Can I finance deals like this?

Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes

Hi Everyone!

So one of my big goals is to own a large multifamily apartment complex. So thinking back to Rich Dad Poor Dad, instead of saying "I can't afford it", I've been asking myself "how can I afford it". I thought of the following method to finance and structure such a deal and I'd like to get your opinions on how/if this can work! I'm in Sacramento, so I'll use related pricing.

33 Unit Multifamily

Purchase Price = $2,500,000

Down Needed (25%) = $625,000

I was told by a commercial loan broker that they would allow the owner to finance 15% of the down payment. So $375,000.

I still need to come up with 10%, which is $250,000. Let's say I get private money lenders to lend me total $300,000 so I can use the extra $50,000 for any immediate repairs needed.

Now let's look at the numbers (Monthly)

Average rent/unit = $775

Gross Income with 94% occupancy = $24,025

50% gross income for expenses = $12,012

Bank Mortgage payment for $1,875,000 @ 4% 30 year = $8,952

Seller finance $375,000 for 6 years @ 4%, with interest-only payments = $1250

Private money loan payment for $300,000 for 6 years @4% also with interest only payments = $1000

Subtracting all expenses and debt service from gross income gives me = $811 in cash flow which I would set aside to use only on the property.

After 6 years, I would have built enough equity to refinance and cash out to pay off my seller and private money lenders. This would increase my monthly cash flow immensely.

So is this something that has been done? What are your thoughts? I feel like I'm missing something so I need to learn while I'm 24 and not 34 years old!

Thanks for your valuable time and input

1 Reply

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

10y

1. The loan broker is misleading you. unless you have great credit and are an experienced real estate investor, no lender will allow a owner second as substitute for borrower contributed capital.

2. Private lenders typically lend in the first position, not second or third. And they don't charge 4% interest, it's 12 - 16%, with 3-4 points at closing, and 12 month terms

3. If private investors put up the "down payment", then they want ownership equity, like 90%, IF you have found and put together a great deal, better than they can find on their own.

4. The expenses of running an apartment property include vacancy loss, maintenance, repairs, management, accounting, legal, evictions, depreciation, landscaping, make ready, utilities in common areas, extermination, insurance, property taxes, building code violation fines, permits, usage fees, security, management, leasing fees, etc. Always more than the seller reveals.

Stop reading crap like Rich Dad Poor Dad. The wealth of knowledge contained in those books can be summed up in one paragraph. If you don't get it after one reading, you are not ready to begin investing. Instead do the things that will give you a chance to really become a successful investor

1. Get a REAL education in real estate. Start with a basic real estate text book, or a basic real estate course at a local college or through a Realtor's Association. Understanding what real estate is, how it is valued, the theory of real estate ownership, and real estate law, will allow you to see each possible purchase with a clarity most amateur investors never experience.

2. Learn real estate finance. The basics, not the one out of a million crazy "creative" legally questionable Byzantine fantasies put forth by the gurus and their unanimously unsuccessful followers.

3. Learn real estate negotiating. Like what is actually obtainable in most transactions. And how to be ready when you do stumble across the rare "home run". There's nothing worse then discovering an opportunity to earn six figures on a quick flip (yes, although rare they do exist) and for lack of knowledge having to pass it on to someone else for a lousy $3k referral fee.

4. Optional - Get a job in the real estate industry. Best is a job with a REIT, real estate mutual fund, real estate equity fund, real estate debt fund, or private real estate investment fund. Next best is property management or commercial real estate brokerage.

5. Optional - Get a college degree in real estate ( Florida International University and University of Florida offer fully online degrees in International Real Estate and Real Estate Finance). Realtors University, run by the National Association of Realtors, offers a Master's in Real Estate. Over 200 colleges and universities offer degrees in real estate. Or consider becoming certified as an appraiser, or real estate counselor.

6. SAVE money so you will have a "grabstake" to begin investing with

From the vantage point of my 40 years involved in real estate investing, I offer these conclusions.

