Become a (Small) Multifamily Millionaire in 7 Steps

this is the bigger pockets podcast show 496. i learned some hard lessons along the way you know it it i didn't have a mentor and i i read everything i could get my hands on but i still made a lot of mistakes but one thing i love about uh investment property and multi-family especially is it's it's very forgiving like you you can make mistakes and if you work hard enough you can you can easily compensate for those mistakes and and be successful you're listening to bigger pockets radio simplifying real estate for investors large and small if you're here looking to learn about real estate investing without all the hype you're in the right place stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com your home for real estate investing online what's going on everyone it's brandon turner host of the biggerpockets podcast here with my co-host mr david single family green what's up man do you have any multifamily yet that's funny that you labeled me that way well i mean it's not a derogatory term here this is this is a good thing i have multi business one fourplex i would say the rest of our single family well i'm a liar then well also joining us today for the introduction here which we don't usually do but we actually have our guests today mr brian murray what's up brian multi-family murray what's going on man hey how you guys doing really excited to be here today sweet man this is gonna be fun so for those who don't know uh brian is my business partner co-founder of open door capital uh author of uh crushing it and commercial apartments in commercial real estate which is one of the best-selling real estate books ever uh and a genuinely awesome dude who understands multi-family better than anybody i've ever met in my entire life and so uh i'm excited to have this kind of conversation today about multifamily i want this to be the like the best multi-family like resource podcast ever made so you guys up for the challenge yeah let's go well before we get to that let's get to today's quick quick tip all right today's quick tip is nice and simple and this is gonna be me totally plugging my own thing we are launching today the multi-family millionaire book which is the book volume one and two which brian and i wrote together so it's a quick quick quick tip go pick it up just go to biggerpockets.com multi-family book and you can get it there and if you get them from bigger pockets today there's a bunch of cool bonuses and we'll talk about that later in the show i don't want to spend the whole intro talking about all the bonus stuff but just trust me if this these books are going to change your life so go get it biggerpocket.com multi-family book okay hey also guys remember uh if you didn't realize that this is part one of a two-part episode on multi-family real estate so the episode we're about to you're about to listen to right now this is all on like small multifamily um we have a little injection we'll talk about who me and brian are and how we got the multifamily but this is really about the smaller side of multifamily then the next episode we're going to release on sunday of this week so just coming up here in a few days is going to be more geared towards the larger deals the syndication the bigger stuff which both are good for everyone to listen to i don't think i don't want you to be like oh well i only do small deals i'm not gonna listen to the second or i only do big deals i think both have a lot of fundamental stuff so just keep in mind this is episode one of a two-part series all right with that said i think we're probably ready to get into this on david let's hear from brian first brain what do you think is the most important thing for thing for today's listeners to take out of this show yeah i think uh i i think i think that you know there's not been a lot of uh resources like this available potentially ever and i think i think if they can see the the value that we're putting out there and in these volumes of the book um you know i want to give them give them a little bit of takeaways they can use right away but also um just share with them you know what a great opportunity this is that that brandon and i put together to help them out so so first off let's talk about why people should listen to you guys at all when it comes to this space so walk me through rock us through your brief stories around multifamily how you got into it what your portfolios look like now and brian we'll start with you yeah so i actually uh i actually started off with with an office property as my first investment property and my second property was a retail property and it wasn't to my third property that i got my first multi-family so i had exposure right out of the gate to all different types of asset classes and multi-family was by far my favorite and so i took i pivoted once i got that first multi-family and i saw what kind of opportunities it presented and the advantages of that as an asset class i pivoted away from office retail and other properties and i've been growing in the multi-family space ever since so yeah that's how i got there and and i just love to share what i've learned along the way um it's been a passion of mine because i know if i can do it so can everybody else brian's being humble here this guy is like owns tons of multi-family and has crushed it for the past what decade you were a teacher right and like you went from that into multi-family i was you know i i was i jumped into real estate because um i wanted that extra income and uh real estate seemed like the the path that could get me there and uh generate some wealth and and the financial freedom that i sought and uh you know i loved investing so much and um i think i think it ended up being 10 years before i took any money out of my investment properties which is you know it's ironic since that's what got me in but i i just kept wanting to invest more and put my money back in and keep improving the properties and growing that portfolio and now i've reached a point in my life where i can reap their benefits of that so let's let's get into why you switch before we go to brandon's story from commercial into multi-family let me ask you how did you get started with the commercial properties so i i was looking at i really had no idea what i was doing to be honest when i first started i looked at all different types of properties i started off looking at like duplexes and triplex's single-family homes um and and i really wasn't finding anything that would get me the returns that i was i was looking for so i started to expand my scope of what i was what i was looking at and i also began to learn about creative financing structures and and how i could take my savings and make it go further and i just came across some commercial properties and and started to evaluate those uh learned a little bit about things like owner financing and assuming mortgages and things like that and eventually i came across this office property and uh they were open to me assuming the mortgage and i figured out how to get into a large property with with uh with without putting a lot of cash down and uh that kind of catapulted me into a pretty big property right out of the gate so you really pulled yourself up by the bootstraps i thought you were going to say something along the lines of a family-owned business that i had to buy or i had a mentor that was involved in it but it sounds like you just set out on your own and that was the space you started in yeah and i i learned some hard lessons along the way you know it it i didn't have a mentor and i i read everything i could get my hands on but i still made a lot of mistakes but one thing i love about uh investment property and multi-family especially is it's it's very forgiving like you you can make mistakes and if you work hard enough you can you can easily compensate for those mistakes and and be successful see if i could jump in real quick what's cool about brian's story and my related but neither of us started as wealthy people he was a teacher i was working in a bank you know making 13 an hour and you know even before that working at coldstone singing for tips right when i got my very very first deal ever but what's cool the like it shows you the power of why multi-family can change your life you know we could have called these books like the book on multi-family real estate investing to kind of fit with the theme but we called it the multi-family millionaire specifically to draw out that point that multifamily can make you a millionaire and in a shorter amount of time than you think possible like nobody would have looked at me or brian years early and be like yeah they're going to be millionaires but just buying some multiplayer properties and we we really go in depth in this in the books this is the idea of like you can really scale up pretty rapidly as you build that knowledge and as you build that uh that network and the credibility and the trust and and you recycle that money back in again it's it's pretty awesome and again i see that in your story brian very much how you started with nothing and became a multi-millionaire through real estate so good job man yeah thanks and and i and to you as well and i i point people to the subtitles of the books which there's a lot of meaning behind those you know in volume one it's achieve financial independence by investing in small multi-family real estate and you know that's that's the american dream right so you can you can start with very little and you can achieve financial independence and in volume two it's create generational wealth so once you're financially independent you start thinking about the future of your family your kids like what's one of those future generations and what can you leave for them so it's it's an it's just an amazing opportunity you know you just don't see that but you know if people question whether the american dream is still alive i point them to to multi-family real estate yet not only did you two start without being wealthy you started sort of from the bottom but you also started in different asset classes than where you ended up and that's a good thing to highlight is that you don't have to have it all figured out to take the first step most people i've ever talked to pivoted once or several times in their career and found their way into the asset class that worked best for them and i noticed that that showed up in your both your stories so brandon you sort of went from the single family road into the smaller multi-family tell me a little bit about the difference between large multi-family and small multi-family yeah good question um so i started yeah i started my very first one's a single family house but even that i rented out all the bedrooms to buddies of mine so in a way it was like a kind of a hacked multi-family uh and then i bought a duplex and people have heard my story before but about that duplex i lived in half of it rented their half out house hacking which i'm a huge fan of and we talked about in in the volume one and then we go from i went from that into buying a little bit of flipping but eventually about a four plex a five unit uh then some duplexes triplexes and then eventually about a 24 unit and i would call all of that the small multifamily so you ask what's the difference like what's the difference between the small and the large i mean it's kind of like this fundamental idea of like what how do i say this like what's the difference between small and large let's phrase it that way it's not a unit number necessarily in fact when we wrote the two books the two volumes we we struggled with that right do you remember brian we were like on haleakala like the big mountain here in maui we're like driving up there to go do a bike ride together and we're sitting there chatting about like what if we wrote a book together and we're sitting there going well this is what i'd write about and he's brian's like well this is what i think we should write about and we realized there's two entirely different yet the same games here small multi-family is i mean like it's duplex triplex four plex of course but the way you buy a buy a five unit or a six unit or a seven unit is not that different from buying a one or two or three unit right like they're it's all the same approach basically we can dive into that david if you