$550M INVESTOR EXPLAINS: 5 Costly Mistakes To Avoid When Buying Your First Multifamily Property

So we just locked up a $13.8 million apartment building for $7.2 million. We got it at a $6.6 million discount. The seller is taking a major loss and it's because he missed something extremely, extremely important. So today I'm going to break down 5 critical pieces that has allowed us to not only create deals just like this that make us millions of dollars, but never lose money. What's Warren Buffett's number one rule, right? Never lose money. My name is Jonathan Cronin. Together with my partners, we've built over $550 million in real estate. We help other investors scale. So let's jump in and break down the exact steps I'm taking right now to build a multibillion-dollar portfolio in the next several years. Let's go. All right. So 5 keys, guys. Number 1 is don't be number 1 when it comes to negotiations, when it comes to finding deals. Right. First off, off-market deals are going to be the best way to go because in that situation, you're in an auction of one. Right? You don't have any investors you're fighting, any other bidders, any other buyers, but there's actually safety in having other buyers. But the key is you don't need to get discouraged if somebody else beats you out of a deal. In fact, we strive to not be the highest bidder. All right? Most investors are massaging the numbers and trying to get up there and be the highest bidder. And then what happens? They go under contract and either after looking at financing, after going through due diligence, all that kind of stuff, they fall out of contract or the investors don't want to invest with them because it's not a great deal at that number. Or even worse, they close on the deal and they just can't get the cash flow. They can't get the margins they need to make sense of the deal, right? And then what happens if it comes out of contract? They come right back to who's number 2, right? Who is the second one in the runnings? In fact, we just had an 88-unit deal. We bought it for $4 million. We now have it under contract for $7 million, 3 years later., right? That was 2023. We got it under contract for $7 million. And for those who understand the market cycles, that means we did really well, right? In 2023, still able to make a deal, uh, create $3 million in equity in 3 years was pretty solid. But that's exactly what happened in that deal. We put an offer in in December, went under contract with somebody else. Somebody else beat us out in January. That falls out of contract and guess who they're calling? They called us, right? So that is actually a win. If you're not number one, right, you want to be that and you wanna play the volume game. We wanna generate off-market leads, we wanna generate more deals, we wanna build those relationships. We just bought a deal, $7.2 million. We have under contract a 90-unit deal in Atlanta, Georgia. The seller's all in at $13.8, so he's taking a $6.6 million loss on that deal. And other bidders came in on that deal at $9, $10 million. We got it for $7.2 because relationships are what's key. That's where the real money's made. All right. So step number 2, prioritize the market. The market is key, guys. Prioritize the market. So it's better to have a good deal in a great market rather than a great deal in a bad market. You need to study the market. You need to know what's going on in that market. Because a lot of things can happen. If you have a deal that's in a, in a bad market, what we are looking for is C and B properties. So what does that mean? Class C and B properties and ideally C+ properties. Ideally. There's still a lot of money to be made in just C, standard C properties. But what does that mean? D properties are the ones that you should never do, right? Those are what we call war zones, right? That's where you, you don't need to be pulling up in a D property or D area. Without a gun, right? You need to make sure that you're not in D properties. And that because simply, you know, that is never going to appreciate. Those areas are going to— you're going to struggle to get property management companies to actually work there and do a good job. The people that you're going to be able to hire in a property management company at a D area or even a C- area are going to not really perform at the level you need them to perform. All right. And so that's key. You're going to struggle with occupancy a lot of times. And when I say occupancy, here's the other bonus point for you. Don't just look at the occupancy, look at the economic occupancy, right? Because the property management company could be saying, "Oh, we got 90% occupied." And there may be 90% occupied, but we got 60% economic occupancy, right? Meaning 60% are actually paying. So that's the other thing you got to watch out for. And that's what happens in a lot of these properties. Now, It'd be better if it was only 60% occupied because now we got to evict all these people, right? And we got to get all these people out and change it over. Listen, we're talking about this from experience. All right. We've had properties where it was bad management, third-party management. If that property management company— and we'll talk about management in a second— if they don't have properties in that area, don't hire them. If they don't have a reputation in that market and are doing well in other properties in that market, don't hire them. But the market is king, guys. So it's 50% of the equation of whether your deal is going to do well. I mean, we bought a 96-unit deal in Macon, Georgia. I'm not saying