[00:00:00] Kristen: Welcome to this week’s edition of Insider Secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Morawski has more than 30 years of multifamily, real estate investing and property management experience.

Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.

Mike: Good morning. And welcome to this session of Insider Secrets. Again, brought to you by My Core Intentions. Before I introduce today’s guest, let me take a quick minute for a commercial. You know what? I always say that the most dangerous man in the room is the guy [00:01:00] with the microphone. And as long as I have it, I’m going to talk about us as much as I can.

My Core Intentions is designed around the ability to deliver proven real estate strategies through personalized coaching. We’re gonna really focus on multi-family and today with our guest, we’re going to really focus on multi-family to help facilitate a positive life change for our clients.

That’s really what we want to try and achieve is get some good positive life changes, some balance in our client’s lives. We do this by delivering proven real estate strategy through a personalized coaching program. So really I’d like to hear from each one of you, give me a call, send me an email.

Let me know what your personal practical plan is for life. What are you doing on a daily basis to grow personally and professionally? And if you’re considering a coach to help you in your real estate business, call us today. Go on our website, you can sign up for a [00:02:00] 45 minute free coaching session.

And how do you set these intentions for yourself? You spend time daily working on them. And why is it important to change them? Because when you change them, you’re going to make a difference in your family’s life and the relationships around you that you build. So before we go on any further, let me introduce our guest today.

I’m joined today by my good friend and real estate investor from Madison, Wisconsin, Chris Hake. Chris, you want to say hi to everybody?

Chris: I do. And I just want to say that dude that first part about the intentionality and coaching I’m in man. Sign me up. Where do I go?

Mike: Perfect. Just go to my website, Chris and download a free coaching session.

Chris: All right. Beautiful. I’m in

Mike: Chris and his family live in Madison. He’s a seasoned real estate investor. And when I say seasoned, seasoned, because we’re going to hear a lot of stories today, Chris and I have known each other for a long time. This formula though, that Chris is going to lay out works.

There’s a lot of people that talk about not being able to buy [00:03:00] multi-family property with nothing down. Chris and I are going to disprove that today. Chris leads the Madison REIA group, and he’ll talk about that at the end too today. So stick with us so that you know how to get in touch with Chris later on. Chris is going to talk about creative real estate investing in the multifamily industry.

You may have read my book, exit strategies and how that outlines a creative structure, but I put together a 450 unit deal in Dallas that some people thought was impossible to do. It’s a $15 million deal. We bought it creatively with very little money out of our own pocket. So Chris, we know that this is possible to do in the multifamily space.

We know that people can go out there and buy deals, no money down. Does it happen every day? No, it doesn’t happen every day. But Chris, what I want to start with today is I want to start with, how did you get involved in [00:04:00] real estate? Tell us about your backstory. What brought you to real estate?

Chris: Sure. Again, thanks for having me today, Mike. I always enjoy talking about stories and helping people that hopefully can further their education and knowledge in the real estate world. I got started back in the nineties, actually, probably in 1997, Carleton sheets, if you’re anybody that’s our age range Mike, Carlton sheets.

He was a big guy in the probably seventies, eighties, and nineties. And I bought his course, no money down, hundred bucks, Friday night, midnight watching it as I’m working for my W2 income and busting a hump working 60 hours a week, trying to figure out how to make it after getting out of school.

And I’ll figure out how to pay for stuff. And I bought that course, within 30 days had read the whole manual and went out and bought my first property. Literally no money down, just like the core set. And I’m like, holy crap, this thing works. And that was in 1997. And it was literally, I had, my [00:05:00] wife was pregnant.

We were having our first baby and I bought a condo is about three blocks from my house that I lived in. And that got me started. And literally within the first three, four years, I think we had almost 40 units 40 doors that we had purchased. And, I just started building at that point up until the early two thousands.

And I had a partner brought my dad in, I did the things that I needed to do to get the next deal. And it’s interesting because at that time, the early two thousands were a lot like probably 2012 to 2015, 16 in our markets. When I look at valuations and rising values. And that was about the same thing back in 2000 to 2002.

And unfortunately I look back and this is the lesson learned. I ended up selling all those properties because I had some partners that were doing some different things and they wanted to move in different directions. With 40 doors, I couldn’t buy them all out. And so I ended up selling, but that became [00:06:00] my track of what I did over the next 20 years in this business.

