How do I attain aggressive growth goals?

Question

BP Community,

My partners and I have been in real estate for 4 years now - we've worked on single-family, small and mid-sized multi-family deals, and done full renovation projects. Now that we've gotten the experience, we feel comfortable with aggressively growing our portfolio.

My question to you all is: how have you managed to attain aggressive growth goals without using out-of-pocket money? Did you partner with people outside of real estate looking to diversify their portfolios? Did you partner with more experienced real-estate investors and work with them as a sort of mentor?

We have projects identified and the analytical work done, we just need to figure out the best way to gain interest in our projects.

Thank you!

Nathan Gesner · Answer

1. Look for a few good partners with cash. There are many people interested in real estate investing that have money but no experience. Find opportunities to meet them through networking events, referrals from lenders, etc.

2. Consider setting up a syndication. I believe there's a book in the BP bookstore for this.

Dave Foster · Answer

@Kyle Vogeler A lot of the time, if the investor already has their foot in the door and has acquired investment property they will start to sell and do a 1031 exchange, which allows investors to defer all of the tax and depreciation recapture, and purchase another investment property using the tax.  Scaling this way will add 20-40% to your war chest in deferred taxes you use to benefit yourselves.  This is the first way I'd scale without going out of pocket.

If you want to expand and diversify your RE portfolio, you could do a diversification exchange where you sell one investment property to acquire multiple smaller investment properties.  This would allow you to test different markets and mitigate risk a bit more, especially if you purchase one cash and put a mortgage on another. Using strategic cash out refis is the second way I'd scale in house.

Partners adding partners is fine.  But each time the soup gets a little more diluted.  And you know what happened with too many cooks in the kitchen :)

Evan Polaski · Answer

@Kyle Vogeler, as you well know, portfolio growth comes with major capital needs.  So joint venture partnerships or syndication type investments, is typically the best way.

JVs require the other partners to be active; talk to an attorney as to what that level of involvement needs to be.

Syndications are entirely passive for your investors.

Alternative routes, utilizing equity in your existing portfolio to buy other properties.  Potentially finding "alternative" lenders, i.e. hard money or private, that will lend at higher levels than traditional lenders to minimize money out of pocket. I have a friend that has a private lender "line of credit" (not sure what collateral he pledged behind it), but it works as has acquisition line, so he can pay it down through refi's or operating cash to build back his capacity without really needing any equity out of pocket.

Robert Rixer · Answer

The best way to get interest is to find amazing deals. If you've identified market rate deals, you can do all the analytics in the world but no one will be interested.

You always have to ask, what is your competitive advantage over every one else doing this? For newer operators, the easiest way is to work very hard to uncover home run deals - which can overcome the lack of experience aspect.

Evan Polaski · Answer

@Kyle Vogeler, my first question is: what are you looking to grow?  Your portfolio size? Your experience? Presumably, the main one most people are concerned with is their bank account.

Most people assume that all three of these are connected, and I would say generally in good markets, they are.  But, as you can see in the syndicator review thread, if your primary goal was the grow portfolio size in 2021, there is a good chance your bank account is shrinking quickly in 2025.

Now, directly to your points:Portfolios require capital to grow.  So partner with a financial partner, where you can "leverage" their capital with any of your own, and bank debt to buy more properties.

Experience: this can certainly be done by buying more of your own properties and learning first hand.  It could mean finding a mentor, either for hire or free.  As you note, this same person could be a partner, but from personal experience, I am willing to talk with/teach people about things I know, but that doesn't mean I would invest with them

Bank Account: make good investments.  Understand the risks and mitigate them, whether for your personal investments or using partner money.

To gain interest in your projects is both the hardest and most time consuming part.  It is a lot of networking, building a following, sharing your learnings, successes and failures.  There are capital raisers for hire out there, and depending on the amount of money you are trying to bring in, they can be very costly, but they can also help you get going.

Kyle Vogeler · Answer

This is a great response, thank you. We are definitely prioritizing portfolio growth at the moment, with the delayed expectation of bank account growth. What I mean by that is: we are not simply buying just to buy, as many individuals did in 2021, we are buying properties that make sense to improve with the anticipation that the improvements lead to equity or cash flow improvement at a later date.

And as always, we are constantly looking for lessons and experience. Every time we handle a scenario and it didn't go 100% perfectly, we complete a debrief, creating and correcting processes.

Kyle Vogeler · Answer

Ben, I should have been more specific. We have cash to put into finding our next deal - we can cover networking expenses, legal fees, and other incidentals and could probably cover a decent portion of the down payment, but we would definitely come up short and would require us to put in money outside of our business accounts, which is what we are trying to avoid.

How do I attain aggressive growth goals?

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