Macon, Georgia is a bad market. This particular area wasn't too great. It's probably a C-minus area. So we struggled to keep occupancy up. We had third-party management in there, horror stories with that. We ended up having to let that management company go and we got in there and now the occupancy is over 90%. But when the interest rates spike, right, the markets get more scrutinized. Investors don't want to be in those types of markets, right? And so all of a sudden our property values go down. There's all kinds of issues when we can't just sell it whenever we want to, right? Because the markets are extremely scrutinized in a high interest rate environment. So let's move on. Number 3, investors invest with people, not property. So people over properties. This may sound crazy to some of you, but let me explain this. The investor is investing in you, not the property. Now the property's important, but at the end of the day, they're trusting you are going to execute on that plan. The property means nothing If the operator can't execute, and I would advise any passive capital partners, I would advise you to do that same thing, right? Focus on the operator. Can they execute? Do they have the track record? Because are you the type of person that is going to take 2, 3 jobs if you need to before you lose investor capital, right? You gotta be that type of person. They are investing in you, and at the end of the day, they're borrowing your faith in the property. Now, they should do their own due diligence. They should do their own scrutinizing of the deal and know that it's a good deal, know that it's a good market, but But at the end of the day, you're the one that has to sell them and you're the one that they're looking to and they're actually putting their trust into. Okay, so how do we raise capital, especially in today's market? All right, order of importance is going to be trust. Okay, trust is number one. Trust is number one. How do we build trust? And what does that look like? How do we provide trust? Right, we get on there and we actually listen to what they have to say. We listen and we dig into what their goals are. What their experience is, and we actively listen to them. The other way to provide trust is we add value to their life, right? So when we're sending out emails, we're providing value over asking for something, right? We provide value as much as we can, and then we, and then we make an ask, right? So if you're sending out emails, you want to send out 5, 10 emails of value, like educate them on the market, educate them on the deals, educate them on things that are happening, things that will improve their life, right? Trust is built because one, you have credibility, but that's a whole nother strategy I'll talk about in a second. But two, because they actually see you as somebody that would steward their money well. So how you show up, how you communicate, and then the emails, the ads, the, the posts that you're making— are you seeking to serve more than you're seeking to get? Right? So when we are building trust, we need to be pumping out value. We need to be adding educational content. We need to be putting out statistics that make them learn something. Right? We need to be everywhere. We need to be on websites. We need to be on, on Google, on all the different platforms. We need to be putting on social media. We need other people sharing about what you're doing. We need to add value. Okay, so that's number 1 is trust. All right. The next one is track record. Okay. So if you don't have a track record, if you're sitting there saying, I don't have much of a track record. Well, first off, if you do have a track record, you need to be pumping that out. You need to be sharing case studies. You need to be getting your investors to make stories, to make— answer a few questions on video and share about their experience with you. You need to be pumping out stuff that says track record, right? You need to be having photos, videos of your property. You need to go all in on track record. People want to know What have you done, right? We take pride in we've never lost an investor dollar. We take pride in that we've been able to have an average annualized return for our investors of 20%. You know, we share all these stats and we show properties. We have videos and aerial views. We go all out on marketing and it's the number one driver, right? But if you don't have a track record, what do you do? Well, first off, I just wanna encourage you, people have raised millions of dollars with no track record, no experience. All right, we, in fact, we just had a guy raise $2 million, actually $2.25 million in just a few weeks because he partnered with someone who did have a track record. That would allow him to build trust with the investors that he is inviting into the opportunity. Now he goes on to do deals by himself. He's not even using partnership anymore, or at least not to the degree he was. Now he's raising $3 million in just less than a week, right? Now he's raising all kinds of capital because he leveraged a sponsor, he leveraged a partner to begin with, and that allowed him to catapult and build trust in the marketplace. All right. Now let's talk about on-call processes. So when we are raising capital, this is so critical for if you are going to grow your portfolio and you're going to do it smartly, if you're going to skip the mistakes that most people make in raising capital, All right. You know, you've got to focus on not buying apartments unless you have these strategies in place. So now let's talk about on-call processes. When