How to Raise Capital - The right way for every deal

All right. Right, hello and welcome to Multifamily Strategy Live, and we are officially live on all platforms starting in 3, 2, 1. Okay, perfect. I should be, uh, just about everywhere, so if it can be streamed, it is being streamed. So welcome to Multifamily Strategy. Today's topic, we are talking about raising capital for your deals. So if you're unfamiliar with how to play the game or you're unfamiliar with this channel, uh, first of all, welcome. I'm Christian. I bought about a rental properties, just under, but we should pass it by the end of the year. Over the last 5 years, I've coached hundreds of people over hundreds of millions of dollar transactions doing exactly what I am going to show you here, uh, today. As always, uh, if you're on the YouTube side of the stream or if you're on TikTok or Instagram, I should see you on one of the feeds here. I'll go ahead and, uh, answer all the questions that you guys have while we are live. We'll go till the questions are done or, uh, until the top of the hour, whichever one comes. First, but again, welcome in, welcome in, welcome in. Uh, now I actually held a vote on our school community here on what topic you guys wanted me to cover, and overwhelmingly it was raising capital, which is funny because we talk about it a lot, but we're gonna dive all the way in. I did some lesson planning here, so this should actually be a pretty darn good episode. So good to see everyone. Let's officially get launched. So when you are raising capital, the first rule of multifamily strategy in general is we do everything in order. Deal, then debt, then equity. Probably heard this before, but I personally did the, uh, the responsible thing. I went to college, I got a first, second, third, fourth job. I went through an 8-year career and I saved up to buy a couple of duplexes. My base theory was if I buy some rentals, I'll get some experience, I'll become a better landlord, and I'll one day build a portfolio for myself. What I learned is that the skills that you build in single-family and duplexes and house hacking and renovation Have almost nothing to do with the skills needed to run a multifamily portfolio or to do the acquisition, which begs the question, if you have less money than you think that you need to buy your deals, where does the money actually come from? And how do we do the capital raise? So I want to talk about both halves of that. So first of all, and this is the most important, we start with the deal. If you are at a car dealership and you want to buy a truck, I'm not a car guy, but I love my Toyota Tundra. If you want to buy a truck and you go to the car dealership and they have no trucks and you're like, well, how do, uh, what trucks do you have as an option? Um, they're like, well, we don't have any. Okay. If you get one in, what color will it be? Depends on what we get. How much should I budget? Depends on what truck we get in. If you don't have a product to pitch, it's a really awkward pitch. You're gonna leave the dealership and go elsewhere. That's the same thing with your deals. If you don't have a deal yet and you're overly worried about the capital, You're worrying about the wrong piece first. You don't have an opportunity to raise capital for. You're not at the point where you need to worry at all. You're just not at that point yet. So the first thing we're going to do is we're going to make sure that we know that our deal is a deal, which means you have to get basic underwriting down, which ends at like 5th grade math. But let's assume that we've got there now. So we found an amazing opportunity in a market we're really excited about. We've put it under contract. It's our deal to lose. We're super excited about this. And what happens next? We need to find a debt product. I don't know what I can offer investors or how we're going to raise capital if I don't know my actual cost. If I don't know my incomes, what can you do? So we line up a debt product. I negotiate everything conventionally, but over 50% of my deals, about 64%, 65-ish percent of my deals have used creative finance to close. And again, I bought hundreds of units. Our most recent deal was creatively financed and 200 units. Wow. So how are we buying the deals? Well, we do the negotiation. We'll talk about that on finding deals. However, you guys wanted to know about funding the deals. We created an opportunity that had a lot of cash flow. We chose a debt product, in this case used creative finance on that deal. But on many deals, we negotiate where the deal works. We select a debt product, which is usually going to be somewhere between 80 to 100% of your money. In this case, the debt product was 98% of my money. So I'm raising the last 2%. On that particular transaction, 2% was still like $370,000. So there was some money to raise, but most of the money was figured out between deal and debt. The capital raise was the easy part. Your goal, by the time you pitch capital, the conversation should basically be, I have an opportunity that makes money today. I have a business plan for said opportunity that makes money in the future. And this is my general business plan of how I'm going to generate returns. Again, is making money right