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.

Your Multifamily Investing Questions Answered

[et_pb_section bb_built=”1″ inner_width=”auto” inner_max_width=”1920px”][et_pb_row][et_pb_column type=”4_4″ custom_padding__hover=”|||” custom_padding=”|||”][et_pb_code _builder_version=”4.20.2″ background_pattern_color=”rgba(0,0,0,0.2)” background_mask_color=”#ffffff” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″][/et_pb_code][et_pb_text _builder_version=”4.20.2″ background_pattern_color=”rgba(0,0,0,0.2)” background_mask_color=”#ffffff” text_text_shadow_horizontal_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength=”text_text_shadow_style,%91object Object%93″ text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength=”link_text_shadow_style,%91object Object%93″ link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength=”header_text_shadow_style,%91object Object%93″ header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″]

As investors and educators, Jake & I fall into the trap of thinking that we know what our member’s pain points are. The only way to truly understand what frustrates beginning investors is to ask them. I set out by asking our members on our J&G Facebook Page what was most challenging to them when beginning to invest in multifamily real estate.

Here are their questions with answers:

Dan S:

“Not knowing where to find the deals?”

Unfortunately Dan, this question is puzzling even to the most experienced operator. What makes finding deals challenging is that the investor has to understand market cycles and to seek out markets that are beginning to emerge. Click here to read our article on Market Cycles. In the current climate, there is a plethora of cash chasing yield, and the options are limited. Multifamily has become a very popular alternative for many investors, and this has led to cap rates compressing and prices escalating.

The first step is to begin to research markets and to select a market that is poised for growth. Remember, real estate should not be viewed from a regional perspective, and should be analyzed market to market. One city may be experiencing tremendous growth, while another is shedding population and contracting. Utilize our Market Research Doc to begin analyzing markets and comparing which market has the most positive metrics.

What should you be looking for? The first, and by far the most important metric, is job growth. I’m sure you’ve all heard “Location, location, location!” When trying to discover the next emerging market, it’s all about “Jobs, jobs, jobs!” The demand for apartments will increase when a city is adding employment, and jobs are a driving force when it comes to people relocating to another city. Jobs have a multiplier effect; in essence, when one white collar job is created, two to five blue collar jobs are created to service that white collar employee. We strive for at least a 2% job growth rate for at least two consecutive years.

These are five other important criteria to focus on:

Household Growth
Construction Permits
Demographics
Tenant Laws

Strong Government Leadership

Your task should be to map out your market, attempt to create a relationship with the various property owners, and network with brokers in the market.

Jaytee L:

“I am worried about timing the market and buying at the top.”

Well Jaytee, you aren’t the only investor with this sentiment. 2017 feels eerily similar to 2008, with a couple of exceptions. First of all, I think banks are on much more solid ground than they were back in 2008. Secondly, cap rates in many markets are still higher than they were back in 2008. And third, the shift in demographics to a renter nation has propelled multifamily valuations. Baby boomers and millennials, the two largest demographics, have shifted to renting instead of purchasing a home, both with different reasons for their decision.

On the other hand, I keep hearing that there are no deals out there, and that cap rates are continuing to compress. I even notice most brokers sense they have the upper hand when selling a property, and make less effort to entertain offers they deem “too low”. A few years ago, brokers were begging for offers.

The only way to combat your fear of market timing is to seek out markets that are:
1. Emerging
2. Still reasonably valued

Create buying parameters for your market, and be willing to stick to those parameters. We are reluctant to invest in deals that offer less than an 8 Cap and a 10% Cash on Cash return based on ACTUAL numbers in our market. It is very difficult to locate these deals, but we are more interested in protecting our downside risk than just buying another deal. Once (not if) the market shifts, we want to make sure that we bought right and the property will be able to sustain the debt service and the expenses. Remember, it’s not what you buy, it’s what you pay, and most investors are getting caught up in the euphoria of the current market projections.
If you feel the market is overpriced, I would recommend that you build your cash reserves and continue to educate yourself. I would also venture into other markets and seek out markets that are starting to emerge. But, keep sourcing deals, and if a deal pencils out, go for it!! Whatever you focus on, expands!

Daniel J:

“How do I have the right answers for brokers and overcome inexperience?”

We experienced the exact same fear when we decided to invest in multifamily properties. Who was going to take a drug rep and a pizza guy seriously? I credit my real estate education with overcoming our lack of credibility. I was able to speak the lingo, and I knew how to underwrite a deal. On our first deal, we stumbled through the rest of the process.
Fortunately, for you Daniel, Jake and I created a couple of resources through our mistakes that will help you network with brokers and display your credibility. Download our Researching A Market E-book, a fantastic resource that will allow you to ask brokers pertinent questions when analyzing a specific market and deal. Start to learn the real estate lingo and qualify yourself as a real estate professional.
The other resource that investors need to create is a Credibility Book, a business plan that investors formulate to convey their investing strategy and their current portfolio.

Click the image below to download our Credibility Book:

We have even created a micro-course to walk you through how to create your own personal Credibility Book.

Click the image below for a link to the course:

Here is a testimonial from a student Melissa who created a Credibility Book with us:

“I did a credibility book for the 12-unit I’m buying. It really made me stand out to the broker, got me great financing, and honestly helped me get organized for my search criteria. Follow what Jake & Gino say and you’ll get a deal!”

If you want to stand out versus the competition and show the broker why you’re the right person to take down the deal, then you need to create your own book.

Robert C:

“How do I invest in multifamily with a lack of cash and a New Jersey market with low cash flow?”

The first step Robert is not to focus on the lack of money, but focus on your education and how you can add value to others. Zig Ziglar says “You can have everything in life you want, if you will just help other people get what they want.” Once you learn how to underwrite deals and invest in markets that cash flow, then you can embark on forming a partnership or raising private money for your deal. Jake & I partnered up for our first deal, and we haven’t looked back. We were able to recruit a third partner who was instrumental in allowing us to grow our portfolio.

Coincidentally, we just had a student from New Jersey close on his first multifamily deal, a ninety-four unit apartment complex in Louisville, Kentucky. He was able to select the market and form a real estate syndication (the pooling of funds from numerous investors). Was this an easy deal for him? Absolutely not!! It seemed as if he continued to run into roadblocks, but his tenacity and desire to buy a large property maintained his motivation to close on the deal.
The answer to your second question lies with our student’s solution. He sought a market that was still reasonably valued, and one that he felt comfortable with the demographics. He is active in his market fixing and flipping, but he understands that his market does not deliver cash flow.

