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SHOW NOTES FOR EPISODE 184: ASK BILL! FINDING A MENTOR, MULTIFAMILY INVESTING, COMMON REI PROBLEMS
I know it’s important to have a mentor but where do I find one? How do I get started in multifamily investing? And what are some of the common problems I might encounter in real estate investing? In this special “Ask Bill” episode, Top Dawg Bill Manassero will tackle these questions and provide some additional food for thought for motivated investors.
This is our special monthly Fun Fact Friday “Ask Bill!” episode where Bill Manassero answers some of the real estate investing questions received during the month from emails, in-person conversations, phone calls or through online portals such as BiggerPockets.com and Quora.
Question # 1 – Finding a Mentor
I’m looking for a real estate mentor. How do I get connected with someone willing to impart their knowledge?
You are very smart to seek out a mentor before you start investing. Many people think that after they’ve read a few books and attended a few seminars, that they are ready to invest. Sure, you can invest any time you want, but you can avoid very costly mistakes and a lot of heartache if you invest under the direction of a good mentor. In an episode of the Old Dawg’s REI Network podcast, I talk about all the things you need to do to effectively start investing in real estate. Education is your first step, the second is to find a mentor. To listen to the entire podcast, just click here: 006: How to Get Started in Real Estate Investing
The four main things you need to do to get started in real estate investing are:
- Get Educated
- Find a Mentor
- Write a Plan
- Take Action
Also, we talk a lot about mentorship in other episodes. Here is an episode where Paul Moore, a successful real estate investor, shares a few creative ways to find yourself a mentor: 069: Finding a Good Mentor
Finding a mentor, however, can be one of the most challenging tasks to achieve as a newbie investor. In fact, I listed “not finding a mentor earlier” as one of the top 5 mistakes I have made in real estate investing in my recent Fun Facts Friday podcast entitled “My 5 Biggest Real Estate Investing Mistakes… So Far” (episode #064).
How do You Find a Mentor?
- Find someone who is busy and successful who needs to conserve their time and wants to get more done in the same amount of hours
- Don’t be focused on what the mentor can do for you – you need to focus on what value you can bring to them
- Ben’s words to those seeking a mentor “Do whatever you have to do to get a mentor. Work selflessly. Do not try to get something out of it yourself. Do it with a sincere desire to serve and learn. The law of reciprocity is real.”
- Don’t give the mentor a carrot saying once you learn everything, you will bring them all kinds of deals
- If you have any skill that the mentor needs, use that skill to serve your mentor
- Paul had one potential mentee offer to make him a meal to honor him and asked Paul if he could just hang out and help Paul with odd jobs at the office
- He later started earning a salary and continues to be mentored and is on his way to a new career
- All because he had the courage to ask
- What really impressed Paul about Ben was when he received personalized “Thank You” cards via US mail from Ben
Where Would You Find a Mentor?
- BiggerPockets.com
- Local successful people in your community (chamber of commerce, service groups, your church/synagogue, etc.)
- REI meetings or other real estate meet-ups
- Meet people – research local real estate investing businesses, call and ask a person at the business to coffee
Question #2 – Multifamily Investing
How can one invest in multifamily real estate in the US?
Many people are intimidated by multifamily investing. However, it’s actually easier than you might think.
Most people think that because there is more money involved that it must be more complicated, but that is not necessarily true.
Like many buy and hold investors, I started out buying single family homes (I bought two) and then I bought a few duplexes. I paid pretty much about the same amount for each property (roughly around $60,000 each in Memphis, Atlanta and Indianapolis), however, my duplexes made twice as much income as my single family homes and I only had one roof, one property tax payment and one insurance payment. When my duplexes had an empty unit, it had only a 50% vacancy. However, when my single family homes had a vacancy, I had 100% vacancy. The economies of scale seemed very obvious, even with just my two-unit properties.
I decided to purchase a larger property and found a 22-unit in Indianapolis for $350,000 that generates up to $120,000 in gross annual income — that’s a 34% return on my investment. That means, in 3 years, I will have earned enough income to pay myself back for the full purchase price of the apartment. That’s a GREAT return! And, after year three, I will have made my full investment back. Again, I only have one roof to worry about, one property tax payment and one insurance payment. At that point, I was hooked.
I set a goal, to acquire 1,000 units by the year 2020. I know it seems like a lot but I have found that with the more units I acquire, the easier it gets. Of course, the financing gets a little more complicated but, then again, once you do it, it gets easier each time. If you want to hear how I am going to reach my goal, here is an episode of my podcast where I explain my strategy: 014: How I Will Acquire 1,000 Units by 2020
Here is another podcast episode where I had an interview with a friend of mine who acquired over 3,000 units in just 3 years! 002: How to Acquire 3,000 Units in 36 Months with Michael Becker. That makes my goal look like nothing!
Question #3 – Common Real Estate Investing Problems
What are the common problems encountered in real estate investing?
The biggest problem I had with real estate investing is not starting sooner. I would always procrastinate, didn’t feel I knew enough, afraid of the risk and just plain afraid to fail. I would see other people take the plunge and crush it but I always thought it was just luck. Today, I know different.
Once I finally had the guts to purchase my first property, I realized it was not that difficult at all. Sure I made my mistakes but, in the long run, it was one of the best decisions I ever made. I am currently on my way to acquiring 1,000 units by 2020.
Here is a podcast about my mistakes: 064: My 5 Biggest Real Estate Investing Mistakes… So Far
# 1 – Not Having a Mentor
- Had done much research and felt I was ready to just get started
- Didn’t want someone else’s feedback
- Looking back, I see most of my mistakens could have been avoided if I, first, had a good mentor to bounce things off of
- Trusted that my first “turn-key” properties were OK and skipped much of the normal due diligence. If I would have have a mentor I could have run it by him first
#2 – Not Vetting Property Managers More Carefully
- I just accepted that the property management that came with my turn-key properties was OK without checking them out first
- Turn-key property managers should be carefully checked out in the same way you would hire in non-turn-key situations
#3 – Not Checking Out the Market Better
- What are real estate prices doing in the area?
- Going up
- Declining
- Stagnant
- What is the local job situation?
- Job growth percentages up or down
- Are new employers coming to the area
- Is the market dependent on a single employer or industry
- Get unemployment stats and trends
- What is the overall local economy?
- Are businesses closing or moving out of the area?
- Are commercial real estate values and office occupancy rates increasing
- Are there “redevelopment plans?”
- Does the city have a major “growth initiative?”
#4 – Wasting time with the wrong funding source
- One of my first big mistakes
- Don’t think because it is a big name bank that that is your best source of money
- Know their funding requirements before applying
- Have a good back-up source if you are not approved
- Make sure the lender is compatible with you and your plan
#5 – Not having sufficient operational reserves
- Have 6 month reserve or back-up funding source to cover expenses
- This can be costly as you struggle to cover expenses by creating additional debt
These are my “Big 5” and you may well have your own, but hopefully, you will learn from my mistakes. Either way, try to avoid mistakes as best you can but understand — mistakes will happen. The important part is learning from those mistakes and how you bring that knowledge into your next deal.
And here is my podcast about how I am going to acquire 1,000 units in 6 years: 014: How I Will Acquire 1,000 Units by 2020
Check Out Bill’s Interview on BiggerPockets!
If you want to find out how Bill Manassero got started in real estate investing, check out his video interview with Josh and Brandon on Bigger Pockets: https://www.biggerpockets.com/renewsblog/bp-podcast-191buying-out-of-state-rentals-investing-life-bill-manassero/
Also, check our Manassero Properties website here: https://www.manasseroproperties.com/
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