This is the BiggerPockets Podcast, show 506. This is how to think about real estate growth. The small multifamilies, the duplex, the fourplex, they are teaching you the lessons needed to get to these deals, the bigger ones that come later. Now, can you see stay here forever? Of course you can stay at the top ones forever, but I don’t want to. I want to get down to the bigger deals. And that’s why we buy routinely now 100 unit properties.
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What’s going on everyone? It’s Brandon Turner, host of the BiggerPockets Podcast here alone today. I got no David Green today, because today is a little bit different of a show. You probably noticed here on the BiggerPockets Podcast lately, we’ve been changing it up a little bit with a few different formats, trying out a few things. We just want to see what you guys like, what you don’t like, what fires people up. And so one thing that we did … Oh, man, it was almost a year ago now maybe. I don’t know, it was a while ago, is we did an episode where we just basically played the recording of one of my webinars that I’ve done on BiggerPockets.
Last time we did we was like on the 90-day challenge. Well, that’s the most popular webinar we ever did at BiggerPockets. But another webinar that I’ve done now is probably the second most popular, if not eclipsing the 90-day challenge, and that is the webinar that I’ve done on how to invest in small multifamily properties. And so that’s what we’re going to deliver to you today. If you want to know how to invest in small multifamily properties, including why I like them, kind of how to run the numbers on it, the pitfalls of small multifamilies, things to be aware of.
And by the way, when I’m talking small multifamily, I’m talking about things generally like duplex, triplex, fourplex, but also potentially maybe like a five or seven or eight unit. The difference is kind of in that line between like, how do you approach real estate? In fact, I recently published The Multifamily Millionaire, Volume I and II. I co-wrote it with Brian Murray. And a lot of people have asked like, “Why two volumes?” Well, the Volume I is about small multifamily properties, which are like the small deals.
And again, not necessarily number one, number two, number three units, but it could be like a five units. How do you approach it? It’s a small way of approaching real estate. You probably manage your tenants yourself. You’re probably using a local bank. You’re probably driving by the properties. It’s probably in your backyard. And then the second volume was all about the larger deals. Like you have a team and you’re using commercial real estate brokers, like mortgage brokers and all the bigger stuff.
You don’t know who your tenants are at that level. And so this episode today is about the small side and some of the things that I’ve learned about investing in dozens of different small multifamily properties over the last decade. All that said, let’s move on and get to today’s quick tip. It’s kind of weird doing that by myself. Today’s quick tip is this, go to, if you have not yet invested in small multimillion properties, go to Realtor.com. I like Realtor.com. There’s lots of sites, Zillow and Trulia and all that, I just, I like realtor for this reason.
And maybe the other ones have this now too. I don’t know, but I just use Realtor. Go to Realtor.com and then you can actually specify property type, and you can choose only multifamily in there. So just for the heck of it, go to your area, wherever you want to invest in, and go and search only small multifamily properties there, and then go and see what you can find. See what’s there. See what duplexes are there, fourplexes are there, fiveplexes, eight units or whatever. They usually show up there. Now, does that mean they’re going to be good deals? No, you got to run the numbers.
And in fact, part of today’s show is about running the numbers. And actually, on the show, you won’t be able to see it part probably unless you’re watching this on YouTube, but actually walk people through how to run the numbers on a small multimillion property using the BiggerPockets Calculators. But just FYI, that does require a BiggerPockets Pro membership if you want unlimited access to those calculators. So later in the webinar, I do tell you a little bit more about what Pro is.
And if it’s something you’re interested in using, a Pro membership, we actually are offering a discount on Pro because of this webinar. So the code is podcast20. Just one word, podcast, the number two zero, no spaces. Podcast20, and then I’ll knock off 20% off your first year of Pro annuals. So instead of like 390, it’s like 312. It’s like less than a bucket a day. If you are going to analyze a bunch of deals, do that.
But really what the quick tip is go to Realtor and just start looking at small multifamily. The more you look at, the more better you’ll be able to understand what’s available, what makes a good deal, what makes a bad deal, et cetera. And that is today’s not so quick tip. All right, I think we’re ready to jump into the episode with me teaching you how to invest in small multifamily real estate. Real estate is a means to an end. Can we all agree to that?
You didn’t wake up when you were a kid go, “Someday I just want to be a real estate investor.” That’s not why we … Now, you might love real estate and want to invest in this for a while, but the key is we’re doing it for a purpose. We’re doing it for that financial freedom, that life that you were meant to live. Gary Keller, Keller Williams Agency, he’s the CEO of Keller Williams, he said, “Financial freedom is when your passive income exceeds your expenses, so that you can do with your time what you were put on earth to do.” In other words, what we’re doing is buying time.
We’re given more free time so we can spend time with our kids, so we can travel the world more often, so we can have a hobby, so we can give back. In fact, I was talking to a woman earlier today who runs a charity, that they use real estate to be able to try to help people who are stuck in sex slavery. What a cool concept? But they couldn’t do that if you’re stuck at a 9:00 to 5:00 or an 8:00 to 6:00 or whatever. It’s a lot harder to be able to do things that you want with your life if you are stuck in the same 9:00 to 5:00 rut, never getting anywhere.
And so that’s what this is all about today and why I’m so passionate about real estate investing. Now, today’s agenda, we’re going to cover a lot of stuff today. Tell you about who I am, what BiggerPockets is, why small multifamily properties are so awesome, how they can help you obtain financial freedom. I’ll show you some very basic math framework for how multifamilies can just change your life completely. We’ll talk about where to find those great deals at. We’ll talk about how to finance them, even if you have no money whatsoever.
We’ll talk about how to analyze them. How do you run the numbers to make sure you’re getting a good deal? I’m going to spend a fairly significant amount of time on that portion, because knowing how to run the math is like the number one most important skill for a real estate investor to get good at. I’m going to show you how to do that. We’ll also be analyzing a real life deal. To prove the point, I’m going to be finding a multifamily property in one of your markets. We’re going to analyze it together to see how much we can pay for it and how much money it’s going to make every month.
We’ll talk about some dangers to be aware of when you’re offering on a, or when you’re going to buy a multifamily. We’ll talk about some Pro tools that you can use in journey. By Pro tools, I mean, some of the parts of the Pro membership that we have at BiggerPockets. Again, I’ll tell you a little bit more about Pro is later in today’s webinar. I don’t want to distract from the main message, which is let’s get you buying multifamily properties because they’re amazing. And I’ll even, if you guys are not a Pro and you’re thinking someday you want to be a Pro member, I’ll even hook you up with a discount code later to use if you’re interested.
And then we’ll do some Q&A at the end to kind of help answer any questions I didn’t get to. Basically, if you’re going to sum up, by the end of the webinar, you’re going to know the detailed process for finding, analyzing and buying small multifamily properties to help you achieve your financial goals. Think about this way, if you knew how to find great deals out there, you could get deals on your plate no matter what. You just knew you could buy a great deal that makes money.
And if you knew you could finance it, you could figure out the money even if you have none. And if you knew you know how to analyze it perfectly, like you’re a pro at this, and you knew you could bring it all together and close on a deal, is there anything stopping you from obtaining that financial victory you want without all the stress? Is there anything stopping you? No. The reality is real estate is just a puzzle. You put together the pieces and then it’s done, and you’re like, “Okay, I just did a deal,” which is why today it’s all about putting together the puzzle pieces.
Now, real quick, how are we qualified to teach this? What is this? Maybe you’re not familiar with BiggerPockets, let me explain in 30 seconds. BiggerPockets is the world’s largest real estate investing website, largest real estate blog, largest real estate investing forum, largest real estate investing podcast. Over 100 million downloads of our podcast that I’ve been on now for eight years. I’m the host of it alongside David Green. We’ve got webinars, live webinars.
And if you’re a BiggerPockets Pro member, you can watch webinar replays anytime. It’s one of the many benefits of being Pro. We’ve got analysis tools to help you run the numbers, and under five minutes to figure out how much you should pay for a property. We got networking. We got books. In fact, we are one of the largest independent publishers in the world for the number of books we sell, which is crazy. Videos all over YouTube. And it’s all designed to help you use real estate to achieve your goals.
All right, that was slightly more than 30 seconds. Moving on. Basically, here’s what we built leave, and this is what I believe. I believe real estate works when you work it. In other words, it’s not a mystery, it’s not a lottery ticket, it’s not Bitcoin, it’s not a stock that you’re hoping will go up. If you put the pieces together correctly, you will get the result you want. It is a logical thing. I firmly believe that. Now, are there crazy things like a meteor going to hit the earth and blow up a city? Maybe.
But barring any craziness, I believe real estate is a very mathematical thing. If you want it, you’ll get it. It’s that simple. But understand that it’s not get rich quick. It’s not going to happen overnight, but it is simpler than you think. I am not a super smart guy. I don’t understand how bonds work and how the stock market does this and that, and I don’t get into that stuff. I’m a pretty basic guy. I buy property, it makes me money every month. I move to Hawaii because I want to surf. And then I just repeat that process.
