focused strategy for collective group of investors

14 Replies

I have been meeting with several folks who would like to combine funds and start a real estate investing group. Any advice on whether or not it is good to have a focused strategy/target or more of a broad less defined strategy. 

Personally, I feel like we there are significant benefits to narrowing the strategy down to specifics like certain property type, financing strategy, neighborhood class, property condition, etc. While my colleagues feel it is better to have a less narrow focus and go for any and all deals that make sense. Any thoughts on this would be greatly appreciated.

I personally would focus more on the numbers than the vehicle. I would 1st define the goal of the group or goals and then determine what types of investments would best help you achieve those goals.

Thanks but I am a bit confused. It sounds like you’re advocating for both. ‘Just look at the numbers...but still have specific goals and strategies for reaching the goals’

We will always look at the numbers to make sense but my thought was that we need to 1. Get familiar/expert in specific strategy (ie large multifamily, in class c or b, distressed, all cash, using BRRR strategy) 2. Limit the extra noise that may come from having to broad of a scope.

@George Ozoude REI clubs have been in existence for many years. So it is a good idea. It is important though to ensure that everyone is aligned on the goals and long terms objectives. Also before you decide to buy a property you need to have an Operating Agreement created by an attorney clearly detailing each person roles and responsibilities.

@George Ozoude I think it is absolutely essential to narrow down to one strategy at the beginning until you have it on the autopilot and can add up more. If you'd like to read up on the topic, get "One Thing" by Gary Keller (of famous Keller - Williams :) ) 


@George Ozoude I'm personally a fan of narrowing your investment strategy so you have a clear plan of attack. When a property pops up that fits within your framework, you know exactly how to value it, put in an offer, and carry out your investment strategy. 

Considering any deal that "makes sense" sounds nice, but you get caught in a cycle of analysis paralysis. The amount of time it will take to evaluate the deal, find people with knowledge of the area, and consider your options with the property will leave you exhausted. Focus on areas and properties that allow you the opportunity to take advantage of information, manpower, or capital that competitors may not possess.  Find a niche that is successful and find a way to rinse and repeat.

@George Ozoude an excellent question. I believe the term that needs to be addressed is "Risk Management." Having a narrow focus minimizes risk as each strategy has it's own. It's also easier to manage from a PM position as you can concentrate on specific area and tenant types. As far as property types, that is another animal. Some investors find 1-3 units more attractive while others only focus on MF. That is something that needs to be discussed with your group. One question is who is going to manage the acquisitions? Outside of money what responsibilities does everyone have? Is this a per project fund or are you forming an investment fund for long term investing. Who manages the fund? Lots of nuances that go into this and definitely have to get attorneys involved. I'm sure you know all of this but it's just never as simple as pooling money and focusing on a strategy. Best of luck to you. 

A good rule of thumb is, the more players involved, the more focused the target and strategy should be.  With "too many cooks in the kitchen" syndrome, I can imagine people in the group going all over the place and ultimately not agreeing on pulling the trigger on a deal.  Narrowing the focus helps reduce that.

On the other side, it's easier for 1 investor or 2 investors (partnership) to cast a wider net and come to a decision quicker.

@George Ozoude you've received some great advice on the question already. I'd just add that you should  include in your operating agreement a very detailed explanation of how issues are resolved, voting power for all members and who is at the helm of the organization (i'd also spell out roles and responsibilities for each member in a very explicit manner)

@George Ozoude great question. Keep me updated on your path. Also am in a similar situation where I represent a large network of investors. For me I keep coming back to what @Ivan Barratt said, FOCUS is key. The more I try and get away from that, the cloudier it gets for me. 

Only thing I would say though is don't focus too early, meaning know whats out there, question a lot of things and  know why you are focusing on say large Multi-family vs oil and minerals. Then, once you have that focus go ALL IN and take MASSIVE ACTION. 

I get what you're saying @Ellis Hammond . Take all aspects into general consideration before deciding on a narrow scope, just so you know the potential of what's out there. And then there has to be sustainable reason why you eventually settle on a specific strategy/target. Agree completely. Thank god we all like different asset classes. 

Another thing I considered today was the fact that so many successful investors harp on the importance of cultivating a system and a team to create efficiency. So focusing one's strategy would greatly help that cultivation process, I'd imagine. Otherwise, you'd need to cultivate and maintain more systems/teams if your scope is broader.

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