Starting off on your first deal can be daunting. How big of a deal should you aim for? How do you build a good team? Where can you find a good network? Host Joe Fairless and guest Michael Blank share their top five secrets to closing your first deal.
Michael Blank Real Estate Background
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- Entrepreneur and investor
- Helped investors purchase over 9,500 units valued at $445M through his training programs
- As CEO of Nighthawk Equity, he controls over $200M in performing multifamily assets
- Based in Atlanta, GA
- Say hi to him at: www.themichaelblank.com
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever. We don’t get into any fluffy stuff, and we’ve got something for you today. And I’m sure you are wanting to dig in, because you probably read the title of this episode. So I’m going to just tell you right now, The 5 Secrets to Closing Your First Deal. That’s what we’re going to talk about today with Michael Blank. How are you doing, Michael?
Michael Blank: Hey, Joe. I’m doing great.
Joe Fairless: Well, I’m glad to hear that. Five secrets to closing your first deal is what we’re going to talk about. You know, Michael Blank; either you’re a loyal Best Ever listener or you’ve come across him in other circles, but I’m just going to give you a quick refresher and then we’ll get into it.
He has helped investors purchase over 9,500 units valued at $445 million through his training programs as CEO of Nighthawk Equity. He controls over $200 million in apartment communities. He’s based in Atlanta, Georgia. His website, themichaelblank.com, you can go to it, it’s also in the show notes.
So, today we’re going to talk about The 5 Secrets to Closing Your First Deal. And just a quick personal note, that is the most important deal, the first deal. There’s so much power and momentum when you get one deal done, and I know Michael subscribes to that same philosophy, and that’s why we’re going to be talking about this.
So with that being said, Michael, how should we tee this up? What have you found are the five secrets to closing your first deal?
Michael Blank: Yeah, I’m going to use the first one of five. We only go for five, right? But the first one is you’ve got to operate with total integrity. Here’s what I mean by that. You’ve got to stay true to yourself. Integrity means different things to different people. What it means to me is you’ve got to stay true to yourself; don’t try to be someone else… And that includes, for example, looking at your strengths and weaknesses. What are you good at, what do you love to do? …and focus on those things. For example, maybe partner with someone who doesn’t have those strengths.
It also means, obviously, doing what you say. That’s one of our company’s values, is always do what you say, and it’s amazing how many people don’t do that. And the third component real in operating total integrity is serving other people; looking for ways to serve other people. Because I’ve started this whole entrepreneurship thing from more of a financial aspect, like how much money can I make, so I can quit my job. It was financially-driven. There was really no element of service in there. And what we’re doing getting into the syndication business is we’re literally building a multi-million dollar business. It’s a foregone conclusion. But how in the process can you serve other people? How can you serve your passive investors? How can you educate them to this asset class, right?
So the bullet number one for me is operating with total integrity, not only for yourself, but also as you evaluate partners, for example, or support groups, or anybody else. So that’s number one for me.
Joe Fairless: Yeah, and I’m glad it’s number one, because people are smart and people have emotional intelligence, and most people can pick up on if someone is not being true to who they are, if they’re trying to fake something. And I’ve always said, I have a great amount of respect for bands, artists who write their own lyrics. I might not agree with what they’re singing, but man, they’re writing it, and that’s what they’re feeling. That’s who they are. Same with this. Be true to who you are. People might not like it, and they might not agree with everything you say, but most importantly is just be true to who you truly are, versus trying to be someone else. What’s number two?
Michael Blank: Number two, is to follow a specific, proven process. When I got started, and when you got started, there wasn’t a lot out there. There was maybe one person doing a seminar, there was one book. In the meantime though, so many years have gone past by, that there’s actually proven processes out there. So find a specific proven process that has been shown to work – I just call it the dealmaker blueprint – and then just follow that process. You wrote a great book about syndication, you’re outlining steps that lead to a deal. That’s a great process.
So in other words, educate yourself. Don’t do what I did, trying to figure this thing on my own. You’ll eventually get there, but it’s super painful… Versus instead, why don’t you try to follow a process that already exists, that’s maybe worked one or two times?
Joe Fairless: Makes sense. Number three?
