Here’s an excerpt from an email that I just received from one of my students. He has just put a 20 unit property under contract (1st deal) and he has already discovered what I taught him to be true …
And that is that most people in this business have little vision and no concept of marketing. That’s the opportunity for you and me. Again, turning crisis into opportunity. He gets it.
He writes…
“I have noticed that many people don’t really seem to have any vision when it comes to repositioning apartments. I have also seen that many people who own apartments really don’t understand what they are doing. They definitely know little about marketing.”
He goes on to share the process he’s going through in his first time with a new venture…
“I’m really excited. I also am a little afraid because I am chartering in unfamiliar territory and I am working on a strict guideline. I’m confident that I will find the way but I have already learned so much from this experience.”
This is natural. That’s the importance of your daily mindset routine in multifamily – to keep showing up despite what the Little Voice says.
Have you called a broker today?
Lance
Quote from Lance Edwards’ Multifamily Success LIVE students, Karen and Mark Keyser:
“Thank you very much Lance it has been a wonderful experience. It was everything I expected and more, so has your program been. We’ve experienced alot of real estate programs in the past, spent an awful lot of money, and got half of what we have got out of this. So we’re really looking forward to working this business and making it everything we know it can be. Thank you very much.”
Lance Edwards’ Multifamily Apprentice Student Quote:
“If I’m going to invest X amount of time into earning income. Then I might as well get the most bang for my buck as I invest that time. Ya know, 10 hours a week, if I’m going to invest 10 hrs I might as well Invest It Doing Big Ticket Items as opposed to the small items.”
The terms “investor” and “entrepreneur” are sometimes used interchangeably, but it’s important to know the difference and to use the terms correctly. Change your language to linguistically change what your subconscious is telling you. For example, when you are an entrepreneur and you call yourself a “real estate investor,” you confuse the marketplace and eventually confuse yourself.
There are several major differences between entrepreneurs and investors, and knowing the differences can help you to figure out your role in the real estate business.
What do you bring to the deal?
An entrepreneur is a person who uses other people’s time, talent, and resources to achieve his vision. Investors bring money to the deals, and entrepreneurs bring deals to the money. If you are looking to buy deals with other people’s money, you are an entrepreneur.
What are your resources?
In multifamily real estate, an entrepreneur’s job is to find deals using other people’s money. When you declare yourself an entrepreneur, nobody expects you to bring cash to the deal. The entrepreneur’s resources are time, talent, and skill. When you claim to be a real estate investor, others expect you to bring cash to the deal.
The benefit of being a real estate entrepreneur
Obviously, multifamily real estate deals need both investors and entrepreneurs to be successful, but being an entrepreneur has one very appealing benefit: control.
As the person controlling the deal, you run the show because providing money is the easy part. The difficult work is finding the gems among the rubble. Once you find them, you control the prize and you get to make the decisions. You get to decide whether to hold apartment deals for wealth, to sell apartments wholesale, or both.
As the member of the deal with the time, talent, and skill, it’s up to you. And by controlling the deals, you can also leverage the deals into considerable wealth.
Lance Edwards’
Multifamily Success LIVE Student: Fred Ferris, Michigan
“Hi, I’m Fred Ferris. I’m a newbie to this. I’ve never had any real estate experience what so ever. This course is really awesome because of the fact that it is so well planned out! It takes you step by step by step…..
Even for me I’m able to take it in small bites and I have a lot of homework to do but I’m looking forward to it!”
I avoid listening to the news. Why? Because the media is in business to sell news – bad news. Bad news sells better than good news.
Want proof? Think of the amount of time allocated by the media to good news. Now, compare that to the amount of time they spend to reporting, predicting, and recalling bad news. OK. Now, I’ll step off my soap box and get back to my point. (But I recommend you ignore the news – like I do.)
Instead, this past weekend, I had the opportunity and privilege to hear Mark Victor Hansen speak. You are probably most familiar with Mark thru his book series: Chicken Soup for the Soul. (There’s a photo above of me with Mark.)
Mark is an incredible visionary and speaker on success. And he made some important points which I believe are extremely relevant to each of us today:
He points out that Yin & Yang really means crisis equals opportunity - for those who recognize this fact and look for it.
Do we have a financial challenge? Yes, absolutely.
Should we roll over and play the victim and wait for someone else to dictate our future? No, absolutely NOT!
More than ever, we need entrepreneurs - like you – who are creating opportunities & innovative solutions from & for the financial ”crisis”. But to do so, you have to ask a very important question.
All great thinking starts with asking the right question(s).
Here’s a great question to ask yourself: “How can I benefit from the current situation?” Let me repeat, Ask: “How can you benefit from the current situation?”
Keep embedding this question and you’ll find that your subconscious will seek out the answer for you.
