In this episode, host Nico dives into the most common mistakes new multifamily investors make and provides actionable strategies to avoid them. Topics include managing emotions versus numbers, accurately estimating expenses like taxes, insurance, and maintenance, the critical role of thorough due diligence, building the right team, and mastering the lending process. With personal stories and lessons learned, Nico shares valuable insights to help you confidently grow your multifamily portfolio.

Timestamps:
- 00:00 Introduction: Avoiding Costly Mistakes in Multifamily Deals
- 00:50 The Importance of Emotional Detachment
- 03:18 Underestimating Expenses: A Common Pitfall
- 06:44 Due Diligence: Non-Negotiable Steps
- 10:26 Building the Right Team
- 13:35 Starting Small and Learning Fast
- 14:37 Recap and Final Thoughts
- 15:26 Bonus Tips on Lending
- 16:43 Conclusion: Keep Sharpening Those Axes

Tune in to learn how to avoid costly mistakes and set yourself up for long-term success in multifamily investing!

In this episode of the Small Axe Podcast, Nico shares his insights on acquiring multifamily properties without needing a huge upfront investment. Whether you’re a first-time buyer or an experienced investor, Nico dives deep into both traditional and creative financing strategies to help you get into the apartment complex game.

Key Takeaways:

1. Getting Started with Traditional Financing

- Learn about commercial loans for multifamily properties, typically available for buildings with five or more units.

- Discover why most first-time buyers begin with local banks or credit unions that understand the area and asset class.

- Nico explains loan options such as 20-30 year amortizations, interest-only payments, and how to shop around for the best rates.

2. Creative Financing Options

- If traditional banks don’t work out, explore creative strategies like seller financing, where the seller holds the note.

- Hear examples of how Nico and other investors negotiate terms like down payments, interest rates, and even deferred payments with seller financing.

3. Alternative Funding Sources for Down Payments

- If you don’t have the required down payment, there are several ways to raise it, including joint ventures, partnerships, retirement accounts, and tapping into home equity.

- Understand how syndications work, where you can raise capital from limited partners to fund a portion or even the entire deal.

4. Exploring Non-Traditional Financing Techniques

- Find out about master lease agreements, loan assumptions, and the benefits and risks of using these methods to structure a deal when traditional bank loans aren’t feasible.

5. Joint Ventures and Partnerships

- Nico discusses the importance of partnering with people who align with your goals and values, particularly in joint ventures where all parties are active in the deal.

Resources Mentioned:

- *Creative Cash* by Bill Ham – A book on structuring deals creatively, which helped Nico understand and apply creative financing strategies in multifamily investing.

Quotes:

- "It’s possible to get into your first apartment complex without a ton of cash if you’re open to exploring different financing methods."

- "When structuring a deal, make sure to align with your partners and carefully consider each financing option."

Action Steps:

1. Evaluate your available financing options for multifamily investing, starting with traditional bank loans.

2. Research creative financing techniques like seller financing and master lease agreements.

3. Think about potential partnerships or joint ventures for raising a down payment.

4. Start building relationships with community banks and credit unions for better financing terms.

Want More Help?

Visit www.smallaxecommunities.com to listen to more episodes of the *Small Axe Podcast* and explore resources that can help you sharpen your multifamily investing skills!

In this episode, Nico from the Small Axe Communities explains the various ways multifamily investors, specifically General Partners (GP) and Limited Partners (LP), get paid. Nico discusses the income sources for GPs, including acquisition fees, asset management fees, capital event fees, and disposition fees, offering practical insights from personal experiences. The episode also covers how LPs earn returns based on their investments, typically receiving an 8% preferred annual return, paid monthly, prior to any GP profits. Additionally, it touches on profit splits when returns exceed the preferred rate and the structure of 'waterfall' payouts. Listeners are encouraged to understand deal structures thoroughly and to reach out for further advice, concluding with a call to action for sharing and reviewing the show.

00:00 Introduction to Multifamily Investing

00:41 Understanding General Partnerships

01:08 The Role of Acquisition Fees

01:58 Justifying Acquisition Fees

04:02 Asset Management Fees Explained

05:01 Challenges in Asset Management

06:03 General Partners' Compensation Breakdown

08:14 Limited Partners' Earnings Explained

09:42 Preferred Returns and Incentives

11:22 Waterfall Structures in Deals

11:50 Final Thoughts and Contact Information

12:00 Closing Remarks and Gratitude