The Guide to Massive Profits Through Small Multifamily Investing

this is the bigger pockets podcast show 506. i want to i want to stress a very important point that if you take nothing else from today's webinar but this remember this it doesn't take all that many properties especially small multi to achieve financial freedom how many of these would you have to have to get financial freedom 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 bigger pockets podcast here alone today i got no david green today because today is a little bit different of a show so you've probably noticed here on the biggerpockets podcast lately we've been changing it up a little bit with a few different formats trying out a few things we just want to see what you guys like what you don't like what what fires people up uh and so one thing that we did ah man it was almost a year ago now maybe i don't know it was a while ago is we did an episode we did an episode a episode and episode where i we just basically played the recording of one of my webinars that i've done on bigger pockets last time we did it we was like on the 90 day challenge well the second that's the most popular webinar we ever do a bigger pockets but a new another webinar that i've done now is is probably the second most popular if not you know eclipse in the 90-day challenge and that is the webinar that i've done on how to invest in small multi-family properties and so that's what we're going to deliver to you today so if you want to know how to invest in small multi-family properties including why i like them uh kind of how to run the numbers on it how to you know some of the pitfalls of small multi-families things to be aware of and by the way when i'm talking small multi-family i'm talking about things generally like you know duplex triplex fourplex but also potentially maybe like a five or seven or eight unit you know the difference is kind of um in that line between like how do you approach real estate in fact you know i recently published the multi-family millionaire volume one and two i co-wrote it with brian murray and a lot of people have asked why two volumes well the volume one is about small multi-family properties which are like the small deals uh and again not necessarily number one number two number three units but it could be like a five units how do you approach it it's a small way of approaching real estate like you probably manage your tenants yourself you're probably using a local bank you're probably driving by the property it's probably in your backyard and then the second volume was all about like the larger deals like you have a team and you're using commercial real estate brokers like mortgage brokers and all the you know the bigger stuff you don't know who your tenants are at that level uh and so this episode today is about the small side uh and some of the things that i've learned about investing in dozens of different small multiple properties over the last decade so all that said let's move on and get to today's quick tip it's kind of weird doing that by myself so today's quick tip is this go to if you have not yet invested in small multiple properties go to go to realtor.com which is a great i like realtor.com there's lots of sites zillow and truly and all that i just i like realtor for this reason and maybe the other ones have this now too i don't know but i just use realtor so go to realtor.com and then you can actually specify property type and you can choose only multifamily in there so just for the heck of it go to your area wherever you want to invest in and go and search only small multi-family properties there and then go and see what you can find like see what's there like see what duplexes are there four pluses are there five plexes eight units whatever they usually show up there now does that mean they're gonna be good deals no you gotta run the numbers and in fact part of today's show is about running the numbers uh and i actually on the show you won't be able to see it probably unless you're watching this on youtube but actually walk people through how to run the numbers on a small multiplayer property using the bigger pockets calculators which is fyi that does require a bigger pockets pro membership if you want unlimited access to those calculators so later in the webinar i do tell you a little bit more about what pro is and if it's something you're interested in using a pro membership we actually are offering a discount on pro because of this webinar so the code is podcast 20. just one word podcast the number two zero no spaces podcast 20 and then i'll knock off 20 off your first year of pro annual so instead of like 390 it's like 3 12. it's like less than a buck a day uh so if you are going to analyze a bunch of deals do that but really what the quick tip is go to realtor and just start looking at small multi-family the more you look at the more better you'll understand what's available what makes a good deal what makes a bad deal etc and that is today's not so quick tip all right i think we're ready to jump into the episode with me teaching you how to invest in small multi-family real estate real estate is a means to an end can we all agree to that you didn't wake up when you were or you didn't get when you were a kid go someday i just want to be a real estate investor that's not why we now you might love real estate and want to invest in this for a while but the key is we're doing it for a purpose we're doing it for that financial freedom that that that life that you were meant to live you know gary oh it's in gary keller keller williams agency um he's like the ceo of keller williams he said like that financial freedom is when your passive income exceeds your expenses so that you can do with your time what you were put on earth to do in other words what we're doing is buying time we're given more free time so we can spend time with our kids so we can travel the world more often so we can uh have a hobby so we can give back in fact i was talking to a woman earlier today who runs a charity uh that they use real estate to be able to try to uh help people who are stuck in uh like sex slavery like what a cool concept but they couldn't do that if you're stuck at a nine to five or an eight to six or whatever it's a lot harder to be able to do things that you want with your life if you're stuck in the same nine-to-five rut never get it anywhere and so that's what this is all about today and why i'm so passionate about real estate investing now today's agenda we're gonna cover a lot of stuff today tell you about who i am what bigger pockets is why small multi-family properties are so awesome uh how they can help you obtain financial freedom i'll show you some very basic math framework for how uh multi-families can just change your life completely we'll talk about where to find those great deals at we'll talk about how to finance them even if you have no money whatsoever without how to analyze them how do you run the numbers to make sure you're getting a good deal i'm going to spend a fairly significant amount of time on that portion because knowing how to run the math is like the number one most important skill for a real estate investor to get good at i'm going to show you how to do that we'll also be analyzing a real life deal to to prove the point i'm going to be finding a multi-family property in one of your markets we're going to analyze it together to see how much we can pay for it and how much money it's going to make every month we'll talk about some dangers to be aware of when you're offering on or you're going to buy a multi-family uh we'll talk about some pro tools that you can use on your journey uh by pro tools i mean some of the parts of the pro membership that we have in bigger pockets again i'll tell you a little bit more what pro is later in today's webinar i don't want to distract from the main message which is let's get you buying multi-family properties uh because they're amazing uh and i'll even if you guys are not a pro and you're thinking someday you want to be a pro member i'll even hook you up with a discount code later uh to use if you're interested so and then we'll do some q a at the end to kind of help any answer any questions i didn't get to so basically if you're gonna sum up by the end of the webinar you're gonna know the detailed process for finding analyzing and buying small multi-family properties to help you achieve your financial goals like if you can just if i mean think about this way if you knew how to find great deals out there and you had yet you could get deals on your plate no matter what you just knew you could buy a great deal that makes money and if you knew you could like finance it like you could figure out the money even if you have none and if you knew you know how to analyze it perfectly like you're a pro at this and you knew you could bring it all together and close on a deal is there anything stopping you from obtaining that financial stress i mean the financial uh victory you want without all the stress is there anything stopping you no like the reality is real estate is just a puzzle you put together the pieces and then it's done and you're like okay i just did a deal which is why today is all about putting together the puzzle pieces now real quick how are we qualified to teach this what is this maybe you're not familiar with bigger pockets let me explain in 30 seconds bigger pockets is the world's largest real estate investing website largest real estate blog large real estate investing forum largest real estate investing podcast over 100 million uh downloads of our podcast that i've been on now for eight years i'm the host of it alongside david green we've got webinars live webinars and if you're a bigger pockets pro member you can watch webinar replays anytime it's one of the many benefits of being pro uh we've got analysis tools to help you run the numbers in under five minutes to figure out how much you should pay for a property we got networking we got books in fact we are one of the largest independent publishers in the world uh for the number of books we sell which is crazy um videos all over youtube and it's all designed to help you use real estate to achieve your goals all right that was slightly more than 30 seconds moving on uh basically here's what we believe and this is what i believe i believe real estate works when you work it in other words it's not a mystery it's not a lottery ticket it's not bitcoin it's not a stock that you're hoping will go up if you put the pieces together correctly you will get the result you want like it is a logical thing i firmly believe that now are there crazy things like a media are going to hit the earth and you know blow up a city maybe but it barring any craziness i believe real estate is a very mathematical thing if you want it you'll get it it's that simple but understand that it's not get rich quick it's not going to happen overnight uh but it is simpler than you think it's like i am not a super smart guy i'm not going to like i don't understand how bonds work and how the stock market does this and that and i don't get into that stuff i'm a pretty basic guy i buy property it makes me money every month i move to hawaii because i want to surf like and then