How I Raised 1 Million Dollars for My First Multifamily Deal

Are you an aspiring apartment syndicator looking to raise equity for your first multifamily deal? I know how daunting it can be to secure equity for your first deal especially when you, and the potential investors, know you just don’t have the track record, yet. However, with the right approach and strategies, it is possible to raise the necessary funds to get your first multifamily deal closed.

In this article, I will share my experience on how I managed to raise 1 million dollars for my first deal.

Here are some tips that could help you too:

1. Leverage The Track Record Of A Mentor

When approaching potential investors, it can be helpful to leverage the track record of a mentor. If you have a mentor who has successfully completed similar deals, you can point to their success as evidence of your own potential. You could also consider partnering with a more experienced investor who can provide guidance throughout the process. This is exactly what I did in the beginning by having a mentor, who at the time had about $100MM Asset Under Management (AUM).

2. Create A Big Company Aura

At first glance, the sentence above may leave you feeling confused and unsure. I agree that it is not immediately clear. However, I will never forget what my father-in-law said when he saw the newly launched Dwellynn website. He exclaimed, "Wow, this looks like a big company!" This initial impression is crucial. Potential partners, investors, and lenders who visit your site for the first time should feel the same way. It is important to pay attention to every detail. Perception is reality, so make sure to appear big from the get-go. And when reaching out to stakeholders, avoid using an email address with "@gmail.com" at the end.

More to come about this in the Apps and Software we use at Dwellynn module.

3. Build a Strong Network

Now that you have created a “big company” aura, it is time to go out with confidence into the world. Networking is crucial when it comes to finding equity for your first multifamily deal. You need to build a strong network of passive investors, mentors, and partners who can help you fund your next deal. Attend real estate conferences, events, join business associations, and participate in online forums such as BiggerPockets, LinkedIn or even Instagram to expand your network.

Personally, this is where I was able to find my partners who were out-of-state but needed a boots on the ground partner in Texas and someone who can find good assets, control the deal, and take it to closing. This is how I did it.

In conclusion, raising equity for your first deal can be challenging, but not impossible. By adding your mentor’s track record to your team’s section on your website, creating a professional look for potential stakeholders, and continually building a strong network.

That classic, though corny, line of Your Network is your Net Worth is true!

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

Questions to Ask When Evaluating an Apartment Building Deal

Let's discuss how to quickly evaluate an apartment building deal. With so many deals available, it's crucial to determine which ones are worth your time. Here are five essential questions you should always ask:

What is the net operating income (NOI)?
What is the asking price?
What is the upside potential?
What is the deferred maintenance?
Why is the seller looking to sell?

Let's delve into a bit more detail about these questions:

First, it's important to find out the NOI. This is crucial information because it helps determine what type of income the property generates and what expenses are being incurred. You will need to verify their income and expenses later, but for now, use the figures they provide.

Next, take the NOI and divide it by the asking price to determine the cap rate (the financial return of the property if you paid all cash).

For example, if the NOI is $35,935 and the asking price is $650,000, then the cap rate is 5.5%. This is a good rate for a property located in a desirable area.

If you don't know the asking price or are attempting to determine what you should offer, then you will need to find the market cap rate for similar properties in that area. One option is to ask brokers or property management companies.

For example, if the NOI is $550,000 and the market cap rate is 9%, then a fair price would be $6,111,111.

Here are some rule-of-thumb assumptions that can help you run some numbers if you don't have all the information:

Assume between $3,000-$3,500 expense per unit per year if no expenses are given.
Assume a 25% down payment, 5.5% interest rate, amortized over 25 years with a 10-year balloon payment if you have no idea about debt service.

NOTE: these assumptions are not always accurate, and should be used initially to run some numbers and determine if the deal meets your buying guidelines. To truly analyze the deal, you will need to obtain concrete information from the seller.

Now that you know the basic financials of the property, it's time to dig deeper. Here are the top three questions that you must always ask about the property:

What is the upside potential?
What is the deferred maintenance?
What is the seller's motivation?

Here's what we didn't cover in this post: Market fundamentals. Investing in the right market is the most important variable for success. Buying in a bad market can result in failure. This is a longer conversation for another day, but it's important to know that the above post assumes that your market is performing well.

How to Find a Property Management Company for Your Real Estate Investing Team

Real estate investing can be a lucrative business, but managing properties can be a hassle. That's why many investors hire a property management company to help them with the day-to-day operations of their rental properties. However, finding the right company can be a daunting task. Here are two ways to find a property management company for your real estate investing team.

Referrals from Other Investors

One of the best ways to find a property management company is to ask for referrals from other investors. Real estate investing is a tight-knit community, and many investors are more than happy to share their experience with property management companies. Reach out to local real estate investment clubs or associations and ask for recommendations. You can also ask for referrals from real estate agents or brokers who specialize in investment properties.

When asking for a referral, be sure to ask about the company's experience, their fees, and their communication style. It's also a good idea to ask for references from current or past clients. Once you have a few referrals, do your due diligence and research the companies further. Check their reviews online and ask for a copy of their contract to review.

Online Directories

Another way to find a property management company is to use online directories. There are several directories available that specialize in connecting investors with property management companies. These directories allow you to search for companies based on location, services offered, and fees.

Some popular directories include All Property Management, Buildium, and Cozy. These directories typically have a vetting process for the companies listed, so you can be assured that the companies you find are reputable. However, it's still important to do your own research and read reviews before making a final decision.

Conclusion

Finding the right property management company for your real estate investing team can take some time and effort. However, by asking for referrals from other investors and using online directories, you can narrow down your options and find a company that fits your needs. Remember to do your research and ask the right questions before making a final decision. With the right property management team in place, you can focus on growing your real estate portfolio and increasing your profits.

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