RE Mentor Blog

Your Real Estate Mentors

Article

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.

Making Money in Real Estate with Zero Risks

by Leave a Comment

The moment you talk about making money in any real estate investment venture, the thought that occurs in most investors’ mind is ‘What are the risks?”. Most people think that in order to make money in real estate you need to have a truckload of money to start off with.

If Donald Trump taught us anything at all from his many public forays, it’s that this is simply not true. Any real estate investment deal is made up of many multi-layered parts, all of which work together seamlessly to make it happen.

Because there are so many ‘parts’, and I will get to them in a moment, successful real estate deals can happen with no money at all from the part of the real estate investor and minimum risks on the parts of his ‘silent’ partners.

The only way to do this is if all parties bring to the table a certain leverage. For the real estate investor looking to close deals and make money, this means expertise and the ability to negotiate complex real estate deals accurately, profitably and fast. For his ‘partners’ which, essentially form a syndicate putting money into the deal it means they bring in cash and, in return, gain access to expertise they have not got and a spread of the risk on their investment as they only put in what they are comfortable with rather than the large amount necessary to close the deal.

This kind of win-win scenario allows the real estate investor who is low on cash but rich on expertise and negotiating skills, to set up a syndicate that will back his efforts, front it, close deals and walk away with money for everyone, including himself.

As a real estate investor with years of expertise and a reputation in the market, I get approached frequently to front syndicates who want to invest in real estate but have no real know-how and also want to reduce some of the risks involved. For the real estate investor fronting the syndicate, the real risk is in closing the deal and justifying their reputation.

Provided you know exactly what to do and how to handle it, and this is an area, which I often spend a lot of time on in the courses and boot camp workshops I run. You will find that investors with money beat a path to your door, eager to take advantage of your skills and capitalize in the appreciation and gains, which can be had by investing through real estate.

The Only Three Reasons To Be In Real Estate

by Leave a Comment

There are only three reasons to be in Real Estate, if any one tells you any differently then they don’t understand real estate investing.

The three reasons to be in real estate are Cash Now, Cash Monthly and Cash Later. Let’s take a closer look at each one of them.

Cash Now. Let’s face it, we need money to live and pay the bills. With out this cash we would have to go back and work for “the man”. If you’re not a full time investor, this is a reason why a lot of people are afraid to quit their job and work for themselves.

Cash now is the money that you get from “Flipping” properties. Whether it be from Wholesaling, Rehabbing, Subject To, Lease Option or Pre-Foreclosures we need the cash from each of these investing models to put food on our tables and clothes on ours (and our children’s) backs.

Cash Now is good. Having rehabbed over 450 properties in just a seven year period, (I use each of the above methods to acquire my properties)  I’m used to those big checks coming in. But then I realized that if I didn’t continue to get Cash Now through flipping properties, then I would not have any cash coming in at all. Which meant I was not as free as I thought I was.

So I changed my strategy. While those big rehab checks were coming in, I put some of money in my account so that I could live, and then I started to put the rest of the money in Apartment Houses.

Owning smaller Apartment Houses is virtually the same as investing in single family houses. If you’re doing your marketing, you run across Apartment Houses all the time. If you are like most investors, you probably just ignore them and continue to search for the next single family deal.

Apartment Houses will give you greater Cash Monthly. In just a short time, you can build yourself a substantial passive monthly income just from your Apartment Houses. That’s how Robert Kyosaki does it in Rich Dad/Poor Dad.

Cash monthly will give you freedom. Freedoms to do what ever you want when you want. I’m not telling you to stop buying and flipping single family houses, that’s Cash Now. I’m saying to get Cash Monthly (Apartment Houses), use some of your Cash Now (single family flips) and buy yourself some freedom!

Pretty soon you will be building an empire. You’ll have enough Cash Monthly to be able to take a month off in the summer or what ever else your freedom desires! If you were only flipping single family houses and you took a month off in the summer, you wouldn’t have any income coming in.

Do you see how Cash Monthly will give you freedom?

You can get some Cash Monthly from owning single family houses long term but not as much and not as fast as owning smaller apartment houses. And it’s a lot riskier to have all of your money in single family houses.

What happens if you lose your tenant in your single family house? You loose all of your income. You’re going to have to dip into your own savings to pay the mortgage until you get a new tenant. That hurts!

If you loose a tenant in a three family house, you’ve only lost one third of your income. The other two floors will cover your mortgage until you get another tenant. That’s just one of many reasons that owning small apartment houses is smarter that owning single family houses, but that’s another article all together.

Now that you have Cash Now and Cash Monthly, Cash Later takes care of itself. It comes when you sell, exchange or refinance those apartment houses somewhere in the future.

You see, with apartment houses you have an appreciating asset. No only is it appreciating every month but your tenants are paying off your mortgage. So between the appreciation and the mortgage pay down, your equity just gets bigger and bigger!

You can sell your property and get a boat load of cash. If it’s creating a lot of Cash Monthly, you may want to keep those checks coming in. If so then you will want refinance to get you cash out.

Not 100% of your cash, which will only get you in trouble. You should take out about 75% of your cash leaving 25% equity in the building, that way if there is a down turn in the market, your protected. Not only that, at 75%, you should still have a decent positive cash flow. Did you know that you do not pay tax on any of the money that you take out during a refinance?

Now take that money and go buy some more apartment houses and get some more Cash Monthly! In doing so, these apartment houses will start appreciating and the tenants will begin to pay down your mortgage for you. You’ve just increased your net worth because you have increasing equity in one or two more buildings instead of the building that you started with.

Can you see how your empire is being created? Can you see how it can be created in a short time? Holding single family houses will make you money. Holding apartment houses will make filthy stinking rich! Which do you prefer?

Top 5 Goals All Businesses Should Meet

by Leave a Comment

  • Add Value: What is great about adding value to your business is that there is no limit to how far you can go.  If you think your business is good, then be better.  If you think your clients and employees are satisfied with their time in your business, then make them even more satisfied.  People will grow to appreciate your business once you are able to effectively go above and beyond their expectations.
  • Stronger Leadership: In case you remember last week’s e-newsletter where we talk about leadership, being a strong leader means putting your employees’ trust in you and reminding them why they should in order to accomplish both short term and long term goals.
  • Expand Your Network: Have you heard any successful business leader say “I have enough contacts”?  Me neither.  You should always be expanding your network with potential clients and colleagues because the more people you know, the greater chances you will have putting together a deal.  Did I mention that new contacts you bring into your circle, also bring the contacts in their circles as well?
  • Recruit the Best: It is nearly impossible to succeed in this business as a one-man-show.  We all have our strengths and weaknesses, and it is your responsibility as the leader of your business to bring in people that excell at the things you are weak at.  Once you cover your weak spots up with heavy-hitters, your team will be unstoppable.
  • Quality Profits: As soon as you learn to define your services to appeal to the right market, then you can expect to see strong profit margins with the right clients.