Category Archives: Finance Right: How to Get Financing for Multifamily Apartments

If you’re following our three essential steps to being successful in multifamily real estate, then you’ve already read through our Buy Right and Manage Right blogs. The final step of our strategy is Finance Right. In order to be truly successful in real estate, you need to learn how to secure long-term financing.

Our Finance Right blogs will teach you how to get financing for multifamily homes and how to make the most of that financing. Once you’ve read through this archive, you’ll be one step closer to having the knowledge you need to succeed in multifamily real estate.

Gino Barbaro Reviews ‘Creative Cash’ – A Book Authored By Bill Ham

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This is arguably one of the timeliest real estate books to come to the market in years. We are in a transitioning economic market, and the real estate market is close behind. The author Bill Ham, multifamily real estate investor and educator, gives a glimpse into the upcoming real estate market cycle and shows us how to use creative financing to fund real estate deals in his new book Creative Cash.

One of the biggest hurdles that we hear from students when trying to buy their first multifamily property is “Where do I find the money for the down payment?”

Creative Cash was written to eliminate this limiting belief by diving into two very effective creative financing strategies that most new investors are unaware of: Master Lease Options and Seller Financing.

In this book review, I am going to discuss Bill’s techniques for closing deals by using seller financing and master lease options. The true value in this book is the step-by-step method in which it is written. Bill shares his experiences and knowledge including how he closed on his first four hundred units without using traditional mortgages to buy any of the assets. No walking into a bank, only creative financing techniques that he teaches in the book.

Bill begins the book by explaining the power of cooperation and the art of bringing value to a seller by using some interesting techniques such as the S.P.Y® technique. This stands for Seller, Property, You, and is one of the keys to how Bill exploded his portfolio without using traditional financing. In short, this is a method for creating problem solving offers so that you are always valuable to a seller. As Bill says, “Solving problems pays well”.

This concept of making value-creating offers was amazing. Bill shows us how to use:

Master Lease Options. There is very little information out there on how to buy an apartment complex using a master lease option, until now!
Seller Financing
3 Pillars of Real Estate®
Deal Analysis
Creating Offers

I have personally used some of the techniques Bill covers in this book. When the markets are good, creative financing is less effective but when the market goes down and financing is harder to secure, these “tricks of the trade” become invaluable, and turn deals that don’t make sense into winners.

Bill dives into market cycles in his book, and describes when and how to use seller financing. In a slowing market, lenders tend to pull back and lend on better assets. This can make doing “value add” or renovation projects more difficult, as lenders tend to shy away from these types of buildings. This can make it hard for a seller to sell. Creative financing is the solution.

Bill’s strategies work for all types of real estate, from single-family homes, to commercial, to multifamily. If you are looking to transition from wholesaling and single-family homes to apartment investing, and lack the capital like Bill did, then you need to buy a copy of Bill’s book and learn the creative financing techniques that will allow you to buy deals with very little capital of your own.

Get the book on Amazon: https://amz.run/4ICI

Visit Creative Apartment Deals for more information!

Learn more about Creative Financing:

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The 7 Steps to Goal Setting

A syndication is simply a partnership between a group of investors pooling their resources into a single investment. I wish executing a syndication was as simple as the definition I just pre

We have all been told that goal setting is one of the keys to leading a successful and fulfilling life. Unfortunately, only approximately 5% of the population actually sits down and constructs their goals. Is it no coincidence that only around the same percentage of people are financially free by the time they attain the age of retirement.

I witnessed the transformation in my life once I began to write down my goals and create a concrete plan for the future. But, how does one even begin to assemble their goals? In this article, I will lay out a framework on how to devise goals for your life, and then act with intention and purpose to achieve those goals. After all, a goal without a plan is just a dream.

The first step you need to take is to overcome procrastination. How do you surmount this force that holds back the vast majority of people? Your goals need to be galvanizing and motivational; that is, there has to be a motive behind the goal. Your shoulds in life need to change into musts. Goals that are bigger and clearer will supply the motivation necessary to attain them.

Progress Takes Place Outside Your Comfort Zone

https://www.youtube.com/watch?v=01z4x4RQupM

Seven Steps To Goal Setting (https://www.youtube.com/watch?v=01z4x4RQupM)

You need to begin focusing on what your “why” is. When I became crystal clear in what my “why” was, then I started to realize how, or what I needed to do, to achieve my goals. This is very important. Stop and ask yourself what is your “why”.

In the words of the great Steven Covey:

“An effective goal focuses primarily on results rather than activity. It identifies where you want to be, and, in the process, helps you determine where you are. It gives you important information on how to get there, and it tells you when you have arrived.”

Here are the seven steps:

Decide what your goals/objectives are.
Write down your goal.
Set a deadline.
List all activities needed to achieve the goal.
Organize your goals into a plan by priority and sequence.
Take action immediately.
Use every day to do something toward achieving your goal.

Decide What Your Goals Are

This may appear like an obvious start to your plan, but ask the majority of people what they want, and they are more inclined to tell you what they DON’T want. You will never hit a target that you don’t have. Write down what you want from the major areas of your life, including family, financial, fitness, faith and friendship. As we just mentioned, begin with your why.

People Don’t Lack Motivation. They Lack Clarity.

I refer to these goals as the 5 Fs, my framework to achieve balance in all areas of my life. Only you can answer for yourself what it is that will make you truly happy and fulfilled in life.

This is also an important time to focus on your values and what type of person you want to grow into. Goals are great, but they are not what we should be ultimately trying to achieve. The “goal” is to become the person you need to be to achieve the goal. As you continue to hit your goals, you will look back and be amazed at the person that you have become through the growth and perseverance of working towards your goals.

Check out the video version of this Blog:

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Write Down The Goal

When you write down your goals on a piece of paper, the thought becomes a tangible goal, something you see and your subconscious will begin to work on. A goal that is not written will leave your thoughts and will never come to fruition. Your action of writing down a goal allows you to choose which goals have more urgency, and reminds you to strive for those written goals.

Your Future Is Created By What You Do Today

Set A Deadline

A goal with no deadline has no energy behind it. This is what leads to procrastination, and ultimately, lack of action. A goal needs to have a sense of urgency, or else you will be looking at tomorrow to finish the task. At one of his seminars, the famous motivational speaker Zig Ziglar told his audience that he was offering an all expense paid vacation, the only caveat being that the trip was scheduled for the next day and they had to complete all of their tasks that were looming. He asked how many people could finish their tasks, and everyone in the audience erupted in laughter. He was making the point that with enough urgency and a deadline, people set about accomplishing the tasks at hand. A bit of motivation, sprinkled with a deadline, is a terrific incentive to completing your goals.

Fall In Love With Your Actions, Not Your Results

List All Activities

A goal is comprised of many activities that need to be executed, or else the realization of the goal will not be achieved. For instance, I had a goal of writing a book on investing in real estate, a task that appeared daunting at first. But when I began to write down all of the activities involved, such as selecting an editor, compiling content and gathering case studies, the goal became less harrowing, and I could see the light at the end of the tunnel. My coach made me realize all I needed to do was write one page per day, and I could have a book written within a year’s time.

Good Things Come To Those Who Work

Organize Goals Into A Plan By Priority And Sequence

I refer to this stage as the chunking stage, where you have to “chunk” down all of your activities into more manageable sizes and begin to draw up a strategy to completion. Activities need to be ranked by priority and have to be followed by a sequence, or set of steps.

For my goal, I knew that I needed to begin writing content, and then look for an editor. I would leave the case studies for the end of the book, but I needed help from a ghostwriter with the title and formation of the content. So, I set about looking for a ghostwriter first, and then began to assemble the content I needed for the book.

