All Forum Posts by: G. Brian Davis

Hi Jerell, I started my real estate career as a rental investor, but I discovered I hated being a landlord and how much time it ended up costing me. It wasn't actually passive income, it was a part-time real estate business.

I ended up selling off all my rental properties. Today I invest passively in real estate, putting small amounts ($5K) in different passive investments (such as syndications and notes) each month through an investment club. People get spooked off by terms like "private equity" and "real estate syndication" but it's actually a much easier way to invest in real estate than buying properties directly. You get all the benefits - cash flow, appreciation, tax advantages - without all the headaches.

Anyway just my two cents, wish someone had introduced me to this format of investing alongside a group of other investors when I was first starting out. 

Quote from @Kenneth Bell:

Quote from @G. Brian Davis:

When we go in on deals together in our investment club, we typically aim for mid-teens or higher. We make exceptions for especially low-risk investments, in which case we might accept as little as 10%.
Ground-up development is not low-risk however, with a few uncommon exceptions. We'd probably have to believe it would pay us high-teens IRR, and would have to feel really confident in the sponsor's experience, construction crew, and local expertise.

 Thanks for the reply Brian.  I will take what you said into consideration. I am curious as to why you consider ground up development more more risky than value add? I have heard this a few times and I want to understand from the investors perspective why that is.  

It typically takes several years for a building to finish and start generating income, and market conditions can change over that time. More supply could hit the market, for example, or cap rates could expand fast and leave the developer trying to figure out how to rent and hold the units. With existing properties you have the potential for immediate cash flow, and you know the market rent with precision. You also (hopefully) have an experienced property management team and plenty of runway on the debt, letting the sponsor pick and choose the right time to sell or refinance, rather than being forced into it upon completion of the buildings.
Just my two cents. Doesn't mean ground-up development is a bad investment. I'm open to it. I'd just have to feel more confident than usual that local market conditions won't change for the worse over the next 2-3 years.

When we go in on deals together in our investment club, we typically aim for mid-teens or higher. We make exceptions for especially low-risk investments, in which case we might accept as little as 10%.
Ground-up development is not low-risk however, with a few uncommon exceptions. We'd probably have to believe it would pay us high-teens IRR, and would have to feel really confident in the sponsor's experience, construction crew, and local expertise.

Quote from @Max Smetiouk:

Quote from @G. Brian Davis:

I'm so sorry to hear you've had such a rough go of it Fran. To be honest, I had a rough go of it as well when I was buying rental properties.
Eventually I got rid of all my rentals and switched to passive real estate investing. I own a fractional interest in over 2,500 units today, and I don't have to hassle with tenants or lenders or inspectors or insurance or contractors or property managers. I just wire in the money and sit back to enjoy the cash flow, appreciation, and tax benefits.
If you love the idea of a real estate side hustle and being a landlord, then I would never discourage you. But if you just want the investment benefits of real estate, consider joining an investment club that goes in on real estate syndications together. That's how I invest every month, with relatively small amounts.

 That's a great idea! I didn't know you get tax benefits as well. Is it true for both GP or LP? And what kind of tax benefits?

 The tax benefits pass through to both LPs (passive investors) and GPs (syndicators). These include depreciation and all expense deductions. 

I'm so sorry to hear you've had such a rough go of it Fran. To be honest, I had a rough go of it as well when I was buying rental properties.
Eventually I got rid of all my rentals and switched to passive real estate investing. I own a fractional interest in over 2,500 units today, and I don't have to hassle with tenants or lenders or inspectors or insurance or contractors or property managers. I just wire in the money and sit back to enjoy the cash flow, appreciation, and tax benefits.
If you love the idea of a real estate side hustle and being a landlord, then I would never discourage you. But if you just want the investment benefits of real estate, consider joining an investment club that goes in on real estate syndications together. That's how I invest every month, with relatively small amounts.

Hey Eli, to play devil's advocate here, consider whether you truly want a real estate side hustle of buying properties directly and becoming a landlord, or if you just want the investment benefits of adding real estate to your portfolio (cash flow, appreciation, tax benefits). 
Becoming a landlord is more work than the average person thinks. If you just want the investment benefits of real estate, consider passive real estate investments like syndications, notes, funds, and crowdfunding platforms.
I spent many years as a landlord, and I hated it. Today I only invest passively, putting small amounts in real estate syndications each month along with other members of an investment club. I own an interest in over 2,500 units at this point, from fractional investing within a club.
Food for thought!

Hi Casey, rental income isn't as passive as many people think. I've owned dozens of rental properties over the last 20 years, and they come with three kinds of hard work:
1. Work to learn all the micro-skills you need to master to profitably invest,
2. Work to find good deals on properties, and
3. Work to manage the asset (even if you hire a property manager).
Here's a quick example. The general rule of thumb for single-family rentals is the 50% Rule: that half of the rent will go to non-mortgage expenses. If you hear that and wonder "How the heck am I supposed to find properties that cash flow well then?" you're starting to get the idea.
Today, I invest in passive real estate syndications instead. You basically become a fractional owner in a large piece of property, such as an apartment complex or retail or industrial property. You get all the benefits of real estate ownership, such as cash flow, appreciation, and tax advantages, without the headaches of trying to score deals or manage tenants.
That said, syndications come with their own downsides. Two big ones are the high minimum investment and the challenge of vetting syndicators and property deals. You can solve for both problems by joining a passive real estate investment club. That's how I personally invest nowadays.
Here's an article I wrote recently for the BiggerPockets blog about short-, medium-, and long-term passive real estate investing options: https://www.biggerpockets.com/blog/gaining-financial-freedom...

Hi Kevin, congratulations on starting down the road of real estate investing!
If you're committed to active investing, the easiest place to start is often finding a reputable turnkey seller, perhaps even one who operates in several markets. In many cases they can recommend a good local property management company and contractors.
If you just want to add real estate to your portfolio and the benefits like cash flow, appreciation, and tax benefits, you might be better off investing passively. Fractional investing options include real estate crowdfunding platforms like Arrived and Ark7, or real estate syndications for potentially higher returns. The two downsides to syndications are the high minimum investment and the difficulty in finding good sponsors and deals, but you can solve for both by joining a passive real estate investment club. That's how I invest personally.
Best of luck, and reach out to me personally any time!

Hey Ryan, glad to hear you're getting into the game!

Two things I wish I'd known when I was first starting out. First, that it takes a ton of work to find good deals on rental properties, and to manage them profitably on an ongoing basis (even if you hire a property manager). As a broad rule of thumb, the 50% Rule for SFRs states that about half of the rent will go to non-mortgage expenses. If that leaves you wondering "How the heck will I ever find a property that cash flows well?!?" then you're on the right track in understanding how hard it is.

The second thing is that you can skip all the headaches of becoming a landlord and still get the cash flow, appreciation, and tax benefits by investing in passive real estate syndications. Don't get me wrong, these come with their own challenges, such as the high minimum investment ($50-100K, although that's also about how much you'll need to buy a rental), and the difficulty in finding reputable sponsors. I personally invest as a member in a passive real estate investing club, where we all go in on these together to invest small amounts, and vet new deals together every month.

Some food for thought. Best of luck, and don't hesitate to message me if you have any other questions!

Has anyone invested with CF Capital? What have your experiences with them been like? The principals are Bryan Flaherty and Tyler Chesser.

We're thinking about investing a deal of theirs through our investment club, and I didn't see any commentary about them when I searched the forums.