Bridger Pennington compares two ways to scale a real estate portfolio fast: raising capital deal-by-deal through syndications, or raising it once through a fund structure to buy dozens of properties at once. Funds close faster and win more bids. He suggests starting with syndications to build a track record, then moving to a fund.
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Welcome back to the channel, people. Today we're going to talk about how to buy real estate with no money. So let's go down to the whiteboard of truth and justice here and dive right into it. Now, a lot of people have a dream of owning large amounts of real estate, which I totally understand, and I have that same dream as well. Now, most people go about it in an interesting way. A lot of them want to buy their own home, and then they're going to slowly make money over time, and they're going to maybe buy a duplex, and then maybe they're going to— hopefully one day they get a fourplex and they scale up, and maybe they turn that into 16, and then they turn it into 32, And this, you know, maybe one day they get to 100 doors, and this, you know, in most people's strategies takes them 30 years to do as they slowly work their way up the chain and ladder of real estate. Now, that's great and dandy and really cool. However, what if I told you there's a whole nother way that you could actually go get 100 doors right now and not have to wait the 30 years to do this? We've actually helped dozens and dozens of people do this exact same thing. It's not hogwash, it's not whatever. I've actually launched 3 investment funds myself, and I'm kind of teasing what we're getting into. We're going to talk about this strategy of raising syndications or funds and be able to allow you not do this long process but be able to get into 100 doors right now. Now, one of the other main reasons you want to do this instead of going after the duplex or fourplex— I actually recently went and bid on a fourplex. I showed up to the property, there were 50 bids. Placed on this property. It was about $430,000 listing price. 50 bids, 30 bids were asking price and 15 were full cash and above listing price. I think it ended up selling for like $575,000. Okay? Because everyone and their dog can pull a little bit of money together with their grandma, their cousin or brother-in-law and afford a duplex. You have lots of bidders on duplexes or fourplexes. You show up to another bid on a 100-door apartment complex and you probably get 2 to 3 bidders. Because there's less competition, it allows you to find better deals. So firstly, that's a main reason why you would like to go bigger rather than smaller. Secondly is you get economies of scale. When you have 100 doors, you can hire a full-time management company, have a person on staff, an assistant to help you run this because you have enough rent roll coming in every month to justify hiring those people. When you buy a duplex or a fourplex, it's great, but also your Saturdays and Sundays and weekends and holidays are now spent managing this fourplex and duplex. Alright, so let's dive into actually how this works. Now, I'm going to show you 2 models and both models work and are successful. I want to show you with how most people are playing this game a lot differently than you and me that play this mom-and-pop little game. Let's buy a duplex, fourplex. This is how the big players are going after 100 doors or even 1,000 doors. So, there's 2 different models. Number 1 is syndication. Number 2 is the fund model. So let's start with the syndication. How syndications work in the most basic sense. So imagine you have a house flipper. They find this great little house. It's actually how a lot of people do duplexes and fourplexes. They think, this is an awesome house. We got to figure out how to pay for this. We use our own money, your money, use the bank money, you use hard money lenders, or you use small investors' money, and you pool that capital together. You set up usually an LLC. That money flows into the LLC. You then go flip the house or you buy the property. And then once you finish flipping that house, you pay back your hard money lenders or your bank or whoever it is, and you take a little spread and then you start over. We actually had a guy in our group, he would flip about 4 houses a year doing this model, which actually was great. He made a good amount of money. He made about $50 grand per flip, which is really good, actually $200,000 a year. However, we then taught him the fund model, which I'm gonna explain in a second. He went from flipping 4 houses a year to 72 houses the next year. Kind of cool, right? Again, because he had economies Before we move into the fund model, this is what I call the syndication loop. This is what a syndicator does. They syndicate capital for one deal at a time. So you could even do this for a 100-unit apartment complex if you found one. You would find it here. You then would go find bank or hard money lenders or investors or your own money. You'd put it together into some kind of legal structure. You then go buy it and you put it together. So this actually does work and does very well. The problem is sometimes you'll get beat out because of what I call a fund. Now funds operate similar to syndications. I'll use blue here to kind of give you an example, okay? So funds, they— you find great deals and properties, you go raise capital, but instead of raising on a deal-by-deal basis, funds raise capital once. They set up their legal documents and structure once, and from that they can go buy dozens or even hundreds of deals out of that fund structure. So for example, in a fund, you would raise the capital here, it flows into your fund, Your fund can then go buy deals and actually as many deals as you'd like. When those deals make money, it flows back to the fund and you split the returns between your investors and yourself. You're over here, the general partner. That's how you do this. Now, like I said earlier, funds a lot of times will win the bid. So for example, I was talking to a fund manager. He managed a $4.5 billion real estate fund and he was telling me, Bridger, We actually go and bid on $100 million apartment complexes and we aren't the highest bidder yet. We will win the bid. And I'm like, what do you mean? How does that work? He goes, for example, we have a $100 million property. We're going to bid on it. And somebody else already placed a bid at $100 million, but they're a syndicator. So they're going to have to take anywhere from 6 to 12 weeks to get that capital pool together. They may or may not close. They hope they can close. So what we do is we show up and we say, hey, we're a big fund. We've done hundreds of deals just like this. We're going to give you a bid at $95 million. However, we have a fund and we can close in 14 days pending all good traction and financials and everything looks correct that you're telling us. He goes, often enough, we will win the bid over a syndicator that comes in at $100 million. Because winning a bid isn't just about money, it's about terms. And we have an incredible reputation and we have cash ready to go. So, what I tell people is imagine you go to the courthouse and you're bidding on properties. properties that are duplex or a fourplex, do you think you're going to win more properties or less properties when you have a full fund behind you? Probably a few more. And you might have a little more negotiating power against those people that you're bidding against. So again, this is a real scenario. We actually help people do this all the time. They set up their general partner, which is you. They set up their limited partnership, which is their fund, and they go out and buy incredible deals. We actually have in our group have 4 funds now over $100 million. We have 1 fund in our group over $1 billion and 54 funds over $1 million inside of their funds. Now, we also help people do syndications. Syndications aren't a bad idea as well. They actually help you build a track record, are a great way to get started. And again, what I tell people is don't think you have to wait 30 years to do your duplex, then fourplex to get to 100 doors. You can actually do that a lot sooner through a syndication or a fund. If you like this video, please hit the like and subscribe button, comment below, and we'll see you guys in the next video. Bye.
