I'll get to that in a moment, but first, I want to discuss "conventional" real estate investing.
Most people believe real estate investing as a side hustle is a great way to build a second income so that one day they can retire and live happily ever after…
But for most, that day never comes.
You see, like most real estate investors, I started with single-family homes. I made some good money, but over time I discovered that houses are not as profitable as you might hope.
You buy a property, rent it, make a few hundred dollars of cashflow… Then you take your cash flow and equity and use them to acquire your next property…
Rinse and repeat, and you’re on your way to easy street... Right?
Wrong.
Then a tenant moves out, and you've got to invest thousands of dollars to get the property back to "livable."
All your profit evaporates in one month.
Or perhaps you've been more successful, and you've been able to acquire lots of properties, but then you find your next super-profitable deal, but the banks won’t loan you any more money.
Suddenly your business growth comes to a screeching halt…
Not because of your credit; you've got great credit and great tenants. Because bankers understand risk - and single-family homes are risky when you have one house and one tenant.
When that tenant moves out, you have no income, but you still have to make the payment.
If you have 30, 50, or even 100 homes, and 30% of your tenants move out in a month (this can and does happen)...
Suddenly, you've got a bunch of payments that ALL need to be made while you are bleeding money to get all the units painted, cleaned, and back in rent-ready shape.
It's risky and exhausting.
In addition, single-family homes can have some of the highest income tax of any real estate investment if you sell them in under a year.
So you decide to invest in apartment buildings instead, and everything will be better.
After all, banks loan on multifamily based on the net cash flow instead of the buyer's credit alone. So you look and find a great deal on an apartment building only to find out you might need as much as 40% down payment which can be hundreds of thousands of dollars (or even millions).
You feel stuck because to play in the big game; you need money
But to make money, you need assets that produce consistent cash flow…
And to acquire assets, you need money, lots of it.
It’s like being on the “it takes money to make money” merry-go-round.
Unless you are sitting on millions, it’s hard to break into the commercial real estate market…
Unless you use other people's money...