I conducted a survey of my Multifamily Apprentices this week and asked them, ”How can you benefit from the current situation?” Here’s how they responded to the question:
1) “Private money fleeing the stock market is going to be looking for secure places - like hard collateralized real estate – in which to park.”
2) “Sellers (who watch the news) will be more motivated for creative financing – if they believe all of the bad news.”
3) “Rental housing demand is going up – raising the value of apartments.”
One of the Apprentices pointed out this quote from the richest man in the world, Warren Buffett. It’s simple and profound advice from the man who is busy building HUGE – I mean HUGE – returns from the “crisis”. Here’s what Warren Buffett says, “Be fearful when others are greedy and greedy when others are fearful.”
So, here’s the point: don’t be among the fearful. Instead, act out of confidence and optimism. Practice your daily mindset routine. Remember, the rules in business and life are simple…
The Stongest Mindset Wins.
Make yours strong.
Lance
The ability to improve real estate properties, particularly multifamily properties, boils down to being a good asset manager. Asset management is different from property management. Property management is the day-to-day operation of a multifamily property, involving such matters as keeping the property up, collecting the rent, and maintaining it. Asset management, on the other hand, is adding value to a property.
Whereas property management can feel like drudgery at times because the tasks are usually the same, asset management is the fun part where you get to use your creativity. The purpose of asset management is to increase equity by raising the NOI (net operating income) to cap out the property.
Asset management involves the following four areas:
1. Property management. You may start out as the property manager for your apartment building, but your long-term goal should be to work as asset manager while making sure the property manager you’ve hired is doing his job. The better your property is managed, the greater your NOI will be. Proper property management affects the value of your property because it will affect your collection rate. A good property manager will decrease the vacancy rate and keep the current tenants happy.
2. Repositioning. Repositioning is changing the appearance, reputation, and image of the property. It involves capital if you are rehabilitating properties and changing the tenant mix. It might mean converting an “all bills paid” property to an individually metered property. Many times repositioning has to do with the reputation of the property, and therefore, you may need to change the property’s name. Some property owners put out a sign that says, “under new management,” but a brand new sign including a brand new name is even better.
3. Adding income sources. Apartment owners can add income sources to their properties by installing vending machines or adding Laundromats. Be creative when thinking of ways to add income sources. Perhaps your tenants have a need for storage; add small storage units for rent. Other possible sources for income include an onsite daycare center, cable television, an exercise room, clubhouse rental fees, pay phones, house cleaning services, and Internet access.
4. Reducing expenses. Reducing expenses means looking at every expense as something that can be eliminated or reduced. That said, landlords have a responsibility to their tenants to provide safe and decent housing, but with creativity, you can find ways to cut costs. Perhaps the previous property owner hasn’t shopped around for better deals on insurance, repairs and maintenance, pest control, security, and lawn care. By lowering one or more of these costs, you can increase your NOI, thus adding value to the property.
Fourplexes are popular properties for investors who are graduating from investing in single family homes but don’t yet feel ready for larger apartment buildings. One of the great things about fourplexes is that you can buy a fourplex and get some tenants for it and then hold it for fifteen years and let the tenants pay down the mortgage for you. All the while, your equity is building and you are reaping depreciation benefits.
Be aware, though, that buying and operating a fourplex is different than buying and operating an apartment building. Take note of the following differences if you’re interested in buying a fourplex.
1. Market Research. When looking for an apartment building, you will use the NOI (net operating income) as a base measurement to compare properties. Based on the NOI, you can figure out what the Cap Rate would be, and then you will know whether or not the property is worth your time and money. With a fourplex, however, the Cap Rate is really low. It’s difficult to get fourplexes that cash flow. They’re better for holding long term in order to build equity. So when you’re researching fourplexes, you’ll have to use comparables, like you would if you were looking for a single family house. Fourplexes are considered residential properties, even if they’re run like multifamily properties.
2. Loans. When considering a fourplex, a bank will look at the strength of the borrower and then the potential for payback on the loan. Lending for fourplexes is similar to lending for single family homes, but there is an occupancy component to qualifying the loan. A fourplex in an area where vacancy rates are low will qualify for a loan easier than a fourplex in an area with high vacancy rates.
3. Resale. There are a lot of buyers for fourplexes, even out of state. If a neighborhood is beginning to look up, then fourplexes in the neighborhood will move up in value, and buyers will be plenty. Again, fourplexes are often stepping stones between single family homes and apartment buildings, so there are generally more buyers for fourplexes than for larger properties.
Depending on your investment strategy, fourplexes may be the right investment for you. Keep in mind that market research is based on comparables, that occupancy is a factor in getting a loan, and that the neighborhood will affect your resale, and your investment should be a success.
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