Want to start passively investing in multi-family real estate, but can’t decide who to invest with?
Now, more than ever, it’s important to know what to look for when choosing a multi-family real estate investment firm. Because in today’s day and age, technology makes it easy for us to quickly feel overwhelmed with so many options at our fingertips.
I’m sure you know what I’m talking about…
One minute you’re watching a YouTube video about cap rates, and before you know it you’ve got twelve new tabs open from twelve different syndications each talking about a different way to invest in real estate.
Ugh!
You see, we couldn’t access all of this information so effortlessly when I first got started over twenty years ago…I guess you could call that a blessing and a curse.
So today, we’re going to skip the fluff and break down the top four most important things to consider when deciding who to invest with.
Let’s get started.
Rule #1: They Must Have Experience
Whenever someone applies for a new job, what’s the first thing the employer looks at?
Experience.
It should be no different when choosing who to invest with as a passive investor. Imagine yourself as the employer and firms as potential candidates. Obviously, you wouldn’t want to shake hands and invest with a firm that just learned about multi-family properties last year, would you?
Of course not!
The last thing you want is some rookie experimenting with your money and learning on your dime. That’s why I personally invested the capital necessary to acquire our first series of properties—I wanted to learn using my money, not somebody else’s. In essence, you’d much rather entrust your funds with a seasoned veteran that has been able to navigate all sorts of different economic environments in the past.
You’re going to experience lots of ups and downs when investing in multi-family properties, and it’s absolutely CRUCIAL that the firm you choose to invest with has significant experience managing these buildings through multiple real estate cycles.
Here at KRI Partners, we’re proud to have a team that has managed 16,000+ units in the span of over two decades—so I think it’s safe to say that we know a thing or two about a thing or two.
Rule #2: They Must Have a Long Track Record of Success
By now, we should all know that past performance does not necessarily indicate future results… but that doesn’t mean we should simply disregard a fund’s track record. In fact, analyzing historical returns is arguably THE most key principle to consider when deciding between investment firms..
Why?
Well…see for yourself. Without knowing any additional information, decide who YOU would personally trust with your money based on these metrics:
Person A
Chance of Success: LOW
- Recently completed an expensive real estate course
- Has very little to zero real-world investing experience
- Has lots of questions and is stuck on what to do next
Person B
Chance of Success: HIGH
- Runs a highly successful multi-family investment firm
- Has 20+ years of real estate investing experience
- Has a long, impressive and verifiable track record
Person C
Chance of Success: AVERAGE
- Just started a multi-family investment firm 3 years ago
- Uses other peoples money to learn and gain experience
- Earned a mere 5% for his investors on his first and only deal
If you chose Person B, I don’t blame you! Pretty much everyone would agree they’re the best option. They have the most experience, they’ve got the best track record, and their average returns are the highest by a longshot.
Keep in mind—anyone can claim they’ve made XX% on a deal, but the problem is it can sometimes be very difficult to verify these returns.
To date, KRI Partners has done 18 deals worth a total of $125 million with annual returns up to 30%+ given to our investors. Unlike many other investment firms you might’ve researched, you can fully verify our track record here.
Rule #3: They Must Put Investors First
This can be a bit tricky to figure out if you’re new to passive investing and don’t know where to look or what to look for.
The first thing you need to do is review their fees and the terms of the investment itself. Be wary of some firms who boast extremely low management fees, because they almost definitely are making up for it somewhere else in the fine print.
Also, make sure profit bonuses are ONLY performance-based and that they get paid last—this is the only acceptable way to treat investors in my humble opinion.
At the end of the day, if all else fails, all you need to do is ask yourself one very simple question:
“Is it possible for the investment firm to do well and for me to not do well?”
If the answer is yes, I highly recommend figuring out how and why that’s the case, and using that as a significant factor in deciding whether or not you should invest with them.
You do NOT want to be in a situation where they can do well while you suffer…
That just simply isn’t fair.
Rule #4: They Must Be Fully Transparent
Let’s be honest—we all have that one friend who takes FOREVER to text you back or return a call. You’d ask them a simple question on Monday morning, and they end up getting back to you five days later with the most B.S. excuse like:
“Hey sorry bro, my pet dinosaur ate my phone and I just got a new one.”
…
HUH?!
If you’re going to provide someone with an excess of $100,000 or more in capital, the LEAST they can do is be responsive and return your call in a timely manner. Like, come on…that’s the equivalent to paying six figures for a supercar only to find out the A/C doesn’t work!
In particular, you should be able to talk to someone familiar with the specific property you invested in. They need to be ready, willing, and able to answer any questions you may have about the current status of your investment throughout the year.
Aside from merely picking up the phone, make sure the firm you choose issues quarterly investor updates to help you track your investment. This includes financial statements, balance sheets, P&L statements, rent rolls, etc. as well as updates on the renovation process.