I buy a property that makes money. And anybody can do it. That’s the key here, is anybody can do it. At BiggerPockets, that is our core belief. I don’t care what background you came from. I don’t care how much money you have in your bank account or what your credit score looks like. None of that, I don’t care. There is a solution to every problem. It is a puzzle, and we’re going to put that together today. Now, the reason I say this stuff is not just because I read it in a book or because BiggerPockets told me to say it.
No, this is my belief because I live it. This is actually who I am, what I do. I’m a real estate investor. That’s me. And I want to be a surfer, and I’m not very good at it, despite trying quite often. I live in Maui, Hawaii. I moved here a few years ago after having enough cash flow that I could pretty much live wherever I want. We call that level one financial freedom. I moved to Hawaii because I like Hawaii. I’m a landlord. I have a little over …
I think we just closed a property the other day, so I think we’re at like 1,700 units right now. Most of those are like 100 unit plus properties, but we’re at like 1,700 units, 55 million dollars roughly in assets owned right now. I’ve been doing this since I was 21 and I’m 35 right now, so 14 years. Host of the BiggerPockets Podcast. Married to a wonderful woman named Heather. Two little kids, Rosie and Wilder. Author of several real estate books. And I am awkward tall, six foot five and a half. And that half matters when you get into a fight with a six foot five man.
And if you want to know more about me, you can follow me @beardybrandon on Instagram. That’s where I’m most active. I post multiple times a day, a lot of video content, a lot of how to stuff there. All right. Anyway, my I’m actually a real estate investor, like I said. And I got my start, and actually I still do it today. In fact, I closed on a duplex two days ago. I got my start in small multifamily. I bought this fourplex at one point, makes me about $1,400 a month in cash flow. That’s just profit after all the bills have been paid.
I got this triplex about $1,000 a month there. I got this four unit, turned it into a fiveplex, makes me about 1,500, almost 1,600 a month. Now, I’m not saying all this stuff to brag and say, “Wow, look how good Brandon is.” In reality, I bought bad deals, I bought good deals. Mostly what I buy today is the large mobile home parks through open door capital. And by the way, if you have any interest in joining me on that, we partner with accredited investors. So you can check it out at odcfund.com.
Again, I’m not saying all this to be like, “Wow, look how great I am.” I want to stress a very important point that if you take nothing else from today’s webinar, but this, remember this, it doesn’t take all that many properties, especially small multi, to achieve financial freedom. How many of these would you have to have to get financial freedom? Probably not that many. It just takes the right ones. If you buy the wrong ones, you’re going to be struggling. It doesn’t take that many, it just takes the right ones and it takes time.
I believe anybody can do this thing. Let’s talk about why I love small multifamily property. Let’s go into to the whys real quick. Number one, cash flow. What is cash flow? Cash flow is the extra money that comes in, the profit every month on your properties. If you bring in $5,000 a month in revenue, in income, and you pay out $4,000 in all your expenses, I’m talking everything, water, sewer, garbage, electricity, the mortgage payments, repairs, maintenance, vacancy, property management, all that stuff.
If you got in 5,000, paid out 4,000, your profit is $1,000. That’s cash flow. Cash flow is great, because cash flow gives you freedom. The more cash flow you have, the more you can go live in Hawaii or travel the world, or spend time watching Dancing with the Stars every night and not feel guilty about it, right? Cash flow is great. And multifamily properties are designed for cash flow. Think about it this way. Single family houses were not designed for cash flow, they were designed for a place for people to live. Now, I’m not saying you can’t get cash flow of a single family. You can, but weren’t designed that way.
But multifamily, who buys multifamily? Investors. What do investors care about? Getting a return on their money? And so like they’re designed for money, to make money. So they should produce cash flow, unlike most houses, which never will. Number two, residential financing, which means it’s easier to get loans, it’s lower down pay payment options. It’s part of the bank that deals with the small multi. It’s a lot easier to get loans. If you can get a single family house loan, you can get a duplex, triplex or fourplex. So why not go for the fourplex? Get four times as many properties as a single family house.
Number three, less competition. Because think about this way, this is what I love about small multi. I mean, I love a lot of stuff. But most people in the world that buy property are what? They’re homeowners. They want to be homeowners, right? They’re mom and pop, like John and Jane Q homeowner. They want a cute kitchen and a cute front porch and cute wallpaper for their cute 2.1 kids, right? That’s what they want. The competition on single family is with just normal people who buy emotionally.
Now, what about really good investors? If you’re competing with me, I’m buying mostly 100 unit properties, like apartments and mobile home parks. There’s this really nice sweet spot in the middle, that you’re bigger than what most people want, you’re smaller than what the big guys that are going to be your competition are after. And so the only people who are your competition are the people that are really on this webinar right now. So people with 2.1 kids. That’s the average number of kids people have to be able to sustain a population.
It’s 2.1, because 0.1 kids don’t make it to reproduce or something like that. I don’t know. 2.1, we’re talking averages here. So your competition’s all here, right? But here’s the great thing. There’s only 1,600 people here right now out of millions of small multifamily properties out there. So yeah, you got this stuff. And finally, and I’m not saying it’s easy. I’m not saying it’s easy. It’s still competitive. You still got to be good. There are people in every market that are looking for small multifamily, but it’s doable.
All right. Number four, the ability to house hack. Anybody here a house hacker? I am right now. House hacking is where you buy a small multifamily property, live in one of the units and then rent the other units out. It’s really a fantastic way to get your foot in the door. Get started with real estate investing, because you can do very low down payment, like three and a half percent down, live in one unit, rent the other ones out.
Now, I do it here. I have a 2 million house in Hawaii. I still rent out my other unit. I have a three unit property I live in. It’s not only like dumpy little duplexes. You can buy a nice property that has an extra unit. And even if you’re not living for free, you can live for cheaper. And it gives you like a good foot in the game, you start getting experience, you start getting knowledge. There’s a lot of good reasons to get a house hack. Anyway, those are some of the reasons why I love multifamily.
All right, so how do they give you financial freedom? I mean, let me walk you through some basic math. If you can take notes right now, take some notes because I want to show you some very simple math. How much money do you need, asking this question to all of you, to be financially free? And when I say financial free, I just mean like to pay your bills. I’m not talking about like buying a jet or buying the New York Jets. I’m talking about like pay your bills, how much every month you need. 5K a month, 2,500 a month, 5K, 5K, 2,500, 3,000, 10,000. Okay.
Let’s just say you had $5,000, divide that by 100 and you’re left with 50. What does that mean? It means if you had $100 in profit, $100 in profit per unit, you would need 50 units in order to have $5,000 a month. The better deal you get, the easier it is, like the fewer units you need to obtain financial freedom. Does that make sense? Now, what a lot of people might be saying right now is, “Well, geez, Brandon, I got to buy 50 units in order to get to that financial freedom number? How am I ever going to do that? It’s going to take 50 years.”
I want to demonstrate something here. Probably my favorite thing, of everything about small multifamily, the thing that’s my favorite is that they are a gateway to larger multifamily. Small multi is just a way to learn the business. Now, yes you could buy … Let’s say you bought a fourplex every year for the next five years. So five times four units is 20 units. And if each one of those was giving you $200 a month, that’s $4,000 a month. I know I’m going kind of quick here. Imagine that’s a duplex.
Now, if this year you bought a duplex, in year number one, we’ll call this year number one, you bought a duplex. And then let’s say next year you decided to buy a four unit. All right, so next year you buy a fourplex. I mean, mean think about it. You already bought a duplex, that’s the hardest thing. In fact, let me do a side note here real quick. I do Brazilian Jiu-Jitsu. I’m terrible at it, I’m awful, I’m horrendous. I can’t beat anybody, I’m terrible. But I try to do it. Three times a week, I work at it.
One of my instructor once told me … I said to a guy, not even my instructor, I said to a guy that … He said, “Well, what belt are you?” I said, “I’m a white belt.” He said, “Oh, a white belt is the hardest belt.” Now, let me explain something. The white belt is what you get automatically just for showing up to the class. You get that automatically for showing up. Why would he say the white belt is the hardest belt? Because 99% of the world will never get it, right?
99.9% of the world will never get the white belt because they never show up. The hardest deal is the first deal. It’s the same thing. Starting is the hardest. Imagine you bought the duplex, now you got some momentum. Then you buy the fourplex. And then now don’t get caught up in the exactness of this, I’m just giving you a picture here, right? Next year you buy an eight unit, 3, 4, 5, 6, 7, 8. All right, so year one you did that, year two you did that, year three you did that.
And then you buy a 16 unit, dah, dah, dah, dah, dah. We’re going to pretend this is 16 units. And then in year 1, 2, 3, 4, 5, in year that you have a 32 unit. All right. This is how to think about real estate growth. The small multifamilies, the duplex, the fourplex, they are teaching you the lessons needed to get to these deals, the bigger ones that come later. Now, can you stay here forever? Of course you can stay at the top ones forever, but I don’t want to. I want to get down to the bigger deals.
