Join us for this episode of Larry Goins Brain-Pick-A-Pro. Learn from leading experts in real estate investing and business. Get the latest information of what is working right now and their predictions for the future. Get ahead of the pack and take advantage of this insider information. Success leaves clues! See first hand what works from them, the lessons they have learned and how to avoid the mistakes they have made. Don’t miss a single episode of Larry Goins Brain-Pick-A-Pro.

Ready To Take Your Real Estate Investing To The Next Level? Click Here to Apply To Work Personally With Larry and His Team!

  • Or Listen To Our Podcast:

Achieving Financial Freedom with Multifamily Investing with Michael Blank

SHOW SUMMARY:

Michael Blank is a full-time entrepreneur, investor, author, coach, and leading authority on apartment investing in the United States. He has helped students buy over 2, 000 units in multifamily investing. He is passionate about helping people become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money.

Through his investment company, Nighthawk Equity, he controls over $24 million in performing multifamily assets all over the United States and has raised over $6 million. He is also the author of the new best selling book, "Financial Freedom with Real Estate Investing: The Blueprint to Quitting Your Job with Real Estate – Even Without Experience or Cash.”

SHOW HIGHLIGHTS:

  • Who Michael Blank is
  • How he got started in real estate
  • The reason he wrote his book
  • The law of the first deal
  • Why he prefers multifamily over single family
  • Who multifamily or apartment investing is for
  • Getting started with apartment investing
  • 2 major things one should overcome:
  • - lack of experience
  • - lack of money
  • Using the right language
  • Building a team around you
  • Raising money proactively
  • Finding deals
  • Capitalization rate
  • Different cap rates
  • Buy and sell investor versus buy and hold investor
  • Different classes of properties
  • Finding a good property manager
  • His thoughts on student housing
  • Steps you need to do in the first 90 days

Quotes:

  • "It doesn't really matter what size you start up."
  • "Using the right language which you get through the education."
  • "You can do stuff without having your own cash."
  • "Real estate is a numbers game."

RESOURCES AND LINKS FROM THIS SHOW:

SHOW TRANSCRIPT:

Larry: Welcome to the Brain Pick-A-Pro show live from Lake Wylie, South Carolina, in my office hanging out today doing deals and also live is my special guest, good friend, this guy is the leading authority on apartment buildings, multifamily. He has helped students buy over 2,000 units in multifamily investing. He owns and controls over $24 million worth of real estate and he is the author of the new bestselling book Financial Freedom with Real Estate Investing, my good friend and co-fellow author of books now is Michael Blank. What’s going on buddy?

Michael: Hey, Larry it’s a real honor to be here on the show.

Larry: Awesome man. Thanks a lot for being here. I really appreciate it. Thanks a lot for being on. Man, I know you got a lot of stuff to cover I mean you are a mover and a shaker, you are out there making things happen, doing deals and all kind of stuff. Why don’t you start out and tell our viewers a little bit about who is Michael Blank.

Michael: Yeah. So, I’m a father of 4 and I’m just trying to become a better version of myself every day. My background really is a lot like other people’s background. I was thought to be, you know, I go to school, get good grades, get a job, and I have a software background so I started working for software startup, I was in the right place, right time, we IPO’d in 2000 right before the market crash. Put a bunch of money in my pocket and then I read Rich Dad Poor Dad and my vision really was to be a CEO of a software company, so I moved around and all the fun people left after while we kinda really big. And so when I read this book it was like, oh my gosh, I’m such an idiot. It does not matter how much money I have in the bank or how much salary or how much passive income I was getting and I really was not getting hardly any.

Larry: Right. Right.

