Apartment Building Investments – Ninja Deal Finding Tricks – buying apartement

Income less Expenses equals Net Operating Income The value of any income property is based on the annual income that the apartment building, or other commercial property creates for you. This annual income is composed of rents and other sources, less the expenses, and is called the Net Operating Income. This is also known as the NOI. The higher the NOI, the more your apartment building is worth.So if everyone knows this, how can you find great deals on apartment buildings for sale? You would think that every apartment building owner would make sure to increase their rents every year. After all, this gives them more cash flow and it increases the value of the commercial property.Lazy Landlords and How to Profit From Them
You might be surprised to learn that there is a small niche of apartment owners who fail to keep their rental amounts up to market rates. I call this group of owners “Lazy Landlords” because they are not taking the simple steps to get all the cash flow from their apartments that they could easily get. In addition to this, because the value of a commercial property is based on the income it brings in, all you need to do is to find apartment buildings owned by Lazy Landlords, negotiate to buy the property, and then increase the rents to market rates.What this means to you is that even if you agree to pay full price, based upon the current income, once you take over the apartment building, and raise the rents, the actual value will be much higher. If you are able to use one of the creative methods of buying apartment buildings that I will be sharing with you over the next few months, you’ll also have the opportunity to get in without using your own cash or credit.Checklist to Find Undervalued Apartment Buildings So when you’re looking for Lazy Landlords it helps to have an idea of the typical owner who might have made the mistake of not keeping their rents up to market rates. Usually, the apartment building owner that you are looking for fits into one of these categories:1) The apartment building was purchased at least 15 years ago. Let’s face it, most investors do a good job when they first get their commercial property. They fix everything up, make sure the rents are at market rates, and they stay on top of their property manager to keep the expenses down. But once they’ve owned that same apartment building for 10 or 15 years, the tendency for most people is to get lazy. This is true of many investors and you’ll be able to use this to your advantage when you are looking to get a great deal. To put together a list of apartments that were purchased at least 15 years ago, contact your County recorder’s office or find a local information provider company that resells the information from the County office.2) The rents are below market rates. Most beginning investors plan on getting all of their deals from Loopnet or other commercial property listing services. If you want to catch the big fish, sometimes you have to find a pond that no one else knows about. This means that instead of chasing after all the same commercial property listings that everyone else is going after, you need to seek out potential deals that no one else knows about.You can do this by doing a “Rent Survey”. I discovered this “Ninja Deal Finding Trick” while doing the due diligence on a property we were taking over. All you need to do is visit some apartment buildings and knock on several doors in each building. You’ll ask:”Can you please tell me what other folks around here pay in rent for these apartments?”The reason you ask about “Other folks” is so that they don’t think you’re too nosy. I’ve found that most tenants are very willing to share what they pay along with what they know about the other apartments in the building. Make sure you wear clothes that are similar to what the typical tenant might be wearing. You don’t need to go in to each apartment, but you can get a good look into each unit to see how the building compares to other commercial properties that you have looked at.You might be tempted to take a shortcut and look at rent amounts online, ask a property manager, or do something that takes less time than actually going out to the areas you are going to be investing in. The reason that this works so well is because most people don’t invest the one or two hours to do it.Rents Are Low – Now What? So once you find a property or two with rents that are well below other similar apartment buildings in the area, what do you do next? The next step is to contact the owner and negotiate your way into a great deal.

