Focus for newbie commercial investor?

Multi-Family and Apartment Investing
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Focus for newbie commercial investor?

Nathan Recchia
Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes

Hi there, 

A quick backstory, I left my former job where I was making little money and absolutely miserable with every aspect of life. My wife makes enough money so that we can comfortably make ends meet, but there isn't a lot of savings opportunity. I decided to jump into apartment investing with both feet, just go full-time. I am very entrepreneurial and I tend to work better when I need to make something happen. 

I've always had an affinity for real estate and have always wanted to be involved with it somehow. Originally, I wanted to buy SFR but after looking at the numbers, reading, and researching a ton; I find that I am far more interested in apartments/commercial and it looks like I will definitely reach my goals faster with this.

My problem is that I've overwhelmed myself, there's so much to do and it feels like trying to eat an elephant with one bite. I have begun writing down my next 3 tasks to do to turn the whole process into a series of bite-sized steps. For you experienced investors out there, what should really be the focus for a newbie looking their first deal, keeping in mind that syndication and raising money will be necessary for me? I'm thinking I need to find someone to partner with who has some experience to help protect against losing somebody's investment money.

For my first deal, I'm looking in the South-East and for approximately a 6-12 unit apartment to start building my reputation and track record. 

Thanks everyone for all you provide here. After I gain experience I intend on becoming a contributor myself to help the next set of newbies coming up in this industry. 

1Reply
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Most Popular Reply

Paul Barbeau
Nashville, TN · Member since 2017 · 37 posts · 41 votes
7y

@Nathan Recchia

I was in exactly the same place you are in 2 years ago. I was a little more rock bottom than that though, I quit my job, sold my house and moved in with my parents for several months, feeling very beat down, self esteem was at an all time low, dedicated to finding a small apartment complex. I now have 89 units. 

Since you have lots of time now, spend it looking for distressed off market properties near you and making relationships with brokers. If you find what you think is a good deal, bring it to the local REIA group or post it on here and have some seasoned investors take a look at it to tell you if it is or not. If it is, try and partner with someone else where you are the hustle partner and they are the money partner and work out some sort of split of cashflow and profit. 

When I first started out I got a list of all properties in my area that I was interested in that would be good value add deals. You can use a database like (www.listsource.com) and you'll have to do some filtering. I hand wrote letters to the owners and this actually produced a deal that worked for me. 

PS if you take my advice and are able to find any good value add off market deals (10-100 units) in Chattanooga area I can help you or partner with you on it. 

Good luck my friend don't give up. 

6Reply
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  • Christopher Hunter
    Investor · Atlanta, GA · Member since 2016 · 335 posts · 144 votes
    7y

    @Nathan Recchia Educate yourself so when you do find a partner you can bring value to that investor. Your just caught paralysis analysis. It happens. Regroup and start getting your hands on the podcast from Joe Fairless , Whitney Sewell. You sound just like me. Do you have an accountability partner? A local REIA to attend?

    2Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Christopher Hunter awesome, thank you, just subscribed to both of those podcasts. I listen to a lot of Michael Blanks podcasts and have started listening to the Old Capital podcast as well. Just found a local BP meetup here in Chattanooga and plan on attending their next event next month.

    0Reply
  • Christopher Hunter
    Investor · Atlanta, GA · Member since 2016 · 335 posts · 144 votes
    7y

    @Nathan Recchia happy learning.

    0Reply
  • Neil Henderson
    Specialist · Carolina Beach, NC · Member since 2016 · 390 posts · 496 votes
    7y

    Hi Nathan, boy do I hear you! Real estate syndication is exciting and rewarding but it is a LOT of work. IMHO, a lot more work than investing in single family homes, but with an outsized return on that extra work.

