Apartment Building Investing with Michael Blank Podcast

Alan Schnur was away on a business trip when a plane struck his office building, killing 40 of his 44 team members. In the aftermath of 9/11, Alan spent a lot of time questioning what he wanted out of life and the experience informed his drive for continuous growth. Because you never know when another plane is coming, Alan doesn’t believe in complacency. In fact, he makes it a point to reinvent himself every few years and take on new challenges in residential and commercial real estate.

Alan is a wildly successful real estate investor based in Houston, Texas. He began his real estate career rehabbing single family homes, owning a portfolio of 120 before making the transition to apartment buildings. Alan’s go-big-or-go-home mindset translated to multifamily, and he invested in 2K units across 18 complexes—AND founded a property management company that handled 7K units across 40 properties. Now he is taking on a new challenge in commercial real estate, investing in shopping centers along with medical, office and warehouse buildings. Alan is the author of three books on real estate investing, including The Cashflow Mindset: Millionaire, Billionaire & Zillionaire Designs for Financial Freedom & a Fulfilled Life.

Today, Alan joins me to share the story of his reawakening in the aftermath of 9/11 and explain how his skill set as a commodities broker translated to real estate investing. He speaks to the single family formula that dominated the first ten years of his career and his subsequent shift to apartment buildings during a trip to Japan that may or may not have involved saké. Alan describes his apartment addiction, discussing his best and worst multifamily deals as well as his reasons for pursuing syndication. Listen in for Alan’s insight on being flexible with geography and asset classes, taking on new challenges in commercial real estate, and stepping out of your comfort zone to take ACTION!

Key Takeaways

Alan’s AHA moment

  • Job as commodities broker on 101st floor of World Trade Center
  • On business trip during 9/11, lost 40 of 44 team members
  • Week in hotel room led to reflection, reawakening
  • Move to Houston with company, rented condo in NYC

Alan’s experience with single family homes

  • First purchase for $23K, profit of $100/month
  • Bought one/month for 10 years (120 houses)
  • Formula: Rehab, Rent, Refi, Repeat

Why Alan made the transition to multifamily

  • Accumulated enough assets to quit job
  • Bought 25 houses during trip to Japan
  • Realized potential of apartment buildings

Alan’s first multifamily acquisition

  • $40K down on 76-door building (owner financing)
  • Generated more income than 100 houses

Alan’s ‘addiction’ to apartments

  • Buy one every 90 days
  • 18 complexes with 2K units

When Alan got involved with syndication

  • Running out of money, wanted to share risk
  • Started raising money on second or third complex
  • Began with general partner at 30%, 70% for sale
  • Work up to 40-50% for general partner

Alan’s best multifamily deal: The Bangkok Close

  • 1031 buyer wanted 300-unit deal
  • Invested $7M, sold for $14M

Alan’s worst multifamily deal

  • Paid $5K/unit for 160-door complex
  • School across street closed and knocked down
  • Money from bank robbery hidden in sewer line
  • Inspired shift to higher quality assets

Alan’s shift to commercial properties

  • Apartments have variable costs (unpredictable)
  • Triple net lease makes commercial predictable
  • Business renting covers repairs, insurance/taxes

Alan’s shopping center deal in Boise, ID

  • Bought six storefronts for $1M
  • 50% discount (three vacancies)
  • Closed at $2.4M

Alan’s outlook on asset classes

  • Be flexible with geography, asset classes
  • Try more things = better chance of success

Alan’s advice for aspiring real estate investors

  • Put book down and get out to property
  • Join networking group or pay for mentor
  • Watch and learn by joining syndication

What Alan is excited about moving forward

  • Retail syndication
  • Education, helping others

Connect with Alan

Alan’s Website

Resources

The Cashflow Mindset: Millionaire, Billionaire, Zillionaire Designs for Financial Freedom & a Fulfilled Life by Alan Schnur

Books by Alan Schnur

LoopNet

International Council of Shopping Centers

National Apartment Association

National Real Estate Investors Association

Michael’s Coaching Program

Michael’s Products

Michael’s Syndicated Deal Analyzer

Michael’s Deal Maker Mastermind

Financial Freedom Summit

Partner with Michael

Invest with Michael

Michael’s Course

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Review the Podcast on iTunes


If you are new to the idea of raising money to invest in apartment buildings, the particulars of complying with SEC regulations may have you spooked. No one wants to inadvertently break the law and face restitution, sanctions, or worse—fines and jail time! The good news is, with an assist from an SEC attorney, it is not as difficult to comply with securities laws as you might think.

