All Forum Posts by: G. Brian Davis

Hi @Lynwood Washington, congrats on starting your journey with real estate investing!

I'd be careful about refinancing, as it costs thousands of dollars in closing costs (lender fees, title fees, recording fees, etc.). Instead, you might ask a portfolio lender if they'd forego the down payment if you give them a second lien position on the other property as additional collateral. Alternatively, you could open unsecured business credit lines and cards to tap for short-term use to cover down payments and closing costs (there's a company that specializes in helping real estate investors do this).

But what I really wish I'd known about when I first started investing in real estate is passive investing options, especially syndications. I got rid of all my rentals a while back and now I only invest passively. The two main downsides are finding syndicators and deals to invest with, and the high minimum investment - $50-100K if you invest by yourself. I invest as part of an investment club, where each person puts in $5K per deal and we all get together every month to vet a new deal.

I didn't fully appreciate all the micro-skills required to buy rental properties, when I first started. Arranging financing, forecasting cash flow (it's not "rent minus the mortgage"), managing contractors, managing tenants, managing property managers, dealing with permits and city inspectors - it's a lot more than the average person realizes. I woke up one day with 15 rentals and realized I'd unintentionally built myself a part-time job that I didn't even like.

Quote from @Evan Polaski:

Thanks for confirming, Brian.  While I was trying to be clear about not having any experience with you, I don't know if many people understand the fund of funds or co-sponsor structures and if/how they bring any value.  Particularly with all the 506(c) offerings marketing themselves, and having $25k minimums, as many do, it is a hard sell to see how a Fund of Funds, who will have their own fees and carry make any sense.  

Clearly, what you are doing is different, as it is a membership model first and foremost.  Out of curiosity, are you only investing in 506(b) and Reg A offerings?

Also, if the groups that you are investing with offer any type of tiered structure, are you typically pooling enough capital to fall into a higher tier? If so, are you sharing that capital directly to all the members in your LLC? I have seen some people that don't come in as a GP or fund of funds, but they are pooling $500k+ together, which may get them an 80/20 split versus 70/30. And in these instances, the "fee" the pooler gets is that 10% difference, i.e. LLC collects the 80% of profits, and pooler takes their 10%, leaving the standard 70% of profits for their members.

Great questions Evan. We only consider investments that allow non-accredited investors, which in most cases means 506(b), Reg A, or Reg CF filings. We've also occasionally invested in notes that allow non-accredited investors.

As for better profit splits and preferred returns, we are just now reaching the size to be able to hit the higher tiers. We've hit it on one deal, and are hoping to hit it for this month's deal as well. The higher splits go directly to the participating investors, we don't take any cut. We try to make it very clear that we aren't selling securities, and therefore aren't allowed to take a cut of profits or investments. It's purely a flat fee membership model.

Quote from @Christie Gahan:

G.Brian Davis:  How do you handle funds that due a cost seg study?

Hey Christie, in most deals the sponsor does a cost segregation study, which helps accelerate depreciation. That shows up as an on-paper loss on the K1 for our joint LLC, which then gets split up proportionately to individual K1s for each participating member.
Bottom line: it works the same way for us as it does if you were to invest individually in a syndicate.

Hey, figured I'd chime in as the cofounder of SparkRental :-) 

To clarify: We're not a fund of funds. We're not a sponsor or capital raiser, we don't get a cut of any of the money invested. 

Instead, we charge a flat membership fee. If you think of an old school investment club where members get together every month to discuss and vet stock investments and then invest together, it's like that, but instead of stocks we focus on passive real estate investments. 

We bring in different sponsors each month to vet together and review their current deal. Any members who want to invest can do so (minimum $5K), and we form a joint venture LLC as the singular investor (the limited partner) in that syndication deal. Collectively, we meet the minimum investment for the syndication.

You're right of course that we're at the mercy of sponsors for K1s. We encourage all members to file extensions for their personal tax returns, because we just don't know when each joint LLC will receive K1s. And then an accountant has to split the K1 into each individual members' K1s. Accounting costs are shared among LLC participants, which do slightly reduce take-home returns, but that's the price of going in on these deals together with small amounts per person.

Hope that makes sense, and feel free to message me any time with questions!

Hi @Adonai Howard, happy to connect and discuss how we all invest passively in our Co-Investing Club. Reach out any time!

The restaurant industry is notoriously difficult, so congrats on creating success there. But it also means you should consider diversifying. 

Building a portfolio of rental properties requires both time and skill. It's a side hustle of its own, which is difficult when you own and are trying to grow a separate business. I personally no longer buy properties directly, but invest small amounts ($5-10K) in fractional real estate syndications. If you're not familiar with these passive real estate investments, they're basically group investments where you own a small piece of a large property. 

The biggest downside for the average investor is the high minimum investments ($50-100K). But if you go in on these with other investors (either friends/family or an investment club like ours), you can invest small amounts. That makes it a lot easier to diversify and ease your way in, rather than having to start with large investments immediately. 

Best of luck with the restaurants and real estate investments both!

Welcome @Trent Brodbeck!

Personally, I wish I'd started with passive real estate investing rather than buying properties directly. It takes far less time, labor, and skill. 

Read up on real estate syndications, and don't get scared off by the high minimum investments ($50-100K). You can split that with other investors, whether friends/family or as a member of a real estate investment club. I invest $5K at a time through a club. 

You get all the benefits of owning real estate (cash flow, appreciation, tax benefits) with none of the headaches of buying, renovating, or managing properties. You can earn strong returns too - I aim for 15-30% returns on passive real estate investments. 

Just because everyone has heard of rental investing and flipping houses doesn't make them the best way to invest. Something to consider!

Start building relationships with DSCR lenders. A few reputable ones include Visio, Kiavi, and New Silver. We have a full comparison table on our website if you want to compare loan terms.

The better the relationships you build with lenders, the more flexible they'll be in lending you money. 

Hi @Esha Chennubhotla, glad you're taking the dive into real estate investing!

Like many investors, I started by buying single-family rentals. It turns out that's one of the hardest ways to invest in real estate. 

The easiest way to invest is crowdfunding platforms. You can start with a few dollars in some cases. A few standout platforms are Groundfloor, Arrived, Ark7, Concreit, and Fundrise. 

When you're ready to bump up to higher returns with slightly more difficulty, look into real estate syndications. Most newbies have never heard of them, and those who have typically don't invest because of the high minimum investment ($50-100K). 

Fortunately, you don't have to invest in these by yourself. You can go in on them with other investors - either friends/family, or with an investment club. For example, I invest $5K at a time through our investment club. That makes it a lot easier to diversify, and you get the benefit of other investors' experience as you vet deals together.

Buying properties by yourself requires a lot of different skills, from finding good deals to financing to overseeing contractors to navigating permits and inspections to managing tenants or property managers. It's also a lot of work.

Today, I only invest passively in real estate. I aim for 7-10% returns on my crowdfunding investments and 15-30% returns on my syndication investments. And I don't miss the headaches of owning properties directly one bit.

Quote from @Nicholas L.:

@G. Brian Davis

@Eric Gerakos

these seem like good strategies... for HNWIs and/or experienced investors.  OP said that the cash was "to put toward an investment" - so that likely means they have savings and other funds.  but i always get nervous when beginners get these recommendations.  they can lose principal.  you guys have way more experience and you can tell the good investments from the bad.

That's why we vet deals together as a club, and on a group call so that we all benefit from each other's knowledge. But you're right that investing by yourself takes more skill and knowledge.