Why I Don’t Love Real Estate—But Just Acquired $20MM of Property in 6 Months

by | BiggerPockets.com

This is the story of how and why I acquired $20 million of property in half a year. 

Well, that’s not exactly the whole truth. My partner and I paid about $20MM; the repositioned stabilized valuation ended up being $30 million-plus.

Why I Invest in Real Estate

I started like many of you—with a diagnosis of Multiple Sclerosis.

No, not you? Hopefully not.

Most people look to real estate because they don’t want to work for “the man.” My good friend Brandon Turner (you know, the dude on the podcasts and webinars with an out-of-control beard who’s wearing a checkered shirt) tells the story of how he went from a bank teller, to house hacker, to landlord, to mogul.

Why did he do this? Because he didn’t want to work for “the man.”

My partner Sam Grooms went from a U.S. Securities and Exchange Commission-reporting CPA, to house hacker, to flipper, to passive investor, to syndicator.

Brandon and Sam weren’t working for the same “man.” Sam’s paid a whole lot more than Brandon’s, but in the end, that wasn’t enough. Neither of them liked to be paid (read: owned) by their respective men, and so both of them looked to real estate for a way out.

In my case, though, doctors told me that whether I like it or not, in a matter of time, I wouldn’t be able to work due to my diagnosis. So, for me, it was less about not wanting to work for “the man” and more about being unable. That necessity, more so than any desire, pushed me toward real estate.

Fortunately, I got good at real estate. And today, you would think that I love it.

But, dear friends, I have just one positive thing to say about real estate: it works!

That’s it. I’m hard-pressed to think of anything else positive about it.

It’s a stressful business. It’s at times a nasty business. Many of the situations and people you come across in real estate are not ones you’d choose.

When I first started, an experienced landlord told me, “If you stay in the game long enough, you will lose all hope for humanity.”

You know what, he was freakin’ right!

But, though I don’t exactly like it, I sincerely respect the power of real estate. It is simply not possible to ignore how effectively it can solve some of life’s problems (provided you know what you’re doing).  

So, here I am. I’ve acquired $20MM worth of real estate in six months, and that number is likely to at least double in the next 12.

Why I Chose Real Estate Syndication

There are many reasons I choose to syndicate apartments. Aside from the fact that it’s simply the best use of my professional skills, I discovered that single family is much more trouble than it’s worth. In most cases, for me, the numbers just don’t make it worth it.

Then, I moved on to small multifamily. I discovered that, while a bit better than single family in most cases, the numbers indicated these properties still can’t absorb professional management. I concluded I was essentially buying a job.

So, as you would expect, I began studying mid-size assets, thinking that the numbers would work better. I studied up.

Here’s the thing. Twenty-four to 60 units, which sort of defines mid-size, is likely the worst space to be in, in my opinion. In order to work as it should, this size requires more or less a professional—I would even say institutional—approach as it relates to management, maintenance, and financing.

And although that’s what it requires, you usually can’t absorb any of it into the operating expense because the size doesn’t produce enough income. As such, these “assets” oftentimes end up being a job that takes over your life.

In the end, there were a lot of structural components that forced me into larger properties. But an important, though perhaps a bit liberal-artsy distinction, is the caliber of people you get to be around at the institutional level.

I have worked very hard to gain an ability to live on my own terms, to not do things I don’t want to, to not share space with people I don’t enjoy, and to never be anywhere I am not wanted and appreciated. Well, in real estate, to attract high-caliber people, you’ve got to play at an institutional level.

This may sound a bit lofty, but I don’t live my life for real estate. I live my life for finer things than that. I live my life for the people in it. I live my life to make some sort of a difference.

Real estate is a multifaceted tool, and you get to chose how to use it. Use it the wrong way, your life turns to crap. Use it the right way, your heart sings. You pick!