i just repeat that process like it's it's i buy property that makes money and anybody can do it that's the key here anybody can do it at bigger pockets that is our core belief i don't care what background you came from i don't care what how much money you have in your bank account what your credit score looks like none of that i don't care there is a solution to every problem it is a puzzle and we're going to put that together today now the reason i say this stuff is not just because i read it in a book or because bigger pockets told me to say it no this is like my belief because i live it this is actually who i am what i do i'm a real estate investor that's like me and i want to be surfer and i'm not very good at it despite trying quite often um i live in maui hawaii i moved here a few years ago after having enough cash flow that i could pretty much live wherever i want we call that level one financial freedom uh so i moved to hawaii because i like you know hawaii uh i'm a landlord i have a little over i think we just we just closed the property the other day so i think we're at like 1700 units right now uh most of those are like 100 unit plus properties but we're like 1700 units uh 55 million dollars roughly in assets owned right now i've been doing this since i was uh 21 and i'm 35 right now so 14 years uh host of the bigger pockets podcast married to a wonderful woman named heather uh two little kids rosie and wilder author of several real estate books and i am awkward tall uh six foot five and a half and that half matters when you get into a fight with a six foot five man uh and if you wanna know more about me you can follow me at uh beardy brandon on instagram that's where i'm most active i post multiple times a day a lot of video content a lot of how-to stuff there so all right anyway my i'm actually a real estate investor like i said and i i got mike start and actually i still do it today in fact i closed on a duplex two days ago uh i got my start in small multifamily so i bought this four plex at one point it makes me about fourteen hundred dollars a month in cash flow that's just profit after all the bills have been paid uh i got this triplex about a thousand dollars a month there i got this four unit turned into a five plex makes me about 1500 almost 1600 a month now i'm not saying all this stuff to like brag and say wow look how good brandon is like in reality i bought bad deals i bought good deals like like mostly what i buy today is the large mobile home parks through open door capital by the way if you have any interest in joining me on that uh we partner with accredited investors so you can check it out at odcfun.com but again i'm not saying all this to be like wow look how great i am i want to i want to stress a very important point that if you take nothing else from today's webinar but this remember this it doesn't take all that many properties especially small multi to achieve financial freedom how many of these would you have to have to get financial freedom like probably not that many it just takes the right ones if you buy the wrong ones you're going to be struggling it doesn't take that many it just takes the right ones and it takes time i believe anybody can do this thing so let's talk about why i love small multi-family property let's go into the the why's real quick so number one cash flow so what is cash flow cash flow is like the extra money that comes in the profit every month on your properties so if if you bring in five thousand dollars a month in revenue like in income and you pay out four thousand dollars in all your expenses i'm talking everything like like you know like water sewer garbage electricity the mortgage payment uh repairs maintenance vacancy property management all that stuff if you paid out five it got in five thousand paid out four thousand your profit is a thousand dollars that's cash flow so cash flow is great because cash flow gives you freedom the more cash flow you have the more you can go live in hawaii or travel the world or spend time watching dancing with the stars every night and not feel guilty about it right like cash flow is great and multi-family properties are designed for cash flow like think about it this way single family houses were not designed single-family single-family houses were not designed for cash flow they were designed for a place for people to live now i'm not saying you can't get cash flow out of a single family you can but they weren't designed that way but multi-family who buys multi-family investors what do investors care about getting a return on their money and so like they were designed for money like to make money so they're they should produce cash flow unlike most houses which never will uh number two residential financing which means it's easier to get loans it's lower down payment options it's it's it's a part of the bank that deals with the small multi it's a lot easier to get loans like if you can get a single family house alone you can get a duplex triplex or four plex so why not go for the four plex get four times as many properties as a single family house number three less competition because think about this this is what i love about small multi i mean i love a lot of stuff but most people in the world that buy property are what they're homeowners like they want to be homeowners right their mom and pop like john and jane q homeowner with their you know they want a cute kitchen and a cute front porch and cute wallpaper for their cute 2.1 kids right like that's what they want so you're dealing the competition on single family is with just normal people who buy emotionally now what about really good investors like you're competing with me i'm buying mostly hundred unit properties like apartments and mobile home parks so there's this really nice sweet spot in the middle that you're bigger than what most people want you're smaller than what the big guys that are going to be your competition are after and so the only people who are your competition are the people that are really on this webinar right now so people are saying 2.1 kids that's the average number of kids uh people have to be able to sustain a population it's 2.1 because 0.1 kids don't make it to reproduce or something like that i don't know 2.1 uh we're talking averages here so your competition is all here right but here's the great thing there's only 1600 people here right now out of millions of small multi-family properties out there so yeah you got this stuff and finally and i'm not saying it's easy i'm not saying it's easy it's still com competitive you still got to be good there are people in every market that are looking for small multifamily but it's like it's doable so all right number four the ability to house hack anybody here a house hacker i am right now house hacking is where you buy a small multi-family property live in one of the units and then rent the other units out it's really a fantastic way to like get get your foot in the door get started with real estate investing because you can do a very low down payment like three and a half percent down live in one unit rent the other ones out now i do it here i have a two million dollar house in hawaii i still rent out my other unit one i have a three unit property i live in so it's not only like dumpy little duplexes like you can buy a nice property that has an extra unit and even if you're not living for free you can live for cheaper and it gives you like a good like foot in the game you start getting experience you start getting knowledge uh there's a lot of good reasons to get a house hack so anyway those are some of the reasons why i love multifamily alright so how do they give you financial freedom i mean like let me walk you through some basic math if you if you can take a note like if you can take notes right now take some notes i want to show you some very simple math how much money do you need i'm asking this question to all of you to be financially free and when i say financial free i just mean like to pay your bills i'm not talking about like buying a jet or you know buying the new york jets i'm talking about like pay your bills how much every month you need 5k a month 2500 a month 5k 5k 2500 3000 10 000 okay so let's just say you had five thousand dollars divide that by a hundred and you're left with 50. so what does that mean it means if you had a hundred dollars in profit a hundred dollars in profit per unit you would need 50 units in order to have five thousand dollars a month the better deal you get the easier it is like the fewer units you need to obtain financial freedom does that make sense now what a lot of people might be saying right now is well geez brandon i gotta buy 50 units in order to get to that financial freedom number how am i ever going to do that it's going to take 50 years well think i want to demonstrate something here probably my favorite thing of everything about small multifamily the thing that's my favorite is that they are a gateway to larger multi-family small multi is just a way to learn the business now yes you could buy like a duplex let's say you bought a fourplex every year for the next five years so five times four units is 20 units and if each one of those ones are giving you 200 a month that's four thousand dollars a month i know i'm going kind of quick here imagine that's a duplex now if if this year you bought a duplex in year number one we'll call this year number one you bought a duplex and then let's say like next year you decided to buy a four unit all right so next year you buy a fourplex i mean think about it you already bought like a duplex that's the hardest thing in fact uh let me do a side note here real quick so i do brazilian jiu jitsu i'm terrible at it i'm awful i'm horrendous i can't beat anybody i'm terrible but i try to do it like three times a week i i work at it one of my instructor once told me uh i said to a guy not with him in my instructor i said to a guy that he said well what belts are you i said i'm a white belt he said oh a white belt is the hardest belt now let me explain something the white belt is what you get automatically just for showing up to the class you get that automatically for showing up why would he say the white belt is the hardest belt because 99 of the world will never get it right 99.9 of the world will never get the white belt because they never show up so the hardest deal is the first deal it's the same thing starting is the hardest and so that's so imagine you buy the duplex now you got some momentum then you buy the fourplex and then now don't get caught up in the exactness of this i'm just giving you an out or a a picture here right uh next year you buy an eight unit three four five six seven eight all right so year one you did that you're two you did that you're three you did that and then you buy a 16 unit that uh we're gonna pretend this is 16 units and then in year one two three four five and you're that you have a 32 unit all right this is how to think about real estate growth so the small multi-families the duplex the four-plex they are teaching you the lessons needed to get to these deals the bigger ones that come later now can you stay here forever of course you can stay at the top ones forever but i don't want to like i