And that’s why we buy routinely now 100 unit properties. The point being, again, don’t get overwhelmed. It’s not that hard to get to 100 units. If you want 100 units, you can get there in the next five years, maybe less. I’ve known people to do it less. So don’t worry about how to get all those properties. All you need to focus is on the next deal. So how do we get you the next deal? Well, let’s walk through it right now. Number one, where do you find … Let’s start by finding those deals. Where do you find good deals on duplexes, triplexes and fourplexes?
Well, number one, I’m going to say the MLS. For most people getting started, the MLS is a great way to find properties. What does that mean? It means get a real estate agent. The MLS is basically where all the real estate agents who are selling properties, they put their properties on the MLS. It’s a big list of all the properties for sale. The first thing a new investor should do is get a real estate agent. It’s free. It doesn’t cost any money whatsoever. I want to explain something very important here. This is super important.
Everything I’m saying is important. What is a mother-in-law suite? It’s like you live in a unit and rent out the other unit. That’s basically like a … That’s what they call mother-in-law apartments. All right. Are you going to find an amazing killer deal on the MLS? Probably not. Can you find something that might work? The best deals on the MLS are fixer uppers. If you’re willing to do a fixer upper, maybe you could make it work. But here’s the thing, it doesn’t matter. Now, let me explain. It doesn’t matter.
You see, when most people get into the game, get into real estate, they want a home run. They want to just knock it out of the park. They want to get such a good deal that they can brag to all their friends and family, “I’m making thousands of dollars a month.” But remember that little pyramid I showed you guys earlier, if you owned 50 or 100 units, do you think it would really matter that much if that first deal is a home run or just a base hit? No. Why? What’s the most important thing to get out of the first deal?
Is it money? No. What is it? What’s the first deal all about? Action. Getting on base, getting started, getting experience, building your network, just getting something done. Because once you get that momentum going, once you’ve got that white belt and you feel comfortable at the gym, now you’re going back over and over and over. The key is just get something. The MLS is great for that. Get yourself a real estate agent, have them start helping you find a thing.
Not just any real estate agent, try to find a good one that understands real estate. You can find them on BiggerPockets. If you go to BiggerPockets, up here at the top it says network, go down to real estate agents and just type an area. We are doing Atlanta. Atlanta. Atlanta, Georgia. And on here, you can find agents. Lowell, or I’m going to say Lowell. Lowell. I think it’s Lowell Champ. We’ll call him Champ, or Hersch, or Matthew. Right? Or Mark or Joel or Chad or Pam.
Now, does they guarantee they’re going to be good? Not necessarily, but check this out. Lowell has 51 forum posts. Lowell. Champ. He’s got 51 forum posts on a real estate investment website. Hersch has 51 forum posts. Same number. Matthew has 340. Mark has 120. These people are offering advice on a real estate investing website. Joel has 15,000. He’s one of our most active members. Chad, 110. Pam, 28. In Carrollton, Ricky, Rob, and there’s nine more pages. It’s a great way to find agents.
If they’re active on BiggerPockets, they might know a thing or two about real estate investing. And you can even know more, like let’s go up here to Champ, right? Champ, my specialty is helping folks make money in real estate. Well, that sounds like a pretty good idea. All right, I can look at some reviews, people who have more worked with Champ before. I can even contact him right here. I can go down here and click on him personally, and go check him out personally.
Yeah. My specialty is to help people make money in real estate. South Florida native. If you’re looking to flip, or build a rental portfolio or buy a personal residence, we should have Zoom in the next 10 minutes. I love it. 15 years real estate experience, active investing in several markets. Champ might be a great guy to connect with, right? I love that. That’s how finding a real estate agent can actually be pretty simple. Now, let’s talk about some more, we’ll call them creative strategies.
If you don’t want to go on the MLS, if you want to try to find some more creative ways to find deals, which is a good way to get better deals. I’ll give you a few. Number one, the second thing we’ll talk about is driving for dollars. It’s where you get in your car, drive around and look for properties that are multifamily. Then you go and research who owns that property, and you call them, or you text them, or you drop by or you send them a letter. For a multifamily, that’s probably one of the most common things, is you send them a letter.
Because you can look them on the internet where their tax bill gets sent. If it’s a multifamily, it’s probably owned by an investor. The tax bill is being sent to the investor’s house, not to the property. So you can find their address and send them a letter just saying, “Hey.” So where do you find that? There’s a ton of websites that can do that for you. It’s called skip tracing. You can look it up on BiggerPockets. You can search Bigger … By the way, if you ever want to know anything on BiggerPockets, just go up to the question mark here and type in like skip tracing and then hit enter.
And you’ll find articles, podcasts, all sorts of stuff. Skip tracing platforms, skip tracing, skip tracing, skip tracing, skip tracing, skip tracing, skip … Right? These are people asking those questions. You can find podcasts where we talk about it, forum posts where we talk about it, blog posts that talk about it. Yeah. How do you skip tracing to unearth awesome real estate deals? The art of skip tracing. How to track down tenants who owe you money. That’s funny.
Thinking about real estate, you get the idea, right? So you go in there, you find some good stuff. All right. Another option, go to Craigslist or Facebook Marketplace and look for people who are listing their properties for rent, for people who are listing property for rent. Why for rent? Well, what you want to find is the multifamily properties because that’s the landlord listing their properties for rent. You can contact them and say, “Hey, I’m not looking to rent your property, but I’m looking to buy a small multifamily. Any chance you want to sell?”
And most of the time they’ll say no, but every once in a while they’ll say yes. And then like I mentioned earlier, you can send letters. You can also do this in bulk. You can send out hundreds or even thousands of letters. And most of them will never call you, but some of them can. Some of them will call you back and say, “Yeah, I’d love to tell you my property,” or, “Let’s talk about it. How much can you offer me?” For example, I once bought a property for my daughter, Rosie. It’s like her college education house.
I sent out like 300 letters. Out of those letters, I got back like 40 people to call me back. Now, some of them didn’t want … They were like, “F you! Don’t call me again.” But some of them actually wanted to have a conversation. Out of them, I made about a dozen, I analyzed about a dozen deals, about a dozen properties, and I made about a dozen offers. Out of them, one person said yes. I sent 300 letters, I only got one deal. And that’s actually really, really good odds.
Some people send thousands of letters, they don’t get anything. Let’s say you sent 5,000 letters, and it costs you a dollar per letter. That’s five grand. But do you think you could land one deal out of 5,000 that you mail? Probably. I’d like to think so. Okay. So then your cost to acquire property is five grand. But if you get a $50,000 discount on that property because you got to them directly before they listed it with an agent, it might be a good way to spend $5,000, don’t you think?
Again, this is just math. It’s just numbers, it’s odds, it’s business. And that’s why I love real estate, because it’s totally doable for everyone. Now, this is only four ways to find deals. Actually, I wrote a book a while ago called, it’s called How to Invest in Real Estate. In here, I go through 27 different ways to find real estate deals. Now, I’m not saying that so you by my book. I don’t care. But I’m trying to point out that there are lots and lots of ways to find real estate properties.
So just get good at one or two of them and you’ll start landing deals. All right. So what’s the best way to finance a small multifamily property? Well, if you’re going to live in the property, if you’re willing to live in it for one year, you can get a loan called an FHA loan. That’s 3.5% down payment. That’s pretty awesome, right? $200,000 property is $7,000 down. That’s one of the best loans out there. There’s also something called the USDA loan and a VA loan, if you’re a US military veteran or a family member of.
You get zero down in those cases, as long as you’re willing to live in the property for one year. Number two, if you can put down 20 to 25%, you can get a conventional mortgage, which means, yeah, you just go to any bank, put down 25% and you’ll likely get a mortgage. Some banks are doing 20, some are 25, some are 30. Call around, you’ll find a bank that can do 20%. All right. Another option, if you don’t have money, one of my favorite strategies is using partnerships. I mean, if I think about it, some of my very first properties, when I had no money, no credit, no income, no nothing, I used partnerships.
I would find the deal, I would put all the pieces together, I would make it work and then I would bring in a partner who could bring the down payment in. It worked out amazing. And in reality, I still do this today. We just closed on a big mobile home park a couple days ago. Do you think I put down the $2 million for a down payment for property? Of course not. I raised the $2 million for the down payment from partners, they’re literally called limited partners. They brought the money, I brought the deal and they get 70% of my deal.
And that’s how syndication, that’s what partnerships. I do it on duplexes, I’ve done it on triplexes, fourplexes, fiveplexes, hundredplexes. It works. Now, finding the right partner, is that going to happen overnight? Of course not. You got to meet a lot of people. You got to connect with people. People got to know what you do. You got to get out there and build connections with people, but it’s totally doable. And so partnerships can be a fantastic way. And again, they don’t need all the money, they just need enough for the down payment.