Michael: So, I decided to change that. I threw away my entire career, my education to pursue this quest for financial freedom. Unfortunately, for me my big idea wasn’t real estate so much though I doubled in real estate. At that time, my big idea was restaurants because I was surrounded by a bunch of burger franchisees and they were crushing it, they’re like oh we’re gonna hire guys, it’s gonna cost this much to open, we’re gonna sit back and count our passive income. I was like sweet, that’s what I want. So, I took all my chips and put it all into a pizza franchise and long story short, I’ve subsequently lost my IPO millions and added a couple hundred thousand dollars of debt to that. I almost ran out of liquidity and finally I was able to sell some of this restaurant and my way of real estate and like so many of us did with single family houses and I was actually pretty successful with that. I had an apartment building, really loved the real estate stuff, but the house flipping stuff for me really wasn’t this passive as I wanted. Meanwhile, this 12-unit apartment building was generating this mailbox money, so I was like, huh, you know, maybe I’m doing something wrong so finally I decided to shift into just buy and hold multifamily and I started to blog Bigger Pockets, put up my own website and kinda one thing led to another and so now we have this program were we educate people about apartment buildings, people can bring us deals, we will partner with them and raise the money for it and so we’ve done almost a thousand units over the last 18 months just by joint venturing with people. So, it’s been really fun. I’m actually having some fun now. Five years or six years ago, I wasn’t having that much fun. So, now I’m having a lot more fun, so it’s great.

Larry: It’s a lot more fun investing in real estate than running a pizza business, right?

Michael: It really is. Even though it is a passive investment but honestly I mean restaurants really is not meant to be a passive investment, so I know that now.

Larry: It’s funny you mentioned that, you know, I’ve had people that have approached me about investing in different restaurants and different concepts or whatever and I just never could grasp earning my money $4 here, $20 here, $25 there, I just never could grasp that. It just seems like a lot of work to go through to generate that little bit of money from each customer. You know what I mean?

Michael: I know exactly what you mean. Yes, I know exactly what you mean plus depreciating asset and what I like about the multifamily is that I can control the value more so on the single family house ‘cause I’m dependent on market comps and so with multifamily I have the ability to affect the evaluation and I can get all this debt financing for, I’m not the person to guarantee it anymore and so I really found a really nice way to scale, replace my income, it was just, you know, 2 to 3 deals versus I was doing 3 dozen houses and I made good money, but it was just a repetitive thing and once I sold it, there was nothing leftover. So, that was frustrating to me and so looking at all the stuff I’ve done in the software, the restaurants and I trace different options for a while, my road to financial freedom is very long, not very straight, I lost a bunch of money and so the reason I wrote the book was to basically give people my blueprint for quitting their jobs and spoil alert it was apartment buildings, but most people dismiss it as a strategy because they feel like they don’t have any experience, they don’t have the money and they go yeah, you know what, I’ll do that maybe down the road or better yet never.

Larry: Right. Right. A lot of people do think they need to work their way up to it but quite frankly it’s really closer than you think, isn’t it?

Michael: It is. It really is closer and I used to say go bigger, go home and everybody agrees the economy is a scale with multifamily, so I used to be arrogant and saying well if you better do not something bigger than 50 unit, don’t even bother and now that I studied it through my podcast and researching for the book, what I’ve noticed is it doesn’t really matter what size you start up because no matter where… you can even start with the duplex because what happens is so the first deal is the hardest to deal and is generally the smallest and it then progresses and the progression is very much like this 2, 10, 25, 50 onward. So, pick your favorite entry point. Wherever you get started, let’s say you get started at 10, it might take you a year may be a year and a half and you kinda struggling, you’re raising money, you are biting your nails and then what happens is that second deal comes in rapid almost automatic succession like you don’t have to try anymore and a lot of times you’ll have that second one under contract before you close on the first one. And I called this the law of the first deal and it’s so powerful, Larry, that’s why I named it and I wrote a book around it because now I don’t have to try to convince you to buy 500 units. I’ll just show you how to do a single deal your first and it could be a duplex. Now I’m gonna push you and try to go bigger, but if you can’t wrap your head around then by all means do a duplex ‘cause I know after that you are not doing a duplex anymore, you’re gonna do a 10 unit and then you do 25 unit and then after that you’re doing 50 to 75 unit and most people are done after 3 deals, they’ve covered their living expenses and mostly ‘cause they enjoy the activity, they keep going but theoretically they don’t have to.