Mauricio Rauld is the founder and CEO of Premier Law Group, a boutique securities firm specializing in asset protection and SEC compliance. Mauricio has 18-plus years of experience helping multifamily investors increase and safeguard their wealth through syndications. He is a regular contributor to The Real Estate Guys Radio show and a faculty member of the Summit at Sea, a week-long conference for elite real estate entrepreneurs. In addition, Mauricio serves as legal advisor to The Real Estate Guys and asset protection advisor for The Elevation Group.

Today, Mauricio sits down with me to explain his role as a syndication lawyer. He discusses the two legal routes to SEC compliance, the idea of a ‘preexisting substantive relationship,’ and the consequences of breaking the law. Mauricio shares the difference between 506(b) and 506(c), describing the right way to use social media to connect with investors under each exemption. Listen in as Mauricio walks us through the process of working with an SEC attorney, including the general timeline and approximate cost for ensuring compliance with securities law.

Key Takeaways

Mauricio’s role as a syndication lawyer

  • Helps real estate investors scale business
  • Raise money legally for bigger deals

What qualifies as a security

  • Returns generated from your efforts
  • Must comply with federal, state laws

The two legal routes to compliance

  1. Register with SEC (two-year process)
  2. Find exemption, follow rules

The consequences of not following the law

  • Restitution—return money to investors
  • Sanctions—prohibited from raising money
  • Fines, jail time

Mauricio’s advice around disclosures

  • Full disclosure required for non-accredited investors
  • Not required for accredited investors ($1M net worth)

The benefit of using an exemption

  • Creates safe harbor, certainty
  • Preempts state law

The features of the 506(b) exemption

  • Raise unlimited amount of money
  • Up to 35 non-accredited investors
  • Prohibited from advertising

The features of the 506(c) exemption

  • Lifts prohibition against advertising
  • Accredited investors only, reasonable steps to verify

The idea of a preexisting substantive relationship

  • Citizen VC outlines nine points
  • Deep conversation, questionnaire, credit report, etc.

How to use social media to connect with investors under 506(b)

  • Talk about business in general terms
  • Don’t discuss specific offer or prior deals

The process of working with an SEC attorney

  • Work together on business plan, structure
  • Lawyer drafts offering documentation
  • Includes PPM, operating/subscription agreements
  • 506(b) = investor questionnaire
  • 506(c) = CPA letter or third-party verification
  • Accept money only after documents returned

Mauricio’s insight around the timeline and general cost of compliance

  • One week to draft docs once business plan complete
  • Include $15K ‘legal and compliance’ line item in budget

Connect with Mauricio

Premier Law Group

Email cs@premierlawgroup.net

Resources

Citizen VC Letter

Verify Investor

Michael’s Coaching Program

Michael’s Products

Michael’s Syndicated Deal Analyzer

Michael’s Deal Maker Mastermind

Financial Freedom Summit

Partner with Michael

Invest with Michael

Michael’s Course

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Review the Podcast on iTunes


Every human interaction is a negotiation. Whether you are communicating with employees, investors, friends or family, the language of give-and-take is at play. And the fact of the matter is, if you don’t ask, you don’t get. So, how can we leverage the ten commandments of negotiation to get more of what we want in the realm of multifamily real estate—and life in general?

Stefan Aarnio is an award-winning real estate investor, entrepreneur and author. He was named one of the Top 10 Real Estate Influencers to Follow by Entrepreneur magazine in 2017 and inducted into the Rich Dad International Hall of Fame in 2014. Stefan is the author of four books on real estate investment and negotiation, including X: The Ten Commandments of Negotiation.

Today, Stefan joins me to share the story of how he went from poor musician to millionaire real estate investor by becoming a student of negotiation. He walks us through his ten commandments of negotiation, explaining the importance of gathering information before you make an offer as well as having clearly written goals going into a negotiation. Stefan speaks to the idea of presenting an ‘offer of greater value’ and making people work for concessions. Listen in for Stefan’s insight around emotional decision-making and the key commandment of negotiation: Get what you want and get out!

