Four years ago today I was wandering through life thinking I had made it. I was working a corporate 9-5 job, good pay and would use my 10 days of PTO for the amazing 1 week getaways. Jan 1st 2017 happened to be the last day of a vacation, my wife and I had enjoyed our Christmas and NYE. But then something came over me, I realized even after receiving a promotion at work that I was no happier. Not that I was miserable I just felt lost, I was wandering through life like the 99% of individuals we surround ourselves with.
Then something happened, I picked up Rich Dad Poor Dad and finished the entire book in one sitting. At first I was upset that no one ever told me about utilizing leverage and purchasing assets. The next thought was I needed to make a change not just for myself but for my family.
Fast forward to today I currently have 778 rental units across 40 buildings, an in house property management company and a newly founded hard Money Lending Company.
(Due to the rise of the syndication model unit count is often much less impressive than ones actual ownership. Our current model is syndicating about 25% of our projects with the remainder of our projects closing in a Joint Venture/Partnership. My overall ownership percentage is approximately 20%. Some I own as little as 7.5% others 100% just depends on the project.)
Before I go over the steps I took to get here, I want to highlight steps in finding a partner and expectations one should have.
PARTNERSHIPS!
- Make sure you enjoy the persons company! Good luck making a $1 million purchase with someone you can’t stand.
- Share in common goals. Ask yourself what do you want to accomplish? Is this goal shared with your partner?
- Morals/Ethics: Real estate just like money can expose both the positive and negative things in people. Make sure to find a partner that you trust with all of your information. At some point your partner will know your net worth, social security number, and you will share many bank accounts. Last thing you want is someone with a gambling problem that bets your operating account on black.
- Have regular conversations. A partnership, like marriage will mean that there is compromise and this can only occur if you are talking regularly to one another.
- Tasks, “who does what”? This is the most common question, and it does not have a straightforward answer. A partnership has to be fluid within its relationship, sometimes one will have to pick up the ball if the other partner gets bogged down. Each partner should adapt to determining what their best strength is. Something to note is that real estate has many different tasks that occur at different times. One partner may do 90% of the underwriting portion then the other partner will end up doing 80% of the asset management, this is ok and means the partners are gravitating to their strengths.
- Do Not partner with anyone who is:
- Lazy
- Untrustworthy
- Does not take accountability
- Looking to make a quick buck
- Thinks they know it all
- Unwilling to except criticism
Here are some of the steps I took to get to this point in my real estate journey.
Step 1 (Education): Read and listen to as many books and podcasts as possible. Below are the books I have read and/or listened to (real estate and business):
This is the most important step in your journey, you must be constantly educating yourself! If you don’t like to read, listen or educate yourself than unfortunately you will likely not find much success (although I am sure there are those out there that have succeeded without).
Rich Dad Poor Dad, Millionaire Real Estate Investor, Multi- Family Millions (Dave Lindahl), ABC’s of Real Estate Investing, The Book on Rental Property Investing, Hold, The Advanced Guide to Real Estate Investing, The Due Diligence Handbook for Commercial Real Estate, Millionaire Real Estate Agent, The Book on Managing Rental Properties (Brandon Turner), The Emyth Revistited
Crushing It in Apartments and Commercial Real Estate, Emerging Real Estate Markets ,The ABC’s of Property Management, Wheelbarrow Profits, The One Thing, Outliers, Start with Why, David and Goliath, Chasing Excellence, Extreme Ownership, The Compound Effect, The Entrepreneur Roller Coaster, Be Obsessed or Be Average, The 10x Rule, The Obstacle is the Way, Ego is the Enemy, Am I Being Too Subtle, 48 Laws of Power, Atlas Shrugged, Man’s Search For Meaning, Sapiens, Tools of Titans, Four Hour Work Week, Who Not How, Shoe Dog, Ride of a Lifetime, The Honey Bee, Living with a Seal, 10% Happier, Relentless, Zero to One, Can’t Hurt Me.
