How To Become Wealthier, Faster
Investing In Real Estate
By David
Lindahl, The "Apartment King"
Home Study Courses by Dave
Having rehabbed over 470 properties in
the last seven years and collected over 600 apartment units I’m often asked,
how can I become wealthier faster investing in real estate?
While most investors concentrate on some
aspect of single family houses, I was always interested in apartment houses
first, and then single family homes as a means of getting more apartment
houses.
From the very beginning of my investing
in real estate, I liked the idea that a group of people (the tenants in a
building) would get together and pool their money to pay down the mortgage
on a property, and I liked the idea that they would also pool their money
together to pay for all of the maintenance work for a building.
I especially liked the idea that they
would give an owner so much money that the owner would have a bunch of money
left over at the end of every month that could be used to either re-invest,
save or to go out and have a good time with.
Essentially, I like the idea that other
people were willing to help make me wealthy.
The first property I purchased was a
three family apartment house. I used credit cards to fund the down payment.
When I began to purchase my third three family, I realized that there were a
lot of good deals out there and I needed a system to come up with down
payments.
That’s how I developed my “Chunker
Strategy”. What I do is buy a single family house with little or no money
down (through private money or partners), flip it and use a chunk of money
to live today and use the other chunk for another apartment house.
I became an expert at flipping single
family houses. I learned to wholesale, retail, pre-foreclosure, rehab,
subject to and lease option single family houses. I became a transaction
engineer because I didn’t want to lose any potential deal that might be
available to me.
I soon came to realize that I could also
wholesale, retail, pre-foreclosure, rehab, subject to and lease option
apartment houses as well.
You see, when I throw out my marketing
dragnet for single family houses, I find that I was also attract motivated
sellers of smaller apartment houses. If for some reason I wasn’t interested
in holding an apartment house for cash flow, I could make a chunk of money
flipping it using one of the methods that I described above.
Learning how to invest in apartment
houses is like adding another tool to your tool box. You might not need it
every day, but when you get the chance to use it, it pays for itself over
and over again.
Every once in a while, you come across a
great deal on an apartment house. A deal that is going to bring you in a
great monthly cash flow of eight hundred dollars a month or more. These
deals are actually more common than you think, you just haven’t trained your
mind to recognize them.
Imagine for a minute, as you are buying
and selling your single family houses, you start “collecting” apartment
houses with cash flows of at least eight hundred dollars a month (if you are
buying 3+ units, you will want at least a net positive cash flow of eight
hundred dollars a month, unless you are in a first half of a rising market,
and then and only then should you get less).
You will find these deals by dealing with
motivated sellers. These deals do not commonly come through real estate
agents. There are many good marketing courses available that teach you how
to attract motivated sellers, get one and prosper!
Let’s say that you collect just four
apartment houses a year, one every 3 months. At the end of the first year
you will have a net positive cash flow of $3,200 per month. That would equal
$38,400 per year.
Now let’s say that you continue to flip
single family houses, get chunks of cash, and when the opportunity arises
you continue your shrewd method of investing and continue to collect four
apartment houses the next year. You have just increased your monthly income
to $6,400 per month and your total yearly net positive cash flow from your
apartments to $76,800.
Let’s jump forward to the end of year
four. You have now collected a total of 16 apartment houses. Your monthly
income from your apartments is $12,800 per month, your yearly net positive
cash flow from your apartments is $153,600!
That means that if want to take all of
year five off and do nothing, no flipping single family houses, no buying
more apartments, no doing nothing, you would still get $153,600 in as a net
positive cash flow from your existing apartments.
With $153, 600 you can do a whole lot of
nothing!
Now you might be thinking whoa! What
about all those tenants! I don’t want to deal with any tenants…you don’t
have to. As your purchasing your property, you factor in the cost of a good
management company. If the property still cash flows properly, buy it. If it
doesn’t…next!
Some people don’t have a problem managing
their own buildings. I did it for my first two and one half years in
business but I soon realized that dealing with my tenants took time out of
me going out and finding more deals, so I systemized the management of my
buildings and hired a girl to work in my office and manage them for me.
I haven’t talked to or taken a call from
a tenant in over four years and yet I happily deposit those cash flow checks
in my bank account every month!
When I buy properties out of state, I
hire local management companies to manage them for us. The rule of thumb is
to pay them 8 –10% of the gross collected rents for buildings with 20 units
or less and 5 – 8% for buildings with 20 units or more.
Let’s get back to the cash flow because
cash flow is the real reason you should consider buying apartment houses
while your doing your single family investing.
The cash flow gives you the freedom to do
what you want when you want, go where you want when you want, and buy what
you want when you want. This is exactly why we are in the real estate game.
What if you don’t decide to invest in
apartment houses? It’s now four years later, you’ve been flipping a lot
houses and are making some good money, heck, you’ve even got some single
family houses that your holding for long term cash flow.
Let’s look at the reality of the
situation. If you want another payday, you have to buy and sell another
house. The cash flow on your single family keepers average $300 per month,
what happens if you lose your tenant for just one month? You’ve probably
lost your profits for most of the year.
If you were collecting apartment houses
during that same four years while buying those single family houses, you
would have a pay day in the tune of $12,800 per month each and every month
for doing nothing (your net positive cash flow). The management company does
all the work! If you lose a tenant in your three family building, no
problemo! The other two tenants still pay enough to cover the expenses and
also give you a little cash flow.
Not only that, you are creating more and
more equity in those apartment buildings through the pay down of the
mortgage and the appreciation that takes place each month that goes by. Your
setting yourself up for some huge paydays further on down the road.
How do you become wealthier faster
investing in real estate? Start collecting some apartment buildings as you
buy and sell those single family homes.
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David Lindahl, also known as the “Apartment King” has been
successfully investing in single family homes and apartments for the
last eight years. He is the author of four popular, money making
home study courses “Apartment House Riches”, “How To Estimate And
Renovate House For Huge Profits” “Managing For Maximum Profits” and
“The Real Estate Investors Marketing Tool Kit”. He can be reached at
dave@rementor.com and www.rementor.com.
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