now. It's under contract. I'm closing this with or without you. Would you like to make money with me? Is effectively the pitch. Now, there's a little bit more that goes into it. I recommend like 15 or so slides of a pitch deck going through your plan, the property itself, you know, walk them through the actual opportunity and returns. But at a very high level, you're creating an opportunity that makes money day 1. You're lining up a debt product that allows you to close it. And then anything else you need, if that's capital, if that's experience, if that's proof of funds, if that— you're building a team of people who want to make money alongside you after you control the deal. You create the product and then you bring the product to market. People don't treat it like a business. They go like, well, the guy on YouTube told me that I can buy houses subject to the existing debt with no equity, and then I can lose them later. Yeah, you can do that. That's a stupid business model. However, if you want to scale, you're going to need buildings that are designed to be rentals. So I found multifamily is a lot easier way to do this. People get stuck on the money because you look at a deal and let's say it's a $2 million deal and you're like, well, I can't buy a $2 million property. You can't buy a $2 million property for 2 reasons. Either you don't have the opportunity or you don't know how to structure it, or you don't have the capital. If you know how to structure the opportunity, you use the opportunity. to bring in the capital. That's the nuts and bolts of it. Now let's talk about how to structure this. If I'm raising capital, how am I going to actually structure the deal? So the first thing that I'm going to do is once we've lined up our deal and our debt, for deal structure, what I personally want to see, how much cash flow do we have day 1 and how much future upside is there in this deal? In today's market, generally assume that you can do a refinance at 75% loan-to-value. So we'll be able to pull out some legitimate capital if There's value add to do in the property, usually through property management. That goes back to the business plan. But I'm going to look at all of the cash available in the deal. If I'm bringing on investors and my goal is to own the property without investors, it's a very simple structure. I am looking at, okay, how would the real estate buy the real estate? If I put no money personally or low money, depending on your capital, if I put little to no money into the deal, how would someone invest into this deal and how would I, one, return their capital to them? And 2, how would I grow that capital? Your total pool of money is only 2 things: the cash flow while you hold your deal, which you can do as distributions— it's basically a dividend to your investor— and the growth of the property, which again, just like buying stock in a company, the value of the property goes up, their equity goes up, they come in and they are partner with you. My most common method— I'm going to teach you guys a few today— my most common method is called the— it's basically the BRRRR method. Like you might've heard in single-family. We have enough money to refinance the money out. You need more than that. So it has to be a little more than a BRRRR. But if we can multiply their money and pay them some cash flow throughout the deal, people are generally very happy. So if they got a 6% cash flow, which is mathematically the same as a 6% dividend, they got paid every year 6% on their money. And at the end, say we bought them out in year 3, we do a refinance, we pull out 1.5 times the money they had, and we give that to them instead of us. I now own 100% of the deal. I never put any money into the deal. I got to share cash flow above their 6%. I got paid upfront. I got paid during the deal, and now I own a deal and all of the subsequent cash flow without any partners. The real estate bought the real estate. Very common play. Another common play, if you have a great deal and the cash flow is strong day one, but you have a little bit less upside, that doesn't mean you can't close the deal. It means the deal's going to have a harder time buying people out because it's harder to multiply the money. Stable cash flow is awesome. Again, I'm going to compare this directly to the stock market. High dividend stocks, there's a huge investor pool for. People love stable income. If you find a deal where it doesn't have the upside to do exactly that, that BRRRR+ method, if you can't do that, free for everyone is a great model. Come up with a model of how between a refinance and just the cash flow of the property, We can get the money back to the investor. If their money is backed out and they hold their equity, so we're partners for a longer period of time, and I don't have any money in the deal, or I have low money in the deal and their money's backed out first, and then my money's backed out, ultimately I put in low to no cash and their cash was parked for a period of time and then pulled back out. I'm in the deal for free. They're in the deal for free. I structured the opportunity and I was the principal managing member of the LLC. They joined me along for the ride. You can do this as a joint venture. You can do