Multifamily Properties The Smart Way

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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…

• Armed with a working understanding of property valuation ratios and calculations.
• Armed with a network of experienced professionals you can position yourself around to serve in exchange for knowledge. And, whose deal tangibles you can see and verify.  Tangibles like their numbers and the actual properties they’ve purchased.
• Armed with patience so as to not rush into a deal, prematurely—getting in over your head.
• And ideally, armed with enough patience to save up between $5K and $20K to demonstrate the financial discipline needed to be a successful investor and be respected as a partner seeking to collaborate with other investors. In other words, be prepared to put a little skin in the game.

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 and relatable investors, out in the field, doing deals and showing their results. I found a few who sounded like my echo (or me theirs).

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 of entry—requiring only valuation knowledge and communication skill to begin.

Having other assets like cash or credit, can eliminate a lot of hassle-factors on your new investing pathway –especially when you choose strategies 2 and 3.

1. 1.Wholesaling | Bird Dogging

• Watch also: “What They Don’t Tell You About Wholesaling”
• Watch also: "How to Make Money Being A Bird Dog"

1. 2. Seller Financing

1. 3.Credit Partnerships

How to Valuate and Analyze Property

1. 1. Bigger Pockets "4 Square Method"

1. 2. How to Calculate Cash on Cash Return | Cash Flow Analysis

1. 3.How to Analyze The Numbers |Gain TRUE Cash Flow from Rental Investments

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 post and this blog post is inspired by a peeve I have around hearing self-appointed gurus talk “no money down,“ and creative financing strategies—around investing in multifamily properties.

 My peeve is them not unpacking, enough, of the realities, nuances, and stressors that come with purchasing properties with and without any 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, it stands to reason that a newbie investor be mentally prepared for their own landmines. Expect the unexpected so you won't be discourage from seeing a deal through when the landmines arise.

For, setbacks, unexpected issues uncovered by inspections, misrepresented financials, or personal financing issues are par for the real estate investing course for newbies.

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 requiring you walking away.

I would like to hear popular online real estate coaches lecture more on the specifics of where their deals went wrong—using those specifics 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).

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.  And, unpacking the common landmines, blind spots, and complications that come with no money down strategies.

To further demonstrate my concern for newbie investors taking action on incomplete misinformation, I recorded a video in 2019 in response to a friend asking for investment advice. In it, I mention a self-ascribed real estate guru that has lost a lot of credibility in the Black community promoting his sketchy strategies and courses.

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 value add 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 credible deal to be had for folks with 500 credit and no cash—IF they have no working valuation knowledge.    

Never mind unpacking and deep diving into the mindset and reasons why a newbie investors thinks they are ready to invest with a poor credit and cash profile in the first place. 

Such a deep dive doesn’t seem to be important or even allowed in the discussions around real estate investing with popular gurus. Instead, its pay me X dollars for my course and I'll teach you "the real estate game."

For a lot of these real estate investment lectures marketed on social 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, in my observation and opinion.

On the flip side, I know from personal experience that there are legit understandable reasons people have poor credit and 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 any personal tragedies.

The truth is, if the newbie doesn't experience a mindset shift, they are not, yet, 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 to become an investor thinking it would be a quick come up. Instead, they crashed and burned in a pile of debt because they rushed, prematurely, into a deal and found themselves in over their heads. 

They ended up over-leveraged in debt. Or, they were forced to comingle 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 have mastered the mirage of marketing and the art of faking it till you make it. You'd be surprised that these marketing gurus (not credible real estate experts) are only be one to three steps ahead of you--financially, if that. 

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.   

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 such a 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 I had the poor cash and credit profile--even while selling real estate.

I got into real estate sales for the wrong reasons--money. For, my first interest in real estate was around investing. Having taken a real estate appraisal licensing course, I became intrigued with the income approach.

But as a green want-to-be investor, I sniffed the gurus and got high off the entrepreneurial propaganda. You know the wealth-building fantasy so popular on social media today.

