of all the videos that we've made up to this point there's one video that stands out from the rest and that is the basic steps to multif family investing we got tremendous support we got a lot of love on that specific video and so as a result we're bringing you part two today so without further Ado let's jump right into it hey everyone it's Wan wear with sage real estate and I'm Caleb Baldwin also with sage real estate in today's video we're going to be covering some of the most common questions that we get from buyers from all different walks of life all different approaches and we're going to dive into some of the most frequently asked questions as well as provide some Pro tips some inside success stories from clients that we've personally worked with and hope that we instill some useful knowledge to you as you get started in your investment career so let's kick this off this is we're almost calling this part two of our basic steps on how to buy your first multif family property in 2024 now if you've not seen our first video we're certainly going to be adding to that one but please make sure you check that video out terrific video it's got a lot of views and we have have we we love all the support and all the comments that you've been giving us so please continue with that so with that being said let's start off with what's the most important part in in in starting with step one into wanting to do this Caleb like like what's the first step yeah that's that's a great question and I believe that the first step before any of the x's and the O's and the the nuts and the bolts of the process is being in the right mindset it's a big unknown It's usually the biggest purchase that any of us will ever make in our life and so entering it with the right mindset and mentality will help alleviate some of that unnecessary stress which I believe is originated in a lot of those unknowns the big question marks that we have to answer and address before we can feel comfortable and confident moving forward with with actually beginning the process and taking the the actual steps that that need to be taken in order to Kickstart your investment career and and and I agree with that you know and I call that a mind shift and so there's a couple things that happened either you know someone who's done it whether it's it's a friend who who went off and they bought their first 4unit building or maybe you read of about someone in a book or maybe you heard a podcast or maybe you've been watching our YouTube channel but at some point it's a mind shift of saying yes I can too or if I can't I want to find out why I can't and if they did it I could do it too so a lot of it has to do with you the individual saying now there's a couple reasons why people want to buy rental properties Caleb like what are some of the most common things that you're hearing from from the clients that you're currently working with today why is it that they're wanting to buy in a in a time where some people are going to say the interest rates are so high why would anyone buy right now you're you're crazy why are they buying that's a great question and I would say at the very basic core is people want to be in control of of where their monthly housing payment is going and if you're not in control of that that means somebody body else's and so when you're in control of your monthly housing expense there's a certain confidence that that instills in you knowing that no one can come shift that or raise your rent over time and that leaks into every other category of your life just knowing that you're in the driver seat and you essentially control your own destiny when it comes to that monthly housing payment which is most people's biggest expense every month you know Caleb and a lot of times what I see from people who want to invest in real estate is there's there's a couple main reasons why they want to invest and one of those reasons is well I've heard and I've seen that when people buy a piece of property you know SE 7even 10 15 years later it's doubled it's tripled in price and that's a thing called appreciation it's just an investment it's like uh you have to live somewhere and why not live in a in a property where and most likely in most cases we have appreciation certainly in Southern California we know that that's a I'm going to call it a guarantee although some of you might push back there's 's this guarantee of like well I have this money that I've saved up now I could go invested in some other type of investment type but I know if I put it in real estate I'm going to be pretty safe so there's there's there's I want to have appreciation in my life and so that's one of the reasons a lot of times people say you know I'm going to retire someday and I don't know that I'm going to have a pension plan or I'm going to have this extra cash flow that I don't have to work for and sometimes that real estate gives them that a lot of times gives people freedom and then the last part is people tell us I want to leave a nest egg behind a lot of us have friends and they know that when Grandma and Grandpa pass pass away that they're going to get several buildings and sometimes this happens and we see this happen all around us now Caleb and I and I'm going to tell every single we are not in that situation okay we're not in a situation where anyone's going to leave us anything and you might be in that situation too but just because you're in that situation doesn't mean that you can't change change that for this for the younger generation in your family I have two daughters and am I'm thinking gez when I pass away do I want to leave them a bunch of buildings of course of course I want to do that and so those are some of the reasons why when we're talking about mindset we're talking about motivation it's this is why you're doing it is it easy no um is it what I like to call get get rich guaranteed it's definitely get