All Forum Posts by: Adam Menconi

It's a good question that everyone starting goes through.  When I started I was in the same position.  How I structured it was that I found the deal (many times off market), negotiated the deal, oversaw all management and construction and manage the management.  In doing this when you have little experience, the risk is obviously higher.  I had a hypothesis but no real life experience so I gave 6% return on any money they invested into the deal and 50% of the cash flow.  It was worth it to me since my investor procured all the financing (at great rates that I couldn't get).  We have very clearly defined roles.  If you are able to go with something simple in the beginning to get a few under your belt, you can change later.  This same investor, after proving myself for years, would just loan me cash whenever I needed it since I had built the trust and we were already partners in other deals that we had built substantial equity in so he was really secured.  This helped me build my own portfolio with zero partners but was only able to do so after taking care of my investors.   I would start small and simple and go for value add off market deals that a savvy investor can't find on their own.  

I agree with Wayne.

The issue always seems to come down to how the agent represented himself in the beginning and if that changed during the course of conversation.

IF They start with-

"Hi, I'm a broker/agent and I'd like to talk about your property", then finds out the price the Seller wants and offers to buy it.  That's a no-no.  Your fiduciary duty is to protect your client, not your pocketbook.

IF they start with-

"Hi, I'm a cash buyer looking to buy direct from Sellers who don't want to pay commissions . . . ", as long as he discloses to the Seller that he has a license and on the purchase contract, you are fine.  

Bottom line is be who you say you are and don't change your role partway  through the conversation or bait and switch.

That's where people get in trouble.

I can say in complete transparency that I have nothing to do with @BrianBurke 's business but we work in the same town, I know him personally and have nothing but respect for the guy. He's one of the sharpest guys I know and his funds are an extremely effective strategy for the right investor. Just throwing that out there.

Absolutely.

Great seeing everyone.

Here's to a profitable 2014!

Sounds good guys.

See you later today.

Well, if Big Daddy @Brian Burke is going to be there . . .

then of course. Wouldn't miss it.

I may be going down there anyway in the next month or so and if possible I'd be down to meet up.

Please keep me posted on when/where and I'll see if its possible.

Thanks.

I agree with both @Michael Blank and @Douglass Benson.

You have to find out whats the best use of your time with the skillset and contacts that you have.

If I had started working in banking or finance, I would probably have gone the route Michael suggests.

I definitely use flips to raise capital. I just don't necessarily use the capital for flips as much as use it to help make sure I spend the time to analyze the deals that I put together and make sure theyre 're solid Doubles to Grand Slams.

If I didn't have flips, even with a good amount of passive income, I could get stressed out with money and force a deal that shouldn't be forced. That's just my personal reason that caters to my skillset and experience.

Good luck with it and I don't think there really is a wrong answer here.

Good question though.

Best,

Adam.

Well, I was fortunate that I didn't have to deal with any big problems this year but I can tell you what I learned the hard way when I started 13+ years ago at age 23.

1. Was driving to job sites in a used BMW that I bought my wife but she couldn't drive (since I was a horrible teacher at how to drive a stick). Driving up to a job site in a BMW sent a bad message to my crew when I was already young (and in my case a cocky know it all).

Lesson: Always treat your crews and the people that work with you with the utmost respect. You will need them to go the extra mile at some point and you'll be thankful that they're on your side.

2. Was building a subdivision in an area out of town and the agent was pushing the deal along faster than we wanted. Luckily, we were able to understand that the market was collapsing (mid 2005) and we cancelled the contract. It cost us 5 digits to walk away but got out by the skin of our teeth.

Lesson: Run your deals at YOUR pace and NOT your agent's. They will sometimes give you the "white lie" to get you to perform on their schedule, not yours. I only say this after 10 years as an agent, make sure you're working with someone you absolutely trust.

3. Was telling my good friend about how easy it was to buy, build and develop. He ended up getting involved in his own deals and he thought he was doing a horrible job. It wasn't until we were running a non-profit later in the year did the truth come up. We decided to start a "Deal of the Month" talk but instead of investors spouting off about how great they are, they need to talk about how they royally screwed up and what they did to fix it. I started off the meeting by telling a bunch of mistakes I made building my first round of spec homes. My buddy came up to me afterwards and told me he had no idea that I ran into any of these problems (as I never mentioned them) and he ended up thinking that he was doing a horrible job with his investing and was thinking of quitting.

Lesson: Be transparent with your failures as well as your successes. By not talking about my failures and lessons I learned, I deprived my good friend of information that could have helped him to not repeat my mistakes and save him lots of money. On top of that, Iron sharpens Iron and I should have been more open . . . we both would have learned.

Well, that's all I got for now.

Oh, and my investor friend did just fine . . . He's now sitting on a nice portfolio of apartments and industrial property.

Good luck to everyone this 2014!

Best,

Adam.

Hey @Douglass Benson,

I agree with you 100%.

Cash flow has to two of the sweetest words I've ever heard.

I own MFRs in Northern CA but my in-laws live in Kalamazoo and Grand Rapids MI so I'm back there at least once a year or so.

It seems like a great market if you know what you're doing and sound like you're doing just that.

Congrats and welcome.

Best,

Adam.