Key Takeaways

Stefan’s journey from poor musician to millionaire real estate investor

  • Teaching guitar and playing gigs, not good life
  • Predictable way to get rich in Rich Dad Poor Dad
  • Author, Rich Dad International Hall of Fame

The importance of negotiation in real estate and life in general

  • Part of every human interaction
  • If you don’t ask, you don’t get

The cultural differences around negotiation

  • Every culture has own style, boundaries
  • Deconditioned in name of commerce in west

Commandment #1: Get what you want and get out

  • Pushing for more can kill negotiation

Commandment #2: Adopt a pleasing personality

  • Student with no egos, rivalries came out on top

Commandment #3: Prepare diligently and collect information

  • Know facts in advance to make offer on-the-spot

Commandment #4: Know what you want and have clearly written goals

  • Outline one major, three minor points (i.e.: price, terms)

Commandment #5: Gather information before making an offer

  • Newbies tend to make offers too quickly

Commandment #6: Always present an offer of greater value

  • People will pay premium for service that solves problem

Commandment #7: Do not give concessions freely

  • Make people work for concessions, get something in return

Commandment #8: Take what they WANT, but give what they NEED

  • Manage wants, recognize double standard in transactional negotiation

Commandment #9: Obey non-linear time in the negotiation process

  • Time can move forward, backward or break (manipulate for advantage)

Commandment #10: Become a student of human nature and irrationality

  • Reptilian brain makes emotional decisions based on fear and greed

How the dynamics of negotiation change when a broker is involved

  • Don’t usually make things easier
  • Deal with seller directly if possible

Connect with Stefan

Stefan’s Website

X: The Ten Commandments of Negotiation

Resources

Self Made: Confessions of a Twenty Something Self Made Millionaire by Stefan Aarnio

X: The Ten Commandments of Negotiation by Stefan Aarnio

Rich Dad Poor Dad: What the Rich Teach Their Kids About Money—That the Poor and Middle Class Do Not! by Robert T. Kiyosaki

Blackbook Journal by Stefan Aarnio

Michael’s Coaching Program

Michael’s Products

Michael’s Syndicated Deal Analyzer

Michael’s Deal Maker Mastermind

Financial Freedom Summit

Partner with Michael

Invest with Michael

Michael’s Course

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Review the Podcast on iTunes


Courage isn’t about being fearless. Courage is about feeling the fear but ‘saddling up anyway.’ When Peter Conti bought his first duplex, he admits that he was shaking. But Peter knew that he had to make a change to life the life he wanted, to be free from the humiliation of a boss who reprimanded him for drinking coffee meant for ‘customers only.’ Peter was highly motivated to leave his job as a mechanic and become a multifamily real estate investor, and that deep desire for financial freedom propelled him to take action.

Peter went from auto mechanic to self-made millionaire in just over three years, using creative financing to invest in both residential and commercial real estate. He started small, buying a duplex, a couple of 4-units, and a 12- and 24-unit before working his way up to shopping centers and 300-unit complexes. He has mentored thousands of investors all over the world and supported many more through his books on multifamily and commercial real estate investing.

Today, Peter sits down with me to describe the moment he decided to take charge of his own financial destiny. He walks us through that first investment in a duplex and the meeting at Chucky E. Cheese that inspired him to invest in a mentor. Peter offers advice around mitigating risk via exit clauses and acquiring property through seller financing or the use of a master lease. Listen in to understand Peter’s unique approach to recovering from a serious motorcycle accident and what he learned in the process that applies to multifamily investing specifically—and life in general!

Key Takeaways

The turning point that propelled Peter into action

  • Working as auto mechanic in Denver
  • Fingers numb from cold, reprimanded for coffee
  • Made decision to be in charge of own financial destiny

Peter’s first investment in a duplex

  • Found real estate agent
  • Took advantage of 5% down for investors through HUD

How Peter got over the hump to make his next investment

  • Meeting with life insurance agent, realized ‘spinning wheels’
  • Invested $5K in training with mentor

Peter’s advice around mitigating risk

  • Attach ‘Addendum A’ to contract (fully assignable)
  • Ask for 10 business days once documents provided
  • Allows to make offer first, then do due diligence

Peter’s guidance around seller financing

  • Target motivated sellers, C class properties
  • Ask seller if willing to carry some of financing
  • Set meeting to build rapport, share track record