rich guaranteed and so let's talk about the first thing we tell people once you have that mindset that motivation that hey I I want to know I want to know is do I can I pull this off what's the first thing that they need to do absolutely so again because it is a big purchase and there's naturally going to be stress involved due to the size of of the transaction there's a lot of big questions that need to be answered before you can have that that peace of mind to move forward and the first one is am I going to be pre-approved what do I qualify ify for and that's typically a very easy starting point because if you're proactive throughout the process and you're taking the right steps I mean the fact that you're watching this video now tells me that you are the next step would be to get in touch with the lender work through the process which is it's free it's relatively easy and quick to get through the process and and compile the necessary items that A lender is going to look for and as you work through that process you again you're you're gaining this confidence because you're taking the necessary steps and at the end of it you're going to be given in most cases a pre-approval amount and that is one of the biggest questions that we need to answer upfront because now we can focus on the type of properties that we're interested in within that price range and I have found that from from our newer investors just simply going through the pre-approval process takes this massive weight off of their shoulders because that's again one of the big unknowns and when you put a check in that box you all of a sudden have this this new found on confidence saying okay wow I I was approved for a lot more than I thought and now we can actually take that and build a strategy around that pre-approval amount and I have found that as soon as someone's through that process again all a lot of that stress of of not knowing whether it's something that they can do or not is now eliminated we Caleb we often get folks who want a buyer consultation with us and we're happy to do so but moving forward here's what I would like before someone reaches out to us and wants a buy consultation cuz here's what's going to happen a lot of folks want to to meet with us and say h how can I do it and we're going to say have you been pre-approved and most times surprisingly even though we make these videos they've not been pre-approved and so promise us before you reach out to us let's get you pre-approved now whether you go with our in-house mortgage Sage trust mortgage or you check in with the local bank wherever you might be doesn't cost you anything so sometimes a lot of our folks will say but I don't want them to run our credit please think about what you're saying is you're telling us that you want to buy a property and we believe you should right that's a very like prudent thing to do is to start investing in real estate but you are being your own like kind of your own roadblock someone on a podcast or a book said don't let them run your credit it's really tough for any lender to pre-approve you now they can but they really want to give you a approval and they want to run your credit so for anyone who says I don't want them to run it have them run it one time you have a copy of your report it's I strongly suggest that you do that because whether you're working with us or you're working with someone like us they're going to say are you pre-approved yes I am and here you go you're now in a position to do so but let's go back a little bit Caleb because because sometimes we get people and they'll say do I need to have any savings what's my credit like do I have to have a job like how can we just guide some of those folks to say for the most part this is kind of what you need to have yeah so there's several factors that will be uniform across the board regardless of what lender you choose to work with some of them are a little bit more obvious than others but they're pretty much the same criteria that each lender is going to look at now obviously everyone's case is a little bit different some people are self-employed some people have a cash heavy income and the lender will take a close look at each of those caseby casee scenarios but in general here are the things that the lender will take into consideration so the first is again a pretty obvious one is your credit which is why having a good credit score is essential if if you don't then A lender will be able to provide some guidance in terms of how you can improve that over time the second is of course your income because that's what's going to help you be able to make that monthly mortgage payment the third one which a lot of people Overlook sometimes is the debt to income ratio so for that reason as you're working through the pre-approval process or gearing up to buy your your first property we always recommend before you make any big purchases such as a car or opening any new lines of credit just check with the lender first and make sure that you're in a good position from a debt to income ratio standpoint because that is another big factor and as Swan mentioned you also need some level of a down payment unless you're a VA buyer which is the only exception where you can come in with zero money down which is a great option for veterans you will need some level of a down payment anywhere as low as 3 and half to 5% all the way up into 25% just depending on the type of loan product that you're going to get so just to recap really quickly they're going to look at your credit score they're going to look at your income they're going to look at your debt to income ratio as well as your reserves or the balance that you have saved and if you're watching this video and you're like you know I've been working with this company for a year and a half I don't know if I qualify or you know what I I made some mistakes early on with my credit I was young