Wealth is not an accident, it’s a choice. And on today’s powerful episode of The BiggerPockets Podcast, you’ll learn exactly how to make that choice each and every day. We’re excited to bring back two return guests, Hal Elrod and David Osborn, to talk about the choices that wealthy people make to ensure they stay focused on reaching their goals. You’ll hear about Hal’s recent battle with cancer and the mindset that allowed him to overcome the odds and live. You’ll discover how your diet can make you wealthy and how to command your day from the moment you wake—even if you aren’t a morning person. And you’ll discover the powerful concept of having an “air game” in addition to your “ground game”—and how understanding the distinction can make you wealthier than you have ever dreamed. Packed with wisdom, humor, and incredible insight, this show will leave you pumped up and ready to choose wealth.

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In This Episode We Cover:

  • Hal’s cancer survival story and the Miracle Morning movie
  • David’s latest updates
  • What their miracle mornings look like
  • How Miracle Morning for Millionaires came to be
  • Overcoming the “but I’m not a morning person” objection
  • How to own your agenda
  • Choosing to be wealthy
  • How to find the right group of people
  • The thing that’s more effective than work ethic
  • Tips on self leadership
  • How to develop unwavering focus
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “It’s not about overthinking things. It’s about finding things that work and putting them into action quickly.” (Tweet This!)
  • “There’s no way you win in life without having your agenda and being purposeful towards your agenda.” (Tweet This!)
  • “The economic downturn was my lucky break.” (Tweet This!)
  • “Work ethic is not enough.” (Tweet This!)

Connect with Hal and David

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Chris and Debbie Emick have two daughters—AND are well on their way to financial independence through a combination of local and long distance real estate investing coupled with frugality and conscious spending.

Chris and Debbie are everyday Joes living the dream in small-town Colorado. Debbie home schools their two daughters and manages their rental property business from home, after her 14-year career in teaching. Chris is a passionate leader to his team of network engineers by day and organic gardener/personal finance extraordinaire by night. Their home base is rural Southeastern CO, where they can go for dirt-road runs and trafficless drives while still being able to make quick mountain trips for hiking, backpacking, and skiing.

This is the first in a periodic series of interviews with families who are on the path to financial freedom.

Click here to listen on iTunes.

Listen to the Podcast Here

Watch the Podcast Here

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Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds. Thanks! We really appreciate it!

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The all-new FreshBooks is accounting software that makes running your small business easy, fast and secure. Spend less time on accounting and more time doing the work you love.

For a 30-day unrestricted trial, go to FreshBooks.com/bpmoney

In This Episode We Cover:

  • Chris and Debbie’s personal finance journey
  • Debbie’s autoimmune disease diagnosis
  • Lifestyle changes and adjustments they made to achieve their objectives
  • Using the YNAB app to budget their money
  • How they track all their spending
  • How their budget works
  • Why they invest their money in real estate
  • The very first property they purchased
  • Properties they have purchased since
  • The cash flow they produce from their portfolio
  • Household and quality of life improvements
  • Their goals for the next few years
  • What the cash flow quadrant is
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “You find what you are looking for.” (Tweet This!)
  • “If we can do it, they can do it, too. It is just a matter of taking a look at priorities.” (Tweet This!)

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I’ve seen all the latest updates on the #TimesUp and #MeToo movements, yet it somehow manages to shock me each time I hear of something new happening. On a recent National Association of Real Estate Investment Trusts panel, real estate investor Sam Zell made some shocking comments. So when is enough going to be enough?

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The majority of individuals on BiggerPockets are investing in real estate because they want to create financial freedom. Blog and forum posts often touch on the fact that building out a real estate portfolio will allow you to achieve financial freedom. And I certainly agree with this notion. But what I’ve come to realize is that financial freedom isn’t what it’s all about.

Few people actively write about building a lifestyle. True, there are many blog posts that touch on lifestyle by roughly saying, “I invest in real estate so that I can eventually do these additional things that I love.” The focus is on building a real estate portfolio with the lifestyle as a result. And that’s the problem.

Today’s article is going to focus on building a lifestyle with the real estate portfolio or business as the result. What will be notably different in my article is that your desired lifestyle is the objective, not a number of units, not a “cash flow per door” number, and not even a “financial freedom” number. I want to turn the formula upside down.

We’re not investing in real estate and as a result, going to live an awesome lifestyle. Instead, we’re going to live an awesome lifestyle and as a result, invest in real estate.

Lifestyle is Secondary—Or is It?

There can be a high price to pay for financial freedom, especially if your means of getting there is investing in real estate or starting a business. Stress is high, money is tight, and your tenant just didn’t want to pay rent this month.

How many times have you met a business owner or real estate investor who is earning gobs of money yet openly complains about their lifestyle? With further prodding, you learn that these poor souls work insane hours, are always on call, and live in a constant jet stream of stress. But they earn $500k! Surely they are just cynical, as anyone earning that much must be happy.

