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 into the purchase of their $999+ real estate course.

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 all credibility in the Black community promoting his sketchy strategies and courses.

Update 08/05/24: In this 2019 video and one other, I mention Grant Cardone as a credible online investor to consult. I've since learned there are similar allegations of sketchy practices with Cardone. Because I've not had the time to deep dive to verify Cardone claims (as I have with Morrison--see details at tulsarealestatefraud.com), I'm no longer recommending him. At the time of my initial recommendation, Cardone appeared more credible in his real estate math knowledge, deal flow, and presentation than Morrison. Takeaway Lesson: There is a tone of valuable information--from good and credible citizen experts/learning-leaders--who share their experience and insights on many topics for FREE. That is, if you have the drive and patience to sort through the trash. Also, real millionaires and billionaires, usually, mentor for free to give back to those who have access to them. And if they do charge, it is for a much more affordable or reasonable price and the value received is demonstrated by verifiable results from their students. NOT the shallow obligatory testimonials from naive students with no significant result.

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. In this video at the 15:31 minute mark, I show you how to calculate the three leading real estate investment ratios you must know to evaluate a good deal should you have no money down or bad credit but want to be a partner in a deal.

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 are the value add a new investor should 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 the mindset of reasons why a newbie investor would think they are ready to invest in anything with a, chronically, 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 motivational mindset speeches appealing to, and even exploiting, peoples want-to-be-entrepreneurial egos and wealth building fantasies. 

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, it's logical to conclude that such people would not be able to attain or sustain success as a real estate investor.

In other words, if you can't give an exact account of 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, and death of loved ones).

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 of the aforementioned personal challenges or tragedies.

The truth is, until the aspiring investor experiences a significant mindset and behavior shift, they will not 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 got into real estate investing 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 co-mingle 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 two 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. Otherwise your lunch will be eaten while you hustle backwards.   

And the irony is, you will eventually have to use your own money to get yourself out of such a bind. For, other people's money is no longer available when its time to get out of debt.

So Why Have I Not Invested In Real Estate—With All My Knowledge & Past Experience in Multifamily Sales?

I caution so strongly against investing with a poor cash and credit profile because it takes one to know one. Below is how I let opportunities to be a successful real estate investor, earlier in my life, pass me by:

1. 1. Because even while selling real estate, my cash and credit profile were poor.
2. 2.The naivety and arrogance of youthful inexperience. And living too hasty.

I purchased my home in 2002 when interest rates were low and 0-3% money down loans were at an all time high. In hindsight, I learned I should have never purchased that home. I got into that home for about $1000-1500, total, out of pocket.

Thanks to Dave Ramsey, around 2005, I woke up and realized my mistake. I really could not afford that cute town home. Even though the government lowered the lending standards and informed my eager real estate agent and lender that I was "qualified" and could afford it.

In addition to buying my home before I should have, I, hastily, quit my stable job, which was a big mistake. I was so ready to be seen and known as an "entrepreneur." I bought into that fantasy--way before it was online ad nauseam. Unaware, vanity (personal and social) was a huge driver in my haste.

But providentially, life began teaching me a series of hard lessons to, quietly, humiliate, uncover, and reform my hidden arrogance and vanities.

So, while waiting for my real estate deals to close, cash flow drained and I crashed and burned--financially in 2005-2006.

In retrospect, had I kept my job, while doing real estate sales as a side-hustle, I would have never faced foreclosure. I would have stayed the course in the real estate industry and turned that town home into my first investment property.

And if I would have had the humility to see the golden mentorship opportunities I had, with real estate giants in Atlanta, for the gems and blessings they were, I could have gradually applied my new knowledge, stayed connected and nurtured those relationships, and been a successful and financially independent protege of one of them, today. Silly me. :(

Instead, I faced foreclosure and chronic financial challenges despite earning a high income. For my earnings were consumed by commission splits, taxes, and delinquent bills.

So my impatience, poor thinking, poor money habits, and ignorance are the leading reasons I am not a successful investor with all the experience and knowledge I have.

I resolved that patience, a solid income foundation, and ongoing income strategy are crucial to have in place before I feel comfortable re-entering real estate as an investor.

Recognizing my shortcomings, in 2006, I've committed myself to a slow and steady income improvement strategy that will ensure I'm ready to take advantage of the next investment and mentorship opportunities. As well as take all this advice I'm dishing, here, when the time is right. :)

Signs I was not ready to be an investor while selling multifamily properties?

1. 1.My income was still 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 freedom.
2. 2.I didn't have the bandwidth--burned out. 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.I needed to level up my skills. My time in sales exposed quite a few skill and professional weaknesses. I chose to level-up my skills while I recharge emotionally. And I decided the highest and best use of my time would be improving those weaknesses. This is the longer upstream strategy to my goal. For, in resolving to focus on eliminating debt, first, I can better absorb the future risks associated with real estate investing.
4. 4.Cash is king. While closing deals, I noticed cash really is king. It is the ultimate leverage.  It gets you mad respect, opens doors, and 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 the "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 around 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.