RG 077 – Top tips to attract the right type of investors to your deals with Brian Burke
About Brian
- Brian is the President and CEO of Praxis Capital.
- He started investing in 1989 and has since acquired 700 properties.
- Brian has also written his own proprietary software to help with acquisitions.
Nuts and Bolts
When Brian was 20 he was working in a grocery store and didn’t own his own home yet, however he bought a mobile home and rented it out. This was the start of his real estate journey and now he’s head of a company that has $100 million in assets under management. The mobile home was a way of testing the water before jumping in real estate completely, but as it was successful he flipped houses throughout the 1990’s while working a day job in law enforcement. This continued until he realized that being in a day job was costing him more in lost revenue and time then he was earning in that job. At the time he didn’t have a large amount of money for buying assets and so he raised the money from his co-workers. He put on a presentation at work after he submitted his 2 week’s notice and left the meeting with 28 investors.
Brian discusses that he didn’t have a specific mindset when going into syndication originally, he simply had no money and therefore no choice. However now he says that you need motivation to juggle a job, a side hustle and a life – you can have all the advice in the world but you need motivation. There’s no quick and easy way out of the day job and the people who tell you there is an easy way out are trying to sell you something. To make syndication work Brian recommends managing expectations of the investors, a common mistake is over promising on return and so it’s beneficial to take a more realistic approach. Brian takes a very conservative approach when underwriting, making sure to account for any possible financial bad patch. Underwriting to attract high capital can be done in two ways; throw out a high rate of return for people who aren’t going to look at the details, or leverage your skills system and track record. If you don’t yet have a track record, then work on attracting capital from the people around you instead.
Brian’s work started in the Texas markets and although he still tried to focus on these areas competition is high and so he has expanded into the Phoenix market. He brought on three new team members last year to take the company national and these people have owned property in nearly every US state. His focus now is on mostly Southern and South-Eastern states. When looking at CAP rates Brian underwrites to an increasing CAP rate to account for a growing purchase price. He underwrites to a 10th of a percent of the inflation factor per year, this way he account for any potential problems before they arise. It’s important to get these projections correct for investors because if the results come in under the projected returns the investors will be very unhappy.
When looking at breaking into real estate investment Brian advises that it’s actually two businesses. Raising money for the purpose of buying a multifamily is one side of the business and the real estate finding, buying and underwriting is the other side, and these two are completely separate. Raising money is all about relationships, making people comfortable and using your judgement. Brian advises that people work on building their track record within their means because people aren’t investing in the real estate; they’re investing in you.
Top tips
- Most important habit – Showing up to the office every day
- Most influential person – His largest investor that took a leap of faith and allowed him to take the next step in his business.
- Most important tool – The Excel based model that allows him to make informed decisions about properties
- Most important mistake – Not appreciating the importance of economic conditions and their effect on vacancies.
Contact – praxcap.com