Patrick Carroll Discusses Real Estate Investments

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Patrick Carroll skipped college and moved from Tampa, Florida to Atlanta, Georgia, where he became a sales representative for clothing. He also started flipping homes in Atlanta with complete financing by 2001, while he was still a clothing sales rep. Patrick transitioned to real estate full-time by 2003 and later began developing private homes, followed by student housing.

Background

Many children want to be professional athletes when they grow up, but Patrick always wanted to be successful in business. He realized that starting his own business was the only option he had for financial success, since he hadn’t gone to college. Patrick began reading the biographies of successful people in Forbes magazine after moving to Atlanta, which solidified his desire in this direction. The Forbes 500 list showed that most of these people got their start in real estate, and Donald Trump served as one of his earliest inspirations for entering that industry.

Real Estate Evolution

Real estate has changed greatly since Patrick started in this industry. At that time, he was able to borrow all the money he needed to buy and develop properties. However, the global economic downturn in 2008 required developers to begin putting their own cash into properties, forcing Patrick to learn more about raising capital. He made frequent trips to New York City (NYC), where he pitched proposals to large private equity investors. These efforts raised billions of dollars for Patrick, allowing him to enter the rental housing market in the southern United States.

Key Challenges

In 2012, Patrick closed a deal worth $240 million, which was the largest single asset he had acquired at that point. One of the largest real estate brokers in Atlanta contacted him while he was vacationing in Miami, saying that Patrick should return to Atlanta and check it out. Patrick decided he wanted the 1,400-unit property, but he would need to make a non-refundable deposit of about $5 million. This was a huge sum of money for Patrick at the time, and he would also need to pay the balance on the $240 million total within 30 days.

Patrick made the deposit, but he needed to raise the balance since he was still relatively new to the multifamily real estate market. He went to NYC to raise this equity, but was turned down by at least 15 groups with which he already had relationships. Patrick was finally able to partner with a group he had never heard of before, which gave him $50 million. This investment combined with Patrick’s own money allowed him to secure the loan he needed to finance the deal. However, interest rates began climbing before Patrick’s partner was committed, giving them a strong negotiating position. They forced Patrick to accept less favorable terms than what they had previously agreed to on the day before his money became nonrefundable.

Patrick doesn’t regret taking this risk, but it taught him to pick his partners wisely. The deal was reported in the Wall Street and put Patrick on the map as a major real estate investor. However, the partnership was a miserable experience for Patrick, primarily due to his partner’s dishonesty and treatment of his employees. As a result, it proved to be a complete distraction from his other projects.

Investment Strategy

Patrick hasn’t changed his investment strategy in real estate since he started his career in this field. He makes his money on the purchase, meaning he always pays less than what he thinks it’s worth. He may see a way to unlock value in a property that others have failed to notice, but he always feels he has made a profit on the day of the purchase. Patrick also ensures that free cashflow is fully in place when he makes a purchase. Location is another key factor in his purchase, as he only buys properties in locations that will attract good residents or tenants.

Patrick currently has the luxury of only reviewing deals that people send to him, allowing him to select the ones that fit his criteria. However, earlier in his career, he routinely drove around just to study properties for potential investment. He would consider the location of desirable features in that area, such as schools and employment centers. Patrick would also look at parking lots during the week to see where people were working. Finally, Patrick would check to see if he was able to get a loan for the property and attract a partner who could provide equity.

Current Activities

Patrick recently founded Carroll Global, which is an investment company that raises capital from third parties. The company will find investments that Patrick likes and look for like-minded investors to form partnerships with. Even when Patrick can’t raise outside capital for the deal, he can also afford to use his own money. This luxury provides a huge advantage in the current real estate market, as institutional investors need approval from a committee before making decisions. As his own committee, Patrick can make his own decisions, giving him greater business agility.

What’s Next for Patrick

Patrick is moving from real estate to pure investments, but he is still waiting for interest rates to drop. Once the market settles, he will be looking to invest in the following areas:

  • Real estate
  • Private credit
  • Service businesses
  • Large publicly-traded companies
  • Clean energy

Patrick Carroll tries to focus on essential products and services that people always need, but aren’t in too much of a niche area. He reads extensively to determine the ideas that he will invest in and continually talks to brokers, lenders and investors around the world on a daily basis.

Patrick also monitors the economy for developing trends he can leverage. For example, the post-covid business environment has a much larger number of people working remotely, greatly reducing the need for dedicated office space. In addition, current interest rates make homeowners less likely to trade up to a more expensive home. However, the relatively low prices of homes in the Sunbelt have prompted a major shift in homeowners to that region.

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