All Forum Posts by: Steve Sorensen

This is all great info, I appreciate you giving me a realistic picture of what to expect. I won't be surprised by any terms in this deal I don't think, I realize that I might get the shortest end of the stick here but if it allows me to scale faster than I can using my own cash then it's worth it; although to your point, that might not actually be the case.

To your point about the level of education required, agreed that there's a lot to learn here so I'm diving head first into reading and listening to everything I can...I can buy and rehab a good property, I'm confident of that, it's just this structure that I need to get my arms around. Thankfully my investor is an older friend that knows where I'm at so he's aware that I'll need some guidance as I make this step into larger investments. And if it looks like I won't be profitable with this model, I can still walk away before I commit to anything. Thanks again for the feedback!

Hello! I have recently been searching for a mentor prior to making my next investment and I found one, and he's in private equity so he and his friends are pretty wealthy. He's willing to act as a mentor, and he also proposed investing with his friends. He threw out a number of $1.5MM for an investment pool; they first want to do a small SFH deal with the potential to expand up to (and hopefully eventually beyond) that $1.5MM number if the first deal is successful. There will be 3 other investors most likely, so a total of 4 of us will be involved in the partnership.

I'm talking with several people I know to try and paint a complete picture of what this will look like, but I haven't contemplated this amount of money or considered working with a number of investors like this before as I've been funding projects myself...at most I've considered bringing one investor in to split equity and cashflow 50/50 which is very straightforward.

Since I'll now be working with more robust investors, I want to make sure I'm structuring things in a way that will be favorable to all parties. Can I get some general guidance on how I can structure this partnership to work toward my personal goals while providing what these wealthy investors will be looking for?

- Personally, my goal is to replace my current W2 income with real estate income so that I can leave my job and pursue REI full time.

- These investors are already very financially secure so they're not looking for cashflow so much as a solid ROI. They also will want to avoid paying taxes as much as possible (as we all do)

- My expectation is that the investors will each bring, say, $200k to the pool, and my financial contribution will be negligible in comparison; my primary contribution to the investment will be the sweat equity.

- Would it be reasonable to purchase a property with their contributions and keep the cashflow for myself since they're less concerned about cashflow and more concerned with their ROI? In that situation, would it be reasonable for their payoff to be a larger return at the end of the investment period? I was told that they'll likely be looking for 8-10% ROI, not sure if this is compounded annually or if it would be a simple interest calculation...these are some of the nuances I need some direction on.

- What should the length of the investment period be? Will they be expecting periodic disbursements or a lump sum at the end of the period?

- Would I sell each property at the end of the investment period? Would I refinance into a traditional loan after the rehab? In my head, I would like to use the BRRRR model so that I don't use up the entire investment pool with just a few properties, but I'm not sure if that's a realistic way to provide the returns they're looking for. It also seems like it defeats some of the advantages of buying with "cash" since that would involve refinancing into a relatively high interest rate mortgage.

I know there's a lot here, so feel free to answer any of the individual questions or provide any response you see fit. Thanks in advance!

 Great, thanks! Any lead is great :)

I could have certainly been convinced by someone that I was confident knew what they were talking about, I'm very much open to suggestions and feedback from knowledgeable folks. But I didn't want to put the uncomfortable effort in to get outside my bubble and find a mentor, so I just went at it alone. There's definitely value in coming out the other side of the mistakes I've made, but if I'd been working with someone experienced, I could have bounced a bad idea off of them and learned the lesson by them telling me it's a bad idea rather than the lesson costing me thousands of dollars. These lessons will stick with me a lot longer than if I'd just been told by someone that they were bad ideas, but working with someone and building good habits as far as my decision making goes is overall a better way to do it rather than learning every lesson the hard way. That's why we send electricians to trade school before going to work instead of making them get electrocuted to figure out how electricity works, right?

And to be clear, I'm still very much net positive from a financial standpoint by owning all four of my current properties compared to where I was before my first property purchase, but the idea here is to optimize my time and money, which I haven't done so far and I feel I can do going forward with an experienced mentor.

Lol thanks for pointing that out, I'll have to update my profile.

As I started typing this out, I'm realizing that this is an incredibly valuable question that I haven't actually articulated myself; I've just kind of kept moving the goal posts as I didn't achieve my goal (for example, I just refreshed my goals going into 2024 and I've changed the date for financial independence to 12/31/24).

First of all, I would say it was an ambitious goal to begin with, which I was fully aware of, because I would have had to replace my full time income with rental income within a couple of years of buying my first property. 

