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Apartment and Multifamily Investing with Tim Bratz

SHOW SUMMARY:

Tim Bratz is the CEO and founder of CLE Turnkey Real Estate, a real estate investment company that acquires and transforms distressed commercial and apartment buildings into high-performance investment assets.

He began his real estate career in 2007 as a commercial broker in NYC real estate market. Tim’s resourcefulness helped him build his first real estate company in 2009 in Charleston, SC, when he used a credit card to acquire his first property. Tim transformed a rundown duplex all on his own and turned a profit on his first deal.

He reinvested those proceeds, meanwhile seeking private capital to expand his growing company. Today Tim still uses this formula for success, which all starts with being resourceful and having the right mindset. Tim has learned how to build a passive business and create a residual income that allows him to live the lifestyle of his choice.

Under Tim’s leadership, CLE Turnkey owns over 1,300 rental units across five states and operates one of the largest property management companies in greater Cleveland.

SHOW HIGHLIGHTS:

  • Tim's background
  • How he got into real estate
  • Focusing on buying apartment buildings
  • How different commercial real estate is
  • Two things to have to be successful: deal flow and money
  • Teaching people to scale up from flipping houses to apartment buildings
  • Single family versus apartment building
  • Partnering up
  • Transitioning from single family to commercial real estate
  • Implementing the same strategy from single family to multifamily
  • BRRRR method of single family
  • On financing
  • Taking his single family strategies and implementing it into commercial
  • His team and their functions
  • Two main skills sets in business:
  • - Technical skill
  • - Business acumen
  • Where motivated sellers hang out
  • Analyzing a deal

Quotes:

  • "There's a lot of money on the sidelines."
  • "We can only do more by partnering up together."
  • "You got to be with the right people."

RESOURCES AND LINKS FROM THIS SHOW:

SHOW TRANSCRIPT:

Larry: Welcome to the Brain Pick-A-Pro show live from Lake Wylie, South Carolina, I’m Larry Goins. Thank you guys so much for watching or listening. We really, really appreciate it. Thanks for sharing the love. Thanks for the feedback you give us and the comments. We really, really appreciate that. Each and every week, we bring you a huge player in the real estate industry and people who are movers and shakers, people who are doing deals, having fun, making money and living the lifestyle so you can learn from them and grow your own real estate business and create your own life vision as well and today man I am so excited, I’ve been trying to get Tim Bratz on the line for so many months. We are in the Mastermind together. This guy is a mover and a shaker. He is only what, 33 years old I think and he has got over 2,000 units, apartment units, turnkey, private money, raises money, multifamily, syndications. This guy is the man, the legend and the myth. Welcome Tim.

Tim: Larry, I’m excited to be here man and you’ve been a mentor of mine when I was first getting started about 10 years ago. I actually used to use your proof of funds when making offers in wholesale deals.

Larry: That’s cool.

Tim: Yeah. I remember seeing you speak at one of the Charleston South Carolina Real Estate Investors Association events.

Larry: That’s cool man.

Tim: I’m following you for a long time.

Larry: You live there, right?

Tim: Yeah. For about 5 years and might be going back actually. I just contracted a house in Isle of Palms as a second home.

Larry: Awesome man. Well, we got some good friends that live down there too, Caleb Pearson and Rob Phillips and some others guys.

Tim: Yeah.

Larry: That’s awesome man. That’s only a few hours away from me.

Tim: I know. I know. We have to hang out.

Larry: That’s really cool man. I’d love to.

Tim: I love it.

Larry: Hey, why don’t you start out and tell our listeners and viewers a little bit about yourself.

