RE Mentor Blog

Your Real Estate Mentors

Dave Lindahl

Why the First Multi-Family You Buy is So Important

by Leave a Comment

52Your first multi-family property is a critical move in your real estate investing career. You’re moving past wrong information and psychological barriers on into new territory to achieve your financial goals. Well, you made the right decision. Multi-family properties open a huge door of profits for the new and experienced investor to achieve their financial goals.

Your first building block of wealth

Multi-family homes are an easy way to get into investing for first time homebuyers. There are loans for owner-occupant home buyers who want to purchase a multi-family home of up to four units which allows home owners the ability to borrow more because they can use the rental income for loan qualification purposes. They’ll also receive owner-occupant financing with little down and lower interest rates as compared to commercial property loans.

There’s less competition

Multifamily investing is still shrouded in myth and misunderstanding. For that very reason, there’s less competition which means more opportunities for you and I to profit! People in general avoid commercial property because they believe that it is too far out of their reach. They see the price tag. They see the work involved and then they run back to working their plan of buying one house at a time. What they’re really missing is the opportunity to learn a new way to profit from real estate – a new system of buying right. Your first multi-family property will take you through the process of putting a tested and proven system to structure the deals the right way.

Significant cash flow can be created

Your first multi-family property will outperform in profits what your single family investments can do. There’s no doubt that you can become wealthy with single family homes, but you’ll have to do multiple deals quickly just achieve the same amount of money. When you start getting those monthly checks in the mail, you’ll have a reminder of why multi-family investing is the way to go.

Lower risk involved

Multi-family properties provide a cushion of income for unexpected events. If you lost a tenant in a single family property, you’ve also lost all your income for that month. With multi-family properties, the mortgage expense can be covered with rents from other tenants and from your cash flow. If there are repairs or maintenance that needs to be done on the property, the cash flow you generate from the property can help to pay those expenses. In order to do that with a single family property, your cash flow needs to be really high to be able to offset the costs.

Start as big or as small as you want

Commercial property is the path that will help you achieve your financial dreams and goals. The idea here is to just start. You can start off with small properties and still see a remarkable cash flow as compared to single family properties.

Apartment Buildings Are An Investor’s Dream

by Leave a Comment

Million dollar dreams are only an illusion without the proper vehicle to attain it. If you’re a serious investor looking for a way to obtain more wealth without the hassle and risk of building your financial empire one house at a time, then apartment investments are just the thing you’re looking for. With regards to cash flow, apartment complexes are by far, the most lucrative deal that is within the reach of private investors. Here’s why.

There’s less competition. The large cost of the apartment buildings compared to single family residences are enough to keep many investors away from this type of investment. For that reason, this market has considerably less competition. Couple that thought with the fact that the amount of apartment building foreclosures are on the rise, and you’ve got a prime market that’s just waiting to be tapped.

Apartment building foreclosures are quickly gaining the attention of commercial property investors looking to gain even deeper profits. Investors can attain even better cash flow than if they were to buy an apartment building that wasn’t in foreclosure simply because they will obtain the property for less than what it was worth.

Higher cash-on-cash returns in comparison to single family homes make apartment buildings the premier opportunity. Obtaining a cash flow of $300 on a single family home is a good starting point for many investors, but with apartment buildings, investors can realize multiplied cash flows because of the sheer number of units you’re dealing with. Even owning a small apartment complex with 10 – 12 units can literally put thousands of dollars in your pocket with just one property.

There’s an increased demand for apartment rentals. Foreclosures happening across the nation have caused many families to have to downsize. More than likely, they’ll end up in apartments because it’s cheaper to rent than a house. For the investor, that means that they won’t end up sitting on an empty apartment building.

Investors can profit instantly from positive cash flows. Apartment building investors profit just because of the number of units they’re dealing with. In the case of a single family home, any profit you receive can easily be eaten up by taxes, insurance, and ongoing maintenance. With apartments, those expenses can more easily be spread over the number of units you have.

Apartment buildings have lower risk. If your single family home goes vacant, do you have the cash flow to sustain it and if so, for how long? The advantage of having multiple units is that if one goes vacant, you’ve got other units that can take on the burden. Earlier, I mentioned that there’s an increased demand for apartments. This trend makes the risk even lower compared to the single family market.

