5 ways to Close a $4M Apartment Deal With ZERO Personal Money

Hey guys, so today we are talking about 5 ways that you can buy apartment complexes like this truly using zero of your own money. What does that mean? There's no way that's possible because there's a lot of cost involved. It's not just about the financing, the raising the capital in buying deals like this. I'm going to break it down for you in this video. For context, this is an 88-unit apartment complex in Phenix City, Alabama. It's called The Grove if you want to look it up. 3 years ago, we purchased it for $4 million. We raised after the financing, you know, the lender gave us 70%. We had to come up with $1.2 million in down payment. Obviously, the capital partners put the $1.2 million in. Today, 3 years later, we are selling this property. It is under contract. It's past due diligence, meaning the money, the deposit is hard, and this deal is about to sell for $6.5 million, meaning we created $2.5 million in equity within 3 years of owning this property and zero of our own money. We didn't bring any money to the table. And not only did we not bring any money, we got paid to close this deal. It's called an acquisition fee. All right? We actually charge, typically it's like 2% to 4% acquisition fee of the purchase price. So 3% of $5,150,000, we walked away with a check at the closing table, not the other way around. So let's talk about what it actually means to come out with no money out of your own pocket. Because there's a lot of other costs. There's the earnest money deposit, that's 1%. You got to come up with that. Inspection costs. Sometimes depending on the lender, they may want you to put up a deposit on the loan, right? Travel costs, right? There's all kinds of different things. How do we approach those things? And more than that, for most of you listening, you want to know, how do I actually scale in this game? How do I actually leverage the opportunity here to actually make a dent in my income? Because if you're smart, you've probably done the math and realized if I use my own capital, I'm on a much slower route. It's going to take you 10 times as long to achieve financial freedom, matching your income, whatever that is for you, than if you were to learn how to leverage other people's money. Okay, this is a beautiful thing. I mean, this is 88-unit, probably does about $30K in monthly income before investors get paid, all that kind of stuff. But You know, Robert Kiyosaki said lazy people use their own money. And I believe that's so true. Lazy people use their own money. So let's break it down. 5 key ways in how to purchase properties and exactly how to get all the costs covered if that's the route you want to go. All right. 5 key ways. And I've seen a lot of people scale in these 5 ways. Okay. Now for context too, in a syndication, which is what we did with this property. All right. And all that means is pooling money together. To invest in a property. Okay. So to invest in any asset, it's called a syndication. First, in a syndication, you have the GP, the general partner, who's the active operator, the one who found the deal. It's us, right? Found the deal, structured the deal, running the deal, managing the property, all that kind of stuff, right? You're the active operator, the general partner, you own a percent of the pie. And the LP, the limited partner, owns a percent of the pie. So the LPs, the limited partners, are the passive investors. They write you a check, go home, sit back and wait for the returns. All right. That's literally what they do. And they get to participate in the upside. So that $2.5 million, they own in this specific deal about 30% of the deal. So they own 30% of the $2.5 million. That's what they'll get plus their returns that we give them. We give them about 8% preferred returns. So they put in $100,000, they get $8,000 per year as long as we own the deal or as long as they have their money in the deal. And if we were to refinance this deal, we could just pay them their money back, continue owning the property. But This particular deal for other reasons made sense to sell the property. Okay, I actually did a full breakdown on this deal if you want to learn about it. It's in another video. Key number 1, number 1 way, purchase properties without your own money. Because here's the reality, you have many parts, you have the GPLP, but in the general partnership, the active operator on the deal, it can be 1 person or it can be 10 people. I'd recommend, you know, less than 5, right? Everybody needs a specific role to play. But there's many roles that you can play and you can partner on these deals just the general partner, we got 70%. So just in that, you have boots on the ground, people who are nearby. If you're not living near the property, or you want somebody just in the area just to compete and make sure the property management company is doing what they're supposed to be doing and be able to check on things every once in a while, right? You have the loan sponsor, you have somebody who's raising capital, you have asset management, you have all these different things that you can split up. If you feel like you don't know how to do a certain thing, you can partner with somebody who does. So number 1, to buy these deals with none of your own money is actually buy it outright, you'd be the sole GP, the only You are the only operator. If you want 100% ownership, you know, you can structure it that way, but you are the one GP. Now, obviously, without your own money, you need to raise the capital, right? You need to get LPs just like we did with this $1.2 million in a $4 million deal. That was without our own money. However, there's other costs associated. I hear people say all the time, you got the earnest money, that's 1%. So $3 million deal, that's $30,000 you got to come up with. $5 million deal, $50,000 you got to come up with at the contract. Before you raise capital, you oftentimes have to come up with that. You have the inspections, you know, you have the travel. Travel expenses. If you're going to the property, sometimes a lender asks for a deposit, all that kind of stuff. But how do you pay for that if you truly want to do it without your own money? Now, if you have the money, I would suggest doing it, just using your own money because you're going to get that back at the closing table. All the expenses, travel, everything incurred during the