If you have any questions, please email me at gino@jakeandgino.com, and I will be sure to respond. I may even write an article answering your question.

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

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

Why All Investors Need To Create A Budget Before Investing In Multifamily Properties

[et_pb_section bb_built=”1″][et_pb_row][et_pb_column type=”4_4″][et_pb_code _builder_version=”4.20.2″ background_pattern_color=”rgba(0,0,0,0.2)” background_mask_color=”#ffffff” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″][/et_pb_code][et_pb_text _builder_version=”4.20.2″ background_pattern_color=”rgba(0,0,0,0.2)” background_mask_color=”#ffffff” text_text_shadow_horizontal_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength=”text_text_shadow_style,%91object Object%93″ text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength=”link_text_shadow_style,%91object Object%93″ link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength=”header_text_shadow_style,%91object Object%93″ header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″]

As I sit here in Florida on a month’s vacation, I find it extremely difficult to compose an article espousing the benefits of creating and following a budget before investing in multifamily properties. My budget for this month has, well, let’s say, not followed my normal spending habits. But, if I had not created a budget early on in my life, there is no chance that I would have achieved financial freedom and been able to take a month’s vacation. In this article, I would like to introduce you to a tool to create your own budget, what skills you will develop as a result of creating a budget and dive into several reasons why a budget is crucial for your success in investing in real estate and achieving financial freedom.

I have embarked on a new learning experience and signed up with Dave Ramsey’s Financial Coach Master’s training. My desire was to learn a framework on sensible saving and spending habits and in turn teach and empower my children and Jake & Gino students to take control of their financial destiny. As so often happens in life, once a person thinks he masters a subject, he only begins to realize his ignorance. I totally underestimated the power and importance of a budget.

A budget is simply a blueprint of your financial future. In my coaching business, I have discovered that money and budget problems are seldom the “problem”. They are usually the symptom of something else that is occurring in the client’s life.

Let me now discuss the three types of budgeting problems. According to Mr. Ramsey:

Budgeting problems fall into three types:

Prospective problems:

The person does not have a big enough reason “why” to do it. If a person can find enough reasons why, they will find a way how. My story is the perfect illustration. I was a small business owner with a large family (six kids) who felt trapped in their situation. I finally built up enough energy and reasons why to escape my surroundings that I jumped into multifamily properties and learned how to accomplish it.
If you don’t have a big enough reason why to create and follow a budget, you won’t do it. How many times do you have to end up with more month at the end of the money? Please read my article on motivation and how you can summon motivation when it is most needed: How You Can Summon Motivation.

People Problems:

The relationships that you are in may cause you to procrastinate about developing a budget. This may be a serious roadblock for some, but I want you to read on and see how you can convince or persuade your counterpart to commit to a budget. Would your partner like to see a 17% raise if they commit to a budget? I know I would. That is the statistic that Dave cites when his clients adopt a budget. Put the savings in real dollars to your partner and then show them where the savings will come from.

Process Problems:

This is the easiest problem to solve. People do not know the mechanics behind creating a budget. Let’s start with a tool that I find extremely useful to begin your journey: Every Dollar. It is a fantastic tool that allow you to plan and track your income and expenses, link your accounts to the bank, and gives you a clear snapshot of what is occurring every month.
I was frustrated when I first began using the budget tool. Whenever you begin something new or vacate your comfort zone, that little inner voice will be screaming at you to quit. It will take you a few months to become proficient, so the key is to stick to it and not to beat yourself up if you aren’t doing it right!

Let me list a few reasons how creating a budget positively impacted my professional life, especially my real estate career:

Laser Focus.
Took responsibility for my spending and saving habits.
Controlled expenses.
Ability to reallocate resources.
Greater understanding of a balance sheet and income statement. Utilized budgeting for capital expenditures.
Focused on earning more income.

The first thing I noticed when I created the budget with Every Dollar was that I was able to focus on what I was spending money on and where I should cut back my expenditures. I was happy that my housing costs were around 30% of my total income, but my food costs were a bit higher (six kids that love to eat). I was also spending more on my lifestyle than I should have. I had money left over at the end of the month, and I was able to allocate more to my charitable contributions.
A person who can focus his efforts is much more likely to succeed in life. In the case of the budget, the numbers don’t lie and I was able to spend money and gift money where I felt it was appropriate. Once I saw the inequity of my spending, it gave me the motivation to fix the problem.

Another amazing benefit of the budget was my ability to realize that my income was not fixed. I had the power to control how much I made that month. For example, I could focus on making more sales calls, expand the Jake & Gino community, solicit more coaching students and try to buy another multifamily property. It was a terrific feeling when I began to add more revenue as it was generated throughout the month. It actually made me work harder and smarter and target revenue producing activities.
The biggest benefit was taking responsibility for my actions and not blaming the economy or my current situation for my money problems. Responsibility, coupled with focus, has been the driving forces behind my recent success in the real estate space.

Task:

So where do you start? First, you need to admit to yourself that money is slipping through your hands every month (remember the 17% figure). Next, consider contacting a Financial Coach to discuss your current situation and how to create a plan to address your problems. If you have a partner, you both need to be onboard and willing to work together to solve the problems. Finally, just jump in and use Every Dollar to create a budget!
Before you even consider investing in real estate, you need to get your financial house in order. It’s never too late to start. Let me know how things work out or if you would like some help creating your own personal plan.

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

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

A Letter To My 30 Year Old Self

[et_pb_section bb_built=”1″][et_pb_row][et_pb_column type=”4_4″][et_pb_text _builder_version=”4.20.2″ background_pattern_color=”rgba(0,0,0,0.2)” background_mask_color=”#ffffff” text_text_shadow_horizontal_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength=”text_text_shadow_style,%91object Object%93″ text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength=”link_text_shadow_style,%91object Object%93″ link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength=”header_text_shadow_style,%91object Object%93″ header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″]

As I approach my first year since “retiring” from my restaurant business, I decided to reflect back and analyze the path I took to reach my current state of affairs. Although I have only a couple of regrets, the ones that I do have are huge. My motivation in writing this article is to illustrate these mistakes with the hope that those embarking on a career or new venture will be able to make a conscious decision for themselves and lead an empowering life.

When I was thirty years old, I was consumed with the restaurant business and devoted my energy towards its success. The business was growing and very profitable, but I was treating it as a high paying job and not a business. I was working in the business and not on the business. This is the largest regret that I have as I look back. I was more interested in a nice paycheck than trying to scale a business and create real wealth.