for whatever happened it's it's okay I would say let's look at it let's let's run your credit let's speak with the lender and let's find out cuz it's most times you might be 80% there ready to qualify you might be there but there's but we kind of need to be told whether we qualify or not now when you're speaking with the lender you're going to want to figure out do they have experience in doing multif family type loans now they're they're because a lot of lenders specialize in homes Town Homes condom that's perfectly fine they are able to do a loan on a 4unit typically and no more than that that's going to get into commercial loans I'll touch a little bit on that but they should be able to help you but sometimes they don't understand it they don't know how to give you credit for the other rental units that are coming in that will help offset the the expense of that new mortgage and so it's important that the lender that you're speaking with understands rental properties um because that makes this huge huge Improvement now let's talk about the the first time we did the video the interest rates were at 3% three and a quar per. that was two years ago now they're at 7% 7 and half per. okay more than doubled in most cases we would have said okay that's going to bring the real estate market to a complete Hall and no one's ever going to buy again what's happening right now yeah so I believe that as interest rates ticked up over time obviously When You See It Go from a three to a seven you kind of pump the brakes a little bit maybe a little bit of sticker shock but as we've kind of settled into this new normal this new lending environment if you will with these new interest rates a lot of buyers have kind of come out of their their hibernation if you will and reentered the market realizing that historically 7% isn't crazy there was times when there was you know up to 15% interest and people were still buying property so although the interest rates did cause people to pause a little bit those people have now come to terms with where we're at and The New Normal that we're operating within and as a result of that have re-engaged in terms of purchasing their first property and they also know that they have options so one is what happens if interest rates go down they have the option to refinance if interest rates go up then they're happy because they got the better rate based on where interest rates were headed at that time and so it's kind of a win-win and I know that some people might push back on that point a little bit but at the end of the day you either have the best interest rate available to you at that time if they go up you're locked in at the lower rate and if they go down you simply refinance to that new rate one thing that we're seeing right now is if you were a buyer and you were unable to buy when the interest rates were at 3% and now you've decided I not going to buy a property CU they're at 7% my first question to you is okay you were unsuccessful when they were at three why and in most cases you were unsuccessful CU you might say well my realtor put in 12 offers 13 offers 14 offers and I never got selected that was probably the case for those people that missed out when the interest rates were low why did you miss out there was so many buyers there was buyers that were able to outbid you and now you're on the sidelines now where I see a mistake being made in wealth creation because this video at the end of the day our channel is teach people how to build wealth right now although the interest rates are much higher than than than we would like one thing has changed all those multiple buyers that were competing against you there's less of them are there still buyers out there there's still buyers out there but there's less and less people competing for these properties does that mean that no one wants the asset does that mean that it's a bad time to buy it doesn't mean any of that it just means other people are having apprehension ition at moving forward and so what I believe is where maybe there was like a long line to get selected before that line has shortened and sometimes we're submitting offers and we might be one of three offers we might be one of two or one of one what does that do to our current client locks them into a property now the first step in Building Wealth is securing a property and when I say secure I mean like closing the property closing the escrow it's it's yours now and listen a lot of the wealth that's being built is being built through through um long-term holds long-term ownership we none of our videos are we talking about quick flips quick profits we've never promised you that but we did promise you wealth creation and you're going to get it and you're still going to get it even when interest rates are at this higher rate why well there's a couple things when there's less competition on the B um on the buy side um good Brokers could help you negotiate the price you know there's there's there's a lot of cost associated with u with lending fees but now since there's less buyers you could come in saying well I'm going to offer you less I also want you um the seller to also give us a credit give us back money and so let me give you an example give us back $55,000 $8,000 give us back $10,000 to offset the cost of me getting this loan back when the interest rates were at 3% they would have slammed the door shut on you they would not even respond to you do you think they're going to think of you now you they sure are and so we're able to put people in in at a really good price at a good credit that will pay down some of that loan and and sometimes do some level of significant repairs and so at the end of the day the the consumer is winning now we need to look past the oh my gosh the interest rate's so high I'm just going to wait cuz what's on the on the other side of waiting you're going to wait wait interest rates let's