Table of Contents - Leap Frogging into Multifamily Properties with Michael Blank
Dave Debeau [00:00:09] Hey, everyone, this is David Debeau with another episode of the Property Profits Real Estate podcast. And today I've got a special guest on the call, and that is Mr. Michael Blank. Michael, how are you doing today?
Michael Blank [00:00:21] I'm doing great, Dave. Thanks for being here. Thanks for having me on the show.
Dave Debeau [00:00:24] My pleasure. So I'm calling in from beautiful Kamloops, British Columbia, Canada. Where are you located today?
Michael Blank [00:00:29] I'm in Northern Virginia, outside of Washington, D.C.,
Dave Debeau [00:00:32] Washington, the beautiful area. I've been to Baltimore several times, watching a few times. Nice area of the country, that's for sure. So if you're not familiar with Michael, Michael is a very, very sharp, astute and experienced, successful real estate entrepreneur, trainer. He's a coach and he focuses on multifamily properties. And his claim to fame is helping people get out of the rat race to achieve financial freedom and three to five years from investing in multifamily property. So that sounds really good to me. Michael and Multifamily are my one of my favorite real estate investing strategies as well. So I'm really looking forward to chatting with you today.
Michael Blank [00:01:12] That's great. I'm looking forward to it.
Dave Debeau [00:01:14] All right. So, Michael, let's just jump in and tell us a little bit about what sparked your interest in real estate investing in the first place.
Michael Blank [00:01:21] Well, it's like so many people. We're sitting there wondering, what are we going to do with ourselves? We've been working 15, 20 years and we're like, we can't do another 15, 20 years. We're missing. Our kids grow up. And this is where where we're thinking about a solution and we pick up rich dad, poor that and like, oh, that's what we want to do. We got that's what we need, financial freedom. And then maybe we're thinking real estate. And it's like so many people send income to passive income. And so like so many people, like I have the first thing you think of a single family house, investing, rentals, flipping, wholesaling, that's what everybody else teaches. That's what everybody at the local real club does. And so therefore you gravitate. And that's what I did, flip three dozen houses in three years and and made great money. And but but then I got into accidentally got into an apartment building and not after the purchase, not very exciting. But it was it was sending me this mailbox money. And meanwhile, I'm flipping and flipping and flipping and busy, busy, busy. I'm like, man, this is not really what I wanted. I didn't want to be a I thought financial freedom and real estate investing were the same thing. And it turns out, my gosh, they actually aren't. And so I paid attention to this and said, hey, I got to do more of these these apartment buildings and less of these house flats. And that's kind of when I started shifting my strategy. And as I got through into into blogging about this and doing the podcast, I discovered that a lot of people, the majority people, when they think investing get start with single family, house investing, nothing wrong with that. But then they silently shift the apartment buildings and then quit their jobs in that way. I was like, that's interesting because that's that's my my journey as well. And that's when I started paying attention to the fact that, hey, maybe apartment building investing is actually the most direct path to quitting your job. And it is. That's my conclusion now.
Dave Debeau [00:02:59] Well, that's really interesting. So what do you find with your students? And I understand that every market is different, every property is different, et cetera, et cetera. But typically, how many multifamily properties or how many rental units or doors do they need to have to be able to quit the job?
Michael Blank [00:03:15] But typically, it typically comes down to two or three deals. That's it. And a size almost doesn't really matter. Meaning that if if you're if you're trying to replace four thousand dollars of income, you're you're probably going to start with a smaller building. But if you have more, you can start with a slightly larger building. But what's interesting, Dave, is this law, the first deal says that if you get into a multifamily of any size, the second or third one will follow in rapid, almost automatic succession. And so really what happens is that first one is the smallest, takes the longest and the hardest to do. And then what happens is a snowball effect. And the second literally comes automatically. You'd have to expend more energy not to do the second deal than to just go with the flow. And so if I can just focus my resource, if I can help a person do their first multifamily deal, I know the second or third will come automatically, even if that first deal is a duplex.
Dave Debeau [00:04:07] Interesting, very, very, very cool. All right, so you kind of answered this already, Michael, but what would you say with you, with your experience is one of the biggest mistakes people are making when they when they get involved in real estate. Is it focusing on these little deals instead of just jumping right into bigger ones?