Tim: Yeah man. Well, again I appreciate all the value you’ve given for a long time and I know it comes back in a big way and I love you and all the value and everything that you’ve been able to help a lot of people out for a long time, so thank you. And thanks for having me. I’m excited to be here. I was going through college when the market was going gangbusters last time, 2003 to 2007. I started a painting company, worked for one of the biggest home builders in the country and then after I graduated from college, I moved out to New York City where my brother was living at that time and became a commercial real estate agent. So, I brokered leases for retail and office based and brokered one transaction $10,000 a month for 400 square feet in Manhattan for a 12-year lease term. And I do the math and I was like this guy is gonna make, with escalations and everything, like 2 million dollars over the next 12 years for doing something at one point in time and that was one space out of 8 retail spaces and 15 storage of apartments and I remembered just thinking like I’m on the wrong side of the coin. I maybe owning real estate instead of brokering it. And so I ended up moving down to Charleston, South Carolina just on a whimand one of some better weather and better lifestyle and when I get down there, I got into wholesaling pretty heavily. Did some retail HGTV kind of flips, did some short sales and stuff and the market was shifting, REO type of stuff and then eventually you get acclimated with how to find deals and you meet people who have access to capital and maybe they don’t have the means or the resources or the time or the bandwidth in order to take down deals themselves and I’m partnering up with them. And just doing some sort of like an equity split with them. They put up the cash. I did all the work and we just kept on moving forward and fast forward, I found one group of guys that I partnered up with and in 2012-2013 and for the next 3 to 4 years we bought a whole bunch of single family houses, high-end flips, low-end flips, some single family rentals, some small multifamily, now I got into apartment buildings. So, about 6-1/2 years ago I bought my first apartment building and you know after that first year of really doing a lot with these guys, I look back where we make our biggest investment returns and it was in the apartments. If they sold, because we would flipped it and rolled into something bigger. If it is sold great, we made a great return on it. At the end of the day, when I added in all the cash flow that came from it, it was double the returns that I was making in single family flips. So, we got rid of all the other stuff and just focus on buying apartment buildings, built up portfolio about to 150 units, that partnership went south. You know, life happens and he doesn’t want anymore. Had to liquidate everything because I was married across every single deal. So, that was a big learning lesson for me. I had to start all over in 2015 and 2016. But you know some things that seem like you know setback in the time are really big set up for something bigger and better moving forward. That was definitely the case with that partnership. With the break up with the partnership, I thought everything was crumbling around me and then I just realized it opened me up for so much more opportunity and today I am talking with you at 2,563 units in my current apartment portfolio. That’s all we do now just buy apartment buildings. I have another 648 units closing in the next 3 weeks. So, we have over 3200 units. My birthday is next month too. So, I’ll be 34 then.

Larry: That’s awesome man. I love it. I love it. You know, there’s a lot of people that are interested in multifamily right now, commercial multifamily and you started at a very young age. I mean I’m 58 and you’re 33 and if people watching this would have just thought about scaling up and doing multifamily instead of sticking with single family, and I love single family, I like negotiating deals. I love getting on the phone doing deals. We wholesale most of our properties, but you’ve got to create the passive income and one of the great ways to do it is with multifamily. So, you are really focused on that now. You really don’t do I mean you’ve done turnkey, you’ve done private money lending and stuff like that in the past but you really don’t even focus on that anymore, do you?

Tim: I don’t do anything other than buy apartment buildings. B-class apartment buildings. A and B class areas. I don’t do luxury and I don’t do anything in rougher areas or war zones. So, I stick to that workforce housing in A and B class areas, places are safe, good school systems, good retail economic anchors, all that kinds of stuff. So, I looked for those areas and then I stay in workforce type houses. So, my average rent is somewhere between 700 to 1200 a month in that ballpark and my average building size is about 100 to maybe 120 units per building. I don’t do a lot of transactions. I mean, there’s a lot of turnkey providers and some of them are in Masterminds that we are in together, they are doing 200 to 300 deals a year. I might do 25 to 30 but it’s on 50 to 150 unit apartment buildings. So, it looks like it’s bigger and I think there’s definitely an aspect like I think a lot of people get into real estate for what you’re talking about the passive income, the residual income and that’s the allurethat attracts a lot of people, that mailbox money and then we think we have to stockpile the cash ourselves in order to go and go invest in those things. I think that’s not an accurate assessment of real estate. There’s a lot of people with a lot of money out there who don’t have the bandwidth or the time or the knowledge or the experience on how to go and deploy that. They’re gonna making money and maybe keeping money but not getting the money making more money for them. So, what I’ve been able to do is educate those people on what I do, how I do it, they can invest with me. They have a fixed return plus an equity upside on the backend and they make a better return and better tax advantage return than anything else toe-to-toe that’s on the market. That’s a safe stable asset class at the same time. So, that’s out there and I have accumulated a portfolio. I’ll be at 250 million dollars of real estate next month and off of that I put up less than 100,000 my own money in those transactions because money didn’t come by right now. There’s a lot of people looking to get their money out of the stock market, out of the volatility and they have money in 401(k), self-directed IRAs, any of those kinds of things, they can then deploy into a real estate transaction and become an equity investor. So, commercial real estate is definitely a different animal. There’s some definitely nuances, different language and some things you got to pay attention to but at the end of the day, it’s not as complex and over your head as a lot of people I think build it up to be in their minds.

Larry: Yeah, I think a lot of people do probably over analyze it or over think it. And you mentioned something a minute ago, there’s a lot of money on the sidelines, you know, maybe they don’t know how to get the deal but there’s a lot of people who have money. You know, I learned a long time ago, there’s two things you got to have to be successful, that’s deal flow and money, right?

