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SHOW NOTES FOR EPISODE 115: OVERCOMING BARRIERS TO ENTRY IN APARTMENT INVESTING
When Jeff Greenberg was first interviewed on the Old Dawg’s REI Network in May of 2016 (episode #003 – “Growing a Real Estate Empire While Working Full-Time”) he was working full-time and investing in real estate part-time. He built up his investment portfolio and recently quit his W2 job. He is now financially independent, living off of his REI business. In this episode, Jeff explains not only how he did it but also a few tricks that will help you to jump right into multifamily investing with little or no experience.
What You Will Learn
- A little little-known trick that will show banks that you are an experienced investor
- Advantages and disadvantages of starting out with smaller multifamily properties
- Net worth and liquidity requirements as key factors when applying for a loan
- Financing Catch 22
- Advantages of using outside consultants
- Volunteering on a team to get the training and experience to buy your own apartments
- The importance of giving back
About Our Guest
Jeff Greenberg
Jeff Greenberg, MBA, has over forty years’ experience in management, staff supervision, development and training. He has proposed, implemented, and supervised multi-million dollar budgets for government agencies, as well as private and public organizations. Since 2007 Jeff has been investing in multi-family assets in emerging markets. Jeff focuses on acquisitions, investor relationships, contract negotiations, business systems development, business management and asset management. He is currently focusing on value add multifamily and student housing properties. He also runs 2 rei clubs and mentors investors in multifamily and student housing acquisitions and asset management.
Jeff’s Start in Multifamily Investing
- Jeff’s first multifamily purchase was a $1 million 20-unit apartment
- He partnered with a person from Alaska
- When he applied for a loan for the 20-unit apartment, the bank was impressed that he was an investor in a 700-unit, $20 million dollar apartment community and counted it as experience, even though he was just a passive investor and made no decisions on the project
- Jeff had only invested $10,000 in the 700-unit. The investment had a bigger return than just the interest and equity
Using Passive Investing Experience to Leverage Loan
- When he applied for a loan for the 20-unit apartment, the bank was impressed that he was an investor in a 700-unit, $20 million dollar apartment community and counted it as experience, even though he was just a passive investor and made no decisions on the project
- Jeff had only invested $10,000 in the 700-unit. The investment had a bigger return than just the interest and equity
- What He Learned From the Experience
- He learned a lot about apartment acquisition and the related operations as a passive investor on the 700-unit deal
- There was also a negative part of the experience because he saw how poor communication affected his experience as an investor and how it made him want to do it differently with his future investors
Starting with Smaller Multifamily Properties
- Starting with smaller units has its advantages and challenge
- Advantages:
- Easier to find
- Easier to finance
- Disadvantages:
- Doesn’t pack as much weight as a larger property will with investors, banks, etc
- Anything less than 75 units management has it’s challenges
- usually doesn’t make financial sense to have “on-site” property management and maintenance personal
- Trying to buy more than 100 units first time out can be a challenge unless you have someone more experienced on your team and/or buy something closer to home
Banks requirements for Larger Multifamily Properties
- You’ll need a signor on the loan who meets the net worth and liquidity requirements of the bank:
- Net worth – Must be equal to or more than the total property value or loan amount
- Liquidity – Must have enough money in the bank to cover 6 months to a year of the mortgage payment or 10% of loan amount
- Sometimes you can get an individual to just sign for you on the deal for you in exchange for 3% of the deal or 10% of the “management cut” of the deals
- Experience and knowledge of all the aspects of successfully managing the deal
Financing “Catch 22” Dilemma
- You can’t get the money because you don’t have the experience, but you can’t get the experience because you can’t get the money
- How to get around this:
- Get on someone else’s team who does have the experience
- Leverage/tout your experience on that team with the banks and investors
- He has a bunch of mentoring students right now working on a student housing deal
Putting Someone on Your Team That is a Consultant
- Great idea to have an experienced person (such as an outside consultant) on your team that you can call as needed
- Someone who can look over your numbers and each piece of paper
Getting on Someone Else’s Project Team
- Jeff started with a group of inexperienced volunteers about 9 months ago
- He has taken them through the entire search, evaluation, purchase, management process
- The volunteers take on tasks (finding, researching/underwriting, etc.)
- Most are local (most came to Jeff through his local meet-up/REI groups he has formed)
- He meets with his team monthly
- Some are not local
- He uses great tools that help make that process easier:
- He encourages volunteers to get some education first (books, podcasts, meetings, etc.)
- He tries to expose his team members to every aspect of the process
- Tries to give team members what they need to do it on their own but hopes to continue working with them in the future
- His philosophy – train people to replace him
- Guiding Quote: “The only thing worse than training your staff and losing them is not-training your staff and keeping them”
Concluding Advise
- Education is critical
- Always keep learning
- Read
- Attend seminars, events
- Network (go to REI meetings, other meetups)
- Pay it Forward
- Help people out
- It always comes back to you
How to Reach Jeff
- His Website: synergeticig.com
- Email: Jeff@synergeticig.com
- Active on BiggerPockets.com
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