just say interest rates go back down uh 3 5 years from now well what's going to happen when the interest rates come down all the buyers come back it you want to be competing again and I don't think that that's the case because again the strategy here is buy as much as you can borrow as much as you can be strategic on your pricing and everything else and hold so the actual process is not a hard process it's simply Buy and Hold and wait okay so that that tremendously anyone who's applied that strategy in Southern California and in areas that are appreciating and have had historical trends of appreciation you're going to win before we move on to the next point you mentioned pricing a few times as we as we discuss interest rates so for those people that are maybe just getting started and are unfamiliar with what that relationship looks like can you expand on that a little bit what how how are interest rates and prices correlated to each other yeah so so what ends up happening is when interest rates are really low the prices is the price is going to get pushed up okay and so it's almost like um it's what I'm going to call a inverse relationship interest rates are low prices are high well now it's Shifting the other way interest rates are high prices are lower right so we sell a lot of apartment buildings and what we're seeing is often times we're not getting the price that the seller wants oftentimes we're sitting on the market much much longer there's less interest on the properties now little by little we start dropping the price why are we dropping the price well the market has let us know that maybe that maybe they're not willing to pay that price anymore but ultimately it goes to a price that does make sense and at that point that's when um you the buyer need to insert yourself and take hold of that property let me be very very clear that I don't expect a collapse in the markets if you've watched any of our videos we've covered the potential of could this happen and we've interviewed a lot of Industry um experts and we're not seeing any of that so some of the push back that I get sometimes it's and Caleb you hear this too I'm just going to wait I want properties to drop and then I'm going to ask the question of how much do you think it's going to drop because if you watch some of our prior videos I'm interviewing um the head analyst for co-star I these are people that all they do is they're they're analyzing what's going on with the economy with with the market what buyers and sellers are doing inside of the commercial level market and they're not expecting a big drop either they're saying maybe 5 to 10% yeah and and again to to bring it back to to the mindset making the the decision the conscious decision to say I'm going to buy a property and I'm going to do whatever it takes to get there the only regret that I hear from from our clients and investors that we work with whether it's a new investor or an investor that we work with for years is the only regret is I wish I would have bought more and then you have the other side which is I wish I would have started and some people just never get the ball rolling and having the right mentality will certainly help you take the first steps and again don't be one of those people that really wants to do this because let's face it at the end of the day everyone knows that the power behind real estate investing and it's just taking those first couple steps to making it a reality and the one thing that pains us the most is when we have clients that reach out and then it comes time to take those first steps and take action and they never do it and then we realize that there's just a segment of of people that want to buy that never will because they can't quite get over that first hurdle and so making the choice to do so is a very powerful thing entering it with the right mindset is of utmost importance and once you decide to do so and you realize that it's really not that complicated just take step after step after step you will make sure that you're not on the side of people that are regretting their inaction or not taking the first step and you're on the side of people that regret not buying more when they had the opportunity to do so you know Caleb that reminds me of this old saying that I've heard and I've said it Through the Years is you know some folks will say hey the best time to have purchase real estate was 20 years ago so that's the that's the first so the best time to have purchase real estate was 20 years ago when's the second best time and the answer is now okay now I'm going to I'm going to kind of break down that I'm going to kind of unpack that statement okay and the reason why they say the best time to have bought it was 20 years ago cuz that's 20 years of appreciation now we know that with appreciation we're we're compounding on top of growth so if in a year your property went up by just say 20,000 well now the growth is happening on what you paid for the property the 20,000 and it's going to grow and so that's called that's compound interest uh which is that is where real wealth is being made okay so that's why they say hey within time everything's going to make sense now why would you want to get started now is that you want to get that that 20e uh clock ticking as soon as you can and can can you put roadblocks in front of you because you because some of you might say prices are too high interest rates are too high I'm not going to buy and that's fine we can't convert everyone but there are some people that are on the sidelines that are thinking you know what you bring up a good point ultimately if I were to ask you and I'm going to ask this question question where is the real estate market 10 years from now if I ask that question I think most of you are going to say I think we're going to be fine I mean think about it is it going to be up most of you are probably going to say 10 years