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So the big question is this, what would you do if money didn’t matter? So you had millions in your bank account, what would you focus on? Would you spend more time with your family, with your wife, with your kids? Take family vacations.
Would you pursue your gifts and talents and dreams? Serve your local community, teach others, serve your church. You see if what you would do if money didn’t matter, it was pursuing your gifts and talents and dreams to serve others, and that is probably what you should be doing.
The problem is most people are in the rat race, living five inches in front of their face with no time to pursue what they were born to do. That is the problem, and the solution is to develop enough passive income to replace your working income so you can quit your job and be free to live your life the way you were created to.
That is a solution and this podcast will show you how…
Alright! Welcome everybody to Cash Flow Dad Life episode number 33…
It is a huge pleasure today to welcome Michael Blank…
Michael is the leading authority on, on apartment, a multi multifamily apartment complexes. He’s got 2000 units that he’s helped his students acquire and he’s also got $25, million dollars worth of assets.
So, we’re just going to be a sponge and soak up all the wisdom that he has for us today…
So starting with, you know, I always like to ask, how did you stumble across this? How did you get started in this in the first place?
Michael Blank: Well, it’s not as clear cut as I put it in my book because my book, I basically have the blueprint for doing this within one to two years. My journey took me 11 years. And you know, I have a background, like a lot of people are taught to get good grades, get a job, and that’s what I did.
I got into software so I was sort off being a software programmer. Joined a startup in [inaudible] 97. Right, right place, right time, a software IPO and put a bunch of money in my pocket and that was great and my vision was to be the CEO of my own software startup company until I read Rich Dad, Poor Dad and I was like, I’m such an idiot…
It doesn’t matter how much money in the bank, what my salary is or anything like that. It’s not much passive income I was having. It wasn’t very much at all…
So I just threw away my entire 15 year career. Right?
And I said, “Oh, I’m going to find my permanent financial freedom.”
So I had a bunch of money, but it wasn’t enough to sit on the beach for the rest of my life. And so my big idea at the time, Ryan was restaurants because I was surrounded by a bunch of a Burger Franchisees, a very successful chain and I saw and it like, “Oh yeah, it cost this much…”
“It costs this much to open a restaurant and we’re going to sit back and count the passive income.” I was like, “Perfect. That’s exactly what I want.”
Now, I flipped some houses. I learned how to trade stocks and options. I went to a apartment building bootcamp. This was all like in 2006, 2007. But my main thing was restaurants.
So you gotta understand, I really, really thought big on this…
I took all my chips, put them in a, hired a multi unit operator, open one, bought one open one, you know, open one, bought one. So within like a year I was at six restaurants and then the, then the recession hit, kicked my butt pretty good and never really recovered from that.
Long Story Short, I subsequently lost my rest of my ipo, millions in the restaurant experiments. Uh, plus I had a couple hundred thousand dollars of debt to its Max out…
My credit cards almost lost my house… And while this is going on, I’m calling myself out with real estate.
But you know, when people think real estate investing, they think a single family house investing. And so I was flipping houses, I didn’t have more money, so I raised it from people and it was like this giant light bulb went off and I flipped all these houses.
It was really successful, I mean we had a pretty good operation going for three years, flip three dozen houses, um, and I bought a 12 unit apartment building, kind of, sort of as an afterthought because one of my wholesale is brought to me and then, uh, you know, I was like, man, this is a lot of work. It’s not really what, what I wanted.
And I was like, why don’t, I mean my oldest apartment buildings or 70 mailbox money, right?
I’m like, why don’t I just to just do more of that?
And then I kind of kind of stepped back for a minute and I was like, what am I doing? Like what am I really doing? And I realized that all the stuff I’ve done, there was always some fundamental flaw with the business to the path I was on, including the house flipping frankly.
And everything was essentially fixed with multifamily. So I was like, my goodness gracious, I gotta do I gotta get me some more of that. And so that’s when I shifted full bore.
And then right around that time I’ve only been done one at a time when I started blogging about it and people said, Oh wow, how do you do this? How do you analyze the deals? How do you raise money? And so one thing led to another. So today we have a fairly significant educational platform and we have this deal desk program where people can bring us deals and we partnered with them and raise the money for them.
So we’ve done, we’ve done close to a thousand units in the last 18 months over that. I’m really excited about that because my mission really is to help people do their first apartment building deal because I know if you can do that, the second and third will follow automatically and they’re literally months away from quitting your job.
