21 Mar CREPN #188 – Multifamily Investor Lessons from 2 to 2400 Units with Ivan Barratt
The investor lessons learned while growing from 2 to 2400 Multifamily units are many.
Growing up, Ivan Barratt saw his father collect rent checks from renters and recognized that getting paid from renters was a great way to get paid.
After college, Ivan started his career in real estate working for an Indianapolis area developer. While working for this developer, he learned all facets of real estate development, and made a lot of money. His real estate fortunes seemed certain.
When the 2008 crash happened, everything stopped. With the path to easy riches closed, Ivan had to find another way to create his real estate fortune.
Through the Wreckage
When the dust settled, Ivan found himself several hundred thousands dollars in debt. Instead of taking the easy way out, filing bankruptcy and walking away from his pile of debt, he committed to repay all his debt.
To survive the crash, Ivan and his family had to make some sacrifices. Without the big paycheck, they had to reduce their living expenses. They turned their luxury condo into a rental and moved into one of their rentals.
Real Estate sales had provided him a tremendous paycheck, but it could be feast or famine. Recognizing he needed some predictable, recurring income, Ivan got out of development and started a property management firm in a spare bedroom.
Investor Lesson: Live within your means.
Property management gave him the chance to create recurring income, which was great. At the time, there were lots of owners who could not sell their homes and became reluctant landlords. They needed property management.
In addition to creating recurring income, he recognized that property management gave him contact with owners who wanted out. These relations with frustrated owners gave Ivan first dibs on investments, sales and purchase opportunities. This additional income provided him the funds needed to pay off his debts which allowed him to keep his credit and reputation in tact. Ivan credits much of his success to his decision to pay off his debts. Making good on his debts kept him in good graces with the local power brokers. Because he made good, these contacts rewarded him with opportunities he would have missed had he elected to not pay back the money.
Investor Lesson: Make good on your commitments.
Investor Lessons to 2400 units
Where do you start on your journey to 2400 units? You start with the first unit. The crash of 2008 was a humbling experience for Ivan and thousands of other investors. Once he came to terms with his predicament, he realized if he was ever going to accomplish his goal of thousands of units, he had to get the first unit.
Investor Lesson: The first deal is the most important deal.
Ivan credits his father’s interest in motivational books and tapes for helping him with the needed mindset to stay positive. Some that stuck with him; “The journey to 10,000 units starts with the first deal.” “Focus on what has to be done today.” “Do what others won’t today so you can do what others can’t tomorrow.”
Today, his company, Barratt Asset Management, BAM, manages over $300 million assets under management of which $210 Million are owned through Syndication. BAM is a vertically integrated company, providing property management, and syndication of multifamily properties.
The challenge of managing people and working to keep them motivated is a task much more difficult than doing a real estate deal. Allowing the little mistakes to happen and your support staff to learn and grow from their mistakes takes a lot for an owner who is used to doing everything them self. However, it is absolutely necessary if you want to grow.
Investor Lesson: Mistakes will happen and are necessary for learning. Allow for mistakes.
By delegating and trusting others, Ivan is able to focus his visionary talents. He is able to work on the business, and practice what he is truly gifted at, attracting capital and investors.
In order to become a big company, you have to first see yourself as a big business that is currently small. This mental shift is key. You have to create a vision of where you want to go and communicate this to others, employees, investors, clients, etc. Without a vision, you will stay small and own a job at your small company.
Each week I ask my guest what is the Biggest Risk they see that real estate investors face.
BIGGEST RISK: Debt Maturity Risk – If capital markets dry up and you cannot get financing.
How to manage the risk?: Long term financing w/ fixed interest rates – HUD market rate loan with an interest rate lock for 35 years. HUD provides financing up to 85% to cost including: acquisition, renovation, reserves, all in.
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