Newbies: You Should Focus on Your First Deal And Nothing Else. Here’s Why.

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I want to talk to you today about the importance of focusing on doing your first deal.

You may have ultimate end-goals like quitting your job, working for yourself, securing your retirement or leaving a legacy for your children. In order to accomplish those goals with apartment buildings, you might determine that you need to own 100 units (or whatever the number).

Those are good and worthwhile goals, and they’re important. But if you’re just starting out on your journey, then you need an interim goal, something you can focus on, something you think you can achieve and something that opens the door to bigger things.

The one interim goal I’m talking about is to focus on your first deal.

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Why You Should Focus on Your First Deal (And Nothing Else)

  • Once you do that first deal, it proves to you not only that the whole apartment building investing thing works, but also that YOU can do it.
  • You now have experience and a track record that boost your self-confidence and make it easier to be taken seriously as a real estate syndicator.
  • You probably have a small number of investors that you can leverage into more dollars and/or referrals to other investors. This makes it easier to raise more money.
  • You probably have a good broker network in place, giving you deal flow you didn’t have before you did your first deal. This makes it easier to find the next deal.

All of this combined makes doing your second deal MUCH, MUCH easier. And that’s why you should focus like a laser on doing that first deal.

Related: Newbies Beware: Even If the Numbers Look Good, THIS Could Tank Your Deals…

What Should Your First Deal Look Like?

In order to define what your first deal should look like, start with your end-goal in mind. If you want $10,000 per month in passive income and you do the math, you might conclude that you’ll need 100 apartment building units that you acquire with investor money.

If you wanted to get there by single family rentals, you’d have to buy a lot of them, and the likelihood of reaching your goal in the next five years will be difficult, if not impossible.

Therefore, given your stated goal, your first deal should be an apartment building between 10 and 30 units. Let’s say you focus on a 25-unit apartment building as your first deal. And let’s say it takes you a really long time to get that deal done. By “long time,” let’s say it’s a year. Or even a bit longer. Definitely not in the “instant gratification” and “get-rich-quick” timeframe.

You were at first frustrated with how long it’s taking to do your first deal, but now you find yourself with a 25-unit building that you bought for $1M with other people’s money.

You’re stunned. You can’t believe it. All of sudden you’re seeing $2,500 per month in passive income, and you’re 25% towards your goal of a 100 units.

You’re actually more than 25% there. Chances are, you already have some other deals in your pipeline. And they’re probably bigger than 25 units. I’m willing to bet that next deal is somewhere between 50 and 75 units. And now you can see yourself doing that kind of deal. In fact, you already have about 60% of the money committed from investors. It most certainly won’t take another year and a half to do that second deal.

Six months later you close on your second deal, a 60-unit building, and you’re about a week away from putting a 91-unit under contract.

Related: Newbies: These 3 Simple Steps Will Prepare You For Your First Deal

Conclusion

Even though it took FOREVER to do your first deal, once you did, a whole new world of possibilities opened up for you. And in relatively short order (3-5 years), you’ve achieved your goal of 100 units and $10,000 of passive income.

Now you can do that which you REALLY wanted to do when you first set out on this journey. You’ve arrived. And it’s all because of that very first deal.

Do you see how critical your first deal is? Does it make sense not to be overwhelmed by your end-goal but set an achievable interim goal and focus like a laser on that and nothing else?

What does your first deal look like?

Leave a comment, and let’s talk!

About Author

Michael Blank

Michael Blank’s passion is being an entrepreneur and helping others become (better) entrepreneurs. His focus is buying apartment buildings by raising money from private individuals. He’s been investing in residential and multifamily real estate since 2005. He is the creator of the Syndicated Deal Analyzer and the eBook "The Secret to Raising Money to Buy Your First Apartment Building".

14 Comments

  1. Robert Blake

    $10k a month on 100 units WITH investors? That’s optimistic.

    I think I’m starting to hate the term “passive income”. Most methods don’t seem to be even remotely passive, but the concept of de-coupling the hours spent from the end result is certainly valid. Time for a rename! 🙂

  2. Brandon Stevens

    Very optimistic first deal i dont know too many investors that are jumping into a million dollar deal with a newbie…..go by a 4 plex learn the ends and outs then start moving that direction. Im all about big goals but you screw up something like that out of the gate you mighy not recover.

  3. Aleksandar P.

    Michael, thanks for all of your posts, but I really have a hard time picturing what you just described in this article. “Newbie”, who is going to start with $1M property and get investors backing up his deal? In what world this exists? Not in this, I can guarantee you that. Let’s be real here.

    • Nick B.

      I know a few people that did first MF deals as described in this article. However, all of them are members of one or another high priced guru programs. The passive investors are from the same programs as well. That solves “who would trust a newbie?” problem.

  4. Robert Steele on

    Unicorns and rainbows!

    Just get a single family home and learn to be a landlord. They are easier to manage, easier to get into and easier to sell if you find out you made a bad choice or figure out being a landlord is not for you.

    Sure you won’t make $2,500 a month but you won’t get killed if things blow up in your face either.

    • Justin Burkleo

      Newbie here. Can you please explain to me how my wife and I would go about purchasing a home to rent out? I currently have an opportunity to purchase a home for $95,000 that is renting for $900 per month. I can see the potential here but I do not have $95,000 cash and being a newbie it seems to me that cash is the only way I am going to secure this property. Am I correct?

  5. Allen Fletcher

    This is a good bit of advice, I have yet to experience this in real estate investing, but I have experienced it using other investment vehicles. Even if the investment does not go as well as you would have liked you have still broken the ice and done all of the foundation work necessary. With that foundation in place all you have to do is build off of it.

  6. Ryan Corris

    I am still learning and no where near my first deal. After reading this article, the statement that comes to mind is, “The journey of a thousand miles begins with a single step.” So whether you a buying a single family dwelling or a large multi family unit for your first deal, find out what you need to know and get the deal done. Unfortunately, I still have a lot to learn and it is going to be a little while before I get my first deal done.

  7. Eyan Lakhani

    Its still a first deal after all. Besides just finding investors and closing the deal, you have some responsibility as a syndicator.
    1) As a newbie who never did a deal before, using investors money is risky and not very wise.
    2) If something goes wrong, it would be heck of a problem to find investors for a years.
    3) Finding a deal like that as a newbie and closing it. Its very optimistic to it without a experienced partner.

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