Trust me, as a CPA who interacts with and provides services to plenty of folks earning much more than $500k, money quickly loses its value in regard to happiness. Money has a diminishing marginal return, meaning that after a certain point, each additional dollar you earn brings less happiness than the dollar before it. Research suggests this “peak” dollar figure is $70,000 annually.


Related: How to Use Lifestyle Design to Create an Ideal Retirement Driven by Passive Income

An example of diminishing marginal return: You order 10 cheeseburgers (you freakin’ love cheeseburgers!), and you eat them all in one sitting. You haven’t eaten in a while, so the first one is delicious. It truly hits the spot. The second one is also delicious. It’s cooked medium rare, nice and juicy, perfectly seasoned. The third one is good, but you are starting to get full so it’s not as good as the first two. By the tenth cheeseburger, you’re so full that the sight of it repulses you. That’s diminishing marginal return in a nutshell. Each cheeseburger is the exact same, but their value steadily reduces as you consume them.

I’m always curious to hear the backstory of these folks who earn plenty of money yet are seemingly unhappy. Unsurprisingly, the stories are all relatively all the same: “I dreamed about living ‘X’ lifestyle in the future, so I started this business/ invested in real estate to hopefully get there.”

On the flip side, I also have clients earning a high amount of money who are perfectly happy. They love what they do, and more importantly, they love their day-to-day. When I ask them about their backstory, their stories generally go like this: “I had a lifestyle that I wanted to live today, and this business was what complimented that lifestyle.”

And that, my dear readers, is the key difference between living a life of full of wealth and happiness and one of just monetary wealth.

Lifestyle Starts Today

I learned this rather quickly in my career so I’m quite grateful: Lifestyle starts today, not tomorrow.

The key point I want to impress upon you throughout this entire article is that you don’t have to wait 15 years to achieve financial freedom and then begin living your desired lifestyle. Instead, I want you to think about the desired lifestyle you want to live right now and figure out what steps you can begin taking to implement said lifestyle immediately.

I’ve never met someone who wanted to be unhappy—yet many people are unhappy. And if you look closely, most of them have a common theme running throughout their life: Their desired future lifestyle dictates how they live today. They are sacrificing their present time for future happiness.

Now, I’m not suggesting that you drop everything and put forth little work or that you don’t think about the future lifestyle you’d like to achieve. What I am suggesting is that you begin implementing the lifestyle you want to live today and build everything else around you to supplement that lifestyle.

You’re still going to sacrifice plenty. You’re still going to stress and wonder if you’re doing the right thing. But the key difference is that we are focusing on crafting your lifestyle today, rather than setting a target number in our minds and saying, “Once I hit that, I’ll begin to live the lifestyle of my dreams.”


Where Do We Start?

Frankly, I don’t really know. I’m a CPA, not a guru trying to sell you my coaching program for $20,000 (I take check or credit—just kidding, of course).

What I do know is that crafting a lifestyle that I’ll enjoy on a day-to-day basis has been my goal from the get-go. I don’t want to wait 20 years to “retire” and live the lifestyle of my dreams. I want to do that today.

So I’m going to walk you through my logic of how I built assets around me to supplement the lifestyle I wanted to live. Hopefully you’ll be able to take something away from this and implement it in your own life.

The first step is to define the lifestyle you want. After my first few months working for a Big 4 accounting firm, I decided that the corporate lifestyle was not for me. I didn’t understand why one must commute to an office for work that could easily be done in the comfort of my own home. I thought the whole “dressing up” thing just got in the way of providing high quality work. The last time I checked, a suit and tie, while studies suggest makes you more confident, don’t improve your intellect nor work product.

Worst of all, I didn’t understand why people of high integrity and character were required to show up a 9:00 a.m. every day. If the deadlines are met, the quality of work is high, and the client is happy (the most important thing), then why does it matter when someone walks into the office? It seemed the performance measurements were backwards.

I disagreed with the values of the corporate lifestyle, how they held individuals accountable, and how they measured performance.

So I began to sketch out what my ideal lifestyle looked like. I knew that I wanted the flexibility to work in my pajamas at home. I knew I wanted to be able to work anywhere in the world seamlessly while traveling. And I knew that I wanted my performance to be measured by something other than whether or not I billed 1,800 hours out of the 2,080-hour work year (that’s called “utilization” in the accounting world).

I determined the best thing to do was to build assets around me that allows me to accomplish these things. The two asset classes I chose were real estate and a professional services business. But the key for living my lifestyle would be a laser focus on implementing systems that complimented my lifestyle.


Building Assets and Focusing on the Systems

When people focus on a number to achieve their desired lifestyle, the business systems get put on the back burner. Instead, you should be focusing on the systems you must implement in order to live the lifestyle you want today.