we're actually in a one-on-one with an investor, what do we say? What are the things we need to do to secure the capital partner? First off, what we do is we take them through what I call a discovery. All right. So on-call processes, let's put it over here. First is discovery. What does that mean? Most investors are going to skip over this, and I guarantee you they're not going to raise much capital. I guarantee you all the big players in the game are doing this thing very well. All right. As soon as they connect with an investor, whether you ran ads, whether you made posts, whether you got— however you're attracting capital partners, they opt into your funnel. You got somebody on your team, or if it's you, you're calling them immediately as soon as they opt in. The first thing you need to do, discovery. What does that mean? We need to find out his goal. We need to find out why that goal. We need to find out what their past experience is in investing in opportunities like this. What did they like about their past opportunities and the investments that they've made? What do they not like about those experiences? And basically what you're doing is you're finding out how can we fill the gap for this person? Right? If they've got this experience in investing in something else, why don't they do that again? Why are they coming to us? Why are they interested in what we're doing? What can we do to help them bridge the gap from where they are to where they want to be? But if you go in and just start pitching your deal and skip discovery, I promise you, you're going to miss so many things. Plus, not every investor is fit for every deal. And that's something that I need to say for people in the back. You know, for the people who are not listening, right? Not every investor is fit for every deal. So you got to remember that because you don't want somebody that's going to be in there and they're going to be reaching out to you all the time. And, you know, you want somebody who understands the risk, understands the opportunity, and understands the game plan, right? If they're used to Wall Street kind of returns, right, then probably not going to like this deal and then you're going to be wasting your breath, right? Tell them, hey, I appreciate you sharing that, that you're kind of returns are this and Wall Street and all this kind of stuff. Write it down, mark them in your CRM, and then hit them up whenever you have a deal like that. Or if you have a non-accredited investor, right? Or if you have somebody that's got their last $50K and, you know, they're going to be tight on it, they may not be a good fit for you because guess what? They're going to be hitting you up every day and you got to be focused on running the property. You got to be focused on managing that property for all the other investors. You can't have somebody on the team or on the limited partner side that's making your life harder, where you can't focus on that. That's really important. We need to know what their goals are, what their pain is, what their challenges are, what their past experience is. You know, how much are you— I typically start those calls with, "How much are you looking to invest?" And it's with us or with anybody, right? It's not just with us. How much are you looking to invest? And then what's the thing that you're looking for in an opportunity? What's most important to you about deals and investments and things that you're looking to get into? Okay, so that's discovery. The next thing is pitch. I call this the pitch. Now we know exactly what they want. And all we're gonna do is share the details of the deal. So we're gonna start with the story. Story of the deal. How'd you find it? Right? How did this come about? What's so great about this? Just like I told you, we got a 90-unit opportunity right now that's under contract. We're about to close the investment opportunity. We've got it almost fully subscribed. But we start— I would start on that deal with, You know, this is 90 units. We're buying it for $6.6 million less than the seller has in it. He has $13.8 million in it. We're buying it at $7.2 million. Other bidders came in at $9, $10 million, but we had a relationship. We had somebody that was on our team and we were able to really build that relationship to get the deal and win the deal. This is in Atlanta, Georgia, where, you know, the— and go through the stats of the market. Why is the busiest airport in the world, right? All these different things, right? Go into why this deal, what's the story behind this deal? The seller, you know, got in trouble. He ended up having some other issues in other properties and now he's got to sell this one fast. Right. The property is great. It's already fully renovated and we're able to get it almost like it's half occupied. So and then you're going to share the numbers, right? You're going to share the metrics. So the story of the deal and then the metrics. Story of the deal and then the metrics. And then you want to show— and this is just your annualized returns, your IRR. How much equity? What's the equity split, right? Is it 70/30 in favor of the LPs? Is it 50/50? What does it look like? And what does all that equal? What's the preferred returns on the deal? We're giving 8%, 9%. What is the preferred returns? And when will you get that? What does all that look like, right? Share the metrics. And then lastly, you're gonna talk about what's most important, downside risk mitigation. What happens if rates increase another 50%? In the market. What then? What are you going to do then? So we need to talk about