Mike’s Apartment Blog

Two heads are better than one… how about seven heads?  I think so.  I mean the hydra had seven heads and he was pretty much a badass, right?

So how do you get seven heads?  And what do you do with them once you got them?

Enter the mastermind.  A mastermind is a group of individuals who get together to weigh in on difficult topics.  In this case, the difficult topic is getting rich, and the seven heads are entrepreneurs at various stages of success.  Having a varied group allows affords you two things: keeps you focused and accountable on your goals, and helps you come up with solutions to issues you can’t on your own.

My mastermind meets every two weeks.  We check in on each other, push eachother towards success, brainstorm over tough problems.  It’s very empowering and I highly suggest getting involved in one if you have given yourself difficult goals.

How do you get involved in a mastermind?  Well, it depends on who you associate with.  Though its pretty hard to find a bunch of folks in your immediate area, so I suggest the internet.  Any forum or site where you can find folks with similar goals, you can get together.  I met my mastermind group on www.fastlanetomillions.com.  It primarily a forum for budding entreprenuers, but there are folks from all walks of life.

In my last post, I talked about how investing is like a pro sport.  The more focused and specialized your are, the better your chances of success become.  Real estate investment is a level of investment specialization.  Commercial real estate is an increased level of specialization.  Apartment investing is an even further level of specialization.

Within apartment investing there is further specializations.  Here are a couple:

• Buy and Hold – This is the most common strategy.  Basically it is buying a stabilized and fully rented apartment building, operating it at it’s current performance, then selling it in the distant future after it has appreciated in value and some of the loan has been paid down.  It represents the lowest risk but also the slowest return.
• Rehab- This strategy seemed to gain a lot of interest over the last couple years.  This is where an investor purchases a down or beat up, vacant building, replaces the mechanics, paints and patches the walls, adds new kitchens, updates the place, essentially a full-on contracting job to bring the building back to life.  Often times they will fill the units up with tenants and then sell the property looking to make a profit over and above their acquisition and rehab costs.  This is higher risk than the buy and hold, but not by much since the rehab has a very mappable expectation.  Return his completely dependant on your purchase price.
• Develop – This strategy is based on finding vacant land, or an infill lot from which to build an apartment from scratch.  Usually done in areas where demand for apartment units is increasing, population is growing, and rents are increasing.  Risk is higher than rehabbing because of the necessary development costs that come into play such as zoning, drainage, and city building codes.  Return can be high when the development is done correctly.
• Value Play – This method is based on finding an ailing apartment building, one that is not performing, and turn its operations around.  Take it from a drain to a cash cow – this is my preferred strategy.  Usually these properties have some deferred maintenance, vacancy problems, crime, low rents, etc.  It makes them difficult to manage, especially for people who have never dealth with those problems.  Properties with these issues become very difficult to own and even more difficult to sell.  This translates into opportunity for those investors with the ability to purchase and turn these properties around.  Risk is very high as most investors have failed in operating these difficult properties, but returns are the highest of all the strategies as the motivation of the sellers often leads to highly leveraged purchases.

In the future I will talk more about the value play strategy and how works in action.

Where do I begin?  I have read a lot of entrepreneur blogs which spend all sorts of time talking about folks who were in dead end jobs.  Jobs where their bosses were tyrants, coworkers were bungholes, and customers were PIA’s.  They were almost forced into entrepreneurship as a last ditch effort before they jumped off a bridge.

Not me.  I can’t sit here and tell you some sob story.  I enjoyed working for corporate america.  I liked my coworkers.  I liked my managers.  Most of all, I enjoyed my job.  But I wanted more… sounds sick?

Well liked, respected, and valued.  That’s how I would describe my job.  But I just wasn’t satisfied.  I am one of those constant thinkers – the wheels are always turning, always something to do, something to achieve.  A constant multi-tasker whose best work comes during the first hour of performing any action.  This means I am best served rotating through thirty-five different problems rather than dealing with only one (maybe that’s why apartment investing comes so naturally).  I am always competing against myself, an entreprenuerial flagellant so-to-speak, constantly measuring how much pain, stress, and expectation I can pile on myself and still survive.  Okay, too melodramatic?  I know… let’s just say I am always pushing myself to the max.

Kayne West sang, “That which doesn’t kill me, can only make me stronger.”  Okay, he stole it from Nietzsche, but he remixed it into a song which went triple platinum.  Kinda like apartment investing, you don’t have to be new, just different and adaptable.  And a rap artist, but I digress.

Real estate has always been of unique interest to me.  The fundamentals were simple, buy a place with leverage and make sure the rents more than cover the payments.  When I bought my first home and rented the extra bedrooms to my buddies, I was enthralled with the fact that my roommates paid rent regardless of whether I made it into the office or not.  It was my first real experience with passive income and it was a massive relevation - me likey!

Bottomline, I love business, want more, and can’t stop my mind from going-going-going.  With my already piqued interest in real estate, apartments were a natural progression.