@Chris Soignier you beat me to it! I wholeheartedly agree with your thoughts. @Gerard Briggs, I can understand your viewpoint, and had the same one several years ago. As far as "just do it," I'm not one of those people. I'm just not. I have to be prepared before acting. I admit I am an over-analyzer, so its possible that I could have learned everything I could, gone out shopping for deals, and possibly gotten one under contract. But without someone experienced to review everything, the risk of a screw-up was just to high for me to accept. With my own money-- maybe. With someone elses-- not a chance. For me, having a mentor simply compressed time frames by YEARS. Not to mention the network of investors I was immediately a part of. That is the biggest fear of most, and if you're an honest, diligent person that others trust, the fundraising is just not an issue.
I do agree with part of your comment, but I would alter it a bit: Its nuts to pay for a mentor and not DO anything with their time and advice. In that case its clearly a waste. I now constantly get the question about whether Brad's program is worth the investment, and it comes down to what you're going to do once you commit. It is not easy, it can be frustrating looking for a solid deal that will give investors a good return, and it takes a lot of work. But if you're okay with that, you believe in multifamily, and you're committed to the work, it is the BEST investment you can make.
@Zeak Hill I completely understand what you're saying, but I believe it is possible. Again, its going to vary greatly based on the work one puts in, as well as what they have to start with. I will just give you a quick example though. I recently got into the best & final round of offers on a 150+ unit property. I didn't get it, but it was apparently close. After returning 10% annual returns to the investors, as well as enough capital gain at the end of five years to cumulatively double their money, the return to the sponsor was over $70,000/yr, with the sponsors share at sale being $427,000. Would I retire on that had I won the deal? No. But it would be a damn good start. My investment into that deal would have been $50k. I may have partnered with somebody for various reasons, which would have cut that return in half, but maybe not. Once you have a track record, and investors trust you, they are much more comfortable with you having less skin in the game. I know of deals where the sponsor has NONE of their own money invested. Not only do I believe its possible to retire in 5 years, I know several people who have. Is everybody going to, I highly doubt it. I really don't believe its a waste of anyones time to advertise it the way he does.
Hi @Zeak Hill, sorry for the slow response, but the @ feature didn't work because there's a letter missing from my last name. As for your questions, I'll give you my thoughts, but most of them don't really have an answer.....
1. First of all there is no requirement that anyone have $50,000. Brad is an educator. He doesn't dictate what his students do with their deals. Now most passive investors have learned the way he recommends doing it, so if you deviate drastically you may have trouble raising money. Or you may not. @Chris Soigniermentioned above that Brads group is less passive investor friendly than Lifestyles. I disagree. I know the deal he is talking about, and that sponsor had a few things in his deal structure that Brad recommends AGAINST. He did it anyway and had trouble raising the money. In the end the deal got funded and I believe is doing very well. The vast majority are extremely friendly to the passive investors. Sorry, that was a tangent.... as far as the $50k, I took 4 investors with $25k into my deal that only had 7 investors total (where you live in Garland in fact!).
One of the reasons I commented on his integrity in the first post is that he interviews any potential personal mentoring students, and if he doesn't think that it will be in their best interest to pay for his mentoring, he will tell them so. He has had many people willing to pay him a lot of money that he turned down. I'm not sure what you consider "right up front" as far as disclosing all the costs. I would NEVER have even bothered looking into the program if I had been hit with that right away. The other thing is that technically you don't have to have any money to put in. Brad advises against that for your first several deals as you build a track record, but what if somebody had relevant skills, or experience, or a big network of potential investors that trusted them, and may be ok with the sponsor not having skin in the game? Worst case, someone spends two days at his event (which is free except for the cost of lunch!), and learns about apartment investing. I've met many people who didn't feel they had enough money to get started, but now its a goal of theirs to work towards that end.