    Some thoughts based upon what you've said here:

    • It will be very hard to syndicate a deal that's only 6-12 units. The costs associated with setting up the PPM (Private Placement Memo) and getting it legally ready to take to investors would kill most deals of that size.
    • If the smaller commercial multifamilies in that range (6-12) still interests you, you are more than likely looking at a joint venture. Find one or two AT MOST people with complimentary skills to partner up with to find and take down a deal. Everyone has to be actively involved in the deal in someway, sourcing, marketing, managing, project managing, etc. No one can be a purely passive investor in the deal as that gets into syndication territory. DISCLAIMER: I am not an SEC attorney. Seek out legal advice. @jilliansidoti at Crowdfunding Lawyers is a great resource.
    • Keep in mind, with units of that size, you are likely going to be self managing as it's probably too small for professional management. Make sure someone on your team is experienced or comfortable handling that.
    • If you are interested in taking down larger deals, 80 units or more, I would suggest to stop trying to do it all. Pick one aspect of syndication and focus on that. Most people start with the deal and then try to go find money to pay for it. Personally, I think that's bass ackwards. Begin building relationships with investors first, create a sample deal presentation, "I don't have a deal yet, but when I do it will look a lot like this..." Get verbal commitments from investors and tally up how much you have committed, figure on about 50% of those people actually investing, often less. Now that you know how much money you have to work with, you have an idea of how large a deal you can go look for. 
    • Network with experienced syndicators with a good track record and reputation of executing the kind of stratgey that appeals to you and your investors and offer to bring money to their deals. 

    Good luck to you!

    3Reply
  • Greg Scully
    Rental Property Investor · Johnson City TN · Member since 2016 · 386 posts · 271 votes
    7y

    @Nathan Recchia - I'm a Tennessee investor as well.  Are you looking to invest in Chattanooga?  

    Just keep chipping away at it, going to meetups and networking is a great way to accelerate your education.  It can supplement the how to's of reading with real life situations.  I would focus on a couple of markets and apply the education to those markets.  Become and expert so when a deal comes along, you'll recognize it.  

    Feel free to reach out if you'd like to talk Tennessee.

    0Reply
  • Paul Barbeau
    Nashville, TN · Member since 2017 · 37 posts · 41 votes
    7y

    @Nathan Recchia

    I was in exactly the same place you are in 2 years ago. I was a little more rock bottom than that though, I quit my job, sold my house and moved in with my parents for several months, feeling very beat down, self esteem was at an all time low, dedicated to finding a small apartment complex. I now have 89 units. 

    Since you have lots of time now, spend it looking for distressed off market properties near you and making relationships with brokers. If you find what you think is a good deal, bring it to the local REIA group or post it on here and have some seasoned investors take a look at it to tell you if it is or not. If it is, try and partner with someone else where you are the hustle partner and they are the money partner and work out some sort of split of cashflow and profit. 

    When I first started out I got a list of all properties in my area that I was interested in that would be good value add deals. You can use a database like (www.listsource.com) and you'll have to do some filtering. I hand wrote letters to the owners and this actually produced a deal that worked for me. 

    PS if you take my advice and are able to find any good value add off market deals (10-100 units) in Chattanooga area I can help you or partner with you on it. 

    Good luck my friend don't give up. 

    6Reply
  • Heath M.
    Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
    7y

    There's an 8 unit in Red Bank on Dayton Blvd that's on the market.  And an 8 unit (2 4 unit buildings) on Delashmit Rd.  Both are a little high I think but it should give you something to start running numbers on.  Good luck, I'd like to pick up an 8-10 unit place myself or at least another 4 Plex.  My current 4 Plex is kicking my butt right now though, almost got it whipped into shape.  Got a couple more loose ends to wrap up and then I'll be on the hunt for another.

    2Reply
  • Jeffrey Holst
    Investor · Chattanooga, TN · Member since 2016 · 676 posts · 543 votes
    7y

    @Heath M. Both if those are high imo but I agree good place to start running numbers.

    Side note chattanooga has been good to me and I am happy to Chat with people investing down here. We also have a monthly investor happy hour that is definitely worth going to.

    0Reply
  • Theo Hicks
    Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
    7y

    Hi Nathan,

    One thing to keep in mind is that the legal costs ($10,000+) associated with putting together a syndication probably don't make sense for such a small deal. You'll want to aim for larger deals so that the higher cash flow makes up for the higher upfront costs. Or you'll want to go the JO route.

