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Scaling a Private Real Estate Portfolio with Partners

With Percy Nikora, Co-Founder

Primarily, when I first started, around 2000-2001, it was the single-family houses - buying them, flipping them, renting them. Then, after doing that for a while, it just becomes hard to scale that, after you get to a certain point. Scaling single-family houses is pretty challenging, so I started to look at other opportunities in real estate because I like that asset class; it's something that's tangible; you can put your hands on it; it's less volatile than the other asset classes. So, I decided to start looking at other alternatives and found commercial real estate, primarily multifamily investments.

There's a number of reasons why multifamily seemed  to be a good asset class compared to some of the others, like hotels, and office buildings, et cetera. I started to invest in multifamily, initially with other people's deals, just to get a sense of the structure. This is around the time that some of the laws were changing, as well, and the SEC started to allow you to do some general solicitation for investments, et cetera.

After doing a couple of those investments - did fairly well on those - I wanted to be more active and take a more active role rather than a passive role in real estate. That's really when we- Ed and I met, and we decided to create Penn Capital, which would be a vehicle through which we can bring these opportunities- identify opportunities and bring it to others who are interested in this type of asset class, as well.

With our equity partners, we pretty much identify good opportunities where we think we want to invest our money, and we invest in every deal that we bring to our investors. The way we look at it is this just allows us to grow faster with a larger group of investors and buy assets that an individual may not be able to buy; but it's still, collectively, as a group of investors, we can, I guess, hit- take the ball farther, so to speak.

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