I should have focused on financial freedom and getting out of the rat race sooner.

Becoming financially free opens your life up to so many opportunities. It has allowed me to concentrate on what I am passionate about, family and real estate. The more passion you exhibit in any endeavor, the better you are at it and the happier you are. Bottom line!

I had it backwards.

My business was dictating my lifestyle instead of my lifestyle dictating my business. I was somewhat content in what I was doing, but there was no thought of creating passive income or multiple streams of revenue. The economy was humming along too well for me to focus on these wealth-building principles. The Great Recession of 2008 woke me up to the fact that I was a slave to my situation and to my paycheck. What was my next step?

I finally took responsibility for my results and dove in head first towards personal development. I realized that I was the one in control of my results, not the economy and certainly not any politician. Once I entered coaching school, I viewed life and achievement from a different perspective and my results exploded. I was able to leave the restaurant four years after I came to the realization,

“Enough was enough”.

This lack of personal development was my second regret in life. My ignorance of goal setting and taking personal responsibility hindered my ability to grow as a person. Once I began to listen to coaches such as Tony Robbins and Zig Ziglar, I was exposed to how a successful person acted.

I began to surround myself with smarter and better people, and I immersed myself in all types of education.

I began to ask myself tougher questions, such as “Where am I going to be in five years”, “What is going to make me happy” and “Who am I”? The quality of your life is in direct proportion to the quality of questions you can ask yourself. Up to this point in my life, I wasn’t asking myself any questions.

My growth began when I started to challenge myself.

I have been blessed with six children and an amazing wife, although I allowed external forces and society to dictate how I felt about having a large family. The first comment out of anyone’s mouth when they heard that I had a large family was “Just wait until college and weddings start coming up”. This only added to my stress at work, and I was beginning to regret my decision of having a large family. The turning point for me was when my wife had an ectopic pregnancy, (her tube ruptured). I was crushed that we had lost a baby and that my wife had to endure such pain.
After that moment, any thought of financial responsibility quickly vanished and I haven’t looked back. I just wish I had come to this realization a lot sooner. Funny thing is that I rarely get those questions about paying for college. I think that I have become more relaxed and my focus is on enjoying every day with them.
My goal in writing this article is to allow you to choose your own path and to make empowering decisions about your career and your family. I want you to embrace personal development and set goals for your life. Don’t let your life happen to you; take control of your life. Finally, always focus on big goals that will elicit the passion in your life. Today is the first day starting the rest of your life!

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

9 Negotiation Techniques To Help You Close The Deal

[et_pb_section fb_built=”1″ _builder_version=”4.16″ global_colors_info=”{}”][et_pb_row _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.20.2″ vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” global_colors_info=”{}”]

Two of the biggest myths in business are:

“He or she was a born negotiator”

and my favorite “That guy is a natural born salesman“. What a crock!

That is taking away all the sweat and tears these professionals have dedicated to mastering their craft. These business skills can ALL be learned, and eventually the pros utilize them with ease and precision.

The previous article focused on the six keys to negotiating and the four tips to becoming a more successful negotiator. This article will concentrate on several negotiation techniques to use when purchasing real estate.

These techniques will not only save you time and money, but will assist you in closing the deal.

Let me outline the techniques and then dive into each one:

Trade off
Nibble
Vice principle
Flinch technique
Doorknob technique
Red Herring
Put offer in writing
Counter their offer
Draft the contract

Trade Off

The idea behind this technique is to get something in return for everything that you give up. For instance, if a buyer asks to close in thirty days, you can come back with,

“How about you knock off $30,000 off the price.“

I would use the trade off every time your opponent asks for something to stop them from asking for more concessions. Also, try not to concede something without getting something else in return.

Try to exchange concessions that are worth less to you, but may carry more weight to the opposition. If my motivation is to receive a reduction in price, and my seller is motivated in selling, I would consider putting down more money in escrow if I could receive a lower price. A higher escrow amount may signal to the seller my seriousness in closing the deal, yet I would require a lower sales price.

Nibble

The nibble technique is used when a negotiator asks for concessions in small “increments”. Your opponent is ready to close the deal, but you throw in one more nibble,

“How about extending the term on the note to 7 years.”

The person has mentality closed the deal, but now is faced with a dilemma. If he is truly motivated to close, he may just say yes to your annoying demand.

This technique is used in almost every sales situation. Have you ever gone to purchase a TV or cell phone, and the salesman asks if you would like to buy an extended warranty? My recommendation if you want to stop your opponent in his tracks is to cut him off as soon as he starts to nibble. I would tell the salesman,

“No thanks. I’m just here for the TV. That’s all.”

Be direct, firm and hold your ground. Another solution would be to convey all of your criteria to the salesman when making a purchase. You could tell him that you are only interested in the purchase of a TV.

My children are the masters of this technique. Hey dad, can we stay up ten more minutes? How about the next commercial? My advice to you is to nip it in the bud if you want a peaceful resolution. Kids know how to grind, and we tend to lose this gift of persistence as we age.

Vice principal

This technique asks the simple question,

“Is that the best you can do?”

The opposition may come back at you with a lower price, and you haven’t even begun to negotiate. Some sellers will ponder this question, and come back with a lower price. Or, the seller may consider adding some concession to the deal. I use this on my children sometimes.

My oldest daughter edits our podcast, and she is usually very punctual with the completion of the work. But if I feel she is taking to long, I will ask her “Is that the best you can do?” Often, this question will put her on the defensive and make her come up with a solution.

Works like a charm, just don’t tell her.

Flinch Technique

With the flinch technique, you are trying to convey a sense of disbelief. The negotiator displays a feeling of pain or discomfort to his opponent, such as flinching, an open mouth or eyes squinting.

A seasoned negotiator will probably notice you are employing this tactic, so don’t embellish it. A show of discomfort will signal to your opponent your disapproval.

Doorknob Technique

You have come to the end of the negotiation, and you still have a few issues to resolve. Both sides can’t come to an agreement, so you decide to get up and go reach for the “doorknob” to leave the negotiation. Your goal is to have the other side stop you and bring you back to the table. You will have to understand the level of motivation of the seller for this technique to be successful. You may be shooting yourself in the foot if the other side lets you keep walking.

Many buyers employ this tactic when purchasing a car. The dealership is done negotiating, yet the buyer is unsatisfied with the results. It’s time to get up, proclaim you are going down the street to the competition and reach for the doorknob. Hopefully, the salesman will rein you in and continue the bargaining.

