I frequently share the story of how I got started in real estate investing. It's something I enjoy doing, because new investors are sometimes encouraged to see that it is possible to escape the rat race, if that is what they aspire to do. Plus, it reminds me of how much work it really is and how long it has taken.

I bought my first rental property in 2004, but it wasn't until 2010 that I became very serious about real estate investing. While I was still employed full-time, I partnered with a general contractor on two residential development projects, and then it was in 2011 I started buying rental properties. My journey has been much like playing Robert Kiyosaki's popular game CASHFLOW®. I started by doing small deals, then gradually moved on to doing bigger deals. I escaped the rat race in January 2015 and acquired a 64-unit apartment complex later in the same year. So far, it has been an exciting and rewarding journey. And, my collection of smaller deals gave me the experience and financial strength required to graduate to doing larger multifamily deals.

But, looking back, there is at least one thing I would have done differently. While I was building my portfolio, I would have partnered with a sponsor on a larger deal. This would have accelerated my journey significantly, because I would have been able to piggyback on someone with more experience and financial strength.

One of the greatest dependencies to doing a commercial deal, such as a large apartment complex, is getting approved for the loan. Commercial lenders have strict underwriting requirements—not just for the property, but for the borrower as well. They typically want to see three things in the guarantor:

Net worth equal to, or greater than, the loan amount;
Enough post-close liquidity to cover 12-months of loan payments;
Past experience of owning and operating similar assets (this is the most important requirement, and an area they apply much scrutiny).

Moreover, Sellers understand the commercial underwriting requirements, and they prefer to go under contract with someone they know is capable of getting to the closing table. So, it's unlikely an investor will be able to graduate to larger deals without first satisfying these requirements.

However, an investor can jump into doing larger deals faster by partnering with a sponsor. A sponsor is someone willing to be a guarantor on the deal and meets all the requirements. Once you have a couple larger deals under your belt, you will have much greater financial strength and the experience to do larger deals by yourself.

You can certainly take a journey similar to mine and gradually do bigger and bigger deals on your own. However, I know multiple people who began investing with a sponsor around the same time I got started, and they have many more large deals under their belt today than I do.

Finding a sponsor doesn't have to be a difficult task either. It may be as simple as reaching out to the person who owns the larger deal down the street from you. Or, you may know of someone else who has already done a larger deal and has the financial strength. Either way, you might consider partnering with a sponsor, if your long-term plan is to someday reap the rewards of doing larger deals. Obviously, I prefer the advantages of investing in multifamily properties, but there are lots of ways to make money in real estate, and there are large deals in every category.

ABOUT THE AUTHOR
Mark Walker has been an active real estate investor since 2004, so he brought a wealth of knowledge with him when he founded Luxmana Investments in 2011.

Though he started out as a part-time investor—holding a full-time job in high tech—he fully transitioned into his passion of real estate investing in 2015.

Mark now dedicates most of his time helping new and experienced investors build wealth through residential, multifamily and commercial real estate.

Learn more about Mark and Luxmana Investments at www.luxmana.com.