The type of people I interact with at the institutional level make my life better—both more fun and easier. That’s what I want, and that’s why I syndicate.

vivid red and yellow apartment building with palm tree-lined property against blue sky background

Related: How to Buy a Small Multifamily Property: A Step by Step Case Study

What Does $20MM of Real Estate Look Like?

In this instance, $20 million looks like 215 units spread over two apartment communities in Phoenix.

My partner Sam and I closed on the first complex in August 2018. It’s a 98-unit value-add for which we paid $8.15 million, with a renovation budget of $1.4 million. We raised about $3.5MM of equity for that deal.

We closed on the second more recently. This one is a 117-unit value-add. We paid $10.75 million for this one, with a renovation budget of about $1.5 million. We raised $4.5MM this time.

The acquisitions are very similar in a lot of ways. Both are mid-80s construction. Both are located in what we call “the path of progress.” Both represent very significant repositioning opportunities, where we were able to underwrite $300 per door income bumps, of which about $175 is a recapture of the loss to lease and the rest is a renovation bump.

In both cases, we were able to underwrite, practically doubling the net operating income (NOI) in three years. Let me say that again: doubling the NOI in three years.

Finding Deals and Identifying Hot Markets

There are many voices out there yelling that the market is too hot and that you should wait to take action until another recession occurs. I disagree on many levels.

First of all, if any of you harbor the notion that the next downturn will in any way resemble 2008, you can stop with that nonsense. What we saw in the Great Recession was a once-in-a-generation event; we will never see anything like that again in our lifetimes.

The next downturn will be more cyclical in nature and constitute a flattening, not a cratering like we saw during the Great Recession. This means, if you can’t find any deals now, you likely won’t find them in the next correction either.

Secondly, you need to understand that a “deal” is defined by the delta to the market. In other words, whatever the market is, a deal is:

Market – Discount Margin = Deal

Because of this, it doesn’t really matter what the market is doing. A deal is that needle in a haystack. While it is incredibly difficult to find, it is not contingent on the market, rather it exists in every market.

Phoenix, Arizona, USA downtown cityscape at dusk.

Related: Want to Find and Close More Deals? Get Better Data!

Real Estate Deals in Phoenix

Phoenix is different from other places. In most cities, you can find a mismanaged apartment building, where the rents are $50 or so too low, but there are a bunch of vacant units. In these situations, the bulk of the value-add is to simply manage the building up to stabilized physical vacancy, and then put some lipstick on it and bump rents $50.

Phoenix is different in that, for the most part, there is no physical vacancy. The population growth is so strong that even the most poorly managed buildings are operating at full occupancy.

Well, I can’t reasonably underwrite full occupancy, so I actually have to assume I’ll manage the asset worse. This is why the only way to add value in Phoenix is to increase rents by about $300.

For starters, I need to offset those higher economic losses in my underwriting against the current market. And then, I actually need the value-add to create returns for myself and my investors.  

Believe me when I tell you that finding an asset that allows for this is truly challenging. Add in the other hurdles listed below, and you begin to understand why Sam and I only hope for a few deals per year.

Here’s a list of obstacles we’ve identified:

  • $300 per door of value-add
  • Practically doubling the NOI in three years
  • 14% internal rate of return on a 10-year model (more on five- and three-year)
  • 1980s construction
  • Specific community footprint
  • Specific mechanical setup
  • Original interiors


Each one of the items in the list above begs for a post of its own. For now, I want to leave you with the following thoughts.

Real estate is not sexy. Real estate requires extreme levels of fluency. But real estate can certainly make you rich!

Deals are out there in any market. The money is in the delta. You just have to know how to identify it.

Are you waiting on the next recession? Or are you going after deals now? Do you prefer single or multifamily, and why?

Let’s talk more in the comments below. 