Tim: I tell everybody the exact same thing, man. We are on the same page there.

Larry: That sounds true.

Tim: It doesn’t matter what the market looks like. If you could find deals and you could find money, you could do deals in any real estate market. Those are the two most important skill sets and those are the highest return on your time, right? Highest return on your investment. So, if you are spending all your time doing those two things, you’re gonna be in really good shape.

Larry: See. And there’s a lot of people out there Tim I mean you’re a young guy, I mean you’re aggressive, you’re motivated, you’re hungry and I know you got a goal to have a billion dollars in properties, right?

Tim: Right.

Larry: That means a lot of people out there that have money sitting on the sidelines and they don’t have the deal flow but they are like, hey, I wanna participate, I want some tax advantages and I wanna get a decent return on my money. So, it’s a marriage made in heaven basically.

Tim: Yeah. I mean, you got to be with the right people. You have to be investing. So, I do some education on this stuff and I wanna teach active operators how to scale up from flipping houses into apartment buildings and there are great active operators, joint venture partners in a deal by deal basis that I am able to partner up with. I can bring money to those deals and then I have other people who come up to my events and they’re like, hey, listen this sounds amazing but way too much work, way more than what I wanna do but I have money or I have access to money, how can we get involved. No problem. I can introduce you to somebody’s awesome operators and you can get wealth and so I can kinda liaison the whole thing, the entire piece of the pie or puzzle pieces and then be involved in a way to make sure that the private money investors are protected, you know, make sure that the active operators are doing the right things and watching out for any sort of missteps that could happen in commercial real estate which there’s a lot of them and so it gets me involved in more deals and for me, I don’t need 100% like in single family when I was doing deals, I had to have 100% of the deal or pretty close to it in order to make enough money, right?

Larry: Right.

Tim: Because flipping the house, making 20, 30, 40,000 dollars, that’s cool but if you start carving it up in 4 ways, you can do a lot of deals, right? With an apartment building, you got one project that has millions of dollars of equity in it, you could have 25% of that and there could be a million dollars of equity in just 25% of that project. And so you can have a quarter of a watermelon versus 100% of a grape and there’s more juice in the squeeze of a quarter of a watermelon. For me that just makes more sense. I can focus on the things that I like doing, things that I’m better at doing, the things that are my unique ability and I could bring on A players, phenomenal single family operators from the Masterminds and stuff that we are in and I can help fill the gaps on things that they are struggling with. They are able to help me out with being boots on the ground, doing the project management, all that kind of stuff. I can handle the administrative side and all that, raising the money and then there’s passive investors who get involved. So, it’s a cool way where 1 plus 1 doesn’t equal 2. 1 plus 1 equals 3. We can only do more by partnering up together and you’re working with some really, really high caliber people who can operate at a really high level so everybody is an A player. You don’t have to deal with Billy Bob and his pickup truck doing maintenance on your single family house because there’s not enough money in it, right?

Larry: Right.

Tim: So, you’re gonna attract better quality contractors, attract better quality property management companies, all those kinds of things. So, there’s definitely some scale on that.

Larry: That’s awesome. Speaking of scale, a lot of people that are in real estate or I should say most people who are in real estate started with single family, right? Whether it is buying land or the wholesaling, fix and flips, landlording, seller financing, you’re really good at helping people make that transition from say single family over to commercial. Give us some insight on that.

Tim: Yeah. I mean one of the roadblocks that I had in my own head early on was one, I need to stockpile my own cash. Two, I don’t come from family money. I mean, my dad, very successful, always work 3 jobs, full-time policeman, had a part-time business and wasn’t rich but kinda millionaire next door kinda guy, right? But I didn’t have a grand daddy that had a big commercial real estate portfolio and pass along legacy wealth, generations and generations. I didn’t go to Walton School of Business and graduate a Degree in Finance or Real Estate.

Larry: Right.

Tim: I don’t have the initials. I never read a book on this stuff. I just kinda started a residential real estate and took my lumps and just kinda I think there’s a natural transition. You start brokering, you start wholesaling, you start doing retail flips, you start doing turnkeys, you start doing property management, you start doing small multifamily or buy and hold single family and then all of a sudden, you transition upward and I know people make a lot of money in single family, I love single family, that’s where I came from but the roadblock in my head was because I didn’t come from commercial I don’t know if I can get into commercial and I think it’s a bunch of BS. I think it’s just a mind game that we all play on ourselves because what I did is I just implemented the same strategies I used in single family and I did it in multifamily. So, what’s the equation that everybody uses the flip houses, I got to be all in for 65 cents of a dollar, I do the same thing with apartment. It makes sense right?