from now yeah I think it's going to be up so all we have to do is is be able to control a a property control it close it and hold it now the reason why I love that statement that I said um previously is because that statement says that the best time is to buy now because it doesn't bring into the component of cash flow which is what I'm going to get into next the statement that I just said pretty much says the best time to buy was 20 years ago why well because you had the appreciation made you wealthy okay and that is that's going to be the number one reason that's going to make you wealthy again not cash flow now let's talk about that because it's kind of a here in Southern California it's a very big like well hey Caleb want to buy a building that cash flows I want it to be a good price what do we tell people when they want both cash flow and I wanted to appreciate at the same time at first like what's what's the possibility of that yeah so that's a a very common question that we get and we know that there's a lot of great information out there a lot of great blogs and websites that talk about real estate investing and a lot of times you'll hear people say the phrase cash is king or cash flow is King now while that might be true in certain markets it it's very dependent on where that specific investor where you as an investor are at in your in your life in your career in your investment Journey for instance if you're a young working professional that has yet to enter into their Peak earning years then cash flow might not be as important because you know that your salary is going to continue to increase if you live below your means you can make that spread that much larger and if you're somebody that's maybe on the latter end of your career where you realize that you're weekly paycheck is going to go away your bi-weekly paycheck is going to go away then maybe we need to supplement that income with cash flow so it's very dependent on again where you're at in the process if you're just starting and and you still have a lifetime of earning left then I would certainly recommend you lean towards the appreciation because again as Juan mentioned the compound interest is going to continue to grow and grow and when I hear the word compound interest I hear generational wealth and if you're the first person starting that for for your family or or your your family to come then the sooner the better and if you're somebody that's again in your older years or thinking about retiring early and you need to supplement that income then maybe we'll look at it more from a cash flow perspective but to Juan's point the the power is in the equity growth in that compound interest that continues to grow and grow and grow year after year it's not rocket science you just buy it and wait right so it's it's not wait to buy real estate it's buy real estate and wait so again not getrich quick but it's get-rich guaranteed all you have to do is knock down the first one get that positive Equity growth working on your side and then you have a an extra piggy bank if you will to go play can we pull from that to buy the next one and and in a net shell you have options at your disposal to continue expanding your your real estate portfolio um so so two things about that and when we're talking about Building Wealth getting started what we've seen the biggest learning curve you know when when Caleb's talking about knocking down that first one uh we've seen the power and what that does to an individual when they've close their first Triplex and they decide to live in one and they decide to self-manage and fix up one of the units and get at least stuff they realize how easy it is yeah they realize holy smokes one that rent that the tenant moved out um I I asked for a market rent w we had 50 people show up to the open house I can't believe it all of a sudden light bulbs start going off it's not that hard you're essentially buying a business that there's demand for a lot of demand for it and all of a sudden you go from buying your first Triplex and being a little nervous and um I don't know what to happens when you know like I dealing with maintenance issues and contractors which is part of this business and you quickly within within months I we talked to the client again and then that they're thinking we're saving up more money because we want to buy our next one and we see that over and over and over again because that learning curve in owning real estate and being a u a manager of rental properties it's not that hard it's actually not that hard and so um I do want to talk about a little bit about it's in the starting phases a lot of times people worry about well how's the rental market um I I worry about tenant and and if you're in a state that has Statewide rent control California we have that in a lot of more and more States every year are bringing on their own Statewide rank control so you might be in a state watching this thinking I don't have to worry about that it's coming no one could stop it California couldn't stop it and more and more states are going to say there's going to have to be some some level of rent increased cap that is put on hold to try to protect the tenant now we all know that there's there's there's a bad side to every law I'm not going to get into that today but how's the environment Caleb when it comes to can we rent a property is the tenant going to pay me like what's what should I worry about yeah so as as Juan just mentioned when you purchase a property an income producing property you're essentially buying a business that has customers waiting in line to to to purchase that product which in this case is rent one of the apartments from you so I would ask the question if something as catastrophic as the pandemic where people couldn't go to work they were stuck at home maybe they got furloughed did people stop renting apartments did did did those customers