All Forum Posts by: Jorge Abreu

 You should build relationships with lenders and local banks. That way when you have a potential deal, you can share the details with them and they can provide you with a term sheet showing exactly what you should expect. You can estimate closing costs anywhere from 3% to 4% of the loan amount but those are very rough numbers. 

 Let me know if you have any questions about the process.

Leverage

This is one of my favorite benefits of real estate!

Let's think about leverage.
With real estate, if we want to go purchase an asset, we can find a bank to potentially lend 60% - 80%, while we cover the difference. That's amazing! 

Why would they do this?

Real estate has proven to be a stable, consistent asset class and it doesn't look like that will be changing any time soon. Banks love to invest in real tangible assets (just like us). That is why financing terms can be so favorable for multifamily investors. 

Try to go ask your bank to lend you 75% of the money for your next stock purchase. Let me know what they say!

Here's an example:

Hypothetically if you bought a $200,000 rental without paying $200,000 in cash. Instead, you put in $50,000 as a down payment, and the bank contributed the remaining $150,000.

The cash flow you earn is based on the full $200,000 asset, not the $50,000 portion. This is the magic of leverage.

Even though the bank contributed 75% of the money, all you have to do is pay the mortgage and interest, and any excess cash flow or profit is all yours. No need to share it with the bank!

What are some of your favorite benefits of real estate? Do you think leverage is a good idea?

The Five Phases of a Value-Add Multifamily Syndication

Each real estate syndication goes through a progression of stages with a clear beginning, middle, and end, which ensures individual investors operate as one, according to a clear business plan.

Phase #1 – Acquire

The first stage begins with sponsors getting a property under contract. Not only can finding a great property be difficult, but this phase also requires impeccable underwriting skills and solid projection calculations.

Phase #2 – Add Value

The term “value-add” means exactly what it sounds like; we’re adding value to the property, which is why renovations typically kick off upon closing.

All in accordance with the business plan, transitions begin with the property management team and renovations on any vacant units. This phase can last 12 to 18 months or longer, depending on the time it takes for all tenants’ leases to expire and for all old units to be renovated.

Exterior and common area renovations may also be made, such as updating or adding light fixtures, a dog park, covered parking, or landscaping.

Phase #3 – Refinance

Since commercial properties are valued according to the income they generate, the whole point of the renovation phase is to fetch rent premiums to increase revenue.

Most tenants will happily pay an additional $100 per month for the opportunity to move into an updated unit, and if the apartment complex has 100 units, that’s an additional $120,000 per year in rental income, which, at a conservative 10% cap rate, equates to $1,200,000 in additional equity.

With that additional equity, a sponsor may attempt to refinance or, if the market is right, sell the property early. Although thrilling, neither of these is guaranteed. Through a refinance or supplemental loan, you would receive a portion of your initial investment back, while still cash flowing as if the entire amount were still invested.

Phase #4 – Hold

The next phase constitutes holding the asset while collecting cash-on-cash returns (aka, cash flow). Since the value-add phases are complete and the riskiest phases have passed, the focus shifts toward attracting great tenants and generating strong revenue.

Throughout the hold period, rent increases at a nominally low percentage each year, thus increasing revenue and contributing toward a steady appreciation of the property. The length of this phase, preferably 5 years or less, is based on the individual property, sponsor, and business plan.

Phase #5 – Sell

At this point, the property exhibits completed updates, increased revenues, and appreciation. So, the best use of investor capital is to sell the property so that they can seek their next investment project. During the disposition phase, sponsors prepare the asset for sale.

Sometimes the asset can be sold off-market, creating minimal disruption for tenants. Otherwise, sponsors muster through the whole listing and sale process. 

1) Am I wrong to assume that property managers should be able to provide ballpark opex numbers for me during the acquisitions process?

Ballpark numbers sure. But after a detailed analysis, they should be able to provide very accurate assumptions of how they expect the property to be ran. This is what they do and they should know this based on their portfolio. 

2) Is there a method that other people have had success with when estimating rehab costs in the St Louis market recently?

The most efficient way is to walk the property with a GC. It's really dangerous to 'estimate' rehab costs when you are buying a property. 

