Arguments for/against personal mentors and an opportunity?

[jeromedawg]

Hey all,

Been visiting BiggerPockets and started attending at least one local REI meeting and the common recurring theme is "find a mentor" or "go in on a deal with a seasoned investor who can mentor you" etc. I know some here may object to feeling the need to have an in-person mentor who will help/hand-hold along the way. But I just wanted to get some of your guys' thoughts on the matter: those of you who have had mentors, have mentored others, or who have completely gone rogue...

On that note, I was curious if any of you have looked into or done any REI in retirement communities. There's a fix and flip opportunity with a local investor in my area to invest in retirement real estate with $50k down and a 10-12% return of the profit on top of your initial investment back with an anticipated 6 month hold. They basically buy distressed condos in a retirement community, rehab them, and then sell. The catch is that the investor either needs to be 55+ or needs to know someone 55+ who can take title on the property. But they will get $5k for doing that alone (taking title). Additionally, you can be as involved (or not) as you want in the entire process from making the offer to selling it. Either way, the investor handles pretty much *everything* to the point where if you really wanted to be 100% hands-off, you could be. I would want to do it for the involvement aspect though.

The guy doing all this is the organizer of the REI meeting I've been attending and seems legit (30yrs of experience) and many other investors at the meeting seem to like it as well - no hard sales or anything and I really think he wants to setup an environment where investors can network and share deals without having to pay membership dues... (so they do solicit for sponsors at the beginning of the meetings). Otherwise, as far as deals, he's just one of those things where he lays it out there and ask for more info if you want. But he seems like he could be a good hands-on mentor as well.

I know, some of you might be saying "you might as well invest $50k in index funds and watch it grow just as fast or faster etc" or "you might as well put $50k into a REIT" etc etc etc... - my motivation for this isn't just the money and returns though. It's for 'guided' hands-on experience as well as networking. My long-term goal is to buy and hold long term (and sell where appreciation makes sense... even BRRRR). But either way, I think learning the fix n flip part would be invaluable to getting my feet wet.

Other than that... thoughts on any or all of this?

[Cwadda]

If you're starting out, I'd recommend looking into buyer's agents for a mentorship opportunity. Realtors call for a service fee, but usually the seller of the property allocates 6% (3% each to the buyer and seller realtors) so your buyer's agent would be compensated by the seller, not you. On that note, ask around for investor friendly agents. You'd be surprised how many agents out there have almost no knowledge in real estate investing. I would interview at least 3 investor-friendly agents, and go with who you feel most comfortable.

On that note, I was curious if any of you have looked into or done any REI in retirement communities.

I haven't looked into retirement communities and I know this can be a solid market, but from everything you've laid out I would have several questions.

They basically buy distressed condos in a retirement community, rehab them, and then sell.

To me, distressed condos is an oxymoron. If condos are in really rough shape, it makes me question how healthy the condo association is. Buying an outdated condo in a healthy association and making cosmetic changes is one thing, but if there are lumps of condos for sale and the exteriors are falling apart, that's a big red flag to me. Remember, condos charge monthly HOA fees, and have the power to levy even higher fees for special assessments.

The catch is that the investor either needs to be 55+ or needs to know someone 55+ who can take title on the property.

The problem I have with this statement is why buy a property where you only have one exit strategy? If I'm buying an investment property, I want the ability to sell it to a wide demographic (millennials thru baby boomers). Not only that, but also I want to be able to rent it for cashflow if the market turns sour and you can't sell it for 6 months. See what I mean?

That being said it'd be good to interview this guy, explain your situation, and see what he says.

[jeromedawg]

If you're starting out, I'd recommend looking into buyer's agents for a mentorship opportunity. Realtors call for a service fee, but usually the seller of the property allocates 6% (3% each to the buyer and seller realtors) so your buyer's agent would be compensated by the seller, not you. On that note, ask around for investor friendly agents. You'd be surprised how many agents out there have almost no knowledge in real estate investing. I would interview at least 3 investor-friendly agents, and go with who you feel most comfortable.