Michael Blank [00:04:23] It's not so much the little deals in the beginning, I thought go big or go home. I no longer think that. But it's this mindset. So someone just because someone buys a duplex does not mean that they're approaching it from a multifamily mindset. But you can have a landlord, a single family house landlord get into a duplex or even a quad with a single family mindset. And it's different. If someone approaches it with a multifamily mindset, they will consider the duplex as a stepping stone. And what happens is if you start with a duplex, the second deal will be a 10 units. The third deal will be somewhere around 20 or 30, and the deal after that will be around between 50 and 100. Right. So pick your favorite entry point. Doesn't really what was the biggest mistake? The biggest mistake people make is that they dismiss multifamily as an advance strategy that they will get to after a decade of single family house investing, after having saved up a bunch of money, they will then graduate to multifamily. And it's just not true.
Dave Debeau [00:05:17] Well, OK. Well, I mean, because that seems like common sense. So why is that not true?
Michael Blank [00:05:23] Well, for a variety of reasons. And I thought this was the case as well. I would call a broker. I flip three dozen houses, I would call it the broker said, hey, broker, I'm Michael. I'm demand. What deals do you have? And then like, well, high demand. Why don't you tell me how much how many multifamily things you've done? I said, well, none. But look at all the houses that flipped. Right? And I got like, no credit at all. So I was like, oh my gosh, I just couldn't believe that I didn't get any credit for the stuff I've done. And then I compare that to people who bypassed single family house investing entirely. And what I see them doing is after some education, their language is sound, some more sophisticated. It sounds like they're speaking the language. Their confidence is a certain their skill level and confidence are certain place. They've built a team around them all following kind of these best practices. And now they're able to get into a multifamily just right from the start and now they're on their way.
Dave Debeau [00:06:15] Nice, nice. I love it. So you're a big fan of Robert Kanzaki. He wrote a book a few years ago called Your Unfair Advantage When it comes to real estate investing. Michael, what do you think is your unfair advantage?
Michael Blank [00:06:27] My unfair advantage is interesting at this point. I would say it's probably a system. It's a system for getting started with multifamily and it starts with the foundation of education and then a focus on building the skillset of analyzing deals and then building on that. Right. And how do you go about reaching out to brokers by building a team, especially a systemize approach to getting started with this business? And the key is, is really overcoming that lack of experience. And the key is learning the art of raising money. That's really the focus of the system. And once you have those two or it's lights out, because now you can overcome your lack of experience by a little bit education, it doesn't take long. Like within 30 days. You're talking a language. You know how to analyze deals is amazing. And you can learn to raise money, which is just a huge aha moment.
Dave Debeau [00:07:21] So, Jeffrey, I want to talk to you about raising money, but before we jump into that, I know we're here up here in Canada, especially in the bigger centers like Vancouver and Toronto, it's very, very difficult to find a multifamily property for sale and B, find one that makes sense financially after you've analyzed numbers. So. Do you or your students invest much outside of your own backyard
Michael Blank [00:07:46] all the time like we assume it now, the vast majority do, and then there are some few individuals who are lucky. They're living in a market that actually happens to have any kind of cash flow. But the majority people are exactly in your shoes. No one is investing in their backyard.
Dave Debeau [00:08:00] Excellent. All right. Very good. So you touched on one of my favorite subjects, which is all about raising capital for your deals. Before you give us a few tips about that, how did you kind of fall into that yourself or where were you doing that? When you're doing your flip deals or you self-financing, how did you get into raising capital?