As I mentioned, I decided that investing in real estate and running a business would both complement the lifestyle I desired to live. The problem was that real estate typically requires a hands-on approach, and professional services firms usually have offices that clients can walk into—both of which go against my desired lifestyle of working anywhere in the world.

The real estate solution was rather simple to figure out. I knew I needed properties that cash flowed quite well, as I needed all of my expenses to be covered. The cash flow would allow me to “buy” teammates on the ground and put the asset in auto-pilot mode, allowing me to be 100 percent virtual. I could invest in areas I visited frequently or wanted to travel to once a year, and I’d require that my property manager send me a video walkthrough of my units quarterly.

Related: How I Saved $20,000 in 2014 and Used it to Invest in Lifestyle Design

On the buy side, I’d research the city’s economics like crazy to make sure the local economy was growing and not subject to undue risk. I’d use Google street view to explore neighborhoods. I’d place offers sight unseen and only travel to the property post-inspection.

Using these “desktop” methods, I’ve picked up two 3-unit properties. These two properties cash flow well and cover most of my monthly living expenses, though I don’t actually use the cash flow for my monthly living expenses. The point is, if the going gets tough, I can rely for a short amount of time on these properties.

The business solution was a bit tougher. When I hammered out what I wanted my lifestyle to look like, I knew there were very few corporate jobs that would support it. The next step was to start a business, and since I had a CPA, I naturally started a CPA firm.

It was tough to figure out how to build a CPA firm that would support my lifestyle. My biggest obstacle was the preconceived notion that clients would want to walk into a CPA’s office and shake his/her hand. But I knew the lifestyle I was crafting so I laid out the ground rules for my CPA firm:

  1. I will not meet clients face-to-face. Instead, we’ll hold meetings over the phone or video calls. This goes for local clients as much as non-local.
  2. My marketing will be content rich. I will develop awesome content that people derive massive value from. A potential client will read my articles and “test me out” prior to ever scheduling their first consultation.
  3. I will develop business systems that will support a virtual practice. Document sharing must only be done in the cloud. I will not accept paper documents.
  4. I will hire employees and not require them to be local to me nor come into an office. They will enjoy the same lifestyle I do. This means they have to want to live the lifestyle I’m living. I will also need to develop metrics that focus on results, not the amount of time an employee works.

With that, I was off to the races. I started making massive strides to get content out there, and I used BiggerPockets as my growth platform. It was tough and took a lot of sacrificing, but two years later, I have a firm that supports my desired lifestyle.



My point in telling you this is that I didn’t say, “I want my lifestyle to be ‘X’ in the future, so I must build a business to reach ‘$Y’ in annual revenue. At that time, I’ll be able to live the lifestyle I want to live.” Instead, my method of thinking is, “I want to live ‘X’ lifestyle and I’m going to build ‘Y’ assets and systems that complement the lifestyle I want to live.”

With my way of thinking, you won’t be putting your desired lifestyle off into some distant future point. Instead, you’ll start thinking of ways you can move toward living your desired lifestyle today. Sure, it takes sacrifice and hard work. It took me two years to get my business to a point where I could actually live the lifestyle I was actively trying to build. But in those two years, I had a laser focus on building a business that complemented the lifestyle I wanted to live. My virtual lifestyle was the objective; the real estate and the business were the results.

Many people make the mistake of letting their lifestyle be the result and their investing or their businesses the objective. Don’t do that. Focus on building a lifestyle portfolio and business. You’ll be much happier in the end.

We’re republishing this article to help out our newer readers.

How are you designing a lifestyle that works for you? Do you agree with the above philosophy?

Let me know your thoughts with a comment!

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Most consumers do not grasp the difference between the price and the value of a product or service. Price is simply the amount of money paid or charged for something. When we focus on price, we are focusing on the short-term acquisition of a product. Value, on the other hand, focuses on the long-term aspect of the purchase.

Price is what a buyer spends, and value is what they receive in the transaction. When a buyer has received more value from a product than what they spent, this purchase is viewed as possessing great value. If a buyer values your product and can find a solution to his problem with your product more than he values his money, then he will purchase your product. People who focus on cost focus on the total cost of ownership, but people who focus on value focus on the total picture and how the product will create a solution.

Now, how can we compute value in real estate and specifically multifamily real estate? There are basically three methods of calculating real estate value: the cost approach, the sales approach, and the income approach. The sales approach is widely used in valuing single family homes, and the cost approach is utilized for properties that have few comps and for new properties (such as a church or school). Let’s focus on the income method, which utilizes the net operating income and cap rates to determine the property’s value. This is by far the best method to analyze apartments.

