007: The Exact Strategy We Use When Vetting an Apartment Investment Deal
If you’re here today, there are a few safe assumptions we can make about you. One, you’re on a mission to change your financial future. Two, you’re curious about this whole apartment syndication thing and wanna know more. Or three, your friend sent this to you asking if you know anyone in investing and you have WTF written across your face. 😌😌
Today we are talking about having the right team by your side when it comes to your success. A team you can trust that has your back and is willing to go all-in with apartment syndication. If you think the most important part of the investment is the deal or return itself—spoiler alert—you’re wrong. The most important piece is having the right apartment deal sponsor team to invest with.
In three years we have invested in 20+ apartments as passive investors in apartment syndication. Yes, that’s a lot. Yes, we are still recovering.
You have to think of your sponsor team like your squad. The people that are going to carry you through. Of course, no group is perfect. (I mean have you seen Sex and the City? Iconic? Yes. Is Carrie a little toxic? Absolutely.) 😵😵
Which is why we wanted to dedicate this episode to share how we got here and the mistakes we made along the way. From the big highs to the fears that can creep in when dealing with a whole new world with a whole new team.
It’s vital to vet deal sponsors and scale your real estate portfolio without having to deal with being a landlord. Ya know, the things you’d rather not deal with like the 4 T’s: tenants, toilets, trash, and termites. You also won’t have to deal with the accounting stuff or be responsible for coming up with a business plan.
It’s also important to talk through these things because stress is not what we’re about, and there are ways to alleviate that when you start to feel that way. You want to make a bigger impact and make your life better for you and those around you and ultimately, gain financial freedom.
You wouldn’t hire just anyone for a specific job or role, would you? The same is to be considered with the deal or sponsor team that will be working with you. Think of this process like choosing your co-workers. Remember being in the office and avoiding that weird HR lady that made passive-aggressive comments about your work attire? Less of her, more of cool work BFFs that you actually want to do a happy hour with.
So where do we find said cool co-workers, aka apartment deal sponsors? Well, Google is a start. As well as podcasts, real estate meet-ups and personal referrals.
And we want to talk about five distinctions to consider when vetting an apartment deal sponsor.
N0. 1 Hell. Yes.
Distinction number one, if it’s not a hell yes, it’s a no.
What do we mean by this?
Check their work before investing with them, are they somebody others have worked with before?
Check with their other passive investors (aka people like you) and go with your gut.
You wouldn’t go on a first date without proper social media stalking, would ya?
Join their mailing list, check out their socials, become a fangirl of their work. You do it for free with Michael B. Jordan 😗😗, so why not do it with someone who can help make you money at the same time? You have to get to a place where you are confident that this person will do right by you. A hell yes from yourself.
However, we’ve got a few confessions of our own. We haven’t exactly been stellar at this in the past. Take a seat, we’ve got a story for you. 🔽
We were bright-eyed and filled with wonder, just a couple of gals who discovered the power of apartment syndication and we couldn’t wait to get started. Our first passive investment was great, the location was great, it was a total dream. Located near Dallas Love Field Airport, there was a ton of foot traffic there. While we were so excited about this investment opportunity.
We had some questions, namely, would it be a good investment and how would it fit with our own investment criteria? However, we decided to continue with the deal. Cue the trash fire that was 2020 and the take no prisoners chokehold that year had on us, especially in retail.
Though the apartment’s rent collection was at an all-time high, because the building is a mix-use building, the apartment sponsor stopped the distribution. All but one local bike shop paid the mortgage (shout out to that bike shop though). Moral of the story? Go with your gut. 😆😆
In order to remain true to yourself, you have to define your own internal investment criteria. Anything outside of that definition is not going to work. We would have rather just taken our sweet time until we found the investment that was a perfect fit.
N0. 2 Vibe Check
Have you ever been around a person and had the thought that this person just gets me. Maybe it was the first time you met your partner, your best friend, or your local barista who knows your order by heart. The same needs to be true of the relationship between you and your apartment deal sponsor.
We’re going to say something that might freak some of you out. Especially for our people with commitment issues, but this relationship should be something long-term. You should feel comfortable with this person. Our favorite question to ask when vetting someone is: Would we want to drink wine and share a charcuterie board with them? If the answer is no then no it is. If you can’t bond over brie, then they’ve gouda go.
