Hey guys, it's Matt Faircloth coming at you today. I want to tell you a story about how
we bought this 18-unit apartment building that I'm standing in. You can see it's 18
meters here, right? So, we bought this 18-unit apartment building with no money out of our
pocket. I'm going to tell you the story of how we did it and hopefully give you some
tips on how you can go out and do the same thing, right?
So, we started investing very, very small. Single family homes, small multifamily duplexes,
that kind of thing. We did that for years, and we built a track record for ourselves.
Learned landlording, learned how to deal with tenants, that kind of thing. And, we did borrow
some money and take on investors, but it was immediate, immediate family, not outside investors
or outside parties, or anything like that. Just small loans and small equity investments
from immediate family. And we did that for years.
Once we got to the point we were comfortable with our business and comfortable with where
we were, we started reaching out to investors, people outside of our family, that wanted
to get involved in real estate but didn't have the time to do the day to day involved
in real estate. And we were willing to do the operation of the asset while they put
their money in as silent partners and do a deal. We slowly built that up, built it up,
built it up as these larger and larger deals. Before this deal, our biggest deal was a five-unit.
We went from five-unit to an 18-unit. And that's how we grew from three, four or five-unit
buildings up to an 18-unit.
To get into larger buildings like this is an 18-unit building, what we had to do was
we had to start networking with larger brokers because the guys that were selling as buildings
like the two-unit, the three-unit, and the four-unit building, they may think that they
can sell us an 18-unit apartment building, and I'm sure they'd love to. But they're not
in that network. They're not aware of the people that own buildings like this and the
places to go to sell them. Or, to find the buyers to find the sellers, that kind of thing.
So we had to get into a different network of realtors and brokers to get access to buildings
like this. Over years of time I network more and more with commercial real estate brokers.
Not residential real estate brokers that can sell you a small Maltese, but big commercial
brokers. Guys that deal with, like this is a small piece for them. They get into bigger
stuff.
So, I started to network with those guys, go to look at buildings, even buildings I
knew that I couldn't afford. I still wanted to go look at it with them if they invited
me out to their open houses and that kind of thing. I wanted to get to know how big
real estate worked, how bigger multi-families, how they operated, what kind of profit potential
they had.
I started to underwrite, meaning write it out and determine the profit potential, profit
and loss, all that kind of stuff for bigger deals. And I got to know a lot of the guys
in the commercial business, even though I wasn't at the point where I could swing a
building like that. I knew that's where I wanted to go, and so we just networked a networked
and networked with the bigger commercial brokers. And as our investment pool grew and grew,
we did larger and larger deals with our investors. We were able to raise enough money, eventually,
did do a deal that one of these guys had to offer us.
We found this building. This building was a great deal. As you may know, the multifamily
market's really, really hot right now. There's a lot of people buying multifamily. Multifamily
can be a bit overpriced, but what we did was, we found a building that needed some work.
This building had nine units of the 18 were vacant, because the story is, owned by an
older guy, didn't want to deal with it anymore, so he let a lot of vacancy come into the building.
But it was in good condition aside from the vacancies. So we stepped in, bought the building
based on the performance of the nine units that were occupied, and a few dollars extra
for the nine units that were vacant, and we purchased the buildings. We got a great price
on the building. Didn't have to pay full market rate price which, again in a multifamily,
is really, really high right now because a lot of people want to get into multifamily.
We found a great deal in the building, were able to lease out the vacant units and it's
not fully occupied. So it's making a really good profit, but it's because we bought it
right.
The way that we got into it with no money out of our pocket was we took all those investors
that we had worked with for years on larger and larger deals, and we raised 500,000 from
those investors and some new investors as well that were even friends of those investors
introducing us to new people. And new people that had contacted us came into this building.
We raised 500K over eight investors and they came in as limited partners in the deal. We
were the general partner, so that's called a limited liability partnership, which you
can look up or talk to an attorney about forming.
We were the general partner. They were the limited partners in this deal. They had direct
ownership of the building. We guaranteed the mortgage on this property. The purchase price
was 1.05 million. We put 350K of that 500,000 into this building. The other 150K we put
into other investments, other smaller stuff. The investors were a little diversified. We
didn't put all their eggs into this basket. We put 350K in equity and put a mortgage on
the property, and the property is now performing well. So the investors are happy, we're happy.
Most importantly, we were able to do this deal by putting investors money in. We still
got ownership. I don't own the whole building ourselves. We have some investors in, but
I'm able to leverage an asset like this. And I can tell you, buildings like this have a
lot of benefits such as maintenance, management, all these things are all easy because everything's
under one roof. There's not 18 roofs. There's one roof. There's not 18 whatever it is. There's
one of those things, like common areas, all of these different things. It's very easy
to maintain a building of the size because it's all compartmentalized here.
So, here's your takeaways. Okay. Number one, develop a track record for yourself, whether
that's on your own or align yourself with someone that has a track record, because you
don't want to go out and pitch investors to work with you to go buy an 18-unit apartment
building like this if you've never done a real estate deal before. I hate to tell you,
for those of you guys that want to get started and get started quick, you got to develop
a track record in this business before you go and take down a big building like this.
That's number one.
Number two, get network with people that are trading the kind of buildings you want to
get into. If you want to grow to get into commercial buildings, even though you're not
ready to go there just yet, start to network with the guy, that big commercial brokers
that are in your area. Tell them that you're interested, and tell them you want to start
seeing their listings of properties that come up. And get to know them. And if they'll allow
you to come out to their open houses, or to when they have broker's opens or whatnot,
and just let you in the building so you can start underwriting it and looking at the performance
of the building, do it. Get to know these buildings. Surround yourselves by it. Surround
yourself around them, and you'll be able to grow into it as you build more and more investors.
Number three, talk to an attorney about the way to structure equity partnerships. It's
not the most simple thing in the world, but it's also not that complicated. See if you
can get an attorney. Take an attorney out to lunch and ask them about structuring the
equity yield, because that's how we bought this building was through an equity partnership.
So those are three tips that I can give you on how to buy an 18-unit apartment building.
And one more, just always make sure you buy something that has a way for you to add value
to it. If you just buy straight market price, you're not going to get a great deal. You
got to buy a building that's got some hair on it. That's got something going on, whether
it's a management issue, like a bunch of vacancy, or a building that needs some work. That's
the way you're going to get a great price on an asset versus something that's priced
at the market, because unfortunately the market's really, really hot for bigger multifamily
right now.
I hope that helps. I may have left something out, but that's okay. You can ask me about
it. Down below, leave a comment and we can get a conversation going so I can help you
guys get some ideas on how you can go and buy yourself a nice midsize multifamily building
with no money out of your pocket, as well. Thanks for watching. Hope this is of value
to you, and have a great day.