How do I make money on a deal with investors involved.

Question

I’m trying to become a real estate investor. With little capital and little experience. But if I can lay in bed with an investor, how can I make money out the deal.

Don Konipol · Answer

@Matt Popilek

Congratulation on the deal you put together.  Problem for the OP is that at this point in time he has neither the knowledge to recognize a great deal, nor the experience to put together a syndication, nor the capital to invest.  To make even a modest amount of money you need at least one of the three;  to do a more substantial financial gain you need two of three, and to get wealthy you need all three.

It starts with education.  And not a how to flip property seminar, mentoring nonsense.  The beginner should take a beginners course on real estate, and learn all the fundamentals and legal theory as a foundation.

Todd Dexheimer · Answer

1. Buy buildings with partners that together have the money and track record, just make sure your goals truly align and that you will all get along.

2. Syndicate – this in my mind should be done by sponsors that have experience with small multi-family at a minimum. A syndication is basically gathering a bunch of people together to passively invest in your/your partners deal.

3. Raise money for a Syndication – This is a great beginner’s way for someone that has a network and wants to get involved in the deal. This allows you to invest in the deal and build your investor network as well as likely take part in the General Partnership. You will need to do other things in the LLC in order to get paid, as you can’t raise money without a broker’s license and get paid, so talk with the lead sponsor to work out a deal that legally allows you to be involved.

4. Be a bird dog and find the deals for other apartment buyers. You can get paid $50k or possibly more for finding the right deal for a buyer. Getting good at finding deals can be a fantastic asset and can really help propel you into success. The best way in my eyes to get paid by the buyer is to use your fee as an investment into the deal and a way to get a small percentage of the general partnership. Pre-negotiate this and be sure to have a contract with the potential buyer that protects your interest.

5. Volunteer or get paid to work with an investor. Be sure you can add true value by asking people you know to help them. I would try to get to know investors before just saying you will volunteer for them. The best way is to form a relationship with them and then start adding value to them as often as you can. Eventually, after you have their trust ask for a paid position if you think one exists or ask to volunteer. As you add value, you may be able to get small percentages of the General Partnership.

6. Start small. This is what I did. When I started I was buying 1-4 unit buildings for rentals and I was completing flips. Really buying any real estate that will make you money will be good experience, but buying real estate that is closest to you final goal is the best. The other thing with this strategy that I would suggest is to use private money and partnerships in order to build relationships. I know you will give up some of the deal, but you will be rewarded with potential money partners when you make the transition.

7. Become a property manager, real estate agent (commercial), appraiser, inspector, mortgage broker, etc. Becoming a professional that works with the industry is a great learning experience and a good way to build income and networks in order to do it yourself.

No matter which way you choose, get started today. Get educated by reading books, attending real estate events and listening to podcasts. Get started shortly after by implementing 1 to 3 of the above steps. Then after you are ready move to your strategy, which may change as you gain traction. The key is not to wait too long. Personally, I think in less than 5 years you should be ready to implement your own strategy and crush it in Apartments.

Matt Popilek · Answer

If you find the deal, you can negotiate your own terms.  The last deal I did was a 22 unit building...I brought the deal, ran the renovation, and organized the lease agreement. I have $0 in the deal, and I am a 33.34% owner of the property. The investors funded the entire purchase and renovation funds.

The key to this is finding a REALLY GOOD deal. Everyone is bringing deals to investors...you want to be the guy that brings the BEST deal. Bring a deal that the investor can't say "No" to.

Look for 16% Cap Rate deals or better...the last deal I did started off as a 22% cap rate ended up being 14% after construction overruns, but I think they are still happy with 14% cap rate, and we refinanced all their cash out of the deal so end of day no one has personal cash in this deal.

On a personal note you might not want to "lay in bed" with anyone you don't know ;)

Kay Kay Singh · Answer

@Todd Dexheimer It is a input how to start in . Multifamily .Another thing high net worth investors can do is sign the loan as KP (key Principle) and get a piece of the pie .

Adrian Stamer · Answer

This is good advice, though you will have to educate and understand what a good deal is first.

Also Matt, I think you misunderstand how cap rates work. I believe the term you are looking for is cash on cash. Cap rate is a function of market risk and rarely will change on individual properties.

Joel Florek · Answer

@Davere Currie I always recommend people look to house hack a small multifamily to get started. This is a great way to purchase with a low down FHA loan and get some experience that people want to see. I would never invest my money with someone completely green. Always want to see at least a bit of experience. If you hit it out of the park with your own deal you may be able to do a few more without any investors and then get OPM involved to scale up to bigger stuff.

John Fortes · Answer

Steps to take

1. Educate yourself! This is going to be what you do for the rest of your life as you constantly tweak and insert what you learned into action.

2. Analyze as many deals as possible. Keep reviewing and learning how to spot a good deal from a bad deal.

3. Connect with like minded people.

4. Talk about real estate! Be vocal and intentional with your conversations. You never know who is interested and needs help. Since you have educated yourself and analyzed deals, great chance to partner with a money partner on that front.

5. Raise money for your own deals.

6. Find deals for others. Also known as bird dogging.

7. Invest in someone else's deal or syndication. Learn from the process and get involved someway, somehow.

8. Find a mentor and volunteer to help them for free. Add value to someone else for free education and building a friendship/relationship.

9. Write a blog, start a podcast, start a YouTube channel, or do all 3.

10. Be active on your social media platforms and create your own brand.

These are not step by step processes. Just guidelines to help you get to your end goal. 1, 2, and 3 are crucial but everything else tackle it in your own way and process. Just do it. Hope this helps, good luck, and God bless!

Kevin Medina · Answer

Try teaming up with an investor that can afford the down payment and if you have good credit you can put the renovations on 0% interest credit cards then pay them off when you refinance or flip the property.

Adrian Stamer · Answer

Understand completely. That’s why I am saying you aren’t using cap rate properly

Matt Popilek · Answer

@adrian stamer I'm not sure how you can determine my risk level with out reviewing my deal. You might want to think about your limiting beliefs. If you automatically assume risk with out knowing the details you might miss out on some really good opportunities.

How do I make money on a deal with investors involved.

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