Multifamily Myths: Why Inexperienced Investors Think They Can Raise a Million Dollars


A few months ago while on vacation in Hawaii, my wife Suzi and I had just sat down for breakfast at one of our favorite restaurants. As we were perusing our menus, a man walked by our table talking on his cell phone and was seated at a table nearby. I saw him but thought nothing of it. Suzi, without even looking up from her menu, immediately recognized the man’s voice and looked up with wide eyes and whispered to me, “Oh my gosh, that’s Magic Johnson!”

I’m not good with faces and names, and I don’t follow sports except NASCAR, so my failure to recognize one of the most recognizable sports figures of all time sitting just feet from me comes as no surprise to me. It’s also not surprising that Suzi would recognize him without even looking; she can pick out anybody from anywhere, and she’s been a sports fan her whole life.

Would you recognize a good deal if it were right in front of you?

I get asked a lot about how to raise money to buy apartment buildings. The question usually goes something like this: “I found a great deal on an apartment building. I don’t have the money so how can I raise a million dollars to buy it?” I ask about their previous experience in multifamily. “I don’t have any experience, but I found this really great deal…”


Here is the problem. I don’t follow basketball, and thus I didn’t recognize the most famous basketball player of all time right in front of me. If you have no multifamily experience, chances are that you wouldn’t recognize a great deal if it was seven feet tall. When you have reached a certain experience level, you will know a good deal instinctively, just like my wife can recognize a famous person without even looking up from her menu.

Cut your teeth before your investors cut a check.

It is easy to think that you know everything there is to know and have learned everything there is to learn, but the truth is that every year you will be proven wrong when you realize how much better you are at what you do than you were the year before. This is why organic growth is the key to long-term success. As you get better at investing in real estate and after you’ve made your mistakes, you can grow into larger deals in a safer manner. Going too big too soon means you’ll make your mistakes on larger deals, where they will cause you (and perhaps your investors) greater injury. So my advice is to mess up small so you can grow big.

Related: Multifamily Myths: Why Newbies Think Multifamily is Easy to Buy & Finance

You are an added risk. Your journey is to mitigate that risk.

Many high net worth folks are looking for alternative investments so they can diversify their portfolios. They’ve worked hard to get to where they are in life—such a place that affords them the financial resources to participate in opportunities that most people can’t. They are looking to take calculated risks, and most view real estate as a fairly safe bet. If they are inclined to invest passively, i.e. in a deal that you find and control, there is an additional risk component—you.

Related: How I Raised $5 Million to Buy an Apartment Complex in 2 Weeks — While on the Beach

These savvy investors want to mitigate that risk. In other words they want to know that you can perform. That you can do what you say you can do. That you know a deal when you see one. Their confidence comes from what you’ve done—your experience, your track record, how you’ve performed in the past. This glance in the rear-view mirror is what gives them clarity to see through your windshield.

Prove your worth.

As you progress through your career, document your accomplishments. Develop a spreadsheet of your deals and their financial performance. Make before and after photo exhibits. Show your initial projections versus your actual results. Prove to your investors that you not only know a deal when you see one, but that you know what to do with it when you’ve found it.

The saying that “if you find the deal, the money will follow” isn’t true anymore. You also have to prove yourself. It’s time to change the saying to: “Perform for your investors, and the money, in increasing amounts, will follow.”

Finally, if you see me in a restaurant and say hello, please don’t be offended if I don’t recognize you, even if you’re seven feet tall and one of the most famous people in the world. If you are, you should probably say hello to my wife instead.

Have you successfully raised money for a big multifamily deal? What advice would you give to newbies?

Let us know with a comment!

About Author

Brian Burke

Brian Burke has raised tens of millions of dollars from accredited investors and family offices during his 25+ year real estate investing career. His focus is on residential real estate but has also done development, self storage, and commercial deals. Brian has completed more than 500 single family flips and has acquired nearly 1,000 residential rental units comprised of large apartment complexes all the way down to single-family homes.