want to i want to i want to get down to the bigger deals and that's why like we buy routinely now 100 unit properties so the point being again like don't get overwhelmed it's not that hard to get to 100 units if you want 100 units you can get there in the next five years maybe less i've known people to do it less so anyway all right moving on don't worry about how to get all those properties like all you need to focus is on the next deal so how do we get you the next deal well let's walk through it right now number one where do you find let's start by finding those deals where do you find good deals on duplexes triplexes and fourplexes well number one i'm gonna say the mls for most people getting started the mls is a great way to find properties what does that mean it means get a real estate agent the mls is basically like where all the real estate agents who are selling properties they put their properties on the mls that's just like it's a big list of all the properties for sale so the first thing a new investor should do is get a real estate agent it's free it doesn't cost any money whatsoever i wanna i wanna explain something very important here this is super important everything i'm saying is important uh what is a mother-in-law suite it's like you live in a unit and rent out the other unit that's basically like a that's what they call a mother-in-law apartments uh all right so are you going to find an amazing killer deal on the mls probably not can you find something that might work the best deals on the mls are fixer-uppers so if you're willing to do a fixer-upper maybe you could make it work but here's the thing it doesn't matter now let me explain it doesn't matter you see when most people get into the game like get into real estate they want a home run they want to just knock it out of the park they want to get such a good deal that they can bring to all their friends and family i'm making thousands of dollars a month but remember that little pyramid i showed you guys earlier like at if you owned 50 or 100 units do you think it would really matters that much if that first deal is a home run or just a base hit no why what's the most important thing to get out of the first deal is it money no what is it why what's the first deal all about action getting on base getting started getting experience building your network just getting something done because once you get that momentum going once you've got that white belt and you feel comfortable at the gym now you're going back over and over and over so the key is just you get something so the mls is great for that get yourself a real estate agent have them start helping you find a thing not just any real estate agent try to find a good one that understands real estate you can find them in bigger pockets like if you go to bigger pockets up here at the top it says uh network go down to real estate agents and just like type in a a an area like we're doing atlanta atlanta atlanta georgia and like on here you can find agents like lowell or they might say lowell lowell i think it's lowell champ we'll call him champ or hirsch or matthew right or mark or joel or chad or pam now does that guarantee they're going to be good not necessarily but check this out uh lowell has 51 forum posts lowell champ he's got 51 forum posts on a real estate investment website hirsch has 51 forum posts same number matthew has 340. mark is 120 these people are offering advice on a real estate investing website joel has 15 thousand he's one of our most active members chad hundred and ten uh pam 28 even carrington ricky rob and there's nine more pages so it's a great way to find agents if they're active on bigger pockets they might know a thing or two about real estate investing and you can even know more like let's go up here to champ right so champ my specialty is helping folks make money in real estate well that sounds like a pretty good idea all right i can look at some reviews people have worked with champ before i can even contact him right here i can go click on his name like i can oops wrong one i can go down here and click on him personally and go check him out personally yeah am i especially helping people make money in real estate south florida native uh if you're looking to flip bur or build a rental portfolio or buy a personal residence we should uh zoom in the next 10 minutes i love it 15 years real estate experience active investing in several markets champ might be a great guy to connect with right i love that so um that's how finding real estate agent can actually be pretty simple now let's talk about some more uh let's talk about some more uh we'll call them creative strategies if you don't want to go on the mls if you want to try to find some more creative ways to find deals which is a good way to get better deals i'll give you a few number one or no the second thing we'll talk about is driving for dollars it's where you get in your car drive around and look for properties that are like multifamily then you go and research who owns that property and you call them or you text them or you uh drop drop by or you send them a letter for multifamily that's probably one of the most common things you send them a letter because you can look on the internet where their tax bill gets sent if it's a multi-family it's probably owned by an investor the tax bill is being sent to the investor's house not to the property so you can find their their their uh address and send them a letter just saying hey so where do you find that there's a ton of websites that can do that for you um yeah there's a it's called skip tracing you can look it up on bigger pockets you can search bigger by the way if you ever want to know anything on bigger pockets just go up to the question mark here and type in like skip tracing and then hit enter and you'll find articles podcasts all sorts of stuff there's yeah like skip chasing platforms skip tracing skip traits and skip tracing skip tracing skip tracings right these are people asking those questions you can find podcasts where we talk about it forum posts where we talk about it um blog posts that talk about it so yeah how do you skip tracing to unearth awesome real estate deals uh the art of skip tracing how to track down tenants who owe you money that's funny thinking about real estate investing let's get political anyway you get the idea right so you go in there you find some good stuff all right another option go to like craigslist or facebook marketplace and look for people who are listing their properties for rent for people who are literally for rent why for rent well what you want to find is the multi-family properties because that's the landlord listing their properties for rent you can contact them and say hey i'm not looking to buy you rent your property but i'm looking to buy a small multi-family any chance you want to sell and most of the time they'll say no but every once in a while they'll say yes and then like i mentioned earlier you can send letters you can also do this in bulk you can send out hundreds or even thousands of letters and most of them will never call you but some of them can like some of them will call you back and say yeah i'd love to sell you my property or let's talk about her how much can you offer me so for example um i once bought a property for my daughter rosie it's like her college education house so i sent out like 300 letters out of those letters i got back like 40 people to call me back now some of them didn't want they were like you know fu don't call me again but some of them actually wanted to have a conversation out of them i made about a dozen i analyzed about a dozen deals about a dozen properties and i made about a dozen offers out of them one person said yes so i sent 300 letters i only got one deal and that's actually really really good odds like some people send thousands of letters they don't get anything but if you sent let's say you sent 5 000 letters and it cost you a dollar per letter that's 5 grand but do you think you could land one deal out of 5 000 that you mail probably i'd like to think so okay so then your cost to acquire property is five grand but if you get a fifty thousand dollar discount on that property because you got to them directly before they listed it with an agent might be a good way to spend five thousand dollars don't you think like again this is just math it's just numbers it's odds business and that's why i love real estate because it's totally doable for everyone now this is only four ways to find deals uh i actually i wrote a book a while ago called uh how to invest in real estate let me pull it up here it's called how to invest in real estate in here i go through 27 different ways to find real estate deals now i'm not saying that so you buy my book i don't care but i'm trying to point out that there are lots and lots of ways to find real estate properties so just get good at one or two of them and you'll start landing deals all right so what's the best way to finance a small multi-family property well if you're gonna live in the property if you're willing to live in it for one year you can get a loan called an fha loan that's 3.5 down payment that's pretty awesome right uh 200 000 property is 7 000 down that's one of the best loans out there there's also something called the usda loan and a va loan if you're a us military veteran or family member of you get zero down in those cases as long as you're willing to live in the property for one year number two if you can put down 20 to 25 you can get a conventional mortgage which means yeah you just go to any bank put down 25 and you'll likely get a mortgage some banks are doing 20 some are 25 some are 30. call around you'll find a bank they can do 20 all right another option if you don't have money one of my favorite strategies was is using partnerships i mean if i think about it like some of my very first properties when i had no money no credit no income no nothing like i used partnerships i would find the deal i would put all the pieces together i would make it work and then i would bring in a partner who could bring the down payment in it worked out amazing and in reality like i like i still do this today like i did we just closed down a big mobile home park a couple days ago like how did do you think i put down the two million dollars for a down payment for that property of course not i raised the two million dollars for the down payment from partners they're actually they're literally called limited partners they brought the money i brought the deal and they they get 70 of my deal and that's how syndication that's what partnership so i do it on duplexes i've done it on triplexes four plexes five plexes hundred plexes like it works now finding the right partner is that going to happen overnight of course not you got to meet a lot of people you got to connect with people people got to know what you do uh you got to get out there and like build connections with people but it's totally doable and so partnerships can be a fantastic way and again they don't need all the money they just need enough of the down payment another option seller financing seller financing this is where the owner of the property actually carries the mortgage or carries the contract so