Lance Edwards' Apartment Wealth Info

A commercial broker friend of mine recently pointed out a truism about multifamily entrepreneurship. He revealed that “Apartments are real estate. Houses are “feel” estate“.

“Feel” estate? What does that mean.

What it means is that apartments are evaluated and valued based solely on the numbers – the financials. It’s a very objective process – no emotion. None. Nada. These are investment income properties. Black and white.

Contrast that to single family homes. One key distinction about houses is they are products that are made to be purchased by home owners. The value of a house is driven primarily – if not exclusively – by the comps. And can be quite emotional. After all, this is someone’s home.

And at the end of the day, the price that a homeowner will pay for it has all to do with the location, the color of the carpet, the kitchen layout, etc. – the way it feels. Hence the label for houses, “feel” estate.

This is not a value judgement on multifamily or single family but rather a fact.

I find the objective, non-emotional aspect of apartment entrepreneurship extremely attractive because it enables me to evaluate deals based on the numbers, not the color of the carpet. And I can predict my value creation because the value is based on the numbers.

Another way of expressing this truism is that when we evaluate and buy apartments, we are not so much buying real estate as we are buying apartment businesses that are heavily secured by real estate.

And if you were in the market to buy a business and someone called you to sell their business, the first thing you would not do is jump in your car and drive across town to check out the lobby. Rather, the first thing you would do is ask to see the financials – the profit and loss statement.

Well, it’s the same with apartments. Again, we are buying businesses that are heavily secured by real estate. And because the evaluation is based on the numbers – the financials, we can evaluate apartment deals nationwide.

All you need is a phone, a PC with Internet access, a calculator and 6th grade math education.

The United States is your territory for apartment deals! Now, go do an apartment deal!