Michael Blank [00:08:17] Yeah, it started with that. And so just a quick background. I have a software background which I felt prepared me very well for real estate. And through that I was part of a software IPO which put a bunch of money in my pocket, which was great. So I was again, demand. And then I read Rich Dad Poor that it completely ruined my life because I decided to to take all this money and get into a cash flow business. I'm getting I'm getting to the point of where I ended up with no money. So I got into these restaurant business is that was my cash flow, my my passive investment. Long story short, I subsequently lost my IPO millions and I clawed my way out with with real estate. And so when I this was after the recession, I had none of my all my money was deployed at that point wasn't completely gone, but it was deployed. I had none of my own capital left. So I had to raise money. And I started by simply by talking to friends and family. And someone was dumb enough to loan me twenty five thousand dollars, you know, it was like 12 percent interest, six, six months. And it was for house flipping. And I was like, holy moly, I can't believe I can do something without my own money like that was that blew my mind. And before you knew it, we had we had raised a million dollars and we're buying two houses a month. And it was just a and that's also how I got into the apartment buildings. And so having done this is what entrepreneurs do, right? I mean, not to make something happen out of nothing. And that was a perfect example of that. How how can I do something without my own money? And I'm actually providing a return for investors and I'm giving them cash flow and I'm giving them advantageous tax treatment. So I'm actually serving them as well. So when that happened, that was a huge light bulb moment for me.
Dave Debeau [00:09:50] That would be huge. So like a lot of people are going to be listening to this or watching this interview and they're going to be doing right. That sounds good. This guy's you know, he did a big in the software industry, raised a bunch of money for a business to raise money for Flip's. It's easy for him to do this kind of thing. What baby steps would you give to somebody who has never talked to anybody about investing their deals? What what kind of tips would you give them to get started now?
Michael Blank [00:10:18] The first thing is you do have to educate yourself to some degree now. And I think at one point you have to you have to start investing in yourself. But there's soul. There's a lot of free resources out there as well where you can actually educate yourself for either free or for very little little money. But you have to educate yourself a little bit because you have to appear knowledgeable and confident when you're talking to other people. And my other advice is not to go out and raise money. My advice is to simply share your enthusiasm with people in an intentional way. So instead of you javin about the weather or sports or politics, which can keep you busy for four hours, you share your enthusiasm for this cool apartment building thing. You're getting this apartment building thing and you have these, you know, investment opportunities, big investment. Fifty thousand dollars and the return is ten to twelve percent. You're really excited. You have a mentor. You're visiting a property, doing all this cool stuff, and all you're doing is sharing the enthusiasm. And people kind of are drawn to that or not. And the ones that are you continue the conversation and some of those people might end up investing with you, but it's really more of an intentional relationship building and really just blabbing about your investing escapades, everyone you come across.
Dave Debeau [00:11:24] Yeah, I can't remember the exact expression is, but the air, it's all about the energy, right? Energy is what is transferred to the person of the highest energy is the one that's going to accomplish what they want. Yeah, most definitely. So, Michael, I know that you've been so when what did you kind of jump into the whole multifamily field in the first place? What how long ago was that?
Michael Blank [00:11:47] Well, when I quit my job in 2005, I decided to do everything at once. I learned to stretch stocks and options. I flipped a house. I got into the restaurants. I took an apartment building bootcamp. I learned how to negotiate short sales. It was I was like a sponge. I was like a financial freedom sponge. And so so I actually got into into apartment buildings in twenty six and I was the time. I live in Northern Virginia, D.C. and I was looking in Texas at the time that was a market and I had a verbal agreement after having looked at about one hundred and fifty deals on our eighty two unit and College Station, Texas, and I put a bullet in that because I was so knee deep in the restaurant. I said, I can't do both. Now, in hindsight, I probably should have put a bullet in the restaurants, not in the apartment buildings. That would have been much better off. But so that's where I got into it. I got into it then and hot and heavy in 2010 and 2011.
Dave Debeau [00:12:39] Very, very interesting. All right. So, Michael, I know that you work with a lot of people and you put on you put on events and training and all kinds of stuff. When when you're working with somebody, what do you what do you think is the biggest problem you help them solve or what he saw for them? What's the biggest challenge? Most of your clients are students are are having that you help them to overcome.
Michael Blank [00:13:01] David, depends on what stage you're coming to me. If you're signing up to a mentoring program, you've already decided you're going to go multifamily. Right. And so if you're coming if you're coming with that kind of mindset, you're looking for knowledge and skill and confidence and support at that point. But if if you're like most people, you're not there yet. The biggest problem we're solving is getting someone to consider multifamily as a strategy when they're thinking, hey, I want a landlord for the next five years, I'm going to flip houses are wholesale. So it really depends on what stage, what stage a person is in.