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Take Action Immediately And Correct Your Course

I know many people who suffer from paralysis by analysis. They look over the figures once and then recheck their work, only to continue to doubt themselves. Finally, when they decide to pull the proverbial trigger, it’s too late and they lament that “Life isn’t fair” or “I tried”.

If you take action immediately, two things occur. First, the fear or doubt you may possess will not be able to rear its ugly head. Secondly, you begin to create momentum, which I call the snowball effect. Any action or plan begins with a small snowball, but over time, with persistent, well-conceived action, this snowball begins to get huge.

Once you get into the habit of taking action, it becomes a more familiar habit. Our motto at Jake & Gino is:

Commit and Figure It Out

A journey of one thousand miles begins with a single step. Here is your moment to begin that journey and take massive action. In your quest, there may have to be several adjustments, so start as soon as possible. I like to make the analogy of a pilot flying his plane from one destination to the next. His route is predetermined, but throughout the flight, he is constantly changing his course due to weather or other factors. Your goals and actions will change just as the pilot’s course, but with action and course correction, you will arrive just as the pilot does.

Discipline Is The Bridge Between Goals & Accomplishments

Use Everyday To Do Something Toward Your Goal

Never miss a day to keep pushing forward toward your goal. This momentum is vital to stay focused and disciplined for achieving your goals. I always schedule fifteen to thirty minutes of reading per day to keep myself in touch with what I need to get done. Choose to read something in your field, or in a related field to continue your growth and knowledge. And don’t ever forget,

Enjoy The Climb To The Summit

How do you begin your path to creating goals? Take out a sheet of paper and list your top 10 goals. List them as if you have already accomplished them. For instance, I earn $50,000 per year, I weigh 160 pounds. Writing your goals in the present allows your subconscious to start working on these goals immediately and gives you the impression that you can hit these targets. IF you say, I want or I should, there is not enough energy behind those words. The present tense is much more empowering and will lead to success.

Secondly, choose the most important goal written and get started. Take action immediately.

I hope this article has helped you craft your goals and helped you along your journey. Email me at gino@jakeandgino.com and let me know what your top goals are.

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6 Steps To Follow To Acquire Wealth

As I was rereading Napoleon Hill’s “Think and Grow Rich”, I came across a fantastic method of training your mind to acquire money. The accumulation of money in our society has become a frowned upon achievement by many, but as I have grown older, I know that this type of thinking has become destructive to our country.

Many people view money as the root of all evils, but I feel that how people use money and their intent dictates whether money will be used for good or evil. If you view money as not necessary or as evil, then your chances of attracting money will diminish dramatically.

Money allows a person to be more of who they are. If you are a jerk, then money will allow you to become more of an unpleasant person, but if you heart leans toward charity, then money will allow you to express that side of your personality. I always tell my friends that poor people are not the ones building schools and hospitals, and money is energy that fuels the economy. The more money that I can earn, the more that I can donate to charity and utilize for worthy causes.

My goal for the Jake & Gino community is to create multifamily entrepreneurs, where these people can take control of their financial future and contribute to the growth and prosperity of our country. I encourage all the readers to follow these six steps and you will attract all the money you want and deserve.

Here are Napoleon Hill’s 6 Steps:

Fix in your mind the exact amount of money you desire.
What are you going to give back to get this money.
Establish a date by when you will acquire money.
Create a definite plan and execute.
Write out a statement stating how much you desire, the time limit and what you intend to give to get the money.
Read statement allowed, during day, when you wake up and before you go to bed.

6 Steps To Follow To Acquire Wealth | Watch the video

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efore bed, your subconscious works on it. There is some truth when people tell you to sleep on a problem and wake up refreshed and with an answer. Your subconscious will be working all night on a solution.

Fix in mind the exact amount of money you desire

You need to pick an exact figure and burn that amount into your mind. This is the point where you don’t undersell yourself. Shoot for the stars. I don’t want you to say “I want a lot of money.” I want to hear you exclaim emphatically “I want 5 million dollars, or I want to earn $20,000 per month.” It is crucial to pick an exact figure and put emotion into your exclamation.

What are you going to give to receive this money?

There is nothing for free in this world, and that includes the accumulation of money. What are you going to give or sacrifice to earn this money? Is it going back to school and learning a new skill, is it working extra hours, or is it seeking out a mentor? Only you know what you are willing to “give” to achieve your goal.

Establish a date

Procrastination is one of the biggest causes of failure. Most of us go through life waiting for the perfect time to start something. Do not wait. There is no better time that the present. Establishing an end date forces you to take action, and will activate your subconscious to get to work towards your goal.

Put that date in your calendar, and refer back to the date often!

Additional Read: The Honey Bee

A business parable that teaches the value of cultivating multiple streams of income—the surest, most achievable means of creating generational wealth.

Create a definite plan and execute

What endeavor are you going to pursue to attain your riches? I chose real estate as my vehicle to procure my riches. I wrote out my business plan and shared it with my business partner. Together, we took action toward our goal. A plan is important, but action is even more important if you are to achieve your goals. A journey of one thousand miles begins with one small step. As they say, a goal without a plan is just a wish.

Write out a statement stating how much you desire, the time limit and what you intend to give to get the money

Putting your ideas down on a piece of paper is the first step to the realization of your desire. A thought is fleeting unless it becomes a desire and is written down so that your subconscious can go to work towards your goal. I hear many friends say they want to earn just enough to pay the bills and have some money left over for retirement. Sadly, the subconscious latches onto to these self-limiting beliefs and produces these exact results.

Thought > Desire > Action > Result!

Read statement allowed during the day, when you wake up and before you go to bed

There is some truth when people tell you to sleep on a problem and wake up refreshed with an answer. Your subconscious will be working all night on a solution. While you are reading your statement, feel yourself in possession of the money you desire.

If you have a burning desire to accumulate the money, then you will have no problem in convincing yourself that you will attain it.

I have begun to use incantations in my daily activities to help activate my entire body towards a goal. Incantations put me in a high mental state where I feel “in the zone” and ready to conquer the world. You can use your daily statement as an incantation to remind yourself of your desire for money. Speak your incantation out loud and repeat it several times.

I have chosen money in this article as a desire to attain. You can substitute any other desire in your life, whether it be your health, family or career. The key is to possess a burning desire and then to follow these six steps I have outlined. Check out our student success stories to see where these steps can take you.

Good Luck and I wish you a prosperous journey. Leave a comment below and let us know if these six steps help you along your journey.

Discover everything you need to know to expand or diversify your own investments in multifamily real estate investing – even if you’re a new investor or a current investor who wants to elevate your success.

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How Much Money Do Apartment Building Owners Make

The majority of investors are hard wired to focus on the short-term benefits and returns of an investment, while not appreciating or understanding the multitude of other benefits that an investment can provide. In this article, I am going to highlight the benefits of investing in multifamily and how much money an owner can make.

Let’s start with the three metrics that every investor should focus on in an investment vehicle:

Leverage
Liquidity
Control

Let’s take multifamily and see how powerful the asset can be when compared to these metrics. Multifamily provides one of the best assets to be able to leverage, that is, using other people’s money, whether it is money from a bank or from investors. In some cases, Jake & I have been able to utilize 85% of the bank’s money to control the asset. We only need to provide 15% of the asset’s price as the down payment.

For example, if an asset costs $1,000,000 to purchase, the bank will provide $850,000, and we need to contribute only $150,000. Now that is sweet! There are very few assets out there that provide this type of leverage. Why would our banker do this? The loan is backed by a real asset, the property, and if we decide not to pay, the banker will take back the property and go after us personally to make the loan whole. They’re getting their money one way or another.

