People send me real estate deals to look at all the time trying to get an opinion on whether or not they should invest. Usually it’s some glossy executive summary showing nice pictures and impressive proforma numbers.
“What do you think?”, they ask. My answer is pretty much always the same. “I don’t know these people so I can’t comment”.
You see, real estate is not like publicly traded stock. If I buy Apple stock from E-trade it’s the same stock that someone else might buy from Ameritrade or some other brokerage. You don’t have to worry that you aren’t getting the same stock. No matter where you buy Apple, it will perform the same.
Real Estate is different. Every property in which you invest is unique. Furthermore, the performance of the asset is highly dependent not only on the intrinsic nature of the property, but also on its operator. The same asset in two different sets of hands will almost certainly result in different outcomes.
Some operators are good and some are outright bad. So, it’s probably a good idea to get to know who they are. That may seem obvious but think about how many people blindly invest in real estate through various on-line platforms where they have zero clue about the operator. The platform gets paid to bring money to the deal. Why do people trust these platforms so much? Is it because they have nice looking websites? Is it because what they say sounds official? I don’t get it.
You see, apart from being good or bad, operators typically have different business models as well. A few weeks back, you heard Dante Andrade, my colleague in Dallas, talk about our hybrid value add/cash flow model. That’s very different from what my partners at Western Wealth Capital do. Their entire focus is on the creation of equity for velocity and a big bump at exit.
So how do you decide with whom to invest? Well, first of all, let’s go back to the the idea that real estate is not a commodity and highly dependent on people. That being the case, my general rule of thumb is to know, like and trust the operations team. That’s what I spend my time doing in investor club.
Of course, liking and trusting is only part of it. I like and trust many people with whom I would never trust my money. You also have to make a judgment on competence. How do you do that? Well, how about taking a look at the company’s track record?
If you know, like and trust a group AND they have a great track record, you can at least start looking at proformas and taking them seriously.
Anyone can make a proforma look good. Some glossy paper and excel worksheets and you can make swamp land in Florida look good. But not every opportunity is good and most won’t achieve proforma—especially in a market like today. Look at the track record.
As for Western Wealth Capital, I won’t pretend that I am not biased. Apart from them being a partner of Wealth Formula, I have invested a lot of my own money in their offerings. Perhaps more illustrative, I have invested just as much of my 80 year old father’s money in these deals. I don’t take that lightly as you can imagine.
Western Wealth Capital has become a big part of my life and my guest today, Tim McLeary has become like a brother to me. Tim is a major part of the Western Wealth machine and is my guest on Wealth Formula Podcast this week. Don’t miss it!
Tim has more than 25 years of experience in business development, financial management and client relationship management. He was responsible for the oversight of more than $1 billion in assets and managed a 40-person team at TD Bank Financial Group. As a Senior Consultant at Standard Life, Tim worked with a group of high net worth advisors throughout BC, helping them increase the efficiency and profitability of their businesses. At Cassels Blaikie, Tim was responsible for the relationship management of institutional and high net worth clients.
- Tim McLeary’s background
- Why invest in multifamily real estate?
- What is the Western Wealth Capital Money Machine?
- Under Promise, Over Deliver
- Tim talks about Western Wealth Capital’s philosophy when selecting properties.