How To Buy A Multifamily Property With No Money 2 easy ways
Summary
TLDRIn this video, Juan Pablo shares strategies for entering the multi-family real estate market without leveraging personal credit. He discusses two main options: the master lease option, which allows control of a property without ownership, and limited partnerships, where one can partner with someone who has better credit or financials. These methods are particularly useful for those with negative credit or who prefer not to use debt, aiming for passive income through multi-family investments.
Takeaways
- 🏢 The video focuses on strategies for entering the multi-family real estate market without leveraging personal credit or using debt.
- 📈 The channel emphasizes three pillars to financial freedom: personal finance, credit, and multi-unit investments for passive income.
- 🚫 If you have negative items on your credit, it's crucial to address them before pursuing multi-family investments.
- 📝 The speaker shares personal experiences, such as using a master lease option to control a property without owning it, which can be a strategy for those with limited cash or credit.
- 💼 The master lease option allows the leaser to sublet units and improve property performance, generating cash flow without the need for a mortgage.
- 🤝 The video suggests considering partnerships as a way to invest in multi-family properties, especially when personal credit or financial documents are not up to par.
- 💡 Limited partnerships can be a creative financing strategy where partners with better financials or credit take the lead, allowing others to invest with less scrutiny on their own financials.
- 💼 The importance of having a small equity percentage in a partnership is highlighted to avoid mortgage lenders requesting personal financials.
- 💰 The video encourages viewers to be creative with financing, such as master lease options or limited partnerships, to overcome barriers to multi-family investment.
- 🎯 For those looking to say goodbye to a 9-to-5 job, the video offers a free training resource on leveraging a portfolio for passive income through multi-family investments.
Q & A
What are the three pillars to financial freedom mentioned in the video?
-The three pillars to financial freedom mentioned are personal finance, credit, and multi-units and multi-family investments.
Why is it important to subscribe to the channel according to the video?
-Subscribing to the channel is important to receive additional videos that can help viewers along their journey towards financial freedom, as the algorithm will recommend more relevant content.
What is a master lease option and how does it relate to multi-family investments?
-A master lease option is a strategy where an individual takes control over a property by leasing it with the right to sublet, without actually owning it. This allows the individual to generate cash flow from the property's operations without the need for bank financing or leveraging personal credit.
How does the speaker in the video use the master lease option to acquire a 13-unit property?
-The speaker used the master lease option by negotiating with a motivated seller to take control of the 13-unit property. He then increased rents, filled vacant units, and made repairs to improve the property's cash flow, all while the seller retained ownership and tax benefits.
What is the benefit of a master lease option for someone with low credit or cash?
-The benefit of a master lease option for someone with low credit or cash is that it allows them to control a property and generate cash flow without needing to go through a bank for financing or having to provide a significant down payment.
What is a limited partnership and how can it be used in multi-family real estate?
-A limited partnership is a business structure where partners contribute capital or credit to an investment, with limited liability for the actions of the partnership. In multi-family real estate, it can be used to pool resources, with some partners providing the necessary credit or capital while others contribute expertise or other assets.
Why did the speaker's tax returns with losses hinder his ability to get a mortgage?
-The speaker's tax returns with losses indicated to potential lenders that his business was unprofitable, which made him a higher risk for defaulting on a loan. Lenders typically prefer to see a history of profitability and stable income when considering mortgage applications.
How did the speaker overcome the issue of not qualifying for a mortgage due to his tax returns?
-The speaker overcame the issue by entering into limited partnerships with other investors who had better financial documentation and credit. This allowed him to participate in multi-family real estate investments without having to rely solely on his own financials for mortgage qualification.
What advice does the speaker give for those who are lacking in credit or documentation for multi-family investments?
-The speaker advises those lacking in credit or documentation to be creative and consider strategies like master lease options or forming limited partnerships with others who can bring the necessary credit or capital to the table.
What is the significance of the speaker's statement about controlling being better than ownership?
-The speaker's statement emphasizes the idea that having control over a property and its operations can be more valuable than owning it, especially in terms of managing risk and leveraging opportunities for cash flow without the responsibilities of ownership.
What additional resources does the speaker offer at the end of the video?
-The speaker offers a free training for viewers to learn more about leveraging their portfolio for passive income through multi-family investments, encouraging them to click on a provided link for more information.
Outlines
🏢 Introduction to Multifamily Real Estate Investing
The speaker, Juan Pablo, introduces the topic of multifamily real estate investing, emphasizing the importance of personal finance, credit, and funding as pillars to financial freedom. He encourages new viewers to subscribe to the channel for more content on these topics. Juan discusses two scenarios where individuals might be hesitant to use their personal credit for investing: either they are against using debt or they have negative items on their credit report. He stresses the importance of addressing credit issues and provides a link to a video on credit preparation. The speaker then dives into strategies for getting started in multifamily real estate without leveraging personal credit, mentioning two options: a master lease option and a limited partnership.
