Knowledge is not power, it's just the first step toward it.
Updated: May 27, 2019
I was chatting with a friend the other day and he asked how I had learned so much about multifamily. The answer is pretty easy - it's simply education. I've learned via various channels: primarily podcasts but also conferences, books, Facebook groups, Meetups and face-to-face meetings with people I've met through networking.
I'm flattered he thinks I'm knowledgeable on the multifamily topic but this got me to thinking that knowledge is great but not useful by itself. You've got to do something with that knowledge. As Michael Becker is fond of saying, at some point you have to get out from behind your computer.
Knowledge enables execution and it's a necessary component of establishing execution. But by itself, knowledge is not power. Last I checked, learning has never literally helped anybody lost 15 lbs, run a marathon or achieve financial independence. So what does actually lead to execution? Here are the four specific phases I've gone through on my way to an accepted offer on a 100+ unit multifamily deal.
1. Knowledge - Learn the jargon, know the concepts and learn to underwrite quickly and accurately. If you're networking with brokers and you can't speak intelligently to them they will write you off. Their time is at a premium because they have to meet with and talk to so many people. They have every right to reject you if you waste their time. After 4-6 months I could speak relatively intelligently about multifamily. After a year I improved my knowledge base and analytical skills to the point where I could very confidently communicate with brokers.
Key point - Gaining knowledge costs very little. Over a 13 month period I spent several hundred dollars on this including several books, two conferences, hundreds of podcast episodes, numerous free Meetups and getting on brokers' email distributions. Everything but the conferences and books was free.
2. Relationships - As you continue to be serious about multifamily you start experiencing synergies. At Meetups and conferences you see the same faces and become colleagues. You start exchanging emails, calls, lunches and coffees with them. You never know what relationships will pay off so they're all valuable.
Key point - always reach out to somebody with the intent to provide specific value. This means two things. Don't reach out to somebody only expecting to get something from them as you be annoying. Also, look to provide something to this person, but vaguely saying "I'm willing to do anything to help!" is not effective. Are you good at analyzing deals? Do you have access to investor capital? What specific value can you bring?
3. Establishing credibility - To a limited extent, #2 helps with #3. But to take down a deal you need legitimacy which doesn't come simply from knowing people. You have to go a step further and establish potential partners who are willing to do business with you. Partners could be investors, service providers, property managers, mortgage brokers or JV partners. If, on your own, you can or have established a reliable network with all of these folks, you are remarkable and I'd love to meet you. However assuming you're more like me, you need help and I think you really have to seek mentorship. There are several options available and they all have their own personalities/philosophies. Go to their events, talk to students in those groups and choose wisely. After doing my research I went with Mark and Tamiel Kenney as I liked their philosophy, the fact that they're instructors and connectors rather than gurus and the fact that they take on downside risk in my deals. As a side note, before I invested in mentorship I approached several established syndicators with offers to provide various kinds of support for even a teeny tiny sliver of the general partnership. It didn't work. Most syndicators want to do deals, not teach.
4. Taking action - I found the first two steps to be relatively easy. I like learning and I like making new friends. Joining Think Multifamily to get through the third step wasn't difficult per se but it sure took a heck of a commitment. But now that I had all of the building blocks, I had to take action and I will admit that was challenging. At some point you have to start making offers and that is not a comfortable thing to do. It's easy to be paralyzed by the countless number of "what ifs". However you can't win deals without making offers - it really is just that simple.
Chihiro Kurokawa is founder of BlackRiver Equity Partners, a real estate private equity firm providing private offerings to investors seeking tax-advantaged cash flowing investments in real estate.