Mike: Yup. Okay, great. And Chris, to buy 40 doors in the first three years of being a real estate investor is pretty good accomplishment, not everybody goes out and does that type of track record, right? So that’s a big accomplishment. What was that like for you to have all those?

Because really there’s a lot of moving plates when you have 40 properties in different locations. That’s why we talk about multifamily so much because multi-family is at economies of scale, it brings those 40 units to one place. Simplifies your life a little, right?

Chris: Yeah. And I tell you, I broke all the rules when I bought all those. Because everything I teach today and everything I know today, when I hear people speak about buying, like you said, a big unit in one location all under one roof or buying smaller properties in a neighborhood or an area where there are economies of scale are much easier. I had 40 [00:07:00] doors in six different cities.

And I was a property manager and I was running my own company and I was running a multi-level marketing company and I had three kids. And so I was running, doing everything, trying to be everything, which we all know where that goes, and that becomes burnout and in the wrong direction. But I I ended up learning that leverage was king. That was 20 years ago.

So I was taught by the mentors and coaches that I went and flew around to different trainers and speakers. It was about leverage up, get that next property, create equity, whether it’s forced appreciation or natural appreciation. Change the rents, lower the expenses and refi, and always be at like 80%.

And I kept doing them. I did it really well, and it allowed me to put very little money in, but just leverage the great deals we were buying into the next deal until the next deal. And that’s why we were able to get 40 units in our [00:08:00] area in a three-year period.

Mike: Yeah, that’s a great accomplishment. Good for you. So with all that going on, it sounds like there was a lot of stress between family and business and running around. Is that what led you into the multifamily space or what really started to point you into that multifamily space?

Chris: It’s interesting because at that time I was young. I had a lot of energy. My time to me had no value. I didn’t know any better. And so I was willing to work more to try to make more and do more. And it’s absolutely not the way I live or what I teach today because I think I spent a lot of years with a lot of undue pressure that I didn’t need to have, but I just didn’t know what I did.

I didn’t have a coach, which is a whole nother conversation, but I didn’t have the right people in my life to lean on and to learn from at that point in time. And when I look today, and why I got to multifamily property over the last, probably six, seven years after the crash in between [00:09:00] 2012 and 2018, I was just buying, flipping rehabbing, wholesaling, single family homes.

And we were burning them out. We were making great money and yeah, it was just we created a machine. And at that point, I was doing that for the purposes of really painting down a lot of debt that I had occurred when the crash happened, because the crash hit me really hard in 2007, 08.

And so I was paying a lot of debts. I was getting debt-free and this is what I was being taught by my new coaches. And so when I got to about 2018, the realization was that I didn’t have any assets. All I had was a job. I was flipping properties and I was getting big chunks of cash. And it’s not that I wasn’t using it for good things, but I just wasn’t sinking it back into multi-family.

And so I went on the hunt. And the end of 2018, I got plugged into a multifamily syndication group that did a lot of teaching and training. And I just immersed [00:10:00] myself for about two or three months in learning, getting educated and actually getting myself a coach to learn about syndication so that I could get into something bigger. And that’s what led me to the 32 units that I have today.

Mike: So Chris, it’s interesting what you said, you know what I really liked the comment you made, that you didn’t know what you didn’t know. There’s those four quadrants. And if we had a board right now, we could draw them out. There’s the, didn’t know what I didn’t know.

Know what I know. Which are like opposites of each other. And then there’s the knew what I didn’t know. And didn’t know what I knew, and there’s those four quadrants and you find yourself in which space, and then you talked about coaching. So I think being in that place of didn’t know, what I didn’t know is a good place to be because you learn.

And if you’re willing to open yourself up, I always tell my coaching students to make sure you’re a sponge. Absorb everything you can. Go to every seminar, read every book, listen to everybody, pay attention, network. [00:11:00] Networking is so huge. You’re a coach. I know that you’re teaching your people, that you coach the same thing as well.

Chris: Yeah. I think the big thing is at heart, I’m a student. And I coach second. And I’ve always said that, and I’ve always been that. And then I probably will be till the day I die because I’ll never know everything.

Mike: Yeah. And that’s one of the funny things about real estate. People say, how come you love real estate so much?

I say, because it never gets boring. There’s always something to learn. If there’s never two deals alike, so it’s always different. So here’s what I’d like you to do before we go to this 32 unit, tell us about your first deal you did and what that was, the size and the dollar amount. And was that a traditional purchase? How did you do that deal?

