Hannah Hammond breaks down the "jockey vs. horse" framework for multifamily real estate: the property matters, but the sponsor matters more. Evaluate sponsors on track record depth, how they handled failures, whether they focus solely on real estate, and how much of their own money they've invested. A sponsor claiming zero failures or zero personal capital is a red flag.
Chapters
Investors will tell you that they invest in the jockey, not the horse. What does that actually mean? Well, the horse is your investment vehicle. That's, say, multifamily real estate. The jockey is the sponsor who is operating that investment plan. So that is the general partner, the person that is actually going to go out, find the apartment building to build or buy and renovate. They're going to manage their construction teams. They're going to manage the property. They're running the whole deal. The jockey is just as important as the horse. If you bet on the right horse and you bet on the wrong jockey, you're probably going to lose all your money. Some of the things that are important to ask the jockey or the operator is what is their experience with this asset class? How long is their track record? Have they had any failures? What was their biggest failure and what did they learn from that failure? If they tell you that they haven't had any failures, run. That's a bad jockey, right? You want to make sure that they have a lot of experience in this asset class. They've successfully completed projects like this before and they have a track record to show for it. Another question that's really good to ask a jockey is, are you focused on anything else? You don't want to be betting on a jockey that is also a ping pong player and and is also a CEO and is also all of these other things, you want to be betting on a jockey that does nothing but race horses. Another great question to ask is how much of your skin is in the game? How much of your money is in this deal? And if they tell you they're putting $0 of their own money in the deal, that's not enough skin in the game for me to feel confident in putting my money alongside them. So I always check for making sure that they're putting their money in alongside me, and they can't just walk away from the deal. Make sure to bet on the jockey. Don't just bet on the horse, but both are very, very, very important and equally important. I will bet on the jockey even more than the horse, because an amazing jockey will always find a way to win and will always operate with the most integrity and do whatever it takes to make sure that their investors are made whole, even when things don't go as planned.