2. Regarding investing with people you don't know, I assume you mean the other passive investors? I would NEVER invest with a deal sponsor I didn't know. Its extremely common for a private placement to be with multiple investors you don't know. In the case of Brad's group, I DO know most of them. It is a huge benefit I believe. It also gives me a sense of security that the passive investors are highly educated about the business, the investment, and the risks.
3. If something happened to Brad, it would obviously be terrible. I have learned enough that I would feel comfortable continuing in the business, and I've met enough investors that I don't think I'd have any trouble raising the equity for potential deals. I suppose if someone were relatively new, that would be a bad situation. He has three coaches that help students out, so they could offer help, plus there are a few dozen webinars students have access to that pretty much lay out the whole process of apartment investing, so at least they'd have that. I guess the bottom line would be that if you're really concerned about that, then do not make the investment.
4. If unexpected things come up, and the group needs to raise additional money, the operating agreement of the partnership spells out exactly what happens. Some have mandatory cash calls. Everyone is required to contribute based on their ownership percentage. If they cannot, then the ownership is recalculated based on the new contributions of everyone else. So if you did't contribute, your ownership percentage could be reduced. Its a very typical arrangement. My agreement states it is not mandatory, but you'll still own less if you don't contribute. Only fair.
5. How much to retire in 2-5 years. Man that is a tough one. @Chris Soignierhad several really good comments on that above. Obviously the more you have to start with, the easier it will be. The problem is the retirement means different things to different people. If you make $200,000/yr, its going to be tougher to replace your income than someone who makes $100,000/yr. Plus the fact that some will simply go after their goals much harder than others. That person might be able to retire in 5 years with little to start with simply because they had the drive to do so. The market is going to have a dramatic effect as well. Right now it is extremely difficult to get a good deal, but people that bought a few years ago are doubling their money already. There was a 108 unit property I bid on that I didn't get. It sold one year later for $1,000,000 more than 1 yr before. Somebody made a killing on that!
Brad is a good example. He was making a low six figure income as an engineer, joined a mentoring group in Houston, and bought a 32 unit apartment with his life savings. No other investors. He got another one like it shortly after. He bought at a great time, and within a couple of years was able to sell and had a $1,000,000 capital gain. He quit his job. Is everyone able to do that? Of course not, but it does happen.
The other thing is that there are a LOT of people in Brad's group that have no intention of retiring. They simply have funds to invest, and this gives them a great vehicle to do so. I cannot tell you how many people are simply looking to get an IRA or cash investment account out of the stock market, and that's their goal. 2-5 years is not a factor for them.
Hopefully thats at least somewhat helpful...
I realize this is an old post, but I'm sure others will google Brad and find this thread so I wanted to post my experience with his program. Yes I am associated with him. I realize my credibility on this topic will be completely shot down as I've seen happen many times when people try to post direct experience in a positive manner. For the record, I am NOT telling you to join anything, or even go to Brad's event. I am simply sharing my direct experience, and will also be giving opinions as well. Take that for what its worth....
I joined Brad's program in March of 2013. I really stressed about spending money on a mentor, primarily due to a lot of research I'd done on BP. I am also an extremely skeptical person by nature, so I had to interview a LOT of people that had worked with him, and was finally convinced it would be worth doing. The biggest objection on many of these posts is that you can do it yourself without paying a mentor. I agree. This is ABSOLUTELY true. People do it all the time. There are hundreds of success stories right here on BP of people that bought a few houses, then a 4 flex, then another, then a 10 unit, then a 20, and now have a few dozen units. That is fantastic! I also think its a great way to start. I met dozens of people that had purchased 100+ unit properties on their FIRST deal, with zero prior experience. I am now one of them. My very first real estate transaction ever was a syndicated 32 unit apt complex that we paid $1,187,500 for. We closed on the sale of it yesterday after two years and more than doubled our money. I also have ownership in over 500 units with other members of his group. And I promise you that starting with a 32 is VERY small. Two other friends in the group started with a 244 and a 226 unit as their first deals. Last year alone Brad's students closed on 25 apartment complexes with a total value of $106,140,000. $34,264,000 in equity was raised mostly (but not all) from within this group. The smallest was 10 units, and the largest was 305.
