If you are considering a passive investment in real estate, it might be beneficial to hear about others' experience. So I have decided to share mine.
During the summer of 2014, I attended a meeting at the local Real Estate Investment Association (REIA). There I met a multifamily investor/sponsor group that was hosting a multi-day Multifamily Conference that September.
I was starting my full time job at a national accounting firm in October so I decided to attend this conference while I had the chance. It was a great conference and convinced me to get involved in multifamily investing. At this event I met who would eventually become my mentor.
Later, I began attending their monthly meetings and at one meeting I was approached by my future mentor regarding a deal he was putting together. We met for coffee a short time after this meeting and he gave me the details surrounding the deal.
The deal was a 48 unit Class C multifamily property located in Columbus, Ohio. The previous owners were two partners, one from Hawaii, and the other from South Korea. It was said that they had never even been to the property.
They also had no capital budget. They were just hoping that the property manager would be able to take care of repairs, maintenance, and capital expenditures with just the cash flow generated from the property. Not the case.
Without a capital budget, the property had some serious deferred maintenance, many units needed to be upgraded, and rents needed to be brought up to market. This deal required some heavy lifting but was perfect for the value-add strategy.
Making the Investment
By this time I had been to Columbus several times on business for the accounting firm I mentioned earlier. I became familiar with the area and knew it was an already strong but also growing market. With a little research, the fundamentals were confirmed.
I wanted to invest.
I also took it to my parents and later set up a meeting so my parents could meet the sponsor and get the full scoop directly from him. After some consideration my parents decided to invest using a Self-Directed IRA account.
After property was acquired, investors received monthly emails with progress updates. There were also quarterly webinars that were more in depth and had an investor Q&A session at the end.
I was fortunate enough to get an inside scoop on this deal that included calls with the property manager, sitting in on meetings with the management team, and inside looks at other aspects of the deal.
The property was purchased in August 2015 and sold in April 2017 after the value-add strategy was implemented and the property was stabilized.
Shortly after the sale, investors were returned their principal plus their share of the profit. Investor level returns were slightly above 17% annualized. Now that’s a pretty nice return.
The Bottom Line
Not only did this passive investment provide a double digit return on my money, it also increased my confidence in real estate investing.
I later went on to make several more passive investments before becoming active in 2017.
Babylon Property Group, LLC provides private investment opportunities for qualified investors looking to diversify their portfolio outside of traditional assets found in typical 401(k) and IRA plans. For a FREE consultation, please fill out our investor questionnaire, or contact us directly by phone at (631) 253-1609 or email at email@example.com.