While at a meet-and-greet for my upcoming summer internship,
I met a successful local RE developer/operator (worth $10MM+ in his 30s)
I could tell immediately he was the real deal so after talking to him for a while and really hitting it off,
I asked him for his business card
Told him I really wanted to learn and that he could send me any extra work or anything he didn't want to do and I'd do it for free
Since he liked me and had nothing to lose, he agreed
He started off by sending me all kinds of menial tasks that would be "below" most interns
(formatting word docs, checking 50+ page documents for errors, and even one time manually downloading 3,000+ contacts in excel)
Eventually, as he began to trust me more, he'd send me more important stuff to do
Next thing I knew, I was checking models for errors and researching submarkets to see if they were viable
All for free
While I'd do the bitchwork, I'd pepper him with (intelligent) questions
How does xyz work?
Why do you like this deal?
Wouldn't doing it that way leave you open to xyz risk?
Why do you structure xyz like that?
Wow, doing it like that must be very profitable
And he was more than happy to answer all of them
I learned years' worth of info in weeks
Everyone was happy
He thought he was getting the better end of the deal (free work and all he had to do was talk about topics he enjoyed)
I thought I was getting the better end of the deal (trading the hours I would've spent boozing to acquire absolutely priceless knowledge)
Eventually, after picking his brain for a few months, I figured out his acquisition strategy
I signed up for every broker's email list I could find and started sending him deals,
Analyzing it first and then sending it to him
I had no idea what I was doing at first, but gradually I learned to spot a good one from a bad one
I started becoming very good at it and found him several extremely good deals (although we never ended up buying any of them)
Once I started working full-time, I stopped working for him
But we've remained really good friends ever since and talk regularly
He has even invested serious cash in my personal deals and always helps me out whenever I need anything (and I do the same for him)
I see so many people asking about how to get a mentor and they all approach it the wrong way
They all try and extract value from him
In reality it should be the other way around
For those of you who say it's not possible or that you don't know enough about real estate to provide value,
You're dead wrong
Everyone, even multimillionaires, have something they want or some part of their life made easier
I knew nothing about real estate, but was able to provide a ton of value as a college kid
(Hint: The easiest way to "provide value" when you have no skills is to find out what someone hates and offer to do it for them. Very few people will say no)
Ironically, once you start providing value, you reap far greater rewards than you could have ever gotten from solely trying to extract value
So if you want a mentor, don't cold email him and ask to pick his brain over coffee
Instead, try to provide value in any way you can
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Since I’ve started this twitter account, blog and email list, I’ve received tons of requests on a weekly basis to assist you guys with everything ranging from buying your first property to starting a career. Previously I’ve declined all phone call...
requests since they’re incredibly time-intensive, but have answered (nearly) all serious DMs. Even the DMs, however, are taking up a large portion of my time and I’ve spent a while thinking of a better way to handle it. I decided on a structure that answers most of the questions
you all have been asking me on a daily basis. Starting this Sunday (the 22nd), I’ll be offering a monthly course that includes a phone call with me that addresses the most common questions I've received as well as a tons of other real estate info (full breakout is below)
Since we focus on value add, the entry cap doesn’t matter at all, as long as we can service our debt
We typically need to get to a 6.5%+ stabilized for a deal to pencil. How quickly we get there plays a role as well (quicker the better for IRR)
4. Unlevered vs levered returns:
This is basically just a gut check to make sure that our leverage isn’t out of control
5. Equity Multiple:
We only check this to make sure that they’ll be enough promote for the deal to be worth our time (no point in 20% IRR and 1.2x EM)
6. Cash-on-cash:
We essentially ignore this metric and expect cashflow to be very low during the hold period (unless we’re working with a specific LP who needs cashflow). Often even have to make (planned) capital calls and have earn-outs built into debt covenants to inject
Most important metrics (in order) 1. Basis (you can show us any IRR you want and we’ll toss the deal if the basis is bad) 2. Exit basis - heavily tied to #1 (we won’t invest in deals where the exit basis is significantly above current market basis)
3. Stabilized cap rate (yield) - since we focus on value add, the entry cap doesn’t matter at all, as long as we can service our debt. We typically need to get to a 6.5%+ stabilized for a deal to pencil. How quickly we get there plays a role as well (quicker the better for IRR)
4. Unlevered vs levered - this is basically just a gut check to make sure that our leverage isn’t out of control
5. Multiple - we only check this to make sure that they’ll be enough promote for the deal to be worth our time (no point in 20% IRR and 1.2x multiple)