Michael Blank: Number three really is purchase large properties, and you probably don’t disagree with me on this. It’s just because that is just they’re more profitable, they’re more stable, you achieve your goal faster, and it’s also more fun. Now, having said that is a caveat, because I’m not necessarily a go big or go home kind of guy. It’s not like that, like, “Well, if you’re not going to do 100+ unit deal, then you might as well not even get started.” That’s not what I’m saying. What I’m saying is you should do the largest possible deal that you can, and normally, that is limited by your comfort zone, by your mindset. I’m not even saying it’s limited by your resources or who you know; it’s actually not the case either. It’s really your comfort zone or your mindset.
There are ways that you can expand your comfort zone, to get into larger and larger deals. So you want to figure out ways to do that, to push your comfort zone so that you can get into the larger deals. Regardless, if you don’t do 100 units right out of the gate, they’re going to progressively get larger anyway. All I’m saying is to really make an impact, you want to do the largest possible deal that you can, because that is the most impactful, and there’s various ways we can do that, which really leads me to point number four, which is to build a team.
Joe Fairless: Before we get into number four – do the largest deals possible, and it’s limited by comfort zone. But what if someone has a comfort zone or a mindset of, “Michael, I’m good. I have a mindset. I want a 250-unit deal. I’m comfortable doing a 250 unit deal, but I only see this sixplex that is available. Should I invest my time and money doing the sixplex, and have there be an opportunity cost where I won’t have the time to look for that 200-plus-unit deal? What should I do?”
Michael Blank: Yeah, that’s a temptation, right? You get a lot of people who have invested in single-family houses that deal with this temptation to just do another house, to just buy another house, flip another house. But like you said, there’s an opportunity cost because for every hour that you spend, on flipping the house, it’s an hour you can’t spend on actually doing what you really should be doing, which is an apartment building deal… Meaning, looking at deals, analyzing deals, talking with investors. So the opportunity cost is enormous. Is a six-unit a lot easier to do than a 250-unit? Yes, that can be true, but it also huge opportunity costs if you do that.
So if you have your comfort zone around a large deal like that, like you did. You somehow develop this confidence that, “Oh my gosh, I can do 176-unit.” So if you have a confidence around that, you’re also going to have a plan around that. Therefore, you should avoid shiny object-itus of flipping another house or buying a sixplex.
Joe Fairless: Let’s change a sixplex to a 15-unit. Is your advice still the same way for that 200-plus unit, don’t do that 15-unit?
Michael Blank: No, it’s not. It’s really that value of the first deal that you mentioned earlier. I call it the law of the first deal; that’s so powerful, because once you do that first deal, everything changes and the second and third deal basically come to you automatically. People also [unintelligible [00:09:16].27] you that want to invest with you. So, the value of that first deal – it far exceeds any kind of money that you can make. Therefore, the goal is not to do the possible largest deal you can, but the goal is to do a deal. And I kind of give myself 12 months to do it. Twelve months gives you enough time to do a deal that is achievable, but also meaningful, and you’ve got to pick whatever that is for you. If you can’t wrap your head around anything bigger than a duplex because my gosh, you’re only making $2,000 a month, and it’s going to take you a year to pull that off – my gosh, a duplex is the right size for you, because that is far outside your comfort zone.
On the other hand, if you’re a high-income earner, a 15-unit or 25-unit might be a great first deal for you, because it’s not a no-brainer, and it’s going to take you a while to raise the money. On the other hand, you don’t want pick something so big or so specific that it’s going to take you three years to get that deal done. Most people don’t have that kind of runway.
Also, don’t make your criteria so specific. Don’t say, “I want a 45.5 unit in this sub-market, in this city.” Don’t be that specific either. Be a little bit opportunistic. Also, be more open to different kinds of partnerships. For example, do you always have to be the lead operator out of the gate? Or could you be a junior partner, for example? So being a little bit optimistic, but making sure that you get yourself into the largest possible situation you can first in the 12 months.
Joe Fairless: Okay. Segueing into number four, I think, right?
Michael Blank: Yeah, which is building a team. I never understood this in the single-family house, even though I had people working with me and for me. It’s not really a team approach, and it took me a while to wrap my head around that. You understood this right out of the gate, for some reason, Joe. It took me a little while to learn that, but multifamily syndication specifically is a team sport. It’s highly unusual to find just a lone wolf out there. They do exist, but if you study them closely, they take a lot longer to scale their portfolio, because they’re doing everything themselves… Versus if you have joint ventures with two or three partners for example, that one plus one far exceeds two, which means that the joint ventures that work really well are complements of each other. For example, we talked about operating with total integrity; be who you are. What are you strong at doing? “Well, gosh, I’m a numbers guy. I’m very detail-oriented, but I’m kind of an introvert.”