First, for almost everyone, a true education in business, investing and or real estate is required for sustainable long term success as a real estate investor. There are two exceptions - (1) people who out of sheer luck purchase property just before a large run-up in prices because of either inflation or the luck of being in the right place at the right time and hanging on to the property, can obtain a large degree of wealth without great knowledge or education in real estate and (2) those wanting to fix and flip single family homes can develop a nice business without the heavy education and experience I noted above. However, although the fix n flippers like to call themselves real estate investors, they are actually in the real estate business, they are not investing in real estate.

Real estate seems to be the one field where a large number of people are willing to believe that with just superficial knowledge, the purchase of a guru's mentorship program, the reading of a couple of books by authors who were NEVER successful in anything except selling books about how successful they were, that they will be able to achieve success as a real estate investor. This belief is so strong that they will incredibly believe this success can be accomplished with little or no capital investment. Even more incredible (and extremely sad), those with $40,000 saved are willing to spend it all (usually eagerly) on a mentorship program in which they have done no research and demanded no proof that the program has been successful, other than read some hand picked testimonials from the guru's students. Even worse are the people with no money who borrower $40,000 on their credit cards for the same mentoring program, with little chance of success. The reason I mention this is that books like RDPD are the introductory step in a continuous upsell leading to the $40,000 worthless mentoring programs I just mentioned.

In any case good luck whatever you decide.

Private Mortgage Financing Partners, LLC

Website View Page

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
Neither a private lender nor an owner is going to be willing to have a 3rd position mtg, and unlikely a private lender will take a 2nd. Your loan also meant that You would have to be contributing the 10%, not borrowing it.
1 Reply
Jake ThompsonPro Member
Rental Property Investor · Albany, OR · Member since 2015 · 312 posts · 136 votes
10y
So rather than get a hard money lender would he be better off trying to raise private money? I'm curious because I'm also 24 and would like to own apartments in the future as well. If I have to work my way up slowly with 2-4 units first that's fine, just curious how others would recommend going about it.
0 Reply
Pratik P.
OP
Flipper/Rehabber · Sacramento, CA · Member since 2016 · 807 posts · 815 votes
10y
Originally posted by @Jake Thompson:

So rather than get a hard money lender would he be better off trying to raise private money? I'm curious because I'm also 24 and would like to own apartments in the future as well. If I have to work my way up slowly with 2-4 units first that's fine, just curious how others would recommend going about it.
Hard money lending is more for short term financing because the interest rates are much higher like 12%
1 Reply
Tim Ryan
Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes
10y
Well @Pratik P. this would be nice. The lender will also require a "Repair Allowance" that is included with the monthly mortgage payment. Usually $250 per door per year. So, that works out to $867.50 per month (now less cash flow than you thought). This is like a forced savings where these funds will accumulate until you need to make a Capital Expenditure (roofing, replace hvac, road work, etc).
Getting private money lenders at 4% for 6 years is very unrealistic. Unless they are your own parents.
You are thinking well though, especially for a 24 year old. If you are serious about this, you need to get educated in exactly how to do these deals and with a coach. BP is cool and fun to ask questions but this is not nearly enough to learn it all. Check out David Lindahl / RE Mentor. He is the master. I learned from him (I do not work for him or get a kick back of any kind). I appreciate Dave's teaching.
FYI, 7 years ago I had the same questions as you and now I own 241 rental units in 7 properties (apartments).
Good luck.
5 Reply
Mike Hanneman
Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
10y
Don't forget that you won't be able to use an HML for 6 years! 1 year at the most and that's going to be very expensive. With a private/hard money lender you are going to be looking at interest rates around 8% if your very lucky all the way to 12% which is average for the first time borrower.
0 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10y
1. The loan broker is misleading you. unless you have great credit and are an experienced real estate investor, no lender will allow a owner second as substitute for borrower contributed capital.
2. Private lenders typically lend in the first position, not second or third. And they don't charge 4% interest, it's 12 - 16%, with 3-4 points at closing, and 12 month terms
3. If private investors put up the "down payment", then they want ownership equity, like 90%, IF you have found and put together a great deal, better than they can find on their own.
4. The expenses of running an apartment property include vacancy loss, maintenance, repairs, management, accounting, legal, evictions, depreciation, landscaping, make ready, utilities in common areas, extermination, insurance, property taxes, building code violation fines, permits, usage fees, security, management, leasing fees, etc. Always more than the seller reveals.
Stop reading crap like Rich Dad Poor Dad. The wealth of knowledge contained in those books can be summed up in one paragraph. If you don't get it after one reading, you are not ready to begin investing. Instead do the things that will give you a chance to really become a successful investor
1. Get a REAL education in real estate. Start with a basic real estate text book, or a basic real estate course at a local college or through a Realtor's Association. Understanding what real estate is, how it is valued, the theory of real estate ownership, and real estate law, will allow you to see each possible purchase with a clarity most amateur investors never experience.
2. Learn real estate finance. The basics, not the one out of a million crazy "creative" legally questionable Byzantine fantasies put forth by the gurus and their unanimously unsuccessful followers.
3. Learn real estate negotiating. Like what is actually obtainable in most transactions. And how to be ready when you do stumble across the rare "home run". There's nothing worse then discovering an opportunity to earn six figures on a quick flip (yes, although rare they do exist) and for lack of knowledge having to pass it on to someone else for a lousy $3k referral fee.
4. Optional - Get a job in the real estate industry. Best is a job with a REIT, real estate mutual fund, real estate equity fund, real estate debt fund, or private real estate investment fund. Next best is property management or commercial real estate brokerage.
5. Optional - Get a college degree in real estate ( Florida International University and University of Florida offer fully online degrees in International Real Estate and Real Estate Finance). Realtors University, run by the National Association of Realtors, offers a Master's in Real Estate. Over 200 colleges and universities offer degrees in real estate. Or consider becoming certified as an appraiser, or real estate counselor.
6. SAVE money so you will have a "grabstake" to begin investing with
From the vantage point of my 40 years involved in real estate investing, I offer these conclusions.
First, for almost everyone, a true education in business, investing and or real estate is required for sustainable long term success as a real estate investor. There are two exceptions - (1) people who out of sheer luck purchase property just before a large run-up in prices because of either inflation or the luck of being in the right place at the right time and hanging on to the property, can obtain a large degree of wealth without great knowledge or education in real estate and (2) those wanting to fix and flip single family homes can develop a nice business without the heavy education and experience I noted above. However, although the fix n flippers like to call themselves real estate investors, they are actually in the real estate business, they are not investing in real estate.
Real estate seems to be the one field where a large number of people are willing to believe that with just superficial knowledge, the purchase of a guru's mentorship program, the reading of a couple of books by authors who were NEVER successful in anything except selling books about how successful they were, that they will be able to achieve success as a real estate investor. This belief is so strong that they will incredibly believe this success can be accomplished with little or no capital investment. Even more incredible (and extremely sad), those with $40,000 saved are willing to spend it all (usually eagerly) on a mentorship program in which they have done no research and demanded no proof that the program has been successful, other than read some hand picked testimonials from the guru's students. Even worse are the people with no money who borrower $40,000 on their credit cards for the same mentoring program, with little chance of success. The reason I mention this is that books like RDPD are the introductory step in a continuous upsell leading to the $40,000 worthless mentoring programs I just mentioned.
In any case good luck whatever you decide.
Private Mortgage Financing Partners, LLC
Website View Page
23 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y
I didn't plug in your numbers. If the cash flow is only eight hundred a month it isn't a deal by any standard. This also doesn't take into account the issues with financing. Consider working on a smaller deal to get started, build equity, force equity, and then scale up.
5 Reply
James Wheelock
Investor · Utica, NY · Member since 2015 · 36 posts · 12 votes
10y
Well this thread got kinda negative there in a hurry. So while they are right in saying there are financing issues with these numbers. Is no reason to be put down by a "Generation x" style thought process. In fact it's that generation that obliterated the economy, thus making it that much harder to make this a reality. Nonetheless, rich dad poor dad is a great book. It's a motivational, self help book. So like anything else in life, it's what you do with the info from that point. The book itself won't make you rich, it's what you do in your spare time that makes you rich. If someone buys wasteful courses that's their choice, but nobody forces you to spend $40,000, you make the conscious decision to do that. And to answer your original question that I don't think anyone actually answered for you. Yes these deals have been done, they close every day. And my thoughts are that we have to just go out and find these deals despite naysayers. Cheers!
4 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10y
Originally posted by @James Wheelock:

And to answer your original question that I don't think anyone actually answered for you. Yes these deals have been done, they close every day.
Really? Do you have any evidence that "these" deals close every day? What is your statement based on? Have you purchased $ 3 million properties without putting up any of your own money, obtained 100% ownership and had a positive cash flow? Has anyone you know done that ( not just said they've done it, actually had it verified)? Have you EVER seen any PROOF that it was done?.
As I stated I'm my post above, on rare occasions a great and highly unusual deal occurs. This can be anything from a 6 figure profit on a quick flip, to a $3 million property purchase using none of the buyers own money. However, this only occurs when the buyer has extensive real estate knowledge, extensive experience, and a large network of FIRST tier contacts.
By repeating an obviously misleading if not totally incorrect assertion (obvious to those of us with enough experience to have been responsible for "screwing up" the economy) you are helping to perpetrate the myth offered by the "motivational" and guru/mentoring crowd, i.e., if you have enough motivation and the proper quickly learned "techniques", then extensive knowledge and experience relating to the specific area of interest is not necessary for success. And they will use the one in a million exception (usually a statically insignificant occurrence based on random"luck") to "prove' their case.
If in ten years time you are not where you want to be as a real estate investor, if you haven't achieved your goal of not needing a job, if your properties are barely generating any cash flow, if you seem to be acquiring more properties and less equity in them, it will be because you spent your time on "motivational" education and searching for the elusive "technique" that will lead to riches, rather than acquiring a genuine real estate education, one that includes the theory of property ownership, real estate finance, real estate law, property management and investment principles. But many people need to learn the hard way, especially when the truth relates to an effort they really have no desire to make.
Private Mortgage Financing Partners, LLC
Website View Page
9 Reply
James Wheelock
Investor · Utica, NY · Member since 2015 · 36 posts · 12 votes
10y
Don Konipol Understand I'm not disagreeing with you. I said the numbers he suggested were not accurate. I simply meant that deals (Apartment complexes) have been acquired creatively, not just traditionally through a lending institution. It's been done, and yes I personally have seen those deals take place and I've sat down with investors and been shown the numbers on how they were acquired. Nor am I claiming to know more than someone who has 40 years in the business. As for the Gen x statement, eh maybe it was a low blow. Sorry. I hate the stereotype that millennials are lazy freeloaders, I work my butt off! Bottom line, were all here to learn from one another. Good Day
2 Reply
Allen Fletcher
Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes
10y
@Pratik P.
I like the enthusiasm and go get 'em attitude, but you may be trying to bite off more than you can chew. Try finding a small multifamily first. Buy it and run it for a year or so. Doing this will give you a better understanding of how being a landlord works and will also start to build you history and network some. A first time investor (unless they have a lot of cash) should not jump immediately into apartment buildings. The complexity and expense greatly increases the risk of financial hardship.
Good Luck,
Allen Fletcher
0 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10y
Generation X are young to me! I am a baby boomer - and a relatively early one at that!
Private Mortgage Financing Partners, LLC
Website View Page
0 Reply
Darryl Dahlen
Commercial Loan Officer · Southern Maine, ME · Member since 2009 · 782 posts · 415 votes
10y
Don's insight is spot on. It's great to have an ambitious spirit, but I'm amazed by the false information that's out there that puts young borrowers on the wrong track.

Lenders want to see capital be injected by the owner AND that you have experience operating similar properties. Yes, you can syndicate funds, obtain seller financing, and use mezz/equity financing, but at the end of the day you need to bring something to the table.