instead of going to a bank you pay a uh you you basically pay the owner like that that used to own the house the old owner you pay them every month for 30 years or whatever until it's paid off seller financing is how i bought my first small apartment complex it was great now why would a seller do that because they don't want a big chunk of money sometimes sometimes they want residual passive income so let's say i own a property that's worth two hundred thousand dollars i sell it to you and you just pay me a thousand bucks a month i mean if you gave me 200 grand for my property today fine i got to pay taxes on it i got to figure out what to do with that money i got to maybe put in the stock market i'm 80 years old i don't want to put in the stock market it might lose it right the stock market's at a crazy high rate but could i sell it to an investor carry the mortgage at a six percent return or seven percent return or five percent interest and just live off the cash flow for a while that sounds awesome yeah they basically want to hold the note note investing is a real thing now will everybody want to do that of course not but many people do luis said what if they pass away good question if somebody passes away and you're paying them a note like the note doesn't go away the the heirs of the property whoever inherits the like their their thing they just get the note but the note stays the same the legal agreement doesn't change if the person's alive or not so yeah seller financing very cool strategy and then finally one of my favorite strategies of all time it's called the burr strategy i tell the burst strategy it's where you buy it's like flipping houses but instead of selling it you know what i'm talking about flipping houses right you like fix it up and then sell it it's like that but you fix it up and then you keep it and if you do it right you can do it for no money out of pocket now i don't want to go into that strategy now we've done entire webinars on it in fact david green taught one a few weeks ago on the bur strategy he also wrote a book on it it's called burr back here somewhere i don't know where somewhere on my shelf but burr is a great strategy for getting real estate with almost no money down sometimes no money down sometimes you can even get paid to buy properties if you do it right you have a good enough deal it's phenomenal so again if you want to watch that webinar replay again pro members get unlimited webinar replays or wait till we do it again we try to do it every you know six months or so so yeah burr pretty cool all right so here's what we've got we've covered so far uh we talked about why they're awesome how they can help you get financial freedom where to find them how to finance them now let's talk about analyzing them because all of this depends upon finding good deals like you're not going to finance a bad deal you're not going to bring in partners on a good deal you're a bad deal you're not going to be able to do any of this stuff like you need to find good deals and how do you know that analysis all right so there's a couple ways to do this you could analyze a deal by hand if you wanted to sit down pencil it all out i even have a youtube video on that but i wouldn't recommend it for especially multi-family but even single family here's why it's too easy to make a mistake if you if you mess up one time while doing it by hand or you get some crappy spreadsheet that has like the decimal point in the wrong spot or a comma where there should have been a slash or whatever one mistake can cost you tens of thousands of dollars please don't do that so what we did is we actually built some tools on bigger pockets to help you with this uh they're called the bigger pockets investment calculators so we've got one on fix and flip we got one on rental property we have a burr calculator we have a wholesaling calculator we have a rehab estimator all that's designed to help you uh analyze deals quickly so that's what i'm going to use today but um let's analyze one together is that cool so you know we already we already found this property in atlanta earlier so i'm just gonna go and run the numbers on this if that's cool uh so this property right here let's go see if we should buy this and in fact uh let's let me come this up okay over here click on tools and i'm gonna go to calculators i'll just click tools i'll show you this [Music] dude all right somebody said it's very hard to estimate rehab costs as a newbie i agree it was also really hard to learn how to surf it was actually hard to learn how to walk it's also a lot hard to learn how to read everything's hard right that's why we make money is because most people aren't willing to do it so get a book on estimating rehab costs like maybe the book there's actually literally a book called the book on estimating rehab costs written by my good friend jay scott and you'll figure it out yeah choose your heart choose your heart i love it all right being broke is hard all right so here we go fix and flip rental property burr wholesaling rehab estimator let's just do the straight rental property in this case even though this is probably a better burr i don't want to conv confuse anybody with bur that's a little more advanced so let's go a little more simple rental property calculator let's go ahead and use it there we go i'm just going to put in the address here so tu tu du banzi street what was this it was in what city was this in atlanta here we go there it is right there so importing property data fancy uh i'm also gonna take that zip code and put in here all right next what's the purchase price what are we gonna buy it for 150 000 right closing costs now at this point people get stuck they're like i i don't i don't know what to do i don't know what to put there well check this out anytime you're analyzing deals on the bigger pockets calculators you can click over here it says help and you click on it it actually helps you learn how to do stuff while you're doing stuff so in this case it says it's typically between one and two percent sometimes kind of more i'm gonna say like three thousand dollars for closing costs we are going to be rehabbing it it's gonna be worth about 200 000 when it's done we're going to put in 20 000 worth of work next we're going to get a loan for 20 down at we'll call it four percent interest charging one point on a 30-year mortgage i know i went fast on that a lot of you are like whoa slow down shooter i just want to show you how quick and simple this is once you get your reps in it was hard the first time you learned how to walk you didn't sprint i'm sprinting because i've done this a lot but i don't want to like i want you to go in here and analyze your own deals in fact everybody can analyze the deal five times for free you don't even need a pro membership to try it out so try it out play with it see what you can find out and see if you'll you'll learn how to do this while you're doing it in fact i would encourage you to analyze at least 20 or 30 deals in the next couple weeks because that's what's going to make you good at this the more you do the better you're going to be it's like walking or like swinging a baseball bat the more bad times you get up at bat the better you're going to be at it so get in here and practice this thing all right down what about income what can we charge for this property well bigger pockets has this thing called the uh property insights i click on that i can put in the address what is a two bedroom rent for in this area now is this going to be perfect of course not because it's just data we pull a lot of data points to find out other properties but ultimately you need to know what your market rents for this is just the beginning but check this thing out all right so median rent for a two for a so here it says four bedroom two bath because again it's it thinks that's a it's a duplex so we're gonna divide it in half let's adjust the details here here we go all right so for a two bedroom one bath 12 45 a month on the low end some of the properties are low of 800 a month on the high end some two bed and one bath are as high as 1 500. but in the middle kind of the the median rent is 12.45 and our confidence is very high which is kind of cool i can see what a lot of other properties have rented for scrolling through a lot of these i can see what the median rent for the area is by bedroom count i can look at sales data over the last few years so all this stuff now again 12 45 i'm going to double check that before i make an offer i'm going to talk to a local property manager because what if this neighborhood was a little worse than the next neighborhood over what if there was something weird about this street what if this school district's a little different so real estate like only contain like objective data like this can only take you so far you've got to learn your market you've got to learn it but for now let's just say that because we're going to remodel it let's say let's say we can get 12 we even go a little more conservative oops let's close the wrong button let's say we can get 1200 out of each unit so twelve hundred and twelve hundred now on a property like this taxes we pull the data it's about thirty seven dollars a month for taxes for this property if you didn't know that you click on this thing and it will tell you how to determine that again we pull in data from public data sources to fill in some of this for you but always double check it before you end up making an offer because things change right all right down below insurance what are the insurance costs not sure clicked up link there but i'm gonna say probably about 1200 bucks a year for insurance repairs and maintenance let's go like yeah but somewhere between five and ten percent i'm gonna go seven percent i'll go five percent vacancy seven percent capex what is capex it means saving up money for future repairs like for future replacements like a new roof every 20 years new carpet new windows uh new countertops those things take time like they don't they don't they're not like you know a hole in the wall they don't happen regularly but you got to save up for them so it's kind of reserved so i always do about five to ten percent for that as well management fees let's hire a property manager for about 10 percent all right below that we got electricity let's assume the tenant people always make fun of the way i say roof the new ruff all right whatever uh electricity the tenant's gonna pay their own gas they'll pay their own if there is gas water and sewer this is super important listen up multi-family small multi-family properties are interesting sometimes roof roof ruff ruff go making fun of me everyone all right uh why is this uh what did i do i hit the wrong button here electricity what'd i say uh was they're gonna pay their own gas are gonna pay their own water and sewer it depends on the property some properties some properties uh is the water meter is separate there's two separate meters sometimes there's only one sometimes you can build a tenant for their usage sometimes you can't that's about learning your market but there's a company out there in fact let me give them a shout out right right now it's called true sub meter let me show you two sub meter