Red Herring

Wikipedia defines a red herring as something that misleads or distracts from a relevant or important issue. In real estate, a buyer may include a clause in the contract that is of little importance to him. If the seller wants the clause removed, then the buyer has ammunition to go back for his own concession.

For instance, the buyer is negotiating with a bank on the terms of the financing. His motivation is to secure interest-only payments for the first twelve months of the mortgage, so he tells the bank he is willing to put down 15% as a down payment. The banker will shoot back that he needs 20%, and the buyer counters with

“How about giving me twelve months interest only payments, and I will put down 20%”.

I am not a huge fan of this technique. Negotiators often use this technique to distract the other side from a major problem, and I have included it here so you can notice when the other side is using it on you.

Put offer in writing

The written word validates our beliefs and gives us instant credibility. The goal of any author, other than becoming a best-selling author, is to convey their credibility and experience through the publication of their book.

When we negotiate a purchase, we analyze the numbers through our deal analyzer and send over a copy of our analysis detailing why we need to purchase the property at the price shown.

The seller can balk and become irritated, but we have shown our justification with the written word, and he is seeing it with his own eyes. There is nothing lost in translation, and he has the ability to refute our numbers.

Counter their offer

Sometimes, a deal is priced accordingly and you may be thrilled to offer full price. I would consider countering the offer with another demand. If you accept his proposal with no objections, the opposition may feel as if they offered too little. They may get the feeling that they missed something.

We were offered an off-market deal a couple of years ago at a great price. Our initial reaction was to accept the deal and go straight to contract. We realized that the seller might feel as if his offer was too low, and he would want to raise the price. Instead, we sent over a copy of our deal analyzer with a price reduction, and the seller accepted it.

We saved over $40,000 employing this tactic because we understood the true motivation of the seller.

Draft the contract

If at all possible, try to draft the contract and insert the conditions that are important to you. Have the other side review the contract, and allow them to amend whatever they disagree with. You have begun the trade-off phase, where the other side is asking for concessions and you can counter with your concessions.

I hope you have enjoyed our article on negotiation techniques. I would be grateful if you could leave a comment below and add additional techniques for the readers.

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

How To Successfully Negotiate Your Next Real Estate Deal

[et_pb_section bb_built=”1″ inner_width=”auto” inner_max_width=”1920px”][et_pb_row][et_pb_column type=”4_4″ custom_padding__hover=”|||” custom_padding=”|||”][et_pb_text _builder_version=”4.20.2″ background_pattern_color=”rgba(0,0,0,0.2)” background_mask_color=”#ffffff” text_text_shadow_horizontal_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_horizontal_length_tablet=”0px” text_text_shadow_vertical_length=”text_text_shadow_style,%91object Object%93″ text_text_shadow_vertical_length_tablet=”0px” text_text_shadow_blur_strength=”text_text_shadow_style,%91object Object%93″ text_text_shadow_blur_strength_tablet=”1px” link_text_shadow_horizontal_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_horizontal_length_tablet=”0px” link_text_shadow_vertical_length=”link_text_shadow_style,%91object Object%93″ link_text_shadow_vertical_length_tablet=”0px” link_text_shadow_blur_strength=”link_text_shadow_style,%91object Object%93″ link_text_shadow_blur_strength_tablet=”1px” ul_text_shadow_horizontal_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_horizontal_length_tablet=”0px” ul_text_shadow_vertical_length=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_vertical_length_tablet=”0px” ul_text_shadow_blur_strength=”ul_text_shadow_style,%91object Object%93″ ul_text_shadow_blur_strength_tablet=”1px” ol_text_shadow_horizontal_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_horizontal_length_tablet=”0px” ol_text_shadow_vertical_length=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_vertical_length_tablet=”0px” ol_text_shadow_blur_strength=”ol_text_shadow_style,%91object Object%93″ ol_text_shadow_blur_strength_tablet=”1px” quote_text_shadow_horizontal_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_horizontal_length_tablet=”0px” quote_text_shadow_vertical_length=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_vertical_length_tablet=”0px” quote_text_shadow_blur_strength=”quote_text_shadow_style,%91object Object%93″ quote_text_shadow_blur_strength_tablet=”1px” header_text_shadow_horizontal_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_horizontal_length_tablet=”0px” header_text_shadow_vertical_length=”header_text_shadow_style,%91object Object%93″ header_text_shadow_vertical_length_tablet=”0px” header_text_shadow_blur_strength=”header_text_shadow_style,%91object Object%93″ header_text_shadow_blur_strength_tablet=”1px” header_2_text_shadow_horizontal_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_horizontal_length_tablet=”0px” header_2_text_shadow_vertical_length=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_vertical_length_tablet=”0px” header_2_text_shadow_blur_strength=”header_2_text_shadow_style,%91object Object%93″ header_2_text_shadow_blur_strength_tablet=”1px” header_3_text_shadow_horizontal_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_horizontal_length_tablet=”0px” header_3_text_shadow_vertical_length=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_vertical_length_tablet=”0px” header_3_text_shadow_blur_strength=”header_3_text_shadow_style,%91object Object%93″ header_3_text_shadow_blur_strength_tablet=”1px” header_4_text_shadow_horizontal_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_horizontal_length_tablet=”0px” header_4_text_shadow_vertical_length=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_vertical_length_tablet=”0px” header_4_text_shadow_blur_strength=”header_4_text_shadow_style,%91object Object%93″ header_4_text_shadow_blur_strength_tablet=”1px” header_5_text_shadow_horizontal_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_horizontal_length_tablet=”0px” header_5_text_shadow_vertical_length=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_vertical_length_tablet=”0px” header_5_text_shadow_blur_strength=”header_5_text_shadow_style,%91object Object%93″ header_5_text_shadow_blur_strength_tablet=”1px” header_6_text_shadow_horizontal_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_horizontal_length_tablet=”0px” header_6_text_shadow_vertical_length=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_vertical_length_tablet=”0px” header_6_text_shadow_blur_strength=”header_6_text_shadow_style,%91object Object%93″ header_6_text_shadow_blur_strength_tablet=”1px” box_shadow_horizontal_tablet=”0px” box_shadow_vertical_tablet=”0px” box_shadow_blur_tablet=”40px” box_shadow_spread_tablet=”0px” vertical_offset_tablet=”0″ horizontal_offset_tablet=”0″ z_index_tablet=”0″]

One of the keys to a successful life is your ability to negotiate and convey your “side of the story” to others. I learned this vital lesson from my six children. It appears that the younger they are, the better or more successful they are at negotiating. I am not sure if it has to do with their relentless personalities, or their willingness to take “NO” for an answer. It seems as if the older the get, the less effective they become at negotiating ice cream. We can learn a great deal from our children.

