I started investing in 2004, back when Cleveland was already seeing a foreclosure crisis. I got a taste early on for figuring out how to buy short sales, so by the time the full weight of the 2008 recession rolled around, I was ready. And of course, like many of you, I started in single residences, duplexes, and fourplexes.
It seemed like everyone at the time was wholesaling and rehabbing, and I started looking at my balance sheet when I noticed something. The duplexes, the quads, and the 10 unit apartment buildings were just quietly sending me checks every month. And they were a lot less work than all of those fix and flips.
Michael Blank had the same kind of epiphany. He’d been busting his tail rehabbing houses and he loved it. He loved the work, he had a great system, but he couldn’t take a single day off because there was always something going on with the rehab process. So he bought a 12 unit building sight unseen, and he discovered something amazing.
Multi-family investing is a lot less work for a lot more money. And it’s a lot more fun.
Of course, there are a lot more moving parts to a multi-family deal. So Michael and I talked about some of the key differences in multi-family deals, and how new investors can learn the new lingo, decide what kind of investor they want to be, and benefit from all of that beautiful mailbox money.
LEARN THE LANGUAGE OF REAL ESTATE INVESTING
The common entry point into any new real estate deal is education, Michael says. You have to know how to analyze deals. You have to know how the deal gets put together, and you have to be knowledgeable about the space. The quickest way to get someone to ignore you is to let them know that you have no idea what you’re doing.
There are a lot of great resources out there; blogs, books, podcasts, even coaching. Start reading about everything, start listening in on the conversation, or sign up for a coach. Once you’ve got enough learning under your belt you can figure out what track you want to pick.
Some people just love the deal making. Others prefer running the numbers on everything. A lot of people like to go down both tracks, and that’s great. But surrounding yourself with high operators, like in a syndicate, can also free up your time to focus on what you’re truly good at.
A big part of your education is confidence and mindset. A lot of us have that fear like, “Oh man, I can’t ask my friends or family for money”. As you start learning the language of real estate investing, you’ll start to feel, like I do, that if you have something amazing that will positively impact someone else’s life, why wouldn’t you want to share with them?
DECIDE WHAT KIND OF INVESTOR YOU WANT TO BE
Active and passive investors want the same thing: passive income. Passive investors might be people with more money than time like doctors or lawyers who just want to make their money grow. An active investor might have more hustle than money, and is ready and willing to find deals.
Multi-family deals appeal to both kinds of investors. You need money, you need someone to make that deal, and there’s space in a joint venture for both an active and a passive investor.
Usually when I see Facebook posts with friends in front of the apartment building that they just bought, there are six or seven of them all together. It’s a lot of work to put together a deal like that, and you really need a team to do that. But luckily, when you’re working with a multi-family deal, they are so big that there’s enough juice in them for everyone.
When I was a fee based planner, I had a lot of wealthy clients, but I noticed that the ones that were really wealthy owned real estate. For many of them, it was a great way to build wealth. Quite frankly, multi-family buildings are a great way to build stable wealth. Everyone always needs a place to live, and as long as that building is cash flowing, you’ve nearly recession- proofed your investment.
CASH FLOW BEATS THE MARKET EVERY TIME
From when we’re little, all of us have been conditioned that the stock market is the best place to stick our money. Our parents, our teachers, even our employers are all about shoving that money into 401ks, and letting it grow at 7% a year.
Except for Buffet, no one ever got rich purely from investing in the stock market. Real estate syndications yield 8-10% in cash flow, which is pretty amazing. Plus you also have consistency. The stock market has volatility, and you never know when it’s going up or down. Every day you have to check in to see if you’ve lost everything overnight. And finally, in real estate you have amazing tax benefits that simply don’t exist in stocks.
One of the only benefits of putting money in stocks is that it stays liquid, but Michael says that liquidity is bad. It’s actually a sign that you have money sitting around not earning you any more money.
Sometimes I hear people say, “Well, I’m not investing because I’m comfortable right now.” I’m here to tell you that comfort is the enemy of growth. If you’re investing in multi-families and putting your money in an asset, you can make that asset work for you. That asset can then generate the funds that buys you the toys that you want.
Consistent cash flow, stability, annual returns of 8-10%, plus amazing tax benefits, and you can watch that mailbox money roll in? Seriously, you cannot beat a multi-family unit for its return on your investment.
Be daring,
Josh
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