  1. Joe Foster

    Thanks for writing this and putting honest perspective on what it takes to get money from a private investor. I had to write back against one other author here at BP that wrote about telling stories and what high school ya went to when trying to lock down money.

    As a high net worth investor and private lender, you are correct, I want to see your experience and why I should trust you with my money. If your first deal is asking for a mega buck, unless you have a garage full o vintage cars for collateral, well I’d consider starting smaller, much smaller.

    For local loans I’ll take a chance if the collateral is good, that is, the property checks out and it’s a SFH, you have some trades experience and when we talk I like you. Big one is that you listen and not wait to talk. (Pulp fiction)

    Thanks for spreading truth.


    • Brian Burke

      You bring up a great point, Joe, that I didn’t cover in the article. There is a big difference between raising debt and raising equity. As you say, you would be comfortable taking a chance if there is good collateral…a common thought when making a LOAN.

      Many new investors think that raising EQUITY to buy multifamily isn’t a big leap from borrowing private money for a house flip. Not true…debt has collateral, equity does not, therefore your experience and track record are the main things the investor can hang their hat on. If you don’t have experience and a track record, you have to develop it, and that takes time. There are no get-rich-quick shortcuts in this business except on late-night TV.

  2. Curt Smith

    Thanks Brian. What I think might be missed by readers I’ll bring focus to:

    ” If you have no multifamily experience, chances are that you wouldn’t recognize a great deal if it was seven feet tall. ”

    I feel this is a huge statement. This is why there are boot camps, gurus etc etc and being mentored through your first few deals makes alot of sense.

    All commercial has the problem of deal analysis. What expenses are missing from the sellers description? What about defered maintenance? Security deposits in a separate bank account that comes with purchase. Not even mentioning the tactics needed to keep earnest money from going hard too soon.

    • Brian Burke

      Yup, there’s a lot to it, Curt. And not just the easy stuff that can be taught. There is hard stuff that is only learned by doing. You can’t learn how to fly a helicopter by reading a book. It takes instruction and most importantly, practice and experience. Same goes with commercial real estate (which includes apartment complexes!).

  3. Jeb Brilliant

    Brian, this is gold. I’m reading every single one of your blog posts and am learning that it’s better that I’m building the relationships with potential investors while I build my own portfolio (experience). I actually went and met a few big MF PM firms, some contractors and brokers during my trip to Indy last week just so I have some relationships (building blocks) in place when the right deal is presented.
    I did the same prior to buying my first SF in Indy.
    Thanks for the good reads.

  4. Ken p.

    Thanks for an interesting article, Brian. We are doing our best to follow the advice that you lay out, so when the time comes and we want to make our move into large multifamily, we will have the proper background. After buying a few single-family houses, we bought a group of 18 units and have been turning the operation around from the state that the previous landlord had left them in. We evicted half a dozen of the original tenants who had problems paying in a timely manner, we switched most tenants to a ACH payment system, and we’ve rehabbed two thirds of the units. Gross rent is up over 20%, tenants are renewing the leases, and we are plowing the money back into further upgrading the units and the property. This year we’ve added four more units at that site, and are looking to grow further. Our goal from the beginning has been to use this experience to build a resume, and then go on to a large property with other investors, at about the five-year mark. Thanks for the words of encouragement that we are on the right path.

  5. Ann Bellamy

    Yes, Yes, Yes! Thank you Brian, for writing this post. Our local REIAs and investing groups are drenched with Dave Lindahl students, a guru teaching investing in large multis and syndication, since he is a local boy who ‘made it big’. They show up telling everyone they are buying large complexes in ’emerging markets’ and that they are seeking investors.

    Even if they by some miracle found a good deal, which is extraordinarily difficult, they still have more obstacles:
    1. It is going to be challenging to get good financing without experience on their resume
    2. Any investor they obtain would only be someone without the knowledge to recognize a good deal or recognize how important the student’s experience level is. So their investors are typically not people who should be taking this kind of risk.
    3. Without experience, they don’t know how to manage the management company leaving room for even more costly mistakes.

