if you start, with half a million capital, where would you go? should I start with the mentorship program first?
Hello everyone,   


  
I'm trying to find my way still with investing, hoping to give myself enough time to learn but also most of the materials online are scattered away and a good information here and a good tip there but nothing is full index of what I need, So I do believe I have enough capital to start on ( thinking between multifamily or small strip malls. ) obviously no one wants to have a bad start, so my questions are the following for everyone here.  
**A**\- who to follow to learn the most  (and how )?  
**B-**comparing between multifamily and strip malls ( what would you choose in terms of optimum space between appreciation and cash flow) knowing that I'm a full time concrete contractor and I develop 2 family buildings so I'm really busy, but I always used to sell after completing the project.   


**C-**most important, what do you think of mentorship programs,   


**D-** Should I consider going back to school and investing in myself first, I thought of getting a master of real estate development and then just be a full-time real estate devoloper.   


I'm looking to put myself in the community, feel free to reach out if you are around the Tri-estate area. lets help each other
[{"id": "ib154c4", "text": "Gurus and mentors will slurp that milkshake of cash up so be careful..However there are things to be gained from the networking and basic education at their events. From those you can learn syndication and how to scale with partnerships.\n\nBecause of a possible down turn I'd be planning on holding 1/2 of that cash and using $250k to get started. I'd also be catching up on how to raise capital from LP investors to augment that money. \n\nSpread the risk with other investors and don't get over your skis trying to get in..the economy is a bit jacked right now and developers chasing to get product out could land right in the middle of a downturn.\n\nBetween MF and strip malls, I'd be leaning towards MF. You'll find more investors and have an easier time leasing up as well as selling. If you can build to B tenants and keep rents lower even better. That will be difficult in most places though because of construction costs.", "replies": [], "depth": 1}, {"id": "ib1l28o", "text": "In terms of development, this is what you could do\u2026500k of funds should be able to help you raise 4.5m in LP investor money that would allow you to then invest in a project at most that\u2019s $20m in size. You\u2019d have to get a 75% construction loan of $15m and you\u2019d have to make sure that your LP Partner\u2019s have a networth that would allow for a loan this size.  And a project of this size should hopefully appraise at $25-28m (this is super general ballpark figures and would depend on the type of development project, location, etc).  1 year to plan and permit, 18 months to construct, and 1-2 years to stabilize.  Near end of construction loan, you\u2019d refi into a mini-perm and then refi again at stabilization.  Should serve you well.  \n\nWith the LPs, keep 40%-50% of the SPV you create to develop the project as the sponsor/borrower.  The LP can have the rest as their share of the project. Now you took 500k and turned it into close to $4m or so in equity over about 4+ years of the overall project (after the debt has been netted out and your % of that is calculated) and you get part of the NOI cash flow each year as well. \n\nI\u2019ll write more if you\u2019re interested in learning more about scenarios such as this one..", "replies": [{"id": "ib1qcho", "text": "I\u2019d love to hear more", "replies": [], "depth": 2}, {"id": "ib1yw0e", "text": "I am all ears, I was always on the other side of the table, project mangment and construction\u2026 I\u2019ve done 18 stories buildings before but never went over the finance side of them. 4.5 mill seems good I have a deal that it\u2019s 64 Aprtment on 55k a key that could fit with it.", "replies": [{"id": "ibed4h2", "text": "So a couple additional points I'd like to add.  OP has the background and experience for construction and building the project, permitting, etc.  It seems that the only aspect of the development that they may be missing is the set-up of how to source the funds, set-up the deals, etc.  And with a solid deal-attorney, to help set-up the business side of the development and build the partnerships with investors and debt with lenders.  \n\nNow, the original post also mentioned mentorship programs and such.  I'd be vary vary wary about programs that promise your success in return for money.  What you need for a successful development is to bring all the necessary skills and players to the table.  In the areas where you do not have the necessary skills, you need to bring other people in your place to make up for what you don't have.  In the meantime, you still need to bring value to the table (or else, why would someone want to work with you?).  So you either need to bring the money, the knowledge, etc. \n\nIn board service (being a board of director for nonprofit companies), there's something known as the Three T's: Time, Talent, and Treasure.  As a nonprofit board member, you give your time by attending meetings and being parts of committees, with talent you bring in your skills and add value or you bring in a network that is able to help bring a solution, and with treasure you donate yourself and/or you help with fundraising.  In a similar way, you need to bring something of value yourself to the project.", "replies": [], "depth": 3}], "depth": 2}, {"id": "ib23z09", "text": "So I had someone post a comment reply to mine above and then deleted it (I\u2019m guessing because it could have come off a bit negative?).  