The Fastest Way To Build A Six Or Even… Seven Figure Real Estate EMPIRE!
When I first got started in real estate, back in my house flipping days, I would worry about a lot of things. I’d worry about the interest rates, turning a profit, getting into the deal at the right price, and how I would exit the deal. Sound familiar?
Eventually, I got tired of doing flips and the sleepless nights that came with it and found a way to build a nine-figure portfolio of forever passive income. Fast forward to today, I’m sleeping much better and not worrying about how I’m going to pay my bills.
In today’s episode, I want to tell you how I did it. You’ll learn why I gave up on residential investing, what I needed to know to break into multifamily, and how I use these techniques to create more income and equity in one year than I could ever get out of ten years of residential investing.
The Forever Passive Income Live Virtual Event
The next FPI Live Virtual Event is coming up on May 19-21, 2023 where I’ll be sharing the step-by-step blueprint on how we raised tens of millions in capital and acquired over 4,300 units. Buy your FPI tickets today by visiting ForeverPassiveIncome.com
Key Takeaways with Josh Cantwell
- Why commercial multifamily is much easier to scale than residential investing.
- How I learned to underwrite commercial multifamily deals, read T12s and T3s, and raise the capital to make our deals work.
- Why commercial multifamily protects you from rising interest rates, needing to find buyers, and allows you to achieve so much more in so much less time.
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Josh Cantwell: Hey, guys, listen, welcome back to the Accelerated Investor Podcast. I’m your host, Josh Cantwell. And today I’m going to talk a little bit about the pivot and making the pivot from residential to commercial investing so you can finally get free. So, let’s jump into that right now.
Josh Cantwell: All right, guys, we’re back. And so, let’s talk about this for a minute. Let me ask you a question. Are you an investor that’s flipping a bunch of homes, maybe wholesaling, maybe doing fixing flips, maybe you own a HomeVestors franchise, Maybe you own a bunch of websites that you bought that drive leads. You’re doing direct mail. Maybe you’re worried about inflation, rising interest rates. The Fed just raised the interest rates another quarter point and the higher interest rates go, the more buyers are going to have higher interest rates when they get their loans. And of course, the higher interest rates, the less likely buyers are to buy, right? Do you ever think about, “Hey, how am I going to exit these deals for a profit if the buyer’s interest rates are so much higher? How am I going to possibly exit this deal? Am I going to basically be wholesaling or doing fix and flips and selling them to retail buyers? And if those retail buyers have a higher expense for their mortgage payment, are they really going to pay the price that you want?”
I used to think about all these things I used to worry about flipping homes and exiting properties. I used to think about buying a house and fixing it up and selling it. And then I would have a private lender loan or a hard money lender loan, and I’d have interest that would be accumulating or I’d have interest that I actually had to pay every month. So, I’d be going deeper and deeper and deeper in the hole in order to hopefully sell that property and hopefully cover all my expenses. I just saw a post on Facebook today of someone I don’t even know who it was that said, “This is my latest real estate flop,” and they’re like, “Yeah, you read that right. I lost $50,000 flipping this house.” I used to worry about all that stuff when I was in residential. Well, over the past six or seven years, I’ve done 19 apartment syndications. We bought over 4,500 units of apartments. Right now, we’re sitting on about 3,000 units of apartments. We’ve raised about $100 million of private money from retail investors, family offices, investor groups. And I’ve successfully made that pivot from flipping houses and not sleeping well at night and wondering when we were going to make our next paycheck so we could pay our employees.
And we’ve made that pivot where now we have kind of forever passive income. We have a nine-figure portfolio, we have an eight-figure balance sheet, eight-figure net worth from apartments and from multifamily. And so, I don’t think anymore about the bills that I have to pay because the deal, the apartment complex pays for the expenses, whether it’s the property manager, the utilities, the maintenance tickets, it all comes from the property. And if you structure the deal the right way with the debt, with the equity, then the income from the property pays not only all the expenses but all the debt service, and then all your pref payments to investors and everything that’s left over is yours. And so, because we’ve taken this longer-term approach, I mean, one of the books that I read that really helped me make the pivot was The Infinite Game by Simon Sinek, and it was about playing the really long-term game. I hear the quote from Tony Robbins all the time that says something along the lines of whatever you can accomplish in one year, you’d be baffled by how much you could accomplish in ten years. And so, just in the last six or seven years of commercial multifamily investing, I’ve accomplished more than I ever accomplished in residential.
And so, I made that pivot. There were a couple of things that went into. Number one was learning exactly how to underwrite a commercial multifamily deal, learning how to look at the seller’s T12 and their T3. If you don’t know that term, that’s the trailing 12 months of cash flow, their trailing three months from their income statement, learning how to read that, seeing what their income is, what their expenses are, what’s the other income that they’re making, what’s their debt service? So, that’s number one. I think underwriting is the most critical thing because to me, if I know how to underwrite, if that turns into my business plan and that tells me what to do going forward. And also, if I can underwrite the right way, it creates the business plan that I can then recruit capital, I can then convince a bank to fund my deal, but I’m working with someone else, maybe a JV partner who’s recruiting capital from my deal or maybe it’s a registered investment advisor, broker-dealer who’s putting our deal on their platform. They all want to know what is the underwriting, what’s the pro forma. So, to me, that’s number one. It’s the number one thing that you should need to know. If you don’t know that, you need to find out. You need to learn from me. You need to learn how to do that.
