I received a message yesterday night after my last video. They person asked what it takes to become a multifamily syndicator.
Here are the five qualities I rely on every day:
1) You Must Be Determined
Like any business, there are days when things don’t go your way. Sometimes, you are disappointed because someone let you down. When things go hard, you go harder. I will work to make things happen. I will reach out to people and travel in person if needed to meet face to face to hash something out. Having that “whatever it takes” attitude is a core principle for me. When you are making the leap either from single family or from zero, you need to be determined to get past all the no’s you will encounter.
As a syndicator, we have processes that take us from start to finish, but there are always challenges and there is no clear map to get to the end sometimes. So clear determination is a must to see your deals and your dreams through.
2) You Must Be Trustworthy Another core principle is that you need to be trustworthy. People need to be able to recognize you are a trustworthy person. If you cannot trust yourself with handling your money, forget about raising money from others. If you are looking for investors to put up thousands of their hard-earned money into your deal but you have a hard time managing your own, you may need to revisit your options.
3) You Must Have a Track Record
When I say track record, it doesn’t need to be in real estate syndication, but it does help. For some of you, it could be that you have experience doing fix-n-flips or wholesaling and you consistently earned profits from money borrowed from lenders and investors.
For others, you may have a proven track record in the corporate world. I started out in single family more than 15 years ago but also built a career as a Chief Information Officer in the financial services industry. I can point to my operational and budget management experience.
If you are just getting out of college with no experience in the real estate world it will be tough to start out on your own. However, you can partner up with others that are in the syndication game either in cash or sweat equity.
Ultimately, investors need comfort that their money and the asset itself are in good hands. You need to demonstrate you have the business acumen to execute on the plan you outlined.
4) You Must Know Your Numbers Knowing how to analyze and put a deal together is crucial. You don’t need to have 15 years of experience analyzing deals. Rather, you can partner with someone who has the knowledge and experience. Regardless, you need to have an understanding of how the numbers work, know how to read a given market, and know the verbiage used by brokers, lenders and sellers. You don’t want the lender asking you if you would like to do an “IO Loan” and you have no idea what they are talking about.
5) You Must Appreciate Your Team Many great leaders talk about gratitude and with a good reason. When you are positive and appreciate the work that your partners, property managers and vendors are doing for you – and you tell them – it will make all the difference in the world. People like to know that you recognize their efforts. And when you do recognize, they will work that much harder for you. It will help you make each day a positive experience and help you on your path towards everyday greatness.
Tell me what you think. What qualities have made you successful? Leave a comment and let me know.
When we are going after a goal, we spend most of our time focused on the journey. When we do finally reach that goal, often, we acknowledge it, and then move on to the next goal. Since hitting the goals most times takes longer than it takes to acknowledge our success, we need to ensure that we pay close attention to our own internal happiness and positivity that keeps us motivated. If not, it could lead to us feeling like we are spinning our wheels and slipping into unhappiness. One of the things that I try to focus on as I’m going through my goals, is to maintain a level of happiness as I go through and knock out new deals, new LOI’s, and new partnerships.
I’ve come up with five ways to help keep my internal positivity on track with my goals:
1) Remind Yourself of What You’re In Control of Changing
As in business and in life, they’re only a few things within our control that will ultimately make a difference. I focus primarily on what I can change, what I can make better, and how I can help others. I avoid getting overwhelmed by things that I can’t control. For example, if a contractor does not deliver their work on time, I ask myself what I can do to improve the situation. Believe it or not, this is extraordinary hard as we all have bad days and sometimes obstacles get in our way. But if we can even control our emotions and maintain a positive mindset, you can see through the obstacle and get on the other side of it.
2) Watch your Language
I talked a little bit about this in the last video in terms of using positive language when speaking to investors. The same thing goes for speaking to yourself. If you’re able to keep what you tell yourself in check, you will do so much better. Do you say to yourself: “I screwed that up. I am such an idiot” or “I can’t believe I’m doing this. I’m such a fool”. All this inner dialogue gets built up inside your own head. It’s like you’re programming yourself with these limiting beliefs. It may seem harmless, but believe it or not, it impacts your overall way of being. You mustn’t allow that sort of self-talk to enter your mind. It’s detrimental to yourself and to your future. If I notice I’m having negative thoughts about a situation, a good rule of thumb that I use is if my brother messed something up, would I berate him? Of course not. So don’t berate yourself.
3) Commit to the Goal, Not the Path
Having a goal with a purpose is good for your brain. It establishes a focus.
Once you understand what your goal is and commit to it, you must make sure that you don’t get confused between the commitment to the goal versus the attachment to the path to get there. If you think you know one way to get to the goal, then you will only see certain opportunities. You’re only going to go in the direction that your brain is familiar with. It’s like you are putting blinders on and ignoring anything that can help you achieve the goal.