    Also, as you mentioned, since you don't have any real estate experience, you'll need to either do a few deals on your own first or find a partner who has the experience. If you go the partner route, you will need to determine what value you are bringing to the table to attract a partner. Do you have access to private capital? Do you know how to find, underwrite, and asset manage deals? Etc.

    1Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Greg Scully yes I plan on working in Chattanooga but am definitely open to other markets in the Southeast. Chatt, Nashville, Knoxville, and possibly the Atlanta area. I definitely plan on staying within a few hours of my house to start off. 

    0Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Paul Barbeau great advice, thank you. And awesome comeback story, seeing someone that was in such a similar place as I am now is so encouraging. Starting out, how did you approach brokers so that they would actually talk to you seriously and not just consider you a tire-kicker? 

    0Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Heath M. awesome, I'm going to call on both of those and hopefully even walk the properties. I agree, too, that even just running the numbers on real deals will be extremely helpful, I think it will build confidence too. 

    0Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Jeffrey Holst just joined the investor group facebook page and will be there for the next happy hour. We have actually messaged before and I was supposed to be moving to CO a few months ago. So many things fell through at the same time and it ended up keeping us here. It has ended up working out, even though I was disappointed, because my wife just got a great, high-paying job. 

    1Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Theo Hicks it seems like the consensus is that I need to think bigger for sure, especially due to the legal costs like you mentioned and the ability to get a good PM in place. I see that you're in Tampa, I visit my parents down there in Clearwater a couple of times per year. Was just there last week, next time I come down maybe I can buy you a coffee. 

    0Reply
  • Michael Ealy
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Neil Henderson:

    Hi Nathan, boy do I hear you! Real estate syndication is exciting and rewarding but it is a LOT of work. IMHO, a lot more work than investing in single family homes, but with an outsized return on that extra work.

    Some thoughts based upon what you've said here:

    • It will be very hard to syndicate a deal that's only 6-12 units. The costs associated with setting up the PPM (Private Placement Memo) and getting it legally ready to take to investors would kill most deals of that size.
    • If the smaller commercial multifamilies in that range (6-12) still interests you, you are more than likely looking at a joint venture. Find one or two AT MOST people with complimentary skills to partner up with to find and take down a deal. Everyone has to be actively involved in the deal in someway, sourcing, marketing, managing, project managing, etc. No one can be a purely passive investor in the deal as that gets into syndication territory. DISCLAIMER: I am not an SEC attorney. Seek out legal advice. @jilliansidoti at Crowdfunding Lawyers is a great resource.
    • Keep in mind, with units of that size, you are likely going to be self managing as it's probably too small for professional management. Make sure someone on your team is experienced or comfortable handling that.
    • If you are interested in taking down larger deals, 80 units or more, I would suggest to stop trying to do it all. Pick one aspect of syndication and focus on that. Most people start with the deal and then try to go find money to pay for it. Personally, I think that's bass ackwards. Begin building relationships with investors first, create a sample deal presentation, "I don't have a deal yet, but when I do it will look a lot like this..." Get verbal commitments from investors and tally up how much you have committed, figure on about 50% of those people actually investing, often less. Now that you know how much money you have to work with, you have an idea of how large a deal you can go look for. 
    • Network with experienced syndicators with a good track record and reputation of executing the kind of stratgey that appeals to you and your investors and offer to bring money to their deals. 

    Good luck to you!

    I agree with Neil.

    Syndication and the associated costs with it is not worth it with smaller deals.

    Now to answer your question - your focus should be 2 things:

    1. FIND & meet private investors; and
    2. FINDING deals

    80% of your time should be devoted to those 2 things. 

    2Reply
  • Heath M.
    Rental Property Investor · Chattanooga, TN · Member since 2017 · 203 posts · 188 votes
    7y

    They aren't great deals.  The 8 unit on Delashmit is advertised at a 7% cap rate.  And I'm not sure it's actually that good.  Only reason I'd be interested in it is because it's real close to my current 4 plex.    The yard area is HUGE too so my lawn guy would go nuts...lol  4 units are on one side of the road and the other 4 across the street.  Mirror image layout and all window units.  

