5-Steps to Turn Your Real Estate Investing Into a Multimillion-Dollar Apartment Empire in 2019

With 2019 right around the corner, you’re probably thinking about your New Year’s real estate investing goals. By the end of 2019, where do you see your real estate portfolio?

Whether you are a seasoned investor or a beginner looking to get started, there is a real estate strategy that can take your current investment position and set you on the path to a multimillion-dollar empire by 2020: apartment syndication.

Simply put, apartment syndication is raising capital from passive investors to purchase apartment buildings while sharing in the profits. It is an advanced, complex investment strategy but there is a way to simplify the process. In this post, I’m going to outline the 5 Steps most needed to build a massive apartment business.

Step 1. Focus on Education and Experience

Like any new endeavor, mastering the apartment syndication investment strategy starts with education. You will need to comprehend:

  • The apartment syndication terminology
  • How apartment syndication works
  • How to calculate the key return metrics most relevant to your investors – cash-on-cash return and internal rate of return

In addition to an apartment syndication education, another requirement before starting is experience. Apartment syndications are all about trust – investors are entrusting you with their hard-earned capital. If you’ve never raised money before, one way to gain that trust is through your past experience.

  • Real estate experience: How long have you invested? Have you taken a deal full-cycle before? Did you meet or exceed the return projections?
  • Business experience: Have you gotten promotions at a large company? Have you started your own business?

The skills obtained from prior real estate and business success can easily translate into apartment syndications, as well as proof to your investors that you are business savvy.

Step 2. Set a 12-Month Goal

While working on your education and experience, the next step is to set your first apartment syndication financial goal. How much money do you want to make in 12 months?

Since you are raising money, the best goal is based on the amount of money you need to raise. Consider this: A syndicator’s main source of income come from:

  • the acquisition fee, a fee for putting the deal together (2% of the purchase price is the standard,)
  • the amount of money required to purchase a deal, usually about 30% of the purchase price.

For example, if your goal is to make $100,000 in 12-months, you would need to acquire $5M worth of apartments, which will require you to raise $1.5M from investors.

Step 3. Build a Thought Leadership Platform

The biggest challenge you will face as a first-time syndicator and money-raiser is lack of credibility. One of the best ways to overcome this challenge is to create a thought leadership platform.

A thought leadership platform is an interview-based, online network where you consistently offer valuable content to a loyal following for free, like a podcast, blog, or YouTube channel.

The key is interview-based. By interviewing apartment experts who share their knowledge, you will go from perceived unknown newbie to credible real estate expert.

Step 4. Select a Target Investment Market

Once your thought leadership platform is established, you’ll need to select a target investment market, which is the primary geographic location in which you chose to invest.

My 4-step market selection process is:

  1. Pick 7 markets to evaluate: These can be markets you are already familiar or markets you are unfamiliar but you know to be strong investment markets.
  2. Record demographic and economic data: For each market, locate and record – at minimum – the 5-year unemployment trend, overall population trend, median rent trend, and occupancy trend, as well as the top employers, the industry that employs the largest percentage of the population, and the age range of the dominant demographic.
  3. Rank the 7 markets using the demographic and economic data: The best markets to consider have low, decreasing unemployment, increasing population, rent, and occupancy, and the top industry employs less than 25% of the working population.
  4. Select the top 1 or 2 markets you will initially target.

Step 5. Build Your All-Star Team

Now that you’ve selected a market, you can build your team. As mentioned previously, your biggest challenge starting out will be lack of credibility. However, in addition to your thought leadership platform, your team is a key piece that will help you overcome this challenge.

The core members of your apartment syndication team are:

  1. Property management company: They will manage the day-to-day operations once you’ve closed, as well as help you manage the due diligence process and confirm your underwriting assumptions.
  2. Real Estate Broker: They will help you find and sell deals.
  3. Mentor or Consultant: They will help you with your credibility problem, as well as offer connections to potential team members and investors. They’ll also expand your education.
  4. Business Partner: Don’t try to do everything yourself. Find out what you are good at and find a partner to complement your skills

Secondary team members include a mortgage broker, CPA, and real estate and securities attorney.

Then, there are the passive investors who will fund your deals. The best (and really only) way to raise money from passive investors for your first deal is from your current network. Your goal should be to get verbal interest from your current network in an amount that is at least 2 times the amount you need in order to achieve your 12-month financial goal.

Once you’ve completed this 5-step process, you’re ready to look for, underwrite, and submit offers on deals. Depending on your current experience, education, and network, expect this process to take anywhere from a few months to a few years. But once completed, you have set the foundation to create a multimillion-dollar apartment empire!

For more information on each of these steps, as well as on the entire apartment syndication process from start to finish, learn more in my book, Best Ever Apartment Syndication Book.

About Joe Fairless:

Joe Fairless is a multifamily real estate investor who controls over $400 million in real estate, author of Best Ever Apartment Syndication Book, and host of the popular real estate podcast Best Real Estate Investing Advice Ever. His advice has been featured in ForbesYahoo! FinanceHuffington Post and U.S. News & World Report. Learn more at JoeFairless.com.