All About Cashflow in Multifamily?

Question

I've been reading many books, looking and analyzing many properties for a few years and I seem to be like all the others that fail to get started. The blueprint to cashflow seems to be overly simple. Save money, find property, analyze the property (hit your metrics, i.e. $100/door), make an offer, close the deal. Then rinse an repeat using many different methods BRRRR, Private Money, 401k loans, etc. for your down payment and finance options. Then do bigger and bigger deals.

I simplify it because it just seems like that's really all I/we as investors need to do in order to achieve financial freedom. What I've realized throughout all these years is that MIND SET is the key to actively working the blueprint. Am I wrong? I seem to understand it all but for whatever reason can't get off my perch and just work the blueprint. Does anyone else relate? Do you find that you create excuses even though you tell/yell at yourself to get moving? Why is it such a mental block? Is it just Fear?

Account Closed · Answer

Having fear is much better than reading a book, or watching a podcast and think you can walk on water. I always believed that thinking you are inferior is also a good thing because then you don't think you already know everything and you know you still need to learn.

The reason most people have fear and can't pull the trigger (I really hate that expression) is because they don't have the knowledge they need in regards to doing the math to analyze properties and I didn't make the jump from single-family properties to fairly large apartment buildings until someone explained the math I am posting in this thread. I put some videos on youtube explaining the math. Search blprei multi-unit or blprei real estate and you can download free software.

I do this side-by-side analysis where I enter the data from the marketing package in the first column. Then enter my estimates in the 2nd column. I use the numbers in the first column to negotiate the price and then use the 3rd column to calculate what I am willing to pay for the property.

I have another section in my software where I use a similar screen for sending a direct mail piece looking for multi-unit owners to sell their properties. I enter the numbers for the properties the person owns including the number of units, the  owner's equity and then I send a letter to the owner with a chart as shown in the following images.

I send 10 to 15 customized direct mail pieces every day to apartment building owners, or pre-foreclosures. I am also building a fairly accurate database and mailing list for every apartment building owner for the areas where I am willing to purchase multi-unit properties. I purchased lists from lead sources, but the lists were inaccurate and useless. So, I take my time, use propertyradar.com, search the LLC owner's names online, find their phone numbers and am creating a fairly accurate database where I can market to the exact owners I want to target and will save tons of time and money by not having to use the shotgun affect when sending direct mail and telemarketing. There is a high percent of apartment building owners I do not want to market to for many reasons and I need to save the time and money.

When you need an opinion or help with the math feel free to post or PM because I may not see your post.

Bjorn Ahlblad · Answer

As younger investors we bought non cash flowing properties in California rented them out and subsidized them every month. It did not hurt because we had high paying jobs. We eventually sold the properties and made huge gains.

Today we are retired and invest strictly for cash flow. So it can depend on where you are in your journey geographically and life wise.

Taylor L. · Answer

Many things are simple in theory but difficult in practice. It's easy to say you just analyze deals until one works, but it's difficult to keep going when you're on deal review #100 and you still haven't found the right one.

I totally agree that mindset is so so important. Sometimes it's fear, sometimes it's discouragement, sometimes it's something else. But having the mindset that you'll keep pushing no matter what is what it takes.

Alecia Loveless · Answer

@AK Fowler I think only you will know when you are ready to jump in and buy something. Maybe start small, a duplex. So you should always have one rent coming in to cover bills even if you have a vacancy.

I turned 45 this year and realized I’d never be able to retire if I didn’t come up with a successful retirement plan and began investing in real estate and it’s been snowballing ever since my first purchase in February. I’m

Up to 10 doors and have 5 more under contract.

There’s some renovations to be done in 2022 for one of the new buildings and then I’ll reevaluate my situation and get back to finding more properties in 2022!

So I’d say figure out your goals for investing and then decide what amount of money you’d feel safe with and start with that. Whether it’s $50,000 on a $250,000 mortgage out of state, or something else, only you can decide this. Best of luck, you can do this.

Danielle Jackson · Answer

Great perspective @Bjorn Ahlblad.

@AK Fowler  The problem is theory and application are two very different beasts. The application requires grit and discipline. Fear is certainly something that could be holding you back. When you are ready to dive in....just make sure you are ready. I certainly wouldn't rush that first investment just to say I got it. Back to that discipline piece in finding the right deal for you.

Bryan Mitchell · Answer

AK, Yes in theory it is simple, but certainly not easy to do. Real Estate does take a lot of capital whether you’re using your money or someone else’s. I think when it comes to investing, this is one of the biggest obstacles. (Probably why investors speak so frequently about “no or low money down”). Combine that with a seemingly slow road to wealth and many would shy away from investing in RE in favor of bit coin or some stock or mutual fund for instance. Easier to contribute $100 or even $1000 a month into a 401K than owning at an investment that requires work (I.e. not passive). Also the risk is far higher owning a property that people call home. All said, I still think that income producing property is a good move for any investor even if you only view it as a means of diversification or  as a hedge to inflation. PM is you want to discuss more.

Fouad Hayek · Answer

Hi AK,

I think this is similar to the flywheel principal... takes alot of energy to get it going at first, but then its off and hard to stop.

Investing works the same way.

Best of Luck,

Fuad

All About Cashflow in Multifamily?

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