The real estate agent my parents and I went with to get the condo I'm in is also an investor and a commercial real estate lawyer but I think she's relatively new to the game for investing for passive income and is still building out her portfolio. I have another friend who's an agent but I don't think he's an investor. I may try to ping the both of them to get some leads. The guy who ran the meeting was a mortgage lender for a long time but has his RE license and is partners with a couple other guys with even more experience. It's basically a 3-4 man operation with that group, and the like to work one-to-one with investors.

To me, distressed condos is an oxymoron. If condos are in really rough shape, it makes me question how healthy the condo association is. Buying an outdated condo in a healthy association and making cosmetic changes is one thing, but if there are lumps of condos for sale and the exteriors are falling apart, that's a big red flag to me. Remember, condos charge monthly HOA fees, and have the power to levy even higher fees for special assessments.

Yea I'm not sure - I haven't researched too much into this retirement community but it seems the demand to live there is relatively high. But it also seems the turnover can be high too. When they say "distressed" I assume bank foreclosed, etc... unless "distressed" carries a different definition though but could it also mean that a person/couple dies, has no trust or estate, and the govt/bank seizes their property?

The problem I have with this statement is why buy a property where you only have one exit strategy? If I'm buying an investment property, I want the ability to sell it to a wide demographic (millennials thru baby boomers). Not only that, but also I want to be able to rent it for cashflow if the market turns sour and you can't sell it for 6 months. See what I mean?

The catch with this is that it's probably the most affordable area to live in in SoCal if you *want* to retire and live here. It's a pretty niche market and likely one of the more 'affordable' ways to get started out investing in flips here in CA. Again, I don't see this as much as an opportunity make big bucks (because it isn't) as it is to network and learn the process from a team of guys who knows what they're doing where the 'bonus' of the payout is icing on the cake. I guess it's a matter of the amount of risk you want to take - dive headfirst into a deal you thought you analyzed and did all your HW on correctly solo and end up losing money or making much less off cashflow than you thought because you didn't factor certain things in (I've heard too many stories where the first buy is always not as good as someone thought and is often a worst buy - perhaps it's just a matter of tempering expectations then...). Or partner with someone who knows what they're doing with smaller risk and a set return but learn the trade while doing it.

[Cwadda]

Take anything I say about your market with a grain of salt because I'm in the cold state of CT, my sister lives in SoCal and the markets are incredibly different.
These are just the questions I would raise given what you've explained. Always good to question everything, not to the point of paralysis and taking no action but to become more savvy in RE investing.

[Another Reader]

If this investment were so great, the seller would find capital elsewhere and keep the profits.  Ever hear of straw buyers?  That's the $5k buyer.  You want me to take title to a property that I don't control?  Ummm... no thanks!  Run from this "opportunity."  This is not an investor association, it's a way to generate leads for these folks.

If you got this information in writing, in your shoes, I would forward it to the District Attorney's office.  There should be someone in charge of investigating real estate schemes that might want to have a look at this one.

[jeromedawg]

If this investment were so great, the seller would find capital elsewhere and keep the profits.  Ever hear of straw buyers?  That's the $5k buyer.  You want me to take title to a property that I don't control?  Ummm... no thanks!  Run from this "opportunity."  This is not an investor association, it's a way to generate leads for these folks.

If you got this information in writing, in your shoes, I would forward it to the District Attorney's office.  There should be someone in charge of investigating real estate schemes that might want to have a look at this one.

Interesting. Never heard of this and just started googling and reading up on it. It seems these 'straw man' schemes are usually in the context of when the investor needs someone with good credit to take out a mortgage loan. This scenario seems slightly different (doesn't mean it isn't shady like you said though) but the person of 55+ would take title and qualify for a "private" money mortgage (presumably one taken from the investor himself). It seems like the premise and intention here is that the use of the 'straw man' would be to get past the age restriction. I guess there's a fine line here - obviously using a straw man for obtain a mortgage loan but not living somewhere is wrong. Is using a straw man for the purpose of skirting an age restriction (with a private money mortgage) something that would be considered illegal or unethical? Not trying to start an argument here - this is an honest question because I'm curious.... a form of indirect vetting if you will.

[Another Reader]

Ask your district attorney.