Where We to Look to Invest

Now that you’ve decided that you want to invest in multifamily apartment complexes, you don’t want to just run out and buy the first apartment complex you find. You need to develop criteria on a city and Metropolitan Statistical Area (MSA). Below are the criteria that I develop when reviewing cities and MSAs.

  • Population Growth

    • The first factor that we look at is population growth. If people are leaving the city, then there is an increase in supply of properties. This increased competition amongst landlords makes it harder for landlords to increase rent. We also want to understand why people are going to that city or MSA. Is it because a certain company is moving headquarters? Is it due to economic development? Figuring out why the population is changing is the first step in analyzing a city/MSA.

  • Economic Diversity

    • Job Sector Diversity

      • We avoid investing in cities and MSAs that has a job sector that represents 25% or more of the workforce. The reason that we look for a diversified job sector is because if one sector faces an economic downturn, then there are other sectors that can maintain jobs. This diversified risk allows us to invest in real estate confidentiality.

    • Employers

      • Along with diversified job sectors, we also look for a number of large employers in a city or MSA. As a multifamily investor, we do not want to be dependent on only one employer dictating our market. If that one company packs up and leaves to a different city, begins to fail, or faces serious litigation, it can be detrimental to our business.

    • Unemployment Rates

      • We analyze the US Census Bureau’s vacancy rates over the last 5 years are declining. This means that more jobs are being created and more money is coming into the city. More jobs, more money, more qualified tenants!

  • Supply & Demand

    • Rental Vacancy

      • Vacancy can make or break the profitability of an investment. Unoccupied units and tenants not paying rent in a timely manner means our Net Operating Income is decreasing. This decrease in Net Operating Income causes the value of our investment to decrease. That is why we verify with the US Census Bureau that the vacancy rates over the last 5 years are decreasing.

    • Median Rent

      • We analyze that median rents are increasing over the past 5 years,  per the US Census Bureau. Increasing rents means potential to increase rents by updating a unit now, and in the future causing profitability to increase.

      • Along with increasing rents, we  verify that rent is affordable in a city/MSA. We verify that 25% of the average monthly gross income for a tenant is equal to the median rents. If the calculation is less than the 25% threshold, it shows that the rents are too expensive.

Other Considerations that we review after the majors have been considered above are the following:

  • City Recognition on being “Best Places to Live”

  • Landlord vs. Tenant Friendly

  • City Infrastructure

  • Business Development in the Area

This list can help you when you are reviewing and making deals in the future! I personally use these criteria and hope they are also helpful for you too!

Always feel free to message me if you have any questions about apartments or multifamily investing. I am happy to help!

Thanks again, and keep leveling up!

Mike


How to Start Investing in Real Estate

I have seen a lot of posts on BiggerPockets saying that they are starting off and don’t know where to begin. I figured I would give the top 3 tips and resources that helped me get started in my real estate investing career:

  1. Educate

    • Read “Rich Dad Poor Dad’ by Robert Kiyosaki

      • This book has been on the BiggerPockets podcast countless times for good reason. Robert Kiyosaki discusses the difference of rich and poor mindset. The biggest takeaway I had from this book is that if you say that you can’t do something, your brain accepts it. Instead of this line of thinking you should ask yourself HOW you can do it. This will allow you to keep processing and thinking of solutions to get to where you want to go. This book helped me execute on my first 2 single family properties, when I was first starting my career in real estate investing. Today it has helped me level up my investing from single family properties to multifamily properties.

    • Read BiggerPockets Forums

      1. On the BiggerPockets forums, you will see infinite questions about all aspects of real estate investing. Here your strategy should be to figure out which methods of real estate investing interest you. Do you want to be active or passive? Do you want to invest in single family properties, multifamily properties, mobile home parks, notes, etc? By doing this you are educating yourself and learning from the top professionals.

    • Subscribe to Podcasts

      1. Podcasts are an easy way to absorb professional advice. I know there are many podcasts out there that mention real estate. I recommend finding a couple that truly resonate with you and your goals. Be careful not to overwhelm yourself- the last thing you want to have is anxiety that you haven’t listened to everything. The top podcasts that I listen when it comes to real estate are the following:

        1. Bigger Pockets

        2. Target Market Insights

        3. Best Ever Real Estate Investing Advice

    • Read “Best Ever Apartment Syndication Book” by Joe Fairless and Theo Hicks

      1. Even if you aren’t interested in multifamily investing, Joe and Theo do an amazing job on how to develop a following, how-to host a successful meetup, and the mindset it takes to become a real estate investor. Along with all this information, they provide all the steps and questions you should be thinking about as a multifamily real estate investor.

  2. Network

    • Connect with People on BiggerPockets

      • Connect with the real estate professionals that you notice being active on the forums. Instead of developing a one-sided relationship where you gain all the value by asking your questions, offer to help with their business or take them to coffee. It shows that you put the homework into understanding what they are working on and how you can make their lives easier.