Another option, filler financing. This is where of the owner of the property actually carries the mortgage or carries the contract. Instead of going to a bank, you basically pay the owner, that used to own the house, the old owner. You pay them every month for 30 years or whatever until it’s paid off. Filler financing is how I bought my first small apartment complex. It was great. Now, why would a seller do that? Because they don’t want a big chunk of money sometimes. Sometimes they want residual passive income.
Let’s say I own a property that’s worth $200,000, I sell it to you and you just pay me a thousand bucks a month. I mean, if you gave me $200,000 for my property today, fine, I got to pay taxes on it, I got to figure out what to do with that money, I got to maybe put it in the stock market. I’m 80 years old. I don’t want to put it in the stock market, I might lose it, right? The stock market is at a crazy high rate. But could I sell it to an investor, carry the mortgage at a 6% return or 7% return, or 5% interest, and just live off the cash flow for a while? That sounds awesome.
Yeah, they basically want to hold the note. Note investing is a real thing. Now, will everybody want to do that? Of course not. But many people do. Louis said, “What if they pass away?” Good question. If somebody passes away and you’re paying them a note, the note doesn’t go away. The heirs of the property, whoever inherits the thing, they just get the note. But the note stays the same. The legal agreement doesn’t change if the person’s alive or not.
Yeah, seller financing, very cool strategy. And then finally, one of my favorite strategies of all time, it’s called the BRRRR strategy, it’s called the BRRRR strategy. It’s where you buy. It’s like flipping houses, but instead of selling it … You know what I’m talking about flipping houses, right? You fix it up and then sell it. It’s like that, but you fix it up and then you keep it. And if you do it right, you can do it for no money out of pocket. Now, I don’t want to go into that strategy now. We’ve done entire webinars on it.
In fact, David Green taught one a few weeks ago on the BRRRR strategy. He also wrote a book on it. BRRRR is a great strategy for getting real estate with almost no money down. Sometimes no money down. Sometimes you can even get paid to buy properties. If you do it right, you have a good enough deal. It’s phenomenal. Again, if you want to watch that webinar, replay again. Pro members get unlimited webinar replays, or wait until we do it again. We try to do it every six months or so.
Yeah, BRRRR, pretty cool. All right. Here’s what we’ve got, we’ve covered so far. we talked about why they’re awesome, how they can help you get financial freedom, where to find them, how to finance them. Now let’s about analyzing them, because all of this depends upon finding good deals. You’re not going to be able to finance a bad deal. You’re not going to be able to bring in partners on a good deal, on a bad deal. You’re not going to be able to do any of this stuff.
You need to find good deals, and how do you know that? Analysis. All right. There’s a couple ways to do this. You could analyze a deal by hand, if you wanted to. Sit down and pencil it all out. I even have a YouTube video on that. But I wouldn’t recommend it for especially multifamily, but even single family, here’s why, it’s too easy to make a mistake. If you mess up one time while doing it by hand, or you get some crappy spreadsheet that has like the decimal point in the wrong spot or a comma where there should have been a slash or whatever, one mistake can cost you tens of thousands of dollars. Please don’t do that.
What we did is we actually built some tools on BiggerPockets to help you with this. They’re called the BiggerPockets investment calculators. So we’ve got one on fix and flip. We got one on rental property. We have a BRRRR calculator. We have a wholesaling calculator. We have a rehab estimator. All of that is designed to help you analyze deals quickly. So that’s what I’m going to use today, but let’s analyze one together. Is that cool? You know what? We already found this property in Atlanta earlier, so I’m just going to go and run the numbers on this, if that’s cool.
This property right here, let’s go see if we should buy this. Click on tools, and I’m going to go to the calculators. I’ll just click tools. I’ll show you this. All right. Somebody said it’s very hard to estimate rehab costs as a newbie. I agree. It was also really hard to learn how to surf. It was actually hard to learn how to walk. It’s also hard to learn how to read. Everything’s hard, right? That’s why we make money, is because most people aren’t willing to do it.
So get a book on estimating rehab costs. There’s actually literally a book called The Book on Estimating Rehab Costs written by my good friend, J. Scott, and you’ll figure it out. Yeah, choose your hard. Choose your hard. I love it. All right. Being broke is hard. All right. Fix and flip rental property, BRRRR, wholesaling, rehab estimator. Let’s just do the straight rental property in this case, even though this is probably a better BRRRR. I don’t want to confuse anybody with BRRRR, that’s a little more advanced. Let’s go a little more simple.
Rental property calculator, let’s go ahead and use it. Here we go. I’m just going to put in the address here. Atlanta, here we go. There it is, right there. Importing property data. Fancy. I’m also going to take that zip code and put it in here. All right, next, what’s the purchase price? What are we going to buy it for? It was 150,000, right? Closing costs. Now, at this point, people get stuck, they’re like, “I don’t know what to do. I don’t know what to put there.” Well, check this out.
Anytime you’re analyzing deals on the BiggerPockets Calculators, you can click over here, it says help. And you click on it, it actually helps you learn how to do stuff while you’re doing stuff. In this case it says it’s typically between 1% and 2%. Sometimes it’s kind of more. I’m going to say like $3,000 for closing costs. We are going to be rehabbing it. It’s going to be worth about 200,000 when it’s done. We’re going to put in $20,000 worth of work. Next, we’re going to get a loan for 20% down. We’ll call it 4% interest, charging one point on a 30 year mortgage.
I know I went fast on that. A lot of you are like, “Whoa! Slow down, shooter.” I just want to show you how quick and simple this is once you get your reps in. The first time you learn how to walk, you didn’t sprint. I’m sprinting because I’ve done this a lot. I want you to go in here and analyze your own deals. In fact, everybody can analyze the deal five times for free. You don’t even need a Pro membership to try it out. So try it out, play with it, see what you can find out. And you’ll learn how to do this while you’re doing it.
In fact, I would encourage you to analyze at least 20 or 30 deals in the next couple weeks, because that’s what’s going to make you good at this. The more you do, the better you’re going to be. It’s like walking or swinging a baseball bat. The more times you get up that bat, the better you’re going to be at it. So get in here and practice this thing. All right, what about income? What can we charge for this property? Well, BiggerPockets has this thing called the Property Insights.
I click on that, I can put in the address. What are the two bedroom rent for in this area now? Is this going to be perfect? Of course not, because it’s just data. We pull a lot of data points to find out about other properties, but ultimately, you need to know what your market rents for. This is just a beginning, but check this thing out. All right. Here it says four bedroom, two bath, because again, it’s a duplex, so we’re going to divide it in half. Let’s adjust the details here. For a two bedroom, one bath, 1,245 a month.
On the low end, some of the properties are low as 800 a month. On the high end, some two bedroom, one bath are as high as 1,500. But in the middle, kind of the median rent is 1,245, and our confidence is very high, which is kind of cool. I can see what a lot of other properties have rented for scrolling through a lot of these. I can see what the median rent for the area is by bedroom count. I can look at sales data over the last few years, all this stuff. Now, again, 1,245, I’m going to double-check that before I make an offer.
I’m going to talk to a local property manager. Because what if this neighborhood was a little worse than the next neighborhood over? What if there was something weird about this street? What if this school district is a little different? Real estate only can take … Objective data like this can only take you so far. You’ve got to learn your market. You’ve got to learn it. But for now, let’s just say that, because we’re going to remodel it, let’s say we can get 12. We can go a little more conservative.
Let’s say we can get 1,200 out of each unit. So 1,200 and 1,200. Now, on a property like this, taxes, we pull the data, it’s about $37 a month for taxes for this property. If you didn’t know that, you click on this thing and it’ll tell you how to determine that. Again, we pull in data from public data sources to fill in some of this for you, but always double-check it before you end up making an offer because things change, right? Down below, insurance. What does insurance cost? Not sure. Click that link there.
But I’m going to say probably about 1,200 bucks a year for insurance. Repairs and maintenance, let’s go like, yeah, somewhere between five and 10%. I’m going to go with 7%. Over 5% vacancy, 7% CapEx. What is CapEx? It means saving up money for future repairs, for future replacements, like a new roof every 20 years, new carpet, new windows, new countertops. Those things take time. A hole in the wall. They don’t happen regularly, but you got to save up for them, so it’s kind of reserved.
I always do about 5% to 10% for that as well. Management fees, let’s hire a property manager for about 10%. All right, below that, we got electricity. Let’s assume the tenant … People always make fun of the way I say roof. The new roof. All right, whatever. Electricity, the tenant’s going to pay their own. Gas, they’ll pay their own if there is gas. Water and sewer, this is super important. Listen up. Multifamily, small multifamily properties are interesting. Sometimes it depends on the property.
Some properties, the water meter is separate. There’s two separate meters. Sometimes there’s only one. Sometimes you can build a tenant for their usage, sometimes you can’t. That’s about learning your market. But there’s a company out there. In fact, let me give them a shout out right now. It’s called True Submeter. Let me show you. True Submeter is one. There’s a lot of company that do this, this is just one exam. It allows you to separate the water meters and build a tenant for their own water usage. On a property like this, I would probably make them pay their own water and sewer garbage. So they can pay their own. And that’s it.