Larry: Right.

Tim: The only difference is I had a few zeros. So, instead of being all into a house that’s worth a hundred grand, I got to be all in for 65 grand, I’ll be all in to an apartment building worth 10 million dollars and I’ll be all in for 6.5 million dollars. That allows me and I always do value add. I don’t buy anything at retail price. I only buy things were I could force the appreciation, not speculate on appreciation. So, I’ll buy an apartment building, you know, let’s say this 2 million dollars’ worth of work, I need to be on for 6.5 million that means the most I could pay for is 4.5 million. So, I’ll go in. I’ll make the offer and then it’s very predictable with the values going to be 12 or 18 months down the road because it’s all base on the income approach. Not based on what a house sold 4 down the street or the apartment sold 4 down the street. It is the net operating income of that in that area, what’s the cap rate that these things are appraising or selling for. So, it’s very predictable what the value is going to be and then you could just kinda reverse engineer the numbers. So, now I got to buy it for 4.5 with another 2 million in. Once I’m all in for 6.5 million dollars then I don’t sell anything. Very rarely do I sell anything. Maybe some small buildings. Maybe like some C class type of stuff that I had early on on my portfolio but for the most part I hold everything and I refinance. So, if I know that it could be appraised at 10 million dollars, I can go get a loan at 7.5 million, 75% loan to value to pay off the acquisition loan, pay off my private equity investors and everybody gets all their money back and there’s still a million dollars spread there on refi proceeds.

Larry: Right.

Tim: So, it’s the BRRR method of single family. Buy, renovate, rent, refinance and hold it, right?

Larry: Yeah.

Tim: So, I do the exact same thing with apartment buildings and believe it or not, it’s actually easier because financing is easier and like I said management companies are easier to work with. They have more business acumen than maybe some of the residential realtors who are going out managing 75 units or whatever, contractors are more sophisticated. They understand business. They are more accountable at least and then financing is easier to come by. It’s assume that you know what the hell you are doing, so don’t even look, they do it to an extent but it’s 10% based on the borrower and 90% based on the property. So, it’s just crazy as it is. It’s easier to do bigger deals than smaller deals and all I’ve done is I take my single family strategies and implemented it into commercial. Everything from finding deals to renovating deals like all that kind of stuff, I just use the exact same strategies, raising money.

Larry: That’s awesome man. I love it. I love it. So, it’s really the same thing as single family. You just add a few more zeros to it.

Tim: That’s it. And again there’s some nuances, there’s some different things you have to understand with managing the management company and some of the different financing terms and strategies and all that kind of stuff but from a global standpoint looking down on it, it’s much simpler than what we all make up to be in our mind.

Larry: That’s great. Let’s talk a little bit about building your team because you’ve got to have a good team I mean you got to have a great property manager, you gotta have a great construction crew or contractor I mean especially when it’s 2 million dollars’ worth of renovation, right? So, you got to know what you’re doing, you got to have a good contracts with those guys and have a right people on your team. Talk a little bit about building your team.

Tim: Sure. So, my team consist of 6 people. Me as a CEO. I really focus my time on spending money and doing marketing. I have a CIO (Chief Investment Officer) who was an attorney. The thing with attorneys is that they get paid transactionally. So, they are creating their time for money the same way I was doing when I was flipping houses or wholesaling houses. It’s do it again, do it again, do it again then they got paid. So, I found an attorney, pay him a base salary, not as much as you think but less than 50 grand a year and then he gets a little percentage of equity in every deal that I do. But he handles all the syndication docs, all the operating agreements, all SEC compliance and he is an equity owner in the property. So, essentially we have an in-house legal counsel in the property for as long as we own this thing. So, it’s a really cool way to attract an A player onto my team and not have to pay multiple 6 figures in order to get that talent. Have I given up a lot of equity? Yes. But I know this guy is an absolute stud and it’s been amazing having him on my team for the past 12 months or so. So, he was my business attorney for the past 6 years and then we came up with that agreement. So, that has been awesome. I love having him on my team. Then I have a COO (Chief Operating Officer) who then oversees 3 other players on my team. My acquisitions director, my project management director and my asset management director. And before when I was doing residential, my acquisitions guy was just acquiring single family houses, I said stop doing that, we are just gonna buy apartment buildings, okay. My project manager used to renovate houses and flip houses for us and now he is just renovating apartment buildings. Same subcontractor. Some of the different subcontractors and stuff too.

Larry: Wow.