want to but it's like smaller even like a 10 unit or a 20 unit when i bought a 24 unit i would still call that small multi-family real estate because of the approach so like the approach was very much hands-on i did everything myself i would hire a local property manager or an on-site manager to take care of it it's very much like like i it's very me focused i'm just doing this thing and so where's the line the number line i don't know i'm actually curious brian where you like what your thoughts on that but it's very different than a 200 unit property right that's large absolutely absolutely and and you know i think people people gravitate to this idea that if you have this unit number you want to have you want to clearly say what's what's small and what's large and and brandon and i went back and forth on that for so long and we realized that when you get into that you know 12 to 30 unit range you could actually take multiple approaches right you can you can approach it very similar to the way you would a duplex or you could kind of approach it the way you would approach 100 unit and uh but as you get further up the you know in the unit count it becomes very clear that hey no that the lending process is different right the way you're going to potentially raise capital and um there's the way you underwrite it the things you're looking for so uh we we recognize that there's a there's a whole approach for both small and large and in the end uh we wouldn't do our reader service if we try to jam those into one volume because there's just too much there and you know there's there's been plenty of great books out there on multifamily but none of them are comprehensive and they don't they don't go into the level of depth and we we want to share everything that we've learned the mistakes and uh you know the things that work and don't and have a resource that you know you just can't find out there right now um but brandon and i are both teachers at heart and you know when we figure this stuff out and we want to share it so that's what we wanted to do yeah you know one like one rule i not 100 agreed to all that but one rule of thumb that i use that i put this actually in the book i got this like side by side comparison of small versus large but my favorite one on there is the owner knows the tenants names if you if you know your tenant's names it's probably a small multifamily even if you're like when i had a 24 unit i knew all my tenants names not by heart but if i saw their name oh yeah you know that guy's in that one or that ladies in that one but with our like large multi-family like the 530 that we're buying right now brian or the 100 unit or the 50 unit like i don't know the tenant because it's a different that's a business that we run versus a personal investment that i run and that's the difference that we're trying to get here small versus large and there's not saying one's better than the other some people will stay small forever and there's nothing wrong with that it's great it's a great business to be in and that's why volume one is all about that but you know some of us like brian you and i the last couple years especially you a lot a lot earlier than i did got really excited about the large like the business of it which goes into you you read the subtitle the first book the subtitle the second book is create generational wealth by investing in large multi-family real estate right so what can you explain the difference i know i'm taking back over the mic here david i'll get back to you in a second but like what's that what's the difference between achieve financial independence with small and create generational wealth what's the difference there brian between the two concepts i think you know everybody's got their own definition of course you know but the way the way i look at it is financial independence you want to you want to have the freedom to live the life you want to live make your own choices and not be boxed in by constraints that other people put on you and you know generating that that financial independence you know that that that's having enough income that you don't have to rely on somebody else you can make your own decisions do what you want to do but it's but but at that level it's really about you uh and your spouse perhaps or or or you know but when you start to get into generational wealth you're looking at a level of freedom not just for yourself but for people that you care about are special to you in your in your life whether it's your kids your grandkids causes that that you believe in that you want to continue on and and impact after you're after you're gone and uh that to me that's what generational wealth is it's making a lasting impact that's going to affect the lives of others after after you're no longer there so it's a it's a whole another level um can you achieve general generational wealth through small multi-family absolutely you can right there's there's plenty of people who do that um but certainly you can you can put your investing on steroids if you if you go bigger and uh you know i think that the real message there is you can do that if you choose to do it it's not necessarily better or worse but we want people to know that you know don't be you know don't be intimidated by those large properties because it is it is within your reach so to sum up what separates small from large multi-family one thing was the way you manage it do you know your tenant's names or do you have a person in charge of managing that it was also mentioned financing are you just getting a loan yourself or i'm i'm assuming here are you raising money as a as a larger group is that basically what your guys's stance is yeah those are three of many you know and it's it's a blurred line right there's like i mean you could technically you could treat a duplex the same way you treat uh like a 200 unit property you could create a syndication or raise money and get this fight like you could treat a two three five ten unit property just most people don't most people start in the small multi-family world of managing themselves figuring it out maybe they hire a local property manager they know their tenant's names all that stuff and then they eventually move into the larger i'm curious brian what do you think do you do you need to start with small and moving up to large can you start with large what what's your thoughts on that i don't think we've ever asked you that question you know i've met plenty of investors who've been successful doing both um and it was eye-opening for me when i did that but i i have seen people jump in and start with a 70 unit or even 100 unit and uh usually they they're they surround themselves with with people to help them do that right you don't if you don't know how to do it all yourself or you don't have experience you have to compensate for that by partnering with the right people so you can jump in and do that particularly if you have a really valuable skill set that you can bring something to the table whether it's the ability to find that great deal and and and you know that'll attract a lot of attention the ability to be really personable and have attract investors who want to um you know bring capital to the table to help you pull the deal off there's plenty of ways you can get in directly to large i do think you're better off if you can find if you could find a way to build that foundation with small multifamily like you did brandon i think you go into it better prepared overall to get a fuller picture understanding of the you know the underlying concepts that are you know at play there david where do you want to go next you want to go through the seven steps yes i understand we've got seven steps that work for small multi-family and i want to start uh brandon will go to you for those what is step number one yeah so step number one that i wrote down here and again my goal today like in this podcast as we were going through it was to give you like a step by step like anybody listen to this show should be able to go out and buy a small multi-family property that's my goal with this episode so i broke it into seven steps so i i mean obviously i'm kind of leading a lot of the charge here on the small multi side because that's my strength and brian's leading the charge in the large but hopefully we go you know this becomes a collaborative effort with the three of us today so step number one that i have here i wrote commit to the process what i mean by that is so many people i meet i go to a local meetup or a real estate club or i meet them in the bigger pockets forums or they come out and hang out in hawaii and they say they want to buy real estate they say they they want to buy multi-family they're going to get into it and then six months later they haven't done anything a year later they haven't done anything and so i know this is like the least tangible of everything and i harp on this topic all the time i know david you do as well but there's just a difference in in there's a difference between somebody who wants something and somebody who actually does it right michael jordan once said some people want it to happen some wish it would happen and others make it happen and so step one is like commit to the process like commit to the game like i'm in this i'm going to do it no matter what uh and i'm i'm going to alter my identity by the actions that i take regularly i go this is not get rich quick this is not i'm just going to wake up one day with a bunch of multi-family this is going to take a long time to build but i'm in it and i'm committed to it so i think just the first step has to be that commitment piece that says i'm in it and a good way to do that is like like or to ask yourself you're committed is are you taking the time like if you told me you were committed to losing weight and then i went to your house and you're just eating like twinkies and nachos on your couch watching dancing with the stars i would assume that you're just a liar right like if that's all you did every day because your actions aren't backing it up so if you say you're committed and you've been committed but you haven't done any action in the last month or two or a week then there's some dissonance there right in your in your actions and in your intention uh and then it i would say it's more desire so step one i would say is commit to the process brian what do you think on that absolutely agree 100 in fact you know we were talking a little bit before this podcast about the i i commented that there's a piece of bonus content that if you if you buy the books through bigger pockets that uh you get access to and it's it's about an hour-long conversation uh that we had on mindset and wow i just i really wish we could have fit that into the book i mean it's such a comprehensive book already so you know there we couldn't get everything in there but we did record a great conversation and mindset is so important and the longer i do this the more i realize you know that that's one of the biggest obstacles that everybody faces and you face it every step of the way it doesn't actually go away so those same limiting beliefs that you might have about oh you know how could i do this and you never get started and is it really possible and i do i have enough money and you know everybody's everybody's got those reasons they think they can't they can't take a step forward and so having that right mindset whether whether it's buying your very first duplex or going from 100 unit property to a 300 unit property you know i i still have limiting beliefs and i have to check myself sometimes you know we we just uh we're in the process right now of acquiring a 530 unit and and uh you know if you if you had asked me whether that was something we'd be able to do even two years ago i i would have scoffed at it right i didn't didn't think i could do that and now i realize that that was another limiting belief you know when i do webinars for bigger pockets i have a slide that talks about what commitment is because i think a lot of people think that they're committed but we don't have a definition of what it is and i love this definition it's the state of being bound emotionally or intellectually to an ideal or course of action and i love that it mentions both emotions and intellect both of them have to be there and being bound you cannot separate