And that’s really why I wrote the book. You feel like that’s the biggest challenge for most people is just getting that first deal done and under their belt.
Ryan Enk: Yeah, it’s really… If I were to narrow it down, you know, Gary Keller’s, the one thing kind of thing, that is the one thing like you don’t need to worry about anything else because everything else really just happens automatically and so I can reduce this goal of, you know, quitting your job one day to only one thing, which is your first deal.
Michael Blank: And the good news is it doesn’t matter what size, I mean if you’re replacing $10,000 of income, well you, it’s very easy for you to do a duplex but it’s not very meaningful, right? So they maybe do something a little bigger, maybe a 10 or 20, but a duplex is just as meaningful.
Ryan, as a larger one because what happens is the first one is the smallest that takes the longest. But then once that closes, let’s say it takes really long time, like 12 to 18 months, you’re like, oh my gosh, this is never gonna work. And then what happens? The second one follows and rapid almost automatic succession.
Like it’s not uncommon to have that second deal under contract before the other one closes or shortly thereafter. And this I called the law the first deal, which says if you do a multifamily deal of any size, you’ll be financially free in three to five years.
…And based on the case studies I’ve seen, I have in the book, it’s more like one to two years. Uh, I just, I’m trying to be a little more conservative, but the reality is that people really can replace her income much faster and all they have to do is really focus on the first deal.
Ryan Enk: Yeah, it’s, it’s, it’s, uh, it’s really going through that mental process and just all the skills you learn on a small, $80,000 duplex are the same skills that you can apply to a multimillion dollar, a 16 unit apartment building. So that’s A. I love that. I love the law of the first deal. So tell me a little bit more about the mindset that you had to go through.
Now you, you came from having to taking a big risk on, on restaurants and then almost losing it all, nearly losing house.
You know, a lot of people would say, how do you recover from that? How do you go back and take risks again?
Michael Blank: Uh, it’s a good question. And it, it didn’t all come at once. It came in waves, so are, you know, there’s like, you know, these, these, you know, the down cycle, like you have these dips and then come back up with you in these dips and they keep going lower than the previous low.
So I have had previous experience leading up to that point of, of this spare and things not going my way at all. Um, and not just in the restaurant side, but in general when you become an entrepreneur you have, you know, you have down, down cycles, up cycles. I primarily had down cycles for a long time and so every time I went through these things, I learned more about, uh, about myself.
…So long story short, when I know in the depths of my despair, I was actually relatively calm, uh, at that point where, you know, for years prior I would have learned, probably jumped out a window literally because the stress was so high. So it was, it is definitely a process that apparently Ryan had to go through. Right? You came, you came out stronger on the, uh, on the back end. I did and it did not, did not kill me.
I guess it makes me a better entrepreneur…
You as you know, you learn a lot more when things don’t go quite as planned and when you’re successful, when you’re successful, you think you’re a genius, but you don’t really learn anything except for maybe build up your ego. But when things go wrong where you make mistakes or better yet you see other people make mistakes.
Ryan Enk: You’re like, Ooh, let me not do that one again. You know, it’s funny. I was uh, uh, the whole Nike just do it thing. People are like, uh, they’re, they’re sending out means that today I just saw this meme of a dwight schrute. You familiar with the office? The show, the office? I’ve, I’ve watched it a few times, but I’m not a fan.
So there’s this line from Dwight schrute where he says, “Whenever I think about doing something, I think would an idiot do that? And if he would, then I don’t do that thing.” So it was one of those things you can learn from other people and their mistakes as well. And that’s, that’s one of the benefits of having a mentor and having someone that you can learn from. So walk me through your first deal now on your first deal for apartments.
Were you using your own money at that time or did you have to go out and find other people’s money?
Michael Blank: Well, no, I didn’t have it. I didn’t hide, deployed it all in the restaurants. It was all tied up in the restaurants, uh, and, and losing a equity rapidly in that.
But so it really puts me in a position of most other people right now. And the biggest hangup people have with apartments, they’re like, Michael, this is great. You know, I get the whole thing about passive income scaling, blah, Blah Blah.
But really I can’t overcome two major main things…
I don’t have the experience for it and I don’t have the money for it. And even you do have a money, 100,000, $500,000 million don’t. I don’t really care, it’s going to be gone at one point, you do one or two deals and the money’s gone and then what now?
What are you going to do? Right?