    The 8 unit on Dayton Blvd gets my attention because Red Bank is on an upswing and it's right on the main drag.  But a friend of mine that's in law enforcement said that they had regular calls at the complex right beside it.  And on the other side looks like one burnt down, it's a vacant lot with the foundation left in tact.  That lot was for sale but I haven't checked on it in a while.

    0Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    @Nathan Recchia

    I think you received a ton of great advice here. You obviously have motivation and drive to succeed. The next steps would be to continue educating yourself through books, podcasts, and surrounding yourself with like-minded investors. Sounds like you have joined some networking groups which is great. It can be a source of deals as well. 

    You're a in good location, so take advantage of it and start looking for partners while looking for deals. Building your team before you find your first property is as critical if not more to ensure you're ready to take action when you find the property. 

    If you're looking for book suggestions, I'd start with the two of David Lindahl books. Reach out if you'd like more books recommendations.

    Best! 

    2Reply
  • Kent Leach
    Specialist · Knoxville, TN · Member since 2012 · 66 posts · 59 votes
    7y

    @Nathan Recchia

    Nathan,

    What do you see as your strengths and what value could you bring to a partnership? I'm not that far from you in Knoxville so feel free to reach out sometime.

    0Reply
  • David Danforth
    Rental Property Investor · Elk Grove Village, IL · Member since 2014 · 31 posts · 25 votes
    7y

    Education, I have purchased some great apartment & syndication books by performing google search rankings & reading Amazon book reviews.

    0Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Alina Trigub Yes I have recieved some great and very actionable feedback so far, which is fantastic. I agree, I'm seeing the value of building a team first. I know that it is possible to syndicate alone, but I'm quickly learning even more of how much of a team sport it is. 

    Will look at David Lindahl books as well, thanks!

    1Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @Kent Leach It's what I'm struggling with the most, I know I need to be a valuable team member and right now I'm learning all I can so I can be as valuable as possible to any team. 

    0Reply
  • John Corey
    London · Member since 2019 · 722 posts · 386 votes
    7y

    Nathan, If I was to ask your friend and past co-workers what you were the best at, what would I learn? You need to be clear on your strengths. While learning about all the other stuff is important, as a ‘team member’, knowing what you best at is top of the list. When you are talking to other investors are REIAs and similar, you can listen for the ones who need what you have.

    Some folks love hunting for the deal. The driving around, talking to sellers, etc. Others are desk warriors who let their fingertips do the walking. They love sifting through the data to find the hidden diamond. Some people are a wizard when it comes to running the numbers while others are fearful. A few love contracts and reading all the details for a deal. And then there are the hand-on types who love tools, breaking a sweat and getting into a good project.

    So, what are you best at? Even if you do not understand how that can be valuable in a team, it is what you are best at.

    1Reply
  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    7y

    You might want to consider a mentor (no I'm not a coach or a mentor) as well. That way you will be able to get to your end goal quicker. Just a thought and something to throw out there. It has helped many achieve levels quicker than if they were to go at it alone. 

    0Reply
  • Nathan Recchia
    OP
    Rental Property Investor · Chattanooga, TN · Member since 2016 · 39 posts · 28 votes
    7y

    @John Fortes I actually just told one of my friends about these investments last night and my desire to syndicate deals. He works in construction with the desire to go into development in a few years. As soon as I told him about this he named off about 3 names who he knows who are pretty serious into commercial MF investing and have plenty of experience. 

    My buddy said he can arrange for me to meet them pretty easily. They should be pretty solid local connections. 

    1Reply
  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    7y
    Originally posted by @Nathan Recchia:

    @John Fortes I actually just told one of my friends about these investments last night and my desire to syndicate deals. He works in construction with the desire to go into development in a few years. As soon as I told him about this he named off about 3 names who he knows who are pretty serious into commercial MF investing and have plenty of experience. 

    My buddy said he can arrange for me to meet them pretty easily. They should be pretty solid local connections. 

     That is great news. Network and allow it to happen naturally if it happens otherwise just consider it just a learning one time meet and great type of moment. Don't go in expecting to find a mentor. Also, there are mentorship programs you can pay into as well. 

    0Reply
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