A November 2022 YouTube presentation by Jonathan Cronin offering practical strategies for buying apartments during a down market. Cronin emphasizes buying for cash flow (not speculation), using creative/seller financing to structure deals sellers will accept, and raising private money (cheaper, flexible capital) as the three key tactics to win when traditional bank financing is expensive or unavailable.
Hey, good morning. Today we are talking about buying real estate and apartments in the current economy, in the, in a down market. And my name is Jonathan. My partner and I have our investors in real estate and in businesses and several other things. I've been able to replace my income through real estate and it's just been amazing. I'm also in ministry and believe the church should also be active in this realm. My partner has several hundred units and buys apartments and we are looking at 30 plus unit apartment buildings. And we love to tackle value add properties that are preferably in nicer areas. But currently what's happening in the market is interest rates going way up, of course, means buyers can't make sense of the deal. And you know, the people who have the ability to wait longer in the market and have the ability to, you know, put things in creative financing are winning. Why? Because they can pay more. So people who can either wait longer for their money to be returned or without cash flow, people who have cheaper money, maybe they're raising private money or people who can lock in deals based on creative financing. And we're going to talk about all three of those things in just a second. But that's what you're seeing right now. You're seeing prices, people buying real estate for high prices. And it's, and it's for people who are just trying to do traditional financing and traditional deals. It just doesn't make sense financially to be able to do it. It doesn't make sense to be able to do the deal in the traditional route with the interest rates going sky high. That's the majority across the board. But of course, in what I love, we run a mastermind, helping other people buy apartments and use syndications, use other people's money. And the thing I love about it is we truly believe that there's endless amounts of deals out there and there really are. There's endless amounts of deals and, but, but in the end you have to know how to lock them in. If you want to have a high rate move faster, you need to be able to expand your knowledge into how to lock in deals even when it doesn't make sense for you and your math because somebody else will figure out how to put it in, whether it's seller carry. And we can just go ahead and talk about that. You know, stellar carry is when you know the seller is taking back some of the money and loaning it out to you, basically allowing you to make payments instead of everything up front. And you can lock that in and sometimes they'll Carry the whole thing. I've seen 0% interest in seller carry for the whole thing, but it may be over 50 years or, you know, there's some crazy stories out there where you can literally buy a piece of property and we've done it with no money out of pocket up front. And, you know, there's so many different ways to structure that deal and ways to communicate it to the buyer because a lot of times they think in their mind, I just want the cash. Not understanding there's so much more benefits and there's so many reasons you would want to do seller financing in terms of tax benefits, you know, in terms of if you're going to just go. A lot of times I say was just with an apartment owner the other day, and I said, well, what are you going to do with the money? I don't know, I haven't thought about that. You know, he's saying, well, I'm gonna may go invest it somewhere. I said, well, why don't you invest it in your own property and I'll just pay you interest. And you know, so there's all kind of ways to do it. But another point to understand too, before you even jump into that, is what you want to think about when buying these big properties is you're not. You don't want to buy for speculation based off speculation alone. You want to buy for cash flow. You know, in a market like this where things could drop instantly and you know the value of properties, all of a sudden you've got more financing than you, than you do the value, and it's based off speculation. You've got to already be in it for cash flow. See, I'm not worried about the value of the property going way down because I'm already in it for 70% of the value. I jumped in at 70% of the value. And I still have cash flow, which is the lifeblood of property. So I hope that makes sense. But just remember, I buy for cash flow. So it's already cash flowing before we improve the property. And then you improve the property and it just goes up that much more. And even if the market tanks within that process, then all of a sudden you're still at least breaking even or you're still able to stay afloat. And that's why I believe wholeheartedly in apartments is because, you know, there's so much room, wiggle room to be able to, to be able to carry that, that, that, that increased risk. And then the other thing is, is, you know, with creative financing, you are essentially Saying I can give you your price. Like to the seller as a buyer, I'm literally saying to the seller, like, I will give you your price even if it doesn't make sense to me. I'll give you your price if you can come onto my terms. And so those terms again could be like, I need, you know, 2% financing, 2% interest, and I need you to carry it for 30 years, you know, or you know, maybe it's a million dollar deal and you, and you say, carry, you know, 700,000 and I'll pay you 2% interest for the next 30 years. And you know, I'll give you 200 right now and then you go and raise that 200. See, that will make sense for you big time. And then in raising the money, the people who know how to raise money right now are going to dominate in the market. If you know how to raise private money and can lock people into a lower rate, then, then you, you know, 3, 5%, then you will be able to beat the market. So, you know, those are the three takeaways. I can't, sorry, I couldn't go longer here and go more into detail. But you know, not buying for cash flow or not buying for speculation, buying for cash flow. Learning how to do seller financing and creative financing. Man, I was just told the other day of a $30 million deal straight, no money out of pocket. 30, you know, 30 year, I think it was a 3% financing loan. Huge, huge deals are being done under creative and seller financing. And then the last thing is raising private money. The banks are going to get you an interest. But how do you combat that? You go to private lenders who still would loan out for, you know, 5%, 6%. So I hope that helps. If you are somebody who wants to dive more into apartments, learn how to jump in the game and buy apartments and get around people who are finding deals and learning to navigate the times and navigate the seasons and ultimately, you know, raise money to lock these deals in and cash flow these deals. Let us know. We'd love to talk with you. If you just want to reach out to us and you have a deal that you're trying to analyze, our team would love to help you out. Our team would love to help analyze those deals for you. Hope you have a great day.