yourself from something when you are bound to it that ideal or course of action that's going to happen you are binding yourself to it so you can't separate yourself from that course of action and you're connected both intellectually and emotionally and i love that definition because i think when we say you got to be committed people go oh i know how to be committed you know i've been committed to eating cereal every morning for the last 30 years of my life i can do that but but they don't actually adhere to that definition when they're moving forward so well let me ask you david then i want how does somebody get that you know there are people listening around are going uh i know i've been trying for years to get into this i just can't seem to get that level of commitment or take the right action i can't seem to keep promises to myself i'm just i'm struggling with that mindset thing i'm curious david how do how do you see a path forward for those people then i'll fire the same question at you brian how do you see a path forward i think it's similar to when people say how do i be a good person it's very difficult to just say i want to be a good person you cannot generate the desire inside yourself to be a good person what you have to start off with saying is i am a bad person and letting yourself feel bad for all the ways that you do something selfishly or you make excuses for something that benefits you and not other people what i would say is people should say i am not committed that's like i think i'm committed but i'm not if your emotions are not involved in the thing that you're trying to achieve you are not committed to it you can't be in a relationship without your emotions being a part of it you may be you may be there you may not be seeing other people that it's not the same of having a living breathing relationship emotions and intellect both have to be there so i would say the first step is just acknowledging you're not committed the next step is say why am i not what is holding me back am i afraid of being hurt am i afraid of failing am i afraid of missing out on other options everyone has reasons that stop them from committing but we don't always acknowledge them so it's digging one step deeper to say let's be honest with myself what is preventing me from committing to this and when you identify that you can start the breakdown of removing that out of the process and then the commitment should sort of happen naturally that's awesome man i mean uh brian what do you think i agree 100 with everything david said um you've got to want it right you got to want it enough the hunger needs to be there um i think one of the one of the biggest obstacles people face is you know it they they're looking at this mass what they view as this massive undertaking and so just another little key i would throw out there is you got to learn to take small steps and recognize that those small steps add up to the journey right so stop looking at stop looking at you know you have to eat the elephant i get it you got to eat the elephant like one bite at a time right that's the answer right yeah that's so insightful it's like going to the gym right like you're there you see all these bodybuilders with like these big guys or right or women who are like super in shape and you're like oh i'm never going to get there because you're looking at that ideal but rather than setting that as the goal maybe the goal should be i'm going to go to the gym twice this week like that's all i'm going to do i'm going to take the baby step to get there which is kind of the goal of today's episode right we want to give this step by step to getting that deal so if right now you're like i've been wanting to do multi-family for a long time i want to buy myself a small multi maybe i buy a four plex maybe i want a house hack it or whatever okay what's like a small action you can do this week maybe it's buying a book maybe it's going to an open house maybe it's just going to realtor.com and sorting only multi-family just for the heck of it just go there and see what's there go to realtor.com there's a filter multi-family only see what shows up there or go to loopnet and register on loopnet if you're one of the larger deals and just download an executive summary of some deal that some broker put out there and read the whole thing tiny little step you're not committed to anything you're not even spending any money whatsoever so let's not give away too many of your steps ahead of time here you're starting to get into step number two there what is the formal definition of step number two all right formal definition of step number two and this actually is a great transition well well done there david it's like you're a podcaster define your define your crystal clear criteria and here's what that is it's a term i've been using a lot lately and it comes i i kind of came up with this framework while writing the multi-family millionaire uh volume one and that was like so many people go into real estate they're like i just want to buy real estate i want to invest and you're like well what type you're like i don't know i just i just want to buy real estate uh and and when people do that when they have that lack of clarity one it's hard for them to get excited and take action it's hard to become an expert it's hard to get other people on your side it's hard to get the motivation to do it and you don't know what the next step is you don't even know what the baby step is because you just don't know right when i you know when i got into like for example mobile home parks like it wasn't that mobile home parks are the best business in the world i like them that's why brian and i do them together we like them but we also like sell storage we also like apartments we also like airbnb it all works all of that can can help you become a multi-family i'm a millionaire we just like multi-family and specifically we chose at that point mobile home parks because i needed to get clarity so i could get depth right in a world where everybody likes to go a mile wide and an inch deep in real estate i wanted to go a mile deep on something to become the world's best expert at that thing and so that led to this idea of the crystal clear criteria and this applies to everybody no matter if you're looking for your very first deal or your thou you know one thousandth property and this is what the crystal clear criteria is and i want you guys to write this down if you're listening to this write it down or pull over and put in your phone number one define your location so where are you going to invest we're talking small multi-family on this episode so it's probably something in your own area it's probably something right in your backyard maybe you're going to househack it and live in one of the units maybe not but it's probably in your location can you do small multi-family from a distance of course but most people will start in their own backyard if you can make it work the great thing about small multifamily is that it literally works everywhere like unlike how some houses just will you cannot buy a single family house in hawaii and make it cash flow it is impossible i'm pretty much impossible you'll just never get it in the bay area it's almost impossible to to buy a house it's probably impossible is it possible to even david in your area to buy it without a house stacking without doing where's it can you just buy a house and have a cash flow from day one not a standard three-two not yeah exactly you can't do it multi-family though i would i would even go as far as to say in every area at least in the united states you can find a way to make multi-family work in every area so it's different than single family and that you can make it work uh so anyway location number two is property type what type of multi-family do you want to buy and in fact i like to i i'm gonna throw out a few of the um the different types here i just want to read them real quick uh and make sure i have the whole list here property type so again this is for small multi-family but this could be anything there's a single story like side-by-side multi-family which is like you know maybe a duplex or triplex there's like three they're next door to each other they're usually touching walls but sometimes there's two units on one lot that's a certain type of multi-family then there's like up and down right where there's a unit upstairs and a unit downstairs maybe three floors and there's a fl you know top and bottom then there's like the cottages or adus um a little different cottages like there's like a bunch of little properties on one lot adus is where you add another unit to a single family house uh then there's the monster house uh you guys know if i say monster house it's like think frankenstein where frankenstein's monster was made out of like pieces of a bunch of other little like dead bodies right and so like it's all pieced together like bolted on that's how i look at a monster house i've actually owned numerous numerous monster houses in my life in fact my own house here in hawaii is kind of a monster house it was a single family house and then they like added on and they remodeled the basement at some point in the last 50 years and they turned it into a multi-family so a monster house is like a single family house that's been hacked together to turn it into multi-family sometimes legally sometimes not legally and again i go into depth on like what the legal side of permits and zoning and lending and all that is with that stuff and then there's like a starter apartment building usually like a 5 10 15 unit building and then there's like a garden style apartment and then there's the larger apartment stuff that brian gets more into in volume two but the idea is like what do you want if you want the like the starter apartment that 5 10 15 unit kind of like building then go after that define what that is but if you want a duplex you want to live in half of it then define what that is but have a clear idea of what you're headed for you can always correct course along the way you can add more later but right now what are you going for anything you guys want to add on that button before i move on to the rest of the ccc's i know i'm talking a lot here okay so number one is location number two is property type number three is condition that's self-explanatory do you want a fixer-upper something you can completely remodel something that's already done a new build what do you want price range uh we talk a lot about having a maximum purchase price which you can work backwards very how much can you afford to buy but also i think it's important to have a minimum purchase price this doesn't get talked about enough you know like in our world of like the larger multi-family we have a minimum right now about five million dollars we want to buy we don't want to buy anything under 5 million now why would we say that because it takes the same amount of work to buy a 3 million property as a 10 million dollar property so in turn like for me and brian we have a minimum it's just not it's it's not worth our effort to focus on the entire spectrum but let's pick a range and go after that and then finally the last one is profitability which means you should know what makes it a good deal now when we get the larger stuff we can talk we'll talk about profitability different with brian on the next episode but when i look at profitability i'm talking about like uh what how much cash flows it's going to generate so if you're house hacking maybe it says hey your goal is to live for free or if you're gonna buy a four plex maybe your goal is a hundred dollars in cash flow per unit or i want to make an eight percent cash on cash return if you don't know what those terms are you can google them or you can go to bigger pockets or you can read them in the book but having an idea of what makes a good deal allows you to decide is this a good deal or not so many people are like well i don't know how to find a good deal i'm like well what's a good deal to you well i don't know well let's start there so again the the critical criteria is knowing what location what property type what condition what price range and what would make it a good deal what makes it profitable and when you can define those five things now that's a mile deep now you can be like i am the best person in my area and i