Jonathan Cronin explains three primary ways to fund earnest money for large multifamily apartment deals: (1) build a capital page/waitlist and secure committed investors early; (2) focus on deal-sourcing and use network/masterminds to find partners who can provide EMD; and (3) use short-term capital provided by attorney-affiliated funds that can front earnest money during due diligence (repayable before the due diligence deadline). The video includes an excerpt of a mastermind meeting where attorneys describe a product that supplies EMD for deals (examples: $50k for a $5M deal, EMD typically ~1% of purchase price, funds held for 45–60 days, and a five-day deadline to post EMD after LOI/PSA).
Submit offers, submit offers, submit offers. Listen, we coach our Mastermind members all the time. If you want to scale in apartments, if you want to grab large apartment deals and scale in multifamily using syndications or whatever creative financing, you've got to get out there and start submitting offers. But what happens whenever you actually have a seller lock, accept an offer, then you've got to lock in the contract. And they want what's called earnest money, right, to just lock you in at generally about 1% or it could be more of the purchase price. And so today I want to talk to you about how you fund that. Where does those funds come from? If you say don't have the money or you don't want to use your money and you want to use other people's money. And even at that stage, okay, so I want to talk to you about that really quickly and I'm going to give you three key ways to get it funded. And, and in a second, I'm going to literally drop you in the middle of a meeting we just had with our SEC attorneys who came and shared with the Mastermind. And there, there are preferred attorneys as far as creating the documents for, and the contracts for limited partners and just the whole syndication. But they also have a fund that is for earnest money and for seller carry and things like that. So I'm going to drop you in the middle of that in just a second. But let me just hit point number one. The first way that you're going to fund your earnest money, and that's just simply going to be creating a network earlier on in the process. So instead of, if you're wanting to use other people's money for the earnest money instead of the traditional route in terms of syndications of raising the money during the, during the contract phase and actually getting the money from investors there, you're going to need to really focus in on getting investors on board from day one. Okay, so, so, so this is just one way to do it. And again, it's not necessarily the way we advise or it's not the way it's not our bread and butter. But here's one way you can do it. And it's simply creating a capital page to just get out there and let people know what you're doing and just collect emails, collect phone numbers of people who want to be a part of deals like that in terms of your limited partners, people that want to invest with you, and I can even show you what ours looks like, and you can just kind of copy that if you want to do that? So look, I'll share my screen so you can kind of see. So early on in the process you may want to create something like this. Okay, here's. You can go to the kingscapitalgroup.com invest and just copy this page. Okay. It's super simple, it didn't take long at all. But it just has a button that says join the wait list. Okay. So you can go to this, just create. What's your mission? Bring high quality institutional grade assets to the market. Our markets, you know, where are we investing at? Investment opportunities coming soon. So join the wait list here. Our benefits, I mean it's just super simple stuff a little bit about us. So go to the kingscapital group.com invest and you can literally just copy that, just go to click Funnels or something like that. Create a page and then just shoot it to your current contact list, shoot it to your email list, shoot it to just anybody you know and say hey, if you know anybody interested in this, we'd love to partner up. We'd love to let you, let you know when we get our first deal or get close to it. Okay? So that's the first way you can do this thing, right? It's just going to simply be create a capital pay, start sending it out day one, you know, while you're looking for deals. But a more preferred way for us is if you literally don't want to use your own money would be to give all your focus to finding the deal, all your focus to make to setting up streams of off market deal flow and then surround yourself in the meantime with, with people who know what they're doing, who have the ability to give you money and surround yourself with people in terms of masterminds, in terms of groups like what we have, you know, there's plenty out there, networking groups. I would join those. Okay. Like day one. Join those. All right. If you are serious about getting into apartments, into commercial real estate and, and replacing your income or 10xing your income even in the next 12 months, I promise you, you will benefit from, you will not regret joining groups like masterminds and networking events, okay? Because there's people out there that have money. I'm telling you, if you find a good deal, you'll find the money to do it. And in the, in this, in the next video, I'm thinking we're probably going to do a video on your actual due diligence phase. So walking through right after this step, but I'm gonna go ahead and share right now. A video. I'm gonna drop you in the middle of a meeting. Just where they talk very quickly about earnest money. Okay, I'm in. Just a second. I'm gonna put you in that. But what it is, is our attorneys, our SEC attorneys created a capital group, and they're going to explain what happens when you want to use debt or use what they have. It's basically a loan that would allow you to fund your earnest money with no money out of pocket. And you don't even need to connect with other investors, just use them. Okay, so let's go.
The other one being, and Jonathan mentioned emd. So it's, it's really cool when you get something under loi, but then there comes the OS moment where you're like, oh, no, I need, you know, it's a $5 million deal. I need 50k or something down, right? Because brokers want some skin in the game to show that you actually can close the deal. So you need to come up with that 50,000 or 100,000 or whatever you guys agree to in the LOI. And we can, we can help that. So if you need that $50,000, but you don't have it yet, you expect to get it, but you can't get it in the five days that you need to. Once the PSA signed, we come in there, and during the due diligence period of that deal, we'll put the money in. So for some points, we have it sitting there for the 45 or 60 days, whatever it might be, if, if, if you replace our money. So you pay us money to disperse, we disperse that money. We need the second half and our capital back more than 24 hours advance of that due diligence deadline. And if we don't, then we have to cancel the contract so we can keep our investor money safe. So that's the other way of doing it. If that's the other aspect of the, of the psychic capital is you don't have the EMD handy, you hope to be able to replace our capital with an investor's money or your own money, maybe, you know, some period of time later. But that's the other type of deal that we'd be happy to help.
And then go ahead.
Can I clarify real quick? So you, you're going to get that back prior to due diligence expiring then, right?
Yeah. So one of the important parts of EMD is that we sign off on the due diligence provision of the contract. We want to use our terms, which is basically, we can Cancel this contract for any reason or no reason at all. If it has magic language in it, there's no dispute. All we have to do is be within that period of time. And that's why we, you know, we can't stress enough people that, oh, I'll get it tomorrow, I'll get the next day. It doesn't matter. We can't. We got to cancel the contract. Now, if you want to reopen it with that seller, you know, with the capital, that's one thing. But we, we would cancel it if we don't get it back because we can't risk you. Actually not.
Yeah.
So kneecaps are not that good a collateral.
That's right.
Especially when you look like me and Adam. So.
Very sensitive.
Kneecaps.
Yeah. But it does obviously that period, you know, the five day deadline of getting that emd and before the seller starts hounding you, that that period from day one to day due diligence ending is a period where it's helpful to have that. Have that EMD money. And then the last one is, the third one is just on double closes for wholesaling deals. If, you know, sometimes different wholesalers have different practices. But.
I hope that was helpful for you and I'd love to help you out in any way we can. That was our mastermind group. We get together weekly and we just talk through stuff like that. And he goes on to talk about seller carry, talk about all different types of things and wholesaling and all that kind of stuff. If you are interested in apartments, if you're, if you want to scale quickly and smartly in apartments and using other people's money, using investors, even if you have money you want to invest, I would definitely suggest using other people in your deals to, to scale quickly and also have the experience to know how to skip the mistakes other people have made. Right. If that's you. If you, if you want to do something like that, let us know. We'd love to connect with you and see if the mastermind would be a good fit for you. Okay, so in the link, in the description, click the link to schedule a call with us and we'd love to see you in there. All right. God bless.
