BAM CEO Ivan Barratt on Real Estate Investing, Failing Early, and Building a Dynasty – a new Podcast summarized
BAM founder and CEO, Ivan Barratt, was recently featured on a “The Real Estate Way to Wealth and Freedom” podcast, which you can find in its entirety here. After listening to Ivan's beginnings in the real estate industry, his experiences along the way, and his tips for new players in the game, we distilled the podcast down to an article that covers many of the bases.
Ivan Barratt grew up with rental properties, performing what he laughingly remembers as manual labor for his father's properties as a kid. Learning that he didn't enjoy manual labor, upon entering college Ivan decided that “owning a lot of real estate would be better than a real job”- then of course goes on to amend what his younger self didn't realize at the time: this is certainly a real job. The humble start of what would later grow to management of over 2,000 multifamily units began in a single duplex – with Ivan living in one side and renting the other. The duplex investment began as an FHA loan with 3% down in a good neighborhood – one of the many lessons Ivan learned along the way being that location matters.
As he grew in the industry, Ivan said that he failed along the way but was lucky enough to “fail small” meaning to make mistakes on smaller deals and be comfortable and more knowledgeable by the time he hit bigger deals. Ivan learned, and points out, that there is usually more capital in one's network than you might think. In 2010, Ivan formed Barratt Asset Management and always had his focus on multifamily properties. Distressed properties were a good deal during the great recession, and Ivan amassed knowledge about investing with partners and kept growing. BAM helped Ivan to build the current successful management platform and also to build his own credibility. Almost all of BAM's team members work in some form of property management.
The focus for BAM has always been on multifamily: recurring cash flow and the potential for long term wealth development make this an attractive property class. It wasn't long before BAM found its niche market. Ivan is big on “workforce housing” - sticking with 600-1,200 unit B and C class properties in good locations. According to Ivan, if you maintain the property well and treat renters well, these investments tend to result in low turnover. As much as what he looks for, Ivan knows what they don't do: BAM doesn't specialize in high-end, retail, industrial, or bad inner city locales. As he points out, even if a property location looks good on paper, if the school district is bad and you can't get families into the units, that's one deal that he'll steer clear of. Despite having a solid formula, Ivan admits that there are probably at least 150 deals they look at just to find the 1 solid deal. He says that inexperienced investors don't necessarily need to scour that many deals, but it's a red flag if there aren't plenty of deals to compare.
Ivan talks about how BAM prefers tertiary markets when looking for their ideal properties, and cities like Bloomington and Evansville are great examples. Indianapolis is what Ivan calls a “hot market” right now, and there is plenty of competition for deals in the city – making smaller markets more desirable. One interesting fact that Ivan shared on the podcast is the role that HUD plays in many BAM deals. As he said, a lot of people automatically assume that he's dealing with Section 8 housing when, in reality, HUD can be a great way to finance. Ivan does acknowledge that HUD requirements are a hassle – he's audited every year, has to provide monthly financials, and more – but the rewards can be “well worth it.” HUD can provide a 35 year fixed note which will, as Ivan pointed out, “weather any economic storm” - which is attractive to almost any investor.
Ivan also gives some great information to aspiring real estate investors. According to Ivan, although he's become very adept at it over the years, he doesn't love sales; however, anyone looking to piece together financing needs to become comfortable risking rejection and doing it repeatedly. Ivan recommends reading or listening to some real estate and finance material, but spending even more time learning about sales and developing networking skills. Knowing what you're good at helps – if you're hopeless at sales but great with your gut on deals, then find a partner who can handle the networking (which is how Ivan describes a relationship with one of his partners). Ivan talked a bit about his own formula for success which includes building a solid team at BAM, comprised of property, accounting, construction, and other experts. He also recommends paying more for quality employees. Ivan leaves listeners with a book recommendation, saying that Maverick Real Estate Financing... by Steve Bergsman is what he'd tell anyone in this industry to pick up.
Host Jacob Ayers noted that Ivan's success was evident. BAM is poised to have over 2,000 units and Ivan highlighted one of his most successful deals: a C class property about 45 minutes outside of Anderson that, after two years, is set to double investor money and had distributions every quarter. Ivan answered Ayers's question about his long-term goals as well, saying he hopes to continue his formula, growing to 20,000 units, and expanding geographically. Ivan said of his motivation that it's to create a legacy, a chance at dynastic wealth, and to continue charting his own course. Going from living in half a duplex to over 2,000 units and $145 million assets under management, we'd say the BAM formula is definitely worth following! For much more in-depth information from BAM founder Ivan Barratt, be sure to check out the podcast link above.