Committing to a goal means doing – within the limits of your value system – “whatever it takes to get there” vs “it has to happen this way and at this time using this process”. For example, if you are counting on a friend’s money to invest in a certain deal, but for some reason, that money is not available anymore, think creatively other ways to get that funding. Stealing or doing anything out of the law is not an option. Go through your social media contacts and find potential investors. Organize your proposal and start talking to people as soon as you can. Maybe the very same day. Make it happen. Don’t make the mistake to talk yourself into doing things only one way. It may/will turn you off to looking at other possibilities to realizing their vision.
When your approach is more like a matter of commitment and you do whatever it takes to reach your goal, it frees your mind. It opens your brain to seeing many more possibilities an make that goal happen. You will see other people to network with for collaborative efforts or you will use other methods to reach out to investors that you hadn’t considered.
4) Focus on Measuring Progress
When you are focusing on what’s in your control, like I mentioned earlier, you then set metrics around that. If you hit all the metrics you defined, then you will have success.
For example, if your goal is to buy an average of three 12-unit apartments for a total of 36 units in the next 12 months. you already recognize that you will need to put in some work to get there. Break it down into metrics – metrics you can control.
So, to hit your goal, you plan on sending out 20 mailers a week to prospects in your target area. Of course, you can’t control how many of those mailers result in a lead. But what you do control is making sure you are sending out 20 mailers a week, tracking the results, and continuing to hit that number month after month. So, you should focus less on the long-term, external results (the 36 units) and more on completing and tracking the task at hand (20 mailers a week). As long as you hit that goal week after week, you can be happy with your results or possibly double down if things are not moving fast enough.
5) Make Yourself a Priority
It’s good to have goals and the ambition to bust down walls to reach them, but you also need to pay attention to your health, business relationships and take time with loved ones or you will not be happy.
As real estate entrepreneurs, we often neglect this. We are so busy building our businesses that we may neglect our bodies, in terms of diet and exercise, and stress our relationships with our spouses. It’s important to take care of your health so you can be around to enjoy the fruits of your labor while making time for the people you love and want in your life.
Another important aspect is personal development. This means setting aside time to read books, attend seminars, and be around others that fortify your habits, so you can work more efficiently. The objective is to positive habits that almost allow you to run many important aspects you do on autopilot. Like brushing your teeth; You don’t need to think about how to do it, you just do it.
For those that have a hard time prioritizing their well-being, try implementing one small habit that will help you. Repeat it every day and track your progress. For example, you may want to get into the habit of writing your goals first thing in the morning over coffee. Make a promise to yourself the night before that you decide to keep. Have everything ready the night before; Do the dishes and leave everything ready for your coffee, Put your pen and notepad on the kitchen table. From there, follow-through. And spend a set amount of time writing your goals, maybe 5 minutes or the time it takes to finish your coffee.
Then once you create that one habit, make it a priority and eventually it’s just going to to be something you do as a matter of course. Then you can add another one. Be careful not to add too many new habits at once as it takes us time to adjust and accept the new habit. You don’t want to quit part way through.
So, again the 5 strategies to stay positive while chasing your goals:
– Remind yourself of what you are in control of changing – Watch your self-talk – Commit to the goal, not the path – Focus on measuring progress – Make yourself a priority
What do you guys think? What strategies to you use to stay positive as you knock out your goals? Let me know in the comments.
If you stay in real estate long enough, you will likely be sued. It happens when you or your property managers dealing with so many people over any amount of time. The best thing to do is prepare for the worse through proper planning and organization of the property.
Unfortunately, dealing with legal issues is a part of the job when it comes to real estate. Just about every property manager or landlord out there has come across some legal issue and they can attest to this. For the most part, tenants are good, honest people that want to live their lives. And if they have a legitimate issue, it’s our responsibility as landlords to provide quality places for our tenants to live. However, there are some nightmare tenants. Fortunately, there are things you can do to protect yourself from unscrupulous and problem tenants. Here are the 4 things you can do to reduce the threat of suits and insulate your personal assets:
Proper Tenant Screening This is where it all begins. When it comes to avoiding lawsuits, the best thing to do is to start with the previous landlords. Call all the numbers they provided on the tenant application and speak to the tenants work ethic, character and cleanliness. Ask about unapproved subletters and pets. You want to create a demographic picture of the person to and determine if it is congruent to the person filling out the application.
