BiggerPockets

Hello,

I was reading through David Lindahl's Multi Family Millions and was curious about a particular point he made as it relates to my situation.

The fact is, is that I have ZERO experience in multi families, and have zippo to put down as far as a down payment. In his book he mentions getting angel investors and others to invest in the property you present (with the accompanying business plan). My question is threefold:

1) The book outlines overcoming the fact of not having any money by approaching friends family and angel investors. Why would any investor, even family and friends give you money to invest with no experience to speak of? I have an MBA and have been working in commercial real estate (analyzing deals) for the last three years, but that is all booksmarts. I have zero real life experience, so I couldn't imagine any situation where someone would give me their hard earned money..why wouldn't they do it themselves?

2) The same applies to the bank side of things.. Never mind the complication of the fact that here in Canada ALL commercial loans are full recourse loans (that is a whole other can of worms to deal with), but with a bank looking at resumes and experience, I couldn't imagine my application getting through given the fact that I have never actually owned a building. Lindahl's book says that before you make the application you should have a business plan in tow with a reputable property management company ready with a marketing plan in place. I agree about being this ready, but again, has this worked for anyone?

3)The book mentions a finder's fee that I could potentially build into the deal for bringing a property to investors. Again, can this be done, have people done it, what is a typical fee (the book mentions 3-5%) and is this collected on closing?

I would truly appreciate all your help in this matter, especially people who have done these kinds of things as I think multi families pose a great oppportunity for investment, but again, how do I overcome the hurdles mentioned above. I spoke at length with someone in my office, who used to work for a bank about finding a building that has the potential to be repositioned, and brining in investors to finance it, and if I could not structure a way to own it, then I would find a way to bring it to them and add a consulting fee (3-5% of the purchase price) and make money that way. I was given all of the rebuttals mentioned in points 1 and 2, and as far as a consulting fee he told me that any investor would wait to give you that fee until they execute their exit strategy, and why should they pay me upfront. I would like to preface this with the fact that while he is a banker he has never owned real estate ever, so I don't put much credence into his advice, but I would like to hear any experienced investor's thoughts on this matter.

Thank you for your help.

Take care,

David.

David, as one who works in this area daily I would like to share with you what I advise others who want to invest in income producing properties.

1. Join a local investment group

2. Start out small -- 6-12 units

3. Find two or three like minded persons who want to invest in muti-family properties and do not have all the financial resources needed for a down payment. (Make sure they have good credit or it can cause you not to get funding)

4. Determine each members strengths and develop a business plan. (Lenders want to how you are going pay them back and all small loans are usually based on the person and not the property)

5.Find a mentor who can guide you through all steps in the process of becoming an investor in mult-family properties

Curtis William Lee, Sr.
Mentor

Curtis,
Just a word of caution. Not all investment clubs are created equal. I've been to some that just try and feed off each other. They'll use the buzzwords like Wholesale or others and really don't have a lot of experience or knowledge to be advising you. I've also been to a couple excellent clubs. The best was a real estate brokers' investment club in Dallas area. Spectacular info and members. I only attended once as a guest of the Pres., but will go again when in the area. Just realize that many attendees have ulterior motives and many mentors aren't really mentors. Good luck.

Once again, I have to agree with Mike. I really have begun to question ANYONE who calls themselves a mentor. Especially those that ask for money to mentor. You have many folks on this board that will help you and answer questions free of charge. Many on this board are better than the so-called mentors that charge.
Side story. I have a dear friend that was the first broker I ever hired 30 years ago. He has been doing mentoring by phone for the Whitney group over the past few years. When he gets a tough client and has questions, he calls me!! He is paid piddle ($35 per session and usually 10 I think) by Whitney who keeps the bulk of the money and I answer the question for free. What a set-up!! Rich

David,

I would not borrow money, or otherwise do business with family or friends. That's just begging to lose your family or friends!

If you have no money to put down and no experience, banks probably won't loan you the money. The solution is to work you butt off so that you do have some money. Banks (and every other intelligent lender) do care about you (the borrower). They care about your income, your credit score, and your experience.

So, I would suggest starting small - with a few SFHs or duplexes AFTER you make (save) some money for a downpayment and a reserve fund. Gain some experience and only then think about some larger commercial buildings.

Good Luck,

Mike

Originally posted by MikeOH

David,

I would not borrow money, or otherwise do business with family or friends. That's just begging to lose your family or friends!

If you have no money to put down and no experience, banks probably won't loan you the money. The solution is to work you butt off so that you do have some money. Banks (and every other intelligent lender) do care about you (the borrower). They care about your income, your credit score, and your experience.

So, I would suggest starting small - with a few SFHs or duplexes AFTER you make (save) some money for a downpayment and a reserve fund. Gain some experience and only then think about some larger commercial buildings.

Good Luck,

Mike

1) With regards to the investment club I have to agree with most of your points. Most of the RE clubs here in Toronto are that multi level $499 type membership, and it simply wreaks of being a business within itself as opposed to being a place where people passionate about real estate can meet in an organized manner. I'm still on the look for a RE club in TO that doesn't cost an arm and a leg.

2) I do realize that asking money from family and friends can only lead to disaster because many grey and fuzzy lines get obliterated. My point is that I don't know of any options. My other point to consider as opposed to buying these buildings is to act as a birddog, bring deals to people and make money upfront that way and gain experience and in time get to a point where I have enough money to put into a project where a bank AND potential partners would take me seriously.

At the end of the day, I want to get involved in this business, but I want to do it right going in with the appropriate expectations and I'm not convinced I'm getting that from Lindah's book.

The "gurus" are in the business of selling and upselling products to newbies. As such, you're not going to hear anything that isn't positive from the gurus. Sure, they'll tell you about a student that started with no experience and bought a 500 unit apartment complex. However, do you think that they'll tell you that this student couldn't make it work and lost the complex 3 years later in a huge bankruptcy that literally destroyed his life? Likewise, do you think that they'll tell you about the 95% of their students that spent $10,000 on the Ultimate Platinum Inner Circle level of guru training, yet never did a deal?

Wake Up! You aren't going to find the SECRET from a "guru"! (my comments are about gurus in general and not specifically about the guru in question)

Good Luck,

Mike