downside protection. People want to know, write this down, people want return of capital over return on capital. All right? Return, capital preservation would be more important than the opportunity to make a bunch of money. Okay? So people want to know that their capital is at least protected, right? They're investing with you because they believe that you have the ability to create more returns than they could just in the bank or the S&P 500. But at the end of the day, what's most important? What is Warren Buffett's number one rule? Don't lose money, right? And that's what most people need to hear. So you need to express that. You need to talk about that. And the pitch, this is something I forgot, the pitch, one of the most important things about this is it's a mirror of discovery. If you think this person's a good investor, If you think this person is a good fit for your investment, the pitch, the story, the metric, the downside, you're almost customizing this to make sure that it fits the narrative that they're looking for. If they've had a bad experience in another opportunity where the value-add plan didn't pan out, right? Well, here I'm gonna be talking about the strategy we have and how the value-add plan, it has multiple layers on it. I'm going to be addressing the thing that they said in discovery about how the value-add plan didn't work and why it didn't work. I'm going to be digging into that, okay? What exactly did they think was going to happen? Okay, rents were going to increase in the market and all this kind of stuff. I'm going to come down here when I'm pitching them a story. I'm going to say, "Look, most investors, they're waiting on market rates, market rents to increase. They're thinking, 'Oh man, rents are going to increase,' and they're banking their whole pro forma on interest rates staying the same." and market rents increasing. Guess what happened? They stayed the same. Rents were flat at best, right, over the past couple of years. And the reason we're different is because we are focused on forced appreciation, right? There's a property right down the street that has market rents or their rents are $200 above ours. We're going to be conservative and grow it $100 more. But it's not based on the market. It's based on forced appreciation. It's based on the fact that right down the street, there's one that's exactly like it. But again, if I'm saying the same thing that someone else told them and it didn't pan out, then you're just sounding like the other guy, right? So this is very important that the pitch is just a mirror of discovery. This may sound long-winded, but I'm telling you guys, you focus on this. All the big guys are doing this. And the last thing that would be important is going to be sharing exclusivity, scarcity, and opportunity, right? So we want to add that. When is the deal going to close? When is the opportunity going to run out? When are you closing the deal? How many investors do you need? If I need $2 million, really, that's just 10 investors at $200,000. If I've already got 1 or 2, I only need 6 to 7 more people, 6 to 8 more people, right? So that shows scarcity, right? You can't just come in whenever you want or just think that it's going to be open forever. And I haven't even hit my email list yet, you know, on the deal, right? So you're showing exclusivity, scarcity. What are the things that's going to add legitimate? Like, we don't want to be fake about that, right? We want to be real. If we're going to add exclusivity and scarcity, it has to be real. But that's important. That's a big driver. Exclusivity and scarcity leads me to number 4. Have multiple exit strategies. Have multiple exit strategies. What does that mean? Well, if your plan is to buy and hold, you want to hold long term. That's one way to go. But you need to know, okay, what happens if things don't work out? What we can refinance, we can get back investor capital through a refinance. But that's not enough. We need to know, can we sell the property? Like I said, we just had a property, 90 units, had multiple bidders, some paying and offering $9 and $10 million to purchase the deal that we bought for $7.2 million. That tells me that there's massive safety and hedging right there because I can turn around tomorrow and sell the property for a profit if I needed to. If, you know, worst case scenario, I need to sell the property fast, I've already got bidders. I've already got people that are competing for this deal and they were wanting to pay more. So that's number 4. Exit strategies, multiple exit strategies. You want to communicate that and you want to have that down before you lock up a deal. Okay, before you get that, get into the contract, you want to have what are the multiple exit strategies that I can have. Okay, that's going to allow you to hedge in a volatile market. Arguably, most importantly, number 5, management. Okay, there is so much here. I don't have time to unpack everything about management, guys, but management will make or break you. This one thing— understand, management is your superpower. This one thing has the ability to make you millions of dollars or cause you to break even or even lose money. This one thing— so many investors think, "Oh, let me just go all in on finding good deals, raising capital, and getting to the closing table," and then it's like, okay, But then they get into trouble, right? Management— if you learn how to systemize management, you learn how to get this management in place to where you have proper systems, you're checking in, you're able to truly get this right. There are