Meetups, Biggerpockets forums, conferences, Linkedln, etc. 

Additionally, all property owner information is public record and can be viewed on sites like Costar.

@Josh Oaten Is this a deal you closed or are just looking at? What is your role in this syndication? What are you looking to do next?

 I would highly suggest you spend a lot of time educating yourself on the process and find sponsors that you align with. The first thing you should always evaluate is the sponsor and their team FIRST and the deal second. 

You can do this by asking here on forums (like you are now), performing background checks, Facebook groups, Linkedln, or searching on professional websites such as VeriVest.

How to Create Investors For Life And Increase The Value Of Each Lead That Comes Into Your Company

Is your focus on how many investors/leads you can attract to your brand? OR How much value each investor, if nurtured correctly, brings to your brand?

1%-2% of leads that you attract will become investors

60%-70% of those are likely to invest again if you take care of them

So many times as business owners, we tend to look at revenue goals to determine how many leads we need to generate in order to reach the needed revenue for our business.

I want to challenge you to place your focus on nurturing each lead, what is the overall value that you are bringing to each lead, and how much revenue you are generating from each investor that has ‘bought in’ to your brand and business plan rather than focusing on how many new leads you can generate according to the metrics required in order to reach your overall revenue goals.

This is a mindset shift!

This is an investor centric approach. When you make this shift, you end up serving your investors at a higher level by creating content and services that they actually want when they need it which makes them more likely to see the value that your company has to offer them.

This approach will create true fans of your company that will in turn invest with you repeatedly, refer you to others, become raving fans for your brand on social media, and provide valuable feedback to you.

This will also help you increase revenue by reducing the cost of marketing. I encourage you to read the essay, - by Kevin Kelly. Think what just 1000 true fans can do for your capital raising efforts!

Remember...we have a moral obligation to add value to our tribe!

You are not only doing a disservice to your tribe, you're doing a disservice to yourself if you refuse to share your service, idea, knowledge, talent or product with the world.

Step 1: Customer Service Mastery

• Make each touch personal
• Build rapport with each investor
• Go above and beyond
• Be a really good listener
• Respond quickly to all inquiries including social comments
• Be accessible
• Be respectful always

Step 2: Create Transformation In Addition To Adding Value

• Bring them into your company by delivering value
• Provide excellent customer service
• Give them an initial offer to help them transform their mindset, portfolio, or financial well-being
• Once you have solved their initial problem via transformation, help them identify the next problem you can help them solve through an additional transformation you can help them make

Step 3: Investor-Focused Culture

• Be intentional and nurture the perception that your investors have about your company and you as an individual
• Your investor wants to see their future self in you
• Be authentic and transparent always
• Identify the future-based transformation that you want for your investors
• Ex: I want to create $100K/yr passive income for 1000 investors. Know what you're trying to accomplish for your tribe.

Do the following exercise to re-evaluate your company’s mission statement based on the idea of creating an investor for life.

I help (target market) achieve (initial transformation) by/with (initial product/service).

When our investors have achieved (initial transformation), they then want to (next desired transformation) I help them achieve this by (next product or service)

Ex: I help high-networth, passive investors achieve a high level understanding of the multifamily syndication model by providing FREE educational content and resources so when they are ready to diversify their investment portfolio, we can give them a variety of opportunities to create passive income with above average returns, and help them create generational wealth, freedom and choice for their families.

Value Ladder Creation

Increase The Life-time Value Of Each Investor

In order to create a successful and sustainable business, you need to work to maximize how much revenue and value in the form of referrals, testimonials and feedback you get from every investor you acquire from the time that they remain an active investor with your company.

Recommended Read - by Russel Brunson

Syndicator Value Ladder Example:

Content = Free Book with shipping = Coaching Call = Course = Event Ticket = $50K investment = Mastermind Member = $100K investment = Key Principal in a deal = General Partner Each step in the Value Ladder should offer a new and improved transformation. You want to make sure that you are only offering them the next step when they are ready for the next transformation. It’s your job to open their eyes to the value that you offer and the potential they have within themselves.