Step 2 (financing): To get a better idea of what I was capable of purchasing, I met with four different lenders and began a relationship to acquire funding. I decided to open a HELOC on my primary residence, this allowed me to have access to capital if I came across an available deal.
***How did I choose the lenders? I choose a larger bank (better rates), two local banks (less restrictions, and one in which I already banked.
Creative Financing:
- HELOC – Home Equity Line of Credit.
- Seller Carry – Have the seller use a portion of their proceeds to cover a portion or all of the downpayment.
- Hard Money to cover full cost of purchase.
- Bridge loan (A lender who will lend the amount between the actual loan and down payment). The lender will typically take a 2nd position lien.
- Utilizing acquisition fees to cover your portion of a down payment (typically done in deals with a partner).
- Utilizing assigned insurance funds to act as a credit at closing.
- Asking for a credit at closing for upcoming repairs (typically seller will increase purchase price and then the difference will be a check or credit to the down payment).
- Transactional funds: House Flipping and Wholesaling.
- Refinance Funds – BRRRR
- Leveraging a promissory note from another investor who is in the deal. Example the investor has $200k, rather than syndicating or having them invest all $200k as equity do the following: $100k goes towards equity the other $100k is a loan in which my group utilizes as equity into the project. Very similar to seller financing except the funds are coming from another investor.
Step 3 (network with everyone): During my lunch breaks at work and in between changing diapers I would call/text anyone I knew or didn’t know to discuss real estate. Friends, brokers, lenders, attorneys. Anyone who either had a relationship to investing or was a person I looked up to based on their successes.
Find everyone in your network that is smarter than you and begin networking and explaining your goals. They likely know other smart people and those smart people will know someone who invests in real estate (Because smart people invest in real estate… just like A=B B=C A=C)!
As I have grown in my investing career I have come to realize that attending conferences and joining masterminds is necessary for continued growth. Do not focus on the price tag of the coaching, rather focus on the results that it can bring. It takes only one deal to recoup the cost of joining a mastermind and can lead to long lasting relationships.
*****I can't underscore how important networking is, I was able to link up with an experienced first partner who helped (and still helps) guide me through REI.
Step 4 (analyze deals and market): Analyzing multiple deals everyday as well as market rents for the areas I was targeting. I regularly searched through Zillow, realtor.com, Loopnet, Crexi and Trulia. I used these sites to find properties for sale, current rents, as and look over previously sold properties.
TOP 3 things I look for in finding a deal:
- Does the property pay for the residents’ utilities? If so this creates an opportunity to billback the owner.
- Are the rents under market (this is obvious but important to note).
- Is there an opportunity to add features that will increase the properties value? Extra bedroom, in unit laundry, or converting a leasing office into an apartment.
Step 5 (leads): Immediately I realized that going about finding a deal through Zillow was nearly impossible and that brokers are not incredibly willing to spend time handing off deals to a newbie. So…. What did I do?
- Started posting on Biggerpockets (I received my first deal through a BP real estate agent)!
- Downloaded a list of multi family owners from Listsource.com
- After receiving the list I searched for phone numbers and began looking up every property (assessors website and Zillow) and becoming familiar with the neighborhoods. I would also walk the neighborhoods and properties over my lunch break and on my drive to and from work. (this is before I made a call or sent out any letters).
- Once I had a decent understanding of my criteria I began hand writing letters (191 to be exact) and calling the phone numbers I was able to gather online.
*****This was the catalyst to me finding deals and launching my career***** I was able to do six deals from that initial list.
- Create dynamic dialogues with brokers and wholesalers. Not everyone is going to provide you results, but with the right questions every resource should provide value.
Step 6 (start networking group): After attending the local REIA a few times and receiving a lot of value I realized that starting another group would bring at least twice the value. With the help of many I began a networking group which now after 3 years has over 2000 members and regular attendance of 100+ individuals a meeting.
Alright well as I write this its January 1st of 2021, lets all create concrete goals and dream big. As some of my favorite mentors say Education X Action = Massive Results!
Please let me know if you have questions or how I can help!
