What Was It Like Buying My First Apartment Building

According to most of the real estate books I read, the ideal investment property is a newer house or apartment building in need of some cosmetic repairs (new landscaping, paint, carpeting, or general cleaning up). Conversely, it should not require major structural work (new foundation, boiler, or roof). The rents should be low, even though the property is situated in a good or an up-and-coming neighborhood. Lastly, the owner should be eager to unload the property. When the seller is motivated, he or she will be open to negotiating the price and other terms of the sale, such as the amount of the down payment, the closing date, and, if the seller is financing the deal, the interest rate.

In the decades since I walked into my first showing, I’ve probably considered over one thousand properties. Very few qualified as “ideal,” but I did not realize at the time that by following the popular wisdom, I was setting an almost impossible goal for myself.

I decided to purchase a small apartment building – in the range of four to ten apartments – which would provide a better chance for a positive cash flow than, let’s say, a duplex..

As my search began, two opposing emotions dominated my brain: fear and desire. As to fear, I didn’t know what I was doing. I had no idea how to find investment property. I didn’t feel street smart. All of my employment history had been with the government or in the not-for-profit sector, and I had never ventured into the for-profit arena. I felt like a lamb who had to deal with wolves.

My most recent job as an assistant hospital administrator in Pittsburgh had ended with my essentially being fired. The prospect of losing another job and starving to death concerned me.

In general, I was a fearful person.

While I had read several books on the subject of real estate investment, my knowledge was basically theoretical. Now I had to face the real world. I had to force myself to evaluate buildings, tenants, and even real estate agents who cared more about earning a commission than about finding me the best deal.

Virtually all the books I had read advocated using a good real estate agent who could find me fantastic deals and would therefore be worth his/her weight in gold. I did not know even one real estate agent, so I struck out on my own. I really got an education.

Every Sunday I scanned the Chicago Tribune Real Estate section. Almost daily the real estate ads in the newspaper or the MLS read in boldface type: BELOW-MARKET SELLER FINANCING AVAILABLE! Even so, very little incentive existed to push people toward real estate investment. Investors were content to put their cash into money market funds, which were paying over 18%.

All this added to my general anxiety about my new venture. Counteracting the fear, however, was desire. After my lousy experience in hospital administration, my mantra became, “I will never depend upon a job for my financial security.” Never again did I want to subject myself to the insecurity of a job. Never again would I allow myself to be in that position. I wanted to control my own destiny.

I had grown up poor and didn’t want to live that way.

My desire proved to be stronger than my fear, and so the journey began and the search was on.

I was on my may to becoming a Apartment Investor Mini-Mogul.

There is more to this story…..

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Building Your Real Estate Team

Building an effective team can make your life as a real estate investor a lot easier.  You are only one person and cannot do everything or be an expert in every aspect of real estate investing.  Going at a project alone can become one of the most frustrating experiences you will ever encounter.  Many people have become frustrated and quite real estate investing because they try and juggle too many things.  Make sure that when putting a team together you provide everyone with win-win opportunities.   When someone knows that working with you is going to make them money they will put you as a higher priority on their list.  But you have to prove it to them that you are the real deal.

People to have on your real estate investing team include

Real Estate Agents:  Find the top agent for volume of sales in your area and other agents who work with real estate investors.  Real Estate agents can be a great source for leads and help you get your rehabbed properties sold.Real Estate appraisers: Find an appraiser that has done a few hundred jobs or more and make sure they carry errors and omissions insurance.Real estate contractors: Good rehab crews that can get the job done in a timely manner, have 3-5 crews on your speed dial and on every deal get 3 estimates done.  Ask for referrals from them and make sure they are licensed.Real estate attorneys: Every investor needs an attorney, they can help to protect your assets, make sure you find one that works with investors and knows what you are doing.A property management company: Can manage your properties and will give you leads on property they are managing that might come up for sale.Title companies: Take care of the legal process and make sure there are no liens against the property you are buying, choose one that does hundreds of closings a year.Home inspectors: Charge about $400 but will give you a great inspection and could save you thousands in the long run.Bankers/Mortgage brokers: Help you get financing for your deals and can get financing for your buyers?Bird Dogs: Every big investor has bird dogs searching every crack and crevice for vacant houses and motivated sellers.  Get some bird dogs and it will save hundreds of hours of your time.Other Investors: other investors may be experts in other investing niches. You can out source your short sales to short sale experts in your area. Wholesalers can get you some amazing deals.  You also need rehabbers to wholesale your deals to. Land lords to sell deals too. Networking with investors is one key to a successful real estate business.  Do not think of them as your competition, think of them as part of your team.And your Mentor

All of these people can help you in various aspects of real estate investing.  You might find that there are a couple others that are keys to your business but this is just a list of a few.  Everyone will also be a source for leads.  You have to let them all know what you do by proving that you keep your word and back up what you say you are going to do.  Also treat each one with respect, and act ethically or your team will turn on you.

Filed under: RE Investing

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