About Author

Ben Leybovich

Ben has been investing in multifamily residential real estate for over a decade. An expert in creative financing, he has been a guest on numerous real estate-related podcasts, including the BiggerPockets Podcast. He was also featured on the cover of REI Wealth Monthly and is a public speaker at events across the country. Most recently, he invested $20 million along with a partner into 215 units spread over two apartment communities in Phoenix. Ben is the creator of Cash Flow Freedom University and the author of House Hacking. Learn more about him at JustAskBenWhy.com.


  1. Christopher Smith

    I’ve actually made our incredibly well with SFRs, but they were extraordinary timing buys. I scooped up a number of properties in two states (where I live now CA, and where I lived before that OH) during the 2011 to 2013 crash time frame.

    In CA I picked up several nearly new properties (A/A- properties in A/A- neighborhoods) at roughly 35% of their pre-crash highs, in OH basically the same thing except not as many and at a discount not as significant.

    My current rental income yield (i.e., CF/FMV) is relatively modest in percentage terms, but tremendous based upon my original cost. Adding another 150% underlying appreciation to that (over appx 6 yrs), they have been to me a small gold mine. The mine’s yield is leveling off some, but I made so much upfront that its still a pretty good deal.

    I have two managers who do 90%/95% of the work, so while not totally a passive income source its pretty darn close. I manage the managers and we get along well. We get good responsible tenants with very few of the headaches that I hear come with Class B & C properties and war zone properties.

    I could live modestly off just the cash flow if I had to, however I still work a full time W-2 job for the time being. I’d like to participate in a larger venture since the current viability of adding SFRs in the current environment is a total non-starter (at least in my opinion). So for the time being, I’ve added to some REIT holdings until an attractive passive investment in a larger operation comes my way.

    However, I am not holding my breath on that.

  2. Jerry W.

    Hey Ben,
    good to see you writing again. Looks like you nailed a good deal with persistence and diligence. Glad to see you doing so well. I am still piddling with a few SFRs. I have left the full time job, but have my own office I work in part time now.I am going to start experimenting with some flips and get up to maybe 40 units in the next year or so. While I don’t get out of town much, I am thinking of trying to move into a few more markets. You ever get lost and end up in Wyoming let me know we can have coffee or pie. I hope you kids are liking the new school and climate. Best of luck.

  3. Alissa schmidtke

    I appreciate this article. After 10 years of doing 1-4 family, I bought my 1st 15 unit apt complex last week. I came up with much of the similar criteria you have listed. I have many people around me that do 1-4 units who have supported me but I dont know anyone who does apt buildings. It reaffirms my decisions, thanks

  4. Saverio Nestico

    Hey brotha. Great content. I read a few of your articles/posts. Interesting stuff. In another post you stated, “The debt was facilitated by Burkadia. This is a bridge loan; 3+1+1 interest only at LIBOR+312.” Could you please expand on finance structure of this deal? Thanks for your time

    • Ben Leybovich

      Saverio – what can I say? It’s a bridge loan at LIBOR + 312 basis point. It was brokered by Berkadia with a lender out of Manhattan with whom I have several deals. It’s a 3-year balloon, with mechanics for +1 + 1. I will be out of it before then, more than likely.

  5. lev palei

    “I started like many of you—with a diagnosis of Multiple Sclerosis.“ Was is just a catchy beginning?

    Anyway, the article basically boils down to SF, duplexes, 4-plexes etc being useless waste of time. The same goes for almost anything below 100 units. 100 and above can make you rich and, in addition, allow you to be with a bit less unpleasant people…

    Until now the BP musings sounded more optimistic. Well, maybe I need to read the article again. Good luck.

    • Ben Leybovich

      Haha I look forward to awesome commentaries, such as yours, Leva. Thank you!

      One – I started precisely how I described in that first sentence.

      Two – while most come to BP for optimistic musings, some actually come for realistic musings… I tend to write for the second group 🙂

      Thanks indeed for commenting!

  6. Tammy Butcher

    Good read, Ben.