I mean, maybe we got to pay the lawn care, because it’s multifamily. Let’s say $100 a month for lawn care. Finish the analysis. Here we go. At the top, let’s see what our results are. If these numbers are accurate, again, we’re going to want to double-check them, monthly cash flow, $894 a month. That’s because the income was 2,400 a month, expenses were 1,500. That leaves 894 per profit. That’s after everything. After the mortgage, after the insurance, after taxes, after we set aside money for repairs and maintenance and CapEx. That’s a 19% cash-on-cash return. That’s crazy, right? That’s really good.
Now, why did that happen? Where do those numbers come from? Well, I can see down here our expenses. I can see that every month we’re paying around 573 for the mortgage, 37 for taxes, insurances around 100. Our variable expenses like vacancy, maintenance, CapEx and managements over here. I can see our fixed expenses worth $100 for the lawn care. I can see what the next few years might look like. This looks like a phenomenal deal. Now, here’s the thing, a lot of people who are in, yeah, it said property taxes were 37 a month, not per year, but 37 a month. It seems too good to be true. Brandon, you’re probably right.
What if we find out somebody said this property looks like more like $1,000 a month in rent? Well check this out. I can take this slider here and drop it to $2,000. What if we’re only getting $2,000 a month total, so a thousand bucks each, we’re making $1,000 each? Maybe even what if we’re only making 1,800, so 900 a aside? Yeah, Brian said $900 on a good day. Okay, let’s go down to 900. What does that make our deal? 468 a month and 10.36% cash-on-cash return. Is that a good deal? I still like it.
I like anything over 10%. Personally, I like 10% cash-on-cash return and I want to make at least $100 a month per unit. You can also share this, if you want. You can upload your own company logo, so I can put Open Door Capital on here. I can share this on the BiggerPockets forum so other people can give me advice on it. It actually removes the address and everything. And I can download a PDF report which I can give to lenders, I can show business partners, private lenders, hard money lenders, or perhaps most importantly, I can take this to my wife and say, “Look, honey, I did the numbers. I think it’s a good deal. What do you think?”
Also, it’s got a map. You can upload as many photos as you want. It shows what’s in the area. There’s a high school over here. Wendy’s, McDonald’s, Atlanta Collegiate. Oh, is that a college? Everyone got freaked out at the beginning of COVID, like, “What if tenants don’t pay rent?” I got 97, 98% of my rent during COVID. Most people do it. Rodney said, “Is this a good calculator for up to 16 units?” Yeah. I actually think this is pretty good until you get into syndication, which is like 50 units and greater.
I think you could do like quite a bit. Anyway, bottom line is this helps you not only run the numbers, it helps you present your deal to other people, and that is super, super important. Was that helpful? Was that cool to see kind of how you analyze deals? Again, everybody can use them five times for free. If you want unlimited access, you got to be a Pro member. Again, I’ll talk about that a little bit later here in a couple minutes. We got about 20 more minutes in today’s webinar. Can you guys hang tight with me?
All right. What are some risks, dangerous to watch out for? First of all, condition and location matter? Just because it’s a small … I’m going to say this a lot of times today. Just because it’s a small multifamily doesn’t mean it’s a good deal. You get what you pay for. Poor conditions, meaning like bad condition of the property or a less desirable location, it’s going to influence your cash a little bit now. Here’s what I like to say. Nasty people like nasty properties. When I have a property that’s not fixed up very nice, it attracts people who aren’t very nice.
That aren’t going to pay the rent, that are going to ruin the thing. When I have a nice property, I tend to attract nicer people. And by nice, I mean, they take care of the property better. And condition, I’m not saying you shouldn’t buy in C or D class areas. I buy in marginal areas, but I try to avoid areas where the worst of the worst, where I might get shot or where the cops don’t want to go. I try to avoid that because I don’t want to own properties in those areas, because it just makes it more difficult.
Can people do it? Sure. I know people making a killing in those neighborhoods. I just personally don’t. Just understand that they matter. You choose what you want to do, but it matters. Number two, again, just because it’s a multifamily doesn’t mean it’s a good deal. It requires more landlording. You got to take care of the tenants. They might complain more. I’ve had tenants complain that the tenant upstairs was being too loud or they were having husband-wife, boyfriend-girlfriend fun time in the middle of the night too loud.
We get those complaints. I’ve got so many stories, I’m not going to go into them. Just understand that they call more, they have more problems, they move more than single family houses, you just got to deal with it. You got to be good at landlording if you want to manage them yourself, or hire a property manager. Number three, do your math. Again, just because it’s a duplex, triplex or fourplex does not mean it’s a good deal. You still have to run your numbers.
And finally, fear. Fear can cause … This is the biggest mistake of all. People get scared and they never get the white belt. They get scared and fear causes them to miss out on knowledge and education and networking, and holds them back until 50 years later they haven’t done anything with their life, because fear drove them everywhere. Fear can cause you to never start, and that’s the biggest mistake of all. If there’s one encouragement I can give you guys today is go after it, get out there, make offers, go look at properties.
If you see somebody working on a house, pull over, talk to them. Overcome that fear and you’re going to do amazing things. You have all the tools you need. Let’s talk about fear for a second. When people jump into real estate, they feel like they’re jumping off a cliff. They feel like they’re free falling, but that’s not what real estate is. Real estate is not a free fall, it’s not a cliff. It’s like a hike. It’s a journey that we walk with our community. Real estate is a well worn path that millions of people before you have walked and millions of people after you will walk.
And what’s cool about the internet, and especially about BiggerPockets, is BiggerPockets is like, “Hey, let’s do this hike together.” Earlier I said you guys are one another’s competition. You’re also one another’s team members. You can help each other, because most of you aren’t the same area. And if you are, there’s enough to go around. We get to work together. “Here’s what’s working for you. Here’s what works for me. Here’s what I did. Hey, watch this.”
It’s like a group of friends on a hike, and it’s really cool. And at BiggerPockets, we’re a company that creates tools to help you on that journey on that hike, we’re like, “Hey, watch out for this pothole over here. Hey, here’s a cool hiking stick for you. Hey, here’s a backpack that will help keep you hydrated.” That’s what we do at BiggerPockets. We want to make you successful. You still have to do your own journey. You can’t get on my back, I can’t take you there.
I just want you to know that we are on the exact same journey together, but it only works if you work it. It only works if you work every single day at it, and you move forward, and you take some risks and you overcome your fears, but you’re not alone. So it’s not theory either. Just understand this is not theory. Everything I talked about today is just legit how real estate works. This is how they find deals. This is how they finance it. This is how I found financial freedom. It’s the same process we talked about today.
Three big questions to ask you guys. Number one, do you believe small multifamily properties can help you achieve financial freedom, financial independence? Are they going to be a big piece of your future? Yes or no. And be honest, you can say no if you’re not convinced. I don’t need to convince you of anything. Maybe it’s not the thing for you. Maybe you want to do like self-storage or you want to do townhouses. I don’t know. I love multifamily properties.
All right. By the way, somebody said there’s not many in my area, so let me just fire back. Who said you have to buy in your area? Right? Multifamily properties are designed so that you can hire a property manager. I don’t care where you live, buy where there’s multifamily. Totally doable. And you would be surprised at how many multifamilies are out there, even in your area. Multifamilies are everywhere. Within a half hour drive of you, I guarantee you there’s over 1,000. I don’t care where you live.
Maybe in the middle of Kansas, maybe not, but they’re out there if you know what you’re looking for. And a lot of them you don’t even know, though you will find them. Number two, yes or no, do you know how to start your search toward finding your first or next multifamily? Do you feel like you know how to start searching? You don’t have to be perfect at it, but do you have some action steps after this webinar you know what to do now? Yes or no.
Number three, do you have a good idea on how you’re going to plan to finance them? Again, you don’t have to have a perfect idea, but do you at least understand the different ways you can finance a property? A lot of confidence, but that’s great. I love the excitement. And like I said earlier, if you know how to do all this stuff, there’s nothing stopping you. Logically, it’s just math. It’s just business. It works. But in the words of Derek Sivers, one of my favorite speakers of all time, he said, “If more information was the answer, we would all be billionaires with perfect abs.”
What I love about this quote is the truth is we all know how to lose weight, we all know how to make money, we all know how to be a good husband, a good father, a good wife, a good mother, a good whatever. We know how to do these things. It’s not information that we’re lacking. You can get the information in a book, it doesn’t guarantee you’re going to be successful. What is the key to success? Action. And even more than action, I would add daily consistent action. Daily consistent action. It means doing things every day over and over and over to get better and better, or at least several times a week.