where is it right here so true sub meters one there's a lot of companies that do this it's just one example what allows you to separate the water meters and build a tenant for their own water usage so on a property like this i would probably i would probably make them pay their own water and stew or garbage so they can pay their own and that's it i mean maybe we got to pay the lawn care because it's multi-family let's say a hundred dollars a month for lawn care finish the analysis so here we go at the top let's see what our results are if these numbers are accurate again we're going to want to double check them monthly cash flow 894 dollars a month that's because the income was 2400 a month expenses were 1500 that leaves 894 for profit that's after everything after the mortgage after the insurance after taxes after we set aside money for repairs and maintenance in capex that's a 19 cash on cash return that's crazy right that's really good now why did that happen like where do those numbers come from well i can see down here our expenses i can see that every month we're paying around 573 for the mortgage 37 for taxes insurance is around a hundred are variable expenses like vacancy maintenance capex and management's over here i can see our fixed expenses with a hundred dollars for for the lawn care i can see what the next few years might look like this looks like a phenomenal deal now here's the thing like a lot of people who are in yeah it said property taxes were 37 a month not per year but 37 a month it seems too good to be true brandon you're probably right what if we find out somebody said this property looks like more like a thousand dollars a month in rent well check this out i can take the slider here and drop it to two thousand dollar what if we're only getting two thousand dollars a month total so a thousand bucks each we're making a thousand dollars each maybe even what if we're only making 1800 so 900 aside yeah brian said 900 on a good day okay let's go down to 900. so what's that make our deal 468 a month and 10.36 cash and cash return is that a good deal i still like it i like anything over 10 personally i like 10 cash and cash return and i want to make at least 100 a month per unit you can also share this if you want you can upload your own company logo so i can put open door capital on here i can share this on the bigger pockets forum so other people can give me advice on it it actually removes the address and everything and i can download a pdf report which i can give to lenders i can show business partners private lenders hard money lenders or perhaps most importantly i can take this to my wife and say look honey i did the numbers i think it's a good deal what do you think also it's got a map you can upload as many photos as you want it shows what's in the area like there's um high school over here wendy's mcdonald's atlanta collegiate oh is that a college like everyone got freaked out at the beginning of cove like what if tenants don't pay rent i've i've got 98 i got 97 98 of my rent during covid most people do it rodney said is this a good calculator for up to 16 units yeah i actually think this is pretty good until you get into syndication which is like 50 units and greater i think you could do like quite a bit so anyway bottom line is this helps you not only run the numbers it helps you present your deal to other people and that is super super important so was that helpful was that cool like to see kind of how you analyze deals again everybody can use them five times for free but it's like if you want unlimited access you got to be a pro member so again i'll talk about that a little bit later here in a couple minutes we'll go by about 20 we got about 20 more minutes of today's webinar can you guys hang tight with me all right so what are some risks dangerous to watch out for uh first of all condition and location matter just because it's a small i'm going to say this a lot of times today just because it's a small multi-family doesn't mean it's a good deal you get what you pay for poor conditions meaning like bad condition on the property or a less desirable location it's going to influence your cash flow a little bit now like that's like here's what i like to say nasty people like nasty properties like all my when i have a property that's not fixed up very nice it attracts people who aren't very nice that aren't going to pay the rent that are going to be they're going to ruin the thing like when i have a nice property i tend to attract nicer people that like take and by nice i mean they take care of the property better and condition i'm not saying you shouldn't buy in in like c or d-class areas i buy in marginal areas but i try to avoid areas where like like that oh like the worst of the worst where i might get shot or where the cops don't want to go like i try to avoid that because i don't want to own property in those areas because it just makes it more difficult can people do it sure i know people making a killing in those neighborhoods i just personally don't just understand that they matter you choose what you want to do but it matters number two again just because it's a multi-family doesn't mean it's a good deal it requires more landlording you gotta take care of the tenants they might complain more i've had tenants complain that like the tenant upstairs was being too loud or they were having you know husband wife uh boyfriend girlfriend fun time in the middle of the night too loud like we get those complaints uh i had yeah i've got so many stories i'm not gonna go into them just understand that they call more they have more problems that they move more than single-family houses you just gotta deal with it you gotta be good at landlording if you wanna manage them yourself or hire a property manager number three do your math again just because it's a duplex tri-picture four-plex does not mean it's a good deal you still have to run your numbers and finally fear fear can cause this is the biggest mistake of all people get scared and they never get the white belt they get scared and fear causes them to miss out on the knowledge and education and networking and holds them back until 50 years later they haven't done anything with their life because fear drove them everywhere fear can cause you to never start and that's the biggest mistake of all so there's like one encouragement i give you guys today is go go after it get out there make offers go look at properties if you see somebody working on a house pull over talk to them overcome that fear and you're going to do amazing things you have all the tools you need let's talk about fear for a second so when people jump into real estate they feel like they're jumping off a cliff they feel like they're free-falling but that's not what real estate is real estate is not a free fall it's not a cliff like it's it's like a hike it's a journey that we walk with our with our like our community like real estate is a well-worn path that millions of people before you have walked and millions of people after you will walk and what's cool about the internet and especially about bigger pockets is bigger pockets is like hey let's do this hike together you know earlier i said you guys are one another's competition you're also one another's team members you can help each other because most of you are in the same area and even if you are there's enough to go around so like we get to work together here's what's working for you here's what works for me here's what here's what i did hey watch this it's like a group of friends on a hike and it's really cool and at bigger pockets we're a company that creates tools to help you on that journey on that hike we're like hey watch out for this pothole over here hey here's a cool hiking stick for you hey here's a backpack that'll help keep you hydrated that's what we do at bigger pockets we want to make you successful you still have to do your own journey you can't get on my back i can't take you there i just want you to know that we're on the exact same journey together but it only works if you work it it only works if you work every single day at it and you move forward and you take some risks and you overcome your fears but you're not alone so it's not theory either just understand this is not theory it's this is like everything i talk about today is just legit how real estate works like this is how they find deals this is how they finance it this is how i found financial freedom it's the same process we talked about today so three big questions ask you guys number one do you believe small multi-family properties can help you achieve financial freedom financial independence are they going to be a big piece of your future yes or no and be honest you can say no if it's not if you're like not convinced i don't need to convince you of anything maybe it's not the thing for you maybe you want to do like self storage or you want to do town houses i don't know yeah i love i love multi-properties all right by the way somebody said there's not many in my area so let me just fire back who said you have to buy in your area right like multi-family properties are designed so that you can hire a property manager so i don't care where you live buy where there's multi-family totally doable and you would be surprised at how many multi-families that are out there even in your area like multifamilies are everywhere within a half hour drive of you i guarantee you there's over a thousand i don't care where you live like maybe in the middle of kansas maybe not but like generally they're they're they're out there if you know what you're looking for and a lot of them you don't even know so you'll you will find them all right number two yes or no do you know how to start your search toward finding your first or next multi-family do you feel like you know how to start searching you don't be perfect at it but do you have some action steps after this webinar you know what to do now yes or no number three do you have a good idea on how you're gonna plan to finance them again you don't have a perfect idea but do at least understand the different ways you can finance a property a lot of confidence but that's great i love the excitement and like i said earlier if you know how to do all this stuff there's nothing stopping you logically it's just math it's just business it works but but in the words of derek sivers one of my favorite speakers of all time he said if more information was the answer we would all be billionaires with perfect abs what i love about this quote is like the truth is we all know how to lose weight we all know how to make money we all know how to be a good husband a good father a good wife a good you know uh mother a good whatever we know how to do these things it's not information that we're lacking you can get the information in a book it doesn't guarantee you're gonna be successful what is the key to success action some people deliberately and even more than action i would add daily consistent action daily consistent action it means doing things every day over and over and over to get better and better or at least several times a week imagine you went to the gym you paid you know 100 bucks a month for a membership at the gym you showed up on a monday worked out