Shane has multiple successful strategies he uses in his real estate investing career. Hear the sacrifices he made to grow his business to where it is today, and how he is able to divide his focus across multiple strategies and businesses. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Shane Connor Real Estate Background:
- Leader of Red Rock Capital, a private investing group providing access to opportunities in MF/Senior Living/ Storage and MHP
- He’s also a part owner with ACM Senior Living
- Based in Atlanta, GA
- Say hi to him at https://www.redrockcapitalgroup.com/
- Best Ever Book: 168 Hours
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Theo Hicks: Hi, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, as Joe is traveling to Texas to look at a few apartment deals. Today I’m speaking with Shane Connor. Shane, how are you doing today?
Shane Connor: I’m fantastic, Theo. How are you?
Theo Hicks: I’m doing fantastic as well. A little bit about Shane’s background before we dive in – he is the leader of Red Rock Capital, a private investing group providing access to opportunities in multifamily, senior living, storage and mobile home parks. He’s also a part owner with ACM Senior Living. He also mentioned to me that he is a limited partner in one of Joe’s deals. He is based in Atlanta, Georgia, and you can say hi to him at redrockcapitalgroup.com.
Before we get started, can you tell us a little bit more about your background and you’re focused on now?
Shane Connor: Absolutely, and thank you everybody for sharing some of your time with me. As you mentioned, my real estate background would be LP and GP investor with ownership in over 1,000 units in multifamily, as well as investments in storage, mobile home parks and senior living buildings. Also, I’m still in the full-time corporate world, staffing and recruiting business in the healthcare practice; I’ve been doing that for about eight years. And lastly, yes, I’m now a 10% owner in a senior living operations company, which synergistically ties into being able to offer investments to private investors in that area.
Theo Hicks: Awesome. So how are you able to balance having that full-time job, working 40+ hours a week, as well as growing your real estate business?
Shane Connor: Yeah, definitely a challenge. I think my wife would like if I was free a little bit more. It’s all about having focus and planning, being okay with very early mornings, late nights… This morning I was up pretty early, working in the gym, then spent about an hour on investing before being at my desk at my corporate job by [7:45]. Then tonight before I go to bed I’ll have a plethora of things that I need to be doing to move the business forward.
So it’s definitely having balance, planning, and just knowing that you’re working for something that’s really good for you and that you really care about.
Theo Hicks: Okay, so let’s talk a little bit about your investment. It sounds like you’re investing in a lot of different assets… What’s the breakdown of that? What’s your main focus? Or are you diversified a quarter each of those four?
Shane Connor: Yeah, in some private investing circles you’ll hear something like “three out of four dollars still goes to multifamily”, and that definitely runs true in terms of my business and my investing as well. Most of the transactions happening are in the multifamily space; it’s also just more comfortable for raising capital and talking to passive investors. They understand apartments more. They have all lived in them at some point in time. Storage and mobile home parks are kind of being second to that… Senior living being kind of brand new, but I expect that to grow a lot coming into 2019. It’s a space I really know and understand well, because as I mentioned, I’ve been in the healthcare recruiting and workforce business for about eight years, I have a masters in healthcare administration… So I’m kind of excited to be able to bring my investing and finance background and then my healthcare operations background to really educate investors that may not understand that space as well. It’s a very, very lucrative industry, and as we all know, baby boomers – 10,000 people hitting Medicare every day. That is going to be a very, very busy space. With Medicare reimbursements you’re looking at upwards of $350/day on a typical skilled nursing facility (SNF), as opposed to monthly rents. So it can be extremely lucrative investing.
Theo Hicks: So your main focus is multifamily – let’s talk a little bit about that. You raise money and then you invest yourself?
Shane Connor: Correct. I started – as you had mentioned earlier in the call – my first ride was where I was actually being an LP investor on one of Joe’s deals a few years back out in Dallas, and that kind of opened my eyes to what was possible, and that this whole world even existed. I continued to do LP investing over the next year to two years, and then over the last year, year and a half I was able to form some partnerships, where now I raise capital for a couple different operators, Joe being one of them; we do some deals there, and that’s kind of really grown.
My investing is focused a lot on raising capital, but still investing alongside my investors when I can, in deals that make sense.
Theo Hicks: A very common theme for people that wanna become multifamily syndicators, or just wanna be involved in the business in some form, which includes raising money, a piece of advice that is often given is for them to invest in a deal first, as a passive investor, and then move on to some other aspect of the business yourself… So what types of things did you learn, or how did being an LP in a deal first help you raise capital?
Shane Connor: Well, you don’t know what you don’t know, and going through the process as an LP, from soup to nuts – and I was as green as they got when I was first learning about the syndication opportunity that I ended up investing in… So going through the process, soup to nuts, from that initial conversation, “What is this? How does it work?”, all the way through closing, first distribution, monthly updates – you’re gonna get exposed to the entire process front to back, so that on the next deal, or if you do two LP’s and then you decide to raise, you are going to be able to speak that process to somebody else who’s completely green, much more than you’d be able to if somebody just tried to give you a crash course. You have to actually know what it’s like to be in that brain of somebody who’s mind-blown and has no idea how this would even work, how a bunch of people together would buy an apartment building.