Well, that kind of person would be more attractive to finding deals – finding deals, analyzing deals, making offers, doing the due diligence, possibly managing the asset… But there’s another kind of person in relationship to people. They’re extroverts, and the sight of a spreadsheet makes them break out into a cold sweat. Well, those people are great for raising capital.
So those two, for example, make fantastic partners; unbelievably great partners. So one plus one is by far greater than two, because now one person is focusing on what they love to do and what they’re really good at, and so is the other, and that becomes very powerful.
So building a team is very, very powerful, and also now, it gets you into larger deals, because if I’m like, “My gosh. I’m struggling with finding capital”, but there’s surely someone out there who has the opposite problem. They have a network of dentists or attorneys or whatever, professional athletes, but they don’t have deal flow. But getting with those guys, and now you can raise $1 million or $2 million, and now you’re in the game as well.
But the other thing also is credibility. You need to have a team around you to get credibility with brokers and investors. If I just call them up and I’ve got no track record, they’re going to ask me for proof of funds, they’re going to ask me for my resume, they’re going to ask all those qualifying questions. But if I have a property manager, a lender, an SEC attorney, a CPA, an advisor, and a pigeon—I don’t why [unintelligible [00:12:40].20] I was thinking carrier pigeon… But you have this team behind you, you have a lot of credibility. So point number four is to build a team around you.
Joe Fairless: Let’s go back to the example of the introvert who is really good at underwriting and perhaps finding deals; maybe they’re really good at some sort of system that attracts owners’ interest, and they can find a lot of deal flow in the market. How can that person find the complement to his or her business?
Michael Blank: It’s about networking. I think a lot of people—
Joe Fairless: Where? Where do you network to find those people?
Michael Blank: There’s a variety of lists. Now, with COVID, there’s actually in-person conferences like yours or ours, and now we all have virtual components, probably, to attract more people. So there’s literally conferences that you can join. It’s great way to meet people. There are now meetups that are online as well. There’s different online communities. BiggerPockets has some online communities, we have online communities; you can use LinkedIn to search for specific people.
I remember interviewing one person, we get on these virtual conferences, and they would write down everybody in there on the Zoom call, and they would reach out to them later, and then they would set off one on one zoom calls after that. This was a couple that lived in the UK, American couple, and they raised literally $750,000 and bought property remotely by using this thing.
So you can do this virtually. It’s just a matter of being a little more systematic, and being more intentional when you go out there. You have to know what your strengths are, and who you’re looking for. “Man, I’m a deal finder, I’m a hustler, I can find deals, but I really struggle with finding capital”, then go find someone who’s strength is people and finding capital.
The other one is signing up with some kind of educational programs. There’s a variety out there; we have one as well and when you get into those ecosystems, there’s also a network inside of them. So there’s a variety of different ways that you can meet people, you just have to be intentional about what you’re looking for.
Joe Fairless: Number five.
Michael Blank: Number five is invest in mentoring, and at minimum, a support network of some sort. There’s different support networks. One is a peer-to-peer support network. Those are people that are around you; imagine like a mastermind. These are people that are at around your level, they’re trying to do what you’re trying to do and you’re basically just supporting each other. That’s super valuable, right? That’s part of your support network. And number two, we talked about partners. That’s part of your support network. And the third one is advisors and mentors. And this is very, very powerful. If you study professional athletes or successful leaders, a good number of them have coaches or mentors.
And this is a mistake I made, Joe, is when I got started in both restaurants and apartment buildings, I had no mentors at all. And as a result, it took me 10 years. Well, in the process, I lost over a million dollars, almost lost my house, and delayed my journey by a decade. Imagine what would have happened if I had a mentor back in 2005 when I quit my job; that mentor probably would have talked me out of restaurants and possibly talked me into something like multifamily. Imagine if you and I got started 10 years earlier with what we did; that would be crazy.