real hard went home and didn't go back for a month are you gonna get in shape that way if you ate really really healthy like for breakfast and lunch and then you ate 5 000 calories for dinner every day or you like you got like it takes consistency and it takes time doing the right actions but if you do that consistency leads toward the results you want case in point dennis here hey brandon i want to thank you and bp this is the email i got from dennis after attending your webinar how to make a million dollars in real estate i got inspired to take action so last week i closed my first deal i now have a triplex that is rented and will cash flow very well for me i can now call myself a real estate investor i have a plan moving forward and will make my business a success thank you you guys dennis sent me this email just a few weeks after attending one of my webinars the one on how to make a million bucks which you can watch in the pro replay room like he he learned he was in your exact spot he learned how to do this and within a few weeks he had already pulled the trigger and did it that's action and that's what i want to i want to get there's 1700 people here today i want to get 1700 emails a month or two from now let's say brandon i was on your webinar thank you i went out there and took consistent action and i bought a property so that's the key there now again i don't know why you're all here today i don't know you individually what brought you here what your position in life is if you've got deals already if not i don't know maybe you're tired of working a full-time job and you want out so you can watch your kids grow up you can be a part of their life or maybe you just want you're looking 20 years down the road saying i i'd like to retire early or maybe you're just jumping from thing to thing to thing to try to get that financial freedom and you just haven't nailed it yet again i don't know what brought you here today but here's what i do know here's what i know in the depths of my soul number one i know that real estate investing works because it's worked for me it's worked for millions of people i know it works it can help you build an incredible amazing powerful life of freedom more time with your family and and it can make you a fortune it can make you a millionaire multi-millionaire and everything that comes with that and i also know that everything we do at bigger pockets is designed for one thing to help you get there like we we want so badly to see you get there because i remember what it was like to be working a nine-to-five job where every sunday night i had this pit in my stomach of oh i got to do it over again tomorrow and then i get there and i'm staring at the clock i remember that feeling i remember that pain and i now have come through that and now i've got millions in real estate and i've got you know passive income and whatever else no money doesn't make you happy necessarily but i can tell you not worrying about money will make you happier like at least it made me happier not worrying about money not worrying about if you can bring your kid to the doctor or your somebody gets sick whether or not you can afford that stuff like having the ability to do that and i i just i dedicate so much my life because i know that the goal of life is not to spend every waking minute making somebody else wealthy amen as that everything we do at bigger pockets designed to help you get there faster with less pain we want you to get there and so we built a membership it's called bigger pockets pro i mentioned earlier it's designed to help you get there remember earlier i said that if you get better deals you can have fewer units you get financial freedom faster so how do you do that how does bigger pockets pro help you do that well first of all it we help you do more deals faster with less risk through one our calculators we already talked about that earlier i showed you how you could analyze the deal in under five minutes number two you get to learn better like you get more content we record these webinars and we keep them just for our pro members we also do pro only events we bring in uh economists we bring in uh tax specialists to do pro only like invite only pro member only uh events we did one a few weeks ago was amazing like on where the economy is headed that's part of our pro membership you also get and by the way here's some of the webinar replays you can watch how to attract private money how to make six figures with uh the burst strategy how to make five grand and five grand a month from single family houses how to find incredible deals in a competitive market and more also as a pro member you just build trust and credibility because you're in the gym like you've got you've got your white belt imagine me going up to a black belt being like hey i'd love to learn i would love to learn how to do karate or or jiu jitsu or whatever and they're like okay well have you ever shown up to a gym before no no no man i i don't i don't actually go to a gym i don't want to do that okay like how serious do they take you so if you want to connect with black belt real estate investors you got to get the white belt on you got to prove that you're moving forward number four as a pro member you get state-specific legal forms like a lease that state like cater to your state approved by an attorney in your state to help you run your rental properties you also save money on what we call bigger pockets perks it's like we had discounts on a bunch of other companies that offer discounts for you uh as a pro member and then you get access to that bp insights which gives you data on on markets on properties on neighborhoods where is the best place to buy where's the worst place to buy where's where is the market gone up where's the market gone down all of that's included as a pro member but you know what again if it helps you with one thing if it helps avoid one bad deal it's worth it not gonna read a bunch of other testimonials like aaron here made seventy thousand dollar profit or uh patrick bought like ten prop or ten units in the first couple months after going joining pro i said final quick sign up for pro i made my money back at the closing table but the point being i just want to move i just want to move this on because either you're going to do it because it's a good investment or your business or you're not because it's not a good investment for your business i don't care much all i care is that you achieve your goals so how much is pro it starts at a hundred thousand dollars you can write your check personally to me brandon turner just don't tell bigger pockets you did it uh i'm totally kidding we don't we don't have a hundred thousand dollar or fifty or 20 or 10. we don't have that crap at bigger pockets like if you want to go pay some get rich quick guru tens of thousands of dollars that's one thing but in reality like we want to make this a affordable as possible so how about two grand a year if you can buy one more deal this year or avoid one bad one's that worth two thousand dollars a year probably but again not everyone has two thousand we want everybody to be a pro member everybody so here's the deal we have two memberships one's twelve hundred dollars a month sorry a year 1200 a year that is our premium membership that is for agents and lenders primarily real estate agents and lenders is 1200 premium but it's 390 for the pro annual membership this is for real estate investors so for 99 of you it's 390 bucks a year that works out to like what a dollar ten or something like that uh a day it's like a buck a day and like byron said it's also an expense write-off yeah if you're if you're using this for business which i assume you would be i don't know why you would have a pro membership you should be able to write it off talk to your cpa though of course but as promised i said if you guys hung out with me the whole time today i do have a code that'll get you 20 off an annual membership uh for the first year so instead of paying 390 you pay just 312 dollars uh so again takes it from 390 down to 312. and that's today you pay 312 today you don't pay anything again for another year uh but in case you're on the fence let me throw a couple bonuses at you if you go pro today you're going to get a workshop we recorded called eight steps to rental property success is such a like it was a full day workshop i did in nashville tennessee we recorded the whole thing that's included for anybody who goes pro today finally number four you get a thing i did called the finding great deals master class i sat down with four like off-market specialists these guys are like some of the best at finding off-market real estate deals and i just interviewed them and said what are you doing how are you making it work how are you how are you finding properties off market and they go through all of their strategies is incredible this alone is worth much more than the cost of pro so again all of that is included if you go pro annual today for only 312 bucks so that's it if you're already a pro member i don't want to leave you out though so go to biggerpockets.com already pro and uh put in that code multi you get the same thing so the code is multi-multi just like multi-family multi and a couple just faqs number one this is only available for pro annual members not monthly all right and then finally if you're on the fence you're still not sure let me just say this do not sign up for pro if you're never gonna use it if you're not sure sign up and try it out we offer a 30-day guarantee like if you like 100 guaranteed so like if you don't like it just email supportedbiggerpockets.com you get the full refund back like it no i won't even know you did it like you can keep the bonuses just for trying it out i just want you to try it i want you to analyze like 30 deals so try that that's my my suggestion is go run the numbers on 30 deals over the next 28 days set a reminder on your phone hey like do i really want to keep my pro membership if you don't email support biggerpockets.com at least you got the full access to the calculator for 30 days but try it i think you'll like it again we do not want you to be pro if you're not going to actively use it to become wealthier like i think the perfect business is one where the business like bigger pockets makes money only because you make a ton more money like that's like the perfect business model and so that's the only way i want you to use get gopro is if you are planning to do that all right final quick tip for the day as we go into the q a it's it's actually a quote i want to read and this is one of the most life-changing quotes i ever heard jim rohn once said if you really want to do something you'll find a way if you don't you'll find an excuse in fact let me let me read that again i want to read that again here because i'm going to probably put this on my instagram later jim rohn once said if you really want to do something you'll find a way if you don't you'll find an excuse now the reason i bring that up is because whenever i teach on real estate or people follow me on instagram or they come to a webinar that i'm doing or they listen to a podcast what people naturally want to do is they want to argue for their limitations there's a like