this in syndications. There's multiple ways that you can structure these, but essentially the free-for-everyone model simply means, well, the real estate might not buy them out. However, the real estate can keep giving forever. By the way, your ideal investor for this, often it's people who have a decent W-2, who are a licensed— who are an actual real estate professional. Or, um, which essentially means they spend like 720 hours a year in real estate. So like property manager, broker, their spouse is a broker, they're professional investor, uh, but they can offset their active income. They don't want to get bought out of these deals. You have to pay what's called recapture tax. You're looking for someone who's like, hey, I'm looking for maximum tax benefits, no recapture. Um, and there's a huge pool of partners available who have money For that sort of structure. That's a play off of the first in, first out method. So your cash, the first one in, it's the first one out. Free for everyone means we just back out everyone's cash until we're at zero. First in, first out, you put the first money in this deal. Awesome. Welcome to the deal. I'm going to return your money before any distributions of any kind go to me. So I did this on a 44-unit deal. I did get paid upfront, got paid $36,000 to close a $1.8 million deal. Investors in that deal are going to make about a 4x multiple on their money, about 400% return in a 5-year period, which is phenomenal. On that particular deal, the way that we structure the returns, they are going to get that money up to the amount they invested before I get paid a dime. However, I put nothing in. I got paid $36,000 upfront. And we're executing the refinance here imminently, probably about 4 months out from completing that, which will back out all of their original capital. Now we share everything by equity. What I like about this structure is that you usually get more equity in this structure, that first in, first out. I have 51% of the deal. Investors have 49%. In deals where we're coming in and they have a majority of the risk, they typically will take more of the equity. I don't want to give away a lot of a deal if I can avoid it. And so if you're in a deal where you have a longer-term partnership and you are the one who structured the deal, I typically favor whichever model gives you the largest equity stake in the product without sacrificing cash flow. But the first in, first out, the free for everyone method, or the BRRRR+ method, fantastic ways to raise capital. And it's just based on a basic sliding scale. On one end, you got cash flow. On the other end, you have future upside. If your conservative future upside gets you the return that you are looking for, you are in a phenomenal place, and that's exactly what you wanna do. All right, I'm gonna take some questions here if we have any. If we don't, then that's fine. We're not required to. I don't make anyone respond to questions, but it was a very popular topic. So if you are looking to raise capital, if this is a concern for you and you don't know how to structure it, let me know below in the comments. By the way, While I look to see if we have any questions from today's episode. There is a webinar that I'm running after this. I haven't run it in a second, but I'll run a webinar here top of the hour. If you don't know how to buy these or structure these deals using creative finance, I'm going to go through the actual playbook of how to buy deals and structure deals, no to low down. I'll actually show you deals from my portfolio. Also show you some of my students' deals. So it's not just the Christian show. You can see how people just like you in markets just like yours are doing the thing that you want to do, there is a link below multifamilystrategy.com/workshop to register. We still have a few spots left. I think that we're limited to 100 people on that particular webinar. We are in the low 90s last I checked, so there should be some spots left if you guys want to join there. You are more than welcome to. And I do have a question here that I saw on Instagram I want to make sure that I get answered here. Perfect. There it is here. So a question came in here on Instagram. What do we do about proof of funds? So I get a deal, it's not under contract yet. I have the business plan. Before I can pitch to partners, I want to have it under contract, which by the way, that is correct. Do it exactly that way. But how do we get past the proof of funds? That is probably The most popular question that I get from new mentees in multifamily strategy. So good news, I have experience answering that particular question. So for proof of funds, the most important thing in that is the salesmanship. You are driving the deal. If a broker says, hey, we need to see proof of funds, it usually means one of two things. More often than not, there is something that happened in that call where they are doubting that you are able to close. And so if they don't believe that you can close, They're going to try to screen for like, hey, their job is to find the most able and willing buyer. They are testing your ability to close the property. I want to caveat this with most investors don't have a magic bag of money sitting under their desk to