Real estate is now known for liquidity, the ability to exit the investment. Have you ever heard the adage “Don’t wait to buy real estate. Buy real estate and wait.” The investor who plans to invest for the long term is the one who is rewarded, and not being able to cash in your chips can be a benefit. But there is a way to access liquidity from multifamily, the Refi & Roll. We will discuss this strategy in a bit.

Now onto control, one of our favorite reasons to buy multifamily. If we want to raise rents, sell the property, refinance the property or hire staff, we are in control and can do it. Good luck trying to fire an employee at Apple, or raise the dividend at Exxon. You have no control of decisions of the company when investing in stocks, and if their focus is on short-term profits at the expense of the long term, oh well. Every entrepreneur and investor craves to have control when investing or building a company.

Let’s dive into how apartment owners make money:

Cash flow
Appreciation
Refi & roll
Tax benefits
Inflation hedge
Economies of scale
Cycle resiliency

Cash Flow:

Revenue is vanity, profit margin is sanity, and cash is king. Let that sink in for a minute. Most investors focus on cash flow as the primary way to get paid, but as you will see, it’s not the only way. We focus on buying multifamily properties that produce cash flow from day one, and we like to say “If it don’t cash flow, let the grass grow”. We call a property that is negatively cash flowing an Alligator, because it will eat you alive!

In our portfolio, we average around $100 to $150 profit per unit per month, depending upon what market the asset is located, and how much debt is on the asset. For example, a twenty-unit property should deliver around $2,000 per month in positive cash flow. Let’s get the party started!!

Appreciation:

In multifamily, the value of an asset is based on the Net Operating Income (NOI), whereas, in residential real estate, valuations rely heavily on the market and the use of the sales comparison approach. For the most part, the investor has much less control of increasing value in residential real estate.

The income approach is utilized in multifamily, where the goal is to raise the NOI by increasing income and or decreasing expenses. Investors target underperforming assets and increase value through either operation or renovation. Some assets may have underperforming management, and yet, other assets may be renovated to a higher class with the expectation of increasing income, thereby, increasing the value.

For example, on our third deal, we purchased a 136 unit apartment complex for $4,075,000. The property was grossing $54,000 per month in total income, and within a year, we increased income to $85,000 per month, as a result of a combination of rent increases, filling vacant units and increasing other sources of income, such as pet fees and late fees.

It was a difficult reposition for us for a couple of reasons. First, we had never repositioned a property of this size. Secondly, we received a significant amount of pushback from residents when we began to raise their rents from $450 per month to $595 plus RUBS (Ratio Utility Billing. We were billing backs residents for their utilities). That isn’t a very pleasant conversation when you tell the resident that the rent is going up 40%, but you need to have it. But, we realized there was significant demand for these apartments at the new price point. We were offering a superior product and much better customer service.

After eighteen months, the property appraised for over $6,000,000, and we were able to refinance $1,600,000. Not a bad payday! This leads us to the third way apartment owners get paid…

Check out the video version:

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Refi & Roll:

When an investor refinances a property, they either replace the debt on the property with new debt or add a supplemental loan. We focus on properties that are underperforming, or in today’s jargon value-add, and as we discussed, raise the NOI on the property. This leads to an increase in the value of the property, and we are able to refinance out the gain in equity. Here are examples of refinances of our properties:

We have coined the term Refi & Roll because we refinance the property and ROLL the proceeds into our next deal. We realized early on if we have patience with the process and understand that multifamily is a long-term play, then with that patience comes rewards. In the tune of over $9,000,000 and counting!

Now I know that you can do this too. Focus on multifamily, and abandon the shiny object syndrome, jumping from one idea to the next. Once Jake & I did this, success started entering our lives.

Tax Benefits:

When Jake & I bought our first property, we had no idea the tax benefits involved with multifamily. Tax benefits, along with the 1031 exchange, in my opinion, have fueled the boom in multifamily valuations. We can look to demographics, and the willingness for the population to view renting as a favorable option, but the tax benefits can’t be overlooked. You always hear the rich not paying their share of taxes, and many of these rich folk invest in multifamily to lower their tax obligations.

We recorded this short video with Rich Dad Advisor Tom Wheelwright, who discusses the tax advantages of multifamily real estate and the tax strategy of cost segregation:

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I don’t invest in multifamily for the tax benefits only, but they are the cherry on top of that hot fudge sundae!

Inflation Hedge:

As governments across the world continue to print money, they create inflation, which is an increase in the money supply. Inflation leads to an increase in prices. A small amount of inflation is healthy for the economy, but what we are witnessing currently has many investors worried with where pricing will go.

We view owning apartments as a hedge against inflation. What do I mean by that? For example, when a maintenance technician receives the benefit of inflation by an increase in his or her salary, what follows is that rents will rise. As prices rise in the economy, rents have followed suit.

The other hidden benefit is that as the governments have been printing money like drunken sailors, hard assets, such as real estate, have benefited from an increase in the valuations. Another way landlords get rich in their sleep!

Economies of Scale:

The main reason why I skipped single family home and fix and flips and went straight to multifamily is that I already had a full-time job, my restaurant. I did not want to create another job, I was striving to create a scalable business and enjoy economies of scale.

How do apartment owners benefit from economies of scale? I will use our first deal, a twenty five-unit property as an example to describe the various benefits. The first obvious benefit is that all twenty-five units were contiguous, that is they were all located in the same location. No running around town trying to collect rents from twenty-five different locations. When you are working a full-time job and trying to grow your portfolio, time is one of your most important assets, and being able to visit one property instead of twenty-five is a home run.

Secondly, the cost savings were tremendous. One lawn to take care of, one garbage bill to pay, less structures to maintain, less transactions to execute. The cost savings were immense. What a nightmare it is to send your maintenance technician to twenty –five different homes, and since each house is different, how much time and energy is wasted to locate a hot water heater or the electrical panel. An apartment unit is basically a shell, and they are all the same. Just the time saved by having your maintenance tech drive around each house is a game changer.

And third, the ability to create a scalable business with multifamily allowed us to quit our jobs. At around the seventy five-unit mark, we were able to hire full-time staff and begin to focus on not only the property management, but also the asset management. We were able to hire out many of the lower paying tasks and focus on tasks that created wealth, such as deal sourcing and creating systems to run the business.

Cycle Resiliency:

Now, you may be saying to yourself, cycle resiliency is not a way that apartment owners get paid. I agree with you, but it is a way that apartment owners stay competitive in a down economy and can continue to grow their operations with sound operations.

As many investors have noticed during this pandemic, several asset classes are experiencing a more challenging market, such as office and retail. People need a place to live, and for many, buying a home is not an option. Jake likes to say that there are three basic human needs:

Food, Clothing and Apartments

We recorded an informative podcast with the co-author of the book Big Shifts Ahead, Chris Porter, who dives into the demographics of the country and the shift in living preferences. The podcast is imperative for all investors and business owners who want to understand how demographics will affect businesses and buying preferences in the future. Click here to listen:

Chris does an amazing job showing where people are migrating to, and how demographics is contributing to more people renting versus owning a home. The demand for apartments will continue to drive occupancy and rent increases, and apartment owners will continue to get paid.

When we first started our journey into multifamily, we thought cash flow was the only way to get paid owning apartments. We couldn’t have been more wrong, and the benefits of owning multifamily contributed to wealth creation. And we haven’t even discussed the various businesses that have been created through multifamily, such as an education company and a syndication company.

I would love to hear what other ways you’ve gotten paid by owning multifamily. Leave a comment down below or email me at gino@jakeandgino.com. Want to learn more? Check out our Education Academy.

