This is an LFI episode and LFI is now part of PassivePockets.
Dan Handford is the Managing Partner of PassiveInvesting.com. Dan is a business owner involved in specialty medical clinics, anatomical model sales, and chiropractic supply companies who got into real estate syndication to help take advantage of the tax advantages to real estate investors. His company has a multifamily real estate portfolio of over 2700 doors worth $380M and is currently closing on their first self-storage deal. In this episode, Dan talks about how to pick a sponsor, debunks the myth about tenants moving to different property types in a recession, investments with multiple share classes and his move into self-storage.
Dan discusses the importance of delegation when managing his businesses and how crucial that was when he made the decision to become a real estate investor and syndicator. He also mentions how hiring a mentor enabled him to feel comfortable with his first few passive investments. Dan is still investing passively with 38 passive investments with 14 operators. To find new sponsors, he recommends getting on as many lists as possible to see the content and deal flow from sponsors which will make it clear to you which ones stand above the others.
Dan talks about picking sponsors with a background in business and why that is important. He also discusses how in a recession tenants don’t really end up moving from Class A down to Class B or C assets, they generally move from A+ to A or B to B-, so the assets to avoid are mostly the A+ assets because there is no one to move down to those properties.
Dan discusses the two different share classes that many sponsors are offering now and that it is becoming more common because of market tightening. The Class A shares are more like preferred equity with higher preferred return, but no upside – while Class B shares benefit from the upside at sale which is magnified because the Class A shares do not participate in the proceeds from sale.
Dan mentions that they have moved into self-storage as a new asset class and that this was part of the plan from the start of their business. He has experience from investing in self-storage on the passive side, but he also hired a team of experienced operators to help find, buy and manage the assets. His team see self-storage cap rates are compressing as they are in multifamily, but self-storage has more room to run as the cap rates are currently higher than multifamily. Dan also talks about his Debt Fund which operates as a hard money lender to rehabbers and flippers and pays a 6% return.
Dan mentions an article on his website titled, The Red Flags of Apartment Investing which can be read by clicking on the link.
Podcasts Dan recommends:
Mulitfamily Investor Nation
Storage Investor Nation
Dan also shares his favorite book on passive investing: Best Ever Apartment Syndication Book
To connect with Dan, go to www.passiveinvesting.com and join the Passive Investing Club. You can also find him on LinkedIn through Linkwithdan.com.
If you would like to contact Jim Pfeifer, you can email him at jim@leftfieldinvestors.com or if you would like to find out more about Left Field Investors go to www.leftfieldinvestors.com.
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