Larry: Right. That’s really cool. So, tell us a little bit about why you settled on multifamily and some of the advantages of multifamily over single family. I have done some multifamily, not a lot but I’ve done a lot of different kinds of investing and I do love, I enjoy the single family stuff and you’ve done single family as well in the past as well, but I want you to share with the listeners why they should be if they are already doing single family, why they should be looking at adding multifamily to it or if they’re not doing anything, why they should look at multifamily.

Michael: Yeah, this is a procurable thing because you shouldn’t abandoned what’s working now. So, I’m kinda like well if you have a job, you don’t quit your job to do something else. Do whatever is creating your income for you, do something on the side until it becomes profitable enough for you to either continue doing both or abandoning one for the other. So, I’m not advising people if they are successful at single family house investing to sell everything to get started in multifamily, right? It’s normally an expand and some guys asked themselves and other guys complement the single family house investing. I think my challenge to listeners to take a look at it. To really take a look at it and I wrote about it in the book about why this might be a good idea and overcoming some of the things that people think they know about apartment investing. They think it is an advance strategy, a very complicated, they think they need 5 or 10 years of experience normally single family house investing which is not true or they think they need a million dollars in the bank before they can get started also which is not true. So I’m really in the book trying to shift people’s minds about what they think they know about apartments.

Larry: Yeah. That’s a really, really good point. So, who is multifamily or apartment investing for actually?

Michael: Well, you know what, I mean the title of the book is Financial Freedom with Real Estate Investing and in my mind anyone who is thinking if they don’t quit their job or shore up their retirement or basically control their time and they were thinking real estate it’s for them. Now, most people like I said are thinking single family house and they are not really thinking apartments, but it is really for anyone who either has done no real estate investing but they are, you know, faithfully going to the monthly REIA meetings or someone who has done a few and it’s really something that compliment with what they are doing or a growth path or even to get started.

Larry: Right. That’s really, really good. That’s good. So, man, you wrote this book and it has been a long time coming, it really has I mean I’ve heard about you for quite a while, you are out there I mean you do some teaching and training, you’ve got students and stuff like that, but how can the average person whether they’re getting started in real estate at all or they are already doing single family, how can the average person get started with apartments even if they don’t have the experience or maybe they even don’t have their own money to start with.

Michael: Yeah, I mean the first step is education of some sort, because multifamily, commercial has it’s own language so you don’t wanna sound like a newbie, and also what education does is it kinda gives you more confidence and allows you to visualize how certain things work, but to boil it down on how to get started really is there is two major things someone has to overcome, one is a lack of experience, the other one lack of money. So, education being the foundation of course some way or another and you can do it by reading blog post, watching, YouTube videos on my site or others or by attending a seminar or course or things of that nature, but after that the focus really is on overcoming the experience and someone can do that within 30 days Larry. For example, the first thing obviously is using the right language which you get through the education, so you are using insider language, you don’t sound like a newbie. Now here’s a litmus test of why you just sound like a newbie, when you call a broker up and whatever you say and the broker says, hey, send me your proof of funds and I’ll send you the details of the deal.

Larry: That’s a sure way to know. They know you don’t know what you are doing.

Michael: That’s right. You just sound like a newbie. And all you have to do that it does not happen that you just don’t sound like a newbie so that’s the test right there. The other thing also is aside from using the right language is to build a team around you. So, you are not talking about, oh me, my track record is exactly zero, but you know what, I’m using Sam an X, Y, Z proper management company who manages 6,000 units and I’m using so and so closing attorney and you are calling a broker, so I’m using Sam and the broker is like, oh my gosh, Sam is a great guy. Oh yeah, he is a good guy and all suddenly we are talking about Sam who you probably already knows already because you are leveraging off their experience, right? So, really building your team first and then once you have your language right and your team build which you can do in 30 days, you will now go out into the world and brokers won’t ask you for proof of funds, etc. So, that’s a relatively easy way to overcome what many people think will take 5 to 10 years to do.

Larry: Wow! That’s amazing. You know, a lot of people are scared to make offers or scared to look at multifamily because number one, they don’t have the money; number two, they don’t know how to analyze the deal; and number three, they probably didn’t know how to find the deal, right? So, touch a little bit on that if you will.

