Let’s take a look back at one of the best snippets with Brian Burke where we talk about finding the right investments and sponsors for your passive income needs. Join our private investor network at 👉 www.vonfinch.com/invest 👈 Brian Burke is the CEO of Praxis Capital Inc. and the author of “The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications”. Having started his investing career at only 20 years old, Brian has acquired over half a billion dollars’ worth of real estate with over 3,000 multifamily units and 700 single-family homes. Now an extremely successful multifamily syndicator, Brian shares with us some of his best practices when it comes to finding the right deals, creating relationships with the best sponsors, and figuring out if an opportunity is truly right for you. If you’ve always wanted to be a hands-off investor but don’t know where to start, listen as Brian and I talk about the common pitfalls in passive real estate investing and how to avoid them. In this episode, you will learn about the factors to consider when choosing the right sponsor to work with, the things that mean you should say ‘no’ to a deal, and how certain decisions can increase your risk of failure.
Let’s take a look back at one of the best snippets with Brian Burke where we talk about finding the right investments and sponsors for your passive income needs. Join our private investor network at 👉 www.vonfinch.com/invest 👈
Brian Burke is the CEO of Praxis Capital Inc. and the author of “The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications”. Having started his investing career at only 20 years old, Brian has acquired over half a billion dollars’ worth of real estate with over 3,000 multifamily units and 700 single-family homes. Now an extremely successful multifamily syndicator, Brian shares with us some of his best practices when it comes to finding the right deals, creating relationships with the best sponsors, and figuring out if an opportunity is truly right for you.
If you’ve always wanted to be a hands-off investor but don’t know where to start, listen as Brian and I talk about the common pitfalls in passive real estate investing and how to avoid them. In this episode, you will learn about the factors to consider when choosing the right sponsor to work with, the things that mean you should say ‘no’ to a deal, and how certain decisions can increase your risk of failure.
KEY TAKEAWAYS
1. If you just ask, people might say yes.
2. When you invest with someone else, you’re adding a new failure point into the equation.
3. Consider your potential sponsor’s track record, team, and experience level.
4. Before saying yes to a deal, make sure that it meets your goals and needs.
5. Understand if the sponsor’s business plan makes sense.
LINKS
https://www.linkedin.com/in/praxiscapital
https://store.biggerpockets.com/products/the-hands-off-investor
Matt: [00:00:01] Hi, everyone, this is Matt the producer of The Investor Mindset Podcast and we're back again this week with another episode in the best of series, we're taking a look back at the interview we did with Brian Burke. We take a deep dive into how to become a super successful hands off investor. And Brian provides some fantastic free advice on how to set yourself up for success. Avoid those common passive pitfalls, and how to work with amazing partners that are going to get you the returns you truly deserve. So let's jump into it.
INTRO: [00:00:42] This is The investor mindset podcasts and I'm Steven Pesavento. For as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And each episode we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation. Today's episode is sponsored by Vonfinch Capital. If you're interested in investing alongside me in the same type of real estate opportunities that I personally invest in that head over to Vonfinch Capital and join their private investor network, you can do so at vonfinchcapital.com/invest. Join me on that next deal, I look forward to seeing you on the inside.
Steven: [00:01:31] What events or influences from your childhood specifically shaped who you are today?
Brian: [00:01:36] I think that the biggest thing for me was when I was a kid, I was kind of thrust into a position where I had to grow up really fast. And that caused me--It's funny I was always hanging out with people about 10 or 15 years older than I was and then I ended up--when I started investing in real estate. I was 20 years old. There were no other 20 year Old’s doing that.
Steven: [00:02:01] That's huge. Being surrounded by all these successful investors that are a lot older, they're all probably looking at you thinking, man, I wish I got started when I was that young.
Brian: [00:02:12] I know right, and the thing was, is that at that time, I didn't know anybody that was successful. So they were probably looking at me thinking like, who is this kid trying to get into this business? Good luck.