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The Seven Levels of Building a Successful Multifamily Real Estate Business

When Jake & I decided to join forces and create the Jake & Gino community back in 2014, I was still working at my restaurant and in the midst of trying to grow another company called Gino’s family, a passion project that was a complimentary business to my restaurant. It was an attempt to broaden the reach of the restaurant by creating multiple streams of revenue, such as a cookbook and E-Books on gardening and cooking, and physical product sales, such as cutlery and vertical gardening bags. Little did I know that Gino’s family was a precursor to the success that we have created at Jake & Gino.

As you might guess, I ultimately abandoned the Gino’s Family brand and the restaurant, and focused my efforts on Jake & Gino and expanding our multifamily real estate portfolio. But, I never lost the learning lessons of why my Gino’s family venture was unsuccessful and Jake & Gino is flourishing.

In this article, I am going to document the seven levels of building a successful multifamily real estate business to help you buy your first deal and begin to grow your portfolio, but these levels can be utilized for any business. My goal with this article is to be able to provide clarity to you, to make you realize that it is ultimately your decision whether you want to buy a few properties and stay small, or scale the portfolio and introduce systems and processes to help you achieve larger goals.

Here are the seven levels:

The epiphany/AHA moment
Massive education
Action
Buy your first deal
Acquire your next few deals
Make your first hire
Scale the business

The epiphany/AHA moment

We all have a moment in our lives where we begin to evaluate ourselves and if our life has had any meaning. For me, it was 2008, right in the midst of the Great Recession, a year after my father passed away. The question I asked myself was “Am I building my dad’s dream, or am I building my own?” It became apparent that the restaurant was my dad’s passion, and I was using the restaurant as a means to generate a lifestyle. There was nothing wrong with that, until I realized that it was not my soul purpose, my reason for owning a business.

That was my AHA moment, and it spurred me to action and to consider investing in multifamily real estate. It was exciting, yet terrifying at the same time. I was so used to working at the restaurant that a life without it seemed incomprehensible at the time.

Massive education:

Once the AHA moment wears off, the reality that you don’t know where to start or how to achieve your massive goal starts to set in. I immediately realized that I needed to seek out a mentor or real estate coach to provide me with the systems to begin my education. I tried my hand in real estate a few years before, and it ended in disaster because I had no experience, training or guidance in investing in real estate. I wasn’t going to make the same mistake twice.

My next step was to sign up with a real estate coaching program and dive into podcasts and real estate books. Here are some of the books that I found to be helpful:

Jake & Gino Reading List

This step is all about focusing on your education and increasing self-awareness around your limiting beliefs you have, and to start to let go of those limiting beliefs. Your behaviors are belief driven, and if you think that you will not be successful in real estate, then your actions will reflect those beliefs. Having the right mentor and community is so important as you begin to educate yourself.

Action

Now that you are immersing yourself in education, it’s time to take action. Our motto at Jake & Gino is:

Education X Action = Results

Paralysis by analysis has left the building. Our motto has become “We commit and then figure it out.” The more decisive a person becomes, the more successful they will be in the long run. Taking small steps of action, and continuing with the momentum of those actions will ultimately lead to achieving the goal.

What do I mean by that? Let’s say you decide to call a broker to see if they have any deals, making the call may be the first action. Most investors quit there when they hear deal flow is minimal and the deals are terrible. Or, you can take action like Grant, a young Jake & Gino member who decided to tour a property with a broker. It’s a scary step for a new investor, and most people would rather not step outside their comfort zone.

I give Grant a tremendous amount of credit. Not only did he build rapport with the broker and learn invaluable information about the market, the broker was going to send him another deal later in the week. From that one action of deciding to tour a property, Grant received numerous benefits!

I have one bit of advice for those who are still contemplating taking action. Go out there and look for a partner. My partner Jake has been instrumental in my success, and I know for sure that I would not have been able to accomplish what I have without the help of an amazing partner. Jake holds me accountable, pushes me out of my comfort zone, and compliments my skill set. One plus one does not equal two when you have a terrific partner, it results in much more.

Buy your first deal:

After all of the hard work, and the property tours, and the underwriting, a deal comes to you, and it looks too good to be true. Did they make a mistake? Can this be happening? Your thought is “This looks too good to be true!”

Once you calm down and realize that you’ve got a deal, you begin to get a queasy feeling in your stomach, and your hands begin to sweat. That’s how I felt once Jake & I found our first deal. Your next thought is “Now what?” Are you really going to send in the Letter of Intent?

When you finally come to your senses, you fire off that LOI, and the broker relays it to the seller. After haggling for some time, the seller finally accepts it, and it’s off to creating the Purchase & Sale agreement (PSA). Now, there’s no turning back. A bunch of the sleepless nights awaits.

The day arrives, and the closing goes off with a few minor hitches, but you are the proud owner of your first mom and pop apartment. Our student Jason Bass summed up the feeling perfectly on the Movers and Shakers podcast:

“I am sitting in a Lowe’s parking lot after I closed. It was a feeling of euphoria, and I just sat there happy. Then, I realized it was time to get to work”

This level is all about the I”ma mentality. I’ma do this, I’ma do that. It’s all about adopting the mom and pop mentality and trying to do everything yourself. I call this the bootstrap phase, where you encounter situations for the first time, such as a resident passing away in an apartment, bed bugs, mold, evictions, and you hit them head on and try to tackle everything yourself. There are many times that you ask yourself was it worth all the trouble and hassles.

Something else also occurs in this level. You are now a closer, and brokers begin to take you seriously. Momentum starts to build towards finding your next deal. It’s a great feeling when residents are paying you, but you still see real estate as only a cash flow play. The other benefits have yet to cross your mind. Just wait!

Buy your next few deals

The last few months have been a whirlwind. Collecting rents, turning units, hiring vendors, still cutting your own grass. It’s been exciting, but also challenging. Deal flow starts to increase, and you start to close on a couple more deals. You are still in the mom and pop phase, but start to realize that you need to hire out some tasks, or else this real estate thing is going to consume you!

At this point, most of us are trying to balance a W2 job, or in my case, a small business, with the enormous tasks of trying to run a multifamily business. Yes, you heard me right! Multifamily is a scalable business, and it’s not jut tenants and toilets. When Jake & I bought our next couple of deals, we were still doing the bookkeeping and collecting rents. We were utilizing resident managers to help us, but we soon realized that we needed one or two more properties before we could hire full time maintenance and property management.

This level is where most investors either choose to continue to self manage their deals or seek third party property management. There is no right or wrong solution. The only concern should be what are you trying to achieve. Jake & I liked the control, and we saw property management as a way to drive operations and create another stream of revenue.

In any case, this is the level where you start to see light at the end of the very long tunnel and begin to see yourself firing your boss at a Taco Bell and transitioning into real estate full time. This is also where you begin to understand the true power of real estate. Our thought was “Why did it take us so long to realize how awesome real estate is?”

Make your first hire

This is a big step in every entrepreneur’s journey, a huge inflection point that will never be forgotten. You are starting to shed the I’ma mentality, and now it’s time to hire a full time manager and maintenance tech. This is almost as daunting as buying your first property, but I think it is easier because now you have proof of concept, you’ve bought a couple of deals and you need the help desperately.

You start reading books like Traction, Scaling Up, and Scale, to learn how to create systems to help you hire and delegate responsibilities. I call this level:

People
Systems
Culture

You are being pushed further from your comfort zone, and it is an exhilarating yet scary feeling. Jake & I knew we needed a mentor to help scale the business, but our focus was to get to the next level.

Leave W2 and begin to scale the business

The day has come to sit down with you spouse or significant other and decide it’s time to fire your boss and launch into real estate full time. You have accumulated around two hundred units, depending on what market you’re in and how much equity you control in those deals. Your friends and family, on the one hand think you’re crazy, and on the other hand, begin to utter phrases like “Lucky” and “I’m not sure”. You know luck has nothing to do with it. The harder you work, the luckier you get!!

