EP272: We Discovered the Simplest Million Dollar Business to Start

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In this video, we’ll dive deep into how we scaled from zero to over $300 million in our multifamily business in just six years, what our business looks like, and how we, as active and passive investors, make money, so that you can take our playbook and grow your wealth through multifamily investing as well.

Here’s the story: we scaled from 0 to $300 million in just 6 years.

So, Palm is about to spill our secrets, so you better grab a pen and paper—you won’t want to miss this!

NO. 1 It’s about *who*, not *how*—

There’s too much for us to do by ourselves

We counted at least 30 vendors/ team members for each property

You’ve probably heard of the 10,000-hour rule, which says you need 10,000 hours to master any skill. But honestly, how many 10,000 hours do you really have in this lifetime?

Another reason we were able to scale so fast was because we didn’t straddle the fence

NO. 2 Focus on one thing and do it really well. 

As Gary Keller says in The One Thing, “multitasking is neither efficient nor effective.”

NO. 3 Another crucial element is de-risking investments. Investors hear all about why deals are great, but what they really want to know is how you’ll safeguard their investment. 

Warren Buffet’s rule applies: Rule #1 of investing is don’t lose money. Rule #2? Don’t forget rule #1.

Q:  What do people who are new/newer need to know when they start a multifamily investing journey?

Multifamily syndication isn’t easy, but it’s a simple business—it’s all about increasing income and reducing expenses. As long as people need places to live, there will always be a demand for housing—AI can’t replace that. 

To get started, all you need is the right “WHO”—your teammates. 

And go big now! Starting Small is only going to just waste your time, you’ll find that you’re working harder on a smaller property than you do on a larger one.

People often think too small, and some never even get started. We used to be the same way, believing we needed millions to begin.  But what we didn’t realize is that there are plenty of people out there who are great at making money—and they’re looking for people like us to help grow their wealth.

In our first two years of business, we experienced linear growth, starting with a $6.9 million multifamily apartment deal in Phoenix, Arizona. 

Then year 2, we thought it would be our momentum year and then Covid-19 happened.  

We were in the middle a multifamily complex for $6.2M purchase

Thus we went from 76 units to 100 units that’s linear growth right there.

Q:  Did we ever think, even for a second, that we wouldn’t be able to close on that deal?

Absolutely!

Sellers – We had to renegotiate the purchase terms

Our Team – Some partner wasn’t comfortable with the deal and literally quit the team and had to be talked back in at 6 AM about a week before closing

It’s a loan assumption and that generally took longer and imagine during covid

So, let’s talk about what our business looks like.

Let’s talk about structure first…

Two groups comes together to purchase and operate mf GP and LPs

As lead GPs, our role involves acquiring properties, which includes building relationships with brokers, sourcing and evaluating deals, securing financing, and overseeing the asset management.

KPI to track property’s performance

Every multifamily property is unique—there’s no one-size-fits-all approach. Periodically, we reassess whether it’s time to exit. 

Limited Partners, job is done once they wire in their funds

As far as structure goes, we have single entity LLCs for each property.

Our philosophy is simple: if we hit (or are very close to hitting) the projected returns, we will exit to protect ourselves from black swan events like COVID-19 or sudden interest rate spikes that could impact the property’s performance.

There are many ways to invest in multifamily syndication…

Yes, there are many ways to get involved, but let me highlight 3 main paths:

First, as an individual investor, you have all the funds and can own the property outright. 

Second, active Investor (General Partner / Syndicator) – As a GP, you’re responsible for pulling together resources like time, team, tools, and money to manage deals. You’re actively involved in the acquisition, management, execution of the investment, and exit strategy.

Third, passive Investor – Your genius zone lies in generating income, whether you’re a business owner, founder, doctor, or dentist. As a passive investor, you want to grow your wealth without putting in more hours. Your role is to vet the sponsorship team, conduct due diligence to make sure the investment aligns with your goals, review monthly reports, and let your money work for you while you enjoy the returns.

We love being passive investors—the idea of not having to be landlording, deal with tenants, toilets, trash, and termites, or worry about liabilities and credit pulls is just amazing. In fact, we started as passive investors ourselves. When we invested our first $100,000, we got back an $83,000 K1 paper loss. K1 paper loss – It’s a designation by the IRA not true value loss.  

We thought, “This is incredible—it’s like the government is investing alongside us! They ‘invested’ $83,000, and we only put in $17,000.” Then we invested another $100,000 and got back a $62,000 K1 loss. And it just kept going like that for several deals.  

But then, we ran out of money. Here’s the backstory: we were in the fashion industry, and when our biggest client closed down their retail stores, we lost about 90% of our income overnight.

That’s when we asked ourselves, “How do we transition into being active investors – AKA general partners, and use other people’s money to grow not only their wealth but ours too?“

Q:  So, how do active and passive investors make money?

So this is a really awesome question, and something that comes up all the time. Let’s go with a simple one, LPs.

So LPs, limited partners, at least talked about earlier. What you do is you invest your money, for instance, $100,000 it’s not always going to be the case, but let’s assume that the deal projection right?