So those are the two main problems people have is, and they can’t overcome them.
So they go, you know what, let me let me flip houses for five or 10 years and I’ll accumulate a portfolio and I’ll take that experience and the money I’m making and I will graduate to apartments in 10 years, which by the way is not a bad plan. Plenty of people have done it, but the truth is you can accelerate the plan significantly by going directly into multifamily if you want.
And, and, and by using other people’s money. Is that the direction that you do?
Ryan Enk: That’s right. Now, when you structure just a food can get specific with it, you know, there’s all kinds of ways to use other people’s money. There’s private money lenders, there’s joint venture ships, um, bank money, uh, what, what do you recommend as a starting point?
Do you recommend a partnership or do you just recommend that someone has some sort of lean position on a property that you find?
Michael Blank: I mean there’s always going to be bank loan involved and when I love this business is is you get not only you get bank loans that are cheap but you don’t have to personally guarantee them. That’s very difficult to do on the on the residential side as you may know, so I love that and then the question is, well, how do you come up with a down payment and the equity and that comes from investors and here’s the thing, how you structure it.
Exactly. Leave that for the attorneys, right? It doesn’t really matter.
What’s more important is that someone wraps their head around the fact that someone is going to be willing to give me money for something to buy real estate with and and then starting to build relationships intentionally around getting other people enthusiastic about what you’re doing, helping and supporting you and then actually investing with you.
And then again, the structure. I mean we can spend an hour just talking about the different structures. That’s not really what’s important, so it’s important thing is really, oh my gosh, I can do it.
There’s a system you can learn not very complicated and with any system you just work it. And, and for me, the light bulb moment went off and you know, one person who invested with me to second person invests in me.
I was like, holy cow, my ability to scale this business is only limited by my ability to find deals and raise money, not by whatever I have in the bank or not. So Bank is, is another big stumbling block for a lot of people because a lot of people are coming from a credit repair type situation.
Or you know, like in your case, I think you’re an excellent example because you had a business that you started and it was, you know, flailing.
Ryan Enk: I have to imagine that the bank was not as eager to lend to you. How did you get around that obstacle when you were starting?
Michael Blank: It’s the same thing when you have something you don’t have. You look around to see who has what you need. Right? And that could be with experience, with money, a good credit rights, anything you write down, oh my gosh, I have nothing. Okay, well it looks like you have to look for a lot of people then. Right?
But in the case where you have really nothing and you have really crappy credit and you need to find some or nothing in the bank, right? Because you’d also need a, you need a net worth guarantee that loan.
You’ve got to find someone who has a net worth individuals…
So for example, if you’re going out raising money, you have someone who’s willing to invest $50,000 with you, well chances are they probably have more than $50,000.
They probably have some kind of net worth. Also, even just high net worth individuals who aren’t even interested in investing with you. Maybe they dislike you and they’re willing to coast on the, on the loan for share the equity. So you give up, give up a share of equity.
You know, in our case, we might give up 10 percent of the general partnership for someone who has coke here and he’s alone.
And we were starting to do a larger deals that exceeds, you know, my net worth, you’ve my partner’s net worth, right? And so, so we have to do the same thing that I’m teach other people to do on a little 12 unit as we’re buying a $38,000,000 unit, right? So, so we do the same thing where we bring in other people into the partnership who have what we want and we compensate them for that.
Everybody’s like, this is great. And everybody wins.
Ryan Enk: Yeah. And your real leverage in that situation, if you don’t have credit that you can, uh, or net worth that the banks like to see to personally guarantee alone is that your, your entire leverages here, the guy finding the deals.
So let’s talk a little bit about that. What is your number one strategy and what are you looking for when you’re going to find deals? Are you looking in home or are you looking outside and in different areas? I mean, most people are looking outside of their own area because most people live in, on either coast.
Michael Blank: I just the reality of things or in, and so a lot of people are looking outside of the areas…
If you’re lucky to live in some of the middle of the country, the South East, you’re in a great position and you can essentially invest in your backyard, but frankly, even if you’re two hours away driving from a property, you’re no better or worse off than hopping on a plane for two hours and flying into another state.
Our training really, uh, assumes that you’re going to be investing outside of your own area just because the probability of you investing in your hometown, hometown, um, is very unlikely either because you can’t find a, the yield or the cashflow or because you’re living, you’re not living in a giant city like Atlanta. And so the deal flow is not that high and it’s all about real estate.