Chris: Yeah. At that time, this was again, when I got Carleton sheets, this would be 97 and I had just gotten out of school. I had just recently been married. My wife was pregnant. I had a condo that I lived in and we barely were able to afford that. And so we were really [00:12:00] just getting by trying to pay college debt, my wife and I bought that course and I found a condo that was for sale.

It was in a six unit building and this was one of the six. And we ended up, I think buying it. Gosh, I want to say it was like $42,000. It was really cheap. It was 900 square feet, two bedroom, one bath, nothing flashy, no garage, just a basic unit. And I was pretty handy. And at that time, I grabbed my father because he had the credibility, which is a key point here. So I borrowed his credibility and his network. And then I borrowed my brother-in-law, who was also a handy guy who said, you know what? I’ll help you gut the whole thing and we’ll fix it up. And so the whole model was to, if we bought it for 45, we took no money out of pocket.

My dad was a banker and so he had the in road tracks to get us a loan to buy the property. We pulled out some [00:13:00] money for the repairs we did. My brother-in-law and I did the repairs and we ended up turning it around, refinancing it and getting more than the value of the property past the 80 20. Then we actually got money back at closing exactly what the course type, which was a crazy thing.

Because when I got done, I was a 100% believer. I just did it, it works and that just catapulted me. And so I was fortunate that I found a small one. I had to bring in partners because I had to do what I had to do to get it done. And so that’s a big lesson for a lot of people. I think a lot of people won’t get started because they were not willing to reach out and ask for help or leverage a joint venture situation or something to get the first deal done.

I was happy to give up 66 and two thirds percent. So just so I could get experience and get my 33 and a third.

Mike: And there’s a lot to be said that experience pieces can be priceless. So there’s your first single family house. Let’s fast forward. How about your first [00:14:00] multi-family deal?

Chris: So that was actually, the first deal was a condo and then we bought three duplexes, like within nine months. They were all in the same neighborhood. And from there, once we had those, we increased the value and the market was going up. And then we found an eight unit building. And so we went from a condo to three duplexes, to an eight unit and then to a 10 unit.

And then I bought another eight unit. And so we just started scaling up, finding bigger properties. But we never got anything bigger. At that time, because we probably would have kept going. But when my dad was at the point he wanted to retire. And then my other partner at that time was wanting to go a different direction.

Everyone said, if you want to buy a sell, great. And at that point in time, because I was leveraged, I didn’t have the ability to buy all my two partners. And I had another opportunity come up on a big resort development project. And so I shifted gears again. I didn’t know what I didn’t know. I didn’t have anyone to say, [00:15:00] man, you did all that work for three years to get that portfolio, figure out a way to keep it.

And I didn’t do that. And I still drive by those properties every week, every month, every year. And I see them and I go, yup, that was mine. That was mine, man. I know what it’s worth today. So that was a lesson learned. I didn’t have the right counsel. I didn’t have a coach or someone to help me see what I couldn’t see.

Mike: Yeah. A good coach would have helped you see something different. So let me ask, did you really buy a 32 unit apartment complex with no money down?

Chris: I did with seriously not a nickle.

Mike: So tell us how you did that and how you went about that?

Chris: So I think when you want to do something well, you immerse yourself and you go out and do the things you need to do to get yourself really dug in, get educated and get help, which is a coach in this case.

And I already knew this. And so when I made the decision, I want to buy, go buy a property, I need to [00:16:00] understand that world from a bigger sense. Cause I didn’t want another four or eight unit. I wanted something bigger, but I was looking at anything from, like 24 units up to a hundred.

That was the range I was looking for. And so I started going to these classes, online virtual summits and investor summits. And then I hired a coach out of Arizona to help me create a pitch book Because I just saw that was a piece that if I really got that I could zero in on my market to go out and promote.

And as I was doing all that, I started creating my pitch book. This is all like within a three-month period, Mike.

Mike: Can we slow down for a minute?. I just want to back up. Some of our listeners might not understand what a PitchBook is. Chris, would you explain that real quick?

Chris: So the PitchBook was a document that would allow me to have a conversation. Really money people was probably the number one reason I built it because I knew if I was going to buy something in the 24 to a hundred unit range, we’re talking millions of dollars [00:17:00] and I’ve got a lot of good contacts and I can go find private money, but I knew I would need it at a bigger level.