You have entered your next inflection point, where you begin to obsess about systems and how to scale the business. Gone are the days of I’ma and doing everything by yourself. You will never go beyond this phase if you do not create the systems for your business. And if you do by some miracle, you will turn back into a mom and pop and be a slave to the business.

At this phase, you start to create core values and a mission statement to help you hire employees and create the culture for your organization. This is where Jake & I hired mentors to help us create core values and work on our business. Take a look at ours:

You realize that the week is starting to be consumed by meetings, and if you don’t create a cadence of accountability, you will drive yourself nuts. You also need to start planning quarterly priorities and yearly goals. I remember thinking to myself “What does this have to do with multifamily?” I now realize this IS multifamily, and if you’re not ready, then you better find a partner who is.

Ironically enough, you start to grasp the big picture. There are countless streams of revenue associated with multifamily, and multiple businesses that can be created. In this level, Jake & I created our education platform, along with our syndication company and our mortgage business. We call this our power wheel, where all of these businesses work in a symbiotic relationship and feed off of each other.

When I reflect back at this level, I remember thinking this was all created from buying that first deal, the deal that everyone passed on, the deal that we affectionately coined “The crack den”. Multifamily, like anything else that is important to you in life, is all about the long game. Staying in there long enough, taking the punches to the gut, and just figuring it out. Jake is famous for saying “Multifamily isn’t rocket science. If a drug rep and a pizza guy can do it, so can you.”

What level are you in? Even more importantly, what level do you want to achieve. Life is not one size fits all. The key to life is all about clarity and what YOU want to achieve.

Please leave us a comment below and let us where you are in your journey. And if you’re just starting, buckle up because it’s an amazing ride.

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Top 5 Risks When You Don’t Have A Mentor

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In this article, we will identify the top five risks associated with not utilizing a mentor or education platform.

We have learned through our years as investors that good multifamily investing comes down to:

Education x Action = Results.

It’s great to take massive action. But if you’re not educated, you can fall flat on your face. When I first started investing in real estate, I was taking massive action. Unfortunately, I was lacking in education, and made some crucial mistakes that made me realize that I needed to get educated. My next step was to identify multifamily as my niche to invest an, and seek out a company that specialized in multifamily real estate education. It was one of the best decisions that I ever made when it came to investing, and partnering with Jake was the only decision that was more impactful.

https://www.instagram.com/tv/CAVcX11jCtE/

Jake & I proceeded to create Jake & Gino and introduce our Three-Step proprietary framework Buy Right, Manage Right & Finance Right so that investors had a proven path to follow.

Let’s dive into the first risk.

The Three Pillars of Real Estate:

I want you to write these three pillars down. The first one knowing that the Market Cycle is truly important every time you analyze a deal, and understanding where part of the cycle your market is in.

The second one is Debt. What kind of debt are you going to secure?

Multifamily has different sources of debt, as opposed to residential. Have you connected with a broker to discuss the various options available to you?

And a third one is the Exit Strategy.

What’s your exit strategy? Are you going to Fix and Flip? Are you going to buy and hold long-term?

You have to look at all three of thes components and understand how they work in a deal to make sure that this deal is a buy and hold, or a sell. Focus on the Three Pillars!

Not Being Able To Assess Risk:

If you haven’t been in the game before and you don’t have a coach working with you, you don’t know what you don’t know and that creates a huge vulnerability. With a coach, you can bounce ideas off them and get instant feedback. A coach can advise you and guide you through new scenarios and can offer additional strategies.

I had a coach on our third deal. It was amazing. My coach was right there with me every single step of the way with that deal, whether it was putting the letter of intent in, the purchase and sale agreement, going through due diligence, closing, taking the property over. Those were all new

steps for me, and my coach actually led me through each one of those processes. It saved us countless and countless thousands of dollars, having that coach by my side. And once I went through the process, I was able to replicate the process on our next deal!!

Not Knowing All The Strategies:

When Jake and I first started, all we knew was buy and hold by ourselves.

We had no idea what syndication was, owner financing, how to joint venture with other partners. If we did, it would have shattered some of our limiting beliefs and led to so much more growth. Coaches and mentors will be able to teach you the various strategies in multifamily. You will learn that each of these strategies is a “tool” in the toolbox, and you will know what “tool” to use for each deal that you analyze.

Lack of Team, Vendors and Community:

One of the great things about the Jake and Gino Community is our private Facebook group. All of the students interact in the group, post questions, look for partners and deals, and utilize it as another tool to learn. We also host live events, weekend boot camps where students can network and meet our vendors, and learn from our entire staff.

It is a fantastic way to surround yourself with like minded individuals. One of the keys to success in life is proximity, surrounding yourself with a community that supports you and holds you accountable. When times get tough, it’s always nice to be able to lean on that community for help and inspiration.

Due Diligence Process:

Due diligence are two of the most important words for any investor. An investor has to truly understand and learn the due diligence process when acquiring a multi-family. There’s a lengthy due diligence process and there’s a lot of steps that you need to take. It was reassuring for me to have my coach walk me through the due diligence process on that deal. I avoided countless mistakes that I had made on my previous deal, such as not looking at bank statements, tenant leases, analysing the T12, performing rent comps, diving into the legal due diligence.

Click HERE! to read our blog on our Three-Step Due Diligence Framework.

We hope that you’ve enjoyed this article. Please leave us a comment below with any risks that you have experienced in real estate if you haven’t used a coach or mentor.

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7 Challenges of our First Syndication

To syndicate or not to syndicate, that has been the question for Jake & I. On the one hand, building a portfolio of over 900 units without utilizing investor money has generated the ability to refinance and roll the proceeds into expanding the portfolio, and to create a sizable monthly cash flow. On the other hand, syndication would have allowed us to scale up much quicker and larger by utilizing investor funds and not relying solely on our on funds.

What we have found on our first syndication has left us confused as to whether we were better off syndicating right from the beginning or not. There is no right or wrong answer. The only true answer is to get in the game at any cost possible. And if that means syndication, then by all means, syndicate!!

In this article, I would like to discuss seven challenges, or difficulties that we faced when syndicating our first deal. To us, syndication added another layer of complexity and unknown that we had yet to experience. My goal is to prepare the reader for what to expect when they decide to join the realm of syndication.

1. TIMING

Have you ever heard the saying “Timing is everything in life?” In a syndication, you had better be prepared to move quickly in order to execute properly. Let’s discuss what other timing factors are present in a syndication.

Listen to the audio version of this Blog:

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The syndicator needs to create syndication documents, which include the Private Placement Memorandum, the Subscription Agreement and the Operating Agreement. Contacting an attorney very early on in the process is key to preparing these documents on time to be able to distribute to your investors. Without these documents, the syndicator will not be able to collect funds for the deal.

My advice would be to contact an attorney as soon as possible to discuss the entire process. We contacted our attorney Kim Lisa Taylor a few months before we decided to enter the realm of syndication, and she was instrumental in helping us how to structure our deal, the time line of the deal process, and the overview of the documents that were going to be created.

You want to have these documents prepared ASAP so you can schedule webinars with your investors and begin to share the opportunity with your community.

2. INVESTOR PRESSURE

When we purchased our first property, the septic fields decided to fail six months after closing. What a relief that we had no investors to go back to for additional capital to address this emergency. We decided that we would withhold owner draws for the next few months to pay for the repair. In fact, I think this limiting belief of unforeseen pressure from investors held us back from pursuing syndication.

In our current deal, we have decided to raise some additional capital to be able to handle these unexpected situations. Pressure can be viewed as a positive and a negative. The investor pressure has “pressured” us into underwriting this deal with a higher level of scrutiny and an even more thorough level of due diligence. We have created an operating memorandum for our investors to view the deal, and have researched the market and the comps extensively. It has left us highly confident that this deal will perform as projected.