buy multifamily deals. They do get closed through capital raises. Very, very standard process. So if a lot of deals close like this and they're putting that smokescreen and you're like, I can't clear that objection, They are trying to clear out investors who don't know how to raise the capital, who don't know how to pitch this. They want to work with closers. How you establish yourself, you answer the question directly, you don't dodge it, and then you move on in the sales process. So an example, uh, you come in, hey, um, uh, broker gives you, hey, um, awesome, let's go ahead and write up the letter of intent or, uh, the purchase and sale agreement. Let's go ahead and get this thing wrapped up. Before we start, we'd like to see, uh, seller's gonna need to see a proof of funds so you know where the money's coming from. Your immediate thought is like, oh no, but I don't have that. Start with yes. Awesome. I can absolutely get that for you. The way that it works for my team is I will be raising capital for this deal and I will be closing this deal. I will not be able to present this in front of my investors until we have it under contract. As I'm sure you can understand, standard practice. I'm not going to pitch people a deal that is not mine to pitch. So what I would like to do, let's get this PSA signed. Our next steps, let's get into feasibility. I'm going to schedule inspection. We're going to get the ball rolling on this. And we move on and we go through it. 9 times out of 10, you've passed the test. And now we're talking paperwork and they never bring it up again and they never ask you for it. This happened to me many, many times. There's going to be other times partway through your transaction where they're going to be like, okay, so, um, This is a company policy and we must do this. It's usually the less experienced shops are going to add that as a roadblock. If you run into it and it's immovable, you're looking for one investor to invest early in your deal or to at least be interested in the deal enough to show proof of funds. They're not committed to the deal. They don't have to close. We're not even under contract yet. But for proof of funds, you find one person who has the money who's like, hey, I'm interested enough to submit a bank statement to show that we can get this closed. If I decide to move forward. It is completely non-binding. Uh, ethics here, make sure that's with someone who's legitimately interested in the deal. Don't just ask a friend with money to be like, hey, can you shoot me a bank statement so I can go ahead and open up this transaction? But effectively, it is non-binding. You're not even through due diligence. You're simply asking, hey, are you interested enough in this deal where I give you first shot at partnering? And you send them a bank statement. It costs them nothing but 5 minutes of time. It's very easy to overcome. But an excellent question and a very, very, very common sticking point for a lot of people. On YouTube, got a question here. Where are some good places you can find these investors to pitch when you're under contract? That's a great question. So where do you find the investors to pitch? Uh, retrospect, should have included that in this presentation. Uh, the first thing that I would do, uh, honestly, Find communities online of people, preferably in your market, who are doing deals like this. Multifamily Strategies page on Skool, S-K-O-O-L, is a great page. I've seen some capital raised through our Facebook group as well, Multifamily Strategy Community on Facebook. There's usually 3 or 4 really good local real estate groups in your area. So I'd look at Facebook, I would look at local meetups, get connected with investors in your area. Priority one, learn how to underwrite your deal and package your deal. Create your product. That is the most important thing. After that though, get around the people who are doing real estate. Places where I've raised the most capital by a huge margin, there's a local real estate group called WIRE in Washington State when I was buying up there. It's a local group. Got connected with them, met some investors, talked about my deals, got stuff funded. I reached out to brokers. who I'd met while putting deals under contract. I'm like, hey, do you guys have any clients who are interested in similar deals like this who might be open to partnering with me? I got a killer deal, but I'm going to need to take it out with a larger team. Broker references I've done insanely well with. Pickleball, underrated. Phil Toth has done this. He sails boats. He does it sailing. I like playing pickleball. I meet people on the pickleball court. A lot of these recreational things where you're just around other humans, when you talk about what you do, you'd be amazed how many people want to invest in your deals. I just talk passively while in line and between games about real estate. Everyone talks about work. And sometimes people are like, dude, I also invest in real estate. This is an amazing opportunity. And we get talking about it and we go out to coffee and boom, capital raised. In multifamily strategy, of course, 5 years, I've never seen a failed capital raise. Not one time. We— you package your deal, you bring it to market. Again, you're