Tim: And then my asset manager used to be disposition. So, he would sell our turnkey houses or list them or whatever and now he just manages the management company. So, that’s who is on my payroll and then we have you know a whole bunch of joint venture partners or people who send us deals, wholesalers, agents and everything who reply and go through the acquisitions guy. And then project manager, he oversees the maintenance department, he oversees all the subcontractors, general contractors, developers that we partner up with and then my asset manager oversees the management company and is making sure that occupancy staying high, collections are staying high and measuring all those different key performance indicators on a weekly, daily basis actually. So, that’s my staff that’s actually on my payroll. Everybody else 1099 either joint venture partner or subcontracted vendor but like I said before is when you get into bigger deals, you have a 2 million dollar project, one of the things I noticed is that there’s two main skill sets in business, right? One is the technical knowledge, the technical skill set and then a contractor that’s swinging the hammer, putting up the drywall, that’s doing any electrical and knowing the ins and outs of that. But in every business, you still need somebody who understands business. It’s a Steve Wozniak and a Steve Jobs or it’s a Paul Allen and a Bill Gates. And you need both aspects because somebody really, really knows business and marketing and finance and people and all those things and the other person knows the technical knowledge and what I found is whenever I took the contractors on the residential site and I give him so much business they all imploded because they didn’t have this side figured out in how to run the business. They didn’t have the business acumen. What I have realized getting into commercial is that a lot of the contractors who have the business acumen, get out of residential and they get into commercial because they figured it out. So they are more accountable. I could put a contract together. I could hold them on time, hold them on budget and it’s actually easier to work with bigger contractors because they have the business side of things set up and they are more accountable. Same thing with property management companies. Property management company that I used out in Texas and Oklahoma they manage 22,000 units. So, they only managed a few hundred units for me but they managed 20, that’s a hell of an operation that they’ve got in place and you have to have yourself together in order to manage 22,000 units and still have over 90% satisfaction rating on it from all of your clients. So, building out a team and then you have the scalability. So, the contractors come in and when I was flipping houses, every house was different. Every house had different finishes and different custom work. Apartment buildings, you take all that re-setup phase and the setup time to do all that stuff and you eliminate it because I could take you to one of my apartments in South Carolina, in Georgia, in Ohio and Texas, Florida or Oklahoma and I could take you in the living room Larry spinning around in circle, you wouldn’t know where you are because they all look exactly the same. Uses the same flooring, use the same paint, the same finishes, the same kitchen, same bathroom, everything is the same.

Larry: Quick encounter.

Tim: Yeah. It looks nice and it is updated and it is better. It is clean and safe and functional and then what happens is the contract goes in, they learn how to lay the flooring in unit number 1 and install the fixtures in unit number 1 and put in the kitchen in unit number 1. Unit 2 goes that much faster. Unit 3 goes that much faster. By the time you get to unit 200, like they are knocking this thing out really, really quick really, really fast and so there’s additional economies of scale that occur in the commercial side. So, for me and my goals, it works out really, really well. It’s not right for everybody but for me, my ambitions, my goals, my team, for us it works out really, really well. We love it.

Larry: That’s awesome man. That’s great. I love that. I love that. Talk a little bit about deal flow because a lot of people are chasing multifamily right now and you are doing A-B type deals but value add deals. That’s kinda be rally hard to find.

Tim: Yeah. Well, it’s interesting. I mean a little bit of a niche where I’m bigger than some of the small multifamily investors. I’m smaller than a hedge funds and the REITs.

Larry: Okay.

Tim: And the hedge funds and the REITs aren’t willing to do any work. They’re lazy, right? They’re big money. They have a bunch of cash. They don’t care. They can sit on it for 5 or 10 years. They got really deep pockets and so they just go buy stuff that’s already stabilized.

Larry: Right.