focus my marketing and my analysis and everything off two to four unit properties in cincinnati that are in a fixer-upper condition somewhere in the hundred to three hundred thousand dollar range and i need to make at least a ten percent return on my money wow like that like just defining that makes you more committed to the process which relates back to the first step right because now you're like oh i'm serious versus somebody who's like i just want to buy real estate i want a good deal so do you have examples in the book of how people can help determine these and tricks for picking the right ones yeah i actually have a whole chapter on each of the ccc's so there's one property type one a location where we go to like yeah crime and yeah much more detail so yeah condition profitability price range that's a common question a lot of people ask that how do i how do i pick this part they don't realize what they're asking is how do i get crystal clear criteria so i'm sure that that's some really good information in there i know the question comes up all the time whenever i talk about this they say well how do i know what to pick and i like to say it doesn't really matter like it doesn't really matter it's more important that you decide than what you decide well i don't know if i should buy a mobile home park or a bunch of townhouses they both work what fires you up what gets you excited what episode of the bigger pockets podcast were you listening to and you're like oh that what that guy does sounds so cool great do that thing because that works so it's more important that you decide than what you decide yeah to totally totally agree with that it's hard to hit a bull's-eye when you don't know what target you're you know you're aiming at right this is why we like brian he can summarize like an hour of me like rambling into like one sentence that like wait makes me more sense this i mean i love when brandon came up with this acronym absolutely love it like it what it communicates and and it's the importance of the specificity um and you know that's one of the objections we hear from investors all the time right like i can't find a property but then you know maybe brandon you could speak real quick to you know how does that relate to your crystal clear criteria yeah i mean the idea being they say i can't find a property i always work backwards to okay well what you know define your crystal criteria tell me exactly what you're looking for right and they can't 99 times they can't do it now if they can then it's like okay well how many offers did you make last week how many deals did you analyze let me see your it's multi-family real estate especially all real estate is very it's a business it's not a complicated thing it's just like you can dissect a little thing and you can find out where the problem is and then work backwards but again 99 of the time they just haven't defined their criteria so they can't get good at marketing for deals if you don't know what you're looking at yeah and if you're overwhelmed with volumes like just an enormous amount if you don't have that ccc you have so many deals to try to look at and figure out it's just it could be it could bear you right so if you're going to find that if you're going to hit that bullseye like let's let's define the target you know before we pull back the arrow so next step in the small multi-family process brandon what do we have all right the third step is so now we've got we've got the commitment to it we got our our crystal core criteria now we need to get leads coming in like i know a lot of people say that they you know should start like the question is should you start with leads or should you start with you know getting financing in order i am actually a bigger fan of starting with the properties like getting leads doesn't mean you have to buy the properties but i think nothing fires me up anyway than like getting making it real when i see a property in front of me even today after doing this for 15 years and buying multi-family for like 15 years i still get excited when i like pull up realtor.com or zillow or i get a listing from my agent and like there is a like triplex and i'm like oh great and there's the numbers and i can run the number and i get like i just love that piece of it so i like to start with getting leads and there's two sides of leads there's on market and off market when we're talking small multifamily or large like you can you can get deals that are listed for sale through a real estate agent or you can get deals that are listed that are not listed and you go and actually hunt down those sellers and i would argue small multi-family is this really sweet spot where there's a lot of people who own them who don't know what they're doing like it's very common right so they may be inherited the property from some relative their mom and pop meaning they don't they're not professional managers they don't know what they're doing their difficulty managing small multi-family tend to attract uh and i don't wanna generalize but i'm gonna generalize they tend to attract a lower income type of tenant and lower income tenants tend to be a little more difficult to manage it's one of the reasons i like it because i like solving problems and i like being good at something that most people are bad at so small multifamily is like there's a lot of people who own it and they struggle so the reason i think off market is such a powerful way to get deals in the small multi-space is because these people don't even know that they have a problem until you contact them so again you can get a real estate agent and they can help you find small multi-family properties there's tons of duplexes triplexes and four plexes and and five 10 units on the mls those are all over but if you want to go real in depth and getting really good deals go off market i'll give an example my four plex that i bought from my daughter rosie you guys have heard that story before i probably i bought a a four unit property for my daughter rosie we remodeled it we we did the birth strategy with it i pulled out my cash and now it's set up to be paid off by the time she goes off to college that property makes me over fifteen hundred dollars every single month in just pure profit i can spend whatever i want what i call pure cash flow uh which is awesome but in addition it's gonna be paid off by the time she goes to college so now it's going to pay for her college education i got that lead off market doing something that i we all call direct mail marketing you know i'm sure most of you know what it is it's in a lot of my real estate books but it's also talked about in the multi-family millionaire but this idea of off mark and that's like one of many strategies that we talk about for off market deal finding and again small multi-family property is this great spot that's too big for most homeowners to to go and buy because they all want a cute house in a cute kitchen a cute front porch for their 2.1 cute kids and it's too small for the big guys most brian and i didn't start open door capital to go punt down four plexus and eight units right so like the level of like machine power that brian and i have built it open our capital we're not hunting for the five unit properties really and so there's this really cool sweet spot that you can find great deals and get leads by going off market in that space which means you're listening to this thing you can find some awesome deals anything you guys want to add on that yeah i would i would go so far as to say from a process standpoint if you're going to pick one area that you want to like have as your super power or just knock the ball out of the park it's generating leads because if you can find those deals um and that's what i love brandon you know there's so many great tips in the book that you know people can take away to like find those deals and you know both in volume one and in volume two you know whether you're looking for small multi-family or large i mean it's it's just chock full of ideas and that that's one way to really set yourself apart and get other people's attention yeah the point i would add is when people are trying to figure do i want to go off market or on market the analogy i like to use is it's like saying do i want to go catch a fish out of the river or do i want to go buy a fish at the store it will be more expensive if you buy it at the store absolutely but it will be more convenient and that would make more sense if you don't have fishing skills some people love fishing so much that they they just want to go catch the fish and it doesn't even matter that it's cheaper but they enjoy the process like what brandon was saying right and other people love real estate but they hate fishing they don't want to have to like smell like a fish they just want to go buy it right out of the store the problem i find people get into is when they want the price of doing it yourself with the convenience of going to the store and you just can't make that work you have to understand whichever road you choose has its own pros and its own cons make peace with that work with it as opposed to trying to say well how do i get an off market deal with the same little amount of work as if i could just go on market and i could find the property you guys see any flaws in that perspective i love the analogy all right cool um all right so the next step here once we've got leads this kind of follows your lap funnel brandon it's as with making an offer and negotiating on that property what can i expect to get out of your book when it comes to teaching me how to make an offer and how to negotiate yeah good question um so yeah making an offer uh is something that so many people are afraid to do they're like it's kind of terrifying right because now now it's commitment now like now you're really into the thing because now you got earnest money and now you got you know all this other stuff in place so anyway so point being how you make an offer i would say depends on how you got the lead is it on market or off mark on or off market so an on market meaning you have a real estate agent the seller has a real estate agent your agent's going to help take care of the whole offer in fact this is one of the main reasons why i think almost every new investor especially if you're in multi-family get an agent who understands real estate investing who can help you with the process i don't care if you're not going to hit a home run and that first duplex or triplex 5x isn't gonna be a home run and knock it out of the park it's okay it's it's just really helpful to have a guy like david green going ah watch about this thing and hey you know this is this is a good lender or here's a little gotcha that they put in the contract super helpful to have that and i will all day long encourage new investors to sacrifice a little bit of like home run a home run for the base hit just getting into the game i know david you would you said the same thing many times that's a great great point you're not good at anything the very first time you do anything so just make peace with that and your basic goal is like how do i just get on base and how do i not get hurt really bad you're not going to knock the person out in your first punch of the whole fight now you could get good enough to where eventually you do that like i think brian's at that level brian's got enough experience that he can pick and choose his battles and he only swings at pitches that are going to be a home run for him but you get to that point you don't start at that point yeah and in fact i probably should have added another tip in here but i will say this and it's related to making an offer and if you've been on a bigger pockets webinar with me ever you and or david you know what i'm about to say every property has a number that makes it a good deal every single property out there has a number no matter what it is now that number could be negative in some cases but every num you could always work backwards from whatever your crystal clear criteria has for profitability like hey i want a 10 return or whatever your number is every property has a number you could figure out what purchase price you could pay for it it's just math so a lot of people get freaked out by this idea of making an offer so i would i would first say like get really good at the analysis side