I know what it feels like to be baited and switched by marketing savvy online coaches. I even quit my good job having believed the hype.

Quitting my good job was mistake number one. I crashed and burned because I broke the cardinal rule of investing--maintain cash flow at all times.

Had I kept my good job and not been in a hurry to be a full-time entrepreneur, I would have exercised patience and made real estate investing my side-hustle instead. I would have been able to comfortably practice and apply my new real estate knowledge to my own life and get my weight up.

In other words, I was unable to seize and optimize the wealth opportunities I was facilitating for others for myself.

My entrepreneurial practice as a salesperson plus the new and advancing financial knowledge I had gained were way ahead of my emotional and financial capacity.

Although earning a high income, my choice to quit my job had me facing foreclosure and getting behind on bills.

So when closing day came, my high income was eaten by commission splits, taxes, a foreclousure threat, and late bills. Not winning.

Poor habits and these impatient youthful mistakes needed correction before I could even think about becoming an investor. I was deep in the red. And, I burned out fast.

Ironically, what we try most to avoid, we end up having to circle back and face the music. While I tried, I couldn't skip being patient. For, it would take patience and a solid income strategy to get me in the black.

In my favor, I had enough common sense and self-awareness to know that all the facts mentioned above simply meant, I was not ready to be a real estate investor NOT that I didn't have what it takes to succeed when I was ready. 

And since 2006, I've committed myself to a slow and steady income improvement strategy to ensure I'm ready to take all this advice I'm dishing in this retrospective.

How, exactly, did you know you were not ready? You could have faked it till you made it. You looked the part and good on paper?

1. 1.One reason I knew I was not ready was because my income was enslaved to debt.  In 2006, I realized I was hustling backward (while selling multifamily properties). I made up my mind to become, relentlessly, committed to becoming debt free.  I became convinced that becoming 100% debt free (i.e., keep more of my income) was my greatest shot at becoming wealthy. It was my greatest shot at realizing my future as a successful real estate investor. So, instead of taking another financial risk transitioning from salesperson to investor, my aim became debt freeedom.
2. 2.Sure, I could have pivoted to put in the work to become a wholesaler. But, the wholesaling hustle, at that time in my life, would have increased my anxiety and financial burden. For, real estate deals take time. And when you are single (with no spouse to have your back while wait for closings), with bills coming due, and thousands in debt, you need steady income. I had no more mental or emotional bandwidth for the payday waiting associated with the real estate hustle.
3. 3.Therefore, I opted for time to recharge and level-up my skills. My time in sales exposed quite a few skill and professional weaknesses. Therefore, I decided the highest and best use of my time would be improving those weaknesses. This is the longer upstream strategy to my goal. But, I'm confident it will add the most value, financial gain, and legacy impact to my life. For, in resolving to focus on eliminating debt, first, I can better absorb the future risks associated with investor payday waiting when I'm ready to return.
4. 4.Next while closing deals, I noticed cash really is king. It is the ultimate leverage.  It gets you mad respect, opens VIP doors, and offers preference in deals. By that standard, I had to admit, again, I was nowhere near ready to pull the trigger on my real estate investing vision. So, I resolved to have a certain level of cash-on-hand to be most credible and respected in future deals. My sales experience taught me to endeavor to always position myself to operate from the strongest position in deals not from the weakest. 

For, I've witnessed many aspiring investors move either desperate or hot-headed into deals from positions of weakness (often unaware) and paying, dearly, for it.

Quiet as it is kept, no money down deals can bring unnecessary stress and complication. Deals are complicated and stressful enough on their own. 

Also, no money deals (usually wholesaling deals) place more demands on you and your time to prove yourself and to meet second and third party expectations. 

You often end up being the one doing all the grunt work because you came to the table with 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 "real estate rookie duty" days are over for me. 

These insights are 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 bring not only my experience and knowledge but enough cash to the table to be respected and, actually, close.

Because of these experiences and observations in real estate, I've concluded it is 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 settle for because I have no cash or credit. 

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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.