Usually, only banks will allow 2nds. You can't use 2nds in the CMBS/agency world. Beyond that, it can get stick very fast as the more creative you try to get the more expensive the money gets. As far as syndication goes, why would I give you my money and take all the risk if you're not putting your funds into the deal? I wouldn't. Not unless I was taking the lion's share of the profits. Truth be told, I'd likely give you a finders fee and simply do the loan myself. I've seen syndication work where the borrower put no money into the purchase, but their track record of running properties was impeccable. They brought experience to the table in lieu of funds, but they still had the reserves and income needed to qualify for the loan.
Equity and mezz lenders are going to be even more picky than the 1st position lender is about your experience, your financials, and the property.
Point being, keep being ambitious, but keep yourself grounded as well. Reality is often quite different than the picture books would have you believe.
3 Reply
David Zheng
Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
10y
@Don Konipol hit it right on the head.

I'm 25 years old, started real estate investing this year and am up to 6 rental homes and about to close on a large 3 unit multifamily in a week. This is not an easy business and lenders are extremely picky. I also looked at multimillion dollar apartments, thinking I've read/researched enough to tackle them. Even with "gift funds" the 30 or so banks I called wouldn't even consider me.

start small and work your way up.
3 Reply
Gordon CuffePro Member
Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
10y
@Pratik P.If this is an off market deal, then find a buyer and make 50k and put it in your own savings account. If you dont have a buyer then send it to me and we can split a fee. I would say build up your own capital by finding deals like this to make big checks then you dont have to worry about finding lenders for the down payment.
1 Reply
Josh Caldwell
Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
10y
You can 100% do this deal, but you need a strong partner. The company that I work with closes these sorts of deals. As a new investor, you don't have the experience yet, that they need to approve that deal.
1 Reply
Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
10y
Originally posted by @Don Konipol:

1. The loan broker is misleading you. unless you have great credit and are an experienced real estate investor, no lender will allow a owner second as substitute for borrower contributed capital.
2. Private lenders typically lend in the first position, not second or third. And they don't charge 4% interest, it's 12 - 16%, with 3-4 points at closing, and 12 month terms
3. If private investors put up the "down payment", then they want ownership equity, like 90%, IF you have found and put together a great deal, better than they can find on their own.
4. The expenses of running an apartment property include vacancy loss, maintenance, repairs, management, accounting, legal, evictions, depreciation, landscaping, make ready, utilities in common areas, extermination, insurance, property taxes, building code violation fines, permits, usage fees, security, management, leasing fees, etc. Always more than the seller reveals.
Stop reading crap like Rich Dad Poor Dad. The wealth of knowledge contained in those books can be summed up in one paragraph. If you don't get it after one reading, you are not ready to begin investing. Instead do the things that will give you a chance to really become a successful investor
1. Get a REAL education in real estate. Start with a basic real estate text book, or a basic real estate course at a local college or through a Realtor's Association. Understanding what real estate is, how it is valued, the theory of real estate ownership, and real estate law, will allow you to see each possible purchase with a clarity most amateur investors never experience.
2. Learn real estate finance. The basics, not the one out of a million crazy "creative" legally questionable Byzantine fantasies put forth by the gurus and their unanimously unsuccessful followers.
3. Learn real estate negotiating. Like what is actually obtainable in most transactions. And how to be ready when you do stumble across the rare "home run". There's nothing worse then discovering an opportunity to earn six figures on a quick flip (yes, although rare they do exist) and for lack of knowledge having to pass it on to someone else for a lousy $3k referral fee.
4. Optional - Get a job in the real estate industry. Best is a job with a REIT, real estate mutual fund, real estate equity fund, real estate debt fund, or private real estate investment fund. Next best is property management or commercial real estate brokerage.
5. Optional - Get a college degree in real estate ( Florida International University and University of Florida offer fully online degrees in International Real Estate and Real Estate Finance). Realtors University, run by the National Association of Realtors, offers a Master's in Real Estate. Over 200 colleges and universities offer degrees in real estate. Or consider becoming certified as an appraiser, or real estate counselor.
6. SAVE money so you will have a "grabstake" to begin investing with
From the vantage point of my 40 years involved in real estate investing, I offer these conclusions.
First, for almost everyone, a true education in business, investing and or real estate is required for sustainable long term success as a real estate investor. There are two exceptions - (1) people who out of sheer luck purchase property just before a large run-up in prices because of either inflation or the luck of being in the right place at the right time and hanging on to the property, can obtain a large degree of wealth without great knowledge or education in real estate and (2) those wanting to fix and flip single family homes can develop a nice business without the heavy education and experience I noted above. However, although the fix n flippers like to call themselves real estate investors, they are actually in the real estate business, they are not investing in real estate.
Real estate seems to be the one field where a large number of people are willing to believe that with just superficial knowledge, the purchase of a guru's mentorship program, the reading of a couple of books by authors who were NEVER successful in anything except selling books about how successful they were, that they will be able to achieve success as a real estate investor. This belief is so strong that they will incredibly believe this success can be accomplished with little or no capital investment. Even more incredible (and extremely sad), those with $40,000 saved are willing to spend it all (usually eagerly) on a mentorship program in which they have done no research and demanded no proof that the program has been successful, other than read some hand picked testimonials from the guru's students. Even worse are the people with no money who borrower $40,000 on their credit cards for the same mentoring program, with little chance of success. The reason I mention this is that books like RDPD are the introductory step in a continuous upsell leading to the $40,000 worthless mentoring programs I just mentioned.
In any case good luck whatever you decide.
Don I wish I could vote for this post 10 times, very wise advice. 👍🏼
0 Reply
Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
10y
Originally posted by @James Wheelock:

Well this thread got kinda negative there in a hurry. So while they are right in saying there are financing issues with these numbers. Is no reason to be put down by a "Generation x" style thought process. In fact it's that generation that obliterated the economy, thus making it that much harder to make this a reality.
Nonetheless, rich dad poor dad is a great book. It's a motivational, self help book. So like anything else in life, it's what you do with the info from that point. The book itself won't make you rich, it's what you do in your spare time that makes you rich. If someone buys wasteful courses that's their choice, but nobody forces you to spend $40,000, you make the conscious decision to do that. And to answer your original question that I don't think anyone actually answered for you. Yes these deals have been done, they close every day. And my thoughts are that we have to just go out and find these deals despite naysayers.
Cheers!
Trump closed $200-300MM deals without any of his own money in his 20s, with a simple handshake. Then, he got a $250-400MM loan from the bank, pocketing some of the money. Get out there and take risks, have balls to ask for money or information, present yourself well, and you'll be all set. Don't listen to the naysayers.
0 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10y
Originally posted by @Andrey Y.:

Trump closed $200-300MM deals without any of his own money in his 20s, with a simple handshake. Then, he got a $250-400MM loan from the bank, pocketing some of the money. Get out there and take risks, have balls to ask for money or information, present yourself well, and you'll be all set. Don't listen to the naysayers.
Technically correct. Fred Trump "lent" the Donald two things
1- $58 million in cash, as an inheritance
2- His signature as co signer on a loan, when Fred was the largest residential landlord in NYC.
So if your dad gives you $58 million ($300 million in today's dollars) and is willing to co sign your loans, and is the largest residential property owner in the largest city in the country, then yes, don't listen to the naysayers, just "present yourself well" and you'll be all set.
Otherwise, you'd be better off listening to sound advise rather than "soundbites" and vague truisms from people who either (1) have something to sell you or (2) lack experience and knowledge in the field of real estate investments.
Private Mortgage Financing Partners, LLC
Website View Page
3 Reply
Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
10y
Originally posted by @Don Konipol:
Originally posted by @Andrey Y.:

Trump closed $200-300MM deals without any of his own money in his 20s, with a simple handshake. Then, he got a $250-400MM loan from the bank, pocketing some of the money. Get out there and take risks, have balls to ask for money or information, present yourself well, and you'll be all set. Don't listen to the naysayers.
Technically correct. Fred Trump "lent" the Donald two things
1- $58 million in cash, as an inheritance
2- His signature as co signer on a loan, when Fred was the largest residential landlord in NYC.
So if your dad gives you $58 million ($300 million in today's dollars) and is willing to co sign your loans, and is the largest residential property owner in the largest city in the country, then yes, don't listen to the naysayers, just "present yourself well" and you'll be all set.
Otherwise, you'd be better off listening to sound advise rather than "soundbites" and vague truisms from people who either (1) have something to sell you or (2) lack experience and knowledge in the field of real estate investments.
I suggest you go read "The Art of the Deal" written by Mr. Trump himself, before commenting. It gives you a firsthand account what burning hard work, a no nonsense/balls to the wall, desire to dream enormously attitude can do. Each deal/project is discussed, many of which state and local governments with a lot more money than Trump and his dad, failed miserably to deliver on time, or on budget. Access to 9 or 10 figures of government and business capital (let alone $58M) did not save them.
It didn't matter if his dad gave him a $5MM or $500MM loan, walking into a room to build rapport, convince the other party that you can close, that you can revitalize the area or the city, that you will get bank financing, etc. takes a lot more than money.
$58M.. by the way, the left media has already thrown around so many figures of this supposed loan from his dad, I think I have heard at least 8 numbers already. In order to succeed where government officials, banks, developers have failed, despite access to a lot more capital, takes a lot more than $$. Money is probably not even 10% of it.
His dad did not loan him any money or co-sign any of his projects that were >$100MM. Which, for all intents and purposes, are ALL his projects that anyone knows or gives a damn about.
Lets stop pretending that you or I could rebuild and remap NYC, in such an impactful and unapologetic way, even if our dad loaned us a mere $58M.
Please read the book, and I wonder if you will still attribute his early success due to luck or money. Its not luck or money. Its guts, charisma, creativity, insight, and "balls". I don't know of any better way to say the last part, in case it offends someone.
0 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10y
Even Donald Trump, with a starting grubstake of $58,000,000.00 and a billionaire father consignor ( of loans "only" up to $100,000,000.00), and working in his father's real estate business since the age of eleven (collecting the coins from the laundry rooms in his fathers apartment houses, where I first met him), saw the need for a quality education and attended and graduated from the University of Pennsylvania Wharton School of Business with a Bachelor of Business degree with a major in Real Estate.
So the point is that education and experience are the necessary ingredients for a successful career in real estate investing. All the other "glad handing", convincing, selling, or as we used to say in Brooklyn where I grew up "********ting", will just present you as another "empty suit" salesman. You might even make one or two deals work. However your lack of knowledge and experience will probably insure they are losing deals, not profitable deals.
There is no way to be able to evaluate, appraise, analyze and recognize deals/investments without experience and knowledge gained through education and apprenticeship. A good sales persona might be able to sell something without extensive knowledge of the thing he's selling (although in the information age it's less likely), but we are talking about INVESTING, not selling or promoting.
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John Oh
Property Manager · Huntingdon Valley, PA · Member since 2016 · 81 posts · 92 votes
10y
Originally posted by @Don Konipol:
Stop reading crap like Rich Dad Poor Dad. The wealth of knowledge contained in those books can be summed up in one paragraph. If you don't get it after one reading, you are not ready to begin investing. Instead do the things that will give you a chance to really become a successful investor
1. Get a REAL education in real estate. Start with a basic real estate text book, or a basic real estate course at a local college or through a Realtor's Association. Understanding what real estate is, how it is valued, the theory of real estate ownership, and real estate law, will allow you to see each possible purchase with a clarity most amateur investors never experience.
2. Learn real estate finance. The basics, not the one out of a million crazy "creative" legally questionable Byzantine fantasies put forth by the gurus and their unanimously unsuccessful followers.