Michael: Sure. I mean the second biggest thing is you mention several of them. Let’s take them one at a time. One is lack of experience, the other one is lack of money. I don’t have any money or I have some of my money, but certainly not to buy this giant building.

Larry: Right. Right.

Michael: And so I got a huge “aha” moment when I deployed my capital in these restaurants and so in 2009 I really got hot and heavy in the flipping houses, but I didn’t have any of my capital so I started looking around and started talking to my friends and family and some of them are dumb enough to loan me 25,000 then another one and another one. Before I know it, I had a million dollar deployed.

Larry: I hope that person that loaned you that 25,000 is not watching.

Michael: They all make great money, but the point is I had this giant light bulb go off in my head.

Larry: Right.

Michael: Like man, I can do something without my own resources and that’s really the message in the book. You can do stuff without having your own cash and there’s an art and science to raising money and there’s literally a system, anyone can learn the system and just work the system and so what you’re doing is you are just intentionally building relationships with people, you are sharing your enthusiasm about your new found passion for multifamily for financial freedom and you basically called to build those relationships, you schedule meetings with them, you tell them more information, you show them a deal package. Basically, what you are looking for is a verbal commitment from people ideally before you actually have a deal under contract, right? So, if you do this let’s say in the first two or three months, while you are looking for deals and you get 5 people say, hey, if you find me a deal like you just showed me in this what I call a sample deal package, if you find a deal that looks a lot like that, you know, I would be interested in investing $50,000 with you. So, now your 5 guys have $50,000 and now you can have a lot of confidence in making an offer on the same million dollar building where before you are like, ah, there is no way I can because I don’t have money.

Larry: Right.

Michael: So, it completely shifts the playing field if you start raising money proactively long before you actually have a deal under contract.

Larry: Well, aren’t deals very difficult to find right now? It seems like everybody is chasing multifamily.

Michael: Well, I remember when I got started in 2005 with real estate investing, it was also difficult to find and I signed up with a mentor and it was a wholesale, I said, wholesaling, I’m gonna flip and I’m gonna go all the way. But he never once told me oh go with the MLS to find deals. It was always postcards, bandit signs, networking, probates, right? All that stuff.

Larry: Right. Right.

Michael: It was a hottest time ever in real estate and you had to hustle and it’s the same thing now and comparison to 2005 not nearly as hot as it was back then in the residential side and people are doing deals but when you asked them how they did a deal, they’re like you know what, I looked at about 100 deals, you know. I looked at 100 deals before I got this one and maybe you got 2 under contract or got a letter of intent except that it didn’t work out. What I’m saying is that people who are doing deals are actually hustling.

On the other hand, people who are, you know, they make a couple offers, they never hear back from the broker, they’re like, ah shoot. It didn’t work. And they’ll throw up their hands and kinda give up. I mean you know better than anybody, real estate is a numbers game. If you had a wholesale that makes two offers and doesn’t work then they walk away, you are like, what an idiot. You got the numbers game. And it’s the same thing that the key in the multifamily I think more so than maybe the residential because the comp structure relatively easy to get especially when you are in an area. So, it is a little more complicated on multifamily but I have it down to a process where you can make that first offer within 10 minutes of getting a marketing package. And if you can do that you can make a lot more offers. In the beginning it took me 4 hours to kinda crack open the marketing package, run the numbers through something and then finally make an offer and then I make an offer typically below asking and they’re silence, crickets on the other end. So, I obviously just missed the mark by a mile, yet I had to spend 4 hours with my life I’ll never get back analyzing a deal and it just doesn’t have to be that way.

Larry: You know what Michael, that’s very, very, very important because a lot of people are talking about if I find a deal, I got to spend like you said 4 hours underwriting the deal. You sign the nondisclosure, you get the package and then you spend 4 or 5 hours underwriting the deal and only to hear crickets on the other end. I know you’ve got a way to make offers as little as 10 minutes. Tell us a little bit about how that works.

