How to Invest in Apartment Buildings : Real Estate Investment Tips and Strategies

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Investing in apartment buildings has always intrigued me but has never been my focus. My company’s niche has been buying single family houses between $130K-$170K ARV. But, I did acquire a couple small apartment buildings early in my career, and there are definitely some advantages to investing in apartment buildings.

This seems like a popular topic amongst investors, and since I’m no expert at buying apartment buildings, I found someone who is. His name is Matthew Martinez. Matthew is the author of 2 Years to a Million in Real Estate, the founder of one of the largest real estate investment associations in the country, and has been interviewed by The Wall Street Journal, Money Magazine, and The New York Times. CNN even called him a tycoon in the making!

Matthew’s second book, Investing in Apartment Buildings, is due to be released in November. Here’s a small excerpt . . .

The Dwindling Middle Class

I’d be remiss if I neglected to implore you to act now rather than waiting and planning to begin at some time in the future. My argument for taking action immediately is outlined in this introductory chapter. Primarily, I’m convinced that the middle class—families with incomes between $40,000 and $200,000 a year—is shrinking at an alarming rate as a result of the financial burdens of our time. If you classify yourself as middle class (based on this definition), you, too, should be alarmed, but I’ll explain how investing in real estate can help.

There are three distinct socioeconomic strata in the United States, and the chasm between the upper and lower groups is becoming increasingly more pronounced every day. As the income gap between these two groups widens, it highlights the inequality between those who have achieved financial prosperity and those who find themselves caught in a perpetual cycle of financial instability, poverty, and lack of opportunity. Sociologists refer to this demographic divide as the “haves” versus the“have-nots.” Both of these groups are growing in numbers, but primarily at the expense of the middle class.

Burdened with excessive credit card debt and facing a precarious job market that has been severely stunted by the subprime debacle, the credit crunch, recession, the Iraq war, terrorism, and several recent natural disasters, the middle class is desperately trying to survive in this unstable environment. However, given the current economic climate, its future seems anything but prosperous. In fact, those who continue to classify themselves as members of the dwindling middle class are finding that their wages have stagnated and that their chances of reaching greater financial prosperity are seemingly negligible.

 

That got my attention whenever I first read it. And now for the solution! (oh yeah, click here to download a couple chapters from the Investing in Apartment Buildings book pre-publication)

 

The Solution: Passive Income

Most individuals start investing in real estate because they perceive it as a path to wealth and financial freedom that will permit them to no longer need to work a day job. You can achieve financial freedom by creating a passive income stream that is large enough to cover your ongoing expenses, or you can achieve it by having a large enough “nest egg” to enable you to live off the proceeds from the interest earned each year. Income-producing real estate (specifically from apartment buildings) can provide a healthy income stream for you and your family during good times and bad. Apartment buildings are unique assets that can generate significant passive income for the rest of your life. Passive income is the profit created from rental activity and is one of the primary benefits of owning such valuable assets. One of the goals of multifamily ownership is to buy apartment buildings and manage them properly so that they generate a profit each year (i.e., they have positive cash flow). When you achieve a stabilization of your portfolio, apartment buildings can provide a sufficient financial cushion and protection should you fall victim to any of life’s less favorable “chances.”

I recently met with the owner of a 50-unit apartment complex. He was 82 years old and quite frail because he had suffered a stroke a year earlier. He had owned the property for 30 years and had paid off the mortgage. Since it was generating $15,000 in positive cash flow each month, he was able to sleep well at night, knowing that his wife could live off the income from the property should he pass away. This is why passive income from apartment investing is so coveted.

 

I suggest if you have an interest in learning how to buy apartment buildings, download the free chapters from the book. Investing in Apartment Buildings looks like a great addition to any real estate investor’s library. You’ll feel the same way after you read the free download.

Posted in Real Estate Investment Buying Strategies | 8 Comments »

Real Estate Investing Video : Utilizing Land Trusts as a Real Estate Investor

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Last Tuesday night, my business partner, Dusty Keefe, spoke at the Charleston Real Estate Investor’s Association on “Utilizing Trusts for Asset Protection as a Real Estate Investor.” Unfortunately, I could not make it sense I was presenting on the recruiting private money webinar that night (which went Outstanding!! if I could say so myself). But . . . one of our buddy’s video taped it for us and we’re going to share a clip with you from the other night!

If you aren’t yet privy to the power of trusts in real estate investing, check this out. Dusty covered a ton of content ranging from the players in a trust (the trustee, beneficiary, successor trustee, director, etc), the differences between land trusts, personal property trusts and living trusts, some of the many benefits like getting your name off public record, avoiding probate, protecting yourself when buying subject to, avoiding seasoning problems, transactional privacy, and much more.

