How to Vet Great Operators?

Commercial Real Estate Investing From A-Z

What questions should you ask operators who will be managing an investment? Whether you’re a syndicator or a passive investor, it’s important to know what questions to ask in order to vet them properly. Camilla Jeffs, Principal at Steady Stream Investments shares her knowledge.

You can read this entire episode here: bit.ly/3epLwt3

As a syndicator, how do you find good operators for your deals?

One of the keys is finding someone who is experienced. You want someone that has at least four or five years of experience. And by experience, I don’t mean how long they have been in business, but what kind of experience have they had? Think about the quality of experience, for example, a woman I know started her syndication journey as an operator in the last two years. She has already been through a fire in her apartment, squatters, all sorts of things. She is one of the best operators I have ever seen because she’s there at the property, getting into the details, she’s really working hard to make sure that asset is running well. Whereas other people that might be more “experienced”, they may have moved away from actually managing the asset and hired a team. Sometimes the team doesn’t quite do it as well, so you get into problems. The more removed you get from the asset can make it problematic.

How do you go about vetting them for the first time that you’re working with them?

I have a specific list of questions that I ask. For example, I ask about their track record and their experience, and almost all of them will tell you the highs, the great things that they have done, which is good, you need to know that they can achieve greatness. If they can’t achieve greatness, you don’t want to invest with them. Then I ask, “tell me about a failure that you had, or a big challenge that you experienced in real estate”. If they say, “Oh, I haven’t really had any big failures”, you have to run the other way because there is a big failure coming. It happens every time in real estate, real estate can be unpredictable, like I said, my friend went through a fire at her apartment units, you don’t know when things like that will happen. What is important is not whether they have faced challenges, but how they approached those challenges. Have they tackled them head on? Or did they just hide their head in the sand? And are they honest about it? Are they honest that they actually lost money and that taught them they need to do X, Y, and Z differently? And now we do XYZ different to really hedge against losing any money in the future. That’s what I want to know. I want to know that you’ve experienced some hard knocks, and that you’ve learned from them, so that now my money is safer with you than it was before.

What are some of the biggest complaints you hear the most from passive investors?

The number one thing is lack of communication. As a syndicator, if you tell your investors that you will be sending out a monthly report, send out the monthly report. Don’t resist it, don’t be late on it, send out your report. If myself, as a passive investor, don’t get those reports I’m scratching my head wondering if something wrong happened. The brain jumps to conclusions, and now I might think my money is at risk, and I start panicking. You will then get calls and emails asking what is going on, so send out the updates.

Camilla Jeffs

www.steadystreaminvestments.com

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