It’s a numbers game…
So I need a certain amount of deals that come across my desk to have a good shot at finding a deal. So that brings up the next question. A lot of people think, well, how am I going to structure the management? On the property, I mean you’ve got standard property management, but is there a strategy that you find more effective than others in giving people that peace of mind that this is going to be a passive income investment?
You’re not going to have to hop on a plane for two hours to go fix a toilet. Now that’s a good point. I mean, the proper manager it makes, makes the difference. Uh, your quality of life as an investor.
It goes way down when you don’t have a good property manager and you can almost almost go to sleep on a property if your property managers performing. So hiring a property manager is absolutely critical and then staying on top of your manager is also critical and there’s a rhythm of monitoring certain key performance metrics of communicating with them.
But when they’re, I mean, my, I’ve, I’ve now replaced two property managers and it’s very painful. I tend to keep people on longer than maybe I should. I can make you the best person that you are. Well maybe not.
And so when you have a poor proper manager, you know, the rents, the collections are less, the expenses are high, the communication is shotty, the reporting is incomplete and it’s like multiple things on multiple levels and it’s all of a sudden sucking, taken up all your time.
And that’s, it takes the fun out of it versus you have a proper manager who just crushes it, right? Income, exceeding expectations. These managing to the, to the project, to the, to the budget ease his, his reporting is complete and it’s frankly a pleasure to work with him. So I could pay you go without a month.
Not Talking to guy though. I should probably talk to them still every, every couple of weeks. But, so your property manager is absolutely key in, in the success of the property.
Yeah. Yeah. So, so you’ve got methods in which to find those people and interview them. And, and uh, and I like what you said about the key performance metrics that you, you stay on top of them. So once you, uh, once you let a property manager go too long, then you start seeing $50 on the bill for changing light bulbs and stuff like that.
Ryan Enk: That’s right. That’s right. So tell me a little bit about what metrics you use when finding a deal. Are you looking at cap rates? Are you looking at cash on cash, Roi? What’s the main thing that you’re looking at when you, when you look at a property?
Michael Blank: So the key, when you’re looking at a property that you have to have a strong financial model of some sort. Now we have one called a syndicated deal analyzer. I’m either way you need a strong financial model because you need to know what the, what the pie looks like, what the were. And then you have different return metrics like average annual return. Then you have cash on cash return of the two primary ones.
And then if you’re going to bring in investors, really what’s driving the deal is those investor returns. What are your investors looking for?
Our investors might be a little more sophisticated and your friends and family and they might be looking for a 15 percent average annual return, but your friends and family would be tickled pink with a 10 percent average annual return or like this is awesome. Really, you have to know who your investors are and uh, and then you find deals that meet those investor criteria. Now of course you need to have enough leftover to compensate you, right?
So you retain 20, 30, 40 percent of the deal, so you can still satisfy your investor requirements. But that’s really, you know, that’s what people look for, that they care about. How long is my money tied up, what is my overall return? And let’s say it’s five years.
People love to double their money in six years, you know, am I getting paid during this time is a cash flow.
Ryan Enk: And that’s really what they, what they care about. So you’re basically, you’re, you’re looking for deals and then you’re trying to figure out what your investors want and you use that end game, that end goal, and they’re returned to find properties?
Michael Blank: That’s right, that’s always the methodology. So your criteria might be quite a bit different than my criteria. Yeah. So, so it’s, it just comes down to pairing up. People are pairing up investors with properties producing that sort of Roi.
Ryan Enk: That’s right. Yeah. That’s awesome. Well, what is, what is the number one piece of advice that you would give anyone that is looking to start getting involved in investing in apartments?
Michael Blank: Yeah, I mean the first thing is probably education, right? Because it’s very difficult when you go. And I made this mistake early on would call brokers, you know, and I’d say, look at me, I flipped three dozen houses and they’re like, well, okay, what kind apartment builds here when done well, none because okay, I’ll tell you what, send me your proof of funds and I’ll send you more details.
And when someone asks you for proof of funds, that is a sure fire, uh, evidence that you just sounded like a Newbie and I just wasn’t using the language.
Ryan Enk: Right.
Michael Blank: And so learning the language and uh, and educate yourself. Um, I, what I find is when someone even reading a book…I mean there’s a lot of information in this book. I find that when, when I show someone how something is done, they can take and visualize the process of, for example, how do I overcome my lack of experience?