I wasn’t even a finance major, I just kind of had this notion that Wall Street or big banks must own every apartment building. I had no idea that it could be a collection of GPs and lots of LP investors coming together. So until you sit on that side of the fence, it’s gonna be hard to try to do that and confidently raise money from somebody if you have never been in their shoes before.
Theo Hicks: Okay. And you mentioned that you go through the process and then you’re able to communicate that process to others, so that’s obviously one tip for how to raise money… For someone who’s just starting out, they’re educated, maybe they’ve been an LP on a deal before, or maybe they bought a smaller apartment themselves and now they’re moving into raising money, but they’ve never done it before – what are a couple of things that you could advise for someone in that situation?
Shane Connor: I’d say definitely talk to more people than you initially think. If you think “I’ve got a good network of 50 people”, you should plan on trying to talk to 100-150… Because you may get this space and you might be comfortable and know that this is a good deal, but not everybody’s brain is wired into real estate like all of us listening on this podcast might be. So that would be one – definitely don’t underestimate the amount of people you’re gonna have to try to talk to.
Two would be you’ve gotta get around more successful people than you, people that have more liquid capital than maybe is in your immediate network, because friends and family are great to start, but most of these deals we’re talking about, $50,000 minimum is a small amount of money. So try to think outside of your immediate networks to other groups and places that have business owners, executives, things like that that you can get yourself around and start marketing yourself as an expert in this area.
Theo Hicks: Once you surround yourself with those people, you go to meetups, maybe different business groups, events in the area… I know volunteering is another good one, because a lot of high net worth individuals are at the charities… How do you approach that conversation with them? Do you just walk up to them and say “Hey, wanna give me money to invest in a deal?” Obviously you don’t do that, so…
Shane Connor: Definitely not, and that’s why time and relationships are pretty crucial here, because it may be that you meet somebody there at that charity event, or at a cocktail hour at a executives business event, and over a casual conversation you’ll drop in that “Yeah, I’m part of a private investing group. We acquire apartments, reposition them, add value, force appreciation, earn some profits when we sell…”, and that might be it. You might gauge their facial reactions, look for silent queues, or do they pique up, do they look like you’re crazy… And then just keep those mental notes and you’re gonna follow up with those people. You might be looking at somebody that’s six months or a year until they actually are interested in investing.
So you’ve gotta develop deep relationships, not transactions, and you cannot sell; I’m a corporate salesman, I sold to Fortune 500 across the country… This is not selling. You never wanna force somebody into a deal; you wanna educate, and then let them come. You’re gonna give them all the reasons why they should – or you think they should – but you are not trying to sell or pressure these people at all, and that’ll come across pretty easily to somebody, especially high net worth or an executive; they’re gonna sniff that out.
Theo Hicks: How much money has your biggest investor invested so far?
Shane Connor: I think $150,000. Sometimes people use the term “singles” or “doubles”. A lot of 50k increments, a couple 25k, some 100k… Even most of the deals that I’ve been a part of across the board, I feel like the average comes in around 100k. Even sometimes the max will say 200k or 250k per investor on the PPM. For me it’s been mostly between 50k and 100k, and I’m 31, so I’ve got a fair network, but by no means do I know 50 people off the top of my head who are high, high net worth. A lot more kind of 25k, 50k, 75k.
Theo Hicks: Okay, so for that person that invested that 150k-200k, where did you find them? Can you tell us about how you found them, what you said to them, how long did it take them to invest…?
Shane Connor: That’s actually coming from some of my corporate business over the years. I’ve had the opportunity to meet with, do business with different clients and vendors, so that was actually somebody that I had known from just years of my healthcare business, who happens to be a business owner. He’s pretty liquid, he does a lot of different investing, so kind of already got this space and had a lot of liquid capital. That’s just kind of a fortunate side effect of being in sales for over eight years… You actively build a rolodex across the country of just a variety of different people.
Theo Hicks: How does that work — because obviously you know them through work… Is it perfectly okay to approach your work colleagues that you work with, or you meet through work? Are you ever hesitant to do that, because you don’t wanna mix your full-time job with your real estate business?
Shane Connor: Absolutely, that’s why it’s not gonna be something that you’re blasting out or just actively advertising when you’re in a middle of a meeting. And we all know those people that over the years — they might be a client, they might be a vendor, but you’ve gotten pretty friendly with them, and you might talk other times about other things, and this is one of those good opportunities. So by no means is this something that I would advise approaching at the end of a business conversation in normal practice, but I know for me personally I’ve got many people that have become friends from doing business with them through my corporate job, over a seven-year period. So that’s certainly something that’s feasible.
Theo Hicks: As it relates to either raising money for deals, or being a passive investor in deals, what is your best real estate investing advice ever?