Imagine you went to the gym, you paid a hundred bucks a month for a membership at the gym. You showed up on a Monday, worked out real hard. Went home and didn’t go back for a month. Are you going to get in shape that way? If you ate really, really healthy for breakfast and lunch, and then you ate 5,000 calories for dinner every day. It takes consistency and it takes time doing the right actions.
But if you do that, consistency leads toward the results you want. Case in point, Dennis here, “Hey, Brandon. I want to thank you and BP.” This is an email I got from Dennis, “After attending your webinar on how to make a million dollars in real estate, I got inspired to take action. Last week I closed my first deal. I now have a triplex that is rented and will cashflow very well for me. I can now call myself a real estate investor. I have a plan moving forward and will make my business a success. Thank you.”
You guys, Dennis sent me this email just a few weeks after attending one of my webinars, the one on how to make a million bucks, which you can watch in the Pro replay room. He was in your exact spot. He learned how to do this, and within a few weeks, he had already pulled the trigger and did it. That’s action, and that’s what I want. I want to get … There’s 1,700 people here today. I want to get 1,700 emails a month or two from now that say, “Brandon, I was on your webinar. Thank you. I went out there and took consistent action and I bought a property.”
That’s the key there. Now, again, I don’t know why you’re all here today, I don’t know you individually, what brought you here, what your position in life is, if you’ve got deals already, if not, I don’t know. Maybe you’re tired of working a full-time job and you want out so you can watch your kids grow up, you can be a part of their life, or maybe you’re looking 20 years down the road saying, “I’d like to retire early,” or maybe you’re just jumping from thing to thing to thing to try to get that financial freedom and you just haven’t nailed it yet again.
I don’t know what brought you here today, but here’s what I do know. Here’s what I know in the depths of my soul. Number one, I know that real estate investing works, because it’s worked for me, it’s worked for millions of people. I know it works. It can help you build an incredible, amazing, powerful life of freedom, more time with your family and it can make you a fortune. It can make you a millionaire, multimillionaire and everything that comes with that.
And I also know that everything we do at BiggerPockets is designed for one thing, to help you get there. We want so badly to see you get there, because I remember what it was like to be working a 9:00 to 5:00 job where every Sunday night I had this pit in my stomach of, “Oh, I got to do it over again tomorrow.” And then I get there and I’m staring at the clock. I remember that feeling. I remember that pain. And I now have come through that, and now I’ve got millions in real estate and I’ve got passive income and whatever else.
No, money doesn’t make you happy necessarily, but I can tell you not worrying about money will make you happier. At least it made me happier, not worrying about money, not worrying about if you can bring your kid to the doctor or somebody gets sick, whether or not you can afford that stuff, having the ability to do that. I dedicate so much to my life because I know that the goal of life is not to spend every working minute making somebody else wealthy. Amen. As that, everything we do at BiggerPockets is designed to help you get there faster, with less pain. We want you to get there.
And so we built a membership, it’s called BiggerPockets Pro. I mentioned earlier, it’s designed to help you get there. Remember earlier I said that if you get better deals, you can have fewer units. You get financial freedom faster. How do you do that? How does BiggerPockets Pro help you do that? Well, first of all, we help you do more deals faster with less risk through one, our calculators. We already talked about that earlier. I showed you how you could analyze the deal in under five minutes.
Number two, you get to learn better. You get more content. We record these webinars and we keep them just for our Pro members. We also do Pro only events. We bring in economists, we bring in tax specialists to do invite only, Pro member only events. We did one a few weeks ago, it was amazing, on where the economy is headed. That’s part of our Pro membership. And by the way, here’s some of the webinar replays you can watch; How To Attract Private Money, How To Make Six Figures With The BRRRR Strategy, How To Make Five Grand A Month From Single Family Houses, How To Find Incredible Deals In The Competitive Market, and more.
Also, as a Pro member, you just build trust and credibility, because you’re in the gym, you’ve got your white belt. Imagine me going up to a black belt being like, “Hey, I would love to learn how to do karate or Jiu-Jitsu,” or whatever, and they’re like, “Okay. Well, have you ever shown up to a gym before?” “No, no, no, man. I don’t actually go to a gym. I don’t want to do that.” Okay. How serious do they take you? If you want to connect with black belt real estate investors, you got to get the white belt on. You got to prove that you’re moving forward.
Number four, as a Pro member, you get state specific legal forms, like a lease that’s catered to your state, approved by an attorney in your state to help you run your rental properties. You also save money on what we call BiggerPockets perks. We get discounts on a bunch of other companies that offer discounts for you as a Pro member. And then you get access to that BP insights, which gives you data on markets, on properties, on neighborhoods. Where’s the best place to buy? Where’s the worst place to buy? Where’s the market gone up? Where’s the market gone down?
All of that’s included as a Pro member. But you know what, again, if it helps you with one thing, if it helps avoid one bad deal, it’s worth it. Now I can read a bunch of other testimonials. Like Aaron here made $70,000 profits, or Patrick bought like 10 units in the first couple months after joining Pro. He said, “Final quick tick, I signed up for pro. I made my money back at the closing table.” But the point being, I just want to move this song, because either you’re going to do it because it’s a good investment for your business or you’re not, because it’s not a good investment for your business.
I don’t care much. All I care is that you achieve your goals. So how much is Pro? It starts at $100,000. You can write your check personally to me, Brandon Turner. Just don’t tell BiggerPockets you did it. I’m totally kidding. We don’t have $100,000, or 50 or 20 or 10. We don’t have that crap at BiggerPockets. If you want to go pay some get rich quick guru tens of thousands of dollars, that’s one thing. But in reality, we want to make this affordable as possible. So how about two grand a year? If you can buy one more deal this year or avoid one bad one, is that worth $2,000 a year?
Probably. But again, not everyone has 2,000. We want everybody to be a Pro member, everybody. Here’s the deal. We have two memberships, one’s $1,200 a month, I’m sorry, a year. 1,200 a year. That is our premium membership. That is for agents and lenders, primarily. Real estate agents and lenders is $1,200 premium. But it’s 390 for the Pro annual membership. This is for real estate investors. For 99% of you, it’s 390 bucks a year. And that works out to, what, a $1.10 or something like that a day? It’s like a buck a day. And like that instead, it’s also an expense write off.
If you’re using this for business, which I assume you would be, I don’t know else why you would have a Pro membership, you should be able to write it off. Talk to your CPA though, of course. But as promised, I said if you guys hung out with me the whole time today, I do have a code that will get you 20% off an annual membership for the first year. So instead of paying 390, you pay just $312. The code is podcast20, just one word. Podcast, the number two, zero, no spaces. Podcast20. Again, it takes it from 390 down to 312. And that’s today you pay 312 today, you don’t pay anything again for another year.
But in case you’re on the fence, let me throw a couple bonuses at you. If you go Pro today, you’re going to get a workshop we’ve recorded called 8 Steps To Rental Property Success. It was a full day workshop I did in Nashville, Tennessee. We recorded the whole thing. That’s included for anybody who goes Pro today. Finally, number four, you get a thing I did called the Finding Great Deals Masterclass. I sat down with four off-market specialists.
These guys are like some of the best at finding off-market real estate deals, and I just interviewed them, I said, “What are you doing? How are you making it work? How are you finding properties off-market?” And they go through all of their strategies. It is incredible. This alone is worth much more than the cost of Pro. Again, all of that is included if you go Pro annual today for only 312 bucks. That’s it. If you’re already Pro member, I don’t want to leave you out though, so go to BiggerPockets.com/alreadypro and put in that code podcast20 and you get the same thing.
And a couple of just FAQs, number one, this is only available for Pro annual members, not monthly. All right. And then finally, if you’re on the fence, you’re still not sure, let me just say this, do not sign up for Pro if you’re never going to use it. If you’re not sure, sign up and try it out. We offer a 30-day guarantee, 100% guarantee. If you don’t like it, just email [email protected], you get your full refund back. I won’t even know you did it. You can keep the bonuses just for trying it out. I just want you to try it. I want you to analyze like 30 deals. So try that, that’s my suggestion, is go run the numbers on 30 deals over the next 28 days.
Get a reminder on your phone, “Hey, do I really want to keep my Pro membership?” If you don’t, email [email protected] At least you got the full access to the calculators for 30 days. But try it, I think you’ll like it. Again, we do not want you to be Pro if you’re not going to actively use it to become wealthier. I think the perfect business is one where the business like BiggerPockets makes money only because you make a ton more money. That’s the perfect business model. And so that’s the only way I want you to go Pro is if you are planning to do that.
All right, final quick tip for the day as we go into the Q&A, it’s actually a quote I want to read, and this is one of the most life changing quotes I ever heard. Jim Rohn once said, “If you really want to do something, you’ll find a way. If you don’t, you’ll find an excuse.” In fact, let me read that again. I want to read that again here, because I’m going to probably put this on my Instagram later. Jim Rohn once said, “If you really want to do something, you’ll find a way. If you don’t, you’ll find an excuse.”