How do I raise money and how do I actually, what are the mechanics of doing your first deal? While the details may not be included, at least they say they get, they see the process and they see, oh my gosh, now I can visualize myself doing that. And it removes a lot of the mystery around the whole apartment building thing because really from the outside in and was like, my gosh, this is so overwhelming, so mysterious. I’d rather not.
And so my purpose with a book is really to open up the Kimono and dispel a lot of ideas that people have of what they think about apartment building investing and almost 90 percent of which is completely misguided and wrong.
And so that’s really, that’s really my purpose for the book is to open up apartment building, investing to more people who are already thinking real estate, but they’re dismissing the apartment building for whatever, whatever they think they know about it.
Ryan Enk: What do you think is the number one lie that people are believing about the apartment buildings?
Michael Blank: Yeah. You need, you know, years of experience and tons of money or height, right? Yeah. And you’ve got to wait two to use your own money too.
Ryan Enk: That’s right. Yeah. That’s another one. So tell me a. well, we’re going to put your book on https://cashflowdadlife.com/. Anybody listening to this is going to have the opportunity to go on there and, and, uh, and get Michael’s book. Michael, can you tell us a little bit more about your book and what people are able to, what they’re going to be, be able to glean from that once they read it?
Michael Blank: It, the books called financial freedom with real estate investing. And the line is the blueprint that quitting your job with real estate even without experience or cash. Because that’s the major hangup we have. It’s a, it’s a bright yellow book. It’s on Amazon. I spent probably a third of the book, a convincing people that yes, you can do apartment buildings and why you should, what are the benefits, how is it possible that you could quit your job?
And as little as a year, because I have several case studies of people who’ve done that, uh, some take two, I say three to five years only to be a little more conservative, but what’s possible and then how do I overcome these two main challenges of I don’t have the experience, I don’t have the money.
And then we get into the mechanics of actually doing a deal, right? So I don’t know how many 10 steps or something, I don’t know how many there are, but how do you find a deal? Um, you know, how do you analyze the deal and how do you essentially get to closing? And then that triggers the law. The first deal. Why does the law the first deal work and why is it so compelling and why should you only focus on your first deal?
Not worry about everything else, so my hope is that more people would, would consider it as a strategy for them because I feel like the more people can become financially free, don’t have to work unless they want to, it opens up people’s minds to, to greater things. And I find most people that have the opportunity not to have to work for a living, tend to come up with ideas that serve others.
You know, they do a podcast like you are, they’ll write a book, they’ll create a training program or they’ll speak or whatever, and because they’ve already kind of satisfied their own needs to some extent, and, and now it allows them to think about others.
Ryan Enk: That’s awesome. That’s awesome. Uh, the, I mean that I’ve got a huge heart for that. That was a, that was the whole reason I started investing in real estate.
We’ve got similar stories. I mean, basically, uh, the Robert Kiyosaki that Darn Robert Kiyosaki turned everything around for ruined my life, ruined it and made it. That’s awesome. Well, thank you so much Michael, for coming on the show again for you guys listening.
We’re going to put his book or some resources to take advantage of some of the things that my class to teach. We’re going to put that on a resource page on https://cashflowdadlife.com/resources.
Yeah, I suggest everybody take advantage of this. Um, we mostly focus on cashflow. Dad Life focuses on single family and, and leveraging that. I do invest in apartment buildings, although I’m not an expert on partner on a apartment building.
So, uh, Michael Blanc is a leading source in this area and I highly recommend checking his stuff out because you know, it, it, it to, to be able to learn that skill, to use other people’s money and to do it in a scalable fashion over and over again.
I’m really, you know, how long will it take you to quit your job as long as it takes you to master the skills. I mean, you can get as aggressive with it as you want and you’re really not limited by anything but yourself.
So thank you so much, Michael, for coming on. It’s been a huge pleasure and thank you for letting us, uh, just kind of soak up some of the wisdom that you have.
Michael Blank: Ryan, thank you so much. Really enjoyed it.
Thanks for listening. Please remember to rate and subscribe. You’re going to want to listen to every episode as soon as it comes out. It hasn’t been an idea or strategy that can literally change your life.
Listen, don’t miss out on the free investor pools that I have on my website https://cashflowdadlife.com/. So go to https://cashflowdadlife.com/ gets a free swag and lists and hit me up. If you want to talk about how we can get you out of the rat race as soon as possible. Until next time. My name is Ryan Enk and this was Cash Flow Dad Life!