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Get ready to find your recipe for a successful real estate lifestyle from America's top experts here at Greenlight REI with your host, Lance Edwards.

Well, hello everyone. Hi. Welcome to this edition of Apartment Wealth Nuggets. Quick shortcuts to small apartment investing. And the topic for this edition, this issue is why, of course, my name is Lance Edwards and I have this short presentation I want to prepare, prepare for them and go with my remarks. And then at the end I will be taking your questions. We are live right now, so if you have any questions at any point, type it into the chat box and I'll be answering them. I'll certainly be taking them, answering them formally at the end of my short prepared remarks here on this topic of why you know, so many people think in terms of getting started with single family or exclusively doing single family. I thought that way when I was getting started and because I'm what about to share with you right now that a mentor, actually it was a single family mentor who also did apartments. He put me on the path to small apartments over 20 years ago. And I'm going to share with you what led me to this journey, plus what I knew 20 years ago, plus what I've learned over the last 20 plus years, doing it myself and coaching thousands and thousands nationwide. So why small apartments? Let's do a quick definition. My definition of small apartments are two to 100 unit properties. That's duplexes and up to 100 doors. It's not so much the number of doors that's important to me, it's the fact that these are owned and operated by mom and pop landlords. Mom and pop landlords. And that's what attracts me to small apartments. Now let's be clear. You are not going to be a landlord. This is, this is about wealth without landlording. But it's the mom and pop landlords and the way they typically operate, they do everything by landlord. My definition of landlord is they do everything. They do everything. They collect the rents, they do the leasing, they do the evictions, they paint the unit, they do the rehab, they get the 2am calls, they do the bookkeeping, the accounting. And I imagine a number of you on here I'm sure are landlords, single family or small apartment landlords. It is not a glorious lifestyle. As a matter of fact, it's not the highest and best use of your time. I certainly don't do landlording, but it's because of that there's lots of low hanging fruit. So when I acquire these assets, there's always Opportunities to raise the rent, add other income. We put in professional third party management company and we asset manager. So this distinction I'm making here is there's a landlord who does everything and there's the asset manager. I'm an asset manager over my multifamily assets. I make decisions and I direct a third party management company. And I'll be showing you the different results I get from that. Let me quickly, as an aside, as an analogy of what I'm talking about, this landlording versus asset management, I'm going to use a music analogy. If you're going to create music one way you could create music. You could be a one man band or a one woman band. You could be like my little buddy right here, see if we get him to talk to us. All right? But you know, the one man bands, they have the cymbals between their knees and the big bass drum on their back and they playing a trombone or they got a harmonica in their mouth and they're on the side of this on the sidewalk making music for loose change, but they're wearing themselves out. That's the analogy from the music. You know, being in the music business, you can be a one man band, that's the landlord model. Or you can be, you see this, the conductor. The conductor, that's the asset manager. The conductor directs a symphony of experts and, and they work off the same sheet music that the asset, the conductor has. And that sheet music is the systems that I provide you. All right? And they do it to a cheering crowd. And so that's the distinction we'll be talking about. So the, the landlords, small apartments. What I'm most interested in small apartments is the fact they are almost exclusively owned by mom and pop landlords. This has a professional operator, asset manager like me. And that means lots of low hanging fruit. That's why I can go into these assets and in 90 days turn them around. Having an improving performance and continually doing that over and over and over, enhancing the resident experience and getting and collecting other fees, higher rents because I'm trading value for value. So that is the attraction into small apartments. That's why I stay in small apartments today because of what I can do so quickly with these assets. And then I get wealth as a byproduct, as a natural byproduct. Now I say 2 to 100 units. Most of my clients, if they're new, start in the 2 to 30 unit range. You can start wherever because the process of doing five doors the same as 50 is doing 500 doors. That's my definition of small apartments. And that's also as a bonus my definition of landlording versus asset management. You