Peter’s approach to getting started in commercial real estate

  • Start with apartment buildings (4-, 6- or 10-unit)
  • Consider using master lease to acquire property

What Peter learned in recovering from his motorcycle accident

  • Hiking Appalachian Trail gave time to reflect
  • Enjoy every moment to fullest, appreciate process
  • Break big projects into chunks

What’s next for Peter

  • Learning to play piano
  • Support wife in startup
  • Limited one-on-one coaching

Peter’s top advice for aspiring real estate investors

  • It’s not about wealth, it’s about freedom
  • Find way to enjoy journey

How Peter wants to be remembered

  • Fully present for friends and family
  • Playful, fun and encouraging

Connect with Peter

Peter’s Website

Free Copy of Peter’s Book

Resources

Making Big Money Investing in Foreclosures Without Cash or Credit by Peter Conti

Making Big Money Investing in Real Estate: Without Tenants, Banks, or Rehab Projects by Peter Conti and David Finkel

Commercial Real Estate Investing for Dummies by Peter Conti and Peter Harris

Wild: From Lost to Found on the Pacific Crest Trail by Cheryl Strayed

1 Simple Strategy to Escape the 9 to 5 by Peter Conti

Michael’s Coaching Program

Michael’s Products

Michael’s Syndicated Deal Analyzer

Michael’s Deal Maker Mastermind

Financial Freedom Summit

Partner with Michael

Invest with Michael

Michael’s Course

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Review the Podcast on iTunes


“It’s these little things that we do every day that get us closer. I remember climbing a mountain in high school, and the guide told us, ‘Don’t look at the summit. Focus on putting one foot in front of the other, and the summit will take care of itself.’ That’s exactly how I treat business. As long as I know I’m on the right mountain—which I firmly believe is multifamily—I come in here every day and focus on putting one foot in front of the other.”

Ivan Barratt is the founder and CEO of Barratt Asset Management, a real estate investment and management company out of Indianapolis that specializes in the acquisition, redevelopment and management of multifamily apartment communities. Since forming the firm in 2010, Ivan has raised tens of millions in equity, acquired 2,700 units, and grown BAM to a best-in-class management company, boasting $100M in assets under management.

Ivan joins me to explain how he started small with a duplex and 6-unit property, financing deals with hard money loans. He discusses his gradual transition to larger deals, describing his approach to raising capital by building trust with potential investors in the business and medical communities. Ivan shares his ‘mortal sins of multifamily’ as well as the game changers that have allowed him to scale up to 2,700 units. Listen in for Ivan’s advice around doing little things every day to prepare for your career as a multifamily investor!

Key Takeaways

How Ivan got his start with a duplex

  • Put down as little as possible
  • Lived in one side, rented other
  • ‘Journey of $10K units starts with first deal’

What Ivan would do differently given the opportunity

  • Go straight to 20-, 30- or 40-unit deals
  • Takes same effort to close small deal as large one
  • Track record and momentum are most important

How Ivan got started with hard money loans

  • Small multifamily opportunities in market
  • Great lender put up cash for acquisition, renovation

Ivan’s early 6-unit deal

  • Evaluated using simple flipper equation
  • Bought for $150K, $100K in renovations
  • Refi nine months in to put high-interest debt to rest
  • Sold for $350K

How Ivan transitioned from hard money to raising capital

  • Built large pipeline of contacts, ask for referrals
  • Conversations with people in business and medicine

Ivan’s approach to building relationships with investors

  • Get to know people through common interests
  • Explain what you do and treat people well
  • Deliver value, educate on what good deal looks like
  • Network multiplies on its own over time

Ivan’s ‘mortal sins’ of multifamily

  • Tried to renovate project out of cashflow
  • Viewed property management co as profit center

Ivan’s AHA moment after the crash

  • Rereading Rich Dad… reinforced cashflow as king
  • Realized need to build model and scale
  • Reduced risk for WHEN market changes, not IF

The game changers that have allowed Ivan to scale

  • View property management arm as a necessary machine (not a profit center)
  • Bring in a partner for sweat equity, combined forces greater than the sum of parts

Ivan’s advice for aspiring multifamily investors

  • Get educated through podcasts
  • Underwrite 100 deals on LoopNet
  • Set networking goals (investors, brokers and team)
  • Do little things every day to prepare