Problem tenants may even have their friends pose as landlords. You may also want to verify you are speaking to the landlord by asking them questions about the property and what other properties they own. Looking them up on social media to see what groups they belong to and verify the landlord is real. All this is above your background check, where you can sometimes see past evictions, criminal convictions and other legal incidents. Finally, either you or someone from your management company, have a face-to-face discussion with the prospective tenant as this can foreshadow problems. Specifically, listen to what they complain about as they will likely have similar complaints about you down the road.
Video Record the Units & Audio Record Your Discussions One of the most frustrating things to deal with is a tenant that makes a false claim of something you said or something you didn’t say. Keep in mind that for many of the tenants you don’t want, they will say just about anything. To avoid this, make sure you record every phone call, keep every email, and scan every document. There are free mobile apps available that allow you to record automatically. If you are in an office, most phone systems will handle call recording. Certain states require you provide notice and obtain consent before recording. If you are on an office phone system, the notification may be enough, but you should talk to your attorney before recording your calls. And never make a verbal commitment to anything. At a minimum, get text message communication and make certain your messages are backed up to the cloud.
Additionally, make sure you video and take plenty of pictures of the unit before handing it over to the tenant. Even go so far as printing the photos and attach them to the lease. This will prevent the tenant from saying the the carpets were stained when they received the keys.
Always have a complete record of all communications and the chances of landing in court for frivolous reasons will disappear.
Have a Detailed and Straightforward Lease Always get a lease and walk through it with the tenant. Get a signature on it along with an initial on every page. NEVER take a tenant on with just a handshake and a key! The last thing you want to do is go to court for a non-paying tenant and not have an executed lease in your hands. If you are in a courtroom that is tenant-friendly, you will lose your case to a frivolous claim. A comprehensive, ironclad lease is your best bet to protecting yourself and your cashflow. The more you have in writing, the less opportunity there is for the tenant to wiggle their way out of what was promised. And the lesser the chance you will land in court and have them win.
Have a Great Attorney on Speed Dial The right attorney on your team goes a long way to keeping you out of court. The money spend on creating a bulletproof lease, putting the property in an LLC and protecting your assets will go a long way. This is the one thing you do not want to skimp on as the time wasted protecting yourself from a frivolous lawsuit. A good attorney that specializes in landlord-tenant law is important. If you have a lot going on, form a relationship with a good attorney and talk to them often about what is going on in the city or if there are any new statutes that can impact you as a landlord. (Maybe even take them out to lunch and pick their brain.) You can use this info in your underwriting as well.
Most tenants are good people and many landlords want to provide good housing. However, you can’t completely protect yourself from lawsuits as there are professional criminals, “victim tenants” and people that misunderstand their responsibilities as a tenant. These are the ones that will try to come after you as their mentality is “because they are a landlord, they have money”. These are the people you need to guard against. Your diligence, consistency and thoroughness will save you time and money – and your sanity.
What do you guys think? How do you keep yourself out of the courtroom? Leave a comment and let me know.
As value-add real estate investors, we are looking for deals that need to be improved to increase the property’s value. I’d say one of the most difficult things to do is finding solid contractors that you can rely on to show up on time and do quality work, and won’t rip you off.
With more than 15 years of experience in real estate, I have run large commercial projects while working with other companies and have had to bring people on for our deals today. I’ve had to bring on general and sub-contractors to work on all sorts of deals.
Here are 3 considerations on how to best deal with contractors and reduce headaches and issues that may come up.
1) Don’t Hire the Cheapest Contractor When you get multiple bids on a job, it may be tempting to go with the lowest offer. Often, the lowest contractor either left something out of his proposal and they will change-order the entire time they are on the job. If they don’t do that, they will realize partway through the job that they underbid and just up and quit on you. Worse than either these two things are that they will just order additional materials only to end up missing.
Instead, hire a contractor that is the right for the job. If they are a specialist at painting, don’t expect them to do an excellent job laying down marble tile. Ask for pictures of work they have done before. Ask for referrals. Don’t hire a single-story contractor to do major work on your three-story multifamily property. Get referrals and make sure to call them. Aside from phone calls, you can also check their ratings on websites you trust. and look at their Facebook page to see what others have said about them.
2) Look at Their Financials Once you narrow down your list of contractors that are a good fit for the job, you will want to ask them if you can get a look at their balance sheet. You are looking for how they make their money, and do they have the cash to pay their employees and other overhead. If that contractor only has $15,000 in the bank, they are obviously not financially healthy. They won’t be able to hire enough people to keep the job on track. It also tells you that they do not have a pipeline of customers that want to use their services.
Getting your hands on their financials is even more important if you are doing a large-scale rehab or new development. The largest chunk of the project will be spent with this contractor – more than permitting and other costs. If you don’t get this info, you risk not only a delayed project but also legal issues and loss of rental income.