    Thanks again, Brian, for summarizing this so well. I’m going to share the heck out of this post in my network.

    • Brian Burke

      Thanks for the feedback, Ann! I’m familiar with Dave Lindahl, I attended some of his seminars a few years ago. His material is good and education can help lead you to success but it is experience that makes you great and it is track record that makes you credible.

      The points you raised are absolutely correct! Certainly the seminar circuit will de-emphasize the importance of the above because the unfortunate reality is that students wouldn’t pay for courses if they knew that success wasn’t always quickly realized and would require hard work and time. Since I have nothing to sell, I can tell it like it is and give everyone insight on how the other 99.5% of us succeed rather than just hearing how the 0.5% of the seminar graduates do it. 🙂

  6. Andrew Syrios

    Dave Lindahl is all about going big quickly (even if you haven’t done another deal). While there’s something to be said for going for big property RELATIVELY quickly, unless you get the deal of the century under contract, I can’t imagine being able to persuade a high net worth individual to do a deal with you if you have no track record at all. Your experience is your best selling point, even better than the property IMO.

    • Brian Burke

      Yes, Andrew! Experience and track record are everything when you are raising money from sophisticated investors. It’s true that new investors with little to no track record can raise some money from friends and family and get a rapid start. In many cases they’ll do OK and this will launch their track record. On the other hand, in many cases they’ll fail and lose that money and most likely the investors involved are the ones that can least afford to lose that money.

      Grow organically and make small mistakes where people don’t get hurt, then you can grow exponentially because sophisticated investors, who recognize that the sponsor is the key to the success of the deal, can take you a lot further than unsophisticated investors ever could.

  7. Brian Moore

    Great series of articles on MF myths.
    You hit the nail on the head stating that a new investor can’t recognize a good deal. A small owner may juice the numbers to make the deal look too good. Most experienced investors would catch on but a new investor may think he found the deal of a lifetime – when it is quite the opposite.

    Also, you got the other part right – no high net worth investor is going to trust a new sponsor with a large investment (without a very compelling reason). Projecting a high rate of return is not usually going to win an investor over. My investors would probably run from a sponsor that projects a 30% IRR because it is not realistic in today’s market. There is no short cut to building up deal experience and trust in your investors.


  8. Jacob Vincent

    Brian, this is a powerful post and analogy! For someone who is actively getting started in real estate investing, this is enough to make me pause and think.

    I’ve always eyed the million dollar MF deals from the viewpoint of “well, i can either get a loan for a small SFH, or if the stars are in alignment, I can just jump on a seller-financed 20-unit deal, no biggie.” Since I don’t have a rich daddy to underwrite my mistakes *cough* Trump *cough*, I’ll have to start small. And you’re right, it’s better to lose my own nickels and dimes on the smaller deals starting off, than losing family/friend/investor dollars trying to bite off more than I can chew.

    It is nuggets of wisdom like these that make me happy that I found BiggerPockets. Thanks a bunch!!

  9. Wilson Lee

    Hi Brian, Thank you for your time in crafting a trustworthy blog in commercial and syndicate real estate deals. It is my goal to progress my career over the next 3 to 4 years in a way that will reflect positively on me in the eyes of investors.

    Here the steps I intend to take. Can you, Brian, let me know if you would trust a partner with similar experience. My spouse and I will be starting entry level jobs this summer after graduating from university. We plan to purchase two triplex / quadruplexs, one each, financed with two FHA owner-occupied loans. We plan to use this time to develop systems of management for investment properties and to network in our local market.
    After we have our feet wet, We well leverage commercial loans from a local bank to amass a portfolio of real estate investments while hiring staff.

    It is my wish to bring my developed systems of management and staff to the table for larger syndicate deals with investors win in 3 to 4 years. Is this respectable qualifications for passive investors to trust in me, Brian?