Michael: You understand a little bit how a commercial real estate is valued and it’s really something called a capitalization rate or a cap rate and I don’t want to confuse the listeners with bunch of formulas, but essentially it’s a multiple of the income. So in other words, you got two boxes, one worth 1 million dollar and the other one is worth 1.5 million dollars and the reason that one is worth 1.5 million dollars is it produces more income than the box sitting next to it. So, one reason I like multifamily, I can buy a million dollar box and fix the problems it’s having, make it produce the income of the box next door and all of a sudden sometimes even with just a few months it’s now worth 1.5 million. So, I’ve just created $500,000 of instant equity. Now I can sell it or better yet I can re-finance it, pull cash out, buy another building and keep holding on and accumulating. So, really that’s the way that real estate is valued. So, the way it typically works you get a marketing package and there’s income in there and typically over report the income, they’ll have to use something called a vacancy rate, right? So, a building has got 20 units. Well some of them are gonna be vacant and some aren’t gonna be paying the rent, so you’re not gonna collect 100% of the rents.

Larry: Right.

Michael: So, in marketing package, you’ll see something like 3% vacancy or 5% vacancy. Rule of thumb really is 10%. So, you take the income as reported, disregard the vacancy rate and just deduct 10% to get your real income. Then the expenses are almost always underreported. They’re typically like 38% to 40% of income. When the reality it’s more like 50%, the 50% rule. So, you take the expenses, actually disregard the expenses entirely and just take 50% of the income and that’s probably closer to the truth. And then you apply this cap rate to the net operating income and you get now your adjusted fair market value which is almost always below that. So, this is something you can do without any kind of research, you are not going on the internet, this multiplier the cap rate is almost always provided by the broker either in the marketing package or a quick phone call. Hey, what cap rate is stuff trading at in this area? Oh, they’re shredding in the seven and a half cap. Great! That’s all I need to know. You plug it in a very simple formula and you take the NOI and you get a new price.

So, now what you do is you call the broker and say you know, this 2 million dollar asking price won’t work and here’s why, but here’s what would, your income is a little over reported, your expenses are little under and so I just use your cap rate and I came up with the 1.7 million dollar price. Is there any flexibility or probably not? And now if they say well let’s see, why don’t you put something in writing, you just got a nibble. And now you can go in there and start researching numbers and itemize any expenses, but if just crickets on the other end, you say, hey, well looks like the seller is not motivated, well they have offers at or above asking price and so I’m just gonna keep moving on.

Larry: Yeah, okay. That’s good. That’s really good. So, are cap rate different in different areas of the country, south east, midwest, north east, you know, west coast?

Michael: Yeah, they are. Right, they are. So, another word, the lower the cap rate the higher the evaluation is of the actual piece of real estate and so cap rates in some of the west coast, east coast, they’re gonna be in the 4% range and it’s very difficult to make money especially when you put a loan on there and you have investors in a deal.

Larry: Right.

Michael: So, if you are a little bit closer in south east or in the middle of the country, the cap rates are gonna be higher which means that the prices are gonna be lower which means the cash flow is gonna be higher as well. So, we are investing in areas that have projections of strong employment growth, but there also is a reasonably high yield. You know, maybe a cap rate of 7% to 8% which is something like that. And then we typically look for a value out of that opportunity. So, we look for that one million dollar box that is not performing the way it should like the one next to it. We apply a professional manager and they fix everything and 12 months later the box is now worth a lot more than before.

Larry: That’s awesome. Man, I got so many things I want to ask you. This is really good stuff. It really is. So, are you a buy and sell investor or are you a buy and hold investor? Explain the difference.

Michael: Yeah buy and sell is… there’s a strategy for that I mean you can flip apartment buildings in the way it is described. You can buy that one million dollar box and you can then fix it up, make it all perform and sell at 1.5 million dollars and then do it again. What I like to do is the combination of the buy and hold and the “flip” and the re-finance model. You do a cash out re-finance once the evaluation is up. Now, you got 1.5 million dollars because you have a special management, now I re-finance and through that loan, I repay my investors and my previous loan and now I do it again. It frees up cash to do another deal. So now I’m holding this one and I’m using the cash from the finance to do another deal. So, that’s really our favorite strategy.

