Multifamily Properties The Smart Way
There are many ways to get started investing in real estate—specifically, multifamily properties. I favor the smart way. What is the smart way? Slowly…
Having reasonable cash on hand—makes you a respected player in a deal (regardless of a poor credit profile) and enables you to bid on deals swiftly.
Smartest Ways to Get Into Real Estate with No Credit No Cash
Success as a real estate investor (multifamily or single family) is rooted in the market knowledge and financial preparedness of the investor. My first recommendation joins the chorus of many others with experience in the industry, and that is to join your local real estate association (REIAs) in order to network, learn, and find credible partnership candidates.
Next, I searched YouTube for credible "everyday" relatable investors out in the field doing deals and showing their results. I found a few who sounded like my echo (and vice versa) and I've included them below to illustrate, better, the finer points I want to make on the best ways to buy real estate with no money down. If you resonate with their lectures, please subscribe to their channel.
Lowest Barriers to Entry
The following strategies have the lowest barriers to entry—requiring only valuation knowledge and communication skill to begin. Having other assets like cash or credit, can make your new investing pathway less cumbersome –especially when you choose strategies 2 and 3.
How to Valuate and Analyze Property
My Opinion, Observations, Peeves, and Cautionary Tales
On October 11, 2019, I made an Instagram post featuring a few cautionary tales about the experiences I had and witnessed as a commercial real estate salesperson of multifamily properties (10-100 units/$6M transactions closed).
That IG post and this blog post is inspired by a peeve I have around listening to gurus talk “no money down,“ and creative financing strategies—specifically, around multifamily property. My peeve has been in them not unpacking, enough, the realities, nuances, and stressors that come with purchasing properties with and without money down.
Not to mention, the untold complications that come with no money down deals, credit partnerships, and seller financing deals gone wrong. The guy in the video below only purchased 4 units and had landmines. Therefore, a new investor should get mentally prepared for the unexpected so it won't discourage them from seeing a deal through. For, setbacks, unexpected issues uncovered by inspections, misrepresented financials, or financing issues are par for the course. And, this is where having a mentor or network of experienced folks you can consult comes in handy. For you can find out--what setbacks are worth staying in the deal to overcome and which are deal-breakers.
I would like to hear popular online real estate coaches lecture more on the specifics of their deals that went wrong—using them as valuable teachable moments.
That’s why I’m glad to see new and seasoned investors posting the nitty gritty details and numbers—like Spencer above. I, highly, recommend new investors search YouTube for investors like Spencer and others who are walking you through their experience (with the numbers) instead of fast talking you through all the sexy highlights of real estate. Stay away from coaches/gurus who do not show you their tangibles (e.g. proof of purchased properties and their numbers).
Although his style and energy can be overwhelming, Grant Cardone is one of a very few popular real estate coaches I exclude from my skeptism because he brings receipts. 1) He shows you how he structures deals, 2) he takes calls from random investors about their deals and 3) he consults them on their deals--walking them through the numbers—in real time. This is why I respect his advice and hustle. He also tells the truth about no money down in this video (at the 4:00 minute mark).
My Peeve about No Money Down
The phrase “no money down” is a loaded financing strategy and MUST be unpacked.
Unpacked as in clarifying how a new investor can become irresistibly valuable to a real estate deal when they have no cash or credit. In addition, as stated above, unpacking the common landmines, blind spots, and complications that come with no money down strategies.
So, what must a new investor know (i.e., bring to the table) if they don’t have cash or credit? That is the million dollar question.
Answer: As the videos above illustrate, they must bring knowledge of the fundamentals of property valuation and how to locate the deals that investors (who have the cash and credit profile they need) will want. This is how new investors (with no cash or credit) can be respected and welcomed into a credit partnership or other nontraditional creative financing strategy.
These skills would be the added value a new investor would bring to the table—in the absence of cash and credit.
In Spencer’s video, he mentioned he studied and learned the game for an entire year before he even fixed his mouth and feet to pursue his first deal.
Consequently, he likely chose to pursue a seller financing deal because he didn’t have the credit profile to make him attractive to a traditional bank. But what he did have that made him attractive to a creative seller financing scenario, was knowledge and cash.