They said that no-one would invest money into a project as an LP unless there was a track record and that\u2019s very true. You either need to know them very well or have a solid track record to show that you have the ability to cross the finish-line.  I personally know equity investors who have funded a residential development of a few million and received 70% of the deal.  This developer was new to the development scene themselves but had knowledge and experience in the industry, though no track record of finished projects, so they had to give up more ownership of the deal.   \n\nSo you need three main things to be successful \n1) skill-set and aptitude\n2) experience and a resume of success\n3) ambition and cultural fit \n\nIf you aren\u2019t able to demonstrate the experience, you will have to put up more money (skin in the game) and so you\u2019ll have to put up more of your own cash OR you will have to give up even more of the deal to the investors to make up for this.  I\u2019ll write more soon (headed into a meeting) and clarify some of these points.", "replies": [{"id": "ib2lp0d", "text": "Wow amazing insight thank you for sharing !", "replies": [], "depth": 3}], "depth": 2}, {"id": "ib2neg4", "text": "For a brand new investors that doesn't know what they are doing and no track record, there will be very few lenders will to lend to this person and very few LP willing to write checks to this person. I'd recommend starting smaller to build up a track record and experience. \n\nThis recommendation is to go all in on their 1st deal with no real reserves if things go really bad which definitely can happen heading into a downturn or doing their first deal and not having experience to identify major issues.\n\nEdit. Saw OPs project management background so he does know how to identify issues, but still hasn't done all the steps from getting initial financing to sale or refi upon stabilization.", "replies": [], "depth": 2}, {"id": "ibeg0fj", "text": "So in-case I wasn't clear about how some of these funds come up, usually you need to bring in about 10% of the equity.  That is, if you have a $20m deal, you could likely find a loan of 75% LTC so that means you would get a $15m loan.  Now,  you'd have to raise the remaining $5m in equity.  No matter who, most LP investors and even most lenders would appreciate having the sponsor have about 10% of the equity in as their own skin in the game.  That means that $500k would be enough to bring in an investor for $4.5m for an overall project of $20m.  But if this is your very first project, you may wish to start smaller.  Perhaps do a project half that size?   Just so you have enough funds and cushion should you come upon any challenges.  \n\nMore than anything, first model out the project to make sure it pencils.  Find the general cost structure that you plan to have for the project and what you plan to build.  This will give you an idea of how much loan you might be able to secure and what your equity requirements for the project will be.  From here, figure out what the project will be worth.  Once you have this, start looking for land.  Once you find the land, you have two options: you can tie up the land with an option for a small fee while you search for an LP or GP partner to join you OR you could reach out to the land owner and ask if they would be interested in partnering with you.  They would contribute the land to an SPV entity that you create in return for a % of said entity.  You can determine how much to give them based on the overall numbers of the project. \n\nI don't recommend using your entire $500k (or the 10% you're putting in) for the land because you need funds to be able to get drawings/plans and the permitting.  You're better off being in control of the land for a $5k-20k option fee and then be able to continue to pay the architects/deisgn fees, etc, than to spend all your money on the land and be stuck until you find an equity partner to continue spending and keeping the project moving forward. \n\nRemember: nobody says \"no\" to a good deal.  And on your earlier deals, you may have to give up a little bit more of the profit to make-up for the lack of track-record or how much money you're going to put into the deal.  But after a project or two, you'll be well on your way to being a developer.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ib1qpyx", "text": "Do you have real estate experience,choice D or going to work with a an experienced principal is probably your best bet if you want to get into development and have no experience", "replies": [{"id": "ib1z5af", "text": "I have extensive experience in construction and permitting, I\u2019ve built before over 1 million Sqft gross between storage units and apartment buildings and even an embassy in Manhattan,,,  I\u2019m trying to switch to the less headache side of the equation.", "replies": [{"id": "ib2bdix", "text": "You can either go smaller for first deal and get a track record as a principal, JV, or Syndicate a project as a GP. You can also be an LP. If you want to try to develop you can but it\u2019s best to partner on your first independent development unless your comfortable with the entire process mistakes in development are often best learned with someone that has done it before and can avoid common pitfalls otherwise it gets expensive very quickly.", "replies": [], "depth": 3}, {"id": "ib2rrjc", "text": "Lol. It isn't less headaches, it's different headaches. You are switching from project management to finding lenders and capital, finding and overseeing property managers, and evaluating your investment plan vs budget and explaining going over budget to your investment partners.