It’s always a projection no guarantees, is that that deal is going to double your money in five years. Okay? So 2x return when you’re putting maybe at max, two three hours of work in five years, I think that’s a really amazing return. I mean, think about it, if you put 100k and in five years, it double, right?

But technically, you didn’t spend five years to make that money hours. So basically it’s the fastest, it might be the fastest hourly wage you can get. So basically you make, like, $33,000 per hour than you spend on the deal, which is amazing, right?

And so again, multiple lane that grows faster.

And the key is you get to go live your life. If you have a great active income, you’re having an amazing business, there’s no need to come and like, shift gears, because you’re going to start at the bottom of the totem pole.

That case, you just sit in and forget it and have these things just grow in the background for you.

You wait a couple years, and that money just grows exponentially. Now on the active side, and which is like being lead general partners.

It’s not a bad gig, right? Obviously, I think being a general partner, to be honest, is one of the most exponential growth things you can do if you’re not a tech founder, if you don’t know how to code, or you don’t have some magical being that you can sell to people or like something crazy like that, right?

So as ordinary people, there’s no other asset class that you can gross your net worth and your actual wealth faster than multifamily apartment as a general partner, that’s our opinion. Yeah. So some of the ways that a general partner makes money on a deal. So before I get into that, let me actually give you guys a little bit more and in depth about how general partners like what are our responsibilities? So the first thing is you have to understand that before you win a deal, you have to build years of relationship with the broker. Have to really do the groundwork to understand the community that you’re investing in. In any real estate transactions, block to block, can make a big difference in the performance of the property.

And so those time that you spend, like the hours and the dark, the hours in the quiet, so but there no one that’s around, you should know that how much work you’re putting in, those are the time that actually helps you become a better general partner.

We have a good friend that before he won his first deal in Arlington, Texas, he literally mapped out the grid of the city, and he went block by block, and he noted Apartment A has these amenities.

These are the prices. Then he went to the next apartment that he wrote the same note when He submitted his first offer. The seller asked, Why should I avoid you this deal?

And the broker said, let me show you something. He grabs a big board that has this grid, and he said, “This guy studied this area.”

He will not fail you, because he knows this area probably better than you do, because he already put in the legwork into it. So that was before he ever won a deal.

And so and that’s before, right even us. We have our team. We have people and resources that we have to put into the market every single day to see what deal makes sense.

On top of that, we also put in hard earnest money, which is basically a deposit that goes into a deal once we get it under contract. Some deals maybe day one, day one.

Some deal can be maybe three, four or $500,000 someday. Can be over a million dollars.

Hard meanings, non refundable, meaning that even if the seller fudged their financials, and we found out, we can lose that money, there’s like, basically almost, unless there’s something massive, there’s almost nothing that we can do to get that money back, even if the seller’s fault. So there’s a lot.

On the line even before we raise a penny, because we’ve never done this.

But there’s been people who raised maybe part of their money and couldn’t close the deal. They end up having to send back their investors money, so they lost their earnest deposit. I think, like over a million, right?

I got no so there’s one a million dollar.

There’s another group like $650,000 another group $800,000 people who couldn’t finish their deal for whatever reason.

Well, specifically for this, these case are they can’t raise the capital, so, so in that case, they couldn’t raise the entire capital. So they got, they got, they had to lose 100 plus a million dollars, whatever it is, the investors got their money back, right?

So even before then, plus we signed on the loan. And now, yes, they say it’s non recourse loan, but there’s our bad boy carves on other things that make it so that it’s very onerous on the person who signs on the loan. So it’s a really big deal.

if you’re a general partner, you put the deal together by using other people’s money, but that also takes the complexity, and you have to build up those relationships.

And so if the deal, like I said earlier, is running smoothly, then, of course, there isn’t that much work. But no deal ever runs as planned. And so there’s always stuff that comes up that’s when you really can see the worth of your general partnership team.

Now that we’ve reached $300 million in our multifamily portfolio, do you think your feelings will change when we hit $1 billion?

the responsibility would be more there’s more dollars on the line, but at the same time, we will be making more impact in our investors lives and the thing, and also our community as a whole.

The other thing is, like, if once we hit that 1 billion asset under management mark, that means that we have a larger team, we have more responsibility to manage a larger group of people.

And the one important thing that we need to maintain.

We’ve talked about this a lot, is like the culture within the business, it has to have that same feeling that people have when they feel like they can always reach us, they have access to our team, have that same open communication so the the again, because for us, like it’s a zeros behind the one, there’s more zeros behind it.

It’s not going to change who we are. It’s really going to be about just in just enhance our ability to have more impact on people’s lives, yes, and just doing what we love at a larger scale.

The secret is that entrepreneurs and investors don’t just chase extra zeros, we exist because we are crazy enough to solve other people’s real problems. 

Real success isn’t defined by the zeros in your bank account, but by the freedom to be the pilot of your own life.

And if that’s what you want, the next video we’ll teach you how to get rich without any hard work.