3. CUSTOMER RELATIONS MANAGEMENT

When Jake & I bought our first property, there was no need for a Customer Relationship Management (CRM) solution. It was just us, and we had yet to build out a real estate team. As we began to expand the portfolio and create the Jake & Gino education platform, we needed a way to manage all of these relationships.

Fast forward to our first syndication, and we have realized that the months of cultivating investor relationships have been very beneficial for us. Every syndicator needs a CRM to manage investor information, send out announcements, create newsletters, and communicate with their investors about the investment. The CRM has allowed us a level of transparency and legitimacy that we did not need when we were purchasing deals on our own.

If you would like to sign into our CRM, click here to register:

We are currently utilizing Active Campaign for investor data and email campaigns, and CrowdStreet for our investor portal.

4. BUILDING SUBSTANTIVE RELATIONSHIPS

When you decide to begin raising capital from investors, a large portion of your energy has to be dedicated to creating “substantive” relationships with investors. Hours of time have to spent on the phone conversing with investors on their goals, building and cultivating your list, and keeping your investors engaged in any future opportunities. Life was so much easier when it was only Jake and myself!

We have been blessed to bring aboard Mike Taravella, who is our asset manager.

5. STRATEGY

Our strategy focuses on buying, re-positioning, refinancing, and holding the asset for the long term. In a syndication, the idea of selling the asset after holding for a few years has entered the discussion. This challenge relates back to the investor, whereby our main focus has shifted from us as the partners, to returning the highest rate or return to the investor. And if that entails selling the asset after three years, then we may have to sell.

The thought of selling never even entered my mind before syndication, and our exit strategy now has to be specific for every deal that we syndicate. One deal may be a buy and hold, another may be a refinance and yet another may be a sell. Syndication has forced us to concentrate even greater on our exit strategy, which is a positive.

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6. FINDING A DEAL

In this challenging market, it has become increasingly difficult to locate deals that generate the necessary rates of return to satisfy investor demands and pay us as the syndicator. When we bought our first property, I was content plowing back all of the excess cash flow into repairs and unit turns to increase the net operating income. If our returns were a bit light, we made up the shortfall when we stabilized the property and refinanced. Short-term pain for long-term gain.

In a syndication, the buy right leg of our framework is crucial. If we overpay for a property, that may limit our ability to invest capital in the deal to perform the necessary repairs to attract higher paying tenants. Every deal has to underwritten conservatively and the projected rent bumps have to also be conservative, as well as the expenses in running the property. This conservative underwriting eliminates many of the deals that come across our desk.

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7. WORKING WITH AN ATTORNEY

We were fortunate when we were introduced to Kim Taylor, our syndication attorney. The biggest challenge we faced was our ignorance to the plethora of securities laws involving syndication. The only way to overcome this challenge is to lean in, listen to podcasts and join a community or group that has experience in syndication. As I previously stated, Kim was instrumental in overcoming this challenge.

If you are looking to learn more about the syndication process or joining a community that is focused on multifamily investing, click the pic below:

Syndication has become another tool in the toolbox, and it is a very powerful and useful tool. It will allow us to scale our portfolio and create wealth for our investors.

If you have any questions on syndication or are considering becoming an investor, please reach out to Mike Taravella at miket@randcre.com

What strategy do you prefer and why? Please leave a comment below!

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How to Use Owner Financing to Generate Wealth

One of the most popular questions that I get from my students is “Where do I get money for the down payment?” In this article, I am going to discuss one strategy we employ to find that elusive down payment: Owner Financing.

Owner financing is confusing to many newbie investors, as well as seasoned investors. It is referred to by other names, such as seller financing, holding paper and private money mortgage. Owner financing is simply a loan provided by the seller to the buyer. Buyers use this to assist in the financing of their deal, and agree to make installment payments usually on a monthly basis over a specified time frame until the loan is repaid.

Read the AUDIO version of this blog on ‘Owner Financing’:

Let me give you an example how Owner Financing works.

In our first deal, we had no credibility and even less money, but we located a property that had potential. The property was listed for $750,000, but had been listed on Loopnet for over two years. We approached the seller and asked if she was willing to hold paper as pat of the down payment. We agreed on a $600,000 sales price, with 10% cash down from us, 10% seller financing and 80% bank financing.

There are several factors that are needed in a deal to be able to utilize this strategy.

You need a motivated seller. We had one, a couple that was burned out and ready to retire.
You need a broker who understands owner financing and can convince the seller to consider it. I would use the word educate rather than convince because there are benefits to the seller.
You need the participation of a bank who is willing to lend money on a deal with owner financing. Our deal met all of these conditions, and we closed on the deal.

We were able to control an asset that was valued by the bank at $600,000 with only approximately $80,000 out of our own pockets. This is one of the main reasons why owner financing leads to achieving massive wealth. Most successful real estate investors have heard of the term OPM, (other people’s money) and by being able to control the most amount of properties with the least amount of money leads to an explosion in wealth creation.

One note: Leverage works in the other direction. If your investments begin to falter, then your losses will also compound.

Fast-forward three years.

We have just refinanced this first deal. The bank appraised the property for $800,000, and we were able to distribute $180,000 to ourselves. The power of leverage allowed us to purchase a property with $80,000 of our own money, and with excellent management, we were able to increase the value of the asset and recoup our initial investment. Our rate of return going forward on this investment is infinite, and that is the goal with all of our investments.

What happened to the note with the seller?

We decided to offer the seller $10,000 if she would extend the note an additional five years. She agreed, and the length of the term of the note was now eight years. Our timing on this refinance may have aided us in the seller’s willingness to extend the note. Christmas was right around the corner, and maybe the seller wanted some cash for Christmas presents. We’ll never know, but it makes for a good theory.

Also Read: Six Steps You Need to Follow to Acquire Wealth

The moral of the story.

“To create wealth in real estate, create value and think outside the box.”

The most common phrase I hear from other investors is “You can’t do that.” Most people are stuck inside the box. Change your mindset to “How can I do that”, and force your mind to come up with creative solutions.

If we had listened to the naysayers, we would have never landed our most recent deal, a 281 unit $11,000,000 asset with NO money down. The seller offered to hold 20% as the down payment, and the bank provided 80% financing. If you look for opportunities instead of problems, they will begin to appear.

You too can access this wealth building strategy. To learn more, visit our website or contact us.

Please leave us a comment below and let us hear of your success with owner financing. We are always looking for creative and unique ways to expand our portfolio and our lives.

By Gino Barbaro, Co-founder, Jake & Gino

Learn how to analyze a multifamily real estate deal quickly and accurately >> Deal Analyzer

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WBP – The Podcaster’s Roadmap on How To Syndicate Your First Multifamily Property

Welcome to the Podcaster’s Roadmap on How To Syndicate Your First Multifamily Property. In this article, we have compiled podcasts, YouTube videos, and articles for any investor who wants a framework on how to syndicate their first multifamily property.

What is the most beneficial way to consume the content in this article? We have designed it so all you have to do is listen to the podcasts and videos in the order that they have been arranged. We begin with T. Harv Eker, an expert in personal development and motivation. He will set the table on how to prepare yourself for your own personal journey, and will share with you what has made him a huge success in the personal development space and what has brought him amazing success.

We continue with podcasts and videos with thought leaders and investors who are making an impact in the syndication space. We conclude with team members who will be able to provide legal and tax advice on syndication. So buckle up, and be prepared to learn how to syndicate your first deal!

1. Secrets of the Millionaire Mind with T. Harv Eker

This show is about finding success by having the “Right Vehicle,” the “Right Knowledge” and the “Right You” to go all the way. It’s about legitimately changing how you were taught to think and knowing that you SHOULD give yourself more by getting rich.