Tim: So, that’s not me. I’m not willing to pay for something that’s stabilized. I want to create equity and then I’m not willing to touch the stuff that is over 100 units and needs a bunch of work. It’s very hard to get financing on that. You essentially need a hard money loan for something that’s only 50% or 60% occupied. And it’s expensive and you need to have a hell of a track record to do that. Fortunately, we do and so we’re able to get into the space where a lot of other people can’t qualify for the loan or they don’t wanna do the work, we’re able to come in and get really, really good deals on this stuff. So, just like there’s motivated sellers in single family realm, there’s motivated sellers in the multifamily realm. You know, what it is, death, disease, divorce, and disaster. That occurs in multifamily also. I bought 400 units earlier this year from a kid who inherited all that property from his parents. Parents built up the portfolio, this kid lives in a beach shack on the golf coast of Florida. He surfs every single day. Doesn’t want anything to do with managing an apartment building. Was running it. Wasn’t paying attention to the management company. Management company charging 3 times what they should have been for grass cutting alone. 50 grand a year versus 20 grand a year. All sorts of stuff like that that happened. We were able to come in and say, hey, he doesn’t want it, it’s mismanaged. We were able to see where we can increase the income and decrease the expenses. Why would we do that? Because the net operating income is how you increase the value of the building and if you can visualize some of that stuff, we were able to come in, we actually got a really good deal on a decently occupied. It was over 85% occupied when we got it but it was a motivated seller. He inherited the property, he rather have 13 million dollars cash than he cares about having cash flow. So, some people are still in that mindset. We paid him for that. We are all in for 16 million. We expected to raise around 29 million dollars first quarter of next year. So, why? Because we came in. We bought it for 13 million and put another 3 million, bumped up the rents, decrease a lot of the operating expenses, put better efficiencies in place and now the net operating income based on the multiple that we can appraise for puts the value north of 28 or 29 million dollars. So, those deals are definitely out there. And you could do the same thing what you do in the single family realm like you could do direct marketing. You could do mail marketing, direct mail. You could do ringless voicemails like sellers of multifamily property have phone numbers and mailing addresses just like everybody else does. It’s just a matter of timing. You know catching with the right time. Where do motivated sellers hangout? You know, I asked myself that question a lot. I think motivated sellers have rental property, the most motivated I ever am in owning rental properties is when I’m evicting all the tenants. So, go and hangout at eviction court. Go down to the county court house on eviction day and pass out business cards to the attorneys, the management companies, the landlords who own property in your community and say, hey, I know you haven’t collected money in several months. I know you spent hundreds of dollars and thousands of dollars to go through this eviction. I know that you spent several thousand dollars to turn the unit. It was probably headache, right? Yeah, it’s a little bit of a headache. Well, hey, I might be interested in buying it. Why don’t we start having some discussions on that. So, there’s no reason. I’ll talk to the management companies who manage all these properties. Talk to the attorneys who represent all these landlords. You know, you can drive for dollars. Look for houses with tall grass and boarded up windows. You look for buildings with tall grass and boarded up windows. You can go and dial for dollars instead of calling for sale by owners, I call for rent by owners and say hey I’m not interested in renting but I’m interested in buying. Do you have any interest in selling? And again the same strategies I use in the single family realm just kinda converting it pivoting for multifamily.

Larry: A lot of the things that intimidate people with commercial multifamily are analyzing the deal. You know, you’ve got underwritings, spreadsheets that can be multi-tabs, multi-pages.

Tim: You don’t need any of that.

Larry: Yeah. Tell us a little bit about analyzing a deal.

Tim: So, one of my secret sauces Larry, you sure? All right man. So, here’s what I do. I realized that I’ve seen all these calculators selling for 200 bucks, 500 bucks I’m like one, I’m not a spreadsheet guy. I’m more of a visionary, have you seen a DiSC profile for me, I’m very high D, high I. so, I’m not the analytical type. I’m not the numbers and digits. I can do it. I’m good at it but it’s not where I wanna spend my time. So, looking at a spreadsheet, analyzing a deal for an hour or two, one, it’s a tedious task and secondly you’re not going through enough deals. This is a sorting game. For where we are in this market right now, you need to be able to move through deals and put them in a category of a deal or not deal very quickly. And nobody else is out there teaching people how to do that. So, secret sauce, this is worth tens of thousands of dollars and probably millions of dollars in multifamily, what I do is I figure out what the after repair value is. I don’t care what it is worth today. I care what it can be worth when it’s all stabilized and I have a 2-minute metric. Essentially what I do is I look at what the after repair value rents can be at this. I don’t inflate them. I just look what market rate rent for 1-bedroom, how many 1-bedrooms units are they, boom, I multiply that up. What’s market rate rent for 2 bedrooms, how many 2-bedroom units are there, boom, multiply that up. Added all up, and I annualize it. I got a 100-unit building and the 1 bedroom is rented for 600 and the 2 bedroom is rented for 800. I got 50 units of each. Essentially what I’m looking at what $70,000 a month in income. That’s $840,000 a year and then the areas like this is the one metric that you need to know, you need to know where you are buying, what your expense ratio is. So, about how much of that money is going towards your operating expenses for the property, vacancy, maintenance, management, utilities, just regular operating cost. And so for most of my buildings, that’s rented on 50% and it can be a little bit less. Actually in Georgia, my new construction stuff is way less. It’s like 35%. My stuff that’s up here in Cleveland, older building, have been around for 150 years with a lot more maintenance on some of those things and that’s close to 50%. So, 50% is usually on a high end. It’s usually closer to 40, maybe 45 but what I do is I just take the gross potential rents which is 840,000 and I divide it by 2, 50%. So, it puts me in $420,000 net operating income. For me, I have to be able to be all in and yield a 10% cap rate. So, that’s me in the markets. That’s because the areas that I buy in probably is appraised for around 7% cap rate. So for me, that’s a delta of 3% in order for my model to work so that way I can refinance in 12 months, cash out my investors and just have a house money in play. Essentially, it meets that 65% all in ratio. That’s just the way that I do it. So, I have to be all in at 10 cap on something that yields $420,000 a year. That means my all in price needs to be 4.2 million dollars. Do you follow me on that?