This article will explore the six keys to negotiating and the four tips to becoming a more successful negotiator. Once you begin to apply these strategies in your life, you will be amazed at the results you will experience. You will also realize when others are trying to negotiate a better deal, especially your kids.

Here are the four tips to becoming a better negotiator:

1. Create a win-win.
2. Learn to listen and talk less.
3. Negotiate with the decision maker.
4. EVERYTHING is negotiable.

Create a win-win:

To most investors, this statement is just a cheap cliché. But to the master negotiator, they will not enter into a negotiation unless both parties gain from the transaction. The key is to discover how your opponent will gain from performing this transaction.

Jake and I have a story that illustrates the power of win-win. We were locked in an extended negotiation with one of our first deals and we were rather close in closing the deal. The seller was adamant in not dropping the price any further, and our group was reluctant to increase the price to meet his demand. Jake and I decided to pay part of the broker’s commission to satisfy the seller’s request. Why did we elect to do that? The deal was too good to lose for a relatively small sum of money. Result: We satisfied the owner’s price and we closed on the deal.

The seller was content to receive his price and we were thrilled to have landed an awesome deal. The property was repositioned (fixed up) in eighteen months and we were able to refinance the mortgage and extract $1,600,000! That wasn’t even the best part. We developed rapport with the seller and the broker. Our broker subsequently brought us our next couple of deals. His level of confidence in us soared and he felt comfortable that we would perform on these deals. He was not disappointed.

The seller sold us another property around eighteen months later. He called us and negotiated the deal in a matter of a few days, and we were able to purchase the asset at a substantial reduction in market value. How was this possible? We created the win-win atmosphere from the first deal and the seller knew we would be true to our word.

Most business owners live by the mantra: “I win, and if the other party wins, that’s O.K. But as long as I win, that’s all that matters!” This mentality is shortsighted and will not allow you to secure repeat business. Always consider the other side’s position and demands and see if you can solve their problem while crafting a deal.

Learn to listen and talk less:

Salesmen need to qualify their prospects if they want to satisfy their demands, offer them the correct product and close the deal. How do they succeed? By asking empowering questions and allowing the prospect to answer the question. It’s not about the salesman or the product; it’s about solving the prospect’s problem. The only path to success is by asking open ended, thought provoking and challenging questions (empowering) for the answer.

One of my favorite motivational speakers Zig Ziglar noted that people should speak 20% of the time, and listen the other 80%. This came as a shock to me. I thought you needed to dominate a conversation and have people like and admire you. The quickest way to admiration is to listen attentively to people’s concerns, and show interest in their problems.

When you are negotiating a deal, the less information you divulge the better it is for you. Conversely, it is your duty to gather as much information on your rival to understand his motivation for entering into a deal. Allow the seller to convey why he is entering into this transaction.

Negotiate with the decision maker

The goal is to negotiate with the person making the decisions, not his brother-in-law or his broker. We like to utilize one broker in a transaction if at all possible. It is so much easier to negotiate with the seller’s broker directly, and have the seller’s broker go straight to the seller. It becomes cumbersome when your instructions are passed from your broker to their broker and to the seller. Many minute but important details get lost in translation.

Everything is negotiable

Why is it that kids ask for three scoops of ice cream? Because they know they can always go down to two scoops. You stood your ground and they ended up getting two scoops. WIN-WIN! Jake and I learned this the hard way on our third deal. We were negotiating origination fees with the bank. Jake casually asked if the banker would drop the fees by .25%. The banker didn’t even hesitate and said yes. Jake ended up scratching his head and wondered why he hadn’t asked for a larger reduction.

At least we learned a valuable lesson early on. EVERYTHING in real estate is negotiable, from price to terms to fees. You just need to ask, and make sure to secure a few prices from different vendors to negotiate the most competitive price. You have nothing to lose from asking.

Six Keys to Negotiating

Knowledge is power:

The first rule of any negotiation is to amass as much information about the person sitting across the table from you. Remember, the key is to try to create a win-win and solve their problem. It can’t be all about you. Discover why this person has entered into a negotiation with you, and what he looks to get out of the deal.

In real estate, we want to identify:

Why is the owner selling?
Is he motivated by retirement, bad partnership, burned out, new opportunity, personal matters, health?
What is more important, price or terms?
What is he going to do with the money? (re-invest, 1031 exchange, pay bills, go on vacation, pay off debt. Each of these problems has a different level of motivation)
Is he amenable to creative financing? Ask this question after you find out what he is going to do with the money and his level of motivation.
Does he have other property?
Is he self-managing his portfolio?
How long has he owned the property?
What is the lowest price he is willing to take
What type of financing does the property currently have?

Know their story.

Doing deals is pretty simple. People like doing business with people they like and trust. Have you ever met someone who connects well with others? This person has taken the time to build rapport and learn the other person’s story. Connect with people on a personal level. Try to find something in common, whether it is a sport’s team, or being a parent. It is imperative that you build common ground with the person you are negotiating with.

Have a plan B

Often times in life, plan A doesn’t work out and we are unprepared to offer another solution. This happens often in real estate, and most deals are lost because very little thought went into another course of action. When Jake and I were negotiating our 281-unit deal, our focus was on price. Our backup plan was to ask for owner financing. The seller offered a price a bit higher than what we were willing to pay, but the owner financing locked in the deal for us. If our only strategy was focused on price, we would have lost the deal.

Employ a contingency clause

Once you complete your due diligence, you may uncover certain aspects of the deal that will “kill” the deal. We stumble upon this problem often when trying to purchase properties on actual numbers. If the seller gives us a set of numbers for due diligence, but we uncover discrepancies when we analyze the actual numbers, we want the option to ask for a price concession or the ability to withdraw our offer. The last thing you want to happen is to be forced into a corner with very few options.

Shed your ego

This is a tough one for most people. I used to be driven by wanting to always be right, and this ended up clouding my judgment and my ability to get the things that I wanted. Check your emotions and ego at the door, and focus on solving the problem, not being right or wrong. If the deal makes economic sense and the numbers work, then do the deal.

