ZARZA We are Zarza, the prestigious firm behind major projects in information technology.
Listen "E07: A Look Into The Buy-and-Hold Forever Strategy with Bernard Pierson"
Episode Synopsis
Ready to invest? If you’re wondering which is better – limited partnership or general partnership – perhaps the best way to answer that depends on which actually suits your goal, lifestyle, personality, or preference. But why not do both?
In this episode, Bernard Pierson, managing partner at a multifamily real estate firm, Equiti Partners, walks us through what it’s like to be a limited partner vs. a general partner.
Born into a family of immigrants from Nicaragua, Bernard is not new to limited partnership and general partnership having experience in both. He has invested in 30 LP transactions across all different asset types of real estate, including mobile home parks, self-storage, industrial, office, and mostly, multifamily. He also transitioned into the more active side of multifamily and has been involved in general partnerships of about 600 units.
Here are some power takeaways from today’s conversation:
A walk-through limited partnership vs. general partnership
Working with in-house property management
Examples of key performance indicators they’re looking at
Viability of a buy-and-hold forever strategy
Ways to get your investors to do a “hold forever”
Finding the right financing option for you
Episode Highlights:
[09:36] Limited Partnership vs. General Partnership
Bernard started with doing limited partnerships through meetings and networking with different sponsors and operators. Most of them were referrals, and some of them were even referred by operators because Bernard wanted diversification in terms of geography and asset type.
Every time he gets a return – say, in two years' time –Bernard would then reinvest it. Sometimes, there are instances where the sponsor chooses to refinance.
On the GP side of things, they buy anywhere from 30 units to 150 units. Although they try to stay above 100 units, they found that buildings under 100 units have less competition. So they have found an opportunity in it even though it warrants a little bit more work on their part.
Some of the key performance indicators they're looking at include occupancy, the number of leads, renewal rates, and budget.
[21:14] Does a Buy-and-Hold Forever Strategy Work?
A long hold period is a great strategy because it becomes a lot easier to manage the risks such as changes in the interest rate or the economy. It's hard to get 10 investors into a “hold forever” strategy or “hold for 20 years” strategy. It’s possible, but it’s going to be very hard.
There are a number of ways to get a number of investors to such a long-term decision, specifically focusing on the return on equity.
[26:00] Why Real Estate Investing is Not 100% Passive
Real estate can be passive, but usually, it’s not really 100% passive. Most people that get into real estate start off fixing and flipping. Then they figure out very quickly that it’s far from passive. Some people also end up doing syndication and soon find out that it's far from passive. That being said, there are ways to do it passively, especially if you're doing a limited partnership.
Resources Mentioned:
Equiti Partners
In this episode, Bernard Pierson, managing partner at a multifamily real estate firm, Equiti Partners, walks us through what it’s like to be a limited partner vs. a general partner.
Born into a family of immigrants from Nicaragua, Bernard is not new to limited partnership and general partnership having experience in both. He has invested in 30 LP transactions across all different asset types of real estate, including mobile home parks, self-storage, industrial, office, and mostly, multifamily. He also transitioned into the more active side of multifamily and has been involved in general partnerships of about 600 units.
Here are some power takeaways from today’s conversation:
A walk-through limited partnership vs. general partnership
Working with in-house property management
Examples of key performance indicators they’re looking at
Viability of a buy-and-hold forever strategy
Ways to get your investors to do a “hold forever”
Finding the right financing option for you
Episode Highlights:
[09:36] Limited Partnership vs. General Partnership
Bernard started with doing limited partnerships through meetings and networking with different sponsors and operators. Most of them were referrals, and some of them were even referred by operators because Bernard wanted diversification in terms of geography and asset type.
Every time he gets a return – say, in two years' time –Bernard would then reinvest it. Sometimes, there are instances where the sponsor chooses to refinance.
On the GP side of things, they buy anywhere from 30 units to 150 units. Although they try to stay above 100 units, they found that buildings under 100 units have less competition. So they have found an opportunity in it even though it warrants a little bit more work on their part.
Some of the key performance indicators they're looking at include occupancy, the number of leads, renewal rates, and budget.
[21:14] Does a Buy-and-Hold Forever Strategy Work?
A long hold period is a great strategy because it becomes a lot easier to manage the risks such as changes in the interest rate or the economy. It's hard to get 10 investors into a “hold forever” strategy or “hold for 20 years” strategy. It’s possible, but it’s going to be very hard.
There are a number of ways to get a number of investors to such a long-term decision, specifically focusing on the return on equity.
[26:00] Why Real Estate Investing is Not 100% Passive
Real estate can be passive, but usually, it’s not really 100% passive. Most people that get into real estate start off fixing and flipping. Then they figure out very quickly that it’s far from passive. Some people also end up doing syndication and soon find out that it's far from passive. That being said, there are ways to do it passively, especially if you're doing a limited partnership.
Resources Mentioned:
Equiti Partners
In God we trust