    • Attend Local Meetups

      • Check BiggerPockets, Meetup.com, Eventbrite.com for local events where you can network with real estate professionals. Once you are at the event, try to develop relationships with colleagues and see if there is anyway you can help with their business. You can also ask the host of the meetup if they need help with the next meetup or need help entering the sign in sheets. Always try to find a way to add value!

    • Attend Conferences

      • Conferences are such a powerful, jam-packed way to meet many people with the similar mindsets. Everyone at the conference has the same goal of seeking to learn more, but are at different stages in their investing career. Connecting with people at varying levels of experience is helpful because you have the opportunity to meet potential mentors, partners, and friends. Conversing with a variety of people can help you to understand unique perspectives about analyzing deals. Every interaction is valuable at a conference. It is an exhilarating way to get inspired, collaborate, and learn from others’ experiences.

  3. Execute

    • Now that you have educated yourself and networked with like-minded professionals, it is time to develop a plan and execute! Believe in your education and trust the network you have developed. It will be very frustrating trying to get your first deal, but trust the process, and don’t feel rushed. Always remember you have support. Keep reaching out to people and you will find that many people want to help you or guide you through your first steps.

It may seem daunting to put yourself out there to so many people, especially when you don’t know the answers to everything. Focus on progressing a little bit everyday, and you will be shocked at how much you can accomplish in a short time period.

Always feel free to message me if you have any questions about apartments or multifamily investing. I am happy to help!
Thanks again, and keep leveling up!

Mike


Multifamily Investor Nation Summit Takeaways

I attended my first real estate conference of the year on January 17-19 from the comfort of my own home! I attended the online Multifamily Investor Summit hosted by Dan Handford. Below are my top 3 takeaways from the conference:

  1. Belief System Matter

    • Trevor McGregor discussed how important having a growth mindset is to your investing career. Instead of asking yourself the following:

      • Why aren’t there any good deals anymore?

      • Aren’t prices too high to invest?

      • Isn’t the real estate crash coming?

    • You should be telling yourself:

      • There is always a good deal to be found!

      • Prices may be high, but there is always a good deal that can make money!

      • Investing in an apartment complex that has long-term debt, positive cash flow, and a value-add component, will allow us to have a successful deal that can overcome the housing market crash.

    • These are the differences between having a limited belief system and a growth belief system. This seminar was impactful because I doubted my myself, my network, and the market before committing to multifamily investing. Trevor helped me realize I can and I will execute my first apartment syndication this year. I look forward to working with Trevor in the future with his coaching.

  2. Treat People’s Money With Your Life

    • Brian Burke was telling his story about his start in multifamily investing and he said that his first fund started with his gun carrying police friends. He said, “My life absolutely depended upon my ability to protect their capital and not lose their money.” He wanted to protect his investors’ money, and so do I.  I want to make all investors aware that I promise to treat their money like Brian does. I promise to:

      • Understand YOUR goals and make sure they align with the investment's goal.

      • Review all underwriting to make sure it is conservative.

      • Have open and clear lines of communication so that you feel assured that your investment is in good hands.

      • Leverage all my resources to make sure the investment and business plan goes as planned.

  3. Class B-C Multifamily Investments Still Have Room for Growth

    • Neal Bawa presented on the single-family and multifamily markets. He presented the state of multifamily investments going into 2019 with impressive graphs and charts. Here are the top 3 takeaways I had from Neal’s presentation:

      • That 97% of new construction builds are Class A properties because construction inflation is the highest it has been since 1992. This means that there is a minimal number Class B and no Class C apartments being built. This results in a capped supply for the investments we are looking to invest in.

      • Class B and C apartment properties have the lowest vacancy rates amongst all the classes. Class C properties have a vacancy rate of 3.9% and Class B properties have a vacancy of 4.7%. This means that these properties are still in high demand for renters.

      • Nationally Class B and C properties have seen a rent growth of nearly 3% since 2017. Neal said that in strong metros, such as Atlanta, he has seen the rent increase for Class B and C apartments been as high as 6% month-over-month.

    • Class B and C apartments continue to be a great investment because they have a capped supply, increasing demand, and increased rent growth.

The Multifamily Investor Nation Summit helped solidify my belief system, create my promise to my investors, and solidified my belief that Class B and C properties are a great investment in 2019.

Thank you to Dan and all the speakers for providing valuable information and having a great system to host everyone! Dan will be hosting another online conference on June 27-29. Below is the link for the event:

https://www.multifamilyinvestornation.com/vsl-order-form25836524

If you have any questions about apartments or multifamily investing feel free to message me at anytime and I would be happy to help.

Thanks again, and keep leveling up!

Mike

Why Apartments?

