Scott Vonderharr sat at his father’s retirement party, listening to him regale his friends and family with a story. This story wasn’t about a business venture or risk that paid off, but about how when his father sold his company of 40 years, he ended up making more money from the sale of the buildings that housed his business than he made from the sale of the business itself. Looking back, his father reflected that he should have focused his energy on investing in real estate rather than business.
“I remember sitting with him when we were having a celebration of him retiring, he said, ‘If I was to do this over, I think I’d focus more on the real estate and less on the business, because I bought these buildings each in an afternoon when we needed space and they ended up making us more money than the company did,’” Scott said.
This realization struck a chord with Scott Vonderharr. If his father, a savvy self-starter with decades of business experience, believed it was more lucrative to invest in real estate than in starting, growing, and selling businesses, then maybe there was something to that. So that’s exactly what Scott did.
“At that point I was a senior in college and I had a finance professor at that time that said, ‘You know, getting rich is really easy. All you gotta do is borrow a ton of money and get someone else to pay it back,’” Scott recalled. “And so, I’m sitting there with a professor giving me that advice and my father saying, ‘Boy, I’d buy more buildings,’ and at that time everyone was talking about how your house is your best investment. I’m like, well why the heck do we only have one then?”
Together with his wife, Scott Vonderharr began scaling his investment portfolio beyond their one house, branching out to include single-family units and apartment complexes. But Scott soon realized there was even more money to be made on the passive side — for about a fraction of the work.
”What I found by meeting a number of the syndicators around the country is no matter how much I will ever know, I will never know as much as they know. Because it’s what they do all day, every day. And they put 100% of their time and resources behind that,” Scott explained.
“So we started putting a small amount of money in a few different deals. And then I realized this is infinitely scalable, where buying apartments is a pain in the butt. Because I could go look at 10 deals, write offers on two or three deals, and I’m lucky to get one or two deals every couple years that actually pan out.”
Rather than spend countless hours managing deals himself, the advisors Scott Vonderharr had aligned himself with on the passive side of syndications allowed him to take a backseat.
“I was giving up control to have scalability. Anytime we want to deploy capital with a fund, it’s as easy as just picking when you want to give money. I love the fund approach in the sense that I can look at my bank account today and say, ‘I want to invest money today.’ And I can send an email, send a wire, and boom — it’s done because the fund is there and ready,” Scott said.
“I can deploy capital and have it invested without having to spend 100 hours trying to find a deal, put a deal together, keep the deal. I think that’s the biggest secret that no one talks about with syndications. Everyone looks at these deals that they put together and no one sees all the deals they don’t put together.”
Scott’s entrepreneurial roots give him the drive he needs to see his investments through. He comes from a family where the motto has always been: “Give it a try; let’s see what happens.”
“One of the deals that I put together early in my career — all of a sudden the financing became a little iffy, so I was panicking. But my father said, ‘If the deal’s as good as you say it is, don’t worry about it. Even if it falls apart, someone will buy it from you.’ And it’s like, oh, never thought of it that way,” Scott said.
Scott advises anyone considering real estate syndications to progress with the same attitude: It’s crucial to surround yourself with the right people — especially those who challenge the way you think.
“If anyone’s questioning getting involved in any form, whatever their view of real estate is, man, give it a try,” Scott said. “My attorney had the best quote I’ve ever heard. If I tell him, ‘I feel like I bit off more than I can chew,’ he always says, ‘It’s okay. Just keep going. You can always spit it out.’”
About the Author:
Leslie Chunta is a marketing consultant with nearly 15 years of experience in creating dynamic marketing programs and building brands for startups to enterprise organizations. She has worked agency- and client-side with high-growth companies that include Silicon Valley Bank, JPMorgan Chase, SailPoint, EMC, Spanning Cloud Apps, Ashcroft Capital, Netspend, and Universal Studios. www.thelabcollective.com
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.