I know people on BP like to hear facts, so thats why I mention this. My feelings on paying for Brad's mentoring are that there is NO WAY I would have been in this business at all without it. Not a chance. Others definitely can and do, but when I was considering using other people's money to do something like this, there isn't a chance in hell that I'd risk OPM without an absolute expert holding my hand every step of the way. Before purchasing my first property, I spent a lot of time learning how to analyze a deal. Just as everyone else does, I made a lot of mistakes in the beginning, but got better and better. About six months in, I thought I was pretty good at it, and can't tell you how many times I called Brad all excited, and told him we had to JUMP on this deal because it looks to meet the criteria he teaches even at their asking price! Almost every time, there was at least one small detail that I'd missed or misinterpreted that made a great deal into an absolute loser. There are SOOOOO many pitfalls to purchasing an apartment complex. You can be off on just one of the variables in your pro forma and it can dramatically affect your returns. If you mess up on a single family home, it may hurt and you may lose a lot of money, but you'll recover. If you screw up a $4,000,000 deal where you raised $1,000,000 of others money, everyone is going to know it, and you're probably going to be finished for good. Looking back at it now, it is absolutely ridiculous that I stressed so much about the fee to join Brad's program. Think about it... I was instantly dumped into a new business where I had instant credibility with brokers, lenders, PM's simply due to my association with Brad Sumrok's name. Let me tell you, if you're an absolute beginner, or unknown to the brokers, you are going to have a hard time getting an offer taken seriously, even if its higher than everyone else. If you've got a bank account thats big enough, or have a lot of deals already, you'll be fine, but if not, its going to take a while to build those relationships. When they hear you're part of Brad's group, it instantly breaks that barrier. Same thing with lenders and property managers. I cannot tell you how many people have bought smaller deals that would have had to pay their PM's 7-10% for management, but because they're part of this group, have access to other students with larger properties nearby, and are now paying 3-4% by combining management. That is huge. I simply looked at the investment as a way to compress timeframes. I didn't want to start with a duplex, then a four flex, etc, etc. I can also tell you that after putting the deal together, running a 200 unit apartment complex is much easier than operating a few fourplexes. I know that sounds crazy, but its absolutely true because PM's do all the work.
I also had instant access to a network of people who were educated on multifamily investing, and were ready to invest in a deal the minute I found one. If you already happen to have a huge network of people you trust, and they trust you, you may not need that, but I did. I completely understand the skepticism of @Trevor Gerardbut I can tell you with absolute certainty that he is misinformed. It is NOT a full time job, although it can be if you want it to be. I'm not sure why your family would commute an hour and a half every day, that sounds terrible. I am looking at properties in several states, but I will use a professional property management company to operate them. I even self managed the property we just sold, but after the first few months did not have to go there very often. Brad does not use Rich Dad, Poor Dad as a textbook, he simply spends about 10 seconds mentioning that it happened to shift his mindset from employee to investor, thats it. The bus tours are anything but an unproductive party bus. The SEC requires that you have a substantive relationship with anyone you offer a spot in your private placement if they're not accredited. How do you think that happens? This is how you get and build these relationships. Not to mention, that is one of THE most educational parts! We go to properties that are owned by students, properties that are for sale, and we get to see them before, during, and after a big rehab. We talk to the staff, the property management companies, and we tour units (sometimes), we talk about how to analyze a property and an area, and many other things. We had one about two weeks ago where one of the management companies a lot of us use brought 3 of his regional managers to spend the whole day with us. Poor guys were a captive audience stuck on a bus with us. I got more out of that one day than I've gotten in 3 years of working on potential deals with PM's! Unproductive??!!