And so the pitch book was really my opportunity to do all the due diligence, all the research, put it into a concise, simple, easy readable 15 page documents that I could hand to anybody in a conversation, a coffee meeting, whatever. And they would know exactly what my criteria is, what I’m looking for.

Who’s my target renter. Where’s my target market and what’s my target property type. And so it was very intentional. And so that’s what I learned going through to a three-day investor summit. I walked away saying of all the things that I heard, all these speakers talking about, something about the pitch book that I felt, that’s the piece I don’t have because I’ve never really researched any deeper.

So the pitch book to me was nothing more than an overview and approved to anybody that I knew what I was doing. I had done the [00:18:00] research. I was very focused. And this is what I’m looking for. And when I find it, that was a tie with either private money, a general partner, limited partner.

Mike: Yep. One of the things I teach my students about pitchbooks too is they come in two forms, right?

You got the first pitch book, which is just about you and who you are and what your goals are and what you’re trying to accomplish. That’s the piece where you’re just trying to sell yourself. And then the second form is the one where you put the deal with it. And you say.

Chris: So I did the first one, what you just mentioned. And then the second one I built was when I got the 32 unit. And then I’d build that packet. And then that’s what I took out with all the real numbers and everything.

Mike: So even a new investor really needs to have that ability to put together that original PitchBook and carry it with them all the time. And be able to sit down on their iPad or their iPhone and say, Hey, here’s who I am. Look at here’s the picture.

Chris: Yeah.

Mike: So go on. Now continue on when we were with the 32 unit.

Chris: So this was in the December of 18. And literally I started working with a coach [00:19:00] and first couple of months in 19, 2019. And I started having conversations with people now. I wasn’t very intentional when I would talk to my realtor network and my banking network that I already had.

I was telling them, Hey, this is what I’m looking for. If you see anything, this is what I’m looking for. I’m a buyer, I’m looking specifically for this. And crazy enough, you start put it out there. And one of the guys I’ve known for probably 15, 20 years, we talk a couple of times a year, he’s a realtor.

We’ve done investing together, little deals. He called me out of the blue and he said, Hey, let’s grab coffee. I just want to catch up with your first of the year. This was 2019. We met for coffee and we started talking about what each of us are doing. And I mentioned, I’m looking for a multifamily, finish that appointment.

About four days later, he calls me and said, crazy timing, but he goes, I got a property and it’s literally right across the street from your office. And he said, it’s 32 units. He goes, it’s in rough shape. But he goes to insert in something like that. I’m like, dude, I’m in, let’s hook it [00:20:00] up. And so he called, he had a personal relationship with the seller on a previous deal years ago and this guy’s a Digger.

And so he started making inroads to find out how can I get Chris the deal because he gets paid on commission. And so he went out and found it. It wasn’t listed, it was off market. Literally, the transaction happened from the day of my coffee meeting and the getting that phone call from this third party to literally within seven days I had it under contract. Yeah, it was crazy.

Mike: It’s amazing though. Here’s what’s really amazing about this is, I always talk to people about building a network and how important it is and people say should I have one broker? Why would you only have one broker? Five or 10 brokers around you that you had coffee with once a month or every couple of months where you built those relationships.

When something like that comes up, they’re going to keep you in mind. You just had coffee with him. Four days later, he’s got a deal all of a sudden. [00:21:00] So it’s funny how that works, but that’s the power of network and the power of networking.

Chris: Yeah. And I think people say, man, that was lucky timing. I’m like, not really because my whole aura, everything I was doing for a two or three month period was I was laser lock stepped in and doing a multifamily syndication.

I was looking, I was talking to everybody and Doug was the guy and he’s the one who brought me the relationship. And he profited from it and did his job to help me secure the deal. And, we worked together on it and it was great. It worked out for everybody. The seller was happy and everyone worked out.

Mike: So you said, you were laser focused on doing a multifamily syndication. Again, some of our listeners might not know what a syndication is. They might think that you’re into syndicate, but you might want to explain that a little bit.

Chris: Yeah, no, that’s good. So syndication is basically when you’re bringing others to the table, it’s not me with a war chest of dollars and I’m [00:22:00] buying it all by myself.

