How to buy an apartment building without any of your money!
The Real Estate madness has been growing for years. A lot of people are already aware that Real Estate is a great investment and a business that has made more millionaires in the world. But one thing that is commonly used as a stop (or excuse?) is that you need capital to start, and not any capital… but a good amount. Well, I’m here to share with you how to buy an apartment building without any of your money, and I’ll be sharing this real-life example that happened to me.
Real Estate has created a lot of millionaires in the world
First of all, and is one of the things that I take care of the most: The purchase price. See, the money is made when you buy, not when you sell. First of all, go and find a good purchase price. In this case, I found a 123-unit apartment building in Louisiana, it was about 4 million dollars.
The money is made when you buy, not when you sell.
After this, we called a few banks, because we wanted a loan. I know that now you can do it by yourself but I recommend you to use the “easy button”: get a really good commercial broker because they can do the calls and negotiations with the banks for you. Yes, they will charge you a fee, but you need to find who does what is needed to achieve your goals. I didn’t want to sit there and try to negotiate with the banks. Let’s be honest: I’m not good at it. So, I rather pay 20K or 40K for someone to go out and find a loan for me because they will “sell” me, they’ll sell the project to the bank and they’ll give me the best possible conditions. Ok, so, the broker got us a loan. Usually is the 70-80% purchase price. In this case, we got a 78% = 3.12 million dollars.
I recommend you to use the “easy buttons”
So, we still needed $880,000 for a down payment. But also, we need to be clear: to buy a property requires several other fees. Especially when the property is not making cash flow (like this one), it’s going to take us about a year to start to make a profit. So, you need to bring more money to the deal, so you can have enough for operations, carry costs, contingency, etc.
In this particular case, we charge a 120,000 USD acquisition fee. So, here we have 880k plus 120k.. we needed to raise about 1.4-1.5 million. How? Well, that’s why I always mention my trifecta REI: believe in yourself, do networking, and take action. We have a list of investors, that we’ve networked with for months or years. We contacted them. It was time to pick up the phone and make some phone calls, and also send some emails. You have to sit there and talk to them about your project. You’ll usually be asked about the returns, how long the plan will take, maybe “what does the city look like”, and even “how is the Real Estate market”? And this is perfect, get with them, and explain to them why you think this is a good project.
领英推荐
?The trifecta REI: believe in yourself, do networking, and take action.
After talking with your investors, create a ppm (private placement memorandum), which is a legal document provided to prospective investors when selling stock or another security in a business. My recommendation would be: don’t do it by yourself, get your attorney to do it. Later we send it to our investors and answer all the phone calls that you will receive. Then… commitments start coming.
And that’s pretty much it.
Let’s summarize:
That’s how you buy an apartment building with no money out of pocket. I do this all the time, believe me: works.
If you want more information, go and check my videos on my Youtube channel , I explain more about this there. Also, follow me on social media , I constantly share valuable content about Real Estate Investment.
Thanks for reading me and for subscribing to this newsletter!