Know when to walk away

This is the quality of a true master. It is often said the best deals are the ones that you didn’t buy. Jake refers to this as “Patience, persistence but willing to walk away.” On our last deal, we gave our final and best offer to the broker in the month of August. There were two groups ahead of us, and this was a killer deal. We were willing to walk away from the deal, but still showed persistence when the seller accepted the higher bid. It felt as if we let one slip away, but we could not pay the price that the seller accepted. We then began to email the broker weekly to see if the deal fell through.

In December, the due diligence period ended, and the property was back on the market. We decided to raise our offer by $100,000 to demonstrate our commitment to closing the deal and the seller accepted the offer. It took sixty more days, but we finally closed on the deal and both sides were ecstatic with the outcome.

To sum it up, a successful negotiator is one who prepares thoroughly, who creates win-win solutions, who is willing to build rapport and who is there to solve problems. As Zig Ziglar was famous for saying “ You can have everything in life you want if you help enough people get what they want.”

In the next article, I am going to describe several powerful negotiating techniques. Please leave any comments below. I would love to hear your negotiating tips and incorporate them into this article. An educated negotiator leads to more win-win situations being created.

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

The Seven Steps To Success In Real Estate, Part 3

In the second ARTICLE, I laid out the next three steps to achieving success in real estate. My goal here is to dive into the final three steps: Submit, Due Diligence and Take Responsibility. Let me recap the Seven Steps (actually, I included Take Responsibility as an extra step).

Educate
Pick a market
Niche
Network
Analyze
Submit
Due diligence
Take responsibility

Submit:

So far, real estate has only been an abstract thought. You’ve learned how to analyze deals, pick a niche, select a market and educate yourself. Once you submit your first offer, the reality of investing hits you like a ton of bricks. It is an exciting but vital step in the process. This step is what creates momentum, and from your thoughts and desires, you are now entering the massive action phase.

How do you submit an offer? Once you have located a deal and performed your underwriting, it’s time to fill out a Letter of Intent (LOI). Click HERE to download an LOI that we used on one of our deals. A real estate broker should be able to furnish you with a blank LOI.

An LOI is a non-binding offer to purchase the property that contains general terms and conditions of the proposed transaction. It expresses to the seller your willingness to enter a Purchase and Sale agreement (P&S), which is the next step once the buyer and seller have agreed to terms.

Do yourself a favor and include a time frame for the LOI. For example, state in the LOI that it is only effective for seven days. Force the seller to give you a quick response, so he does not have time to “shop” your offer.

Once the seller agrees to your terms, the P&S is drawn up. Read over the contract very carefully with your attorney to make certain that everything that was agreed upon is spelled out in the P&S. Now it’s time to move to the due diligence phase.

Due Diligence

I have found that most beginning investors underestimate the importance of due diligence. In my very first transaction, I was thrilled to be purchasing an investment property, and should have focused more on the actual numbers and condition of the property. I had no idea that the due diligence period came with a sixty day time-frame, in which I had to close on the deal. It never occurred to my lawyer to include an extension in the contract if I was unable to secure financing or complete the due diligence.

Due diligence can be broken down into 3 types and should be performed in this order:

1. Financial:

Analyze the actual performance of the property. Request the last twelve months of operating statements (profit and loss, income statement, balance sheet). If the actual numbers are different than the ones you were given, you have two choices. You can go back to the seller and demand an adjustment in the price, or you can walk away from the deal. We have a clause in our P&S that the deal is contingent on the numbers provided to us in the beginning of the process.

The majority of deals that don’t go to closing are because of the financial due diligence. We recommend a minimum of a thirty-day due diligence period for inspecting smaller properties, and at least forty-five to sixty days for the larger properties. There is no sense in scheduling an inspection and wasting money if the numbers don’t work.

2. Physical:

It’s time to schedule an inspection of the property. I recommend you search Home Inspector to locate a qualified inspector in your market. You can also ask for a referral, but I would refrain from asking your real estate broker. There may be a conflict of interest in getting the deal done, and the inspector may feel some pressure from the broker in not disclosing every minor detail. Try to hire someone who is independent and who has experience in the multifamily space.

The cost of an inspection varies from market to market. Expect to pay around $500 for a single-family home inspection, and a per unit cost for larger properties. We are currently paying $20 per unit for inspections on out apartment complexes

NOTE: Inspection costs are negotiable. Make sure the inspector enters and inspects EVERY unit on the property. The inspection report is used to demonstrate the deficiencies in the property to the seller, and a tool to negotiate money off the price or those deficiencies being rectified.

3. Legal:

When you purchase a property, you want the property to have no encumbrances, or liens, to have good title, and to have a valid Certificate of Occupancy (C of O). Your title company will provide title insurance to protect you if there is ever any question to the title of the property. Check to see if the property has any type of liens, and have the seller “cure” the liens before you take over.

Take Responsibility:

The property is finally yours. Now it’s time to get to work and follow the game plan you have developed to adding value. It is an exciting moment to realize that you are now in control of your own destiny. This final step is what separates the mediocre investment from the stellar performer. It’s the same way in life. Those of us who are responsible for our lives and actions tend to lead a more fulfilling and empowering life.

Let me know if this seven-step framework has led you to your first deal. As Jake likes to say, follow our yellow brick road to multifamily investing!

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

The Seven Steps To Success In Real Estate Part 2

In the first ARTICLE, I laid out the seven steps to achieving success in real estate. I expanded upon the first two steps, and my goal here is to dive into the next three steps: Niche, Network and Analysis. Let me recap the Seven Steps (actually, I included an extra one).

Educate
Pick a market
Niche
Network
Analyze
Submit
Due diligence
Take responsibility

Niche:

What does it mean to choose a niche in real estate? Most newbie investors, myself included, become overwhelmed with the choices and strategies available in real estate. I often compare it to being in line at a buffet, with countless tempting choices in front of us. But, as we all know, some choices are far superior than others. I am not here to tell you which choice is better. I am only here to tell you to pick one, focus all of your energies on that choice, master that niche, and then begin to invest exclusively in that niche.

Some investors may have no capital to begin their investing. Wholesaling may be their best option to jump into real estate. My recommendation would be to master the wholesaling platform, crush it, and then and only then, consider another strategy.

My reason for this stern recommendation is simple. It is easier to hit a target that you are focused upon, one that has all of your energy and attention. When you first begin a new venture, it is vital that you master all of the basics. Does anyone expect a new driver to jump into a Porsche and begin driving 100 miles per hour? The end result is not going to be pretty.