Hyperbolic Discounting

Before we dive into analyzing the value of a multifamily property, I would like to discuss the term “hyperbolic discounting” and why I think a significant amount of investors shy away from investing in multis. I was introduced to this term by Gary Keller while reading the book The One Thing, and hyperbolic discounting states that the farther away a reward is, the less motivated an individual is to achieve it. If I have a choice of earning $100 in two weeks or earning $500 in 18 months, most people will choose the present reward over the future reward overwhelmingly. This impulse of instant gratification is becoming evermore popular within our society.

This may explain why strategies such as wholesaling and fix and flipping are extremely popular to investors. These strategies employ much shorter time horizons than multifamily investments. A wholesaler can earn a profit in a matter of weeks, while a multifamily investor usually needs to dedicate a much longer time horizon to execute his business plan to generate his return.

There are other challenges that investors encounter when deciding upon multifamily investments, such as lack of capital or lack of experience, but I feel that not being able to focus on the long-term dissuades many investors from multifamily investing. I sometimes wonder if our society is losing the willpower and the persistence to see things through.

If you understand the value and the various benefits that multifamily offers, the decision of delayed gratification will be a no-brainer. So what are the benefits of multifamily, and how do we determine the value?


Related: The 4 Phases of a Real Estate Cycle (& When to Buy a Multifamily for Maximum Profitability)

6 Benefits of Investing in Multifamily Real Estate

Here is a list of benefits:

  1. Cash flow. Apartments generate monthly income, what I like to refer to as wallet money. I compare cash flow to dividends paid by stocks. The money rolls in every month.
  2. Control. You are the captain of your own ship. You have the ability to control every decision that affects your investment.
  3. Tax advantages. It’s not what you make, it’s what you keep that’s important, and real estate offers tremendous tax benefits. Why would the government create advantages for this tax class? The government realizes it does not have the ability to deliver affordable housing, and by offering these benefits, it is trying to stimulate the private sector to step in and fill the void.
  4. Economy of scale: This is a huge advantage when trying to scale your business. I find it much easier trying to collect rent from 30 tenants in my apartment building rather than running all across the city to collect from my single family homes. It is easier and more cost effective to have more units under one roof.
  5. Ability to force the appreciation: The value is not as reliant on comps as it is your ability to increase the value through growing the NOI.
  6. Velocity of money: This refers to the ability to refinance a property, withdraw the equity, maintain control of the asset, and invest the refinance proceeds into another property. Banks are the ideal example of “velocitizing” money. They borrow funds from their customers and lend the proceeds out to individuals looking for loans. The faster the money moves, the wealthier you become.

Multifamily Valuation: How to Calculate Value in Multifamily Investing

Now that you’ve seen the incredible benefits that the multifamily space provides, how do you calculate value? In multifamily investing, it is all about the net operating income (NOI) of the property and the fact that the investor is purchasing the property based on an income stream. Let me provide you with a few definitions:

Operating Expenses

Costs that are incurred to maintain and run a property. Some examples include trash, snow plowing, and pest control.

Capital Expenditures

An expenditure for an asset that will improve or extend the useful life of an existing asset for a period to exceed one year. Some examples include water heaters, driveways, roofs and A/C units. I like to set aside $250 per unit per year in a cap ex account to address these “repairs.”

You may have to set aside a larger amount, depending upon the age and condition of the property. The cap ex figure falls below the net operating income, so it does not affect the value of the asset, but it will certainly affect your cash flow, i.e. the money you put in your pocket!

Net Operating Income

Annual income generated from a property less total operating expenses.

Cap Rate

The rate of return on an investment property based on the income. Cap rates are specific to a market and are affected by the type of property class (A, B, C, D) you are investing in. A broker should be able to tell you the cap rate in his market.


Property Class

  • A Properties: Newest, shiniest asset. They contain many amenities and cater to white-collar workers. Expect low cap rates, around 2-4. This class of asset is poor at cash flowing but has the ability to appreciate greatly. I tend to think that investors choose A properties to maintain their wealth, not create it.
  • B Properties: Built within the last 20 years, this class caters to a mix of white and blue-collar workers. This type of property may show a bit of deferred maintenance, but overall, it has a nice mix of cash flow and potential appreciation. Look for cap rates around 5-7.
  • C Properties: My first real estate brokers defined C properties as “crap” properties, but loved their ability to generate substantial cash flow. I tend to agree with his candid analysis. These properties are usually 30+ years old and have deferred maintenance issues. Cap rates hover between 8-10 on these properties.
  • D Properties: The lowest class of property. They are usually located in inner cities where it’s difficult to collect the rent and vacancy rates are high. These properties are highly management intensive, and the tenant base is often difficult to deal with. Investors get lured into investing in these properties due to the low prices, but soon realize they got more than they bargained for. 

