Business Insider Article

Christopher Competiello Sep 25, 2020, 7:05 AM

Bruce Petersen, a successful real-estate investor and author of “Syndicating Is a B*tch,” knew it was time to throw in the towel on his conventional 9-to-5 career when each day became more and more demoralizing.

“I kind of fell into retail and was there for 18 to 20 years,” he told Business Insider. “So I did that until I just couldn’t do it anymore.”

Petersen had officially burned himself out over the years, as he slogged through 90- to 100-hour weeks in managerial positions at Home Depot, Lowe’s, and Bed Bath & Beyond. At 42, he decided he’d finally had enough.

“I hated everything about my life,” he said. “I didn’t have a girlfriend. I didn’t have a wife. I didn’t have kids. I didn’t even have a pet. I had nothing. And all I was doing was working.”

For the next year, Petersen found himself searching for his next venture while reevaluating his life choices and purpose. For Petersen, it was a time of reflection.

But that all changed thanks to a serendipitous online search. Real-estate investing was now on his radar.

“So I said, ‘Well, let me figure this thing out,'” he said. “I just did a search for a mentor in central Texas, which is where I live. And I found somebody that would teach me how to do it.”

Petersen’s mentor would play an integral role in his evolution as a real-estate investor moving forward. It was through the mentor’s advice, training, and expertise that Petersen developed the confidence to make a big leap into the arena of real-estate investment.

“I converted my Roth IRA, my traditional IRA, and I pocketed it,” he said. “Paid the taxes, paid the fee, the penalty, and went all in.”

Fast-forward to today, and Petersen’s portfolio encompasses just under 1,000 units in the central Texas area.

Here’s how he did it.

A scalable strategy

While most prospective real-estate investors contemplate entering the space with a whimper, Petersen decided to enter the fray with a bang. Instead of following more-traditional paths — like slowly building a portfolio of single-family rental properties, or methodically conducting fix-and-flips — Petersen set his sights elsewhere: a 48-unit multifamily apartment complex. 

Petersen’s aha moment arrived after he expressed interest in establishing a portfolio of single-family rentals. A mentor told him the idea was “stupid” and taught him the “virtues” of multifamily investing. Today, Petersen refers to the approach as “head and shoulders better” than single-family rentals.

Among the advantages were scalability, profitability, ease of management, and predictability. All served to make Petersen’s final decision that much simpler. 

From that point on, Petersen knew a syndication strategy would be his bread and butter.

For the uninitiated, real-estate syndication equates to crowdfunding for institutional-quality deals.

It’s a strategy Spencer Hilligoss, the cofounder of Madison Investing, leveraged to achieve over $350 million worth of transactions and own a piece of over 3,500 units.

Here’s a breakdown of the figures behind Petersen’s first 48-unit pickup:

Purchase price – $1,625,000

Cash raised from investors – $460,000

Petersen’s contribution – $115,000

Despite having no experience and no track record at the time, Petersen was able to attract investors, 14 in total, to join him in his venture by building trust and a rapport through a real-estate meetup group he’d established and nurtured. What’s more, he put up his own dollars, signifying his confidence and commitment to the project. 

“It was incredibly important to me to be the highest-dollar investor,” he said. “I just had the conviction to jump out there and try because I knew I had smart people around me that were there to lean on when things got a little weird, or if I got into a situation that I didn’t know what to do.”

That initial deal opened the proverbial floodgates for Petersen, and he’s been scooping up properties at a rapid pace ever since.

Today he’s on the lookout for properties that will garner between 6 and 7% of cash flow within the first year of operation and 9 to 10% over the whole holding period of between four to seven years. 

He has no plans of slowing down anytime soon.

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