Harv and Jake & Gino dive in deep to the core of how mindset affects the person and spurs them forward or holds them back. This is a deeply affecting episode that will help you examine your limiting beliefs and re-condition yourself to step on the gas pedal on your path to financial freedom!

2. Making The Move into Multifamily With Bill Ham

Bill Ham was a former pilot, but soon realized that flying was not the right path to financial freedom. AS with most investors, he started out buying small multifamily properties, but soon realized that raising capital was the only way for him to scale up to larger multifamily properties. Listen to his story on how he scaled to over 1000 units and created a property management company.

3. Follow The Plan With Ivan Barratt

Ivan Barratt is a multifamily owner and syndicator who specializes in FHA and agency financed projects. Since 2015, Ivan Barratt has raised nearly 30 million in equity and acquired over 2000 units. Currently, his companies manage well over $150 million in assets comprising nearly 3,000 units. On this podcast, he speaks with us about his first syndication, partnerships and habits for success.

4. Buying Right With Vinney “Smiles” Chopra

This podcast’s exciting guest has been fondly nicknamed “Mr. Smiles” for good reason! Vinney Chopra, one of our happiest guests ever, oversees Moneil Investment Group, LLC, and Moneil Management Group, LLC, in addition to teaching through his academies. He has funded over 26 syndications to date!

Vinney has a very inspiring story. From selling books to buying single-family was a journey in itself! He sprung for his broker’s license and consequently, multifamily caught his eye. Vinney gives tips on how to overcome analysis paralysis like he did and to take massive action in raising money and acquiring properties.

5. The Mindset Of An Investor With Dave Zook

One of the few returning guest on our podcast, Dave Zook discusses how and why he started investing in multifamily, and why he got into the syndication game. For Dave, it’s all about team building and creating value for his investors.

6. Blue Collar Marketing Mark Kenney

Mark Kenney, founder of Think Multifamily, is a hustler and seasoned real estate investor in the multifamily mecca of Dallas, TX and now Atlanta, and owns 2700 units!! Mark gives us hos breakdown on how he structures his syndication deals and his favorite ways to add value during renovations.

7. Don’t Lose Money With Andrew Cushman

In 2007, Andrew left his corporate job and began investing in real estate. In this podcast, he shares about the extreme persistence and creative tactics he used to land his first single-family and multifamily deals and then spills ALL of the details about HOW he successfully repositioned the multi-unit! He also shares what he looks for in a market and in a property, as well as a property management company.

8. Snowballing Capital With Devin Elder

Listen to Devin’s take on Buying Right, Managing Right and Financing Right with both single and multifamily. He also talks about how it felt getting into multifamily syndication, his buying criteria, and what his business plan looks like for repositioning a property and getting his investors returns.

9. Balancing Capital & Opportunity With Chris Urso

Chris is another repeat guest on the podcast, and I think you will know why we invited him on again. He is a wealth of knowledge, is passionate about multifamily, and shares his tips and habits that have made him successful in the business.

10. Turning One Deal Into Multiple Deals With Bruce Petersen

Bruce takes a deep dive into that first deal and the strategies that he used to find his investors, finance the deal and running his own property management. At one point, he closed 4 deals totaling 860 units in 18 months. This episode is jam-packed full of ways to add value to your properties and involve your tenants suggestions and treat them well!

11. Navigating The Waters Of Syndication Law With Kim Taylor

Kim Lisa Taylor (a nationally recognized expert in the securities industry) is the founder of Syndication Attorneys PLLC, where she and the other members of the Syndication Attorneys team focus on helping small business owners/developers structure and convey their investment opportunities in a way that will attract private investors, both domestic and foreign. They teach their clients how to use securities laws effectively!

12. Ins & Outs of 1031 Exchange With Len Berkowitz

Len Berkowitz is the Managing Director of Riverside TACS, providing sophisticated international tax advice and cost segregation services to a broad array of clients. He has over twelve years of experience as a tax practitioner, and discusses the pros and cons of 1031s on this podcast.

13. Asset Protection With Scott Smith

Scott Smith is the founder of Royal Legal Solutions. On this podcast, he gives some great advice on how to hire the right professional to advise you on your real estate investments and how to place your assets in an LLC the smart (and unexpected) way. As a real estate investor himself, he has the ability to strategize, compartmentalize and structure legal entities appropriately. Scott warns: there are certain situations in which insurance just won’t protect you! It’s important to use the right entity structure to safeguard yourself.

14. The Go Giver With Bob Burg

If you work in sales whatsoever, you are surely concerned with increasing volume. By being an avid learner, Bob Burg taught himself how to dramatically increase his sales using systems and by building relationships. Thus, ‘The Go Giver’ was born, teaching the foundational concept: Being a Go-Giver is giving value to your relationships. This podcast will teach you how to create value for your investors and how to think of solving problems for others, thus opening the floodgates of $$$ for your next syndication.

16. Seven Challenges Of Our First Syndication

In this article, I discuss the seven challenges, or difficulties that we faced when syndicating our first deal. To us, syndication added another layer of complexity and unknown that we had yet to experience. My goal is to prepare the reader for what to expect when they decide to join the realm of syndication.

17. Multifaceted Multifamily With Jake & Gino

This episode is dedicated to a big theme for Jake & Gino this year: Multifaceted Multifamily – building a multifamily business with multiple streams of income. Starting as just an investing business, Jake & Gino went on to build out their own in-house property management, design an education platform, and now they are adding another facet to their business allowing YOU to invest alongside Jake & Gino as an equity partner! The guys tell the fascinating play-by-play story of the last 5 years and how far they’ve come, and hit hard on having the drive, persistence, and out of the box mindset that is vital for multi-faceted success! They even detail how multiple streams of income can be created in other businesses, for example: Gino’s family restaurant in New York.

18. Multifamily Stories: The Investor Dinner

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investor dinner to begin to raise funds for our first syndication. Get motivated and inspired to step out of your comfort zone and start raising funds for your first syndication!!

Task:

It’s time to create your power base, your list of close friends and family members that you can begin to offer the opportunity to invest with you. Next, you will need to select a market to start looking at deals. Once the market is selected, begin to reach out to brokers and start to create relationships with these brokers. When the brokers start sending deals your way, be sure to underwrite them quickly and let the brokers know if you want to pursue it further.

It’s time to MIH!!

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Multifamily Financing: How To Get The Best Terms For Your Deal?

Most investors are familiar and find comfort when it comes to financing a single-family home, but become overwhelmed and intimidated when the conversation turns to multifamily financing. In this article, I would like to describe the differences between a residential and commercial loan, outline the different types of commercial lenders, and how to qualify for a commercial loan. A commercial loan is simply a loan that finances properties that are five or more units.

Multifamily Financing Podcast:

There are a few key differences between a residential and commercial loan.

1. Commercial loans are underwritten using the income approach and rely heavily on the performance of the property that is being financed. Residential loans employ the sales approach, where the comparables (comps) in the market weigh heavily on valuing the asset.
2. Commercial loans tend to have a much shorter maturity period than a residential loan. This shorter maturity requires a balloon payment at the end of the term. The maturity periods are typically five, seven or ten years.
3. Commercial loans employ a Debt Service Coverage Ratio (DSCR) to analyze the viability of a loan. DSCR is simply a formula that measures a company’s ability to service its current debts by comparing its net operating income with its total debt. You take the Net Operating Income and divide the total debt service. The rule of thumb for a reasonable DSCR is 1.2.
4. The interest rate on a commercial loan is usually higher than a residential loan.