Apartment Investing – Long Term Success Tips – buying apartement

In 1975 a young man from Cincinnati, Ohio worked hard to keep his latest project afloat. He was over budget and late, despite the fact that the new film would set the domestic record for box office gross sales of over $470,000,000 and win three Academy Awards. The movie was Jaws and the director was Steven Spielberg, one of America’s youngest multimillionaires.Jaws, a 25-foot great white shark reminds me of some investors in this business. But not for the reasons you might think. Most people would think of the word shark as someone who is ruthless and crooked. That’s not what I’m talking about.For a shark to survive, it must continue to swim. If it stops swimming, it dies. And that’s what happens to most investors in real estate. What would happen if you stopped? What would happen if you decided not to work for a year? Most investors are like sharks, their business would die.That’s why apartment buildings make more sense. You can buy and sell multifamily properties without spending an extraordinary amount of time doing it. And, if you stop, your investment continues to flourish-if you know what to do.That doesn’t mean you don’t need to go fishing first. You won’t do yourself any favors if you stop swimming before you’ve caught a fish. To that end, what are the biggest mistakes investors make when finding and analyzing properties? How do successful investors “fish” for the right opportunities? They start by avoiding these common mistakes:It’s a marathon, not a sprintThe investment firm Edward Jones airs a commercial where a man wins an auction on a painting. He paid $50,000 for it and when the auctioneer said “Sold!” the man stood up and announced that he was ready to sell it. Stunned and speechless, the auctioneer glanced around the room as though the buyer were crazy. The commercial continues, explaining that the firm takes a long-term approach to investing.Buying real estate is very similar. There’s nothing wrong with making a quick profit, but the fastest way to making millions of dollars in this business is tax-deferred asset accumulation of capital. Investing is like running a marathon (think long-term). Marathon runners train differently than those running a sprint. Be cautious of why and how you’re running the race. Those who think long-term last a lot longer and usually make millions more than those who do not.Smart warriors put on their armorBuying apartment buildings is exciting. I get energized when I find a property I really like. But we have to be careful to make sure the numbers make sense. Verifying and properly projecting operating expenses are to your investment what armor is to a warrior-you just need to do it right. Too often investors let emotion get the best of them and they begin to justify questionable numbers. Don’t let that happen to you.Thanksgiving feastMy wife makes a mean turkey. I’m really not a big turkey fan, but when she cooks one up, that’s all she wrote. And although Thanksgiving meals include many other dishes, the main dish is always the turkey.The same thing is true with apartments. Start by pre-analyzing the property. Does it fit into your investment plan? Don’t worry about the stuffing. Don’t worry about the corn and potatoes. They’re all part of the meal, yes, but put first things first. When you look at apartment buildings there should be three questions you ask yourself first:
Why is the seller selling?
Do the preliminary numbers make sense? If not, why not? Is there a genuinely justifiable reason?
If you had to sell the building tomorrow, would you get your money back?
Of course the other dishes are important, but the first dish is what holds them all together. Start by doing a quick analysis on the property and then move into the other ingredients. You’ll save yourself a lot of time and mental energy.Overly optimisticThere’s nothing fun about being negative. Most buyers invest in real estate because it’s not only fun, but it also provides for all the other benefits we look forward to enjoying, such as financial security. Because of that, we tend to be optimists. I encourage people to be a negative optimist. Again, there’s nothing fun about being negative, but you don’t want to be overly optimistic either.Many investors push expected operating expenses down, as discussed above, to turn a marginal opportunity into something it’s not. They do the same thing when they project rental income. Be careful of accepting any “market rent” an agent or seller claims you can attain. Do your own rent study and understand where the property is really positioned in the market.IndecisionGood opportunities don’t stay good opportunities for long. Somebody else is looking for property just like you. If you find a building that makes sense-something you’d like to own-don’t wait. The Purchase and Sale Agreement (PSA) gives you plenty of provisions to back out if things are not what they seem. Some investors sit on the sidelines for years waiting for that one property that will make them a million dollars. Meanwhile, the two dozen they rejected are making someone else 10 times that. Don’t be afraid to pull the trigger. You have plenty of outs, if you need them.No analysisSome gurus teach that, long-term, you can’t lose when you buy real estate. That’s why some investors buy property without analyzing anything. They don’t do an effective due diligence. They pay little attention to the numbers. The best way to get run over by a steel ball is to try pushing one up a steep hill. If your goal is to lose a lot of money, buy real estate without analyzing the numbers or the property. If, on the other hand, you want to make money in this business, take the time and energy needed to properly analyze the opportunity.