There are so many ways to be in real estate; flipping houses, rehabs, rentals, mobile homes, notes, and they are all profitable. At some point in your learning curve though, you realize the place where you maximize return on time, effort and money put into a venture is commercial real estate.
There’s no getting around commercial real estate is where you can make a quantum leap in your personal net worth. You can start small, say with a 2 unit office building rehab, and go big, say with a 200 unit apartment building … and beyond. With commercial real estate, the sky is the limit, it’s just a matter of how high you want to go.
The reason for this is commercial real estate is income property, and it benefits from economies of scale. The more units a property has producing income, the lower the expenses per per dollar of rental income. In a nutshell, this means that each piece of commercial real estate is an investment opportunity, and the bigger the property is, the more free cashflow is available for return on investment.
So once you get the hang of how to run a piece of income property, and (importantly) maximize it’s value, you can start on the low end, say, with a 10 unit apartment building, and then advance to considerably larger properties, say 100-200 unit properties without a lot of fanfare.
The key is … getting started.
One of the simplest and least taxing ways to get you into the driver’s seat of an apartment building is to use a Master Lease Option. The Master Lease Option (MLO) is the income property version of the “lease-option” you encounter in the single family world. The only significant difference is the provision in the agreement that allows you to lease from the Seller, a single entity, and sublease to Tenants, multiple entities. The rest is substantially the same.
The power of the Master Lease Option is that it allows you to control the property while you increase the value of it, and then capture all that value for yourself. The beauty of it (if it is possible for a financing agreement to be beautiful) is that gain that control without taking title, getting bank financing, raising large tracts of private money, and assuming all of the risk that comes with taking title.
Little or no up front cash is required, your credit is a non-issue, you take literally no risk, and you can have a deal put together and “closed” in a couple of weeks. It’s hard to think of a better way to get started doing apartment deals.
But how do you do the deals?
You are lucky in this regard, because Susan Lassiter-Lyons has created a wonderful course addressing just this called, the Master Lease Option Method.
The course is an entirely digital product that consists mainly of videos, audios, forms, and transcripts.
The main body of the course consists of 15 videos taking you through the process from start to finish. The titles of the videos are as follows:
The REIA (Real Estate Investor Association) as we know them today are the organizations dotted around the country, in just about every major market, dedicated to helping beginning real estate investors of to a successful start, and facilitating networking for active investors.
I’m sure real estate investors have always been getting together to swap notes, but the REIA as we know it today is a vestige of the Blue Vase Club initiated by Robert Allen during the heyday of Nothing Down and “creative real estate” in the 1980’s. Time hasn’t been kind to Robert Allen, but the Blue Vase idea really stuck … like minded people getting together monthly to help each other succeed.
Today Real Estate Investor Associations are becoming more organized, both as sources of education and centers for networking. In the early stages of your real estate investing career they are a must stop destination, for several very good reasons.
1) You will be around other people who are as nuts about real estate as you are. There will be no vacant stares, no eye rolling or admonitions to “be sensible”. Everyone else at the meeting is there for the same reason you are; to learn as much as possible about about real estate investing. You will be around “your people”.
2) There will be live training courses being conducted, often by local investors, that will allow you to get very specific training, usually at very affordable prices. Bus tours to look at rehabs in different parts of town are becoming more common in REIAs around the country. Theses trainings given by active local investors are some of the best you will find. Many REIA’s also have lending libraries with many of the latest home study courses. The REIA has paid the expensive sticker price for the course, and you are able to borrow the course when you are a paid member.
3) A lot of vendors, like mortgage brokers, real estate brokers, appraisers, real estate attorneys, title officers, contractors, attend the monthly REIA meetings. Many have associate membership and get the majority of their business from the REIA. When doing your fist few deals these contacts are extremely useful. The quality of the vendor is usually very good, as they are concerned about their reputation, and in the case of title/escrow officers it is a quick way to find the investor friendly title/escrow company that will help make your first deal a success.
4) You have a good chance of meeting an active local investor who will agree to be your mentor. If you are will to take instruction and be a diligent student, a mentor/mentee relationship can really fastrack your learning curve and gain priceless experience you would not otherwise be able to get. There are many veteran investors who attend REIA meetings looking for just such opportunites to help beginning investors along.
5) Networking for deals. Many investors with properties to sell, as well as investors wanting to buy attend monthly REIA meetings. If you have a multi-family project you are looking to wholesale, or raise money for, you are very likely to find the people who can help you, or know the people in their network who can help you, at the monthly REIA meeting.
Buying apartment buildings can appear thoroughly daunting, and overwhelming when you first face down the task of getting it done. But just like anything else, there is a “right way” to do it so you avoid the major traps and follow the straightest line a successful purchase.
Odds are you won’t find that “right way” your first attempt by yourself, but if you follow the instructions of a seasoned pro, someone who has already made the mistakes, figured out the right, best way to buy apartment buildings, then you can tag along and travel the straight line to a successful purchase ahead of schedule.
That’s what Lance Edwards is; a successful apartment investor who has figured out the most effective way to buy high-profit apartment buildings. Recently I spoke to Lance about his process and what he does.
There were a few surprises, things you wouldn’t expect to be true about how to buy most effectively.
- you don’t need a single penny of your own money to do it
- it’s easier to buy bigger properties than smaller properties
- credit is not an issue when buying apartment properties
There were more, but those where the main ones that caught my attention.
Below is a recording of the conversation I had with Lance. It’s about 90 minutes long. In the first half of the call Lance is talking about the process for buying apartments he uses in his Multi-Family Success course, and the second half he is answering questions that some SMART Guide subscribers had sent in about problems they were having with getting started buying their first property. Graciously, Lance answered them all.
Have a listen, I think you will find the Teleclass very illuminating.
Also, if you are serious about creating passive income that frees you from your job, I recommend you invest in Lance’s Multi-Family Success system.