If you are like me when I started investing in real estate, the key obstacle In your head to getting started and growing is cash:
- How much cash do I need to invest in real estate?
- With the financial resources that I have, what am I able to buy?
This is an individual investor mindset and works fine if you want to keep a small portfolio of cash flowing homes. However, it will be extremely limiting to those who want to grow the number of rentals under management and build a scalable business.
3 Key Resources
Brandon Turner, well-known investor and host of the Bigger Pockets Real Estate Podcast, often says that in order to bring value, you need one of three things to bring to the table:
Money: Often the primary resource that people identify as a hurdle or necessity to starting and growing your real estate portfolio, having funds can make you an asset to other people’s deals, can earn you a key role in a partnership or alllow you to passively invest with people you trust.
Deals: Maybe you have developed an efficient system of off-market deal hunting that generates many leads per month which results in a fair amount of motivated sellers. Or perhaps due to your education and practice, you can find and create opportunities such as seller-financing, where little cash needs to be put into the deal; or maybe you partner with someone who has cash and values your deal finding skills.
Hustle: Maybe you have neither money or deals, but you have the time and hustle to do work and make a deal happen. If you have partners or contacts with resources, you become an asset to them because they can leverage your time and willingness while you leverage their investment capital. This synergy allows for each party to meet their personal objective to grow wealth from doing a deal passively (as in your partners’ case) or actively (as in your case).
The above key attributes are precisely what makes larger deal making, such as multifamily syndications, attractive and successful. Limited partners, the passive investors, help bring investment capital. General Partners, or deal sponsors, can bring capital but also provide the essential ingredients of deal finding and the legwork (hustle) to negotiate, align and coordinate financing and execute the deal. Multifamily syndications are great examples of synergies created from putting the various human resources at work.
Try not to think of cash being the only resource needed to invest in real estate. What other resources do you have to offer (education, deal finding, networking skills, etc)? This mindset and associated awareness of skillsets allows you to see over the “cash obstacle,” but drive a focus on increasing any of the other assets that make you valuable for being successful in real estate. When you begin to see real estate as a team sport, you will no longer see cash limitations as the obstacle it once was.
Passive Investor Startup Guide
To find out more about what it looks like to invest as a passive investor in multifamily real estate, download our free Passive Investor Startup Guide here!
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Rodney Robinson II