The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
If you’re aspiring to be ultra-successful in real estate multi-family investing, it’s best to start from the bottom and work your way up. When you take on too much, those beginners mistakes can break you and break you out of the market as quickly as you’ve got in. When you start small, you can recover from these mistakes, learn from them, and use them to make your investments stronger in the future.
Richard: I’m sure some people hear of you having a thousand investors and 3000 units and they say “Well, I want to be Brian Burke when I grow up.” in some way, and they want to achieve that level of success and they’re on property number one and they bought a four-plex or they’re looking to educate themselves to become an active commercial real estate investor, or a sponsor, or open their first fund, etc. What would you suggest to someone who does have that aspiration, who’s looking to do it the right way, who’s really looking to be serious about building a substantial platform over time?
Brian Burke: You kind of almost nailed it right there in your question, Richard. It’s really important to start at the level that you are at, and people always want to jump too high. They’ll say “Yeah, I want to invest in 300 unit apartment buildings.” Well, what have you done? “Oh, I’ve never done anything.” Well, it’s kind of like saying you’re standing on the ground, and you want to get on the roof. There’s two ways to get on the roof: one way is you jump, and you jump up onto the roof, and the other way is you climb a ladder. Well, if you jump, you’re probably just going to break your leg. And if you get people that will actually invest with you on that jump, they’re probably going to break their legs, not your own. So, it’s much safer to climb the ladder, and if that ladder means that the first thing you do is buy a single family home and then you buy a duplex, and then you buy a four-plex, and then a 10 unit, then a 20 unit, then a 50 unit, and then a hundred unit, that is really the path to success because everybody is going to make mistakes. I don’t care how much education you get before you start, everybody makes mistakes, and mistakes are always painful. But if you can limit the damage that those mistakes make by having smaller properties, you can survive it. If you make a serious mistake on a 20 million dollar deal which is your first deal, that’s probably the last thing you’re ever going to do in this business. But if you make that mistake on a $50,000 house, you can recover. So start small, build your way up that’s the way I did it, so if they want to do it the same way I did it, that’s the way I would do it.
Richard: Right, right. That’s the same way we’re operating as well.
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