Looking for advice on multi family investments

[David F.]

Hello,

I was reading through David Lindahl's Multi Family Millions and was curious about a particular point he made as it relates to my situation.

The fact is, is that I have ZERO experience in multi families, and have zippo to put down as far as a down payment. In his book he mentions getting angel investors and others to invest in the property you present (with the accompanying business plan). My question is threefold:

1) The book outlines overcoming the fact of not having any money by approaching friends family and angel investors. Why would any investor, even family and friends give you money to invest with no experience to speak of? I have an MBA and have been working in commercial real estate (analyzing deals) for the last three years, but that is all booksmarts. I have zero real life experience, so I couldn't imagine any situation where someone would give me their hard earned money..why wouldn't they do it themselves?

2) The same applies to the bank side of things.. Never mind the complication of the fact that here in Canada ALL commercial loans are full recourse loans (that is a whole other can of worms to deal with), but with a bank looking at resumes and experience, I couldn't imagine my application getting through given the fact that I have never actually owned a building. Lindahl's book says that before you make the application you should have a business plan in tow with a reputable property management company ready with a marketing plan in place. I agree about being this ready, but again, has this worked for anyone?

3)The book mentions a finder's fee that I could potentially build into the deal for bringing a property to investors. Again, can this be done, have people done it, what is a typical fee (the book mentions 3-5%) and is this collected on closing?

I would truly appreciate all your help in this matter, especially people who have done these kinds of things as I think multi families pose a great oppportunity for investment, but again, how do I overcome the hurdles mentioned above. I spoke at length with someone in my office, who used to work for a bank about finding a building that has the potential to be repositioned, and brining in investors to finance it, and if I could not structure a way to own it, then I would find a way to bring it to them and add a consulting fee (3-5% of the purchase price) and make money that way. I was given all of the rebuttals mentioned in points 1 and 2, and as far as a consulting fee he told me that any investor would wait to give you that fee until they execute their exit strategy, and why should they pay me upfront. I would like to preface this with the fact that while he is a banker he has never owned real estate ever, so I don't put much credence into his advice, but I would like to hear any experienced investor's thoughts on this matter.

Thank you for your help.

Take care,

David.

[Scott M.]

1, If you believe no one will give you the money then they probably won't. Change your mind – change your world – or was that save the cheerleader save the world? Why they wouldn’t do it themselves is very easy – they don’t know how. And even though you don’t feel like you know anything – you have been in that world for 3 years – so you know something – I am sure you don’t feel like it and you may not in terms of actually doing a deal – but your not a X (insert career here – school teacher, janitor, pilot, senator) who doesn’t have anything to do with RE for a living. Most people with money who invest with others like us is because they don’t have the time to do it themselves. If you can bring a good deal – and prove it – to someone with money – why wouldn’t they want to be a part of it? You just helped them make some cash.

2. Your taling about commercial property here not single family homes. A lender (traditional) for a single family home doesn’t care about the house – they care about you – the opposite is true for commercial. They don’t care about you (as much) they care about the property. Same thing – you show them the property is a cash flow king and they will invest – as long as you have the right doc’s / plans in place

3. Yes it can be done I have been offered as much as 50% of the brokers commission or to turn that %age into a piece of the deal. Is that normal? I don’t think so I think a % of 5% or lower is more traditional. My point was to point out that yes those are real and it can happen.

Sounds like your heading down the right road here – and I see your in CA – not sure how things work in CA if they are different VS the US.