I received an email from a potential student with a bunch of questions trying to figure out why the MFIA Owner Forum was a different type of coaching/consulting/mentoring program for real estate investors looking to own apartments. I figured that if I responded, he would just take anything I said as a sales pitch, so instead, I put it out there to my students and here is what one of them came back with . . . . .
“Charlie forwarded your email below over so I thought I would jump in and answer your questions to the best of my ability as a student of his.
“First, a little background on me...I was working a corporate job and investing in real estate on the side, but couldn't get over the hump into the bigger properties. I left my job to take the plunge full-time investing in 2013, and at that point, had a vacation rental, a single-family townhouse rental and a 10-unit multifamily. That may sound like a lot, but believe me, it wasn't enough for me and my family to live on full-time.
“After a year of going it alone and still not acquiring anything else, I knew I needed guidance, so I interviewed a number of "coaches"/"gurus" to find the right one, because I knew I couldn't go it alone anymore. Charlie was hands-down the most qualified, and also, the least expensive, many of these other coaches wanted $30,000 or more up front.
“Over the course of my time with Charlie, I put in a ton of offers (that's Charlie's philosophy, "if you're not putting in offers, this is just an expensive hobby") and had two accepted (in succession, not at the same time) which eventually didn't work out. I made sure to do as much as I could up front to minimize my losses on each of these, so losses were limited to travel time and a few hundred dollars of attorney's fees.
“In March of 2016, I finally got a 56-unit under contract and moved that along to completion in October. Charlie was invaluable throughout the process, we spoke nearly every day for a while there (and Charlie charged nothing additional beyond my monthly Owner's Forum dues). This property has now been highly profitable for the first six months and looks like it will be a nice, positive cash flow property into the future.
“Sorry for the lengthy background there, but I wanted you to understand where I was coming from before answering your questions...
“In your email below you said the following...
‘From what I have gathered in order to invest in multifamily you must prove a high net worth in the process of financing or be able to place a large sum of cash up-front. Can you give me a straight forward answer as to the best way to get into multifamily ownership without the net worth or upfront capital to finance these types of properties.’
“So, the short answer is yes, the banks do typically require a net worth equal to the amount you plan to borrow. But that net worth doesn't have to come from you alone. I had this issue with the 56-unit, so Charlie set me up with a key principal, who partnered with me for a percentage of the deal. In addition to providing the experience and net worth the bank was looking for, the key principal provided additional mentoring and guidance since his name was on the deal, too. Since I was a student, Charlie offered this introduction free of charge. With regards to down payment required, that will typically be between 20% to 30% of the purchase price. Charlie teaches that you should be looking for silent equity partners from day one as well, so this money doesn't have to come from you. It's helpful if you have your own money as a cushion, but it's not necessary. When you do get a property under contract, an earnest money deposit is required (typically 1% of purchase price), but if you don't have those funds or don't want to use your own, Charlie has an Earnest Money Deposit program as well, he can explain the details of that.
“There are also upfront fees for inspection, appraisal, etc, the size of the property determines how much these would be. For the 56-unit property, the total for me for inspection, appraisal, and environmental was about $10,000. But keep in mind that this was for a 56-unit property in the $2.3M purchase price range. If the property is smaller, these fees will be smaller, too. Charlie teaches that one should start off with a smaller property to minimize risk and learn and then incrementally build on to that. Since I already had a 10-unit for six years at that point, 56-units made sense for me. For someone just starting out, a smaller 10-15 unit might make sense, but that is a personal choice to be made after consulting with your coach.
“We have a number of students in Charlie's program at various levels, there are folks with quite a few small properties, folks with a few large properties, and many folks who don't yet have any, but are still learning and putting offers out there.
“Again, sorry for writing a book here, but I thought you might find this information helpful. The person who introduced me to Charlie gave me quite a bit of info about her business and her relationship with Charlie as one of his students and I thought that was invaluable in helping me make a decision. I am eternally grateful to her for making that introduction. I am so glad I joined the program, not just for Charlie's guidance, which has been invaluable, but also for the "Mastermind" aspect of it. We all discuss things together, Charlie encourages students to work together, bounce ideas off of each other and I can honestly say that we have a camaraderie together, even though we are all scattered around the country and many of us have never met each other. We all cheer each other on for success, which helps a lot in this business.
“Ultimately, the decision of whether and when to jump in to multi-family investing is up to you. Hopefully, my experience above will help you gain clarity and come to a decision either way. If you have any further questions for me, please feel free to reach out, my number is below.
So there you have. I could not have said it any better myself. His explanation of costs and process was spot on.
If you would like to get started working with me, read this page and sign on up. Would love to make you the next success story.