I might bring in a couple of other people that there’s two terms, general partners and limited partners who have different roles in a syndication. But a normal deal, right by duplex. It’s me buying it a hundred percent. I put the money up or I leverage it. I do whatever I do.

And it’s just me on the deal. But a syndication on my 32 unit, I have eight people including myself that are part of that entire deal. And so there’s a lot more moving parts. There’s a lot more things that you definitely want to have a securities attorney. I’ll just say that again and again, because it was definitely a member of my team that I wanted to make sure that everybody knew everything that was going on and where all the money’s going.

And so that’s the role of a good attorney, a securities attorney. If you’re doing something bigger. And so that was the first guy that I called when I did this. So again, Mike as part of that team, I’m always trying to connect the dots for when some day happens and I need those folks in my life.

Mike: Yep. Good for [00:23:00] you. So all of a sudden now there’s this deal shows up, you go look at it. What was your first reaction?

Chris: I was super excited because I already, because of all the research, because of the pitch book, in my market, this is a BC type property, meaning classification wise. It was a C neighborhood that I know that the neighborhood was going upward with regard to infrastructure and everything around the roads and new construction and buildings going.

People were buying multi-families in this area over the last 10 years and really turning them around. So this used to be definitely a C, even a low C neighborhood. But by the time I bought this particular owner was still in the sea world and the rents were low, but the things were moving towards the upper Cs low Bs.

And so I knew there was an opportunity there. The per door unit costs of a deal in our area [00:24:00] about a year ago was anywhere from $80,000 to about a hundred thousand dollars per door. If you just run rough numbers. I buy a 10 unit, it’s a hundred thousand a door I’m going to pay a million dollars, the simple math.

And so when I found this deal and I found out that price range of where I would be, I got into this deal at $56,250 a a door as is. And so I knew at that price, even with some of the repairs I had to do and then, and I’d been in the rehab repair world forever. So I have contacts. I knew I could do all that stuff.

Even all in with everything fixed and done in my projections, my top dollar was going to be 65,000 a door all in when it’s totally done and completed, which is par to where I’m at today. From looking at when I purchased it 11 months ago.

Mike: So one thing I just want to narrow down in your market, what is the average cost for a B class property in your market?

Chris: Again, that you’re paying a hundred thousand dollars a door. [00:25:00]

Mike: So you’re in below market costs on this deal, even after your repairs and your all in cost. So there’s a big spread there for you. So tell us about that letter of intent, that original offer going in to buy this thing. Did you walk in the door originally saying, Hey, I’m going to do no money.

Chris: No. It’s really a great story how it all unfolded because as I mentioned, I was trying to learn everything I could about multifamily syndication. I’ve been.

Mind you, I’ve been a flipper or wholesale or whatever for 20 years. And so my mindset just runs in that circle. I think about that when I borrow private money to buy maybe a property, I’m going to single family home rehab, but my mindset is how we’d been there. And then I get into this multifamily world and I start listening to all these experts and everything is syndicated, general partners, limited partners.

There’s all these moving parts I don’t speak the language. And so when I went into this deal, I knew I was going to have to bring money in. And so my mind was I’m going to need to [00:26:00] borrow X dollars. I always look at a deal that I’m not going to bring any money in. I’m always trying to creatively structure something.

But the deal has to be good to do that. Because in essence, that means I’m funding it a hundred percent or more if there’s repairs and with me not having anything. This particular one, when I met with the guy and my realtor partner who found the deal, we were told there was nobody else looking at the property.

And that’s why I told them, I said, we got to move fast on this. And I literally within 24 hours after me and the guy, I had written an offer to get to him. And we got him the offer and it was literally a full offer. It wasn’t a letter of intent. It was a full-blown offer. And we ended up meeting with him two days later for costs to talk about the offer and go through it. And then we found out at that meeting, this was a Friday morning at 10 in the morning at a coffee shop, myself, the guy who turned me onto the deal, who’s a realtor. And then the seller, and we’re talking to him thinking, we’re going to get this sucker sign because he’s the only [00:27:00] owner.

So he controls the whole thing. And so he can sign on it and we find out there’s another offer on it. And I’m like, oh, it was just like a dagger. And because we had asked and talked about that and it never come up in conversation. After asking more questions about this other offer, what we found out was that it was a verbal offer from the guys who bought the property 32 units across the street.