meaning like well this is why it doesn't work for me this is why i can't do it they try to argue for all the reasons it's not gonna work for them and maybe today you've thought that as well like you've read something i said or you heard something i said or read something i wrote and you're like that just doesn't work for me here's all the reasons why i don't have the money i don't know the time i got a family i can't house hack i don't know what burr is i'm not smart enough i don't have good credit i don't care if you really want to do something you will find a way there are people who are less skilled in a less uh lesser position in life than you are with a worse credit score with uh a worse area they live in who have become multi-millionaires to real estate investing so don't tell me any of those excuses you can get through all of that but the key is shifting the way you think i've learned this from kiyosaki in the book rich dad poor dad he once said that like the poor say i can't afford it the rich ask how do i afford it the same way some people say i can't do it and others say how do i do it so rather than saying i don't have any money i can invest say i don't have any money how do i invest anyway rather than saying i live in an expensive market i can't find deals here it's how do i find deals even though i live in an expensive market that's the mindset shift that if you make you will never lose like yes you'll have temporary setbacks in life i'm not saying things always perfect but you will never lose over the long haul because you're always trying to better yourself you're always asking the question how do i do this better how do i figure it out how do i get through this and if you have that attitude you are going to be such an amazing success story maybe we'll bring you on the bigger pockets podcast to come tell your story that's the truth agreed let me know all right y'all with that said we gotta get uh get to some q a was that helpful is that helpful i hope so so if you want a couple free gifts first of all just free gifts for everyone for hanging out for the whole webinar you can get an ebook or i should say it's a resource guide on some of my favorite real estate books you can download it right now everybody by going to biggerpockets.com books b-o-o-k-s again biggerpockets.com books b-o-o-k-s you can also get today's sly deck by going to biggerpockets.com multi-slides again biggerpockets.com multi slides you get the entire slide deck from today's class and you can get an ebook i wrote called seven years to seven-figure wealth a road map to earning your first million by investing in small multi-family properties you can get that by going to biggerpockets.com seven years that's the number seven years all that's included just for hanging out with me today just want to reward you guys so that's it let's do some q a again i'll do some more uh shout outs in a little bit but i want to get to some questions i want to help you guys out so what questions you have put in the chat area right now and uh we'll go by the way somebody said what's the url for upgrading to pro it's just biggerpockets.com pro upgrade biggerpockets.com pro upgrade first question what is better single family or multi-family man whatever you want i mean like you could literally do either one single family or multi-family the the thing i love about family houses honestly is that there's so many of them they're everywhere uh and they're a great like lower cost way to get into real estate to start cutting your teeth to get some knowledge and experience multi-family allows you to scale faster so that's why i'm a big fan of like the small multifamily space where you buy like a duplex or triplex it is no harder to buy a triplex than it is a single family house and so you can do either one so i like to recommend find that triplex maybe live in one of the units so you can get an fha loan three and a half percent down rent out the other units and then move on like later on like after you stay for a little while like i love that strategy but really you can make you can become a multi-millionaire with either one so pick something and just dive in learn about it grow and you're going to crush it as long as you're focused as long as you're learning the business and doing it right all right other question let's see how do you find the after repair value or the value of a property for multi-family properties that's a great question so here's the thing i want to differentiate between small multi and large multifamily so small multifamily in the lending sense or in the valuation sense means duplex triplex or fourplex now larger multifamily which are commercial properties are five unit and greater so we're gonna separate here real quick so small multi-family properties are valued typically typically based on what other small multi-family properties have sold for so this duplex was 200 it sold for 200 000 this duplex went sold for 220 this duplex sold for 210. okay yours is probably worth around 210. that's how you figured out on the small side now it's harder to find you know like especially in a smaller area it's kind of hard to find comps sometimes which are comparable sales but that's still how they typically do it now on the larger multi-family side it's based on something called like the income approach in other words a commercial property which could be like a you know it could be a warehouse it could be a retail center a shopping mall or a five unit or greater multifamily those are valued based on the profit they generate so i don't want to go into the necessary details on like how cap rates and noi work but the basic idea is the more profit a property generates the more it's worth and that would make sense right i mean if you're comparing because you can't really compare apples to apples when it comes to those larger deals like if you buy a 32 unit apartment complex like you're not going to find another 32 unit apartment complex with the exact same rents in the same area so instead of looking at the comparable sales we look at how much profit they generate and by the way we take out that we don't include the mortgage in that because mortgage rates could differ we just look at like what would the property actually make in profit if it weren't for the mortgage payment and then like we base that what what do other investors expect to get on their money like what kind of return do they want on that and based on that that's how cap rates work and noi that is how we generate the value of the property if you really want to get detailed the idea is noi which is how much profit a property generates in a given year that's net operating income so it brings in a hundred thousand dollars in profit in a year not counting the mortgage or capex but that's just getting into the weeds so it brings in a hundred thousand dollars in profit now in this area most investors would be looking they're buying a property that generates a five percent uh what we call five percent return on that which is like a five cap so you take a hundred thousand divided by point zero five and you'd get a value which i believe uh is what two million dollars that property would be worth two million so that's how we evaluate the larger deals i know that got a little bit complex and you can read entire books on that in fact i have a book coming out uh in uh soon on multi-family it's called the multi-family millionaire and we've got two two volumes of that it includes all of that in there so you'll learn more if you want to check out that but that's the idea that's how you value multi-family properties whether it's small or large all right let's see other questions here all right the question came in the one percent rule is that a good rule to use or not let me explain what the one percent rule is for real estate investors then i'll explain if it's a good deal or not a good idea the one percent rule basically says that a property rents for one percent of what you can buy it for so a hundred thousand dollar property rents for a thousand dollars a month and the general idea is if it's better than one percent good if it's lower than one percent bad now is that true no now let me explain the one percent rule can be helpful i mean if you got a hundred thousand dollar property that only rents for five dollars a month you can pretty much say yeah that's a terrible deal so you're kind it's just a basic way of saying is the rent high enough to make money off whatever you buy it for so the one percent rule can be helpful for doing a quick and dirty like oh yeah that's a one percent rule that's a 2.2 deal that's a three percent deal typically greater than one percent can be better and lower than one percent is worse but it's not always the case there's too many variables involved like who pays the water bill in the rental property who how much are taxes in texas you might pay five thousand dollars for taxes in ohio you may pay thirty dollars right like it's it's drastically different so you can't use just a general rule of thumb which is why we built calculators a bigger pocket so you can run the numbers like the actual numbers like this is the income these are all the expenses boom boom boom boom boom and then what type of return are you getting so is the one percent real helpful not very it's only at a very high level past like okay yeah that might be an okay deal now i'm gonna take it and dive in deeper and do the real work that's the one percent rule all right other questions jacob said hey you said you have thousands of units so i have like not quite i have like 1700 but it says your tool looks great and all but do you actually use them for your real estate investing so the short answer is yes for anything under 50 units i use my the actual bigger pockets calculators that is what i use for all of my smaller stuff but on my large apartments and mobile home parks i just they're not set up for that i can't like i mean think of how complicated a mobile home park is we've got 10 different types of properties in there we've got raising money from private lenders we've got multi-level like lending options in there we've got so much complication the we just don't have that in the bigger pockets calculators maybe someday we'll build it but honestly there's probably only a handful of people in the world that need that level so like it's not worth us building a tool for the 50 people in the world that are going to use it uh so the calculators i yeah i just bought a condo uh a duplex condo it's like two unit condo i use the bigger pockets calculators for that i bought a triplex recently i used the calculators for that i bought a single family i use a calculator for that in fact like i flipped a bunch of houses last year i used a calculator for every one of those so i personally use it because i don't trust my own like i don't want to do a spreadsheet it's too easy for me to make mistakes and the bigger pockets calculators just make it easy they're just there it saves them in my account they keep me organized and they make sure i don't actually screw something up so that's why i like them sometimes in multifamily properties the owner pays the utilities and other times the tenant pays the utilities so christian asked how do you know who pays it this