You see? There is no such thing as coming to any investment deal empty handed.
In other words, there is no deal to be had for folks with 500 credit and no cash—IF they have no solid valuation knowledge.
And never mind unpacking and addressing the mindset and specific reasons behind why certain new investors have a poor credit and cash profile in the first place. That question doesn’t seem to be important or even allowed in the discussions around real estate investing.
As some of these real estate investment lectures turn out to be more, effectively, motivational mindset speeches appealing to, and even exploiting, peoples entrepreneurial and wealth building egos and fantasies. Lest I digress.
For in my observation, addressing questions around one's current financial discipline would be a MUST first step if I were a real estate coach. New investors with no cash or credit should be able to reconcile and rectify to themselves their current financial condition and behaviors before even trying to invest.
For if you have not corrected poor financial habits in your personal life, you will not be able to attain or sustain success as a real estate investor. In other words, if you don't know exactly where every dime of your money is going every month in your personal life, then you have no business being a real estate investor.
On the flip side, I know from personal experience that there are legit understandable reasons for people having poor credit and no cash profiles (e.g.,illness, divorce, job loss, tied up in other investments, and death of loved one).
But quiet as it is kept, most people with poor credit and no cash who have experienced all of the above were poor money managers before personal tragedies. The truth is if they don't experience a mindset shift, they would not, yet, be suitable candidates for the nuances, responsibilities, and stress of investing.
Perhaps their time would be better spent, first, practicing principles of sound money management in their personal lives. They should focus on saving a few thousand dollars to prove the financial discipline necessary to be successful as a real estate investor.
For, I’ve lost count of the stories I’ve heard or witnessed where new investors, led either by their egos, impatience, or financial desperation—prematurely got into a deal and found themselves in over their heads.
They ended up over-leveraged in debt and/or comingling personal funds to prevent foreclosure or to keep up with repairs and other property expenses for which they failed to adequately plan.
No money down sounds really sexy and VIP when you are broke listening to sales pitches for real estate courses from people who might only be one to three steps ahead of you.
That is why you must do your due diligence to build your own knowledge base and comfort in property valuation—or your lunch will be eaten. Consequently, you would not prove a smart investor with “other people’s money.”
You would prove to be hustling backwards. And the irony is, you will eventually have to use your own money to get yourself out of a deeper bind.
So Why Have I Not Invested In Real Estate—With My Current Knowledge & Past Experience in Multifamily Sales
To my chagrin, I caution so hard against going into investing with a poor cash and credit profile because that has been me. I've been that new wanna-be-investor high off entrepreneurial wealth-building fantasy baited and switched by marketing savvy online coaches and gurus. Until the reality of my former financial ignorance and lack of discipline caught up with me.
At the time I started gaining proper financial knowledge (and even while in sales), I was unable to take the actions I envisioned because I was broke. My entrepreneurial aspirations and new and advancing financial knowledge were way ahead of my bank account and the habits and mistakes I needed to correct.
So, I was unable to seize and optimize the wealth opportunities I was facilitating for others for myself because I had a poor cash and credit profile (due to ignorance and undisciplined financial habits). Although to my fortune, I did have enough self-awareness to know that all the above meant I was not ready.
No money down deals can bring unnecessary stress and complication. Deals are complicated and stressful enough on their own. And my being inclined to anxiety attacks, I know my stress thresholds and I was not interested in aggravating or triggering anxiety.
No money deals, also, place more demands on you and your time to prove yourself and to meet second and third party expectations. And, you often end up being the one all the grunt work is dumped upon--because you have no money. That’s fine, by the way, if you have the bandwidth and tolerance for such. But I didn't have it at the time and those "rookie duty" days are over for me.
So this is why I am not, primarily, attracted to pursue no money down scenarios and caution so hard about them. As my vision for my first deal is to have some money down to bring to the table.
Because of my experiences and observation in real estate, it’s smartest and safest for me, at this point in my life, to wait until I can pursue the deals I prefer instead of the deals I would be forced to pursue because I have no cash or credit.
So, there you have it folks. If you found this post helpful or motivational, please share it. And if you like how I'm showing up in the world with Goodbye Broke, then please subscribe to my YouTube Channel and Instagram.