Getting Your First Multifamily Deal - Part 2

So not only finding the deal, but analyzing the deal. So these are in order intentionally so. Number one is finding the deal. Number two is analyzing the deal. These are intentionally ordered so that analyzing the deal is less important, less significant than finding the deal in the first place. Why is that? Because if you find a deal, it's absolutely a home run. Then when you go and take that deal to your investors, when you take that to your partners, people in your network, because you've been doing this first one, they're going to recognize it for what it is, right? And they're going to dive into it. Virgil was just talking to me about a deal that he's working on with a partner. Virgil's a private lender. And Virgil's going to do a deep dive, dive into the underwriting, dive into the analysis of that deal. The person who is boots on the ground, I guarantee, wasn't able to do the deep dive that Virgil is going to be able to do, right. Just because of the experience level, because of the longevity of Virgil's career. And he's going to go in and analyze that deal at a much deeper level and make sure that that deal makes sense before moving forward. So when you come in as a new investor, the value that you provide is not being the smartest underwriter. So don't forget that. Because I think a lot of new investors get analysis paralysis. Especially if you've got more of an analytical mindset. You tend to get frozen because you feel like you have to be an expert in underwriting. You have to be an expert in due diligence. You have to be an expert in seeing all of the holes. And, man, that's a rabbit hole if there ever was one. There are books on due diligence in commercial real estate. There's books on underwriting. I have a certification that I paid a lot of money for to get commercial real estate underwriting and analysis certification from the Corporate Finance Institute. And that took weeks. You know, it took hours. It takes. It takes a tremendous amount of effort to learn all of that, and we don't have that kind of time. Your goals are more important than you learning. Keep in mind what your objective is here. Your objective is to get your first deal. If you haven't gotten the deal right, that's why 80% of your time should be spent finding the deal. If you're spending 80% of your time analyzing deals, then you're off the mark. You're spending too much time on the wrong thing. You're not focused on what's actually Going to move you forward. What's going to move you forward is finding the deal. Now that being said, you should learn how to analyze a deal. You should learn how to recognize a good deal when you see one. You should learn basic underwriting. But really, what am I talking about? I'm talking about napkin analysis, right? I'm talking about knowing how to recognize a deal is really just the napkin analysis. And that's not an intense level of underwriting. That napkin analysis is sufficient for you to write a letter of intent to get the deal locked up, whether verbally or formally, and to bring that deal to investors. Just the napkin analysis. You do a napkin analysis and that deals a home run. Don't spend a week underwriting it. Start talking to people in your community. So earlier today on the wholesale call, we said you should have two lists in your network. List one should be investors, it should be buyers. List two should be sellers. And your job, especially early in your career, is to connect the two. That's what syndication is, that's what wholesaling is. That's what all of these different strategies, bird dogging, that's, that's what's going to generate revenue, is connecting investors and buyers with motivated sellers on good deals and just bringing them together. Being a syndicator, being a wholesaler, being a deal maker, that's what brokers do professionally and they make a ton of money. The successful ones make a ton of money brokering deals by just being the middleman. You as an equity partner can make a lot more money than a broker by ultimately doing a very similar thing, right? But you're holding equity in the deal and you're finding home run deals, life changing deals. So we're focused on getting that first deal. The first deal is always the hardest. We're focused on finding that. So 80% of our time is spent finding that deal. We're learning how to analyze deals, okay? And so we're learning the basics of underwriting, the basics of analyzing. You do not need to be an expert on underwriting and analyzing in order to make a lot of money in this industry. Because if you find a deal that makes sense on the napkin analysis and makes sense with basic underwriting, you're like, wow, this is a home run. This is mind blowing. This is a fantastic deal. That's enough information to go to your community, to go to your network, which is going to be made up of more experienced investors than you, people on your team who have told you what their buy box is, they've told you what they're looking for and you're just going out. They've said, this is the bullseye and you're going out into the world and aiming for it, right? That's the value that you provide. So earlier I said the value that you provide as a new investor is not to be an expert in analyzing underwriting. The value that you provide as a new investor is boots on the ground, deal location. You find a deal, off market, deal pocket listing, direct to seller is vastly preferred. You now have a monopoly, right? You have an exclusive right to a transaction that everybody will pay for. I'm looking for deals. A lot of people in our community are looking for deals. We have 13,000 investors on our investor list that are looking for deals. Everybody's looking for deals. It's an obsession. And so to move us forward to meet our goals, my objective this year is to buy between 30 and 50 million dollars in real estate. I would love to, to have somebody send me a deal within, you know, southeast United States that's within my buy box. That would be fantastic. And like I said earlier, I would happily pay a transaction fee. Believe me when I say I'm not the only one. There's a lot of private equity firms, there's a lot