Multifamily Legacy Podcast 007: How to Fund Your Deals
Today is going to be a fun episode because we talk about how to fund your deals. There are a lot of little pieces to the total funding package. I’m going to give you the juicy details of how it works and how to remember everything. We’ve talked about how to find deals and make offers. Now it is time to talk about how to get funding. We will go over where to get private funding, how much of it to use, the capital stack, and more.
I am so excited about this because I love the cashflow life. When you start from nothing it is really exciting to become successful and have successful real estate deals. I also appreciate all of the new listeners and reviews. I have a fun episode coming up where my wife is going to join me and share a little about me. She has supported me, and this has been a partnership with her. She is my best friend and the upcoming episode will be real and authentic.
Topics on Today’s Episode:
- The capital stack is the total amount of money it takes to fund a deal.
- Example: 2 million dollar deal purchase price. Start underwriting with .75
- That’s a 75% loan-to-value rate. This depends on occupancy.
- The bank finances 1.5 million, so we still need $500,000 of private funding money.
- We borrow all it takes for the down payment, closing costs, inspection costs, legal costs, and capital expenditures or money to fix up the property.
- We borrow more than we are purchasing.
- It’s our job to find all the right problems that are fixable and then fund it with all the money we need.
- Acquisition fee is 3 to 5%. It depends on how good a deal we found. 4% of a 2 million deal is $80,000. That is some fix and flip money.
- Investors want to get their money back with interest. Private money cost more than loans from the bank. Bank money is cheaper, so get as much as you can.
- Don’t get discouraged when raising private money. Ask people about who they know because that takes the pressure away.
- Pencil a higher interest rate. If the deal still works at these numbers, it is still a deal. Don’t fine tune the numbers until the deal is ready to close.
- Under promise and over deliver. This is a hidden art that most people don’t do.
- Showing people better numbers makes them believe and trust in you and become raving fans.
- Always be conservative with your projections.
- I’m also creating software to that will show you how to structure a deal.
- Find a commercial mortgage broker.
- Never undervalue the benefit of asking for help. Get a referral to the right person and ask the hard questions.
- Keep expanding your network and be the conductor of your team.
Links and Resources Mentioned:
Quotes:
“I run my multi-million dollar business from my home, and I have kept it simple for a reason. I don’t want to have to check in to the office.” Corey Peterson
“I am the conductor. I take all the pieces that I need to assemble my team and then make sure they are playing right.” Corey Peterson
“It’s how you put the jigsaw puzzle together to find the solution.” Corey Peterson
Don’t forget to download my Free Workshop Quickstart Video Series, and if you like what you have heard please leave a review on iTunes. On the next episode, I am going to give a quick shout out to some of my reviewers.