want to be doing the asset management, making decisions. So there's really. I really should collaborate on that. Within this category of wealth without landlording, there's three roles that you could play and you do a combination. I have clients who do combination. One, you can be an owner, you can own the asset, but you're going to be an asset manager. Here's my. Can you see him on the screen? That's a conductor. My shiny bald head isn't reflecting off of it. Too bad. But the conductor, you're going to be an asset manager. As the owner, you're going to make manage the managers. I'm going to give you systems how to do that. I'm going to use systems. There's actually I have a 50 Ways list of how to improve or how to enhance the resident experience. Well they're gladly give you more money but that's one role as an owner. You're as an owner doing as an asset manager, not as a landlord. The second role you can play, whereas the one is one if active, you're actively making decisions. The second role is an investor. Now this is a passive participation. You make no decisions. Whoever the owner is make the decisions. But you invest in other people's small apartment assets. So for example, you can invest in my projects and I'll show you how to do that in a moment if you want to get some information. But you know, you invest in my projects and I'm the asset manager, I generate returns and I send you a monthly check. So that's a one way. That's again you're creating wealth in that process. And clearly there's no landlording when you're an investor because you don't, you're totally passive. Now the third way you can do it is you can partner. So this is, there's a couple ways you can do this. For example, maybe if you own, if you own a small apartment right now and you want to create, keep generating wealth from it, you want to keep generating cash flow and you want to improve it, but you don't want to be involved with it anymore, then you can partner with, with me, someone like me, I'll do it. We'll come in, we will partner on your property. I will run it, I'll even put up the money for the improvements and we'll split it 60, 40 is what I do and you get 60 and I'm gonna, and by the way, I don't get. You get paid first, I don't get him paid until there's an improvement. And I can show you how. Even on, even how you making 60% of what I'm going to do for the property is worth more than 100% you're doing right now as a landlord. That's easy to show. I'll show you that if you're interested in that. So that's if you already own an asset or maybe you want to go be an owner, you're going to go buy an apartment building and then bring me in. So even if you don't own an apartment building right now, you can go out and find one and buy it. And if you acquire it and you're the owner, you can then bring it to me and we'll partner, still do the same. 60, 40 split. That's real for, that's for people like maybe, you know, doctors, dentists, anybody who has assets or wants to convert their idle cash into passive income. And equity partnership is a way you can do it and create wealth without landlord because you're getting 60% of the wealth creation, you're getting 60% of the cash flow, you're getting 60% of THE depreciation. All right, that's the three roles. So and by the way, I'm going to detail all three of those roles now. There's three profit centers in small apartments, pre profit centers. One is the quick cash method. This is wholesaling. And those of you that are familiar with wholesaling houses, it's a very similar process. This is where you put a property under contract and you sell your contract. This generates quick cash. You never take title. And I'll talk about that in just a moment. Well, I'll tell you, I've wholesale everything up to 294 doors. 294 doors. So it's just, it's a contract. You're wholesaling a piece of paper to somebody else for five and six figure checks. The second profit center is passive income. This is where we buy and hold these. This is where you're the owner, you're the asset manager. This what apartments are certainly known for. And all of these are active, I should say active profit centers. And the third way is the equity in your net worth. This is also known as forced appreciation. It's what I call potentializing because we get the full true potential out of these assets. I buy a small apartment building and I enhance the resident experience. And in the process I raise the rents, I raise the occupancy. I charge other income. That creates even more passive income and it creates huge, huge, huge paydays on the equity standpoint. So if you're going to be active in the business, those are your three profit centers. Now I'm gonna go back to the three roles. Remember, you can be an owner, you can be an investor, or you can be a partner. So what are the benefits if you're an owner? Well, you get wealth without landlording. As long as you're the asset manager, not the landlord. You might want to put a double star next to that. This is the secret to it right here. This is the secret to it. And if you're a landlord right now, I can show you