We consider the financing portion of an investment to be a crucial part of our three-legged framework, which entails “Buy Right, Manage Right and Finance Right”. We employ the analogy of our framework to a wheelbarrow, where if one of the legs is weak or unstable, it will topple over. It is vital to master the financing portion of the investment, or else you will put the investment in jeopardy.
The first thing an investor has to realize is that money is a commodity, thanks to the Internet. Years ago, banks had more control over the process and made it more difficult to secure financing. But once a product is turned into a commodity, the consumer benefits with lower and more aggressive pricing. If you don’t like one bank’s terms, walk down the street and elicit a quote from another bank to use in the negotiating process.

Jake and I recorded a video on bank financing terms. We discuss all of the relevant terms you need to negotiate with the lender:

Multifamily Financing: How To Get The Best Terms For Your Deal

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What are bankers looking for from an investor? They are looking to lend on deals that make sense. Their priority is to lend money on sound investments that do not end up in default. Their bonuses are usually tied to the amount of loans that they underwrite. Bring them a deal that is viable and that they feel comfortable underwriting. Bankers are also looking for an investor who is prepared and who can articulate the merits of his deal. We created a credibility book to illustrate to bankers, brokers, partners and even potential investors to outline our investment strategy and list our portfolio of properties. We are trying to create “credibility” with individuals who are interested in doing business with us. Click here to download a copy of our credibility book:

Click Here to download a copy of our Credibility Book.

In commercial lending, Net Operating Income (NOI) is key. Click here to read an article I wrote for Bigger Pockets on how to calculate the value of multifamily real estate. The article dives into NOI and how to properly analyze and add value to a multifamily deal.

Now let’s discuss the different types of commercial lenders:

1. Banks
2. Life insurance companies
3. Conduit lenders
4. Mortgage banker
5. Mortgage broker
6. Agency lender
7. Private Money

Banks:

Banks are the preferred lender of choice for most investors when it comes to multifamily financing. You can break down banks into three different types: commercial bank, savings bank and credit union. We have funded most of our deals through a commercial bank. There are a few benefits to using a commercial bank.
• A local commercial bank is usually much easier to work with. They tend to have an intimate knowledge of the market and are in search of demand deposits.
• It is easier to get a deal financed with a commercial banker, especially a portfolio lender. Portfolio lenders hold their mortgages in their portfolio and do not sell them off to the secondary market. This allows them to be more flexible with their terms.
• Once you establish a relationship, the bank may even bring you deals from their portfolio.

There are a couple of drawbacks with using a local bank. The loans have a shorter amortization period, the prepayment penalties can be onerous, the interest rates may not be as competitive as other lenders and the loans are usually recourse (the borrower has to personally guarantee the loan). When you first begin your investing career, commercial banks are the easiest and quickest way to finance your deals.
A credit union is a financial institution that is owned and controlled by its members. It is not open to the public. All three of these banks rely on customer deposits to be able to lend money out for loans.
Listen to our podcast with our commercial banker Mike Saporito on how to secure financing for your next deal:
How To Network With a Banker When Buying Multifamily Apartments

Life insurance companies:

Life insurance companies are a huge source of real estate loans. They originate loans from all of the premiums they collect from insurance policies. Insurance companies are risk averse and tend to lend on around a 75% loan to value. They also seek out assets that are in newer locations. Mortgage brokers will employ insurance companies when looking to finance a deal.

Conduit Lender:

A conduit lender is an investment bank that originates loans. A conduit loan is an individual mortgage that is pooled together with other commercial loans, and then securitized. This process is known as commercial mortgage back securities (CMBS), where these loans are converted into fixed income securities. A couple advantages of a conduit loan are that they are non-recourse loans, the amortization is longer than those of commercial banks, and rates are very competitive. On the other hand, these loans are expensive to originate and they have hug prepayment penalties. There is very little flexibility with these loans, although many of these loans are coming due on the next twelve months, which may force lenders to come to the table and renegotiate the terms.

Mortgage banker/ Mortgage broker:

The mortgage banker originates and funds commercial real estate loans for a fee and then sells the loans. They generate revenue by charging origination fees and servicing the loan. A mortgage broker, on the other hand, is an intermediary who works with the borrower and lender to secure financing. One distinct advantage of a mortgage broker is that they have access to hundreds of different types of loan programs to match the borrower with the program that suits his or her needs.

Agency Lender:

An agency lender is a commercial mortgage-banking firm that originates and underwrites loans for the purpose of selling back to either Fannie or Freddie, but not all agency lenders sell their loans back. Agency lenders have strict underwriting guidelines, and their terms are competitive in the market. They quote their interest rates in relation to the Ten-year treasury bond. We have seen rates priced at around 200-250 (100 basis points equal 1%) basis points above the Ten-year treasury. These loans are non-recourse and have longer amortizations.

Private money:

Also referred to as hard money, this method of financing commercial real estate is not as popular. The fees on private money tend to be very expensive and the interest rates can hover anywhere from 8 to 25%, depending upon the experience of the investor and the quality of the deal. When seeking private money, a lender requires much more equity in the deal to protect his investment and will usually lend on 65-75% of the loan to value of a property. Any investor who is looking for short-term money and can’t get conventional multifamily financing should consider utilizing private money. I have a student who uses private money to purchase the investment, repositions the investment (AKA increases the NOI) and goes to his local bank to refinance the property once it is stabilized. He uses the funds to pay off his private lender and utilizes the remaining funds for his next deal.

Task:

It depends on where you are in your investing journey. Beginning investors will find it easier to utilize local banks, while seasoned investors will find the benefits of agency-led multifamily financing attractive, even with all the effort involved in securing agency financing. If you have any questions financing your next deal, or are looking for a partner, we’re here to help. Email us at gino@jakeandgino.com

Read more about multifamily financing: https://jakeandgino.com/tag/multifamily-financing/

If you would like to partner or invest with Jake & Gino, please fill out this form:
Investor Form

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1. TIMING

2. INVESTOR PRESSURE

3. CUSTOMER RELATIONS MANAGEMENT

​4. BUILDING SUBSTANTIVE RELATIONSHIPS

5. STRATEGY

6. FINDING A DEAL

​7. WORKING WITH AN ATTORNEY

Let me give you an example how Owner Financing works.

Fast-forward three years.

The moral of the story.

1. Secrets of the Millionaire Mind with T. Harv Eker

2. Making The Move into Multifamily With Bill Ham

3. Follow The Plan With Ivan Barratt

4. Buying Right With Vinney “Smiles” Chopra

5. The Mindset Of An Investor With Dave Zook

6. Blue Collar Marketing Mark Kenney

7. Don’t Lose Money With Andrew Cushman

8. Snowballing Capital With Devin Elder

9. Balancing Capital & Opportunity With Chris Urso

10. Turning One Deal Into Multiple Deals With Bruce Petersen

11. Navigating The Waters Of Syndication Law With Kim Taylor

12. Ins & Outs of 1031 Exchange With Len Berkowitz

13. Asset Protection With Scott Smith

14. The Go Giver With Bob Burg

16. Seven Challenges Of Our First Syndication

17. Multifaceted Multifamily With Jake & Gino

18. Multifamily Stories: The Investor Dinner

Task:

It’s time to MIH!!

Multifamily Financing Podcast:

There are a few key differences between a residential and commercial loan.

Jake and I recorded a video on bank financing terms. We discuss all of the relevant terms you need to negotiate with the lender:

Multifamily Financing: How To Get The Best Terms For Your Deal

Now let’s discuss the different types of commercial lenders:

Banks:

Life insurance companies:

Conduit Lender:

Mortgage banker/ Mortgage broker:

Agency Lender:

Private money:

Task:

4. BUILDING SUBSTANTIVE RELATIONSHIPS

7. WORKING WITH AN ATTORNEY