Short on Cash & Experience? Consider THIS Strategy to Break Into Multifamily Investing
I believe multifamily investing is one of the best real estate strategies to achieve your financial goals because it generates passive income and long-term wealth. You might actually agree with that, but DON’T believe it’s right for you.
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Most investors think that because they don't have the money for a multifamily property, they can't get started. My normal response to this objection is to raise money from others (and I write extensively about this here on the BiggerPockets). However, there’s an alternative:
Refer the deal to someone else (and get paid for it).
I had a student who brought me a deal in Columbus. He found it, analyzed it, and was getting close to a verbal agreement around a number that made sense. He then called me up, and we determined that the deal was in fact going to work. We agreed on a $45,000 referral fee payable at closing, and I would take over from there.
This would let him say that he did a deal AND he got paid $45K. Experience + getting paid. Very cool.
In an environment where deals are harder to come by, finding and pre-negotiating a deal HAS HUGE VALUE. That’s something you can get paid for.
And it’s not difficult to get started: You have to learn how to find deals and how to analyze them (I’ve written about both of these topics!). You don’t necessarily have to learn about raising money, building a team, performing due diligence, or dealing with property management. You just have to get good at analyzing deals, which is a skill you can learn in a few weeks.
The Key to Referring Deals to Others
I have people email me like this: “Michael, attached is a 25-unit deal in Orlando. Let me know what you think.”
First of all, answering that question will take some time, and even if I were to answer the question, you have no control over this deal. All you’re doing is sending me an unqualified lead, of which there are hundreds.
Don’t be that guy or gal.
Instead, make it easy for the person you’re referring the deal to. Analyze the deal, figure out the most you can pay, and make an offer. If you either start negotiating around a number that makes sense, you have a verbal agreement on a number that makes sense, or (even better) you have a signed Letter of Intent for a number that makes sense, THEN (and only then) contact your potential buyer or partner with the deal.
Now, that the deal is qualified AND you have some kind of control over the deal. That’s what makes working with you so valuable. You have an “in” with the broker or seller, something no one else has.
Get in the Multifamily Investing Game!
If you’re looking for a way to get into the apartment building investing game, bird-dogging or wholesaling deals might be a great way to go. You just need to get good at analyzing deals. Then refer deals that are properly underwritten and pre-negotiated. This is a skill you can get paid handsomely for, it’s not terribly hard to learn, and it gets you started with multifamily investing.
Is this a strategy you’d use to help break into the multifamily game?
Let me know with a comment!