Steven: [00:02:22] Yeah, right. Well, what did you end up learning from that? Why did you feel comfortable going into real estate at such a young age when there weren't a lot of peers in it rather than just going the traditional route?
Brian: [00:02:35] I read a book that said that you could become wealthy in real estate and you could buy real estate with no money down, just simply ask the seller, if they'll carry the down payment. And I thought, well, that's easy enough. I was too dumb to know that that actually is really hard to do and that not everybody says, yes. But I found this house and I asked the seller, and they said, yes. And I was like, okay, that is how this is done, I guess the book was right. So I kind of got into it, I guess it was intentional but it was kind of by accident too because in the real world or as the real world as we know it, nobody says yes to that.
Steven: [00:03:15] Yeah but that's what's so interesting is that it was a bunch of BS before is like just this idea out in the world, somebody wrote this book. But once it actually happened for you, you were able to prove that belief in your mind that it was possible and obviously, you were able to kind of build a phenomenal career after that. At what point did you start focusing on commercial real estate?
Brian: [00:03:37] That was about 12 years after I first got into real estate. So I had been flipping houses, and I even built a few homes. But house flipping was really my main business, I didn't have the money to be a big time investor. So I'm like I could get scraped together just enough cash to buy one property and then fix it up and resell it and then do it again, and do it again and do it again and do it again. And after about a decade of that, the business just started to grow, and I was building homes. And then, after a couple years of that I had a couple of rental houses. And I thought, you know what, if I could sell these two rental houses into a 1031 exchange, and buy an apartment building, that would be like the most incredible thing ever. I mean, who would ever have imagined that this poor kid can come in and buy an apartment building. And I actually managed to pull it off and again taking another page out of the old playbook, I told the seller I said, I've got enough money there's 1031 for half the down payment, would you carry the other half? And he's like, yeah, I'll do that.
Steven: [00:04:37] Oh, that's amazing it's the power of the question. If you just ask, who knows, people might say yes.
Brian: [00:04:43] You never know, the answer's no, if you don't ask. So that was how I got into multifamily and that was 20 years ago, and I've been doing it ever since.
Steven: [00:04:50] That’s amazing. And so now it sounds like you focus the majority of your time on the syndication front. Tell us a little bit more. Give us a little bit of color about what your focus is today.
Brian: [00:05:02] When I first was in this business, I didn't have money on my own, the only way that I could do anything in real estate is if I had other investors helping me along the way to put the money in what we needed. A long, long, long time ago, about 20 years ago, I raised my first fund, it was a little small $500,000 fund, and it was funded by coworkers that I used to flip houses. And then as I grew and grew and then got into multifamily, I'm like, hey, I need to do the same thing with multifamily as I did with single family if I want to grow this, I need to get investors. And so I went out and found a few people to invest with me and kind of the rest is history. Now I've got over 1000 investors over $100 million, that we've raised from high net worth individuals and family offices that have grown this to a half a billion dollar business.
Steven: [00:05:48] So you've been able to effectively help folks really become hands off investors, just like you talked about in the book. So let's dive deep into the tactic here. So on the Investor Mindset, we always are thinking about, like, how do the most successful people--how do their thoughts and beliefs end up impacting the actions they take? But from a tactical perspective, how can somebody start to set themselves up for success to become a hands off investor?
Brian: [00:06:18] Well, the first thing you should do is read the book "A Hands Off Investor" because it may seem simple but there's out there in the world, there's this concept of OPM, every real estate seminar that you go to preaches OPM, which means other people's money. It means you have a real estate idea that you want to do, go get other people's money and you can buy all the real estate you want. And the problem was, there was no resource for the quote on quote "other people", so what if you're one of those people that is bringing the money to the deal? How do you know if the investment that you're contemplating is not only suitable for you, but it's likely to succeed and that the person that's bringing you the opportunity is going to be the one who's most likely to succeed in carrying it out. So there was really no resource for people to turn to learn that and so that's one of the reasons why I wrote the Hands off Investor. So the first thing you have to do, if you're thinking about being one of the other people, and bringing money to someone else's real estate deal, the first step is get educated and make sure you know what you're doing.