Dave Debeau [00:13:32] Yeah, I know that makes a lot of sense. So if somebody just kind of tiptoeing around the idea of getting into multifamily investing, you have any kind of resource or freebie that you can offer them.
Michael Blank [00:13:45] We have a we have a bunch of freebies, so we have a free e-book called How to Raise Money to Buy Your First Apartment Building. That's a free ebook. We have a YouTube channel, podcast, blog articles. It's really all intended to help people decide if multifamily is right. I have a book that I published last year as well where everything is kind of in the same it's on Amazon, everything's kind of kind of together. So I think the first step of all the free resources is really to, hey, is this is this right for me? Like, what would it look like if I did this? What's it like to raise money? What's it like to analyze deals? And you kind of get a feel for for the for the business. And I think the biggest important thing is just to have an open mind and not dismiss it because of what you think you know about about keeping an open mind. And at that point, if someone says, oh, my gosh, this is actually really interesting, I see how I can do this. I see how I can overcome lack of experience and how am I able to raise money. At that point, one might consider investing in an education. And we obviously we have programs, but a lot of other people have programs as well.
Dave Debeau [00:14:43] And if people want to find out more about you, Michael, what what should they do?
Michael Blank [00:14:46] Sure. Our website is the Michael Black dot com. That's Michael and black dot com or just just search apartment building, investing in and you'll come across me
Dave Debeau [00:14:57] now for sure. Excellent. So, Michael, from all your years of experience, especially focused on on investing multifamily properties, what would be one really good actionable tip you would give somebody to get started in that direction?
Michael Blank [00:15:12] So I think the biggest actual tip is to gain clarity. This is kind of wishy washy and has nothing to do with tactics. And sometimes I get asked tactical questions and I'm happy to answer them all day long. The problem is it doesn't really help someone get to where they want to go. So I've come to conclusion that the biggest actionable step is to gain clarity. What does one want in life? Do they want to quit? Their job is so why? What is it that they don't like? What is it they want? And then getting clear about that path, because if people were to do that, number one, they may not do a single family house investing strategy. They may or may not. It depends. And also clarity allows them to be very clear in what action to take because someone is very clear on something. It's very easy for someone to take action versus someone is not clear and what they want. It's a wishy washy thing and they might take some action here, might take some action here. It nullifies what they did over here or to complete inaction. So clarity is really, really important.
Dave Debeau [00:16:06] Excellent. Very, very well that we were a little concerned about not having enough time on this on this interview, Michael. But we've gone through the questions with our last minute and a half or so. Is there any question that I should have asked you? But I did.
Michael Blank [00:16:19] I don't know. Good question. I think we I think we've really covered it. I think it really is a. It's a mindset thing, and I find in conversations with people, you know, they would agree with me that multifamily is what they eventually want to do. They just dismiss it as something that's viable for them. And that's kind of one of the things I want to I want to change, because I see that this phenomenon of two to three deals of quitting your job is so strong, it's so pervasive, it's so powerful. And I've done so many shenanigans in my life, from software to restaurants to this, that the other thing, that there's nothing more powerful, more replicable and more learnable and faster than passive income through multifamily. That's really what I'm excited about. And and and really, the financial freedom is kind of a means to an end, which is which is allowing you to live a life of significance. Right. So if you're working 50, 60 hours a week and I'm talking about living a life of purpose, Dave, live a life of purpose, you're like, what the heck are you talking about? I'm working my butt off here providing for my family. I don't know what you're talking about. On the other end, I find people that were able to quit their jobs with the stuff. There's a temporary state of confusion. Maybe they buy a bunch of stuff and they go on vacation. And after about four months, I'm going to go, oh, this is now what's not what? And a start thinking about living a larger life or living in significance. I see this over and over again. So really that that first that first step to living a life of significance, in my opinion, is you have to have your living expenses covered in some way. And that's what keeps me getting out of bed every morning.
Dave Debeau [00:17:46] Very well said. Michael, thank you very much for your insight and your time on the interview. Today has been a lot of fun. Really appreciate it. And everybody, thank you very much for joining in. And we'll see you next on. Well, thanks very much for checking out the property profits podcast and you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us the review. He very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom. Take care.