📝 Master Lease Option and Limited Partnership Strategies
Juan shares his experience with a master lease option, explaining how he took control of a 13-unit property without needing a down payment by negotiating with a motivated seller. He details the process of increasing rents, filling vacant units, and making repairs to improve cash flow. The speaker also discusses the benefits of this strategy, such as not needing to involve banks or use personal credit. He then moves on to explain limited partnerships, recounting a personal story where he faced challenges in qualifying for a mortgage due to unfavorable tax returns. Juan's mortgage lender suggested finding partners with better financials to form a partnership, allowing him to continue investing. He emphasizes the importance of being creative with financing and leveraging partnerships to overcome credit or funding obstacles in multifamily real estate investing.
🎉 Conclusion and Call to Action
In the final paragraph, the speaker wraps up the discussion by encouraging viewers to be resourceful and consider master lease options or limited partnerships when facing credit or funding challenges in multifamily real estate. He offers a free training resource for viewers to learn more about leveraging their portfolio for passive income and multifamily investments. The speaker signs off with a motivational message, wishing viewers success in their financial endeavors and encouraging them to continue earning and living passionately.
Mindmap
Keywords
💡Multifamily
💡Financial Freedom
💡Credit
💡Leverage
💡Master Lease Option
💡Limited Partnership
💡Passive Income
💡Cash Flow
💡Commercial Mortgages
💡Tax Write-offs
💡Creative Financing
Highlights
Introduction to multifamily investment without leveraging personal credit
Emphasis on the importance of tackling credit issues for investment strategies
Explanation of the buy and hold strategy for multifamily properties
Differentiating between commercial mortgages and their leniency
Introduction of Option A: Master Lease Option
Introduction of Option B: Limited Partnership
Personal story of securing a 13-unit property through a Master Lease Option
Advantages of Master Lease Option in terms of cash flow control
How to negotiate a Master Lease Option with a motivated seller
The role of a real estate agent in facilitating a Master Lease Option
Understanding the legal documents involved in a Master Lease Option
Benefits of a Master Lease Option for those with low credit or cash
Introduction to Limited Partnerships as an investment strategy
Experience of overcoming tax return issues through Limited Partnerships
How Limited Partnerships can help investors with credit or documentation issues
Practical advice on finding partners for Limited Partnerships
Creative financing strategies for multifamily investments
Encouragement to be creative and explore different investment avenues
Offer of a free training resource for further learning on multifamily investment
Transcripts
so you want to get started in
multifamily huh but don't know how huh
and guess what you found the right video
huh hey daniel q a intro please
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[Applause]
hey how's it going friend juan pablo
here if you're new to our channel
welcome we're glad to have you because
on this channel we like to focus on the
three pillars to financial freedom which
are
personal finance credit and all that
good stuff
funding having a repeatable source of
investment capital last and certainly
not least multi-units and multi-family
so that way you can get that passive
income baby now if you're new to this
channel make sure you like and subscribe
so that way the algorithm can do its
thing to get you additional videos to
help you along your journey towards
financial freedom so without further ado
let's dive into the topic so you might
be in a situation in which you want to
get into multi-family but
you don't want to leverage your credit
either
you're just against uh using debt you
know that could be a reason why you
don't want to use leverage your your
personal credit or b
you might not be able to leverage your
personal credit because you might have
some negative things on your credit okay
so i completely understand but i have to
say if you're the latter meaning you
have some negative things on your credit
you definitely gotta tackle that because
i want to share these these strategies
with you and just thinking okay well
i'll just use these strategies you
should utilize these strategies but do
nothing about my credit nope you still
got to clean up your credit all right i
got a video below that talks about
preparation just make sure you check
that in the description okay watch the
video all right so let's dive into the
topic so let's say
you know you still want to get started
with um multi-family let's say you are
preparing your credit let's say you just
don't want to use that cool no problem
i'ma list a few strategies that you can
leverage to help you get multi-family so
multi-family
we're talking about buy and hold
strategy meaning you're buying a
property and you're holding on to it for
the cash flow
now with that strategy especially with
multi-family
i'm going to be talking about five units
enough that's what multifamily is okay
especially for commercial mortgages
purposes because they're a tad bit more
lenient
now
there's two ways to go about it why i
did this that's four
two ways to go
there's two ways about
there's two ways to to going about it
whatever you get what i'm trying to say
what you want to do first and foremost
is consider
option a or option b option a can be a
match release option option b can be a
limited partnership so let me explain
let's let's talk about the uh mass lease
option first
this is how this is how i found the
master lease option
myself i was buying two properties
concurrently i had uh i think a nine
unit and eleven unit under contract
and i i was invested in these two
properties and so my cash was pretty
slim okay
now
being that my cash was slim my real
estate agent gave me another deal that i
might like it was a 13 unit and i was
looking at the numbers and say you know
what i really want to do this deal
however i just don't have the capital to
to go towards the down payment so me and
being that i had a great rapport with my
real estate agent i asked the agent hey
what's the motivation of the seller
that's important why still selling
and he said well he's a he's an attorney
and uh
he mismanaged the property he hired a
property manager who wasn't doing a good
job yada yada
and so he's trying to get this property