The goal is to increase the NOI by either increasing revenues or by decreasing expenses. You are trying to force the appreciation of the asset by increasing the NOI.  The term that is thrown around to accomplish this task is “reposition.” When you reposition an asset, you are adding value by changing the appearance of the property or the operations of the property, all to increase the NOI. You are focusing on the value-adds to a property.

Related: The #1 Thing Newbies Should Do to Get Started With Multifamily Investing

Example of a Successful Multifamily Reposition

Let me give you a quick example of a reposition on one of our assets and different types of value-adds we instituted. We purchased a property that had rents that were well below market, and many units that were vacant. Our goal was to address desperately needed deferred maintenance, while filling the vacant units.

We eventually filled all the vacant units and increased the rent rates on the current tenants from $450 per month to $625 per month. In a span of 12 months, revenue exploded from $53,000 per month to over $90,000 per month. In this example, we were able to increase the value of the property from $4.1 million to just over $6.3 million in only 12 months!

Examples of Value-Adds

Potential value-add items might include:

  • Adding upscale touches, such as two-tone paint and upgraded kitchen floors
  • Offering amenities, such as a fitness center or clubhouse
  • Instituting Ratio Utility Billing System (RUBS)
  • Changing the zoning on a property to a more favorable use
  • Generating new sources of revenue, such as laundry, pet fees, late fees, application fees and storage fees
  • Renovating a property to allow the owner to increase rents
  • Increasing the quality of the tenant base
  • Repositioning a C Property into a B property

All of the value-adds listed above need to focus on either increasing the revenue or decreasing the expenses. If you decide to install granite countertops, but you realize that this upgrade has failed to increase revenue, this would NOT be a value-add. One of the biggest mistakes investors make is to over-improve a property without focusing on the ability of the improvement to increase revenue. (I’ve done that a couple of times. OUCH!)

This is the beauty in multifamily real estate. You have the ability to increase the value of your asset by employing sound management principles to increase the NOI, thereby increasing the value.


How to Calculate Multifamily Value Using Cap Rates

Now let’s tackle how you calculate the value of a property using cap rates. You would take the NOI of a property and divide it by the cap rate.

NOI/Cap Rate = Value

For instance, if the property had an NOI of $150,000 and the cap rate was 6, the property value would be $2,500,000 (150,000/.06). If the NOI increased to $180,000, the value would increase to $3,000,000. A $30,000 increase in NOI generated a $500,000 increase in value.

Cap rates have an inverse relationship with market value. When cap rates compress, as we are witnessing in the current real estate market, the value increases — and vice versa. It’s fantastic when you own property and cap rates are falling, but a real bummer when you are trying to invest. The formula for cap rates is:

NOI/Price = Cap Rate

For example, if the property had an NOI of $50,000 and was listed for $500,000, then the cap rate would be 10 ($50,000/$500,000).

Our strategy is to purchase assets based on actual numbers. We ask the seller to provide us with the last 12 months of income and expense figures, as well as the rent roll. Once you purchase on actuals, your job is to go to work on the NOI. In life, it’s not what you buy but what you pay that is critical to the success of any investment.

My goal in this article has been to describe what “value” is, why some investors are hesitant to jump into multifamily investing, the benefits of investing in this asset class, how to analyze a multifamily property and how to implement value-adds to an investment. Remember, at the end of the day, it’s all about the income versus the expenses.


Related: Thinking About Buying a Multifamily? STOP! Wait Until You Read This!

Your Task

Decide now that you are ready to invest in apartments. Seek out websites, such as BiggerPockets, to begin your education. Immerse yourself in podcasts and books that focus solely on multifamily investing. Learn how to properly underwrite (another fancy word for analyze) deals.

Begin to visit websites that list multifamily properties, such as Loopnet, Costar, and Realtor.com, to become familiar with your market and the “players” in the market. Start networking with these individuals and ask them to start sending you deals to analyze. Expect to receive subpar deals in the beginning, but don’t quit. Tell them why these deals don’t work for you, and continue to analyze more deals. Formulate a business plan and strategy on how you will create value once you begin investing.

We’re republishing this article to help out our newer readers.

Investors: Do you choose to invest in multifamily real estate? Why or why not? Any questions about the valuation process?

Leave your questions and comments below!

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Buying groups of properties all at once is a great way to rapidly increase the size of your portfolio. The key, of course, is being able to find, evaluate, and finance such deals.

In the past, we’ve bought portfolios with as many as 97 and 41 houses, but this time I will discuss a more reasonably sized package of nine houses we recently bought and the lessons you can learn from it.

Finding the Deal

This deal came to us in a very simple manner; a wholesaler emailed it to me. Now, most of the properties I see from wholesalers range from OK to terrible. The portfolios are usually particularly bad, with most of the properties residing in the absolute worst parts of town.

