types of apartments types of multi-family properties

205 Pages·2016·4.09 MB·English

How to Create
Lifetime
CashFlow
Through
Multifamily
Properties
The New Rules of
Real Estate Investing
From Real Estate Investment Expert
Rod Khleif
Copyright © 2016 The Lifetime Cashflow Academy. All rights reserved. No part of
this book may be reproduced, stored in a retrieval system or transmitted in any form
or by any means, electronic, mechanical, photocopying, recording, scanning, or
otherwise, without the prior written permission of the publisher.

All of the material contained in this book is provided for educational and
informational purposes only. No responsibility can be taken for any results or
outcomes resulting from the use of this material. While every attempt has been made
to provide information that is both accurate and effective, the authors do not assume
any responsibility for the accuracy or use/misuse of this information.
T C
ABLE OF ONTENTS
Dedication ............................................................................................5

Foreword ..............................................................................................6

Introduction ..........................................................................................8

My First Date with Real Estate .................................................... 8

I Discovered Visualization ........................................................... 9

My First Big “Seminar” ............................................................. 10

The House on the Beach ............................................................ 10

My Life Changing Mentor ......................................................... 11

My Second and Largest “Seminar” ............................................ 11

The Most Important Lesson I Learned ....................................... 12

1
  Goal Setting ................................................................................14

Course Corrections ..................................................................... 14

2
  The Importance of Finding Your Why .......................................16

3
  The Power of Visualizing and Manifesting What You Want in
Life ..............................................................................................18

4
  Cash Flow is King .......................................................................21

We Need to Play by Some New Rules ....................................... 21

A Shift in Investment Strategies ................................................ 22

5
  Understanding Real Estate ..........................................................26

True Wealth is Cash Flow .......................................................... 26

Buying Property with Other People’s Money ............................ 27

Leverage the Power of Leverage ............................................... 27

Tax Benefits Add Value to Real Estate ..................................... 28

The Key to Earning is Learning ................................................. 29

Four Must Do’s That Will Speed Up Your Success .................. 29

Build a Killer Team ................................................................... 31

6
  Business Structures .....................................................................33

1
The Benefits of Business Structures .......................................... 33

Types of Business Structures Available .................................... 34

How to Use Business Structures ................................................ 39

7
  Types of Apartments ...................................................................42

Types of Multi-Family Properties .............................................. 42

Apartment Building Classification ............................................ 44

Classifications and Their Effect on Financing ........................... 47

Classifications and Their Typical Purchasers ............................ 48

Understanding Property Classifications ..................................... 49

8
  Taking Action when You Find a Deal ........................................51

How to Be Ready to Act ............................................................ 52

How to Identify a Good Investment Deal .................................. 52

Create a Conduit that Leads to Successful Funding .................. 53

9
  What Markets to Focus On .........................................................55

Why Backyards Are Better ........................................................ 55

You Must Know Your Market ................................................... 56

Where to Find the Data .............................................................. 59

10
  How to Locate Investment Properties .........................................62

Real Estate Brokers .................................................................... 62

Finding Properties Online .......................................................... 64

Buying Properties at Auction ..................................................... 65

Working with a Bank’s REO Department ................................. 70

Working Directly with the Property Owner ............................... 71

11
  Mailings ......................................................................................73

The Timing ................................................................................. 73

Where to Get the Lists ............................................................... 74

The Content ................................................................................ 77

Managing Your Lists and Mailings ........................................... 78

Talking to Sellers Effectively .................................................... 80

2
Negotiating with the Seller ........................................................ 85

12
  Real Estate Syndication ..............................................................88

Securities Laws .......................................................................... 88

Types of Investors ...................................................................... 90

The Structure of a Syndication .................................................. 91

Which Comes First? ................................................................... 93

13
  Investors ......................................................................................95

What an Investor or Partner Can Bring to Your Deal ................ 95

Active Partners ........................................................................... 96

Passive Investors ........................................................................ 96

The Elevator Pitch .................................................................... 100

Put it in Writing ....................................................................... 103

Avoid the Big Mistakes ........................................................... 104

How to Keep Your Investors Happy ........................................ 105

14
  Financing Options for Funding Your Multi-Family Deal .........107

Using a Self-Directed Retirement Account ............................. 107

Bank Financing ........................................................................ 111

Bridge Loans ............................................................................ 117

Mezzanine Loans ..................................................................... 118

15
  Easily Evaluating Properties .....................................................120

Four Basic Components ........................................................... 120

The Initial Property Pre-Screening .......................................... 121

Looking Over the Financials .................................................... 125

Important Formulas .................................................................. 129

Hidden Opportunities ............................................................... 138

Property Evaluation Software .................................................. 138

16
  Preparing and Presenting Offers ...............................................141

Try to Learn the Motivation ..................................................... 141

The Purchase Price ................................................................... 142

3
The Letter of Intent .................................................................. 143

The Purchase Contract ............................................................. 149

17
  Killer Due Diligence .................................................................162

The Resources .......................................................................... 162

The Basics ................................................................................ 166

The Inspection .......................................................................... 169

The Re-Trade or Negotiation ................................................... 170

18
  Property Management ...............................................................173

Taking Over the Management ................................................. 173

Property Management Software .............................................. 176

Know the Law .......................................................................... 177

Finding a Tenant ...................................................................... 178

Sample Rental Application ...................................................... 179

Repairs and Maintenance ......................................................... 181

Rent Collection ........................................................................ 182

Choosing a Property Management Company .......................... 183

19
  Adding Value to Your Property ................................................188

Increase Value through Rent Increases .................................... 188

Increase Value through Expense Adjustments ........................ 188

Increase Liquid Assets through Refinancing ........................... 191

20
  Success Versus Fulfillment .......................................................193

Giving Back ............................................................................. 194

21
  Summary and Taking Action ....................................................198

So Now It’s Your Time! ...................................................................199

Acknowledgements ..........................................................................200

Contributors ......................................................................................202

About the Author ..............................................................................203

4
D
EDICATION
This book is dedicated to my mother, Zwaantje Jacobs. Burdened
with the difficulty of raising five boys with very little money or re-
sources she inspired me immeasurably. From her courage and hard
work, I learned my work ethic and love of real estate.