how to get out of doing that in 90 days. All right? That's a simple process. Once you decide to do it, it's a mindset shift. So you're going to be an asset manager, not a landlord. You want to hire good management companies, I'm even going to provide them to you. These are third party professional management companies. And if you stick with small apartments and you acquire these, there's lots of low hanging fruit, the rent hasn't been raised and maybe three years typically is the time frame. Also another benefit when you're buying these assets, you can buy them on non recourse loans. Now this is not a presentation on financing, but non recourse means there's no personal guarantee. No personal guarantee. Completely different the way you bought, perhaps bought your house. Also, when continuing as benefits as an owner, private investors are the norm. So I use private investors on my transactions. They put up the cash for the down payment, they put up the cash for the rehab that we're going to do. And they are basically my collaboration with me, part of the partnership is the private investors. And I'll talk about that in a moment. Seller financing is very common in small apartments. I'm actually in the middle of a transaction right now. Matter of fact, I just sent a contract out an hour ago on a project that I'm buying with seller financing and seller financing right now. You know, we're in, we're in an environment as time I'm speaking, that interest rates have gone up. There's no better time than for seller financing. Interest rates go up because that's the way transactions are getting done. So if you're active out there right now, I want to encourage you, you should be proposing seller financing at least as an option in every offer you're making right now. Also back to the benefits when owning, you have multiple tenants paying you one of them moves out, you still got the others paying you. You make offers sight unseen. I'm broadcasting to you today from my office here in Houston, Texas. And I have projects in Oklahoma, Ohio and West Virginia. And I made offers on them all sight unseen. Sight unseen. You don't need to see the property to make an offer. You just need to see the math. And again, like I said, do this nationwide and part time. Now I spend one hour per week making decisions as an asset manager on my apartment. All of them. When you're getting started, you might spend one to two hours per day. Max. Max. I used to work one block away from here as an engineer in corporate America and I was working on the, on the side generating real estate income while I was busy working 60 hours per week as an engineer. And I was doing it part time, no more than one to two hours per day, spare time, evenings, weekends, et cetera. So you can do it strictly part time. Part time. There's huge tax breaks as an owner and we're talking six figure tax breaks. There's something called bonus depreciation. You want to be asking your CPA about that? Basically, let me tell you, I bought a $3.15 million asset and my tax deduction in the first year was $530,000. 530 on that one asset, $530,000. So you buy enough assets, you want to wipe out your tax bill for a few years. You don't need any experience to get started. I had none when I got started. Simple to learn business. There's nothing hard about this business. It's simple to learn. It's the application where people sometimes need some help. If you're already in single family, you can add small apartments to it, combine it with houses, and if you're a single family landlord, I want to encourage you to go buy some small apartments. Then you do a comparison. See for yourself what I'm talking about. Or if you're wholesaling houses, just start wholesaling small apartments you can easily scale up. You're going to start small, you're going to scale up. I have, I teach a leapfrog strategy. Four moves to 100 doors. That's worth $2 million to you, no less than $2 million to you over five years is 100 doors. And there's a little competition out here with small apartments, certainly in comparison to the single family space. So you have all these benefits when you're out acquiring an asset, managing these assets. Now as a wholesaler, which is another profit center and by the way, I started with owning because the most money is made as an owner, let's be clear about that. The most money is made as an asset manager. But you can also in parallel be a wholesaler. So when I got started, I was out wholesaling and buying. I would wholesale, wholesaler, household, and then I buy one and you know, again, wholesaling in small apartments is very similar. Single family, it's bigger checks, less competition. And like I say, you can scale a duplex the same way you scale 294 units, which is what I've done. It's just different buyers you're taught, you're marketing to. It's the same process you can scale. So instead of having to scale 10 houses, why not scaling a 10 unit, one 10 unit apartment building or one 20 unit apartment building? It's the same process. You can do it once instead of 10 times, over and over and over. It's just the highest