office off his hands how long has he
listened for it's been some time but
he just he just wanted to get it get rid
of it so that was a huge
uh that was some great information for
me because i realized well this dude is
motivated that's the first requirement
motivation to sell it so i start to
think well this guy's motivated that he
might be willing to negotiate
so i said hey
agent see if the the seller be willing
to do a massive lease option and by the
way agent used to get paid i get it's
not a closing because it's a lease
option meaning
i'll be the master tenant so i have a
lease over to all 13 units with the
right to sublet it but i'm typically not
the the owner i'm pretty much like john
d rockefeller said
control was better than ownership i'm
controlling the 13 units but i don't own
it the owner still owns it so the owner
owner still gets the benefits of the tax
write-offs and so forth but i get the
benefits of the cash flow because i'm
controlling it to improve the
performance so i share this with the
agent told him he'll still get his
commission even if we don't
even though i'm not technically buying
it i still pay you since you gave this
deal to me
long story short
seller agreed to it so i had two
documents prepared the match released an
option the match lease was basically
saying that i have control over the 13
units and the option is basically i have
the right to exercise my option to buy
it at a future date
and so i i took control of the property
i increased the rents i fill up the
vacant units i did some repairs to the
point that it was cash flowing nicely
okay so that's the first thing matching
these options so even though i said
i entertained a match lease option
because i was low on cash
but
you can also exercise the mass lease
option if you're low on credit why
there's no banks involved
it's just a negotiation between the
seller and i
with the agent being the intermediary
you know just being a liaison between
the two
that's it
so i didn't have to
reach out to my mortgage lender for that
morris lender to run my credit
i didn't have to use any other forms of
financing because it's just a lease
option it's like you're negotiating with
a landlord if you were a tenant
about the rent you know what you're
going to pay and so forth so you're sure
you might pay a little bit upfront
and that's about it so you might have to
pay something called an option which is
similar to a down payment
and if you exercise your option that
money will go towards the down payment
so you can do that
but
it's negotiable
right you don't have to put a 10 20 down
payment you can negotiate whatever you
want
so that's the first thing a master's
option now the second thing i mentioned
was a lease option
not at least option a limited
partnership so let me share with you how
i discovered living a partnership
so after i quit my nine to five
you know feeling great amazing
i
placed a ton of expenses and write-offs
on my tax return to reduce my tax
liability i didn't want to pay uncle sam
a dime
so i pretty much just wrote a lot of
things off but then i realized that it
hindered me from getting qualified for a
mortgage because at this point i had a
three unit under contract so i reached
out to my mortgage lender and said hey
hey linda i got this three unit uh let's
go ahead and push this deal through let
me know if you need an updated personal
financial statement whatever documents
you need to do this mortgage
and she said hey juan thanks but
i can't
you know after seeing your docs i i
can't give you a mortgage
why while your tax returns won it shows
that you had losses
well you know it's just on paper so i
you know i have to pay taxes
yeah one i get it i understand however
we can't give you a mortgage because
it looks like your business is
unprofitable
and that was a huge blow so i i thought
so what does it mean i can't invest
anymore
it's just like telling a basketball
player he can't shoot anymore right so
you tell me as a rosin investor i can't
invest anymore and she said you know
what
not not necessarily i said hey linda
give me the scoop what do i need to do
just share with me
she says long as you can get partners
that bring the things you like to the
table
so in that case i had better tax returns
i had i didn't have the documentation
but in your case you might not have the
credit so if you like the credit then
cool find a partner who could bring the
credit to the table
you can do the same thing for cash if
you happen to you know realize you don't
have the investment capital together
find an investor who can eliminate
partner in other words who could bring
the capitals to the table as well so
that way you can have
many limited partners bring the cash the
paper the documents the table the
positive tax returns as well as the
credit
as long as you
make sure you have a small percentage in
the equity so that way you fly under the
radar and the mortgage lender won't ask
you for your financials
so she gave me some golden advice so
once i learned that
i started doing partnerships now
unfortunately for two years i had losses
on my tax returns for one year i had to
show two years of positive tax returns
in order to qualify for a mortgage
personally speaking
so i said okay even i have to wait to do
a deal by myself for two years i can do
deals with partners and that's what i
did so i ended up buying several
properties doing that and using creative
financing
and i have a video below too about a
creative financial source for you to
check out and that's what i did so if
you're in that same situation in which
you're you might be lacking in credit or
let's say documentation you might have
the task returns you might not have the
w2 1099s you might not have the income
to prove that you're you're profitable
or you might not even have the uh the
cash or credit or whatever there might
be other things holding you back that's
perfectly fine you just got to be
creative
do a master lease option
or do
a limited partnership for a multi-family
property trust me
you will be on your way to getting that
cash flow baby all right guys so that's
it hopefully you found value i actually
got a free training for you i definitely
want you to check it out just click the
link below it shows you how to leverage
your your portfolio get some passive
income multi-family baby so you can say
goodbye to 95. as always guys this is to
your success continue to earn passively
live passionately peace
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[Applause]
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you
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