Show Notes
I learned about apartment buildings in 2006 and closed on my first one in 2011.
In this episode I walk through the seven steps I would hand my 2006 self. We get into the economics that make apartments a faster path than flips, the people you need around you before you make a single broker call, what getting deal ready involves and why it comes first, the two activities that carry you the rest of the way, and the law of the first deal.
If you have been circling multifamily for a year or more while doing something smaller in the meantime, this episode gives you the sequence and the math behind it.
Key Takeaways
The acquisition fee is what buys you the runway
A $4 million deal at a typical 3% acquisition fee pays the general partnership around $120,000.
At a $10,000 monthly income target, that single fee funds roughly 12 months.
That runway is what lets people leave a job and work the business full time.
Single-family investing has no equivalent to the acquisition fee.
Cash flow starts thin in year one and builds through years two, three, and four, with a profit spike at sale.
Your vision has to be bigger than a dollar figure
Most people arrive with a number and a weak reason behind it.
Ask yourself why you want the number, then ask why again, until you reach something that has nothing to do with money.
The people with a reason outside themselves finish at a much higher rate.
Write out your perfect day: when you get up, where you are, who is with you, what you do.
You can usually stage one version of that day right now, long before you are financially free.
Get deal ready before you call a single broker
Learn the language, learn to analyze deals, and pick your market first.
Build your team early so you can borrow their credibility instead of waiting on your own track record.
This setup takes about 30 days.
I skipped it, started calling brokers and investors cold in 2007, and it went badly.
Brokers gave me zero credit for three dozen house flips, because the only question they asked was how many apartment buildings I had done.
Deal flow and deal capital are the only two activities
Working the system comes down to generating deal flow and talking with investors, repeated.
This phase gets tedious, and consistency through the tedium is the whole skill.
Commit to the activities rather than to a deadline, since the deadline has variables you do not control.
- In your first 14 days, have five conversations with people who already know, like, and trust you.
Any general partnership position counts as your first deal
Buy a small deal with your own money, joint venture one with two friends, or syndicate a small one with five.
Raise capital for another operator's deal and take a general partnership slice.
Find a deal, hand it to an experienced operator, and keep a sliver of the general partnership.
Every one of these builds the track record that government-backed lenders ask for.
A slice of the pie early beats no pie at all.