Regarding those above who have said to just attend Brad's events and then invest in some of the deals, that is an option. Regarding the substantive relationships though, most deal sponsors will want to make sure they've known you for a while. Some will even require that you be part of the group so that they know you are extremely knowledgeable about the investment. I got to invest in a deal last September that was only offered to a small number of people. I acted quickly, and invested $75k with some IRA funds. 4 months later a group out of California offered to buy the property before even finishing the rehab at an amount that will give us a 65% return! In four months! It instantly paid for my membership fee and then some. That is certainly not typical, but goes to the fact that it is all about relationships.
To be clear about my involvement with Brad's program, about a year ago Brad asked me to help him with "coaching" other members as they were analyzing, buying, operating, and disposing of multifamily properties. To some that may cheapen his mentoring to think he took someone with 2 years of experience on to do that. I assure you thats not the case. I help with some of the early mistakes, but Brad ALWAYS goes over everything before making an offer. Brad is also a broker, and last October asked me to become an agent in his brokerage to help students on the buyers side. This is not his main focus, but it was something that was needed, so he is providing the service if students want it.
The last thing I want to comment on is Brad's integrity. It was a HUGE issue for me, being skeptical as mentioned above. I always operate under the "why isn't this guy doing it instead of selling education" mentality. Well he IS doing it. I finally figured out that Brad simply has the heart of a teacher and you can instantly tell that he absolutely LOVES the mentoring business he is building. That is his main focus, but he is buying deals as well. Being kind of behind the scenes a bit over the last year or so, I can tell you that it is almost embarrassing to think that I didn't trust his motives. I was always waiting for the other shoe to drop, and find out that something really wasn't as it seemed. The complete opposite has happened. He always puts his students best interests above his own, and truly wants them to succeed. I've even heard him turn down a few opportunities that could have made him a lot of money that he didn't feel were best for his group. I have been truly impressed with his honesty and integrity.
yes, we've talked about looking in AZ, but apparently it's as competitive as DFW, so we've been focusing here and a few other areas that are closer.
@Zeak Hill, First of all, there is no requirement that you be in his group in order to invest in a multifamily deal sponsored by someone in his group, but most of us do raise money from within the group because we know that people who are active in it are absolutely sophisticated investors, even if they're accredited.
I would say that if you're looking to only invest $50,000 one time, and its all your capital, then it probably wouldn't be the best choice for you. If you've got access to good SF deals, maybe thats a great way to build capital with which you can invest in other ways. I had a self-directed 401k that I wanted to get out of stocks and into real estate, so joining Brad's group gave me access to some incredible investments I would never have seen if I weren't involved.
I chose the multifamily business exclusively, because I was focused on becoming an expert at one thing. I also knew that I was going to be a deal sponsor, and in that case it was absolutely critical that I have an expert helping me every step of the way. I did think it was a large investment at first, but looking back it was absolutely the best decision I could have made. I was able to jump straight into sponsoring a deal with absolutely no experience, and there's no way in the world I would have been able to do that without the credibility and mentoring I had behind me. As it turns out, our investors who put in $50k under 2 years ago are doubling their money as we're selling now. I've seen that happen a lot lately, so its not always a 5 yr hold. Obviously that won't always be the case when the market isn't this hot, but even if it takes 5 years, I'm ok with that.
Feel free to message me if you want to talk further. I know thats a big decision, and its hard to discuss via email.
@Account Closed, sorry, couldn't get the @ feature to work in the post above so made a new post....
I will tell you right up front that I now work for the guy I'm about to recommend....
I would look up Brad Sumrok and his multifamily mentoring program. I know a lot of people are super against paying for mentors, but I'll just say that I joined Brads program in March of 2013, and after a closing of a 106 unit property in Jan of 2016 I will be invested in 525 units. It is only partial ownership, and I am only the deal sponsor on 32 of those units.
I cannot say enough about the quality of his education, and the level of integrity this guy has. I have seen him make decisions that cost him a great deal of money simply because it was what was best for a student or the whole group. I spent a long time being very skeptical of his motives for teaching this business, and I greatly regret that now, but its just how I am. I missed out on several deals because of this, but I'm glad I finally jumped in.
