050: Show Me the Money!

SHOW NOTES FOR EPISODE 050  –  SHOW ME THE MONEY!

Now that his 22-unit is beginning to stabilize, Bill is looking ahead at a possible 8-unit purchase before the year-end and the more ominous 100 plus units in 2017.  In this episode, Bill candidly examines funding challenges as he continues to pursue 1000 x 2020.  There are various options to consider (seller financing, JV, sponsorship, syndication) but he knows sellers will be singing the same tune – “Show me the Money!”

Introduction

I really want to be real with you.  Why?  Because I know if you really hear what I’m thinking and see what I’m doing, you will say, “If this guy can do it ANYONE can do it!”  And that’s really what I want to happen.  I want you to see that there really is nothing to fear.  Sure, you will see my stupid mistakes – which I have and will continue to make.  But you will also see that when I fall down, I’ll pick myself up (maybe wine a little), learn something new and keep moving forward.

When I went to Indy I was concerned that I wouldn’t make my goal but when I did I celebrated.  If I didn’t I would still keep moving forward to my goal.

As I’m stabilizing Indy and am receiving steady cash flow, I still have more rehab and I will need the cash flow to continue the upgrades and rehabs, still a few more thousands.  I had to put $7,000 on my American Express card to cover rehabs/upgrades and hope to pay it off quickly (in the meantime I’m earning miles) I also need to still continue to work closely with management for ongoing rehab, upgrades, quick turn-arounds, the introduction of RUBS in 2017 utility share with tenants, and continue to reduce expenses and maintain strong cash flow.

I’ve had tenant problems and vacancies in Memphis and Atlanta while I was in Indy that I have also had to deal with.  I’m thinking I may sell one or more of my SFRs once I purchase a 100 plus apartment.  I’m realizing they are more of a cash drain and the multis are really carrying me.  But no hurry there.

But now I need to look ahead to my goal of 1,000 by 2020

I still am under goal for 2016 by 8 units and, coincidentally, just found an 8 unit that interests me.  I have money sitting in my Self-Directed IRA, not earning a penny, and want to buy some small multis with those funds – looking to possibly buy an 8-plex before year-end in order to make my goal for this year – if possible.  If not, no problem.  It’s a personal purchase.

But, looking ahead at 2017, I have some major decisions.

• Need to purchase minimum of 72 units sometime during the year.
• Am targeting 100plus apartment communities
• Would really prefer a B or B+ property. The C-class properties are a lot of effort
• I will likely need anywhere from $300K to $2,000,000 for the down payment (depending on the price of the property), plus repair funds and that means…
  • I will have to be dealing with sellers and bankers who will be saying those famous words — “Show me the money!”
• Remember the movie Jerry Maquire (not a favorite of mine – especially with the cheesy line “You had me at hello…”) Oh, brother…
• Anyway, when I think of sellers (and bankers) I can’t help but see Cuba Gooding, Jr walking around making the uncompromising statement as he’s waiting for the dollar amount he wants for the BIG NFL contract – “Show me the money!” as the sports agent played by Tom Cruise is thinking and saying – “What money?”
• Well, that’s where I am now! I have no choice but to come up with the money for the next step of my goal or stop moving forward.  The next goal!  The next big property!

I’ve always hated to ask for money – even as a missionary

But now, iI have no choice if I am going to move forward.  I must raise funds!

What to do?  What are my options?

So, I’ve really pondered all the options here and yes, if I didn’t have such a tight timeline, I might NOT have to look for money.  Here’s why

If I had the time…

• After a 2-5 years or so, I could pull $300-500K in equity from Indy to purchase a larger apartment and keep leveraging from there, but I would have to make a lot of home runs in a row to continue to grow to 1,000 units.  But I would have to have tons of equity every couple of years and that may be hard to perpetuate
• Would have to invest in higher risk properties that have big return potentials
• Would also have to do seller finance deals and other creative financing to reach my goal (very limiting)

That would not likely happen quick enough, especially as I get into years 5 and 6.  So, really, these are my most likely options now:

• Set up a “fund” in advance of purchasing the property to create a war chest (as discussed with Kim Lisa Taylor in episode #049) to be ready to purchase the second I find the right deal
• Do a joint venture deal (how hard would that be to find the right person)
• Find a sponsor (same challenge as a joint venture)
• Be ready to syndicate the second I get that great deal under contract

I will keep you updated as I explore these options and continue researching and developing my fund raising strategy.  And, as promised, I will continue to share the good, the bad and the ugly on my trek to achieve 1,000 units by 2020.

So, until next time, remember CASH FLOW IS KING AND REAL ESTATE INVESTING THE MEANS.  Thanks again for listening and God bless!

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