go away or were there still prospective tenants lined up out the door um people needed housing people moved a lot depending on hey I'm going to be working from home so now I need maybe something bigger and sales went up during that time I I think we were worried as from a business perspective but there was more people willing to what I call transact buy and sell rental properties during that time then then they're doing so now and so to your point no people still needed housing it was still a we call it a product but it's because that's what we kind of view it as but it is housing it's essential and no it wasn't impacted whatsoever and and I believe that that speaks to the stability of uh real estate as an investment as a whole at its very basic core you're putting a check in the box of one of the most basic human needs right which is food and water clothing and the big one shelter and that's not going to go away it's been around since the beginning of time and it will be around until the end of time because at the end of the day people will always need a safe comfortable place for themselves for them f for their families and there is no alternative I mean you have in technology for instance it's rapidly moving there's always something new but a building is always going to be a building people are always going to need a roof over their heads to keep them out of the conditions and so the very basic core the utility of the real estate is what's going to to maintain it as a a great investment for now and to forever so as you know if you followed our Channel a lot of our content is based on the small apartment market so two three and four units but there are investors that when they're first getting started or maybe moving up to that next level want to get into the commercial s so could you elaborate a little bit on on what is commercial real estate from from the financial perspective from a lender's perspective and what are some of the differences and things that people should look for when it comes to that product perfect so when you're buying five units or more so if you're looking at a property and it's a six unit 7 Unit 8 unit 12 or or even more know that that financing requirement is going to be different now here's the difference and which is a lot of people actually prefer what we call Commercial loans now I don't want to throw you off when I use the word commercial loans it means five units and above okay so what ends up happening when you're at the commercial level the lenders the commercial lenders look at the property how much money does it make and what's going to cost to operate now the beauty in that they're auditing the the the profit and loss for the building is they're going to depend Less on you as the qualifier okay meaning you need they almost want the property to stand alone without your help which is a very good thing some people are like well why would I buy a 4unit when I could buy an eight unit great now let me tell you why that's going to be harder especially in today's environment if you buy a 4unit building you could get it with 25% down when you buy a 4-unit building or a three-unit building the bank doesn't care if you are negative meaning like you're going to lose money every month meaning that you might have to put in $600 of your own to make it pay for itself Break Even okay so the bank doesn't care they'll do that loan all day long if you have 25% down they definitely care when it's five plus even if you're a wealthy individual and you have plenty of cash flow and you don't mind putting in $2,000 a month to break even on a commercial loan they do care they will not give you that loan now typically what ends up happening in today's market to buy five units or more you're you're looking at 40% down 50% down 60% down 70% down or more so what what what it means right now is you need a lot more money down if you're looking you know if you're looking at a million dollar sixun building you're putting in half a million dollars now it's not always a set amount for for all the units it depends on how much income is being produced there's a thing called the debt coverage ratio and I'm trying to make this uh in a simple way what the bank says at the commercial level says for every dollar of expense that this building is going to incur for everything for the mortgage for the property taxes for the insurance for the maintenance for the management for everything that's going to entail we want you to make a120 to the dollar okay so that's so that's what we call the one 1.2 debt coverage ratio so every building is going to be different because one building one 8un building might require 40% down and the one next to it that you think is identical but the rent is less might require 60 or 70% down well you could see there's a lot more people with the 25% down to buy that fourplex or Triplex than there is someone that has 70% down doesn't make commercial bad it just means you need to have more money and can you make more money at the commercial level yeah you can you can because there actually you're um you're buying what we call more doors in some cases you could be bringing on more debts uh you could reposition the property so it's not that one is better than the other it's you as the individual what are you comfortable with what can you qualify for now the one other thing with commercial loans to kind of wrap this up the loans are typically good for five 7 or 10 years meaning when that time frame comes up up you now have to go get a new loan uh to get a new loan is not free and you're having to pay and so a lot of times we've we've we've uh really um doubled down on like hey just buy a fourplex because your loan's never going to change for 30 years you you could make a lot of plans and a lot of assumptions in in owning this business knowing that for 30 years that loan is not going to change when you have five plus or more doors it's