Thank you Mom.

5
F
OREWORD
As a real estate “artist,” and one who has gone from flipping
$50,000 houses to creating then selling the most expensive spec home
in the world at $50 million, I know good real estate advice when I read
or hear it. I also know bad real estate advice, and believe me there’s
plenty of it. I’ve been at this for 30 years and most real estate books
aren’t worth the paper they’re printed on.
Rod Khleif’s new book “How to Create Lifetime Cash Flow
through Multifamily Properties” is radically different. The book you’re
holding is actually worth at least its weight in gold. That’s right, at 12
ounces, that’s $15,840, and BELIEVE ME you’ll create that much in
equity in just your first deal by reading and applying Rod’s advice!
I encouraged Rod to change the subtitle to “How to Create
GENERATIONAL Cash Flow Through Multifamily Properties.”
That’s how important and impactful Rod’s book can be, but only if
you methodically and patiently apply Rod’s wisdom. If there were
such a thing, Rod possesses a PHD in real estate, so now it’s time to
go to school!
How to Create Lifetime Cash Flow Through Multifamily Properties
will open your eyes to the incredible opportunities in multifamily real
estate, massively expand your knowledge on the subject, and provide
you with the aspiration to take action towards becoming a successful
multifamily investor. For anyone considering multifamily investing, I
know of no better book on the subject than the one you’re holding
right now.
This book was written to be an essential textbook for the new multi-
family investor, an instruction manual. I suggest you study this book
many times over and learn from Rod’s years of experience and exper-
tise in multifamily investing.
Rod has also included important content related to the psychology
of your success. It’s well known that 80% of your success is related to
your psychology and only 20% is related to the actual mechanics.
Throughout this book you will be motivated, encouraged, and inspired
to take action towards reaching your goals both as a successful multi-
family investor and in your personal life.
With four decades experience in real estate investing, Rod has
earned a reputation as one of America’s top real estate professionals
and top multifamily investing coaches. Among Rod’s many talents, he
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has the unique ability to simplify the complex which makes him an
outstanding teacher and coach.
For the last three decades, Rod and I have travelled similar paths as
real estate professionals and dedicated philanthro-capitalists. We know
and deeply respect each other’s work. We both incorporate sharing our
blessings with those less fortunate as a major driver in our lives.
Through my foundation; The Caring House Project, I have provided
housing and a self-sustaining existence for 10,616+ people in Haiti.
Through Rod’s foundation; The Tiny Hands Foundation, he has pro-
vided over 45,000 children and families in need with food, Christmas
toys, backpacks, and school supplies.
I trust that you will enjoy and benefit from reading this book, just as
I did. In it you will learn the path to creating Lifetime Cash Flow
Through multifamily real estate investing, and if you really good,
maybe even generational cash flow!

Frank McKinney (www.frank-mckinney.com), Real Estate Artist,
Philanthro-Capitalist and 5x Bestselling Author, including “Burst
This! Frank McKinney’s Bubble-Proof Real Estate Strategies.”

7
I
NTRODUCTION
Have you ever struggled financially? Have you ever wanted more?
As you were growing up, did you have everything given to you or did
you have to fight and work hard for everything you wanted? I’d like to
take a few minutes to tell you a bit of my story. I have had fantastic
successes and some equally spectacular failures, which I call my “sem-
inars.”
I was born in The Hague, Holland in 1960. I lived in Holland for
my first three years, and then I lived in Israel for my next three years. I
immigrated to the United States with my mother and my brother when
I was six years old. We made the journey in a large ship, and I have a
memory of my mother crying when she saw the Statue of Liberty in
the New York harbor. That was in 1966.
We quickly ended up in Denver, Colorado, where I lived for the
next 30 years. We didn’t have many possessions or very much money.
I was forced to wear clothes from the Goodwill because we couldn’t
afford to buy regular clothes. My brothers ended up wearing my
Goodwill hand-me-downs. We couldn’t afford to buy real milk, so we
had to use the powdered kind. My mother bought bread from the day
old store because it was half price. We had love, but not much else. I
am eternally grateful, however, that my mother showed me the value
of hard work. She had a side babysitting business in our home. She
taught us that if we wanted anything, we had to work for it.
MY FIRST DATE WITH REAL ESTATE
My love of real estate started back when I was 17. Three years pri-
or, when I was 14, my mom had used her babysitting income to pur-
chase the house across the street for $34,000. When I was 17, she told
me it was now worth $55,000. Even though I flunked basic math in
high school, I could do that calculation. When I realized that she made
$21,000 in 3 years, it was then and there that I decided that I was go-
ing to get into real estate.
I went to real estate school when I was 17. I had my broker’s li-
cense by age 18. I was ready to make the big bucks. The sorry thing
was that I had absolutely no clue what I should be doing. I rented this
bench at a bus stop at the end of my street and put my picture and
name on it. I never got any business off that, but my mom was very
proud.
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