\n\nI would recommend trying to network and partner with some other small investor to learn your first deal and start very small. You have your skill set of construction and entitlements, but unsure if you know the insurance and financing structures needed to do a ground up or value add investment.\n\nYour budget of $55,000/unit apartment acquisition indicates you are likely looking in rural or depressed economic areas. These are the last areas to recover  financially years after a recession. That could also mean years before your investment recovers it's value.\n\nI would recommend starting small with a 5-50 unit apartment property. Acquired in an area that longer term has seen population increases. Do a value add investment where you are renovating the units to drive up rent. Another way to drive up rent is switch utilities to individual tenants and pass back RUBS. Lots of old buildings still have free steam heat and the landlord is paying a fortune for the people that keep their windows open with the free heat! Switching to individual furnaces paid for by each unit is a big boost to NOI. Partner with someone that has done this before so they can help you with aspects of the business you don't have experience. Although you could probably buy and renovate all cash with some of these smaller acquisitions, you should take out a bridge loan and refinance in to a term loan upon completion so you start becoming familiar with the bridge and term loan lenders in the industry and the rates they are offering. \n\nGiven your experience with entitlements and development, maybe doing a small ground up apartment development could also work. I think value add refi is less risky because you might end up with a low leverage loan or low sale price upon completion. This is especially true right now with rates going up.\n\nMost importantly is to set aside lots of cash in case things go wrong so you can stay in the game. I would recommend only risking up to $250,000 of your personal equity on your first project. It is easy to blow through that 10% budget contingency on a project and blow through the bank minimum 3-6 month loan payments needed as proof of liquidity required when things start going bad. Your reserve cash will be much cheaper than trying to find an investment partner that knows you are in trouble on a project and may lose it all to a foreclosure. It is also much cheaper than the high rates of hard money lender that will be one of the few people willing to offer you a 2nd bridge loan when your renovations take longer than the term of the bridge loan.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ib270gw", "text": "Just start with one small project and do it yourself start to finish. You\u2019ll figure it out haha", "replies": [], "depth": 1}, {"id": "ib28g4f", "text": "I would look into the CCIM program. It\u2019s probably about a $10k investment and does a pretty good job of covering all the bases. Plus they offer a mentorship program for people who are new to real estate. \n\nJust for context, I\u2019m in the program now.", "replies": [{"id": "ib2phk3", "text": "This may be a dumb question, but do I need a Real Estate License to get a CCIM designation?  I have a RE portfolio, and feel it could serve some use to credential and go in to that network.\n\nthanks", "replies": [{"id": "ib2qnbu", "text": "No the only requirement is the portfolio you need to submit. I kind of forgot about that when I suggested it to be honest. I don\u2019t think there is any expiration of the class work while you work on your portfolio though.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ib2dr0k", "text": "A. Any decently reviewed books online can be ok starting out. Maybe read just 3 or 4 of them. \nB. Multi family. The risk of commercial assets like retail and office is just to high for a first time buyer. \nC. Bullshit 99.9% of the time. Real mentors are found naturally not at the local community center. \nD. Going to school is a fine option but it\u2019s not going to be a substitute of real world experience. \n\nMy recommendation is to buy a multi family building 5 units plus getting LTV financing. There\u2019s not any construction risk and you\u2019ll generate cash flow to maybe help with going to school and other stuff. Owning this building for just a year will be an amazing teacher of just what hands on ownership is. From there and after going to school you\u2019ll have a better picture of what real estate really is and what you want to do.", "replies": [], "depth": 1}, {"id": "ib2f84m", "text": "Honestly you are in a great spot. What I\u2019d do in your position is reach out to a group in your area that does whatever you are interested in well. \n\nDon\u2019t tell them how much money you have obviously just tell them you are interested in the business and would like to learn. I\u2019m not sure how old you are but internship might sound silly but it\u2019s far from that. \n\nOne of the best groups in my city has a partner that basically started as an intern at 47 years old. He was an entrepreneur that owned a couple successful businesses. He sold them and was sitting on some cash. He started out by investing with the group but he told them he wanted to come on and work full time. He effectively was an \u201cintern\u201d haha but he did not need to worry about getting paid he just wanted to learn.", "replies": [{"id": "ib2kaap", "text": "I hope I can do that but I can\u2019t stop my contracting business, also I am an engineer. So I think partnering up with someone might be better \n\nBut it\u2019s extremely hard for me to trust someone to that extent, I m at my early 30\u2019s", "replies": [], "depth": 2}], "depth": 1}, {"id": "ib2o43i", "text": "If I were you, I would find 5 projects and throw $100K into each. Ideally you would partner with someone with experience who can teach you everything along the way.", "replies": [], "depth": 1}]