Larry: I do.

Tim: So, divide by 0.1, I can be all in at 4.2 million then I back out whatever the rehab cost is. So, if the rehab cost is gonna be 10 grand a unit on 100 units, that’s a million dollars. So, my maximum allowable offer on that property will be around 3.2 million. So, I look at that number, I could do it in 2 minutes. I’ve done it a thousand times and maybe it takes 1 minute and so when I do that I can look at what the asking price is. If they’re asking 6 million dollars and I know I gotta be on for 3-2 I shoot them an email. I’ll say, hey, listen I know where you are at. I’ll be closer to 3 million bucks, you know, maybe 3.5 on this thing. Let me know if it’s worth continuing the conversation. If they are at, and this is a snapshot, this isn’t a true underwriting but it’s a snapshot to tell me is it worth it or not. Do I discard that deal and just move onto the next one or do I dive deeper into this deal? And if it makes sense if they’re asking 3.5 million and I could be all in at 3.2, guess what, I’m gonna go dive deeper into the numbers because chances are my operating expenses won’t be that much. Chances are, I probably don’t need to put that much rehab in. So, chances are I might be able to see and make this thing work and chances are the seller might come down on price. So it allows me to have a snapshot where now I can sort through more properties and instead of looking at 6 or 8 deals a day at best and underwriting in you know, taking an entire day to do all that stuff, we can sort through 20 or 30 deals a day and actually make offers on them too, non-binding letter of intent or at least just an email saying, hey, is it worth having an additional conversation on this? So, now my guy can sort through, my acquisitions director can sort through more deals than anybody else can and that’s why we got more deals because we are just better sorters.

Larry: Right. Right. So, basically you got to have the ARV and the amount of repairs and the ARV is based on the market rents.

Tim: Yup, that’s it. That’s it.

Larry: That’s really good. That’s really good.

Tim: It’s the exact same strategy that you would use to go and find or backtrack into the numbers, it’s just it’s valued a little bit differently instead of valuing based on the comparisons. It values based on the income approach. So, if you understand the finances in the market that you’re buying in then you can just reverse engineer those same numbers the same way and you can do it in 2 minutes, making offer, is it worth continuing the conversation, yes, great, let’s start diving deeper then you can get off the calculator then I send it over to my commercial mortgage broker who underwrites it with all the due diligence items and everything and he gives me a dollar amount what we can pay for it in order for it to be my model.

Larry: That’s awesome. That’s awesome. Now, Tim you mentioned early on I mean you teach this and I know you’ve got an event that you have, a 3-day event where you teach people and I know a lot of the people that have been there from our Mastermind and I wanted to get some more information about that as well. Why don’t you share a little bit about that with our viewers?