Steven: [00:07:25] And so, obviously, go check out bigger pockets, the Hands Off Investor, you can find it on Amazon, you can find it on BP, bigger pockets.com. Once someone's dove into that book, obviously, they're going to learn a lot here from it, but talk to me about what are some of the pieces of the puzzle that people are going to need to learn in order to be effective?
Brian: [00:07:47] Yeah, there's a lot of pieces of the puzzle. And the first piece, most importantly, is to learn about how to analyze real estate sponsors. So when you're the person bringing the money, there's also somebody that's bringing the deal and doing all the work. And there's a new element of risk that's added to the equation when you invest passively, and that's the person that you're investing with. If you're buying the real estate yourself, you know that there's risk in the real estate, you know there's risk in the economy but if you're investing with someone else, you've added a new failure point into the equation. So one of the first steps is to learn how to look at a real estate sponsor and figure out if, if they're most likely to be successful in carrying out these business plans? Very, very important component, making the wrong decision could cost you everything that you've invested.
Steven: [00:08:42] Okay, so we want to dive in, we want to do our due diligence on who is actually operating that, what the team looks like, what else goes into that due diligence process?
Brian: [00:08:53] Well first you want to see, what kind of a track record did they have? How many times have they done this before? What kind of--what does their team look like? Do they have experience? Do they have experience not only in the market that you're looking to invest into, they have experience in the product type. So if all they've done is apartments, and this deal is a hotel that could be an additional point of risk. If all they've done is value add, and this is a development project that adds another additional layer of risk. So knowing a little bit about their experience is helpful, their track record, and their full cycle experience. In other words, have they actually gone all the way through an acquisition operation and disposition of a property or they only bought stuff and never sold anything? Have they survived through a market cycle and seen an adverse market cycle and did they survive and how did they get from one side to the other? All those things are critically important but also their experience and the team and the track record, those are those are the main things that you really got to focus on.
Steven: [00:10:02] Okay, so we dive in, we do our due diligence, we're starting to understand what their track record looks like, what market they're investing in, the asset type, all of these things are starting to feel comfortable in that sponsor. We feel like as a team, they're the right folks to manage this business plan. What next?
Brian: [00:10:24] Yeah, the next is to look at the offering that they're presenting to you. And so there's a number of different fronts you're looking at here. The first is, is the investment suitable for you? If you're a retiree and you're living off the cash flow of your investments, and they're presenting to you a development deal, it's probably not suitable because a development deal isn't going to throw off any cash flow. If you're a young tech entrepreneur who's got a lot of extra disposable income but no time to invest in real estate, and a high tolerance for risk, and all you're looking for is capital growth. And the investment being presented to you is a stable, classy multifamily asset with no upside potential, that investment might not be suitable for you. If you know that you're going to need this money in two years to go buy a home, and you're looking at a 10 year investment play that's probably not suitable for you. So the first thing you got to look at is does the investment meet your objectives and your needs, as to when you're going to need to get your capital back but also, what kind of distributions are you going to need in the interim. So that's the first step, it's to really understand whether it's suitable. The second is to understand whether you think that the sponsor’s business plan makes sense. And if you're looking at right now, we're in the middle of this COVID 19 pandemic. If you have somebody that's proposing to build a 400 room hotel in a small city, you might be thinking, well, no one's traveling right now, is that really a good idea to be doing that? So you want to, you want to have a sense of whether or not you think that the business plan makes sense for the time we're in.
OUTRO: [00:12:09] Thank you for listening to The Investor Mindset Podcast. If you like what you heard, make sure to rate, review, subscribe and share with a friend. Head over to theinvestormindset.com to join the insider club, where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.