Part of the reason for this is that wholesalers will often develop strong relationships with a couple of end-buyers, and those investors will get to pick over all the deals. So all the good ones get gobbled up, and the one’s that get to you are usually mediocre at best. On that note, it’s a good idea to find the best wholesalers and try to become one of their go-to investors. Take the best one’s out to lunch, and if you do buy a deal from one, try to leverage that into another.

But even though most of the good ones will get snatched up before they land in your inbox, some of the good ones will slip through the cracks. I’ve purchased plenty of properties from wholesalers by simply being on their email lists. While you’ll have to sift through a lot of coal to find a diamond and learn to ignore heavy-handed sales language like “Cash Cow,” or “25 percent cash on cash return,” or “this property will cure cancer,” it’s still worth the effort. After all, all you have to do is get on an email list and check to see if the property and price look reasonable. Most wholesalers will include a lot of pictures, so that can help you do a quick evaluation as well.

Related: How We Got a Million-Dollar Property Portfolio for (Almost) Free

Move Quickly

When you get an email from a wholesaler with an interesting property, you can bet that a bunch of other people got the same email. In the past for example, when a wholesaler sent me a house that would have been a great deal, I got there right as another investor (who happens to be on BiggerPockets as well) was leaving. As soon as I had finished walking through the house I called and let the wholesaler know I would take it. Unfortunately, the other BiggerPockets investor (who will remain unnamed) had already locked it up.

That’s how fast this game can move. Try to get in the property as soon as possible!

On this package of nine, I called the same day and set up an appointment for the following day. This was the soonest we could get in. In the past, I have made a couple of blind offers on properties I knew I wanted. But oftentimes sellers will be hesitant with those because they (rightfully) think there is a high chance you’ll back out upon seeing the property. It also makes you seem desperate. You don’t want to be a motivated buyer anymore than a motivated seller. Occasionally, blind offers may be appropriate. But I haven’t generally found them to be useful.

Talk to the Seller

I’ve found that with wholesalers, it’s usually easier to talk to the actual seller than it is when the property is listed with a real estate agent. On a run-of-the-mill deal, that might not be necessary. But on one that may require terms such as seller-financing, or on a larger deal like this one, it is always a good idea to meet with the seller. Never underestimate the importance of rapport!

On this occasion, we were able to meet with the seller at the one vacant property in the portfolio. We built rapport while getting as much information from the horse’s mouth about the properties themselves. This is always a critical step. The seller needs to trust you and want to sell the properties to you. By building this trust, you can increase your odds of stemming off any other last minute suitors.

Valuing the Deal

A lot of big investment firms that buy houses such as American Home Buyers, B2R or Colony Homes value large portfolios of houses in the same way normal investors value apartments; by looking at their cap rate and gross yield (annual rent divided by total cost). Unless you own or work for such a firm, I wouldn’t recommend this.

Yes, you need to analyze deals to see if they will cash flow. But more importantly, you should value these properties based on their ARV. We want our portfolios to meet the same ARV requirements that our individual purchases do. For these, it took a little while to put together nine comparative analyses (albeit a lot less time than when I put together 97), but it is an important step. You never want to just shoot from the hip, especially when buying multiple houses at once.

We were only able to walk through two houses beforehand. The other seven I rove by. So I listed out my assumptions on our offer. I said that I expected that all nine were habitable and that while there was some deferred maintenance, there were no major renovations to be done. This is something I have started doing on larger offers and am quite happy with so far. What it does is gives me something to point to if I find a bunch of problems that weren’t disclosed prior to going under contract. If need be, this makes it much easier to retrade with the seller.

Related: Introducing: The BiggerPockets BRRRR Calculator!

Due Diligence and Closing

I have stressed before and will stress again; walk every unit! Sometimes, you may not be able to; for example, one of the major points during our negotiation on the 97 was that the seller didn’t want to go through all 97 properties. But we felt the price and terms justified that as long as we made a major contingency in our analysis that we were taking on some of these properties relatively blind. Whenever possible, walk each unit.

On this deal, the seller agreed to let us walk each one and luckily the properties were more or less as expected. We weren’t able to get much in the way of an operating statement. Again, we felt the price justified that as long as we made a contingency in our analysis for that unknown.

For the financing, we used the same technique we used to close the 41 properties. We set the close date to be shortly after a bank refinance on a portfolio of houses we already owned and had private lenders on. Then we simply asked those private lenders to lend on the new properties. Given these lenders wanted to keep receiving their interest payments, they all said yes. This method calls for a lot of paperwork, but it’s a great tool to add to your BRRRR strategy, particularly with regards to buying small portfolios of houses.

Remember, no one ever said you can only buy houses one at a time. You just have to think outside the box a little bit.

We’re republishing this article to help out our newer readers.

What strategies do you use to close large portfolio deals?