Larry: Right. So, basically you use investor’s money to raise money for the deal and get financing on the deal so you have some equity financing and then you increase the value of that property and I’m assuming that’s probably over like a 3- to 5-year period.

Michael: It’s normally much faster than that.

Larry: Oh really?

Michael: Yeah. It’s typically in the 12- to 18-month period.

Larry: Oh, okay. Good.

Michael: Typically, we are looking to “stabilize” between 18 and 24 months. So, in that year, two time frame is really where we wanna be at stabilization, so it will perform a rate.

Larry: Oh okay. So, are you looking for properties that maybe don’t have a lot of tenants yet or maybe they are 50% occupied or are you looking for higher occupancy than that and you are just going in and improve the management?

Michael: It varies. I mean the best deals are like this, the best deals are the previous owner, they’ve got variants in rents. They got one at 700 and one at 600, and maybe they got a little higher one because maybe they upgraded the countertop. I called that a self-camping property. All you got to do now is do the same thing to the other units and get everyone to 100 dollars up and that 100-dollar increase in rent is huge, right? It is absolutely huge. There is other ones for example other problems let’s say maybe it’s 30% vacant and those are also opportunity but you have to understand why it is vacant. What exactly is the problem and can I/my profit manager fix that in 12 months because it could be the market, right? If the market stinks well I’m not filling that building up. Aside from the self-camping properties, I want a property right next door that looks basically exactly like it maybe it is in better shape and the rents are higher, now I know if I make my box look like that box, I can get my rents up and therefore achieve my business plan. If I can’t make a clear case for that I’m like hmmm maybe I should stay away from that one.

Larry: Right. Right So, what type of return are you typically paying your investors or how should somebody structure that when they’re raising money?

Michael: Yeah, so typically what happens is the investors get a share of the deal typically 70% or 80%, it really depends on the deal and then us as the operators retain the rest of the equity and it really is determined by the investor returns. The entire deal, you create the pie, how big is the pie, you slice it up, so the investor gets the target return. For classy property typically we are looking average returns of 15% and all that 15%, 10% is a cash on cash return. For class B or better, the returns are probably a couple points lower than that but now we own a much nicer assets, it is more stable and there’s less risk associated with it.

Larry: That’s really good. That’s really good. What do you prefer and maybe explain the different classes to people if you don’t mind.

Michael: Yeah, class C is older stuff. This is older stuff built maybe the 60s, 70s and 80s and this is working class that’s not ghetto by all means, that’s class D and we stay away from ghetto, it’s really not my style. So, this is the clean relatively safe affordable rents 500, 600 or 700 and class B now is something that was built in the 90s maybe early 2000s and then class A is something that’s really new possibly luxury. Right now we are not doing class A stuff. I think it’s too market sensitive but I really like a class B stuff like I said you have less repairs, less renovations, less big things can go wrong. You track a little bit better demographic tenants so your collections are a little better and it’s a bit more enjoyable to own and manage, I do like how it behaves in up market and down market. In up market, people will move from class C to class B and down market people will move from class A to class B regardless they are all converging on a class B. So, for those reasons, I do like that though the returns are a bit lower than on a class C.

Larry: Yeah, that’s good. But class C can be a little bit more labor intensive or a little bit more volatile maybe, you think?

Michael: That’s right. Yeah. I think that’s fair though. In fairness though the property manager is doing that work and not so much you, but you are right. I mean eventually it all bubbles up to you when there’s problems.

Larry: You know Michael that leads me to another question I wanted to ask. The really good key outside of being able to find the deal, structure the deal, raise the money, get the financing, maybe have a sponsor or promoter help you with the financing, outside of all that the big key is the property manager, how do you find the good one?

Michael: You are actually right. The key is a good property manager and your life really stinks when you have a poor one and your life is really good when you have a strong one and I mean you find things by… in general when you are building your team the best way to build your team in general is by word of mouth. Any time you talk to anyone, hey, who is the best property manager in town? Who is the best real estate attorney in town?

Larry: Right.