And the story goes way deeper than that, but let’s just say, he had an offer from them. For no number other than they’ll just tell him what he wants and they would pay it, crazy. This was a much bigger deal. I call it David and Goliath. This is my David and Goliath story. And so this was definitely Goliath.

They own a bunch of properties. They have property management. They have guys who come in and pay cash from overseas and bought this property with cash but I never even saw it and they’d been rehabbing it. So it was a great comp identical buildings. And so they were in communication with this [00:28:00] guy.

And so we left that coffee meeting, Mike, and I felt powerless because I built a relationship with a guy. We built, we gave him a solid offer. He even said the offer was fair. I think he enjoyed our conversations and meeting. And the guy who turned me on to it had a good relationship with him.

So we had a pretty good relationship, but this other guy was just out there. Muddying the waters that he could maybe be a player. But he didn’t have an offer on the table. And so this is what I did, and this is what I feel turned the whole thing around. I went home and it was about 11:30 that morning.

I got home and I remember talking to my wife and she’s Hey, how’d the meeting go with their seller. Did you get it? And I said, there’s another potential shooter. And I said, we didn’t get anything done. And I said, these other guys are the Goliath man there. I know they would pay hundreds of thousands of dollars more.

I know they would. And it’s still a good deal. You could’ve paid another couple of hundred grand what I bought it for. And she’s oh, and she’s what are you going to do? And I said, I guess I’m just going to sit and [00:29:00] wait for him. He told me to get back to me and blah, blah, blah.

And I got thinking about it. And about an hour later, I sat down at my laptop and I thought, you know what, I’m going to type this guy up a letter. So I typed them up a long email and it was basically the story of David and Goliath. And I basically, she and I were David. Like he was just a Joe Q public dude.

And I already knew about his family. He knew about my family. I knew where his kids went to school. I got all this stuff in our initial conversations. And so I just really related the two of our lives together with me growing. And this is a legacy for my family and my boys and his boys.

He’s all in this and the whole thing. And I said, I kept the story about it. Wanting to really work with him as another David and and then there’s this Goliath, they come bull in a China shop and they think they can buy anything and blah, blah, blah. And I sent a big picture with my family from the lake, last year and on a sunny day and, introduce them to that.

And sent it out and [00:30:00] literally an hour later, he emailed back and he’s man, I really appreciate your letter. And I’ve been thinking all about this and he went into a whole bunch of other stuff, but at the end of it, the very last line was, I really liked the offer and I think we can do business.

And that’s how it ended. And I’m like, holy crap. I go, that’s awesome. So the next day that was Friday, probably five o’clock now. Saturday morning, I was in the office and my realtor guy called me and I told him what had happened. And he said, I called him and I said, Hey, what’s going on? What’s going on? And my realtor, the guy who brought me the deal, he really went to battle.

He did a great job. He called the guy. And he said, let’s do this thing. And he literally drove over to his office, the seller and got the offer, got assigned, brought it to me. We signed off on everything. And by Saturday it was done and Goliath was gone and David was victorious.

Mike: The original offer was a no money down offer?

Chris: No, actually it was a 80% [00:31:00] financed and a 20% down payment type offer. Because I figured I would just go raise the private money limited partners. I would go find, I think I needed a 650 grand from whoever. And I had no idea where I was getting it. I just knew I would find it.

Mike: All right. Before we go on, I want to back up for a teaching moment here.

And the teaching moment was that, this David and Goliath story, you went to the seller, you didn’t plead to the seller but what you did was you built a little bit of a relationship with the seller. Because you knew somebody else. Sometimes that’s really important in this situation.

There has been times that I’ve told the other broker, let me talk to this seller.

Chris: Yeah.

Mike: And once I think sometimes that you convey who you are and what you’re trying to accomplish to that seller, you are more in a better position where that seller is more a natural reluctant, right? And they want to work with you.

That David and Goliath story, there’s a lot of other really good stories and analogies in that same [00:32:00] book that we can use in life. And through a lot of this.

Chris: Oh yeah. But anyway.

Mike: So you wrote this offer 80 20 deal. You were going to go get some limited partners, put together a syndication and what happened?

So this is

Chris: where things got interesting because I knew the numbers look good debt coverage ratio, which is the banks measure of is this property going to allow for them to pay us back, even if there’s a little bit of trouble. And so the numbers were good. It was over 1.2. We had property management, the property management company is top-notch.