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Let’s face it. It is tough living in a big city. It is no secret that life in a big city is seriously expensive. With ever-climbing costs, the situation just keeps getting harder. To top it all off, there’s the the skyrocketing costs of real estate! It’s just not easy to find an ideal spot worth investing in. Soaring prices, bad neighborhoods, and an overcrowded market are all big reasons so many would-be investors simply don’t ever get to it.

Everyone knows what happens when demand is high: Prices rise.

So, do you still want to follow the crowd and call a tiny patch of land with a tiny set of rooms your own? If so, then invest in the West Coast and East Coast. Investing there may be one of the stupidest things you can do right now.

Now, you might be thinking, why on earth is investing on the West and East Coast such a bad idea? Well, it’s because huge hedge funds have raised billions of dollars and bought tons of available properties. The first ones they bought were the best deals. There are absolutely no deals left, and the few available are usually not even worth the sweat. Right now, you would be paying top dollar and getting a crappy ROI to boot. But hey, you tell me. How does a $300,000-$500,000 single family home that rents for between $1,200-$1,500 per month sound? Does that seem like a good deal to you? Let me answer that for you: not at all! These are ridiculous and lousy investments in my opinion. I would rather stay in bed sleeping than wreck my balance sheet buying properties like this.

Why All Investors Should Consider the Midwest

Now, if you are someone who refuses to be a follower, I might have some awesome news for you. Think Midwest. Yes, you heard me. The Midwest is where all the real estate action is. Wake up and smell the roses. City dwellers won’t even believe how far their money can go in the Midwestern states. Here, you’ll end up spending almost one-fifth of what you’ll shell out on real estate in any area on the East or West Coasts.

Yes, life in the Midwestern region is different. Yes, it’s less crowded there and a lot quieter, but isn’t it better to have more space, more conveniences, and a stunning piece of real estate at knock-out prices? Well, many people with families would argue that it is indeed better to live there than anywhere else. With top-rated schools, the possibility for a high-end lifestyle, and effortless connectivity all finding their way to these locations, there isn’t much to complain about.

Related: 28 Smart Questions to Ask a Broker When Investigating Out-of-State Markets

The Midwestern region is known for its scenic natural vistas, which are virtually non-existent in big cities, thanks to rapid urbanization. Most Midwestern areas offer an incredible lifestyle at extremely lucrative prices. So what is the catch, you ask? Well, there isn’t any catch. The cost of living here is much more reasonable than in most big cities. This means people get to save way more than they could ever manage in the big city! Comparatively an under-explored market, the Midwest has potential beyond compare!

Why should you care as an investor? Because these Midwestern families are your future rentals. There’s such a clear demand for rental properties in the Midwest.

5 Reasons to Consider Midwest Investments

But there’s more. When was the last time you felt like a kid in a candy store? With deals so sweet you will feel like a kid again, the Midwest is sure to bring back some great feelings. Why? Properties are available between $50,000-$70,000. In addition, many of these $50,000-$70,000 properties will bring in a rent of $700-$1,000 per month. Now, I don’t know how good your math is, but this gives you a ridiculously high ROI. Many of these houses could be found in solid B areas! You can think of the Midwest as a hidden gold mine waiting to be explored. In many parts of the Midwest, a mere $1 million will buy you a stunning mansion with acres of open space surrounding it. You might even get a lake-facing property, or one with a huge pool and a car collector’s garage!

Let’s face it — life is too short to be spending your time in cramped spaces. Many people feel that way, and that’s why the Midwest is such a success for families. Of course, living in a place that doesn’t resemble a chicken coop is a big plus as well.

Take advantage of the low cost of living and low-priced properties. Invest in properties that give you a perfect ROI and do not burn a hole in your pocket. And there ain’t any place like the Midwest to do that! Here are five things that we absolutely love about the Midwest:

  1. It is so well contained and life is so much simpler. Its unspoiled solitude is both captivating and oh-so invigorating. Translation? Happy tenants. There’s no big city pressure in the Midwest; everything is just nice.
  2. Low cost living! An affordable lifestyle with all possible luxuries to go with it is never a distant dream here. That means more cash for rent. It also explains, in part, why rent is relatively high here. It also means that maintenance may be cheaper as well. Don’t forget, especially if you’re living on the East or West Coasts, your hard-earned cash simply has more milage in the Midwest.
  3. While big cities might be known for neon lights and crazy traffic, the Midwest is known for its serene outdoors and calming silence. Compared to busy city life, the Midwest is like an oasis. There sure are some really beautiful locations. It’s also perfect for the average family: Great family trips assured.
  4. The Midwest might not be the center of a bustling universe, but there’s still a lot of activity here — economically speaking, that is. There are few financial headquarters, many factories, and an overall less-corporate environment. There are loads of good blue-collar workers, jobs, and job stability.
  5. There’s a notable lack of pretension. Why is this important? Well, in terms of the maintenance and amenities you need to provide for a mid-class home, it makes a huge difference. People’s expectations are usually a bit lower, and that means easier tenants. It’s not a huge difference from the Coasts, but it’s still noticeable to investors.