and when it comes to small multi-family properties like in the book i walk people through the foursquare method on how to do that i walk people through exactly how to run those numbers but you could also you know use bigger pockets calculators they are designed for single family and small multi i'll be the first to admit the bigger pockets calculators are not good if you're trying to buy a 75 unit apartment complex with syndication and a 70 30 split in a waterfall right like all that you're going to want to read you know a book on multi-family large scale like the multi-family millionaire volume 2 because that that's more in depth but bigger pockets calculators are great for the small stuff so just get that number get good at that part and once you're so confident with analyzing a small multi-family and knowing exactly how much you could pay it takes so much of the fear out of making that offer and uh you know going after it so anything you want to add on that brian i think the only thing that you know i'd add is just this is another example of where small multi-family and large multi-family and your approach to you know negotiating extending offers is a very very different process so you're gonna find you know when you when you go through volume one you're gonna read one process when you get to volume two you're gonna realize that things are done entirely differently so just just i'll just throw that out there all right so i've read your book i've made an offer i successfully negotiated this thing i'm happy i go give a review on amazon because i'm so grateful for what brian and brandon taught me now i'm married congratulations and i get to start the fun part of real estate investing not it's the management right this is the part where everybody tends to sort of lose steam when it comes to it's always fun to hunt the animal and you've got it and now you got to clean it and continue to do so so what advice does your book give me on uh managing the property yeah uh i mean one i have an entire chapter in there obviously i'm managing on the managing side but again this is a split between small and large if you're talking small you're probably either self managing or you are hiring a local property manager now i would actually highly recommend the local property manager um if you instead of self-managing i think there's a lot of value to self-managing and knowing how to do it but i've been saying this thing a lot lately and or i've been thinking about this concept i might even put this in a book someday in like its own chapter but so many times in life and i think david you'll like this one so many times in life we choose to do things ourselves just because we are avoiding the more painful or outside our comfort zone activity for example i think it's a good idea to self-manage i mean and so we i i'm a self-manager i you know i want to know how to how to do a rehab so i'm going to do my own toilet i'm going to do my own toilet repair right because we think we're what we're actually avoiding is the harder work of stepping outside our comfort zone and and being a leader and being a manager and having systems and having processes and so i would just encourage people if you're going to manage yourself nothing wrong with that i still manage some of our own you know kind of in-house who built our own in-house management company just understand the difference between avoidance activities because you don't want to be a leader and do you really want to manage yourself so if you're going to manage yourself great there are systems i mean i wrote what the book on managing rental properties is all about managing rental properties and there's again in the multi-family millionaire both books have instruction on how to manage but management really comes down to having policies in place and then holding everyone accountable to those policies like all of property management can be condensed down to those two things have policies and hold everyone accountable to them it's so much easier when you do that like it's the expectations things david you already talked about you always talk about if you step set the expectations first this is what it looks like between a tenant and a landlord and then you hold everyone to that there's no surprises there's very little drama it's just it is what it is and it's a very much a business it's when you start trading property management like a like a hobby or like you're renting your bedroom out to your buddy instead of a business that's when things get rough and things get hard anybody who ever tells me horror story after horror story of how much it sucks to be a landlord i always know it's because they didn't treat it like a business always a hundred percent now i'm not saying there's not hard times in owning a property but if people are just complaining over and over and over about how much it sucks and how this tenant hasn't paid rent nine months and this tenants are bad and this one had to be evicted 12 times over it means your systems aren't good enough i still have evictions but i don't whine about it because that's part of the business i just have i expect it i manage my expectations i know how to deal with it and so property management's actually fairly simple when you do that uh what do you guys think on that i think uh i think there's pros and cons to both right so um what's what i love is i mean volume one goes into both right you can it tells you how to hire a property manager and it also tells you it's got a ton of tips on self-managing but i think what's right for each person is different right so um totally agree that for for some people you know you're better off getting a property manager but for others they may be better suited to to try to do it themselves there's certainly benefits if you can pull it off if you've got the time and the inclination and the skills and you can man you can you can do that self management you're going to save yours yourself money assuming you don't make any massive mistakes um you know so i think if you read volume one you'll you'll understand a little bit more about you know the pros and cons of each and then you can look at your own life your own skill set your own motivations and say yeah what's right for me but start certainly as you grow and you get bigger um you know self-management you mean you're basically starting up an entirely separate business that's outside of real estate investing and basically if you're going to do that you're growing two businesses at the same time and that can be very demanding and so by the time you get to those large properties um you know invol in volume two we're assuming you're using third-party management because otherwise you're building a massive business as a side business that's actually completely separate as from being a real estate investor it's a great point and that doesn't just apply to management that could apply to rehab work okay i don't want to buy a property or i bought one i don't want to pay someone do this i'll put the flooring down well if you know how to put down flooring that's great if you choose to do it but if you don't you're now learning the construction business and there's a lot of things that go into that the the picture you painted in my head brandon when you were talking there would be brian's example of you need to know the bullseye if you what the target is if you want to hit it so i started imagining a bowler who's like okay those pins at the end of this alley that's what i'm shooting for and the commitment we talked about is sort of like how much emphasis are you gonna put on that ball to get it to roll all the way from where you are to where the pins are because if you don't knock down a pin it doesn't matter if you got three quarters of the way there or one quarter of the way there the result was the same the standards we talked about are sort of the bumpers that you put in the gutter you your your decision your investment can wander but the standards will always bounce it back to keep it in the lane and eventually it will hit the target and when we relax on our standards that's when the ball can fall off go in the gutter and we'll never hit the target that's really good man and you mentioned standards so in the book i talk about something called the five star tenant in the chapter on like self management or basically say like there's a way to determine like you there's a way to set standards for the type of tenant you attract i mean i got i got requirements for income for job stability for rent history for credit and for like criminal background like that's what makes a five-star tenant and if you want an easy job managing tenants just make sure you get a five-star tenant but that's not the only thing the other thing is becoming a five-star landlord and this is what most i think most books and conversations about landlording miss is it's always about how bad the tenant is and how you find the right tenant they're a good tenant but so much of landlording is not about the tenant it's about you as a landlord so that's why i go into like the five points just like five for the tenant there are five things every landlord should be the type of landlord you are and and if you can nail all five like five-star landlord things it's so much easier to manage properties and then when you get into hiring property managers it's so much easy to control your property manager because you just understand how the business works and you can see oh that's not a five-star property manager that's a four-star property manager they're missing that fifth thing or you know it's it's it's all about like again having those those those expectations met for the the landlord and for the tenant and when you do that everything's a lot easier so anyway next step so i am sold on looking for leads and i found the property and i have confidence that i know how to write an offer and i will negotiate so i'm ready to go brendan where am i going to find the money to buy this thing that's a good question uh there's a place called the bank and if you go in there and rob it you can make a lot of money uh other than that yeah let's talk about again this is a massive difference between small and large well maybe not massive yeah you could there's some there's some cross over there but i'll say there's a difference there when it comes to small multi-family first of all if you're just getting into it i highly recommend considering house hacking i know david you are you preached this to the ends of the earth i preached it in the end of the earth as well the beautiful part about small multi and when i say small in this in when we're talking with financing i'm talking about two three and four unit properties that is considered residential when you go into a typical bank a lot of people don't even notice this but there are two there is a left side of the bank and a right side of the bank not always but very common and the one side is for residential stuff and one side is for commercial stuff so one side of the bank has all the people doing bank loans and like for houses and cars and that side of things the other side of the bank and again it's not always separate sides but a lot of times it is they're dealing with business loans and commercial real estate and all that so again four and below is on the residential side five and above is on that side so if you're in a house hack or if you're even just going to buy a two three or four unit individually you're gonna use the residential side the benefit of house hacking though is the fha loan or the other conventional loans where you can get a loan for as low as three and a half percent down or really zero down if you're like a military veteran or you live in the middle of nowhere and you want to use a usda loan but you can get these loans for like three and a half percent down live in one unit rent the other ones out so one of my favorite strategies and i hear about it all the time and i've i mean i've done it is where you live in one unit rent the other three out you buy a four plex live in one of the units run the other three out now you're living for free maybe making money in the process and you're getting like training wheels to be a landlord so from financing if you can if you can house hack it an fha loan what an amazing way to get started in real estate uh and because now you're living for free you can