going to change every so often so those are two different things one is not better than the other and I will tell you this for those of you who are um ambitious and want to get going on your on your first fourplex but that is just the first one of many I will tell you that in order for you to scale in order for you to grow in order for you to become uh super wealthy you need to get into the bigger the bigger properties and so a lot of times we'll say if if you want to scale let's start with a small stuff that's buil some equity and then let's grow into the larger units at this moment you are having to put more money down because the interest rates have risen so high and it's it's really throwing off our deck um coverage ratio but once the interest rates come back down the amount of down payment will change it'll spur things up again and so those are two different things to look for I don't want anyone to think that just because you've never done it that you shouldn't start with the big units listen if Mom and Dad or or someone is willing to partner with you and you want to go chase bigger units I I will tell you this you're going to have better deals at the larger units there's going to be better deals to be had but you better get ready because you're going to need that money to be uh the the larger down payment to be able to pull that off yeah and you brought up an interesting concept that another word that's often thrown around when it comes to to the entry level investor which is scale right and so I get to ask this question a lot by new investors that are just getting their feet wet and they always come to me they say Caleb what I want to do is scale my portfolio as fast as I can and I always have to tell them to take a couple steps back because in order to scale you have to buy the first one and if you have no F if you don't have that initial property there is nothing to scale right so another common acronym that goes under the umbrella of scale is the the bur method right so buy rehab rent refinance and repeat and I always tell my clients that that come to me with that and it's a great approach and it does work however what's the first letter is BU so a lot of people will get caught up on all the RS that follow that where they should be focused on the B because once they knock down the buy portion of it and complete their first purchase now they can move into the next phases so there is no skill without the first property under your belt let's talk about for someone who's preapproved and they want to know how do I know that it's a good deal that's very dependent on on each specific spefic investor again depending on what it is that you're looking for from an investment and a return on your investment so some people think that a good deal is purchasing in an area that's going to climb in value and if they can break even or get close to a break even Point that's a great deal for them other people depending on where they're at in life they have to have the cash flow so unless there's a little bit of incremental income coming in each month then maybe that deal doesn't work for them and that's why it's important to work with somebody that's able to sit down with you understand what your exact motive is and then build a strategy around that specific objective without figuring that out up front it's really hard to tell somebody what a good deal is or isn't without knowing what's driving them what's causing them to take those first initial steps and and once you can outline that and have a good understanding with the the professional that you're working with then you'll be able to say okay for what I'm trying to accomplish this puts a check in all of the boxes or a majority of the boxes and to me if we're able to get close to the complete list of of investment objectives then that that makes a good deal in my opinion you know Caleb you bring up a good point when when someone takes the the first step of I'm going to buy a property um it's rarely it's the perfect property and it meets all of these things therefore I I I have to buy it often times someone might say well I like it I like its location the cash flow is not great but we remind people hey that that cash flow is not permanent the income of today is not the income of tomorrow and all that means is when you're looking at a property often times because it's your first one you might be thinking I really love that location I feel that it's safe I feel that I would feel comfortable there it's got a little backyard I could rent out the other three units and if the rents are low don't let that stop you don't let that stop you because often times you're doing the math and you might say oh you know I'm going to lose $6,000 because I have to put that money to make up the difference but if the building goes up by $220,000 or $30,000 in appreciation that one year are you really losing or well I guess if you ask us we're going to say you are going to be losing without taking that initial step and so again just because a property has really low rents does not mean that there's not a way to strategically figure out a way the next 18 24 months how can we change that where can we make adjust ments U where can we give you know legally you know what are our legal rights to be able to reposition some of these units it's not this is the income so therefore that's the income for the rest of its useful life that's not the case although people get stuck on that and the purpose of this video is that we're trying to get you on stuck we're trying to let you see how we view things and and how people are taking those steps and Building Wealth and so when it comes again when it comes to is it a good deal or not if you're working with a professional who knows the area and we strongly suggest if anyone's looking to buy multif family work with someone who specializes in multif family because they will understand they will