Many investors, like myself, start out in single family real estate investments. It’s a great way to get our foot in the door, and learn many important real estate investing tactics. If you’ve ever read Robert Kiyosaki’s book, Rich Dad Poor Dad, you’ve probably wondered how on earth he can make so much money from investing in single family homes. Well, the answer is, he doesn’t, and if you haven’t read his book, add it to your Audible or Amazon list.
The way that many investors make more money in investing is that they scale their business. Investors choose their niche, and they set higher goals to achieve those niches. There are many different niches: apartments, storage units, retirement communities, single family houses, college housing, or trailer parks. Each niche has different positives and negatives, and they each have potential to make a lot of return on your investment. If you are just dabbling in single family homes, and taking out Home Equity Line of Credit, you are probably making money, but you just can’t quite figure out how to scale your investments. Here are some ways to help, specifically with scaling your investing in apartments.
1.Raise money from passive investors
You’ve probably heard the phrase, using other people’s money to invest in your deals is how you make money in real estate. Raising money for multifamily deals from passive investors is not a new invention. There are many investors scattered throughout the U.S. desperately looking for someone who is willing to make them a return on their investment, they are called passive investors. Passive investors have the money to invest in real estate, but they don’t have the time to find deals, organize capital, get all the legal work in order, close the deal, and manage all aspects of the deal. The investor who does all the work is called the active investor. If you are looking to buy a large apartment building, chances are that you don’t have $2 million dollars in a savings for a down payment, so raising money is a must. Start networking with people to find the passive investors that are willing to invest their money in your company for an apartment building. Most passive investors make around an 8% annual preferred return PLUS a profit return at the end of the apartment investment, which could turn out to be around a 20% return. Many investors can’t argue with that!
2. Find multifamily apartments
This may seem like a daunting task, but finding multifamily deals is one of the most important pieces of breaking in to multifamily investing. Some multifamily deals may pop up on the MLS market, but if it’s a good deal, you will probably be competing with other investors. One way to find multifamily deals is to send letters or postcards of interest to apartments that are off-market instead of on the MLS. Sometimes you will find owners that are contemplating selling, and you can make a great deal with them, which also saves them 5-6% from selling with a realtor.
Another way is by word of mouth, if you’re an experienced real estate investor, referrals from people that know you’re investing, are of the utmost importance. This is where having a realtor or broker on your team can be so beneficial. Many times brokers get deals several days before they go on the market. If you have a trusted realtor and broker that you work with, he or she can point you in that direction. When you find a trusted broker, treat them well. It is important that investors treat brokers for the time they are spending on you, especially when you are buying off-market deals as well. We all know that time is precious.
3. Find a team to help you
If you are looking to get in to your first apartment deal, it is important to have people help you. There are too many things to do for you to take on that task all alone. A couple of options could be to 1) find a mentor that has already purchased apartments before and has a good track record doing it. 2) A property management company that is reputable in the areas you are looking in. Property management companies can help you with a lot of things in regard to apartments. They should know a lot of information about the market, what the average rent rate is, the rent rate of the apartment you are looking to buy and how to increase the rents, and even things like the unemployment rate in the city. 3) A reputable real estate broker will help you get started on your journey. He or she can point you in the direction of other apartment owners, and can give you off-market deals. Offer to take them to lunch and pay for their time, hopefully you can get some worthy information from them about the area.
Creating opportunities for financial freedom 