Real Estate is one of the best ways to create and grow wealth. My friend Lance Edwards is here to talk about how to get into small apartment investing and create wealth by scaling up. Lance talks about the three methods for creating deal flow including his secret weapon.
Lance Edwards is a best selling author, real estate investor, teacher, and radio and TV personality. In this episode, he breaks down what small apartment investing is and how it can be so much more lucrative than single family home investing. He also talks about the advantages of direct seller negotiation including down payments, interest rates, and no personal guarantees.
You can find Lance here:
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Show Notes
- [01:50] Lance has been involved with real estate since 2002. He was in the process of trying to find ways to make extra money.
- [02:38] His first deal was a fourplex with no money down. Within 2 1/2 years he had done 50 deals using other people's money on a part-time basis.
- [02:55] Within three years of his start in small apartments, he was able to retire from a 20 year corporate job.
- [03:02] He has been doing real estate full-time since 2005. He has been teaching others how to do the same thing since 2007.
- [03:16] There is so much less competition was small apartments than single-family. You make bigger numbers for the same effort. Plus you can buy these properties for cash flow or flip them.
- [03:45] My best-selling book is How to Make Big Money in Small Apartments.
- [04:37] Rental houses don't have the cash flow that small apartments do. Apartments are built to be income producing vehicles.
- [05:17] You can buy 10 houses or one 10 unit apartment complex. Start with a small apartment building and scale up. It's all very simple math.
- [06:36] Learn the business and understand the basics. Then decide if you want to do it yourself or have us do it for you. We do a lot of done for you services to find sellers and buyers. At the end of the day, you need to find sellers and buyers or investors.
- [07:33] Three methods for deal flow are websites, brokers, or direct mail.
- [08:06] Brokers can give you access to pocket listings that are not available on the public websites.
- [08:12] The secret weapon is direct mail. This is sending mail directly to an owner asking if they are interested in selling. This cuts out the competition and gives you direct contact to negotiate for things like seller financing.
- [09:03] Negotiate your own down payment and interest rate with no personal guarantee.
- [10:29] When you sign a personal guarantee or recourse loan. The bank can take your property and come after you personally.
- [10:53] With seller financing, you can purchase a property with monthly installment payments for a few years. There is no credit check, everything is negotiable, and there is no personal guarantee.
- [11:13] If you default on the note, the seller takes the property back, but they don't come after you personally.
- [12:22] Flip one, flip one, flip one, hold one is the path to financial success. Create deal flow and flip properties while you cherry pick the ones you want to keep.
- [13:39] Use other people's money for leverage. Use private investors or self-directed IRA investors. Tap into other people's resources. The only thing that holds you back is deal flow.
- [15:15] The investor can be a lender or an equity partner. They loan me $50,000 and I give them 6% interest. An equity partner may get 1/3 of the property value and income.
- [16:56] You can negotiate the terms of your loan with your private lender. Deferring interest will boost cash flow.
- [18:01] Small, midsize, and large apartments. Corporations own large properties. Midsize is the space of mom and pop investors.
- [19:39] Everything is the same with the midsize. There are just more zeros on the check.
- [20:18] Forced appreciation. Increasing the net operating income. Raising rents or reducing operating costs. Raising occupancy also raises value.
- [25:16] Don't make the mistake of thinking that you are not qualified to get started.
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