understand that hey this 4unit building the five prior sales in this neighborhood have all sold for this but the interest rate was lower back then it's higher now so therefore we think we could get you a better deal we don't expect you to know all that stuff you know there's things like cap rate and grow R multiplier and we've covered all that stuff in our video you should be familiar with it our videos are free so they're there for you so you should be familiar what those things are but the professional should be able to guide you this is a good deal for these three reasons this is a good purchase because you said that you wanted a yard and you wanted to have the front housee with a picket fence and the rental unit and there's plenty of parking sometimes a good deal is the utility of the property not necessarily the cap rate or the gross rent multiplier or the return on Equity because going back to what Caleb said it what's important to you and so when we're advising you there's a lot of things that are going to be important to you sometimes it's all about the numbers sometimes sometimes it's not about the numbers it's about does that property meet the utility use of of what we're looking for yeah and again a lot of people watching I'm sure if you're interested in real estate you've thought maybe I should purchase a house or a condo first and the reason why we strongly recommend looking into a small apartment building as your first purchase and you live in one of the units offset the mortgage with the other incomes is when you buy that house or that condo and that's a great choice for a lot of people out there so don't get me wrong however purchasing two three or four units what you're doing as Juan mentioned is you're purchasing additional income streams that you now as the owner have the ability to manipulate in a positive manner moving forward if you purchase the house or the condo you have a set payment it's fixed you're still going to make money in the long run however you're eliminating your ability as an an owner as a strategic owner to make the right decisions to to improve the property to add amenities that will increase that income over time and so I always tell my clients that the more income streams that you have to positively manipulate or enhance over time the better off you're going to be as an investor that's terrific advice I'm going to add a a few creative ways that that folks are doing now to add value to their properties and and we'll wrap up with those two things is the first one is people are buying multif family dwellings rentals and one of the units or more than one depending on where you might be they're turning those into Airbnb because when Caleb's talking about income stream when you have a piece of property and we call that an asset or or the product you want to increase its income and so one way could be if there's a market for it or demand for it um is having Airbnb in those units you might make more money having one of those units be Airbnb the second part is this this is very popular in California and I know it's getting more and more popular in areas that need housing it's accessory dwelling units adus we've done a lot of videos on adus now that is a terrific way to build wealth for a lot of reasons one if it cost you $250,000 to build and in a place like California that might be worth 500,000 you just doubled your money so that's an that's a huge win on top of that you've brought in another income stream to the property so those are two ways that once you get past the okay I'm going to take the plunge and buy my first property if you're working with us we're going to say this is ways that people enhance the income of their property by doing these things and whether you're working with us or somebody else we we hope that they're able to guide you with that with that with that type of uh Pro tips we we're doing it on the properties that we own but we also have a lot of clients and we're asking them hey what do you plan to do here and sometimes they give us new ideas hey I'm going to convert both of these garages then not just a one Adu we're going to do two adus and so a lot of different ways to try to build wealth but of course adding adding income streams now you could never add income stream to something you don't own can you correct and you will hear us use this phrase over and over again we will say strategic ownership decisions now if we unpack that the key word to focus on there is ownership and until you are in the position of ownership there's no decision to be made and so again the purpose of this video is to help you get over that initial hurdle get over some of those reservations that you might have that are preventing you from getting started and putting yourself in the driver seat of ownership and deciding which direction that that specific asset or investment is going to go but without the ownership and the equity on your side you have no choice and it's it's at the the discretion of somebody else that's in control so there you have it our basic steps to buying your first multif family in 2024 and just to rehash some of the major major steps that you the individual have to take that we can't take for you okay we'll be here as mentors and advisers and we'll be your uh your your team pushing you and and and uh trying to motivate you but the very first step is you have to get pre-qualified you have to align yourself with the lender that knows multif Family you have to align yourself with a real estate brokerage team that specializes in multif family those would be the three key steps into getting the process started again none of these steps cost you money and so you have nothing to to lose by doing so so that's all for now make sure to like comment and subscribe we do want to give a special shout out to our sponsor Sage trust mortgage thank you for putting this show on that's all for [Music] now
