In a recent episode of the Investor Mindset podcast, host Terrance Doyle and Chris Lopez sit down with real estate investor Steven Pesavento for a comprehensive Q&A session on multi-family real estate investing.
The conversation delves into various aspects of investing, from building a trustworthy team to negotiating deals and managing risk.
Let’s dive into the key insights shared during this informative episode.
1. Conservative Investing and Protecting Your Money
Steven Pesavento emphasizes the importance of protecting your money by adopting a conservative investing approach. This includes carefully considering out-of-state investing opportunities but also acknowledging the challenges involved. Building a reliable team and leveraging the expertise of third-party property management are crucial for successful out-of-state investing.
2. Transitioning to Multi-Family Properties
Steven shares his negative experience investing in single-family homes from a distance, even with a team of 15 people and property managers. He highlights how property managers may lack sufficient incentives to care for the property due to the low income generated from managing smaller properties. As a result, he shifted his focus to larger commercial multi-family properties to have more control and work with professional operators who are paid based on success.
3. Approach to Raising Capital
Steven discusses his preferences when it comes to raising capital for real estate deals. He avoids asking friends, family, or anyone from church, as he believes it could potentially strain relationships or lead to business discussions during personal gatherings. Instead, Steven seeks funding from other professionals and like-minded individuals who align with his investment strategy.
4. Patience and Managing Expectations
Throughout the conversation, Steven emphasizes the importance of patience and managing expectations when it comes to real estate investing. He mentions the significance of having clear conversations to identify interested investors and sets transparent expectations regarding the risks involved in a deal. Additionally, he highlights the benefits of dealing with investors rather than friends and family during challenging situations.
5. Mindset and Commitment
Steven shares his personal journey in real estate, highlighting the mindset shift necessary to pursue investment opportunities. Despite facing limiting beliefs, including lack of experience, money, and connections, he made the decision to pursue real estate and burned bridges with consulting clients. He emphasizes the need for commitment, adaptation, and open communication in partnerships, acknowledging that real estate deals often endure longer than the average marriage.
6. Equity, Compensation, and Risk
Steven provides insights into negotiation strategies and determining equity or compensation in real estate deals. Factors such as experience, expertise, and the amount of capital invested play a role in deciding the distribution. Moreover, he emphasizes the importance of understanding risk levels in deals, including renovation uncertainty and stability indicators such as occupancy rates and turnover.
7. The Power of Reserves
Steven stresses the significance of having reserves in real estate deals to mitigate risks. He advocates for maintaining reserves of 3% to 5% of the deal size, with potential adjustments for different types of deals. Sharing personal experiences, Steven explains that having ample reserves provides peace of mind and minimizes potential losses in tight situations.
This Bigger pockets episode offers valuable insights into multi-family real estate investing strategies. From protecting your money to transitioning to larger properties, raising capital, and managing risk, Steven’s experiences and advice provide essential guidance for aspiring investors. With a focus on patience, mindset, and effective communication, real estate investors can navigate challenges, build trustworthy teams, and make informed investment decisions.