3) Check the Contractor’s History All contractors must be licensed in the state they are working. As part of your due diligence, you need to make sure they are licensed by looking at their registration with the state. For many states’ websites, you can see the contractor’s history and background a well as problems and complaints. You can see if their license is up to date or if it’s lapsed or suspended. You can use those same resources to find any down payment limits as they vary from state to state.
As far as other considerations make sure they have General Liability, Worker’s Comp and property damage insurance before they step foot on your property. Also, always get a written contract that lays out how and when payments will be disbursed. (I would talk to your attorney for that document.) For larger projects, you can use a checklist that lines up to the contract which will help keep expectations for both you and the contractor. Speaking of payments, never pay cash. Use a check or credit card for small jobs and arrange financing for larger projects.
If you are looking to hire a handyman for several properties, ask them to do a small job to see how they perform. Do they show up on time? Did they perform the work as promised? Were they conscientious about the property and the neighbors? A test job is a quick way to find out.
Anyway, do you have any tips on hiring contractors? Let me know in the comments.
If you are a real estate entrepreneur or investor, you questioned what the role of U.S. politics – specifically the presidency – has on the market and on your investments. Since President Trump made his millions in real estate development, one could assume that he wouldn’t make a decision that would adversely impact his investments.
However, if we have learned anything about the political climate is that it is difficult to know what will happen next. While the country is polarized on a variety of issues, we as entrepreneurs and investors have a duty to do what we do best: buy real estate and provide homes for people. I am not a politician and I don’t want to guess what will hit the news wire in the next hour about something that will not directly impact my life. I am a real estate entrepreneur. And from a real estate perspective, Trump should not any negative effect on what we do as real estate entrepreneurs.
We cannot make investment decisions based on who is president, what they are tweeting in social media or what the talking heads on TV are saying from either side. Rather, there are three fundamental rules that we as investors must follow in order to not only take advantage of the current market cycle but also prosper when the market turns.
Here they are:
1) Buy for Cashflow, Never for Appreciation When we think of real estate, we consider that the values increase over time as a matter of course. According to the U.S. Bureau of Labor Statistics, prices for housing were 52.05% higher in 2018 versus 2000. So, a house valued at $100,000 in 2000 would cost $152,050.77 in 2018 for an equivalent purchase. This is called natural appreciation and is simply the rise in an investment property’s future value over time. This means that you have almost no control over the appreciation.
On the other hand, forced appreciation involves making improvements to a property, increasing revenue and decreasing expenses which drives Net Operating Income – and increases the overall property valuation. If you purchase a multifamily deal for $2MM and drive improvements, reduce some unneeded expenses, and offer new amenities to tenants that they pay for, that property may be worth $4MM because you made improvements, reduced costs and increased income. In this case, you are actively taking part in increasing the property’s present value as well as investor returns.
Many investors have bought for natural appreciation. Often times, nonprofessional investors believe this is the only type of appreciation because this is the one they are most familiar with.
I personally never buy expecting natural appreciation to kick in. I always buy for cashflow. The reason why I do this is because if the property is well maintained and there are plenty of renters in the market, it won’t matter what the market is doing. If you run the property well, make improvements and it is positioned as a nice place to live, the property will perform – even when the market turns.
2) Don’t Use Too Much Leverage One of the great benefits to buying real estate in the United States is that we can use leverage to multiply our money to take down a deal. For example, if you decided to invest $200,000 in Ford stock, you would only control $200,000 of that stock. However, if you wanted to invest that same $200,000 as a down payment in a building, and you were able to get an 80% LTV (Loan to Value), you would now control a $1,000,000 asset. This is the power of leverage.
But this can also lead to problems if not done right. The less money you put down on a deal, the more leveraged you are. This means your mortgage payment will be high. In a hot market, over-leveraging is very tempting, and some banks will even do it. But if market turns, values drop, and the income falls along with it, you will have to cover that note. My partners and I never have less than 20% of equity in a deal and we are usually between 25%-30%. There are lenders that will do the 0% down, but you must avoid it. This will prevent you from getting burned in the event of a downturn.
3) Don’t Get Forced into Selling Before Plan One of the primary reasons people are forced to sell or turn their properties over to the bank is because they bought for natural appreciation or they simply over-leveraged.
Something typical in commercial and multifamily real estate is that there is a balloon payment on the loan. This can become a problem if a big balloon payment is due in the middle of a market downturn and you do not have the reserves to pay. The best thing to do in this case is to plan years in advance (or even before you buy) what the exit strategy will be, such as a refi, pay off or a planned sale.
By applying these three rules, you can build a strong portfolio of real estate while providing investors with healthy returns. The rules will serve you well, regardless of what Trump tweets or does in the White House.
Let me know what you think. Do you use these rules? Leave your responses in the comments.