More specifically though to get at what you're really looking for with your question, I haven't mastered the art identifying and purchasing quality properties that cashflow right from the start. My place here in Denver has been the only property that has made money right from the start, but after that purchase, I had a fixed amount of cash that I could take and either purchase one more owner-occupied property in this area or change to the BRRRR method and ideally continually recycle that cash and continue to acquire properties; I chose the latter option and chose Houston because I was priced out of Denver for a BRRRR with the amount of cash I had. So then I went to one of the cheapest areas of Houston to purchase properties because I was hesitant about purchasing something too expensive for my first BRRRR and losing all my cash. However, one of my properties in Houston is a very low quality property in a low quality neighborhood, and I took some bad advice to try it as an AirBNB. I had a lot of issues with the rehab that my contractor did (overall he did a very poor job) so I've spent probably 3 times what I originally budgeted for the rehab and I couldn't get it rented consistently as an AirBNB. So that property has drained a lot of my funds. I've absolutely learned a lot of lessons, but it came at the expense of my own cash and, more importantly, a lot of my time that I would have spent investing in additional properties. Another thing that didn't help was my contractor. I feel I vetted him thoroughly and he just didn't do good, thorough work; I talked to a few people that had used him before I selected him and got good reviews, so I think finding a good contractor is going to be trial and error to some degree until you find someone you want to stick with (which I have now thankfully after 4 different contractors).

I also haven't learned to use other peoples money, which would have allowed me to purchase a better property in a better area, something that I think a mentor could have helped me with (so I'd also say that I should have prioritized finding a mentor sooner). 

Finally, I'd say that the most tangible thing that has held me back from that goal though is buying a quality property in a desirable neighborhood; my most profitable property right from the start is my property in Denver. Even though I live in the basement and rent out the upstairs, people are still willing to pay the value of my mortgage during the lowest points of the off-season, and at the high points I've made close to $3k in profit over my mortgage. I would have loved to continue purchasing in this area, but as I mentioned, I didn't have the cash to do it more than one more time. So instead, I hit the easy button and bought a crappy property in an undesirable neighborhood in the Houston area because it cost $100k to. I actually thought I had done enough research on the neighborhood and the immediate area but I'm finding that it takes a lot of work to truly identify these areas. I should have also spent more time physically in Houston getting to know the in's and out's of the market since I made the choice to invest out-of-state.

So this go round, I intend to take those lessons learned and find a mentor/partner, do my research to find very desirable neighborhoods within Houston (including spending extended time in Houston), and buy properties that need just the right amount of rehab work (has to have good bones).

Thanks again for the question, this has been very valuable to work through in my head!

@Andrew Postell thanks! Yeah I’ve joined a couple and haven’t had any luck connecting yet but I’ll keep at it!

Hello!

I’m looking to partner with an experienced mentor within the Houston area. I have passively sought out a mentor in the past with mild success, and now that I own four properties, I feel that I have the basic experience and have proven my level of commitment to financial independence through real estate to add tangible value to a mentor/partner.

Here is what I am generally looking for in a mentor:

• 15+ years’ experience in real estate investing
• Has been built their wealth/portfolio from the ground up, similar to the path that I am on (i.e. worked a W2 and invested on the side until their real estate portfolio was large enough leave their W2)
• Be "retired" from their 9-5 and completely financially free
• Own at least 30 doors
• Invest heavily in the Houston market
• Wants to partner on projects and provide project financing (this is not a requirement but I certainly feel this would be more mutually beneficial)

Here is what I intend to offer:

• Shared equity in projects
• I will do all the heavy lifting and day to day coordination for projects (with the understanding that the mentor will support questions and assist in critical decisions)
  • I plan to make real estate investing my full time job so this would be an opportunity to grow my mentors portfolio with significantly reduced time commitment for the foreseeable future
• Provide a few hours of my time each week free of charge to assist with whatever the mentor would want within their business

My real estate background:

• I purchased my first property, a triplex in Minnesota on an FHA loan, in December 2019.
• My second property is my current residence which is a house-hack in Denver that I’ve been in since 2021. I do monthlong rentals in the upstairs two levels and I live in the basement full time.
• I've BRRRR'd two additional SFH's in the last year and a half, one in Texas City and one in La Marque. These are both long term traditional rentals.

I’m looking to make my next investment in Q1 2024 and want to identify my mentor by the end of this year. Please direct message me if you have interest, I’d love to get on a call to consider a potential partnership and discuss each other’s real estate goals.

Thanks in advance!

Hi, anyone have good suggestions for purchasing new garage doors for a good price? Home Depot and Lowe's have decent options, wondering if there's any other good options that people have used. I just need the door and I'll install it myself. Thanks in advance!

Hi, I'm looking for a credit union in the Minneapolis area...looking to do a HELOC on a small multifamily in Chaska. Thanks in advance!

Hi, I'm looking for a credit union in the Houston area...looking to do a HELOC on a SFH in Texas City. Thanks in advance!