Self-Liquidating Offer: Be willing to breakeven on your initial offer in order to acquire a customer

The idea is to know what your cost to acquire an investor is so that you can determine what the cost of your initial offer should be. If your initial offer is $100, then be willing to spend $100 on ads to acquire that investor. Assuming you nurture each lead correctly, this gives you the freedom to spend the necessary funds to acquire say 1000 investors on your front-end, break-even offer because you know that the lifetime value of that customer comes on the back-end offers.

Order Bump, Up-Sell and Down Sell

You never want to put an offer out with only one thing to buy. You want to maximize how you can better serve your investors therefore increasing the value of your lead.

• Offer no-brainer add-ons as order bumps at checkout or opt-in for a free book or live event for example (bonus report, software, swag, etc)
• Offer different ways to be of service as attractive up-sells (VIP package, mastermind, coaching sessions, course offering, etc)
• If you are offering a product like a book or swag, give them an opportunity to purchase more than one at a discounted price
• Turn a ‘no’ into a ‘yes’: Offer a down-sell version of the same product at a lower price (course without bonuses or without live event ticket)

Strategic Bonuses

Bonuses are essential at helping your potential customers make the decision to purchase. It becomes a no-brainer!

• You want to overcome their objections with bonuses such as
• Coaching calls
• Checklists
• Tools/Software
• Lifetime access
• Facebook Group support
• Add-on course for value
• Video/Audio/Transcript version of the course

One Back-End With Multiple Front-End Offers

• Start with one self-liquidating front-end offer with a single back-end order bump
• Create a back-end offer with ‘no-brainer’ bonuses
• Add additional front-end offers that lead to the same back-end offer
• Once this is successfully done, you can add bigger and better back-end offers to increase the value of each investor lead.

The investor-centered approach to building your brand is fairly simple once you understand the concept that you have a moral obligation to serve your investors if you truly believe that what you are offering to them will improve their life and/or benefit them in some way. In order to create life-long investors, you must master your customer service, create lasting financial and educational transformation for them and create a culture that is focused on each individual investor and their needs. The best way to accomplish this is to create a value ladder that takes your investors on a journey of transformation by nurturing them with high-quality content and services built to solve their problems and then ultimately offering them life-changing investment opportunities that they turn around and share with their friends and family. This is how you create an investor for life.💥

Savvy investors find hot commercial real estate investments outside their local market by exploring out of area markets. If you take the initiative to look for commercial real estate outside of your local area, you are more likely to see decreased competition, easier deal negotiation, and you will probably be able to snag the property you had in mind with better terms than if you'd pursued a typical listing. For these reasons, it seems like a no-brainer - You need to find off-market commercial real estate!

Get to know your fellow investors

While most folks will immediately turn to online websites for real estate properties that are listed for sale, you want to buy off-market properties. So, it's important to approach things differently.

First, you want to get to know and make friends with other real estate investors. While at first, this might seem counterintuitive because you might think they are your competition, there's actually a TON of value in having relationships with people who share your interests.

Connect With Area Contractors

A good idea for individual investors is to connect with contractors in your desired market. Contractors often can help you find unlisted real estate because they know what renovations they've quoted and which owners have been considering a change. You might even consider partnering with a contractor to help you buy a distressed property and hit your investment goals.

Use Direct Mail For Investing In Off-Market Properties

A lot of real estate investors use direct mail to find off-market real estate. Direct mail marketing does not require a lot of money and you can help generate off-market leads for years to come.

Whether you are a new real estate investor or you've got some experience under your belt, you should consider direct mail marketing because it's a quick way to get your name out there.

Your first step in starting a direct mail campaign is to figure out your audience. This way you can craft a very well thought out targeted campaign. After you have created your mailing list, send out the mail to residential real estate, apartment building owners, and other types of properties that you’d like to have in your portfolio.

Try Your Hand At An Auction

You can find great deals at an auction as the properties up for auction may be distressed properties at a low price point. Likely, there are regularly occurring real estate auctions in or near any zip code, and this makes it really easy to connect to excellent off-market commercial real estate deals in any area!

Find Off-Market Properties Through Wholesalers

Wholesalers can help you grow your taxable income, add to your net worth, or develop rental income because they often have a lot of information on, strategy around, and insider knowledge about off-market opportunities.