I began helping Brad as a coach for his other students several months ago, and recently got my RE license to act as a buyers agent for students buying multifamily deals.
This is NOT a no money, no credit type program, and I've worked hard to get into these deals, but I can tell you that by year end, his students will have closed over 20 deals ranging in size from 14 units to 305 units. And nearly all of them had ZERO multifamily experience, with some having very limited single family experience.
Yes I paid for his services, but I avoided a huge mistake that I nearly got into due solely to Brad's mentoring. I also feel that my learning curve was dramatically shortened compared to how long it would have taken me to get to this point on my own.
Anyway, if you're specifically looking for someone to teach you the multifamily business, I recommend Brad Sumrok. The program is based in Dallas, but since he started the group, it has been steadily gaining out of state members.
I ran across this post while searching for something else and cannot believe its been almost two years since purchasing the 32 unit property. Given all the advice that came in from my original question, I figured I should add some information in case others read this.
I've been self-managing since Feb 2014, and while there were times in the beginning that were a little crazy, it has been great. When I say self-manage, I don't mean I'm sitting there every day writing leases or fixing toilets. We have a manager and a maintenance guy, but there is no property management co to pay the bills, hire staff, direct contractors for rehabs, etc.
We have rehabbed about 20 of the 32 units, increased rents dramatically, and the property is still 100% full with a waiting list, so they need to go up some more.
I mainly wanted to say that I am extremely glad that I made the leap on this one. I was scared to death to do it with no real estate experience whatsoever, but it has been an incredible learning experience. I had an amazing group of investors who trusted me, so that was obviously key in this. I would NOT invest in something like this myself if I weren't very very comfortable that the person running the deal was either very experienced, or working with someone who was. In my case I have a great mentor who helped me buy the deal, which could have been a disaster had I tried it on my own.
Learning the business from the ground up has given me a great insight into the business, and I've even invested in several other deals where people were doing the same thing I did, but now I get to be the totally passive investor! I am invested in over 500 units now, which I think would have been much harder to do without my hands on experience.
The property is now under contract to sell. We bought it for $1,137,500 and our sale price is $1,475,000. Our initial equity was about $325k, so with the cash flow during our ownership as well as the capital gain on sale, our investors will get approx. a 100% return on their investment, or a 50% annualized return. Our goal was to double everyones money in 5 years, but we can hit that now, so they voted to sell.
I will also add that having a great staff (even if its only 1 part-time person) on site is absolutely critical. I know some other first-time apt owners who are doing the same thing I am, and are doing extremely well. They did have challenges getting the right person on site, which took a ton of their time, and was very stressful. I simply got lucky that the woman who we had from day one is an absolutely AMAZING person. Without her this may not have been as successful. Just wanted to say you CAN self manage successfully if you learn all you can before jumping in, and have good people around to help you.
Just wanted to post the end of the story....
I would also add that it depends on the area, demographic, and demand. We have a 32 unit property in a DFW suburb that is mostly 1/1's. They are full all the time and we have a waiting list of over 20 people. We've had the property for almost 2 years, and there are 11 of the 32 units we haven't even been able to get in and rehab because the tenants just take the big renewal jump and remain in place.
I'd definitely prefer more 2bd units as all the others have said, but I'm all over anything that stays that full, and wouldn't dismiss it without further info. I'm looking at a 167 unit property right now that has 127 1/1's. Yuck. But if the numbers work I'll probably go after it anyway.
I agree with all that said it just depends on your goals and initial business plan. I'm going through this right now with an apartment complex in DFW. Our goal was to purchase and rehab the property, and then sell in five years hoping to double our investors money. We've hit our goal in less than two years, so I put the option to sell to the investors. Most were totally in favor, but a few wanted to refi to capture equity and keep it. In talking to them all I got to hear their thoughts on this and they were all different in some way. I could completely see all viewpoints, so it was an interesting lesson in this very topic.