creating an invitation to when you're explaining this to someone. I have a deal that's making money today. I have a business plan on how I'm going to grow the equity of this, and it's a conservative business plan. This is how we plan on operating it. Would you like to make money with me on this deal? That's effectively your pitch. You should know your numbers and have everything prepared to pitch it. But like, the basis of your pitch is it's already making money. Would you like to make money alongside me on this deal? There's a lot of people who have money who do not have a deal. That's where most people are stuck, is they don't have a deal and they think they're stuck on the money. But yeah, great place to find it. Uh, Facebook groups, local meetups. Local sports event. I've raised the first— out of the first million dollars I raised, I raised like $700,000 of it from Starbucks coffee shops. Just drinking coffee, I hear someone talking about real estate, join their conversation. It's not that weird to do. It's also not that hard to do. Oh, another thing I found, we call this one the phone book scramble. You open your phone book, and I've done this. I call it the scramble because I've only ever done this when I'm like, oh my gosh, a partner just dropped out. We're closing in 3 days. We gotta scramble. But it's a great drill. You go through and you go alphabetically through your phone. Just go, who might have the money for this? And then you ask, who might know someone who has the money for this? I have found for most investors, they are at— it's roughly their first million to a million and a half is within their network already. It's people that they know. And this is people that regardless of how connected you are, I've had 18-year-olds who are like, my family has no money. I grew up in a one-bed apartment. I shared a room with 3 of my siblings. We slept on a mattress on the floor. Like, I've had mentees like that, and they found within their network, within like people who they know know, so 2 degrees of separation from them, their first million-dollar capital raise, knocked it all the way out of the park. It took them 8 days to raise the capital. 18, no college degree, never had a job. So the resume is nothing, no credit score. Like they have none of the things you would think you would need. Their family doesn't have any money. They go through their phone list and they find almost $1 million. It's, that's, that's where most of your raise goes. Now, as you, as you utilize the network and the people around the network, you close the first and second deal, it grows and more people are interested and you have a larger resume. And so it gets progressively easier and you will expand outside that network. But for most people, up to your first million or so dollars, it lives in your phone right now. You can absolutely 100% raise it. From JD Royalty, how's it going? Join the group, looking to start soon. JD, welcome, super excited to have you there. Multifamily Strategy, you guys can check out the mentorship as well. It's hosted off of the school platform. It's a mentorship, but there's a bunch of cool course components and education. We strive to be the best in education, community, and mentorship with a huge emphasis on the mentorship. If you're in that community, you're working directly with me, unlike literally every other group online where they're going to pawn you off on someone else. I don't do that. But dude, super, super, super excited to have you there. How much is your online course, Mr. Osgood? If you can't answer here, please message me. Well, this is not an ad for Multifamily Strategy. That being said, I always share, and it is posted publicly. Uh, the online course, uh, which actually I literally don't know— you can go to multifamilystrategy.com though, and there is— you can purchase the course explicitly there. It is included with the mentorship, which is what 99% of people do. Uh, that is $9,800. It is a 6-month intensive mentorship where you're working with me. We meet 3 times a week, plus one-on-one support, plus the entire course. Uh, but everyone who joins that group, we go in with one mission. Close at least one deal within the next 6 months, and our success rate is fantastic. But again, it's not an ad for that. If you're interested in it, let me know. My mission— information should be free. We're in the information era, uh, so you can learn anything you want on this YouTube channel. You guys can ask any questions on YouTube video. I'm live every single week. Um, if your goal is knowledge, you can learn it here. If your goal is application, that's what Multifamily Strategy is about. It's about working with you In community with other people, knocking out deals in a way faster timeline with way more oversight. But it does take a lot of time, and I will invest every second I have into that. How do we pitch without violating SEC rules? Great question. So the first thing you cannot do unless you are filing a 506— so that is a syndication in which you are allowed to openly solicit for capital— You can talk about deals that you're doing. You can form relationships with people around these deals. You can find active partners. You cannot post online, hey, I have a deal and it makes 