Now, the reason I bring that up is because whenever I teach on real estate, or people follow me on Instagram, or they come to a webinar that I’m doing, or they listen to a podcast, what people naturally want to do is they want to argue for their limitations, meaning like, “Well, this is why it doesn’t work for me. This is why I can’t do it. They try to argue for all the reasons it’s not going to work for them.” And maybe today you’ve thought that as well. Like, you’ve read something I said, or you heard something I said, or read something I wrote, and you’re like, “That just doesn’t work for me. Here’s all the reasons why. I don’t have the money. I don’t have the time. I got a family. I can’t house hack. I don’t know what BRRRR is. I’m not smart enough. I don’t have good credit.”
I don’t care. If you really want to do something, you’ll find a way. There are people who are less skilled, in a lesser position in life than you are, with a worse credit score, with a worse area they live in who have become multimillionaires through real estate investing. So don’t tell me any of those excuses. You can get through all of that. But the key is shifting the way you think. I learned this from Kiyosaki in the book Rich Dad Poor Dad, he once said that, “The poor say, ‘I can’t afford it,’ the rich ask, ‘How do I afford it?'”
The same way some people say, “I can’t do it,” and others say, “How do I do it?” So rather than saying, “I don’t have any money. I can’t invest,” say, “I don’t have any money, how do I invest anyway?” Rather than saying, “I live in an expensive market. I can’t find deals here,” it’s, “How do I find deals even though I live in an expensive market?” That’s the mindset shift that if you make, you never lose. Yes, you’ll have temporary step backs in life. I’m not saying things are always perfect, but you will never lose over the long haul because you’re always trying to better yourself.
You’re always asking the question, “How do I do this better? How do I figure it out? How do I get through this?” And if you have that attitude, you are going to be such an amazing success story. Maybe we’ll bring you on the BiggerPockets Podcast to come tell your story. That’s the truth. Agreed? Let me know. All right, you all, with that said, we got to get to some Q&A. Was that helpful? I hope so. So if you want a couple free gifts, first of all, just free gifts for everyone for hanging out for the whole webinar.
You can get an e-book, or I should say it’s a resource guide on some of my favorite real estate books. You can download it right now everybody by going to BiggerPockets.com/books, B-O-O-K-S. Again, BiggerPockets.com/books, B-O-O-K-S. You can also get today’s slide deck by going to BiggerPockets.com/multislides. Again, BiggerPockets.com/multislides. You get the entire slide deck from today’s class. And you can get an e-book I wrote called 7 Years To 7 Figure Wealth: A Roadmap To Earning Your First Million By Investing In Small Multifamily Properties.
You can get that by going to BiggerPockets.com/7years. That’s the number seven, years. All that’s included just for hanging out with me today. I just want to reward you guys. That’s it. Let’s do some Q&A. Again, I’ll do some more shout outs in a little bit, but I want to get to some questions. I want to be able to help you guys out. What questions you have? Put it in the chat area right now, and we’ll go … By the way, somebody said, “What’s the URL for upgrading to Pro?” It’s just BiggerPockets.com/proupgrade. BiggerPockets.com/proupgrade.
First question, what is better, single family or multifamily? Man, whatever you want. I mean, you could literally do either one, single family or multifamily. The thing I love about single family houses, honestly, is that there’s so many of them, they’re everywhere. And they’re a great lower cost way to get into real estate, to start cutting your teeth to get some knowledge and experience. Multifamily allows you to scale faster. That’s why I’m a big fan of like the small multifamily space, where you buy like a duplex or triplex.
It is no harder to buy a triplex than it is a single family house. And so you can do either one. I like to recommend find that triplex, maybe live in one of the units so you can get an FHA loan 3.5% down, rent out the other units and then move on later on, like after you stay for a little while. I love that strategy, but really you could become a multimillionaire with either one. So pick something and just dive in, learn about it, grow, and you’re going to crush it.
As long as you’re focused, as long as you are learning the business and doing it right. All right, other question. Let’s see. How do you find the after repair value or the value of a property for multifamily properties? That’s a great question. Here’s the thing, I want to differentiate between small multi and large multifamily. Small multifamily in the lending sense or in the valuation sense means duplex, triplex or fourplex.
Now, larger multifamily which are commercial properties are five unit and greater. We’re going to separate here real quick. Small multifamily properties are valued typically based on what other small multifamily properties have sold for. This duplex was 200, it sold for 200,000. This duplex went sold for 220. This duplex sold for two 10. Okay, yours is probably worth around 210. That’s how you figure it out on the small side. Now, it’s harder to find, especially in a smaller area, it’s kind of hard to find comps sometime, which are comparable sales, but that’s still how they typically do it.
Now, on the larger multifamily side, it’s based on something called the income approach. In other words, a commercial property which could be like a … It could be a warehouse, it could be a retail center, a shopping mall or a five unit or greater multifamily, those are valued based on the profit they generate. I don’t want to go into the necessary details on how cap rates and NOI work, but the basic ideas, the more profit a property generates, the more it’s worth. And that would make sense, right?
Because you can’t really compare apples to apples when it comes to of those larger deals. If you buy a 32 unit apartment complex, you’re not going to find another 32 unit apartment complex with the exact same rents in the same area. So instead of looking at the comparable sales, we look at how much profit they generate. And by the way, we take out the … We don’t include the mortgage in that, because mortgage rates could differ. We just look at like what would the property actually make in profit if it weren’t for the mortgage payment? And then we base that, what do other investors expect to get on their money? What kind of return do they want on that?
And based on that, that’s how cap rates work and NOI. That is how we generate the value of the property. If you really want to get detailed, that idea is NOI, which is how much profit a property generates in a given year, that’s net operating income. It brings in $100,000 in profit in a year, not counting the mortgage or CapEx, but that’s just getting into the weeds. It brings in &100,000 in profit. Now, in this area, most investors would be looking …
They’re buying a property that generates a 5%, what we call 5% return on that, which is like a five cap. You take &100,000, divide it by 0.05, and you’d get a value which I believe is, what, $2 million. That property would be worth 2 million. That’s how we evaluate the larger deals. I know that got a little bit complex and you can read entire books on that. In fact, I have a book coming out soon on multifamily, it’s called The Multifamily Millionaire, and we’ve got two volumes of that. It includes all of that in there.
So you’ll learn more if you want to check out that, but that’s the idea. That’s how you value multifamily properties, whether it’s small or large. All right, the cool question came in. The 1% rule, is that a good rule to use or not? Let me explain what the 1% rule is for real estate investors, then I’ll explain if it’s a good deal or not, a good idea. The 1% rule basically says that a property rents for 1% of what you can buy it for. $100,000 property rents for $1,000 a month.
And the general idea is if it’s better than 1%, good, if it’s lower than 1%, bad. Now, is that true? No. Now, let me explain. The 1% rule can be helpful. I mean, if you got $100,000 property that only rents for $5 a month, you can pretty much say, “Yeah, that’s a terrible deal.” It’s just a basic way of saying, “Is the rent high enough to make money off whatever you buy it for?” The 1% rule can be helpful for doing a quick and dirty like, “Oh, yeah, that’s a 1% rule. That’s a 2.2% deal. That’s a 3% deal.”
Typically, greater than 1% can be better and lower than 1% is worse, but it’s not always the case. There’s too many variables involved. Like, who pays the water bill on the rental property? How much are taxes? In Texas, you might pay $5,000 for taxes. In Ohio, you might pay $30. It’s drastically different. You can’t use just a general rule of thumb, which is why we built calculators at BiggerPockets so you can run the numbers, like the actual numbers, like, “This is the income. These are all the expenses.” Boom, boom, boom, boom, boom.
And then what type of return are you getting? Is the 1% rule helpful? Not very. Only at a very high level pass like, “Okay. Yeah, that might be an okay deal. Now I’m going to take it and dive in deeper and do the real work.” That’s the 1% rule. All right, other questions. Jacob said, “Hey, you said you have thousands of units.” Not quite, I have like 1,700. He says, “Your tool looks great and all, but do you actually use them for your real estate investing?”
The short answer is yes. For anything under 50 units, I use my … The actual BiggerPockets Calculators, that is what I use for all of my smaller stuff. But on my large apartments and mobile home parks, they’re not set up for that. I mean, think of how complicated a mobile home park is. We’ve got 10 different types of properties in there. We’ve got raising money from private lenders. We’ve got multi-level lending options in there. We’ve got so much complication. We just don’t have that in the BiggerPockets Calculators.
Maybe someday we’ll build it. But honestly, there’s probably only a handful of people in the world that need that level, so it’s not worth us building a tool for the 50 people in the world that are ever going to use it. The calculators, yeah, I just bought a condo, duplex condo. It’s like two unit condo, I used the BiggerPockets Calculators for that. I bought a triplex recently, I used the calculators for that. I bought a single family, I used the calculators for that. In fact, I flipped a bunch of houses last year, I used the calculators for every one of those.