Michael: You know, who is the best X, Y, Z in town and then you interview them. There’s questions that we have in our training to ask, you check references, you look at their properties and then you make a decision. Sometimes you don’t make the greatest decision or does not work out properly and so there’s gonna be a rhythm of staying on top of the property manager tracking certain key performing metrics. Obviously, it give them a chance to perform but then I have held on to the property manager for too long to my detriment and you got to be able to make a change which of course is disruptive but on the other than when you put someone in place that is really performing very well I mean you can go to sleep on these buildings. There is no such thing as completely passive investment, I truly believe that, but there’s definitely quality life issue when you have a property manager who is not communicating property, who is not meeting their goals versus someone who is just crushing it and all of a sudden you are making money and like, wow, this is fantastic.

Larry: Right. That’s really cool. How many units do you need to get to before you need on-site property management?

Michael: I would say start from the beginning. I mean typically the property management is build right into the multifamily business model.

Larry: Right.

Michael: With houses, it is not so much and lot of guys and gals are self-managing until they get to a certain portfolio. With multifamily it is not the case. However, as you get larger and larger, the quality of the property manager goes up.

Larry: That’s really good. That’s really good. I’ve heard of some guys giving their property manager a piece of the deal to keep them motivated. What are your thoughts on that?

Michael: Yeah, I mean I love to credit stuff like that or performance bonuses. We have not done that yet, but it is something to consider as well. We have not done it yet, but we do another parts of the business so it’s not unreasonable to say, hey, if you meet this key performance metrics or your net operating income is X, Y, Z, your fee increases or something like that and it puts everybody on the same page.

Larry: That’s good. That’s really, really good stuff. How do you feel about the student housing. That seems to be the hot thing right now.

Michael: You know student housing is a kind of a specialty kinda like section 8 or subsidize housing and I don’t really have a strong feeling about it. We haven’t really done the student housing. We have a student that’s looking in a student housing, so I don’t love it or hate it. It is a specialty which means that…

Larry: Total niche.

Michael: It’s a niche which means your property manager has to be knowledgeable and experienced in that area. So, if you have someone who has market level housing and no student housing, that’s probably not, even if they are an awesome property manager, they are probably not right for that property because it is a different animal kinda like the section 8 so it does require specialized property management.

Larry: Yeah, that’s good. You know, I’ve heard some people say, you know, and you are talking about you got yo hustle man, you got to find deals, you got to be proactive and you know that just like it is in single family housing. You know, you got to be up there hustling man to get deals. People are complaining, I’ve heard a lot of people saying, if it is on LoopNet, it is too late. What are your thoughts about some of the ways you find deals?

Michael: Yeah, you know, it’s funny I used to say the same thing, but if you look at some actually good number of deals that’s like 30% actually came from LoopNets, I’m no longer saying that; however, the main benefit of LoopNet could be to find the deal, but the main benefit is for you to find the brokers in a certain market, right?

Larry: Right.

Michael: Just like the ideal place to find brokers of almost any size as well. So, that’s really why we like LoopNet as, hey you know, you can quickly find the 20 top brokers in the area just by going on LoopNet.

Larry: Yeah and really the key is to find the brokers on LoopNet because once they know that, you know, what you are doing, you can talk to legal, they are not asking you for proof of funds, right?

Michael: That’s right.

Larry: Those are the guys that get the deals and they send them out to their I guess to their core group of investors instead I’ll put them right on LoopNet is that correct?

Michael: Yeah, that’s where you want to get to Larry, you are exactly right, is you wanna build relationship with these guys, so over time you are responsive to them, you are providing them with feedback, you are building rapport with them, you appear knowledgeable, you build a really top notch team around, now they’re gonna start taking you more seriously so what happens is brokers like everybody else we tend to be a bit lazy, so they just get a listing or promise of a listing, well they don’t wanna put an entire marketing package necessarily, they might call a handful of guys up or if it is a specialty thing you are looking for in an area with a certain characteristic and they’ll call and say, Larry I got a steal from you. It’s going out next week, but if you can come in around 2 million, I don’t have to do any work, I already got the listing sold. That’s the magic. That’s where the magic happens because you are not in a competitive environment and that’s really where you get to. That’s something that a lot of people can get to within 90 days of just really building rapport with these brokers and then my gosh once you close a deal, it is game over. That process even accelerates even more ‘cause now words out that Larry is closing on multifamily deals and people are like, oh my gosh, I’m calling Larry first ‘cause I know he just bought a deal.

