As I moved into multi-family deals, I discovered something amazing: the relationships that you’ve created and nurtured along your journey can literally supercharge your investing life. The meet-ups, the masterminds, and even just getting out and genuinely talking to people in your everyday life can help you find your next deal.
With single residentials and duplexes, you can find your deals through mailings or on the MLS. But a lot of times those bigger apartment buildings never make it to a listing, and that’s when who you know becomes incredibly important.
My friend Sachin Patel and I were recently talking about our journey into multi-family real estate, and he told me that his first apartment building deal came from a referral from his exterminator! He’d already built up a great reputation while he was buying single and doubles, so when his exterminator mentioned that he knew someone trying to sell a college portfolio, Sachin jumped at the chance.
And for Sachin, his relationship with his exterminator wasn’t about looking for a deal. He was all about treating him with respect. He loved the work this company was doing, so he gave them all of his contracts. That respect was mutual because it was based on Sachin just being a genuine and real person.
The older I get, the more I realize that all of my significant relationships that revolve around money or deals or capital aren’t about tactics. These relationships are because I’m having real conversations with people and I genuinely care about what’s going on in their life. The relationships you build on your real estate investing journey will be essential to your success.
Your Why For your REI Life
What makes you excited to jump out of bed every day? What drives your passion for your business? I think that having a “why” or a greater purpose behind your business is what helps your business to grow. You’re not buying houses just to own a house. You’re buying houses to provide for your family or eventually give back to your community.
As an immigrant from India, Sachin saw how hard his parents worked to provide a better life for him and his sisters. His “why” came from the same place. He wanted to build a better life for his own family too. This meant that when he graduated from college, he wasn’t interested in blowing his first paycheck on cars. He’d read The Millionaire Next Door and he was completely focused on using real estate to build his dream.
His purpose drove his dream, even if he didn’t know the first thing about homeownership or being a landlord. I love that sort of drive. Even if you don’t know exactly the next steps in your entrepreneurial journey, the important part is to take the first step. Don’t get hung up on things being lined up perfectly. Everybody’s going to make mistakes, so just figure it out and move on.
Building trust with investors brings huge returns
Finding and raising capital is always going to be a huge part of real estate investing. Sachin’s wife’s family was his first investors. When his wife saw how committed he was to buying homes, she got behind him in a big way, and brought her whole family on board.
With his wife’s family totally invested in his business, Sachin had to carefully structure his business so that they were guaranteed their return. Can you imagine how bad every family reunion would have been if he’d mismanaged their funds (and trust) in him? Sachin held their money for five years to invest in homes, and through a rent rule gave them back their initial principal, plus 10% annualized and dividends.
By the time Sachin was ready to invest in much bigger multi-family deals, he already had a pool of investors who had profited from his business, and who were more than happy to continue to invest with him. And because he’d made sure his investors “always ate first”, they were happy to recommend him to their own friends, and stretch out his potential investing network.
When Sachin was ready to take on a multi-family deal, he had a great pool of private investors, a good reputation as a trustworthy businessman, and he could go to a commercial bank confident that his business plan was solid with good cash flow.
A Positive mindset undoes the negative impact of mistakes
Multi-family deals can be uncomfortable and scary. They’re risky, and sometimes they still make me nervous. But none of that is real. That fear isn't real. It’s concocted in your mind, and you have to push past that fear to take ahead of the next step in your journey.
Sachin says that he waited too long to jump into multi-family properties. In fact, he let his first one get away, and passed it on to a friend. Then he turned around and changed his mind and bought it for $100,000 over what his friend paid for it. He says he made a lot of mistakes with this first property, like not leaving enough money in the deal to pay for the renovations and having to come up with the cash on his own.
Instead of getting upset over his mistake, Sachin got in there and hustled his face off. He was hungry to learn how to make this deal work for his family. Your “why” has to be more powerful than your fear. You’re not in this business for you. Your ultimate purpose will help you overcome your insecurities about the things that scare you.
If Sachin had let his fear overcome his purpose for building a real estate business, he would’ve missed out on a lot of growth and a lot of fun. Because you have to love this business. It should be fun to have to figure out price per door, cash per unit, and cash on cash return. If you’re not jumping out of bed every day excited about going to work, then take some time to find your passion again.
Find your true purpose behind your real estate business.
Reinvest in relationships with the people around you.