17% projected IRR, who wants to invest with me? That is creating a security. You're asking for passive investors, which you are not allowed to do. Easiest way to do this is I— if you're in a Facebook group, as an example, I just went under contract for a deal, super excited about it, would love to get additional eyes for it. We're just rounding out the last few partners on this. If you're interested in checking this out, the deal is here. Post link, host an event, talk about your deal. You can talk about the projected returns for capital, so you can absolutely talk about the partnership structure. You're just not soliciting for partners. If you're interested in learning more about the deal, you have an idea, or you want to discuss partnership, I'm open to it. Please email me or text me at this number, which you do at the end of your presentation. Super easy way to do it. It's basically webinar mode. Uh, for your deal. You're asking for feedback. You let people know that you're raising capital, but you're not asking for investors. You're not asking for passive investment. You are not offering any returns. I'm not saying, hey, this is a 17% IRR, click the link and partner with me. That is where you get in trouble. You have to be really careful about that. But what you're actually asking for is, I would love to get additional eyes on this deal, check out what we're working on, or You can simply file a 506, which will allow you to openly market as much as you want. For me, on larger deals, I do multimillion-dollar raises. I'll usually do a 506, and I'm also a decent marketer. So that's a nice way for me to be able to take advantage of the fact that I do have a little bit of an audience. And so people can view that, look at my deal. I'll also close a ton of deals where I'm just calling people who I've met, and I'll talk to people on the pickleball court. I'll do all the things I just mentioned earlier. You can roll through these things one at a time. Cody Davis said in a recent video, the banks told him his deal's cash flow. They like the property, but he's scaling fast. How do you get around that when refinancing owner-financed? Cody is in an interesting spot. Cody is a moderately large investor. I mean, he's done really well. He's one of the largest investors in a very small town. One of the ways you get around it, and this is the way that I got around it, is we— I'm buying bigger deals. And so when the bank looks at my stuff, they're evaluating everything on a per-deal basis, and they look at the overall experience, and what they see is 800 other rentals. They see a property management company. They see a 30-person staff. Like, I've built— I built a company around this. And so when they're looking at me, they're going to look at that different than Cody. When you are starting, many of you are going to be in a more similar position to Cody. Or maybe a little bit smaller than Cody for a lot of people. So when you are doing the refinance, the more bank debt you have, the more you're gonna get is generally the rule of thumb. The way around it, if it's a legitimate obstacle, and usually you're just looking for the right relationship, you're looking for a banker who really wants to work with you. Cody has a few, I have a few. You build deep banking relationships as you start to play this game. However, Another way to get it is you work with someone else who has a different set of experience than you. This is where strategic partners can come in if you are actually stuck there, which I think most people can blow through. There's usually a few lenders who are like, yes, we understand what you're doing, we love your deals, they're cash flowing, we want to invest. Um, you have to really work the, the lender relationships, and if you haven't done that, you bring other people in who do have the experience onto your team. It is one methodology difference between Cody and I, and there is not a right or wrong here. So I'm not saying my way is better, it's Legitimately not. They're, they're just 2 different strategies. Cody's goal is to own as many things as he can by himself without partners, which is a phenomenal goal. I, I really like it. Where he's going to be limited is everything is going to be looked at by who he is as an individual, what he has done as an individual, and his portfolio and his lending. When they look at me, I have a buying group. I invest with Caleb Hummel on every Texas deal. We just brought Mark Hobbside and Drew Hobbside onto the equity team officially. They bring their own experience and their own, but we, I work in teams, so I do not deal with those problems. Again, I have different problems. I'm not a dictator. So while I am the CEO of, well, all of the companies, I'm not the sole decision maker on every single deal. And I love having the checks and balances. Personally, and I have way more fun doing this on a team of people who I like working with, but it is a strong personal preference on how you want to operate in the business that you want to build. And Cody's model is right for a lot of people. Your workaround is really working those deep banking relationships. Get to know them and don't just rely on one bank. Cody has 3 banks that he bounces between pretty frequently. He's able