put a lot more your income towards buy another multi-family in the future it's just a great like jumping off point but that's not the only way to do it you could also just get a normal loan you could go through the bank process put down 20 or 25 down and go buy that four plex or go buy that eight unit with a with a normal loan typically on on the residential side the one two three and four unit properties you can get 30-year financing which means we spread our loan out to 30 years which is awesome but on the commercial side obviously and we'll talk about that more in the next episode the loans are a little bit different so something to know about there anyway and there's also creative stuff sorry i was just gonna say there's creative stuff too i mean i wrote a whole book on creative strategies but i put a bunch of them into volume one of the multi-family millionaire like some of the creative strategies that work well for the small deals things like seller financing and you know lease options and all that we should we should highlight i think a lot of people hear house hacking and assume it's what brandon just said buy a triplex live in one unit run out the other two that is house hacking in the multifamily model but house hacking is a more broad term that can be used you can household single families you can house tax single families in different ways right you can rent out rooms you can rent out an adu it's more of a principle of renting out a part of your property than it is a just buy a triplex and do it this way but i do think multi-family is is sort of the easiest way of every way you could house hack as far as the least amount of work required from you and the simplest to accomplish and most spouses are more okay with having somebody in an 80 you like a separate part of your house or downstairs or upstairs then having them in the bedroom next door to you like like it's difficult to convince your wife hey honey let's go have a random stranger move into the bedroom next door to us like that's weird right but buying a duplex and having them live in half of it most i'm not most uh maybe most most spouses would be like okay i understand the sacrifice for this but it's not that big a deal i mean i literally do it here in a two million dollar property in maui which is a which is something i should say it's not like when people think house hacking or buy a duplex they think crap property they think i gotta go buy some dumpy d-class property into d-class area and my tenant's gonna be doing meth out of my garage like that like i live in a super stupid nice house in maui with an ocean view and pool and all that and ryan murdoch one of my partners that opened our capital he's in the back like he literally rents from me back there and then i got a downstairs area that i rent out um and so it does i guess just get that out of your mind that house hacking has to be a dirty thing it's very much there's nice properties with extra units or adus or whatever that you can live in and reduce your expenses doesn't mean you're living for free but you can live cheaper so yeah house hacking it's great way so brandon there's there's four chapters i thought i should share with everybody it's actually four chapters in volume one on how to finance and and what i love about that is you know completely dispels the myth or you know that obstacle that that so many investors cite to say you know if i don't have a lot of money i can't start investing right so there's creative financing opportunities in there there's the ones you just mentioned and there's others and i mean anybody who reads those chapters is going to realize they have so many different ways that they could approach it and actually get that first property financed even if they don't have a lot of money all right well i think that stops a lot of people from moving forward so i'm glad you guys put in some content a chapter on this financing component because just the other day two days ago i was at my chiropractor's office and he's a little bit younger he just got out of uh you know medical school or what they go to and we're talking about houses and i said you know you could buy a house for three and a half percent and he said you know i don't mean to offend you but that just seems too good to be true that's gotta be a scam i was like still right doctors are still thinking along these lines so if you're listening to this and you're thinking i don't have enough money my credit's not good enough whatever contact a mortgage broker and let them tell you if that's the case you know one more thing i want to put out there is one of the chapters in the book is on partnerships and i don't want to go into it in depth right now but if you guys know me you know i love partnerships one of my very first properties with the triplex i didn't have the money for i brought in a partner so in the book i talk about something called the kite method on how to attract like unlimited private money and partners to like to invest with you so like if you follow like the right principles and guidelines like on how to get other people to partner with you you can literally build a massive empire using none of your own money like it's totally doable and then there's like the burst strategy we talk about in there as well so all that is like doable see like brian said dispel the myth that you have to have a lot of money to get into multifamily it's just not true all right moving on what is the next step after it comes to financing and managing the property uh so we talk about managing type of financing so last thing really step number seven here is i wrote down i wrote rinse and repeat and what i mean by that is once you get one done once you got your first multi-family it suddenly becomes a whole lot easier and then you can do another one and then another one and some people will stay that level they'll buy a four plex and then a three plex and then a dude like whatever they stay small and there's nothing wrong with that you can get like i said earlier the subtitle the book you can achieve financial independence by investing in those small deals i mean like i said earlier i got 1500 a month coming in in profit and pure cash flow from one of those um one small multi-family property that i own so i'd ask you this like everyone listening right now how many of those properties or even if you got one that was half as good or as quarter of as good how many of those would you need to be able to quit your job it's not as many as you might think and that's why i think multi-family is the path towards financial independence now if you want to get wealthy if you want to become a like extremely wealthy that's when you're going to want to scale up and this is the final point i'll make and we can move on to you know part two of this and you guys can listen to the next episode but the great part about small multifamily my favorite thing of all is that it's it's a gateway to the larger deals once you master the small stuff you buy that duplex you buy that four plex you build your confidence your knowledge your experience all that and so then you would maybe take on a five unit or a seven unit or an eight unit and then you do that one and you're like oh this isn't so hard you expand your mindset and then maybe you buy a 15 unit or a 20 unit and you're like hey i'm kind of getting the hang of this and then you buy a 40 unit and now people are saying well i don't have the money to buy a 40 unit again we we talk about that in the book and there it's we've talked about it today that dispel that myth because now you've got momentum on your side and that's the thing people don't realize is once you start getting into bigger deals you got momentum you got a lot of people out there who want to invest their money in your deals and if you know how to pitch them right you can scale up pretty rapidly and that's when you make that shift the larger deals so the analogy in the book i use is this um super mario bros you guys remember super mario brothers the original mario brothers on nintendo right my favorite game ever so you start on level one one and then you go to level one two and then one three and then one four and at the end of one four you go to level two one two two two three two four and there's eight levels each with four of these sub worlds so in total eight native sixteen thirty two there's 32 levels in the game but there's this cool little hack for those who are good at mario brothers remember there's like these little secret vines like you hit this break this block and this little vine starts drifting upward and you can climb that beanstalk up into the clouds and then go to these warped these little warp tubes and you can literally jump from level one to level three to level eight so i when i was younger i could beat the entire game of mario brothers in eight minutes not even kidding eight minutes for the entire game uh the way that i did that is by doing these warp things are they jumping from one level one three eight that's what multi-family lets you do you don't have to buy a house and then another house and then maybe a small deal you can jump from level one to three to eight and by the time you get to level eight let me just tell you it's so good like i work i bought more properties and brian you're probably on this thing too we bought more units in the past year you know including the ones that we're now closing on here shortly then my entire career 15 years combined we're buying more in like this one in fact we got more properties under contract in last three months then my entire career combined in time number of units because that's what it's like when you get to that next level and that's where we lead into volume 2 of the book is how to grow that and how to scale that business what does level 8 look like so anything else you want to add on that before i kind of move to the closest no brandon one of the concepts that you go over in the book is the stack method which i think is fantastic and that's really what you're talking about here right i mean so i don't know if you want to share a little bit about the stack method yes i mean it's basically that concept of you you buy a small property and then you buy a significantly larger one and then a larger one and like let's say you bought a duplex this year next year you bought a four plex then in the year after an eight unit then a 16 and then a 32. at the end of five years if you just doubled each year you're never going crazy you're never going from zero to a hundred you're just accelerating exponentially and so the beauty of that is you're again you're never going crazy you're never like going super risky like you you're building knowledge confidence motivation momentum all the whole way but within five years you can have enough properties to quit your job maybe in three years i've seen people do it in two years uh and that's the power of multi-family so that's where the stack comes in and there's a whole chapter on that in there and i i love that concept and that's where the later parts of the stack you start just rapidly growing your portfolio to the point where you're making millions of dollars every year in cash flow or in equity and over time that just gets better so yeah i love this i love this stuff multifamily is so fun we can tell the passion you have is clearly coming across the mic brandon i think this is you're making me want to read this it's called dominating okay good i'll send you a copy i might even sign it for you david you never know um i will say this uh you didn't ask me to say this one was it anyway yeah if you want to get the book go to biggerpockets.com multifamilybook you can get both of them there and when you buy both of them you get a bunch of cool bonus content so we're talking less than 60 bucks you get uh we did a bonus chapter called how to bypass small real estate investments and start your journey with large multi-family uh we did something brian wrote a super good white paper on investing in a post-covert world uh we did that thing you mentioned earlier brian where we talked to my performance coach jason juries the three of us sit down and talk for an hour about the mindset how to shift your thinking and 10 extra results and then we did a two-hour video with ryan murdock on called no money multi-family it's on how to do multiply with no money and then a