How To Buy A Multifamily Property With No Money 2 easy ways

Summary

In 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

00:00

🏢 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.

05:02

📝 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.

10:08

🎉 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.

Keywords

💡Multifamily

Multifamily refers to properties that contain multiple residential units, typically used for rental income. In the video, the speaker discusses strategies for investing in multifamily properties as a means to achieve financial freedom and passive income. The focus is on properties with five or more units, which are considered commercial and often have more lenient mortgage terms.

💡Financial Freedom

Financial freedom is the state of having sufficient personal wealth to live without having to work actively for basic necessities. The video emphasizes the pursuit of financial freedom through the three pillars: personal finance, credit, and investment in multifamily properties, which can generate passive income.

💡Credit

Credit in this context refers to an individual's financial reputation and ability to borrow money, which is crucial for securing loans and mortgages. The script mentions the importance of having good credit for investment purposes, but also explores strategies for those who may have negative items on their credit report or are unable to leverage their credit.

💡Leverage

Leverage in finance means using borrowed money to increase the potential return of an investment. The video discusses the option of not using personal credit or debt to invest in multifamily properties, suggesting alternative strategies like master lease options and limited partnerships.

💡Master Lease Option

A master lease option is a strategy where the investor takes control of a property through a lease agreement, with the right to sublet the units. This allows the investor to manage and improve the property's cash flow without actually owning it. The video uses this as an example of how one can control a property and its income stream without the need for a mortgage.

💡Limited Partnership

A limited partnership is a business structure where partners have limited liability, and one or more general partners manage the business while the limited partners are passive investors. The video suggests forming a limited partnership as a way to invest in multifamily properties when an individual lacks the necessary credit or capital.

💡Passive Income

Passive income is income earned with little to no effort by the recipient, often from investments. The video's theme revolves around generating passive income through multifamily property investments, which can provide a steady stream of rental income with minimal ongoing involvement.

💡Cash Flow

Cash flow refers to the net amount of cash moving into and out of a business or investment. In the context of the video, improving cash flow from a multifamily property is a key goal, achieved by increasing rents, filling vacancies, and making necessary repairs.

💡Commercial Mortgages

Commercial mortgages are loans used to finance commercial real estate, such as multifamily properties. The video notes that commercial mortgages can be more lenient than residential mortgages, making them a viable option for financing multifamily investments.

💡Tax Write-offs

Tax write-offs, or deductions, are expenses that can be subtracted from taxable income to reduce the amount of tax owed. The video mentions that even though the property owner in a master lease option retains the tax benefits, the investor can still focus on improving cash flow without immediate tax liability.

💡Creative Financing

Creative financing refers to unconventional methods of funding real estate investments, such as seller financing, private loans, or partnerships. The video encourages the use of creative financing when traditional financing options are not available due to credit or capital constraints.

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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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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you