    • Dean Meier

      Wilson: if I may chime in on this one… maybe you can find someone in your market that is doing what you’d like to do. A mentor of sorts. You have good credit and jobs. To a mid level operator that has value. Instead of focusing on finding someone to fund your projects, focus on finding a person who is finding projects and has seen them through. Learn from their processes and add your knowledge.

      Just my two sense.

  10. Brian Burke

    Not quite, Wilson. Systems are developed as a result of experience, you can’t develop systems from academics alone. Systems developed that early in your career are subject to rookie mistakes. Instead, leverage your experience in your FHA-financed deals to find friends & family investors to fund some smaller deals–like another duplex (because you’ll have proven that you can do that). Then move up to a 4-plex or two (or ten), then do a 10-20 unit (or two or ten)…that’s how you build the trust with investors. Starting small, making your rookie mistakes on small deals (where they hurt less and you can recover from them), and growing organically over time will build your systems as well as your investor base. Take a look at my article on the BP blog where I wrote about raising $5 million in two weeks–I go into more detail on how to establish trust with investors. Good luck! Having a plan puts you way ahead of the curve.

  11. Dean Meier

    Brian: Loving your series. Thanks for taking the time. It must be a bunch of work.

    One question; now that one has established “street cred” in the real estate world… Where do you start to look for investors outside of organic growth. I have five investors with whom I regularly work and once in a while they have a friend that comes on board. That’s about as organic as it gets I suppose. Do you focus on finding one or two really high net worth people who can fund most of your acquisitions or do you spread it around? How do you meet the people if they weren’t a referral? Okay, that’s more than one question.

    If anyone is interested in how I’m creating credibility I’ve got some videos posted of a project. My long term plan is to create a page that documents the entire deal. Send me a private message and I’ll send you the link.

    Thanks again for taking the time to do this;

    • Brian Burke

      Thanks for the feedback, Dean!

      Finding investors is a complicated topic, there are just so many things you can do such as going to REIA meetings, Rotary, chamber of commerce, volunteer at organizations, get on boards of directors for organizations, the list goes on and on. Pretty much putting yourself in a situation where you might meet and develop relationships with people with money to invest. Ok, that’s the textbook answer and I had to get that out of the way.

      In reality, most investors come from word of mouth and referrals (and of course, participating on BiggerPockets). I started with a couple of investors and now have a couple hundred, but it’s taken years to get this far so you have to be patient, document your track record, and always be networking and getting the word out there about what it is that you do.

  12. Russell Brazil

    One myth I see for newer investors is they think that multifamily housing is purely about the numbers. That is not necessarily the case with the 2-4 unit multis. Newbies seem to find it hard to grasp how these differ from the 5+ units.

    Also many cant comprehend the low cap rates a commercial property will get in some major metro areas. You may be able to get a 10% cap rate in the midwest, but you are not getting anywhere close to that in the north east corridor.

    • Brian Burke

      Yes, Russell, there is certainly a big difference in cap rates between the Midwest and the core coastal cities. Some misinterpret this to mean that the higher cap rate deals are somehow better deals, but that isn’t necessarily the case. Thanks for commenting!

  13. Mark Gaines

    Brian, Thank you for your insight. The wisdom you share will be of use. I have been successful but I know that my past needs to be articulated graphically if it is to be of use in the future. I am also impressed with your writing clarity and ability.

  14. David Thompson

    Agree, I heard that a lot in my MF meetup group that if you have a good deal money will follow. I can say after raising $1.5M in three weeks as a first timer w/no experience, that It’s all about credibility w/a great deal. I leveraged working w/a skilled team and their track record. I could have never accomplished that w/o that. Posted below top 10 things I learned from that experience recently on BP.


  15. Peter Mckernan

    Hello Brian,

    Great article! You covered very great points with track record and how to get those investors to trust you as a deal finder. One wrong move and a person’s reputation can be ruined for a long time.

    Great talk up in Oakland this past August! It was my second time going.

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