large MF space.  He saw your attitude, commitment to learn, work hard, and exercise wisdom, and your potential.  You will honor the relationship if you simply commit to bringing these same things to the table.  Which means don't try to treat him as a partner where you are each bring equal to the table.  Treat him as a mentor who has way more than money to offer you.

Work your hardest but don't try to do it apart from him so you can wow him with the results.  Bring him in early and often to find, vet, and negotiate deals with you, to source his contacts, and to ask questions.  The greatest resource he's offering you is not the money - it's the time and his experience.

His contacts alone are worth a truck full of gold.

Jason Shackleton · Answer

@Keegan Lawyer Opportunities don't last forever. I would take advantage of the opportunity today as it may not exist in the future. Things change quick. He may decide to divest into crypto tomorrow if his business partner says he has to for example....who knows. Or your situation may change where it just doesn't fit for you anymore. Perhaps you have a few kids and or your spouse says I don't want to be a landlord...etc etc. It fits today.

That being said you likley don't need to do it all at once if it is outside your comfort zone. Do two 20 unit complexes or 4, 10 units.

He is impressed with what you have done today and how you are taking action today.

You said you have been reading real estate books for 3 years...Many investors have read 0 and made millions. This is not rocket science.

Good Luck

David M Trapani · Answer

Hi Keegan!

I'm a lawyer who's moved into r/e full-time. You're on the right track. Flips are good to build capital / gain experience. I recommend using 1031 tax free exchange (if you can) to defer those cap gains and build your capital faster. It's a judgment call on whether to bootstrap / partner with your relative on the MFH. I generally prefer to go it alone, any kind of partner (even relatives) mean you have less say in management, operations and exit strategy. You will always need permission or approval from someone else.

My journey involved (initially) condo LTR's, some of which I paid cash for in Sacramento area ($95,000 and $105,000 etc), then 1031 into duplexes. A few flips in between - Always 1031 exchange. Then into Airbnb and NNN QSR's. Keep working as a CPA, save your money, keep flipping, always keep looking for good deals & opportunities in hot / up & coming areas.

Best wishes on your journey!

Bonnie Griffin Kaake · Answer

@Keegan Lawyer  I am with @Jason Shackleton   Offers like that don't come often. You have shown your worth and there is always something new to learn. You can do this. A visit with a Broker over lunch who does multi-families to pick his/her brain would not be a bad idea.  Of course, you pay for lunch. The information could be invaluable. You will become more confident as you learn by experience and about others' successes and failures. Get that partnership with your uncle moving asap.

Todd Dexheimer · Answer

Doing flips and small MF's won't give you much experience, so I would not use that as an excuse. Educate yourself and find/hire mentors. Possibly even partner with someone that has some experience already. Take advantage of the opportunity in front of you and don't look back.

Jonathan Pavkov · Answer

I'm a CPA who moved into RE full time... help others invest as a Realtor + own my own properties. Wish I'd have done it sooner... best of luck to you! If you want to chat, DM me!

Nick Elder · Answer

@Dave Foster very well said Dave

Scott Trench · Answer

@Keegan Lawyer Love it! Good luck and congrats on making the scary choice to seize the opportunity.

Todd Dexheimer · Answer

Loopnet is the place deals go to die. A great place to look at and analyze deals, but not a place to find deals. Before you start calling brokers, you need to educate yourself and have very specific goals.

Brian Armstrong · Answer

@Keegan Lawyer Don’t discount LoopNet, especially for your first deal. I just closed on my first investment property last month, it was a small 6-plex that I found on LoopNet and it has the makings of a great deal. Long term, relying on brokers and relationships may be the most reliable way to get deals but when you’re starting out nobody is going to bring you the best deals since you don’t have a track record of closing commercial deals (which is much harder than residential IMO). Saying there are no deals on LoopNet is like saying there are no deals on MLS - it’s not true.

My advice - be diligent about analyzing 3-4 deals a day on there and be patient until you find one that you’re confident in. It took me several months and at least a hundred analyzed before I found a winner. Like others have said the opportunity may not be there in the future so you should take your uncle up on it, but maybe start with a 5-12 unit property first to get comfortable because there really are a ton of moving pieces and it can be pretty overwhelming, especially if there is a lot of work to do on the property.

Unique situation… Best route to financial freedom?

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