Shane Connor: I would say just get in the game and build relationships, not transactions. Get in the game, like we mentioned – do an LP investment. Just start small. If you don’t have the capital to meet some of these larger opportunities at 25k or 50k, get on CrowdStreet or on one of the platforms where you can get in for much lower, and just at least try to soak up everything you can… But you’re never gonna win on the sidelines. Eventually, you can analyze all you want, but you’ve gotta pull the trigger when you know it’s a good deal… And then relationships, not transactions, like we mentioned. It’s gotta be for the long-term, whether that’s with other sponsors, other GPs, people you’re raising money with – you’ve gotta go deep with these people in terms of getting them to like, know and trust you.
Theo Hicks: Are you ready for the Best Ever Lightning Round?
Shane Connor: I’m ready.
Theo Hicks: Alright. First, a quick word from our sponsor.
Theo Hicks: Alright, what’s the best ever book you’ve recently read?
Shane Connor: A book called 168 Hours. The concept of the book is essentially that in a seven-day week there’s 168 hours that make up that block, and that by thinking in blocks and the actual hours’ time, you realize that you have a lot more time than you think. We’re all very busy and we say we don’t have time to do that side thing, or to get to that event, or whatever it is; the book kind of takes you through a lot of different people and examples that show you even if you’re sleeping 8 hours a night, working 45 hours a week, spending 3 hours with kids, working out 3 hours 5 days a week, that still leaves an excess of 20+ hours… So as long as you’re strategic about it and really prioritize it, you’ve got a lot more time than you think.
Theo Hicks: What’s the best ever business decision you’ve recently made?
Shane Connor: Well, I don’t know if it’s recent, but I moved to Atlanta from Philadelphia. I didn’t know anybody, I’d never been to the city; I took an opportunity to start an office with my company… And kind of taking that risk and jumping into the unknown has led to basically everything else that’s happened to me good in my life. So I would say taking risks and taking a jump is the best thing that I’ve done.
Theo Hicks: What’s the best ever deal you’ve done, besides your first deal and your last deal?
Shane Connor: That would probably be the acquisition of ownership in a ACM Senior Living operations company… Because aside from real estate deals that we’re gonna get in, renovate and sell, this one we plan to last and build it for decades, potentially even build it to go public one day, so I think that will probably have the longest-lasting impact.
Theo Hicks: What’s the biggest mistake you’ve made in real estate?
Shane Connor: The biggest mistake – not so much like an actual blunder that I could point to, but I would say more the being a little bit naive when I first went to start raising capital, thinking that it might be a little easier than it actually was, that more people would think like I did, that I knew in my immediate network, that would be wanting to invest. As I mentioned, if you think you need to talk to 50 people that you know, when you’re first starting out you might have to talk to 150-200… So not underestimating that it’s still a lot of hard work to do this.
Theo Hicks: What’s the best ever way you like to give back?
Shane Connor: This year I’m planning to start a foundation in my dad’s honor, who passed away from heart failure this year. Our foundation will focus on a few areas; he was a pool builder, so building pools in underprivileged communities, helping underprivileged kids access golf courses, because my dad did that for me, and I attribute a lot of my success to being around golf courses and successful people… It’s also going to provide financial assistance for families that lost their breadwinners to heart failure. Fortunately for me, my mom is kind of taken care of and we’re all grown, but there’s a lot of families that lose a man or a woman, a breadwinner, too early on, and they struggle financially as a result.
Theo Hicks: That’s wonderful, thanks for sharing that with us. Lastly, what’s the best ever place to reach you?
Shane Connor: You can get me at email@example.com, www.redrockcapitalgroup.com, Facebook, LinkedIn, or a website for networking dinners, syndicationsuppers.com.
Theo Hicks: I like that. Well, Shane, I really appreciate you coming on to talk to us today. A lot of great information for those listeners who are interested in raising capital for deals. You talked about how you were able to balance your full-time job with real estate; it really just comes down to getting up early and staying up late, and it sounds like you might have gotten that idea from that 168 Hours book you were referencing, or at least reiterated that concept in your mind…
You mentioned that being an LP on a deal will help you raise capital because you get to go through the process first-hand, and it’s really difficult to get that education otherwise; you go in green, you learn the process, and then you’re able to communicate the process to other people who are green.
A couple of tips on how to raise money – I think the biggest one was knowing that you’re gonna need to talk to 2-3 times more people than you actually think… The way I think about it is if I need to raise a million dollars, then I need to have at least 2-3 million dollars in verbal commitments lined up in order to be certain I’ll be able to hit that million-dollar number.
You also mentioned that it’s all about building relationships over time. Sometimes you’re not finding someone who will invest right away, but more than likely it’ll take a little bit longer for it to happen. And then if you wanna raise money through work, don’t do a business meeting and then on the last slide of your PowerPoint have a link to your website to invest in a deal.
Shane Connor: Absolutely not.
Theo Hicks: Instead, it takes time – become friends with them, and once you start chatting about other things (sports, life), you can bring up your side business and go from there. Again, Shane, I really appreciate it. Thank you for talking to us. Have a best ever day, and we’ll talk to you soon.
Shane Connor: Theo, thank you, and Best Ever audience, thank you as well.