If you don’t feel that connection, then why on earth are you going to wire over $50 or $100k to this person? It doesn’t add up. Another test we like to run through we heard from a fantastic podcast. The Starbucks test. ☕☕
After doing some virtual or phone interviews with potential candidates, for the second interview or check-in, she asks to meet them in person like at a Starbucks. She purposely gets there a little bit later. She’s checking to see a couple of things here. One, will the candidate get there late? Will they ask her if they can get her a drink while she waits? How do they respond to her tardiness? If they’re thoughtful and understanding, this could be someone she can work with. It may not be the make-or-break factor that determines if they get the job, but she takes their thoughtfulness into consideration.
No 3 Referrals Are BAE
Our third distinction is referrals. When it comes to picking the people we want to invest with, we almost always select people who are referred to us. When we invest with someone who is a mutual friend or colleague of someone else, we know it makes it feel a bit safer. These days it’s our preferred method when it comes to investing with someone else. Instead of just investing with someone at random.
Think of it like being set up on a blind date vs. your BFF setting you up with her husband’s best friend. I mean your first question might be, “Why is he single, what’s wrong with him?” but hey, he’s got more solid references than that random Tinder swipe.
Usually, only the best people are referred to work with, so it’s a no-brainer, right? The way for you to get this conversation started is to do what we do and start asking people “Hey, do you know anyone we could invest with that has solid references?” You might have seen those ads off the side of the highway that look a little sketch advertising to invest by calling a number. You can totally go that route as long as they are 506(c) offering. This way works for a lot of people, it’s just not a surefire bet.
No 4 The 4-Letter Word “Fear”
There’s no easy way of saying this, and we’re saying this with all the love in our hearts but… you have to get over the fear. Look, we can’t sit here and praise all the incredible awesomeness that comes from passive investing without getting real. There is risk involved. But there is also such a thing as a calculated risk. We would have never invested money we couldn’t afford to lose. At the time we had disposable income and wanted to do something with it, or rather, have it do something for us.
You need to examine what you can afford to reduce. If your investment loses money can you still pay the mortgage, put food on the table, and put gas in your car? Essentially, can I afford to lose this money and will I be okay? Start slow and steady.
Repeat this: There is no right time to invest. Investing is always going to feel a little bit scary but if you’re serious about this, at some point you’re going to have to make that leap. Napoleon Hill says, “Do not wait, your time will never be just right.” And whew does that sit with us. And I’m sure a few of you overthinkers are here today. 👉 Hear this… we don’t regret a day going into passive investing. We’re able to fund our dreams and expand our lifestyles beyond our wildest imagination. And the same can be true for you.
Remember, no more 2 a.m night sweats here! Just financial freedom and some good night’s rest for once. 😌😌
True wealth comes from making your money work for you while you’re out, we don’t know, living your life. Hanging out with friends, spending time with loved ones. Not making your work an excuse why you can’t do things. Don’t let exchanging your time for money be the reason why you feel stuck.
You also have to learn the art of not comparing yourself to others when you’re first starting out, we know how easy of a trap that can be. Trust your team and know that your money will have a bigger impact. Go slowly but patiently and most importantly listen to the words of our Lord and Savior, Oprah Winfrey: “Run your race but stay in your lane.”
No 5 Ask for The Receipts
Finally, ask for those receipts when it comes to potential apartment deal investors. A lot of times people will have their own website so you can review their projects and track records. If they don’t have them visible, ask for them‼️
Other things to consider, how many deals do they have under their management? What you’re looking for here is consistency. Look for if they only do light value-add, class B apartment properties, or are they all over the place with their investments? Including other niches like storage units etc. Also look for different strategies like turnarounds, momentum plays, etc.
🌟 Consistency is a character trait that shows they can stay with you and have experience in what you’re also looking to achieve.
Don’t be afraid to ask if their apartment syndication deals have gone full-circle, meaning, have they closed on a deal successfully? The even harder question: Did they have an investment go bad? But don’t be afraid of that one either! If they’re able to explain and learn from their mistakes and show how they’ve managed afterward, it could be the start of a beautiful friendship. With a ton of money in your pocket.
And definitely, a few cheese boards to be shared.
So there it is! Your top five distinctions when considering an apartment deal sponsor. And did you think we were gonna leave you hanging? We hope not! Check out your freebie download here, 9 Make or Break Questions When You’re Vetting an Apartment Deal Sponsor.
ARE YOU READY TO START PASSIVE INVESTMENT?
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