Now, those of you who know me know that when I speak about good investment opportunities, I never talk about the appreciation of a property. Right now, the East and West Coasts have some decently appreciating real estate. The thing with appreciation, however, is that it’s basically anyone’s guess as to where it’s going. Many people buy an expensive property and hope that it increases in value in a record amount of time. You might call it investing, but I call it gambling. You know, all I care about is a good cash flow from properties. If you think about it, that’s all that matters. And it’s exactly what the Midwest has to offer. Don’t ask me about where the properties are going in terms of value because I simply don’t care.

Add in extensive homeownership (thanks to some of the lowest average home prices in the country), simple lifestyle, and low-cost living, and you’ve got the perfect mix for investing in properties. After all, homeowners take care of their homes and make living in their neighborhoods as nice as they can.

Related: 4 Things to Do With Extra Cash in a Low Inventory Housing Market

Check it Out for Yourself

Of course, I understand that if you’re currently living somewhere else, it’s hard to imagine what it’s like elsewhere. It’s why I always recommend that people go check it out for themselves. Know where you’re investing. Think about traveling to the Midwest, and check out some properties in areas that appeal to you. It doesn’t matter that you won’t be living there  it’s just always nice to know that you understand what living in a certain place is like.

Above all, considering a purchase price of $60,000 for a single family home with a rental income of $800 each month, you’d be hard-pressed to find a deal with a similar return anywhere else  especially if you take into account that one $600,000 East or West Coast home buys you 10 of these Midwestern homes. I personally own 20 properties and am looking to buy another 30 by the end of the year.

How’s that for a passive income?

We’re republishing this article to help out our newer readers.

Where do you invest — and why?

Let me know your thoughts on the best real estate markets!

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Walker & Dunlop wants to increase it’s investment sales volume by $2 billion and hired Bobby Gatling away from CBRE to help with the effort. In his new role, Gatling will be responsible for originating and executing the sale of multifamily assets in Central and North Florida.

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To push forward the real estate industry, JLL has created a $100 million investment fund for real estate technology development. JLL Spark and its team of veteran Silicon Valley entrepreneurs have been tasked with dishing out this seed money to worthy tech startups.

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I never plan to sell a single multifamily property, and here’s why:

I’m Going Long

I’m in it for the long haul. I’m not just thinking about how to make money next month, hit a goal this year, or get rich in five. My eye is on the long game. I’m looking 10, 20, 50 years down the line and beyond.

It’s a Lot of Work

Sourcing, screening, negotiating, and closing on multifamily apartment buildings takes a lot of work and time. Often, that is just the beginning. Once purchased, you must deal with tenants. You’ll have to market the units, and you’ll probably have to renovate and improve the property at some point. Compared to the long-term rewards, to me, it doesn’t make much sense to sell after putting in all of that work. I want the best returns on my time and money. I want to know that I am really doing something worthwhile — something that will last. 

Related: Attention Multifamily Investors: Are You STILL Paying Taxes?


The quick cash and returns some people rave about from flipping and wholesaling houses can sound really attractive. Until you do the real math and pay your tax bill. They never talk about taxes on reality TV. They talk about gross profit, which is in a completely different ballpark from net profit. You pay a lot less in taxes on long-term gains and passive income dividends than on active income or short-term windfalls. I’m not trying to give up a large fraction of the gains I work so hard to earn in real estate investing. That’s just not my model.


I believe it is just too much of a gamble to buy a property in the hopes of selling it. Especially after putting countless hours, energy, and precious capital into renovations and improvements. Some people say that you make your money when you buy, but really, you make your money when the property puts money in your pocket. I know I can do that with cash flow from tenants right away. There is never a guarantee that you can flip for a certain figure (or even sell at all). I see many investors setting themselves up for difficulties right now, overpaying for properties with hopes of flipping. None of the thousands of investors who got caught in the last crash expected they would get stuck with those properties, but they did. I buy for cash flow.

Related: Why the Wealthy Put Their Money Into Multifamily & Commercial Real Estate

Net Worth

Even the best properties may fluctuate in value at different times. Yet, in the long run, these assets keep going up in value. After all, what are you going to do with fast money anyway? Stick it in the bank at negative interest rates? Or stuff it in your mattress to devalue? I’m looking at long-term wealth building, which will in turn increase my real net worth. By holding multifamily properties long term, extra losses on transaction fees, taxes, commissions, can be avoided.


I’m not selling anytime soon. I’m going long, and never plan to sell my multifamily property investments. That may not be for everyone, but before you are quick to judge, do the math on the above factors and give it some thought.

We’re republishing this article to help out our newer readers.

What about you? Have you sold and regretted it?

Or am I missing something about flipping that you think I should know?

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