3. Learn real estate negotiating. Like what is actually obtainable in most transactions. And how to be ready when you do stumble across the rare "home run". There's nothing worse then discovering an opportunity to earn six figures on a quick flip (yes, although rare they do exist) and for lack of knowledge having to pass it on to someone else for a lousy $3k referral fee.
4. Optional - Get a job in the real estate industry. Best is a job with a REIT, real estate mutual fund, real estate equity fund, real estate debt fund, or private real estate investment fund. Next best is property management or commercial real estate brokerage.
5. Optional - Get a college degree in real estate ( Florida International University and University of Florida offer fully online degrees in International Real Estate and Real Estate Finance). Realtors University, run by the National Association of Realtors, offers a Master's in Real Estate. Over 200 colleges and universities offer degrees in real estate. Or consider becoming certified as an appraiser, or real estate counselor.
6. SAVE money so you will have a "grabstake" to begin investing with
From the vantage point of my 40 years involved in real estate investing, I offer these conclusions.
First, for almost everyone, a true education in business, investing and or real estate is required for sustainable long term success as a real estate investor. There are two exceptions - (1) people who out of sheer luck purchase property just before a large run-up in prices because of either inflation or the luck of being in the right place at the right time and hanging on to the property, can obtain a large degree of wealth without great knowledge or education in real estate and (2) those wanting to fix and flip single family homes can develop a nice business without the heavy education and experience I noted above. However, although the fix n flippers like to call themselves real estate investors, they are actually in the real estate business, they are not investing in real estate.
Wow @Don Kopinol! Thank you for this advice! As a 21 year old beginning in Real Estate Investing, I will definitely take this to heart and begin actually learning basics in finance and getting an education in Real Estate.
Thanks Don, for the wake-up call and enlightening message!
-Jonathan
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Jason PhillipsPro Member
Investor · Haverhill, MA · Member since 2015 · 3 posts · 1 vote
10y
Don Konipol Thank you for the shared wisdom, this was one of the realest post I've ever read. Your profile is impressive and inspiring. I was in a Realestate Class about 2yrs ago when a friend of mine did his first fix/flip, one of those lucky/ right place, right time deals. Long story short is, I never took the exam thinking I don't need to work for an agency to make money in Realestate. Well I've just decided to go back to school and seek the needed education. My question is how and where do I find a qualified mentor?
1 Reply
Jason PhillipsPro Member
Investor · Haverhill, MA · Member since 2015 · 3 posts · 1 vote
10y
@Don Konipol
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Justin K.
Investor · Saxonburg, PA · Member since 2016 · 68 posts · 53 votes
10y
@Pratik P.
You asked a hypothetical question. And I agree that you fired up some naysayers. Its important to remember that real estate is INCREDIBLY regional. So without stipulating a location it is hard for anyone to say this can or cannot be done. You are based out of California and you got answers from people in Florida, Texas, New York, etc. I will agree that your use of the words 'Private Money Lenders' could mean several things. If you mean hard money lenders then what others have said is correct. You will get terms of about a year with 12% interest. If you are talking about friends you know (Parents, Wealthy Uncles, etc), then you can structure any sort of financing that you both mutually agree on. For anyone to say that this cannot be done, end of story, or this is done every day is hard to say. Below I will outline some of my experience. Take it for what its worth.
I am closing on a commercial loan for a multi-unit property next week. Its a 'no' money down deal (I am paying only the closing costs out of pocket) in which I structured a commercial loan for about 72% of the purchase price at 5.6% (fixed) for 15 years. The remaining portion of the purchase price (28%) I am getting seller financed at 3.5% (fixed) for 25 YEARS!! The seller is taking a second position and loves the fact that I will be sending her a check every month as she sits on the beach and enjoys her retirement. In my discussions with my banks commercial underwriter on this deal and asking the questions you asked (is this even possible) I was told and I quote. 'As long as you have a W2 job and you can prove the deal is self supporting through the sale transition and any repositioning that I intend to do, then we (the bank) will loan you money all day!' Now, keep in mind.
1) This is a regional bank in my area.
2) I have done several smaller multifamily deals to show a track record, albeit short.
3) These are their lending practices today, who knows what they will want to do tomorrow.
Long story short, can it be done, yes. Are you going to be able
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