Choose a niche that relates to your personal situation. For instance, my goal in real estate was to create passive income and generate wealth. I knew that buy and hold, specifically multifamily properties, would propel me to success. I never considered fix and flip, or purchasing single-family homes because these strategies were not consistent with my goal. Once I chose my niche, I searched for a mentor who was teaching multifamily investing, and I dedicated myself to learning everything in the space.

Is it no wonder that some of the richest investors in the world adhere to this principle. Take Warren Buffet as an example. His advice is not to diversify, not to put all of your eggs into different baskets. Mr. Buffet is a value investor, and has created an amazing company maintaining this discipline. Once you become a master, the deals start coming to you.

Network:

Real estate, like so many other businesses, is all about the relationships you develop. It has become easier to network in this day and age due to the Internet and social media platforms. Sites, such as LinkedIn, allow you to seek out the decision maker of a company in a matter of minutes. But what do you do once you make the connection?

I recorded a podcast with Alex Franks on the subject of networking and his insight is invaluable. Click HERE! to listen to the podcast. Some keys to networking are:

Build rapport. Try to find something that you and your prospect both share in common, whether it is kids, sports teams or a hobby.
People do business with people they like and trust.
Stop talking, listen and show genuine interest in the person with whom you are trying to build rapport.
In the words of the great Steven Covey, “Seek first to understand, then to be understood.”
Do as you say and say as you do. If you have an appointment to jump on a call at 9 AM, you better jump on at 9 AM. Stick to your word.

Don’t be afraid to tell people what you do for a living. I have memorized a short elevator speech that gives a concise description of what I can offer potential prospects and how I can add value to their lives.

Finally, try to enjoy networking and don’t view it as a job. People can sense if you’re faking it, or if you’re in it for your own personal intentions. Choose events that you will enjoy. My favorite is taking people out to lunch, where I feel the setting is more intimate yet casual.

Analyze:

It took me a long time to learn this particular step, and once I did, my investing career took off. Real estate is all about the numbers. If the numbers don’t work, move onto the next deal. Early on, I would fall in love with a property, and convince myself that I could make the numbers work. Avoid this huge mistake by approaching real estate as a business.

In multifamily investing, I focus on three specific benchmarks: Cash on Cash, Debt Coverage and Cap Rate. Once the property can be acquired by satisfying these benchmarks, I further analyze the property to see if there are any value adds to the asset, such as raising rents or lowering expenses. I only purchase a property based on actual numbers, specifically the last twelve months of performance, and expect a 10% Cash on Cash, a 1.2 Debt Coverage Ratio or higher and an 8 Cap.

It is no different in other niches in real estate. When a fix and flipper is buying a home, he has to perform an after repair market value of the property to estimate his profit. A wholesaler needs to know current market values before putting a deal under contract. Not knowing market value will lead to failure in real estate.

Current market conditions are making it more difficult to locate these deals, but I have learned to be disciplined in the buying process. All savvy investors understand that you make money when you buy in real estate. When analyzing multifamily real estate, there are other amazing benefits that are often overlooked. I wrote an article on Bigger Pockets highlighting these benefits. Click Benefits! to read.

Task:

Decide what you want real estate to provide for you. Choose a niche based on your needs and goals. Seek a mentor or coach to assist in your education. Next, get out there and start networking with individuals in your niche. Finally, begin to analyze deals based on actual numbers and remain disciplined throughout the buying process.

Let me know if you have chosen multifamily investing as your niche and why!

Read further: The Seven Steps To Success in Real Estate – Part III

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

The Seven Steps To Success in Real Estate

Starting a new venture can be one of the most daunting tasks, especially an undertaking that involves money and risk. If you begin a new diet and don’t lose the weight, not much has changed. You slide right back into your old habits and comfort zone. Can you imagine investing money in real estate when you Mom told you it was a bad idea, and you ended up losing your investment?

I’ve heard those words “ I told you so”, but I didn’t let it deter my will to succeed. I just realized I needed a new approach. I am just thankful that I didn’t allow anyone to crush my dreams of financial success, including mom.

My goal in this article is to outline seven steps that any new investor needs to follow to achieve success in real estate. I developed these seven steps through hard knocks and creating huge mistakes, but without those mistakes I would still be chained to a mundane job with no ability to control my future. So let’s dive into the seven steps!

Educate
Pick a market
Niche
Network
Analyze
Submit
Due diligence
Take responsibility

Educate:

Investors think that a few podcasts and a couple of books on real estate will prepare them for the rigors and perils of investing. Does everyone forget it takes four years to receive a college education, and most professions require additional schooling? Podcasts and books are a fantastic start, but you will have to go deeper in your education to succeed.

So where should you start? Every investor should read “Rich Dad Poor Dad” to understand why real estate is a powerful tool to create wealth. A large number of our podcast guests point to “Rich Dad Poor Dad’ as opening up their eyes and minds to the opportunity with real estate. But this is just the beginning.

The next step is to seek out authors who also speak to the “how” in real estate. Our book Wheelbarrow Profits is a fantastic place to begin your multifamily investing. We have created a detailed three-step framework on how to create wealth and generate passive income with multifamily real estate: Buy Right, Manage Right and Finance Right. Our students are amazed at the depth and amount of actionable content that we share with the reader. If you are a podcast lover, subscribe to our weekly podcast Wheelbarrow Profits on Itunes.

Click HERE to download a free copy of “Wheelbarrow Profits”.

Other authors that have influenced my investing career are: Dave Lindahl, Dean Graziosi, Fixer Jay Decima and Gary Keller. These authors all have two ingredients that are crucial for the success of their students. They are investing in the current market and have achieved a level of success from doing, and their content is focused on the how part, not just the why.

Most “gurus” focus on the ‘why’ because they are not acting in the current market. Choose a teacher/mentor who has been in the trenches and is running their business in today’s market. Jake and I pride ourselves on the fact that we are continually pursuing deals to grow our portfolio.

This gives us the advantage of understanding what strategies are working today, where valuations are and what phase of the market we are currently in.

The internet has countless websites that offer tremendous content. We recommend Jake & Gino, Bigger Pockets, Connected Investors, Keith Weinhold, Seth Williams and Mark Ferguson as places to commence your education. These sites all offer a robust blog page and most contain their own podcasts.

Finally, once you realize that real estate is the right vehicle to take you to where you want to go and you commit to it, seek out a mentor or coach for a deeper dive. I credit much of my success in real estate to hiring a coach and developing a specific plan for me to follow.

A coach reduced my learning curve tremendously, which eliminated many mistakes and propelled me to success much quicker.

I was such an advocate of coaching that I ended up attending IPEC (Institute of Professional Excellence In Coaching) and became a Certified Professional Coach.