Larry: Right. Right. And that means a lot. You’ve earned that and you should probably let all your brokers know, hey, we just close on a deal.

Michael: That’s right.

Larry: That’s what lenders do to let you know they actually lend money, right?

Michael: That’s right. Yeah.

Larry: That is good man. Man, this has just been a wealth of information. This is really awesome. It really is. I appreciate all the stuff you are sharing. This is really good stuff. So, where could somebody go from here? What is, you know, maybe the one thing that they need to do to get a deal?

Michael: Yeah, I’m ashamed to plug for my book, but that’s what I would say is just read my book because it has the blueprint to answer that question but in much more detail because I talked about overcoming those few things, but I also show the steps that you go through to raise money, to finance the deal, to do the due diligence, how to establish broker, so it’s not a 20-page book, it took me a year to write this thing. In fact, they should be sold for a thousand dollars ‘cause I think only $999 right now on Amazon but it kind of encompasses my blueprint kind of in a yellow book. And then I have a bunch of free blog post and YouTube videos, I have a podcast as well. I have paid programs as well if someone is a little more serious, but I think the first thing is just look into it. Have it with an open mind, don’t say, oh apartments buildings are advanced, right? Just have an open mind and consider it because it might be a good compliment to what you are doing right now.

Larry: That’s really good. That is really good. So, where could somebody go to get the book?

Michael: It’s on Amazon, it’s called Financial Freedom with Real Estate Investing. It is bright yellow here and it’s on Amazon right now.

Larry: Awesome.

Michael: Yes sir.

Larry: That’s really good. That’s really good. Actually, give us a few steps that they need to do like in the next 90 days or whatever. I mean what are they gonna do their first 30 days and then how they gonna move on from there?

Michael: Sure yeah. I mean the first 30 days is kinda what I called the prelaunch sequence and so that includes your education. Again one of our courses or someone else’s identifying the size of your first deal and the location of the first deal we have a methodology for that then the third thing to do on that first 30 days is to analyze 5 deals. If you sign up with us, we have something called the syndicated deal analyzer which makes this really, really simple but you need some kind of financial model that helps you analyze deals. The fourth is to create what I mentioned earlier sample deal package. This is an investor package and everything about it is essentially real but you don’t have a contract. You use it as a conversation piece to raise money. So, that’s the first 30 days and then the next 60 days you gonna do 3 things at the same time. You are gonna build your team, you are gonna continue analyzing deals and you might get something acceptable, but it is really all about improving your skill level and your confidence and you are gonna set up meetings with potential investors. All without any focus on outcome. We take the pressure off you. Don’t have an expectations about getting a deal, don’t get an expectations about getting investors. It’s all about practice and confidence. Now, what we found people who do this is actually will have results. They will have their team ready to go on the ground, they’ll have a pipeline of deals and they’ll have a bunch of people who have either committed to investing them or really, really interested, but that’s kind of a focus of the first 90 days.

Larry: That’s awesome. That’s really good. That’s really good. I love it. I love it. So, Michael this has just been a wealth of information, I really appreciate you sharing all this. I hope some of my questions didn’t throw you for a curve.

Michael: I’m sweating here, man. I’m really sweating, I need a towel.

Larry: No, man. You are right on top of it. That’s awesome man. That’s good stuff. So, if somebody wanted to reach out to you to check out your blog and your podcast, you got a great podcast and then for some of your education or whatever, how would they reach out to you?

Michael: Yeah, just go to my website, it’s themichaelblank.com or just Google Apartment Building Investing and I should be all over the first page of Google, so it should be relatively easy to find me and just check out the book and look at the free resources and if you are more serious, I got more stuff for you.

Larry: That’s awesome, man. Thank you so much for coming on today. I really appreciate it. This has been some really cool stuff. Thank you so much for sharing it. I appreciate it.

Michael: Well, my pleasure Larry. Thank you so much for having me on your show.

Larry: All right, thanks a lot. See you later.