Tim Bratz was interviewed on the CREPN podcast to discuss “Multifamily Mindset”.
Multifamily Mindset is key to growing true wealth in multifamily real estate.
Tim Bratz brokered his first commercial lease for a 400 square foot retail space which rented for $10,000 per month in New York, NY. When he realized the landlord was going to make almost $2,000,000 over the 12 year lease for this one space, he knew he was on the wrong side of the coin. He needed to be a landlord instead of a real estate broker if he wanted to create real wealth in real estate.
Since that time, Tim has flipped single family homes, wholesaled, owned single family rentals, turnkey rentals, and invested actively and passively in multifamily properties.
The first apartment building he purchased was an 8 unit property for $30,000 which he invested another $50,000 into. All in he is in for $10,000 per door, and it cash flows like crazy. Since this one property, he stopped investing in all other types of real estate except for multifamily.
Real Wealth in Real Estate
Real wealth is not created on one commission from an individual transaction. It is created from residual income; getting paid repeatedly, month after month and year after year. Wealth in real estate is created over time, not by flipping property after property, but by holding the asset and letting it appreciate over the years.
Multifamily Mindset for Tim started with the realization that residual income was key. More wealth has been created in real estate. It’s a proven formula if you stick with it and have a vision.
The more he learned about real estate, the more he saw an opportunity for him. He also recognized the power and potential danger of leverage. When the 2008 crash happened, those with too much leverage, lost everything. While those with cash flowing assets, were able to ride out the storm.
When the banks were not lending, real estate investors with positive balance sheets and cash flowing properties were able to get loans, because they had cash flow. This allowed them to buy more and grow their portfolio.
Your Multifamily Mindset starts with education. Recognize, you will pay for this, one way or another. If you decide to go it solo, and learn the hard way, on your own, you will pay for your education in costly mistakes and missed opportunities. If you elect to pay a mentor, you will be able to shorten your learning curve, and gain from your mentors experience, and mistakes so you won’t have to repeat them. The choice is yours.
There are tons of books and podcasts available for free. But these do not hold you accountable. How many times have you been to a seminar or read a book that inspired you to do great things. But as soon as you return home, you get into your regular routine and forget all the excitement and momentum you gained from the event. Having regular meetings with your mentor or mastermind group, will keep you on track and hold you accountable to yourself so that you reach your goals.
Tim has learned from books, podcasts and mentors, both bad and good. He has found his mastermind group has been the most beneficial for him. His mastermind group is where he learned from other investors who had passed through his current challenge.
Meeting regularly with his mentor or his mastermind has helped Tim create a portfolio valued at more than $250,000,000 in just over 4 years.
Tim had over 200 doors made up of a mix of single family and multifamily properties. When he took some time to reflect, the numbers did not lie. Ninety percent of his wealth was from multifamily yet it accounted for only ten percent of his time. This aha, lead Tim to focus only on multifamily from that point forward.
If you don’t know where you want to go, it doesn’t matter which path you take. Know your why, and then back into the numbers to get you on the right path for where you want to end up. When you know what you want, you can ask better questions, on how you can accomplish your goal.
Take a day, schedule it, and periodically take stock of where you are and compare it to where you want to be. Then ask questions, and course correct. This is key to keeping your multifamily mindset.
Consistency is Key
Consistency is key to building a successful business. An apple a day keeps the doctor away, not seven apples on Sunday.
If you want to build a big business, there is no shortcut. Consistency is the key to growing a big business. If you want to build a big business, recognize that it will take time, and act consistently. When you do this over time, your efforts will accumulate and you will have success.
Tim recognizes that having a consistent marketing message in front of his key prospects is how he will reach his goals. This applies to both raising money, and buying apartments. In the communities where Tim is actively acquiring properties, everyone knows Tim buys apartments. Why? Because, for the past three years, he has marketed to owners, and residential brokers that “Tim buys Apartments”.
For investors looking to participate passively, Tim stays in front of them, and is constantly building his list. His consistent actions allows him to raise millions of dollars in a single webinar for any deal he has.
From his residential wholesale days, where he built his list of buyers and wholesalers, he recognized that wholesalers come across multifamily deals all the time, and usually throw them away. What if the wholesaler could make a referral fee by sending it to Tim?
Tim emails his list of wholesalers weekly, reminding them that he buys apartment buildings. Because these buyers come across multifamily opportunities regularly, and have nowhere to go, Tim has been able to make a win-win-win situation for the seller, wholesaler and Tim.
Tim has a unique syndication strategy for how he structures for his deals compared to traditional syndication models. Unlike others where investors may not see any return until the building sells, Tim offers a preferred return to investors from day one. As soon as the property is stabilized and can be refinanced, he pays back the investors their principal, replaces his bridge financing, and keeps his investors in the deal for 10 to 30 percent equity into perpetuity.
Investor benefits include: tax advantages because the preferred returns are long term capital gains. The investor gets their capital back for the next deal, and they get the long term equity build from their 10 – 30 percent investment with no capital in the deal.
For Tim, this has created a constant source of money looking for a return that is ready for the next deal.
Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”
BIGGEST RISK: The BIGGEST Risk we face is the potential tightening up of the banks.
How do you manage the risk? The model is based on refinancing within 12 to 18 months. If we see the market shifting, we can refinance sooner, and not take out any proceeds. Usually we like to wait for 12 months so we can take out some proceeds. This allows us to pay a little more to our investors, and make them happy, and me a little more liquid so I can qualify for more loans. But if we had to refi before 12 months, we could just refi at our basis, lock into long term debt, and ride out the storm.
The other thing we do is underwrite our projects as if the loan to value is going to drop by 5 – 10% in 12 – 18 months and we assume that the interest rates will bump up 1 percent. Do I think these will happen? No. But, I want to be prepared for if they do.
This podcast originally appeared on the Commercial Real Estate Pro Network podcast July 11, 2019.