contract period that you're going to pay yourself back at the closing table on top of the acquisition fee. Because that's acquisition cost or closing cost. So the other way is if you don't have the money, you can absolutely— we've done this so many times. There's one of our coaches, Chris Caffrey. We have so many people I can name after one after another that bought a deal and raised capital before they even went under contract. They found a limited partner, found a capital partner. If you don't know how to find capital partners, reach out to us. We'd love to help you out with that. There's many ways to do that. We can talk through that. I've made other videos on that as well, but you can raise capital before. That's one way to fund that initial cost and make sure you're not doing this with any of your own money. Number 2 way, there's actually earnest money deposit lenders, people who loan money for short term on earnest money deposits, short term funding in general. Could help with that. And then obviously there's partners. You bring in other partners, other general partners to help put up those costs. So you find the deal. Number 2, let's talk about the second way to buy properties like this without using your own money. This one's a really popular one because it's probably a term you've heard of, but I call it bird dogging for equity. All right. Bird dogging for equity, meaning you go out, you find the deal, you bring it to someone who wants to either partner with you on the deal or you just give it to them and say, hey, I just found you a deal. Cut me in some equity, right? And so typically we advise if all you're doing is going to find a deal, like if you brought me a deal and all you did was find it, you're not going to contribute anything else after we close the deal. Typically it's a fee. It's not equity. However, you can also— you bring me a deal and I say, yeah, I'd love to do that deal. I could also include you as equity if you say, yeah, well, I can be boots on the ground in this area. I can serve in other roles that is needed to make sure the property is performing right. I can check in with the property manager. I can make sure that things are going well. I can give side on the market and all kinds of stuff, right? So there's ways to participate in equity. Now, at the end of the day, if you found the deal, it's your deal, right? If you found a true deal that is off market, you found the deal, you can structure it however you want. You can say it's equity or nothing, right? And the other operator that you need help with, or that's going to help you has to decide if that's worth it for them. But that's number 2 ways is bird dogging for equity. Number 3, this is a very common one. We had 2 people Brett Laser and Bridget Baker, they came into our group. We have a group of investors that are scaling their portfolio. They came in our group, they closed on a 197-unit deal within 4 months. How did they do that? Because they were capital raisers for another deal. So they stepped in and they said, this looks like a great deal, but the operator needed help raising capital. And they said, I can help. They learned how to raise capital and they got in there and partnered to bring some of their network, to bring some of their skill set to raise capital, and they got equity for All right. So if you learn how to raise capital, the 2 biggest skill sets you need in this game, number one is how to find good deals. And number 2 is how to raise and attract capital. You do those 2 things, you're going to be dangerous, you're going to be valuable, people are going to want to include you. Right? So if you want to learn how to do any of that, let me know, would love to connect with you. I'll put a link in the description. But they came in, partnered, got equity. Now, key thing to understand from SEC compliance, the Securities and Exchange Commission governs securities and raising capital. Big thing is you can't pay someone like you can't give a certain amount of equity or a fee based on how much the person's raised. Now, people try and work around this all the time. Obviously, it only matters if you get audited, but I wouldn't try and work around it. It would be bad for me to sit here and tell you to do that. Don't do that. Typically, what you need to do is say, if this person— you feel good that this person can help you raise capital, qualify them on the front end, make sure you feel strong, 100%, they're going to come in and raise capital. Because that's the other thing, guys, you can invite somebody in, And they flop. Now, we value partnership, but what you do is you just give them a percent of the deal. I have a whole sheet that breaks down exactly how to structure a capital raiser, but typically we give them anywhere from 5 to 10% of the general partner pie, and they are responsible to bring in a certain amount of capital. Also for investor relations, they also do something else in the deal, right? We, we maybe asset management, something else. They're not just capital raisers because that requires a broker-dealer license. Okay? So, that's number 3. Number 4, number 4 way of how to participate in deals like this, how to own deals, actually buy deals like this, be an owner and a partner in these deals without your own money. Number 4 is you can be boots on the ground. I've mentioned it several times but there's a lot of investors who invest remotely. If you're part of a mastermind like ours, there's a lot of people who's not necessarily want to invest in their backyard or in their state or in their area. But they want to invest in a certain state. And so if you go to that state, if you're living in that state or you want to move to that state, you can potentially participate because they need somebody with eyes on the property every once in a while. It doesn't mean you have to be here every day. It just means that you need to be able to go over there and just check on things. The last thing you want to do is have your property management company be the end-all be-all, right? And expect that they're running the property perfectly great, right? You don't want that. You want to have boots on the ground. And the way to find boots on the ground is similar to raising capital, right? You're looking for people that have experience, or maybe they have a property management company, or they understand the area very well. Maybe they understand business very