another video i did with my two of my guys from open door capital that work with me and brian who are both getting into their first small multi-family deals so uh mike williams and michael cabagbag both talk about how they've gotten small multi-family deals in a super expensive market uh plus a raising money pitch deck and a bunch more so all that you get when you uh get the book so i think you guys will like it again biggerpockets.com multi-family book you can get it there anything you guys want to add on that not sure you could find a better return on investment out there than uh that's the same thought i had brian that's so funny you said that for 60 bucks could you get a higher roi if you get sorry sorry i almost forgot uh i did a four week class also on multifamily where i broke down like an hour between an hour and a half and two hours each of those four classes i did the whole month of june sorry july the whole month of july i did this class and i recorded it and if people buy it also the book before the end of august they also get access to those recordings that's more like seven more hours of content so just keep that in mind as well that's only available if you buy it before the end of august so sorry i didn't mean to cut you off there but i thought that was pretty important to mention we are going to have another episode of multi family millionaire where we are getting into the large multi-family stuff sort of the stuff down brian's wheelhouse and of course brandon's going to weigh in on what he thinks so i want to thank you two both for this is a long episode you give away a lot more content than i thought we were going to do that was pretty cool i think i want to read that book more than i thought i was going to want to read it i already do some multi-family property now i want to see what you guys have to say so we're going to wrap this one up and we're going to get to brandon reading chapter one of his book right after this so thank you guys both this is david green for brandon the dominator turner signing off introduction if people aren't calling you crazy you aren't thinking big enough richard branson i just don't want to see you ruin your life the broker said in a patronizing tone that made me want to reach across the table and strangle him you seem like a nice guy he continued but it's pretty obvious you haven't done this before some very experienced investors have looked at this property and passed on it you just don't know what you're getting yourself into maybe he had a point after all he was the big shot broker from out of town in a fancy suit who had been doing this for decades and he was right i didn't have a lot of experience and the property i had under contract was in distress i certainly didn't fit the profile of a typical buyer in fact a small investor acquiring a property of this size was far enough outside the norm that some people might consider it reckless and inappropriate still the way he said it really irked me and that infuriating smile of his i decided was just a little too big he may have been well intentioned but he struck me as a bit too smug and condescending i imagined if he had a puppy at home he'd speak to it in the same way he was speaking to me in fact i half expected him to reach over and pat me on the head maybe offer me a treat as if on cue his voice interrupted my thoughts would you like another donut he asked still beaming in hindsight i realized my negative reaction probably had less to do with his demeanor and more to do with my own insecurities and the hard truth of his words despite any displays of outward calm under the surface i was waging an internal war fighting to suppress a cacophony of doubts and fears i was trying to buy my largest property to date and a lot of naysayers were making me second-guess myself fortunately while the broker's words played on my anxieties they didn't deter me i moved forward with the deal and eventually managed to turn that property around creating massive value as occupancy improved income climbed and expenses came down even so the broker was at least partially right because when you take on a challenging project it's never really as easy as just turning the property around which almost makes it sound like flipping a switch although most aspects of multifamily investing aren't complex it takes a lot of work and can be a bumpy road to say the least you can expect lots of trial and error and plenty of setbacks along the way i did make a lot of mistakes just as people thought i would not only on my first multi-family but on all the others that followed some mistakes were small some were big and while some may have been unavoidable others were downright embarrassing all in all i've gotten a real education the lessons i learned as i grew my portfolio would prove valuable over the long run but they didn't pay the bills still if i messed up so many times how did i manage to pull it off how did i avoid bankruptcy and not ruin my life as some people had predicted while many factors contributed to my positive outcome the most important is this multi-family investments are forgiving by their very nature and offer a number of benefits that are unique within the investment world the benefits of large multifamily large multi-family investments share the same advantages as most rental real estate including wealth creation through cash flow appreciation forced and passive tax savings and amortization which results in the accumulation of equity as you pay down your debt brandon calls these the four wealth generators of real estate and for good reason given enough time these four glorious generators can be further magnified through leverage and compounding to create abundant wealth in addition multi-family assets can serve as an effective hedge against inflation provide diversification to your investment portfolio and offer a degree of recession resistance not found in other asset classes which we will explore in more depth in a later chapter these are all advantages but let's not overlook the obvious the benefits you can realize by owning investment real estate are directly proportional to the size of your holdings all things being equal owning a multi-family property that is 10 times as large will generate 10 times the cash flow 10 times the tax benefits and so on what won't increase by a factor of 10 the work that goes into it that's not to say that investing in large multi-family properties isn't a lot of work but efficiencies of scale do come into play for example the work that goes into the underwriting due diligence and closing of a 150 unit apartment complex is not 10 times as much as for a 15 unit complex it might be closer to 50 more work if that other benefits of investing in larger multi-family properties include better lending terms than you could get for smaller multi-family properties diversification of income across more tenants efficiencies of scale and operations more opportunity to force appreciation through value add more leverage and negotiating power with vendors more well-qualified buyers when it's time to sell and greater interest from people who would like to invest in your projects the income diversification aspect of large multi-family properties is particularly important let's say you own a hundred unit apartment building and you make a mistake that causes you to lose a tenant or three most likely the resulting one to three percent drop in income is something you can learn from without missing a beat most new property owners have at least a 25 cushion built into their cash flow which if necessary can help them muddle through some pretty big gaps surprises or dismal circumstances on top of that if you have an amortizing mortgage you're paying down your debt every month which is building equity in effect creating a reserve that could be cashed in someday in a time of need finally large multi-family properties offer the advantage of allowing owners to force appreciation on an even larger scale by taking steps to boost income or reduce expenses a change that might yield modest results in a smaller property such as the installation of low-flow plumbing fixtures or a modest increase in rents can create surprising amounts of equity in a large multi-family as already stated multi-family properties tend to be forgiving by nature they operate with momentum and once they're headed in the right direction they can power through most setbacks without significant consequences if you make as many mistakes as i have it's reassuring to know that it's going to take a lot to derail the train even though we took somewhat different paths brandon and i shared a penchant for finding ways to make improvements that paid some pretty big dividend dividends right from the start we both overcompensated for our blunders by constantly identifying problems and coming up with solutions unlocking value by fixing things improving things making them more efficient it might be something as simple as installing higher efficiency light bulbs or it might involve mustering up the fortitude to deal with unsavory situations we have both tackled problems that would make most people's skin crawl all along showing lots of love and attentiveness were before there was neglect this value-add approach turned out to be one of the keys to surviving and then thriving for both of us especially early in our investing careers by incessantly seeking out and implementing strategy strategies to boost income and cut expenses we were able to generate the cash flow we needed not only to overcome our mistakes and setbacks but also to purchase additional properties and grow our portfolios after we added enough value to a property we would refinance it pull out the cash to do more deals which in turn continue to fuel our growth that said while focusing on value-add real estate investments can be lucrative and allow you to grow without raising outside capital it isn't easy and it's not for everyone over the years as brandon and i have grown our respective portfolios and expanded geographically we've both learned how to invest more passively by relying on the knowledge and experience of partners and third party associates to get things done our earlier hands-on experience has proven invaluable as we underwrite deals and oversee property managers we've also realized the benefits of raising capital to fund our acquisitions which has accelerated our ability to buy large multi-family properties while providing the satisfaction of creating wealth for others who invest in our deals the downsides of large multi-family after hearing all the benefits of investing in large multi-family real estate perhaps you're motivated to dive in if so we wouldn't blame you it's a decision we've both made but if large multi-family properties are so wonderful why doesn't everybody invest in them there are many reasons but let's review the most common and legitimate ones first and foremost while investing in large multi-family properties can be lucrative it's no walk in the park this type of investing requires a lot of hard work and sacrifice we've had the pleasure of meeting dozens of investors who have grown portfolios of a thousand units plus the one thing they all have in common a strong work ethic this should not be surprising as hard work is a powerful force that can lead to positive results in any field of endeavor in an interview with 60 minutes the actor will smith said i've never really viewed myself as particularly talented i viewed myself as slightly above average in talent where i excel is ridiculous sickening work ethic among the highest achievers in real estate you'll often find the same level of determination sometimes bordering on obsession even when the work is divided among a team of partners there's always more to be done that said you have a choice about how far and how fast you grow a business you don't need to have 500 units in the first year or 2 000 in the second and you certainly wouldn't be expected to do everything yourself nor should you there are plenty of excellent property management firms and other vendors out there who can make your life easier investors who are in it for the long haul need to have balance in their lives just know going in that if you want to excel in the multi-family world you can't offload everything that may be disheartening for people who are under the illusion that real