Number two, recruiting capital. Getting good debt is frankly fairly easy and if you don’t have a big balance sheet, you’re just going to recruit a loan sponsor that can help you qualify for the debt. So, if you’re getting a $5 million loan or a $10 million loan or a $40 million loan, whatever it is, if you don’t have that balance sheet, it’s very simple. In the commercial multifamily space, you just bring in a loan sponsor, a partner who has that kind of balance sheet that can sponsor that loan for you. Between me and my business partners, Glen and Tyler, we can sponsor loans up to about $50 million, which also means we got to have about $5 million liquid, which we do. So, that is the next piece is the loan sponsorship but again, if you don’t have that kind of net worth to sponsor the loan, you just bring somebody in. Okay, no big deal. So, really, the next skill set outside of underwriting is recruiting capital or recruiting private money. And that’s a critical skill set to make the pivot from residential to commercial. I mean, there’s a lot of different ways to do residential with no money down. There’s a lot of different ways to do residential with wholesaling, fix and flips, subject to taking properties over in a land trust. There’s a million different ways to take over properties residential with truly no money down.
On the commercial space, you’re going to typically need some money down. It just doesn’t have to be your money. So, that’s the second skill set. Everything else, when it comes to property management, capital improvements, exiting the property, managing investors like all that is secondary to underwriting and raising capital. And so, that’s the pivot that I would love to see all of you make. It’s the pivot that I made, right? I successfully made the pivot from flipping houses and doing private lender loans and wholesaling and fix and flips to having this nine-figure portfolio and this eight-figure balance sheet. And I’ve been where you are like I’ve been in your shoes, right? I was doing residential for a long, long time. It never got me exactly where I wanted to be, which was getting true financial freedom with forever passive income.
And so, guys, what I’ve done is I’ve created a special event. It’s called FPI Live, right? The event’s not for everybody. So, if it’s not for you, it’s okay but the event is called Forever Passive Income Live. And the event is focused on making the pivot from being an intermediate to advanced residential investor to scaling up into apartments, doing syndications, doing joint ventures with none of your own money. And with such a volatile market and with the Fed just raising interest rates again by 25 basis points, do you really want your livelihood for your family, your spouse, your kids, your loved ones, you really want your whole business to depend on low-interest rates to drive buyers? Now, everybody looks like a genius when interest rates are super low because there’s tons of buyers but what about when interest rates are higher? How are you going to unload your deals to make a profit if you’re in residential? So, now it’s more important than ever to have passive cash flow, to pay your operating expenses, to live a full, fun life, full of joy, and full of incredible experiences with your loved ones, with your friends, and with your family and you just stop worrying about these interest rates, man.
It kills me because I know every time the interest rates go up, my friends that are in residential, they’re like, “Oh, shoot. How are we going to find buyers?” And so, the Forever Passive Income Live event that I put together is going to focus on making that pivot from residential to commercial apartment acquisition strategies that you can incorporate into your residential investing. You don’t have to stop what you’re doing. Just tack on these additional techniques and expand into apartments and create additional cash flow now and then eventually, you could just stop doing residential. FPI Live is going to show you how to structure joint ventures, how to raise millions of dollars of private capital, with multiple exit strategies. And I promise you, if you do this the right way, you’ll create more income and more equity in one year doing apartment buildings than you’ve probably created in ten years doing residential.
If that sounds like something that you’re interested in and you’re ready to make the jump, again, this is not for everybody, just go to ForeverPassiveIncome.com. Hit the link on that page. Grab a ticket. The event’s virtual. You can do it from your home. You could do it right from your phone. You download the Zoom app. You can listen in right from your phone. But this is something that I’m passionate about because I made the pivot. And as successful as I was with residential, I never really got where I wanted to go after doing that for over ten years. You know, the last five or six, seven years of commercial multifamily I’ve hit incredible life goals by investing in apartments. So, I’m passionate for that. I’m passionate to show you how to do that, how to eliminate your taxes, and really build long-term infinite income. So, if you’re interested in that, check it out. Go to ForeverPassiveIncome.com and that will help you make that pivot from resi to commercial multifamily.
Josh Cantwell: So, guys, listen, if you enjoyed this episode of the Accelerated Investor podcast, don’t forget to subscribe, rate, review, and like this video wherever you see it. This podcast, wherever you see it, leave us a comment. Let us know how we’re doing. We appreciate your feedback. And of course, as always, if you would share this all over social media, it would mean so much. I’m so grateful when I get shares and likes and comments and subscriptions. It tells me I’m doing a good job. It tells me we’re getting the message out. People like what they’re hearing. That’s the only way I really know if I’m having an impact on you. So, do that, if you would. If it’s having an impact on you, I appreciate that. And we’ll see you next time. Take care.