On the other hand, you hired a mentor and fast-tracked your success; you didn’t lose a decade and lost a million dollars. In fact, I did a 12-unit deal. That was my first deal. And that was basically me, myself and I doing the best I can, learning on the job… And you’re like, “Yeah, that’s for the birds. I’m going to invest in a mentor” and did a 176-unit.
Joe Fairless: Those are for the pigeons.
Michael Blank: Those are for the pigeons. This is the difference in mentorship. And the thing is, the problem with mentorship is that of course it costs money, and it does. And if you don’t have money for mentorship, then obviously it’s not for you. But there’s a good number of people who have money. For example, they want to invest a certain amount of money in their first deal. “Oh my gosh, should I use this money to invest in a deal? Or should I buy this mentorship program?” Or whatever. And the answer is always the same – investing in yourself is far better than investing any one deal, because the ROI is much, much higher.
So if you’re watching or listening to this and can afford mentorship, then align yourself with someone that you resonate with; and there’s a variety of them out there, everyone’s a little bit different… But if you can do that, what it does is, it kind of fast-tracks your outcome. Number one, it does push your comfort zone, because if you’re working with a mentor who’s done this before, well, they’re probably going to try and talk you out of doing a duplex, and they’re also going to help you avoid the big mistakes. For you, clearly, they must have done something to your comfort zone, because you didn’t come out of the womb going, “I’m going to get myself 176-unit old apartment building.” You know what I mean?
Joe Fairless: Right. When you say “invest in mentoring,” is there a point where the investment is, “Wait a second. That’s way too much”, or would you say, “A million dollars for a mentoring program”, because if that mentoring program teaches you how to do 300-unit plus properties, then you will likely make that back within two deals. At what point is it too much or is it not too much? Is it always just an ROI thought process that, based on your opinion?
Michael Blank: Well, to be specific here… If you do a million-dollar deals, we pay ourselves, let’s say a 3% acquisition fee of these deals, which is pretty normal, and you have no other partners because you’re doing a million-dollar deal. That’s $30,000. A lot of people with some education, especially with a mentor, can probably raise $250,000, $50,000 from five people. That is in the realm of possibility, to get do your first deal. Therefore, if your mentoring program cost $30,000, you get that back in your first deal, not your second deal. But that doesn’t include the experience you get coming through that first deal, it doesn’t include the asset management fees, the equity, and certainly not the profit in 3-5 years when you sell the [unintelligible [00:17:59].22] thing. Therefore, even on your first tiny deal, you already get an ROI, and that doesn’t even count a second or third deal. So it’s a pretty basic kind of math, if you look at it that way.
Joe Fairless: That makes sense. Very easy to think of.
Joe Fairless: When evaluating mentoring programs or mentors (maybe they don’t have a program), you just think, “Hey, that person knows a lot. Maybe I should approach them to see if they’ll be my mentor.” How should we look at evaluating how to pick which mentor to approach or go with?
Michael Blank: That’s a good point. You don’t always have to pay for mentorship either. If you can convince someone to meet with you take your underwing, that’s fantastic. There’s a lot of experienced syndicators out there who would love to mentor someone else.
On the other hand, I’ve found a lot of syndicators don’t want to mentor someone else. Or they wanna teach other people, it’s just not something that they’re passionate about… So you don’t have to necessarily pay for mentors, but either way, you want to look for someone, and there’s really five points that come to mind… One is you do want to find someone who operates with total integrity. I think that’s super important as well as you bring on new partners.
And number two, you want to find someone who has done what you want to do, meaning – they have, of course, done their first deal, but more importantly, because you’re on a path of financial freedom, ideally, you want to work with someone who’s actually quit their job… Because the mindset around actually transitioning from a full-time job to full-time real estate – there’s a lot of mindset things going on, and you’d really like to know someone who has actually started at least a scalar portfolio. So working with someone who does this full time would be something that would be important. Also, you want to work with someone who’s focused on results, and not necessarily a cheerleader. A cheerleader is more like a little bit like a coach, like “Yes, you can do it. Here’s some ways you can hack your mindset.” And that’s useful, but I want to work with someone who’s focused on my results, who really knows how to get results.
And then number four, someone who follows a proven system. I wouldn’t just hire a mentor who just kind of a good guy or a good girl, who’s done this before, but is there a methodology or system that we’re working?