    I first came to this site, thinking I would learn more about single family investing. I soon realized that I might be more drawn to multi-family and then, finally, syndication. The trouble, I’m realizing, is that one must either be an accredited investor or have up to 100k liquid cash to get involved in syndication (which, in my case, would mean selling off some of my investments, bringing me back a step from getting accredited any time soon which I’m not willing to do at this point). So, I’m still involved mainly in “regular” investments and REITs at this point while I do more research. I’m not as sold on traditional real estate investing (single families), etc. as I thought I was thanks to this site and articles like these, however. I think I want more return for the work that would be required than what I would be actually getting.

  7. Carey Greiner

    It’s exciting to hear about your success finding the deal and making the deal work out well for you and the other investors. I’m currently finding deals with SFR’s even in a hot market like Bend Oregon. I’m running numbers on small multi family and seem to have found one that looks good. Now I’m working on financing, which is another good way to have someone else analyzing the deal for loan qualifications!

    Thanks for sharing your experience and insight!

  8. Sarah A.

    Wondering what these statements mean. Thanks in advance!

    “…we were able to underwrite $300 per door income bumps, [of which about $175 is a recapture of the loss to lease] and the rest is a renovation bump.” **Especially the part in [brackets].


    “For starters, I need to offset those higher economic losses in my underwriting against the current market.”

    • Ben Leybovich

      Daniel, yes I live in Phoenix. Yes, we have 3rd party PM.

      With a 16-unit you are right to be concerned. My PM, for instance, will not accept anything under 100 units. So, for 16-unit you are going to need to fudge thing substantively.

      Good luck!

  9. Asa Hunt

    I enjoyed the post and you’re writing style. If you’re looking for another blog idea, going in to detail with supporting data for the claim of the next correction will constitute a flattening and not cratering would be a good one. Mainly because I hear something like this with every potential investor I talk to. “We’re at the top of the market, what about when 2008 happens again?”

    • Ben Leybovich

      Asa, thanks. I have no interest in tangling with folks about the future. The 2 pieces of advice I can give you are this:

      – if you are hearing this from a lot of people, you may be talking to the wrong people.
      – since no one really knows, underwrite cash flows conservatively and realistically, with provisions to stay in for 10 years.

  10. Oscar J Osorio

    Hi Ben, I must tell you, I first heard about you when you lived and did RE on Ohio, you wrote about the $30,000 SFH being a waste of time and resources; I thought you crazy and I didn’t like you very much.
    You backed it up with Data making me realize I was VERY wrong about you.
    You convince me to shift my strategy to Multi units and I will not go back to SFH, unless I’m going to hit a home run.
    Damn it here you are again and you hit it out of the park, thank you for that prospective and I will definitely pay attention and shift again.
    I have been following your writings and thoughts about RE, you definitely understand RE, I will continue following your point of view and advice in your writing, my best to you.

    • Ben Leybovich

      Oscar, thank you indeed!

      I’ve not been writing very much at all. I write only when I have something to say that I believe is worthy of your time. I think I am at an inflection point. My own growth has taken me to a place where once more I have something new to add to the conversation.

      And here I am 🙂
      Thank you!

  11. Matt Powell


    I would love to know how to get started in Syndication. I have a 300+ off market apt complex and the investors/owners are thinking in the 12-17 million range.

    Is this something a bank can help me with finding the right investors etc?

    Thanks for the article!

  12. Tamara Rodenbeck

    Ben, as always love your transparency, directness, and intelligence in the actions. Much appreciated! So given that I’ve repeatedly heard you say that SF and small MF are tough to cash flow (or at least in class levels you’d want to own), do you still recommend Phoenix for the first-time investor? If so how and why?

    • Ben Leybovich

      Hey! Thanks 🙂

      The only thing I recommend in Phoenix for a new investor is a luxury house hack. Mine cash flowed $1900 this month. Friends of ours were visiting this week. My wife helped them buy their luxury house hack in the North part of town last year. They are doing even better than I.

      Why would you look at anything else…

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