is tough uh the short answer is i i've been saying that phrase a lot lately part of the answer is uh you can talk to the agent who's selling the property and find out so how is it currently set up but it's deeper than that because the way that it's currently set up doesn't mean that's how it has to be set up so maybe you could change it later so there's a lot involved here uh and in fact in the multi-family millionaire book that i wrote i got a lot on this topic because it's such an important topic but like part of it is the layout of the house if or the property if it's a house where all the water lines are mixed with one another it's hard to separate the water meters because like the bathroom water is the same like the water that goes into the toilet in unit a is the same water line that goes into the sink and toil in unit b i know it sounds gross but that's how water lines work right um not drain lines i'm talking about the water supply lines where the water goes in right so you got to separate those if you want to do separate meeting separate metering now there are companies like i mentioned uh truesubmeter.com they're a company that will let you put on a meter on the device itself so i can actually attach the device to the toilet to the water heater to the kitchen sink and that way you can separate the meters that way it's just a little more complicated and then the fourth piece of the puzzle of knowing is like is it normal can you get away with it like what i mean by that is like if you let's say you had a property where you're charging 1200 for rent and you wanted to add on the tenant pays their own utilities can you find a tenant in that area that's willing to pay 1200 and pay their own utilities if it's completely out of the norm that nobody in that area would ever like no tenant would ever pay for the water bill then maybe try maybe it would be hard for you to do that but i would say in most case in my experience most cases a tenant like i don't think i've ever had a tenant be like oh yeah i won't rent that because i got to pay the water bill it's just like okay like most people they tenants when i was a tenant i thought the same way like there's we we compartmentalize our bills so there's there there's rent there's utilities there's my credit card bill there's all that and so yeah great if you don't charge if they don't pay utilities they're like oh great that's cool but most of the time they don't object if they have to so most of the time you can sub-meter them and they can pay their own and i haven't had a lot of pushback but again every deal is a little bit different there evan asked the question he said is long-distance real estate investing better for high-priced areas it depends i mean i live in maui hawaii right so i live in maui hawaii it's very expensive here it's million dollar plus houses everywhere so is is it better for me to go long distance well it depends on what i'm trying to buy flipping houses is amazing here you can make a thou i mean a hundred thousand dollars on a flip here but buying like uh single-family houses to rent out terrible i don't think i could ever cash flow on a single family house in in maui it's just like the houses are a million dollars they don't rent for that much they rent for a couple grand a month maybe three or four grand a month the math just isn't there but i'm like a duplexer triplex i can sometimes find it so really the area like every area has something that's good there but not everything works in every area so it depends on what you want so find out what you want and then decide what area is really good for that mobile home parks i don't buy them in maui i buy them in ohio and minnesota and wisconsin and florida and georgia and that where can you find private investors great question so where do you find private investors to fund your deals i mean first of all they're everywhere all over the place the key is you they you gotta connect with a lot of people tell people what you do and and find people and like find a way to present your deals to those people that they'll want to invest with you in other words like go to local real estate meetups meet a lot of real estate investors the best private lenders are typically real estate investors usually older real estate investors that are at a different stage in their career they don't want to be crawling under houses they don't want to be dealing with tenants and toilets and termites they want to sit on their couch and watch dancing with the stars so they might be very happy to get a return on their money and invest it with you or people who have a really good income like a lot of our investors at opendoor capital work at silicon valley like tech firms and so they make amazing money from their jobs and they give their money to me to invest in real estate passively for them and so you can find them just by networking connecting going to real estate meetups conferences and then just tell everybody you know that you do real estate and that you are looking for partners or whatever like you can find those people they're all around because at the end of the day you don't need to only like it's not just multi-millionaires you have to raise money from or you can raise money from like one of my very first partners was just a friend of mine from church they had they had a line of credit on their house a heloc they used that to give me thirty thousand dollars to buy a triplex we make about five thousand dollars every year on that money and technically it's no money down for them and so like that was one of my early partnerships and and that those people are everywhere but you got to have a good reputation you got to have knowledge you got to have experience or at least like you know experience from knowledge even if you're brand new like you gotta have a reputation that says i'm trustworthy and i know what i'm doing and if you have that and then you get around enough people you will find private lenders jake said brandon where do you invest in ohio uh i've got a i had a property in cincinnati i sold that and now i have mobile mobile home park in fostoria ohio so fostoria which is up north can you do this in canada you can i have friends at invest in canada i have friends in canada who invest in the us i have friends in the u.s to invest in canada so it's doable canada is typically more expensive and harder to get cash flow but it's still doable um especially if you get in the middle of country like smaller towns more rural areas you can do okay there i'm gonna do one more question before i get to that though let me just say thank you everyone for coming today i hope you learned a lot uh i hope that this wasn't just hype i hope you got some like i know i get hyped up and excited about this stuff but i hope you got some concrete steps next uh to be able to do so that's that's always my goal all right this is a great question this is what i'm gonna end with because it applies to everybody here today so i got a question in here from che and chase said i'm 21 years old i'm reading your book this is my first like webinar i've been do what's your best advice so this is my best advice for everybody getting started with real estate whether you're 21 or 41 or 81 like look at what the steps are needed to get successful in other words don't just look at the success look at what are the tangible like actions needed like to use a metaphor of working out or diet and exercise like if you want to lose weight that's the goal what are the actual steps oh i'm going to eat 1500 calories a day and i'm going to work out 30 minutes every other day that's tangible steps then track that every day keep track of that when you track things you're more like liable to continue them and so like know what you want have a vision for where you're headed to so maybe you want to be a millionaire real estate investor maybe you want to have 5 000 a month in cash flow great but then what does that look like how many units is that oh i want to have 30 units okay great what do you want to do next i'm going to buy a single family house okay great what do you got to do i got to go uh find it okay what are you going to do to find it i'm going to go drive around okay when are you going to drive around tomorrow put it on your calendar what we basically did is we took a lofty goal that almost feels out of reach and we made it into an actionable thing that we can put on our calendar and if you get into the practice of doing that every single day what are my goals where am i going what do i got to do right now to make that come closer and you build a habit of consistently driving closer to that you're going to achieve anything you want in life whether it's real estate like i teach or something totally different like it's that consistent daily action that's going to make a difference in your life and so many people wish and want and hope and dream and plan and desire but they don't do they just don't do and so if there's one piece of advice i give you today is do every single day do something that aligns with your vision and you're going to go far thank you everyone for coming today i got to get out of here you guys are the best if i didn't give you a shout out i apologize to everyone i didn't give a shout out to there's a lot of people here today uh hundreds of people said they're going pro so i want to give you all just a big you guys are awesome congratulations thank you for joining the pro family and uh yeah thank you all right i hope you guys enjoyed today's show that was me teaching you how to invest in small multimedia properties uh for those people interested in what we talked about in the show about going uh to become a bigger pockets pro member remember that discount code is podcast20 podcast p-o-d-c-a-s-t and the number two zero it's gonna knock off 20 off your annual membership your first year and get you a whole bunch of cool bonuses that you saw in there and honestly the bonuses my goal is that the bonuses alone are worth like a decade of paying for pro like that video series i did with david green all about like no and low money down investing is gold uh and i mean everything in there like how to find the off market real estate deals and all that so definitely check it out it comes with a guarantee anyways if you don't like it you can always ask for a refund but i really want you guys to try it out and go use it to go buy some small multi-family properties it changed my life it'll change yours as well that's all i got so thank you guys for hanging out today listen to the show for biggerpockets.com my name is brandon the multi-family millionaire signing off 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: 503,196

Keywords: biggerpockets, real estate, real estate investing, investing, rental property, investing in real estate, income property, bigger pockets, passive income, small multifamily investing, multifamily investing, multi family real estate, multi family real estate investing, multifamily, multifamily vs single family, multi family financing, how to buy an apartment complex, how to buy a duplex, grant cardone, buying apartments, small multifamily deals, multifamily deals, investment, rental

Id: OkhUg-n0e2g

Length: 83min 28sec (5008 seconds)

Published: Thu Sep 16 2021