well, right? Because they got to make sure it runs. And this can also be an asset manager. So you can be boots on the ground and get 5-10% equity in the deal. You can also participate as an asset manager, all that kind of stuff. There's many ways, many roles in the deal. We break down in our, in our training and other videos in detail exactly what percent each partner gets, each participant. And again, you can do all the roles by yourself, just learn everything, right? So valuable to just learn these things, learn how to find deals, learn how to underwrite, learn how to raise capital, learn how to do due diligence, learn how to run a property like this. And then number 5, the last way you can make money Without bringing your own money. It's going to be for a little bit different person. It's called a loan sponsor, a loan partner. This was a big thing a few years ago. This was a really hot item. You can actually— there's 3 things the bank requires when it comes to buying deals like this. If you want to qualify for a loan, right, this $4 million deal, $1.2 million, so $2.8 million that was financed on this deal, 3 things that you have to have. From the bank in order to get that loan. Number 1 is you have to be 10% liquid of the loan amount, meaning you have $280,000 in liquid cash sitting in the bank, all right, or somewhere. And it could be a combination of different accounts, but $280,000, right? If you don't have that, you got to go find somebody with that. And you can also split this up many different ways. Number 2 is you have to have a net worth equal to the loan amount. So your net worth needs to be $2.8 million. Number 3 is the experience. You actually have ran a property of this caliber, or you've You know, manage a property of this caliber, like you have the experience, because the bank is looking for that experience too. They don't just want to give anybody a loan just because they have money. Right. Now, if you don't qualify as a loan sponsor, or maybe you qualify for one of those things, maybe you have the experience but not the finances, or maybe you have the net worth but not the experience or the liquidity, you can still be a loan sponsor. It's just typically you need those other 2 pieces in play. So it can be 2 different people or another person that's coming in to help Bring the credibility and get the loan. All right. But that's another way to participate. A loan sponsor is what we always do. In fact, just about most of our clients, typically the deals that they're truly going after, they need a loan sponsor for. Because most of the people that I help and the people that I'm working with want to— they're at this level, maybe they're at a 50-unit level, maybe they're at a 100-unit level, but they want to go and do a 300-unit. Maybe they want to go do a 400-unit. Or maybe they're at a 1-unit and they want to go to Either way, that kind of big jump, you need other partners involved if you're going to make that big a jump. Now, some people are definitely just doing the same thing. They got a rhythm, 200 units every quarter. They don't ever need a loan sponsor, but loan sponsor, if you want to participate in someone's deal like that, I've seen people get extremely wealthy by, again, same thing. They come into a community like ours, they find a deal, they get to know the partner, right? Because if you're going to be a loan sponsor, that means you're signing your name on the loan docs. And you're guaranteeing the loan, or it's obviously going to be non-recourse for the most part. Some deals are recourse, but you're putting your name, you're signing your name. So you better know the property and you better know the operator. So you still need to learn underwriting. You need to understand the dynamics. And really a lot of times loan sponsors nowadays, because you can get in trouble if you don't know that it's a good deal and you don't have a strong operator running the deal. A lot of times loan sponsors will also want to be asset manager or have some kind of role in the active operations of the deal so they can have some control, right? Because if the deal goes south, their name is on the line, their reputation is on the line. So loan sponsors keep that typically just say anywhere from 20% to 30% of the general partnership of the operator side, they get an ownership. So that's just with the GP. So if the general partner is 70% or 50%, they would get 20% to 30% of the 50%. Okay, makes sense. So that's the 5 ways, guys. If you want to get into deals like this, you want to learn how to do it without your own money, check out the link in the description. I would love to chat with you, love to connect with you to see how we can help you. Again, if you want to do deals like this and you want to truly do it with no money out of your own pocket, because here's the other thing, here's a little bonus for you. If you're finding deals, okay, you're wanting to be a bird dog for equity, you can even do that with no money out of your own pocket. Now I know that's kind of menial and a lot of people say, what are you talking about? I mean, sometimes it can take you a couple hundred dollars a month To you know go find properties, right? You can call brokers. You can pull lists. You know we have a dealfire.ai software. Dealfire.ai is our software for finding properties like this. We pull a list of properties just like this and we call the owners. But you can do it for free. Zero dollars, right? We're talking about zero dollars. You can do it with zero dollars. You just got to go to tax records. You go use AI to find all the properties in your area, and then you can use opencorporate.com to search the who owns the LLC, you know, and who what's the phone number, and you could do it manually. It takes a lot longer. Obviously, the more capital you have to invest in deals like this, the faster you can go. But typically we help clients get into a 30 to 50 unit, maybe up to 75 units in about 4 to 6 months. You can't ever guarantee these things. I mean, the lender drags his feet, legal issues happen, there's all kinds of different things. You may have to extend the contract a little bit, maybe it's 6, 8, 9 months. But as long as you're in there finding deals, you're getting in there learning how to partner up. All right, we always say commercial real estate is a team sport. All right, so look, I hope this video helps you. Uh, we look forward to seeing you soon. God bless.