and best use of your time if you want to wholesale, wholesale, these small apartments. Now, as an investor, as an investor, let me check my notes here, make sure I have some things I wanted to share with you. As an investor, you can passively invest. So here's the benefits. Now these assets, let's say I'm the owner of the asset, I own the small apartment building, the cash that goes into it and the cash is used for the down payment, the cash is used for the rehab. Those assets produce a minimum of 30 to 40% per year return on the cash invested, 30 to 40% minimum per year ROI. So if you buy a small apartment building and you put up your cash, that's the, that's return that comes to you. That's why I'm saying you make the most as an owner. So if you're doing that with your private investors or if you want to be a private investor, you, what you can expect to earn investing in small apartments is 12 to 15% per year ROI passively. You put your self directed IRA money in, for example, or your idle cash in and you get a monthly check of 12 to 15% per year passively. How can. So here's a question. If you're an investor, you may be thinking, how can, you know, how can someone pay me 12 to 15%? I don't get that anywhere else. Because these assets produce a minimum of 30 to 40% ROI. So your 12 to 15% is being paid out of the 30 to 40%. So basically there's a share of the cash flow that you're getting. There's a share of the equity creation that you're getting. And when I say equity creation, there's two ways that small apartments have equity created in it. One is through called forced appreciation, or I call it potentializing. Every time I raise the rent $100 on my apartment complex, it raises the value $15,000 per door. Per door. Okay? So that's one big part of the return is I'm enhancing the resident experience so I can charge extra fees. That boosts the value. The other way we generate equity as an owner, every month we're paying down the mortgage. My renters are paying down my mortgage for me. That's paying down the principal. That's building up equity for me over five years. So when I go to sell or refinance an asset, I harvest that equity as cash. And then I, that's another way I pay back my investment. I share that windfall cash, a portion of it with my investors. So overall, if the Property is producing 30 to 40% ROI on cash through a combination of cash flow, equity creation from potentializing equity creation by paying down the mortgage out of that 30, 40% a portion of it, which equates to 12 to 15% per year, ROI goes to you as an investor. And actually I pay 12 to 18%. Okay. But so many people right now have self directed IRAs that are earning zero. Here's a fact, I heard this at a conference recently. 97% of all self directed IRAs earning less than 1%, less than 1%. So 12 to 15% would be better. A lot better. A lot better. So these are the benefits when you invest in these assets. And again, it's a, it's a physical real estate asset. Put your hands on it. It has cash flow, has appreciation, all these great things you're looking for in an investment. Now the third role was partnering. Partnering. So if you own a small apartment building or you want to go buy one and you bring me in as your partner, I will operate it. And if you own it when you sell it to me, or when we put it into the partnership, that is considered a taxless transfer. So this is a taxless event and I'm going to operate it going forward. And we're going to do an equity split on all the profits. The profits means the cash flow, the profits means the cash generated when we sell or refinance the asset. Plus we'll profit share on the depreciation. And if you do it with me, you get 60%. 60% of cash flow, 60% of equity, 60% of depreciation. So a lot of times we have, I have clients or this is a common situation. You have an asset, you have an apartment building, you've had it for years and you're thinking about your estate planning. You'd like to pass this apartment asset onto your adult children. They have no interest in apartments. They don't want to be involved with the operation. Fine, bring it to me. We'll partner on it and that's a taxless transfer to you. And we'll do the 60, 40 partnership where you get 60 and if you were to pass, that would go on to your heirs. So they're getting wealth without landlording, without doing anything. You're just passing it on to them. And when it passes on to them, it's a step up bump with regards to tax treatment there as well. So if you own an apartment building that you want to get out of the operation of it, whether you're landlording or asset managing it, contact me. Let's have a conversation. I will show you what I can do. And remember, you get paid first. I don't get paid until. Unless there's improvement.

You've been listening to Interview with the Experts with Lance Edwards. Let us now blatantly and shamelessly bribe you toward creating your own real estate lifestyle by offering you a whole bunch of free stuff. Go to greenlight reinvesting.com and get you some free stuff. And this session's show notes, that's greenlightreinvesting.com.