Here’s what some of the attendees had to say about it:

“I was very impressed by Dusty’s knowledge and his willingness to share it. Hope he’s available at other meetings for questions once I have a grasp on his information. Thanks Dusty for your brilliance!”

- Sheryl Greenberg

“Dusty, your presentation was unbelievable, and it was packed with valuable information and tips. As I told Patrick, you all should be commended for all the free information that you are willing to share in order to help others succeed. Thanks for taking the time to share your knowledge and experience about land trusts with the group, and I look forward to learning more from you in the future. The group is lucky to have you and Patrick as members.”

-Bryant Pearson

“Dusty did do a wonderful job of explaining and trusts. I have always been somewhat confused by these and to date have never used them because I wasn’t really sure how. Thanks to Dusty I now have a greater understanding and am planning to begin using trusts on future purchases. Greatly appreciate Dusty’s time and willingness to share information.”

-Karen Rapchick

“Dusty did an excellent job. He stepped to the plate (with very little advance notice) and clobbered it. He really opened my eyes to different approaches; the info was priceless. Thanks again!”

-Rob Robinson

Dusty’s spoke for over an hour but here’s a short clip on the benefits of transactional privacy with land trusts and how Walt Disney used this technique to lock up over 28,000 acres for pennies on the dollar.

If you are interested in gaining access to the entire lesson, all you have to do is sign up for the email updates on the site.

This is just the tip of the iceberg as far as trusts go. Just so you know, this kind of information usually costs thousands of dollars and you would get it from someone less knowledgeable than Dusty. Dusty has studied asset protection, specifically, using trusts in real estate for many years. Enjoy!

Posted in Business Management Systems and Tools, Real Estate Investment Buying Strategies | 5 Comments »

Real Estate Investing Tips and Strategies: How to Combat the Shopper

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First off, let’s define “shopper” and make sure we are on the same page.

A shopper is a seller who has contacted every investor in the book to try and get the best offer possible. These people have very little loyalty and aren’t thinking about anything other than what’s in it for me (as if I could blame them). They call every “We Buy Houses” ad in the phone book, the newspaper, on the internet, etc.

BEWARE: A shopper can steal a ton of your time and suck the life right out of you. You spend time researching their property, do a thorough inspection, make them an offer, and . . . nothing. They tell you thanks a lot, maybe I’ll call you after the other five investors have made their offers. You drive home dejected, never to hear from the seller again.

First Line of Defense

The first thing that you can do to combat the shopper is to identify them. This is done by asking the seller a simple question.

“Have you spoken to anyone else about selling your property?”

I ask this question for a couple reasons.

First, I want to make sure that the seller hasn’t already contractually obligated themselves to another investor because we don’t want to step on anyone’s toes. You would be surprised how many times we’ve contracted a property and two weeks later, the seller is signing a contract with another investor. Sometimes they claim ignorance but usually they are just trying to get a better offer. Click here to learn about protecting your real estate deals from contract to close.

Second, I want to know if there is any competition already in the picture. Depending on how the seller answers, you’ll have a pretty good idea if you are dealing with a shopper.

Assimilate Your Battle Plan

Next, you want to gather all the necessary information so that you can position yourself for success.

“Have you received any offers?”

You want to find out if an offer has been made and exactly what that offer was.

If the seller doesn’t want to answer, just tell them, “I don’t mean to be intrusive, it’s just that I don’t want to waste any of your time. I value my time highly as I’m sure you do, and you may already have been offered much more than I could pay you. That makes sense, right?”

Find out what was offered, price and terms, and ask the seller what is most important to them about an offer. You may find out that price is not the number one concern. It could be the time frame or working with a professional company or that it’s an all cash deal. Let the seller tell you.

The #1 Mistake Real Estate Investors Make when Dealing with a Shopper

A shopper’s goal is to collect as many offers as they can. Once you make them an offer, you no longer have a bargaining chip. The seller no longer needs you. Your offer will be used as a baseline for the seller’s future negotiations.

Unless you are one of the last investors that the seller is going to meet with, you have little to no chance of securing the deal.

Winning the Battle

“How many investors do you plan on meeting before making a decision?”

This question will help you gage when to schedule your appointment with the seller. If you find out when you are at the property that the seller is still going to meet with someone else, take your time building rapport with the seller but don’t make your offer yet. Let them know that you will start working up your numbers and will meet back up with them after their last appointment.

Your ability to build massive rapport with the seller throughout this process will aide you greatly in your quest for the deal. You will most likely have the most touches with the seller by communicating with them throughout their shopping process.

By positioning yourself to be around at the end of the battle, you’ve got a fighting chance to win the deal! Good luck and may the best investor win!

Tags: creative real estate investing
Posted in Negotiating, Real Estate Investment Buying Strategies, Tips and Tricks | No Comments »