I personally use it because I don’t trust my own … I don’t want to do a spreadsheet, it’s too easy for me to make mistakes. And the BiggerPockets Calculators just make it easy, they’re just there. It saves them in my account. They keep me organized and they make sure I don’t actually screw something up, so that’s why I like them. Sometimes in multifamily properties, the owner pays the utilities and other times the tenant pays the utilities, so Christian asked, “How do you know who pays it?” This is tough. The short answer is … And I’m using that phrase a lot lately.
Part of the answer is you can talk to the agent who’s selling the property and find out. How is it currently set up? But it’s deeper than that, because the way that it’s currently set up doesn’t mean that’s how it has to be set up. So maybe you could change it later. There’s a lot involved here. And in fact, in The Multifamily Millionaire book that I wrote, I got a lot on this topic, because it’s such an important topic. But part of it is the layout of the house or the property.
If it’s a house where all the water lines are mixed with one another, it’s hard to separate the water meters because the bathroom water is the same. The water that goes into the toilet in unit A, is the same water line that goes into the sink in unit B. I know it sounds gross, but that’s how water lines work, right? Not drain lines, I’m talking about the water supply lines where the water goes in, right? So you got to separate those if you want a separate metering. Now, there are companies, like I mentioned, Truesubmeter.com. They’re a company that will let you put on a meter on the device itself.
So I can actually attach the device to the toilet, to the water heater, to the kitchen sink. And that way you can separate the meters that way, it’s just a little more complicated. And then the fourth piece of the puzzle of knowing is, is it normal? Can you get away with it? What I mean by that is like, if you … Let’s say you had a property where you are charging $1,200 for rent, and you wanted to add on the tenant pays their own utilities, can you find a tenant in that area that’s real in to pay 1,200 and pay their own utilities?
If it’s completely out of the norm that nobody in that area would ever, like no tenant would ever pay for the water bill, maybe it would be hard for you to do that. Okay. In my experience, most cases, I don’t think I’ve ever had a tenant be like, “Oh yeah, I won’t rent that because I got to pay the water bill,” it’s just like, “Okay.” When I was a tenant, I thought the same way. We compartmentalize our bills. So there’s rent, there’s utilities, there’s my credit card bill, there’s all that. And so, yeah, great. If they don’t pay utilities, they’re like, “Oh, great. That’s cool,” but most of the time they don’t object if they have to.
So most of the time you can sub-meter them and they can pay their own. And I haven’t had a lot of pushback, but again, every deal is a little bit different there. Evan asked the question, he said, “Is long distance real estate investing better for high-priced areas?” It depends. I mean, I live in Maui, Hawaii, right? I live in Maui, Hawaii, it’s very expensive here. It’s million dollar plus houses everywhere. Is it better for me to go long distance? Well, it depends on what I’m trying to buy.
Flipping houses is amazing here. You can make, I mean, $100,000 on a flip here. But buying like single family houses to rent out, terrible. I don’t think I could ever cash flow on a single family house in Maui. The house are a million dollars, they don’t rent for that much. They only rent for a couple grand a month, maybe three or four grand a month. The math just isn’t there. But on a duplex or triplex, I can sometimes find it. Really, the area, every area has something that’s good there, but not everything works in every area.
So it depends on what you want. Find out what you want and then decide what area is really good for that. Mobile home parks, I don’t buy them in Maui, I buy them in Ohio, and Minnesota, and Wisconsin, and Florida, and Georgia and that. Where can you find private investors? Great question. Where do you find private investors to fund your deals? I mean, first of all, they’re everywhere, all over the place. The key is you got to connect with a lot of people, tell people what you do, and find people, and then find a way to present your deal to those people that they’ll want to invest with you.
In other words, go to local real estate meet apps, meet a lot of real estate investors. The best private lenders are typically real estate investors, usually older real estate investors that are at a different stage in their career. They don’t want to be crawling under houses, they don’t want to be dealing with tenants and toilets and termites. They want to sit on their couch and watch Dancing With The Stars. They might be very happy to get a return on their money and invest it with you, or people who have a really good income.
A lot of our investors that opened our capital work at Silicon Valley tech firms. And so they make amazing money from their jobs and they give their money to me to invest it in real estate passively for them. And so you can find them just by networking, connecting, going to real estate meetups, conferences. And then just tell everybody you know that you do real estate and that you are looking for partners or whatever. You can find those people, they’re all around.
Because at the end of the day, you don’t need to only … It’s not just multi-millionaires you have to raise money from, or you can raise money from. One of my very first partners was just a friend of mine from church. They had a line of credit on their house, a HELOC, they used that to gimme $30,000 to buy a triplex. We make about $5,000 every year on that money, and technically, it’s no money down for them. And so that was one of my early partnerships and those people are everywhere. But you got to have a good reputation, you got to have knowledge, you got to have experience, or at least experience from knowledge even if you’re brand new.
You got to have a reputation that says, “I’m trustworthy and I know what I’m doing.” And if you have that and then you get around enough people, you will find private lenders. Jake said, “Brandon, where do you invest in Ohio?” I had a property in Cincinnati, I sold that, and now I have a mobile home park in Fostoria, Ohio. Fostoria, which is up North. Can you do this in Canada? You can. I have friends that invest in Canada. I have friends in Canada who invest in the US. I have friends in the US who invest in Canada. So it’s doable.
Canada is typically more expensive and harder to get cash flow, but it’s still doable. Especially if you get in the middle of the country, like smaller towns, more rural areas, you can do okay there. We’re going to do one more question. Before I get to that though, let me just say thank you everyone for coming today. I hope you learned a lot. I hope that this wasn’t just hype. I hope you got some … I know I get hyped up and excited about this stuff, but I hope you got some concrete steps next to be able to do. That’s always my goal. All right, this a great question. This is what I’m going to end with, because it applies to everybody here today.
I got a question in here from Chay, and Chay said, “I’m 21 years old. I’m reading your book. This is my first webinar I’ve been to. What’s your best advice?” This is my best advice for everybody getting started with real estate, whether you’re 21 or 41 or 81, look at what the steps are needed to get successful. In other words, don’t just look at the success, look at what are the tangible actions needed. To use a metaphor of working out or diet and exercise, if you want to lose weight, that’s the goal, what are the actual steps?
“Oh, I’m going to eat 1,500 calories a day and I’m going to work out 30 minutes every other day.” That’s tangible steps. Then track that. Every day, keep track of that. When you track things, you’re more liable to continue them. And so know what you want, have a vision for where you’re headed to. So maybe you want to be a millionaire real estate investor, maybe you want to have 5,000 a month in cashflow. Great. “But then what does that look like? How many units is that?” “Oh, I want to have 30 units.” “Okay, great. What do you want to do next?” “I’m going to buy a single family house.”
“Okay, great. What do you got to do?” “I got to go find it.” “Okay, what are you going to do to find it?” “I’m going to go drive around.” “Okay. When are you going to drive around?” “Tomorrow.” Put it on your calendar. What we basically did is we took a lofty goal that almost feels out of reach, and we made it into an actionable thing that we can put on our calendar. And if you get into the practice of doing that every single day, “What are my goals? Where am I going? What do I got to do right now to make that come closer?” and you build a habit of consistently driving closer to that, you’re going to achieve anything you want in life, whether it’s real estate like I teach or something totally different.
It’s that consistent daily action that’s going to make a difference in your life. And so many people wish, and want, and hope, and dream, and plan and desire, but they don’t do. They just don’t do. And so if there’s one piece of advice I’d give you today is do. Every single day do something that aligns with your vision, and you’re going to go far. Thank you everyone for coming today. I got to get out of here. You guys are the best.
If I didn’t give you a shout out, I apologize to everyone I didn’t give a shout out to. There was a lot of people here today. Hundreds of people said they’re going Pro, so I want to give you all just a big, “You guys are awesome.” Congratulations. Thank you for joining the Pro family. And yeah, thank you. Without further delay, I got to get out of here and see my family. For BiggerPockets.com, my name is Brandon Turner, signing off. All right, I hope you guys enjoyed today’s show. That was me teaching you how to invest in small multifamily properties.
For those people interested in what we talked about in the show about going to become a BiggerPockets Pro member, remember that discount code is podcast20. Podcast, P-O-D-C-A-S-T, and then number two, zero. It’s going to knock off 20% off your annual membership the first year, and get you a whole bunch of cool bonuses that you saw in there. And honestly, the bonuses, my goal is that the bonuses alone are worth like a decade of paying for Pro. That video series I did with David Green, all about No And Low Money Down Investing is gold.
And I mean, everything in there, like how to find the off-market real estate deals and all that. So definitely check it out. It comes with a guarantee anyways, so if you don’t like it, you can always ask for a refund. But I really want you guys to try it out and go use it to go buy some small multifamily properties. It changed my life, it will change yours as well. That’s all I got. So thank you guys for hanging out today and listening to the show. For Biggerpockets.com, my name is Brandon, The Multifamily Millionaire, signing off.
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