estate investing is an entirely passive activity however real estate is a business like any other and it doesn't magically run itself especially in growth mode are there passive paths to wealth and multi-family investing absolutely if you want to invest in a large scale but don't want to put in the work you can invest in other people's deals there are lots of syndicators out there looking for limited partners who are willing to invest in their multi-family projects these investments come with no responsibilities or authority you just have to write a check the downside of this passive approach you won't have any control over the outcome and there's generally less upside that said these limitations can be a fair trade-off for people whose commitments or priorities won't allow for active involvement the myths of large multifamily in an ideal world decisions regarding whether to invest in multi-family would be driven by an objective evaluation of the pros and cons in conjunction with one's own personal goals and circumstances unfortunately decisions about large properties are often made for the wrong reasons there are many convincing myths out there let's take a look at four of the most pervasive myth number one large multifamily is too complex while there are more moving parts to large properties and analyzing them as more involved in most cases they really aren't that much more complex than small ones most aspiring investors have heard this at one point or another but few actually believe it when a new investor first enters a large apartment complex with an eye toward owning and operating it they are likely to feel overwhelmed the sheer vastness of the asset in fear of the unknown create anxiety which can drive people to discard the idea when that same investor considers a single family home a condo or a duplex they probably feel a greater sense of familiarity and comfort they have probably lived in a similar property and it seems more manageable most new investors feel they can handle a small condo how complicated could it be what is a 150 unit apartment complex it's 150 single apartments it's 75 duplexes or 50 triplexes at a high level the issues you deal with are the same if you can manage a single condo unit you can manage a large apartment complex especially since you're most likely going to have a third party management company to handle day-to-day operations you can hire people to help with anything else you don't have the time for you don't have the knowledge or skills for or just don't want to do yourself you can also partner when you invest in a large multi-family deal there's a lot more potential profit to split with other people myth number two most investors can't afford to buy a large property this is a particularly powerful and prevalent myth primarily because it's rooted in a grain of truth most people don't have enough money to buy a large apartment building in fact even investors who've already accumulated a respectable portfolio of smaller multi-family assets may not be able to make the leap on their own but here is the real truth the vast majority of people buying these large assets are not using their own money they raise money from others and keep some of the equity for their trouble in fact in the world of large multifamily the rarity is the investor who has enough cash to not need other people's money there are many ways to structure the acquisition of large assets and we'll review those in more detail later just know that cash is not a prerequisite for making a large multi-family acquisition myth number three there are no good deals the market moves in cycles and valuations can be high or low relative to other periods in time however at every stage of this cycle there's a seemingly incessant chorus of people predicting a pending decline or complaining that things are overpriced the truth is that there are always good deals regardless of where we may be in the market cycle of course we should clarify what a good deal actually is since that can be clearly subjective we would define a good deal as one that cash flows at a high enough level to generate returns satisfactory to the investor with enough of a cushion built in to weather any storms you're likely to encounter along the way if you have a long-term horizon and can lock in debt at an interest rate that will achieve these results your downside is limited a good deal should also have a potential upside that will allow you to force appreciation and increase the value of your investment are there deals out there that can achieve these kinds of returns while it can seem impossible at times the answer to this question is always yes the question is how difficult are they to find and how hard are you willing to search to find them if you're relying entirely on public sources like the internet and broker listings finding strong deals can be challenging and you're likely to get discouraged but there are many other ways to find deals which we'll delve into later on myth number four you need a ton of experience this myth is also rooted in a grain of truth real estate investment experience is undoubtedly a valuable asset for diving into the world of large multifamily but lack of it is not a deal breaker we've observed that prominent investors can travel a wide array of paths to achieve their goals some start with smaller properties and work their way up using the stack method which we outlined in volume one these investors begin with a small property and exponentially grow their portfolio by making increasingly larger acquisitions gaining knowledge experience and capital along the way other investors team up with partners who have the experience they lack still others leverage valuable skills they acquired through an education or career that on the surface may seem entirely unrelated to real estate is experience valuable undoubtedly does a lack of experience preclude you from buying a large multi-family property absolutely not large multi-family is is within your reach one of the greatest takeaways from all my experience with larger multifamily properties is a conviction that investing in large multi-family deals is within the reach of most real estate investors there are ways to overcome any limitations you may face as well as the mistakes you'll undoubtedly make if you currently own rental real estate or have owned rentals in the past you're almost certainly laid a solid foundation for moving up to larger multi-family properties everything you've learned and experienced will improve your chances of success what if you haven't owned rental real estate and are just getting started you'll need to dig in and really educate yourself a process that by the way you should never stop if you haven't already done so read volume one of the multi-family millionaire then read this book then go back and read them both again you'll also need to network and build relationships because going it alone as a newbie is a recipe for disaster you'll need to do a ton of work and take on the things that others aren't willing to however if you're determined enough patient enough and prepared to do whatever work is necessary becoming a large multi-family investor and creating generational wealth is almost certainly within your reach in the first volume of the multi-family millionaire we discussed a common problem many real estate investors stay within their comfort zone for far too long they get comfortable with their small portfolio or with no portfolio and although their heart and soul yearn for growth and expansion they stay small because their fear speaks louder than their ambition this book is designed to be an antidote to fear we want to arm you with the detailed tried tested and true knowledge you need to rise to your full potential a decade ago i didn't listen to mr condescending smile instead i stepped away from my comfort zone and discovered an incredible life on the other side may this book be your guide as you take your business to the next level toward becoming a multi-family millionaire and creating generational wealth key takeaways before deciding to invest in large multi-family properties you'll need to weigh a number of advantages and disadvantages common myths about large multi-family real estate are that it's too complicated the properties are not affordable there's no good deals and you need a lot of experience all of these may have a grain of truth but are simply challenges that can be overcome despite what many people say or believe investing in large multi-family deals is within the reach of most small real estate investors river apartments part one i still remember the phone call the ceo of a real estate investment firm was going to be in town soon and wanted to meet me his company owned river apartments a 115 unit multi-family project in the area and they decided it was time to sell hopefully to me the call was not entirely unexpected the multi-family property in question had caught my attention several years earlier so i had reached out to see if they might be willing to sell when they said no i continued to reach out every six months or so the message was the same every time i checked in no and if we change our mind we'll let you know well true to his word the ceo was now letting me know it can be difficult to find good multi-family deals so i make it a point to plant seeds like this all the time when the owner of a property i'm interested in eventually decides to sell i'll be the first one they call and i can reap what i sowed it's worked for me before and it worked again this time during my meeting with the ceo i discovered that the property was an affordable housing project that was currently operating under a contract with the u.s department of housing and urban development this meant that the government was subsidizing the rent to help the residents afford their housing in exchange for the property owner the property owner was subject to a wide range of operating restrictions inspections and reporting requirements however the ceo explained that the contract was about to expire knowing the local rental market i thought that converting departments from hud to market rate housing could be a great opportunity to unlock some value soon after our meeting i entered into negotiations and started doing some preliminary underwriting what i found wasn't pretty on the surface staffing was literally double what it should have been for a project this size and maintenance costs were exorbitant beyond reason the ceo acknowledged that there was plenty of opportunities to cut costs and use this angle to try to persuade me that there was upside potential something that i was already sold on he explained that his company was ready to pull up stakes in the area and wanted to make a deal soon so they could redeploy the proceeds to another project that they had lined up he encouraged me to look beyond the numbers which were ugly as it turned out the seller didn't know the half of it things were worse than either of us could have imagined since the property was local i asked around eventually i tracked down some of the contractors who were routinely doing work there one of which i had an excellent relationship with it was a painting contractor who gave me the first clue as to what was really going on at river apartments and it was shocking what a mess this project was why did i like this property again it was about to become a lot harder to remember to be continued you're listening to bigger pockets radio simplifying real estate for investors large and small if you're here looking to learn about real estate investing without all the hype you're in the right place stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com your home for real estate investing online

Channel: BiggerPockets

Views: 57,330

Rating: 4.9231234 out of 5

Keywords: biggerpockets, real estate investing, investing, rental property, investing in real estate, income property, bigger pockets, passive income, multifamily investing, small multifamily investing, investing in multifamily, investing in small multifamily, multi family investing, real estate investing 101, how to invest in real estate, multifamily, real estate investor, real estate wealth, how to get rich in real estate, brandon turner, brian murray, biggerpockets podcast, cashflow

Id: 8LRW8IR0S9I

Length: 90min 25sec (5425 seconds)

Published: Thu Aug 19 2021