And so the banks knew who they were. So that was solid. But I knew I wasn’t bankable for that entire loan. I knew the bank wanted in our market and a new loan like that. The banks were wanting to see enough coverage from a credibility portfolio standpoint assets with the general partners themselves.

I knew from day one, if I found something big, I was going to have to bring in somebody else, maybe [00:33:00] two people, but one for sure. And so after I got the offer accepted, I was on the hunt for those general partners for the money. And so my first track was, alright, I knew I needed 650 grand, 650 grand would pay for the down payment and pay for all the upgrades and repairs for the next 12 months.

Mike: Okay.

Chris: And basically cover the attorney fees. Cause I spend 15 grand for my securities attorney to make sure everything was going to be great. And all the other miscellaneous costs that were associated. So literally a hundred percent I’m like I’m going to borrow all the money because the number still worked for the bank.

So the first challenge was I started meeting with banks and I started bringing this deal to them and I got the door shut in my face, every single bank, literally one after the other, because my first question to them is, are you willing to work with me? And are you okay if the 20% doesn’t come from me?

And they’re like okay, where’s it coming from? And [00:34:00] I said, general partner or private investors or wherever it’s coming from third party. And most of the banks are, no, we don’t do that. Nope, we don’t do that. No, that’s not going to work. And so I just kept getting nos as I went through banks and I knew from my mindset is I’m a flipper and a rehabber and I do this stuff all the time on $200,000 homes, but this was a $2 million deal on a 32 unit, commercial, blah, blah, blah.

And so as I’m continuing to talk to banks, I’m also meeting with private individuals who could stroke a check for 650. And now I’m trying to create a partnership of how much percentage for the money in. Is there an interest rate?

Is there an equity position? What is someone going to need? And I spent with one gentleman who could write a check for 650 I spent almost every Sunday for a month, hours at my office, going through spreadsheets and meeting with property management companies and a friend I’ve [00:35:00] known for 25 years.

And he really loved the deal and the whole thing. And here’s the long and short of it is, I spent so much time going through that, that what happened was by the time it got towards the hand and we were close to trying to connect something. His counsel and his I guess attorneys or other folks that he was working with, it basically came down to he’s taken all the risks and I’m taking none and I’m basically I went out and found the deal.

So I should probably just get a small fee and then turn the deal over to him. And then he would go get the bank loan and bring in his own 650 and he keeps the deal and I get maybe five or 10. And so when that day happened and I’ll still never forget it, we’re sitting in my office and we were getting to the end and I’m like, and I won’t mention names, but I kept asking him, are we there?

We’ve done all this homework and everything looks like we’re on target. And he pulls up his phone and he’s reading and you go. I got this email from my attorney. He goes, I don’t know if you’re going to want to read it. And I’m like yeah, I want to read it. [00:36:00] Then he showed it to me and I read it.

And it was basically the attorney saying I bring no value to the equation. I did nothing more than a finder’s fee. His client’s taking all the risks and that he advised his client. There’s no way you should go down this road. Just give them a fee and then if not, then walk away. And I’m just like, I was devastated because I knew in my heart, there was the deal penciled in no doubt about it.

And I was frustrated. And so what that did is it turned me to thinking changing mindsets at that point, this is almost two months into the deal. I’m already going to be late on closing. I still don’t have things in place with the bank. I had to start extending and pushing all the closing. So there’s a lot of learning experiences in here that things went right, and things went wrong. But the long and the short of it is, I shifted my mindset of trying to figure out a way that I could use the methods that I use for private money, where I just raised debt.[00:37:00]

As simple as that I wasn’t trying to create equity or try to get percentages and any of that. I finally went to my investor pool and said, look, I’m paying 8%. And there’s no equity, it’s just debt. I’m looking for 650. And literally within five days, I raised it all from my original people that I didn’t go to any of them, because I didn’t think anything of would be a fit for it because I was learning for how to syndicate from the experts.

And so I was taking everything I learned from them and going well, this is the way it has to. What I did is I shifted the way I did the deal at the end. And ultimately long story short, found a bank who said, yeah, literally I still remember sitting with the president of the bank. He’s sitting across from me at the big table and he’s, so I just got to tell you, I don’t understand your deal.

And I’m like, okay what don’t you understand? He said, so you’re not bringing any money in. I go, no. And he said, so you want us to land 80% [00:38:00] on the 1.8 million? I go, yeah. And he said, and the 650,000 you’re bringing in, it’s not yours. I go, no, it’s from other investors who are investing in me, private lenders.