And then number five, what would be important is if I’m going to invest in a mentoring program is I’m investing in an ecosystem, right? So what does that network of peers, what does that network of partners or capital raisers or deal finders – what does that look like? So, when you’re looking at mentorship programs or even just aligning yourself with a volunteer, those are some of the things to consider.
Joe Fairless: I have three comments on that. One, you said you don’t have to pay for mentors. I would argue that is the exception.
Michael Blank: Yeah.
Joe Fairless: Because from my experience, if you’re not paying a consultant, then question number one, question number two, question number three that you send them might go answered, but question number four is likely going to be a slower period of time for them to get back to you. And then question number 5, 6, 7, 8, 9, 10, it comes to a point where unless they’re a family member or a very close family friend, you’re taking, taking, taking, taking, and you’re not giving them much if you’re not paying them. And at minimum, it’s going to trigger some sort of guilty feeling on your part. It’s like, “Man, I keep asking this person all this stuff.”
And the other part and perhaps more bottom-line oriented, is if you are feeling guilty that, “Hey, I’m not giving them anything”, then you might second guess asking them questions, and then your growth is stunted, because you haven’t been giving them stuff. So I would argue there are some exceptions where you don’t pay for mentors, but by and large, in real estate mentor, I think you pay for mentorship, from my experience.
The second thing I want to mention is – I remember listening to Tim Ferriss, and he talks about how it’s great if someone who’s great at something is great at it, but can they teach others how to be great like they are? So you mentioned a proven system as the fourth thing here. I agree, they’ve got to have a system in place where, yeah, they’ve done it before, but they know how to replicate their results. I remember Tim Ferriss specifically talking about that on one of his episodes, and I think that’s a great point.
And then the third thing I want to mention is that you talked about the “invest in the ecosystem.” Whatever value someone thinks they’re getting as a result of the mentorship program and the education, they likely do not understand, because it’s nearly impossible to understand the value of the network of the peer group that they’re going to be plugged into, should there be a peer group within that mentoring program.
So I would say whatever mentoring program you decide on, I would implore you to make sure that there’s lots of others in that group that you can connect with… Because probably, that’s going to be the biggest value of the mentoring program, and it’s the most overlooked value.
Michael Blank: I can’t disagree with anything you just said. So I’ll let you keep talking.
Joe Fairless: Well, those are my three things. So do you have a mentoring program? I know personally, from people that worked with you, that it has proven to be successful for them… But I’d love to just quickly have you talk about what’s an overview of your mentoring program for anyone who might be interested.
Michael Blank: I appreciate that, and again, there are variety of quality mentoring programs out there. The thing that is a little bit different around us is that if you value mentorship, you have the ability to actually work one on one with a full-time syndicator. We don’t have any part-time syndicators. And these people are really hard to find, to attract and to keep, because they don’t really need a job in many cases, and the only reason they’re doing is because they share my passion for helping other people.
Number two, we do actually follow a proven system, which we call the Dealmaker Blueprint, and we’ve had hundreds of people go through that. It’s just—I wouldn’t say cookie-cutter, but it’s a very methodical way to get to your first deal and scale your portfolio. And then not only do we focus on results, we actually guarantee results as well. So the bottom line is look at ours, of course—
Joe Fairless: What’s your guarantee?
Michael Blank: Well, it’s a guarantee that you’re going to do your first deal in the first 12 months—
Joe Fairless: Or what?
Michael Blank: —and if not, we’re going to continue supporting you until you do.
Joe Fairless: Got it. How can the Best Ever listeners learn more about what you’re doing?
Michael Blank: Yeah, we’ve set up a special code to find out more about our mentoring program. If you text the word “Joe” to 66866, we’ll send you a quick link, and you can just check out our mentoring program and see what it’s about. You can set up a call, see if it’s right for you. So that’s a great way to do that. So, it’s “Joe” to 66866.
Joe Fairless: Michael, thanks for sharing the five secrets to closing your first deal. Thanks for getting into the specifics of each one of those, and then also highlighting the mentoring aspect of it, which is, by and large, you know, having that community is one of the most important parts of the process. And quite frankly, it makes the process much more enjoyable when you’re doing it with a lot of other people, versus trying to be a lone ranger. So thanks for being on show, hope you have a Best Ever day, and talk to you again soon.
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