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How Apartment Investing Pays For Your Kids College Education

graduationAs a species we humans started as hunter/gatherers, then becoming civilized we moved to being agrarian, then in the Industrial Revolution populations moved to cities and became workers, performing manual labor. Now, with technology transforming the economy and work we are in the Information Age. Many pundits have tried to label what the next “Age” is going to be; the Wisdom Age, the Communication Age, and so on. None of that really captures it for me.

What I see coming next is the Entrepreneurial Age. The Age of taking nothing for granted, where you are entitled to precisely nothing. With populations and need growing on a Hockey Stick trend line, if you don’t know how to solve problems and create value, in the coming years you will be “dead”. Almost literally.

You can see the beginnings of it now; people in mid life whose jobs have been eliminated by technology, looking for another job where they can employ their existing skills, that unfortunately don’t exist. The hard truth is, many job seekers have to go back to school and learn new skills so they can be employable for jobs that are available today.

OK. Wow. A bit of a rant brewing here.

Actually, I didn’t mean to go out on such a bender on this topic. What I want to say is, whatever “Age” we are moving into next, today we are most decidedly in the Information Age. If you work as an employee, there is a roughly 85% chance that you are a Knowledge Worker; meaning the tool of the trade you practise is the specialized knowledge you have in a certain area, and you are employed based on your ability to use or implement that knowledge somehow.

Knowledge is evolving daily, and the way it is used and applied is also changing right along with it. So all of this is to say, if your kids want a chance at prosperity in the coming years, be that as an employee, or a business owner, they need an education. A college education maybe, though not necessarily, nevertheless an education that gives them the chance to be relevant in the workforce of today and tomorrow.

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If I Have No Cash Or Credit For A Down Payment, Will I Need To Obtain POF To Get The Deal Closed?

proof of funds

Source: Wikipedia

The situation that will require proof of funds is working with a lender to get a mortgage approved. Any lender who is providing acquisition financing will want to see the money sitting in a bank account with your or your partner’s company name on it as part of their underwriting.

So at some point before closing, whether it is early or later in the process, you will have to be able to provide proof of funds in order for the deal to close. If you personally don’t have the funds there are a number of ways to raise them.

One is with a money partner. There is nothing new or revolutionary about this. You have a deal in the early stages of being tied up, most likely you have an LOI submitted and the Seller is showing interest. You create a deal summary and then contact every person you know who would be a possible candidate for partnering with you. For every one that says they are not interested, you say to them you understand, but do they know of anyone who would be interest. In about half the cases you will get another name, and so you call them, and continue your search.

Another way to find partners, and private lenders for that matter, is to advertise the property for sale. Advertise it heavily in as many places as possible to get as many calls as possible. With each caller you give them the deal summary and follow up after one or two days.

In the best case you will have a buyer for the property you can wholesale to. If they say they are not interested, you ask them what was it about the deal that made them not interested; they will tell you. If the reason they give is related to the property, note what it is and let them know you will be in touch with another property that fits their criteria. If the reason they give is related to price, ask them if they would like to partner on the deal instead, with them being the money partner and you doing all the work. Depending on who you are talking to, this will be interesting to them. A younger go-getting investor will say “no”, because he/she doesn’t need you, an older more veteran investor will probably be interested, because having their capital and track record make money for them, instead of their personal time and effort, is more what they are looking for.

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How Do I Get Started In Apartment Investing And Find A Property?

real estate mentorGetting Starting in apartment investing is the simultaneously thrilling, and overwhelming. Thrilling because it is pretty clear to see, once you get through the learning curve and past deal number one, your money worries are over. Overwhelming because, let’s face it, you’ve probably bought a house before, but not an apartment building. There are more moving parts in an apartment investment and the numbers are bigger.

It might be a lot to get your head around at first, but in the end you are so far better off buying apartment buildings than houses; both with monthly cashflow, and appreciation.

How do you get started in apartment investing though, how do you find a property?

Getting started really means getting educated. Learning the basics of what makes a “profitable” deal would be step one. There are many good courses. I am partial to mine though, the SMART Guide To Apartment Investing; a) because it is free, and b) because it is so darn big and comprehensive. I challenge you to find another free course that delivers so much educational value about apartment investing. Anyway, start with getting a good course and getting educated about the basics of apartment investing.

Once you have a basic grounding in the basics of apartment investing, find an active apartment investor and offer to be a deal finder for him or her. You may be entertaining romantic notions of hurling yourself into the commercial real estate scrum and emerging scarred but victorious with a hot deal and millions in equity, but if you are starting at the very beginning, that’s dreamland. Seminar stuff. Just about any story you hear about starting broke, bankrupt and faking it until you make it and so on, is almost always the end result of a lot of very relevant experience that came before and laid the groundwork for a redeeming success.

The bottom line is, if you don’t know how to do something yet, you need to learn, and acquire the skills, and the fastest way to travel the learning curve is at the elbow of a mentor. The best place to find a mentor is at your local Apartment Owners Association, or your local REIA. You may not find the right person right away, but if you keep looking, you will.

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How To Make A Comfortable Living Buying Apartment Buildings Without Using My Own Money

There are two components to this question.

1) How do you find an apartment building that will throw off enough positive cashflow to provide you with a comfortable living?
2) Once you’ve found that property, how do you buy it using none of your own money?

Point 1) begs the question; what exactly is a comfortable living. The definition of a comfortable living is going to differ for just about everyone, but to get a general idea let’s look at some personal income statistics from Wikipedia.

If you look at these statistics you can see the income of people varies widely depending on, a) whether they are male or female, and b) how much education they have. Based on people who are over 25, high school graduates earn $26,000 a year, some college $31,000 a year, And the way the trend goes, the more education people have the higher their income is.

Source: Wikipedia

If you are a high school graduate your income is likely to be $26,506, or thereabouts. If you have a Bachelors degree your income is probably $49,300 or more. I don’t know what your situation is or where you fall in this range, but let’s say it’s somewhere between $26,000 and $49,000. So if your income is between $26,000 and $49,000 a year that means it’s on average about $35,000 per year.

So if you are going to create a “comfortable living” buying an apartment building, the first thing the property must accomplish for you is replace your current income. So let’s define “comfortable living” as replacing your current income, and then adding another 20% on top of that to provide the comfort factor. To keep with round numbers and something that is easily divisible by twelve, let’s say that comfortable living number is $48,000 a year, which is $4,000 per month.

Now, how do you find an apartment building, or buildings, that will produce $4,000 per month or more? Well, there are many, many ways to do that, as in all of real estate there are many different ways to get to that objective. But let’s stay within the realm of apartment buildings, and the easiest way,  which is to buy turnarounds.

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