Why Ivan continues to grow and scale his business

  • Driven by possibilities, freedom

Ivan’s perfect day on Gulf Shores

  • Up before sun to workout
  • Mission-critical emails/calls, check in with partner
  • Day on beach or at pool with family

Connect with Ivan

Barratt Asset Management

Call (317) 762-2625

Resources

Rich Dad Poor Dad: What the Rich Teach Their Kids About Money—That the Poor and Middle Class Do Not! by Robert T. Kiyosaki

LoopNet

Ivan on BiggerPockets

Michael’s Products

Michael’s Syndicated Deal Analyzer

Michael’s Course

Michael’s Deal Maker Mastermind

Financial Freedom Summit

Partner with Michael

Invest with Michael

Michael’s Course

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Review the Podcast on iTunes


Before Tim Hubbard purchased and renovated his small multifamily property in Memphis, Tennessee, the long-term rents ranged from $350/month for the studios to $700/month for the two-bedroom unit. After the renovations, complete with furnishings and Airbnb-ready locks and amenities, Tim began earning revenue of $2,500/month—PER UNIT! How did he do it? What made this particular property perfect for the short-term rental market? Is the Airbnb model right for you?

Tim Hubbard began his career in the hospitality industry before making the transition to real estate. He is passionate about travel, and the Airbnb model allows Tim to visit dozens of countries around the world—while providing the opportunity for others to do the same. Tim serves as the Director of Operations for Midtown Stays, a vacation rental company with properties in both Memphis and Sacramento, California.

Tim sits down with me to explain how he got involved in the worlds of real estate and Airbnb. He describes his experience purchasing and renovating an 8-unit in Memphis for short-term rental, discussing how much he invested in the property, what it took to make the apartments Airbnb-ready, and how he financed the deal through a local bank. Listen in for Tim’s insight around managing Airbnb properties remotely and learn what factors to consider in choosing vacation rental property!

Key Takeaways

Tim’s experience with Airbnb

  • User since 2012, began hosting in 2015

Tim’s background in real estate

  • Wanted to pursue travel, started investing in 2010

Tim’s 8-unit property in Memphis

  • Staying in Airbnb on same street
  • Found large colonial in Midtown
  • Vacated entire building to renovate

How Tim financed the venture

  • Commercial loan from local bank

Tim’s backup plan should new regulations restrict Airbnb

  • Go back to long-term rental

The extent of the renovations on Tim’s property

  • Built in 1912, needed top-to-bottom overhaul
  • Updated plumbing/electrical, structural work
  • Seller replaced roof as part of deal

How much Tim invested in the property

  • Bought for $270K
  • $200K in renovations, furniture

The revenue from rent before and after

  • Long-term rents ranged from $350 to $700/month
  • Airbnb income per unit after was $2,500/month

How Tim made the units Airbnb-ready

  • Installed digital locks
  • Provide guest essentials (i.e.: iron, kitchen appliances)

How Tim manages the units

  • Software, reservation system in place
  • Housekeeping and maintenance staff
  • Full-time manager local to Memphis

How Tim can market the units on multiple sites

  • Use ChannelManager to syndicate
  • Sync calendars to prevent double-bookings

What’s next for Tim

  • Explore other markets, purchase more in Memphis
  • Pursue master lease model to scale faster

Tim’s insight around considerations for short-term rentals

  • Airbnb guests looking for unique experience
  • Walking distance from local attractions
  • Landlord-friendly, turnkey markets (e.g.: Memphis, Indianapolis)

Connect with Tim

Midtown Stays

Email tim@midtownstays.com

Resources

Tim’s Before & After Photos

Nav Athwal on Apartment Building Investing

Rich Dad Poor Dad: What the Rich Teach Their Kids About Money—That the Poor and Middle Class Do Not! by Robert T. Kiyosaki

Guesty

Airbnb

VRBO

HomeAway

ChannelManager

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

  • Download
  • Text “secretbook” to 44222

Review the Podcast on iTunes

Financial Freedom Summit

Partner with Michael

Invest with Michael

Michael’s Course

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Review the Podcast on iTunes

Direct download: MB_111-_AirBnB_for_Apartments-Tim_Hubbard.mp3
Category:Commercial Real Estate -- posted at: 8:07pm EDT

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