to keep closing these deals. And the longer he goes in business and the older he gets, the easier it will continue to be. Really, really, really great point though. When Cody and I started, the hardest thing was our first bank loan. We'd closed 6 seller finance deals and the bank's like, I just don't want to be the first bank to lend to you. Like, we love your deal. Your deal's fantastic. We love you guys. I don't want to be the first bank to invest in you. And we ran into that again and again and again until we finally got it closed. The message there though is you can't get it closed. Oh, see here. After we purchase, who handles property management? For me personally, I built my own property management company. I recommend that for less than 1% of people. I don't think it's the best strategy. It is a strategy. It's not the best strategy. Um, you want some amount of passivity. I'm a huge fan of passivity. So that's generally speaking, purchase, find a fantastic third-party manager. For your first or second deal, if you can self-manage, I highly recommend it. You're going to learn so much. You'll be a better manager of your manager. Really, really, really highly recommend. It's a great idea. That being said, for me personally, when we take over a project, I'm looking at stuff that I can put my resources and my team into. The 200-unit, we have a goal of trying to get to 95% occupancy from 75, 74% occupied and doing 18 evictions. So we're really coming in with like 60 out of 200 vacant units, more or less, once everything settles out. We're gonna try to get that all the way to 95% occupancy in a 90-day turnaround. I believe we are on day like 20 of that. The YouTube series is one week behind reality, so I think the next episode you're gonna see is, um, we're 17 days into the project. Um, so there's a little slight lag between reality because I do actually have to go out in the field, film the darn thing. Uh, put it together, get to the media team, and then schedule it. So it has like a 1-week lag. But that is the main thing that I do is I, I can do things a little faster than other people because I control the teams. I have on-site employees, I have regional directors, I have marketing teams, leasing agents. We built a company around it. As an individual, 2, 3, 4 properties, you can do a lot of this stuff yourself. And there's 4 models, by the way, that we go through in Multifamily Strategy. I believe I've shared them here on YouTube a few times, but the 4 models that work are self-management, hybrid management, where you are no longer in the field, you've delegated the driving to the property pieces, but you kind of are sitting in overwatch over a team of contractors. There's a specific model for that that I actually really, really, really like. There's third-party management where most people will end up. You have a professional property manager who you vet and they manage your property. You are responsible for making sure they get you all the reports you need to make decisions at the same time every single month. The 4th option is build a PM company, which again, I've recommended, I think twice in my career to anyone to actually do. While it is what I do, it is, and it is the right move for me. It is rarely the right move for most investors. Yeah. And Mario would like to see an example of how a hypothetical purchase is valued. For example, do you start with the NOI and work backwards to figure out the debt interest rate term? Um, so for a standard deal, the nice thing is they post the offering memorandum online. So I'll go to CREXi, I'll download the offering memorandum. It'll put the broker's numbers in there. They're usually a little bit rosy. Uh, what I'm gonna do, first thing I do, I eliminate whatever they're paying for in taxes and insurance. And the nice thing is with AI, you can just model it. I'm planning on buying this property at around this price at this address. What is the average post-close tax reassessment and what is the average insurance rate? I'm going to place those there. For maintenance and repair, I'm going to do the higher of their existing maintenance and repair bills that they have on their profit and loss, or at least $100 per month per unit for maintenance. So the higher of the 2. Besides that, I'm going to fill out the rest of the calculator with the rest of whatever there is in there. You know, landscaping, are tenants paying utilities, or am I paying utilities? All those pieces. We're going to fill out our income and expenses, and that will give you net operating income, which allows you to get a value for the property. You divide that by your market cap rate, and that tells you what the property's worth today. Then you do your exit math. When I plan on refinancing, we intend to have the income here with expenses here and income now here. We have a new net operating income. Our projected value is X, and that's how we determine how much upside there is in a deal. Good questions today, by the way. I appreciate you guys very much. Well, it's Wednesday. Thank you guys for joining. This was the topic we voted for this in the school community. So for you guys who are there, I will actually. let you drive the ship. I will post ideas for what we want to teach on, and I'll