People in and outside of our Mastermind bring me deals all the time. My first question is how do you know this person?

In vetting deals, it is often the people component which has the greatest amount of impact on the success of a deal. I don’t invest with anyone I don’t know personally (one degree of separation).

None of this I know a guy that knows a guy where that guy is not even an investor and hear it second hand.

This is another reason I moved on from single family home deals because it is a very large pool of people and therefore it is hard to spot out shysters. Another reason I don’t like the single family home investor world is that it is a lower barrier to entry and it is often filled with people trying to “get rich quick no add value people.” I feel the is a higher rate of people who are needing to “put food on the table” from vendors, brokers, and peers.

Only work with people you know, like, and trust. And one degree of separation. Use your network to verify past performance and integrity of people. Also when you are financially free you will likely keep those you climbed the ladder with in close company…

Most people in this space are able to make profits off unsophisticated investors. This is another reason why I don’t really like going to local real estate meet-ups or free online forums because of the caliber of people there is pretty poor because the barrier to entry is often times nothing and a 15 minute car ride. I spent thousands of dollars to travel across the country to get access to high quality people who came from the same high net worth professional pedigree and were also taking action.

When starting out you have to start somewhere, but take everything with a grain of salt.

Try targeted meetups like my local on in Hawaii for Passive investors. But remember that you are getting what you pay for…

https://www.meetup.com/REI808-Passive-Real-Estate-Investing-for-the-Working-Class/
https://www.facebook.com/groups/SPCHUI808/

Case and point: wholesellers are famous for this. They want a proof of funds and letter of intent to purchase with no access any financials? Who would ever offer on-a property without seeing the numbers first? The reason they do this is because they have a seller who does not even trust the wholeseller and needs to qualify the buyer first. A lot of these jokers will sell a property higher than the past listing price when the expired listing just closed a few weeks ago. Duh. If these Bozos spent as much time building their buyers lists as they did actually looking of good deals… they would likely make a lot of money.

It took me from 2009 to 2015 to go from zero to 11 units. In 2016-2020, I acquired over 3,500 units!

Why?!? Other than spending over $100,000 in Masterminds and conferences…

It was because I found a tribe of other high net worth professionals like doctors, lawyers, engineers, dentists, accountants, pharmacists, and computer programmers who were a few year ahead of me and on the same path to financial freedom. I discovered all these hack that the wealthy do but more importantly I build relationships with these people which help be vet operators and deals.

Tip for networking – Always add value and make things better than you found it. Too many people who are new come in and ask too many questions and are drawing a negative social currency balance. Don’t be an Ask-hole! Give without expecting anything back and you will find those who are the good one you want to work with.

More tips here.

Celebrity GP

For many newer operators who you don’t really want to work with one way to jump start your syndicator career (to leave your current career) is to partner with another partner who has the track record an experience for the balance sheet, reputation, and ability to pull in investors as LPs into the deal. Doing so is a lop-sided partnership where the senior partner is getting compensated to do very little than to put their name on a pitch deck and collect 20% to as much as 60% of the general partnership which ultimately comes out the the LP shares too. Stick with sponsors who can take down their own deal without the need for celebrities.

Sponsor Creep

Newer sponsors might do 90% LP / 10 GP or 80% LP / 20% GP splits with very low acquisition/asset management/distribution fees. Later as they build a track record and grow their investor list they might go down to 70% LP / 30 GP or 50% LP / 50% GP and more fees which is totally fine and good for the GP because they earned it. A passive investor needs to understand that the more reliable the operator it will typically mean less returns for the LP. What a LP needs to look out for us 1) a GP who does not have a real track record and 2) a successful GP who is underwriting future deals aggressively and can get away with due to unsophisticated LPs.

Pop-up Syndicators who just capital raise

More info.

Everyone can be a Podcaster

Just because you have someone who can put together a 50 minute MP3 File with a 10 dollar intro song from Fiver. By the way mine was free because I was too cheap to pay for it.

Using LP Relationship Proxy & three levels of referrals

Starting out in any endeavor you are not going to have the know how or network to determine who to invest with. Here are three levels of referrals to think about using to help you make a decision on who to work with.

The Bad – investing totally off Facebook likes or a nice website/pitch deck. You don’t know anyone who has invested with this person to verify results. Another example is that you had a couple beers with someone who mentioned someone was a good sponsor.

Half-Way there – you got a loose referral from someone who is potentially an unsophisticated investor on some message board or vendor or guy you met at a local REIA. The person who made the recommendation is not close contact to you nor has skin in the game and a first hand investor in the sponsors past deals. I made this mistake in 2013 when I investing in my first passive deal by just blindly following a referral from an institutional company (IRA servicer company). More details – SimplePassiveCashflow.com/fail

Best – You are going off a referral of a trusted sophisticated investor who is going into the same deal too.