Is coaching right for you?

If you are unsatisfied with your current results, it may be time to take a harder look into hiring a coach and getting you back on track. Just hire a coach that has experience in real estate, and a coach who has a track record.

Pick A Market:

Once your education is in high gear, it is time to focus on a market you want to invest in. Are you fortunate enough to be able to invest in your back yard, or do you have to consider other markets to invest in?

I wrote in a previous article how not understanding my market was one of my biggest blunders. It is worth reading: Top Five Things I Wish I Knew. It describes what to look for in a market and how to choose an emerging market.

My first journey outside my backyard was purchasing duplexes in Rochester, NY. My market was nearly impossible to buy multifamily properties that cash flowed, so with the guidance of a coach, I decided to try my hand elsewhere.

Although I ended up selling the duplexes last year, the experience was priceless. I learned how to analyze a market, how to hire a management company, how to underwrite deals and I shattered my limiting belief that I needed to “touch” real estate in order to succeed. It set the stage for me to invest with Jake down in Knoxville, TN.

In the next part of this article, I am going to focus on the next steps to success.

Read further: The Seven Steps To Success in Real Estate – Part II

Please let me know what real estate books you have found helpful. I am always on the lookout for new strategies to learn and implement. My motto has become: Learn-Do-Teach. The truly successful people never stop learning and growing.

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

The $1,600,000 Climb To The Top

When Jake and I purchased Park Place apartments, we knew that the property was underperforming and we had a terrific opportunity to “force” the appreciation on the asset. The property was grossing only $53,000 per month due mainly to poor management. Our goal was to implement our three-step repositioning framework, increase the Net Operating Income significantly over the next twelve months, and with some luck, refinance the property.

The next twelve months proved challenging, but with determination and hard work, we were able to increase the revenue to over $80,000 per month. We implemented RUBS (ratio utility billing), began to charge all types of fees (late, pet, application), and raised the rents to market.

We drove the income on all different fronts, while focusing on reducing expenses.

At the end of eight months, we began to shop around different lenders to refinance the property. We received our first appraisal in December from a CMBS lender, a disappointing $5.7 million. (We purchased the property at $4.075 million, but we felt the appraisal still came in light) The lender just could not comprehend how we turned around an asset within eight months, and delivered a very low appraisal.

We then approached another CMBS lender, and as you can see on the picture above, we were met with more resistance. At this point, we were losing faith in getting a deal done. This is where our mantra kicked in: Patient, Persistent, but Willing to Walk Away. We decided to seek out another lender who would give us the best terms.

Finally, almost a year after our initial inquiry, we struck gold. We found a portfolio lender who was willing to offer a fair appraisal ($6.33 million) of the property along with very favorable terms. The lender created a win-win situation. He underwrote a large loan against a very stable asset. We were able to cash out a huge sum of money, the lender required us to set aside a sizable capital expenditure amount to address deferred maintenance on the property, and the lender financed our next big multifamily deal. WIN-WIN!!

All lenders will require you to set up funds for a capital expenditure account based on the needs of the property. Our first two lenders required us to fund the account with much more than what we felt the property needed. Our portfolio lender’s requirement was much lower, and we were able to extract more equity for ourselves.

How does a capital expenditure account work? Basically, the bank estimates the amount of deferred maintenance on a property and funds the account with proceeds from the refinance. As you can imagine, the estimate is highly subjective and should always be negotiated with the bank. In the end, these funds do belong to you but are to be used only for repairs made to the property.

We allocated our cap ex funds to repairing parts of the driveway, exterior painting and upgrades to some of the units. Once the repairs were finished, we submitted the receipts to the bank, and then the bank disbursed the money to us.

While you are in the midst of the reposition, take pictures to document your progress so you can use them to show the banks what you have done to add value to the property. Maintain accurate records, while concentrating all of your efforts to revenue trending upwards every month.

The moral of the story: Look to create value in any endeavor you choose, work hard to create that value and work even harder to get paid. If one approach isn’t working, learn from that approach and try another one.

Jake and I had to abandon CMBS lenders and partner with a portfolio lender. It was one of the best decisions we have made. The lender has become an integral team member and has financed several other acquisitions and refinances. Our problem turned into an incredible opportunity.

Task:

If you want to learn how to invest in apartments and receive a huge payday, visit Jake and Gino and contact us today!

Begin to develop relationships with local banks. Jake and I prefer to work with local banks (portfolio lenders) because they are much easier to work with and have an intimate knowledge of the local market. They will understand your deal and will give you a quick answer whether or not your deal will meet their lending criteria. The ideal timeframe to begin the refinance process is usually one year after the purchase. Banks like to see consistent performance and are content with twelve months of performance.

Don’t always take the first deal. Shop your deal to a couple of lenders and let them fight it out for your business. We used to be thrilled when a bank offered us terms, but our true success came when we began negotiating with multiple lenders to secure the best deal.

CMBS: Commercial mortgage backed security that is secured by the loan on a commercial property. The loans are then packaged and sold by conduit lenders on the secondary market to institutional investors. This secondary market is vital and provides liquidity to the commercial mortgage market.

The interest rate on these loans are fixed, the loan is typically amortized over a thirty- year period, a balloon payment is due at the end of the term, and there is usually a prepayment penalty. The loan is non-recourse.

Portfolio Lender: This type of lender originates its own loans and holds them on their balance sheet. These loans do not have to conform to Fannie Mae guidelines and allow the lender to be more flexible in lending guidelines.

Recourse Loan: Debt that is backed by collateral from the borrower. The bank can go after a borrower’s assets in case of a default. (The bank has recourse)

Non-Recourse Loan: Debt that is secured by the property, and the borrower is not personally liable in the event of a default. Ideal loan.

Loan points: A form of prepaid interest to buy down the rate of the loan.

Loan origination fee: A fee paid to the bank to originate the loan. (Make sure to negotiate this fee with banks)

Amortization: A gradual paying off of a debt by regular periodic installments, which include interest and principal.

Balloon Payment: Large payment, due at a certain period of time in the future, is usually 5, 7 or 10 years.

Capital Expenditure: This is an expenditure for an asset that will improve or extend the useful life of an existing asset for a period to exceed one year. We set aside $250 per unit per year in a Cap Ex account. Banks will require that you set up and fund a cap ex account when you refinance a property. Think of a Cap Ex account as a rainy day account. (Another avenue where your negotiation skills will be used)

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

How It’s Done, Our Refinancing Timeline (Infographic)

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]