of private investors, there's a lot of people out there that are looking for deals constantly. But as you scale, as you grow, time becomes your biggest constraint, lead generation becomes your biggest constraint. That's where I am right now. So I'm hungry for deals, but I just struggle to find the time to go out and identify those deals, to talk to sellers, and to move the process forward so you can provide tremendous value to people like me by doing that. So don't be confused about the value that you bring to this situation. I think that we have a tendency to think, well, I'm new, I'm not as experienced, you know, I don't have a big portfolio. I don't have a lot of assets under management or whatever. And so you feel like, oh, I don't have a ton of value. But everybody universally agrees that the most valuable asset that anybody has is time, right? You have time. You're bringing time to the table. That's number one. That's why you get paid. That's why your boots on the ground dog. That's why you're the wholesaler. That's why you're making hundreds of thousands of dollars by identifying a deal and then pulling people together to transact that deal. They're all grateful for the opportunity. So it's not like you're asking for a favor here. You're providing a tremendous service. And then third is funding. So to find my first deal, I need to be doing outreach to sellers. I need to be networking with brokers, with lenders, with other investors. I need to learn the basics of analyzing the deal, primarily the napkin analysis, primarily, you know, understanding rents in the area, et cetera. And then third is funding. I need to be prepared to fund that deal. Where are those funds coming from? Who's going to put up the money? Well, we've often said that the hardest part is finding the deal. That's why it's number one on this list. Finding a deal is the hardest part. You find a home run deal and the money comes to you. However, there are several caveats that you want to think about. Number one is, is really a deal. You find a mediocre deal, public listing, you know that any stabilized property at a 6 cap, I could go to any market in the United States and find that, you know, all of these more experienced investors you're trying to pull in to go in on your deal, they could do that themselves. They don't need you for that. What they do need you for is you find an off market deal, you find a real opportunity, you recognize something that's truly exceptional. Now you're providing value. Now you're providing a tremendous service to the people in your community. But the other part of that is you need to have a community. Now you guys, I already know, take this seriously because you're part of our community here at REI Accelerator. And so you see the value in networking, you see the value in community. But when you join our network, it's not like you check that box. Okay, I'm done networking now I'm going to go find a deal. Networking is a lifestyle. It's something that you continually do over the course of your entire life, surrounding yourself by successful people. As you become more successful, that becomes a greater, greater challenge, more and more intentionality. So on day one, if you're going out and finding deals, looking for deals, make sure that you're not neglecting networking with investors, you're not neglecting networking with private lenders, you're not neglecting networking with, you know, brokers in the area, etc. So that once you have a deal, you've got your list of buyers, you've got your list of investors, you got your, your list of private lenders, you've got your list of limited partners. And at that point you should know what their buy box is, you should know what Their objectives are. And you should be able to go out and identify a deal and say, oh, I know that this deal would work for so and so, right? I sat down and for those of you who were on the 555 challenge, you remember me talking about the importance of the discovery call being the most important element of raising capital. And for those of you who, who weren't there, the discovery call is me coming to an investor, a prospective investor, whether it's an experienced real estate investor, whether it's a limited partner, whether it's somebody in my community. I'm going to sit down and I'm going to draw them out on what's important to them, what are their goals, what are their objectives, what's their why. And I'm going to spend the majority of that initial conversation, I call it a discovery call. Could be coffee, could be zoom, whatever it is, I'm going to spend the majority of that conversation asking them about them. So that when I do find a deal that makes sense, I know who it makes sense for. And I got to tell you, it builds a tremendous amount of confidence when you identify an investor who's capable of being a general partner, who's capable of being a private lender, who's capable of collaborating with you on a deal, and they tell you their buy box and you have it in detail. And now you go find that deal that provides a tremendous amount of confidence. Because, you know, if I find a deal, I'm going to make a lot of money and it's not charity. If I find a deal, I'm going to make a lot of money because I'm going to bring it to this investor and I'm going to serve them by connecting them to what they're looking for. Right? And so I would encourage you when you're thinking about funding, and you'll notice all of these build on each other, but when you're thinking about funding, think about who is it that's going to invest in your deal? Who is it that's going to partner with you on it? As I said, we have a network of investors. That's what we do. People bring us deals, we connect them to investors. We're happy to do that, but it's important to us to teach you how to fish rather than just give you a fish, right? And so we want to teach you how to do this long term. So for those of you who are with us for a year, for those of you who are with us for 18 months, whatever it is, we want you to be equipped to continue to be able to scale, continue to be able to keep that snowball rolling, and continue to be able to do deals through your investor network.