actually go through all of the work of lesson planning for these. Um, so I will give you guys a full-on lesson because again, I believe that information on real estate should be free, uh, and I love sharing. So if you guys want to learn the adventure, absolutely hit that subscribe button, support the channel. Apparently commenting on videos helps the algorithm or something, I don't know, but do the things to help me run this channel because I spend more on this channel than the channel makes. I can tell you That for 100% certainty. That being said, there's a heck of a lot of fun, so do what you can to support the channel. I will be here every single Wednesday. There is a slight chance that I might miss next week, and I will try to get Caleb Hummel in the pocket if I do, because our baby's due date happens to be right then. So I may be the father of a daughter for the first time. I have an awesome son. We're adding a daughter to the family here in the next few weeks. So I should be here every single week. There will be a point where, depending on when that happens, I may or may not make the live, and I think that's okay. Uh, but I'll make sure that we have an awesome sub, uh, ready to go and ready to rock after that time. So appreciate you guys a ton. I'll answer one last question here before we wrap, uh, from JD here. After signing up, uh, when should I start looking for deals? Uh, when you're in Multifamily Strategy, first 30 days, make this your baby. Look at deals online almost immediately, like get through the math section, which doesn't take very long. And those who just joined the community, you guys can just download the calculator and do this drill yourself too. Get used to underwriting the deals. You need to know that a deal is a good deal, or at least why a deal is a good deal before you write an offer. And certainly before you raise capital, you have to be able to articulate why your deal works. So your first mission, learn how to find deals, go through the first 10 sections of the course. How to find them, how to negotiate them, how to underwrite them. When you have that done in less than 30 days, you want to start doing the broker calls. You look at the deals that are listed right now in your market and you start talking to those brokers about those deals. I don't care if it's been listed for 3 years or 2 days. They don't know who you are yet. You're going to have conversations with them around the deals they have, and you're going to start submitting offers where those deals work. What starts to happen is the brokers who get all the listing in the market that you want to buy in Now know that you are a ready, able, willing buyer who actually submits offers. And so while you get in this rhythm of like one offer a week, it's not super intense. You're building a track record of, okay, these people know who I am. They know I submit offers. They know we're ready to close. You're going to start getting better and better deals sent to you. That's the first step. Generally speaking, if you join Multifamily Strategies, this is what it looks like. 30 days of like learn, learn, learn, learn, learn. Get the blocking tackling down. Months 2 and 3, you're writing one offer a week. Which means you're usually going under contract because we shoot for, if you're like 33% confident that you've talked to the broker and you're like, I think we know what the seller wants. If you have a 33% chance or higher of getting accepted, write that darn offer, write that darn LOI. Do that once a week. You take one 33% chance every single week for 2 months, pretty much go under contract. 60 days to close the deal. That has you right around month 4 or 5. Closing on your first deal, which is our average multifamily strategy. It's right around the beginning of month 5, people close their first deal. I've seen people do it in 45 days. I've seen people be extremely successful and take a 7th month to get it done. But generally speaking, that's the normal cadence. The focus is make it your baby for 30 days so that we can just start the process of getting the deal put together. Then we line up the debt, then we line up the equity, then you've closed. We install a management model that works for you. And And you start on the next deal. Super fun though. Super fun. I appreciate you guys a bunch. Thank you guys for joining today and I'll see you all on the next episode. If you guys want to catch that, if you guys want to catch the webinar that is upcoming here, that will be at the top of the hour. So in roughly 20 minutes from now. I'll be back in studio for exactly that, sharing the creative finance and creative real estate side of creative debt and equity. So it kind of pairs nicely with this. I'll show you guys how to work the money both creatively on the debt side and the equity side, different models that work. And I'll show you different people within the mentorship who've done that. So if you guys want to see that and you're not yet part of the mentorship, there's a few spots to register. It should be linked here on YouTube specifically, but it's multifamilystrategy.com. You guys can check that out there. Appreciate y'all, and I'll see you in about, uh, some of you in about 20 minutes, the rest of you guys next week.