You must be logged in to reply to this topic.
-
I have been listening to many of the recordings available as I begin learning about the real estate market and preparing myself for finding my first deal. Several times I have heard Jack Miller refer to how he worked under someone for one year, learning the ropes, but without taking a profit himself.
I currently have access to an investor (an owner of a very successful hedge fund), who has previously expressed interest in investing in real estate, but as far as I know, has yet to break in to the market. I am currently in the Capital District market of NY, and he is based down in VA. Previously, he went out to the properties to inspect them himself (since the properties were located in his area), but I don’t think that he would be willing to travel for each property find in NY. My investor does have a track record with putting faith in individuals with a successful record, so if I was able to find a local and successful real estate investor…
So this is my idea, but I’m not sure how feasible this is. My plan was to locate a successful real estate investor in the area and request an apprenticeship with the condition that I would make sure to privately fund the transactions, but would not take a part of the profit. However, from what I have read as well, many successful investors already have a network of funds available.
Part of me feels like this is a “smart” way in order to leverage the situation. My bills would continue to be paid by my office job while I studied with the local real estate investor, but I would gain first hand knowledge and experience. At the same time, part of me feels like this may be a road to failure, as I may miss crucial first hand learning experiences. For those who have much more experience than myself, how would you approach this situation? My goal is to gain as much knowledge as possible. With the prediction of the market crash in the near future, I would really appreciate being able to gain the experience and knowledge necessary to capitalize on this opportunity.
Stuart
In theory it sounds like a feasible plan however, I think you will have a very hard time finding an active real estate investor to work with. You’d need to find someone who is completely RETIRED. An active real estate investor would see you as competition. Why should they teach you the ropes so you can compete with them in the future??
I remember when I first got started, I asked an active rehabber to show me a good way to estimate repair costs. That was my biggest weakness initially. But I had no problem finding deals. The investor told me there was no room for women in this business and I needed to go back home to make brownies and have more kids. For me, that just fueled the fire to be even more successful…
Look for a retired investor or burnt out landlord to show you the ropes. Anyone who is active in the biz will not want to help you.
Also… Jack MIller worked as a real estate salesperson after he lost his job. He did not get a paycheck, he worked solely for commissions. That lasted about a year until he realized that he could make MUCH mosr by getting OPTIONS on properties then selling to investors or wrapping the underlying loan then selling with seller financing. Instead of making 1/2 of a 6% commission, he routinely make 20% of more per deal…. all without actually buying the house or using anything more than a $100 bill to secure the option.
.
Just so our CFD audience will have some definition, here’s a handy article that explains the differences among hedge funds, private equity funds, and venture capital firms:http://usatoday30.usatoday.com/money/perfi/columnist/krantz/2007-08-17-hedge-private-equity-vc_N.htm
StuartA, do you happen to know what the minimum and maximum dollar limits are that your hedge fund guy uses to bracket acceptable deals? I’m guessing (though there may some rare exceptions) that the minimum figures is likely to be somewhere in the millions, which is likely to exclude all but extremely high end single family homes (single family homes being mostly where the expertise of the CashFlowDepot.com community is concentrated).
The reason for such likely high minimums would typically be the very high amounts of capital that a hedge fund manager has the responsibility to assure being regularly deployed into deal flows in order to earn regular trading profits.
Odds are that such high minimums will only work for larger commercial real estate deals, which requires a different set of deal evaluation skills with many different niches. For example, hotel expertise is one thing. Industrial plant expertise is another. Shopping malls are different. Mixed use office developments are another. Multi-family apartment expertise is its own niche. Etc, etc. The very bare statement that your hedge fund guy is interested in “real estate” needs a lot of definition to be helpful.
Also, since hedge funds tend to have more of a short term trading mentality than a longer term fixer-upper or hold to resell approach, you’ll want to find out what that hedge fund’s maximum deal holding time is.
Have you asked your hedge fund guy how long he has been looking for real estate expertise, what his requirements for such expertise are, and if he has any explanation for why he hasn’t been able to find or hire that expertise yet?
I’m only guessing that those answers will tell you whether trying to obtain personally some very specialized commercial real estate evaluation skills and the track record to make them credible is really worth your effort, or whether the only contribution you could make is a one-time introduction to such expertise (once you get a clear definition of what skills and experience are being sought) — which is not easy to get paid for unless you’re very careful and skilled with finder deals.
I have a friend who tried to get paid for international introductions to facilitate multi-country aircraft funding deals, and the most frequent results of her efforts to collect such fees were “so sue me” responses.
Good luck.
.
Thank you so much for the very informative and well thought out replies!
Jackie, I had not even considered that active local agents may not want to help the new guy on the block. Thank you for that perspective. I have been listening to as many lectures as I can about options, setting them up, and using them. I suppose that this idea was brought about by those thoughts — those fears — that I may not be able to do this on my own. Realistically speaking, I know that I’m more than capable of doing this, doing the cold calls, the hard knocks to the doors; and finding a local agent to work under is to shelter me from those fears. The more that I consider the possibility of financial freedom, the more driven I am to go out on my own and just do this.
Dee, my hedge fund guy is actually my uncle, and thankfully, he does do “smaller” investments when it comes to family. I haven’t sat down with him yet, but I am definitely hoping to do so the next time I visit. Hopefully, by then I will have some experience under my belt and I’ll be able to see if I am able to work a market that he is interested in, or perhaps, I’ll find that I don’t have a use for such funds. I am interested in rehab/flip projects, but I would need to be doing a very large scale project, or upscale neighborhood, for the profit margins to be worthwhile for a hedge fund investment.
Again, I really do appreciate that well thought out answers. I still have much to learn, and I’m very thankful for all of the consideration given to these situations.
.
StuartA, a couple of thoughts:First, I’m glad you posted. Sometimes new members are reluctant. Having lurked here for years before I felt it appropriate to post, I can say that nobody here is out to embarrass anyone, or do anything other than to look for a poster’s best possible outcomes. We also keep in mind that there may well be anywhere from tens to hundreds of other members that the discussion topic you kicked off might help.
Second, there is a whole jungle full of hedge funds, private equity funds and even REIT groups, and there will be directories of them — if you should conclude you have further interest in such things. You don’t actually need them, because Jackie’s teaching materials can easily help you become independent. But you still might come across one or more of those large funds where you could possibly find an alignment of interests. There’s nothing wrong with that. It’s just a matter of how you choose to spend your time and energy.
Good luck!
–Dee
.
You must be logged in to reply to this topic.