And he said, okay. And I said, is that a problem? And he said the numbers work. He goes, I got to tell you it’s pretty kick ass. And I go, oh. And he goes, I gotta tell you, I’ve never done a deal like this. And I said, so does that mean we’re going to do a deal? Is it work? And I said, he goes, if everything pencils in, like your said, which I’ve looked through it, he goes, the numbers work.

He said, yeah. He goes, I’ll get back to you whatever tomorrow when he did. And he’s yeah. As long as you have general partners to have enough paper where we can look at your assets and go, yeah, we’re comfortable that you guys can make good if something goes bad.

And so what I had to do, Mike is long story short. I brought in five investors for 650 grand. I’m paying simple interest, 8% on their money, [00:39:00] no equity. And I ended up finding two general partners to come in and sign on the dotted line with the bank loan and the other loans. Four or 5% each and they didn’t bring in a nickel. I just gave him 5% of the whole deal perpetuity forever.

Mike: So your ownership in the deal is 90%?

Chris: 90%.

Mike: You have 90% ownership in the deal because you didn’t give up any equity to the private investors.

Chris: No.

Mike: And you only gave away 10% because they signed, they helped you sign to guarantee the loan.

Chris: The guarantors.. Yep. So they were guarantors. Yeah.

Mike: What a great structure. Okay. And it’s amazing to me that you could sit back with a banker who’s never done a syndication or who has never seen this type of a transaction. And not only the one you sat with, but the others before you even put the deal there.

Chris: All of them saw me as somebody having no skin in the game and I didn’t have any relationships with them. I had never done a deal. These are all commercial banks that are doing multi-family and not one of them [00:40:00] would, I never got past a lunch meeting or a coffee meeting with them.

Mike: You only had 25 hours of Sundays in with some guy who you know.

Chris: Yeah. It’s interesting now is we’re 11 months down the road. And I am in the process of refinancing. So I got a three-year loan on the original a three year, 25 year am. And the interest rate was way too high. It was that almost 5.6% at the time I got it, which everyone that I knew was getting loans way lower than that.

But I was so happy that I could get into a deal that I could do it with no money. I was willing to pay a little higher interest because a bank believed in me. And now we’re going around the other side. Now that we’ve raised the net operating income, literally $50,000 in the last 10 months, I should say my property management company.

They’ve been doing an awesome job. And now we’re going to refinance. We’re looking at three and a half percent for five-year with a 30 year amortization. And I’ll be able to take out [00:41:00] all my real estate and fester as my private money, and then still be able to have 90%, have my two partners at five and five. And our cashflow first year should be 50, 60 grand a year.

Mike: Awesome. Chris, it sounds like that was really a great deal to put together and we’re about to the end here. What I would like you to do is I’d like you to tell people how they could get ahold of you. You run the Madison REIA group.

So if anybody’s in the Madison area listening to this today, they can definitely come to you for coaching and come to your group. And anybody else who wants to call you, why don’t you go ahead and tell people how they can get ahold of you? If they have any questions or want to talk with you.

Yeah, just

Chris: my full name, Chris hake. And that’s chrishake@gmail.com and shoot, if you want to call me, I’m happy to have a conversation. 6 0 8 8 5 2 4 4 0 3. And I welcome anybody if you’re ever in the Madison area look [00:42:00] up, but you can see it right there in the back. Madison REIA, madisonreia.com check out our website. I’ve been doing that for eight years and we’ve got 350 members and it’s awesome association if you’re in our market, come on in you’re my guest for checkout.

Mike: No doubt. You have some really great events on that stuff going on and that’s for sure. Chris, I want to thank you for your time this morning, and for being a part of this and sharing all your knowledge and information with our listeners. And for anybody who wants to try and get ahold of us, we’re at mycoreintentions.com.

We’ll have Chris’s information posted on our website after this, and feel free to give us a call. If you’re looking for coaching, you can go sign up for a free coaching call and we’ll see what we can do about planning some structure for you. Thanks and look forward to talking to you all soon. Have a great day.

Chris: Thanks Mike, see you guys.

Kristen: Thank you, Mike, and thank you for joining us for another great [00:43:00] episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing in property management.

We’re looking forward to having you back again next week for more Insider Secrets.