Multiplied profits enable investors to hire property managers who can handle rental issues and maintenance issues. The cash flow you’ll be generating from an apartment building enables you to leverage your time leaving you with the opportunity to look for more deals or enjoy the time you have.

Apartment building owners are more willing and able to provide seller financing. While this doesn’t apply to all apartment owners, there are still considerably more opportunities to obtain seller financing compared to single family homes. Again, I do want to mention that I don’t advocate 100% loan deals, but if the numbers work and the deal is solid, then it might be something to consider.

Successful Apartment Ownership Requires Efficient and Quality Maintenance

by Leave a Comment

Since a professional team is so important to your success as a real estate investor and, more specifically as an apartment owner, I would like to wrap up this article series on how to use these team members in a little more detail.

Just to recap, some of the essential team members that you’ll want to have in place include:

· Bird dogs
· A real estate agent or agents
· A commercial mortgage broker
· A banker (one or more)
· A title company or closing attorney
· A real estate attorney
· Private lenders
· An SEC attorney (if part of your business includes securing private funding)
· An asset protection attorney
· An accountant or CPA
· Property management companies
· Contractors

Contractors are the behind the scenes magicians that can really aid your overall cash flow in the long run as an apartment owner. Units that are in need of complete renovation or simply a few updates do nothing for you if they are unrentable. A good contractor (or collection of them) can minimize the time that units in need of some fixing stay vacant, thus optimizing your income from your properties.

Finding contractors who both do good work and do so in a timely manner can sometimes be challenging but remember that it is a tougher economy out there right now and people are looking for work. Make sure your contractors are necessarily bonded and insured and don’t be afraid to move on if someone does poor work or, worse yet, shows up late or not at all. It is your business and you have every right to expect quality and timely work.

I suggest having a variety of contractors at your disposal. You won’t need all of them all of the time (at least you hope not) but there is something to be said for specialization. Maybe you’re replacing carpet in your units as they turn over from one tenant to another. A professional carpet installer might be a perfect fit for getting a couple of units done at a time. You could make similar arguments for plumbing, electrical work, painting, etc.

Some contractors will claim they can do it all but you rarely need it all when managing apartment units. For assorted odd jobs, a good handyman is always a good bet and they can be great allies when tenants call with fix it items. It is both easy and practical to have budgetary limits set with your property management company so they can coordinate with contractors as needed for small jobs and avoid you getting bombarded with calls for ‘nickel and dime’ issues’.

Remember, this is a business and, as a business owner, it is both reasonable and advisable to delegate as much as you can so you can actually enjoy the fruits of your labor. As we conclude this more detailed article series on your professional team, remember that just about all highly successful business share a common mindset. Success is a state of mind that is shared by few but for which principles are more freely shared than you might think. Make the acquaintance of wealthy people and pattern your own business after what they have done. This is one of the most basic secrets of becoming wealthy beyond your wildest imagination. Now that you have heard what I have to say about building a team, the next step is to find the deals that will help you build the fortune that is out there for the taking!

5 Smart Questions you Should be Asking EVERY Management Company

by Leave a Comment

When you are screening potential management companies to run your property, you shouldn’t just hire anybody. Here are five absolutely necessary questions you should be asking before making your final decision.

“How long have you been managing properties?”
This is clearly the most obvious question to ask anyone, but if you are looking to hire a management company you don’t want to take the risk on an amateur for the sake of saving a buck. Experienced and reliable management companies will often publish how many properties they manage in an impressive portfolio.

“How many people do you have on your team?”
A one-man-show can be impressive sometimes, but the downside is that there’s only one of him. There should be people out in the field, and then there should be people running the operations from an office.

“Can I get references from at least 3 owners?”
If their current and previous clients are satisfied with this company, then you are moving in the right direction to finding the management company for you.
“How will you market my property?”

Advertising is important. The right management company will have the right marketing strategy to bring your property to the masses via web, print, etc.
“Describe your tenant screening process”

This is a critical question because you are putting your trust within a company to pick the right tenants and root out the bad ones. Most management companies have them fill out an application that asks for their income, employment, credit. criminal history, eviction history, and sexual predator history.