There are countless ways to invest your hard-earned money in real estate. From single family residents, real estate investment trusts (REITs), notes, self-storage facilities, multifamily properties, and much more. Of all the real estate investments, I have chosen to focus on apartments. The reasons I am focusing on apartments is because they are:

1. A Human Basic Need with More Renters than Ever

When the markets are at an all-time high, people need a place to live. During a depression, people need a place to live. People always need a place to live. The US Census Bureau has shown that population has increased 5.6% since 2010. This increased population will require more housing. The Bureau also shows that that the amount of renters has increased 12.9%. With the demand for housing and rental properties to increase, apartments will satisfy those increasing demands.

2. Able to Generate Cash Flow

With single family investments if the tenant doesn’t pay, YOU have to pay all the expenses. However, with investing in apartments, if one tenant doesn’t pay, you have several other units to make up for the one tenant not paying. With apartments you are diversifying your risk by having several tenants instead of hoping your one tenant pays.

3. Are Able to Control Appreciation

Unlike the price of single family homes, apartments have a formulaic approach when it comes to valuing the asset. Apartments are valued by the following formula:

Net Operating Income/Capitalization Rate= Price

This means the operator has the ability to raise the value of the asset by increasing income (raising rents, providing other revenue generating services, etc) or reducing expenses (reducing vacancies, implementing energy efficient appliances, etc). When the value is raised by the syndicator, the investors receive this value in the form of larger returns once the property is sold.

4. Easier to Scale.

It takes just as long to coordinate all the people involved (seller, broker, inspector, contractor, property manager) to do one unit as it does to do a 100 unit building. Also when investing in apartments you have a team of people helping find a property, execute the business plan, manage the tenants, and sell the property. So why do it alone and spend the time getting one unit, when you can get 100 units in one transaction.

5. Handled by Professional Property Management

A property manager will be managing the day-to-day operations for large apartment complexes. The property manager will be heavily vetted before the investment by the apartment syndicator. The vetting process will make sure that the property manager can execute on the business plan and has a positive track record for managing similar sized properties and tenants. The syndicator will continue to keep in touch with the property manager to ensure the business plan is being executed so that the investors can receive their projected returns.

If you have any questions about apartments or multifamily investing feel free to message me at anytime and I would be happy to help.
Thanks again, and keep leveling up!

Mike


New Year, Bigger Thinking

Happy New Year everyone and welcome to Next Level Investing! Our purpose is to take your investing to the next level by showing you the incredible powers of real estate.

My attendance at the Midwest Real Estate Conference and reading Best Ever Apartment Syndication Book by Joe Fairless and Theo Hicks in 2018 inspired me to create this website.

Attending the Midwest Real Estate Conference was an amazing 2 day conference in Chicago. The event involved networking with real estate professionals and learning from successful investors such as John Casmon, Brie Schmidt, Joe Fairless, and many others. They discussed specific markets within Chicago, the mindset of an investor, and the importance of standard operating procedures (SOPs). Along with their priceless lessons, I got to interact with an authentic network of real estate professionals. The majority of people had completed at least one real estate deal. They shared a variety of experiences such as flipping houses, closing on large apartment complexes, and the perseverance it takes to become a successful real estate investor. It truly was a wealth of knowledge that I would highly recommend attend next year’s conference! Next year’s Midwest Real Estate Conference is on June 1-2, 2019 in Chicago.

A very memorable presentation from the conference was Joe Fairless’s speech about his goal to have an apartment portfolio worth $1 BILLION by the time he was 40 years young. After the conference,I quickly subscribed to his podcast and purchased his book Best Ever Apartment Syndication Book. This book provided a step-by-step guide on how to think, network, raise money, analyze deals, and execute business plans like an apartment syndicator. I was blown away by the amount of information Joe Fairless and Theo Hicks provided. This book is the first resource I have read that provided structured detail on how to become a successful apartment syndicator.

Both of these events changed my entire line of thinking in 3 ways:

1.    I can do this! I won’t tell myself I can’t anymore.

2.    Dream big! Don’t trap myself with small thinking.

3.    Invest bigger!

I currently have two single family investments. I have felt content with them, but I have realized that I need to push myself to go bigger with my real estate investing.

Thanks to the change in mindset and the network of people, I have 3 goals for 2019:

1.    Fundraise and syndicate my first successful performing apartment community of over 50 units

2.    Launch a podcast showing the power of real estate by interviewing real estate professionals and investors

3.    Document my journey every step of the way

I look forward to showing everyone my journey by demonstrating how real estate can achieve your personal and financial goals. With my podcast and blog, I will be providing information to investors and real estate professionals, documenting successes and growing pains, and looking for people to join my team. Together we will conquer 2019 and achieve our goals!

Feel free to message me about your ideas, what you’re interested in, or even if you just want to chat about how to start. I’m looking forward to talking to you more about making big dreams a reality!

Level Up and have a great day!

Mike

Joe Fairless and Myself at the Midwest Real Estate Conference, May 12, 2018

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