Tim: Yeah, I appreciate it Larry. I’m not a guru, you know me way before I started teaching, right? The only reason I do it is one, I think wealth is like sunshine, I don’t think there’s a finite amount of it, I think Larry you getting sunshine doesn’t take any sunshine away from me. There are tens of thousands of apartment building, 44,000 to be exact apartment buildings, over 100 units in the continental United States and there’s millions of apartment buildings under 100 units in the continental United States. If you did one to 100 unit apartment building your entire life, your personal finance will change forever. If you do one a year for the next 5 years, legacy wealth, I’m talking tens of millions of dollars net worth by managing and owning and operating this thing over the next 10 to 20 years. And being able to pass it down to your heirs and all these other things. So, to me I’m not creating competitors, I have a lot of people who come out that I end up partnering with on deals. So, I built up a team and I had all these employees on the management side and I realized I couldn’t stand managing other people so what I did is I partnered up with some educators, professionals in the education space, they run all the logistics, I show up few times a year to teach and coach and mentor people, they handle all the logistic side of things and then I’m able to partner up with awesome people who have skill sets that compliment with I’m not good at. So, I can bring money to a deal to a great operator or if somebody has money, I can bring a deal to that passive investor and we’re all like I said before rising tide floats all boats. So, that’s why I do the education stuff first of all. I don’t need to do it but I do it because I like it one and two it actually helps me build my portfolio and I help other people build their portfolios. So, it’s a really, really cool model and I partnered with a whole bunch of students on and whole bunch of things and it’s a lot of fun. So, it’s called commercialempire.com, you fill out the app, my team will reach out and give you details on the next one and then I have one in Tampa that I think it’s gonna be in early November in Tampa, Florida. So, we do that and go over everything. A to Z on my entire business model. So, you don’t have to partner up with me. You can do deals on your own. There’s a lot of people who do, but if you come across 200-unit deal and maybe you don’t have the balance sheet or the liquidity or the net worth or the experience, you can call me up, I’ll come in, I’ll sponsor the deal, I’ll co-sign on the loan, I’ll raise all the money and mentor you through the whole thing and help out that way. But we go over in depth how to find off-market deals, direct to seller not through broker relationships like everybody else is teaching right now. And then I go over how to underwrite these things in a snapshot and do a 2-minute snapshot in a 5 minute actual underwriting and then how to utilize your commercial mortgage broker to do it to the dollar amount. We go over all the SEC compliance type of stuff, my in-house attorney comes in to teach you how to stay inside the lines of syndicating capital to make sure that you’re not getting any trouble there. How I raise private money. I’m raising 7 million dollars right now over the next 3 weeks and it takes a little bit of work but it’s not as much work as you might think.

Larry: That’s a lot of money in 3 weeks.

Tim: And I have 4 million bucks raised already.

Larry: Wow.

Tim: And I’ve only been working on it for 2 weeks so far. We will make it happen. I raised 4 million in 48 hours. I’ll tell you that story at the event too. But how we structure it, you know, how to have that conversation, why it’s a better investment and why it’s a better vehicle for your passive investors than anything else that they can invest in. The tax advantages of all that stuff. My entire team, I have a discussion panels each day to ask them any sort of questions. My acquisitions guy, my operations COO, my attorney, my commercial mortgage broker. All my resources. All the bad vendors that I had had to go through in order to create the power team that I have today, nobody else has to go through all that stuff, right? I gave them my power team and all my documents. My operating agreement cost me $8500 to write up and give that to you. My SEC documents about 15 grand, I give that to you so that way you can just take it, have your attorney review it, cost you a couple thousand dollars instead of $25,000. And so my course isn’t anywhere near that by the way. And then how we go through the value add process, the science behind that making sure it’s done the right way. I have conversations with the tenants and then different exit strategies. We’re gonna flip it, wholesale it. I really like to buy and hold and then refinance and hangout to it long term and then how to manage the management company and we do some business development, how to build out your team and some mindset stuff too. So, it’s good man and we know Jason Medley has been out there. A whole bunch of other people that have given us amazing reviews and states it’s one of the best events that they’ve ever been to if not the best. So, it really means a lot to me that they say that and I know we are doing something right because we are taking down deals with students every month.

Larry: That’s awesome man. I love it. So, not only you get to share and teach people exactly what it is you are doing and how to do it, but there’s an opportunity for them to bring you a deal, you to bring a deal to the money and them to bring money to you and stuff like that, right?

Tim: I love it. Yup. Absolutely.

Larry: That’s awesome man. I love it. So if somebody wanted to reach out to you and learn more in addition to your other event, what are you looking for? What do you need? What would like to tell everybody, hey, if you’re looking for this or if you need that reach out to me.

Tim: I mean I give away a lot of free content on social media so I’m very active on Facebook. Find me on Facebook. Connect with me there. I put out a lot of good stuff on there and then through my website also I put a lot of like blogs and content through my website. So, find me on Facebook, Tim Bratz, you can go to my website https://www.legacywealthholdings.com/. Learn more way more about me and check out all the contents and stuff that I put out there. If you wanna get plugged in to an event, you know, if you want more formal type of a coaching, come to Commercial Empire. It’s a lot of fun, you need to plug in, you could bring a guest and you can come the second time for free, no additional cost in the future. So, it’s a win for students. It’s a win because I’m able to teach and give and kinda pay it forward and do some deals with you too. So, it’s good stuff man.

Larry: Sounds great man. Thank you so much for being on. I really, really appreciate it. It’s been a wealth of information. It’s gonna be a great show and thanks a lot man. I really appreciate that.

Tim: I appreciate you Larry. Like I said at the beginning man, you’ve been giving so much value for a long time and you are a mentor of mine. So, thank you for everything that you do.

Larry: Thanks buddy. I really appreciate it. Thanks everybody.