Planning first 3 commercial investments. Feedback on strategy?
Looking to make 3 commercial real estate investments in the next year, two as primary (sole) owner, one as a limited partner. Just finished 10 years in industry, and just returned to the states after 6 years in Japan where I wasn't comfortable doing real estate. Roughly $0.5M in liquid assets saved up I'm eager to invest in real estate. I understand I missed the optimal timing from the last real estate cycle, but it still looks viable to invest today in cash flow deals with a plan to buy and hold.
I've read 15+ books on real estate investing (analysis, due diligence, financing, etc.) and feel comfortable with the theory, but lack experience. I've been warned commercial real estate is an easy area to get screwed if you're not careful. Appreciate any advice from more seasoned investors.
Investing Strategy:
- Purchase a 15-30 unit apartment complex; self manage for one year to learn the ropes, then hire property management. Criteria: 8-9% cap, 10-15% cash-on-cash.
- Purchase one mobile home park (30-50 lots); convert park owned homes to tenant owned; position for low maintenance long term
- Participate as a limited partner investing $75k-120k as one of 4-5 co-investors in a 40-60 unit apartment complex. Expecting 6% cap, 8% cash-on-cash. The deal will be found and managed by a high school acquaintance with a successful property management company with whom I have moderate trust.
I'm attracted to the last deal (limited partner). However, I've been warned limited partners can get screwed in a variety of ways (general partners increase operating costs that go into their own pockets; limited partner yield approaches 0-3% and becomes virtually unsellable).
My high school acquaintance explained the last 3-4 deals he's done in the $3M range have included 4-5 wealthy investors who go in together and receive roughly 8% cash-on-cash. I understand one incentive to not screw them is for continued investment on more deals, but wonder how reliable that is.
Questions:
- Anything you'd do differently re: investing strategy?
- Any advice as a limited partner?
- Any advice overall?
Greatly appreciate any feedback or suggestions,
-Michael