people, I promise you, and I don't want to name names, but we know a lot of people that we're connected with that have 10x, 100x where everybody else can go because they have such refined management operations. This is the difference between someone who goes 10 times faster than the average investor. Because look, with management, what you can do is if you can install systems to create the value quicker, right, you can get to the refinance or get to the exit twice as fast, or however long. Just say you have a goal of 10 years, you want to own 1,000 doors or 10,000 doors or whatever that is. If you understand how to add value, how to get the systems down, I'll give you an example. You get your unit turns to 3 days, 3, 4 days, right? In other words, you have a tenant leaving, 3 to 4 days later you have another tenant in there, right? That may sound crazy to a lot of people, but there are systems where you can do it. Basically, you go in there and you put, you know, you find out the tenant's gonna leave, you immediately list the unit, you find tenants for that unit, you get it lined up for that person to move in day 4, You go ahead and do a pre-inspection a few days before the unit is going to be clear. You know, the tenant's going to be out. You do a pre-inspection and you have the reno team lined up, ready to get in there as soon as the tenant goes out at 10:00 AM in the morning. Right. And then they're done within day 2. And then by day 3 or 4, you have a tenant in there. All right. So little things like that. If you get good, you have your team that understands these systems, right? That means that we can turn the units faster. We can get higher occupied., and you can get way more opportunity. So now you can go to the next deal and the next deal. I know people who has not— who's never raised capital before, but they have 10,000 units, 15,000 units, right? And they've done it in probably 10, 15 years because they understand how to run a property well. So, and then obviously if you improve the property aggressively and you get in there and roll over cash flow and just really go hard at that and get really good at that, you're going to be able to see your investors walk away with a much higher IRR, right, and return on their investment. Whereas most syndicators, maybe they get 18% in 3 to 5 years. If you can get this property where it needs to be and refinance in 15 months, you just doubled their return because they did it in 15 months versus 3 years. So this is key, guys. Do not skip out on this. This can be the difference between someone losing a lot of money. We had property management companies steal from us, and we've had all kinds of different things happen, and we understand the importance of property management. Another thing, when you're looking for third-party property management companies, now there's argument to say don't ever use a third-party management company, and if you can do it, there's a strategic play there I don't have time to go into now as far as when to hire third party, when to do it yourself, you know, how to hire your own property management team. But when you're looking for third party, make sure that they have a reputation in the market that you're buying in, in the market of that property. Make sure they have a reputation managing similar properties. All right. So sometimes we try and get a property management company to come into a different neck of the woods, right? So a place that they've never been. We don't know how they're going to perform, or at the very least, make sure that they're managing properties in a similar type of market and they've got a good reputation. So that's going to be very key, guys. We've learned this the hard way. I hope this helps you. So let me know your thoughts. So that's the process. All right. Step number 1, don't be number 1. All right. Don't be the highest bidder. Don't get discouraged if you— your offer gets outbid. Or even better yet, learn off-market deal sourcing systems. Step number 2 is prioritize the market that will massively hedge your downside protection. And step number 3 is investors invest with people, not properties. All right. Step number 4, always have multiple exit strategies. Step number 5, management can either skyrocket everything in your portfolio or be a major obstacle for your portfolio. And none of these are complicated, but every single one of them matters. Guys, I've been doing this for years. All right. Our partners collectively have over $550 million in real estate., and I still follow every single one, or I try to, every single one of these deals or every single one of these points on every deal, including this 90-unit building I just— we just locked up. So this is the process that protects you. That's what it is for. All right. If you're thinking of buying your first multifamily deal, please follow this process. For those of you who want to skip the guesswork and get systems for finding, funding, and closing properties this year in 2026, if you want to get our systems for finding off-market deals, be a part of an exclusive group That's key to helping you build the relationships that attract the best deals and be able to create a capital raising system that you can actually scale and a step-by-step process to get to the closing table. That's exactly what we do inside REI Accelerator. We are a faith-based group of investors and we've already helped over 1,000 investors at this point. So if you want to see how that works, click the link below. We're going to show you the exact next step so you can close deals just like this. See you guys!